628 Glossary
C+, C++:Programming languages used in the 1990s to program many personal com-
puter and UNIX based applications.
Call option:An asset which gives the owner the right but not the obligation to pur-
chase some other asset for a set price on or up to a specified date.
Capital asset pricing model (CAPM):A model in which the cost of capital for any
security or portfolio of securities equals a risk-free rate plus a risk premium that is
proportionate to the systematic risk of the security or portfolio.
Capital loss carryover:The excess of capital losses over capital gains that may not
be deducted currently but may be carried for ward and set off against future capital
gains.
Capital structure:The composition of the invested capital of a business enter-
prise; the mix of debt and equity financing.
Capitalization: The conversion of a single period stream of benefits into value.
Capitalization factor:Any multiple or divisor used to convert anticipated benefits
into value.
Capitalization rate: Any divisor (usually expressed as a percentage) used to con-
vert anticipated benefits into value.
Cash f low:Cash that is generated over a period of time by an asset, group of assets,
or business enterprise. It may be used in a general sense to encompass various levels
of specifically defined cash f lows. When the term is used, it should be supplemented
by a qualifier (e.g., “discretionary” or “operating”) and a definition of exactly what it
means in the given valuation context.
Cash settled:A future contract that does not require delivery of the underlying
asset upon expiration. Instead of actual delivery, the contract is marked to market, so
that one party is compensated in cash by the other for the change in the underlying
asset price.
CD:A compact disk, which stores roughly 700,000,000 bytes (700 megabytes) of
data in digital format. CDs used in computers and in stereos are identical. A music
CD has the capacity to store roughly one hour of sound.
Changes in accounting estimates:Estimates are essential to the implementation
of accrual accounting. A typical example would the estimates of useful lives and sal-
vage values that are necessary in computing depreciation. Changes in either useful
lives or salvage values would represent changes in accounting estimates.
Changes in accounting principles:A change in the accounting treatment ap-
plied to a particular area of accounting. The most common examples would be dis-
cretionary changes in inventory and depreciation accounting. A firm might change
from the LIFO to the FIFO inventory method or from the accelerated to straight-
line method of computing depreciation. Most accounting changes are not discre-
tionary but rather are the result of the mandatory adoption of new accounting
standards.
Charges:Commonly used in accounting in referring to expenses and losses.
COBOL:A programming language used prior to the early 1990s to program most
business applications.
Comfort letter:Communication from the independent auditor to the underwriter,
at the time of registration of securities, which includes information about the audi-
tor ’s role, auditor ’s independence, compliance of the financial statements with the