The Language of Small Business Texts and Vocabulary Training (for students of Economics) Part 1. Учебное пособие

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1.Планы основываются на прогнозах.

2.Я продал дом и вложил вырученную сумму в ценные бумаги.

3.Выручка от продажи, после вычета комиссионных, со- ставляет 5000 фунтов.

4.Прибыль от продажи гастрономических товаров в этом году больше, чем в прошлом.

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Definitions of terms

Forecast, econ. – any methodical attempt to tell the nature, extent and direction of any future changes in the economic system, such as a change in the size of population. Such forecasts, called projections, are essential aids when deciding government policy.

Cash flow, accts. & fin. – the amount of cash made by a business during a specified period which it can use for investment; it can be calculated from the accounts of a business and is a means of measuring its financial strength. To the net profit (after the taxation) are added depreciation and any sums put to reserves; the resulting sum, after taking away the expenses of running the business shows the ability of the business to earn cash.

Accounting period, accts. – any period (or fixed length of time) usually a year, at the end of which accounts are made up, balances are struck and a profit or loss figure is arrived at.

Bank balance – the balance to the credit or debit of a customer's account with a bank. Syn.; balance at bank.

Bank overdraft, bkg. – an agreed sum of money which by arrangement a bank allows a customer to overdraw his account, i.e. to run into debt to the bank by drawing more than the amount standing to his credit in the account. The customer can make use of this money when he wishes and for an agreed length of time. Interest is payable only on the amount overdrawn at the end of each day, but the bank may make an additional charge for agreeing to the arrangement, and will usually demand that the customer should deposit easily saleable stocks and shares as security for repayment of the debt.

Net (nett), com. – the exact amount after all allowances and reductions, such as discounts and rebates, have been deducted; an amount actually payable; an amount that will not qualify for any discount or other deduction.

Net price – a price on which no discounts will be allowed. Terms net cash – payment of the full amount stated is ex-

pected in cash, no credit or discounts being allowed.

Assets, pl. accts. & com. – all things owned by a person or business and having some money value, especially if they can be used to pay debts, produce goods, or in some way help the business to make a profit. Assets are of many kinds.

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Active assets – assets that earn interest. Syn.: productive assets.

Current assets – assets which may be consumed (used up) or turned into cash fairly soon in the ordinary course of business, e.g. stock-in-trade, raw materials, stores, etc.

Syn.: circulating assets. Opp.: fixed assets.

Fixed assets – possessions of a long-lasting and unchanging nature such as land, buildings, machinery, trade investments, etc. Used for making and selling the products of business and not intended for sale or to be turned into cash as long as they are useful to the business.

Syn.: capital assets; permanent assets.

Frozen assets – assets which cannot immediately be turned into cash, either because they have been put under some sort of limiting control, e.g. goodwill, patents, copyrights, trademarks.

Tangible assets – assets which have material form and therefore can be turned into cash fairly quickly, e.g. securities, cash, cheques, etc.

Liquid assets – possessions which consist of cash in hand, or cash with bankers, and anything which can be quickly turned into cash, e.g. bills receivable and marketable securities. Syn.: available assets; quick assets.

Opp.: slow assets.

Net assets:

1.fixed assets plus current assets;

2.fixed assets plus the difference between current assets and current liabilities, the resulting figure is often called the capital employed;

3.the excess of assets over liabilities.

Operating assets – those being used in the active operating of the business.

Real assets – property other than money, such as buildings, machinery.

Capital – in business, the value, measured in units of money, of real assets, i.e. assets in the form of property other than money, e.g. machinery, buildings and stocks of materials. The capital of a company is the money which its shareholders have put into the concern to buy the real assets it needs to start up and carry on the

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business; it is usually calculated to be its bet worth (the value of its assets less the amount it owes to its creditors.

PAYE — pay as you earn, – taxn. In Britain, the popular name for a method of collecting income tax, by which an employer must by law deduct income tax from each employee's wages or salary, and must pay tax to the government once a month.

NIC — national insurance contributions – in Britain, a state insurance scheme administered by the Department of health and Social Security by which every employer, employee and self-employed person makes weekly contributions to provide against accidents on retirement, and other benefits, e.g. for widows and disabled persons.

Syn.: social insurance.

Installment, com. – one of a series of regular payments, made under an agreement, in order to settle a debt, especially to buy an asset. The buyer experts to pay more if he buys by installments than he would if payment were made in one cash sum because of the need to reward the seller for the cost of collecting the installments and the interest he loses by having possessions and use of the asset while it is being paid for.

Hire purchase agreement, com. & fin. – a form of consumer credit, being a contrast to hire an article with the right to buy it, i.e, become its owner only when the last installment has been paid. Until then the article remains the property of the hirer/seller although used by the buyer. The agreement must always be in writing.

