What is Finance?

What is the difference between “finance” and “finances”?

How does capital differ from finance?

Is the money you possess your capital? Can capital take any form of material wealth (including movable property and real estate)?

Is money and capital the same thing? Which money is called capital?

What is money? Which forms can it take?

Task 9. a) Study the following words

SHARE vs. STOCK

WHICH WORD?

.

· Either shares (plural) or stock (uncountable) can be used to describe the amount of a company that a person owns or a company’s value on the stock exchange (основний капітал; акціонерний капітал; пакет акцій; фонди – частина сумарного акціонерного капіталу, що належить певній особі або групі осіб). In this sense shares is more common in BrE and stock – more common in AmE. · Share, NOT stock, is used when talking about a particular number of shares in both BrE and AmE (акція; частка; пай). · In BrE, the phrase stocks and shares (акції та облігації) means “bonds and shares”. This meaning of stock is also found in other phrases: a company’s loan stock; government stock. The AmE expression for “bonds and shares” is stocks and bonds.

b) Translate into Ukrainian paying special attention to the words in italics.

1. They invested their money in stocks and bonds.

2. The bank holds 60% of the company’s shares / stock.

3. The publisher’s stock rose to $25 a share.

4. They got a profit of $3.75 a share.

5. The company boasts 1.2 billion shares.

Task 10. Practice reading the following words.

1. although[O: l `ðəu] / [O:l`ðou] 2. to borrow[`bOrəu] / [`bO:rou] 3. consideration[kənֽsıdə`reı∫^ən] 4. corporate[`kO:p ə rət] 5. device [dı`vaıs] 6. earnings[`ə:nıŋz] 7. enough[ı`nAf] 8. entity [`entəti] 9. expenses [ık`spen^tsız] 10. external[ık`stə:n^əl] 11. finance[`faınæn^ts] 81% / [faı`næn^ts] 19% 12. to finance[faı`næn^ts] 13. hence [hen^ts] 14. ingredient [ın`gri:diənt] 15. internal[ın`tə:n^əl] 16. interrelated[ֽıntərı`leıtəd] 17. inventories [`ınv ə nt ə riz]

18. loan [ləun] / [loun] 19. managerial[ֽmænə`Gıəriəl] 20. necessary[`nesəseri] 21. offer[`Ofə] / [`O:f^ər] 22. ongoing[`Onֽgəuıŋ] / [`α:nֽgouıŋ] 23. primary [`praım ə ri] 24. profits [`prOfıts] / [`prα:fəts] 25. property [`prOpəti] / [`prα:p^ərti] 26. proprietorship[prə`pra ı ətə∫ıp] 27. to receive[rı`si:v] 28. to rein­vest[ֽri:ın`vest] 29. retained[rı`teınd] 30. securing[sı`kjuərıŋ] 31. statesman [`steıtsmən] 32. sufficient[sə`fı∫^ənt] 33. truth[tru:θ] 34. utilizing[`ju:tılaızıŋ] 35. to view [vju:]

Task 11. Read the text.

(Part I)

“And statesmen as well ought to know these things; for a state is often as much in want of money and of such devices for obtaining it as a household, or even more so; hence some public men devote themselves entirely to finance. ”

(4^th Century BCE – Aristotle [`ærıstOt^əl] – Politics, Book I, Part XI,)

The field of finance refers to the concepts of time, money and risk and how they are interrelated. One of the key ingredients here is money.

Indeed, finance is often defined as money borrowed from a bank, received from investors, etc. in order to run a business, complete an activity or buy something. It is also viewed as the activity of managing money, especially by a commercial organization or a government.

Finance is used by individuals (personal finance), by governments (public finance), by businesses (corporate finance), as well as by a wide variety of organizations including schools and non-profit organizations.

Managerial or corporate finance is the task of providing the funds for a corporation’s activities. For small business, this is referred to as SME finance. It generally involves balancing risk and profitability, while attempting to maximize an entity’s wealth and the value of its stock. Finance, in this case, is securing and utilizing capital to start up, operate, and expand a company.

