See FLOW OF FUNDS.

Cash-flow analysis is a planning device that looks at the cash flows into and out of a new project, new venture, equipment purchase, new product, etc. The manager analyzes the cash-flow predictions to determine the relative desirability of doing the new activity.

See COMMON LAW.

A cartel is an organization comprised of members of an industry who once competed against each other. Cartel members usually agree to set production quotas, reducing total output available to the market, based on the percentage market share each participant had when the cartel was formed.

See BOOK VALUE.

Capital markets are those in which stocks and long-term debt instruments are traded.

Capitalism is a social and economic system based on private property rights, private allocation of CAPITAL, and self-interest motivation. Capitalism is often referred to as a free enterprise or market system. Capitalism contrasts with SOCIALISM, in which most RESOURCES and industrial- PRODUCTION systems are state-owned or controlled; and with communism, in which most resources are state-owned and most decisions regarding output are made through central planning.

CAPITAL gain (or loss) is the result of the purchase and subsequent sale of a capital ASSET. If a stock, bond, or piece of real estate is sold for more than was paid for it, a capital gain on the sale of that asset is realized. If that asset has been held for less than a year, it is a short-term capital gain.

When a firm spends money, it is either for the purchase of an ASSET (a CAPITAL expenditure) or the payment of an expense (a revenue expenditure). Capital expenditures are recorded by debiting some asset account, and as a result, capital expenditures are reflected on the BALANCE SHEET.

See BUDGETING, CAPITAL BUDGETING.

See BETA COEFFICIENT, CAPITAL ASSET PRICING MODEL.

Along with labor, natural resources, and ENTREPRENEURSHIP (managerial ability), capital is one of the four factors of PRODUCTION. The sources of capital for a firm are represented by the items on the right-hand side of its BALANCE SHEET; debt, preferred stock, COMMON STOCK, and retained earnings. Capital is a major determinant of a firm’s size.

A callable bond is a bond that the issuer can repurchase during certain time periods before its maturity date. To be callable, a bond must have a call feature, which enables the issuer to repurchase the bond before its maturity date. An issuer who chooses to call a bond generally pays the bond’s holder a call premium upon repurchase, which is meant to compensate the holder for the disadvantage of having to find another way to invest his or her money.

Cafeteria plans allow employers to compensate employees by offering a combination of cash and tax-favored “fringe” benefits (health/disability INSURANCE, dependent care, or group term life insurance).