Glossary of Investment Terms

Capacity at Peak (Electric Utility Industries)—a utility's generating capability plus purchases from other utilities less sales to other utilities.

Capacity Utilization—the ratio of actual production levels to maximum possible production levels, expressed as a percentage. The Federal Reserve Board publishes capacity utilization figures monthly for both the overall economy and individual industries.

Capital Funds (REIT Industry)—stockholders' equity (net worth) plus subordinated debt.

Capital Gains Per Share After Tax (Real Estate Industry)—profits derived net of income taxes on the sale of property (either land or buildings) during the year, expressed in terms of the number of common shares outstanding at year end.

Capital Spending Per Share—the outlays for plant and equipment for the year expressed on a per-share basis. Excludes funds spent for acquisitions.

Capital Structure—a balance sheet item defined by Value Line as the total of a company's long-term debt, preferred stock at liquidation or redemption value, and its shareholders' equity.

Capitalization—see Market Capitalization.

Cash Assets—the sum of cash on hand plus short-term securities, such as Treasury bills, that can readily be converted into cash.

"Cash Flow"—the total of net income plus non-cash charges (depreciation, amortization, and depletion) minus preferred dividends (if any). See Free Cash Flow.

"Cash Flow" Line—also known as the "Value Line." See page 17 for more information.

Cash Flow Per Share—net profit plus non cash charges (depreciation, depletion, and amortization), less preferred dividends (if any), divided by common shares outstanding at year end.

CD—abbreviation for Certificate of Deposit. See also Time Deposits.

Certificate of Deposit—see Time Deposits.

Closed-End Investment Company (or Fund)—a company or fund that has a relatively fixed number of shares (hence the term ''closed-end'') that are bought or sold through broker/dealers on the stock exchange. In contrast, an open-end (or mutual) fund stands ready (continually) to redeem shares for cash or issue new shares for cash and, hence, deals directly with its investors.

Combined Ratio (Insurance Property/Casualty/Industry)—the percentage of losses to premiums earned plus the percentage of expenses to premiums written. The break even point is 100%; in other words, a combined ratio of less than 100% represents an underwriting profit and a combined ratio of more than 100% represents an underwriting loss.

Common Equity Ratio—shareholder's equity divided by total capital (i.e., long-term debt, preferred equity, and common equity).

Common Shares Outstanding—the number of shares of common stock actually outstanding at the end of a company's accounting year. This total excludes any shares held in the company's treasury. The figures for common shares outstanding in previous years are fully adjusted for all subsequent stock splits and stock dividends.

Common Stock to Surplus (Insurance Industries)—the market value of the common stock held in the insurance company's investment portfolio divided by statutory net worth.

Compound Growth—the annual rate of growth of an investment when dividends or interest are reinvested.

Consumer Price Index—a Labor Department index published monthly designed to reflect changes in the cost of living. Housing; food and beverage; and transportation costs account for about 80% of the value of the index, a measure of inflation at the consumer level.

Conversion Price—the effective price paid for common stock when the stock is obtained by converting either convertible preferred stock or convertible bonds or debentures. For example, if a $1,000 bond is convertible into 20 shares of stock, the conversion price is $50, that is, $1,000 divided by 20.

Convertible Debentures—long-term debt instruments, not secured with collateral, that may be converted into a specified number of shares of common stock.

Convertible Preferred Stock—preferred stock that may be converted into a specified number of shares of common stock.

Corporate Profits—the aggregate of all profits for U.S. corporations reported by the Commerce Department as part of the domestic income and product (GDP) accounts. Reported both on a pretax and aftertax basis. They are somewhat different from profits reported to shareholders and profits reported for tax purposes.

Current Assets—assets that may reasonably be expected to be converted into cash, sold, or consumed during the normal operating cycle of a business, usually 12 months or less. Current assets usually include cash, receivables, and inventories.

Current Liabilities—financial obligations that will have to be satisfied within the next 12 months. Current liabilities include accounts payable, taxes, wage accruals, and total short-term debt, or Debt Due (the sum of notes payable and the portion of long-term debt maturing in the operating year).

Current Position—the components of a company's working capital are presented in this table in Value Line reports on industrial companies. The difference between current assets and current liabilities is known as Working Capital.

Current Ratio—the sum of current assets divided by the sum of current liabilities.

Cyclical Stock—stocks of companies whose earnings tend to fluctuate with the economy (the opposite of a growth stock, which is defined below).