Asset Rationalization

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DEFINITION of 'Asset Rationalization'

Reorganizing a firm's assets in order to improve operating efficiencies and boost the bottom line. Asset rationalization may involve a range of activities, including sales or divestitures of certain assets, closures of some facilities and expansion of others and streamlining of manufacturing or other operations. In the majority of cases, asset rationalization may result in the loss of hundreds of jobs.

INVESTOPEDIA EXPLAINS 'Asset Rationalization'

Detractors of asset rationalization contend that the strategy focuses on short-term business gains at the expense of human capital, since widespread job losses will foster a sense of uncertainty and lead to lower productivity among the remaining employees at an organization. In challenging economic times, however, companies may have little choice but to continue on the asset rationalization path in order to stay competitive in the global marketplace.

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