An L-shaped recovery refers to substantial losses in economic growth followed by a period of stagnation. Represented graphically, GDP data looks like the letter "L."For example, suppose countr...

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Labor intensive is used to describe any production process that requires higher labor input than capital input in terms of cost.The production of goods and services requires labor and capital in varyi...

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Labor market flexibility is the degree to which a company is able to modify its labor force to maximize productivity.A company is constantly adjusting its labor force via variables like staff size, to...

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Labor productivity measures the hourly productive output for a country's economy during a period of time. A country's labor productivity is a function of technological innovation, labor r...

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The labor theory of value says that the value of a finished good correlates solely with the number of labor hours required to produce it.Economist Adam Smith, the founder of the idea of modern capital...

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A labor union is an organization that advocates for workers' rights and benefits through collective bargaining.Labor unions represent workers in both the public and private sector. Individual labor un...

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Labor-sponsored venture capital corporations (LSVCCs) are Canadian venture capital companies established by labor unions. Labor-sponsored venture capital corporations (LSVCCs) issue labor-sponsored i...

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A ladder option is an option contract that allows the holder to earn a profit as long as the underlying asset's market price reaches one or more strike prices before the option expires.A tradition...

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Laddering is a bond investment strategy whereby an investor staggers the maturity of  the bonds in his/her portfolio so that the bond proceeds can be reinvested at regular intervals.For example, ...

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Lady Godiva accounting principles (LGAP) are informal, unofficial accounting principles under which companies make disclosures beyond what generally accepted accounting principles (GAAP) require. Lad...

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A Lady Macbeth strategy is a merger strategy in which a company betrays a target company by first appearing as a friendly alternative to an unfriendly acquirer and then later joining forces with the u...

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The Laffer curve is a graphic representation of the relationship between an increasing tax rate and a government's total revenues. The relationship suggests that revenues decline beyond a peak tax...

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Laggard describes a stock that fails to perform as well as the overall market or a group of peers.In a broad sense, the term laggard connotes resistance to progress and a persistent pattern of falling...

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Lagged reserves are currency reserves banks are required to hold with the Federal Reserve. Lagged reserves must be equal to the sum of all demand deposits from two weeks in arrears. The United St...

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A lagging indicator is a financial gauge that becomes measurable only after an economic shift has taken place.There are certain economic indicators that rely on changes in productivity or economic gro...

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Laissez faire is a capitalist precept that states that market economies function at optimal efficiency in the absence of government regulation.The term laissez faire is French for "leave to do,...

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A lame duck is a person who has gone bankrupt or is in default. In politics, a lame duck is a politician whose tenure is about to end. For example, let's say John Doe has lost money on ever...

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The Lanchester strategy is a marketing strategy named after Frederick W. Lanchester, who wrote about World War II war strategies. Originally a way to calculate losses during World War II, many compan...

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A land contract is a contract in which the buyer of a property agrees to pay the seller in scheduled installments.A land contract allows the buyer of a property to use it while the seller continues to...

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A land flip is an act of fraud whereby a group of people buy a piece of land and then profits by continually reselling to each other for more than its actual value.In a land flip, several buyers purch...

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A land lease option is a section of a lease contract that allows a renter to lengthen his or her use of a piece of land beyond the term specified in the contract.An individual who intends to rent a pi...

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Land rehabilitation is the practice of returning a piece of land to the natural state it was in prior to human interference or damage from natural disasters.Land rehabilitation reclaims the natural st...

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A land trust is a trust comprised exclusively of real estate assets. A land trust holds one or more properties for the benefit of a designated group or organization (beneficiary). The trust...

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Land value is the overall value of a piece of property. The value of a piece of property includes a number of variables including location, the distance of from commercial and health amenit...

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A land value tax (LVT) is a tax on undeveloped property. Local governments that impose an LVT specifically target pieces of property that someone owns but has not developed or modified for ...

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Landlocked is a term describing a piece of property that has no direct access.Landlocked property is separated from major access ways including streets, canals and public roads. Landlocked property ca...

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A landlord is an individual who owns real estate that he or she leases to renters.Landlords may own either residential or commercial properties. They lease the properties to families or companies in r...

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A landominium is a housing community in which residents own the housing units as well as the land on which they are built.Typically developed as retirement communities, landominiums are usually multip...

