- •Starter асtivities
- •2. What financial components does the balance sheet contain?
- •Vocabulary focus
- •Opening inventory
- •Factory overheads
- •Interest costs
- •Cost of sales
- •Task 3. Read the text again and answer the questions.
- •B. Answer the following questions taking in account the data above.
- •Listening
- •Writing
- •2.000 2,000
- •Lower, reduce, make, list, raise, have, use
- •B. Insert the correct verb forms in the following sentences.
- •Case study
- •Test yourself
- •Vocabulary
- •Starter activities
- •1. When is a business considered to operate with profit?
- •Vocabulary focus
- •1.____________
- •Reading and discussion
- •Further speech practice
- •Planning for cash flow
- •Consolidated profit and loss account
- •Grammar focus
- •Test yourself
- •Accounting ratios
- •Vocabulary
- •Inland Revenue and Customs and Excise
- •Vocabulary focus
- •Fig. 1. Table of ratios
- •Reading and discussion task 1. Read the text and fill in the following chart.
- •Review of accounting ratios
- •Overall performance ratio
- •Profitability ratios
- •Productivity ratios
- •1St year 2nd year
- •Liquidity ratio
- •Investment ratio
- •Capital structure ratio
- •Trading and profit and loss accounts for the year ended 31 December
- •Balance sheets as at 31 December
- •Reference materials
Task 3. Read the text again and answer the questions.
1. In what conditions is a business able to exist?
2. What groups of financiers operate a business?
3. What are' assets'?
4. What headings in the balance sheet show sources of finance in a business?
5. Does the balance sheet show the financial state of a business at a certain date?
6. How can items be presented on the balance sheet?
7. Is side by side or vertical layout of the balance sheet generally used in the UK?
8. Working capital is the difference between current assets and current liabilities, isn't it?
9. What parts of finance does employed capital consist of?
10. What is called 'net worth?
11. The balance sheet is a statement of wealth invested in resources into a business, isn't it?
TASK 1. A. Find in the text sentences with the following words and word combinations and translate them. B. Use this vocabulary in sentences of your own. Ask your partner about financial items you find on a balance sheet statement.
1) to make an equivalent amount;
2) resources for use;
3) to relate to;
4) to obtain smth. from smb.;
5) to contain smth.;
6) to show smth. as;
7) to list smth.;
8) to supply resources;
9) side by side;
10) to represent the claims;
11) to oppose to smth.;
12) to relate to.
TASK 2. Tell your friend about American balance sheets compared with European ones.
TASK 3. Read the passage about sources of finance. Translate it and give the definitions to the terms: 'fixed assets', 'current assets', and 'long-term liabilities'.
The sources of finance are grouped under three headings in the balance sheet: shareholders' capital, long-term liabilities, and current liabilities. The last two categories represent finance made available on condition that it will be paid off at some time in the future. The assets are divided into groups under headings: current assets, fixed assets and other assets.
Fixed assets are those resources, which have been acquired with the intention that they will be kept and used by the business. As they wear out or obsolete they are depreciated. Their net book value is the difference between their cost or valuation and the accumulated depreciation to date. They include
items such as land and buildings, plant and equipment, and vehicles used by the business.
Current assets consist of cash and items which are to be turned into cash as part of the normal operation of the business. Cash will be used, among other things, to buy stocks. Stocks will eventually be sold to customers who become the company's debtors. The debtors' liabilities are converted into cash on settlement of the accounts. Some cash will be used to buy more stocks and the cycle of conversion will repeat continually. The fixed assets are used as a means by which this conversion may be carried out. Finance has been obtained from shareholders in the form of share capital and by retaining some of the profits belonging to the shareholders. In addition, long-term liabilities represent finance obtained on terms, which include repayment more than twelve months after the balance sheet date. They include such items as bank overdraft, creditors (representing unpaid suppliers' accounts), unpaid tax, and unpaid dividends.
TASK 4. Make up questions to which these sentences are the answers.
Shareholders own company's assets while lenders and creditors provide finances to the company on condition of their later repayment.
They are known to be divided into fixed and current.
Besides assets it contains two headings which relate to the sources of finance.
They differ in the term of paying off.
No, it isn't. It is the difference between the cost of a fixed asset and its depreciation up-to-date.
They include repayment more than a year after the balance sheet date.
European presentation is sure to be the most common in Russia but UK companies usually use a vertical layout.
Yes, besides they contain some changes in the terms used.
I can name such items as creditors unpaid accounts, overdraft, retained profit.
TASK 5. A. Learn a vertical presentation of Expended Balance Sheet of a typical manufacturing company.
Assets |
|
|
Current assets: |
|
|
Cash |
|
$40,000 |
Accounts receivable |
$90,000 |
|
Less allowance for doubtful accounts |
10.000 |
80,000 |
Inventories: |
|
|
Finished product |
75,000 |
|
Work in process |
75,000 |
|
Raw materials |
20,000 |
|
Supplies |
10.000 |
180,000 |
Prepaid expenses |
|
10.000 |
Total current assets |
|
$310,000 |
|
|
|
Fixed assets: |
|
|
Furniture and fixtures |
$10,000 |
|
Less allowance for depreciation |
5,000 |
$5,000 |
Machinery and equipment |
$30,000 |
|
Less allowance for depreciation |
16,000 |
14,000 |
Buildings |
$45,000 |
|
Less allowance for depreciation |
9,000 |
36,000 |
Land |
|
15,000 |
Total fixed assets |
|
70,000 |
Investments |
|
20,000 |
Total assets |
|
$400,000 |
|
|
|
Liabilities and Equity |
|
|
Current liabilities: |
|
|
Accounts payable |
|
$40,000 |
Notes payable |
|
80,000 |
Accrued liabilities: |
|
|
Wages and salaries payable |
$4,000 |
|
Interest payable |
1.000 |
5,000 |
Allowance for taxes: |
|
|
Income tax |
$16,000 |
|
State taxes |
4.000 |
20,000 |
Total current liabilities |
|
$145,000 |
|
|
|
Equity: |
|
|
Capital stock |
|
200,000 |
Surplus |
|
55,000 |
Total equity |
|
255,000 |
Total liabilities and equity |
|
$400,000 |