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Date: Tuesday 13th 2008f May 2008 09:14:30 AM

Glossary
 

D
 
DAX: the top German index consisting of 30 stocks.
Our take: DAX is one of the most commonly watched index for the european market.
 
DCA: Dollar Cost averaging:  an investing technique to purchase stocks at the same amount regularly.
Our take: The reasoning behind this is that when the stock falls, investors can buy more shares of it and bring their average cost down.
 
DCF: Discounted Cash Flow; an investing valuation method used by analyzing the future amount of cash flow generated from the specific investment.
Our take: DCF is a powerful method but as cash flow is discounted further into the future, the valuation method becomes less accurate.
 
DDM: Dividend Discount Model: A valuation method used by estimating the future value of dividends that are obtained by holding the common stocks over a period of time.
Our take: This method has similar weakness to DCF model and it does not work for companies that pay no dividend.
 
DECS: Debt Exchangeable for Common Stock; it is a debt issued by corporations which can be converted into common stock.
Our take: This is similar to convertible bond offering.
 
DJIA: Dow Jones Industrial Average; a price weighted 30 stocks traded on the US market.
Our take: DJIA is founded back in 1896 by Charles Dow. It is a proxy for the overall US market indices.
 
DJTA: Dow Jones Transportation Average: a collection of 20 transportation stocks that are traded in the US stock market.
Our take: DJTA consists of railway, airlines, trucks and shipping companies.
 
DJUA: Dow Jones Utility Average: a collection of  15 utility companies traded in the US market.
Our take: Utility companies normally pay most of their profits as dividends since they are a fairly regulated industries. There is less incentive to use that profit to expand.
 
DPO (Days Payable Outstanding) : the average period of a company's account payable being outstanding.
Our take: It measures how long it takes for a company to pay its bill.

DPO= (Accts. Payable x Number of Days)/ Cost of Sales
 
Data Mining: the use of large collection of data base to analyze pattern of consumers
Our take: The infamous club cards introduced by national grocery chains is one example of data mining.
 
Day Order: A trade order that will expire at the end of the day if not executed.
Our take: If a limit or a stop loss order specification is not met, the order will be cancelled by the close of the trading day.
 
Day traders: A stock investors that trade in and out of stocks on the same day.
Our take: A day trader will take small profits (5 to 50 cents) and then make the trade over and over again. The key here is the swiftness of the trade. The faster the trade is, the more trade they make.
 
Days Payable Outstanding: the average period of a company's account payable being outstanding.
Our take: It measures how long it takes for a company to pay its bill.

DPO= (Accts. Payable x Number of Days)/ Cost of Sales
 
Day Sales Outstanding: The average collection period of a company's accounts receivable.
Our take:  The lower the day sales outstanding is, the better the cash flow production is. It signals a strong and efficient bill collection method.
 
Days to Cover: The length of time it takes for all the short position in a stock to be covered.
Our take: For example if a stock A has a short interest of 5 million shares and the average daily volume for A is 1 million shares, the days to cover for stock A is 5 days.
 
Dead Cat Bounce: refers to a stock price that is rising temporarily after a long sell-off.
Our take: The stock price of a Dead Cat Bounce will then decline further
 
Dead weight loss: The cost borne to society as a result of inefficiency
Our take: High labor cost due to labor union is a dead weight loss since a company will need to raise price to make a decent profit.
 
Dealer's market: A market where a dealer is assigned a specific security. Every transactions for this security has to go through this particular dealer.
Our take: The benefit of this is that buyers and sellers can have immediate access to the security because the dealer assigned normally carry an inventory of the specific security on hand.
 
Death Benefit: The amount of money from life insurance policy or pension disbursed to the beneficiary when the annuitant passed away.
Our take: The amount the beneficiary gets is dependent upon the types of policy that the annuitant enrolled in.
 
Debenture: Debt that is not backed by collaterals.
Our take: Debenture can only be given to borrowers who has solid credit history or for those borrowers willing to pay high interest rates.
 
Debit: An entry system in accounting that decreases liabilities or inreases assets.
Our take: The opposite of debit is credit.
 
Debt: Amount of money borrowed from other individuals or organizations.
Our take: Bonds, Loans are example of debt.
 
Debt Bomb: term used when large debt issuers default on its financial obligation.
Our take: Debt Bomb causes ripple in the financial systems as a lot of entities will be affected by it. The largest borrowers in the country is big financial institutions such as banks.
 
