What is the primary aim of a financial restructuring plan?

The primary aim of a financial restructuring plan is to reduce the debt burden and ensure sustainability. Financial restructuring typically occurs when a company is facing financial distress, facing difficulties in meeting its obligations, or seeking to improve its long-term financial health. By focusing on reducing the debt burden, a restructuring plan allows a company to reorganize its financial commitments, negotiate with creditors, and possibly convert debt to equity or extend payment terms. This process ultimately aims to stabilize the financial condition of the company and pave the way for future growth, ensuring that it can continue to operate sustainably over the long term.

In contrast, eliminating all debts immediately is often unrealistic and not the primary goal in restructuring, as it may not take into account the company's operational needs and its relationships with creditors. Merging with a competitor is generally a strategic decision rather than a specific focus of a restructuring plan, which primarily addresses financial issues rather than growth or competitive positioning. Maximizing shareholder profits, while a desirable outcome, is not the fundamental objective of financial restructuring; the focus is first and foremost on stabilizing the company’s financial position.