A Practical Guide to Angel Investing (2nd Edition)

Call Option The right to buy a security at a given price (or range) within a specific time period. Capital Gains The difference between an asset’s purchase price and selling price, when the selling price is greater. Long-term capital gains (on assets held for a year or longer) are taxed at a lower rate than ordinary income. Capitalization Table Also called a cap table, this is a table showing the total amount of the various securities issued by a firm. This typically includes the amount of investment obtained from each source and the securities distributed – e.g., common and preferred shares, options, warrants, etc. – and respective capitalization ratios. Capitalize To record an outlay as an asset (as opposed to an expense), which is subject to depreciation or amortization.

Cash Position The amount of cash available to a company at a given point in time.

Closing An investment event occurring after the required legal documents are implemented between the investor and a company, and after the capital is transferred in exchange for company ownership or debt obligation. Common Share A unit of ownership of a corporation. In the case of a public company, the shares are traded between investors on various exchanges. Owners of common shares are typically entitled to vote on the selection of directors and other important events, and in some cases, receive dividends on their holdings. Investors who purchase common shares hope that the share price will increase so the value of their investment will appreciate. Common shares offer no performance guarantees. Additionally, in the event that a corporation is liquidated, the claims of secured and unsecured creditors and owners of bonds and preferred shares take precedence over the claims of those who own common shares. Conversion Ratio The number of shares into which a convertible security may be converted. The conversion ratio equals the par value of the convertible security divided by the conversion price.

108 A Practical Guide to Angel Investing

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