Final answer:
When a company faces prolonged negative earnings, they may opt for a restructuring plan to address their financial and operational issues, potentially avoiding long-term exit from the market.
Step-by-step explanation:
If a company has had negative earnings for several periods, they might choose to use a restructuring plan (C). A restructuring plan helps a business reorganize its activities, responsibilities, and financial structure to better align with its current economic realities and ensure its survival and future profitability. During challenging financial times, it is crucial for a business to examine its operations and make necessary adjustments which may include cost-cutting, asset sales, or a shift in strategic direction.
In the short run, a company may continue operating despite losses if it can cover its variable costs with revenues. However, if losses persist, the company may enter a long-run process called exit, where it reduces production or ceases operations altogether. An effective restructuring plan can be instrumental in preventing such a scenario by adapting to the challenges and establishing a sustainable path forward.