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Ltd. (Limited) What it means “Ltd.” is the abbreviation for “limited” and denotes a company structure in many Commonwealth jurisdictions (for example, the U.K., Ireland, Canada). It indicates that the business is a separate legal entity and that owners’ liability for company debts is limited to the amount they invested. Key takeaways Ltd. signals a…

Loyalty programs reward customers for repeat purchases and interactions with a brand. They drive repeat business, encourage higher spending, and provide companies with valuable customer data that can improve marketing and product decisions. Key takeaways * Programs offer rewards, discounts, or exclusive benefits to encourage repeat purchases. * They benefit businesses by increasing customer retention…

Lower of Cost or Market (LCM) Method Definition The lower of cost or market (LCM) method is an inventory valuation approach that reports inventory at the lesser of its historical cost or its current market value. Its purpose is to avoid overstating assets and income when inventory values decline or items become obsolete. Key points…

Low-Volume Pullback: What It Is and How Traders Use It A low-volume pullback is a price retracement toward a support area that happens on below-average trading volume. It typically reflects short-term profit-taking by weaker long positions rather than a broad shift in market sentiment. Because volume remains muted, the underlying trend is often still intact,…

Low Interest Rate Environment Key takeaways A low interest rate environment exists when central-bank–guided risk-free rates remain below historical averages for an extended period. It’s typically used to stimulate growth after recessions (e.g., post‑2008 and during the COVID‑19 downturn). Borrowers, homeowners, businesses, and many investors in risk assets benefit; savers, fixed‑income investors, and some banks…

Low-Income Housing Tax Credit (LIHTC) Key takeaways LIHTC is the federal tax incentive that encourages private developers to build, buy, or renovate rental housing for low-income households. Credits are claimed over 10 years; projects must maintain required affordability for at least 15 years. Two main credit types exist: the 9% credit (for projects without other…

Low Exercise Price Option (LEPO): Meaning, Pros and Cons A low exercise price option (LEPO) is a European-style call option with a strike price of one cent. Because the strike is effectively zero, LEPOs trade like the underlying stock and behave similarly to a futures or forward contract: exercise at maturity is almost certain. Both…

Love Money Love money is seed capital provided by family, friends, or close contacts to help an entrepreneur start or grow a business. Decisions about providing love money are usually based on personal relationships rather than formal risk analysis. Key points Love money typically comes from friends, family, or people already in the entrepreneur’s social…

Lot (Securities Trading) A lot is the number of units of a financial instrument that are bought or sold in a single trade. Lot sizes vary by market and instrument: some are standardized by exchanges, while others can be any number of units. Key takeaways In stocks and ETFs, a round lot traditionally equals 100…

Lost Policy Release (LPR): What it Is and How It Works A lost policy release (LPR) is a signed statement in which the insured releases an insurance company from liability for a particular policy that has been lost, destroyed, or is being replaced. Historically, insurers required the original policy documents to cancel coverage; an LPR…

Understanding Japan’s “Lost Decade” The “Lost Decade” refers to a prolonged period of economic stagnation in Japan that began after the early‑1990s bursting of an asset-price bubble. What started as roughly ten years of weak or negative growth and deflation has extended into multiple decades of sluggish performance and structural challenges—often called the “Lost Decades.”…

Loss Reserves A loss reserve is an accounting estimate of the future claims an insurer expects to pay on policies it has underwritten. It represents a liability set aside to cover unpaid losses and loss adjustment expenses, helping insurers remain solvent and meet claim obligations as they arise. How loss reserves work When an insurer…

Loss Ratio What is the loss ratio? The loss ratio is an insurance metric that compares claims paid (including adjustment expenses) to premiums earned. It shows what portion of premium income an insurer pays out for policyholder claims. Formula: loss ratio = (claims paid + adjustment expenses) / earned premiums Explore More Resources › Read…

Loss Payee What is a loss payee? A loss payee is an entity named on an insurance policy that has the right to receive insurance proceeds if a covered loss occurs to a financed or otherwise encumbered asset (commonly vehicles and property). The designation protects the financial interest of a lender, lessor, or other party…

Loss Leader Strategy A loss leader strategy intentionally prices one or more products below cost to attract customers and drive sales of higher-margin items. Retailers and online sellers use it to increase foot traffic, build a customer base when entering new markets, and encourage repeat purchases. While effective when executed well, it carries operational, competitive,…

Loss Given Default (LGD) Loss Given Default (LGD) measures the portion of an exposure a lender expects to lose if a borrower defaults, after accounting for any recoveries. It can be expressed as a dollar amount or as a percentage of exposure at default (EAD). LGD is a core input for credit risk measurement and…

Loss Development: What it Is and How It Works Loss development is the change between an insurer’s initial estimate of claims and the final losses actually recorded. Because many insurance claims—especially in long‑tailed lines—take months or years to settle, initial reserves and reported losses are often adjusted over time as new information becomes available. Why…

Loss Carryforward: Definition, Example, and Tax Rules What is a loss carryforward? A loss carryforward (often a net operating loss, NOL, carryforward) lets a business apply a current-year loss against taxable income in future years. By offsetting future profits with earlier losses, a company reduces its future tax liability. The term also applies to capital…

