What is a Zombie Company?

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About Zombie Company:

A zombie company is a corporate entity with very limited cash flows, only sufficient to pay the interest on the debt borrowed but not the principal amount of the loan.
The revenue generated by the business operations only covers the fixed routine and operating costs (wages, rent, interest payments on debt, for example).
These companies, often referred to as the “living dead” or “zombie stocks,” have no excess capital to invest in growth, innovation, or significant improvements.
They are highly dependent on banks for financing.
They are typically subject to higher borrowing costs and may be one just event—market disruption or a poor quarter performance—away from insolvency or a bailout.
They are “uncompetitive survivors” and contribute to lower productivity in the global economy.
These companies can pose a risk to the broader economy by tying up resources that could be more effectively used by healthier, more innovative firms.

Q1: What is insolvency?

Insolvency refers to situations where a debtor cannot pay the debts they owe. For instance, a troubled company may become insolvent when it is unable to repay its creditors money owed on time, often leading to a bankruptcy filing.

Source: Zombies: Ranks of world’s most debt-hobbled companies are soaring, and not all will survive