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A lapping scheme is a fraudulent accounting practice that hides stolen cash by overlapping successive receivables.A lapping scheme begins when someone -- a clerk, for example -- steals money that was ...

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Lapse refers to the expiration of an insurance policy or other agreement.   Let's say John Doe has a life insurance policy with a $5,000 annual premium. This year, John can't make the ...

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Generally speaking, large cap companies have at least $8 billion of market capitalization. Market capitalization refers to the value of a company's outstanding shares. The formula for market capi...

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A large trader is a person or entity that trades more than 2 million shares or $20 million worth of shares in a single day, or 20 million shares or $200 million worth of shares in a single month. Let...

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The large value transfer system (LVTS) is a wire system in Canada that allows banks to transfer funds among each other. The Bank of Canada and the country's department of finance developed the LV...

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A large-value stock is a stock whose intrinsic value is greater than its market value. Let's say John Doe is analyzing Company XYZ. He uses a discounted cash flow model to determine that the intr...

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Last fiscal year (LFY) refers to a company's most recent completed fiscal year.A fiscal year is a company's 12-month accounting cycle. The cycle begins on the first of any month (not necessari...

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In telecommunications, the last mile refers to the final step in the process that connects the end customer to a network. In the broader business world, last mile refers to the final, often expensive ...

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The last trading day is the last time traders may trade a derivative contract before it expires.Derivative contracts (for example, options and futures) have an expiration date, at which time the terms...

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Last twelve months (LTM), also known as trailing twelve months (TTM), is the 12-month interval occurring before a given point in time. For example, an analyst who is issuing a report on October 1...

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A will is a legal document that indicates how a person wants his or her estate (money and property) to be distributed after death. Wills must expressly state whom the will belongs to, and it must ...

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A last will and testament is a legally-binding document in which an individual expresses his last wishes concerning the affairs and distribution of his estate.An individual creates a will while still ...

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Last-in, first-out (LIFO) describes a method for accounting for inventories. Under this system, the last unit added to an inventory is the first to be recorded as sold.Let's assume you own the XYZ...

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Last-sale reporting refers to the submission of trade details in the Nasdaq market.When a broker executes an order for a stock traded on the Nasdaq exchange, he or she must report it to Nasdaq no more...

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Late majority refers to the last large group of people to adopt a new product or technology.Analysts estimate that the late majority, roughly 34% of a given population, adopts new technology only...

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Late-day trading is the practice of illicitly recording trades executed after hours as having occurred prior to the end of market trading.A mutual fund's net asset value (NAV) reflects the value r...

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Latin baseball futures are investments in Dominican, Cuban or other Latin American baseball coaches or academies that train up-and-coming baseball players who could one day obtain multimillion-dollar ...

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The law of 29 is a marketing theory that claims that individuals will purchase a new product or service after having been exposed to related advertising 29 times. The law of 29 is based on the idea t...

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The law of large numbers states that as additional units are added to a sample, the average of the sample converges to the average of the population.Applied to finance, the law of large numbers implie...

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The law of supply is the microeconomic theory stating that all else being equal, as the price of a good or service increases, the number of goods or services offered will also increase. The law of sup...

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Layaway is an arrangement in which a retailer agrees to reserve a piece of merchandise for a customer who cannot immediately pay for it in full. Layaway is a delayed payment method. A customer d...

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Layered fees are management fees, typically in investment products, that investors pay to financial managers for the same group of assets. Many mutual funds, annuities and investment advisors charge ...

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A layoff is a temporary or permanent termination of employment by an employer. Let's say John Doe works for Company XYZ. He has worked there for 15 years. Company XYZ begins having cash flow prob...

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In the securities industry a lead bank is a company, usually an investment bank, that helps companies introduce their new securities into the market by leading a syndicate of investment banks to i...

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Lead time is a crucial part of managing a manufacturing business or any business that involves waiting for supplies or products to arrive. Generally, the lower the lead time, the more flexible a compa...

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In the securities industry a lead underwriter is a company, usually an investment bank, that helps companies introduce their new securities into the market by leading a syndicate of investment banks t...

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A leadership grid, also known as a management grid, is a tool for determining leadership style. The idea dates to the 1960s and was developed by Robert Blake and Jane Mouton. Leadership behavior, as ...

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A leading indicator is an index, stock, report or other measurement that signals the economy or market's direction in advance. Popular leading indicators include average weekly hours worked i...

