Chapter I

MICROECONOMICS AND
MACROECONOMICS

Many economists specialize in a particular

branch of the subject. For example, there are
labour economists, energy economists, monetary
economists, and international economists. What
distinguishes these economists is the segment of
economic life in which they are interested.
Labour economics deals with problems of the
labour market as viewed by firms, workers, and
society as a whole. Urban economics deals with
city problems: land use, transport, congestion,
and housing. However, we need not classify
branches of economics according to the area of
economic life in which we ask the standard
questions what, how, and for whom. We can also
classify branches of economics according to the
approach or methodology that is used. The very
broad division of approaches into microeconomic
and macroeconomic cuts across the large number
of subject groupings cited above.
Microeconomic analysis offers a detailed
treatment of individual decisions about particular
commodities.
For example, we might study why individual
households prefer cars to bicycles and how
producers decide whether to produce cars or
bicycles. We can then aggregate the behavior of
all households and all firms to discuss total car
purchases and total car production. Within a
market economy we can discuss the market for
cars. Comparing this with the market for
bicycles, we may be able to explain the relative
price of cars and bicycles and the relative output
of these two goods. The sophisticated branch of
microeconomics known as general equilibrium
theory extends this approach to its logical
conclusion. It studies simultaneously every
market for every commodity. From this it is
hoped that we can understand the complete
pattern of consumption, production, and
exchange in the whole economy at a point in
time.
If you think this sounds very complicated you
are correct. It is. For many purposes, the analysis
becomes so complicated that we tend to lose
track of the phenomena in which we were
interested. The interesting task for economics, a
task that retains an element of art in economic
science, is to devise judicious simplifications
which keep the analysis manageable without
distorting reality too much. It is here that
microeconomists and macroeconomists proceed
down different avenues. Microeconomists tend to
offer a detailed treatment of one aspect of
economic behaviour but ignore interactions with
the rest of the economy in order to preserve the
simplicity of the analysis. A microeconomic
analysis of miners’ wages would emphasize the
characteristics of miners and the ability of mine
owners to pay. It would largely neglect the chain
of indirect effects to which a rise in miners’
wages might give rise. For example, car workers
might use the precedent of the miners’ pay
increase to secure higher wages in the car
industry, thus being able to afford larger houses
which burned more coal in heating systems.
When microeconomic analysis ignores such
indirectly induced effects it is said to be partial
analysis.
In some instances, indirect effects may not be
too important and it will make sense for
economists to devote their effort to very detailed
analyses of particular industries or activities. In
other circumstances, the indirect effects are too
important‘ to be swept under the carpet and an
alternative simplification must be found.
Macroeconomics emphasizes the interactions in
the economy as a whole. It deliberately
simplifies the individual building blocks of the
analysis in order to retain a manageable analysis
of the complete interaction of the economy. For
example, macroeconomists typically do not
worry about the breakdown of consumer goods
into cars, bicycles, televisions, and calculators.
They prefer to treat them all as a single bundle
called ‘consumer goods’ because they are more
interested in studying the interaction between
households’ purchases of consumer goods and
firms’ decisions about purchases of machinery
and buildings.
Macroeconomics is the study of the economy as
a whole.
Macroeconomics is concerned not with the
details — the price of cigarettes relative to the
price of bread, or the output of cars relative to the
output of steel — but with the overall picture.
The distinction between microeconomics and
macroeconomics is more than the difference
between economics in the small and economics
in the large, which the Greek prefixes micro and
macro suggest. The purpose of the analysis is
also different.
 A model is a deliberate simplification to enable
us to pick out the key elements of a problem and
think about them clearly. Although we could
study the whole economy by piecing together our
microeconomic analysis of each and every
market, the resulting model would be so
cumbersome that it would be hard to keep track
of all the economic forces at work.
Microeconomics and macroeconomics take
different approaches to keep the analysis
manageable.
Microeconomics places the emphasis on a
detailed understanding of particular markets. To
achieve this amount of detail or magnification
many of the interactions with other markets are
suppressed. In saying that a tax on cars reduces
the equilibrium quantity of cars we ignore the
question of what the government does with the
revenue. If government has to borrow less money
it is possible that interest rates and the exchange
rate will fall and that improved international
competitiveness of U.K car producers will
increase the equilibrium output of cars in the
U.K.
Microeconomics is a bit like looking at a horse
through a pair of binoculars. It is great for
details but sometimes we get a clearer picture of
the whole race by using the naked eye. Because
macroeconomics is concerned primarily with the
interaction of different parts of the economy, it
relies on a different simplification to keep the
analysis manageable. Macroeconomics simplifies
the building blocks in order to focus on how they
fit together and influence one another.
The main issues in macroeconomics:
1.Inflation –the annual inflation rate is the
percentage increase per annum in the average
price of goods and services.
What causes inflation? The money supply? Trade
unions?
Why do people mind so much about inflation?
Does it cause unemployment?
2.Unemployment. It is a measure of the number
of people registered as looking for work but
without a job. The unemployment rate is the
percentage of the labour force that is
unemployed. The labour force is the number of
people working or looking for work. It excludes
all those –from rich landowners to heroin
addicts- who are neither working nor looking for
work.
.Why has it increased so much?Are workers
pricing themselves out of jobs by greedy wage
claims? Is high unemployment necessary to keep
inflation under control, or could the government
create more jobs?
3.Output and Growth .Real gross national
product measures the total income of the
economy. It tells us the quantity of goods and
services the economy as a whole can afford to
purchase. Increases in real gross national product
are called economic growth.
-What determines the level of real GNP? Why do
some countries grow faster than others?

4. Macroeconomic policy. Almost every day the

newspapers and television refer to the problems
of inflation, unemployment, and slow growth.
These issues are widely discussed; they help
determine the outcome of elections, and make
some people interested in learning more about
macroeconomics. The government has a variety
of policy measures through which it can try to
affect the performance of the economy as a
whole. It levies taxes, commissions spending,
influences the money supply, interest rates, and
the exchange rate, and it sets targets for the
output and prices of nationalized industries.
What the government can and should do is the
subject of lively debate both within the field of
economics and in the country at large. As usual,
it is important to distinguish between positive
issues relating to how the economy works and
normative issues relating to priorities or value
judgements.
Economic Growth
There is general agreement amongst economists
concerned with the problems of less developed
countries (LDCs) that a distinction should be
made between economic growth and economic
development.
Economic growth is defined as an increase in the
productive capacity of an economy over time,
giving rise to an increase in real National Income
(NI). If the rate of growth of income is greater
than the rate of growth of population, income per
capita will also rise.
Economists distinguish between the Gross
Domestic Product (GDP) and the Gross National
Product (GNP) of an economy. GDP is the total
final output of goods and services produced
within an economy for any given year, by both
residents and non-residents. GNP is equal to
GDP plus net factor (or property) incomes from
abroad (that is, the difference between returns to
the inhabitants of the country from property
located overseas minus the returns accruing to
foreigners from their property located within the
reporting country). For most LDCs, net property
income from abroad is likely to be negative and
thus GDP will be greater than GNP.
Both domestic product and national product can
be expressed in net terms (that is, after allowing
for capital depreciation) and either at market
prices or factor costs (that is, including and
excluding respectively, indirect taxes net of
subsidies). Net National Product (NNP) at factor
cost is identical to National Income.
For many LDCs, economic growth has been
rapid and sustained for much of the post-Second
World War period. World Bank projections for
the 1980s predicted that higher rates of economic
growth would be difficult to reach and sustain
and that there would occur a widening in both
the relative and absolute gaps between the richest
and the poorest countries, including the gap
between the middle- and low-income LDCs.
 In the early years of the evolution of
development economics as a distinct area of
study, economic growth and economic
development were generally seen as being
synonymous. The deficiencies of using GNP per
capita as an indicator of economic welfare (and
by implication, the level of economic
development) were recognised by economists,
however, and over time it became increasingly
evident that economic growth on its own,
although undoubtedly a necessary condition, was
certainly not a sufficient condition to ensure
increases in economic, let alone social,
welfare.Within the concept of economic
development was some notion of progress.
Economic development meant growth plus
structutal and institutional change which
involved the move towards certain normative
goals or objectives.Growth without development
was a possibility if increases in per capita
incomes were not accompanied either by
structural changes or by the diffusion of the gains
in real income among all sectors of the
population.
 Vocabulary

Commodity-goods sold in large quantities

Consumption- using,consuming
Cumbersome- large and difficult to move
Debate- formal discussion, contest between two
speakers
Economics-study of macro and micro economics
Economy-financial state of a country
Gain- increase of possessions, increase in
amount or power
Housing- accomodation
Income-money received during a given period
Issue- giving out shares, outgoing, result,
outcome
Levy- money collected by authorities
Manageable- that can be managed,easily
controlled
Overseas- abroad, across the sea
Purchase-something which has been bought
Rate- charge for service or work.-market price
Subsidy- money given to support unprofitable
enterprises
Supply-providing something
To accrue- to come as a natural growth or
development
To cite- to mention
To deal with- to do business
To distort- to give a false account of
To ensure- to make sure, guarantee
To exchange-to give one thing for another
To increase- to make, to become greater
To levy- to demand payment of taxes and dues
To owe- to have to pay money
To purchase- to buy
To subsidise- to help or support financially
To trade- to buy and sell
Trade- buisness of buying and selling
Transaction- exchange of goods or services for
money
Welfare- condition of having good health,
comfortable living and working conditions
 Chapter II

The Medium of Exchange

Money, the medium of exchange, is used in one-
half of almost all exchange. Workers exchange
labour services for money. People buy or sell
goods in exchange for money. We accept money
not to consume it directly but because it can
subsequently be used to buy things we do wish to
consume. Money is the medium through which
people exchange goods and services.
To see that society benefits from a medium of
exchange, we should imagine a barter economy.
A barter economy has no medium of exchange.
Goods are traded directly or swapped for other
goods.
In a barter economy the seller and the buyer each
must want something the other has to offer. Each
person is simultaneously a seller and a buyer. In
order to see a film, you must hand over in
exchange a good or service that the cinema
manager wants. There has to be a double
coincidence of wants. You have to find a cinema
where the manager wants what you have to offer
in exchange.
Trading is very expensive in a barter economy.
People must spend a lot of time and effort
finding others with whom they can make
mutually satisfactory swaps. Since time and
effort are scarce resources, a barter economy is
wasteful. The use of money — any commodity
generally accepted in payment for goods,
services, and debts — makes the trading process
simpler and more efficient.

