Lyubimtseva_S_N__Koreneva_V_N_L_93_Kurs_angli

chief financial officer вице-президент корпорации по финансам

controller n финансист-контролер, ведущий анализ хозяйственной и учетно-финансовой деятельности

treasurer n казначей компании

B. financial ratios финансовые коэффициенты/показатели

price/earnings ratio отношение рыночной цены (акции) к чистой прибыли компании (в расчете на одну акцию)

gearing ratio (debt-to-equity ratio) отношение задолженности к собственному капиталу indication n показатель

analyst n экономист-аналитик

liquidity ratio коэффициент ликвидности

financial leverage ratios доля заемных средств в совокупном капитале

C. ratio analysis кредитный и инвестиционный анализ solvency n платежеспособность

efficiency n эффективность

profitability n доходность, рентабельность

current ratio отношение оборотного капитала к краткосрочным обязательствам debt-to-equity ratio соотношение собственных и заемных средств indebtedness n задолженность

inventory turnover ratio оборачиваемость товарных запасов to turn over оборачиваться

return on equity доход от акций, доход на собственный (акционерный) капитал return on assets доход от имущества

payback of an investment окупаемость инвестиций

EXERCISES

Ex. 1. Answer these questions:

A. 1. What financial concerns face every enterprise?

2.What problems do finance managers face daily?

3.What does financial management involve?

4.What are financial managers concerned with?

5.What are the major components of a balance sheet?

6.How is the finance function most commonly organized? B. 1. What is a financial ratio?

2.What do financial ratios help to measure?

3.What groups of ratios have been developed?

C. 1. Can you give examples of ratios measuring solvency, efficiency and profitability? Ex. 2. Give derivatives of:

финансовые средства; приобретать активы; необходимые наличные средства; слияния и поглощения;

дивидендная политика; быть подверженным риску; управление основными средствами; управление текущими активами; управление оборотными средствами; управление краткосрочными обязательствами; управление дебиторской задолженностью; управление запасами; структура капитала; финансовая отчетность; балансовый отчет; отчет о прибылях и убытках; основные средства; оборотные средства; счета дебиторов; векселя к получению; незавершенное производство;

закладная; кредиторская задолженность; векселя к оплате; начисленные издержки; доходы будущих лет; оплаченная часть акционерного капитала; нераспределенная прибыль; собственный капитал;

основные фонды; оборотный капитал;

B. финансовые коэффициенты; отношение рыночной цены (акции) к чистой прибыли компании;

отношение задолженности к собственному капиталу; коэффициент ликвидности; коэффициенты,

характеризующие долю заемных средств в совокупном капитале компании; коэффициент доходности; прибыль от продаж;

С. кредитный и инвестиционный анализ; вести дела эффективно; оценивать результаты;

платежеспособность; выполнять краткосрочные обязательства; отношение оборотного капитала к краткосрочным обязательствам; соотношение собственных и заемных средств; иметь отношение к чему-л.; удовлетворять потребности в наличных средствах; оборачиваемость товарных запасов;

скорость оборота ...; существенно отличаться; доход от акций; доход от имущества; окупаемость инвестиций; быть подверженным риску.

Ex. 4. Say in a few words what the main text is about. Use the opening phrases from Ex. 4 (Unit 1). Ex. 5. Sum up the content of the dialogue. Use the phrases from Ex. 5 (Unit 1).

Ex. 6. Read the dialogue, translate the Russian remarks into English and act it out. Foreigner. What funds are most typically generated at enterprises?

Russian: Для осуществления своей деятельности предприятию необходимы основные и оборотные фонды. Основные фонды – это здания, оборудование, машины. Они используются в хозяйственном процессе многократно. Оборотные фонды представляют собой запасы сырья, материалов, топлива,

малоценных и быстроизнашивающихся предметов (objects of small value, quick-wearing objects). F.: What resources can be used to acquire fixed and working capital?

R.: Предприятия могут использовать собственные и заемные средства.

F.: You mean own and borrowed capital, don't you?

R.: Да, собственный капитал формируется за счет выпуска акций, части прибыли от реализации продукции, амортизационных отчислений. А заемный капитал-это банковские ссуды, выпуск облигаций, прочие кредиты.

F.: As far as I know, enterprises create reserve funds, don't they?

R.: Да, образование резервного фонда является обязательным для акционерных обществ,

кооперативов, предприятий с иностранными инвестициями. Он создается на случай прекращения деятельности предприятия и погашения его задолженности.

