Category: Financial Terms

Financial Controller: Roles, Duties, Skills, and Career Path A financial controller is the senior manager responsible for a company’s accounting and financial reporting systems. Controllers oversee the collection, consolidation, and accuracy of financial data, supervise accounting departments, and ensure internal controls and compliance are effective. They focus on day-to-day financial operations and reporting rather than…

Contribution Margin: Definition and Calculation Key takeaways * Contribution margin shows how much revenue from each unit sale remains after covering variable costs; it contributes to covering fixed costs and generating profit. * It is essential for break-even analysis and resource-allocation decisions. * High contribution margins are more common in capital-intensive businesses; low margins are…

Contributed Capital Contributed capital (also called paid‑in capital) is the value of cash and other assets that investors provide to a company in exchange for equity. It represents the owners’ stake recorded in the shareholders’ equity section of the balance sheet. What it includes Common stock recorded at par (nominal) value. Additional paid‑in capital (share…

Contrarian Investing: Strategy, Risks, and Examples Contrarian investing is an approach that deliberately goes against prevailing market sentiment: buying when most investors are selling and selling when most are buying. The strategy relies on the idea that markets frequently overreact to news and emotion—creating mispriced opportunities when fear or greed dominate. Key takeaways Contrarian investors…

Contractionary Policy What it is A contractionary policy is a macroeconomic strategy used to slow economic activity by reducing the growth of the money supply or government spending. Central banks and governments employ these measures to combat high inflation, cool an overheating economy, and restore price stability. Why it’s used Contractionary policy aims to: *…

Contract for Differences (CFD) Key takeaways A CFD (Contract for Difference) is a cash-settled derivative that lets traders speculate on an asset’s price movement without owning the underlying asset. CFDs trade over-the-counter (OTC) through brokers and typically carry high leverage, amplifying both gains and losses. CFDs have no expiration date and can be used to…

Contra Account What is a contra account? A contra account is a ledger account used to reduce the value of a related account when the two are netted on the financial statements. Contra accounts carry the opposite normal balance of their associated accounts and are presented alongside the related account (typically directly below it) with…

Continuous Compounding Continuous compounding is the theoretical limit of compound interest when interest is calculated and reinvested an infinite number of times per period. While no financial account actually compounds at every instant, the concept is useful in finance and mathematical modeling because it represents the maximum possible growth for a given nominal interest rate….

Contingent Value Rights (CVRs) Contingent Value Rights (CVRs) are contractual instruments issued to shareholders of a company being acquired or restructured. They provide the right to receive additional compensation—typically cash or shares—if specified future events or performance milestones occur within a defined timeframe. CVRs are commonly used to bridge valuation differences between an acquiring company…

Contingent Liability A contingent liability is a potential obligation that depends on the outcome of a future uncertain event. Common examples include pending lawsuits, product warranties, environmental cleanup obligations, and guarantees. Whether and how a contingent liability is reported depends on the likelihood of the event and whether the amount can be reasonably estimated. How…

Contingent Convertibles (CoCos): Definition, Uses, Benefits, and Risks What are CoCos? Contingent convertibles (CoCos), also called AT1 bonds or enhanced capital notes (ECNs), are hybrid debt instruments predominantly issued by European banks. They pay higher-than-average interest but include pre-set mechanisms that convert the debt into equity or write it down if the issuing bank’s capital…

Contingent Beneficiary A contingent beneficiary is a person, trust, charity, or other entity designated to receive assets only if the primary beneficiary cannot or will not accept them. Naming contingent beneficiaries on wills, life insurance policies, retirement accounts, and other payable-on-death instruments provides a backup distribution plan and helps ensure assets pass according to your…

Contingent Asset: Overview and Considerations What is a contingent asset? A contingent asset is a possible economic benefit that depends on the outcome of a future event beyond a company’s full control. Because its realization and exact value are uncertain, a contingent asset is not recorded on the balance sheet until the inflow of economic…

Contingency: Definition and Overview A contingency is a potential adverse event that may occur in the future but cannot be predicted with certainty. Examples include economic recessions, natural disasters, cyberattacks, litigation, and supply‑chain disruptions. Organizations and investors use contingency planning to reduce disruption, protect assets, and preserve reputation. Key Takeaways Contingency planning anticipates negative events…

Understanding Contango: Causes, Effects, and Comparison with Backwardation What is contango? Contango is a futures-market condition in which a commodity’s futures prices are higher than its current spot price. In other words, investors pay more for delivery at a future date than for immediate delivery. This is common in markets where storage and carrying costs…

Consumption Function: Formula, Assumptions, and Implications Key takeaways The consumption function describes the relationship between aggregate consumer spending and disposable income. Basic form: C = A + M·D, where A is autonomous consumption, M is the marginal propensity to consume (MPC), and D is real disposable income. The MPC determines the size of the Keynesian…

Understanding Consumerism: Impact, Benefits, and Drawbacks What is consumerism? Consumerism is the cultural and economic tendency to prioritize the acquisition of goods and services. It can refer to: * An economic view that rising consumer spending fuels growth and higher living standards. * A cultural critique describing excessive materialism, conspicuous consumption, and the social or…

What Are Consumer Staples? Consumer staples are essential goods people buy regularly, regardless of economic conditions. They include food, beverages, household products, personal care items, and tobacco. Because demand for these items is relatively inelastic—consumers continue buying them even when prices rise or the economy slows—the sector is considered non-cyclical and often viewed as defensive….

