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You are Here : Home > Investor Education > Glossary

Glossary to investment terminology : F

 
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Face Value
This is the cash denomination of a debt instrument e.g. a bond. It is the amount of money that the holder of the debt instrument receives from the issuer upon its maturity. It is also referred to as par value or principal.

Financial Institution
A financial institution is a money management company e.g. a bank that collects cash deposits from the public and invests or lends to borrowers. Some of these institutions have very large funds and can influence the prices of securities in the stock market considerably.

Financial Instrument
A financial instrument is a contract that represents a legal agreement involving monetary value. Financial instruments are either equity based; representing ownership of an asset, or debt based representing a loan made by the investor to the owner of the asset; or foreign exchange instruments.

Financial Markets
A financial market is generally any market place where buyers and sellers transact in assets such as equities, bonds, currencies and derivatives and include money markets and capital markets.

Financial Pyramid
This is a risk structure model used by investors who wish to spread their investments for safety and profits. At the base of the pyramid, its broadest span will be safe and liquid investments which will yield a decent return e.g. treasury bonds. The next segment will be debentures and shares which will yield a good return and at the top and narrowest segment with the least part of an investor's funds will be the high risk investments which if successful yield extraordinary returns.

Fiscal Year
A fiscal year is any 12 month period that a company uses for accounting purposes. It may or may not be the same as the calendar year or the government's financial year.

Fixed Assets
Fixed assets are entered into a company's balance sheet and include items like land, buildings, machinery and plants, fixtures and furniture which are not meant to be converted into cash in the normal course of events.

Fixed Income Investments
These are investments such as fixed deposits, non-convertible debentures, or government bonds that yield a fixed rate of interest.

Flat
This is a price that is neither rising nor declining. If the shares of a company have been trading at KES 12.00 over the last one month, they can be referred to as flat.

Flexible Fund
This term applies to pooled funds or collective investment schemes like mutual funds that may change their investment strategy as they see fit so as to maximize the total returns, as opposed to sticking to one type of investment vehicle.

Float
Also known as free float and is the total number of shares issued by a listed company that are publicly owned and available for trading. Floating stock is therefore the number of shares of a company that are traded at the Nairobi Stock Exchange.

Front Running
This is an illegal activity where a stockbroker buys or sells shares in his/her own name while taking advantage of advance knowledge of pending orders from his customers. Example; if a stockbroker buys himself 10,000 shares of a company just before he buys 1,000,000 shares of the same company for his client.

Fund Manager
This is a professional who runs and manages a portfolio of securities e.g. shares or bonds for and on behalf of investors.

Futures Contract
A futures contract is a contractual agreement to buy or sell a specified quantity of a commodity, currency or shares at a specified price on a fixed date in the future. It is also referred to as forward dealing or forward trading.