margins.

We can distinguish between permanent and temporary working capital. …(3)… . The temporary working capital is usually serviced from an overdraft facility.

Inventories (raw materials, work in progress and finished goods) are part and parcel of working capital. …(4)… . It is the job of financial manager to minimize the stocks of raw materials, the level of the work in progress and the quantity of finished goods. His task is also to see that generous credit terms are negotiated with suppliers but minimal credit is offered to customers. …(5)… . A balance must be achieved between getting and giving good credit terms …(6)… .

Another thing is that adequate cash should always be available for meeting the company’s day-to-day debts and …(7)… . The expected cash flows that will result from potential investment projects should be measured carefully.

b. Look at the missing parts A-H and fit them in the gaps. There is one extra you don’t need.

A	The former keeps the business flowing throughout the year, while the latter is needed from time to time to take account of seasoned, cyclical or unexpected fluctuations in the business.
B	In the UK a public company raises its capital by inviting the public to take up shares.
C	there should always be a reserve on hand to meet contingencies
D	the more exposed the company is in times of economic difficulty
E	If inventories are not well managed there will be an enormous amount of excess working capital
F	in order to attract customers and maintain positive relationships on the one hand, and minimizing cash outlay on the other hand
G	then the high interest charges associated with gearing will increase the rate of slowdown
H	It is often referred to as the debtor side, because working capital is required to finance the gap between payment due to suppliers and payment owed by customers1

1	2	3	4	5	6	7
D

c. Complete the chart and elaborate upon the uses of working capital.

Working capital
permanent		a. _____________
fixed assets	investments	inventories			debtors	cash
		b. _____	c. _____	d. _____		e. _____	contingencies (abnormal requirements)

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2. 
   Discuss the ways of funding the business. Make a full use of the chart below.
   

	Source of funds	Advantages / disadvantages
Low gearing	Owner’s capital	Most exposed but claim on all profits
	Venture capital	Demand very high rate of return but doesn’t interfere in company
	Unlisted securities market	Outside investors, no loss of control
	Stock exchange	Long-term solution to raising money 25% in public hands therefore less control
High gearing	Long-term loans from banks and pension funds	Secured over fixed assets Better return on net profits in prosperous times High interest payments in difficult times

Word-building

Translate the following words and word-combinations.

• 
  a gear – to gear - gearing adjustment – high gearing – low gearing - geared investment trust
  
• 
  to draw – draft – overdraft – drawer – drawee - to withdraw – withdrawal
  
• 
  hold - holder – shareholder – stockholder – stakeholder - holding
  
• 
  debt – debtor – debit – indebtedness
  
• 
  own – owned – owning - owner - ownership – ownerless
  
• 
  owe – owing – owed
  

WATCH OUT: translator's "false friends"

business – company – firm - enterprise

a. Change the expressions written in bold type by the synonyms from the box if any.

A	to hire help from outside	E	to promote growth
B	to invest in capital resources	F	to contribute to something
C	to enable somebody to do something	G	returns from
D	to replace equipment	H	to cover the costs

A.: I think we can get down to the text right away.

B.: Very good. Let’s start. On the whole the text suits me quite well, but there are some points I’d like to clarify.

A.: All right. Shall we go point by point then, in order to (1) permit you to clarify the matter?

B.: Yes, first comes the difference between the use of the words “company”, “firm” and “enterprise”.

A.: Most business organisations in Britain and the USA are officially called “companies”, for instance:

• 
  He works for a company which does not (2) employ outside workers.
  
• 
  He works for a firm that is (3) restoring tools at the moment.
  

Mind that “company” occurs in conversation and informal writing but “firm”is often used instead. “Firm” is preferable to “company”in any style when followed by “of”, as in “the firm of L’Oreal”. However, “firm” is not used as an alternative to “company” in all spheres.

---

B.: Could you be more specific, please?

A.: For example, “firm” is not used instead of “company” in “film / television company”. Note also that neither firm nor company is used of an organization which organizes air travel. This is “airline”.

