Lapsed Policy An insurance policy that is canceled for nonpayment of premiums, or canceled before it has cash or surrender value.
Lease A legal contract conveying the use of property from the owner (lessor) to another (lessee) at a fixed rate, for a stated length of time.
Lease-Purchase Agreement An agreement where a portion of each lease payment applies to a future purchase of the leased property. Also, applies where the leaseholder has the right to buy the property during or at the conclusion of the lease term.
Leaseback (Sale and Leaseback) An arrangement in which the seller of an asset leases that same asset back from the purchaser. For example, a business owner may sell the business’s office building to raise cash, then arrange to lease the building from the new owner so the business can remain at its present location.
Leasehold Improvements Additions, improvements or alterations made to leased property by the lessee.
Ledger A book of final entry containing all the accounts of a business or all the accounts of a particular type. Some examples are general ledgers and accounts receivable ledgers.
Lender A person or organization that parts with something of value for a stated, or open, duration of time in exchange for specific compensation.
Letter of Credit A document by which a bank substitutes its creditworthiness for that of a recipient customer and buyer in a sales transaction.
Level Premium Term Insurance A life insurance policy for which premiums remain the same from year to year for a specified period.
Liability Something for which one is held liable, such as an obligation or debt. Financial liabilities can include loans, mortgages, accounts payable, deferred revenues and accrued expenses, among others.
Life Annuity An annuity that provides income for life.
Life Cycle The time period from the beginning to the end of the life of an individual, product or business. Corporate business entities frequently have life cycles that extend beyond those of their founders or current owners.
Life Expectancy The average number of years that an individual of a given age is expected to live.
Life Insurance A contract in which the insured pays a premium to an insurance company in exchange for a defined payment to a beneficiary, usually a family member, upon his or her death. Available types of life insurance include term life, whole life and universal life.
Lifetime Learning Credit A federal tax credit for qualified higher education expenses incurred to learn or improve job skills.
Limited (Ltd.) See Corporation
Limited Liability Company A business entity formed upon filing articles of organization with the proper state authorities and paying all fees. LLCs are a new entity in the United States, although the concept has long been used internationally. LLCs provide limited liability to their members, and are taxed like a partnership, preventing double taxation. LLCs can be formed in every state.
Limited Liability Corporation (LLC) A form of business ownership that provides each shareholder with limited liability to the extent of invested capital.
Limited Partnership An investment affiliation consisting of a general partner and limited partners. The general partner, in return for fees and a percentage of ownership, manages business operations and is ultimately liable for any debt. Limited partners may receive income, capital gains, and tax benefits in return for their investment, but have little involvement in management.
Liquid Asset An asset, such as cash, that can be readily converted into other types of assets or used to buy goods and services or satisfy obligations.
Liquid Assets Cash and short-term investment vehicles. Liquid assets can be things like commercial paper, checking accounts, account receivables and Treasury bills.
Liquidation The winding-up of an organization by settling with debtors, creditors and shareholders. Usually done by selling or otherwise disposing of assets to pay off liabilities.
Liquidation Value The net amount realized on assets in the event of a liquidation.
Liquidity The ability to quickly convert assets into cash without significant loss.
Liquidity Ratio A ratio that quantifies a company’s ability to discharge debt obligations maturing within one year.
Living Trust A trust established by a living person who controls the assets he or she contributes to the trust.
Living Will A document designating another person to make medical decisions for the principal if he or she becomes incapacitated due to accident or illness.
Local Tax In addition to federal and state taxes, your local town or city may also need tax money to operate services such as garbage pick-up water treatment, and street-cleaning. This tax money is known as a local tax.
Locking In The process of assuring that an interest rate has been set. In the case of a mortgage, there may be a fee to lock in a particular rate.
Long-Term Care Insurance An insurance policy that covers long-term health care expenses, such as nursing home care, in-home assistance, assisted living or adult day care.
Loss The excess of expenditures over revenues. The opposite of income or profit.