Long-Term Debt and Financial Performance: A Study of Abbott Manufacturing Firm in Brussels, Belgium
DOI:
https://doi.org/10.53819/81018102t5250Abstract
Long-term debt has a significant impact on the financial performance of firms. It can affect profitability by increasing interest expenses and reducing net income. Cash flow can be constrained as regular debt servicing obligations limit available funds for investments or operational activities. High levels of long-term debt can also restrict financial flexibility, making it challenging for firms to secure additional financing or respond to market changes. Moreover, the risks associated with long-term debt, such as debt covenants and refinancing risk, can pose threats to a firm's financial stability and sustainability. Therefore, effectively managing long-term debt is crucial for optimizing financial performance and maintaining a strong financial position. The study used the descriptive research design. The target population was 15 finance officers working in Abbott Manufacturing firm in Brussels, Belgium. The study did sampling of 10 respondents that were selected from the target population of 15 finance officers working in Abbott Manufacturing firm in Brussels, Belgium. Collection of data was done through questionnaires. The study concluded that the interest expenses, cash flow constraints, and limited financial flexibility associated with long-term debt can impact the company's profitability and hinder its ability to invest in growth opportunities. Mitigating risks, optimizing debt structure, improving cash flow management, and diversifying financing sources are key strategies for Abbott Manufacturing to effectively manage long-term debt and enhance its financial performance. The study recommended that Abbott Manufacturing should analyze its current long-term debt structure and explore opportunities to optimize it. The firm should focus on improving working capital management, streamlining operational processes, and implementing cash flow forecasting techniques to optimize cash flow generation and allocation. To reduce the risks associated with heavy reliance on long-term debt, the firm should explore alternative financing sources.
Keywords: Long-Term Debt, Financial Performance, Manufacturing firm, Belgium
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