Face value A stated and fixed nominal value of a share or bond. Not related to market value, which fluctuates.
Fair game In the context of a stock market, the situation where some investors and fundraisers are not able to benefit at the expense of other participants. The market is regulated to avoid abuse, negligence and fraud. It is cheap to carry out transactions and the market provides high liquidity.
Fair value (Fair market value) The amount an asset could be exchanged for in an arm’s-length transaction between informed and willing parties.
Fallen angel Debt which used to rate as investment grade but which is now regarded as junk, mezzanine finance or high-yield finance.
Fallen angel risk The risk that a bond currently rated as ‘investment-grade’ is downgraded to junk-grade. The bond price falls due to increased default risk and the fact that many institutions, banned from holding high-yield bonds, are forced to sell.
Fat-finger trades With direct market access systems investors have been known to make trades they did not mean to do. For example: buy instead of sell (or vice versa), trade 10 times the amount they meant to, or accidentally put in a silly price, such as selling a share at a fraction of its true value.
Fill or kill A type of buy or sell instruction given by an investor to a broker. If the deal cannot, in its entirety, be executed at the maximum (minimum) price stated by the investor (or better) then the entire order expires.
Final dividend The dividend announced with the annual accounts. The final dividend plus the interim dividend make the total dividend for the year for a company that reports results every six months.
Finance house A financial institution offering to supply finance in the form of hire purchase, leasing and other forms of instalment credit.
Finance lease (‘capital lease’, ‘financial lease’ or ‘full-payout lease’) The lessor expects to recover the full cost (or almost the full cost) of the asset plus interest, over the period of the lease.
Financial assets (securities, instruments or financial claims) Contracts that state agreement about the exchange of money in the future, e.g. shares, bonds, bank loans, derivatives.
Financial binary bets Book makers (spread betting firms) accept bets from punters on financial movements. The spread quoted is calculated as a market movement in a chosen direction – up or down within a time frame, say one day, e.g. the quoted spread on the FTSE 100 is 60–61. If you make an ‘up’ bet (the FTSE will end the day higher) then you will win 100 – 61 = 39 times your stake. If the index falls you lose 60 times the stake.
Financial Conduct Authority (FCA) The chief financial services regulator in the UK.
Financial distress Obligations to creditors are not met or are met with difficulty.
Financial gearing (leverage) The proportion of debt capital in the overall capital structure. Also called ‘leverage’. High gearing can lead to exaggeratedly high returns if things go well or exaggerated losses if they do not go well.
Financial Ombudsman Scheme (FOS) The UK ombudsman tries to find a just settlement between a complainant and a financial service company.
Financial Policy Committee The part of the Bank of England responsible for macro-prudential regulation – trying to reduce risks in the financial system as a whole rather than in individual banks and other financial institutions.
Financial Reporting Council (FRC) The UK’s independent regulator responsible for ensuring high-quality corporate reporting, accounting and governance.
Financial review An explanation of financial performance and strategy contained in a company’s annual report and account. The finance director usually breaks down turnover, profits, assets and liabilities into geographical and/or product divisions, discusses the balance sheet strengths and some key performance indicators.
Financial risk The additional variability in a firm’s returns to shareholders and the additional risk of insolvency which arises because the financial structure contains debt.
Financial Services and Markets Act The 2000 Act (and orders made under it) form the bedrock of financial regulations in the UK.
Financial Services Compensation Scheme (FSCS) If a dishonest or incompetent financial services company is unable to pay money owed to a complainant (e.g. it has been liquidated) the FSCS will pay the customer (up to fixed limits) to compensate for loss if the financial services company was authorised by the Financial Conduct Authority.
Financial slack (Financial flexibility) Having cash (or near-cash) and/or spare debt capacity available to take up opportunities as they appear.
Financing gap The gap in the provision of finance for medium-sized, fast-growing firms. Often these firms are too large or growing too fast to ask the individual shareholders for more funds or to obtain sufficient bank finance. Also they are not ready or not willing to launch on the stock market.
Firm prices Market makers are required to trade at the prices posted on the London Stock Exchange’s system, unless the transaction is above the exchange market size.
Fixed assets (non-current assets) Those not held for resale, but for use in the business.
Fixed charge (e.g. fixed charge debenture or loan) A specific asset(s) is assigned as collateral security for a debt.
Fixed cost A cost that does not vary according to the amount of goods or services that are produced, and has to be paid regardless of the firm’s turnover and activity.
