V.. Answer the questions.

1. Is money needed to start a business?

2. When may temporary financing be needed?

3. What kinds (виды) of financing do you know?

4. What is short-term financing?

5. What is cash flow?

6. What is the ideal cash flow?

7. What can cause a cash flow problem?

8. Does inventory require considerable investment for most manufacturers,

wholesalers and retailers?

9. Why do manufacturers often need short-term financing?

10. For what purpose (цель) is the borrowed money often used by the

manufacturers?

11. When is the borrowed money usually repaid?

12. What is long-term financing? , .:

13. For what purpose is long-term financing needed?

14. Are the amounts of long-term financing greater than those of short-term

financing?

VI. Make up a written abstract of the above text.

VII. Retell the prepared abstract.

Unit 6

Sources of Unsecured Financing

Unsecured financing is financing for which collateral is not required.

Most short-term financing is unsecured. Sources of unsecured short-term

financing include trade credits, promissory notes, bank loans, commercial

papers, and commercial drafts.

1. TRADE CREDIT

Wholesalers may provide financial aid to retailers by allowing them

thirty to sixty days (or more) in which to pay for merchandise. This

delayed payment, which may also be granted by manufacturers, is a form of

credit known as trade credit or the open account. More specifically, trade

credit is a payment delay that a supplier grants to its customers.

Between 80 and 90 percent of all transactions between businesses involve

some trade credit. Typically, the purchased goods are delivered along with

a bill (or invoice) that states the credit terms. If the amount is paid on

time, no interest is generally charged. In fact, the seller may offer a

cash discount to encour-. age prompt payment. The terms of a cash discount

are specified on the invoice.

2. PROMISSORY NOTES ISSUED TO SUPPLIERS

A promissory note is a written pledge by a borrower to pay a certain sum

of money to a creditor at a specified future date. Unlike trade credit,

however, promissory notes usually require the borrower to pay interest.

Although repayment periods may extend to one year, most promissory notes

specify 60 to 180 days. The customer buying on credit is called the maker

and is the party that

issues the note. The business selling the merchandise on credit is called

the payee.

A promissory note offers two important advantages to the firm extending

the credit. First, a promissory note are negotiable instruments that can be

sold when the money is needed immediately.

3. UNSECURED BANK LOANS

Commercial banks offer unsecured short-term loans to their customers at

interest rates that vary with each borrower's credit rating. The prime

interest rate (sometimes called the preference rate) is the lowest rate

charged by a bank for a short-term loan. This lowest rate is generally

reserved for large corporations with excellent credit ratings.

Organizations with good to high credit ratings may have to pay the prime

rate plus 4 percent. Of course, if the banker feels loan repayment may be a

problem, the borrower's loan application may be rejected.

Banks generally offer short-term loans through promissory notes.

Promissory notes that are written to banks are similar to those discussed

in the last section.

4. COMMERCIAL PAPER

A commercial paper is a short-term promissory note issued by a large

corporations. A commercial paper is secured only by the reputation of the

issuing firm; no collateral is involved. It is usually issued in large

denominations, ranging from $5,000 to $100,000. Corporations issuing

commercial papers pay interest rates slightly below those charged by

commercial banks. Thus, issuing a commercial paper is cheaper than getting

short-term financing from a bank.

Large firms with excellent credit reputations can quickly raise large

sums of money. They may issue commercial paper totaling millions of

dollars. However, a commercial paper is not without risks. If the issuing

corporation later has severe financing problems, it may not be able to

repay the promised amounts.

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5. COMMERCIAL DRAFTS

A commercial draft is a written order requiring a customer (the drawee)

to pay a specified sum of money to a supplier (the drawer) for goods or

services. It is often used when the supplier is insure about the

customer's credit standing.

In this case, the draft is similar to an ordinary check with one

exception: The draft is filled out by the seller and not the buyer. A

sight draft is a commercial draft that is payable on demand -whenever the

drawer wishes to collect. A time draft is a commercial draft on which a

payment date is specified. Like promissory notes, drafts are negotiable

instruments that can be discounted or used as collateral for a loan.

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Exercises

I. Translate into Russian.

Source; unsecured financing; promissory note; commercial draft; trade

credit; loan; commercial paper; transaction; delayed payment; credit terms;

pay interest; interest rate; invoice; amount; prompt payment; written

pledge; sum of money; borrower; repayment period; buy on credit; deliver;

provide aid; maker; payee; offer loans; credit rating; prime interest rate;

questionable credit rating; large denomination; raise large sums of money;

drawee; drawer; credit standing; sight draft; time draft; collateral;

commercial draft.

