Deficit broadly refers to a person or entity having more expenses than revenue. Typically deficit is used to refer to finances of a company or government where the entity is spending more money than it makes, having to borrow money to cover the deficit. Deficit, though, can refer to non-monetary items as well. Deficit is used in a variety of circumstances as a gauge of the performance, debt load, and financial safety of corporations and governments.
In law, statutes and courts frequently look at whether an entity is running on a deficit. For example, tax law in the United States typically taxes profit, and if a company is running deficits, their tax liability will be reduced. As another example, a court could look at the deficits of a corporation in seeing whether executives of the company were not fulfilling their fiduciary duties.
[Last updated in February of 2022 by the Wex Definitions Team]