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You are Here : Home > Investor Education > Glossary

Glossary to investment terminology : C

 
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Capital Gain
A capital gain is an increase in the value of a capital asset. Stocks and other investments such as property are classified as capital assets. The gain is only realized after the asset is sold.

Capital Loss
This is a loss incurred when there is a decrease in the capital asset value as compared to its purchase price.

Capital Market
Refers to the sources from which long term capital is raised for the setting up of the sustained growth of companies. The stock exchange is a part of the capital market.

Capital Reserves
Capital Reserves comprise of a company's profits that are not normally distributed as cash dividends to shareholders. They can however be distributed as permanent share capital by way of bonus issues.

Capital Structure
The capital structure is how a company finances its overall operations and growth by using different sources of funds like long term debt, short term debt, common equity and preferred equity.

Central Depository and Settlement Corporation (See part 1)

Certificate (Share Certificate)
This is the physical document that shows ownership of a stock, bond or other security. However, after the introduction of the Central Depository System, paper certificates were rendered obsolete and through a process called immobilization, the movement of all paper certificates ceased.

Closing Date of Offer
This is the last date by which subscriptions for a new offering are accepted.

Closing Price
It is the final price at which a security is traded at the Nairobi Stock Exchange. By comparing the closing price of a stock on any given day to its previous closing price, one can be able to measure the market sentiment for the stock.

Code of Ethics
This is a document drafted by the Kenya Association of Stockbrokers and Investment Banks as a self regulatory guide to the manner by which the members do business with the investing public.

Collective Investment Schemes
Collective Investment Schemes are pools of funds from investors that are managed on their behalf by professional money managers who buy a wide range of securities e.g. shares according to the specific investment objectives of the scheme.

Mutual Fund
A mutual fund is an investment vehicle built with funds collected from many small investors that invests in stocks, bonds and other securities. An open-ended mutual fund is one which keeps accepting new investors and redeems the funds of those who wish to opt out, while a close-ended mutual fund has a fixed number of investors.

Unit Trust
This is a collective investment scheme that pools funds together from small investors by issuing units and is constituted under a trust deed. The funds are invested in a wide range of securities and are managed by a professional manager.

Consortium
This is a temporary alliance of two or more companies for the purposes of bidding for a large project. Their combined financial, technical and human resources gives them a competitive edge over the other bidders.

Contrarian Shares
These are shares that perform in a fashion contrary to the general stock market trend. They fall when the market is rising, and rise when the market is falling.

Controlling Interest
This is holding a sufficiently large number of shares in a company to enact changes (or control) in its policies. Ownership of 50% plus one of the equity shares in a company can give an individual or group the voting power to influence a company's decision. If the shareholding is dispersed among people who do not bother to vote (usually small shareholders), controlling interest of the company can be achieved with shareholding of a lot less than 50%

Convertible Security (Convertibles)
This refers to a range of securities (usually bonds) that are convertible into other securities of the issuer (usually ordinary shares) in accordance to the specified terms of the conversion.

Cooking the Books
This is falsifying the financial accounts of a company to give the impression of high profits to attract investors and to keep the shareholders happy.

Corporate Governance
Corporate Governance is the set of processes, laws, and institutions that guide the way by which businesses are regulated, operated and controlled. It also describes the ways by which rights and responsibilities are shared between the various participants, especially the management and the shareholders.

Corporate Social Responsibility (CSR)
Corporate social responsibility is a company's commitment to behave ethically and contribute to economic development while improving the quality of life of its workforce and their families as well as the environment and local community at large.

Corporation or Company
A form of business organization created under the Companies Act of Kenya, which has a legal identity separate from its owners. The owners of the corporation are the shareholders and they are liable for the debts of the corporation only up to the amount of their investment. This is called limited liability.

Correction
This is the term used to explain a decline in a market which is seen to be generally in an upward move. It is said that the market never goes straight up or straight down.

Coupon
This is the interest rate on a fixed income security e.g. bond, determined upon the issuance of the bond. Coupon also refers to the actual interest payment of the bond to the holder which is normally twice a year for government bonds.

Crash
A drastic and sharp drop in share prices within a short period of time.

Credit Rating
This is the process of ascertaining the creditworthiness of a company or financial institution. Credit rating is not a recommendation to buy or sell but is an objective and independent assessment of the company so as to create risk awareness among investors.

Cross Listing
This is when a company lists its shares in a different exchange than its primary and original stock exchange.

Cum Dividend
This means with dividend. The owner of shares bought cum dividend is entitled to receive an upcoming already declared dividend.

Cum Rights
The buyer of a cum-rights share is entitled to subscribe to the forthcoming rights issue announced by the company.

Custodian
This is a financial institution with the legal responsibilities and mandate to manage and safe-keep a customer's securities.

Cyclical Shares (Cyclical Stock)
Cyclical Shares are the shares of a company which is particularly sensitive to changes in the economic conditions. Such shares will rise and fall in price depending on various factors like the state of the national economy e.g. cement, the international economy e.g. tourism or even natural phenomena e.g. floods.