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bankruptcy cost, and pecking order), which result from considerations of asymmetric information,
asymmetric taxes, and transaction costs.
Capital market line (CML)
The line defined by every combination of the risk-free asset and the market portfolio. The line represents the
extra risk premium you get for taking an extra risk. Defined by the Capital Asset Pricing Model.
Capital rationing
Placing one or more limits on the amount of new investment undertaken by a firm, either by using a higher
cost of capital, or by setting a maximum on parts of, and/or the entirety of, the capital budget.
Capital stock
Stock authorized by a firms charter and having par value, stated value, or no par value. The number and
value of issued shares are usually shown, together with the number of shares authorized, in the capital
accounts section of the balance sheet. See: Common stock
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.
Capital surplus
Amounts of directly contributed equity capital in excess of the par value.
CAPM
See: Capital asset pricing model
Car
A loose quantity term sometimes used to describe the amount of a commodity underlying one commodity
contract; e.g., a car of bellies. Derived from the fact that quantities of the product specified in a contract used
to correspond closely to the capacity of a railroad car.
CARDs
See: Certificates of Amortized Revolving Debt
Carry
Related:net financing cost.
Carrying costs
Costs that increase with increases in the level of investment in current assets.
Carrying value
Book value.
CARs
See: Certificates of Automobile Receivables
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