Money
The unit of account is the unit in which prices
are quoted and accounts are kept.
In Britain prices are quoted in pounds sterling; in
France, in French francs. It is usually convenient
to use the units in which the medium of exchange
is measured as the unit of account as well.
However there are exceptions. During she rapid
German inflation of 1922—23 when prices in
marks were changing very quickly, German
shopkeepers found it more convenient to use
dollars as the unit of account. Prices were quoted
in dollars even though payment was made in
marks, the German medium of exchange.
 Money is a store of value because it can be used
to make purchases in the future.
To be accepted in exchange, money has to be a
store of value. Nobody would accept money as
payment for goods supplied today if the money
was going to be worthless when they tried to buy
goods with it tomorrow. But money is neither the
only nor necessarily the best store of value.
Houses, stamp collections, and interest-bearing
bank accounts all serve as stores of value. Since
money pays no interest and its real purchasing
power is eroded by inflation, there are almost
certainly better ways to store value.
Finally, money serves as a standard of deferred
payment or a unit of account over time. When
you borrow, the amount to be repaid next year is
measured in pounds sterling. Although
convenient, this is not an essential function of
money. UK citizens can get bank loans
specifying in dollars the amount that must be
repaid next year. Thus the key feature of money
is its use as a medium of exchange. For this, it
must act as a store of value as well. And it is
usually, though not invariably, convenient to
make money the unit of account and standard of
deferred payment as well.
 Different Kinds of Money
In prisoner-of-war camps, cigarettes served as
money. In the nineteenth century money was
mainly gold and silver coins. These are examples
of commodity money, ordinary goods with
industrial uses (gold) and consumption uses
(cigarettes) which also serve as a medium of
exchange. To use commodity money, society
must either cut back on other uses of that
commodity or devote scarce resources to
producing additional quantities of the
commodity. But there are less expensive ways
for society to produce money.
- A token money is a means of payment whose
value or purchasing power as money greatly
exceeds its cost of production or value in uses
other than as money.
A £10 note is worth far more as money than as a
3 x 6 inch piece of high-quality paper. Similarly,
the monetary value of most coins exceeds the
amount you would get by melting them down
and selling off the metals they contain. By
collectively agreeing to use token money, society
economizes on the scarce resources required to
produce money as a medium of exchange. Since
the manufacturing costs are tiny, why doesn’t
every-one make ₤10 notes?
The essential condition for the survival of token
money is the restriction of the right to supply it.
Society enforces the use of token money by
making it legal tender. The law says it must be
accepted as a means of payment.
In modern economies token money is
supplemented by IOU money. An IOU money is
a medium of exchange based on the debt of a
private firm or individual.
A bank deposit is IOU money because it is a debt
of a bank. When you have a bank deposit the
bank owes you money. Bank deposits are a
medium of exchange because they are generally
accepted as payment.

Vocabulary

Exchange-giving one thing for another

To trade-to do business by buying and selling
Swap-an exchange
Barter-interchange of goods or services without
the intervention of money.
Commodity-goods sold in large quantities.
Share-a small part of a company’s capital
To purchase-to buy
Purchase-something which has been bought
Bearer-person who holds a cheque or certificate
Bear market-period when share prices are falling
To defer-to put to a later date
Deferred payments-payments postponed to a
later date
 Chapter-III-

Bank organization

The way in which a bank is organized and

operates is determined by its objectives and by
the type of economy in which it conducts its
business. A bank may not necessarily be in
business to make a profit. Central banks, for
example, provide a country with a number of
services, while development banks exist to
increase the economic growth of a country and
raise the living standard of its population. On the
other hand, the aim of commercial banks is to
earn profits. They therefore provide and develop
services that can be sold at a price that will yield
a profit.
A commercial bank which provides the
same range of services year after year is less
likely to be successful than one which assesses
changes in the demand for its products and which
tries to match products to its customers’ needs.
New services are constantly being introduced
and developed by commercial banks, and the
full- service philosophy of many banks means
that they are akin to financial supermarkets,
offering a wide variety of services. However, not
every bank may want to offer every kind of
financial service.
Many banks offer a combination of wholesale
and retail banking. The former provides large-
scale services to companies, government
agencies and other banks. The latter mainly
provides smaller-scale services to the general
public. Both types of banking, however, have
three essential functions, which are:
• deposits, payments, credits
These three functions are the basis of the services
offered by banks. They make it possible for
banks to generate profits and to achieve their
operating aims.
Several factors have combined to make banking
an international business. These include the
growth of multinational companies and of
international capital markets, the increased
competition between the banks themselves, and
important improvements in communications and
transportation .The major banks of the world
have established extensive international
operations by acquiring banks in other countries,
by extending their own branch network abroad
and by establishing correspondent relationships
with foreign banks so as to develop profitable
joint operations. The operations of these major
commercial banks are dynamic and rapidly
changing, and their organization is of a global
nature.

TEXT1

William Sands meets David Black an ex-

mate and tries to describe him the structure of the
bank where he is the president.
William: I can show you an organization chart
David, in the back of the annual report,which we
can run through, just to make things a little
clearer:
David :That’s O.K
William: We were reorganized earlier this year,
so the organization is still fairly new.
Actually, as you can see, we have split into six
line divisions. The first of these, the Banking
Division, consists of three geographic groups:
Group One The Americas, Group Two Europe,
and Group Three Africa, Asia and the Middle
East. All these groups are offering a full range of
international banking services.
Then we have the Private Banking Division
which serves consumers in the domestic and
international markets.
The Treasurer’s Division has a wide spread of
operations which includes investment portfolio
management, commercial paper, government and
municipal bonds, foreign exchange, bullion, and
public finance.
David: So there are three operative divisions.
William :That’s right, and these three operative
divisions are backed up by another three
servicing divisions. We have the Administrative
Division which covers administrative services as
well as personnel, premises and economic
analysis.
The Financial and Information Systems Division
includes the Comptroller’s Department, the
Corporate Tax Department, and the Systems and
Data Processing Department.
And then finally, the Corporate Planning
Division includes strategic planning, and credit
policy and administration.
Here you have the annual report in case you need
it for reference.
David: Thank you very much. It was extremelly
interesting but i think your work is not at all
easy,is it?
So, I wish you good luck.
 Vocabulary:
Annual: for one year.
Annual report: a report presented each year
giving details of the company’s activities and
financial performance during the previous
financial year.
Portfolio: range, collection.
Portfolio management: buying /selling a range of
shares for a client.
Domestic: in your country, not abroad.
Bullion: bars of gold or silver.
Municipal bonds: documents issued by a local
government authority promising to repay loans at
a certain time.
Premises: buildings and surrounding land.
To back up: to support
Backing: financial support.
Credit: time given to a customer to pay.
To credit: to put money into someone’s account.
Credit control- checking that customers pay on
time.
Credit limit- a maximum amount that a customer
can owe.
Creditor-person who is owed money.
Credit rating-amount which a credit agency
thinks a company/person should be allowed to
borrow.
*Match the following words with the correct
deffinition: (premises,annual report,credit policy,
domestic,comptroller's department, investment
portfolio management, bullion,line division, personnel,
reorganized, consumers, strategic planning,
commercial paper, municipal bonds)
1.Formed or structured in a new way.
2 A report presented each year,giving details of
the company's activities and financial
performance during the previous financial year.
3 Sections of a company which deal with
different products or services from each other.
4.People who buy goods or services.
5.In your own country, not abroad.
6.Management of a client's collected
investments.
7.Short-term documents usually sold by big U.S
corporations, promising to pay a specified sum of
money on a particular date; they may be sold
again by the buyer.
8.Documents issued by a local government
authority, promising to repay loans at a certain
time.
9.Bars of gold or silver.
10.Employees,staff.
11.Buildings and surrounding land.
12.A department which controls the internal
finances of a company.
13.Deciding the main aims of an organization.
14 Plans for the lending of money.

TEXT 2

Adam Regan is interviewed about his bank’s

organization.
Interviewer: I would like you to tell me how
you’re organized could you?
Adam: Yes, certainly. Just to give you the
background, it was in 1869 when we were
established as a merchant bank . We operated
independently as one of the major merchant
banks in the City until 1977, when Metropolitan
and Provincial acquired one third interest in us,
and as of last year we are now a wholly-owned
subsidiary of that bank.
Interviewer: Oh, really? I didn’t realize that.
Adam: One of the consequences of our
acquisition was that we sold off our non- banking
related activities, though of course we still cover
a full range of international banking services.
Now in terms of management structure, we have
an Administration Division which looks after all
administrative matters. These include planning,
group financial control, accounting and audit,
computer services, legal services, personnel,
premises and so forth.
Interviewer: Ah, yes. That’s cost centre services
then?
Adam: That’s cost centre services, right. Next
we have the Banking Division and they deal with
loans, syndicated loans, project finance,
overdrafts, documentary credits and
correspondent banking.
Interviewer: I see.
Adam: We’re very active in the markets and so
therefore we have a Dealing Division. They
cover foreign exchange, currency options, money
market transactions, bonds, floating rate notes,
Eurodollar CDs,...
Interviewer: CDs?
Adam: Certificates of Deposit.
Interviewer: Oh, I see. Yes.
Adam: CDs, financial futures and bullion. Then
there’s our Corporate Finance Division which
has expanded quite rapidly over the last couple
of years. They provide advice to a large number
of UK and international companies. The
activities of the Corporate Finance Division
include mergers, takeovers, acquisitions and
divestments, as well as stock market and USM
flotations in London, and of course capital
raising.
Interviewer: I see.
Adam: We also have an Investment
Management Division which provides services to
companies: pension funds, investment trusts, unit
trusts and offshore funds. And finally there’s a
Leasing Division which organizes leasing
packages for lessors and lessees. Well, that’s
who we are, and what we do. I think that sums it
up.