Ex. 7. Work on vocabulary and grammar.

a)Study the key words of the unit in the dictionary at the back of this book: assets, exchange rate, interest rate, management, return, value, flow;

b)Think of the verbs that are commonly used with:

funds, financing, assets, inventory, cash, merger, dividends, liquid assets, business, solvency, profitability, risk, return;

c) Think of the nouns that are most often used with:

to acquire, to finance, to borrow, to distribute, to hold, to measure, to manage; d) Think of word combinations with these words:

assets, capital, to manage, liabilities, ratio, shares, cost, return, cash, value; e) Match the verbs from (a) with the nouns from (b) below:

Ex. 8. a) Supply the articles where necessary.

b)Write down 3-5 questions about the texts.

c)Say in what activities financial managers are involved.

a) Financial Management explains how ... financial managers can help maximize the value of their firms by making better decisions in such areas as capital budgeting, choice of capital structure, and working capital management.

Financial managers also have ... responsibility for deciding the credit terms under which customers may buy, how much inventory ... firm should carry, how much cash to have on hand, what types of securities to issue, whether to acquire ... other firms (merger analysis) and how much of the firm earnings to plough back in the business versus payout as dividends.

A successful firm usually has ... rapid growth in sales, which requires investments in ... plant, equipment and inventory. The financial manager must help decide on ... specific assets to acquire and the best way to finance these investments. For example, should ... firm finance with debt or equity, and if debt is used, should it be long-term or short-term?

In this connection, the financial manager must deal with ... money and capital markets, where funds are raised and where the firm's securities are traded. As a consequence, financial managers of many large companies are responsible for working with investors (for example, mutual funds), bond rating agencies, stock holders, and the general financial community.

Financial managers, controllers in particular, are also responsible for financial accounting – preparation of

the financial statements for ... firm, cost accounting – preparation of ... firm's operating budgets, and preparation of reports that the company must file with the various government (local, state and federal) agencies.

One of ... major documents developed and controlled by financial managers is the Enterprise Financial Plan.

It comprises ... requirements for financial resources and the amounts currently available and expected in ...

future to meet them, i.e. the estimated revenues and expenditures of an enterprise within some future period of time. The enterprise financial plan determines whether ... cumulative revenues exceed the cumulative outlays at every point of time during ... plan period and whether the necessary capital structure is assured. The enterprise financial plan is composed of ... revenue plan, ... expenditure plan and ... financing or credit plan.

Words you may need:

financial accounting финансовый учет cost accounting производственный учет file v представлять какой-л. документ cumulative adj совокупный

d) Explain how an enterprise can achieve its prime objective – profitable growth. b) Mergers and Acquisitions

Profitable growth constitutes one of... prime objectives of most of the business firms. It can be achieved "internally", either through ... process of introducing or developing ... new products, as well as by expanding the capacity of existing products ... firm is engaged in. Alternatively, growth process can be facilitated "externally", by acquisitions of... existing business firms. This acquisition is technically referred to as mergers, acquisitions, amalgamations, takeovers, absorptions, consolidations, etc. Although ... legal procedures involved in these terms are different, these terms are often used interchangeably. It is ... finance manager's job to say "how large an enterprise should be, how fast it should grow, and how it should grow". If ... enterprise grows "internally" it can retain control with itself during expansion and it will be free to choose how to grow. However, ... internal expansion usually involves ... longer implementation period as well as different problems connected with raising ... necessary funds. Mergers or acquisitions, in most cases, help to avoid ... financial problems and expedite ... pace of growth, by saving the time otherwise required in building up new facilities from scratch in the case of internal expansion programme.

Mergers are typically classified into ... horizontal mergers (when two or more corporate firms dealing in ...

similar lines of activity combine together) and vertical mergers, extending to ... suppliers of raw materials or distributors. The finance manager's job is to evaluate such merger decisions.

Words you may need: takeover n слияние компаний expedite v ускорять

pace n темп(ы) from scratch с нуля

Ex. 9. a) Supply the prepositions where necessary.

b) Say what classes of shares are usually issued by companies and what rights they give their holders. Financial Capital

Financial capital includes the liquid assets of a company as opposed ... physical assets. Companies can have

a variety of types of capital. The principal distribution is ... share capital and loan or debenture capital. The most usual classes of share ... which the capital of a company can be divided are preference, ordinary, and deferred shares.

