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what is bankruptcy risk.............‚Äč

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what is bankruptcy risk.............

Dec 22nd, 2014

BANKRUPTCY RISK

The possibility that a company will be unable to meet its debt obligations. Bankruptcy risk describes the likelihood that a firm will become insolvent because of its inability to service its debt. A firm can fail financially because of cash flow problems resulting from inadequate sales and high operating expenses. To address the cash flow problems, the firm might increase its short-term borrowings. If the situation does not improve, the firm is at risk of insolvency or bankruptcy. Many investors consider a firm's bankruptcy risk prior to making equity or bond investment decisions. Agencies such as Moody's and Standard & Poor's attempt to assess risk by giving bond ratings. Also called "insolvency risk."

Reference:

http://www.investopedia.com/terms/b/bankruptcyrisk.asp


Dec 22nd, 2014

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