Каирсапова Сборник дополнителных 2014

№3

Read the following text. Translate this text from English into Russian in writing

Insurance

Throughout human history, unexpected economic losses have occurred. Such losses would continue to occur whether or not a system of insurance had ever been devised. But through the operation of an insurance system, losses can be predicted before they occur. The predictability of losses in advance is basic to an insurance system's operations. Because an insurance system allows losses s to be predicted in advance, it allows the cost of losses to be financed and redistributed in advance.

The first definition of insurance that we will examine is the financial one. In this instance, insurance is a financial arrangement that redistributes the costs of unexpected losses. The insurance arrangement involves the transfer of many different exposures to loss to one insurance pool, which combines the numerous exposures.

An insurance system accomplishes the redistribution of the costs of losses by collecting a premium payment from every participant in the system. In exchange for the payment of the premium, the insured receives a promise from the insurance system to be compensated in the event of a loss. In most insurance systems only a small percentage of those insured suffer losses. Thus, an insurance system redistributes the costs of losses from the unfortunate few members who experience them to all the members of the insurance pool (including those who suffer losses) who have paid premiums.

An insurance system is able to operate because all the insureds are willing to substitute a relatively small certain outlay, the insurance premium, for a relatively large uncertain loss. It is generally assumed that most people find the possibility of suffering a large loss unpleasant to contemplate. Therefore, people are willing to pay an insurance premium to be relieved of the uncertainty about a loss, as well as to be compensated if the loss actually occurs. Thus, even if no loss occurs during a year, as will be the case for most insureds, value has still been received in the form of a reduced or eliminated unpleasant mental state, the anxiety about a loss.

31

№4

Translate the following sentences from Russian into English in writing

1.Отчет о движении денежных средств рассматривает изменения, происходящие в результате деловой активности.

2.В финансовой отчетности отчет о движении денежных средств является финансовым отчетом, который указывает на поступающие и расходуемые средства.

3.Он делит анализ по рубрикам по видам деятельности: операционной, инвестиционной и финансовой.

4.Операционная деятельность также включает в себя дивиденды и процентные платежи, получаемые от инвестиций.

5.Инвестиционная деятельность относится к видам деятельности, связанной с приобретением и продажей долгосрочных активов.

Unit 5

№1

Read the following article

Translate this article from English into Russian

Answer the following questions:

1.What are disadvantages of any currency?

2.OFFLINE paper / plastic money is sunsetting... ONLINE money is sunrising... Bitcoin, or other currencies like it, are the future.” Do you agree with statement?

3.Will virtual currencies displace paper currencies?

4.Can you convert Bitcoin into a currency of your choice instantly?

5.Economically it´s equivalent to the extraction of a commodity that serves as a medium of exchange. Can anybody “mine” Bitcoins?

6.Is this currency issued by a government?

7.What should happen to cut bitcoin off at the knees?

32

Virtual currencies Mining digital gold

Even if it crashes, Bitcoin may make a dent in the financial world

Apr 13th 2013 |From the print edition

IN 1999 an 18-year-old called Shawn Fanning changed the music industry for ever. He developed a service, Napster, that allowed individuals to swap music files with one another, instead of buying pricey compact discs from record labels. Lawsuits followed and in July 2001 Napster was shut down. But the idea lives on, in the form of BitTorrent and other peer-to-peer filesharers; the Napster brand is still used by a legal music-downloading service.

The story of Napster helps to explain the excitement about Bitcoin, a digital currency, that is based on similar technology. In January a unit of Bitcoin cost around $15 (Bitcoins can be broken down to eight decimal places for small transactions). By the time The Economistwent to press on April 11th, it had settled at $179, taking the value of all Bitcoins in circulation to $2 billion. Bitcoin has become one of the world’s hottest investments, a bubble inflated by social media, loose capital in search of the newest new thing and perhaps even by bank depositors unnerved by recent events in Cyprus.