Loan, fin. – something lent, especially money, on condition that interest will be paid at an agreed rate and that the amount lent will be repaid at an agreed time or in an agreed manner.

Quotation, com. – a statement of the current price and conditions upon which a supplier is willing to sell, or upon which services may be performed.

Direct cost – one, which is directly related to the production of a particular article or unit of output, and which therefore varies in proportion to the number of articles or units produced.

Syn.: variable cost.

Indirect cost – one that does not vary with output (the volume of goods produced); a cost that has to be paid whether anything is produced or not.

Syn.: fixed cost.

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Overhead cost – the expenses of running a business; those costs that cannot be directly related to the separate products produced or bought and sold, by business, such as rent, rates and management salaries.

Profit margin (margins) – the rate of profit generally made in selling an article or commodity.

Freehold, n., law., – a legal right to hold land as the absolute owner, free of payment or duty to others.

Leasehold, n., law. – the right, given in a lease to a person called the leaseholder or lessee or tenant, to own and use land and buildings tor a stated period in return for payment of a premium or rent.

Board of Customs and Excise, taxn. -- the British government department which is responsible for collecting all indirect taxes, i.e. taxes which are collected from some person or organization, who passes the charge on to the final consumer.

Definitions of terms

Поток денежной наличности – сумма доходов до упла-

ты налогов и амортизационных отчислений.

Овердрафт – вид краткосрочного кредита; представляется списанием средств сверх остатка на текущем счету клиента; обычно составляется соглашение о максимальной сумме оверд- рафта, об условиях представления, порядке погашения; меняется взависимостиотпоступлениясуммпатекущийсчет.

Цена нетто – цена после вычета всех скидок; цена, с ко- торой не делается скидка; цена, не включающая расходы по перевозке, страхованию и пр.

Цена = прибыль – доход; прибыль, остающаяся в распо- ряжении компании после расчетов с государством, банками и другими контрагентами.

Активы – в широком смысле слова – всякие активы, имущество, за счет которых могут быть произведены платежи и погашение обязательств их владельцем; в узком смысле – средства банка: денежные средства, иностранная валюта, цен- ные бумаги, золото, чеки, векселя, переводы, аккредитивы, которыми производятся платежи и погашения, или ликвид- ная часть активов, включая денежные средства, находящиеся в банке, легко реализуемые ценные бумаги, которыми их вла-

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делец может распоряжаться; в международных расчетах – вклады в зарубежные банки в иностранной валюте.

Счет-фактура – счет на отправленный или отпущенный товар, содержащий подробные данные о роде, количестве и стоимости товара и обозначение всех относимых за счет поку- пателя расходов.

Vocabulary drill

1.Plans are based on forecasts.

2.I have sold my house and have invested the proceeds in giltedged securities.

3.The sale proceeds, after deducing our commission, amount to £5,500.

4.Margins on groceries are higer than last year.

For discussion

1.How will you define a cash flow forecast?

2.What is the purpose of the cash flow forecast?

3.Explain the meaning of the term VAT.

4.What are the purposes of the national insurance scheme?

5.Drawings – what are they?

6.How will you work out the net profit figure?

Summary

1.Прогнозирование очень важно, если вы берете на себя обязательства на основе того, достаточно четких данных.

2.Пусть ваши прогнозы будут консервативны.

3.Прогноз потока наличности не есть то же самое, что про- гноз прибыли и убытков; эти цифры будут различны. В прогнозе потока наличности показывайте, какие выпла- ты наличности вы ожидаете сделать и получить и когда.

4.Если вам самому трудно сделать прогнозы, воспользуй- тесь услугами агентства предпринимательства, обслужи- вания малых фирм или бухгалтера.

5.Осуществление выплат НДС, а также чеков и амортиза- ции требуют особого внимания.

6.Когда прогнозы сделаны, используйте их для оценки то- го, насколько жизнеспособно будет ваше предприятие и сможете ли вы получать от него достаточно средств.

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Staying Afloat

Unit 8.

Staying afloat

You are launched. You have premises, even if it is your own home. You have started selling and now must produce the goods. You may have raised money to help finance the business. So what next? Staying afloat is the name of the game. Learning to live within the income your sales bring is a hard task, but one that has to be learnt.

For some, it is easy: this could apply to you if your sort of business is consultancy, or design, or some other type of work where the overheads can be contained, at least until the time comes for expansion. For others, there is this point to strive towards before your business is truly afloat. This is known as breakeven point, and is the point at which the contribution your sales bring is large enough to cover the overheads of your business, for example, rent, rates, telephone and some employee costs.

