Category: Financial Terms

Futures Futures are standardized derivative contracts that obligate the buyer to purchase—and the seller to deliver—an underlying asset at a predetermined price on a specified future date. They are used for speculation, hedging, and price discovery across a wide range of assets. How futures work Contracts are standardized by quantity, quality (when applicable), and expiration…

Future Value of an Annuity The future value (FV) of an annuity is the total value at a future date of a series of equal payments made at regular intervals, assuming a specific interest (or discount) rate. Calculating FV helps assess how recurring payments grow over time due to compound interest. Key concepts Annuity: a…

Future Value (FV) What is Future Value? Future value (FV) is the value that a current asset or cash amount will grow to at a specified future date, given an assumed interest or growth rate. It helps investors and planners estimate how much an investment made today will be worth later, accounting for interest, compounding,…

Furniture, Fixtures, and Equipment (FF&E) Furniture, Fixtures, and Equipment (FF&E) are the movable, tangible assets a business uses in its daily operations but that are not permanently attached to a building. Examples include desks, chairs, computers, phones, display cases, and many types of security equipment. Properly identifying, accounting for, and depreciating FF&E is essential for…

Fungibility: What it Means and Why it Matters Key takeaways * Fungibility means an asset can be exchanged for another identical unit without loss of value or function. * Money, standardized commodities, and widely traded shares are typical fungible assets. * Unique items—artwork, individual houses, collectible cards—are non-fungible because each unit has distinguishing characteristics. *…

Funds Transfer Pricing (FTP) Key takeaways * FTP is an internal pricing framework banks use to allocate funding costs and interest income between liability and asset business units, enabling assessment of product, branch, and unit profitability. * Common methodologies are single-rate (one transfer rate) and multi-rate (rates by product/maturity/risk factors), with multi-rate offering greater granularity….

Funds From Operations (FFO) Funds from operations (FFO) is a non‑GAAP metric used to evaluate the operating performance of real estate investment trusts (REITs). It adjusts net income to better reflect the cash-generating ability of real estate assets by adding back noncash charges and excluding nonrecurring items like gains from property sales. Key takeaways FFO…

Funded Debt: Overview and Types in Corporate Accounting Key takeaways * Funded debt (long-term debt) comprises a company’s interest-bearing obligations that mature beyond one year or beyond the normal operating cycle. * Common examples: bonds with maturities >1 year, convertible bonds, long-term notes payable, and debentures. * Analysts assess funded debt via ratios such as…

Understanding Fundamentals in Finance and Economics Fundamentals are the core qualitative and quantitative factors that reveal the financial health and economic value of a company, security, currency, or economy. They form the basis for valuation, risk assessment, and investment decisions. Key takeaways Fundamentals combine qualitative information (business model, management, competitive position) and quantitative data (revenue,…

Fundamental Analysis: Principles, Methods, and Practical Steps What is fundamental analysis? Fundamental analysis evaluates a company’s intrinsic value by examining its financial statements, business model, industry position, and macroeconomic context. The goal is to determine whether a security is overvalued, undervalued, or fairly priced relative to its true worth. Explore More Resources › Read more…

Fund of Funds (FOF) Key takeaways * A fund of funds (FOF) invests in other investment funds rather than individual securities to achieve broader diversification and manager access. * FOFs can smooth volatility and provide access to strategies or managers that may be hard for individual investors to reach. * Drawbacks include layered fees, potential…

Fund Manager A fund manager is a professional responsible for implementing an investment strategy and managing a fund’s portfolio—such as a mutual fund, pension fund, trust fund, or hedge fund. They make buy/sell decisions, oversee analysts and traders, and communicate with clients and stakeholders. Fund managers are typically paid a fee based on assets under…

Understanding Fund Flow: Definition, Examples, and Insights for Investing What is fund flow? Fund flow refers to the cash moving into and out of financial assets over a specified period (commonly monthly or quarterly). It measures investor money movement—purchases (inflows) and redemptions or withdrawals (outflows)—but does not measure investment performance or returns. Net inflow: More…

Fund: Definition, How It Works, and Types A fund is a pool of money set aside for a specific purpose. Funds can be created by individuals, families, businesses, institutions, or governments to pay for expenses, preserve capital, provide future income, or invest for growth. Funds are often managed professionally and may be invested to generate…

Functional Obsolescence Functional obsolescence is the reduction in an object’s usefulness or desirability because of an outdated design feature that cannot be easily changed or updated. The term applies across industries, from consumer electronics to real estate, and describes when a product, asset, or property no longer meets market expectations or practical needs. Key points…

Functional Currency: Definition and How It Works in Accounting Key takeaways A functional currency is the primary currency of the economic environment in which an entity generates and spends cash. Companies often transact in multiple currencies but prepare financial statements in one functional (reporting) currency; foreign-currency amounts must be translated into that currency. Accounting standards…

Fully Vested: Definition and How Vesting Schedules Work What “fully vested” means Being fully vested means you have full legal ownership of a benefit granted by another party—most commonly employer-provided retirement contributions, stock options, profit sharing, or pension benefits. Once fully vested, those funds or rights belong to you even if you leave the employer….

