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Browsing by the letter "F"
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Freddie Mac (Federal Home Loan Mortgage Corporation)
Definition: A Congressionally chartered corporation that purchases residential mortgages in the secondary market from S&Ls, banks, and mortgage bankers and securities for sale in the capital markets.
Definition: A Congressionally chartered corporation that purchases residential mortgages in the secondary market from S&Ls, banks, and mortgage bankers and securities for sale in the capital markets.
Free Alongside Ship (FAS)
Definition: An Incoterm (FAS) that means the seller is responsible for the cost of transporting and delivering goods alongside a vessel in a port in his or her country. Since the buyer has responsibility for export clearance under FAS, it is not a practical Incoterm for U.S. exports. FAS should be used only for ocean shipments since risk and responsibility shift from seller to buyer when the goods are placed within the reach of the ship's tackle (crane).
Definition: An Incoterm (FAS) that means the seller is responsible for the cost of transporting and delivering goods alongside a vessel in a port in his or her country. Since the buyer has responsibility for export clearance under FAS, it is not a practical Incoterm for U.S. exports. FAS should be used only for ocean shipments since risk and responsibility shift from seller to buyer when the goods are placed within the reach of the ship's tackle (crane).
Free And Clear
Definition: Owning property free and clear is having title to a property without encumbrances; that is, free of liens. Also known as having "clear title" or "marketable title."
Definition: Owning property free and clear is having title to a property without encumbrances; that is, free of liens. Also known as having "clear title" or "marketable title."
Free Box
Definition: A bank vault or other suitable storage place for the securities of a firm's customer.
Definition: A bank vault or other suitable storage place for the securities of a firm's customer.
Free Carrier (FCA)
Definition: An Incoterm meaning that the cost, risk and responsibility shift from the seller to the buyer when the goods are turned over to a carrier at a designated place.
Definition: An Incoterm meaning that the cost, risk and responsibility shift from the seller to the buyer when the goods are turned over to a carrier at a designated place.
Free Cash Flows
Definition: Cash not required for operations or for reinvestment. Often defined as earnings before interest (often obtained from the operating income line on the income statement) less capital expenditures less the change in working capital. In terms of a formula: Free cash flows = Sales (Revenues from operations) - COGS (Cost of goods sold-labor, material, book depreciation) - SG&A (Selling, general administrative costs) EBIT (Earnings before interest and taxes or Operating Earnings) - Taxes (Cash taxes) EBIAT (Earnings before interest after taxes) + DEP (Book depreciation) - CAPX (Capital expenditures) - ChgWC (Change in working capital) C (Free cash flows) There is an issue as to whether you want to define the FCFs to the firm as a whole (the cash flow to all of its security holders), or the FCFs only to the firm's equity holders. For firm valuation, you want the former; for stock valuation you want the latter. To value the firm, calculate the stream of FCFs to the firm and discount this stream by the firm's WACC (Weighted average cost of capital). This will give you the value of a levered firm, including the tax benefits of debt financing. Alternatively, you can discount the firm's FCFs by its unlevered cost of capital and add separately the present value of the tax benefits. To value the firm's equity, you can either take the above number and subtract the market value of all outstanding debt (liabilities) or you can calculate the FCFs to the firm's equity holders and discount this stream by the firm's levered equity cost of capital. Notice that changes in working capital have the same effect on free cash flows as do changes in physical capital, i.e., capital expenditures. For example, suppose you had to spend $XX to increase the capacity of your plant. This expenditure would be a reduction in free cash flow in the year it was made. Likewise, if you had to increase the level of your cash balance, inventory or receivables by $XX to accommodate greater sales, then this too would result in a like reduction in free cash flows in the year the level of working capital was increased. [Definition and discussion courtesy of Professor Michael Bradley.]
Definition: Cash not required for operations or for reinvestment. Often defined as earnings before interest (often obtained from the operating income line on the income statement) less capital expenditures less the change in working capital. In terms of a formula: Free cash flows = Sales (Revenues from operations) - COGS (Cost of goods sold-labor, material, book depreciation) - SG&A (Selling, general administrative costs) EBIT (Earnings before interest and taxes or Operating Earnings) - Taxes (Cash taxes) EBIAT (Earnings before interest after taxes) + DEP (Book depreciation) - CAPX (Capital expenditures) - ChgWC (Change in working capital) C (Free cash flows) There is an issue as to whether you want to define the FCFs to the firm as a whole (the cash flow to all of its security holders), or the FCFs only to the firm's equity holders. For firm valuation, you want the former; for stock valuation you want the latter. To value the firm, calculate the stream of FCFs to the firm and discount this stream by the firm's WACC (Weighted average cost of capital). This will give you the value of a levered firm, including the tax benefits of debt financing. Alternatively, you can discount the firm's FCFs by its unlevered cost of capital and add separately the present value of the tax benefits. To value the firm's equity, you can either take the above number and subtract the market value of all outstanding debt (liabilities) or you can calculate the FCFs to the firm's equity holders and discount this stream by the firm's levered equity cost of capital. Notice that changes in working capital have the same effect on free cash flows as do changes in physical capital, i.e., capital expenditures. For example, suppose you had to spend $XX to increase the capacity of your plant. This expenditure would be a reduction in free cash flow in the year it was made. Likewise, if you had to increase the level of your cash balance, inventory or receivables by $XX to accommodate greater sales, then this too would result in a like reduction in free cash flows in the year the level of working capital was increased. [Definition and discussion courtesy of Professor Michael Bradley.]