Most people go into business to make money – to make profits. But there is some truth to the old say­ing, “It takes money to make money.” That is why money is one of the primary considerations when going into business.

Without sufficient funds a company cannot begin opera­tions, meet day-to-day expenses, and expand. The money needed to start and continue operating a business is known as capital. Capital, in the financial sense, is the money that gives the business the power to buy goods to be used in the production of other goods or the offering of a service.

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.

Some money a business uses will come from internal funds; other money might come from external funds. Most of the money a business uses for its expenses comes from the sale of its products and services. Since these funds come from the operation of the business, they are described as internal funds.

The funds that remain after paying expenses are a firm’s profits or earnings. Although the owners could keep all of the profits for themselves, in most instances the business will rein­vest some of them in the business. These funds are called retained earnings and are considered internal funds.

About 60 to 80 percent of a firm’s financing comes from its internal sources. The rest must come from outside, or external, sources.

Even the most successful busi­nesses need to use external funds when they are starting or expanding. At times there is not enough money coming in to cover operating costs. When this happens, firms do three basic things:

· borrow;

· sell shares of stock (if it is a corporation) or seek additional capital from the owners (if it is а partnership or proprietorship);

· reduce spending.

Vocabulary notes:

1. statesman [`steıtsmən] – державний діяч;

2. device [dı`vaıs] – пристрій; механізм, прилад; винахід; вигадка;

3. household [`haushəuld] / [`haushould] – домашнє (хатнє) господарство; сім’я, родина; домочадці;

4. hence [hen^ts] – отже; звідси;

5. personal finance [`pə:s<sup>ə</sup>n ə l `faınæn^ts] – особисті фінанси;

6. public finance [`pAblık `faınæn^ts] – державні фінанси; державний бюджет;

7. corporate finance [`kO:p ə rət `faınæn^ts] – корпоративні фінанси; фінанси корпорації;

8. managerial finance [ֽmænə`Gıəriəl `faınæn^ts] – управлінські фінанси;

9. funds [fAndz] – кошти; суми; фонди;

10. profitability [ֽprOfıtə`bıləti] – прибутковість; рентабельність; доходність;

11. entity [`entəti] – суб’єкт; юридична особа; економічний об’єкт, господарський підрозділ;

12. value of stock [`vælju: əv `stOk] – ціна акції;

13. securing (of capital) [sı`kjuərıŋ] – гарантування, забезпечення;

14. utilizing (of capital) [`ju:tılaızıŋ] – використання, вживання, витрачання;

15. to start up (a company) – заснувати;

16. consideration [kənֽsıdə`reı∫^ən] – міркування; підстава;

17. sufficient [sə`fı∫^ənt] – достатній (for); у достатній кількості;

18. to meet (expenses) – покривати / оплачувати витрати;

19. day-to-day expenses [ık`spen^tsız] – повсякденні витрати;

20. to expand [ık`spænd] – розвивати(ся); поширювати(ся); розширяти(ся);

21. inventories [`ınv ə nt ə riz] – матеріальні цінності; товарно-матеріальні запаси; запаси, матеріально-виробничі запаси;

22. equipment [ı`kwıpmənt] – устаткування; апаратура; приладдя;

23. property [`prOpəti] / [`prα:p^ərti] – власність, майно; господарство;

24. internal funds [ın`tə:n<sup>ə</sup>l `fAndz] – внутрішні фонди (засоби, ресурси);

25. external funds [ık`stə:n<sup>ə</sup>l `fAndz] – зовнішні ресурси (фонди, засоби);

26. operation (of the business) [ֽOpə`reı∫<sup>ə</sup>n] / [ֽα:pə`reı∫^ən] – управління підприємством; функціонування підприємства;

27. profits [`prOfıts] / [`prα:fəts] – прибуток, дохід; нажива;

28. earnings [`ə:nıŋz] – заробіток; дохід, прибуток; виручка; надходження;

