Glossary

LEAP

A LEAP is a long-term option contract for a company's stock. They usually run for one year or more and are available on several U.S. exchanges.

Letter from a bank stating that it has established credit in the company's favor.

A corporate restructuring where the existing shareholders sell their shares to a small group of investors. The purchasers of the stock sue the firm's unused bet capacity to borrow the funds to pay for the stock. Typically the company becomes private.

Use of debt financing.

London InterBank Offered Rate. The lending rate among international banks in London.

When you instruct your broker to buy or sell a given security at a specific price.

Limitation of a shareholder's losses to the amount invested.

refers to an investor's ability to convert an asset into cash. The faster the conversion the more liquid the asset. Illiquidity is a risk in that an investor might not be able to convert the asset to cash when most needed. Moreover, having to wait for the sale of an asset can pose an additional risk if the price of the asset decreases while waiting to liquidate.

The additional return required by investors in securities that cannot be converted into cash at a reasonably predictable price or time.

The amount that could be realized if an asset were sold independently of the going concern.

When a company's stock trades on an official exchange.

also called Limited Liability Partnership (LLP) It a new type of partnership that is now permitted in many states. Unlike a regular and limited partnership, in an LLC, all partners enjoy limited liability with regard to business's liabilities, and, in that regard, they are similar to shareholders in a corporation.

A commission paid by an investor to a broker for the purchase or sale of a mutual fund.

Investors who go "long" own stock or another financial security. It is a term that means the opposite of "short."

A gain on the sale of a capital asset where the holding period was six months or more and the profit was subject to the long-term capital gains tax.

Additional return required to compensate investors for purchasing illiquid assets.