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A data flow diagram ("DFD") is a graphical tool used by systems analysts that shows how data enters and leaves a particular process. Ed Yourdon created DFDs in 1989 in his book Modern Structured Analysis as a replacement to the more cumbersome flow charts.

DFDs have only four components. A "process" (depicted by a circle) denotes a function that transforms data. A "data flow" (depicted by an arrow) shows the direction of the flow of data. A "data store" (depicted by two parallel lines) represents data that can be accessed from a particular area, like a file or a database. An "external" (depicted by a rectangle) represents a boundary to the system; a provider or user of data that is not a part of the system.

A DFD cannot, by itself, model a system. Rather, creating DFDs is an important first step in designing a system blueprint. When combined with process flow diagrams, state transition diagrams, entity relationship diagrams, process specifications, and a data dictionary using an automated Computer-Aided Software Engineering ("CASE") tool, DFDs can become the root of a well-designed object oriented system.

Primary Source: Analysis and Design of Information Systems by Arthur Langer (2001)

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