Fixed exchange rate The national authorities act to ensure that the rate of exchange between two currencies is constant.
Fixed-interest securities Strictly, as the term applies to securities such as bonds on which the holder receives a predetermined interest pattern on the par value (e.g. gilts, corporate bonds, Eurobonds). However, the term is also used for debt securities even when there is no regular interest, e.g. zero-coupon bonds, and when the interest varies, as with floating rate notes, for example.
Fixed-rate borrowing (fixed interest) The interest rate is constant throughout the loan period.
Fixed-odds trading For those who want to speculate on the movements of markets a fixed-odds trading firm will offer you an amount that you can take from them if your bet turns out to be right. For example, they pay you 200 per cent of the amount you put down if the FTSE falls by more than 10 per cent in the next 30 days. If you lose you forfeit your initial stake and no more.
Flat yield on a fixed-interest security is the gross interest amount, divided by the current market price, expressed as a percentage.
Float 1. The difference between the cash balance shown on a firm’s cheque book and the bank account, caused by delays in the transfer of funds between bank accounts. (2) A currency exchange rate that is permitted to vary rather than being fixed. (3) An issuance of shares to the public by a company joining a stock market. (4) For insurance companies: A pool of money held in the firm in readiness to pay claims.
Floating The issue of shares in a company for the first time on a stock exchange.
Floating charge The total assets of the company or an individual are used as collateral security for a debt. There is no specific asset assigned as collateral.
Floating exchange rate A rate of exchange which is not fixed by national authorities but fluctuates depending on demand and supply for the currency.
Floating-rate bond The interest rate payable varies with short-term rates (e.g. three- month LIBOR).
Floating-rate borrowing (floating interest) The rate of interest on a loan varies with a standard reference rate (e.g. bank base rate or LIBOR).
Floating-rate notes (FRNs) Notes (legal contracts for borrowing) in which the coupon fluctuates according to a benchmark interest rate charge (e.g. LIBOR). With reverse floaters the interest rate declines as LIBOR rises.
Flotation The issue of shares in a company for the first time on a stock exchange.
‘Footsie™’ Nickname for the FTSE 100 index.
Foreign banking Transactions in the home currency with non-residents.
Foreign bond A bond denominated in the currency of the country where it is issued when the issuer is a non-resident.
Foreign exchange control Limits are placed by a government on the purchase and sale of foreign currency.
Foreign exchange (forex or FX) markets Markets that facilitate the exchange of one currency into another.
Forex A contraction of ‘foreign exchange’.
Forward agreement A contract between two parties to undertake an exchange at an agreed future date at a price agreed now.
Forward basis The price investors pay for unit trust units will be fixed at a particular time of day (usually 12 noon) that is yet to come.
Forward PER Current share price divided by the anticipated earnings for the current year.
Forward-rate agreement (FRA) An agreement about the future level of interest rates. Compensation is paid by one party to the other to the extent that market interest rates turn out to deviate from the ‘agreed’ rate.
Founders’ shares Dividends are paid on these shares only after all other categories of equity shares have received fixed rates of dividend. They usually carry a number of special voting rights over certain company matters.
Free cash flow Cash generated by a business not required for operations or for reinvestment. Profit before depreciation, amortisation and provisions, but after interest, tax, capital expenditure on long-lived items and increases in working capital. These deductions can be made from the historic facts presented by the company of actual spending, or they can be based on estimates of the expenditures necessary to maintain the company’s competitive position, unit volume and investment in all value generating projects.
Free float (Free capital) The proportion of a quoted company’s shares not held by those closest (e.g. founding directors’ families) to the company who may be unlikely to sell their shares.
Free plus A return an investor enjoys over and above initial expectations.
Friendly merger Merger to which the two companies agree.
Friendly Society A mutual (cooperative) organisation involved in saving and lending.
Front-end charge (load) A charge made when an investment is first made (e.g. by a unit trust manager when an investor first buys the units). Also called initial charge or sales charge.
Frontier market Financial markets that tend to be small, with few companies, low turnover and often government restrictions on investors. They are usually in poor countries.
FRS 3 earnings Also known as basic earnings per share. Includes deductions from profit of one-off exceptional items.
FTSE 100 share index An index representing the UK’s 100 largest listed shares.
FTSE 250 index This is an index of UK shares quoted on the London Stock Exchange constructed by the FTSE. Based on the largest 250 firms which are the next size range after the top 100. Also calculated with investment trusts excluded.
