Accounting, Business Studies and Economics Dictionary

Federal Reserve (Fed) - The central bank of the United States.

Feedback - Term used to refer to information concerning actual perfor­mance, particularly in comparison with the plan. The feedback process is a critical part of a management control system in order to test a given system or model to see if it is performing as planned. Timely feedback enables quick corrective action when things get out of hand.

Fees - Charges billed for services rendered. They are tied into the mone­tary value of those services. Professional fees apply to accounting, tax, and legal work. They may be on a flat basis or an hourly one.

Fertility rate - The average number of children born to each woman in a country.

Fiat money - Paper money or coinage that is neither backed by nor convertible into anything else but is decreed by the government to be accepted as legal tender and is generally accepted in exchange for goods and services and for the discharge of debts.

Fictitious asset -  An asset recorded in the balance sheet that really does not deserve to be classed as an asset.  If this is intentional it may be considered fraud.

Fiduciary – An individual or institution responsible for holding or admin­istering property owned by another. An executor, guardian, trustee, and administrator are examples of a fiduciary.

Field research - Primary research.

FIFO (first-in, first-out) - A method of valuing stock. This method is recording inventory and its associated cost flow where the first items that were purchased are then assumed/recorded as to be the first items sold. This means ending inventory holds the most recent purchased items.

File - Collection of information stored as records. For example, the records for all charge customers at the local department store collec­tively form the accounts receivable file.

Final accounts - Accounts produced at the end of the year giving details of the profit or loss made over the year and the worth of the business.

Final demand - Demand for the economy's final output.

Final goods - Goods that are not used as inputs by other firms but are produced to be sold for consumption, investment, government, or exports. during the period under consideration.

Finance - The field that studies how people make decisions regarding the allocation of resources over time and the handling of risk.

Finance charge – Refers to the amount in total $ a loan will cost. It includes all the interest payments over the full life of the specified loan,  interest to be paid at closing of the loan, any origination fee or other charges that were paid to the lender/broker.

Finance house – A specialist institution which provides funds for hire purchase agreements.

Financial account of the balance of payments - The record of the flows of money into and out of the country for the purposes of investment or as deposits in banks and other financial institutions.

Financial accounting - Information developed in conformity with generally accepted accounting principles (GAAP). It involves the recording and summarisation of business transactions and events. Financial accounting relates to the preparation of financial statements for external users such as creditors, investors, and suppliers. The financial statements include the balance sheet, income statement, and statement of changes in financial position.

Financial analysis - Use and transformation of financial data into a form that can be used to monitor and evaluate the firm's financial position, to plan future financing, and to designate the size of the firm and its rate of growth.

Financial budget - Is one that embraces the impacts of the financial decisions of the firm. It is a plan including a budgeted balance sheet, which shows the effects of planned operations and capital investments on assets, liabilities, and equities. It also includes a cash budget, which forecasts the flow of cash and other funds in the business.

Financial capital - Money that a firm raises to carryon its business, including both equity capital and debt. Also called money capital.

Financial decisions - Decisions that involve: (1) determining the proper amount of funds to employ in a firm; (2) selecting projects and capital expenditure analysis; (3) raising funds on the most favourable terms possible; and (4) managing working capital such as inventory and accounts receivable.

Financial crowding out - When an increase in government borrowing diverts money away from the private sector.

Financial deregulation  -The removal of or reduction in legal rules and regulations governing the activities of financial institutions.

Financial engineering - Application of economic principles to the dynamics of securities markets, especially for the purpose of struc­turing, pricing, and managing the risk of financial contracts.

Financial flexibility - Where employers can vary their wage costs by changing the composition of their workforce or the terms on which worker are employed.

Financial intermediaries - The general name for financial institutions (banks, building societies etc.) which act as a means of channelling funds from depositors to borrowers.

Financial expense -1. generally refers to a firm's interest expense on its long-term debt. Or 2. it may include interest and other related charges including losses on foreign exchange due to debt; also the net expense for the selling of securities; the amortisation relating to any bond redemption premiums; and any additions or changes to the provisions for financial liabilities and any possible charges and other related impairment losses relating to the firms other investments.

Financial gearing - Reflects the borrowing levels that the firm has undertaken. The operating income of the firm will see increased volatility with higher levels of financial gearing i.e. borrowing.

Financial institution - An institution or organisation which may be public or private that is engaged in the act of collecting funds from the public and/or other organisations with the intention of investing these funds into financial assets.

