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UNIVERSITATEA AGRARĂ DE STAT DIN MOLDOVA
Elvira SUSARENCU
Elena BOCAN
BUSINESS COMMUNICATION
IN ENGLISH
CHIŞINĂU 2008
CZU 811.111:334.12(075.8)
S 96
Autori:
Elvira Susarencu, lector universitar, UASM
Elena Bocan, lector universitar, UASM
Recenzenţi:
Ludmila Grigoriev, doctor, conferenţiar universitar, catedra limbi
moderne, Universitatea Agrară de Stat din Moldova
Tamara Gogu, doctor în filologie, conferenţiar universitar, catedra
filologie engleză, Universitatea Pedagogică de Stat „Ion Creangă”
Tamara Matei, doctor în filologie, şeful catedrei de limbă
engleză, Universitatea de Stat din Moldova
Manualul corespunde curriculum-ului la limba engleză în cadrul
învăţămîntului universitar şi include texte informative de specialitate din
domeniul comunicării în afaceri şi al economiei. „Business communication
in Economy” propune teme variate care se axează pe dezvoltarea
competenţei de comunicare.
Manualul este destinat studenţilor facultăţii de Economie,
specialităţilor de 366.1 Economie Generală, 364.1 Finanţe şi Bănci, 363.1
Business şi Administrare, 362.1 Marketing şi Logistică, 365.1 Economie
Mondială şi REI, 363.2 Achiziţii.
Se editează conform hotărîrii Senatului UASM din 15 februarie
2008, proces-verbal Nr. 03.
DESCRIEREA CIP A CAMEREI NAŢIONALE A CĂRŢII
Susarencu, E.
Business communication in English / E. Susarencu, E. Bocan;
Univ. Agrară de Stat din Moldova. – Ch.: UASM, 2008 – 399 p.
ISBN 978-9975-64-113-5
100 ex.
CZU 811.11:334.12(075.8)
S 96
ISBN 978-9975-64-113-5
© All rights reserved
Cuprins:
Prefaţă ............................................................................... 5
Unit 1. What is Economics? ............................................ 7
Supplementary reading “The Good Life Beckons” ............ 20
Autevaluation test to unit I ................................................. 21
Unit 2. The small business scene ..................................... 28
Supplimentary reading “Small business” ........................... 41
Autevaluation test to unit II ................................................ 43
Unit 3. Advantages and disadvantages
of running a small firm .................................................... 50
Supplementary reading “These booths
are made for export” ........................................................... 64
Autevaluation test to unit III ............................................... 66
Unit 4. Financial statements ............................................ 73
Supplementary reading “Past experiences” ........................ 89
Autevaluation test to unit IV .............................................. 90
Unit 5. The comprehensive plan ..................................... 97
Supplementary reading “Planning Ahead” ......................... 113
Autevaluation test to unit V ................................................ 117
Unit 6. Surveying the market ......................................... 124
Supplementary reading “Marketing with Computers” ....... 139
Autevaluation test to unit VI .............................................. 141
Unit 7. Advertising and promotion ................................. 148
Supplementary reading “The Name of
the Game Is the Brand Name” ............................................ 165
Autevaluation test to unit VII ............................................. 168
3
Unit 8. Sources of financing for new small firm ........... 174
Supplementary reading “Guidelines for
Choosing an Account Executive” ....................................... 187
Autevaluation test to unit VIII ............................................ 189
Unit 9. Choosing a legal form of organization .............. 195
Supplementary reading “Demassing: Building
a Lean, Mean, Competitive Machine” ................................ 208
Autevaluation test to unit IX .............................................. 210
Unit 10. How to set prices ................................................ 216
Supplementary reading “A New Price Policy
for America's Largest Retailer” .......................................... 231
Autevaluation test to unit X ................................................ 233
Appendixes
Appendix I – Words formation ........................................... 240
Appendix II – Irregular verbs ............................................. 245
Appendix III – Phrasal verbs ............................................. 250
Appendix IV – List of Business English Idioms ................ 258
Appendix V – Explanation of the most common
Economic Terms ......................................... 273
Appendix VI – Economical Terminology Guide ............... 279
Appendix VII – Financial terms and ratios ........................ 367
Appendix VIII – Parts of a business letter .......................... 382
Answer keys to tests .......................................................... 398
Bibliography ...................................................................... 399
4
PREFAŢĂ
Manuscrisul/ Manual “Business communication in English”
are ca obiectiv esenţial perfecţionarea cunoştinţelor de limbă
engleză prin utilizarea a diferitor tipuri de lectură cu referinţă la
vorbirea monologată orală şi scrisă, cît şi a discuţiilor, dezbaterilor, opiniilor, demonstraţiilor, argumentărilor şi convingerilor.
Sursa cuprinde 10 unităţi pe diferite aspecte ale economiei şi domeniului comunicării în afaceri selectate din surse
originale britanice şi americane.
Fiecare unitate conţine următoarele compartimente:
Objective and Task, Motto, Terms to know, Text, Comprehension, Grammar, Word study, Translation exercises, Discussion,
Writting, Supplimentary reading şi Test.
Fiecare unitate scopul şi obiectivul fiecărei teme, ceea ce
facilitează munca profesorului pentru întocmirea unui plan al
lecţiei. Fiecare unitate debutează cu un citat Motto-u ce reflectă
tematica dată şi este un prilej, o provocare sau un îndemn la
meditaţii şi discuţii.
Compartimentul Terms to know cupride majoritatea
termenilor de specialitate referitor la tema dată, traduşi în limba
română şi rusă, ceea ce va facilita înţelegerea textului şi
îmbogăţirea vocabularului activ al studenţilor.
Compartimentul Text propune pentru studiu teme de
specialitate din Economie, Management, Marketing, Contabilitate, Business şi administrare.
Comportamentul Comprehension cuprinde întrebări pe
baza textului pentru însuşirea temei propuse, studiul lexicului
de bază în diverse situaţii, cum ar fi găsirea compatibilităţii
unui termen cu definiţia sa.
Compartimentul Grammar se axează pe studierea aprofundată a tuturor aspectelor verbului englez pe bază de tabele
explicative cu exerciţii practice, ceea ce simplifică înţelegerea
şi accesibilitatea definiţiilor gramaticale.
5
Word study propune lucrul cu dicţionarul pentru a găsi
sinonime şi antonime sau formarea cuvintelor cu aceeaşi
rădăcină pentru lărgirea şi consolidarea lexicului studenţilor în
domeniul afacerilor.
Translation exercises propune exerciţii de traducere din
limba maternă în limba engleză care are menirea să fixeze
lexicul şi să-l activeze în actul vorbirii.
Compartimentul Supplimentary reading propune articole
din presa actuală pentru lectură individuală, ceea ce contribuie
la aprofundarea cunoştinţelor de bază la specialitatea cu profil
economic.
Compartimentele Discussion şi Writing are ca scop
crearea atitudine faţă de problemele abordate, de practicarea
tehnicii scrisului sau servesc drept punct de reper într-o
dezbatere. În baza modelelor studiate, a vocabularului tematic,
a informaţiei sesizate studenţilor li se propun exerciţii ce ţin de
exprimarea scrisă.
La finele fiecărei unităţi sunt propuse Teste, ce cuprind
întrebări de lexic şi gramatică şi propun 4 variante de răspuns
pentru evaluarea cunoştinţelor studenţilor căpătate în cadrul
fiecărui compartiment.
Al doilea compartiment al manualului include 8 Anexe,
ce cuprind informaţia – cheie cu referire la dificultăţile ce ţin
de formarea cuvintelor prin sufixare/prefixare, verbe neregulate, ghid de terminologie economică, termeni financiari în
definiţii şi scrisori de afaceri cu expresii tip şi modele cu cele
mai variate tipuri de scrisori şi sfaturi utile în corespondenţă.
Conţinutul şi forma de prezentare sînt moderne şi susţin
învăţarea ca proves logic, asociativ, şi nu mecanic.
Autorii
6
Unit 1. What is Economics?
Objectives: to get acquainted with Economics; to revise the
Present and Past Tenses
Tasks: to give the explanation of the new terms; to discuss the
economical theory; to ask information about
macroeconomics/ microeconomics; to match the words with
their definitions
Motto:
“Economics is a method rather
than a doctrine, an apparatus of
the mind, a technique of thinking
which helps its possessor to draw
correct conclusions”
Author: John M. Keynes
Terms to know:
scarce resources
resurse puţine
consumer
saver
latest equipment
consumator
persoană economă
utilaj performant
voluntary exchange
economic freedom
schimb intenţionat
libertate economică
to require
to deliver
competitive markets
a cere
a distribui,
a livra, a preda
măiestrie, abilitate
de organizare
pieţe de concurenţă
market economy
willingness
economie de piaţă
bunăvoinţă
organizational skills
7
недостаточные
средства
потребитель
бережливый человек
последнее
оборудование
добровольный обмен
экономическая
свобода
требовать
доставлять
организационные
качества
конкурирующие
рынки
рыночная экономика
готовность
scarcity price
marginal production
cost
preţ supraevaluat
din cauza insuficienţei ofertei
cost marginal al
produsului
choice
аlegere
to choose/chose/ chosen a alege
instead
în schimb/ loc, mai
degrabă
to organize
a organiza
to coordinate
a coordona
raw materials
materie primă
to provide a service
a aproviziona, a
presta un serviciu
free market economy economie liberă de
piaţă
to accomplish
a realiza, a face
to allow
a permite
to own
a poseda
will
dorinţă
to face
a înfrunta
to afford
trade-off
income
employee
a-şi permite,
a oferi
negociere
venit
funcţionar
недостаток в цене
предельные
издержки
производства
выбор
выбирать
вместо
организовать
координировать
сырьë
предлагать
обслуживание
свободная рыночная
экономика
выполнять
разрешать
владеть, обладать
желание, воля
сталкиваться с чемлибо
позволить себе
сделка, обмен
прибыль
работник
TEXT
Every day in our country millions of people choose
about using scarce resources. They weigh the costs and benefits
of these choices as consumers, savers, workers, business
owners or managers, and government officials. Together, those
choices create an economy. We can’t possibly identify each of
these choices, but we can put them into three groups. Let’s call
them the what, how, and who choices.
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What – What goods and services are to be produced and in
what quantities? People choose the kinds and quantities of
goods and services to produce.
How – How should those goods and services be produced?
There is more than one way to build a home or a school, to
manufacture an automobile, or to farm the land. Will the school
and home be built from brick or wood? Will the automobile
plant use flexible work teams or a traditional assembly line?
Will farmers use the latest equipment, or will they use older
machinery and more workers instead? (That is, who will
produce them and which resources will be used to do so ?)
Who - Who receives those goods and services? Since there
can’t be enough production to satisfy everybody’s wants, the
goods and services that are produced must be divided among
people who want more than they can possibly have. For
example, there aren’t enough CD players to go around for
everyone who wants one. (This is the question "who gets what?)
We generally describe the economy as consisting of
three sectors:
Ø The primary sector: agriculture, and the extraction of
raw materials form the earth;
Ø The secondary sector: manufacturing industry, in
which raw materials are turned into finished products
(although of course many of the people working for
manufacturing companies do not actually make
anything, but provide a service – administration, law,
finance, marketing, selling, computing, personnel and
so on);
Ø The tertiary sector: the commercial services that help
industry to produce and distribute goods to the final
consumers, as well as activities such as education,
health care, leisure, tourism, and so on.
An economy organizes and coordinates all these
choices. But an economy is not something apart from the
9
people who participate in it. Our individual choices as
consumers, workers, savers, and producers determine what is
produced, how things are produced, and who receives them. In
any country the way people answer these questions describes
the type of economic system they have. In Moldova there is a
free market economy, in the United States there is a market
economy, which is sometimes called a free entreprise system or
capitalism.
A market occurs whenever and wherever people voluntarily
make exchanges with one another. The markets allow
businesses and individuals who own their resources to
exchange them voluntarily. In a system of voluntary exchange,
both parts benefit.
Free market economy is an economic system in which
individuals and firms are free to enter and leave markets at
their will.
Economic freedom ensures the existence of competitive markets,
because sellers and buyers can enter markets as they choose.
Economics is the study of people producing and exchanging to
get the goods and services they want. Understanding economics
means learning its content and using it to think more accurately.
Goods are physical products businesses produce - like
computers, basketball shoes, pizza etc.
Services are products you can’t touch - like plumbing and auto
repairs, taxi rides, and haircuts.
Scarcity is the result of an inability to satisfy all of everyone’s
wants. You face scarcity when you have more things to do
during the day than time to accomplish them. In this case your
time is scarce. Everyone faces scarcity. Consumers want more
than they can afford. Workers don’t have enough time to get
everything done. Even business faces scarcity. Likewise,
government faces a scarcity of funds, despite their power to
raise money through taxation. Consequently, we all must make
choices about using money, time and other resources.
„The solution to scarcity is obvious,” you might say. „If
10
the government printed more money, we could afford all we
want.” But the problem isn’t really a scarcity of money; it’s a
scarcity of all the things we buy with money – goods and
services. Goods and services are scarce because our resources
are scarce.
Resources are the basic elements used to produce goods and
services. There are three types of productive resources: natural,
human and capital.
Natural resources are unaltered gifts of nature, such as
minerals, timber and fresh air.
Human resources, or labor, are the physical and mental efforts
people use to create goods and services.
Capital resources are the buildings, tools and machines people
create to produce other goods and services. So, too, is a truck
that delivers gasoline and a computer or telephone that delivers
information. Since producing any good or service requires
natural, capital, and human resources, economists often call
them factors of production.
Some economists also include management or enterpreneurship in the list of productive resources. Imaginative
thinking, the willingness to take risks, and the management and
organizational skills needed to operate a business are extremely
important to the success of business and economy. However
this list of the factors of production is limited to those
resources people can see, touch, feel and measure.
Because resources are scarce, they can only be used one
way at a time. Consequently, when you choose to use a
resource for one purpose, you give up a chance to use it for
another. Each choice has an opportunity cost, it is always the
best alternative you give up when making a choice. Economists
often focus on the additional; or extra costs or benefits of a
choice. Technically, these are called marginal costs and benefits.
By focusing on marginal costs and benefits, consumers and
producers often give up some of one thing to have more of
another. This is a trade-off.
11
For convenience, economists usually study the choices
of an individual, a family, or a business separately from all
these choices put together as a nation. They even have specific
names for each area of study – macroeconomics and microeconomics.
Macroeconomics is the study of the economy as a whole; microeconomics is the study of individual consumers and businesses.
Macroeconomics examines questions that lead to an
understanding of „the big picture.” How fast is the level of
production in the nation changing? How fast are the prices
rising? How many people are unemployed? How has the
nation’s income changed? Macroecenomics also seeks to
understand economy – wide issues, such as unemployment,
poverty, and long term economic growth.
Microeconomics examines the choices that individuals,
families, and business make. What prices should we charge for
a concert ticket? What wages should we pay our employees?
Should we invest in new computers? How do our customers
like our new advertising campaign?
COMPREHENSION
1. Answer the following questions:
1. What are the three basic groups of choices?
2. What do they mean?
3. What is economy?
4. Which activities are as important as the production of goods?
5. Where does a market occur?
6. What kind of economic system is in Moldova?
7. What is the difference between goods and services?
8. How could you explain the term “scarcity”?
9. What are the types of productive resources?
10. What is the difference between macroeconomics and
microeconomics?
11. Explain the motto of the lesson.
12
2. In each of the following, select the word of phrase that
best completes the statement or answers the questions.
l. Detailed knowledge about the production and distribution of
most products
a. is concentrated in a small team of managers.
b. is spread among many people who may not even know
each other.
c. is collected and summarized by the Department of
Commerce.
d. is easily obtained from the Internet.
2. In a voluntary exchange between two people
a. both people believe they are benefiting.
b. one person's gain is the other's loss.
c. both people lose.
d. no one really benefits or loses.
3. Which of the following illustrates a market?
a. A person buying a milkshake at an ice cream store.
b. Someone using a mail order catalog, telephone, or credit
card to buy clothing.
c. None of the above.
d. Both of the above.
4. The unemployment rate is a subject of
a. microeconomics.
b. macroeconomics.
c. opportunity costs.
d. marginal costs and benefits
5. In a market economy, what organizes and coordinates the
production of goods and services?
a. Voluntary exchange
b. Scarcity
c. Government
d. Banks
6. Economists say that scarcity is a relative concept. This
means that
13
a. resources are scarce only in poor societies.
b. scarce and limited resources are identical.
c. the scarcity of resources can change if wants or amounts
of resources available change.
d. market economies usually eliminate scarcity.
GRAMMAR
THE PRESENT and PAST TENSES
The Present (Simple)
It is used to express:
1. A state or a single action at
the present moment;
(e.g. I often have lunch in the
office)
2. Habitual or repeated actions;
(e.g. They usually get up very
yearly)
3. General statements covering
all time.
(e.g. I prefer coffee to tea )
Time-indicators: usually, generally,
often, always, sometimes, … every
day, week, month
The Present Perfect
The present result of a past
action or experience;
(e.g. I have just met some new
partners.)
Time-indicators: How long?
just, already, yet, ever, never.
The Present Continuous
1. An action being performed
at the moment of speaking or
writing;
(e.g. What are you doing?/ I’m
making a report.)
2. Temporary habit (the action
is happening about this time)
(e.g. He is working hard this
term.)
Time-indicators: now, just, at the
moment, still (look, listen)
The Present Perfect Continuous
It is used to express: the same
kind of meaning as the Present
Perfect, though the action is very
often still happening. This tense
answers the question How long?
Since when?
(e.g. He has been working here
for three years / How long? )
For - the whole period of
duration
Since - what point of time the
action began
14
The Past (Simple)
1. An action wholly completed at
some point in the past;
(e.g. He attended well the
presentation last week.)
2. Repeated actions
(e.g. During the winter session I
made a lot of appointments).
Time-indicators: yesterday, last
week/month, year …, in 1997,
1,2 years ago, long ago.
The Past Perfect
1. A single action or repeated
actions which took place before
a given past moment;
(e.g. All the people had come by
seven o’clock.)
Time-indicators: for, since, by
… o’clock, by summer, by that
time/ after…, before…, …
when…
The Past Continuous
1. An action going on at a given
past moment;
(e.g. They were risking a lot
with the new services last year
this time.)
2. It indicates that an action was
going on a time when something
else happened;
(e.g. The secretary was drinking
tea when the manager entered.)
Time-indicators: yesterday, last
week/month, year
The Past Perfect Continuous
1. An action begun before a
given moment in the past and
continued into that past moment;
(e.g. By that time he had been
dealing his affairs very well.)
Time-indicators: for, since, by
… o’clock, by summer, by that
time/ after…, before…, …
when…
3. Open the brackets putting the verbs in the necessary form:
1. I (not to type) ………… a letter now, I (drink ) …………..
coffee, I have a break.
2. The firm (to face) …………. difficult problems when the
top manager came.
3. Ford (to produce) ………….. the Edsel, a large heavy
automobile, when the public (to be interested) ………………..
in smaller, sportier cars.
15
4. An economy (to organize) .................. and (to coordinate)
................... all these choices.
5. Joe always (to want) …………... to own and operate a
Mexican restaurant.
6. When he (to return) …………. from business trip, he (to
call) …………. on us.
7. You (not to see) ………….. me for ages.
8. We (not to understand) ………….. the problem yet.
4. Talk about your daily routine with a partner. Use these
adverbs: always, usually, often, sometimes, occasionally,
rarely.
WORD STUDY
5. Give synonyms for:
Consumer
To require
Income
To deliver
Skill
To own
Expense
To afford
Demand
To argue
6. Explain the terms:
Market
Scarcity
Goods
Services
Production
7. Form words of the same root and state what part of
speech they are (see Appendix 1):
To divide
Commerce
To doubt
Centre
To settle
Collection
8. Match the words with their definitions.
1. economics
a. Items of value that can be seen and
touched.
16
2. economic
system
3. entrepreneur
4. goods
5. opportunity
cost
6. scarcity
7. services
8. market
9. capital
resources
10. free
enterprise
b. Whenever and wherever people
exchange with one another.
c. Another name for a market economy.
d. How people in a society make the
what, how and who decisions.
e. Items of value that cannot be seen or
touched.
f. Machinery and tools.
g. Takes business risks in hopes of
earning a profit.
h. The inability to satisfy all of
everybody’s wants.
i. Study of people producing and
exchanging to get the things they want.
j. The best alternative one gives up when
making a choice.
9. Complete the sentences with suitable words and try to
explain them.
Earn, countryside, growth, industrialized, manufacturing,
agriculture, industrial
Two hundred years ago, the vast majority of the
population of every country lived in the .......................and
worked in agriculture. Today, in what many people call „the
advanced .......................... countries”, only 2-3% of the
population ..................... their living from .................... But
some people already talk about „the post-....................
countries”, because of the .............................. of service
industries, and the decline of ........................ , which is moving
to „the developing countries”.
10. Use the words in the box once each to complete the
paragraph below. Notice that the stressed syllable changes
in this group of words.
17
Verb
Nouns
Adjectives
pro'duce 'product
pro'ductive
pro'duction 'unpro'ductive
produc'tivity
pro’ducer
'produce
A few years ago, Harry Coe's, a large (1)...............................of
tinned food (2)...............................s, decided that some of their
workers were not (3)............................enough. Much of the
work of preparing fruit and vegetables was done on rows of
tables rather than on a (4)...............................line. So they
decided to introduce a piecework system, whereby workers got
paid according to the amount of work they completed. The
company thought that this would motivate previously
(5)...............................workers,
and
thereby
increase
(6)................................ .
Yet the new pay scheme did not (7)...............................the
results they expected: after six months they were still
processing
the
same
amount
of
agricultural
(8)..............................., but there was a lot of dissatisfaction
among the workers who were now all earning different
amounts of money.
TRANSLATION EXERCISES
1. Ţi-am urmat sfaturile şi nu am avut probleme în procurarea
acestui utilaj performant.
2. Mărfurile s-au vîndut foarte repede datorită abilităţilor
noastre de organizare a pieţei locale.
3. Pe pieţele de concurenţă trebuie să profităm din plin de
bunăvoinţa clienţilor pentru a avea rezultate cît mai bune.
4. Aprovizionarea cu materie primă.
5. Întreprinzătorii sînt înlăturaţi de pe piaţă dacă nu asigură
mărfuri şi servicii de calitate.
18
6. Strategia preţurilor a fost stabilită şi inclusă în planul de
vînzări pe termen lung.
7. S-a constatat că reducerile de preţ favorizează rata vînzărilor.
1. Я последовал твоим советам и у меня не было проблем с
покупкой этого последнего оборудования.
2. Товар реализовался очень быстро благодаря нашим
способностям по организации местного рынка.
3. На конкурентных рынках мы должны удовлетворить
наших клиентов, чтобы получить хорошие результаты.
4. Обеспечение сырьём.
5. Предприниматели теряют конкурентоспособность, если
не обеспечивают рынок качественным товаром.
6. Стратегия цен была составлена и утверждена в плане
продаж на длительный срок.
7. Выяснилось что скидки улучшают показатели продаж.
DISCUSSION
1. In a market economy no individual or group decides what to
produce, how to produce, and who will get what is produced.
Yet these decisions are somehow made. Select a product and
explain how our market economy organizes and coordinates
people to make these decisions.
3. Every product you buy or see in stores involves the use of all
three types of productive resources-natural, human, and capital
resources. To prove this, select one of the products below and
list the resources used to produce it and transport it to market.
Choose one:
T-shirt
Apple
Loaf of bread
Hammer
Magazine or newspaper
See the example here: Product: Envelopes
19
Natural Resources
timber
fertile soil
water
Human Resources
paper mill workers
truckers
packers
order department
workers
machine operators
maintenance
workers
marketing staff
Capital Resources
cutting machine
folding machine
trucks
WRITING
1. „If people could have anything they wanted by rubbing a
magic lamp, there would be no economics”. Explain why you
agree or disagree with this statement.
2. Prepare a short paper explaining the economic theory.
Supplementary reading
The Good Life Beckons
The good society accepts the basic market system and
its managers, but there are some things the market system does
not do either well or badly. In the good society these are the
responsibility of the state. Some areas of state action are
evident. In no country does the market system provide good
low – cost housing. This is a matter of prime importance and it
must everywhere be a public responsibility. Few things are
more visibly at odds with a good society than badly housed or
homeless people.
Health care is also a public responsibility in all civilized
20
lands. No one can be assigned to illness or death because of
poverty. Here Britain can proudly point to its leadership. The
state has many other essential functions. It must also be borne
in mind that many of these – parks and recreational facilities,
police, libraries, the arts, others – are more needed by the
underclass than by the affluent. Those who attack the services
of the state are usually those who can afford to provide similar
services for themselves.
In a good society, there must also be paid attention to a
range of activities that are beyond the time horizons of the
market economy. This is true in the sciences which are not
excluding medical research. The market system invests for
relatively short run return. To support science is pre-eminently
the responsibility of the state.
Some of the truly important industrial achievements of
recent generations – the great improvements in agricultural
productivity, modern air transport advanced electronics – have
depended heavily on such public investments. Also it’s
necessary – a matter we are beginning reluctantly to recognize
– the investment and regulation in the longer – run interest of
the environment. The good society protects and improves life
in its planetary dimension.
(from New Statesman and Society, January 28th , 1994)
EVALUATION TEST TO UNIT I
1. The three groups of choices are:
a) what, how, who choices
b) when, where, what choices
c) who, how, how much choices
d) where, how, what choices
21
2. Who receives the goods and services?
a) people
b) government
c) banks
d) students
3. A market occurs:
a) voluntary
b) involuntary
c) friendly
d) imposed
4. The economic system in Moldova is:
a) capitalistic
b) socialistic
c) free enterprise system
d) free market economy
5. The services are:
a) physical products
b) untouched products
c) luxury products
d) foodstuff
6. Who organizes and coordinates the production of goods
and services in a market economy?
a) offices
b) banks
c) government
d) parliament
7. Business is:
a) an activity of making, buying, selling or supplying things
for money
b) commerce
22
c) trade
d) all of them
8. Factors of production are:
a) natural resources
b) capital resources
c) human resources
d) all of them
9. Scarcity is:
a) lack of something or difficulty to obtain it
b) plenty of something
c) limited resources
d) inability to satisfy all of everyone’s wants
10. Economy is:
a) The inability to satisfy all of everybody’s wants.
b) Study of people producing and exchanging to get the
things they want.
c) The best alternative one gives up when making a choice.
d) Items of value that can be seen and touched.
11. Macroeconomics is:
a) study of the economy as a whole;
b) level of production in the nation changing
c) unemployment
d) all of them
12. I __________________ TV when the telephone rang.
a) watched
b) was watching
c) are watching
d) have watched
23
13. I'm afraid I'm not hungry. I've _______ eaten lunch.
a) yet
b) still
c) already
d) ever
14. My mother let me ____________ late when I was a child.
a) to stay out
b) stayed out
c) stay out
d) staying out
15. Jack _____ (live) in Boston for the past 15 years.
a)has lived
b)lives
c) live
d) was living
16. Janet ____ (work) for Smith and Brothers before she
came to work for us.
a) works
b) worked
c) has worked
d) was working
17. Dad, ____ (you/finish) reading the paper yet?
a) did you finish
b) are you finishing
c) have you finished
d) do you finish
18. I would love to visit Prague sometime. Unfortunately,
I ____ (be/never) there.
a) have never been
b) was never
24
c) will never be
d) didn’t work
19. It … almost every day in Manchester.(rain)
a) rain
b) rains
c) is raining
d) has rained
20. John … very hard in class, but I don’t think he’ll pass
the course. (try)
a) try
b) tries
c) is trying
d) has tried
21. The books… on that shelf for fifteen years.
a) have be
b) have been
c) has be
d) has been
22. She … hard this semester.
a) have worked
b) have work
c) has worked
d) has work
23. Roberto often …. about his good friends in Mexico
a) thoughts
b) think
c) thinking
d) thinks
25
24. We’ll go out with you when our work….
a) have been done
b) has been done
c) has done
d) are done
25.I didn’t go to see the movie because I…. it twice.
a) saw
b) has seen
c) have seen
d) had seen
26.What… you…from 6:00 to8:00 last night?
a) were…doing
b) are… doing
c) did…do
d) have done
27. It …when they left.
a) rained
b) was raining
c) has rained
d) is raining
28. Some new oil fields…since 2000.
a) have opened up
b) opened up
c) was opened up
d) have been opened up
29. My younger brother… to the ground and hurt himself
while he … his bike.
a) fell…riding
b) fallen…was riding
c) was falling…rode
d) fell…was riding
26
30. The slaves were… as animals that could be bought and
sold.
a) thinking of
b) thought of
c) to be thought of
d) to think of
27
Unit 2. The small business scene
Objectives: to discuss the small business scene; to revise the
Future and the Future in the Past Tenses;
Tasks: to consider problems that arise in a small business
scene; to deal with lexical tasks, to evaluate proposals in a
meeting; to make future arrangements.
Motto:
„Business is a means - the only
means - to increase the quantity of
goods available for preserving life
and rendering it more agreeable.”
Author: Ludwig Von Mises
Terms to know:
собственник,
владелец
franchise
autorizaţie
франшиза
distribute goods
a distribui bunuri
распространять
товары
sell smth. at retail
a vinde cu amănuntul продавать в розницу
management
consultaţie
консалтинг по
consulting
managerială
менеджменту
preserve competition a păstra concurenţa
сохранить
конкуренцию
prevent monopolistic a împiedica controlul предотвратить
control
monopolistic
монополистический
контроль
преимущества
benefit of competition a beneficia de
concurenţă
конкуренции
incentive
stimul
стимул
procurement
ajutor tehnicoматериальноassistance
material
техническая
помощь
owner
proprietar
28
return
allowances
keep records
tax
валовой
национальный
продукт
a crea locuri noi de
создавать новые
muncă
рабочие места
a furniza, a oferi
снабжать
proprietate
собственность
vinzare cu amănuntul розничная торговля
vînzare en gros
оптовая торговля
producere
производство
cost total al bunurilor oбщая стоимость
имущества, сумма
баланса
cost net
стоимость
имущества за
вычетом
обязательств
profit brut
валовая прибыль
profit net
чистая прибыль
bon de plată
платёжная
ведомость
venit net
чистая выручка
cost total al vînzărilor общий объём
продаж
restituire
возмещение возврат
alocaţie
начисление
a duce evidenţa
вести учет
impozit, taxă
налог
bank loan
partnership
business premises
labour force
business failure
profit
assets
împrumut, credit
parteneriat
sediul firmei
forţă de muncă
faliment
venit, profit;
bunuri, fonduri
liabilities
datorii, debit, pasive
gross national product produs naţional brut
create new jobs
supply
ownership
retailing
wholesaling
manufacturing
total assets
net worth
gross profit
net profit
payroll
net receipts
total sales
29
банковская ссуда
партнёрство
помещение фирмы
рабочая сила
коммерческий крах
прибыль
активы, фонды,
средства
пассивы, долги
earnings
advertising agency
warehouse
cîştiguri, venit
agenţie publicitară
depozit
tangible
intangible
notes receivable
tangibil, material
intangibil, nematerial
act de primire
cash
equipment
real estate
retail business
surplus
total receipts
bookkeeping
merchandise
money borrowed
in bulk orders
financial investment
заработок, доходы
рекламное агентство
склад
материальный
нематериальный
векселя к
получению
în numerar
наличность
utilaj
оборудование
imobil
недвижимость
vînzare cu amănuntul розничная торговля
surplus
излишек
încasări totale
общая сумма
поступлений
evidenţă contabilă
бухгалтерский учет
mărfuri
товары
împrumut
деньги, взятые
взаймы
comandă mare
большой заказ
investiţii financiare
финансовые
инвестиции
TEXT
Today small businesses are the heart of the market
economy. There are a great number and variety of small
businesses. People become owners and operators of small
business firms in one of three ways: start a new firm, buy a
franchise, buy or inherit an existing firm.
Small firms have been established to do just about any
kind of business imaginable. They have been established to
manufacture and distribute goods, to sell them at retail and, of
course to provide all kinds of needed services. Some serve only
the local community, while others function in national and
international markets.
The vast majority of small firms concentrate on selling
30
material products, although an increasing number of firms
provide a service. Although an increasing number operate in
local markets, services, too, are exported. In recent years there
has been a great increase in the export of services, such as
management consulting, medical, and technological services.
The existence of a strong, healthy small business
community has always been recognized as the best way to
preserve competition, prevent monopolistic control of any
industries, and thus assure the population of the benefits of
competition through better prices and qualitative products.
Incentives have been provided to assist small firms. The
government of the US created the Small Business Administration (SBA) in 1954 to provide financial, management,
and procurement assistance for small firms.
There are some facts that illustrate the importance of
small business. According to the Small Business Administration:
Ø 99% of all businesses in the US can be classified as
small;
Ø 43% of the gross national product is contributed by
small business;
Ø while large business has been cutting back employment,
small business has been creating new jobs;
Ø many of new products and services in the US are
created by small businesses.
Numerous definitions of the term “small business” exist. A
small business is one which is independently owned, operated
and not dominant in its field of operation. A small business
is one which possesses at least two of the following four
characteristics:
1. management of the firm is independent;
2. capital is supplied and the ownership is held by
an individual or a small group;
3. the area of operation is mainly local, with workers
31
and owners living in one home community.
However, the markets need not be local;
4. the relative size of the firm within its industry
must be small when compared with the biggest
units in its field.
Most scholars believe that the fourth characteristic,
relative size, is the most important one.
The SBA traditionally uses the following criteria for
defining a small business: retailing (sales volume), service
(sales volume), wholesaling (sales volume), and manufacturing (number of employees).
The following list includes terms that can be used to
describe a business. Each term tells something about the size of
a business.
Total assets – all that a business owns.
Net worth – business assets less what is owed.
Gross profits – money left from sales after all expenses
(except taxes) have been paid.
Net profits – what is left from gross profit after business
income taxes are paid.
Employees – total number of workers and managers
listed on the payroll.
Income – net receipts, the total sales less returns,
allowances, and discounts.
It is necessary to keep records of a business for tax
purposes and as a measure of growth. Some businesses fail
because they are improperly expended. Other businesses are
unsuccessful because they expand too quickly and cannot handle
problems that come with rapid growth. Many businesses remain
small and provide excellent income throughout their lifetime.
Business operations are subject to review by local, state,
and federal authorities. These reviews insure that rules and
regulations are being obeyed and standards maintained. Some
of the operations, subjects to review, are listed here.
32
Income. Business income must be reported for income
tax purposes. Other reasons for reporting business income
include providing information for bank loans, attracting investors,
making equitable distribution of profits in partnership, and as
a measure of business growth. The records are usually subjects
for an audit.
Working conditions. Clean and safe working conditions
must be provided for employees and if required, medical and
safety equipment must be provided too.
Wages and hours. Work regulation announcements must
be posted where employees can read them. Employers must
pay at least the minimum wage that applies to their employees.
Advertising, labelling and packaging. Businesses must
not be guilty of false advertising, mislabelling, or providing
less than the labeled weight in a package.
Unfair practices. Laws prevent business persons from
engaging in various unfair practices, such as price fixing and
other means of restraining trade.
Discrimination. Federal and state regulations prevent an
employee from being discriminated against of color, race, sex,
religion, or national origin.
Liability and compensation. Employers are required to
carry insurance and provide adequate compensation for
workers injured on the job and customers injured on the
business premises.
COMPREHENSION
1. Answer the following question:
1. How do people become owners and operators of small
business firms?
2. What are the aims of establishing small firms?
3. What has always been recognized as the best way to
preserve competition, prevent monopolistic control of
any industries?
33
4. What facts illustrate the importance of small business?
5. Can you define a small business?
6. What is the most important characteristic of a small
business?
7. What criteria are used for defining small business?
8. What terms describe the size of a business?
9. What operations of a small business are subject to
review?
2. In each of the following select the word or phrase that
best completes the statement or answers the question.
1. All of the following measure business size except
a. profits
c. location
b. assets
d. number of employees
2. Which of the following would most likely be self-employed?
a. teacher
c. grocery clerk
b. barber
d. minister
3.
a.
b.
c.
d.
Which of the following is the definition of net profit?
income after expenses are paid
income after all taxes have been paid
gross income after taxes
assets minus liabilities
4. It is necessary to keep accurate business records
a. for tax purpose
b. to determine business size
c. to determine earnings
d. for all of these reasons
5. The fastest growing type of business is
a. manufacturing
b. franchising
c. farming
d. fishing
34
GRAMMAR
THE FUTURE TENSES
The Future (Simple)
1. a future event: a single action
or state;
(e.g. We shall speak about this
matter of fact tomorrow)
2. Habitual or repeated actions;
(e.g. They will really come every
other day.)
3. General statements covering
all time.
(e.g. She will make a good
specialist.)
Time-indicators: tomorrow, the
day after tomorrow, next
day/week/month/year, …. in a
month…
The Future Perfect
1. An action already completed
at a given future moment;
(e.g. By this time tomorrow they
will have met the delegation.)
2. An action began and still
going on at that future moment;
(e.g. By the 1st of September we
shall have been here for a year.)
Time-indicators: by this time
tomorrow, for….
The Future Simple in-the-Past
1. Past routines;
(e.g. when we were students we
would become good specialists.)
2. In Reported Speech and as a
The Future Continuous
1. An action going on at a given
future moment;
(e.g. What will you be doing at
this time tomorrow?/ I shall be
making a report.)
2. Temporary habit (the action
will be happening about this time
in future)
(e.g. He will be preparing documents all the evening.)
Time-indicators: at this time
tomorrow /in five weeks …
The Future Perfect Continuous
1. An action begun before a given
future moment and continued up
to or into that future moment
(e.g. By next month they will
have been staying here. )
Time-indicators: for …, by … .
The Future Continuous in-thePast
1.In Reported Speech and as a
past equivalent of the Future
Continuous Tense;
35
past equivalent of the Simple
Future Tense;
(e.g. ”I’ll write them as soon as
possible”
He said he would write them
as soon as possible.)
3. In polite requests;
(Would you like to help me?)
The Future Perfect in-the-Past
1.As a past equivalent of the
Future Perfect Tense;
(e.g. “I hope they will have
finished the work by last week”
I hoped they would have
finished the work by last week.)
(e.g. “I’ll be talking to Marry
soon”.
She said she would be talking
to Marry soon.)
The Future Perfect Continuous
in-the-Past
1. In Reported Speech and as a
past equivalent of the Future
Perfect Continuous Tense.;
(e.g.. “I will have been writing”
He said that he would have
been writing)
3. Put the verbs in parentheses into the most suitable future
form: Future Simple, Continuous, Perfect, Perfect
Continuous:
1) The entrepreneurs (to meet) ………… in a couple of days.
They hope they (to make) ……… good arrangements.
2) By the end of their meeting the managers (to find)
…………….. the solutions of all their problems.
3) At the same time the tour agency (to sell) ……………….
400 tickets to Brazil.
4) The price of petrol has gone up again. People (to ride)
…………….. their bicycles soon.
5) It’s an interesting plan. I (to think) ……………. about it.
4. Work with a partner to ask and answer questions. Use
the correct question form from the box.
36
Would you ………?
Would you mind…………...?
Would you mind if I ……….?
Would you like to ………?
Would you like me to ……?
Would you prefer …………?
1.
2.
3.
4.
5.
Ask for permission to use your client’s phone.
Find out whether your guest wants tea or coffee.
Offer to call a taxi for your visitors.
Invite your partner to play golf with you next week.
Ask your supplier to make you a copy of their new
price list.
6. Ask your colleague to give you a lift to the airport.
WORD
STUDY
5. Give Synonyms for:
Owner
Profit
Assistance
Tax
To preserve
To create
To prevent
To return
Franchise
Competition
Wholesaling
Retailing
7. Write from what verbs these nouns are:
a) wish, interest, supply, guarantee
b) information, consideration, negotiation, production,
addition.
1. The entire resource of a person or
a) loan
business, tangible and intangible, such as
accounts and receivable notes, cash,
inventory, equipment, real estate, good will,
etc.
37
b) partnership 2. The act of operating a retail business.
3. The capital investment an individual or
c) assets
partners have in a business after the
liabilities have been subtracted from the
assets, that is, the capital value of business.
4. A surplus that remains after the cost of
d) retailing
goods is subtracted from the total receipts.
5. A surplus after all the expenses have been
e) payroll
paid, including operating expenses such as
heat, light, rent, and wages, but excluding
taxes.
6. A list of employees who are paid
f) sales
periodically by a firm, along with other
information; also includes the money to pay
employees.
g) gross profit 7. A bookkeeping term referring to the
amount of income derived from the sale of
merchandise or services, both for cash and
on account, less taxes, returns, and
allowances.
8. An amount of money that is borrowed
h) net worth
and must be paid back by a certain date or
on demand ; usually interest is charged on
the money borrowed.
9. A business owned by two or more people.
i) net profit
9. Complete the sentences. Use the correct form of phrasal
verbs in the box.
give up
tie up
hit back at
take on
put off
turn up
pick up
run over
pay in
Hold on
1. I can’t hear you very well because of the traffic noise.
___________ a moment and I’ll shut the window.
38
2. We were expecting them at seven but they didn’t
__________until nearly ten.
3. We can’t afford expensive holidays. All our money is
___________ in the business.
4. I’ll be driving pat the airport at around ten tomorrow.
Shall I ________ Mrs Hope for you?
5. I think we should _________ making a decision until we
have all the relevant facts.
6. A lot of businesses need to __________ extra staff at
this time of the year to cope with the rise in demand.
7. Is that clear or would you like me to _________ the main
points again?
8. I’m just popping out to the bank to ____________ some
cheques.
9. At the AGM the Chairman __________ at his critics,
saying he should be praising this year’s results not criticizing
last year’s.
10. When he lost his job he had to _____________ the
company car.
10. Make new words from the root words below to
complete the sentences:
Compete
1. We work on very small profit margins so our prices are very
_____________.
2. Our recent technological breakthrough has given us a lead
over our __________.
3. The fall in sales revenues resulted from increased
______________ from the far East.
Economy
4. Leading __________ are predicting that inflation will rise to
over 2% by the end of the year.
5. Did you study _____________ when you were at University?
6. The new Honda does nearly fifty miles to the gallon. It’s a
very ___________ to run.
39
1. Ei duc foarte des tratative cu firmele străine.
2. Consider că preţurile voastre sunt exagerat de mari.
3. Aş dori să contactez administraţia firmei Dmv. şi să le aduc
la cunoştinţă decizia voastră.
4. Noi suntem dispuşi să procurăm cîte ceva din mărfurile
Dmv.
5. Moldova importă şi exportă modele industriale, materie
primă, mărfuri alimentare etc.
6. Cu toate că i-am expediat companiei registrele şi listele
noastre de preţuri acum 2 săptămîni, încă nu am primit nici
un răspuns.
7. Ei ne-au anunţat că vor analiza propunerea noastră îndată
ce-o vor primi.
1. Они часто ведут переговоры с иностранными фирмами.
2. Боюсь что ваши цены слишком высоки.
3. Мне хотелось бы связаться со своей фирмой и сообщить
им ваш ответ.
4. Мы заинтересованы в покупке некоторых ваших
товаров.
5. Молдова импортирует и экспортирует промышленные
изделия, сырьё, продовольственные и другие материалы.
6. Хотя мы послали фирме свои каталоги и прейскуранты
2 недели тому назад, мы еще не получили от них ответа.
7. Он сказал, что рассмотрит наше предложение, как
только его получит.
DISCUSSION
1. How does the committee for Economic Development
measure a small business?
2. Does the U.S. government support small business firms?
How?
40
3. Prepare a list of 5 different business firms. Explain how
you would classify each of these firms as small, medium, or
large according to the size measurement of the Small Business
Administration.
4. Discussions: “Business is business”.
5. Explain the motto of this unit.
W R I T I N G.
1. Write the summary of the text.
2. Write a short essay on why you agree or disagree with
the statement that a strong small business community is
in the best interest of all citizens.
Small Business
Many visitors from abroad are surprised to learn that,
even today, the U.S. economy is by no means dominated by
giant corporations. Fully 99 percent of all independent
enterprises in the country employ fewer than 500 people.
Small businesses are a continuing source of dynamism
for the American economy. They produced three-fourths of the
economy's new jobs between 1990 and 1995, an even larger
contribution to employment growth than they made in the
1980s. They also represent an entry point into the economy for
new groups. Women, for instance, participate heavily in small
businesses. Small firms also tend to hire a greater number of
older workers and people who prefer to work part-time.
A particular strength of small businesses is their ability
to respond quickly to changing economic conditions. They
often know their customers personally and are especially suited
to meet local needs. Small businesses — computer-related
41
ventures in California's "Silicon Valley" and other high-tech
enclaves, for instance — are a source of technical innovation.
Small companies that rapidly became major players in the
national and international economies include the computer
software company Microsoft; the package delivery service
Federal Express; sports clothing manufacturer Nike; the
computer networking firm America OnLine; and ice cream
maker Ben &Jerrys.
Of course, many small businesses fail. But in the United
States, a business failure does not carry the social stigma it
does in some countries. Often, failure is seen as a valuable
learning experience for the entrepreneur, who may succeed on
a later try. Failures demonstrate how market forces work to
foster greater efficiency economists say.
The SBA seeks to support programs for minorities,
especially African, Asian, and Hispanic Americans. It runs an
aggressive program to identify markets and joint-venture
opportunities for small businesses that have export potential. In
addition, the agency sponsors a program in which retired
entrepreneurs offer management assistance for new or faltering
businesses. Working with individual state agencies and
universities, the SBA also operates about 900 Small Business
Development Centers that provide technical and management
assistance.
In addition, the SBA has made over $26,000 million in lowinterest loans to homeowners, renters, and businesses of all
sizes suffering losses from floods, hurricanes, tornadoes, and
other disasters.
(Outline of the U.S. Economy)
42
EVALUATION TEST TO UNIT II
1. A fact that demonstrates the role of small business in the
United States is that:
a) 43% of labor force is employed by small businesses.
b) 29% of businesses are small.
c) 99% of all businesses are small according to the definition
of Small Business Administration.
d) 51% of all businesses are small according to the definition
of the Small Business Administration.
2. Which statement is not true in relation to business success?
a) As the population expands, there is a greater need for
small businesses.
b) People with more education and experience usually have
a better chance of success.
c) There is a little or no risk in operating a small business if
you have adequate capital.
d) The chances of business failure are reduced if you get
sufficient and adequate training.
3. Which of the following is true?
a) There are more small businesses than large businesses.
b) There are more people employed in large businesses.
c) There are more large businesses than small businesses.
d) None of these statements is true.
4. Regulations are necessary because they:
a) help politically powerful big business
b) make business practices more equitable and fair
c) give government officials power
d) create jobs
43
5. Which one of the following is a distributive kind of
business?
a) radio station
b) advertising agency
c) canning factory
d) warehouse
6. Which one of the following would probably not be selfemployed?
a) attorney
b) airline pilot
c) artist
d) plumber
7. A ......... is the person who directs, supervises and
operates a business or a section of a business. This
person is in a management position but is not always the
owner of the company.
a) worker
b) manager
c) accountant
d) wealthy person
8. There are many companies that manufacture products
and consumers buy them. The products that people buy
are called ..........
a) supply
b) services
c) goods
d) offer
9. Tax that is calculated and dependant on the amount a
person's earns in a democracy is called ......... tax.
a) sales
b) income
44
c) service
d) goods
10. Federal or state tax that is added to goods and/or
services is called ......... tax.
a) sales
b) income
c) service
d) goods
11. Whether businesses manufacture goods or offer
services, all of the money taken in by a business is
called……..
a) costs
b) revenue
c) labor
d) income
12. Complete each sentence with the correct form of the
word.
Employ
a) In an area of high …people are desperate to find jobs.
b) Every …of the firm is entitled to a 10% discount.
c) Her ..gets very angry if she uses the phone too much.
d) I’m looking for temporary …during the summer
holidays.
word.
Know
a) We need somebody with a good working …of French.
b) Our company is virtually …abroad.
c) She’s obviously very …as far as marketing is
concerned.
d) A firm that reduces its advertising soon …it.
45
word.
Possess
a) I had in my … a portion of money.
b) I am a proud … of two kiosks in Deleanu Street.
c) A small Business is one which …at least two
characteristics.
d) A good businessman must…fundamental knowledges in
economy.
word
Existence
a) These institutions do not come into…except as a result
of state policy.
b) We have to find ways of making the …system work
better.
c) Numerous definitions of the term” small business”…
d) In Moldova …a free market economy.
16. At this time tomorrow, we...to New York.
a) will be flying
b) will have flown
c) have flown
d) would be flying
17. I don’t know when…
a) will she arrive
b) she arrive
c) she will arrive
d) does she arrive
18.When he… I’ll let you know.
a) arrives
46
b) will arrive
c) arrived
d) would arrive
19. I wonder if he … . If he …, please let me know as soon
as possible.
a) comes….will arrive
b) will come…arrives
c) comes… arrives
d) will come…will arrive
20.You won’t know if the dress… you until you…it on.
a) fits…will try
b) will fit…will try
c) fits…have tried
d) will fit…will have tried
21. He was quite definite about it and assured me he .........
come.
a) will
b) shall
c) should
d) would
22. I really hope I ......... see you again.
a) did
b) shall
c) should
d) would
23. I'm sure they ......... get married and live happily ever
afterwards.
a) did
b) have
47
c) will
d) would
24. What ......... be doing this time tomorrow?
a) were you
b) did you
c) have you
d) will you
25. ........ go if you like because I have to do some shopping.
a) I'm
b) I'd
c) I'll
d) I've
26. I ......... simply wait until she comes back.
a) was
b) am
c) shall
d) do
27. What ......... happen to the family if he loses all his
money?
a) does
b) did
c) will
d) is
28. I …the article when he comes.
a) shall read
b) shall be reading
c) shall have read
d) read
48
29. You … in the newspapers about the conclusion of this
agreement.
a) read
b) will read
c) would read
d) will have read
30. While he is having his breakfast, I…the latest news.
a) shall be listening
b) shall listen
c) should listen
d) shall have listened
49
Unit 3. Advantages and disadvantages
of running a small firm
Objectives: to exchange information about the activities of
small firms; to enumerate the advantages /disadvantages of
small firms; to explain the sequence of tenses;
Tasks: to follow the presentation of terms; to discuss
advantages/ disadvantages of a small firm; to explain the
difference of the verbs ”to make ” – “to do”.
Motto:
“When I chased after money, I
never had enough. when I got my
life on purpose and focused on
giving of myself and everything
that arrived into my life, then I
was prosperous.”
Author: Wayne Dyer
Terms to know:
flexibility
make decisions
supervise
beauty parlor
real estate
render
offset
flexibilitate
a lua decizii
a supraveghea, a
controla
salon de frumuseţe
imobil
a oferi [ajutor]
a compensa
overheads
exceed the local
market demand
adjust to smth
chitanţe de cheltueli
a depăşi cererea
pieţei locale
a se adapta la ceva
to secure
a păstra, a face rost,
a asigura
50
гибкость
принимать решения
контролировать,
наблюдать
косметический салон
оказывать
возмещать
[компенсировать]
накладные расходы
превышать спрос
местного рынка
приспосабливаться к
чему- либо
обеспечить, сохранить
to cope
finance expansion
good will
lack of time
to handle multiple
assignments
a face faţă
a finanţa
expansiunea
prestigiul firmei
lipsă de timp
a duce controlul
asupra multor sarcini
overcome
reveal opportunities for success
be contemplated
be undertaken
reward
a învinge
a crea posibilităţi
pentru succese
a fi plănuit
a fi întreprins
răsplată
causes of failure
rely on the
inherent
advantages
to achieve success
to decrease un
employment
insurance
company
facilities
cauzele falimentului
a miza pe propriile
avantaje
law of supply and
demand
expenses incurred
vendor
distribution
supply a retailer
legea ofertei şi
cererii
cheltuieli suportate
vînzător
distribuţie
a furniza negustorii
cu bucata
a suferi din cauza
crizei
suffer from the
recession
a obţine succese
a micşora şomajul
companie de
asigurare
bani, posibilităţi
51
справиться
финансировать
расширение
престиж фирмы
нехватка времени
руководить
многочисленными
заданиями
преодолеть
раскрыть возможности
для успеха
быть задуманным
быть предпринятым
поощрение,
вознаграждение
причины провала
полагаться на
свойственные
преимущества
достичь успеха
уменьшить
безработицу
страховая компания
денежные средства,
возможности
закон спроса и
предложения
понесённые раcходы
продавец
распределение
снабжать розничного
торговца
страдать от спада
TEXT
Small firms actually have advantages over large firms
in many cases. One advantage of small firms is that they often
grow into large firms. Many of today’s small firms will
become giants in tomorrow’s business world.
Some of the situations in which small firms have
distinct advantages are the following:
1. When new products or ideas are being tried. Small firms
have much flexibility. Decisions can be made and
implemented quickly.
2. When the personal attention of the owner is essential to
daily operations. The owner’s presence is important to the
growth of the business. It will be more successful if the
business is small enough for one person to supervise.
3. Where personal services, either professional or skilled, are
dominant. Examples of these include beauty parlors, real
estate offices, interior-decorating firms, TV repair shops.
