Unit 7 Text a Preparation for negotiations

Vocabulary

Abbreviated account	Краткий отчет
Attract additional capital	Привлекать дополнительный капитал
Capital costs	Затраты основного капитала (инвестиции)
Capital structure	Структура капитала
Consolidated accounts	Сводный отчет
Contribution ratio	Валовой коэффициент
Current assets	Текущие активы
Current liabilities	Текущие обязательства
Current ratio	Отношение оборотного капитала к краткосрочным обязательствам
Curve	Кривая
Decline	Снижаться
Digressive variable costs	Снижающиеся переменные издержки
Direct costs	Прямые расходы
Drop	Падать
Equity	Стоимость капитала
Extraordinary item	Статья непредвиденных расходов
Gearing	Отношение капитала компании к заемным средствам
Labour costs	Расходы на зарплату
Liquidity	Ликвидность
Loan capital	Ссудный капитал
Long-term debts	Долгосрочные обязательства
Overtime work	Сверхурочная работа
Owner’s capital	Собственный капитал
Pretax income	Доход до уплаты налогов
Profit and loss account	Счет прибыли и убытков
Profit margin	Чистая прибыль
Progressive variable costs	Прогрессивные переменные издержки
Proportionally variable costs	Пропорциональные переменные издержки
Quick ratio	Отношение ликвидности фирмы к долговым обязательствам
Rate	Ставка
Regressively variable costs	Регрессивные переменные издержки
Return on capital employed	Доход на используемый капитал
Short-term debts	Краткосрочные обязательства
Total assets	Общая стоимость имущества
Trading income	Доход от коммерческой деятельности
Unit contribution	Единица прибыли
Volume of production	Объем производства
Wealth	Материальные ценности
Work-in-progress	Незавершенное производство

1. Read and translate the following text about financial ratios:

There are four critical areas of a company’s business which can be analyzed by applying ratios. These are: liquidity, capital structure, activity and efficiency, and profitability.

Measurements of liquidity should answer the question: Can a company pay its short-term debts? There are two ratios commonly used to answer this question. Firstly, the current ratio, which measures the current assets against the current liabilities. In most cases, a healthy company would show a ratio above 1, in other words more current assets than current liabilities. Another method of measuring liquidity is the so-called quick ratio – this is particularly appropriate in manufacturing industries where stock levels can disguise the company’s true liquidity. The ratio is calculated in the same way as above but the stocks are deducted from the current assets.

The balance sheet will also reveal the gearing of the company – this is an indicator of the company’s capital structure and its ability to meet its long-term debts. The ration expresses the relationship between shareholders’ funds and loan capital. Income gearing is also important and shows the ratio between profit and interest paid on borrowings. Relatively high borrowings would indicate vulnerable rate rise. Highly geared companies generally represent a greater risk for investors.

The balance sheet and the profit and loss account can be used to asses how efficiently a company managers its assets. Basically, sales are compared with investment in various assets. For example, in the retail sector, an important ratio which indicates efficiently is sales divided by stock – the resulting figure should be much higher than in manufacturing sector where stock tends to show a much slower turnover. Another example of efficiency measurement is to calculate the average collection period on debts. This is found by dividing debtors by the sales per day. This can vary tremendously from industry to industry. In the retail sector it may well be as low as one or two days, whereas in the heavy manufacturing and service sector it can range from thirty to ninety days.

Finally, profitability ratios show the manager’s use of the company’s resources. The profit margin figure (profit before tax divided by sales and expressed as a percentage) indicates the operational day-to-day profitability of the business. Return on capital employed can be calculated in a number of ways. One common method is to take profit before taxes and divide by the total assets – this is a good indicator of the use of all assets of the company. From a shareholder’s point of view, the return on owner’s equity will be an important ratio; this is calculated by dividing the profit before taxes by the owner’s equity and expressing it as a percentage. If the company doesn’t earn a reasonable return, the share price will fall and thus make it difficult to attract additional capital.