Investing Advice

Definitions of Investing, Legal, & Business Terms

  Investing Term Dictionary
Choose below the first letter of the investment term you would like defined.
 
C
Call: An option contract giving you the right, but not the obligation, to buy shares of stock at a set price (the strike price) on, or any time before, a set expiration date. 
Capital: Money.
Capital Assets: Capital consists of property, inventory, cash on hand, accounts receivable, and other items of value owned by a company.
Capital Expenditure: Money spent to buy equipment or other item that will be "written off" over a period of years (depreciable asset).
Capital Gain or Loss: The money you make or lose on an investment. The money a company makes or loses on the sale of an asset.
Capital Stock: Stock issued by a corporation to raise money for the growth and expansion of a business.
Capitulation: Surrender, admit defeat, give up.
Carry Forward: A tax benefit allowing a company to apply losses realized in a previous year to future years' revenue in order to reduce taxes.
Cartel: A group of businesses or countries that agree to work together to affect the pricing and availability of certain products that they pro- duce. OPEC is a classic example.
Cash Account: A brokerage account that doesn't offer margin. IRA's are always cash accounts, as well as most brokerage accounts opened with less than $5,000.
Cash Management Account: A brokerage account that pays you interest, also called an asset management account, that invests your money in treasuries and government mortgage programs. Check writing privileges come with these accounts.
Cash Cow: Business that has had strong sales, generating revenue consistently. In most cases, cash cows are based on products with a strong brand name that generate repeat buying.
Cash Discount: A discount offered to buyers who pay their bills within a specified time period. A prompt payment incentive.
Cash Flow: The actual cash in and out of a corporation. Companies can secure paper profits but go bankrupt because of negative cash flow.
Certificate of Deposit (CD): A bank savings account with a set time the funds will remain with the bank, from 14 days to 7 years.
Certified Check: A depositor's check stamped by the bank as "certified" and guaranteeing payment. A "certified bank check", issued by the bank itself, is also commonly known as a certified check.
Certified Public Accountant (CPA): A licensed accountant who has a degree in accounting or business administration and has passed a rigorous examination covering accounting, auditing, and tax preparation.
CEO, Chief Executive Officer: The number one person who runs the corporation, usually is also the corporation’s president.
 CFO, Chief Financial Officer: The head accountant of a corporation.
CIO, Chief Information Officer: The head of the data processing and MIS (management information systems) department of a company.
Chairman of the Board: The Head of the Board of Directors of a corporation. May be the largest shareholder or company’s founder.
Channel of Distribution: The means of getting a product into a customer's hands. This might include retail stores, direct salespeople, wholesalers, and distributors.
Churn: Unnecessary and excessive trading on a customer's brokerage account, thereby generating fee income for a broker without adding value to the investments. While this practice is illegal, it is also difficult to prove.
Circuit Breaker: A procedure giving the authority to temporarily halt trading on all U.S. stock markets for one hour when the Dow Jones Industrial Average falls 250 points or more within a trading day. The pause is designed to allow time for the markets to absorb the news that precipitated the decline. Should the average fall another 150 points within the same day, trading would again be halted, this time for two hours.
Class Action: A suit filed by one or more individuals on behalf of a larger group of people who have been treated similarly by a situation. Once the suit has been filed and the court has approved its class action status, all people who may benefit from a ruling (the parties to the suit) must be notified.
Clifford Trust: A trust established for more than 10 years that allows the transfer of assets from one individual or organization to another and then back again when the trust expires. Before new regulations were established in 1986, these trusts were a popular means of transferring income-producing assets to children, who would be taxed at a lower tax rate. The assets were typically reclaimed when the child reached the age of 18.
Cold Call: A marketing technique that involves a salesperson placing a telephone call to a potential client without having had any previous contact. 
Collateral: Property that is pledged as security for a loan that will be forfeited if repayment is not made.
Commission: The amount, usually a percentage, paid to a broker or salesperson for selling securities, real estate, or an insurance policy.
Commercial Paper: Short term loans to companies, usually of high credit quality.
Commodities: Goods such as coffee, grains, gold, pork bellies and orange juice that are traded on world exchanges, the largest being the Chicago Mercantile Exchange.
Common Stock: Shares of stock that represent ownership of a corporation, with aright to vote on major corporate affairs. With the hope that future profits will be distributed to them and the value of the stock will go up, this is the usual kind of stock that investors buy.
Common Carrier: A business that specializes in providing transport of goods and services.
Compounding: When an investment pays interest on accumulated interest, or earns money on reinvested gains on your investment.
Consideration: An item of value given from one individual or business to another in return for a promise or agreement to do something or sell something. In a contract, there must be consideration for both sides.
Consolidating: Market pulling back a little as investors take some money “off the table”.
Constant Dollar: A measurement tool used to gauge fluctuations in consumer purchasing power. The dollar in the base year is valued at $1, with its value being expressed over future years relative to the base year.
Consumer Price Index: The U.S. Department of Labor's measure of change in the U.S. cost of living. A survey is conducted monthly to gauge the cost of various consumer goods, such as food, housing, and transportation. Costs are tracked over time to monitor overall living expenses.
Contempt of Court: An act that interferes with the ability of the court to conduct normal business, or which insults the court's authority. 
Contingent Agreement: Agreement between two parties in which lease, sale, purchase, or payment depends on a special condition usually involving a third party.
Contract: An agreement, signed by two individuals or businesses, outlining goods or services to be exchanged, and on what terms.
Convertible Bonds: Bonds that can be exchanged for common stock in the same corporation, based on a preset formula and time-frame.
Cooling-off Period: The period after a company's prospectus has been filed with the Securities and Exchange Commission and before offering is made to the public.
Copyright: The legal right of artists, authors, and creative individuals to determine who can use works that they have created.
Corporate Culture: The values, beliefs, and ways of doing business that affect the way employees act, think, and feel about their employer.
Corporation: A business organized as a legal entity that issues shares of stock to the owners. The owners of the shares have no legal liability if the company goes bankrupt or is sued.
Cost Basis: An investor's original cost of a stock or mutual fund, used for tax purposes. This basis is changed under various circumstances allowed by the IRS.
Coupon or Coupon Rate: The annual rate of interest paid by a bond. A $1,000 bond paying $50 a year interest has a coupon of 5%.
Cost per Thousand (CPM): The cost quoted in advertising to reach one thousand people using a promotional method. Allows comparison of various promotional methods by standardizing the way costs are reported.
Cover: Buying stock to close-out a short position.
CPA: See Certified Public Accountant.
Current Yield: Calculated by taking a bond's annual dollar interest and dividing it by the bond's current market price.
Current Dividend Yield: Calculated by taking a stock's anticipated annual dollar dividend and dividing it by the stock's current market price. Keep in mind that a company may change the amount of the dividend or even eliminate it at any time.
Custodian: An individual or institution that has the responsibility for overseeing the financial management of a group of assets.
Creditor: A person or business that lends money or is owed money for goods and services.
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