Just like Napster, Bitcoin may crash but leave a lasting legacy. Indeed, the currency experienced a sharp correction on April 10th—at one point losing close to half of its value before recovering sharply (see chart). Yet the price is the least interesting thing about Bitcoin, says Tony Gallippi, founder of BitPay, a firm that processes Bitcoin payments for merchants. More important is the currency’s ability to make e-commerce much easier than it is today.

Bitcoin is not the only digital currency, nor the only successful one. Gamers on Second Life, a virtual world, pay with Linden Dollars; customers of Tencent, a Chinese internet giant, deal in QQ Coins; and Facebook sells “Credits”. What makes Bitcoin different is that, unlike other online (and offline) currencies, it is neither created nor administered by a single authority such as a central bank.

Instead, “monetary policy” is determined by clever algorithms. New Bitcoins have to be “mined”, meaning users can acquire them by having their computers compete to solve complex mathematical problems (the

33

winners get the virtual cash). The coins themselves are simply strings of numbers. They are thus a completely decentralised currency: a sort of digital gold.

Bitcoin’s inventor, Satoshi Nakamoto, is a mysterious hacker (or a group of hackers) who created it in 2009 and disappeared from the internet some time in 2010. The currency’s early adopters have tended to be tech-loving libertarians and gold bugs, determined to break free of government control. The most infamous place where Bitcoin is used is Silk Road, a marketplace hidden in an anonymised part of the web called Tor. Users order goods—typically illegal drugs—and pay with Bitcoins.

Some legal businesses have started to accept Bitcoins. Among them are Reddit, a social-media site, and WordPress, which provides web hosting and software for bloggers. The appeal for merchants is strong. Firms such as BitPay offer spot-price conversion into dollars. Fees are typically far less than those charged by credit-card companies or banks, particularly for orders from abroad. And Bitcoin transactions cannot be reversed, so frauds cannot leave retailers out of pocket.

Yet for Bitcoins to go mainstream much has to happen, says Fred Ehrsam, the co-developer of Coinbase, a Californian Bitcoin exchange and “wallet service”, where users can store their digital fortune. Getting hold of Bitcoins for the first time is difficult. Using them is fiddly. They can be stolen by hackers or just lost, like dollar bills in a washing machine. Several Bitcoin exchanges have suffered thefts and crashes over the past two years.

Ripple effects

As a result, the Bitcoin business has consolidated. The leading exchange is Mt.Gox. Based in Tokyo and run by two Frenchmen, it processes around 80% of Bitcoin-dollar trades. If such a business failed, the currency would be cut off at the knees. In fact, the price hiccup on April 10th was sparked by a software breakdown at Mt.Gox, which panicked many Bitcoin users. The currency’s legal status is unclear, too. On March 18th the Financial Crimes Enforcement Network, an American government agency, proposed to regulate Bitcoin exchanges; this suggests that the agency is unlikely to shut them down.

Technical problems will also have to be overcome, says Mike Hearn, a Bitcoin expert. As more users join the network, the amount of data that has to circulate among them (to verify ownership of each Bitcoin)

34

gets bigger, which slows the system down. Technical fixes could help but they are hard to deploy: all users must upgrade their Bitcoin wallet and mining software. Mr Hearn worries that the currency could grow too fast for its own good.

But the real threat is competition. Bitcoin-boosters like to point out that, unlike fiat money, new Bitcoins cannot be created at whim. That is true, but a new digital currency can be. Alternatives are already in development. Litecoin, a Bitcoin clone, is one. So far it is only used by a tiny hard-core of geeks, but it too has shot up in price of late. Rumour has it that Litecoin will be tradable on Mt.Gox soon.

A less nerdy alternative is Ripple. It will be much easier to use than Bitcoin, says Chris Larsen, a serial entrepreneur from Silicon Valley and co-founder of OpenCoin, the start-up behind Ripple. Transactions are approved (or not) in a few seconds, compared with the ten minutes a typical Bitcoin trade takes to be confirmed. There is no mystery about the origins of Ripple nor (yet) any association with criminal or other dubious activities.

