Face Value
The principal of a stock, bond, or other security. Also the principal of an insurance policy. Face value is sometimes called par value.

Factoring
The practice of buying debt at a discount, e.g., if somebody owes you $10,000 payable within a year, a factoring lender may pay you $9,000 for the debt. You receive $9,000 cash quickly, but at the cost of the $1,000 discount.

Fair Labor Standards Act  
A U.S. federal law that enforces a group of minimum standards that employers must abide by when hiring employees.

Fair Market Value (FMV)
The price at which a willing seller will sell and a willing buyer will buy, in an arms- length transaction, when neither is under compulsion to sell or buy and both have reasonable knowledge of relevant facts. FMV is the reasonable price of an asset. Fair mark et value is the price that a willing seller and buyer would negotiate for an asset, given that both know all the facts and are not under compulsion to buy or sell.

Fair-Trade Agreement
An agreement between a producer and a seller that commodities bearing a trademark, label, or trade name belonging to the producer be sold at or above a specified price.

Fair Value
Under GAAP, is the amount at which an asset could be bought or sold in a current transaction between willing parties, other than in liquidation. On the other side of the balance sheet, the fair value of a liability is the amount at which that liability could be incurred or settled in a current transaction between willing parties, other than in liquidation.

F.A.S. (Free Along Side)
e.g. “F.A.S. New York”, means that, for instance, if goods are shipped from the State of Nevada in the U.S. to Madrid, Spain, no charges for shipment are made to the importer until the goods are "free alongside the vessel" in New York. After this point, charges may be applied to the importer.

FASB see Financial Accounting Standards Board.

FCIA (Foreign Credit Insurance Act)
An EximBank program that offers credit insurance against losses due to political conflict or buyer default.

Federal Unemployment Tax (FUTA)
Tax paid on wages and salaries to pay for federal and state unemployment programs. A U.S, federal law providing guidelines for the unemployment compensation system. A Federal tax is paid by all liable employers to fund the administration of Federal and State unemployment insurance programs and the extended benefits program. FUTA provides for payments of unemployment compensation to workers who have lost their jobs. Most employers pay both a federal and a state unemployment tax.

Fee
An inheritable freehold estate in real property

Fee Accountant
An individual who performs manual or automated bookkeeping services and/or maintains the official accounting records.

Fee Simple
Absolute ownership of real property; owner is entitled to the entire property. This includes unencumbered right of disposition during his/her life and upon death the real property passes to his/her heirs. Also known as FEE SIMPLE ABSOLUTE and FEE ABSOLUTE.

Fiat Money
Money not backed by gold.

FICA (Federal Insurance Contributions Act)
The U.S. law requiring U.S. employers to match the amount of Social Security tax deducted from an employee's paycheck.

Fictitious Asset
Debit balance includes on balance sheets as assets that do not conform to the definition of an asset. Intentional includes of assets known to be fictitious assets may be ruled as fraud.

Fictitious Name
Is often referred to as a DBA, "Doing Business As," a fictitious name is frequently used by sole proprietors or partnerships to provide a name, other than those of the owners or partners, under which the business will operate.

Fidelity Bonds
Bonds that bankers purchase from insurance companies to protect themselves against robbery, employee fraud, and other wrongdoings. In some states, banks are required to purchase fidelity bonds.

Fiduciary
A person who manages someone else’s investments. A person or business (for example, a bank or stock brokerage) who has the power and obligation to act for another (often called the beneficiary) under circumstances which require total trust, good faith and honesty.

FIFO (First-In, First-Out)
An inventory cost flow whereby the first goods purchased are assumed to be the first goods sold so that the ending inventory consists of the most recently purchased goods.

Finance Charge
The cost of interest payments, filing fees, and other costs apart from the actual cost of an item. The finance charge is what you pay when you finance a purchase.

Financial Accounting Standards Board (FASB)
The board that establishes rules for certified public accountants (CPAs). This board also determines the generally accepted accounting principles.

Financial Planning
Counseling by financial planners to help individuals get the highest returns for their investments.

Financial Position
The status of a firm's or individual's assets, liabilities, and equity positions as reflected on its financial statement.

Financial Risk
The possibility of whether a bond issuer will default, by failing to repay principal and/or interest in a timely manner. Usually bonds issued by the federal government, for the most part, are immune from default (if the government needs money... more is printed). Bonds issued by corporations are more probable to be defaulted on, since companies often go bankrupt. Municipalities occasionally default as well, but it is much less common. Can also be called default risk or credit risk.

Financial Statement
A statement of one's status with regard to money or wealth.

Financial Statement Analysis
Analysis of a company's financial statement, usually by accountants or financial analysts. Usually includes in depth financial ratio analysis comparisons over time periods.

