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Terms starting with 'L'
L
A NASDAQ stock symbol specifying that it is a miscellaneous situation such as a depositary receipt, stub, additional warrant, or unit.

Labor Intensive
A process or industry that requires large amounts of human effort to produce goods.

Ladder Option
An option that locks-in gains once the underlying reaches predetermined price levels or "rungs," guaranteeing some profit even if the underlying security falls back below these levels before the option expires. ;

Laddering
The promotion of inflated pre-IPO prices for the sake of obtaining a greater allotment of the offering.

Lady Godiva Accounting Principles - LGAP
A theoretical set of accounting principles under which corporations must fully disclose all information, including that which often doesn't get reported to investors under GAAP.

LGAP includes disclosure of:
-all off-balance sheet items
-how new goodwill accounting rules (in 2002) impact EPS
-the impact on EPS of stock options issued in lieu of salaries
-how pension expense are accounted for
 

Lady Macbeth Strategy
A corporate takeover strategy whereby a third party poses as a white knight to gain trust, but then turns around and joins with unfriendly bidders.

Laffer Curve
Invented by Arthur Laffer, this curve shows the relationship between tax rates and tax revenue collected by governments. The chart below shows the Laffer Curve:
Illustration for Laffer Curve

Lagging Indicator
A measurable economic factor that changes after the economy has already begun to follow a particular pattern or trend.

Laissez Faire
An economic theory from the 18th century that is strongly opposed to any government intervention in business affairs. Sometimes referred to as "Let it be economics."

LAK
In currencies, this is the abbreviation for the Laos Kip.

Lambda
A ratio comparing change in option price to a 1% change in option volatility.


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Land
Property or real estate, not including buildings or equipment. Land is not depreciable under IRS tax law.

Land Value
The total value of the land, including any upgrades or improvements to the land.

Large Trader
A futures trader who holds or controls a single position that is equal to or greater than the CFTC specified reporting levels.

Large Value Transfer System - LVTS
In Canada, an electronic wire payments system that facilitates the transfer of funds between financial institutions.

Large-cap (Big-Cap)
Companies having a market capitalization between $10 billion and $200 billion.

Last In, First Out - LIFO
An inventory management and valuation method that assumes that the products acquired last are the ones sold first.

Last Twelve Months - LTM
A term used to describe financial results during the period of the last 12 months.

Last-Sale Reporting
An electronic entry, to the NASDAQ Stock Market, of the amount and price of shares involved in a transaction's not less than a board lot.

Late Day Trading
An unethical (if not illegal) practice where a hedge fund purchases and sells securities (usually mutual fund shares) after the close of a trading day, but makes the transactions appear as though they occurred before the market close.

Law of Diminishing Marginal Returns
A law of economics stating that, as the number of new employees increases, the marginal product of an additional employee will at some point be less than the marginal product of the previous employee.


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Law of Diminishing Marginal Utility
A law of economics stating that as a person increases consumption of a product--while keeping consumption of other products constant--there is a decline in the marginal utility that person derives from consuming each additional unit of that product.

Layoff
1. When a company eliminates jobs regardless of how good the employees' performance. 2. A risk reduction, made by investment bankers, that minimizes the potential downside associated with a commitment to purchase and sell a stock issue unsubscribed by stockholders holding rights.

LBP
In currencies, this is the abbreviation for the Lebanese Pound.

Lead Time
In terms of a supply chain, the total time needed for an order to be processed.

Leading Indicator
A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators are used to predict changes in the economy, but are not always accurate.

Leading Lipstick Indicator
An indicator based on the theory that when a consumer feels less than confident about the future, she (or he) turns to less expensive indulgences such as lipsticks. Therefore, lipstick sales tend to increase during times of economic uncertainty or a recession.

Leakage
A release of information to certain people before the official public announcement.

Lease
An agreement in which one party gains a long-term rental agreement, and the other party receives a form of secured long-term debt.

Leaseback
An arrangement where the seller of an asset leases back the same asset from the purchaser.

Leasehold Improvement
Improvements on a leased asset that increase the value of the asset.


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Leg
1. Term describing an order entry technique used by brokers. A leg occurs when a broker executes contingent orders in separate phases, thus increasing the risk for price swings through time delays.

