Incipient Default

A A A

DEFINITION

When a borrower appears to be heading toward defaulting on its debt. An incipient default is the foreshadowing of a person or company's inability to service a debt obligation.

INVESTOPEDIA EXPLAINS

Within the loan arrangement, the lender can make specific provisions regarding an incipient default. Such provisions may place covenants on the borrower or impair a contractual right. Incipient defaults may be determined based on current business problems, such as an illiquid balance sheet or a low quick ratio.


RELATED TERMS
  1. Quick Ratio

    An indicator of a company’s short-term liquidity. The quick ratio measures a ...
  2. Cash Basis Loan

    A loan where interest is recorded as earned when payment is collected. Ordinarily, ...
  3. Debtor In Possession - DIP

    An individual or corporation that has filed for Chapter 11 bankruptcy protection ...
  4. Default

    1. The failure to promptly pay interest or principal when due. Default occurs ...
  5. Default Risk

    The event in which companies or individuals will be unable to make the required ...
  6. Nonperforming Loan - NPL

    A sum of borrowed money upon which the debtor has not made his or her scheduled ...
  7. Recession

    A significant decline in activity across the economy, lasting longer than a ...
  8. Risk

    The chance that an investment's actual return will be different than expected. ...
  9. Working Capital

    This ratio indicates whether a company has enough short term assets to cover ...
  10. Treasury Direct

    The online market where investors can purchase federal government securities ...
Related Articles
  1. What Is A Corporate Credit Rating?
    Investing Basics

    What Is A Corporate Credit Rating?

  2. Are Your Stocks Doomed?
    Markets

    Are Your Stocks Doomed?

  3. An Overview Of Corporate Bankruptcy
    Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

  4. Subprime Lending: Helping Hand Or Underhanded?
    Investing Basics

    Subprime Lending: Helping Hand Or Underhanded?

  5. Taking Advantage Of Corporate Decline
    Bonds & Fixed Income

    Taking Advantage Of Corporate Decline

  6. Understanding Leveraged Buyouts
    Fundamental Analysis

    Understanding Leveraged Buyouts

  7. How The Sarbanes-Oxley Era Affected ...
    Fundamental Analysis

    How The Sarbanes-Oxley Era Affected ...

  8. Where's The Market Headed Now?
    Fundamental Analysis

    Where's The Market Headed Now?

  9. How Return On Equity Can Help You Find ...
    Economics

    How Return On Equity Can Help You Find ...

  10. Does Higher Risk Really Lead To Higher ...
    Active Trading

    Does Higher Risk Really Lead To Higher ...

comments powered by Disqus
Hot Definitions
  1. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  2. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
  3. Centralized Market

    A financial market structure that consists of having all orders routed to one central exchange with no other competing market. The quoted prices of the various securities listed on the exchange represent the only price that is available to investors seeking to buy or sell the specific asset.
  4. Balanced Investment Strategy

    A portfolio allocation and management method aimed at balancing risk and return. Such portfolios are generally divided equally between equities and fixed-income securities.
  5. Negative Carry

    A situation in which the cost of holding a security exceeds the yield earned. A negative carry situation is typically undesirable because it means the investor is losing money. An investor might, however, achieve a positive after-tax yield on a negative carry trade if the investment comes with tax advantages, as might be the case with a bond whose interest payments were nontaxable.
  6. Rounding Bottom

    A chart pattern used in technical analysis, which is identified by a series of price movements that, when graphed, form the shape of a "U". Rounding bottoms are found at the end of extended downward trends and signify a reversal in long-term price movements.
Trading Center