Unit 18 (Part I)

finance function організація фінансової діяльності

management of fixed assets керування основними засобами

working capital management керування поточними активами

management of current assets керування оборотними засобами

management of current liabilities керування короткостроковими зобов’язаннями

cash management керування грошовими операціями

receivables management керування дебіторською заборгованістю

inventory management керування матеріально-технічним постачанням

financial statements фінансова звітність

balance sheet балансовий звіт

accounts payable кредиторська заборгованість

paid-up capital частина акціонерного капіталу, яка оплачена

retained earnings прибуток, який нерозподілений

1. Read sentences only with new lexis and translate them.

1. Does the firm have adequate cash or access to cash?

2. How much inventory should be held?

3. Financial managers are primarily concerned with the management of fixed assets, working capital management, including management of current assets and current liabilities, cash management, receivables management and inventory management.

4. The standard classification of assets divides them into four parts.

5. The financial manager has to take these decisions with reference to the objectives of the firm.

6. Current assets are short-term in nature.

7. Fixed assets are assets purchased for use in the business on a permanent basis.

8. The chief financial officer distributes the financial management responsibilities between the controller and the treasurer.

2. Put the missing letters.

f..nance f..nct..on, m..n..g..ment of c..rrent a..ets, c..sh m..n..g..m..nt, r,,c,,v,,bles m..n..g..ment, b..l..nce sh..t, m..rt..ge, acc…nt pa..ble,p…d-up cap..tal.

Read the text. FINANCE FUNCTION

Any business - whether large or small, profit-seeking or not-for- profit - has important financial concerns:

How to get the funds needed to run the business on favorable terms and how to make sure that the funds are used effectively?

In this connection modern businesses have financial managers to look after these problems, whose major objective is to maximize the value of the firm for its owners, i.e. to maximize the shareholders' wealth, which is represented by the market price of a firm's common stock¹.

Managers daily face questions like the following:

• What assets to acquire?

• Will a particular investment be profitable?

• Where will the funds come from to finance the investment?

• How much to maintain as equity capital?

• Does the firm have adequate cash or access to cash – through bank borrowing agreements, for example, to meet its daily operating needs?

• Which customers should be offered credit and how much should they be offered?

• How much inventory should be held?

• Is the merger or acquisition advisable?

• How should profits be used or distributed? What is the optimal dividend policy?

• How should the firm behave in the situation of exchange rate variations and interest rate changes?

• How should risk to which the firm is exposed² and return be balanced?

Financial managers are primarily concerned with the management of fixed assets³, working capital management, including management of current assets and current liabilities, cash management, receivables management and inventory management; they are responsible for designing capital structure, choosing long- and short-term financing techniques. The financial manager has to take these decisions with reference to the objectives of the firm. To have a better understanding of how managers go about all these concerns one should know what resources managers typically have at their disposal. The position of an enterprise, its assets and capital are best illustrated by its financial statements - the balance sheet and the income statement⁴.

The first major component of the balance sheet of an enterprise is its assets, which are the resources owned by the enterprise. The term “assets” means anything of value that is owned by a company and can be expressed in terms of money. The standard classification of assets divides them into: 1) fixed assets, 2) current assets, 3) investments and 4) other assets.

Fixed assets are assets purchased for use in the business on a permanent basis, e.g. land and buildings, plant and machinery, furniture, motor vehicles, etc.

Current assets are short-term in nature. They are also known as liquid assets⁵ and include cash, marketable securities, accounts receivable⁶ (debtors), notes/bills receivable⁷ and inventory, including finished goods or work in process⁸.

Investments represent investment of funds in the securities of another company, the purpose of which is either to earn a return or/and to control another company.

The second major component of the balance sheet is liabilities of the enterprise, which represent the amount that the enterprise owes to other enterprises, or the outside sources which the enterprise uses to finance its assets. They are: long-term liabilities (obligations payable after the accounting period) - debentures, bonds, mortgages, secured loans - and current liabilities (obligations usually repayable within the accounting period) - accounts payable, bills/notes payable⁹, accrued expenses¹⁰, deferred income¹¹ and short-term bank credit.

The third major component of a balance sheet is the owners' equity¹²-part of the resources of a firm which are supplied by its owners - shareholders. The owners' equity may consist of two elements: paid-up capital (the initial amount of funds contributed by the shareholders) and retained earnings (part of the profits of the shareholders which is not paid out to them as dividends but ploughed back¹³ in the business).

Capital is the store of accumulated wealth contributed to the firm by its proprietors - it is the net worth of the business¹⁴ to the owners. Fixed capital¹⁵ is capital tied up in fixed assets. Working capital¹⁶ is the capital available for working the business. When an enterprise has bought fixed assets it still needs further capital to buy raw materials, etc., or money to pay wages.

The finance function in a firm is usually headed by a chief financial officer (CFO), who reports to the firm's president.

The chief financial officer¹⁷ distributes the financial management responsibilities between the controller¹⁸ and the treasurer.¹⁹

Words you need:

common stock¹ звичайні акції

to be exposed to risks² бути схильним до риску

assets³ активи

income statement⁴ звіт про прибутки та збитки

liquid assets⁵ ліквідні засоби

accounts receivable⁶ рахунки дебіторів

notes/bills receivable⁷ векселя до отримання

work in process⁸ виробництво, яке незавершене

notes payable⁹ векселя до оплати

accrued expenses¹⁰ витрати, які нараховані

deferred income¹¹ прибутки майбутніх років

equity¹² акціонерний капітал

to plough back¹³ перетворювати в капітал

net worth of the business¹⁴ власний капітал фірми

Fixed capital¹⁵ основні фонди

Working capital¹⁶ оборотний капітал

The chief financial officer¹⁷ віце-президент корпорації по фінансам

controller¹⁸ фінансист-контролер, який веде аналіз господарської та фінансово-облікової діяльності

treasurer¹⁹ скарбник компанії