Category: Financial Terms

Financial Intermediary What is a financial intermediary? A financial intermediary is an institution that connects parties in financial transactions—typically savers (or investors) and borrowers—by mobilizing, allocating, and managing capital. Common intermediaries include commercial banks, investment banks, mutual funds, pension funds, insurance companies, and non-bank firms that provide leasing, factoring, or other financial services. How financial…

Financial Instruments Explained A financial instrument is a real or virtual contract that represents a monetary claim, obligation, ownership interest, or right to receive or deliver cash or another financial asset. Financial instruments enable the transfer of capital and risk among investors, institutions, and markets. How financial instruments work Financial instruments either create an ownership…

Financial Institutions (FI): Definition, Roles, Types, and Regulation A financial institution (FI) is an organization that facilitates monetary transactions—accepting deposits, making loans, underwriting and trading securities, providing insurance, advising on investments, and exchanging currencies. FIs connect savers and borrowers, allocate capital, manage risk, and enable payments, making them central to economic activity and stability. Key…

Financial Information eXchange (FIX) The Financial Information eXchange (FIX) is a widely adopted, open protocol for real-time electronic communication of securities transaction information. Designed to standardize and speed messaging across pre-trade, trade, and post-trade workflows, FIX reduces manual processes and improves the accuracy and accountability of market communication. Key takeaways FIX is the de-facto global…

Financial Industry Regulatory Authority (FINRA) What FINRA is The Financial Industry Regulatory Authority (FINRA) is an independent, private, not‑for‑profit self‑regulatory organization that creates and enforces rules for U.S. registered brokers and broker‑dealer firms. Its stated mission is to protect investors from fraud and abusive practices. FINRA was formed in 2007 through the consolidation of the…

Financial Independence, Retire Early (FIRE) Financial Independence, Retire Early (FIRE) is a movement built on frugality, aggressive saving, and investing with the goal of achieving enough assets to stop depending on a traditional full‑time paycheck—often many years before conventional retirement age. Origins: Many core ideas come from the book Your Money or Your Life, which…

Financial Inclusion Financial inclusion means making affordable, useful financial services — such as payments, savings, credit and insurance — accessible to all individuals and businesses, especially those who are underserved or marginalized. It supports economic participation, reduces poverty and inequality, and fosters innovation by bringing more people into the formal financial system. Key takeaways Financial…

Financial Health Financial health describes the overall condition of your personal finances: how well you can meet current obligations, withstand shocks, and progress toward long‑term goals. It spans savings, debt, cash flow, insurance, and retirement readiness. Key measures of financial health Net worth = total assets − total liabilities. A positive, growing net worth is…

Financial Guarantee A financial guarantee is a promise by a third party (the guarantor) to repay a loan or satisfy a debt if the original borrower fails to do so. Guarantees reduce lender risk, can improve a borrower’s credit profile, and often result in lower borrowing costs. They take various forms in corporate and personal…

Financial Exposure: What It Is, Why It Matters, and How to Manage It What is financial exposure? Financial exposure is the amount an investor stands to lose if an investment fails — essentially the dollar value of risk to one’s principal. It applies to any situation where money is put at risk, from stock purchases…

Financial Engineering What it is Financial engineering applies mathematics, statistics, computer science, and economics to solve quantitative problems in finance. Practitioners develop models, trading strategies, and structured products to analyze markets, manage risk, and create new financial instruments. How it’s used Financial engineers use quantitative modeling and computing to: * Design and price derivatives and…

Understanding Financial Economics: Concepts, Models, and Investment Insights Definition Financial economics is the branch of economics that analyzes how resources are allocated and priced in markets under uncertainty. It focuses on monetary decisions involving time, risk, and information, combining economic theory with quantitative tools to guide investment and policy decisions. Key takeaways Financial economics examines…

Financial Distress: Definition, Signs, and Remedies Key takeaways * Financial distress occurs when income or cash flows are insufficient to meet obligations. * Left unaddressed, distress can lead to asset loss, diminished creditworthiness, or bankruptcy. * Remedies include cost reduction, debt restructuring, improved cash management, and—in systemic cases—regulatory resolution measures. What is financial distress? Financial…

Financial crises occur when parts of the financial system—banks, markets, or whole economies—face sudden, large declines in asset values and severe liquidity shortages. They undermine confidence, disrupt credit flows, and can trigger deep recessions or depressions. Key takeaways * A financial crisis typically involves sharp asset-price declines, liquidity shortfalls at financial institutions, and widespread difficulty…

Finance Charge: Definition, How It Works, and What Borrowers Should Know Definition A finance charge is any fee charged for the use or extension of credit. It typically appears as interest but can also include transaction fees, origination fees, account maintenance fees, and late-payment penalties. Finance charges are usually expressed as a percentage of the…

Financial Asset — Definition and Overview A financial asset is a non-physical asset that represents a contractual claim or ownership interest and can generate income or be converted into cash. Examples include cash, stocks, bonds, bank deposits, mutual funds, and other securities. Unlike tangible assets (real estate, commodities) and intangible assets (patents, trademarks), financial assets…

Financial Analysis: Definition, Purpose, Types, and Examples What is financial analysis? Financial analysis evaluates a company’s financial health, performance, and prospects by examining its financial statements and related data. It turns raw numbers into actionable insight for decision making — whether by management improving operations or investors assessing whether to buy or lend. Key takeaways…

