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

depreciate v – обесцениваться divide v – делить

equal v – равняться equation n – уравнение equilibrium n – равновесие

exponential a – экспоненциальный, показательный growth n – рост

income n – доход, прибыль

increase v – увеличиваться, возрастать, расти labor n – труд

log n – (сокр. от logarithm) логарифм linear a – линейный

mathematical model – математическая модель numerical a – цифровой, численный oscillate v – колебаться

output n – продукция, выпуск per cent – процент population n – население ratio n – отношение

savings n – сбережения, накопления share n – доля, часть

solve v – решать

square n – квадрат величины, вторая степень stable a – стабильный, постоянный

stand for v – символизировать, означать starvation n – голод

value n – значение

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: mathematical models, technological progress, output per worker, exponential population growth, numerical example, to increase linearly, to increase with the square of this ratio, equilibrium values, to oscillate back and forth, to converge to the equilibrium values, a constant level, to divide

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the equation on both sides, to grow at the rate of, to took logs of, to make numerical assumption, to drop to zero, to solve equation, a balanced growth path, assumed parameters.

IV. Test VI (1)

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

1.In the essay, written in 1788, Thomas Malthus said that when food is ample, population grows exponentially.

2.When the Industrial Revolution broke out of the Malthusian trap, economies began to consume all of their output.

3.If we want to have high labor productivity, we need a high ratio of capital to output, and therefore we need a high saving rate.

4.Economists define a balanced growth path as a path along which capital and output grow at the same rate. The alternatives to a balanced growth path are not sustainable.

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

Unit 2

I. Information for study

Arbitrage

In economics, arbitrage is the practice of taking advantage of a state of imbalance between two (or possibly more) markets: a combination

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of matching deals is struck that exploit the imbalance, the profit being the difference between the market prices. A person who engages in arbitrage is called an arbitrageur.

Statistical arbitrage is an imbalance in expected values. A casino usually has a statistical arbitrage in every game of chance played, even though it could lose money on any single game.

Conditions for arbitrage

Arbitrage is possible when one of three conditions is not met:

1.The same asset must trade at the same price on all markets (“the law of one price”).

2.Two assets with identical cash flows must trade at the same

price.

3.An asset with a known price in the future, must today trade at its future price discounted at the risk free rate (in addition, the asset must have negligible costs of storage; as such, for example, this condition does not hold for grain but does for securities).

The term “arbitrage”, is usually applied only to trading in money and investment instruments (such as stocks, bonds, and other securities), not to goods.

Examples

• Suppose that the exchange rates (after taking out the fees for making the exchange) in London are £5 = $10 = ¥1000 and the exchange rates in Tokyo are ¥1000 = £6 = $10. Converting $10 to £6 in Tokyo and converting that £6 into $12 in London, for a profit of $2, would be arbitrage.

• One real-life example of arbitrage involves the stock market in New York and the futures market in Chicago. When the price of a stock in New York and its corresponding future in Chicago are out of sync, one can buy the less expensive one and sell the more expensive. Because the differences between the prices are likely to be small (and not to last very long), this can only be done profitably with computers examining a large number of prices and automatically exercising a trade when the prices are far enough out of balance. The activity of other arbitrageurs can make this risky. Those with the fastest computers and the smartest mathematicians take advantage of series of small differentials that would not be profitable if taken individually.

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•If you can buy items at one price at a factory outlet and sell them for a higher price on an internet auction website such as eBay, you can exploit the imbalance between those two markets for those items.

•Economists use the term “global labor arbitrage” to refer to the tendency of manufacturing jobs to flow towards whichever country has the lowest wages per unit output at present and has reached the minimum requisite level of political and economic development to support industrialization. At present, many such jobs appear to be flowing towards China, though some which require English are going to India. In the future, they may flow towards even poorer countries in Africa or south Asia.

Price convergence

Arbitrage has the effect of causing prices in different markets to converge. As a result of arbitrage, the currency exchange rates, the price of commodities, and the price of securities in different markets tend to converge to the same prices, in all markets, in each category. The speed at which prices converge is a measure of market efficiency. Arbitrage tends to reduce price discrimination by encouraging people to buy an item where the price is low and resell it where the price is high, as long as the buyers are not prohibited from reselling and the transactions cost of buying, holding and reselling are small relative to the difference in prices in the different markets.

