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Leverage: a term commonly used in the USA and more or less synonymous with gearing. It can refer to the use of debt to increase the expected return on equity. It is commonly the ratio of the debt in the company’s balance sheet to its equity. Alternatively, it is sometimes expressed as the ratio of the debt to the balance sheet total (that is the sum of the debt and equity).

Leveraged Buyout (LBO): this takes place when (usually) a private equity firm acquires a controlling interest in a company using a high proportion of borrowed money to finance the acquisition.

Leveraging: when a company increases its use of borrowed money to supplement investor share capital in order to boost profits. A higher proportion of debt will increase the amount of interest to be deducted in calculating taxable profits. More commonly known in the UK as `gearing up'.

LIBID (London Interbank Bid Rate): the rate of interest which major London banks are willing to pay on Eurocurrency deposits. It is the mirror image of LIBOR, with LIBOR representing an offer to lend and LIBID a rate at which the banks are prepared to borrow. LIBID is therefore often used as a benchmark for deposit rates, though it is not fixed in the same way as LIBOR. LIBID has traditionally been one-sixteenth to one-eighth of a per cent below LIBOR, but the gap is narrow.

LIBOR (London Interbank Offered Rate): a benchmark interest rate fixed by the British Bankers’ Association at 11 a.m. each London business day. The BBA determines the price by asking 16 banks for the rate at which that bank could borrow in each of the range of currencies quoted in London, for a number of different durations, if it were to ask for and accept inter-bank offers just before 11 am. The data is averaged to produce daily interest rate figures for each of the currencies for borrowing periods from one day to twelve months. See INTM577035.

Liquidity: it refers to the ability of a company to meet its obligations as they fall due. If it does not maintain that ability, it may become insolvent. Liquidity is readily available money, not money tied up in long-term investments, owed to the company, etc. If a company does not have the cash to pay its bills, it risks legal action against it for recovery of debts. A company becomes illiquid hen it does not have sufficient working capital at its disposal.

Loan Note: an instrument giving evidence of a loan. Also another name for a bond.