Causes Of Financial Distress

This question practices your understanding of the main drivers of corporate distress, from weak cash flow and missed debt payments to covenant breaches, supplier pressure, and disruptive changes in an industry. It also tests whether you can connect balance sheet stress to real world restructuring scenarios, including leveraged buyouts and sudden macro shocks. Interviewers ask this because financial distress is often the starting point for restructuring work, and a strong candidate should be able to explain how operational problems, financing terms, and external events can combine to force a company toward bankruptcy or a negotiated restructuring.