In This Section
Marginal Cost 
Marginal cost is the cost of the next unit or one additional unit of volume or output. In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit.
Lower of Cost or Market (LCM)
Lower of cost or market (LCM or LOCOM) is a conservative approach to valuing and reporting inventory or eligible securities. Normally, ending inventory is stated at historical cost but according to generally accepted accounting principles, it should be valued using this method of lower of cost or market.
Lockbox
A lockbox is a specific post office box opened by a bank's treasury management area to provide expedited processing of payments received by account debtors.
Loan Workout Agreement
A mutual agreement between a lender and borrower to renegotiate terms on a loan that is technically in default. This agreement can take many forms such as a modification or a forbearance agreement. The main purpose is to work out a mutual set of terms to avoid foreclosure or liquidation and provide continued financing for a period of time.
Loan and Security Agreement
A loan agreement is a contract between a borrower and lender that outlines the mutual promises made by each party. A security agreement provides a lender with a security interest in a specified asset or property that is pledged as collateral.
Liquidity
Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price.
Liquidation Timeframe
The period of time it takes a liquidator, secured creditor or owner to liquidate the assets of the business. Each asset class will have a different estimated liquidation timeframe.
Liquidation
In finance and economics, liquidation is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations as and when they come due. The company’s operations are brought to an end, and its assets are divvied up among creditors and shareholders, according to the priority of their claims.
Line of Credit (Revolver)
A line of credit and revolving credit are financial arrangements made between the lending institution and a business or an individual. The lender provides access to funds that you can draw down, borrow and repay at your discretion.
Line Cap
The maximum amount you can borrow under a line of credit.
Limited Recourse Debt
A limited recourse debt is a debt in which the creditor has limited claims on the loan in the event of default. Limited recourse debt sits in between secured bonds and unsecured bonds in terms of the backing behind the loan.
Limited Liability Company (LLC)
A limited liability company (LLC) is a corporate structure whereby the members of the company cannot be held personally liable for the company's debts or liabilities. Limited liability companies are essentially hybrid entities that combine the characteristics of a corporation and a partnership or sole proprietorship.
LIFO Reserve
The LIFO reserve is a contra inventory account that will reflect the difference between the FIFO cost and LIFO cost of its inventory. With consistently increasing costs, the balance in the LIFO reserve account will have a credit balance—resulting in less costs reported in inventory.
LIFO (Last-In First-Out)
Last in, first out (LIFO) is an asset management and valuation method that assumes assets produced or acquired last are the ones used, sold or disposed of first; LIFO assumes an entity sells, uses or disposes of its newest inventory first.
Lien
A lien is a legal right granted by the owner of property, by a law or otherwise acquired by a creditor. A lien serves to guarantee an underlying obligation, such as the repayment of a loan.
LIBOR vs Prime
The London Interbank Offered Rate (Libor) and the US Prime Rate are both benchmark interest rates. Both rates are used as reference rates for various lending and borrowing transactions.
LIBOR
LIBOR is a benchmark rate that some of the world’s leading banks charge each other for short-term loans. It stands for London Interbank Offered Rate and serves as the first step to calculating interest rates on various loans throughout the world.
Liability
A liability is a company's financial debt or obligations that arise during the course of its business operations. Liabilities are settled over time through the transfer of economic benefits including money, goods or services.
Leveraged Buyout (LBO)
A leveraged buyout (LBO) is the acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company.
Leverage
The ratio of a company's debt to it's equity. Can also defined as the ratio of a company's debt to its earnings before taxes, interest, depreciation, and amortization (EBITDA).