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Leakage occurs when money leaves an economy. In the investor relations world, leakage also refers to the unauthorized or unanticipated dissemination of information. Let's say interest rates...

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A learning curve is the time it takes to master a concept. It is more of an idea than a chart or other visual representation of learning. For example, piloting a 777 has a steep learning cu...

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There are many kinds of leases. Some allow the lessee to buy the asset at the end of the lease term, some do not, for example. Regardless, a lease is a legal contract, and violating a lease can result...

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There are many kinds of leases and thus many ways to calculate and record lease payments. Some allow the lessee to buy the asset at the end of the lease term, some do not, for example. For example, th...

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Lease-to-own contracts can be very helpful in the case of musical instruments and children, but they can also be very costly. Furniture, for example, is a popular thing to lease-to-own. Often, custome...

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Leaseholds designate which assets aren't really the lessee's property. Accordingly, these are assets that companies must account for them in particular ways. For example, let's say that C...

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Leasehold improvements make assets more useable and, in many cases, more marketable. Sometimes, landlords will pay for leasehold improvements in order to entice a tenant to rent a space for a long per...

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The left-hand side of a stock quote is the bid. A bid-ask is a quote that reflects the security’s bid price and its ask price. If, for example, the bid-ask for Company XYZ stock is $50 - ...

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In the brokerage world, a leg is an individual component of a multistep trade. Let's say John Doe wants to do an options straddle, which involves buying call and put options with the same expirat...

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Legging out means to unwind part of a transaction. Let's say John Doe conducts an options straddle, which involves buying a call and a put with identical expiration dates. His broker first ...

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Legacy assets became a hot topic during the financial downturn of 2008, because many struggling banks had them on their balance sheets and were having trouble attracting the capital they needed to sta...

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A lemming is an investor who does whatever the crowd does. A lemming is a short, furry rodent that is noted for its tendency to migrate en masse, regardless of the danger of the location or...

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A lemon is an item whose defects were not outwardly apparent at the time that it was sold to a consumer.  ”Lemon” has typically referred to a defective new car but its current applica...

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A lender is a creditor or any entity to which you owe money for services provided. If you borrow money from XYZ Bank, XYZ Bank becomes your lender. Lenders are creditors, but not all creditors are len...

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The term "Lender of Last Resort" refers to financial institutions or individuals that provide credit and/or liquidity to other financial institutions and/or individuals who have exhausted thei...

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A letter of credit is a bank's written promise that it will make a customer's (the holder) payment to a vendor (called the beneficiary) if the customer does not. Letters of credit are most co...

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In general, a letter of guarantee is a written promise to take responsibility for another company's financial obligation if that company cannot meet its obligation. The entity assuming this respon...

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A letter of intent is a non-binding document detailing a planned action on the part of an organization or individual.A letter of intent is often drafted by companies in relation to a deal or transacti...

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A level I quote is the current best bid and offer for a security that trades on the Nasdaq or over-the-counter markets. Level I quotes do not disclose which market makers are bidding for or...

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A level II quote is a set of real-time trading information, including the best bid/ask prices from market makers, for a security that trades on the Nasdaq or over the counter (OTC) markets.A level II ...

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A level III quote is pricing information made available to registered Nasdaq market makers.A level III quote for Company XYZ stock would include the real-time bid price, ask price, quote size, price o...

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A level-load is a periodic fee (usually annual) paid by the investor during the time he or she owns the investment.  Level-load mutual funds are often referred to as "C Shares."Level-load...

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Leverage is any technique that amplifies investor profits or losses. It's most commonly used to describe the use of borrowed money to magnify profit potential (financial leverage), but it can al...

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A leverage ratio is meant to evaluate a company’s debt levels. The most common leverage ratios are the debt ratio and the debt-to-equity ratio. A debt ratio is simply a company's total de...

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A leveraged buyout (LBO) is a method of acquiring a company with money that is nearly all borrowed. The basic idea behind an LBO is that the acquirer purchases the target with a loan collateralized b...

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A levy is the seizure of property in order to repay debt. In the U.S., the IRS has the authority to levy. (For everybody else, this is called foreclosure or repossession.) Let’s assume Jo...

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In finance and investing, a liability is a claim on a company's assets.For example, let's assume that XYZ Company sold $1,000,000 of gift certificates during the holidays. The gift certificate...

