Economy and Business Terms - Charlie, your teacher of English
though critics point to the theory's inability to explain stagflation in the United States during the
1970s.
Legally Binding: Common legal phrase indicating that an agreement has been consciously made,
and certain actions are now either required or prohibited. For example, a lease for an apartment is
legally binding, because upon signing the document, the lessor and the lessee are agreeing to a
number of conditions. The lessor typically agrees to provide the apartment in a certain condition for
a certain length of time, and the lessee typically agrees to pay an agreed upon rent and refrain from
certain destructive behaviors. The other requirement for an agreement or contract to be considered
legally binding is consideration - both parties must knowingly understand what they are agreeing to.
Laissez-Faire: It's a term describing an economic theory that promotes government nonintervention. Laissez-faire theory states that most government interventions make an economy less
efficient and hamper growth. According to this, government ought to restrict itself to safeguarding
the right to private property. In its extreme form, it is opposed to any law limiting economic activities
short of theft or extortion. Laissez-faire economists are philosophically opposed to minimum wages,
protectionism, antitrust laws, and most laws intended to benefit workers at the expense of
employers. Proponents of laissez-faire economics argue that it benefits employers and workers
alike. For example, a man may open a mechanic shop to make money for himself, but, in the
process of doing so, he may hire otherwise unemployed mechanics and service otherwise broken
cars, which then facilitates business for the rest of the community. If there were environmental or
wage restrictions on his business, however, he might not hire as many employees and may not start
the mechanic shop at all. Critics of the theory contend that its benefits are overstated and that a
laissez-faire structure without regulation lends itself to the creation of bubbles, which harms both
businesses and their employees.
Leasehold: It's an accounting term used to classify an asset on a company's balance sheet that is
leased. In order to be classified as a leased asset, the firm must enter into a lease agreement that is
an operating lease, and not a capital lease.
The reason capital leases are not included in the leasehold account is due to their accounting
treatment. Capital leases are classified as long-term assets with a matching long-term liability.
Examples of an operating lease, include a lease on a building, service vehicle or even heavy
equipment.
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. Recorded on the right side of the balance sheet, liabilities
include loans, accounts payable, mortgages, deferred revenues and accrued expenses.
Limited Liability: Limited liability is a type of liability that does not exceed the amount invested in a
partnership or limited liability company. The limited liability feature is one of the biggest advantages
of investing in publicly listed companies. While a shareholder can participate wholly in the growth of
a company, his or her liability is restricted to the amount of the investment in the company, even if it
subsequently goes bankrupt and has remaining debt obligations.

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