Cfa Test Glossary D

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dark pools

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alternative trading systems that do not display orderst that their clients send to them

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data mining

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the practice of determining a model by extensive searching through a dataset for statistically significant patterns

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what is data mining also called

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data snooping

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date of book closure

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the date that a shareholder listed on the corporations books will be deemed to have ownership of the shares for purposes of receiving an upcoming dividend

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date or record

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the date that a shareholder listen on the corporation books will be deemed to have ownership of the shares for purposes of receiving an upcoming dividend

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day order

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an order that is good for the day on which it is submitted. if it has not been filled by the close of business the order expires unfilled

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days in receivables

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estimate of the average numbers of days it takes to collect on credit accounts

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days of inventory on hand (DOH)

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an activity ratio equal to the number of days in teh period divided by inventory turnover over the period

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day's sales outstanding

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estimate of the average number of days it takes to collect on credit accounts

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dead cross

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a technical analysis term that describes a situation where a short term moving average crosses from above a longer-term moving average to below it; considered bearish

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deadweight loss

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a net loss of total (consumer and producer) surplus

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dealer

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a financial intermediary that acts as a principal in trades

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dealing securities

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securities held by banks or other financial intermediaries for trading purposes

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debentures

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type of bond that can be secured or unsecured

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debit

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records increases of assets and expense accounts or decreases in liabilities and owners equity

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debt incurrence test

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a financial covenant made in conjunction with existing debt that restricts a company's ability to incur additional debt at the same seniority based on one or more financial tests or conditions

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debt-rating approach

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a method for estimating a company's before tax cost of debt based upon the yield on comparably rated bonds for maturies that closely match that of the company's existing debt

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debt-to-assets ratio

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a solvency ratio calculated as total debt divided by total assets

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debt-to-capital ratio

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a solvency rato calculated as total debt divided by total debt plus total shareholder equity

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debt to equity ratio

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a solvency ratio calculated as total debt divided by total shareholders

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declaration date

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the day that the corporation issues a statement declearing a specific dividend

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decreasing returns to scale

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increase in cost per unit resulting from increased production

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decreasing-cost industry

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an industry in which per-unit costs and output prices are lower when industry output is increased in teh long run

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deductible temporary differences

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temporary differences that result in a reduction of or deduction from taxable income in a future period when the balance sheet item is recovered or settled

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default probability

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the probability that a borrower defaults or fails to meet its obligation to make full and timely payments of principal and interest, according to the temrs of the debt security

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what is another word for default probability.

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fefault risk

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default risk premium

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an extra return that compensates investors for the possibility that the borrower will fail to make a promised payment at the contracted time and in the contracted amount

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defensive companies

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companies with sales and profits that have little sensitivity to the business cycle or state economy

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defensive interval ratio

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a liquidity ratio that estimates the number of days that an entity could meet cash needs from liquid assets

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what is the formula for defensive interval ratio

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(cash+short term marketable investments + receivables)/ daily cash expenditures

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deferred coupon bond

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bond that pays no coupons for its first few years but then pays a higher coupon than it otherwise normally would for the remainder of its life

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what is differed coupon bond also called

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split coupon bond

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deferred income

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a liability account for money that has been collected for goods or services that have not yet been delivered
- payment received in advance of providing a good or service

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deferred revenue

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a liability account for money that has been collected for goods or services that have not yet been delivered; payment received in advance of providing a good or service

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deferred tax assets

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a balance sheet asset that arises when an excess amount is paid for income taxes relative to accounting profit
- taxable income is higher that accounting profit and income tax payable exceeds tax expense
- the company expects to recover the difference during the course of future operation when tax expense exceeds income tax payable

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deferred tax liabilities

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a balance sheet liability that arises when a deficit amount is paid for income taxes relative to accounting profit.
- the taxable income is less than the account profit and income tax payable is less than tax expense
- the company expects to eliminate the liability over the course of future operations when income tax payable exceeds tax expense.

