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Glossary of Financial Terms: C

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Capital

Broadly, all the money and other property of a corporation or other enterprise used in transacting its business

Capital Markets

A financial market where debt or equity securities are traded by institutions and individuals; the market for trading long-termdebt instruments (those that mature in more than one year). Also used in a more general context to refer to the market for stocks, bonds, derivatives and other investments. A capital market is made up of three major parts: (1) stock market, (2) bond market, and (3) money market. It also works as an exchange for trading existing claims on capital in the form of shares. T he generic term for markets used to raise longer term funds from various investors.

As opposed to money markets where short-term securities are traded, capital markets are more specifically understood as the markets for medium- to long-term financial products such as shares and bonds.

Capital market instruments include fixed-income instruments such as index-linked bonds, asset backed securities, mortgage backed securities and related products.

Capital market instruments include fixed-income instruments such as index-linked bonds, asset backed securities, mortgage backed securities and related products.

Capitalisation

Long-term debt, preferred stock and net worth. The loan capital of a community development loan fund; includes that which has been borrowed from and is repayable to third parties as well as that which is earned or owned by the loan fund (i.e. “permanent capital”).

Cash Flow Financing

Short-term loan providing additional cash to cover cash shortfalls in anticipation of revenue, such as the payment(s) of receivables.

Collateral

Assets pledged to secure the repayment of a loan.

Commodity Murabaha

See Murabaha, commodity

Commutative

Relating to, involving, or characterised by substitution, interchange, or exchange. Legal term in which one in which each of the contracting parties gives and, receives an equivalent. The contract of sale is of this kind. The seller gives the thing sold, and receives the price, which is the equivalent. The buyer gives the price and receives the thing sold, which is the equivalent.

Cost-plus Financing

See Murabaha.

Covenant

An agreement or promise to do or not to do a particular thing; to enter into a formal agreement; a promise incidental to a deed or contract. The following are functional objectives guiding most covenants: full disclosure of information, preservation of net worth, maintenance of asset quality, maintenance of adequate cash flow, control of growth, control of management, assurance of legal existence and concept of going concern, provision for lender profit or program goals.

Current Asset

Assets that will normally be turned into cash within a year.

Current Liability

Liability that will normally be repaid within a year.

Current Ratio

Current assets divided by current liabilities — a measure of liquidity. Generally, the higher the ratio, the greater the “cushion” between current obligations and a firm’s ability to meet them.