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
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
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
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 The fee paid to a broker to execute a trade, based
on number of shares, bonds, options and/or their dollar
value. 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.
COMMON STOCK/OTHER EQUITY Value of outstanding common shares
at par, plus accumulated retained earnings. Also called
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.
CONSENSUS RATING The average of analysts recommendations for
a single entity. As many brokers have different ratings
systems, their recommendations must be standardized so that
a consensus can be calculated. The I/B/E/S ratings are
calculated using a standard set of recommendations,
maintained by I/B/E/S, each with an assigned numeric value:
1. Strong Buy 2. Buy 3. Hold 4. Underperform 5. Sell Each
recommendation received from the analysts is mapped to one
of the I/B/E/S standard ratings. Assigning a numeric value
to the broker text enables I/B/E/S to calculate a consensus
recommendation. This consensus recommendation appears as the
mean (average) of the assigned values.
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 interest, 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 payable 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
CURRENT YIELD For bonds or notes, the coupon rate divided by
the market price of the bond.
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