Arbitrage moves different currencies toward purchasing power parity. For example if a car purchased in America is cheaper than the same car in Canada, Canadians would buy their cars across the border to exploit the arbitrage condition (this assumes that they did not face, or were confident in evading, duties on the cars). When people arbitrage commodities, goods, securities and currencies, on a large scale, the higher demand for US Dollars and the higher supply of Canadian Dollars (Canadians would have to exchange their Dollars into US Dollars) leads to an appreciation of the US Dollar and eventually, if unchecked, would make US cars more expensive for all buyers, especially for the Canadians, who would then no longer have an incentive to buy cars in the US.

(However, in reality, one must consider taxes and the costs of traveling to the U.S. and driving the new car back to Canada. Also, the features built into the cars sold in the U.S. are not exactly the same as the features built into the cars for sale in Canada. This is due to the different emissions and other auto regulations in the two countries.)

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Similarly, arbitrage affects the difference in interest rates paid on government bonds, issued by the various countries, given the expected depreciations in the currencies, relative to each other.

Risks

Arbitrage transactions in modern securities markets involve fairly low risks. Generally it is impossible to close two or three transactions at the same instant; therefore, there is the possibility that when one part of the deal is closed, a quick shift in prices makes it impossible to close the other at a profitable price. There is also risk that the other party to one of the deals fails to deliver as agreed; though unlikely, this hazard is serious because of the large quantities one must trade in order to make a profit on small price differences. These risks become magnified when leverage or borrowed money is used.

Another risk occurs if the items being bought and sold are not identical and the arbitrage is conducted under the assumption that the prices of the items are correlated or predictable. In comparison to the classical quick arbitrage transaction, such an operation can produce disastrous losses.

Traditionally, arbitrage transactions in the securities markets involve high speed and low risk. At some moment a price difference exists, and the problem is to execute two or three balancing transactions while the difference persists. When the transaction involves a delay of weeks or months, as above, it may entail considerable risk if borrowed money is used to magnify the reward through leverage. One way of reducing the risk is through the illegal use of inside information, and in fact risk arbitrage with regard to leveraged buyouts was associated with some of the famous financial scandals of the 1980s such as those involving Michael Milken and Ivan Boesky.

II. Vocabulary Items

arbitrage n – арбитраж, арбитражные операции (покупка и продажа ценных бумаг, товаров на различных рынках) asset n – активы, имущество, капитал

assumption n – предположение, допущение bond n – облигация

borrowed a – взятый взаймы, одолженный buyout n – выкуп доли в предприятии, фирме

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cash flow – движение денежной наличности commodity n – товар

converge v – сводить воедино correlate v – коррелировать costs n – расходы, издержки currency n – деньги, валюта delay n – отсрочка

demand n – требование, спрос depreciation n – обесценение discount v – снижать, сбавлять

exchange rate – валютный курс, обменный курс fee n – сбор, пошлина

futures market – рынок посделкам насрок, фьючерсныйрынок goods n – товар

hazard n – риск, опасность

imbalance n – дисбаланс, несоответствие interest rate – процентная ставка

issue v – выпускать, пускать в обращение item n – вид товара, товар, изделие

leverage n – использование кредита для биржевой игры outcome n – результат

outlet n – торговая точка predictable a – предсказуемый profit n – прибыль, доход

purchasing power – покупательная способность quantity n – количество

rate n – размер, ставка reward n – вознаграждение security n – ценная бумага shift n – изменение, сдвиг stock n – акция

stock market – фондовая биржа storage n – хранение, плата за хранение supply n – предложение

sync n – соответствие transaction cost – цена сделки tax n – налог, сбор, пошлина

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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: a state of imbalance, cash flows, at future price discounted at the risk free rate, negligible costs of storage, investment instruments, exchange rate, stock market, futures market, to be out of sync, to be far enough out of balance, price convergence, to reduce price discrimination, transaction cost, purchasing power, to exploit the arbitrage condition, interest rates, to involve risks, a quick shift in prices, leveraged buyouts.

IV. Test VI (2)

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

1.Statistical arbitrage is an imbalance in expected values. A casino usually has a statistical arbitrage in every game of chance played, even though it could lose money on any single game.

2.Arbitrage tends to increase price discrimination by encouraging people to buy an item where the price is low and resell it where the price is high, as long as the buyers are not prohibited from reselling and the transactions cost of buying, holding and reselling are small relative to the difference in prices in the different markets.

3.Arbitrage transactions in modern securities markets involve rather high risks.

4.One way of reducing the risk is through the illegal use of inside information.

