Dividend A dividend is a portion of a company’s earnings distributed to shareholders, usually in cash or additional shares. In the UK, dividends are a significant part of investment income, particularly for income-focused investors. Dividend-paying stocks are often sought after for their steady income potential, and the timing and amount of dividends can impact a stock’s price.
Debt-to-Equity Ratio (D/E Ratio) The debt-to-equity ratio measures a company’s financial leverage by comparing total debt to shareholders’ equity. In the UK, investors use this ratio to assess a company’s risk level; a high D/E ratio may indicate high debt and potential financial strain, while a lower ratio suggests a more conservative capital structure.
Deferred Tax Deferred tax is a tax obligation or asset resulting from temporary differences between accounting profits and taxable profits. In the UK, deferred tax liabilities often arise from depreciation or accrued expenses, affecting financial statements and tax planning. Investors consider deferred tax when evaluating a company’s future tax obligations and cash flow.
Discount Rate The discount rate is the interest rate used to calculate the present value of future cash flows. In the UK, the discount rate is often the risk-free rate plus a risk premium, representing the required return on investment. Investors use it in discounted cash flow (DCF) analysis to evaluate investment opportunities and determine fair value.
Dilution Dilution occurs when a company issues new shares, reducing existing shareholders’ ownership percentage. In the UK, dilution affects shareholders’ voting power and dividend entitlement, and it can impact stock prices if new shares are issued below market value. Investors monitor dilution risks, particularly in companies that frequently raise capital.
Due Diligence Due diligence is the investigation and assessment process conducted before entering a financial transaction, such as an acquisition or investment. In the UK, due diligence is essential for understanding a company’s financial health, legal standing, and market potential, ensuring that investors make informed decisions and mitigate potential risks.
Debenture A debenture is a type of debt instrument unsecured by collateral, relying on the issuer’s creditworthiness. In the UK, debentures are often issued by large, established companies with solid credit ratings. They provide regular interest payments, making them attractive for income investors, though they carry higher risk than secured bonds.
Defensive Stock A defensive stock is a type of stock that tends to remain stable or even increase in value during economic downturns. In the UK, defensive stocks are found in sectors like utilities, healthcare, and consumer staples, where demand remains consistent regardless of economic conditions. They are popular among conservative investors seeking stability.
Day Trading Day trading involves buying and selling financial instruments within the same trading day, often to profit from small price movements. In the UK, day trading is popular among retail investors seeking quick returns but requires careful risk management due to the high volatility and leverage often involved in short-term trades.
Dividend Yield Dividend yield is the annual dividend payment divided by the stock’s current price, expressed as a percentage. In the UK, dividend yield is a key metric for income investors, as it indicates the return on investment from dividends alone. High-yield stocks are favoured for income generation, though very high yields can indicate risk.
Deferred Shares Deferred shares are a class of shares that do not receive dividends until certain conditions are met, such as achieving a profit threshold. In the UK, deferred shares are often issued to founders or early investors and may come with voting rights. They are useful for aligning interests with long-term company performance but are generally illiquid.
Discounted Cash Flow (DCF) Discounted Cash Flow (DCF) is a valuation method that estimates the present value of future cash flows using a discount rate. In the UK, DCF analysis is widely used by investors to assess the intrinsic value of investments, particularly in companies with predictable cash flows, such as utilities or mature businesses.
Dual Listing A dual listing occurs when a company’s shares are listed on more than one stock exchange. Some UK companies are dual-listed on exchanges like the New York Stock Exchange (NYSE), providing access to international investors. Dual listings can increase liquidity, broaden the investor base, and enhance global visibility for UK firms.
Default Risk Default risk is the risk that a borrower will be unable to make required debt payments. In the UK, investors consider default risk when assessing bonds and loans, as it affects the potential return and creditworthiness of the issuer. High default risk generally results in higher interest rates or yields to compensate investors.
Direct Listing A direct listing is a method of listing shares on an exchange without an initial public offering (IPO). In the UK, direct listings allow companies to go public without raising new capital, reducing underwriting fees and allowing market-driven pricing. This method is often used by companies with strong brand recognition and no immediate need for new funding.
