GLOSSARY C - D

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Capital Budget

A firm's set of planned capital expenditures.

Capital Expenditures

Amount used during a particular period to acquire or improve long-term assets such as property, plant or equipment.

Capital Gain

When a stock is sold for a profit, it's the difference between the net sales price of securities and their net cost, or original basis. If a stock is sold below cost, the difference is a capital loss.

Capital Lease

A lease obligation capitalized on the balance sheet.

Capital Loss

The term refers to the difference between the net cost of a security and the net sale price, if the security is sold at a loss.

Capital Structure

The makeup of the liabilities and stockholders' equity side of the balance sheet, especially the ratio of debt to equity and the mixture of short and long maturities.

Capitalization

The debt and/or equity mix funding a firm's assets.

Capitalization Rate (or Cap Rate)

A measure of the return generated by a property investment. The capitalization rate (or "cap" rate) for a property is determined by dividing the property's net operating income by its purchase price.

Capitalized

Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives greater than one year.

Cash

The term refers to the value of assets convertible into cash immediately. Usually includes bank accounts and marketable securities.

Cash (or Funds) Available for Distribution

Cash (or Funds) available for distribution (CAD or FAD) is a measure of a REIT's ability to generate cash and to distribute dividends to its shareholders. In addition to subtracting from FFO normalized recurring real estate-related expenditures and other non-cash items to obtain AFFO, CAD (or FAD) is usually derived by also subtracting nonrecurring expenditures.

Cash Budget

forecasted summary of a firm's expected cash inflows and cash outflows as well as its expected cash and loan balances.

Cash Equivalent

The term refers to a short-term security sufficiently liquid it may be considered the financial equivalent of cash.

Cash Flow

Earnings before depreciation, amortization and non-cash charges. Cash flow from operations (called Funds from Operations (FFO)) by real estate and other investment trusts is important because it indicates the ability to pay dividends.

Cash Flow Coverage Ratio

The number of times financial obligations (for interest, principal payments, preferred stock dividends, and rental payments) are covered by earnings before interest, taxes, rental payments, and depreciation.

Cash Flow from Operations

Firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus non-cash expenses deducted in calculating net income.

Collateral

Assets than can be repossessed if a borrower defaults.

Commission

The fee paid to a broker to execute a trade, based on number of shares, bonds, options, and/or their dollar value.

Common Stock

The term refers to securities representing equity ownership in an entity. Common shares often have voting rights and/or give the holder a share in a company's profits via dividend payments or the capital appreciation of the security.

Common Stock Ratios

Ratios designed to measure the relative claims of stockholders to earnings (cash flow per share), and equity (book value per share) of a firm.

Cost of Capital

The cost to a company of raising capital in the form of equity (common or preferred stock) or debt. The cost of equity capital generally is considered to include both the dividend rate, as well as, the expected equity growth either by higher dividends or growth in stock prices. The cost of debt capital is merely the interest expense on the debt incurred.

Coverage Ratios

Ratios used to test the adequacy of cash flows generated through earnings for purposes of meeting debt and lease obligations, including the interest coverage ratio and the fixed charge coverage ratio.

Current Ratio

Determined by dividing current assets by current liabilities. The ratio is a good indicator of an entity’s ability to pay its short-term debt. The higher the ratio, the more liquid the company.

Custodial Fees

Fees charged by an institution holding securities in safekeeping for an investor.

Debt Ratio

Total debt divided by total assets.

Debt to Equity Ratio

Determined by dividing long-term debt by common stockholder equity. The ratio is a good indicator of an entity’s financial leverage. Compares assets provided by creditors to assets provided by shareholders.

Declaration Date

The date on which a Trust’s Trustees meet and announce the date and amount of the next dividend.

Depreciate

To allocate the purchase cost of an asset over its life.

Depreciation

An annual charge taken to reduce the value of a property due to age, obsolescence, etc. Depreciation is a non-cash expense reducing taxable income but not cash flow.

Dilutive Effect

Result of a transaction decreasing earnings per common share.

Discounted Cash Flow (DCF)

Future cash flows multiplied by discount factors to obtain present values.

Distribution Reinvestment Program (DRP)

A program enabling existing Unit-holders to automatically reinvest their distributions towards the purchase of common shares.

Distribution Yield

The annualized per unit distribution expressed as a percentage of the unit price.

Distributions

Payments from cash flow, including dividends from earnings, capital gains from sale of portfolio holdings and return of capital.

Diversification

Dividing investment funds among a variety of securities with different risk, reward, and correlation statistics so as to minimize unsystematic risk.

Dividend

A dividend is a portion of a company's profit paid to common shareholders. For example, a stock selling for $20 a share with an annual dividend of $1 a share yields the investor 5%.

Dividend Coverage

Funds from Operation (FFO) divided by dividends paid to shareholders and unit holders.

Dividend Payout Ratio

Percentage of earnings paid out as dividends.

Dividend Rate

The fixed or floating rate paid on preferred stock based on par value.

Dividend Reinvestment Plan (DRP)

A program enabling existing shareholders to automatically reinvest their dividends towards the purchase of more common shares. Some plans provide for the purchase of additional shares at a discount to market price. Dividend reinvestment plans allow shareholders to accumulate stock over the long-term using dollar cost averaging. The DRP is usually administered by the company without charges to the holder.

Dividend Rights

A shareholders' rights to receive per-share dividends identical to those other shareholders receive.

Dividend Yield

Indicated yield represents annual dividends divided by current stock price.

Dividends per Share

Dividends paid for the past 12 months divided by the number of common shares outstanding, as reported by a company. The number of shares often is determined by a weighted average of shares outstanding over the reporting term.

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