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Glossary |
Glossary 0-9|A|B|C|D|E|F|G|H|I|J|K|L|M|N|O|P|Q|R|S|T|U|V|W|Y|Z - L -LEAP A LEAP is a long-term option contract for a company's stock. They usually run for one year or more and are available on several U.S. exchanges. Letter of Credit Letter from a bank stating that it has established credit in the company's favor. LBO (Leverage Buyout) A corporate restructuring where the existing shareholders sell their shares to a small group of investors. The purchasers of the stock sue the firm's unused bet capacity to borrow the funds to pay for the stock. Typically the company becomes private. Leverage Use of debt financing. LIBOR London InterBank Offered Rate. The lending rate among international banks in London. Limit Order When you instruct your broker to buy or sell a given security at a specific price. Limited Liability Limitation of a shareholder's losses to the amount invested. Liquidity refers to an investor's ability to convert an asset into cash. The faster the conversion the more liquid the asset. Illiquidity is a risk in that an investor might not be able to convert the asset to cash when most needed. Moreover, having to wait for the sale of an asset can pose an additional risk if the price of the asset decreases while waiting to liquidate. Liquidity Risk Premium (LP) The additional return required by investors in securities that cannot be converted into cash at a reasonably predictable price or time. Liquidation Value The amount that could be realized if an asset were sold independently of the going concern. Listing When a company's stock trades on an official exchange.
LLC (Limited Liability Company) also called Limited Liability Partnership (LLP) It a new type of partnership that is now permitted in many states. Unlike a regular and limited partnership, in an LLC, all partners enjoy limited liability with regard to business's liabilities, and, in that regard, they are similar to shareholders in a corporation. LLP See LLC Load A commission paid by an investor to a broker for the purchase or sale of a mutual fund.
Long Investors who go "long" own stock or another financial security. It is a term that means the opposite of "short." See short selling. Long Ownership of securities. (See Long) Long-term Gain A gain on the sale of a capital asset where the holding period was six months or more and the profit was subject to the long-term capital gains tax. LP (Liquidity Premium) Additional return required to compensate investors for purchasing illiquid assets. Also see liquidity. 0-9|A|B|C|D|E|F|G|H|I|J|K|L|M|N|O|P|Q|R|S|T|U|V|W|Y|Z - M -Maintenance Margin Minimum margin that must be maintained on a futures contract. Majority Voting Voting system under which each board of director is voted upon separately. See cumulative voting. Margin Cash or securities set aside by an investor as evidence for ability to honor a financial commitment. Margin Account When an investor borrows from his/her broker to finance the purchase of an asset. The Fed determines what the maximum borrowing rate is. Marginal Tax Rate The tax rate that would be applied to the next dollar of income. Marked-to-Market An arrangement whereby the profits or losses on a futures contract are settled up each day. Market Makers The exchange member firms that use their own capital to represent a stock and compete with each other to buy and sell the stocks they represent. There are over 500 member firms that act as NASDAQ market makers. One of the major differences between The NASDAQ Stock Market and other major markets in the US is Nasdaq's structure of competing market makers. Each market maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the market maker will immediately purchase for or sell from its own inventory, or seek the other side of the trade until it is executed, often in a matter of seconds. Market Cap This is the company's market capitalization. If a company has 1 million shares and the company's shares are selling for $10, the market cap is $10 million. Also called Market Capitalization. Market Order When an investor instructs his/her broker to buy or sell an asset at the price prevailing in the market. In such a case, the investor, unlike the case of the limit order, does not put any restrictions on price. Market Risk Uncertainty from factors influencing a large number of stocks, such as inflation, interest rates, oil-shocks, etc. Market Portfolio A conceptual construct of a value-weighted index of all securities. In practice, the S&P 500 index is used as a proxy, to represent the average investor's return. Market Timing Ability to determine the time occurrence of peaks and troughs of stock markets. Market Value The value observed in the market place, whereby buyers and sellers negotiate mutually acceptable price for the asset. Marketable Securities Security investments that the firm can quickly convert into cash balances. Material News News released by a NASDAQ company that might reasonably be expected to affect the value of a company's securities or influence investors' decisions. Material news includes information regarding corporate events of an unusual and non-recurring nature, news of tender offers, unusually good or bad earnings reports, and a stock split or stock dividend. (See also Trading Halt.) Maturity Matching The practice of financing long-term projects with long-term assets, while financing short-term projects with short-term financing. Maturity Date The date on which the last payment on a bond is due. Maturity Risk Premium (MRP) Risk associated with interest rate uncertainty. The longer the time to maturity, the higher the premium. MBO (Management Buyout) An LBO with the new investor group is the firm's management. MBS (Mortgage Backed Securities) Mortgage "pass-through" securities. Medium-term Note Debt with a typical maturity of 1 to 10 years at the time of issue that is offered by a company.. Merger Acquisition in which all assets and liabilities of a company are absorbed by the buyer to form a combined business entity.
MITI Japan's Ministry of International Trade & Industry. Monitoring Costs An agency cost that arises when bondholders take steps to ensure that protective covenants in the bond indenture are adhered to by the firm. Similarly, shareholders take steps to ensure that management is acting in the best interest of the owners, i.e., that managers are maximizing the wealth of shareholders. Moral Hazard Refers to human nature's increased incentive to take risk when insured. MRP (Maturity Risk Premium) Risk associated with interest rate uncertainty. The longer the time to maturity, the higher the premium. Municipal Bond (Muni) State or local government offer "muni" bonds, as they are called, to finance special projects such as highways or sewers. The interest that investors receive is exempt from some income taxes. Mutually Exclusive Projects Two projects that cannot both be undertake as they perform essentially the same task. Mutual Fund Managed investment fund whose shares are sold to investors
Mutually Exclusive Projects Two projects that cannot both be undertaken.
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