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	CAC 40 The CAC 40 is the official equity market benchmark of France that tracks a sample of Blue Chip stocks, whose performance is closely correlated to that of the market as a whole. The index contains the largest 40 stocks by market capitalization. The base value is 1,000 as at December 31, 1987. CAGR See Compound Annual Growth Rate. CALENDAR SPREAD An option strategy involving the simultaneous purchase and sale of two options on the same security (either call or put), with the same strike price but with different expiry dates. CALL An option contract that entitles the holder (purchaser), the right, but not the obligation, to purchase a specified quantity of securities from the writer (seller) at a specified price (i.e. strike or exercise price) up to a specified date (i.e. strike or expiry date). Also called a call option. CALL DATE The date, prior to maturity, when the issuer can redeem a callable bond. CALL OPTION See Call. CALL PRICE The price at which the issuer can redeem a callable bond or preferred share. CALL PROTECTION A feature on some callable bonds prohibiting the issuer from redeeming a callable bond within a specified initial period, usually 2 or 3 years. CALL RISK The cash flow risk to a holder of a callable bond that the bond may be redeemed prior to maturity. CALLABLE Bonds or preferred shares that give the issuer an option to purchase, or redeem, the securities at a specified price on or after a specified date. The issuer must usually pay the holder a premium if the security is redeemed. CALLABLE BOND A bond where the issuer has the right to redeem prior to its maturity date for the call price, under certain conditions. CANADA BILL A promissory note denominated in U.S. dollars. Canada bills mature not more than 270 days from their date of issue and are discount obligations with a minimum order size of US$1,000,000 and a minimum denomination of US$1,000. Primary distribution occurs through a number of specified issuing agents, and rates on Canada bills are posted daily. Participants in this market usually include U.S., Canadian and international financial institutions. CANADA CUSTOMS AND REVENUE AGENCY (CCRA): On November 1, 1999, Revenue Canada became the Canada Customs and Revenue Agency (CCRA). CCRA’s mission is to promote compliance with Canada's tax, trade, and border legislation and regulations through communication, quality service, and responsible enforcement, thereby contributing to the economic and social well being of Canadians. CANADA DEPOSIT INSURANCE CORPORATION (CDIC): A federal Crown Corporation that was established to protect Canadian currency deposits against the possible failure of CDIC member financial institutions. As a general rule, eligible deposits are protected up to a maximum of $60,000 per person, including principal and interest, at each member institution. CANADA NOTE A promissory note usually denominated in U.S. dollars and available in book-entry form. Notes can be issued for terms of nine months or longer, and can be issued at either a fixed or a floating rate. Canada notes are issued for foreign exchange reserve funding purposes only. CANADA PENSION PLAN (CPP) A contributory, earnings-related social insurance program that ensures a measure of income protection to contributors and their families against the loss of income due to retirement, disability or death. The plan operates throughout Canada except in the province of Quebec, where a similar program - the Quebec Pension Plan - is in effect. CPP contributions and benefits are not part of the federal government's revenues or expenditures and therefore do not directly affect the federal government's budget. CANADA PREMIUM BOND (CPB) A new savings product for individual Canadians, introduced by the Government of Canada in 1998. It offers a higher interest rate compared to the Canada Savings Bond and is redeemable once a year on the anniversary of the issue date or during the 30 days thereafter without penalty. CANADA SAVINGS BOND (CSB) CSBs are currently offered for sale by most Canadian financial institutions to individual Canadians. CSBs pay a competitive rate of interest that is guaranteed for one or more years. They may be cashed at any time and, after the first three months, pay interest up to the end of the month prior to being cashed out. CANADIAN INVESTOR PROTECTION FUND (CIPF) A fund set up by the stock exchanges and the Investment Dealers Association to protect investors from losses resulting from the bankruptcy of a member firm. CANADIAN ORIGINATED PREFERRED SECURITIES (COPRS) Introduced to the Canadian market in March 1999, as long-term junior subordinated debt instruments. This type of security offers features that resemble both long-term corporate bonds and preferred shares. CANADIAN PAYMENTS ASSOCIATION (CPA) A not-for-profit association established through legislation in 1980 to operate national systems for the