2015- Rresource Bank 2
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1 BUSINESS ENGLISH 2 RESOURCE BANK 2014/15 DEPARTMENT OF BUSINESS FOREIGN LANGUAGES
description
Resource bank
Transcript of 2015- Rresource Bank 2
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BUSINESS ENGLISH 2
RESOURCE BANK
2014/15
DEPARTMENT OF BUSINESS FOREIGN LANGUAGES
2
COURSE CONTENTS
TOPIC TEXT SOURCE
INTRODUCTION Course Contents
RB Contents
Business English II: Information for
Students
RB*
BUSINESS MEETINGS Introduction Structure of meetings Language of meetings Role-play Memo, agenda and minutes
RB
REPORT WRITING Introduction Structure Useful phrases Report writing tasks
RB
DESCRIBING GRAPHS
AND CHARTS
Types of graphs and charts
Verbs
Nouns
Adverbs and adjectives
Prepositions
Describing graphs in a paragraph
Practice
RB
TRADE Retail trade: Storm Clouds over the Mall E- commerce: Clicks and Bricks International trade Barriers to trade: Oh, sweet reason Visible and invisible trade European Union: Fit at 50? A brief history of the EU enlargement
RB RB MK UNIT 27 + RB RB RB RB RB
BANKING Banking
The bare essentials
Bank Statements
Banking crisis: Northern Rock
Central banking functions
Exchange rates
MK** UNIT 14
RB
RB
RB
RB
MK UNIT 26
INSURANCE Insurance
RB
FINANCE Accounting and financial statements
The financing of corporate activity
Stocks and shares
Bonds
Takeovers
Derivatives
MK UNIT 19 + RB
RB
MK UNIT 17 + RB
MK UNIT 16 + RB
MK UNIT 21
MK UNIT 18
THE BUSINESS
CYCLE
The Business Cycle
The Crisis
Capitalist Fools
MK UNIT 23
RB
RB
RB*- Resource Bank compiled by the Department of Business Foreign Languages MK**- Coursebook English for Business Studies (MacKenzie, I. (2010) Third Edition, CUP), with the number indicating the unit related to the specific topic
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RESOURCE BANK CONTENTS
TOPIC TEXT PAGE
INTRODUCTION Course Contents
RB Contents
Introduction - Business English II:
Information for Students
2
3
4-5
BUSINESS MEETINGS Introduction Structure of meetings Language of meetings Downtoning Role-play Memo, agenda and minutes
6-7
8
9-10
11-13
14
15-16
REPORT WRITING Introduction Structure Useful phrases Report writing tasks
17-18
19-21
22-24
25-26
DESCRIBING GRAPHS
AND CHARTS
Types of graphs and charts
Verbs
Nouns
Adverbs and adjectives
Prepositions
Describing graphs in a paragraph
Practice
27-28
29-31
31-32
32-33
33-34
35-36
37-38
TRADE Retail trade: Storm Clouds over the Mall E- commerce: Clicks and Bricks International trade Barriers to trade: Oh, sweet reason Visible and invisible trade European Union: Fit at 50? A brief history of the EU enlargement
39-42 43-44 45-48 49-50
51 52-53 54-55
BANKING Banking
The bare essentials
Bank Statements
Banking crisis: Northern Rock
Central banking functions
56-57
58
59-60
61
62-64
INSURANCE Insurance
65-68
FINANCE Introduction to business finance
Accounting and financial statements
The financing of corporate activity
Stocks and shares
Bonds
69
70-76
77-79
77-79
77-79
THE BUSINESS
CYCLE
The Crisis
Capitalist Fools
80
81-84
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1 INTRODUCTION
Business English 2
Information for Students
COURSE AIMS
This course aims to:
☐ develop students’ business communication skills (written and oral)
☐ help students acquire specialist vocabulary (on selected business topics)
☐ strengthen students’ academic skills
☐ help students understand the difference between written/spoken language and formal/informal
language
☐ develop students’ critical thinking skills (analysis, synthesis, foreseeing, deducing, selecting…)
☐ help students learn how to use dictionaries and other reference material
COURSE REQUIREMENTS
1 Regular attendance and class participation
2 Passing one oral progress test (a role-played meeting)
3 Passing two written progress tests or one comprehensive written test at the end of the term
4 Passing the final oral exam
A The written tests will examine:
☐ reading skills: understanding texts concerned with contemporary business issues and
academic content
☐ writing skills: ability to write reports using the appropriate style (register, layout, coherence,
clarity, concision, visual appeal)
B The role-played meeting should demonstrate:
☐ successful team work
☐ thorough research
☐ a clear structure
☐ the effective use of the language of meetings
C At the final oral exam you are expected to:
☐ demonstrate your ability to clearly and coherently present business topics covered by the
course
☐ express a viewpoint on a topical issue (advantages, disadvantages, agreeing, disagreeing…)
and ask relevant questions.
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REQUIRED LITERATURE
1 MacKenzie, I. (2010) English for Business Studies, Third Edition, CUP
2 Business English Resource Bank 2, 2013/14
RECOMMENDED LITERATURE
1 Longman Business English Dictionary (most recent edition)
2 Špiljak, V. ed. (2000) Englesko-hrvatski poslovni rječnik, Masmedia
3 Englesko-hrvatski poslovni rječnik, Školska knjiga, 2006
SUGGESTED ADDITIONAL SOURCES
☐ Business Week, The Financial Times, The Economist…
☐ CNBC, Bloomberg, business programmes on BBC and CNN
☐ web sites: bized.com, investopedia.com, quickmba.com, startup.wsj.com, dictionary.com,
harvardbusinessonline.hbsp.harvard.edu, encarta.msn.com, acronymfinder.com, uefap.com,
cusd.com/calonline/econ
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2 BUSINESS MEETINGS
1 Introduction 2 The structure of meetings 3 The language of meetings 4 Downtoning 5 Role-play 6 Memo, agenda and minutes
1 INTRODUCTION
I Discuss these questions before reading the text.
1 Why are business meetings usually held?
2 What are the typical problems associated with meetings?
3 What makes meetings effective?
4 What is the role of the chairperson in a meeting?
II Read the text and find out.
EFFECTIVE BUSINESS MEETINGS
The functioning of many business organizations today relies heavily on complex work organization, which requires effective communication between different departments, layers of management, customers and business partners. In other words, it is really difficult to imagine a modern workplace in which people don’t spend any time in meetings, either to discuss critical issues, solve problems or make important decisions. Although thousands of business meetings are held every day, not all of them are effective. Ineffective meetings usually have no clear purpose, take too much time and produce no clear outcomes. The chairperson of the meeting is probably the first to blame for an unsuccessful meeting because if s/he does not prepare well, the discussion easily gets sidetracked and participants lose focus and interest. Many business people often complain that meetings can really be a waste of their precious time. No wonder then that effective and productive meetings are everyone’s goal. Successful meetings are usually well-planned, have a clear purpose and follow-up. When preparing the meeting, it is important for the chairperson to announce the meeting in good time, state the venue and circulate the agenda. The agenda contains the items which will be discussed in a meeting so that people who attend the meeting can prepare in advance. The chairperson opens, runs and concludes the meeting. He or she makes sure that all participants are included in the discussion. She or he allocates time for each item to keep the discussion on track. It is very important to assign responsibility for each action point discussed so that all participants know what they are expected to do after the meeting. The chairperson can appoint a minute taker who will take the minutes, or write down the most important things said at the meeting. When most items on the agenda have been discussed, the chairperson asks if there is any other business, often abbreviated to AOB, and closes the meeting. If the meeting is well-planned and well-chaired, participants will be able to present information, contribute their ideas and proposals and express their opinions. For meetings to be really productive, many different arguments need to be heard so that listening to speakers, asking questions and offering counterarguments are all welcome steps in the process of reaching consensus or the final decision.
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III Find the words in the text for these definitions. 1 the last item on the agenda, usually used as an abbreviation
2 a place where the meeting is held
3 one subject or issue discussed in the meeting
4 a person who writes down the things said and decided at the meeting
5 a list of subjects to be discussed in the meeting
6 a person who is in charge of the meeting
7 an official written record of what is said and decided at the meeting
IV Complete the sentences with the missing verbs below.
attend run discuss contain state announce make circulate solve
1 In business meetings participants ____________ different issues, _____________ problems
and ____________decisions.
2 If the chairperson doesn't know how to _____________ the meeting well, the meeting will
probably lose focus.
3 The chairperson should ____________ the meeting in good time, _____________ the venue
and _____________ the agenda.
4 Agendas _______________ items to be discussed so that those who _____________ the
meeting can prepare in advance.
V Complete the sentences with the missing nouns.
1 The chairperson usually appoints the _______________ who writes down the most important
points from the meeting.
2 A good chairperson should allocate ______________ for each item to keep the meeting on
track.
3 It is important to assign ____________ to participants who are in charge of a certain action
point.
4 In some meetings participants vote in favour of or against a ______________.
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2 THE STRUCTURE OF MEETINGS
I Look at the table below. How many parts does the meeting consist of? Then tick the corresponding box next to each function depending on who does it: the chairperson, participants or both?
HOW TO BEGIN?
FUNCTION
CHAIRPERSON
PARTICIPANTS
☐ start the meeting
☐ welcome the participants
☐ introduce everyone if necessary
☐ state the objective of the meeting
☐ go through the agenda
☐ say when the meeting will finish
√
WHAT HAPPENS DURING THE MEETING?
☐ ask for opinion
☐ state an opinion
☐ comment on opinion
☐ (dis)agree
☐ ask for clarification
☐ interrupt
☐ express doubt
☐ make a suggestion
☐ check understanding
☐ keep to the agenda
☐ vote
HOW TO END THE MEETING?
☐ conclude the main points
☐ summarize
☐ emphasise action points
☐ close the meeting
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3 THE LANGUAGE OF MEETINGS
I Read the useful phrases used in the meeting and copy the phrases from the box below in the appropriate place in the table.
The purpose of this meeting is to… I couldn’t agree more. Why don’t we…? I think we’ve covered everything. I see what you mean. Just let me finish…
AT THE BEGINNING USEFUL PHRASES ☐ start the meeting Let’s get started.
We’ve got a very tight agenda, so we’d better get down to business.
☐ welcome the participants I’m very glad to welcome you here (on behalf of…) Thank you all for coming here today.
☐ introduce everyone if necessary
This is XY. She is in charge of…She deals with… Let me introduce you to…
☐ state the objective of the meeting
We’re here today to… 1 _________________________________________________
☐ go through the agenda There are three items on the agenda. Firstly, we’ll deal with… Secondly, we’ll…,Thirdly,… Finally,…
☐ say when the meeting will finish
I’d like to finish by… The meeting is due to finish by…
DURING THE MEETING USEFUL PHRASES ☐ ask for opinion What do you think about this?
What’s your opinion on this? ☐ state an opinion In my opinion,…
If you ask me,… ☐ comment on opinion That’s a good point.
So, what you’re saying is… 2 _________________________________________________
☐ disagree I’m afraid I disagree. I have to disagree. It’s out of the question!
☐ Agree I agree completely. That’s a good idea! 3 _________________________________________________
☐ ask for clarification What exactly did you mean by…? Could you be more specific about…? Could you please elaborate on that?
☐ interrupting and dealing with interruptions
Excuse me, may I interrupt? Can I just finish what I was saying…? 4 _________________________________________________
☐ express doubt I agree to some extent, but… I suppose you’re right but…
☐ make a suggestion I think we should… 5 _________________________________________________
☐ check understanding Is that clear everyone?
☐ keep to the agenda Let’s now move on to the next item on the agenda. We’ll come to that later.
☐ Vote Let’s put this to a vote. Everyone in favour of this proposal? Against?
AT THE END USEFUL PHRASES ☐ conclude the main points Let’s go over the main points again.
So, we’ve agreed that… As far as…is concerned, we’ve agreed that…
☐ summarize So, to sum up…
☐ emphasise action points Ana is in charge of completing the report by 14 January. So John, can you please write the report?
☐ close the meeting That brings us to the end of our meeting today. 6 __________________________________________________
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II In which part of the meeting will you hear the following? Let me introduce you to… If I understand you correctly… We’ve got a very tight
agenda, so we’d better get
down to business…
The meeting is due to finish by… It’s out of the question… We’ll deal with … first, then
we’ll discuss…, and finally
we’ll…
Thank you for coming here… To recap, John, you’re in charge
of the report. Ann is in charge of
the draft plan. Sue will inform the
team, right?
The objective of today’s
meeting is …
III Match the phrases that are similar in meaning.
1 I couldn't agree more. ☐ I agree to some point, but..
2 What's your opinion? ☐ Why don't we buy from ABC Ltd.?
3 I agree to some extent, but... ☐ As far as this item is concerned, we’ve agreed that…
4 I see what you mean. ☐ I totally agree.
5 Ann is in charge of the report. ☐ What do you think about this?
6 So, we’ve agreed that… ☐ I see, what you're saying is ...
7 To summarize the meeting… ☐ Ann is responsible for writing the report.
8 I advise you to buy from ABC Ltd. ☐ To sum up,…
IV Fill in the gaps in this introduction to a meeting.
Good morning, everyone. Are you all here? OK....
Let's get s_____________ then. Thanks for c_____________ to today's meeting.
Have you all got a copy of the a_____________? Good.
As you can see, we've got a very t_____________ agenda today so I suggest we get down to
b_____________.
The p_____________ of today’s meeting is to decide what we can do to improve the financial
situation of the company.
So, first we'll d_____________ with the financial report.
T_____________, we'll have a look at Simon's proposal for consolidation. I'd like to hear everyone's
o_____________ on the proposal then.
Finally, we'll m_____________ a decision on the financial plan for the next quarter.
I think we should spend around 15 minutes on each i_____________, so we’ll finish by 3.
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4 DOWNTONING
I Sort out these phrases: Absolutely! I don’t quite agree. That’s out of the question! That’s absurd! I suppose so. Exactly! That’s true, I guess. That’s not really how I see it.
MILD AGREEMENT
MILD DISAGREEMENT
STRONG AGREEMENT
STRONG DISAGREEMENT
II React to this sentence from a meeting using the prompt from the bracket.
I believe that our department should be given more freedom to make decisions.
1 (disagree mildly) _____________________________________________________________.
2 (disagree strongly) ___________________________________________________________.
3 (ask for clarification) __________________________________________________________.
4 (agree mildly) _______________________________________________________________.
5 (agree strongly) _____________________________________________________________.
III Fill in the gaps in this conversation from a meeting. The first letters will help you.
Chair: Ok, everyone. Let’s get s_____________. Does everybody have a copy of the
a____________? … All right then. We are here today to d___________ the problem of sales. For three months in a row we have seen a steady fall. So, I’d like us to focus on three issues today. First of all, we’ll look at our sales figures in the last quarter. After t__________, Mary will give her projection for the next quarter on the basis of current trends. F____________, I’d like to hear your proposals for reversing this negative trend.
Ann: Sorry to i____________, but I think we should discuss the performance of sales force as well (…)
Chair: I’m sure Mary will mention that as she gives us the sales report. Right Mary? Could you please take the m___________, Ann?
Chair:
(…) So, we’ve seen the sales figures. Let’s now m___________on to projections.
Mary: Thank you, well, as you can see from this g____________, sales will continue to fall. I have to insist that my sales force are doing all they can …
Ann: E_________ me, but they are the most responsible…
Mary: In my o____________, we should blame the falling demand and not my sales force (…)
Chair: So to s_________up, the negative trend, I’m a___________, is going to continue. We all a___________that we should focus on marketing more and perhaps consider cutting the sales force. So, if there are no more q____________, I’d like us to meet in 10 days’ time.
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IV What are the implications of aggressive language for a business deal? Read the text and study the table below.
“You must reduce the price or else…!”
If you want to be an effective communicator, you should know how to soften your points by avoiding aggressive, uncompromising and confrontational language.
Remember that in effective business meetings it is important
to make your point firmly but politely.
SOFTEN BY USING:
EXAMPLE:
☐ WE / LET’S Let’s reconsider the price, shall we?
We could reduce the price.
☐ PERHAPS / MAYBE Perhaps we can reduce the price?
☐ A BIT / JUST / A LITTLE /
SLIGHTLY
The price is a little bit high, don’t you think?
Can we reduce the price slightly?
☐ WOULD / COULD / MAY / MIGHT Would it be possible to reduce the price a bit?
Could we reduce the price a bit?
The price may be a bit lower.
☐ PLEASE Please confirm your attendance via e-mail.
☐ I’M AFRAID I’m afraid the price is too high.
☐ “NOT” AS A MODIFIER It wouldn’t be bad if the price was lower.
V Rewrite the following sentences by using the words and phrases in the brackets.
1 We won’t give you a discount (afraid).
__________________________________________________________________________.
2 You must finish the report! (please)
__________________________________________________________________________.
3 Your prices are way too high. (a little bit)
__________________________________________________________________________.
4 These figures are false! (not)
__________________________________________________________________________.
5 He is not available. (afraid)
__________________________________________________________________________.
6 So, we’ll find another buyer! (perhaps)
__________________________________________________________________________.
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VI Read the dialogues and underline different verb structures for making suggestions.
A: It seems we have the wrong documents.
B: I advise we contact the Berlin office
immediately!
A: I suggest that we should relocate next
year.
B: I completely agree.
A: Can we postpone the meeting?
B. Yes, I suggest putting it off for next week.
A: I suggest we read the draft now.
B. I agree.
A: I propose that we wait for the new scheme
to be put in place.
B: You really propose waiting for another
month?
A: I suggest relocation.
B. That's out of the question!
A: Who should we elect?
B: I propose Tom.
REMEMBER!
SUGGEST
☐ Suggest that someone do something
☐ Suggest that someone should do something
☐ Suggest doing something
☐ Suggest something
BUT NOT: suggest to do something suggest somebody to do something
PROPOSE
☐ Propose that somebody do something
☐ Propose doing something
☐ Propose somebody (in voting)
ADVISE
☐ advise doing something
☐ advise somebody to do something
☐ advise that somebody do something
BUT: ADVISE (verb) ≠ ADVICE (noun)
VII Translate the following into English.
1 Predlažem da povisimo cijene.
2 Predlažem izvoz u Italiju.
3 Predlažem Johna.
4 Predlažem da ti vodiš zapisnik.
5 Predlažem da IT odjel preseli u novi ured.
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5 ROLE-PLAY
I Make groups of four. Read the situation first and assign roles.
