Capital
The invested amount in a company that enables the firm’s functioning and activities is referred to as capital. When we talk about the company’s capital, we may also mean the “share capital”. A company is obliged to sate the amount of the capital during the process of initial registration, providing details of the number and the type of shares. The different aspects of the share capital are denoted using the following terms:
If shares are limited, a company can alter its capital in the following ways:
These alterations can be done by passing a company’s general meeting resolution which does not require the court’s confirmation.
Capital Gain
The capital gain represents an increase in the value of capital assets. In general terms, capital assets are held for the sole purpose of generating profits. The investment in assets increases their purchasing price and results in capital gains. On the contrary, the decrease in the value of capital assets results in capital loss.
Capital gains result in relation to tangible and intangible assets. One can generate profits from the sale of real assets, such as buildings and equipment, or non-physical financial assets, such as securities. The sale of intangible assets, for instance goodwill, also results in capital gains. There are two types of gains, short-term and long-term, depending on the time period the asset is held. The short-term investments are held for less than twelve months. If long-term capital assets are held longer than the period of twelve months, their purchase results in a long-term capital gain. The calculation of the period length excludes the acquisition day but includes the disposition day. This logic can be applied to capital losses.
Most countries impose taxes on the capital gains. It is a known that capital investments are one of the keys to economic growth. Capital investment is encouraged by the reduction of tax rates on the capital gains. In the United States, the top tax rate was lowered to 15 percent for individual capital gains. It has to be noted that federal and state taxation are both applicable to capital gains. Many states subject short-term capital investments to state income tax rates. Usually, the rates of taxation differ for individuals and corporations. The Capital Gains Tax is payable by individuals on profits made from the sale of capital assets. Corporations list their capital gains in the shareholders' funds on the statement of financial position.
The rate of taxation is different for the short-term and long-term capital investments. If assets are characterized as short-term capitals, the gain is deemed ordinary and not taxed at discounted capital gain rates. Long-term capital gains are eligible for the capital gain rates. The taxpayer`s bill is reduced if the capital gains are offset by capital losses.
Capital Loss
The capital loss is a decrease in the value of capital assets. If the purchasing cost is higher than the selling price, the result is capital loss. One can claim capital losses from the sale of real assets, such as machinery and equipment, or financial assets, for example, bonds. Capital loss may be incurred by the sale of intangible assets such as trademarks. Unlike the United States, other countries apply different rules to capital losses. Canada, for instance, allows for the deduction of capital losses only when the assets are securities (for instance, bonds, mutual funds, and stock).
The capital losses are also defined as short-term and long-term, in view of the period the assets are held. Short-term capital loss is incurred on investments that are held less than one year. Capital assets that are sold after the period of twelve months are considered long-term. The acquisition day shall be excluded when calculating the length of the period.
The short-term capital losses are eligible for ordinary income deductions. Here, the net capital loss represents a deduction from the rest of the income by up to $3000. If the net capital loss exceeds the capital loss ceiling of $3000, one cannot claim the entire amount of losses for the current year. The additional capital loss is carried over to the next calendar year. In this case, the extra loss is treated as a new capital loss at the beginning of the carryover year. It is important to note that only sold assets qualify as capital losses. The deflated price of the stock in one's portfolio does not entitle one to income deductions.
Long-term net capital losses are incurred when the capital loss exceeds the gain. One can claim a deduction of up to $3000 for the current year. The carryover shall be long-term if the net capital loss is greater than the capital loss ceiling. This limitation applies to the cases when the short-term and the long-term transactions turn both negative. However, the short-term capital loss shall be claimed first.
Capitalization
The term capitalization is used when the acquisition costs are recorded as assets rather than treated as expenses. The accounting standards differentiate between two kinds of expenses. The first type of expense is incurred on assets that will be consumed immediately in the normal work of the company. The second type represents expense on assets that will be operating for many years to the benefit of the company. An asset which provides service for many years may be capitalized. It will be referred to as capital expenditure and added to the asset account. This increases the value of the asset as defined for tax purposes.