29. retained earnings [rı`teınd `ə:nıŋz] – нерозподілений прибуток; нерозподілена виручка; реінвестований прибуток;

30. internal sources [ın`tə:n<sup>ə</sup>l `sO:sız] – внутрішні джерела;

31. outside / external sources [ık`stə:n<sup>ə</sup>l `sO:sız] – зовнішні джерела;

32. operating costs – поточні витрати; експлуатаційні витрати;

33. to borrow [`bOrəu] / [`bO:rou] – позичати (у когось – of, from); запозичати;

34. shares of stock – частка (пай) у капіталі; пай акціонерного капіталу; акція;

35. to seek [si:k] – шукати, розшукувати; намагатися; прагнути.

Task 12. Complete the sentences with the most appropriate items.

1. Governments are in need of money …

A. much less than households;

B. twice as much as households;

C. not less than households;

2. As it follows from the text the field of finance refers to the concepts of …

A. time, money, risk;

B. space, danger, scarcity;

C. profits, poverty, uncertainty;

3. The money needed to start and continue operating a business is known as …

A. debt;

B. profit

C. capital;

4. The funds that remain after paying expenses are a firm’s …

A. profits or earnings;

B. shares of stock;

C. retained funds;

5. About 60 to 80 percent of a firm’s financing comes from …

A. outside sources;

B. retained earnings;

C. its internal sources;

Task 13. Agree or disagree with the following statements.

1. Finance is the primary concern of statesmen alone.

2. Some public men devote themselves entirely to finance.

3. Finance is the field where the concepts of time, money and risk are interrelated.

4. Finance is not only money itself but also the process of managing it.

5. There are various areas of finance.

6. Finance is not used by non-profit organizations.

7. Corporate finance is securing and utilizing capital for all phases of business operation.

8. It takes money to make money.

9. A new business needs capital not only for ongoing expenses but also for purchasing necessary assets.

10. Most of the money a business uses for its expenses comes from external sources.

11. Money that comes from the operation of a business is described as internal funds.

12. Most business owners keep all of the profits for themselves.

13. Retained earnings are viewed as internal funds.

14. Successful busi­nesses do not need to use external funds to cover operating costs.

15. Reducing spending is the only thing a firm can do to obtain additional financing.

Task 14. Match items in column A with their synonyms in column B.

A	B
1.statesmen	a)to run a company;
2.commercial organization	b)to earn money;
3.corporate finance	c)operating costs;
4.profits	d)spending;
5.obtaining	e)to secure;
6.to make money	f)activities;
7.to operate a company	g)receiving;
8.to provide	h)earnings;
9.to meet expenses	i)to cover costs;
10.operations	j)managerial finance;
11.expenses	k)business entity;
12.ongoing expenses	l)public men;

Task 15. Find in the text “What is Finance?” (Part I) (Task 11) the words opposite in meaning to the following:

1.non-profit organization;	3.lend;	5.to minimize;	7.to reduce;	9.external funds;
2.utilize (the funds);	4.selling;	6.unnecessary;	8.expenses;	10.insufficient.

Task 16. Find in the text “What is Finance?” (Part I) (Task 11) the words (word-combinations) similar in meaning to the following:

1.to establish a company;	7. area;	12.to look for;
2.to perform (an activity);	8.idea;	13.politician;
3.considered to be;	9.fully;	14.in need of;
4.a wide range of;	10.to try;	15.buying;
5.profit-making;	11.using;	16.major.

Task 17. a) Match the terms in column A with their definitions in column B:

A

B

1. asset 2. inventory 3. household 4. retained earnings

a)a thing of value that a person or a company owns, such as money or property or the right to receive payment of a debt; b)all the people living together in a single house or flat, considered as a unit; connected with looking after a house or flat and the people living in it; c) (especially AmE) all the goods owned by a business, including raw materials, parts, work not yet finished and finished products; complete list of something, especially of all the goods and property owned by a person, a company, an organization, etc.; d)the part of the profit made by a company after tax has been paid that is invested in the company rather than being paid to shareholders as dividends;

b) Translate into Ukrainian paying special attention to the words in italics.