SITUATION
Four managers are in a meeting to decide whether to lay off their colleague Ann. The reason why Ann might be dismissed is that recently she hasn’t performed well and her abrasive style is seen as offensive. If she is laid off, the managers need to decide how much severance pay to give her.
ROLES
Students 1 and 2 think Ann should be dismissed. Think of additional details why she should be fired. Students 3 and 4 think Ann should stay because of her experience and work discipline. Think of additional details why she should stay.
II Now role-play the meeting following the prompts below. The meeting should last about 5 minutes. The prompts below help you to get started, but as you go, invent more details and finish the meeting yourselves. Remember what the purpose of the meeting is. Then report your decision to the class.
Student 1: Good afternoon, everyone. I see we’re all here, so I suggest we get down to
business right away because I’d like to finish by 4.
Student 2: Excellent. I have another meeting to attend at 4.30.
Student 1: So, have you all got a copy of the agenda?
Students 2, 3, 4: Yes.
Student 1: Ok, we have to decide if we should let Ann go. If we do, we have to decide
how much severance pay to give her.
So, to begin, you all realize that we need to cut costs and her recent results
are quite disappointing. What do you think, John?
Student 2: Ok, I think it is quite clear why Ann should go. First of all,
__________________________________________. Then,
__________________________________________.
Student 3: I’m afraid I can’t agree with you. Ann is one of the most experienced
workers __________________________________________. Besides, she
is __________________________________________.
And __________________________________________.
Student 2: Excuse me, may I interrupt? Look at her sales results from last months!
__________________________________________!
Student 4: Come on! Are you saying that she’s not a good worker? I think she is
doing all she can. But this crisis ______________________________.
Student 1: Hmm, true…
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6 MEMO, AGENDA AND MINUTES
I Study this sample memo and circle the correct word in the sentences on the right outlining the basic rules for writing memos.
Adapted from: Market Leader Intermediate, p. 144, Longman.
II Study the agenda below and complete the explanation next to it.
Adapted from: Market Leader Intermediate, p. 144, Longman.
III Read the paragraph below and explain the main purpose of action minutes.
For most business meetings, action minutes are more useful than full minutes. Action minutes are
intended to make sure that decisions of the meeting are understood and carried out. There is a brief
summary of the discussion for each item on the agenda. The initials of the person responsible for
carrying out any action required are given on the margin, along with the deadline.
Department Heads Meeting
AGENDA
Date: 5 February Time: 1 p.m. Venue: Room 12, Angus House
1 Presentation: Germanica Ltd. 2 Course organization 3 AOB
MEMO To: All department heads From: Mary Fitch, HR Manager Date: 2 February 2014 Subject: Visit of Germanica Ltd. representative Please note that Sandra Keiths, a representative of Germanica Ltd., a company specializing in offering Business German courses, will visit us on Friday, 5 February.
There will be a presentation of the courses, followed by a meeting at 1 p.m. that you should all attend. If you wish to join us for lunch at a local restaurant, please let me know as soon as possible. MF
Memos are usually used for internal/external communication.
They should include the following headings: To, From, Date, and
Subject/Topic.
They should be long/short and include only relevant information.
The tone of a memo may be/must be
formal, informal or neutral.
It is usual to end with your full
signature/initials.
Agendas contain the following information: the title, the date, and the ____________ (place). Larger or more formal meetings may also include the following:
a) Apologies for absence b) Matters arising from last
meeting c) Correspondence d) Date of next meeting.
____________ is reserved for other relevant issues that were not included in the agenda.
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IV Read the action minutes below. Then, explain the layout and the structure of the action minutes by answering these questions:
1 What do the initials on the right margin stand for? 2 What do the dates on the right margin stand for? 3 Where do we include information about the time and the venue of the meeting?
4 What are action points and where are they included?
Minutes of the Department Heads' Meeting
_____________________________________________________
Date: 5 February 2014, 1 p.m.
Venue: Room 12, Angus House
Present: Mary Fitch, Christina Bilich (Germanica Ltd.), Joe Piscarelli, Ann Murray, Vince Wallace
1 Presentation: Germanica Ltd.
Following the Board's decision to provide Business German courses for our employees, the representative of Germanica Ltd. made a presentation of the courses, detailing the necessary steps for the organization of the courses in our premises.
We all agree that Mary Fitch should make the necessary arrangements with Christina Bilich to organize classification testing. Department heads will be informed about the time and place for testing of their employees.
2 Course organization We agreed that the courses will be offered at different language levels on Mondays, Wednesdays and Fridays after 4 p.m. All department heads should rearrange their staff's regular work activity to allow them regular attendance of the courses. These arrangements should be sent to the HR Manager in a written form. Next meeting: 8 February, 10 a.m. Venue: To be confirmed
MF
JP
AM
VW
10 FEB
15 FEB
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3 REPORT WRITING
1 Introduction 2 Structure 3 Useful phrases 4 Report writing tasks
1 INTRODUCTION
WHAT IS A REPORT?
☐ A report is a piece of factual writing, usually based on some kind of research or real-life
experience.
☐ It usually focuses on factual information about the past, but may also include recommendations.
☐ A report is not a letter.
PURPOSE
☐ You may be asked to give information, evaluate something or make suggestions or
recommendations.
TARGET READER
☐ Usually the person who is asking for the report.
☐ This may be an official group of people in authority, your employer or a group of colleagues you
study or work with.
A FEW QUESTIONS TO THINK ABOUT BEFORE WRITING A REPORT
☐ What have I been asked to do?
☐ Who is this report for? What kind of information do you think the target reader will be interested
in? What will they expect to achieve by reading the report?
☐ What specific areas do I need to cover?
☐ What factual information do I need to present?
☐ What will I discover?
☐ What are my general opinions on the result?
☐ What particular recommendations do I wish to make? (Am I in the position to make any?)
CONTENT- WHAT INFORMATION SHOULD I INCLUDE?
☐ Ensure that you fully understand the purpose of the report.
☐ Make a number of points in answer to the question.
☐ Use section headings for clarity.
☐ Include facts or results of a survey or research.
☐ Give description and explanation in support of each argument.
☐ Summarise your conclusions in the final part and conclude with a personal recommendation.
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REGISTER
☐ It depends on the target reader, but the report will almost always be FORMAL
☐ Do not use colloquial phrases (e.g. ‘masses of’). Replace them with formal ones (e.g. ‘ a large
amount of’)
☐ Do not use contractions (e.g. ‘don't’, ‘haven't’, 'cos, etc.). Replace them with their full forms instead
(e.g. ‘do not’, ‘have not’, ‘because’, etc.)
☐ Avoid phrasal verbs (e.g. pick up, set up, etc.). Replace them with one-word verbs (e.g. 'take a
look at' with 'investigate')
☐ Replace general verbs with the specific ones (e.g. 'got' with 'received')
☐ Replace extreme adjectives with less extreme ones (e.g. 'huge' with 'large')
Adapted from: http://elc.polyu.edu.hk/cill/eiw/reportformality.aspx
CONTENT
☐ Include true facts, precise wording, supporting data and reference to sources.
CLARITY
☐ Organise the text clearly by using sections, subsections, headings, subheadings, paragraphing,
numbering and bulleting.
CONCISION
☐ Avoid any unnecessary detail and sentences that are too long.
☐ Avoid repetitions.
☐ Give essential information, your evaluation and recommendation.
OBJECTIVITY
☐ Include all the relevant information, do not be biased.
☐ Use an impersonal tone (avoid the overuse of the pronoun 'I', use passive and reporting structures
instead, e.g. It was decided...; Most employees agreed that...; A lot of people expressed their
dissatisfaction with... It was generally felt that...).
ACCURACY
☐ Use precise and correct language (grammar, spelling and punctuation).
LAYOUT
☐ Start with a TITLE.
☐ Use CLEAR HEADINGS to organize your thoughts and to help the reader see how the report is
organised. Make sure there is a line space between headings.
☐ Give each SECTION in the report its own PARAGRAPH. Where appropriate divide sections into
paragraphs.
☐ Use NUMBERS (1) or BULLETS (•) to make important items stand out, especially if you want to
single them out.
☐ Companies often have their own format of standard reports and do not completely follow the
structure presented below.
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2 STRUCTURE
TITLE
(e.g. REPORT ON THE COMPANY IMAGE)
TERMS OF REFERENCE (or INTRODUCTION or BACKGROUND)
It states the purpose and the subject of the report and outlines the essential information – Who
asked for it?
What is to be investigated? What kind of information is required? When should it be submitted?
PROCEDURE (or METHOD)
It outlines the steps taken to make an investigation. It explains how the data were collected,
listing sources consulted.
FINDINGS
It sets out the information itself, with appropriate headings and subheadings, if the report covers
more than one topic.
CONCLUSION(S)
This section summarizes the main findings and assessments, and draws conclusions.
RECOMMENDATION(S) (if required)
The writer may suggest the solution to the problem investigated, so that the recipient will be able
to make a decision if necessary.
I Decide if the statements about REPORTS below are TRUE (T) or FALSE (F).
1 Reports should include the same opening and closing as formal letters. □ 2 They are informal in register. □ 3 Reports are based on facts and personal opinions. □ 4 Impersonal tone is achieved by using passive and reporting structures. □ 5 It is advisable to use detailed descriptions and long sentences. □ 6 They are divided into sections with clear headings. □ 7 They may contain numbers and bullet points. □ 8 It is not necessary to use a line space between different sections. □ 9 The sources used in your research are mentioned in the introduction. □ 10 The findings of the research are presented in the conclusion. □
20
II Copy the following headings above the corresponding paragraphs below. Then,
put the sections in the right order to get the STRUCTURE OF THE REPORT.
☐ RECOMMENDATION(S) (if required)
☐ TITLE
☐ CONCLUSION(S)
☐ PROCEDURE (or METHOD)
☐ FINDINGS
☐ TERMS OF REFERENCE (or INTRODUCTION or BACKGROUND)
☐ ______________________
The information for this report was gathered from different sources:
Extensive research conducted among consumers of our products
Detailed analysis of our competitive position on the market
The company's annual reports
Materials available on the company’s website
☐ ______________________
The following points summarize our key findings:
Our products are perceived as old-fashioned and expensive.
We have enough funds to start with modifying the established range of products and introducing the new ones which are trendier and more affordable.
Competition is fierce in Croatia, but there are expansion prospects on some untapped markets.
☐ ______________________
Report on the possibilities of launching a new range of products
☐ ______________________
It is clear that our company needs to focus on launching a new range of products which would meet the market expectations more adequately, thus being more competitive. Design and style should be given equal consideration as production costs.
☐ ______________________
We strongly recommend, therefore, that:
We should hire an internationally acclaimed designer to design our new range of products and revamp our company's image.
The company should consider outsourcing production abroad to reduce the production costs.
☐ ______________________
The aim of this report is to consider the possibilities of launching a new range of products. The report was requested by Hillary Swift, the CEO and it was to be submitted by 26 May 2013. Mathew Sloane Brand Manager 20 May 2013
21
III Make these sentences more formal by rewriting them in the PASSIVE FORM.
1) We enclose payment together with our order.
Payment ______________________________________________________________________.
2) The customer should receive the delivery by Friday.
The delivery ___________________________________________________________________.
3) According to a recent report the group is making similar investments in other parts of the world.
Similar investments ______________________________________________________________.
4) We will produce the components at our Sao Paolo factory.
The components ________________________________________________________________.
5) We would reduce costs if we used less paper.
_____________________________________________________________________________.
6) They should enlarge the premises to fit more offices.
______________________________________________________________________________.
IV Edit the text below by replacing the INFORMAL WORDS and phrases with the FORMAL ONES.
Here are some formal words you could use. You might need to change the tenses, parts of speech or turn an active sentence into passive.
reliable very disappointing decline design little conduct
currently investigate no distribute discuss large-scale
To take a look at the problem of declining numbers of visitors to Hong Kong, we decided to do
a really big survey. We made a questionnaire and handed it out to 2,000 people. We did this
because right now we don't have any hard data on why tourist numbers are declining. There's
not much information available either on what might bring them back to Hong Kong. The
return rate for the questionnaire was really bad at only 13% but this figure should provide a
firm enough basis for talking about why tourist numbers are going down.
Source:http://elc.polyu.edu.hk/cill/eiw/reportformality.aspx
22
3 USEFUL PHRASES
I Copy the following FUNCTIONS above the corresponding PHRASES in the table:
☐ STATING PURPOSE
☐ OUTLINING INTRODUCTORY INFORMATION
☐ DESCRIBING PROCEDURE
☐ PRESENTING FINDINGS
☐ INTRODUCING OTHER PEOPLE'S OPINIONS
☐ SIGNALLING
☐ SUMMARIZING AND CONCLUDING
☐ MAKING SUGGESTIONS AND RECOMMENDATIONS
____________________________________
This report aims to…/sets out to…
The aim/purpose of this report is to…
The aim of this report is to recommend/ analyse/give feedback on...
The purpose of this report is to analyse the results of...
This report will consider/examine/ compare/comment on/explain...
The report is intended to assess/evaluate/ outline ...
This report is based upon…
_________________________________
The following areas of concern have
been highlighted.
There are a number of reasons for…
There are several factors which affect…
This raises a number of issues.
As might have been expected,…
Contrary to expectations,…
____________________________________
It is suggested/proposed/recommended that…
We (strongly) recommend that…
It is essential to…
It would be advisable to...
In view of this, I (would) recommend/ suggest (that)...
It could be recommended for the following reasons...
Both... and... would be most valuable/of utmost importance for...
Neither of the previously mentioned solutions are recommendable/advisable.
________________________________
It was felt/assumed that...
Some participants claimed/argued/
believed...
It was unanimously agreed that...
They were universally criticized as...
There was general agreement that...
Most employees were in favour of...
Most employees expressed their
dissatisfaction with...
____________________________________
It was decided/agreed/felt that…
It is clear that…
No conclusions were reached regarding…
In general/In short/In conclusion,...
To sum up/All in all...
Taking everything into account/All things considered,...
________________________________
The data were collected/gathered from the following sources:
1. 2. 3.
The findings are based on a questionnaire that was sent to...
____________________________________
It was found that…
The following points summarize our key findings:
The key findings are outlined below:
________________________________
The report was commissioned/
requested by XY.
The report was to be submitted by 9
January 2014.
23
II Which of the phrases from the table above would you use in different SECTIONS OF A REPORT: TERMS OF REFERENCE, PROCEDURE (or METHOD), FINDINGS, CONCLUSION(S) or RECOMMENDATION(S)?
III Complete the missing parts of the Report on Improving Project Team
Communication with the phrases from the box below.
results in situations outlined in Point 1 The aim of this report is Although found on it is essential by 40% of the respondents said questionnaire It is clear
should key issues submitted The key findings are outlined below: recommend interviews Furthermore It was also found that It is recommended suggested
REPORT (1) __________________ IMPROVING PROJECT TEAM COMMUNICATION
Introduction
(2) _______________________ to identify communication problems within the new project team and (3) _______________________ ways of improving this communication. The report was to be (4) _______________________ to Ian Woods, Human Resources Manager (5) _______________________ 15 April 2012. Procedure
Individual (6) _______________________were held with all eight team members. Each team member also completed a (7) _______________________, which was designed to highlight the effectiveness of communication within the team. Several (8) _______________________ arose from this feedback. Findings
(9) _______________________ 1 (10) _______________________ individual team members meet fairly frequently to discuss the project, the outcome of these discussions is not shared amongst other team members. (11) _______________________, these individual meetings are creating mini-teams within the team. This damages team spirit. 2 (12) _______________________ the eight team members are located in different parts of the Building. This does not encourage contact and (13) _______________________. 3 (14) _______________________ that team members do not make enough effort to share information by email. Messages are sent to one person only and not copied to colleagues. Conclusion
No evidence of personnel problems was (15) _______________________ amongst team members. (16) _______________________ that the lack of communication is due to difficulty with procedures and location, both of which should be easy to solve. Recommendations
(17) _______________________ that the whole team meet on a weekly basis to share information and time together. Team members (18) _______________________ remember to copy colleagues in on emails relating to the project. This may require some training with the email software, therefore (19) _______________________ that the firm provides this training to those who need it. It is (20) _______________________ that the team attend a team-building seminar or adventure weekend.
24
IV Skim-read the article Storm Clouds over the Mall (The Economist, 8 Oct 2005), and match the paragraphs of the article to the corresponding sections of the report below. Then, complete the report with the missing words or phrases.
REPORT ON UK RETAIL INDUSTRY IN 2005 T _________________________ OF R _________________________ Ian Sullivan, Retail Department Manager, has r ________________ this report on UK retailing in 2005. The report was to be s _________________ to him by 01 June 2006. P _________________________ The data for this report were g _________________ from the following s _________________:
1 a survey of retailing by the Confederation of British Industry 2 consumer confidence data p _________________ by GfK Martin Hamblin; The Conference
Board 3 press r _________________ and public statements made by the leading UK retailers (e.g.
Boots, Tesco, Wal-Mart) 4 Supermarket Wars (a book by Andrew Seth and Geoffrey Randall) 5 The Economist of 8 October 2005, p. 67
F ________________________ I Two main d__________________ for UK retailers in 2005
4. Consumer s__________________ down (reason: increase in fuel costs and household debt)
4. Fierce c_________________ (victims: smaller supermarkets, chain stores, department stores all attacked by huge supermarkets)
II Different survival s__________________ applied:
1 M__________________ customers’ wishes (finding specific niches, e.g. designer goods, organic food, ...)
2 E___________________ into specific regions (e.g. Slovakia, the Czech Republic, China, ...) 3 B___________________ trust with own brands: either through pricing or service 4 I___________________ changes in the supply chain (e.g. fewer but fast fashion lines
coming from local production and not from China) 5 D____________________ e-commerce through a) on-line sales and b) extra service
supported by the internet which drives in-store sales (e.g. sending digital pictures and order prints in a local store)
C ________________________ As consumer spending slowed in 2005, competition was getting increasingly f _________________ and UK retailers developed a range of strategies to retain their c _________________ edge. R ________________________ 1 It is r _________________ to research the UK retail market also in 2006 to obtain a better
picture of the current situation. 2 The five mentioned strategies (Findings, Section II) should be thoroughly a _________________ in terms of their results. Kate Oakley Market Research Department 25 May 2006
25
4 REPORT WRITING TASKS
TASK 1
Read the following text and use it to write a report. Do not forget about giving it a title.
