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growth performance. In other words, it is not only the level of profits that may be limited in the current market, but also the growth of sales.

II. The mistakes in the sentences below have been underlined. Correct

them.

1.Diversification is the process whereby a firm shifts to being a single-producer.

2.Although a business produces a single product in a single market, it depends on that market.

3.Diversification enable the business to spread risk.

4.Businesses might also have encouraged to spread risk.

5.In other words, it is not only the current markets that may be limited in the level of profits, but also the growth of sales.

1.

2.

3.

4.

5.

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THE FIRM AS A LEGAL ENTITY

The legal structure of the firm is likely to have a significant impact on its conduct, and subsequent performance, within the market place. There are several types of firm, each with a distinct legal status.

___ (1)

This is where the business is owned by just one person. Usually such bus i- nesses are small, with only a few employees. Retailing, building and farming are typical areas to find sole proprietorships. Such businesses are easy to set up and may require only a relatively small initial capital investment. They may well flourish if the owner is highly committed to the business, and they can be very flexible to changing market conditions. They suffer two main disadvantages, however:

Limited scope for expansion. Finance is limited to what the owner can raise personally. Also there is a limit to the size of an organisation that one person can effectively control.

Unlimited liability. The owner is personally liable for any losses that the business might make. It could result in the owner’s house, car and other assets being seized to pay off any outstanding debts.

___ (2)

This is where two or more people own the business. In most partnerships there is a legal limit of 20 partners. Partnerships are common in the same fields as sole-proprietorships. They are also common in the professions: solicitors, accountants, surveyors, etc. With more owners, there is more scope for expansion. M ore finance can be raised and the partners can each specialise in one aspect of the business.

Partners, however, still have unlimited liability. This problem could be very serious. The mistakes of one partner could jeopardise the personal assets of all the other partners.

Where large amounts of capital are required and/or when the risks of business failure are relatively high, partnerships are not an appropriate form of organisation. In such cases it is best to form a company (or “joint -stock company” to give it its full title).

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___ (3)

A company is legally separate from its owners. This means that it can enter into contracts and own property. Any debts are its debts, not the owners.

Each owner has a share in the company. The size of their share holdings will vary from one shareholder to another and will depend on the amount they invest. Each shareholder will receive his or her share of the company’s distributed profit. The payments to shareholders are called “dividends”.

The owners have only limited liability. This means that, if the company goes bankrupt, the owners will lose the amount of money they have invested in the company, but no more. Their personal assets cannot be seized. This has the advantage of encouraging people to become shareholders, and indeed large companies may have thousands of shareholders – some with very small holdings and others, including institutional shareholders such as pension funds, with very large holdings. Without the protection of limited liability, many of these investors would never put their money into any company that involved even the slightest risk.

Shareholders often take no part in the running of the firm. They may elect a board of directors which decides broad issues of company policy. The board of directors in turn appoints managers who make the day -to-day decisions. There are two types of companies: public and private.

Public limited companies. Don’t be confused by the title. A public limited company is still a private enterprise: it is not a nationalised industry. It is “public” because it can offer new shares publicly: by issuing a prospectus, it can invite the public to subscribe to a new share issue. In addition, many public limited companies are quoted on the Stock Exchange. This means that existing shareholders can sell some or all of their shares on the Stock Exchange. The prices of these shares will be determined by demand and supply. A public limited company must hold an annual shareholders’ meeting.

Private limited companies. Private limited companies cannot offer their shares publicly. Shares have to be sold privately. This makes it more difficult for private limited companies to raise finance, and consequently they tend to be smaller than public companies. They are, however, easier to set up than public companies.

___ (4)

It is common, especially in large civil engineering projects that involve very high risks, for many firms to work together as a consortium. The Channel Tunnel and Thames Barrier are products of this form of business organisation. Within the consortium one firm may act as the managing contractor, while the other members may provide specialist services. Alternatively, management may be more equally shared.

I. Match each of these headlines with one of the texts above.

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II. Which text reports on these items?

