Similar financial terms
CapitalizationThe combined sources of capital, consisting of dept capital (liabilities) and equity capital (capital stock and retained earnings).
Working capital ratio
Working capital expressed as a percentage of sales.
Working capital management
The management of current assets and current liabilities to maximize short-term liquidity.
Working capital
Defined as the difference in current assets and current liabilities (excluding short-term debt). Current assets may or may not include cash and cash equivalents, depending on the company.
Weighted average cost of capital
The weighted average cost of capital (WACC) is the expected return on a portfolio of all the firm's securities when debt, equity and tax shields are taken into account. Used as a hurdle rate for capital investment.
Venture capital
An investment in a start-up business that is perceived to have excellent growth prospects but does not have access to capital markets. Type of financing sought by early-stage companies seeking to grow rapidly.
Static theory of capital structure
Theory that the firm's capital structure is determined by a trade-off of the value of tax shields against the costs of bankruptcy.
Soft Capital Rationing
Capital rationing that under certain circumstances can be violated or even viewed as made up of targets rather than absolute constraints.
Real capital
Wealth that can be represented in financial terms, such as savings account balances, financial securities, and real estate.
Pro forma capital structure analysis
A method of analyzing the impact of alternative capital structure choices on a firm's credit statistics and reported financial results, especially to determine whether the firm will be able to use projected tax shield benefits fully.
Planned capital expenditure program
Capital expenditure program as outlined in the corporate financial plan.
Pie model of capital structure
A model of the debt/equity ratio of the firms, graphically depicted in slices of a pie that represent the value of the firm in the capital markets.
Personal tax view (of capital structure)
The argument that the difference in personal tax rates between income from debt and income from equity eliminates the disadvantage from the double taxation (corporate and personal) of income from equity.
Perfect market view (of capital structure)
Analysis of a firm's capital structure decision, which shows the irrelevance of capital structure in a perfect capital market.
Perfect capital market
A market in which there are never any arbitrage opportunities.
Pecking-order view (of capital structure)
The argument that external financing transaction costs, especially those associated with the problem of adverse selection, create a dynamic environment in which firms have a preference, or pecking-order of preferred sources of financing, when all else is equal. Internally generated funds are the most preferred, new debt is next, debt-equity hybrids are next, and new equity is the least preferred source.
Outstanding share capital
Issued share capital less the par value of shares that are held in the company's treasury.
Other capital
In the balance of payments, other capital is a residual category that groups all the capital transactions that have not been included in direct investment, portfolio investment, and reserves categories. It is divided into long-term capital and short-term capital and, because of its residual status, can differ from country to country. Generally speaking, other long-term capital includes most non-negotiable instruments of a year or more like bank loans and mortgages. Other short-term capital i ...
Opportunity cost of capital
Expected return that is foregone by investing in a project rather than in comparable financial securities.
Nondiversifiability of human capital
The difficulty of diversifying one's human capital (the unique capabilities and expertise of individuals) and employment effort.
Net working capital
Current assets minus current liabilities. Often simply referred to as working capital.
Market capitalization rate
Expected return on a security. The market-consensus estimate of the appropriate discount rate for a firm's cash flows.
Market capitalization
The total dollar value of all outstanding shares. Computed as shares times current market price. It is a measure of corporate size.
Long-term debt/capitalization
Indicator of financial leverage. Shows long-term debt as a proportion of the capital available. Determined by dividing long-term debt by the sum of long-term debt, preferred stock and common stockholder equity.
Legal capital
Value at which a company's shares are recorded in its books.
Capital
Money invested in a firm.
Capital account
Net result of public and private international investment and lending activities.
Capital allocation decision
Allocation of invested funds between risk-free assets versus the risky portfolio.
Capital budget
A firm's set of planned capital expenditures.
Capital budgeting
The process of choosing the firm's long-term capital assets.
Capital Builder Account (CBA)
A Merrill Lynch brokerage account that allows investors to access the loan value of his or her eligible securities to buy or sell securities. Excess cash in a CBA can be invested in a money market fund or an insured money market deposit account without losing access to the money.
Capital expenditures
Amount used during a particular period to acquire or improve long-term assets such as property, plant or equipment.
Capital flight
The transfer of capital abroad in response to fears of political risk.
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 gains yield
The price change portion of a stock's return.