Last month we sent a team of three members of staff to assess the town of Camford as a
potential location for a new English language college for speakers of other languages.
There are a number of basic geographical reasons why Camford would appear to be an
attractive location for a language college. Firstly, it is situated at a distance of only fifty miles from
London and there are good rail and bus connections with the capital. Secondly, although Camford
is mainly known for its ancient university, it also has a number of other further education colleges
so that there are substantial groups of young people in the city in term-times. Moreover, links
between local industry, much of which is based on modern technology, and the educational
institutions are growing so that the economy of the area is relatively healthy. Due to the strong
economy of the town and the young population, there are a lot of entertainment facilities in town.
These include a sports complex with, among other things, a skating rink and a swimming pool.
There are also five cinemas and a large concert hall in town.
Despite its many fine points, Camford has, nevertheless, a couple of significant
disadvantages. First of all, there is a lack of appropriate rented accommodation available. In
addition, public transport within the city is extremely poor.
The best solution for us would be to find a location in Camford within walking distance of
the town centre. We could also think about the possibility of providing residential accommodation
for our students.
TASK 2
Your Managing Director has asked you to write a report on the proposed merger with Unibank, together with your recommendations. This was requested in his memo of 15 January, and you were asked to submit the report by 28 February. You have collected information from different sources, including Unibank’s publicity materials, financial publications, annual reports, and materials on its official website. Organise and expand the following notes to write a report.
Unibank - well-established and highly respected bank, over forty branches
important corporate clients, profitable investment department and modern communication
system + covers areas where we are not represented
cutting costs by closing down unprofitable branches and thus reducing staffing costs
possibility of recession → the prospects for growth not good
different management styles: Unibank is cautious and conservative
the Chairman of Unibank might not be willing to play a secondary role
unions strongly oppose staff cuts
suggestions: an in-depth study of Unibank’s financial situation + a meeting between the
chairmen of both banks to discuss the advantages of the merger
mergers with other banks should also be considered
Adapted from: Cotton D., Kent S. (2002): Practice File, Market Leader, Longman
26
TASK 3
Fowlers is a company making electrical appliances. One of their best-selling products used to be their coffee maker. However, in recent years sales have fallen dramatically. Due to losses the firm has made, the old management team has resigned and the new team asked you, a management consultant, to carry out a study to establish the reasons behind this problem. a) Decide what information you would put into each section. What kind of research
would you carry out? b) Read the following sentences and decide which section of the report they belong
to. c) Write a report. Incorporate the sentences from Task 3b) and invent any necessary details.
1 Fowlers coffee makers are perceived as old-fashioned and expensive by 75% of women
between 25-40.
2 Clearly, immediate action must be taken to guarantee short-term survival.
3 Fowlers has long been a household name for its high-quality coffee-makers, but more recently
the majority of the market perceives it as old-fashioned.
4 Fowlers should immediately hire a world-class designer to produce a new range of products.
5 Following the resignation of the old management team, we were invited to evaluate the
company’s position.
6 Between 1999 and 2005 Fowlers introduced a new product per year. Since 2005, however,
Fowlers has not launched a new product or redesigned its coffee-maker.
7 Once an innovative and pioneering company, Fowlers has relied too heavily on its established
range of products.
8 We conducted research among a wide range of consumers.
Adapted from: Jon Naunton, Head for Business: Upper-Intermediate Students' Book. OUP. p. 81-82
TASK 4
You are the Site Manager of Texan Chicken, a fast-food business. Your General Manager, Edward Thomas, has asked you to write a report on two possible locations in your area for a new restaurant. He telephoned you with his instructions on 10 April, saying, ‘Let me know the advantages and disadvantages of each site, and give me a firm confirmation please, with your reasons. Can you let me have the report by 30 April as I have a board meeting on the following day?’
Site A Site B
Floor space in sq. metres 330 180
Parking Car park
(Maximum 20 cars)
Unrestricted street parking. No car park.
Location High street.
Residential area nearby.
On corner in the city centre.
Building Ground floor of historic
building. A lot of renovation
needed.
New building in excellent condition.
Rent per week £520 £350
Security of area High crime rate. Shops
broken into and
vandalised.
Low crime rate because near the police
station.
Estimated customer
numbers
Now: 1,000
In 5 years: 5,000
Now: 2,000
In 5 years: 3,000
Source: Cotton D., Kent S. (2002): Practice File, Market Leader, Longman
27
4 DESCRIBING GRAPHS
1 Types of graphs and charts
2 Verbs
3 Nouns
4 Adverbs and adjectives
5 Prepositions
6 Describing graphs in a paragraph
7 Practice
1 TYPES OF GRAPHS AND CHARTS
I Label each chart.
flow chart line graph bar chart diagram table pie chart
_______________________ _______________________
_______________________ _______________________
28
_______________________ _______________________
II Answer these questions about charts and graphs.
1 Which type of chart is useful for describing a process?
2 Which type of chart is useful when we want to show the sizes of components that make up
some whole?
3 What is an explanatory drawing that shows how some parts are arranged?
4 Which type of chart is used when we want to show how the size of something varies through
time?
5 Which chart helps in comparing two or more values?
6 What can be used to present different categories of data organized into rows and columns?
III Label the parts of this line graph with the right word from the box.
vertical axis horizontal axis legend dotted line solid line broken line
values peak trough
0
10
20
30
40
50
60
70
80
90
100
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
East
West
North
29
2 VERBS
I Read the verbs in the box and decide where they belong in the table.
grow decline rise fluctuate slash level out plummet boost jump
rally slump soar bring down fall plunge rocket decrease
increase drop vary raise stagnate
GO UP GO DOWN
STAY THE SAME CHANGE
II Read through the list of verbs again, and choose the ones that mean a sudden
movement.
1 ______________________
2 ______________________
3 ______________________
4 ______________________
5 ______________________
6 ______________________
30
III Look at the line graph representing the sales figures of a company and write a
sentence to describe each year.
0
10
20
30
40
50
60
70
80
2002 2003 2004 2005 2006 2007 2008
______________________________________________________ in 2003.
______________________________________________________ in 2004.
______________________________________________________ in 2005.
______________________________________________________ in 2006 and 2007.
______________________________________________________ in 2008.
IV TRANSITIVE AND INTRANSITIVE VERBS
In English some verbs cannot be followed by an object, these are called intransitive
verbs. The verbs that have to be followed by an object are called transitive verbs.
Some verbs can be both. Sort out the verbs from Exercise I.
TRANSITIVE INTRANSITIVE BOTH
______________________ ______________________ ______________________ ______________________
______________________ ______________________ ______________________ ______________________
______________________ ______________________ ______________________ ______________________ ______________________ ______________________ ______________________ ______________________ ______________________ ______________________ ______________________ ______________________
______________________ ______________________
V Now use these verbs to fill in the gaps in these sentences. Use the grammatically
correct form.
1 The government _____________ the price of fuel by 2%, it now costs $1.02, instead of $1.
2 Prices _____________ all year. It was very difficult to make plans in a situation when we
couldn’t know what to expect.
3 The government's decision to decrease sales taxes _____________ the economy.
4 The new expansionary fiscal policy _____________ unemployment figures in the country.
31
5 Due to the efficient management of the company, we _____________ sales by 25% this year.
6 Unemployment _____________ from 200,000 to 600,000 in 3 months due to the closure of
several factories in the country.
7 The higher income that resulted from the suddenly increased sales _____________ the
company's deficit by half.
8 The economy _____________ for five years. The GDP growth was around 1% and there was
a high unemployment.
VI Complete the table with the missing forms of these verbs.
INFINITIVE PAST SIMPLE PAST PARTICIPLE
to rise
to raise
to arise
VII Now fill in the gaps in these sentences with the correct form of the verbs from above.
1 The Sun ____________ every morning.
2 ____________ your hand if you agree.
3 The problem ____________ from the lack of quality control.
4 Last year we ____________$2 m in capital.
5 The cash flow crisis ____________ because the company did not receive payment from its
debtors.
6 Retail prices ____________by 7% last year.
7 The Fed will probably ____________interest rates by 0.5%.
8 The mistakes that have ____________ this week are due to a lack of communication
between the staff and the management.
3 NOUNS
I Turn these verbs into nouns.
VERB NOUN VERB NOUN
grow fall
rise decline
increase slump
boost plunge
jump decrease
improve drop
stagnate fluctuate
peak bottom out
32
II Write a sentence about each year represented on the graph using a verb. Then
rewrite the sentence so that you are using a noun instead of a verb. Use the
prompts provided.
0
10
20
30
40
50
60
70
80
2002 2003 2004 2005 2006
EXAMPLE: Rice production decreased in 2002. There was a decrease in rice production in
2002.
1 _____________________________________________________________________________.
The chart shows a(n) _____________________________________________________________.
2 _____________________________________________________________________________.
We see a(n) ____________________________________________________________________.
3 _____________________________________________________________________________.
There was a(n) __________________________________________________________________.
4 _____________________________________________________________________________.
2006 brought a(n) _______________________________________________________________.
4 ADVERBS AND ADJECTIVES
Adverbs and adjectives can be used to describe changes in more detail.
I Finish the sentences. Adverbs go after _________________. Adjectives go before _________________.
II Change these adjectives into adverbs.
SIZE SPEED
ADJECTIVES ADVERBS ADJECTIVES ADVERBS
big quick
significant sharp
substantial dramatic
massive sudden
small slow
slight steady
insignificant moderate
33
III Underline the correct word in each sentence.
1 There was a CONSIDERABLE / CONSIDERABLY fall in oil prices last week.
2 The demand for the older model of the phone decreased SLIGHT / SLIGHTLY when the newer
model was launched.
3 There was a SUBSTANTIAL / SUBSTANTIALLY upturn in exchange rates.
4 The government decreased taxes MODERATE/ MODERATELY.
5 They reported a DRAMATIC / DRAMATICALLY downturn in the price of shares last year when
the CEO was fired.
6 We managed to raise our profits RAPID / RAPIDLY when we increased our advertising budget.
IV Now rewrite your sentences from section 3, exercise II by adding an adverb or an
adjective.
EXAMPLE: Rice production decreased moderately in 2002. There was a moderate decrease
in rice production in 2002.
1 _______________________________________________________________________________.
_______________________________________________________________________________.
2 _______________________________________________________________________________.
_______________________________________________________________________________.
3 _______________________________________________________________________________.
_______________________________________________________________________________.
4 _______________________________________________________________________________.
_______________________________________________________________________________.
5 PREPOSITIONS
I Study the sentences and circle the prepositions in them. Then, complete the rules
with the missing prepositions.
1 A growth of 20% in sales.
N + __________ + (%, number) + __________+ (topic of the graph)
2 Sales grew by 20%.
V + __________+ (%, number)
3 Sales grew from $8m to $15m. (Sales are now $15m.)
V + __________+ (number) + __________ + (number)
4 Sales are currently standing at 15m.
Sales peaked at 25m.
Sales bottomed out at 4m.
Current position on a graph: __________
34
II Fill in the gaps with prepositions from the box below.
from between to in by at of
1 Last year sales fell ______ $3m ______ $1.5m.
2 This year in our town there was a growth ______ 20% ______ marriages.
3 The employment ratio in the country reached a trough ______ 30% last year.
4 The competition’s advertising spending has fluctuated ______ €5m and €5.75m this year.
5 Our market share plummeted ______ 20% when a new company broke into the market.
Currently we control 15% of the market and we are making enormous losses.
6 Our market share plummeted ______ 20% from 45%, which is a 25% drop.
III Write a sentence about each year represented on this chart using the data provided.
73
55 55
66
13
0
10
20
30
40
50
60
70
80
2002 2003 2004 2005 2006
5 __________________________________________________________________________.
5 __________________________________________________________________________.
5 __________________________________________________________________________.
5 __________________________________________________________________________.
5 __________________________________________________________________________.
35
6 DESCRIBING GRAPHS IN A PARAGRAPH
I Read the text and fill in the gaps with the words from the box below.
at fluctuated decline peak by moderate doubled substantially
leveled off dramatic
Market share of Mintel and Orefon
70
5550
4033
40 40
10
20
40
50
6055
60
0
10
20
30
40
50
60
70
80
90
100
2002 2003 2004 2005 2006 2007 2008
Mintel Orefon
The graph shows the changes in the market share of two telecommunications companies,
Mintel and Orefon, between 2002 and 2008. As it can be seen, the overall trend shows a
decreasing of the difference between the market shares of the two companies.
Mintel, represented by the solid line, lost a considerable portion of its market share during this period.
Mintel was the market leader in 2002, however, with Orefon’s entry into the market it saw a steady
(1) ___________ in the next five years. By 2006 its market share fell (2) ___________ 37%, reaching
a trough (3) ___________ 33%. This period was followed by a (4) ___________ growth of 7%. At the
end of the examined time period Mintel’s market share (5) ___________ at 40%.
Orefon’s market share grew dramatically during the examined years. It entered the market in 2001
and by 2002 it owned 10% of the market. In the next two years this company’s market share (6)
___________ each year, reaching 40% in 2004. In 2006 it reached a (7) ___________ at 60%.
Between 2006 and 2008 the market share (8) ___________ between 60% and 55%.
To sum up, the years between 2002 and 2008 is the period when Orefon surpassed Mintel. During the
6 years represented on the graph, Mintel saw a (9) ___________ decline while Orefon’s market share
increased (10) ___________. In 2008 the competition between the two companies was much more
even than in 2002.
II Read the text again and decide what function the following sections have.
☐ The first sentence.
☐ The second sentence.
☐ The sentences in italics.
☐ The final paragraph.
36
WRITING TIPS FOR DESCRIBING GRAPHS
☐ Start with saying what the topic and the time frame of the graph is.
☐ Check what the labels and the numbers represent. (a percentage, a currency, are they in
thousands or millions?)
☐ Describe the overall situation, find the most important trends.
☐ Do not describe every change, do not go into too much detail.
☐ Try not to repeat the same language and sentence structures.
☐ Conclude by summarising what we learn from the chart.
III Describe this graph in no more than 300 words.
0
20
40
60
80
100
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Units sold in millions (2013)
airconditioners
heaters
37
7 PRACTICE
I Read this article and rewrite the sentences in bold with the help of the prompts. Do
not use the same words as in the original sentences.
Croatia's economy: Finnish lessons for
Croatia The Economist Jun 17th 2013, 16:27 by L.O.
“AT FIRST glance Croatia and Finland share a great many common features,” said Esko Aho (pictured), a former prime minister of Finland, when visiting Zagreb a few weeks ago. Mr Aho visited Croatia to talk about the reforms he introduced during his years in power to a small crowd hopeful that the Finish experience might offer some answers to the problem of Croatia’s protracted recession.
Besides an (1) approximately corresponding population size, Finland and Croatia seem to share other similarities when comparing Finland’s crisis in the early 1990s and Croatia’s current recession. (2) Croatia’s exports fell by 25% in 2009 partly thanks to the general recession in the European Union just as Finland’s exports dropped a quarter after the dissolution of the Soviet Union. In both cases the fall in exports would not have hit them so hard had they been otherwise economically sound.
A housing bubble played a big role in Finland’s and Croatia’s respective pre-crisis growth and subsequent decline. A large and costly bureaucracy in both countries, a high tax burden, restrictive monetary policy and faltering consumer confidence led to soaring unemployment and a drop in GDP. (3-4) Croatia’s unemployment rose from 7% to just below 20% while GDP plunged by 6.9% in 2009. Finland’s unemployment rose from 2.1% to 19.9% while GDP slumped by 13% between 1991 and 1994.
Finland emerged from the crisis by 1995, with international trade growing to a third of its GDP today. (5) Croatia’s economy continues to shrink this year. While Finland struggled for recovery with a comprehensive tax reform, deep cuts in federal and municipal spending as well as export-focused currency devaluations, the Croatian government shied away from structural reforms.
The best example of Croatia’s and Finland’s diametrically opposite solutions to almost identical problems is tax reform. Aiming to bolster both consumption and private-sector development, Finland reduced taxes while
maintaining tax revenue by reducing deductibility. (6) The personal income-tax rate was reduced from 51% to 39% and the corporate tax rate was cut from 33% to 19%. Jelena Lovric, a Croatian political analyst, summarised the Finish tax cuts in a recent newspaper column: “(7) Finland literally halved its high taxes, increasing budget revenue from taxes by an incredible 350% [by 2000]” with corporate income tax revenue in 2000 seven times higher than in 1994.
Meanwhile in Croatia personal consumption has been in free fall over the past four years, bar a month or two during the tourist season. (8) Last year, value-added tax was raised from 23% to 25% while income tax is the third highest globally, after Belgium and Greece. The corporate tax burden was reduced by a modest 2% in statutory healthcare insurance contributions. Ms Lovric argues that (9) Croatia “has increased the tax burden while state budget tax revenues are dwindling”.
The Croatian government recently caved in to the threat of a national labor union strike and committed to retracting the 3% public sector wage cut instituted in February as soon as GDP growth returns for three consecutive quarters. An analysis by Bisnode, a business-intelligence company, estimates average Croatian public sector wages to be 73% higher than average wages in the private sector.
Many Croatian economists have called for currency depreciation to support the fledgling export sector, yet both central bank and political leadership discard this possibility. Exports are key to recovery of smaller countries: if not helped by currency depreciation, the fiscal system must favour exporters.
Finland is also an excellent example of bold bets on new sectors. With substantial investments in the ICT and education sectors, the country fueled its growth over the past two decades. (10) The World Bank recently revised its forecasts for the Croatian economy, predicting it would grow at a weak 1.5% in 2014. However, to sustain more robust growth politically costly moves are necessary—a lesson Mr. Aho learnt when he lost his re-election. It remains to be seen if Croatia’s leadership will rise to the task at hand.
38
(1) The number of inhabitants in both countries is _______________________________.
(2) Both countries’ exports _______________________________.
(3) In both countries the number of people out of work _____________, in Croatia this was
_______________________________, while Finland saw a
_______________________________.
(4) The GDP in both countries _________________, in Finland
_______________________________, in Croatia _______________________________.
(5) Croatia’s GDP ________________ this year.
