III. What meaning have the following word combinations in the text?

Financial statement, top management, the firm’s data, the summary of transactions, a particular period, the financial health of the firm, the balance sheet, the income statement, the statement of cash flows, assets and liabilities, owner’s equity, cash available, credit card debt.

IV. Complete each sentence with a word or phrase from the text.

1. A financial statement is … of all transactions that have occurred over a particular period.

2. Financial statements indicate … of the firm.

3. … helps managers to see what the sources of cash are where cash is spent.

4. The balance sheet reports the financial condition of a firm at …

5. … is composed of assets, liabilities and owners’ equity.

6. The income statement reports on changes …

V. Match each term with its explanation.

1. Financial statement 2. Balance sheet 3. Income statement 4. Statement of cash flows 5. Statement of owner's equity

a) … shows what the sources of cash are where cash is spent. b) … shows a balance between assets on the one hand, and liabilities plus owners’ equity on the other. c) … reports on changes over a period of time. d) … indicates the financial health of the firm. e) …presents changes in the owner's equity during a specific time period.

VI. Checking facts and ideas. Decide if these statements are true or false.

1. External users are interested in the firm’s profit level and its profitability.

2. The balance sheet provides information on the firm’s cash movements.

3. The income statement provides information on the financial performance of a business in terms of its income and expenditure.

4. Profitability is the difference between the firm’s income and expenditure.

5. The balance sheet shows a balance between assets and liabilities plus owners’ equity.

VII. Read the text and explain what the accounting equations mean. The fundamental accounting equation

Imagine that you don’t owe anybody any money. That is, you don’t have any liabilities. Then the assets you have (cash and so forth) are equal to what you own (equity). Translated into business terms, you have a fundamental accounting equation that is rather obvious. If a firm has no debts, than:

Assets = Owners’ equity

This means that the owners of a firm own everything. If a firm has debts, the owners own everything except the money due others, or:

Assets – Liabilities = Owners’ equity

If you add an equal amount to both sides of the equation (you remember this operation from algebra), you get a new formula:

Assets = Liabilities + Owners’ equity

This last formula is the basis for the balance sheet.

VIII. Check your grammar.

Choose the correct adverbs from the box given below to put into the blanks in the following sentences.

finally consistently approximately properly successfully currently only

1. _________, stable economic growth in Britain is one of the most rapid in Europe.

2. ___________, more than 8,000 international enterprises operate in France.

3. Foreign businesses can’t operate _______ if they are not ______ registered.

4. Britain ________ improves and simplifies its legal base.

5. We ______ completed the initial stage of business undertakings.

6. The expenses would amount to ______ EUR 700.