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. Protected Cell Company (PCC)

    A corporate structure in which a single legal entity is comprised ...
  6. Plant Patent

    An intellectual property right that protects a new and unique ...
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. Stock Analysis

    What Are Intel’s Hopes In The Processor Market?

    Intel has pretty minimal share in the smartphone applications processor market, despite some heavy investments in products for the segment.
  5. Stock Analysis

    What's DISH’s Strategic Direction In The Industry?

    Telecommunications industry has evolved from being a backwater of ultra-conservative utility-like stocks to a high-growth area for cutting-edge investors.
  6. Stock Analysis

    What Are Kinder Morgan’s Plans For Growth In 2016?

    One thing investors likely love about Kinder Morgan is its robust backlog of future projects, like growing its generous dividend by 10% per year.
  7. Economics

    Iron Ore Market: Falling Into The Hands Of A Few

    The big iron ore mining companies have embarked on a drive to increase supply, reduce cost, and take market share.
  8. Trading Strategies

    Know How To Manage Gaps On Your Trading Strategy

    Gaps generate profitable strategies right after they print, as well as during retracements that test those levels, often months or years later.
  9. Stock Analysis

    Why Should You Invest In Stratasys Today?

    When Stratasys pre-announced its fourth-quarter earnings, management highlighted that its MakerBot acquisition was underperforming expectations.
  10. Investing

    What's a Monopolistic Market?

    A monopolistic market has a significant number of characteristics of a pure monopoly. Though there may be more than one supplier, the market has high prices, suppliers tightly control availability ...

You May Also Like

Hot Definitions
  1. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  2. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  5. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  6. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
Trading Center