clearing and settlement of payment items between financial institutions. To maintain the efficiency, safety and soundness of the Canadian payments system the CPA takes into account the interest of all users. It also administers the frame work of rules, standards and procedures for the exchange, clearing and settlement of cheques, pre-authorized debits, direct deposit payments, wire transfers and other payment items. The CPA’s membership includes chartered banks, trust and loan companies, credit union centrals and federations of caisses populaires, and other deposittaking financial institutions. The Canadian Payments Act, passed by Parliament in June 2001, extended eligibility for CPA membership to life insurance companies, securities dealers and money market mutual funds. CANADIAN SECURITIES ADMINISTRATORS (CSA) An association that is comprised of the securities administrators of each province that meets regularly to discuss regulatory issues of national importance as well as to coordinate the implementation of national policies. CANADIAN SECURITIES COURSE (CSC) Offered exclusively through the Canadian Securities Institute, the Canadian Securities Course and the Conduct and Practices Handbook Course are requirements to be licensed to sell securities. The person must also be registered with their appropriate Provincial Securities Commission. CANADIAN VENTURE EXCHANGE (CDNX) This is the exchange that resulted from the merger of the Vancouver and Alberta stock exchanges in 1999. CANDLESTICK CHARTS They are the oldest type of charts used for price prediction, dating to rice markets in Japan in the 1700’s. It is a technical analysis charting method that displays the open, high, low and close price of a security in a bar-like format. The top of the bar represents the open or close price, depending on which is higher. The bottom of the bar represents the open or close price, depending on which is lower. One line extends from the top of the bar plotting the highest price and another extends below the bottom of the bar plotting the lowest price. The center bar is filled in if the close price is below the open, and left unfilled otherwise. Each candlestick represents one period of data. CAP (1)  An abbreviation for capitalization. (2) The highest interest rate that can be paid on a floating-rate bond or charged on a variable rate mortgage. CAPACITY UTILIZATION RATE The percentage of a company’s, industry’s or country’s production capacity that has been used over a specified period of time. CAPITAL The value of total assets, less current liabilities, which contribute to generating income for a company. CAPITAL ACCOUNT Part of the balance of payments that records a nation’s inflow and outflow of financial instruments. CAPITAL APPRECIATION An increase in the market price of an asset. CAPITAL ASSETS Tangible items used in the operation of a business but not consumed in the course of those operations. Capital assets generally have a long life and are also known as "fixed assets". Some examples of capital assets are a company's buildings or the machinery with which a product is made. CAPITAL ASSET PRICING MODEL (CAPM) Introduced by William Sharpe in 1964, CAPM is an economic model for valuing stocks by relating risk and expected return. CAPM assumes that the value of a stock is based on the risk-free rate (such as the rate on a T-bill) plus a risk premium. The model assumes that there are no transaction costs or taxes, investors’ time horizons are identical, the cost of borrowing and savings are the same, and investors have identical perceptions on expected return and risk. CAPITAL COST ALLOWANCE (CCA) A tax deduction for business-related capital property that provides for the depreciation of these assets. Businesses can deduct a fixed percentage of the depreciated cost each year. There are approximately 40 CCA classes described in the regulations to the Income Tax Act. The CCA rate applicable to each class is usually intended to reflect the economic life of the assets of that class. CAPITAL CONSUMPTION ALLOWANCE The percentage of GDP that arises from depreciation. GDP less capital consumption allowance equals net national product. CAPITAL EXPENDITURE Money spent by a company to purchase or upgrade physical assets such as plants, buildings and equipment. Also called capital spending or capex. CAPITAL GAINS An increase in the money value of a capital asset such as a share, bond, parcel of land, antique or other asset, which results in a profit if the asset is sold. If a share is bought at $26 and sold at $30, there is a capital gain of $4. Capital gains are generally taxable. CAPITAL GAIN EXEMPTION An exemption from tax arising from a capital gain on qualified small business and farm property as defined by Canada Customs and Revenue Agency. CAPITAL GAINS TAX Income tax applied to taxable capital gains. Currently taxable capital gains are 50% of capital gains arising from the sale or disposition