Market structure

 

THE FINANCIAL CONTROL OF THE BUSINESS

Words and Expressions

application of funds – использование денежных средств

assets – средства, фонды

assets and liabilities – актив и пассив

balance sheet – бухгалтерский баланс, баланс компании

bank overdraft – превышение кредита (в банке)

borrowed funds – заимствованные фонды, заемные средства

bridge cash flow problem – устранить проблему дефицита денежных средств

budget – бюджет

budget – предусматривать в бюджете, составлять бюджет

budgetary process – процесс формирования бюджета

budgeting – составление (формирование) бюджета, финансовое планирование,

cash flow forecasting – прогноз движения денежной наличности

continual flow of money – постоянный круговорот денег

cost centres – бюро калькуляций

current assets – оборотные фонды, оборотные средства (денежные средства, вложенные в запасы сырья, материалов, топлива, готовой продукции)

current liabilities – краткосрочные обязательства

day-to-day – повседневный

debtor policy – политика в отношении должников

existing liabilities – непогашенные долговые обязательства

financial control – управление финансами, финансовый контроль

forecast – прогноз, прогнозирование

interest charges – расходы по уплате процентов; процент по займам

prevail – преобладать, превалировать; доминировать

profit and loss account – счет прибылей и убытков

provided – при условии, если только; в том случае, если

raise the finance – привлекать фонды, получать ссуду

regarding – относительно, касающийся

solvent – платежеспособный; кредитоспособный

source of finance – источник финансирования

supplement cash flow – увеличить поток денежных средств

system of stock control – система управления запасами

target – цель, мишень; план; задание

trading activities – торговые мероприятия, торговая деятельность

working capital – оборотный капитал

 

Financial control means the directing and monitoring of the financial resources within the business.

In order to make financial control possible it is first necessary to set objectives and targets within which each department is expected to work. The process is known as budgeting and is central to financial management.

Essentially a budget is a financial expression of intentions or expectations. Budgeting occurs at several levels within the business and over different time scales. However, common to all budgets is that they relate to the future and that they are therefore based upon forecasts rather than facts. This is in contrast to the balance sheet and the profit and loss account, which relate to the businesses past performance.

The preparation of a budget consists of a number of stages, which can be expressed as the following sequence.

1. Information. A department will start its budgetary process by looking at the information relating to its present situation. For example, in the case of the Sales Department this means analyzing the current sales figures, identifying trends and taking care to interpret any figures, which may be result of unusual circumstances.

2. Forecasts. The next stage is to look forward to the period under consideration and try to estimate as accurately as possible the situation, which will prevail in the future, e.g. estimate the amount of business is likely to sell over the coming year. Experience will be of great help here but other techniques may also be employed, e.g. market research and statistical analysis. Where accurate predictions are difficult to make it is common to prepare more than one set of forecasts, e.g. an optimistic forecast and a more pessimistic one.

3. Objectives. Once a business has framed its various forecasts, e.g. production, sales, marketing and so on, then it is possible to set realistic performance objectives. These will normally take the form of a series of targets that each department is expected to meet, e.g. how much is to be produced, the increase in sales the business is aiming for, etc.

4. The budget. The final stage of the process is to budget to meet the business's performance targets. This means setting out the level of expenditure within which each department or sub-department (usually known as cost centres) will have to work. The materials budget will be agreed on the basis of the production targets, the marketing budget on the basis of the sales target and so on. It is very important that all the various parts of the budget are carefully coordinated. It obviously makes no sense to budget to sell 100,000 units if a production target of only 80,000 has been set. Therefore, at each stage of the budgetary process close interdepartmental consultation will be necessary.

Once the budget has been set up there must be sufficient funds flowing into the business to meet the necessary expenditures incurred during its day-to-day trading activities. This process is called a continual flow of money through the business.

The sale of business's goods (or services) generates finance which is used to purchase more materials, pay wages and so on in order to generate more production, more sales and hence more income. Provided income from sales is sufficient to meet this necessary immediate expenditures then the business can continue to trade.

The business is said to be solvent. If the business is successful then the amount received from sales will be greater than the costs of production and therefore a profit will be made. The profit then can be used to reward the owner(s) and possibly improve or expand the business in order to generate higher profits in the future.

The items which change continually during the normal trading activities of the business are known collectively as the business's working capital. Working capital can be defined as the current assets available to the business minus any current liabilities on these assets.

Current liabilities are the short-term debts of the business which will have to be paid in the near future from current assets. The items making up current liabilities are the various sums owed to the business's creditors.

To ensure the efficient operation of the business, working capital needs to be carefully managed. This involves a system of stock control, a debtor policy and cash flow forecasting.

