If Companies Lose Money, They Go Out of Business, Right? Not Quite

In our capitalistic system, if a company can’t make profit, it goes out of business, at least, that’s how it is supposed to work. However, for many legacy companies, this isn’t the case. For companies that had been profitable in the past and have already reached a certain amount of scale they can borrow money and keep the doors open in the hopes that things improve or management can turn the company around. Lovingly referred to as “zombie” companies, these companies pay enough debt and cycle their obligations just enough to keep going but never get back to profitability. When debt gets to expensive, or there is a downturn in the economy, then these companies are especially vulnerable and thousands can be out of work and communities can be deeply effected.

In this video, we learn more about zombie companies, how years of cheap debt in the US and China have fueled an epidemic of zombie companies, and what happens when the day of reckoning finally arrives for these companies and the greater economy.