Bankruptcy Risk
The likelihood an organization or company will become insolvent due to inability to pay its debts or financial obligations.
In layman's terms, it's (generally speaking) how likely a business is to fail. Various agencies (Standard & Poor's, Moody's, etc.) will give risk ratings to determine the insolvency (or bankruptcy) risk. If that risk is high, then uh...don't lend money to them. Duh.
Related or Semi-related Video
Finance: What are Collection Agencies?12 Views
Finance, a la shmoop. What are collection agencies?
All right so sometimes when a man and a woman have trouble getting pregnant well [A couple kissing]
the guy has to go to one of these places, oh wait that's a different kind of [Stop sign appears]
collection agency, sorry just kidding. All right well a collection agency in the finance world
is seeking a different form of currency that is literal currency, greenbacks [Lots of money being counted]
cashola, whose money are they after exactly? Deadbeats, anyone who made a
promise to remit payments to pay back a mortgage, to pay off a credit card, to pay [Wads of money]
out for a jewelry thing at the mall, to pay for a tattoo down there as well. [Someone getting a tattoo]
You name it and then they defaulted on that promise to pay back the vendor, yeah
because when you sign your name on the dotted line and agree to pay back a
lender for their generous loan or extension of credit or agree to buy [Someone signing a contract]
something and pay someone 30 days later for it, paying them back is really not a
suggestion... Once you fall behind enough in your [Woman who is owed money does not look happy]
payments and you're a real deadbeat well they call a collection agency who then
tracks you down delivers nasty threatening letters to your mailbox and [Letter being posted]
if it's a New Jersey collection agency well they usually send someone to break
your kneecaps with a billy club, yeah they still do that... If the message still [Guy opens his door to find a man in a suit with a bat]
isn't getting through to you well the next step is for the agency to set the [Truck wheels]
wheels in motion that will result in the repossession of your home, your car, your [Repossessed notice being nailed to a house]
treasured signed set of Big Bang Theory trading cards you swore would be buried [Gravestone with the trading cards sticking out of the ground]
with you. So yeah if you choose not to make good on your obligations well you
shouldn't expect the people you owe to forget about you, or to go easy on you
like why should they would you do that for them, because they will stick a
collection agency on you, which is not a good feeling when you're up to your [Guy stood in a pile of bills]
knees in debt, or if you live in New Jersey up to your thighs... [Guy who has had his legs beat off in a pile of bills]
Up Next
What is bankruptcy? Deadbeats who can't pay their bills declare bankruptcy. Either they borrowed too much money, or the business fell apart. They t...
How do credit card companies work? Credit card companies are, in a way, lenders. They give consumers a rectangular piece of plastic that allows the...
What is liquidity? Think: water. It's liquid. It can be squeezed into little, tiny spaces and infused into large spaces. A defining trait of liquid...
What is a going concern rule, and does it have to do with the bathroom? No? Okay...no harm in checking.