The term capital expenditure covers several types of assets. Amounts spent on the acquisition of fixed assets fall into the category of capital expenditures. Similarly, the money spent to add value to existing fixed assets qualifies as capital expenditures. The requirement is that the assets have useful life that extends beyond one calendar year. Repair work on problems that existed prior to the acquisition of the assets fall into this category. Other covered categories are: the start-up costs of a new business activity, the renovation and adaptation of assets to be used by the company, and the legal costs to establish and maintain property rights over a real estate. Expenses which are incurred to maintain the current condition of an asset shall be deduced during the same year.
Capital expenditure is used most extensively in the oil, telecommunications, and utility industries. In general, capitalization is beneficial for companies because it allows for the delayed recognition of expenses. Companies that acquire long-term assets can spread out the costs over certain periods of time. Usually, the goal is to maintain or enlarge the scope of activities. When the cost of equipment is capitalized, the particular item is recorded as a tangible asset on the balance sheet. Shipping charges are also capitalized and included as assets. Then, the asset is subject to depreciation for many years. If the item in question is an intangible asset, it will be amortized. Costs which are not capitalized will appear as the costs of the items.
Cash Flow
Cash flows reflect the financial health or the lifeblood of every company. The measurement of the cash flows indicates the rate of return on business projects. Cash flows can be used to measure the company's profit. For instance, companies that barter their products generate small amounts of operational cash flows. Such companies may issue shares to raise operational cash.
In addition, cash flows are used to determine the liquidity or convertibility of the company's assets into cash. The operating cash flow ratio reveals the extent of the company's liquidity. The ratio shows how well the cash flow from the operations covers the current liabilities. The access to cash is the essential precondition for financial flexibility. Liquid cash eliminates the need to look for new sources of funding. Healthy cash flows allow the company to invest in new enterprises without the approval of bankers and shareholders. On the other hand, the lack of liquidity means that the company does not have enough cash or assets that are convertible into cash. In this scenario, the company cannot meet its payment obligations. This situation may require borrowing or raising additional share capital that will serve to meet the obligations. Long-term liquidity shortages may result in insolvency.
There are two types of cash flows in terms of cash movement: cash inflows and outflows. The first type comprises of the net cash that enters the company due to its ongoing functioning. The most obvious example of cash inflows is the revenue. Conversely, cash outflows refer to the net cash that leaves the company in relation to its operational activities. The expenses are a form of cash outflow.
Cash flows are further divided into operational, investment, and financing cash flows. The operational cash flows refer to the cash that is generated from the revenues less the investment income, taxation, interest, and dividends paid. The investment cash flows have to do with cash that is received from the sale of long-term assets or spent in the form of capital expenditures. Finally, the financing of cash flows refers to cash that flows in the company as a result of share repurchases, payment of dividends, and the issue of debt and securities.
Cash in Advance
When an importer must pay the exporter in cash before a shipment is made. The logic behind the structure of such a transaction is that if an exporter ships a product to an importer and the importer does not pay for the item, the exporter has very little recourse. This term can be used in a variety of businesses, but it is most common in the import/export business.
CENTCOM
Central Command
Certificate
A Certificate is a piece of paper which shows ownership of corporation’s shares.
Certificate of Deposit
The certificates of deposit (CD) are promissory notes offered by commercial banks, thrift institutions, and credit unions. Sometimes, they can be purchased from brokerages. The brokerage companies may negotiate higher interest by promising to the issuing institution an increased number of holders.
This type certificate represents time or fixed deposit that cannot be withdrawn without penalty. The penalty for a five year certificate may amount to six months of interest. This said, certificates have to be held for the specified period of time. At the end of the term, the holder may decide to keep the deposit for another term or withdraw the funds. As a rule, the holder is entitled to receive interest which is determined by the length of the period during which the deposit is kept. Longer terms result in better yield on the deposit. Other factors that determine the interest are the current interest rate, the invested amount of money, and the particular institution of choice. In has to be noted that the time deposits pay higher interest rate than demand deposits such as checking accounts. The reason is that the holders cannot withdraw the time deposits at their convenience. Moreover, the time deposits are slightly riskier for the issuing institutions. Some banks will require sixty or ninety days notice before they issue payment.
