Business / Finance Glossary

Capital International Indexes: Goods used by firms to produce other goods, e.g., office buildings, machinery, equipment.

Capital Lease: Market indexes maintained by Morgan Stanleythat track major stock markets worldwide.

Capital Loss: A lease obligation that has to be capitalized on the balance sheet.

Capital Market: The difference between the net cost of a security and the net sales price, if the security is sold at a loss.

Capital Market Efficiency: The market for trading long-term debt instruments (those that mature in more than one year).

Capital Market Imperfections View: The degree to which the precent asset price accurately reflects current information in the market place. See: Efficient market hypothesis.

Capital Market Line (CML): The view that issuing debt is generally valuable, but that the firm's optimal choice of capital structure involves various other views of capital structure (net corporate/personal tax, agenc . . . View Full Definition

Capital Rationing: The line defined by every combination of the risk-free asset and the market portfolio. The line represents the risk premium you earn for taking on extra risk. Defined by the capital asset pr . . . View Full Definition

Capital Requirements: Placing 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 the entire capital budget or parts of it.

Capital Shares: Financing required for the operation of a business, composed of long-term and working capital plus fixed assets.

Capital Stock: One of two types of shares in a dual-purpose investment company, which entitle the holder to the appreciation or depreciation in the value of a portfolio, as well as the gains from trading i . . . View Full Definition

Capital Structure: Stock authorized by a firm's charter and having par value, stated value, or no par value. The number and the value of issued shares are usually shown, together with the number of shares auth . . . View Full Definition

Capital Surplus: 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 Turnover: Amounts of directly contributed equity capital in excess of the par value.

Capital-Intensive: Calculated by dividing annual sales by average stockholder equity (net worth). The ratio indicates how much a company could grow its current capital investment level. Low capital turnover ge . . . View Full Definition

Capitalization: Used to describe industries that require large investments in capital assets to produce their goods, such as the automobile industry. These firms require large profit margins and/or low cost . . . View Full Definition

Capitalization Method: The debt and/or equity mix that funds a firm's assets.

Capitalization Rate: A method of constructing a replicating portfolio in which the manager purchases a number of the most highly capitalized names in the stock index in proportion to their capitalization.

Capitalization Ratios: The rate of interest used to calculate the present value of a number of future payments.

Capitalization Table: 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 ca . . . View Full Definition

Capitalized: 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 Interest: Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year.

Captive Finance Company: Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time.

Caput: A company, usually a subsidiary that is wholly owned, whose main function is financing consumer purchases from the parent company.

Car: An exotic option. It represents a call option on a put option. That is, you

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