FTSE 350 index This is an index of UK shares quoted on the London Stock Exchange constructed by the FTSE. Based on the largest 350 quoted companies. It combines the FTSE 100 and the FTSE 250. This cohort of shares is also split in two to give high and low dividend yield groups. A second 350 index excludes investment trusts.
FTSE AIM All-Share This is an index of UK shares quoted on the London Stock Exchange constructed by the FTSE of all Alternative Investment Market companies except those with a low free-float and low liquidity.
FTSE All-Share index (the ‘All-Share’) This is an index of UK shares listed on the London Stock Exchange constructed by the FTSE. The most representative index reflecting the average movements of about 600 shares representing 98–99 per cent of the value of the London market. Broken down into a number of commercial and industrial sectors. Companies in the FTSE All-Share index have market capitalisation above roughly £70 million. It is an aggregation of the FTSE 100, FTSE 250 and the FTSE SmallCap.
FTSE All-Small An index of UK shares quoted on the London Stock Exchange constructed by the FTSE which combines companies in the FTSE SmallCap with those in the FTSE Fledgling.
FTSEurofirst 300 An index of large European shares constructed by the FTSE.
FTSE Fledgling An index of UK shares quoted on the London Stock Exchange constructed by the FTSE. Includes companies listed on the Main Market but too small to be in the FTSE All-Share.
FTSE Russell This organisation calculates a range of share indices published on a regular (usually daily) basis.
FTSE SmallCap index An index of UK shares quoted on the London Stock Exchange constructed by the FTSE. Covers companies included in the FTSE All-Share but excluded from the FTSE 350,
Full accrual price (bonds) On a bond a buyer pays a total of the clean price and the accrued interest since the last coupon payment.
Full-payout lease The lessor expects to recover the full cost (or almost the full cost) of the asset plus interest, over the period of the lease.
Fully automated trading An online brokerage service. The investor is directly connected to the market maker system. Retail service providers (RSPs) offer competing price quotes and the investor trades directly with one RSP.
Fully paid The holder of shares has paid the full price and does not owe an instalment(s).
Fund management Investment and administration of a quantity of money (e.g. pension fund, insurance fund) on behalf of the fund’s owners.
Fund of funds A fund that then invests the money raised from investors in a range of funds (e.g. hedge funds).
Fund platform Online organisations that allow investors to invest in a range of unit trusts, investment trusts, shares, bonds ETFs, OEICs, etc. Investors can select one, two or a dozen funds from different management companies together with other investments. They usually charge either a flat fee or a percentage of funds held on the platform.
Fund supermarkets Online organisations that allow investors to invest in a range of unit trusts, investment trusts, shares, bonds ETFs, OEICs, etc. Investors can select one, two or a dozen funds from different management companies together with other investments. They usually charge either a flat fee or a percentage of funds held on the platform..
Fundamental analysts Individuals who try to estimate a share’s true value, based on future returns to the company. Data from many sources are used, e.g. company accounts, economic and social trends, technological changes, etc.
Fundraising Companies can raise money through rights issues, IPO or bond sales etc.
Fungible Interchangeable securities; can be exchanged for each other on identical terms.
Future A standardised contract between two parties to undertake a transaction at an agreed price on a specified future date.
Futures-based bet A bet with a spread betting company placed on the price of shares or the level of an index on the next quarter day or the one after that.
FX A contraction of foreign exchange.
GAAP Generally accepted accounting principles. Accounting rules for reporting results.
GDP (nominal, real) Gross domestic product, the sum of all output of goods and services produced by a nation. Nominal GDP includes inflation, and real excludes it.
Gearing (financial gearing) The proportion of debt capital in the overall capital structure. Also called ‘leverage’. High gearing can lead to exaggeratedly high returns if things go well or exaggerated losses if they do not go well.
Gearing (operating gearing) The extent to which the firm’s total costs are fixed. This influences the break-even point and the sensitivity of profits to changes in sales level.
General inflation The process of steadily rising prices resulting in the diminishing purchasing power of a given nominal sum of money. Measured by an overall price index (e.g. RPI or CPI) which follows the price changes of a ‘basket’ of goods and services through time.
General insurance Insurance against specific contingencies (e.g. fire, theft and accident). The term excludes life insurance.
Gilt-edged market makers (GEMMs) These organisations are at the centre of trading in UK government bonds. They stand ready to buy from or sell to investors at all times (when markets are open) quoting bid and offer prices.
