ABSTRACT
This chapter focuses on turnaround processes including all of the aforementioned types of actions. This means we disregard turnarounds of companies not requiring asset and/or financial restructuring. The basis of our framework is the premise that all claims against the cash flows of the company can be seen as options, irrespective of being equity or debt. Companies create value by investing the capital they attract in projects that generate excess returns, which means generating future cash flows at higher rates of return than the cost of capital. Under the discounted cash flow method, the sum of totalized value of the free cash flows discounted at the weighted average cost of capital, plus the value of non-operating assets is called the enterprise value. Given their asset and cash-flow-generating structure, companies should find an optimal capital structure. Companies must make a decision about how to find a balance between their operational structure and their financial structure.
