Business Glossary: C

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C Fifth letter of a Nasdaq stock descriptor specifying that issue is exempt from Nasdaq listing requirements for a temporary period.

CA The two-character ISO 3166 country code for CANADA.

CAD The ISO 4217 currency code for Canada Dollar.

CADS See Cash Available for Debt Service.

CAGR See: Compound Annual Growth Rate

CAMPS See: Cumulative Auction Market Preferred Stocks

Capex See: Capital expenditures

CAPM See: Capital asset pricing model

CAPS See: Convertible adjustable preferred stock

CARs See: Certificates of Automobile Receivables

CARDs See: Certificates of Amortized Revolving Debt

CATS See: Certificate of Accrual on Treasury Securities (CATS)

CAX The ISO 4217 currency code for Canadian Cent.

CBD See: Cash In Advance.

CBO See: Collateralized Bond Obligation.

CBOE See: Chicago Board Options Exchange

CC The two-character ISO 3166 country code for COCOS (KEELING) ISLANDS.

CD See: Certificate of deposit

CD The two-character ISO 3166 country code for CONGO, THE DEMOCRATIC REPUBLIC OF.

CDN See: Canadian Dealing Network

CDO See: Collateralized Debt Obligation.

CEC See: Commodities Exchange Center

CEG See: Canadian Exchange Group

CF The two-character ISO 3166 country code for CENTRAL AFRICAN REPUBLIC.

CFAT Cash flow after taxes.

CFAT See: Cash flow after taxes

CFC See: Controlled foreign corporation

CFR See: Cost and Freight

CFTC See: Commodity Futures Trading Commission

CG The two-character ISO 3166 country code for The Congo.

CH The two-character ISO 3166 country code for SWITZERLAND.

CHAP See: Clearing House Automated Payments System

CHESS See: Clearing House Electronic Subregister System

CHF The ISO 4217 currency code for Swiss Franc.

CHIPS See: Clearing House Interbank Payments System

CI The two-character ISO 3166 country code for COTE D'IVOIRE.

CIF See: Cost Insurance and Freight

CK The two-character ISO 3166 country code for COOK ISLANDS.

CL The two-character ISO 3166 country code for CHILE.

CLF The ISO 4217 currency code for Chile Unidades de Fomento.

CLO See: Collateralized Loan Obligation.

CLP The ISO 4217 currency code for Chilean Peso.

CM The two-character ISO 3166 country code for CAMEROON.

CMBS See: Commercial Mortgage Backed Securities

CME See: Chicago Mercantile Exchange

CML See: Capital market line

CMO See: Collateralized mortgage obligation

CMTA See: Clearing Member Trade Agreement

CN The two-character ISO 3166 country code for CHINA.

CNY The ISO 4217 currency code for Chinese Renminbi (Yuan).

CO The two-character ISO 3166 country code for COLOMBIA.

COP The ISO 4217 currency code for Colombian Peso.

CDC See: Commonwealth Development Corp

CPT See: Carriage Paid To

CR The two-character ISO 3166 country code for COSTA RICA.

CRB See: Commodity Research Bureau.

CRC The ISO 4217 currency code for Costa Rican Colon.

CTA See: Cumulative Translation Adjustment. Also refers to Commodity Trading Advisor.

CU The two-character ISO 3166 country code for CUBA.

CUP The ISO 4217 currency code for Cuban Peso.

CUSIP See: Committee on Uniform Securities Identification Procedures

CV The two-character ISO 3166 country code for CAPE VERDE.

CVE The ISO 4217 currency code for Cape Verde Islands Escudo.

CX The two-character ISO 3166 country code for CHRISTMAS ISLAND.

CY The two-character ISO 3166 country code for CYPRUS.

CYP The ISO 4217 currency code for Cyprus Pound.

CZ The two-character ISO 3166 country code for CZECH REPUBLIC.

CZK The ISO 4217 currency code for Czech Republic Koruna.

Cabinet crowd NYSE members who trade bonds with a low daily traded volume. See: Automated Bond System.

Cabinet security A stock or bond listed on a major exchange with low daily traded volume.

Cable Exchange rate between British pound sterling and the U.S. dollar.