Capital lease
A lease obligation that has to be capitalized on the balance sheet.
Capital loss
The difference between the net cost of a security and the net sale price, if that security is sold at a loss.
Capital market
The market for trading long-term debt instruments (those that mature in more than one year).
Capital market efficiency
Reflects the relative amount of wealth wasted in making transactions. An efficient capital market allows the transfer of assets with little wealth loss.
Capital market imperfections view
The view that issuing debt is generally valuable but that the firm's optimal choice of capital structure is a dynamic process that involves the other views of capital structure (net corporate/personal tax, agency cost, bankruptcy cost, and pecking order), which result from considerations of asymmetric information, asymmetric taxes, and transaction costs.
Capital market line (CML)
The line defined by every combination of the risk-free asset and the market portfolio.
Capital rationing
Placing one or more limits on the amount of new investment undertaken by a firm, either by using a higher cost of capital, or by setting a maximum on parts of, and/or the entirety of, the capital budget.
Capital structure
The makeup of the liabilities and stockholders' equity side of the balance sheet, especially the ratio of debt to equity and the mixture of short and long maturities.
Capital surplus
Amounts of directly contributed equity capital in excess of the par value.
Capitalization method
A method of constructing a replicating portfolio in which the manager purchases a number of the largest-capitalized names in the index stock in proportion to their capitalization.
Capitalization ratios
Also called financial leverage ratios, these ratios compare debt to total capitalization and thus reflect the extent to which a corporation is trading on its equity. Capitalization ratios can be interpreted only in the context of the stability of industry and company earnings and cash flow.
Capitalization table
A table showing the capitalization of a firm, which typically includes the amount of capital obtained from each source - long-term debt and common equity - and the respective capitalization ratios.
Capitalized
Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives greater than one year.
Capitalized interest
Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time.
Complete capital market
A market in which there is a distinct marketable security for each and every possible outcome.
Cost of capital
The required return for a capital budgeting project.
Cost of limited partner capital
The discount rate that equates the after-tax inflows with outflows for capital raised from limited partners.
Authorised capital
The maximum amount of share capital that a public limited company or a private limited company can issue according to its articles of association. Part of the authorised capital can remain unissued.
Basel II (Basel Capital Accord)
Basel II - short for the new Basel Capital Accord - lays down new guidelines for determining the minimum solvency requirements for banks. The main change in these guidelines is a new system for weighting the risks run by banks in their loans to retail and corporate customers. The objective of Basel II is to improve the soundness of the financial system.
Capital coverage ratio
Available capital divided by required capital.
Risk-adjusted return on capital (RAROC)
Measures performance on a risk-adjusted basis. Calculated as the economic return divided by economic capital. RAROC helps determine if a company has the right balance between capital, returns and risk. The central concept in RAROC is economic capital: the amount of capital a company should put aside needed based on the risk it runs.
Flight Capital
Money that flows offshore and likely never returns. Flight is exacerbated by a lack of confidence as government grows without bounds.
Risk Capital
Money put up by ordinary shareholders, an individual entrepreneur or venture capitalist that will be lost if the enterprise fails.
Dual-class stock
Two (or more) classes of common stock with equal rights to cash flows but with unequal voting rights
Stock index
A stock index tracks changes in the value of a hypothetical portfolio of stocks. The major stock indices in the world are the NASDAQ Composite, S&P 500 and Dow Jones Index.
Nikkei 225 Stock Average
The Nikkei 225 Stock Average (NIKKEI 225) is based on a portfolio of 225 of the largest stocks trading on the Tokyo Stock Exchange. Stocks are weighted according to their prices.
High-tech stock
Stocks of corporations and companies operating in the high-technology market segments.
Oslo Stock Exchange
In the early 1800s, Norway was a country of farmers and fishermen. Christiania, as the capital city was then called, had just 10,000 citizens. The Norwegian economy was weak, and money was scarce. This had a crushing effect on business and industry, and it was decided that the country needed a commercial exchange to encourage greater commercial activity.
The merchant Nicolay Andresen is generally recognised as the "father" of the Oslo stock exchange. He made the first proposal for a com ...
Common stock ratio
A ratio showing the portion of total capitalization represented by common stock and retained earnings. To calculate, add the dollar value of common stock plus retained earnings and divide by total capitalization; the result is expressed as a percentage
Convertible preferred stock
Stock that can be converted to common stock if the investor wishes, at a set price per share or by a specified deadline.
