Usage
"Zombie company" is used to describe a situation in an economy where a failing company continues to operate with government support, but cannot stand on its own. The term can be traced to Edward Kane's explanation of the situation of insolvent savings and loan associations in the 1980s and of Japanese banks in the early 1990s. During the financial crisis of February 2009, Newsweek Magazine gave a down arrow to banks in its conventional wisdom watch section saying, "restructure them now, before we get Japanese-style "zombie banks" stalking a lost decade.
Zombie companies are businesses that, although generating cash, are unable to attract enough investment to start paying off their debts. After covering running costs, fixed costs (wages, rates, rent) they only have enough funds left to pay off the huge interest on their debts, but not the debt itself. This is why they are called "zombie companies" - they are still trading, and so half living, but not able to invest or grow to pay off their debts, which is why they are also considered half dead. With too little cash to live properly, the company's Chief Financial Officer (CFO) has to look out for a subsistence living and therefore wanders from one loan repayment to the next. Zombie firms are loss-making and have little hope of improvement in the imminent future. Therefore, they depend on banks to grant them another loan to survive, effectively putting them on never-ending life support.
Research from the Institute for Turnaround, the not-for-profit and leading membership body for turnaround and transformation professionals, estimates that there may be up to 100,000 zombie companies in operation in the UK. Zombies are often at an unfair advantage over their non-zombie competitors, because of the trading advantages they receive.
Read more about this topic: Zombie Company
Famous quotes containing the word usage:
“I am using it [the word ‘perceive’] here in such a way that to say of an object that it is perceived does not entail saying that it exists in any sense at all. And this is a perfectly correct and familiar usage of the word.”
—A.J. (Alfred Jules)
“Girls who put out are tramps. Girls who don’t are ladies. This is, however, a rather archaic usage of the word. Should one of you boys happen upon a girl who doesn’t put out, do not jump to the conclusion that you have found a lady. What you have probably found is a lesbian.”
—Fran Lebowitz (b. 1951)
“Pythagoras, Locke, Socrates—but pages
Might be filled up, as vainly as before,
With the sad usage of all sorts of sages,
Who in his life-time, each was deemed a bore!
The loftiest minds outrun their tardy ages.”
—George Gordon Noel Byron (1788–1824)