The main advantage is the relative safety of the certificates of deposit. In addition, the holders know their return in advance. The certificates of deposit usually require that the holder makes a minimum deposit. Two types of certificates can be differentiated: small denomination and large denomination time deposits. The small time deposits are made for sums under $100.000. The amount of this investment is guaranteed by the Federal Deposit Insurance Corporation coverage. This is the ceiling on the coverage, as set by the FDIC. The large denomination deposits represent deposits for sums above $ 100.000.
The Australian and New Zealand bank institutions have similar regulations on time deposits. The holder signs an agreement which stipulates that the funds shall be kept for a specified term. Alternatively, the bank may require a prior notification or impose penalty on early withdrawals.
CIP - [Customer Identification Program]
The policies and procedures in place to identify the identity of the person attempting to conduct a transaction.
COFER - [Currency Composition of Official Foreign Exchange Reserves]
COFER is an IMF database that keeps end-of-period quarterly data on the currency composition of official foreign exchange reserves. The currencies identified in COFER are:
Before the euro was introduced in 1999, the European currencies identified separately were:
Foreign exchange reserves in COFER consist of the monetary authorities’ claims on nonresidents in the form of:
Foreign exchange reserves in COFER do not include holdings of a currency by the issuing country. For instance, the U.S. dollar assets of the Federal Reserve and the euro assets of the European Central Bank and member countries of the European Economic and Monetary Union are not foreign exchange reserves. The definition of foreign exchange reserves in COFER is the same as that in the IMF’s International Financial Statistics (IFS).
COFER data are reported on a voluntary basis. At present, there are 139 reporters, consisting of member countries of the IMF, non-member countries/economies, and other foreign exchange reserves holding entities. The classification of countries in COFER (as advanced economies or emerging and developing economies) follows that currently used in IFS world tables.
Coffer
a. Financial resources; funds.
b. A treasury: stole money from the union coffers.
c. (usually plural) a store of money
Collateral
Collateral stands for asset that are pledged by a loan recipient in order to guarantee the prompt repayment of a loan. The collateral functions to protect the lending institution against potential risks of default on the part of the borrower. In case that the recipient fails to repay the loan, under the specified terms and obligations, the lender becomes the owner of the property that is pledged as collateral. The most popular example of a collateral loan is the acquisition of a real estate property under the terms of a mortgage loan agreement. The mortgage serves as collateral for the entire duration of the loan repayment. Thus, if the borrower fails to repay the loan, the right over his property is transferred to the mortgage holder. In essence, the lender retains interest in the real estate until the loan is repaid in full. When the debt is discharged, the lending institution releases all claims over the property in question. Another common example involves the purchase of a vehicle by means of collateral. In principle, the lender will finance the current market value of the automobile.
Collateral's for secured loans serve to provide a certain degree of confidence that the lender’s investment will be recouped. This will be materialized through repayment of the loan or via transfer of the asset’s ownership. Collateral's may be made in the form of accounts receivable, inventory such as raw materials, equipment and machinery, and personal assets. Jewelry and securities which posses a certified value may be held as collateral. In general, any asset that is owned by an individual may serve as collateral. This is valid if the lending institution agrees that the value of the asset is sufficient to guarantee the amount of the loan. Loans, granted by means of collateral, become secured debt. Again, default is followed by a transfer of property rights to the lending institution.
Commission
The Commission term refers to the fees charged by brokers for trading securities.
Common Stock
Common stock refers to equity ownership in the form of securities that entitles to voting rights. In addition, it gives the right to receive a portion of the dividends and capital appreciation. The voting right entitles shareholders with a voice in the election of the management body and in the articulation of the company’s policies and objectives. In the usual case, shareholders receive one vote per each share while electing the board of directors. Voting shares pose more risks than preferred shares and other investment instruments. In case of bankruptcy, the holders of voting shares will receive their money after the creditors and the preferred share holders, among others. However, it can be said that voting shares usually outperform bonds and other financial instruments.
