Financial Planing

    Unit 4

    Financial planning (like all planning) begins with the establishment of
  goals and objectives. Next, planners must assign costs to these goals  and
  objectives. That is, they must determine  how  much  money  is  needed  to
  accomplish each one. Finally, financial planners must  identify  available
  sources of financing and decide which to use. In the  process,  they  must
  make sure that financing needs are realistic and that  sufficient  funding
  is available to meet those needs.

       THREE STEPS OF FINANCIAL PLANNING

   1. Establishing Organizational Goals and Objectives. Establishing  goals
 and objectives is an important management task. A goal  is  an  end  state
 that the organization wants to achieve. Objectives are specific statements
 detailing what the organization intends to  accomplish  within  a  certain
 period of time. If goals and objectives are not specific  and  measurable,
 they cannot be  translated  into  costs,  and  financial  planning  cannot
 proceed. They must also be realistic. Otherwise, it may be  impossible  to
 finance or achieve them.
   2. Budgeting for Financial Needs. A budget is a financial statement  that
projects income and/or expenditures over a specified future period of time.
Once planners know what the firm's goals and objectives are for a  specific
period of time - say, the next calendar year- they can estimate the various
costs the firm will incur and the revenues it will  receive.  By  combining
these items into a companywide budget,  financial  planners  can  determine
whether they must seek additional funding from sources outside the firm.
  Usually the budgeting process begins with the construction of  individual
budgets  for  sales  and  for  each  of  the  various  types  of   expenses:
production,  human  resources,  promotion,  administration,   and   so   on.
Budgeting accuracy is  improved  when  budgets  are  first  constructed  for
individual departments and for shorter periods of time.  These  budgets  can
easily be combined into a com-
 panywide cash budget. In addition, departmental budgets can  help  managers
 monitor and evaluate financial performance throughout the period covered by
 the overall cash budget.
   Most firms  today  use  one  of  two  approaches  to  budgeting.  In  the
 traditional approach, each new  budget  is  based  on  the  dollar  amounts
 contained in the budget for the preceding year. These amounts are  modified
 to  reflect  any  revised  goals,  and  managers  must  justify  only   new
 expenditures. The problem with this approach is that it leaves room for the
 manipulation of budget items to protect the (sometimes  selfish)  interests
 of the budgeter or his or her department.
   This problem is essentially eliminated through zero-base budgeting.
   Zero-base budgeting is a budgeting approach in which every  expense  must
be justified in  every  budget.  It  can  dramatically  reduce  unnecessary
spending. However, some managers feel that zero-base budgeting requires too
much time-consuming paperwork.
  3. Identifying Sources of Funds. The four primary sources  of  funds  are
sales revenue, equity capital, debt capital, and the sale of assets. Future
sales generally provide the greatest part of a firm's financing.
   Sales revenue is the first type of funding.
  The second type of funding is equity capital,  which  is  money  received
from the sale of shares of ownership in the  business.  Equity  capital  is
used almost exclusively for long-term financing. Thus it might be  used  to
start a business and to  fund  expansions  or  mergers.  It  would  not  be
considered for short-term financing needs.
  The third type of funding  is  debt  capital,  which  is  money  obtained
through loans. Debt capital may be borrowed for either short- or  long-term
use.
  The fourth type of funding is  the  sale  of  assets.  A  firm  generally
acquires  assets  because  it  needs  them  for  its  business   operations.
Therefore, selling assets is a drastic step. However, it may
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    be a reasonable last  resort  when  neither  equity  capital  nor  debt
    capital can be found. Assets may also be sold when they are  no  longer
    needed.

        MONITORING AND EVALUATING FINANCIAL PERFORMANCE

      It is important to ensure that financial plans are being  implemented
    and  to  catch  minor  problems  before  they  become  major   problems.
    Accordingly,  the  financial  manager  should  establish  a   means   of
    monitoring  and  evaluating  financial  performance.   Interim   budgets
    (weekly, monthly, or quarterly) may be prepared for comparison purposes.
    These comparisons point up areas  that  require  additional  or  revised
    planning.

