What strategy is used to cut expenses for making a business more financially stable?

Retrenchment is a strategy employed by businesses aiming to cut expenses and improve financial stability. This approach focuses on reducing costs, which can include downsizing the workforce, eliminating or consolidating departments, and minimizing operational expenses. By tightening its budget and streamlining operations, a company can enhance its efficiency and focus on its core activities, thereby strengthening its overall financial position.

During periods of financial distress or economic downturns, retrenchment can be a proactive measure that allows a business to remain competitive and viable in the long run. This strategy often involves careful analysis of various functions within the organization to identify areas where spending can be curtailed without sacrificing essential operations.

In contrast, other options like divestiture involve selling off parts of the business, which may not directly cut expenses but rather reallocate resources. Liquidation refers to closing down a business entirely and selling off assets, which is typically a last resort. Bankruptcy is a legal process to resolve intractable debt and is not inherently a strategy to stabilize finances but rather a legal pathway for dealing with insolvency.