Further speech practice

TASK 1. Give the definition of the income statement.

TASK 2. Discuss with your partner the use of the profit and loss statement by a financial manager.

TASK 3. Say what sets of resources are considered on the balance sheet

TASK 4. Discuss the following questions.

1. What is the difference between the balance sheet and the profit and loss statement?

2. Can you explain what the return on capital is?

3. Why are shareholders interested in the return on capital?

4. What do cost of sales include?

5. What is the difference between current and long-term liabilities?

6. What does analyzing of the income statement make possible?

7. How would you prepare the income statement?

TASK 5. Give extended answers to the questions.

1) In what circumstances can a business be profitable?

2) How can you understand that the business is in the red?

3) What actions would you undertake to improve its financial position?

TASK 6. Translate the passage into Russian.

Planning for cash flow

Cash flow can be used not only to determine how cash can flow though the business but also as an aid to determine the excess or shortage of cash. Suppose your analysis of cash flow forecasts a potential cash deficiency. You may then do a number of things, such as:

• increase borrowings: loans, stock issuance, etc.

• reduce current asset accounts: reduce receivables, inventory, etc.

• reduce non-current assets: postpone expanding the facility, sell off some fixed assets, etc.

By using a cash flow statement you can determine if sufficient funds are available from financing activities, show funds generated from all sources, and show how these funds were applied. Using and adjusting the information gained from this cash flow analysis will help you to know in advance if there will be enough cash to pay:

• suppliers' bills

• bank loans

• interest

• Dividends.

Careful planning will insure a sufficient amount of cash to meet future obligations on schedule which is essential for the "successful" business.

TASK 7. Translate from Russian into English.

По требованию наличных средств бухгалтер может помочь определить количество наличных, необходимых для работы фирмы в течение определенного периода времени, например: на три месяца, на шесть или год.

Бухгалтер выясняет, сколько наличных потребуется для того, чтобы оплатить дебиторские счета, пополнить запасы, оплатить текущие расходы, купить оборудование и выплатить ссуды. К тому же бухгалтер может определить, сколько наличных придет от поступления счетов к получению и сколько средств следует занять.

Разрабатывая требование наличных, бухгалтер может заметить и обратить ваше внимание (to call attention) на опасные места на предприятии, такие как просроченные счета. Например, одна из фирм позволила покупателю отложить выплату 25000 долларов. Когда он разорился, фирма потеряла 22000 долларов - почти всю свою годовую прибыль.

В дополнение к анализу отчета о прибылях и убытках и указанию на места, которые требуют контроля, бухгалтер может дать рекомендации по требованию наличных средств, по бюджетному прогнозу, кредитам, организации предприятия и налогам.

LISTENING

TASK 1. Listen to the dialogue and say what the financial controller decided to do to increase profits.

Before listening to the dialogue pay attention to the words and expressions given below.

export sales продажа на экспорт

overall sales total общая брутто-прибыль, общая выручка от продаж

to cover costs покрыть расходы

return on capital возврат на инвестиции

excess capital избыточный капитал

to apply применять, обращаться

TASK 2. Listen to the conversation again and then complete the script

The financial controller of Proteus phones the managing director to discuss the problems appeared.

FC I just wanted to say something about that financial report I gave you.

MD Yes, I think I see what's wrong. The export sales were good but not good enough.

FC That's right. Our overall sales total did not make enough to cover all our costs.

MD Yes, and I can see that the return on capital is now well below the

minimum set by Head Office. How did that happen?

FC Well, it is because of the low profit, you see. And excess working capital.

It's clear from the balance sheet.

MD Yes, I see. So what do you think we should do about it?

FC Well, we must report in detail on how much profit each product makes.

This applies particularly to production costs; so we can see which

products make a low gross profit and which products are doing well.

TASK 3. Answer the comprehension questions on the dialogue.

1. What was the overall gross profit of the company?

2. Was the pro-forma return on capital low or high?

3. Were all costs covered by gross sales?

4. What did they decided to do to improve the situation?

TASK 4. Can you define the causes of the trouble?

TASK 5. Read the dialogue and find out what terms and expressions a financial report contains.

TASK 6. Speak with your friend about activities of a financial controller.

CASE STUDY

TASK 1. Read the following text. Make up a profit and loss statement filling the chart below according to the figures given in the text.

In the P&L account of the Cedar the direct costs, or cost of sales of $30 million, are deducted from the turnover of $65 million to reach a gross profit of $35 million. The operating profit is reached by deducting other operating expenses, sometimes called fixed costs (in this case $15.5 million) to reach a figure of $19.5 million as an operating profit. On some statement, especially consolidated accounts, minority interests will be deducted from this sum. In this case $5.4 million is due to the minority shareholders in the company's subsidiaries and associated companies.

The profit figure now reached ($14.1 million) is taxable at whatever rate of corporation tax is applicable. The Cedar pays $1.8 million in tax to end up with $12.3 million in profit after tax. This year, an amount of $450,000 is set aside as an extraordinary item. This represents a sum contributed to a special disaster fund.

The $11.85 million can now be distributed between shareholders of the Cedar and retention to the reserves. In this case there are a small number of preference shareholders who receive a fixed dividend of $50,000 in total; a further $300,000 is paid out as a dividend to the ordinary shareholders. The company retains earnings of $11.5 million. Of particular interest to investors is the earnings per share, which has risen from 25p last year to 31p this year.