Fully Diluted Shares Fully diluted shares represent the total number of common shares that would be outstanding if every convertible security that can create common stock is exercised or converted. This count shows the maximum potential share base and is used to calculate diluted earnings per share (EPS), a key metric for investors. Why it…

Fully Amortizing Payment A fully amortizing payment is a recurring loan payment structured so that, if paid on schedule, the loan’s principal and interest are completely paid off by the end of the loan term. For fixed-rate loans, each payment is the same dollar amount; for adjustable-rate loans, the required fully amortizing payment may change…

Full Ratchet Anti-Dilution: Definition and Guide What is a full ratchet? A full ratchet is an anti-dilution provision in a financing agreement that protects early investors by resetting the conversion price (or option strike) of their convertible securities to the lowest price at which the company subsequently issues shares. In other words, if the company…

Full Employment: Definition, Types, and Examples Key takeaways Full employment describes an economy in which all willing and available workers who want jobs can find them; in practice it allows for a small, nonzero unemployment rate. Economists treat full employment as a policy target rather than a literal zero-unemployment state. An unemployment rate around 5%…

Full Disclosure: What it Is and How It Works Definition Full disclosure is the principle and legal requirement that parties involved in business transactions or securities offerings reveal all material facts that could influence another party’s decisions. In U.S. securities law, the Securities and Exchange Commission (SEC) enforces full disclosure for publicly traded companies. The…

Full Costing (Absorption Costing) Full costing, also called absorption costing, is an accounting method that allocates all product-related costs—direct, variable overhead, and fixed overhead—to units of production. It produces a “full” per‑unit cost that is carried in inventory until the related goods are sold, at which point those costs flow to cost of goods sold…

What is front-running? Front-running occurs when a broker, trader, or firm trades a security for their own account based on advance knowledge of a pending client order, recommendation, or other nonpublic information that is likely to move the price. Acting on such information to profit in advance is generally unethical and, in many cases, illegal….

Front Office: Definition, Functions, and How It Differs from Middle and Back Office What is the front office? The front office comprises a company’s customer-facing departments whose primary responsibility is interacting with clients and generating revenue. Typical front-office functions include sales, marketing, customer service, client advisory, and reception. In many industries, front-office staff are the…

Front-End Load: Definition, Types, and Investment Impact What is a front-end load? A front-end load is a sales charge or commission taken out of an investor’s initial payment when buying certain investment products—most commonly mutual funds, annuities, or life insurance contracts. The fee is deducted from the deposit before shares are purchased, so it reduces…

Front‑End Debt‑to‑Income Ratio (DTI) Key takeaways Front‑end DTI measures the percentage of your gross monthly income that goes to housing costs. Housing costs include mortgage principal and interest, property taxes, homeowners insurance, mortgage insurance, and HOA fees. Lenders commonly prefer a front‑end DTI of about 28% or less; back‑end DTI (all debts) is often expected…

Fringe Benefits Fringe benefits are non-wage compensations employers provide to attract, motivate, and retain employees. They range from basic offerings like health insurance and paid time off to unusual perks such as on-site childcare, pet-friendly workplaces, or free meals. Common types Health insurance and group-term life insurance Retirement planning services and health savings accounts (HSAs)…

Friedrich Hayek: Life, Ideas, and Legacy Key takeaways * Friedrich A. von Hayek (1899–1992) was a leading economist and political philosopher of the 20th century, associated with the Austrian School. * He won the 1974 Nobel Prize in Economic Sciences for work on money, economic fluctuations, and the interplay of economic, social, and institutional phenomena….

Friedrich Engels Friedrich Engels (1820–1895) was a German philosopher, social scientist, and political activist who, together with Karl Marx, helped shape modern communist theory. He co-authored The Communist Manifesto, provided financial and intellectual support for Marx’s work, and edited the posthumous volumes of Das Kapital. Engels’s writings combined empirical observation of industrial society with theoretical…

Frictional Unemployment Overview Frictional unemployment is short-term, voluntary unemployment that occurs when people are between jobs or entering or re-entering the labor force. It is a normal feature of a functioning economy and forms part of the economy’s “natural” unemployment. Frictional unemployment often reflects job search and matching processes, not an absence of demand for…

Freudian Motivation Theory Overview Freudian motivation theory holds that unconscious psychological forces—hidden desires, fears, and motives—shape behavior, including consumer choices. Originating with Sigmund Freud’s psychoanalytic framework, the theory helps explain why people buy products that fulfill both conscious needs (functionality) and unconscious wants (status, safety, identity). Key takeaways Behavior is driven by both conscious and…

Frequency Distribution A frequency distribution summarizes how often values or ranges of values occur in a dataset. It organizes raw data into a format that makes patterns, central tendencies, spread, and outliers easier to see and analyze. Definition A frequency distribution is a table or chart that shows the number (frequency) of observations within specified…

Freemium Business Model What is freemium? Freemium (from “free” + “premium”) is a pricing strategy in which a company offers a basic version of a product or service at no cost while charging for enhanced features, add-ons, or an ad-free experience. The free tier removes barriers to entry and helps grow a user base; the…

Free Trade Area Key takeaways A free trade area (FTA) is an agreement among countries to reduce or eliminate tariffs and quotas between members. FTAs increase trade, encourage specialization, and can raise living standards, but they can also shift jobs, create dependencies, and place pressure on domestic industries. The specific scope and effects of an…