Category: Financial Terms

Cash Flow: What It Is, How It Works, and How to Analyze It What is cash flow? Cash flow is the movement of money into and out of a business over a period of time. When inflows exceed outflows, net cash flow is positive; when outflows exceed inflows, it is negative. Cash flow is a…

Cash Equivalents Definition Cash equivalents are short-term, highly liquid investments that a company can quickly convert into a known amount of cash with minimal risk of value change. They appear with cash at the top of the Current Assets section on the balance sheet. Why they matter Holding cash equivalents lets a company earn a…

Cash Dividend Key takeaways A cash dividend is a cash payment a company makes to its shareholders, typically from current earnings or retained profits. Dividends are usually paid on a regular schedule (quarterly, semiannual, monthly, or annually), though one‑time special dividends also occur. Cash dividends reduce a company’s cash and shareholders’ equity but do not…

Cash Cow: Definition, Characteristics, Examples, and Context in the BCG Matrix What is a cash cow? A cash cow is a business, product, or asset that generates consistent, reliable cash flow with relatively low ongoing investment. The term also refers to one quadrant of the BCG (growth–share) matrix: units with high market share operating in…

Cash Conversion Cycle (CCC) What is the CCC? The cash conversion cycle (CCC) measures the number of days a company’s cash is tied up in the operating cycle — from purchasing inventory to collecting cash from sales — after accounting for the time it defers payments to suppliers. A shorter CCC indicates more efficient working-capital…

Cash Budget A cash budget estimates a business’s cash inflows and outflows over a specific period (weekly, monthly, quarterly, or annually). It helps determine whether the business will have sufficient liquidity to operate, reveals cash surpluses or shortfalls, and guides decisions about financing, spending, and investment. Key takeaways A cash budget projects cash receipts and…

Cash Balance Pension Plan A cash balance pension plan (CBP) is a type of defined‑benefit retirement plan that presents benefits as an individual account balance rather than a guaranteed monthly payout. Employers credit each participant’s hypothetical account with a pay credit (a percentage of salary or a flat dollar amount) plus an interest credit. The…

Cash Back: How It Works and How to Get the Most from It What is cash back? Cash back refers to rewards programs tied to credit and debit cards that return a percentage of your spending to you. For credit cards, cash back is a rebate—typically a small percentage of each purchase—that the cardholder receives…

Cash and Cash Equivalents (CCE): Definition, Types, and Why It Matters Cash and cash equivalents (CCE) are a company’s most liquid assets—funds it can quickly use to meet immediate obligations. They appear at the top of the balance sheet and indicate how much readily available money a company has for short-notice needs. Key characteristics Readily…

Cash-and-Carry Arbitrage: Strategy and Example Cash-and-carry arbitrage is a market-neutral strategy that exploits pricing differences between the spot (cash) market and the futures market for the same underlying asset. The arbitrageur buys (goes long) the physical asset or spot position, shorts the corresponding futures contract, and “carries” the asset until the futures contract expires —…

Cash Advances: Types, Costs, and Credit Impact What is a cash advance? A cash advance is a short-term loan that provides quick access to cash. Common sources include credit cards, specialized apps, banks, and business lenders. While accessible, cash advances usually carry high fees and interest and can increase your overall debt and credit risk….

Cash Accounting Key takeaways Cash accounting records revenues when cash is received and expenses when cash is paid. It is simple and provides a clear view of cash on hand, making it common for small businesses. It can distort financial position compared with accrual accounting, which records transactions when earned or incurred. Certain entities and…

Carve-Out: Definition, Process, and How It Differs from a Spin-Off What is a carve-out? A carve-out occurs when a parent company sells a minority stake in a subsidiary to outside investors—typically via an initial public offering (IPO)—creating a legally separate company with its own shareholders while the parent retains a portion of ownership. Unlike a…

Carried Interest Key takeaways * Carried interest is a profit share paid to general partners (GPs) of private equity, venture capital, and some hedge funds to reward performance. * A common structure is “20% carry” plus an annual management fee (often ~2%). * Carried interest is typically payable only after investors (limited partners, LPs) receive…

Carriage and Insurance Paid to (CIP): Definition and Example Definition Carriage and Insurance Paid to (CIP) is an Incoterm that requires the seller to pay freight and minimum insurance to deliver goods to a named destination. Risk of loss or damage transfers from the seller to the buyer when the goods are handed over to…

Carding: How It Works, Common Terms, and How to Prevent It Key takeaways * Carding is the use and resale of stolen credit/debit card data—often to buy store gift cards that act like cash. * Stolen card data is traded on underground forums; schemes often involve multiple parties (thief, reseller/buyer, receiver of goods). * Consumer…

Carbon Credits Key takeaways * A carbon credit permits the emission of one metric ton of carbon dioxide (or equivalent greenhouse gases). * Credits are central to cap-and-trade systems that cap total emissions and allow trading of surplus allowances. * Regulated carbon credits are issued by governments; voluntary carbon offsets are sold by projects and…

