UNIT XVII

WORD STUDY

Exercise 1. Check the transcription in a dictionary, read and translate the words listed below.

Nouns

balance, coconut, juice, beach, island, material, industry, entrepreneur, equipment, summary, truck, bankruptcy, purpose, accounting, picture, health.

Adjectives

necessary, nervous.

Verbs

substract, add, owe, label, declare.

Exercise 2. Match the equivalents of the given allocations.

a)side by side, balance sheet, cash on hand, coconut juice stand, to set up the business, to be around this business, loans from the bank, to declare bankruptcy, to owe to the creditors.

b)начинать бизнес, взять кредит в банке, быть причастным к этому бизнесу, рядом, задолжать кредиторам, киоск по продаже кокосового сока, балансовый отчет, заявить о банкротстве, наличные деньги.

UNDERSTANDING A PRINTED TEXT

WHAT IS A BALANCE SHEET?

If a simple coconut juice stand on a Samoan island beach were treated as a company, its balance sheet would consist of the following: its assets would be made up of the coconuts and the materials necessary to make and sell juice plus any cash on hand. If anything had been borrowed to set up the operation, these debts would have to be listed as liabilities. Whatever was left over after subtracting the debts from the assets would become the budding young entrepreneur's stockholder's equity.

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All of the assets and liabilities of a company-even one as small as a coconut stand in the South Pacific-can be added up to see what the company owes and what it owns. A balance sheet is this summary, a snapshot of a company's position at a given point in time.

A balance sheet is made up of two lists, placed side by side. On the left the company lists everything it owns, such as cash and "fixed assets" called property, plant, and equipment, which include everything from buildings and trucks to tools, pencils, and copy machines. This list is labeled assets. On the other side, the company lists its liabilities, consisting of all claims to the company's assets, from creditors and from the company's owners. The lists end up being exactly equal-whatever assets are not claimed by the company's creditors belong to the owners.

When the company's shareholders sit down to see what they really own, they look at the lists on both sides of the balance sheet. By subtracting a company's liabilities from its assets, shareholders calculate the stockholders' equity to see what belongs to them after all of the company's debts have been paid off. This is commonly called book value.

When liabilities, such as loans from banks, start to exceed the level of a company's assets, the shareholders may become nervous and sell their shares. They don't want to be around on the day when the company can no longer pay its debts and is forced to declare bankruptcy, reducing the shareholders' equity to nothing.

The purpose of accounting is to provide the company's shareholders with a clear picture of the company's financial health. This "photograph", which is usually published once a year, can be used as a managerial tool, allowing us to see how efficient a company is, and whether it should stay in business.

Notes:

to be around – быть причастным

book value – чистые активы фирмы, реальная величина капитала

COMPREHENSION CHECK

Exercise 1. Complete the sentences referring to the information from the text.

1.A balance sheet is … .

2.A balance sheet is made up … .

3.The list of labeled assets includes … .

4.The company lists its liabilities … .

5.A book value shows … .

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Exercise 2. Give the right answer.

1.What happens to shareholders when the liabilities of the company exceed the level of its assets?

a)They become happy.

b)They become rich.

c)They become nervous.

2.Do shareholders support the company if it declares bankruptcy?

a)Yes, they do.

b)No, they don’t want to be around on this day.

c)They are waiting when the company starts a new business.

3.How often is the company’s accounting published?

a)Twice a week.

b)Monthly.

c)Once a year.

INCREASE YOUR VOCABULARY

Exercise 1. Match the synonyms.

Exercise 2. From the words listed below choose economic terms:

Assets, liability, sheet, snapshot, cash, equipment, loan, equity, bankruptcy, health, property, debt, claim, accounting, stand, creditors, balance, shareholder, borrowings, summary, truck, entrepreneur.

LANGUAGE ACTIVITY

Exercise 1. Insert prepositions (from, at, in, to , by, on).

1.A balance sheet of any company consists of its assets plus cash … hand.

2.A balance sheet consists of two lists placed side … side.

3.The shareholders looked … the balance sheet to see what really belongs … them.

4.I think you should stay … business.

5.It is very bad when loans … banks exceed the level of a company’s assets.

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Making cars is an international business. Cars not only (to manufacture) in their original country, they also (to produce) in other countries, and such giants as Toyota and Honda have factories in many different countries.

There are several British car manufacturers, Ford, Rover, etc. and a lot of car factories in the UK. But some British cars not (to make) in Britain. The process is like a conveyor belt: while parts of British cars (to produce) in Germany or Belgium, the ready parts (to transport) to the UK where the cars soon (to assemble).

As for other countries, they produce Renault’s not only in France, but also in Slovenia. German Opels (to make) in Hungary and new Audi TT Coupe, as it (to plan), (to produce) in Hungary as well.

The famous Škoda factory, in Czech Republic, is now a joint stock company. Seventy percent of the company (to own) by German car manufacturer Volkswagen. Thirty percent (to own) by Czechs. Škoda is the most profitable company in the country.

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