Financial leverage - The portion of a firm's assets financed with debt instead of equity. It involves contractual interest and principal obliga­tions. Financial leverage benefits common stockholders as long as the borrowed funds generate a return in excess of the cost of borrowing, although the increased risk can offset the general cost of capital.

Financial markets - Markets through which saving passes before it goes either to governments or to business firms for investment purposes.

Financial planner - A professional engaged in providing personal financial planning services to individuals. A financial planner assists a client in the following ways: (1) assesses a client's financial history, such as tax returns, investments, retirement plan, wills, and insurance policies; (2) helps decide on a financial plan, based on personal and financial goals, history, and preferences; (3) identifies financial areas where a client may need help, such as building up retirement income or improv­ing investment return; (4) prepares a financial plan based on the individ­ual situation and discusses it thoroughly; (5) helps implement the financial plan, including referring the client to specialists, such as lawyers or accountants, if necessary; and (6) reviews the situation and financial plan periodically and suggests changes when needed.

Financial position - The status or position of a firm's or other entity assets, liabilities, and owners equity position. This is shown by the  financial statements of the entity.

Financial ratio - Mathematical relationship between one quantity and another. There are many categories of ratios such as those that evaluate a business entity's liquidity, solvency, return on investment, operating performance, asset utilization, and market measures. An example of a ratio is the earnings yield that equals dividends per share divided by market price per share.

Financial ratio analysis – Is a  method used by interested parties such as investors, creditors, and management to evaluate the past, current, and projected conditions and performance of the firm. Ratio analysis is the most common form of financial analysis. It pro­vides relative measures of the firm's conditions and performance. When using the financial ratios, a financial analyst makes two types of comparisons: (1) Industry comparison. The ratios of a firm are compared with those of similar firms or with industry averages or norms to determine how the company is faring relative to its competitors. Industry average  Or (2) Trend analysis. A firm's present ratio is compared with its past and expected future ratios to determine whether the company's finan­cial condition is improving or deteriorating over time.

Financial ratio analysis – List of ratios

Financial reporting - Presenting financial data of a company's position, operating performance, and funds flow for an accounting period.

Financial restructuring - Normally refers to a set of processes and procedure aimed at avoiding the possible liquidation of the firms. It often involves agreement with third parties/entities to help satisfy the creditors' claims under a variety of different terms and possible conditions.

Financial results - Refers to the different financial statements that need to be  provided to be in compliance with the GAAP guidelines. They but usually relate to a month, quarter, or year.

Financial statement - Report containing financial information about an organisation. The required financial statements are balance sheet, income statement, and statement of changes in financial posi­tion. They may be combined with a supplementary statement to depict the financial status or performance of the organization.

Financial statement analysis - Is a  method used by interested parties such as investors, creditors, and management to evaluate the past, current, and projected conditions and performance of the firm. Ratio analysis is the most common form of financial analysis. It pro­vides relative measures of the firm's conditions and performance. When using the financial ratios, a financial analyst makes two types of comparisons: (1) Industry comparison. The ratios of a firm are compared with those of similar firms or with industry averages or norms to determine how the company is faring relative to its competitors. Industry average  Or (2) Trend analysis. A firm's present ratio is compared with its past and expected future ratios to determine whether the company's finan­cial condition is improving or deteriorating over time.

Financial viability - Ability of a firm or other entity to be able to continue to accomplish its operating and other  objectives and achieve its mission or goals over the long term period.

Fine tuning - The attempt to maintain national income at or near its full employment level by means of frequent changes in fiscal or monetary policy.

Finished goods inventory - That percentage of items in recorded in the inventory which are completed in there manufactured state and are available and ready for sale.

Firm -  A unit that employs factors of production to pro­duce goods and services. 

First in, first out (FIFO) - Method of inventory valuation that assumes merchandise is sold in the order of its receipt. The first-price in is the first-price out. Hence cost of sales is based on older dollars. Ending inventory is reflected at the most recent prices.

First-mover advantage - When a firm gains from being the first one to take action.

Fiscal - Used in relation to government accounting and means Belongs to the public (government) treasury or is pertaining to the area public finance.

Fiscal drag - The tendency of automatic fiscal stabilisers to reduce the recovery of an economy from recession.

Fiscal period – A period of time into which the fiscal year is then divided. In Hong Kong the fiscal year is 1^st of April to 31^st of March.

Fiscal policy - The use of the government's tax and spend­ing policies in an effort to influence the behaviour of such macro variables as GDP and total employment.

Fiscal stance - How deflationary or re-flationary the Budget is.

Fiscal quarter - Any of the individual four different financial accounting quarters that exist as a  part of the fiscal year.

