Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
1. Socialising
1. The Impact of Culture on Business
2. Telephoning
2. Telephoning across cultures
3. Presentations
3. Planning and preparation
4. Image, impact and making impression
5. The presentation
. The end of the presentation
4. Meetings
!. Preparation for meetings
". Participating in meetings
#. $nding the meeting
5. Negotiations
1%. &no' 'hat (ou 'ant
11. )etting 'hat (ou can
12. *ot getting 'hat (ou don+t 'ant
6. Management
13. ,hat is management-
14. T(pes of managers
15. The management process
1. .anagement le/el and skills
7. ompanies an! organisations
1!. Compan( structure
1". The e0ternal en/ironment of organisations
". Pro!#ction an! pro!#cts
1#. 1ust2in2time production
2%. Products and 3rands
$. Mar%eting& a!'ertising& promotion
21. The centralit( of marketing
22. 4o' companies ad/ertise
23. The four ma5or promotional tool
1(. Mar%et str#ct#re an! competition
24. .arket leaders, challengers and follo'ers
25.Takeo/ers, mergers and 3u(outs
2. Profits and social responsi3ilit(
11. Mone) an! *inance
2!. 6 histor( of mone( 7 'hat makes the 'orld goes round
2". The profits of la3our
2#. 6ccounting and financial statements
3%. $0change 8ates
12. +an%ing an! ta,ation
31. T(pes of 3anks
32. 9pening an account and means of pa(ment
33. Banking 7 &e( 'ords and sentences
34. Ta0ation and ho' to a/oid it
13. Stoc% mar%et
35. :tocks and shares
3
3. Bonds
3!. ;utures, options and s'aps
)lossar(
Cheia e0erci<iilor
=er3e modale I 7 form> ?i utili@areA $0erci<ii
=er3e modale II 7 form> ?i utili@areA $0erci<ii
Infiniti/ul 7 form> ?i utili@areA $0erci<ii
;ormele Bn Ing 7 utili@areA $0erci<ii
=er3e care primesc infiniti/e sau forma Bn 7IngA $0erci<ii
=er3e comple0e 7 form> ?i utili@areA $0erci<ii
=or3irea indirect> 7 form> ?i utili@areA $0erci<ii
Prepo@i<ii, Con5unc<ii 7 form> ?i utili@areA $0erci<ii
:u3stanti/ul 7 form> ?i utili@areA $0erci<ii
6rticolul 7 form> ?i utili@areA $0erci<ii
6d5ecti/ul 7 form> ?i utili@areA $0erci<ii
Pronumele 7 form> ?i utili@areA $0erci<ii
6d/er3ul 7 form> ?i utili@areA $0erci<ii
+i-liogra*ie
Cotton, Ca/id 7 &e(s to management, Dongman, 1##
Cotton, Ca/idA 8o33ins, :ue 7 Business Class, *elson $nglish Danguage Teaching, Dondon, 1##3
.ac&en@ie, Ian 7 $nglish for Business :tudies, Cam3ridge Eni/ersit( Press, 2%%1
:'eene(, :imon 7 $nglish for Business Communication, Cam3ridge Eni/ersit( Press, 2%%%
Chiriacescu, 6drianaA .ure?an, DauraA Barghiel, =irginiaA 4ollinger, 6le0ander 7 Coresponden<> de
afaceri Bn lim3ile romFn> ?i engle@>, $ditura Teora, Bucure?ti, 1##5
)eoghegan, C.).A )eoghegan, 1.G. 7 $ngle@a pentru negocieri, $ditura Teora, Bucure?ti, 2%%%
8oland, .arie2ClaudeA .ast2)rand, .artha 7 C= Bn lim3a engle@>, un pas spre anga5are, $ditura
Teora, Bucure?ti, 2%%%
Ca(an, 6.A Dindsa(, ,.4.A 1anakie'ic@, 6.A .archeteau, .. 7 $ngle@a pentru marketing ?i
pu3licitate, $ditura Teora, Bucure?ti, 2%%%
Banta?, 6ndreiA Por<eanu, 8odica 7 Dim3a engle@> pentru ?tiin<> ?i tehnic>, $ditura *iculescu,
Bucure?ti, 1##5
Daun, ;la/ia $. 7 Birotics and Telecommunication $0planator( Cictionar(, $ditura Cacia, Clu52
*apoca, 1##
4
.>n>il>, C.A Popa, C.A Popa, C.A Popescu, I...A =lad, =.I. 7 .ic dic<ionar poliglot de fi@ic>, tehnic>
?i matematic>, $ditura 6cora Press, Bucure?ti, 1##5
De Ci/enach, Hloi 7 $ngle@a Bn pres>, $ditura Teora, Bucure?ti, 1###
.archeteau, .ichel 7 Berman, 1ean2Pierre 7 :a/io, .ichel, $ngle@a comercial> Bn 4% de lec<ii,
$ditura *iculescu, Bucure?ti, 2%%1
1. Socialising
Rea!ing
The following text is about cultural diversity. Read it through once and decide which of the three
statements (A, B or C) given below the extract offers the most accurate summary.
1. The Impact of Culture on Business
Take a look at the ne' 3reed of international managers, educated according to the most modern
management philosophies. The( all kno' that in the :BE, TI. should reign, 'ith products deli/ered
1IT, 'here C;T+s distri3ute products 'hile su35ect to .B9.
J:BE K strategic 3usiness unit, TI. K total Lualit( management, 1IT K 5ust2in2time, C;T K customer
first team, .B9 K management 3( o35ecti/es.M
But 5ust ho' uni/ersal are these management solutions- 6re these Ntruths+ a3out 'hat effecti/e
management reall( is, truths that can 3e applied an('here, under an( circumstances-
$/en 'ith e0perienced international companies, man( 'ell2intended Nuni/ersal+ applications of
management theor( ha/e turned out 3adl(. ;or e0ample, pa(2for2performance has in man( instances 3een
a failure on the 6frican continent 3ecause there are particular, though unspoken, rules a3out the seLuence
and timing of re'ard and promotions. :imilarl(, management 3( o35ecti/es schemes ha/e generall(
failed 'ithin su3sidiaries of multinationals in southern $urope, 3ecause managers ha/e not 'anted to
conform to the a3stract nature of preconcei/ed polic( guidelines.
$/en the notion of human2resource management is difficult to translate to other cultures, coming
as it does from a t(picall( 6nglo2:a0on doctrine. It 3orro's from economics the idea that human 3eings
are Nresources+ like ph(sical and monetar( resources. It tends to assume almost unlimited capacities for
indi/idual de/elopment. In countries 'ithout these 3eliefs, this concept is hard to grasp and unpopular
once it is understood. International managers ha/e it tough. The( must operate on a num3er of different
premises at an( one time. These premises arise from their culture of origin, the culture in 'hich the( are
'orking, and the culture of the organi@ation 'hich emplo(s them.
In e/er( culture in the 'orld such phenomena as authorit(, 3ureaucrac(, creati/it(, good
fello'ship, /erification and accounta3ilit( are e0perienced in different 'a(s. That 'e use the same 'ords
to descri3e them tends to make us una'are that our cultural 3iases and our accustomed conduct ma( not
3e appropriate, or shared.
:BE K strategic 3usiness unit K unitate comercial>, economic> strategic>
TI. K total Lualit( management K managementul total al calit><ii
5
1IT K 5ust2in2time K li/rare e0act la momentul potri/it
C;T K customer first team K
.B9 K management 3( o35ecti/es K managementul pe o3iecti/e
pa(2for2performance K plat> pentru munca depus>
human2resource management K managementul resurselor umane
at an( one time K Bn fiecare moment
premises K premise, loca<ii
grasp K a pricepe, a Bn<elege JBn te0tM
accounta3ilit( K r>spundere
3ias K tendin<>, orientare
A. There are certain popular uni/ersal truths a3out management 'hich can successfull( 3e applied in
/arious cultural conte0ts.
+. Cultures are so /aried and so different throughout the 'orld that management has to take account of
differences rather than simpl( assume similarities.
. $ffecti/e management of human resources is the ke( to e/er(one achie/ing their full potential.
.ang#age hec%list
Cultural diversity and socializing
Welcoming visitors
,elcome to O
.( name+s O
Arriving
4ello. .( name+s O from O
I+/e an appointment to see O
:orr( 7 I+m a little late P earl(.
.( plane 'as dela(edO
Introducing someone
This is O 4ePshe+s m( Personal 6ssistant.
Can I introduce (ou to O 4ePshe+s our JPro5ect .anagerM.
I+d like to introduce (ou to O
Meeting someone and small talk
Pleased to meet (ou.
It+s a pleasure.
4o' 'as (our trip- Cid (ou ha/e a good flight P trip P 5ourne(-
4o' are things in JDondonM-
4o' long are (ou sta(ing in J*e' GorkM-
I hope (ou like it.
Is (our hotel comforta3leP
Is this (our first /isit to Jthe Big 6ppleM-
ffering assistance
Can I get (ou an(thing-
Co (ou need an(thing-
skill increases as one rises through the ranks of a management s(stem 3ased on hierarchical principles of
authorit( and responsi3ilit(. It depends mainl( on the manager+s rank in the organi@ation.
7. ompanies an! ArganiCations
17. ompan) str#ct#re
1oca-#lar)
Match #p the /or!s on the le*t /ith the !e*initions on the right
1 autonomous 6 a s(stem of authorit( 'ith different le/els, one a3o/e the other
2 decentrali@ation B a specific acti/it( in a compan(, e.g. production, marketing, finance
3 function C independent, a3le to take decisions 'ithout consulting a higher authorit(
4 hierarch( C people 'orking under someone else in a hierarch(
5 line authorit( $ di/iding an organi@ation into decision2making units that are not centrall(
controlled
6 report to ; the po'er to gi/e instructions to people at the le/el 3elo' in the chain of
command
7 su3ordinates ) to 3e responsi3le to someone and to take instructions from him or her
Rea!ing
Rea! the te,t -elo/& a-o#t !i**erent /a)s o* organiCing companies& an! then la-el the !iagrams&
accor!ing to /hich o* these the) ill#strate7
,ine structure E functional structure E matrix structure E staff structure
6.OOOOOO B.OOOOOOO.
C.OOOOOO. COOOOOO..
.ost organi@ations ha/e hierarchical or p(ramidal structure, 'ith one person or a group of people
at the top, and an increasing num3er of people 3elo' them at each successi/e le/el. This is a clear line or
chain of command running do'n the p(ramid. 6ll the people in the organi@ation kno' 'hat decisions
the( are a3le to make, 'ho their superior Jor 3ossM is Jto 'hom the( reportM, and 'ho their immediate
su3ordinates are Jto 'hom the( can gi/e instructionsM.
!
:ome people in an organi@ation ha/e colleagues 'ho help themQ for e0ample, there might 3e an
6ssistant to the .arketing .anager. This is kno'n as a staff positionQ its holder has no line authorit(, and
is not integrated into the chain of command, unlike, for e0ample, the 6ssistant .arketing .anager, 'ho
is num3er t'o in the marketing department.
Get, the acti/ities of most companies are too complicated to 3e organi@ed in a single hierarch(.
:hortl( 3efore the ;irst ,orld ,ar, the ;rench industrialist 4enr( ;a(ol organi@ed his coal2mining
3usiness according to the functions that it had to carr( out. 4e is generall( credited 'ith in/enting
functional organi@ation. Toda(, most large manufacturing organi@ations ha/e a functional structure,
including Jamong othersM production, finance, marketing, sales, and personnel or staff departments. This
means, for e0ample, that the production and marketing departments cannot take financial decision 'ithout
consulting the finance department.
;unctional organi@ation is efficient, 3ut there are t'o standard criticisms. ;irstl(, people are
usuall( more concerned 'ith the success of their department than that of the compan(, so there are
permanent 3attles 3et'een, for e0ample, finance and marketing, or marketing and production, 'hich ha/e
incompati3le goals. :econdl(, separating functions is unlikel( to encourage inno/ation.
Get, for a large organi@ation manufacturing a range of products, ha/ing a single production
department is generall( inefficient. ConseLuentl(, most large companies are decentrali@ed, follo'ing the
model of 6lfred :loan, 'ho di/ided )eneral .otors into separate operating di/isions in 1#2%. $ach
di/ision had its o'n engineering, production and sales departments, made a different categor( of car J3ut
'ith some o/erlap Jsuprapunere% LntrepJtrundereM, to encourage internal competitionM, and 'as e0pected
to make a profit.
Business that cannot 3e di/ided into autonomous di/isions 'ith their o'n markets can simulate
decentrali@ation, setting up di/isions that deal 'ith each other using internall( determined transfer prices.
.an( 3anks, for e0ample, ha/e esta3lished commercial, corporate, pri/ate 3anking, international and
in/estment di/isions.
6n inherent pro3lem of hierarchies is that people at lo'er le/els are una3le to make important
decisions, 3ut ha/e to pass on responsi3ilit( to their 3oss. 9ne solution to this is matri0 management, in
'hich people report to more than one superior. ;or e0ample, a product manager 'ith an idea might 3e
a3le to deal directl( 'ith managers responsi3le for a certain market segment and for a geographical
region, as 'ell as the managers responsi3le for the traditional functions of finance, sales and productions.
This is one 'a( of keeping authorit( at lo'er le/els, 3ut it is not necessaril( a /er( efficient one. Thomas
Peters and 8o3ert ,aterman, in their 'ell2kno'n 3ook In &earch of />cellence, insist on the necessit( of
pushing authorit( and autonom( do'n the line, 3ut the( argue that one element 7 pro3a3l( the product 7
must ha/e priorit(A four2dimensional matrices are far too comple0.
6 further possi3ilit( is to ha/e 'holl( autonomous, temporar( groups or teams that are
responsi3le for an entire pro5ect, and are split up Ja se diviza% a se LmpJrRiM as soon as it is successfull(
completed. Teams are often not /er( good for decision2making, and the( run the risk or relational
pro3lems, unless the( are small and ha/e a lot of self2discipline. In fact, the( still reLuire a definite leader,
on 'hom their success pro3a3l( depends.
:escri-ing compan) str#ct#re
The most common 'er-s *or !escri-ing str#ct#re are7
Consists of contains includes
"
Is composed of is made up of is divided into
e.g. The compan( consists of fi/e main departments.
The marketing department is made up of three units.
Ather 'er-s *reB#entl) #se! to !escri-e compan) organiCation incl#!e7
To (e in charge of to (e responsi(le for
To support or to (e supported (y to assist or to (e assisted (y
To (e accounta(le to
e.g. The marketing department is in charge of the sales force.
The fi/e department heads are accounta3le to the .anaging Cirector.
This is an e,ample o* part o* a compan) organiCation chart7
Board of *irectors
with a Chairman (?B)
or &resident (A')
"anaging *irector (?B)
or
Chief #xecutive 4fficer (A')
Production .arketing ;inance 8esearch V Personnel
Ce/elopment
.arket :ales 6d/ertising
8esearch Promotions ;inancial 6ccounting
.anagement
*orthern :outhern
8egion 8egion
*o' 'rite a description of either the organi@ation chart a3o/e, or a compan( (ou kno', in a3out 1%%215%
'ords.
1". The 2,ternal 2n'ironment o* ArganiCations
The man( rapid changes taking place in the e0ternal en/ironment of organi@ation reLuire increasing
attention from managers. The direct1action com!onent of the en/ironment consists of the organi@ation+s
stakeholders 7 that is, the groups 'ith direct impact on the organi@ation+s acti/ities. #xternal
sta(eholders include customers, suppliers, go/ernments, consumer and en/ironmental ad/ocates, special
interest groups, la3or unions, financial institutions, the media, and competitors. .nternal sta(eholders
include emplo(ees, shareholders, and the 3oard of directors.
.anagers must 3alance the interests of the /arious stakeholders for the good of the organi@ation as a
'hole. The( ma( 3e a3le to use the net'ork of relationships among the stakeholders and the organi@ation
to influence stakeholders indi/iduall(. ;or their part, stakeholders ma( unite in coalitions to e0ert o/er J a
e>ercita% a face uz de influenRJM the organi@ation. Indi/idual stakeholders ma( also hold conflicting stakes
Jinteres% participareM in an organi@ation.
#
The indirect1action com!onent of the en/ironment consists of their factors that influence the
organi@ation indirectl(. *ot onl( do these factors create a climate to 'hich the organi@ation must ad5ust,
3ut the( ha/e the potential to mo/e into the direct2action en/ironment. Cemographic and lifest(le
/aria3les mold Ja forma% a modelaMan organi@ation+s la3or suppl( and customer 3ase, and changes in
/alues are at heart of e/er( other social, economic, political, and technological change. .anagers must
distinguish 3et'een and ad5ust to structural and c(clical changes in the econom(. In addition, the( must
contend 'ith Ja lupta cuM the gro'ing influence of special interest groups in politics, and technological
de/elopments also fuel the competition 3et'een organi@ations.
Technological ad/ances in communication and transportation ha/e made the international
en/ironment increasingl( important. )reater international competition has made the E.:. lag Ja LntKrzia%
a rJmKne Ln urmJM in competiti/eness critical, and has also 3lurred Ja Lntuneca% a pune Ln ceaRJM the
distinction 3et'een the pri/ate and pu3lic sectors.
The en/ironment determines the e0tent to 'hich Jgradul Ln careM organi@ations face uncertaint( and
to 'hich the( are dependent on others for /ital resources. In tur3ulent en/ironments, organi@ations must
de/ote more of their resources to monitoring the en/ironment. The natural2selection, resource2
dependence, and industrial2organi@ation models pro/ide alternati/e /ie's of the relationship 3et'een
organi@ations and the en/ironment.
