What Is a Loan Participation Note? A loan participation note (LPN) is a fixed-income security that permits investors to buy portions of an outstanding loan or package of loans. LPN holders participate on a pro-rata basis in collecting interest and principal payments, and are similarly exposed to a proportional risk of default. Banks, credit unions
What Is a Loan Production Office? A loan production office (LPO) is an administrative division of a bank, that, as the name implies, deals solely with loan-related activities. The Federal Reserve defines an LPO as “a staffed facility, other than a branch, which is open to the public and provides lending-related services such as loan
What Is a Loan Shark? A loan shark is a person who – or an entity that – loans money at extremely high interest rates and often uses threats of violence to collect debts. The interest rates are generally well above an established legal rate, and often loan sharks are members of organized crime groups.
What Is Liquidation? Liquidation in finance and economics is the process of bringing a business to an end and distributing its assets to claimants. It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when they are due. As company operations end, the remaining assets are used to
What Is Liquidation Margin? Buying securities on margin allows a trader to acquire more shares than can be purchased on a cash-only basis. If the stock price goes up, earnings are often higher because an investor holds more shares. However, if the stock price falls, traders may lose more than their initial investment. The liquidation
What Is a Liquidation Preference? A liquidation preference is a clause in a contract that dictates the payout order in case of a corporate liquidation. Typically, the company’s investors or preferred stockholders get their money back first, ahead of other kinds of stockholders or debtholders, in the event that the company must be liquidated. Liquidation
What Is Liquidation Value? Liquidation value is the net value of a company’s physical assets if it were to go out of business and the assets sold. The liquidation value is the value of company real estate, fixtures, equipment, and inventory. Intangible assets are excluded from a company’s liquidation value. Key Takeaways Liquidation value is
What Is a Liquid Certificate of Deposit (CD)? A liquid certificate of deposit is a type of CD that allows you to make withdrawals without incurring a penalty. The funds in the account are accessible throughout the lifetime of the product—unlike most traditional CDs, which apply a hefty penalty fee for withdrawing early, reducing the interest earned
What Is Liquidity? Liquidity refers to the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price. The most liquid asset of all is cash itself. Key Takeaways Liquidity refers to the ease with which an asset, or security, can be converted into ready cash
What Is a Liquidity Crisis? A liquidity crisis is a financial situation characterized by a lack of cash or easily-convertible-to-cash assets on hand across many businesses or financial institutions simultaneously. In a liquidity crisis, liquidity problems at individual institutions lead to an acute increase in demand and decrease in supply of liquidity, and the resulting