OpenCoin is expected to start handing out Ripples to the public in May. It has created 100 billion, a number it promises never to increase. To give the new currency momentum, OpenCoin plans eventually to give away 75% of the supply. Existing Bitcoin users can already claim free Ripples and eventually anyone opening an OpenCoin account will also receive some.

The 25% retained by OpenCoin will give it a huge incentive to make sure that the Ripple is strong: the higher its value, the bigger the reward for OpenCoin’s investors when the firm cashes out. On April 10th several blue-chip venture-capital firms, including the ultra-hip Andreessen Horowitz, announced that they had invested in OpenCoin.

If Ripple gains traction, even bigger financial players may enter the fray. A firm such as Visa could create its own cheap instant international-payments system, notes BitPay’s Mr Gallippi. And what if a country were to issue algorithmic money?

At that point Bitcoin would probably be bust. But if that happened, its creators would have achieved something like Mr Fanning. Napster and other file-sharing services have forced the music industry to embrace online services such as iTunes or Spotify. Bitcoin’s price may collapse; its users may suddenly switch to another currency. But the

35

chances are that some form of digital money will make a lasting impression on the financial landscape.

Imagine how the financial world would look like in 50 years. What currencies would prevail?

Refer back to the article and write a summary of the article

№2

Read the following text. Translate this article from English into Russian

Working capital management is a central concern in most businesses and even for small firms this area of financial management and control can be most difficult.

Working capital consists of cash, bank deposits, marketable securities, inventories and accounts receivable (debtors) on the asset side of the balance sheet less accounts payable on the claims side.

The working capital of the business is a dynamic system where financial resources are being continuously transformed from one type of the asset to another in what is known as the “operating cycle” of the business.

Working capital management is the process of ensuring that all aspects of this system operate efficiently: inventories are maintained at the minimum level necessary to meet the needs of the production and of customers: debtors and creditors are settled promptly and bad debts are minimized, and, finally, cash is put to use quickly within the business or is returned to the investors.

Are the following sentences true or false:

1.The management of working capital of the company Is not difficult.

2.Working capital includes only assets.

3.Working capital consists of financial resources of one type.

4.Stocks are always maintained at the minimum level.

36

Form a group of three or four students and discuss the role of working capital in the modern world

№3

Read the following text

Translate this text from English into Russian in writing

DEBT

“Neither a borrower nor a lender be,” wrote Shakespeare in “Hamlet”. Actually, the availability of debt, and the willingness to take it on, is a crucial ingredient of economic growth, because it allows individuals, firms and goverments to make investments they would not otherwise be able to afford. The price of debt is interest. Until recently, lending was an activity dominated by banks (although mortgages for individuals buying their homes have long been available from special housing savings institutions). Since the 1960s, debt has become increasingly available from other sources. Companies have sold trillions of dollars worth of bonds to investors in the financial markets. Individuals have been able to borrow with credit cards, and for those who have nowhere else to turn there are pawn shops and loan sharks, which charge very high rates of interest. Total private-sector debt in 2003 was around 150% of GDPin the United States, compared with less than 100% in 1928. In most countries, by far the biggest single borrower is the state, through the national debt.

№4

Translate the following sentences from Russian into English in writing

1. К концу 2012 года, к сожалению, национальный ВВП упал на 0,1% в соответствии с данными ОЭСР, а уровень роста не достиг пока докризисных значений.

37

2.Канадским банкам пришлось иметь дело с завышенными требованиями к капиталу, а они спровоцировали жесткие правила по страховке рисков по ипотечным кредитам.

3.Канада переживала хронический дефицит бюджета и растущий внешний долг, которые толкали страну к «жестким мерам экономии.

4.В разгар финансового кризиса 2008 - 2009 гг. правительство смогло поддержать экономику, используя фискальные рычаги, не боясь серьезных последствий.

5.Будущий глава Банка Англии также несет в себе «ноу-хау», которое может оказать Англии и остальному миру огромную услугу.

