Get Ready for the Postgraduate Entrance English Exam. Working with Texts. Часть 1. Учебное пособие

losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier.

•Nuclear incident insurance – damages resulting from an incident involving radioactive materials is generally arranged at the national level.

•Political risk insurance can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions will result in a loss.

•Professional indemnity insurance is normally a mandatory requirement for professional practitioners such as Architects, Lawyers, Doctors and Accountants to provide insurance cover against potential negligence claims. Non licensed professionals may also purchase malpractice insurance; it is commonly called Errors and Omissions Insurance and covers a service provider for claims made against them that arise out of the performance of specified professional services. For instance, a web site designer can obtain E&O insurance to cover them for certain claims made by third parties that arise out of negligent performance of web site development services.

•Property insurance provides protection against risks to property, such as fire, theft or weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance or boiler insurance.

•Terrorism insurance

•Title insurance provides a guarantee that title to real property is vested in the purchaser and/or mortgagee, free and clear of liens or encumbrances. It is usually issued in conjunction with a search of the public records done at the time of a real estate transaction.

•Travel insurance is an insurance cover taken by those who travel abroad, which covers certain losses such as medical expenses and theft.

•Workers’ compensation insurance replaces all or part of a worker’s wages lost and accompanying medical expense incurred due to a job-related injury.

Potential sources of risk that may give rise to claims are known as “perils”. Examples of perils might be fire, theft, earthquake, hurricane and many other potential risks. An insurance policy will set out in details which perils are covered by the policy and which are not.

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Types of insurance companies

Insurance companies may be classified as

•Life insurance companies, who sell life insurance, annuities and pensions products.

•Non-life or general insurance companies, who sell other types of insurance.

In most countries, life and non-life insurers are subject to different regulations, tax and accounting rules. The main reason for the distinction between the two types of company is that life business is very long term in nature – coverage for life assurance or a pension can cover risks over many decades. By contrast, non-life insurance cover usually covers a shorter period, such as one year.

Insurance companies are generally classified as either mutual or stock companies. This is more of a traditional distinction as true mutual companies are becoming rare. Mutual companies are owned by the policyholders, while stockholders, (who may or may not own policies) own stock insurance companies.

Reinsurance companies are insurance companies that sell policies to other insurance companies, allowing them to reduce their risks and protect themselves from very large losses. The reinsurance market is dominated by a few very large companies, with huge reserves.

Captive Insurance companies may be defined as limited purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups.

II. Vocabulary Items

accident n – несчастный случай annuity n – ежегодный доход

beneficiary n – лицо, к выгоде которого что-л. происходит boiler n – дилер по ценным бумагам

captive a – несамостоятельный, внутрифирменный casualty a – несчастный случай, катастрофа, авария claim n – иск о возмещении убытков или ущерба court n – суд

cover v – обеспечивать покрытие (денежное), страховать coverage n – общая сумма риска, покрытая договором страхования

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damage n – вред, повреждение, убыток, ущерб, урон disability n – неплатежеспособность

earthquake n – землетрясение

encumbrance n – обременение (лежащее на имуществе) entity n – субъект

equitable a – справедливый

fidelity bond – гарантия защиты фондового брокера от мошенничества со стороны его служащих

flood n – наводнение harm n – ущерб

hedge v – хеджировать, страховать от потерь hurricane v – ураган

indemnity v – гарантия возмещения убытка indemnification v – возмещение (убытка), компенсация injury n – телесное повреждение

insolvent a – неплатежеспособный insurance n – страхование insured a – застрахованный insurer n – страховщик

interest n – процент

lawsuit n – судебный процесс, производство дела в суде legal a – законный, дозволенный законом

lien n – право удержания имущества за долги loss n – убыток, потеря

malpractice n – профессиональная некомпетентность margin n – прибыль; остаток

mortgage n – ипотека, залог, закладная mutual a – взаимный

negligence n – небрежность occur v – случаться, происходить

policyholder n – держатель страхового полиса payout n – выплата

peril n – опасность, риск

premium n – страховая премия, страховой взнос rate n – размер

real property – недвижимость sickness n – болезнь

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stock company –акционерная компания surety bond – облигация с гарантией theft n – воровство, кража

transfer risk – риск ограничения перевода средств из страны в страну

unemployment n – безработица verdict n – вердикт

III. Exercises

1.Read the text.

2.Learn the vocabulary items by heart.

3.Translate the text in written form.

4.Retell the text using the following expressions and terms: the equitable transfer, potential loss, a reasonable fee and duty of care, timing or occurrence of the loss, rate of loss, to set premiums, the insured-for event, to transfer risk, in the event of a loss, policy contract, insurance premiums, to approximate future claims, the total claims expense, property and casualty insurance companies, automobile insurance, credit insurance, financial loss insurance, health insurance, liability insurance, to cover legal claims against the insured, court verdict, life insurance, cash benefit, designated beneficiary, total permanent disability insurance, locked funds insurance, marine insurance, nuclear incident insurance, political risk insurance, professional indemnity insurance, malpractice insurance, property insurance.