Debt Securities Debt securities are financial instruments representing a loan made by an investor to a borrower, usually in the form of bonds or debentures. In the UK, debt securities provide predictable interest payments and are a popular choice for income-seeking investors. Government gilts and corporate bonds are common debt securities in the UK.
Dividend Cover Dividend cover is a ratio that measures a company’s ability to pay dividends from its net income, calculated as net income divided by the total dividend. In the UK, a high dividend cover ratio is considered favourable, as it indicates a company can sustain or increase dividends. Low ratios may suggest dividend cuts or financial strain.
Derivatives Derivatives are financial contracts whose value is derived from an underlying asset, such as stocks, bonds, or commodities. In the UK, derivatives are used for hedging risk or speculative purposes and include products like options, futures, and swaps. They are often complex and require a strong understanding of market conditions.
Discounted Rights Issue A discounted rights issue is a capital-raising event where a company offers new shares to existing shareholders at a price below the current market value. In the UK, rights issues are used to raise funds for expansion or debt reduction. While discounted rights benefit shareholders, they can dilute ownership if shareholders choose not to participate.
Deferred Income Deferred income, also known as unearned revenue, is income received before goods or services are delivered. In the UK, companies with subscription models or long-term contracts often report deferred income, which provides cash flow but is recorded as a liability until earned. It’s a key metric for assessing cash flow sustainability.
Debt Instrument A debt instrument is a financial asset that represents a loan from the investor to the issuer, providing interest income. In the UK, debt instruments include government bonds, corporate bonds, and commercial paper, appealing to income-focused investors seeking fixed returns. Debt instruments vary in risk depending on the issuer’s creditworthiness.
Derivative Market The derivative market is a financial market where derivatives, such as options and futures, are traded. In the UK, the derivative market is used by institutional and retail investors to hedge risks, gain leverage, or speculate on price movements. It plays a vital role in financial markets by providing liquidity and enabling risk management.
Depreciation Depreciation is the allocation of an asset’s cost over its useful life, reflecting wear and tear or obsolescence. In the UK, depreciation is a non-cash expense that reduces taxable income, making it important for tax planning. Investors analyse depreciation rates to assess a company’s asset management and long-term capital needs.
Divestment Divestment is the process of selling off assets, businesses, or investments, often to improve focus or financial health. In the UK, companies divest non-core assets to streamline operations, reduce debt, or comply with regulatory requirements. Investors consider divestment strategies as they can influence a company’s profitability and strategic direction.
Downgrade A downgrade is a reduction in a credit rating or investment rating, often reflecting increased risk or declining performance. In the UK, downgrades impact borrowing costs and investor sentiment, as a lower rating can reduce a stock’s attractiveness. Bondholders are particularly sensitive to downgrades, as they affect yields and default risk.
Dividend Aristocrats Dividend Aristocrats are companies that have consistently increased their dividends for a significant number of years. In the UK, FTSE Dividend Aristocrats are particularly appealing to income-focused investors, as they represent stable, high-quality companies with reliable dividend growth. These stocks are favoured for generating steady income over time.
Discount Window The discount window is a facility through which central banks, like the Bank of England, lend short-term funds to financial institutions. In the UK, the discount window provides liquidity during times of financial stress, helping banks meet cash flow needs and maintain stability. It is often used as a last resort due to higher borrowing costs.
Debt Capacity Debt capacity is the maximum amount of debt a company can sustain based on its earnings, assets, and cash flow. In the UK, investors assess debt capacity to determine a company’s borrowing power and financial risk. Companies with higher debt capacity are viewed as more resilient, especially in capital-intensive industries.
Deferred Tax Liability A deferred tax liability is a tax obligation that a company will pay in the future due to timing differences between accounting income and taxable income. In the UK, deferred tax liabilities arise from items like depreciation and pension contributions. Investors consider deferred tax liabilities when evaluating future cash flows and tax planning.
