Spelling & Vocabulary Enrichment [ 40 ]

40- ]Spelling & Vocabulary Enrichment .

Business In Use .

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 .

The bottom line .

A-] Accounts :

- I am an accountant . I work for one of the big ‘accountancy firms’ . We look at the financial records or ‘accounts’ of a lot of companies . We work with the accountants of those companies and the people who work under them : the ‘bookkeepers’ . I like my profession   accountancy. The profession is called ‘accountancy’ [Br E] or ‘accounting’ [Am E]. The activity is called ‘accounting’ .Sometimes we act as ‘auditors’ : specialist outside accountants who ‘audit’ a company’s accounts , that is , we check them at the end of a particular period to see if they give a ‘true and fair view’ [ an accurate and complete picture ] . An ‘audit’ can take several days , even for a fairly small company .

- When a company’s results are presented in a way that makes them look better than they really are , even if it follows the rules , it may be accused of ‘creative accounting’ or ‘window dressing’ .

B-] Results :

- A firm reports its performance in a particular period in its results . Results for a particular year are shown in the company’s ‘annual report’ . This contains , among other things a ‘profit and loss account’[  Br E / income statement ] .

- In theory , if a company makes more money than it spends , it ‘makes a profit’ . If not it ‘makes a loss’ . But it is possible for a company to show a profit for a particular period because of the way it presents its activities under the ‘accounting standards’ or ‘accounting rules’ of one country , and a loss under the rules of another .

- A ‘pre-tax profit’ or a ‘pre-tax loss’ is one before tax is calculated . An ‘exceptional profit’ or ‘loss’ is for something that is not normally repeated , for example the sale ‘gross profit’ is before charges like these are taken away ; its ‘net profit’ is afterwards . The final figure of profit or loss is what people call informally the ‘bottom line’ .

- If a company is making a loss , commentators may say that it is ‘in the red’. They may also use expressions with ‘red ink’ ,saying , for example , that a company is ‘bleeding red ink’ or ‘haemorrhaging red ink’ .

Share capital and debt .

A-] Capital :

‘Capital’ is the money that a company uses to operate and develop .There are two main ways in which a company can ‘raise capital’ , that is find the money it needs : it can use ‘share capital’ or ‘loan capital’ , from investors . These are people or organizations who ‘invest in’ the company ; they put money in hoping to make more money .

B-] Share capital :

‘Share capital’ is contributed by ‘shareholders’ who ‘put up money’ and ‘hold shares’ in the company . Each share represents ownership of a small proportion of the company . Shareholders receive periodic payments called ‘dividends’ , usually based on the company’s profit during the relevant period . Capital in the form of shares is also called ‘equity’ .

- A ‘venture capitalist’ is someone who puts up money for a lot of new companies .

C-] Loan capital :

- Investors can also lend money , but then they do not own a small part of the company . This is ‘loan capital’ , and an investor or a financial institution lending money in this way is a ‘lender’ . The company borrowing it is the ‘borrower’ and may refer to the money as ‘borrowing’ or ‘debt’ . The total amount of debt that a company has is its ‘indebtedness’

- The sum of money borrowed is the ‘principal’ . The company has to pay ‘interest’ , a percentage of the principal to the borrower , whether it has made a profit in the relevant period or not .

D-] Security :

- Lending to companies is often in the form of ‘bonds’ or ‘debentures’ , loans with special conditions . One condition is that the borrower must have ‘collateral’ or ‘security’ : that is , if the borrower cannot repay the loan , the lender can take equipment or property , and sell it in order to get their money back . This may be an asset which was bought with the loan .

E-] Leverage :

Many companies have both loan and share capital . The amount of loan capital that a company has in relation to its share capital is its ‘leverage’ . Leverage is also called ‘gearing’ in Br E . A company with a lot of borrowing in relation to its share capital is ‘highly leveraged’ or ‘highly geared’ . A company that has difficulty in making payments on its debt is ‘overleveraged’ .

Success and failure .

A-] Cash mountains and surpluses :

The successful company has ‘distributed’ over the years some profits or ‘earnings’ to ‘shareholders’ , but it has also kept profits in the form of ‘retained earnings’ and built up its ‘cash reserves’ ; it is sitting on a ‘cash pile’ or ‘cash mountain’ . These reserves may be used for investment or to make ‘acquisitions’ : to buy other companies .

B-] Debt and debt problems :

Here are some expressions that can be used to talk about a company’s debts or a company’s

foreign debts :repayment servicing when a company repays its deb and / or invest on it .

 ‘debt repayment’ describes a particular amount repaid

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  burden :a company’s debt , especially when considered as a problem

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                 crisis : when a company as serious difficulty repaying its debt

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  debt      rescheduling  :when a company persuades lenders to change

                restructuring  :  repayment dates and terms

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                default   : when a company fails to make a debt repayment

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- to     to reschedule a debt                           to  repay default on service

                                                                                          = a debt

           to  restructure a debt                                       

C-] Turnarounds and bailouts :

The company is in financial trouble and it is being described as ‘sick’ , ‘ailing’ and ‘troubled’.

They have called in a company doctor – an expert in ‘turning round’ companies . There may be a ‘turnaround’ and the company may recover . But if there is no ‘recovery’ , the company may ‘collapse’ completely . The owner is currently looking for another company to ‘bail out’

the company by buying it . This would be a ‘bailout’ .

D-] Bankruptcy :

--If a company is in financial difficulty , it has to take certain legal steps .

- In the US , it may ask to announce bankruptcy .