.anagers 7 especiall( at higher le/els 7 must monitor the e0ternal en/ironment and tr( to forecast
changes that 'ill affect the organi@ation. The( ma( use strategic planning and organi@ational design to
ad5ust to the en/ironment.
". Pro!#ction an! pro!#cts
1oca-#lar)
a. Match #p these /or!s /ith the !e*initions /hich *ollo/.
Capacity component inventory lead time plant
'ocation su(contractor outsourcing or contracting out
1. an( compan( that pro/ides goods or ser/ices for another one
2. an( of the pieces or parts that make up a product, machine, etc.
3. 3u(ing products or processed materials from other companies rather than manufacturing them
4. the Jma0imumM rate of output that can 3e achie/ed from a production process
5. the 3uildings, machines, eLuipment and other facilities used in the production process
. the geographical situation of a factor( or other facilit(
!. the stock of an( item or resource used in an organi@ation Jincluding ra' materials, parts, supplies,
'ork in process and finished productsM
". the time needed to perform an acti/it( Ji.e. to manufacture or deli/er somethingM
-. A*ter it has -een !eci!e! /hat to man#*act#re& operations managers ha'e to !eci!e where to
man#*act#re the !i**erent pro!#cts& how much !roductive ca!acity their *actories an! plants sho#l!
ha'e& an! how much inventory to maintain. Rea! the 15 sentences -elo/& an! classi*) them #n!er
the *ollo/ing si, hea!ings. Some sentences ma) *all #n!er t/o hea!ings.
!%
6 The conseLuences of insufficient capacit(
B The conseLuences of e0cess capacit(
C The ad/antages of large facilities
C The disad/antages of large facilities
$ The ad/antages of ha/ing a large in/entor(
; The disad/antages of ha/ing a large in/entor(
1. 6 long lead time ma( allo' competitors to enter the market.
2. 6/erage fi0ed cost per unit drops as /olume increases 3ecause each succeeding unit a3sor3s part of
the fi0ed costs, gi/ing economies of scale.
3. ;inding staff and coordinating material flo' 3ecome e0pensi/e and difficult.
4. If lead time increases, some customers ma( go to other suppliers.
5. Dost sales and market share are usuall( permanent.
. The 'orking en/ironment might 'orsen and industrial relations deteriorate.
!. There are costs of storage, handling, insurance, depreciation, the opportunit( cost of capital, and so
on.
". Gou can 3e more fle0i3le in product scheduling, and ha/e longer lead times and lo'er cost operation
through larger production runs 'ith fe'er set2ups.
#. There is al'a(s a risk of o3solescence, theft, 3reakage, and so on.
1%. Gou can meet /ariation in product demand.
11. Gou ma( 3e under2utili@ing (our 'ork force.
12. Gou ha/e protection against /ariation in ra' material deli/er( time Jdue to shortages, strikes, lost
orders, incorrect or defecti/e shipments, etc.M
13. Gou ma( 3e forced to produce additional less profita3le products.
14. Gou can take ad/antage of Luantit( discounts in purchasing.
15. Gou ma( ha/e to reduce prices to stimulate demand.
1$. H#stDinDtime pro!#ction
Rea! the te,t -elo/& an! insert the eight /or!s !e*ine! in 'oca-#lar) a> in the spaces.
Capacity component inventory lead time
'ocation outsourcing plants su(contractor
.anufacturing companies are faced 'ith a Nmake2or23u( decision+ for e/er( item or J1M OOO. the(
use Jas 'ell as for e/er( process and ser/iceM. Co the( make it themsel/es or do the( outsource J a
contracta lucrJri Ln afara companieiM, and 3u( from a J2M OOO- If a compan( assem3les products
supplied 3( a large num3er of su3contractors Jfurnizor intermediarM, the( face the pro3lem of ho' much
J3M OO. the( reLuire.
In 1ust2In2Time J1ITM production 7 also called lean production, stockless production, and continuous
flo' manufacture 7 nothing is 3ought or produced until it is needed. $ach section of the production
process makes the necessar( Luantit( of the necessar( units at the necessar( time 7 'hich is 'hen it is
reLuired 3( the ne0t stage of the manufacturing process, or 3( distri3utors or customers.
The 1IT s(stem is usuall( credited to Taiichi 9hno, 'ho 'as /ice2president for manufacturing 'ith
To(ota in 1apan in the earl( 1#5%s 7 although he stated that he got the idea from 6merican supermarketsR
1IT is 'holl( contrar( to the $uropean and 6merican logic of encouraging greater producti/it(, and
'elcoming production that e0ceeds the agreed schedule or Luota, and stocking e0tras in case of the future
pro3lems.
1IT minimi@es the cost of holding in/entories, 'hich are regarded negati/el(, as a/oida3le costs,
rather than as assets. The large 1apanese manufacturing companies ha/e long practised J4MOOOO, and
!1
generall( use e0tensi/e net'orks of small su3contractors. 9f course, if a single su3contractor fails to
deli/er a component on time, the 'hole production process is sa3otaged, 3ut the 1apanese industrial
s(stem relies on mutual trust and long2term relationships. :mall suppliers often attempt to situate their
facilities close to the J5M.OOO of a larger compan( 'ith 'hich the( 'ork.
The 1apanese also prefer small, speciali@ed production JMO.OO 'ith a limited J!MOO.. , in 'hich,
'here/er possi3le, all the machines reLuired for a certain 5o3 are grouped together. This a/oids all the
'aiting and mo/ing time in/ol/ed in sending half2finished item from one department to another, although
it often reLuires fle0i3le, multi2skilled emplo(ees.
1IT thus greatl( reduces transportation and in/entor( costs, and should ensure that there is no 'aste
from o/erproduction, or from idle 'orkers 'aiting for parts. It allo's increased producti/it( 3ecause of
shortened throughput time Jtimpul de prelucrare a materialelorM. If factories are eLuipped so that set2up
times are short, /er( small production runs Jetape de producRieM are possi3le. 6n( Lualit( pro3lems or
product defects should 3e noticed more Luickl(, production J"MOOO Jtimpul de conducere a producRieiM
are reduced, and the firm can react more rapidl( to demand changes.
2(. Pro!#cts an! -ran!s
Rea! the *ollo/ing te,t& an! /rite a -rie* hea!ing *or each paragraph.
1 ????????????
.arketing theorists tend to gi/e the 'ord product a /er( 3road meaning, using it to refer to an(thing
capa3le of satisf(ing a need or 'ant. Thus ser/ices, acti/ities, people Jpoliticians, athletes, film starsM,
places Jholida( resortsM, organi@ations Jhospitals, colleges, political partiesM, and ideas, as 'ell as ph(sical
o35ects offered for sale 3( retailers, can 3e considered as products. Ph(sical products can usuall( 3e
augmented Ja spori% a creQteM 3( 3enefits such as customer ad/ice, deli/er(, credit facilities, a 'arrant( or
guarantee, maintenance, after2sales ser/ice, and so on.
2 ????????????
:ome manufactures use their name Jthe Nfamil( name+M for all their products, e.g. Philips, Colgate,
Gamaha. 9thers, including Enile/er and Procter V )am3le, market /arious products under indi/idual
3rand names, 'ith the result that man( customers are unfamiliar 'ith the name of the manufacturing
compan(. The ma5or producers of soap po'ders, for e0ample, are famous for their multi23rand strateg(,
'hich allo's them to compete in /arious market segments, and to fill shelf space in shops, there3(
lea/ing less room for competitors. It also gi/es them a greater chance of getting some of the custom of
3rand2s'itchers Jcei care schim(J mJrcile pe care le cumpJrJM.
3 ????????????
.ost manufactures produce a large num3er of products, often di/ided into product lines. .ost
product lines consist of se/eral products, often distinguished 3( 3rand names, e.g. a range of soap
po'ders, or of tooth2pastes. :e/eral different items Jdifferent si@es or modelsM ma( share the same 3rand
name. Together, a compan(+s items, 3rands and products constitute its product mi0. :ince different
products are al'a(s at different stages of their c(cles, 'ith gro'ing, sta3le or declining sales and
profita3ilit(, and 3ecause markets, opportunities and resources are in constant e/olution, companies are
al'a(s looking to the future, and re2e/aluating their product mi0.
4 ?????????????
Companies 'hose o35ecti/es include market share and market gro'th generall( ha/e long product
lines, i.e. a large num3er of items. Companies 'hose o35ecti/e is high profita3ilit( 'ill ha/e shorter lines,
including onl( profita3le items. Get, most product lines ha/e a tendenc( to lengthen o/er time, as
companies produce /ariations on e0isting items, or add additional items to co/er further market segments.
!2
6dditions to product lines can 3e the result of either upBmarket or do"nBmarket, i.e. making items of
higher or lo'er Lualit(. This can 3e carried out in order to reach ne' customers, to enter gro'ing or more
profita3le market segments, to react to competitors+ initiati/es, and so on. Get, such mo/es ma( cause
image pro3lemsQ mo/ing to the lo'er end of the market dilutes Ja slJ(i% a diluaM a compan(+s image for
Lualit(, 'hile a compan( at the 3ottom of a range ma( not con/ince dealers and customers that it can
produce Lualit( products for the high end. 'ineBfilling 7 adding further items in that part of a products
range 'hich a line alread( co/ers 7 might 3e done in order to compete in competitors+ niches J niQJM, or
simpl( to utili@e e0cess production capacit(.
1oca-#lar)
3in! /or!s or e,pressions in the te,t /hich mean the *ollo/ing.
1 the possi3ilit( of pa(ing for a product o/er an e0tended period
2 a promise 3( a manufacturer or seller to repair or replace defecti/e goods during a certain period of time
3 a surface in a store on 'hich goods are displa(ed
4 consumers 'ho 3u( /arious competing products rather than 3eing lo(al to a particular 3rand
5 the standard pattern of sales of a product o/er the period that is marketed
the e0tend to 'hich an acti/it( pro/ides financial gain
! possi3ilities of filling unsatisfied needs in sectors in 'hich the compan( can produce goods or ser/ices
effecti/el(
" the sales of a compan( e0pressed as a percentage of total sales in a gi/en market
# the set of 3eliefs that the pu3lic at large holds of an organi@ation
1% a small, speciali@ed, 3ut profita3le segment of a market
$. Mar%eting& A!'ertising& Promotion
1oca-#lar)
.atch up the 'ords or e0pressions on the left 'ith the definitions on the right.
1 distri3ution channel 6 all the companies or indi/iduals in/ol/ed in mo/ing a particular good
or ser/ice from the producer to the consumer
2 to launch a product B an idea for a ne' product, 'hich is tested 'ith target consumers 3efore
the actual product is de/eloped
3 market opportunities C attri3utes or characteristics of a productQ Lualit(, price, relia3ilit(, etc.
4 market research C di/iding a market into distinct groups of 3u(ers 'ho ha/e different
reLuirements or 3u(ing ha3its
5 market segmentation $ places 'here goods are sold to the pu3lic 7 shops, stores, kiosks,
market stalls, etc.
packaging ; possi3ilities of filling unsatisfied needs in sectors in 'hich a compan(
can profita3l( produce goods or ser/ices
! points of sale ) someone 'ho contacts e0isting and potential customers, and tries to
persuade them to 3u( goods or ser/ices
" product concept 4 collecting, anal(sing and reporting data rele/ant to a specific
marketing situation Jsuch as a proposed ne' productM
!3
# product features I to introduce a ne' product onto the market
1% sales representati/e 1 'rappers and containers in 'hich products are sold
21. The centralit) o* mar%eting
.oo% B#ic%l) thro#gh the *ollo/ing te,t an! !eci!e /hich paragraphs are a-o#t these s#-5ects7
- compan(2to2compan( marketing
- identif(ing market opportunities
- the marketing mi0
- the selling and marketing concepts
- the importance of market research
.ost management and marketing 'riters no' distinguish 3et'een selling and marketing. The Nselling
concept+ assumes that resisting consumers ha/e to 3e persuaded 3( /igorous hard2selling techniLues to
3u( non2essential goods or ser/ices. Products are sold rather than 3ought. The Nmarketing concept+, on
the contrar(, assumes that the producer+s task is to find 'ants and fill them. In other 'ords, (ou don+t sell
'hat (ou make, (ou make 'hat 'ill 3e 3ought. 6s 'ell as satisf(ing e0isting needs, marketers can also
anticipate and create ne' ones. The markets for the ,alkman, /ideo games, personal computers, and
genetic engineering, to choose some recent e0amples, 'ere largel( created rather than identified.
.arketers are conseLuentl( al'a(s looking for market opportunities 7 profita3le possi3ilities of
filling unsatisfied needs or creating ne' ones in areas in 'hich the compan( is likel( to en5o( a
differential ad/antage, due to its distincti/e competencies Jthe things it does particularl( 'ellM. .arket
opportunities are generall( isolated 3( market segmentation. 9nce a target market has 3een identified, a
compan( has to decide 'hat goods or ser/ice to offer. This means that much of the 'ork of marketing has
3een done 3efore the final product or ser/ice comes into e0istence. It also means that the marketing
concept has to 3e understood throughout the compan(, e.g. in the production department of a
manufacturing compan( as much as in the marketing department itself. The compan( must also take
account of the e0istence of competitors, 'ho al'a(s ha/e to 3e identified, monitored and defeated in the
search for lo(al customers.
8ather than risk launching a product or ser/ice solel( on the 3asis of intuition or guess'ork, most
companies undertake market research J)BM or marketing research JE:M. The( collect and anal(@e
information a3out the si@e of a potential market, a3out consumers+ reactions to particular product or
ser/ice features, and so on. :ales representati/es, 'ho also talk to customers, are another important
source of information.
9nce the 3asic offer, e.g. a product concept, has 3een esta3lished, the compan( has to think a3out the
marketing mi0, i.e. all the /arious elements of a marketing program, their integration, and the amount of
effort that a compan( can e0pend on them in order to influence the target market. The 3est2kno'n
classification of these elements is the N4Ps+Q product, place, promotion and price. 6spects to 3e considered
in marketing products include Lualit(, features Jstandard and optionalM, st(le, 3rand name, si@e,
packaging, ser/ices and guarantee. Place in a marketing mi0 includes such factors as distri3ution
channels, locations of points of sale, transport, in/entor( si@e, etc. Promotion groups together ad/ertising,
pu3licit(, sales promotion, and personal selling, 'hile price includes the 3asic list price, discounts, the
length of the pa(ment period, possi3le credit terms, and so on. It is the 5o3 of a product manager or a
3rand manager to look for 'a(s to increase sales 3( changing the marketing mi0.
It must 3e remem3ered that Luite apart from consumer markets Jin 'hich people 3u( products for
direct consumptionM there e0ists an enormous producer or industrial or 3usiness market, consisting of all
the indi/iduals and organi@ations that acLuire goods and ser/ices that are used in the production of other
goods, or in the suppl( of ser/ices to others. ;e' consumers reali@e that the producer market is actuall(
larger than the consumer market, since it contains all the ra' materials, manufactured parts and
!4
components that go into consumer goods, plus capital eLuipment such as 3uilding and machines, supplies
such as energ( and pens and paper, and ser/ices ranging from cleaning to management consulting, all of
'hich ha/e to 3e marked. There is conseLuentl( more industrial than consumer marketing, e/en though
ordinar( consumers are seldom e0posed to it.
omprehension
.oo% at the *ollo/ing !iagrams *rom "ar(eting "anagement -) Philip Iotler.
1 The first diagram contrasts the selling and the marketing concepts. ;ill in the four spaces 'ith the
follo'ing 'ords or e0pressionsQ
] Coordinated marketing ] .arket
] Customer needs ] Profits through customer satisfaction
'tarting Docus "eans #nds
!oint
;actor( Products :elling V promoting Profits
through sales /olume
a. The selling concept
J1M OOOO.. J2M OOOOO . J3M OOOOO.. J4M OOOOO
3. The marketing concept
22. <o/ companies a!'ertise
6d/ertising informs consumers a3out the e0istence and 3enefits of products and ser/ices, and
attempts to persuade them to 3u( them. The 3est form of ad/ertising is pro3a3l( 'ord2of2'ord
ad/ertising, 'hich occurs 'hen people tell their friends a3out the 3enefits of products or ser/ices that
the( ha/e purchased. Get, /irtuall( no pro/iders of goods or ser/ices rel( on this alone, 3ut use paid
ad/ertising instead. Indeed, man( organi@ations also use institutional or prestige ad/ertising, 'hich is
designed to 3uild up their reputation rather than to sell particular products.
6lthough large companies could easil( set up their o'n ad/ertising departments, 'rite their o'n
ad/ertisements, and 3u( media space themsel/es, the( tend to use the ser/ices of large ad/ertising
agencies. These are likel( to ha/e more resources, and more kno'ledge a3out all aspects of ad/ertising
and ad/ertising media than a single compan(. The most talented ad/ertising people generall( prefer to
'ork for agencies rather then indi/idual companies as this gi/es them the chance to 'ork on a /ariet( of
advertising accounts Jcontracts to ad/ertise products or ser/icesM. It is also easier for a dissatisfied
compan( to gi/e its account to another agenc( than it 'ould 3e to fire its o'n ad/ertising staff.
The client compan( generall( gi/es the ad/ertising agenc( an agreed 3udgetA a statement of the
o35ecti/es of the ad/ertising campaign, kno'n as a 3riefA and an o/erall ad/ertising strateg( concerning
the message to 3e communicated to the target customers. The agenc( creates ad/ertisements Jthe 'ord is
often a33re/iated to ad/erts or adsM, and de/elops a media plan specif(ing 'hich media 7 ne'spapers,
maga@ines, radio, tele/ision, cinema, posters, mail, etc. 7 'ill 3e used and in 'hich proportions. J9n
tele/ision and radio, ads are often kno'n as commercials.M 6gencies often produce alternati/e ads or
commercials that are pre2tested in ne'spapers, tele/ision stations, etc. in different parts of a countr(
3efore a final choice is made prior to a national campaign.
