GlossaryG–6
D
date payable The actual date on
which a company mails the dividend
payment to the holders of record.
debentures Bonds backed by a claim
over tangible property.
debt capital Long-term borrowed money.
debt capital market (DCM) This refers
to the market for raising debt capital.
Financial institutions providing DCM
services in Australia will often have
separate divisions or teams focusing
purely on these services, rather than
covering both debt and equity markets.
debtor days A measure of the average
time a company takes to collect
payment from its debtors.
debt ratio A measure of the proportion
of total assets financed by a company’s
creditors.
debt-to-equity ratio A measure of
the company’s financial leverage,
calculated by dividing long-term debt
by shareholders’ equity.
decision tree A visual representation of the
sequential choices that managers face
with regard to a particular investment.
deed of company arrangement A
procedure that permits a company in
distress to make a compromise or
arrangement that is binding on all
creditors. Subject to the terms of the
arrangement, the company may then
be saved and continue to operate.
default risk The risk that the bond
issuer may not make all scheduled
payments.
deferred taxes An account that reflects
the difference between the taxes that
companies actually pay and the tax
liabilities they report on their public
financial statements.
demand registration rights Agreements
giving the venture capitalists the right
to demand that a portfolio company’s
managers arrange for a public offering
of shares in the company.depreciate A currency depreciates
when it buys less of another currency
than it did previously.
depreciation tax shield This is the
tax deduction that comes from the
depreciation of an asset. When this
tax shield is applied, the book value of
the asset is reduced by this amount.
derivative security A security that
derives its value from another asset.
diminishing value method A method
of depreciating assets, accepted
by the Australian Taxation Office,
whereby assets are depreciated by
a set percentage of their remaining
value every year. It is analogous to
the reducing balance method used
in accounting, and effectively means
that, in theory, an asset will never
have zero value. The percentage used
to calculate the diminishing value is
set at twice the prime cost rate. Thus
diminishing value rate = (1/effective
asset life) × 200%.
direct insolvency costs Include
fees paid to lawyers, accountants,
investment bankers and other
professionals involved in insolvency
proceedings in addition to other
expenses directly tied to insolvency
filing and administration.
direct lease A lessor acquires the
assets that are leased to a given lessee.
direct quote An exchange rate quoted
in terms of units of domestic currency
per unit of foreign currency.
discount A bond trades at a discount
when its market price is less than its
par value.
discounted payback period The
amount of time it takes for a project’s
discounted cash flows to recover the
initial investment.
discounting The process of calculating
present values.
diversification The act of investing in a
variety of different assets rather than
just one or two similar assets.divestiture Assets and/or resources of a
subsidiary or division are conveyed to
another organisation.
dividend payout ratio The percentage
of current earnings available for
common shareholders paid out as
dividends. Calculated by dividing the
company’s cash dividend paid per
share by its earnings per share in a
given period.
dividend per share (DPS) The portion
of the earnings per share paid to
shareholders.
dividend yield Annual cash dividend
per share divided by the current share
price.
dividends Periodic cash payments that
companies make to shareholders.
dual-class recapitalisation Issuance of
a new class of common shares with
the intent of concentrating control of
voting rights in one group of investors.
due diligence Examination of
potential security issuers in which
investment banks are legally required
to search out and disclose all relevant
information about an issuer before
selling securities to the public.
DuPont system An analysis that uses
both income statement and balance
sheet information to break the ROA
and ROE ratios into component
pieces.E
earnings available for ordinary
shareholders Net income net of
preferred share dividends.
earnings per share (EPS) Earnings
available for ordinary shareholders
divided by the number of shares of
common shares outstanding.
economic exposure The risk that a
change in prices will negatively impact
the value of all cash flows of a company;
in international finance, the risk that a
company’s value will fluctuate due to
exchange rate movements.