Asset Rationalization

AAA

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.

RELATED TERMS
  1. Divestiture

    The disposal of a business unit through sale, exchange, closure, ...
  2. Asset Sales

    A sale of bank receivables by a bank to another party. Asset ...
  3. Asset Stripper

    An individual or company, which purchases a corporation with ...
  4. Asset Redeployment

    The strategic relocation of assets from a less valued, or less ...
  5. Rationalization

    A reorganization of a company in order to increase its efficiency. ...
  6. Sharpe Ratio

    A ratio developed by Nobel laureate William F. Sharpe to measure ...
Related Articles
  1. Fundamental Analysis

    Understanding Leveraged Buyouts

    LBOs are often presented as predatory by the media, but it really depends on which side of the deal you're on.
  2. Bonds & Fixed Income

    Cashing In On Corporate Restructuring

    Companies use M&As and spinoffs to boost profits - learn how you can do the same.
  3. Investing Basics

    The Merger - What To Do When Companies Converge

    Learn how to invest in companies before, during and after they join together.
  4. Investing

    Use Breakup Value To Find Undervalued Companies

    Find out a company's worth if it were sold in pieces - it may be more than you think.
  5. Entrepreneurship

    The Impact Of Recession On Businesses

    Find out how this economic cycle affects both small and big business.
  6. Bonds & Fixed Income

    Taking Advantage Of Corporate Decline

    A bankrupt company can provide great opportunities for savvy investors.
  7. Economics

    Understanding Perpetuity

    Perpetuity means without end. In finance, a perpetuity is a flow of money that will be received on a regular basis without a specified ending date.
  8. Fundamental Analysis

    What is a Null Hypothesis?

    In statistics, a null hypothesis is assumed true until proven otherwise.
  9. Investing

    What's a Divestiture?

    Divestiture is when a company, government or other organization sells, shuts down or otherwise eliminates a division or operating unit. Divestitures happen for many reasons. Management may decide ...
  10. Economics

    How A Limited Government Affects A Country's Finances

    Countries with limited governments have fewer laws about what individuals and businesses can and can’t do. What's the net result?

You May Also Like

Hot Definitions
  1. Loan-To-Value Ratio - LTV Ratio

    A lending risk assessment ratio that financial institutions and others lenders examine before approving a mortgage.
  2. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  3. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  4. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  5. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  6. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
Trading Center