On March 8, 2023, Silicon Valley Bank (SVB) disclosed its plans to raise USD 1.75 billion to seal a hole in its balance sheet from an unsuccessful sale of a fixed-income portfolio that had reportedly resulted in substantial losses. This unexpected move triggered a massive withdrawal of deposits, especially by technology and venture capital firms. The liquidity problem was expected to leave losses amounting to USD 20 billion. A fund manager intended to examine the level of financial distress in SVB and identify the possibility of recovery. His clients believed that SVB could still be a good buy at the current valuation. The fund manager examined various risks and applied the probability of financial distress model for analysis.
A financial consultancy analyst received an assignment to assess the long-term performance of Reliance Industries Ltd., a multinational conglomerate based in India. The assignment had resulted from a share price rise for Reliance Industries. On April 27, 2022, the company’s share price reached its peak of ₹2,776. Consequently, a few of the financial consultancy’s clients had requested information regarding the long-term performance of Reliance Industries. The analyst was therefore tasked with calculating the economic value added in order to evaluate the company’s performance.
<p align="justify">In May 2022, a young analyst intended to examine the financials of Yes Bank, one of India’s leading private banks. It had gotten into financial trouble and had experienced irregularities in recent years. Crucial clients of the analyst’s financial advisory firm were interested in Yes Bank’s investment potential because the share price was cheap. The clients therefore wanted to know if the bank showed signs of progress and stability, as it could make an ideal investment. The analyst believed the bank would be financially stable only if it was no longer experiencing financial distress. Therefore, the analyst used the CAMELS framework and probability of financial distress model to examine the financials and advise their clients on the bank's financial position.<p/>
In early 2021, an investor had a substantial amount invested in three companies in the Reliance Anil Dhirubhai Ambani Group Reliance Group: Reliance Communications Ltd., Reliance Infrastructure Ltd., and Reliance Capital Ltd. The market price of Reliance Group shares had fallen steeply during the past five years (2016–2020), eroding the wealth of shareholders; consequently, the investor had lost almost all of his investments in the three group companies. Further, in 2019, Reliance Communications Ltd. had filed for bankruptcy. In 2020, the chair of the Reliance Group mentioned that Reliance Capital Ltd. had stopped its lending business and initiated stake sales. The investor decided to sell his shares in Reliance Communication Ltd. and Reliance Capital Ltd. at a huge loss. However, good dividend payments, and positive signals from the Reliance Group chair regarding betterment in the top line, a promotors’ stake increase, and his intention to reduce the companies’ debt to zero in 2020 made the investor hold their Reliance Infrastructure Ltd. shares. Nevertheless, to understand the possibility of improved fundamentals, the investor had to analyze the financial statements of Reliance Infrastructure Ltd., examining these for potential red flags that could identify significant threats to the future of the company and his investments.