II. Find the English equivalents.

Ссуда; давать ссуду; процент; процентная ставка; необеспеченное

финансирование; покупать в кредит; условия кредита; счет-фактура; основная

сумма; деловая операция; торговый кредит; долговое обязательство;

коммерческая бумага; тратта (переводной вексель); условия; обеспечение

(залог) ; заемщик; трассат (лицо, на которое выставлена тратта); трассант

(лицо, выписавшее переводной вексель-тратту) ; кредитоспособность; тратта

(вексель) на предъявителя; срочная тратта.

III. Fill in each blank with a suitable word or word combination.

1. Trade credit is a payment... that a supplier grants to its customers.

2. The invoice that's ....

3. A promissory note is a written ... by a borrower to pay a certain sum

of money at a specified date.

. 4. The customer buying on credit is called ... and is the party that

issues the promissory note.

5. The business selling the merchandise on credit is called ....

6. Most promissory notes are... that can be sold when money is needed

immediately.

7. The prime interest rate is the lowest rate charged by a bank for...

loan.

8. A commercial paper is ... issued by a large corporation.

9. A commercial paper is secured only by the ... of the issuing . firm.

10. Issuing a commercial paper is ... than getting short-term financing

from a bank.

11. A commercial draft is a written... requiring a drawee to pay a

specified sum of money to the ... for goods or services.

12. A sight draft is a commercial draft that is payable on ....

13. A ... is a commercial draft on which a payment date is specified. 14.

Like promissory notes drafts can be used as ... for a loan.

IV. Translate into English.

1. Источники необеспеченного краткосрочного финансирования включают

торговые кредиты, долговые обязательства, банковские ссуды, краткосрочные

долговые обязательства (кредитно-денежные документы) и тратты (переводные

векселя).

2. Торговый кредит — это отсрочка платежа, которую поставщик предоставляет

своим клиентам.

3. Долговое обязательство — это письменное обязательство заемщика уплатить

определенную сумму денег кредитору.

4. В отличие от торгового кредита долговые обязательства требуют, чтобы

заемщик платил проценты.

5. Коммерческие банки предоставляют необеспеченные краткосрочные ссуды

своим клиентам, которые меняются в зависимости от (with)

кредитоспособности каждого заемщика.

6. Коммерческая бумага — это краткосрочное долговое обязательство,

выпускаемое крупными корпорациями. .

7. Коммерческая бумага не имеет специального (special) обеспечения.

8. Тратта (переводной вексель) —это письменный приказ, требующий, чтобы

трассат (лицо, на которое выставлена тратта) уплатил конкретную сумму

денег поставщику за товары или услуги.

9. Тратта часто используется, когда поставщик не уверен в

кредитоспособности клиента.

V. Answer the questions.

1. What is unsecured financing?

2. What are the sources of unsecured short-term financing?

3. What is a trade credit?

4. What is the difference between a promissory note and trade credit?

5. In what case a loan application may be rejected by a bank?

6. What is a commercial paper secured by?

7. Why issuing a commercial paper is cheaper than getting short-term

financing from a bank?

8. What is a commercial draft?

9. Can commercial drafts be used as collaterals for loans?

VI. Make up a written abstract of the above text.

VII. Retell the prepared abstract.

Unit7

Accounting

1. GENERAL DEFINITION OF ACCOUNTING

Today, it is impossible to manage a business operation without accurate

and timely accounting information. Managers and employees, lenders,

suppliers, stockholders, and government agencies all rely on the

information contained in two financial statements. These two reports — the

balance sheet and the income statement — are summaries of a firm's

activities during a specific time period. They represent the results of

perhaps tens of thousands of transactions that have occurred during the

accounting period.

Accounting is the process of systematically collecting, analyzing, and

reporting financial information. The basic product that an accounting firm

sells is information needed for the clients.

Many people confuse accounting with bookkeeping. Bookkeeping is a

necessary part of accounting. Bookkeepers are responsible for recording (or

keeping) the financial data that the accounting system processes.

The primary users of accounting information are managers. The firm's

accounting system provides the information dealing with revenues, costs,

accounts receivables, amounts borrowed and owed, profits, return on

investment, and the like. This information can be compiled for the entire

firm; for each product; for each sales territory, store, or individual

salesperson; for each division or department; and generally in any way that

will help those who manage the organization. Accounting information helps

man-

agers plan and set goals, organize, motivate, and control. Lenders and

suppliers need this accounting information to evaluate credit risks.