2. A description of different aspects in a combination option.

Legal List
A selection of eligible companies and investments, determined by local state governments, for institutions such as insurance companies and pension plans.

Legend
A notification placed on certain stock certificates describing the terms and conditions of sale and ownership.

Legislative Overkill
A law enacted to stop or prevent the abuse of a loophole, but ends up imposing more restrictions than are necessary for reasonable prevention.

Lehman Formula
A compensation formula developed by Lehman Brothers for investment banking services. The structure is as follows:

Lemming
The act of following the crowd into an investment that will inevitably head for disaster.

Lemon
A very disappointing investment. Your expected return wasn't even close to being achieved.

Lender of Last Resort
An institution, usually a country's central bank, that offers loans to banks or other eligible institutions that are experiencing financial difficulty.

Leprechaun Leader
A corporate manager or executive who, like the fabled Irish elf, is a mischievous and elusive creature said to possess buried treasures of money and gold.

Lessee
The person who rents land or property from a lessor.


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Lessor
The person who rents land or property to a lessee.

Letter of Comfort
A letter issued to a lending institution by a parent company acknowledging the approval of a subsidiary company's attempt for financing.

Letter of Credit
A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount.

Letter of Indemnity
1. A letter guaranteeing that contractual provisions will be met, otherwise financial reparations will be made.

2. A letter requesting replacements for lost shares from a company's treasury.

Letter of Intent
1. A letter that describes in detail a corporation's intention to act on something.

2. It is also a way to protect your son or daughter from unnecessary chaos and turmoil when he or she must depend upon someone other than you for care and support (if you suddenly pass away).

Letter Security
A security that is not registered with the SEC, and so cannot be sold publicly in the marketplace.

Level 1
A trading service consisting of real-time bid/ask quotes for securities trading on the NASDAQ stock market and comparable information for securities quoted in the OTC Bulletin Board Service.

Level 2
A trading service consisting of real-time access to the quotations of individual market makers registered in every NASDAQ listed security, as well as market makers' quotes in OTC Bulletin Board securities.

Level 3
A trading service consisting of everything in Level 2, plus the ability to enter quotes, execute orders, and send information. This service is restricted to NASD member firms that function as registered market makers.

Level Load
An annual load that decreases in proportion to the amount invested the longer the money is kept in a mutual fund.


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Leverage
1. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.

2. The amount of debt used to finance a firms assets. A firm with significantly more debt than equity is considered to be highly leveraged.

Leveraged Buyout - LBO
A strategy involving the acquisition of another company using borrowed money (bonds or loans). The acquiring company uses its own assets as collateral for the loan in hopes that the future cash flows will cover the loan payments.

Leveraged Lease
A lease agreement wherein the lessor, by borrowing funds from a lending institution, finances the purchase of the asset being leased.

Leveraged Recapitalization
A strategy where a company takes on significant additional debt with the purpose of either paying a large dividend or repurchasing shares. The result is a far more financially leveraged company.

Levy
To collect or assess money that is due.

Liability
A legal debt or obligation estimated via accrual accounting.

Lien
When a creditor or bank has the right to sell mortgaged or collateral property of those who fail to meet the obligations of their loan contract.

Life Expectancy
1. The age until which a person is expected to live.

2. The remaining number of years an individual is expected to live, based on IRS issued life expectancy tables. The life expectancy, for Required Minimum Distribution calculation purposes, is determined by the current age of the individual.

Life Insurance
A protection against the lost income that would result if the insured were to pass away. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured.

Lifestyle Fund
A fund whose asset mix is determined according to the level of risk and return that is appropriate for an investor's current life situation.


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Lifetime Learning Credit
A federal initiative whereby a person is eligible for a non-refundable credit for a specific amount spent on higher education tuition and fees during the year.

LIFO Liquidation
When a company using the LIFO method of inventory costing liquidates their older LIFO inventory.

Like-for-Like Sales
The portion of current sales achieved through activities that are comparable to the activities of the previous year.

Like-Kind Property
Investment or business land/properties that are considered to be the same type and exchanging them is therefore tax-free.

Limit Down
The maximum amount by which the price of a commodity futures contract may decline in one trading day.

Limit Order
An order placed with a brokerage to buy or sell a predetermined amount of shares at a specified price or better. Limit orders also allow an investor to limit the length of time an order can be outstanding before being canceled.

