Texts for supplementary reading Finance
Finance, basically, is the function in a business that is responsible for acquiring funds for the firm and managing funds within the firm (for example, preparing budgets, doing cash flow analyses, and planning for the expenditure of funds on such assets as plant, equipment, and machinery).
The firm has little chance for survival regardless of its product or marketing effectiveness without a carefully calculated financial plan. Most organizations will have a manager in charge of financial operations. Generally, this chief financial officer is known as the treasurer or vice president of finance. The fundamental charge is to obtain money and then plan, use, and control money effectively.
You are probably somewhat familiar with several finance functions, for example, the idea of buying merchandise on credit and collecting payment from buyers of the firm's merchandise. Both credit and collections are important responsibilities-of financial managers. The finance manager must also be sure that the company does not lose too much money to bad debt losses (people or firms that don't pay.
Naturally, this means that finance is further responsible for collecting payments. These functions are critical to all types of businesses, but particularly important to small and medium-size businesses that typically have smaller cash credit cushions than large corporations.
Taxes represent an outflow of cash from the business. As tax laws and tax liability have changed, finance people have taken on the increasingly important responsibility of tax management. Tax management is the analyzing of tax implications various managerial decisions in an attempt to minimize the taxes paid by business Businesses of all sizes must concern themselves with tax responsibilities.
Finally, often someone in the finance department serves as an internal audit. It's the internal auditor that checks on the journals, ledgers, and financial statements prepared by the accounting department to make sure that all transactions have been treated in accordance with established accounting rules there were no such audits, accounting statements would be almost worthless. Regular internal audits offer the firm assistance in the important role of financial planning, which we will look at next.
Can you see the link between accounting and finance? They are mutually supportive functions in a firm. A firm cannot get along without accounting but neither can it prosper without short- and long-term financing, managing its funds well, minimizing its taxes, and investing its funds properly. In fact, finance is so important to a firm that some finance executives go on to be presidents of firms.
What would be the advantages and disadvantages of a president with a finance background versus a marketing background? Is there a danger of being too concerned with cost-cutting, budgeting, and controlling funds?
Words you may need:
Acquire- приобретать
сash –наличные (деньги)
flow - поток
treasurer - казначей
merchandise - товары
payment – оплата, платеж
medium-size - средний
ledger – гроссбух, (главная) учетная книга
statement – отчет (фин)
implication - вовлечение
internal - внутренний
transaction –сделка
advantage - преимущество
disadvantage – невыгодное положение
background - образование
outflow -утечка
Financial planning
Planning has been a continuous theme throughout this book. We have stressed the importance of planning as a managerial function and offered insights into planning your career. Financial planning involves an analysis of the short- and long-term picture of money flows to and from the firm.
The overall objective of financial planning is to optimize profits and make the best use of money. It's probably safe to assume that we all could use more or better financial planning in our lives.
Financial planning involves three steps: (1) forecasting financial needs—both short- and long-term needs, (2) developing budgets to meet those needs, and (3) establishing financial control to see how well the company is following the financial plans. Let’s look at the important role each step plays in the financial health of an organization.
Forecasting is an important component of financial planning. A short-term forecast is a prediction of revenues, costs, and expenses for a period of one year or less. This forecast is the foundation for most other financial plans, so its accuracy is critical. Part of the short-term forecast may be in the form of a cash flow forecast that projects the expected cash inflows and outflows in future periods, usually months or quarters. Naturally, the inflows and outflows recorded in the cash flow forecast are based on the expected sales revenue and on various costs and expenses incurred and when they will come due.
A long-term forecast is a prediction of revenues, costs, and expenses for a
|period longer than 1 year, sometimes as far as 5 or 10 years into the future. This
forecast plays a crucial part in the company's long-term strategic plan. Remember, the strategic plan asks questions such as: What business are we in and should we be in five years from now? How much money should we invest in automation and new plant and equipment over the next decade?