IV. Test III (5)

1. Read the text again and decide which statements are true.

1.An entity seeking to transfer risk (an individual, corporation, or association of any type) becomes an ‘insurer’.

2.Property insurance includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance or boiler insurance.

3.Travel insurance is an insurance cover taken by those who travel abroad, which covers certain losses such as medical expenses and theft.

4.Captive Insurance companies are insurance companies that sell policies to other insurance companies, allowing them to reduce their risks and protect themselves from very large losses.

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2. Match the words given in the left column with the words in the right column.

Unit 6

I. Information for study

Valuation

In finance, valuation is the process of estimating the market value of a financial asset or liability. Valuations can be done on assets (e.g., stocks, options, businesses) or on liabilities (e.g., bonds issued by a company). Valuations are required in many contexts including investment analysis, capital budgeting, merger and acquisition transactions, financial reporting, taxable events to determine the proper tax liability, and in litigation.

Valuation of financial assets is done using one or more of three types of models:

1.Relative value models determine the value based on the prices of similar assets.

2.Absolute value models determine the value by estimating the expected future earnings from owning the asset discounted to their present value.

3.Option pricing models are used for certain types of financial assets (options) and are essentially a complex present value model.

Common terms for the “value” of an asset (or liability) are fair market value, fair value, and intrinsic value. The meanings of these terms

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differ. The most common term is fair market value defined as the cash price an item would sell for between a willing buyer and willing seller assuming they have knowledge of the relevant facts and they have no compulsion to buy or sell. Fair value is a term used in generally accepted accounting principles (GAAP) for financial reporting and it is used in shareholder rights legal statutes. In these cases, fair value is what accounting literature or the law, respectively, says it is. Fair value may be different than fair market value. Intrinsic value is an asset’s “true” value regardless of the market price. When an analyst determines a stock’s intrinsic value is greater than its market price, the analyst issues a “buy” recommendation and vice versa. The intrinsic value may be a matter of personal option.

Valuation of Mining Projects

In Mining, valuation is the process of determining the value or worth of a mining property.

Mining Valuations are sometimes required for IPO’s, fairness opinions, litigation, mergers & acquisitions and shareholder related matters.

In Valuation of a mining project or mining property, Fair Market Value (FMV) is the standard of value to be used.

Valuation of companies (business valuation)

Businesses or fractional interests in businesses may be valued for various purposes such as mergers and acquisitions, sale of securities, and taxable events. An accurate valuation of privately-owned companies largely depends on the reliability of the company’s financial information. Public company financial statements are audited by Certified Public Accountants and overseen by a government regulator. Private companies do not have government oversight and are generally not required to have their financial statements audited. Private company financial statements are commonly prepared to minimize taxes by lowering taxable income. Public companies tend to want higher earnings. Faulty financial information can lead to overand undervaluation.

The numbers used for accounting purposes always have to be as objective as possible, as you could otherwise construct any profit or loss (so also tax bill!) you want. Assets and liabilities in financial statements therefore always use the concept of book value, except in case of a mark- to-market is very easy to determine, for instance in case of publicly traded

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bonds. There are, broadly speaking, two ways to value a company or a subsidiary.

Valuation using discounted cash flows

The value of a company depends on how much money it is expected to make in the future. This method tries to estimate what the future cash flows, coming from sales, going to expenses, paying interest on debt, etc. You apply a discount rate to these cash flows and the sum of the discounted cash flows is considered the value of the company. This clearly involves a lot of estimates on the size of the cash flows. It is normally viewed as a fundamental approach.

Valuation using multiples

In this case, a company is compared to its peer group. The assumption is that certain financial ratios are characteristic for an industry. For example, to value an oil company, you can look at other oil companies and divide each company’s market capitalization by its earnings. In other words, you calculate the Price/Earnings (PE) ratio. If these are all within a certain range, say 12-15, then you suppose that is valid as well for the company you are trying to value. You now estimate the future earnings of your company, multiply it by the PE ratio, and you’ve got an estimate for the value of your company.

Usage

In finance, valuation analysis is required for many reasons including tax assessment, wills and estates, divorce settlements, business analysis, and basic bookkeeping and accounting. Since the value of things fluctuates over time, valuations are as of a specific date e.g., the end of the accounting quarter or year. They may alternatively be mark-to-market (estimates of the current value of assets {liabilities} as of this minute or this day) for the purposes of managing portfolios and associated financial risk (e.g., within large financial firms including investment banks and stockbrokers).