Vocabulary

Merchant bank-a bank concerned with the

financing of international trade.
Interest-percentage of the capital paid by a
borrower to a lender.
Accounting and audit-the keeping of financial
records and their periodic examination.
Syndicated loans- a very large loan for one
borrower, arranged by several banks.
Overdraft- money overdrawn on a bank accounts
to agreed limits.
Correspondent banking- activities where one
bank acts as an agent for another bank.
To deal- to trade, buy, sell.
Deal- business agreement.
Bonds- documents promising to pay sums of
money at specified times.
Floating rate note- note on which interest rates
are fixed periodically and which can be traded on
the market.
Financial futures- contracts to buy or sell
currencies, bonds, bills at a stated price at some
future time.
To merge- to join together.
Merger- the joining of two or more companies
into one.
Takeover- the buying of a majority of the shares
of a company.
Divestment- the selling-off of interests.
U.S.M flotation- the starting of a new limited
company where the shares are not included in the
official list on the Stock Exchange.
Unit trust- an organization which collects and
pools money from many small investors and
invests it in securities for them.
Offshore funds-money placed in countries with
very low taxes.
Lease-contract for renting property or equipment
for a period of time.
Lessee-person who pays for a lease.
Lessor- person who receives money for a lease.
* Match the terms (1-20) with the right
definition(A-T).

1. merchant bank
2. clearing bank
3. wholly-owned subsidiary
4. accounting and audit
5. syndicated loan
6. overdraft
7. documentary credit
8. correspondent banking
9. currency option
10. bonds
11. floating rate note
12. Eurodollar CD
13. financial futures
14. merger
15. takeover
16. divestment
17. USM flotation
18. investment trust
19. unit trust offshore funds
20. offshore funds

A. The selling-off of interests.

B. A very large loan for one borrower,
arranged by several banks.
C. Money overdrawn on bank accounts
to agreed limits.
D. Documents promising to pay sums of
money at specified times.
E. Money placed in countries with very
low taxes.
F. The joining of two or more companies
into one.
G. A bank which is a member of a
central organization through which
cheques are presented for payment.
H. Activities where one bank acts as an
agent for another bank.
I. A contract where the buyer has the
right to demand purchase or sale of a
specified currency, but no obligation to
do so.
J. A bank mainly concerned with the
financing of international trade.
K. An organization which collects and
pools money from many small investors
and invests it in securities for them.
L. A company entirely owned by
another company.
M. A limited company formed to invest
in securities.
N. A method of financing international
trade where the bank accepts a bill of
exchange from the exporter for the
invoice amount, in return for receipt of
the invoice and certain shipping
documents.
O. The buying of a majority of the shares
of companies.
P. Contracts to buy or sell currencies,
bonds and bills, etc. at a stated price at
some future time.
Q. Note on which interest rates are fixed
periodically, and which can be traded
on the market.
R. Document given for a deposit
repayable on a fixed date, the currency
being dollars which are deposited
outside the USA.
S. The keeping of financial records and
their periodic examination.
T. The starting of a new limited company,
where the shares are not included in the
official list on the Stock Exchange.
 TEXT 3

Ronald Sims describes the organization of a

Scandinavian Savings Bank.
Ronald: In order to understand how we’re
organized, it’s perhaps first necessary to
understand just what we are, and that means a
Savings Bank. This has some important
implications as to why we’re organized the way
we are. We were the oldest and largest Savings
Bank in the country. In 1990 we merged with the
two largest regional Savings Banks and
effectively this now gives us a nationwide
network of branches to serve the private
customer.
Head Office of course is here, that’s in the
central region, and there are two other regional
offices. There’s a Board of Directors, which is
elected by the Board of Trustees of the bank, and
a Managing Director, who has two Deputy
Managing Directors who are responsible to him.
The one Deputy Managing Director is
responsible for the branch network of offices,
and reporting to him are the three Regional
Managers, for the northern, central and southern
regions.
The other Deputy Managing Director is
responsible for the Corporate Business Division,
and the formation of this division, really, was
one of the main objectives of the merger: to pool
our resources and to gain access to the lucrative
markets dominated by the commercial banks.
We’ve still got a long way to go, of course, but
we’ve turned from a Savings bank which, prior
to 1980, was not able to accept deposits in excess
of the equivalent of ten thousand dollars, because
of the regulations, into a commercially
competitive bank which last year, for instance,
granted an international debenture loan of forty-
five million dollars and which had a loan
portfolio fifty per cent of which, in terms of
volume, related to corporate customers.
And we’ve done this virtually from scratch,
building up our client list of small and medium-
sized companies, establishing and expanding
worldwide correspondent banking relationships,
and, of course, making major investments in
terms of personnel and technology. In our case,
the new organization structure was very
necessary for us to be able to broaden the scope
of our activities.
 Vocabulary

Savings bank- bank where your money earns

interest.
Trustees- people responsible for administering
money or property for the benefit of others.
Lucrative markets- markets in which there are
good profits.
Commercial banks- banks which offer a wide
range of services to the public, to companies .
Debenture loan- loan of money at a fixed rate of
interest, involving a certificate of the debt.
Loan portfolio-an entire collection of loans.
To broaden-to increase, to extend.
Corporate-referring to the whole company.
Company-a registered business
To invest- to put money into a bank, building
society, shares or other project in order to earn
interest.
Investment- money put into a bank or project
with the intention that it should increase in value.
Safe investment- non-risky investment

What can you say instead of the following

words:
*set up in 1990
*bank set up to accept deposits from members of
the public.
*joined together.
*system of local offices over the whole country.
*people responsible for administering money or
property for the benefit of others.
*markets in which there are good profits.
*before
*banks which offer a wide range of services to
the public, to companies and other organizations.
*more than
*loan of money at a fixed rate of interest,
involving a certificate of the debt.
*an entire collection of loans.
*arrangements with banks who act for each
other.
*people who work here.
*increase the range or extent of our operations.
 Chapter-IV-

Bank performance

Banks necessarily use sophisticated accounting

systems to record as clearly as possible what the
financial situation of the bank is. Normally such
a system is based on the principle of the double
entry, which means that each transaction is
entered twice, as a credit in one account and as a
debit in another account. If we deposit £100 with
a bank, for example, the bank enters a debit for
the receiver and a credit for the giver. The former
represents an asset to the bank, since it is a sum
of money at the bank’s disposal, as well as a
liability, since it will one day have to be repaid.
The balance sheet of a bank gives us a view of its
financial situation at one point in time, usually 31
December of a particular year. But we do not
know what has happened between two balance
sheets. This information is provided by the profit
and loss account for the period in question.
Neither statement is exactly uniform from bank
to bank, but both contain certain essential
features.
The largest asset of a bank is normally its total
portfolio of loans. Deposits usually constitute the
largest liability. Balance sheets usually include
the following items listed as assets:
• Cash on hand and due from banks - money in
vaults, balances with other banks, cheques in
process of collection.
• Investments - bonds, shares, etc.
• Loans - to companies, the general public, etc.
• Fixed assets - buildings, equipment, etc.
Items listed in the balance sheet as liabilities are:
• Deposits - all money owed to depositors
• Taxes payable - national and local
• Dividends payable - decided on, but not yet
paid
The profit and loss account records the income of
a bank, and here, typically, the items in order of
size are:
• interest on loans
• return on investments
• fees, commissions, service charges
The granting of credit provides the largest single
source of bank income. Typically, two thirds of
an American commercial bank’s yearly earnings
result from interest on loans. Nine out of every
ten dollars they lend come from depositors’
funds. The following items normally constitute
the main expenses in a bank’s profit and loss
account, again in typical order of size:
• interest paid
• salaries and other benefits
• taxes
A bank’s accounting systems, then, are designed
to record and present the many transactions that
take place every day. Substantial reserves over
and above statutory requirements are an
indication to customers of the bank’s strength,
that it has run its business well and has retained
profits in the business for future operations.
Profitability indicates the effectiveness of a
bank’s performance and how well it has managed
the resources under its control. Published figures
thus provide some essential data on the liquidity,
safety and income of a bank.
 TEXT 4

Presenter: Bill River gives an informal

presentation of his bank to a prospective client.
Bill:I have here a copy of our last annual report
for your reference which you’ll probably want to
look through later. But I can give you right now a
very brief overview of our last year performance.
Client: That’s o.k.
Bill: As of January 31st 1994, the Lacey Bank
Corporation was the fifth largest bank in the
United States, based on stockholders’ equity, and
sixth largest based on deposits. This bank has
over one thousand two hundred offices around
the world with some fourteen thousand
employees spread over thirty-five foreign
countries. And within this worldwide framework
we are offering a wide range of financial
services to a very diverse customer base which
includes corporate clients, government agencies
and correspondent banks.
In 1994 we achieved record earnings coupled
with our tenth consecutive year of profit growth
in what is, as you know, an intensely competitive
environment.
Consolidated net income was five hundred and
fifty million dollars, ten per cent up on 1988, and
this was the second year that our net income
reached the half-billion dollar mark.
A part of the bank’s policy is to maintain a
strong capital base and at the end of 1994 our
total assets amounted to over sixty-five billion
dollars. We hold deposits of around thirty-seven
point eight billion dollars and net interest income
alone in fiscal 90 was one point nine billion
dollars. In addition, we hold two point two
billion dollars’ worth of investment securities.
Net income, the net income per share for the
period was five dollars sixty-five. We think it
was a good year and we are proud of it.

