Glossary - L

FINANCIAL GLOSSARY : L

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Leverage

Term for gearing in the U.S., the ratio of a company's debts to its assets.

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Leveraged buyout

Purchase of a company by an institution using a high proportion of debt. A type of Management Buy-Out (MBO).

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Liabilities

The accounting term for what a company owes (all cliams against a company).

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Limit order

An order of instructions that an investor gives to his broker, which sets out the limits that he/she is prepared to pay for investments.

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Limited-life trust

A trust which has been set up for a limited period, after which it will be wound up.

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Liquidation

The process of ending the existence of a company. A company will go into liquidation if it is unable to pay its debts. In this situation the company's assets will be sold in order to pay off its debts.

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Liquidity

Liquidity describes the ease with which an asset can be converted into cash immediately. A liquid market is one where there are many buyers and seller and it is easy to sell your investments. For example, the shares on the FTSE 100 index are very liquid while shares on the Alternative Investment Market are not.

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Listed company

A listed company is one whose shares are included in the Official List of Securities and are dealt with by members of the Stock Exchange.

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Loan stock

Long-term debt issued by a company in order to raise capital for which interest is paid.

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London Interbank Offer Rate (Libor)

The London Inter-Bank Offer Rate is the rate of interest which applies to the wholesale money markets lending between London banks.

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London International Financial Futures and Options Exchange (Liffe)

LIFFE allows investors and business enterprises to use financial futures to speculate or to hedge against risks of movements in gilt prices, interest rates, foreign currency exchange rates, shares prices and bond prices.

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Low-start mortgage

A mortgage that offers a low interest rate initially which then rises to the lender's standard variable rate after a set date agreed at the start of the mortgage.

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Loan to value (LTV)

This is the ratio between the size of the loan you are seeking and the mortgage lenders valuation of the property.

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London Stock Exchange (LSE)

The London Stock Exchange is a primary capital market in which companies and other institutions can raise funds by issuing shares or loan stock. However, it is more important as a secondary market for buying and selling existing securities. The Stock Exchange is also the market for dealings in government securities (gilts).