Glossary – D

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D

Days purchases in accounts payable ratio
Indicates how quickly you pay your suppliers for inventory purchases. Average accounts payable divided by the cost of goods sold plus change in inventory, multiplied by 365.

Days to sell inventory ratio
Indicates the firm’s efficiency at matching purchases to expected sales. Average inventory divided by the cost of goods sold, multiplied by 365.

Debt ratio
Indicates the firm’s debt level, or leverage. Total liabilities divided by total liabilities plus capital.

Debt-to-Income Ratio
The ratio, expressed as a percentage, which results when a borrower’s monthly payment obligation on long-term debts is divided by his or her gross monthly income. See housing expenses-to-income ratio.

Deed of trust
In many states, this document is used in place of a mortgage to secure the payment of a note.

Default
Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

Deferred interest
When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance. See negative amortization.

Delinquency
Failure to make payments on time. This can lead to foreclosure.

Department of Veterans Affairs (VA)
An independent agency of the federal government which guarantees long-term, low-or no-down payment mortgages to eligible veterans.

Depreciation
Amortization of the cost of a fixed asset, such as plant and equipment, over several years, or the “depreciable life.”

Direct Financing Lease (Direct Lease)
A non-leveraged lease by a lessor (not a manufacturer or dealer) in which the lease meets any of the definitional criteria of a capital lease, plus certain additional criteria.

Discount Point
See Point.

Dividend
Distribution of earnings to shareholders.

Down Payment
Money paid to make up the difference between the purchase price and the mortgage amount.

DSC
Debt Service Coverage Ratio: A 1.0 means breakeven. The ratio is calculated by taking the net operating income and dividing it by the mortgage payments. Most lenders look for a ratio of 1.25 or higher.

Due-on-Sale-Clause
A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the property.

Durable Goods Orders
This gives a reading on the country’s future manufacturing activity. Durable goods include those manufactured items with a normal life expectancy of three years or longer. An increase in the amount of durable goods orders may indicate an expansion in the economy and, if inflationary, the Federal Reserve could choose to tighten money by raising interest rates. Bond Market Moves Down In Price.