The amount by which a financial obligation or liability exceeds the amount of cash that is available. A shortfall can be temporary in nature, arising out of a unique set of circumstances or it can be persistent, in which case it may indicate poor financial management practices. Regardless of the nature of a shortfall, it is a significant concern for a company, and is usually corrected promptly through short-term loans or equity injections.

For example, a temporary shortfall for a small company may arise when an accident at its production facility impedes output and revenues in a particular month. In this case, the company may resort to short-term borrowings to meet payroll and other operating expenses.

A typical long-term shortfall is the pension shortfall faced by many organizations whose pension obligations exceed the return they can generate from their pension assets. This situation generally occurs when returns from equity markets are well below average.

Shortfall risk can be mitigated through the use of efficient hedging strategies, which aim to offer protection from adverse price movements. As an example, resource companies often sell part of their future output in the forward market, especially if they are expecting to incur substantial capital expenditures in future. Such hedging helps to ensure that the finances required for a future financial obligation are available.

Investment dictionary. . 2012.

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  • shortfall — short‧fall [ˈʆɔːtfɔːl ǁ ˈʆɔːrtfɒːl] noun [countable] a difference between the amount that you have and the larger amount you need or expect: • a $300 million budget shortfall shortfall in/​of • A shortfall in oil supplies worldwide precipitated… …   Financial and business terms

  • shortfall — A dollar realization on assets that is not sufficient to clear the debt completely. (Dictionary of Canadian Bankruptcy Terms) United Glossary of Bankruptcy Terms 2012 …   Glossary of Bankruptcy

  • shortfall — 1895, from SHORT (Cf. short) (adj.) + FALL (Cf. fall) …   Etymology dictionary

  • shortfall — [n] deficit; imperfection arrears, default, defectiveness, deficiency, flaw, inadequacy, incompleteness, insufficience, insufficiency, in the hole*, in the red, lack, loss, red ink*, shortage, shortcoming, underage; concepts 230,335,646,671,718 …   New thesaurus

  • shortfall — ► NOUN ▪ a deficit of something required or expected …   English terms dictionary

  • shortfall — [shôrt′fôl΄] n. the act or an instance of falling short, or the amount of the shortage …   English World dictionary

  • shortfall — short|fall [ˈʃo:tfo:l US ˈʃo:rtfo:l] n the difference between the amount you have and the amount you need or expect shortfall in ▪ Parents have been asked to pay £30 each to cover the shortfall in the budget. shortfall of ▪ an estimated shortfall …   Dictionary of contemporary English

  • shortfall — short|fall [ ʃɔrt,fɔl ] noun count a lack of something you need or want, or the amount that you lack: a severe budget shortfall of $3.8 million shortfall in/of: New foreign investments made up for the shortfall in dollar earnings …   Usage of the words and phrases in modern English

  • shortfall — UK [ˈʃɔː(r)tˌfɔːl] / US [ˈʃɔrtˌfɔl] noun [countable] Word forms shortfall : singular shortfall plural shortfalls a lack of something that you need or want, or the amount that you lack a sudden shortfall in the supply of skilled labour …   English dictionary

  • shortfall — noun Date: 1895 a failure to come up to expectation or need < a budget shortfall >; also the amount of such failure < a $2 million shortfall > …   New Collegiate Dictionary

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