Financial Capital

Financial capital includes the liquid assets of a company as opposed ... physical assets. Companies can have a variety of types of capital. The principal distribution is ... share capital and loan or debenture capital.

The most usual classes of share ... which the capital of a company can be divided are preference, ordinary, and deferred shares.

Preference shares have a fixed rate ... dividend. However large the profits of a company might be, the holders of preference shares are not entitled ... any additional dividends over and above the rate of dividend agreed when the shares are first issued. The holders of preference shares do not usually have any voting rights. This means that they cannot vote ... the general meetings of the company. But they do have an advantage ... the holders of all other types of shares in that the dividends due ... preference shares must be paid before any dividend is paid ... the holders of ordinary or deferred shares.

Ordinary shares entitle their owners a vote at companies' general meetings. They also have a right to elect company directors, and to receive a proportion of distributed profits ... the form of a dividend.

Issuance of shares is a source ... capital for companies. If a company wishes to raise more money ... expansion it can issue new shares. These are frequently offered ... existing share holders ... less than their market price: this is known as a rights issue.

Companies may also turn part of their profit ... capital by issuing new shares to shareholders instead ... paying dividends. This is known as a bonus issue or scrip issue or capitalisation issue. The source of equity is the securities market.

Loan capital is a long-term debt. Companies can raise this type of capital... clearing banks, merchant banks and even pension funds.

The composition of a company's capital is called capital structure.

Words you may need:

Англійський варіант	Російський варіант	Український варіант
debenture capital	заемный капитал	позичальний капітал
preference shares	привилегированные акции	привілегірований капітал
ordinary shares	обычные акции	звичайні акції
deferred shares	отсроченные акции	відстрочені акції
voting right	право голоса	право голосу
rights issue	выпуск льготных акций	випуск пільгових акцій
bonus/scrip/capitalisation issue	бонусная эмиссия	бонусна емісія

Ex. 8.

a) Put the verbs in brackets in the correct form.

b) Describe the development of financial management.

Prior to the 1930s the field of financial management basically (to confine) to descriptive discussions of the various financial markets and the securities traded in those markets and fund raising.

With years this field of finance (to undergo) a number of significant changes and (to become) involved with legal matters of bankruptcy, reorganization, and government regulation.

During the 1950s, for example, financial management (to expand) to include uses of a firm's funds; application of discounted cash flow techniques was perfected; significant breakthroughs in developing techniques for measuring the cost of capital and valuing financial assets (to make); capital budgeting (to make) progress. Later, financial researchers (to focus) on the allocation of current assets, i.e. cash accounts receivable and inventories, and fixed assets.

During the 1960s mathematical models using statistical and optimization techniques (to apply) in financial management. The financial management field witnessed an exciting period of change and growth during the 1970s when there (to be) an increasing emphasis on applying computer technology to assist in financial decision making.

The 1980s (to witness) an explosion of new financial instruments, such as options and futures contracts, that can be used to manage risk. Techniques (to change) but the objective of financial management (to remain) - to maximize the shareholder's wealth.

So the financial manager's job is to arrange for the firm to get the funds needed on favourable terms and to make sure they are used effectively.

The job must be done not only in businesses, but also in not-for-profit firms and units of government.

In a world that is increasingly affected by international trade and cooperation, financial management (to acquire) very important new dimensions.

Words you may need:

Англійський варіант	Російський варіант	Український варіант
discounted cash flow	будущие поступления наличными, приведенные в оценке настоящего времени	майбутні надходження готівкою, приведені в оцінці теперішнього часу
optimization technique	метод оптимизации	метод оптимізації

Ex. 9.

a) Fill each gap with a suitable word from the box.

b) Sum up the text in 5-7 sentences and present your summary in class.

c) Explain the differences between macroeconomics and microeconomics.

operation	policy	familiar
businesses	says	demand
notions	lead	affects
whole	operates	success
microeconomics

Contemporary financial .managers should be familia areas of economics macroeconomics and ...

Macroeconomics is concerned with the over-all institutional environment in which the fir. It looks, in other words the economy as a . Macroeconomics is concerned with the institutional structure of the banking system, money and capital markets, financial intermediaries, monetary, credit and fiscal____ and economic policies dealing with and controlling the level of activity within an economy. Since business firms operate in the macroeconomic environment, it is important for financial managers to understand the broad economic_____ . Specifically, they should recognise and understand how monetary policy _____ the cost and the availability of funds; be versed in fiscal policy and how it affects the economy; be aware of the various financial institutions and their modes of operations to evaluate the potential investment/finan­cing outlets; and understand the consequences of various levels of economic activity and changes in economic policy for their decision environment and so on.

Microeconomics deals with the economic decisions of and organisations. It concerns itself with the determination of optimal operating strategies. In other words, the theories of microeconomics provide for effective ___________of business firms. They are concerned with defining actions that will permit the firms to achieve______. The concepts and theories of microeconomics relevant to financial management are, for instance, those involving supply and ______ relationship and profit maximization strategies, issues related to the mix of productive factors, "optimal" sales level and product pricing strategies, risk and the determination of value and the rationale for depreciating assets. In addition, the primary principle that applies in financial management is marginal analysis which ______ that financial decisions should be made on the basis of comparison of marginal revenue and marginal cost. Such decisions will _____ to an increase in profits of the firm. Thus, financial managers must be ____ with the basic microeconomics.

Words you may need:

Англійський варіант	Російський варіант	Український варіант
to be versed	разбираться	розбиратися
outlets	возможности	можливості
rationale	основная причина	головна причина
marginal analysis	анализ по предельным показателям	аналіз по граничним показникам
marginal revenue	предельный доход	граничний дохід
marginal costs	предельные издержки	граничні витрати