Debt financing: It is when organization/s is raising money by issuing debt to other individuals/organizations.
Our take: In exchange lenders will receive regular payments from the borrowers and the principal amount on maturity date.
 
Debt overhang: term used to describe when a debt of a country is bigger than its ability to repay it.
Our take: This occurs when a country is overleveraged at the same time the general economic health of the country deteriorates.
 
Debt ratio: sometimes referred to as debt/asset ratio. It is the proportion of the company's debt to its assets.
Our take: Higher debt ratio is an indicate of a more risky investment.
 
Debt Restructuring: used by companies with financial trouble to change the debt agreements with lenders.
Our take: Lenders normally get favorable treatments in exchange for the change of debt agreement in a debt restructuring.
 
Debt Service: Cash needed to pay interest payments and principals due for a given period.
Our take: A simple example of debt service is our monthly mortgage payments. We need certain amount of money every month to cover interest as well as the principal of our mortgage loan.
 
Debt Service Coverage Ratio: the amount of cash flow needed to pay interest and principal payments of a loan.
Our take: When this ratio is less than one, the cash flow generated is not enough to cover the necessary obligation.
 
Debt to GDP ratio: A comparison of a country's debt with the amount of GDP it generates.
Our take: High ratio means that a country is highly leveraged and its ability to pay back those debt is limited.
 
Debt to Equity ratio: the ratio of a company's long term debt and its book value.
Our take: It measures the financial leverage of a company and how the overall capital structure is financed.
 
Debtor: An entity who owes money to its lenders.
Our take: Debtor normally pays interest rate to lenders in exchange for the loan.
 
Debtor In Possession: A company that operates after declaring Chapter 11 bankruptcy.
Our take: Chapter 11 gives a company a breathing room to operate without the burden of debt.
 
Decimalization: The change of the way securities are traded from fractions into decimals.
Our take: Decimalization reduces spread cost and confusion among traders on which price is better.
 
Declaration Date: The date on which the next dividend payment is announced by the board of directors.
Our take: Dividend declaration is generally announced one or two months before the actual dividend payment.
 
Declining Balance Method: One method of depreciation where the asset is depreciated the most during the first year. Depreciation gradually decreases during subsequent years.
Our take: This method of depreciation understates assets and overstates expense which is the conservative ways of financial reportings.
 
Declining Industry: an industry where the demand for its product is shrinking.
Our take: An example of such industry is VCR industries.
 
Deductible: An expense that can be subtracted from your adjusted gross income and thus, reduce the amount of taxable income.
Our take: Mortgage payment is one example of deductible
 
Deep in the Money: An option with strike price a lot lower than the current stock price (for call) and strike price of a lot higher than the current stock price (for put)
Our take: Deep in the Money option tends to be less volatile than Out of the Money option.
 
Deep-Discount bond: Bond that sells a significant discount to its par value.
Our take: Deep-Discount Bond is perceived to have a high chance of defaulting.
 
Default: Failing to promptly pay interest rate on a bond or loan.
Our take: The lower a bond rating, the higher the risk of default is.
 
Default premium: The additional amount of money a borrower must pay to take into accounts the default risk.
Our take: Default premium includes paying higher interest rate or putting additional collateral to the lenders.
 
Default risk: The risk of borrowers being unable to make prompt payments on its debt obligation.
Our take: To compensate for default risk, lenders generally demand higher interest rate or collateral from the borrowers.
 
Defensive Stock: Stock that historically rise in value during the overall market decline.
Our take: Example include health care , consumer durable stocks.
 
Deferred Income Tax: A liability that is created when net income is already recognized while the income tax has not been realized.
Our take: Sooner or later, income tax has to be paid.
 
Deferred Revenue: Money that has been received but has not been recognized as revenue.
Our take: Sooner or later, the corresponding goods or services need to be performed. Otherwise, customers may start demanding their money back.
 
Deficit:A circumstance in which expense exceeds income or import exceed export.
Our take: the opposite of deficit is a surplus.
 
Deflation: A situation where price of goods keep falling due to the reduction of money supply.
Our take: The opposite of deflation is inflation.
 
Delinquent: failure to satisfy your obligation on time.
Our take: Delinquent account will be charged late fees.
 
Delisting: A company that is removed from the stock exchange.
Our take: A company that fails to meet listing requirements will be delisted from an exchange.
 
Delta: This ratio compares the movement of a stock price with the corresponding change in the price of the option.
Our take: Delta of 0.9 for a call option means that for a $1 rise in stock price, the option price will increase by $0.90.
 