Loss Carryback: Definition, History, and Example Key takeaways A loss carryback allows a business to apply a net operating loss (NOL) to a prior year’s tax return, producing an immediate refund of taxes previously paid. A carryforward applies NOLs to future years’ returns instead. Carrybacks are generally more valuable than carryforwards because of the time…

Loss Adjustment Expense (LAE) What is LAE? Loss adjustment expense (LAE) is the cost an insurer incurs to investigate, defend, and settle claims. These costs include payments for claims adjusters, outside investigators, attorneys, mediators, experts, and administrative support related to claims handling. LAE helps insurers detect and deter fraud and ensures claims are properly evaluated…

Lorenz Curve: Definition and Overview A Lorenz curve is a graphical tool that shows how a variable—typically income or wealth—is distributed across a population. Developed by Max Lorenz in 1905, it displays cumulative population percentiles on the x-axis and cumulative share of the variable (income or wealth) on the y-axis. The curve is used to…

Loophole A loophole is a technicality, gap, or ambiguity in a law, regulation, or contract that lets a person or organization avoid the intended scope of that rule without explicitly breaking it. Loopholes appear most often in complex systems—tax codes, regulatory statutes, contracts, and political rules—where detailed drafting and unintended omissions create opportunities for circumvention….

Lookback Options: What They Are, How They Work, and When to Use Them What is a lookback option? A lookback option is an exotic option that lets the holder use the historical price path of the underlying asset over the option’s life to determine the payoff. Rather than being forced to use the spot price…

Look-Alike Contracts: What They Are and Why They Matter Key takeaways * Look-alike contracts are over-the-counter (OTC), cash-settled derivatives whose settlement is tied to the settlement price of a similar, exchange-traded, physically settled futures contract. * They carry no risk of physical delivery, often mirror the contract terms of the underlying futures, and can be…

Longitudinal Data Key takeaways Longitudinal data are repeated observations of the same subjects over time, used to measure change and dynamics. It differs from cross‑sectional data, which samples different subjects at each point in time. Panel data are a common form of longitudinal data where the same units are observed across waves. Applications include economics,…

Long-Term Liabilities Long-term liabilities are financial obligations a company must pay more than one year in the future. Also called long-term debt or noncurrent liabilities, they appear on the balance sheet separate from obligations due within 12 months to clarify a company’s short-term liquidity and longer-term financing needs. Key takeaways Long-term liabilities are due beyond…

Long-Term Investments Definition and importance Long-term investments are assets a company intends to hold for more than one year. Common examples include equity stakes in other companies, bonds, and real estate. These investments appear on the noncurrent (asset) side of the balance sheet and are used to diversify holdings, generate steady income (dividends, interest, rent),…

Long-Term Incentive Plan (LTIP) What is an LTIP? A Long-Term Incentive Plan (LTIP) rewards employees—often executives—for meeting performance goals that increase shareholder value. LTIPs align employee incentives with company growth objectives, encourage retention, and focus effort on long-term business outcomes by delaying or phasing compensation over multiple years. Why companies use LTIPs Aligns employee behavior…

Long-Term Growth (LTG) What LTG means Long-term growth (LTG) is an investment approach that aims to increase the value of a portfolio over a multi-year horizon—typically a decade or more. The focus is growth of capital rather than short-term income or preservation. Key takeaways LTG targets above-market returns over long time frames (commonly 10+ years)….

Long-Term Equity Anticipation Securities (LEAPS) What are LEAPS? LEAPS are exchange-listed options with expiration dates longer than one year (commonly up to 39 months). Like standard options, a LEAPS call gives the buyer the right—but not the obligation—to buy the underlying asset at a specified strike price; a LEAPS put gives the right to sell….

Long-Term Debt-to-Total-Assets Ratio What it is The long-term debt-to-total-assets ratio measures the portion of a company’s assets financed with long-term debt (debt obligations due in more than one year). It is a solvency metric that helps assess financial leverage and the company’s ability to meet long-term obligations. Formula LTD/TA = Long-Term Debt / Total Assets…

Long-Term Debt to Capitalization Ratio Definition The long-term debt to capitalization ratio measures the proportion of a company’s long-term debt relative to its total capital. It is a leverage metric that indicates how much of a firm’s financing comes from long-term borrowings versus equity and preferred stock. Calculation Long-term debt to capitalization = Long-term debt…

Long-Term Debt Long-term debt is any borrowing that matures more than one year from the balance sheet date. For issuers it represents a noncurrent liability; for investors it is an asset with a longer time-to-maturity and different risk and return characteristics than short-term debt. Key takeaways Matures in more than one year and is treated…

Long-Term Care (LTC) Insurance: Definition, Costs, and Alternatives What is LTC insurance? Long-term care (LTC) insurance is private coverage that helps pay for care needed when someone can no longer perform basic daily activities independently because of aging, chronic illness, or disability. It typically covers services such as nursing-home care, assisted living, home health aides,…

Long-Term Capital Management (LTCM) Long-Term Capital Management (LTCM) was a high-profile hedge fund founded in 1994 by prominent Wall Street traders and Nobel Prize–winning economists. It became famous for delivering strong returns using sophisticated arbitrage strategies and extreme leverage, then infamously nearly collapsed in 1998 after a series of market shocks. The event exposed how…