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FREE CASH FLOW

This is the cash flow that is left once a firm’s operating cash flow (the cash it generates from the heart of its trading operations as shown towards the top of a cash flow statement) has been adjusted for non-discretionary payments such as the interest on debt and the tax bill. It is also common …

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FIXED ASSETS

These are the long-term assets of a business intended for revenue generation and not onward sale. Examples include land and buildings, motor vehicles and computer equipment. Usually they are recorded in a firm’s balance sheet at their acquisition or purchase price and then gradually written off via a depreciation charge against profits at a rate …

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FINAL SALARY SCHEME

These are increasingly rare pension schemes (unless you are a government employee) where an employer guarantees to link your pension to your final salary whilst you were in employment. The reason they are rare is that this puts all the risk onto an employer in terms of whether they will have the funds available to …

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FUND MANAGER

Someone paid to run an active or passive fund. Active funds are those where a fund manager makes decisions about what should be held within the fund according to an investment mandate. They are free to buy and sell securities on behalf of investors in order to meet the objectives of the fund (for example …

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FISCAL POLICY

This is the mechanism by which governments adjust their tax policies and spending levels. For example, in order to stimulate growth they may try cutting tax (to encourage entrepreneurship) and/or boost spending in order to directly influence the jobs market and generate confidence. Opinion divides as to which measures are the most effective. READ MORE

FIXED INCOME SECURITY

Also known as “bonds” these are IOUs issued by companies and governments. They carry a fixed coupon so the income return to an investor is known in advance as is the final redemption date and the value of the bond at that redemption date (its “face”, “par” or “nominal” value). From an issuer’s point of …

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FIXED PROTECTION

This describes a way for a pension saver, who is in danger of breaching the Lifetime Allowance (LTA), to exclude additional assets from the scope of the LTA penalty charge. It does this by fixing the LTA at a higher amount based on previous years’ allowances. READ MORE

FLOATING RATE NOTE

This is a debt security where the interest paid to the holder floats up or down in accordance with a benchmark rate of interest (such as LIBOR) rather than being fixed. Since the coupon payments are less predictable for the issuer with this type of security they are less common than simple fixed income securities. …

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FREE CASH FLOW YIELD

This is a metric used to get a view on whether a firm is over, or under, valued in cash flow terms. It compares the annual free cash flow per share to the price per share as a percentage. So if FCPS is 10p and the share price is 100p, then the FCF yield is …

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FREE FLOAT

This is the proportion of a firm’s total shares that can be freely bought and sold and are therefore not held solely for directors, other firms within a group, or even the government. This is an important number because if a firm has a low free float the shares may be very volatile if there …

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