FINANCIAL GLOSSARY








Below is a glossary of financial terms written by us.
Simply click on a term to access its definition.
[For a correct use of this glossary, please consult these "notes"]

puce CAC 40

[Compagnie des Agents de Change 40 Index]
An index based on 40 of the largest and most liquid stocks traded on the Paris Stock Exchange.
See also Index.

puce CAGR

[Compound Annual Growth Rate]

puce Call Option

The right to buy a security at a given price (or range) within a specific time period.
See also "Put option".

puce Call Protection

Provision which protects the investor against the early repayment of a bond or debenture.

puce Capital

The accumulated wealth of a company, which is capable of generating income.

puce Capital Apreciation

An increase in the market price of an asset.

puce Capital Gain

The amount by which an asset's selling price exceeds its initial purchase price.
An unrealised capital gain is an investment that hasn't been sold yet but would result in a profit if sold.

puce Capital Loss

The difference between the net cost of a security and the net sale price when that security is sold at a loss.

puce Capital Market

The market for trading long-term debt instruments (those that mature in more than one year).

puce Capital market instrument

puce Capitalization

The sum of a corporation's long-term debt, stock and retained earnings.
See also Market Capitalization.

puce Capitalization Rate

The discount rate used to determine the present value of a stream of future earnings.

puce Capitalization Ratios

The percentage of each capital component (debt, preferred stock, common stock, other equity) represented in a company's total capitalization.

puce CAPM

[Capital Asset Pricing Model]Capital asset pricing model, a famous financial model that relates the rate of return on an asset to its riskyness relative to the market and to the risk premium associated with the market:
R=Rf+Beta*(Rm-Rf)
where Rf is the risk free rate, Rm-Rf the risk premium associated with the market, and Beta the parameter of a linear regression between the market rate of return and the reviewed asset's rate or return, in essence, market risk of the asset.

puce Capped-style Option

An option with an established profit limit.
A capped-style option is automatically exercised when the underlying security closes at or above the option's cap price for a call, or at or below the option's cap or price for a put.

puce Carried Interest

Portion of any gains realized by a Private Equity fund to which the fund manager is entitled after capital repayment and interest levied on capital (see hurdle rate).
Usually, such portion amounts to 20% whereas the remaining 80% is distributed to investors.

puce Cash Basis

The accounting practice of recording sales and expenses only when cash is actually received or paid out (as opposed to accrual basis).

puce Cash-flow

A company's cash flow is based on the cash receipts minus cash payments over a given period of time.
See also "Free cash flow".

puce Catch-up

A provision, mainly in the case of investment funds, which grants the manager the payment of an increased later compensation provided that the distribution of profits of the fund is being delayed until a hurdle rate has been reached.

puce Cede & Co (USA)

A firm acting as the recorded owner ("Nominee") of securities held in street name for several major brokerage firms and other financial institutions.

puce Cedel S.A.

See Clearstream.

puce Cheap Stock

Stock or rights to purchase stock issued to employees, consultants, promoters etc, of the issuer at a price lower than the public offering price, particulary if issued within one year prior to the public offering.

puce Class Action Suit

A lawsuit brought by one person on behalf of a group of individuals all having the same grievance (collective suit).

puce Classified Stock

The division of a company's capital stock into various classes, such as Class A and Class B etc.

puce Claw back Option

The right to require repayment of funds set aside for a specific purpose which have been disbursed in a manner inconsistent with or contrary to the rules or agreements governing the disbursement.
In the context of an acquisition, a buyer may have clawback rights with respect to part of the purchase price if the target company fails to meet agreed upon milestones after the acquisition.

puce Clearstream

Previously Cedel SA.
International clearing institution established in Luxemburg.
Its activities compare with those of Euroclear.

puce Closed Corporation

A corporation in which all of the voting stock is held by a few shareholders, such as management or family members.

puce Closed End Fund

A fund with a fixed number of shares.
These are offered during an initial subscription period.
Unlike open-end mutual funds, closed-end funds do not stand ready to issue and redeem shares on a continuous basis.

puce Closely Held

A corporation in which most of the stock is held by a small number of shareholders.

puce Coaching

In the field of venture capital the management, the follow up or the assistance at strategic and operational level provided by external experts to a young company.

puce Co-Investment

An investment that is made alongside with one or several other investors.

puce Collateral

Tangible assets of the borrower, such as real estate or equipment, for which a lender has a legal entitlement until a loan obligation is fully reimbursed.

puce Combination Stock Option Plan

A plan under which a company grants both Incentive Stock Options and Non-Qualified Stock Options.

puce Comfort Letter or Cold ComfortLletter

A confirmation delivered by the auditors for an issuer at the time of a public offering of a bond issue or stock which confirms that there have not been any material changes in the issuer's financial conditions since the last audit.

puce Comment Letter (USA)

A letter prepared by the SEC setting forth its questions and comments with regard to a registration statement or prospectus.
Also issued for other filings such as annual reports or Form 10K.
See also Reporting Company Forms.