of a capital asset. CAPITAL LEASE A lease that must be reflected on the company’s balance sheet, including the property as a fixed asset and the present value of the lease payments as a long-term liability. A lease will be classified as a capital lease, as opposed to an operating lease, if it meets one or more of the following conditions: the lease term is for at least 75% of property’s estimated economic life; the lease includes an option to purchase the property for less than its fair market value; ownership is transferred to the lessee at the end of the lease term; or the present value of the lease payments are at least 90% of the property’s fair market value. CAPITAL LOSS A loss arising from the sale or deemed disposition of a capital asset. Capital losses are calculated as: proceeds of disposition, less outlays and expenses on disposition, less adjusted cost base (original cost plus expenses to acquire it, such as commissions and legal fees). Capital losses can be applied against taxable capital gains in the current year, carried back three years and/or carried forward indefinitely. CAPITAL MARKET A market where equity and debt securities are traded. CAPITAL PROPERTY Assets usually purchased for investment purposes or to earn income, which would result in a capital gain or capital loss if sold or deemed to be sold. Capital property includes: stocks, bonds, investment /mutual funds, property used in a business or for rental purposes, cottages, depreciable assets, artwork and antiques. CAPITAL STOCK All classes of common and preferred shares of a company. CAPITAL STRUCTURE A company’s long-term financing structure that includes long-term debt, common shares, preferred shares and retained earnings. Current liabilities are not included in a company’s capital structure. CAPITAL TAX The federal government taxes the capital of all large corporations (large corporations tax) and large financial institutions (financial institutions capital tax). The financial institutions capital tax acts as a minimum tax and ensures that large financial institutions pay tax every year. All provinces levy capital taxes on financial institutions and seven provinces levy a capital tax on other corporations. Provinces rely more heavily on corporate capital taxes than the federal government. CAPITALIZATION (1) The total value of a company’s common shares, preferred shares and long-term debt. Also called invested capital. (2) The total value of a company calculated by multiplying the current price per share by the number of shares outstanding. Also called market capitalization or market cap. CAPITALIZATION RATE The discount rate, or interest rate, used to calculate the present value of future earnings. CAPITALIZATION RATIOS The percentage of a company’s total capitalization that each of common stock, preferred stock, longterm debt and retained earnings represents. CAPITALIZATION WEIGHTED INDEX See Market Value Weighted Index. CAPITULATION The point at which investors sell because they cannot stand any further losses. When the market capitulates, everyone surrenders at once and there is a mad, frenzied rush to exit every position as fast as possible. CAPM See Capital Asset Pricing Model. CASH Currency and coins, available bank balances and negotiable cheques. CASH BASIS ACCOUNTING An accounting method that records revenues and expenses when received or paid. As opposed to the more commonly used accrual accounting which records revenues and expenses when earned or incurred. CASH CYCLE The time it takes from the purchase of inventory through to collection of accounts receivable from the sale of goods. CASH EQUIVALENT Highly liquid, safe investments that can readily be converted to cash. These include receivables, T-bills, money market funds, commercial paper, bankers’ acceptances and other short-term securities. CASH FLOW Representation of a company’s financial health. Cash flow equals net earnings plus depreciation, amortization and all other non-cash expenses. CASH FLOW STATEMENT A summary of a company's cash flow over a given period of time. The cash flow statement includes cash flows from operations, investing, and financing. CASH FLOWS FROM FINANCING ACTIVITIES Reported on the cash flow statement in a company's annual report, it is an accounting of funds related to the financing of the company. These funds include cash received from new securities offerings, dividend payments and debt payments. CASH FLOWS FROM INVESTING ACTIVITIES Reported on the cash flow statement of a company's annual report, it is an accounting of funds related to the company's investments. These funds include cash applied to debt and equity investments and the returns from those investments, as well as cash spent on physical property. CASH FLOWS FROM OPERATING ACTIVITIES Reported on the cash flow statement of a company's annual report, it is an accounting of funds related to the company's operations. This figure is calculated by