Current account and capital account

 

Lead-in: What is, in your opinion, the main difference between these types of accounts? Key words and phrases: 1. balance account – балансовий рахунок 2. capital account – рахунок капiтальних операцiй 3. merchandise trade account – рахунок торгiвлi товарами 4. income receipt – грошовi надходження вiд прибутку 5. unilateral transfers account – однобiчний жирорахунок 6. trade surplus – активне сальдо зовнiшньоторгового балансу 7. fees and royalties –платня та авторський гонорар 8. reserve assets –резервний фонд 9. treasury bill –казначейський вексель

Two main categories in the balance of payments are the balance account and the capital account. The balance account summarizes a country’s real transactions involving currently produced goods and services. These transactions are grouped in the following categories:

– Merchandise trade account;

– Services account;

– Income receipts and payments on asset accounts;

– Unilateral transfers account.

The merchandise trade account measures the trade deficit or surplus. Its balance is derived by subtracting merchandise imports from merchandise exports. A negative result indicates a balance of trade deficit; a positive result – a balance of trade surplus.

The services account measures the following transactions: travel and transportation, tourism, fees and royalties. Income receipts and payments on asset accounts measure foreign investment in the country and foreign investment abroad.

Unilateral transfers are payments made to a country for which no goods or services are received. An example is a foreign aid to a country deva Nationald by an earthquake or flood. On the whole, the current account of balance is the sum of the exports and the imports of goods, income and net unilateral transfers.

The capital account measures transactions that involve existing rather than currently produced assets. There are two major categories in the capital account: the country’s assets and foreign official reserved assets and the country’s other assets and other foreign assets. Official reserve assets are transactions involving central banks, that is, the official government institutions that establish monetary policy. The country’s other assets and foreign assets refer to direct investments as well as investments in government treasury bills and stocks of private companies.

Ø Comprehension:

1. What does a balance account show?

2. What categories are the country’s transactions grouped in?

3. In what account is the trade deficit or surplus shown?

4. What does the services account measure?

5. What is an example of unilateral transfers?

6. Give the difference between the capital account and the balance account.

7. How many categories are there in the capital account?

 

Ø Summarizing.

Complete the following sentences to summarize the text above:

1. The two main categories in the balance of payments are ….

2. The transactions of produced goods and services are grouped in the following way ….

3. The merchandise trade account shows ….

4. Travel and transportation, tourism, fees and royalties are grouped in ….

5. Unilateral transfers are made ….

6. The capital account measures transactions ….

 

Ø True-false questions:

1. Two main categories in the balance of payments are the balance account and the capital account.	
2. The balance account summarizes a country’s real transactions involving currently produced goods and services.	
3. The services account measures foreign investment in the country and foreign investment abroad.	
4. The current account of balance is the sum of the exports and the imports of goods, income and net unilateral transfers.	

AUDITING

Lead-in: What is the main purpose of auditing? Key words and phrases 1. auditing–ревізія, аудит 2. company’s accounts –рахунки компанії 3. instigators of malpractice –підбурювачи службового злочину 4. internal audit –внутрішній аудит 5. independent audit–незалежний аудит 6. reliable and exact data –надійні та точні дані 7. current transactions –поточні операції 8. accounting system –облікова система 9. personnel –персонал, штат 10. fiscal affairs –фінансова діяльність, справи 11. to find fraud –виявляти обман, шахрайство 12. share capital –акціонерний капітал

Auditing is an official inspection of a company’s accounts by a qualified accountant as required by law to ensure that the company balance sheet reflects the true National of its affairs. There are three main roles of auditors: they are responsible for overseeing a company’s finances, responsible for informing authorities of malpractice and they must track down the instigators of malpractice.

There are two types of audit, an internal audit and an independent audit.

An internal audit is usually carried out by a company’s own accountants. Some large companies maintain a continuous internal audit by their own accounting departments. They check for complete, reliable and exact data, that current transactions of the company are recorded promptly and completely.

An independent audit is a review of financial Nationalments and records by an independent auditor, i.e. an accountant not belonging to the company. The major steps of the independent auditing process are as follows:

¾ to become acquainted with the firm’s accounting, personnel, production, marketing and other systems;

¾ to evaluate the management and the accounting control system in operation;

¾ to analyse and review the accounting data of the company;

¾ to formulate a judgment on the basis of the inspection.

