See: Deflation; Inflation; Consumer Price Index

Crash
A precipitous drop in stock prices. Crashes usually occur after periods of inflated stock prices followed by a loss in investor confidence.

See: Bear Market; Black Monday; Black Friday; Overvalued

Credit Balance
1: In a client's cash account at a brokerage firm, the amount that the firm owes to the client. This equals money deposited and remaining after any purchases are paid, plus uninvested proceeds from securities sold and not sent to the client.

2: In a client's margin account at a brokerage firm a credit balance may mean either: * Proceeds from short sales that are held in escrow for the securities borrowed for these sales, plus the required margin for the trade.

* Any free credit balances, or net balances, which can be withdrawn at any time. A free credit balance occurs when all previously margined securities have been paid for in full. Special miscellaneous account (SMA) balances are not free credit balances. If money is withdrawn, a new or increased debit balance will be incurred. SMA is generated from the borrowing power of margin securities within the client's account

See: Debit Balance; Margin; Margin Account; Selling Short; Special Miscellaneous Account

Credit Rating
Assessment of an individual's or corporation's credit history and ability to pay its obligations. There are several firms that investigate, analyze, and maintain records on the credit status of individuals and businesses--for example, Equifax for individuals, and Dun & Bradstreet for commercial firms. Standard & Poor's and Moody's assign ratings to bonds. In rating the bonds, credit worthiness is an important factor.

See: Dun & Bradstreet; Moody's Investors Service; Rating; Standard & Poor's Corporation

Credit Risk
The risk that the issuer of a security, such as a bond, may default on interest and/or principal payments or become bankrupt. If either event occurs, the investor stands to lose part or all of the investment.

See: Default

Credit Spread
An option spread position whereby the premium of the option sold exceeds the premium of the option purchased--thus, creating a credit to the investor.

See: Debit Spread; Options; Option Premium; Option Spread; Spread

Crossed Market
A condition in which a broker submits a bid that is greater than the lowest offer of another broker, or vice versa.

See: Asked Price

CSE (Cincinnati Stock Exchange)
The first completely automated stock exchange that transacts members' orders without having an actual trading floor. Orders are placed and executed via computers.

See: Floor; Over The Counter; Stock Exchange

Cum-Dividend
The literal translation is "with dividend"--that is, a stock whose buyer is eligible to receive a declared dividend. Stocks are cum-dividend when a buy trade is made on or before the third day preceding the record date. After the third day, trades are executed ex-dividend (without dividend).

See: Declaration Date; Dividend; Ex-Dividend; Record Date

Cum-Rights
The literal translation is "with rights"--that is, during a rights offering, the period in which the purchaser of stock will receive the rights. The rights entitle the purchaser to buy a fixed amount of shares of stock that has not yet been issued. The prospectus that accompanies a rights distribution states when the rights become ex-rights (without rights). On the ex-right date, a purchaser will not receive the rights.

See: Ex-Rights; Prospectus; Subscription Right

Cumulative Preferred Stock
A preferred stock that has a provision stipulating if one or more dividends are omitted (arrearage) because of insufficient earnings or any other reason, the dividends will accumulate until they are paid to shareholders. Cumulative preferred stocks have seniority over common stocks--that is, a common stock dividend cannot be paid until all cumulative preferred dividends are current.

See: Arrearage; Common Stock; Non-Cumulative Preferred Stock; Omitted Dividend; Preferred Stock

Cumulative Voting
A method of voting for corporate directors. In contrast to statutory voting, cumulative voting allows shareholders to multiply the number of shares owned by the number of directorships being voted. The votes may be cast in any manner that the holder chooses--all for one director or any combination thereof. If a corporation, for example, has 6 openings to the Board of Directors, in statutory voting, a stockholder who owns 100 shares may cast 100 votes for each opening, thus having 600 votes. In cumulative voting, the stockholder may vote in the same manner as statutory voting or cast 600 votes for only one nominee, 300 for two, 200 for three, or any other combination.

Cumulative voting allows small shareholders to have a better chance of naming representatives on the board of directors. Cumulative voting is required under the corporate laws of some states, and is at the discretion of the corporation in most others.

See: Nonvoting Stock; Statutory Voting; Voting Right

Current Assets
Corporate assets that are expected to be converted to cash within twelve months. These assets include cash, accounts receivable, marketable securities and inventories.

See: Accounts Receivable; Asset; Marketable Securities

Current Coupon Bond
A municipal, corporate or government bond that has a coupon within half a percentage point of current market rates. Because these bonds have an interest rate that is competitive with current market instruments, they are less volatile than comparably rated bonds with lower coupons.

See: Corporate Bond; Coupon; Government Bond; Municipal Bond; Rating; Risk; Volatility

Current Liabilities
Debt or other obligations that are due within twelve months.

See: Liability

Current Market Value (CMV)
The worth of all positions in a client's brokerage account. To determine the portfolio's current market value, stocks and bonds are valued at their closing prices. For over-the-counter securities, the bid is used.

See: Closing Price; Long Market Value; Over The Counter; Over The Counter Securities; Short Market Value

Current Ratio
A test of a corporation's liquidity--that is, a corporation's ability to pay its current obligations from current assets. The ratio is calculated by dividing current assets by current liabilities.

See: Acid Test Ratio; Current Assets; Current Liabilities; Liquidity Ratio; Quick Asset Ratio

Cushion Theory
A theory which asserts that if many investors have short positions in a stock, the stock's price must inevitably rise because the short positions must eventually be covered by purchases of the stock. If the number of short positions in a stock is twice as high as the stock daily trading volume, most technical analysts will be bullish on the stock--that is, any price rise will force short sellers to cover their short positions, making the stock's price rise even more.

See: Bull; Selling Short; Short Position; Short Squeeze; Technical Analysis; Volume

CUSIP (Committee On Uniform Securities Identification Procedures)
Committee that assigns codes to securities for the purposes of identification--commonly just referred to as a "Cusip Number."

Custodial Account
An account opened on the behalf of a minor by an adult who acts as custodian. The custodian is usually one of the child's parents--both parents cannot be custodian. This type of account is opened because minors cannot enter into contracts. Thus, they cannot make securities transactions for themselves. Any assets placed into a custodial account are irrevocable. Once the minor is of majority (usually 18, but some states are 21), they may do what they please with the assets.

See: Uniform Gift To Minors Act

Custodian
A financial institution, such as a brokerage firm, or a bank that holds stock certificates and other assets on the behalf of a mutual fund, corporation or individual. An individual may also act as a custodian in the case of an account for an minor.

Custodian Bank
Bank assigned by a mutual fund to act as its custodian. The bank performs clerical functions and holds the fund's cash and securities.

See: Custodian; Mutual Fund

Customer's Loan Consent
Agreement signed by a margin customer allowing a broker to borrow their margined securities to complete delivery of certain failures and to cover other customers' short positions.

See: Delivery; Fail To Deliver; Margin; Margin Security; Short Position

Customer's Net Debit Balance
The total amount of credit extended by New York Stock Exchange member firms to finance customers' security purchases.

See: Debit Balance; Margin

CV
Abbreviation used in newspaper listings of stocks and bonds to denote a convertible security.

See: Convertible Securities

Cyclical Stock
Stock that is strongly affected by changes in economic activity. The stock's price will rise when the economy turns up, and will fall when the economy turns down. Examples are automobiles and paper stocks. Non-cyclical stocks, such as stocks within the food and hospital industries, are not directly affected by economic changes.