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                                  Exercises

   I. Translate into Russian.
  Basis of financial management; goal; objective; sources of fi

nancing; funding; step; important task; financial performance;

budgeting; expenditure; revenue; sales revenue; equity capital;

debt capital; specific period; profit; assets; short-term borrowing;

long-term borrowing; merger; companywide budget; cash budget;

zero-base budgeting; income; source; share of ownership; assign

a cost; justify; meet needs; obtain; implement; modify; establish;

reduce; determine; evaluate.      !:

  II. Find the English equivalents.     \
  Финансовый план; бюджет; составление  бюджета;  наличный  бюджет;  бюджет
всей компании;  промежуточный  бюджет;  доход  (годовой);  доход;  доход  от
продаж; заемный капитал; работа фирмы;  активы;  бюджетная  статья;  расход;
источник  денежных  средств;  доля   собственности;   акционерный   капитал;
средство;  последнее  спасительное  средство;  радикальный  шаг;  финансовая
деятельность;  определять   стоимость;   решать;   оценивать;   оправдывать;
осуществлять;  удовлетворять  потребности;  нести  издержки;  финансировать;
занимать (брать в долг).

  III. Fill in the blanks.
 1. Financial planning begins with the establishment of ... and

 2. A budget is a financial statement that projects ... and/or ... over a
   specified future period of time.
 3. Usually the budgeting process begins with the construction of individual
   budgets for each of the various types of ... .
 4. Budgeting accuracy is improved when budgets are first constructed for
  individual ... for shorter periods of time.
 5. Departmental budgets can help managers   .. .   and financial
  performance throughout the period covered by the overall cash budget.
       6. In the traditional approach, each new budget is based on the ...
       contained in the budget for the  .. .  year.
 7. This approach leaves room for the manipulation of ... ...
  to protect the interests of separate departments.
 8. Zero-base budgeting is a budgeting approach in which every ...  must  be
  justified in every budget.
 9. ...   ...  are the first type of funding.
10. The second type of funding is  .......
11. The third type of funding is  .......
12. The fourth type of funding is the  ...  of ....
13. Selling assets is a   ...   ...   .
14. The financial manager should establish a  ...  of  monitoring  and  ...
  financial performance.

  IV. Translate into English in a written form.
 1. Финансовый план—это план получения и  использования  денег,  необходимых
  для осуществления целей организации.
 2. Финансовое планирование  начинается  с  установления  конечных  целей  и
  поэтапных целей.
 3. Бюджет предусматривает доход и расходы за конкретный период времени.
 4.  Процесс  составления  бюджета  (budgeting)  начинается  с   составления
  отдельных бюджетов по продажам и по каждому виду расходов.
 5. Эти бюджеты легко объединяются в наличный бюджет всей компании.
 6. Многие фирмы используют один из двух подходов к построению бюджетов.
 7. При  традиционном  подходе  новый  бюджет  основывается  на  бюджете  за
   предыдущий год и руководители обосновывают только новые расходы.
 8. Это оставляет место для манипуляции бюджетными статьями.
 9. Эта проблема в основном ликвидируется через бюдже

  тирование нуля.      -;••;
  10. Четырьмя основными  источниками  финансирования  являются:  доход  от
    продаж, акционерный капитал, заемный капитал и продажа активов.
  11. Продажа активов — это последнее спасительное средство.
  12.  Финансовый  руководитель  должен  обеспечить   (establish)   средство
    контроля и оценки финансовой деятельности.

    V. Questions and assignments.
  1. What is a plan?
  2. What is a financial plan?
  3. What does financial planning begin with?
  4. State the difference between goals and objectives.
  5. List the three steps involved in financial planning.
  6. In what case financial planning cannot proceed?
  7. State the meaning of the word "budget".
  8. Give the examples of various types of expenses which must be considered
    (учтены) in budgeting process?
  9. How can budgeting accuracy be improved?
 10. What is the peculiarity (особенность) of the traditional approach to
   budgeting?
 11. What is the problem with this approach?
 12. What is the difference between the traditional budgeting approach and
   zero-base budgeting?
 13. What is the problem with zero-base budgeting?
 14. List the four primary sources of funding.
 15. For what purpose (цель) is equity capital used?
 16. Is selling assets a normal step?
 17. In what case selling assets may be a reasonable last resort?
18. For what purpose may interim budgets be prepared?