Demand: A desired or willingness by consumers towards a specific goods.
Our take: Demand will change depending on people's needs or other substitutes.
 
Depletion: An accounting method used to depreciate natural resources over its life span.
Our take: Depletion is used to deduct expenses for natural resources while depreciation is used to deduce expense for aging equipments and properties.
 
Depository Receipt: A financial instrument used to represent foreign companies trading as publicly traded securities.
Our take: The Depository Receipt in the US is called American Depository Receipt (ADR). Foreign multinational companies listed abroad is traded in ADR such as Nokia Corp. (NOK) and Toyota Motor Corp (TM)
 
Depreciation: An expense deducted to take into accounts the aging of equipment and properties.
Our take: If a company bought a machinery that is expected to last five years, then the cost needs to be depreciated over the five years time span.
 
Depressed: A situation where a market or a security is priced really low due to weak demand and low interest.
Our take: Some stronger firms may take advantage of depressed price to buy out weaker competitors.
 
Depression: A severe recession accompanied by high unemployment, low productivity and falling price.
Our take: During depression, consumer confidence is low, spending decreases, factory output decreases which in turn increases layoff and causes further deterioration of consumer confidence.
 
Deregulation: The reduction or elimination of government intervention in a particular industry.
Our take: Deregulation normally will create competitors and it will force existing firms to be more efficient.
 
Derivative: A security such as an option or future, whose values depends on the performance of the underlying assets or securities.
Our take: A basic type of derivative is stock option whose performance depends on the value of the underlying stock price.
 
Devaluation: A deliberate depreciation of a country's currency with other major currencies.
Our take: Devaluation decreases the purchasing power of a country. As a result, it will make its products more competitively priced abroad while discouraging imports.
 
Diluted EPS: It is Earning Per Share (EPS) for a corporation if all existing stock derivatives such as options and warrants are exercised.
Our take: Diluted EPS is a more accurate reporting of a company's earnings since sooner or later, all the option outstanding will be exercised.
 
Dilution: A reduction in Earning per Share due to the issuance of additional shares or the exercise of stock option.
Our take: Adding more shares to the existing shares outstanding will reduce the value of current stcokholders.
 
Dilutive Acquisitions: An acquisition financed with a company's stock that will dilute existing shareholders.
Our take: The acquiring firm will earn less EPS due to the issuance of shares and as a result, stock price normally will decline.
 
Direct Cost: A cost that can be traced into producing specific goods or services.
Our take: Example includes: raw material, labor used to produce one unit of goods and so forth.
 
Direct Repurchase: Occurs when a company repurchase its own share at the open market.
Our take: Direct Repurchase reduces the number of shares outstanding and therefore increases the value of the remaining shares.
 
Direct tax: tax that cannot be shifted onto other entitites.
Our take: Example include: property and income tax.
 
Discount Bond: Bond that traded significantly less than its par value.
Our take: It means that investors perceive the bond to be unsafe or interest rate environment has risen since the bond was issued to the public.
 
Discretionary Income: Money that can be spent after basic economic needs such as food, shelter and clothing.
Our take: Companies that operate in a discretionary industry will always find revenue regardless of economic condition.
 
Diseconomies of Scale: An economic situation where economies of scale no longer apply for a firm. In this situation, marginal cost rise faster than the marginal increase in output.
Our take: As capacity approaches 100%, diseconomies of scale might occur due to the stretching of resources at other parts of productions.
 
Disinflation: A condition whereby the rate of price increase slows down.
Our take: This happens during economic slowdown where demand is weak and producers are unable to pass the price increase to consumers.
 
Disinvestment: The action of entities to sell or liquidate part of their assets.
Our take: This action is normally taken when an organization wants to focus on their core competencies and hence sells off non-core assets.
 
Disposable income: After-tax income that is available to be either spent or saved.
Our take: For retirees, their main source of disposable income is normally from their savings or social security benefit.
 
Disposition: The process of getting rid of assets through various methods.
Our take: another word for disposition is simply 'sell'
 
Distressed sale: A sale of an asset at a price that is less than the market value.
Our take: Sellers usually needs the money urgently and as a result, the sell price is seldom the best price around.
 
Distressed Securities: refers to securities trading at a low price due to the negative perception surrounding it.
Our take: For example: A lot of tobacco companies can be distressed securities due to the uncertainty regarding numerous lawsuits.
 