Unit 6

№1

Read the following article

Translate from English into Russian

Answer the following questions:

1.Why do you think the author used words like “bomb” and “weapon” speaking about financial derivatives?

2.Why can these instruments (derivatives) lead to incredible losses?

3.Why does Mr. Buffett think that derivatives may not be exposed for many years and some problems can hit companies many years later?

4.What pushes companies onto a "spiral that can lead to a corporate meltdown"?

5.Where does Mr. Buffett prefer to invite his shareholders? And

why?

6.In what company does Mr. Buffett invest for long-term?

7.Did his strategy produce only incredible returns or there were some losses?

Buffett warns on investment 'time bomb'

Derivatives are financial weapons of mass destruction

Warren Buffett

38

The rapidly growing trade in derivatives poses a "mega-catastrophic risk" for the economy and most shares are still "too expensive", legendary investor Warren Buffett has warned.

The world's second-richest man made the comments in his famous and plain-spoken "annual letter to shareholders", excerpts of which have been published by Fortune magazine.

The derivatives market has exploded in recent years, with investment banks selling billions of dollars worth of these investments to clients as a way to off-load or manage market risk.

But Mr Buffett argues that such highly complex financial instruments are time bombs and "financial weapons of mass destruction" that could harm not only their buyers and sellers, but the whole economic system.

Contracts devised by 'madmen'

Derivatives are financial instruments that allow investors to speculate on the future price of, for example, commodities or shares - without buying the underlying investment.

Derivatives generate reported earnings that are often wildly overstated and based on estimates whose inaccuracy may not be exposed for many years Warren Buffett.

Derivates like futures, options and swaps were developed to allow investors hedge risks in financial markets - in effect buy insurance against market movements -, but have quickly become a means of investment in their own right.

Outstanding derivatives contracts - excluding those traded on exchanges such as the International Petroleum Exchange - are worth close to $85 trillion, according to the International Swaps and Derivatives Association.

Some derivatives contracts, Mr Buffett says, appear to have been devised by "madmen".

He warns that derivatives can push companies onto a "spiral that can lead to a corporate meltdown", like the demise of the notorious hedge fund Long-Term Capital Management in 1998.

Derivatives are like 'hell'

Large amounts of risk have become concentrated in the hands of relatively few derivatives dealers ... which can trigger serious systemic problems

Warren Buffett

39

Derivatives also pose a dangerous incentive for false accounting, Mr Buffett says.

The profits and losses from derivates deals are booked straight away, even though no actual money changes hand. In many cases the real costs hit companies only many years later.

This can result in nasty accounting errors. Some of them spring from "honest" optimism. But others are the result of "huge-scale fraud", and Mr Buffett points to the US energy market, which relied for most of its deals on derivatives trading and resulted in the collapse of Enron.

Berkshire Hathaway, the investment group led by Mr Buffett, is pulling out of the market, closing down the derivatives trading subsidiary it bought as part of a huge reinsurance company a few years ago.

In his letter Mr Buffett compares the derivatives business to "hell...

easy to enter and almost impossible to exit", and predicts that it will take years to unwind the complex deals struck by its subsidiary General Re Securities.

Warren Buffett, dubbed "the sage of Omaha", from where he controls Berkshire Hathaway, is well-known for both his blunt assessments of the markets and the high returns he delivers to shareholders.

This year, he remains cool towards further share investments, despite the sharp correction in stock market values. Mr Buffett says this "dismal fact is testimony to the insanity of valuations reached during The Great Bubble".

Berkshire backyard barbecues

A good friend of Bill Gates, he famously refused to invest in technology shares during the boom years that came to a sudden end in March 2000. As a result, Berkshire was sitting pretty after the technology bubble burst.

In marked contrast to the hubris of former managers at fallen firms like Enron and WorldCom, Mr Buffett is known for his down-to-earth style, summoning shareholders not to glitzy hotels but "Berkshire backyard barbecues" and baseball games in out-of-the-way Omaha, Nebraska.

But his strategy of identifying undervalued companies with good management in unfashionable retail sectors or the insurance industry

40