The recent statistics show that over 85 per cent of Fortune 500 companies in the USA have downsized over the last five years and 100 per cent is planning to do so in the next five year. As a result of reducing the large number of labor force, layoffs have negative effects on companies' health in the long run and surviving employees. A study has found that in the short run, layoffs can lead companies to be able to reduce their operating expanses. However, in the long run, the layoffs will negatively affect revenues and stock price of the companies. Layoffs can affect companies' health in the form of decreasing of long-term revenues, due to losing their human resources because of emphasizing on the financial statement.
Humans are valuable resources that produce revenues for companies.
Therefore, this revenue-producing ability should be carefully considered by the firms contemplating a layoff. In the business world, humans resources are often referred to as the most valuable assets of the companies, particularly in the age of the service economy. Basically, companies that lay off a large number of employees significantly to reduce their operating expanses, primarily salaries, wages, health insurance, etc. This reduction of operating expenses will be shown in the firms' financial statements. As a result, the financial statements would show the higher short-term profit.