Glossary of Financial Terms - D

Deal Breaker

A deal breaker is a significant issue relating to the proposed financing between the prospective investor and the entrepreneur that needs to be resolved in order to close the deal.

Debenture

A written acknowledgment of debt, usually secured by a lien on assets.

Debt Capacity

An assessment of ability and willingness to repay a loan from anticipated future cash flow or other sources.

Debt Financing

Raising loan capital through the creation of debt by issuing a form of paper evidencing amounts owed and payable on specified dates or on demand.

Debt Ratio

Total debt divided by total assets.

Debt/Equity Ratio

A comparison of debt to equity in a company's capital structure.

Default

Failure of a debtor to make timely payments of principal and interest as they become due.

Demand Loan

A loan which must be repaid in full on demand.

Depreciation

Amortization of fixed assets, such as plant and equipment, so as to allocate the cost over their depreciable life.

Discount Rate

A rate of return used to convert a monetary sum, payable or receivable in the future, into present value.

Discounted Cash Flow

Techniques for establishing the relative worth of a future investment by discounting (at a required rate of return) the expected net cash flows from the project.

Discounting

The process of finding the present value of a series of future cash flows. Discounting is the reverse of compounding.

Discounting of Accounts Receivable

Short-term financing in which accounts receivable are used as collateral to secure a loan. The lender does not buy the accounts receivable but simply uses them as collateral for the loan. Also called pledging of accounts receivable.

Due Diligence

The process of systematically evaluating information, to identify risks and issues relating to a proposed transaction.(i.e. verify that information is what it is proposed to be).