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defined benefit pension plan

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plan in which the company promies to pay a certain annual amount (defined benefit) to the employee after retirement. The company bears investment risk of the plans assets

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defined contribution pension plans

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individual accounts to which an employee and typically the employer makes contributions, generally on a tax-advantaged basis. The amounts of contributions are defined at the outset but the future value of the benefits is unkown. The employee bears the investment risk of the plan assets.

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deflation

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negative inflation

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degree of confidence

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the probability that a condifence interval includes the unkown population peramiter

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degree of financial leverage (DFL)

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the ratio of the percentage change in net income to the percentage change in operating income; the sensitivity of cash flows available to owners when operating income changes

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degree of operating leverage (DOL)

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the ratio of the percentage change in operating come to the percentage change in units sold; the sensitivity of operating income to changes in units sold

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degree of total leverage

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the ratio of the percentage change in net income to percentage change in units sold
- the sensitivity of the cash flows to owners to changes in the number of units produced and sold

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degree of freedom

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number of independent observations used

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delivery

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a process used in a deliverable forward contract in which the long pays the agreed-upon price to short, which in turn delivers teh underlying asset to the long

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delivery option

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the feature of a futures contract giving the short the right to make decisions about what, when, and where to deliver

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delta

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the relationship between the option price and the underlying price of the option to changes in the price of the underlying security

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demand

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the willingness and ability of consumers to purchase a given amount of goods or service at a given pice

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demand and supply analysis

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the study of how buyers and sellers interact to determine transaction prices and quantities

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demand curve

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graph of the inverse demand function

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demand function

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a relationship that expresses the quantity of demanded of a good or service as a function of own-price and possibly other variables

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demand shock

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a typically unexpected disturbance to demand such as an unexpected interruption in trade or transportation

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demand-pull

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type of inflation in which increasing demand raises prices generally, which then are reflected in a businesss' costs as workers demand wage hikes to catch up with the rising cost of living

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dependent

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with reference to events, the property that the probability of one event occuring depends on (is related to) the occurrence of another event

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depository bank

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a bank that raises funds from depositors and other investors and lends it to borrowers

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depository institutions

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commercial banks, savings and loan banks, credit unions, and similar institutions that riase funds from depositors and other investors and lend it to borrowers

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depository receipt

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a security that trades like an ordinary share on a local exchange and represents and economic interest in a foreign company

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depreciation

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the process of systematically allocating the cost of long-lived (tangible) assets to the periods during which the assets are expected to provide economic benefits

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derivative pricing rule

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a pricing rule used by crossing the networks in which a price is taken (derived) from the price that is current in the assets primary market

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derivatives

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a financial instrument whose value depends on the value of some underlying asset or factor

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descending price auction

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an auction in which the auctioneer begins at a high price then lowers the claled price in increments until there is a willing buyer for the item being auctioned

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descriptive statistices

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the study of how data can be summarized effectively

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development capital

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minority equity investments in more mature companies that are looking for capital to expand or restructure operations, enter new markets or finance major acquisitions

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diffuse prior

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the assumption of equal prior probabilities

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diffusion index

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reflects the proportion of the index 's componets that are moving in a pattern consistent with the overall index

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diluted eps

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the EPS that would result if all dilutive securities were converted into common shares

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diluted shares

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the number of shares that would be outstanding if all potentially dilutive claims on common stock were executed

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diminishing balance method

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an accelerated depreciation method, one that allocates a relatively large proportion of the cost of an asset to the early years of the assets useful life

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diminishing marginal productivity

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describes a state in which each additional unit of input produces less output than previously

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direct debt program

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an arrangement whereby a customer authorizes a debit to a demand account typically used by companies to collect routine payments for services

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direct format

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with reference to the cash flow statement, a format for the presentation of the statement in which cash flow from operating activities is shown as operating cash receipts less operating cash disbursements .