Gilts (gilt-edged securities) Fixed-interest UK government securities (bonds) – a means for the UK government to raise finance from savers. They usually offer regular interest and a redemption amount paid years in the future.
Global depositary receipts (GDRs) Certificates which represent ownership of a given number of a company’s shares and which are traded independently of the underlying shares.
Globalisation The increasing internationalisation of trade, particularly financial product transactions. The integration of economic and capital markets throughout the world.
Goal congruence The aligning of the actions of senior management with the interests of shareholders.
Going concern A judgement as to whether a company has sufficient financial strength to continue for at least one year. Accounts are usually drawn up on the assumption that the business is a going concern.
Going long Buying a financial security (e.g. share) in the hope that its price will rise.
Going public A phrase used when a company becomes quoted on a stock exchange (the company may have been a public limited company for years before this).
Going short The selling of financial securities (e.g. shares) not yet owned (they are borrowed), in the anticipation of being able to buy at a later date at a lower price.
Golden handcuffs Financial inducements for managers to remain working for a firm.
Golden parachutes In a hostile merger situation, managers will receive large pay-offs if the firm is acquired.
Golden shares Shares with extraordinary special powers over the company (e.g. power of veto over a merger).
Good for the day A buy or sell order for a financial security has a limit above/below which theinvestor does not want the broker to go. If the order is not completed that day it is cancelled.
Good till cancelled A buy or sell order for a financial security has a price limit. The order stays in place (up to 90 days) until the investor tells his/her broker that it is cancelled it or it has been satisfied by a trade.
Goodwill An accounting term for the difference between the amount that a company pays for another company and the fair value of the other company’s assets (after deducting all liabilities). Goodwill is thus an intangible asset representing such things as the value of the company’s brand names and the skills of its employees.
Grace period A lender grants the borrower a delay in the repayment of interest and/or principal at the outset of a lending agreement.
Greater fool investing The object is to pass on a share which is currently of great interest to the market speculators and traders after making a return on the ‘investment’ without really bothering to understand the fundamentals of the business.
Greenmail Key shareholders try to obtain a reward (e.g. the repurchase of their shares at a premium) from the company for not selling to a hostile bidder or becoming a bidder themselves.
Greenshoe An option that permits an issuing house, when assisting a corporation in a new issue, to sell more shares than originally planned. They may do this if demand is particularly strong.
Grey Knight During a merger bid process a second bidder, who is a rival to the hostile first bidder (black knight) and friendlier toward the managers of the target, launches a bid. The rivalry may produce a higher takeover price.
Grey market A market in shares which have not yet come into existence (e.g. in the period between investors being told they will receive shares in a new issue and the actual receipt they may sell on the expectation of obtaining them later).
Gross dividend yield The gross (before tax) dividend per share as a percentage of share price.
Gross domestic product (GDP) The sum of all output of goods and services produced by a nation. Nominal GDP includes inflation, and real excludes it.
Gross margin Profit defined as sales minus cost of sales, expressed as a percentage of sales.
Gross profit Turnover less cost of sales.
Gross profit margin (gross margin) Profit defined as sales minus cost of sales, expressed as a percentage of sales.
Gross redemption yield (gross yield to redemption) A calculation of the redemption yield on a bond (see Yield) before tax is deducted.
Group accounts All the income costs, assets and liabilities of all group companies, whether wholly or partially owned, are brought together in the consolidated accounts. Consolidation must take place if 50 per cent or more of the subsidiary’s shares are held by the parent. If less than 50 per cent of the shares are held, consolidation may still be required.
Growth industries Those industries which grow almost regardless of the state of the economy.
Growth stock/share Where the company has performed better than average (in growth in earnings per share) for a period of years and is expected to do so in the future. Second-rate investors/speculators call some companies growth stocks even if there is no history of good performance growth.
Guaranteed equity bonds Offered by insurance companies, banks, building societies and other investment firms, they provide a return linked to stock market indices. The investor commits to holding the bond for, say, five years and is guaranteed a minimum amount back and may also benefit from a rise in the stock market.
Guaranteed income bonds (GIBs) A lump-sum investment is made with an insurance company for a fixed period, say five years. GIBs pay regular income (the money is invested in a portfolio of low-risk bonds such as gilts). With growth bonds the interest accumulates until the maturity date.
Guaranteed loan stock (bond) An organisation other than the borrower guarantees to the lender the repayment of the principal plus the interest payment.
