I am haunted by a zombie ….are you too?                                   

By Alia Noor, FCMA, CIMA, MBA, Oxford fintech programme, GCC VAT Comp Dip,COSO Framework.
Associate Partner Ahmad Alagbari Chartered Accountants, UAE
Founder xpertsleague


Few years ago, i was haunted by a zombie!
No, it is not a supernatural world dream!
It is reality…… difference was that this zombie was a company!!

Zombie Companies exist everywhere.
They are out there!
It may be a Brand new or well-established business.

I survived from it. But what should you do as a Finance Professional ” if you work for a Zombie Company??
Will you become Zombie yourself or you will fight for your survival?
These are Mythical Zombies of corporate world and here is my story of survival!


A zombie is a reanimated corpse with a vicious craving for brains.
Main aspects of zombie is if they bite you, you’ll become a zombie too.
Much like the supernatural zombie,
The “Corporate Zombie” doesn’t know that it’s already dead.

Zombification in humans is usually caused by infection or voodoo magic, zombie companies are usually the result of restricted revenue and cash flow.
For returning to healthy company, zombie companies must follow rigorous Cash management policy i.e. review their suppliers, debtors, inventory, reduce their fixed cost. Reduce cash outflows expenditures or increase their earnings in order to pay off debts .
Corporate Zombies are found in form of companies or banks unable to break out of their low-productivity trap.

These Zombie companies walk among us.

Zombie companies are indebted mature businesses that continue to operate despite not having enough earnings to cover the interest payments on their debts, they are insolvent or on the brink of insolvency.

The term “zombie company” originated in Japan to describe companies that were only generating enough cash to pay interest on their debts. After the collapse of the Japanese asset price bubble in late 1991, Japanese banks continued to support weak or failing firms instead of letting them go bankrupt. This contributed to what is known as the “Lost Decade,” a period of economic stagnation in Japan.

In 2008, during the Global Financial Crisis, the term regained popularity and was used to describe companies  that were bailed out by the U.S. Troubled Asset Relief   Program (TARP)

Zombie Companies Are Multiplying and Fueling New Risks

Even before the Covid-19 crisis, a decade of low interest rates helped to fuel a rise in the number of “living dead”: companies unable to cover their debt-servicing costs from profits in the long term.

Zombie companies proliferate under cover of pandemic they have worsened the situation by taking advantage of promised government bailouts and payment holidays from banks and other financial institutions.

The lowering of interest rates and other extraordinarily sympathetic market conditions have opened the door for zombie companies to take advantage of the situation and incur further credit by entering into loans at low interest rates. What was offered to them was a legal concoction of further debt, lower interest rates and an opportunity to dig themselves into an even bigger hole.
Deutsche Bank Securities estimates the zombies’ share of US companies alone has roughly tripled since the financial crisis to more than 18 per cent. (Financial times)


Voodoo is a religion practiced chiefly in Caribbean countries and some African countries but is focused mainly in Haiti. In many Western countries, the term “voodoo” may connote black magic and unexplained phenomena.

“Corporate voodoo accounting” occurs when a company uses some highly suspicious accounting methods to disguise what’s really going on with the business.

Voodoo accounting can also raise zombies of its own. Corporate zombies are exactly the type of desperate and mindless companies that could use some voodoo accounting to cover up their major financial woes.

The Securities and Exchange Commission has brought enforcement actions against corporations for many types of fraudulent financial reporting, including improper revenue recognition, period-end stuffing, fraudulent post-closing entries, improper asset valuations, and misleading non-GAAP financial measures.

How to Test your Company is a Zombie?

Muge Adalet McGowan,Identifies a firm as a zombie;

If its interest coverage ratio (ICR) has been less than one for at least three consecutive years  and if it is at least 10 years old.

Companies that are carrying leveraged loans are not the same as zombies, the average “interest coverage ratio” of leveraged loans is heading toward zombie territory.

The ratio is a measure of the amount of interest a company must pay compared to its earnings. If the ratio is 1, it means a company’s profits are equal to its interest obligations. Anything below 1 means the company is unable to pay the interest on its debt.

Future of Zombie Companies

For vampires,the weakness is garlic.For werewolves, it’s a silver bullet.
And for zombies? A rise in interest rates.

Existence of zombie companies depends on debts, a hike in interest rates will wipe out a significant number them. make them unable to meet their interest obligations.

Finance professional Role …

Now question is how to survive?
Well the Zombification in humans is usually caused by infection or voodoo magic,
while in zombie companies it is usually the result of restricted revenue and cash flow.

  • First step of survival plan iis to have a “Debt management plan”  list down all company debts from Bank loans, lines of credit, business credit cards as well as outstanding payments due to vendors. Prioritize which debts to tackle first, review interest rate and monthly payment plan based on highest-interest-rate debt.


  • Use “Critical thinking” identify primary roots behind acquiring the debt in the first place so it will not be repeated in future and addressed the main issues which were behind it.


  • “Redesign budget plan” for the year, incorporate business plan that leaves profit enough to cover monthly costs, pay interest and principle of your debts .

Make”Strategy” to free up more cash, by reducing outflows & increasing inflows,
Boosts sales, Cutoff Expenses and put that money back into servicing your debt      

  • “Plan to Boost sales”, implement strategies to boost sales, like price increase ,discounts. Identify unprofitable segments/SKUs that result in ultra-low margins discontinue them.


  • Most importantly focus and manage  “Operating cycle”, i.e. timing of cash payments and collections. Ensure that conversion from inventory to receivables to cash works in a timely fashion.


  • “Debtor management”, manage  receivables by analyzing credit policy terms, credit period, terms, discount, penalty, and collection process practices.


  • “Inventory management” forecast the demand with help of supply chain & production maintain inventory level neither too low not too much. Neither losing  customer nor increasing storage and carrying cost.


  • “Creditors”, negotiate with  supplier for extending the payment terms that smooth  cash flow and reduce operating gap required until the products are sold.


  • “Sell and Lease Back”, analyze unnecessary equipment ,land or building & to sell and lease them back when required.


  • Analyze  “Threats and opportunities “of business. Review outdated business models. Consider all possibilities of benefiting from technology to enhance company growth , collection of debts system , and online marketing.

This is advance technologies era The Fourth Industrial Revolution is built on Blockchain and AI , market nature is volatile ,business needs to use innovative ideas to leverage the technology to survive and standout.

 Ignoring disruption risk becoming akin to the walking dead .

These measures were the rescue plan for me and my company, which definitely work for me. But the last backup plan i had in mind was;

“Hire a Debt Management Company”. As they sniff out where you’re losing money unnecessarily. But they might be expensive but worth it in the long-run.

“Find an Investor”, As a last resort my plan was if things turns out to be really bad, to find an investor for injection of of cash which are often in exchange for a piece of your company. Try to avoid this option as it involves signing away a portion of your future profits.


Avoid your company to become a Zombie,
like you would avoid the living dead.