1. The group has total assets of 1.2 billion. 2. The vehicle is recorded as an asset in the company accounts. 3. Foreign companies were prevented from buying local media assets (= media businesses). 4. Our staff are our most valuable asset. 5. This report is based on a survey of around 5 000 households. 6. How much does the average household spend on food each week? 7. There has been a sharp decrease in household debt. 8. The company has no factories, no inventory, no delivery trucks and no sales force. 9. The software can improve inventory management and cash flow. 10. There is a drive to cut costs and reduce inventory levels in manufacturing. 11. She keeps a full inventory of company assets and updates it every six months. 12. They made (took) an inventory of all the goods in the shop. 13. Retained earnings are profits earned by a company but not distributed as dividends. 14. The vast majority of capital spending by companies is financed from retained earnings.

Task 18. “Odd man out.” In each line cross out a word (word combination) that in its meaning differs from the others. Explain your choice.

1. individuals – state – personal finance;

2. government – public finance – businesses;

3. corporation – small business – managerial finance;

4. external funds – retained earnings – internal funds;

5. statesmen – commercial organization – government;

6. households – corporate finance – commercial organizations;

Task 19. a) Fill in the blanks with the most appropriate terms from the box.

charge	credit	to take out
means	outgo	credit card
wallet	debt	insolvency
issued	bills	collateral

Our modern society is based on mass consumption of goods and services of all kinds, and there are so many attractive things to buy. Little wonder, many families today live beyond their (1) _____.

It’s so easy (2) _____ a loan at the bank. Almost any property of value will serve as (3) _____. Then there is the (4) _____. That is the little plastic identification plate that you carry in your (5) _____. Credit cards are (6) _____ by banks, travel agencies, and credit associations of all kinds. When paying for a meal in a restaurant or buying something in a store, you merely produce your card and say, “ (7) _____ it!”

Of course you have to pay the (8) _____ eventually, but the availabili­ty of so much easy (9) _____ does make it simple to get over your head in (10) _____. Financial planning – keeping an account of income and (11) _____ – can help most families avoid the headaches of even temporary (12) _____.

b) Think and answer.

1. What makes many people today live beyond their means?

2. Is it easy to take out a loan at the bank these days?

3. How can the credit card – the little plastic identification plate that you carry in your wallet – facilitate payments for goods and services?

4. What should you do not to get over your head in debt?

5. Apart from sound financial planning what else can help families to avoid even temporary insolvency?

Task 20. a) Study the following words.

Income	Earnings	Revenue
прибуток;	прибуток; прибутки;	прибуток;
дохід;	дохід;	дохід; дохідні статті;
надходження;	надходження;	надходження;
заробіток;	заробіток; зароблені гроші;	виручка;
	виручка;	річні державні доходи (в бюджеті);
	чистий прибуток (після сплати податків);	департамент податків і зборів, податкове управління;

These words all describe money that is earned.

· Income [`ınkAm] is used to describe money earned by a person, an organization or a country, especially on a regular basis. It is usually used in the singular or as an uncountable noun: an income of $10,000 a year; a drop of income.

In the plural it refers only to money earned by individuals: The research shows that families on low incomes are struggling with debts.

· Earnings [`ə:nıŋz] is a plural noun and is used mainly in the context of calculating or reporting amounts that are earned by people or businesses: Full-year earnings rose by 15%. You must declare all earnings to the tax office. It is also used to describe money that a country earns from exporting goods: export earnings.

A person’s earnings are money that they have earned for doing a job. They do not include unearned income which the person did nothing to earn, such as interest on a savings account at a bank. Earnings are whatever somebody manages to earn and may vary from month to month or year to year.

· Revenue [U] or revenues [plural] [`revənju:] are used about money earned by a business: A product generates revenue for the business. Over half the company’s revenues are in dollars.