adjusting net income to reflect depreciation expenses, deferred taxes, accounts payable, accounts receivables and any extraordinary items. CAVEAT EMPTOR Let the buyer beware. CBO See Collateralized Bond Obligation CBOT See Chicago Board of Trade CBRS See Canadian Bond Rating Service CCA See Capital Cost Allowance CCAA See Companies Creditors Arrangement Act CD See Certificate of Deposit CDIC See Canada Deposit Insurance Corporation CDNX See Canadian Venture Exchange CENTRAL BANK The generic name given to a country's primary monetary authority, Canada’s Bank of Canada and the Federal Reserve System in the U.S. Usually has responsibility for issuing currency, administering monetary policy, holding member banks' deposits and facilitating the smooth operation of the nation's banking industry. CEO See Chief Executive Officer CERTIFICATE A document providing evidence of ownership of a security such as a stock or bond. CERTIFICATE OF DEPOSIT (CD) A debt instrument issued by a bank that usually pays interest. CERTIFIED INVESTMENT MANAGER (CIM) A designation conferred by the Canadian Securities Institute in recognition of the attainment of certain standards of education and proficiency in investments. The CIM program is broken into two parts: CIM1 and CIM2. Each part consists of two three-hour exams. CIM1 is being replaced with the Professional Financial Planning course, which consists of two three-hour exams and a case study. CFA See Chartered Financial Analyst CFO See Chief Financial Officer CHAPTER 11 The part of the U.S. Bankruptcy Code describing how a company or creditor can file for court protection. In the case of a corporation, reorganization occurs under the existing management. CHAPTER 7 The part of the U.S. Bankruptcy Code describing the liquidation of a company after bankruptcy. CHARTERED FINANCIAL ANALYST (CFA) A designation conferred by the Association for Investment Management and Research, Charlottesville, Virginia. Consists of three courses in which you must write three rigorous and comprehensive six-hour exams. The courses take three years to complete and teach the student ethical standards, how to analyze investments and design investment portfolios. CHARTING The use of charts and patterns to forecast buy and sell decisions. See also Technical Analysis. CHICAGO BOARD OF TRADE (CBOT) An exchange where grain, gold and U.S. Treasury Bond futures and options are traded. CHIEF EXECUTIVE OFFICER (CEO) The executive who is responsible for a company's operations, usually the President or the Chairman of the Board. The CEO reports directly to the Board of Directors who are accountable to the shareholders and owners of the company. CHIEF FINANCIAL OFFICER (CFO) The executive who is responsible for financial planning and record keeping for a company. The CFO also has full authority for all of the expenditures of the organization. CHIEF INVESTMENT OFFICER (CIO) The executive who is responsible for tactical asset allocation and overseeing management of equity, fixed interest and money market portfolios. CHIEF OPERATING OFFICER (COO) The executive who is responsible for the day-today management of a company. CHINESE WALL A term used to describe procedures enforced within a securities firm that separate the firm's departments to restrict access to non-public, material information, in order to avoid the illegal use of inside information. CIPF See Canadian Investor Protection Fund CIM See Certified Investment Manager CIO See Chief Investment Officer CLASS A SHARES The most preferred tier of classified stock. CLASS B SHARES The second tier of classified stock. CLAW BACK An amount required to be paid back to an institution issuing cheques based on an income needs test. Common examples of these are Old Age Security (OAS) and Employment Insurance Commission (EIC). CLEARING CORPORATION An organization that works with the Exchanges to handle confirmation, delivery and settlement of transactions. Sometimes called a clearinghouse, it facilitates the settlement of debits and credits of its members with each other. CLONE FUND An investment fund designed to match the risk and return of an existing fund by copying both its strategy and its asset class weightings. CLOSELY HELD A corporation for which most of the voting stock is held by a small number of shareholders, usually founders and directors of the firm, but which is still publicly traded. COATTAIL INVESTING A trading strategy in which an investor tries to duplicate the performance of a successful (and usually well-known) investor by copying their trades as soon as they are made public. This is a risky strategy, since there is a time delay between when the successful investor's trades occur and when they are made public, and because the strategy disregards overall portfolio considerations, risk tolerance, and other unique circumstances. COGS See Cost of Goods Sold COINCIDENT INDICATOR An economic indicator that varies directly with, and at the