  VI. Make up a written abstract (краткое изложение) of the text.

  VII. Retell the prepared abstract.
                                                                      Unit 5

      Outside Sources of Financing

   Financial management consist of all those activities that  are  concerned
 with  obtaining  money  and  using  it  effectively.  Effective   financial
 management involves careful planning. It begins with a determination of the
 firm's financial needs.
   Money is needed to start a business. Then the income from sales could  be
 used to finance the firm's continuing operations and to provide a profit.
   But sales revenue does not generally flow evenly. Income and expenses may
very from season to season or from year to year. Temporary financing may be
needed when expenses are high or income is low. Then, the need to  purchase
a new facility or expand an existing facility may require more  money  than
is available within a firm. In these cases the firm must look  for  outside
sources of financing. Usually it is short- or long-term financing.
   1. Short-term financing is money that will be used for one year  or  less
and then repaid.
  There are many short-term financing needs. Two deserve special attention.
First, certain necessary business practices may affect  a  firm's  cashflow
and create a need for short-term financing.
  Cashflow is the movement of money into and out of  an  organization.  The
ideal is to have sufficient money coming into the firm, in  any  period,  to
cover the firm's expenses during that period. But the ideal  is  not  always
achieved. For example, a firm that offers credit to its customers  may  find
an imbalance in its cash flow. Such credit purchases are generally not  paid
until thirty or sixty days  (or  more)  after  the  transaction.  Short-term
financing is then
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  needed to pay the firm's bills until customers  have  paid  their  bills.
  Unanticipated expenses may also cause a cash-flow problem.
    A second major need for short-term  financing  that  is  related  to  a
  firm's cash-flow problem is inventory.
    Inventory  requires  considerable  investment  for  most  manufactures,
  wholesalers, and retailers. Moreover, most goods are manufactured four  to
  nine months before they are sold to the ultimate customer.  As  a  result,
  manufacturers often need short-term financing. The borrowed money is  used
  to buy materials and supplies,  to  pay  wages  and  rent,  and  to  cover
  inventory costs until the goods are sold. Then, the money is repaid out of
  sales revenue. Additionally, wholesalers and retailers may need short-term
  financing to build up  their  inventories  before  peak  selling  periods.
  Again, the money is repaid when the merchandise is sold.
    2. Long-term financing is money that will be  used  for  longer  period
  than one year. Long-term financing is needed to start a new  business.  It
  is  also  needed  for  executing  business  expansions  and  mergers,  for
  developing and marketing new products, and for  replacing  equipment  that
  becomes obsolete or inefficient.
    The amounts of long-term financing needed by large firms  can  be  very
  great.

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                  Exercises

  I. Translate into Russian.
  Income; profit; facility; sales revenue; expense;  source;  term;  short-
term financing; long-term financing;  cash;  cash  flow;  expand;  provide;
obtain;  purchase;  affect;  be  available;  repay;  borrow;   transaction;
supplies; marketing; equipment; merger; retailer; wholesaler; manufacturer;
imbalance; merchandise; inventory; rent; sales revenue.

  II. Find the English equivalents.
  Финансовые потребности; арендная плата; стоимость; изготовитель;  оптовый
торговец; розничный торговец; (торговая) сделка; доход от продажи;  припасы;
товары; слияние (предприятий); определение; товарные  запасы;  оборудование;
продажа;  доход;  прибыль;  расход;  срок;   краткосрочное   финансирование;
долгосрочное  финансирование;  денежная  наличность;  движение   наличности;
обеспечивать; изменяться; покупать; быть в  наличии;  предлагать;  заменять;
влиять   (на);   конечный;   устарелый;    неэффективный;    непредвиденный;
тщательный.

  III. Fill in the blanks.
 1. Financial management begins with a determination of the firm's... .
 2. Temporary financing may be needed when ... are high and ...   is low.
 3. In these cases the firm must look for outside ... of financing.
 4. Short-term financing is ... that will be used for one year or less and
   then   ....
 5. Cash flow is the movement of ... into and out of an organization.
6. A firm that offers credit to its customers may find an imbalance in  its
  ... .
7. A second major need for ... financing that is related to a firm's  cash-
  flow problem is ... .
8. The borrowed money is used to buy ... and ... , to pay ... and to  cover
  ... until the goods are sold.