Medical and dental services are also usually rendered by
small firms. Any possible advantages of large size in these
areas are usually offset by greatly enlarged overheads, less
efficiency on the job, and the loss of the personal touch of
the smaller firm.
4. When the market for the product or service is mainly local.
In some types of firms, it is not just economical to attempt
a scale of operations that exceeds the local market demand.
The making of bricks or concrete blocks for the construction
industry is an example. Transportation costs are prohibitive
for moving such products.
5. When the industry is characterized by wide variations in
demand or in styles. Examples of these include ladies’dress
line, ornamental candles and custom-made chandeliers and
lamp shades. These types of products just do not invite
large firm development in most cases. The small, flexible
firm usually can adjust to the necessary variations of
specialized products more easily.
52
6. When close rapport with personnel is essential. Small firm
owners usually have the advantage of being close to
employees. They know the problems from the daily
conversations and can adjust employment to the person’s
abilities better due to this close association. As a result,
they are usually able to maintain better morale and
efficiency in the firm, which is important in any business.
Small firms are often said to labor under such
disadvantages as:
- the inability to secure competent employees,
- the inability to cope with monopolistic practices,
- the inability to finance expansion when it has been
proved to be practicable, tax burdens, limited
vendor goodwill, discriminatory practices by large
shopping-center developers,
- lack of time for the small proprietor to handle
multiple assignment,
- lack of research facilities,
- the problems of making a new firm or a known
product in its market.
Many of the disadvantages of small firms could be
overcome with positive planning. An ill-conceived business,
whether large or small, has little chance of success if its
operation has not been properly planned. Good research in the
planning stage can reveal opportunities for success. It can
indicate when a business that is contemplated should not be
undertaken.
The rewards for successful small firm ownership can be
significant. The personal satisfaction will vary with the
individual owner. Good profits, satisfying employment, being
one’s own boss, community status, family pride and tradition,
and having an outlet for one’s creativity are some of them.
But these rewards are never automatic or guaranteed.
Success makes many demands upon the operator of the firm.
53
The requirements for successful ownership of small business
firms can be summarized as follows: personal characteristics,
good community relations; business ethics and social responsibility, compliance with government regulations. But sound
business knowledge and willingness to work hard stand at the
head of any list. Knowing the causes of failure can protect the
owner against them.
The individual firm has benefited from having these and
other advantages. In addition to the types of firms cited, small
firms in such fields as construction, wholesaling, retailing, and
the service industries have faced up well to their larger firms
competition. Insurance and small finance firms have also been
very successful. The profitable firms have not relied on the
inherent advantages of small firms as such, but have combined
these advantages with alert and competent management to
achieve their success.
COMPREHENSION
1. Why are small firms more preferable when new
products or ideas are being used?
2. Why do small firms have advantages when the personal
attention of the owner is essential to daily operations?
3. Why are large firms less efficient where personal professional services are dominated?
4. What are the advantages of small firms when the market
for the product is local and there are wide variations in
demand and styles?
5. What advantages do small firm owners have?
6. What disadvantages of small firms do you know?
7. How can owners of small firms overcome disadvantages?
8. In what way can owners of small firms be rewarded?
54
9. What requirements for successful ownership of small
business firms are mentioned in the passage? Which are
the most important?
2. In each of the following, select the word of phrase that
best completes the statement or answers the questions.
1. An advantage of small business over big businesses is
that small businesses
a) are more flexible
c) are less regulated
b) have fewer problems
d) are all of the above
2. Which of the following would be classified as working
for someone else?
a) physician in private practice
c) retail sales clerk
b) dairy farmer
d) attorney
3. Big business, some people believe,
a) is unethical
c) has more political power
b) strangles small business d) does all of the above
4. A list of skills in order of difficulty or rank is called
a) a rank list
c) a exposed to hierarchy
b) a guild record
d) a table of skills
5. Small businesses when compared to big businesses
a) are more likely to succeed
c) are greater risk
b) employ more workers
d) usually require
less capital to start
GRAMMAR
The Sequence of Tenses
PRINCIPAL
CLAUSE
Future simple/
Imperative
I shall answer your
letter
I shall read the
paper
CONJUNCTION
SUBORDINAT
ACTION
E CLAUSE
Present Simple
/ Present
Simultaneous
as soon as
Perfect
Posterior
when
I have time.
as soon as
I have finished
my work.
55
Let me know
Present or
Present Perfect
I know
I hope
I have just learned
you have received
the answer.
Present/Past/
Future
you went there.
you do this
successfully.
I shall take a
holiday next
week.
Past Perfect
he had crossed
this bridge.
Past Indefinite
he was ill.
Future in the
Past
she would go as
soon as possible.
that
Past Indefinite /
Past Perfect
He said
I understood
that
We understood
Exceptions:
Past Indefinite that Present
Indefinite
I knew that a friend in need is a
friend indeed.
The teacher explained that the
Earth moves round the sun.
Past Indefinite that Future
Indefinite
She told me that her sister will be
here tomorrow morning.
Past Indefinite as much as
Present/Future/Past
He loved his sister as much as he
loves or will ever love me.
56
Anterior
Simultaneous
Posterior
Anterior
Simultaneous
Posterior
- the subordinate clause
introduces a general, a known
present.
- the action in the subordinate
clause is independent from the
action in the regent
- in a comparative subordinate
linked with the Regent by the
conjunctions: as, than, as much
as, as well as the verb can be
used at any tense required.
3. Mr. Brown works in the travel business. He has a very
busy week. Read the information and complete the diary.
1. Tomorrow, he’s flying to New York.
2. The day after tomorrow, he has two afternoon
appointments.
3. On Saturday, he attended a trade fair in Prague.
4. Today he’s seeing the Managing Director of Ocean
Travel.
5. He’s returning from New York in three days’ time.
6. He returned from Prague yesterday.
7. He’s spending this weekend at his holiday home in
Bath.
8. In New York, he’s meeting Mrs. Catell at 3 p.m., and
Mrs Forster two hours later.
9. The day before yesterday, he went sightseeing in Prague.
10. Next Monday, his contact from Transcape is coming to
visit him.
Saturday 9 ………
Sunday 10 ……....
Monday 11 ………
Tuesday 12 ………
Wednesday 13 …… flight LH 162 to ……..
Thursday 14 ………. Meetings with:
Friday 15 …………..
Saturday 16 …………
Sunday 17 ………….
Monday 18 ………….
4. Choose the correct Tense of the Verb being attentive at
the sequence of tenses
1. Alex didn't come to see the film last night because
he _____ it before.
57
a) saw
c) has seen
b) had seen
d) was seen
2. A cold wind _____ for the last three days.
c) is blowing
a) has been blowing
b) blows
d) blew
3. I _____ as ill as I do now for a long time.
a) wasn't feeling
c) didn't feel
b) haven't been feeling
d) haven't felt
4. I wish I _____ younger.
a) had been
c) were
b) would be
d) have been
5. She said she _____ to me, but she didn't.
c) would write
a) would have written
b) will have written
d) will write
6. If he _____ lucky, he could get the job.
a) is
c) would be
b) had been
d) would have been
7. She told him that if he _____ his promise, she
_____ speak to him again.
a) break - would never
c) broke - will never
b) break - will never
d) broke - would never
8. You _____ a six-month contract when you are
offered a permanent position elsewhere. What will
you do?
c) were starting
a) have just started
b) had started
d) started
58
9. I'll see you in August when I _____ back.
c) will have come
a) will come
b) came
d) come
10. They claimed they _____ the law.
a) haven't broken
c) hadn't braken
b) were not breaking
d) wouldn't breaking
5. Complete the following sentences by putting the verbs in
brackets into the right tense.
1) We (to find) that if a firm has sales of $100,000 and gross
margin of $40,000, it (to have) an average mark up on total
sales of 40 percent.
2) In the UK, price increases (to restrict) by the operation of
Price Code from 1972 to 1979.
3) Critics of price control (to argue) that if profits are restricted
the level of investment (to reduce).
4) It is possible that free markets with minimum state
intervention (to encourage competition).
5) The economic organization of every human society (to
characterize) by certain social costs and certain social benefits.
6) Public goods (to produce) and
(to consume) in great
”lumps” and the users can’t (to charge) through the pricing
systems.
7) Firms (to supply) goods and services motivated by their
desire for profits.
8) The important point to notice is that the price mechanism
under perfect conditions (to operate) automatically.
WORD STUDY
6.Give Synonyms for:
Decision
To become
Operation
To exceed
Lack
To offset
59
7.Explain the terms:
Consumerism
Guarantee
Failure
Management
Reward
8. Give all the possible combinations of the following verbs
with nouns:
To expose, to ensure,
To be contemplated, to supply, to adjust, to rely on
a) Efficiency
b) facilities
c) demand
d) costs
e) expansion
f) efficiency
g) facilities
h) demand
1. A need for or a desire for a commodity,
together with the ability to pay for it, as in
the law of supply and demand.
2. A consumer protest against the perceived
injustices in exchange relationships and
effort to remedy those injustices.
3. The expenses incurred in producing goods
or services during the period.
4. Regular and essential expenses such as
rent and the cost of telephones, stationery,
etc
5. The quality of being able to do a task
successfully and without wasting time or
energy.
6. A need for or a desire for a commodity,
together with the ability to pay for it, as in
the law of supply and demand.
7. A consumer protest against the perceived
injustices in exchange relationships and
efforts to remedy those injustices.
8. The expenses incurred in producing goods
or services during the period.
9. Regular and essential expenses such as
rent and the cost of telephones, stationery,
etc
10. The quality of being able to do a task
j) expansion
successfully and without wasting time or
energy.
11. The process of becoming greater in size,
k) overheads
number, or amount.
l) consumerism 12. An amount of money that you have to
pay to the government so that it can pay
for public services.
13. The popularity and good reputation of a
m) reward
successful business that forms part of its
financial worth.
14. Something that you are given, for
n) goodwill
example because you have behaved well,
worked hard, or provided a service to the
community.
15. The equipment, buildings, services, etc
o) tax
that are provided for a particular activity
or purpose.
i) costs
10. Supply the sentences with the missing words.
Render, lack, facility, offset, estate, maintain, cope with,
adjust, handle, vendor, exceed
1. He divided his.... among his four brothers.
2. We would never have secured our independence
without the aid you .... .
3. They argued that their wage increases would be ....
by higher prices.
4. Sales .... all expectations.
5. We should .... our approach.
6. I need the money to .... me for at least the next month
until I start a job.
7. We must try to .... our own failure.
61
8. The streets were crowded with .... and buyers.
9. .... of proper funding is making our job more
difficult.
10. He.... all the major accounts.
11. They ask for a 6 million pound loan .... as working
capital.
11. Complete each sentence with the correct form of
MAKE or DO.
‼GRAMMAR NOTE
Make and Do have similar meanings so it is often difficult to
know which to use.
Make - is often used for constructive or creative actions:
making suggestions, making plans
Do - is often used with unspecified actions or to talk about
work: Do something! Have you done the monthly figures yet?
1. There’s a rumor going round that Pelly’s are going to
.... a bid for Squash International.
2. Please .... your best to get these typed documents
before 5 o’clock.
3. Who shall I ... the cheque out to?
4. If we don’t get some orders soon we’ll have to ...
some of our workers redundant.
5. I’m afraid you’ll have to ... without the other
photocopier until we can get the part we need from
the suppliers.
6. We’ve been …...... a roaring trade since they decided
to advertise on local television.
7. I’ve got all these invoices to ……… before I can go
home.
8. A customer has …….. a compliant about one of our
salespeople.
9. We’ve been ………… business with them for over
thirty years now.
10. Who shall I …………. the cheque out to?
62
1. Ei s-au interesat cînd vom pune în discuţie propunerea lor,
dar noi nu vom analiza această ofertă pînă la întoarcerea
directorului.
2. Noi am analizat propunerea Dmv. şi considerăm că ne
convine.
3. Noi am îmbunutăţit calitatea mărfurilor noastre şi suntem
convinşi că ele vor corespunde standardelor voastre.
4. Vom expedia prima partidă de mărfuri pînă la sfîrşitul verii.
5. Cred că voi reuşi să studiez toată documentaţia tehnică pînă
la întoarcerea consultantului vostru comercial.
6. Noi considerăm că preţurile voastre sunt mari pentru a putea
concura cu alte firme.
7. Voi de acum aţi primit utilajul despre care ei v-au scris ?
1. Они интересовались, когда мы рассмотрим этот вопрос.
Мы не будем рассматривать этот вопрос до тех пор,
пока не вернется наш директор.
2. Мы уже рассмотрели ваше предложение, и полагаем,
что оно приемлемо для нас.
3. Мы улучшили качество нашего товара и теперь мы
уверены что оно соответствует вашим требованиям.
4. Мы отправим первую партию наших товаров до конца
лета.
5. Я думаю, что смогу просмотреть всю техническую
документацию до того, как вернётся ваш коммерческий
консультант.
6. Мы считаем что ваши цены на эти услуги неконкурентоспособные, они выше цен других фирм.
7. Вы уже получили оборудование о котором они вам
писали ?
DISCUSSION
1. Do you know a business firm where the personal attention
of the owner is important to the firm’s success?
63
2. Do you think that small firms can keep competent
employees? How?
3. Why is it that not all Americans believe they would be
successful owners and managers of their own business?
4. Which two rewards of success would you place first if you
had your own small business?
5. Would you include preownership experience in your list of
requirements for successful management?
WRITING
1. Write a description of a small firm with which you are
familiar where the personal attention of the owner is
considered important by its customers. Explain why this is
important.
2. Prepare a short paper explaining your impressions of the
chief disadvantages can be overcome.
These boots are made for export
Every walker wants waterproof boots. They are the key
to comfort, progress and even survival. Nick Brown, the
creator of Nikwax, realized this at 15, cooked up his own
solutions in the kitchen and at 21 discovered he had a viable
product.
“I actually sold my first tin of Nikwax in 1977. I was going to
Scotland and needed new boots. The guy at Alpine Sports in
London sold me a pair and tried to sell me some wax too. I told him
I made my own and why it was better. He took six dozen tins.”
Nick’s company now sells a whole range of rub-in,
spray-on and wash-in waterproofing products as well as
64
waterproof clothing. Sales have increased at a steady 10 to 15
percent a year and today the company employs five people,
who all spend around 30 percent of their time on research.
“When we started, the biggest problem was getting
customers to buy large enough quantities. So I offered them
advertising by printing their logo on the lid in exchange for a
minimum order. Two things happened. Firs, the shops bought
more, and second, because people who were satisfied with the
product knew where to buy it, the shops with logos outsold the
others.”
In the second year, he had a turnover of 50 000 units.
He moved from his kitchen into a small workshop, making wax
by night and selling it by day. He sold to outdoor shops all over
the UK and he interrailed around the mountain centers in
Europe, winning orders from the big names in boots,
Fjellraven, Edelweiss and Kaufmann, Van de Sport. Le
Trappeur, France’s biggest manufacturer, ordered 60 000 tins.
European’s sales outstripped those in the UK.
Nick believes strongly in research and international
marketing. He is a linguistic (an ex-student of the School of
African and oriental Studies) and he makes sure his foreign
language publicity material is accurate to the last accent.
Unlike most British companies, he invoices in local currency.
“I’d rather risk losing money on individual deals than loosing
a customer because exchange rates have changed.”
The big question now is whether outdoor shops can
survive the recession. Four years of drought on top of
economic decline have been bad for business. “Now, thank
God, it’s raining”, says Mr. Brown.
(from Business News and practice, June, 2003)
1. Say the meaning of the italic print words, underline any
other words you don’t know and try to work out what they
mean too.
65
2.Discuss what you have read with your colleagues. Tell
them what you think the article is about.
3. Do you know any similar stories about how other
businesses began?
EVALUATION TEST TO UNIT III
1. Future innovations in technology will:
a) create opportunities for small businesses.
b) put small businesses out of business
c) decrease employment in some industries
d) all of the above
2. Which of the following products can be sold in vending
machines?
a) hot soup and sandwiches
b) stockings
c) insurance policies
d) all of these
3. Which of the following is a performance test?
a) driving (road) test
b) IQ test
c) blood test
d) written driver’s test
4. Which of the following is a repair business that services
businesses?
a) watchmaker
b) TV repair shop
c) office machine repair
d) dentist
66
5. Which of the following is not a financial business?
a) credit union
b) insurance company
c) investment banker
d) company that prints paper money
6. If you opened a hamburger stand, you would probably
need a……….
a) license
b) lemonade stand
c) permit
d) all of these
7. What businesses are most people likely to have been
involved with while still in school?
a) paper route
b) lemonade stand
c) babysitting
d) all of these
8. Which of the following statements is true?
a) Small businesses can be very small.
b) Small businesses must be run on a full time basis to be
profitable.
c) Small businesses are not found in the production area.
d) All distribution businesses are small.
9. Demand is:
a) an act of asking for something strongly
b) a very determined request
c) the desire of customers for goods or services which they
wish to buy or use
d) all above mentioned
67
10. Profit is:
a) money gained in business
b) the difference between the amount earned and the
amount spent
c) advantage benefit gained from something
d) all of them
11. Tax is…..
a) an amount of money that you have to pay to the
government so that it can pay for public
b) something that you are given, for example because you
have behaved well, worked hard, or provided a service to
the community
c) regular and essential expenses such as rent and the cost
of telephones, stationery
d) the expenses incurred in producing goods or services
during the period
12. Efficiency is _______________.
a) a need for a desire for a commodity, together with the
ability to pay for it, as in the law of supply and demand
b) a consumer protest against the perceived injustices in
exchange relationships and efforts to remedy those
injustices
c) the popularity and good reputation of a successful
business that forms part of its financial worth
d) the quality of being able to do a task successfully and
without wasting time or energy
13. The small businesses:
a) are more flexible
b) have unlimited liability to borrow
c) have the ability to finance expansion
d) have the ability to cope with monopolistic practices
68
14 The advantages of a small business are:
a) the personal attention of the owner is essential to daily
operations
b) lack of time to handle multiple assignment
c) the inability to secure competent employees
d) limited vendor goodwill
15. What are the requirements for successful ownership of
small business firms?
a) personal characteristics
b) good community relations
c) compliance with government regulations
d) all the above
16. I assumed you ......... paying for the repairs until the end
of last year.
a) have been
b) was been
c) are being
d) had been
17. ........ get tired of answering the same questions every
day?
a) Have you ever
b) Had you ever
c) Did you ever
d) Are you ever
18. She ......... working on that manuscript for 2 years now.
a) will be
b) has been
c) had been
d) is
69
19. I ......... there once a long time ago and haven't been
back since.
a) went
b) go
c) have gone
d) was going
20. She ......... trying to pass her driving test but fails every
time.
a) kept
b) is keeping
c) had kept
d) keeps
21. I ......... complete silence now while I try this experiment.
a) am wanting
b) want
c) did want
d) have wanted
22. ........ any one object if I turn the heating down?
a) Do
b) Does
c) Did
d) Doing
23. I ......... come to the conclusion that nowadays nobody
cares about anything.
a) will
b) had
c) do
d) have
70
24. No matter what happens next I ......... help you.
a) am
b) have
c) will
d) would
25. They ......... for 3 hours when the storm suddenly broke.
a) had been running
b) have been running
c) are running
d) will be running
26. That programme is so boring that it's like watching
paint ..........
a) dries
b) dried
c) dry
d) has dried
27. By the end of this year I realize I ......... writing tests for
three years now.
a) shall be
b) shall have been
c) will be
d) shall have
28. I honestly think that the time ......... come when we
should celebrate our success.
a) has
b) had
c) will
d) having
71
29. How anyone ......... to live in those conditions in the 18th
century is difficult to imagine.
a) manages
b) will manage
c) managed
d) is managing
30. They were eating dinner when the lights ......... out.
a) go
b) are going
c) went
d) goes
72
Unit 4. Financial statements
Objectives: to consider the facts and the comparisons taken
into consideration in financial statements; to explain Passive
Voice;
Tasks: to make and to discuss short situations with the terms;
to report the results of a good record keeping; to analyse an
income statement using passive Voice.
Motto:
“Everything you want in life has a
price connected to it. There's a price
to pay if you want to make things
better, a price to pay just for
leaving things as they are,
a price for everything.”
Author: Harry Browne
Terms to know:
accurately
transaction
avoid errors
cash receipts
record of credit sales
purchases journal
operations statement
(profit and loss
statement or income
statement)
balance sheet
income and expenses
of the business
net sales
exact, precis
afacere
a evita erori, greşeli
chitanţe de primire a
banilor
evidenţa vinzărilor în
credit
jurnalul evidenţei
cumpărăturilor
dare de seamă,
evidenţa veniturilor şi
pierderilor
точно
сделка
избежать ошибок
денежные
поступления
учет продаж в
кредит
журнал учета
закупок
учет о прибылях и
убытках
bilanţ
veniturile şi
cheltuielile companiei
vînzări nete
балансовый отчет
доходы и расходы
предприятия
чистый объём
продаж
73
потери от
безнадежных долгов
inventory
inventar, rezervă
запас, товарно-материальные запасы
balance against
a echilibra împotriva балансировать
liabilities
obligaţiilor
против
обязательств
current assets
active curente
текущие активы,
оборотные средства
current liabilities
obligаţiuni curente
текущие
обязательства
liquidity
bani lichizi
ликвидность
convert into cash
a schimba în bani cheş конвертировать в
be due within one
se poate să fie plătit
подлежать выплате
year
timp de un an
в течение 1 года
sale of securities
vînzarea hîrtiilor de
продажа ценных
valoare
бумаг
cash discount
reducere pentru plata скидка за платёж
în numerar
наличными
trade discount
reducere negustorilor скидка розничным
cu amanuntul
торговцам
to entitle to
a justifica, a
давать право на чтоîmputernici
либо
margin
limită; acoperire,
разница, допускаеgaranţie dată pentru
мый предел
asigurarea unei plăţi
ledger
registru contabil
главная
бухгалтерская книга
avoid paying tax
a evita plata pentru
избегать уплаты
impozite
налога
keep on hand for sale a ţine de-a gata pentru держать наготове
vînzare
для продажи
stock
rezervă
резерв
overtime pay for work plata pentru supraсверхурочная плата
orele de lucru
за работу
net wage
plată netă pentru
заработная плата к
salariu
выплате
loss on bad debts
pierderi de la datorii
74
gross wage
take-home pay
perpetual inventory
overstock
turnover
receipts
lump sum
solvency
delay
settle account
payroll
claim
overtime in the red
overdue
write off
raise money
security market
fixed term loan
overdraft
stock exchange
network
номинальная
заработная плата
реальная заработная
плата
inventariere continuă постоянная
инвентаризация
surplus de mărfuri
излишний запас;
затоваривание
convertibilitate
оборот, текучесть
încasări
денежные
поступления
sumă globală,
единовременно
a plăti dintr-o dată
выплачиваемая
сумма
posibilitatea de a plati платежеспособность
întîrziere
задержка
a plăti contul
оплачивать счет
chitanţă de plată
платёжная
ведомость
a cere
требовать
a lucra supra-ore
сверхурочное время
gratis
с убытком
cu termen expirat
просроченный
a anula
списать
a face rost de bani
достать деньги
piaţa hîrtiilor de
рынок ценных
valoare
бумаг
împrumut pe termen срочная ссуда на
fixat
фиксированный
период времени
procente de la credit задолженность
cu îndatorire băncii
банку
birja de fonduri
фондовая биржа
reţea
сеть
plată nominală a
salariului
salariu real
75
TEXT
Good record keeping by a business is not only wise, but
is required by many laws. Legal and financial questions may be
raised by various agencies, banks, and employees. These
questions can be accurately answered when written records of
business proceedings are kept.
By recording daily transactions, the owner can learn
from mistakes and avoid errors in the future. A record of all the
events that occur in a business permits evaluation, improvement, and a good chance for personal and financial success.
For a typical small business, it is suggested that the
following records be kept: cash receipts and cash payments
journal, record of credit sales (sales journal), record of
purchases (purchases journal), record of wages (payroll),
operations statement (profit and loss statement or income
statement), and balance sheet. The results of operations and the
present financial position of the firm are reflected in two key
financial statements: the income statement and the balance
sheet. The income statement reports revenues, costs, expenses,
and profits (or losses) for a specific period of time, showing the
results of operations during that period. The balance sheet
reports the financial condition of a firm on a specific date. The
balance sheet is a snapshot, while the income statement is a
motion picture. The former tells what the company owns and
owes on a certain day; the latter, what it sells its products for
and what its selling costs are over a period of time.
Management decisions must be weighed in terms of their effect
on these two basic financial statements.
The income statement (the profit and loss statement or
the operations statement). This statement is a summary of the
income and expenses of the business. The income statement
summarizes these facts for any period of time. Income
statements may be made for a year, a month, a quarter, or a
half-year. Some firms have weekly or daily income statements.
76
Although many items appear on the income statement the basic
idea is very simple. The formula is: net sales minus cost of
goods equals profit. Amount taken is minus. Amount paid out
equals’ profit. With a larger business, expenses change the
formula somewhat:
Net sales – costs of goods sold = gross profit.
Gross profit – expenses (rent, light phone) = net profit.
In business, there are two kinds of profit: gross profit
and net profit.
Net sales - cost of goods sold= gross profit.
Gross profit- operating expenses= net profit.
The income statement might be compared to a ‘moving
picture’. It describes the business in action. It summarizes the
results of past activities and gives hints of what the future
holds. The final figure net profit is of the greatest importance.
One might find, for instance, that even though sales had
increased since last year, profits were less. The operations
statement might show that expenses were too high, it might
also show that the utilities increased or there was too much loss
on bad debts. Once a problem area is identified, steps can be
taken to correct it.
When applying for a loan, the bank may want to
examine several operations statements. The bank is interested
in how sales compare with expenses, how much inventory is
carried, and credit which is extended by the business. The
owner is provided with information about the business from the
operating statement. Profits earned over a period of time,
department performance, inventory size, overhead costs, and
many other items are shown on the statement.
The balance sheet. In contrast to the operations
statement, the balance sheet is a ‘still picture’ of the business.
A balance sheet is composed of assets, liabilities, and
owners’ equity. Note that the income statement reports on
changes over a period of time and the balance sheet reports
financial conditions at a specific point in time.
77
The words balance sheet imply that the report shows a
balance, equality between two figures. That is, the balance
sheet shows a balance between assets on the one hand, and
liabilities plus owner’s equity on the other. The balance sheet
shows that assets are divided into three categories: (1) current
assets (cash or assets that can be turned into cash in one year or
less), such as accounts receivable; (2) fixed assets (land,
building, furniture); and (3) intangible assets, such as patents
and copyrights.
Liabilities are divided into two categories: (1) current liabilities
(obligations that must be paid within one year), such as
accounts payable, and (2) long-term liabilities (obligations that
will not be paid within one year), such as long-term loans and
corporate bonds.
In a corporation, owners’ equity consists of common stock
(certificates of ownership) and retained earnings (earnings not
distributed to owners). Because neither sole proprietorships nor
partnerships have common stock, their owners’ equity is called
a capital account.
Imagine that you don’t owe anybody any money. That is, you
don’t have any liabilities. Then the assets you have (cash and
so forth) are equal to what you own (equity). Translated into
business terms, you have a fundamental accounting equation
that is rather obvious. If a firm has no debts, then:
Assets = owners’ equity
This means that the owners of a firm own everything. If
a firm has debts the owners own everything except the money
due others, or:
Assets-liabilities = owners’ equity.
If you add an equal amount to both sides of the equation
(you remember this operation from algebra), you get a new
formula:
Assets = liabilities +owners’ equity
This last formula is the basis for the balance sheet.
78
The figures for the balance sheet come from the records kept
by the business. Each item on the balance sheet is based on
facts that have been recorded daily in different ledger accounts.
The records used for the operations statement are also used in
preparing a balance sheet.
Current ratio. The assets are divided into current
assets and fixed assets. The relationship between current assets
and current liabilities is a prime measure of liquidity of any
firm. Liquidity is the measure of ability to pay debts as they
become due.
Current assets are assets that are in the form of cash or
will convert into cash within 90 days. Current liabilities are
those debts that will be due within one year. The relationship
between current assets and current liabilities is called the
current ratio. Sound financing demands that this ratio be at
least 2 to 1. The current ratio is found by dividing the current
assets by the current liabilities.
Quick ratio. This ratio is also known as the acid test of
liquidity. It is the relationship between only the most liquid
assets (cash and accounts receivable) and the total of the
current liabilities. The conservative rule is that this ratio should
be at least 1 to 1. In other words, cash plus receivables should
be equal or exceed the current liabilities.
Working capital. Working capital is the difference between
current assets and current liabilities expressed in dollars.
of owner’s equity ratio is the
The proprietorship ratio
relationship between the owner’s investment in the firm and
the total assets being used in the business. This ratio can be
expressed as a ratio of owner investment to total assets or as a
percentage of those total assets.
There are many other ratios utilized in the analysis of
business firm operations. Most small firms that maintain
adequate current ratios, quick ratios, and working capital,
proper inventories, and a 50 percent proprietorship ratio will
maintain sound financial structure.
79
Trading on equity. In connection with owner investment
prospective business owners and managers should become
familiar with the phrase “trading on equity”. This phrase refers
to the relationship between the creditor capital (liabilities) in
the business and the owner capital. Trading on too thin an
equity is a term used to describe owners who have too little of
their own money invested compared with the creditor capital
(liabilities) used to finance the business. A proprietorship ratio
of 50 percent indicates that the owner or owners have invested
half the value of the total assets used in the business. When this
ratio falls bellow 50 percent, the outside creditors are supplying
more of the firm’s total capital needs than the owners are. This
indicates, in most cases, that further capital will be more
difficult to obtain either from current loans, sale of securities,
or other investors. Such owners are truly trading on too thin an
equity and probably need more investment capital of their own.
COMPREHENSION
1. Answer the following questions.
1) Why is good record keeping necessary?
2) What opportunities can be provided by recording daily
transactions?
3) What records are suggested to be kept for a typical small
business?
4) Where are the results of operations and the present
financial position of the firm reflected?
5) What does the income statement summarize?
6) How often are income statements prepared?
7) What is the basic idea of the income statement?
8) What kinds of profit are there in business? Explain the
difference between them.
9) What items are shown in the income statements?
10) What have you learned about the balance sheet?
11) In what way does the income statement differ from the
balance sheet?
80
12) What is the current ratio? What is the conservative rule as
to a minimum limit on this ratio?
13) Is the quick ratio different from the current ratio? How?
14) What is the working capital of any business?
15) What have you learned about the proprietorship ratio and
trading on equity?
2. In each of the following, select the word or phrase that
1) When business owners pay their bills early, they are
usually entitled to a
a. dividend
c. cash discount
b. profit
d. trade discount
2) When business owners purchase large quantities of goods
from a seller, they are usually entitled to a
a. trade discount
c. markdown
b. cash discount
d. dividend
3) The difference between the cost of an article and its selling
price is
a. profit
c. expense
b. markup
d. margin
4) The form used to record daily transactions is called a
a. ledger
c. balance sheet
b. statement of operations d. journal
5) The purpose of the balance sheet is to
a. give a clear financial picture of the business
b. avoid paying taxes
c. attract investors
d. meet federal regulations
6) Which one of the following terms is used to refer to
merchandise that is kept on hand for sale ?
a. fixed assets
c. supplies
b. stock
d. inventory
81
7) An employee is normally entitled to overtime pay for work
in excess of
a. 35 hours in one week
c. 40 hours in one week
b. 37 ½ hours in one week
d. 44 hours in one week
8) The total earnings due to an employee who is paid hourly
wages is called
a. net wages
c. take- home pay
b. gross wages
d. overtime pay
GRAMMAR
Passive Voice
The passive voice is used when focusing on the person or thing
affected by an action.
• The Passive is formed: Passive Subject + To Be + Past
Particple
• It is often used in business and in other areas where the
object of the action is more important than those who
perform the action.
For Example: We have produced over 20 different models
in the past two years.
Changes to: Over 20 different models have been produced
in the past two years.
• If the agent (the performer of the action) is important,
use "by"
For Example: Tim Wilson wrote "The Flight to
Brunnswick" in 1987.
Changes to:"The Flight to Brunnswick" was written in
1987 by Tim Wilson.
• Only verbs that take an object can be used in the
passive.
The following chart includes sentences changed from the active
to the passive in the principal tenses.
82
Active
Passive
Time Reference
They make Fords in Fords are made in
Present Simple
Cologne.
Cologne.
Susan is cooking
dinner.
Dinner is being
cooked by Susan
Present
Continuous
James Joyce wrote
"Dubliners".
"Dubliners" was
written by James
Joyces.
Past Simple
They were painting
the house when I
arrived.
The house was
being painted
when I arrived.
Past Continuous
They have
produced over 20
models in the past
two years.
Over 20 models
have been
produced in the
past two years.
Present Perfect
They are going to
build a new factory
in Portland.
A new factory is
going to be built
in Portland.
Future Intention
with Going to
I will finish it
tomorrow.
It will be finished
tomorrow.
Future Simple
3. Take the following sentences in the passive voice and put
them into the active voice.
1. The instructions have been changed. – Someone
…………………….. the instructions.
2. She will have to be taught. ______________________________.
3. This car was manufactured in Japan by Toyota. ______________________________.
4. Why aren't the exercises being finished on time? ______________________________
83
5. Last year 2,000 new units had been produced by the
time we introduced the new design.
____________________________________________.
6. Casual clothes must not be worn. ____________________________________________ .
7. $400,000 in profit has been reported this year. _____________________________________ .
8. The test will be given at five o'clock this afternoon. ____________________________________ .
9. Students are required to wear uniforms at all times.
____________________________________.
10. This rumour must have been started by our competitors
____________________________________.
4. Put the verbs into the brackets at suitable tense in
Passive Voice:
1. He (to give) _____________
a job of considerable
responsibility.
2. The surprise which played over the manager’s face (to
manufacture) _________________.
3. Two years had passed before this employee (to release)
_____________ from the concentration camp.
4. I (to please) _______________ beyond measure.
5. The goods (to ensure) ______________ of marine risks
according to the rules.
WORD STUDY
5. Give Antonyms for:
Tangible
Debt
Regular
Earning
Retailing
To borrow
To avoid
To buy
To fix
To install
84
Transactions
Balance sheet
Operations statement
Liabilities
7. Give all possible combinations of the verbs with nouns
and of adjectives with nouns:
To carry out
Partial
To expire
Fair
To suspend
Unfair
To transfer
Clear
To bear
Perpetual
8. Match the words with their definitions:
a) Credit sale
1) Gross sales reduced by amounts allowed to
customers as credits for goods returned, goods
over- invoiced, etc.
b) quick ratio 2) A formal acknowledgment that money due
has been paid or that goods have been received.
c) liabilities
3) A sale for which payment will be made
later, either as a lump sum on a certain date or
by regular installments over a period. Goods
bought in this way become the property of the
buyer as soon as they have been delivered to him.
d) operating
expenses
4) A book of prime entry, being that section
of the day book in which a listing is made
daily of all goods bought on credit by business.
Each entry is posted as a credit to the
supplier’s account in the purchases (or bought)
85
ledger and totals are posted periodically to the
debit side of the purchases account in that
ledger.
e) working
capital
5) The expenses of running a business, such
as salaries and wages, rent, rates, telephones,
postages, advertising and distribution, but not
including direct cost of factory labor, materials,
and other manufacturing costs.
f) receipts
6) A ratio used as a test of solvency ratio
(relation) between current assets and current
liabilities.
g) purchases
journal
7) A test used in deciding solvency, by
relating a concern’ s most liquid assets (usually
its bank balance, money due from customers,
cash, and quickly saleable investments ) to its
current liabilities.
h) net sales
8) The stock of money needed by a business
in order to keep trading or to carry on
production. It consists of stocks and liquid
resources (cash and things that can quickly be
turned into cash); and it is equal to the
difference between the current assets and the
current liabilities.
i) bad debts
9) Debts that are likely never to be paid and
must be treated as worthless by being entered
as written off in a bad debts account.
j) current
ratio
10) The sums of money which a company or
organization owes, for example because it has
made promises or signed agreements.
86
Credit, statement, inventory, sound, payment, avoid,
loss, accurately, evaluation
1) The…. of debts must not be delayed.
2) I may not have drawn it… enough.
3) You must … giving any unnecessary information
evaluation.
4) A realistic … of the working of Britain’ s economy was
done by the government.
5) I have a bank … at the start of every month.
6) The company announced a huge … for the first half of the
year.
7) Industrial expansion was a … investment.
8) … is all the merchandise you have on hand for sale.
9) Businesses which make regular use of … must have good
credit ratings.
10. Complete these sentences with the correct form of the
verbs raise or rise:
1. The Chancellor has just _______________ the duty on
petrol.
2. The sun ______________ in the east and sets in the west.
3. Our share price has ___________ recently.
4. She ____________ an important point at the meeting
yesterday.
5. Bank lending rates __________ by 0.5 % last month.
6. Could I __________ a question?
1. Sunt satisfăcut de controlul cu privire la mărfuri şi servicii
deoarece a fost semnat chiar de directorul general.
2. Noi aşteptăm cu nerăbdare pe viitor încheierea a mai multor
contracte cu Dmv.
3. Compania a fost satisfăcută de utilajul pe care l-am livrat
87
4.
5.
6.
7.
8.
9.
anul trecut şi ei cu nerăbdare aşteaptă încheierea unui
contract nou cu noi.
Pentru noi este foarte important să primim răspunsul firmei
nu mai tîrziu decît peste o săptămînă.
Compania Smoke &Co este considerată unicul agent în
vînzările utilajului electric.
Condiţiile generale sînt considerate o parte de neexclus a
oricărui contract.
Au sosit mărfurile ? Da, ele se află în port de 2 săptămîni.
Noi am informat compania de asigurări precum că marfa a
fost deteriorată în drum.
Toţi banii sunt transferaţi pe contul Dmv. bancar.
Această ofertă este valabilă doar în cazul în care marfa nu se
va realiza.
1. Я очень доволен контрактом по поводу этих товаров и
услуг, так как он был подписан генеральным менеджером.
2. Мы с нетерпением ждём заключения большого количества сделок с вами в будущем.
3. Фирма была очень довольна машинами, которые мы им
поставили в прошлом году, и они с нетерпением ждут
заключения нового контракта с нами.
4. Нам очень важно получить ответ фирмы не позднее, чем
через неделю.
5. Фирма Smoke &Co считается единственным агентом по
продаже электрооборудования в стране.
6. Общие условия считаются неотъемлемой частью любого
контракта.
7. Товар уже прибыл ? – Да, он находится в порту уже две
недели. Мы послали письмо в страховую компанию с
извещением что товар был повреждён в пути.
8. Все деньги уже переведены на Ваш счёт в банке.
9. Это предложение действительно лишь в том случае,
если товар еще не будет продан.
88
DISCUSSION
1. Where is the owner’s investment plus any accumulated
profit shown in the basic financial statements?
2. When business owners analyze their income statement,
what fact and comparisons should they consider?
3. The current ratio is often referred to as the firm’s test of
liquidity. Explain in a short paper how the current ratio is
truly such a test and how it assures the ability to pay current
bills as they become due.
4. “Trading on too thin an equity” means that the creditors
have more investment in the firm than the owners.
a. Explain how such a condition can affect the success of
the business.
b. Prepare a balance sheet for a small firm that illustrates a
condition of trading on too thin an equity.
WRITING
2. Make up your own example of an income statement for a
service business and one for a retail business. Explain their
basic difference.
Past experiences
Masayoshi Son was born in Kyushu, Japan in 1957. He
is the founder of SOFTBANK, Japan’s leading PC software
distributor. Below is the description of his account of how he
came to start the business and work out, how long it took him
to decide what to do.
“I spent a lot of time doing research and making
business plans before I started the company. I was living in
89
Kyushu at the time. It was 1979 and I’d just come back from
the States. I had no income and all my family and friends were
worried. They couldn’t understand why I wasn’t doing
anything, but I was thinking.
I’d gone to the States to study when I was sixteen. I
went to Oakland, California for a couple of years first, then I
transferred to Berkeley where I graduated. I met my wife while
I was studying English at Oakland and by the time we came
back to Kyushu we had a new baby. She was worried too. I had
come up with 40 new ideas – for creating software to setting up
hospital chains – but I didn’t know which to start.
I wanted a business I could fall in love with. It had to
be unique and original. It had about 25 points like this and I
took a big sheet of paper and gave each business idea scores.
Then I picked the best one. It turned out to be the personal
computer software business. So in 1981 we finally moved to
Tokyo and I started SOFTBANK.”
(Business lines, August, 1999)
1. Say the meaning of the italic print words, underline
any other words you don’t know and try to work out what
they mean too.
2.Discuss what you have read with your colleagues. Tell
them what you think the article is about.
3.Imagine your own beginning career in business and try
to put on a sheet of paper the best ideas.
EVALUATION TEST TO UNIT IV
1. Worker’s compensation is paid by the
a) employer
b) employee
90
c) employer and the employee
d) federal government
2. A cost code is used to
a) simplify records
b) show the date of purchase of an article
c) conceal the wholesale cost of the article
d) all the above
3.The Julian calendar is used in business to show the
a) the age of merchandise
b) shipping date
c) date merchandise was sold
d) last date merchandise can be sold
4. The numbers of times an inventory is sold in a given
period is referred to as
a) perpetual inventory
b) overstock
c) turnover
d) sales
5. Which one of the following records, in chronological
order, all receipts and payments of money for a business?
a) cash book
b) ledger
c) balance sheet
d) operations statement
6.Which one of the following is not a financial record?
a) operations statement
b) dossier
c) balance sheet
d) time card
91
7. It’s up to the accountant to …the various financial
statements.
a) interpret
b) intercept
c) invent
d) translate
8. The bookkeeper keeps a record of every financial …
a) action
b) transaction
c) entry
d) transcription
9. It’s essential to … the invoice number in any
correspondence.
a) estimate
b) quote
c) say
d) tell
10. One … of the invoice goes to the customer, another copy
goes to Sales and we keep the other one here in
Accounts.
a) photocopy
b) issue
c) top copy
d) account
11. We send a…to customers who haven’t settled their
accounts.
a) reminder
b) remainder
c) remembrance
d) memory
92
12. We’re in …with our supplier over this invoice so don’t
pay it until you hear from me
a) argument
b) dispute
c) agreement
d) distress
13. If these figures could be …into parts and labor it would
make them easier to understand.
a) set up
b) broken down
c) rounded up
d) laid up
14. This company has a weekly ..of about $ 100,000.
a) pay
b) payroll
c) salary
d) wage
15. Such items as buildings and machinery are knowing
as…assets.
a) current
b) hidden
c) fixed
d) liquid
16. Your jacket …over there.
a) can be hunging up
b) can be hang up
c) can be hung up
d) can be hunged up
93
17. An idea … for discussion.
a) was put forward
b) was putted forward
c) was putting forward
d) were put forward
18. My bank loan … in five years time.
a) will be being paid of
b) will be paid off
c) will be payed off
d) will be paying off
19. The inconvenience …by this money.
a) will made up for
b) will being made up for
c) will been made up for
d) will be made up for
20. 3000 employees …
a) were lied off
b) were laying off
c) were laid off
d) were layed off
21. Our allies … support.
a) will been lent
b) will be lent
c) will be lend
d) will be lended
22. Thirty more people … last week.
a) were laid off
b) were layed off
c) were laying of
d) were lied off
94
23. The protesters …by the police.
a) are being hald back
b) are being holding back
c) are being hold back
d) are holding back
24. More and more farmland …by cities.
a) is being eaten up
b) is being eat up
c) being eaten up
d) are being eaten up
25. Most of the land in the area …by property developers.
a) has be bought up
b) has been being bought up
c) have been being bought up
d) has been bought up
26. The task … into smaller, manageable mini-tasks.
a) is brake down
b) is braking down
c) is broken down
d) is broking down
27. His confidence …by this.
a) will be being built up
b) will be build up
c) will be built up
d) will been built up
28. The engagement …just to days before the wedding.
a) was braking off
b) was broke of
c) was broken off
d) was braked off
95
29. I …by the other students of English.
a) am be caught up
b) am been caught up
c) am being caught up
d) am being catching up
30. Unemployment … by the government.
a) must be deal with
b) must be dealed with
c) must be dealt with
d) must being dealt with
96
Unit 5. The comprehensive plan
Objectives: to outline the main steps in planning the total
business activities; to describe the formation and the use of
non-finite forms of the verb (infinitive, Participle I, Participle
II, Gerund).
Tasks: to discuss questions related to the theme; to make and
follow a future total business plan; to underline the major steps
in planning; to practice in exercises the non-finite forms of the
verbs.
Motto:
“An economist is an expert who
will know tomorrow why the
things he predicted yesterday
didn't happen today. ”
Author: Laurence J. Peter
TERMS TO KNOW:
creditworthiness
sequence of steps in
planning
accounting records
merchandising
advertising and
promotion
break-even point
depreciation policy
apt de a primi
credite
consecutivitatea
paşilor în planificare
conturi contabile
plan de
comercializare a
mărfurilor
publicitate şi
promovare
punct de pornire al
venitului
politică de
amortizare
97
кредитоспособность
последовательность
шагов в планировании
бухгалтерские счета
коммерческое
планирование
реклама и
продвижение
точка нулевой
прибыли
амортизационная
политика
inventory valuation
method
desired income
approach
based on the
conviction
neglect
commitments
projected income
statement
be abundantly
available
sales volume
ascertain
value in monetary
units
hire a delivery
service
eliminate
incur
layout
money terms
pricing policy
public relations
markup
markdown
estimate
metodă de evaluare метод оценки товарноa mărfurilor
материальных
ценностей
mod de abordare a способ получения
venitului dorit
желаемого дохода
bazat pe convingere основан на убеждении
a neglija
angajamente,
obligaţii
cont planificat al
venitului
a fi destul de utilizat
упускать
затраты, вложение
планируемый отчет о
прибылях
быть в наличии в
изобилии
volumul vînzărilor обьем реализованной
продукции
a clarifica, a stabili выяснять,
устанавливать
valoare, cost în
стоимость в денежных
unităţi monetare
единицах
a închiria servicii de нанимать услуги по
livrare
доставке
a exclude
устранять, исключать
a suporta pierderi
терпеть (убытки)
aşezare, plan,
схема расположения
tehnoredactare
expresii, termeni
в денежном
băneşti
выражении
politica preţurilor
ценовая политика
relaţii publice
связи с
общественными
организациями
majorarea preţurilor наценка, повышение
(цен)
micşorarea
снижение цены,
preţurilor
величина скидки
a evalua
оценивать
98
estimated expenses
sales on account
establish a credit
policy
credit card sale
open account
risk uncollectibility
tax return
lender
chamber of
commerce
lease the property
cover production
reduction in price
debt problem
cost of production
fee
calcule preventive
ale cheltuielilor
vînzare pe cont
deschis
a aproba politica
creditelor
vînzare în credit
cont deschis
riscul neachitării
declaraţie fiscală
creditor
camera de сomerţ
a da în arendă
сдавать в аренду
proprietatea
собственность
a gestiona producţia обеспечивать
производство
scăderea preţurilor снижение цен
problema datoriilor проблема долга
costul producţiei
издержки
производства
recompensă, onorar гонорар,
вознаграждение
a micşora conştient умышленно занижать
preţurile
цены
concurenţi
конкуренты
a suporta o piedere терпеть убыток
a ieşi de pe piaţă
уйти с рынка
deliberately
undercut
competitors
make a loss
withdraw from the
market
at the point of sale la locul vînzării
reach target
recruit new
assistants
turnover
fall in profits
предварительно
подсчитанные расходы
продажи по открытому
счету
установить кредитную
политику
продажа в кредит
открытый счет
подвергаться риску
неполучения
налоговая декларация
заимодавец, кредитор
торговая палата
a atinge scopul
a angaja noi
lucrători
circuit economic
diminuarea
profiturilor
99
на месте совершения
продажи
достичь цели
нанимать новых
помощников
оборот, товарооборот
понижение прибыли
TEXT
Chances of success for any new business are greatly
increased when attention is first directed to a comprehensive
business plan. A complete business plan provides a total
visualization of the firm before operations are started. When
financial assistance is necessary from bankers, trade creditors,
or investors, their first request will be to see the total business
plan. With it they can visualize the creditworthiness of the
business.
There is no one sequence of steps in planning that is
agreed upon by all authorities in the field. The most important
thing in planning a new small firm is that all phases of its
operations must be considered. The person planning a new firm
should have very definite ideas about profits, financing,
accounting records, merchandising plans, location, market and
customers, general method of operation, policies, advertising
and promotion, amount and type of expenses, break-evenpoint, legal form of organization, depreciation policies, and
inventory valuation methods, among other factors.
The desired income approach to the entire planning
process suggests that planner’s first question should be, “How
much profit do I expect to receive from this business in return
for investing my time and money in it?” This approach is based
on the conviction that this question has been neglected much
too often by new firm planners. No commitments, contracts, or
obligations relative to a new business should be undertaken
without a clear idea of that profits are possible over at least the
first year of operation.
Using the desired income approach, there are 14 major
steps in planning.
Step 1. Determine what profit you want from the
business, recognizing the time you will give and the investment
you will have. The complete projected income statement based
upon your decision.
100
With the profit figure clearly in mind, it is possible,
using statistics that are abundantly available, to calculate the
sales volume that is necessary to produce that particular profit.
Step 2. Survey and test the market you plan to serve to
ascertain if the necessary sales volume required to produce the
profit called for in step 1 is obtainable.
The basic objective of step 2 is to find out what can
reasonably be expected in sales if the business is established
within the intended market area.
Step 3. Prepare a statement of assets to be used.
A statement of assets to be used is a list of assets that are
essential to the operation of business. Value in monetary units
should be attached to each asset.
Step 4. Prepare an opening day balance sheet.
Step 4 involves close study of the asset needs of the business as
determined in step 3 and decisions on how they are to be met.
Here we decide whether to rent or buy the business building;
whether to by delivery trucks and on what terms, or whether to
hire a delivery service or even eliminate such service. Every
asset to be used, every liability to be incurred, and the resulting
necessary investment buy the proprietor must be clarified in
this step. This will involve knowing the various types of
financing available in providing each asset and how they
should be spent without fear of loss. Basic information
provided by a balance sheet and by an income statement is
necessary to do this task well.
Step 5. Study the location and the particular site chosen
for specific characteristics.
Too many small firms are located in space that just happened
to be available without any analysis of the suitability of that
space as alocation for the specific type of firm planned.
Step 6. Prepare a layout for the entire space to be used
for business activity.
101
Step 7. Choose your legal form of organization.
Planners should not only study the characteristics of the three
major legal forms of organization (proprietorships, partnerships
and corporations); they should also seek out the true
management advantages of each.
Step 8. Review all aspects of your merchandising plan.
Merchandising is a broad term. It is popularly known today as
“the total marketing concept”. It covers many things- plans for
presenting products to customers, inventories in money terms
and lines of goods, sales promotion plans, advertising plans,
pricing policy, public relations, markups, markdowns,
seasonable variations in business, planned special sales, and
other associated activities.
Step 9. Analyze your estimated expenses in terms of
their fixed or variable nature.
Step 10. Determine the firm’s break-even point.
Step 11. If you are even considering sales on account,
review the advantages and administrative decision involved.
Then establish a credit policy.
The process of selling to customers on credit has many
more implications than generally assumed. Credit-card sales
cost money. Open accounts risk uncollectibility.
Step 12. Review the risks to which you are subject and
how you plan to cope with them.
The more we know about the risks around us, the better
we can prepare the firm to protect itself against them.
Step 13. Establish a personnel policy at the outset.
How will you attract and keep good employees? Will
you understand employee’s needs and desires? How will you
establish policies regarding them?
Step 14. Establish an adequate system of accounting
records.
Good accounting records are essential to decision
making in any business. They are also necessary for
102
government reports, tax returns, and operation analysis. Every
new firm should provide for an adequate system of accounting
records in the planning stage.
COMPREHENSION
1) What is the advantage of developing a comprehensive
plan before starting a new business?
2) Why do the bankers always request the total business
plan?
3) What is the most important thing in planning a new small
firm? What must be considered in planning?
4) What approach suggests that the planner’s first question
should be about the amount of profit?
best completes the statement or answers question .
1) The business plan is developed by
a. banker
c. lender
b. entrepreneur
d. accountant
2) The business plan does not need to include a
a. budget for operating the business
b. description of business
c. description of products or services
d. photo of owners
3) The least important factor to consider when selecting a
location for a new furniture store is the:
a. weather
c. competition
b. future
d. historical background
of community
4) The aim of a good self-service layout should be
a. customer convenience
c. the elimination of
stockroom space
b. stocking merchandise
d. appearance
103
5) A good layout will
a. save money
b. save space
c. need good aisle displays
d. do all of these
GRAMMAR
The non-finite forms of the verbs
The non-finite forms of the English Verbs are:
The Infinitive – to cope, to supply All these forms express
The Gerund – coping, supplying
the action but do not
The Participle I - coping, supplying show any category of
The Participle II - coped, supplied person, tense, mood.
The Infinitive can be used with the Particle “to” or without it.
