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GLOSSARY
Financial modeling
Financial modeling is a method of analyzing a company's financial performance and predicting outcomes based on past performance and current industry conditions. The analyst would construct a working representation of the company's financial statements. This can be done in a spreadsheet, or in a more specialized software program. The analyst then uses the model to change certain inputs, and test the sensitivity of the company's financial performance.
Financial plan
A financial plan is generally the same thing as a budget. Households can use financial plans to get out of debt, or to determine when they can afford to buy a house, etc. Businesses can use financial plans to set financial performance targets for a particular period. These targets might apply to a division, product line, or the whole company.
Financial planner
A financial planner is a qualified professional who helps individuals and businesses set financial targets and take the appropriate steps to meet those targets. For example, individuals would seek the services of a financial planner when starting an investment program or when planning for retirement.
Financial risk
Financial risk, in general, can be any threat associated with money. In business, financial risk usually refers to the portion of a company's risk profile that's related to the use of debt. Debt provides capital, but it also increases interest expense, and can drain cash reserves when principal payments come due.
Financing
Financing is supplying funds for a purchase or for ongoing activities. Financing often involves the use of debt, but it can also include the raising of equity capital.
Finder's fee
A sum paid to an individual for producing a buyer or seller.
Firm commitment
When a lender promises to give the borrower a loan on a certain property. Also, a promise by the FHA to insure a mortgage loan for a specified borrower and property.
Firm commitment lending
Firm commitment lending is the practice of providing a prospective borrower with a loan approval that remains in effect for a given time period. If the prospective borrower accepts the loan within that time period and meets the stated conditions, the lender must fund the loan.
First dollar coverage
First dollar coverage is a type of insurance policy where the insurance covers the entire loss, without subjecting the customer to a deductible or copayment, up to stated policy limits.
First in, first out - FIFO
First in, first out, or FIFO, is a method for determining the costs of sold inventory. Under FIFO, the first items purchased are the first items sold. In other words, the costs associated with the oldest inventory will always be moved to cost of goods sold first as sales are made. In periods where costs are rising or falling, the method of inventory accounting affects the costs of goods sold and value of inventory on the balance sheet. During inflationary periods, FIFO leads to a lower cost of goods sold and a higher inventory value.
First lien
The primary claim by the lender for satisfaction of outstanding debt. The first lien is created from a first mortgage.
First mortgage
It is that mortgage which receives the primary position amongst all loans taken out against a property. In case of the borrower defaulting, it is claimed first.\n\nSee further Second mortgage
First-time homebuyer
A first-time homebuyer, in general, is someone who hasn't owned a home previously. Other definitions apply for specific financial actions, such as early withdrawal from an IRA without penalty for the purchase of a home. In this case, a first-time homebuyer is one who hasn't owned a home for two years prior to the purchase of the new home.
Five-year Treasury constant maturity
Five-year Treasury constant maturity is an index that's used as a benchmark for adjustable-rate loans. The index reflects the average five-year yield equivalent on Treasury securities with varying maturities.
Fixed installment
A fixed installment is a regular principal and interest payment, made in the same amount in each billing period, on a loan.