Asset Deficiency

AAA

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.

RELATED TERMS
  1. Deficiency

    Conceptually, the numerical difference between the amount of ...
  2. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  3. Asset

    1. A resource with economic value that an individual, corporation ...
  4. Liability

    A company's legal debts or obligations that arise during the ...
  5. Discharge In Bankruptcy

    A permanent order that releases the debtor from personal liability ...
  6. Deficiency Agreement

    An arrangement in which a party provides a firm with funds to ...
Related Articles
  1. Reading The Balance Sheet
    Investing Basics

    Reading The Balance Sheet

  2. ROA And ROE Give Clear Picture Of Corporate ...
    Markets

    ROA And ROE Give Clear Picture Of Corporate ...

  3. Warning Signs Of A Company In Trouble
    Professionals

    Warning Signs Of A Company In Trouble

  4. Understanding The Cash Conversion Cycle
    Investing Basics

    Understanding The Cash Conversion Cycle

comments powered by Disqus
Hot Definitions
  1. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  2. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  3. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  4. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  5. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  6. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
Trading Center