(6) Personal income tax was _________________ by ___________________, the corporate tax
rate was _________________ by __________________ in Finland.
(7) Finland ________________ its taxes by _____________%.
(8) Last year there was a _________________ in value-added tax in Croatia.
(9) In Croatia taxes _______________, while income from taxes is ________________.
(10) The World Bank forecasted a (Adj + N + preposition) ________________________________
1.5% in 2014.
II Read The Guardian’s stock market report and match the numbered phrases in the
text with those in the box below.
A) plummeted
B) was losing the energy to do something
C) made losses
D) suddenly take away support from the recovery of the stock market
E) to cause something to fail
F) was removed
G) continued the same way as the day before
H) did something to cause trouble among people
World stock markets fall after Ben
Bernanke hints at easing stimulus
Graeme Wearden and Nick Fletcher
guardian.co.uk, Thursday 20 June 2013 16.54 BST
FTSE 100 falls nearly 3%, wiping more than £48bn off
the value of Britain's biggest companies
More than £48bn (1) was wiped off the value of
Britain's biggest companies as world stock markets fell
sharply on Thursday and UK government borrowing
costs hit a 15-month high.
The blue-chip FTSE 100 index (2) tumbled by 189
points, or nearly 3%, in its biggest percentage fall
since September 2011, after the chair of the Federal
Reserve gave the clearest signal yet that America's
huge stimulus package will be slowed this year.
Fears that China's economy (3) was running out of
steam were also blamed for heavy losses across all
major markets. On Wall Street, shares (4) picked up
where they left off on Wednesday night with the Dow
Jones index falling 200 points in early New York
trading, adding to Wednesday's 206-point decline as
the global sell-off turned full circle.
Government sovereign debt also (5) suffered losses,
driving up the yield on Britain's 10-year gilts to 2.29%,
a level last seen in March 2012.
Commodity prices also joined in the rout, with the gold
price falling below the $1,300 an ounce mark for the
first time since September 2010.
Traders blamed the sell-off on Ben Bernanke's
prediction on Wednesday night that the Fed will start to
ease its bond-buying programme later this year,
having seen evidence that the US economy is
recovering.
"Ben Bernanke has (6) put the cat well and truly
among the pigeons with his statement that asset
purchases would begin slowing by the end of this
year," said Yusuf Heusen, sales trader at IG. "It does
feel as if the Fed chairman has (7) pulled the rug
from underneath the stock market rally, and he
certainly seems to have (8) dealt a killer blow to
gold."
39
5 TRADE
RETAIL TRADE
I Anticipate some of the themes in the article from the following title: “Retailing: Storm
clouds over the mall: As consumer spending slows, rival strategies are being put to the
test”
II Read the opening sentence of each paragraph. Think of these sentences within the
context of the predictions you have made.
Storm clouds over the mall: As consumer spending slows, rival strategies are being put to the test
1 “CONDITIONS on the high street are difficult, competition is intense and there is nothing to suggest this will change in the coming months.” That was the message of Richard Baker, the chief executive of Boots, a chain of British chemists, earlier this summer. Since then, things have only got tougher. This week, Mr Baker announced the £7 billion ($12 billion) merger of his British retailing institution with a rival chain—a move widely seen as defensive. With consumer spending declining in Europe and America, retailers are bracing for a thoroughly awful Christmas.
2 Shopkeepers are notorious Eeyores. But this time their fears may be well founded. Britain's economy grew at its slowest annual rate for 12 years in the second quarter, and a recent survey of retailing by the Confederation of British Industry has reported the fastest-ever year-on-year sales decline. In Germany's mired economy, retail sales in August fell for the third month in a row. In the same month, retail sales fell by 2.1% in America, led by a plunge in sales of gas-guzzling sports-utility vehicles. Consumer confidence in the United States is declining sharply (see chart).
3 A number of retailers have seen this slowdown coming. Lee Scott, the boss of Wal-Mart, the world's biggest retailer, has
been warning for over a year that higher fuel bills are cutting into customers' spending. Sir Terry Leahy, who heads Britain's biggest retailer, Tesco, is also worried about rising fuel costs and increasing household debt. Yet compared with many smaller rivals, Wal-Mart and Tesco are still doing well: Wal-Mart's sales increased by 10.2% to $76.8 billion in the second quarter to July 31st, compared with the same period a year earlier. And in its first half to August 13th, Tesco's sales were up 14% to £18.8 billion. It is the weaker players who are suffering. In the United States, Albertsons, the country's second-biggest grocer, has put itself up for sale after a long struggle against discount chains. Its 2,500 stores could fetch around $16 billion.
4 But it is not just other supermarkets that are feeling the pressure from the likes of Wal-Mart and Tesco. The giant supermarket chains are expanding into more product areas, such as clothing, health, beauty and electrical appliances. This increases the pressure on many high-street chains and department stores. Without the same buying power and economies of scale as the biggest supermarket chains, these retailers seem destined to suffer more from the present slowdown.
Change or checkout
5 How can a retailer ensure that it is among the survivors? The first thing companies need to do sounds easy, but is notoriously difficult: provide
customers with what they want. To compete against the giants, retailers can specialise in a narrower range of products, often aimed at a specific group of consumers. Target, a more upmarket version of Wal-Mart, does this in America and also employs star designers to make products. Whole Foods Market, another successful American retailer, has become the leader in natural and organic products. But this is a moving battle. Wal-Mart is starting to offer more designer goods and organic produce.
6 Concentrating on specific regions can also help. Even successful retailers can stumble in new markets. Wal-Mart, for instance, has struggled in Germany against local discounters such as Aldi. Unless they are among the leaders in certain countries, big retailers are now inclined to throw in the towel. This week Tesco said it would swap, with a cash adjustment, its six stores in Taiwan for 15 hypermarkets in Slovakia and the Czech Republic owned by France's Carrefour. The deal allows each firm to quit markets where it is weak.
7 It is still not clear if any retailer will be able to dominate in all the big markets, especially China. However, a small group of world leaders is emerging, according to “Supermarket Wars”, a new book by two retail experts, Andrew Seth and Geoffrey Randall. They list the leaders, so far, as Wal-Mart, Carrefour, Tesco and
40
Aldi. Among the supermarket chains they believe will have no global clout are Albertsons and Sainsbury's—the latter in third place in Britain behind Tesco and Asda, which was bought by Wal-Mart in 1999.
8 Successful retailers also need to win the trust and confidence of consumers, either through pricing or service. Building trust means consumers will give a retailer the benefit of the doubt when it introduces new lines or own-branded products. So they have been happy to buy things such as DVD players, microwave ovens and clothing from supermarkets. Nowadays it is becoming easier for retailers to source high-quality products globally and brand them as their own.
9 Such changes in the supply chain can transform an industry, says Nick Greenspan, who leads the European retail practice of Bain & Company, a business consultancy. He cites fast-fashion as an example. Instead of long supply lines with garments ordered months in advance from China, some successful European retailers, such as Spain's Inditex (which owns Zara) and Sweden's Hennes & Mauritz, order fewer
lines more locally. Production is more expensive, but garments are in the shops within weeks and so are closer to the latest fashion trends. And stock is not replenished, but replaced with new lines. According to Bain, the profit margins and revenue growth of fast-fashion retailers greatly exceed those of many other chains.
10 Finally there is the internet, which every year takes a bigger share of consumer spending.
Online sales of general merchandise in America will exceed $100 billion this year, according to Forrester, a research company. Carrie Johnson, Forrester's e-commerce specialist, predicts that will double by 2010, by which time more than
half of all computers will be sold online, along with almost a quarter of cosmetics, 29% of small electrical appliances and more than 10% of clothes.
11 Yet the importance of the internet goes beyond cyberspace. A website can also drive in-store sales. Successful retailers are linking the two. Wal-Mart, for instance, is beefing up its website, which now allows customers to send in digital pictures and order prints to be picked up in an hour from a local store. And because big retailers can build virtual stores even bigger than their bricks-and-mortar ones, the breadth of products on offer is growing enormously. Online or offline, it will not be a happy Christmas for many retailers.
Source: The Economist, 6 October 2005
III Find and correct the mistake in each paragraph summary.
1 Consumer spending rises in Europe, competition is intense and some retail chains decide to merge
with rival chains.
2 While Britain's and Germany's GDP is falling, consumer confidence is on the rise around the world.
3 Rising fuel costs and household debts affect customers’ spending which in turn has a positive effect
on the sales of weaker retail players.
4 British supermarket chains expand into more product areas, and this affects negatively high-street
chains and department stores.
5 Retailers’ survival strategy should rely primarily on meeting a wide array of customers' needs.
6 Secondly, retailers should keep a foothold in as many regions as possible to reach economies of
scale.
7 Many retail chains have global clout.
8 Thirdly, retailers need to win consumer confidence through pricing, so the biggest supermarkets own
factories where they manufacture own-branded products cheaply.
9 Fourthly, some wholesalers introduce changes in the supply chain.
10 Consumer spending declines because of the use of the Internet.
11 Sales in virtual stores work against brick-and-mortar sales.
41
IV What suggestions does the text offer as a way for retailers to survive? Fill in the missing verbs. 1 __________ in a narrower range of products __________ at a specific group of consumers.
2 __________ on specific regions, __________ markets where the company is weak.
3 The company needs to __________ the trust and confidence of consumers, either through pricing or
service.
4 __________ the supply chain: instead of long supply lines __________ fewer lines more locally.
5 __________ virtual stores to supplement in-store sales.
V Find the expressions in the text.
1 Which expressions mean the same as ‘consumer demand’? ____________________,
___________________, _____________________.
2 Find 8 types of retail outlets. ____________________, ____________________, ____________________, ____________________, ____________________, ____________________, ____________________, ____________________.
VI Find the expressions in the text which match the following explanations.
Paragraph 1
the primary business street of towns or cities, especially in the United Kingdom
a shop that sells medications, medical supplies and toiletries
Paragraph 2
three months of a fiscal year
Paragraph 3
debt held by families, the opposite of public debt
a shop selling foodstuffs (e.g., meat, dairy, etc.)
a chain of retail outlets offering goods at a decreased price
Paragraph 4
the increase in efficiency of production as the number of goods being produced increases
extent to which a person, firm, or group has available funds to make purchases
Paragraph 7
influence, or power that can be felt all over the world
Paragraph 8
products that a large retailer buys from a manufacturer in bulk and puts its own name on
Paragraph 9
a network of all the companies manufacturing parts for a product, assembling it, delivering it and selling it
Paragraph 10
another word for goods
42
VII Online world vs offline world. Find the corresponding terms in the text.
ONLINE OFFLINE
Online sales
E-commerce
Digital pictures
Virtual stores
43
E-COMMERCE
I What are some of the advantages of online shopping over buying in bricks-and-mortar shops? II Judging from what you read in the article Storm clouds over the mall, which was published in 2005, do you think that by 2012 major retailers made strong efforts to participate in e-commerce? III Take a look at the list of large retailers mentioned in the text as examples. Find them in the text and explain why they are mentioned.
1 United Retail Group
2 Walmart
3 Target
4 Amazon
5 Apple
6 Disney
7 Macy's
8 Borders
Retailers and the internet
Clicks and bricks: Many retailers are being too slow in reinventing themselves for the age of online shopping
“WE TEND to overestimate the effect of a technology in the short run and underestimate the effect in the long run,” observed Roy Amara, an American futurologist. This is certainly proving true of retailers and their attitude to the internet. After a panic at the turn of the millennium about the impact on their industry of online shopping, bricks-and-mortar stores settled into making only modest alterations to their business model or, ostrich-like, trying to ignore it. Few have so far made the radical changes needed to meet the threats from, and tap the enormous potential of, e-commerce.
Such inaction threatens retailers' survival. Online sales are now approaching $200 billion a year in America. Their share of total retail sales is creeping up relentlessly, from 5% five years ago to 9% now. People in their 20s and 30s do about a quarter of their shopping online. True, few ladies who lunch will buy their Christian Dior dresses online; and bargain-hunters will still enjoy rummaging in discount stores like Dollar General. But to attract everyone in between, retailers will have to build a strong online offering while making their shops nicer, more conveniently located and, in the case of many big-box retailers, smaller. Otherwise they are likely to go under, as United Retail Group, an American clothing chain, did this month.
To build a profitable online business retailers must integrate it seamlessly with their bricks-and- mortar operations. Many keep them separate, increasing the risk that they fail to communicate or work together properly. Walmart's online operations are in Silicon Valley, far from its Arkansas headquarters. Target, another
supermarket giant, until recently outsourced its e-commerce to Amazon, the biggest online retailer, and is only now building its own e-business. Both Walmart and Target still have a puny online presence relative to their size. Are you being served? Retailers also need to be ruthless in chucking out products that do not gain from being sold in a physical store: not just things like CDs and DVDs, which can be replaced by digital goods, but bulky stuff like nappies (Amazon has become a big seller of Pampers). Their shops must focus on those things, such as expensive clothes and gadgets that customers will want to try before they buy, and for which they will pay extra, such as advice from competent sales assistants. Stores have to become more fun to visit, so shoppers feel it is worth the trip to the mall or high street. Apple's shops thrive not only because they contain cool products; they are beautifully designed, with helpful staff. Disney stores may be an ordeal for parents but they often succeed in giving their pint-sized clients “the best 30 minutes of a child's day”. But too many retailers think only of getting a quick sale, neglecting to build relationships with customers. They are the most at risk from “showrooming”: shoppers trying products in physical stores before sneaking off to buy them more cheaply online. To survive in the new world of retail shopkeepers will need large amounts of imagination—and money. Macy's is investing $400m in the renovation of its flagship store in New York. The losers will include those (like Borders, an extinct chain of bookshops) that keep selling things people are happy to buy online. The biggest winners will be consumers. They can look forward not only to ever-greater convenience thanks to the internet. They will also find a growing number of physical stores that compete to make shopping a pleasure. Source: The Economist, 25 February 2012
44
IV Answer these questions.
1 What kind of future changes in retailing is predicted in the first 2 paragraphs?
2 What did most retailers do so far to benefit from the growth of e-commerce?
3 How has e-commerce grown in the past few years?
4 Who will be the winners of the changes in the retail landscape? Why?
V What does the article suggest retailers should do to get the custom of people who
shop online? Use the prompts to write suggestions.
1 Retailers' physical stores should be ___________________________________________________.
2 Oversized stores ought to be ________________________________________________________.
3 The online and offline branches of a retailer should be ____________________________________.
4 Only goods that are ________________________________________________ should be sold in
bricks-and-mortar stores.
5 The experience of shopping in a bricks-and-mortar store ought to be ________________, where
there is a _________________ between retailers and customers.
6 ____________________________________________________ have to be invested into
traditional stores.
VI Summarize the sections of this article in a sentence.
Paragraph 1: ________________________________________________________________________.
Paragraph 2: ________________________________________________________________________.
Paragraphs 2-6: _____________________________________________________________________.
Paragraph 6: ________________________________________________________________________.
VII What do these expressions mean? Choose the correct explanation.
1 Ladies who lunch
a. Women in managerial positions who eat lunch at work.
b. Well-off, well-dressed non-working women who meet each other for lunch during the working week.
2 Bargain-hunter
a. Someone who tries to find goods at discounted prices.
b. Someone who tries to negotiate the price of a product.
3 Big-box retailer
a. A retailer set up in a big box-like building with a large amount of floor-space, selling a wide range
of products at low prices.
b. A retailer selling large, high-value items at discounted prices in suburban areas.
4 To go under
a. To go bankrupt.
b. To downsize.
45
INTERNATIONAL TRADE
I Match these words and expressions from the box with the definitions below.
autarky balance of payments balance of trade barter or counter-trade
deficit dumping invisible imports and exports protectionism quotas
surplus tariffs visible trade (GB) or merchandise trade (US)
1 trade in goods
2 trade in services (banking, insurance, tourism, and so on)
3 direct exchange of goods, without the use of money
4 the difference between what a country receives and pays for its exports and imports of goods
5 the difference between a country's total earnings from exports and its total expenditure on
imports
6 the (impossible) situation in which a country is completely self-sufficient and has no foreign
trade
7 a positive balance of trade or payments
8 a negative balance of trade or payments
9 selling goods abroad at (or below) cost price
10 imposing trade barriers in order to restrict imports
11 taxes charged on imports
12 quantitative limits on the import of particular products or commodities
II Read the text Protectionism and free trade and answer the following questions.
1 Why do most economists oppose protectionism?
2 Why do most governments impose tariffs and/or quotas?
3 Why were many developing countries for a long time opposed to GATT?
4 Why have many developing countries recently reduced protectionism and increased their
international trade?
PROTECTIONISM AND FREE TRADE
The majority of economists believe in the comparative cost principle, which proposes that all nations
will raise their living standards and real income if they specialize in the production of those goods
and services in which they have the highest relative productivity. Nations may have an absolute or a
comparative advantage in producing goods and services because of factors of production (notably
raw materials), climate, division of labour, economies of scale, and so forth.
This theory explains why there is international trade between North and South, e.g. semiconductors
going from the USA to Brazil, and coffee going in the opposite direction. But it does not explain the
fact that over 75% of the exports of the advanced industrial countries go to the other similar
advanced nations, with similar resources, wage rates, and levels of technology, education, and
capital. It is more a historical accident than a result of natural resources that the US leads in building
aircraft, semiconductors, computers and software, while Germany makes luxury automobiles,
machine tools and cameras.
46
However, the economists who recommend free trade do not face elections every four or five years.
Democratic governments do, which often encourages them to impose tariffs and quotas in order to
protect what they see as strategic industries – notably agriculture – without which the country would
be in danger if there was a war, as well as other jobs. Abandoning all sectors in which a country does
not have a comparative advantage is likely to lead to structural unemployment in the short (and
sometimes medium and long) term.
Other reasons for imposing tariffs include the following:
- to make imports more expensive than home-produced substitutes, and thereby reduce a balance
of payment deficit;
- as a protection against dumping (the selling of goods abroad at below cost price in order to destroy
or weaken competitors or to earn foreign currency to pay for necessary imports);
- to retaliate against restrictions imposed by other countries;
- to protect “infant industries” until they are large enough to achieve economies of scale and strong
enough to compete internationally.
With tariffs, it is impossible to know the quantity that will be imported, because prices might be
elastic. With quotas, governments can set a limit to imports. Yet unlike tariffs, quotas provide no
revenue for the government. Other non-tariff barriers that some countries use include so-called
safety norms, and the deliberate creation of customs difficulties and delays.
