Capital rationing occurs when managers have insufficient funds to invest in all projects with a positive net present value (NPV). It requires prioritization of projects to maximize NPV. It is classified into soft and hard capital rationing depending on whether constraints are self-imposed or external, respectively.
A capital redemption reserve is a statutory reserve created when a company repurchases its own shares, leading to a reduction in share capital. This non-distributable reserve ensures the maintenance of the company's capital base and protects creditors' interests.
Capital reduction, also known as the reduction of capital, is a restructuring process whereby a company reduces its shareholder equity through activities such as repurchasing shares or decreasing share capital to distribute assets to shareholders or to eliminate losses.
Capital requirement refers to the amount of capital a business needs to sustain its operations, including both long-term and working capital necessary for maintaining day-to-day functionality and growth.
A capital reserve is an accounting term that refers to a reserve fund that is set aside for long-term projects or other significant ventures. It is part of a company's equity that is not appropriate for distribution as dividends to shareholders.
Capital resources are assets such as factories, buildings, and equipment used in the production of goods. These are crucial for the growth and development of industries.
The risk, in a lending operation, that the capital amount of the investment may be less than its par value even at maturity.
Capital stock represents the equity shares held in a corporation. In the USA, the two fundamental types of capital stock are common stock and preferred stock.
Capital structure refers to the balance between a company's assets and liabilities, the nature of its assets, and the composition of its borrowings. It is also commonly used in the context of a company's debt-equity ratio and the mix of debt classes in structured finance instruments.
In the USA, capital surplus refers to the difference between the par value of a share and its issue price. It is the equivalent of a share premium in the UK.
Capital transactions refer to significant financial activities involving things like share capital and reserves, long-term debt capital, or fixed assets of a company, as opposed to revenue transactions which are common, operational activities.
Capital Turnover, also known as Asset Turnover, measures the efficiency of a company in using its assets to generate sales revenue. A higher ratio indicates better utilization of assets in generating sales.
Capital widening in macroeconomics refers to the process of increasing an economy's capital stock to enhance production levels.
An economic system where private ownership, profit moti ve, and market competition play central roles, facilitating individual and corporate economic gain.
An essential concept in accounting and finance that pertains to providing capital for a company, managing its capital structure, converting reserves into capital, and accounting for capital expenditures.
A capitalization issue, also known as a scrip issue, involves a company issuing new shares to existing shareholders, usually to bolster additional funds or to distribute reserves.
Understand the accounting process of including borrowing costs in the cost of a qualifying asset and how this affects financial statements.
Capitalization rate, often abbreviated as cap rate, is a rate of interest or discount rate used to convert a series of future payments into a single present value. In real estate, the rate includes annual capital recovery in addition to interest.
Understanding the multifaceted term 'capitalize' and the concept of capitalization, especially within various business and financial contexts. This includes asset valuation, financing capital expenditures, accounting procedures, and making economically advantageous decisions.
Capitalized value represents the value at which an asset is recorded in the balance sheet of a company or organization. It is also the capital equivalent of an asset that yields a regular income, calculated at the prevailing rate of interest.
Capitulation is the terminal stage of a market collapse, characterized by investors giving up hope and taking losses, causing prices to bottom out. This typically stirs bullish sentiment as it creates opportunities for value investing and marks a technical sign that downside risk is being replaced by upside potential. Market bottoms are confirmable only in hindsight, which introduces an element of speculation.
A Capped Floating-Rate Note (Capped FRN) is a type of bond that features an interest rate that fluctuates with market levels but has an upper limit or 'cap' to protect issuers against excessive interest rate rises.
Limitations, especially those placed on the extent of interest rate or payment adjustments associated with adjustable-rate mortgages (ARMs).
Understanding Captive Finance Companies, their benefits, structure, and role in providing financial services aligned with the parent company's product sales efforts.
A captive insurance company is a subsidiary company formed to insure the risks of its parent company or a group of companies. This structure allows the parent company to manage and tailor its own risk management strategy, potentially leading to cost savings and more comprehensive coverage.