The agenc(+s media planners ha/e to decide 'hat percentage of the target market the( 'ant to
reach Jho' man( people 'ill 3e e0posed to the adsM and the num3er of times the( are likel( to see them.
!5
6d/ertising people talk a3out freLuenc( or N9T:+ Jopportunities to seeM and the threshold effect Jefectul
de pronireM 7 the point at 'hich ad/ertising 3ecomes effecti/e. The choice of ad/ertising media is
generall( strongl( influenced 3( the comparati/e cost of reaching 1,%%% mem3ers of the target audience,
the cost per thousand Joften a33re/iated to CP., using the 8oman numeral for 1,%%%M. The timing of
ad/ertising campaigns depends on factors such as purchasing freLuentl( and 3u(er turno/er Jne' 3u(ers
entering the marketM.
4o' much to spend on ad/ertising is al'a(s pro3lematic. :ome companies use the comparati/e2
parit( method Jmetoda comparativBanalogicJM 7 the( simpl( match their competitors+ spending, there3(
a/oiding ad/ertising 'ars. 9thers set their ad 3udget at a certain percentage of current sales re/enue. But
3oth these methods disregard Ja nu Rine seama% a negli.aM the fact that increased ad spending or counter2
c(clical ad/ertising JreclamJ anticiclicJM can increase current sales. 9n the other hand, e0cessi/e
ad/ertising is counter2producti/e JantiproductivJM 3ecause after too man( e0posures people tend to stop
noticing ads, or 3egin to find them irritating. 6nd once the most promising prospecti/e customers ha/e
3een reached, there are diminishing returns, i.e. an e/er2smaller increase in sales in relation to increased
ad/ertising spending.
1oca-#lar)
3in! the terms in the te,t /hich mean the *ollo/ing.
1 free ad/ertising, 'hen satisfied customers recommend products to their friends.
2 ad/ertising that mentions a compan(+s name 3ut not specific products
3 companies that handle ad/ertising for clients
4 a contract 'ith a compan( to produce its ad/ertising
5 the amount of mone( a compan( plans to spend in de/eloping its ad/ertising and 3u(ing media time or
space
the statement of o35ecti/es of an ad/ertising campaign that a client 'orks out 'ith an ad/ertising
agenc(
! the ad/ertising of a particular product or ser/ice during a particular period of time
" a defined set of customers 'hose needs a compan( plans to satisf(
# the people 'ho choose 'here to ad/ertise, in order to reach the right customers
1% the fact that a certain amount of ad/ertising is necessar( to attract a prospecti/e customer+s attention
11 choosing to spend the same amount on ad/ertising as one+s competitors
12 ad/ertising during periods or seasons 'hen sales are normall( relati/el( poor
:isc#ssion
@hich o* the *ollo/ing claims !o )o# agree /ith8
1. 6d/ertising is essential for 3usiness, especiall( for launching ne' consumer products.
2. 6 large reduction of ad/ertising 'ould decrease sales.
3. 6d/ertising often persuades people to 3u( things the( don+t need.
4. 6d/ertising often persuades people to 3u( things the( don+t 'ant.
5. 6d/ertising lo'ers the pu3lic+s taste.
. 6d/ertising raises prices.
!. 6d/ertising does not present a true picture of products.
". 6d/ertising has a 3ad influence on children.
0n a /ellD%no/n s#r'e)& the $arvard Business Review as%e! 2&7(( senior -#siness managers
/hether the) agree /ith these statements. The s#r'e) pro!#ce! some #ne,pecte! res#lts. @hich o*
the *ollo/ing percentages !o )o# thin% go /ith /hich o* the statements a-o'e8
!
41X 4#X 51X 5!X %X !2X "5X #%X
23The *o#r ma5or promotional tools
0nsert the *ollo/ing /or!s in the te,t -elo/.
Advertising aimed a"areness channel loyalty
Maturity medium tactics target trial
The 3asic idea 3ehind the Nmarketing concept+ 7 that (ou make 'hat (ou can sell rather than sell
'hat (ou make 7 does not mean that (our product 'ill sell all 3( itself. $/en a good, attracti/el(2priced
product that clearl( satisfies a need has to 3e made kno'n to its J1MOOO. Customers. Curing the
introduction and gro'th stages of the standard product life c(cle, the producer Jor importer, and so onM
has to de/elop product or 3rand J2MOOO. , i.e. inform potential customers Jand distri3utors, dealers and
retailersM a3out the product+s e0istence, its features, its ad/antages, and so on.
6ccording to the 'ell2kno'n N;our Ps+ formulation of the marketing mi0 Jproduct, place,
promotion and priceM, this is clearl( a matter of promotion. :ince 3udgets are al'a(s limited, marketers
usuall( ha/e to decide 'hich tools 7 ad/ertising, pu3lic relations, sales promotion, or personal selling 7 to
use, and in 'hat proportion.
&ublic relations Joften a33re/iated to P8M is concerned 'ith maintaining, impro/ing or
protecting the image of a compan( or product. The most important element of P8 is pu(licity 'hich Jas
opposed to ad/ertisingM is an( mention of compan(+s products that is not paid for, in an( J3MOOO. Q
read, /ie'ed or heard 3( a compan(+s customers or potential customers, aimed at assisting sales. .an(
companies attempt to place stories or information in ne's media to attract attention to a product or
ser/ice. Pu3licit( can ha/e a huge impact on pu3lic a'areness that could not 3e achie/ed 3( ad/ertising,
or at least, not 'ithout an enormous cost. 6 lot of research has sho'n that people are more likel( to read
and 3elie/e pu3licit( than ad/ertising.
'ales !romotions such as free samples, coupons, price reductions, competitions, and so on, are
temporar( J4MOOO. Cesigned to stimulate either earlier or stronger sales of a product. ;ree samples, for
e0ample, Jcom3ined 'ith e0tensi/e ad/ertisingM, ma( generate the initial J5MOOO. 9f a ne' product.
But the ma5orit( of products a/aila3le at an( gi/en time are of course in the JMOOOO.. stage of the
life c(cle. This ma( last man( (ears, until the product 3egins to 3e replaced 3( ne' ones and enters the
decline stage. Curing this time, marketers can tr( out a num3er of promotional strategies and tactics.
8educed2price packs in supermarkets, for e0ample, can 3e used to attract price2conscious 3rand2
s'itchers, and, also, to counter Ja contracaraM a promotion 3( a competitor. :tores also often reduce
prices of specific item as loss leader, 'hich 3ring customers into the shop 'here the( 'ill also 3u( other
goods.
:ales promotions can also 3e J!MOOO.. at distri3utors, dealer and retailers, to encourage them
to stock ne' items or larger Luantities, or to encourage off2season 3u(ing, or the stocking of items related
to an e0isting product. The( might eLuall( 3e designed to strengthen 3rand J"MOOO. 6mong retailers,
or to gain entr( to ne' markets. :ales promotions can also 3e aimed at the sales force, encouraging them
to increase their acti/ities in selling a particular product.
Personal selling is the most e0pensi/e promotional tool, and is generall( onl( used sparingl(, e.g.
as a complement to J#MOOO.. . 6s 'ell as prospecting for customers, spreading information a3out a
compan(+s products and ser/ices, selling these products and ser/ices, and assisting customers 'ith
possi3le technical pro3lems, salespeople ha/e another important function. :ince the( are often the onl(
person from a compan( that customers see, the( are an e0tremel( important J1%MOOOO of
information. It has 3een calculated that the ma5orit( of ne' product ideas come from customers /ia sales
representati/es.
!!
S#mmariCing
omplete the *ollo/ing sentences to s#mmariCe the te,t a-o'e.
1 ,hen a ne' product is launched, the producer has to O..
2 Promotion is one of the four O. A sales promotions are one of the four different OO.
3 The ad/antages of pu3licit( include O..
4 The four stages of the standard product life c(cle Je0cluding the pre2launched de/elopment stageM are
O.
5 8easons to offer temporar( price reductions include O.
:ales promotions need not onl( 3e aimed at customersA O.
! 6part from selling a compan(+s products, sales representati/es O.
:isc#ssion
@hat %in! o* sales promotions are )o# recepti'e to8
J coupons gi/ing a price reduction-
J free samples-
J discounts for 3u(ing a large Luantit(-
J price reductions in shops-
J packets offering N2%X $0tra+-
J competitions-
1oca-#lar)
There is a logical connection among three o* the *o#r /or!s in each o* the *ollo/ing gro#ps. @hich
is the o!! one o#t& an! /h)8
1 ad/ertising 7 competitors 7 pu3licit( 7 sales promotion
2 ad/ertising agenc( 7 ad/ertising campaign 7 media plan 7 'ord2of2mouth ad/ertising
3 ad/ertising manager 7 3rand2s'itcher 7 marketing manager 7 sales rep
4 after2sales ser/ice 7 guarantee 7 optional features 7 points of sale
5 3rand a'areness 7 3rand lo(alt( 7 3rand name 7 3rand preference
competitions 7 coupons 7 free samples 7 line2stretching
! credit terms 7 discount 7 list price 7 packaging
" decline 7 gro'th 7 introduction 7 product impro/ement
# focus group inter/ie's 7 internal research 7 media plan 7 Luestionnaire
1% packaging 7 place 7 product 7 promotion
1(. Mar%et str#ct#re an! competition
24. Mar%et lea!ers& challengers an! *ollo/ers
Rea! the *ollo/ing te,t an! /rite short hea!ings *or each paragraph.
1 ?????????????.
In most markets there is a definite market leaderQ the firm 'ith the largest market share. This is
often the first compan( to ha/e entered the field, or at least the first to ha/e succeeded in it. The market
leader is freLuentl( a3le to lead other firms in the introduction of ne' products, in price changes, in the
le/el or intensit( of promotions, and so on.
!"
2 ????????????
.arket leaders usuall( 'ant to increase their market share e/en further, or at least to protect their
current market share. 9ne 'a( to do this is to tr( to find 'a(s to increase the si@e of the entire market.
Contrar( to a common 3elief, 'holl( dominating a market, or ha/ing a monopol(, is seldom an
ad/antageQ competitors e0pand markets and find ne' uses and users for products, 'hich enriches
e/er(one in the field, 3ut the market leader more than its competitors. 6 market can also 3e e0panded 3(
stimulating more usageQ for e0ample, man( households no longer ha/e onl( one radio or cassette pla(er,
3ut perhaps one in each room, one in the car, plus a ,alkman or t'o.
3 ??????????..
In man( markets, there is often also a distinct market challenger, 'ith the second2largest market
share. In the car hire 3usiness, the challenger actuall( ad/ertises this factQ for man( (ears 6/is used the
slogan N,e+re num3er t'o. ,e tr( harder.+ .arket challengers can either attempt to attack the leader, or
to increase their market share 3( attacking /arious market follo'ers.
4 ??????????..
The ma5orit( of companies in an( industr( are merel( market follo'ers, 'hich present no threat
to the leader. .an( market follo'ers concentrate on market segmentationQ finding a profita3le niche in
the market that is not satisfied 3( other goods or ser/ices, and that offers gro'th potential or gi/es the
compan( a differential Jdistinctiv% deose(itM ad/antage 3ecause of its specific competencies.
5 ???????????
6 market follo'er, 'hich does not esta3lish its o'n niche is in a /ulnera3le positionQ if its
product does not ha/e a NuniLue selling proposition+ there is no reason for an(one to 3u( it. In fact, in
most esta3lished industries, there is onl( room for t'o or three ma5or companiesQ think of soft drinks,
soap and 'ashing po'ders, 5eans, sports shoes, and so on. 6lthough small companies are generall(
fle0i3le, and can Luickl( respond to market conditions, their narro' range of customers causes
pro3lematic fluctuations in turno/er and profit. ;urthermore, the( are /ulnera3le in a recession 'hen,
largel( for ps(chological reasons, distri3utors, retailers and customers all prefer to 3u( from 3ig, 'ell2
kno'n suppliers.
1oca-#lar)
3in! /or!s in the te,t /hich mean the *ollo/ing.
1 a compan(+s sales e0pressed as a percentage of the total market
2 short2term tactics designed to stimulate stronger sales of a product
3 the situation in 'hich there is onl( one seller of a product
4 companies offering similar goods or ser/ices to the same set of customers
5 a short and easil( memori@ed phrase used in ad/ertising
the di/ision of a market into su3markets according to the needs or 3u(ing ha3its of different groups of
potential customers
! a small and specific market segment
" a factor 'hich makes (ou superior to competitors in a certain respect
# a 3usiness+s total sales re/enue
1% a period during 'hich an econom( is 'orking 3elo' its potential
25. Ta%eo'ers& mergers an! -#)o#ts
1oca-#lar)
Match #p these /or!s /ith the !e*initions -elo/.
!#
Back"ard integration to diversify !diversification# synergy
9or"ard integration horizontal integration to merge !a merger#
to innovate !innovation# a raid a takeover (id
vertical integration
1 designing ne' products and 3ringing them to the market
2 to e0pand into ne' fields
3 to unite, com3ine, amalgamate, integrate or 5oin together
4 3u(ing another compan(+s shares on the stock e0change, hoping to persuade enough other shareholders
to sell to take control of the compan(
5 a pu3lic offer to a compan(+s shareholders to 3u( their shares, at a particular price during a particular
period, so as to acLuire a compan(
to merge 'ith or take o/er other firms producing the same t(pe of goods or ser/ices
! 5oining 'ith other firms in other stages of the production or sale of a product
" a merger 'ith or the acLuisition of one+s suppliers
# a merger 'ith or the acLuisition of one+s marketing outlets
1% com3ined production that is greater than the sum of the separate parts
Rea!ing
.e'erage! -#)o#ts
9ne indication that the people 'ho 'arn against takeo/ers might 3e right is the e0istence of
le/eraged 3u(outs.
In the 1#%s, a 3ig 'a/e of takeo/ers in the E: created conglomerates 7 collections of unrelated
3usinesses com3ined into a single corporate structure. It later 3ecame clear that man( of these
conglomerates consisted of too man( companies and not enough s(nerg(. 6fter the recession of the earl(
1#"%s, there 'ere man( large companies on the E: stock market 'ith good earnings 3ut lo' stock prices.
Their assets 'ere 'orth more than the companies+ market /alue.
:uch conglomerates 'ere clearl( not ma0imi@ing stockholder /alue. The indi/idual companies
might ha/e 3een more efficient if li3erated from central management. ConseLuentl(, raiders JpersoanJ
agresivJ% acaparatoareM 'ere a3le to 3orro' mone(, 3u( 3adl(2managed, inefficient and under2priced
corporations, and then restructure them, split them up, and resell them at a profit.
Con/entional financial theor( argues that stock markets are efficient, meaning that all rele/ant
information a3out companies is 3uilt into their share prices. 8aiders in the 1#"%s disco/ered that this 'as
Luite simpl( untrue. 6lthough the market could understand data concerning companies+ earnings, it 'as
highl( inefficient in /aluing assets, including land, 3uildings and pension funds. 6sset2stripping 7 selling
off the assets of poorl( performing or under2/alued companies 7 pro/ed to 3e highl( lucrati/e Javanta.os%
profita(ilM.
Theoreticall(, there 'as little risk of making a loss 'ith a 3u(out, as the de3ts incurred J datoriile
fJcuteM 'ere guaranteed 3( the companies+ assets. The ideal targets for such 3u(outs 'ere companies
'ith huge cash reser/es that ena3led the 3u(er to pa( the interest on the de3t, or companies 'ith
successful su3sidiaries that could 3e sold to repa( the principal, or companies in fields that are not
sensiti/e to a recession, such as food and to3acco.
Takeo/ers using 3orro'ed mone( are called Nle/eraged 3u(outs+ or NDB9s+. De/erage Jraportul
dintre creanRe Qi capitalM means ha/ing a large proportion of de3t compared to eLuit( capital. J,here a
compan( is 3ought 3( its e0isting managers, 'e talk of a management buyout or .B9.M .uch of the
mone( for DB9s 'as pro/ided 3( the 6merican in/estment 3ank Cre0el Burnham Dam3ert, 'here
.ichael .illken 'as a3le to con/ince in/estors that the high returns on de3t issued 3( risk( enterprises
more than compensated for their riskiness, as the rate of default Jrata neonorJrii plJRiiM 'as lo'er than
might 3e e0pected. 4e created a huge and liLuid market of up to 3%% 3illion dollars for N5unk 3onds+
Jo(ligaRiuni cu riscM. J.illken 'as later arrested and charged Ja fi acuzatM 'ith #" different felonies
"%
Jcrime% acte penaleM, including a lot of insider dealing JoperaRiuni ale unui iniRiat% a unei persoane
anga.ate Ln respectiva firmJM, and Cre0el Burnham Dam3ert 'ent 3ankrupt Ja da falimentM in 1##%.M
8aiders and their supporters argue that the permanent threat of takeo/ers is a challenge to
compan( managers and directors to do their 5o3s 3etter, and that 'ell2run 3usinesses that are not
under/alues are at little risk. The threat of raids forces companies to put capital to producti/e use. ;at or
la@( companies that fail to do this 'ill 3e taken o/er 3( raiders 'ho 'ill use assets more efficientl(, cut
costs, and increase shareholder /alue. 9n the other hand, the permanent threat of a takeo/er or a 3u(out is
clearl( a disincenti/e Jmi.loc de intimidareM to long2term capital in/estment, as a compan( 'ill lose its
in/estment if a raider tries to 3reak it up as soon as its share price falls 3elo' e0pectations.
DB9s, ho'e/er, seem to 3e largel( an 6merican phenomenon. )erman and 1apanese managers
and financiers, for e0ample, seem to consider companies as places 'here people 'ork, rather than as
assets to 3e 3ought and sold. 4ostile takeo/ers and 3u(outs are almost unkno'n in these t'o countries,
'here 3usiness tends to concentrate on long2term goals rather than seek instant stock market profits.
