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Lease Extension: What It Means, How It Works, Examples A lease extension is a written agreement that lengthens the term of an existing lease or rental contract. It’s commonly used in residential and commercial real estate and for leased equipment, vehicles, and machinery. Extensions are optional—they’re entered into when both parties want to continue the…

Lease Definition and Complete Guide to Renting Key takeaways * A lease is a legally binding contract that grants a tenant (lessee) the right to occupy property owned by a landlord (lessor) for a specified period in exchange for regular payments. * Leases define rent, term length, responsibilities, and remedies for breach. Residential leases are…

Learning Curve A learning curve shows how the time, cost, or resources required to perform a task decline as the task is repeated and proficiency increases. First described by Hermann Ebbinghaus in 1885, the concept is used to measure production efficiency and to forecast costs. Key takeaways The learning curve charts how performance (time, cost,…

Lean Startup: Definition and How It Differs From a Traditional Business What is a lean startup? A lean startup is a method for creating new companies or launching new products that emphasizes building only what customers have demonstrated they want. Rather than developing a full product and hoping demand appears, the lean approach tests market…

Lean Six Sigma: Definition, Principles, and Benefits What is Lean Six Sigma? Lean Six Sigma is a management approach that combines Lean manufacturing principles with Six Sigma statistical methods to eliminate waste, reduce defects, and improve process performance. It focuses on delivering greater value to customers by streamlining workflows, minimizing variability, and optimizing use of…

Leakage: Definition and Key Examples Leakage in economics refers to income or capital that diverts out of the main circular flow of income and expenditure, reducing the funds available for consumption and domestic investment. In Keynesian terms, leakages lower the effective demand and weaken the multiplier effect. How leakages fit into the circular flow The…

Leads and Lags: Timing International Payments to Manage Currency Risk Key takeaways * Leads and lags are deliberate advances (leads) or delays (lags) of cross‑border payments to benefit from expected exchange‑rate movements. * Corporations and governments use spot transactions, forward contracts, and forward points to lock or adjust future exchange rates. * Timing strategies carry…

Understanding Leading Indicators Key takeaways * A leading indicator is a measurable data point that tends to change before the broader economy, helping forecast future economic activity. * Common examples: Consumer Confidence Index, Purchasing Managers’ Index (PMI), initial jobless claims, durable goods orders, and the yield curve. * Leading indicators vary in accuracy and timing;…

Leadership Grid The Leadership Grid is a behavioral leadership model developed in the 1960s by Robert R. Blake and Jane S. Mouton. It maps leadership styles on two axes—concern for production (task orientation) and concern for people (relationship orientation)—each scored from 1 (low) to 9 (high). Positions on the grid represent five principal leadership types….

Leadership in Business: Definition, Key Components, and Examples What is leadership? Leadership is the ability to set direction, motivate others, and guide an organization toward its goals. In business, leadership shapes strategy, culture, and performance by inspiring people to collaborate, adapt, and perform at their best. Why leadership matters Influences company culture and morale. Aligns…

Understanding Lead Time: Definition, Calculation, Impact, and Management What is lead time? Lead time is the total time required to complete a process from start to finish. In business, it most commonly refers to the period from when an order or material request is initiated until the finished product reaches the customer. Measuring and reducing…

Lead Bank: Definition and Overview A lead bank (also called a lead underwriter, lead manager, or managing underwriter) is the primary bank that coordinates a group of lenders or underwriters for a large financing transaction. Its role is to organize the syndicate, negotiate terms, market the deal, and oversee administration and compliance. In international debt…

Layoff What is a layoff? A layoff is the involuntary termination of employment for reasons unrelated to an individual’s performance — typically cost-cutting, organizational restructuring, seasonal slowdown, or an economic downturn. Layoffs can be temporary or permanent. Laid-off workers generally qualify for unemployment benefits and retain their vested retirement investments, though employer-paid benefits usually end….

Layaway: How It Works, Pros & Cons, and Where to Find It Layaway is a retail payment option that lets a shopper reserve an item by paying a deposit and completing the remaining balance in installments. The retailer holds the merchandise until the balance is paid in full, at which point the customer takes possession….

Lawful Money: Meaning, History, and Legal Confusion What is lawful money? Lawful money refers to forms of U.S. currency issued by the U.S. Treasury rather than the Federal Reserve. Historically this term has included: * Gold and silver coins (often called “specie”) * Treasury notes and bonds Lawful money is distinct from fiat money (paper…

Law of Supply and Demand The law of supply and demand describes how prices, quantities supplied, and quantities demanded interact in a market. Price acts as a signal: higher prices tend to reduce demand and increase supply, while lower prices tend to increase demand and reduce supply. The point where supply and demand balance is…

Law of Supply What it is The law of supply is a foundational principle of microeconomics: as the price of a good or service rises, producers are generally willing to supply more of it; as the price falls, they supply less. This behavior reflects firms’ incentives to increase profits when prices are higher and conserve…