 IV. Translate into English.
1. Финансовый менеджмент состоит из тех  видов  деятельности  (activities),
  которые относятся к получению денег и эффективному их использованию.
2. Краткосрочное финансирование — это деньги, которые будут  использоваться
  в течение одного года или менее (less).
3. Существуют (there are) многие потребности краткосрочного финансирования,
  но движение наличности и товарные запасы представляют (are)  две  основные
  проблемы.
4. Товарные запасы требуют  значительного  инвестирования  для  большинства
  производителей, оптовых торговцев и розничных торговцев.
5. Занятые деньги возвращаются (is repaid) из дохода от продаж.

 V.. Answer the questions.
1. Is money needed to start a business?
2. When may temporary financing be needed?
3. What kinds (виды) of financing do you know?
4. What is short-term financing?
5. What is cash flow?
6. What is the ideal cash flow?
7. What can cause a cash flow problem?
8. Does inventory require considerable investment for  most  manufacturers,
  wholesalers and retailers?
9. Why do manufacturers often need short-term financing?
  10. For what purpose (цель) is the borrowed money often used by the
  manufacturers?
11. When is the borrowed money usually repaid?
12. What is long-term financing?  , .:
13. For what purpose is long-term financing needed?
14. Are the amounts of long-term financing greater than those of short-term
   financing?

  VI. Make up a written abstract of the above text.

  VII. Retell the prepared abstract.

 Unit 6

   Sources of Unsecured Financing

   Unsecured financing is financing for which collateral  is  not  required.
 Most short-term financing is unsecured.  Sources  of  unsecured  short-term
 financing include trade credits, promissory notes, bank  loans,  commercial
 papers, and commercial drafts.

                               1. TRADE CREDIT
   Wholesalers may provide financial  aid  to  retailers  by  allowing  them
 thirty to sixty days (or more)  in  which  to  pay  for  merchandise.  This
 delayed payment, which may also be granted by manufacturers, is a  form  of
 credit known as trade credit or the open account. More specifically,  trade
 credit is a payment delay that a supplier grants to its customers.
  Between 80 and 90 percent of all transactions between businesses  involve
some trade credit. Typically, the purchased goods are delivered  along  with
a bill (or invoice) that states the credit terms. If the amount is  paid  on
time, no interest is generally charged. In fact,  the  seller  may  offer  a
cash discount to encour-. age prompt payment. The terms of a  cash  discount
are specified on the invoice.

  2. PROMISSORY NOTES ISSUED TO SUPPLIERS
  A promissory note is a written pledge by a borrower to pay a certain  sum
of money to a creditor at a specified future  date.  Unlike  trade  credit,
however, promissory notes usually require the  borrower  to  pay  interest.
Although repayment periods may extend to one year,  most  promissory  notes
specify 60 to 180 days. The customer buying on credit is called  the  maker
and is the party that

issues the note. The business selling the merchandise on credit  is  called
the payee.
  A promissory note offers two important advantages to the  firm  extending
the credit. First, a promissory note are negotiable instruments that can be
sold when the money is needed immediately.

           3. UNSECURED BANK LOANS
  Commercial banks offer unsecured short-term loans to their  customers  at
interest rates that vary with each  borrower's  credit  rating.  The  prime
interest rate (sometimes called the preference rate)  is  the  lowest  rate
charged by a bank for a short-term loan.  This  lowest  rate  is  generally
reserved  for   large   corporations   with   excellent   credit   ratings.
Organizations with good to high credit ratings may have to  pay  the  prime
rate plus 4 percent. Of course, if the banker feels loan repayment may be a
problem, the borrower's loan application may be rejected.
  Banks  generally  offer  short-term  loans  through   promissory   notes.
Promissory notes that are written to banks are similar to  those  discussed
in the last section.

