What's the Big Idea? It's the Return of the Zombie Company

The video discusses the concept of 'zombie companies,' which are firms unable to cover interest payments with earnings. Barnaby Martin from Bank of America Merrill Lynch highlights how central banks' policies lead to capital misallocation, allowing these companies to survive. The video examines the prevalence of zombie companies in Europe and the UK, noting Brexit's impact. While these companies' survival supports employment and growth, it also complicates exiting low-interest environments.

What is the main argument presented by Barnaby Martin regarding central banks' policies?

• They lead to a balanced allocation of capital.

• They increase interest rates significantly.

• They cause a misallocation of capital by encouraging a search for yield.

• They reduce the number of zombie companies.

How does Barnaby Martin define a zombie company?

• A company with high revenue growth.

• A company with earnings less than its scheduled interest payments.

• A company with a strong market presence.

• A company with low employee turnover.

What was the peak percentage of European zombie companies in 2016?

• 6%

• 11%

• 14%

• 20%

How has Brexit uncertainty affected the number of zombie companies in the UK?

• It has decreased the number of zombie companies.

• It has increased the number of zombie companies.

• It has had no impact on the number of zombie companies.

• It has stabilized the number of zombie companies.

What is one downside of the survival of zombie companies in Europe and the UK?

• Difficulty escaping a low-rate environment.

• Higher unemployment rates.

• Increased default rates.

• Decreased capital flow into businesses.