Fair game In the context of a stock market, the situation where some investors and fundraisers are not able to benefit at the expense of other participants. The market is regulated to avoid abuse, negligence and fraud. It is cheap to carry out transactions and the market provides high liquidity.
Fair value (Fair market value) The amount an asset could be exchanged for in an arm’s-length transaction between informed and willing parties.
Fallen angel Debt which used to rate as investment grade but which is now regarded as junk, mezzanine finance or high-yield finance.
Fallen angel risk The risk that a bond currently rated as ‘investment-grade’ is downgraded to junk-grade. The bond price falls due to increased default risk and the fact that many institutions, banned from holding high-yield bonds, are forced to sell.
Fat-finger trades With direct market access systems investors have been known to make trades they did not mean to do. For example: buy instead of sell (or vice versa), trade 10 times the amount they meant to, or accidentally put in a silly price, such as selling a share at a fraction of its true value.
Fill or kill A type of buy or sell instruction given by an investor to a broker. If the deal cannot, in its entirety, be executed at the maximum (minimum) price stated by the investor (or better) then the entire order expires.
Final dividend The dividend announced with the annual accounts. The final dividend plus the interim dividend make the total dividend for the year for a company that reports results every six months.
Finance house A financial institution offering to supply finance in the form of hire purchase, leasing and other forms of instalment credit.
Finance lease (‘capital lease’, ‘financial lease’ or ‘full-payout lease’) The lessor expects to recover the full cost (or almost the full cost) of the asset plus interest, over the period of the lease.
Financial assets (securities, instruments or financial claims) Contracts that state agreement about the exchange of money in the future, e.g. shares, bonds, bank loans, derivatives.
Financial binary bets Book makers (spread betting firms) accept bets from punters on financial movements. The spread quoted is calculated as a market movement in a chosen direction – up or down within a time frame, say one day, e.g. the quoted spread on the FTSE 100 is 60–61. If you make an ‘up’ bet (the FTSE will end the day higher) then you will win 100 – 61 = 39 times your stake. If the index falls you lose 60 times the stake.
Financial Conduct Authority (FCA) The chief financial services regulator in the UK.
Financial distress Obligations to creditors are not met or are met with difficulty.
Financial gearing (leverage) The proportion of debt capital in the overall capital structure. Also called ‘leverage’. High gearing can lead to exaggeratedly high returns if things go well or exaggerated losses if they do not go well.
Financial Ombudsman Scheme (FOS) The UK ombudsman tries to find a just settlement between a complainant and a financial service company.
Financial Policy Committee The part of the Bank of England responsible for macro-prudential regulation – trying to reduce risks in the financial system as a whole rather than in individual banks and other financial institutions.
Financial Reporting Council (FRC) The UK’s independent regulator responsible for ensuring high-quality corporate reporting, accounting and governance.
Financial review An explanation of financial performance and strategy contained in a company’s annual report and account. The finance director usually breaks down turnover, profits, assets and liabilities into geographical and/or product divisions, discusses the balance sheet strengths and some key performance indicators.
Financial risk The additional variability in a firm’s returns to shareholders and the additional risk of insolvency which arises because the financial structure contains debt.
Financial Services and Markets Act The 2000 Act (and orders made under it) form the bedrock of financial regulations in the UK.
Financial Services Compensation Scheme (FSCS) If a dishonest or incompetent financial services company is unable to pay money owed to a complainant (e.g. it has been liquidated) the FSCS will pay the customer (up to fixed limits) to compensate for loss if the financial services company was authorised by the Financial Conduct Authority.
Financial slack (Financial flexibility) Having cash (or near-cash) and/or spare debt capacity available to take up opportunities as they appear.
Financing gap The gap in the provision of finance for medium-sized, fast-growing firms. Often these firms are too large or growing too fast to ask the individual shareholders for more funds or to obtain sufficient bank finance. Also they are not ready or not willing to launch on the stock market.
Firm prices Market makers are required to trade at the prices posted on the London Stock Exchange’s system, unless the transaction is above the exchange market size.
Fixed assets (non-current assets) Those not held for resale, but for use in the business.
Fixed charge (e.g. fixed charge debenture or loan) A specific asset(s) is assigned as collateral security for a debt.
Fixed cost A cost that does not vary according to the amount of goods or services that are produced, and has to be paid regardless of the firm’s turnover and activity.
