Deficiency Agreement

Filed Under » ,
Dictionary Says

Definition of 'Deficiency Agreement'

An arrangement in which a party provides a firm with funds to cover any shortfalls arising from capital or cash flow restraints, allowing the company to service its debt. A deficiency agreement will usually have a cumulative limit specified by the lending party.
Investopedia Says

Investopedia explains 'Deficiency Agreement'

Deficiency agreements allow firms to avoid the possibility of default during difficult periods. These types of agreements will usually involve parties that have an interest in the company and want to see it continue operations.

While a deficiency agreement will cover an entire company, it may be specified to protect a smaller aspect of the business. For example, a new project may have unstable cash flows and be unable to generate revenues until it reaches a certain level of operations. To prevent the project from failing, a deficiency agreement could provide it with enough cash until a revenue steam is established.

Articles Of Interest

  1.

    Operating Cash Flow: Better Than Net Income?

    Differences between accrual accounting and cash flows show why net income is easier to manipulate.

  2. Working Capital Works

    A company's efficiency, financial strength and cash-flow health show in its management of working capital.

  3. What Is A Cash Flow Statement?

    Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports.

  4. Free Cash Flow: Free, But Not Always Easy

    Free cash flow is a great gauge of corporate health, but it's not immune to accounting trickery.

  5. Cash Flow Indicator Ratios

    Learn about the operating cash flow to sales ratio, free cash flow to operating cash flow ratio and free cash flow coverage ratio.

  6. Finding Solid Buy-And-Hold Stocks

    Find out how to look at the big picture - even when the market's short-term outlook is less than rosy.

  7. Corporate Bonds: An Introduction To Credit Risk

    Corporate bonds offer higher yields, but it's important to evaluate the extra risk involved before you buy.

  8. 5 Ways To Boost Your Firm's Value

    In today's tough business environment, firms have to get creative with ways to boost value for their shareholders.

  9. How To Invest In Corporate Bonds

    Understand the basics of corporate bonds to increase your chances of positive returns.

  10. APR vs. APY

    Annual percentage rate and annual percentage yield are two ways companies calculate the amount of interest you can owe. Learn more about them and find out which is the better rate.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Yield Elbow

    The point on the yield curve indicating the year in which the economy's highest interest rates occur. The yield elbow is the peak of the yield curve, signifying where the highest interest rates occurred.

  2. Xenocurrency

    A currency that trades in markets outside of its domestic borders.

  3. Wanton Disregard

    A standard of severe negligence. Wanton disregard is a very serious accusation that indicates that a person behaved extremely recklessly.

  4. Ultra ETF

    A class of exchange-traded funds (ETF) that employs leverage in an effort to achieve double the return of a set benchmark.

  5. Toehold Purchase

    A purchase of less than 5% of a target company's outstanding stockmade by an acquiring company. A toehold purchase of just under 5%, while not a significant stake in a firm, allows the shareholders a "toe-holds" grip on the company and its decision making.

  6. Samurai Bond

    A yen-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations.
Trading Center
http://sp.fastclick.net/ad/tr/10858-64082-15546-0?mpt=990cbc32649b4269d97c4e0ba2cc2b3a