Capture rate refers to the portion of total sales in a market that are achieved by a specific entity or project. This concept is commonly used in real estate, retail, and other industries to determine market performance and analyze competitive advantage.
Cargo refers to freight or merchandise transported on a transportation vehicle, such as a ship, airplane, truck, or train, excluding passengers. It covers a broad range of goods, from raw materials to finished products, playing a crucial role in global trade and logistics.
Cargo insurance is a specialized insurance policy designed to provide financial protection for goods while they are being transported, typically by sea but also by other modes of transport. It covers a single shipment or all shipments under a continual agreement, protecting against most risks associated with the journey.
Carload Rate refers to a discounted transportation charge applicable when a shipment meets a certain volume or quantity of freight that is sufficient to fill a freight car. This rate is especially relevant for large-volume shipments.
Carousel fraud is a type of criminal scheme commonly involving cross-border transactions within the European Union (EU), where fraudsters exploit the VAT system to steal large amounts of money.
Carpal Tunnel Syndrome (CTS) is a repetitive-use injury of the carpal tunnel, a nerve pathway in the wrist, frequently seen in individuals who spend extended periods keyboarding and using a mouse. It can cause numbness, tingling, and pain in the hand. Preventive measures such as stretching and taking regular breaks can help mitigate the risk of CTS.
Carriage Inwards, also known as Freight Inwards, refers to the delivery costs incurred by a business when purchasing goods. If these costs are associated with fixed assets, they can be capitalized and included in the cost of the asset on the balance sheet.
Carriage outwards refers to the delivery costs incurred when a business sends goods to customers. These costs are accounted for as an expense in the profit and loss account.
In book-keeping, 'carried down' (**c/d**) refers to an amount that is to be transferred as the opening balance in the next accounting period.
Carried Down (C/D) is an accounting term used to indicate that the total balance from the previous page of a ledger is carried down to the top of the new page.
Carried forward (c/f) is an accounting practice of bringing the balance of an account from one accounting period over to the next.
An accounting term used to describe the total of a column of figures that is to be the first item in the corresponding column on the next page.
An entity engaged in the business of providing transportation services for passengers or cargo. Carriers can operate across various modes of transportation including air, sea, road, and rail.
A Carrier's Lien is a legal right bestowed upon providers of transportation services (carriers) to retain possession of the cargo they transport as security for the payment of services rendered.
The Carrot and Stick strategy is often used in negotiations, involving a combination of rewards and threats to induce desired behavior from the other party. It is a metaphor for the use of a carrot (reward) and a stick (punishment) to influence behavior.
Carry trade is a financial strategy that involves borrowing funds in a low-interest-rate market and investing them in a higher return market. This practice capitalizes on the interest rate differential between two markets to generate profit.
Carryback is a tax provision allowing deductions or credits of one taxable year that cannot be used to reduce tax liability in that year to be applied against tax liability in an earlier year or years.
Carryforward refers to a provision in tax law allowing individuals or corporations to apply an unused deduction, credit, or loss from one tax year to future tax years, effectively reducing future taxable income or taxes owed.
The balance-sheet value of an asset or liability, representing the amount at which it is reported on the financial statements.
A carrying charge is a fee associated with holding an investment or conducting business that includes costs such as interest, storage, and insurance across various sectors like commodities, real estate, retailing, and securities.
Carrying costs, also known as holding costs or cost of carry, refer to the expenses associated with maintaining an inventory or financial position. These include opportunity costs, protective measures, wastage, and funding costs.
Carryover refers to the process by which deductions and credits of one taxable year that cannot be used to reduce tax liability in that year are applied against tax liability in subsequent years.
The carryover basis concept is pivotal in a tax-deferred exchange, wherein the adjusted tax basis of the property surrendered is used to determine the tax basis of the property acquired.
Cartage refers to the charge or service for moving goods by truck, wagon, or other vehicle. It plays a crucial role in logistics and supply chain management.
Carte Blanche refers to the full freedom and authority to act at one's own discretion. It is often used in business contexts to describe a situation where an individual is given the broad authority to make decisions and take actions as they see fit, without requiring additional approval.