             4. COMMERCIAL PAPER
  A commercial paper is a short-term promissory  note  issued  by  a  large
corporations. A commercial paper is secured only by the reputation  of  the
issuing firm; no collateral is involved. It  is  usually  issued  in  large
denominations,  ranging  from  $5,000  to  $100,000.  Corporations  issuing
commercial papers pay  interest  rates  slightly  below  those  charged  by
commercial banks. Thus, issuing a commercial paper is cheaper than  getting
short-term financing from a bank.
  Large firms with excellent credit reputations  can  quickly  raise  large
sums of money.  They  may  issue  commercial  paper  totaling  millions  of
dollars. However, a commercial paper is not without risks. If  the  issuing
corporation later has severe financing problems, it  may  not  be  able  to
repay the promised amounts.
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              5. COMMERCIAL DRAFTS
    A commercial draft is a written order requiring a customer (the drawee)
  to pay a specified sum of money to a supplier (the drawer) for  goods  or
  services. It is  often  used  when  the  supplier  is  insure  about  the
  customer's credit standing.
    In this case, the draft is  similar  to  an  ordinary  check  with  one
  exception: The draft is filled out by the seller and  not  the  buyer.  A
  sight draft is a commercial draft that is payable on demand -whenever the
  drawer wishes to collect. A time draft is a commercial draft on  which  a
  payment date is specified. Like promissory notes, drafts  are  negotiable
  instruments that can be discounted or used as collateral for a loan.

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                                  Exercises

  I. Translate into Russian.
  Source; unsecured financing; promissory  note;  commercial  draft;  trade
credit; loan; commercial paper; transaction; delayed payment; credit terms;
pay interest; interest  rate;  invoice;  amount;  prompt  payment;  written
pledge; sum of money; borrower; repayment period; buy on  credit;  deliver;
provide aid; maker; payee; offer loans; credit rating; prime interest rate;
questionable credit rating; large denomination; raise large sums of  money;
drawee; drawer; credit  standing;  sight  draft;  time  draft;  collateral;
commercial draft.

  II. Find the English equivalents.
  Ссуда;  давать  ссуду;   процент;   процентная   ставка;   необеспеченное
финансирование; покупать в кредит; условия кредита;  счет-фактура;  основная
сумма;  деловая   операция;   торговый   кредит;   долговое   обязательство;
коммерческая  бумага;  тратта  (переводной  вексель);  условия;  обеспечение
(залог) ; заемщик; трассат (лицо, на которое  выставлена  тратта);  трассант
(лицо, выписавшее переводной вексель-тратту)  ;  кредитоспособность;  тратта
(вексель) на предъявителя; срочная тратта.

III. Fill in each blank with a suitable word or word combination.
 1. Trade credit is a payment... that a supplier grants to its customers.
 2. The invoice that's ....
 3. A promissory note is a written ... by a borrower to pay a  certain  sum
   of money at a specified date.
. 4. The customer buying on credit is called ... and is the party that
   issues the promissory note.
 5. The business selling the merchandise on credit is called ....
 6. Most promissory notes are... that can  be  sold  when  money  is  needed
   immediately.
 7. The prime interest rate is the lowest rate  charged  by  a  bank  for...
   loan.
 8. A commercial paper is ... issued by a large corporation.
 9. A commercial paper is secured only by the ... of the issuing .    firm.
10. Issuing a commercial paper is ...  than  getting  short-term  financing
   from a bank.
11. A commercial draft  is  a  written...  requiring  a  drawee  to  pay  a
   specified sum of money to the ... for goods or services.
12. A sight draft is a commercial draft that is payable on ....
13. A ... is a commercial draft on which a payment date is specified. 14.
Like promissory notes drafts can be used as ... for a loan.

