Category: Financial Terms

Fair Market Value (FMV) Fair market value (FMV) is the price at which an asset would change hands between a willing buyer and a willing seller, both reasonably informed, acting in their own best interests, free of undue pressure, and given a reasonable time to complete the transaction. FMV is used to produce an objective,…

Fair Labor Standards Act (FLSA): Overview The Fair Labor Standards Act (FLSA) is a federal law that establishes basic labor standards in the United States, including minimum wage, overtime pay, child labor protections, and record-keeping requirements. Enacted in 1938, the FLSA has been amended over time to broaden coverage and address pay discrimination. Key takeaways…

Fair Debt Collection Practices Act (FDCPA) Key takeaways The FDCPA limits how, when, and how often third‑party debt collectors may contact you. It applies to collectors working for collection agencies (not original creditors collecting their own accounts) and covers common household debts (credit cards, medical bills, student loans, mortgages). Collectors must send a written validation…

Fair Credit Reporting Act (FCRA) What the FCRA is The Fair Credit Reporting Act (FCRA) is a federal law that governs how consumer credit information is collected, used, retained, and shared. Enacted in 1970, it aims to promote the accuracy, fairness, and privacy of data held by credit reporting agencies (CRAs). Who enforces it The…

Fair Credit Billing Act (FCBA) Key takeaways The FCBA protects consumers with open-end credit (credit cards, charge accounts, lines of credit) from billing errors and unauthorized charges. Consumers generally have 60 days from the date a statement is mailed to dispute a billing error in writing (phone disputes allowed for lost/stolen cards). Creditors must acknowledge…

Failure to Deliver (FTD): Definition, Causes, and Effects Failure to deliver (FTD) occurs when one party to a trade or contract does not fulfill the obligation to transfer cash or the agreed asset by settlement. This can happen in equity trades, futures, forwards, and other contracts. Causes include insufficient funds, lack of the underlying asset,…

Facultative Reinsurance Facultative reinsurance is a form of reinsurance in which a reinsurer reviews and accepts or rejects individual risks (or specific blocks of risk) offered by a primary insurer. It provides tailored, policy-by-policy coverage for unusual, large, or otherwise atypical exposures that a primary insurer prefers not to retain fully. Key takeaways Facultative reinsurance…

FactSet FactSet Research Systems is a financial data and software company that consolidates market data, company information, and analytics into a single platform for financial professionals. Its tools are used by investment managers, hedge funds, investment bankers, and other financial institutions to support research, portfolio analysis, and reporting. What FactSet does Aggregates global market data…

Factors of Production Factors of production are the broad categories of resources required to produce goods and services: land, labor, capital, and entrepreneurship. These elements combine in different proportions depending on the industry and business model, and the distribution of ownership over them influences how wealth and economic activity are organized. Brief history and concept…

Factor Market: Definition, How It Works, and Why It Matters What is a factor market? A factor market (also called an input market) is where businesses obtain the resources needed to produce goods and services. These resources—known as the factors of production—include: Labor (human work and skills) Capital (machinery, equipment, financial capital) Land and natural…

Factor Investing Factor investing is an investment approach that selects securities based on attributes (factors) historically associated with higher returns or different risk exposures. By targeting broad, persistent drivers of returns, factor investing seeks to enhance diversification, manage risk, and potentially generate above-market performance. Key takeaways Factors are characteristics that help explain asset returns across…

What is a factor? A factor is a financing intermediary that purchases a company’s accounts receivable (invoices) in exchange for immediate cash. The factor pays the company a portion of the invoice value up front and collects payment from the invoiced customer. The purchase price is typically reduced by fees and commissions. How factoring works…

Facility: Definition, Loan Types, and Examples Key takeaways – A facility is a formal lending arrangement from a bank or financial institution that provides a company with access to capital. – Common facility types include overdraft services, lines of credit, revolving credit, term loans, and letters of credit. – Facilities can be short- or long-term…

Face Value: What It Means and How It Differs From Market Value Face value, also known as par value or par, is the nominal dollar value assigned to a financial security by its issuer. It serves different roles depending on the type of security and should not be confused with market value—the price investors currently…

What Are FAANG Stocks? FAANG is an acronym for five leading U.S. technology companies: Meta (META, formerly Facebook), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Alphabet (GOOG, formerly Google). The term originated as “FANG” and was popularized in 2013; Apple was later added to form FAANG. These companies are recognized for their consumer brands, market…

1913 Federal Reserve Act — Overview The 1913 Federal Reserve Act created the Federal Reserve System, the central bank of the United States. Enacted to address recurring banking panics and instability in financial markets, the law established a national framework to manage monetary policy, provide liquidity to the banking system, and promote a stable financial…

Extrinsic Value Extrinsic value (also called time value) is the portion of an option’s premium that exceeds its intrinsic value. It reflects factors other than the option’s immediate in‑the‑money amount—primarily time until expiration and implied volatility. How extrinsic and intrinsic values combine An option’s premium = intrinsic value + extrinsic value. Explore More Resources ›…