Limit Order Book
A record of unexecuted limit orders maintained by the specialist.

Limit Up
The maximum amount by which the price of a commodity futures contract may advance in one trading day.  ;

Limited Liability
A type of liability that does not exceed the initial amount a person invested into a partnership.

Limited Liability Company - LLC
A corporate structure whereby the shareholders of the company have a limited liability to the firms actions.


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Limited Partnership - LP
Two or more partners formed to conduct a business jointly, and in which one or more of the partners is liable only to the extent of the amount of money they have invested. Limited partners do not receive dividends, but enjoy direct access to the flow of income and expenses.

Limited Risk
The risk of an investment that has a predetermined maximum downside potential, which is usually the initial amount invested.

Line of Credit
An arrangement between a financial institution (usually a bank) and a customer establishing a maximum loan balance that the bank will permit the borrower to maintain.

Lintner's Model
A model stating that dividend policy is based on two parameters: (1) the target payout ratio and (2) the speed at which current dividends adjust to the target.

Liquid Market
A market with many bid and ask offers. The market is characterized by high liquidity, low spreads, and low volatility.

Liquid Yield Option Note - LYON
A zero coupon bond that is callable (by issuer), putable (by investor), and convertible. LYONs are synthetic products that are financially engineered by Merrill Lynch.

Liquidated Damages
Present in certain legal contracts, this provision allows for the payment of a specified sum should one of the parties be in breach of contract.

Liquidating Dividend
Payment by a firm to its owners from capital rather than from earnings.

Liquidation
1. When a business or firm is terminated or bankrupt, its assets are sold and the proceeds pay creditors. Any leftovers are distributed to shareholders.

2. Any transaction that offsets or closes out a long or short position.

Liquidity
1. The degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Liquidity is characterized by a high level of trading activity.

2. The ability to convert an asset to cash quickly.


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Liquidity Cushion
A reserve fund for a company or person containing money market and highly liquid investments.

Liquidity Path
A way of referring to the process of taking a company public.

Liquidity Preference Theory
The hypothesis that forward rates offer a premium over expected future spot rates.

Liquidity Risk
The risk stemming from the lack of marketability of an investment that cannot be bought or sold quickly enough to prevent or minimize a loss.

Liquidity Trap
A situation in which prevailing interest rates are low and savings rates are high. As a result, monetary policy is ineffective.

Listed Security
Securities that have been accepted for trading purposes by a recognized and regulated exchange.

LKR
In currencies, this is the abbreviation for the Sri Lankan Rupee.

Load Fund
A mutual fund with shares sold at a price including a large sales charge. This sales fee may range from 3% to as high as 8% of the full purchase.

Loan
When a lender gives money or property to a borrower, and the borrower agrees to return the property or repay the borrowed money along with interest, at a predetermined date in the future.

Loan Constant
The required annual cash flow needed to service both the principal and interest upon a loan obligation.


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Loan Loss Provision
An expense set aside as an allowance for bad loans (customer defaults, or terms of a loan have to be renegotiated, etc).

Loan Sharking
When a borrower is charged interest above an established legal rate. Depending on where you live, lenders typically cannot charge more than 60% interest per annum.

Loan Syndication
The process of involving numerous different lenders in providing various portions of a loan.

Loan to Value Ratio - LTV Ratio
A lending risk ratio calculated by dividing the total amount for the mortgage or loan by the appraised value of the property.

Lobster Trap
A strategy used by a target firm to prevent a hostile takeover. In a lobster trap, the company passes a provision preventing anyone with more than 10% ownership from converting convertible securities into voting stock.

Local
Traders on future exchanges who occasionally fill public orders, but mainly buy and sell for their own personal accounts.

Local Tax
An additional tax on top of federal and state taxes, usually collected in the form of property taxes.

Lock Limit
Commonly associated with the futures market, a lock limit occurs when the trading price of a futures contract arrives at the exchanges predetermined limit price. At the lock limit, trades above or below the lock price are not executed.

Lock-up Agreement
A legally binding contract between the underwriters and insiders of the company prohibits them from selling any shares of stock for a certain specified period of time.

Lock-Up Option
A stock option offered by a target company to a white knight for additional equity or for the purchase of a valuable portion of their company.


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Locked Market
A short-term situation occurring within a market where both the bid and ask are identical, resulting in no bid-ask spread.