Vocabulary

Overview-description
Stock-quantity of goods for sale, inventories.
Stockholders’ equity-based on money received
from the sale of the parts into which the capital
of a company is divided.
Deposit-sums of money left with the bank.
Corporate clients- company customers.
Correspondent banks- banks in other countries
with whom we have an agency relationship.
To earn-to receive money for work
Earnings-salaries, profits, dividends, interest
received.
Earnings per share- dividends per share shown
as percentage of the market value of a share.
Income-money received through operations or
investment
Earned income- money earned through work.
Consolidated net income-the annual income of
the group of companies after the payment of
costs.
Assets-something of value which is owned by a
company
Current assets- assets in daily use by a business.
Fixed assets- property and machinery
Frozen assets- assets which cannot be sold.
Intangible assets- assets which cannot be seen.
Liquid assets- cash or bills which can be easily
converted into cash.
Tangible assets- assets which can be seen.
Securities- investments in stocks and shares.
Security- guaranty that a debt will repaid.
The securities market- place where shares can be
bought/should.
Investment securities- placement of money in
shares to produce profit.
Try to find the meaning of the following :
*a very short general description.
*sums of money left with the bank.
*money received from the sale of the parts into
which the capital of a company is divided.
*it includes company customers.
*banks in other countries with whom we have an
agency relationship.
*the highest ever profits after transfers to
reserves.
*the tenth year in a row of profit growth.
*the annual income of the group of companies
after the payment of costs.
*the value of all the things we own.
*the financial year.
*placements of money in shares so as to produce
profit.
*the last report presented each year giving
details of the company’s activities and financial
performance during the previous financial year.
 TEXT 5

Max Proney gives some information about his

bank to a group of professional visitors from
abroad.
Max: We have a diagram which gives a very
brief summary of some of the key figures
relating to our performance in 1994. We’ll be
meeting these figures again later in greater detail,
but it may be useful at this stage to present them
and to indicate a number of important trends.
If we begin with income then, you will see that
the total group income amounted to a record
level of one hundred and fifty-five million
pounds, an increase of nearly fifteen per cent on
the previous year, a rate of increase slightly
above that of recent years. Interest received
amounted to six hundred and fifteen million
pounds, and interest paid to five hundred and
sixteen million, leaving us with a net interest
income of ninety-nine million pounds. This is
eleven per cent up over the 1989 figure and
represents sixty-four per cent of the total group
income for 1994. The net interest income is quite
satisfactory in itself, given the very difficult
market conditions, but what is especially
significant is the increase in non-interest income
from forty-six to fifty-six million pounds, an
increase of some twenty-two per cent. A very
important part of the bank’s policy lies in
limiting dependence on net interest as a source of
income and in developing its fee and commission
earning activities, and 1994 income in this area
accounted for a two per cent higher contribution
to total income than was the case in 1989. This is
an encouraging trend, as it reflects the bank’s
response to the changing economic environment
in general and to the sensitivity of interest rates
in particular.
Non-interest income then of fifty-six million
pounds, making the total income for the year of
one hundred and fifty-five million pounds,
twenty million pounds higher than the previous
year.
 Vocabulary

Trends-general development in a market,

business.
Income-money received through operations or
investment.
Earned income- money earned through work.
Unearned income- money received from
investments.
Net interest income-the amount by which the
total interest received is higher then the total
interest paid during the period.
Key figures- the most important figures.
Rate- charge for service or work or for loans.
Going rate- market price.
To run - to manage, to organise.
Running- operating,continuing,consecutively.

*Choose the best answer.

1 A brief summary is:
a) a small amount of something; b) several
numbers added together to make a total;c) a short
report of the main points; d) a full report with
details.
2 Key figures are:
a) figures that are easy to understand; b) the most
important figures; c) figures that give an answer
to a problem; d) figures that are well-known.
3 Trends are:
a) movements or directions; b) goals that you try
to reach; c) events that are likely to happen; d)
events that happen quite often.
4 A record level of income is:
a) an amount that will never be reached again;
b) an amount that is written down so that it will
not be lost or forgotten;
c) an amount that stays the same and does not go
up or down;
d) a higher amount than ever before.
5 Net interest income is:
a) the amount by which the total interest received
is higher than the total interest paid during the
period;
b) the amount by which the total interest received
is lower than the total interest paid during the
period;
c) the total interest received by the lender;
d) the amount earned on an investment after
paying for its capital cost.
6 Something which is especially significant is:
a) the only one of its kind; b) the very best of its
kind; c) important and worth noting; d) widely-
known and accepted.
7.Fee and commission earning activities are:
a) the buying and selling of currencies for profit;
b) plans to lend money profit;
c) services that are sold by an agent;
d) services for which charges can be made.
8.A contribution to total income is:
a) a fixed amount of money paid at regular
intervals;
b) money that is owed or payable;
c) an amount of money that is taken away from
the total.
d) an amount given or supplied.
9.The economic environment is:
a) an area of the economy;
b) the future of the economy;
c) the economic situation;
d) financial laws and regulations.
10.The sensitivity of interest rates is:
a) the way in which interest rates affect each
other;
b) the way in which interest rates are easily
influenced or affected;
c) the changes in interest rates;
d) the way in which interest rates are worked out.
 TEXT 6

The presentation continues:

Max: We’ve seen the income; let’s now look at
the outgoings. The largest of these is staff costs
which increased by ten million pounds, or
eighteen per cent, to sixty-five million pounds in
1992. This increase is larger than in previous
years and is partly due to the increase in staff
numbers needed to handle the expansion of the
bank’s fee-generating activities which I have just
mentioned.
Provisions for doubtful debts increased to eight
million pounds. Depreciation on leased assets
and on premises and equipment, calculated on a
straight line basis, amounted to fifteen million
pounds.
Other expenses increased by a little under
seventeen per cent, from twenty-four million to
twenty-eight million pounds, the smallest annual
increase since 1988, which I think illustrates our
determination to keep costs under control.
Tax - not much to say there really - other than to
note that we paid five million pounds, or twenty-
five per cent more than in 1989, taking us, in
fact, up to twenty five million pounds.
Dividends remained unchanged over the previous
year at five million pounds, as the major part of
the year’s profit was retained to expand our
consolidated capital base. Our balance sheet
footings have been growing steadily over recent
years and this was in fact the first year in which
they passed the three billion pounds mark.
After allocation of the dividends, there remained
a net undistributed balance for the year of nine
million pounds which was transferred to
reserves.

Vocabulary:

Outgoings-amount of money spend.

Staf costs-money involved in paying employees.
Fee generating activities-services for which
charges can be made.
Depreciation on leased assets- the decline in
value of property which is hired.
Premises-buildings and the land on which they
stand.
Expenses- money spent on the running of the
bank.
Dividents- the part of the company’s profits
which is paid to the shareholders.
Retained-kept by the company and not paid to
the shareholders.
Footings-totals.
To allocate- togive money in certain proportions
Allocation- setting aside money for.
Undistributed balance- amount of money kept by
the company and not paid to shareholders.
Reserves-amount of money set aside from profits
for a special purpose.
To grow- to become larger.
To transfer- tom ove from one place to another.
Transfer pricing- adjustment of price son sales
made between parts of a multinational company.

* Note down what you think it can be said

instead of the words in italics.
1 ... let’s now look at the (amount of money
spent)
2 The largest of these is... (money involved in
paying the employees)
3 ... to handle the expansion of the bank’s
(services for which charges can be made)
4. …………. increased to eight million pounds ...
(money put aside to cover possible credit losses)
5. ………….(the decline in value of property
which is hired) and on..... and equipment ...
(buildings and the land on which they stand)
6. Other increased by ... (money spent on the
running of the bank)
7. ... the smallest increase ... (yearly)
8. ……………remained unchanged ... (the part
of the company’s profits which is paid to
shareholders)
9. …as the major part of the year’s profit
was……. (kept by the company and not paid to
shareholders)
10. Our balance sheet…………. (totals)
11. After………. of the dividends ... (setting
aside money for)
12. …there remained a net…………… (amount
of money kept by the company and not paid to
shareholders).
13. …nine million pounds, which
was…………… (moved over to funds put aside
to cover unexpected events).
 Chapter-V-
Foreign exchange

Foreign exchange dealing is, as its name

implies, the exchange of the currency of one
country for the currency of another. The rate of
exchange is the value of one unit of the foreign
currency expressed in the other currency
concerned.
With the growth of global trade, many
companies need foreign currencies to pay
producers in other countries. A British company
with a supplier in Germany, for example, will
probably use sterling to buy Deutschmarks from
its bank in order to pay an invoice from the
German company. The bank buys the
Deutschmarks from another bank at a particular
rate and provides them to its customer at a higher
rate, thus making a profit. Similarly, a bank may
make gains on buying and selling currencies on
the inter-bank market. Making a profit on the
transaction is the basic idea of foreign exchange
dealing.
Currencies can be bought or sold in the
foreign exchange market either for immediate
delivery, that is at the spot rate, or for delivery
later (e.g. two weeks, three months, etc.) at a
forward rate. The forward market is useful for
companies, since if a company knows that it will
need a particular foreign currency to pay a bill in
four weeks’ time, for example, a forward deal
enables it to protect itself against future adverse
movements in the exchange rate which would
have otherwise had the effect of making the
foreign goods more expensive.
When dealing in foreign exchange,
normally by telephone, the bank quotes both the
selling and buying rate of a currency at which it
is prepared to transact business. Settlement for a
spot transaction is two working days later. Thus
if a contract is made on Monday, the seller
delivers the amount sold and receives payment
on Wednesday. Similarly if the contract is made
on Tuesday, value is Thursday.
Currency traded in this way is delivered to
the buyer’s account with a bank in the main
centre, or one of the main centres, for the
currency in question. In the case of sterling, for
example, this is London, for Dutch guilders it is
Amsterdam and Rotterdam, and for Belgian
francs it is Brussels and Antwerp. The buyer
decides the bank where his or her account is to
be credited.
The foreign exchange dealer fills in a
dealing slip containing basic information such as
the date and time of the deal, the contracting
party, the amount and rate agreed on, the date of
settlement, and the place of delivery of the
currency dealt in. As soon as a foreign exchange
transaction has been carried out, both banks send
a written confirmation containing the basic
information mentioned above. Any discrepancies
may thus be detected quickly.
A bank holding debts or claims in a
foreign currency is itself exposed to an exchange
risk, unless the debts and claims neutralize each
other by being of equal size and by having
roughly the same maturity dates. Dealers
therefore aim for a balanced total position. If the
amount of a bank’s claims in dollars, for
example, is larger than the total debts in dollars,
then the bank has a long position, but if the debts
are larger than the claims, the bank is short in
dollars. As long as the total position balances,
there is no risk for the bank.
 TEXT 7

