What is Finance? When a company obtains capital from external sources, the financing can be either on a short-term or a long-term arrangement

(Part II)

When a company obtains capital from external sources, the financing can be either on a short-term or a long-term arrangement. Long-term funds are provided by ownership equity and long-term credit, often in the form of bonds. The balance between these forms the company’s capital structure. Short-term funding or working capital is mostly provided by banks extending a line of credit.

A company, much like an individual, utilizes short-term capital to pay for items that last a relatively short period of time, e.g. for salaries and office expenses. On the other hand, a company seeks long-term financing to pay for new assets that are expected to last many years. Generally, short-term financing must be repaid in less than one year, while long-term financing can be repaid over a longer period of time.

Each company today has a finance manager or a financial department. There is currently a move towards converging and consolidating finance provisions into shared services within an organization. Rather than an organization having a number of separate finance departments performing the same tasks from different locations a more centralized version can be created.

In obtaining and using capital, the decisions made by managers affect the overall financial success of a company.

Thus, finance is one of the most important aspects of business management. Without proper financial planning a new enterprise is unlikely to be successful. Managing money (a liquid asset) is essential to ensure a secure future, both for the individual and an organization.

Financial management is duplicate with the financial function of the accounting profession. However, financial accounting is more concerned with the reporting of historical financial information, while the financial decision is directed toward the future of the firm.

Vocabulary notes:

1. (short-term / long-term) arrangement [ə`reın d ჳmənt] – домовленість, угода; заходи; плани; розпорядження; приготування, накреслення, плани;

2. ownership equity [`əunə∫ıp / `oun^ər∫ıp `ekwəti] – пайова (часткова) власність;

3. bond [bOnd] / [bα:nd] – облігація; борговий інструмент; боргове зобов’язання; pl облігації, бони;

4. capital structure [`kæpıt<sup>ə</sup>l `strAkt∫ə] / `strAkt∫^ər] – структура капіталу (компанії);

5. working capital [`kæpıt^əl] – оборотний капітал; обігові кошти;

6. to extend a line of credit – надавати (продовжувати) кредитну лінію;

7. to utilize capital [`ju:tılaız] / [`ju:t^əlaız] – використовувати (витрачати) капітал;

8. item [`aıtəm] – предмет; виріб, одиниця продукції; окрема одиниця;

9. to last – тривати; зберігатися; витримувати;

10. salary [`sæl ə ri] – платня, плата; оклад;

11. office expenses [`Ofıs / α:fəs ık`spen^tsız] – конторські (офісні) витрати; витрати на канцелярське приладдя (на утримання офісу) (входять до загальних і накладних витрат);

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

13. to repay [rı`peı] – винагороджувати; відшкодовувати; відплачувати; віддячувати; повертати борг; платити вдруге;

14. finance manager [`faınæn<sup>t</sup>s `mænıGə / `mænıG^ər] – фінансовий менеджер (керуючий), менеджер з фінансів, керуючий фінансами;

15. financial department [faı`næn<sup>t</sup>∫<sup>ə</sup>l dı`pα:tmənt] – фінансовий відділ;

16. a move (towards) [mu:v] – рух (у напрямку до);

17. to converge [kən`və:G] – зосереджувати в одній точці; зводити в одну точку;

18. to consolidatе [kən`sOlıdeıt] / [kən`sα:lıdeıt] – зміцнювати(ся), консолідувати; об’єднувати(ся), поєднувати; включати;

19. finance provisions [`faınæn<sup>t</sup>s prə`vıჳ^ənz] – фінансове забезпечення;

20. shared service [`∫eəd `sə:vıs] – колективне обслуговування;

21. liquid asset [`lıkıwd `æset] – ліквідні активи; ліквідні кошти (готівка або те, що може бути швидко переведено в готівку; наприклад, цінні папери);

22. to ensure [ın`∫O:] / [ın`∫u^ər] – забезпечувати, гарантувати, (по)ручатися; страхувати;

23. secure future [sı`kjuə `fju:t∫ə / [`fju:t∫^ər] – забезпечене (гарантоване, захищене) майбутнє;

24. duplicate [`dju:plıkeıt] – ідентичний; аналогічний; такий, що дублює;

25. accounting profession – бухгалтера; представники бухгалтерської професії.

Task 5. Agree or disagree with the following statements.

1. Traditionally organizations had a number of separate finance departments performing the same tasks from different locations.

2. Finance has nothing to do with business management.

3. Managing money is a major concern of organizations as well as individuals.

4. There is currently a trend for consolidating financial management and financial accounting services.

5. Financial management is mainly concerned with the reporting of historical financial information.

Task 6. Complete the sentences with the most appropriate items.

