A circular flow model is a diagram illustrating how the major sectors in a mixed-CAPITALISM economy fit together. Circular flow models show how the value of output equals INCOME in an economic system. The model also demonstrates the MUTUAL INTERDEPENDENCE of the various participants in an economy.

Churning is excessive trading in an investor’s portfolio to generate commissions for the stockbroker. Sometimes brokers or INVESTMENT advisors are given discretionary authority over an investor’s account. Many investors do not want to or do not have the knowledge necessary to actively manage their investments.

The chief financial officer (CFO), the highest-ranking financial executive of an organization, is responsible for all financial operations.

The chief executive officer (CEO) is the primary leader in an organization. Though he or she may be known by many other names, such as president, executive director, and chief administrator, the CEO’s role is more or less the same.

The Chicago Mercantile Exchange (CME) is a market exchange where commodity and financial FUTURES and OPTIONS contracts are bought and sold. Created in 1898 as the Chicago Butter and Egg Board, the CME is used primarily by investors, managers, and broker/dealers to reduce risk in business transactions.

The Chicago Board of Trade (CBOT) is a market exchange where commodity and financial FUTURES and OPTIONS contracts are bought and sold. Created in 1848, the CBOT is used primarily by investors, managers, and broker/dealers to reduce risk in business transactions. Initially the CBOT focused on grain trade, allowing farmers and other agricultural- industry members to hedge or reduce their risk of price changes by using futures contracts.

The chain-of-command principle refers to the relationship of the reporting mechanism within an organization.

A Certified Public Accountant (CPA) is an individual who performs FINANCIAL ACCOUNTING services for the general public for a fee. While all CPAs are accountants, not all accountants are CPAs.

See TIME DEPOSITS.

A centrally planned economy is an economic system where the factors of PRODUCTION (RESOURCES) are controlled by the state. Resource allocation plans and decisions are made by the central government and then promulgated through government agencies.

The Center for Science in the Public Interest (CSPI) is an independent nonprofit organization focusing on food safety, nutrition, and alcohol abuse. Founded in 1971 by Michael Jacobson and headquartered in Washington, D.C., the CSPI has over 800,000 members and publishes Nutrition Action Healthletter, a widely read and respected source for information on health and nutrition.

Cash management is the cash collection, payment, and INVESTMENT activities involved in managing a business. This is done with the deliberate goal of minimizing the amount of cash the company has to borrow and maximizing its return from investments.

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.