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Glossary |
Glossary 0-9|A|B|C|D|E|F|G|H|I|J|K|L|M|N|O|P|Q|R|S|T|U|V|W|Y|Z - C -C/A Current Assets C/L See Current Liability Call Option See Option Call Premium The difference between then call price and the security's value. Call Provision A provision that entitles the corporation to repurchase its bonds or preferred stock from their holders at stated prices over specified periods. Callable Bond A bond that the issuing company has the right to buy back at a pre-specified price. Cap See Capitalization Capital Asset All property used in conducting a business other than assets held primarily for sale in the ordinary course of business or depreciable, and real property used in conducting a business. Capital Asset Pricing Model (CAPM) An equation relating an asset's relative riskiness (beta) to its required return. Capital Budget List of planned investment projects, usually prepared annually. Capital Budgeting The decision-making process with respect to investment in fixed-assets. It involves measuring the additional cash flows associated with investment proposals and evaluating the viability of those proposed investment.
Capital Gains or Loss The profit or loss made when an asset is sold for more than the purchase price is a capital gain. If the sale price is less than the purchase price, this is a capital loss. Capital Gains Distribution Payments to mutual fund shareholders of profits from the sale of securities in a fund's portfolio. Capital gains distributions (if any) are usually made annually. Capital Markets Markets for long-term financial securities. Capital Rationing. Shortage of funds that forces a company to choose between projects. Capital Structure Mix of different securities issued by a company. Capitalization A company's amount of capital. Usually measured as the sum of a company's market value of equity and debt.
CAPM See Capital Asset Pricing Model. Cash Budget A detailed plan of future cash flows. This budget is composed of four elements: cash receipts, cash disbursements, net change in cash for the period, and new financing needed. Cash Flow
CD (Certificate of Deposit) Receipts for funds deposited in bank or S&L for a fixed period. The funds earn a fixed interest rate. Chaebols South Korea's industrial giants. Change This shows the change in price of a security from the previous day's closing price. For instance, -1 means the security has fallen $1.00. Characteristic Line The line of "bet fit" through a series of historical returns for the firm's stock relative to the market returns. The slope of this line, called beta, represents the average movement of the firm's stock returns in response to a change in the market's returns. Cheap An asset is said to be cheap when it is worth (intrinsic value) more than its market value. Circuit Breakers
Closed-End Fund An investment fund that does not stand ready to purchase its own shares from its owners. Its shares can trade on an exchange. Closing Price (alternatively close) The price at which the last trade took place on a given day in a particular security. Collar An upper and lower limit on the interest rate on a floating-rate note. Collateral Assets that are used as security for a loan. Commercial Paper Unsecured debt (IOU), issued by large corporations, with maturities (at time of issue) less than a year. They can be traded on OTC. Commission The broker=s fee for purchasing or selling assets. Commodity A commodity is food, a metal or another physical substance that investors buy or sell, usually via futures contracts. Common Shares These are securities that represent equity ownership in a company. Common shares topically allow an investor to vote on such matters as the election of board of directors. They also give the holder a share in a company's profits via dividend payments or the capital appreciation of the security. Competitive Bid A mechanism to select a lead investment bank in which investment banks submit a bid representing their compensation. The issuing firm solicits bids on the underwriting and chooses the underwriter who offers the most favorable terms. Compounding The process of determining the future value of a payment or a series of payments when applying the concept of compounding interest. This process is the opposite of discounting. Conglomerate Merger Merger between two corporations in unrelated business. Consol A perpetual bond issued by the British government. Sometimes used as a general term for perpetuity. Consumer Price Index (CPI) The CPI measures the prices of consumer goods and services and is a measure of the pace of U.S. inflation. The U.S. Department of Labor publishes the CPI every month. Conversion Ratio The number of shares of common stock for which a convertible security can be exchanged for. Convertible Bond Bond that can be converted to equity at a pre-specified conversion ratio. Core Investor A shareholder or a group of investors that holds enough shares to be able to influence management decisions.