The Infinitive has different forms of Tense and voice:
Perfect
Indefinite Continuous Perfect
Continuous
To have
To have
Active To discuss To be
discussed
discussed been
discussed
To have
Passive To be
discussed
been
discussed
The negative form of the infinitive is formed by adding the
particle “not” before it. e.g.: to make – not to make; to have
made - not to have made.
The Infinitive can be used to :
- Express purpose: She went abroad to become
acknowledged with all the principles of trade.
- After certain verbs: We refused to interview these
economists.
To agree
To expect
To promise
To appear
To hope
To refuse etc
To decide
To plan
104
-
After certain adjectives (happy, glad, sorry etc.):
They were happy to win the prize.
- After the forms: I would like/ would prefer/ would
love etc. I’d like to cope easy with all the
difficulties.
- After Modal Verbs without particle “to”: We can
deal with all these problems.
- After the verbs let, see, hear, feel + Object: They
made him pay for the damage.
The Present Participle (Participle I) and the Gerund is
formed adding the '-ing' form to the verb. Their form is
identical, the difference is in the function, or the job the
word does in the sentence.
The Gerund:
Has the same forms as the
Participle I
- may be used as noun;
- sometimes functions as the
object of the verb; - it is
definitely noun – related;
- often qualifies a noun, e.g.:
A dancing teacher (= a teacher
of Dance)
• is preceded only by
prepositions:
He was accused of having stolen
some money.
Other cases of using:
• as the subject of the sentence:
E.g.: Walking is good exercise.
• After certain verbs:
to admit, to anticipate, to
appreciate, to avoid, to consider,
to continue, to delay, to deny, to
discuss, to enjoy, to escape, to
excuse, to fancy, to finish, to
The Present Participle:
Has the same forms as the
Gerund
- is definitely adjective-adverb
related;
- try to frame the “–ing” forms
into continuous construction, e.g.:
A dancing girl (= a girl who is
dancing or dances)
• is preceded only by
conjunctions:
While washing up she dropped a
glass.
• as part of the continuous
form of a verb;
e.g.: He is painting
• after verbs of movement/
position in the pattern: Verb
+Participle I
e.g.:She sat looking at the see;
• after verbs of perception in
the pattern:
Verb + Object + Participle I:
forgive, to go, to imagine, to
e.g.: We saw him swimming.
involve, to keep, to mention, to
mind, to miss, to object to, to
• as an adjective:
postpone, to practice, to risk, to e.g.: Amazing, boring, worrying,
save, to stand, to suggest, to
exciting etc.
tolerate, to understand etc.
e.g.: They discussed selling the
company.
• To express general preferences
it is used after the verbs: to
like, to enjoy, to hate, to love,
to prefer.
e.g.: I like working in this
enterprise.
or we use the Infinitive:
I like to work in this enterprise.
Past Participle (or Participle II) of regular verbs is formed
with the help of the suffix “-ed”;
e.g.: to discuss- discussed
The irregular Verbs form Participle II in many ways, it is their
3rd form.
e.g.: see-saw.
There are some differences in using Participle I or Participle II:
The Present Participle
(Participle I):
• describes what somebody or
something is:
e.g.: These goods are
fascinating.
Is often used as:
• a determinative to a Noun
(before or after the Noun)
e.g.: They looked at the flying
airplane.
The Past Participle
(Participle II):
• Describes how someone feels:
e.g.: The customers were
fascinated by these products.
Is often used as:
• a determinative (before a Noun):
e.g.: The received letter was lying
on the table.
• After Nouns in constructions
106
• Adverbial modifier with the
conjunction “while” or
“when”:
e.g.: When going home I met
my colleague.
While doing this job, I was
very concentrated not to make
mistakes.
that are used definal clauses:
e.g.: The products sold this month
increased our income.
3. Put the verbs in brackets into the correct form, using,
where possible, Participles or Gerunds:
1. (to read) ______________ the telegram twice, he
understood what was the matter.
2. When (to fill in a form) ________________, you must
write your name and address clearly.
3. “Don’t lose your things, little boy”, said a young man,
(to pick up) ___________ the gloves (to drop)
________ by the boy.
4. The man who (to make) _________ the opening speech
at the exhibition is a well known painter.
5. I had never realized what a talented manager he was
until I saw his abilities (to practice) _________ in our
company.
4. This is an advertisement for the book 'Winning in
Business'. Put in the correct form of each verb:
e.g.: Are you fed up with (be) being a failure in your job?
Wouldn't you rather (succeed) succeed ? Do you want (earn)
to earn more money?
Are you anxious (1)...............(get) ahead?
Do you believe in (2) ……............. (make) the most of your
talents? Do you sometimes dream about (3) ………………
(reach) the top? If the answer is yes, read on. Just imagine
107
yourself (4) ………………(run) a big successful company.
And now you can do something about it instead of
(5)................ (dream). It'll happen if you want it
(6).................(happen). Make it a reality by (7)………….....
(order) your copy of the best-selling 'Winning in Business'. It
has a ten-point plan for you (S)................(follow). Do it and
you're certain (9) …………… (be) a success. You'll know
what (10) …………. (do) in business. You can make other
people (11) …………… (respect) you and persuade them (12)
……........(do) what you want. Experts recommend (13)........
…… (buy) this marvelous book. You’d better (14)
…………….. (order) your copy today.
5. To-infinitive or ing-form? Complete this article from a
magazine. Put in the to-infinitive or ing-form of these
verbs:
accept, argue, be, find, have, insist, lose, plug, repair, say,
take, wait
If you buy something from a shop, a new stereo for example,
you usually can't wait to plug it in and put some music on. And
of course, you expect to find the equipment in working order.
But that doesn't always happen, unfortunately. If the thing
doesn't work, you should take it straight back to the shop. If
you delay (l) ............................... it back, you will risk (2)
............................. your rights as a customer. And you should
prepare (3) ............................. on those rights. You may be one
of those people who always avoid (4) ..................... with
people, but in this case you should be ready for an argument.
The assistant may prove (5) ............................ a true friend of
the customer - it's not impossible — but first he or she will
probably offer (6) ......................... the stereo for you. That's all
right if you don't mind (7) ................... a few weeks, but it isn't
usually a good idea. What you should do is politely demand
108
(8) .......................... your money back immediately. You may
want to accept another stereo in place of the old one, but you
don't have to. You should refuse (9) .............. a credit note. Just
keep on (10)……………. that you want your money back.
WORD STUDY
6. Give Synonyms for:
Advertising
To project
Conviction
To depreciate
Expenses
To reduce
Competitors
To lease
Fall
To cover
7. Explain the following terms and use them in a situation
of your own:
Comprehensive business plan
Value
Monetary units
Personnel policy
Commitments
Layout
1. The level of sales at which the income
a) value
from goods sold is just enough to cover
production, neither profit nor loss being
made.
b) layout
2. A promise; something to which one has
committed oneself, which one is bound to
do; a payment which one is bound to
make.
109
c) break-even
point
3. The amount that can be obtained for
something by exchanging it for money or
goods.
d) tax return
4. The standard unit of the currency of a
country.
e) commitment
5. The active planning and organization of
various ways of attracting the public to
buy a particular product in the shops such
as displays, free samples, free gifts,
competitions.
f) monetary unit
6. A reduction in price, usually to
encourage a quick sale.
g) mark-up
7. An increase in the price of something,
for example, the difference between its
cost an the price that you sell it for.
h) merchandising
8. In Britain, a statement which every
taxpayer must be law make once a year.
i) mark-down
9. The way the building and its contents
are arranged. A drawing or diagram
showing this.
9. Choose the correct word for each sentence.
1. I’ll ask my bank manager for (advice/advise) about
investment.
2. He first spoke (briefly/shortly) about the agenda for the day.
3. She took her case to an (industrial/industrious) tribunal.
4. Unfortunately we have (mislaid/misled) the original
invoice.
110
5. The secretary made (notes/notices) of what was said at
the meeting.
6. If you pay too much tax you get a (discount/rebate).
7. Lawyers here only get their (fee/wages) if they win the
case.
8. The (income/salary) from the investment is ₤52,000 a
year.
9. She hopes to get a (chair/seat) on the board.
10. We (check/control) each new consignment very carefully.
10. Complete the following sentences with:
Either
neither too
nor / or
both
1. John and Sam ... agree. Peter does.... .
2. ....Simon.... Ann agrees with you. They ... think you are
crazy.
3. You can ... leave the firm of you own free will ... be
fired. In any case, I want you out.
4. ...Peter ... Roger like living in London. I don’t like it... .
5. ... Marketing and Production share the same opinion
about the need for higher quality. However, of them
have come forward with any concrete proposals.
1. Această politică a fost îndreptată împotriva majorării importului.
2. Noi încă nu am discutat formularea punctului cu privire la
achitarea plăţilor trimise de companie pentru aprobare.
3. Noi am studiat instrucţiunile anexate la această scrisoare cu
privire la asamblare, întreţinere şi exploatare a utilajului.
4. După o studiere amănunţită a ofertei Dmv. am ajuns la
concluzia că capacitatea acestui utilaj este mai mică decît
este indicat în caracteristici anexate la cerere.
5. Urmînd toate instrucţiunile pentru exploatarea acestei maşini
Dmv. La sigur nu veţi întîmpina nici un fel de dificultăţi.
111
6. Cred că vom întîmpina dificultăţi în stabilirea preţurilor.
Compania are obiecţii mari în privinţa revizuirii preţurilor.
7. Această întrebare se află în proces de analiză şi nu putem să
vă oferim un răspuns mai amplu şi sigur mai devreme decît
peste o săptămînă.
1. Эта политика была направлена против увеличения
импорта.
2. Мы ещё не обсудили формулировку пункта о платежах
присланных нам фирмой на утверждение.
3. Мы изучили инструкции по сборке, уходу и эксплуатации оборудования, приложенные к этому письму.
4. После тщательного рассмотрения Вашего предложения
мы нашли, что мощность этой аппаратуры ниже, чем
указано в характеристике, приложенной к нашему
запросу.
5. Соблюдая все инструкции по уходу за эксплуатации
этой машины, у вас несомненно не возникнут никаких
проблем.
6. Боюсь, что нам трудно будет договориться с фирмой о
цене. Их возражения против пересмотра цен слишком
велики.
7. Этот вопрос еще находится в стадии рассмотрения, и я
не могу Вам дать окончательного ответа раньше чем
через неделю.
DISCUSSION
1. What is the danger of starting a new firm without
adequate financing?
2. Do you think it is advisable for someone planning a
new firm to think about what profit it will produce
before beginning operations? Why?
3. What do we mean by “planning a new business”?
4. Do you agree with the steps for developing a compre112
hensive business plan outlined in the reading? How
would you change them?
WRITING
1. Write a summary of the text.
2. Explain in a short paper what term “the desired income
approach to planning a new firm“ means to you?
International meetings I
1. You are attending a two-day conference at the international
headquarters of your company. Top managers from all over the
world are attending, but you encounter a few problems. Decide
what to do about them, and tick one of the boxes.
1. Before the conference,
the organizers send you
some working papers. You
are short of time. Decide
what to do with them:
□ I’ll make sure I study
the papers
thoroughly, even if I
have to stay up all
night.
□ I'll have a quick look
at them on the plane.
□ I'll do something else.
(What ?)
2. The subject of this
morning's meeting has little
relevance to your area of
4. The weather is very hot
and the sun is beating
through the meeting room
windows. You are getting
uncomfortable. Decide what
to do.
□ I'll remove my jacket
and loosen my tie.
□ I'll do nothing.
(What?)
5. This morning's meeting is
supposed to be about next
year's budget. However,
113
work. You have a phone
call to make and you'd like
to leave half-way through.
Decide what to do:
□ I'll leave without
saying anything.
□ I'll wait until the
meeting is over to
make my call.
(What?)
you've had an idea about the
distribution
system that
you'd prefer everyone to
discuss. Decide what to do.
□ I'll keep quiet and
discuss the budget.
□ I'll introduce the topic
of the distribution
system.
(What?)
3. Your Finance Director is
supposed to attend the
conference with you, but
something important has
come up and she can't.
Decide what to do:
□ I'll go alone.
□ I'll see if her deputy
can attend instead,
even though he has a
much lower status in
my organization.
(What?)
6. You are sitting in a small
meeting, listening to the
Production Manager's report.
You are not an expert on the
subject of production but
suddenly you have an idea.
Decide what to do.
□ I'll indicate I'd like to
speak and tell
everyone my
suggestion.
□ I'll keep quiet and
speak to the
Production Manager
later.
(What?)
7. You are putting forward a proposal that several people at
the meeting disagree with. You are absolutely sure that you
are right and they are wrong. How will you handle this?
□ I'll stick to my guns.
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□ I'll drop the proposal.
□ I'll do something else. (What?)
2 Tell a colleague what you've decided and explain why.
A What are you going to do with the working papers?
B I think what's said at the meeting is more important than
what's in the papers, so I'm going to look at them quickly.
A Are you? I'm not. I think ...
3 Now compare your answers with these comments from John
Mole. Does he mention your nationality at all? See if you agree
with him.
Planning Ahead
John Mole was educated at Oxford University and the
international business school INSEAD. After a fifteen-year
career with an American bank in the USA, the Middle East,
and Europe, he became an independent writer and consultant
on international human resources development.
Preparing for international meetings
'Germans, Dutch and Danes will be well prepared. They
will expect briefing papers which they will study and amend
and whose implications they will have meticulously
researched. British, Italian, Spanish, Irish and Greek
participants will have skimmed through the papers on the plane
and some may still be leafing through them at the meeting.'
Sending a subordinate
'If a participant cannot attend, British, Dutch and
Danish managers will send a subordinate who may be much
more junior. Spanish, French and North American managers
will either send an immediate and trusted deputy or no one at
all. Unaccustomed to meetings between people of different
status, they will ignore the deputies of others.'
115
Sticking to the agenda
'Participants from the USA, Germany, Denmark and the
Netherlands will expect to keep to the agenda. Participants
from Portugal, Greece and Italy will feel free to introduce
unscheduled topics at any time.'
Leaving a meeting
'Some participants, probably French or Italian, may feel
less bound by the discipline of a meeting than others. They
may leave to make phone calls or attend to paperwork if the
discussion is not directly relevant to them. In the UK it is not
acceptable to leave a meeting half-way through.'
Dress codes
'In most German offices, you keep your jacket on and
buttoned up unless you are alone. Shirt sleeves are a sign of
relaxation and not getting down to work. But in the
Netherlands, taking off the jacket means getting down to work.
In a Spanish meeting it is common to take off jackets and even
loosen your tie.'
Contributing ideas
'At meetings in Germany, it is important to come very
well prepared and not comment on things you are not qualified
to speak about. In the Netherlands, everyone is expected to
contribute, whatever their seniority.'
Dealing with conflict
'Commitment and tenacity, even to the point of
obstinacy, are prized in the West. To change your mind, to
abandon a position without a struggle, are signs of weakness.
Sticking to your guns in an argument, not letting go, even in
trivial matters, indicates strength of character. To a Japanese, it
is the opposite.'
Glossary:
to amend
meticulously
unaccustomed to
to change slightly
very carefully
not used to
116
tenacity
obstinacy
to abandon
a struggle
trivial
being very determined and not giving up easily
stubbornness, refusing to change your mind
or opinion
to leave, to give up
a fight
unimportant
(Economic purposes, July, 2001)
EVALUATION TEST TO UNIT V
1. When starting a business in a new community, it is
important to get information about the community from
a) the chamber of commerce
b) local banks
c) state agencies like the Department of Commerce
d) all of these sources
2. When selecting a location for a business, it is important
a) to purchase the property
b) to lease the property
c) to rent or buy the property to obtain a specific site
d to compare buildings and property for sale or rent
3. Which one of the following stores would find the selfservice type of layout most convenient?
a) jewelry store
b) supermarket
c) shoe store
d) fish market
4. When looking for a location for a gasoline service
station, which one of the following factors is most
important?
a) the age of the people in the community
117
b) the number of automobiles in the community
c) the average family income
d) the vehicular traffic through the community
5. When starting a business in a new community, it is
important to get information about the community
from
a) the chamber of commerce
b) local banks
c) state agencies like the Department of Commerce
d) all of these sources
6. When selecting a location for a business, it is important
a) to purchase the property
b) to lease the property
c) to rent or buy the property to obtain a specific site
d to compare buildings and property for sale or rent
7. Which one of the following stores would find the selfservice type of layout most convenient?
a) jewelry store
b) supermarket
c) shoe store
d) fish market
8. When looking for a location for a gasoline service
station, which one of the following factors is most
important?
a) the age of the people in the community
b) the number of automobiles in the community
c) the average family income
d) the vehicular traffic through the community
118
5. Supermarket aisles should be wide enough for
a) two persons abreast
b) three persons abreast
c) two persons and one cart abreast
d) three carts abreast
6. Which one of the following should be located in the rear
of a drugstore?
a) prescription department
b) cards and ribbons
c) magazines
d) tobacco
7.Buying that new machinery has seriously…our reserves.
a) depreciated
b) depleted
c) depressed
d) deprived
8. By examining the balance… and other documents we
were able to find out that the company was not doing as
well as they claimed.
a) slip
b) ledger
c) account
d) sheet
9. Surely we can affort some of these expenses…tax.
a) against
b) for
c) on
d) from
10. The rent for the office is already 3 months…!
a) overtime
119
b) in the red
c) in demand
d) overdue
11. Due to the economic climate we have had to …more bad
debts this year than ever before.
a) tell off
b) write off
c) find out
d) note down
12. Do they have enough working …to keep trading?
a) capital
b) expenses
c) accounts
d) currency
13. A formal acknowledgment that money due has been
paid or that goods have been received.
a) net sales
b) credit sales
c) receipt
d) evaluation
14. The standard unit of the currency of a country.
a) monetary unit
b) value
c) creditworthiness
d) tax return
15. A reduction in price, usually to encourage a quick sale.
a) mark-up
b) mark-down
c) commitment
d) layout
120
16. I don’t mind the children…in the yard
a) to play
b) playing
c) play
d) played
17. In our society, people spend more and more time…
a) work
b) working
c) to work
d) worked
18. To live a healthy life, we ought …our food wisely.
a) to choose
b) choose
c) choosing
d) chooses
19. The boy accepted to help …the meal.
a) prepare
b) preparing
c) to prepare
d) prepared
20. I don’t want …
a) his coming
b) him to come
c) that he would come
d) him coming
21. I wanted him … at once.
a) to come
b) coming
c) came
d) come
121
22. It’s no use … ; nobody will listen to you.
a) complaining
b) to complain
c) complain
d) complained
23. I’m a little tired. Why don’t we stop … a cup of tea?
a) have
b) having
c) to have
d) had
24. He was ill, but he seems … much better today.
a) to feel
b) feeling
c) feel
d) felt
25. I (see) Bill this morning, but I (not see) him since.
a) have seen, haven't seen
b) saw, haven't seen
c) saw, didn't see
d) have seen, didn't see
26. You (know) that he says that he never (lie) in all his
entire life ?
a) Do you know, lied
b) Do you know, had never lied
c) Do you know, never lies
d) Do you know, has never lied
27. My father just (finish) primary school when the war
(break) out
a) just finished, broke
b) has just finished, broke
122
c) just finished, was breaking
d) had just finished, broke
28. You (type) all morning, but you only (do) three letters !
a)have been typing, have only done
b)were typing, only did
c) typed, only did
d)have typed, have only done
29. It just isn't fair: while I (work) as a waiter last month,
my friends (lie) on the beach
a) worked, lied
b) was working, lied
c) have been working, lied
d)was working, were lying
30. It's very annoying: he always (brag) about his rafting
adventure. I (do) the same, twice already, but I don't
make such a fuss!
a) always brags, have done
b) has always bragged, did
c) is always bragging, have done
d) has always been bragging, did
123
Unit 6. Surveying the market
Objectives: to define the active vocabulary linked to the field
of market; to give effective explanations about Modal Verbs.
Tasks: to outline the analysis on surveying the market; to
compare different surveys; to discuss the market survey for a
new independent firm; to distinguish ability, necessity,
permission, advise, prohibition in text; to make a correct use of
Modal Verbs in situations.
Motto:
“Economics is not about things
and tangible material objects; it is
about men, their meanings and
actions.”
Author: Ludwig Von Mises
Terms to know:
projected sales area
merely
thorough
regiunea proiectată
pentru vînzări
doar, numai
complet, profund
to require thorough
study
a cere un studiu
profund
to satisfy customers
a satisface clienţii
to pick
to pick the proper
location
marketing costs
a allege, a selecta
a alege un local
potrivit
cheltuieli ce ţin de
piaţă
cheltuieli totale ale
afacerii
total business costs
124
планируемый район
сбыта
только, просто,
основательный,
доскональный
требовать
тщательного
изучения
удовлетворять
покупателей
выбирать, отбирать
выбрать подходящее
расположение
маркетинговые
затраты
совокупные расходы
предприятия
outside firm
market survey
attainable sales
volume
under consideration
firm under
consideration
to seek /
sought/sought
adjacent area
purchasing power
firmă din exterior
studierea pieţei
volumul vînzărilor
obţinute
în cercetare
firmă în cerectare
rarely attempt
telephone survey
questionnaire
tentativă, încercare
rară
examinare telefonică
chestionar, anchetă
mail survey
rate
examinarea poştei
preţ, tarif, curs
rate of return
tarif de restituire
reliable
to draw up a budget
sigur
a întocmi un act ce
ţine de buget
a încredinţa servicii
diverşilor
funcţionari
investitori potenţiali
to assign jobs to
various employees
potential investors
in advance
increase in fees
merchant bank
network of service
centers
installation and
maintenance
a căuta
spaţiu învecinat
putere de cumpărare
фирма аутсайдер
изучение рынка
возможный объем
продаж
на рассмотрении
рассматриваемая
фирма
искать
соседний район
покупательная
способность
редко пытаться
опрос по телефону
опросный лист,
анкета
опрос по почте
показатель, степень,
коэффициент
окупаемости
надежный
составлять бюджет
поручать работу
различным
служащим
потенциальные
инвесторы
avans
досрочно
creştere în taxe
увеличение гонорара
bancă comercială
торговый банк
reţea de centre de
сеть обслуживаюservicii
щих центров
instalare şi menţinere установка и
техническое
обслуживание
125
overall marketing
strategy
startegii generale de
vînzare
to expect a downturn a aştepta o scădere a
activităţii economice
successful rivals
concurenţi prosperi
lucrative market
piaţă profitabilă
Общая
маркетинговая
стратегия
ожидать спада
деловой активности
успешные
конкуренты
прибыльные рынки
TEXT
It is very important to have the facts about how many
potential buyers are in your projected sales area and to know
their needs and wishes before you invest. It is better to have
the facts than too merely have a feel for how your products
will sell. This requires thorough study of the market you
propose to serve.
The total marketing concept. It involves matching the
firm's products or services with the needs and desires of those
people who will buy them, whether now or in the future.
Marketing planning must include all the ingredients necessary
to satisfy customers, including producing the product they
want, picking the proper location for your firm, determining
the correct promotion and advertising plans, and many other
factors that lead to customer satisfaction. Marketing costs for
small firms can be as much as 50 percent of total business
costs. Planners may employ an outside firm to study their
suggested market; advertising firms and market research firms
often specialize in such surveys.
Objective of a market survey is to determine a
reasonably attainable sales volume in a specific market area for
a specific type of business. This means finding out how many
potential consumers for the planned merchandise or service
there are in this market and how many of them can reasonably
be expected to become customers of the firm under consideration.
126
What is a market? The market or trading area for a particular
firm is the area that it seeks to serve with its products. From the
buyer's point of view, it is the area within which the buyer
knows he or she can find desired goods and services at
desirable prices. Sellers may desire to expand their market
beyond the limits that are normally recognized by buyers.
Market areas may change with the development of new
shopping centers in adjacent areas. At any given time, a market
has its limits set by the area within which the firm can
economically sell its goods or services.
Procedure for making a market survey. The procedure will
vary from factory to wholesaler to retailer. In all cases,
however, it will seek to determine the number of customers in
the market area who may become customers for the planned
business. For retailing, the steps should include the following:
1. Determine the limits of the market or trading area.
2. Study the population within this area to determine its
potential sales characteristics.
3. Determine the purchasing power of the area.
4. Determine the present sales volume of the type of goods or
services you propose to offer.
5. Estimate what proportion of the total sales volume you can
reasonably obtain.
"People surveys" for collecting market information. One
effective method for gathering market information is the use of
"people surveys", which are made by surveying the population
in a designated market area. Such surveys can rarely attempt to
reach all persons in the area; instead the market researchers
select a representative group of persons to be contacted. Even
the highly important national television ratings, for example,
involve the use of only about 1,200 homes.
Small firm planners may use 3 different types of people
interviews. These are:
1. Telephone surveys.
127
2. Mail surveys,
3. Personal interviews.
Specific questions that will provide meaningful answers that
can then be analyzed should be built into each type of
interview questionnaire. Each type of interview has characterristics that can be summarized as follows:
1. Telephone surveys. This type of interview offers the
advantage of economy and speed in the collection of desired
data. To be effective, telephone surveys demand short, clear,
and easily understood questions. A sound questionnaire, a truly
representative sample group, and courteous telephone interviewers are the only requirements for gathering the key data,
which are then analyzed.
2. Mail surveys. Using the mail to gather basic data is more
expensive than telephone interviews but still much less
expensive than personal interviews, especially when a large
market area is being studied. The rate of return is the key to
whether or not it is successful. Today a 40 percent return on
such mail survey is considered excellent. Experience has
shown that the shorter the interview sheet, the higher the rate of
return.
3. Personal interviews. Personal interviews require much more
time than other types and, accordingly, are the most expensive
kind of survey to conduct. But when a broad section of opinion
is being sought they are usually considered the most reliable.
They enable the interviewer to interpret questions, to explore
the respondents’ opinions, and to identify areas of information
that although not anticipated may be valuable in the final
analysis of data collected.
COMREHENSION
1) Why is it very important to know the number of potential
buyers, their needs and wishes in your projected sales area?
128
2) What does the total marketing concept involve?
3) What is a market survey? What is its objective?
4) How many definitions of a market are given in the text?
What are they?
5) What is an effective method for gathering market
information?
6) What types of people interviews may small firm planners
use?
7) Can you compare telephone surveys, mail surveys and
personal interviews for cost, coverage, and effectiveness?
best completes the sentence or answers the question.
1. Which one of the following actions would not increase
sales?
a. providing more space for display
b. training sales persons
c. increasing product information on sales tickets
d. improving departmental displays
2. Good selling cannot
a. increase business income
b. compensate for poor management
c. increase customer loyalty
d. improve the company image
3. The small retailer will usually use all of the following media
except
a. local radio
c. local newspapers
b. national TV
d. local telephone director
4. Customers frequently judge a store by the
a. sales personnel
c. physical layout
b. exterior store windows
d. all of these
129
5. Which one of the following terms is used to refer to all of
the activities that are needed to get a product from the
producer to the consumer?
a. advertising
c. selling
b. marketing
d. sales promotion
GRAMMAR
Grammatical behavior of modal verbs
Grammatically, modal verbs behave in a different way from
ordinary verbs.
• They have no -s in the third person singular (he, she, it):
e.g.: She mights go to clas.
• Most modal verbs, except for ought, are followed by
the verb without to e.g.: Gallaudet should to build a
new computer center
• Modal verbs have no infinitive or -ing form. E.g.:My
teacher can signing well.
• They make questions and negative forms without using
do/did: May I see that? / You mustn't shout.
Here is a list of modals:
can/can't (to be able to)
could/couldn't
may/may not (to be permitted)
shall/shall not
will/won't
have to/don't have to
must/must not (have to)
should/shouldn't ought to/ought not to
might/might not
used to/didn't use to
would/wouldn't
130
VERBS
EXAMPLES
USES
Can I use your phone?
Can you quote me a price for
CIF New York?
I can speak Chinese, but I
can't write it.
I can’t find my boarding card
Permission
Requests
Could
Could I interrupt a moment?
Could you speak up?
We could ask for volunteers.
Permission
Requests
Suggestions
May
May I borrow your car?
It might be possible to reduce
the price
I’ll tell him to phone you back.
How many people will work
here?
There won’t be much space.
Permission
Future possibility
Would you speak more slowly
please?
What would you like to drink?
Would you like to come to a
party? I’d love to!
What time would suit you?
Shall we ask for volunteers?
What shall I do?
Shall I call a taxi for you?
I think we should teach the
French sales staff English.
The government should
increase taxes on petrol.
Requests
Can
Might
Will
Would
Shall
Should
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Possibility/ability
Inability
Promises
Future facts
Predictions
Offers
Invitations
Suggestions
Suggestions
Asking what to do
Offers
Recommending
action
Saying what is
right or correct
Must
Passengers must make sure
their luggage is clearly
labeled.
Passengers mustn’t carry
guns or explosives
Obligation
Prohibition
3. Choose from the modal verbs below in order to complete
the dialogue.
Must, may, can, have to, could, should
A: Surely your brands... be worth more than that?
B: Well, it's very difficult to say'. They... well be. However, we
prefer to put ~on the conservation side.
A: I ... say I find these figures hard to believe. After all, a
company that wanted to create a brand would pay a fortune in
advertising alone.
B: Yes, that's true, but you ... not put a figure on brand creation
it depends on so many factors.
A: I agree, but we ... calculate from a historical basis.
B: That's not the point. The real value is the long-term potential
profit. How... you estimate them?
A: Well, you ...have annual sales forecasts?
B: Of course, but if we are going to value them in the balance
sheet, we have a longer-term perspective.
A: In my opinion what you ... do it to take ten years' potential
net income.
4. Supply the correct forms of the missing modal verb: can,
could, have to, must, might, should.
1. Ted's flight from Amsterdam took more than 11 hours. He
… be exhausted after such a long flight. He…prefer to stay in
tonight and get some rest.
2. If you want to get a better feeling for how the city is laid out,
you…walk downtown and explore the waterfront.
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3. Hiking the trail to the peak …be dangerous if you are not
well prepared for dramatic weather changes. You…research
the route a little more before you attempt the ascent.
4. When you have a small child in the house, you…leave small
objects lying around. Such objects …be swallowed, causing
serious injury or even death.
5. A: …you hold your breath for more than a minute?
B: No, I can't.
6. Jenny's engagement ring is enormous! It…have cost a
fortune.
7. Please make sure to water my plants while I am gone. If they
don't get enough water, they.. die.
8. I…speak Arabic fluently when I was a child and we lived in
Egypt. But after we moved back to Canada, I had very little
exposure to the language and forgot almost everything I knew
as a child. Now, I…just say a few things in the language.
9. The book is optional. My professor said we …read it if we
needed extra credit. But we … read it if we don't want to.
10. A: Where is the spatula? It … be in this drawer but it's not
here.
B: I just did a load of dishes last night and they're still in the
dish washer. It …be in there. That's the only other place it…
be.
5. Complete each sentence by using the correct form of one
of the following verbs. Use each verb once only.
Hold, know, lose, send, set up, steal, tell, underwrite
133
1) A prospectus will be ... to all potential investors.
2) Why weren't clients ... in advance about this increase in
fees?
3) A product can be ... by different names in different
countries.
4) An extraordinary general meeting will be ... next
Wednesday.
5) The share offer will be ... by a leading merchant bank.
6) 110 working days have been ... so far this year as a result of
industrial unrest.
7) A network of service centers will be ... to take care of
installation and maintenance.
8) They claim that plans for the new aircraft were ... by a
competitor.
6. Combine an adjective from the list on the left with a
preposition from the list on the right to complete each
sentence. You must use each adjective once only, but each
preposition can be used more than once.
available envious
consistent familiar
contrary popular
eligible responsible
for
with
of
to
1) I'm sure they must be ... ... our products as they're used all
over the world.
2) If you pay within seven days you will be ...... a discount.
3) I will be ... ... an interview at any time.
4) The other salespeople were all ... ... her success and so they
were pleased when she left.
5) ... ... expectations, our sales figures went down last month.
6) Our new range of toys has proved to be very ... ... children
who have watched the television programmer.
134
7) Any decisions made must be ... ... the company's overall
marketing strategy.
8) The maintenance engineer is ... ... checking every machine at
least once a week.
WORD STUDY
Attempt
Survey
Budget
Strategy
To advertise
To change
To involve
To purchase
Cooperative
Corporation
Survey
Interview
Advantage
Product
Income
Promotion
9. Form words of the same root:
To advertise
Rate
To require
Market
To determine
Power
a)market
survey
1) Of money, the amount of goods and services
that money can buy at a given time. It varies in
the opposite direction to changes in the level of
prices, I. e. when prices rise, it power falls.
b) attempt
2) The work of collecting information about the
people's tastes and opinions from a sample of
population in order to plan how to advertise,
distribute and sell a product.
135
c) costs
3) The work of finding out what kind of goods
consumers want, what they are willing to spend
and how to persuade them to buy.
d) rarely
4) A written list of questions which are
answered by a lot of people in order to provide
information for a report or a survey.
e) purchasing 5) Payments to the factors of production.
power
6) Something that can be reached or achieved.
f) survey
g) obtain
7) To get something or achieve.
h) reliable
8) Not very often.
i) attainable 9) To try to do something or achieve it,
especially when it is something difficult.
j) questionnaire
10) Something or someone you can trust them to
work hard or well, or always to act, behave, or
happen in the way that you want them to.
11. Time is sometimes an obsession, sometimes an excuse,
and often a luxury. Below are some expressions associated
with time. Group the expressions on the right under the
headings on the left.
HEADINGS
1) Lack of time
EXPRESSIONS
a. How long does it take?
b. I'm short of time.
c. I've got plenty of time
136
2) Surplus of time
3) Length of time
4) Reducing time
5)Extending time
6) Time idioms
7) Infrequency
d. I'll have to cut short the meeting.
e. Time is money.
f. I'm in a hurry.
g. We'll have to prolong the project.
h. A couple of hours.
i. It takes a good twenty minutes.
j. It'll last longer than we thought.
k. Time never stands still
1. I'm rushed off my feet.
m. I've got time to spare.
n. We'll have to have a guillotine on
this.
o. Time is of essence.
p. Never in a month of Sundays.
q. Once in a blue moon.
r. Time is pressing.
s. Every once in a while.
t. Now and then
u. Off and on
12. Market partners. Complete the commentary:
market economy
market price
market forces
market place
market research
1) A ... .. .is one where things are bought and sold freely and
not under government control.
2) In a market economy, prices are decided by ... .., the factors
that influence the demand for things, their availability, and
consequently their price.
137
3) ... ... is used to indicate that a price has been decided by the
market, and not in some other way, for example by the
government.
4) ... ... means the same as market.
5) ... ... is the gathering of information on markets, products
and consumers: on what people need, want, and buy; how and
when they buy; and why they buy one thing rather than another.
TRANSLATION EXERCICES
1. Preţurile rezultă din înţelegerea dintre cumpărător şi
vînzător.
2. Noi am studiat efectul devalorizării dolarului în ultima
vreme.
3. Deoarece crizele datoriilor internaţionale au crescut, economia mondială a devenit instabilă.
4. Ei deţin capital suficient pentru menţinerea vînzărilor.
5. Astfel de articole ca cladiri şi maşini sunt cunoscute ca
fonduri fixe.
6. Inflaţia a crescut mereu anul acesta.
7. Examinînd bilanţul şi alte documente am putut determina că
compania a făcut aşa cum ei au vrut.
1. Цена следует из переговоров между покупателем и
продавцом
2. Мы изучили эффект падения в стоимости доллара в
настоящее время
3. Поскольку международные долговые кризисы росли,
мировая экономика стала более неустойчивой.
4. У них достаточно оборотного капитала, чтобы поддерживать торговлю.
5. Здания и машины относятся к основным фондам
(недвижимое имущество).
6. В этом году постоянно увеличилась инфляция.
138
7. Исследовав балансовый отчет и другие документы, мы
смогли установить, что компания сделала так, как они
требовали.
DISCUSSION
1. Compare telephone surveys, mail surveys, and personal
interviews for cost, coverage, and effectiveness.
2. Do you think a professional market survey is worth $500?
What advantages would such a report have, even if it shows
that the planned firm should not be established?
3. Do you feel competent to make a market survey now?
WRITING
2. Explain how you would proceed if you planned to make
your own market survey for a new independent grocery in your
hometown.
3. Prepare sample questions you would include in a telephone
survey, a mailing survey and a personal interview. Explain how
they would differ.
Marketing with Computers
Marketing is being transformed by the computer. A
salesperson's primary equipment used to consist of good shoe
leather and intuitions about products that might be best for a
particular market at a particular time. Now, with the development of specialized computer programs, marketers-from highlevel chain-store executives to salespeople working a territory
rely on computers to help them make the most efficient use of
139
their time and money. Impressed by the computer's ability to
quickly get important sales information to the people who need
it, marketers are using this information to coordinate advertising and human resources in new ways.
COMPUTERIZING CASH REGISTERS
Marketers like The J. M. Smucker Co. are relying on
computerized cash registers to steal customers from
competitors. For example, computerized cash register can
automatically print out a free coupon for Smucker's jam when
it records a customer's purchase of competitor Sorrell Ridge's
all-fruit jam.
R.J. Reynolds Tobacco USA keeps 40 million customer
profiles in its mainframe computers, which can thus tailor the
firm's premiums to its customers' lifestyles. A golfer, for
example, would receive free golf balls in a promotional
mailing, while a photographer would be offered free camera
accessories. Similarly, Seagram and General Foods Corp. have
been compiling millions of customers' names for their
promotional campaigns. Nabisco Brands, Inc. handles 235,000
consumer contacts each year, usually inquiries about product
usage, nutrition, and ingredients. This consumer feedback is
computerized and available on demand throughout Nabisco's
operating divisions. To keep its customers flying in the friendly
skies, United Air lines' Covia subsidiary spends $120 million a
year maintaining and updating software for its computerized
reservation system.
REDRAWING TERRITORIES
One difficulty of assigning a salesperson to a particular
geographic "territory" has been what to do when the territory
changes. As certain areas grow faster than others, imbalances
result in the workloads and potential sales for the salespeople
in those areas. Redrawing the territories has traditionally been
such a slow and tedious process that managers were reluctant
to do it. Now, with software called Maps III (Manpower
Allocation and Planning System), a manager can realign a
140
territory and within minutes see the results of the change. The
manager supplies the computer with business data such as
potential sales and travel times between customers, and the
program combines these data with geographic features, road
networks, and zip codes to come up with the best possible
territory assignments.
PREPARING SALESPEOPLE
Arriving at a customer's door not knowing what to
expect has long been a salesperson's nightmare.
Now OACIS (Online Automated Commercial Information System) relieves salespeople of many of their daily
worries by supplying them with up-to-the-minute data.
Monsanto Chemical Co.Plastics Division uses such a system
linked to its automated order billing network. Any of the
company's salespeople can use a company terminal to access
freshly updated information on accounts, products, and performance. Before calling on an account the salesperson thus
knows what a customer has bought in the past month or year,
and how good the customer's payment record is. Perhaps just as
important, the salesperson can see whether Monsanto has been
behind on a delivery and will have an answer when the
customer asks, "Where's that product I ordered last month?"
(Business lines, March, 1998)
EVALUATION TEST TO UNIT VI
1. Before you propose to serve the potential buyers in your
projected sales area, you are required _______________.
a) to invest in the market
b) to know the desires of buyers
c) to study thoroughly the market
d) to implement new rules of behaviour
2. Marketing planning must include all ____________ to
satisfy customers.
141
a)
b)
c)
d)
the ingredients
the cookies
the dishes
the spices
3. Marketing costs for small firms can be as much as
_______ of total business cost.
a) 30%
b) 40%
c) 50%
d) 60%
4. ____________ or trading area for a particular firm is the
area that it seeks to serve with its products.
a) The plan
b) The objective
c) The goal
d) The market
5. Small firm planners may use ______ different types of
people interviews.
a) 5
b) 3
c) 7
d) 9
6. The work of finding out what kind of goods consumers
want, what they are willing to spend and how to
persuade them to buy.
a) questionnaire
b) investigation
c) market survey
d) telephone survey
142
7. To get something or achieve means to __________.
a) receive
b) give
c) reach
d) obtain
8. Now, with software called __________ (Manpower
Allocation and Planning System), a manager can realign
a territory and within minutes see the results of the
change.
a) Maps III
b) Spider II
c) Flower IV
d) Road V
9. What’s the synonym of “to purchase”?
a) to sell
b) to buy
c) to measure
d) to increase
10. A condition or circumstance that puts one in a
favourable position compared to other people is called
___________.
a) disadvantage
b) accommodation
c) advantage
d) misunderstanding
11. Any made decisions must be __________ the company's
overall marketing strategy.
a) available to
b) familiar with
c) contrary to
d) eligible to
143
12. A network of service centers will be ... to take care of
installation and maintenance.
a) held
b) known
c) lost
d) set up
13. To try to do something or achieve it, especially when it
is something difficult.
a) attempt
b) attend
c) accuse
d) accustom
14. ___________ is the gathering of information on
markets, products and consumers.
a) market price
b) market forces
c) market place
d) market research
15. Choose the word with the same meaning: “The writer,
the artist and the editor collaborate to perfect the
book.”
a) keep in touch
b) work in their offices
c) study methods
d) work closely together
16. Choose the word with the same meaning: “He inherited a
lucrative business from his father.”
a) lucid
b) wealthy
c) profitable
d) losing
144
17. Maria’s boutique appealed to a very wealthy _________
a) city
b) manufacturer
c) clientele
d) clothing
18. Apparently short skirts are in __________ this year.
a) magazines
b) newspapers
c) vogue
d) tradition
19. You _____ learn this poem by heart.
a) wish
b) need
c) have to
d) can
20.You _________ not travel by train if you are in hurry.
a) may
b) must
c) should
d) ought
21. Our workers _________ do their job properly. They are
competent enough.
a) can
b) could
c) may
d) might
22. You _______ trust yourself, who knows you better than
you.
a) will
145
b) dare
c) would
d ) must
23. A fool __________ ask more questions than a wise man
________ answer.
a) would …….. need
b) shall ….. dare
c) can …… could
d) must …… might
24. The synonym for “genuine ” is:
a) natural
b) artificial
c) synthetic
d) simple
25. First think, then _______.
a) sing
b) speak
c) say
d) cry
26. The antonym for “to discontinue” is:
a) to start
b) to spend
c) to prove
d) to maintain
27. Having spent all my money on tuition, I am not affluent
enough even to go to the movies.
a) destitute
b) wealthy
c) arrogant
d) afraid
146
28. Do you think your question is pertinent to the matter
we are discussing?
a) perceptive
b) discriminating
c) appropriate
d) apparent
29. Usually the night before the exams I _______not to
succumb to sleep.
a) scoff
b) die
c) save
d) try
30. I'd rather stay in a hotel with all the amenities than
camp in the woods.
a) conveniences
b) friends
c) expenses
d) sports
147
Unit 7. Advertising and promotion
Objectives: to discuss the direct and indirect promotion
methods; to present the cases of uses of the Reported Speech;
Tasks: to explore the differences between advertising and
promotion; to distinguish the characteristics of public
relations; to underline the use of Reported Speech in a text.
Motto:
“Concentrate your strengths
against your competitor’s relative
weaknesses”
Author: Bruce Henderson
Terms to know:
established
demand
promoted demand
conveniently
placed
to attract
to engage
to supplement
promotion of sales
publicity
cerere stabilită
сформированный спрос
cerere promovată
plasat convenabil
пропагандистский спрос
удобно расположенный
a atrage
a angaja
a adăuga
publicitatea
vînzărilor
publicitate
привлекать, притягивать
заниматься, вовлекать
дополнять
стимулирование сбыта
special event sales vînzări cu o ocazie
specială
personal selling
vînzare personală
sales promotion
campanie de
campaign
promovare a
vînzărilor
public relations
relaţii publice
148
гласность,
рекламирование
продажа в связи с
определенным событием
индивидуальная продажа
кампания по
стимулированию сбыта
связи с общественными
организациями и
частными лицами
community
goodwill
intermittent
impulse items
feature
to involve
to gain the
prospective
customer
cumulative net
result
credit account
delivery service
bunăvoinţa
comunităţii
discontinuu
articole / produse
mobile
trăsătură/
caracteristică
a include
а cîştiga un client
oportun
доброжелательность
общества
прерывистый
импульсивные товары
особенность
вовлекать, включать
достичь предполагаемого
покупателя
rezultat net simultan кумулятивный чистый
результат
credit
кредитный счет
servicu de livrare
обслуживание при
поставке
поставки в срок
on-time deliveries livrare la timp
conformity to
în conformitate cu соответствие специфике
specification
specificare
tarnish
a păta
пятнать, порочить
tarnished goodwill reputaţie pătată
запятнанная репутация
ultimate result
rezultat final
конечный результат
conviction
convingere
убежденность,
уверенность
billboard
stand pentru
рекламный щит
reclamă
poll
chestionar
опрос
to launch a new
a lansa un nou
выпустить новый товар
product
produs
commercial break pauză de publicitate рекламная пауза
to account for
a justifica
насчитывать
newspaper
tiraj de ziare
тираж газеты
circulation
point-of-sale
punct de vînzare
место совершения
продажи
to keep costs
a păstra preţul
не увеличивать расходы
down
micşorat
149
to put forward a
proposal
to be financially
sound
to cause a
recession
fall in demand
redundancies
sales increase
fall in share price
a oferi o propunere
выдвинуть предложение
a fi bine finanţat
быть в хорошем
финансовом состоянии
вызывать падение
a cauza o criză
căderea cererii
inutilităţi
creşterea vînzărilor
căderea preţurilor la
acţiuni
падение спроса
излишки
увеличение сбыта
падение цен на акции
TEXT
The total demand for the goods or services offered by
any small firm can be divided into established demand and
newly created demand, sometimes called promoted demand.
Established demand is that volume of sales which
comes without conscious outside promotion by the firm.
People buy because they have had positive experiences with
the firm's products, find the firm conveniently placed, or are
attracted by the firm's appearance.
Newly created or promoted demand by contrast, is
the volume of sales that results from firm's engaging in various
types of activities to draw people to the firm. Promoted
demand customers, if pleased, can become established
customers. Those firms that supplement established demand
with promoted demand show much better sales volume and
profits. Almost without exception, additional advertising and
promotion brings in greater sales volume.
All the activities that go into the development of sales
can be grouped under the title promotion of sales. This
promotion can use either direct or indirect methods. Every
small firm owner should think about using some of the
following types of sales promotion.
150
Direct promotion methods
Indirect promotion methods
1. advertising
2. publicity
3. displays
4. special event sales
5. manufacturer's aids
6. personal selling
7. sales promotion campaigns
1. public relations
2. customer relations
3. customer services
4. product styling and packaging
5. community goodwill
A d v e r t i s i n g can be defined as commercial
messages to the public designed to inform potential and
established customers and to encourage sales for the advertiser.
Advertising can be either institutional (designed to sell the
firm's name) or direct-action (designed to sell the firm's
product or service).
T y p e s o f a d v e r t i s i n g m e d i a . Among
the media generally used in advertising are: television, radio,
newspapers, magazines, outdoor billboards, specialty advertising (distribution of such items as notebooks, pencils, calendars, blotters, gummed labels, telephone pads, shopping bags),
public transportation, yellow pages, direct mail, other media
(catalogues, samples, handouts, leaflets, etc.)
Measuring advertising effectiveness.
Whenever possible, every advertising program undertaken
should be checked for its effectiveness. Some of the ways the
small firms can do this are:
1. Advertise one item in one ad only. By having no
references to the item on the sales floor and then counting the
calls and requests, ad results can be identified.
2. Place identical ads with identifying marks in two
separate publications. The reader is asked to bring the ad to the
firm to obtain a special price or prize. Count how many ads
come in from each source.
151
3. Omit a regular advertising project for itermittent periods and watch for any change in sales.
4. Check sales results when a new advertisement is
placed.
P u b l i c i t y has always been described as advertising
that is not paid for. It includes such things as public news items
about the owner of the firm that tend to brighten the firm's
image or make friends for the business.
D i s p l a y s are an one-site method of sales promotion. Products that are not normally considered impulse
items are often sold through an effective display in the
windows or on the sales floor. Displays enable the merchant to
add changes, interest, and brightness to the standard layout, and
when well done can do much to increase sales.
S p e c i a l e v e n t s a l e s Special events to directly
promote sales have become a well-established feature of most
consumer goods businesses. The firm's anniversary, the firm's
president's birthday, the addition of a new service for
customers, the start of the spring and fall seasons, and so on,
can all be used as occasions to promote sales. Major holidays,
of course, are ideal for sales.
M a n u f a c t u r e r ' s a i d s are any form of
assistance provided by the manufacturer to small wholesalers
and retailers for promoting sales. These aids may take the form
of national advertising of the products involved, assignment of
trained personnel to demonstrate the use of a product such as
cookware in the particular store, provision of attractive window
and floor displays, or monetary contributions to an advertising
program.
P e r s o n a l s e l l i n g means all those activities
and characteristics of the individual salesperson which make
successful sales. Fundamental to all good personal selling is a
thorough knowledge of the merchandise. Personality, human
psychology are also important.
152
The four basic steps in making any sale have been
summarized as follows: 1. Gaining the prospective customer's
attention and interest, 2. Creating desire and overcoming
objections, 3. Presenting various solutions, 4. Closing the sale.
S a l e s p r o m o t i o n c a m p a i g n s are usually
built around a central idea. The campaign may last a day, a
week, or even several months. It may be seasonal or associated
with a business opening or anniversary, a new product, or the
introduction of a new service. The opening of a new department, a new location, or a national or historic commemoration
can also be the basis for a campaign.
When the theme is chosen, the campaign itself must be
carefully planned. The list that follows outlines a number of
important campaign elements: a basic promotion idea or
philosophy must be developed, promotion objectives should be
drawn up, various elements of the campaign - advertising,
display, and public relations should be studied, responsibilities
should be assigned to employees, the program of activities
should be scheduled, using a calendar and a timetable,
individual promotions should be reviewed after the campaign,
critiques should be written and filed for the future reference.
P u b l i c r e l a t i o n s . A firm's public relations
determine its image, or popular reputation, in the general
community. The nature of its public relations, good or bad, is
reflected in the community's attitude and goodwill toward the
firm. Good public relations are cumulative net result, which is
more easily destroyed than built. It is the responsibility of
every person associated with the firm. Every act of the firm's
representatives contributes to the overall image of the firm.
C u s t o m e r r e l a t i o n s build sales independently and also contribute to the total image of the firm.
Satisfied, happy customers are the best form of advertising and
promotion.
C u s t o m e r s e r v i c e s can be a part of both
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public relations and good customer relations. Many customers
want special services and seek out firms that supply them.
Examples are air-conditioned stores, night hours for shopping,
credit accounts, delivery service, and lines of merchandise not
generally available. Pricing policies are sometimes adjusted for
particular customer groups as a part of service. Firms selling
industrial products have found that the most valued customer
services are on-time deliveries, conformity to specifications or
products sold, and efficient accounting procedures.
P r o d u c t s t y l i n g a n d p a c k a g i n g are
obvious aids in developing sales volume. When similar
products are offered in various styles, customers seek choices.
Packaging can be an equal attraction.
C o m m u n i t y g o o d w i l l. Every owner should
be aware of the importance of the goodwill of the public to the
firm’s success. Every proposed business policy should first be
analyzed in terms of its effect upon the company’s image. No
firm with tarnished goodwill will be very successful in a
community. Potential purchasers stay away from such firms,
sales fall, service becomes more difficult to maintain, and as a
result the circle gets smaller. Failure is the ultimate result.
All the sales promotion methods reflect a conviction
that the customer is the most important part of any successful
business. There can be no profit in the absence of sales. Efforts
to keep present customers happy and to constantly attract new
ones are essential to continued profits and growth.
COMPREHENSION
1) How would you describe established demand as contracted
with promoted demand?
2) What is promotion of sales? What types of sales promotion
do you know?
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3) How would you define advertising?
4) What types of media are used in advertising?
5) What do we mean by checking the effectiveness of
advertising?
6)What are some of the methods by which this can be done?
7) What goods are often sold through an effective display in
the windows or on the sales floor?
8) What occasions can be used as special event sales?
9) What are the four basic steps in successful selling?
10) What are important campaign elements?
11) What do public relations determine?
12) What are the best forms of advertising and promotion?
13) Can you give examples of special customer services?
14) What is the most important part of any successful business?
15) What efforts are essential to continued profits and growth?
best completes the sentence or answers the question.
1) When designing an advertising layout, you should use'
a. large headlines since big print is easy to read
b. as many ideas as possible since space is expensive
c. a series of elements which draw attention to a regular pattern
d. startling proportions so that the advertising attract attention
2) Which one of the following departments usually has the
responsibility in a company for the development of a
favourable community image for the business?
a. the advertising department
b. the personnel department
c. the public relations department
d. the purchasing department
3) Which one of the following media is usually the most expensive?
a. radio
c. outdoor advertising (billboards)
b. newspapers
d. television
155
4) One way to cut down on advertising expense and still reach
customers is to
a. join a merchants association which shares the cost of
advertising
b. take advantage of cash credits given by manufacturers for
giving premium space for their products
c. advertise national brands in local papers where an allowance
is provided by the national company
d. take advantage of all of these opportunities
5) Which one of the following elements of an advertising
layout would be a problem for you if you could not draw or
sketch?
a. headline
c. illustration
b. copy
d. media
6) Which one of the following policy recommendations offers
poor advertising advice?
a. The advertiser should spend as much as the budget will
allow
b. The advertiser should periodically evaluate the advertising
dollar for effectiveness.
c. The advertiser should vary media from time to time to reach
different markets
d. The advertiser should read the results of research and polls
of buying habits in the area.
