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. Loan

    The act of giving money, property or other material goods to ...
  4. Default Probability

    The degree of likelihood that the borrower of a loan or debt ...
  5. Pre-Provision Operating Profit ...

    The amount of income a bank or similar type of financial institution ...
  6. Bad Debt Recovery

    A debt from a loan, credit line or accounts receivable that is ...
Related Articles
  1. A credit rating is a useful tool not only for the investor, but also for the entities looking for investors.
    Investing Basics

    What Is A Corporate Credit Rating?

    Is the bond you're buying investment grade, or just junk? Find out how to check the score.
  2. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  3. Investing

    Debt Reckoning

    Learn about debt ratios and how to use them to assess a company's financial health. You could save a lot of money!
  4. Options & Futures

    What are the differences between divergence and convergence?

    Find out what technical analysts mean when they talk about a market experiencing divergence or convergence and how they affect trading strategies.
  5. Options & Futures

    Futures Quotes Explained The "Easy" Way

    If there’s a security whose price fluctuates, there can theoretically be a futures marketplace for it.
  6. Options & Futures

    Why is the Accumulative Swing Index helpful for traders and/or investors?

    Find out why J. Welles Wilder believed that the accumulative swing index could be used in the futures markets to indicate long-term trends.
  7. Options & Futures

    Stock Futures vs Stock Options

    A full analysis of when is it better to trade stock futures vs when is it better to trade options on a particular stock. A quick overview of how each of them works and why would a trader, investor, ...
  8. Options & Futures

    The Potential Of Low-Priced Options

    The benefits of trading low-priced options, and learning how to pinpoint them, can be a very profitable strategy for an options trader.
  9. First time stock investors may ask, is there any way to buy insurance on stocks to prevent losses?
    Options & Futures

    Stock Safety: Top 3 Ways to Limit Your Losses

    First time stock investors may ask, is there any way to buy insurance on stocks to prevent losses?
  10. Investors can use derivative securities to effectively buy insurance on their individual holdings or on their portfolio as a whole.
    Options & Futures

    Can You Buy Stock Insurace? 3 Strategies to Limit Stock Losses

    Investors can use derivative securities to effectively buy insurance on their individual holdings or on their portfolio as a whole.

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center