We blogged about Borders Group back on January 4. Even though the company has a new financing commitment, it continues to have problems paying suppliers. It looks like Borders is still circling the drain.
Borders’ survival is questionable, but for us the more interesting question is, “How could we have have seen the trouble at Borders coming?” What were the warning signs of Borders’ distress? In this video post we talk about three of the six early warning signs of financial distress and see how they apply to Borders. We’ll talk about the other three in our next post.
[youtube SXjauKH5s7c]
Early Warning Signs Part 1
Very well done. I can see lots of good reasons for having the blog and keeping it current.
Best,
Ken
Excellent synopsis of a credit in crises stemming from key drivers that can affect any complacent management that fails to understand and grasp the subtle and not so subtle changes happening within its own industry…This management team would have done well to heed the lessons of American Greetings issues back in 2001/2002 when it too failed through hubris to pay attention to an industry undergoing a structural sea change.
Loved the concise analysis of the problem and the evidence. This all falls under “Disruptive Technologies” with management that can’t cope (or can’t see)
Thanks Tim
Keep up the good comments
The working capital point is particularly interesting as this can affect adversely businesses both going into a recession and coming out of a recession. Firms going into a recession may benefit from shrinking orking capital releasing cash but once the economy starts picking up the business needs to fund the increased working capital associated with growth and may run into difficulties if it cannot do so.