Sample Finance Paper on Financial Risk

A publicly traded company that recently filed for chapter 11 bankruptcy protection is, David’s Bridal, on November 19th 2018. In the wedding apparel space, David’s bridal has once showcased its leadership in the industry, having 65 years of experience. Currently, the retailer is struggling to keep up in the industry.  In financing from lenders, David’s Bridal filed and secured $60 million, with $125 million asset loan. Although no store closures have been announced yet, restructuring needs to be done in order to reduce the debt by over $400 million.

Signs of David’s bridal struggles have gradually bubbled to the surface over the years. Financial “red flags” that have been an indicator of the company’s financial struggles include: lack of finesse when it comes to individual customer needs, its brand has been slow to adapt to a changing market that now includes online pure-play providers, David’s Bridal selling used dresses as new, shoddy and expensive alterations on price, misplaced orders and its employees’ complaints over poor treatment including stolen sales commission by managers. David’s bridal revenue have declined with Moody investor service citing the company’s unsustainable capital structure.

Management at David’s bridal should address the following issues by; increasing custom creations. This is due to casualization of American weddings that range out of the scope of traditional white wedding dresses. Secondly, David’s bridal should choose adequate prices for wedding dresses. Dropping prices sets shoppers with the expectation that they would have a budget experience.  This suits a generation of consumers used to fast-fashion pricing. Raising prices while providing luxury price will satisfy a portion of customers willing to use serious cash for that special day. David’s bridal can choose to remain at mid-range price with cost thus serving muddled expectations. David’s bridal can similarly offer customers gowns at deposited prices to be ahead of their competitors.

I am confident of the models used for predicting bankruptcy for David’s bridal. The model used evaluated economic and institutional factors that impact reasons for bankruptcy. For example, measures of management and employee experience or other behavioral aspects either from customers’ complaints that impact operations of the company. For David’s bridal, the model was able to analyze employee complaints over poor treatment including stolen sales commission by managers as well as complaints from customers. Financial irregularities in ratios and debt service such as lenders offering the retailer $40 million to support David’s bridal during planned bankruptcy. Variations such as reduced cash outflows and inflows, liquidity of assets and capitalization of David’s bridal versus total industry value are among the indicators used in the model to predict bankruptcy in David’s bridal.