III. Change the noun form into the verb and adjective forms. You may want to use a dictionary.

Example: finance (n) - finance (v) - financial (adj)

Manager, expansion, bankruptcy, responsibility, acquisition, cost, extention, flow, object, idler, adviser, balance, payment, control, product.

IV. For each word or phrase, write one which means the opposite.

Inaccurate, information, losses, particular, objective, assets, cash surplus, increase, directly, responsible, careful planning, lending, long-term investments, dispersal, insufficient funds, to lose track of, to be productive, past cash status.

V. Match these words as they occur in the text. Translate the phrases.

1. idle 2. long-term 3. boxes for 4. cash 5. controlled 6. overall 7. financial 8. company's 9. accurate

a) safekeeping b) requirements c) information d) cash e) flow f) investments g) disbursement h) objective i) earnings

VI. Choose the explanation for each of these words and phrases.

1. cash flow 2. fund 3. finance 4. financial manager 5. earnings 6. disbursement 7. costs

a) business function of effectively obtaining and managing funds b) the profit that a company makes c) the volume of cash moving into and out of a business d) expenditures required in order to produce some specified output or benefit e) a sum of money held for a specified purpose f) individual in an organization responsible for developing and implementing the firm's financial plan and for determining the most appropriate sources and uses of funds g) a legitimate payment of money out of some fund

VII. Find words and phrases in the text which mean:

1. large enough in amount or number to be noticeable or to have an important effect

2. a person who gives advice

3. edge of something unknown, dangerous or exciting

4. a business owned by two or more partners who share the profits and losses

5. the state of being unable to pay your debts

6. the act of spending things over a wide area

7. anything of economic value owned by a firm or an individual

VIII. Fill in the blanks with prepositions.

Managerial Finance Function

Most business plans and decisions are measured .... financial terms, and the financial manager consequently plays a key role in the operation .... the firm. The scope and importance of the managerial finance function depend .... the size of the firm. In small firm the finance function is commonly performed .... the accounting department, but as the firm grows, a separate department typically evolves. This department becomes headed by a vice-president .... finance with the title of chief financial officer (CFO) who reports directly .... the company president or chief executive officer (CEO). The placement of the firm's finance functions under one man, and in turn within one department, marks the significant transition from a small business .... a sizeable and maturing corporation.

The treasurer and the controller report directly to the CFO. The treasurer is responsible .... financial planning, cash management, capital expenditures, fund raising, credit management, and management .... the firm's investment portfolio. The controller is responsible for the firm's financial accounting and cost accounting, data processing, and tax management.

X. Fill in the blanks with the most appropriate words from the list.

1. analysis 2. finance 3. related 4. flows 5. data 6. accounting

7. financial 8. supplementary 9. guide 10. insolvency 11. benefits 12. evaluates

Finance and Its Relationship to Economics and Accounting

Since every business operates within the economy, the field of finance is closely.... to that of economics. The financial manager needs to be alert to the effects of variations in economic activity and changes in economic policies. He must also be able to use economic theory as a .... to operating efficiency of the firm. Examples of this include price theory, supply-and-demand and profit-maximizing strategies. In his daily working, the financial manager makes frequent use of marginal analysis, the economic principle that financial decisions should be made only when added .... exceed added costs. A basic knowledge of micro-economics is therefore desirable.

The functions of finance and accounting are closely related and may at times overlap. Consequently the firm's finance and accounting activities are typically within the control of the CFO. Nevertheless, there are two quite basic differences between .... and accounting: one pertains to the method of funds recognition, and the other is related to decision making.

The function of the accountant is to develop and provide management with .... for measuring the firm's performance, assessing its financial position, and paying taxes. By working according to standardized principles accepted within the profession, the accountant prepares.... statements. One of these principles is called the accrual method. It recognizes income at the point of sale and recognizes expenses when incurred. On this basis, taxes are paid and a good overall view of the firm's performance can be gained. On the other hand, the financial manager must worry about the firm's solvency, i.e. having adequate funds on hand to satisfy operational needs. He therefore places primary emphasis on cash ...., the intake and outgo of cash. This is referred to as the cash method of recognizing income and expenses only when actual cash inflows and outgoes occur. The example shows that accrual accounting does not adequately describe a firm's circumstances. Consequently a financial manager must use supplementary statements to gain insight. Knowledge about cash flows enables him to avoid.....Accountants are of course aware of the significance of cash flows, but their emphasis must be placed on the accrual method, whereas the financial manager relies on cash flow methods as well.

The essential difference between finance and accounting lies in the area of decision making. While the accountant works on the collection and presentation of financial data, the financial manager .... the accountant's statements, prepares supplementary data, and analyzes the totality of this material. On this basis he makes decisions about actions to be taken by the firm. The primary focus of .... is therefore distinctly different from that of finance. The accountant provides data and statements about the firm's past, present and projected future operations. The financial manager uses these data together with .... material in his decision-making process. The financial manager thereby moves closer to the activity of the general manager.

Reading Tasks

I. Answer the questions using the information from the text.

1. What is finance («corporate finance»)?

2. What is a financial manager responsible for?

3. What is a financial manager's overall objective?

4. What must financial managers do to reach this goal?

5. Into what do profits translate in proprietorships and partnerships?

6. Into what do profits translate in corporations?

7. What is cash flow planning?

8. Can idle funds become a profitable workhorse?

9. What are some sources of idle cash?

10. Is accurate information about current cash status enough for good cash management?