Explain Downsizing and Discuss the Major Reasons Why Organizations Engage

question 28

Essay

Explain downsizing and discuss the major reasons why organizations engage in it. Explain why downsizing strategies are or are not generally successful.

---

Definitions:

Levered Firms

Companies that use debt in their capital structure alongside equity.

Unlevered Firms

Companies that operate without the use of borrowed money or debt in their capital structures.

Interest Tax Shield

A reduction in taxable income that results from deducting interest payments, decreasing overall tax liability.

Debt-Equity Ratio

A financial indicator showing the relationship between borrowed funds and equity in a company's asset financing.