7) A method of sales promotion used in supermarkets is
a. trading stamps
c. coupons
b. games of chance
d. all of these
8) Dependent customers are usually
a. impatient
c. nervous
b. skeptical
d. undecided
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GRAMMAR FOCUS
Reported speech
If you put a command into reported speech there are some steps
which are the same like in statements: (changing of the person,
backshift of tenses, changing of expressions of time).
The formation is mostly: form of to tell + to + infinitive.
Affirmative commands
Negative commands
Father: "Do your
homework."
Teacher. "Don't talk to your
neighbour."
Father told me to do my
homework.
The teacher told me not to talk to
my neighbour.
Statements
1) If the sentence starts in the present, there is no backshift of
tenses in reported speech.
Example: Susan: "I work in an office." Susan tells me that she
works in an office.
2) If the sentence starts in the past, there is often a backshift of
tenses in reported speech.
Example: Susan: "I work in an office." Susan told me that she
worked in an office.
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REPORTED SPEECH
References
Person
Tense
Direct speech
I/me/my/mine,
you/your/yours
we/us/our/ours,
you/your/yours
Reported speech
him/his/her/hers
they/their/theirs
PRESENT INDEFINITE
„I work hard”, he said
PAST INDEFINITE
He said (that) he worked
hard.
PAST CONTINUOUS
He said (that) he was
working hard.
PAST PERFECT
He said (that) he had
worked hard
PAST PERFECT or PAST
INDEFINITE
He said (that) he had
worked / or worked hard
FUTUR SIMPLE IN THE
PAST
He said (that) he would
work hard.
PRESENT CONTINUOUS
„I am working hard”, he
said
PRESENT PERFECT
„I have worked hard”, he
said
PAST INDEFINITE
„I worked hard”, he said
FUTUR SIMPLE
„I will work hard”, he said
Modal verbs
Place
Can
May
Must
here
now
today
yesterday
Time
tomorrow
this week
these days
last week
an hour ago
158
Could
Might
Had to
there
then, at that time
that day, on Monday etc.
the day before, the previous
day
the next/ following day
that week
those days
the week before/ earlier
an hour before, earlier
- Reported questions
If you put a question into reported speech there are some steps
In reported speech there is no question anymore, the sentence
becomes a statement.
That's why the word order is: subject - verb
Question without question words (yes/no questions):
Peter: "Do you play football?" - Peter asked me whether (if) I
played football.
Question with question words:
Peter: "When do you play football?" - Peter asked me when I
played football.
If you put a command into reported speech there are some
steps which are the same like in statements: (changing of the
person, backshift of tenses, changing of expressions of time).
The formation is mostly: form of to tell + to + infinitive.
Affirmative commands
Negative commands
Father: "Do your
homework."
Teacher. "Don't talk to your
neighbour."
Father told me to do my
homework.
The teacher told me not to talk to
my neighbour.
159
- Reported questions
If you put a question into reported speech there are some steps
In reported speech there is no question anymore, the sentence
becomes a statement.
That's why the word order is: subject - verb
Question without question words (yes/no questions):
Peter: "Do you play football?" - Peter asked me whether (if) I
played football.
Question with question words:
Peter: "When do you play football?" - Peter asked me when I
played football.
3. Transform the direct speech into indirect:
1. Sang said, "I have already written a letter to my family in
Thailand."
2. Roeun said, "I have got to pick up my children from school
at three o'clock."
3. Cun said, "I am studying English at Long Beach City
College."
4. Rosa said, "I should start studying Chinese."
5. Evangelina said, "I can speak, read and write Spanish,
English, and Cambodian."
6. Carmen said, " I am planning to take a trip to Peru.".
7. Gonzalo said, "I don't like Chinese food."
8. Monica Cheng said, "I may go to the Lakewood Mall after
class."
9. Jose said, "I have lived in Long Beach for six years."
160
10. Chanty said, "I want to become a nurse."
11. Truc said, "I had a nice time at the party."
12. Mary said to her friend: “Please don’t mention it to
anybody.”
4. Report the sentences:
1. David Balko: „Can you break it open for me?”
2. Addison James: „We are about half way through the process
of pitching for a new client, or a potential client”.
3. David Balko:” What we’ve got here is a reception ... we
haven’t got a room , we’ll have to do it in creative.”
4. Addison James: „The rehearsal is not the end of the world”.
5. Jim Thortnton: „I am the creative group leader, so Matt and
Steve are working to me”
6. Steve Nichols: „It’s aggressive and it’s speaking in the
language of the dog eat dogworld of the saleman.”
7. David Balko: „Competitiveness in advertising is definitely
here, in this pitch.”
8. Paul Bainsfair: I’m just here, I don’t want to lose it for the
wrong reason.”
9. Graham Deakin: „Very good, they think it is brilliant.”
10. Voice - over: „ ... but at the end of the day, if you want to
get the top in business, you have to be in the right place at
the right time.”
5. Complete each of the sentences by using the past form of
one of the verbs on the left and combining it with one of the
words on the right. Use each verb once only. Some words
on the right are used more than once.
cut
get
back
through
deal
keep
down forward
find
put
out
with
read
think
over
1) By accident the switchboard operator … her ... in the middle
of our conversation.
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2) After testing-every thing they finally......what was wrong
with the machine.
3) They ... costs ... by using less expensive materials.
4) The Finance Department...... the query about discounts.
5) He ... the figures ... to her so that she could be sure that he
had the quantities exactly right.
6) She......an interesting proposal at the meeting.
7) They ... the offer ... for a week before making a decision.
8) After ringing up three times I finally...... to head office.
WORD STUDY
a) Intermittent 1) The wants of buyers in the market.
b) check
2) To get or obtain something wanted.
c) demand
3) The business of attracting public attention
and of encouraging general feelings of
goodwill towards a product or service in order
to sell it.
d) goodwill
4) A single article or class of articles in a list,
account, inventory, etc.
e) feature
5) The advantage possessed by an established
business over a new business. The attractive
force that brings in customers.
f) gain
6) Make sure that smth or smb is correct, safe,
making progress.
g) item
7) Say all numbers one after another up to a
particular number.
162
h) omit
8) Do not include smth in an activity or piece
of work, deliberately or accidentally.
i) publicity
9) Smth happening or appearing occasionally
or at regular intervals rather than constantly or
continuously.
j) count
10) A particular part of smth or characteristic
that it has, which you notice because it seems
important or interesting.
tarnish, conviction, conveniently, supplement, involve,
attract, ultimate, occasion, engage
1) The amount of fuel is displayed ... on a gauge.
2) I tried desperately to ... his attention.
3) It was considered inappropriate for a former President
to ... in commerce.
4) They had to get a job to ...the family income.
5) The Oval Office will be used for ceremonial....
6) The business seemed to ... an enormous amount of sales.
7) It turned into a witch-hunt that... the names of many of
the country's intellectuals.
8) He knew this action was necessary for the ... success of
the talks.
9) Nothing would budge him from his ... that he could run
a newspaper successfully.
8. Find antonyms. Write one sentence with each word to
illustrate the difference:
To borrow-..
Substract-…
Purchase-..
163
Raise-…
Deficit-…
Efficiency-…
9. Define the following terms:
Advertising
Promotion
Price
Delivery
Policy
Supply
Publicity
Interest
speech they are:
Request
Supply
Interest
Invest
To fail
Industry
1. Marfa este un lucru real şi fizic cel poţi atinge.
2. Fiecare articol progresează printr-un ciclu de viaţă a
produsului, ce are o serie de stadii în care venitul de la
vînzări şi profitul cresc, ajung la un apogeu şi apoi coboară.
3. Cererea este relaţia dintre preţ şi cantitatea cumpărată de
consumatori.
4. Ambalajul este o parte vitală a produsului.
5. Etichetele pot da deasemenea detalii şi garanţie în scris.
6. Dacă publicitatea este efectivă, aceasta poate să sporească
cantitatea cerută.
7. Uneori cumpărătorii fac o legătură între preţ şi calitate.
1. Товар - реальная, физическая вещь, которую можно потрогать.
2. Каждое изделие проходит определенный жизненный
цикл, состоящий из нескольких этапов, на которых
164
коммерческий доход и прибыль от изделия сначала
увеличиваются, затем достигают своего пика и, наконец,
снижаются.
3. Спрос - отношение между ценой и количеством купленного товара.
4. Упаковка – неотъемлемая часть изделия.
5. На ярлыке может быть указан гарантийный срок и
некоторые другие сведения о товаре.
6. Если реклама эффективна, то это увеличит требуемое
количество товара.
7. Иногда покупатели связывают цену с качеством.
DISCUSSION
1. Can you give an example of manufacturer's aids helping
individual retailers make sales?
2. Does a neighborhood store in your hometown do any
advertising? How? Would you recommend any other advertising?
3. Is advertising as important to small firms as to large ones?
4. Do you agree that good public relations can normally not be
purchase?
WRITING
2. Do you know of a product you or your family prefer because
of its packqaing and styling? Explain in a short essay such a
case and why you prefer it?
The Name of the Game Is the Brand Name
Do you wonder how Mazda chose the name Miata for
its hot new sports car? Miata is derived from an Old German
word meaning "reward." Fortunately, Mazda did not have to
165
wait for a court decision to use the name Miata. But Toyota
was not so lucky.
Toyota's new luxury car had to await a court decision
on the name Lexus. Mead Data Central, Inc. had claimed that
Lexus was too close to Lexis, the brand name of its
computerized data base for the law profession. Finally, Toyota
won the right to use the name Lexus.
SELECTING AND DEVELOPING BRAND NAMES
There are several different sources and methods for
selecting and developing brand names. In the past, some of the
most successful names have come from such sources as
surnames and nicknames, names relating to product
ingredients, tribal and company names, and social structures.
Other traditional name sources include animal names, song
titles, historical events, and language elements. New and
unique brand names can be developed from association
analysis, which attempts to create an association between the
product and something culturally recognizable; linguistic
analysis, which uses graphemics, morphemics, and semantics
to create new names; and from random symbol combinations.
Products are given a brand name and often a trademark. A
brand name identifies the product and/or its manufacturer. A
trademark is a name, symbol, or any other device that
identifies a product; it is officially registered and legally
restricted for the exclusive use of the owner or manufacturer.
Among trademarks that cannot be imitated are the Playboy
bunny costume and the NBC chimes.
PROTECTING BRAND NAMES
Companies spend considerable time and effort selecting
a brand name. But that is only half the battle. Company
attorneys must be ever vigilant to ensure that the
communications media do not use the brand name
166
inappropriately. For example, multibillion dollar Xerox
Corporation of Stamford, Connecticut, spends $100,000 a year
on "educational trademark ads" directed at publishers, editors,
and others who may misuse its product name "Xerox" as a
generic term for photocopy. Advertising people and trademark
attorneys are sometimes at odds-the common use of a product
name is an advertiser's dream, but a trademark attorney's
nightmare. Xerox Corporation's trademark attorney protects the
company's product name by actively seeking any infringements
of trademark laws by competitors. Recently, Owen Ryan &
Associates (OR&A) won a summary judgment from the
Trademark Trial and Appeals Board against Anheuser-Busch's
claims of trademark infringement. OR&A had registered the
name Party Animals for a snack-cracker product with the U.S.
Patent and Trademark Office. Anheuser-Busch, Inc., claimed
that this would cause consumer confusion with its Bud Light
Spuds MacKenzie "Original Party Animal" and Eagle Snacks
promotions. Precedent and law agree that a brand name
constitutes a protectable trademark if the name meets three
requirements:
~ It must be adopted and used by a company.
~ It must be distinct from other brand names.
Distinctiveness is determined through searches of
federal registration lists, telephone books, trade journals, and
other publications.
~ It must meet the standards for valid trademarks
established by the courts or the U.S. Patent and Trademark
Office.
(Welcome, April 1999)
167
EVALUATION TEST TO UNIT VII
1. The total demand for ____________ offered by any small
firm can be divide into established and promoted demands.
a) products
b) the goods or services
c) merchandises
d) warehouses
2. ___________ is that volume of sales which comes without
conscious outside promotion by the firm.
a) Exposed demand
b) National demand
c) Established demand
d) Promoted demand
3. ____________ is the volume of sales that results from
firm's engaging in various types of activities to draw
people to the firm.
a) Promoted demand
b) Varied demand
c) Explained demand
d) Cited demand
4. All the activities that go into the development of _____
can be grouped under the title promotion of sales.
a) produces
b) sales
c) buying
d) finances
5. Almost without exception, additional advertising and
promotion brings in greater sales _________.
a) plan
168
b) schedule
c) programme
d) volume
6. Every small firm _________ should think about using
some of the following types of sales promotion.
a) worker
b) owner
c) manager
d) secretary
7. Commercial messages to the public designed to inform
potential and established customers and to encourage
sales for the advertiser is called ______________ .
a) promotion
b) adds
c) advertising
d) displays
8. Among the ________ generally used in advertising are:
television, radio, newspapers, magazines, outdoor
billboards, specialty advertising etc.
a) media
b) newspapers
c) magazines
d) journals
9. What’s the synonym of “publicity”?
a) television
b) radio
c) advertising
d) communication
169
10. The ___________ may last a day, a week, or even
several months.
a) holiday
b) campaign
c) election
d) birthday
11. Credit is _______, bad pay killed it.
a) death
b) died
c) dead
d) die
12. Listen ____ , please
a) to me
b) me
c) I
d) my
13. I saw no reason ___________ we should get up so early.
a) for
b) why
c) that
d) how
14. I ________ if someone is glad to see me.
a) enjoy
b) wonder
c) respect
d) forget
15. These tickets are collected ______ John.
a) for
170
b) by
c) to
d) at
16. You’ll feel better after you _________ an aspirin.
a) will take
b) should take
c) will have taken
d) have taken
17. I think I ________ be going now if I don’t want to be
late.
a) have better
b) would better
c) would do better
d) had better
18. He shouts at me as if __________ deaf.
a) I be
b) I have been
c) I were
d) I would be
19. Shall we go for a walk? – Well, I’d rather _______ at
home.
a) stay
b) would stay
c) don’t stay
d) won’t stay
20. I don’t remember ________ he was talking about.
a) whose
b) why
c) which
d) what
171
21. To become an eloquent man you ____________ to read
lots of books.
a) could
b) should
c) have
d) may
22. He never listens to _______ I say, ___________ makes
me angry.
a) what ……… what
b) what ……… which
c) which …….. what
d) which ……..which
23. He was standing there with ______ hands in _____
pockets.
a) the ….. the
b) his …. the
c) the …. his
d) his …. his
24. They do not understand _________ he was so angry
with them.
a) for
b) why
c) that
d) how
25. They are so much alike that I never know __________ .
a) which is which
b) what is which
c) which is what
d) where is which
172
26. They’ll be back by _______ month.
a) the end of the
b) an end of the
c) the end of a
d) an end of one
27. I’d rather ___________ it now than later.
a) do
b) doing
c) to do
d) did
28. Let’s go to work, _________.
a) will we?
b) won’t we?
c) don’t we?
d) shall we?
29. I have known ________ for a couple of years.
a) they
b) them
c) their
d) themselves
30. My colleagues don’t like the dictations, ________ .
a) so I don’t
b) neither do I
c) neither I do
d) so don’t I
173
Unit 8. Sources of financing for new small firm
Objectives: to exchange factual information accurately and
precisely on different sources of financing for new small
firms; to get acquainted with the types and uses of
Conditionals;
Tasks: to express the content of the text using the Active
Vocabulary; to identify the sources to finance a new firm; to
consider and to try to solve the problems that arise in
financing; to use the types of Conditionals in situations and
in exercises.
Motto:
“Finance is the art of passing
currency from hand to hand until
it finally disappears.”
Author: W. Sarnoff
Terms to know:
equity capital
capital propriu
debt capital
a atrage capital
fixed capital
real estate
capital statutar
avere imobiliară,
capital fix
cash on hand
numerar/ disponibil
în casă
accounts receivable datoriile debitorilor
turn into cash
a schimba in numerar
borrowed capital
inherit
mortgage
to venture
capital de împrumut
a moşteni
ipotecă
a risca
174
собственный капитал
(акций)
привлечённый
капитал
основной капитал
наличность кассы
дебиторская
задолженность
превратить в
заёмный капитал
унаследовать
ссуда
рисковать
to lend financial
assistance
a oferi asistenţă
financiară
to avoid subsequent
problems
a evita problemele
ulterioare
предоставлять
финансовую
помощь
избежать последних
проблем
business dealings
secure a mortgage
rental payment
afaceri comerciale
a primi împrumut pe
cauţiune
plată pentru arendă
коммерческие дела
получать ссуду по
залог
арендная плата
equity
capitalul acţionarilor
fixed assets
current liabilities
capital fix,de bază
obligaţii curente
operating expenses
cheltuieli curente
акционерный
капитал
основной капитал
текущие
обязательства
текущие расходы
deferred share
acţiune cu dividend
prelungit
pledge property
a amaneta
proprietatea pe
cauţiune
bursă de valori
stock market
ordinary shareholder
to title to do smth
bear
bull
dog
stag
aкция c
отсроченным
дивидендом
закладывать
cобственность под
залог
фондовая биржа
обыкновенный
акционер
a da dreptul de a face давать права делать
ceva
ч-л
speculator “la
«медведь», спекуscădere”
лянт играющий на
понижение
speculator “la
«бык», спекулянт
creştere”
играющий на
повышение
agent al firmei
агент фирмы
acţionar de rînd
speculator la titluri de Спекулянт
valoare
175
golds
guilts
hîrtii de valoare
monede de aur
ценные бумаги
золотые монеты
gilts
hîrtie de valoare
superioara
volatile
storage problem
schimbător
problema păstrării
первоклассная
ценная
бумага
быть изменчивым
проблема
складирования
TEXT
The capital of a business consists of those funds used to
start and run the business. The funds may be either the owner’s
(equity capital) or creditor’s (debt capital). Capital is also
classified, depending on its use, as fixed or working.
Fixed capital refers to items bought once and used for a
long period of time. These items include real estate, fixtures,
and equipment.
Working capital refers to the funds used to keep a
business working or operating. It pays for merchandise,
inventory, and operating expenses such as rent, utilities (light
and heat), taxes, and wages. Cash on hand accounts receivable
are also considered working capital. Therefore, working capital
is cash.
No firm should ever be started without a clear and
positive understanding of where its total capital needs are
coming from. The various types of financing available to
business firms are usually classified as:
1. Short-term capital. This is borrowed capital that is
to be repaid within one year.
2. Intermediate capital. This is borrowed capital that is
to be repaid in one to five years.
3. Long-term capital. This is capital whose repayment is
arranged for more than five years in the future.
Sources of funds for small firms: Equity capital,
176
Personal funds – saved or inherited. Loans from relatives and
friends. Commercial bank loans. Mortgage loans. The small
business administration. Venture capitalists.
Equity capital consists of those funds provided to the
business by the owners. These funds come from the personal
savings of the small business entrepreneur. If the entrepreneur
decides to obtain more funds through equity sources, it can be
done by having partners or selling stock. When these sources
are used, however, the small business entrepreneur gives up
some ownership control of the business and shares the profits.
Personal funds. Whenever potential creditors, partners,
or stockholders are invited to invest in or lend financial
assistance to a new firm, their first question is, “How much
does the owner have invested?” Every business contains an
element of risk, and outsiders who invest in a new firm wish to
be sure that such risk is shared by the owner. It is important
that the would-be owners have assets of their own to invest in
the firm. The closer they are to 50 percent of the total capital
needs that can be provided, the greater will be their
independence and share of net profits.
Loans from relatives and friends. Many new owners are
encouraged in their enterprise by parents, relatives, or friends
who offer to supply loans to the firm to get it started. The best
way to avoid subsequent problems is to make sure that loans
are made on a businesslike basis. They should be viewed as
business dealings. The right of the owner to make decisions
should be respected by all parties involved.
Commercial bank loans. The commercial bank is one of
the main sources of short-term loans. Commercial bank loans
are usually for short periods of time(less than one year), but
many banks lend money for longer periods. The interest on a
commercial bank loan is higher than many other sources. The
business owner should establish a credit line with a commercial
bank. A credit line means that the bank agrees to lend the
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business owner an amount of money, to a stated maximum, at
any time.
Mortgage loans. If the new firm planners own a
commercial building, they can usually secure a mortgage on it
with payments over as many as 30 years. It may be the building
in which the new firm operates. In that case, the planners will
be making mortgage payments instead of rental payments to a
landlord.
The small business administration is a US government
agency organized to aid small business in many ways. This
agency offers small businesses financial aid in the form of
guaranteed loans and advice about where financial aid can be
obtained. The SBA also offers educational aids and consulting
services.
Venture capitalists. This is a term used to refer to
individuals or corporations invest long-term equity and debt
capital in promising start-up and growing businesses. Venture
capitalists usually take some equity (ownership) in the firms
for which they provide funding. Many venture capitalists only
invested in firms that need $100,000 or more financing.
COMPREHENSION
1.
1)
2)
3)
4)
5)
Answer the following questions.
How is capital classified?
What is considered fixed capital and working capital?
What types of financing are available to business firm?
What funds does equity capital consist of?
Why are potential creditors interested in how much the
owner has invested?
6) What is the best way to avoid subsequent problems
when your friends offer to supply loans to the firm?
7) What is one of the main sources of short-term loans?
8) What aid does the SBA offer?
178
2. In which of the following select the word or phrase that
1) The funds used to run a business are called:
a. equity
b. fixed assets
c. operating capital
d. current liabilities
2) If after six month a business shows no profit, it will
probably:
a. fail
b. succeed
c. require a partner
d. sell at a profit
3) Working capital does not include
a. merchandise
b. real estate
c. accounts receivable
d. cash on hand
4) Fixed capital includes
a. money in the bank
b. real estate, fixtures, and equipment
c. money to pay for repairs
d. goods for sale in the store
5) The financial institution that is the most common source
for short-term loans is the
a. savings bank
b. commercial bank
c. insurance company
d. community development corporation
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6) Which of the following services is not provided by a
bank?
a. loans
b. assessments
c. savings accounts
d. protection against bankruptcy
GRAMMAR FOCUS
The CONDITIONAL
English has four forms of conditional, conventionally called
the zero, first, second, and third. Here are examples of each:
If water is heated to specifies results of
Zero
conditional 100 degrees, it boils. real or already known
Whenever it rains, I conditions in the
take my umbrella.
ongoing present, they
express some kind of
universality
If it rains later, the
asserts results of
First
roads
will
be
wet.
possible or expected
conditional
If someone calls me, conditions in the
I'll usually pick up the future, or of
phone.
commonplace
conditions in an
ongoing present
If she were at work
postulates results for
Second
today,
you
could
find
as yet unknown or
conditional
her on the next floor unreal conditions in a
up.
present time, or for
If I were king, you
ones not expected in a
would be queen.
future time The
If you won the lottery formal structure of
tomorrow, what
the second
would you do?
conditional is:
If + simple
180
past/subjunctive,
would + verb
If
you
had
called
me,
postulates results for
Third
conditional I would have come. past conditions which
If Thomas Paine had were never real. The
been born in the mid- structure of the third
20th Century, he
conditional is:
would undoubtedly
If + past perfect,
have kept a blog.
would have + past
If I had lived during participle
the Elizabethan era, I
would have attended
all of Shakespeare's
plays.
Conditional sentences have two clauses:
Dependent Clause
Independant Clause
"If" Clause
"Result" Clause
Condition
Result
If you stay in the sun too long, you will get sunburned!
If you drink too much
whiskey,
If you study hard and practice
a lot,
you will get sick.
your English will improve.
3. Choose the correct conditional form to complete the
sentences below.
1. If I ...(stay) in Boston, I would have found a new
apartment.
2. She would help the poor if she … (be) the President.
3. If he goes to Rome on a business trip, he often … (visit)
the Vatican.
181
4. We won't go to the film unless they … (arrive) in the
next 5 minutes.
5. She …(buy) a new car if she had had the money.
6. If Enrico were me, he …. (go) to New York
immediately.
7. They will talk to John if he … (come).
8. She comes to work 30 minutes late if her child …
(miss) the bus to school.
9. If Jack … (think) twice, he wouldn't have made such a
stupid mistake.
10. Katherine … (become) a VIP if she studies hard!
11. If they … (know) all the facts, they would have found
the defendant guilty.
12. Unless you …. (hurry up), we will never arrive on time.
13. If I were in charge, I … (change) the standard business
routines.
14. He takes his daughter out to dinner, if she … (come) to
town.
15. If I hadn't known better, I … (trust) him.
4. Combine a noun from the list on the left with a
preposition from the list on the right to complete each
sentence. You must use each noun once only, but each
preposition cam be used more than once
access
change
for
to
admiration
confidence
of
on
effect
interest
solution
1) He was full of … the way she had chaired the meeting.
2) The rise in interest rates has had a considerable … sales
of furniture and kitchen appliances.
3) By taking them over we shall gain … new markets.
4) We have very … your organizing ability.
5) I hope they find a … this storage problem soon.
182
6) To cater for the growing … information technology, we
have had to put on three extra courses this year.
7) Is there any … seeing you about this some time today?
5. Complete the following sentences with the correct preposition.
1) We are looking … a message which really appeals … the
audience. So far we haven’t found one.
2) People tend to look … to expert figures such as doctors.
3) We where thinking … doing the ad on television.
4) He insisted … using a balance argument to present the
product.
5) I was very annoyed … the simplicity of the arguments.
Consumers like to think … the product.
6) If you look … the word in the dictionary, it means all
communication which is non-verbal.
7) Have you heard … Professor Stell? He’s very well-known
in his field.
8) We’ve looked … the questions of hiring professional
actors. It’s much too expensive.
WORD STUDY
Loan
Savings
Assessment
Account
Venture
To refer
To deal;
To act
To aid
To lent
Rent
Cash
Estate
fund
Credit
Equity
Share
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speech they are:
Account
Save
Capital
Finance
Entreprise
Property
1. A sum of money due to be received from
a) fixed
a customer in the ordinary course of trade but
capital
not yet paid.
2. The act of lending, especially on condition
b) equity
that the thing lent will be returned.
capital
3. Sums of money saved, not spent but put
c) venture
aside for future use and in the meanwhile
invested or held as cash.
4. The part of the capital of a company that
d) savings
consists of ordinary, deferred, deferred
ordinary or founders’ shares, all of which
together, in effect, carry the right of ownership
(the equity) in the business.
5. A contract by which the owner of land
e) secure a
(the mortgagor) borrows money, giving the
loan
lender (the mortgage) an interest in the land
as security for the loan
6. The amount, in money, of the rent for a
f) mortgage
particular property or part of a property
7. That part of the capital of a business
g)account
which is represented by the value of producer
receivable
goods, i.e. goods held and used to produce
the products which the business sells.
8. To make the loan safe for the lender by
h) rental
pledging or mortgaging property with him as
security.
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i) loan.
9. A business, or a business deal, in which
there is some degree of risk, which is
accepted in the expectation of making a
profit.
Encourage, refer, source, aid, dealings, would-be, inherit,
borrow, subsequent
1) He always … money from his friends and never pays it
back.
2) Candidates are required to publish the … of their campaign
funds.
3) They … a weak economy.
4) I met him first when I was a very young … banker.
5) Her success … me to try the same thing.
6) … research has produced even better results.
7) We have had …with them for many years.
8) The serial number … to the country n which the car was
manufactured.
9) He had sought the … of the counter.
1. Activele pot fi vîndute cind sînt inutile.
2. Corporaţiile mici şi cele în creştere nu plătesc dividente-sau
foarte mici -acţionarilor săi.
3. Folosirea efectivă a finanţelor este o funcţie importantă în
conducerea financiară.
4. Planul financiar începe cu obiectivele organizaţionale.
5. Acţionarii pot „face bani” atunci cînd valoarea acţiilor lor
creşte.
6. Speculatorul la creştere este persoana care aşteaptă creşterea
preţurilor; speculatorul la scădere este persoana care aşteaptă
scăderea preţurilor.
185
7. Dacă acţionarul hotărăşte să vîndă acţiile diferenţa dintre
preţul de cumpărare şi cel de vînzare reprezintă venitul şi
pierderea.
1. Активы также могут быть проданы, если они больше не
нужны.
2. Малые и развивающиеся корпорации не платят своим
акционерам никакого наличного дивиденда, или платят,
но очень маленькие.
3. Эффективное использование финансов - важная
функция в финансовом управлении
4. Финансовый план начинается с организационных целей.
5. Акционеры могут «делать деньги» тогда, когда ценность
их акций увеличивается.
6. «Бык» - инвестор, который ожидает, что цены повысятся; «медведь» - инвестор, который ожидает, что цены
понизятся.
7. Если акционер решает продать акцию, денежно-кредитное различие между покупной ценой, и откупной
ценой представляют собой прибыль или потерю.
DISCUSSION
1. Why it is important for new firm planners to have some
capital of their own to invest?
2. Do you think it is advisable to borrow from relatives and
friends to raise capital to start a business?
3. What are the pros and cons of having partners in your
business?
4. Does our government assist small firms in obtaining
financing? How?
WRITING
186
2. Write a short essay on why you agree or disagree with the
statement that private development companies to assist
new small firms should be expanded.
Guidelines for Choosing an Account Executive
A good personal investment program should start
before you choose an account executive. First, decide on and
write down your financial goals and objectives. Then,
accumulate enough money to start your investment program.
Most financial experts suggest that you keep a cash reserve
equal to at least three months' salary. Once you have
accumulated funds beyond your cash reserve, you are ready to
begin your investment program by choosing an account
executive.
FACTORS THAT CAN AFFECT YOUR DECISION
All account executives, sometimes called stockbrokers
or registered representatives, can buy and sell stock for you.
And yet, choosing an account executive can be difficult for at
least three reasons. First, you must remember to approach an
account executive with a shrewd combination of trust and
mistrust. While you are interested in your broker's recommenddations to increase your wealth, he or she is interested in your
investment trading as a means to swell commissions.
Unfortunately, some account executives are guilty of churninga practice that generates commissions by excessive buying and
selling of securities.
A second factor to consider is compatibility. It is always
wise to interview several potential accounts executives. During
each interview, ask some questions to determine if you and the
account executive understand each other. You must be able to
communicate the types of stocks you are interested in, your
187
expected rate of return, and the amount of risk you are willing
to take to achieve your investment goals.
Finally, you must decide if you need a full-service
broker or a discount broker. A full-service broker charges more
but gives you personal investment advice. He or she can
provide you with research reports from Moody's Investors
Service, Standard & Poor's Corporation, and Value Line Inc.all companies that specialize in providing investment
information to investors. Also, a full-service broker should
provide additional reports prepared by the brokerage firm's
financial analysts. A full-service broker charges a commission
of approximately 2 percent for executing an order to buy or sell
stocks.
A discount broker simply executes buy and sell orders,
usually over the phone. Generally, discount brokers do not
offer investment advice; you must make your own investment
decisions. Discount brokers charge commissions that average
20 to 50 percent less than those of full-service brokers.
OTHER CONCERNS
If your account executive asks you to sign a contract
read the agreement carefully. Beware of an arbitration-only
clause, which prevents you from taking your claim to court if
you believe that your account has been handled improperly.
The growing number of arbitration cases-a 650 percent
increase since 1980-is evidence of unhappy investors who feel
they were victims of incompetent or unethical account
executives. Also, beware of a discretionary clause in the
contract that gives the broker the right to use his or her
judgment in investing your money without consulting you.
A FINAL WORD OF CAUTION
After choosing your account executive, start out slowly
with your first investments to "test the water.” If the account
executive does well with a few investments, then you will feel
safer in making larger investments based on his or her advice.
188
Once you have used an account executive for about six months,
evaluate his or her performance. If you become dissatisfied
with your investment program, do not hesitate to discuss your
dissatisfaction with the account executive. You may even find
it necessary to choose another account executive if your
dissatisfaction continues. This is not at all uncommon.
Remember, the final responsibility for the success of
your investment program falls on your shoulders.
(Business lines, September, 2002)
EVALUATION TEST TO UNIT VIII
1. Wealth or property that can be used to produce more
wealth is called _________.
a) will
b) thesaurus
c) capital
d) buildings
2. Capital is also classified, depending on its ________, as
fixed or working.
a) accessibility
b) use
c) interests
d) facts
3. ____________ refers to items bought once and used for a
long period of time.
a) Fixed capital
b) Borrowed capital
c) Loaned capital
d) Inherited capital
189
4. Cash on ________ accounts receivable are also
considered working capital.
a) leg
b) shoulder
c) hand
d) head
5. No firm should ever be started without a clear and
positive _____________of where its total capital needs
are coming from.
a) fixing
b) understanding
c) meaning
d) misunderstand
6. The funds from equity capital come from the personal
_______of the small business entrepreneur.
a) cards
b) banks
c) homes
d) savings
7. Commercial bank ________ are usually for short
periods of time (less than one year), but many banks
lend money for longer periods.
a) rents
b) borrows
c) loans
d) approvals
8. Fixed capital includes:
a) land in household chores
b) money reserved from parents
c) goods and services
d) real estate and equipment
190
9. If the new firm planners own a commercial building,
they can usually secure a mortgage on it with payments
over as many as __________.
a) 30 years
b) 40 years
c) 60 years
d) 70 years
10. The small business administration is a US government
agency organized _______ small business in many ways.
a) to write
b) to explain
c) to provide
d) to aid
11. Many venture capitalists only invested in firms that
need ________or more financing.
a) $100,000
b) $700,000
c) $1 000,000
d) $2 200,000
12. A credit line means that the bank agrees to lend the
business owner_________, to a stated maximum, at any
time.
a) an account in bank
b) an invention
c) an amount of money
d) a borrowed sum of money
13. The right of the owner to make decisions should be
respected by all parties involved.
a) each
b) all
c) every
d) some
191
14. The ________ also
consulting services.
a) CBA
b) DCU
c) USA
d) SBA
offers educational aids and
15. Venture ______ usually take some equity (ownership) in
the firms for which they provide funding.
a) founders
b) capitalists
c) magnates
d) seekers
16. There were _________ people at the meeting.
a) a few
b) a little
c) much
d) little
17. I know they spoke to ________ yesterday.
a) yourself
b) themselves
c) each other
d) yourselves
18. You have to go on, _________ difficulties you meet.
a) whatever
b) whichever
c) however
d) whoever
19. Fine words ________________.
a) who laughs last
b) than never
192
c) easy go
d) dress ill deeds
20. Look ___________________.
a) before you drink
b) before you leap
c) before you sing
d) before you eat
21. You are still angry with him, ________?
a) are you
b) don’t you
c) do you
d) aren’t you
22. He had finished his paper, so ____ we.
a) do
b) be
c) had
d) will
23. East or west home is ________ .
a) worse
b) bad
c) good
d) best
24. I saw at once _______ was happening.
a) which
b) what
c) whom
d) where
25. If I had done my exercises, I _______ passed the test.
a) would have
b) will have
193
c) have had
d) have been had
26. If he goes to Rome on a business trip, he often _____ the
Vatican.
a) should visit
b) visits
c) will visit
d) had visit
27. If I were in charge, I ________ the standard business
routines.
a) change
b) will change
c) have changed
d) would change
28. She ________ a new car if she had had the money.
a) shall buy
b) should buy
c) would have bought
d) buys
29. If I _________ better, I would have trusted him.
a) have
b) had
c) had had
d) would have
30. I find it hard ________ why you didn’t receive my
letter.
a) on explaining
b) if I explain
c) to explain
d) explaining
194
Unit 9. Choosing a legal form of organization
Objectives: to identify and to explain the legal forms of
organization; to enumerate the advantages of partnership
and the types of corporation; to present information on the
use and the types of Subjunctive Mood;
Tasks: to define the forms of organization; to place the terms
for suitable definitions; to practice in exercises the forms of
Subjunctive Mood.
Motto:
“Only positive consequences
encourage good future
performances”
Author: George Crane”
Terms to know:
new endeavor
consequences
be available
raise capital
available
investment funds
to subject
losses incurred
to provide
something
legal restrictions
ease of
discontinuance
partnership
agreement
încercare nouă,
tendinţă
urmări
a fi disponibil
новая попытка
restricţii juridice
libertatea
suspendării
acord de
parteneriat
юридические ограничения
свобода приостановления
последствия
имеющийся в
распоряжении
a acumula capital добывать капитал
fonduri
имеющийся в наличии
disponibile pentru инвестиционные фонды
investiţii
a supune, a
подвергать
expune
a înfrunta pierderi несомые убытки
a furniza ceva
снабжать
195
соглашение партнёров
to foresee
special
arrangements
interest on capital
investment
advance drawings
agreed ratio
consent
transact business
sue
entity
capital stock
profit sharing
to borrow against
your stock
sum due
repayment of the
loan
bankruptcy
intestacy
to claim money
to take out
to cover somebody
against accidental
damage
to take on extra
staff
to take off
to take steps
to lose market
share
to take the chair
to take down
to take charge of
a prevedea
acorduri speciale
предвидеть
специальные соглашения
procent din
investiţie
a da în avans
rată în acord
процент инвестиции
împărţirea
veniturilor
a împrumuta pe
acţiuni
sumă cuvenită
a plăti creditul
распределение прибыли
faliment
lipsa testamentului
a cere bani
a întreprinde
a asigura
împotriva
accidentelor
ocazionale
a angaja personal
adiţional
a mări
a lua măsuri
a pierde o parte de
piaţă
a conduce
a face însemnări
a lua conducerea
банкротство
отсутствие завещания
требовать деньги
предпринять
страховать от случайного
повреждения
выдача аванса
согласованное
coотношение
acord
согласие
a conduce afaceri вести дела
a da în judecată
предъявлять иск
unitate economică экономический объект
pachet de acţiuni акционерный капитал
196
занимать под акции
причитающаяся сумма
погашение ссуды
нанимать
дополнительный штат
увеличить
предпринимать меры
терять долю рынка
председательствовать
записывать
взять на себя руководство
to take a risk
to break down
to halt
to sell out
to shut down
to take off
to be confident
insolvent
to make redundant
a-şi asuma riscul
a se strica
a opri
a vinde la solduri
a închide
a lua zborul
a fi încrezut
debitor, falit
a face reduceri de
cadre
брать на себя риск
ломаться
останавливать
распродавать
закрывать
взлетать
быть уверенным
неплатёжеспособный
увольнять
TEXT
New firm planners do some serious thinking about what
legal form to choose for their new endeavor. This means
determin what the status of the business will be in the eyes of
the law. The choice has very important consequences.
Three legal forms (1. single proprietorship, 2. partnership, 3. corporation) are available to small firms. In all cases, all
three choices should be looked at carefully. Some of the factors
that should affect the decision include plans for expansion,
product or service being sold, needs for raising the capital now
and in subsequent years, liability characteristics of the planned
firm, the proprietor’s available investment funds, need for
continued life of the firm, alternatives for bringing desired people
into the firm, and legal requirements of the particular locality.
The sole proprietorship is a business owned and
operated by one person. The owner and the business are
synonymous in the eyes of the law. All assets in the firm are
owned by the proprietor, subject only to the liabilities incurred
in its establishment and operation. The proprietor is solely
responsible for all personal and business debts and any losses
incurred, assume the entire firm’s risks, provide most of its
capital, and provide its total management. The only requirement for its establishment is that the owner obtains any licenses
required by the city, state and start operations.
197
The proprietorship form has several advantages, such
as: 1.Simplicity of organization, 2.Owner’s freedom to make
all decisions, 3.Owner’s enjoyment of all profits, 4.Minimum
legal restrictions, 5.Easy of discontinuance, 6.Tax advantages.
Disadvantages of the sole proprietorship: 1.Owner’s
possible lack of ability and experience, 2.Limited opportunity
for employees, 3.Difficulty in raising the capital, 4.Limited life
of the firm, 5.Unlimited liability of proprietor.
The partnership is usually defined as an association of
two or more persons to carry on as co-owners of a business for
profit. Partnerships are based on a partnership agreement, also
known as Articles of Copartnership. Without a written
agreement, the partnership does not really exist. Many
circumstances arise which cannot be foreseen and therefore
must be anticipated. It should cover all areas of possible
disagreements among the partners. It should define the
authority and the rites and duties of each partner, and the limits
of such authority. It should include an agreement on how
profits and losses are to be divided. Partners may make special
arrangements to pay members of the firm for rendered
services; interest on capital investment, time spent, or advance
drawings before the balance of profits is to be divided in an
agreed ratio.
Advantages of the partnership: 1.Ease of organization,
2.Combined talents, judgment and skills, 3.Larger capital
available to the firm, 4.Maximization of personal interest in the
firm, 5.Definite legal status of the firm, 6.Tax advantages.
Disadvantages of the partnership: 1.Unlimited liability,
2.Limited life, 3.Divided authority, 4.Danger of disagreement.
The corporation is an association of stockholders (part
owners), formed with government consent and having the
power to transact business in the same manner as if it were one
person. A corporation has the same right as an individual to
own property, conduct business, make contacts, sue, and be
198
sued. A corporation is a single (an individual person) in the
eyes of the law.
Corporations are either closed or public. A small
business corporation is usually a closed corporation. This
means that the capital stock is not sold to the public. If one of
the stockholders decides to sell his stock, it is usually sold to
one of the other stockholders or to someone who they all
approve. In this way, the ownership of the business is selective
and controlled.
A public or open corporation offers its stock to the
public. This means that its stock is available to anyone who
wants to buy it. The principal owner of a public corporation is
the majority stockholder.
Advantages of the corporation: 1.Limited liability,
2.Variety of skills, abilities, and ideas, 3.Easy transfer of
ownership, 4.Ease of expansion, 5.Unlimited existence,
5.Applicability for both large and small firms.
Disadvantages of the corporation: 1.Government
regulation, 2.Profit sharing, 3.Complexity and high cost,
4.Lack of freedom of action, 5.Taxes.
COMPREHENSION
1) How many legal forms are available to small firms?
2) What factors affect the decision to choose legal form of
the business?
3) What are the legal requirements for starting a business as
a sole proprietorship?
4) What is the proprietor solely responsible for?
5) What is a partnership agreement? What should it include?
6) What is the corporation? What types of corporations exist?
7) Can you compare the legal forms of business according to
their advantages and disadvantages?
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1) The legal form of business organization that has only one
owner is known as
a. a sole proprietorship
b. a partnership
c. a cooperative
d. a stock company
2) One disadvantage of the corporate form of business
ownership is that
a. It has limited liability
b. It has unlimited existence
c. It requires a sharing of responsibility
d. It must comply with a number of government regulations
3) A corporation that sells stock to the public is known as a
a. private corporation
b. government corporation
c. nonprofit corporation
d. public corporation
4) Two partners operating a small amusement park with highrisk rides should consider changing their current partnership to a
a. sole proprietorship
b. limited partnership
c. private corporation
d. cooperative
5) The most common form of business organization for a
small business is
a.
the corporation
b.
the cooperative
c.
the sole proprietorship
d.
the partnership
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GRAMMAR FOCUS
The Subjunctive Mood
A verb is in the subjunctive mood when it expresses a
condition which is doubtful or not factual. It is most often
found in a clause beginning with the word if. It is also found in
clauses following a verb that expresses a doubt, a wish, regret,
request, demand, or proposal.
These are verbs typically followed by clauses that take
the subjunctive:
ask, demand, determine, insist, move, order, pray,
prefer, recommend, regret, request, require, suggest, and wish.
The subjunctive for the present tense third person
singular drops the -s or -es
The subjunctive mood of the verb to be is be in the
present tense and were in the past tense.
Ex: If I were you, I would run.
I wish he were able to type faster.
Sometimes we may use the conditional auxiliary verbs
of could, should, or would to express the same sense.
Subjunctive: I wish he were kinder to me.
Conditional: I wish he would be kinder to me.
The following table summarizes the formation of the
English Subjunctive tenses:
Tense
Simple Present
Present Continuous
Present Perfect
Present Perfect Continuous
Simple Past
Past Continuous
Past Perfect
Past Perfect Continuous
Auxiliary Verb Form
do
bare infinitive
be
present participle
have
past participle
have been present participle
did
bare infinitive
were
present participle
had
past participle
had been
present participle
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Time Referred in
Subordinate Clause
Compared to Time Referred Form of Verb Used in
in Main Clause
Subordinate Clause
Past Perfect Subjunctive or
Past Perfect Continuous
Earlier
Subjunctive
e.g. I wish it had snowed
yesterday.
Same
Later
Simple Past Subjunctive or
Past Continuous Subjunctive
e.g. I wish it were snowing
now.
Simple conjugation with
would
e.g. I wish it would snow
tomorrow.
There are three types of conditional sentences of
subjunctive:
I
II
III
If clause
If clause(hypothesis)
If clause
(hypothesis)
(hypothesis)
If+Past Perfect or
If+Past Simple or Past Perfect
If+ any present
form (Pres. S.,
Past Continuous. Continuous.
Pres.C.)
If the weather
If the weather had
been fine, we should
If the weather is were fine, we
fine, we shall play should play
have played outside.
outside.
outside.
If you had rung me
If you ring me up, If you rang me
up, I should have told
I shall tell you
up, I should tell you something.
something.
you something.
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3. After each sentence, select the verb or verb string
that best completes that sentence. Caution: the subjunctive
form will not be the best choice in all sentences.
1. It is very important that all employees _______________ in
their proper uniforms before 6:30 a.m.
A. are dressed
B. will be dressed
C. be dressed
2. I wish my brother _________ here.
A. were
B. was
3. The coach insisted that Fabio _______ the center position,
even though he's much too short for that position.
A. plays
B. play
4. Evelyn Pumita moved that the meeting _______________.
A. was adjourned
B. be adjourned
5. My mother would know what to do. Oh, would that she
_______ here with us now!
A. were
B. was
6. If only Jughead ______ a little more responsible in his
choice of courses!
A. was
B. were
7. If Mrs. Lincoln ________ ill that night, the Lincolns would
not have gone to Ford Theatre.
A. were
B. had been
8. Her employees treated Mrs. Greenblatt as though she
_______ a queen.
A. was
B. were
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9. If his parents ____________ more careful in his upbringing,
Holden Caulfield would have been quite different.
A. had been
B. were
10. I wish I _________ better today.
A. feel
B. felt
4. Put the verb into the correct form.
1. The computer gets overheated if it (use) ____________ for
more than 48 hours.
2. I (accept) _____________the job if I were in your place.
3. Would the job be easier for you if you (speak)
_____________ French?
4. She’ll be furious if he (not turn)_______________ up on
time.
5. If he (insure) _____________ the shop against fire, they
would have paid him.
6. If people drove more carefully here, we (have) ___________
fewer accidents.
7. What you (replay) _____________ if somebody (apologize)
_____________ to you?
8. Where you (go) _____________ if you (be) _____________
on leave now?
9. If you (smoke) ____________ less, you (feel) ___________
much better.
10. If she (not decide) _____________ to change a job last
year, she (go) _____________ to China next month.
WORD STUDY
capital
stock
liability
tax
firm
To divide
To agree
To combine
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Partnership
Investment
Income
To claim
Freedom
Restriction
Stockholder
speech they are
Endeavor
Bankruptcy
Transaction
Law
Restriction
Ratio
Insolvent
a) A payment of part of a sum due before receipt
1. transfer
of the goods; to pay money before it is due.
b) The price paid for the use of money such as
2. sue
by borrower to lender of money; the money
earned by a lender as a reward for allowing the
borrower to use his money and for waiting for
the repayment of the loan.
c) The entire shares of a joint-stock corporation
3. capital
(company), the holders of which together form
stock
the ownership of the concern.
d) Association of two or more person carrying
4. entity
on business together for the purpose of making
a profit.
5. advance e) The passing of a right of ownership from one
person or organization to another, by an
intentional act by a transferor as a sale or gift,
or as a result of operation of law, such as
bankruptcy or intestacy.
f) An arrangement between the owners of a
6. profit
business and its employees by which an agreed
sharing
7. interest
8. single
proprietorship
9. partnership
10. endeavour
share of the profit is paid to each employee
over and above his wages or salary.
g) The one and the only owner of a business,
He provides all the capital, bears all the risk,
and in return receives all the profit. Such a
concern is called a one-man business, although
the proprietor may employ a number of people.
h) An attempt to do a particular thing,
especially something new or original.
i) A complete, separate thing that is not divided
and that is not part of anything else.
j) You start a legal case against someone,
usually to claim money from them because
they have harmed you in some way.
apply, affect, foresee, consequence, subject, assume, consent,
available, provide, arrangement
1) The economic … of the computer revolution are
unforeseeable.
2) More information becomes … through the use of
computers.
3) I made a mistake and I will … responsibility for it.
4) He made an … to rent the property.
5) We intend to … economic sanctions.
6) There was a basis for … between the two parties.
7) Computers can … our lives in different ways.
8) The government cannot … all young people with a job.
9) Your gift will be … to tax.
10) Do you … any problems with the new system.
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1. Dacă întreprinderea nu prosperă sau posesorul hotărăşte să
se specializeze în alt domeniu firma poate fi închisă tot atît
de uşor precum a fost înfiinţată.
2. De cele mai dese ori parteneriatul reprezintă îmbinarea unor
talente speciale, mai ales în astfel de domenii ca dreptul,
contabilitatea, publicitatea, proprietate imobiliară,vînzări cu
amănuntul.
3. Răspunderea nelimitată, limitarea în resurse capitale şi
împrumutul, spre exemplu, pot împiedica dezvoltarea parteneriatului.
4. Unei afaceri i se permite să fie incorporată în orice stat pe
care îl alege.
5. Membrii consiliului sînt direct resposabili de felul de conducere a firmei de către acţionari.
6. Firma nu trebuie să deţină mai mult de 80% din acţiunile
unei alte corporaţii.
7. Băncile au format sindicate pentru a furniza credite ţărilor
dezvoltate pentru a distribui riscul neplăţii.
1. Если предприятие не преуспевает, или владелец решает
войти в другую торговую специализацию, фирма может
быть закрыта так же легко, как и была открыта.
2. Часто товарищество представляет собой союз отдельных таланто, особенно в таких областях как юриспруденция, бухгалтерский учет, рекламирование, недвижимое имущество, и продажа в розницу.
3. Неограниченная ответственность и ограничение финансовых ресурсов, а также заимствования капитала, могут
препятствовать развитию товарищества.
4. Бизнес может внедриться в любое государство, которое
он выберет.
5. Члены правления на прямую несут ответственность за
способ правления фирмой, выбранной акционерами.
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6. Фирма не может обладать более 80 % акций любой
другой корпорации.
7. Банки сформировали синдикаты, чтобы обеспечить ссуды
развивающимся странам, разделять риск неплатежа.
DISCUSSION
1. Can lack of ability and experience in small firm owners be
corrected solely by adopting another legal form of
organization for the business?
2. Evaluate “ease of discontinuance” as an advantage of the
proprietorship form of legal organization.
3. Is the owner of a small corporation as “free to make all
decisions” as a single proprietor? Explain.
WRITING
2. Demonstrate in writing your understanding of what the
term “unlimited liability” means to owners of small firms?
Demassing: Building a Lean, Mean,
Competitive Machine
Besides shutting down, how can a company cut costs?
Today many companies have found demassing to be effective
in reducing budgets. Demassing, or downsizing, refers to
reducing an organization's staff. This can lead to quicker
decision making, more precise accountability, and harderworking employees. Why don't more companies downsize
their labor forces? It is because demassing, if not planned and
carried out carefully, it can produce more disadvantages than
advantages, and it can ruin a firm's reputation. Du Pont,
208
Monsanto Company, and Union Carbide have all successfully
demassed their companies. Initially demassing is expensive,
since most companies must make severance payments and
fund retirement plans. Du Pont spent $125 million in the first
quarter after demassing; Union Carbide spent $70 million.
However, Du Pont saves about $230 million each year, while
Union Carbide saves approximately $250 million annually.
After a business is involved in an acquisition or merger,
there may be an excess of personnel. Technological innovations or automation may mean that fewer workers are needed.
A sluggish economy and a dynamic business environment
might cause a company to be highly cost competitive.
Demassing can take a number of forms: early
retirement programs, transfers to other locations, hiring
freezes, pay and benefit reductions, and terminations.
Whatever methods a company uses must be studied
thoroughly. Many companies avoid demassing because
terminations can be painful and stressful. Managers do not like
firing subordinates because it reduces their own responsibility
(less people will report to them), poses a potential threat to
their own job security, and because it is personally difficult to
deprive a colleague of a job. Demassing is not easy to reverse.
Therefore, management should consider long-term market
situations and other factors like the size of the company,
impact on terminated and retained employees, and impact on
the competition. If a company does make the decision to
downsize, it should follow these guidelines:
1. Form a strategy.
2. Consider alternatives.
3. Identify who will be kept, transferred, and terminated.
There should be set criteria for these decisions.
Management should take into account job analyses, seniority,
work appraisals, and market forecasts.
4. Develop good communication with employees.
209
Communication is vital to demassing. Employees
should be well informed.
