Glossary of ‘Financial Terms’ starting with Alphabet ‘L’, i.e. ‘Meaning’ or ‘Definition’ of Common and Unusual terms relating to Accounting, Auditing, Company Law, GST, Income Tax, Investments, etc., along with the ‘Context’ in which they are used.
Market indicators showing the general direction of the economy and confirming or denying the trend implied by the leading indicators or concurrent indicators.
A defaulter on a Stock Exchange who is not able to meet his market commitment and financial obligations of his business.
LIBOR – London Interbank Offer Rate
Often used as a basis for pricing Euro loans. LIBOR represents the interest rate at which first class banks in London are prepared to offer dollar deposits to other first class banks. There are a number of similar rates like HIBOR (Hong Kong Interbank Offer Rate); SIBOR (Singapore Interbank Offer Rate); TIBOR (Toronto Interbank Offer Rate).
Last In First Out – LIFO
An inventory cost accounting procedure in which the last item manufactured is assumed to be the first one sold by the company.
Law of one price
An economic rule stating that a given security must have the same price regardless of the means by which one goes about creating that security. This implies that if the payoff of a security can be synthetically created by a package of other securities, the price of the package and the price of the security whose payoff it replicates must be equal.
The sell off by an issuer of any or all unsubscribed shares in a rights offering to the underwriters at the subscription price.
Market indicators that signal the state of the economy for the coming months.
The merchant banker(s) associated with the issue and responsible for due diligence and other associated issue related activities.
The risk of loss because a law or regulation is applied in an unexpected way or because a contract cannot be enforced.
Letter of offer
A letter of offer is a document addressed to the shareholders of the target company containing disclosures of the acquirer/ (Persons Acting in Concert) PACs, target company, their financials, justification of the offer price, the offer price, number of shares to be acquired from the public, purpose of acquisition, future plans of acquirer etc.
The use of borrowed money to finance an investment.
The purchase of shares usually by the management of a company using its own assets as collateral for loans provided by banks or insurance company.
Any claim for money against the assets of a company, such as bills of creditors, income tax payable, debenture redemption, interest on secured and unsecured loans, etc. Although on balance sheet shareholder’s equity is shown under liability, it has no claim on the assets of a company, unless it goes into liquidation.
An order to buy or sell a specified number of shares of a security when a specified price is reached.
Brokers who have teleprints in their office communicate the quantity, price etc., as soon as deals are struck, for onward transmission to their branch offices. This is known as line business. It also includes arbitrage.
The process of converting stocks into cash. Also means the dissolution of a company.
Liquidity Adjustment Facility (LAF)
Under the scheme, repo auctions (for absorption of liquidity) and reverse repo auctions (for injection of liquidity) will be conducted on a daily basis (except Saturdays). It will be same-day transactions, with interest rates decided on a cut-off basis and derived from auctions on a uniform price basis.
Proportion of listed unit trust’s or mutual fund portfolio that is kept in cash or easily encashable assets to meet any request for redemption.
The risk that a solvent institution is temporarily unable to meet its monetary obligations.
A company which has any of its securities offered through an offer document listed on a recognised stock exchange and also includes Public Sector Undertakings whose securities are listed on a recognised stock exchange.
Formal admission of a security into a public trading system.
An agreement which has to be entered into by companies when they seek listing for their shares on a Stock Exchange. Companies are called upon to keep the stock exchange fully informed of all corporate developments having a bearing on the market price of shares like dividend, rights, bonus shares, etc.
A sales charge assessed by certain mutual funds (load funds) to cover selling costs. A front end load is charged at the time of purchase. A back-end load is charged at the time of sale.
A Load Fund is one that charges a percentage of Net Asset Value (NAV) for entry or exit.
Locked or Crossed Quotations (U.S)
A temporary condition, normally associated with fast-moving, active markets, where the asking price of one market maker in a given security is the same or lower than the bid price of another market maker, thereby producing locked or crossed markets respectively.
Lock in Trade
A securities transactions in which all the terms and conditions to the transactions are irrevocably accepted by the buyer and seller.
A position showing a purchase or a greater number of purchases than sales in anticipation of a rise in prices. A long position can be closed out through the sale of an equivalent amount.
Loss on Security Provisions
The risk that changes in security prices may lead to capital losses.
LP (Liquidity Premium)
Additional return required to compensate investors for purchasing illiquid assets.