  IV. Translate into English.
 1.  Источники  необеспеченного   краткосрочного   финансирования   включают
  торговые кредиты, долговые обязательства, банковские ссуды, краткосрочные
  долговые обязательства (кредитно-денежные документы) и тратты (переводные
  векселя).
 2. Торговый кредит — это отсрочка платежа, которую поставщик  предоставляет
  своим клиентам.
 3. Долговое обязательство — это письменное обязательство заемщика  уплатить
  определенную сумму денег кредитору.
4. В отличие от торгового кредита  долговые  обязательства  требуют,  чтобы
  заемщик платил проценты.
5. Коммерческие  банки  предоставляют  необеспеченные  краткосрочные  ссуды
  своим   клиентам,   которые   меняются    в    зависимости    от    (with)
  кредитоспособности каждого заемщика.
6.  Коммерческая  бумага  —  это  краткосрочное   долговое   обязательство,
  выпускаемое крупными корпорациями. .
7. Коммерческая бумага не имеет специального (special) обеспечения.
8. Тратта (переводной вексель) —это  письменный  приказ,  требующий,  чтобы
  трассат (лицо, на которое  выставлена  тратта)  уплатил  конкретную  сумму
  денег поставщику за товары или услуги.
9.   Тратта   часто   используется,   когда   поставщик   не    уверен    в
  кредитоспособности клиента.

 V. Answer the questions.
1. What is unsecured financing?
2. What are the sources of unsecured short-term financing?
3. What is a trade credit?
4. What is the difference between a promissory note and trade credit?
5. In what case a loan application may be rejected by a bank?
6. What is a commercial paper secured by?
7. Why issuing a  commercial  paper  is  cheaper  than  getting  short-term
  financing from a bank?
8. What is a commercial draft?
9. Can commercial drafts be used as collaterals for loans?

 VI. Make up a written abstract of the above text.

 VII. Retell the prepared abstract.
                                                                       Unit7

                Accounting

    1. GENERAL DEFINITION OF ACCOUNTING

  Today, it is impossible to manage a business operation  without  accurate
and  timely  accounting  information.  Managers  and  employees,   lenders,
suppliers,  stockholders,  and  government  agencies  all   rely   on   the
information contained in two financial statements. These two reports —  the
balance sheet and  the  income  statement  —  are  summaries  of  a  firm's
activities during a specific time period. They  represent  the  results  of
perhaps tens of thousands of transactions that  have  occurred  during  the
accounting period.
  Accounting is the process of systematically  collecting,  analyzing,  and
reporting financial information. The basic product that an accounting  firm
sells is information needed for the clients.
  Many  people  confuse  accounting  with  bookkeeping.  Bookkeeping  is  a
necessary part of accounting. Bookkeepers are responsible for recording  (or
keeping) the financial data that the accounting system processes.
  The primary users of accounting  information  are  managers.  The  firm's
accounting system provides the information  dealing  with  revenues,  costs,
accounts  receivables,  amounts  borrowed  and  owed,  profits,  return   on
investment, and the like. This information can be compiled  for  the  entire
firm; for each product; for  each  sales  territory,  store,  or  individual
salesperson; for each division or department; and generally in any way  that
will help those who manage the organization.  Accounting  information  helps
man-
agers plan and set goals, organize,  motivate,  and  control.  Lenders  and
suppliers need  this  accounting  information  to  evaluate  credit  risks.
Stockholders and potential  investors  need  the  information  to  evaluate
soundness of investments, and government agencies need it  to  confirm  tax
liabilities, confirm payroll deductions, and approve new issues  of  stocks
and bonds. The firm's accounting system must be able to  provide  all  this
information, in the required form.

   2. THE BASIS FOR THE ACCOUNTING PROCESS

  The basis for the accounting process is the accounting equation. It shows
the relationship among the firm's assets, liabilities, and owner's equity.
  Assets are the items of value that a firm owns — cash, inventories, land,
equipment, buildings, patents, and the like.
  Liabilities are the firm's debts  and  obligations  —  what  it  owes  to
others.
  Owner's equity  is  the  difference  between  a  firm's  assets  and  its
liabilities — what would be left over for the firm's owners if  its  assets
were used to pay off its liabilities.
  The relationship among these three terms is the following:
  Owners' equity = assets - liabilities
  (The owners' equity is equal to the assets minus the liabilities)
  For a sole proprietorship or partnership, the owners' equity is shown  as
the difference between  assets  and  liabilities.  In  a  partnership,  each
partner's share of the ownership is  reported  separately  by  each  owner's
name. For a corporation, the  owners'  equity  is  usually  referred  to  as
stockholders' equity or shareholders'equity. It is shown as the total  value
of its stock, plus retained earnings that have accumulated to date.
  By moving the above three terms algebraically,  we  obtain  the  standard
form of the accounting equation:
  Assets = liabilities + owners' equity
  (The assets are equal to the liabilities plus the owners' equity)
              3. A BALANCE SHEET