Financial Viability
The ability of an entity to continue to achieve its operating objectives and fulfill its mission over the long term.

Finished Goods Inventory
That portion of goods in inventory which have completed manufacture and are available for sale.

Fiscal Year
A period of 12 months for which a company plans its budget and reports on its financial activity. The fiscal year and the calendar year often do not coincide; the fiscal-year can begin at any point in the calendar year.

Fixed Asset
A tangible asset, such as equipment, that a company cannot dispose of without interrupting normal business activities. It is a long-term tangible asset that is not expected to be converted into cash in the current or upcoming fiscal year, e.g., buildings, real estate, production equipment, and furniture. Sometimes called PLANT.

Fixed Assets
Those assets of a permanent nature required for the normal conduct of a business, and which will not normally be converted into cash during the ensuring fiscal period. For example, furniture, fixtures, land, and buildings are all fixed assets. However, accounts receivable and inventory are not. Sometimes called PLANT.

Fixed Assets (Net)/Net Worth
Measures liquidity by comparing "fixed" assets with "fixed" capital. A lower ratio indicates proportionately smaller investment and a better "cushion" for creditors in case of liquidation. This may be important if the fixed assets are not easily used in other businesses. The presence of substantial leased fixed assets (not shown on the balance sheet) may deceptively lower this ratio. Therefore smaller is better, i.e., greater than .75 (75%) should merit caution.

Fixed Asset Turnover (FAT)
Measures management's ability to generate revenues from investments in fixed assets. FAT considers only the firm's investment in property, plant and equipment and is extremely important in high asset firms such as manufactures and telecommunications companies. Generally, the higher this ratio:

a) the smaller the investment required to generate sales, thus the more profitable the firm.

b) indicates the firm has less money tied up in fixed assets for each dollar of sales revenue.

A declining ratio may indicate that the firm has over-invested in plant, equipment, or other fixed assets.

Fixed Charge
Those expenses incurred each time a batch of product is produced. Primarily consists of ordering cost for the raw material, engineering costs for machine setup and preparation for the production run, and work order processing cost; also known as SETUP COST.

Fixed Expenses
The operation of a business are those expenses that remain the same regardless of production or sales volume, i.e. do not fluctuate with sales volume. Contrast with VARIABLE EXPENSES.

Fixed Income
Any type of investment that yields a regular (fixed) payment. For example, if you borrow money and have to pay interest once a month, you have issued a fixed income security. When a company does this, it is called a bond (although 'preferred stock' is also sometimes considered to be fixed income). The term fixed income is also applied to people's income which is invariant each period. This could include income derived from fixed income investments such as bonds and preferred stocks or pensions that guarantee a fixed income. See NON-FIXED INCOME.

Fixed Overhead
Those costs like rent, utilities, basic telephone, loan payments, etc., that stay the same whether sales go up or down. Variable overhead, on the other hand, are those costs which vary directly with production.

Fixed-Rate Loan
A loan whose rate of interest does not change.

Fixture
Personal property that becomes part of real property because of the way in which it is used. Fixture is a legal term. If you build shelves into a wall in your rented apartment, they become a fixture; that is, they are a part of the rental property.

Flash Report
Provides highlights of key information promptly to the responsible managerial accountant; also called EXCEPTION REPORT.

Flat Interest
Refers to charging interest on the full original loan amount, rather than on the declining balance. With group based loans, for example, a common "interest rate" is "3% per month, flat, for 4 months". This means that a $100 principal amount lent is multiplied by 3%, and then by 4 months to come up with $12 in interest. Thus, $112 would be repaid over 4 months in equal installments.

Flat Lease
A lease where the cost is fixed for a specific period of time.

Flat Rate
A per unit price that remains constant regardless of the volume purchased.

Float
Is 1. the time between the deposit of checks in a bank and when the amount is truly accessible; 2. the amount of funds represented by checks that have been written but not yet presented for payment. Some entities will 'play the float' by writing checks although there are insufficient funds actually on deposit to cover the checks; and, 3. to issue new securities through an underwriter.

F.O.B. (Free On Board)
A transportation term that indicates that the price for goods includes delivery at the seller’s expense to a specified point and no further. The FOB term is used with an identified physical location to determine 1) the responsibility and basis for payment of freight charges, and 2) the point to which title for the shipment passes from seller to buyer. The FOB location terms, Origin and Destination, may be qualified by modifiers. The modifier determines the payment of the transportation charges. Modifiers denote nothing about the title of the goods or filing of claims. The most three common modifiers are: Collect, Prepaid & Add, and Prepaid & Allow. Collect: The carrier collects the transportation charges from the buyer. Prepaid & Add: The seller prepays the transportation charges, but adds the charges to the invoice for reimbursement from the buyer. Prepaid & Allow: The seller prepays the transportation charges and they are already included in the contract price.

