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Calendar Spread:
buying two options of the same security with different maturity dates. If the EXERCISE PRICE is the same it is a horizontal option: if the exercise prices are different, it is a diagonal spread.
Call A notice for payment:
Call A notice for payment of an installment or the entire unpaid sum of a partly paid share. It also means a demand by a brokerage firm to a client for a partial payment of the client's debt or deposit further securities because the value of securities he had given as a collateral has fallen.
Call Money:
- Money which is loaned, in the call market, which can be demanded for repayment on call i.e., immediately. Also known as money at short notice, also traded in the money market, is repayable in 24 hours.
- Price paid for buying a call option. See OPTION.
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Call Option:
Call Option The right to buy a fixed number of sharesat a particular priced within a fixed period, in exchange for a premium. See also, NAKED OPTION PUT OPTION.
Call Premium:
The price of buying a call option
Call Price:
The price at which the issuer of a call agreement can redeem the agreement; also known as the redemption price. The issuer of the call has to compensate the holder for loss of income.
Call-of More Option:
Call-of More Option Option to double, in which the buyer of a call option has the right to buy double the quantity of securities for which the option has been bought. See PUT-OF-MORE OPTION, and OPTIONS TRADING.
Called-Up:
Capital When shares are issued by a company, it may not require the shareholders to pay the full value of the shares, but reserve a certain portion for future needs so that part of the share capital may not lie unused.
Called-up capital:
Called-up capital is that portion of the share's full value which the company has collected. However,in the event of the company winding up before the shares are fully paid, investors may be required to pay up the uncalled portion.
Capacity Utilization:
When plants and machinery are installed they have a rated capacity, i.e., under optimum utilization they can produce a certain quantity of goods, working a single shift. The rate of utilization of that capacity is expressed in percentage. The nature of demand for the company's product often regulates capacity utilization. Sometimes, owing to a glut of a commodity in the market, e.g. fertilizers, the government to a gult of a commodity in the market , e.g. fertilizers, the government regulates capacity utilization. When there are no such controls, a low capacity utilization is generally bad news for the company. Under conditions of a seller's market, a company may achieve morethan 100% capacity utilization, by working more than one shift.
Capital:
The money with which a company runs its business is its capital obtained in two ways: by issuing shares, and by borrowing. The maximum amount of capital that a company is allowed to raise is its authorized capital, out of whichthe maximum it can raise by selling shares is its share capital. The company may choose to raise the entire share capital in the first instance, or it may choose to raise part of it. The number of sharesthat a company choose to sell is its issued capital, all or part of which may be subscribed by shareholders. It then becomes subscribed capital, which is also called paid-up capital.
Capital Budget:
Programme for making financial provision for expenditure on long-term outlays such as expansion of plant capacity, research, human development, etc.
Capital Flight:
Movement of large sums of money from one country to another, or within a country from one state to another,to find a more congenial investment climate. The flight may take place because of political uncertainty, high inflation, labour unrest, military dictatorship, or violence in general.Capital Gain| Profit arising out of the sale or transfer of an asset. Shares in companies, if these have been held for over a year, qualify for long-term capital gains charged at a flat rate of 20% of the gains, reduced by the indexed cost of acquisition . For any ither asset, to qualify for long-term capital gains it must be heldfor over three years. Short-term capital gains for shares arise out of holdings for less than a year, and in the case of other assets, less than three years. Such short-term gains are regarded as current income and taxed according to the income slab into which they fall. See COST INFLATION INDEX.
Capital Account:
The account in a country's trading which shows themovement of capital in and out of the country in the form of international loans, overseas investments, etc. When one speaks of the full convertibility of the rupee on the capital account one is referring to this aspect of movement of foreign exchange.
Capital Adequency Norms:
The SEBI promulgated these norms in October 1993 to check excessive specualtion by brokers in the country's stock exchanges and directed the stock exchange authorities to amend their by laws and enforce the norms. These norms require the Bombay and Calcutta brokers to maintain a minimum deposit of Rs 5 lakh with the exchange authorities, the minimum for other exchanges being Rs 3.5 lakh for Delhi and Ahmedabad, and Rs 2 lakh for others. In addition to this , if any broker's business should at any point be such that the base minimum deposite fell below 8% of the total outstanding business done, the brokerwould be required to increase the amount of deposit.