Law of One Price The law of one price states that identical goods or assets should sell for the same price across different markets once currency differences and transaction costs are accounted for. Under ideal conditions—no trade barriers, no transaction or transportation costs, and free market entry—price differences create arbitrage opportunities that push markets toward…

Law of Large Numbers Key takeaways In statistics, the law of large numbers (LLN) states that as a sample size grows, the sample average converges on the population average. In business and finance, the term is often used to describe the difficulty large organizations have in maintaining high percentage growth rates as their base size…

Law of Diminishing Marginal Utility Definition The law of diminishing marginal utility states that as a person consumes successive units of the same good or service, the additional satisfaction (marginal utility) gained from each extra unit tends to decline. The first unit typically provides the highest utility; later units add less and may eventually produce…

Law of Diminishing Marginal Returns: Definition, Example, and Uses in Economics Overview The law of diminishing marginal returns describes how adding more of one input to a production process—while keeping other inputs fixed—eventually yields smaller increases in output. It is a central principle in production theory and helps explain why simply increasing one factor (like…

Law of Diminishing Marginal Productivity What it is The law of diminishing marginal productivity (also called the law of diminishing marginal returns) states that when increasing one input in the production process while holding other inputs constant, the additional output produced by each additional unit of that input will eventually fall. In plain terms, each…

Law of Demand The law of demand states that, ceteris paribus, as the price of a good rises, the quantity demanded falls; as the price falls, the quantity demanded rises. This inverse relationship underpins how markets allocate goods and helps explain price formation. How it works: diminishing marginal utility Consumers derive less additional satisfaction (marginal…

Late Fees: Definition, How They Work, and How to Avoid Them A late fee is a charge imposed by a creditor, landlord, or service provider when a payment is not made by the agreed-upon due date. These fees are meant to encourage timely payment and must be disclosed in contracts or account agreements. Late fees…

Last Will and Testament: Definition, Types, and How to Write One Key Takeaways * A last will and testament is a legal document that states how you want your assets distributed after death and can name guardians for minor children. * Assets with designated beneficiaries (life insurance, retirement accounts) and property held jointly usually bypass…

Last Twelve Months (LTM) What is LTM? Last Twelve Months (LTM), also called Trailing Twelve Months (TTM), is a rolling 12‑month period used to evaluate a company’s recent financial performance. LTM figures typically aggregate the most recent four quarters (or the 12 months ending on the date of a financial statement) to present current metrics…

Quantitative Easing: How It Spurs Economic Recovery What is quantitative easing (QE)? Quantitative easing (QE) is an unconventional monetary policy tool used by central banks to stimulate the economy when conventional tools—primarily cutting short-term interest rates—are exhausted (e.g., when rates are near zero). Under QE, a central bank buys longer-term securities (government bonds, mortgages, or…

Last Mile: Reaching Customers Efficiently What the last mile is The “last mile” is the final segment in delivering a service or product to an end user: – In telecommunications, it’s the physical connection from a network trunk to a home or business (the cable, fiber, or wireless link). – In logistics and retail, it’s…

Last In, First Out (LIFO) What is LIFO? Last In, First Out (LIFO) is an inventory-costing method that assumes the most recently purchased or produced items are sold first. Under LIFO, the cost of the newest inventory is recorded as cost of goods sold (COGS), while older, often lower-cost items remain on the balance sheet…

Larry Ellison: Profile of a Tech Founder and Visionary Key takeaways * Co-founder of Oracle Corporation (founded 1977), creator of one of the first commercial relational database systems. * Built Oracle into the world’s largest database software supplier and a leading provider of business applications. * Stepped down as CEO in 2014; currently serves as…

Large Trader: Definition, How It Works, and Key Considerations What is a large trader? A large trader is an investor or organization whose trades in National Market System (NMS) securities meet or exceed SEC-established thresholds. The Securities and Exchange Commission (SEC) defines a large trader as any person whose transactions in NMS securities equal or…

Large-Cap (Big Cap) Stocks: Definition, Benefits, and Investment Tips What are large-cap stocks? Large-cap (or big-cap) stocks are shares of companies with a market capitalization greater than $10 billion. These firms are typically well-established, operate across multiple markets, and often serve as core holdings in investment portfolios. How market capitalization is calculated Market capitalization =…

What Is a Lapse? A lapse is the expiration or loss of a right, privilege, or policy because required conditions were not met or time limits were missed. In insurance, a lapse most commonly occurs when a policyholder fails to pay premiums on time, causing coverage to end until the policy is reinstated. Lapses also…

Lapping Scheme A lapping scheme is a type of accounting fraud in which an employee conceals stolen cash by misapplying subsequent customer payments to earlier unpaid accounts. Each new payment is used to cover a previous shortfall, creating a rolling mismatch that temporarily hides theft until the pattern collapses or is discovered. How lapping works…

Landlord: Duties, Responsibilities, and Rights Key takeaways * A landlord owns real estate and leases it to tenants in exchange for rent. * Landlords can rent residential or commercial property and are bound to tenants by a lease agreement. * Common landlord responsibilities include property maintenance, compliance with building and health codes, and proper handling…