XV. Answer the following questions.

1.What types of banks do you know?

2.What institutions are classified as thrift institutions?

3.What’s a commercial bank?

4.Describe the main features of credit unions.

5.How does a retail bank work?

6. Speak on the investment banks.

7. What are the online banks?

XVI. Read, translate and memorize the following statements.

1. Money is language of business.

2. Money is a good servant but a bad master.

3. Money is a root of all evil.

4. Money makes the world go round.

5. Money begets money.

6. Adventure is the life of commerce, but caution is the life of banking

(W. Bagohot).

7. He that goes a borrowing, goes a sorrowing (Th.Fuller).

8. He who likes borrowing dislikes paying (Proverb).

Unit VII

Topic: Finance. Audit and Accounting Text A. What is finance Text B. What is accounting Text C. The work of accountants Text D. What is auditing

I. Practise the pronunciation of the following words.

1. stress the first syllable:

assets, budgeting, entity, finance, income, injury, merely, mortgage;

2. stress the second syllable:

commission, deduce, emerge, expenses, to finance, financial, insurance, prerequisite, procurement, securities;

II. Before you read the text answer the following questions.

1. What do you know about finance? What is finance?

2. What are the responsibilities of finance manager?

III. Text A

What is finance

Before we begin, first let’s understand the origin of word finance.

If we trace the origin of finance, there is evidence to prove that it is as old as human life on earth. The word finance was originally a French word. In the 18^th century, it was adapted by English speaking communities to mean “the management of money”. Since then, it has found a permanent place in the English dictionary. Today, finance is not merely a word else has emerged into an academic discipline of greater significance. Finance is now organized as a branch of Economics.

Furthermore, the one word which can easily replace finance is exchange. Finance is nothing but an exchange and/or management of money. A barter trading system is also a type of finance. Thus, we can say, Finance is an art of managing various available resources like money, assets, investments, securities, etc.

At present, we cannot imagine a world without Finance. In other words, Finance is the soul of our economic activities. To perform any economic activity, we need certain resources, which are to be pooled in terms of money (i.e. in the form of currency notes, other valuables, etc.). Finance is a prerequisite for obtaining physical resources, which are needed to perform productive activities and carrying business operations.

Hence, Finance has now become an organic function and inseparable part of our day-to-day lives.

Definition of Finance

Finance is defined in numerous ways by different groups of people. Though it is difficult to give a perfect definition of Finance following selected statements will help you to deduce its broad meaning.

1. In General sense,

“Finance is the management of money and other valuables, which can be easily converted into cash”.

2. According to Experts,

“Finance is a simple task of providing the necessary funds (money) required by the business of entities like companies, firms, individuals and others on the terms that are most favourable to achieve their economic objectives”.

3. According to Academicians,

“Finance is the procurement (to get, to obtain) of funds and effective (properly planned) utilisation of funds. It also deals with profits that adequately compensate for the cost and risks borne by the business”.

Most organisations have finance managers or financial departments in charge of financial operations. Financial management performs the following finance functions:

• Planning

• Budgeting

• Obtaining funds

• Controlling funds

• Collecting funds (Credit management)

• Auditing

• Managing taxes

• Advising top management on financial matters

For example, obtaining funds is a very important finance function, because the amount of money needed for various time periods and its sources are fundamental questions in sound financial management. Credit management gives a firm chance to earn money having an interest on credits and loans given. Finance manager must be sure that the firm doesn’t lose too much money to bad debt losses.

Personal finance

All the money a person receives or earns as payment is his or her income. This can include:

• a salary: money paid monthly by an employer or wages: money paid by the day or the hour, usually received weekly

• overtime: money received for working extra hours

• commission: money paid to salespeople and agents – a certain percentage of the income the employee generates

• a bonus: extra money given for meting a target or for good financial results

• fees: money paid to professional people such as lawyers and architects

• social security: money paid by the government to unemployed and sick people

• a pension: money paid by a company or the government to a retired person.

Salaries and wages are often paid after deductions such as social security charges and pension contributions.

Amounts of money that people have to spend regularly are outgoings (expenses). These often include:

• living expenses: money spent on everyday needs such as food, clothes and public transport

• bills: requests for the payment of money owed for services such as electricity, gas and telephone connections

• rent: the money paid for the use of a house or flat

• a mortgage: repayments of money borrowed to buy a house or flat

• health insurance: financial protection against medical expenses for sickness or accidental injuries

• tax: money paid to finance government spending.

Business finance

When people want to set up or start a company, they need money, called capital. Companies can borrow this money, called a loan, from banks. The loan must be paid back with interest: the amount paid to borrow the money. Capital can also come from issuing shares or equities – certificates representing units of ownership of a company. The people who invest money in shares are called shareholders and they own part of the company. The money they provide is known as share capital. Individuals and financial institutions, called investors, can also lend money to companies by buying bonds – loans that pay interest and are repaid at a fixed future date.

Money that is owed – that will have to be paid – to other people or businesses is a debt.

The money that a business uses for everyday expenses or has available for spending is called working capital or funds.