Dark Pool A dark pool is a private trading venue where large orders are executed anonymously, away from public exchanges. In the UK, institutional investors use dark pools to buy or sell significant volumes without impacting market prices. Although controversial due to lack of transparency, dark pools provide liquidity and reduce price impact for large trades.
Deflation Deflation is a decrease in the general price level of goods and services, often due to reduced demand or increased productivity. In the UK, deflation can signal economic contraction, impacting business profits and wages. Investors monitor deflation risks, as they can lead to lower asset prices and reduce returns on investments, particularly in equities.
Debt Financing Debt financing is the process of raising capital through borrowing, typically by issuing bonds or taking loans. In the UK, companies use debt financing to fund expansion while retaining ownership control. Debt financing is attractive for tax purposes, as interest payments are deductible, but it increases financial leverage and risk.
Discount Factor The discount factor is used in calculating the present value of future cash flows, reflecting the time value of money. In the UK, discount factors are essential in discounted cash flow (DCF) analysis, allowing investors to value cash flows from investments. A higher discount rate lowers present value, making it key in riskier projects.
Deferred Payment A deferred payment is a payment scheduled for a future date, allowing buyers to receive goods or services before full payment. In the UK, deferred payments are common in business transactions and often come with interest or fees. Investors monitor companies’ deferred payment arrangements to assess liquidity and working capital management.
Dow Theory Dow Theory is a market analysis theory that suggests that stock market trends have three phases: accumulation, public participation, and distribution. In the UK, Dow Theory is used in technical analysis to identify long-term market trends and make informed trading decisions, often by examining index movements and volume patterns.
Dividend Reinvestment Plan (DRIP) A Dividend Reinvestment Plan (DRIP) allows investors to reinvest their cash dividends into additional shares of the company’s stock. In the UK, DRIPs are popular for long-term investors seeking to compound returns by increasing their holdings over time without incurring transaction fees. DRIPs also help boost the total return of dividend-paying stocks.
Debt Service Coverage Ratio (DSCR) The Debt Service Coverage Ratio (DSCR) measures a company’s ability to cover its debt obligations with its net operating income. In the UK, a DSCR above 1 indicates that a company generates enough income to meet debt payments, while a DSCR below 1 may signal financial strain. It’s widely used in assessing credit risk for lenders.
Depositary Receipt A depositary receipt is a security representing shares in a foreign company, allowing investors to trade shares of foreign firms on domestic exchanges. In the UK, depositary receipts, like Global Depositary Receipts (GDRs), enable access to foreign stocks without currency risk and regulatory hurdles, providing portfolio diversification.
Discount Brokerage A discount brokerage is a brokerage firm that offers reduced fees for trading without providing personalised advice. In the UK, discount brokerages are popular among DIY investors who prefer lower costs over advisory services. Discount brokerages often provide online trading platforms, making them accessible and cost-effective for active traders.
Developed Market A developed market refers to a country with a highly advanced economy, stable institutions, and a robust financial market. In the UK, developed markets like the US, Japan, and Europe are considered safer investments with lower volatility than emerging markets. Investors often allocate to developed markets for stability and reliable growth.
Derivative Security A derivative security is a financial instrument whose value depends on an underlying asset, such as stocks, bonds, or commodities. In the UK, derivatives like options, futures, and swaps are used for hedging and speculation. They can help manage risk or leverage exposure, but they carry complexity and require sophisticated understanding.
Dividend Payout Ratio The dividend payout ratio is the percentage of a company’s earnings distributed as dividends. In the UK, this ratio is used to evaluate dividend sustainability, with a lower ratio indicating that a company retains more profits for growth. High payout ratios can indicate a commitment to returning income to shareholders but may reduce reinvestment potential.
Downside Risk Downside risk is the potential for an asset’s value to decline, leading to financial losses. In the UK, investors use downside risk measures, such as Value at Risk (VaR) and downside deviation, to assess the likelihood of significant losses in a portfolio. Downside risk management is essential for conservative and risk-averse investors.
