The role of this glossary is to present brief definitions of most of the key concepts in corporate finance and management (in total 900 names-definitions) with aim the reader to be able to understand and become familiar with the terminology in the analyses that will present in the category Corporate & Business.
Additionally, we hope that the reader by acquiring intimacy with the specific terminology, he will also love the science of finance and management, giving to it a significant part of his personal time.
In the following glossary we tried to include the most well-known definitions and terms in the field of Corporate Finance & Management. If you still find that a term or definition is missing and you know that it can be included in this glossary, please do not hesitate to contact us via the contact form of our web-site (Contact Us) and the Liberal Globe will edit it and will include it.
Glossary Corporate Finance & Management
There are currently 39 names in this directory beginning with the letter L.
Latent debt capacity hypothesis
a theory that post-merger increases in financial leverage are due to underleverage in the premerger period.
Leadership continuum
the concept advanced by Tannenbaum and Schmidt in which leadership is seen as involving a variety of styles ranging from highly boss-centered to highly subordinate-centered, depending on situations and personalities.
Leadership, definition of
influence, or the art or process of influencing people so that they strive willingly and enthusiastically toward the accomplishment of group goals.
Leading
the function of managers involving the process of influencing people so that they will contribute to organization and group goals.
Learning by doing
a means of transferring knowledge which is complex or embedded in a complex set of technological and/or organizational circumstances, and thus difficult or impossible to transfer in a classroom setting. May motivate knowledge acquisition joint ventures.
Learning curve
an approach to strategy formulation which hypothesizes that costs decline with cumulative volume experience, resulting in competitive advantage for the first entrants into an industry.
Letter of credit
letter from a bank stating that it has established a credit in the company’s favor.
Letter stock
privately placed common stock, so called because the SEC requires a letter from the purchaser that the stock is not intended for resale.
Level cost method (projected benefit cost method)
method for estimating the normal costs of a pension plan. Its principle is that the company should contribute each year an equal amount per employee or an equal proportion of its wage bill.
Leverage buy-out (LBO)
the purchase of a company by a small group of investors, financed largely by debt. Usually entails going private.
Leveraged ESOP
an employee stock ownership plan recognized under ERISA in which the ESOP borrows funds to purchase employer securities (Banks have tax incentives to make loans to ESOPs). The employer then makes tax-deductible contributions to the ESOP enough to cover both principal repayment and interest on the loan.
Leveraged lease
is the lease in which the lessor finances part of the cost of the asset by an issue of debt secured by the asset and the lease payments.
Leveraged recapitalization (leveraged cash out-LCO)
a defensive reorganization of the firm’s capital structure in which outside shareholders receive a large one-time cash dividend, and inside shareholders receive new shares of stock instead. The cash dividend is largely financed with newly borrowed funds, leaving the firm highly leveraged and with a greater proportional ownership share in the hands of management. Also called leveraged cash-out.
Liabilities, total liabilities
total value of financial claims on a firm’s assets. Equals (1) total assets or (2) total assets minus net worth.
LIBID (London Inter-Bank Bid Rate)
the interest rate at which major international banks in London borrow to each other.
LIBOR (London Inter-Bank Offered Rate)
the interest rate at which major international banks in London lend to each other.
Life cycle model of firm ownership
a theory which suggests firms will attract different shareholder clienteles (high or low tax bracket investors) over different periods of firm development depending on changing investment needs and profitability.
Limiting factor, principle of
in choosing from among alternatives, the more individuals can recognize and solve for those factors which are limiting or critical to the attainment of the desired goal, the more clearly, accurately, and easily they can select the most favorable alternative.
Line and staff
an organizational form characterized by the separation of support activities (staff) from operations (line).
Line of credit
agreement by a bank that a company may borrow at any time up to an established limit.
Linear programming (LP)
technique for finding the maximum value of some equation subject to state linear constraints.
Liquid assets
are assets that are easily and cheaply turned into cash-notably cash itself and short-term securities.
Liquidity premium
(1) additional return for investing in a security that cannot easily be turned into cash. (2) difference between the forward rate and the expected spot rate of interest.
Load-to-load
arrangement whereby the customer pays for the last delivery when the next one is received.
Lock-box system
form of concentration banking. Customers send payments to a spot office box. A local bank collects and processes the checks and transfers surplus funds to the company’s principal bank.
Lock-in amendment
a corporate charter amendment which makes it more difficult to void previously passed (antitakeover) amendments i.e. by requiring supermajority approval for a change.
Lock-up option
an option to buy a large block of newly issued shares which target management may grant to a favored bidder, thus virtually guarantying that the favored bidder will succeed. Target management’s ability to grant a lock-up option induces bidders to negotiate.
Logical incrementalism
a process of effecting major changes in strategy via a series of relatively small (incremental) changes.
Lookback option
a call (put) option whose exercise price is fixed in retrospect as the lowest (highest) price of the asset during the life of the option.
