Guide to Analysing Companies

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FORECASTING
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for the market. The answer will suggest whether investors
should buy or sell its shares.
Foreign bond
A bond denominated in a currency foreign to the issuer, and
sold in the domestic market of the currency of issue – for
example, a Swiss franc bond issued by a Japanese company
and sold in Switzerland. (See also eurobond.)
Foreign direct investment
The purchase by a commercial organisation of assets overseas
for the purpose of investment. Such assets might include green-
field sites, where a factory or office is to be built from scratch, or
a sizeable stake (usually over 50% if regulations allow) of an ex-
isting company that is already operating in the foreign market.
Flows of foreign direct investment (fdi) can have a profound
effect on a developing economy. Maintaining the economy’s
equilibrium in the face of a flood of investment can be as diffi-
cult as coping with the consequences when, for whatever
reason, the flow is suddenly turned off.
Foreign exchange
The means through which payments are made between one
country and another. banks and their customers are the main-
stay of the foreign-exchange (forex) markets. The markets
started out as the servants of trade but, during the past 20 years
or so, they have undoubtedly become one of its masters. Every
day in the forex markets traders place buy-and-sell orders
worth more than $2 trillion, most of them in pursuit of short-
term (that is, overnight) gain. This is more than the value of all
the cars, wheat, oil and other products bought and sold in the
real economy every day.
As well as dealing in physical currency (for example, from
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dollars to yen or vice versa), traders routinely use derivatives
(futures, options and the like) to give them extra leverage or
to hedge against the risk of possible losses. This gives the
markets power not just to influence events but sometimes also
to profit from them. In 1992, George Soros made $1 billion from
betting correctly that the UK would be forced out of Europe’s
exchange rate mechanism.
Forfaiting
Also known as 
à forfait, the business of discounting a finan-
cial instrument that is being used to finance the export of
capital goods. banks buy the instruments at a discount and
then trade them. The forfait market grew up in Switzerland,
where it concentrated on buying east–west trade debt, but its
name became increasingly anglicised (from 
à forfait to forfait-
ing) as the market shifted to London in the 1980s.
Forgery
A counterfeit coin, note or document that tries to pass as some-
thing that it is not. Forgeries often involve the copying of other
people’s signatures. To make forgery as difficult as possible, the
printing of notes has become a highly specialised task that in-
volves sophisticated technical processes.