CAC 40 index A broad-based index of common stocks composed of 40 of the 100 largest companies listed on the forward segment of the official list of the Paris Bourse.

Cage A section of a brokerage firm used for receiving and disbursing funds.

Calendar List of new issues scheduled to come to market shortly.

Calendar effect Describes the tendency of stocks to perform differently at different times. For example, a number of researchers have documented that historically, returns tend to be higher in January compared to other months (especially February). Others have documented returns patterns across days of the week and within the day. Some of these patterns are found in volume and volatility as well as returns.

Calendar spread Applies to derivative products. A strategy in which there is a simultaneous purchase and sale of options of the same class at the same strike prices, but with different expiration date.

Calendar Straddle or Combination See Calendar Spread.

Call An option that gives the holder the right to buy the underlying asset.

Call date A date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond for a specified call price.

Call feature Part of the indenture agreement between the bond issuer and buyer describing the schedule and price of redemptions prior to maturity.

Call loan A loan repayable on demand. Sometimes used as a synonym for broker loan or broker overnight loan.

Call loan rate See: Call money rate

Call money rate Also called the broker loan rate , the interest rate that banks charge brokers to finance margin loans to investors. The broker charges the investor the call money rate plus a service charge.

Call option An option contract that gives its holder the right (but not the obligation) to purchase a specified number of shares of the underlying stock at the given strike price, on or before the expiration date of the contract.

Call an option To exercise a call option.

Call premium Premium in price above the par value of a bond or share of preferred stock that must be paid to holders to redeem the bond or share of preferred stock before its scheduled maturity date.

Call price The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a specified call date.

Call protection A feature of some callable bonds that establishes an initial period when the bonds may not be called.

Call provision An embedded option granting a bond issuer the right to buy back all or part of an issue prior to maturity.

Call risk The combination of cash flow uncertainty and reinvestment risk introduced by a call provision.

Call swaption A swaption in which the buyer has the right to enter into a swap as a fixed-rate payer. The writer therefore becomes the fixed-rate receiver/floating-rate payer.

Callability Feature of a security that allows the issuer to redeem the security prior to maturity by calling it in, or forcing the holder to sell it back.

Callable Applies mainly to convertible securities. Redeemable by the issuer before the scheduled maturity under specific conditions and at a stated price, which usually begins at a premium to par and declines annually. Bonds are usually called when interest rates fall so significantly that the issuer can save money by issuing new bonds at lower rates.

Called away Convertible: Redeemed before maturity.
Option: Call or put option exercised against the stockholder.
Sale: Delivery required on a short sale.

Cumulative Auction Market Preferred Stocks (CAMPS) Stands for Cumulative Auction Market Preferred Stocks, Oppenheimer & Company's Dutch Auction preferred stock product.

Canadian agencies Agency banks established by Canadian Banks in the U.S.

Canadian Dealing Network (CDN) The organized OTC market of Canada. Formerly known as the Canadian Over-the-Counter Automated Trading System (COATS), the CDN became a subsidiary of the Toronto Stock Exchange in 1991.

"Can get $xxx" Refers to over-the-counter trading. "I have a buyer who will pay $xxx for the stock". Usually a standard markdown from $xxx is applied to this price in bidding the seller for its stock. Antithesis of cost me.

Cancel To void an order to buy or sell from (1) the floor, or (2) the trader/salesperson's scope. In Autex, the indication still remains on record as having once been placed unless it is expunged.

Canceled Certificates Before the issuance of a new certificate, the old certificate is presented to the Transfer Agent and is canceled.

"Cannot compete" In the context of general equities, cannot accommodate customers at that price level (i.e., compete with other market makers), often because there is no natural opposite side of the trade.

"Cannot complete" In the context of general equities, inability to finish an order on a principal or agency basis, given prevailing price instructions and/or market conditions.

Cap An upper limit on the interest rate on a floating-rate note (FRN) or an adjustable-rate mortgage (ARM). Also, an OTC derivatives contract consisting of a series of European interest rate call options; used to protect an issuer of floating-rate debt from interest rate increases. Each individual call option within the cap is called a caplet. Opposite of a floor.

