Distress Price

AAA

DEFINITION of 'Distress Price'

When a firm chooses to mark down the price of an item or service instead of discontinuing the product or service altogether. A distress price usually comes about in tough market conditions when the sale of a particular product or service has slowed down dramatically and the company is unable to sell enough of it to cover the fixed costs associated with doing business.

INVESTOPEDIA EXPLAINS 'Distress Price'

A company will sometimes choose to mark down an item's price rather than discontinue operations completely because even at a distressed price, those revenues will help with covering some of the fixed costs associated with running the business. However, if the item can not be sold at a price greater than its variable cost of production, discontinuing the item is usually in the firm's best interests.

RELATED TERMS
  1. Discontinued Operations

    A segment of a company's business that has been sold, disposed ...
  2. Financial Distress

    A condition where a company cannot meet or has difficulty paying ...
  3. Distressed Sale

    When property, stocks or other assets are sold in an urgent manner, ...
  4. Distressed Securities

    A financial instrument in a company that is near or is currently ...
  5. Path To Profitability (P2P)

    A clearly defined route to profitability as described in a business ...
  6. Opaque Pricing

    Opaque pricing is a way that companies can sell their merchandise ...
RELATED FAQS
  1. What's the difference between the production cost and the manufacturing cost?

    Production costs include any expenses associated with business activity for an organization. Manufacturing costs only include ... Read Full Answer >>
  2. How do I calculate production costs in Excel?

    It is impossible for a single method of calculating production costs to work for all businesses, much less for a Microsoft ... Read Full Answer >>
  3. What are the different types of price discrimination and how are they used?

    Price discrimination is one of the competitive practices used by larger, established businesses in an attempt to profit from ... Read Full Answer >>
  4. How can key performance metrics (KPIs) help evaluate employees?

    Key performance indicators (KPIs) can help evaluate employees by measuring how well they perform in meeting individual goals ... Read Full Answer >>
  5. How can you use a cash flow statement to make a budget?

    To use the cash flow statement to make a budget, a company needs to combine the operating cash flow portion of its cash flow ... Read Full Answer >>
  6. How do I calculate the degree of operating leverage?

    The degree of operating leverage is a measure used to evaluate how a company's operating income changes with respect to a ... Read Full Answer >>
Related Articles
  1. Personal Finance

    Spotting Companies In Financial Distress

    What are the warning signs that a company is struggling - or worse, sinking - financially? Read on to find out.
  2. Mutual Funds & ETFs

    How To Profit From Debt Securities In Failing Companies

    Learn about the vulture funds that prey on the market's weakest companies by investing in distressed debt.
  3. Bonds & Fixed Income

    Distressed Debt An Avenue To Profit In Corporate Bankruptcy

    Use debt securities to attack bankrupt companies and scavenge them for profits.
  4. Credit & Loans

    How To Increase Your Appeal To Prospective Lenders

    Making a business eligible for loans/credit cards at the best possible rates requires crafting an excellent credit profile through the smart use of credit.
  5. Economics

    Understanding Marginal Benefit

    Marginal benefit is an economic term that describes the maximum amount a consumer is willing to pay for an additional unit of a good or service.
  6. Entrepreneurship

    The Story Behind Google's Success

    An ongoing commitment to innovation and rapid iteration drives Google's ongoing success.
  7. Entrepreneurship

    How To Profit From Solar Energy

    Once regarded as too expensive and inefficient, solar energy is now becoming a more viable option for consumers and businesses alike.
  8. Entrepreneurship

    New Battery Technology Investment Opportunities

    With the advent of mobile computing and electric cars, the importance of batteries for electrical power will continue to grow.
  9. Economics

    Explaining Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent.
  10. Personal Finance

    How Agile Project Management Changed Zara

    Zara has created a competitive advantage in the retail industry by using a supply chain centered on agile project management.

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center