Impaired Capital

AAA

DEFINITION of 'Impaired Capital'

1. When a bank's actual assets are worth less than their stated value. When a bank has impaired capital, this capital can be liquidated if the bank cannot make up the deficiency. State laws define the treatment of a bank with impaired capital.


2. When a company's actual assets are worth less than the stated value of the company's outstanding shares.

INVESTOPEDIA EXPLAINS 'Impaired Capital'

In the case of a bank with impaired capital, one option for making up the deficiency is that the bank's board of directors can choose to levy and collect pro rata assessments on common stock to restore the impaired capital. If stockholders do not pay the assessments within a specified time frame, usually three to four weeks, the bank's board of directors can choose to sell enough of the stockholder's shares to collect the assessment.

RELATED TERMS
  1. Outstanding Shares

    A company's stock currently held by all its shareholders, including ...
  2. Capital

    1) Financial assets or the financial value of assets, such as ...
  3. Asset

    1. A resource with economic value that an individual, corporation ...
  4. Liquidation

    1. When a business or firm is terminated or bankrupt, its assets ...
  5. Book Value

    1. The value at which an asset is carried on a balance sheet. ...
  6. Inherent Risk

    The risk posed by an error or omission in a financial statement ...
Related Articles
  1. Analyzing A Bank's Financial Statements
    Fundamental Analysis

    Analyzing A Bank's Financial Statements

  2. From Booms To Bailouts: The Banking ...
    Home & Auto

    From Booms To Bailouts: The Banking ...

  3. Are Your Bank Deposits Insured?
    Savings

    Are Your Bank Deposits Insured?

  4. How Bank of America Holds 1/8 of All ...
    Stock Analysis

    How Bank of America Holds 1/8 of All ...

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center