FinanceTalking Financial Glossary

A large listed company ? a member of the FTSE 100 share index.

Laundering is processing money acquired illegally so that it appears to have come from a legitimate source.

Leveraged Buy-Out. The term leveraged simply means geared (ie with lots of debt). In a leveraged buy-out, a group of investors buy a company or part of company (usually a listed company or part of a listed company) using mainly borrowed money.

A lease involves hiring equipment or buying it on a hire-purchase type arrangement to avoid the capital outlay. For accounting purposes, there are two types of lease - an operating lease, where the risks and rewards of ownership remain with the lessor, and a finance lease, where the risks and rewards of ownership pass to the lessee. Finance leases are accounted for as assets with loans (ie the asset and loan are on the lessee's balance sheet) whereas the operating lease payments are treated as an expense (ie the asset and loan are not on the lessee's balance sheet).

A method of raising money in which an organisation sells its land or buildings to an investor on the condition that the investor will lease the property back to the organisation for a fixed term at an agreed rental.

Hiring equipment or buying it on a hire-purchase type arrangement to avoid the capital outlay.

A letter of acceptance of allotment of securities.

A form often attached to an allotment letter, on which a person who has been allotted shares in a new issue renounces the rights to them, either absolutely or in favour of someone else.

The US word for gearing. Usually the ratio of debt to debt plus equity. Leverage is a measure of balance sheet risk - the higher the proportion of debt in the funding mix, the higher profits will be in good times and the lower they will be in bad times. Leverage is associated with risk because it increases the volatility of profits ? and because the lenders have first call on profits. The leverage ratio shows the amount of money borrowed in relation to the equity (or the shareholders' funds). Leverage can also be calculated as the ratio of debt to equity or the ratio of equity to total assets or debt to EBITDA.

Like for like. LFL growth describes growth adjusted for businesses which have been bought or sold during the year. It is often used in the retail sector to describe growth in sales from the same stores (both location and number) in two consecutive years.

A sum owed by a company - a creditor or payable.

London Interbank Offered Rate. The rate of interest in the short-term wholesale market at which banks lend money to each other. LIBOR is the most widely used benchmark or reference rate for short term interest rates in the UK.

London International Financial Futures and Options Exchange ? now owned by NYSE Euronext.

Like for like (LFL) growth describes growth adjusted for businesses which have been bought or sold during the year. It is often used in the retail sector to describe growth in sales from the same stores (both location and number) in two consecutive years.

A company in which the liability of the shareholders in respect of the company's debts is limited to the amount they pay for their shares. Most companies are incorporated with limited liability.

A company is usually incorporated with limited liability. This means that the liability of the shareholders for the company's debts is limited to the amount that they have paid for their shares, rather than the full debts of the company.

The extent of the credit available to a borrower as set down in a credit agreement with the bank.

Assets held in cash or other assets that can be readily turned into cash.

To dissolve or wind up a company.

The distribution of a company's assets among its creditors and shareholder prior to its dissolution.

The ability to convert a financial instrument quickly and easily into cash, at a reasonable price. Alternatively, the extent to which a company's assets are easily convertible into cash, enabling it to pay its debts when they fall due.

The ratio of a company's liquid assets - cash and debtors to its current liabilities. The ratio indicates the company's ability to pay any debts without it being necessary to make further sales. This provides evidence of its solvency.

A company whose shares are listed on an official list and traded on a stock exchange.

Shares or bonds that have a quotation on a recognised stock exchange.

The acceptance of a security for quotation on an official list and trading on a stock exchange.

A document which must be published in certain circumstances under the UKLA Rules when securities are issued. The listing particulars produced for a flotation are called a prospectus.

The UKLA Rules set out 6 general listing principles which overlay the rules. These are: companies must understand their responsibilities/obligations; companies must maintain adequate procedures, systems and controls to enable them to comply with the rules; companies must act with integrity; companies must avoid a false market in their securities; companies must treat all shareholders equally; and companies must be open and co-operative in their dealings with the FSA.

The conditions that must be satisfied before a security can be listed on an official list and traded on a stock exchange.

Listing Rules ? these form part of the UKLA rules for companies listed on the London Stock Exchange. The Listing Rules contain the rules for eligibility for listing and the continuing obligations for listed companies (other than those contained in the Disclosure and Transparency Rules).

A corporation of underwriters and insurance brokers. Lloyds specialises in underwriting unusual risks.

An insurance broker belonging to Lloyd's of London.

An underwriter who works for the Lloyd's of London.

London Metal Exchange.

Money lent on the condition that it is repaid either all at once or in instalments on agreed dates, and usually with interest.

Money raised by loans to fund activities of an organisation.

Loan coverage ratios are used by banks and analysts to measure the level of bad debts provisioning (impairment charges). Typically they measure: NPL level ? non-performing loans as a percentage of total loans to customers Provisioning level ? total impairments as a percentage of total loans NPL cover ? total impairments as a percentage of non-performing loans.

Loan notes are a type of IOU (loan) offered to investors instead of a cash payment, to defer tax liability.

IOUs/bonds issued to investors/lenders.

LIBOR. The rate of interest in the short-term wholesale market at which banks lend money to each other. LIBOR is the most widely used benchmark or reference rate for short term interest rates in the UK.

A long fund holds shares, rather than going short (see shorting).

A portfolio of shares which can hold negative (short) positions as well as long positions. Long refers to the buying of a security with the expectation that the asset will rise in value. Short refers to the selling of a borrowed security, commodity or currency, with the expectation that the asset will fall in value.

A sum owed that has to be repaid after more than one year.

In calculating EEV profits in the life insurance industry, companies must look through the internal fee mechanisms and into the underlying expense base of the companies which provide administration, investment management and other services to the group's life businesses. In other words, they must include the impact of those costs in the calculation of embedded value. So embedded value is after all expenses relating to that business. See also EEV and Embedded Value.

The loss ratio is used in general insurance and is defined as claims as a percentage of premiums. See also Combined Operating Ratio.

Listing Rules. The LR form part of the UKLA rules for companies listed on the London Stock Exchange. The Listing Rules contain the rules for eligibility for listing and the continuing obligations for listed companies (other than those contained in the Disclosure and Transparency Rules).

Loan to Value Ratio. The LTV ratio measures the mortgage as a percentage of the value of a house. The idea is that the lower the LTV the lower the risk.