Dow Theory Forecasts

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Debenture

A promissory note that is backed by the general credit of the issuing company. Unlike a mortgage bond, a debenture is generally not secured by a mortgage or lien on any specific property.

Debit Balance

The portion of a stock's purchase price that is supplied by the broker extending credit to an investor in a margin account.

Debt

Funds borrowed from a creditor and that must be repaid. Short-term debt represents those obligations that must be repaid in the near term, which typically means within one year. Long-term debt represents those obligations, such as a mortgage, that are not required to be repaid in the near future.

Depreciation

A charge taken against a firm's earnings to approximate the deterioration in the value of company's tangible assets each year. Although a charge for depreciation reduces a firm's net income, it is termed a noncash charge and is typically added back to net income when calculating a firm's cash flow because it entails no out-of-pocket expense.

Derivatives

A wide variety of securities, such as futures, options, inverse-rate floating bonds, and floating rate bonds, that are derived from other less complex instruments, such as common stocks and bonds. They are called derivatives because they derive their value from their underlying securities. Typically, derivatives are significantly more volatile than the underlying securities on which they are based and entail the use of leverage or margin.

Director

A person elected by shareholders to serve on a company's Board of Directors.

Discretionary Account

A type of investment account in which the individual has granted his/her broker or money manager full authority to trade securities in the account.

Diversification

An investment philosophy of investing among different types of securities, companies, and/or markets to reduce investment risk. For example, an investor who believes in diversifying might allocate his/her portfolio among gold, international stocks, bonds, domestic large-cap stocks, domestic small-cap stocks, and cash. Other individuals practice "time diversification" whereby they add to their security holdings periodically, such as every month, to avoid purchasing at market high points.

Dividend

A payment made by a company out of its earnings to its shareholders.

Dividend Yield

A measure that shows the current income return from a particular stock.