Capacity Credit grantors' measurement of a person's ability to repay loans.

Capacity utilization rate The percentage of the economy's total plant and equipment that is currently in production. Usually, a decrease in this percentage signals an economic slowdown, while an increase signals economic expansion.

Capital Money invested in a firm.

Capital account Net result of public and private international investment and lending activities.

Capital allocation decision Allocation of invested funds between risk-free assets and the risky portfolio.

Capital appreciation See: Capital growth

Capital appreciation fund See: Aggressive growth fund

Capital asset A long-term asset, such as land or a building, not purchased or sold in the normal course of business.

Capital asset pricing model (CAPM) An economic theory that describes the relationship between risk and expected return, and serves as a model for the pricing of risky securities. The CAPM asserts that the only risk that is priced by rational investors is systematic risk, because that risk cannot be eliminated by diversification. The CAPM says that the expected return of a security or a portfolio is equal to the rate on a risk-free security plus a risk premium multiplied by the asset's systematic risk. Theory was invented by William Sharpe (1964) and John Lintner (1965). The early work of Jack Treynor is was also instrumental in the development of this model.

Capital budget A firm's planned capital expenditures.

Capital budgeting The process of choosing the firm's long-term assets.

Capital Builder Account (CBA) A Merrill Lynch brokerage account that allows investors to access the loan value of his or her eligible securities to buy or sell securities. Excess cash in a CBA can be invested in a money market fund or an insured money market deposit account without losing access to the money.

Capital expenditures Amount used during a particular period to acquire or improve long-term assets such as property, plant, or equipment.

Capital flight The transfer of capital abroad in response to fears of political risk.

Capital formation Expansion of capital or capital goods through savings, which leads to economic growth.

Capital gain When a stock is sold for a profit, the capital gain is the difference between the net sales price of the securities and their net cost, or original basis. If a stock is sold below cost, the difference is a capital loss.

Capital gains distribution A distribution to the shareholders of a mutual fund out of profits from selling stocks or bonds, that is subject to capital gains taxes for the shareholders.

Capital gains tax The tax levied on profits from the sale of capital assets. A long-term capital gain, which is achieved once an asset is held for at least 12 months, is taxed at a maximum rate of 20% (taxpayers in 28% tax bracket) and 10% (taxpayers in 15% tax bracket). Assets held for less than 12 months are taxed at regular income tax levels, and, since January 1, 2000, assets held for at least five years are taxed at 18% and 8%.

Capital gains yield The price change portion of a stock's return.

Capital goods Goods used by firms to produce other goods, e.g., office buildings, machinery, equipment.

Capital growth The increase in an asset's market price. Also called capital appreciation.

Capital infusion Often refers to the cross-subsidization of divisions within a firm. When one division is not doing well, it might benefit from an infusion of new funds from the more successful divisions. In the context of venture capital, it can also refer to funds received from a venture capitalist to either get the firm started or to save it from failing due to lack of cash.

Capital-intensive Used to describe industries that require large investments in capital assets to produce their goods, such as the automobile industry. These firms require large profit margins and/or low costs of borrowing to survive.

Capital International Indexes Market indexes maintained by Morgan Stanley that track major stock markets worldwide.

Capital investment See: Capital expenditure.

Capital lease A lease obligation that has to be capitalized on the balance sheet.

Capital loss The difference between the net cost of a security and the sales price, if the security is sold at a loss. Also used in a more general context to refer to the market for stocks, bonds, derivatives and other investments.

Capital market The market for trading long-term debt instruments (those that mature in more than one year). Also used in a more general context to refer to the market for stocks, bonds, derivatives and other investments.

Capital market efficiency The degree to which the present asset price accurately reflects current information in the market place. See: Efficient market hypothesis.

Capital market imperfections view The view that issuing debt is generally valuable, but that the firm's optimal choice of capital structure involves various other views of capital structure ( net corporate/personal tax, agency cost, bankruptcy cost, and pecking order), that result from considerations of asymmetric information, asymmetric taxes, and transaction costs.

Capital market line (CML) The line defined by every combination of the risk-free asset and the market portfolio. The line represents the risk premium you earn for taking on extra risk. Defined by the capital asset pricing model.

