Finance Words Starting with C

Capital

Capital is a foundational term in finance. It represents the financial resources available to a business or individual, typically used for investment or to start and operate a business. It can include cash, assets like equipment or property, or even intellectual property. The amount and type of capital available significantly impact a company’s growth potential and overall financial health. Different types of capital exist, such as equity capital (ownership stake) and debt capital (borrowed funds).

Cash Flow

Cash flow refers to the movement of money in and out of a business or project. It’s a vital metric for assessing a company’s liquidity and its ability to meet its short-term obligations. Positive cash flow indicates more money is coming in than going out, while negative cash flow signals the opposite. Analyzing cash flow statements helps investors and creditors understand how well a company is managing its finances and generating enough cash to cover expenses, pay dividends, and invest in future growth.

Collateral

Collateral is an asset pledged as security for a loan. If the borrower defaults on the loan, the lender has the right to seize and sell the collateral to recover their losses. Common examples include real estate, vehicles, or valuable equipment. Providing collateral reduces the risk for lenders, often resulting in lower interest rates or more favorable loan terms for the borrower.

Credit

Credit represents an agreement where a borrower receives something of value (typically money) with the understanding that it will be repaid at a later date, usually with interest. Credit can take many forms, including loans, credit cards, and lines of credit. Access to credit is crucial for individuals and businesses to finance purchases, investments, and day-to-day operations. A good credit score is essential for obtaining favorable terms on loans and other financial products.

Currency

Currency is a medium of exchange for goods and services in a particular country or economic region. It’s the form of money used in transactions. Different countries have different currencies, such as the US dollar (USD), the Euro (EUR), and the Japanese Yen (JPY). Currency exchange rates fluctuate based on various economic factors, influencing international trade and investment.

Compound Interest

Compound interest is often called the “eighth wonder of the world” due to its power to generate wealth over time. It’s interest earned not only on the principal amount but also on the accumulated interest from previous periods. This creates a snowball effect, where earnings grow exponentially over time. Understanding compound interest is crucial for making informed investment decisions and maximizing long-term returns.

Capital Gains

Capital gains refer to the profit earned from selling an asset, such as stocks, bonds, or real estate, for a higher price than its original purchase price. Capital gains are subject to taxes, with the tax rate often depending on how long the asset was held (short-term vs. long-term capital gains). Managing capital gains taxes is an important aspect of investment planning.

Cost of Goods Sold (COGS)

Cost of Goods Sold (COGS) represents the direct costs associated with producing the goods or services that a company sells. It includes the cost of raw materials, labor, and other direct expenses. COGS is an important component in calculating a company’s gross profit, which is revenue minus COGS. Analyzing COGS helps assess the profitability of a company’s products or services.