Fiscal year - The term used for a business's accounting year. The period is usually twelve months which can begin during any month of the calendar year (e.g.. 1st April 2001 to 31st March 2002).

Fisher effect - The one-for-one adjust­ment of the nominal interest rate to the inflation rate.

Five-year plans - Economic plans set up by the central government in a country that plots the future course of its economic development.

Fixed assets - These consist of assets which are likely to be kept by the business for more than one year. Most fixed assets, apart from land, depreciate over time so the value of these will fall on the balance sheet from one year to the next.

Fixed assets (net) - Plant, property, and equipment, net of the accumulated depreciation or the depletion of the asset.

Fixed asset turnover - A measure of the management's ability to be able to generate revenue flow from the firms investments in its fixed assets.

Fixed budget - A budget that does not get adjusted for any changes in the level of sales or service.

Fixed costs  - The costs that do not vary with output. Fixed costs include such things as rent on a building and the price of machinery. These costs are fixed for a certain period of time; in the long run they are variable.

Fixed exchange rate - An exchange rate that is maintained within a small range around its publicly stated par value by the intervention of a country's central bank in foreign market operations..

Fixed factor - An input that cannot be increased in supply within a given time period

Fixed income - Used to refer to types of investment that give or yield a regular or fixed amount.  Fixed income can also be used to apply to people's income which does not change in each period of time e.g. pensions which give a fixed income or fixed income investment bonds.

Fixed investment. - Purchases, made by business, of capital goods, such as machinery and office equipment. .

Fixed overhead - expenses like rent, utilities, loan payments, etc., that do not change when sales volume increases or decreases. Variable overheads are those expenses which vary or change directly with output.

Fixed expenses - The  expenses of a firm that remain constant regardless of changes in output or sales volume.

Fixed price - 1.the price that serves as a standard for the valuation of certain inventory accounts (i.e., raw materials, work-in-process, and finished goods) in standard costing. OR 2. the price that must be charged under a contract regardless of production costs. Or 3. an economic concept utilized by governmental units establishing a fixed price for a price floor (below which the price is not legally allowed to fall) and price ceilings (above which the price is not legally allowed to rise) on certain regulated goods and services. Or 4. the price at which investment bankers agree to sell the issue to the investing public in a public offering of new security issues.

Fixtures & fittings - This is a class of fixed asset which includes office furniture, filing cabinets, display cases, warehouse shelving and the like.

Flash earnings - A news release issued by a company that shows its latest quarterly results.

Flat (rate of) interest - is when interest is charged on the full amount of the original loan as opposed to the declining balance of the loan.

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

Flat tax - One in which the income tax rate is the same for all income levels. It is a proportional tax. A pure flat tax would eliminate all deductions, exemptions, and loopholes, and tax all income at the same low tax rate.

Flexible budget (variable budget) – A budget based on different volumes of activity. It is an extremely useful tool for the comparison the actual cost incurred to the cost that are allowed for a given activity level. It is dynamic by its nature rather than static. By using the cost volume formula (or flexible budget formula), a series of budgets can be devel­oped easily for various levels of activity. Flexible budgeting is a way of distinguishing between the fixed and variable expenses, thus allowing for a more flexible budget that is able to be automatically adjusted (via changes in variable cost totals) to the particular level of activity which is actually achieved. Thus variances between actual costs and budgeted costs are adjusted for volume ups and downs before differences due to price and quantity fac­tors are computed. The primary use of the flexible budget is for accurate measure of performance by comparing actual costs for a given output with the budgeted costs for the same level of output.

Flexible exchange rate - An exchange rate that is left free to be determined by the forces of demand and supply on the free market, with no intervention by the monetary authorities.

Flexible firm - A firm that has the flexibility to respond to changing market conditions by changing the composition of its workforce.

Flexible workforce - A workforce that can respond (in quantity and type) to changes in demand a business may face.

Flextime (flexi-time) - Scheduling concept that allows for nontraditional work hours to be employed on a systematic basis. Hours can be arranged for different times or periods of time to accommodate such aspects as effi­ciency, traffic, motherhood, disabilities, continuous operations, etc.

Float -  1. the amount of funds represented by checks that have been issued but not yet collected. Or 2. to issue new securities, usually through an underwriter. Or 3. time between the deposit of checks in a bank and payment.

Floatation cost - Cost of issuing new securities in the market.

Floating exchange rate - When the government does not intervene in the foreign exchange markets, but simply allows the exchange rate to be freely determined by demand and supply.

Flow - Activities that occur over time. For example, income is a flow that occurs per week, per month, or per year. Consumption is also a flow, as is Production.