Ken Williams explains some of the basic

principles of foreign exchange dealing.
Ken: We’re accounted in sterling, but generally
all dealings are based on the dollar. So, for
instance, your spot prices are dollar
Deutschmark, OK? That’s the big market really,
dollar Deutschmark. And it’s the movement in
the dollar which is really moving the market. I
mean, for instance, yesterday the dollar rates
firmed up a little. They went up about a sixteenth
to an eighth of a per cent. So people buy dollars
because the interest differential between dollars
and Deutschmarks is widening. So I mean, if you
buy dollars, OK, you, you can lend them out on
the next day at, say, eleven and a half per cent.
You’re short of Deutschmarks that day, and you
have to purchase, borrow those for one day, and
that’s about five and a half per cent. So you’re
talking about six per cent difference. The basic
idea of spot dealing is to buy dollars low and sell
high. That’s the basis of making a profit.
Interviewer: So why would you need
Deutschmarks on a particular day? You said
you’d be short in Deutschmarks so you’d have to
borrow them.
Ken: Well, to square the account for that day.
We’re dealing ahead all the time. The spot
market is dealing two working days forward. So,
for instance, if I bought dollars against
Deutschmarks, I would come in tomorrow and
find that on the seventeenth I’m short in
Deutschmarks and long in dollars. So then I
would go into the market and say ‘What’s your
tom/next dollar mark?’
Interviewer: What’s your what?
Ken: Tom/next dollar mark. They’re dealing
terms, OK?
We have spot which is normal buying and
selling of currencies. Then we have a tom/next.
Now a tom/next simply means tomorrow to the
next day. Then we have a spot/next which is your
two days’ forward dealing value date to the next
day. Then you have a spot a week, a spot a
fortnight. Then you go one, two, three months
and so on. We also have outrights. So someone
can ask ‘What is your spot dollar mark outright
tomorrow?’ It’s just that you’re quoting a spot
rate but it’s from tomorrow, and you adjust the
price, depending what the price is for the tom/
next swap. It’s always, it’s always relative to the
two day forward dealing rate.
Interviewer: So the ... yeah, yeah, OK. I don’t, I
don’t see what an outright is.
Ken: Well, an outright is simply ... we also have
the term swaps, in forward dealing which is
when you lend one currency and borrow another
for a certain period time. There are two related
contracts, one sale and one purchase, and you’re
taking into consideration different interest rates,
trading on the movement in two currencies. By
using a simple calculation these swaps can
calculate into another currency’s deposits, so that
the relationship between the two currencies
determines the forward pricing. Now an outright
is if someone wants to buy Deutschmark and sell
dollars on any particular day. It’s not, it’s not
connected to a corresponding spot transaction.
Say, for instance, two month’s time, a company
has to cover its Deutschmark payments, so they
cover their foreign exchange exposure by buying
Deutschmarks from tomorrow to that day. So
they would ring us and say ‘What is your price
spot dollar mark outright to the tenth of
October?’ And that is an outright.
Presenter: So now we know a little about the
principles and terminology of foreign exchange
dealing.
 Vocabulary:

Spot prices- prices for funds which will be

exchanged two working days later.
To firm up-to increase.
Interest differencial-difference in interest rates.
To purchase- to buy.
Profit-a result where the income is higher than
the costs.
To square- to balance.
Spot a fortnight- a period of two weeks
beginning two working days from now.
Outrights- deals where someone buys one
currency and sells another on any particular day.
To quote- to state the price that you will charge
for a spot rate.
Swap- an exchange of one currency for
another,for a certain period of time.
Deal- a business agreement.
To deal- to buy and sell.
* Write down the words that are used in
place of those printed in italics.
1. We’re accounted in (British pounds.)
2. So, for instance, your( prices for funds which
will be exchanged two working days later) are
dollar Deutschmark.
3. I mean, for instance, yesterday the dollar rates
(increased slightly).
4. So people buy dollars because the (difference
in interest rates) between dollars and
Deutschmarks is (increasing).
5. You’re short of Deutschmarks that day and
you have (to buy), borrow those for one day...
6. That is the basis of making (a result where the
income is higher than the costs).
7. Well, (to make totals equal, to balance) the
account for that day.
8. …….and find that on the 17th that I am (in a
position where I have sold more Deutschmarks
than I have bought, and bought more dollars
than I have sold.)
9. Then you have spot a week,( a period of two
weeks beginning two working days from now.)
10. We also have (deals where someone buys
currency and sells another on any particular one
day).
11. It’s just that you’re (stating the price that you
will charge for) a spot rate.
12 ... depending what the price is for the
tom/next (exchange of one currency for another,
for a certain period of time.)
13 ... so that the relationship between the two
currencies (fixes, decides) the forward pricing.
14 ... so they cover their foreign exchange (risk
or possibility of loss) by buying Deutschmarks
 Chapter-VI-

Meetings

Banks provide a wide variety of services to

companies, and a company operating
internationally is likely to use several banks
around the world to meet its various needs.
Banks keep in touch with these customers by
telephone and perhaps with regular meetings, to
maintain the relationship and to market new
services.
Most companies use banks at one time or another
to finance their operations. As with any other
type of loan, banks charge interest on corporate
loans. Interest rates for loans in Britain, for
example, can be charged in one of three ways:
• at a margin above the bank’s base rate. Each
bank decides its own base rate, and then charges
the company a rate of interest which is related to
this. A big customer with a very good reputation
may be charged the bank’s base rate plus 0.5%,
for example, while a smaller company might be
charged the base rate plus 3%.
• at a margin above LIBOR, the margin again
depending on the bank’s assessment of the
corporate customer.
• at a fixed rate of interest for the period of the
loan.
The first two ways are variable and are adjusted
periodically to reflect movements in interest rates
on the market. They may also be negotiable. The
third may be dangerous for the bank when
market rates are erratic.
A company involved in a business where income
and expenditure are subject to constant changes
needs a variable borrowing facility. This is met
most simply by an overdraft facility. The
company opens an account with the bank, and an
overdraft with a specified limit is granted on the
account.
Many companies make a profit not only from the
goods or services which they sell, but also from
the money that they have. Cash managers utilize
funds at their disposal, buying and selling shares,
treasury bills and so on, to generate profit in the
form of investment income. Rather than move
valuable foreign shares and securities around the
world by post, a company will deposit them for
safe keeping with a bank in the foreign country.
A company in Sweden which buys shares on the
American market, for example, will use the
custodian services of a US bank. Banks naturally
charge fees and/or commissions for custodian
services.

TEXT 8

Presenter: Simon Stillman meets Oliver

Richardson .
Simon: Could we take up the question of the
interest rate charged for this overdraft facility?
Oliver: Yes, of course.
Simon: It seems to be rather high: one per cent
over Wallers base rate. First of all, what is the
base rate?
Oliver: It’s our basic lending rate which at the
moment is eleven per cent.
Simon: Yes, I see. It’s more or less the overnight
rate, then, as I understand it, your base rate.
Oliver: Yes.
Simon: But a mark-up of one per cent seems
rather high. As you know, we work with a lot of
banks, and, quite frankly, one per cent is just too
expensive for us.
Oliver: Yes, I see.
Simon: I think you’ll have to think about this,
Oliver, because we’re not interested in having
the facility if it is going to be so expensive for us
to use it. We work with Key Commercial Bank
too, and just for your information there we pay
zero point two per cent above LIBOR, more or
less the same as Wallers base rate.
Oliver: What kind of reduction did you have in
mind?
Simon: Well, a margin more in line with what
we can get from the other banks. Say zero point
two five per cent above your base rate.
Oliver: Zero point two five.
Simon: Yes, at the very highest. We’d be
prepared to pay that little bit extra simply to
maintain our working relationship. But one per
cent is just too high for a company like
Denavian.
Oliver: Yes, the...
Simon: By the way, I haven’t told you, but it
could be useful for you when you take this up in
the credit committee in the bank. We have been
rated now by Alibright and Rich, and for short-
term debt we have A one plus, and as you know
that’s the best you can get.
Oliver: That’s credit rating?
Simon: Yes, credit rating, and for the long-term
we have triple A. And that’s also the best.
There’s no risk involved for you, so one per cent
for the overdraft facility ... we’d really like you
to review that.
Oliver: Fine, I’ve made a note of it. I’ll take it up
when I get back to London, and I’ll get in touch
with you. All right?
Simon: Yes, do that. Then you can confirm it. If
it’s positive. Otherwise, there’s not much point in
us keeping this facility.

Vocabulary:

Overdraft - amount of money which a person or

company withdraws from a bank account and
which is more than is in the account.
Overdraft facility- arrangements with a bank for
an overdraft to a certain limit;
Overnight rate-the rate of interest charged for a
loan at call from one day to another.
Mark-up- the gross profit margin or an increase
in price.
Margin- the relation between profit and selling
price.
Libor-London Inter-Bank Offered Rate, the rate
of interest between London banks on some
deposits.
Credit committee- a group of bank staff who
control the lending of the bank.
Credit rating- a formal and detailed examination
of the financial strength of a company.
To confirm- to give agreement.
Debt- money owed.

*Match the words with the correct definition:

1) credit rating,
2) confirm,
3) overnight rate,
4) credit committee,
5) review,
6) overdraft facility,
7) LIBOR,
8) mark up,
9) margin,
10) quite frankly

a. the rate of interest charged for a loan at

call from one day to another.
b. a bank service providing for borrowing on
current account up to an agreed maximum
limit.
c. the gross profit margin or an increase in
price.
d. honestly and directly, without wishing to
hide anything.
e. London Inter-Bank Offered Rate, the rate
of interest between London banks on some
deposits.
f. the relation between profit and selling
price.
g. a group of bank staff who control the
lending of the bank.
h. a formal and detailed examination of the
financial strength of a company.
i. to look at or examine again.
j. to give agreement.
 Chapter-VII-

Financial news

Modern information technology has led to

news being transmitted worldwide quicker than
ever before. Time differences around the world
mean that financial news is being made twenty-
four hours a day, and it is this barrage of readily
accessible information that serves as a basis for
many of the business decisions that are made
concerning international banking and financing.
Techniques of analysis are applied to information
to determine its implications and to try to discern
trends in the future.
Many prices are determined by a complex
interaction of factors. With regard to currencies,
it may be said that one factor governing prices is
the interaction of supply and demand. Interest
rates prevailing in different countries affect
currency exchange rates. If interest rates rise in
the UK for example, US investors may move
funds to the UK to earn higher interest income.
They will then sell dollars for sterling, and the
demand for sterling will rise, while at the same
time the supply of dollars will rise too. The
dollar will therèfore fall in value, while the price
of sterling will rise.
Trade between countries may also affect
currency rates. If, say, Japanese exports to
Germany rise, and German exports to Japan
remain the same, there will be an increase in the
supply of Deutschmarks as Japanese exporters
sell them for dollars. This will normally increase
the value of the Yen in relation to Deutschmarks.
Government intervention may also affect
exchange rates. If sterling is weak, for instance,
the Bank of England may enter the market to buy
sterling with some of its reserves of other
currencies. This will reduce the supply of
sterling, thereby increasing its value.
Stock market prices in a particular country
are often affected by stock market prices
elsewhere in the world, and markets tend to
move together, as indicated by the worldwide
crash in the autumn of 1987. The share price of
any one company will obviously tend to be
influenced by the financial performance of the
company, details of which are released at various
times during the financial year.
The factor of supply and demand
mentioned ealier will also tend to affect
commodity prices. A bad coffee harvest in Brazil
will increase the price of coffee because demand
will exceed supply. The over-production of oil,
on the other hand, will lead to a fall in the price
of the commodity, since there will be a glut of oil
available on the market.