same time as, the current state of the economy. COLLATERAL Securities such as bonds, shares, insurance policies, or other tangible assets that are pledged against a loan. If the borrower fails to repay the loan, the creditor can take ownership or sell the collateral assets to recover the lost money. COLLATERALIZED BOND OBLIGATION (CBO) An investment-grade bond backed by a large, diversified pool of junk bonds. Usually broken down into tiers with varying degrees of risk and varying interest rates. COMFORT LETTER A letter filed with applicable securities commission(s) by a company's auditor when submitting unsigned financial statements for use in a prospectus. The letter states that the final format of the statements should not be materially different from those presently being filed. A letter is needed because the auditor does not sign the report before or when the financial statements are filed with the preliminary prospectus. The signing is done after the securities commission(s) has reviewed the prospectus and any required changes have been made. COMMERCIAL BANK An institution that accepts deposits, makes business loans and offers related financial services. COMMERCIAL PAPER Short term debt securities (less than a year to maturity) issued by non-financial corporations for the purpose of raising capital. COMMISSION The broker or agent's fee for buying or selling securities for a client. The commission fee is usually based on a percentage of the transaction's market value. COMMITTEE ON UNIFORM SECURITIES IDENTIFICATION PROCEDURES (CUSIP) The committee which supplies a unique nine-character identification, called a CUSIP number, for each class of security approved for trading in Canada and the U.S. The CUSIP number facilitates clearing and settlement of trades. COMMODITY A product used for commerce that is traded on an organized exchange. A commodity could be an agricultural product such as canola or wheat, or a natural resource such as oil or gold. A commodity can be the basis for a futures or forward contract. COMMON SHARE A class of stock that represents ownership or equity in a company. Common shares usually carry voting privileges and entitles the holder to a portion of the company's profits, normally issued in the form of dividends. See Common Stock. COMMON-SIZE STATEMENT A financial statement displaying all items as a percentage of a common base figure, usually revenues. Such a statement may be useful for noting changes in the relative size of the various elements. COMMON STOCK Securities representing equity ownership in a corporation, providing voting rights, and entitling the holder to a share of the company's success through dividends and/or capital appreciation. In the event of liquidation, common stock holders have rights to a company's assets only after bondholders, other debt holders and preferred stock holders rights have been satisfied. COMPETITIVENESS The ability to sell goods or services profitably relative to other producers/sellers of the same goods or services. A number of factors contribute to competitiveness including technological change, a highly skilled labour force, low inflation and a sound public policy environment. As competitiveness improves, costs are reduced and exports expand across international markets. COMPANIES CREDITORS ARRANGEMENT ACT (CCAA) The CCAA is a Federal Legislative Act that allows for a plan of compromise between debtors and creditors to resolve the financial problems of a distressed company. COMPOSITE An index or average that is a combination of multiple other indices or averages. An example is the Dow Jones Composite, which combines the industrial, transportation and utility averages. COMPOSITE PRICE When a security is traded on more than one Exchange, the price may vary among exchanges. The composite price includes all the prices for all transactions of the security on all Exchanges where it is traded; as a result, you have a better idea of the security's true price range. COMPOUND ANNUAL GROWTH RATE (CAGR) The year over year growth rate applied to an investment or other part of a company's activities over a multiple-year period. COMPOUND INTEREST The interest (or growth) earned on a principal amount, including interest earned in an earlier period. For example, if $100 is invested at 10% for one year, the investor will have $110 in one year. If the investor earns 10% in the following year, then the investor will receive a 10% return on the whole $110 not just the principal amount of $100. COMPOUNDING The process by which income is earned on income that has previously been earned. The end value of the investment includes both the original amount invested and the reinvested income. See example in Compound Interest. CONSENSUS FORECAST The financial forecasts for a given company, taken in aggregate, for all analysts who follow that company. CONSERVATIVE A stable and predictable investment that usually features a specific (or