Business, Legal & Accounting Glossary

Definition: Divisor

What is the dictionary definition of Divisor?

Dictionary Definition

  1. arithmetic A number or expression that another is to be divided by.
  2. An integer that divides another integer an integral number of times.

Full Definition of Divisor

Divisor is shorthand for the Dow Divisor. The popular Dow Jones Industrial Average is a price-weighted average of 30 stocks. Initially, simply dividing the sum of its 30 stock prices by 30 (in other words, applying a divisor of 30), was sufficient to compute the DJIA. Given stock splits, mergers, etc., the calculation became much more complicated; thus the need for a Dow Divisor to enable meaningful comparisons over time. The Dow Divisor in October 2005 was about 0.125. Thus if the sum of stock prices in the DJIA is 1500 and the divisor is 0.125, the DJIA is 1500/0.125, or 12,000.

The Dow Divisor is continuously adjusted for special events.

For example, suppose the DJIA was 12,000 when the sum of stock prices was 1,500 and the price of Boeing, a DJIA component, was 50. Boeing splits, so its price is now 25, and the adjusted sum of stock prices is 1,500-50/2=1475. A new divisor must be calculated according to the following equation:

Adjusted Sum of Prices/New Divisor = DJIA

In our example, the new divisor will be calculated as follows:

(1500-25)/New Divisor = 12,000

New Divisor = 12,000/1475 or New Divisor = 0.1229.

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Divisor. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. October 15, 2021 https://payrollheaven.com/define/divisor/.
Chicago Manual of Style (CMS):
Divisor. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/divisor/ (accessed: October 15, 2021).
American Psychological Association (APA):
Divisor. PayrollHeaven.com. Retrieved October 15, 2021, from PayrollHeaven.com website: https://payrollheaven.com/define/divisor/

Definition Sources

Definitions for Divisor are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 9th February, 2020 | 10 Views.