TEXT 9

Presenter: The financial news headlines, and

more detailed news of the currency markets.
Newsreader: Here is the Financial News, read
by Margret Sinclair. The dollar recovered after a
weak start. The pound strengthened. Gold was
slightly stronger, and silver slightly weaker.
London share prices were steady, but New York
prices drifted down.
A survey published in London yesterday states
that over the past five years trading on the
world’s foreign exchanges has more than
doubled in size. It estimates that Forex volume
now stands at almost fifty-five thousand billion
dollars a year. London remains the leading
centre, with nearly fifty billion dollars traded
here every day. Despite increasing competition
from the Far Eastern market, New York is in
second place and Zurich third.
In the European foreign exchanges the dollar
closed yesterday little changed, after recovering
from early weakness. Trading was thin, with
dealers waiting for US economic indicators due
on Friday, when US consumer prices and durable
goods orders will be released. In London the
dollar closed at two marks sixty-three point
seven pfennigs, and later in New York at two
marks sixty-three point nine. That’s a gain of two
and three quarters on the previous close there.
In Tokyo today the dollar slipped back a little,
ending at two hundred and fifteen point eight
five yen, against a previous close of two hundred
and sixteen point two. Some selling by the Bank
of Japan was noted, but the dollar was helped by
the covering of short positions.
The pound yesterday was stronger against most
currencies, aided by firmer spot oil prices.
In the latest currency prices in London this
morning, the pound is at one dollar forty-four
point five cents, that’s one and a quarter cents up
on the closing price yesterday. The German mark
is two marks sixty-three point eight pfennigs to
the dollar. The Swiss franc is unchanged at two
francs sixteen point six. The French franc is eight
francs forty, and the Dutch guilder is weaker at
two guilders ninety- seven point five. The
Japanese yen is unchanged at two hundred and
fifteen point eight five yen to the dollar.
Presenter: So now we know about the currency
exchange rates for the day in question.

Vocabulary:

To recover- to get better after a downturn.

Survey-a report based on inspection.
To drift- to fall slightly.
Forex volume- the volume of foreign exchange.
Gain- an increase in volume.
To slip back- fall slightly.

Choose the one best answer

1. If prices drifted down they:
a) fell heavily; b) fell slightly; c) fell quickly; d)
rose then fell.
2. A survey is:
a) a report based on inspection; b) a document
that describes what is expected in the future; c) a
detailed description of goods; d) an official list of
things or events.
3. Forex volume is:
a) a sum of money that is borrowed; b) a sum of
money that is invested; c) the volume of money
in a country; d) the volume of foreign exchange.
4. If trading was thin:
a) buying and selling was not very successful; b)
there was a lot of buying and selling; c) there
was not much buying or selling; d) there was no
buying or selling at all.
5. US economic indicators are:
a) the index of retail prices produced by the US
government; b) figures that show the difference
between the amount of money flowing into and
out of the USA; c) figures dealing with economic
activities in the USA; d) the total amount of
money that other countries owe to the USA.
6. US consumer prices are:
a) a list of prices to be paid for goods imported
into the USA; b) the index of retail prices
produced by the US government; c) the prices
charged for goods exported from the USA; d) the
prices charged for US dollars expressed in the
money unit of another country.
7. Durable goods orders are:
a) orders for goods which are intended to be used
over a period of time;
b) orders for goods which are used up soon after
they are bought;
c) orders for any type of goods; d) orders for
goods to be exported.
8. If information is released, it:
a) is for sale; b) is kept secret from the public; c)
is made known to the public; d) is written down
and recorded.
9. A gain is:
a) a change in value; b) an increase in value; c) a
fall in value; d) a value that stays the same.
10. If the dollar slipped back a little, it:
a) fell slightly; b) fell unexpectedly; c) fell
quickly; d) rose then fell.
11. The covering of short positions is:
a) banks buying a currency because they had
previously sold more than they had bought; b)
banks selling a currency because they had
previously bought more than they had sold; c)
banks buying and selling currencies so as to
make a profit; d) banks buying a currency and
selling it soon.
12. If the pound was aided by firmer spot oil
prices, it was:
a) helped by higher spot oil prices; b) not helped
by higher spot oil prices; c) helped by lower spot
oil prices; d) not helped by lower spot oil prices.
 TEXT 10

Presenter: Now we will hear news relating to

companies and stock markets.
Newsreader: The company headlines today are
that Lewhill is to open a thirty million pound
production centre in Birmingham. It will employ
around fifteen hundred people. Welby Engines
have landed a twenty-five million pound order
from Air Texas, and the latest bid for
Basterfields by the Canadian giant Garvin has
been rejected.
On the interim results front, Luxdon’s third
quarter profit of three hundred thousand pounds
came as a setback, after first half profits of two
and a half million pounds. Another company
reporting was Fisher Hogg, who pleased the
market, however, with a fifty per cent profits rise
compared with last quarter.
On the London stock market yesterday, shares
remained close to last week’s record highs.
Financial and discount houses were a firm sector,
with United Alverson advancing twenty pence to
seven pounds sixty-eight. Banks too made further
gains, and Key Commerce rose twelve to six
seventy-six.
Among the other features, Ainscough and Lee
were up nine at four thirty- seven on bid hopes,
and Sheldon jumped thirty to two forty-five on
their Monday sale of their Quinton stake. Hale
and Owen stuck at two oh four, despite reporting
treble interim profits which in fact conceal a
setback, if one disregards the proceeds from the
sale and leaseback of their Birmingham
headquarters. Berry Sugar were down eight at
one seventy one, on doubts about the commodity
price.
On Wall Street on Tuesday, leading stocks were
moderately firmer, though the market was mixed.
Falling stocks outnumbered rising ones by seven
hundred and ninety-eight to seven hundred and
twenty-eight, on a moderate volume of one
hundred and one million shares. Bonds were
strong.
In Tokyo today there were heavy falls for many
shares, especially among the market leaders.
Hong Kong shares slipped back a little. In
Australia, shares fell sharply across the board
although trading was subdued.
Presenter: Some specific news about British
companies and share prices there, followed by
stock market news from other parts of the world.
 -Vocabulary-

Market- place where products and services can

be bought and sold.
Capital market- place where companies can look
for investment capital.
To land- to succeed in obtaining.
Bid- price offered
Setback- diappointment and difficulty.
On the interim results front-in the area of news
dealing with the outcome of a company’s trading
during only part of the year.
Shares- the parts into which the ownership of a
company is divided.
Financial and discount houses- finance
companies and finance organizations which buy
and sell bills of exchange.
A firm sector- an area of business activity
tending to rise.
Bid hopes- hopes of an offer to buy.
To conceal- to hide.
Doubt- uncertainty.
Commodity price- price of the raw material.
Bonds- documents promising to pay sums of
money at specified times.
To fall across the board- to move downwards
suddenly.
Trading was subdued- there was a lot of buying
and selling.

Write down the words used instead of those

in italics:

**they have (succeeded in obtaining) a very

important order.
**this is the latest( price offered) for
Grandfields.
**(in the area of news dealing with the outcome
of a company's trading during only part of the
year) Luxdon's third profit of $ 300 000 came as
a ( disappointment and difficulty).
**(the parts into which the ownership of a
company is divided) remained close to last
week's record highs.
**(finance companies and finance organizations
which buy and sell bills of exchange) were an
(area of business activity tending to rise ).
**on Wall Street (major shares were slighty
higher in price).
**(documents promising to pay sums of money at
specified times) were strong.
**in Australia ( all share prices moved
downwards suddenly) although (there was not a
lot of buying and selling).
 Chapter-VIII-

TEST -1-

*Chose from the words in brackets to

complete the sentences.
(Bank of England, bearer,base rate,Stock
Exchange,stock, bear, shares, bond, bull,asset).
1.The American central bank is the equivalent of
................ in Britain.
2.The units of ownership of a company allowing
the holder to receive a proportion of the
company’s profits are the .........
3.In the U. K.a fixed amount of a paid –up
capital held by a stockholder is a ............
4.If the market is thought to be good and prices
on the Stock Exchange are thought to be likely to
rise the market is called a .........market.
5.If the market is thought to be poor and prices
on the Stock Exchange are likely to fall the
market is called a ..........market.
6.A promise to pay a sum of money over an
agreed time by anyone licensed to do so such as
a government insurance firm is a .....
7.Certificates of ownership of bond that can be
tranferred from seller to buyer without any
formalities are ...........bonds.
8.Something that is owned by an individual or a
company has monetary value and can be sold to
pay debts is an .........

TEST-2

*Match the following sentences with the

words or phrases (a-k).
1.The holder of these has lent the company
money but has no voting rights.
2 A group of six accountants have decided to
form an association to carry on business in
common and make a profit.
3.The investors give these people the power to
run the company .
4.This company holds more than 50% of the
voting shares in another company.
5.Members of the public can only invest in this
company if they are invited to do so.
6.Investments in many companies can be made
by buying shares on this market.
7.The public at large can be shareholder in this
company.
8.The golf club was set up with the intention of
not making a profit.
9.Fifty one per cent of the voting shares of this
company are held by another company.