Logistics
The overall ; management of the way resources are moved to the areas where they are required.

Lombard Rate
The rate charged to banks by the German central bank for collateralized loan obligations.

London Interbank Bid Rate - LIBID
This is the rate bid by banks on eurocurrecy deposits.

London Interbank Offer Rate - LIBOR
This is the rate of interest at which banks borrow funds, in marketable size, from other banks in the London interbank market.

Long (or Long Position)
The name for a person owning a security.

Long Bond
A bond that matures in more than 10 years. When people refer to "the long bond," this typically is the 30-year U.S. treasury.

Long Jelly Roll
An option strategy that aims to profit from a time value spread through the sale and purchase of two call and two put options, each with different expiration dates.

Long Run
In terms of operating activities, a period of time in which all costs are variable.

Long Run Incremental Cost - LRIC
Forward-looking incremental costs that can be accounted for by a company.


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Long Term
Holding an asset for an extended period of time.

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

2. A stock, bond, or other asset that you plan on holding in your portfolio for a lengthy period of time.

Long Term Debt/Capitalization
A ratio showing the financial leverage of a firm. It is calculated by dividing long-term debt by the capital available:
Illustration for Long Term Debt/Capitalization

Long Term Equity Anticipation Securities - LEAPS
An options contract that expires more than 9 months in advance, and can last as long as 2 years. Normal options tend to last no longer than nine months.

Long Term Liabilities
Recorded on the balance sheet, a company's liabilities for leases, bond repayments, and other items due in more than one year.

Long-Term Debt
Loans and financial obligations lasting over one year.

Long/Short Equity
A hedge fund strategy that involves buying certain stocks long and selling others short. There usually isn't a restriction on the country that the stocks trade in either.

Look Thru
An accounting method for calculating taxes owed on income from controlled foreign corporations.

Lookback Option
An exotic option that allows investors to "look back" at the underlying prices occurring over the life of the option, and then exercise based on the underlying asset's optimal value.

Loophole
A technicality that allows a person or business to avoid the scope of a law without directly violating the law.


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Losing Your Shirt
In the investment world, this expression is used to describe a very bad investment that causes an investor to lose everything he or she has invested (and more, in some cases).

Loss Carryback
An accounting technique with which a company retroactively applies net operating losses to a preceding year's income in order to reduce tax liabilities present in that previous year.

Loss Carryforward
An accounting technique with which a company applies net operating losses of the current year to future year's profits in order to reduce tax liability.

Loss Leader Strategy
The strategy of offering a product or service at a considerable discount and loss of profit in order to attract future business.

Lot
In general, any group of goods or services making up a transaction.

Lottery Bond
A bond issued in the U.S. and U.K. with a rate of return dependent upon a lottery style payout.

Lotto Ticket
Lotto Ticket buy. A lotto ticket buy is a buy where the rewards can be huge, but the odds of winning are slim. This type of buy is done sometimes because the prize associated with a win, mitigates the entire loss of the investment.
ie. A stock gets a piece of property next to a large oil field. No one has drilled it and they are about too. The odds of success/fail are higher than 50/50 because of the adjacent field. So you buy the lotto ticket.
ie. A company has a huge strike next door to a property that has no drill program planned and no money but is a Proximity play on the big strike. The company is worthless, other than for its proximity to the existing play.
Lotto Ticket plays are extremely high risk, but with extremely high reward if they turn out to be more than proxy plays. TA on these stocks are literally non existent because they follow the results of an entirely different company. So you cannot use TA on the proximity stock, and you have no FA, ergo Lottery Ticket

Love Money
Seed money or capital given by family or friends to an entrepreneur to start a business.

Low Ball
A slang term for an offer that is significantly below the fair value of an asset or group of assets.

LRD
In currencies, this is the abbreviation for the Liberian Dollar.


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LSL
In currencies, this is the abbreviation for the Lesotho Loti.

LT
Long-term hold of a stock

LTL
In currencies, this is the abbreviation for the Lithuanian Litas.

Lump-Sum Distribution
A one time payment for the entire amount due, rather than breaking payments into smaller installments. Some lump-sum distributions receive special tax treatment.

LVL
In currencies, this is the abbreviation for the Latvian Lats.

LYD
In currencies, this is the abbreviation for the Libyan Dinar.





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