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What is Debt-to-Income (DTI) Ratio?
The debt-to-income (DTI) ratio represents the portion of your gross monthly income allocated to cover your monthly debt obligations. Lenders use this ratio to assess your borrowing risk. You can calculate the debt-to-income ratio using the following formula: Total Monthly Expenses ÷ Total Monthly Income = Debt-to-Income Ratio.
OTHER TERMS BEGINNING WITH "D"
- Daily Sales Outstanding (DSO)
Daily Sales Outstanding (DSO) or daily sales outstanding formula is a financial metric that measures the average number of days it takes for a company to collect payment from its customers after a sale has been made. It is also…
- Days Sales Outstanding (DSO)
Days Sales Outstanding (DSO) is a measure of the average number of days that a company takes to collect revenue after a sale has been made. DSO is often determined on a monthly, quarterly or annual basis and can be…
- Debt Advisor (U.S)
A debt advisor in the United States, also known as a debt counselor or credit counselor, is a professional who helps individuals facing financial challenges related to debt management, credit issues, and overall financial well-being. They provide guidance, advice, and…
- Debt Consolidation
Debt consolidation combines multiple high-interest debts, such as credit cards, lines of credit or merchant cash advances, into a single monthly payment. Ideally, it’s used to lower the overall monthly payment of all debt along with decreasing the repayment period.…
- Debt Covenant
Debt covenants are restrictions thatlenders(creditors,debt holders, investors) put on lending agreements to limit the borrower's actions (the debtor). In other words, debt covenants are agreements between a company and its lenders that the company will operate within specific rules set…
- Debt Equity Ratio (D/E ratio)
The debt-to-equity ratio (D/E ratio) is a financial ratio that measures the proportion of a company's total debt to its shareholders' equity. It provides insight into the company's capital structure and indicates the extent to which it relies on debt…
- Debt Financing
Debt Financing is when a company borrows money from a lender with the principal and interest being paid back in scheduled payments.
- Debt Service Coverage Ratio (DSCR)
Debt Service Coverage Ratio (DSCR) is the amount of cash flow a company has to cover its debts over the period of one year. The ratio is the net operating income compared to the amount of debt being serviced including…
- Debt to Assets Ratio
The Debt-to-Assets ratio is a financial ratio that indicates the proportion of a company's total debt to its total assets. It is used to assess the extent to which a company's assets are financed by debt. To calculate the Debt-to-Assets…
- Debt to Income Ratio (DTI)
Debt-to-income (DTI) ratio is a financial ratio that compares a borrower’s total monthly debt to their total monthly income, and is frequently used to evaluate a borrowers creditworthiness.
- Debt Yield
Debt yield is a risk assessment tool commonly used by commercial mortgage lenders. It factors in the net operating income generated by a commercial property to estimate the pace at which the lender could recover their investment if a default…
- Debtor
A debtor is an entity or person with outstanding debts. When the debt arises from a loan from a financial establishment, the debtor is termed a borrower. If the debt takes the form of securities like bonds, they are labeled…
- Debtor Finance
Debtor finance refers to a financial strategy where a business utilizes its accounts receivable ledger, or the outstanding invoices owed by customers, as collateral to secure funding. This approach is particularly beneficial for companies experiencing low working capital reserves, which…
- Debtor-in-Possession (DIP)
Debtor in possession (DIP) is a term used in bankruptcy law to refer to a debtor (an individual or a company) that retains control of their assets and continues to operate their business while in the process of reorganizing under…
- Debtor-in-Possession Financing
Debtor-in-possession financingorDIP financingis a unique form of financing provided for companies infinancial distress, typically during restructuring under corporate bankruptcy law (such as Chapter 11 bankruptcy in the US or CCAA in Canada). Usually, this debt is considered senior to all…
- Deductions
Deductions are funds subtracted from the customer (the account debtor) when paying a client’s invoice (other than discounts) and are typically unknown to the factoring company. If known to the Factor’s client they should be disclosed immediately.
- Deed of Company Arrangement (DOCA)
A Deed of Company Arrangement (DOCA) is a legally binding agreement entered into by a financially distressed company, its creditors, and a Deed Administrator. It is a part of the voluntary administration process under Australian corporate law, specifically governed by…
- Deposit Account Control Agreement (DACA)
Deposit Account Control Agreement (DACA) is an agreement between a debtor, secure party and the debtors bank where the bank agrees that the secure party controls the deposit account of the debtor. This agreement is part of the Uniform Commercial…
- Depreciation
Depreciation is used in accounting to calculate the decreased value of business assets over multiple years. Examples may include machinery, vehicles, furniture, computers and equipment. All of which lose value over time. Businesses depreciate these long-term assets for both tax…
Capital expenses are either amortized or depreciated depending upon the type of asset acquired through the expense. Tangible assets are depreciated over the useful life of the asset whereas intangible assets are amortized.
- Dilution
Dilution is comprised of discounts, chargebacks, credit memos, marketing allowances, end cap & slotting fees and other deductions that reduce the final payment amount against an Invoice.
- Dilution
Dilutionis any portion, regardless of why, of yourreceivablesthat you did notcollect. This is important as the amount available from yourline of creditwith thebankis based on your outstandingaccounts receivablebalance. Thebankwants to know the extent to which yourreceivablesare likely to be turned…
- Dilution of Receivables
Dilution of receivables denotes the variance between the gross amount of invoices and the cash collected for such invoices. Factors such as bad debt write-offs, warranty returns, invoicing errors, trade discounts and returned goods all are involved in computing dilution.…
- Dilutive Financing
Dilutive financing refers to a type of funding that results in the issuance of additional equity or securities, which can potentially dilute the ownership or control of existing shareholders. When a company engages in dilutive financing, it typically raises capital…
- Directional Boring Financing
Directional boring or directional drilling companies need financing as labor and equipment must be paid for immediately, but your customers can take 60-90 days to pay you. Invoice Factoring is a common financing option for directional boring companies.
- Discount
A Discount is a reduction in the selling price of the merchandise as indicated by the "Terms of the Sale". There are two major types: An early pay or cash discount is an incentive for quicker payment from your B2B…
- Distress Cost
Distress cost refers to the expense that an organization in financial distress faces beyond the cost of doing business, such as a higher cost of capital. If additional capital is not acquired, distress costs may extend to the need to…
- Double Brokering
Double Brokering is the re-brokering of a load to another trucking company without the consent of the original shipper. This unauthorized activity violates the Federal Motor Carrier Safety Administration (FMCSA) legislation and is considered illegal. Additionally, this duplicitous activity leaves…
- Due Diligence
Due Diligence is researching a business and its owners in preparation for a business transaction. ACH and MCA lenders will have minimal due diligence and conversely, be the MOST expensive source of capital. A bank line will have the most…
