Final answer:
Companies in the decline phase that cannot sustainably cover costs may choose to 'exit' or cease production long term due to constant losses, affecting all stakeholders involved.
Step-by-step explanation:
When a company finds itself no longer viable in the decline phase, it faces a critical decision. If the business is incurring losses in the short run, it must determine whether its revenues can cover its variable costs. In such a case, it may continue operating at a reduced pace or temporarily 'limp along.' However, if losses persist and the business's revenues do not cover its variable and fixed costs in the long run, it will likely cease production. This process is termed as 'exit,' which is a strategic decision to stop operations due to an unsustainable pattern of financial performance. The decision to exit is difficult as it impacts employees, investors, and owners, and should be made only after thorough consideration and perhaps exhausting other strategic alternatives like restructuring or seeking a buyer.