Acquisition of stock
:A merger or consolidation in which an acquirer purchases the acquiree's stock.
Adjustable rate preferred stock (ARPS)
Publicly traded issues that may be collateralized by mortgages and MBSs.
American Stock Exchange (AMEX)
The second-largest stock exchange in the United States. It trades mostly in small-to medium-sized companies.
Treasury stock
Common stock that has been repurchased by the company and held in the company's treasury.
Stockout
Running out of inventory.
Stockholder's equity
The residual claims that stockholders have against a firm's assets, calculated by subtracting total liabilities from total assets.
Stockholder's books
Set of books kept by firm management for its annual report that follows Financial Accounting Standards Board rules. The tax books follow IRS tax rules.
Stockholder
Holder of equity shares in a firm.
Stock ticker
This is a lettered symbol assigned to securities and mutual funds that trade on U.S.financial exchanges.
Stock split
Occurs when a firm issues new shares of stock but in turn lowers the current market price of its stock to a level that is proportionate to pre-split prices. For example, if Cisco trades at $100 before a 2-for-1 split, after the split it will trade at $50 and holders of the stock will have twice as many shares than they had before the split.
Stock replacement strategy
A strategy for enhancing a portfolio's return, employed when the futures contract is expensive based on its theoretical price, involving a swap between the futures, treasury bills portfolio and a stock portfolio.
Stock option
An option in which the underlying is the common stock of a corporation.
Stock market
Also called the equity market, the market for trading equities.
Stock index option
An option in which the underlying is a common stock index.
Stockholder equity
Balance sheet item that includes the book value of ownership in the corporation. It includes capital stock, paid in surplus, and retained earnings.
Stock selection
An active portfolio management technique that focuses on advantageous selection of particular stocks rather than on broad asset-allocation choices.
Stock repurchase
A firm's repurchase of outstanding shares of its common stock.
Stock exchanges
In the US, a stock exchange is a formal organization, approved and regulated by the Securities and Exchange Commission (SEC). The SEC are made up of members that use the facilities to exchange certain common stocks. The two major US stock exchanges are the New York Stock Exchange (NYSE) and the American Stock Exchange (ASE or AMEX). Five regional stock exchanges include the Midwest, Pacific, Philadelphia, Boston, and Cincinnati. The Arizona stock exchange is an after hours electronic marketpla ...
Stock dividend
Payment of a corporate dividend in the form of stock rather than cash. The stock dividend may be additional shares in the company, or it may be shares in a subsidiary being spun off to shareholders. Stock dividends are often used to conserve cash needed to operate the business. Unlike a cash dividend, stock dividends are not taxed until sold.
Stock
Ownership of a corporation which is represented by shares which represent a piece of the corporation's assets and earnings.
Reverse stock split
A proportionate decrease in the number of shares, but not the value of shares of stock held by shareholders. Shareholders maintain the same percentage of equity as before the split. For example, a 1-for-3 split would result in stockholders owning 1 share for every 3 shares owned before the split. After the reverse split, the firm's stock price is, in this example, worth three times the pre-reverse split price. A firm generally institutes a reverse split to boost its stock's market price and ...
Repurchase of stock
Device to pay cash to firm's shareholders that provides more preferable tax treatment for shareholders than dividends. Treasury stock is the name given to previously issued stock that has been repurchased by the firm. A repurchase is achieved through either a dutch auction, open market, or tender offer.
Preferred stock agreement
A contract for preferred stock.
Preferred stock
A security that shows ownership in a corporation and gives the holder a claim, prior to the claim of common stockholders, on earnings and also generally on assets in the event of liquidation. Most preferred stock pays a fixed dividend that is paid prior to the common stock dividend, stated in a dollar amount or as a percentage of par value. This stock does not usually carry voting rights. The stock shares characteristics of both common stock and debt.
Preference stock
A security that ranks junior to preferred stock but senior to common stock in the right to receive payments from the firm; essentially junior preferred stock.
Preferred equity redemption stock (PERC)
Preferred stock that converts automatically into equity at a stated date. A limit is placed on the value of the shares the investor receives.
