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Finance Terminology Letter C
Call
A call, in finance, will usually mean one of two things.
- A call option is a derivatives contract giving the owner the right, but not the obligation, to buy a specified amount of an underlying security at a specified price within a specified time.
- A call auction occurs over a set time when buyers set a maximum acceptable price to buy, and sellers set the minimum satisfactory price to sell a security on an exchange. Matching buyers and sellers in this process increases liquidity and decreases volatility. The auction is sometimes referred to as a call market.
Call may alternatively refer to a company's earnings call, or when an issuer of debt securities redeems (calls back) their bonds.
Call Option
Call options are financial contracts that give the option buyer the right but not the obligation to buy a stock, bond, commodity, or other asset or instrument at a specified price within a specific time period. The stock, bond, or commodity is called the underlying asset. A call buyer profits when the underlying asset increases in price.
Callable bond
A callable bond, also known as a redeemable bond, is a bond that the issuer may redeem before it reaches the stated maturity date. A callable bond allows the issuing company to pay off their debt early.
Canceled Check
A canceled check is a check that has been paid or cleared by the bank it was drawn on after it has been deposited or cashed. The check is "canceled" after it's been used or paid so that the check cannot be used again.
Cap and trade
Cap and trade is a common term for a government regulatory program designed to limit, or cap, the total level of emissions of certain chemicals, particularly carbon dioxide, as a result of industrial activity.
Capacity utilization rate
Capacity utilization rate measures the percentage of an organization's potential output that is actually being realized. The capacity utilization rate of a company or a national economy may be measured in order to provide insight into how well it is reaching its potential.
CAPE ratio
The CAPE (cyclically adjusted price-to-earnings ratio) ratio is a valuation measure that uses real earnings per share (EPS) over a 10-year period to smooth out fluctuations in corporate profits that occur over different periods of a business cycle.
Capital
Capital is a broad term that can describe anything that confers value or benefit to its owners, such as a factory and its machinery, intellectual property like patents, or the financial assets of a business or an individual.
Capital adequacy ratio (CAR)
The capital adequacy ratio (CAR) is a measurement of a bank's available capital expressed as a percentage of a bank's risk-weighted credit exposures. The capital adequacy ratio, also known as capital-to-risk weighted assets ratio (CRAR), is used to protect depositors and promote the stability and efficiency of financial systems around the world. Two types of capital are measured: tier-1 capital, which can absorb losses without a bank being required to cease trading, and tier-2 capital, which can absorb losses in the event of a winding-up and so provides a lesser degree of protection to depositors.
Capital Asset
Capital assets are significant pieces of property such as homes, cars, investment properties, stocks, bonds, and even collectibles or art. For businesses, a capital asset is an asset with a useful life longer than a year that is not intended for sale in the regular course of the business's operation
Capital Asset Pricing Model (CAPM)
The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk, or the general perils of investing, and expected return for assets, particularly stocks.1 CAPM evolved as a way to measure this systematic risk. It is widely used throughout finance for pricing risky securities and generating expected returns for assets, given the risk of those assets and cost of capital.
Capital Budgeting
Capital budgeting is the process a business undertakes to evaluate potential major projects or investments. Construction of a new plant or a big investment in an outside venture are examples of projects that would require capital budgeting before they are approved or rejected.
Capital Employed
Capital employed, also known as funds employed, is the total amount of capital used for the acquisition of profits by a firm or project. Capital employed can also refer to the value of all the assets used by a company to generate earnings.
Capital expenditures (CapEx)
Capital expenditures (CapEx) are funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment. CapEx is often used to undertake new projects or investments by a company.
Capital Gain
The term capital gain refers to the increase in the value of a capital asset when it is sold Put simply, a capital gain occurs when you sell an asset for more than what you originally paid for it.
Capital Gains Tax
The capital gains tax is the levy on the profit that an investor makes when an investment is sold. It is owed for the tax year during which the investment is sold.
Capital Structure
Capital structure is the particular combination of debt and equity used by a company to finance its overall operations and growth.
Capitalism
Capitalism is an economic system in which private individuals or businesses own capital goods. At the same time, business owners (capitalists) employ workers (labour) who only receive wages; labour does not own the means of production but only uses them on behalf of the owners of capital.
Capitalization
Capitalization is an accounting method in which a cost is included in the value of an asset and expensed over the useful life of that asset, rather than being expensed in the period the cost was originally incurred. In addition to this usage, market capitalization refers to the number of outstanding shares multiplied by the share price, which is a measure of the total market value of a company.
Capitalized Interest
Capitalized interest is the cost of borrowing to acquire or construct a long-term asset. Unlike an interest expense incurred for any other purpose, capitalized interest is not expensed immediately on the income statement of a company's financial statements
Capitulation
Capitulation in finance describes the dramatic surge of selling pressure in a declining market or security that marks a mass surrender by investors. The resulting dramatic drop in market prices can mark the end of a decline since those who didn't sell during a panic are unlikely to do so soon after.
Carried Interest
Carried interest is a share of profits earned by general partners of private equity, venture capital, and hedge funds.
Carve Out
A carve-out is the partial divestiture of a business unit in which a parent company sells a minority interest of a subsidiary to outside investors. A company undertaking a carve-out is not selling a business unit outright but, instead, is selling an equity stake in that business or relinquishing control of the business from its own while retaining an equity stake.
Cash accounting
Cash accounting is an accounting method where payment receipts are recorded during the period in which they are received, and expenses are recorded in the period in which they are actually paid.
Cash Advance
A cash advance is a short-term loan from a bank or an alternative lender. The term also refers to a service provided by many credit card issuers allowing cardholders to withdraw a certain amount of cash. Cash advances generally feature steep interest rates and fees, but they are attractive to borrowers because they also feature fast approval and quick funding.
Cash-and-carry-arbitrage
Cash-and-carry-arbitrage is a market-neutral strategy combining the purchase of a long position in an asset such as a stock or commodity, and the sale (short) of a position in a futures contract on that same underlying asset.