Some balance sheet items are much easier to value than others. Publicly traded stocks and bonds have prices that are quoted frequently and readily available. Other assets are hard to value: for instance, private firms that have no frequently quoted price. Additionally financial instruments that have prices that are partly dependent on theoretical models of one kind or another are difficult to value. For example, options are generally valued using the Black-Scholes model while the liabilities of life assurance firms are valued using the theory of present value.

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It is possible and conventional for financial professionals to make their own estimates of the valuations of assets (liabilities) that they are interested in, and their calculations are of various kinds including analyses of companies that focus on price-to-book, price-to-earnings, price-to- cashflow and present value calculations, and analyses of bonds that focuses on credit ratings (e.g. assessments of default risk), risk premia and levels of real interest rates. All of these approaches may be thought of as creating estimates of value that compete for credibility with the prevailing share or bond prices (where applicable) and may or may not result in buying or selling by market participants.

It is very important to note that valuation is more an art than a science because it requires judgment:

1)There are very different situations and purposes in which you value an asset (e.g. company in distress, tax purposes, mergers & acquisitions, quarterly reporting). In turn this requires different methods or a different interpretation of the same method each time.

2)All valuation models and methods have their limitations (e.g., mathematical, complexity, simplicity, comparability) and could be widely criticized. As a general rule the valuation models are most useful when you use the same valuation method as the “partner” you are interacting with. Mostly the method used is industry or purpose specific.

3)In all valuation models there are a great number of assumptions that need to be made and things might not turn out the way you expect. Your best way out of that is to be able to explain and stand for each assumption you make.

When a valuation is prepared all assumptions should be clearly stated, especially the context. It is improper, for example, to value a going concern, based on an assumption that it is going out of business, since then only a salvage value remains.

II. Vocabulary Items

accounting n – бухгалтерский учет, счетоводство acquisition n – приобретение

assessment n – оценка

audit v – проверять (бухгалтерские книги, отчетность) balance sheet – балансовый отчет, баланс

bookkeeping n – бухгалтерия, регистрация данных

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book value – реальная величина капитала, соответствующая массе выпущенных акций

budget n – бюджет, финансовая смета cash flow – движение наличности current value – существующая цена debt n – долг, задолженность

discounted cash flow – будущие поступления наличными, приведенные к оценке настоящего времени; дисконтированные поступления наличными

discount rate – учетная ставка distress n – бедственное положение divorce n – развод

earnings n – заработок, доход, прибыль, поступления estate n – имущество

estimate v – оценивать, составлять смету expenses n – расходы, издержки

fair value – стоимость в текущих ценах financial statement – финансовый отчет, баланс fluctuate v – колебаться, быть неустойчивым interest n – проценты

intrinsic value – внутренняя стоимость (товара), действительная стоимость

litigation n – судебный процесс, судебное дело, тяжба market value – курсовая стоимость, рыночная стоимость mark-to-market – переоценка портфеля ценных бумаг на основе текущих цен

merger n – поглощение (путем приобретения ценных бумаг или основного капитала)

options n – опцион, сделка с премией

peer group – группа равных (по положению) portfolio n – портфель ценных бумаг present value – текущая стоимость

price-to-book value – остаточная стоимость основного капитала

property n – собственность, имущество quarterly adv – раз в квартал, поквартально ratio n – отношение, коэффициент

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relative value – относительная стоимость salvage value – остаточная стоимость

settlement n – актраспоряжения имуществом(впользу кого-л.) stocks n – ценные бумаги

stockbroker n – биржевой маклер taxable – налоговый

valuation n – оценка, определение стоимости will n – завещание

III. Exercises

1.Read the text.

2.Learn the vocabulary items by heart.

3.Translate the text in written form.

4.Retell the text using the following expressions and terms: market value, capital budgeting, merger and acquisition transactions, financial reporting, taxable events, proper tax liability, relative value models, absolute value models, present value, option pricing models, fair market value, intrinsic value, business valuation, privately-owned companies, government regulator, public companies, financial statements, book value, mark- to-market, publicly traded bonds, cash flows, discount rate, discounted cash flows, peer group, Price/Earnings ratio, tax assessment, current value, balance sheet, publicly traded stocks and bonds, frequently quoted price, present value, price-to-book, price-to-earnings, price-to-cashflow, default risk, risk premia, interest rates, quarterly reporting, salvage value.

IV. Test III (6)

1. Read the text again and decide which statements are true.

1.The value of a company depends on how much money it is expected to make in the future.

2.Public companies do not have government oversight and are generally not required to have their financial statements audited.

3.Relative value models determine the value based on the prices of similar assets.

4.Fair value is an asset’s “true” value regardless of the market price. When an analyst determines a stock’s intrinsic value is greater than its market price, the analyst issues a “buy” recommendation and vice versa. The intrinsic value may be a matter of personal option.

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