Depository Trust Company (DTC) The Depository Trust Company (DTC) is a US-based organisation that settles trades and provides securities custody services. Although based in the US, DTC services are relevant for UK investors with exposure to US markets, as it helps secure and transfer securities in a centralised system, ensuring transaction accuracy and security.
Dilutive Securities Dilutive securities are financial instruments that can increase the number of outstanding shares, leading to potential dilution of earnings per share. In the UK, dilutive securities include options, warrants, and convertible bonds. Investors monitor potential dilution when assessing a stock’s value, as it affects ownership percentages and earnings.
Dividend Drag Dividend drag refers to the impact of dividend distribution on a stock’s price, as paying dividends can reduce retained earnings. In the UK, dividend drag affects companies’ growth potential, as funds used for dividends cannot be reinvested. Investors seeking capital appreciation may consider lower dividend payout stocks to reduce dividend drag.
Debt Amortisation Debt amortisation is the process of gradually paying off a debt over time through regular payments. In the UK, amortised loans are structured with fixed payments that cover both principal and interest. Debt amortisation is important for credit risk assessment, as it indicates a borrower’s ability to manage and repay debt.
Dividend Growth Model The Dividend Growth Model is a valuation method used to estimate a stock’s price based on its expected dividend growth rate. In the UK, this model, particularly the Gordon Growth Model, is popular for valuing mature companies with stable dividend growth. It helps income investors determine if a stock is fairly valued based on dividend projections.
Discount Bond A discount bond is a bond that is sold for less than its face value, typically due to lower interest rates or market conditions. In the UK, discount bonds are attractive to investors seeking potential capital gains, as they are redeemed at face value at maturity. They provide returns through price appreciation rather than periodic interest payments.
Dynamic Asset Allocation Dynamic asset allocation is an investment strategy that actively adjusts a portfolio’s asset mix based on market conditions. In the UK, this approach is favoured by investors who seek to capture returns in different market cycles by shifting between stocks, bonds, and other assets. Dynamic allocation allows for flexibility and can reduce downside risk in volatile markets.
Deferred Revenue Deferred revenue, also known as unearned revenue, is income a company has received but has not yet earned by delivering goods or services. In the UK, deferred revenue appears on a company’s balance sheet as a liability until it is recognised as income. Investors monitor deferred revenue to understand future cash flow and revenue potential.
Dividend Discount Model (DDM) The Dividend Discount Model (DDM) is a valuation method that determines a stock’s intrinsic value based on the present value of expected future dividends. In the UK, the DDM is commonly used for valuing companies with stable and predictable dividend payments, especially in sectors like utilities and consumer goods.
Debt Restructuring Debt restructuring is a process where a company renegotiates the terms of its debt to improve financial stability. In the UK, debt restructuring is used by companies facing financial difficulties, allowing them to reduce interest rates, extend payment terms, or reduce debt levels. It’s a key consideration for investors in distressed debt situations.
Default Probability Default probability is the likelihood that a borrower will fail to meet its debt obligations. In the UK, investors assess default probability to manage credit risk, especially in high-yield bonds and corporate debt. Ratings agencies and financial models estimate default probabilities, providing investors with insights into potential risks.
Debt Overhang Debt overhang occurs when a company’s debt level is so high that it discourages new investment, as most of the returns would go toward repaying existing debt. In the UK, debt overhang can hinder growth and innovation, leading investors to evaluate companies’ debt levels carefully, particularly in capital-intensive sectors.
Direct Investment Direct investment refers to an investment made by a firm or individual in one country into business interests in another country. In the UK, foreign direct investment (FDI) is an important economic driver, attracting capital for infrastructure and job creation. Investors consider direct investment flows as indicators of economic confidence.
Discount Spread Discount spread is the difference between the face value and market value of a bond, often expressed as a percentage. In the UK, discount spreads are common in the bond market, where market price fluctuations create buying opportunities for investors seeking bonds at a discount. A larger spread can indicate perceived risk or market sentiment.