Sometimes, the shareholders have preemptive rights which allow them to keep proportional ownership in case that the company decides to issue additional shares. The shareholders have the right purchase stock, rather than the obligation to invest further. They can purchase such amount of shares that sustains their ownership at the present levels. This is also referred to as junior equity. The term “junior” indicates that this stock is subordinate to another financial instrument: the preferred stock. The latter is a form of capital stock that pays dividends before other surplus payments are distributed. This usually means that preferred stock provides dividend before the common stock. The company is not required to pay this dividend in case of poor financial circumstances. Moreover, the dividend on preferred stock does not fluctuate. This type of stock pays at a fixed rate.
Furthermore, the shareholders have the right to receive dividends or portion of the company’s profit. Typically, corporations reinvest a portion of their surplus and distribute the rest of the profit in the form of dividend. Another benefit from the ownership of common stock is capital appreciation. In brief, appreciation refers to the increase in asset value over a period of time.
CTR - [Currency Transaction Report]
The report filed within 15 days of a financial transaction where more than $10,000 in cash is either received or distributed.
Current Account
The difference between a nation's total exports of goods, services and transfers, and its total imports of them. Current account balance calculations exclude transactions in financial assets and liabilities.
Current Account Deficit
Occurs when a country's total imports of goods, services and transfers is greater than the country's total export of goods, services and transfers. This situation makes a country a net debtor to the rest of the world.
The invested amount in a company that enables the firm’s functioning and activities is referred to as capital. When we talk about the company’s capital, we may also mean the “share capital”. A company is obliged to sate the amount of the capital during the process of initial registration, providing details of the number and the type of shares. The different aspects of the share capital are denoted using the following terms:
- The registered, nominal or authorized capital is the amount raised by the company by issuing shares.
- Issue capital is the part of the authorized capital, offered for subscription to members. In addition, the shares presented to shareholders for consideration are included.
- Subscribed capital is the part of the issue capital at the face or nominal value which has been subscribed or taken up by the person who has purchased the shares.
- Called up capital represents the gross amount of shares issued. It is a called up capital subscribed by the shareholders on capital account..
- Paid up capital represents the total amount that is actually added to the company`s called up share capital.
If shares are limited, a company can alter its capital in the following ways:
- It san issue new shares and in this way, the company will increase the amount of shares to a volume that is deemed expedient.
- Divide and consolidate any or all of its share capital. For example, the existing shares can be transformed into shares of larger volume.
- Execute a share conversion into stock for the shares paid in full and then again convert the stock into shares of a desired denomination.
- Make a subdivision of shares to even smaller amount.
- Cancel these of the shares that have not been taken as agreed and thus, diminish the amount of share capital.
These alterations can be done by passing a company’s general meeting resolution which does not require the court’s confirmation.
Capital Gain
The capital gain represents an increase in the value of capital assets. In general terms, capital assets are held for the sole purpose of generating profits. The investment in assets increases their purchasing price and results in capital gains. On the contrary, the decrease in the value of capital assets results in capital loss.
Capital gains result in relation to tangible and intangible assets. One can generate profits from the sale of real assets, such as buildings and equipment, or non-physical financial assets, such as securities. The sale of intangible assets, for instance goodwill, also results in capital gains. There are two types of gains, short-term and long-term, depending on the time period the asset is held. The short-term investments are held for less than twelve months. If long-term capital assets are held longer than the period of twelve months, their purchase results in a long-term capital gain. The calculation of the period length excludes the acquisition day but includes the disposition day. This logic can be applied to capital losses.
Most countries impose taxes on the capital gains. It is a known that capital investments are one of the keys to economic growth. Capital investment is encouraged by the reduction of tax rates on the capital gains. In the United States, the top tax rate was lowered to 15 percent for individual capital gains. It has to be noted that federal and state taxation are both applicable to capital gains. Many states subject short-term capital investments to state income tax rates. Usually, the rates of taxation differ for individuals and corporations. The Capital Gains Tax is payable by individuals on profits made from the sale of capital assets. Corporations list their capital gains in the shareholders' funds on the statement of financial position.