Fixed exchange rate The national authorities act to ensure that the rate of exchange between two currencies is constant.
Fixed-interest securities Strictly, as the term applies to securities such as bonds on which the holder receives a predetermined interest pattern on the par value (e.g. gilts, corporate bonds, Eurobonds). However, the term is also used for debt securities even when there is no regular interest, e.g. zero-coupon bonds, and when the interest varies, as with floating rate notes, for example.
Fixed-rate borrowing (fixed interest) The interest rate is constant throughout the loan period.
Fixed-odds trading For those who want to speculate on the movements of markets a fixed-odds trading firm will offer you an amount that you can take from them if your bet turns out to be right. For example, they pay you 200 per cent of the amount you put down if the FTSE falls by more than 10 per cent in the next 30 days. If you lose you forfeit your initial stake and no more.
Flat yield on a fixed-interest security is the gross interest amount, divided by the current market price, expressed as a percentage.
Float 1. The difference between the cash balance shown on a firm’s cheque book and the bank account, caused by delays in the transfer of funds between bank accounts. (2) A currency exchange rate that is permitted to vary rather than being fixed. (3) An issuance of shares to the public by a company joining a stock market. (4) For insurance companies: A pool of money held in the firm in readiness to pay claims.
Floating The issue of shares in a company for the first time on a stock exchange.
Floating charge The total assets of the company or an individual are used as collateral security for a debt. There is no specific asset assigned as collateral.
Floating exchange rate A rate of exchange which is not fixed by national authorities but fluctuates depending on demand and supply for the currency.
Floating-rate bond The interest rate payable varies with short-term rates (e.g. three- month LIBOR).
Floating-rate borrowing (floating interest) The rate of interest on a loan varies with a standard reference rate (e.g. bank base rate or LIBOR).
Floating-rate notes (FRNs) Notes (legal contracts for borrowing) in which the coupon fluctuates according to a benchmark interest rate charge (e.g. LIBOR). With reverse floaters the interest rate declines as LIBOR rises.
Flotation The issue of shares in a company for the first time on a stock exchange.
‘Footsie™’ Nickname for the FTSE 100 index.
Foreign banking Transactions in the home currency with non-residents.
Foreign bond A bond denominated in the currency of the country where it is issued when the issuer is a non-resident.
Foreign exchange control Limits are placed by a government on the purchase and sale of foreign currency.
Foreign exchange (forex or FX) markets Markets that facilitate the exchange of one currency into another.
Forex A contraction of ‘foreign exchange’.
Forward agreement A contract between two parties to undertake an exchange at an agreed future date at a price agreed now.
Forward basis The price investors pay for unit trust units will be fixed at a particular time of day (usually 12 noon) that is yet to come.
Forward PER Current share price divided by the anticipated earnings for the current year.
Forward-rate agreement (FRA) An agreement about the future level of interest rates. Compensation is paid by one party to the other to the extent that market interest rates turn out to deviate from the ‘agreed’ rate.
Founders’ shares Dividends are paid on these shares only after all other categories of equity shares have received fixed rates of dividend. They usually carry a number of special voting rights over certain company matters.
Free cash flow Cash generated by a business not required for operations or for reinvestment. Profit before depreciation, amortisation and provisions, but after interest, tax, capital expenditure on long-lived items and increases in working capital. These deductions can be made from the historic facts presented by the company of actual spending, or they can be based on estimates of the expenditures necessary to maintain the company’s competitive position, unit volume and investment in all value generating projects.
Free float (Free capital) The proportion of a quoted company’s shares not held by those closest (e.g. founding directors’ families) to the company who may be unlikely to sell their shares.
Free plus A return an investor enjoys over and above initial expectations.
Friendly merger Merger to which the two companies agree.
Friendly Society A mutual (cooperative) organisation involved in saving and lending.
Front-end charge (load) A charge made when an investment is first made (e.g. by a unit trust manager when an investor first buys the units). Also called initial charge or sales charge.
Frontier market Financial markets that tend to be small, with few companies, low turnover and often government restrictions on investors. They are usually in poor countries.
FRS 3 earnings Also known as basic earnings per share. Includes deductions from profit of one-off exceptional items.
FTSE 100 share index An index representing the UK’s 100 largest listed shares.
FTSE 250 index This is an index of UK shares quoted on the London Stock Exchange constructed by the FTSE. Based on the largest 250 firms which are the next size range after the top 100. Also calculated with investment trusts excluded.
