GlossaryG–4
cash position management The
primary cash management tasks
that are performed daily and involve
the collection, concentration, and
disbursement of company funds.
cash rate The interest rate that
Australian banks charge each other
for overnight loans.
cash receipts All of a company’s cash
inflows in a given period.
cash settlement An agreement between
two parties, in which one party pays
the other party the cash value of its
option position, rather than forcing
it to exercise the option by buying or
selling the underlying asset.
certification Assurance that the issuing
company is in fact disclosing all
material information.
chief executive officer (CEO) The
top company manager with overall
responsibility and authority for
managing daily company affairs and
carrying out policies established by
the board.
chief financial officer (CFO) To p
management position charged with
developing financial policies and
strategies covering all aspects of a
company’s financial management and
accounting activities.
Chi-X Australia The stock exchange
established in 2011 for trading
Australia company shares. It now
trades all companies also listed on
the ASX.
clearing float The time between
deposit of the cheque and
presentation of the cheque back to
the bank on which it is drawn.
Clearing House Electronic Sub-
register System (CHESS) The
computer-based settlement and
transfer system used by the ASX to
finalise trades in shares and their
payments.
closing futures price The price used
to settle all contracts at the end ofeach day’s trading. Also called the
settlement price or settle price.
collateral The specific assets pledged
to secure a loan.
collateral trust bond A bond secured
by financial assets held by a trustee.
collection policy The procedures used
by a company to collect overdue or
delinquent accounts receivable. The
approach used is often a function
of the industry and the competitive
environment.
collective action problem When
individual shareholders bear all the
costs of monitoring management,
but the benefit of such monitoring
accrues to all shareholders.
common stocks Common stocks
are the US equivalent of Australian
ordinary shares. Common stocks are
usually considered to be a separate
asset class, but they are a form of
equity investment, so may be classed
as equities.
common-size income statement An
income statement in which all entries
are expressed as a percentage of
sales.
company A legal entity, owned by the
shareholders who hold its ordinary
shares, with many of the economic
rights and responsibilities enjoyed by
individuals.
comparable multiples method A
valuation method that calculates a
valuation ratio or multiple for each
company in a sample of similar
companies, and then uses the average
or median pricing multiple for the
sample companies to estimate a
particular company’s value.
compound interest Interest earned both
on the initial principal and on the
interest earned in previous periods.
conglomerate merger Unrelated
diversification mergers that occur
between companies in completely
different lines of business.conservative strategy Financing
strategy in which a company makes
sure that it has enough long-term
financing to cover its permanent
investments in fixed and current
assets as well as the additional
seasonal investments in current assets
that it makes during the various
quarters each year.
consolidation A merger in which both
the acquirer and target disappear as
separate corporations, combining to
form an entirely new corporation with
new ordinary shares.
constant dollar payment
policy Dividend policy based on the
payment of a fixed-dollar dividend in
each period.
constant payout ratio policy Dividend
policy in which a company establishes
that a certain percentage of earnings is
paid to owners in each dividend period.
constitution The legal document
created at the company’s inception to
govern its operations.
continuous compounding Interest
compounds literally at every moment
as time passes.
contribution margin The sale price per
unit (SP) minus variable cost per unit
(VC).
controlled disbursement A bank
service that provides early notification
of cheques that will be presented
against a company’s account on a
given day.
conversion premium The percentage
increase in the underlying shares that
must occur before it is profitable to
exercise the option to convert a bond
into shares.
conversion price The market price of
a convertible bond, divided by the
number of shares that bondholders
receive if they convert.
conversion ratio The number of shares
bondholders receive if they convert
their bonds into shares.