The role of this glossary is to present brief definitions of most of the key concepts in corporate finance and management (in total 900 names-definitions) with aim the reader to be able to understand and become familiar with the terminology in the analyses that will present in the category Corporate & Business.
Additionally, we hope that the reader by acquiring intimacy with the specific terminology, he will also love the science of finance and management, giving to it a significant part of his personal time.
In the following glossary we tried to include the most well-known definitions and terms in the field of Corporate Finance & Management. If you still find that a term or definition is missing and you know that it can be included in this glossary, please do not hesitate to contact us via the contact form of our web-site (Contact Us) and the Liberal Globe will edit it and will include it.
Glossary Corporate Finance & Management
There are currently 44 names in this directory beginning with the letter F.
Factoring
arrangement whereby a financial institution buys a company’s accounts receivable and collects the debt.
Failing firm defense
is a defense against a merger challenge alleging that in the absence of the merger, the firm(s) would fail. The 1982 Merger Guidelines spell out the conditions under which this defense will be acceptable.
Fair-price amendment
an antitakeover charter amendment which waives the supermajority approval requirement for a change of control if a fair price is paid for all purchased shares. Defends against two-tier offers which do not have board approval.
Fallen angel
a bond issued at investment grade whose rating is subsequently dropped to below investment grade, below BBB.
Federal funds
non-interest-bearing deposits by banks at the Federal Reserve. Excess reserves are lent by banks to each other.
Feedback
An informational input in a system transmitting messages of system operation to indicate whether the system is operating as planned; information concerning any type of planned operation relayed to the responsible person for evaluation.
Feedforward control
a control system that attempts to identify future deviations from plans, early enough to act before the deviations occur, by developing a model of system or process inputs, monitoring these inputs, and acting in time to prevent undesired or unplanned system outputs.
Field theory of motivation
that motivation depend on organizational climate and must be looked upon as an element in a larger field of restraining and driving forces.
Final-average plan
pension plan offering a pension that depends on the employer’s average compensation in his or her final years of service.
Financial Conglomerates
are conglomerate firms in which corporate management provides a flow of funds to operating segments, exercises control and strategic planning functions, and is the ultimate financial risk taker, but does not participate in operating decisions.
Financial leverage (gearing)
use of debt to increase the expected return on equity. Financial leverage is measured by the ratio of debt to debt plus equity.
Financial synergy
a theory which suggests a financial motive for mergers, especially between firms with high internal cash flows (but poor investment opportunities) and firms with low internal cash flows (and high investment opportunities which absent merger, would require costly external financing). Also includes increased debt capacity or coinsurance effect, and economies of scale in flotation and transaction costs of securities.
Fiscal agency agreement
an alternative to a bond trust deed. Unlike the trustee, the fiscal agent acts as an agent of the borrower.
Flexibility principle
the more that flexibility (the ability to change direction without undue cost, embarrassment or friction) can be built into plans, the less the danger of losses incurred by unexpected events.
Flip-flop note
is the note which allows investors to switch backward and forward between two different types of debt.
Flip-over poison pill plan
the most popular type of poison pill antitakeover defense. Shareholders of the target firm are issued rights to purchase common stock at an exercise price high above the current market price. If a merger occurs, the rights flip over and allow shareholders to purchase the acquiring firm’s common stock at a substantial discount.
Floating rate preferred
is a preferred stock paying dividends which vary with the short-term interest rates.
Floor planning
arrangement used to finance inventory. A finance company buys the inventory, which is then held in trust by the user.
Forward cover
purchase or sale of forward foreign currency in order to offset a known future cash flow.
Forward rate agreement (FRA)
agreement to borrow or lend at a specified future date at an interest rate that is fixed today.
Four-firm concentration ratio
the sum of the shares of sales, value added, assets, or employees held by the largest four firms in an industry. A measure of competitiveness, according to the structured theory.
Free cash flow hypothesis
Jensen’s theory of how the payout of free cash flows help resolve the agency problem between managers and shareholders. Holds that bonding payout of current (and future) free cash flows reduces the power of management as well as subjecting them more frequently to capital market scrutiny.
Free-rider problem
atomistic shareholder reasons that its decision has no impact on the outcome of the tender offer and refrains from tendering to free-ride on the value increase resulting from the merger, thus causing the bid to fail.
From-end loading
a tender offer in which the offer price is greater than the value of any unpurchased shares. Resolves the free-rider problems by providing an incentive to tender early.
Full ex post settling
a manager’s compensation is frequently adjusted over the course of his or her career to fully reflect his or her performance, thus eliminating an inventive to shirk.
Full-service lease (rental lease)
is the lease in which the lessor promises to maintain and insure the equipment.
Functional authority
the right or power inherent in a position to issue instructions or approve actions of persons in positions not reporting directly to the person holding such authority. For example, a company controller is ordinarily given functional authority to prescribe the system of accounting throughout the company, but this specialized authority is really a delegation from the chief executive.
Future
a contract to buy a commodity or security on a future date at a price that is fixed today. Unlike forward contracts futures are generally traded on organized exchanges and are marked to market daily.
