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Call Option

A particular type of option that permits the owner to purchase a specific number of shares of a stock a set price and within a certain time frame.

Capital

The money invested into a business by its owners. This investment may be made via equity investment or long-term debt.

Capital Expenditures

Spending by a company on plant and equipment, shown in the consolidated statement of cash flows in the annual report. Also known as capital spending or capital investment.

Capital Gain

The profit resulting from the sale of a stock or other security.

Capital Gain Taxes

The taxes levied against a capital gain.

Capital in Excess of Par Value

One of several sub-classifications of shareholders' equity, also referred to as Additional Paid-In Capital or Paid-In Capital in Excess of Stated Value.

Capital-Intensive Industry

An industry that typically requires a high level of investment by a firm in new equipment and production facilities in order for the company to remain competitive. Examples of some capital-intensive industries are steel, automotive, and printing.

Capitalization

A company's permanent capital, long-term debt, and equity.

Cash & Cash Equivalents

A current asset on the balance sheet consisting of short-term, highly liquid investments, such as money-market funds, certificates of deposit, and/or commercial paper.

Cash Flow

The cash income stream of a business typically calculated as net income plus certain noncash charges, such as depreciation and amortization.

CD

"Certificate of Deposit," which is an interest bearing deposit of funds at a bank for a fixed period of time for a fixed rate of interest.

Certified Financial Planner (CFP)

A person who sets up financial plans for individuals.

Charter Financial Analyst (CFA)

A person who has earned the prestigious professional designation via a minimum of three years of testing and work experience. A CFA primarily analyzes securities.

Chief Executive Officer (CEO)

Typically the highest-ranking individual at a firm, or in other words, the top boss. Different firms have different corporate organizational schemes; thus some firms may instead have a President or Chairman who is the highest-ranking individual.

Chief Financial Officer (CFO)

The head individual responsible for overseeing the preparation of various financial documents that may be distributed inside or outside of an organization.

Churning

Excessive trading in a customer's account by an account manager that unjustly benefits the account manager via commissions generated. This practice is unethical and punishable by law.

Closed-End Investment Company

A mutual fund that issues a fixed number of fund shares which trade on an exchange similar to a common stock. Unlike an open-end investment company, a closed-end investment company is under no obligation to redeem its shares from its shareholders. Thus, at any given time, the fund shares may trade at a price above or below the underlying net asset value (NAV) of the shares. Market supply and demand conditions determine the prevailing market price of the shares.

Collateral

Securities or other property pledged by a borrower to a lender to guarantee repayment.

Commercial Paper

A short-term financial obligation issued by a company typically for short-term financing needs.

Commission

The fee paid to a broker for handling the sale or purchase of a security or other property.

Commodities

A variety of agricultural products, such as wheat, soybeans, and pork bellies that are traded in the futures markets. In general, these types of transactions tend to be highly leveraged and entail a high level of risk.

Common Stock

A security representing ownership in a company.

Confirmation

The written statement issued to a customer after a trade has been made. This statement contains pricing information relevant to the trade and should be retained by the investor for tax purposes.

Consolidated Balance Sheet

A balance sheet which consolidated the various asset, liability, and shareholder equity accounts of a parent company with its subsidiary companies.

Convertible

A bond, debenture, or preferred share that may be exchanged by the holder for common stock or another security as per the terms of the instrument.

Correction

A short-term pullback in the price of the overall market or an individual security.

Cost of Goods Sold

Expenses that a company incurs producing the items that it sold during a particular period. Cost of goods sold typically includes such items as the cost of raw materials, labor, and some indirect expenses incurred to produce the products.

Coupon Bond

A bond with coupons attached to it that must be physically clipped as they come due and then presented to the issuer of the bond for the payment of interest.

Covered Option

An option position that is offset by an equal and opposite position in the security underlying the option.

Creditors

A type of preferred stock that requires a firm to pay any current and past unpaid dividends before common stock dividends are paid.

Cumulative Preferred Stock

Expenses that a company incurs producing the items that it sold during a particular period. Cost of goods sold typically includes such items as the cost of raw materials, labor, and some indirect expenses incurred to produce the products.

Current Assets

Items such as cash and cash equivalents, accounts receivable, marketable securities, and inventories. These items are called current assets because a firm expects that it will be able to turn those assets into cash within the next accounting cycle (typically one year).

Current Liabilities

Items such as accounts payable, notes payable, accrued wages, and current maturities of long-term debt. These items are called current liabilities because a firm expects that it will be required to pay those liabilities within the next accounting cycle (typically one year).

Current Ratio

Equal to current assets dividend by current liabilities. Its goal is to measure the financial liquidity, or cash generating ability, of a firm. A low current ratio typically means that a company may have difficulty meeting its obligations (debts or liabilities) that are payable over the next year with the assets that it can turn into cash over the next year. A current ratio of 2 or more generally indicates a strong financial condition.

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