Financial austerity also offers opportunities

Banks have postponed until July 15 the release of their quarterly results according to International Financial Reporting Standards because of ongoing negotiations on their pension issue. This delay is contributing to the general confusion regarding the results of listed companies, since this deadline does not apply to others. Corporate results are a crucial criterion for any investment choice, but should not be the only one. Particularly in the present situation, when several listed companies are in serious trouble, every bit of news – especially on profits – matters. But it may actually be more important for investors to monitor the companies’ liquidity. A company with small profits or losses under control may reverse its picture. A company in a serious liquidity crisis is in greater danger, and there are many such examples. The attitudes of the banks are speeding up negative developments for many companies. Banks do not intend to continue funding companies which do not offer tangible guarantees they can recover. Another reason is the legal context that does not promote the recovery of firms in trouble, because the insolvency law is antiquated. Businesses also lack the initiative to take advantage of opportunities emerging in this situation. Besides the banks’ attitude, the situation is aggravated by companies’ debts to suppliers. It may be time for credit assurance to expand to the domestic market so that such risks have insurance coverage. Consequently, this crisis might eventually develop the nascent insurance domain.

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