Flowchart - Method of representing in schematic form the flow of data in a system. The flowchart shows the points of input and output, the logic or sequence of the various processing steps in the sys­tem, and the relationship of one element of the system to the other parts of the system or to other information systems.

Flow of funds - This is a report which shows how a balance sheet has changed from one period to the next.

Flow production  - Very large scale production of a standardised product, where each operation on a unit is performed continuously one after the other, usually on a production line.  Also called mass production because of the large quantity of a standardised product that is produced.

Folio – 1. a manuscript or book that consists of sheets of paper that have been folded in the middle to make four pages. Or 2. a sheet of any printed or written material . Or 3. a system of giving pages numbers. Or 4. with reference to investments, refers to an unstructured mixed basket of various common stocks that may or may not represent a particular stock index, a specific sector or specific theme, or an managed portfolio, that may be modified by the investor or their advisor to meet the differing tax and expenditure needs of its beneficial owner.

Footing - Summary of the debits (left side of any account) and credits (right side of any account) to obtain a new balance.

Footloose industries - Those industries which are neither influenced by their market or the source of raw materials when deciding where to locate.

Footnote (accounting) - Explanatory data that follows the financial statements and is integrally related to them. Footnotes help the user understand financial statement figures and any other matters essential in gauging a company's financial position

Forecast - 1. projection of future financial position and operating results of an organisation. Or 2. projection or estimate of future sales, revenue, earnings, or costs.

Foreign - Other nations than your own.

Foreign currency transaction - One that requires settle­ment in a currency other than the entity's domestic currency.

Foreign exchange - Actual foreign currencies or various claims on them, such as bank balances or promises to pay, that are traded on the foreign exchange market.

Foreign exchange market - The market for buying and selling foreign currencies.

Foreign exchange rate - The price of foreign currency in terms of domestic currency, or vice versa.

Forensic accounting - A science (i.e., a department of system­ized knowledge) dealing with the application of accounting facts gath­ered through auditing methods and procedures to resolve legal problems. Forensic accounting is much different from traditional auditing. Forensic accounting is a specialty requiring the integration of investigative, accounting, and auditing skills.

Forex - Foreign exchange market.

Foreseeable - What may be reasonably anticipated.

Formal groups - Groups specifically set up by a carry out tasks. They have certain formal rules of behaviour.

Formal organisation – The relationships between the employees and the organisational structure determined by business as shown on the organisation chart.

Formula - A standard and systematic procedure or process for solving a class/variety of different mathematical problems.

Forward exchange market - Where contracts are made today for the price at which currency will be exchanged at some specified future date.

Forward vertical integration - Merging with a firm involved in the next stage of production.

45° line - In macroeconomics, the line that graphs the equilibrium condition that aggregate desired expenditure should equal national income (AE = Y).

Fractional reserve system - A banking system in which commercial banks are required to keep only a fraction of their deposits in cash or on deposit with the central bank.

Franchise - an agreement where a business (the franchisor) sells rights to other businesses (the franchisees) allowing them to sell products or use the company name.

Franchising - Where a firm is given the license to operate a given part of an industry for a specified length of time.

Fraud - 1. falsification of a tax return by an individual. Examples of tax fraud are intentionally not reporting taxable income or overstating expenses. Tax fraud is a criminal act. Or 2. deliberate action by individual or entity to cheat another, causing damage. There is typically a misrepresentation to deceive, or pur­poseful withholding of material data needed for a proper decision. An example of fraud is when a bookkeeper falsifies records in order to steal money.

Free cash flow – The amount of cash that remains after deducting the funds a company must commit to continue operating at its planned level; net cash flows from operating activities, minus dividends, minus net capital expenditures..

Free enterprise - A system in which private business firms are able to obtain resources. to organize those resources and to sell the finished product in they choose.

Free good - A product for which the quantity supplied ex­ceeds the quantity demanded at a price of zero; therefore, a good that does not command a positive price in a market economy.

Freehold - 1. an interest in a piece of property that is both unconditional and also represents the most broad ownership interest recognised under the law. Or 2. an interest in a piece of land the period or duration that is restricted to the life/lives of a particular individual holding it,

Free-market economy - An economy where all economic decisions are taken by individual households and firms and with no government intervention.

Free rider - Someone who consumes a good, service without paying for it. 

Free-rider problem - The tendency for the scale of provision of a public good to be too small – to be allocatively inefficient - if it is privately provided.  The free-rider problem means that people are often unwilling to pay for things if they can make use of things other people have bought. This problem can lead to people not purchasing things which would be to the benefit of themselves and other members of society to have.