Capitulation Capitulation in financial markets is a phase of mass, panic-driven selling during a downturn that accelerates price declines. It often marks a climax of fear and can precede a rebound as selling pressure exhausts and more patient or risk-tolerant buyers step in. How capitulation works Capitulation occurs when a large group of investors gives…

Capitalized Interest What it is Capitalized interest is interest incurred to acquire or construct a long-term asset that is added to the asset’s cost basis on the balance sheet instead of being expensed immediately on the income statement. The capitalized amount becomes part of the asset’s historical cost and is recognized over time through depreciation…

Capitalized Cost: Definition, Examples, Pros and Cons What is a capitalized cost? A capitalized cost is an expense added to the cost basis of a long‑lived asset on the balance sheet rather than recognized immediately on the income statement. Instead of expensing the entire amount in the period incurred, the cost is recognized over the…

Capitalize: Meaning in Accounting and Finance Definition To capitalize a cost means recording it as an asset on the balance sheet rather than immediately expensing it on the income statement. The cost is then recognized gradually over the asset’s useful life through depreciation (for tangible assets) or amortization (for intangible assets). Capitalization defers expense recognition…

Capitalization Table (Cap Table) A capitalization table, or cap table, is a structured record—usually a spreadsheet—detailing a company’s ownership structure. It lists equity holders, types of securities, share counts, and ownership percentages, and it’s especially important for startups and early-stage companies. Key takeaways A cap table shows who owns what in a company and how…

Capitalization Rate (Cap Rate) The capitalization rate, or cap rate, is a common metric in commercial real estate that estimates an investment property’s unlevered annual rate of return. It’s calculated by dividing a property’s net operating income by its current market value and is used to compare the relative value and risk of similar properties….

Capitalization: Meaning and Why It Matters Capitalization has two related meanings in finance and accounting: Accounting capitalization — treating certain costs as long-term assets on the balance sheet and recognizing them over time (through depreciation or amortization) rather than expensing them immediately. Capital structure capitalization — the composition of a company’s long-term funding (equity, debt,…

Capitalism Definition Capitalism is an economic system in which private individuals or businesses own and control the means of production (factories, machinery, land, etc.) and operate them to generate profit. Production, pricing, and distribution are largely determined by decentralized decisions in markets—through supply, demand, voluntary exchange, and competition—rather than by central political planning. Key features…

Capital Structure A company’s capital structure is the mix of debt (borrowed money) and equity (investor funding) it uses to finance operations and growth. This mix reveals whether a firm relies more on leverage—such as loans and bonds—or on funds from shareholders, and it shapes the firm’s risk profile, tax position, and strategic flexibility. Key…

Capital Stock Key takeaways Capital stock is the total number of shares a company is authorized to issue, encompassing both common and preferred shares. It appears in shareholders’ equity on the balance sheet and represents the maximum shares that can ever be outstanding. Issuing stock raises capital without debt but dilutes ownership and can reduce…

Capital Projects What is a capital project? A capital project is a large-scale, long-term endeavor to build, improve, or maintain a significant physical asset. These projects require substantial investment and are usually capitalized on the balance sheet and depreciated over their useful life. Examples include infrastructure (roads, bridges, railways), energy facilities (power plants, pipelines), and…

Capital Markets: What They Are and How They Work What are capital markets? Capital markets are venues—physical or electronic—where entities that need funds sell financial instruments to investors who have capital to deploy. Common capital markets include the stock market (equities), the bond market (debt securities), and related markets for currencies and commodities. Their primary…

Capital Market Line (CML) The Capital Market Line (CML) shows the set of optimal portfolios that combine a risk-free asset with a diversified market portfolio of risky assets. In the Capital Asset Pricing Model (CAPM) framework, portfolios on the CML achieve the highest expected return for a given level of total risk (standard deviation). Key…

Capital Loss Carryover: Definition, Rules, and Example What it is A capital loss carryover lets you apply unused capital losses from one tax year to future years. If your capital losses exceed capital gains in a year, you can: Offset up to $3,000 of the remaining loss against ordinary income each year ($1,500 if married…

Capital Leases A capital lease (also called a finance lease) transfers most of the ownership benefits and risks of an asset from the lessor to the lessee. For accounting purposes, a capital lease is treated like a purchase: the lessee records an asset and a corresponding liability on the balance sheet and recognizes interest and…

S&P Capital IQ Key takeaways S&P Capital IQ is the research and data arm of S&P Global, supplying financial data, analytics, and research to institutional and professional investors. The platform aggregates and analyzes massive datasets—more than 135 billion data points annually—to support investment decision‑making. It covers intelligence on tens of thousands of companies (over 62,000…

Understanding Capital Investment Capital investment is the acquisition of long-term assets or the provision of funds to support a business’s strategic growth and productivity. It can refer to: * Cash provided to a company (for example, by venture capitalists, angel investors, banks, or public-market investors). * Purchase or development of physical and intangible assets (land,…

Capital Improvement Definition A capital improvement is a permanent alteration, addition, or restoration to real property that increases its value, extends its useful life, or adapts it for new uses. To qualify (per IRS guidance), the improvement must be durable or permanent and generally last more than one year. How capital improvements work They typically…