The rate of taxation is different for the short-term and long-term capital investments. If assets are characterized as short-term capitals, the gain is deemed ordinary and not taxed at discounted capital gain rates. Long-term capital gains are eligible for the capital gain rates. The taxpayer`s bill is reduced if the capital gains are offset by capital losses.
Capital Loss
The capital loss is a decrease in the value of capital assets. If the purchasing cost is higher than the selling price, the result is capital loss. One can claim capital losses from the sale of real assets, such as machinery and equipment, or financial assets, for example, bonds. Capital loss may be incurred by the sale of intangible assets such as trademarks. Unlike the United States, other countries apply different rules to capital losses. Canada, for instance, allows for the deduction of capital losses only when the assets are securities (for instance, bonds, mutual funds, and stock).
The capital losses are also defined as short-term and long-term, in view of the period the assets are held. Short-term capital loss is incurred on investments that are held less than one year. Capital assets that are sold after the period of twelve months are considered long-term. The acquisition day shall be excluded when calculating the length of the period.
The short-term capital losses are eligible for ordinary income deductions. Here, the net capital loss represents a deduction from the rest of the income by up to $3000. If the net capital loss exceeds the capital loss ceiling of $3000, one cannot claim the entire amount of losses for the current year. The additional capital loss is carried over to the next calendar year. In this case, the extra loss is treated as a new capital loss at the beginning of the carryover year. It is important to note that only sold assets qualify as capital losses. The deflated price of the stock in one's portfolio does not entitle one to income deductions.
Long-term net capital losses are incurred when the capital loss exceeds the gain. One can claim a deduction of up to $3000 for the current year. The carryover shall be long-term if the net capital loss is greater than the capital loss ceiling. This limitation applies to the cases when the short-term and the long-term transactions turn both negative. However, the short-term capital loss shall be claimed first.
Capitalization
The term capitalization is used when the acquisition costs are recorded as assets rather than treated as expenses. The accounting standards differentiate between two kinds of expenses. The first type of expense is incurred on assets that will be consumed immediately in the normal work of the company. The second type represents expense on assets that will be operating for many years to the benefit of the company. An asset which provides service for many years may be capitalized. It will be referred to as capital expenditure and added to the asset account. This increases the value of the asset as defined for tax purposes.
The term capital expenditure covers several types of assets. Amounts spent on the acquisition of fixed assets fall into the category of capital expenditures. Similarly, the money spent to add value to existing fixed assets qualifies as capital expenditures. The requirement is that the assets have useful life that extends beyond one calendar year. Repair work on problems that existed prior to the acquisition of the assets fall into this category. Other covered categories are: the start-up costs of a new business activity, the renovation and adaptation of assets to be used by the company, and the legal costs to establish and maintain property rights over a real estate. Expenses which are incurred to maintain the current condition of an asset shall be deduced during the same year.
Capital expenditure is used most extensively in the oil, telecommunications, and utility industries. In general, capitalization is beneficial for companies because it allows for the delayed recognition of expenses. Companies that acquire long-term assets can spread out the costs over certain periods of time. Usually, the goal is to maintain or enlarge the scope of activities. When the cost of equipment is capitalized, the particular item is recorded as a tangible asset on the balance sheet. Shipping charges are also capitalized and included as assets. Then, the asset is subject to depreciation for many years. If the item in question is an intangible asset, it will be amortized. Costs which are not capitalized will appear as the costs of the items.
Cash Flow
Cash flows reflect the financial health or the lifeblood of every company. The measurement of the cash flows indicates the rate of return on business projects. Cash flows can be used to measure the company's profit. For instance, companies that barter their products generate small amounts of operational cash flows. Such companies may issue shares to raise operational cash.
In addition, cash flows are used to determine the liquidity or convertibility of the company's assets into cash. The operating cash flow ratio reveals the extent of the company's liquidity. The ratio shows how well the cash flow from the operations covers the current liabilities. The access to cash is the essential precondition for financial flexibility. Liquid cash eliminates the need to look for new sources of funding. Healthy cash flows allow the company to invest in new enterprises without the approval of bankers and shareholders. On the other hand, the lack of liquidity means that the company does not have enough cash or assets that are convertible into cash. In this scenario, the company cannot meet its payment obligations. This situation may require borrowing or raising additional share capital that will serve to meet the obligations. Long-term liquidity shortages may result in insolvency.
