- •Vocabulary
- •Vocabulary Tasks
- •I. Study the following words and phrases. Recall the sentences in which they are used in the text. Use them in sentences of your own.
- •II. Replace the Ukrainian words and phrases by appropriate English equivalents. Translate the sentences.
- •III. Change the noun form into the verb and adjective forms. You may want to use a dictionary.
- •IV. For each word or phrase, write one which means the opposite.
- •V. Match these words as they occur in the text. Translate the phrases.
- •VII. Find words and phrases in the text which mean:
- •VIII. Fill in the blanks with prepositions.
- •II. Mark these statements t (true) or f (false) according to the information in the text. Find the part of the text that gives the correct information.
- •I. Write sentences with the following words.
- •II. Write questions to the following answers.
- •Text b. Financial Plan
- •Vocabulary
- •Reading and Speaking Tasks
- •I. Make up questions covering the content of the text and le your fellow students answer them.
- •II. Having read the text, what you can now say about:
- •III. Work with a partner who read the text to produce a summary of the text. You need only mention the important points. Lesson 2. Firm's finances Text a: Short-Term and Long-Term Expenditures
- •Vocabulary
- •Vocabulary Tasks
- •I. Study the following words and phrases. Recall the sentences in which they are used in the text. Use them in sentences of your own.
- •II. Replace the Ukrainian words and phrases by appropriate English equivalents. Translate the sentences.
- •III. Change the noun form into the verb and adjective forms. You may want to use a dictionary.
- •IV. For each word or phrase, write one which means the opposite.
- •VII. Find words and phrases in the text which mean:
- •VIII. Fill in the blanks with prepositions.
- •II. Mark these statements t (true) or f (false) according to the information in the text. Find the part of the text that gives the correct information.
- •III. Without looking back at the next, exchange its content with someone who read the text too.
- •I. Write sentences with the following words.
- •Part II. Sources of Long-Term Funds
- •Vocabulary
- •Vocabulary Tasks
- •I. Study the following words and phrases. Recall the sentences in which they are used in the text. Use them in sentences of your own.
- •II. Replace the Ukrainian words and phrases by appropriate English equivalents. Translate the sentences.
- •III. Change the noun form into the verb and adjective forms. You may want to use a dictionary.
- •IV. For each word or phrase, write one which means the opposite.
- •VII. Find words and phrases in the text which mean:
- •VIII. Fill in the blanks with prepositions.
- •Inventory Loans
- •Reading Tasks
- •I. Answer the questions using the information from the text.
- •II. Mark these statements t (true) or f (false) according to the information in the text. Find the part of the text that gives the correct information.
- •III. Without looking back at the next, exchange its content with someone who read the text too. Writing and Speaking Tasks
- •I. Write sentences with the following words.
- •III. Identify five sources of short-term financing for businesses.
- •Text b: Financial Management for Small Businesses
- •Venture Capital As a Source of Funds
- •Vocabulary
- •Reading and Speaking Tasks
III. Identify five sources of short-term financing for businesses.
IV. Distinguish between the various sources of long-term financing and the financial risks involved with each type.
V. Write the summary of the text.
VI. Check the summary of the text written by one of the students and if it is necessary comment on the mistakes.
VII. If you were the financial manager of a large firm, what type(s) of short-term funding would you use most? Least? Why?
VIII. How would you decide on the best mix of debt, equity, and preferred stock for a company?
IX. How might you use financial management in your personal life?
X. Are you a proponent or critic of foreign investment (venture capital) in Ukrainian firms? Defend your position.
XI. Choose a business you would like to start. What short-term and long-term sources of funding would be needed? Why? Discuss what business needs are served by each source of funding?
XII. Interview the owner of a small local business. Identify the types of short-term and long-term funding used by the firm. Determine the reasons behind these financial management decisions.
Text b: Financial Management for Small Businesses
New business failures are often caused by inadequate funding. One study of nearly 3,000 new companies found the survival rate to be 84 percent for new businesses. Those with lower initial funding have a lower survival rate. Entrepreneurs often underestimate the value of establishing bank credit as a source of funds and do not use trade credit effectively. They often do not consider venture capital as a source of funding, and they are notorious for not planning their cash flow requirements properly.
Establishing Bank Credit and Trade Credit
Obtaining credit begins with choosing a bank that can support the small firm's financial needs. Banks differ greatly in their willingness to assume risk, ability to give professional advice, loyalty to customers, and maximum size of loans offered. Some have liberal credit policies and offer financial analysis, cash flow planning, and suggestions based on their experiences with other local small businesses. Some provide loans to small businesses in bad times and work to keep them going. But some do not.
Credit seekers must be prepared to show they are worthy of the bank's help. A sound financial plan, a good credit history, and proven capability on the part of the entrepreneur can all convince bankers and other potential financiers that the business can succeed.
Once a line of credit is obtained, the small business can attempt to secure more liberal credit policies from other businesses. Sometimes suppliers will give customers longer credit periods, such as 45 or 60 days rather than 30 days. Such liberal trade credit terms with suppliers let the firm increase its short-term funds and avoid additional borrowing from banks.
Venture Capital As a Source of Funds
Many newer businesses, especially those that are growing rapidly, are hard-pressed to obtain the funds they need through borrowing alone, Venture capital is an alternative source of equity funds in which outside capital is obtained in return for part ownership of the firm. Venture capital firms are always looking for opportunities to invest in new and growing firms. Because the failure rates of new businesses pose high risks, venture capitalists demand higher returns.
On the international front, however, the trend is toward greater venture capital participation. In 1989, for example, for the first time ever, more venture capital was invested in Europe than in the United States. The gap widened in 1992 when the European market became the world's largest. In the Pacific Rim countries of Korea, Taiwan, Singapore, and Hong Kong, some U.S. entrepreneurs seeking venture capital have found Asian venture capitalists to be much more cautious than those in the United States. They tend to look more closely at the borrower than do U.S. venture capitalists.
Planning Cash Flow Requirements
Although all businesses should plan for their cash flows, it is especially important for small businesses to do so. Success or failure may hinge on anticipating the times when cash will be short and when excess cash can be expected.
By anticipating shortfalls, a financial manager can seek funds in advance and minimize their cost. By anticipating excess cash , a manager can plan to put the funds to work in short-term, interest-earning investments.