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Exercise 22. Read the dialogue

A company is about to launch an expensive program while its revenues are too small to cover the expenses. The manager is con­sulting with his financial adviser


Man: I'd just like to know the advantages and disadvantages of the debt financing.

Adv: Are you going to issue bonds or just to take out a loan?

Man: Well, it depends. If we manage to find an institution that will not demand any collateral, we'll try to obtain a loan.

Adv: But don't you know that you'll have to pledge collateral no matter what kind of a debt you're in for?

Man: Do you mean that even bonds issue needs collateral to back it up?

Adv: Why, yes. Unless you have a solid financial reputation, of course.

Man: We've just started, you know. Anyway, I'll have to report to the Board of Directors on Thursday. And meanwhile, how about talking about the advantages?

Adv: Well, compared to other types of securities, long term loans and bonds have at least two advantages. First, the holders are just creditors, not owners. This provides you with some flexibility in using the funds you have borrowed.

Man: You mean that the holders have no voting rights and can't participate in the operations of the corporation?

Adv: You've got it. And the second one is that the interest you pay to these creditors is tax deductible

Man: Oh, I see. We subtract this interest from the company's earning before taxes are calculated?

Adv: Right. And this eventually reduces the amount of corporate income tax.

Man: That sounds great!

Adv: Don't jump to conclusions! There are some disadvantages as well. First, these obligations must be repaid. You will have to plan a huge repayment at some fixed point in the future.

Man: I bet it will cause all of us many headaches!

Adv: And moreover, bond agreements often contain restrictive provisions that may limit your flexibility in handling the corporation's future finances.

Man: Yes, I see. We'll have to think twice before creating a debt in either way. Anyway, thanks a lot for your information!


Words and phrases to remember



to launch - начинать

I'd like to - я бы хотел

it depends - это зависит от ...

don't you know - разве вы не знаете?

no matter what... - независимо от того ...

unless you have - если вы не имеете ...

meanwhile - тем временем, пока

compared to- в сравнении с

at least - по крайней мере, по меньшей мере

to vote - голосовать

voting rights - права голоса

you've got it - вы попали в точку

to deduct - скидывать, сбавлять; вычитать

deductible - вычитаемые (из сумм, облагаемых налогом)

to subtract - вычитать, сбавлять

to figure - считать, подсчитывать

to jump to conclusions - спешить с выводами

obligations - обязательства

I bet - бьюсь об заклад; здесь: я полагаю

headache - головная боль

to think twice - подумать дважды

Exercise 23. Make up dialogues of your own


1. Your company is planning to construct a new building that would take up lots of money.

2. A bondholder is talking to the manager of the company about the advantages of bonds.




Fill in the spidergram with the words associated with Stock Market (use your active vocabulary from Unit 2)

Discuss the following questions:


1. What do you know about stock market?

2. What are the most famous stock markets?

3. Do you have any stock or bond, or security?

4. What can you say about the situation at the world’s stock markets nowadays?

5. What are the most profitable stocks?

Terms and Vocabulary


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