Liabilities пасив балансу, борги,

Assets актив

Договору

Default невиплата, невиконання

To have voting rights мати право голосу

The principal запозичена сума

Long-term loans довгострокова позика

Short-term loans короткострокова позика

To wear out зношуватися, спрацьовуватися

Unit 24. Financing Business

Objectives

Marketing

Market

Business Plan Checklist

1. Details of the business:

Name of business

Types of business (limited company, partnership and etc.)

2. Product/service

Description

Describe toy market.

Who are your customers?

Is your market growing, static, or decline?

Who are the main competitors?

What are the advantages of your product or service over the competition?

What sort of marketing or advertisement do you intend to do?

5. Premises/ Machinery/ vehicles

Where do you intend to locate the business

What sort and size of premises will you need?

What machinery/vehicle do you require?

What objectives do you have for the business?

Exercise 5. Work in pairs. Be prepared a report about an interview with the owner of a local business. Plan carefully in advance your interview. Ask the business owner questions such as:

1. What service does he/she sell?

2. What risks do you take in operating your own business?

3. What method do you use to compete with similar business for customers?

4. What training and experience should a person have before attempting to

start his or her own business?

5. How much capital did he/she put in business to start it?

6. What are his/her fixed and variable costs?

7. What price does he/she charge?

8. How many hours' work does cover his/her costs?

9. How much profit does he/she make?

Active Vocabulary

internal funds внутрішні борги

external funds зовнішні борги

to meet one’s expenses покривати чиїсь витрати

depreciation знецінення, зниження цін

to cover the cost of smth. покрити вартість чого-небудь

common stock спільні акції

preferred stock привілейовані акції

security exchange фондова біржа

mutual funds спільні фонди

prospectus проспект емісії

balance sheet балансовий звіт

income statement звіт про прибуток

заборгованість

net worth вартість майна за винятком

зобов’язань

Most money used by business comes from the sale of its products and services. Since these funds come from within the firm they are described as internal funds. The rest must come from outside, or external funds.

As a firm sells its products or services, it receives money, which it uses to meet its expenses. One of these expenses, depreciation, represents the cost of replacing assets (like tools, machinery, and buildings)that wear out. Typically, business use internalfunds to cover the cost ofdepreciation.

Business loans are generally classified as either short-term or long-term loans. Forshort-term loans, the principal (the amount borrowed) must be repaired within one year. Long-term loans mature (come due) in more than a year.

Short-term loans are used to finance the everyday costs of doing business, such as payrolls, raw material and merchandise. Long-term loans are more likely to be used to purchase equipment, buildings and other high cost items.

All corporations issue common stock; some, however, also issue preferred stock. Unlike common stockholders, preferred stockholders usually do not have voting rights.

A security exchange is a market where brokers meet to buy and sell stock and bonds for their customers.

The largest of the securities exchanges are the New York Stock Exchange and the American Stock Exchange.

There is some risk of default (failure to pay interest or principal) on the bonds ofeven the strongest corporations. For this reason many people invest in mutual funds. mutual funds are corporations that sell stock and use the proceeds to invest or speculate in the security markets.

Two of the most important pieces of information contained in every prospectus and annual report are the balance sheet and the income statement. The balance sheetsummarizes a corporation’s assets, what it owns; its liabilities; what it owes; and its net worth, the difference between the two sums at a given time. The income statement summarizes a firm’s revenues, costs, and difference between the two (profit and loss) over a period of time.

Exercise 1. Give the English equivalents:

покрити вартість чого-небудь, пасив (балансу), балансовий звіт, довгострокова позика, невиплата, запозичена сума, фондова біржа, привілейовані акції, актив (балансу), внутрішні борги, мати право голосу.

Exercise 2. Write an appropriate word-phrase into sentence:

“investors”, capital, money, net worth, customers, bonds, a security exchange, long-term financing;

1. … is the difference between assets and liabilities.

2. Similarly, firms need … to begin operation, to meet their day-to-day expenses and to expand.

3. … charge purchases to their accounts for payment at a later date.

4. … is money that will be used for a year or more.

5. Many large corporations raise long-term capital through the sale of their ….

6. Corporations sell stocks and bonds as a way of raising ….

7. … is a market where brokers meet to buy and sell stocks and bonds for their customers.

8. Those who buy stocks to share in the profits and growth of a corporation over a long period of time are described as ….

Exercise 3. Answer the following questions:

1. Where does most of the money used by business come from?

2. What do we call internal funds?

3. What does depreciation represent?

4. What remains after paying expenses?

5. How do you understand the term «external funds»?

6. What can the firm do to get more money?

7. What rights have common stockholders?

8. What is the difference between common and preferred stockholders?

9. What is the reason for investing in mutual funds?

10. How do you read a balance sheet and income statement?

Exercise 4. Translate into English:

1. Найбільша кількість грошей, що використовується бізнесом, надходить з продажу продукції та різних послуг.

2. Оскільки фірма продає товари або послуги, вона одер­жує гроші та використовує їх з метою покриття своїх ви­трат.

3. Бізнесові позики зазвичай класифікуються як довгострокові та короткострокові.

4. Короткострокові пози­ки використовуються для фінансування повсякденних вартостей для створення фірми (справи), таких як платіжні відомості, сировина, товари.

5. Довгострокові позики існують для купівлі обладнання, будинків та інших цінних предметів.

6. Фондова біржа — це ринок, де зустрічаються посеред­ники для купівлі й продажу акцій та облігацій своїм клієнтам.

7. Чи існує певний ризик невиплати за облігаціями найсильніших корпорацій?

8. На відміну від власників спільних акцій, власники привілейованих акцій не мають права голо­су.

9. Спільні фонди — це корпорації, що купують акції та використовують виручені суми для інвестування або гри на фондових біржах.

10. Звіт про прибуток підбиває підсумки річного прибутку, вартості фірми та різниці між прибут­ком і збитком.

Exercise 5. Read and translate the following dialog:

T.:	Do you know anything about John Say and his works?
S.:	As far as I remember, an admirer of Adam Smith, John Baptiste Say's «Treatise on Political Economy» (1803) helped to introduce «The Wealth of Nations» to his native France. In the course of explaining Smith's theories and the role of markets in satisfying human wants, his statement came to be known as Say's Law.
T.:	So, according to Say's Law, «production creates its own demand», in other words, people produce and sell goods and services in order to buy the things they want.
S.:	No doubt. And if buyers no longer want certain products, sellers will stop producing them and shift into something that is in demand.
Т.:	Now, if only those goods and services actually in demand are produced, and the income received from the sale of those products is ultimately used by managers and workers to buy the things they want and need, it follows that supply created its own demand.
S.:	Can we say in other words: there could be no such thing as overproduction, or long-term unemployment?
Т.:	Temporary overproduction and unemployment, yes. Long term, never. When was Say's Law put to rest?
S.:	The onset of the Great Depression of the 1930-s with its widespread unemployment and overproduction that dragged on for years, finally put Say's Law to rest.
T.:	Although some economists continued to agree with Say that «in the long run», the market would bring supply, demand and unemployment into balance, most agreed with the British economist J.M. Keynes who pointed out that «in the long run we are all dead».
S.:	By that he meant pressing problems require immediate attention. Besides they couldn't wait for long-term solutions.

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