Preference shares have a fixed rate ... dividend. However large the profits of a company might be, the holders of preference shares are not entitled ... any additional dividends over and above the rate of dividend agreed when the shares are first issued. The holders of preference shares do not usually have any voting rights. This means that they cannot vote ... the general meetings of the company. But they do have an advantage ... the holders of all other types of shares in that the dividends due ... preference shares must be paid before any dividend is paid ... the holders of ordinary or deferred shares.

Ordinary shares entitle their owners a vote at companies' general meetings. They also have a right to elect company directors, and to receive a proportion of distributed profits ... the form of a dividend.

Issuance of shares is a source ... capital for companies. If a company wishes to raise more money ...

expansion it can issue new shares. These are frequently offered ... existing share holders ... less than their market price: this is known as a rights issue.

Companies may also turn part of their profit ... capital by issuing new shares to shareholders instead ...

paying dividends. This is known as a bonus issue or scrip issue or capitalisation issue. The source of equity is the securities market.

Loan capital is a long-term debt. Companies can raise this type of capital... clearing banks, merchant banks and even pension funds.

The composition of a company's capital is called capital structure.

Words you may need:

debenture capital заемный капитал preference shares привилегированные акции ordinary shares обычные акции

deferred shares отсроченные акции voting right право голоса

rights issue выпуск льготных акций, предлагаемых акционерам компании bonus/scrip/capitalisation issue бонусная эмиссия, выпуск льготных акций (или бесплатных акций) Eх. 10. a) Put the verbs in brackets in the correct form.

b) Describe the development of financial management.

Prior to the 1930s the field of financial management basically (to confine) to descriptive discussions of the various financial markets and the securities traded in those markets and fund raising.

With years this field of finance (to undergo) a number of significant changes and (to become) involved with legal matters of bankruptcy, reorganization, and government regulation.

During the 1950s, for example, financial management (to expand) to include uses of a firm's funds; application of discounted cash flow techniques was perfected; significant breakthroughs in developing techniques for measuring the cost of capital and valuing financial assets (to make); capital budgeting (to make) progress. Later, financial researchers (to focus) on the allocation of current assets, i.e. cash accounts receivable and inventories, and fixed assets.

During the 1960s mathematical models using statistical and optimization techniques (to apply) in financial management. The financial management field witnessed an exciting period of change and growth during the

1970s when there (to be) an increasing emphasis on applying computer technology to assist in financial decision making.

The 1980s (to witness) an explosion of new financial instruments, such as options and futures contracts, that can be used to manage risk. Techniques (to change) but the objective of financial management (to remain) – to maximize the shareholder's wealth.

So the financial manager's job is to arrange for the firm to get the funds needed on favourable terms and to make sure they are used effectively.

The job must be done not only in businesses, but also in not-for-profit firms and units of government. In a world that is increasingly affected by international trade and cooperation, financial management (to acquire) very important new dimensions.

Words you may need:

discounted cash flow будущие поступления наличными, приведенные в оценке настоящего времени optimization technique метод оптимизации

Ex. 11. a) Fill each gap with a suitable word from the box.

b)Sum up the text in 5-7 sentences and present your summary in class.

c)Explain the differences between macroeconomics and microeconomics.

Contemporary financial managers should be familiar with two areas of economics – macroeconomics and ...

Macroeconomics is concerned with the over-all institutional environment in which the firm________. It looks, in other words, at the economy as a________. Macroeconomics is concerned with the institutional structure of the banking system, money and capital markets, financial intermediaries, monetary, credit and fiscal ________ and economic policies dealing with and controlling the level of activity within an economy. Since business firms operate in the macroeconomic environment, it is important for financial managers to understand the broad economic________. Specifically, they should recognise and understand how monetary policy ________the cost and the availability of funds; be versed in fiscal policy and how it affects the economy; be aware of the various financial institutions and their modes of operations to evaluate the potential investment/financing outlets; and understand the consequences of various levels of economic activity and changes in economic policy for their decision environment and so on.

Microeconomics deals with the economic decisions of_______ and organisations. It concerns itself with the determination of optimal operating strategies. In other words, the theories of microeconomics provide for effective________of business firms. They are concerned with defining actions that will permit the firms to achieve_______.

The concepts and theories of microeconomics relevant to financial management are, for instance, those involving supply and_______ relationship and profit maximization strategies, issues related to the mix of productive factors, "optimal" sales level and product pricing strategies, risk and the determination of value and the rationale for depreciating assets. In addition, the primary principle that applies in financial management is marginal analysis which ________ that financial decisions should be made on the basis of

comparison of marginal revenue and marginal cost. Such decisions will________to an increase in profits of the firm. Thus, financial managers must be ________with the basic microeconomics.