FTSE 350 index This is an index of UK shares quoted on the London Stock Exchange constructed by the FTSE. Based on the largest 350 quoted companies. It combines the FTSE 100 and the FTSE 250. This cohort of shares is also split in two to give high and low dividend yield groups. A second 350 index excludes investment trusts.
FTSE AIM All-Share This is an index of UK shares quoted on the London Stock Exchange constructed by the FTSE of all Alternative Investment Market companies except those with a low free-float and low liquidity.
FTSE All-Share index (the ‘All-Share’) This is an index of UK shares listed on the London Stock Exchange constructed by the FTSE. The most representative index reflecting the average movements of about 600 shares representing 98–99 per cent of the value of the London market. Broken down into a number of commercial and industrial sectors. Companies in the FTSE All-Share index have market capitalisation above roughly £70 million. It is an aggregation of the FTSE 100, FTSE 250 and the FTSE SmallCap.
FTSE All-Small An index of UK shares quoted on the London Stock Exchange constructed by the FTSE which combines companies in the FTSE SmallCap with those in the FTSE Fledgling.
FTSEurofirst 300 An index of large European shares constructed by the FTSE.
FTSE Fledgling An index of UK shares quoted on the London Stock Exchange constructed by the FTSE. Includes companies listed on the Main Market but too small to be in the FTSE All-Share.
FTSE Russell This organisation calculates a range of share indices published on a regular (usually daily) basis.
FTSE SmallCap index An index of UK shares quoted on the London Stock Exchange constructed by the FTSE. Covers companies included in the FTSE All-Share but excluded from the FTSE 350,
Full accrual price (bonds) On a bond a buyer pays a total of the clean price and the accrued interest since the last coupon payment.
Full-payout lease The lessor expects to recover the full cost (or almost the full cost) of the asset plus interest, over the period of the lease.
Fully automated trading An online brokerage service. The investor is directly connected to the market maker system. Retail service providers (RSPs) offer competing price quotes and the investor trades directly with one RSP.
Fully paid The holder of shares has paid the full price and does not owe an instalment(s).
Fund management Investment and administration of a quantity of money (e.g. pension fund, insurance fund) on behalf of the fund’s owners.
Fund of funds A fund that then invests the money raised from investors in a range of funds (e.g. hedge funds).
Fund platform Online organisations that allow investors to invest in a range of unit trusts, investment trusts, shares, bonds ETFs, OEICs, etc. Investors can select one, two or a dozen funds from different management companies together with other investments. They usually charge either a flat fee or a percentage of funds held on the platform.
Fund supermarkets Online organisations that allow investors to invest in a range of unit trusts, investment trusts, shares, bonds ETFs, OEICs, etc. Investors can select one, two or a dozen funds from different management companies together with other investments. They usually charge either a flat fee or a percentage of funds held on the platform..
Fundamental analysts Individuals who try to estimate a share’s true value, based on future returns to the company. Data from many sources are used, e.g. company accounts, economic and social trends, technological changes, etc.
Fundraising Companies can raise money through rights issues, IPO or bond sales etc.
Fungible Interchangeable securities; can be exchanged for each other on identical terms.
Future A standardised contract between two parties to undertake a transaction at an agreed price on a specified future date.
Futures-based bet A bet with a spread betting company placed on the price of shares or the level of an index on the next quarter day or the one after that.
FX A contraction of foreign exchange.
GAAP Generally accepted accounting principles. Accounting rules for reporting results.
GDP (nominal, real) Gross domestic product, the sum of all output of goods and services produced by a nation. Nominal GDP includes inflation, and real excludes it.
Gearing (financial gearing) The proportion of debt capital in the overall capital structure. Also called ‘leverage’. High gearing can lead to exaggeratedly high returns if things go well or exaggerated losses if they do not go well.
Gearing (operating gearing) The extent to which the firm’s total costs are fixed. This influences the break-even point and the sensitivity of profits to changes in sales level.
General inflation The process of steadily rising prices resulting in the diminishing purchasing power of a given nominal sum of money. Measured by an overall price index (e.g. RPI or CPI) which follows the price changes of a ‘basket’ of goods and services through time.
General insurance Insurance against specific contingencies (e.g. fire, theft and accident). The term excludes life insurance.
Gilt-edged market makers (GEMMs) These organisations are at the centre of trading in UK government bonds. They stand ready to buy from or sell to investors at all times (when markets are open) quoting bid and offer prices.