There are two types of cash flows in terms of cash movement: cash inflows and outflows. The first type comprises of the net cash that enters the company due to its ongoing functioning. The most obvious example of cash inflows is the revenue. Conversely, cash outflows refer to the net cash that leaves the company in relation to its operational activities. The expenses are a form of cash outflow.
Cash flows are further divided into operational, investment, and financing cash flows. The operational cash flows refer to the cash that is generated from the revenues less the investment income, taxation, interest, and dividends paid. The investment cash flows have to do with cash that is received from the sale of long-term assets or spent in the form of capital expenditures. Finally, the financing of cash flows refers to cash that flows in the company as a result of share repurchases, payment of dividends, and the issue of debt and securities.
Cash in Advance
When an importer must pay the exporter in cash before a shipment is made. The logic behind the structure of such a transaction is that if an exporter ships a product to an importer and the importer does not pay for the item, the exporter has very little recourse. This term can be used in a variety of businesses, but it is most common in the import/export business.
CENTCOM
Central Command
Certificate
A Certificate is a piece of paper which shows ownership of corporation’s shares.
Certificate of Deposit
The certificates of deposit (CD) are promissory notes offered by commercial banks, thrift institutions, and credit unions. Sometimes, they can be purchased from brokerages. The brokerage companies may negotiate higher interest by promising to the issuing institution an increased number of holders.
This type certificate represents time or fixed deposit that cannot be withdrawn without penalty. The penalty for a five year certificate may amount to six months of interest. This said, certificates have to be held for the specified period of time. At the end of the term, the holder may decide to keep the deposit for another term or withdraw the funds. As a rule, the holder is entitled to receive interest which is determined by the length of the period during which the deposit is kept. Longer terms result in better yield on the deposit. Other factors that determine the interest are the current interest rate, the invested amount of money, and the particular institution of choice. In has to be noted that the time deposits pay higher interest rate than demand deposits such as checking accounts. The reason is that the holders cannot withdraw the time deposits at their convenience. Moreover, the time deposits are slightly riskier for the issuing institutions. Some banks will require sixty or ninety days notice before they issue payment.
The main advantage is the relative safety of the certificates of deposit. In addition, the holders know their return in advance. The certificates of deposit usually require that the holder makes a minimum deposit. Two types of certificates can be differentiated: small denomination and large denomination time deposits. The small time deposits are made for sums under $100.000. The amount of this investment is guaranteed by the Federal Deposit Insurance Corporation coverage. This is the ceiling on the coverage, as set by the FDIC. The large denomination deposits represent deposits for sums above $ 100.000.
The Australian and New Zealand bank institutions have similar regulations on time deposits. The holder signs an agreement which stipulates that the funds shall be kept for a specified term. Alternatively, the bank may require a prior notification or impose penalty on early withdrawals.
CIP - [Customer Identification Program]
The policies and procedures in place to identify the identity of the person attempting to conduct a transaction.
COFER - [Currency Composition of Official Foreign Exchange Reserves]
COFER is an IMF database that keeps end-of-period quarterly data on the currency composition of official foreign exchange reserves. The currencies identified in COFER are:
- U.S. dollar,
- Euro,
- Pound sterling,
- Japanese yen,
- Swiss francs, and
- Other currencies.
Before the euro was introduced in 1999, the European currencies identified separately were:
- European Currency Unit (ECU),
- Deutsche mark,
- French franc, and
- Netherlands guilder.
Foreign exchange reserves in COFER consist of the monetary authorities’ claims on nonresidents in the form of:
- foreign banknotes,
- bank deposits,
- treasury bills,
- short- and long-term government securities, and
- other claims usable in the event of balance of payments needs.