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

Unit 3

I. Information for study

Enterprise resource planning

Enterprise resource planning systems (ERPs) are management information systems that integrate and automate many of the business practices associated with the operations or production aspects of a company.

Overview

Enterprise resource planning is a term derived from manufacturing resource planning that followed material requirements planning (MRP). ERP systems typically handle the manufacturing, logistics, distribution, inventory, shipping, invoicing, and accounting for a company. Enterprise Resource Planning or ERP software can aid in the control of many business activities, like sales, delivery, billing, production, inventory management, quality management, and human resources management.

ERPs are often called back office systems indicating that customers and the general public are not directly involved. This is contrasted with front office systems like customer relationship management (CRM) systems that deal directly with the customers, or the eBusiness systems such as eCommerce, eGoverment, eTelecom, and eFinance, or supplier relationship management (SRM) systems that deal with the suppliers.

ERPs are cross-functional and enterprise wide. All functional departments that are involved in operations or production are integrated in one system. In addition to manufacturing, warehousing, logistics, and Information Technology, this would include accounting, human resources, marketing, and strategic management.

In the early days of business computing, companies used to write their own software to control their business processes. This is an expensive approach. Since many of these processes occur in common across various types of businesses, common reusable software may provide costeffective alternatives to custom software. Thus some ERP software caters to a wide range of industries from service sectors like software vendors

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and hospitals to manufacturing industries and even to government departments.

Implementation

Because of their wide scope of application within the firm, ERP software systems rely on some of the largest bodies of software ever written. Implementing such a complex and huge software system in a company used to involve an army of analysts, programmers, and users, until the development of the Internet allowed the use of outside consultants to connect to company computers to install standard updates. ERP implementation, without professional help, can comprise a very expensive project in itself for bigger companies, especially transnationals, but with companies specializing in ERP implementation, the task can be completed in under six months, with solid pilot testing.

Enterprise resource planning systems are often closely tied to supply chain management and logistics automation systems. Supply chain management software can extend the ERP system to include links with suppliers.

To implement ERP systems, companies often seek the help of an ERP vendor or of third-party consulting companies. Consulting in ERP involves two levels, namely business consulting and technical consulting. A business consultant studies an organization's current business processes and matches them to the corresponding processes in the ERP system, thus 'configuring' the ERP system to the organization’s needs. Technical consulting often involves programming. Most ERP vendors allow modification of their software to suit the business needs of their customer.

Customizing an ERP package can be very expensive and complicated, because many ERP packages are not designed to support customization, so most businesses implement the best practices embedded in the acquired ERP system. Some ERP packages are very generic in their reports and inquiries, such that customization is expected in every implementation. It is important to recognize that for these packages, it makes more sense to buy third party reporting packages that interface well to particular ERP, than to reinvent what tens of thousands of other clients of that same ERP have needed to develop.

Today there are also web-based ERP systems. Companies would deploy web-based ERP because it requires no client side installation, and is cross-platform and maintained centrally. As long as you have an Inter-

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net connection, you can access web-based ERPs through typical web browsers.

Advantages

In the absence of an ERP system, a manufacturer may find itself with many software applications that do not talk to each other, do not effectively interface.

Change how a product is made, in the engineering details, and that is how it will now be made. Effectivity dates can be used to control when the switch over will occur from an old version to the next one, both the date that some ingredients go into effect, and date that some are discontinued. Computer security is included within an ERP, to protect against both outsider crime, such as industrial espionage and insider crime, such as embezzlement. Preventing abuse is part of what ERP security takes care of.

There are concepts of Front office (how the company interacts with customers), which includes CRM or Customer relationship management, Back end (internal workings of the company to fulfill customer needs), which includes quality control, to make sure there are no problems not fixed, in the end products, Supply chain (interacting with suppliers and transportation infrastructure), all of which can be integrated through an ERP, although some ERP have some gaps in what is supported, or works effectively. Without an ERP that integrates this stuff, it can be a nightmare for a manufacturer to manage.

Disadvantages

There can be limitations and pitfalls to ERP, though:

•Success depends on the skill and experience of the work force, including education in how to make the system work correctly. Many companies cut costs by cutting user training. Personnel turnover; companies can employ new managers lacking education in the company's ERP system, proposing changes in business practices that are out of synchronization with the best utilization of the company's selected ERP.

•ERP systems can be very expensive to install.

•ERP vendors can charge sums of money for annual license renewal that is unrelated to the size of the company using the ERP or its profitability.

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