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Glossary of Financial Terms: C




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This article is from the Glossary of Financial Terms.

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 contract.

  • 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 loss.

  • 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.

  • Churning
    Excessive trading of a client's account in order to increase the broker's commissions.

  • 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 options.

  • 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 options.

  • Comission
    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 exceeded.

  • Confirmation
    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, etc.

  • Convergence
    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 the bond.

 

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