Reference no: EM132952951

Case 1 A scary number' of retail companies are facing bankruptcy amid the coronavirus pandemic. By Brian Sozzi, November 10, 2020 The retail death march persists. Somewhat under-the-radar, Italian luxury goods retailer Furla filed for bankruptcy on Friday after being hit hard from the COVID-19 pandemic. The company is looking to close stores and cut debt as part of the reorganization. The retailer, founded in 1927, plans to emerge from bankruptcy with a greater focus on e-commerce. Furla joins a long list of well-known retailers that have buckled during the health crisis. New York City-based department store chain Century 21 filed for bankruptcy in September and said that it will shut 13 locations that for years served up deep discounts on designer wares. The company pinned the blame on the COVID-19 pandemic and uncooperative insurers who were supposed to help provide the company with fiscal support during tough times. Bankrupt J.C. Penney, meanwhile, received a bailout in September from landlords Simon Property Group and Brookfield. The consortium valued the century old department store - which went bust back in May - at some $1.75 billion. A total of 650 stores will stay open, down from the more than 1,000 pre-pandemic.

Questions:

1. Based on the article above, coronavirus already made the company experience financial distress. What is meant by financial distress? What are the causes of financial distress? Explain.

2. Once a company recognized serious financial distress, the owner should prepare plans to resolve the problem. What action should the company prepare to deal with financial distress? Explain.