5. Allow a sufficient time for demassing to occur.
6. Assist displaced employees through resume workshops,
placement programs, and opportunities for counseling.
7. Provide early-retirement and voluntary-separation
incentives.
8. Follow up demassing by building the confidence and
morale of the remaining workers.
A company must deal with its present and former
employees equitably and compassionately. If it does not, it
runs the double risk of putting current workers in a constant
state of fear and of driving away potential employees. Also, the
community where a company is located can be affected by
demassing. An effective information program should be used
to ensure that the community, customers, shareholders, and
suppliers are accurately informed.
(New statesman and society, May, 1999)
EVALUATION TEST TO UNIT IX
1. Three ______ are available to small firms.
a) illegal forms
b) legal forms
c) illicit forms
d) real forms
2. The sole _____________ is a business owned and
operated by one person.
a) proprietorship
b) entrepreneurship
c) leadership
d) directorship
210
3. The __________________ are synonymous in the eyes of
the law.
a) husband and wife
b) son and father
c) daughter and mother
d) owner and the business
4. ____________ is usually defined as an association of two
or more person to carry on as co-owners of a business
for profit.
a) The partnership
b) The corporation
c) The small business
d) The large business
5. ______________ is a business owned and operated by
one person.
a) The single entrepreneurship
b) The sole partnership
c) The prime minister
d) The President
6. One disadvantage of the corporate form of business
ownership is that _____________.
a) it has limited liability
b) it has unlimited liability
c) it does not require a sharing of responsibility
d) it must comply with a number of government regulations
7. An attempt to do a particular thing, especially something
new or original is called _________ .
a) thing
b) idea
c) purpose
d) interest
211
8. What should not a partnership agreement include?
a) possible disagreement among the partners
b) the authority and the rights and duties of each partner
c) how profits and losses are to be divided
d) check lists of the workers
9. When you have a problem, you are __________.
a) in danger
b) in a fix
c) at home
d) at work
10. A product that is the best quality is _________ .
a) up the line
b) down the line
c) over the line
d) top of the line
11. Would you help me? - _______________ .
a) Bless you God
b) Yes, I will
c) Oh, certainly not
d) Just as you like
12. She had no friends __________her nasty behaviour.
a) thanks to
b) on account of
c) in favour
d) in spite of
13. What do you mean_____ “useful”?
a) to
b) at
c) for
d) by
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14. Take your time means - ________________.
a) You don’t have to hurry
b) Look at your watch
c) Tell me the time
d) It doesn’t matter
15. They’d like __________ a lot abroad.
a) travelling
b) to travel
c) having travelled
d) travelled
16. When did she ever tell us the truth? - ______ .
a) Never
b) No one
c) Nothing
d) None
17. He turned and walked away, ________ ?
a) did he
b) had he
c) didn’t he
d) hadn’t he
18. A close mouth _____________ .
a) catches flies
b) catches no flies
c) easy go
d) easy come
19. Please do not wake our children if I ________ late.
a) was
b) am
c) will be
d) were
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20. He would behave differently if he ___________.
a) realised
b) realises
c) would realise
d) had realised
21. He thought that his friend was exaggerating.
a) He was shouting to make his point understood.
b) He was afraid he wouldn’t be understood.
c) He made it seem much more important than it really
was.
d) He gossiped a lot and thought he was misunderstood.
22. One day he went to an employment office.
a) office where he worked
b) organization that helps people to find an occupation
c) SBA
d) institution responsible to teach a profession
23. He couldn’t afford his own apartment
a) he couldn’t live alone
b) he need not to pay for the rent
c) he enjoy living in a big apartment
d) he didn’t have enough money to pay the rent.
24. I ________ he would be kinder to us.
a) dare
b) need
c) wonder
d) wish
25. He wishes ______ not having get up early.
a) me
b) I
214
c) myself
d) my
26. She behaved as though nothing ____________.
a) happen
b) would happen
c) had happened
d) will happen
27. If I _______ you, I would call the specialists to advise
me on this matter.
a) was
b) be
c) am
d) were
28. She wishes her father ___________ it.
a) knows
b) didn’t know
c) hadn’t known
d) wouldn’t know
29. If I _____ the lottery, I would travel all over the world.
a) win
b) won
c) will win
d) have won
30. It had all happened __________ of that stupid situation.
a) despite
b) for the reason
c) in fact
d) because
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Unit 10. How to set prices
Objectives: to report on the need of setting prices; to give
general information about the Phrasal Verbs;
Tasks: to speak about the way of setting prices; to analyse
these settings; to give an account of improvements in markup and markdown notions; to write down suitable Phrasal
Verbs in exercises.
Motto:
“ Money isn’t everything… but it
ranks right up there with oxygen.”
Author: Rita Davenport
Terms to know:
charge a price
apply in a
particular case
clientele
competitors price
policy
market strategy
loss leader
price lining
target return
pricing
a prescrie preţul
a se adresa cu o ocazie
specială
clientelă
politică de preţuri a
concurenţilor
strategie de piaţă
produs ce se vinde în
pierdere
categoria preţurilor
beneficii fixate ca
obiectiv din preţul ţintă
retail the product
on the price
to recognize
to exist
policy of setting
price
reflect in price
policy
a vinde la preţ cu
amănunutul produsul
a recunoaşte
a exista
politică de fixare a
preţului
a se răsfrînge pe
politica de preţuri
216
назначать цену
обращаться в особом
случае
клиентура
ценовая политика
конкурентов
рыночная стратегия
товар продаваемый в
убыток
шкала, категория цен
назначение цен,
обеспечивающих
получение целевой
нормы прибыли
продавать товар в
розницу по цене
признавать
существовать
политика
установления цен
отражать в ценовой
политике
состоятельные люди
защищать имидж
качества
маржинальный доход,
прибыльности
novelty
noutate, inovaţie
новинка
to combat the
a combate creşterea în бороться с
increase of chain lanţ a concurenţei între увеличением
store competition reţele de magazine
конкуренции между
сетью магазинов
alter the prices
a schimba preţurile
изменить цены
overall demand
cerere globală
общий спрос
specialty goods
produse de o cerere
товары особого
desosebită
спроса
luxury items
articole de lux
предметы роскоши
desired percentage procentaj dorit de
желаемая процентная
return
profit
прибыль
on investment
din investiţii
от инвестиций
total fixed cost
cost total fix
совокупные
постоянные издержки
markdown
scădere de preţ
снижение цены
damaged
produs, marfă
поврежденный товар
merchandise
deteriorată
discount
reducere
скидка
to cover expenses a acoperi cheltuielile
покрывать расходы
to assure fair profit a garanta un profit real гарантировать
справедливую
прибыль
to attract
a atrage clienţi
привлекать
customers
покупателей
markup
creştere a preţului
наценка
to arrive at a
a primi cu preţul
получить по
selling price
vînzării
продажной цене
subtract to find
a extrage pentru a găsi вычесть, чтобы найти
initial price
preţ iniţial
исходная цена
shortage
lipsă, criză
нехватка, недостача
adequate profit
profit adecvat
адекватная прибыль
affluent people
protect the quality
image
profit (gross)
margin
persoane influente
a apăra imaginea de
calitate
marjă a profitului
217
to assign
responsibility to
smb
deduction in the
price
gross margin
to consume in
great lumps
to subdue
export receipts
working capital
household
appliances
а transmite
responsabilitate
передавать
ответственность
reducere din preţ
скидка с цены
marjă a profitului
а consuma în cantităţi
mari
a scădea
încasări, venituri din
export
capital circulant
unelte de uz casnic
валовая прибыль
потреблять в
большом количестве
понижать
экспортная выручка
оборотный капитал
бытовые приборы
TEXT
F a c t o r s a f f e c t i n g i n d i v i d u a l p r i c e s.
The prices that any firm can charge for its merchandise are the
subject of many influences. Some or all of the following
considerations may be applied in a particular case: 1. Fair trade
laws, 2. Nationally advertised prices, 3. Desired customer
clientele, 4. Competitor price policies, 5. Market strategy,
6. Manufacturers’suggested prices, 7. Type of merchandise
handled, 8. Policy on loss leaders, 9. Seasonal nature of sales,
10. Demand factor for certain products, 11. Price lining,
12. Target return pricing.
A word about each of these factors will introduce us to
the total scene of setting prices. F a i r t r a d e l a w s still
exist in many states. These laws allow the manufacturer of a
product to make agreements with dealers who retail the
product on the price at which it can be sold to the public.
N a t i o n a l l y a d v e r t i s e d p r i c e s must be recognized
by small firms as at least an upper limit to the prices they place
on items so advertised. C o m p e t i t o r p r i c e s on similar
lines or merchandise with similar quality must be recognized
218
when active competition exists between firms. M a r k e t
s t r a t e g y is a policy of setting prices and quality in a range
not served by competitors. Where a special clientele is served,
its buying habits can be reflected in price policy. For example,
if affluent people want special services and special merchandise,
they are willing to pay for them. In other cases, the desired
clientele may be price-conscious and price policy will be
directed to serve them.
M a n u f a c t u r e r s’ s u g g e s t e d p r i c e s are
designed by the manufacturers to protect the quality image of
their products and to protect profit margins for the individual
retailer. Price policy is significantly affected by the tipe of
merchandise. Novelties or special-interest items normally carry
higher markups.
L o s s l e a d e r s (products sold below cost) are still
illegal in some states whose laws reflect an earlier attempt by
independent firms to combat the increase of chain store
competition s e a s o n a l n a t u r e o f s a l e s can affect
pricing policy by making it possible to alter prices with the
high and low seasons of sales and volume. The nature of
o v e r a l l d e m a n d is likewise a consideration in setting
individual prices. Elastic demand suggests lower prices.
Specialty goods, such as luxury items and style merchandise,
carry higher prices. P r i c e l i n i n g is a policy of keeping
merchandise in fairly well-definite price ranges. Dresses at $
19.95, $ 24.95, and $ 29.95 would be an example.
T a r g e t r e t u r n p r i c i n g involves adding a
desired percentage return on investment or a specific dollar
amount return to total fixed costs in setting retail prices.
S e t t i n g i n i t i a l p r i c e s. Initial prices on
merchandise must cover all these items: 1. Markdowns,
2. Shortages, 3. Damaged merchandise, 4. Employee discounts,
5. Operating expenses, 6. Cost of goods sold, 7. Profits.
When a business owner decides what price to change
219
for different items and services offered, some kind of method
should be used. Poor pricing may end up costing the owner
customers and profits. Two basic questions must answered: 1.
Are prices high enough to cover expenses and assure a fair
profit, 2. Are prices low enough to meet or undersell the
competition and attract customers?
Markup. The term markup refers to the amount which
a proprietor adds to the cost of an item in order to arrive at a
selling price. The selling price may be expressed in a simple
formula - cost price plus markup equals selling price If a
particular product costs a proprietor $ 1.00, it may be sold to
the customer for $ 1.50. The markup on the item is $.50 based
on the cost.
cost price + markup = selling price
$ 1.00
$.50
$ 1.50
Because most businesses deal in a large number of
different items, an owner should not have to decide on a
markup every time new merchandise arrives. A standard
markup system should therefore be adapted.
There are two ways of figuring markup. One method is
based on the cost price. The other more modern method is
based on the selling price:
1. Markup based on cost price:
cost price + 50% markup = selling price
$ 1.00
$.50
$ 1.50
2. Markup based on selling price:
selling price - 33 1/3 % markup = cost price
$ 1.50
$.50
$ 1.00
In theory, for every dollar taken in over the counter, the
merchant should not know how much is clear profits, how
much goes for merchandise, and how much goes for expenses.
When a customer gives a merchant $ 1 for an item, then sales
dollar might look like this:
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Rent1
Heat2
Light1
Wages20
Cost of
merchandise 70
Insurance1
Profit 5
Of course a merchant does not actually analyze every
dollar. But when $ 1 is multiplied by 10,000 at the end of a six
months business period, the effects are important.
M a r k d o w n. It is not as difficult to figure as
markup. Markdown is simply an amount or percentage cut
from the original selling price. For example, if men’s shirts are
not selling at $ 16.95, they might sell for $ 14.95. The dollar
value of the markdown is $ 2.00 and the percentage, found by
deviding the markdown by the selling price, is $ 11,8%. To
mark down an item 25%, simply multiply the selling price by
25%, or devide the selling price by 4 and substract to find the
new selling price.
COMPREHENSION
1) Which of the factors affecting individual prices are of
primary importance from your point of view?
2) What does market strategy mean as a price policy?
3) What is a loss leader?
4) What items are of importance for setting initial
prices?
5) What is a mark-up?
6) What are the ways of figuring mark-up?
221
best completes the sentences or answers the question.
1) Price policy is significantly affected
a. by the market
c. by the competitors
b. by the type of
d. by the productivity merchandise
2) Which of the following statements is true?
a. Elastic demand suggests higher prices,
b. Elastic demand doesn’t influence prices,
c. Elastic demand suggests average prices.
d. Elastic demand suggests lower prices.
3) Manufacurers’ suggested prices are designed by
a. retailers
c. middlemen
b. wholesalers
d. manufacturers
4) Initial prices on merchandise must cover
a. operating expenses
c. cost of goods sold
b. shortages
d. all of the above
5) The selling price may be expressed in a formula
a. cost price - mark-up = selling price
b. cost price + operating expenses = selling price
c. initial price + mark-downs = sellingprice
d. cost price + mark-up = selling price
6) The pricing strategy helps to determine if the business
a. receives enough income
b. makes an adequate profit
c. receives enough money to pay the expenses
d. all of the above
7) What things must you take into consideration in
setting the price on your goods and services?
222
a. how does the price of your products compare with
your competitors?
b. how must a basic promotion idea or philosophy be
developed?
c. how should advertising, display, and public relations
be studied?
d. how should responsibilities be assigned toemployees?
8) Which of the following is the definition of discount?
a. charge quoted as a percent
b. a minimum, an amount below which commissions
are reduced
c. an amount deducted from the total of a bill for any of
several reasons.
d. a planned percentage mark-up on cost to cover
overheads
9) The typical mark-ups on manufacturers’ prices are
for:
a. tobacco products
b. bakery products
c. greeting cards
d. perfumes
GRAMMAR FOCUS
PHRASAL VERBS
By “phrasal verb” we mean a combination of an
“ordinary” verb and an adverbial or prepositional
particles, or sometimes both, which constitutes a single
semantic and syntactic unit.
We can define four types of phrasal verbs according to form.
Note the term: transitive (followed by a noun or pronoun
object) intransitive (not followed by a noun or pronoun
object)
223
type
Type 1:
Type 2
Type 3
Type4
example
Verb+preposition(transitive)
Listen to this
record.
Verb+particle (transitive)
Take off your
hat. Take it
off
Verb+ particle (intransitive)
Hurry up! Sit
down!
Verb+particle+prep.(transitive) We’ve run
out of
machines
Money
Spending Money
lay out
to spend money. especially a large
amount
splash out
to spend a lot of money on something
you don't need, but is very pleasant
run up
to create a large debt
fork out, fork over
inf. to pay for something, usually
something you would rather not have
to pay for.
shell out
inf. to pay for something, usually
something you would rather not have
to pay for.
cough up
inf. to provide money for something
you do no want to
Having Just Enough
Money
get by
to have just enough money for your
needs
224
scrape by
to manage to live on very little money
Helping Someone
with Money
bail out
to help a person or organization out of
a difficult situation
tide over
to help someone with money for a
period of time until they have enough
Paying Debts
pay back
pay off
to return money owed to someone
to finish paying all money that is
owed
Saving Money
save up
to keep money for a large expense in
the future
put aside
to save money for a specific purpose
Using Saved Money
dip into
to spend part of your saved money
break into
to start to use money that you have
saved
3. Here is a practice dialogue using some of the above
vocabulary.
Well, last week I finally dipped into that money that I had
been putting aside for the past year and a half. I decided that I
should really enjoy myself so I splashed out and had a great
meal at Andy's. Next, I went to Macys on Saturday and laid
out $400 for that suit I'd told you about. Of course, I used a
great deal of what I had saved up to pay back that bill I had
run up on my Visa card. It feels great to finally have some
money after all those years of scraping by. Thanks again for
225
tiding me over during that long winter of '95. I don't think I
would have got by without your bailing me out…
Unfortunately, I also had to cough up about $250 in insurance
costs. Oh well, I guess shelling out the cash for those things is
just as necessary as anything else. …..
4. Complete each of the sentences by using the past form of
one of the verbs on the left and combining it with one of
the words on the right. Use each verb once only. Some
words on the right are used more than once.
cut
get
back through
deal keep
down forward
find
put
out
with
read think
over
1) By accident the switchboard operator … her ... in the middle
of our conversation.
2) After testing-every thing they finally......what was wrong
with the machine.
3) They ... costs ... by using less expensive materials.
4) The Finance Department...... the query about discounts.
5) He ... the figures ... to her so that she could be sure that he
had the quantities exactly right.
6) She......an interesting proposal at the meeting.
7) They ... the offer ... for a week before making a decision.
8) After ringing up three times I finally...... to head office.
5. Complete the following sentences with one of the
prepositions
of
in
to
forth from
1) A factory plans to sell 10,000 thousand units... its product
the coming year.
2) Almost every firm today has sales.... each of the four areas
shown .... Fig. 14-1.
226
3) The term markup denotes the total amount added ... the cost
of merchandise ... setting the initial prices.
4) Operating expenses and desired profits are clearly set ... on
the budgeted income statement.
5) It can be seen ... Table 14-2 that 20 percent ... sales, for
example, is equivalent ... 25 percent of cost.
6) ... real life, perfect knowledge about the prices ... goods and
resources is by no means a free good.
7) It is maintained that the pricing system operates ... the face
of extreme inequalities ... income and wealth.
8) Most ... the industrialized and less developed countries have
experienced persistently rapid rises ... prices ... their
economies.
6. Complete the following centences by putting it, they,
there with an appropriate form of the verb:
1) ... (to argue) that a market economy respounds more quickly
to change economic conditions in the world markets.
2) Overall inflation remained subdued despite exchange rate
effects.
... (to be) several offsetting factors.
3) ... ( to continue) to be considerable diversity in economic
activity across regions in 1993.
4) ... (to be) also a significant pickup in export receipts.
5) ... (to be) also a response to a lesser need for working
capital.
6) Although long-term rates came down at the beginning of
1944, ... (to remain) high relative to current inflation.
7) Broader price measures also indicate that inflation rate
remained very low. ... (to be) about 0.7 percent compared to
1.6 percent in 1992.
8) Nevertheless, ... (to be) substantial increases in spending on
some goods such as household appliences, furniture and
clothing.
227
WORD STUDY
1) All the people who use the services of a
a) strategy
particular firm.
b) clintele
2) The percentage of the wholesale or cost
price added to produce the retail or selling
price.
c) mark-down
3) A deduction in the price of goods to
encourage sales.
d) loss leader
4) One of a number of similar shops
belonging to the same company.
e)
profit
margin
5) A plan of future action which, in a
company, is usually decided by senior
management.
f) mark-up
6) A product sold at a loss to encourage
trade.
g) chain store
7) A goal or result aimed at; an objective.
h) target
8) The difference between the cost of
buying or producing something and the
price for which it is sold.
alter, combat, figure, recognize, fair, assure, affluent, exist,
reflect, protect
1) Are qualifications gained in Britain ... in other European
countries?
228
2) Their stock prices fell to levels that didn’t ... the true value
of their assets.
3) The Common Law has always ... individual rights.
4) Communities who live by hunting and gathering still ... .
5) The schools were fighting endlessly to ... truancy.
6) He could resign if he wanted and ... himself of Ł 156,000 a
year pension.
7) This doesn’t ... the fact that the problem has got to be dealt
with.
8) They both come from relatively ... backgrounds.
9) He must have made a ... amount of money.
10) The five year boy demonstrated the ability to read, write
and do simple ... .
9. What are the synonyms (from the text) of the following
words?
to influence
to defend
producer
benefit
to permit
to fight
rival
to change
primary
major
10. Find words in the text to
expressions.
the price are subject...
they are willing...
products sold below...
the selling price may be...
when $1 is multiplied...
11. Define the word.
Clientele
Discount
Retailer
complete the following
demand factor...
to make agreements...
a desired percentage return...
most businesses deal...
divide the selling price...
Wholesaler
Markdown
Strategy
229
speech they are:
Leader
Shortage
Strategy
To reflect
Merchandise
To exist
Expenses
To assure
1. Posibil ca pieţele libere cu o intervenţie minimă a statului să
incurajeze concurenţa.
2. Uzina planifică să vîndă 10000 unităţi din producţia sa anul
viitor.
3. Economia de piaţă reacţionează mai rapid la schimbarea
condiţiilor economice pe pieţele mondiale.
4. Majoritatea ţărilor industrializate şi mai putin dezvoltate au
experimentat persistent creşterea rapidă a preţurilor in
economia lor.
5. Cheltuielele curente şi venitul dorit sînt clar stabilite in
bilanţul venitului bugetar.
6. Inflaţia totală a rămas supusă necătînd la efectele cursului
ratei de schimb.
7. Sînt creşteri substanţiale in cheltuielile pentru aşa mărfuri ca
mărfuri electrocasnice, mobilă şi haine.
1. Возможно, что свободные рынки с минимальным государственным вмешательством поощряют конкуренцию.
2. Фабрика планирует продавать 10 000 единиц ее изделие
в наступающий год.
3. Рыночная экономика отвечает более быстро на изменения экономических условиях на мировых рынках.
4. Большинство промышленно развитых и развивающихся
стран постоянно испытывало стремительное повышение
цен внутри своих экоомических систем.
5. Эксплуатационные расходы и желательная прибыль
ясно установлены на ассигнованном утверждении дохода.
6. Сплошная инфляция сохранялось, несмотря на изменения обменного курса.
7. Наблюдаются существенное увеличение расходов на
такие товары как электроприборы, мебель и одежда.
DISCUSSION
1. What factors determine the pricing policy?
2. Express your opinion on the nature and computation of
mark-up.
3. Do you agree with the statement “Buyers and sellers are said
to be price takers in the sense that all prices are marketdetermined”?
WRITING
2. “Monopoly power is the ability of a firm to control its
prices”.
Do you support this statement? Give your arguments in
writing.
A New Price Policy for America's Largest Retailer
Crowds began forming early to eagerly await the
opening of most Sears stores. When the stores opened, there
were balloons, streamers, free gifts, and jazz bands to celebrate
a major change for America's largest retailer. Faced with stiff
competition from both specialty stores like The Gap (clothing)
and Circuit City (electronics) and from discount stores like K
mart and Wal-Mart, Sears, Roebuck closed 824 stores for
231
forty-two hours and permanently lowered prices by as much as
50 percent on 50,000 items. And, to prove that it means
business, Sears has promised to match any competitor's
advertised price. The new price policy is designed to recapture
customers who have been shopping at cheaper discount stores
or trendier specialty stores. According to management, the
everyday low-price policy also eliminates the need for
regularly scheduling special promotional sales because prices
have already been reduced. Fewer sales promotions will save
the company as much as $200 million each year-by reducing
the labor (now used to change price tags), advertising, and
inventory-handling costs associated with special sales. Sears
also hopes to attract more customers by placing famous-label
products alongside its own store brands, such as Kenmore
appliances and Craftsman tools. This tactic has already proved
successful in test marketing.
In fact, part of a recent Sears media blitz focuses on
1,000 brand-name items already sold at Sears, and the
company is adding new brands each week. In addition, Sears is
moving to convert its stores into a collection of superstore
departments that can compete head-on with specialty stores.
(Superstores are large retail stores with departments featuring
housewares, clothing, automotive products, and so on.) By the
end of the year, the chain will introduce a new superstore
department called Brand Central to sell appliances and
electronics. Sears' new everyday low pricing is aimed at lifting
the firm's sagging sales and profits. Analysts concede that price
cuts will initially spur sales and profits but could later (in the
long run) hurt the firm's profits unless management reduces
administrative, distribution, and sales costs. Last year, Sears'
overhead expense accounted for 30 cents of every sales dollarcompared with 23 cents at K mart and a mere 15 cents at WalMart. For Sears, lowering costs is every bit as important as
lowering prices. To be successful with everyday low pricing, a
232
company must also have everyday low costs. For now,
management hopes that the new low price policy and resulting
increase in profits will placate the firm's stockholders. It's no
secret that large numbers of stockholders have been
disappointed with the firm's financial performance over the
past few years. Increased profits could also help protect the
company from a threatened takeover.
For years, Sears-valued at just over $15 billion believed
it was too big to be taken over, but the recent $25-billion
takeover of RjR Nabisco Inc. has shown that no takeover target
is too large for a hostile buy-out. In addition to restructuring its
retail operations, Sears has bought back 10 percent of stock,
sold the company's 110-story Sears Towel" in Chicago, and
tried to sell parts of its Coldwell-Banker (real estate) and
Allstate Insurance divisions to improve its cash position and
thus protect itself from a takeover.
(Business News and practice, June, 2003)
EVALUATION TEST TO UNIT X
1. Nationally advertised prices must be ___________ by
small firms as at least an upper limit to the prices they
place on items so advertised.
a) underlined
b) explained
c) recognized
d) written
2. Novelties or special-interest items normally carry higher
__________ .
a) markups.
b) markdowns
c) high prices
d) low prices
233
3. The nature of ________________ demands likewise a
consideration setting individual prices.
a) world demand
b) national demand
c) every demand
d) overall demand
4. ____________ is a policy of keeping merchandise fairly
well –definite price ranges.
a) price sequence
b) price policy
c) price problem
d) price lining
5. What does not enter in setting initial prices?
a) markdowns
b) roads
c) shortages
d) profits
6. Poor pricing may __________ costing the owner
customers and profits.
a) end up
b) set up
c) give up
d) stand up
7. _________ is simply an amount or percentage cut from
the original selling price.
a) markup
b) markout
c) markdown
d) markin
234
8. Which of the following statements is true?
a. Elastic demand suggests higher prices,
b. Elastic demand doesn’t influence prices,
c. Elastic demand suggests average prices.
d. Elastic demand suggests lower prices.
9. All the people who use the services of a particular firm
are called ________.
a) crowd
b) crew
c) clientele
d) sellers
10. A goal or result aimed at; an objective is called
________ .
a) target
b) gun
c) consumers
d) customers
11. “___________are said to be price takers in the sense
that all prices are market-determined”?
a) Managers and assistants
b) Secretaries and directors
c) Finances and profits
d) Buyers and sellers
12. When something is produced,
__________ .
a) a buyer
b) an opportunity cost
c) an elastic supply
d) a profit
235
there
is
always
13. People want to buy of a product when its price rises.
a) expectations of higher future prices for a product
b) market supply
c) price effect
d) marginal cost
14. A higher price for a product ___________.
a) encourages sellers to sell less of it
b) causes shortages
c) causes buyers to buy less of it
d) shifts both demand and supply
15. Producing more than people need causes ________ .
a) competition
b) shortage
c) supply
d) surplus
16. Reasons to producing goods and services means
_______________.
a) changes in demand
b) market clearing price
c) incentive to produce
d) information
17. What best describes the forces that make a price move
up or down to its market-clearing level?
a) competition among buyers
b) competition among sellers
c) competition between buyers and sellers
d) both a and b
18. If the demand for a product increases faster than its
supply, what would probably happen to the product’s
market – clearing price?
236
a) It would fall
b) It would rise
c) It would remain unchanged
d) There is not enough information to answer the question
19. Entrepreneurship is ________
a) always profitable
b) limited
c) a personality style
d) never without risks
20. Self- imposed means _________
a) fool oneself
b) starve oneself
c) force oneself
d) impress oneself
21. a bright student means_________
a) shiny
b) brash
c) inferior
d) intelligent
22. Substitute the word: “She resembles her mother “.
a) looks after
b) takes after
c) seems to be
d) marks to
23. I sided ______ my friends.
a) to
b) at
c) with
d) near
237
24. I confined ____ our daughter.
a) up
b) into
c) down
d) in
25. We ironed ____ the difficulties.
a) down
b) with
c) in
d) out
26. I walked _______ the bridge quickly.
a) over
b) across
c) up
d) down
27. What are you looking ____ ?
a) with
b) between
c) for
d) up
28. Let us ______ into the possibility.
a) watch
b) see
c) move
d) look
29. The can turn ______ me whenever they want.
a) into
b) to
c) with
d) on
238
30. I know I can count ______ my friends.
a) to
b) for
c) with
d) on
239
APPENDIX I
Word formation
Introduction
There are many different suffixes such as : -ence; -ize;
-al; -tion; - ly; etc, and prefixes such as: il-; ir-; im-; -in; en-;
em- etc. It is noticeable that there are a lot of nouns ending in –
tion: information; enumeration; appreciation; instruction etc.
With the suffixes we can form verbs, adjectives,
adverbs etc. There are no exact rules which suffix to add to
which word. Adding a suffix can also involve other changes to
the form of a word:
Industry (n.) – industrial (adj.)
Repeat (v.) – repetition (n.)
Science (n.) – scientific (adj.)
Usual (adj.) – usually (adv.)
The prefixes are used to add something to the meaning
of the word. For example the verb “to replay” means “to play
again”. We can also add prefixes to the nouns and adjectives.
We can distinguish different types of suffixes which are
called Noun suffixes, Adjective suffixes etc.
§ Noun Suffixes – change the part of speech of the word in a
Noun:
-
ment
-
ion
tion
sion
ation
ition
To employ – employment
To agree – agreement
To discuss – discussion
To produce – production
To permit – permission
To invite – invitation
Opposite- opposition
240
-
ence
ance
ty
ity
ness
-
ing
To prefer- preference
Distant - distance
Certain – certainty
To secure – security
Willing – willingness
Ill- illness
To build- building
To understand – understanding
Examples: to take part in a discussion
to increase steel production
to ask for permission
to keep the door lacked for security
to reach an understanding
§
Nouns for people – which denominates the professions, the
occupations etc.
-
er
or
-
ist
ant
ent
an
ian
ee
Examples:
to drive – driver
to edit – editor
to employ – employer
a science – scientist
to assist – assistant
to study – student
republic – republican
electricity – electrician
to employ – employee (someone employed)
to examine – examinees (people taking an
exam)
a newspaper editor
a scientist doing an experiment
an assistant for practice period
notes for examinees
241
§
Verb suffixes – many verbs are formed by adding the
suffixes: –ize or –ise to an Adjective. Some are formed by
adding –en.
§
ize
en
Adjective suffixes – most of the Adjectives are formed
from Nouns:
-
al
-
ic
-
ive
ful
- less
(without)
- ous
-
y
-
ly
able
-
ible
§
-
standard – to standardize
wide – to widen
light – to lighten
profession- professional
coast – coastal
metal – metallic
science – scientific
Information – informative
success – successful
hope – hopeful
hope – hopeless
power – powerless
danger – dangerous
luxury – luxurious
rock – rocky
salt – salty
friend – friendly
to accept – acceptable
value – valuable
comfort – comfortable
to comprehend – comprehensible
Adverb suffixes – are formed from Nouns, Adjectives
adding the suffix – ly.
ly nervous – nervously
ly usual – usually.
ly recent – recently
242
§
Some common prefixes:
Anti (against) anti-roads
anti-government
Inter
international
(between)
interstate
Mini (small)
minicomputer
minibar
Mis
Mishear
(wrongly)
miscalculate
Multi (many) multicolored
multimillionaire
Over – (too overeating
much)
overcrowded
Post - ( after) post – war
postgraduate
Pre – (before) prematch
prehistoric
Re – (again)
reunion
reread
Semi – (half) semi-skilled
semicircle
Super – (big) superstore
supermarket
Under – (too underpaid
little)
underweight
§ Negative prefixes
We can also use a prefix to form an opposite. For example: the
opposite of clear is unclear (= not clear). Un – is the most
common negative prefix.
243
Dis-
Il – ()+l
Im (+m or p)
In Ir – (+ r)
Non Un -
Dishonest
Disorganized
Dislike
Disadvantage
Illegal
Illiberal
Impossible
Impolite
Indirect
Injustice
Irregular
Irrelevant
Non – alcoholic
Non-stop
Uncomfortable
Uncertain
Undated
244
APPENDIX II
Irregular verbs
VERB
abide
arise
awake
be
bear
beat
become
befall
beget
begin
behold
bend
bereave
beseech
beset
bestride
bet
betake
bethink
bid
bind
bite
bleed
bless
blow
break
breed
PAST TENSE
abided, abode
arose
awoke, awakened
was/were
bore
beat
became
befell
begot
began
beheld
bent
bereft, bereaved
besought,
beseeched
beset
bestrode
bet, betted
betook
bethought
bade, bid
bound
bit
bled
bless, blest
blew
broke
bred
245
PARTICIPLE
abided
arisen
awoken
been
borne
beaten, beat
become
befallen
begotten
begun
beheld
bent
bereft, bereaved
besought, beseeched
beset
bestridden
bet, betted
betaken
bethought
bid, bidden
bound
bitten
bled
blessed, blest
blown
broken
bred
bring
broadcast
build
burn
burst
buy
can
cast
catch
chide
choose
cleave
brought
broadcast
built
burned, burnt
burst
bought
could
cast
caught
chided
chose
cleaved, cleft, clove
cling
come
cost
creep
cut
deal
dig
dive
do
clung
came
cost
crept
cut
dealt/delt/
dug
dived
did
brought
broadcast
built
burned, burnt
burst
bought
could
cast
caught
chidden
chosen
cleaved, cleft,
cloven
clung
come
cost
crept
cut
dealt
dug
dived
done
VERB
draw
dream
drink
drive
dwell
eat
fall
feed
feel
fight
PAST TENSE
drew
dreamed, dreamt
drank
drove
dwelt, dwelled
ate
fell
fed
felt
fought
PARTICIPLE
drawn
dreamed, dreamt
drunk
driven
dwelt, dwelled
eaten
fallen
fed
felt
fought
246
find
flee
fling
fly
forbear
forbid
forecast
foresee
foretell
forget
forgive
forgo
forsake
forswear
freeze
Gainsay
gird
give
go
grind
grow
hamstring
Hang
Have
Hear
Hide
Hold
Hurt
Keep
Know
Lay
Lead
Learn
Leave
found
fled
flung
flew
forbore
forbade, forbad
forecast
foresaw
foretold
forgot
forgave
forwent
forsook
forswore
froze
gainsaid got
girded, girt
gave
went
ground
grew
hamstrung
hung
had
heard
hid
held
hurt
kept
knew
laid
led
learnt
left
247
found
fled
flung
flown
forborne
forbidden
forecast
foreseen
foretold
forgotten
forgiven
forgone
forsaken
forsworn
frozen
gainsaid got
girded, girt
given
gone
ground
grown
hamstrung
hung
had
heard
hidden
held
hurt
kept
known
laid
led
learnt
left
Lend
Let
Make
May
Mean
Meet
Mistake
lent
let
made
might
meant
met
mistook
lent
let
made
might
meant
met
mistaken
VERB
Pay
Put
Read
Rend
Ride
Ring
Rise
Run
Saw
Say
See
Seek
Sell
Send
Set
Sew
Shake
Shall
Shine
Shoot
Shut
Sing
Sink
Sit
Sleep
PAST TENSE
paid
put
read /red/
rent
rode
rang
rose
ran
sawed
said
saw
sought
sold
sent
set
sewed
shook
should
shone
shot
shut
sang
sank
sat
slept
PARTICIPLE
paid
put
read /red/
rent
ridden
rung
risen
run
sawn
said
seen
sought
sold
sent
set
sewn
shaken
should
shined
shot
shut
sung
sunk
sat
slept
248
Smell
Speak
Speed
Spell
Spend
Spoil
Spread
Stand
Steal
Stride
Strike
Swear
Sweep
Swim
Take
Teach
Tell
Think
Throw
Tread
Understand
Wake
Wear
Wed
Weep
smelt
spoke
sped
spelt
spent
spoilt
spread
stood
stole
strode
struck
swore
swept
swam
took
taught
told
thought
threw
trod
understood
woke
wore
wedded
wept
smelt
spoken
sped
spelt
spent
spoilt
spread
stood
stolen
stridden
struck
sworn
swept
swum
taken
taught
told
thought
thrown
trodden
understood
woken
worn
wedded
wept
VERB
Wet
Will
Win
Write
PAST TENSE
wet
would
won
wrote
PARTICIPLE
wet
would
won
written
249
APPENDIX III
Phrasal verbs
deal in
deal with
decide on
dispense with
dispose of
dwell on
enlarge on
enter into
expand on
frown on
get at
get into
get over
get through
go against
go over
go through
go with
grow on
guard against
hinge on
inquire into
keep to
laugh at
launch into
leaf through
live on
look after
look into
stock, sell
handle successfully
settle on
proceed without
get rid of
emphasize
say more about
begin, commence
say more about
disapprove of
reach
become involved with
recover from
survive, finish
oppose
review
examine in detail
look good with
become more attractive to
take precautions
depend on
investigate
adhere to
mock, make fun of
start
turn the pages
survive using
take care of
investigate
250
look through
part with
pick on
prey on
provide for
reason with
reckon on
rise above
run across
run into
run over
see through
send for
settle for
side with
sit through
stand by
stand for
stick to
stumble across
survive on
take after
tamper with
touch on
verge on
wade through
watch over
write into
examine quickly
give up reluctantly
be unkind to
hunt and eat; disturb
prepare for
try to persuade
calculate on
be superior to
find accidentally
meet accidentally
injured by a vehicle
not be deceived by
ask to be sent
reluctantly accept
support in a dispute
sit and endure
support
represent
adhere to
find accidentally
survive using
resemble an ancestor
interfere with
mention
approach
slowly peruse
guard
add to in writing e.g. The terms were written
into the lease.
EXAMPLES:
We abided by the rules.
He accounted for the discrepancy.
They asked for an extension.
We are banking on good weather tomorrow.
251
Please bear with the delay.
Their excitement bordered on hysteria.
Thieves broke into the store.
We want to build on our success
He burst into the room.
This calls for an investigation.
We will call on you to give a speech.
She came across some old papers.
We came upon a small lake.
Phrasal verbs consisting of a verb followed
by an adverb
Many phrasal verbs consist of a verb followed by an adverb.
Some of these phrasal verbs are intransitive and some are
transitive.
For instance, the intransitive phrasal verb to show up is formed
from the verb to show followed by the adverb up. In the
following example, the phrasal verb does not have an object.
e.g.: At ten o'clock, her brother showed up.
The following are examples of intransitive phrasal verbs which
consist of a verb followed by an adverb. Each phrasal verb is
followed by its meaning and an example of its use.
Intransitive Verbs followed by Adverbs:
boil away
boil over
bounce back
buckle down
catch on
cloud over
die down
double up
drop in
disappear by boiling
overflow by boiling
recover
work seriously
be widely accepted
become overcast
become less
bend over
visit
252
fall off
get away
get by
give in
go on
grow up
keep on
level off
log on
log off
move in
move out
nod off
pass out
pitch in
play along
pull in
pull out
set off
settle down
settle in
show up
stay up
step down
step in
take off
touch down
tune in
watch out
??????????
phase out
pick up
pin down
play down
become less
escape
barely succeed
admit defeat
continue
become an adult
persist in
stop rising
contact a computer
break contact with a computer system
take possession of living quarters
give up possession of living quarters
go to sleep
faint
help
pretend to agree
arrive (of vehicles)
leave (of vehicles)
leave
become peaceful
become used to
arrive
not go to bed
resign
intervene
leave the ground
land (of planes)
find a station on the radio
beware
cease gradually
collect
get a commitment
de-emphasize
253
point out
polish off
pull down
pull off
put away
put back
put off
reel off
rope in
rub out
rule out
scale down
sell off
set back
shout down
shrug off
single out
size up
sort out
sound out
stammer out
sum up
summon up
take in
take out
take over
talk over
tear up
think over
think up
track down
trade in
try on
try out
draw attention to
finish
demolish
succeed
put in proper place
return to original location
postpone
recite a long list
persuade to help
erase
remove from consideration
reduce
dispose of by selling
delay
stop from speaking by shouting
dismiss as unimportant
select from others
assess
organize
talk with to learn the opinion of
stammer
summarize
gather
absorb
invite to a restaurant
assume control
discuss
destroy by tearing
consider
invent
search for and find
give as part payment
test clothes by putting them on
test by using
254
turn away
turn back
turn off
turn on
water down
wear out
write down
write off
refuse admission
reverse direction
deactivate by using a switch
activate by using a switch
dilute
gradually destroy by wearing or using
make a note
cancel, regard as write up
Negative Phrasal Verbs
blare out
blow up
burn down
calm down
dry out
get across
liven up
pull through
roll up
shut down
wake up
wash out
wear away
wear out
make a loud sound
destroy by an explosion
destroy by fire
become calm
become dry
transmit
become lively
recover from, survive
wrap into a cylinder
close, stop working
stop sleeping
remove by washing
gradually remove
gradually destroy by using
Verbs followed by Adverbs followed by
Prepositions
add up to
back down
from
back out of
boil down to
amount to
withdraw, avoid
not fulfill
can be reduced to
255
bow out of
brush up on
catch up to
clean up after
come down to
come down
with
come out in
come up against
come up with
creep up on
cry out for
cut back on
do away with
face up to
fall back on
fit in with
fool around
with
get away with
get down to
get in on
give up on
go back on
grow out of
hold out for
keep up with
lead up to
log on to
look down on
look forward to
look out for
look up to
make up for
withdraw - He bowed out o/the race
refresh knowledge of
overtake
tidy for
can be reduced to
become ill with
develop
meet an obstacle
produce
approach undetected
urgently require
reduce
abolish
accept and deal with
turn to for help
be suited to
not be serious, have as a hobby
not be punished
begin dealing seriously with
manage to participate in
stop trying
break a promise
become too big for
not compromise
be on the same level as
be a preparation for
contact a computer
regard as inferior
anticipate
watch for
admire
compensate for
256
pull out of
push on with
put up with
read up on
rub off on
run up against
send away for
stick up for
stock up on
talk down to
walk away with
watch out for
wriggle out of
zero in on
leave (of vehicles
go ahead, continue
endure, tolerate
read about
acquire from someone
meet
order by mail
defend, support
lay in supplies
speak patronizingly
win easily
beware of
avoid
focus on
257
APPENDIX IV
List of Business English Idioms
Abide by (object)
MEANING: to accept or obey an agreement, rule, or decision
EX: "Staff who refused to abide by the new rules were fired."
"We are quite willing to abide by their decision, whatever it
may be."
Ace out (inseparable)
MEANING: American, informal to defeat someone.
EX:"We were aced out by a rival agency."
Act up (no object)
MEANING: Misbehave (for people); Not work properly (for
machines).
EX: "My Mum had a difficult time. I was always acting up as a
child."
"I guess I'd better get the television repaired. It's been acting
up lately."
Act like (inseparable)
MEANING: Behave in a way that's like _____ .
EX:"What's wrong with him? He's acting like an idiot."
Account for (object)
MEANING: Explain or give a reason for something.
EX:“The employee was sacked because she couldn’t account
for the missing money from the cash register”
Act out (object)
MEANING: 1. When you act something out, you perform it or
make it into a play.
2. Express your feelings or ideas.
EX:1. The script itself is well written and well acted out by the cast”
2. “He has become desperate and is acting out his frustration
by behaving like an idiot.”
258
Add up (1. no object)
MEANING: Logically fit together.
EX:"His theory is hard to believe, but his research adds up."
Add up (2. separable)
MEANING: Find the total of something.
EX: "What's the total of those bills? Could you add them up
and see?"
Add up to (inseparable)
MEANING: To total.
Ex:"The bills add up to $65. That's more than I expected!"
Allow for (object)
MEANING: to consider or include something when you are
making plans or judging a situation
EX:“Allowing for delays, we should reach our destination by
6 o’clock this evening”
Answer back (separable)
MEANING: To reply rudely.
EX:“Don't answer back to your teacher!”
Answer for (object)
MEANING: to take responsibility for something wrong you
have done.
EX:“The public had hoped to see the politician answer for his
actions before a tribunal.
Answer to (object)
MEANING: If you answer to someone in a higher position,
they are the person you have to explain your actions or
decisions to.
EX:"We were living in a police state, where the police
answered to no one."
Apply for (object)
MEANING: To fill in a form or write a formal letter asking
for a job, permit, scholarship, loan or permission.
EX:“The professor applied for a job at the famous university”
259
Ask after (object)
MEANING: Inquire how someone is getting on, to ask for
information about someone, especially about their health.
EX:“My aunt wrote to us asking after our Mum who is sick.”
"Tom was asking after our grandmother, who is sick in
hospital."
Ask about/around (no object)
MEANING: to make inquiries
EX:“I asked around to see if anyone knew the address I was
looking for.”
Ask for (object)
MEANING: To request something.
EX:“We stopped our car to ask for directions”
Ask in (object)
MEANING: to invite someone into your house, office etc.
EX:“The woman asked the door salesman in”
Ask out (separable)
MEANING: Ask for a date
EX:"Nancy has a new boy friend. Joe asked her out last
night."
Ask over (separable)
MEANING: Invite to your home.
Ex:"I would like to ask our neighbours over tomorrow tonight
for dinner. We haven't eaten together for a long time."
Arrive at (inseparable)
MEANING: to achieve an agreement or decision, especially
after thinking about it or discussing it for a long time.
EX:"We discussed the matter at length but failed to arrive at a
decision"
Auction off (object)
MEANING: get rid of something by selling it at an auction.
Ex:“We auctioned off our old furniture and got a great price”
260
Avail yourself of (object)
MEANING: to take the opportunity to use something, to
improve your situation
EX:"As an employee I should avail myself of the opportunity to
buy cheap shares in the company."
Average out (separable)
MEANING: to calculate the average of a set of numbers
EX: "When I average out what I spend on clothes it comes to
about £50 a month."
Average out at (object)
MEANING: to have as the average number
EX:"My time off work this year averages out at two days a week."
across the board
MEANING: including everyone or everything
EX:The computer company decided to give the workers an
across-the-board increase in their salary.
at a loss
MEANING: sell something and lose money
EX:We were forced to sell the computers at a big loss.
bail a company out
MEANING: help or rescue a company with financial
problems.
EX:The government decided to bail out the failing bank in
order to maintain stability in the economy.
ball park figure/estimate
MEANING: a rough estimate or figure
EX:The contractor gave us a ball park figure for the cost of
repairing the new building.
bang for the buck
MEANING: value for the money spent
EX:We were able to get a big bang for our buck when we
advertised on the Internet.
261
banker's hours
MEANING: short work hours
EX:My sister's husband owns his own company and is able to
work banker's hours with his large staff.
Bean-counter
MEANING: an accountant
EX:We asked the bean-counters to look over the figures in the
new budget.
big gun/cheese/wheel/wig
MEANING: an important person, a leader
EX:The new director was a big wheel in his previous company
but is not so important now.
bottom fall out/drop out
MEANING: to fall below an earlier lowest price
EX:When the bottom fell out of the coffee market many
companies had to stop doing business.
bottom line
MEANING: the total, the final figure on a balance sheet
EX:When they examined the bottom line of the company they
decided not to invest in it.
bottom out
MEANING: reach the lowest or worst point of something
EX:The value of the stock has begun to bottom out and should
soon begin to increase in value.
boys/men in the backroom
MEANING: a group of men making decisions behind the
scenes
EX:The boys in the backroom told us that we must close down
the factory as soon as possible.
break even
MEANING: have expenses equal to profits
EX:After only three months the company was able to break
even and start making profits.
262
budget squeeze/crunch
MEANING: a situation where there is not enough money in
the budget
EX:We have been going through a severe budget squeeze at
our company and must begin to stop spending money in a
wasteful manner.
buy off
MEANING: use a gift or money to divert someone from their
duty or purpose
EX:The land developer tried to buy off the politician but he
was not successful.
buy out
MEANING: buy the ownership or a decisive share of
something
EX:The company was bought out by another large company in
the textile industry.
by a long shot
MEANING: by a big difference, by far
EX:The soap company was able to beat out the bids of the
other companies by a long shot.
calculated risk
MEANING: an action that may fail but has a good chance to
succeed
EX:They took a calculated risk when they introduced the new
computer screen onto the market.
captain of industry
MEANING: a top corporation officer
EX:The president of our company was a captain of industry
and after he retired he was appointed to many government boards.
carry over
MEANING: save for another time
EX:We were forced to carry over the sale to the Monday after
the national holiday.
263
carry over
MEANING: transfer (a figure) from one column or book to
another
EX:Our company is still facing difficult times and we will
have to carry over last year's losses to this year.
carry the day
MEANING: win completely
EX:The president's new idea carried the day and everyone
supported him energetically.
carry through
MEANING: put into action
EX:The steel company carried through their plan to restructure
all of their operations.
close out
MEANING: sell the whole of something, sell all the goods
EX:They decided to close out the store and sell all of the
remaining stock very cheap.
close the books
MEANING: stop taking orders, end a bookkeeping period
EX:They usually close the books at the end of February every year.
cold call
MEANING: call a potential customer from a list of persons
one has never seen
EX:When he first started to work at his company he was asked
to make cold calls using the telephone book.
come on strong
MEANING: overwhelm with excessively strong language or
personality
EX:The salesman came on too strong at the meeting and
angered the other members of the team.
company man
MEANING: a person who always works hard and agrees with
his employees
264
EX:My father was a true company man and was always
putting in an extra effort for his company.
company town
MEANING: a town dominated by one industry or company
EX:When the coal mine closed down the company town faced
severe economic times.
cut back
MEANING: use fewer or use less
EX:The company has been cutting back on entertainment
expenses for over a year now.
cut corners
MEANING: economize
EX:We have been forced to economize on stationary expenses
during these severe economic times.
cut off
MEANING: interrupt or stop
EX:The speech of the president was cut off when the
electricity went off in the building.
cut one's losses
MEANING: do something to stop losing money or something
EX:We should sell the old machinery as soon as possible and
try and cut our losses.
deliver the goods
MEANING: succeed in doing well what is expected
EX:The new owner of the company is not very popular but he
is able to deliver the goods.
double-check
MEANING: check something again to confirm
EX:We were unable to double-check the costs of the new
products before the price list was printed.
face value
MEANING: the official worth or trust of something
EX:Although the face value of the postage stamp was very low
it sold at the auction for much money.
265
fair play
MEANING: justice, equal and right action to someone
EX:The company is very good to work for as they always use
fair play when they are bargaining with their employees.
figure out
MEANING: find an answer by thinking about something
EX:Everyone in our company is trying to figure out what our
boss is going to do with the new equipment.
fill the bill
MEANING: be just what is needed
EX:That new machine should fill the bill as to what we need to
finish the job.
finger in the pie
MEANING: involved in what is happening, receiving money
for something
EX:The new manager has his finger in the pie in all aspects of
our company's business.
gain ground
MEANING: go forward, make progress
EX:Our company has been gaining ground in our attempt to be
the best in the industry.
get a break
MEANING: get an opportunity or good deal
EX:We were able to get a break on the price of the paint and
saved a lot of money.
get off the ground
MEANING: make a successful beginning, go ahead
EX:We were unable to get the new product off the ground and
will have to wait until next year.
give someone the green light
MEANING: give permission to go ahead with a project
EX:Our boss gave us the green light to begin work on the new
sales promotion.
266
go public
MEANING: sell shares of a privately owned company to the
public
EX:The stock of the Internet company rose very quickly when
they went public.
go through with
MEANING: finish, do as planned or agreed
EX:We have decided not to go through with our plans to
launch the new product until we have solved all of its
problems.
hard sell
MEANING: sell something by being very aggressive
EX:The car salesman gave us a hard sell so we decided to go
to another dealer.
heads will roll
MEANING: someone will be punished
EX:Heads will roll when our boss learns about the money that
we have lost recently.
in black and white
MEANING: in writing
EX:The company refused to deal with the customer's
complaints until they saw them in black and white.
in charge of
MEANING: in control of, responsible for
EX:My sister has been in charge of buying supplies at her
company for many years.
in short supply
MEANING: not enough, in less than the amount or number
needed
EX:Experienced computer programmers are in short supply at
our company.
in stock
MEANING: have something ready to sell or use
267
EX:They didn't have any computer printer ribbons in stock at
the store.
in the black
MEANING: successful or making money
EXAMPLE:The new company has been in the black for over
a year now.
in the long run
MEANING: in the final result
EXAMPLE:The company has been losing money recently but
in the long run they should do very well.
in the market for
MEANING: ready to buy something
EXAMPLEWe have been in the market for a new computer
for a long time but still we haven't bought one.
in the red
MEANING: losing money, unprofitable
EX:The company began to go into the red when the price of
oil began to rise rapidly.
in the works
MEANING: in preparation, being planned or worked on
EX:The camera company has a new automatic camera in the
works but nobody knows about it yet.
jack up
MEANING: make a price higher
EX:The steel companies decided to jack up the price of steel at
the beginning of the year.
keep books
MEANING: keep records of money gained and spent
EX:The new assistant to the sales manager has no experience
keeping books and has made many mistakes.
keep track of
MEANING: keep a count or record, stay informed
EX:They have been making a great effort to keep track of the
number of visitors to their store.