Stockholders and potential investors need the information to evaluate

soundness of investments, and government agencies need it to confirm tax

liabilities, confirm payroll deductions, and approve new issues of stocks

and bonds. The firm's accounting system must be able to provide all this

information, in the required form.

2. THE BASIS FOR THE ACCOUNTING PROCESS

The basis for the accounting process is the accounting equation. It shows

the relationship among the firm's assets, liabilities, and owner's equity.

Assets are the items of value that a firm owns — cash, inventories, land,

equipment, buildings, patents, and the like.

Liabilities are the firm's debts and obligations — what it owes to

others.

Owner's equity is the difference between a firm's assets and its

liabilities — what would be left over for the firm's owners if its assets

were used to pay off its liabilities.

The relationship among these three terms is the following:

Owners' equity = assets - liabilities

(The owners' equity is equal to the assets minus the liabilities)

For a sole proprietorship or partnership, the owners' equity is shown as

the difference between assets and liabilities. In a partnership, each

partner's share of the ownership is reported separately by each owner's

name. For a corporation, the owners' equity is usually referred to as

stockholders' equity or shareholders'equity. It is shown as the total value

of its stock, plus retained earnings that have accumulated to date.

By moving the above three terms algebraically, we obtain the standard

form of the accounting equation:

Assets = liabilities + owners' equity

(The assets are equal to the liabilities plus the owners' equity)

3. A BALANCE SHEET

A balance sheet (or statement of financial position), is a summary of a

firm's assets, liabilities, and owners' equity accounts at a particular

time, showing the various money amounts that enter into the accounting

equation. The balance sheet must demonstrate that the accounting equation

does indeed balance. That is, it must show that the firm's assets are equal

to its liabilities plus its owners' equity. The balance sheet is prepared

at least once a year. Most firms also have balance sheets prepared semi-

annually, quarterly, or monthly.

4. AN INCOME STATEMENT

An income statement is a summary of a firm's revenues and expenses during

a specified accounting period. The income statement is sometimes called the

statement of income and expenses. It may be prepared monthly, quarterly,

semiannually, or annually. An income statement covering the previous year

must be included in a corporation's annual report to its stockholders.

5. THE IMPORTANCE OF THE ABOVE TWO STATEMENTS

The information contained in these two financial statements becomes more

important when it is compared with corresponding information for previous

years, for competitors, and for the industry in which the firm operates. A

number of financial ratios can also be computed from this information.

These ratios provide a picture of the firm's profitability, its short-term

financial position, its activity in the area of accounts receivables and

inventory, and its long-term debt financing. Like the information on the

firm's financial statements, the ratios can and should be compared with

those of past accounting periods, those of competitors, and those

representing the average of the industry as a whole.

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Exercises

I. Translate into Russian.

Accounting; bookkeeping; accounting information; lender; stock;

stockholder; financial statement; balance sheet; income statement;

assets; liabilities; owners' equity; bond; debt; annual report;

profitability; accounting period; return on investment; soundness of

investment; issue of stocks and bonds; revenue; profit; account

receivable; transaction; amount; own; owner; relay on; report; borrow;

deal with; confirm; approve; provide; compare.

II. Find the English equivalents.

Бухгалтерский учет (бухучет); точная и своевременная информация;

акционер;кредитор; ведомство (агентство); отчет

(доклад); балансовый отчет; отчет о доходах; отчетный период; счетоводство

(бухгалтерия); финансовая информация; прибыль (доход); выгода (прибыль);

прибыль на инвестированный капитал; дебиторская задолженность;

обязательство; денежное обязательство (пассив); платежная ведомость; акция

(ценная бумага); активы; долг; счет прибылей (иубытков); ежегодный отчет;

доходность; собственный акционерный капитал; одобрять; сравнивать;

подтверждать; занимать (брать взаймы); обрабатывать (информацию).

III. Fill in the blanks.

1. Managers, lenders, suppliers and government agencies relay on the

information contained in two ....

2. These two reports — the balance sheet and ... — are summaries of a

firm's activities during a specific time period.

3. The basis for the accounting process is ....

4. Assets are the ... that a firm owns.

5. Liabilities are the firm's debts and ....

6. Owners' equity is the difference between a firm's ... and its

liabilities.