  A balance sheet (or statement of financial position), is a summary  of  a
firm's assets, liabilities, and owners' equity  accounts  at  a  particular
time, showing the various money amounts  that  enter  into  the  accounting
equation. The balance sheet must demonstrate that the  accounting  equation
does indeed balance. That is, it must show that the firm's assets are equal
to its liabilities plus its owners' equity. The balance sheet  is  prepared
at least once a year. Most firms also have balance  sheets  prepared  semi-
annually, quarterly, or monthly.

           4. AN INCOME STATEMENT

  An income statement is a summary of a firm's revenues and expenses during
a specified accounting period. The income statement is sometimes called the
statement of income and expenses. It may be  prepared  monthly,  quarterly,
semiannually, or annually. An income statement covering the  previous  year
must be included in a corporation's annual report to its stockholders.

     5. THE IMPORTANCE OF THE ABOVE TWO STATEMENTS

  The information contained in these two financial statements becomes  more
important when it is compared with corresponding  information  for  previous
years, for competitors, and for the industry in which the firm  operates.  A
number of financial ratios can  also  be  computed  from  this  information.
These ratios provide a picture of the firm's profitability,  its  short-term
financial position, its activity in the area  of  accounts  receivables  and
inventory, and its long-term debt financing. Like  the  information  on  the
firm's financial statements, the ratios can  and  should  be  compared  with
those  of  past  accounting  periods,  those  of  competitors,   and   those
representing the average of the industry as a whole.

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                      Exercises

       I. Translate into Russian.
       Accounting;  bookkeeping;  accounting  information;  lender;   stock;
     stockholder; financial  statement;  balance  sheet;  income  statement;
     assets;  liabilities;  owners'  equity;  bond;  debt;  annual   report;
     profitability; accounting period; return on  investment;  soundness  of
     investment;  issue  of  stocks  and  bonds;  revenue;  profit;  account
     receivable; transaction; amount; own; owner; relay on; report;  borrow;
     deal with; confirm; approve; provide; compare.

       II. Find the English equivalents.
       Бухгалтерский учет (бухучет);  точная  и  своевременная  информация;
     акционер;кредитор; ведомство (агентство); отчет
(доклад); балансовый отчет; отчет о доходах; отчетный  период;  счетоводство
(бухгалтерия); финансовая информация;  прибыль  (доход);  выгода  (прибыль);
прибыль   на    инвестированный    капитал;    дебиторская    задолженность;
обязательство; денежное обязательство (пассив); платежная  ведомость;  акция
(ценная бумага); активы; долг; счет прибылей  (иубытков);  ежегодный  отчет;
доходность;   собственный   акционерный   капитал;   одобрять;   сравнивать;
подтверждать; занимать (брать взаймы); обрабатывать (информацию).

  III. Fill in the blanks.
 1. Managers, lenders, suppliers and government agencies relay on the
   information contained in two ....
 2. These two reports — the balance sheet and ... — are summaries of a
   firm's activities during a specific time period.
 3. The basis for the accounting process is ....
 4. Assets are the ... that a firm owns.
 5. Liabilities are the firm's debts and ....
 6. Owners' equity is the difference between a firm's ... and its
   liabilities.
 7. A balance sheet is ... of a firm's assets, liabilities, and owners'
   equity accounts at a particular time.
 8. A balance sheet must demonstrate that the accounting ... does indeed
   balance.
 9. An income statement is a summary of a firm's revenues and
... during a specific accounting period.     >

10. The information in these two financial statements becomes

more important when it is... with corresponding information

for previous years or past... periods.