268
kickback
MEANING: money paid illegally for favourable treatment
EX:The construction company was taken to court for giving
kickbacks to the local politicians.
make a go of
MEANING: produce good results, succeed
EX:Although he works very hard in his small business he has
been unable to make a go of it and may soon go out of business.
mean business
MEANING: be serious
EX:Our boss means business when he tells everyone to try and
work harder.
number-cruncher
MEANING: an accountant, someone who works with
numbers
EX:Our president is a good number-cruncher and understands
about the finances of our company.
on hand
MEANING: in one's possession, ready
EX:We didn't have any supplies on hand and were unable to
finish the job.
(buy) on credit
MEANING: buy something without paying cash
EX:My friend had no money so he decided to buy the furniture
on credit.
on the block
MEANING: for sale
EX:As soon as they purchased the company they began to put
some of the equipment on the block.
pay off
MEANING: make a profit, be successful
EX:The furniture manufacturer was unable to pay off their
loan and had to go out of business.
269
piece/slice of the action
MEANING: a share in the activity or the profits of something
EX:The inventor wanted a large piece of the action of the
profits from the new computer that he had invented.
red ink
MEANING: debt (red ink on a financial statement)
EX:The automobile company has been drowning in red ink
since the US dollar began to rise.
run short
MEANING: not have enough in quantity
EX:They ran short of gasoline at the gas station and had to
close early.
saddled with debt
MEANING: burdened with debt
Ex:Our sister company is saddled with a great amount of debt
and should be sold as soon as possible.
sell like hotcakes
MEANING: sell very quickly
EX:The children's toys were selling like hotcakes at the end of
the year.
sell out
MEANING: sell all of a product
EX:Every year at least one company sells out all of their
products which frustrates many customers.
strike while the iron is hot
MEANING: take advantage of an opportunity
EX:We decided to strike while the iron was hot and began to
market the product around the time of the Olympics.
sweetheart deal
MEANING: a deal made between friends so that both may
make a big profit
EX:We were able to make a sweetheart deal with our landlord
and got the rent greatly reduced.
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take a nosedive
MEANING: collapse, fail, decrease in value
EX:The stock market took a nosedive when the earnings of the
oil company began to weaken.
take on
MEANING: to give a job to or hire someone
EX:The company took on many new workers during the busy
holiday season.
take over
MEANING: take control or possession of something, take
charge or responsibility
EX:The government decided to take over the bank after it
declared bankruptcy.
take public
MEANING: sell shares in a company to the general public
EX:We decided it was necessary to take our company public
in order to raise money to expand our facilities.
take stock
MEANING: count the items of merchandise or supplies in
stock, take inventory
EX:The department store closes down for 3 days every March
in order to take stock.
throw cold water on
MEANING: discourage, forbid
EX:The managers threw cold water on the plans to close down
the factory for one week in August.
throw money at something
MEANING: try to solve a problem by spending money on it
EX:The president of our company is willing to throw a lot of
money at the problem in the hope of solving it.
tight spot
MEANING: a difficult situation
EX:The computer manufacturing company has been in a tight
spot since the shortage of computer chips appeared.
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turn over
MEANING: to buy and then sell something to customers
EX:The turn-over at that discount store is very rapid.
work out
MEANING: plan, develop
Ex:I spent the weekend trying to work out the budget estimates
for next year.
write off
MEANING: remove from a business record, cancel a debt
EX:It was impossible for the bank to collect the money so they
were forced to write off the loan.
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APPENDIX V
Explanation of the most common
Economic Terms
Enterprise - An enterprise is a business organization
consisting of one or more domestic establishments that were
specified under common ownership or control. The enterprise
and the establishment are the same for single-establishment
firms. Each multi-establishment company forms one enterprise
- the enterprise employment and annual payroll are summed
from the associated establishments.
Firm - A firm is a business organization consisting of one or
more domestic establishments in the same state and industry
that were specified under common ownership or control. The
firm and the establishment are the same for singleestablishment firms. For each multi-establishment firm,
establishments in the same industry within a state will be
counted as one firm- the firm employment and annual payroll
are summed from the associated establishments.
Enterprise Size - Enterprise size designations are determined
by paid employment in the mid-March pay period. The size
group 0 includes enterprises that did not report any paid
employees in the mid-March pay period but paid employees at
some time during the year.
Establishment - A single physical location where business is
conducted or where services or industrial operations are
performed. An establishment is defined, as a general rule, the
following prerequisites are satisfied;
1. The economic activity is carried out under a single entity of
management at one location, occupying a demarcated area.
2. The production or supply of goods or services is done on a
continuing basis with the help of persons and equipment.
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[Legal organization]
Individual proprietorship
This is an organizational state of an establishment owned and
managed by an individual. It includes an establishment under
the joint management of individuals which is not incorporated.
Company
This represents a Joint-stock company, a limited company, a
limited and unlimited liability partnership, a mutual insurance
company and a foreign company. A foreign company is a principal branch office or a sales office of a company which was
founded in a foreign country, which was registered according
to the prescription in the Commercial Law. A company with
capital participation by a foreign company is not regarded as a
foreign company.
Corporation excluding company
This is an organizational state of a incorporated establishment
excluding any company, such as a public corporation and a
foundation.
Unincorporated association
This is an association which is not legally incorporated.
Capital
This is amount of capital as to a Joint-stock company and a
limited company, amount of in-vestment as to a limited and
unlimited liability partnership, or amount of fund as to a
mutual insurance company.
Opening year
This is defined as the year when the establishment opened the
business at the current location, made a drastic conversion to
the other type of business, or changed the type of legal organization.
Employment - Paid employment consists of full and part-time
employees, including salaried officers and executives of
corporations, who were on the payroll in the pay period
including March 12. Included are employees on sick leave,
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holidays, and vacations; not included are proprietors and
partners of unincorporated businesses.
Employment status
Individual proprietors
Individual proprietors are proprietors of establishments who
own and manage the business on their own account, and are
not nominal owners.
Unpaid family workers
Unpaid family workers are family members of individual
proprietors who are working for the family business without
wages and salaries. Family members who work and get as
much in-come as employees are treated as regular employees
or temporary employees.
Employees
The generic term for Salaried directors, Regular employees and
Temporary employees is Employees.
Salaried directors
This category mean salaried managers or directors of corporations or associations irrespective of the fact whether they are
full-time or part-time workers.
However, directors or managers who are concurrently regular
employees and receive payment on the same payroll scheme as
regular employees are excluded from this category and are
classified as regular employees.
Regular employees
Regular employees are employees engaged regularly in the
business of establishments. Temporary workers are generally
excluded from this category, but they are included, if they are
on a contract of more than one month, or if they are employed
for 18 days or more in each of the past two months.
Part-timers and so on
Those who are called such as "part-timer", "arubaito" or the
like at their places of regular employees are classified this
category.
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Temporary employees
Temporary employees are persons other than regular
employees, who are on a contract not exceeding one month or
who are employed on a daily basis.
[Income (annual)]
This is annual income (the accounts of the one year to from
November 1998 October 1999), that is, the total income from
all operations of the establishment (actual income including
expenses, wages and salaries and also consumption tax). Those
income such as interest, dividend, income by the sales of land
or buildings, and borrowings are excluded.
In case of a public corporation and so on (Corporation
excluding company and Unincorporated association), income
that the establishment got by business or activity, income that
the establishment continues business (donations, contributions,
subsidies and membership fees) are applicable to this category.
And donations and offerings to temples or shrines are also
applicable to this category.
Annual Payroll - Total annual payroll includes all forms of
compensation, such as salaries, wages, commissions, bonuses,
vacation allowances, sick-leave pay, and the value of payments
in-kind (e.g., free meals and lodgings) paid during the year to
all employees.
Metropolitan Statistical Area (MSA) - An MSA is an
integrated economic and social unit with a large population
nucleus. Each MSA consists of one or more counties or
statistically equivalent area meeting published standards of
population and metropolitan character; in the six New England
states (Connecticut, Maine, Massachusetts, New Hampshire,
Rhode Island, and Vermont), cities and towns (rather than
counties) are used as the component geographic units.
Primary industry and Secondary industry
Primary industry
The decision of the Primary industries is as follows. If the
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business or activity under a single grouping of the
classification is executed within one establishment, the
business or activity is to be taken as the industry of that
establishment. If the businesses or activities under two or more
different groupings of the classification are performed by one
establishment, the industry of the establishment is decided by
its main business or activity (the largest value of income in the
last one year).
Secondary industry
Secondary industry refers to industries other than the primary
industry of the establishment which executes two or more
businesses or activities.
Other parties that establishments got income
It is classified into as follows.
Individuals (general consumers) – it means that income are
gained from general consumers.
Enterprises and associations -it means that income are gained
from enterprises and associations. And it also includes that
income are gained from the dealings between establishments
under the control of the same management, such as dealings
between head office and branch office.
Government offices - it also includes income of subsidy .etc
from Government offices.
Expenses (annual)
It refers to the expenses which are required for operating a
business, that is, first cost, tax and public dues, water,
electricity and fuel expenses, traveling expenses, communication expenses, real estate and other rents, advertising costs,
repairing costs, the cost of expendable supplies, in-surance
against loss, depreciation expenses, welfare expenses and
entertainment expenses.
Equipment investment (annual)
It is defined as the expenses paid out for the plant or equipment
with more than one year of durability and more than \100,000
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purchase price (however more than \200,000 about things
purchased before 31 December 1998). The expenses for
acquiring, or improving and reclaiming land are excluded.
Wages and salaries (annual)
It is defined as the before-tax wages and salaries (including
income tax and social insurance premium) to Employees
containing Salaried directors.
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APPENDIX VI
Economical Terminology Guide
A
A Misstatement is Inconsequential - If a reasonable person
would conclude after considering the possibility of further
undetected misstatements that the misstatement either
individually or when aggregated with other misstatements
would clearly be immaterial to the financial statements. If a
reasonable person could not reach such a conclusion
regarding a particular misstatement, that misstatement is more
than inconsequential.
Abatement - Complete removal of an amount due, (usually
referring to a tax abatement a penalty abatement or an interest
abatement within a governing agency.)
Accelerated Depreciation - Method that records greater
DEPRECIATION than STRAIGHT-LINE DEPRECIATION
in the early years and less depreciation than straight-line in
the later years of an ASSET'S holding period.
Account - Formal record that represents, in words, money or
other unit of measurement, certain resources, claims to such
resources, transactions or other events that result in changes to
those resources and claims.
Account Payable - Amount owed to a CREDITOR for
delivered goods or completed services.
Account Receivable - Claim against a DEBTOR for an
uncollected amount, generally from a completed transaction
of sales or services rendered.
Accountable Plan - An accountable plan is any reimburse279
ment or other expense allowance arrangement of an employer
that meets all of the following requirements (therefore
excluding it from gross w-2 earned income and tax): (1) it
provides reimbursements advances or allowances including
per diem and meals, to employees for any job related
deductible business expense; (2) employees must be able to
substantiate expenses covered in the plan; (3) employee must
return any excess advances or payments.
Accountant - Person skilled in the recording and reporting of
financial transactions.
Accountants' Report - Formal document that communicates
an independent accountant's: (1) expression of limited
assurance on FINANCIAL STATEMENTS as a result of
performing inquiry and analytic procedures (Review Report);
(2) results of procedures performed (Agreed-Upon Procedures
Report); (3) non-expression of opinion or any form of
assurance on a presentation in the form of financial statements
information that is the representation of management
(Compilation Report); or (4) an opinion on an assertion made
by management in accordance with the Statements on
Standards for Attestation Engagements (Attestation Report).
An accountants' report does not result from the performance
of an AUDIT. (See AUDITORS' REPORT)
Accounting - Recording and reporting of financial transacttions, including the origination of the transaction, its
recognition, processing, and summarization in the
FINANCIAL STATEMENTS.
Accounting Change - Change in (1) an accounting principle;
(2) an accounting estimate; or (3) the reporting entity that
necessitates DISCLOSURE and explanation in published
financial reports.
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Accounting Principles Board (APB) - Senior technical
committee of the AMERICAN INSTITUTE OF CERTIFIED
PUBLIC ACCOUNTANTS (AICPA) which issued
pronouncements on accounting principles from 1959-1973.
The APB was replaced by the FINANCIAL ACCOUNTING
STANDARDS BOARD (FASB).
Accrual Basis - Method of ACCOUNTING that recognizes
REVENUE when earned, rather than when collected. Expenses
are recognized when incurred rather than when paid.
Accumulated Depreciation - Total DEPRECIATION
pertaining to an ASSET or group of assets from the time the
assets were placed in services until the date of the
FINANCIAL STATEMENT or tax return. This total is the
CONTRA ACCOUNT to the related asset account.
Additional Paid in Capital - Amounts paid for stock in
excess of its PAR VALUE or STATED VALUE. Also, other
amounts paid by stockholders and charged to EQUITY
ACCOUNTS other than CAPITAL STOCK.
Adjusted Basis - After a taxpayer's basis in property is
determined, it must be adjusted upward to include any
additions of capital to the property and reduced by any returns
of capital to the taxpayer. Additions might include
improvements to the property and subtractions may include
depreciation or depletion. A taxpayer's adjusted basis in
property is deducted from the amount realized to find the gain
or loss on sale or disposition.
Adjusted Gross Income - Gross income reduced by business
and other specified expenses of individual taxpayers. The
amount of adjusted gross income affects the extent to which
medical expenses, non business casualty and theft losses and
charitable contributions may be deductible. It is also an
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important figure in the basis of many other individual
planning issues as well as a key line item on the IRS form
1040 and required state forms.
Adjusting Journal Entry - An accounting entry made into a
subsidiary ledger called the General journal to account for a
periods changes, omissions or other financial data required to
be reported "in the books" but not usually posted to the
journals used for typical period transactions (the cash receipts
journal, cash disbursements journal, the payroll journal, sales
journal and so on) the entry is posted to the general ledger
accounts directly and usually will be numbered itself, dated
and have an explanation. Example: AJE# 1 12-31-2003, debit
Cash in bank $1,000. Credit interest income $1,000, to record
interest income on business bank account at year end, not
recorded in cash receipts journal but credited by the bank.
(Cross-reference bank reconciliation and account where it was
found)
Adverse Opinion - Expression of an opinion in an
AUDITORS' REPORT which states that FINANCIAL
STATEMENTS do not fairly present the financial position,
results of operations and cash flows in conformity with
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(GAAP). The auditor will issue an adverse opinion when
there is an existence of a material weakness on the effectiveness of internal control over financial reporting.
Affiliated Company - Company, or other organization
related through common ownership, common control of
management or owners, or through some other control
mechanism, such as a long-term LEASE.
Agency Fund - Fund consisting of ASSETS where the holder
agrees to remit the assets, income from the assets, or both, to
a specified beneficiary in due course or at a specified time.
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Agreed-Upon Procedures Report - See ACCOUNTANTS'
REPORT.
AICPA - See AMERICAN INSTITUTE OF CERTIFIED
PUBLIC ACCOUNTANTS.
Alternative Dispute Resolution - An alternative to formal
litigation which includes techniques such as arbitration,
mediation, and a non-binding summary jury trial.
Alternative Minimum Tax (AMT) - Tax imposed to back up the
regular income tax imposed on CORPORATION and individuals
to assure that taxpayers with economically measured income
exceeding certain thresholds pay at least some income tax.
American Depository Receipts (ADRs) - Receipts for shares
of foreign company stock maintained by an intermediary
indicating ownership.
American Institute of Certified Public Accountants
(AICPA) - National professional membership organization
that represents practicing CERTIFIED PUBLIC ACCOUNTANTS
(CPAs). The AICPA establishes ethical and auditing standards as well as standards for other services performed by its
members. Through committees, it develops guidance for
specialized industries. It participates with the FINANCIAL
ACCOUNTING STANDARDS BOARD (FASB) and the
GOVERNMENT ACCOUNTING STANDARDS BOARD
(GASB) in establishing accounting principles.
Amortization - Gradual and periodic reduction of any
amount, such as the periodic writedown of a BOND premium,
the cost of an intangible ASSET or periodic payment Of
MORTGAGES or other DEBT.
Analytical Procedures - Substantive tests of financial
information which examine relationships among data as a means
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of obtaining evidence. Such procedures include: (1) comparison
of financial information with information of comparable prior
periods; (2) comparison of financial information with anticipated
results (e.g., forecasts); (3) study of relationships between
elements of financial information that should conform to
predictable patterns based on the entity's experience; (4) comparison of financial information with industry norms.
Anonymous Debit Card – A Debit Card, which does not
bear any personal details about its holder.
Annual Fees - These are comparatively small fixed renewal
fees a typical offshore company, especially an IBC pays
annually to the authorities of the jurisdiction of incorporation/
formation and to the Registered Agent. The companies may
suffer penalties and/or be struck off the Register in case of
late payment or failure to pay the fee.
Annual Report - Report to the stockholders of a company
which includes the company's annual, audited BALANCE
SHEET and related statements of earnings, stockholders' or
owners' equity and cash flows, as well as other financial and
business information.
Annuity - Series of payments, usually payable at specified
time intervals.
Anti-dilution - Condition that may increase the computation
of EARNINGS PER SHARE (EPS) or decrease loss per share
solely because of the inclusion of COMMON STOCK
equivalents, such as STOCK OPTIONS, WARRANTS,
convertible DEBT or convertible PREFERRED STOCK,
nomination or selection of the independent AUDITORs.
Apostille - A special form attached to a public document (e.g.
Certificate of Good Standing) issued in accordance with the
standards of the Le Hague Convention of 1961. Documents
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issued in a convention country, which have been certified by
an Apostille are entitled to recognition in any other
convention country without any further authentication.
Authentication of a foreign legal entity's documents submitted
is often requested e.g. when forming a subsidiary or opening
an account with a bank or a brokerage.
Assembly of Financial Statements - The providing of
various accounting or data-processing services by an
accountant, the output of which is in the form of financial
statements ostensibly to be used solely for internal
management purposes.
Assertion - Explicit or implicit representations by an entity's
management that are embodied in financial statement
components and for which the AUDITOR obtains and
evaluates evidential matter when forming his or her opinion
on the entity's financial statements.
Asset protection - The legal steps a natural or legal person
undertakes to protect his/her/its assets from possible seizure
by creditors. Such offshore tools as Private Foundations,
International Business Companies and Trusts are being used
by our clients for the above purpose.
Assets - From the accounting point of view, assets of a legal
entity are the entries on a balance sheet showing all properties
(cash, inventories, securities, property rights, and goodwill)
and claims against others. The assets may be applied to cover
the liabilities of a person or business. Similarly, the assets of a
natural person make up the entire property owned by him/her
that can be used to settle creditors' claims.
Association - Within the context of our site it's an
organization established by legal entities that have an interest,
activity, or purpose in common. ATM
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An acronym, which stands for Automatic Teller Machine. It's
a fully automatic electronic machine providing some banking
services (i.e. cash withdrawal) to the owners of credit and
debit Cards. See information regarding Anonymous Debit
Card to be used worldwide with ATMs in Bank Cards.
Audit Documentation - The written record of the basis for
the AUDITOR's conclusions that provides the support for the
auditor's representations, whether those representations are
contained in the auditor's report or otherwise. (May be
referred to as work papers or working papers)
Audit Engagement - Agreement between a CPA firm and its
client to perform an AUDIT.
Audit Risk - The risk that the AUDITOR may unknowingly
fail to modify appropriately his or her opinion on financial
statements that are materially misstated.
Audit Sampling - Application of an AUDIT procedure to less
than 100% of the items within an account BALANCE or class
of transactions for the purpose of evaluating some
characteristic of the balance or class.
Auditing Standards - Guidelines to which an AUDITOR
adheres. Auditing standards encompass the auditor's
professional qualities, as well as his or her judgment in
performing an AUDIT and in preparing the AUDITORS'
REPORT. Audits conducted by independent CERTIFIED
PUBLIC ACCOUNTANT (CPA) usually in accordance with
GENERALLY ACCEPTED AUDITING STANDARDS
(GAAS), which consist of standards approved and adopted by
the membership of the AMERICAN INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS (AICPA).
Auditor - Person who AUDITS financial accounts and
records kept by others. Includes both public accounting firms
registered with the PCAOB and associated persons thereof.
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Auditors' Report - Written communication issued by an
independent CERTIFIED PUBLIC ACCOUNTANT (CPA)
describing the character of his or her work and the degree of
responsibility taken. An auditors' report includes a statement
that the AUDIT was conducted in accordance with
GENERALLY ACCEPTED AUDITING STANDARDS
(GAAS), which require that the AUDITOR plan and perform
the audit to obtain reasonable assurance about whether the
FINANCIAL STATEMENTS are free of material misstatement, as well as a statement that the auditor believes the
audit provides a reasonable basis for his or her opinion. (See
ACCOUNTANTS' REPORT.)
B
Backup Withholding - Payers of interest, dividends and
other reportable payments must withhold income tax equal at
a rate equal to the fourth lowest rate applicable to single filers
if they fail to supply a federal id # or if they fail to certify that
they are not subject to it.
Bad Debt - All or portion of an ACCOUNT, loan, or note
receivable considered to be uncollectible.
Balance - Sum of DEBIT entries minus the SUM of CREDIT
entries in an ACCOUNT. If positive, the difference is called a
DEBIT BALANCE; if negative, a CREDIT BALANCE.
Balance Sheet - Basic FINANCIAL STATEMENT, usually
accompanied by appropriate DISCLOSURES that describe
the basis of ACCOUNTING used in its preparation and
presentation of a specified date the entity's ASSETS,
LIABILITIES and the EQUITY of its owners. Also known as
a STATEMENT OF FINANCIAL CONDITION.
Bankruptcy - Legal process, governed by federal statute,
whereby the DEBTS of an insolvent person are liquidated
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after being satisfied to the greatest extent possible by the
DEBTOR'S ASSETS. During bankruptcy, the debtor's assets
are held and managed by a court appointed TRUSTEE.
Bearer Shares - The natural persons or legal entities holding
bearer shares are considered to be the shareholders; there is no
official record of ownership kept by the company that issued
the shares or by authorities.
The International Business Companies (IBCs) incorporated in
most Offshore Financial Centers are allowed to issue bearer
shares.
Beneficial owner - Same as Beneficiary
Beneficiary - A natural person or a legal entity enjoying the
right to receive benefits through a legal design (i.e. a Trust,
Private Foundation, an International Business Company).
Bond - A long-term certificate of debt issued by a
government agency or private company. A bond represents an
obligation on the part of the issuer to pay interest and repay
principal of a loan.
Bequest - A gift by will of personal property. If the bequest is
money to the extent it is paid out of income from property it is
taxable to the recipient. Generally bequest value is fair market
at the date of the decedent's death.
Blue Sky Laws - State laws that regulate the ISSUANCE of
SECURITIES. These laws are coordinated with federal acts.
Board of Directors - Individuals responsible for overseeing
the affairs of an entity, including the election of its officers.
The board of a CORPORATION that issues stock is elected
by stockholders. (See AUDIT COMMITTEE.)
Bond - One type of long-term PROMISSORY NOTE,
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frequently issued to the public as a SECURITY regulated
under federal securities laws or state BLUE SKY LAWS.
Bonds can either be registered in the owner's name or are
issued as bearer instruments.
Book Value - Amount, net or CONTRA ACCOUNT
balances, that an ASSET or LIABILITY shows on the
BALANCE SHEET of a company. Also known as
CARRYING VALUE.
Boot - The no technical term used by some to describe any
cash or other property that is received in exchange of property
that would be otherwise nontaxable.
Branch - A division of a company. As opposed to a
subsidiary, a branch is not a separate legal entity.
British Common Law - See Common Law
British Commonwealth of Nations – It is a voluntary
association of 54 independent sovereign states comprising
30% of the world population. Commonwealth members
adhere to the statements of beliefs set out by their respective
heads of governments. The basis of these is the Declaration of
Commonwealth Principles, agreed at Singapore in 1971, and
reaffirmed in the Harare Declaration of 1991.
Commonwealth activities are diverse: e.g., they include
observing elections, public health issues, international trade
and law, etc. Most Offshore Financial Centers in the world
belong to the Commonwealth, e.g. Bahamas, Britain, Cyprus,
Mauritius, St Kitts and Nevis.
Broker -A person, other than a bank, who acts as a qualified
intermediary in the purchase of securities. Called a broker
when buying securities, and a dealer when selling them.
Brokerage - A corporate broker/dealer.
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Brokerage Account - An investment account opened by a
buyer/seller of securities with a brokerage.
Budget - Financial plan that serves as an estimate of future
cost, REVENUES or both.
Business Combinations - Combining of two entities. Under
the PURCHASE METHOD OF ACCOUNTING, one entity is
deemed to acquire another and there is a new basis of
accounting for the ASSETS and LIABILITIES of the
acquired company. In a POOLING OF INTERESTS, two
entities merge through an exchange of COMMON STOCK
and there is no change in the CARRYING VALUE of the
assets or liabilities.
Business Segment - Any division of an organization
authorized to operate, within prescribed or otherwise
established limitations, under substantial control by its own
management.
Bylaws - Collection of formal, written rules governing the
conduct of a CORPORATION'S affairs (such as what officers
it will have, what their responsibilities are, and how they are
to be chosen). Bylaws are approved by a corporation's
stockholders, if a stock corporation, or other owners, if a nonstock corporation.
C
Cafeteria Plan - A benefit plan maintained by an employer
for the benefit of the employees under which each participant
has the opportunity to select the benefits they desire. Certain
minimum choices and nondiscriminatory rules apply.
Call Loan - Loan repayable on demand. Also known as
DEMAND LOAN.
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Callable Instrument - BOND which accords an issuer the
right to redemption before it is due.
Capital - ASSETS intended to further production. The
amount invested in a PROPRIETORSHIP, PARTNERSHIP,
or CORPORATION by its owners.
Capital Gain - Portion of the total GAIN recognized on the
sale or exchange of a noninventory asset which is not taxed as
ORDINARY INCOME. Capital gains have historically been
taxed at a lower rate than ordinary income.
Capital Stock - Ownership shares of a CORPORATION
authorized by its ARTICLES OF INCORPORATION. The
money value assigned to a corporation's issued shares. The
BALANCE SHEET account with the aggregate amount of the
PAR VALUE or STATED VALUE of all stock issued by a
corporation.
Capitalized Cost - Expenditure identified with goods or
services acquired and measured by the amount of cash paid or
the market value of other property, CAPITAL STOCK, or
services surrendered. Expenditures that are written off during
two or more accounting periods.
Capitalized Interest - INTEREST cost incurred during the
time necessary to bring an ASSET to the condition and
location for its intended use and included as part of the
HISTORICAL COST of acquiring the asset.
Capitalized Lease - LEASE recorded as an ASSET
acquisition accompanied by a corresponding LIABILITY by
the LESSEE.
Capital Projects Funds - Funds used by a not-for-profit
organization to account for all resources used for the development of a land improvement or building addition or renovation.
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Captive (Re)insurance Company - Such a company is a
specialized subsidiary of a non-insurance "parent": a parent
company, holding or association. Its primary goal is to
improve risk management of the parent's business while
optimizing cash flows and tax-planning issues.
Carrying Value - Amount, net or CONTRA ACCOUNT
balances, that an ASSET or LIABILITY shows on the BALANCE
SHEET of a company. Also known as BOOK VALUE.
Carryovers - Provision of tax law that allows current losses
or certain tax credits to be utilized in the tax returns of future
periods.
Cash Basis - Method of bookkeeping by which REVENUES
and EXPENDITURES are recorded when they are received
and paid.
Cash Equivalents - Short-term (generally less than three
months), highly liquid INVESTMENTS that are convertible
to known amounts of cash.
Cash Flows - Net of cash receipts and cash disbursements
relating to a particular activity during a specified accounting
period.
Casualty Loss - Any loss of an asset due to fire storm act of
nature causing asset damage from unexpected or accidental
force. Generally it is deductible regardless of whether it is
business or personal.
CD - See CERTIFICATE OF DEPOSIT.
Certificate of Deposit (CD) - Formal instrument issued by a
bank upon the deposit of funds which may not be withdrawn
for a specified time period. Typically, an early withdrawal
will incur a penalty.
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Certificate of Formation - The document of a Delaware
LLC corresponding to the Certificate of Incorporation for a
corporation.
Certificate of Good Standing - A Certificate of Good
Standing (CGS) is issued by the authorities of the jurisdiction
of incorporation/formation to a legal entity such as an
International Business Company, Panamanian Private
Foundation, Delaware Corporation or Limited Liability
Company. The document attests that the aforesaid legal entity
actually exists and is in good standing owing to compliance
with all requirements of the local laws (timely payment of
annual fees and local taxes, if any, as well as filing of annual
statements and/or returns where applicable).
CGS is often requested by local authorities when a foreign
legal entity is forming a subsidiary as well as by banks and
brokerages when opening an account with them.
Certificate of Incorporation - A Certificate of Incorporation
(CI) is issued by the authorities of the jurisdiction of
incorporation/formation to a legal entity such as an International Business Company or Delaware Corporation. The
document bears evidence of actual formation and registration
of the aforesaid legal entity with the authorities in accordance
with the local laws. It contains some basic data about the
company (name, date and place of registration, entry number
in the register, etc.) CI is often requested by local authorities
when a foreign legal entity is forming a subsidiary as well as
by banks and brokerages when opening an account with them.
Certificate of Incumbency - A Certificate of Incumbency
(CI) of a company (e.g., an International Business Company)
is issued by its registered agent or authorities of the
jurisdiction of incorporation. The document attests that the
person(s) listed is (are) actually director(s) of the company.
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The CI is often requested by local authorities when a foreign
legal entity is forming a subsidiary as well as by banks and
brokerages when opening an account with them.
Certified Financial Planner (CFP) - Individual who is
trained to develop and implement financial plans for
individuals, businesses, and organizations, utilizing
knowledge of income and estate tax, investments, risk
management analysis and retirement planning. CFPs are
certified after completing a series of requirements that include
education, experience, ethics and an exam. CFPs are not
regulated by a governmental authority.
Certified Internal Auditor (CIA) - Internal AUDITOR who
has satisfied the examination requirements of the Institute of
Internal Auditors.
Certified Management Accountant (CMA) - An accreditation conferred by the Institute of Management Accountants
that indicates the designee has passed an examination and
attained certain levels of education and experience in the
practice of accounting in the private sector.
Certified Public Accountant (CPA) - ACCOUNTANT who
has satisfied the education, experience, and examination
requirements of his or her jurisdiction necessary to be
certified as a public accountant.
CFP - See CERTIFIED FINANCIAL PLANNER.
CIA - See CERTIFIED INTERNAL AUDITOR.
Claim for Refund - A refund is not automatically mailed if
one is due. A taxpayer, whether business or individual, must
file a request on a form. It must also be filed within the
timeframe allotted or the refund may be lost. An individual
can claim a refund back to whatever year it was due but it will
only be paid three years back or less.
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Clean Opinion - AUDIT opinion not qualified for any
material scope restrictions nor departures from GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES (GAAP). Also
known as UNQUALIFIED OPINION.
Closed-End Mutual Fund - MUTUAL FUND with a fixed
number of shares outstanding that may be bought or sold.
CMO - See COLLATERALIZED MORTGAGE OBLIGATION.
Collateral - ASSET provided to a CREDITOR as security for
a loan.
Collateralized Mortgage Obligation (CMO) - SECURITY
whose cash flows equal the difference between the cash flows
of the collateralizing ASSETS and the collateralized
obligations of a securitized TRUST. Characteristics of CMO
residuals vary greatly and can be extremely complex in nature.
Combined Financial Statement - FINANCIAL STATEMENT
comprising the accounts of two or more entities.
Comfort Letter - Letter provided by a company's independent public accountant to an underwriter when the underwriter
has a DUE DILIGENCE responsibility under Section 11 of
the Securities Act of 1933 regarding financial information
included in an offering statement.
Committee of Sponsoring Organizations of the Treadway
Commission (COSO) - An alliance of five professional
organizations dedicated to disseminating appropriate internal
control standards.
Common Law - The system of law that is widely used in
England, USA, and in the most of the British Commonwealth
countries. As opposed to the civil law system based on
statutes and codes, common law court decisions are derived
from precedents, i.e. past court decisions. Most Offshore
295
Financial Centers have used common law as the basis for their
International Business Company and trust legislation.
Common Stock - CAPITAL STOCK having no preferences
generally in terms of dividends, voting rights or distributions.
(See PREFERRED STOCK.)
Company - A lawful legal entity, established and owned by
one or more natural persons and/or legal entities. A company
has a subject of its activities and bears such rights and
responsibilities of a natural person as the ability to conduct
commercial operations, own shares and other securities, hold
titles to property, borrow and loan money. A company bears
liabilities, but exists and acts separately from its owners.
Same as corporation.
Company Level Controls - Controls that exist at the
company level that have an impact on controls at the process,
transaction, or application level.
Company limited by guarantee - A company in which
members' liability is limited to the amount they have agreed
to contribute to the company's assets if it is wound up.
Company limited by shares - Such company members'
liability is limited to the amount unpaid on shares they hold.
Comparative Financial Statement - FINANCIAL STATEMENT
presentation in which the current amounts and the correspondding amounts for previous periods or dates also are shown.
Compensatory Balance - Funds that a borrower must keep
on deposit as required by a bank.
Compilation - Presentation of financial statement data
without the ACCOUNTANT'S assurance as to conformity
with GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(GAAP).
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Compilation Engagement - Agreement between a CPA firm
and its client to issue a COMPILATI0N REPORT. (See
ACCOUNTANTS' REPORT.)
Compilation Report - See ACCOUNTANTS' REPORT.
Compliance Audit - Review of financial records to determine
whether the entity is complying with specific procedures or
rules.
Complex Trust - A trust that is to be distinguished from a
simple trust in the fact that it permits accumulation or
distribution of current income during the tax year and
provides for charitable contributions.
Compound Interest Principles - Interest computed on
principal plus interest earned in previous periods.
Comprehensive Income - Change in EQUITY of a business
enterprise during a period from transactions and other events
and circumstances from sources not shown in the income
statement. The period includes all changes in equity except
those resulting from INVESTMENTS by owners and
distributions to owners.
Confirmation - AUDITOR'S receipt of a written or oral
response from an independent third party verifying the
accuracy of information requested.
Conservatism - An investment strategy aimed at long-term
capital appreciation with low risk; moderate; cautious;
opposite of aggressive behavior; show possible losses but wait
for actual profits. Concept which directs the least favorable
effect on net income.
Consistency - ACCOUNTING postulate which stipulates
that, except as otherwise noted in the FINANCIAL
STATEMENT, the same accounting policies and procedures
297
have been followed from period to period by an organization
in the preparation and presentation of its financial statements.
Consolidated Financial Statements - Combined FINANCIAL STATEMENTS of a parent company and one or more
of its subsidiaries as one economic unit.
Consolidation - BUSINESS COMBINATION of two or
more entities that occurs when the entities transfer all of their
NET ASSETS to a new entity created for that purpose. (See
MERGER.)
Constructive Receipt - A taxpayer is considered to have
received the income even though the monies are not in hand,
it may have been set aside or otherwise made available. An
example is interest on a bank account.
Contingent Liability - Potential LIABILITY arising from a
past transaction or a subsequent event.
Continuing Operations - Portion of a business entity
expected to remain active.
Continuing Professional Education (CPE) - Educational
programs for CERTIFIED PUBLIC ACCOUNTANTS
(CPAs) to keep informed on changes that occur within the
profession. State Boards for Public Accountancy and the
AMERICAN INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS (AICPA) each have separate CPE
requirements.
Contra Account - ACCOUNT considered to be an offset to
another account. Generally established to reduce the other
account to amounts that can be realized or collected.
Control Deficiency - This exists when the design or
operation of a control does not allow management or
employees, in the normal course of performing their assigned
298
functions, to prevent or detect misstatements on a timely
basis.
Control Risk - Measure of risk that errors exceeding a
tolerable amount will not be prevented or detected by an
entity's internal controls.
Controls Tests - Tests directed toward the design or
operation of an internal control structure policy or procedure
to assess its effectiveness in preventing or detecting material
misstatements in a financial report.
Convertible Stock - Stock that may be exchanged for other
SECURITIES of the issuer.
Corporation - Form of doing business pursuant to a charter
granted by a state or federal government. Corporations
typically are characterized by the issuance of freely
transferable CAPITAL STOCK, perpetual life, centralized
management, and limitation of owners' LIABILITY to the
amount they invest in the business.
Corporate Director (Secretary) - Some jurisdictions allow a
legal entity (corporation) to be appointed to the position of a
director (secretary) of a company. It gives an opportunity to
restrict a corporate director (secretary)'s liabilities and/or
increase the anonymity features of the company. On the other
hand a corporate director may meet some bureaucratic
obstacles in the jurisdictions where such representation is
unusual.
Cost Accounting - Procedures used for rationally classifying,
recording, and allocating current or predicted costs that relate
to a certain product or production process.
Cost Recovery Method - METHOD OF REVENUE
RECOGNITION which recognizes profits after costs are
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completely recovered. Generally used only when the total
amount of collections is highly uncertain. In tax, the
ACCOUNTING METHOD used to depreciate ASSETS.
Coverdell Education Savings Account (Education IRA) A tax exempt trust exclusively for the purpose of paying
qualified higher education costs of the trusts designated
beneficiary.
CPA - See CERTIFIED PUBLIC ACCOUNTANT.
CPE - See CONTINUING PROFESSIONAL EDUCATION.
Credit - Entry on the right side of a DOUBLE-ENTRY
BOOKKEEPING system that represents the reduction of an
ASSET or expense or the addition to a LIABILITY or
REVENUE. (See DEBIT.)
Credit Agreement - Arrangement in which one party
borrows or takes possession in the present by promising to
pay in the future.
Credit Balance - BALANCE remaining after one of a series
of bookkeeping entries. This amount represents a LIABILITY
or income to the entity. (See BALANCE.)
Credit Card - A plastic card with a magnetic strip on its
reverse side. A credit card holder is entitled to purchase goods
or services on credit provided by the card issuer (a bank or
business) as well as make cash withdrawals via ATMs.
Creditor - Party that loans money or other ASSETS to
another party.
Current Asset - ASSET that one can reasonably expect to
convert into cash, sell, or consume in operations within a
single operating cycle, or within a year if more than one cycle
is completed each year.
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Current Liability - Obligation whose LIQUIDATION is
expected to require the use of existing resources classified as
CURRENT ASSETS, or the creation of other current liabilities.
Current Value - (1) Value of an ASSET at the present time
as compared with the asset's HISTORICAL COST. (2) In
finance, the amount determined by discounting the future
revenue stream of an asset using COMPOUND INTEREST
PRINCIPLES.
D
Date of Auditors'/Accountants' Report - Last day the
AUDITORS perform fieldwork and the last day of
responsibility relating to significant events subsequent to the
financial statement date.
Death Benefit - Amounts received under a life insurance
contract and paid by reason of the death of the insured.
(Although most death benefits are paid at termination of life,
certain plans now pay accelerated death benefits while the
insured is still alive, i.e.: an AIDS patient might possibly
receive accelerated death benefit)
Debit - Entry on the left side of a DOUBLE-ENTRY
BOOKKEEPING system that represents the addition of an
ASSET or expense or the reduction to a LIABILITY or
REVENUE. (See CREDIT.)
Debit Balance - BALANCE remaining after one or a series of
bookkeeping entries. This amount represents an ASSET or an
expense of the entity. (See BALANCE.)
Debit Card - A plastic card with a magnetic strip on its
reverse side. A Debit Card (DC) holder is entitled to purchase
goods or services when accepted technically by a Seller. A
DC doesn't provide any credit to the holder and it's a "mirror"
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of the underlying account with the DC's issuer (a bank or
business). Most often DCs are used for cash withdrawals via
ATMs.
Debt - General name for money, notes, BONDS, goods or
services which represent amounts owed.
Debt Security - Document which is evidence of an obligation
or LIABILITY.
Debt Service Fund - Fund whose PRINCIPAL or
INTEREST is set aside and accumulated to retire DEBT.
Debtor - Party owing money or other ASSETS to a CREDITOR.
Decedent - Individual who has died.
Defalcation - To misuse or embezzle funds.
Default - Failure to meet any financial obligation. Default
triggers a CREDITOR'S rights and remedies identified in the
agreement and under the law.
Defeasance - Annulment of a contract or deed; a clause
within a contract or deed that provides for annulment.
Deferred Charge - Cost incurred for subsequent periods
which are reflected as ASSETS.
Deferred Income - Income received but not earned until all
events have occurred. Deferred income is reflected as a LIABILITY.
Deferred Income Taxes - ASSETS or LIABILITIES that
arise from timing or measurement differences between tax
and accounting principles.
Deficiency in Design - This exists when a control necessary
to meet the control objective is missing or an existing control
is not properly designed so that even if the control operates as
designed, the control objective is not always met.
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Deficiency in Operation - This exists when a properly
designed control does not operate as designed, or when the
person performing the control does not possess the necessary
authority or qualifications to perform the control effectively.
Deficit - Financial shortage that occurs when LIABILITIES
exceed ASSETS.
Defined Benefit Plan - See EMPLOYEE BENEFIT PLAN.
Defined Contribution Plan - See EMPLOYEE BENEFIT
PLAN.
Demand Loan - Loan repayable on demand. Also known as a
CALL LOAN.
Dependent Care Expenses - Qualified child care expenses
will allow a taxpayer this computed credit against tax. The
amounts can be found on the individual forms as the
limitations and computation may change each tax year.
Depletion - Method of computing a deduction to ACCOUNT
for a reduction in value of extractable natural resources.
Deposit Method - Related to the sales of real estate, under
this method the seller does not recognize any profits, does not
record a note RECEIVABLE, and continues to reflect the
property and related DEBT in the seller's FINANCIAL
STATEMENTS, recording the buyer's initial investment and
subsequent payments as a deposit.
Depreciation - Expense allowance made for wear and tear on
an ASSET over its estimated useful life. (See ACCELERATED DEPRECIATION and STRAIGHT-LINE DEPRECIATION.)
Derivatives - Financial instruments whose value varies with
the value of an underlying asset (such as a stock, BOND,
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commodity or currency) or index such as interest rates.
Financial instruments whose characteristics and value depend
on the characterization of an underlying instrument or asset.
Detection Risk - Risk that the AUDITOR will not detect a
material misstatement.
Detective Controls - These have the objective of detecting
errors or fraud that have already occurred that could result in
a misstatement of the financial statements.
Disbursement - Payment by cash or check.
Disclaimer of Opinion - Statement by an AUDITOR
indicating inability to express an opinion on the fairness of the
FINANCIAL STATEMENTS provided and the reason for the
inability. The auditor is required to disclaim depending on the
limitation in scope.
Disclosure - Process of divulging accounting information so
that the content of FINANCIAL STATEMENTS is
understood.
Discontinued Operations - Portion of a business that is
planned to be or is discontinued.
Discount - Reduction from the full amount of a price or
DEBT.
Discount Rate - Rate at which INTEREST is deducted in
advance of the issuance, purchasing, selling, or lending of a
financial instrument. Also, the rate used to determine the
CURRENT VALUE, or present value, of an ASSET or
income stream.
Discounted Cash Flow - Present value of future cash
estimated to be generated.
Discretionary Trust - Arrangement in which the TRUSTEE
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has the authority to make INVESTMENT decisions and has
control over investments within the framework of the TRUST
instrument.
Dissolution - Termination of a CORPORATION.
Distribution Expense - Expense of selling, advertising, and
delivery of goods and services.
Distributions - Payment by a business entity to its owners of
items such as cash ASSETS, stocks, or earnings.
Dividends - Distribution of earnings to owners of a
CORPORATION in cash, other ASSETS of the corporation,
or the corporation's CAPITAL STOCK.
Documentation Completion Date - A complete and final set
of audit documentation should be assembled for retention as
of a date not more than 45 days after the report release date.
Domicile - One's residence from a legal point of view.
Generally, it may not coincide with the current physical place
of residence of a person rather it's the place where one intends
to return after the purposes of his/her absence are attained.
Double-Entry Bookkeeping - Method of recording financial
transactions in which each transaction is entered in two or
more accounts and involves two-way, self-balancing posting.
Total DEBITS must equal total CREDITS.
Double Taxation Agreement - A Double Taxation
Agreement (DTA) is entered into between two countries to
eliminate the possibility that the same income or gains might
be fully taxed in both. This may happen where a natural
person or legal entity is resident in one of the countries and
has income or gains arising in the other. A DTA allocates the
taxing right over items of income and gains to one or other of
the countries. Where, however, certain items remain taxable
305
in both, the DTA will generally provide that the country of
residence of the taxpayer will either exempt the income or
gains from further taxation or, alternatively, give a credit
against its tax for the tax paid in the other country. Such
sophisticated offshore tools as Cyprus IBCs or Mauritius
offshore companies are purchased by our clients to use to
their benefit the exemptions of DTAs, respectively Cyprus or
Mauritius have entered into. British Private Limited
Companies and Delaware Corporations and Limited Liability
Companies use relevant DTAs as well when applicable.
Dual Dating - Dating of the ACCCOUNTANTS' or
AUDITORS' REPORT when a subsequent event disclosed in
the FINANCIAL STATEMENTS occurs after completion of
the field work but before issuance of the report. For example,
"January 3, 19xx, except for Note x, as to which the date is
March 10, 19xx."
Due Date - Each governing agency and its forms scheduled
reporting and most importantly payments have a required due
date. It is this date that if most files timely may result in a
penalty, fine, and commence interest charges.
Due Diligence - (1) Procedures performed by underwriters in
connection with the issuance of a SECURITIES EXCHANGE
COMMISSION (SEC) registration statement. These procedures involve questions concerning the company and its
business, products, competitive position, recent financial and
other developments and prospects. Also performed by others
in connection with acquisitions and other transactions. (2)
Requirement found in ethical codes that the person governed
by the ethical rules exercise professional care in conducting
his or her activities.
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E
Earned Income - Wages, salaries, professional fees, and
other amounts received as compensation for services rendered.
Earned Income Credit - A refundable tax credit for eligible
low income workers, subject to computations based on
qualifying children and phase in and phase out income levels.
Earnings Per Share (EPS) - Measure of performance
calculated by dividing the net earnings of a company by the
average number of shares outstanding during a period.
Effective Tax Rate - Total income taxes expressed as a
percentage of NET INCOME before taxes.
EITF - See EMERGING ISSUES TASK FORCE.
Emerging Issues Task Force (EITF) - Assists the FINANCIAL ACCOUNTING STANDARDS BOARD (FASB) and
provides guidance on early identification of emerging issues
affecting financial reporting and problems in implementing
authoritative pronouncements.
Employee Benefit Plan - Compensation arrangement, generally in writing, used by employers in addition to salary or
wages. Some plans such as group term life insurance, medical
insurance and qualified retirement plans are treated favorably
under the tax law. Most common qualified retirement plans
are: (1) defined benefit plans - a promise to pay participants
specified benefits that are determinable and based on such
factors as age, years of service, and compensation; or (2)
defined contribution plans - provide an individual account for
each participant and benefits based on items such as amounts
contributed to the account by the employer and employee and
investment experience. This type includes PROFITSHARING PLANS, EMPLOYEE STOCK OWNERSHIP
PLANS and 401(k) PLANS.
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Employee Stock Ownership Plan (ESOP) - Stock bonus
plan of an employer that acquires SECURITIES issued by the
plan sponsor.
Encumbrance - (1) MORTGAGE or other lien on the entity's
ASSETS; (2) Anticipated EXPENDITURE; (3) Uncompleted
or undelivered portion of a purchase commitment.
Engagement Completion Document - A document whereby
the AUDITOR identifies all significant findings or issues. The
document should be as specific as necessary in the
circumstances for a reviewer to gain a thorough understanding
of the significant findings or issues.
Equity - Residual INTEREST in the ASSETS of an entity
that remains after deducting its LIABILITIES. Also, the
amount of a business' total assets less total liabilities. Also,
the third section of a BALANCE SHEET, the other two being
assets and liabilities.
Equity Account - ACCOUNT in the EQUITY section of the
BALANCE SHEET. Includes CAPITAL STOCK, ADDITIONAL PAID IN CAPITAL and RETAINED EARNINGS.
Equity Method of Accounting - Investors cost basis is
adjusted up or down (in proportion to the % of stock
ownership) as the investee's retained earnings fluctuation;
used for long-term investments in equity securities of affiliate
where holder can exert significant influence; 20% ownership
or greater is arbitrarily presumed to have significant influence
over the investee.
Equity Securities - CAPITAL STOCK and other SECURITIES that represent ownership shares, or the legal rights to
purchase or acquire CAPITAL STOCK.
Error - Act that departs from what should be done; imprudent
deviation, unintentional mistake or omission.
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Escrow - Money or property put into the custody of a third
party for delivery to a GRANTEE, only after fulfillment of
specified conditions.
ESOP - See EMPLOYEE STOCK OWNERSHIP PLAN.
Estate Tax - Tax on the value of a DECENDENT'S taxable
estate, typically defined as the decedent's ASSETS less
LIABILITIES and certain expenses which may include
funeral and administrative expenses.
Estimated Tax - Amount of tax LIABILITY a taxpayer may
expect to pay for the current tax period. Usually paid through
quarterly installments.
Estimation Transactions - Activities that involve management judgments or assumptions in formulating account
balances in the absence of a precise means of measurement.
Evidential Matter - Underlying ACCOUNTING data and
other corroborating information that support the FINANCIAL
STATEMENTS.
Exchanges - Transfer of money, property or services in
exchange for any combination of these items.
Exchange Control - Imposed by government limitation on
transactions in foreign currency.
Excise Tax - Tax or duty on the manufacture, sale, or
consumption of commodities.
Excluded Income - See EXCLUSIONS.
Exclusions - Income item which is excluded from a
taxpayer's gross income by the INTERNAL REVENUE
CODE or an administrative action. Common exclusions
include gifts, inheritances, and death proceeds paid under a
life insurance contract. Also known as excluded income.
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Executor - Person appointed by a will to manage a
DECENDENT'S estate.
Exempt Organization - Organization which is generally
exempt from paying federal income tax. Exempt
organizations include religious organizations, charitable
organizations, social clubs, and others.
Exemption - Amount of a taxpayer's income that is not
subject to tax. All individuals, TRUSTS, and estates qualify
for an exemption unless they are claimed as a dependent on
another individual's tax return. Exemptions also are granted to
taxpayers for their dependents.
Expatriation Tax - Individuals that loose or terminate their
residency within the 10 year period immediately preceding
the close of a tax year, if the termination or loss is for the sole
purpose of avoiding tax.
Expectation Gap - The difference in perception between the
public and the CPA as a result of accounting and audit
service.
Expenditure - Payment, either in cash, by assuming a
LIABILITY, or by surrendering ASSET.
Experienced Auditor - An AUDITOR that has a reasonable
understanding of audit activities and has studied the
company's industry as well as the accounting and auditing
issues relevant to the industry.
Exploration Expenditures - Unlimited deductions are
allowed for a taxpayer's expenses incurred while searching for
any ore or mineral deposit (except oil or gas).
Exposure Draft - Document issued by the AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
(AICPA), FINANCIAL ACCOUNTING STANDARDS
310
BOARD (FASB), GOVERNMENTAL ACCOUNTING
STANDARDS BOARD (GASB) or other standards setting
authorities to invite public comment before a final
pronouncement is issued.
Extension - Time granted by a taxing authority, such as the
INTERNAL REVENUE SERVICE (IRS), a state or city,
which allows the taxpayer to file tax returns later than the
original due date.
Extent of Tests of Control - Each year the AUDITOR must
obtain sufficient evidence about whether the company's
internal control over financial reporting, including the controls
for all internal control components, is operating effectively.
External Reporting - Reporting to stockholders and the
public, as opposed to internal reporting for management's
benefit.
Extinguishment of Debt - To get rid of the liability by
payment; to bring to an end.
Extraordinary Items - Events and transactions distinguished
by their unusual nature and by the infrequency of their
occurrence. Extraordinary items are reported separately, less
applicable income taxes, in the entity's statement of income or
operations.
European Union (EU) -An intergovernmental organization,
The European Union (EU) was founded in 1951. At the time
being its members are Belgium, Germany, France, Italy,
Luxembourg, the Netherlands, Denmark, Ireland, the United
Kingdom, Greece, Spain, Portugal, Austria, Finland and
Sweden. The following twelve countries have applied for the
membership in the EU: Bulgaria, Cyprus, the Czech Republic,
Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania,
Slovakia and Slovenia. The main objectives of the EU are to
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promote single economic market, assert its identity in the
international relations, and introduce European citizenship,
currency (EURO) and law.
F
401(k) Plan - EMPLOYEE BENEFIT PLAN authorized by
INTERNAL REVENUE CODE section 401(k), whereby an
employer establishes an account for each participating
employee and each participant elects to deposit a portion of
his or her salary into the account. The amount deposited is not
subject to income tax. This is the most common type of salary
reduction plan.
Face Value - Amount due at maturity from a BOND or note.
Factoring - Selling a RECEIVABLE at a discounted value to
a third party for cash.
FASB - See FINANCIAL ACCOUNTING STANDARDS
BOARD (FASB).
Fair Market Value - Price at which property would change
hands between a buyer and a seller without any compulsion to
buy or sell, and both having reasonable knowledge of the
relevant facts.
Favorable Variance - Excess of actual REVENUE over
projected revenue, or actual costs over projected costs.
