Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

DEBT Is a Four-Letter Word

BY Kathy Hensley
July 29, 2009

Has your divorce client's business been caught in the recent economic crisis? Most industries, such as retail, wholesale, construction, and services, are affected. Although there are a few exceptions, the presence of debt in a business elevates risk, which depletes divisible asset value. The presence of loaned money to the business (most often, from a bank) indicates leverage, or the concept of “using other people's money” to fund the business. Higher financial leverage is fine during periods of expansion and growth, but during contractions, high leverage actually penalizes a business and makes it more vulnerable to bankruptcy.

Matrimonial attorneys must be able to distinguish elements of leverage risk that are accentuated in today's economy in order to prevent overvaluing business equity. In some cases, common valuation techniques that ignore leverage can actually undervalue a business that is less risky and able to weather the economic storm. These latter businesses will be best positioned to take advantage of growth when the recession ends, and may be valued higher because of conservative strategies followed during 2007 and 2008.

A Brief Lesson on Financial Statements

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Yachts, Jets, Horses & Hooch: Specialized Commercial Leasing Models Image

Defining commercial real estate asset class is essentially a property explaining how it identifies — not necessarily what its original intention was or what others think it ought to be. This article discusses, from a general issue-spot and contextual analysis perspective, how lawyers ought to think about specialized leasing formats and the regulatory backdrops that may inform what the documentation needs to contain for compliance purposes.

Hyperlinked Documents: The Latest e-Discovery Challenge Image

As courts and discovery experts debate whether hyperlinked content should be treated the same as traditional attachments, legal practitioners are grappling with the technical and legal complexities of collecting, analyzing and reviewing these documents in real-world cases.

Identifying Your Practice's Differentiator Image

How to Convey Your Merits In a Way That Earns Trust, Clients and Distinctions Just as no two individuals have the exact same face, no two lawyers practice in their respective fields or serve clients in the exact same way. Think of this as a "Unique Value Proposition." Internal consideration about what you uniquely bring to your clients, colleagues, firm and industry can provide untold benefits for your law practice.

Risks and Ad Fraud Protection In Digital Advertising Image

The ever-evolving digital marketing landscape, coupled with the industry-wide adoption of programmatic advertising, poses a significant threat to the effectiveness and integrity of digital advertising campaigns. This article explores various risks to digital advertising from pixel stuffing and ad stacking to domain spoofing and bots. It will also explore what should be done to ensure ad fraud protection and improve effectiveness.

Turning Business Development Plans Into Reality Image

This article offers practical insights and best practices to navigate the path from roadmap to rainmaking, ensuring your business development efforts are not just sporadic bursts of activity, but an integrated part of your daily success.