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ILC Glossary of Financial Terms: F

From Face Value to Futures Contract

Face Value:

The value of a bond or debenture that appears on the face of the certificate. Face value is the amount the issuer promises to pay at maturity. Face value is no indication of market value. For example, a low grade bond may have a face value of $1000 but can trade at a market price of $130.

Fails:

Short for failed deliveries. It is the failure to deliver a security on the settlement date, or the date agreed upon when the trade was done.

Fair Market Value:

The value of an asset, under the assumption it is sold to a willing purchaser by a willing seller, under normal conditions.

Fee-Based Accounts:

Client accounts in which the investment dealer does not charge commissions, but charges a fee based on the value of the investor's account instead.

Fill-or-Kill:

A client order that stipulates that as soon as a portion of the order which can be traded immediately is completed, any remaining portion of the order not filled is cancelled.

Final Prospectus:

The prospectus which supersedes the preliminary prospectus and is accepted for filing by the applicable provincial securities commissions. The final prospectus shows all required information pertinent to a new issue and a copy must be given to each buyer of the new issue.

Finance or Acceptance Company Paper:

Short-term negotiable debt securities similar to commercial paper, but issued by finance companies.

Financial Instruments:

The term used for debt instruments, which are loans with an agreement to pay back funds with interest, or equity securities, which are shares or stock in a company.

Financial Intermediary:

An institution such as a bank, life insurance company, credit union or mutual fund company which receives cash and invests it on behalf of the suppliers of the cash.

Firm Bid - Firm Offer:

A firm bid is an undertaking to buy a specified amount of securities at a specified price for a specified period of time, unless released from this obligation by the seller. A firm offer is an undertaking to sell a specified amount of securities at a specified price for a specified period of time, unless released from this obligation by the buyer.

First-In-First-Out (FIFO):

A method of valuing inventory which assumes that the first items bought are also the first items used or sold.

Fiscal Agent:

An investment dealer appointed by a corporation or government to advise in financial matters and to manage the underwriting of its securities.

Fiscal Policy:

The policy pursued by the federal government to direct the economy through taxation and the level and allocation of government spending.

Fiscal Year:

A company's accounting year. Due to the nature of particular businesses, some companies do not use the calendar year for their bookkeeping. A typical example is the department store which finds December 31st too early a date to close its books after the holiday rush and has a January 31st fiscal year-end instead.

Fixed Asset:

A tangible long-term asset such as land, buildings or machinery, held for use rather than for processing or resale. Fixed assets are found on a company's balance sheet.

Fixed Charge:

A company's expenses, such as debt interest, which it must pay and which are deducted from income before income taxes are calculated.

Fixed Income Securities:

Securities that generate a predictable stream of interest or dividend income, such as bonds, debentures and preferred shares.

Flat:

When the quoted market price of a bond or debenture is only the total cost of the bond or debenture, instead of the cost of the debt instrument plus accrued interest. Bonds and debentures in default of interest trade flat.

Floor Traders:

Employees of a member of a stock exchange who execute buy and sell orders on the floor (trading area) of the exchange for their firm and its clients.

Flow-Through Shares:

Tax deductions and credits, normally available only to a corporation, are given to the owners of the corporation's flow-through shares. Canadian exploration and mining companies are able to issue such shares at a premium because investors are considered to be funding exploration and development costs and are therefore entitled to deduct these expenses from all other income.

Formula Investing:

These are investment strategies. One formula involves shifting funds from common shares to preferred shares or bonds as the stock market rises above a predetermined point - and returning funds to common shares as the stock market declines.

Fully Diluted Earnings Per Share:

Earnings per common share calculated on the assumption that all convertible securities are converted into common shares, such as convertible preferred shares, convertible debentures, stock options (under employee stock-option plans) and warrants.

Fundamental Analysis:

An analysis of securities based on the fundamental facts about a company, such as sales, earnings and dividend prospects. This is in contrast to technical analysis.

Funded Debt:

All outstanding bonds, debentures, notes and similar debt instruments of a company payable after one year.

Futures Contract:

An agreement to buy or sell a commodity sometime in the future.