· Income [U] or revenue [U or plural], not earnings, are used when describing the way in which money is earned: fee/investment/sales income (= money earned from fees/investment/sales): licence/sales/tax revenues.

b) Translate into Ukrainian paying special attention to the words in italics.

1. Many families find it extremely difficult to live within their income? 2. Not surprisingly they live beyond their income. 3. He has a nice home and an adequate income. 4. Figures showed an overall increase in income this year. 5. Many families on low incomes will be unable to afford to buy their own home. 6. To cover its costs, the company will need an annual income of ₤15 million. 7. Over a third of their income comes from comedy videos. 8. Average weekly earnings rose by 1.5% in July. 9. She has earnings of $60 000 per year. 10. Germany’s earnings from esports rose by 2%. 11. The company has reduced its 2011 earnings forecast. 12. He was satisfied with his earnings as an accountant. 13. We research earnings differentials (difference in earnings, earnings difference) between men and women. 14. What are your weekly earnings? 15. Traders have lost £10,000 in revenue since the traffic scheme was implemented. 16. One study said the government would gain about $12 billion in tax revenues over five years. 17. Revenue from local advertisers fell by 6%. 18. They reported a three per cent increase in advertising revenue for the first half of the year. 19. New products account for 40% of our total revenue. 20. Poor economic growth will also hurt tax revenue.

Task 21. Translate into English.

1. Держава, не менше, ніж індивідуальні домогосподарства, потребує гроші та засоби для їхнього отримання. 2. Час, гроші та ризик є взаємозв’язаними поняттями, якими оперують у сфері фінансів. 3. Фінанси – це не тільки гроші, але й процес управління ними, особливо комерційними організаціями та урядом. 4. Існують різні галузі фінансів в залежності від того, хто їх використовує – окремі особи, комерційні організації чи держава. 5. Фінанси поділяються на особисті, державні, корпоративні. 6. Управлінські фінанси визначаються як функція забезпечення коштів для функціонування корпорації. 7. Фінанси корпорації включають у себе балансування ризику та прибутковості у спробах максимізувати прибутки організації. 8. Більшість людей йде в бізнес, щоб заробити гроші. 9. Щоб заробити гроші, потрібні гроші. 10. Без достатніх коштів компанія не може розпочати свою діяльність, покривати щоденні витрати і розширюватися. 11. Капітал – це гроші, які необхідні, щоб розпочати і продовжувати діяльність організації. 12. Новостворене підприємство потребує капітал не лише для поточних витрат, але й для придбання необхідних активів. 13. Придбання товарно-матеріальних запасів, обладнання, будівель є інвестиціями капіталу в новий бізнес. 14. Більша частина коштів, які використовує компанія, надходить від продажу її товарів і послуг. 15. Кошти, що надходять від діяльності організації, називаються внутрішніми. 16. Фонди, які залишаються після сплати всіх витрат, є прибутком або заробітком фірми.

17. У більшості випадків власники бізнесу реінвестують частину своїх прибутків у діяльність фірми. 18. Реінвестований прибуток вважається внутрішнім капіталом. 19. Десь 60-80 відсотків фінансування підприємств надходить з їхніх внутрішніх джерел. 20. Навіть найбільш успішні підприємства потребують використання зовнішніх джерел, особливо для розширення. 21. Коли недостатньо коштів для покриття експлуатаційних витрат, компанії 1) позичають гроші; 2) продають акції компанії або вишукують додаткові фонди у своїх власників; 3) скорочують витрати.

Task 22. Answer the following questions.

1. What concepts does the field of finance refer to?

2. How is finance often defined?

3. What is the activity of managing money known as?

4. Who is finance used by?

5. What task does managerial finance perform?

6. What is known as SME finance? What does it involve?

7. Why is money one of the primary considerations when going into business?

8. What money is known as capital? What power does capital give the business?

9. Why does a new business need capital?

10. What percentage of a firm’s financing come from internal sources?

11. What are other possible sources of business funds?

12. What funds are known as retained earnings?

13. Do business owners generally keep all of the profits for themselves? Why?

14. Do successful businesses need to use external funds? Why?

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