Glossary: Close to D

C (continued)

Close Period: Typically the time between the end of an accounting period and the day a company announces its results for that period. During this time, when the company is calculating its results, it does not normally communicate with investors and directors are not able to buy or sell their shares.

Commission: The way a stockbroker or an Independent Financial Adviser is often compensated. When he or she makes a transaction for a customer, the customer pays a commission. In the Fool's opinion this is a Bad Thing, as it sets up a situation where the customer's and the broker's interests are directly at odds. The good news is that from the end of 2012, commission-based investment sales will be outlawed.

Common Stock: A US term for shares.

Compound Interest: The investor's best friend. It's a snowball effect which can multiply your many times over your investing lifetime. See the Miracle of Compound Returns.

Conditional trading: When a company decides to float its shares on the stock market it may decide to perform this in two distinct stages. Once the offer price has been confirmed, and before the shares are officially admitted to the Stock Exchange, they can be unofficially traded. This is known as conditional trading, as the shares are being traded on the condition that they will be officially admitted to the Stock Exchange.

Consultant: Someone who borrows your watch and tells you the time in return for a fee.

Contracts for Differences (CFDs): A way of betting on shares, indices, exchange rates or commodities. These are high-risk products that allow you to make geared bets on short-term price movements, both up and down.

Cookie: A piece of software that gets downloaded into your computer when you register with a web site. It can provide the website with details of how you use the site.

Cookie Cruncher: Something that knows what a cookie is and eats it.

Cookie Monster: Something that eats Cookie Crunchers, naughty children, stray dogs and day traders. Cookie Monsters also like honey.

Corporate Action: A general term covering anything that a company does that may affect its shareholders. Examples include a share split or a share buyback.

id="correction">Correction: A decline, usually short and steep, in the prevailing price of shares traded in the market or an individual share. Any time that commentators cannot find a reason for an individual stock or the entire market falling, they call it a correction. It sounds better than a "Crash".

CREST: Introduced in 1996, this is a computerised system to settle up share purchases. No more bits of paper passing hands any more.

Creditor: Someone you owe money to, like the Inland Revenue. See debtor.

Cum-Dividend: "Cum" means "with" in Latin. If you buy shares cum-dividend, you are buying them at a time when you will be entitled to receive the next dividend. This is as opposed to ex-dividend. If restrictions on entitlement to dividends didn't exist, people would simply buy shares the day before the dividend was due, collect it and then sell them the day after.

Current Ratio: A measure of whether a company is able to meet its short-term liabilities. The higher the ratio, the more secure the company should be. The Current Ratio is calculated by dividing the total of Current Assets by Current Liabilities. You can find these figures in the company's balance sheet.

Cyclical: Not a bicycle missing a wheel, but a description of a company, such as a steel maker, that is ultra-sensitive to the business cycle. Some investors enjoy buying and selling cyclicals according to which way they think the cycle is going next. Like any form of market-timing, this is a tricky exercise to get right.

D

DAX: German index of major companies, broadly equivalent to the Dow Jones Industrial Average.

Day Trader: Day traders are in and out of the market many times during the course of one trading session and may not even hold a position in any securities overnight. This approach tends to generate a lot of expenses in the form of commissions. 

Debenture: A long-term loan, similar to a bond.

Defensive Share: A company that is less exposed to the vagaries of the economic cycle is called a defensive share. Typically, these would be pharmaceutical companies or food retailers. The theory goes that even in times of depression we'll still be buying similar amounts of drugs and food.

Deflation: Opposite of inflation. A rise in the value of money.

Debtors: People, or businesses, that owe you money. Usually, it is your biggest client... or your brother.

Demutualisation: The process building societies or other mutual organisations go through when they convert to banks and thus go from being owned by their members (in a building society, the borrowers and savers) to being a public limited company owned by shareholders. 

Depreciation: The diminution through time of the value of a fixed asset. In other words, an allowance for things wearing out. There is normally a charge in the profit and loss account to account for this. It is purely an accounting feature and has no effect on the cash flow. In a steady state the capital expenditure of a company will normally equate to the depreciation charge.

Derivatives: While shares are actual assets, derivatives represent contracts to buy or sell a particular security at a given point in the future for a particular price. Options, warrants and futures are derivatives. They can be used to lessen investment risk, but often their main attraction is that they are highly geared and can thus offer spectacular profits... and spectacular losses. 

Dilution Levy: Bid-offer spreads are not allowed for OEICs. Instead, they have a dilution levy which is supposed to cover the cost for the hassle of someone buying into or selling out of an OEIC. The money goes into the OEIC's fund itself, not the pockets of the company running it.

Directors: These people form the Board of Directors and are legally responsible for running a company. If they transgress they can go to jail. If they run the business properly they can make themselves, and you as a shareholder, very rich.

Discount Rate This is the rate applied to a future cash flow in order to determine its current value. For instance, applying a discount rate of 8%, a payment of £100 in 10 years' time is currently worth 100/(1.08^10), or £46.32. The flip side of this is that if we have £46.32 now and it grows at 8%, then in ten years' time it will be worth £100. The discount rate is often based on long-term interest rates (see Redemption Yield).

Dividend: A distribution from a company to a shareholder in the form of cash, shares, or other assets. The most common kind of dividend is a distribution of earnings. 

Dividend Yield: The dividend divided by the current share price, expressed as a percentage. Different companies have different policies on the size of their dividend payouts. 

Dow Jones Industrial Average: The most commonly quoted measure of the US stock market. It contains 30 companies chosen by editors of Dow Jones & Company that reflect the landscape of corporate America.