Guide to Analysing Companies

Floor
There are two meanings.
1 A minimum rate of interest on a floating-rate note.
2 The place in a stock exchange where trading actually
takes place, or where it used to. Thus the tag given to a floor
trader: somebody who trades (or who used to trade) on the floor
of a stock exchange.
Flotation
The launch of a new bond or equity issue on a capital
market. All markets have rules governing the way flotations
must take place, most of which are designed to protect investors
from fraud. It is the job of a regulator, such as the sec in the
United States or the fsa in the UK, to make sure the rules are
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observed. This adds to the cost of a flotation, which usually re-
quires the services of an investment bank or sponsoring
stockbroker to underwrite (or assume the risk for selling)
new shares in the company that is being floated. To qualify
for a flotation, companies usually have to satisfy the authorities,
or stock exchange on which their shares are to be listed,
that they have audited accounts and articles of association
drawn up by lawyers. (See also initial public offering.)
Footsie
See ftse 100.
Forced savings
Savings which accrue without the consumer making a con-
scious decision to save. This can happen in all sorts of ways. For
example, governments levy taxes which go towards paying
pensions, or certain expenditure is prohibited, as when restric-
tions are imposed on foreign travel.
Forecasting
The instinct to try to predict the future is found everywhere,
particularly in things financial. Any certainty about the future
which is not widely known promises huge gains to those who
do know. For this reason, analysts spend their waking hours
trying to discern what is happening to the economy and there-
fore how particular industries and companies are likely to fare.
Companies’ profits may lead or lag behind changes in the
business cycle, but over time they generally track the rate of
growth in a country’s gross domestic product (gdp). Using
various models, analysts try to forecast a company’s earnings
and how this might affect their valuation. At a certain share
price, they can then determine whether a company is under-
valued or overvalued compared with its peers and the average