1. When a company obtains capital from external sources, the financing can be on …

A. a short-term arrangement;

B. a long-term arrangement;

C. either of them;

2. Long-term funds are NOT provided by …

A. ownership equity;

B. long-term credit;

C. working capital;

3. Short-term funding or working capital is mostly provided by …

A. banks;

B. individuals;

C. shareholders;

4. A company utilizes short-term capital to pay for …

A. salaries;

B. inventories;

C. office equipment;

5. Short-term financing must be repaid in less than one …

A. month;

B. week;

C. year;

Task 7. a) Pronounce the words below according to the given patterns.

backward [`bækwəd] / [`bækw^ərd] forward [`fO:wəd] / [`fO:rw^ərd] inward [`ınwəd] / [`ınw^ərd] outward [`autwəd] / [`autw^ərd]
BUT	toward [tə`wO:d]

b) Make the difference between the wollowing words.

· toward[`təuəd] / [tO:rd] adj – майбутній; прийдешній, наступний; · toward(s)[tə`wO:d(z)] prep – до; у напрямку до; стосовно, по відношенню до; для, зтим щоб;

Task 8. Which term from the box is being defined?

a line of credit	ownership equity
capital structure	financial accounting

· an amount of credit that a bank, company, etc. makes available to a person or a company for a particular period; an amount of credit extended to a borrower;

· the balance between the assets and liabilities of a company, the nature of its assets, and the composition of its borrowings;

· a financial term for the difference between a company’s assets and liabilities – that is, the value that accrues to the owners (sole proprietor, partners, or shareholders);

· reporting of the financial position and performance of a firm through financial statements issued to external users on a periodic basis.

Task 9. Verb, noun or adjective? Define which parts of speech are the words in italics.

1. Long-term funds are provided by ownership equity and long-term credit, often in the form of bonds.

2. The balance between these forms the company’s capital structure.

3. A company utilizes short-term capital to pay for items that last a relatively short period of time.

4. In obtaining and using capital, the decisions made by managers affect the overall financial success of a company.

5. The financial decision is directed toward the future of the firm.

6. There is currently a move towards converging and consolidating finance provisions into shared services within an organization.

7. Managing money (a liquid asset) is essential to ensure a secure future, both for the individual and an organization.

Task 10. Revise the word-building rules. Use the flexions in the box and the stems below to form new words.

re-	-ly	-ship
un-	-ful	-ment

1.pay;	3.likely;	5.current;	7.success;
2.most;	4.owner;	6.arrange;	8.relative.

Task 11. Match the words in column A with their antonyms in column B.

A	B
1.same 2.likely 3.balance 4.external 5.separate 6.to obtain 7.to provide 8.short-term	a)centralized; b)imbalance; c)long-term; d)to extend; e)unlikely; f)different; g)to utilize; h)internal;

Task 12. Find synonyms among the following words from the text “What is Finance?” (Part II) (Task 4).

1. To acquire; 2. (finance) preparation, (finance) planning; 3. aspect; 4. to assure, to guarantee; 5. salaries; 6. assured, certain; 7. to concentrate, to consolidate; 8. at present; nowadays; 9. common, mutual; 10. to converge; 11. correct; 12. currently; 13. to endure; 14. duplicate; 15. essential; 16. to ensure; 17. exact, identical, true; 18. external; 19. to last; 20. independent, discrete; 21. indispensable, necessary; 22. move; 23. to look for, to try; 24. outside; 25. (finance) provisions; 26. to obtain; 27. overall; 28. to provide; 29. point of view; 30. proper; 31. to seek; 32. remuneration, wage; 33. to supply; 34. secure;

35. to use; 36. separate; 37. shared; 38. total, universal, general; 39. trend; 40. to utilize.

Task. 13. Use the prepositions from the box in the following phrases. Refer to the text “What is Finance?” (Part II) (Task 4) to check your answers.

for	in ×2	between	with ×2	by ×2
	of ×6		into
over	on ×2	toward(s) ×2	from ×2	within

1. … the other hand; 2. … an organization; 3. to pay … new assets; 4. in the form … bonds; 5. a move … converging; 6. to extend a line … credit; 7. concerned … the reporting; 8. decisions made … managers; 9. … obtaining and using capital; 10. aspects … business management; 11. directed … the future … the firm;

12. to be repaid … less than one year; 13. a number … separate departments; 14. the balance … forms of financing; 15. duplicate … the financial function; 16. to obtain capital … external sources; 17. to perform tasks … different locations; 18. financing … a short-term arrangement; 19. to be repaid … a longer period … time; 20. funds are provided … ownership equity; 21. consolidating finance provisions … shared services;

Task 14. Use proper articles in the following phrases. Explain the use of the articles.