B.: This does (4) supply me with understanding of the term! Shall we go on?

A.: Certainly. “Enterprise” is not widely used in the sense of a business organisation.

• 
  His (5) rewards from business are so small because he has no enterprise².
  

B.:But sometimes the meaning of it is “a business organisation”, or a “business concern”.

A.: Exactly. And note the following economic terms: “private enterprise”, “free enterprise”³.

• 
  The Conservative Party (6) supports private enterprise whereas the Labour Party favours nationalisation.
  
• 
  The supporters of free enterprise very often (7) put into the money or the property used to produce consumer goods or services with the aim (8) to gain profits.
  

B.: May I suggest a break now?

A.: No objections.

b. Discuss the pitfalls of using the terms “company”, “firm” and “enterprise”.

Supporting materials

A distinction must be drawn between the words “business” and “company”. A business is simply an activity. The activity should be thought of as quite distinct from the person or persons who carry it on – the two are separate. The person or persons carrying on a business may be either an individual, several individuals or a company. However, a confusion is often caused by use of the word “company” to refer to a business. This is inaccurate. To confuse the meaning of “business” and “company” can be an expensive mistake. For example, an individual who wants to sell his business may put an advertisement in the newspaper which says “company for sale”. This is inaccurate and will not impress a potential purchaser.

Similarly, a person who buys a defective item from a business owned by an individual, but who instructs his solicitor to sue “the company” which sold it to him will confuse his solicitor – this is bound to make the exercise more expensive!

2.5.6 A. Use the plan below and the phrases that follow to make a presentation of a company. Surf the Internet, find supporting materials and base your presentation on the profile of a real company.

Greetings	Introduction (Preparing the audience)	Main Part (Delivering the message)	Conclusion (Winding-up)
Good morning / afternoon ladies and gentlemen!	First, let me introduce myself; I’m … from … .	Let us clear first of all over … ( the mail points / the general aims / etc...)	In conclusion … .
Ladies and gentlemen!	I’ll begin by …, then go on to …, and I’ll end with …	The first point to make is that … .	Looking back, … .
Good morning / afternoon!	I stick to the opinion that no speech can be entirely bad if it is short enough. So I intend to be brief.	The next point is that … .	That’s all I have to say for the moment.
Good morning / afternoon, colleagues!	The core of my presentation will be contained in … .	However, one or two comments have some validity.	Before closing I’d like to summarize the main points again.
	Feel free to interrupt if you have any questions.	Initially, … .	Thank you for your attention.
	My presentation will take not more than 7 minutes as I intend to be concise.	All this suggests that, … .

---

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B. Comment on the presentation given by your colleague. Make use of the following points and helpful phrases.

-Timing

• 
  to be a bit out of schedule/had an appropriate timing
  
• 
  to follow the timeline
  

Lay-out of the presentation

• 
  to have a well-balanced lay-out(structure)
  
• 
  to be plainly arranged into foreword, the body, conclusion
  

Manner of presentation

• 
  to speak (exceedingly/appropriately) fluently / to be inarticulate (confused)
  
• 
  to speak in an appropriately formal tone/in a tone sometimes inappropriate
  

• 
  (not) to follow the response of the target listeners
  
• 
  to be fully(hardly any) (in)dependent of the text
  

General language ability

• 
  …the wide range of the active does the speaker credit / the limited range of the active is not to the speaker’s credit
  
• 
  …the mistakes were quite occasional/ unfortunately rough
  
• 
  …the speaker shows/can boast of a good (poor, adequate) command of the language
  
• 
  … the speaker uses effective strategies for delivering the message across
  

Contents of the presentation

• 
  to be integrated throughout the professional component
  
• 
  to give relevant information (judgment / opinion) in subject-matter areas
  
• 
  to be discussed with a special bias towards analyzing and evaluating …
  
• 
  to be too difficult for the target listeners
  

Use of visuals and slide structure

• 
  … the chosen Power Point techniques (fonts, background, colours, animation, graphs and charts) make the statements more convincing/are eye-(un)friendly
  

- My impression of the presentation is (un- / hardly / quite) favourable.

