Financial Terms: F-L

Markets for sale and purchase of stocks (shares), bonds, bills of exchange, commodities, futures and options, foreign currency, etc., which work as exchanges for capital and credit. See also capital market and money market.

A financial statement (or financial report) is a formal record of the financial activities of a business, person, or other entity.

Items on a company's balance sheet—the tangible property used in the business and not for resale; would include buildings, furniture, fixtures, equipment, and land.

The cash flow that remains after taking into account all cash flows including fixed-asset acquisitions, asset sales, and working-capital expenditures. The definition of free cash flow varies depending on the purpose of the analysis for which it is being used.

Long-term interest-bearing debt, such as that for bonds and debentures.

Intangible assets relating to a company's business practices. Goodwill includes assets with value that are exceptionally difficult to quantify. Examples include brand recognition, customer loyalty, and employee happiness. Goodwill helps a company remain competitive in the long term, even if the company does not produce the best product. For example, a customer will be more likely to buy peanut butter from one company and pay more for it, if he/she thinks the company produces better-tasting peanut butter, regardless of whether or not this is the case. When a company buys another company, it will often pay above the target company's book value to account for goodwill.

A company's revenue from sales in a given period of time less its cost of goods sold. Gross profit is easy to calculate and may provide a rough idea of a company's performance. However, it does not account for a number of very important expenses, such as marketing or employee salaries. For that reason, it is not as accurate of a measurement as net profit or EBIT.

A strategy whereby an investor seeks out stocks with what they deem good growth potential. In most cases a growth stock is defined as a company whose earnings are expected to grow at an above-average rate compared to its industry or the overall market.

A business financial statement that lists revenues, expenses, and net income throughout a given period. Because of the various methods used to record transactions, the dollar values shown on an income statement often can be misleading.

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Central banks attempt to stop severe inflation, along with severe deflation, in an attempt to keep the excessive growth of prices to a minimum.

A broad categorical description for the set of intangibles owned and legally protected by a company from outside use or implementation without consent. Intellectual property can consist of patents, trade secrets, copyrights and trademarks, or simply ideas. The concept of intellectual property relates to the fact that certain products of human intellect should be afforded the same protective rights that apply to physical property. Most developed economies have legal measures in place to protect both forms of property.

The price paid for borrowing money. It is expressed as a percentage rate over a period of time and reflects the rate of exchange of present consumption for future consumption. Also, a share or title in property.

The amount of raw materials, work in process, and finished goods being held for sale at a given time. Diamonds held by a jeweler, engines owned by General Motors, and canned and frozen foods in a grocery store chain's warehouse are examples of inventory. Inventory is generally the least liquid item listed by a firm in the current asset account of its balance sheet.

The purpose of Chapter 15, and UNCITRAL, the model law on which it is based, is to provide effective mechanisms for dealing with insolvency cases involving debtors, assets, claimants and other parties in interest involving more than one country. This general purpose is realized through five objectives specified in the statute: (1) to promote cooperation between United States courts, interested parties, and the courts and other competent authorities of foreign countries involved in cross-border insolvency cases; (2) to establish greater legal certainty for trade and investment; (3) to provide for the fair and efficient administration of cross-border insolvencies that protects the interests of all creditors and other interested entities, including the debtor; (4) to afford protection and maximization of the value of the debtor's assets; and (5) to facilitate the rescue of financially troubled businesses, thereby protecting investment and preserving employment.

The use of fixed costs in order to increase the rate of return from an investment. One example of leverage is buying securities on margin. While leverage can operate to increase rates of return, it also increases the amount of risk inherent in an investment.

in risk analysis, any ratio that measures a company's leverage. One example of a gearing ratio is the long-term debt/capitalization ratio, which is calculated by taking the company's long-term debt and dividing it by its long-term debt added to its preferred and common stock. Another example is a simple debt-to-equity ratio, which is calculated by dividing total debt by total equity. Generally, companies with higher leverage as determined by a leverage ratio are thought to be more risky because they have more liabilities and less equity. A leverage ratio is also called a gearing ratio or an equity multiplier.

An obligation to pay an amount in money, goods, or services to another party. The balance sheet lists the liabilities.

Cash and other assets (such as accounts receivable, demand and time deposits, gilt edged securities) that can be converted into cash in a short time, with little or no loss in value.

1. General: Measure of the extent to which a person or firm has (or has the ability to quickly put hands on) cash to meet immediate and short-term obligations. 2. Accounting: Ability of current assets to meet current liabilities. 3. Investing: Ability to quickly convert an investment portfolio to cash with little or no loss in value.