Dividend Tax Credit The dividend tax credit is a tax benefit that reduces the tax burden on dividend income. In the UK, dividend tax credits have been replaced by a tax-free allowance, but the principle remains relevant for tax planning. Investors consider dividend tax implications to maximise after-tax income from dividend-paying stocks.
Deficiency Letter A deficiency letter is issued by regulatory authorities when a company’s financial filings or disclosures are found to be incomplete or inadequate. In the UK, the Financial Conduct Authority (FCA) may issue deficiency letters, prompting companies to provide additional information. Investors monitor deficiency letters, as they can indicate transparency issues or regulatory concerns.
Discounted Payback Period The discounted payback period measures the time needed to recover an investment’s initial cost, considering the time value of money. In the UK, this metric is used by investors and businesses to evaluate project viability, with shorter payback periods indicating lower risk and quicker returns.
Debt Syndication Debt syndication is the process of pooling funds from multiple lenders to finance a single borrower. In the UK, large projects or corporate loans are often syndicated, allowing lenders to spread risk and gain exposure to significant investments. Investors in syndicated loans benefit from diversification and shared risk management.
Distribution Yield Distribution yield is the annual income paid to investors by a fund or trust, expressed as a percentage of its current price. In the UK, distribution yield is widely used by income-focused investors to evaluate funds, as it reflects the income return from dividends, interest, and capital gains distributions.
Debt Relief Debt relief involves reducing or restructuring a borrower’s debt to alleviate financial hardship. In the UK, debt relief is provided to individuals and companies in financial distress, often as part of government initiatives or creditor negotiations. Investors in distressed assets may encounter debt relief measures that impact investment value.
Domicile Domicile refers to the country or jurisdiction where an individual or entity is considered a legal resident for tax purposes. In the UK, domicile affects taxation on worldwide income and inheritance. Investors consider domicile in tax planning, especially for those with international assets, as it impacts tax obligations and liabilities.
Downgrading Downgrading is the process by which a ratings agency reduces the credit rating of a borrower or debt instrument. In the UK, downgrades can increase a borrower’s interest costs and signal financial difficulties, impacting investor sentiment. Investors in bonds closely monitor rating downgrades as they affect yields and risk assessments.
Debtor Days Debtor days, also known as accounts receivable days, measure the average time a company takes to collect payment from its customers. In the UK, a lower debtor days ratio indicates efficient cash collection, while higher ratios may signal cash flow issues. Investors use this metric to assess working capital efficiency and liquidity.
Discounting Discounting is the process of calculating the present value of future cash flows by applying a discount rate. In the UK, discounting is essential for valuing investments, as it considers the time value of money. It is widely used in discounted cash flow analysis, making it crucial for investment appraisals and corporate finance.
Defensive Investment Defensive investments are assets that are less affected by economic downturns, providing stability during market volatility. In the UK, defensive investments include government bonds (gilts) and sectors like utilities and healthcare. Defensive strategies appeal to risk-averse investors, as they offer capital preservation and steady returns in turbulent markets.
Defined Benefit Pension A defined benefit pension plan promises a specified retirement benefit based on salary and years of service. In the UK, defined benefit pensions are becoming less common due to high costs for employers. Investors with defined benefit pensions have stable retirement income, though these schemes carry investment risk for pension providers.
Defined Contribution Pension A defined contribution pension is a retirement plan where contributions are invested, and the final benefit depends on investment performance. In the UK, defined contribution pensions are popular due to their flexibility and potential for growth. Contributions are typically invested in a variety of assets, allowing for potential capital appreciation over time.
Debt-to-Assets Ratio The debt-to-assets ratio measures the percentage of a company’s assets that are financed by debt. In the UK, this ratio is used to assess financial leverage, with higher ratios indicating increased debt levels. Investors use it to gauge a company’s risk profile and debt management, particularly in asset-heavy industries.
Dividend Irrelevance Theory Dividend Irrelevance Theory suggests that a company’s dividend policy has no impact on its stock value, assuming perfect markets. In the UK, this theory is debated, as many investors view dividends as a critical part of returns. It is particularly relevant for growth companies that reinvest earnings rather than paying dividends.