2.6 DIALOGUE 1

Read and translate the following dialogue:

Types of Securities

A.	You see, I’ve found myself in a real predicament … . I cannot make out the difference between “stocks”, “shares” and “securities”.
B.	Oh, really? In a nutshell, in Britain stock is used to refer to all kinds of securities, including government bonds. The word equity or equities is also used to describe stocks and shares. The places where the stocks and shares of listed or quoted companies are bought and sold are called stock markets or stock exchanges.
A.	And I believed that shares are certificates representing part ownership of the company … .
B.	And it is really so. Let’s get this right from the start. Ownership in a company is divided among stockholders or shareholders. The original shareholders are the people who started the business, but now they have sold shares of the profits to outsiders. By selling these entitlements to share in the profits, the business has been able to raise new funds.
A.	Well this is it, isn’t it? Then everybody can easily buy into the company.
B.	To a certain extent, yes. For public companies the shares or stocks can be resold on the stock exchange to anyone prepared to pay the going price. Mind that even the largest company occasionally needs to issue additional new shares to raise money for especially large projects.
A.	Do you mean that to buy into the company, a shareholder must purchase shares on the stock exchange.
B.	Absolutely right. As a reward for this initial outlay, shareholders earn a return in two ways. First, the company makes regular dividend payments, paying out to shareholders that part of the profits that the company does not wish to re-invest into business. Second, the shareholders may make capital gains (or losses).
A.	So, if you buy company X shares for € 600 each and then everyone decides its profits and dividends will be unexpectedly high, you may be able to resell the shares for € 650, making a capital gain of € 50 per share on the transaction. And if the company suffers a loss or goes bankrupt?
B.	The shareholders of the company have limited liability. The most they can lose is the money they originally spent buying shares.
A.	If the company stops trading because it is unable to pay its debts (goes bankrupt), or has to sell all its assets to repay part of its debts (goes into liquidation), is there any chance for the shareholders to get at least part of their money back?
B.	It depends. There are common or ordinary shares, and preference shares or preferred stock. Holders of preference shares receive a fixed dividend that must be paid before holders of ordinary shares receive a dividend.
A.	I see … . So, holders of preference shares have more chance of getting some of their capital back in the case of bankruptcy.
B.	Yes, they are repaid before other shareholders, but after owners of bonds and other debts.
A.	Bonds? Are they the same as securities? Let me see … . The dictionary describes securities as “a certificate attesting credit, the ownership of stocks or bonds, or the right to ownership connected with tradable derivatives”. Oh, I can’t make head or tail of it … .
B.	And I know it up and down and sideways. Security indicates either an ownership position in a corporation (a stock), or a creditor relationship with a corporation or a governmental body (a bond), or rights to ownership, such as those, represented by an option, subscription right or warrant. Thus, bonds guarantee to repay their face value after a certain number of years and pay a fixed rate of interest to the bond-holder in the meantime.
A.	I suppose that the price written on the share, the nominal value, is hardly ever the same as the price it is currently being traded on the stock exchange.
B.	There is no arguing that the market price depends on supply and demand and can change every minute during trading hours. Traders in stocks quote bid (buying) and offer (selling) prices. The spread or difference between these prices is their profit.
A.	Very reasonable. And what about options? Are they also traded on the stock exchange?
B.	Of course. Actually, it’s a contract giving the holder a right to buy a designated security (this is a call option) or sell it (this is a put option) at or within a certain period of time at a specified price.
A.	If I’m not mistaken in a number of companies apart from salary an executive’s compensation package can include share options, the right to buy the company’s shares at an advantageous price. It’s a kind of benefits or perks.
B.	Exactly. Oh, I must be going. I’ve lost track of time.
A.	Thank you very much for helping me to come to grips with the problem.

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