4. Lexical Card. Prepare a short talk on the following topics, using the lexical items listed below, either in written or oral form:

“Financial management solutions for breaking through insolvency” 1 accumulate (v) 2 cash balance 3 near-term (adj) 4 by virtue of (comp. prep.) 5 foresight (n) 6 receivables (n) 7 borrow (v) 8 go hand in hand with

“Financial management aimed at gaining private profit” 1 borrowing (n) 2 current assets 3 equity contributions 4 long-range (adj) 5 make sales on credit 6 generate (v) 7 endeavor (n) 8 endeavor (n)

5. Work either individually or in pairs / groups. Answer the following questions. Prepare a report, if necessary.

1) Are there any differences in financial management functions in small and big companies? Give examples.

2) Enumerate and explain financial statements / indicators / ratios, etc. that are important for chief executives to efficiently fulfill financial management functions?

3) How is it possible to identify a company’s financial strengths / weaknesses by its basic financial statements / indicators / ratios, etc.?

4) Is it possible to spot financial manipulations judging by the basic financial statements / indicators / ratios, etc.? Illustrate your answer.

5) Analyze a company’s financial statements / indicators / ratios, etc. from the perspective of future merger / takeover. Prepare a report that will illustrate advantages of one company over the other.

6) What kind of policy should a company’s management follow in the run-up to an IPO? What factors can influence share prices before and after the event? Give examples.

7) Analyze a company’s financial statements / indicators / ratios, etc. in order to assess its chances of floating on the stock market.

Text 2 Banking On Blue Chip Stocks

June 08, 2012

1. Scan the text and match the subheadings to the parts I-V.

A Blue Chip Advantages

B The Bottom Line

C How to Invest in Blue Chip Stocks

D Basic Characteristics of Blue Chip Stocks

E Blue Chip Disadvantages

Blue chip stocks, named after the highest-valued chips in poker, are prized investment holdings representing ownership in some the most successful firms in the economy. If you want to invest in companies that have proven their ability to ride out economic downturns and maintain profitability even when times get tough, you should take a look at these stocks.

I. _____. A blue chip stock is a share of ownership in a large, well-established and stable company that has a long history of consistent earnings growth and dividend payments. Blue chip companies have a large market capitalization, strong balance sheets and good cash flow. Blue chip stocks have low volatility overall, but strong changes in the overall market can also have strong effects on these stocks. The performance of an individual blue chip company will tend to correlate closely with the performance of the S&P 500.

Many blue chip stocks are household names, such as American Express, Boeing, Coca Cola and Disney. However, a company doesn't have to be a household name to be a blue chip. You may have never heard of the following companies, but all are considered blue chips: ABM Industries, Donaldson Company and Kaydon Corp. There are tens of thousands of publicly traded companies, but only a few hundred are considered blue chips.

II. _____. Blue chips are supported by proven business models, slow but consistent growth and strong cash flow. They are a good option for capital preservation and their dividend payments not only provide income, but also help protect against inflation. Blue chips tend to be stable even during recessions and, because they're widely owned by both individuals and institutions, they have high liquidity. Blue chips are about as safe an investment as you can get, when it comes to investing in stocks.

III. _____. In exchange for the stability associated with blue chip stocks comes slow growth and lower returns. Growth stocks and real estate investments can offer higher returns to investors willing to accept greater risk. Blue chip stocks can also be expensive, and if you're investing in individual stocks, you need to make sure to diversify to avoid company risk.

IV. _____. To invest in blue chips, you have a few options. You can directly purchase individual shares through a brokerage. If you choose this route, you might to want use a value investing strategy to try to purchase these stocks when they're underpriced.

An important characteristic of blue chip stocks is that they not only consistently pay dividends to their shareholders during times of better and worse company performance, but they increase their dividends more years than not. To locate stocks with an excellent track record of dividend increases, see the S&P's Dividend Aristocrats and Mergent's Dividend Achievers.

You can also invest in a basket of blue chip stocks through mutual funds and ETFs. Some of these funds have the term "blue chip" in the fund name, like the Bridgeway Blue Chip 35 Index, which provides diversification across a number of economic sectors, has a net expense ratio of 0.15% and has historically performed similarly to the S&P 500, though it invests less in consumer discretionary companies and more in information technology than the S&P.

Other funds are essentially blue chip funds even though they don't use those words in the fund name. An example is Vanguard's Dividend Appreciation (VIG) ETF. Its goal is to track the Dividend Achievers Select Index, an index of U.S.-based companies that have increased their regular annual dividend payments for the last 10-plus consecutive years. VIG has a 0.13% expense ratio and is heavily weighted toward consumer staples and industrials, which together make up 45% of its holdings.

V. _____. If you want to invest in market-leading companies with a proven track record and low volatility, look no further than blue chip stocks, mutual funds and ETFs. They may not be as glamorous as the latest growth stocks, but they can quietly help you achieve your long-term investing goals.