Restructuring and Financial Performance Restructuring is the act of reorganizing the legal, ownership, operational or other structures of a company for the purpose of making it more profitable and better organized for its present needs. A company that has been restructured effectively will theoretically be leaner, more efficient, better organized and focused on its core business with a revised strategic and financial plan. Financial restructuring may be accomplished with the motive to enhance liquidity, lower the cost of capital, reduce risk, avoid loss of control, and improve shareholder value, among many other reasons. Eastman Kodak Company can be said to be the queen of restructuring and has taken one-time restructuring charges every year for the past 12 years, wiping out virtually half of its $11.4 billion operating earnings. Of course, companies have routinely taken restructuring charges. But nervous investors fear that huge multiyear write-offs increasingly distort earnings so much so, that some question whether the meaning of earnings numbers and their value as a measure of performance is tting trampled. There are two issues inherent in restructuring charges. First is the timing. Restructuring charges represent asset write-offs and the accruals of future liabilities such as severance payments. Because both are estimates, an overly conservative company can front-load such charges. This burdens the current income statement and benefits future income statements. This practice is referred to as a "big bath." Second is the question of interpretation should such charges be treated as normal operating expenses or as transitory charges? Eastman Kodak Company prefers the latter. Companies are burying all sorts of normal operating expenses in these charges. Eastman Kodak Company may try to spirit the changes away in presentations, but investors should be leery. The restructuring charges aren't simply for selling old equipment and factories at a loss. Hard cash will be flying out the door to pay severance and other real costs." Required 1. Research more on Eastman Kodak Company restructuring efforts and analyze the success and failures of the company in enhancing its financial performance. (10 marks) 2. Companies in Kenya have been restructuring with the aim of enhancing their financial performance. Critically evaluate any two companies listed in the Nairobi Securities Exchange (NSE) that have restructured and highlight the impact of the restructuring on the financial performance. (20 marks) Restructuring and Financial Performance Restructuring is the act of reorganizing the legal, ownership, operational or other structures of a company for the purpose of making it more profitable and better organized for its present needs. A company that has been restructured effectively will theoretically be leaner, more efficient, better organized and focused on its core business with a revised strategic and financial plan. Financial restructuring may be accomplished with the motive to enhance liquidity, lower the cost of capital, reduce risk, avoid loss of control, and improve shareholder value, among many other reasons. Eastman Kodak Company can be said to be the queen of restructuring and has taken one-time restructuring charges every year for the past 12 years, wiping out virtually half of its $11.4 billion operating earnings. Of course, companies have routinely taken restructuring charges. But nervous investors fear that huge multiyear write-offs increasingly distort earnings so much so, that some question whether the meaning of earnings numbers and their value as a measure of performance is tting trampled. There are two issues inherent in restructuring charges. First is the timing. Restructuring charges represent asset write-offs and the accruals of future liabilities such as severance payments. Because both are estimates, an overly conservative company can front-load such charges. This burdens the current income statement and benefits future income statements. This practice is referred to as a "big bath." Second is the question of interpretation should such charges be treated as normal operating expenses or as transitory charges? Eastman Kodak Company prefers the latter. Companies are burying all sorts of normal operating expenses in these charges. Eastman Kodak Company may try to spirit the changes away in presentations, but investors should be leery. The restructuring charges aren't simply for selling old equipment and factories at a loss. Hard cash will be flying out the door to pay severance and other real costs." Required 1. Research more on Eastman Kodak Company restructuring efforts and analyze the success and failures of the company in enhancing its financial performance. (10 marks) 2. Companies in Kenya have been restructuring with the aim of enhancing their financial performance. Critically evaluate any two companies listed in the Nairobi Securities Exchange (NSE) that have restructured and highlight the impact of the restructuring on the financial performance. (20 marks)