1. A) Supply the articles where necessary.

b) Write down 3-5 questions about the text.

c) Say in what activities financial managers are involved.

Financial Management explains how ... financial management can help maximize the value of their firms by making better decisions in such areas as capital budgeting, choice of capital structure, and working capital management.

Financial managers also have ... responsibility for deciding the credit terms under which customers may buy, how much inventory ... firm should carry, how much cash to have on hand, what types of securities to issue, whether to acquire ... other firms (merger analysis) and how much of the firm earnings to plough back in the business versus payout as dividends.

A successful firm usually has ... rapid growth in sales, which requires investments in ... plant, equipment and inventory. The financial manager must help decide on ... specific assets to acquire and the best way to finance these investments. For example, should ... firm finance with debt or equity, and if debt is used, should it be long-term or short-term?

In this connection, the financial manager must deal with ... money and capital markets, where funds are raised and where the firm’s securities are traded. As a consequence, financial managers f many large companies are responsible for working with investors (for example, mutual funds), bond rating agencies, stock holders, and the general financial community.

Financial managers, controllers in particular, are also responsible for financial accounting – preparation of the financial statements for ... firm, cost accounting – preparation of ... firm’s operating budgets, and preparation of reports that the company must file the various government (local, state and federal) agencies.

One of ... major documents developed and controlled by financial managers is the Enterprise Financial Plan. It comprises ... requirements for financial resources and the amounts currently available and expected in ... future to meet them, i.e. the estimated revenues and expenditures of an enterprise within some future period of time. The enterprise financial plan determines whether ... cumulative revenues exceed the cumulative outlays at every point of time during ... plan period and whether the necessary capital structure is assured.

The enterprise financial plan is composed of ... revenue plan, ... expenditure plan and ... financing or credit plan.

Words you may need:

financial accounting – фінансовий облік

cost accounting – виробничий облік

file – представляти певний документ

cumulative – сукупний

2. A) Read the text.

b) Say what you think about the conflict between managers and shareholders.

Corporate Governance

The financial manager’s duties include different tasks aimed to maximize the shareholders’ wealth.

It has been observed, however, that in practice not all management decisions are consistent with this objective.

In other words, there often is a divergence between the shareholder wealth maximization goal and the actual goals pursued by management.

Instead of seeking to maximize shareholder wealth, management try to satisfy their own welfare. In doing so managers are concerned with their job security. The concern for long-run survival may lead management to minimize (or limit) the amount of risk incurred by the firm, since unfavourable outcomes can lead to their dismissal or possible bankruptcy for the firm.

The existence of divergent objectives between owners and managers is an example of problems arising from agency relationships. Agency relationships take place when one or more individuals (the principals) hire another individual (the agent) to perform a service on behalf of the principals.

In an agency relationship, decision-making authority is often delegated to the agent from the principals.

Conflicts between corporate managements and shareholders surfaced as a major public policy issue in the 1980s. the potentially adversarial principal-agent relationship between corporation owners and managers has long been recognized. In the last decade, however, two major developments brought this issue to greater prominence.

First, corporate managements, responding to a wave of hostile corporate takeovers, instituted various defensive strategies. These defences were designed to prevent the target companies from being acquired easily, thereby protecting the jobs of exiting management. Indeed, they appear to have had the intended result of making those companies worth less to prospective acquirers. However, they also reduced the value of the companies to their existing shareholders.

Second, large shareholders came to realize that they wielded considerable corporate voting power. The growth of institutional investors has concentrated corporate ownership in the hands of a relatively few organizations. The resources of these large organizations enabled them to actively oppose management decisions that diminished the value of their investment. Corporate governance has become the catchall description for institutional investor efforts to influence the fundamental business policies of corporate managements.

Words you may need:

corporate governance – керівництво корпораціями

to be consistent (with) – відповідати

divergence – відхилення

survival – виживання

to incur a risk – нести ризик

agency relationships – взаємовідносини між агентом та принципалом

adversarial – той, що містить елемент суперництва

wield – володіти, мати в руках (владу, вплив і т.п.)

catchall – повний