The long-term financial forecast gives top management, as well as operations managers, some feel for the income or profit potential possible with different strategic plans. Additionally, along with the short-term forecasts, long-term projections assist finance managers with the preparation of company budgets.
Words you may need:
Insight - понимание
involve - понимать
objective - цель
assume - принимать
profit – польза, выгода
forecasting -
need - прогнозирование
prediction - предсказание
revenue - доход
inflow - приток
Bank
Bank is a business establishment that safeguards people's money and uses it to make loans and investments. People keep their money in banks rather than at home for several reasons. Money is safer in a bank than at home. A checking account with a bank provides an easy way to pay bills. Also, money deposited in many types of bank accounts earns additional money for the depositor. People who put money in a bank are actually lending it to the bank, which may pay them interest for the use of their funds.
Banks are an essential part of business activity. Business companies borrow from banks to buy new equipment and build new factories. People who do not have enough money to pay the full price of a home, an automobile, or some other product also borrow from banks. In these ways, banks promote the sale of a wide range of goods and services.
Banking is nearly as old as civilization. The ancient Romans developed an advanced banking system to serve their vast trade network, which extended throughout Europe, Asia, and much of Africa. In A.D. 395, the Roman Empire split into an eastern and a western section. The West Roman Empire fell in the late 400's, and most of financial networks were destroyed. Banking almost disappeared from western Europe. However, the Justinian Code, a collection of laws issued in the 500s in the East Roman Empire, included many banking laws.
Modern banking began to develop between the 1 ZOO'S and the 1 GOO'S in Italy. The word bank comes from I the Italian word banco or banca, meaning bench. Early Italian bankers conducted their business on benches in the street. Large banking firms were established in Florence, Rome, Venice, and other Italian cities, and banking activities slowly spread throughout Europe.
Banks in the United States differ greatly from those in I most other countries. Most of the sections of this article deal with banking practices and the history of banks in the United States.
Words you may need:
Establishment - создание
safeguard - защищать
loan – заем, ссуда
reason - причина
provide - обеспечивать
lend – давать под проценты
borrow – занимать, брать на время
range - ряд
goods - товар
destroy - разрушать
disappear – исчезать
network - сеть
law- закон
activity - деятельность
Safeguarding deposits
Safeguarding deposits. Money in a bank is safe. Banks keep cash in fire-resistant vaults and are insured against the loss of money in a robbery. In the United States, Canada, and many other countries, the government also insures bank deposits. This insurance protects people from losing their money if the bank is unable to repay the funds.
A bank is not only a safe place to keep money but also a profitable one. Money placed in a savings account earns interest at a specified annual rate. Many banks also offer a special account for which they issue a document called a certificate of deposit {CD). A CD pays a higher rate of interest than a regular savings account. However, the certificate must be held for a certain period, such as one or two years, to earn this high rate of interest Banks also offer money market accounts. These accounts pay interest based on current conditions in the money market, which deals in corporation and government short-term securities.
Words you may need:
Safe - безопасный
fire-resistant- огнестойкий
vault – хранилище, сейф
insure - застраховывать
robbery- ограбление
repay- отдавать, возвращать (долг)
profitable – полезный, благоприятный
current - текущий
condition- условие
Providing a means of payment.
Providing a means of payment. People who have money in a bank checking account can pay bills by simply writing a check and mailing it. A check is a safe method of payment, and the canceled check provides written proof that payment was made.
Banks also offer an order of withdrawal accounts, usually called NOW accounts. Like a savings account, a NOW account pays interest. But the depositor can transfer funds to someone else by writing a negotiable order of withdrawal, which is like a check.
Many banks also offer credit cards as a means of payment. People can pay for their purchases at stores and other establishments by using the cards to charge sums up to an amount determined by the bank. They then write one monthly check to the bank to cover their expenses. The bills are paid directly by the bank.
Words you may need:
bill - счет
cancel - отменять
proof – подтверждение
withdrawal – снятие (денег)
order -распоряжение
store - запас
expense – затрата, расход