I’m reading other definitions online and it says that it allows companies to restore liquidity & be more flexible. How? What do they mean by more flexible?
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An ELI5 explanation: Let’s say you get a job cutting lawns over the summer. To buy a mower, you go to your best friend and ask him to lend you $200 to buy a mower, and you’ll pay him back next week (along with, say, an extra $10).
You begin cutting lawns, and realize that there’s no way that you can afford to pay him back that fast. So you go to your parents, and ask them for $210, and a payment plan that extends to the end of the summer.
You have just restructured your debt, and avoided pissing off your friend. You are also more flexible, so you might be able to use earned cash to pay a helper.
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