Financial Glossary


L

Lagging Indicators. A selection of statistical data, that on average, indicate highs and lows in the business cycle behind the economy as a whole. These relate to business expenditures for new plant and equipment, consumers' installment credit, short term business loans, the overall value of manufacturing and trade inventories.

Large-Cap Stock. Large company stocks (also called "large-cap" stocks) are stocks of companies with a total market value (or market capitalization) of $1 billion or more. These are established, successful companies that are more likely than smaller companies to pay dividends. These stocks are considered more stable than stocks of smaller companies.

Large Corporations Tax (LCT). A tax levied on the amount by which a corporation's taxable capital employed in US/Canada exceeds $10 million. It ensures that all large corporations contribute each year to reducing the federal deficit.

Last In, First Out Inventory Method (LIFO). An accounting method for valuing the Cost of Goods Sold that assumes the newest item in inventory is used first. See FIFO.

Lead Investor. This is a company's principal provider of capital, such as the entity which originates and structures a syndicated deal.

Leading Indicators. A selection of statistical data, that on average, indicate highs and lows in the business cycle ahead of the economy as a whole. These relate to employment, capital investment, business starts and failures, profits, stock prices, inventory adjustment, housing starts and certain commodity prices.

Lease. A contract that grants you the use of automobiles, equipment, real estate or other fixed assets for a period of time in exchange for payment. Essentially, a rental agreement for an asset. There are two kinds of leases: Capital Leases and Operating Leases

Letter of Intent. A preliminary outline of the major terms of a proposed transaction.

Leverage. Increasing the return on an investment through borrowing or special contract terms. Using borrowed funds to maximize the rate of return on investment. Keep in mind, however, that losses can mount very quickly if your investment starts losing money.

Leveraged Buy-Out (LBO). An acquisition in which a public company is taken private or control of a private company is purchased in a transaction that is financed using a high degree of debt collateralized by the company's assets.

Liabilities. An amount owed by a company including short-term and long-term liabilities. Short-term liabilities are amounts payable indebtness that must be paid within 12 months while long-term liabilities are due beyond one year. In short, the amounts a company owes to various creditors, including bank loans, mortgages, and credit card balances.

Liabilities Not Assumed. In a transaction, liabilities not transferred to the buyer.

LIBOR. The interest rate the largest international banks charge each other for loans of a stated maturity. This is a base index for setting some adjustable rate financial instruments. Put another way, the term "LIBOR" is an acronym for London Interbank Offered Rate, which is the market interest rate charged by lenders and paid by borrowers for U.S. dollars outside U.S. borders (commonly called Eurodollars). LIBOR is quoted on a daily basis representing fixed time periods ranging from 30 days to 360 days.  The rate is set not by banks but by market forces in the supply and demand of Eurodollars.  Interest rates on senior acquisition financing are normally based on a floating rate related to either the prime rate or LIBOR.

Limit Order. An order to buy a security at or below the current market price, or to sell it above or at the current market price.

Limited Liability Company (LLC). A form of ownership, owned by its members, which is a separate legal entity that has continuity of life and is not dependent on any one member for maintaining its legal existence. An LLC is governed by a particular state's laws, however, in general it has the advantage that its members maintain limited liability while avoiding Double Taxation.

Limited Partnership. An ownership entity used to limit liability for most of its partners and avoid Double Taxation. One or more partners, designated as general partners, manage the partnership's daily operations and have unlimited liability for the entity's debts while the limited partners are only liable for their capital contributions. See Partnership.

Line of Credit. Revolving credit extended to an individual by a financial institution. It may be secured or unsecured. Rates are ordinarily better than credit cards.

Liquidation. A process by which a company's business is sold or its operations terminated and its assets are sold. The proceeds are used to pay creditors based on priority of debt claims and the remaining funds, if any, are distributed to stockholders.

Liquidation Preference. The amount an investor is entitled to receive prior to any distribution to holders of common stock. For preferred stockholders, the liquidation preference is usually equal to the purchase price plus any unpaid accumulated dividends.

Liquidity. The ease with which an asset can be sold and converted to the most liquid of assets - cash - without a substantial change in price. It is one of the most important characteristics of a good market.

Liquidity Event. This is the way in which an investor plans to close out an investment. Liquidity event is also known as exit strategy. 

Liquidity Ratios. A ratio that measures a company's ability to pay off short-term debt as it becomes due. The main ratios of this type are the current ratio (Current Assets divided by Current Liabilities) and the quick ratio (Current Assets less inventory divided by Current Liabilities).

Liquid Net Worth. A measure of worth that only includes assets that can readily be turned into cash without a major loss in value. When calculating liquid net worth do not include real estate or business equity, personal property and automobiles, expected inheritances, or funds already earmarked for other purposes. Your net worth is the total of all of your assets (stocks, bonds, bank accounts, home equity, real estate, personal property, business receivables, notes receivable, etc.) minus the total amount of your liabilities (outstanding loans owed, credit card balances, taxes payable, bills payable, etc.) Unfortunately, many of these assets will not be readily accessible if cash is needed in a hurry; therefore, we will use only your liquid net worth in determining your financial health.

Listed Stock. The stock of a company that is traded on a stock exchange.

Lock Up. The contractual obligation between the underwriter, the company and certain security holders, whereby the holders agree to refrain from selling the securities during a specified period following the effective date of a registration statement filed by the company with the SEC. Also referred to as a market standoff. Put another way, it is also refered to as Lock-Up Period. This is the period an investor must wait before selling or trading company shares subsequent to an exit, usually in an initial public offering the lock-up period is determined by the underwriters.

London Inter-Bank Offer Rate (LIBOR). The interest rate the largest international banks charge each other for loans of a stated maturity. This is a base index for setting some adjustable rate financial instruments. Put another way, the term "LIBOR" is an acronym for London Interbank Offered Rate, which is the market interest rate charged by lenders and paid by borrowers for U.S. dollars outside U.S. borders (commonly called Eurodollars). LIBOR is quoted on a daily basis representing fixed time periods ranging from 30 days to 360 days.  The rate is set not by banks but by market forces in the supply and demand of Eurodollars.  Interest rates on senior acquisition financing are normally based on a floating rate related to either the prime rate or LIBOR. (also see LIBOR)

Long. Signifies ownership in a security. "I'm long 100 BCE common" means the person owns 100 common shares of BCE Inc. See also Short Selling.

Long-Term Assets. Reported on the balance sheet, it's the value of a company's property, equipment and other capital assets, minus depreciation. 

Long-Term Debt. Debt that becomes due after more than one year.

Long-Term Interest Rates. Rates applying on money lent for a period of 10 years or more are called long-term rates. Those on money lent for a period of less than three years are considered short-term rates. Typically, long-term rates are higher than short-term rates because lenders want a higher return for tying up their money for a lengthy period.

Loss Carry-Forward. An accounting technique that applies the current year's net operating losses to future years' profits in order to reduce tax liability.  Generally accepted accounting principles (GAAP) specify that loss carryforwards can be used in any one of the seven years following the loss.