Not so many years ago the presence of an auditor suggested that a company was having financial difficulties or that irregularities had been discovered in the records. Nowadays independent audits are a normal and a regular part of business practice.

At the final stage of the inspection auditors write reports to the management on the current National of the company’s fiscal affairs in the form of Auditor’s Report or Auditor’s Opinion, where they may underline some weak points and recommend how to improve operating procedures. If the auditor finds any fraud he must take further investigations. Who appoints auditors? Senior executives and advisors of the company do it. Then the candidates are to be approved by the owners of the share capital at the company’s meeting. As we have already said, nowadays it is generally accepted that every business should be audited.

 

Ø Comprehension:

1. What is auditing?

2. Name three main roles of auditors.

3. Who is an internal audit carried out by?

4. What are the major steps of an independent auditing process?

Ø Summarizing:

Complete the following sentences to summarize the text above:

1. Auditing is an official inspection of ….

2. There are three main roles of auditors: ….

3.There are two types of audit, an internal audit and ….

4. An independent audit is a review of ….

5. Not so many years ago the presence of an auditor suggested that ….

6. At the final stage of the inspection auditors write ….

Ø Text organization:

The Nationalments below express the main ideas of the text. Number them so that they are in the same order as the ideas in the text. The first one is given for you:

	Nationalment	Order
a.	At the final stage of the inspection auditors write reports to the management.
b.	Auditing is an official inspection of a company’s accounts by a qualified accountant.
c.	An internal audit is usually carried out by a company’s own accountants.
d.	Not so many years ago the presence of an auditor suggested that a company was having financial difficulties.
e.	There are two types of audit, an internal audit and an independent audit.
f.	An in independent audit is a review of financial Nationalments and records by an accountant not belonging to the company.

Ø Viewpoint:

How do you think the work of auditors could be made more effective? Should the government pay auditors or the companies they audit?

MARKETING

Lead-in: Can you give your definition of marketing? Key words and phrases 1. to promote goods and services –просувати товари та послуги 2. marketing mix –маркетингова структура, (cклад, асортимент) 3. product life cycle –життєвий цикл товару 4. costs and expenses –витрати та видатки 5. manufacture and distribution –виробництво та розподіл 6. demand and supply –попит і пропозиція 7. below or above the average price –нижче або вище середньої ціни 8. current price –поточна ціна 9. competitors’ price –ціна конкурентів 10. distribution channel –канал розподілу 11. competing product –конкурентний товар 12. manufacture – виробник 13. wholesaler –оптовий продавець 14. retailer –роздрібний продавець 15. consumer –споживач

Marketing is a total system of business activities designed to plan price, promote and distribute goods and services to satisfy individual and organizational objectives.

The key to successful marketing is having the right product at the right price in the right place with the right promotion. Marketing can be divided into 4 main elements that are popularly known as “the four P’s: product, price, promotion, and place.”

Each of the 4 Ps focuses on the customer and each is related to the other because a decision about one usually affects the others. The most effective combination of the 4 Ps is the right marketing mix for each particular product or service.

Product is the first and most important element of the marketing mix. Product strategy means making coordination decision on the product mix, product lines, individual product items, brands, packages and services.

As a product is developed and introduced and as it progresses through its life cycle, decision must be made about the pricing of the product. Among the important factors considered when setting a price are:

¾ the costs and business expenses involved in the manufacture or distribution of the product,

¾ its fashion and seasonal appeal,

¾ the competition,

¾ government price regulations,

¾ supply and demand.

Marketers may choose the price above or below the average or current market price. If the price is above competitors’ price, the marketer must offer some unique advantages that are easily seen by the customers. If marketers’ price is below the market price, they may attract more customers and increase sales. If the price is the same as others then the service must be better to attract the customer.

When a product comes off the production line, the manufacture must select the best distribution channel to get that product to the consumer. No mater how good a product is, it can be a total sales failure if it arrives in the market place too late, if distribution costs are too high, or if it is not distributed as widely as a competing product.

Producers of consumer goods have 5 channels to choose from on marketing their goods. The channels range from the simplest (manufacture to consumer) to the most complex (manufacture – to agent – to wholesaler – to retailer – to consumer).