Freely floating (or flexible) exchange rates - Exchange rates that are allowed to fluctuate in open market in response to changes in supply demand. Sometimes called free exchange rate floating exchange rates.

Free trade - The absence of any form of government inter­vention in international trade, which implies that imports and exports must not be subject to special taxes or restrictions levied merely because of their status as "imports" or "exports.

Free trade agreement – An agreement that is between different countries that is aimed at achieving, over an specified length of time, in the elimination or reduction of protectionist measures and policies for goods and services flowing or exchanged between the  different countries who are signatories to the agreement i.e. NAFTA (North American Free Trade Area) between the US, Canada and Mexico.

Free trade area - An agreement among two or more countries to abolish tariffs on all or most of the trade among themselves while each remains free to set its own tariffs against other countries.

Freely floating exchange rate -Where the exchange rate is determined entirely by the forces of demand and supply in the foreign exchange market with no government intervention whatsoever.

Free trade zone (FTZ) - An area, often a port of entry, designated by the country for duty-free entry of goods

Freight collect - The buyer pays the shipping costs.

Freight-in - Transportation charge the company pays when it receives goods from a supplier. It is a separate account that is added to pur­chases in determining the cost of goods and ending inventory.

Freight-out cost of transporting goods to a customer. It is a selling expense. When the freight is included in the selling price, it is deducted from sales.

Frequency - Marketing, the number of different times a firm hopes to reach its target market through a specific advertising campaign.

Frequency distribution - Schedule showing the number of times each observation in the data occurs. Data collected need to be organized in some fashion. One method of summarizing a population or sample is to organize the data in terms of their frequency.

Frictional (search) unemployment - Unemployment caused by the time that is taken for labour to move from one job to another.

Friendly takeover - A buyout of a company that has the support of the company being purchased Board of Directors. The shareholders may receive cash and/or shares of the acquiring firm's stock.

Fringe benefits - Non-monetary rewards given to employees.

Full cost method - Accounting method used by some extractive industries, particularly oil and gas companies, in which all exploration costs are capitalized whether the projects are successful or unsuccess­ful. The capitalized cost is then amortized into expense as the total reserves are produced.

Full disclosure - Comprehensively and understandably presenting all material facts in the footnotes to the financial statements so that financial statement users are properly informed.

Full employment - Full employment is the quantity of labour employed when the labour market is in equilibrium.

Full-employment level of national income - The level of national income at which there is no deficiency of demand.

Fully depreciated - When a fixed asset has been charged (accumulated depreciation) with the maximum total amount of depreciation that is allowed under the relevant tax law for accounting purposes.

Functional based accounting - Accounting and reporting by activity. It aids in conforming organisational performance to plan so that proper budgetary and operational controls can be maintained.

Functional currency - Legal tender of the primary economic environment in which a company operates.

Functional distribution of income - The distribution of total national income among the major factors of production.

Functional flexibility - Where employers can switch workers from job to job as requirements change.

Fund - 1. in government accounting, fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with related liabilities and residual equities or balances, and changes therein. Funds are segregated for the purpose of conducting specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. Or 2. the cash, securities, or other assets designated for a specified purpose such as in a sinking fund. Or 3.can be used as a verb, to finance, using long-term debt, usually bonds.

Fund accounting - . Used by government entities and not-for-profit organisations. This method of accounting groups assets and liabilities in accordance with the purpose they are intended to be used

Fundamental analysis - Evaluation of a company's stock based on an examination of the firm's financial statements. It is distinguished from technical analysis, which attempts to predict the market price of a company's stock based on historical price performance and overall stock market trends. It considers overall financial health, economic and political conditions, industry factors, marketing aspects, management quality, and future outlook of the company.

Fundamentals - Factors that are “fundamental” to the operations of a firm’s business, its profitability, operating costs,  technical innovations, product prices, etc.

Funding - Where the authorities alter the balance of bills and bonds for any given level of govern­ment borrowing.

Fund management – A professional individual or firm, that is often regulated. A fund manager performs the role as a caretaker of their client assets for a specified or variable fee.

Future price - A price agreed today at which an item (e.g. commodities) will be exchanged at some set date in the future. '

Futures or forward market  - A market in which contracts are made to buy or sell at some future date at a price agreed today.

Future value - Amount to which an investment will grow at a future time if it earns a specified interest that is compounded annually. The process of calculating future values is called compounding.

FX account (Foreign Exchange Account) - Refers a trading account in foreign currencies.

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