Face value нарицательная стоимость
Rights issue выпуск акций для размещения среди акционеров
Inflow (out flow) приток (отлив, отток)
Receipts денежные поступления
Expense (expenses) расходы
Syn. expenditure
Capitalization issue капитализационный выпуск, капитализационная
Эмиссия (выпуск ценных бумаг, предназначенных
Для капитализации резервов компании: на сумму
Резервов выпускаются акции, которые затем
Бесплатно размещаются среди текущих акционеров)
Answer to the questions:
- What is an equity capital?
- What is a dividend?
- What can a shareholder do with their shares?
- How can the capital raise more capital?
- Where can a business find a capital if there are serious problem with financing?
Complete the sentences according to the text:
- If the company is doing badly and the shareholders sell their shares they get…
- Rights issue is…
- Capitalization issue is …
- If there is a regular inflow of receipts from sales and regular outflow of payment for expenses …
CORPORATE FINANCE
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 as 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 by 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 on bonds. They are also negotiable. But the interest has to be paid out 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 that 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 on her items. It helps to determine if the financial 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.
Notes to the text:
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Equity funding акционерный способ образования денежного фонда
Debt funding образования денежного фонды с помощью займа
Negotiable оборотный, могущий быть купленным, проданным
Net assets стоимость имущества за вычетом обязательств
Bond долговое обязательство, облигация
A note зд. долговая расписка
To run a corporation руководить корпорацией
Exercise. Complete the following sentences according to the text.
- Corporations need financing for …
- Equity funding is …
- When a share a negotiable it means …
- The value of share depends on …
- Debt funding is …
- Interest on bond has to be paid out …
- The out flow of capital is formed …
- The inflow of capital is formed …
- Corporations get a profit when …
- … helps to determine if the financial management has been profitable.
WHY FINANCE?
One of the primary considerations when going into business is money. Without sufficient funds a company cannot begin operations. The money needed to start and continue operating a business is known to be a capital. A new business needs capital not only for ongoing expenses but also for purchasing necessary assets. These assets – inventories, equipment, buildings and property – represent an investment of capital in the new business.
How this new company obtains and uses money will, in large measure, determine its success. The process of managing this acquired capital is known as financial management. In general, finance is securing and utilizing capital to start up, operate, and expand a company.
To start up or begin business, a company needs funds to purchase essential assets, support research and development, and buy materials for production. Capital is also needed for salaries, credit extension to customers, advertising, insurance, and many other day-to-day operations. In addition, financing is essential for growth and expansion of a company. Because of competition in the market, capital needs to be invested in developing new product line and production techniques and in acquiring assets for future expansion.
In financing business operations and expansion, a business uses both short-term and long-term capital. A company, much like an individual, utilizes short-term capital to pay for items that last a relatively short period of time. An individual uses credit cards or charge accounts for items such as clothing or food, while a company seeks short-term financing for salaries and office expenses. On the other hand, an individual uses long-term capital such as a bank loan to pay for a home or car – goods that will last for a long time. Similarly, a company seeks long term financing to pay for new assets that are expected to last many years.
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When a company obtains capital from external sources, the financing can be either on a short-term or a long-term arrangement. Generally, short-term financing can be repaid in less than one year, while long-term financing can be repaid over a longer period of time.
Finance involves the securing of funds for all phases of business operations. In obtaining and using this capital, the decisions being made by managers affect the overall financial success of a company.
I. Ответьте на следующие вопросы к тексту:
- Why does a new business need a capital?
- What determines a success of a business?
- What is a financial management?
- What is finance?
- Why is it necessary to invest in developing new product lines and production technique?
- What is the difference between short-term and long-term capital?
- Where can a company obtain the capital?
- What affect the overall success of the business?
Exercise. Determine which of the following statements are true and which are false. Correct those statements which are false by rewriting them. Translate all the sentences.
- Long-term financing is used by a company to purchase new equipment and to construct additional facilities.
- A new business only needs capital to meet day—to-day expenses.
- In financing business operation, a company relies almost entirely on short-term financing.
- Long-term financing and short-term financing may be acquired from outside sources.
- How well a company manages its finances affects the overall success of the business venture.
The Balance Sheet
Financial statements are the final product of the accounting process. They provide information on the financial condition of a company. The balance sheet, one type of financial statement, provides a summary of what a company owns and what it owes on one particular day.
Assets represent everything of value that is owned by a business, such as property, equipment and accounts receivable. On the other hand, liabilities are the debts owed by a company – for example, to suppliers and banks. If liabilities are subtracted from assets (assets – liabilities), the amount remaining is the owners’ share of a business. This is known as owners’ or stockholders’ equity.
One key to understanding the accounting transactions of a business is to understand the relationship of its assets, liabilities, and owners’ equity. This is often represented by the fundamental accounting equation: assets equal liabilities plus owner’s equity.
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Assets + Liabilities + Owners’ Equity
These three factors are expressed in monetary terms and therefore are limited to items that can be given a monetary value. The accounting equation always remains in balance; in other words, one side must equal the other.
The balance sheet expands the accounting equation by providing more information about the assets, liabilities, and owner’s equity of a company at a specific time (for example, on December 31, 2005). It is made up of two parts. The first part lists the company assets, and the second part details liabilities and owners’ equity. Assets are divided into current and fixed assets. Cash, accounts receivable, and inventories are all current assets. Property, buildings, and equipment make up the fixed assets of a company. The liabilities section of the balance sheet is often divided into current liabilities (such as accounts payable and income tax payable) and long-term liabilities (such as bonds and long-term notes).
The balance sheet provides a financial picture of a company on a particular date, and for this reason it is useful in two important areas. Internally, the balance sheet provides managers with financial information for company decision-making. Externally, it gives potential investors data for evaluation of the company’s financial position.
Notes to the text: