Financial Terms and Definitions » C

Conversion Price

ashivapu — Fri, 29 Jan 2010 22:45:13 +0000

The price at which a given convertible security can be converted to common stock. The conversion price is specified when the security is issued. The number of shares to be received is the principal amount of the security divided by the conversion price (after the conversion price is adjusted for stock splits anddividends). Related posts:Initial [...] Related posts:

Cross-Hedging

ashivapu — Mon, 18 Jan 2010 01:36:58 +0000

Hedging one instrument’s risk with a different by taking a position in a related derivatives contract. This is done when there is no derivatives contract for the instrument being hedged, or a suitable derivatives contract exists but the market is highly illiquid.

The maturity of the derivatives contract must be at least as long as the maturity of the desired hedge, otherwise the investor will be left with an unhedged exposure for a period of time.

The success of cross-hedging depends completely on how strongly correlated the instrument being hedged is with the instrument which underlies the derivatives contract. Additionally, the credit quality of the derivative and the instrument being hedged needs to be similar and their markets need to be of similar liquidity, so that price changes are similar.

Call Option

Contingent Order

ashivapu — Sat, 12 Dec 2009 23:51:19 +0000

A buy or sell order which is to be executed only if another order is executed first.

An example of a contingent order is to sell one specific security if another specific security has been bought. Individual traders can use this type of order as a way to limit risk. See stop market order.

Capital

ashivapu — Sat, 03 Oct 2009 23:16:51 +0000

Any money, buildings, equipment, or anything that can be used to ultimately help perform the task at hand. 1. Companies higher employees to operate. These employees are a form of capital. 2. Money being invested into a fund or portfolio is a form of capital. Related posts:Venture Capital Capital Gain Mutual Fund Related posts:

Commodity

ashivapu — Sat, 03 Oct 2009 23:00:09 +0000

A physical substance such as food, oil, and gold that investors can buy and sell through futures contract. Price of these commodities generally fluctuate due to demand and supply as well as other related economic situations. Related posts:Futures Emini Cross-Hedging Related posts:

Common Stock

ashivapu — Sat, 03 Oct 2009 22:55:36 +0000

The most usual type of stock. Common stock is a a security that represents ownership in a corporation.

Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation, common shareholders have rights to a company’s assets only after bondholders, preferred shareholders and other debtholders have been paid in full.

Common stockholders are generally the last to get anything should a company go bankrupt.

Also see preferred stock.

Current Ratio

ashivapu — Sat, 03 Oct 2009 22:01:49 +0000

A ratio used to determine the company’s ability to pay of short-term liabilities. Also known as liquidity ratio.

A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. A higher current ratio indicates the company is more likely to be able to pay off its obligations.

Current Ratio = Current Assets/Current Liabilities.

Coupon Rate

ashivapu — Sat, 03 Oct 2009 19:42:57 +0000

The interest rate stated on a bond, note or other fixed income security, expressed as a percentage of the principal value. Related posts:Federal Funds Rate Security Interest Rates Related posts:

Cash Flow

ashivapu — Fri, 02 Oct 2009 22:04:59 +0000

Cash flow is the cash moving in and out of a company. Companies with more cash on hand are considered more solvent and considered being in good financial standing. Related posts:Moving Average Crossover Inventory Mergers And Acquisitions (M&A) Related posts:

Consumer Price Index (CPI)

ashivapu — Fri, 02 Oct 2009 21:54:50 +0000

A consumer price index (CPI) is a measure estimating the average price of consumer goods and services purchased by households. A consumer price index measures a price change for a constant market basket of goods and services from one period to the next within the same area (city, region, or nation).

CPI is the preferred method of measuring inflation.