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Liability insurance, also called third-party insurance, protects the insured from claims arising from injuries and damages to other people or property. It covers legal costs and legally required ...

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Liability matching is an investing strategy for investors who need to fund a series of future liabilities. Buy-and-hold and indexing strategies are about generating steady rates of return in a portfo...

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A lien is a lender's claim against a collateral asset that may be legally sold should the borrower fail to repay a loan.When someone takes out a sizeable loan, such as a home mortgage or an auto l...

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A lien sale is the sale of a lien by a relevant authority to a third party in an effort to recoup money owed. Let’s assume John Doe owns a house in the country and the annual property taxes are...

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A life settlement occurs when a person sells his or her whole or universal life insurance policy to a third party, who maintains the premium payments and receives the death benefit when the insured di...

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The life-only option, which is generally associated with annuities, describes the contractual arrangement whereby annuity payments cease upon the owner's death. To understand how this works, let's as...

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The life-plus-five option, which is generally associated with annuities, describes the contractual arrangement whereby annuity payments are paid out to a beneficiary for five years after the owner's d...

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The life-plus-ten option, which is generally associated with annuities, describes the contractual arrangement whereby annuity payments are paid out to a beneficiary for ten years after the owner's dea...

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Like-kind property is property that, for tax purposes, is similar in nature to property being sold. Like-kind property is a key component of Section 1031 exchanges, which are real estate transactions ...

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Limit orders allow you to set a price at which you want to buy or sell a stock. Unlike market orders, your purchase or sale will go though only when the price reaches the level that you spec...

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Limited liability is limited exposure to financial risk by investors of a company or a partnership. This exposure is usually limited to the individual's investment. In certain cases where an ...

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A limited liability company (LLC) is a type of business entity formed that can be taxed like a partnership but protects its shareholders from liability beyond their investment.Investors can decide to ...

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A limited partner is a member of a partnership who cannot incur debt or obligations on behalf of the partnership and is not personally liable for those debts or obligations. Limited partners contrast ...

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A limited partnership is a business formation that limits the liability of certain owners. A limited partnership is made up of partners. In most cases, some of the partners are general partners and o...

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A limited partnership unit is a piece of ownership in a limited partnership. A limited partnership is a business formation that limits the liability of certain owners. Shares of ownership are referre...

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In finance, limited risk describes any investing strategy intended to protect an investment or portfolio against loss. Limiting risk usually involves securities that move in the opposite direction tha...

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A line of credit (sometimes called revolving credit) is a pre-arranged amount of money lent by a financial institution. Unlike a traditional loan – which is usually a lump sum payment that is r...

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Liquid refers to the ability to transfer hard assets to cash or the state of being in a position where one has sufficient cash on hand to accommodate any and all necessary financial obligations.Market...

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A liquid asset is cash or securities that can be converted to cash quickly. Let's assume Company XYZ has $1 million of cash on its balance sheet and $300,000 of marketable securities. We could say...

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A liquid CD allows you to withdraw money without penalty before the CD matures. These financial instruments are sometimes known as risk-free or no-penalty CDs.  Traditional CDs typically c...

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Liquid market refers to any market in which there are many buyers and sellers present and in which transactions can take place with relative ease and low costs.A liquid market refers to any market whi...

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In the financial world, to liquidate something means to sell it for cash. Although this sounds harmless, in the corporate world the term often carries a connotation of failure, because it is most ofte...

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Liquidation refers to the selling of assets in return for cash.  The term liquidation is most often used in discussions about Chapter 7 bankruptcy -- a section of U.S. bankruptcy law u...

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Liquidation value refers to the value of a project or investment if it were to be sold or abandoned immediately.Also called abandonment value, the liquidation value of a project or investment is the i...

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Liquidity is the ability to sell an investment at or near its value in a relatively short period of time. Let’s say you take an old painting from the attic to the local filming of Antique...

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Liquidity risk is the risk that a company or individual will not be able to meet short-term financial obligations due to the inability to convert assets into cash without incurring a loss. This mo...

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Liquidity trap describes the macroeconomic conditions under which interest rates cannot be pushed any lower, rendering monetary policy ineffective. Named in reference to the associated overabunda...

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A listed security is a stock, bond, derivative, ETF, mutual fund, or other security that trades on a national exchange such as the New York Stock exchange or the Nasdaq. The Nasdaq, which stands for ...