Extraordinary Item: Definition, How It Worked, and What Changed What an extraordinary item was An extraordinary item was a gain or loss from an event that was both unusual and infrequent in nature, and thus presented separately on a company’s financial statements. These items were typically one‑time in nature and outside normal operating activities, so…

Extraordinary General Meetings (EGMs) Key takeaways An Extraordinary General Meeting (EGM) is called to resolve urgent matters that cannot wait until the next Annual General Meeting (AGM). EGMs can address issues such as the removal of executives, pressing legal matters, or other time-sensitive corporate decisions. EGMs may be convened at short notice and on any…

Production externalities Production externalities are side effects of industrial or business activity that affect third parties and are not reflected in the market price of the good or service. These effects can be economic, social, or environmental and may be positive or negative. Measuring production externalities Production externalities are typically measured as the difference between:…

Understanding Externalities: Positive and Negative Economic Impacts An externality occurs when an activity by one party imposes an unintended cost or benefit on others. These effects—positive or negative—are not reflected in market prices, creating a gap between private incentives and social outcomes. Because externalities often produce market inefficiencies, public policy and private strategies frequently aim…

External Economies of Scale External economies of scale occur when the average cost of production falls for all firms in an industry because of factors outside any single company. These benefits arise from industry-wide developments—such as improved infrastructure, a specialized labor pool, or technological diffusion—that reduce costs or increase productivity across many firms located in…

External Debt: Definition, Types, Risks, and Consequences Key takeaways * External debt is the portion of a country’s debt borrowed from nonresident lenders and usually must be repaid in the currency of the loan. * It includes principal and interest but excludes contingent liabilities. * External debt can finance needed investment or humanitarian aid, but…

Extended Trading: How It Works, Risks, and Hours Extended trading refers to buying and selling securities on electronic venues outside an exchange’s regular hours. In the U.S., regular market hours run from 9:30 a.m. to 4:00 p.m. ET. Extended sessions typically include pre-market trading (commonly from about 4:00 a.m. to 9:30 a.m. ET) and after-hours…

Expropriation: Definition, Legal Basis, and Compensation Key takeaways * Expropriation is a government taking of privately owned property for public use, typically accompanied by compensation. * In the U.S., the power to take property is exercised under the doctrine of eminent domain and constrained by the Fifth Amendment requirement of “just compensation.” * Compensation disputes…

Express Warranty An express warranty is a seller’s explicit promise that a product, component, or service will be repaired, replaced, or otherwise remedied if it is faulty within a specified time period. Buyers often rely on these promises when deciding to purchase. Key points An express warranty can be oral or written and may appear…

Exposure at Default (EAD): Definition, Calculation, and Risk Management What is Exposure at Default (EAD)? Exposure at Default (EAD) is the estimated monetary amount a lender stands to lose when a borrower defaults on a loan. It reflects the outstanding balance and any additional credit that may be drawn before default. EAD is a core…

What Is an Export? An export is a good or service produced in one country and sold in another. Exports, together with imports, form international trade and help countries access larger markets, increase revenue, and specialize according to comparative advantage. Why Exports Matter They expand markets for businesses, increasing potential sales and profits. Exports contribute…

Export Trading Company (ETC) An export trading company (ETC) is an independent firm that handles export-related functions on behalf of manufacturers and exporters. Services commonly include warehousing, shipping, insurance, billing, market research, and finding overseas buyers. An ETC can act as a company’s export division or be formed by a group of producers to consolidate…

Export Credit Agency What is an Export Credit Agency (ECA)? An export credit agency (ECA) is a public or private institution that helps domestic companies sell goods and services overseas by reducing the financial risks of international trade. ECAs provide financing, guarantees, and insurance that private lenders may be unwilling to offer—especially for transactions involving…

Exponential Moving Average (EMA) What it is The Exponential Moving Average (EMA) is a type of moving average that gives greater weight to recent price data, making it more responsive to new information than a Simple Moving Average (SMA). Traders use EMAs to identify trend direction, generate signals, and smooth price action while preserving sensitivity…

Exponential Growth Overview Exponential growth describes a process where a quantity increases by a constant multiplicative factor over equal time periods. On a chart it starts slowly, then accelerates rapidly, producing the characteristic J-shaped curve of an exponential function. Formula The standard formula for exponential growth is: V = S × (1 + R)^T Explore…

Exploration & Production (E&P) Exploration and production (E&P) is the upstream segment of the oil and gas industry focused on finding and extracting crude oil and natural gas. E&P activities lay the foundation for the rest of the energy value chain by locating resources, drilling wells, extracting hydrocarbons, and closing sites when reserves are depleted….

Explicit Cost: Definition and Overview Explicit costs are tangible, out-of-pocket business expenses that are recorded in a company’s general ledger and reflected on the income statement. They have clearly defined dollar amounts and directly reduce accounting profit. Examples include wages, rent, utilities, raw materials, advertising, and payments for purchased equipment. Key Points Explicit costs are…

Expiration Date (Derivatives) An option’s expiration is the specific date and time when the contract becomes void. It determines how long the holder can exercise the right to buy (call) or sell (put) the underlying asset at the agreed strike price. Expiration strongly influences an option’s value, risk profile, and suitable trading strategies. Types of…