Capital rationing Placing limits on the amount of new investment undertaken by a firm, either by using a higher cost of capital, or by setting a maximum on the entire capital budget or parts of it.

Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets.

Capital shares One of two types of shares in a dual-purpose investment company, which entitle the holder to the appreciation or depreciation in the value of a portfolio, as well as the gains from trading in the portfolio. Antithesis of income shares.

Capital stock Stock authorized by a firm's charter and having par value, stated value, or no par value. The number and the value of issued shares are usually shown, together with the number of shares authorized, in the capital accounts section of the balance sheet. See: Common stock.

Capital structure The makeup of the liabilities and stockholders' equity side of the balance sheet, especially the ratio of debt to equity and the mixture of short and long maturities.

Capital surplus Amounts of directly contributed equity capital in excess of the par value.

Capital turnover Calculated by dividing annual sales by average stockholder equity (net worth). The ratio indicates how much a company could grow its current capital investment level. Low capital turnover generally corresponds to high profit margins.

Capitalization The debt and/or equity mix that funds a firm's assets.

Capitalization method A method of constructing a replicating portfolio in which the manager purchases a number of the most highly capitalized names in the stock index in proportion to their capitalization.

Capitalization rate The interest rate used to calculate the present value of a number of future payments.

Capitalization ratios Also called financial leverage ratios, these ratios compare debt to total capitalization and thus reflect the extent to which a corporation is trading on its equity. Capitalization ratios can be interpreted only in the context of the stability of industry and company earnings and cash flow.

Capitalization table A table showing the capitalization of a firm, which typically includes the amount of capital obtained from each source - long-term debt and common equity - and the respective capitalization ratios.

Capitalization-Weighted Index A stock index which is computed by adding the capitalization (float times price) of each individual stock in the index, and then dividing by the divisor. The stocks with the largest market values have the heaviest weighting in the index. See also Float, Divisor.

Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year.

Capitalized interest Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time. In the context of project financing, interest that is paid by additional borrowing.

Capped-Style Option A capped option is an option with an established profit cap or cap price. The cap price is equal to the option's strike price plus a cap interval for a call option or the strike price minus a cap interval for a put option. A capped option is automatically exercised when the underlying security closes at or above (for a call) or at or below (for a put) the Option's cap price.

Captive finance company A company, usually a subsidiary that is wholly owned, whose main function is financing consumer purchases from the parent company.

Caput An exotic option. It represents a call option on a put option. That is, you purchase the option to buy a put option at a particular price on or before the expiration date.

Car A loose quantity term sometimes used to describe the amount of a commodity underlying one commodity contract; e.g., "a car of bellies." Derived from the fact that quantities of the product specified in a contract once corresponded closely to the capacity of a railroad car.

Caracas Stock Exchange Originally established in 1947 and merged with a competitor in 1974 to become the only securities exchange of Venezuela.

Cargo Goods being transported.

Carriage and Insurance Paid To (CIP) Seller is responsible for the payment of freight to carry goods to a named overseas destination. The seller is also responsible for providing cargo insurance at minimum coverage against the buyer's risk of loss or damage to the goods during transport. The risk of loss or damage is transferred from the seller to the buyer once the goods are delivered into the carrier's custody. This term may be used for any mode of transport.

Carriage Paid To (CPT) Seller is responsible for the payment of freight to carry goods to a named overseas destination. The risk of loss or damage is transferred from the seller to the buyer when the goods have been delivered into the carrier's custody. This term may be used for any mode of transport.

Carrot equity British slang for an equity investment with the added benefit of an opportunity to purchase more equity if the company reaches certain financial goals.

Carry Related: Net financing cost.

Carryforwards Tax losses allowed to be applied to offset future income in some specified number of future years.

Carrying charge The fee a broker charges for carrying securities on credit, such as on a margin account. Also, any component of a futures basis, such as storage costs, interest charges or insurance costs on the underlying interest.

Carrying costs Costs that increase with increases in the level of investment in current assets.

Carrying value Book value.

Cartel A group of businesses or nations that act together as a single producer to obtain market control and to influence prices in their favor by limiting production of a product. The United States has laws prohibiting cartels.