10.This is the meeting which is held once a year

for the shareholders.

a.subsidiary
b.group
c.non-profit-making
d.stock exchange
e.partnership
f.directors
g.private limited
h.debentures
i.public limited
j.holding company
k.annual general meeting
 TEST-3-

Choose the correct answer in each of the

following:
1.Funds coming into a firm are known as
................of funds.
a.springs
b.sources
c.origination
d.income
2.The ways these funds are used are known as
the ....................of funds.
a.application

b.delegation
c.disposal
d.consumption.
3.................funds include money in our hands
and in the bank.
a.working
b.current
c.profit
d.cash
4.When you take away current liabilities from
current assets you have the amount of
.............funds.
a.liability
b.working capital
c.asset
d.flow
5.Financial statements about cash funds are
usually known as.....................statements.
a.cash flow
b.cash resource
c.cash outflow
d.cash loss
6.An item which doesn’t involve flow of funds is
.........................
a.sales of fixed assets
b.drawings
c.depreciation
d.loan repayment
7.An item which involves flow of funds
is...............
a.provision for bad debts
b.book loss on sale of fixed assets
c.sale of fixed asset
d.book profit on sale of fixed asset.
8.After making adjustment for items which
dont’t involve the flow of funds the net profit or
loss is known as...............
a.gross profit
b. outflow of funds
c. cash movements
d.total generated from operations..
 TEST-4-

*Fill in the missing words in each of the

following sentences.Chose from the
alternatives beneath each sentence:

1.The Board of .......is responsible for deciding

on and controlling the strategy of a corporation
or company.
a.workers
b.directors
c.control
2.Small businesses depend on investors
providing .........capital.
a.venture
b.individual
c.cooperative
3.Investors are influenced by the
projected.........on their capital.
a.market
b.return
c.rate
4.The capital needed to run a business is
provided by............
a.gain b.risk c.investment
5.Rent and rates which do not change as turnover
volume changes make up the...........costs of a
company.
a.fixed
b.contribution
c.variable
6.Every company must watch its...........carefully
if it is to avoid banrupcy.
a.market managers
b.cash flow
c.production lines.
7.The..........account shows whether the company
is profitable or not.
a.profit and loss
b.volume
c.shareholders
8.Banks require.........to guarantee a loan.
a.accounts
b.shares
c.securities
9.Insurance companies may use .............to
negotiate the amount of insurance to be paid.
a.claim forms
b.tariff companies
c.insurance adjusters.
10.The Stock Exchange deals with the purchase
and sale of...........
a.stocks and shares
b.bulls and bears
c.statements and invoices.
 TEST-5-

Choose the correct words from the following:

bookkeeping, interest, creditor, company, profit,
current, capital, net, shares, debtor, divident,
statement, to complete the definitions.

1.Recording financial transactions is...........

2.A legal organisation,formally registered in one
of three ways and having a life independent of its
members is a ............
3.A person or organisation that owes money is
a................
4.A person or organisation to whom money is
owed is a.....................
5.The assets,including cash, debtors and stocks
used in a company’s trading available at the
present moment are its...................assets
6.The equal parts into which the ownership of a
company is divided are its..................
7.The money paid to shareholders out of a
company’s profits is the ..................
8.A company’s turnover, less its cost of sales,is
its gross......................
9.A company’s turnover after the cost of sales,
tax,rent and other liabilities are deducted is
its.................profit.
10.The sum of money paid by a borrower to a
lender for the use of the lender’s money is
the.............on the loan.
11.The document send to the debtor by the
creditor, showing how much is owed and for
what, is the .............of account.
12.The shareholders’ investment in a company is
the share..............

TEST-6-

1. I have been requested to... a deposit

a) leave
b)let
c) put
d) do
2. An I.O.U...
a) is a small loan
b) is the same as a cheque
c) is a bill exchange
d) is a promise to pay on the part of the debtor
3. Your payment is ... and your account is now in
the red.
a) overtime
b) overdue
c) overtaxed
d) overcome
4. The bank does not want to lend me any
money. I shall have to go to the...
a) borrower
b) hireling
c) pawnbroker’s
d) cash-register
5. Counterfoil is a synonym for...
a) stub
b) ticket
c) coupon
d)draft
6. A bad cheque may be referred to as a ... check
a) red
b) black
c) dud
d) void
7. A bill of exchange is drawn up by...
a) the payer
b) the debtor
c) the creditor
d) the drawee
8. When the acceptor stipulates some special
condition, the acceptance of a bill is said to be...
a) particular
b) qualified
c) specialized
d) peculiar
9. A hire purchase transaction involves payment
by...
a) scattering
b) instalments
c) settlements
d) periods
10. The contract provides for the ... to leave 10%
of the loan on deposit.
a) lender
b) depositor
c) borrower
d) creditor
11. Most foreign bills are payable 30, 60 or 90
days after...
a) record
b) sight
c) fill in
d) signature
12. Deeds of property may be ... as security for
loans.
a) hedged
b) dredged
c) pledged
d) fledged
13. You are supposed to give a few days’...
before withdrawing the balance of your deposit
account.
a) period
b) delay
c) warning
d) notice
14. The bill will ... due on January 30th.
a) fall
b) come
c) get
d) reach
15. The acceptor of a bill of exchange is the...
a) drawer
b) lender
c) payee
d) drawee
16. When making a deposit you have to fill in
the...
a) folder
b) paying-in-slip
c) application form
d) statement of account
17. Banks collect ... and lend them out again.
a) coins
b) bookings
c) savings
d) ratings
18. Owing to the credit ... it is increasingly hard
to obtain cash.
a) squeeze
b) loan
c) back
d) stop
19. We grant loans to our clients and arrange for
... facilities.
a) overdrive
b) overdraft
c) overdone
d) overpaid
20. The ... system is the British equivalent to the
French Cheques Postaux.
a) Biro
b) Giro
c) Tiro
d) Barrow
Translate into English:
1. Am vrea sa vă rugăm să deschideţi un cont
curent pe numele Mateescu and Co.
2.Credeti ca putem sa deschidem un cont current
pe numele Stanculescu and Co.?
3. Pentru a deschide contul, anexăm un cec emis
de banca Carpatica în valoarea de 200.000 000
lei.
4. Acest cec în valoare 500 000 000 lei tras
asupra bãncii Carpatica va constitui depozitul
nostru iniţial.
5.Vreau sa anexez cecul meu in valoare de
20 000 000 lei, plătibil la ordinul dumneavoastrã.
6.Credeam ca ştiţi că trebuie sã plătiţi taxe
bancare pentru cecurile internaţionale.
7. Puteţi plăti prin cec, ordin de platã sau
cashier’s check. Această plată trebuie să fie trasă
asupra unei bănci din SUA.
8. Plata se va face prin transfer bancar.
9. Anexăm cecurile noastre în valoare de
600000000 lei, ca plată corespunzătoare
următoarelor facturi...
10. La care bancă sunteţi?
11.Eu ştiu că nu puteţi achita cecuri fãrã
acoperire.
12. Pentru creditarea corectă am dori să indicaţi
întotdeauna numărul dumneavoastră de cont.
13. Am aprecia dacã aţi plăti imediat.
14. Va rugäm să plătiţi astăzi, deoarece
procesarea cecului durează .
15.Cum doriţi să plătiţi: în numerar sau cu carte
dc credit?
16 Trebuie să andosati cecul pe verso inainte de
a-l incasa or depune.
17. Vă cerem permisiunea sã depãsim limita
contulul nostru cu pânã la 7 000 $ intre martie 25
si iulie 25.
18. Ne-aţi face un mare serviciu dacă ne-aţi
susţine în acest moment.
19. Contul dumneavoastrã este descoperit cu
1000 $.
20. Suntem de acord sã vă aprobăm o depăşire a
contulul în valoare de 500 $ până în martie anul
curent.
21. Suntem gata sã vă acordăm un împrumut, cu
condiţia să fie garantat.
22. Va trebui sã asiguraţi garanţii pentru
acoperirea avansului.
23. Suntem dispuşi să fim garantul
dumneavoastrã.
24. Ca o garanţie, vă vom oferi titluri de valoare.
25. Va rugăm sã ne remiteţi garantiile.
26 Din cauza tranzacţiilor sale financiare
dubioase, i-am blocat contul.
27. Noi oferim credite clientilor nostri si le
acordăm conditii avantajoase de rambursare.
28. Rata de bazã (de referinţă) este rata pe care
băncile o aplică celor mai solvabili clienţi.
29. Ei nu au întocmit documente care să
precizeze condiţiile împrumutului.
30. Graficul de rambursare este prezentat in
contractul de împrumut.
31. Care este cursul de schimb al zilei pentru
€uro în raport cu dolarul SUA?
32. Va oferim dolari la cel mai bun curs posibil .
33. Acestea sunt variaţii ale cursului de schimb,
rata de bază, cursul de schimb actual (curent).
34 Bancnotele şi cecurile de călătorie în dolari
SUA pot fi convertite în lire dacă prezentaţi
paşaportul la ghişeul din colţ.
35. Păstraţi borderoul, care vă va fi de folos
pentru a schimba yenii în moneda ţării
dumneavoastră la sfârşitul excursiei.
36 Agentul de schimb este cel care vă va spune
cursul la care veţi putea schimba valuta
dumneavoastră.
37. Cotaţiile monedelor echivalente dolarilor
SUA sunt doar aproximative. Pentru cursurile
exacte ar fi bine să vă adresaţi băncii
dumneavoastră.
38. Pentru remiteri de fonduri în alte valute decât
dolari veţi fi creditaţi cu echivalentul valorii
primite pentru remiterea dumneavoastră.
39. Alăturat vă trimitem cecul în valoare de
8000$ reprezentând plata corespunzătoare
facturii anexate. Am convenit suma
datorată,considerând că la data plăţii cursul de
schimb pentru €uro era destul de ridicată.
40.Vrem să vă inştiinţăm că cererea
dumneavoastrá de cumpărare a fost refuzată
deoarece aţi depăşit limita creditulul acordat.
41. Documentele care trebuie prezentate sunt
următoarele:
 o trată la vedere pentru valoarea creditulul
 un certificat de origine
 un certificat (o poliţă ) de asigurare.
42. După cum am convenit, documentele de
expediţie vă vor fi înmânate de agenţii
(reprezentanţii) Băncii Carpatica la plata tratei, la
scadenţă.
43 Am tras asupra dumneavoastră valoarea
facturii de 400 $, la 6o de zile de la prezentare,
prin banca de care am vorbit, căreia i-am remis
documentele de expediţie.
44.Puteţi să vindeţi creanţele dumneavoastra unei
societaţi de factoring.
45.Ar fi bine să oferiţi garanţie sub forma de
obligaţiune.
46.Vă vom pregăti comanda atunci când vom
primi confirmarea creditului de la Banca
Bucuresti.
47.Contul meu este deja descoperit aşa că evit
emiterea de cecuri in clipa de faţă.
48.Cecurile descoperite îi fac pe majoritatea
vânzătorilor cu amănuntul să refuze acest
instrument de plată şi să solicite plăţi in numerar
pentru valori mici.
48.Banca Centrala şi-a diminuat rata de baza
pentru a evita o criză severă.
49.Trebuie să aflu care este rata dobănzii la
banca despre care mi-ai vorbit.
50.Ai un cont la o bancă de stat?
51.Ce garanţie oferiţi pentru acest împrumut?
52.Vreau să aflu mai mult despre creditul
încrucişat .
53.Nu ştiu prea multe despre metoda numită
compensare.
54.Dacă preţurile nu vor fi susţinute ele se vor
prăbuşi vertiginos deoarece piaţa este saturată.
55.Am vrea să cumpărăm 100 de acţiuni ale
societăţii amintite cu condiţia ca detaliile
tranzacţiei să ne parvină prin avocatul firmei
noastre.
1.Translate into Romanian:

