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A dividend paid in cash to a company's shareholders. The amount is normally based on profitability and is
taxable as income. A cash distribution may include capital gains and return of capital in addition to the
dividend.
Cash equivalent
A short-term security that is sufficiently liquid that it may be considered the financial equivalent of cash.
Cash-equivalent items
Temporary investments of currently excess cash in short-term, high-quality securities such as treasury bills
and Bankers Acceptances.
Cash flow
In investments, it represents earnings before depreciation, amortization and non-cash charges. Sometimes
called cash earnings. Cash flow from operations (called funds from operations) by real estate and other
investment trusts is important because it indicates the ability to pay dividends.
Cash flow after interest and taxes
Net income plus depreciation.
Cash-flow break-even point
The point below which the firm will need either to obtain additional financing or to liquidate some of its
assets to meet its fixed costs.
Cash flow coverage ratio
The number of times that 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
A firms 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 that were deducted in calculating net income.
Cash flow matching
Also called dedicating a portfolio, this is an alternative to multiperiod immunization in which the manager
matches the maturity of each element in the liability stream, working backward from the last liability to
assure all required cash flows.
Cash flow per common share
Cash flow from operations minus preferred stock dividends, divided by the number of common shares
outstanding.
Cash flow time-line
Line depicting the operating activities and cash flows for a firm over a particular period.
Cash management bill
Very short maturity bills that the Treasury occasionally sells because its cash balances are down and it
needs money for a few days.
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