,orkers in these companies are considered to 3e at least as important as shareholders. The idea of a
1apanese manager restructuring a compan(, la(ing off Ja concedia temporarM a large num3er of 'orkers,
and getting a huge pa( rise Jas freLuentl( happens in Britain and the E:M, is unthinka3le. Da(2offs in
1apan are instead a cause for shame for 'hich managers are e0pected to apologi@e.
S#mmariCing
omplete the *ollo/ing sentences& /hich s#mmariCe the te,t a-o'e.
1 The fact that man( large conglomerates+ assets 'ere 'orth more than their stock market /aluation
demonstrated that O
2 8aiders 3ought conglomerates in order to O
3 8aiders sho'ed that the stock market did not O
4 8aiders 'ere particularl( interested in O
5 In/estors 'ere prepared to lend mone( to finance DB9s 3ecause O
8aiders argue that the possi3ilit( of a 3u(out O
26. Pro*its an! social responsi-ilit)
In the 1#2%s, man( large 6merican corporations 3egan, on a 'ide scale, to esta3lish pension
funds, emplo(ee stock o'nership, life insurance schemes, unemplo(ment compensation funds, limitations
on 'orking hours, and high 'ages. The( 3uilt houses, churches, schools and li3raries, pro/ided medical
and legal ser/ices, and ga/e mone( to charities Jacte filantropiceM. :ince this is fairl( surprising 3eha/ior
for 3usiness corporations, there must 3e a good e0planation.
In the <enerous Corporations, *eil 1. .itchell argues that the reason for man( of these actions,
most of 'hich clearl( did not 3ring immediate cash 3enefits, 'as that large corporations had a legitimac(
pro3lem. The e0istence of large corporations sho'ed the classical economic theor( of perfect competition
to 3e inadeLuate. ConseLuentl( large corporations introduced N'elfare capitalism+ Jcapitalism socialM as a
'a( of creating fa/ora3le pu3lic opinion. 8ational capitalists starting 'ith 4enr( ;ord, also reali@ed that
a 3etter paid 'ork force 'ould 3e more lo(al, and 'ould 3e a3le to 3u( more goods and ser/ices, and that
a 3etter educated 'ork force 'ould 3e a more efficient one.
9f course, pure free market theorists disappro/e of 'elfare capitalism, and all actions inspired 3(
Nsocial responsi3ilit(+ rather than the attempt to ma0imi@e profits. :ince the 3enefits of such initiati/es are
not confined to Ja se limita laM those 'ho 3ear the costs, .ilton ;riedman has critici@ed them for 3eing
un3usinesslike, and for threatening the sur/i/al not onl( of indi/idual corporations 3ut also the general
/italit( of capitalism. In a ne'spaper article titled NThe social responsi3ilit( of 3usiness is to increase its
profits+, he argued thatQ
In a free enterprise, pri/ate2propert( s(stem, a corporate e0ecuti/e is an emplo(ee of the o'ners
of the 3usiness. 4e has direct responsi3ilit( to his emplo(ers. That responsi3ilit( is to conduct the
"1
3usiness in accordance 'ith their desires, 'hich generall( 'ill 3e to make as much mone( as possi3le,
'hile of course confirming to the 3asic rules of the societ(, 3oth those em3odied in la' and those
em3odied in ethical custom.
Thus e0ecuti/es should not make e0penditures on reducing pollution 3e(ond the amount that is
reLuired 3( la' or that is the 3est interest of the firm. *or should the( deli3eratel( hire less2Lualified,
long2term unemplo(ed 'orkers, or 'orkers from ethnic minorities suffering from discrimination. To do
so is to 3e guilt( of spending the stockholders+ Jor the customers+ or the emplo(ees+M mone(. ;riedman
does not consider the possi3ilit( that stockholders might prefer to recei/e lo'er di/idends 3ut li/e in a
societ( 'ith less pollution or less unemplo(ment and fe'er social pro3lems.
6n alternati/e /ie' to the stockholder model e0emplified 3( ;riedman+s article is the
stakeholder Jcei care deRin un interesM model, outlined, for e0ample, in 1ohn &enneth )al3raith+s 3ook,
The $e" Industrial &tate. 6ccording to his approach, 3usiness managers ha/e responsi3ilities to all the
groups of people 'ith a stake in or an interest in or a claim on the firm. These 'ill include suppliers,
customers, emplo(ees, and the local communit(, as 'ell as the stockholders. 6 firm 'hich is managed for
the 3enefit of all its stakeholders, 'ill not, for e0ample, pollute the area around its factories, or close
do'n a factor( emplo(ing se/eral hundred people in a small to'n 'ith no other significant emplo(ers,
and relocate production else'here in order to make small financial sa/ings. Proponents of the stakeholder
approach suggest that suppliers, customers, emplo(ees, and mem3ers of the local communit( should 3e
strongl( represented on a compan(+s 3oard of directors.
1oca-#lar)
3in! /or!s or e,pressions in the te,t /hich mean the *ollo/ing.
1 institutions or organi@ations that pro/ide help for people in need
2 accepta3ilit(, according to la' or pu3lic opinion
3 the situation 'hen there are a large num3er of sellers and 3u(ers, freedom to enter and lea/e markets, a
complete flo' of information, and so on
4 a condition of general 'ell23eing Jand go/ernment spending designed to achie/e thisM
5 menacing, endangering
li/eliness, health, energ(, strength
! an economic s(stem in 'hich an(one can attempt to raise capital, form a 3usiness, and offer goods or
ser/ices
" compl(ing 'ith or follo'ing Jrules, etc.M
# e0pressed, gi/en a material form
1% supporters, people 'ho argue in fa/our of something
11. Mone) an! 3inance
27. A histor) o* mone) K /hat ma%es the /orl! go ro#n!
"2
.one( 7 it @ingles in (our pocket, it rustles in (our 'allet and it clin(s in (our !iggy1ban(.
"oney ma(es the world go round, 3ut 'hat+s it- It+s a store of value or a measure of wealth. .one( is
an(thing that is generall( accepted as !ayment for goods and services. This is a 'ide definition and, o/er
the centuries, mone( has appeared in all shapes and si@esA cowrie shells in ancient China, huge stone
discs on a :outh Pacific Island or beads J=am!umM for the *orth 6merican Indians.
1ingle K a @orn>i
8ustle K a fo?ni
Clink K a @>ng>ni
Pigg(23ank K pu?culi<>
Co'rie K scoic>, ghioc
Beads K m>rgele, m>t>nii
,ampum K colier de scoici
3rom hic%ens to Plastic
6t the end of the da(, of course, it doesn+t reall( matter 'hat shape or si@e the mone( takes, as
long as e/er(one recognises it and acce!ts it in !ayment. But, o/er the course of histor(, mone( has
predominantl( 3een associated 'ith metals, in particular gold, silver and co!!er.
+artering JtrocM
Before metal mone( 3ecome the usual means of e0change, people 'ould swa! Jschim(aM goods
and ser/ices in a process kno'n as 3artering 7 SI+ll s'ap (ou ten chickens for (our goatT. This kind of
e0change does not reall( encourage trade, as all sorts of pro3lems ariseA are all the chickens of the same
si@e- If I+/e onl( got fi/e chickens, can I 3u( half a co'- 93/iousl(, precious metals are a !ractical
alternative to !ayment in (ind JLn naturJM.
3o#r 2ssential E#alities
;or mone( to 3e practical and efficient it should possess these LualitiesQ
*urability 7 in prison, cigarettes ma( 3ecome a medium of e0change 7 3ut the(+re eas( to 3reak and
Luickl( dr( upA in other 'ords, the( don+t last.
&ortability 7 in some parts of 6frica (our 'ealth is measured in cattle. This is fine if (ou+re trading
locall(, 3ut if mone( isn+t eas( to carr(, ho' can trade de/elop-
*ivisibility > small units make life much easier 7 imagine tr(ing to 3u( a hot dog in *e' Gork if the
\1%% 3ill 'as the lo'est unit of currenc(R
.ntrinsic value 7 mone( should ha/e some 'orth in itself, other'ise it 'on+t inspire confidence.
oins
,e first read of coins in the &ingdom of D(dia in the !
th
centur( BC. Their coins 'ere of e5ual
weight and therefore of e5ual value, simplif(ing trade. 'tam!ing a design onto the coins is called
FmintingGA Alexander the ?reat introduced the practice of stamping a picture of the sovereign)s head on
the coins, an idea that 'as soon copied.
Coins ho'e/er, 'ere not al'a(s as /alua3le as the( seemed 7 the( 'ere often cli!!ed or shaved
3( unscrupulous indi/iduals or debased 3( the state. The 8omans, 'ith the economic pressure of the
Punic 'ars, 3egan a long process of debasement, mi0ing more and more copper in 'ith the sil/er, so that
the intrinsic value of the coin 'as far lo'er than the mar(ed face value.
.int K a 3ate moned>
Ce3ase K a de/alori@a
"3
Ce3asement K de/alori@are
Clipped K rete@at, scurtat
:ha/ed K redus
Paper Mone)
Bank notes 'ere first introduced 3( the Chinese in the 1%
th
centur(. The( 'ere later used 3(
go/ernments in dire financial straits JLn dificultJRi mari financiareM 7 caused 3( things like ha/ing to
finance a 'ar, for e0ample. The $nglish colonies in *orth 6merica made important strides in the use of
3ank notes. ;or /arious political and economic reasons, the Colonists often found themsel/es short of
coinage. To get round this pro3lem, the( used first wam!um, then tobacco, rice and whis(y or brandy 7
not e0actl( the most practical solution. The first !a!er money issue 'as 3( the .assachusetts Ba(
Colon( in 1#%. The practice 'as fro'ned upon and e/entuall( 3anned 3( the mother countr(, 3ut the
in/enti/e money1ma(ing instincts of the ne' Enited :tates of 6merica meant that, during the 1#
th
centur(, most of the mone( used 'as in the form of !a!er dollars. The first full( printed note in $ngland
'as issued in 1"55 7 until that time the cashier had to 'rite the name of the pa(ee and sign each note
indi/iduall(.
6t first, 3ank notes 'ere redeemable for gold 7 on Bank of $ngland notes (ou 'ill see 'ritten S.
!romise to !ay the bearer on demand the sum ofHT If (ou took a ten2pound note to the Bank the( used
to ha/e to gi/e (ou ten pounds in gold coin. Britain left the gold standard in 1#31 and thus the notes are
no longer 3acked 3( gold.
:trides K progrese, pa?i
:hort of coinage K lips> de mone@i
Ban K a inter@ice, a scoate Bn afara legii
;ro'n upon K a nu fi de acord cu ce/a
8edeem K a compensa, r>scump>ra
Plastic mone)
*o'ada(s man( transactions are carried out 'ith S!lastic moneyT such as credit cards. The
ne'est are called Ssmart cardsT and carr( small silicon chi!s that can record e/er( transaction on the
card. 8esearch into the cards of the future continues, 3ut the latest de/elopment is e1cash, cash to 3e used
across the .nternet 7 (ou+ll 3e a3le to spend mone( from the comfort of (our armchair. If onl( earning
the damn stuff 'as so eas(R
MAN26 TA.I K the lang#age o* cash
.one( is so central to our li/es that it has spa'ned Ja proliferaM a 'ealth of specific terminolog(,
idioms and sa(ings. )reat thinkers in all ages ha/e had something to sa( a3out itA go/ernments are
elected on the strength of ho' the( plan to manage it, empires rise and fall 3ecause of it.
The Root o* All 2'il
.one( is so important to us 7 people e/en sa( it ma(es the world go round 7 that it has acLuired
man( nicknames, such as bread, dough, dinero, maCuma, s!ondulic(s, rhino, gravy, dosh, lucre or
"4
simpl( the necessary. :mall amounts of it are chic(enfeed or !eanuts. JLn slang) lovele% (iQtari% parale%
(ani% cKQtigM
:o 'hat are (ou thinking a3out no'I A !enny for your thoughtsJ 9h, I see, (ou like the look of that ne'
5acket 7 it)ll cost you an arm and a leg. I+m afraid, or, to put it another 'a(, (ou+ll ha/e to !ay through
the nose for it.
Gou ma( like it so much (ou insist that money)s no ob@ect 7 3ut don+t forgetQ money doesn)t
grow on trees, so don)t live beyond your meansJ If (ou do go ahead and 3u( that 5acket, (our friends 'ill
tell (ou that you might as well flush it Jthe mone(M down the toilet. :o, if (ou can)t afford it, 3u( the
chea!o /ersionQ you can bet your bottom dollar that no3od( 'ill 3e a3le to tell the difference.
9f course (our attitude to mone( depends, to a certain e0tend, on how well off you are. Gou ma(
3e e0periencing a li5uidity !roblem or a cashflow !roblem at the momentA in other 'ords, (ou+re
stra!!ed for cash, bro(e, or e/en flat bro(e. Perhaps you don)t have a dollar to your name, you don)t
have a red cent and you haven)t got a bean, in 'hich case you)re as !oor as a church mouseR
If, on the other hand, (ou+/e got plent( of mone( then (ou+re filthy rich, or stin(ing rich or
rolling in it 7 perhaps (ou had some good 3usiness ideas and !ut your money where your mouth is or
cashed in on a golden business o!!ortunity and managed to get rich 5uic(, so no' (ou+re laughing all
the way to the ban(.
Gou+/e got money to burnA (ou+re earning megabuc(s and, no' that (ou kno' its po'er, (ou
3elie/e 'hat people sa( 7 money tal(sR In spite of this, (ou might 3e so careful 'ith mone( that people
think (ou+re mean or stingy JzgKrcitM. Perhaps the(+ll call (ou a miser 3ehind (our 3ackA in the E: (ou+d
3e called a tightwad Jcalic% avarM.
Gou might repl( that mone( doesn+t gro' on trees 7 3ut then others might sa( that you can)t ta(e
it with you J'hen (ou dieM and so the( s!end money as if it were going out of fashion. In this case,
money burns a hole in their !oc(et, and (ou 'ould 3e the first to remind them that a fool and his money
are soon !arted. If, on the other hand, (ou loo( after the !ennies, then the !ounds will loo( after
themselves.
2". The pro*its o* la-or
Roman soldiers 'ere gi/en part of their !ay in salt, as it 'as so /alua3le 7 at least that+s the
e0cuse the :enate ga/eR
6t the time it 'as called their salario, and it is for this reason that 'e still use the 'ord salary to descri3e
the regular monthly !ayment made to em!loyees 7 especiall( white1collars wor(ers. If (ou recei/e (our
pa( every wee(, then (ou recei/e wages on !ayday, in the form of a !aychec( in the E:, or a !ay!ac(et
in the E&.
Gou ma( find that some of (our mone( is taken from (ou 3efore (ou e/en see it, that is it is
deducted at sourceA in the E: these deductions are kno'n as deduc(s or duc(s. The( ma( 3e for tax and
also, in the E&, Bational .nsurance, 'hich means that (our ta(e1home !ay ma( 3e a lot less than (ou
e0pectedR
Those 'ho are unluck( enough not to ha/e a 5o3 'ill 3e on the dole 7 recei/ing unem!loyment
benefit in the E& or on welfare in the E:. If (ou pa( mone( for (our retirement then (our compan(
runs a !ension scheme. If (ou 'ork more than (our normal hours, then (ou+re paid overtime. If (our
compan( has 3een doing 'ell, (ou ma( get a bonus.
If (ou+re one of the 3osses of a ne'l(2pri/atised monopol(, (our emplo(ees ma( call (ou a fat
cat, and part of (our pa( ma( take the form of share o!tionsA 'hen (ou started to 'ork for the compan(
(ou 'ere gi/en a golden hello and, regardless of the compan(+s performance, (ou 'ill 3e gi/en a golden
handsha(e 'hen (ou lea/e.
Perhaps (ou+re the kind of 3oss that ne/er stops complaining a3out (our emplo(eesA if so remem3erQ if
you !ay !eanuts you get mon(eysJ
"5
Gou and (our fello' top2managers are likel( to en5o( a range of fringe benefits or !er(s 7 like a
free car, house and e/en pri/ate education for (our children. This is in lieu of money, and means that (ou
ha/e a high standard of living 'ithout ha/ing to declare hundreds of thousands of pounds at the end of
the tax year. 6ll the ex!enses the compan( incurs on (our 3ehalf are also tax deductible for the
compan(, so it doesn+t lose out either.
,hen the time comes to retire, sooner rather then later, for the luck( fe' 'ho can choose early
retirement, (ou ma( decide to take (our compan( pension in a lum! sum 7 and finall( (ou can go on that
'orld cruiseR
,hite2collars 'orkers K func<ionari
9n the dole K a5utor de ?oma5, su3/en<ie de la stat
9n 'elfare K a5utor social
:hare options K
;ringe 3enefit P perks K 3eneficiu suplimentar
In lieu of mone( K Bn loc de 3ani
Incur K a face, a crea
Dump sum K sum> glo3al> P unic>, plat> unic>
+orro/ing
.an( of us go to the 3ank at some point to ask for a loan 7 it is often said that a ban( manager
is someone 'ho lends (ou an um3rella 'hen the sun is shining and 'ho asks for it 3ack 'hen it starts to
rain.
The simplest 'a( to 3orro' is 'ith an overdraft, or 3( using the facilities offered 3( a credit
cardA 3ut to 3orro' large sums (ou+ll pro3a3l( negotiate a loan 'ith (our 3ankA (ou can either 3orro' a
fixed amount or agree a credit limit.