Double Taxation Double taxation occurs when income is taxed at both the corporate and shareholder levels. In the UK, double taxation is an issue for dividends, as companies pay corporate tax on profits, and shareholders pay income tax on dividends. Tax treaties and credits are available to reduce double taxation, especially for international investors.
Drawdown Drawdown is the peak-to-trough decline during a specific investment period, often used to measure an investment’s risk. In the UK, drawdowns are monitored by investors to understand potential losses, particularly in volatile assets. Smaller drawdowns are favoured as they indicate lower risk and better portfolio resilience during downturns.
Dead Cat Bounce A dead cat bounce is a temporary recovery in stock prices after a significant decline, followed by a continuation of the downtrend. In the UK, this phenomenon is observed in bear markets, where short-lived rallies can mislead investors into thinking the downturn is over. It’s a cautionary signal in technical analysis for identifying false rebounds.
Diversification Diversification is an investment strategy that spreads risk across various assets, sectors, or geographic locations to reduce the impact of any single asset’s performance on the overall portfolio. In the UK, diversification is a foundational principle, especially in portfolios that include stocks, bonds, and other asset classes, helping to smooth returns and mitigate losses.
Debt Consolidation Debt consolidation is the process of combining multiple debts into a single loan with a lower interest rate or more manageable terms. In the UK, debt consolidation is commonly used by individuals and businesses to simplify repayments and reduce overall interest costs, making debt management easier and potentially improving credit scores.
Direct Public Offering (DPO) A Direct Public Offering (DPO) allows a company to offer its shares directly to the public without an underwriter, bypassing traditional IPO processes. In the UK, DPOs are less common but provide an alternative for companies seeking to go public cost-effectively, particularly for smaller or niche firms with established customer bases.
Discounted Rights Issue A discounted rights issue is a form of capital raising where a company offers new shares to existing shareholders at a price below the current market value. In the UK, discounted rights issues allow companies to raise capital while providing shareholders with a preferential buying opportunity, though they can dilute existing holdings if shareholders do not participate.
Debt Ceiling The debt ceiling is a limit set on the amount of debt that a government or organisation can incur. In the UK, public debt levels are monitored by the government and financial institutions to ensure fiscal responsibility. Debt ceilings are more common in the US, but similar limits are considered in the UK to maintain financial stability.
Dividend Trap A dividend trap occurs when a stock’s high dividend yield attracts investors, but the company may struggle to maintain the payout. In the UK, dividend traps can signal financial strain, as companies may be using high yields to attract investors despite underlying issues. Investors evaluate dividend sustainability to avoid falling into dividend traps.
Debt Forgiveness Debt forgiveness is the cancellation or reduction of a debt owed by a borrower. In the UK, debt forgiveness can occur in situations like individual insolvency arrangements or for financially distressed companies. Investors in distressed debt markets sometimes engage in debt forgiveness as part of restructuring to recoup part of their investment.
Deferred Compensation Deferred compensation is income that is earned in one period but paid out at a later date, often used as an incentive for executives. In the UK, deferred compensation arrangements, such as bonuses or stock options, are commonly used in corporate finance to align management’s interests with long-term company performance.
Discretionary Account A discretionary account is an investment account where the investor gives an advisor or broker the authority to make decisions on their behalf. In the UK, discretionary accounts are popular among high-net-worth individuals seeking professional management. Investors benefit from the expertise of the advisor but must trust their judgment in managing assets.
Discount Margin (DM) Discount Margin (DM) is a measure used to estimate the yield on a floating-rate bond. In the UK, investors use DM to assess the expected return on bonds whose interest payments fluctuate with market rates. The discount margin reflects the spread over a benchmark rate, such as LIBOR, helping investors compare floating-rate securities.
Dollar-Cost Averaging (DCA) Dollar-Cost Averaging (DCA) is an investment strategy where investors regularly invest a fixed amount, regardless of market conditions. In the UK, DCA is used to reduce the impact of market volatility by buying more shares when prices are low and fewer when prices are high, creating a cost-effective, long-term investment approach.