limited) gain or loss. The risk of a conservative investment usually results in lower, but more even returns. CONSOLIDATION The combination of separate companies, functional areas, or product lines into a single one. Differs from a merger in that a new entity is created in the consolidation. CONSOLIDATED FINANCIAL STATEMENTS A combination of the financial statements of a parent company and its subsidiaries, presenting the financial position of the group as a whole. CONSUMER CONFIDENCE INDEX A measure of U.S. consumer optimism toward current and future economic conditions compiled by the Conference Board. The Consumer Confidence Index was arbitrarily set at 100 in 1985 and is adjusted monthly on the basis of a survey of consumers. The Index considers consumer opinion on both current conditions (40%) and future expectations (60%). CONSUMER DEBT The term applied to debt incurred for consumable or depreciating assets that aren't considered investments. This includes credit card debt, store-financed consumer purchases, car loans, family loans that will be repaid, etc. Consumer debt doesn’t include routine bills paid monthly such as water, phone, and electricity, and doesn't include mortgages, home or business equity loans, home or business equity lines of credit, or stock margin accounts. CONSUMER PRICE INDEX (CPI) Measure of price changes produced by Statistics Canada on a monthly basis. The CPI measures the retail prices of a "shopping basket" of about 300 goods and services including food, housing, transportation, clothing and recreation. The Index is "weighted," meaning that it gives greater importance to price changes for some products than others - more to housing, for example, than to entertainment - in an effort to reflect typical spending patterns. Increases in the CPI are also referred to as increases in the cost of living and are directly correlated to increases in inflation. CONSUMPTION TAXES Taxes on consumption - purchases of goods and services - levied by both the federal and provincial governments. Federal consumption taxes consist mainly of GST and excise taxes on motor fuel, tobacco products and alcoholic beverages. Provincial consumption taxes consist mainly of retail sales taxes, and provincial taxes on fuel and tobacco products. CONTAGION When an economic crisis in one country's bond or equity markets spreads to other countries that experience the same problems. The term comes from the more general definition of contagion, which is a highly transmittable disease. CONTRACTION Represents a downturn in the economic cycle and can lead to a recession if prolonged. CONTRACTUAL PLAN An arrangement whereby an investor legally agrees to purchase a given amount of a security by a certain date and agrees to make partial payments at specified intervals. CONTRARIAN An investor who behaves in opposition to the prevailing wisdom; for example, buying when others are pessimistic and selling. CONTROLLING INTEREST The ownership of more than 50% of a company's voting stock; or a significant fraction, even if less than 50%, if the rest of the shares are not actively voted. CONVERGENCE The coming together of futures prices and cash market prices on the final trading day of a futures contract. CONVERSION OPTION A feature on some bonds and preferred stock issues allowing the holder to convert the bond or preferred stock issue into common stock. As the number of outstanding shares increase due to conversions, a resulting dilution of ownership occurs among current common shareholders. CONVERSION PRICE The price, usually specified when issued, at which a given convertible security can be converted to common stock. CONVERSION RATIO The number of shares of common stock that could be obtained by converting each share of a convertible security, such as a convertible bond, or preferred stock. CONVERTIBLE Security that can be exchanged for a specified amount of another related security, normally at the option of the issuer and/or the holder. CONVERTIBLE ARBITRAGE A strategy involving the purchase of convertible securities and the subsequent shorting (selling) of the corresponding stock. The conversion option will protect the short position. The transaction may be profitable if the convertible security is priced incorrectly relative to the stock. CONVERTIBLE SECURITY A bond, preferred stock or debenture that is exchangeable at the option of the holder for common stock of the issuing corporation. CONVEXITY A volatility measure for bonds used in conjunction with modified duration in order to measure how the bond's price will change as interest rates change. It is equal to the negative of the second derivative of the bond's price relative to its yield, divided by its price. For example, since a noncallable bond's duration usually increases as interest rates decrease, its convexity is positive. COPRS See Canadian Originated Preferred Securities. COO See Chief Operating Officer COOKIE JAR ACCOUNTING A sometimes