Refers to the financial assets, or resources, that a company has to fund its business operations.
Capital at risk
The risk an investor faces that he or she may lose all or part of the assets invested.
Occurs when the current value of an investment is greater than the initial amount invested.
The term for the gain or loss derived from an investment over a particular period. Capital return includes capital gain or loss only and excludes income (in the form of interest or dividend payments).
The composition of a firm's liabilities - refers to the way a firm finances its assets through a combination of equity, which refers to raising funds by selling shares, and debt. Often when capital structure is referred to, the focus is on the firm's debt-to-equity ratio, which is an indicator of how risky a company is.
The total market value of all of a company's outstanding shares.
Deposits or investments with similar characteristics to cash.
Consumer Prices Index (CPI)
An index used to measure inflation, which is the rate of change of prices for a basket of goods and services. The contents of the basket are meant to be representative of products and services we typically spend our money on.
Fixed income securities that can be exchanged for predetermined amounts of company shares at certain times during their life.
Fixed income securities issued by a company. They are also known as bonds and can offer higher interest payments than bonds issued by governments as they are often considered more risky.
The interest paid by the government or company that has raised a loan by selling bonds.
The borrowing capacity of an individual, company or government. More narrowly, the term is often used as a synonym for fixed income securities issued by companies.
Credit default swaps (CDS)
Are a type of derivative, namely financial instruments whose value, and price, are dependent on one or more underlying assets. CDS are insurance-like contracts that allow investors to transfer the risk of a fixed income security defaulting to another investor.
An independent assessment of a borrower's ability to repay its debts. A high rating indicates that the credit rating agency considers the issuer to be at low risk of default; likewise, a low rating indicates high risk of default. Standard & Poor's, Fitch and Moody’s are the three most prominent credit rating agencies. Default means that a company or government is unable to meet interest payments or repay the inital investment amount at the end of security's life.
Credit rating agency
A company that analyses the financial strength of issuers of fixed income securities and attaches a rating to their debt. Examples include Standard & Poor's and Moody's.
The process of evaluating a fixed income security, also called a bond, in order to ascertain the ability of the borrower to meet its debt obligations. This research seeks to identify the appropriate level of default risk associated with investing in that particular bond.
Risk that a financial obligation will not be paid and a loss will result for the lender.
The difference between the yield of a corporate bond, a fixed income security issued by a company, and a government bond of the same life span. Yield refers to the income received from an investment and is expressed as a percentage of the investment's current market value, and a bond is a fixed income security.
Refers to the means of making loans; a set of regulations and institutions involved in making loans on a commercial basis.