The General Agreement on Tariffs and Trade (GATT), an international organization set up in 1947,
had the objectives of encouraging international trade, of making tariffs the only form of protectionism,
and of reducing these as much as possible. The most favoured nation clause of the Gatt agreement
specified that countries could not have favoured trading partners, but had to grant equally favourable
conditions to all trading partners. The final Gatt agreement – including services, copyright, and
investment, as well as trade in goods – was signed in Marrakech in 1994, and the organization was
superseded by the World Trade Organization.
It took nearly 50 years to arrive at the final Gatt agreement because until the 1980s, most developing
countries opposed free trade. They wanted to industrialize in order to counteract what they rightly
saw as an inevitable fall in commodity prices. They practised import substitution (producing and
protecting goods that cost more than those abroad) and imposed high tariff barriers to protect their
infant industries.
Nowadays, however, many developing countries have huge debts with Western commercial banks
on which they are unable to pay the interest, let alone repay the principal. Thus they need to rollover
(or renew) the loans, to reschedule (or postpone) repayments, or to borrow further money from the
International Monetary Fund, often just to pay the interest on existing loans. Under these
circumstances, the IMF imposes severe conditions, usually including the obligation to export as
much as possible.
Quite apart from IMF pressure, Third World governments are aware of the export successes of the
East Asian “Tiger” economies (Hong Kong, Singapore, South Korea and Taiwan), and of the collapse
of the Soviet economic model. They were afraid of being excluded from the world trading system by
the development of trading blocks such as the European Union, finalized by the Maastricht Treaty,
and the North American Free Trade Agreement (NAFTA), both signed in the early 1990s. So they
tended to liberalize their economies, lowering trade barriers and opening up to international trade.
Source: Ian MacKenzie, English for Business Studies, 2nd
Ed, pp. 155-7
47
III Write questions, relating to the text, to which these could be the answers.
1 __________________________________________________________________________?
Factors of production, most importantly raw materials, but also labour and capital, climate,
economies of scale, and so on.
2 ___________________________________________________________________________?
Because it doesn’t explain why the majority of the exports of advanced industrialized countries go
to other very similar countries.
3 ___________________________________________________________________________?
A recently developed one, that has not yet grown to the point where it benefits from economies of
scale, and can be internationally competitive.
4 ___________________________________________________________________________?
Unlike quotas, they produce revenue.
5 ____________________________________________________________________________?
Unlike tariffs, you know the maximum quantity of goods that will be imported.
IV Read the article and answer the questions.
1 How many types of trade barriers are mentioned in the text? List them.
2 Look back at the first reading in this unit and check the list of reasons why a country may impose
tariffs. Which ones apply in this situation?
3 Of what did the European trade commissioner accuse the Chinese?
4 What did the EU plan to do?
5 How was a trade war avoided?
6 What will the next point of contention be?
Sabres sheathed: The EU and China have averted a trade war. Or have they?
THE European trade commissioner, Karel De Gucht, has long been determined to take China to task for unfair trade practices. As a result, it has looked as though a trade war might break out between China and the EU.
Two months ago, as part of an anti-dumping case against China, the EU imposed punitive tariffs on solar panels and related components, solar wafers and cells. The initial penalty was set at roughly 12%, but was to rocket to an average of nearly 50% on August 6th. China had threatened to punish European exports of wine and polysilicon.
Things looked bleak until suddenly, on July 27th, a truce was announced. The EU will set a minimum sales price, though far below the level expected. It will also set a (generous) quota beyond which heavy duties would apply. A deadline of August 8th looms on a related dispute, but Jacquelyn MacLennan of White & Case, a law firm, thinks further action on solar panels is unlikely.Chinese officials are pleased.
The ministry of commerce gushed that the deal displayed wisdom as well as “pragmatic and flexible attitudes”. China is also reconsidering its earlier threats to curb EU exports.
Even so, it may be premature to celebrate. EU ProSun, an industry lobby, is planning to appeal against the decision. “This agreement is not a solution but a capitulation,” it thundered. And indeed it is, in a way. China forced Mr De Gucht to cave in by pressing several European countries, notably Germany, into speaking out against his investigations.
Telecoms is the other worry. Mr De Gucht has been rattling his sabre about a possible investigation into subsidies granted to Huawei and ZTE, two Chinese telecoms giants. He went out of his way to say that “mobile networks were not even mentioned” in the recent solar talks.
Will he dare proceed, given the recent climbdown? Expert opinion is divided, but one European finance minister, who describes Mr De Gucht as “an extremely stubborn man with nothing to lose”, thinks he might. If he does, expect a battle royal.
Based on: The Economist, 3 August 2013
48
V Explain these sentences taken from the article with the help of the questions.
1 “Two months ago, as part of an anti-dumping case against China, the EU imposed punitive tariffs on
solar panels and related components….”
At what kind of price were Chinese solar panels sold in the EU? How did the EU want to stop this
unfavorable practice?
2 “…a truce was announced. The EU will set a minimum sales price, though far below the level
expected. It will also set a (generous) quota beyond which heavy duties would apply.”
Which parts of the compromise are advantageous to China and which to the EU? Why? 3 “China is also reconsidering its earlier threats to curb EU exports.”
Why was China threatening to limit EU exports?
4 “EU ProSun, an industry lobby, is planning to appeal against the decision.” Why is the industry in the EU unhappy with the agreement?
5 “Mr De Gucht has been rattling his sabre about a possible investigation into subsidies granted to Huawei and ZTE, two Chinese telecoms giants.”
Why are subsidies given by the Chinese government to Chinese firms seen as a problem in Europe?
VI Find word partnerships with the following nouns.
1 a trade war b__________ o_____ 2 i __________ a tariff 3 s__________ a price 4 s__________ a quota 5 c__________ exports 6 a__________ against the decision 7 g__________ a subsidy
VII Retell the article in your own words using the word partnerships from above.
49
PROTECTIONISM AND BARRIERS TO TRADE
I Discuss the following questions.
1 What are subsidies? 2 How do sugar producers profit from receiving subsidies? 3 What do you know about the European Union's Common Agricultural Policy (CAP)?
Trade
Oh, sweet reason
A report counts the cost of Europe's sugar subsidies on poor countries
AS THE Doha round of trade negotiations slowly
revives at the World Trade Organisation (WTO) in
Geneva, agricultural subsidies and tariffs have been
taking centre stage. A new report from Oxfam, a
campaigning group for poor countries, highlights the
absurdities of agricultural subsidies, by focusing on
those for sugar, a product that developing countries
are especially good at producing. In particular, the
report explains exactly how the European Union's
common agricultural policy (CAP) enriches a few
European farmers and sugar refiners at the
expense of the world's poorest.
Oddly, the EU is the world's second-biggest sugar
exporter. Though it does not have the right climate
for growing cane sugar, since Napoleon's time
Europeans have grown sugar beet instead. They do
not, however, do this efficiently: the cost of
producing a pound of sugar in the EU is more than
six-times higher than in Brazil, says Oxfam (see
chart). It argues that the EU subsidy is much bigger
than the €1.3 billion ($1.5 billion) it owns up to
publicly. Oxfam says there are €833m of “hidden
subsidies”, too.
Subsidising sugar producers is not just
economically stupid, it is morally indefensible, too.
For Europe's subsidies are not merely a quaint way
to keep a few farmers in business. They cause so
much sugar to be produced that the stuff is
exported to poor countries, hurting farmers who
might otherwise earn a living by growing it
themselves—and perhaps even exporting it to
Europe.
At most, only 1.5m tonnes of sugar a
year is bought in Europe from
preferred trading relationships with
African, Caribbean and Pacific
countries. Worse, the sugar provisions
of the CAP set poor countries against
each other. European subsidies mean
that its excess sugar ends up in places
such as Algeria, Ghana, Congo and
Indonesia, displacing sugar produced
in countries such as South Africa and
India.
Brazil and Thailand are the hardest hit, Oxfam
reckons. On its analysis, Brazil loses around
$500m a year, and Thailand about $151m, even
though these two countries are the most efficient
sugar producers in the world. Even less efficient,
and poorer, African countries lose out.
Mozambique will lose $38m in 2004—as much as
it spends on agriculture and rural development.
The costs to Ethiopia equal the sums it spends on
HIV/AIDS programmes.
The biggest winners, says Oxfam, are large
European sugar refiners. France's Beghin Say, it
claims, benefits by €236m a year, Germany's
Sudzucker by €201m, and Britain's Tate & Lyle by
€158m. Further progress at the WTO may depend
in part on whether such firms will accept the loss of
such subsidies. That fact should leave a very sour
taste in the mouth.
Source: The Economist, 15 April 2004
50
II Read the article Oh, Sweet Reason and decide if the following statements are True (T) or False (F).
1 Developing countries are better at producing sugar than European countries. □ 2 The EU is the world's second-biggest sugar exporter because it has the best climatic conditions for growing cane sugar. □ 3 The European Union's agricultural subsidies help poor farmers to reduce the cost of
producing sugar and thus becoming more competitive exporters of sugar. □ 4 Subsidizing European sugar producers is absurd because the cost of producing sugar in the
EU is more than six-times higher than in Brazil, for example. □ 5 African countries are the most efficient sugar producers in the world. □ 6 Hundreds of millions of dollars are lost globally due to the European Union's Common
Agricultural Policy (CAP). □ 7 Ethiopia is particularly affected because the sums of money lost equal the sums it spends on
HIV/AIDS programmes. □ 8 France, Spain and Italy are among the most influential European sugar refiners. □
III Answer the following questions.
1 What does the EU do when it subsidizes sugar?
2 What are the main arguments against subsidies?
3 How are sugar subsidies a barrier to trade?
4 What do you think the WTO should do in the situation outlined in the article?
5 Which products does Croatia subsidize?
IV Use the following notes and write a SUMMARY of the article Oh, Sweet Reason.
1 ABSURDITIES OF AGRICULTURAL SUBSIDIES
The EU’s Common Agricultural Policy enriches a few farmers and refiners at the expense of the world’s poorest
The world’s 2nd exporter with the wrong climate
cost of production: EU = 6 X Brazil!
2 GLOBAL IMPACTS
subsidies – too much sugar – exports
hurting other exporters hurting foreign farmers
3 LOSERS WINNERS
Brazil $ 500m → the most efficient producers France $ 236m (Berghin Say)
Thailand $151m → in the world Germany $201m (Sudzucker)
Mozambique $38m Britain $158m (Tate & Lyle)
Ethiopia $ = AIDS programmes!
Doha negotiations depend also on large EU companies
51
VISIBLE AND INVISIBLE TRADE
I Study the chart below and explain the difference between:
☐ Primary / secondary products
☐ Visible / invisible trade
☐ Balance of trade / balance of payments
Foods and Produce
Manufactured Goods Imports
Specialist Goods + VISIBLE TRADE → BALANCE OF
Raw Materials Exports TRADE
Electrical Appliances
Machine Tools
BALANCE OF
PAYMENTS
Government Payments
Shipping Imports
Specialist Aviation + INVISIBLE TRADE
Travel Exports
Banking
Other Services
II Look at the chart again and answer the following questions:
1 Can you add to the list of invisible exports and imports?
2 If you go abroad and buy music, clothes, books, or eat in a restaurant, is it recorded as imports or
exports for Croatia?
3 When foreign tourists come to Croatia and spend money in night clubs, shops, restaurants, buy
food, or pay for hotel rooms, is it imports or exports for Croatia?
4 If our transport companies ship foreign goods through Croatia, is it recorded as our exports or
imports in the balance of payments?
52
THE EUROPEAN UNION
I How many member states are there in the European Union today? When did they accede to the EU?
II Read the text and decide which paragraphs are covered by the following headings.
1 Recent achievements
2 ECSC, EDC, EEC
3 Objection
4 EU responsibilities
5 The importance of the economy
6 Birth
7 Enlargement
Fit at 50?
A On MARCH 25th 1957 a gaggle of leaders from six European countries (France, West Germany, Italy and the Benelux trio) met in the great hall of the Horatii and the Curiatii in Rome's Capitoline museum. Behind them two 17th-century frescoes depicted ancient Rome's bloody history: a suitable backdrop, since one of their concerns was to prevent a recurrence of Europe's internecine wars. They signed a treaty to establish a European Economic Community (EEC), soon to become known as the common market.
B True federalists actually saw the Treaty of Rome as a move away from the building of a European superstate that they had hoped would develop from the European Coal and Steel Community, set up in 1951. But in fact the EEC grew out of two other events: the French National Assembly's rejection of the proposed European Defence Community in 1954 and the Suez crisis of 1956. The first pointed to a reassertion of nation-states at the heart of Europe; the second led France to conclude that a European community was in its vital interest.
C A bigger objection to the EEC was that it covered only a small part of Europe. Soviet-dominated eastern Europe was excluded, as were fascist Spain and Portugal, because they were not democracies. But Britain and others chose to stand aside, either because they disliked the political integration implicit in the new grouping or because they wanted to preserve their neutrality.
D Fifty years later the European Economic Community has changed out of all recognition, having metamorphosed into the European Union and grown far beyond the original six members. Despite the EFTA experiment, Britain applied for membership only four years after the Treaty of Rome, but was blocked by de Gaulle's veto and did not join until 1973, along with Denmark and Ireland.
E Several waves of further expansion followed, including Spain and Portugal in 1986. The biggest of all saw the admission of ten new members, including many ex-communist central European countries, on May 1st 2004. At the start of this year Romania and Bulgaria became the EU's 26th and 27th members. The only countries that have chosen to stay out even though they would instantly qualify for membership are Iceland, Norway and Switzerland.
F The European Union has also moved far beyond the economic sphere. The completion of the single market was set in train only in the 1980s and remains a work in progress. The European institutions have exploited single-market rules to extend their responsibilities into such areas as social policy, welfare and the environment. Along the way the EU has acquired a single currency, a common foreign policy, a passport-free travel zone and policies on justice and home affairs, plus a nascent defence alliance with its own military-planning staff.
53
G This does not sound like an organisation in deep crisis. Even in the past two years the EU has agreed on a seven-year budget and set out ambitious plans for an energy policy and for tackling climate change. It has sent troops as far afield as Aceh and Congo and co-ordinated big national deployments in Lebanon. It has started membership negotiations with Croatia and, most momentously, with Turkey. Claims that this club has been unable to function since 2005 seem overblown.
H It was the roaring economic growth of the EEC, above all else, that made it such a success in its early days. It was this economic dynamism, too, that lured first Britain and then all the others to apply for membership. Conversely, it was gloom about the economy, and particularly over persistent high unemployment, that played the biggest part in the rejection of the constitution and in the spread of Euroscepticism across the continent. If the EU is to flourish far beyond its 50th birthday, it is its economy that most needs attention.
Adapted from: The Economist, Special Report, 15 March 2007
III Present the history of enlargement. The text does not provide complete information on the years of accession for all member countries. Which countries are missing? Find this information on the official web-pages of the EU: http://europa.eu/.
1957 (6 countries) 1973 (3 countries) 1981 (1 country) 1986 (2 countries) 1995 (3 countries) 2004 (10 countries – “Big Bang“) 2007 (2 countries) 2013 (1 country)
IV Do you know the meaning of the expressions below? How are they related to the EU? Which of them can you find in the texts and exercises on the European Union?
single market euroscepticism accede (to)
Accession harmonization Treaty of Rome
common market enlargement candidate country
pre-accession funds single currency apply for membership
member states euro area/euro zone acquis communautaire
V Fill in the gaps with the words in the box.
harmonization candidate treaties accedes opening European Union overview Accession Member States
Accession Negotiations are the processes by which a (1) _______________ country (2) _______________ to the (3) _______________ and adopts its founding (4) _______________. The close of Accession Negotiations is followed by the signing of an international treaty between the EU (5) _______________ and the candidate country called the (6) _______________ Treaty. The formal (7) _______________ of the negotiating process is followed by the analytical (8) _______________ and evaluation of the degree of (9) _______________ of national legislation with the acquis communautaire, known as screening.
VI Discuss Croatia’s path to the European Union using appropriate terminology. Visit the official web-pages of the EU to get reliable information and make notes here.
54
A BRIEF SUMMARY OF THE HISTORY OF EUROPEAN UNION ENLARGEMENT (2010)
I a) Read the gapped text and think about what words and expressions might be
missing. Then, fill in the gaps as you watch the video:
http://www.youtube.com/watch?v=RE6QgoykLZU.
The story of the European Union begins in 1951, with the (1) ______________ of the
European Coal and Steel Community. France, Italy, West Germany and the three Benelux countries
agreed to (2) ______________ their coal and steel markets. The idea being that economic
(3) ______________ would make a return to war […] materially impossible. The GDP of the six
members (4) ______________ steadily as the effects of the community rules on industrial production
and trade began to kick in.
Six years later, in 1957, the six countries (5) ______________ the Treaty of Rome creating
the European Economic Community. In 1961, the UK along with Ireland and Denmark
(6) ______________ to join, but France's President, Charles de Gaulle vetoed Britain's application. It
wasn't until 1973 that the EEC enlarged to take in the three countries.
[…]
The single European currency, the Euro, was (7) ______________ in 1999 with notes and
coins entering (8) ______________ in 2002.
[…]
In the twelve countries that joined in 2004 and 2007, the (9) ______________ process has
brought real benefits. According to the European Commission, between 2000 and 2008 the process
contributed an average 1.75 percentage points to annual GDP (10) ______________ in these
countries. The Commission also says that (11) _______________ has brought economic benefit to
existing EU members as new (12) ________________ markets opened up.
Today's EU (13) _______________ 27 member states, ranging in size from Germany down to
Malta. Under current rules, in the European (14) ________________, where heads of government
meet to take decisions, voting (15) _______________ are awarded roughly in proportion to a
country's (16) ________________, although smaller countries tend to do better, proportionately, than
larger ones.
The future of the EU enlargement is uncertain. Three countries: Croatia, Macedonia and
Turkey have had their (17) ________________ to join the Union officially accepted. Yet, many argue
that the EU needs more time to digest its recent eastward extensions before it embarks on further
serious enlargements. Of the three official (18) _______________, only Croatia looks likely to join in
the near future … (19) _______________ with Macedonia are being blocked by Greece, which has
(20) ______________ about the former Yugoslav republic’s name. Turkey’s movement towards
(21) _______________ has stalled owing to concerns among senior European leaders over whether
it belongs in the EU at all.
