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D
debenture
The written acknowledgement of a debt by a company, usually
given under its seal, and normally containing provisions
as to payment of interest and the terms of repayment of
principal. A debenture may be secured on some or all of
the assets of the company or its subsidiaries.
debt
One of the alternative sources of capital for a company,
also called long-term debt or loans.
debt/equity ratio
A gearing ratio that relates to financial gearing, which
is the relationship between a company's borrowings, which
includes both prior charge capital and long-term debt, and
its ordinary shareholders' funds (share capital plus reserves).
debtor days
Average trade debtors divided by average daily sales on
credit terms indicates the average time taken, in calendar
days, to receive payment from credit customers.
debtors
Money that is owed to the company by customers, usually
called trade debtors.
decision tree
A pictorial method of showing a sequence of interrelated
decisions and their expected outcomes. Decision trees can
incorporate both the probabilities of, and values of, expected
outcomes, and are used in decision-making.
defensive interval
Quick assets (current assets excluding stocks) divided by
average daily cash from operations shows how many days a
business could survive at its present level of operating
activity if no inflow of cash was received from sales or
other sources.
depreciation
A measure of the wearing out, consumption or other reduction
in the useful economic life of a fixed asset, whether arising
from use, effluxion of time or obsolescence through technological
or market changes (FRS 11 and FRS 15). Depreciation should
be allocated so as to charge a fair proportion of the total
cost (or valuation) of the asset to each accounting period
expected to benefit from its use.
depreciation provision
The amount of depreciation that has cumulatively been charged
to the profit and loss account, relating to a fixed asset,
from the date of its acquisition. Fixed assets are stated
in the balance sheet at their net book value (or written
down value) which is usually their historical cost less
the cumulative amount of depreciation at the balance sheet
date.
differential cost
The difference in total cost between alternatives, calculated
to assist decision-making.
direct cost
A traceable cost, or expenditure which can be economically
identified with and specifically measured in respect of
a relevant cost object.
direct labour
Labour costs which can be economically identified with and
specifically measured in respect of a relevant cost object.
direct materials
Materials costs which can be economically identified with
and specifically measured in respect of a relevant cost
object.
direct method
A method of calculating cash flow as the net of operating
cash receipts and payments that is summarised for inclusion
in the cash flow statement. It is a time-consuming process
that is not straightforward and is not widely used by UK
companies.
director
A person elected under the company's articles of association
to be responsible for the overall direction of the company's
affairs. Directors usually act collectively as a board and
carry out such functions as are specified in the articles
of association or the Companies Acts, but they may also
act individually in an executive capacity.
discontinued operations
Operations of the reporting entity that are sold or terminated
and that satisfy certain criteria (FRS 3):
- the sale or termination is completed
either in the period or before the earlier of three months
after the commencement of the subsequent period and the
date on which the financial statements are approved
- if a termination, the former activities
have ceased permanently
- the sale or termination has a material
effect on the nature and focus of the reporting entity's
operations, and represents a material reduction in its
operating facilities resulting from its withdrawal from
a particular market (whether class of business or geographical)
or from a material reduction in turnover in the reporting
entity's continuing markets
- the assets, liabilities, results
of operations and activities are clearly distinguishable
physically, operationally and for financial reporting
purposes.
discounted cash flow (DCF)
The discounting of the projected net cash flows of a capital
project to ascertain its present value, using a yield or
internal rate of return (IRR), net present value (NPV) or
discounted payback.
discounted payback
The number of years required to repay an original investment
using a specified discount rate.
dividend
An amount payable to shareholders from profits or distributable
reserves. Dividends are normally paid in cash, but scrip
dividends, paid by the issue of additional shares, are permissible.
Listed companies usually declare two dividends each year,
an interim dividend based on the mid-year profits, and a
final dividend based on annual profit.
dividend cover
Earnings per share divided by dividend per share indicates
the number of times the profits attributable to the equity
shareholders cover the actual dividends payable for the
period.
double-entry bookkeeping
The system of bookkeeping based on the principle that every
financial transaction involves the simultaneous receiving
and giving of value, and is therefore recorded twice.
doubtful debt
A debt for which there is some uncertainty as to whether
or not it will be settled, and for which there is a possibility
that it may eventually prove to be bad. A doubtful debt
provision may be created for such a debt by charging it
as an expense to the profit and loss account.
doubtful debt provision
An amount charged against profit and deducted from debtors
to allow for the estimated non-recovery of a proportion
of the debts.
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