 

Ø Comprehension:

1. What is marketing?

2. What is the key to successful marketing?

3. Name four elements of marketing.

4. What is the most effective combination of the 4 Ps?

5. Product is the most important element of the marketing mix, isn’t it?

6. What factors are considered when setting a price?

7. What must the marketer do if the price is above competitors’ price?

8. When can a product be a total sales failure?

Ø Summarizing:

Complete the following sentences to summarize the text above:

1. Marketing is a system of business activities designed to ….

2. Successful marketing is ….

3. Product, price, promotion and place are ….

4. Product strategy means ….

5. When you set a price, you must consider the costs and business expenses of the product ….

6. Marketers may choose a price above or ….

7. It is necessary to select the best distribution channel to get the product ….

Ø Viewpoint:

Is marketing art or science?

 

 

THE CENTRALITY OF MARKETING

Lead-in: Can you name the four factors that are called “marketing mix”? Key words and phrases 1. market segmentation –ринкова сегментація 2. competitor–конкурент 3. to launch a product –запускати товар у виробництво 4. market research –ринкове дослідження 5. sales representative –торговий представник 6. brand name –марка товару 7. distribution channels –канал розповсюдження, збуту 8. inventory size –величина поточного запасу 9. advertising –реклама, рекламна справа 10. publicity –популярність, реклама 11. sales promotion –просування товару 12. discount –дисконт, скидка 13. credit terms –кредитні умови 14. industrial marketing and consumer marketing –промисловий маркетинг таспоживчий маркетинг

“The last stage of fitting the product to the market

is fitting the market to the product.”

(Clive James, Australian writer and broadcaster)

Most management and marketing writers now distinguish between selling and marketing. The ‘selling concept’ assumes that resisting consumers have to be persuaded to buy non-essential goods or services. The ‘marketing concept’, on the contrary, assumes that the producer’s task is to find wants and to fill them. As well as satisfying existing needs, marketers can also create new ones.

Marketers are always looking for market opportunities – profitable possibilities of filling unsatisfied needs or creating new ones in areas the company is likely to enjoy a differential advantage. Market opportunities are generally isolated by market segmentation. A company has to decide what goods or service to offer. This means that much of the work of marketing has been done before the final product comes into existence. The company must also take into account the existence of competitors.

Rather than risk launching a product or service on the basis of intuition, most companies undertake market research (GB) or marketing research (US). They collect and analyze the information about the potential market, about consumer reaction to particular product or service and so on. Sales representatives are another important source of information.

Once a product concept has been established, the company has to think about the marketing mix, i.e. the various elements of marketing program. The best-known classification of these elements is the ‘4 Ps’: product, place, promotion and price. Aspects in marketing products include quality, features, style, brand name, size, packaging, services and guarantee. Place in marketing includes distribution channels, points of sale, transport, inventory size, etc. Promotion groups together advertising, publicity, sales promotion, personal selling, while price includes the basic list price, discount, payment period, credit terms, and so on. The producer market is larger than the consumer market since it contains all the raw materials, manufactured parts and components, plus capital equipment such as buildings, machines, energy, and services ranging from cleaning to management consulting. Consequently, there is more industrial than consumer marketing. It must be remembered that apart from consumer markets there exists an enormous producer or industrial or business market.

 

Ø Comprehension:

1. Characterize the ‘selling concept’ and the ‘marketing concept’.

2. Why do companies undertake market research?

3. What is marketing mix?

4. Characterize each component of marketing mix.

5. What does a producer market consist of?

 

Ø Summarizing:

Complete the following sentences to summarize the text above:

1. There are two concepts in modern marketing, the ‘selling concept and....

2. The ‘selling concept’ assumes that....

3. The ‘marketing concept’ assumes that....

4. The various elements of marketing program are called....

5. Apart from consumer markets there are....

Ø True-false questions:

1. Most management and marketing writers now distinguish between selling and marketing.	
2. ‘Marketing’ and ‘selling’ concepts do not differ very much.	
3. Marketers are always looking for market opportunities in areas the company is likely to enjoy a differential advantage.	
4. The only source of information for companies is market research.	
5. ‘Marketing mix’ means the various elements of marketing program.	
6. Apart from consumer markets there exists an enormous producer or industrial or business market.	

