|Lapsed Policy: A lapsed policy is one that is canceled for nonpayment of premiums. The term also refers to a policy canceled before it has cash or surrender value.
Lease: A lease is a contract granting the use of real estate or a fixed asset, such as a vehicle or equipment, for a specific period in exchange for periodic payments.
Leaseback (sale and leaseback): A leaseback is an arrangement where a seller of an asset leases back that same asset from the purchaser. For example, a business owner may sell all or part of the property from which the business operates to
raise cash for business operations. The business owner then may agree to lease the sold property for a term of years from the new owner. The leasebackoffers security to the new owner because the seller becomes the tenant with business operations remaining
at its present location on a potentially long-term basis.
Lease-Purchase Agreement: A lease-purchase agreement may state that a portion of each lease payment applies to a future purchase of the leased property or that the leaseholder possesses a right to buy the property during or at the conclusion of the
Lender: A lender is one who parts with something of value for specific compensation, for a stated or open duration of time.
Letters of Credit (by a Bank): The bank, as an issuer, may substitute its creditworthiness for a recipient customer and buyer in a single or series of sales transactions through a letter of credit. The seller has little risk in default of payment by
the buyer because of the letter of credit. A significant variation on a letter of credit is a letter guaranteeing performance for completion of a contract.
Level Premium Term Insurance: Level premium term insurance refers to a life insurance policy for which premiums remain the same from year to year for a specified period.
Liability: A liability is something for which one is held liable, such as an obligation, responsibility, or debt. Business liabilities may include loans, mortgages, accounts payable, deferred revenues, and accrued expenses. Current liabilities are
debts payable within one year, whereas long-term liabilities are payable over a longer period.
Life Annuity: This type of annuity provides income for life.
Life Cycle: The life cycle is the time period that measures from the beginning to the conclusion of an individual, product, or business. A corporate business entity frequently has a life cycle beyond its founder or current owners; therefore, small
family businesses may compute life cycles in generational terms to plan an eventual transfer or liquidation.
Life Expectancy: Life expectancy refers to the average number of years individuals of a given age are expected to live, according to a mortality table based on factors such as gender, age, heredity, and health characteristics.
Life Insurance: Life insurance is a contract wherein a premium is paid to an insurance company in return for the insurance company's promise to pay the beneficiary a defined amount upon the death of the insured. There are various types of life insurance
available, including term life, whole life, and universal life.
Lifetime Learning Credit: The lifetime learning credit is a federal credit toward qualified higher education expenses, including tuition and/or other educational expenses, incurred to learn or improve job skills. This credit applies to undergraduate
study, graduate school, and professional education pursuits.
Limited Liability Corporation (LLC): In contrast to the unlimited liability inherent in proprietorships as a form of business ownership, a limited liability corporationprovides limited liability to each shareholder to the extent of invested capital.
Limited Partnership: A limited partnership is a financial affiliation, consisting of a general partner and limited partners, that invests in projects such as real estate, oil and gas, equipment, movies, etc. The general partner, in return
for fees and a percentage of ownership, manages operations and is ultimately liable for any debt. Limited partners, who may receive income, capital gains, and tax benefits in return for their investment, have little involvement in management. They also have
limited liability, which limits their maximum loss to the amount they invested.
Liquid Assets: Cash and short-term investment vehicles (e.g., commercial paper, checking accounts, account receivables, Treasury bills) are cash equivalents or liquid assets. Cash and cash equivalents maintain existing market values through
the conversion period.
Liquidity: Liquidity refers to the ability to quickly and easily convert assets into cash without incurring a significant loss.
Liquidity Ratio: Liquidity ratios (cash asset ratio, current ratio, quick ratio) quantify a company's ability to discharge debt obligations maturing within one year.
Living Trust: Also called an inter vivos trust, a living trust is established by a living person and allows that person to control the assets he or she contributes to the trust.
Living Will: Also called a health care proxy, a living will is a written document that allows an individual to designate a representative to make medical decisions in the event that he or she becomes incapacitated due to accident or illness. Often,
a living will identifies specific medical treatments a person does or does not wish to have in the event life-sustaining treatment is necessary.
Locking-In:Locking-in refers to the process of assuring that an interest rate, such as on a mortgage, CD (certificate of deposit), or fixed-rate bond, has been set. In the case of a mortgage, there may be a fee for locking-in the rate.
Long-Term Care Insurance: Long-term care insurance covers the cost of long-term health care expenses, such as nursing home care, in-home assistance, assisted living, or adult day care.
Management Buyout: Management buyout occurs when managers or executives of a company purchase controlling interest in their company from existing shareholders. If management has existing funding sources to pay a premium over the existing fair
market value of outstanding shares, the company becomes a private corporation without a majority of shares trading on the market. Motivation for management buyout may include preservation of present management positions, privacy in management operations, or
potentially substantial capital gain with future expansion and anticipated profits.
Management Fee: A managment fee is a charge against an investor's assets for the fund manager's services in overseeing the portfolio. The charge is calculated as a fixed percentage of the fund's asset value, usually 1% or less, and terms of the fee
should be disclosed in the fund's prospectus.
Mandatory Employee Contribution: While participation in an employee benefit plan is voluntary, some plans, generally some defined benefit plans, require mandatory employee contributions in order to accrue benefits under the plan.
Market Risk: Also called systematic risk, market risk is the portion of a security's risk common to all securities in the same asset class, and it cannot be eliminated through diversification. For example, a market risk associated with investment
in stocks is the general tendency of share prices to decrease during an economic downturn.
Market Timing: An investor who practices market timing makes buy-sell decisions by attempting to predict market trends, such as the direction of stock prices, the direction of interest rates, or the condition of the economy. Unlike investors
who buy and hold securities with the hope of substantial gains over an extended period of time, market-timing investors actively buy and sell securities, hoping to turn quick profits on short-term price fluctuations.
Maturity: The date of maturity is the date on which a debt becomes due for payment. For example, if a bond has a face value of $1,000 and a 30-year term of maturity, the bondholder should receive $1,000 in 30 years.
Medicaid: Medicaid is a federal program that covers medical expenses for individuals who are financially unable to afford health care.
Medicare: Medicare is a federal program that covers health care for individuals age 65 and over, or individuals with certain disabilities.
Medicare Part D: Medicare Part D is the prescription drug benefit program available to Medicare recipients.
Minimum Participation Requirements: Employer-sponsored retirement plans usually require minimum participation requirements. Generally, a participant must be a full-time employee, 21 years of age, and a one-year tenured employee in order
to receive benefits. Employee welfare benefit plans may provide a separatecriterion for employee participation.
Monthly Housing Expenses: Monthly housing expenses include the sum of the principal, interest, and taxes a borrower pays towards housing on a monthly basis. This figure is used to determine affordability in relation to total income.
Mortality Table: A mortality table is a statistical table showing the death rate of people at each age, usually expressed as the number of deaths per thousand.
Municipal Bond: This tax-exempt bond may be issued by a state government or agency, or by a town, county, or other political subdivision or district. Interest payments are generally not subject to federal taxes, and they may be exempt from state and
local taxes if the bondholder is a resident of the state where the bond was issued.