Modern banking appeared in England and

Scotland at the end of the XVIIIth century-1694
and 1695.We certainly know that the Bank of
England held a dominant position for about two
centuries and enjoyed a monopoly on overseas
operations and acting as the government’s
banker’s;in 1946 it was nationalized and we can
consider it today as a typical central bank.
It was in 1760 when Scotland was the first
country to have set up a modern banking system
with seven banks which carried out transactions
through a clearing house
In 1826 the first joint stock banks were set up in
England and in the XVIIIth century there were
100 clearing banks. The English banking system
became a highly concentrated system with the
great banks :Lloyd’s, Barclays, Midland,
Wesminster and National Provincial.
Today there are four major banks:Lloyd’s,
Midland, Natwest, Barclays which are involved
in wholesale banking activities through diferrent
subsidiaries.
The U.S Banking system is quite peculiar today
having more than 10 000banks .Unfortunately
none of them among the top ten in the world.
2-Translate into Romanian:

Deferred shares do not take part in profits until

the preferred share and ordinary share dividents
have already been paid. Founder’s shares are
issued to the promoters of the company.Ranking
after other shares they may yield nothing during
the early years.They may bring huge dividends
later.Industrials are the shares of industrial
companies. Blue chips are the shares of
particularly well known and sound companies.
An investor who buys stocks gets tangible shares
of a corporation, which can be held for a long
term.The person who buys or sells stock index
futures is making a short term bet on which
direction the market is going towards the near
future usually a month or less.The investor
buying into futures –buying shares on credit- has
to put up only a fraction or percentage of the
amount of the investment.And this is called the
margin .Stock index futures contracts represent
an obligation to buy or sell an index at a stated
price before a stated date.
3.Translate into Romanian:

Attempts to introduce other costs and benefits of

development, which would move GNP toward a
broader welfare measure, lack a logical basis and
tend instead to result in a confusion of concepts.
Research on ‘social’ indicators has failed to
produce an alternative which is as readily
accepted and com prehended as GNP per head ...
Systems of social accounts which could integrate
social indicators through some unifying concept
have not been able to overcome successfully all
the difficult problems encountered.
The search for a composite index of social
welfare, analogous to GNP as an index of
production, has been a fruitless one so far, since
it has proved virtually impossible to translate
every aspect of social progress into money values
or some other readily accepted common
denominator. The great deal of work devoted to
composite indices, however, suggests the need
for a single number which, like GNP per head,
can be quickly grasped and gives a rough
indication of “social” development.
4.Translate into Romanian:

Many firms lay down definite terms of payment

and expect their customers to abide by these
terms, but special arrangements may be made in
certain cases. The purchaser should, however,
pay his accounts at due date whatever is
arranged, as it is unwise to gain a reputation for
slow payment. Promptitude in payment in normal
circumstances makes it easier to obtain
consideration when actual need to delay payment
for a time arises.
In general, terms of payment may be classified
into cash on or before delivery of the goods and
credit. By far the greater number if transactions
are on credit, and generally longer periods of
credit are given by wholesalers to retail
customers than by manufacturers to wholesalers.
5.Translate into Romanian:

The primary need when starting a business,

whether a retail firm, a wholesale warehouse, or
manufacturing concern, is money. Goods have to
be bought for stock, premises leased or bought
and fitted out to suit the requirements of the
business, and some money retained for current
expenditure such as wages. A small retail
business may he set up by a person with very
small financial resources; more ambitious
concerns will entail great expense before they are
able to commence operations.
The money which must be got together to start
the enterprise is called the capital of the firm.
How the original capital is provided depends
upon the form the business unit takes.
6.Translate into Romanian:

Classes of Shares. The shares into which a

company’s capital is divided may be of different
classes according to the rights given to their
holders in respect of them. They may also be of
different amounts, for example £1, £5, £10, or
£25 shares, but the £1 share is most general.
Shares in a public company are freely
transferable and, unless a further issue of shares
is made, the only way in which a person may
become a shareholder in a going concern is to
purchase the shares of a present holder.
Preference Shares are those which have a prior
claim to the profits of the company.
Ordinary Shares are generally entitled to the
remainder of the profits after the preference share
dividends have been paid.
If Deferred Shares exist, then the ordinary shares
have a limited dividend and the deferred
shareholders are entitled to the remainder of the
profits.
When joint-stock companies raise loans, they
usually give to the lenders a form of security,
named a debenture, which gives to the holder a
right to a fixed interest.
A company may make application for its fully-
paid shares to be converted into stock, which
may be transferred in fractions of a pound,
whereas shares cannot be subdivided. Shares
must each bear a distinctive number; stock is
unnumbered.

7.Translate into Romanian:

Bills of Exchange put debts into tangible form. A

creditor receiving one has a legal
acknowledgement of the debt, and if the amount
is not paid when due he can sue on a bill without
proving that he has delivered goods. He may sell
or discount the bill at the bank, which makes a
profit called discount for the accommodation; or
he may, in payment of one of his own debts,
endorse the bill to one of his creditors. The
debtor gets longer time in which to pay and so he
may take advantage of special opportunities for
buying. Thus it will be seen that Bills of
Exchange are very useful commercial
documents.
 Vocabulary
agreement- contract
as agreed- după cum ne-am înţeles
bank run- panică bancară
bearer- bond- titlu la purtător
bill of exchange-trata,cambie
clearing bank-banca de compensaţie
clearing-compensare
closing- încheiere
collateral- garanţie
counterfoil- talon,matcă,cotor
debtor-debitor
deferred shares-acţiune cu plata ulterioară
draft- trata
exchange rate- cursul de schimb
face value-valoare nominală
fall due to- a ajunge la scadenţă
fee-comision
financial dealings- tranzacţii financiare.
floatations- emisiuni de titluri
founder’s share-acţiune de fondator
funding-finanţare
futures- contracte la termen
glutted-saturat
gilt-edged securities- titluri de valoare
hedging- acoperire financiară
Giro- serviciu de cecuri postale
instalment- plată parţială,rată
invoice- factură
lender-creditor,
loan agreement-contract de împrumut
loan on mortgage-împrumut ipotecar
loan repayable-împrumut rambursabil
margin-marjă,coeficient de siguranţă.
no effects/uncovered-fără acoperire
order-comandă
outstanding -restant
overdraft- suma cu care s-a depăşit contul
overdrawn account- cont descoperit
overdrawn- descoperit
overdue- restant,neachitat
pawnbroker- propietarul unei case de amanet
payee- beneficiar
premises -sediu
prime rate-rata de bază
rate shift- variaţii ale cursului de schimb
remittance-remitere
repayment-rambursare
securities-garanţii
security-garanţie
settlement-reglementare,decontare
share certificates- titluri de acţiuni
shipping documents- documente de expediţie
standing order- ordin de plată
statement of account-extras de cont
stub-matcă,cotor
swap agreement-acord de swap, acord de credit
încrucişat
swap- credit încrucişat
swift- sistemul de transfer electronic al fondurilor
tax shelter- paradis fiscal
teller- casier
term deposit- depozit la termen
terms -condiţii
to acknowledge- a confirma
to be over - a depăşi
to comply with- a fi în concordanţă cu
to deem- a considera,a estima
to default- a nu-si plati datoriile
to deny- a refuza
to enclose- a anexa
to grant-a acorda
to incur- a atrage asupra sa
to pawn- a amaneta
to providea - asigura
to recocile- a face să concorde
to set out –a preciza
to settle- a achita
to stand surety -a fi garantul
to underwrite securities- a subscrie titluri de
valoare
unsecured credit- credit negarantat
to abide- a rămâne,a sta,a suporta,a respecta,a se
conforma
due- datorat,cuvenit, scadent
to retail- a vinde cu amănuntul
instalment- plată parţială, rată
to entitle- a da dreptul la
expenditure- cheltuială,consum
joint- comun,asociat, mixt, colectiv
joint stock company- societate anonimă pe
acţiuni
debenture- obligaţiune, împrumut pe termen lung
tangible- concret, palpabil
to acknowledge- a recunoaşte, a confirma
acknowledgement- constatare, confirmare,
certificare, recipisă,chitanţă
bill- titlu de valoare, poliţă, factură
to discount- a reduce, a diminua
to endorse- a andosa, a gira, a subscrie
wholesaler- angrosist
warehouse- depozit de mărfuri, magazie
premises- local
lease- contract de închiriere
to set up a business- a porni o afacere
lender- împrumutător
lessor- propietar care dă cu chirie
lessee- chiriaş
to claim- a pretinde, a revendica
issue- emisiune, punere în circulaţie
to issue- a emite, a pune în circulaţie