A cartel is a group of independent suppliers who band together to control prices and limit competition by restricting trade to their mutual benefit. This cooperation typically aims to maximize collective profits by regulating supply and prices.
The term 'carve out' refers to the separation of a specific interest, such as the current income stream of a property, from the property itself. For instance, an owner might sell a portion of future mineral production from a property for a set number of years, creating a carved-out interest in that mineral property.
A form of corporate restructuring in which a parent firm sells shares in a subsidiary through an initial public offering (IPO).
A cascading menu is a secondary menu that appears next to the original menu when an option with its own menu is selected, often leading to further menus.
CASE is an acronym for the Committee on Accounting for Smaller Entities. This organization focuses on the creation and adaptation of accounting standards and practices to better suit the needs of smaller entities, ensuring that they are adequately represented and that their financial reporting is manageable and effective.
Case sensitivity refers to the distinguishing between upper- and lowercase letters in data processing contexts. This concept affects various fields such as programming, file management, and user authentication, determining how differences in letter case impact functionality.
A widely recognized measure of U.S. residential real estate prices, particularly focusing on changes in the price of single-family homes in specific cities.
The Case-Study Method involves studying information from hypothetical or actual business situations to formulate recommended policies based on given facts. This approach is widely used in business education, notably through Harvard case studies, to gather, organize, evaluate, and generalize relevant data. Analyzing how companies handle real-world occurrences helps determine the effectiveness of management policies and offers improvements when necessary.
Legal tender in the form of banknotes and coins that are readily acceptable for the settlement of debts.
Cash accounting is an accounting method where transactions are recorded only when cash is received or paid. This system differs significantly from accrual accounting, which records transactions when they are earned or incurred. Cash accounting provides a simplified approach to managing VAT liabilities for eligible businesses.
A cash acknowledgment is a notice sent to a cash buyer acknowledging receipt of their order. This notice may include an offer inviting the buyer to increase the purchase order and serves to reinforce positive feelings about the purchase and encourage future orders.
Cash at Bank refers to the total amount of money held in bank accounts by an individual or company. This can be in the form of current accounts or deposit accounts and is reflected in the balance sheet under current assets.
A type of hybrid pension plan in which each participant's benefit is stated as a hypothetical account balance, increased with pay credits for additional service and interest credits to reflect the passage of time.
Cash Basis or Cash Method is an accounting method primarily used by individual taxpayers, wherein income and deductions are recognized when money is received or paid.
An accounting method where transactions are recorded only when cash is received or paid. This method does not account for debtors, prepayments, creditors, accruals, stocks, and fixed assets.
A cash book is a financial journal that contains all cash receipts and payments, including bank deposits and withdrawals. It records transactions chronologically and is frequently reconciled with the bank statement to ensure accuracy and integrity in financial reporting.
A detailed analysis of expected cash inflows and outflows over a specific period, crucial for managing liquidity and ensuring a business can meet its obligations.
A cash buyer is a customer who pays for goods or services by submitting cash, a check, or a money order with the order they make. Unlike credit transactions, the payment is made upfront.
A cash card is a plastic card that enables customers of retail banks to obtain cash from automated teller machines (ATMs) using a personal identification number (PIN). Many cash cards also function as cheque cards and debit cards.
A 'Cash Cow' is a term used in the Boston Matrix to describe a business unit or product that generates a steady, reliable cash flow with lower investment, often used to fund other ventures or pay down debt.
A crop that is grown primarily for sale to return a profit rather than for consumption by the farmer. Common examples include coffee, cocoa, and sugar in tropical regions, and grains and vegetables in temperate zones.
In the manufacturing industry, the cash cycle represents the interval between the outlay of cash to procure raw materials and the receipt of payment for the manufactured goods produced from them.
Cash disbursement refers to the amount of money paid out by a business or individual during a specific period for expenses, purchases, or other financial obligations.
A cash discount is a reduction in the invoice amount offered to customers to encourage early payment. By offering this discount, businesses can enhance cash flow and reduce the risk of non-payment.
A cash dispenser, also known as an Automated Teller Machine (ATM), is a specialized machine that allows bank customers to perform basic financial transactions without needing a branch representative.