 

Ø Viewpoint:

Can marketing and selling be opposed or are they part and parcel of each other?

ADVERTIZING

Lead-in: Do you agree with the Nationalment “Advertising is the life of trade”? Key words and phrases 1. promotion –просування, впровадження товару 2. institutional advertising –інституціональна реклама 3. goodwill –репутація, престиж 4. advocacy advertising –пропагандистська реклама 5. to persuade and remind –переконувати та нагадувати 6. product life cycle–життєвий цикл товару 7. growth and maturity stages –зростання та зрілість 8. decline stage –період зниження, спаду 9. to allocate the budget –розподіляти, розміщати бюджет 10. life span –тривалість життя 11. advertising media –засоби інформації, що використовуються для розміщення реклами 12. outdoor advertising –зовнішня реклама

Advertising is a paid, non-personal sales communication directed at a large number of potential buyers. For many firms, it is the most effective type of non-personal promotion.

The two basic types of advertising are product and institutional. Product advertising involves selling a good or service. Institutional advertising involves promoting a concept, idea, or philosophy, or the goodwill of an industry, company, organization, of government entity; a form of institutional advertising that is growing in importance, advocacy advertising, supports a specific viewpoint on a public issue. Its purpose is to influence public opinion and the legislative process. Both nonprofit organization and businesses use advocacy advertising.

Both product and institutional advertising can be subdivided into three categories according to the purpose: to inform, persuade, or remind. Informative advertising, intended to build initial demand for a product, is used in the introductory phase of the product life cycle. Persuasive advertising attempts to improve the competitive status of a product, institution or concept. It is used in the growth and maturity stages of the product life cycle. Reminder-oriented advertising, often used in the late maturity or decline stages of the product life cycle, tries to remind people of the importance and usefulness of a product, concept, or institution.

All marketers face the question of how to best allocate their advertising budget.

Newspapers are the largest of the advertising media. Because newspaper advertising can be tailored for individual communities, local advertising is common. Other advantages are that readers can refer back to them. A disadvantage is the relatively short life span. Television advertising can be classified as a network, national, local, and cable. TV has the advantage of a significant impact on potential customers. Mass coverage, repetition, flexibility, and prestige are other advantages. The disadvantages of television as an advertising medium include high cost, the temporary nature of the message, some public distrust.

Direct mail is another form of advertising media. Its advantages include selectivity, intense coverage, speed, flexibility, complete information. On the negative side, direct mail is very expensive. Radio is another important broadcast advertising medium. It can be classified as network, spot and local advertising. Advantages of radio are its immediacy, low cost, targeted audience selection, flexibility and mobility. Disadvantages include the short life span of a message and a highly fragmented audience. Magazines are also used in advertising. Advantages of magazines include selectivity, quality reproduction, long life and prestige. But they lack the flexibility of newspapers and broadcast media.

Outdoor advertising, such as billboards, is one more advertising medium. It communicates simple ideas quickly. Other advantages are repetition and the ability to promote goods and services available for sale nearby. There are disadvantages, however. The medium requires that messages should be brief, and there isn’t much time to make a point. There are lots of other options that companies can use to advertise products: public transportation, movie theatres, special advertising conferences may be held for advertising purposes.

 

Ø Comprehension:

1. What is the purpose of advertising?

2. How can goods be advertised?

3. Characterize each type of advertising.

4. What are the advantages and disadvantages of each type of advertising?

Ø Summarizing:

Complete the following sentences to summarize the text above:

1. Advertising is....

2. The two basic types of advertising are....

3. Product advertising involves....

4. Institutional advertising involves....

5. According to the purpose, advertising can be subdivided into....

6. Informative advertising is used....

7. Persuasive advertising attempts to....

8. Reminder advertising tries to....

 

Ø Text organization:

The Nationalments below express the main ideas of the text. Number them so that they are in the same order as the ideas in the text. The first one is given for you:

	Nationalment	Order
a.	Informative advertising is used in the introductory phase of the product life cycle.
b.	Reminder-oriented advertising tries to remind people of the importance and usefulness of a product, concept, or institution.
c.	Both product and institutional advertising can be subdivided into three categories according to the purpose: to inform, persuade, or remind.
d.	Institutional advertising involves promoting a concept, idea, or philosophy, or the goodwill of an industry, company, organization, of government entity.
e.	Advertising is a paid, non – personal sales communication directed at a large number of potential buyers.
f.	The two basic types of advertising are product and institutional.
g.	Product advertising involves selling a good or service.
h.	Persuasive advertising attempts to improve the competitive status of a product, institution or concept.

