what impact does a large deficit have on companies?

Answer 1

Depends on what you mean by deficit. The term deficit is mostly used in macroeconomics, to refer to a Government`s shortage of funds, or to refer to a country that`s importing more than it exports.

If by deficit you mean "shortage of funds" that a company is clearly jeopardised by the lack of liquidities (money) to finance its day to day operations or its investment projects. In this case, the impact of the "deficit" is to postpone investment opportunities, or seize those that are cheaper (or realistic).

In financial theory, we measure a project´s profitability by measuring it net value, or the expected future cash flows derived from a certain investment or a certain project.

On the other hand, if by deficit you mean "debt" the impact depends on the kind of debt (short versus long term) and on the covenants that creditors attach to such debt. In this case, the most direct impact is the lack of flexibility to run the company, since debt functions as a straightjacket, curtaling managers´ leeway.

Some scholars argue that these constraints are healthy, since they oblige managers to start acting more wisely and responsible. In other words, a deficit (or a debt) induces discipline into a company´s management.

Answer 2

A lousy CEO & their executives and Managers! These positions are blood sucking companies' fund if they don't make money.

What is the normal payroll for an employee vs a vice president and above? e.g.Feed one VP per mth I can feed 2 or 3 employees in my company. Company is a military of army. An Army is the business of profit or lost.

Therefore choosing the right person for the right job, it is the same like American IDOL. hehe.....

Answer 3

Ever heard of the word "bankruptcy"?