UNIT XIX

WORD STUDY

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

Nouns

ratio, Japan, stake, brewery, trust

Adjective

high, relevant, few, annual.

Verbs

reflect, vary, wear, accelerate.

Exercise 2. a) There are two prefixes which have opposite meaning: “over-” (too much, more) and “under-” (too little, below)

Make words with these prefixes according to the model.

Model: to estimate – to overestimate; to estimate – to underestimate

with prefix “over-”

time, coat, to work, to sleep; with prefix “under-”

ground, wear, to value, to pay, to line.

b) Translate the collocations below:

overpopulated cities; 5 minutes of overtime; to underestimate the talent; to overwork every day; an underground passage; to put on an overcoat.

UNDERSTANDING A PRINTED TEXT

HOW ARE COMPANIES COMPARED INTERNATIONALLY?

The price of a company’s shares is based on two things: what the company is worth and what it can provide in earnings in the years to come. A company’s earnings, like a fruit tree’s annual production of apples or oranges, is usually accounted for at the end of each year of activity.

A company’s share price is based on its earnings, usually in the form of a ratio, called the price/earning (p/e) ratio. When a company’s earnings rise, its share prices usually rises, keeping its p/e ratio in line with other companies within its industry. A company with a price /earnings ratio of 10/1, for example, has a share price that is ten times the amount the company earns per year, implying that the stock would pay for itself in ten years’ time.

The problem in comparing p/e ratios from country to country is that each country has its own accounting rules: earnings may be understated in one country and overstated in another. It is hard judge a company’s value when the measuring sticks

82

are not the same. Instead of asking, “Is the price too high?”, it may be relevant to ask, “Are the reported earnings too low”.

In Japan, different accounting rules allow many Japanese companies to report fewer earnings then would be accounted for be European or North American standards. For example, many of the Japanese holdings of other companies are not included in their reported earnings. The 5 percent stake that Mitsubishi Trust may hold in Kirin Breweries would be reflected in its price per share, but not in its earnings statement. Japanese price/earnings ratios, therefore, often look high by Western standards.

Another accounting practice that varies from country to country is depreciation, the theoretical “loss” companies can report on their taxes as assets such as building and machinery wear out. In Japan, companies use an “accelerated depreciation” method to show lower profits in the early years of an asset’s life, a practice that is not allowed in most Western countries. If the Japanese were to use Western depreciation methods, their reported earnings would rise considerably. This is why any big institutional investors do their own analysis of financial statements from around the world, recalculating a foreign company’s earning according to a common set of accounting rules. This recalculation often brings foreign p/e ratios in line with those of other companies in the world economy.

Notes:

to pay for itselfокупиться

measuring stick – принцип измерения, планка отсчета to bring the line – выравнивать, привести в соответствие

COMPREHENSION CHECK

Exercise 1. Answer the following questions.

1.When are usually company’s earnings accounted for?

2.What is a company’s share price based on?

3.Are the methods of comparing p/e ratio equal in all countries?

4.Why do big institutional investors do their own analysis of financial statement from around the world?

Exercise 2. Join suitable parts of the sentences.

1. When a company’s earnings rise, … a) while in Western companies they are lower.

b) its share price rises as well.

c) when accounting rules are different in different countries.

83

Exercise 1. Match Russian and English equivalents.

Exercise 2. What terms from the text are preceded with the following adjectives? Translate the resulting collocations:

- institutional, reported, financial, early, annual, company’s, accounting, fewer, accelerated.

LANGUAGE ACTIVITY

Exercise 1. Insert prepositions (to, per, on, to) where necessary.

1.The accountant informs the owners about the amount that the company earns … year.

2.According … our rule we have no right to sell our shares to the general public.

3.The shareholders wanted to know what really belonged … them.

4.The share price is based … the earnings of the company.

5.Accounting rules in Japan allow … local companies to report earnings fewer than in Europe.

Exercise 2. a) Change the following sentences from Direct speech into the

b)Convert the interrogative sentences into the Reported speech.

a)General question.

84

Exercise 3. a. Read and translate the conjunctions of reason: as, since, for, because, the reason why, due to the fact that, because of the fact that.

b.Choose the appropriate conjunction.

1.This month the workers were paid at overtime rate because/ the reason why they worked more than it was required.

2.Since/ For the country earned more than it had spent, it has a favorable balance of payment.

3.We couldn’t come on time due to the fact that/for we were held by a heavy traffic.

4.This man can’t cross the border of the country due to/because of the fact that he has forgotten his passport at home.

5.As/The reason why the company lost money, the dividends were reduced.

6.Due to the fact that/For we earned a little more last month I could buy a new washing machine.

Exercise 4. a. Read and translate the text.

One day Emily Ross, author of articles on management in selling, called the magazine to tell them about a new article she was planning to write. But she was told that the editor was no longer there and a new man replaced him.

She spoke to the new editor. “I don’t take articles from non-staff writers”, he told her. “But I’ve been writing to this magazine for years”, she said.

“That may be”, he answered, but the old editor is gone, and I’m running the magazine now. Non-staff writers don’t do the kind of job I require. “

Emily said, “I’d like to come to see you”. “Come if you like but you will waste your time”, he answered.

Nevertheless Emily went. She showed him one of her previous articles that had excellent response from readers. The editor looked through the article and said, “Well, write something for me and I’ll see if I like it”.

85

Two days later Emily’s secretary told her, “The editor has called and he’s eager to speak to you”. “Oh, Emily”, he said when she has called him, “your article is fantastic. I’ll put it in our next issue and your photo on the first cover”.

b. Change the sentences of the dialogues into the Reported Speech.

86