default point

default point

The total revenues necessary from a project to pay all the bills with nothing left over—the point at which $1 more in revenues creates a profit and $1 less forces one to default on paying creditors unless additional capital is injected into the project.See break-even point.

References in periodicals archive ?
The California sample provided uses as a default point the ratio of interest and pension expenses to total revenue.
DTD measures the number of standard deviation moves required to bring the expected value of a firm's assets below the default point, X.
The tabulated results are based on setting the default point equal to the sum of (1) debt in current liabilities, plus (2) 50% of long-term debt.
Credit rating = f(COV, ROA, VOL, LEV, SIZE, SIGE, MVE, MVA_X), (ACCT-MKT) where SIGE is the daily standard deviation of stock returns, MVE is the natural log of market value of equity, and MVA_X is the natural log of the ratio of market value of assets to the default point.
Distance to default (DTD): DTD measures the number of standard deviation moves required to bring expected total asset value to the default point.
The authors find that the rational default point is below the underwater mark, at which the house price equals the remaining loan balance.
For that reason, Vasicek- Kealhofer KMV model measures the distance to the default using the number of standard deviations from the assets' value to reach the default point .
The default point is thus assumed to be somewhat lower than the value of total debt.
3) We also find that the signal-to-noise ratio of subordinated debt spreads should be quite low far away from the default point of the bank.
The current distance d from the default point (where In [V.
represents the number of standard deviations that the firm is from the default point.
Further note that the indicators may differ with respect to the strength of their reaction to a shock moving the bank closer to the default point.