Bail out

Bail out in economics and finance is a term used to describe a situation where a bankrupt or nearly bankrupt entity, such as a corporation or a bank, is given a fresh injection of Liquidity, in order to meet its short term obligations. Often bail outs are by governments, or by consortiums of investors who demand control over the entity as the price for injecting funds.

Often a bail out is in response to a short term cash flow crunch, where an entity with illiquid, but sufficient, assets is given funds to "tide it over" until short term problems are resolved. However, often bail outs are merely delaying the inevitable, as a government or investment structure attempts to avoid putting a large quantity of illiquid assets on the market, which would force other similar entites to write down their assets.

See also

• Bankruptcy
• Cash flow
• Moral hazard
• Stock market crash
• Bubble (economics)