Category: Financial Terms

Follow-On Public Offer (FPO) What is an FPO? A follow-on public offer (FPO) is the issuance of additional shares by a company that is already publicly listed. Unlike an initial public offering (IPO), which brings a private company to the public markets for the first time, an FPO raises new capital (or provides liquidity for…

What Is a Follow-On Offering (FPO)? A follow-on offering (FPO) is the sale of additional shares by a company after its initial public offering (IPO). Public companies use FPOs to raise equity capital for purposes such as debt repayment, acquisitions, refinancing, working capital, or other corporate needs. FPOs can also provide a way for existing…

Folio Number: Essential Guide for Investors and Accountants Key takeaways A folio number uniquely identifies an investor’s account with a mutual fund, similar to a bank account number. It records investments, transaction history, contact details, and fee applicability. Folio numbers are used by accountants, lawyers, regulators, and investigators to audit transactions, detect fraud, and reconcile…

Flow-Through Entity A flow-through (or pass-through) entity is a business structure that passes its income, gains, losses, deductions, and credits directly to owners, shareholders, or investors. The entity itself generally pays no federal corporate income tax; instead, the individuals report and pay tax on their share of the business income on their personal tax returns….

Flow of Funds (FOF): Definition, Purpose, and Key Data What are Flow of Funds (FOF) accounts? Flow of Funds (FOF) accounts are national financial accounts that track net money movements among sectors of an economy. They record how funds flow between households, businesses, government, nonprofit organizations, farms, and the foreign sector, capturing changes in assets…

Flotation Cost What is a flotation cost? Flotation costs are the fees a company pays when issuing new securities (typically equity). They include underwriting fees, legal and registration costs, accounting and audit fees, and stock-exchange listing charges. Flotation costs are expressed as a percentage of the issue price and reduce the net capital the company…

Flotation: What It Is, How It Works, Pros and Cons Definition and overview Flotation (commonly called “going public” in the United States) is the process by which a private company becomes a public company by issuing shares for purchase by the general public. The primary purpose is to raise equity capital to fund growth, research…

Floor Trader (FT) A floor trader is an exchange member who executes trades from the exchange floor exclusively for their own account. Historically active in open outcry pits, floor traders today increasingly use electronic systems. They act as individual liquidity providers, helping narrow bid-ask spreads while pursuing profits with their own capital; they are sometimes…

Understanding Floor Area Ratio (FAR) Floor Area Ratio (FAR) measures the relationship between a building’s usable floor area and the size of the lot it occupies. Municipalities use FAR in zoning to control building density, guide urban form, and influence property values and development potential. Formula and how to calculate it FAR = Total building…

Floating Stock: Definition and Why It Matters Floating stock (or “float”) is the number of a company’s shares available for public trading on the open market. It excludes restricted shares and closely held shares owned by insiders, employees, or large shareholders. Formula: * Float = Outstanding shares − Restricted shares − Closely held shares Explore…

Floating-Rate Note (FRN) Key takeaways * A floating-rate note (FRN) is a debt security with a variable interest rate tied to a short-term benchmark (e.g., Treasury bill rate, Fed funds rate, LIBOR, prime) plus a fixed spread. * FRN coupon payments reset periodically (daily to yearly) according to a prospectus-specified reset period and are often…

What is a floating rate fund? A floating rate fund is a mutual fund or exchange-traded fund (ETF) that invests in debt instruments whose interest payments vary with an underlying short-term benchmark rate. Instead of fixed coupons, the interest on the fund’s holdings resets periodically (for example, monthly or quarterly), so the fund’s income tends…

Floating Interest Rate: Definition, How It Works, and Examples A floating (or variable) interest rate is one that changes periodically in line with market conditions or a designated benchmark. Unlike a fixed rate, which stays the same for the agreed term, a floating rate rises or falls as the underlying index moves. Common products with…

Floating Exchange Rate A floating exchange rate is a currency valuation system in which a currency’s price is determined by supply and demand in the foreign exchange (forex) market rather than being fixed by a government or pegged to another currency. Most major currencies today operate under floating rates. Key takeaways Currency values under a…

Floating Charge: Definition, Uses, and Example What is a floating charge? A floating charge is a security interest over a company’s circulating or current assets—such as inventory, accounts receivable, and marketable securities—that are expected to change in value and quantity during normal business operations. Unlike a fixed charge (which attaches to a specific asset and…

Float: What It Is and How It Works What is float? Float is the temporary double-counting of the same funds within the banking system due to delays in processing transactions—most commonly paper checks. When a deposit is credited to a payee’s account but the payer’s bank has not yet completed the transfer, the amount can…

Flip: What it Means, How It Works, Examples A “flip” describes a decisive change in the positioning of an investment or a short-term ownership-to-sale strategy. The term appears in several financial contexts—technical trading, real estate, IPO investing, and macro/portfolio management—and generally implies acting quickly to capture gains or to respond to a changing trend. Key…

Flexible Spending Account (FSA) A Flexible Spending Account (FSA) is an employer-established, pretax account that lets employees set aside wages to pay for qualified medical, dental, and dependent-care expenses. Contributions reduce taxable income, and reimbursements for eligible expenses are tax-free. Employers may also contribute to employees’ FSAs. Key points FSAs are funded with pretax payroll…