7. A balance sheet is ... of a firm's assets, liabilities, and owners'

equity accounts at a particular time.

8. A balance sheet must demonstrate that the accounting ... does indeed

balance.

9. An income statement is a summary of a firm's revenues and

... during a specific accounting period. >

10. The information in these two financial statements becomes

more important when it is... with corresponding information

for previous years or past... periods.

IV. Translate into English.

1. Бухгалтерский учет — это процесс систематического сбора и сообщения

финансовой информации.

2. Балансовый отчет и отчет о доходах являются (are) основой процесса

бухучета.

3. Балансовый отчет (или отчет о финансовом положении) — это (is)

обобщенный отчет об активах фирмы, пассивах и собственном акционерном

капитале.

4. Отчет о доходах — это обобщенный отчет о доходах и расходах за (during)

конкретный отчетный период.

5. Основой процесса бухгалтерского учета является буху-четное уравнение.

6. Согласно (according to) бухучетному уравнению активы равны пассивам

(денежным обязательствам) плюс собственный акционерный капитал.

7. Собственный акционерный капитал—это разность между активами и пассивами.

8. Балансовый отчет должен показывать, что бухучетное уравнение

балансируется.

9. Результаты (results) балансового отчета должны сравниваться (be

compared) с результатами за (for) прошлый отчетный период.

10. Эта информация дает картину доходности фирмы, ее финансового положения

и ее деятельности в области (area) дебиторской задолженности, товарных

запасов и долгового финансирования.

V. Questions and assignments.

1. What is accounting? Give a short definition.

2. Is it possible to manage a business operation without accurate and

timely accounting information?

3. Who needs accounting information? Explain why.

4. What is the basis for accounting process?

5. State (изложите) the standard form of the accounting equation.

6. What is a balance sheet? Give a short definition.

7. What must a balance sheet show?

8. What is an income statement?

9. What can be computed from the information contained in a balance sheet

and an income statement?

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10. Do the ratios computed from this information provide a picture of a

firm's profitability and its financial position?

11. Is this information for competitors?

VI. Read and translate this newspaper advertisement.

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VII. Answer the questions.

1. What is the name of the firm that has published this ad (advertisement)?

2. Who is the firm's client?

3. What information have you got about the bank for which the firm works?

4. What kind of (каких) specialists does the firm invite?

5. What kind of experience must the invited professionals have?

6. Does experience in accountancy matter (имеет значение)1

7. What will preferred candidates demonstrate?

8. What chief traits (основные черты) of character must the applicants

have?

9. Is it necessary to send a full curriculum vitae to Michael Page City

firm?

10. What words in the ad characterize the team within which the selected

applicants will work?

Unit 8

Operations Management

Operations management consists of all the activities that managers engage

in to create products (goods, services, and ideas). Operations are as

relevant to service organizations as to manufacturing firms. In fact,

production is the conversion of resources into goods or services.

1. A technology is the knowledge and process the firm uses to convert

input resources into output goods or services. Conversion processes vary in

their major input, the degree to which inputs are changed, and the number

of technologies employed in the conversion.

2. Operations management often begins with the research and product

development activities. The results of R&D may be entirely new products or

extensions and refinements of existing products. The limited life cycle of

every product spurs companies to invest continuously in R&D.

3. Operations planning is planning for production. First, design planning

is needed to solve problems related to the product line, required

production capacity, the technology to be used, the design of production

facilities, and human resources. Next, operational planning focuses on the

use of production facilities and resources. The steps in this periodic

planning are (1) selecting the appropriate planning horizon, (2) estimating

market demand, (3) comparing demand and capacity, and (4) adjusting output

to demand.

4. The major areas of operations control are purchasing, inventory

control, scheduling, and quality control. Purchasing in-

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volves selecting suppliers and planning purchases. Inventory control is

the management of stocks of raw materials, work process, and finished

goods to minirnize the total inventory cost. Scheduling ensures that

materials are at the right place at the right time — for use within the

facility or for shipment to customers. Quality control ensures that

products meet their design specifications.

5. Automation, the total or near-total use of machines to do work, is

rapidly changing the way work is done in factories and offices. A growing

number of industries are using programmable machines called robots to

perform tasks that are tedious or hazardous to human beings. The flexible

manufacturing system combines robotics and computer-aided manufacturing

to produce smaller batches of products more efficiently than the

traditional assembly line.

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