Guide to Analysing Companies

LIFFE
Short for London International Financial Futures Exchange (see
euronext).
Limit order
An order from a client to a broker to buy or sell a specific
number of shares at a specified price or better. Usually there
will be a time limit on a limit order. (See also stop order.)
I made my money by selling too soon.
Bernard Baruch
Line of credit
A loan facility made available to a debtor by a creditor on con-
dition that the debtor uses it to buy goods or services from the
creditor. banks also provide customers with lines of credit to
enable them to make a series of purchases which have been
agreed with the bank in advance.
Liquidation
The winding up of a company’s affairs and the distribution of
its remaining assets after it has ceased trading. After deducting
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the costs of the liquidation, the assets are divided among the
company’s creditors. Preferential creditors (such as the tax man
and employees) get first call. What is left is divided among the
remaining creditors, each according to the amount they are
owed. The liquidation process can be lengthy, particularly if
there are contested claims to the company’s assets.
Liquidity
The degree to which an asset or security can be bought or
sold without affecting its price. A highly liquid share is one in
which there is a lot of trading (both buying and selling). An illiq-
uid share is one in which a large order to buy or sell will quickly
affect the price. As a result, investors trading in illiquid securities
must do so with caution, otherwise the price will move up or
down against them. The risk of illiquid stocks is that the price
will tumble before investors can sell them.
Listing
The addition of a company’s capital to the list of shares and
other securities such as debt instruments that are traded on
a particular stock exchange. A company’s securities are
usually listed after it has been floated as part of an initial
public offering of its shares. Listed companies must abide
by strict rules governing the amount and frequency of informa-
tion that they must make available to shareholders. In the
United States, listed companies must report to their sharehold-
ers every three months; in Europe, most exchanges insist that a
company reports its results every six months.
Lloyd’s
An insurance market based in London which began in the
18th-century coffee house of a man called Lloyd. The market,
which started as an association of underwriters, has since