Gilts (gilt-edged securities) Fixed-interest UK government securities (bonds) – a means for the UK government to raise finance from savers. They usually offer regular interest and a redemption amount paid years in the future.
Global depositary receipts (GDRs) Certificates which represent ownership of a given number of a company’s shares and which are traded independently of the underlying shares.
Globalisation The increasing internationalisation of trade, particularly financial product transactions. The integration of economic and capital markets throughout the world.
Goal congruence The aligning of the actions of senior management with the interests of shareholders.
Going concern A judgement as to whether a company has sufficient financial strength to continue for at least one year. Accounts are usually drawn up on the assumption that the business is a going concern.
Going long Buying a financial security (e.g. share) in the hope that its price will rise.
Going public A phrase used when a company becomes quoted on a stock exchange (the company may have been a public limited company for years before this).
Going short The selling of financial securities (e.g. shares) not yet owned (they are borrowed), in the anticipation of being able to buy at a later date at a lower price.
Golden handcuffs Financial inducements for managers to remain working for a firm.
Golden parachutes In a hostile merger situation, managers will receive large pay-offs if the firm is acquired.
Golden shares Shares with extraordinary special powers over the company (e.g. power of veto over a merger).
Good for the day A buy or sell order for a financial security has a limit above/below which theinvestor does not want the broker to go. If the order is not completed that day it is cancelled.
Good till cancelled A buy or sell order for a financial security has a price limit. The order stays in place (up to 90 days) until the investor tells his/her broker that it is cancelled it or it has been satisfied by a trade.
Goodwill An accounting term for the difference between the amount that a company pays for another company and the fair value of the other company’s assets (after deducting all liabilities). Goodwill is thus an intangible asset representing such things as the value of the company’s brand names and the skills of its employees.
Grace period A lender grants the borrower a delay in the repayment of interest and/or principal at the outset of a lending agreement.
Greater fool investing The object is to pass on a share which is currently of great interest to the market speculators and traders after making a return on the ‘investment’ without really bothering to understand the fundamentals of the business.
Greenmail Key shareholders try to obtain a reward (e.g. the repurchase of their shares at a premium) from the company for not selling to a hostile bidder or becoming a bidder themselves.
Greenshoe An option that permits an issuing house, when assisting a corporation in a new issue, to sell more shares than originally planned. They may do this if demand is particularly strong.
Grey Knight During a merger bid process a second bidder, who is a rival to the hostile first bidder (black knight) and friendlier toward the managers of the target, launches a bid. The rivalry may produce a higher takeover price.
Grey market A market in shares which have not yet come into existence (e.g. in the period between investors being told they will receive shares in a new issue and the actual receipt they may sell on the expectation of obtaining them later).
Gross dividend yield The gross (before tax) dividend per share as a percentage of share price.
Gross domestic product (GDP) The sum of all output of goods and services produced by a nation. Nominal GDP includes inflation, and real excludes it.
Gross margin Profit defined as sales minus cost of sales, expressed as a percentage of sales.
Gross profit Turnover less cost of sales.
Gross profit margin (gross margin) Profit defined as sales minus cost of sales, expressed as a percentage of sales.
Gross redemption yield (gross yield to redemption) A calculation of the redemption yield on a bond (see Yield) before tax is deducted.
Group accounts All the income costs, assets and liabilities of all group companies, whether wholly or partially owned, are brought together in the consolidated accounts. Consolidation must take place if 50 per cent or more of the subsidiary’s shares are held by the parent. If less than 50 per cent of the shares are held, consolidation may still be required.
Growth industries Those industries which grow almost regardless of the state of the economy.
Growth stock/share Where the company has performed better than average (in growth in earnings per share) for a period of years and is expected to do so in the future. Second-rate investors/speculators call some companies growth stocks even if there is no history of good performance growth.
Guaranteed equity bonds Offered by insurance companies, banks, building societies and other investment firms, they provide a return linked to stock market indices. The investor commits to holding the bond for, say, five years and is guaranteed a minimum amount back and may also benefit from a rise in the stock market.
Guaranteed income bonds (GIBs) A lump-sum investment is made with an insurance company for a fixed period, say five years. GIBs pay regular income (the money is invested in a portfolio of low-risk bonds such as gilts). With growth bonds the interest accumulates until the maturity date.
Guaranteed loan stock (bond) An organisation other than the borrower guarantees to the lender the repayment of the principal plus the interest payment.