Philadelphia Stock Exchange (PHLX)
A securities exchange where American and European foreign currency options on spot exchange rates are traded.
Non-cumulative preferred stock
Preferred stock whose holders must forgo dividend payments when the company misses a dividend payment.
New York Stock Exchange (NYSE)
Also known as the Big Board or The Exhange. More than 2,000 common and preferred stocks are traded. The exchange is the older in the United States, founded in 1792, and the largest. It is lcoated on Wall Street in New York City
Margin account (Stocks)
A leverageable account in which stocks can be purchased for a combination of cash and a loan. The loan in the margin account is collateralized by the stock and, if the value of the stock drops sufficiently, the owner will be asked to either put in more cash, or sell a portion of the stock. Margin rules are federally regulated, but margin requirements and interest may vary among broker/dealers.
Listed stocks
Stocks that are traded on an exchange.
Letter stock
Privately placed common stock, so-called because the SEC requires a letter from the purchaser stating that the stock is not intended for resale.
Vancouver Stock Exchange (VSE)
The Vancouver Stock exchange (VSE) was one of Canada's junior company stock exchanges. On March 15, 1999, the VSE and the ASE (Alberta Stock Exchange) agreed to merge and form the CDNX - the Canadian Venture Exchange - which will also take on some junior Toronto and Montreal Exchange companies. The VSE got a bad reputation in the 80's due to many unscrupulous scam artists manipulating VSE listed companies. New regulatory controls and surveillance systems which had been implemented on the VSE wer ...
Junior Stock Exchange
A stock exchange which lists mainly small, emerging companies with low market capitalizations (e.g. under $100million or even under $10 million).
Kuala Lumpur Stock Exchange (KLSE)
Incorporated in 1965 as Kuala Lumpur's stock exchange (although share-trading activity dated from the 1930s).
Common stock
These are securities that represent equity ownership in a company. Common shares let an investor vote on such matters as the election of directors. They also give the holder a share in a company's profits via dividend payments or the capital appreciation of the security.
Common stock/other equity
Value of outstanding common shares at par, plus accumulated retained earnings. Also called shareholders' equity.
Common stock equivalent
A convertible security that is traded like an equity issue because the optioned common stock is trading high.
Common stock market
The market for trading equities, not including preferred stock.
Common stock ratios
Ratios that are designed to measure the relative claims of stockholders to earnings (cash flow per share), and equity (book value per share) of a firm.
Conflict between bondholders and stockholders
These two groups may have interests in a corporation that conflict. Sources of conflict include dividends, distortion of investment, and underinvestment. Protective covenants work to resolve these conflicts.
Convertible exchangeable preferred stock
Convertible preferred stock that may be exchanged, at the issuer's option, into convertible bonds that have the same conversion features as the convertible preferred stock.
Cumulative preferred stock
Preferred stock whose dividends accrue, should the issuer not make timely dividend payments.
Blank Check Preferred Stock
This is stock over which the board of directors has broad authority to determine voting, dividend, conversion, and other rights. While it can be used to enable a company to meet changing financial needs, its most important use is to implement poison pills or to prevent takeovers by placement of this stock with friendly investors.
Bo Derek stock
High quality stock.
Madrid Stock Exchange (Bolsa de Madrid)
The largest of Spain's four stock exchange.
Joint stock bank
A joint stock bank is one operated by a joint stock or limited company. It is therefore a bank with limited liability. This is in contrast to a private bank which may be owned by a family or individual. All commercial banks in the United Kingdom are joint stock banks.
Preferred Stock
An (equity) security which has a priority relative to ordinary common shares for dividends and return of par amount in the event of a corporate dissolution. Often, preferred shares are nonvoting equity interests. However, a default in the payment of that issue's preferred dividend or other covenant breach may temporarily give the preferred holders voting powers. Preferred shares can have convertible, cumulative, participating, voting, or other special features.
Montreal Stock Exchange (MSE)
One of the four major stock exchanges in Canada.
Commercial Grain Stocks
Domestic grain in store in public and private elevators at important markets and grain afloat in vessels or barges in lake and seaboard ports.
Certificated or Certified Stocks
Stocks of a commodity that have been inspected and found to be of a quality deliverable against futures contracts, stored at the delivery points designated as regular or acceptable for delivery by a commodity exchange. In grain, called "stocks in deliverable position".
