Economics And The Legal Environment Of Business Finance Essay

As we are discoursing the macroeconomic theory of the unfastened economic system, it is of import to look at the single authorities ‘s macroeconomic policies, which are pecuniary and financial policy. In the United States, the pecuniary policy that is put in topographic point, affects an organisation ‘s economic and fiscal determinations, such as loans and purchases. This macroeconomic policy influences the operations of the organisation ‘s economic activity ( Business Financial Systems, 2009 ) .

Macroeconomic factors that influence the operations of the company

This paper is written for XYZ Construction, Inc, as the organisation passages from being in private owned to public ownership with their IPO in a few months. In order to adequately discourse the indispensable economic factors for XYZ horizontal building company, the two macroeconomic policies have to be defined:

Monetary policy – is the ordinance of the money supply and involvement rates by the United States Federal Reserve for the intent of commanding rising prices and stabilising the currency ( HayatA & A ; A Mishra, A 2010 ) .

Fiscal policy – this is the ordinance by the authorities to that affect revenue enhancement rates, involvement rates and disbursement to command the economic system. Like the pecuniary policy, it uses to stabilise the economic system ( HayatA & A ; A Mishra, A 2010 ) .

For XYZ direction to hold a full apprehension of the macroeconomic of unfastened economic system, it important that we mention the market for loanable financess and the market for foreign exchange in the analysis. In the market for loanable financess, the involvement rate adjusts to equilibrate supply for loanable financess from national economy and demand for loanable financess from domestic investing and net capital escape ( Business Financial Systems, 2009 ) . This is represented by the undermentioned calculation:

S = I + NCO

S represents Salvaging = Domestic investing + Net capital escape

Since XYZ purpose is to travel planetary, it is hence of import explained foreign exchange in my treatment. In the market for foreign exchange, the existent exchange rate adjusts to equilibrate the supply of dollars ( for net capital escape ) and the demand for dollars ( for net exports ) . Net capital escape is the variable that connects the two markets ( Business Financial Systems, 2009 ) . This is computed in the followers:


Net capital outflow = Net exports

The calculation shows that the instability between the purchase and sale of capital assets abroad ( NCO ) equals the instability between exports and imports of goods and services ( NX ) .

The supply and demand in the foreign exchange market determines the existent involvement exchange rate and in an unfastened economic system ( NX=NCO ) , it allowed for trade and adoption and loaning from the planetary markets. In some instances, a trade limitation can be imposed to increase the net exports and increases the demand for dollars in the market for foreign exchange. This will ensue in the dollar appreciating in value, doing domestic goods more expensive relation to foreign goods and this addition will equilibrate the net exports ( Bergstrand, 1992 ) .

Microeconomic considerations relative to the company

As the XYZ Construction, Inc. , passages from being in private owned to public ownership with their IPO in a few months, it is of import to discourse the planetary concern market and the importance of client keeping and market economic systems. To foster the treatment, microeconomic has to be defined. Microeconomicss is the survey of how single houses or consumers do and/or should do economic determinations taking into history such things as: their ends, inducements, aims ; their picks, options, jobs ; restraints such as inputs, resources, money, clip, engineering, competition, supply & A ; demand factors and All ( hard currency & A ; noncash ) incremental or fringy benefits and costs ( Breser-Pereira, 2009 ) .

States such as the United States uses microeconomic policies to aim cost rising prices force per unit areas which can non be contained efficaciously by utilizing macroeconomic steps. The organisation ( XYZ ) has to understand that microeconomics is about how supply and demand interacts in markets. At this degree, engagement in planetary concern can assist XYZ to accomplish economic systems of graduated table that can non be achieved in domestic markets ( Breser-Pereira, 2009 ) .

Legal considerations relative to equipment rentals and e-contracts

A contract is a binding understanding made between two competent parties that can be written, verbal or implied. To measure up as a contract, a set of promises must be based on a voluntary understanding, which is made up of an offer and an credence of that offer ( Miller, Barnes, Bowers, & A ; Langvardt, 2007 ) .A The intent of a contract is to make an understanding that can be supported by the jurisprudence ( Miller, Barnes, Bowers, & A ; Langvardt, 2007 ) .A In today ‘s concern universe of promises and actions, contracts must be made in order to hold those promises lawfully adhering. The indispensable elements of a contract are: binding understanding, competent parties, signifier required by jurisprudence, legal in intent, consideration, and echt acquiescence ( Koff, 1994 ) .

