Bad Debt Reserve

AAA

DEFINITION of 'Bad Debt Reserve'

An account set aside by a company to account for and offset losses that arise as a result of defaults from futures loans. This figure may be calculated based on historical norms or other known information about the relative safety of the debt.

Also known as a "loss reserve".

INVESTOPEDIA EXPLAINS 'Bad Debt Reserve'

Bad debt reserves become alarming when they reach levels outside of historical norms or averages, either at the company level or the national level. For instance, there are many concerns today about China's high bad debt reserves at its banks, an aftereffect of many years of almost non-existent lending requirements.

RELATED TERMS
  1. Allowance For Credit Losses

    An estimation of the debt that a company is unlikely to recover. ...
  2. Provision For Credit Losses - PCL

    In accounting, an estimation of potential losses that a company ...
  3. Bad Debt

    A debt that is not collectible and therefore worthless to the ...
  4. Default

    1. The failure to promptly pay interest or principal when due. ...
  5. Default Risk

    The event in which companies or individuals will be unable to ...
  6. Loan

    The act of giving money, property or other material goods to ...
Related Articles
  1. What Is A Corporate Credit Rating?
    Investing Basics

    What Is A Corporate Credit Rating?

  2. The Importance Of Your Credit Rating
    Credit & Loans

    The Importance Of Your Credit Rating

  3. Debt Reckoning
    Investing

    Debt Reckoning

  4. Curious About Stock Index Futures? Read ...
    Options & Futures

    Curious About Stock Index Futures? Read ...

comments powered by Disqus
Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  3. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  4. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
Trading Center