Words you may need:

to be versed (in) разбираться (в чём-л.) outlets n pl (зд.) возможности

rationale n основная причина, логическое обоснование marginal analysis анализ по предельным показателям marginal revenue предельный доход

marginal costs предельные издержки

DISCUSSION

Ex. 12. a) Read the texts.

b) Say what you think about the conflict between managers and shareholders. a) Corporate Governance

The financial manager's duties include different tasks aimed to maximize the shareholders' wealth. It has been observed, however, that in practice not all management decisions are consistent with this objective.

In other words, there often is a divergence between the shareholder wealth maximization goal and the actual goals pursued by management.

Instead of seeking to maximize shareholder wealth, management try to satisfy their own welfare. In doing so managers are concerned with their job security. The concern for long-run survival may lead management to minimize (or limit) the amount of risk incurred by the firm, since unfavourable outcomes can lead to their dismissal or possible bankruptcy for the firm.

The existence of divergent objectives between owners and managers is an example of problems arising from agency relationships. Agency relationships take place when one or more individuals (the principals) hire another individual (the agent) to perform a service on behalf of the principals.

In an agency relationship, decision-making authority is often delegated to the agent from the principals. Conflicts between corporate managements and shareholders surfaced as a major public policy issue in the 1980s. The potentially adversarial principal-agent relationship between corporation owners and managers has long been recognized. In the last decade, however, two major developments brought this issue to greater prominence.

First, corporate managements, responding to a wave of hostile corporate takeovers, instituted various defensive strategies. These defences were designed to prevent the target companies from being acquired easily, thereby protecting the jobs of existing management. Indeed, they appear to have had the intended result of making those companies worth less to prospective acquirers. However, they also reduced the value of the companies to their existing shareholders.

Second, large shareholders came to realize that they wielded considerable corporate voting power. The growth of institutional investors has concentrated corporate ownership in the hands of a relatively few organizations. The resources of these large organizations enabled them to actively oppose management decisions that diminished the value of their investment. Corporate governance has become the catchall description for institutional investor efforts to influence the fundamental business policies of corporate managements.

Words you may need:

corporate governance руководство корпорациями to be consistent (with) соответствовать divergence n отклонение, расхождение

survival n выживание to incur a risk нести риск

agency relationships взаимоотношения между агентом и принципалом adversarial adj содержащий элемент соперничества

wield v владеть, иметь в руках (власть, влияние и т.п.) catchall adj всеобъемлющий, полный

с) Read the text and say how investment risks can be reduced: b) Investment Management

Investment management relates to the selection of assets in which funds will be invested by a firm. The assets which can be acquired fall into two broad groups: long-term assets and short-term, or current assets. Nowadays investors face a lot of choices. Along with stocks and bonds of large companies and government debt securities, investors can now own stocks of small companies, the stocks and bonds of companies headquartered in foreign countries, high-yield bonds, collateralized mortgage obligations, floating-rate notes, swaps, puts, calls, and futures contracts. The list is seemingly endless and it continues to grow. Furthermore, the ability to purchase these securities has become both less expensive and more convenient with the advent of advanced communications and computer networks. The challenge to investors is increasing because the investment environment is becoming more and more complex. With the rapid evolution that the investment industry is undergoing, new securities, markets, investment management techniques have appeared.

When making decisions with regard to what marketable securities to invest in, how big the investment should be, and when the investment should be made, the investor:

•sets investment policy and determines objectives,

•performs security analysis,

•constructs a portfolio,

•revises the portfolio,

•evaluates the performance of the portfolio.

For any type of security, the risk can by reduced by investing in more than one firm. This is called "diversification". An investor with stocks and bonds issued by a number of firms is said to have a diversified portfolio.

Diversification does not eliminate all risks. Events like recession, high interest rates, and so on may depress profits and stock prices of all firms.

Words you may need:

collatcralized mortgage obligation облигация, обеспеченная пулом ипотек floating-rate note облигация с плавающей ставкой

advent n приход, появление

to construct a portfolio создать портфель to revise a portfolio пересмотреть портфель

to depress the profits снижать прибыль

Ex. 13. Read the dialogues, sum up their content and act them out. a) Investment Decision Making

Financial manager. Our company is working on an investment project. What do you think we should take into account in our work?