Financial Advisor: How to Choose the Right One for You What is a financial advisor? A financial advisor is a professional who provides compensated guidance on money matters such as investments, tax planning, retirement, estate planning, insurance, and overall financial strategy. Advisors may offer one or many services and increasingly act as a “one-stop shop”…

Financial Accounting Standards Board (FASB) The Financial Accounting Standards Board (FASB) is the independent nonprofit organization that establishes accounting and financial reporting standards for public and private companies and nonprofit organizations in the United States. Its standards—known collectively as generally accepted accounting principles (GAAP)—guide how entities prepare and present financial statements so that users (investors,…

Understanding Financial Accounting: Principles, Methods & Importance Financial accounting records, summarizes, and reports a company’s transactions to present an accurate picture of its financial position and performance. Its outputs—standardized financial statements—are used by external parties (investors, lenders, regulators) and must follow frameworks such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS)….

Financial Account Key takeaways * The financial account is a component of a country’s balance of payments that records changes in international ownership of financial assets and liabilities. * Main components: direct investment, portfolio investment, and reserve assets (broken down by sector). * Typical financial assets include currency, gold, bonds, equities, derivatives, and special drawing…

What Is Finance? Finance is the study and management of money and financial resources by individuals, businesses, and governments. It covers how people and institutions make, save, invest, borrow, and spend money to meet goals, manage risk, and allocate capital efficiently. Key Takeaways * Finance covers personal, corporate, and public finance. * It combines quantitative…

Fill or Kill (FOK) What it is A fill or kill (FOK) order is a time-in-force instruction in securities trading that requires an order to be executed immediately and in full, or else it is canceled. It combines the all-or-none (AON) requirement for a complete fill with the immediate execution focus of an immediate-or-cancel (IOC)…

Filing Status: What It Means for Your Taxes Key takeaways Filing status determines which tax form you use and affects tax brackets, deductions, and credits. There are five federal filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er)/Surviving Spouse. Choosing the correct status is essential—misreporting your status can lead…

Fiduciary Definition: Examples and Why They Are Important Key takeaways * A fiduciary is legally and ethically required to put another party’s interests ahead of their own. * Common fiduciary duties include the duty of care, duty of loyalty, and duty to act in good faith. * Fiduciary relationships appear across finance, law, corporate governance,…

Fidelity Bond What is a fidelity bond? A fidelity bond is an insurance policy that protects a business against financial loss caused by employee dishonesty, fraud, theft, forgery, or other wrongful acts. Although called a “bond,” it is not a tradable security and does not accrue interest. In some countries it is known by other…

FICO Score What it is A FICO score is a three-digit credit score (range 300–850) developed by Fair Isaac Corporation that lenders use to evaluate a borrower’s creditworthiness. Higher scores indicate lower credit risk. FICO scores are widely used in U.S. lending decisions, including the majority of mortgage approvals. How it’s calculated FICO bases scores…

Fibonacci retracement levels are a technical analysis tool traders use to identify potential support and resistance zones during price pullbacks. Based on ratios derived from the Fibonacci sequence, the most commonly watched levels are 23.6%, 38.2%, 50%, 61.8%, and 78.6%. These levels help traders anticipate where a market may stall, reverse, or resume its trend….

Fibonacci Numbers and Lines Definition The Fibonacci sequence is a series of numbers in which each number equals the sum of the two preceding ones: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, … Explore More Resources › Read more Government Exam Guru › Free Thousands of Mock Test for Any Exam ›…

Fibonacci Extensions Key takeaways * Fibonacci extensions are charting levels used to project where a price wave may move after a retracement, commonly used to set profit targets or identify potential reversal areas. * They are drawn by selecting three points on a chart (start of a move, end of a move, end of the…

Fiat Money Explained What is fiat money? Fiat money is currency issued by a government that is not backed by a physical commodity (like gold or silver). Its value comes from trust in the issuing government, legal status as money, and the willingness of people to accept it in exchange. Most modern national currencies—the U.S….

FHA 203(k) Loan: Definition, How It Works, and Key Considerations An FHA 203(k) loan is a government‑insured mortgage that combines the cost of purchasing (or refinancing) a home with funds to repair or renovate it. It enables borrowers to finance both the property and eligible improvements in a single loan, making it easier to buy…

What is a feeder fund? A feeder fund is a smaller investment vehicle that pools investor capital and channels it into a central, overarching fund called a master fund. The master fund consolidates the capital from one or more feeder funds and executes all portfolio management and trading on behalf of those feeders. This master–feeder…

Feed-In Tariff (FIT) Key takeaways A feed-in tariff (FIT) guarantees long-term, cost-based payments to producers of renewable electricity, typically above market rates. FITs reduce investment risk by offering long-term contracts (commonly 15–25 years) and guaranteed grid access. Widely used internationally (notably Germany, Japan, China), FITs helped scale early solar and wind deployment, though some jurisdictions…

Understanding Fees: Definition, Types, and How to Avoid Hidden Charges A fee is a fixed charge for a specific service. Fees appear as costs, commissions, penalties, or surcharges across many transactions—from banking and investments to travel, real estate, and government services. Some fees are transparent and expected; others are added later or buried in fine…