Comprehension questions

1. What does every company worry about?

2. What is the primary goal of financial management?

3. Name a key goal of any business.

4. What is capital? What do companies need capital for?

5. Explain the term “cost of capital”. What does the cost of capital depend on?

6. Where can a firm obtain the money it needs?

7. Differentiate between equity financing and debt financing.

8. How do all corporations receive their starting capital?

9. Identify the main advantages and disadvantages of equity financing.

10. What other methods of raising money internally do companies use?

11. Highlight the benefits and disadvantages of debt financing.

12. List the three major types of short-term debt.

13. Name the three major types of long-term debt.

14. Explain what is meant by a maturity date. What could happen with a

company if it can’t meet its loan and bond commitments?

15. What issues do financial managers consider when choosing between

debt and equity financing?

16, Identify the responsibilities of a financial manager. What is a financial

plan? Why is it so important in managing financial resources?

17. Who is responsible for financial decisions in smaller companies and

in larger firms?

II. Vocabulary practice exercises

1. Complete the statements:

1. Financial management means

1. preparing financial statements

2. the system business uses to measure its financial performance

3. effective acquisition and use of money

2. A key goal of any business is

1. to develop new product lines and production techniques

2. to pay less taxes

3. to increase the value of its owners by making it grow

3. The price a company must pay to raise money is known as

1. capital

2. cost of capital

3. capital costs

4. Equity financing refers to funds

1. that are borrowed from sources outside the corporation

2. that will be used to pay salaries and wages

3. that are invested by owners of the corporation

5. Increased liquidity and voluntary dividend payments are advantages of

1. equity financing

2. debt financing

3. accumulating excess earnings

6. Many companies accumulate excess earnings instead of

1. meeting their loan and bond commitments

2. paying dividends to shareholders

3. acquiring assets for future expansion

7. A typical corporation prefers

1. to plow back all the earnings into the business

2. to pay out all the earnings as dividends

3. to plow back about half of the earnings into the business and pay out the other half as dividends

8. Debt financing refers to what we normally think of

1. a stock certificate

2. a loan

3. the prevailing level of interest rates

9. Debt financing can be

1. only short

2. only long

3. either short or long

10. Two of the three major types of short-term debt are

1. trade credit

2. bonds

3. commercial paper

11. Certificates that obligate the company to repay a certain sum, plus

interest, to the bond-holder are called

1. leases

2. loans

3. bonds

12. A financial plan is a document that shows

1. all the expenditures and all the earnings of the company

2. the cost of the financing including interest, fees, and other charges

3. the funds a firm will need for a period of time, as well as sources and uses of those funds

2. Choose the necessary word or word-combination and put it in a

sentence.

stock certificate trade credit obsolete revenue flow of money maturity date issues

excess cash financial plan long-term debt debt financing raise money funds bonds

loan and bond commitments voluntary dividend payments cost of capital internal and external financial managers equity financing

1. Before you can earn any ----------- , you need money to get started.

2. A company needs ---------- to purchase essential assets, support research and development.

3. ----------- is the price a company must pay to raise money.

4. Large corporations can sell -------- .

5. Business firms can raise money from -------------------- sources.

6. ---------------- refers to funds that are invested by owners of the corporation.

7. The sale of corporate stock describes an exchange of money for a share of business ownership – evidenced by a ------------------- .

8. ---------------------- mean that stockholders do not have to be repaid at a fixed rate or time.

9. Some companies use their --------------- to finance their growth.

10. Some companies ----------- internally by selling assets that are no longer needed or ------------ .

11. ------------------- refers to funds that are borrowed from sources outside the company.

12. If a company can’t meet its ------------------- , it could be forced into bankruptcy.

13. -------------- from suppliers allows purchasers to obtain products before paying for them.

14.The three major types of --------------- are loans, leases, and bonds.

15. A deadline when the corporation must repay all the money it has borrowed is called a --------------- .

16. When choosing between debt and equity financing, -------------- consider the variety of ------------- .

17. When developing a --------------- financial managers estimate the ------- ----- into and out the business.

3. Match the columns:

1. loan 2. capital 3. debt 4. wages 5. creditor 6. interest 7. salary 8. lease 9. pension 10. debtor 11. cash 12. fees

the money needed to start a company the money paid for a month’s (professional) work money borrowed from a bank the money paid to lawyers, architects, public accountants, etc a person who has borrowed money another word for a lender the income received by someone who lends money borrowed money that has to be paid back the money earned for a week’s manual work money paid by the government or a company to a retired person legal agreement that obligates the user of an asset to make payments to the owner of the asset in exchange for using it l) money in notes and coins

4. Language study. Complete the following chart.

Person	Noun	Verb	Adjective
manager	management	manage	managerial
financier
			supporting
		grow
selector
			creditable
		control
-----------------	requirement
payer
			purchasable
		plan
			reported
valuer
-----------------		acquire
-----------------	attraction
		officialize

5. Complete this summary with the words below.

intuitively clear confidence logically

The business plan needs to be ………. and presented ……… . The presenter should speak with ……. to persuade the investor that the project is worthwhile. However, at the end of the day, the investor may feel ………. that the project is not worth investing in.

6. Find in the text English equivalents for the following:

Альтернативные источники и назначения денежных средств; другими словами; основная цель любого предприятия; максимальное увеличение богатства владельцев; когда предприятие уже основано; закупать необходимое имущество; оклады служащих и заработная плата рабочих; расширение компании; из-за конкуренции на рынке; следует принимать в расчёт; преобладающий уровень процентной ставки; наличные деньги, полученные от продаж; в кредит; отсрочить платежи; два основных типа финансирования; обмен денег на долю собственности компании; начальный капитал; выпуск и продажа акций; добровольная выплата дивидендов; потеря контроля над собственностью; главная привлекательная особенность; накапливать избыточную прибыль; вкладывать около половины доходов в предприятие; с накопленным процентом; пережить тяжёлые времена; выполнять обязательства по займам и облигациям; быть доведённым до банкротства; со сроком платежа по векселю от 30 до 90 дней; учитывать множество спорных вопросов; обязанности финансового менеджера; определять, является ли движение наличности отрицательным или положительным; мобилизовать капитал, чтобы поддерживать рост; взаимодействовать с банками и рынками ссудного капитала.