When you see explanations of break-even point in textbooks, it seems straightforward. Your business struggles towards the level of sales you find from the laid-down formula and once you have reached there, your business is ticking along nicely. In reality break-even point is not like that at all. It has a most disconcerting habit of moving; as sales increase, so inevitably do the pressures on the business to get the job done. One way to ease the pressure is to increase the overheads and so the cycle continues. Trying to hit a moving target is notoriously difficult; and so is struggling to break even.

To stay afloat in the longer term requires more than being permanently at break-even; you need profits. These can be used to develop new products and markets as existing ones mature and decline.

These are the problems. What about the solution? Clearly increasing the amount and value of the sales are top priorities, as well as containing costs. But these take time. The business needs a breathing space to allow sales to develop. To allow yourself that

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leeway, you must control the business. And cash control assumes the major role in this. Your business will stay afloat (in the short term) if the money goes round; you hope you can keep it going long enough for sales to reach that moving target and get to breakeven. You cannot do it for ever; at some stage, it will be clear that your business must raise more money or it will fail. If you are unable to get more funds, you do not want to reach the point of trading illegally and you do not want your crash to take other small businesses with you. You have to recognize the warning signs.

Of course, any well-run business should be interested in cash control, whether struggling for break-even or already well into profit. Making the cash go round more efficiently helps increase your profits. Controlling cash is essentially a question of controlling debtors (that is, people who owe you money), creditors (that is, people to whom you owe money) and stock (including work-in-progress).

Break-even Point

One management technique you should get to grips with is break-even point. This assumes extreme importance for the sort of business which makes losses initially; possibly, you may raise money to cover that loss-making period or you find it yourself. What you are working towards is the point at which the contribution (strictly, gross margin), which you make from sales, is sufficient to cover the overheads (also called indirect or fixed costs).

Overheads are the cost of setting up the structure of your business. For example, the cost of your premises does not rise and fall with the amount of sales you are making. In the long run, you could move to cheaper premises, but this is a major upheaval. In the meantime, this overhead cost is fixed. The value of your sales needs to be built up to the level which contributes to the expense of the premises.

Other examples of overheads are insurance, the cost of equipment – such as cars and typewriters, heating and lighting, the telephone and so on. One vexed problem is whether employees are a fixed cost or not. For most businesses, they will be, certainly for a few months.

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How to work out Your Break-even Point

To do this you need to know:

•gross profit margin;

•total cost of overheads.

If your product or service is uniform, you can work out the

gross profit (or contribution) on each item sold. The gross profit on each item is the selling price less the direct cost of each item. Direct costs are those items which you only have to pay for because you make a product or provide a service, for example, raw materials.

However, if the product can vary, work out the gross profit for one month's sales, say, and use this to find your gross profit margin.

The formula for break-even point of sales is:

Overheads

Price of product – direct cost of product .

This gives you the number of items you must sell to cover the overhead costs, see Example 1 below:

Example 1

Robert Atherton sells quantities of paper cleaning cloths. He buys them in large rolls, cuts them and distributes them as duster-size (twelve to each packet). He has worked out the direct cost of each packet of twelve as 10 р and sells them for 26p. thus, gross profit on each packet of twelve is I6p. His overheads are £6,000 in the year, £500 a month. His break-even sales each month are:

£500 = 3,125 packets of twelve £0.16

Gross profit margin is the gross profit divided by the value of sales times 100. This formula gives you the value of sales you must make to cover the overhead costs, see Example 2:

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Example 2

Jane Edwardes runs a company which sells computer systems to the accounting profession. The prices of the system vary depending on the size of the computer, the exact form of the software and how many screens are run off the computer. The cheapest starts at £5,000 and the most expensive system is £15,000. For her business plan for the next twelve months, Jane has worked out the likely number of systems of each size she forecasts she will sell. For the year, sales are estimated at £300,000 and the direct costs, that is, the computers, screens and other parts, and the software, are forecast to be £ 120,000

£300.00 – £120,000

The overheads of the business are estimated at £180,000 for the next year, that is, £9,000 a month.

The break-even sales for each month are:

£9,000

_______ × 100 – £ 15,000 60

This applies as long as the level of fixed costs remains unchanged and either the gross profit margin is the same on each product or the pattern of sales mirrors the forecast for the year.

The diagrams may help you to gain a better understanding of what break-even is all about. The level line shows the estimated level of overheads for different levels of sales. The dotted line which starts at point Оshows the amount of the direct costs for each level of sales. Total costs are the sum of the direct costs and the overheads.

The sloping line which starts at point О shows the value of sales at different levels of units sold. Point X is the break-even point. To the left of point X, your business is making a loss; to the right of it, your business is making a profit.

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