Consultant: First, I'd like to know something about your project. Could you describe it in general terms? P.M.: Yes, sure. The project is aimed at investing in fixed assets. The market research we've carried out has revealed that the demand for our products exceeds our supply. So we are intending to buy new equipment abroad, to expand our production facilities and to increase output, which will allow us to increase sales and get higher profits.

Con.: Have you drawn up the capital budget?

P.M.: We are not through yet, but we've calculated the project outlays, estimated the anticipated flow of future benefits from our investments, operational and financial activities.

Con.: What time period do your calculations cover?

P.M.: We proceed from standard service life of major technological equipment, with adjustment for depreciation. In our case, it is five years.

Con.: Any project needs funding, doesn't it? What sources of financing do you intend using?

P.M.: Internally generated funds and borrowed resources. We are going to issue shares and obtain long-tern Rouble and hard-currency loans. The estimates of the actual cash flow has been based on this plan.

Con.: You've adjusted your calculations for inflation, haven't you? What if the inflation rate happens to be higher than the interest rate? You may have problems with creditors.

P.M.: Yes, to avoid the situation, commercial banks insist on monthly interest payments.

Con.: Speaking about the loan repayment I would like to know which loan will be repaid first – the Rouble or the hard currency loan.

P.M.: The one with a higher interest rate.

Con.: Right. Now that you've estimated the real cash flow, you should prepare your company's profit and loss statements as well as balance sheets for each stage of the project.

P.M.: Well, I agree that the profit and loss statement is useful for the evaluation of the project. Is the balance sheet necessary?

Con.: Manuals on project evaluation recommend to do it, UNIDO's manuals in particular. The balance sheet allows to forecast the company's financial position during various stages of the project implementation. Besides, having done it you'll be able to check your estimates.

P.M.:I see your point. The statements are also important from the point of view of taxes. What else should we focus on while working on the capital budget?

Con.: I know from my experience that the key problems in capital budgeting are forecasting sales, calculation of the cost of capital as well as analysis and estimates of cash flow risks.

P.M.: Thank you. I'll tell my staff to be most careful about these things. b) Investment Project Appraisal

P.M.: How can an investment project be evaluated?

Con.: There are different techniques. Most common today are UNIDO techniques based on payback period, net discounted cash flow and internal rate of return.

P.M.: What criteria should be used in our case? What do they imply?

Con.: Let's start with the payback period, which is the number of years required to recover the investment needed for the project.

F.M.: Experience has shown that the payback method does not provide reliable information about the project's contribution to the market value of a company. Besides, it disregards time value of money. It's common knowledge that the value of our Rouble today is more than its value to be received after some time. Con.: Yes, the sum of money to be received in future is less valuable than it is today.

P.M.: What can you say about the other criteria?

Con.: In the opinion of a number of scientists, net discounted cash flow appraisal, based on cash flow discounted at a certain discount rate, is a more effective technique. Net discounted cash flow gives a wider picture of investment results.

P.M.: From my experience, I, for one, think that this technique is more reliable because it takes into consideration all benefits and costs occurring during the entire life of the project.

Con.: Net discounted cash flow is a difference between the cash flow over the project life expressed in terms of its present value and investments in the project.

P.M.: I see. How can the third criterion be determined, I mean the internal rate of return? Does this method have any advantages over the others?

Con: The IRR method also considers the time value of money by discounting the cash streams. But the rate of return is not predetermined. The IRR is based on facts which are internal to the proposal. The idea of the method is that the internal rate of return is equal to the maximum borrowing interest rate that can be repaid over the period of the project life, if the project is financed only from borrowed funds. So the IRR is a measure of investment effectiveness.

P.M.: Which method, do you think, suits us best?

Con.: It's a difficult question to answer. The choice of the method depends on the company's position, size of the investment project, the situation in financial markets. It would be a good idea to use all the methods. P.M.: It's a hell of a job, isn't it?

Con.: Yes, but these criteria can be easily determined using modern computer equipment. Words you may need:

capital budget смета капиталовложений service life срок службы

depreciation n износ, амортизация

profit and loss statement счет прибылей и убытков

UNIDO (United Nations Industrial Development Organization) Организация Объединенных Наций по промышленному развитию

manual n руководство, справочник cash flow risks риск денежного потока payback period срок окупаемости

discounted cash flow будущие поступления наличными, приведенные в оценке настоящего времени internal rate of return внутренняя норма доходности

time value of money временная стоимость денег present value приведенная стоимость