ERP Glossary - F: Factoring to Functionality

Factoring

The business practice of purchasing discounted debt from an organization, and making a profit by assuming the collection risk and collecting more from the debtors than the debt cost to purchase.

FIFO (First in, First out)

First in, First out is an inventory strategy which requires that the oldest inventory (first in) always be consumed next. This approach minimizes shelf life risk, and assuming that prices are generally inflationary over time, it tends to increase the value of inventory and decrease the cost of goods sold, compared to LIFO (cheapest materials are always being consumed first).

Financial Reports (or Financial Statements)

Financial statements are a collection of documents which summarize the financial activities and results of a business or organization. Financial statements normally adhere to GAAP accounting methodology and generally include - but are not limited to - an income statement, a balance sheet, a cash flow statement, and a statement of retained earnings.

Financial Statements

A group of standard documents that are intended to express the comprehensive financial performance of a company or organization in unambiguous mathematical terms. Financial statements contain a variety of documents, but almost all financial statements include the following four: (1) income statement (2) balance sheet (3) cash flow statement (4) performance ratios

Fiscal Year

The period of time that defines when an accounting year begins and ends. A fiscal year does not have to conform to a calendar year, in terms of starting January 1 and ending December 31.

Fixed assets

The category of assets which is not expected to be converted to cash in a year or less. Examples of fixed assets might be a factory and any production equipment contained within; any trucks, cars, or other owned vehicles used in business operations; or a headquarters building with office space and computing resources.

Fixed Costs

Fixed costs are the category of costs which remain constant in the short term, independent of the level of business activity. For instance, in a factory, the cost for the plant manager's salary, the insurance on the building, and the depreciation on the equipment remains constant, regardless of how much product the factory produces.

Flexibility

In ERP, flexibility refers to the relative ease with which a system or program can be adapted to accommodate a changing business environment or new business model.

Functionality

The spectrum of tasks that a computer program or ERP system can perform.

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Tom Stephenson

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Tom Stephenson