Financial Analysis Terms: F, Continued
Financial Leverage – This is the measure of a company’s ability to operate continuously as a going concern even if it resorts to borrowing long-term funds. The measure is determined by dividing the company’s total liabilities over the value of its stockholders’ equity. This denotes that borrowings are used for self-liquidating business ventures and do not affect the company’s capital growth in any way.
Financial Model – This refers to the mathematical equations used to come up with representations on how different economic situations or conditions will impact the business. It may also be used as a tool for analyzing business decisions that entail committing funds to an investment or business undertaking.
Financial Projection – See Financial Forecast
Financial Ratio -- This is a mathematical tool used for determining proportions between two financial components. The numerical objective is derived by dividing the financial statement balance of one account over the balance of another financial statement account.
Financial Ratio Analysis – The interpretation of the financial ratio proportion, which depends on the analyst's objective in terms of profitability, liquidity, or stability.
Financial Reporting – The required financial statements submitted by business entities, for review or perusal by regulatory bodies, public investors, creditors, employees, and all others who may have vested interests in a business entity.
Financial Risk – The connotation of risk means the probability of negative outcomes for a financial venture such as investments, or the amount of money lent or any form of undertaking from which yields are generally expected.
Fixed Asset Turnover -- This refers to a measure of profitability by determining how effectively the fixed assets are being utilized to generate revenues for the business. This is determined by dividing net sales (sales - discounts/refunds) over the value of fixed assets.
Fixed Asset Unit – Refers to every single item classified as a tangible asset capitalized as a fixed asset cost. Examples include machinery, delivery equipment, office furniture, computers, and the like.
Fixed Asset-to-Equity Capital Ratio -- The ratio is looked into by investors who are interested in determining how much of the capital has been infused in fixed assets that are used for business operations. It indicates if management is harnessing capital funds on resources for the purpose by which the company operates and not on speculative investments.
Fixed Budget -- The predetermined plan that has been resolved as non-adjustable regardless if there are any deviations in the conditions that affect a company’s ability to realize the income that was projected.
Flotation Cost -- This is defined as the monetary considerations involved in the issuance of a new security. This pertains not only to the administrative expenses paid in order for the new security to have a physical presence in the capital market but also the yield that will be paid out to investors who will buy the newly released investment product.