  IV. Translate into English.
 1. Бухгалтерский учет — это процесс систематического сбора и сообщения
   финансовой информации.
 2. Балансовый отчет и отчет о доходах являются (are) основой процесса
   бухучета.
  3. Балансовый отчет  (или  отчет  о  финансовом  положении)  —  это  (is)
  обобщенный отчет об активах фирмы,  пассивах  и  собственном  акционерном
  капитале.
 4. Отчет о доходах — это обобщенный отчет о доходах и расходах за  (during)
  конкретный отчетный период.
 5. Основой процесса бухгалтерского учета является буху-четное уравнение.
 6. Согласно (according to)  бухучетному  уравнению  активы  равны  пассивам
  (денежным обязательствам) плюс собственный акционерный капитал.
 7. Собственный акционерный капитал—это разность между активами и пассивами.
 8.  Балансовый  отчет   должен   показывать,   что   бухучетное   уравнение
  балансируется.
 9.  Результаты  (results)  балансового  отчета  должны   сравниваться   (be
  compared) с результатами за (for) прошлый отчетный период.
10. Эта информация дает картину доходности фирмы, ее  финансового  положения
  и ее деятельности в области (area)  дебиторской  задолженности,  товарных
  запасов и долгового финансирования.

  V. Questions and assignments.
 1. What is accounting? Give a short definition.
 2. Is it possible to manage  a  business  operation  without  accurate  and
  timely accounting information?
 3. Who needs accounting information? Explain why.
 4. What is the basis for accounting process?
 5. State (изложите) the standard form of the accounting equation.
 6. What is a balance sheet? Give a short definition.
 7. What must a balance sheet show?
 8. What is an income statement?
 9. What can be computed from the information contained in a  balance  sheet
  and an income statement?
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 10. Do the ratios computed from this information provide a picture of a
    firm's profitability and its financial position?
  11. Is this information for competitors?

   VI. Read and translate this newspaper advertisement.

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  VII. Answer the questions.
 1. What is the name of the firm that has published this ad (advertisement)?
 2. Who is the firm's client?
 3. What information have you got about the bank for which the firm works?
 4. What kind of (каких) specialists does the firm invite?
 5. What kind of experience must the invited professionals have?
 6. Does experience in accountancy matter (имеет значение)1
 7. What will preferred candidates demonstrate?
 8. What chief traits (основные черты) of character must the applicants
  have?
 9. Is it necessary to send a full curriculum vitae to Michael Page City
  firm?
10. What words in the ad characterize the team within which the selected
  applicants will work?
                                                                      Unit 8

       Operations Management

   Operations management consists of all the activities that managers engage
in to create products (goods,  services,  and  ideas).  Operations  are  as
relevant to service organizations  as  to  manufacturing  firms.  In  fact,
production is the conversion of resources into goods or services.
   1. A technology is the knowledge and process the  firm  uses  to  convert
input resources into output goods or services. Conversion processes vary in
their major input, the degree to which inputs are changed, and  the  number
of technologies employed in the conversion.
  2. Operations management often  begins  with  the  research  and  product
development activities. The results of R&D may be entirely new products  or
extensions and refinements of existing products. The limited life cycle  of
every product spurs companies to invest continuously in R&D.
  3. Operations planning is planning for production. First, design planning
is  needed  to  solve  problems  related  to  the  product  line,  required
production capacity, the technology to be used, the  design  of  production
facilities, and human resources. Next, operational planning focuses on  the
use of production facilities and resources.  The  steps  in  this  periodic
planning are (1) selecting the appropriate planning horizon, (2) estimating
market demand, (3) comparing demand and capacity, and (4) adjusting  output
to demand.
  4. The major  areas  of  operations  control  are  purchasing,  inventory
control, scheduling, and quality control. Purchasing in-
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  volves selecting suppliers and planning purchases. Inventory  control  is
  the management of stocks of raw materials,  work  process,  and  finished
  goods to minirnize the total  inventory  cost.  Scheduling  ensures  that
  materials are at the right place at the right time — for use  within  the
  facility or for shipment  to  customers.  Quality  control  ensures  that
  products meet their design specifications.
     5. Automation, the total or near-total use of machines to do  work,  is
  rapidly changing the way work is done in factories and offices. A growing
  number of industries are using programmable  machines  called  robots  to
  perform tasks that are tedious or hazardous to human beings. The flexible
  manufacturing system combines robotics and  computer-aided  manufacturing
  to  produce  smaller  batches  of  products  more  efficiently  than  the
  traditional assembly line.

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