Category: Financial Terms

Direct Tax: Definition, History, and Examples Key takeaways * A direct tax is paid by the person or entity on whom it is legally imposed. * Common direct taxes include income, corporate, property, estate, and gift taxes. * Direct taxes cannot be shifted to another party; indirect taxes (sales tax, VAT, excise) are typically passed…

Direct Stock Purchase Plan (DSPP) A direct stock purchase plan (DSPP) lets individual investors buy a company’s shares directly from the company (or its transfer agent) without using a broker. DSPPs often support small, recurring investments, fractional shares, and optional dividend reinvestment. Key benefits Low minimums — many plans accept modest initial investments (often $25–$500)…

Direct Quote A direct quote expresses an exchange rate as the amount of domestic currency required to buy one unit of foreign currency. In a direct quote, the foreign currency is the base currency and the domestic currency is the quote (or counter) currency. Which currency is “domestic” depends on the location of the trader…

Direct Public Offering (DPO) Key takeaways A direct public offering (DPO), also called a direct placement, lets a company sell securities directly to the public without using underwriters, broker-dealers, or investment banks. Eliminating intermediaries reduces costs and gives the issuer control over offering terms. DPOs often rely on federal and state exemptions (e.g., intrastate exemptions,…

Direct Participation Programs (DPPs) Key takeaways * DPPs let investors share directly in a venture’s cash flow, losses, and tax benefits through pass‑through structures. * They are commonly organized as limited partnerships, non‑traded REITs, non‑listed BDCs, energy partnerships, or equipment‑leasing ventures. * DPPs are typically long‑term, illiquid investments with limited investor control and may require…

Direct Method What it is The direct method is one way to prepare the cash flows from operating activities in a statement of cash flows. Instead of starting with accrual-based net income and adjusting for noncash items and balance-sheet changes (the indirect method), the direct method reports actual cash receipts and cash payments during the…

Direct Marketing: What It Is and How It Works Key takeaways * Direct marketing communicates with consumers directly rather than through third-party media. * Common channels include email, social media, mail, SMS/phone, and catalogs. * Effective campaigns use targeted lists, personalized messages, and a clear call to action. * Direct marketing performance is easier to…

Direct Market Access (DMA) Direct Market Access (DMA) gives institutional traders electronic access to exchange order books so they can place and manage orders without routing each trade through an intermediary broker. It’s most commonly used by buy-side firms (hedge funds, mutual funds, pension funds) that obtain access via sell-side providers (broker-dealers, market makers, or…

Direct Investment: Definition, Types, and Examples Direct investment, commonly called foreign direct investment (FDI), occurs when an investor acquires a lasting interest in a foreign business with the objective of exerting control over its operations. Unlike buying shares as a passive investor, direct investment typically involves obtaining an equity stake that provides effective influence—through ownership,…

Direct Deposit Direct deposit is an electronic payment method that transfers funds directly into a bank or prepaid account without using a paper check. Most direct deposits move through the Automated Clearing House (ACH) network, which credits recipient accounts automatically when payments are processed. How direct deposit works The payer (employer, government agency, payer) initiates…

Direct Costs Explained A direct cost is an expense that can be specifically traced to the production of a particular good, service, project, or department. These costs are assigned directly to a cost object (for example, a product or contract) rather than being pooled as overhead. Understanding direct costs is essential for accurate pricing, budgeting,…

Dim Sum Bond What is a dim sum bond? A dim sum bond is a bond denominated in Chinese renminbi (RMB) and issued in Hong Kong. The name refers to the Hong Kong cuisine—small, varied dishes—reflecting the market’s role as an offshore venue for RMB-denominated debt. How dim sum bonds work Issuance: Dim sum bonds…

What Is Dilution in Trading? Dilution occurs when a company issues new shares, reducing existing shareholders’ percentage ownership. It can also happen when holders of options or other convertible securities exercise or convert them into common stock. As the number of outstanding shares rises, each existing share represents a smaller portion of the company. Key…

Diluted Earnings Per Share (Diluted EPS) Diluted EPS estimates a company’s earnings per common share assuming all potentially convertible securities are exercised or converted into common stock. It provides a conservative—or “worst‑case”—view of EPS by showing how net income would be spread over a larger number of shares if stock options, warrants, convertible preferred stock,…

Digital Wallet A digital wallet (electronic wallet) is a software application that stores payment details and passwords, enabling secure, contactless transactions on connected devices—primarily smartphones. By holding credit/debit card information, bank accounts, or stored value, digital wallets reduce the need to carry physical cards and cash. What a digital wallet can store Credit and debit…

Binary Option: Definition and Key Takeaways Binary options are financial derivatives that pay a fixed amount or nothing based on the outcome of a yes/no proposition—typically whether an underlying asset will be above or below a specified level at a set time. Because payouts are all-or-nothing and many platforms operate outside regulated markets, binary options…

Digital Money: What It Is, How It Works, Types, Benefits, and Risks Introduction Digital money is any means of payment that exists only in electronic form. Unlike physical cash, digital money is recorded, stored, and transferred via computers, smartphones, cards, and online platforms. It can represent traditional fiat currencies (dollars, euros), but also includes newer…