If (ou+re 3u(ing a house, then (ou+ll 'ant a mortgage. If the 3ank refuses to lend (ou mone(,
(ou might resort to 3orro'ing from a finance com!any or e/en the local loan shar( to pa( off (our
.4As J. 4we 0ouM. ;or an( loan, (ou should look at the Annual &ercentage Rate 'hich takes into
account the /arious charges 'hich 'ill 3e included in (our re!ayments.
Borro'ing from a loan shar( can in/ol/e e0or3itant interest rates. If (ou+re 3eing gouged in this
'a(, then (ou ma( end up 3eing una3le to make the repa(ments. Gour debt ma( 3e sold to a debt
collector or (ou ma( recei/e a /isit from the bailiffs in the E&. If (ou+/e 3een 3u(ing something in
instalments or on a hire !urchase J$&M scheme, defaulting on the re!ayments 'ill pro3a3l( lead to a
/isit from the dreaded re!o JrepossesssionM man.
)ouged K escrocat, tras pe sfoar>
Bailiff K inspector
Creaded K de temut
3orger)
,ith the in/ention of mone( came forgery. .odern counterfeit notes can 3e e0tremel( difficult
to s!ot and ne' de/elopments in the production of notes are soon co!ied 3( the forgers. 4ere+s a Luick
guide to recogni@ing a counterfeit Ban( of #ngland noteQ
The feel of the !a!erQ it should 3e cris! and slightl( rough in the heavily !rinted areas.
The watermar(Q (ou shouldn+t 3e a3le to notice it until (ou hold the note u! to the lightA then (ou can
see a picture of the Iueen.
The threadQ all genuine notes ha/e a thread embedded in the paper. 8ecent notes ha/e a FwindowedG
thread 'hich does not appear as a continuous line until the note is held up to the light.
Kuality of !rintingQ !ure, clear colours and shar!, well1defined lines.
"
:pot K a identifica, a distinge
Counterfeit notes K 3ancnote contraf>cute
;orgers K falsificatori
Crisp K fragil
$m3edded K introdus
0:0AMS
<ar! Times
If (ou+/e fallen on hard times, (ou might tell people that (ou need to watch your s!ending, (our
money or (our !ennies. In the :tates, (ou might sa( that you have to watch every dime. Perhaps (our
3ank account is in the red, so (ou decide to control your s!ending and (ee! trac( of your ex!enses
more closely. This 'ill certainl( in/ol/e cutting down on ex!enses in general, budgeting your money,
tightening your belt and saving your !ennies.
6lmost certainl( (ou 'ill ha/e to cut the frills Junneccessar( ex!enditureM, trim JreduceM the
budget and go bac( to basics. If an unex!ected ex!ense comes up that (ou ha/e to meet, (ou might
decide to di! into your savings, or scrounge the mone( someho'.
If, on the other hand, (ou s!lash out on something extravagant, (ou might @ustify the ex!ense 3(
telling people that you)ve got enough saved u!, that (ou+/e been saving for a rainy day or that (ou+re
luck( enough to ha/e a nest egg that (ou+/e finall( decided to use.
;rills K fasoane, lucruri care nu sunt necesare
:crounge K a ?aprli, a ?terpeli
:plash out K a se arunca
2$. Acco#nting an! *inancial statements
1oca-#lar)
a. Match #p the terms on the le*t /ith the !e*initions on the right.
1. +oo%%eeping
6 calculating an indi/idual+s or a compan(+s lia3ilit( for ta0 7
2. Acco#nting
B 'riting do'n the details of transactions Jde3its and creditsM 2
3. Managerial acco#nting
C keeping financial records, recording income and e0penditure, /aluing assets and lia3ilities, and so on
4. ost acco#nting
C preparing 3udgets and other financial reports necessar( for management
5. Ta, acco#nting
$ inspection and e/aluation of accounts 3( a second set of accountants 7 audit
6. A#!iting
; using all a/aila3le accounting procedures and tricks to disguise the true financial position of a compan(
7. Gcreati'e acco#nting4
) 'orking out the unit cost of products, including materials, la3our and all other e0penses
-. Match #p these /or!s /ith the !e*initions -elo/
1. Assets
6 a compan(+s o'ners
2. :epreciation
"!
B all the mone( recei/ed 3( a compan( during a gi/en period
3. .ia-ilities
C all the mone( that a compan( 'ill ha/e to pa( to someone else in the future, including ta0es, de3t, and
interest and mortgage pa(ments
4. T#rno'er
C the amount of 3usiness done 3( a compan( o/er a (ear
5. re!itors =;+> acco#nts pa)a-le =US>
$ an(thing o'ned 3( a 3usiness Jcash in/estments, 3uildings, machines, and so onM that can 3e used to
produce goods or pa( lia3ilities
6. :e-tors =;+> acco#nts recei'a-le =US>
; the reduction in /alue of a fi0ed asset during the (ears it is in use Jcharged against profitsM
7. A'erhea!s =;+> o'erhea! =US>
) sums of mone( o'ed 3( customers for goods or ser/ices purchased on credit
". Re'en#e or earnings or income
4 sums of mone( o'ed to suppliers for purchases made on credit
$. Sharehol!ers =;+> stoc%hol!ers =US>
I Jthe /alue ofM ra' materials, 'ork in progress, and finished products stored read( for sale
1(. Stoc% =;+> in'entor) =US>
1 the /arious e0penses of operating a 3usiness that cannot 3e charged to an( one product, process or
department
Rea!ing
0nsert the /or!s in 'oca-#lar) -> in the gaps in the te,t -elo/.
Acco#nting an! *inancial statements
In accounting it is al'a(s assumed that a 3usiness is a Ngoing concern+, i.e. that it 'ill continue
indefinitel( into the future, 'hich means that the current market /alue of its assets is irrele/ant, as the(
are not for sale. ConseLuentl(, the most common accounting s(stem is historical cost accounting, 'hich
records J1M OOOO at their original purchase price, minus accumulated depreciation charges. In times
of inflation, this understates the /alue of appreciating assets such as land, 3ut o/erstates profits as it does
not record the replacement cost of plant or J2M OOO . The /alue of a 3usiness+s assets under historical
cost accounting 7 purchase price minus J3M OO.. 7 is kno'n as its net 3ook /alue. Countries 'ith
persistentl( high inflation often prefer to use current cost or replacement cost accounting, 'hich /alues
assets Jand related e0penses like depreciationM at the price that 'ould ha/e to 3e paid to replace them Jor
to 3u( a more modern eLui/alentM toda(.
Compan( la' specifies that J4M OOO. .ust 3e gi/en certain financial information. Companies
generall( include three financial statements in their annual reports.
The profit and loss account J)BM or income statement JE:M sho's J5M OOO.. and e0penditure. It
usuall( gi/es figures for total sales or JM OOO. 6nd costs and J!M OOO . The first figure should
o3/iousl( 3e higher than the second, i.e. there should 3e a profit. Part of the profit goes to the go/ernment
in ta0ation, part is usuall( distri3uted to shareholders JstockholdersM as di/idend, and part is retained 3(
the compan(.
The (alance sheet sho's a compan(+s financial situation on a particular date, generall( the last da( of
the financial (ear. It lists the compan(+s assets, its J"M OOOO , and shareholders+ JstockholdersM funds.
6 3usiness+s assets include J#M OOO as it is assumed that these 'ill 3e paid. Dia3ilities include J1%M
OOO , as these 'ill ha/e to 3e paid. *egati/e items on financial statements, such as creditors, ta0ation,
and di/idends paid, are usuall( enclosed in 3rackets.
In accordance 'ith the principle of dou3le2entr( 3ookkeeping Jthat all transactions are entered as
credit in one account and as de3it in anotherM, the 3asic accounting eLuation is 6ssets K Dia3ilities W
""
9'ner+s Jor :hares+M $Luit(. This can 3e re'ritten as 6ssets 7 Dia3ilities K 9'ners+ $Luit( or *et
6ssets. This includes share capital Jmone( recei/ed from the issue of sharesM, share premium J)BM or
paid2in surplus JE:M Jan( mone( realised 3( selling shares at a3o/e their nominal /alueM, and the
compan(+s reser/es, including the (ear+s retained profits. :hareholders+ eLuit( or net assets are generall(
less than a compan(+s market capitalisation Jthe total /alue of its shares at an( gi/en moment, i.e. the
num3er of shares times their market priceM, 3ecause net assets do not record items such as good'ill.
The third financial statement has /arious names including the source and application of funds
statement, and the statement of changes in financial position. This sho's the flo' of cash in and out of
the 3usiness 3et'een 3alance sheet dates. :ources of funds include trading profits, depreciation
pro/isions, sales of assets, 3orro'ing, and the issuing of shares.
6pplications of funds include purchases of fi0ed or financial assets, pa(ment of di/idends, repa(ment
of loans, and 7 in a 3ad (ear 7 trading losses.
The pro*it an! loss acco#nt =;+> or income statement =US> 7 calculul re@ultatelor, al pierderilor ?i a
profitului
The -alance sheet 7 3ilan<ul conta3il
Net Assets 7 acti/ul net
Share capital 7 capitalul ac<inilor
Share premi#m =;+> or pai!Din s#rpl#s =US> 7 prim> suplimentar> din ac<iuni
ompan)4s reser'es 7 re@er/ele firmei
The )ear4s retaine! pro*its 7 profitul p>strat dintr2un an
;oo!/ill 7 clientelaA fondurile comercialeA /ad
So#rce an! application o* *#n!s statement L the statement o* changes in *inancial position 7 situa<ia
surselor ?i a aplic>rii fondurilor P situa<ia schim3>rilor din situa<ia financiar>
1oca-#lar)
There are ten gaps in the t/o statements /hich *ollo/. Accor!ing to the in*ormation in the pre'io#s
te,t& !eci!e /here the *ollo/ing hea!ings sho#l! appear7
CalledBup share capital cash in hand and at (ank
Corporation ta> de(tors depreciation turnover
9reehold properties historical cost net assets overheads
The Arsenal 3oot-all l#- P.
Pro*it an! .oss Acco#nt *or the 6ear 2n!e! 31
st
Ma) 1$$4
1##4 1##3
^ ^
M1 ????????.N 21,4!1,"% 15,341,"#
Jincome from foot3all and related
acti/itiesQ gate receipts, 3roadcasting,
ground ad/ertisements, pri@e mone(M
Costs and _2 OOOOOOOOO`, J14,#51,!3!M J12,"%4,53"M
less other income Jcosts include
salaries, _3 OOOOOOO`, auditors+
"#
remuneration, and lease pa(mentsA other
income includes Interest 8ecei/a3leM
Pro*it on Ar!inar) Acti'ities -e*ore
Trans*er 3ees ,51#,#43 2,53!,151
Transfer fees pa(a3le J""#,5""M J54,25#M
Pro*it on Ar!inar) Acti'ities -e*ore
Ta,ation 5,3%,355 2,4"2,"#2
Ta0ation J1,5#,22M J!5%,%%%M
Pro*it a*ter Ta,ation Retaine! *or
The 3inancial 6ear 4,%34,12# 1,!32,"#2
Arsenal 3oot-all l#- P. K +alance Sheet 31
st
Ma) 1$$4
1##4 1##3
^ ^
3i,e! Assets 2",4!",#22 1",#"2,#31
Jincluding _4 OOOOOO.`,
leasehold properties, plant and
eLuipment, and motor /ehiclesA
all recorded at _5 OOOOO`
minus depreciationM
#rrent Assets #,%!,5#2 !,##1,%""
:tocksA Jincluding _ OOOO.`,
Instalments on e0ecuti/e 3o0esMA
and _! OOOOO.`
re!itors J#,"3,45!M J",!55,4#1M
6mounts falling due 'ithin one
(ear Jincluding _" OOOOO.`
and social securit(M
Total Assets less #rrent .ia-ilities 2",223,%5! 1",21",52"
.ong Term .ia-ilities
6mounts falling due after more than
9ne (ear Jincluding de3enture
:u3scriptionsM J1!,"#3,5%%M J11,#23,1%%M
M$ ?????????..N 1%,32#,55! ,2#5,42"
apital an! Reser'es
_1% OOOOOOOOO` 5,%%% 5,%%%
:hare premium account 23!,2%1 23!,2%1
Building reser/e "4,%%% "4,%%%
Profit and loss account #,1#%,35 5,15,22!
J(ear+s profit added to pre/ious 3alanceM
#%
Sharehol!ers4 3#n!s 1%,32#,55! ,2#5,42"
3(. 2,change rates
@hile rea!ing the te,t& !eci!e /hich paragraph co#l! -e gi'en the *ollo/ing hea!ings.
- ;loating e0change rates
- Inter/ention and managed floating e0change rates
- :upporters of fi0ed and floating rates
- The a3olition of e0change controls
- The period of gold con/erti3ilit(
- The po'er of speculators and the collapse of the $.:
- ,h( man( 3usiness people 'ould prefer a single currenc(
The Bretton ,oods agreement of 1#44 esta3lished fi0ed e0change rates, defined in terms of gold
and the E: dollar. Bet'een 1#44 and 1#!1, man( currencies 'ere pegged against Jfi>at% sta(ilizat dupJM
the E: dollar, i.e. their parties 'ith the E: dollar 'ere fi0ed. In this period, a E: dollar 'as a promissor(
note issued 3( the Enited :tates Treasur(. If an(3od( reLuested it, the Treasur( had to e0change the note
for 1P35
th
of an ounce of gold. Ender this s(stem, o/er/alued or under/alued currencies could onl( 3e
ad5usted 'ith the agreement of the International .onetar( ;und. :uch ad5ustments are called
de/aluations and re/aluations. The Bretton ,oods s(stem of gold con/erti3ilit( and pegging against the
dollar 'as a3andoned in 1#!1, 3ecause follo'ing inflation, the ;ederal 8eser/e did not ha/e enough gold
to guarantee the 6merican currenc(.
)old con/erti3ilit( 'as replaced 3( a s(stem of floating e0change rates. JToda(, the E: dollar 7
the unofficial 'orld currenc( 7 is merel( a piece of paper on 'hich is 'ritten NIn )od ,e Trust.+ )od,
not goldRM a freel( Jor cleanM floating e0change rate is determined purel( 3( suppl( and demand.
Theoreticall(, in the a3sence of speculation, e0change rates should reflect purchasing po'er parit( 7 the
cost of a gi/en selection of goods and ser/ices in different countries. Proponents of floating e0change
rates, such as .ilton ;riedman, argued that currencies 'ould automaticall( esta3lish sta3le e0change
rates, 'hich 'ould reflect economic realities more precisel( than calculations 3( central 3ank officials.
Get, the( underestimated the impact of speculation, and the fact that companies and in/estors freLuentl(
follo' short2term mone( market trends e/en if these are contrar( to their o'n long2term interests.
In the late 1#!%s and earl( 1#"%s, the 6merican, British and other go/ernments deregulated their
financial s(stems, and a3olished all e0change controls. 8esidents in these countries are no' a3le to
e0change an( amount of their currenc( for an( other con/erti3le currenc(. This has led to the current
situation in 'hich #5X of the 'orld+s currenc( transactions are unrelated to transactions in goods 3ut are
purel( speculati/e. $normous amounts of mone( mo/e round the 'orld, chasing high interest rates or
capital gains, as in/estors 7 including rich indi/iduals, companies and pension funds 7 seek to ma0imi@e
the /alue of their assets. In Dondon alone, o/er \3%% 3illion 'orth of currenc( is traded on an a/erage da(
7 the eLui/alent of a3out 3%X of the /alue of the goods Britain procedures each year. Banks make a
profit from the spread Jmar.JM 3et'een a currenc(+s 3u(ing and selling prices.
;e' go/ernments, ho'e/er, lea/e e0change rates 'holl( at the merc( of market forces. .ost of
them attempt to influence the le/el of their currenc( 'hen necessar(. .anaged Jor dirt(M floating
e0change rates are more common than freel( floating ones. In 1#!#, most ,estern $uropean
go/ernments 5oined the $.: J$uropean .onetar( :(stemM, 'ith its $8. J$0change 8ate .echanismM.
This esta3lished parties 3et'een mem3er currencies, and a margin of plus or minus 2 a X. If the rate
di/erged 3( more than this amount from the central parit(, go/ernments and central 3anks had to
inter/ene in e0change markets, 3u(ing or selling in order to increase or decrease the /alue of their
currenc(.
#1
Get, go/ernment polic( can easil( 3e defeated 3( the com3ined action of international
speculators. ;or e0ample, on a single da( in :eptem3er 1##2 the Bank of $ngland lost fi/e 3illion pounds
in a hopeless attempt to support the pound sterling. ;or 'eeks, all the 'orld+s financial institutions and
rich indi/iduals had 3een selling their pounds, as e/er(one e0cept the British )o/ernment 3elie/ed that
e/er since it 5oined the $8. in 1##%, the pound had 3een seriousl( o/er/alued. ,hen the British central
3ank ran out of reser/es and could no longer 3u( pounds, the currenc( 'as 'ithdra'n from the $8. and
allo'ed to float, instantl( losing a3out 15X of its /alue against the C2mark. The ne0t (ear, speculators
attacked the ;rench franc, the Belgian franc, the Canish krone and the :panish peseta. In 6ugust 1##3,
the $uropean .onetar( :(stem 'as more or less suspended.