questionable corporate accounting practice of taking reserves against losses during profitable years and using them in unprofitable years. The practice is done to smooth out the earnings numbers and make the company's operations seem more consistent. COOKING THE BOOKS Knowingly providing incorrect information in a company's financial statements. This is an illegal practice. CORE HOLDING A substantial long-term holding in a portfolio or fund, usually with relatively lower risk and stable returns. CORPORATE ACTIONS Changes in companies that affect their listings on stock exchanges. Examples of corporate actions are new issues, defunct issues, mergers and name changes. CORPORATE BOND A bond issued by a corporation. Such bonds usually have a par value of $1,000, are taxable, have a fixed term to maturity, or are paid for out of a sinking fund accumulated for that purpose, and are traded on major exchanges. CORPORATE GOVERNANCE A generic term that describes the ways in which rights and responsibilities are shared between the various corporate participants, especially the Board of Directors, management and the shareholders. CORPORATE TAX Tax on corporate income in Canada. In addition to corporate taxes, Canadian corporations pay a variety of taxes and other levies to the various levels of government in Canada. These include capital and insurance premium taxes; payroll levies (e.g., health taxes, Employment Insurance, Canada Pension Plan, Quebec Pension Plan, Workers' Compensation); property taxes; and indirect taxes, such as sales and excise taxes levied on business inputs. CORPORATION A legal business entity created under federal or provincial statutes. Because the corporation is a separate entity from its owners, shareholders have no legal liability for its debts. CORRELATION A measure of the relationship between two or more securities. If two securities mirror each other's movements perfectly, they are said to have a positive one (+1) correlation. Combining securities with high positive correlations does not reduce the risk of a portfolio. Combining securities that move in the exact opposite direction from each other are said to have perfect negative one (-1) correlation. Combining two securities with perfect negative correlation reduces risk. Very few, if any, securities have a perfect negative correlation with another. However, risk in a portfolio can be reduced if the various securities have low positive correlations with each other. COST BASIS The cost basis of an investment is the amount one paid for it when it was originally purchased. COST OF CAPITAL The opportunity cost of an investment, i.e. the rate of return that a company would otherwise be able to earn at the same risk level as the investment that has been selected. COST OF FUNDS The interest cost that a financial institution or other borrower must pay for the use of money. COST OF GOODS SOLD (COGS) This amount represents the cost of buying raw materials and producing the goods that a company sells. It also includes the cost of the company's labour force. Usually the COGS is the first item subtracted from revenues in a company’s income statement. COST PERFORMANCE OR UNIT LABOUR COSTS A method of measuring competitiveness - national cost performance - that compares the total wages of a country (or an industry or individual firm) relative to its total output. To measure the unit labour costs of the Canadian economy, one would divide Canada's total labour income by its real GDP. Whereas labour productivity shows how much output an economy gets per worker, unit labour costs show how much output an economy gets relative to how much workers are paid. If wages are rising but productivity is rising faster, unit labour costs are actually falling. This shows the combined effect of changes in productivity and in wages on the cost of production. The higher a country’s unit labour costs are in comparison to those of other countries, the harder it is for them to compete. COTTAGE INDUSTRY An industry where the creation of products and services is home-based, rather than factory-based. COUNTRY RISK The potential volatility of foreign stocks, or the potential default of foreign government bonds, due to political and/or economic events in the given country. COUPON The interest rate specified on a bond when it is originally issued. COUPON BOND An unregistered, negotiable bond on which interest and principal are payable to the holder, regardless of whom it was originally issued to. The coupons are attached to the bond, and each coupon represents a single interest payment. The holder submits a coupon, usually semi-annually, to the issuer or paying agent to receive payment. Coupon bonds are being phased out in favor of registered bonds. Also known as a bearer bond. COUPON RATE The interest rate stated on a bond, note or other fixed income security, expressed as a percentage of the principal (face value). COUPON YIELD See Coupon Rate