Consumer Surplus: Definition, Measurement, and Significance Key takeaways * Consumer surplus is the difference between what consumers are willing to pay and what they actually pay. * It arises from diminishing marginal utility and is represented graphically as the area under the demand curve above the market price. * Consumer surplus influences business pricing strategies…

Consumer Price Index (CPI) What the CPI is The Consumer Price Index (CPI) measures how the prices consumers pay for a representative basket of goods and services change over time. Compiled monthly by the U.S. Bureau of Labor Statistics (BLS), the CPI is a widely used gauge of inflation and purchasing-power trends that influences monetary…

Consumer Packaged Goods (CPG) Key takeaways CPGs are everyday items consumers use and replace frequently—examples include food, beverages, personal care, and household cleaning products. The U.S. CPG sector contributed roughly $2 trillion to GDP in 2023. CPGs differ from durable goods by short lifespan, lower purchase cost, and higher purchase frequency. Major companies in the…

Consumer Goods: Definition, Types, and How They’re Marketed What are consumer goods? Consumer goods (also called final goods or retail goods) are finished products purchased by individuals for personal use or enjoyment. They are the end result of production and manufacturing and include everyday items such as clothing, food, electronics, and household appliances. Explore More…

Consumer Discretionary Consumer discretionary refers to goods and services that are desirable but not essential to daily living—items consumers buy when they have sufficient disposable income. Examples include durable goods, high-end apparel, entertainment, leisure activities, and automobiles. Companies producing these items are often grouped under the consumer discretionary (or consumer cyclicals) sector. Key takeaways Consumer…

Consumer Credit What is consumer credit? Consumer credit (consumer debt) is money borrowed by individuals to purchase goods and services and repay over time. It commonly refers to unsecured, smaller-dollar borrowing rather than large, collateralized loans. For example, credit cards and personal loans are typical forms of consumer credit, whereas a mortgage is not considered…

Understanding Construction Loans: Definition, Process, and Key Examples Construction loans finance the building, renovation, or restoration of residential or commercial real estate. They are typically short-term, higher-interest loans that fund construction costs in stages and can convert into long-term permanent mortgages once the project is finished. Key takeaways Construction loans are short-term, higher-rate loans used…

Consolidation Consolidation has two distinct meanings in finance: in technical analysis it describes a market phase where price moves within a range, and in accounting it refers to combining the financial statements of a parent company and its subsidiaries into a single set of reports. Key takeaways In markets, consolidation is a period of price…

Consolidated Omnibus Budget Reconciliation Act (COBRA) Overview The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that lets eligible employees and their families temporarily continue group health insurance after certain qualifying events—most commonly job loss or reduced hours. Passed in 1985, COBRA applies to many private-sector employers and to state and local government…

What Does “Consolidate” Mean? To consolidate means to combine multiple items into a single, unified whole. In finance and business the term appears in several related but distinct contexts: accounting, corporate transactions, consumer debt, and market behavior. Across uses, consolidation aims to simplify reporting, reduce fragmentation, or increase scale. Types of Consolidation Financial (Accounting) Consolidation…

Consignment Explained Consignment is an arrangement in which an owner (the consignor) delivers goods to an authorized third party (the consignee) to sell on their behalf. Ownership typically remains with the consignor until the item is sold, and the consignee keeps an agreed portion of the sale as a commission. How consignment works The consignor…

Conglomerate: What it is and how it works A conglomerate is a single corporation that owns controlling stakes in multiple, often unrelated, businesses. Each subsidiary typically operates independently, while the parent company provides capital allocation, strategic oversight, and centralized management where useful. Conglomerates are commonly formed to diversify risk, enter new markets, or allocate capital…

Conflict Theory Conflict theory is a sociopolitical framework that explains social life as a struggle over scarce resources and power. Famously associated with Karl Marx, it emphasizes how social order is maintained through domination rather than consensus, and how institutions often serve the interests of powerful groups at the expense of others. Key takeaways Society…

Conflict of Interest A conflict of interest occurs when personal interests, relationships, or outside obligations compromise—or appear to compromise—an individual’s ability to act impartially in their professional role. Conflicts can affect judgment, decision-making, and trust, and they may carry legal and reputational consequences if not handled properly. How conflicts of interest arise A person stands…

Confidence Interval Overview A confidence interval (CI) is a range of values, derived from sample data, that is likely to contain an unknown population parameter (commonly the mean). A CI expresses both an estimate and its uncertainty: for example, a 95% CI of 9.50 to 10.50 means you can be 95% confident the true population…

Conditional Value at Risk (CVaR) What CVaR Measures Conditional Value at Risk (CVaR), also called expected shortfall, quantifies the expected loss in the tail of a loss distribution beyond a chosen Value at Risk (VaR) cutoff. While VaR estimates a threshold loss that will not be exceeded with a given confidence (e.g., 95%), CVaR answers:…

Conditional Probability: Definition, Formula, and Examples What is conditional probability? Conditional probability measures the chance that an event A occurs given that another event B has already occurred. It’s written P(A|B) and captures dependence: if the occurrence of B affects the likelihood of A, the events are dependent; if it doesn’t, they are independent. Key…