55
b) Make a list of the other countries that would like to join the EU in the future.
☐ _____________
☐ Countries of the Western Balkans:
______________
______________ ● applied for membership
______________
______________ ● some way off yet
______________
☐ _____________: a large, poor country wrecked by instability and _____________.
☐ _____________: aspires to EU membership but there is no real prospect of this in the short- or even
medium term.
II Answer the questions.
1 What was the non-economic reason for establishing the European Coal and Steel Community?
2 Did the enlargement have a positive outcome for the countries that joined in 2004 and 2007?
3 How about the countries that were already members?
4 What is the purpose of the European Council?
5 Explain this sentence: “In the European Council … voting rights are awarded roughly in proportion
to a country's population, although smaller countries tend to do better, proportionately, than large ones.”
6 What is the official term for countries that want to join the EU?
III Match the phrases with the same meaning.
1 unify their coal and steel markets a) to make larger
2 war would be materially impossible b) the yearly increase in a country’s income
3 applied to join c) economically unviable
4 vetoed Britain's application d) create a single market
5 annual GDP growth e) expressed a wish to enter the EU
6 to enlarge f) banned Britain from joining
IV Match the word partnerships.
launch benefit
economic process
accession rights
voting a currency
Based on: http://www.youtube.com/watch?v=RE6QgoykLZU
56
6 BANKING
Banking The bare essentials
I Use the words below to fill in the gaps.
goes bust deposits depositors interest rates bank account loans interest in cash borrow shortages central bank
What banks are for In developed economies, nearly everyone has a (1) __________________, because keeping (2) __________________ under a mattress is neither safe nor convenient. Banks are an essential feature of national life, like buses, post offices and hospitals. Any money that is not floating around as cash, in the form of notes or coins, is either sitting (3) __________________ a bank account, or is in transit in a payment system between banks. Banks operate by taking (4) __________________ from private people, on which they pay low (5) __________________ or none at all, and using the money to make longer-term (6) __________________ to other customers, charging them higher (7) __________________. Banking is based on trust, but banks sometimes misuse depositors' money or make losses on their loans, and (8) __________________ do not usually have the time, the inclination or the capacity to monitor their banks. They are happy to leave that task to the governments. Governments also help banks cope with temporary cash (9) __________________ by providing access to the "discount window" so they can (10) __________________ money from the (11) __________________. The bank deposits are often insured in a pool of arrangement or by the government itself, in case the bank (12) __________________.
cartels payments debit securities financial services regulators credit payment system transaction foreign currency investments
Banks are also needed to make (13) __________________, sending money from one bank account to another, whether in the same bank or in any other one the world over. Even a payment by (14) __________________ or (15) __________________ card or a mobile-phone billing account, ends up as part of a (16) __________________ with a bank. These days most banks do a lot more besides, offering a wide range of (17) __________________. For example, they give financial advice, exchange (18) __________________, deal in (19) __________________ and derivatives, and manage (20) __________________ on behalf of clients. Regulators have an interest in making sure that these businesses are run properly; but their chief concern remains that banks are sound, that those deposits are safe and that the (21) __________________ runs smoothly. Regulating banking systems is an uncertain business. Banks have to be discouraged from forming protectionist (22) __________________ and encouraged to compete with each other, but not so fiercely that they cut each other's throats. It is a delicate balance for (23) __________________ to strike.
Source: The Economist, May 19th 2005
57
II Follow the text and find verbs that collocate with the words below.
1 t__________________ deposit
2 p__________________ interest
3 m__________________ loans
4 c__________________ interest
5 m__________________ depositors' money
6 m__________________ losses
7 b__________________ money
8 g__________________ bust
9 m__________________ payments
10 o__________________ financial services
11 g__________________ financial advice
12 e__________________ foreign currency
13 d__________________ securities and derivatives
14 m__________________ investments
III Use the words from the box below to translate the words in brackets into English.
debited bank statement accountant balance black ATM credits red standing order current account
Vesna Bakić is an __________________ (računovođa). When she started working she opened a
__________________ (tekući račun) with her bank. Her company __________________ (uplaćuje
sredstva na) her account every month. She can withdraw money from her account in the bank during
office hours or from an __________________ (bankomat) any time she wants. She has arranged with
her bank to pay electricity and other bills by __________________ (trajni nalog). Every month on a
certain day the bank sends her a __________________ (bankovni izvod) which tells her the
__________________ (stanje), the exact amount on her account, i.e. whether she is in the
__________________ (minus) or in the __________________ (plus). Vesna is happy to have a credit
card for paying goods and services, but she is not happy when her account is __________________
(terećen) too much.
58
BANK STATEMENTS
I Match the headings with the corresponding sections of the bank statement.
Source: Invest Ed My Money Handbook (http://www.investedok.org/MyMoneyHandbook/2012_My_Money_Handbook.pdf)
II Match the definitions to the corresponding headings.
1 This is the amount the bank charges to maintain your account. ______________________
2 The number that uniquely identifies your account. _______________________
3 This area shows your previous balance, the total deposits, the total withdrawals and service
charges and calculates your new balance. _______________________
4 Each check that has been cashed is listed here by number with the date cashed and the amount.
The * indicates that a check number has been skipped. _______________________
5 This section lists all transactions where money has gone into your account. ____________________
6 All transactions taking place between these two dates are on the statement. ___________________
7 Here each withdrawal you have made is listed with the location, date and amount of withdrawal.
_______________________
8 Any ATM you have used in the statement period is listed here. _______________________
9 This section lists all transactions where money has come out of your account.
________________________
59
BANKING CRISIS
I Before reading about the first run on a British bank for generations match up the words and definitions below.
the Treasury bank run solvent the Chancellor credit squeeze shakeout
1 the concerted action of depositors who try to withdraw their money from a bank because they think
it will fail 2 an elimination of some competing businesses, products, etc., as a result of intense competition in a
market of declining sales or rising standards of quality. 3 the department of government that has control over the collection, management, and disbursement
of the public revenue. 4 a restraint or limitation of credit; restricted bank lending that is accompanied by rising short-term
interest rates and a decline in economic growth 5 the British cabinet minister responsible for finance 6 having enough money to pay your debts at the time they must be paid
II Read the introductory paragraph and find out what happened and how it happened. Can you predict what came next?
Northern Rock Banking Crisis The Times, Friday September 21th, 2007
The shake-out from the global credit squeeze led to the first run on a British bank for generations. Northern Rock's customers rushed to withdraw their savings after the Bank of England offered the mortgage lender emergency funding. The run
continued despite assurances that North Rock was solvent. It was only halted after the government (eventually) guaranteed all its deposits.
III Scan the rest of the text and match the questions to the corresponding paragraphs.
1 Who is to blame for the Northern Rock crisis? Paragraph ______ 2 Why did the Bank of England not act earlier? Paragraph ______ 3 Why did the Treasury get involved? Paragraph ______ 4 Are critics convinced by the Bank's response? Paragraph ______ 5 What does the Chancellor's guarantee for Northern Rock cover? Paragraph ______ 6 What about investors who lent money to Northern Rock? Paragraph ______ 7 How much is the guarantee worth and how long will it last? Paragraph ______
A If the bank goes bust, the Treasury will repay investors who made unsecured loans but will not cover those who bought the bank's covered bonds, securities issued by Northern Rock's structured investment vehicle or subordinated debt.
B Questions remain about why the Governor retreated. Some believe he came under pressure from the Chancellor, Alistair Darling, and the Treasury. Others feel the Bank made the move to cover up some other, as yet unknown, banking losses.
C The Treasury said yesterday that the guarantee would last "during current instability in the financial markets." D Most people point the finger at management, who borrowed over their heads in the money markets to provide mortgages on the cheap. Others blame the Financial Services Authority, the banking regulator, and the Bank of England for not spotting trouble early enough.
60
E The Treasury has promised to protect all retail and commercial accounts opened by midnight on September 19. The guarantee covers interest payments, the movement of money between accounts and deposits into existing accounts. The Treasury will also protect accounts opened at the bank by customers who closed their accounts between September 13 and September 19.
F Because the Bank's guarantee to Northern Rock was not enough, the only way to stem the panic was for the Government to step in and guarantee 100 per cent of all deposits. G The Governor said the Bank was hampered by the interaction of four pieces of legislation. The first was the Market Abuse Directive, which prevented it from following its preferred course of action – a covert bailout of Northern Rock. The Directive, introduced in 2005, meant that any such action had to be carried out in a overt, transparent manner.
IV Match the following words from the text to the corresponding explanations:
1 unsecured debt
2 bailout
3 on the cheap
4 to stem
5 to hamper
6 covered bonds
7 run on a bank
8 to spot trouble
9 to come under pressure
10 subordinated debt
11 (to borrow) over their heads
12 mortgage lender
a. at a low cost
b. to prevent, hinder
c. issued with a guarantee (an asset)
d. to notice that something is going wrong
e. to stop
f. debt that is not supported by any assets of a
borrower
g. providing money to get somebody out of
financial trouble
h. an organization that makes loans for buying
property with the property as security
i. when many depositors try to withdraw their
money because they think a bank will fail
j. more than would be reasonable, intelligent
k. to feel pushed to act
l. debt that will only be repaid after all the other
debts have been paid
V Read the text again and underline:
a) words that appear in Subprime Meltdown (MK, p. 75) or The Crisis of Credit (to be found on YouTube or Vimeo: http://vimeo.com/3261363)
b) any unknown words
61
CENTRAL BANKING
I Gabriel Mangano is an economics research student, specializing in monetary policy.
You will hear him outlining the functions of a central bank. Listen to the interview with
him, and fill in the gaps.
The first one is actually to implement monetary policy. There are roughly three ways to do it. First
(1a) _____________________________________, which means limiting, upwards or downwards,
the fluctuations of the interest rate. The second way to implement monetary policy is simply
(1b) ___________________________ - coins, banknotes. The third one, which is a bit more
modern, is those (1c) ______________________________, which are simply buying and selling
government bonds to and from commercial banks.
So that was the first main task of a central bank. The second one is (2) ___________________,
I would say. (...)
Third main task, yes, (3) _______________________________________, I would say - make sure
that the commercial banks have enough liquidities, for instance, to avoid any bank run. (...)
The fourth main task of the central bank would be to (4) ___________________________, in case,
actually, one of these commercial banks goes bankrupt and the investors, the people putting money
in the bank, have to get back their money.
II Read the six sentences below, which also summarize central banking functions,
but slightly differently, and match them up with the six expressions you have
written in the first task.
A controlling the amount of banknotes in circulation
B establishing maximum and minimum lending rates, thereby controlling the credit system
C ensuring that banks have a sufficient liquidity ratio to allow customers to withdraw their
deposits when they want
D intervening on foreign exchange markets, buying or selling large amounts of the national
currency, to prevent major fluctuations
E lending money to a commercial bank in danger of going bankrupt
F selling government bonds to commercial banks or buying them back, in order to alter the
amount of credit the banks can offer (and thereby alter the money supply)
Source: Ian MacKenzie, English for Business Studies, 2nd
Ed, p. 133
62
CENTRAL BANKING: HOW CAN MONETARY POLICY HELP THE ECONOMY?
I Discuss the following questions.
1 What are central banks responsible for? Does Croatia have a central bank? Do
you know the meaning of the following acronyms and abbreviations: ECB (S), the Fed,
CNB (HNB)?
2 Do you understand the words below? Which of them did you mention in your
economics classes? Are they related to monetary policy issues?
full employment money supply output a ggregate demand bonds
reserve requirement discount rate loan availability loan approval borrow
lending capacity market participants scarce goods inflation
income redistribution investment consumption open market
3 How can monetary policy help the economy? Read the the extract from Schiller,
B.R. (1996). Essentials of Economics. McGraw-Hill and explain.
The ultimate goal of all macro policy is to stabilize the economy at its full-employment potential.
Monetary policy contributes to the goal by increasing or decreasing the money supply as economic
conditions require.
Expansionary policy
When the economy is in recession, it produces less than its full-employment potential. Monetary policy
may then be used to stimulate the economy to increase the rate of output and aggregate demand. If
the Fed lowers reserve requirements, drops the discount rate, or buys more bonds, it will increase
bank lending capacity. The banks in turn will try to use that expanded capacity and make more loans.
By offering lower interest rates or easier approvals, the banks can encourage people to borrow and
spend more money.
Restrictive policy
Monetary policy may also be used to cool an overheating economy. Excessive aggregate demand
may put too much pressure on the economy's production capacities. As market participants bid
against each other for increasingly scarce goods, prices will start rising. The resulting inflation will
redistribute real incomes (perhaps unfairly) and may disrupt investment and consumption plans.
The goal of monetary policy in this situation is to reduce aggregate demand. To do this, the Fed can
reduce the money supply by (1) raising reserve requirements, (2) increasing the discount rate, or (3)
selling bonds in the open market. All of these actions will reduce bank lending capacity. The
competition for this reduced pool of funds will drive up interest rates. The combination of higher
interest rates and lessened loan availability will curtail investment consumption and even government
spending. This was the intent of the Fed's money restraint in 1994. The Fed was worried that the US
economy was growing so fast that it would overshoot the full-employment goal. To avert those
inflationary pressures, it reduced money-supply growth and raised interest rates.
Source: Schiller, B.R. (1996). Essentials of Economics. McGraw-Hill Schiller
63
II Read the text again and fill in the table.
III Work in pairs. Present one type of monetary policy (expansionary or restrictive) to your colleague using the framework below.
If the economy ............................................, the central bank should...................................................
This can be done by ........................................................ the reserve requirement,
....................................... the discount rate, or by....................................................... bonds on the
open market.
IV MONETARY AND FISCAL POLICY
a) Fill in the gaps with the correct form of the words in the box. Then decide which paragraph refers to monetary policy, and which one to fiscal policy.
wish spending reduce greater inflation make demand monetary fiscal
unemployment hire expansionary restrictive
______________ policy
Reducing taxes and increasing government ______________ have the same effect –
______________ spending in the economy. The difference is that when you ______________ taxes,
the extra spending is done by individuals. Governments will do this if they want to reduce
______________ – the extra spending will increase ______________ for products which firms will
meet by ______________ more workers. This is called a(n) ______________ _____________
policy. A problem is that inflation might increase ______________ a result.
If the government ______________ to reduce inflation it might increase taxes or reduce spending –
a(n) ______________ _____________ policy. There will be less spending, and firms will
______________ less profit.
MONETARY POLICY
PROBLEM What has gone wrong?
GOAL What should be done?
MEASURES How should it be done?
EXPANSIONARY (LOOSE)
RESTRICTIVE (TIGHT)
64
rate opposite bank less borrow more fiscal
monetary spend
______________ policy
When the interest ______________ is cut, it is cheaper to ______________ money and you get less interest when you put money in the ______________. So both firms and consumers borrow and spend ____________ and save ______________. What kind of policy is this?
Increases in interest rate have the ______________ effect – it is better to save than ______________, so both firms and consumers spend ______________. What kind of policy is this?
b) UP OR DOWN? Decide how the two types of fiscal and monetary policies change the following:
EXPANSIONARY RESTRICTIVE
Up Money supply Down
Interest rate
Public spending
Taxes
Demand
Bank savings
Growth
Unemployment
Inflation
V PROJECT - ECONOMY AROUND US Find business headlines, international or local, talking about the impact of central banking on the economy (e.g. the Fed and the Great Recession of 2008, Croatian news dealing with the CNB etc.). Prepare a talk in English on each piece of news (no more than 3-4 short sentences).
65
7 INSURANCE
I Do you know the answers to the following questions: 1 What is insurance? 2 Why do people and businesses purchase insurance cover? 3 What does a person or a business have to do if they want to purchase insurance? 4 Do you know how the insurance business works? 5 What happens if you suffer a loss? II Read the text and find the answers to those questions.
How Insurance Works
People and businesses attempt to avoid the financial consequences of replacing personal lost or
damaged property resulting from their exposure to risks of fire, theft, earthquake, or other accidents by
purchasing insurance cover. Insurance is actually a type of risk management where the risk is shifted
to the insurance company in exchange for payments or premiums.
If a person or a business wants to purchase insurance, he/she contacts an insurance broker who
advises on the best type of insurance policy for him/her. This is a legally binding contract that
describes all the rights, responsibilities and obligations of both interested parties – the insured and the
insurance company. If the insured suffers losses covered in the policy, he/she files a claim describing
what is lost or damaged and its value, and asking to be reimbursed up to the amount of the policy –
the insured sum. If the policy is for $5,000 that is the maximum amount the insured person can get.
When individuals or businesses take out insurance policies, all the premiums are combined into the
insurance pool. Insurance companies assess their exposure to risk trying to predict the amounts of
claims for losses or damages they will have to compensate. Based on this statistics they will
determine the amount of the premium for each particular case. This is called underwriting. As the vast
majority of insured do not suffer the losses or damages their insurance policies cover, the insurance
companies make huge profits. However, in order to be able to pay out the occasional huge
compensations insurance companies increase their pool of premiums by acting as institutional
investors, i.e. by trading in securities together with pension funds, hedge funds and the likes. In order
to protect themselves most insurance companies minimise their underwritten risks by reinsuring risk
with larger insurers.
Adapted from: http://www.ehow.com/how-does_4675265_insurance-work.html
III Find the words in the text which match the following explanations.
1 an application for payment under an insurance policy ______________________
2 a payment for an insurance policy (usually monthly, yearly etc.) ______________________
3 an act of lowering risk exposure ______________________
4 a contract on insurance cover between the insurer and the insured (also called the policy holder)
______________________
5 the person or business taking out the insurance ______________________
6 to evaluate the risks of insuring a particular person or asset ______________________
7 a chance or possibility of injury, loss etc. ______________________
8 the amount of money a policy holder claims upon suffering a loss ______________________
9 to insure the risk of one insurance company by another ______________________
10 an independent agent who advises on best insurance deals ______________________
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IV Match the verbs with the appropriate nouns to make collocations. *to take out...
to refund... to pay... to issue...
to claim… to cover...
to bear...
to file... to assess... to cancel... to make…
to settle... to insure against... to draw up... to purchase…
to take out
.
an insurance cover
compensation a policy risks a claim
V Read the gapped text and think about what kind of words and expressions might be missing. Then, fill in the gaps as you watch the video: http://www.youtube.com/watch?v=ID9aevs-els
You pay a (1) _________________ to a company that provides you with insurance and in the
event of a loss they will provide you some sort of benefit (...)
