What Is Diversification? Definition: Diversification is defined differently based on the context in which it is used. On the one hand, diversification is a business strategy that companies employ to maximize the profit potential of their operations. On the other hand, diversification is a strategy that investors use to construct a portfolio that lessens their
What Are Discretionary Expenses? Definition: In business, discretionary expenses are costs that cover activities that have insignificant effect on the core business. Such expenses have little effect on the operational procedures of the business if they are reduced or even removed completely. The nature of the expenses is not necessary for proper operation of the
What is the Discount Rate? Definition: Discount rate is a tool for evaluating the present value of future cash flow of a business. Further, this tool plays a critical part in the role of the central bank (Federal Reserve in the US) as a lender of last resort as the lender of last resort in
What is Diminishing Marginal Product? Definition: Diminishing marginal product is an economic concept that describes the phenomenon where the more input that is employed in a production process the lesser the margin of extra output obtained. This concept helps managers to refine their decisions concerning how to adjust inputs in a way that maximizes productivity.
What is Diluted Earnings Per Share? Definition: Diluted earnings per share (EPS) is the income that a shareholder would earn from every individual share of a company in the event of exercising of all convertible securities like warrants and options. When calculating the diluted EPS, accountants assume that holders of all convertible securities will actually
What is a CVP Graph? Definition: A CVP Graph, or cost volume profit chart, is a graphical representation that shows the relationship between the cost of production and overall sales. Companies plot the CVP graph to ascertain the potential impact of changes in sales volume on production costs and overall profits. The chart, in this
What is Demand? Definition: Demand is a key pillar in commerce and without it, there would be no business. It is defined in economics as the quantity or amount of products or services that consumers are willing to pay a specific amount of money for. Think about it this way. One cannot sell a product
What is a Deferred Expense? Definition: Deferred expense is an accounting term that denotes payments made for goods and services whose consumption would happen in future. Such charges occur when a company or a person pays for items in advance, awaiting delivery or consumption later. Consequently, deferred expenses results in an accounting entry dubbed prepaid
What is a Deferral? Definition: Deferral is a term used in accounting to indicate the postponement of either revenues or expense payments in a given financial period. In general, a deferral is a prepaid revenue or expense that will reflect in the company books on a future date. Understanding Deferral In Accounting In accounting, deferral
What is a Depreciation Schedule? Definition: A depreciation schedule is a chart that records the loss in value of a business’ assets for the whole period that the assets are useful in the operations of the business. This tool enables business owners to keep track of the value of their long-term assets. Additionally, the depreciation