III. In most of the lines below there is one extra word. It is either grammatically incorrect or does not fit in with the sense of the text. S ome lines, however, are correct. If there is an extra word in the line, write out the extra word in CAPITAL LETTERS .

00 Co-operatives. These are of two types.

01 Consumer co-operatives. These, like the old high street Co-ops, are 02 officially owned by the consumers. Consumers in a fact play no part in 03 the running of these co-ops. They are run by various professional

04 the managers.

05 Producer co-operatives. These are firms that are owned by their workers, 06 who share in the firm’s profit according to some agreed formula. They are 07 sometimes formed by people in the same trade coming together: in

08 example,producers of handicraft goods. At an other times they are formed 09 by workers buying out their factory from the owners; this is most likely if 10 it is due to close, with a resultant loss of jobs. Producer co-operatives, 11 although still relatively few in number, have grown in recent years.

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IV. Choose the best answer to complete each gap in the text.

Public corporations

These are state-owned enterprises such as the BBC, the Bank of England and nationalised industries.

They have a legal identity separate ___ (1) the government. The corporation is run ___ (2) a board, but the members of the board are ___ (3) by the relevant government minister. The boards have to act within various ___ (4) of reference laid down by Act of Parliament. Profits of public corporations that are not reinvested accrue to the ___ (5). Since 1980 many public corporations have been “privatised”: that is, they have been sold directly to other firms in the ___ (6) sector (such as Austin Rover to British Aerospace) or to the general public through a public issue of shares (such as British Gas).

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S HOULD CENTRAL BANK

BE INDEPEND ENT OF GOVERNMENT?

I. Read the text. Some parts of the text have been taken out. These e x- tracts are listed below. Complete each gap with the appropriate extract. One se n- tence does not belong in any of the gaps.

a)An independent central bank is free from political manipulation.

b)But the Bundesbank was concerned to dampen the inflationary pressures caused by German reunification.

c) The advocates of independence frequently cite the experience of Germ a-

ny.

d) Technology provides both opportunities and threats to the banking co m-

munity.

e) But with an independent central bank committed to monetary st ability, it may be difficult for the government to achieve such economic policy goals.

In recent years there has been much discussion among both economists and politicians as to whether the Bank of England should be independent. ___ (1). The

Bundesbank, Germany’s central bank, is fiercely independent, and is credited with being instrumental in Germany’s economic success. The Bundesbank’s philosophy is simple: M onetary and price stability are of overriding importance in the pursuit of growth. Inflation should be tightly controlled at all times.

The arguments in favour of an independent central bank are strong.

–___ (2) It can devote itself to attaining long-run economic goals, rather than to helping politicians achieve short-run success in time for the next election.

–Independence may strengthen the credibility of monetary policy. This may then play an important part in shaping expect ations: workers may put in moderate wage demands and businesses may be more willing to invest.

–An independent central bank has a clear legal status and set of responsibilities. It is the “protector of the currency” and as such it is not subordinate to government. This is important given the political nature of economic

policy making in both a domestic and an international context. The Bundesbank’s policy concerning the ERM (European M onetary System) is a good example. In 1992, international pressure mounted on Germany to cut interest rates as other ERM members faced a deeping recession. ___

(3). It stuck firmly to its statutory obligations and refused to cut interest rates, except when the domestic economy allowed.

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The statistics show that the greater the independence of a country’s central bank, the lower and more stable is its rate of inflation. If this is the goal of economic policy, it seems that more rather than less independence is desirable.

One of the major arguments against having an independent central bank is that it makes it more difficult to integrate monetary management into wider economic objectives. On some occasions it may be desirable to accept a higher rate of inflation – if this were the consequence of a growth stimulus aimed at reducing unemployment. ___ (4).

II. Are sentences below “Right” or “Wrong”? If there is not enough information to answer, choose “Doesn’t say”.

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III. The mistakes in the sentences below have been underlined. Write the corrections in the spaces provided.

1._____________________________________________

2._____________________________________________

3._____________________________________________

4._____________________________________________

5._____________________________________________

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ARE THE DAYS OF CAS H NUMBERED?