Businesses require finance for a wide variety of reasons and most businesses can obtain finance from a number of different sources. Therefore, decisions have to be made regarding the most appropriate source of finance. The provision of advice concerning the best method of financing different aspects of business activity is one of the key responsibilities of the Finance Department. When considering which method of finance is most suitable for any type of business activity, a number of factors must be taken into account:

1. The purpose for which finance is required. The reason a business requires finance – the application of funds – is often the most important factor in determining how the finance will be obtained – the source of funds. This means that funds required to bridge a temporary cash flow problem are likely to be sought from a different source than funds for capital expansion.

2. The cost of the finance. Certain types of finance are expensive to raise, e.g. an issue of new shares. Other forms of finance can be expensive to service, e.g. interest charges on borrowed funds. The various costs must be carefully considered to ensure the business is obtaining its finance as cheaply as possible.

3. The availability of finance. Some sources of finance are not available to all businesses and this restricts the choice of funding.

4. The present financial structure of the business. It is important to take account of the existing liabilities of the business when considering further finance. The capital gearing of the business is particularly important in this respect.

5. How quickly the finance is required. If the funds are needed immediately, e.g. to supplement cash flow, then the choice is likely to be restricted to a small number of sources, e.g. a bank overdraft. The more time the business has to plan for its financial needs, the wider the choice will be.

Finally, it should be noted that the larger the business, the greater the number of possible sources of funds available. Small firms face particular difficulties in raising the finance they need. This is one of the major reasons preventing the growth and development of such businesses.

 

Translate the sentences into English paying special attention to the expressions in bold type.

1. Выбирая оптимальный метод финансирования, следует принять во внимание ряд факторов.
2. После того как бюджет согласован, он используется для контроля за деятельностью всех отделов компании.
3. Следует отметить, что, чем больше предприятие, тем больше у него выбор потенциальных источников финансирования.
4. Следовательно, нужно принять решение относительно наиболее целесообразного источника финансирования.
5. Малые предприятия сталкиваются с трудностями в получении финансовых средств, в которых они нуждаются.

 

TYPES OF FINANCIAL OPERATIONS

Words and Expressions

borrow – занимать деньги; заимствовать; брать взаймы; брать в кредит

borrower – заемщик; берущий взаймы

capacity to pay – платежеспособность

character – репутация

charge interest – начислять проценты, взыскивать проценты

collateral – имущественный залог; дополнительное обеспечение; гарантия, поручительство (финансовое)

college tuition payment – плата за обучение в колледже

commercial bank – коммерческий банк

credit – кредит; долг

credit history – кредитная история (записи займов и выплат по ним определенного лица)

credit payments – выплаты по кредиту

credit rating – оценка кредитоспособности

credit risk – кредитный риск

disposable income – доход, остающийся после уплаты налогов, чистый доход

down payment – первоначальный взнос, первая выплата, аванс (напр, при покупке в рассрочку)

forfeit – лишиться в результате конфискации, потерять право на что-л.

home mortgage – ипотека; залог; заклад; закладная

insurance payment – страховой платеж

installment loan – ссуда с оплатой в рассрочку

interest – проценты (на капитал)

interest rate – процентная ставка

lender – заимодавец, кредитор; ростовщик

loan – заем; ссуда; кредит

loan period – срок возвращения займа

meet retirement needs – оплачивать пенсионные нужды

money market account – накопительный счет, депозитный счет денежного рынка

mortgage – заклад; ипотека, закладная

mortgagee – кредитор по закладной

NOW (negotiable order of withdrawal) account – текущий счет с выплатой процентов и списанием по безналичным расчетам (типа чеков)

passbook savings – сбережения на банковской сберегательной книжке

passbook account – сберегательный счет с выдачей сберегательной книжки

principal – основная сумма, капитал (сумма, на которую начисляются проценты)

principal and interest – капитал и проценты

pool of money – общий денежный фонд; объединенный резерв капитала

real property – недвижимое имущество

regular savings account – обычный сберегательный счет

repayment – уплата (процентов), выплата (основной суммы)

saving rate – норма сбережений

savings – сбережения, накопления

savings account – депозит, сберегательный счет

savings bank – сберегательный банк

savings deposit – сберегательный вклад

Treasury (the) – государственное казначейство, министерство финансов

Treasury bills – краткосрочные казначейские векселя

time deposit – срочный депозит; вклад на срок

 

Saving money

People in the United Stated have many ways to save money. They may spend it or save it, consume it or not consume it. Spending (the consumption of disposable income) and saving (the non-consumption of disposable income) are equally important to a strong economy.

