Investopedia

Continue to Site »

Credit Cliff

Filed Under » ,
Dictionary Says

Definition of 'Credit Cliff'

A slang term referring to the compounding of a company's credit deterioration caused by provisions such as financial covenants, or events that trigger a change in the company's credit rating. These can put pressure on the company's liquidity or its business to a material extent.
Investopedia Says

Investopedia explains 'Credit Cliff'

For example, if a company is performing poorly it may get a credit rating downgrade, which gives the company a higher cost of capital. This is because a lower rating increases the company's interest payments on its debt, making its situation even worse.

You can think of a highly leveraged company that is in financial trouble as teetering on the edge of a cliff. One false step and it'll be in a freefall.

Articles Of Interest

  1.

    Junk Bonds: Everything You Need To Know

    Don't be fooled by the name - junk bonds may be for you if you know how to analyze them.

  2. Are Your Stocks Doomed?

    When a company is headed for trouble, the warning signs are usually there. Learn how to spot disaster.

  3. Finding The Best Yields

    Using yields to supplement earnings can mean big bucks, with the right strategy.

  4. What Is A Corporate Credit Rating?

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

  5. Why Your Pension Plan Has Sovereign Debt In It

    One type of security pensions tend to invest in is sovereign debt, or debt issued by a government.

  6. 6 Popular ETF Types For Your Portfolio

    Exchange traded funds are an extremely popular diversification tool that can protect your portfolio during troubled periods.

  7. Top 5 Budgeting Questions Answered

    You don't need a degree to understand your money, begin saving and pay down debt.

  8. Don't Judge Your Partner Based On Credit Score

    Credit scores indicate past behavior but don't necessarily reflect present or future behavior, so don't judge you partner solely on credit.

  9. Asset Allocation: The First Step Toward Profit

    Understanding the different asset classes is an essential part of portfolio diversification.

  10. Junk Bond

    Find out more about these bonds that have a high risk of default.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  2. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  3. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  4. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  5. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  6. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.
Trading Center