Category: Financial Terms

Distress Sales: Definition and Key Takeaways A distress sale (or distressed sale) happens when an asset—such as real estate, stocks, antiques, or collectibles—must be sold quickly because the owner faces urgent financial needs. Sellers under duress typically accept below‑market offers, so distress sales often produce a financial loss. Key takeaways * Distress sales arise from…

Dissenters’ Rights: Definition, Process, and Practical Considerations Overview Dissenters’ rights (also called appraisal rights) are statutory protections under state corporate law that allow shareholders who oppose certain “extraordinary” corporate actions—most commonly mergers or consolidations—to demand payment for the fair value of their shares instead of accepting stock in the surviving or successor company. These rights…

Disruptive Technology Key takeaways Disruptive technologies introduce innovations that change how consumers, businesses, or entire industries operate, often replacing established systems. The concept explains how smaller, resource-constrained entrants can displace incumbents by targeting overlooked segments and improving over time. Adoption can be slow or fail entirely, so investing in disruption carries substantial risk. Examples range…

Disruptive Innovation Key takeaways Disruptive innovation turns expensive, complex products or services into simpler, more affordable, and broadly accessible options. It targets overlooked or nonconsuming markets rather than improving offerings for existing customers. Successful disruption typically requires enabling technology, a novel business model, and a supportive value network. Examples include Amazon (online retail), Netflix (streaming…

Disposition: Definition, How It Works in Investing, and Example Definition A disposition is the act of selling or otherwise transferring ownership of an asset. Common types of dispositions include selling securities on an exchange, donating assets to charity or a trust, transferring property or assignments, and selling real estate. In all cases the disposer gives…

Disposable Income Key takeaways Disposable income is the amount of money left to spend or save after mandatory taxes and deductions. Discretionary income is disposable income minus necessary living expenses. Economists track disposable income to gauge consumer spending, saving, and overall economic demand. What is disposable income? Disposable income (also called disposable personal income or…

Dispersion in Statistics and Finance Dispersion describes how spread out a set of values or possible outcomes is. In finance, it refers to the range of potential returns for an asset or portfolio based on historical volatility. Greater dispersion means outcomes are more spread out and, generally, the investment is considered riskier. Why dispersion matters…

Disinvestment: Definition, Strategies, and Examples What is disinvestment? Disinvestment is the sale, liquidation, or reduction of funding for assets, subsidiaries, business divisions, or capital expenditures. Organizations and governments disinvest to reallocate resources, improve returns on investment (ROI), reduce costs, comply with legal orders, or align holdings with political, social, or environmental values. Key takeaways Disinvestment…

Disintermediation: What it is and why it matters Disintermediation is the removal of intermediaries from a supply chain or transaction so that producers and consumers (or investors and issuers) deal directly. The goal is usually to lower costs, speed up delivery, or both. While the concept appears across industries, it has particular significance in finance,…

Disinflation: Definition and Key Points Disinflation is a slowing in the rate of inflation — prices are still rising, but more slowly than before. For example, if consumer inflation falls from 3% one year to 2% the next, that is disinflation. It differs from: – Inflation: prices rising (rate positive and can be rising or…

Understanding Disguised Unemployment: Key Concepts and Types Disguised unemployment occurs when people are technically employed but their work adds little or no additional output to the economy. It often arises where labor supply exceeds productive demand—common in informal sectors and agriculture in many developing economies—and can mask the true extent of labor underutilization. Key takeaways…

Disequilibrium: Causes, Market Effects, and Examples Key takeaways * Disequilibrium occurs when supply and demand are mismatched, producing shortages or surpluses and moving a market away from its equilibrium (market‑clearing) price. * Causes include sticky prices, government price controls, labor market rules, balance‑of‑payments imbalances, exchange‑rate shifts, and shocks amplified by automated trading. * Market forces…

Diseconomies of Scale: Definition, Causes, and Examples Diseconomies of scale occur when increasing a firm’s output leads to higher average cost per unit. They are the opposite of economies of scale, where expanding production lowers per-unit costs. Diseconomies typically appear after a firm has passed the output level that minimizes average cost. How they work…

Discretionary Investment Management: Definition, Benefits, Risks & Services What it is Discretionary investment management is a service in which a professional portfolio manager is authorized to make buy and sell decisions on a client’s behalf without obtaining approval for each transaction. The client and manager agree upfront on an investment strategy, risk tolerance, and objectives;…

Discretionary Income: What It Is and Why It Matters Discretionary income is the money left after paying taxes and covering essential living expenses such as housing, utilities, food, insurance, transportation, and debt obligations. This remainder can be spent, saved, or invested and typically funds nonessential items and experiences. Examples of discretionary spending: * Vacations and…

Discretionary Expense Key takeaways * A discretionary expense is a non-essential cost—something you can forgo without jeopardizing daily operations or basic living needs. * Discretionary expenses are funded by discretionary income: money left after paying necessities (housing, food, taxes, insurance). * Tracking and ranking discretionary spending makes it easier to cut back during financial strain….

