Glossary

Leakages

Parts of national income which are not used for consumptions purposes, including net taxes, savings and imports.

Lease

Legal contract in which the owner of an asset, e.g. a property, agrees to another individual/business utilising that asset in return for a consideration, such as rental payments.

Lease back

Situation in which a property is sold by its owner to another person/company on condition that the purchaser leases the property back to the original owner for an agreed rent over a set term.

Ledger

A book in which the accounts of a business are kept. The main types of ledger are the nominal ledger, containing the nominal accounts which list revenue and costs, the sales ledger which lists the sales accounts of customers, and the purchase ledger which lists the purchase accounts of suppliers.

Lessee

A person to whom a lease is granted, also known as a tenant.

Lessor

A person who grants a lease, also known as a landlord.

Leverage

The use of financial instruments to increase the return on an investment, or the amount of debt used to finance a business’ assets.

Leveraged buyout

The takeover of a company by investors who use the company’s own assets as collateral to raise the money that finances the bid.

LIBOR (London Inter Bank Offered Rate)

Interest rate at which banks lend money to each other.

Lien

The right of a creditor to take possession or control of the property of a debtor upon them failing to satisfy a debt.

Limited liability

The principle that a shareholder’s liability for company debts is limited to the nominal value of their shares and therefore that their personal assets are not at risk should the company become insolvent.

Liquid market

A market in which large quantities of securities are being bought and sold daily with relative ease.

Liquidation

The sale of the assets of a bankrupt company to pay creditors.

Liquidator

An official appointed to supervise the liquidation of a company.

Liquidity

The level of ease with which an asset can be converted into cash.

Liquidity ratio

See ‘acid test ratio’.

Litigation

The process of a person or company taking legal action against another.

Loan capital

The part of a company’s capital structure which is raised by loans, e.g. debentures, which usually pay fixed interest over a fixed period.

Loan stock

A security bearing a fixed rate of interest and where the capital is repaid after a given period of time.

Long term liabilities

Debts of a person or company not due for repayment within the next accounting period.

Loss adjuster

An independent assessor called in by an insurance company to check the validity of claims.