.an( manufacturers are in fa/our of fi0ed e0change rates, or a single currenc(. 6lthough it is
possi3le to some e0tend to hedge against Ja se asigura LmpotrivaM currenc( fluctuations 3( 'a( of futures
contracts, for'ard planning is difficult 'hen the price of ra' materials 3ought from a3road, or the price
of (our products in e0port markets, can rise or fall 3( 5%X in onl( a fe' months. J:ince e0change
controls 'ere a3olished, currencies including the E:\ and the pound sterling ha/e in turn appreciated 3(
up to 1%%X and then depreciated 3( more than 5%X against the currencies of ma5or trading partners.M
9ther supporters of fi0ed e0change rates or a single currenc( include e0treme conser/ati/es 'ho
'ant to return to something like the gold standard, as 'ell as people on the left 'ho 3elie/e that
speculators ha/e too much po'er. :upporters of fle0i3le rates include monetarists 'ho 'ant countries to
follo' strict monetar( rules, as 'ell as &e(nesians 'ho 'ant to 3e free to de/alue in the attempt to
reduce unemplo(ment. These are 3oth rather surprising alliances, 'hich put into dou3t the planned
timeta3le for the introduction of a :ingle $uropean Currenc(.
omprehension
Are the *ollo/ing statements Tr#e or 3alse8
1 )old con/erti3ilit( 'as a3andoned 3ecause there 'as too much gold.
2 It is no' impossi3le to e0change dollars for gold.
3 9nl( a pegged currenc( can 3e de/alued or re/alued.
4 6 floating currenc( can either appreciate or 3e de/alued.
5 Central 3anks sometimes attempt to decrease the /alue of their currenc(.
The $.: 'as designed to sta3ili@e e0change rates.
! To speculate is to take risksA to hedge is to tr( to a/oid risks.
" Ender the s(stem of floating e0change rates, currencies can depreciate 1%%X in a short time.
1oca-#lar)
1. Match #p the hal*Dsentences -elo/.
1. To Npeg+ a currenc( against something means to
6. the amount of a countr(+s mone( that residents 'ere a3le to change into foreign currencies.
2. 6 clean floating e0change rate
B. fi0 its /alue in relation to it.
3. $0change controls used to limit
C. make a profit 3( making capital gains or 3( in/esting at higher interest rates.
4. :peculators 3u( or sell currencies in order to
C. is determined 3( suppl( and demand.
5. N.arket forces+ means
#2
$. tr(ing to insure against unfa/oura3le price mo/ements 3( 'a( of futures contract.
. N4edging+ means
;. the determination of price 3( suppl( and demand Jthe Luantit( a/aila3le and the Luantit( 3ought and
soldM.
2. @hich si, o* these 'er-s are !e*ine! -elo/8
A(olish ad.ust appreciate convert diverge
/sta(lish fluctuate peg suspend revalue
1 to make changes to something
2 to change something into something else
3 to end something permanentl(
4 to end something temporaril(
5 to go up or do'n Jin Luantit(, /alue, etc.M
to mo/e a'a( from 'hat is considered normal
12. +an%ing an! ta,ation
1oca-#lar)
Match #p these terms /ith the !e*initions -elo/.
Cash card cash dispenser credit card home (anking
'oan mortgage overdraft standing order
Current account !<B# or checking account !A&#
-eposit account !<B# or time or notice account !A&#
1 an arrangement 3( 'hich a customer can 'ithdra' more from a 3ank account than has 3een deposited
in it, up to an agreed limitA interest on the de3t is calculated dail(
2 a card 'hich guarantees pa(ment for goods and ser/ices purchased 3( the cardholder, 'ho pa(s 3ack
the 3ank or finance compan( at a later date
3 a computeri@ed machine that allo's 3ank customers to 'ithdra' mone(, check their 3alance, and so on
4 a fi0ed sum of mone( on 'hich interest is paid, lent for a fi0ed period, and usuall( for a specific
purpose
5 an instruction to a 3ank to pa( fi0ed sums of mone( to certain people or organi@ations at stated times
a loan, usuall( to 3u( propert(, 'hich ser/es as a securit( for the loan
! a plastic card issued to 3ank customers for use in cash dispensers
" doing 3anking transactions 3( telephone or from one+s o'n personal computer, linked to the 3ank /ia a
net'ork
# one that generall( pa(s little or no interest, 3ut allo's the holder to 'ithdra' his or her cash 'ithout
an( restrictions
1% one that pa(s interest, 3ut usuall( cannot 3e used for pa(ing cheLues J)BM or checks JE:M, and on
'hich notice is often reLuired to 'ithdra' mone(
31. T)pes o* -an%s
#3
Rea! the te,t -elo/ an! /rite short hea!ings =one or t/o /or!s> *or each paragraph
1???????????..
Commercial or retail 3anks are 3usinesses that trade in mone(. The( recei/e and hold deposits,
pa( mone( according to customers+ instructions, lend mone(, offer in/estment ad/ice, e0change foreign
currencies, and so on. The( make a profit from the difference Jkno'n as a spread or a marginM 3et'een
the interest rates the( pa( to lenders or depositors and those the( charge to 3orro'ers. Banks also create
credit, 3ecause the mone( the( lend, from their deposits, is generall( spent Jeither on goods or ser/ices, or
to settle de3tsM, and in this 'a( transferred to another 3ank account 7 often 3( 'a( of a 3ank transfer or a
cheLue JcheckM rather than the use of notes or coins 7 from 'here it can 3e lent to another 3orro'er, and
so on. ,hen lending mone(, 3ankers ha/e to find a 3alance 3et'een (ield and risk, and 3et'een liLuidit(
and different maturities.
2???????????
.erchant 3ank in Britain raise funds for industr( on the /arious financial markets, finance
international trade, issue and under'rite securities, deal 'ith takeo/ers and mergers, and issue
go/ernment 3onds. The( also generall( offer stock3roking and portfolio management ser/ices to rich
corporate and indi/idual clients. In/estment 3anks in the E:6 are similar, 3ut the( can onl( act as
intermediaries offering ad/isor( ser/ices, and do not offer loans themsel/es. In/estment 3anks make their
profits from the fees and commissions the( charge for their ser/ices.
3???????????..
In the E:6, the )lass2:teagall 6ct of 1#34 enforced a strict separation 3et'een commercial
3anks and in/estment 3anks or stock3roking firms. Get, the distinction 3et'een commercial and
in/estment 3anking has 3ecome less clear in recent (ears. Ceregulation in the E:6 and Britain is leading
to the creation of Nfinancial supermarkets+Q conglomerates com3ining the ser/ices pre/iousl( offered 3(
3anks, stock3rokers, insurance companies, and so on. In some $uropean countries Jnota3l( )erman(,
6ustria and :'it@erlandM there ha/e al'a(s 3een uni/ersal 3anks com3ining deposit and loan 3anking
'ith share and 3ond dealing and in/estment ser/ices.
4????????????
6 countr(+s minimum interest rate is usuall( fi0ed 3( the central 3ank. This is the discount rate,
at 'hich the central 3ank makes secured loans to commercial 3anks. Banks lend to 3lue chip 3orro'ers
J/er( safe large companiesM at the 3ase rate or the prime rateA all other 3orro'ers pa( more, depending on
their credit standing Jor credit rating, or credit'orthinessMQ the lender+s estimation of their present and
future sol/enc(. Borro'ers can usuall( get a lo'er interest rate if the loan is secured or guaranteed 3(
some kind of asset, kno'n as collateral.
4???????????
In most financial centres, there are also 3ranches of lots of foreign 3anks, largel( doing
$urocurrenc( 3usiness. 6 $urocurrenc( is an( currenc( held outside its countr( of origin. The first
significant $urocurrenc( market 'as for E: dollars in $urope, 3ut the name is no' used for foreign
currencies held an('here in the 'orld Je.g. (en in the E:, C. in 1apanM. :ince the E:\ is the 'orld+s
most important trading currenc( 7 and 3ecause the E: has for man( (ears had a huge trade deficit 7 there
is a market of man( 3illions of $urodollars, including the oil2e0porting countries+ Npetrodollars+.
6lthough a central 3ank can determine the minimum lending rate for its national currenc( it has no
control o/er foreign currencies. ;urthermore, 3anks are not o3liged to deposit an( of their $urocurrenc(
assets at %X interest 'ith the central 3ank, 'hich means that the( can usuall( offer 3etter rates to
3orro'ers and depositors than in the home countr(.
ommercial L retail -an% 7 3anc> comerciale P 3anc> de depo@it
Merchant -an% L 0n'estment -an% 7 3anc> comercial> P de in/esti<ii
#4
1oca-#lar)
a. 3in! the /or!s or e,pressions in the te,t /hich mean the *ollo/ing.
1 to place mone( in a 3ankA or mone( placed in a 3ank
2 the mone( used in countries other than one+s o'n
3 ho' much mone( a loan pa(s, e0pressed as percentage
4 a/aila3le cash, and ho' easil( other assets can 3e turned into cash
5 the date 'hen a loan 3ecomes repa(a3le
to guarantee to 3u( all the ne' shares that a compan( issues, if the( cannot 3e sold to the pu3lic
! 'hen a compan( 3u(s or acLuires another one
" 'hen a compan( com3ines 'ith another one
# 3u(ing and selling stocks or shares for clients
1% taking care of all a client+s in/estments
11 the ending or rela0ing of legal restrictions
12 a group of companies, operating in different fields, that ha/e 5oined together
13 a compan( considered to 3e 'ithout risk
14 a3ilit( to pa( lia3ilities 'hen the( 3ecome due
15 an(thing that acts as a securit( or a guarantee for a loan
-.The te,t contains a n#m-er o* common 'er-Dno#n partnerships =e.g. to len! mone)& to *inance
international tra!e>. Match #p the 'er-s an! no#ns -elo/ to ma%e common collocations.
Charge ad/ice
Co 3onds
$0change 3usiness
Issue currencies
.ake deposits
9ffer funds
Pa( interest
8aise loans
8ecei/e profits
Ender'rite securit( issues
32. Apening an acco#nt an! means o* pa)ment
At the +an% K Apening an acco#nt
Mr. O 7 I 'ould like to open an account 'ith (ou.
+an% ler% 7 =er( 'ell, sir. 4ere is a form (ou+ll ha/e to fill in.
Mr. O 7 There ma( 3e a pro3lem. Gou see, I+m a foreign resident.
+an% ler% 7 This is Luite all right, sir. Iuite a large num3er of our clients are foreigners. Co (ou 'ant
to open a current account or a deposit account-
Mr. O 7 ,ell, I+m going to sta( and 'ork here for a 'hile, and I+d like m( salar( to 3e paid into m(
account. But I don+t 'ant to ha/e to gi/e notice 3efore I can 'ithdra' mone(.
+an% ler% 7 It+s o3/iousl( a current account (ou need.
Mr. O 7 4o' long 'ill take to open an account-
+an% ler% 7 Coesn+t take long, sir. Det me seeO Toda( is Thursda(, if (ou can complete this form
toda(, (our cheLue23ook 'ill 3e read( for (ou on Tuesda(.
#5
Mr. O 7 ;ine. :o, m( salar( could 3e paid in at the end of the month.
+an% ler% 7 *o dou3t, sir.
Mr. O 7 There are t'o Luestions I+d like to ask. ,ill this 3e the onl( place 'here I can cash a cheLue-
+an% ler% 7 9h, no, sir. Gou can ha/e them cashed at an( of our 3ranches.
Mr. O 7 )ood. 6nd 'hat a3out statements of account- 4o' freLuentl( does one get them-
+an% ler% 7 *ormall(, once a month. But 'e shall send one out after each transaction if (ou 'ant us to.
;eneral 0n*ormation7
,hen doPare (ou open-
4o' late do (ou sta( open-
,hen do (ou close-
,hat are (our opening hours-
In the E:Q Coes this 3ank ha/e an 6T. J6utomatic Teller .achine 7 (ancomatM
In the E&Q Co (ou ha/e a cash pointPdispenser-
The 6T. atePkept m( card.
The cash dispenser 'on+t gi/e me m( card 3ack.
If (ou 'ant to use 3ank ser/ices (ou ma( ha/e to Lueue JE&M or stand in line JE:M and 'ait for the ne0t
a/aila3le teller JE:M 7 or clerk JE&MQ ,hen their desk is free, a light 'ill come onQ
*e0t, please.
Please step do'n JE:M.
I+m open o/erPdo'n here.
Iueue @ stand in line S a sta la coadJ
Teller @ clerk S funcRionar la ghiQeu
6o# can then tell him or her /hat )o# /ant7
I 'antPneedP'ould like to cash a check.
I+d like to cash these tra/elers checks, please.
Can (ou change a ten2pound note, please-
I+d like ten dollars+ 'orth of Luarters, please.
I need a roll of Luarters.
If (ou ha/e an account thereQ
I+d like to make a deposit.
I+d like to 'ithdra' some mone( from m( account.
I+d like to make a 'ithdra'al.
If (ou 'ant to 'ithdra' some mone( from a3roadQ
I+d like to transfer some mone( from an o/erseas 3ank account.
Before the clerk gi/es (ou an( mone(, shePhe 'ill askQ
4o' 'ould (ou like that-
6n( preference-
Darge or small 3ills JE:M notes JE&M-
Gour repl(Q
It doesn+t matter J'hich denominationM
#
6ll t'enties, please.
1ust tens and t'enties, please.
;i/e, tens and three fi/es, please.
*o small 3illsPnotes, please.
0* )o# /ant to trans*er some mone)& the cler% /ill sa)7
6re (ou a customer here-
;irst of all, I need some IC, please.
.a( I see some identification-
Co (ou ha/e a 3ank card 'ith (ou-
I+d like the name and address of (our 3ank, (our account num3er and (our sorting code, please.
Please fill in this form.
I+m afraid (ou+ll ha/e to go to the enLuiries desk J(iroul de informaRiiM.
Ar& i* )o#4re cashing a chec%7
Could (ou endorse this Jsign it on the 3ackM, please.
Perhaps )o#4re /ith!ra/ing mone) /ith a cre!it car!7
$nter (our PI* num3er, please JPI*Q Personal Identification *um3erM.
0* )o# ha'e *oreign c#rrenc)7
Co (ou handle foreign e0change here-
Is there a foreign e0change desk-
I+d like to changeP3u( some foreign currenc(.
,hat+s the current e0change rate, please-
4o' man( marks to the dollar, please-
An! the repl)7
The e0change rate is 1,5 marks to the dollar.
I+m afraid the rate has gone up toda(.
6o# might /ant to %no/7
Co I ha/e to pa( 3ank charges JcomisionM on top of that-
Is that inclusi/e of commission-
6re there an( additional e0penses-
,hat commission do (ou charge-
Ma)-e )o#4re sta)ing in an Anglophone co#ntr) *or more than a )ear an! )o# /ant to open a -an%
acco#nt there7
I+d like to open a depositPcheckingP sa/ings account, please.
I+d like to appl( for a loan.
I+d like to get a safet( deposit 3o0 Jsafe de depuneriM.
,hat+s the interest rate on this account-
Could (ou e0plain the ser/ice charges on this account-
Could I ha/e a ne' check3ook, please-
I+d like to appl( for a 3ankPcheLuePcreditPcash card, please.
Means o* pa)ment.
#!
I+d 5ust had a phone call from the 3ank. The( couldn+t cash in C+s cheLue. The( 'ere told there 'ere
insufficient funds on his account.
I+m surprised. That 'ould 3e the first time. Can (ou remind me of the amount-
It+s not a large sumQ onl( 135 pounds.
This is all the more surprising. 4e is not the kind of person to o/erdra' his account. ,hat sort of a
cheLue did he make out-
I+m looking into his fileO *o'O It 'as a giro cheLue. Esuall( he pa(s us 3( 3ank cheLue for small
amounts, and 3( draft for large sums.
It makes more sense. 1ust gi/e him a ring, 'ill (ou- I+m sure he+ll settle immediatel(.
I+ll do that. :omething else. I+/e had /er( 3ad information a3out B, (ou kno', the reseller JvKnzJtorM 'ho
'anted immediate deli/er(.
I see 'ho (ou mean. It+s his first order 'ith us-
That+s it. 4e+s alread( had a current account cancelled and has a reputation for 3eing a slo' pa(er.
If so, insist on pa(ment 'ith the order Jplata la comandJM. Celi/er( is out of the Luestion until the sum
has 3een paid into our account.
,ell, I think that+s all. 9h (esR 9ne more thing, the drafts to 3e discountedO
Means o* pa)ment. Ie) sentences.
4is account is o/erdra'n Jin the redM.
Cecul sJu este descoperit.
The settlement is long o/erdue.
*lata ar fi tre(uit sJ fie fJcutJ demult.
,hat+s his current account num3er-
Care este numJrul contului sJu curent3
Charge it to m( account.
&coateRi suma din contul meu.
:ettle the amount 3( mone( order if (ou find it more con/enient.
*lJtiRi suma prin mandat poQtal dacJ consideraRi cJ este mai practic.
The cheLue 'as made out to his order.
Cecul era fJcut la ordinul sJu.
4e intends to open a deposit account at one of our 3ranches.
/l are intenRia sJ deschidJ un cont pentru depuneri la una din sucursalele noastre.
I think I remem3er it 'as a 3earer cheLue.
Cred cJ Lmi amintesc% era un cec la purtJtor.
*ormall(, that pa(ment2in ought to ha/e 3een recorded on m( last statement of account.
$ormal% acea platJ !vJrsJmKnt# ar tre(uie sJ figureze pe ultimul meu e>tras de cont.
;or sight 'ithdra'als, (ou simpl( ha/e to go to counter no.3
*entru retragerile la vedere% a.unge sJ mergeRi la ghiQeul nr.6
:he 'ill pa( us 3( instalments o/er si0 months.
/a ne va plJti Ln rate eQalonate pe Qase luni.
I ha/e kept the stu3 JcounterfoilM of the cheLue 'hich I issued on .arch
th
.
Am pJstrat talonul cecului pe care lBam emis pe T martie.
The holder of the credit card must inform our nearest office in case of loss or theft.
Titularul cJrRii de credit tre(uie sJ informeze imediat (iroul nostru cel mai apropiat Ln caz de pierdere
sau de furt.
Thanks to (our credit card, (ou ma( rent a car 'ithout lea/ing a deposit.