Discretionary Account Key takeaways A discretionary account authorizes a broker or advisor to buy and sell securities on a client’s behalf without obtaining approval for each trade. Clients can place limits or preferences (e.g., asset allocation, exclusions for certain industries). Traditional managed discretionary accounts typically charge 1–2% of assets under management (AUM); robo-advisers charge much…

Discrete Distribution A discrete distribution is a probability distribution defined over a countable set of outcomes (for example: 0, 1, 2, …, or labels such as success/failure, yes/no). Each outcome has an associated probability; the probabilities are nonnegative and sum to 1. Discrete distributions are used to model counts and categorical events and contrast with…

Discouraged worker A discouraged worker is someone who is able and available to work but has stopped actively looking for a job because they believe no suitable opportunities exist. Because they have not searched for work in the four weeks prior to a labor-force survey, discouraged workers are not counted as unemployed in the official…

Understanding Discounts for Lack of Marketability (DLOM) in Valuation Discounts for Lack of Marketability (DLOM) reflect the reduction in value applied to ownership interests that cannot be readily sold in public markets. They are essential when valuing noncontrolling, privately held shares because such interests are generally harder, slower, and more costly to convert into cash…

Understanding Discounting in Finance Discounting is the process of determining the present value of future cash flows by applying a discount rate that reflects the time value of money and the risks associated with those cash flows. It’s a foundational concept for valuing bonds, stocks, projects, and any asset that generates payments over time. Key…

Discounted Payback Period What it is The discounted payback period (DPBP) is the time required for the present value of a project’s discounted cash inflows to equal its initial investment. Unlike the simple payback period, DPBP accounts for the time value of money by discounting future cash flows. Why it matters DPBP is used in…

Discounted Cash Flow (DCF) What is DCF? Discounted Cash Flow (DCF) is a valuation method that estimates the present value of an investment by forecasting its expected future cash flows and discounting them to today using an appropriate discount rate. It is used to assess whether an investment, project, or company will generate returns above…

Discount Yield Key takeaways Discount yield estimates the return on a bond sold at a discount to par and held to maturity. It uses money-market conventions (30-day month, 360-day year). Commonly applied to Treasury bills, commercial paper, municipal notes and zero-coupon bonds. It differs from yield-to-maturity and accretion because it expresses return relative to face…

Discount Rate: Fed Tool and DCF Input The term “discount rate” has two common meanings in finance. One is the interest rate the Federal Reserve charges banks for short-term borrowing from its discount window. The other is the interest rate used in discounted cash flow (DCF) analysis to convert future cash flows into present value….

Discount Margin (DM): Definition and Overview The discount margin (DM) measures the additional yield an investor can expect to receive on a floating-rate security above its reference index (for example, LIBOR or SOFR). It is the constant spread that, when added to projected reference rates, discounts the bond’s future cash flows to equal its current…

Discount Broker: Definition, How They Work, Pros and Cons Key takeaways * A discount broker executes buy and sell orders for securities at reduced commission rates compared with full-service brokers. * They generally do not provide personalized investment advice, financial planning, tax or estate planning, or proprietary research. * Discount brokers are typically online platforms…

Discount Bond: Definition and Overview A discount bond is a debt security issued or trading for less than its par (face) value. This can occur at issuance or in the secondary market. When a bond trades substantially below par—often 20% or more—it’s sometimes called a deep-discount bond. Discount bonds contrast with premium bonds, which trade…

Discounts: Definition and Types Key takeaways * In finance, a discount means a security is trading below its intrinsic or face value. * For bonds, a discount occurs when market price is below par (commonly $1,000); reasons include rising market interest rates or increased credit risk. * Pure discount instruments (e.g., zero-coupon bonds) are sold…

Discontinued Operations: Definition, Reporting, and Why They Matter Key takeaways * Discontinued operations are parts of a business that have been sold, disposed of, or shut down and are reported separately from continuing operations. * Separate reporting helps investors distinguish current, ongoing performance from results tied to activities that have ceased. * GAAP and IFRS…

Disclosure: Definition, Laws, Documents, and Examples What is disclosure? Disclosure is the timely release of information that helps stakeholders—especially investors—evaluate an organization’s financial condition, operations, risks, and outlook. In public companies, disclosures include financial statements, management discussion and analysis, risk factors, and other material information that could influence investment decisions. Key takeaways Public companies are…

What Is a Disbursement? A disbursement is a payment made from a fund — money debited from the payer’s account and credited to the payee’s account. It can be a direct payout (for example, a loan or dividend), a payment made on behalf of a client to a third party, or cash allocated to a…

What Is Disability Insurance? Definition and How It Protects You Disability insurance replaces a portion of your income if an illness or injury prevents you from working. It’s available through public programs (like Social Security benefits in the U.S.) and from private insurers. The purpose is to cover the income loss—the opportunity cost—when a policyholder…

Dirty Price A dirty price is the full price of a bond that a buyer pays, equal to the quoted (clean) price plus any accrued interest since the last coupon payment. It reflects the true cash amount exchanged when a bond trades between coupon dates. Why it matters Accrued interest accumulates daily between coupon payments….

Directional Movement Index (DMI) Overview The Directional Movement Index (DMI), developed by J. Welles Wilder, is a technical analysis tool that identifies both the direction and strength of a price trend. It plots two directional lines—+DI (positive directional indicator) and −DI (negative directional indicator)—and is commonly paired with the Average Directional Index (ADX), a non-directional…