E) liabilities of the enterprise

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E) liabilities of the enterprise

amount; to owe; outside sources; long-term liabilities; current liabilities;


F) owner’s equity

resources; to supply; shareholder; elements; paid-up capital; retained earnings.

— iii. ORAL Practice

A. Dialogue


  1. Read and translate the dialogue in pairs:


Ukrainian: Are there any guidelines which enable the businessman to conduct his affairs efficiently and profitably and to compare his company’s performance with those of other companies?

American: Yes, there are. One of the major tools is ratio analysis. Ratios make it easy to see trends, risks and to assess the results. All most important decisions are based on ratios.

Ukrainian: What are the most commonly used ratios?

American: We in the US operate with tree main categories of ratios. We use ratios measuring solvency, efficiency and profitability.

Ukrainian: Could you give some examples of each?

American: Yes, sure. Let’s begin with measuring solvency.

Ukrainian: Solvency is the ability of a firm to meet its short-term liabilities as they come due, isn’t it?

American: Yes, you are absolutely right. And one of the most commonly used measures of solvency is the current ratio.

Ukrainian: How is it found?

American: This is the ratio of all current assets, liquid assets, accounts receivable and inventories to current liabilities.


Vocabulary list:

ratio analysis – кредитний та інвестиційний аналіз

solvency – платоспроможність

efficiency – ефективність

profitability – прибутковість, рентабельність

current ratio – відношення оборотного капіталу до короткотермінових зобов’язань


2.Read the dialogue, translate the Ukrainian remarks into English and act it out:

Foreigner: What funds are most typically generated at enterprises?

Ukrainian: Для здійснення своєї діяльності підприємству необхідні основні та оборотні фонди. Основні фонди – це будинки, обладнання, машини вони використовуються у господарському процесі багаторазовою оборотні фонди представляють собою запаси сировини, матеріалів, палива, малоцінних предметів та предметів, що швидко зношуються. (object of small value, quick-wearing objects).

Foreigner: What resources can be used to acquire fixed and working capital?

Ukrainian: Підприємства можуть використовувати власні та позичкові кошти.

Foreigner: You mean own and borrowed capital, don’t you?

Ukrainian: Так, власний капітал формується за рахунок випуску акцій, частини прибутку від реалізації продукції, амортизаційних відрахувань. А позичковий капітал – це банківські позички, випуск облігацій, інші кредити.

Foreigner: As far as I know, enterprises create reserve funds, don’t they?

Ukrainian: Так, утворення резервного фонду є обов’язковим для акціонерних товариств, кооперативів, підприємств з іноземними інвестиціями. Він створюється на випадок припинення діяльності підприємства та погашення його заборгованості.


3.Make up a dialogue on the following:


Imagine, that you take interview with one businessman, who has his business in Kyiv. Ask him:

· does he use managers’ work on his enterprise?

· how do managers help him?

· how is financial management organized on his firm?

· how are financial risks managed on his firm?

· how are different assets managed?



1. Round-table discussion. The question on the agenda is “Financial management on a firm”:

· how is financial management organized in atypical firm?

· what sources of financial resources are used by business?

· how do business firms use their funds? How can they increase their capital?

· explain why all firms need both fixed and working capital.

· how are different assets, say current or fixed, managed?

· how are financial risks managed?

· what do financial managers take into account when they try to strike the right balance between different sources of funds, e.g. between long- and short-term debt or between debt equity?


2.Make a short essay on the following:

£ The main sources and uses of funds for a business firm.

£ The roles of the chief financial officer, the treasurer and the controller.

£ Leverage and its role in striking a balance between debt and equity.



1. a) Supply the articles where necessary.

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

c) Say in what activities financial managers are involved.


Financial Management explains how ... financial management 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 f 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 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 – фінансовий облік

cost accounting – виробничий облік

file – представляти певний документ

cumulative – сукупний


2. a) Read the text.

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

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 exiting 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 – керівництво корпораціями

to be consistent (with) – відповідати

divergence – відхилення

survival – виживання

to incur a risk – нести ризик

agency relationships – взаємовідносини між агентом та принципалом

adversarial – той, що містить елемент суперництва

wield – володіти, мати в руках (владу, вплив і т.п.)

catchall – повний

3. Read the text and say how investment risks can be reduced:

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 contributes 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 number of a 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:

collateralized mortgage obligation – облігація, що забезпечена пулом іпотек

floating-rate note – облігація із ставкою, що спливає

advent – прихід, поява

to construct a portfolio – створити портфель

to revise a portfolio – передивитись портфель

to depress the profits – знижувати прибуток


4. 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 in … 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 preferences 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 meeting of the company. But they do have an advantage … the holders of all other types of shares in that the dividends due … preferences 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 meeting. They also have a right to elect company directors, and to receive a proportion of distributed profits … the form of 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 thsn 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 script issue or capitalization 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 – позиковий капітал

preference shares – привілейовані акції

ordinary shares – звичайні акції

deferred shares – відстрочені акції

voting right – право голосу

rights issue – випуск пільгових акцій, що пропонуються акціонерами компанії

bonus/scrip/capitalization issue – бонусна емісія, випуск пільгових акцій (або безкоштовних акцій)


5. 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.


operation microeconomics familiar

businesses policy demand

notions says affects

whole lead success




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 recognize and understand how monetary 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 organizations. 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) – розбиратися (в чому-небудь)

outlets – можливості

rationale – основна причина, логічне обгрунтування

marginal analysis – аналіз по певним показникам

marginal revenue – граничний дохід

marginal costs – граничні витрати



I. For each word or sentence choose the correct definition:

2.Single the functional elements of managing of the finance:

a) planning;

b) crediting;

c) operative managing;

d) control;

e) selection a kind of a financial mechanism


3.Choose correct statements:

a) finances of the enterprises are the basis of the financial system;

b) financial system doesn’t have single sources of all its links;

c) the finances of the economic entities include financial resources of the state and collective subjects;

d) financiers perform two functions: distributing and controlling;

e) financiers allocate not only one conception in regard to the “work”, what finance do.


4.The directions of the activities, which define the long-term perspective of using the finance, are:

a) financial managing tactics;

b) organization of the financial relations;

c) financial managing strategy;

d) financial instruments.


5.Financial control includes:

b) control of the observance of the financial and economic legislation;

c) estimation of the effectiveness of financial and economic operations;

d) delegation of the liability over special sectors of finance work;

e) estimation of the expenses;

f) making financial strategy.


II. Match what statements are true and what are false. Results write to the table:

1. Financial managers are primarily concerned only with the management of fixed assets.

2. Balance sheet and the income statement are the main financial statements.

3. Fixed assets are assets purchased for use in the business on an unsteady basis.

4. Current assets are known as liquid assets.

5. Single financial ratio can answer all questions analysts may have.

6. The part of the resources of a firm which supplied by its shareholders is the owners’ equity.






III. Fill the tables:







ì Unit 11



  1. Stress the first syllable:

capture, processing, record, profit, equal, debit, credit, statement, separate, principle, operating, balance, separate, quarterly.


  1. Stress the second syllable:

accounting, significant, commitments, equation, accrual, determine, extent, direction, transaction, assumption, income, account, important, disseminate.


  1. Stress the third syllable:

calculation, managerial, information, economic


  1. Read the text:


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