Consideration must be present in a contract in order for the contract to be enforceable. As the XYZ Construction, Inc. , passages from being in private owned to public ownership with their IPO in a few months, it is of import for the organisation to understand the legal considerations relative to equipment rentals and e-contracts. Organizations are affected by Torahs and ordinances in all their concern activities, such as hiring and fire determinations, workplace safety, the fabrication and selling of merchandises, and concern funding ( Business Financial Systems, 2009, p.338 ) . For XYZ direction to hold good concern etiquette, their cognition of the Torahs and ordinances will be indispensable and good to the organisation ( Business Financial Systems, 2009 ) . This cognition of the Torahs and ordinances will assist the organisation to forestall legal differences.

The premise is that since XYZ is a building company, that equipment will be leased. The common jurisprudence regulation that a contract requires consideration besides applies to gross revenues and rental contracts ( Business Financial Systems, 2009, p. 379 ) . Compared with the common jurisprudence of contracts, the UCC topographic points more accent on purpose, if the parties intended to do a contract. Under the UCC, alterations to gross revenues and rental contracts require no consideration. Under the UCC, an organisation transportation of the right to possess and utilize goods for a period in exchange for payment ( Business Financial Systems, 2009, p.374 ) .

What is this UCC? Uniform Commercial Code is the jurisprudence that encourages commences ( Business Financial Systems, 2009, p.370 ) . The original intent of UCC was to do different minutess uniform throughout the 50 provinces of the United States, so concerns and people should non hold to worry about understanding the different Torahs regulating fiscal minutess as they conduct concern within the Continental U.S.A. This jurisprudence facilitates commercial minutess by doing the Torahs regulating gross revenues and rental contracts unvarying, clearer, simpler, and more readily applicable to the legion troubles that can originate during such minutess ( Business Financial Systems, 2009, p. 370 ) . In order words, it is the streamline procedures of managing fiscal minutess.


These are contracts entered into electronically. For XYZ to make concern via the cyberspace the organisation has to protect itself against contract differences and legal liability by making offers that clearly spell out the footings that will regulate the minutess if the offers are accepted or clearly understands the offers made to them ( Business Financial Systems, 2009, p.396 ) . The credence can be done in several ways, such as the e-signature, click-on understanding and browse-wrap footings ( Business Financial Systems, 2009, p.399 ) .

Employment and labour jurisprudence influences as the company grows

As the XYZ Construction, Inc. , passages from being in private owned to public ownership with their IPO in a few months, it is of import that the direction wage attending to employment and labour Torahs. XYZ direction ends are to increase the organisation ‘s net incomes through improved on the job conditions, wages, and benefits ( Business Financial Systems, 2009, p.409 ) .

This treatment will cover with certain Torahs and ordinances that will be good to the direction of XYZ Construction, Inc. The organisation must follow with Torahs and ordinances to guarantee that employee rights are protected ( Business Financial Systems, 2009, p. 409 ) . The undermentioned Torahs and ordinances are some that the organisation has to follow:

Employee Retirement Income Security Act ( ERISA ) – Prevents fraud and other maltreatments associated with private pension programs.

Amalgamate Omnibus Budget Reconciliation Act ( COBRA ) – Permits employees and their donees to go on their group wellness insurance after an employee ‘s employment has ended.

Family and Medical Leave Act ( FMLA ) – Guarantees workers up to twelve hebdomads of unpaid leave in a twelve-month period to go to to household and medical exigencies

Immigration Reform and Control Act ( IRCA ) – Brands it improper for employers to engage illegal immigrants. Employers are required to finish INS Form I-9 attesting legal U.S. citizenship or legal foreigner position of each employee.

Minimal Wage and Overtime Pay – Employers are required to pay covered ( non-exempt ) workers at least the minimal pay for their regular work hours. Overtime wage is besides mandated.

Worker Health and Safety

Under the common jurisprudence, employees injured on the occupation had to trust on civil wrong jurisprudence or contract jurisprudence theories in suits they brought against their employers ( Business Financial Systems, 2009, p.415 ) . Worker safety and wellness should be a primary concern to XYZ direction. The benefits of the usage safety and wellness system in the workplace are: it will do the decrease of work related hurts and unwellnesss ; will better morale and productiveness and cut down workers ‘ compensation costs, whereby doing the organisation profitable ( Business Financial Systems, 2009 ) .


In order for XYZ Construction, Inc. , to work decently in the domestic and planetary market, safety and wellness, economic, employment and labour Torahs forces must be clearly understood.