In finance, both drawdown and disbursement have multiple meanings. They are similar in that they both refer to a transfer of funds from a larger account to a specified recipient. Drawdown most commonly refers to the process of receiving funds from a retirement account or a bank loan, money literally deposited into an individual account. Disbursements are cash outflows; dividend payments, purchases from an investment account and even spending cash are all considered disbursements.

Definitions of Drawdown

Retirement accounts typically have a specified "drawdown percentage," which represents the portion of the total account balance assumed by the retiree each year. For example, a retiree receives $10,000 from a 5% drawdown on a $200,000 account.

A drawdown loan, sometimes known as a drawdown facility, allows the borrower to take out additional credit with ease. This is often seen with flexible mortgage accounts.

In investing terms, a drawdown refers to the extent of an asset's price decline from peak-to-trough. If the price of oil declines from $100 to $75 per barrel, its drawdown is 25%.

Definitions of Disbursement

Money disbursements come in many forms; any payment by cash, check, voucher or outlay is considered a disbursement. The more technical use of disbursement usually refers to financial aid or professional financial services.

Financial accountants keep a cash disbursement journal to record all of a company's expenditures. This journal helps to identify different destinations of cash outflow and potential tax write-offs.

Certain businesses utilize a cash management technique known as "remote disbursement" to manipulate the Federal Reserve's check-clearing system. When executed properly, remote disbursement allows a company to earn a small amount of additional interest on its deposit accounts.

  1. How does Sallie Mae disburse funds?

    Understand how Sallie Mae operates as a private company and discover about the different ways in which Sallie Mae disburses ... Read Answer >>
  2. Do Sallie Mae loans go directly to your school?

    Learn the types of financial aid and student loans Sallie Mae offers college students, including when funds are disbursed ... Read Answer >>
Related Articles
  1. Investing

    Four Steps To Manage A Downturn In The Market

    A few simple adjustments could end your losing streak as soon as it begins.
  2. Investing

    What Do Apple and Amazon Have in Common? Massive Drawdowns (AAPL, AMZN)

    You don't get 30% annualized returns without the occasional 50% drawdown.
  3. Investing

    Don't Let Valuations Drive Your Investing Decisions

    Base your investment decisions on data, processes and risk rather than on valuations.
  4. Investing

    3 Benefits of Looking at Asset Classes Beyond Your Portfolio

    Discover three of the primary advantages for investors that can be obtained by diversifying their investment portfolio with different asset classes.
  5. Investing

    US EIA Oil Inventory Preview

    U.S. Department of Energy crude oil inventory data released later today should provide an indication of what is next for oil prices.
  6. Investing

    Fundamental Case Study: Is Amazon's Cash Flow Actually Solid? (AMZN)

    Review Amazon's cash flow situation, including its free cash flow yield, operating cash flow from organic growth and cash flow from debt financing.
  7. Investing

    Should Your Retirement Portfolio Include Alternative Investments?

    Alternative investments have the potential to generate attractive returns with the added benefit of protecting a portfolio from market volatility.
  8. Personal Finance

    What Else Banks Can Help With (Besides Banking)

    As competition increases and technology advances, banks, credit unions and savings institutions are offering more services intended to attract customers.
  9. Small Business

    Best Checking Accounts For Small Businesses

    What you need to know to choose the best checking account for your small business – and where to look.
  1. Disbursement

    Disbursement is the act of paying out or disbursing money; examples ...
  2. Cash Disbursement Journal

    A cash disbursement journal is a record kept by accountants of ...
  3. Delayed Disbursement

    Delayed disbursement is a technique that involves a company paying ...
  4. Sterling Ratio

    Sterling ratio is a risk-adjusted return measure that uses compounded ...
  5. Peak-to-Valley Drawdown

    A peak-to-valley drawdown is a fund's or money manager's largest ...
  6. Paying Agent

    A paying agent is an agent who accepts payments from the issuer ...
Trading Center