eFinancialCareers

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

C Corporation
A corporation that elects to be taxed as a corporation. The C corporation pays federal and state income taxes on earnings. When the earnings are distributed to the shareholders as dividends, this income is subject to another round of taxation (shareholder's income). Essentially, the C corporations' earnings are taxed twice. In contrast, the S corporation's earnings are taxed only once.

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

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.

CAD
The ISO 4217 currency code for Canada Dollar.

CADS
See Cash Available for Debt Service.

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

CAGR
See: Compound Annual Growth Rate

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

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

Call an option
To exercise a call option.

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 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 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.

CAMPS
See: Cumulative Auction Market Preferred Stocks

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.

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.

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.

Capex
See: Capital expenditures

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 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
Traditionally, this has referred to the market for trading long-term debt instruments (those that mature in more than one year). That is, the market where capital is raised. More recently, capital markets is 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.

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.

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 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.

capitalization.


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.

CAPM
See: Capital asset pricing model

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.

CAPS
See: Convertible adjustable preferred stock

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.

CARDs
See: Certificates of Amortized Revolving Debt

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.

Carry Trade
A trade where you borrow and pay interest in order to buy something else that has higher interest. For example, with a positively sloped term structure (short rates lower than long rates), one might borrow at low short term rates and finance the purchase of long-term bonds. The carry return is the coupon on the bonds minus the interest costs of the short-term borrowing. Of course, if long-term interest rates unexpectedly rose(and long-term bond prices fell as a result), the carry trade could become unprofitable. Indeed, if this occured, there could be a number of investors trying to unwind the carry trade, which would involve selling the long-term bonds. It is possible that this could exacerbate the increase in long-term interest rates, i.e. push the rates even higher. Related: Currency Carry Trade.

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.

CARs
See: Certificates of Automobile Receivables

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.

Carve out
Usually occurs when a company decides to IPO one of their subsidiaries or divisions. The company usually only offers a minority share to the equity market. Also known as equity carve out.

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

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

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 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 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 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 price
Applies to derivative products. See: Spot price.

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

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

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

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 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 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 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 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).

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

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

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

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.

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

Casualty-insurance