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A load is a fee paid to purchase or sell a specific investment. It is expressed as a percentage of the amount invested. The term is most often used when discussing mutual funds. In general,...

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A load fund is a mutual fund that carries a fee to purchase or sell its shares. This load is expressed as a percentage of the amount invested. In general, there are two kinds of load funds: front-end ...

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A loan is a sum of money that is borrowed by an individual or business from a lender (typically a financial institution or another party with money). Under a typical loan agreement, the lender e...

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A loan loss provision is an expense that is reserved for defaulted loans or credits.  It is an amount set aside in the event that the loan defaults.Generally, banks conduct their business by taki...

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Loan loss reserves are accounting entries banks make to cover estimated losses on loans due to defaults and nonpayment.Let's assume Bank XYZ has made $10,000,000 of loans to various companies and ...

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There comes a time in everyone’s life where they need to finance a major purchase. It may be a car loan, a line of credit for a business, or even the cornerstone of the American dream: a home lo...

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Loan sharking refers to predatory lending practices by individuals or organizations (aka loan sharks) that charge extraordinarily-high interest rates. Loan sharking involves taking advantage of the b...

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Loan syndication is a lending process in which a group of lenders provide funds to a single borrower. When a project is unusually large or complex, it may exceed the capacity of a single lender. For ...

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The loan-to-value (LTV) ratio is a calculation that helps lenders measure mortgage risk. The formula to calculate the loan-to-value ratio is: Loan to value = Mortgage amount / Appraised value of pr...

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A locked market, also called a daily trading limit, is the maximum gain or loss allowed on a derivative or currency in one trading day. Let's say a forward contract on Company XYZ stock has a trad...

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Logistics is the integration and management of the product value chain from suppliers to the customer.  It includes all aspects of the chain of production, including design, suppliers, financing,...

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The London Interbank Offered Rate (LIBOR) is the base lending rate banks charge each other in the London wholesale money market. LIBOR is an average of inter-bank deposit rates offered by member...

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The London Spot Fix occurs when the members of the London Gold Pool (five banks) have a conference call and set the price per ounce for several metals (gold, platinum, silver and palladium). To perfo...

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A long bond is a Treasury bond that is issued for an extended period of time (twenty to thirty years).  The investing public can purchase long bonds from brokers. The desire to obtain these type...

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A long straddle is an options trading strategy that involves purchasing both a call option and a put option for a particular asset with identical strike prices and expiration dates.Because a long stra...

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Long-legged doji candlesticks are one of four types of dojis -- common, long-legged, dragonfly and gravestone. All dojis are marked by the fact that prices opened and closed at the same level. If pric...

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Long-run average total cost (LRATC) represents the average cost per unit of production over the long run. In this calculation, all inputs are considered to be variable, because, over the long term,...

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A long-term asset is an asset that a company expects to sell or otherwise recognize the economic value of after more than one year. An asset is anything that has commercial or exchange value. Accordin...

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A long-term capital gain or loss is the profit or loss on the sale of an investment that has been held for longer than a certain IRS-defined period of time.   Let’s assume you purchase ...

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Long-term debt is debt due in one year or more. It is a key item that appears on a company's balance sheet. Let's assume Company XYZ borrowed $12 million from the bank and now must repay $1...

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Long-Term Equity AnticiPation Securities (LEAPS) is a registered trademark of the Chicago Board Options Exchange (CBOE). LEAPS are virtually identical to traditional exchange-traded options, but t...

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A long-term liability is a liability due in more than one year. A liability is a claim on a company’s assets. Technically, a liability is a required transfer of assets or services that mu...

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A loophole is an exception that allows a system to be circumvented or avoided.  It usually refers to legal, taxation, or security strategies that are exploited for personal gain.Loopholes are fai...

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Losing your shirt refers to an investment move resulting in a total loss of all financial assets. Meant to imply a degree of loss serious enough to warrant selling the shirt off your back, "losing yo...

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The term "loss carryback" is where a company retroactively chooses to apply the net operating loss in the current year to the previous profitable year(s) to obtain a tax refund for monies alre...

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The term "loss carryforward" refers to an accounting practice whereby companies utilize their current year's net operating loss against future year's net operating profit to reduce the...

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A lot is a securities trade for a “standard” number of trading units. In stock trading, a lot is 100 shares (also called a "round lot"). However, inactive stocks generally trade in 10-share lo...

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