8
July
2022

Distressed security /

Problémový cenný papír

Business Term of the Day

Definition

Distressed securities are securities issued by a company that is currently in financial distress.

Example sentence

Even though RubberBall Inc. was getting ready for bankruptcy, an unexpected investment into its distressed securities increased the share price enough to help the company recover.

Comment

Most commonly, financial distress for a company means bankruptcy or the risk of bankruptcy. Such situation entails considerable risk that the respective security will become worthless. The price of such securities therefore tends to fall substantially, which makes them a potentially attractive, albeit highly risky, investment to certain types of investors. If the company manages to pull through its distress and recover, such investment may turn out to be highly profitable.

Definice

Problémové cenné papíry jsou cenné papíry vydané společností, která je momentálně v problémové finanční situaci.

Příklad použití ve větě

Ačkoli se společnost RubberBall Inc. už připravovala na bankrot, neočekávaná investice do problémových cenných papírů společnosti zvýšila jejich cenu za akcii natolik, že jí to pomohlo se zotavit.

Poznámka

Problémová finanční situace pro společnost nejčastěji znamená bankrot nebo riziko bankrotu. Taková situace obsahuje značné riziko, že se příslušný cenný papír stane bezcenným.  Cena takového cenného papíru proto většinou výrazně poklesne, což z něj dělá potenciálně atraktivní, ačkoli vysoce rizikovou, investici pro určité typy investorů. Pokud se společnosti podaří tuto situaci překonat a zotavit se, taková investice může být vysoce zisková.

Business Term of the Day

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Simply subscribe to receive our Business Term of the Day at no charge to your inbox each business day, with explanation in English and Czech.

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