1. … number of separate finance departments performing … same tasks;

2. long-term funds are often provided in … form of bonds;

3. they affect … overall financial success of … company;

4. it is one of … most important aspects;

5. on … other hand;

Task 15. Fill in the blanks with the most appropriate terms from the box.

payment schedule	repaid	secured
internal finance	lender	floating
debt financing	asset	borrow
interest rate	loan	raising

The vast majority of small firms are now financed through (1) _____. However, when people think about (2) _____ money their first port of call is generally the bank. In fact, approximately between 60% and 70% of small businesses call on their local bank to (3) _____ a sum of money to see them to the next stage of growth or to get the company up and running. This is the most typical form of (4) _____. The loan typically has to be (5) _____ at an agreed interest rate and within a specified period of time. The (6) _____ can either be (7) _____ or fixed rate.

Typically the (8) _____ is secured against an asset. This means that if the business fails to repay the loan, the (9) _____ has the right to claim the asset. An (10) _____ could be a house or other premises or some equipment owned by the business. As the loan is (11) _____, the cost is usually less than other more risky types of borrowing. However, a bank loan also locks companies into a (12) _____ that may cause problems for small businesses.

Task 16. Translate into English.

1. Фінансування із зовнішніх джерел може бути на короткотермінових і на довготермінових умовах (засадах, домовленостях). 2. Довготермінові кошти часто надаються у формі облігацій. 3. Пайова власність і довготермінові кредити використовуються для довгострокового фінансування. 4. Баланс між пайовою власністю та довгостроковими кредитами формують структуру капіталу компанії. 5. Банки часто надають кредитну лінію компаніям, які потребують обігових коштів. 6. Компанії використовують короткостроковий капітал дуже подібно до того, як це роблять фізичні особи. 7. Короткотерміновий капітал компаній використовується на утримання офісу та заробітну плату. 8. Компанії вдаються до довгострокового фінансування, щоб заплатити за нові активи, які існуватимуть багато років. 9. Найчастіше короткострокове фінансування повинно бути відшкодоване за період до одного року. 10. У кожній компанії сьогодні є фінансовий відділ, або ж принаймні фінансовий менеджер. 11. Сьогодні спостерігається тенденція зосереджувати й консолідувати фінансове забезпечення в межах організації у колективне обслуговування. Це дозволяє перейти від низки фінансових відділів, які виконують одні й ті ж самі функції, до більш централізованої моделі. 12. Фінанси є одним із важливих аспектів управління компанією. 13. Рішення, які приймають менеджери в питаннях отримання й використання капіталу, впливають на загальний фінансовий успіх компанії. 14. За відсутності належного фінансового планування малоймовірно, що нове підприємство стане успішним. 15. Управління коштами є суттєвим для гарантування безпечного майбутнього як фізичних осіб, так і організацій. 16. Фінансовий менеджмент є аналогічним фінансовій функції бухгалтерів. 17. Фінансовий облік більшою мірою зосереджений на звітуванні фінансової інформації про діяльність компанії у попередній період. 18. Фінансові рішення спрямовані у майбутнє компанії.

Task 17. Answer the questions.

1. How can long-term funds be acquired?

2. What is the company’s capital structure formed by?

3. What are the main sources of working capital?

4. How do companies generally utilize their short-term capital?

5. Why does a company seek long-term financing?

6. What is the repayment period by short-term / long-term financing?

7. Who is in charge of financial operations in a company?

8. What is a current trend in finance provisions of an organization?

9. How does finance relate to business management?

10. How do functions of financial accounting differ from those of financial management?

Task 18. Say what you know about …

1. Long-term capital: its sources, repayment period, common ways of utilizing.

2. Short-term caputal: its sources, repayment period, common ways of utilizing.

3. Modern trends in arranging financial provisions within a company.

4. The impact of managerial decisions on the state of financial affairs in a company.

5. Financial management vs. financial acounting.

Task 19. Comment on the following sayings.

1. “A budget is just a method of worrying before you spend money, as well as afterward.”

2. “A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.” (Robert Frost, 1874-1963)

3. “Every day I get up and look through the Forbes list of the richest people in America. If I’m not there, I go to work.” (Robert Orben)

4. “The highest use of capital is not to make more money, but to make money do more for the betterment of life.” (Henry Ford)

5. “We can loan you enough money to get you completely out of debt.”
(Sign on bank)

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