What Is Capital Structure? Capital structure is the particular combination of debt and equity used by a company to finance its overall operations and growth. Equity capital arises from ownership shares in a company and claims to its future cash flows and profits. Debt comes in the form of bond issues or loans, while equity
What Is Capital Surplus? Capital surplus, or share premium, most commonly refers to the surplus resulting after common stock is sold for more than its par value. Capital surplus includes equity or net worth otherwise not classifiable as capital stock or retained earnings. In the past, the account Paid-in Capital in Excess of Par – Common
What is a Capital Tax? A capital tax is a tax levied on a corporation that is based on its assets rather than its income. Canada was one of the few OECD nations that levied both a federal and provincial capital tax. Canada limited its federal capital tax to financial corporations in 2006, and some
What Is Capitulation? Capitulation in finance describes the dramatic surge of selling pressure in a declining market or security that marks a mass surrender by investors. The resulting dramatic drop in market prices can mark the end of a decline, since those who didn’t sell during a panic are unlikely to do so soon after.
What Is a Caplet? A caplet is a kind of call option based on interest rates. The typical use of a caplet is to limit the costs of rising interest rates for those corporations or governments that must pay a floating rate of interest on bonds they have issued. However, as with all derivatives, commercial
What Is the Capital Asset Pricing Model? The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk, or the general perils of investing, and expected return for assets, particularly stocks. It is a finance model that establishes a linear relationship between the required return on an investment and risk. The model is based
What Is a Capped Fund? A capped fund is a pooled investment fund that has imposed specified maximum limitations included on its investing or expense structure. Capped funds will often have a set cap on fees or holdings associated with the fund’s management. Fund companies can have broad latitude for adjusting expense levels and holdings
What Is a Capped Index? A capped index is an equity index that has an upper limit on the weight of any single security. Thus, a capped index sets a maximum percentage on the relative weighting of a component that is determined by its market capitalization, even if that company naturally carries a greater weight in
What Is a Capped Option? A capped option limits, or caps, the maximum possible profit for its holder. When the underlying asset closes at or beyond a specified price, the option automatically exercises. For capped call options, the option exercises if and when the underlying closes at or above the predetermined level. Similarly, capped put options
What Is a Capped Rate? A capped rate is an interest rate that is allowed to fluctuate, but which cannot surpass a stated interest cap. A capped rate loan issues a starting interest rate that is usually a specified spread above a benchmark rate, such as the federal funds rate. Key Takeaways A capped rate
