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Large cap
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Large cap (large capitalization) refers to corporations which have a total
market value (shares outstanding x current market price) of over $10 billion
for US companies.
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Leading
indicator
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Leading indicators are statistics
which are used to forecast how the economy will be
performing in the future. Examples are
unemployment rates, commodity prices, housing
starts, inflation, bankruptcies, etc.
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Lease
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A contract for the rental of
property. The owner of the property is the
lessor, and the person or company renting the
property is the lessee.
If you are leasing property for a business,
you will need to know if the lease is an operating
lease or a capital lease, because they require
different handling for accounting purposes.
Operating leases
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The lessor retains the benefits and risks of
owning the property. |
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The time span of the lease is usually much
shorter than the estimated life of the asset. |
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Maintenance of the asset is often the
responsibility of the lessor. |
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Lease payments are expensed as they are
paid, except for prepayment for future
payments, such as the final month of the
lease. |
Capital leases (also known as financial
leases)
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Most of the benefits and risks of owning the
property are essentially transferred to the
lessee.
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The lease term usually provides for
ownership to be transferred to the lessee
by the end of the lease, perhaps with a
clause allowing for buyout at a very
reasonable price. |
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The time span of the lease covers a
significant portion (usually 75% or more)
of the estimated life of the asset. |
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Maintenance and other costs are typically
the responsibility of the lessee. |
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The cost of the asset is capitalized
(recorded as part of property, plant and equipment) by the lessee, with the
present
value of future lease payments recorded as a liability.
The capitalized cost is then depreciated,
either over the estimated life of the asset,
or over the term of the lease. As lease
payments are made, they are allocated to
interest expense and a reduction of the lease
liability. |
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Leverage
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Leverage is the use of debt to
increase return on investment. When a firm
has a high debt/equity
ratio, it is said to be highly leveraged.
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Liabilities
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Amounts owed. These may
be current, which means due to be paid within 1 year, or they may be
long term, which means not due for at least 1 year.
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Life annuity
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A life annuity provides the
purchaser with regular periodic payments (weekly,
monthly, etc.), usually for the rest of their
life. The amount of the payments will depend
on current interest rates, the age and sex of the
purchaser (and perhaps their spouse), and the type
of annuity being purchased. There are many
different types of life annuities. Depending
on the type of life annuity:
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payments may cease when the annuitant
(purchaser) dies, even if the annuity was
recently purchased |
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certain number of payments may be guaranteed |
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payments may continue to be paid to a
surviving spouse |
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cash payment may go to the estate or a named
beneficiary when the annuitant dies |
With an immediate life annuity, payments
are started within one year after the purchase of
the annuity.
With a deferred life annuity, payments
are started no earlier than one year after the
purchase of the annuity.
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Limit order
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A limit order is an order to buy or
sell securities on the stock market at a specified
or better price.
See also market order. |
Limited
liability
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The owners or shareholders of a
limited company are normally only liable for the
amount they have invested in the company. If
the business fails, they are not responsible for
the debt of the company. |
Limited Partnership
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A limited partnership will have two classes of partners
- general partners, and limited (or special) partners. The
liability of the limited partner(s) will be limited to the amount of
capital they have contributed to the partnership. However,
certain actions by a limited partner will deem them to be a general
partner and end the unlimited liability, such as taking an active roll
in the management of the business. In a limited partnership
there must be at least one general partner who has unlimited
liability.
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Liquidity
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The liquidity of a stock refers to
the ease with which it can be bought and
sold. If large volumes are usually traded in
the stock, it is liquid. If small volumes
are usually traded, it is illiquid.
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Listed stock
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A listed stock is one which is
listed, or traded, on a stock exchange.
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Long
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Signifies ownership of
securities. If a person is "long" 100 shares of a
corporation, it means that they own 100 shares of the corporation.
See also "short"
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Revised: December 18, 2010
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