Glossary of Financial Terms: C
This article is from the Glossary of
Glossary of Financial Terms: C
- Call option
An option contract that gives the holder of the option the right
(but not the obligation) to purchase, and obligates the writer to
sell, a specified number of shares of the underlying stock at the
given strike price, on or before the expiration date of the
- Capital expenditures
Amount used during a particular period to acquire or improve long
term assets such as property, plant, or equipment.
- Capital gain
When a stock is sold for a profit, it's the difference between the
net sales price of securities and their net cost, or original
basis. If a stock is sold below cost, the difference is a capital
- Capital loss
The difference between the net cost of a security and the net sale
price, if that security is sold at a loss.
- 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 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 government bonds and Bankers'
Acceptances. Cash equivalents on balance sheets include securities
(e.g., notes) that mature within ninety days.
- Cash flow
In investments, it represents earnings before depreciation
amortization and non-cash charges. Sometimes called cash
earnoings. Cash Flow from operations (called Funds From Operations
(FFO) by real estate and other investment trusts, is important
because it indicates the ability to pay dividends.
- Changes in financial position
Sources of funds internally provided from operations which alter a
company's cash flow position: depreciation, deferred taxes, other
sources, and capital expenditures.
Excessive trading of a client's account in order to increase the
- Closing purchase
A transaction in which the purchaser's intention is to reduce or
eliminate a short position in a stock, or in a given series of
- Closing sale
A transaction in which the seller's intention is to reduce or
eliminate his long position in a stock, or a given series of
Te fee paid to a broker to execute a trade, based on number of
shares, bonds, options and/or their dollar value. In 1975,
deregulation led to the creation of discount brokers, who charge
lower commissions than full service brokers. Full service brokers
offer advice and usually have a full staff of analysts who follow
specific industries. Discount brokers simply execute a client's
order--and usually do not offer an opinion on a stock.
- Common stock/other equity
Value of outstanding common shares at par, plus accumulated
retained earnings. Also called shareholders' equity.
- Confidence indicator
A measure of investors' faith in the economy and the securities
market. A low or deteriorating level of confidence is considered
by many technical analysts as a bearish sign.
- Confidence level
The degree of assurance that a specified failure rate is not
The written statement that follows any "trade" in the securities
markets. Confirmation is issued immediately after a trade is
executed. It spells out settlement date, terms, commission,
The movement of the price of a futures contract toward the price
of the underlying cash commodity. At the start, the contract price
is higher because of the time value. But as the contract nears
expiration, the futures price and the cash price converge.
- Corner a market
To purchase enough of the available supply of a commodity or stock
in order to manipulate its price.
- Coupon rate
In bonds, notes or other fixed income securities, the stated
percentage rate of nterest, usually paid twice a year.
- Covered call
A short call option position in which the writer owns the number
of shares of the underlying stock represented by the option
contracts. Covered calls generally limit the risk the writer takes
because the stock does not have to be bought at the market price,
if the holder of that option decides to exercise it.
- Covered put
A put option position in which the option riter also is short the
corresponding stock or has deposited, in a cash account, cash or
cash equivalents equal to the exercise of the option. This limits
the option writer's risk because money or stock is already set
aside. In the event that the holder of the put option decides to
exercise the option, the writer's risk is more limited than it
would be on an uncovered or naked put option.
- Current assets
Value of cash, accounts receivable, inventories, marketable
securities and other assets that could be converted to cash in
less than 1 year.
- Current liabilities
Amount owed for salaries, interest, accounts ayable and other
debts due within 1 year.
- Current ratio
Indicator of short-term debt paying ability. Determined by
dividing current assets by current liabilities. The higher the
ratio, the more liquid the company.
- Current yield
For bonds or notes, the coupon rate divided by the market price of