Direct Lending Direct lending involves non-bank lenders providing loans directly to companies or individuals, bypassing traditional banks. In the UK, direct lending is popular among private equity firms and alternative lenders, offering flexibility and speed in financing, especially for small and medium-sized businesses seeking capital without extensive bank scrutiny.
Derivative Swap A derivative swap is a financial contract where two parties exchange cash flows based on different financial instruments or interest rates. In the UK, swaps are used for hedging and speculation, allowing companies to manage interest rate risk, currency risk, or credit exposure. Swaps are commonly used by banks and large corporations to mitigate financial risks.
Debt-Equity Swap A debt-equity swap is a restructuring tool where creditors exchange debt for equity in a company. In the UK, debt-equity swaps are common in corporate turnarounds, as they reduce debt levels and improve liquidity. Creditors gain an ownership stake, while the company benefits from reduced financial obligations and increased financial flexibility.
Drawdown Facility A drawdown facility is a credit line that allows borrowers to access funds as needed, up to a predetermined limit. In the UK, drawdown facilities are used by businesses to manage cash flow and meet short-term financing needs. Investors in companies with drawdown facilities monitor their use as it indicates liquidity management and financial stability.
Dividend Recapitalisation Dividend recapitalisation is a process where a company raises debt to pay a dividend to shareholders. In the UK, dividend recaps are often used by private equity firms to extract returns from portfolio companies. While providing immediate cash flow, this strategy increases the company’s debt burden and can affect financial health.
Discount Bond A discount bond is a bond sold below its face value, often due to lower interest rates or credit concerns. In the UK, discount bonds appeal to investors seeking capital gains, as the bond’s price converges to face value at maturity. These bonds provide value through price appreciation rather than regular interest payments.
Dividend Policy Dividend policy is a company’s approach to distributing profits to shareholders. In the UK, companies follow different dividend policies, such as constant, stable, or residual policies, depending on cash flow and growth objectives. Investors analyse dividend policies to assess income potential and the company’s commitment to shareholder returns.
Defined Contribution Scheme A defined contribution scheme is a retirement plan where contributions are made by employees and/or employers and invested to build a retirement fund. In the UK, defined contribution schemes are popular due to their flexibility and growth potential, with retirement income dependent on investment performance, unlike defined benefit pensions.
Deregulation Deregulation is the process of removing or reducing government controls over a particular industry. In the UK, deregulation in sectors like telecommunications and energy has spurred competition and innovation, often benefiting consumers. Investors monitor deregulation impacts as they can open up new opportunities and reduce operational constraints for companies.
Discounting of Bills Discounting of bills involves selling a bill of exchange or promissory note at a discount to receive immediate cash. In the UK, discounting is used by businesses to improve cash flow, as the buyer pays less than the bill’s face value and collects the full amount later. Investors use discounting to manage liquidity and working capital.
Debt Instruments Debt instruments are financial products representing a loan made by an investor to a borrower, such as bonds or notes. In the UK, debt instruments provide fixed income through interest payments and are used by companies and governments to raise funds. Investors in debt instruments value them for stability and predictable returns.
Deposit Insurance Deposit insurance is a guarantee provided by the government to protect bank deposits up to a certain limit. In the UK, the Financial Services Compensation Scheme (FSCS) insures deposits up to £85,000 per institution, reducing bank run risks and providing security for individual savers and investors.
Default Swap A default swap, or credit default swap (CDS), is a financial derivative that provides insurance against the risk of default on debt. In the UK, CDSs are used by institutional investors to manage credit risk, particularly in corporate bonds and loans. By paying a premium, investors transfer default risk to a counterparty, providing protection if the issuer defaults.
Devaluation Devaluation is a reduction in a currency’s value relative to other currencies, often enacted by governments to boost exports. In the UK, devaluation impacts trade, as a weaker British pound makes exports cheaper and imports more expensive. Investors with international portfolios monitor devaluation risks, as they can affect foreign returns and currency exposure.