Digital Marketing Digital marketing uses websites, apps, mobile devices, social media, search engines, and other digital channels to promote products and services, build brand awareness, and engage customers. It complements traditional marketing by offering data-driven targeting, real-time measurement, and interactive experiences. How it works Digital marketing combines creative messaging with analytics and technology. Teams or…

What Is a Digital Currency? A digital currency is money that exists only in electronic form. It has no physical counterpart (no banknotes or coins) and is stored, transferred, and recorded digitally. Digital currencies can be used for purchases, payments, and transfers—often across borders—and range from decentralized cryptocurrencies to centrally issued digital versions of fiat…

What is the Diamonds (DIA) ETF? The Diamonds ETF is the common name for the SPDR Dow Jones Industrial Average ETF Trust, which trades under the ticker DIA on NYSE Arca. Launched in 1998 and managed by State Street Global Advisors, DIA seeks to replicate the performance of the Dow Jones Industrial Average (DJIA) by…

Development Economics: Key Concepts and Theories Key takeaways Development economics studies how to improve fiscal, economic, and social conditions in low- and middle-income countries. It integrates macroeconomic and microeconomic analysis and considers factors such as health, education, institutions, trade, and labor markets. Major theoretical approaches include mercantilism, economic nationalism, the linear stages-of-growth model, and structural-change…

What Is a Developed Economy? A developed economy is one that sustains relatively high and stable levels of prosperity and economic security. Common characteristics include high income per capita, advanced industrialization, widespread technological infrastructure, and a generally high standard of living. How It’s Measured No single metric defines development, so analysts use a combination of…

Understanding Currency Devaluation: Effects on Trade and Economy What is devaluation? Currency devaluation is a deliberate policy action in which a government lowers the official value of its currency relative to other currencies while operating under a fixed or semi-fixed exchange rate. The primary goals are to make exports cheaper and more attractive abroad, raise…

Descriptive Statistics Descriptive statistics summarize and communicate the main features of a dataset without making predictions or generalizing beyond the data. They reduce large amounts of raw data into concise, interpretable measures and visualizations that describe the center, spread, and frequency of values. Key takeaways Summarize characteristics of a dataset (either a full population or…

Descending Triangle A descending triangle is a common technical analysis chart pattern that typically signals bearish continuation but can occasionally precede a bullish reversal. It is defined by a series of lower highs forming a descending upper trendline and a relatively flat horizontal lower trendline that marks support. Key takeaways Usually a bearish continuation pattern:…

Derived Demand What it is Derived demand is the demand for a good or service that exists because of the demand for another, related good or service. In other words, demand for an input (labor, raw materials, components, machinery, or services) is driven by demand for the final product that uses that input. How it…

Derivatives: Definition and How They Work A derivative is a financial contract whose value depends on the price of an underlying asset, a group of assets, or a benchmark. Common uses include hedging risk, speculating on price movements, and gaining leveraged exposure to markets. Derivatives can be traded on regulated exchanges or over the counter…

Deregulation: Definition, History, Effects, and Purpose What is deregulation? Deregulation is the reduction or elimination of government rules and restrictions governing an industry, market, or economic activity. Its goal is to increase competition, lower costs, and encourage innovation by removing legal and administrative barriers to entry and operation. Key takeaways Proponents argue deregulation spurs economic…

Depth of Market (DOM) What is Depth of Market (DOM)? Depth of Market (DOM), also called the order book, is a real‑time listing of open buy (bid) and sell (ask) orders for a tradable asset at multiple price levels. It shows how much interest exists on each side of the market, helping traders assess liquidity…

Depression (Economic): Definition, Causes, and How to Prepare What is an economic depression? An economic depression is an extreme, prolonged downturn in economic activity. It is commonly defined as either: – a recession that lasts three or more years, or – a decline in real gross domestic product (GDP) of at least 10% in a…

Depreciation Recapture Depreciation recapture is the tax the IRS collects when you sell a business or investment asset for more than its adjusted (depreciated) basis. If you previously reduced taxable income by claiming depreciation deductions, and the asset later sells for more than its depreciated value, the IRS “recaptures” some or all of those prior…

Depreciation, Depletion, and Amortization (DD&A) Depreciation, depletion, and amortization (DD&A) are accounting techniques that allocate the cost of long-lived assets over the periods in which those assets help generate revenue. They help match expenses with related revenues and provide a more accurate picture of profitability than expensing large capital outlays in a single period. Key…

Depreciation Depreciation is an accounting method that spreads the cost of a tangible fixed asset across the years it is expected to be used. Instead of recording a large upfront expense when an asset is purchased, businesses allocate portions of that cost to the income statement over the asset’s useful life, matching expense recognition with…

Depreciated Cost Depreciated cost is the value of a fixed asset after subtracting the accumulated depreciation recorded against it. It shows how much of an asset’s original cost has been used up and represents the asset’s carrying value on the balance sheet at a given point in time. Key takeaways Depreciated cost = original cost…

Depository Trust Company (DTC) Overview The Depository Trust Company (DTC), founded in 1973 and based in New York City, is one of the world’s largest central securities depositories. As a subsidiary of the Depository Trust & Clearing Corporation (DTCC), DTC provides electronic safekeeping, record-keeping and automated post-trade services that streamline clearing and settlement for corporate…