explain the concept of debt management

Expert Solution

The concept of debt management is associated with the agreement that is done with the unsecured creditors when the company is going through a stage where it is facing shortage of funds. This basically means negotiating the terms or the structure of interest rate, extending the duration of the loan and if possible, having a slightly favorable terms which are acceptable to the creditor as well. The concept of debt management comes specially into the play when the company is going through a short-term business crisis which the company is sure will go away with in a short span of time. It readdresses the terms of the agreement on loan and how to pay it. Debt management is said to be beneficial from the perspective of lender as well as borrower because it gives the times to fix the cash flow issue to the borrower whereas if the lender goes to court it might take a long time and cost to recover the full amount.

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