Cash The value of assets that can be converted into cash immediately, as reported by a company. Usually includes bank accounts and marketable securities, such as government bonds and banker's acceptances. Cash equivalents on balance sheets include securities that mature within 90 days (e.g., notes).

Cash account A brokerage account that settles transactions on a cash-rather than credit-basis.

Cash Available for Debt Service Ratio of cash assets to debt service (interest plus nearby principal). Used in evaluating the risk of a project or firm. The higher the ratio the less likely the firm or project will fail to meet its debt obligations.

Cash asset ratio Cash and marketable securities divided by current liabilities. See: Liquidity ratios.

Cashed-Based Refering to an option or future that is settled in cash when exercised or assigned. No physical entity, either stock or commodity, is received or delivered.

Cash basis Refers to the accounting method that recognizes revenues and expenses when cash is actually received or paid out.

Cash and equivalents The value of assets that can be converted into cash immediately, as reported by a company. Usually includes bank accounts and marketable securities, such as bonds and Banker's Acceptances. Cash equivalents on balance sheets include securities (e.g., notes) that mature within 90 days.

Cash budget A forecasted summary of a firm's expected cash inflows and cash outflows as well as its expected cash and loan balances.

Cash & carry Applies to derivative products. Combination of a long position in a stock/index/commodity and short position in the underlying futures, which entails a cost of carry on the long position. Also known as cash and carry arbitrage.

Cash commodity The actual physical commodity, as distinguished from a futures contract.

Cash conversion cycle The length of time between a firm's purchase of inventory and the receipt of cash from accounts receivable.

Cash cow A company that pays out most of its earnings per share to stockholders as dividends. Or, a company or division of a company that generates a steady and significant amount of free cash flow.

Cash cycle In general, the time between cash disbursement and cash collection. In net working capital management, it can be thought of as the operating cycle less the accounts payable payment period.

Cash deficiency agreement An agreement to invest cash in a project to the extent required to cover any cash deficiency the project may experience.

Cash delivery The provision of some futures contracts that requires not delivery of underlying assets but settlement according to the cash value of the asset.

Cash discount An incentive offered to purchasers of a firm's product for payment within a specified time period, such as ten days.

Cash dividend A dividend paid in cash to a company's shareholders. The amount is normally based on profitability and is taxable as income. A cash distribution may include capital gains and return of capital in addition to the dividend.

Cash earnings A firm's cash revenues less cash expenses, which excludes the costs of depreciation.

Cash-equivalent items Examples include Treasury bills and Banker's Acceptances.

Cash flow In investments, cash flow represents earnings before depreciation, amortization, and non-cash charges. Sometimes called cash earnings. Cash flow from operations (called funds from operations by real estate and other investment trusts) is important because it indicates the ability to pay dividends.

Cash flow after interest and taxes Net income plus depreciation.

Cash flow break-even point The point below which the firm will need either to obtain additional financing or to liquidate some of its assets to meet its fixed costs.

Cash flow per common share Cash flow from operations minus preferred stock dividends, divided by the number of common shares outstanding.

Cash flow coverage ratio The number of times that financial obligations (for interest, principal payments, preferred stock dividends, and rental payments) are covered by earnings before interest, taxes, rental payments, and depreciation.

Cash flow matching Also called dedicating a portfolio, this is an alternative to multiperiod immunization that calls for the manager to match the maturity of each element in the liability stream, working backward from the last liability to assure all required cash flows.

Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses that are deducted in calculating net income.

Cash flow time line Line depicting the operating activities and cash flows for a firm over a particular period.

Cash in Advance A payment term meaning the buyer pays the seller before shipment is effected.

Cash In Lieu (CIL) In a typical exchange offer, "old" shares of the target company are exchanged for "new shares".

Cash investments Short-term debt instruments—such as commercial paper, banker's acceptances, and Treasury bills—that mature in less than one year. Also known as money market instruments or cash reserves.

Cash management Refers to the efficient management of cash in a business in order to put the cash to work more quickly and to keep the cash in applications that produce income, such as the use of lock boxes for payments.

Cash management bill Very short-maturity bills that the Treasury occasionally sells because its cash balances are down and it needs money for a few days.

