Glossary

Learn & be a stock guru...

The financial world has developed a special investment-oriented language to help describe the stock market, investments, securities for the stock market, stock market analysis, and its conditions. At times you may be confronted with a term which is totally alien or has a completely different meaning from what you thought. Misunderstanding these terms can sometimes lead to the wrong conclusion, and that can cost you money!

What you don't know can hurt you.

Laddering

The practice of reducing market risk by owning a series of bonds of staggered durations.

Last

The current trading price of one unit of a particular security.

Last Trade Size

The most recent number of shares traded of the security.

Last Updated

The time a quote was provided.

Latest Dividend Rate

If a company's board has committed to dividend payments in the future, the latest reported dividend rate equals the number of times the company pays dividends per year times the latest dividend, expressed in ruppees. If a company's board has not committed to dividend payments in the future, the latest reported dividend rate equals the total dividends paid in the past 12 months.

Latest Fiscal EPS

Earnings per share for the most recent fiscal year.

Latest Quote

The most recent trade price (buy or sell) for a stock, as reported by all exchanges.

Leading Economic Indicators

A compendium of previously announced economic indicators: new orders, jobless claims, money supply, average workweek, building permits, and stock prices.

Leverage Ratio

Total assets divided by total stock equity. This figure gives some indication of how highly leveraged a company is. If the ratio is high -- if assets far exceed stock equity -- then the company is quite leveraged. This can be lucrative during good times, when borrowed assets earn more than they cost, but if things go bad the company could have trouble servicing the debt implied by all this leverage.

Leveraged Buyout

A leveraged buyout, or LBO, is the purchase of a company using a large amount of debt -- much of it short-term bank borrowing secured by the assets of the company itself. After the acquisition, the acquired company typically issues bonds to pay off a portion of the debt created by the takeover.

Liability

The opposite of an asset, a liability is an obligation to pay. Thus, short-term debt, long-term debt and certain other obligations appear as liabilities on a company's balance sheet.

Limit Order

When you instruct your broker to buy shares for you at or below a certain price, or sell shares at or above a certain price, you've entered a limit order. Limit orders reduce the risk that an order will be filled at a price you don't like, and since most stocks move around a little on any given day, you can often get an extra 1/8 of a point in your favor just by entering a limit order and being patient. The down side, of course, is that by waiting for your price the stock you want gets away from you, or the stock you want to unload just keeps falling. The opposite of a limit order is a market order, in which the broker is instructed to execute the trade at any market price available.

Line Charts

A chart that displays only the closing price for a security for each time period. A line connects closing values from each period. Often used for plotting mutual funds, which typically only have a daily close value. Over time, these points present a telling performance history for the security.

Linear Regression Channels

A technical indicator used to determine the trend a security is developing and the likely price range that will take place within that trend. The channel is created using a price history chart and consists of an upper line, a middle line, and a lower line. The upper channel line is created by connecting a series of recent high price points in a straight line, the middle line by connecting intermediate highs and lows, and the lower channel line by connecting a series of low price points. Primarily the top of a channel line tends to act as a resistance level much like a moving average might. When the stock hits the upper line, it usually moves down or "regresses" to the lower or middle line. Consequently, the lower end of the channel tends to act as support. The middle line acts as a median, giving a central point to watch how the stock reacts - does it tend to gravitate more towards the lower line or the upper line of the channel? The channel provides a picture of the overall trend of a stock, whether it is in an uptrend, downtrend, or just consolidating.

Liquidity

Cash and assets easily converted to cash are liquid assets, and liquidity is the extent to which an individual or firm can produce cash when necessary. A high degree of liquidity implies that a company isn't immediately going to fail in the event of a downturn in its business or the economy. That means increased safety for investors, but it comes at a price: cash and cash-like assets usually produce the lowest returns. Thus, a company sitting on a large pot of cash suffers reduced profitability compared to a similar company with all its assets brought to bear on its profitable business activities.

Liquidity Ratio

A measure of how much trading in a given stock has to happen for the price to change by 1%. The liquidity ratio is figured by adding up the daily percentage change in closing price for each trading day of the month, regardless of direction. This number is divided into the total dollar volume for the month. The higher the resulting number, the more liquid the stock, and thus the more attractive it becomes for conservative investors and institutions whose large trading might otherwise move the market too much.

Load Fund

A mutual fund that charges a commission, or ""load,"" every time you buy new shares. Usually, load funds are purchased through stockbrokers and financial planners.

Lock-Limit

The lock-limit is the tool the exchanges use to protect investors in a whirlwind market. If a contract price moves up or down to the pre-established price limit, the market ""locks up"" or ""locks down"" and doesn't open up again until the price returns to an acceptable level. The idea is to prevent prices from swinging too wildly.

Long Bond

A long bond is one with a long maturity, say 15 to 30 years (there are even some 100-year bonds floating around, and recently a 1,000-year issue was reported). But the long bond, in the language of Wall Street, is the 30-year Treasury Bond. In general, long bonds offer a chance to lock in an attractive yield, and longer term bonds usually pay a higher rate than shorter term issues. But intermediate term bonds offer most of the advantages with less interest rate risk. That's one reason long bonds are especially suitable to investors who choose to speculate on the direction of interest rates; long-term bonds fluctuate the most for any unit of change in rates.

Long-Term Debt

Long-term debt is debt due in more than a year. The artful use of such debt can enhance profits, but also exposes the company and its investors to greater risk in the event that things go sour.

Low Estimate

The lowest of the given earnings estimates by any analyst.