Free Delivery
Definition: Securities industry procedure whereby delivery of securities sold is made to the buying customer's bank without requiring immediate payment; thus a credit agreement of sorts. Antithesis of delivery vs. payment.
Definition: Securities industry procedure whereby delivery of securities sold is made to the buying customer's bank without requiring immediate payment; thus a credit agreement of sorts. Antithesis of delivery vs. payment.
Free Float
Definition: An exchange rate system characterized by the absence of government intervention. Also known as clean float.
Definition: An exchange rate system characterized by the absence of government intervention. Also known as clean float.
Free Indices
Definition: Usually refers to indices constructed by Morgan Stanley Capital International such that the market capitalization weights reflect the degree to which a stock is investible by foreigners. For example, if a stock has $700 million capitalization but government restrictions only allow up to 50% to be held by foreigners, then the weight in the Free index would by $350 million. The Standard and Poors/International Finance Corporation indices call their equivalent indices Investible Indices (IFCI).
Definition: Usually refers to indices constructed by Morgan Stanley Capital International such that the market capitalization weights reflect the degree to which a stock is investible by foreigners. For example, if a stock has $700 million capitalization but government restrictions only allow up to 50% to be held by foreigners, then the weight in the Free index would by $350 million. The Standard and Poors/International Finance Corporation indices call their equivalent indices Investible Indices (IFCI).
Free Of Particular Average
Definition: Marine cargo insurance that does not cover partial losses or partial damage unless caused by the vessel being sunk, stranded, burned, on fire, or in a collision.
Definition: Marine cargo insurance that does not cover partial losses or partial damage unless caused by the vessel being sunk, stranded, burned, on fire, or in a collision.
Free On Board (FOB)
Definition: Implies that distribution services like transport and handling performed on goods up to the customs frontier (of the economy from which the goods are classed as merchandise.) are included in the price.
Definition: Implies that distribution services like transport and handling performed on goods up to the customs frontier (of the economy from which the goods are classed as merchandise.) are included in the price.
Free Rider
Definition: A follower who avoids the cost and expense of finding the best course of action simply by mimicking the behavior of a leader who made these investments.
Definition: A follower who avoids the cost and expense of finding the best course of action simply by mimicking the behavior of a leader who made these investments.
Free Right Of Exchange
Definition: An investor's right to transfer securities from one name to another name without paying charges that accompany a sales transaction.
Definition: An investor's right to transfer securities from one name to another name without paying charges that accompany a sales transaction.
Free Stock
Definition: A stock that is paid for in full and is not pledged in any way as collateral.
Definition: A stock that is paid for in full and is not pledged in any way as collateral.
Free To Trade
Definition: Used in the context of general equities. Not subject to any internal (restricted list) or external restrictions on trading; hence, the trader is free to solicit interest.
Definition: Used in the context of general equities. Not subject to any internal (restricted list) or external restrictions on trading; hence, the trader is free to solicit interest.
Free-riding
Definition: A forbidden practice in which the member of an underwriting syndicate retains a portion of an initial public offering (IPO) and resells the securities at a higher price determined by the market at a later time. Also forbidden is a brokerage customer's rapid buying and selling of a security without putting up money for the purchase.
Definition: A forbidden practice in which the member of an underwriting syndicate retains a portion of an initial public offering (IPO) and resells the securities at a higher price determined by the market at a later time. Also forbidden is a brokerage customer's rapid buying and selling of a security without putting up money for the purchase.
Freed Up
Definition: A term used to indicate that an underwriting syndicate's members are no longer restricted to the fixed price agreed upon in the agreement among underwriters and are permitted to trade the security on a free market basis.
Definition: A term used to indicate that an underwriting syndicate's members are no longer restricted to the fixed price agreed upon in the agreement among underwriters and are permitted to trade the security on a free market basis.
Freely Floating Exchange Rate System
Definition: Monetary system in which exchange rates are allowed to move due to market forces without intervention by country governments.
Definition: Monetary system in which exchange rates are allowed to move due to market forces without intervention by country governments.
Freeze Out
Definition: The action of pressurizing shareholders with relatively minor amounts of stock to sell their shares after a takeover.
Definition: The action of pressurizing shareholders with relatively minor amounts of stock to sell their shares after a takeover.
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