Foreign exchange reserves in COFER do not include holdings of a currency by the issuing country. For instance, the U.S. dollar assets of the Federal Reserve and the euro assets of the European Central Bank and member countries of the European Economic and Monetary Union are not foreign exchange reserves. The definition of foreign exchange reserves in COFER is the same as that in the IMF’s International Financial Statistics (IFS).
COFER data are reported on a voluntary basis. At present, there are 139 reporters, consisting of member countries of the IMF, non-member countries/economies, and other foreign exchange reserves holding entities. The classification of countries in COFER (as advanced economies or emerging and developing economies) follows that currently used in IFS world tables.
Coffer
a. Financial resources; funds.
b. A treasury: stole money from the union coffers.
c. (usually plural) a store of money
Collateral
Collateral stands for asset that are pledged by a loan recipient in order to guarantee the prompt repayment of a loan. The collateral functions to protect the lending institution against potential risks of default on the part of the borrower. In case that the recipient fails to repay the loan, under the specified terms and obligations, the lender becomes the owner of the property that is pledged as collateral. The most popular example of a collateral loan is the acquisition of a real estate property under the terms of a mortgage loan agreement. The mortgage serves as collateral for the entire duration of the loan repayment. Thus, if the borrower fails to repay the loan, the right over his property is transferred to the mortgage holder. In essence, the lender retains interest in the real estate until the loan is repaid in full. When the debt is discharged, the lending institution releases all claims over the property in question. Another common example involves the purchase of a vehicle by means of collateral. In principle, the lender will finance the current market value of the automobile.
Collateral's for secured loans serve to provide a certain degree of confidence that the lender’s investment will be recouped. This will be materialized through repayment of the loan or via transfer of the asset’s ownership. Collateral's may be made in the form of accounts receivable, inventory such as raw materials, equipment and machinery, and personal assets. Jewelry and securities which posses a certified value may be held as collateral. In general, any asset that is owned by an individual may serve as collateral. This is valid if the lending institution agrees that the value of the asset is sufficient to guarantee the amount of the loan. Loans, granted by means of collateral, become secured debt. Again, default is followed by a transfer of property rights to the lending institution.
Commission
The Commission term refers to the fees charged by brokers for trading securities.
Common Stock
Common stock refers to equity ownership in the form of securities that entitles to voting rights. In addition, it gives the right to receive a portion of the dividends and capital appreciation. The voting right entitles shareholders with a voice in the election of the management body and in the articulation of the company’s policies and objectives. In the usual case, shareholders receive one vote per each share while electing the board of directors. Voting shares pose more risks than preferred shares and other investment instruments. In case of bankruptcy, the holders of voting shares will receive their money after the creditors and the preferred share holders, among others. However, it can be said that voting shares usually outperform bonds and other financial instruments.
Sometimes, the shareholders have preemptive rights which allow them to keep proportional ownership in case that the company decides to issue additional shares. The shareholders have the right purchase stock, rather than the obligation to invest further. They can purchase such amount of shares that sustains their ownership at the present levels. This is also referred to as junior equity. The term “junior” indicates that this stock is subordinate to another financial instrument: the preferred stock. The latter is a form of capital stock that pays dividends before other surplus payments are distributed. This usually means that preferred stock provides dividend before the common stock. The company is not required to pay this dividend in case of poor financial circumstances. Moreover, the dividend on preferred stock does not fluctuate. This type of stock pays at a fixed rate.
Furthermore, the shareholders have the right to receive dividends or portion of the company’s profit. Typically, corporations reinvest a portion of their surplus and distribute the rest of the profit in the form of dividend. Another benefit from the ownership of common stock is capital appreciation. In brief, appreciation refers to the increase in asset value over a period of time.
CTR - [Currency Transaction Report]
The report filed within 15 days of a financial transaction where more than $10,000 in cash is either received or distributed.
Current Account
The difference between a nation's total exports of goods, services and transfers, and its total imports of them. Current account balance calculations exclude transactions in financial assets and liabilities.
Current Account Deficit
Occurs when a country's total imports of goods, services and transfers is greater than the country's total export of goods, services and transfers. This situation makes a country a net debtor to the rest of the world.