Flexible Manufacturing Systems (FMS) A Flexible Manufacturing System (FMS) is a production approach that uses programmable, often automated equipment and interconnected workstations to switch rapidly between different products or product variants. Designed for adaptability, FMS supports make-to-order strategies, enables customization, and reduces inventory and setup downtime while increasing overall production agility. Key takeaways FMS enables…

Flat Yield Curve A flat yield curve occurs when yields on bonds of different maturities are very similar, meaning investors receive nearly the same return for short-term and long-term securities of the same credit quality. It often appears during transitions between a normal (upward-sloping) curve and an inverted curve and typically signals uncertainty about future…

Flat Tax Key takeaways A flat tax levies a single income tax rate on all taxpayers regardless of income and typically eliminates most deductions and exemptions. Many flat taxes exclude certain investment income (capital gains, dividends). Flat-rate levies such as payroll and sales taxes are common examples; sales taxes tend to be regressive in effect….

Trading Flat: Definition, How It Works, and When It Applies Trading flat describes market or position conditions where there is little or no meaningful price movement. The term applies across asset classes—equities, bonds, and foreign exchange—with slightly different practical meanings in each context. Key takeaways “Flat” generally means neither rising nor falling: prices are stable…

Fixed-Rate Payment What it is A fixed-rate payment is a loan installment in which the interest rate — and therefore the monthly payment amount — remains constant for the life of the loan. While the total monthly payment stays the same, the portions applied to interest and principal change over time. Sometimes called a “vanilla”…

Fixed-Rate Mortgage: How It Works and When to Choose One What is a fixed-rate mortgage? A fixed-rate mortgage is a home loan with an interest rate that stays the same for the entire length of the loan. Monthly payments for principal and interest remain constant, making budgeting straightforward. Common terms are 15 and 30 years,…

What is a fixed interest rate? A fixed interest rate is an interest charge on a loan that remains the same for the loan’s entire term. With a fixed rate, monthly principal-and-interest payments are predictable and do not change with market interest-rate movements. Fixed rates are common on mortgages, auto loans, personal loans, and some…

Fixed-Income Security Key takeaways Fixed-income securities pay predictable interest (coupons) and return principal at maturity. Common types include government debt (T-bills, notes, bonds), municipal bonds, corporate bonds, CDs, savings bonds, and preferred stock. Risks include interest-rate risk, inflation risk, credit/default risk, and liquidity risk. Fixed income is useful for portfolio diversification and stable income; tax…

Fixed Income Clearing Corporation (FICC) Overview The Fixed Income Clearing Corporation (FICC) is the United States clearing agency that facilitates confirmation, netting, settlement, and delivery for U.S. government securities and mortgage‑backed securities (MBS). Established in 2003 as a subsidiary of the Depository Trust & Clearing Corporation (DTCC), FICC was formed by merging the Government Securities…

Fixed Income Fixed income refers to investments that pay regular interest or dividends for a defined period and return the original principal at maturity. Common fixed-income instruments include government and corporate bonds, certificates of deposit (CDs), and some preferred stocks. These products generally offer lower volatility and lower expected returns than equities, making them a…

Fixed Exchange Rate What it is A fixed exchange rate (or peg) is a system in which a country’s currency value is tied to another currency, a basket of currencies, or a commodity (such as gold). The peg keeps the currency’s value within a narrow band to promote price stability and predictability. How it works…

Fixed Cost: Definition and Use in Business Key takeaways * A fixed cost is an expense that does not change with short-term variations in production or sales within a relevant range. * Typical examples: rent, insurance, interest, depreciation, property taxes, and some salaries. * Fixed costs affect breakeven analysis, operating leverage, and per-unit costs (economies…

Fixed-Charge Coverage Ratio (FCCR) What it is The Fixed-Charge Coverage Ratio (FCCR) measures a company’s ability to cover fixed financial obligations—such as interest, lease payments, insurance, and other fixed charges—from operating earnings. Lenders and creditors use it to assess how comfortably a business can meet recurring fixed payments. Formula and terms FCCR = (EBIT +…

Fixed Capital Key takeaways Fixed capital is money invested in long-term physical assets used in production, such as property, plant, and equipment (PP&E). These assets are not consumed during production and provide value over multiple accounting periods. Fixed capital is typically illiquid and depreciates over time; it can be owned or held via long-term leases….

Fixed Asset Turnover Ratio What it is The Fixed Asset Turnover (FAT) ratio measures how efficiently a company uses its fixed assets—primarily property, plant, and equipment (PP&E)—to generate net sales. A higher FAT indicates more effective use of fixed-asset investments to produce revenue. Important: fixed assets should be measured net of accumulated depreciation. Explore More…

Key Takeaways * Fixed assets (also called capital assets) are long-term tangible resources a company uses to operate or generate income, typically listed as property, plant, and equipment (PP&E) on the balance sheet. * They are noncurrent and not easily converted to cash within a year; their cost is allocated over time through depreciation (except…

Fixed Annuity: Uses, How It Works, Benefits, and Drawbacks What is a fixed annuity? A fixed annuity is an insurance contract that guarantees a specified rate of return on contributions and can provide a predictable stream of income in retirement. Earnings grow tax-deferred during the accumulation phase, and distributions begin during the payout phase. Fixed…