DISCOVER NEW PERSPECTIVES

Glossary of Financial Terms: L

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Liabilities, Total Liabilities

Total value of financial claims on a firm’s assets. Equals total assets minus net worth.

Limited Liability

Limitation of shareholders’ losses to the amount invested.

Limited Recourse

Line of Credit

Agreement by a bank that a company may borrow at any time up to an established limit.

Loan Agreement

A written contract between a lender and a borrower that sets out the rights and obligations of each party regarding a specified loan.

Loans with service charge

The Council of the Islamic Fiqh Academy established by the Organisation of Islamic Conference in its third session held in Amman, Jordan from 8 to 13 Safar 1407 H (11-16 October 1986), in response to a query from the Islamic Development Bank has resolved that it is permitted to charge a fee for loan related service offered by an Islamic Bank. However, this fee should be within actual expenditures and any fee in excess to actual service related expenses is forbidden because it is considered usurious. See Qard Hasan.

Loss Reserves

That portion of a fund’s earnings or permanent capital designated by the board of directors as a reserve against possible loan losses and, as such, unavailable for lending purposes.