puce Commercial Paper

An unsecured short term obligation issued by a corporation to finance its short-term credit needs, such as accounts receivable and inventory.
Maturities typically range from 2 to 270 days.

puce Commissie Voor Het Bank –en Financiewesen (CBP)

[Commission Bancaire et Financière]
The Belgian Commission of Banking and Finance (the Belgian equivalent of the USA Securities and Exchange Commission).

puce Commitment

The obligation of the Limited Partner to invest a certain amount of capital in a Private Equity fund when the General Partner asks for it.
See also "Drawdown".

puce Common Stock

A unit of ownership of a corporation.
In the case of a public company, the stock is traded between investors on various exchanges.
Owners of common stock are typically entitled to vote on the selection of directors and other important events and in some cases receive dividends on their holdings. Investors who purchase common stock hope that the stock price will increase so the value of their investment will appreciate.
Common stock offers no performance guarantees.
Additionally, in the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred stock take precedence over the claims of those who own common stock.

puce Common Stock Equivalents

Debt or equity type securities which can be converted into or exchanged for common stock of a corporation.

puce Common Stock Ratio

A company's common stock expressed as a percentage of its total capitalization.

puce Compensation Committee

A committee of the board of directors responsible for reviewing and setting the compensation of certain executive officers of the company.
The compensation committee may also be responsible for the allocation of stock or options to employees.

puce Competent Authority

A term used within Directives produced by the European Commission to describe a body which has been designated by a member state of the European Union as being responsible for specified functions related to the securities market within the state.
Areas of competence include the recognition of firms permitted to offer investment services; the approval of prospectuses for public offerings; the recognition and surveillance of stock markets; etc.
See also Investment Services Directives and Prospectus Directive.

puce Compliance

The state of being in accordance, within the exercice of one's activities, with the rules and regulations of the supervisory authorities.
Most large financial services companies have a unit that makes sure that those rules and regulations are followed.

puce Confidentiality and Proprietary Rights Agreement

An agreement in which an employee, customer or vendor agrees not to disclose confidential information to any third party or to use it in any context other than that of company business.

puce Contributed Capital

Equals the portion of a capital initially raised by a Private Equity fund that has been drawn down.
See also Drawdown and Commitment.

puce Conversion

The act of exchanging one form of security for another security usually of the same company, i.e. preferred stock for common stock, debt securities for equity, etc.

puce Conversion Parity

The relationship between the price of a convertible security and that of the underlying security (basis value) into which it can be converted.
As an example, if a CHF 1'000 debt instrument is convertible into 50 shares of common stock, conversion parity occurs when the common stock price is at CHF 20.00 per share.

puce Conversion Premium

The currency or percentage amount by which the price of a convertible security exceeds the current market value of the common stock into which it is convertible.

puce Conversion Ratio

Indicates the number of underlying securities that can be acquired upon exchange of a convertible security.

puce Convertible

Adjective to qualify a security that can be exchanged for an other type of security (usually common shares) at the option of the holder, the issuer, or both.
Common examples include convertible bond and convertible preferred shares.

puce Convertible bond

puce Convertible Debt

A debt obligation of a company which can be exchanged for stock under certain circumstances.

puce Convertible Preferred Stock

Preferred stock convertible into common stock.

puce Copyrights

The exclusive right to make and dispose of copies of a literary, musical, or artistic work.

puce Correlation

A linear relationship between two variables.

puce Co-sale Agreement

See Tag Along Agreement.

puce Covenants

An agreement by a company to perform or to abstain from certain activities during a certain time period.
Covenants usually remain in force for the full duration of the time a private equity investor holds a stated amount of securities and may terminate on the occurence of a certain event such as a public offering.
Affirmative covenants define acts which a company must perform and may include payment of taxes, insurance, maintenance of corporate existence, etc.
Negative covenants define acts which the company must not perform and can include the prohibition of mergers, sale or purchase of assets, issuing of securities, etc.

puce Co-Venturing

Participation in a company of several investors where one of them assumes the role of Lead Investor.

puce Cram Down

Financial transaction where the entrepreneur must offer to investors a large amount of stock at a price below the last financing round (Down round).

puce Credit

A contractual agreement in which a borrower receives a product or a service and agrees to repay the lender at a specific later date.
Also, the borrowing capacity of an individual or company.

puce Cross-collateralization

A collateral for one loan or obligation serving also as collateral for other loans or obligations.

puce CTA

[Commodity Trading Adviser]
To see Managed future

puce Cumulative Dividend

Dividends which accumulate if not paid and which must be paid in full before other dividends are paid on the company's common stock ( Arrearage).

puce Cumulative Preferred Stock

A form of preferred stock which specifies that if one or more dividends is not paid, those dividends accumulate and must be paid in full before other dividends may be paid on the company's common stock.
See also Cumulative Dividend.

puce Cumulative Voting

Allows a shareholder to cumulate his votes based on the number of shares owned multiplied by the number od directors to be elected, and vote them all for one nominee.
The technique is intended to assure minority shareholder representation on the board of directors.





 

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