This could be a homeowner’s insurance where you pay a premium and the insurance company
will help you (2) _________________that loss of a home or a damaged property (...)
Insurance companies are in the business to make money. […] They take your money and they
are taking a (3) _________________ (...)
They are taking in a ton of risk and they are kind of (4) _________________ it around.
Maybe they’ll take on 20, 30, 40 people and only one or two of them have any type of auto
(5) _________________, so they are able to make money by spreading that risk around (...)
Oftentimes insurance companies will even do something called (6) _________________ where
there’ll be another insurance company that will (7) _________________ that risk from the
insurance company that you go through (...) The [other] insurance company can help
(8) _________________ their level of risk that they are undertaking by offering reinsurance.
VI What kinds of insurance are mentioned in the talk? ____________________________, ___________________________, ____________________________.
67
VII Put the following steps in the chronological order.
How to take out insurance
☐ The insurer quotes a premium.
☐ You find an insurance company and contact an agent or a broker.
☐ The underwriting process (risk assessment) takes place.
☐ You decide to protect your property against an accident, loss or damage.
☐ The insured pays the first premium.
☐ The insurer issues the policy (the contract).
☐ The insurer is willing to provide cover.
☐ You apply for insurance.
VIII Fill in the missing words with the help of the above exercises.
_______________ for
an insurance
_______________ a policy
_______________ cover
_______________ a premium
_______________ a premium
_______________ something against
theft
_______________ a loss
_______________ a claim
insure _______________ something
_______________ the risk
IX Identify the different types of insurance cover:
full/all-risks cover/policy fire risk only burglary insurance
car insurance casualty insurance liability insurance
life assurance malpractice insurance
marine insurance multi-risk policy credit insurance
extended coverage non-medical policy obligatory insurance ordinary life assurance general insurance goods-in-transit/cargo hail insurance re-insurance pet insurance theft insurance
voluntary insurance
travel/voyage insurance war risks whole life assurance industrial accident insurance
social security insurance partial/total disability insurance government subsidised insurance comprehensive motor policy
1 If you are going on holidays and are concerned with being burgled what insurance would you take out? ____________________ 2 If you are selling insurance to surgeons, what insurance would you offer? ____________________. 3 If you are considering buying a yacht, you must count on the expense for ____________________ insurance. 4 If you are planning to raise a home mortgage the banks will oblige you to take out __________________ assurance. 5 A ____________________ insurance policy will not cover damages incurred by defective packing. 6 There are 3 basic types of ____________________: third party, fire and theft and comprehensive insurance. 7 As a manufacturer of potentially dangerous products, you may want to purchase product ____________________ insurance to cover yourself if a product causes damage to the purchasers. 8 If your job involves danger of mishap your employer should cover you with a ____________________. 9 For trips abroad particularly, it is recommended to take out ____________________ insurance. 10 ____________________ insurance will cover the insured for all possible types of hazards,
mishaps or accidents.
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X Discuss or look up the remaining types of insurance, choose some you are particularly interested in, and make your own sentences:
1 _____________________________________________________________________________.
2 _____________________________________________________________________________.
3 _____________________________________________________________________________.
4 _____________________________________________________________________________.
5 _____________________________________________________________________________.
XI Read the article below and comment: How do disasters affect a) insurers and b) the insured?
Lloyd’s tsunami exposure limited
By Robert Orr in London
Lloyd’s of London confirmed it had only limited exposure to the Asian tsunami and said the market’s net loss would be about £100m ($188m). Several Lloyd’s members, including Amlin, SVB and Wellington, have already said their tsunami exposure would be minimal. Munich Re and Swiss Re, the leading reinsurers, have put their exposure at less than €100m ($130m) and SFr100 ($83.8m) respectively. While the tragedy on December 26 killed more than 250,000 people and caused widespread devastation, the insurance industry escaped relatively unscathed. Economic losses have been put at $10bn although insured losses are taught to be less than half that, and could possibly be as low as $2bn. This is partly because the penetration of insurance in affected countries such as Sri Lanka, Indonesia and Thailand is particularly low. The average insurance spent in Sri Lanka is $7 per head, compared with $2.000 per head in the US.
Moreover, while the tsunami affected many thousands of miles of coastline, it did not hit a large metropolis. Many insurance policies also include specific exclusions for “acts of God” such as hurricanes and tsunamis. “This is not a big number in insurance terms,” said Nick Johnson, analyst at Numis Securities. Charles Coyne, at KBC Peel Hunt, added: “The cost of an ordinary hurricane hitting Florida is $1bn; a bad one costs $5bn. This is clearly nothing like that.” Despite this, 2004 was still the worst year on record in terms of insurance losses, with worldwide claims. About $27bn of these were caused by the hurricanes that struck Florida and the Caribbean in the autumn. Japan also experienced its highest number of typhoons for a decade, the largest of which, Typhoon Songda, caused property claims of $2.5bn. However, despite the record year, the industry is still experiencing good profitability. One effect of the record losses has been to prevent an even greater softening of premium rates, something that has been welcomed by the industry.
Source: Financial Times, January, 2005
PROJECT
XII Research Lloyd's at http://www.lloyds.com/lloyds/about-us/what-is-lloyds and find out
more about A) members, B) syndicates and 3) re-insurance.
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8 FINANCE
INTRODUCTION TO BUSINESS FINANCE
I Read the text and find out about the different ways of raising and using capital. In addition, find out about the difference between assets and liabilities.
RAISING CAPITAL
When people want to set up a company, they need money, called capital. There are many different ways how people can raise capital.
For instance, they can borrow money from friends or use their personal assets. Or, they they can borrow from banks by taking out a loan. The loan must be paid back with interest, the amount paid to borrow the money. Capital can also come from issuing shares or equities – certificates representing units of ownership of a company. The people who invest money in shares are called shareholders and they own part of the company. The money they provide is known as share capital. Individuals and financial institutions called investors, can also lend money to companies by buying bonds – loans that pay interest and are repaid at a fixed future date.
Money that is owed (that will have to be paid) to other people or businesses is debt. In accounting, companies' debts are usually called liabilities. Long-term liabilities include bonds; short-term liabilities include debts to suppliers who provide goods or services on credit (that will be paid for later). In contrast, all the things that a company owns are called assets.
The money that a business uses for everyday expenses or has available for spending is called working capital or funds.
Source: Professional English in Use: Finance, Ian MacKenzie, CUP.
II Find the words and expressions in the text that match the following definitions.
1 The amount of money owed to other people.
2 The amount of money borrowed from a bank which has to be repaid with interest.
3 An accounting term for companies' debts.
4 The money that a business uses for everyday expenses or has available for spending.
5 The people who invest money in shares.
6 Everything a company owns.
7 Certificates representing units of ownership of a company.
8 A type of liabilities which have to be repaid within a year and include debts to suppliers who provide goods or services on credit.
III Fill in the gaps with the verbs from the box below.
repay pay back issue own owe raise borrow set up pay
1 If you want to _______________a company, you first have to ____________capital.
2 If you _____________from a bank, you will have to ____________the loan with interest.
3 If you __________shares, you will have to ___________ dividends to shareholders.
4 If you __________ a lot of assets, you can try to sell them to __________your debts.
5 Borrowers ___________ money to the bank.
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ACCOUNTING AND FINANCIAL STATEMENTS
I Read the text and fill in the notes below.
FINANCIAL REPORTING AND THE ANNUAL REPORT
Financial reporting deals with financial transactions that involve money. These transactions can include making payments, or expenditure, and receiving money, or income. Financial transactions are recorded in the accounting system of a business. Each type of transaction is entered in a record known as an account. The accounts are dealt with by bookkeepers, accountants, and auditors. Bookkeepers' job is to enter data and keep the financial records (ledgers) of companies’ accounts. Accountants check and examine the accounts prepared by bookkeepers, and auditors (internal and external specialists) are in charge of the oversight, i.e. checking the accounts. It is important to record financial transactions in order to see how much a business is earning and how much it has to pay. Managers want to know who owes them money (debtors) and to whom they owe money (creditors). Public limited companies, that are listed or quoted on stock exchanges, are required by law to publish their financial reports as parts of their annual report. The annual report presents the company's performance in the course of the previous year. It consists of the following principal parts: the chairman's statement, which gives an overview of the company's past and present situation, the director's report, which shows the principal activities of the business, the results and dividends, investments, employment policies, and the auditor's report granting that the accounts give a “true and fair view“ of the company's financial performance. This is reflected in the crucial part of the annual report, the three financial statements: the profit and loss account (UK) or income statement (US), i.e. the records of a company’s income and expenditure, the balance sheet showing assets, liabilities and owners’ equity, and the cash flow statement that records cash inflow and cash outflow.
Source: Professional English in Use: Finance, Ian MacKenzie, CUP.
NOTE-FORM SUMMARY
PEOPLE INVOLVED IN COMPANIES' ACCOUNTS
_____________________ ______________________ _____________________
PARTS OF THE ANNUAL REPORT
the_______________statement the_______________report the_______________report
three _______________statements: 1 _____________________
2 _____________________
3 _____________________
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II Match these terms to their definitions.
1 ACCOUNTING □ examining a company's systems of control and the accuracy or
exactness of its records, looking for errors or possible fraud where the company may have deliberately given false information
2 BOOKKEEPING □ day-to-day recording of transactions such as sales, purchases, debts,
expenses 3 AUDITING □ recording and summarizing an organization's transactions and business
deals, such as purchases and sales, and reporting them in the form of financial statements
III Fill in the missing words.
ACTIVITY PERSON accounting
bookkeeping
auditing
IV Which financial statements are defined below?
1 The ____________________ shows the company's assets, its liabilities and its capital.
2 The ____________________ shows the company's revenues and expenses during a particular
period.
3 The ____________________ shows how effectively a company generates and manages cash.
V Read the text and underline the definitions and examples of assets, liabilities and capital. How should assets, liabilities and capital balance?
THE BALANCE SHEET
The balance sheet is a document which has two sides. The totals of both sides are always the same, so they balance. One half shows the business's assets, which are things owned by the company, such as factories and machines that will bring future economic benefits. The other half shows the company's liabilities, and its capital or shareholders' equity. Liabilities are obligations to pay other organizations or people: money that the company owes, or will owe at a future date. These often include loans, taxes that will soon have to be paid, future pension payments to employees, and bills from suppliers: companies which provide raw materials or parts. Shareholders’ equity or capital consists of all the money belonging to shareholders. Part of this is share capital, the money raised by selling its shares. Part of it includes retained earnings: profits from previous years that have not been distributed to shareholders as dividends. Assets are shown as debits. The total value of assets must correspond with the total sum of credits (liability + capital) because that is the amount of money spent on purchasing the assets. Therefore, assets equal liabilities plus capital.
Source: Professional English in Use: Finance, Ian MacKenzie, CUP
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VI Look at the ASSETS section of the balance sheet below and fill in the gaps in the text that follows.
MacKenzie Inc.New York balance Sheet 31 December 2012 ($'000)
FIXED ASSETS
Property, plant and equipment 4,500
Goodwill 950
Long-term investments 6,265
Total fixed assets 11,715
CURRENT ASSETS
Cash and equivalents 3,415
Accounts receivable 8,568
Inventory 5,699
Other 5,562
Total current assets 23,244
TOTAL ASSETS 34,959
Fixed assets (or non-current assets) and investments, such as buildings and (1) _______________, will continue to be used by the business for a long time. Current assets are things that will probably be used by the business in the near future. They include (2) _______________, money available to spend immediately, (3) _________________ (or debtors) i.e. companies or people who owe money to be paid in the near future and stock or (4) __________________. Assets can also be classified as tangible and intangible. Tangible assets are assets with a physical existence - things you can touch - such as (5) __________________, (6) ________________ and equipment. Intangible assets include brand names, patents, copyrights and trade marks, loyal customers, trained staff, skilled management, etc. Because it is difficult to give an accurate value for any of these things, companies normally only record tangible assets. If a company buys another one at above its net worth (or net assets) because of its intangible assets, the difference in price is recorded under assets in the balance sheet as (7) __________________.
Source: Professional English in Use: Finance, Ian MacKenzie, CUP
VII Read the text on LIABILITIES and translate the bold parts into Croatian.
Liabilities are amounts of money that a company owes, and are generally divided into two types – long-term and current. Long-term liabilities or non-current liabilities have to be paid back in more than 12 months, and include bonds, loans, mortgage payments, deferred income taxes, etc. Current liabilities are expected to be paid within a year of the date of the balance sheet. They include accounts payable (or creditors) – largely suppliers of goods and services to the business who are not paid at the time of purchase, planned dividends, and deferred taxes – money that will have to be paid as tax in the future, although the payment does not have to be made now. Accrued expenses are expenses that have accumulated or built up during the accounting year but will not be paid until the following year, after the date of the balance sheet. So accrued expenses are deducted from profits even though the bills have not yet been received or the cash paid.
Source: Professional English in Use: Finance, Ian MacKenzie, CUP.
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VIII Sort out the following into ASSETS and LIABILITIES.
accounts payable land and buildings accrued expenses dividends
inventory accounts receivable investments cash and equivalents
deferred taxes long-term debt
ASSETS LIABILITIES
IX Sort out the following into FIXED, CURRENt or INTANGIBLE ASSETS.
cash debtors (accounts receivable) brand names inventory property
copyright plant equipment land trade marks patents
FIXED ASSETS CURRENT ASSETS INTANGIBLE ASSETS
CURRENT LIABILITIES Short-term debt 1,555 Accounts payable 5,049 Accrued expenses 8,593
Total current liabilities 15,197 LONG-TERM LIABILITIES
Deferred income taxes 950 Long-term debt 3,402 Other non-current liabilities 1,201
Total non-current liabilities 5,533 TOTAL LIABILITIES 20,750 SHAREHOLDERS' EQUITY
Common stock 10,309 Retained earnings 3,900
Total 14,209 TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 34,959
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X Read the text on the profit and loss account and find one mistake in the sample
profit and loss account below.
THE PROFIT AND LOSS ACCOUNT
This financial statement shows the difference between the revenues and expenses of a period. At the top of the statement is total sales revenue or turnover: the total amount of money received during a specific period. Next is the cost of sales, also known as cost of goods sold (COGS): the costs associated with making the products that have been sold, such as raw materials, labour and factory expenses. The difference between the sales revenue and the cost of sales is gross profit. There are many other costs or expenses that have to be deducted from gross profit, such as rent, electricity and office salaries. These are often grouped together as selling, general and administrative expenses (SG&A). The statement also usually shows EBITDA (earnings before interest, tax, depreciation and amortization) and EBIT (earnings before interest and tax). The first figure is more objective because depreciation and amortization expenses can vary depending on which system a company uses. After all the expenses and deductions have been calculated, we get the net profit, often called the bottom line. This profit can be distributed as dividends (unless the company has to cover past losses), or transferred to reserves.
Source: Professional English in Use: Finance, Ian MacKenzie, CUP
XI Sort out the following terms into PROFIT AND LOSS ACCOUNT or BALANCE
SHEET.
revenue fixed assets cost of sales current liabilities equity EBIT goodwill
inventory operating expenses accounts payable net profit
PROFIT AND LOSS ACCOUNT BALANCE SHEET
Searby PLC
Annual Profit and Loss Account, 1/2013
(£'000)
Sales Revenue 48,782
Cost of Sales 33,496
Gross Profit 15,286
Selling, General and Administrative Expenses 10,029
Earnings Before Interest, Tax, Depreciation and Amortization 5,257
Depreciation and Amortization 1,368
Earnings before Interest and Tax 3,889
Interest expenses 257
Income Tax 1,064
Gross Profit 2,568
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XII Read the text and answer the questions.
1 What does the cash flow statement consist of?
2 What can a company do with cash surplus?
THE CASH FLOW STATEMENT
This financial statement gives details of cash flows – money coming into the business (cash inflows or sources of funds) and money leaving the business (cash outflows or applications of funds), relating to operations (day-to-day activities), investing (buying or selling property, plant and equipment), and financing (issuing or repaying debt, or issuing shares). The cash flow statement shows how effectively a company generates and manages cash. If a company is consistently generating more cash than it is using, the company will be able to increase its dividend, buy back some of its stock, reduce debt, or acquire another company. All of these are perceived to be good for stockholder value. Sources: Professional English in Use: Finance, Ian MacKenzie, CUP; http://www.accountingcoach.com/online-accounting-course/06Xpg01.html#statement-of-cash-flows-intro
XIII Would the following appear as OPERATING, FINANCING or INVESTING ACTIVITIES? Check in the sample cash flow statement below.
amortization dividends paid purchase of property
GODWIN- MALONE INC, New York
CASH FLOW STATEMENT ($'000)
20__ 20__
Earnings 1,811 1,274
Amortization 924 683
Other adjustments to Earnings 33 -6
Net Cash provided from operations 2,768 1,951
Proceeds from issuing new stock 234 167
Stock dividends paid -14
Net Cash provided from financing 220 167
Additions to property, plant and equipment -2,351 -1,755
Net cash used for investing -2,351 -1,755
Change in cash and equivalents during year 356 97
Cash and equivalents, beginning of year 2,150 2,014
Cash and equivalents, end of year 2,506 2,111
Source: Professional English in Use: Finance, Ian MacKenzie, CUP.
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ACCOUNTING VOCABULARY
I Fill in the gaps in the sentences with the words from the box.
cash outflows income (2x) amortization (2x) assets accountants expenditure (2x)
annual report profit and loss account bookkeepers auditors liabilities
shareholders' equity balance sheet depreciation (2x) cash inflows
(1) ________________ enter data and record transactions in journals of companies accounts.
(2) ________________ turn data into meaningful financial information and prepare financial
statements.
(3) _________________ are in charge of internal and external oversight of accounts.
The (4) _________________ gives details about the company’s performance throughout the
preceding year.
The (5) __________________ is a financial statement which shows profitability.
The (6) ___________________ is a financial statement which shows the financial position of a firm
at a particular time. It consists of (7) _________________, (8) __________________, and
9) __________________.
The cash flow statement is a financial statement which gives information on liquidity. It shows
(10) ___________________ and (11) ____________________.