#"
-atoritJ cJrRii dumneavoastrJ de credit veRi putea Lnchiria o maQinJ fJrJ sJ lJsaRi o garanRie.
4o' is it that this cheLue has not 3een endorsed-
Cum se face cJ acest cec nu a fost andosat3
I suppose (ou+d rather 3e paid in cash-
*resupun cJ preferaRi sJ fiRi plJtiRi cu (ani gheaRJ.
The draft 'ill fall due at the end of the month.
Trata a.unge la scadenRJ la sfKrQitul lunii.
,h( ha/en+t (ou presented this draft for acceptance (et-
-e ce nu aRi prezentat LncJ aceastJ tratJ la acceptare3
4o' long 'ill it take to ha/e the sum transferred to m( account-
CKt dureazJ sJ viraRi suma Ln contul meu3
It has 3een re5ected for non2conformit( of the signature J3ecause the signature 'as not trueM.
/l a fost refuzat din cauza nepotrivirii semnJturii !din cauzJ cJ semnJtura nu era cea adevJratJ#.
This is not the first time he has issued 3ad cheLues Jdud checksA cheLues that 3ounceM.
$u este prima datJ cKnd el emite cecuri fJrJ acoperire.
33. +an%ing K Ie) /or!s an! sentences
The 3anks ha/e pla(ed a prominent role in the de/elopment of modern econom( since the /er(
3eginning of commercial acti/ities. Their 3ranches ha/e 3ecome a familiar sight on man( cit( streets, 3ut
also in /illages, as more and more people no' S3ankT 'ith an( one of the national or local 3anks.
Banks offer their ser/ices 3oth to pri/ate indi/iduals and to 3usinesses. 9ne can open a current
account or a deposit account 'ith them. The former 'ill ena3le a person to use a cheLue for pa(ment
instead of hard cash, 'hereas the latter 'ill 3ring a small interest. People can ask their 3ank to pa(
recurring e0penses for them, such as su3scription, rents, telephone, gas or electrical 3ills. =alua3les or
deeds can 3e left in custod( in a 3ank safe on pa(ment of certain charge. The 3ank 'ill o3tain foreign
currencies, issue tra/eller+s cheLues and letter of credit pa(a3le at their 3ranches or at correspondent
3anks.
Besides, 3anks 'ill operate transactions on the stock e0change for (ou and gi/e ad/ice on
in/estments. The( also lend mone(, generall( on a short term 3asisQ thus the( can allo' o/erdraft
facilities or personal loansA if (our credit rating is good and if (ou can offer some sort of securit(, the(
ma( consider longer term credit. .ost of this applies to 3usiness discounting of their 3ills 7 Bills of
$0change JdraftsM, or e/en Promissor( *otes. In the field of foreign trade, the 3anks can help 3(
financing or ad/ising their clients. The( can 3e referred to 3( either part( for status enLuiries in 3usiness
transactions.
8ecurring e0penses K cheltuieli recurente
=alua3les P deeds K acte, /alori
9/erdraft K cont de3itor, descoperire de cont
Be referred to K a fi Bndrumat
Cefinition
A cheB#e is signed 3( the pa(er and pa(a3le to the pa(ee or to his order. A !ra*t Jor -ill o* e,changeM is
dra'n 3( the creditor on the de3tor and pa(a3le to the dra'er or to a third part( after acceptance 3( the
dra'ee.
##
An cec este semnat de plJtitor Qi se plJteQte (eneficiarului sau la ordinul sJu. tratJ este trasJ de
creditor asupra de(itorului Qi se plJteQte trJgJtorului sau unei terRe pJrRi dupJ acceptare de cJtre tras.
+an%. Ie) sentences.
1. 6n interest is charged on all 3anks ser/ices.
&e percepe do(KndJ pentru toate serviciile (ancare.
2. Gou had 3etter ask for an o/erdraft 3efore (our account is o/erdra'n Jin redM.
Ar fi (ine sJ cereRi un descoperit Lnainte de a vi se epuiza contul.
3. I al'a(s deposit m( /alua3les and m( 'ife+s 5e'els in a 3ank safe 3efore lea/ing for a long holida(.
-epun Lntotdeauna o(iectele mele de valoare Qi (i.uteriile soRiei la o (ancJ Lnainte de a pleca LntrBo
vacanRJ de lungJ duratJ.
4. ,here can I cash this cheLue Jcheck 7 E.:.M-
Ande pot Lncasa acest cec3
5. 8emem3er to record all 'ithdra'als on counterfoils JE.:. 7 stu3sM in (our cheLue23ook.
$u uitaRi sJ LnregistraRi toate retragerile pe talonul carnetului dumneavoastrJ de cecuri.
. The( offered me to refund a 2,%%% personal loan o/er a 3%2month period.
/i miBau propus sJ ram(ursez un Lmprumut personal de 0.555 de lire Ln treizeci de rate lunare.
!. ,hen 'riting out or endorsing a cheLue, one must 3e careful to a/oid an( erasure.
CKnd se redacteazJ sau se andoseazJ un cec% tre(uie sJ se evite orice QtersJturJ.
". :he made out so man( dud J3adM cheLues that no 3ank 'ill trust her 'ith a cheLue23ook.
/a a Lntocmit atKtea cecuri fJrJ acoperire% LncKt nici o (ancJ nuBI va mai LncredinRa un carnet de
cecuri.
#. Con+t forget to ha/e these 3ills discounted 3( the end of this month.
$u uitaRi sJ scontaRi aceste efecte la sfKrQitul lunii.
1%. 8ecentl( a trader sued his 3anker after he could no longer ha/e his 3ills discounted.
+ecent% un comerciant a intentat un proces (Jncii sale dupJ ce nBa mai avut posi(ilitatea sJBQi
sconteze efectele de comerR.
11. The clearing2house 'ill centrali@e all the operations dealing 'ith the e0change of 3ills and cheLues
3et'een 3anks.
Camera de decontJri@oficiul de cliring va centraliza toate operaRiunile care se referJ la schim(ul
inter(ancar de efecte de comerR Qi cecuri.
12. The E.:. in/estment 3anks ha/e 5ust raised their prime rate 3( a point to ,!5X.
BJncile de investiRii americane tocmai au crescut rata de (azJ !a do(Knzii# la T%FNH mJrindBo cu un
sfert de punct.
13. The increase in the price of short2term mone( has 3een confirmed 'hereas longer term rates remain
sta3le.
&Ba confirmat creQterea preRului pentru Lmprumuturile pe termen scurt% Ln timp ce ratele !do(Knzii# pe
termen lung rJmKn sta(ile.
14. The Prime 8ate Jfine rate, 3lue2chip rate, _B.$.` 3ase rateM is the rate granted 3( E.:. 3anks to their
clients 'ith the highest rating.
+ata de (azJ reprezintJ rata acordatJ de (Jncile americane clienRilor care prezintJ cel mai mic risc.
15. The spell of monetar( sta3ilit( has lasted since the 3egining of the (ear.
AceastJ perioadJ de sta(ilitate monetarJ dureazJ de la Lnceputul anului.
1. The polic( of e0pensi/e mone( is meant to fight inflation.
*olitica diri.atJ Lmpotriva creQterii preRurilor este destinatJ com(aterii inflaRiei.
1!. O3ut it has immediate repercussions on corporate income statements.
1%%
=dar acest lucru are repercursiuni imediate asupra conturilor de venit Qi pierderi ale
Lntreprinderilor.
1". The Central Bank acts as 3anker to the go/ernment and to other 3anks, and as the central note2issuing
authorit(.
Banca centralJ funcRioneazJ Ln calitate de (ancher pentru guvern Qi alte (Jnci Qi ca autoritate
centralJ de emisiune monetarJ.
+an%ing. Ie) sentences.
1. I+d like to change ;rench francs into pounds.
AQ vrea sJ schim( franci francezi Ln lire.
2. Gour account is in the red Jo/erdra'nM.
Contul -umneavoastrJ este epuizat.
3. :hould I Jmust IM endorse the cheLue-
Tre(uie sJ andosez cecul3
4. 4e has opened a giro account.
/l a deschis un contBcec poQtal.
5. .( salar( is paid into m( account e/er( month.
&alariul meu este vJrsat Ln contul meu Ln fiecare lunJ.
. The holders of such deposit accounts must gi/e se/en da(+s notice 3efore 'ithdra'al.
-eRinJtorii de astfel de conturi de depuneri tre(uie sJ LnQtiinReze !(anca# cu Qapte zile Lnainte pentru
aBQi retrage (anii.
!. :a/ings accounts earn an interest.
Conturile de economii aduc o do(KndJ.
". The last 'ithdra'al dates 3ack to the 2!
th
of last month.
Altima retragere este din 0F luna trecutJ.
#. 4e 'anted me to make out a 3lank cheLue.
/l voia sJ facJ un cec Ln al(.
1%. I+m not sure I kept the stu3.
$u sunt sigur cJ am pJstrat talonul.
11. ,h( not endorse the cheLue to his JherM name-
-e ce sJ nu andosez cecul pe numele lui !ei#3
12. .( 3ank 'ill lend me part of the sum.
Banca mea o sJBmi dea cu Lmprumut o parte din sumJ.
13. 4e 'ill find it hard to repa( his loan.
Ui va fi greu sJ ram(urseze Lmprumutul.
14. ,h( has his JherM o/erdraft 3een discontinued -
-e ce nu i sBa mai dat descoperitul3
15. 4e should not ha/e 3orro'ed so much.
$u ar fi tre(uit ca el sJ Lmprumute atKt.
1. This is the 5
th
3ad cheLue Jdud cheLueM 'e+/e had this month.
/ste al cincilea cec fJrJ acoperire care mi se dJ luna aceasta.
1!. Please go to counter .
1J rog sJ mergeRi la ghiQeul T.
1". Please gi/e me the rest in 52pounds notes.
-aRiBmi restul Ln hKrtii !(ancnote# de N lire.
1#. The statement has still not reached me.
/>trasul !de cont# nu a a.uns LncJ la mine. !nu miBa parvenit LncJ#
2%. I ha/e to JI mustM replenish m( account.
1%1
Tre(uie sJBmi reaprovizionez contul.
21. :he hasn+t dra'n on her account for 3 'eeks.
/a nu a mai scos din contul sJu de trei sJptJmKni.
34. Ta,ation an! ho/ to a'oi! it
1oca-#lar)
@hich terms !o the *ollo/ing sentences !e*ine8
1. The ta0 people pa( on their 'ages and salaries is called
Capital transfer ta0 income ta0 'ealth ta0
2. 6 ta0 on 'ages and salaries or on compan( profits is aPan
Cirect ta0 indirect ta0 /alue2added ta0
3. 6 ta0 le/ied at a higher rate on higher incomes is called a
Progressi/e ta0 regressi/e ta0 'ealth ta0
4. 6 ta0 paid on propert(, sales transactions, imports, and so on is aPan
Cirect ta0 indirect ta0 /alue2added ta0
5. 6 ta0 collected at each stage of production, e0cluding the alread(2ta0ed costs from pre/ious stages, is
called aPan
6dded2/alue ta0 sales ta0 /alue2added ta0
. Profits made 3( selling assets are generall( lia3le to a
Capital gains ta0 capital transfer ta0 'ealth ta0
!. )ifts and inheritances o/er a certain /alue are often lia3le to a
Capital gains ta0 capital transfer ta0 'ealth ta0
". The annual ta0 imposed on people+s fortunes Jin some countriesM is aPan
6dded2/alue ta0 capital gains ta0 'ealth ta0
#. .aking false declarations to the ta0 authorities is called
;iscal polic( ta0 a/oidance ta0 e/asion
1%. 8educing the amount of ta0 (ou pa( to a legal minimum is called
Creati/e accounting ta0 a/oidance ta0 e/asion
0ncome ta, 7 impo@it pe /enit
@ealth ta, 7 impo@it pe a/ere
:irect ta, 7 impo@it direct
0n!irect ta, 7 impo@it indirect
Progressi'e ta, 7 impo@it progresi/
Regressi'e ta, 7 impo@it regresi/
1al#eDa!!e! ta, K T=6
Sales ta, 7 impo@it pe /Fn@>ri
apital gains ta, 7 impo@it pe plusul de capital
apital trans*er ta, 7 impo@it pe transferul de capital
3iscal polic) 7 politic> fiscal>
Ta, a'oi!ance 7 e/itare fiscal>
Ta, e'asion 7 e/a@iune fiscal>
Ta, 7 ta0>, impo@it
Ta,ation 7 impo@it, impo@itare
Ta, shelter 7 protec<ie fiscal>
Ta, ha'en 7 paradis fiscal
Ta,D!e!#cti-le 7 deducti3il fiscal
2,cise !#ties 7 acci@e, impo@it de fa3ricare
1%2
Rea!ing
Rea! the *ollo/ing te,t an! !eci!e /hich paragraphs co#l! -e gi'en the *ollo/ing hea!ings.
- 6d/antages and disad/antages of different ta0 s(stems
- 6/oiding ta0 on profits
- 6/oiding ta0 on salaries
- Ta0 e/asion
- The functions of ta0ation
Ta,ation =an! ho/ to a'oi! it9>
The primar( function of ta0ation is, of course, to raise re/enue to finance go/ernment
e0penditure, 3ut ta0es can also ha/e other purposes. Indirect e0cise duties, for e0ample, can 3e designed
to dissuade Ja preveni% a schim(a pJrereaM people from smoking, drinking alcohol, and so on.
)o/ernments can also encourage capital in/estment 3( permitting /arious methods of accelerated
depreciation accounting that allo' companies to deduct more of the cost of in/estments from their profits,
and conseLuentl( reduce their ta0 3ills.
There is al'a(s a lot of de3ate as to the fairness of ta0 s(stems. Business profits for e0ample, are
generall( ta0ed t'iceQ companies pa( ta0 on their profits Jcorporation ta0 in Britain, income ta0 in the
E:6M, and shareholders pa( income ta0 on di/idends. Income ta0es in most countries are progressi/e,
and are one of the 'a(s in 'hich go/ernments can redistri3ute 'ealth. The pro3lem 'ith progressi/e
ta0es is that the marginal rate 7 the ta0 people pa( on an( additional income 7 is al'a(s high, 'hich is
generall( a disincenti/e to 3oth 'orking and in/esting. 9n the other hand, most sales ta0es are slightl(
regressi/e, 3ecause poorer people need to spend a larger proportion of their income on consumption than
the rich.
The higher the ta0 rates, the more people are tempted to cheat, 3ut there is a su3stantial N3lack+ or
Nunderground+ econom( nearl( e/er('here. In Ital(, for e0ample, self2emplo(ed people 7 'hose income
is more difficult to control than that of compan( emplo(ees 7 account for more than half of national
income. Dots of people also ha/e undeclared, part2time e/ening 5o3s Jsome people call this
Nmoonlighting+M 'ith small and medium2si@ed famil( firms, on 'hich no one pa(s an( ta0 or national
insurance. 6t the end of the 1#", the Cirector of the Italian *ational Institute of :tatistics calculated the
si@e of the underground econom(, and added 1.!X to Ital(+s gross national product J)*PM figure, and
then claimed that Ital( had o/ertaken Britain to 3ecome the 'orld+s fifth largest econom(.
To reduce income ta0 lia3ilit(, some emplo(ers gi/e highl(2paid emplo(ees lots of Nperks+ Jshort
for perLuisitesM instead of ta0a3le mone(, such as compan( cars, free health insurance, and su3sidi@ed
lunches. Degal 'a(s of a/oiding ta0, such as these, are kno'n as loopholes in ta0 lo's. Dife insurance
policies, pension plans and other in/estments 3( 'hich indi/iduals can postpone the pa(ment of ta0, are
kno'n as ta0 shelters. Conations to charities that can 3e su3tracted from the income on 'hich ta0 is
calculated are descri3ed as ta02deducti3le.
Companies ha/e a /ariet( of 'a(s of a/oiding ta0 on profits. The( can 3ring for'ard capital
e0penditure Jon ne' factories, machines, and so onM so that at the end of the (ear all the profits ha/e 3een
used upA this is kno'n as making a ta0 loss. .ultinational companies often set up their head offices in
countries such as Diechtenstein, .onaco, the Ca(man Islands, and the Bahamas, 'here ta0es are lo'A
such countries are kno'n as ta0 ha/ens. Criminal organi@ations, mean'hile, tend to pass mone( through
1%3
a series of companies in /er( complicated transactionsin order to disguise its origin from ta0 inspectors 7
and the policeA this is kno'n as laundering mone(.
omprehension
Accor!ing to the te,t& are the *ollo/ing statements Tr#e or 3alse8
1. Ta0es can 3e designed 3oth to discourage and to encourage spending.
2. The same amount of mone( can 3e ta0ed more than once.
3. Progressi/e ta0es ma( discourage people from 'orking e0tra hours.
4. :ales ta0es are unfair 3ecause poor people spend more than the rich do.
5. The Italian go/ernment kno's that a3out one se/enth of national income escapes ta0ation.
.NDoopholes+ are a common form of ta0 e/asion.
!.If (ou pa( a lot of (our income into a pension fund or a life insurance polic( (ou ne/er ha/e to pa( ta0
on it.
". 6 compan( that makes an unusuall( large profit during a ta0 (ear might Luickl( decide to spend it, for
e0ample, on a ne' factor( or eLuipment.
1oca-#lar)
3in! /or!s in the te,t that mean the *ollo/ing.
