Guide to Analysing Companies

CTA
See commodity trading adviser.
Cum div
A share being sold together with the right to a dividend that
has been declared but not yet paid. In most cases, shares are
deemed to be cum div up to a few days before the register of
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eligible shareholders is closed. Then the share goes ex-dividend,
or ex-div. Similarly, cum rights is a share that is being sold
together with the right to take up a new offer of shares; and ex-
rights refers to one that does not.
Current account
See account.
Current ratio
The ratio of a company’s current liabilities to its current
assets.
 Current assets  cash, bank deposits and other items
that can quickly be turned into cash
 Current liabilities  short-term loans and trade
credit
 Current assets  current liabilities  working capital (see
also capital employed)
The current ratio is used as a guide to a company’s solvency.
It has only limited use in comparing companies across industries,
however. The appropriate current ratio for a company depends
on the sector to which it belongs and on the normal terms of trade
in that industry. These terms can vary greatly.
Cushion bond
A bond that can be retired early – that is, it can be called in
before it reaches maturity. There is a stated price (the call
price) at which such bonds can be called. This inevitably holds
down the price of the bond in the secondary market. As a
result, cushion bonds are less volatile than other bonds of a
similar maturity, making them suitable for investors wanting to
reduce their risk.
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Custodian
Somebody (usually a bank but sometimes a lawyer) who holds
an investor’s securities on that investor’s behalf. A custodian
handles everything that arises from the ownership of the secu-
rities, such as the collection of income, voting at meetings, exer-
cising rights and so on. Some institutions, such as the Bank of
New York, have built sizeable businesses around such services.
They often cater for institutional investors who have
little experience of investing in foreign markets and who may
invest outside the United States primarily through american
depositary receipts.
Cyclical stock
A stock that rises quickly when investors expect the economy
to turn up and falls again when it shows signs of turning down.
Cyclical stocks include engineering, cars, and paper and packag-
ing. In contrast, non-cyclical stocks, such as food and pharma-
ceuticals, vary less with movements in the economy. Canny
investors try to anticipate an upturn in the economy by switch-
ing out of defensive, non-cyclical stocks into cyclical ones.
Movements of this kind can occur surprisingly quickly when
the telltale signs emerge.