Folio
Dependent upon application, is a) a book (or manuscript) consisting of large sheets of paper folded in the middle to make two leaves or four pages; or, b) a sheet of any written or printed material (especially in a manuscript or book); or, c) the system of numbering pages; or, d) in investments, an unstructured basket of common stock that may represent a stock index, a sector or theme, or even an actively-managed portfolio at inception, but which may be modified by an investor or an advisor to meet the tax and spending needs of its owner. The rationale for the folio is to take advantage of diversification and the ability to realize tax losses in a separately managed account. In general, an investor will have to devote a fair amount of time to the folio or engage the services of a specialized advisor.

Forbearance
Not seeking penalties against a borrower in default, on the condition that the borrower will fulfill obligations in the future.

Foreclosure
Legal proceeding in which a lender attempts to obtain the collateral that was secured for a defaulted loan.

Forensic Accounting
Provides for an accounting analysis that is suitable to a court of law which will form the basis for discussion, debate and ultimately dispute resolution. Forensic accounting encompasses investigative accounting and litigation support. Forensic accountants utilize accounting, auditing and investigative skills when conducting an investigation. Equally critical is the ability to respond immediately and to communicate financial information clearly and concisely in a courtroom setting.




 

Forged check
A check whose drawer signature or endorsement signature is not valid.

Forgery
Fraudulently altering a document, such as a check.

Form 1065 (Schedule K-1)
The domestic partnership income tax return form used in the U.S.

Form 1099
The disclosure form filed with the IRS that lists all independent contractor income and all unearned income from stocks, bonds, interest, and the like.

Form 1120
The income tax return form used by corporations in the U.S.

Franchise
A business arrangement whereby one party is allowed to use another party’s name for a fee. It is a legal arrangement giving rights to sell a product or service. Fast-food eateries are the best examples of franchises.

Franchise Tax
A tax imposed by a state on a business headquarters outside the state that does business in the state.

Fraud
Intentional deception undertaken to trick someone else into parting with something of value. No legal definition of fraud exists.

Free Trade Agreement
An agreement between countries that will result, over an agreed period of time, in an elimination of duties for goods flowing between the signatories

Fresh Start Accounting
Upon emergence from bankruptcy, the consolidated financial statements of the "Successor Company" apply the provisions of fresh start accounting in accordance with Generally Accepted Accounting Principles (GAAP). Under fresh start accounting, a new reporting entity, the “Successor Company”, is deemed to be created, and the recorded amounts of assets and liabilities are adjusted to reflect their fair value. As a result, the reported historical financial statements of the “Predecessor Company” generally are not comparable to those of the "Successor Company".

Friendly Takeover
Consists of a straight buyout of a company, and happens all the time. The shareholders receive cash or (more commonly) an agreed-upon number of shares of the acquiring company's stock.

Full Charge Bookkeeper
Someone who can do it all - including compiling the data into the General Ledger and preparing financial statements.

Full Disclosure
Generally, is the requirement to disclose all relevant or material facts to a transaction.

Fully Depreciated
When an asset has already been charged with the maximum amount of depreciation allowed by the taxing authority for accounting purposes.

Functional-Based Accounting
Focuses on organizational units such as departments and plants, uses financial outcome measures and static standards and benchmarks to evaluate performance, and emphasizes status quo and organizational stability. On the other hand, activity-based accounting focuses on processes, uses both operational and financial measures and dynamic standards, and emphasizes and supports continuous improvement. Activity-based accounting adds a process perspective.




 

Fund Accounting
A method of accounting and presentation whereby assets and liabilities are grouped according to the purpose for which they are to be used. Generally used by government entities and not-for-profits.

Fundamental Analysis
A method used to evaluate the worth of a security by studying the financial data of the issuer. Performing fundamental analysis will teach you a lot about a company, but virtually nothing about how it will perform in the stock market. Apply this analysis on two competing companies or in comparison to its industry and it becomes clearer which the best investment choice is. See FUNDAMENTALS.

Fundamentals
Factors which are “fundamental” to the working of a company’s business, its profitability, operating costs, product prices, technical innovations, etc. Company analysis taking into account these fundamental factors facilitates share valuation. See FUNDAMENTAL ANALYSIS.

Fund Theory
Views the organization as a series of funds or sub-funds represented by various services or departments.

FUTA see FEDERAL UNEMPLOYMENT TAX ACT.

Future Value
The value that a stock, bond, or commodity will attain in the future.

Futures
Commodities to be delivered and paid for at a future date at a price agreed upon by the buyer and seller.