People save money for four main reasons. They save for a down payment on an automobile or a house and to finance a major purchase such as a television set. They set money aside regularly to meet large annual or semiannual bills such as property taxes or automobile insurance payments. They save to have a ready reserve to meet unexpected expenses such as medical or home repair bills. Finally, they save for major expenses in the future such as college tuition payments or to meet retirement needs. Some people save because they want to leave money to their children.

Depositing money in a financial institution provides physical security by protecting savers' money from losses due to fire, theft, or other catastrophes that might take place in the home. Most financial instructions are protected by state and federal deposit-insurance plans.

The fee that financial institution pays for the use of depositors' money is interest. A financial institution charges interest on loans to make money. It pays interest on savings deposits to attract a pool of money it can lend. A financial institution makes a profit by charging more interest on loans than it pays on deposits.

One of the measures economists use to analyze savings behavior is saving rate, the percentage of disposable income deposited into savings accounts. The single most important determinant of personal savings in the United States is income. Two other economic factors that have key effects on the savings rate are the availability of consumer goods and rising prices. When consumer goods are adequate to meet consumer demand and prices are lower, people tend to spend their money. At such times, savings rates are relatively low. When consumer demand is greater than the supply of consumer goods and prices are high, people cannot readily purchase the goods they need or want. At such times, savings often increase.

Types of Savings Accounts

Financial institutions have devised many types of saving accounts to meet the different needs of savers. Among these are passbook savings, NOW and money market accounts.

A common type of savings accounts among financial institutions is a regular savings account, which is sometimes called a passbook account because depositors receive a book in which all account transactions are recorded. A second type of savings accounts is the negotiable order of withdrawal, or NOW account. NOW accounts are offered at most commercial banks, savings banks, and loan associations across the nation. The holder of a NOW account can write checks on the amount deposited in the account and collect interest on the money remaining in the account. Another type of savings account that pays interest and allows easy access to the savings is a money market account. It offers variable interest rates that are usually higher than those of regular savings or NOW accounts. The interest paid by money market accounts is often linked to Treasury bills because financial institutions invest the money deposited in money market accounts in Treasure bills.

A savings account that requires the saver to leave money in the account for a specific amount of time is called a time deposit.

Borrowing Money

Borrowing is the transfer of a specified amount of money from a lender to a borrower for a specified length of time. Business people borrow money to begin or expand their business, and federal, state, and local governments borrow money to finance their programs and operations. Credit is the purchase of goods and services without the actual transfer of money on the promise to pay later. Even wealthy consumers consider the use of credit necessary when purchasing expensive items such as houses and automobiles.

Consumers borrow money and use credit for two main reasons. First, buyers can enjoy the use of an item while paying off the debt. They do not have to postpone purchases until they have enough money to pay for the items in cash. Second, consumers can extend payments for expensive items over a period of time. Payments for home mortgages typically run for 20 to 30 years. Houses are made affordable in this manner. Credit payments for televisions, major appliances, and other expensive items often run from one to five years.

The money borrowed is called the principal. The amount paid by the borrower for the privilege of using the money is called the interest. Both the principal and the interest are included in the loan's repayment. Most loans are secured loans, which require that borrowers put up collateral. Collateral is something of value offered by the borrower as a guarantee that the loan will be repaid. If the loan is not repaid according to the terms of the loan agreement, the lender may take the borrower's collateral. Unsecured loans requiring no collateral are rare and usually involve small amounts of money and short periods of time.

A common consumer loan is an installment loan. Repayment of the principal and interest is divided into equal amounts according to the length of the loan period, typically 12, 18, 24, or 36 months. The length of repayment of the loan is important in determining the amount of the monthly payment. The longer the loan period is, the smaller the monthly amount the consumer must pay. Buyers who can afford higher monthly payments prefer the shorter loan period because it is less expensive.

The most common use of an installment loan is a home mortgage. A mortgage is an installment debt owed on land, buildings, or other real property. The mortgagee must repay the mortgage in installments for fixed number of years, usually between 15 and 30 years. The loan is secured by the property, which is forfeited if the loan terms are not met.

Buying on Credit

In the use of credit, no money changes hands directly. Rather than requiring money for a purchase, businesses allow customers to charge their purchases and to pay for them over a period of time. Customers who do not pay their charges in full each month pay interest on the unpaid principal until the full amount is repaid. Consumers who want credit must apply for it and must have their credit approved before the credit can be used. The creditor evaluates information about the purchaser and assigns that person a credit rating. A credit rating is an estimation of the probability of repayment.

Creditors are particularly concerned about an applicant's 4-Cs – character, capacity to pay, capital, and credit history. An applicant who satisfies the 4-Cs is likely to receive a high credit rating, meaning the person is a good credit risk. An applicant who fails to satisfy the 4-Cs is usually assigned a low credit rating.