Spelling & Vocabulary Enrichment [ 39 ]

39- ] Spelling & Vocabulary Enrichment .

Business In Use .

Profitability and unprofitability .

A-] Profitable and unprofitable products :

A supermarket manager talks about the costs and prices for some of its products :

Product	Cost per unit [euros] ]	Sale price per unit	Result
A	10 euros	12 euros	We ‘make  a profit’ : the product is ‘profitable’ or ‘profit-making’ .
B	15 euros	15 euros	We ‘break even’ : we reach break-even point .
C	8 euros	7 euros	We ‘make a loss’ . The product is ‘loss-making’ , but we use Product ‘C’ as a ’loss leader’ to attract people to the store , as we know they will then also buy profitable products .
D	12 euros	22 euros	Product D is very profitable and we sell a lot of it . It is one of our ‘money-spinners’ or ‘cash cows’ , products that have very good profitability .

B-] Budgets and expenditure :

- All companies  have to ‘budget for’ , or plan their costs and have a ‘budget’ . The planned budgets are compared with ‘actual expenditure’ .

- When ‘actual expenditure’ is more than the planned budget , the companies go ‘over

budget’ and ‘overspend’ .

- When The ‘actual expenditure’ is less than the ‘budget’ , the companies ‘underspend’ by . They are ‘under budget’ .

C-] Economics of scale and the learning curve :

-Ford is one of the biggest car companies in the world .It benefits from ‘economics of scale’. For example ,the costs of developing a new car are enormous , but the company can spread them over a large number of cars produced and sold . In dealing with suppliers ,it can obtain lower prices because it buys in such large quantities.

- The company also benefits from the ‘experience curve’ or ‘learning curve’ : as it produces more , it learns how to do things more and more quickly and efficiently . This brings down the cost of each thing produced and the more they produce , the cheaper it gets .

Getting paid .

A-] Shipping and biling :

- When you ask to buy something , you ‘order’ it , or ‘place an order for it’ . When the goods are ready , they are ‘dispatched’ or ‘shipped’ to you .

- An ‘invoice’ is a document asking for payment and showing the amount to pay . The activity

of producing and sending invoices is ‘invoicing’ or ‘biling’ .

B-] Trade credit :

- I have a furniture business . We do not expect our business customers to pay immediately . They are given ‘trade credit’ , a period of time before they have to pay , usually 30 or 60 days.

If a customer orders a large quantity or pays within a particular time , we give them a ‘discount’ , a reduction in the amount they have to pay .

- With some customers , especially ones we have not dealt with before , we ask them to pay

‘upfront’ , before they receive the goods .

- Like all businesses , we have a ‘credit policy’ , with ‘payment terms’ : rules on when and how customers should pay . This is part of controlling ‘cash flow’ , the timing of payment coming into and going out of a business .

C-] Accounts :

- Jennifer is a businesswoman and has her own company in Britain . She is waiting to be paid by some of her customers . These are her ‘debtors’ . They owe her money . The suppliers and other organizations that she owes money to are her ‘creditors’. She must remember to pay tax to the ‘Inland Revenue’ on time .

- Kathleen is a businesswoman and has her own company in the US . The customers that she is waiting to be paid by are her ‘accounts receivable’ or ‘receivables’ . The suppliers and other organizations that she owes money to are her ‘accounts payable’ or ‘payables’ . She must remember to pay tax o the ‘Inland Revenue Service’ on time .

- The people and organizations they sell to are their customers or ‘accounts’ . The most important ones are ‘key accounts’ .

- There are some companies that they owe them money . They get the feeling they are never going to get paid : these are ‘bad debts’ and they have ‘written them off’ .

Assets , liabilities and the balance sheet .

A-] Assets :

- An asset is something that has value or the power to earn money . These include :

1-] ‘Current assets’ : money in the bank , investments that can easily be turned into money , money that customers owe , stocks of goods that are going to be sold . 2-] ‘Fixed assets’ :

equipment , machinery , buildings and land . 3-] ‘Intangible assets’ : things which you cannot see . For example , ‘goodwill’ : a company’s good reputation with existing customers and ‘brands’ : established brands have the power to earn money .

- If a company is sold as a ‘going concern’ , it has value as a profit-making operation ,or one that could make a profit .

B-] Depreciation :

- I am a head of IT [ Information Technology ] in a publishing company . Assets such as machinery and equipment lose value over time because they wear out , or are no longer

up-to-date . This is called ‘depreciation’ or ‘amortization’ . For example , when we buy new computers ,we ‘depreciate’ them or ‘amortize’ them ‘over’ a very short period , usually three years and a ‘charge’ for this shown in the financial records : the value of the equipment is

‘written down’ each year and ‘written off’ completely at the end .

- The value of an asset at any one time is its ‘book value’ . This is not necessarily the amount that it could be sold for at that time . For example , land or buildings may be worth more than shown in the accounts because they have increased in value . But computers could only be sold for less than book value .

C-] Liabilities :
- ‘Liabilities’ are a company’s debts to suppliers , lenders , the tax authorities etc. Debts that

have to be paid within a year are ‘current liabilities’ , and those payable in more than a year are ‘long-term liabilities’ , for example bank loans .

D-] Balance sheet :

- A company’s ‘balance sheet’ gives a picture of its assets and liabilities at the end of a particular period , usually the 12-month period of its ‘financial year’ . This is not necessarily January to December .