Deficit

Dictionary Says

Definition of 'Deficit'


The amount by which expenses exceed income or costs outstrip revenues. Deficit essentially refers to the difference between cash inflows and outflows. It is generally prefixed by another term to refer to a specific situation - trade deficit or budget deficit, for example. Deficit is the opposite of "surplus" and is synonymous with shortfall or loss.

Investopedia Says

Investopedia explains 'Deficit'


For example, if a nation has exports of $2 billion and imports of $3 billion in a given year, it would have a trade deficit of $1 billion for that year. Similarly, a government that has revenues of $10 billion and expenditures of $12 billion in a particular year would have a budget deficit of $2 billion in that period.

Large and growing deficits over prolonged periods of time are unsustainable in most cases, irrespective of whether they are incurred by an individual, corporation or government. Huge deficits over a number of years can wipe out equity for an individual or a company's shareholders, eventually leaving bankruptcy as the only option. Although sovereign governments have a much greater capacity to sustain deficits, negative effects in such cases include lower economic growth rates (in case of budget deficits) or a plunge in the value of the domestic currency (in case of trade deficits).

comments powered by Disqus
Hot Definitions
  1. Private Equity

    Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity.
  2. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  3. Valuation

    The process of determining the current worth of an asset or company. There are many techniques that can be used to determine value, some are subjective and others are objective.
  4. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  5. Tech Street

    A term used in the financial markets and the press to refer to the technology sector. Companies like Intel, Microsoft, Apple and Dell are all considered to be part of Tech Street.
  6. Momentum Investing

    An investment strategy that aims to capitalize on the continuance of existing trends in the market. The momentum investor believes that large increases in the price of a security will be followed by additional gains and vice versa for declining values.
Trading Center