EFTPOS versus ATMs

I. Read the text. Some parts of the texts have been taken out. These extracts are listed below. Complete each gap with the appropriate extract. One sentence does not belongin any of the gaps.

a) But under some circumstances cheques are more efficient than cash.

b) Subsequently your account will be automatically debited and the retai l- er’s account automatically credited.

c)So are we using more cash or less cash?

d)So are we moving towards a cashless society? Probably not.

e) This is where you pay for goods in the shops by means of a card – either a credit card (like Access or Visa) or a debit card (like Switch or Connect).

f) Banking is becoming increasingly automated, with computer debiting and crediting of accounts replacing the moving around of pieces of paper.

___ (1) What was once done by a bank clerk is often now done by computer. One possible outcome of this replacement of labour by computers is the gradual elimination of cash from the economy – or so some commentators have

claimed.

The most dramatic example of computerisation in recent years has been EFTPOS (electronic funds transfer at the point of sale). ___ (2) The card is simply “swiped” across a machine at the till which may then require you to enter your PIN (personal identification number). The details of the transaction (the amount, the retailer and your card number) are then transmitted down the line to the EFTPOS UK processing centre. If necessary, the information is then directed down the line to the card issuer for authorisation. If the card is valid and the transaction acceptable, then within seconds the machine will issue a slip for you to sign and the purchase is complete.

___ (3)

The advantage of this system is that it does away with the processing by hand of pieces of paper. In particular it does away with the need for (a) credit -card slips when used in conjunction with credit cards and (b) cheques. Both cheques and credit-card slips have to be physically moved around and then read and processed by people. If this EFTPOS system were to become widely used for small transactions, it could well reduce the need for cash. But reducing the need for cash is not the prime purpose of EFTPOS. Its prime purpose is to do away with cheques and credit -card slips.

____ (4) Cash is still the simplest and most efficient way of paying for a host of items, from your bus ticket to a newspaper to a packet of mints. What is more, another technical innovation is moving us in the direction of using more cash, not less! This is the cash machine – or ATM (automated teller machine), to give it its official title.

____ (5) The evidence suggests a gradual decline in cash in circulation as a proportion of GDP. It fell from just over 5 per cent of GDP in 1980 to just over 2% per cent in 1997.

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But although the effects of EFTPOS and ATMs may be quite different in terms of the use of cash, they both have the same advantage to banks: they reduce the need for bank staff and thereby reduce costs.

II. Look at statements 1-4. In each statement, which phrase or sentence is correct?

1. One possible outcome of the replacement of labour by computers is the gradual elimination of cash from the economy – or so some commentators have claimed.

A. It is suggested that cash should be removed from the economy. B. It is supposed that computers will deal with cash rather than people.

C. It is stated that the economy might get rid of cash as a result of computerisation.

2. If necessary, the information is then directed down the line to the card issuer for authorisation.

A. If there is a need the card issuer is addressed for user identification. B. If necessary, local authorities are addressed to confirm the information. C. Every time the card is used, it should be checked by the card issuer.

3. The advantage of this system is that it does away with the processing by hand of pieces of paper.

A. The system has stopped the processing by hand of pieces of paper and this is its advantage.

B. There is not much paperwork with the introduction of the system.

C. The system has the advantage of completing manual processing of pieces of p a- per.

4. If this EFTPOS system were to become widely used for small transactions, it could well reduce the need for cash.

A. The application of the EFTPOS system to a greater number of small transactions is likely to reduce the need for cash.

B. Cash will no longer exist, if the EFTPOS system is used for small transactions.

C. M aking small transactions people would avoid using cash if the EFTPOS system were introduced.

III. Choose the best answer to complete each gap in the text.

The ___ (1) of cash machines to virtually ___ (2) bank and building society branch and to many larger stores has been ___ (3) in recent years. The sheer simplicity of ___ (4) cash at all hours from these machines, not only from your ___ (5) account but also on your credit card, is obviously a huge encouragement to the use of cash.

IV. Are sentences below “Right” or “Wrong”? If there is not enough information to answer, choose “Doesn’t say”’.

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