Starter activities

TASK 1. Read the passage through quickly. Then answer the questions:

1. When is a business considered to operate with profit?

2. What does a business need to manufacture goods or produce services?

When a business operates, resources are used up to produce products or services, which are sold to customers. There are four sets of resources: people's skills, services, materials and facilities, to create products or services which customers need.

The value of the products or services sold is the sales figure, the cost of the resources used up is the costs figure. The business is operating profitably, if sales exceed costs and wealth is created.

The profit and loss account, also known as the income statement, summarises the profitability of the company by balancing revenue against expenses.

Revenue (sometimes called turnover) represents any increase in the owner's equity resulting from the operation of the business. Expenses are costs incurred in connection with the earning of revenue.

TASK 2. Match the five kinds of accounts from the left-hand column with their definitions from the right-hand one. What statements use them?

1) assets a) expired costs

2) expenses b) things owned

3) income c) amounts owed

4) liabilities d) owners' investment

5) net worth e) sales revenue

TASK 3. Choose the best explanation to show the meaning of each of the expressions below.

revenue (turnover)

a) total value of production in one year;

b) complete change of production methods;

c) total value of sales in period of time;

d) change from making a big loss to making a profit

gross margin

a) the difference between selling price and cost of manufacture, minus factory overheads;

b) a large-scale production method used in some countries;

c) the same as gross profit;

d) the total value of goods remaining unsold at the end of the year

overall gross profit

a) money remaining after all costs including tax have been deducted;

b) same as net profit;

c) same as gross profit;

d) excess profit over previously estimated figure

sales

a) act of selling;

b) money received for selling smth.;

c) offering smth. for sale;

d) examining the repots to see why items have or not sold well costs

a) money paid for doing smth. in the course of business, but not for manufacturing a product or for purchasing stock;

b) amounts of money spent;

c) amount of money which has to be paid for something;

d) money spent

expenses

a) money paid for doing smth. in the course of business, but not for manufacturing a product or for purchasing stock;

b) amounts of money spent;

c) amount of money which has to be paid for something;

d) money used by a company, provided by shareholders

expenditure

a) money paid for doing smth.in the course of business, but not for manufacturing a product or for purchasing stock;

b) amounts of money spent;

c) amount of money which has to be paid for something;

d) money used by a company, provided by shareholders