Glossary of Financial Terms - C

Canada Small Business Financing Act

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Capital

Any asset or stock of assets, financial or physical, capable of producing income.

Capital Cost Allowance (CCA)

The annual depreciation expense allowed by the Canadian Income Tax Act.

Capital Investments

Money used to purchase fixed assets for a business, such as land, buildings, or machinery. Also, money invested in a business on the understanding that it will be used to purchase permanent assets rather than to cover day-to-day operating expenses.

Capital Lease

One where substantially all of the benefits and risks of ownership are transferred to the lessee. It must be reflected on the company's balance sheet as an asset and corresponding liability.

Capital Structure

The mix of the various types of debt and equity capital maintained by a firm. The more debt capital a firm has in its capital structure, the more highly leveraged the firm is considered to be.

Capitalization

The total amount of debt and equity issued by a company.

Capitalization Rate

A discount rate used to find the present value of a series of future cash receipts. Sometimes called discount rate.

Capitalize

In Finance: to find the present value of a stream of cash flows.
In Accounting: to reflect costs of the balance sheet rather than charge them off through the income statement, as to capitalize major repairs to a fixed asset.

Cash Cycle

The length of time between a purchase of materials and collection of accounts receivable generated by the sale of the products made from the materials.

Cash Equivalents

Instruments or investments of such high liquidity and safety that they are virtually equal to cash.

Cash Flow

In investments, NET INCOME plus DEPRECIATION and other noncash charges. In this sense, it is synonymous with CASH EARNINGS. Investors focus on cash flow from operations because of their concern with a firm's ability to pay dividends.

Cash Flow Forecast

An estimate of the timing and amount of a company's inflows and outflows of money measured over a specific period of time typically monthly for one to two years then annually for an additional one to three years.

Cash Ratio

Ratio of cash and cash equivalents to liabilities; in the case of a bank, the ratio of cash to total deposit liabilities.

Cash Turnover

The number of cash cycles completed in one year.

Chattel

Personal property other than interests in land.

Collateral

Assets that are used to secure a loan.

Collection Department

An internal department within a company staffed by specialists in collecting past due accounts or accounts receivable.

Commercial Mortgage

A loan made on real estate collateral, other than a residential property, in which a mortgage is given to secure payment of principal and interest.

Common Shares

Are equity instruments that take no security against assets, have no fixed terms of repayment and pay no fixed dividends.

Company Acquisitions

Assets acquired to create money. May include plant, machinery and equipment, shares of another company etc.

Competitive Advantage

The strategies, skills, knowledge, resources or competencies that differentiate a business from its competitors.

Conditional Buyer

One of two parties to a conditional sale agreement, the other being the conditional seller.

Conditional Sale

A type of agreement to sell whereby a seller retains title to goods sold and delivered to a purchaser until full payment has been made.

Conditional Sale Agreement

An agreement entered into between a conditional buyer and a conditional seller setting out the terms under which goods change hands.

Conditional Seller

One of two parties to a conditional sale agreement, the other being the conditional buyer.

Confidentiality Agreement

A legal document whereby the one party, usually the prospective investor, pledges to keep strictly confidential, and return on request, any and all information provided by the entrepreneur seeking funding.

Contigency

An existing situation the result of which is unknown, this may be positive or negative.

Contract

A formal written statement of the rights and obligations of each party to a transaction.

Convertible Debenture

Are debt instruments that are convertible into common or preferred shares, take secondary or no security against assets, have flexible terms of repayment and charge fixed or floating interest rates.

Convertibles

Securities (generally bonds or preferred shares) that are exchangeable at the option of the holder for common shares of the issuing firm.

Cost of Capital

The discount rate that should be used in the capital budgeting process.

Covenants

Promise usually made in a contract whereby a party to the contract promises to do or not to do specified things.

Credit

A rating of a company's credit (ability to payback debt), usually by a third party credit agency.

Credit Loss

A loan receivable that has proven uncollectible and is written off.

Credit Risk

Financial and moral risk that an obligation will not be paid and a loss will result.

Credit Terms

Conditions under which credit is extended by a lender to a borrower.

Credit Union

Credit unions are community based financial co-operatives and most offer a full range of services. All are owned and controlled by members who are also shareholders. Credit unions are regulated provincially and insured by a stabilization fund, deposit insurance or guarantee corporation.
Credit unions are supported by a system of provincial credit union Centrals, a national credit union Central and affiliated national financial co-operatives.

Creditor

Person or business that is owed money.

Critical Growth Periods

Times in a company's history when growth is essential and without which survival of the business might be in jeopardy.

Current Assets

Cash and other company assets that can be readily turned into cash within one year.

Current Liabilities

Debts or other obligations coming due within a year.

Current Ratio

Current assets divided by current liabilities. This ratio indicates the extent to which the claims of short-term creditors are covered by assets expected to be converted to cash in the near future.