Finance Dictionary ( daily finance terms and concepts will be added and discussed)

Corporation

The most common form of business organization, in which the total worth of the organization is divided into shares of stock, each share representing a unit of ownership. A corporation is ongoing and the owners face only limited liability.
 
Correction

A temporary decrease in stock price -- usually of at least 10%, but no greater than 20% -- in a Bull Market. This might signify a good time to buy.
 
Coupon Bond

A debt obligation with coupons representing semiannual interest payments attached; the coupons are submitted to the trustee by the holder to receive the interest payments. No record of the purchaser is kept by the issuer, and the purchaser’s name is not printed on the certificate.
 
Current Assets

Appears on a company’s Balance Sheet, representing cash, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be
converted to cash within one year.
 
Current Liabilities

Appears on a company’s Balance Sheet, representing amounts owed for interest, accounts payable, short-term loans, expenses incurred but unpaid, and other debts due within one year.
 
Current Price / Current EPS.


Comparing it to the average PE ratio shows over or under valuation of the company. Divide the current PE by the five-year average PE. If the result is 1 or less, the stock is undervalued.
 
Current Ratio

Indicator of company’s ability to pay short-term obligations, calculated by dividing current assets by current liabilities. Used to compare companies within a single industry. The higher the ratio, the more Liquid the company.
 
Cyclical Industry


A fundamental analysis term for an industry that is sensitive to the business cycle and price changes. Most cyclical industries produce durable goods such as raw materials and heavy equipment.
 
Debt Financing


Raising money for working capital or for capital expenditures by selling bonds, bills, or notes to individual or institutional investors. In return for the money lent, the individuals or institutions become creditors and receive a promise to repay principal and interest on the debt. The other major way of raising capital is to issue shares of stock in a public offering.
 
Debt Security

A security representing a loan by an investor to an issuer such as a corporation, municipality, the federal government, or a federal agency. In return for the loan, the issuer promises to repay the debt on a specified date and to pay interest.
 
Debt-to-Capital Ratio


The ratio of total debt to total capital ([short + long term debt] / capital). For long-term investors, a suggested acceptable percentage is up to 33%. Debt must be funded in good times and bad, so a company going through a bad slump has a better chance of recovering if its debt load is not too high. Keep in mind that debt serves the useful function of helping the company grow. It is up to management to use it wisely and increase the sales and earnings.
 
Debt-To-Equity Ratio

The ratio identifies the relationship of debt to ownership interest in the firm’s financial structure. A measure of a company’s financial leverage, calculated by dividing Long Term Debt by Shareholders’ Equity. A higher debt/equity ratio generally means that a company has been aggressive in financing its growth with debt, which can result in volatile earnings as a result of the additional interest expense.
 
Declaration Date

The date on which a company’s Board of Directors meet to announce the date and amount of the next dividend payment. Once the payment has been authorized, it is known as a Declared Dividend, and becomes a legal liability that must be paid.
 
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