Answer the following questions:
1. Do you total the accounts at the end of the fiscal year?
2. What are your usual activities at the end of the fiscal year?
3. When do you prepare a financial statement?
5. Why should you have more assets than liabilities? Does the accounting
department work on taxes?
6. What is the difference between your gross salary and net salary?
7. Is the difference between gross salary and net salary big in this country?
What does this difference depend on?
Ex.3. Make up the dialogue about accounting:
a) between an experienced accountant and a university graduate;
b) an employer and an experienced accountant-applicant.
Ex.4. Translate from Russian into English:
1. Бухгалтерский учет представляет данные для кредиторов и
вкладчиков.
2. Они готовят отчет о доходах и балансовый отчет в конце
финансового года.
3. Мы определяем эффективность производства с помощью анализа
коэффициентов.
4. Недвижимость является собственностью корпораций.
5. Мы проверим актив и пассив и определим стоимость имущества за
вычетом обязательств.
6. Мы платим большие налоги.
7. Сколько ты получаешь без вычетов?
Grammar Exercises
Ex.1. Make the sentences negative:
Model: I worked as an accountant in a big corporation.
I didn't work as an accountant in a big corporation.
1. An accounting department reported on the effects of the transactions.
2. They studied carefully income statement and balance sheet.
3. We used ratio analysis to determine the firms operating efficiency.
4. The accountants checked the assets and liabilities.
5. The accounting department provided data for the management.
Ex.2. Put up for questions of different types to each sentence (general,
special, disjunctive, alternative):
Model: The accounting department regularly prepared the income
statement and balance sheet.
1. Did the accounting department regularly prepare the income
statement and balance sheet?
2. What did the accounting department regularly prepare?
3. The accounting department regularly prepared the income
statement and balance sheet, didn't it?
4. Did the accounting department prepare the income
statement or a financial statement?
1. The board of directors checked out assets, liabilities and net worth.
2. He worked as a controller of the company for two years.
3. The applicants sent their resumes and letters of interest.
4. He used to do books in a big company.
5. Some governmental corporations issued stock certificates.
LESSON 7
CORPORATE FINANCE
Text
Corporations need financing for the purchase of assets and the payment
of expenses. The corporations can issue shares in exchange for money or
property. Sometimes it is called equity funding. The holders of the shares form
the ownership of the company. Each share is represented by a stock certificate,
which is negotiable. It means that one can buy and sell it. The value of a share
is determined as the net assets divided by the total number of shares
outstanding. The value of the share also depends on the success of the
company. The greater the success, the more value the shares have.
A corporation can also get capital by borrowing. It is called debt
funding. If a corporation borrows money, they give notes or bonds. They are
also negotiable. But the interest has to be paid out no matter whether
business is profitable or not.
When running the corporation, management must consider both the
outflow and inflow of capital. The outflow is formed by the purchase of
inventory and supplies, payment of salaries. The inflow is formed by the sale
of goods and services. In the long run the inflow must be greater than the
outflow. It results in a profit. In addition, a company must deduct its costs,
expenses, losses on bad debts, interest on borrowed capital and other items.
It helps to determine if the finance management has been profitable. The
amount of risk involved is also an important factor. It determines the fund
raising and it shows if a particular corporation is a good investment.
purchase
payment of
expenses
property
equity funding
debt funding
holders of the
shares
stock certificate
negotiable
net assets
bond
note
interest
to run a
corporation
inflow
outflow
inventory
supplies
goods
fund raising
Active Vocabulary
покупка, приобретение
оплата расходов
собственность, имущество
акционерный (долевой) способ образования
денежного фонда предприятия
образование денежного фонда предприятия с
помощью займа
держатели акций
сертификат акций
оборотный, могущий быть переуступленным,
купленным, проданным
стоимость имущества за вычетом обязательств
долговое обязательство, облигация
зд. долговая расписка
доля, фиксированный процент
руководить корпорацией
приток, поступление (денег)
отток (денег)
материально-производственные запасы, инвентарь
зд. ресурсы
товары
финансирование, привлечение капитала
Comprehension Questions
1. Why do all corporations need financing?
2. What does equity funding mean?
3. What does debt funding mean?
4. How is the value of a share determined?
5. What activities produce an inflow and outflow of capital?
6. What can happen if an enterprise has a greater outflow of capital than an
inflow?
7. Why is the risk involved important in determining fund raising?
Vocabulary Practice
Choose the necessary word and put it in the sentence:
1.... funding is a financing formed by borrowing.
2. They have borrowed much money and they have to pay
a big....
3. Financing by shares is called... funding.
4. That is a very profitable deal, for that purpose we need
extra....
5. You can sell your shares and.... They are ….
6. The current assets of a company usually include cash
and....
7. As a result of this deal we'll have greater... than
outflow.
Dialogue
a. equity
b. negotiable
c. interest
d. inventory
e. funding
f. inflow
g. bond
h. debt
Mary: It' s so nice to see you, Frank. Sorry, I couldn't come to your office
today.
Frank: Never mind. Have a seat. Let's start by having some coffee.
Mary: So, Frank, I guess it might be right time for me to invest in that
computer company. As my stockbroker, what can you suggest?
Frank: I am sure they are doing extremely well and they would welcome
your investment.
Mary: But why do they need my investment if they are doing so well?
Frank: O.K. I think I should explain you a little about a corporate finance.
Mary: Go ahead. If it concerns my money I am always interested.
Frank: If a corporate enterprise wants to expand it needs financing.
Mary: You are right.
Frank: So, there are two basic types of financing: equity and debt.
Mary: What's the difference between them?
Frank: If the money is supplied by the owners of a business it is called equity
funding. And the use of money supplied by loans is called debt funding.
Mary: So as investor, what am I?
Frank: Well, as an investor you become a partial owner of a business and
receive equity. You get shares or certificates of common stock
which represent your portion of ownership.
Mary: You did right buying the stock for me. By the way, are there any
documents which show the financial state of the company?
Frank: Oh yes. You've just reminded me. I’ve brought a copy of the
company's Annual Report for you to look over. You should read it
very carefully. And if you have something to ask do it, please.
Mary: Thanks a lot, Frank. I will. Does this company pay dividends on its
stock?
Frank: Yes. In fact, I studied their Annual Report and I can tell that they
have good management. Their business is doing very well, the value
of their stock has been rising. It can be an excellent long-term
investment, I am sure.
Mary: But if I want to sell my shares very soon?
Frank: No problem. Undoubtedly you can make a profit on the sale. But it
seems to me you'll want to keep this company in your portfolio.
Mary: Thank you for your advice. You are wise as usual.
Frank: Well, my advice now is to study the company's Annual Report. You
need several days for that. Then we'll meet and talk again.
Active Vocabulary
a stockbroker
to concern smth
loan
partial owner
Annual Report
to pay dividends
long-term investment
to make a profit on sale
биржевой маклер
зд. касаться чего-либо
заем, ссуда
совладелец
годовой отчет
платить дивиденды
долгосрочный вклад
продать с выгодой, прибылью
Vocabulary Exercises
Ex.1. Make up a sentence according to the model:
Model: How should the company pay the expenses? (borrow from
the government) The company should pay the expenses by
borrowing from the government.
1. How can we form an equity funding? (issue shares)
2. How can a business sell more shares of stock? (offer a dividend)
3. How should we know about the financial state of the company? (look
over the Annual Report)
4. How should he invest his savings? (buy common stock)
5. How should they make people buy their bonds? (increase the interest)
6. How can this company make a profit? (raise investment capital)