COVARIANCE A measure that reflects both the variance (volatility) of a stock's returns and the tendency of those returns to move up or down at the same time relative to other stocks (their correlation). This is a way to see if two stocks tend to move up or down together and also see the size of those movements. COVENANT A pledge in a fixed income instrument indicating the fulfillment of a promise or agreement by the company issuing the debt. An example of a covenant may include the promise not to issue any additional debt that is more senior to the current debt in question. COVERAGE The tracking of a stock by an analyst. The initiation of coverage leads to the subsequent publishing of reports, research and recommendations related to the issue. COVERED CALL The selling of a call option while simultaneously holding an equivalent position in the underlying security. When the buyer of the call option exercises the option, the seller of the covered call will already have the underlying security in their portfolio to deliver to the buyer of the option. See Covered Option. COVERED OPTION An option contract backed by the shares underlying the option. The two types are covered call and covered put. COVERED PUT The selling of a put option while being short an equivalent amount in the underlying security. See Covered Call. CPA See Canadian Payments Association CPB See Canada Premium Bond CPI See Consumer Price Index CPP See Canada Pension Plan CREDIT Funds advanced and/or available to be borrowed as required. CREDIT ANALYSIS The process of evaluating an applicant's loan request or a corporation's debt issue in order to determine the likelihood that the borrower will live up to their obligations and will not default. CREDIT RATING AGENCY A company that collects information about the creditworthiness of individuals and corporations and provides it for a fee to interested parties. CROSS-COLLATERALIZATION When collateral for one loan is also serving as collateral for other loans. CROSSED TRADE An illegal practice in which a broker offsets buy and sell orders without recording the transactions on the Exchange. This observance may prevent an investor from getting the best possible price on the trade. CROWN CORPORATION A corporation wholly owned directly or indirectly by the Canadian federal or provincial governments. CSA See Canadian Securities Administrators CSB See Canada Savings Bond CSC See Canadian Securities Course CUM DIVIDEND OR RIGHTS ‘With a dividend or with rights’. For instance, if one purchases a stock cum dividend or cum rights, you receive forthcoming already-declared dividends or rights. CURRENCY RISK The risk that a business' operations or an investment's value will be affected by changes in exchange rates. Also known as exchange rate risk. CURRENCY SWAP A financial arrangement in which two parties exchange specific amounts of different currencies initially, and then repay those currencies at future points in time according to a specified schedule. CURRENT ACCOUNT A measurement of the flow of goods, services and investment income between a country and the rest of the world, including merchandise imports and exports, international service transactions, and interest and dividend payments or receipts. If a country receives more money from investments in and the sale of goods and services to the rest of the world than it pays out, it has a current account surplus. A country can also have a surplus in merchandise trade, but a larger deficit in service and investment transactions, resulting in an overall current account deficit. The deficit on investment transactions reflects the need to pay interest and dividends on foreign debt. CURRENT ASSET An asset that could be converted into cash within the next 12 months. CURRENT LIABILITY A liability that has to be paid within 12 months. CURRENT RATIO A company's current assets divided by its current liabilities. From this ratio, one can determine whether a company could pay off its debts with its current assets if it needed to. CURRENT YIELD Same as yield. CUSIP See Committee on Uniform Securities Identification Procedures CUSIP NUMBER A nine-character number that uniquely identifies a particular Canadian or U.S. security. CUSIP is an acronym for the Committee on Uniform Securities and Identification Procedures, the standards body that created and maintains the classification system. Foreign securities have a similar number, called the CINS number. CUSTODIAN A financial institution, usually a bank or trust company, which holds an investment portfolio’s securities and cash in safekeeping. CYCLICAL INDUSTRY An industry which is sensitive to business cycles and whose performance is tied to the overall economy, especially interest rates. Examples are durable goods such as raw materials, autos, chemicals, paper, steel and heavy equipment. CYCLICAL STOCK A stock of a company in an industry that is particularly sensitive to swings in economic conditions.