Diversification: Buying a wide variety of investments in one's portfolio for the purpose of reducing risk.
Our take: Too much diversification can be detrimental to your overall portfolio return.
 
Dividend: The distribution of profits to stockholders
Our take: Some companies may decide to pay dividend, some may decide not to pay at all. Dividend-paying companies are considered safe because it needs to be marginally profitable to pay out dividend year after year.
 
Dividend payout ratio: The ratio of dividend paid to the stockholder and the net income of a company.
Our take: This ratio gives an idea on how safe the dividend payments are. If net income of a firm declines, it can still continue giving out dividends if the dividend payout ratio is still low.
 
Dividend Policy: The policy set by the Board of Director regarding dividend payments.
Our take: Some companies use dividend payout ratio of 20% as dividend policy. This means that the company is required to pay out 20% of its net profit to the shareholders in the form of dividend.
 
Dividend Reinvestment Plan (DRIP): A plan offered by corporations to reinvest the company's dividends by buying the company's shares
Our take: Most companies that have DRIP plan is commission-free.
 
Dividend Yield: It is the annual income generated by the dividends payments with respect to the stock prcie.
Our take: A stock trading at $25 while giving out dividends of $1 is having a dividend yield of 4%
 
Diworsification: A term used to describe excessive diversification which in turns lower portfolio performance.
Our take: A lot of investors do this by investing in similar companies at similar industries, or by buying different mutual funds of the same industries.
 
Dog of the Dow: An investment method used by buying the 10 stocks in DJIA with the highest dividend yield and reevaluating the position once in a year.
Our take: This method has proven to be successful for a number of years and become more popular with the book "Beating the Dow" written by Michael O' Higgins.
 
Dollar Cost Averaging - DCA : an investing technique to purchase stocks at the same amount regularly.
Our take: The reasoning behind this is that when the stock falls, investors can buy more shares of it and bring their average cost down.
 
Dow Jones Industrial Average (DJIA):  a price weighted 30 stocks traded on the US market.
Our take: DJIA is founded back in 1896 by Charles Dow. It is a proxy for the overall US market indices.
 
Dow Jones Transportation Average (DJTA): a collection of 20 transportation stocks that are traded in the US stock market.
Our take: DJTA consists of railway, airlines, trucks and shipping companies.
 
Dow Jones Utility Average (DJUA) : a collection of  15 utility companies traded in the US market.
Our take: Utility companies normally pay most of their profits as dividends since they are a fairly regulated industries. There is less incentive to use that profit to expand.
 
Dow Theory: A theory where it says that market is in a bull mode if one of the average (DJIA or DJTA) advances above previous high and accompanied by the advance of another index as well.
Our take: Similarly, if both index fall below previous low, it is an indication of a bear market.
 
Downside: The potential loss of an investment.
Our take: Technically, all investment in stocks and options has a potential loss of 100%, unless it is bought on margin.
 
Downsize: It means reducing the number of employees in a company by eliminating divisions or reducing the number of employees in a division.
Our take: Layoff is another word for it.
 
Downturn: Refers to downturn in the economy which means it is the time period when the economy is not growing or even contracting.
Our take: Recession and depression are examples of economic downturn.
 
Dragon Bond: Asian bond that is denominated in US dollars.
Our take: US dollar is used because the currency is more stable than some Asian currencies.
 
Dual Listing: Company that are listed in two stock exchanges.
Our take: Many large corporations do this, for example: Research in Motion, the maker of popular blackberry devices are listed in the Canadian as well as the US stock exchange.
 
Due Diligence (DD): A thorough investigation for a possible investment. The purpose is to ensure that investors know all the risks involving the investment before making the purchase.
Our take: For investing in common stock, the first step to due diligence is to read the company's 10 K.
 
Dumping: The trade practice of one country where it significantly lowers the price of one export good compared to what it sells in the domestic market.
Our take: The purpose of this trade practice is to gain market overseas by offering a competitive pricing.
 
Duopoly: An industry where the total market is controlled by two companies..
Our take: A good example would be The cola market which is controlled by Coca Cola and Pepsi Cola.
 
Durable goods: Goods that is not perishable, meaning: goods that will last for quite some time if not consumed.
Our take: This include: furniture, vehicle, television sets, washing machine and so forth.
 
Dutch action: An auction where the price of an item is lowered until it gets its first bid and then it is sold at that price.
Our take: Google and Overstock.com use Dutch auction to determine the price of its IPO
 

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