Asset Deficiency

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.

BREAKING DOWN '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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RELATED FAQS
  1. What happens when a corporation declares bankruptcy?

    Understand what options are available to corporations under bankruptcy protection, and learn what takes place after bankruptcy ... Read Answer >>
  2. Does a shareholder lose all of their equity once a Chapter 11 bankruptcy is filed ...

    When a company files for Chapter 11 bankruptcy, the management of the company is still in charge of the daily operations. ... Read Answer >>
  3. What happens to the shares of a company that has been liquidated?

    Learn what happens to a company's shares during Chapter 11 and Chapter 7 bankruptcy proceedings, and understand how much ... Read Answer >>
  4. Under what circumstances might a company decide to liquidate?

    Learn about the circumstances under which a company may decide to liquidate, and understand how assets are liquidated in ... Read Answer >>
  5. When will bankruptcy be removed from my credit history?

    I filed for bankruptcy 10 years ago in November. Firstly, I do not know which category I applied for. ... Read Answer >>
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    Filing for chapter 11 bankruptcy protection simply means that a company is on the verge of bankruptcy, but believes that ... Read Answer >>
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