Cash markets Also called spot markets, these are markets that involve the immediate delivery of a security or instrument. Related: Derivative markets.

Cash offer Often used in risk arbitrage. Proposal, either hostile or friendly, to acquire a target company through the payment of cash for the stock of the target. Compare to exchange offer.

Cash-on-cash return A method used to find the return on investments when there is no active secondary market. The yield is determined by dividing the annual cash income by the total investment. See: Current yield or yield to maturity.

Cash on delivery (COD) In the context of securities, this refers to the practice of institutional investors paying the full purchase price for securities in cash.

Cash-out Laws These laws enable shareholders to sell their stakes to a "controlling" shareholder at a price based on the highest price of recently acquired shares. This works something like Fair-Price provisions extended to nontakeover situations. A few states have these laws.

Cash plus convertible Convertible bond that requires cash payment upon conversion.

Cash position The percentage of a mutual fund's assets invested in short-term reserves, such as US Treasury bills or other money market instruments.

Cash price Applies to derivative products. See: Spot price.

Cash ratio The proportion of a firm's assets held as cash.

Cash reserves See: Cash investments

Cash sale/settlement Transaction in which a contract is settled on the same day as the trade date, or the next day if the trade occurs after 2:30 p.m. EST and the parties agree to this procedure. Often occurs because a party is strapped for cash and cannot wait until the regular three-business day settlement. See: Settlement date.

Cash Settlement The process by which the terms of an option contract are fulfilled through the payment or receipt in dollars of the amount by which the option is in-the-money as opposed to delivering or receiving the underlying stock.

Cash settlement contracts Futures contracts such as stock index futures that settle for cash and do not involve delivery of the underlying.

Cash-surrender value The amount an insurance company will pay if the policyholder tenders or cashes in a whole life insurance policy.

Cash transaction A transaction in which exchange is immediate in the form of cash, unlike a forward contract (which calls for future delivery of an asset at an agreed-upon price).

Cashbook An accounting book that is composed of cash receipts plus disbursements. This balance is posted to the cash account in the ledger.

Cashier's check A check drawn directly on a customer's account, making the bank the primary obligor, and assuring firm that the amount will be paid.

Cashout Occurs when a firm runs out of cash and cannot readily sell marketable securities.

Casualty-insurance Insurance protecting a firm or homeowner against loss of property, damage, and other liabilities.

Casualty loss A financial loss caused by damage, destruction, or loss of property as a result of an unexpected or unusual event.

Catastrophe call Early redemption of a municipal revenue bond because a catastrophe has destroyed the project that provided the revenue source backing the bond.

Cats and dogs Speculative stocks with short histories of sales, earnings, and dividend payments.

Caveat emptor, caveat subscriptor Latin expressions for "buyer beware" and "seller beware," which warn of overly risky, inadequately protected markets.

Cease-and-desist order An order issued after notice and opportunity for hearing, requiring a depository institution, a holding company or a depository institution official to terminate unlawful, unsafe or unsound banking practices. Cease-and-desist orders are issued by the appropriate federal regulatory agencies under the Financial Institutions Supervisory Act and can be enforced directly by the courts.

Cede & Co. Nominee name for The Depository Trust Company, a large clearing house that holds shares in its name for banks, brokers and institutions in order to expedite the sale and transfer of stock.

CEDEL A centralized clearing system for Eurobonds.

Ceiling The highest price, interest rate, or other numerical factor allowable in a financial transaction.

Central bank A country's main bank whose responsibilities include the issue of currency, the administration of monetary policy, open market operations, and engaging in transactions designed to facilitate healthy business interactions. See: Federal Reserve System.

Central bank intervention The buying or selling of currency, foreign or domestic, by central banks in order to influence market conditions or exchange rate movements.

Central Limit Theorem The Law of Large Numbers states that as a sample of independent, identically distributed random numbers approaches infinity, its probability density function approaches the normal distribution. See: Normal Distribution.

Centralized cash flow management Provision of consolidated cash management decisions to all MNC units from one location, usually at the parent's he

 

Copyright © 2008 Donald W. Reynolds National Center for Business Journalism