reserve for contingencies

Reserve for Contingencies

A company's retained earnings that are not reinvested but set aside to protect against future losses. A company may set up a reserve for contingencies when it is performing well to guard against the risk that it may eventually perform poorly. A reserve for contingencies allows a company to maintain its operations smoothly even when it has suffered an operating loss.
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reserve for contingencies

A part of retained earnings that are set aside for potential future losses. For example, a firm may establish a reserve account to cover the possibility of losing a lawsuit to which it is a party.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
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The Army also has to worry about replenishing stocks of pre-positioned equipment that is held in reserve for contingencies. For the wars in Iraq and Afghanistan, both the Army and Marines have drawn extensively from pre-positioned stocks that are stored aboard ships and ashore in Kuwait, Qatar and several locations in Europe, CRS noted.