Ø Viewpoint:

Which of the following Nationalments do you agree with?

* Advertising is essential for business, especially for launching new products.

* Advertising often makes people buy things they don’t need.

 

 

THE BUSINESS CYCLE

 

Lead-in: What causes the business cycle? Key words and phrases 1. trade cycle – торговий цикл 2. gross domestic product (GDP)–валовий внутришний продукт 3. boom and recession –бум та спад 4. demand for goods and services –попит на товари та послуги 5. output –продукція, випуск продукції 6. peak and trough –вершина та найглибша точка падіння 7. downturn (upturn) –економічний спад (економiчний ріст) 8. contraction and expansion –зниження та зростання, розвиток 9. to pay mortgage or rent –виплачувати заставну чи ренту, оренду 10. borrow or save –позичати або економити, заощаджувати 11. internal and external theories –внутрішні та зовнішні теорії 12. austerity programme –програма суворої економії 13. tax cuts –зниження податку

The business cycle or trade cycle is the fluctuation in the general level of economic activity, measured by the rate of unemployment and changes in GDP; it is a permanent feature of market economies: gross domestic product fluctuates as booms and recessions succeed each other. During a boom an economy expands to the point where it is working at full capacity, so that production, employment, prices, profits, investment and interest rates all tend to rise.

During a recession, the demand for goods and services declines and the economy begins to work at below its potential. Investment, output, employment, profits, commodity and share prices, and interest rates generally fall.

A serious, long-lasting recession is called a depression or a slump.

The highest point of the business cycle is called a peak, which is followed by a downturn or downswing or a period of contraction. The lowest point of the business cycle is called a trough, which is followed by a recovery or an upturn or upswing or a period of expansion.

Economists sometimes describe contraction as ‘negative growth’.

There are various theories as to the cause of the business cycle. Internal theories consider it to be self-generating, regular and repeating. A peak is reached when people begin to consume less. In the mid-nineteenth century, it was suggested that the business cycle results from people infecting one another with optimistic or pessimistic expectations. When economic times are good or when people feel good about the future, they spend, and run-up debts. If interest rates rise too high, a lot of people find themselves paying more than they anticipated on their mortgage or rent, and so have to consume less. If people are worried about the possibility of losing their job in the near future they tend to save more. A country’s output, investment, unemployment, balance of payments depend on millions of decisions by consumers and industrialists on whether to spend, borrow or save.

Investment is closely linked to consumption, and takes place when demand and output are growing. As soon as the demand stops growing at the same rate, investment will drop, leading to a downturn.

Another theory is that sooner or later during every period of economic growth – when the demand is strong, profits are increasing – employees will begin to demand higher wages or salaries. As a result, employers will either reduce investment, or start to lay-off workers, and downsizing will begin.

External theories, on the contrary, look for causes outside economic activity: scientific advances, natural disasters, elections or political shocks, demographic changes, and so on. There is a theory that, where there is no independent central bank, the business cycle is caused by governments beginning their periods of office with a couple of years of austerity programmes followed by tax cuts and monetary expansion in the two years before the next election.

Ø Comprehension:

1. Give the definition of the business cycle.

2. What is the economy like during a boom?

3. How does the economy work during a recession?

4. What is a peak and what is a trough?

5. What do internal theories of the business cycle consider?

6. What are, according to external theories, the reasons for fluctuations in the economic activity?

 

Ø Summarizing:

Complete the following sentences to summarize the text above:

1. The business cycle is ….

2. During a boom an economy ….

3. In the period of recessions the demand for goods and services ….

4. There are … theories as to the cause of the business cycle.

5. Internal theories suppose that ….

6. External theories, on the contrary, consider that ….

7. There is also a theory that ….

 

Ø Viewpoint:

Which of the theories mentioned in the text do you find the most convincing?