D

Days in receivables
Average receviables collection period. Also called Days Sales Outstanding.

Days' sales in inventory ratio
The average number of days' worth of sales that is held in inventory.

Debt
An amount owed. The general name for notes, bonds, mortgages and other instruments evidencing the amounts owed.

Debt service coverage
The ratio of cash flow available to the borrower to the annual interest and principal payments on a loan or other debt.

Debtor
Borrower of money.

Debt-Service
Required payments of principal and interest on a debt over a given period of time.

Default
Failure to make timely payment of interest or principal on a debt security or to otherwise comply with provisions of the loan or debt agreement.

Defined-Benefit Plan
A pension plan obliging the sponsor to make specified dollar payments to qualifying employees. The pension obligations are effectively the debt obligation of the plan sponsor. Sometimes referred to as a "fixed-benefit" plan. Related: Defined Contribution Plan.

Defined-Contribution Plan
A pension plan whose sponsor is responsible only for making specified contributions into the plan on behalf of qualifying participants. Sometimes referred to as a "Money Purchase Plan".
Related: Defined Benefit Plan.

Depreciation
The decline in value of a limited-life tangible asset, such as a building, machine, vehicle, equipment, furniture, etc., due to age, and to the normal wear and tear of use. In general, depreciation assigns to a fiscal period a portion of the original cost of the capital cost asset.

Direct Cost
Cost of direct material and direct labor incurred in producing a product.

E

Early-stage Financing
Includes seed stage, start-up stage, and first stage financing.

EBIT
Operating Income

Employee Stock Ownership Plans (ESOP)
A trust established to acquire shares in a company for the subsequent allocation to employees over a period of time.

F

Factoring
Sale of a firm's accounts receivable to a financial institution known as a factor. A means of enhancing cash flow.

FIFO
First in, first out. A method of calculating inventory value by which ending inventory costs is computed from most recent purchases and the cost of goods sold is computed from the oldest purchases including beginning inventory. Contrast with LIFO.

Financial Ratio
The result of dividing one financial statement item by another.

Financial Ratio Analysis
Financial Ration analysis is aimed at characterizing the company in a few basic dimensions fundamental to the financial health of the company. They usually cover five areas: 1. Liquidity (ability to meet short-term financial obligations), 2. Leverage & Capital  (ability to fulfill long-term obligations), 3. Profitability (ability to generate profits,  4. Turnover (efficiency and productivity), and 5. Common Stock security (performance from the point of view of the shareholders.

First-Round Financing
The first investment made by external investors.

Five C's of Credit
Five crucial criteria for obtaining credit; Character (borrower's integrity), Capacity (ability to repay), Capital (net worth), Collateral (assets to secure the debt), Conditions (condition of borrowers industry, general economy).

Fixed Cost
An expenditure that does not vary with volume of activity, at least in the short run.

Franchising
An organizational form in which a firm (franchisor) with a market-tested business format enters into a contractual relationship with operators (franchisees) operating under the franchisor's trade name. In exchange for support services the franchisor receives fees and royalties.

G

Going Concern
Assumes the company will continue as an operating business.

Goodwill
Excess of purchase price over fair market value of net assets acquired.

Gross Margin
Net Sales minus Cost of Goods Sold

Guarantee
The assumption of responsibility for payment of a debt. Typically provided by owners to support the obligations of the company.

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