Fiduciary - Person who is responsible for the administration
of property owned by others. Corporate management is a
FIDUCIARY with respect to corporate ASSETS which are
beneficially owned by the stockholders and CREDITORS.
Similarly, a TRUSTEE is the fiduciary of a TRUST and
partners owe fiduciary responsibility to each other and to their
creditors.
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FIFO - See FIRST IN, FIRST OUT.
Filing of Returns - Taxpayers meeting statutory requirements
MUST file various returns on the prescribed forms. And they
must be filed timely or the y may not be considered as filed.
Financial Accounting Standards - Official promulgations,
known as STATEMENTS OF FINANCIAL ACCOUNTING
STANDARDS, by the FINANCIAL ACCOUNTING
STANDARDS BOARD (FASB) which are part of
(GAAP) in the United States.
Financial Accounting Standards Board (FASB) – Independent, private, non-governmental authority for the establishment
of ACCOUNTING principles in the United States.
Financial Action Task Force on Money Laundering
(FATF) - The intergovernmental organization established by
the G-7 Paris Summit in 1989. The principal aim of FATF is
to identify the technology of money laundering, suggest the
ways of its elimination, and monitor the anti-money
laundering actions of the concerned countries.
First in, First out (FIFO) - ACCOUNTING method of
valuing INVENTORY under which the costs of the first
goods acquired are the first costs charged to expense.
Commonly known as FIFO.
Financial Institution - Organization engaged in any of the
many aspects of finance including commercial banks, thrift
institutions, investment banks, securities brokers and dealers,
credit unions, investment companies, insurance companies,
and REAL ESTATE INVESTMENT TRUSTS.
Financial Stability Forum (FSF) - The FSF was convened
on 14 April 1999 in Washington. Its members are the G-7
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countries, Australia, Singapore, Hong Kong, Netherlands, and
some international financial and regulatory institutions. It's an
international watchdog identifying the crucial flaws in the
international financial system, which may lead to regional or
worldwide crises. Another tasks of the organization are to
develop financial crises prevention policy and oversee its
implementation.
Financial Statements - Presentation of financial data
including BALANCE SHEETS, INCOME STATEMENTS
and STATEMENTS OF CASH FLOW, or any supporting
statement that is intended to communicate an entity's financial
position at a point in time and its results of operations for a
period then ended.
Fiscal Year - Period of 12 consecutive months chosen by an
entity as its ACCOUNTING period which may or may not be
a calendar year. Fixed Asset - Any tangible ASSET with a life
of more than one year used in an entity's operations.
Floor - Term used when discussing INVENTORIES.
Inventory cannot be valued lower than the "floor" which is the
net realizable value of the inventory less an allowance for a
normal profit margin.
Forced heir ship - Provision of the law stipulating how a
natural person may bequeath (pass on) his or her assets to
another persons after his/her death. Private Foundations or
Trusts are used as lawful designs to avoid or circumvent
undesirable forced heir ship procedures.
Forecast - Prospective FINANCIAL STATEMENTS that are
an entity's expected financial position, results of operations,
and cash flows.
Foreclosure - Seizure of COLLATERAL by a CREDITOR
when DEFAULT under a loan agreement occurs.
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Foreign Corporation - A corporation which is not organized
under the laws of ones territories or states. Taxing of foreign
corporations depends on whether the corporation has Nexus
or effectively connected income in that state.
Foreign Currency Translation - Restating foreign currency
in equivalent dollars; unrealized gains or losses are postponed
and carried in Stockholder's Equity until the foreign operation
is substantially liquidated.
Foreign Tax Credit - A U.S. taxpayer that pays or accrues
income tax to a foreign country may elect to credit or deduct
these taxes in a determinable us dollar amount. This is usually
done on the annual individual tax return and there is s specific
form provided for this.
Form 8-K - SEC filing which is a filing that must be made on
the occurrence of an event that is deemed to be of significant
importance to SECURITY holders.
Form 10-K - SEC filing which is the ANNUAL REPORT
due 90 days after the registrant's BALANCE SHEET date.
Form 10-Q - SEC filing which is the quarterly report due 45
days after each of the first three quarters ends of each fiscal
year.
Fortune 500 - A listing of the top 500 U.S. companies,
ranked by revenues, in accordance with Fortune magazine's list.
Founder (of a Private Foundation) - The person who
actually creates a Private Foundation by transferring some
property in its assets.
Foundation Council -The top administrative body in a
Private Foundation providing administration and management
of the foundation's assets and their further distribution among
the beneficiaries.
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Fraud - Willful misrepresentation by one person of a fact
inflicting damage on another person.
Franchise - Legal arrangement whereby the owner of a trade
name, franchisor, contracts with a party that wants to use the
name on a non-exclusive basis to sell goods or services,
franchisee. Frequently, the franchise agreement grants strict
supervisory powers to the franchisor over the franchisee
which, nevertheless, is an independent business.
Fund Accounting - Method of ACCOUNTING and
presentation whereby ASSETS and LIABILITIES are
grouped according to the purpose for which they are to be
used. Generally used by government entities and not-forprofits. (See RESTRICTED FUND and UNRESTRICTED FUND.)
Future Contract - Transferable agreement to deliver or
receive during a specific future month a standardized amount
of a commodity.
G
G-7 -A forum of the seven most economically powerful
countries of the world: Canada, France, Germany, Italy,
Japan, United Kingdom, and USA.
General Accounting Office (GAO) - Accounting and
auditing office of the United States government. An
independent agency that reviews federal financial transactions
and reports directly to Congress.
General Ledger - Collection of all ASSET, LIABILITY,
owners EQUITY, REVENUE, and expense accounts.
General Partnership - PARTNERSHIP with no limited
partners. (See LIMITED LIABILITY PARTNERSHIP and
LIMITED PARTNERSHIP.)
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Generally Accepted Accounting Principles (GAAP) Conventions, rules, and procedures necessary to define
accepted accounting practice at a particular time. The highest
level of such principles are set by the FINANCIAL
ACCOUNTING STANDARDS BOARD (FASB).
Generally Accepted Auditing Standards (GAAS) Standards set by the AMERICAN INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS (AICPA) which
concern the AUDITOR'S professional qualities and judgment
in the performance of his or her AUDIT and in the actual
report.
Gift - A valid transfer of property from one taxpayer to
another without consideration or compensation. A gift may be
subject to the unified estate and gift transfer tax.
Going Concern - Assumption that a business can remain in
operation long enough for all of its current plans to be carried
out.
Going Public - Activities that relate to offering a private
company's shares to the general investing public including
registering with the SEC.
Goodwill – (1) Premium paid in the acquisition of an entity
over the fair value of its identifiable tangible and intangible
ASSETS less LIABILITIES assumed. (2) An intangible
(immaterial) asset representing the value of long-term
clientele, solid reputation among partners and customers, and
connections.
Governing Documents - Official legal documents that dictate
how an entity is operated. The governing documents of a
CORPORATION include ARTICLES OF INCORPORATION and BYLAWS; a PARTNERSHIP includes the
partnership agreement; a TRUST includes the trust agreement
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or trust indenture; and an LLC includes the ARTICLES OF
ORGANIZATION and OPERATING AGREEMENT.
Governmental Accounting Standards Board (GASB) Group that has authority to establish standards of financial
reporting for all units of state and local government.
Grantee - Person to whom property is transferred.
Grantor - (1) Person who transfers property. (2) Person who
creates a trust.
Greenmail - Any amount a corporation pays to a shareholder
to directly or indirectly buy back its stock.
Gross Income - The beginning point for the determination of
income, including income from whatever sources derived.
(Also see ADJUSTED GROSS INCOME.)
Guaranty - Legal arrangement involving a promise by one
person to perform the obligations of a second person to a third
person, in the event the second person fails to perform.
H
Head of Household - An individual entitled to special tax
rates that fall midway between single rates and married filing
joint rates, if they fit the qualifying profile.
Hedge - A financial term for a specific type of commodities
planning and trading.
Historical cost - Original cost of an asset to an entity.
Holding - A parent company which holds shares (interest) in
another company or other companies.
Holding Period - The time in which a taxpayer acquires
property and the date on which it is sold.
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Hope Scholarship Credit - A maximum allowable credit of
$1,500 per student for each of the first 2 years of postsecondary education. It is allowable after all additional
requirements are met.
I
Immigration Planning - The legal steps a natural person
plans and/or undertakes in view of his/her (and family
members') future immigration. IP often includes tax planning
and asset protection components.
Improvement - EXPENDITURE directed to a particular
ASSET to improve its performance or useful life.
Imputed Interest - If no interest or an unrealistic amount of
interest is charged in a salve involving certain kinds of
deferred payments, then the transaction will be treated as if
the realistic rate of interest had been used. The difference
between the realistic interest and the interest actually used is
referred to as imputed interest.
Incorporation - The legal process of establishing a company
(corporation), which entails submitting of definite documents
to the authorities of a relevant jurisdiction, their further
registration and issuing by the authorities of proper
documentary evidences of the company's (corporation) legal
existence (e.g., Certificate of Incorporation).
Income - Inflow of REVENUE during a period of time. (See
NET INCOME.)
Income Statement - Summary of the effect of REVENUES
and expenses over a period of time.
Income Tax Basis - (1) For tax purposes, the concept of basis
determines the proper amount of gain to report when an
ASSET is sold. Basis is generally the cost paid for an asset
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plus the amounts paid to improve the asset less deductions
taken against the asset, such as DEPRECIATION and
AMORTIZATION. (2) For accounting purposes, a consistent
basis of accounting that uses income tax accounting rules
while GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) does not. (See OTHER COMPREHENSIVE BASIS OF ACCOUNTING.)
Independence Standard Board (ISB) - This is the private
sector standard-setting body governing the independence of
AUDITORs from their public company clients. It came about
from discussions between the AICPA, other accounting
representatives and the SEC.
Individual Retirement Account (IRA) - An IRA is a
personal savings plan that allows an individual to make cash
contributions per year dependent on the individual's adjusted
gross income and participation in an employer's retirement
plan. Under a traditional IRA these earnings are not taxable
until the time of withdrawal from the plan.
Inheritance - As distinguished from a BEQUEST or devise,
an inheritance is property acquired through laws of descent
and distribution from a person who dies without leaving a
will. The value of property inherited id excluded from a
taxpayers gross income, but if the property inherited produces
income it is included in gross income. A taxpayer's basis in
inherited property is the fair market value at the time of death.
Initial Public Offering (IPO) - When a private company
goes public for the first time.
Inquiry - A procedure that consists of seeking information,
both financial and non financial, of knowledgeable persons
throughout the company. It is used extensively throughout the
audit and often is complementary to performing other
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procedures. Inquiries may range from formal written inquiries
to informal oral inquiries.
Insolvent - When an entity's LIABILITIES exceed its ASSETS.
Installment - Partial payment.
Installment Method - Tax ACCOUNTING method of
reporting GAIN on the sale of an ASSET exchanged for a
RECEIVABLE. In general, the gain is reported as the note is
paid off.
Intangible Asset - Asset having no physical existence such as
trademarks and patents. (See TANGIBLE ASSET.)
Interest - Payment for the use or forbearance of money.
Interim Financial Statements - FINANCIAL STATEMENTS that report the operations of an entity for less than
one year.
Internal Audit - AUDIT performed within an entity by its
staff rather than an independent certified public accountant.
Internal Control - Process designed to provide reasonable
assurance regarding achievement of various management
objectives such as the reliability of financial reports.
Internal Control Over Financial Reporting - A process
designed by, or under the supervision of the company's
principal executive and principal financial officers or persons
performing similar functions and effected by the company's
board of directors, management, and other personnel, to
provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles and includes those policies and
procedures that:
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1. Pertain to the maintenance of records that accurately and
fairly reflect the transactions and dispositions of the assets of
the company.
2. Provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in
accordance with GAAP and that receipts and expenditures are
being made only in accordance with authorizations of
management and directors of the company.
3. Provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect
on the financial statements.
Internal Rate of Return - Method that determines the
discount rate at which the present value of the future CASH
FLOWS will exactly equal investment outlay.
Internal Revenue Code - Collection of tax rules of the
federal government. Also referred to as Title 26 of the United
States Code.
Internal Revenue Service (IRS) - Federal agency that
administers the INTERNAL REVENUE CODE. The IRS is
part of the United States Treasury Department.
International Accounting Standards Committee, the
(IASC) - Is an independent private sector body, formed in
1973, with the objective of harmonizing the accounting
principles which are used in businesses and other
organizations for financial reporting around the world. Its
members are 143 professional accounting bodies in 104
countries.
International Business Company (IBC) - A typical
company of that type can carry on business outside its
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jurisdiction of incorporation, have meetings of its Directors
and/or Members anywhere in the world, keep as many bank
accounts as it desires anywhere in any currency, issue bearer
shares. An IBC is exempted from all or the most part of taxes
in jurisdiction of incorporation. As a rule such companies
have low profile owing to the lack of requirements to register
their Directors' and Shareholders' details with the local
authorities.
Internet/World Wide Net - The Internet is the unregulated
wild west show of computer networks connected together
throughout the world. The World Wide Web or WWW, is part
of the Internet.
Inventory - Tangible property held for sale, or materials used
in a production process to make a product.
Investment - EXPENDITURE used to purchase goods or
services that could produce a return to the investor.
Investment Tax Credit - This is a component of the general
business credit and consists of the following:
1. The energy credit;
2. The rehabilitation credit; and
3. The reforestation credit.
Involuntary Conversions - This is a conversion of property
where it is in whole or part destroyed, stolen, seized,
requisitioned or condemned (or where there is a threat or
imminence of requisition or condemnation).
IPO - See INITIAL PUBLIC OFFERING.
IRS - See INTERNAL REVENUE SERVICE.
Issuer - This term means an issuer, the securities of which are
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registered under Section 12 of the Securities Exchange Act of
1934, or that is required to file reports under Section 15(d) of
that Act, or that files or has filed a registration statement with
the SEC that has not yet become effective under the Securities
Act of 1933 and that it has not withdrawn.
J
Jeopardy - If the IRS believes that collection of tax appears
to be in jeopardy (danger of being uncollected), it may
immediately assess and collect such tax. The intermediate
steps are bypassed.
Joint Return - A return filed by married taxpayers or
surviving spouses.
Joint Venture - When two or more persons or organizations
gather CAPITAL to provide a product or service. Often
carried out as a PARTNERSHIP.
Journal - Any book containing original entries of daily
financial transactions.
Junk Bonds - DEBT SECURITIES issued by companies
with higher than normal credit risk. Considered "noninvestment grade" bonds, these SECURITIES ordinarily yield
a higher rate of interest to compensate for the additional risk.
Jurisdiction - Within the context of our site it's a country or a
territory, where we provide incorporation and other services.
Each such jurisdiction adopted its peculiar legislation which
concerns incorporation/formation of offshore legal entities
and their further activities.
Jurisdiction of the incorporation/formation - A jurisdiction where the company or corporation was incorporated/formed.
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K
Keogh Plan - Also known as an HR 10, this is a qualified
retirement plan for self employed who do not incorporate
their business. If qualifications are met the taxpayer may
receive a deduction for contributions made.
Key Employee - For purposes of rules that apply to top heavy
plans, a key employee:
1. An officer of the employer earning more than $130,000;
2. An individual who owns more than 5 percent of the employer;
3. An individual who owns more than 1 percent of the
employer and compensation greater than $150,000.
Key Person Insurance - Business-owned life insurance
contract typically on the lives of principal officers that
normally provides for guaranteed death benefits to the
company and the accumulation of a cash surrender value.
Kiting - Writing checks against a bank account with
insufficient funds to cover them, hoping that the bank will
receive deposits before the checks arrive for clearance.
L
Legal Entity (Legal Person) - A legal entity (LE), e.g., an
International Business Company, Panamanian Private Foundation, Delaware Corporation or Limited Liability Company,
exists independently from its members, founders or shareholders. Generally, the liability is limited to the assets a LE
owns, and the personal property of the members, founders or
shareholders may not be seized by the creditors. A LE has
many features of a natural person, e.g. it may hold property,
suit other legal and natural persons, and be responsible in a
court for its acts and deeds.
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Last in, First out (LIFO) - ACCOUNTING method of
valuing inventory under which the costs of the last goods
acquired are the first costs charged to expense. Commonly
known as LIFO.
Lease - Conveyance of land, buildings, equipment or other
ASSETS from one person (LESSOR) to another (LESSEE)
for a specific period of time for monetary or other
consideration, usually in the form of rent.
Leasehold - Property INTEREST a LESSEE owns in the
leased property.
Ledger - Any book of accounts containing the summaries of
debit and credit entries.
Lessee - Person or entity that has the right to use property
under the terms of a LEASE.
Lessor - Owner of property, the temporary use of which is
transferred to another (LESSEE) under the terms of a LEASE.
Letter of Credit - Conditional bank commitment issued on
behalf of a customer to pay a third party in accordance with
certain terms and conditions. The two primary types are
commercial letters of credit and standby letters of credit.
Leveraged Buy Out - Acquisition of a controlling INTEREST
in a company in a transaction financed by the issuance of
DEBT instruments by the acquired entity.
Leveraged Lease - Transaction under which the LESSOR
borrows funds to acquire property which is leased to a third
party. The property and lease rentals are security for the
LESSOR'S indebtedness.
Liability - DEBTS or obligations owed by one entity
(DEBTOR) to another entity (CREDITOR) payable in money,
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goods, or services. Any current or future legal obligation, e.g.
debt, duties under a contract or a position.
Lifetime Learning Credit - This allows a credit for 20
percent of qualified tuition and fees paid by the taxpayer with
respect to one or more students for any year that the HOPE
SHCOLARSHIP CREDIT is not claimed.
LIFO - See LAST IN, FIRST OUT.
Limited Liability - Within the context of our site it's limited
liability of shareholders or members in a Company Limited
by Shares or Company Limited by Guarantee.
Limited Liability Company (LLC) - Form of doing business
combining limited liability for all owners (called members)
with taxation as a PARTNERSHIP. An LLC is formed by
filing ARTICLES OF ORGANIZATION with an appropriate
state official. Rules governing LLCs vary significantly from
state to state.
Limited Liability Partnership (LLP) - GENERAL PARTNERSHIP
which, via registration with an appropriate state authority, is
able to enshroud all its partners in limited liability. Rules
governing LLPs vary significantly from state to state.
Limited Partnership - PARTNERSHIP in which one or
more partners, but not all, have limited liability to creditors of
the partnership.
Liquid Assets - Cash, cash equivalents, and marketable
SECURITIES.
Liquidation - Winding up an activity by distributing its
ASSETS to the appropriate parties and settling its DEBTS.
Listed Property - Limits are imposed on the DEPRECIATION deduction a taxpayer may claim on certain listed
property as follows:
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1. A passenger car;
2. Other property used as transportation;
3. Property used for purposes of entertainment, recreation, or
amusement;
4. A computer and peripheral equipment; and
5. Cellular telephone.
Litigation Support/Dispute Resolution - A service that
CPAs often provide to attorneys - e.g., expert testimony about
the value of a business or other asset, forensic accounting (a
partner stealing from his other partners, or a spouse
understating his income in a matrimonial action). The lawyer
hires the CPA to do the investigation and determine the
amount of money stolen or understated.
Long-Term Debt - DEBT with a maturity of more than one
year from the current date.
Loss - Excess of EXPENDITURES over REVENUE for a
period or activity. Also, for tax purposes, an excess of basis
over the amount realized in a transaction. (See NET INCOME.)
Lower of Cost or Market - Valuing ASSETS for financial
reporting purposes. Ordinarily, "cost" is the purchase price of
the asset and "market" refers to its current replacement cost.
(GAAP) requires that certain assets (e.g., INVENTORIES) be
carried at the lower of cost or market.
M
Management Accounting - Reporting designed to assist
management in decision-making, planning, and control. Also
known as Managerial Accounting.
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Management Discussion and Analysis (MD&A) - SEC
requirement in financial reporting for an explanation by
management of significant changes in operations, ASSETS,
and LIQUIDITY.
Management's Report - Management is required to include
in its annual report its assessment of the effectiveness of the
company's internal control over financial reporting in addition
to its audited financial statements as of the end of the most
recent fiscal year.
Managerial Accounting - See MANAGEMENT ACCOUNTING.
Margin - Excess of selling price over the unit cost.
Mark-to-Market - Method of valuing ASSETS those results
in adjustment of an asset's carrying amount to its market
value.
Marketable Securities - Stocks and other negotiable instruments which can be easily bought and sold on either listed
exchanges or over-the-counter markets.
Married Taxpayers - Taxpayers that are married may file a
JOINT RETURN, therefore combining their INCOME and
expenses. Individuals will be considered married if:
1. They are living as husband and wife;
2. They are recognized living as common law marriage; or
3. Legally married but separated and living apart but not
legally divorced.
Marriage is determined as of the last day of the tax year.
Matching Principle - A fundamental concept of basic
accounting. In any one given accounting period, you should
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try to match the revenue you are reporting with the expenses
it took to generate that revenue in the same time period, or
over the periods in which you will be receiving benefits from
that expenditure. A simple example is depreciation expense. If
you buy a building that will last for many years, you don't
write off the cost of that building all at once. Instead, you take
depreciation deductions over the building's estimated useful
life. Thus, you've "matched" the expense, or cost, of the
building with the benefits it produces, over the course of the
years it will be in service.
Material Weakness - A significant deficiency or combination of significant deficiencies that results in more than a
remote likelihood that a material misstatement of the annual
or interim financial statements will not be prevented or
detected.
Materiality - Magnitude of an omission or misstatements of
ACCOUNTING information that, in the light of surrounding
circumstances, makes it probable that the judgment of a
reasonable person relying on the information would change or
be influenced.
MD&A - See MANAGEMENT DISCUSSION AND ANALYSIS.
Member - A holder of an interest in a Delaware Limited
Liability Company or same as a shareholder in some other
types of legal entities.
Merger - BUSINESS COMBINATION that occurs when one
entity directly acquires the ASSETS and LIABILITIES of one
or more entities and no new corporation or entity is created.
(See CONSOLIDATION.)
Monetary Items - Definite fixed amounts stated in terms of
dollars, either by law or by contract agreement.
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Money Laundering - The process and technology of
disguising, investing, and/or hiding the proceeds of criminal
activities coupled with their "legitimization".
Mortgage - Legal instrument evidencing a security interest in
ASSETS, usually real estate. Mortgages serve as
COLLATERAL for PROMISSORY NOTES.
Municipal Bond - BOND issued by a government or public
body, the INTEREST on which is typically exempt from
federal taxation.
Matching Principle - A fundamental rule for basic accounting. In any one given accounting period, you should try to
match the revenue you are reporting with the expenses it took.
Mutual Fund - Investment company which generally offers
its shares to the general public and invests the proceedsin a
diversified portfolio of SECURITIES. (See CLOSED-END
MUTUAL FUND and OPEN-END MUTUAL FUND.)
N
NASBA - See NATIONAL ASSOCIATION OF STATE
BOARDS OF ACCOUNTANCY.
National Association of State Boards of Accountancy Serves as a forum for the 54 State Boards of Accountancy,
which administer the uniform CPA examination, license
Certified Public Accountants and regulate the practice of
public accountancy in the United States.
Natural person - An individual as a subject of legal and/or
business relations.
Negative Assurance - Report issued by an ACCOUNTANT
based on limited procedures that states that nothing has come
to the accountant's attention to indicate that the financial
information is not fairly presented.
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Negligence - The omission to do something which a
reasonable man, guided by those ordinary considerations
which ordinarily regulate human affairs, would do, or the
doing of something which a reasonable and prudent man
would not do. Negligence is the failure to use such care as a
reasonably prudent and careful person would use under
similar circumstances; it is the doing of some act which a
person of ordinary prudence would not have done under
similar circumstances or failure to do what a person of
ordinary prudence would have done under similar circumstances. The term refers only to that legal delinquency which
results whenever a man fails to exhibit the care which he
ought to exhibit, whether it be slight, ordinary, or great. It is
characterized chiefly by inadvertence, thoughtlessness,
inattention, and the like, while "wantonness" or "recklessness"
is characterized by willfulness. The law of negligence is
founded on reasonable conduct or reasonable care under all
circumstances of particular care. Doctrine of negligence rests
on duty of every person to exercise due care in his conduct
toward others from which injury may result.
Net Assets - Excess of the value of SECURITIES owned,
cash, receivables, and other ASSETS over the LIABILITIES
of the company.
Net Income - Excess or DEFICIT of total REVENUES and
GAINS compared with total expenses and losses for an
ACCOUNTING period. (See INCOME and LOSS.)
Net Lease - In addition to the rental payment, the LESSEE
assumes all property charges such as taxes, insurance, and
maintenance.
Net Sales - Sales at gross invoice amounts less any
adjustments for returns, allowances, or discounts taken.
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Net Worth - Similar to EQUITY, the excess of ASSETS over
LIABILITIES.
Nominal Director - A Director holding its position only
formally, while the real powers on administering and
managing the company rest with the Beneficiary or its agent.
Nominal Shareholder (Member) - A shareholder holding
the shares only nominally. At any point, the Nominal
Shareholder will transfer the shares he/she formally holds to
the person(s) listed in the appropriate instruction from the
Beneficiary. See more details in NOMINEES.
Nominees - General term for Nominal Directors, Nominal
Shareholders (Members), and other nominal persons in an
offshore legal entity.
Non-for-Profit Organization/Tax-Exempt Organization An incorporated organization which exists for educational or
charitable purposes, and from which its shareholders or
trustees do not benefit financially. Also called not-for-profit
organization.
Non-resident - In relation to a jurisdiction: a legal or natural
person not having its domicile and/or place of business in the
given jurisdiction.
Non-resident alien (NRA) - The person who is neither a
resident in nor a citizen of the country, esp. in the USA.
Nonresident Alien - Any citizen that is not a resident or
citizen of the United States. Income of such individuals is
subject to taxation if it is effectively connected with a United
States trade or business.
Non Routine Transactions - Activities that occur only
periodically, the data involved are generally not part of the
routine flow of transactions.
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No-Par Stock - Stock authorized to be issued but for which
no PAR VALUE is set in the ARTICLES OF INCORPORATION. A STATED VALUE is set by the BOARD OF
DIRECTORS on the issuance of this type of stock.
No-Par Value - Stock or bond that does not have a specific
value indicated. (See STATED VALUE.)
Notional - Value assigned to ASSETS or LIABILITIES that
is not based on cost or market (e.g., the value of a service not
yet rendered).
O
Objectivity - Emphasizing or expressing the nature of reality
as it is apart from personal reflection or feelings; independence of mind.
Obligations - Any amount which may require payment by an
entity at a future time.
OCBOA - See OTHER COMPREHENSIVE BASIS OF
ACCOUNTING.
Offshore - Managed, registered, located, conducted, or
operated in a foreign country, especially when it is arranged
for the tax-planning or asset-protection purposes.
Offshore Financial Center (OFC) - A jurisdiction, providing
some or all of the following services: low or zero taxation;
moderate or light financial regulation; banking secrecy and
anonymity.
OPEB - See OTHER POST-RETIREMENT EMPLOYEE
BENEFIT.
Open-End Mutual Fund - MUTUAL FUND that does not
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have a fixed number of shares outstanding, offers new shares
to the public, and buys back outstanding shares at market value.
Operating Agreement - Agreement, usually a written
document, that sets out the rules by which a LIMITED
LIABILITY COMPANY (LLC) is to be operated. It is the
LLC equivalent of corporate BYLAWS or a PARTNERSHIP
agreement.
Operating Cycle - Period of time between the acquisition of
goods and services involved in the manufacturing process and
the final cash realization resulting from sales and subsequent
collections.
Operating Expenses - The amount paid for assets maintenance or the day-to-day costs of running and maintaining a
business.
Option - Right to buy or sell something at a specified price
during a specified time period.
Ordinary Income - One of two classes of income (the other
being CAPITAL GAINS) taxed under the INTERNAL
REVENUE CODE. Historically, ordinary income is taxed at a
higher rate than capital gains.
Organization Expenditures - The costs of organizing a trade
or business or for profit activity before it begins active
business. A taxpayer may elect to amortize such expenses for
a tern no less than 60 months. If the election is not made then
the expenses are not deductible and may only be recovered
when the business ceases operation or is sold.
Organization for Economic Cooperation and Development
(OECD) - At the present time there are 29 countries in the
OECD. They share the principles of the market economy,
pluralist democracy and respect for human rights. The
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original 20 members of the OECD are located in Western
countries of Europe and North America. Next came Japan,
Australia, New Zealand and Finland. More recently, Mexico,
the Czech Republic, Hungary, Poland and Korea have joined.
The official goals of the organization are to help "member
countries promote economic growth, employment and
improved standards of living through the coordination of
policy" and to encourage "the sound and harmonious
development of the world economy and improve the lot of
developing countries, particularly the poorest."
Other Comprehensive Basis of Accounting (OCBOA) Consistent accounting basis other than GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES (GAAP) used
for financial reporting. Examples include an INCOME TAX
BASIS or a CASH BASIS.
Other Post-Retirement Employee Benefit (OPEB) - All
post-retirement benefits other than pensions, provided by
employers to employees.
P
Paid in Capital - Portion of the stockholders' EQUITY which
was paid in by the stockholders, as opposed to CAPITAL
arising from profitable operations.
Parent Company - Company that has a controlling interest in
the COMMON STOCK of another. A company in relation to
its subsidiaries, branches, or daughter companies.
Partnership - Relationship between two or more persons
based on a written, oral, or implied agreement whereby they
agree to carry on a trade or business for profit and share the
resulting profits. Unlike a CORPORATION'S shareholders,
the partnership's general partners are liable for the DEBTS of
the partnership. (See GENERAL PARTNERSHIP, LIMITED
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LIABILITY PARTNERSHIP, LIMITED PARTNERSHIP.)
A for-profit organization in which two or more persons
(partners) furnished a part of the capital and labor. They share
agreed proportion of profit and losses. A typical partnership
does not create a legal entity separate from the partners, and is
tax transparent. On the other hand, the partners' liability is not
limited and may extend to their personal property.
Par Value - Amount per share set in the ARTICLES OF
INCORPORATION of a CORPORATION to be entered in
the CAPITAL STOCKS account where it is left permanently
and signifies a cushion of EQUITY capital for the protection
of CREDITORS.
Passive Activity Loss - LOSS generated from activities
involved in the conduct of a trade or business in which the
taxpayer does not materially participate.
Passive Income - Includes income derived from such sources
as dividends, interest, royalties, rents, amounts received from
personal service contracts, and income received as a
beneficiary of an estate or trust.
Patronage Dividends - These dividends are amounts paid by
a cooperative to its members and customers based on the
quantity or value of business conducted with or for the
members during the tax year.
PCAOB - Public Corporation Accounting Oversight Board, a
private-sector, non-profit corporation, created by the
Sarbanes-Oxley Act of 2002, to oversee the AUDITORs of
public companies in order to protect the interests of investors
and further the public interest in the preparation of
informative, fair, and independent audit reports.
Peer Review - Process by which an accounting firm's practice
is evaluated for compliance with professional standards. The
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objective is achieved through the performance of an
independent review by one's peers.
Penalty - The various government codes contain numerous
provisions which impose penalties on a taxpayer (any type of
taxpayer) for failure to perform a specific act or omitting vital
information on a return.
Pension - Retirement plan offered by an employer for the
benefit of an employee, usually at retirement, through a
TRUSTEE who controls the plan ASSETS. (See EMPLOYEE
BENEFIT PLAN.)
Perpetual Inventory - System that requires a continuous
record of all receipts and withdrawals of each item of
INVENTORY.
Personal Financial Planning - Process for arriving at a
comprehensive plan to solve an individual's personal,
business, and financial problems and concerns.
Personal Financial Specialist (PFS) - CERTIFIED PUBLIC
ACCOUNTANT who specializes in PERSONAL FINANCIAL PLANNING and completes a series of requirements
that include education, experience, ethics and an exam.
Personal Financial Statements - FINANCIAL STATEMENTS prepared for an individual or family to show
financial status.
Personal Property - Movable property that is not affixed to
the land (REAL PROPERTY). Personal property includes
tangible items such as cash, cars and computers, as well as
intangible items, such as royalties, patents and copyrights.
Phantom Income - Income reported on a TAX BASIS for
which no cash or financial benefit is realized.
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Pledged Asset - ASSET placed in a TRUST and used as
COLLATERAL for a DEBT.
Pooling of Interest - Used to account for the acquisition of
another company when the acquiring company exchanges its
voting COMMON STOCK for the voting common stock of
the acquired company when certain criteria are met.
Post-Retirement Benefits - PENSIONS, health care, life
insurance and other benefits that are provided by an employer
to retirees, their dependents, or survivors.
Preferred Stock - Type of CAPITAL STOCK that carries
certain preferences over COMMON STOCK, such as a prior
claim on DIVIDENDS and ASSETS.
Premium - (1) Excess amount paid for a BOND over its face
amount. (2) In insurance, the cost of specified coverage for a
designated period of time.
Prepaid Expense - Cost incurred to acquire economically
useful goods or services that are expected to be consumed in
the revenue-earning process within the operating cycle.
Present Value - CURRENT VALUE of a given future cash
flow stream, discounted at a given rate.
Preventive Controls - These have the objective of preventing
errors or fraud from occurring in the first place that could
result in a misstatement of the financial statements.
Prime Rate - Rate of interest charged by major U.S. banks on
loans made to their preferred customers.
Principal - Face amount of a SECURITY, exclusive of any
PREMIUM or INTEREST. The basis for INTEREST computations.
Private Foundation - In the context of our services, it is a
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Panamanian legal entity combining the features of a trust and
an International Business company. Similarly to a Trust, the
purpose of a Private Foundation is to preserve the assets,
donated by the Founder and some third persons, for the
benefit of and distribution among the Beneficiaries. Akin to
an International Business Company, a Private Foundation has
a distinctive legal personality and tax-exempt status. PF is an
effectual offshore asset protection tool.
Private Placement - Sales of SECURITIES not involving a
PUBLIC OFFERING and exempt from registration pursuant
to certain EXEMPTIONS.
Private unlimited company - A company with unlimited
liability of its members.
Privilege - A right or immunity granted as a peculiar benefit
advantage.
Privity - An interest in a transaction, contract or legal action
to which one is not a party, arising out of a relationship to one
of the parties.
Profit Sharing Plan - DEFINED CONTRIBUTION PLAN
characterized by the setting aside of a portion of an entity's
profits in participant's accounts. (See EMPLOYEE BENEFIT
PLAN.)
Pro Forma - Presentation of financial information that gives
effect to an assumed event (e.g., MERGER).
Projection - Prospective FINANCIAL STATEMENTS that
include one or more hypothetical assumptions.
Promissory Note - Evidence of a DEBT with specific amount
due and interest rate. The note may specify a maturity date or
it may be payable on demand. The promissory note may or
may not accompany other instruments such as a
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MORTGAGE providing security for the payment thereof.
(See DEMAND LOAN.)
Proprietorship - Business owned by an individual without
the limited liability protection of a CORPORATION or a
LIMITED LIABILITY COMPANY (LLC). Also known as
sole proprietorship.
Pro Rata - Distribution of an expense, fund, or DIVIDEND
proportionate with ownership.
Prospective Financial Information (forecast and projection) - Forecast: Prospective financial statements that
present, to the best of the responsible party's knowledge and
belief, an entity's expected financial position, results of
operations, and changes in financial position. A financial
forecast is based on the responsible party's assumptions
reflecting conditions it expects to exist and the course of
action it expects to take. Projection: Prospective financial
statements that present, to the best of the responsible party's
knowledge and belief, given one or more hypothetical
assumptions, an entity's expected financial position, results of
operations, and changes in financial position.
Prospectus - Major part of the registration statement filed
with the SECURITIES AND EXCHANGE COMMISSION
(SEC) for PUBLIC OFFERINGS. A prospectus generally
describes SECURITIES or partnership interests to be issued
and sold.
Proxy - Document authorizing someone other than the
shareholder to exercise the right to vote the stock owned by
the shareholder.
Public Limited Company (PLC) -The shares of such
company may be offered for sale to the general public and
members' liability is limited to the amount unpaid on shares
held by them.
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Public Offering - Offering shares to the public. Generally
done through SEC filings.
Public Oversight Board (POB) - The POB is an independent
oversight board, composed of public members, which
monitors and evaluates peer reviews conducted by the SEC
Practice Section (SECPS) of the AICPA's Division for CPA
Firms as well as other activities of the SECPS.
Purchase Method of Accounting - ACCOUNTING for a
MERGER by adding the acquired company's ASSETS at the
price paid for them to the acquiring company's assets.
Push-Down Accounting - Method of ACCOUNTING in
which the values that arise from an acquisition are transferred
or "pushed down" to the accounts of an acquired company.
Puts - A put is an option to sell a certain number of shares of
stock at a stated price within a certain period. The gain or loss
on a put is short or long term depending on the holding period
of the stock involved. (Also see CALLS)
Q
Qualified Opinion - AUDIT opinion that states, except for
the effect of a matter to which a qualification relates, the
FINANCIAL STATEMENTS are fairly presented in
accordance with GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP). The AUDITOR is required to
qualify when there is a scope limitation.
Quasi-Reorganization - Type of reorganization in which,
with shareholder approval, the management revalues ASSETS
and eliminates the DEFICIT (increased by asset devaluations
if any) by charging it to other EQUITY accounts without the
creation of a new corporate entity or without court
intervention.
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R
R&D - See RESEARCH AND DEVELOPMENT.
Ratio Analysis - Comparison of actual or projected data for a
particular company to other data for that company or industry
in order to analyze trends or relationships.
Real Estate Investment Trust (REIT) - Investor-owned
TRUST which invests in real estate and, instead of paying
income tax on its income, reports to each of its owners his or
her pro rata share of its income for inclusion on their income
tax returns. This unique trust arrangement is specifically
provided for in the INTERNAL REVENUE CODE.
Real Estate Mortgage Investment Conduit (REMIC) - An
entity that holds a fixed pool of mortgages and issues multiple
classes of interest s in itself to investors. A qualified REMIC
is generally taxed like a partnership, unless it takes
contributions after its start up day or engages in a prohibited
transaction.
Real Property - Land and improvements, including buildings
and PERSONAL PROPERTY, that is permanently attached to
the land or customarily transferred with the land.
Reasonable Assurance - Management's assessment of the
effectiveness of internal control over financial reporting is
expressed at the level of reasonable assurance. It includes the
understanding that there is a remote likelihood that material
misstatements will not be prevented or detected on a timely
basis. It is a high level of assurance.
Recapitalization - An internal reorganization of a corporation
including a rearrangement of the capital structure by changing
the kind of stock or the number of shares outstanding or
issuing stock instead of bonds. It is distinguished from most
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other types of reorganization because it involves only one
corporation and is usually accomplished by the surrender by
shareholders of their securities for other stock or securities of
a different type.
Receivables - Amounts of money due from customers or
other DEBTORS.
Reconciliation - Comparison of two numbers to demonstrate
the basis for the difference between them.
Redemption Value - Price to be paid by an ENTITY to retire
its BONDS or PREFERRED STOCK.
Red Herring - "Pre-release" PROSPECTUS offering. An
announcement of a future issuance of SECURITIES, given
restricted circulation during the waiting period of 20 days or
other specified period between the filing of a registration
statement with the SEC and the effective date of the
statement. A red herring is not an offer to sell or the
solicitation of an offer to buy.
Refinancing Agreement - Arrangement to provide funding to
replace existing financing, the most common being a
refinance of a home MORTGAGE.
Registered Agent - A registered agent represents an International Business Company, Panamanian Private Foundation,
Delaware Corporation or Limited Liability Company in the
jurisdiction of incorporation. A Registered Agent normally
provides a Registered Office address, provides liaison with
local authorities and receives all legal and tax papers and/or
notices addressed to the underlying company, corporation or
foundation.
Registered Office - It is the official address of a company to
which authorities, courts, and suitors send their notices, letters
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and reminders. The Registered Office (RO) can be anywhere
in the jurisdiction of the incorporation. It must always be an
effective address for delivering documents to the company.
The RO is provided by a Registered Agent.
Regulated Investment Company (RIC) - Commonly called
a MUTUAL FUND, this is a domestic corporation that acts as
an investment agent for its shareholders by typically investing
in government and corporate securities and distributing the
DIVIDENDS and INTEREST income earned from such
investments. In order to be considered a RIC a CORPORATION must make an irrevocable election tax election in
order to be treated as one.
Reinsurance - Process by which an insurance company
obtains insurance on its insurance claims with other insurers
in order to spread the risk.
REIT - See REAL ESTATE INVESTMENT TRUST.
Related Party Transaction - Business or other transaction
between persons who do not have an arm's-length relationship
(e.g., a relationship with independent, competing interests).
The most common is between family members or controlled
entities. For tax purposes, these types of transactions are
generally subject to a greater level of scrutiny.
Relevant Assertions - Assertions that have a meaningful
bearing on whether the account is fairly stated.
Reorganization - This is a change in the businesses capital
arrangements. If for a CORPORATION there are seven
statutory options for reorganization that would cause the
corporation and shareholders to not recognize any GAIN or
LOSS on the exchange of stock.
Repairs - EXPENDITURES made in order to keep property
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in good condition but that do not appreciably prolong the life
or increase the value of the property.
Replacements - EXPENDITURES for making good or whole
the portions of property that have deteriorated through use or
have been destroyed through accident.
Report Release Date - The date the company's financial
statements are issued.
Repos - See REPURCHASE AGREEMENT.
Repurchase Agreement (Repos) - Agreement whereby an
institution purchases SECURITIES under a stipulation that
the seller will repurchase the securities within a certain time
period at a certain price.
Research and Development (R&D) - Research is a planned
activity aimed at discovery of new knowledge with the hope
of developing new or improved products and services.
Development is the translation of research findings into a plan
or design of new or improved products and services.
Reserve - ACCOUNT used to earmark a portion of EQUITY
or fund balance to indicate that it is not available for
expenditure. An obsolete term in the United States. More
commonly used in Europe.
Resident - In relation to a jurisdiction: a legal or natural
person having its domicile and/or place of business in the
given jurisdiction.
Resident Alien - This is an individual that is not a citizen, but
who has a residence in the United States. They are taxed on
all of their INCOME worldwide in the same manner a citizen
of the United States is.
Restricted Assets - Cash or other ASSETS whose use in
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whole or in part is restricted for specific purposes bound by
virtue of contracted agreements.
Restricted Fund - Fund established to account for assets
whose income must be used for purposes established by
donors or grantors of such ASSETS. (See FUND ACCOUNTING and UNRESTRICTED FUNDS.)
Restructuring - Reorganization within an entity. Restructuring may occur in the form of changing the components of
CAPITAL, renegotiating the terms of DEBT agreements, etc.
Retained Earnings - Accumulated undistributed earnings of
a company retained for future needs or for future distribution
to its owners.
Return on Investment (ROI) - Ratio measure of the profits
achieved by a firm through its basic operations. An indicator
of management's general effectiveness and efficiency. The
simplest version is the ratio of NET INCOME to total
ASSETS.
Revenue Recognition - Method of determining whether or
not income has met the conditions of being earned and
realized or is realizable.
Revenues - Sales of products, merchandise, and services; and
earnings from INTEREST, DIVIDEND, rents.
Review - Accounting service that provides some assurance as
to the reliability of financial information. In a review, a
CERTIFIED PUBLIC ACCOUNTANT (CPA) does not
conduct an examination under GENERALLY ACCEPTED
AUDITING STANDARDS (GAAS).
Review Engagement - Agreement between a CERTIFIED
PUBLIC ACCOUNTANT (CPA) and his or her client to
perform a review. (See ACCOUNTANTS' REPORT.)
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Review Report - See ACCOUNTANTS' REPORT.
Right to Setoff - DEBTOR'S legal right, to discharge all or a
portion of the DEBT owed to another party by applying
against the debt an amount that the other party owes to the
debtor.
Risk Management - Process of identifying and monitoring
business risks in a manner that offers a risk/return relationship
that is acceptable to an entity's operating philosophy.
ROI - See RETURN ON INVESTMENT.
Routine Transactions - Recurring financial activities reflected in the accounting records in the normal course of business.
S
S Corporation - An S Corporation is a corporation which,
under the Internal Revenue Code, is generally not subject to
federal income taxes. Instead, taxable income of the
corporation is passed through to its stockholders in a manner
similar to that of a partnership.
Safe Harbor Rule - Concept in statutes and regulations
whereby a person who meets listed requirements will be
preserved from adverse legal action. Frequently, safe harbors
are used where a legal requirement is somewhat ambiguous
and carries a risk of punishment for an unintended violation.
Sale-Leaseback Transaction - Sale of property by a seller
who simultaneously leases the property back from the
purchaser.
Salvage Value - Selling price assigned to retired FIXED
ASSETS or merchandise unsalable through usual channels.
SAS - See STATEMENTS ON AUDITING STANDARDS.
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SEC - See SECURITIES AND EXCHANGE COMMISSION.
SEC Filings - Financial and informational DISCLOSURES
required by the SEC in order to comply with certain sections
of the Securities Act of 1933 and the Securities and Exchange
Act of 1934. Some of the more common filings that publicly
owned companies must submit are the FORM 10-K, FORM
10-Q and FORM 8-K.
SEC Registration Statement - DISCLOSURE document that
must be filed with the SEC in connection with a public
offering of SECURITIES, unless the offering is exempt.
Security - Any kind of transferable certificate of ownership
including EQUITY SECURITIES and DEBT SECURITIES.
Security Interest - Legal interest of one person in the
property of another to assure performance of a second person
under a contract.
Securities - Shares, bonds, and other instruments, which give
evidence to and assure the fulfillment of an obligation.
Securities are traded in financial markets. Having opened an
Offshore Brokerage Account you may buy and sell securities
via the Internet.
Securities and Exchange Commission (SEC) - Agency
authorized by the United States Congress to regulate the
financial reporting practices of most public corporations.
Securitization -Source of financing whereby an entity's
ASSETS (typically mortgage loans, lease obligations or other
types of RECEIVABLES) are placed in a special purpose
vehicle that issues SECURITIES collateralized by such assets.
Self Employment Tax - Most individuals that are in business
for themselves, such as SOLE PROPRIETORS, PARTNERS
or independent contractor, are subject to self employment
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taxes. The taxes provide coverage for the self employed
individual for social security (OASDI) and Medicare benefits
(HI) similar to the taxes withheld by employers from wages it
pays the employees.
Settlor - The person who actually creates a trust by donating
property to be managed and administered by a trustee but
from which all benefits and profits would go to a beneficiary.
Settlement Method - Method of ACCOUNTING for
SECURITIES whereby transactions are recorded on the date
the securities settle by the delivery or receipt of securities and
the receipt or payment of cash.
SFAS - See STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS.
Share - Part ownership in a company limited by shares.
Share Certificate - A document signifying part ownership in
a company. Same as a "Stock Certificate".
Shareholder - The owner of one or more shares in a
company.
Shelf Company - A company, which has been incorporated
by us in an Offshore Financial Center. It is "pure" in a sense
that it has never entered into any commercial or other
activities and/or obligations. The client him/herself appoints
the initial Director(s) of the SC and decides on issuance of the
shares. We always keep in stock several Shelf Companies
available for the immediate disposal by our precious clients.
Shipping Company - A company, which owns a ship or
ships. One of the preferable jurisdictions for registration of
SC is Cyprus.
Short Sale - Sale of an item before it is purchased. A person
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entering into a short sale believes the price of the item will
decline between the date of the short sale and the date he or
she must purchase the item to deliver the item under the terms
of the short sale.
Short-Term - Current; ordinarily due within one year.
Significant Accounts - An account is significant if there is
more than a remote likelihood that the account could contain
misstatements that individually or when aggregated with
others, could have a material effect on the financial
statements, considering the risks of both overstatement and
understatement.
Significant Deficiency – A control deficiency or combination
of control deficiencies, that adversely affects the company's
ability to initiate, authorize, record, process or report external
financial data reliably in accordance with GAAP such that
there is more than a remote likelihood that a misstatement of
the company's annual or interim financial statements that is
more than inconsequential will not be prevented or detected.
Significant Findings or Issues - Substantive matters that are
important to the procedures performed, evidence obtained, or
conclusions reached and include but are not limited to:
1. significant matters
2. results of auditing procedures indicating a need for significant modification of planned auditing procedures
3. audit adjustments
4. disagreements among members of the engagement team
5. circumstances that cause difficulty in applying auditing
procedures
6. significant changes in the assessed level of audit risk
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7. matters that could result in modification of the AUDITOR's
report
Single Audit Act - The Single Audit Act of 1984 and the
Single Audit Act Amendments of 1996 establish requirements
for audits of states, local governments, and nonprofit
organizations that administer federal financial assistance
programs above a certain threshold.
Simple Plans - An employer may adopt a simplified
retirement plan called a SIMPLE Plan (Savings incentive
match plan for employees) if it has fewer than 100 employees
that received at least $5,000 in compensation in the preceding
year.
Simple Trust - This type of TRUST is required to distribute
all its income currently, whether or not the TRUSTEE
actually does so, and it has no provision in the trust
instrument for charitable contributions. It is to be
distinguished from a COMPLEX TRUST. A trust may be a
simple trust in one year and a complex trust in another year.
In the year in which the trust distributes its corpus, it loses its
classification as a simple trust.
Small Business Stock - Noncorporate investors may exclude
up to 50 percent of the GAIN they realize on the disposition
of qualified small business stock issued after Aug. 10, 1993,
and held for more than five years. The amount of gain eligible
for the 50 percent exclusion is subject to per-issuer limits. In
order to qualify for the EXCLUSION, the CORPORATION
issuing the stock must be a C Corporation (but excluding
certain investment corporations) and it must use at least 80
percent of its assets in active conduct of one or more qualified
trade or businesses. In addition, its gross assets cannot exceed
$50 million.
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Sole Proprietorship - See PROPRIETORSHIP.
Special Assessment - Charge made by a local government for
the cost of an improvement or service. It is usually levied on
those who will benefit from the service.
Special Report - Special report is a term applied to
AUDITORs' reports issued in connection with various types
of financial presentations, including: Financial statements that
are prepared in conformity with a comprehensive basis of
accounting other than generally accepted accounting
principles. Specified elements, accounts or items of a
financial statement. Compliance with aspects of contractual
agreements or regulatory requirements related to audited
financial statements. Financial presentations to comply with
contractual agreements or regulatory provisions. Financial
information presented in prescribed forms or schedules that
require a prescribed form of auditor's reports.
Spinoff - Transfer of all, or a portion of, a subsidiary's stock
or other ASSETS to the stockholders of its parent company on
a PRO RATA basis.
Spot Market - Market for buying and selling commodities or
financial instruments for immediate delivery and payment
based on the settlement conventions of the particular market.
Spread - Difference between two prices, usually a buying and
selling price.
SSARS - See STATEMENTS ON STANDARDS FOR
ACCOUNTING AND REVIEW SERVICES.
Standard Deduction - Individual taxpayers who do not
itemize their deductions are entitled to a standard deduction
amount by which to reduce ADJUSTED GROSS INCOME in
arriving at taxable income. The amount of the standard
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deduction varies by the type of the taxpayer and changes each
year. A schedule of standard deductions is easily found in the
instructions for the federal form 1040. Each state may also
use a standard deduction format, but the amounts and
computations differ from the federal and from state to state.
Certain taxpayers may not be entitled to use the standard
deduction. An example of this would be a married filing
separate taxpayer. If one taxpayer itemizes then the other is
required to by law even if the married filing separate taxpayer
is unknowing of what is included on the spouses separate
return. A reason for this might be the prevention of pooling
and duplication of deductions.
Start-up Costs - (1) Costs, excluding acquisition costs,
incurred to bring a new unit into production. (2) Costs
incurred to begin a business.
Stated Value - Per share amount set by the BOARD OF
DIRECTORS to be placed in the CAPITAL STOCK account
upon issuance of NO-PAR VALUE.
Statement of Cash Flows - A statement of cash flows is one
of the basic financial statements that is required as part of a
complete set of financial statements prepared in conformity
with generally accepted accounting principles. It categorizes
net cash provided or used during a period as operating,
investing and financing activities, and reconciles beginning
and ending cash and cash equivalents.
Statement of Financial Accounting Standards (SFAS) Statements issued by the FINANCIAL ACCOUNTING
STANDARDS BOARD (FASB).
Statement of Financial Condition - Basic FINANCIAL
STATEMENT, usually accompanied by appropriate
DISCLOSURES that describe the basis of ACCOUNTING
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used in its preparation and presentation as of a specified date,
the entity's ASSETS, LIABILITIES and the EQUITY of its
owners. Also known as BALANCE SHEET.
Statements on Auditing Standards (SAS) - Statements
issued by the Accounting Standards Board of the
AMERICAN INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS (AICPA).
Statements on Standards for Accounting and Review
Services (SSARS) - Statements issued by the AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
(AICPA) that specifically relate to REVIEWS and
COMPILATIONS. (See ACCOUNTANTS' REPORT.)
Statute of Limitations - This sets out the period within which
actions may be brought upon claims or within which rights
may be enforced. As it pertains to tax returns, the statute of
limitations is generally three years from the date a return is
due or filed.