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what is direct format also called

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direct method

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direct taxes

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taxes levied directly on income wealth and corporate profits

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direct write-off method

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an approach to recognizing credit losses on customer receivables in which the company waits until such time as a customer has defulted and only then recognizes the loss

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disbursement float

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the amount of time between check issuance and a check's clearing back against the company's account

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discount

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to reduce the value of a future payment in allowance for how far away it is in time; to calculate the present value of some future amount
- amount by which an instrument is priced below its face value

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discount interest

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a procedure for determining the interest on a loan or bond in which the interest is deducted from the face value in advance

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discount rates

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in general, the interest rate used to calculate a present value.
- in money market however discount rate is a specific type of quoted rate

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discounted cash flow models

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valuation models that estimate the intrinsic value of a security as the prsent value of the future benefits expected to be received from the security

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discouraged worker

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a person who has stopped looking for a job or has given up seeking employement

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discrete random variable

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a random variable that can take on at most a coutable number of possible values

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discriminatory pricing rule

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a pricing rule used in continuous markets in which the limit price of the order or quote that first arrived determines the trade price

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diseconomies of scale

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increase in cost per unit resulting from increased production

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dispersion

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the variability around teh central tendency

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display size

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the size of an order displayed in public view

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distressed investing

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investing in securities of companies in financial difficulties. PRivate equity funds typically buy the debt of mature companies in financial difficulties

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divergence

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in technical analysis a term that describes the case when an indicator moves differently fromt eh security being analzed

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diversification ratio

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the ratio of the standard deviation of an equally weighted portfolio to the standard deviation of a randomly selected security

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dividend

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a distribution paid to shareholders based on the number of shares owned

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dividend discount model (DDM) a present value model that estimates teh intrinsic value of an equity share based on the present value of its expected future dividends

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a present value model that estimates teh intrinsic value of an equity share based on the present value of its expected future dividends

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dividend discount model based approach

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an approach for estimating a country's equity risk premium. The market rate of return is estimated as the sum of the dividend yield and the growth rate in dividends for a market index. Subtracting the risk-free rate of return from the estimated marketreturn produces an estimate for the equity risk premium

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dividend payout ratio

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the ratio of cash dividends paid to earnigns for a period

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dividend yield

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annual dividends per share divided by share price

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divisor

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a number (denominator) used to determine the value of a price return index. Initially chosen at the inception of an index and subsequently adjusted by the index provider, as necessary, to avoid changes in the index value that are unrelated to changes in the prices of constituent secrities

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domestic contetn provisions

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stipulate that some percentage of the value added or compents used in production should be of domestic origin

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double bottoms

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in technical analysis a reversal pattern that is formed when the price reaches a low rebounds and then sells off back to the first low level; used to predict a change from a downward trend to an uptrend

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double coincidence of wats

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a prerequisite to bater trades in particular that both economic agents in the transaction want what the other is selling

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double declining balance depreciation

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an accelerated depreciation method that involves depreciating the asset at double the staight line rate. this rate is multiplied by the book value of the asset at the beginning of the period (( a declining balance) to calculate depreciation expense

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double top

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in technical analysis a reveral pattern that is formed when an uptrend reverses twice a roughly the same high price level used to predict a change from an uptrend to a down trend

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double entry accounting

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the accounting system of recording transactions in which eveyr recorded transaction affects at least two accounts os as to keep the basic accounting equation (assets = liabilities + owners' equity) in balance

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down transition probability

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the probability that an assets value moves down in a model of asset price dynamics

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downgrade risk

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the risk that a bond issuers creditworthiness deteriorates or migrates lower leading investors to believe the risk of default is higher.

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what is downgrade risk also called

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credit mitigration risk

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drag on liquidity

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when receipts lag, creating pressure from teh decreased available funds

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drawdown

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a reduction in net asset value

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DuPont analysis

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an approach to decomposing return on investment, e.g. return on equity as the product of other financial ratio

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dual currency bonds

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bonds that make coupon payments in one currency and pay the par value at maturity in another currency

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duration gap

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a bond's Macaulay duration minus the investment horizon

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dutch book theorem

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a result in probability theory stating that inconsistent probabilities create profit opportunities

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dutch auction

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an auction in which the auctioneer begins at a high price, then lowers the called price in increments until there is a willing buyer for the item being auctioned