Corporation A legal entity that functions separate and apart from its owners. Coupon Interest payment on debt. Cost Budgets Budgets prepared for every major expense category of the firm, such as administrative cost, financing cost, production cost, selling cost, and research and development. Cost of Capital The rate that must be earned by the company to satisfy all the firm's providers of capital. It is based on the opportunity cost of funds.
Coupon Interest Rate The Interest to be annually paid by the issuer of a bond as a percent of par value, which is specified in the contractual agreement. Covariance A measure of co-movement between two variables. Covenants See Bond Covenants CP See commercial paper Credit Scoring A procedure for assigning scores to companies or individuals on the basis of the risk of default. Credit Union is an agency providing some financial services to its members. Cum dividend With dividend. Cum Rights With rights. Cumulative Voting A shareholder may cast all his or her votes for one candidate for the board of directors. Also see majority voting. Current Asset Asset that is expected to be turned into cash within a year. Current Liability Liability that is expected to be paid in less than a year. Cyclical Stock The stock of a company whose fortunes are closely tied to the cyclical ups and downs of the economy in general. For example, General Motors is a cyclical stock since its business of selling autos is highly dependent on the general health of the economy. 0-9|A|B|C|D|E|F|G|H|I|J|K|L|M|N|O|P|Q|R|S|T|U|V|W|Y|Z - D - Date of Record The date on which a shareholder must officially own shares in order to be entitled to a dividend. Day High This is the highest price that a security has traded at during the day. Day Low This is the lowest price that a security has traded at during the day. DCF Discounted Cash Flows Dealer A person (or firm) who facilitates transactions in the secondary market. They make their living on the difference between the prices they pay for the assets in their inventory and what they sell them for. Debentures Unsecured debt Debt IOU, such as bank loans, bonds, commercial paper, government bonds and bills. Declaration Date The date on which a firm announces a future dividend payment. Default Risk Uncertainty of a firm's ability to meet its debt obligations on time and in full. Default Risk Premium (DRP) The additional return lenders require to compensate them for default risk. Deleted A security is no longer included in The Nasdaq Stock Market. Depreciation (1) Reduction in the book or market value of an asset. (2) Portion of an investment that can be deducted from taxable income.
Derivative Security A financial asset whose value is based on an underlying asset. Options and futures are examples.
Dilution (1) A decrease in the proportion of income to which each shareholder is entitled, (2) A decrease in the % ownership of individual shareholders.
Diversification: The act of not putting all your investments in only one or few assets.
Discount (1) The amount by which a bond or preferred stock may sell below its par value. (2) The notion that market prices "takes into account@ or include all publicly available relevant information. Discount Bond A bond that sells at value below par value. Discount Broker Brokerage services provided at a cost lower than full-service brokers. Discounting The inverse of compounding. This process is used to determine the present value of a cash flow. Discount Rate (1) The interest rate used in calculating the present value of cash flows. The rate reflects the time value of money and risk of the cash flows. (2) The interest rate charged by the twelve Federal Reserve Banks for short-term loans made to member banks. Distribution Date Date on which the payout of realized capital gains on securities in the fund portfolio occurred. Diversifiable Risk The components of an asset's risk that can be eliminated when the asset is combined in a well-diversified portfolio. Divestiture A division of a company that is sold out to new investors.
Dividend Distribution of wealth by firm to shareholders based on number of shares owned.
Dividend Yield Dividends per share divided by the price of the security. DJIA (Dow Jones Industrial Average) This is the best known U.S. index of stocks. It contains 30 stocks that trade on the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest U.S. companies are performing.
DRP See Default Risk Premium. Duration A measure of a bond price's sensitivity to a 100-basis point change in interest rates. A duration of 7 would mean that, given a 100-basis point change up/down in rates, a bond's price would move up/down by 7%. 0-9|A|B|C|D|E|F|G|H|I|J|K|L|M|N|O|P|Q|R|S|T|U|V|W|Y|Z |
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