The profit and loss account shows (12) _________________ and (13) ________________.
(14) _________________ means making payments to creditors, to the government, to shareholders
and to suppliers. On the other hand, (15) _______________ means receiving money from debtors,
customers or investors.
(16) __________________ is the deduction of capital expenses over a specific period of time
(usually over the asset's life). While it is often used interchangeably with (17) ________________,
technically this is an incorrect practice because (18) ___________________ refers to intangible
assets and (19) __________________ refers to tangible assets.
II Fill in the missing letters. 1 Assets are things that you OW_ and liabilities are things that you OW_.
2 The term “debtors” is often replaced by “accounts REC_ _ _ ABLE”. Similarly, “creditors” is often
replaced by “accounts PA_ _ BLE”.
3 Expenses that have been incurred but are not yet paid are called “A _ _ R_ _ D” expenses.
4 The total value of raw materials + work in progress + unsold stock is called IN_ _ _T_ _Y.
5 Revenue or TU_ _ O_ _R is also called the T_ P line.
6 Net profit or net IN_ _M_ is also called the B_TT_M line.
Source: Business English Handbook Advanced, Paul Emmerson, MacMilllan
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THE FINANCING OF CORPORATE ACTIVITY
I Group the words below as to whether they specifically relate to stocks or to bonds.
vote interest loan retained earnings ownership principal dividend legally prior claim
Words related to stocks:
_______________________________________________________________________________
Words related to bonds:
_______________________________________________________________________________
II Do you know the meaning of the following words/expressions?
1 undistributed corporate profits ________________________________
2 common stock ________________________________
3 IOU ________________________________
4 maturity date ________________________________
5 face value ________________________________
6 unincorporated business ________________________________
7 prior to maturity ________________________________
8 purchasing power ________________________________
III Which of the words above have their synonyms in Exercise I?
IV Read the text and put the proposed headings in their right positions in the text:
a. Stocks vs Bonds
b. Corporate Finance
c. Bond Risks
The Financing of Corporate Activity (Stocks and Bonds)
1 _____________________________ Generally speaking, corporations finance their activities in three different ways. First, a very large portion of a corporation's activity is financed internally out of undistributed corporate profits. Second, like individuals or unincorporated businesses, corporations may borrow from financial institutions. For example, a small corporation planning to build a new plant may obtain the funds from a commercial bank, a savings and loan association, or an insurance company. Third, unique to corporations, they can issue common stocks and bonds. 2 _____________________________ A common stock is an ownership share. The purchaser of a stock certificate has the right to vote for corporate officers and to share in dividends. If you buy 1000 of the 100,000 shares issued by Specific Motors, Inc. (hereinafter SM), then you own 1 percent of the company, are entitled to 1 percent of any dividends declared by the board of directors, and control 1 percent of the votes in the annual election of corporate officers.
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In contrast, a bond is not an ownership share. A bond purchaser is simply lending money to a corporation. A bond is merely an IOU, in acknowledgment of a loan, whereby the corporation promises to pay the holder a fixed amount at some specified future date and other fixed amounts (interest payments) every year up to the bond's maturity date. For example, you might purchase a ten-year SM bond with a face value of $1000 with a 10 percent stated rate of interest. This means that in exchange for your $1000 Specific Motors guarantees you a $100 interest payment for each of the next years and then to repay your $1000 principal at the end of that period. There are clearly important differences between stocks and bonds. First, as noted, the bondholder is not an owner of the company, but is only a lender. Second, bonds are considered to be less risky than stocks for two reasons. On the one hand, bondholders have 'legally prior claim' upon a corporation's earnings. Dividends cannot be paid to stockholders until all interest payments that are due to bondholders have been paid. On the other hand, holders of SM Stock do not know how much their dividends will be or how much they might obtain for their stock if they decide to sell. If Specific Motors falls on hard times, stockholders may receive no dividends at all and the value of their stock may plummet. Provided the corporation does not go bankrupt, the holder of an SM bond is guaranteed a $100 interest payment each year and the return of his or her $1000 at the end of ten years. 3 _____________________________ But this is not to imply that the purchase of corporate bonds is riskless. The market value of your SM bond may vary over time in accordance with the financial health of the corporation. If SM encounters economic misfortunes which raise questions about its financial integrity, the market value of your bond may fall. Should you sell the bond prior to maturity you may receive only $600 or $700 for it (rather than $1000) and thereby incur a capital loss. Changes in interest rates also affect the market prices of bonds. Specifically, increases in interest rates cause bond prices to fall and vice versa. Assume you purchase a $1000 ten-year SM bond this year when the interest rate is 10 percent. This obviously means that your bond provides a $100 fixed interest payment each year. But now suppose that by next year the interest rate has jumped to 15 percent and SM must now guarantee a $150 fixed annual payment on its new $1000 ten-year bonds to be issued next year. Clearly, no sensible person will pay you $1000 for your bond which pays only $100 of interest income per year when new bonds can be purchased for $1000 which pay the holder $150 per year. Hence, if you sell your bond before maturity you will suffer a capital loss. Bondholders face another element of risk due to inflation. If substantial inflation occurs over the ten-year period you hold a SM bond, the $1000 principal repaid to you at the end of that period will represent substantially less purchasing power than the $1000 you loaned to SM ten years earlier. You will have lent 'dear' dollars, but will be repaid in 'cheap' dollars.
Based on McConnell, R., Brue, S. L. (1996) Economics. McGraw-Hill, Inc.
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V Well-organized texts use different features to help readers understand their structure. These are topic sentences, text headings, paragraphing, linking words (e.g. connectors) etc. Fill in the table as it is suggested in the instructions below. a) The structure of the previous text can be presented as shown in the table below.
Read the text and fill in the left column.
b) Find features of the text indicating its structure and fill in the right column.
NOTES PARTS OF THE ARTICLE SHOWING TEXT STRUCTURE
Part 1 (paragraph 1)
THREE WAYS OF CORPORATE FINANCE:
1 ____________
2 ____________ (e.g. ___________ )
3 ____________
Part 2 (paragraphs 2-4)
STOCKS vs. BONDS
● ownership ● lending
● risky for investors ● less risky due to : 1 _________
2 _________
Part 3 (paragraphs 5-7) BOND RISKS 1 ___________
2 ___________
3 ___________
VI Make a two-minute PRESENTATION on stocks and bonds as sources of corporate finance.
VII Write a short SUMMARY of the text based on the notes above.
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9 THE BUSINESS CYCLE
THE CRISIS
I What is a business cycle? (MK, U 23)
II Can government institutions help the economy? (RB, p. 63)
III What may be the chronology of the events below? a. Poor borrowers go bankrupt, so houses are returned to lenders. ________
b. Central banks help to prevent system collapse. ________
c. Poor borrowers can no longer repay their loans. ________
d. Some lenders go bust as they cannot sell the property, and some lenders sell loan obligations
to investors who also suffer as their assets keep losing value. ________
e. Poor borrowers obtain loans to buy houses. ________
f. Because of low interest rates, it is easy to borrow. ________
g. But after some time, interest rates go up. ________
II Which of the words/expressions in italics can be replaced by the words below?
mortgage lenders subprime borrowers hedge funds
default release liquidity
III Check if you understand how the global crisis developed. Establish the chronology.
a. Central banks came in to release liquidity into the market place which allowed most struggling
lenders and investors to continue their operations. ______
b. As a result, housing prices were going up. Mortgage lenders created non-traditional mortgages
which made it easy even for people with poor credit (financially unstable) to obtain a housing loan.
______
c. However, interest rate climbed back up. Many subprime borrowers (those with poor credit
rating) could not repay their obligations and went bankrupt when their mortgages were reset to
much higher monthly payments. ______
d. Not knowing what to do, many mortgage lenders sold mortgages to investors and hedge funds
who also suffered as they were left with property that was quickly losing value. ______
e. This left mortgage lenders with property that was worth less than the loan value because the
housing prices went down. Defaults increased, the problem snowballed and several lenders went
bankrupt. ______
f. There is now a lot of debate if private financial institutions should be helped with taxpayers'
money. ______
g. Nearly for a decade, the Federal Reserve stimulated the economy by cutting interest rates. It
was easy to borrow money from financial institutions. ______
IV Check the order of the events on Investopedia’s website:
http://www.investopedia.com/terms/s/subprime-meltdown.asp
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THE FINAL REVISION – CAPITALIST FOOLS
I Before reading the text browse through your course book (MacKenzie, 2010) and
the Resource Bank 2, and answer the questions using the words in brackets.
1. What are central banks responsible for? How does monetary policy affect the economy? (expansionary, restrictive, money supply, supervise, control)
2. Find arguments for and against taxation. (redistributive taxation, theft, income tax, penalize)
3. Describe a typical business cycle of an economy. (upturn, downturn, prices, inflation, bubble)
4. How did the subprime crisis break out in the US in 2008? (housing loans, subprime borrowers, default, hedge funds, bankruptcy, liquidity, bailout)
5. Briefly describe financial derivatives. What is the purpose of such financial instruments? Who takes most risk when using them? (underlying, futures, swaps, call/put options).
6. Discuss the banking business in terms of the Glass-Steagall Act (retail/commercial, investment, repeal, deregulation).
7. Explain the role of credit rating agencies. (bonds, rating)
8. Present the difference between Keynesians and believers in free markets (durable equilibrium, unemployment, intervention, excess savings, interest rates, neutral, inflation).
II Check if you know the meaning of the words below. Use your knowledge of the
topics covered in Business English classes or internet sources.
The Fed ________________________________________________________
Regulator ________________________________________________________
Credit-default swaps ________________________________________________________
A+++ ________________________________________________________
Market bubble ________________________________________________________
Leverage ________________________________________________________
Tax cuts ________________________________________________________
Enron, WorldCom ________________________________________________________
Sarbanes-Oxley Act ________________________________________________________
Moody’s, Standard & Poor’s ______________________________________________________
Lehman Brothers ________________________________________________________
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Capitalist Fools
Behind the debate over remaking U.S. financial policy will be a debate over who’s to blame. It’s crucial to get the history right, writes a Nobel-laureate economist, identifying five key mistakes—under Reagan, Clinton, and Bush II—and one national delusion.
There will come a moment when the most urgent threats posed by the credit crisis have eased and the larger task before us will be to chart a direction for the economic steps ahead. This will be a dangerous moment. Behind the debates over future policy is a debate over history—a debate over the causes of our current situation. The battle for the past will determine the battle for the present. So it’s crucial to get the history straight.
What were the critical decisions that led to the crisis? Mistakes were made at every fork in the road—we had what engineers call a “system failure,” when not a single decision but a cascade of decisions produce a tragic result. Let’s look at five key moments.
No. 1: Firing the Chairman
In 1987 the Reagan administration decided to remove Paul Volcker as chairman of the Federal Reserve Board and appoint Alan Greenspan in his place. Volcker had done what central bankers are supposed to do. On his watch, inflation had been brought down from more than 11 percent to under 4 percent. In the world of central banking, that should have earned him a grade of A+++ and assured his re-appointment. But Volcker also understood that financial markets need to be regulated. Reagan wanted someone who did not believe any such thing, and he found him in [Greenspan].
Greenspan played a double role. The Fed controls the money spigot, and in the early years of this decade, he turned it on full force. But the Fed is also a regulator. If you appoint an anti-regulator as your enforcer, you know what kind of enforcement you’ll get. A flood of liquidity combined with the failed levees of regulation proved disastrous. Greenspan presided over not one but two financial bubbles. After the high-tech bubble popped, in 2000-2001, he helped inflate the housing bubble. The first responsibility of a central bank should be to maintain the stability of the financial system. If banks lend on the basis of artificially high asset prices, the result can be a meltdown – as we are seeing now, and as Greenspan should have known [...].
Of course, the current problems with our financial system are not solely the result of bad lending. The banks have made mega-bets with one another through complicated instruments such as derivatives, credit-default swaps, and so forth. With these, one party pays another if certain event happen – for instance, if Bear Sterns goes bankrupt, or if the dollar soars. These instruments were originally created to help manage risks – but they can also be to gamble. [...] Even [under Clinton], it was clear that derivatives posed a danger. [To] put it as memorably as Warren Buffet – who saw derivatives as ‘financial weapons of mass destruction’. And yet, for all the risk, the deregulators in charge of the financial systems [...] decided to do nothing, worried that any action might interfere with ‘innovation’ in the financial system. But innovation, [...] can be bad [...] as well as good.
No. 2: Tearing Down the Walls
The deregulation philosophy would pay unwelcome dividends for years to come. In November 1999, Congress repealed the Glass-Steagall Act – the culmination of a $300 million lobbying effort by the banking and financial-services industries [...]. Glass-Steagall had long separated commercial banks (which lend money) and investment banks (which organize the sale of bonds and equities); it had been enacted in the aftermath of the Great Depression and was meant to curb the excesses of that era, including grave conflicts of interest. For instance, without separation, if a company whose shares had been issued by an investment bank, with its strong endorsement, got into trouble, wouldn’t its commercial arm, if it had one, feel pressure to lend money, perhaps unwisely? An ensuing spiral of bad judgment is not hard to foresee. [...]
The most important consequence of the repeal of Glass-Steagall Act was indirect – it lay in the way repeal changed an entire culture. Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people’s money very conservatively. It is with this understanding that the government agrees to pick up the tab should they fail. Investment banks, on the other hand, have traditionally managed rich people’s money – people who can take bigger risks in order to get bigger returns. When repeal of Glass-Steagall brought investment and commercial banks together, the investment-bank culture came out on top. There was a demand for the kind of high returns that could be obtained only through high leverage and big risktaking [which lead to reckless use of derivatives...].
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No.3: Applying the Leeches
Then along came the Bush tax cuts, enacted first on June 7, 2001, with a follow-on installment two years later. The president and his advisers seemed to believe that tax cuts, especially for upper-income Americans and corporations, were a cure-all for any economic disease – the modern-day equivalent of leeches. The tax cuts played a pivotal role in shaping the background conditions of the current crisis. Because they did very little to stimulate the economy, real stimulation was left to the Fed, which took up the task with unprecedented low-interest rates and liquidity. The war in Iraq made matters worse, because it led to soaring oil prices. With America so dependent on oil imports, we had to spend several hundred billion more to purchase oil – money that otherwise would have been spent on American goods. Normally, this would have led to an economic slowdown, as it had in the 1970s. But the Fed met the challenge in the most myopic way imaginable. The flood of liquidity made money readily available in mortgage markets, even to those who would normally not be able to borrow. And, yes, this succeeded in forestalling an economic downturn; America’s household saving rate plummeted to zero. But it should have been clear that we were living on borrowed money and borrowed time. [...]
No.4: Faking the Numbers
Meanwhile, on July 30, 2002, in the wake of a series of major scandals – notably the collapse of WorldCom and Enron –
Congress passed the Sarbanes-Oxley Act. The scandals had involved every major American accounting firm, most of our banks, and some of our premier companies, and made it clear that we had serious problems with our accounting system. Accounting is a sleep-inducing topic for most people, but if you can’t have faith in a company’s numbers, then you can't have faith in anything about a company at all. Unfortunately, in the negotiations over what became Sarbanes-Oxley a decision was made not to deal with what many [...] believed to be a fundamental underlying problem: stock options. Stock options have been defended as providing healthy incentives toward good management, but in fact they are ‘incentive pay’ in name only. If a company does well, the C.E.O. gets great rewards in the form of stock options: if a company does poorly, the compensation is almost as substantial as is bestowed in other ways. This is bad enough. But a collateral problem with stock options is that they provide incentives for bad accounting: top management has every incentive to provide distorted information in order to pump up share prices.
The incentive structure of the rating agencies also proved perverse. Agencies such as Moody’s and Standard & Poor’s are paid by the very people they are supposed to grade. As a result, they’ve had every reason to give companies high ratings, in a financial version of what college professors know as grade inflation. [...] We had seen this same failure of the rating agencies during the East Asia crisis of the 1990s: high ratings facilitated a rush of money into
the region, and then a sudden reversal in the ratings brought devastation. But the financial overseers paid no attention.
No.5: Letting it Bleed
The final turning point came with the passage of a bailout package on October 3, 2008 – that is, with the administration’s response to the crisis itself. [...] As America’s banks faced collapse, the administration veered from one course of action to another. Some institutions (Bear Stearns, A.I.G., Fannie Mae, and Freddie Mac) were bailed out. Lehman Brothers was not. Some shareholders got something back. Others did not.
The original proposal by Treasury Secretary Henry Paulson, a three-page document that would have provided $700 billion for the secretary to spend at his sole discretion, without oversight or judicial review, was an act of extraordinary arrogance. He sold the program as unnecessary to restore confidence. But it didn’t address the underlying reasons for the loss of confidence. The banks had made too many bad loans. There were big holes in their balance sheets. No one knew what was truth and what was fiction. [...]
Was there any single decision which, had it been reversed, would have changed the course of history? [...] The truth is most of the individual mistakes boil down to just one: a belief that markets are self-adjusting and that the role of the government should be minimal. [...] The embrace by America - and much of the rest of the world – of this flawed economic philosophy made it inevitable that we would eventually arrive at the place we are today.
Source: Joseph E. Stiglitz*, January 2009, Vanity Fair
*The author of the article is Joseph E. Stiglitz, a Nobel Prize winning economist and a professor at Columbia University.
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III In his comment on the flaws in the US economy J. Stiglitz sends clear messages
on how economies should operate. Read the article Capitalist Fools and decide
which paragraphs (i.e. mistakes numbered 1- 5, e.g. No.1 ) show that this advice
was not followed.
1 Advice: It is essential to have sound accounting practices in the economy. If not, the
system can start acting in a corrupt way. (No. 4)
2 Advice: Central banks should introduce order in financial markets and control the money supply in
order to keep the economy stable. (No.□)
3 Advice: Governments should be much more involved in correcting market imperfections. (No.□)
4 Advice: Financial institutions should not be allowed to take risks with ordinary people’s money.
(No.□)
5 Advice: Careful with tax reductions - this does not necessarily encourage sufficient economic
activity. (No.□)
IV What actually happened in the US economy? Discuss each piece of advice from
exercise III, compare it to the text, and find the flaws of the system (mistakes 1- 5)
as discussed by the author (e.g. According to Stiglitz, … Stiglitz claims/argues
that…, However, …).
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