Capital Appreciation:
Increase in the capital value ofshares as their price increases over a period- the most important reason for investing in shares.Historically, the price of shares has always moved upwards, barring periodic CORRECTIONS.
Capital Asset:
See ASSET.
Capital Asset Pricing Model:
This seeks to establish the relationship between expected risk and expected return, the assumption being that investors expect higher return for higher risks. In such cases the return should be equal to risk-free return plus a risk premium.
Capital Employmed:
NET ASSETS used in a business to make profits.
Capital Expenditure:
Expenditure on acquiring fixed, rather than liquid (i.e., meant for resale) assets.
Capital Gains:
See CAPITAL GAIN.
Capital Gearing:
The ratio of fixed interest loan and preference shares to the ordinary share capital of a company. A company in which the ordinary share capital is greater than its loan funds is called low-geared, While the opposite kind is called high-geared. The ordinary shares of a company are called equity; hence capital gearing is also known as equity gearing. See LEVERAGE.
Capital Growth:
An increase in the value of investment. Fixed interest deposit of any kind offer little or no growth of the investment, although they may offer satisfactory income. Equity shares offer the promise of substantial growth if investment, particualrly when inflation is high. At such times fixed interest securities erode the value of the original investment, as the value of money falls(see AppendixE). Also, as the companies one has invested in improve their performance ( carefully chosen companies do) there is a simultaneous rise in the dividend income and share prices.
Capital Issue:
The issue of shares by a company, whether nw issue or premium issue or rights issue.
Capital Loss:
Loss incurred when investments are sold at a price lower than their purchase price. In the case of shares, if the sale is within a year of the purchase, it is a short-term capital loss; if it is after a year long-term capital loss is sustained. In Income Tax returns long-term capital losses can only be set off against long-term CAPITAL GAINS, whereas short-term capital losses can be set off against short-term capital gains or against current income from other sources.
Capital Market:
A fortnightly magazine on the share market scene in the country. A particularly useful feature of this magazine is the detailed scrutiny of forthcoming new issues with ratings given on a hundered point scale. Another regular feature is a share price analysis of and buy and sell recommendations on the important companies in nearly ninety industry groups. From time to time it publishes surveys of different industries in the stock market context. Technical analysis of certain share prices, examination of half-yearly results, information on allotments or new issues, dates of book closure, dividend announcements, and market movements are other regular features. Published alternate Fridays from 11th Floor, 115 Jolly Market Chambers, Nariman Point, Bombay 400021. Available at newsstands. An important financial journal for making buying decisions from the primary or secondry market.
Capital Market:
Sources from which long-term capital is raised for the setting up and sustained growth of companies. The stock exchange is a part of the capital market, not only because it helps investors to trade in new or existing ventures, but also because it helps investorsto tradein their shares and maintains the liquidity if investments. Investmentinfurther public and rights issues, convertible and non-convertible debentures, therefore, becomes an attractive proposition and companies are able to raise the resources they need. The capital market is distinct from money market- banks and lending institutions - which provide short-term finance.
Capital Redemption Reserve Fund:
When a company redeems its preference shares the nominal value of the shares is put in this fund, which becomes part of the paid up capital of the country. with no obligation to pay dividend, although the fund can be used towards issuing bonus shares.
Capital Reserves:
These arise out of undistributed profits of a compan, i.e., not distirbuted as dividend to shareholders. These reserves include profits on revaluation of capital assets and share premium ( which is shown in a separate share premium account). Capital reserves are undistributable as dividends, but can be converted into permanent share capital by way of bonus issues.
Capital- Intensive:
A project that requires large investments in capital assets, especially machinery and equipment. Automobiles, oil refineries, and steel production are capital intensive and may keep the investor waiting for rewards, unless these make a high profit within a short time or keep the cost of borrowing low. Capital-intensive may also mean a high proportion of fixed assets to labour or raw materials.
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