Stepped Up Basis - Generally, the basis of property acquired
by INHERITENCE, BEQUEST or device from a
DECENDANT is the FAIR MARKET VALUE of the
property on the date of the decendant's death. Thus if the fair
market value is more than the decedent's basis, a taxpayers
basis in the property received is stepped-up.
Stock Compensation Plan - FRINGE BENEFIT that gives
employees the option to purchase the employer's stock at a
specified price during a specified period.
Stock Option - Right to purchase or sell a specified number
of shares of stock at specified prices and times.
Stock Rights - Stock rights are rights issued to stockholders
of a CORPORATION that entitle them to purchase new
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shares of stock in the corporation for a stated price that is
often substantially less than the FAIR MARKET VALUE of
the stock. These rights may be exercised by paying the stated
price, may be sold, or may be allowed to expire or lapse.
Stock rights are generally treated as stock DIVIDENDS.
Stock Split - Increase in the number of shares of a company's
COMMON STOCK outstanding that result from the issuance
of additional shares proportionally to existing stockholders
without additional capital investment. The PAR VALUE of
each share is reduced proportionally.
Straight-Line Depreciation - ACCOUNTING method that
reflects an equal amount of wear and tear during each period
of an ASSET'S useful life. For instance, the annual
STRAIGHT-LINE DEPRECIATION of a $2,500 asset
expected to last five years is $500. (See ACCELERATED
DEPRECIATION.)
Strike Price - Price of a financial instrument at which
conversion or exercise occurs.
Subsequent Event - Material event that occurs after the end
of the accounting period and before the publication of an
entity's FINANCIAL STATEMENTS. Such events are
disclosed in the notes to the financial statements. (See
MATERIALITY.)
Subsidiary (Subsidiary company) - A company with a
majority of its shares being owned by another company.
Surviving Spouse - This is a person whose husband or wife
died during the tax year. A surviving spouse may file a JOINT
RETURN for the year in which the death occurred. In
addition a joint return may be filed for the two succeeding tax
years if during that time the surviving spouse:
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1. Remains unmarried; and
2. Maintains as his home a household that is the principal
place of abode during the entire TAX YEAR for a child for
whom a dependency exemption may be claimed.
Swap - Financial contract in which two parties agree to
exchange net streams of payments over a specified period.
The payments are usually determined by applying different
indices (e.g., interest rates, foreign exchange rates, equity
indices) to a NOTIONAL amount. The term notional is used
because swap contracts generally do not involve exchanges of
PRINCIPAL.
T
Tangible Asset - ASSETS having a physical existence, such
as cash, land, buildings, machinery, or claims on property,
investments or goods in process. (See INTANGIBLE
ASSETS.)
Tax - Charge levied by a governmental unit on income,
consumption, wealth, or other basis.
Tax Court - The U.S. Tax Court is a legislative court
functioning to adjudicate controversies between taxpayers and
the IRS arising out of deficiencies assessed by the IRS for
INCOME, GIFT, ESTATE, windfall profit and certain
EXCISE TAXES. It has no jurisdiction over other taxes such
as employment taxes. Various sales taxes and certain excise
taxes.
Tax Credit for the Elderly and Disabled - Taxpayers age 65
or older or those under 65 who are retired with permanent and
total disability are eligible to claim a credit to reduce the
amount of their tax liability. It is designed primarily to benefit
those individuals who receive small amounts of retirement
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INCOME. Each taxpayer is allocated an initial base amount
based on his or her filing status determining the credit. The
base amount is then reduced by the amount of nontaxable
income, or is phased out for taxpayers whose ADJUSTED
GROSS INCOME exceeds certain levels.
Tax Haven - A jurisdiction where local legislation provides
for considerable tax exemptions for non-residents.
Tax Lien - ENCUMBRANCE placed on property as security
for unpaid taxes.
Tax Planning - The legal steps a natural or legal person plans
and/or undertakes to minimize lawfully his/her/its tax
liabilities. Such offshore tools as Private Foundations,
International Business Companies, Delaware Corporations
and Limited Liability Companies, and Trusts are being used
by our clients for the above purpose.
Tax Shelter - Arrangement in which allowable tax deductions
or EXCLUSIONS result in the deferral of tax on INCOME
that would otherwise be payable currently.
Tax Year - The period used to compute a taxpayer's
TAXABLE INCOME is tax year. It is an annual period that is
either a calendar year , FISCAL YEAR or fractional part of a
year for which the return is made.
Taxable Income - Taxable income is generally equal to a
taxpayer's ADJUSTED GROSS INCOME during the TAX
YEAR less any allowable EXEMPTIONS and deductions.
Taxpayer Identification Number (TIN) - Any individual or
other taxable entity that is required to file a return, statement
or any other document with the IRS must indicate his (or its)
taxpayer identification number. For an individual, the social
security number is used, and if you do not have a social
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security number, the IRS will assign you a TIN. A federal or
employer ID number is assigned to other types of entities and
will use that as their TIN.
Tenancy-in-Common - Co-ownership of property. In a valid
tenancy-in-common, a deceased co-owner's title passes to his
or her heirs without being included in the estate of the
deceased co-owner.
Term Loan - Loan for a specified time period.
The Statute of Elizabeth - it was enacted in 1576 by the
Queen Elizabeth I. The Statute voids a transfer to a trust if the
transfer could be interpreted as intention to hinder, delay, or
defraud creditors, including potential future creditors. Some
Offshore Financial Centers (i.e. Nevis) declared The Statute
of Elizabeth null and void in their trust legislation.
Timing of Tests of Control - The AUDITOR must perform
tests of controls over a period of time that is adequate to
determine whether, as of the date specified in management's
report, the controls necessary for achieving the objectives of
the control criteria are operating effectively.
Total Gain - Excess of the proceeds realized on the sale of
either INVENTORY or noninventory goods.
Trade Date - Date when a SECURITY transaction is entered
into, to be settled on at a later date. Transactions involving
financial instruments are generally accounted for on the trade
date.
Transferred Basis - A transferred basis is the basis of
property in the hands of a transferor, donor or GRANTOR. In
this sense a prior owner's basis in the property is transferred to
the taxpayer. Transferred basis occurs in the following
transactions: GIFTS, transfers in trusts, certain transfers to
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controlled CORPORATIONS, contributions to PARTNERSHIPS and LIQUIDATING distributions from a corporation.
Transferee Liability - A person may be held LIABLE for
another taxpayer's delinquent taxes if:
1. The transferee received assets of the transferor-taxpayer;
and
2. The transferor was INSOLVENT at the time or was
rendered insolvent by that transfer or related series of
transfers. However the insolvency requirement does not apply
to GIFT taxes. The transferee is only liable to the extent of the
value of the property received from the transferor. Thus,
transferee liability merely provides a means for the IRS to
recover any assets the transferor-taxpayer attempts to transfer
to avoid paying taxes.
Treasury Bill - Short-term obligation that bears no
INTEREST and is sold at a discount.
Treasury Bond - Long-term obligation that matures more
than five years from issuance and bears INTEREST.
Treasury Instruments - Direct financial obligations of the
United States government. (See TREASURY BILL;
TREASURY BOND; TREASURY NOTE; TREASURY
STOCK.)
Treasury Note - Intermediate-term obligation that matures
one to five years from issuance and bears INTEREST.
Treasury Stock - Stock reacquired by the issuing company. It
may be held indefinitely, retired, issued upon exercise of
STOCK OPTIONS or resold.
Troubled Debt Restructuring - Agreement between
DEBTOR and CREDITOR which amends the terms of a
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DEBT that has little chance of being paid in accordance with
its contractual terms. The agreement may involve the transfer
of ASSETS in full or partial satisfaction of the debt.
Trust - Ancient legal practice where one person (the
GRANTOR) transfers the legal title to an ASSET, called the
principle or corpus, to another person (the TRUSTEE), with
specific instructions about how the corpus is to be managed
and disposed. A legal design placing ownership of property in
the name of one person, called a trustee, to be held by the
trustee for the use and benefit of some other person, called a
beneficiary. In some jurisdictions (i.e. Nevis) Trust Law
permits the Settlor and Beneficiary in a Trust be the same
person.
Trust Company - A company properly licensed by the
authorities to provide services of a Trustee.
Trustee - The person who administers and manages the
property transferred in a Trust. This person becomes a legal
owner of the property. In due time, a Trustee distributes the
property and/or relevant earnings under the trust among
beneficiaries.
U
Unaudited Financial Statements - FINANCIAL STATEMENTS which have not undergone a detailed AUDIT
examination by an independent CERTIFIED PUBLIC
ACCOUNTANT (CPA).
Unearned Income - Payments received for services which
have not yet been performed.
Uniform Accountancy Act (UAA) - The UAA is the
proposal for a new regulatory framework for the public
accounting profession which was developed jointly by the
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American Institute of Certified Public Accountants (AICPA)
and the National Association of State Boards of Accountancy
(NASBA). The new framework is intended to enhance
interstate reciprocity and practice across state lines by CPAs,
meet the future needs of the profession, respond to the
marketplace and protect the public that the profession serves.
Uniform Capitalization Rules - These are a set of rules
intended to be a single comprehensive set of rules to govern
the capitalization, or inclusion in INVENTORY of direct and
indirect cost of producing, acquiring and holding property.
Under the rules, taxpayers are required to capitalize the direct
costs and an allocable portion of the indirect costs attributable
to real and tangible personal property produced or acquired
for resale. The obvious effect of the uniform capitalization
rules is that taxpayers may not take current deductions for
these costs but instead must be recovered through
DEPRECIATION or AMORTIZATION.
Unqualified Opinion - AUDIT opinion not qualified for any
material scope restrictions nor departures from GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES (GAAP). The
AUDITOR may issue an unqualified opinion only when there
are no identified material weaknesses and when there have
been no restrictions on the scope of the auditor's work. Also
known as CLEAN OPINION.
Unrestricted Funds - Resources of a not-for-profit entity that
have no restrictions as to use or purpose. (See FUND
ACCOUNTING and RESTRICTED FUND.)
Use of Professional Skepticism when Evaluating the
Results of Testing - The AUDITOR must conduct the audit
of internal control over financial reporting and the audit of the
financial statements with professional skepticism, which is an
attitude that includes a questioning mind and a critical
assessment of audit evidence
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V
Valuation Allowance - Method of lowering or raising an
object's CURRENT VALUE by adjusting its acquisition cost
to reflect its market value by use of a CONTRA ACCOUNT.
Variable Rate Loan - Loan whose interest rate changes over
its life in relation to the level of an index.
Variance - Deviation or difference between an estimated
value and the actual value.
Venture Capital - Investment company whose primary
objective is capital growth. New ASSETS invested largely in
companies that are developing new ideas, products, or processes.
Vesting - Point at which certain benefits available to an
employee are no longer contingent on the employee
continuing to work for the employer.
W
Walkthroughs - The most effective means for an AUDITOR
to confirm his understanding how internal control over
financial reporting is designed and operates to evaluate and
test its effectiveness. It includes making inquiries of and
observing the personnel who actually perform the controls;
reviewing documents that are used in, and that result from, the
application of the controls; and comparing supporting
documentation to the accounting records. In a walkthrough,
the auditor traces a transaction from origination through the
company's information systems to the point where it is
reflected in the company's financial reports.
Walkthroughs provide the auditor with evidence to:
1. Confirm the auditor's understanding of the process flow of
transactions.
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2. Confirm the auditor's understanding of the design of
controls identified for all five components of internal control
over financial reporting, including those related to the
prevention or detection of fraud.
3. Confirm that the auditor's understanding of the process is
complete by determining whether all points in the process at
which misstatements related to each relevant financial
statement assertion that could occur have been identified.
4. Evaluate the effectiveness of the design of controls.
5. Confirm whether controls have been placed in operation.
Warrant - Option to purchase additional SECURITIES from
the issuer.
Wash Sale - A wash sale occurs if stock or securities are sold
at a LOSS and the seller acquires substantially identical stock
or SECURITIES 30 days before or after the sale. Stock or
securities for this purpose includes contracts or operations to
acquire or sell stock or securities. Losses incurred in a wash
sale cannot be deducted. It does not matter if the total 60 day
period begins in one tax year and ends in another. However,
the disallowed loss is not permanently lost. Instead, the basis
in the newly acquired stock or securities is the same basis as
of the stock or securities sold, adjusted by the difference in
price of the stock or securities.
Withholding - Amount withheld or deducted from employee
salaries by the employer and paid by the employer, for the
employee, to the proper authority.
Withholding Allowance - Each taxpayer is allowed to claim
a withholding allowance, which exempts a certain amount of
wages from being subject to WITHHOLDING. The
allowance is designed to prevent too much taxes being
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withheld from a taxpayers wages and a person can compute
this by completing form W-4 and submitting it to their
employer.
Working Capital - Excess of CURRENT ASSETS over
CURRENT LIABILITIES.
Working Papers - (1) Records kept by the AUDITOR of the
procedures applied, the tests performed, the information
obtained, and the pertinent conclusions reached in the course
of the AUDIT. (2) Any records developed by a CERTIFIED
PUBLIC ACCOUNTANT (CPA) during an audit.
Work in Progress - INVENTORY account consisting of
partially completed goods awaiting completion and transfer to
finished inventory.
Wrap-Around Mortgage - Second MORTGAGE which
conveniently expands the total amount of borrowing by the
mortgagor without disturbing the original mortgage.
Y
Yellow Book - Written by the GENERAL ACCOUNTING
OFFICE, the yellow book sets forth standards to be followed
in auditing the FINANCIAL STATEMENTS of entities that
receive federal financial assistance. "Yellow Book" is the
name given to "Government Auditing Standards" issued by
the Comptroller General of the United States which contains
standards for audits of government organizations, programs,
activities and functions, and of government assistance
received by contractors, nonprofit organizations and other
nongovernmental organizations.
Yield - Return on an INVESTMENT an investor receives
from DIVIDENDS or INTEREST expressed as a percentage
of the cost of the SECURITY.
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Yield to Maturity - Rate of return on a SECURITY to its
maturity, giving effect to the stated interest rate, accrual of
discount, or AMORTIZATION of PREMIUM.
Z
Zero-Coupon Bond - BOND on which the holder receives
only one payment at maturity which includes both
PRINCIPAL and INTEREST from issuance to maturity.
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APPENDIX VII. Financial terms and ratios
Business financial terms and ratios definitions
acid test - A stern measure of a company's ability to pay its
short term debts, in that stock is excluded from asset value.
(liquid assets/current liabilities) Also referred to as the Quick
Ratio.
assets - Anything owned by the company having a monetary
value; eg, 'fixed' assets like buildings, plant and machinery,
vehicles (these are not assets if rented and not owned) and
potentially including intangibles like trade marks and brand
names, and 'current' assets, such as stock, debtors and cash.
asset turnover - Measure of operational efficiency - shows
how much revenue is produced per £ of assets available to the
business. (sales revenue/total assets less current liabilities)
balance sheet - The Balance Sheet is one of the three
essential measurement reports for the performance and health
of a company along with the Profit and Loss Account and the
Cashflow Statement. The Balance Sheet is a 'snapshot' in time
of who owns what in the company, and what assets and debts
represent the value of the company. (It can only ever nbe a
snapshot because the picture is always changing.) The
Balance Sheet is where to look for information about shortterm and long-term debts, gearing (the ratio of debt to equity),
reserves, stock values (materials and finsished goods), capital
assets, cash on hand, along with the value of shareholders'
funds. The term 'balance sheet' is derived from the simple
purpose of detailing where the money came from, and where
it is now. The balance sheet equation is fundamentally:
(where the money came from) Capital + Liabilities = Assets
(where the money is now). Hence the term 'double entry' - for
every change on one side of the balance sheet, so there must
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be a corresponding change on the other side - it must always
balance. The Balance Sheet does not show how much profit
the company is making (the P&L does this), although
pervious years' retained profits will add to the company's
reserves, which are shown in the balance sheet.
budget -In a financial planning context the word 'budget' (as a
noun) strictly speaking means an amount of money that is
planned to spend on a particularly activity or resource, usually
over a trading year, although budgets apply to shorter and
longer periods. An overall organizational plan therefore
contains the budgets within it for all the different departments
and costs held by them. The verb 'to budget' means to
calculate and set a budget, although in a looser context it also
means to be careful with money and find reductions
(effectively by setting a lower budgeted level of expenditure).
The word budget is also more loosely used by many people to
mean the whole plan. In which context a budget means the
same as a plan. For example in the UK the Government's
annual plan is called 'The Budget'. A 'forecast' in certain
contexts means the same as a budget - either a planned
individual activity/resource cost, or a whole business/
corporate/organizational plan. A 'forecast' more commonly
(and precisely in my view) means a prediction of performance
- costs and/or revenues, or other data such as headcount, %
performance, etc., especially when the 'forecast' is made
during the trading period, and normally after the plan or
'budget' has been approved. In simple terms: budget = plan or
a cost element within a plan; forecast = updated budget or
plan. The verb forms are also used, meaning the act of
calculating the budget or forecast.
capital employed -The value of all resources available to the
company, typically comprising share capital, retained profits
and reserves, long-term loans and deferred taxation. Viewed
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from the other side of the balance sheet, capital employed
comprises fixed assets, investments and the net investment in
working capital (current assets less current liabilities). In
other words: the total long-term funds invested in or lent to
the business and used by it in carrying out its operations.
cashflow - The movement of cash in and out of a business
from day-to-day direct trading and other non-trading or
indirect effects, such as capital expenditure, tax and dividend
payments.
cashflow statement - One of the three essential reporting and
measurement systems for any company. The cashflow
statement provides a third perspective alongside the Profit and
Loss account and Balance Sheet. The Cashflow statement
shows the movement and availability of cash through and to
the business over a given period, certainly for a trading year,
and often also monthly and cumulatively. The availability of
cash in a company that is necessary to meet payments to
suppliers, staff and other creditors is essential for any business
to survive, and so the reliable forecasting and reporting of
cash movement and availability is crucial.
cost of debt ratio (average cost of debt ratio) - Despite the
different variations used for this term (cost of debt, cost of
debt ratio, average cost of debt ratio, etc) the term normally
and simply refers to the interest expense over a given period
as a percentage of the average outstanding debt over the same
period, ie., cost of interest divided by average outstanding
debt.
cost of goods sold (COGS) - The directly attributable costs of
products or services sold, (usually materials, labour, and
direct production costs). Sales less COGS = gross profit.
Effetively the same as cost of sales (COS) see below for fuller
explanation.
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cost of sales (COS) - Commonly arrived at via the formula:
opening stock + stock purchased - closing stock.Cost of sales
is the value, at cost, of the goods or services sold during the
period in question, usually the financial year, as shown in a
Profit and Loss Account (P&L). In all accounts, particularly
the P&L (trading account) it's important that costs are
attributed reliably to the relevant revenues, or the report is
distorted and potentially meaningless. To use simply the total
value of stock purchases during the period in question would
not produce the correct and relevant figure, as some product
sold was already held in stock before the period began, and
some product bought during the period remains unsold at the
end of it. Some stock held before the period often remains
unsold at the end of it too. The formula is the most logical
way of calculating the value at cost of all goods sold,
irrespective of when the stock was purchased. The value of
the stock attributable to the sales in the period (cost of sales)
is the total of what we started with in stock (opening stock),
and what we purchased (stock purchases), minus what stock
we have left over at the end of the period (closing stock).
current assets - Cash and anything that is expected to be
converted into cash within twelve months of the balance
sheet date.
current ratio - The relationship between current assets and
current liabilities, indicating the liquidity of a business, ie its
ability to meet its short-term obligations. Also referred to as
the Liquidity Ratio.
current liabilities - Money owed by the business that is
generally due for payment within 12 months of balance sheet
date. Examples: creditors, bank overdraft, taxation.
depreciation - The apportionment of cost of a (usually large)
capital item over an agreed period, (based on life expectancy
or obsolescence), for example, a piece of equipment costing
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£10k having a life of five years might be depreciated over five
years at a cost of £2k per year. (In which case the P&L would
show a depreciation cost of £2k per year; the balance sheet
would show an asset value of £8k at the end of year one,
reducing by £2k per year; and the cashflow statement would
show all £10k being used to pay for it in year one.)
dividend - A dividend is a payment made per share, to a
company's shareholders by a company, based on the profits of
the year, but not necessarily all of the profits, arrived at by the
directors and voted at the company's annual general meeting.
A company can choose to pay a dividend from reserves
following a loss-making year, and conversely a company can
choose to pay no dividend after a profit-making year,
depending on what is believed to be in the best interests of the
company. Keeping shareholders happy and committed to their
investment is always an issue in deciding dividend payments.
Along with the increase in value of a stock or share, the
annual dividend provides the shareholder with a return on the
shareholding investment.
earnings before.. - There are several 'Earnings Before..' ratios
and acronyms: EBT = Earnings Before Taxes; EBIT =
Earnings Before Interest and Taxes; EBIAT = Earnings
Before Interest after Taxes; EBITD = Earnings Before
Interest, Taxes and Depreciation; and EBITDA = Earnings
Before Interest, Taxes, Depreciation, and Amortization.
(Earnings = operating and non-operating profits (eg interest,
dividends received from other investments). Depreciation is
the non-cash charge to the balance sheet which is made in
writing off an asset over a period. Amortisation is the
payment of a loan in instalments.
fixed assets - Assets held for use by the business rather than
for sale or conversion into cash, eg, fixtures and fittings,
equipment, buildings.
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fixed cost - A cost which does not vary with changing sales or
production volumes, eg, building lease costs, permanent staff
wages, rates, depreciation of capital items.
FOB - 'free on board'- The FOB (Free On Board)
abbreviation is an import/export term relating to the point at
which responsibility for goods passes from seller (exporter) to
buyer (importer). It's in this listing because it's commonly
misunderstood and also has potentially significant financial
implications. FOB meant originally (and depending on the
context stills generally means) that the seller is liable for the
goods and is responsible for all costs of transport, insurance,
etc., until and including the goods being loaded at the
(nominated FOB) port. An importing buyer would typically
ask for the FOB price, (which is now now often linked to a
port name, eg., FOB Hamburg or FOB Vancouver), knowing
that this price is 'free' or inclusive of all costs and liabilities of
getting the goods from the seller to the port and on board the
craft or vessel. Logically FOB also meant and still means that
the seller is liable for any loss or damage up to the point that
the goods are loaded onto the vessel at the FOB port, and that
thereafter the buyer assumes responsibility for the goods and
the costs of transport and the liability. From the seller's point
of view an FOB price must therefore include/recover his costs
of transport from factory or warehouse, insurance and
loading, because the seller is unable to charge these costs as
extras once the FOB price has been stated. The FOB
expression originates particularly from the meaning that the
buyer is free of liability and costs of transport up to the point
that the goods are loaded on board the ship. In modern times
FOB also applies to freight for export by aircraft from
airports. In recent years the term has come to be used in
slightly different ways, even to the extent that other
interpretations are placed on the acronym, most commonly
'Freight On Board', which is technically incorrect. While
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technically incorrect also, terms such as 'FOB Destination'
have entered into common use, meaning that the insurance
liability and costs of transportation and responsibility for the
goods are the seller's until the goods are delivered to the
buyer's stipulated delivery destination. If in doubt ask exactly
what the other person means by FOB because the applications
have broadened. While liability and responsibility for goods
passes from seller to buyer at the point that goods are agreed
to be FOB, the FOB principle does not correlate to payment
terms, which is a matter for separate negotiation. FOB is a
mechanism for agreeing price and transport responsibility, not
for agreeing payment terms. In summary: FOB (Free On
Board), used alone, originally meant that the transportation
cost and liability for exported goods was with the seller until
the goods were loaded onto the ship (at the port of
exportation); nowadays FOB (Free On Board or the distorted
interpretation 'Freight On Board') has a wider usage - the
principle is the same, ie., seller has liability for goods,
insurance and costs of transport until the goods are loaded (or
delivered), but the point at which goods are 'FOB' is no longer
likely to be just the port of export - it can be any place that it
suits the buyer to stipulate. So, if you are an exporter, beware
of buyers stipulating 'FOB destination' - it means the exporter
is liable for the goods and pays transport costs up until
delivery to the customer.
gearing - The ratio of debt to equity, usually the relationship
between long-term borrowings and shareholders' funds.
goodwill - Any surplus money paid to acquire a company that
exceeds its net tangible assets value.
gross profit-Sales less cost of goods or services sold. Also
referred to as gross profit margin, or gross profit, and often
abbreviated to simply 'margin'. See also 'net profit'.
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initial public offering (ipo) - An Initial Public Offering (IPO
being the Stock Exchange and corporate acronym) is the first
sale of privately owned equity (stock or shares) in a company
via the issue of shares to the public and other investing
institutions. In other words an IPO is the first sale of stock by
a private company to the public. IPOs typically involve small,
young companies raising capital to finance growth. For
investors IPO's can risky as it is difficult to predict the value
of the stock (shares) when they open for trading. An IPO is
effectively 'going public' or 'taking a company public'.
letters of credit - These mechanisms are used by exporters
and importers, and usually provided by the importing
company's bank to the exporter to safeguard the contractual
expectations and particularly financial exposure of the
exporter of the goods or services. (Also called 'export letters
of credit, and 'import letters of credit'.) When an exporter
agrees to supply a customer in another country, the exporter
needs to know that the goods will be paid for. The common
system, which has been in use for many years, is for the
customer's bank to issue a 'letter of credit' at the request of the
buyer, to the seller. The letter of credit essentially guarantees
that the bank will pay the seller's invoice (using the
customer's money of course) provided the goods or services
are supplied in accordance with the terms stipulated in the
letter, which should obviously reflect the agreement between
the seller and buyer. This gives the supplier an assurance that
their invoice will be paid, beyond any other assurances or
contracts made with the customer. Letters of credit are often
complex documents that require careful drafting to protect the
interests of buyer and seller. The customer's bank charges a
fee to issue a letter of credit, and the customer pays this cost.
The seller should also approve the wording of the buyer's
letter of credit, and often should seek professional advice and
guarantees to this effect from their own financial services
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provider. In short, a letter of credit is a guarantee from the
issuing bank's to the seller that if compliant documents are
presented by the seller to the buyer's bank, then the buyer's
bank will pay the seller the amount due. The 'compliance' of
the seller's documentation covers not only the goods or
services supplied, but also the timescales involved, method
for, format of and place at which the documents are presented.
It is common for exporters to experience delays in obtaining
payment against letters of credit because they have either
failed to understand the terms within the letter of credit, failed
to meet the terms, or both. It is important therefore for sellers
to understand all aspects of letters of credit and to ensure
letters of credit are properly drafted, checked, approved and
their conditions met. It is also important for sellers to use
appropriate professional services to validate the authenticity
of any unknown bank issuing a letter of credit.
letters of guarantee - There are many types of letters of
guarantee. These types of letters of guarantee are concerned
with providing safeguards to buyers that suppliers will meet
their obligations or vice-versa, and are issued by the supplier's
or customer's bank depending on which party seeks the
guarantee. While a letter of credit essentially guarantees
payment to the exporter, a letter of guarantee provides
safeguard that other aspects of the supplier's or customer's
obligations will be met. The supplier's or customer's bank is
effectively giving a direct guarantee on behalf of the supplier
or customer that the supplier's or customer's obligations will
be met, and in the event of the supplier's or customer's failure
to meet obligations to the other party then the bank undertakes
the responsibility for those obligations.
Typical obligations covered by letters of guarantee are
concerned with:
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•
Tender Guarantees (Bid Bonds) - whereby the bank
assures the buyer that the supplier will not refuse a
contract if awarded.
•
Performance Guarantee - This guarantees that the
goods or services are delivered in accordance with
contract terms and timescales.
•
Advance Payment Guarantee - This guarantees that
any advance payment received by the supplier will be
used by the supplier in accordance with the terms of
contract between seller and buyer.
There are other types of letters of guarantee, including
obligations concerning customs and tax, etc, and as with
letters of credit, these are complex documents with extremely
serious implications. For this reasons suppliers and customers
alike must check and obtain necessary validation of any
issued letters of guarantee.
liabilities - General term for what the business owes.
Liabilities are long-term loans of the type used to finance the
business and short-term debts or money owing as a result of
trading activities to date. Long term liabilities, along with
Share Capital and Reserves make up one side of the balance
sheet equation showing where the money came from. The
other side of the balance sheet will show Current Liabilities
along with various Assets, showing where the money is now.
liquidity ratio - Indicates the company's ability to pay its
short term debts, by measuring the relationship between
current assets (ie those which can be turned into cash) against
the short-term debt value. (current assets/current liabilities)
Also referred to as the Current Ratio.
net assets (also called total net assets) - Total assets (fixed
and current) less current liabilities and long-term liabilities
that have not been capitalised (eg, short-term loans).
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net current assets - Current Assets less Current Liabilities.
net profit - Net profit can mean different things so it always
needs clarifying. Net strictly means 'after all deductions' (as
opposed to just certain deductions used to arrive at a gross
profit or margin). Net profit normally refers to profit after
deduction of all operating expenses, notably after deduction
of fixed costs or fixed overheads. This contrasts with the term
'gross profit' which normally refers to the difference between
sales and direct cost of product or service sold (also referred
to as gross margin or gross profit margin) and certainly before
the deduction of operating costs or overheads. Net profit
normally refers to the profit figure before deduction of
corporation tax, in which case the term is often extended to
'net profit before tax' or PBT.
opening/closing stock-See explanation under Cost of Sales.
p/e ratio (price per earnings) - The P/E ratio is an important
indicator as to how the investing market views the health,
performance, prospects and investment risk of a public
company listed on a stock exchange (a listed company). The
P/E ratio is also a highly complex concept - it's a guide to use
alongside other indicators, not an absolute measure to rely on
by itself. The P/E ratio is arrived at by dividing the stock or
share price by the earnings per share (profit after tax and
interest divided by the number of ordinary shares in issue). As
earnings per share are a yearly total, the P/E ratio is also an
expression of how many years it will take for earnings to
cover the stock price investment. P/E ratios are best viewed
over time so that they can be seen as a trend. A steadily
increasing P/E ratio is seen by the investors as increasingly
speculative (high risk) because it takes longer for earnings to
cover the stock price. Obviously whenever the stock price
changes, so does the P/E ratio. More meaningful P/E analysis
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is conducted by looking at earnings over a period of several
years. P/E ratios should also be compared over time, with
other company's P/E ratios in the same market sector, and
with the market as a whole. Step by step, to calculate the P/E
ratio:
1. Establish total profit after tax and interest for the past
year.
2. Divide this by the number of shares issued.
3. This gives you the earnings per share.
4. Divide the price of the stock or share by the earnings
per share.
5. This gives the Price/Earnings or P/E ratio.
profit and loss account (P&L) - One of the three principal
business reporting and measuring tools (along with the
balance sheet and cashflow statement). The P&L is essentially
a trading account for a period, usually a year, but also can be
monthly and cumulative. It shows profit performance, which
often has little to do with cash, stocks and assets (which must
be viewed from a separate perspective using balance sheet
and cashflow statement). The P&L typically shows sales
revenues, cost of sales/cost of goods sold, generally a gross
profit margin (sometimes called 'contribution'), fixed
overheads and or operating expenses, and then a profit before
tax figure (PBT). A fully detailed P&L can be highly
complex, but only because of all the weird and wonderful
policies and conventions that the company employs. Basically
the P&L shows how well the company has performed in its
trading activities.
overhead - An expense that cannot be attributed to any one
single part of the company's activities.
378
quick ratio - Same as the Acid Test. The relationship
between current assets readily convertible into cash (usually
current assets less stock) and current liabilities. A sterner test
of liquidity.
reserves - The accumulated and retained difference between
profits and losses year on year since the company's formation.
restricted funds - These are funds used by an organisation
that are restricted or earmarked by a donor for a specific
purpose, which can be extremely specific or quite broad, eg.,
endowment or pensions investment; research (in the case of
donations to a charity or research organisation); or a particular
project with agreed terms of reference and outputs such as to
meet the criteria or terms of the donation or award or grant.
The source of restricted funds can be from government,
foundations and trusts, grant-awarding bodies, philanthropic
organisations, private donations, bequests from wills, etc. The
practical implication is that restricted funds are ring-fenced
and must not be used for any other than their designated
purpose, which may also entail specific reporting and
timescales, with which the organisation using the funds must
comply. A glaring example of misuse of restricted funds
would be when Maxwell spent Mirror Group pension funds
on Mirror Group development.
return on capital employed (ROCE) - A fundamental
financial performance measure. A percentage figure representing profit before interest against the money that is
invested in the business. (profit before interest and tax/capital
employed x 100)
return on investment - Another fundamental financial and
business performance measure. This term means different
things to different people (often depending on perspective and
what is actually being judged) so it's important to clarify
379
understanding if interpretation has serious implications. Many
business managers and owners use the term in a general sense
as a means of assessing the merit of an investment or business
decision. 'Return' generally means profit before tax, but
clarify this with the person using the term - profit depends on
various circumstances, not least the accounting conventions
used in the business. In this sense most CEO's and business
owners regard ROI as the ultimate measure of any business or
any business proposition, after all it's what most business is
aimed at producing - maximum return on investment, otherise
you might as well put your money in a bank savings account.
Strictly speaking Return On Investment is defined as:
- Profits derived as a proportion of and directly attributable to
cost or 'book value' of an asset, liability or activity, net of
depreciation.
In simple terms this is the profit made from an investment.
The 'investment' could be the value of a whole business (in
which case the value is generally regarded as the company's
total assets minus intangible assets, such as goodwill,
trademarks, etc and liabilities, such as debt. N.B. A
company's book value might be higher or lower than its
market value); or the investment could relate to a part of a
business, a new product, a new factory, a new piece of plant,
or any activity or asset with a cost attached to it. The main
point is that the term seeks to define the profit made from a
business investment or business decision. Bear in mind that
costs and profits can be ongoing and accumulating for several
years, which needs to be taken into account when arriving at
the correct figures.
share capital - The balance sheet nominal value paid into the
company by shareholders at the time(s) shares were issued.
shareholders' funds - A measure of the shareholders' total
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interest in the company represented by the total share capital
plus reserves.
t/t (telegraphic transfer) - International banking payment
method: a telegraphic transfer payment, commonly
used/required for import/export trade, between a bank and an
overseas party enabling transfer of local or foreign currency
by telegraph, cable or telex. Also called a cable transfer. The
terminology dates from times when such communications
were literally 'wired' - before wireless communications
technology.
variable cost - A cost which varies with sales or operational
volumes, eg materials, fuel, commission payments.
working capital - Current assets less current liabilities,
representing the required investment, continually circulating,
to finance stock, debtors, and work in progress.
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APPENDIX VIII. Parts of a business letter
A business letter has five main parts:
* the heading
* the date
* the opening
* the body
* the closing.
The Heading
This is your name and address. You can use your fancy
letterhead or just type up your business name and address.
The letterhead address can be positioned anywhere on the top
of the page: centered, left side or right side. However, if
you're typing the business address, it should be located in the
top right-hand corner.
Date
The date line is used to indicate the date the letter was written.
However, if your letter is completed over a number of days,
use the date it was finished in the date line. When writing to
companies within the United States, use the American date
format. (The United States-based convention for formatting a
date places the month before the day. For example: June 11,
2001. ) Write out the month, day and year two inches from the
top of the page. Depending which format you are using for
your letter, either left justify the date or center it horizontally.
Sender’s Address
Including the address of the sender is optional. If you choose
to include it, place the address one line below the date. Do not
write the sender’s name or title, as it is included in the letter’s
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closing. Include only the street address, city and zip code.
Another option is to include the sender’s address directly after
the closing signature.
Inside Address
The inside address is the recipient’s address. It is always best
to write to a specific individual at the firm to which you are
writing. If you do not have the person’s name, do some
research by calling the company or speaking with employees
from the company. Include a personal title such as Ms., Mrs.,
Mr., or Dr. Follow a woman’s preference in being addressed
as Miss, Mrs., or Ms. If you are unsure of a woman’s
preference in being addressed, use Ms. If there is a possibility
that the person to whom you are writing is a Dr. or has some
other title, use that title. Usually, people will not mind being
addressed by a higher title than they actually possess. To
write the address, use the U.S. Post Office Format. For
international addresses, type the name of the country in allcapital letters on the last line. The inside address begins one
line below the sender’s address or one inch below the date. It
should be left justified, no matter which format you are using.
Salutation
Use the same name as the inside address, including the
personal title. If you know the person and typically address
them by their first name, it is acceptable to use only the first
name in the salutation (i.e., Dear Lucy:). In all other cases,
however, use the personal title and full name followed by a
colon. Leave one line blank after the salutation.
If you don’t know a reader’s gender, use a nonsexist
salutation, such as "To Whom it May Concern." It is also
acceptable to use the full name in a salutation if you cannot
determine gender. For example, you might write Dear Chris
Harmon: if you were unsure of Chris's gender.
383
Body
For block and modified block formats, single space and left
justify each paragraph within the body of the letter. Leave a
blank line between each paragraph. When writing a business
letter, be careful to remember that conciseness is very
important. In the first paragraph, consider a friendly opening
and then a statement of the main point. The next paragraph
should begin justifying the importance of the main point. In
the next few paragraphs, continue justification with
background information and supporting details. The closing
paragraph should restate the purpose of the letter and, in some
cases, request some type of action.
Closing
The closing begins at the same horizontal point as your date
and one line after the last body paragraph. Capitalize the first
word only (i.e., Thank you) and leave four lines between the
closing and the sender’s name for a signature. If a colon
follows the salutation, a comma should follow the closing;
otherwise, there is no punctuation after the closing.
Enclosures
If you have enclosed any documents along with the letter,
such as a resume, you indicate this simply by typing
Enclosures one line below the closing. As an option, you may
list the name of each document you are including in the
envelope. For instance, if you have included many documents
and need to insure that the recipient is aware of each
document, it may be a good idea to list the names.
Typist initials
Typist initials are used to indicate the person who typed the
letter. If you typed the letter yourself, omit the typist initials.
384
If your computer is equipped with Microsoft Office 2000, the
Letter Wizard can be used to take much of the guesswork out
of formatting business letters. To access the Letter Wizard,
click on the Tools menu and then choose Letter Wizard. The
Wizard will present the three styles mentioned here and input
the date, sender address and recipient address into the selected
format. Letter Wizard should only be used if you have a basic
understand of how to write a business letter. Its templates are
not applicable in every setting. Therefore, you should consult
a business writing handbook if you have any questions or
doubt the accuracy of the Letter Wizard.
Another important factor in the readability of a letter is the
chosen font. The generally accepted font is Times New
Roman, size 12, although other fonts such as Arial may be
used. When choosing a font, always consider your audience.
If you are writing to a conservative company, you may want
to use Times New Roman. However, if you are writing to a
more liberal company, you have a little more freedom when
choosing fonts.
As far as punctuation after the salutation and closing is
concerned, the standard is to use a colon after the salutation
(never a comma) and a comma after the closing. There is also
a less accepted format, known as open punctuation, in which
punctuation is excluded after the salutation and the closing.
Useful Key Phrases
The Reason for Writing
I am writing to enquire about
apologize for
confirm
385
Requesting
Could you possibly?
I would be grateful if you could
Agreeing to Requests
I would be delighted to
Giving Bad News
Unfortunately
I am afraid that
Enclosing Documents
I am enclosing
Please find enclosed
Enclosed you will find
Closing Remarks
Thank you for your help. Please contact us again if we can
help in any way.
there are any problems.
you have any questions.
Reference to Future Contact:
I look forward to ...
hearing from you soon.
meeting you next Tuesday.
seeing you next Thursday.
The Finish: Yours faithfully, (If you don't know the name of
the person you're writing to) Yours sincerely, (If you know
the name of the person you're writing to) Best wishes,
Best regards, (If the person is a close business contact or friend)
386
Writing a Cover Letter when Applying for a Job
The cover letter should always be included when sending
your resume or CV for a possible job interview. This letter of
application serves the purpose or introducing you and asking
for an interview. Here is an outline to writing a successful
cover letter. To the right of the letter, look for important notes
concerning the layout of the letter signaled by a small number
in red.
1Begin your cover letter by placing your address first,
followed by the address of the company you are writing to.
2Use complete title and address; don't abbreviate.
3Always make an effort to write directly to the person in
charge of hiring.
4Always sign letters
Cover Letter Outline
2520 Vista Avenue (1)
Olympia, Washington 98501
April 19, 2001
Mr. Bob Trimm, Personnel Manager ( 2)
Ideas Inc.
587 Lilly Road
Dear Mr. Trimm: (3)
Opening paragraph - Use one of the following to bring
yourself to the attention of the reader and make clear what job
you are applying for:
A. Summarize the opening
B. Name the opening
387
C. Request an opening
D. Question the availability of an opening
Middle paragraph(s) - Use one of the following in each of
your middle paragraphs to provide the reader with plenty of
reasons to invite you to an interview:
A.
B.
C.
D.
E.
F.
Education
Work experience
Ability to work with others and/or alone
Interest in your field
Interest in the company
Responsibilities in previous positions
Closing paragraph - Use the closing paragraph to ensure
action on the part of the reader
The last paragraph needs to help ensure that action is taken.
You can ask for an interview appointment time, stating that
you will be happy to come to the employer's office when
convenient. Make it easy for the reader to follow-up by
providing your telephone number and email address.
Sincerely,
Kenneth Beare (4)
Enclosure
Here is an example of a sample cover letter requesting a
position. Before taking a look at the letter, here are some
useful key phrases to use in your own cover letters.
Useful Key Phrases
•
•
•
Please accept this letter as an expression of interest in
the position of...
I have enclosed a copy of my resume for your review.
...and believe I possess the right combination
of....skills.
388
•
•
•
My current position .... has provided the opportunity to ...
I would welcome the opportunity to personally discuss
my potential contributions to your company with you.
I look forward to your reply.
Cover Letter
2520 Vista Avenue
Olympia, Washington 98501
April 19, 2001
Mr. Bob Trimm, Personnel Manager
Importers Inc.
587 Lilly Road
Dear Mr. Trimm:
Please accept this letter as an expression of interest in the
position of Areas Sales Manager
I have enclosed a copy of my resume for your review. I am
familiar with the requirements for success in the Sales
profession and believe I possess the right combination of
marketing and management skills.
My current position coordinating two local area sales teams
has provided the opportunity to work in a high-pressure, team
environment, where it is essential to be able to work closely
with my colleagues in order to meet sales deadlines.
Thank you for your time and consideration. I would welcome
the opportunity to personally discuss my potential
contributions to your company with you. Please telephone me
at (360) 352-0259 after 4.00 p.m. to suggest a time that we
may meet. I look forward to your reply.
Sincerely,
Kenneth Beare
389
Enclosure
It is very important to make a good impression when responding
to enquiries from potential customers. Of course, the best
impression will be made by providing the materials or information that the perspective client has asked for, this positive
impression will be improved by a well written response.
Remember to place your or your company's address at the top
of the letter (or use your company's letterhead) followed by
the address of the company you are writing to. The date can
either be placed double spaced down or to the right. You can
also include a reference number for correspondence.
Here is an example of a sample cover letter requesting a
position. Before taking a look at the letter, here are some
useful key phrases to use in your own cover letters.
Business Letter Writing: Enquiries - Asking for Information
We write an enquiry when we want to ask for more
information concerning a product, service or other
information about a product or service that interests us. These
letters are often written in response to an advertisement that
we have seen in the paper, a magazine, a commercial on
television when we are interested in purchasing a product, but
would like more information before making a decision.
Remember to place your or your company's address at the top
of the letter (or use your company's letterhead) followed by
the address of the company you are writing to. The date can
either be placed double spaced down or to the right.
Important Language to Remember
•
•
The Start: Dear Sir or Madam
To Whom It May Concern - (very formal as you do
not know the person to whom you are writing)
390
•
•
•
•
•
•
Giving Reference: With reference to your advertisement (ad) in...
Regarding your advertisement (ad) in ...
Requesting a Catalogue, Brochure, Etc.: After the
reference, add a comma and continue - ... , would
(Could) you please send me ...
Requesting Further Information: I would also like
to know ...
Could you tell me whether ...
Signature: Yours faithfully - (very formal as you do
not know the person to whom you are writing)
RECOMMENDATION LETTERS
Guidelines for Writing Letters of Recommendation
Before writing the letter:
•
•
•
In most cases, agree to write a letter of recommendation only if you can honestly write a supportive
letter. If you cannot portray an individual positively,
decline to write the recommendation.
Ask for a current resume and as complete a description as possible of the position or program to which
the person is applying.
Assemble and review all other relevant information
you may have about the person you are recommending. It is often easy to overlook some important
accomplishment.
Writing the letter:
•
Present the person truthfully but positively. A
recommendation that paints an unrealistic picture of a
candidate may be discounted. A recommendation that
focuses on negative qualities may do more harm than
intended.
391
•
•
•
•
Tailor the recommendation to the position. A letter
recommending an individual for a job as a camp
counselor should contain different information from
that in a letter recommending the same individual for a
job as a computer programmer.
Begin the letter by describing how you know the
individual you are recommending and the specific
contexts upon which you are basing your evaluation.
In what situations have you known the individual? For
how long? How closely?
Present the individual's general qualities relevant to
the position along with one or two detailed examples.
Including vivid detail will make the recommendation
much more effective.
In most cases, a letter of recommendation should
consist of three or four paragraphs and not be over one
page in length.
Reference letters structure/template
•
•
•
•
•
•
•
•
•
Addressee name and address if known
Date
Salutation ('To whom it may concern', or 'Dear Sir or
Madam', or 'Dear <title> <surname>')
Confirm dates, job title(s) capacity, and salary and
benefits details if required/appropriate.
Confirm that the person's performance and attitude
was (at all times) satisfactory/exceeded expectations
or standards.
Briefly explain the person's responsibilities (optional)
Briefly describe their skills/qualifications/strengths/
characteristics (optional)
State that you would willingly re-employ the person if
the opportunity arose
(optional, and very re-assuring for the reader)
392
•
•
Offer to provide more information if required (optional)
Yours faithfully (or 'Yours sincerely' if writing to a
named addressee)
N.B. It's a matter for your own discretion how much praise
and positive information to include in the reference letter,
hence the optional items.
•
professional/academic qualities
Is this person a leader?
Is this person a strong team player?
Is this person a keen analytical thinker?
Is this person capable of conducting sophisticated research?
•
specific skills
Strong communication skills?
Fluency in certain languages?
•
personal qualities
Does this person get along with peers?
Does this person have a good sense of humor?
•
past accomplishments
What are the principal two or three accomplishments this
person has achieved under my guidance?
•
weaknesses
What are some points this person must address to advance
his/her career?
How well does this person learn from past mistakes?
•
future potential
What do I believe this person is capable of achieving?
your logo, address, etc)
393
Employment reference letter template sample
Date
To whom it may concern,
I confirm that (name) is/was employed as (position) with this
organisation from (date) to (date/the present day), and was/is
paid (salary, plus bonus and benefits as applicable).
Their job of (position) carries the following responsibilities
(describe briefly the job). (Name) is skilled in (details of
skills) and is also (characteristics – e.g. reliable dependable,
a good communicator, etc).
I would happily re-employ (name) as I consider him/her to be
a valuable member of the team, who consistently achieved
good results and delivers all expectations.
Yours faithfully, etc
Confidential - Request for Reference
date...............
name of applicant..............
The above has applied for a job as ................................ with
us and has suggested you might provide a reference, or has
agreed that we can contact you for one. I'd be grateful for you
to provide whatever details you feel able to according to the
criteria below. Please don't write anything that might
compromise you or your organisation (if applicable), although
where clear evidence exists of significant negative history,
especially of a serious nature, then we'd be grateful such
information.
If you'd prefer to speak on the phone please call me on
..................
394
Delete/ignore as applicable.
1. The above person was/is employed with us as
.............................................. date(s) ........................
(provide estimates if precise dates are not readily available)
2. General character
3. Attitude
4. Relationships with others/peers/subordinates
5. Team-working
6. Personal integrity and honesty
6. Reliability
7. Calmness under pressure
8. Competence (state skills if appropriate..........................)
9. Ambition
10. Overall performance in past role(s) with your organisation
11. Qualifications/Training attained
12. Why did the person leave?
13. Would you re-employ the person if a suitable vacancy
existed?
14. Any other comments?
15. Under the Data Protection Act (UK) the person named
above would normally have access to the information
provided here if requesting it from the receiving organisation.
The organisation providing the reference is exempt under the
Data Protection Act - but the organisation receiving the
reference is not. If there are strong reasons for protecting
395
confidentiality (risk to referee, etc) please state them here. For
your information the law relating to data protection and
references is explained at www.ico.gov.uk.
Respondent's/Referee's signature ........................... date...........
Respondent's/Referee's name and title.......................................
On behalf of (employer/organisation, if applicable) .............
..........................................
Please return this form to .....................................
Reference number ...............................................
Contact details of sender of this request (email, phone, etc)
.......................................................
Please make a copy of your reply for your own records and if
in doubt about anything you'd like to state on this form please
seek advice before writing and sending a response.
Thank you for your assistance.
Sample College Recommendation
To Whom It May Concern,
“Alicia Stone is an exceptional young lady. Most everyone
knows of her intellectual acumen, lofty ambitions, dancing
abilities, and kindness - indeed, she is a sort of legend in her
small hometown of Northfolk - but few know of the struggle
Alicia endured during her middle years of high school. Alicia
had a close friend, Lori, whom she had met at summer camp.
She and Lori had grown very close during the first two years
of high school.
During the middle of tenth grade, Alicia received news that
396
Lori was suffering from a rare degenerative disease. It was
terminal, Alicia was told. Alicia did not cry. She did not even
take a moment to worry about how this might affect her. She
simply called me, her principal, and asked if she could miss a
few days of school, explaining to me the grave situation.
I told her that, of course, she may miss school, provided that
she make up her work, which she assured me she would, and
which I already knew she would without asking.
Then, before she hung up, Alicia asked me to pray on her
friend's behalf, and said, "I can go on without Lori - I have
many friends and I will mourn but I have a wonderful life.
Lori is suffering so much, though, and when it's all over, that
will be it for her. And she is her mother's only child, how will
her mom go on." I was so impressed that Alicia was thinking
about everyone affected except herself: Lori, Lori's mother,
but not Alicia Stone. Such maturity. Alicia knew she had a
wonderful life, she had a strong Faith, but she felt for others
so profoundly.
Alicia visited Lori often for several months, always bringing
her cards and flowers and of course, good cheer. Lori finally
passed away that Spring, and Alicia made sure to visit Lori's
mother every week that following summer.
You will read of Alicia's grades and scores and sports
abilities, of her awards and accolades; I wanted to relate this
episode, as it characterizes what this remarkable young lady is
really all about. As she graduates high school, I and all of
Northfolk are so sad to see Alicia go, but realize that she is
destined to effect great things far beyond the narrow confines
of our small Rhode Island town.”
Sincerely,
Taryn Decker
Principal, Northfolk High School
397
ANSWER KEYS TO TESTS
ITEMS
Items
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
I
a
a
a
d
b
c
d
d
d
b
d
b
c
c
a
b
c
a
b
b
b
c
d
b
d
a
b
d
d
a
I
II
c
c
a
b
b, d
b
b
c
b
a
b
a
a
a
c
a
d
b
c
d
c
c
c
b
b
a
II
III
c
a
a
c
d
c
d
b
d
d
a
d
a
a
d
d
c
b
a
d
b
b
d
c
a
c
b
a
c
c
III
IV
a
c
a
c
a
b
a
b
b
c
a
b
b
b
c
c
a
b
a
c
b
a
c
a
d
c
b
c
c
c
IV
UNIT
V VI
a
c
d
a
b
c
d
d
b
b
a
c
b
d
d
a
a
b
d
a
b
b
a
d
c
a
a
d
b
a
b
c
b
c
b
c
b
d
a
c
a
a
a
c
c
c
b
a
b
b
d
b
d
b
a
c
d
c
c
a
V VI
UNIT
398
VII VIII IX
b
c
b
c
b
a
a
a
d
b
c
a
a
b
b
b
d
a
c
c
d
a
d
d
c
a
a
b
d
d
c
a
b
a
d
b
b
b
d
b
d
d
b
b
b
d
d
a
b
c
c
c
a
b
a
c
d
d
b
a
c
d
c
b
c
b
b
d
d
b
b
d
a
a
b
a
c
c
a
d
d
c
c
c
b
d
b
d
c
d
VII VIII IX
X Items
c
1.
a
2.
d
3.
d
4.
b
5.
b
6.
c
7.
d
8.
c
9.
a
10.
d
11.
b
12.
c
13.
b
14.
d
15.
c
16.
d
17.
b
18.
d
19.
c
20.
d
21.
a
22.
c
23.
d
24.
d
25.
b
26.
c
27.
d
28.
b
29.
d
30.
X
Bibliography:
1. Chilver, J. - “English for business”, DP Publications Ltd,
1992
2. Chiriacescu, A., Mureşan, L. - “Corespondenţă de
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399
E. Susarencu, E. Bocan
BUSINESS COMMUNICATION
IN ENGLISH
Format A5. Coli de autor 10,5.
Centrul editorial UASM
MD-2049, or. Chişinău, str. Mirceşti, 42
tel.: (373 22) 432 575
fax: (373 22) 432 659
400

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