Asset Deficiency

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DEFINITION of 'Asset Deficiency'

A situation where a company's liabilities exceed its assets. Asset deficiency is a sign of financial distress and indicates that a company may default on its obligations to creditors and may be headed for bankruptcy. Asset deficiency can also cause a publicly traded company to be delisted from a stock exchange.

INVESTOPEDIA EXPLAINS 'Asset Deficiency'

A company that has a chance at recovering financially may file for chapter 11 bankruptcy, under which the company is restructured, continues to operate and attempts to regain profitability. In a worst-case scenario, asset deficiency may force a company to liquidate, in order to pay off creditors and bondholders. The company will file for chapter 7 bankruptcy and go completely out of business. In this situation, shareholders are the last to be repaid, and they may not receive any money at all.

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  3. What happens to the shares of a company that has been liquidated?

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  4. What is the difference between compulsory and voluntary liquidation?

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