If necessary read the excerpt again and choose the best ending:

1. Whether particular assets are to be shown as fixed assets or current assets shall depend upon …

1. the purpose of the Chief accountant

2. the aim of the Balance Sheet

3. for which they are intended

2. Fixed assets shall comprise those assets which are intended for …

1. use on a continuing basis

2. use on a temporary basis

3. use on a contemporary and temporary basis

Exercise 8.12

Fill in the missing words in the sentences below. Choose from the following:

in, assets, tangible, depreciation, patents, from

1. Total assets as of December 31, 2003, increased by €184 million, or 32.7%, … December 31, 2002.

2.  The most common types of intangible assets are …, copyrights, franchises or licenses, trademarks or trade names, and goodwill.

3. At December 31, 2003 and 2002, the Company had patents, trademarks and other identifiable intangible … with a value of $124.0 million and $128.6 million, respectively.

4. The increase in current assets is largely due to increases … notes receivable and prepaid expenses.

5. The … net assets of this company were appraised at €950,000 on December 31, 2002.

6. Property, plant, and equipment include buildings $2,525,000 less accumulated depreciation of $461,000; equipment $642,000 less accumulated … of $208,000; and land $856,000.

Text 9 financial statements analysis

Exercise 9.1

Study the vocabulary:

	highlighting		висвітлення, висування на перший план
	suffice it to mention		достатньо згадати
	to make adjustments		впорядковувати, вносити поправки
	a company's annual report		річний звіт компанії
	a footnote		примітка
	to accomplish a goal		досягати цілі
	the trend		курс, напрямок, тенденція
	expenses		витрати
	net income		чистий прибуток
	cash flow		рух готівки
	return investment		повернення інвестицій
	assessment of future potential and related risk		оцінка майбутніх можливостей та пов’язаного з цим ризику
	profitability		прибутковість
	liquidity		ліквідність
	the electric utility		електрична компанія загального призначення
	the interest rates on loans granted by a bank		відсоткова ставка на кредити, надані банком

Exercise 9.2

Read and translate the text:

There are a number of techniques intended to aid in decision-making by highlighting important relationships in the financial statements. This is called financial statement analysis. The importance of financial statement analysis cannot be overestimated. Suffice it to mention that effective decision-making calls for the ability to sort out relevant information from a great many facts and to make adjustments for changing conditions. Very often, financial statements in a company's annual report run ten or more pages, including footnotes. If these statements are to be useful in making decisions, decision-makers must be able to find information that shows important relationships and helps them make comparisons from year to year and from company to company. This goal is accomplished by financial statement analysis.

Different individuals may use the tools of financial analysis in different ways. For example, creditors and investors use financial statement analysis in two general ways: to judge past performance and current position; and to judge future potential and the risk connected with possible investments.

It should be pointed out that past performance is often a good indicator of future performance. Therefore, an investor or creditor is interested in the trends of past sales, expenses; net income, cash flow, and return investment. These trends offer a means for judging the management's past performance and are a possible indicator of future performance. In addition, an analysis of current position will tell where the business stands today. For example, it will tell what assets the business owns and what liabilities must be paid. It will tell you what the cash position is, how much debt the company has in relation to equity, and how reasonable the inventories and receivables are. Knowing a company's past performance and current position is often important in achieving the second general objective of financial analysis: assessment of future potential and related risk.

The past and present information is useful only to the extent that it effects future decisions. An investor judges the potential earning ability of a company because that will affect the value of the investment (market price of the company's stock) and the amount of dividends the company will pay. A creditor judges the potential debt-paying ability of the company. The potential of some companies are easier to predict than others' and so there is less risk associated with them. The risk of the investment or loan depends on how easy it is to predict future profitability or liquidity. For example, the potential associated with an investment in an established electric utility is relatively easy to predict. On the contrary, the potential associated with a small minicomputer manufacturer may be much harder to predict. For this reason, the investment or loan to the electric utility is less risky than the investment or loan to the small computer company, which will be reflected in the interest rates on loans granted by a bank.

Exercise 9.3

Read the text again and choose the best variant:

1. Techniques aimed at the assistance in decision-making by highlighting important relationships in the financial statements are called …

1. the importance of financial statements

2. financial statement analysis

3. financial analysis

2. Financial statements in a company's annual report … ten or more pages, including footnotes.

1. cannot run

2. sometimes can run

3. often can run

3. The tools of financial analysis are used by different individuals …

1. in the same way

2. according to their preferences

3. in different ways

4. Аn investor or creditor … in the trends of past sales, expenses, net income, cash flow, and return investment.

1. is interested

2. is sometimes interested

3. is never interested

5. An analysis of [current position of business] will tell where the business stands today.

1. nature of the company’s business

2. current position of business

3. the size of the company

Exercise 9.4

Read the last paragraph of the text again and fill in the gaps. Then read and translate:

profitability; predict; information; investor; value; associated; company; loan; manufacturer; debt-paying;

The past and present…1… is useful only to the extent that it effects future decisions. An …2… judges the potential earning ability of a company because that will affect the…3… of the investment (market price of the company's stock) and the amount of dividends the …4… will pay. A creditor judges the potential …5… ability of the company. The potential of some companies are easier to …6… than others' and so there is less risk associated with them. The risk of the investment or loan depends on how easy it is to predict future …7… or liquidity. For example, the potential …8… with an investment in an established electric utility is relatively easy to predict. On the contrary, the potential associated with a small minicomputer …9… may be much harder to predict. For this reason, the investment or loan to the electric utility is less risky than the investment or …10… to the small computer company, which will be reflected in the interest rates on loans granted by a bank.

Exercise 9.5

Read the whole text again and choose the best answer:

1. What must the decision-makers be able to do if the financial statements are useful in making decisions?

a) They must find information that displays important relationships and helps them make comparisons from year to year and from company to company.

b) They must ignore information that shows essential relationships and helps them make comparisons from year to year and from company to company.

2. Why is the past performance often considered to be a good indicator of future performance?

а) Because the trends of past sales, expenses, net income, cash flow, and return investment are the true indicator of future performance.

b) Because these trends offer a means for judging the management's past performance and are a possible indicator of future performance.

3. What will the analysis of current position in business tell us?

а) It will tell what amount of money the business owes and what liabilities must be paid.

b) It will tell how reasonable the inventories and receivables are.

4. Why does the investor judge the potential earning ability of a company?

а) Because that won’t affect the rate of the investment (market price of the company's stock) and the amount of dividends the company will pay.

b) Because that will affect the value of the investment (market price of the company's stock) and the amount of dividends the company will pay. .

5. What does the risk of investment depend on?

a) It depends on how easy it is to predict future profitability or liquidity.

b) It depends on how difficult it is to predict future productivity or liquidity.