Debt Coverage: A figure that illustrates the cash generation of the business. It is calculated by taking net profit and adding back all the non-cash expenses.

Debt Service Capacity: The amount available for debt servicing and calculated as net income after tax plus term interest plus depreciation minus dividends minus living expenses plus off-farm income.

Debt Service Coverage: Debt service capacity divided by debt service requirements.

Debt Service Requirements: Total principal payments plus term interest expense.

Deferred Income Taxes: The accumulated amount of the difference in income taxes due on accounting income (net income before taxes on the financial statements) versus income taxes actually paid based on taxable income (taxable income on your tax return). This liability has no specific repayment terms and would only be payable upon winding down of the business.

Depletion: A non-cash expense charged periodically to allocate or distribute the cost of a natural resource asset like a gravel pit over its estimated useful life. The allocation is based on the reduction in quantity resulting from consumption or removal.

Depreciation: A non-cash expense charged periodically to allocate or distribute the cost of a long-term asset over its estimated useful life. An allowance for the “wearing out” of the business’s fixed assets is expensed each year, and accumulated in the balance sheet account “accumulated depreciation.” This reduces the value of the assets by the total amount depreciated or “used up.” Depreciation is therefore the current year’s expense, and accumulated depreciation is the total depreciation charged to date.

Disposal: The selling or trading-in of an asset.

Dividends: An amount of retained earnings declared by a company’s board of directors for distribution to its shareholders in proportion to their relative shareholdings.