1. reducing the /alue of a fi0ed asset, 3( charging it against profits
2. something 'hich discourages an action
3. an ad5ecti/e descri3ing a ta0 that is proportionall( higher for people 'ith less mone(
4. spending mone( to 3u( things, rather than sa/ing it
5. 'orking for (ourself, 3eing (our o'n 3oss
. a ta0 on incomes that pa(s for sickness 3enefit, unemplo(ment 3enefit, and old2age pensions
!. non2financial 3enefits or ad/antages of a 5o3
". a 'a( to dela( the pa(ment of ta0 to a later time
#. an ad5ecti/e descri3ing e0penditure that can 3e taken a'a( from ta0a3le income or profits
1%. a countr( offering /er( lo' ta0 rates to foreign 3usinesses
13. Stoc% Mar%et
35. Stoc%s an! shares
ompanies
Indi/iduals and groups of people doing 3usiness as a partnership, ha/e unlimited lia3ilit( for
de3t, unless the( form a limited compan(. If the 3usiness does 3adl( and cannot pa( its de3ts, an(
creditor can ha/e it declared 3ankrupt. The unsuccessful 3usiness people ma( ha/e to sell nearl( all their
possessions in order to pa( their de3ts. This is 'h( most people doing 3usiness form limited companies.
6 limited compan( is a legal entit( separate from its o'ners, and is onl( lia3le for the amount of capital
that has 3een in/ested in it. If a limited compan( goes 3ankrupt, it is 'ound up and its assets are
1%4
liLuidated Ji.e. soldM to pa( the de3ts. If the assets don+t co/er the lia3ilities or the de3ts, the( remain
unpaid. The creditors simpl( do not get all their mone( 3ack.
.ost companies 3egin as private limited companies. Their o'ners ha/e to put up the capital
themsel/es, or 3orro' from friends or a 3ank, perhaps a 3ank speciali@ing in /enture capital. The
founders ha/e to 'rite a .emorandum of 6ssociation J)BM or a Certificate of Incorporation JE:M, 'hich
states the compan(+s name, its purpose, its registered office or premises, and the amount of authori@ed
share capital. The( also 'rite 6rticles of 6ssociation J)BM or B(la's JE:M, 'hich set out the duties of
directors and the rights of shareholders J)BM or stockholders JE:M. The( send these documents to the
registrar of companies.
6 successful, gro'ing compan( can appl( to a stock e0change to 3ecome a pu(lic limited
compan( J)BM or a listed compan( JE:M. *e'er and smaller companies usuall( 5oin No/er2the2counter+
markets, such as the Enlisted :ecurities .arket in Dondon or *asdaL in *e' Gork. =er( successful
3usinesses can appl( to 3e Luoted or listed Ji.e. to ha/e their shares tradedM on ma5or stock e0changes.
Pu3licl( Luoted companies ha/e to fulfil a large num3er of reLuirements, including sending their
shareholders an independentl(2audited report e/er( (ear, containing the (ear+s trading results and a
statement of their financial position.
The act of issuing shares J)BM or stocks JE:M for the first time is kno'n as floating a compan(
Jmaking a flotationM. Companies generall( use an in/estment 3ank to under'rite the issue i.e. to
guarantee to purchase all the securities at an agreed price on a certain da(, if the( cannot 3e sold to the
pu3lic.
Companies 'ishing to raise more mone( for e0pansion can sometimes issue ne' shares, 'hich
are normall( offered first to the e0isting shareholders at less than their market price. This is kno'n as a
rights issue. Companies sometimes also choose to capitali@e part of their profit, i.e. turn it into capital, 3(
issuing ne' shares to shareholders instead of pa(ing di/idends. This is kno'n as a 3onus issue.
Bu(ing a share gi/es its holder part of the o'nership of a compan(. :hares generall( entitle their
o'ner to /ote at a compan(+s 6nnual )eneral .eeting J)BM or 6nnual .eeting of :tockholders JE:M,
and to recei/e a proportion of distri3uted profits in the form of a di/idend 7 or to recei/e part of the
compan(+s residual /alue if it goes into liLuidation. :hareholders can sell their shares on the secondar(
market at an( time, 3ut the market price of a share 7 the price Luoted at an( gi/en time on the stock
e0change, 'hich reflects Jmore or lessM ho' 'ell or 3adl( the compan( is doing 7 ma( differ radicall(
from its nominal /alue.
1oca-#lar)
3in! /or!s in the te,t /hich mean the *ollo/ing
1 ha/ing a responsi3ilit( or an o3ligation to do something, e.g. to pa( a de3t
2 a person or organi@ation to 'hom mone( is o'ed Jfor goods or ser/ices rendered, or as repa(ment of a
loanM
3 to 3e insol/entQ una3le to pa( de3ts
4 e/er(thing of /alue o'ned 3( a 3usiness that can 3e used to produce goods, pa( lia3ilities, and so on
5 to sell all the possessions of a 3ankrupt 3usiness
mone( that a compan( 'ill ha/e to pa( to someone else J3ills, ta0es, de3ts, interest and mortgage
pa(ments, etc.M
! to pro/ide mone( for a compan( or other pro5ect
" mone( in/ested in a possi3l( risk( ne' 3usiness
# the people 'ho 3egin a ne' compan(
1% the place in 'hich a compan( does 3usinessQ an office, shop, 'orkshop, factor(, 'arehouse, and so on
11 to guarantee to 3u( an entire ne' share issue, if no one else 'ants it
12 a proportion of the annual profits of a limited compan(, paid to shareholders
1%5
Alternati'e terminolog)
6mericans often talk a3out corporations rather than companies and a3out an initial pu(lic offering rather
than a flotation.
6nother name for stocks and shares is e?uities, 3ecause all the stocks or shares of a compan( 7 or at least
all those of a particular categor( 7 ha/e eLual /alue.
T'o terms for nominal value are face value and par value.
9ther names for a (onus issue are a scrip issue Jshort for Nsu3scription certificate+M and a capitalization
issue, and in the E:, a stock dividend or stock split.
1oca-#lar)
Match #p the *ollo/ing /or!s an! !e*initions.
Blue chip -efensive stock <ro"th stock
Insider shareBdealing Institutional investors Mutual fund
MarketBmaker *ortfolio &tock(roker
1. a compan( that spreads in/estors+ capital o/er a /ariet( of securities
2. an in/estor+s selection of securities
3. a person 'ho can ad/ise in/estors and 3u( and sell shares for them
4. a stock in a large compan( or corporation that is considered to 3e a secure in/estment 7
5. a stock 7 in an industr( not much affected 3( c(clical trends 7 that offers a good return 3ut onl( a
limited chance of rise or decline in price
. a stock 7 'hich usuall( has a high purchasing price and a lo' current rate of return 7 that is e0pected
to appreciate in capital /alue
!. a 'holesaler in stocks and shares 'ho deals 'ith 3rokers
". financial organi@ations such as pension funds and insurance companies 'hich o'n most of the shares
of all leading companies Jo/er %X, and risingM
#. the use of information not kno'n to the pu3lic to make a profit out of 3u(ing or selling shares
36. +on!s
Companies finance most of their acti/ities 3( 'a( of internall( generated cash flo's. If the( need
more mone( the( can either sell shares or 3orro', usuall( 3( issuing 3onds. .ore and more companies
no' issue their o'n 3onds rather than 3orro' from 3anks, 3ecause this is often cheaperQ the market ma(
3e a 3etter 5udge of the firm+s credit'orthiness than a 3ank, i.e. it ma( lend mone( at a lo'er interest rate.
This is e/identl( not a good thing for the 3anks, 'hich no' ha/e to lend large amounts of mone( to
3orro'ers that are much less secure than 3lue chip companies.
Bond2issuing companies are rated 3( pri/ate rating companies such as .ood(+s and :tandard V
Poors, and gi/en an Nin/estment grade+ according to their financial situation and performance, 6aa 3eing
the 3est, and C the 'orst, i.e. nearl( 3ankrupt. 93/iousl(, the higher the rating, the lo'er the interest rate
at 'hich a compan( can 3orro'.
.ost 3onds are 3earer certificates, so after 3eing issued Jon the primar( marketM, the( can 3e
traded on the secondar( 3ond market until the( mature. Bonds are therefore liLuid, although of course
their price on the secondar( market fluctuates according to the changes in interest rates. ConseLuentl(, the
ma5orit( of 3onds on the secondar( market are traded either a3o/e or 3elo' par. 6 3ond+s (ield at an(
1%
particular time is thus its coupon Jthe amount of interest it pa(sM e0pressed as a percentage of its price on
the secondar( market.
;or companies, the ad/antage of de3t financing o/er eLuit( financing is that 3ond interest is ta0
deducti3le. In other 'ords, a compan( deducts its interest pa(ments from its profits 3efore pa(ing ta0,
'hereas di/idends are paid out of alread(2ta0ed profits. 6part from this Nta0 shield+, it is generall(
considered to 3e a sign of good health and anticipated higher future profits if a compan( 3orro's. 9n the
other hand, increasing de3t increases financial riskQ 3ond interest has to 3e paid, e/en in a (ear 'ithout
an( profits from 'hich to deduct it, and the principal has to 3e repaid 'hen the de3t matures, 'hereas
companies are not o3liged to pa( di/idends or repa( share capital. Thus companies ha/e a de3t2eLuit(
ratio that is determined 3( 3alancing ta0 sa/ings against the risk of 3eing declared 3ankrupt 3( creditors.
)o/ernments, of course, unlike companies, do not ha/e the option of issuing eLuities.
ConseLuentl( the( issue 3onds 'hen pu3lic spending e0ceeds receipts from income ta0, =6T, and so on.
Dong2term go/ernment 3onds are kno'n as gilt2edged securities, or simpl( gilts, in Britain, and Treasur(
Bonds in the E:. The British and 6merican central 3anks also sell and 3u( short2term Jthree monthsM
Treasur( Bills as a 'a( of regulating the mone( suppl(. To reduce the mone( suppl(, the( sell these 3ills
to commercial 3anks, and 'ithdra' the cash recei/ed from circulationA to increase the mone( suppl( the(
3u( them 3ack, pa(ing 'ith ne'l( created mone( 'hich is put into circulation in this 'a(.
Rating compan) 7 firm> de rating
:e-t *inancing 7 finan<area de3itului
2B#it) *inancing 7 finan<area ac<iunilor
0n'estment gra!e 7 gradul riscului de in/esti<ie
:e-tDeB#it) ratio 7 ra<ia de3it2ac<iuni
P#-lic spen!ing 7 chletuieli pu3lice
Receipts 7 Bncas>ri, /enituri
Treas#r) -on!s 7 certificate de tre@orerie pe termen lung
Treas#r) -ills 7 certificate de tre@orerie pe termen scurt
1oca-#lar)
Match #p the /or!s or phrases on the le*t /ith the correspon!ing ones on the right.
1 in/estors 6 the amount of a loan
2 issuing 3onds B 3orro'ing mone(
3 principal C date at 'hich the mone( 'ill 3e returned
4 maturit( C fall in interest rates
5 pension funds $ keep their 3onds till maturit(
3u(2and2hold in/estors ; default
! non2pa(ment ) profits on the sale assets
" price appreciation 4 pro/iders of funds
# price depreciation I retirement mone(
1% capital gains 1 rise in interest rates
1oca-#lar)
Match #p the e,pressions on the le*t /ith the !e*initions on the right.
1 eLuit( financing 6 a securit( 'hose o'ner is not
registered 'ith the issuer
2 de3t financing B easil( sold Jturned into cashM
1%!
3 3earer certificate C the rate of interest paid 3( a fi0ed interest securit(
4 liLuid C the rate of income an in/estor recei/es taking into account a securit(+s
current price
5 par $ issuing 3onds
coupon ; issuing shares
! (ield ) nominal or face /alue J1%%XM
37. 3#t#res& options an! s/aps
1oca-#lar)
Match #p the *ollo/ing /or!s an! !e*initions.
1 3#t#res
6 contracts gi/ing the right, 3ut not the o3ligation, to 3u( or sell a securit(, a currenc(, or a commodit( at
a fi0ed price during a certain period of time
2 Aptions
B contracts to 3u( or sell fi0ed Luantities of commodit(, currenc(, or financial asset at a future date, at a
price fi0ed at the time of making the contract
3 ommo!ities
C a general name for all financial instruments 'hose price depends on the mo/ement of another price
4 :eri'ati'es
C 3u(ing securities or other assets in the hope of making a capital gain 3( selling them at a higher price
Jor selling them in the hope of 3u(ing them 3ack at a lo'er priceM
5 <e!ging
$ making contracts to 3u( or sell a commodit( or financial asset at a pre2arranged price in the future as a
protection or Ninsurance+ against price changes
6 Spec#lation
; ra' materials or primar( products Jmetals, cereals, coffee, etc.M that are traded on special markets
Rea!ing
Select ten or ele'en o* the *ollo/ing /or!s that )o# /o#l! e,pect to *in! in an intro!#ctor) te,t
a-o#t *#t#res an! options.
Assets (eer (ush call commodities contracts
Copper currencies discount store foodstuffs hedge
'ia(ilities plastic phone ra" materials shout
&pot market supermarket tea
No/ rea! the te,t& an! see i* )o# *in! the /or!s )o# selecte!.
3#t#res
$/er( 'eekda(, enormous amounts of commodities, currencies and financial securities are traded
for immediate deli/er( at their current price on spot markets. Get there are also futures markets on 'hich
contracts can 3e made to 3u( and sell commodities, currencies, and /arious financial assets, at a future
date Je.g. three, si0 or nine months adeadM, 3ut 'ith the price fi0ed at the time of the deal. :tandardi@ed
1%"
deals for fi0ed Luantities and time periods Je.g. 25 tons of copper to 3e deli/ered ne0t 1une 3%M are called
futuresA indi/idual, non2standard, No/er2the+counter+ deals 3et'een t'o parties Je.g. 1.! 3illion (en to 3e
e0changed for dollars on :eptem3er 15, at a rate set toda(M are called forward contracts.
<e!ging an! spec#lating
;utures, options and other deri/ati/es e0ist in order that companies and indi/iduals ma( attempt
to diminish the effects of, or profit from, future changes in commodit( and asset prices, e0change rates,
interest rates, and so on. ;or e0ample, the prices of foodstuffs, such as 'heat, mai@e, coca, coffee, tea and
orange 5uice are freLuentl( affected 3( droughts, floods and other e0treme 'eather conditions.
ConseLuentl( man( producers and 3u(ers of ra' matrials 'ant to hedge, in order to guarantee ne0t
season+s prices. ,hen commodit( prices are e0pected to rise, future prices are o3/iousl( higher than Jat a
premium onM spot pricesA 'hen the( are e0pected to fall the( are at a discount on spot prices.
In recent (ears, especiall( since financial deregulation, e0change rates and interest rates ha/e also
fluctuated 'idl(. .an( 3usinesses, therefore, 'ant to 3u( or sell currencies at a guaranteed future price.
:peculators, anticipating currenc( appreciations or depreciations, or interest rate mo/ements, are also
acti/e in currenc( futures markets, such as the Dondon International ;inancial ;utures $0change JDI;;$,
pronounced Nlife+M.
Aptions
6s 'ell as currencies and commodities, there is no' a huge futures market in stocks and shares.
9ne can 3u( options gi/ing the right 7 3ut not the o3ligation 7 to 3u( and sell securities at a fi0ed price in
the future. 6 call option gi/es the right to 3u( securities Jor a currenc(, or a commodit(M at a certain price
during a certain period of time. 6 put option gi/es the right to sell an asset at a certain price during a
certain period of time. These options allo' organi@ations to hedge their eLuit( in/estments.
;or e0ample, if (ou think a share 'orth 1%% 'ill rise, (ou can 3u( a call option gi/ing the right to
3u( at 1%%, hoping to sell this option, or to 3u( and resell the share at a profit. 6lternati/el(, (ou can
'rite a put option gi/ing someone else the right to sell the shares at 1%%Q if the market price remains
a3o/e 1%%, no one 'ill e0ercise the option, so (ou earn the premium.
9n the contrar(, if (ou e0pect the /alue of a share that (ou o'n to fall 3elo' its current price of
1%%, (ou can 3u( a put option at 1%% Jor higherMQ if the price falls, (ou can still sell (our shares at this
price. 6lternati/el(, (ou could 'rite a call option gi/ing someone else the right to 3u( the share at 1%%Q if
the market price of the underl(ing securit( remains 3elo' the option+s e0ercise price or strike price, no2
one 'ill take up the option, and (ou earn the premium.
S/aps
9ptions are merel( one t(pe of deri/ati/e instrument, 3ased on another underl(ing price. .an(
companies no'ada(s also arrange currenc( s'aps and interest rate s'aps 'ith other companies or
financial institutions. ;or e0ample, a ;rench compan( that can 3orro' francs at a preferential rate, 3ut
'hich also needs (en, can arrange a s'ap 'ith a 1apanese compan( in the opposite position. :uch
currenc( s'aps, designed to achie/e interest rate sa/ings, are of course open to the risk of e0change rate
fluctuations. 6 compan( 'ith a lot of fi0ed interest de3t might choose to e0change some of it for another
compan(+s floating rate loans. ,hether the( sa/e or lose mone( 'ill depend on the mo/ement of interest
rates.
all option 7 op<iune de achi@i<ie
P#t option 7 op<iune de /Fn@are
1%#
2,ercise price L stri%e price 7 pre< de e0erci<iu
S/ap 7 schim3
S#mmariCing
omplete the *ollo/ing sentences
1 The difference 3et'een futures and for'ard contracts is O.
2 Producers and 3u(ers often choose to hedge 3ecause O.
3 :peculators can make mone( on currenc( futures if O
4 If (ou 3elie/e that a share price 'ill rise, possi3le option strategies include O
5 9n the contrar(, if (ou think a share price 'ill fall, possi3le option strategies include O
1. The risk 'ith currenc( and interest rate s'aps is that O
1oca-#lar)
3in! /or!s in the te,t that are in an o-'io#s sense the o!!osite o* the terms -elo/.
Appreciate call discount drought floating
2edging spot market strike price