Fair Value

AAA

DEFINITION of 'Fair Value'

1. The estimated value of all assets and liabilities of an acquired company used to consolidate the financial statements of both companies.

2. In the futures market, fair value is the equilibrium price for a futures contract. This is equal to the spot price after taking into account compounded interest (and dividends lost because the investor owns the futures contract rather than the physical stocks) over a certain period of time.

INVESTOPEDIA EXPLAINS 'Fair Value'

2. The "fair value" quoted on TV refers to the relationship between the futures contract on a market index and the actual value of the index. If the futures are above fair value then traders are betting the market index will go higher, the opposite is true if futures are below fair value.

RELATED TERMS
  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Perceived Value

    The worth that a product or service has in the mind of the consumer. ...
  3. Spot Price

    The current price at which a particular security can be bought ...
  4. Annual Report

    1. An annual publication that public corporations must provide ...
  5. Compounding

    The ability of an asset to generate earnings, which are then ...
  6. Consolidate

    The combining of assets, liabilities and other financial items ...
Related Articles
  1. Fundamental Analysis

    Discounted Cash Flow Analysis

    Find out how analysts determine the fair value of a company with this step-by-step tutorial and learn how to evaluate an investment's attractiveness for yourself.
  2. thinkstock|istock
    Options & Futures

    How To Avoid Closing Options Below Intrinsic Value

    To get the best return possible on your options trading, it is important to understand how options work and the markets in which they trade.
  3. Investing Basics

    Pin Down Stock Price With Real Options

    How can you assign a value to what a company may do with its business in the future? We explain how it works.
  4. Active Trading Fundamentals

    Efficient Market Hypothesis: Is The Stock Market Efficient?

    Deciding whether it's possible to attain above-average returns requires an understanding of EMH.
  5. Active Trading

    Traders: Profit From Other Investors' Fear

    Learn to pounce on the opportunity that arises when other traders run and hide.
  6. Personal Finance

    For a company, is it more important to lower costs or increase revenue?

    Examine the question of whether a company's desire for increased profitability is better served by focusing on cutting costs or on increasing revenue.
  7. Fundamental Analysis

    What role does discounted cash flow (DCF) play in stock valuation?

    Understand the meaning and significance of discounted cash flow, and learn how market analysts commonly use this stock evaluation tool.
  8. Fundamental Analysis

    What is the first day of the third quarter?

    Learn when the first day of the third quarter begins. Explore how reported financial results may have a profound impact on the price of shares.
  9. Fundamental Analysis

    What is the difference between revenue and sales?

    Learn to distinguish between a company's revenue and its sales, and see why the distinction is important when analyzing a company's financial performance.
  10. Fundamental Analysis

    What is the difference between revenue and profit?

    Understand the difference between revenue and profit, two key concepts in business accounting, including where each can be found on an income statement.

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center