A cash dividend is a distribution of a portion of a company’s earnings to its shareholders in the form of cash rather than additional shares. These dividends are paid net of income tax, and shareholders typically receive credit for the tax deducted.
Cash earnings refer to the income that a business generates from its operations after accounting for cash revenues and cash expenses, specifically excluding noncash expenses such as depreciation.
Cash Equivalence refers to the market value of an item if it were to be sold for cash. In real estate, this often represents the true value of a property, which can differ from the stated selling price due to various financial arrangements.
Cash equivalents are highly liquid investments that are readily convertible into a known amount of cash and are subject to an insignificant risk of changes in value.
Short-term, highly liquid investments that are capable of being converted into known amounts of cash without notice, typically maturing within three months when acquired.
Cash float refers to the notes and coins held by a business to ensure they can provide change to customers during transactions. This concept is essential for efficient cash management and smooth operational flow in day-to-day transactions.
Cash flow refers to the movement of cash into and out of a business, reflecting the inflows and outflows of capital within a specified period. It is a critical indicator of a company's financial health and sustainability.
Cash Flow at Risk (CFaR) is a financial metric used to quantify the risk to a firm's cash flows over a specific time period under normal market conditions. It leverages the concept of Value-at-Risk (VaR) to estimate the potential deviation in cash flows, helping firms to manage liquidity risk and financial planning.
A Cash Flow Statement is a financial document that shows the inflows and outflows of cash and cash equivalents for a business over a financial period. It is a crucial part of financial reporting.
The Cash Flow to Capital Expenditure (CapEx) Ratio analyzes a company's ability to maintain its plant and equipment using cash generated from its operations, excluding dividends, rather than relying on external borrowing.
A ratio for assessing the solvency of a company, calculated by dividing the cash flow from operations by the total liabilities. It indicates a company's ability to satisfy its debts.
Cash inflows are the cash receipts of a business, which include transactions such as sales of trading stock, receipts from debtors for credit sales, and disposals of fixed assets.
Cash management involves the planning, monitoring, and execution of a firm's policy regarding liquidity to ensure adequate availability of cash for operational needs, investment opportunities, and unforeseen expenses.
A market in which transactions are promptly completed, resulting in immediate transfer of ownership and payment upon delivery of a commodity.
A transaction requiring that goods be paid for in full by cash or certified check at the point of delivery. Also known as Collect on Delivery with the same abbreviation.
A Cash or Deferred Arrangement (CODA), commonly known as a 401(k) plan, is a retirement savings plan sponsored by an employer that allows employees to save and invest a portion of their paycheck before taxes are taken out.
A Cash Or Deferred Arrangement (CODA) is a type of retirement plan arrangement that allows employees to defer a portion of their income to a retirement plan, such as a 401(k), on a pre-tax basis.
A cash order is an order accompanied by the required payment at the time of the order. It differs from other types of orders where payment may be made at a later date. This ensures the vendor receives payment immediately upon the placement of the order.
Cash outflows are the financial transactions where a business expends cash, which is essential for managing liquidity and business operations.
A Cash Payments Journal is a specialized accounting book or log used to record all cash disbursements made by a business in a sequential manner.
The amount of cash or equivalent instruments held at any point in time. A commodity or securities trader or an investment company needs to monitor its cash position carefully to maintain adequate liquidity.
An important liquidity ratio indicating the extent of a bank's cash reserves relative to its total liabilities. Essential for ensuring a bank's ability to meet short-term obligations.
A Cash Receipts Journal is a specialized accounting ledger used to record all cash inflows received by a business, such as payments from customers, cash sales, and other receipts. Each entry is chronologically organized to ensure accurate tracking and reconciliation.
The Cash Receipts Journal is a specialized accounting ledger used to record all cash inflows received by an organization. This ledger often records cash deposits into the organization's bank account and may be combined with other journals for comprehensive cash flow tracking.
A machine used for recording cash and credit receipts from sales. It typically includes a paper tape to provide a receipt to customers and print each transaction. Sales are reconciled daily with actual cash and credit receipts, with entries logged into the appropriate journal.
