Keywords VersionDianaSchalko

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UNIT 1COMPANIES IKEY FEATURES

(1)Company1general aspects Kapitalgesellschaftallgemeine AspekteCompanies (corporations in US) are the most prominent form of business organization in

many fields of economy. The majority of large, medium-sized and even small businesses in

the UK and the US are run as companies/corporations.

A company in the private sectoris formed with a view to making a profit for its members by

engaging in manufacturing, trading or the provision of services.

Its capital is divided into sharesit is raised by each member taking a certain number of

shares, which are paid for in cash or sometimes given in exchange for some other

consideration.

The members are called shareholders(stockholders in the US). They share in the companys

profits in accordance with the size of their holdings. Profits are distributed in the form of a

cash dividend(=percentage of the nominal value of a share).

A company is a legal entityit has a legal existence separate from that of its members. The

company itself is owner of all business assets and liable for all its debts and obligations.

The liability of its shareholders is limited to the issue price of the shares held by them.

A shareholder is personally liable only for any amount remaining unpaid on the shares held

by him.

The shareholders have ultimate control of the companythis power is exercised by voting at

meetings, in particular at the annual general meeting (AGM).Nevertheless, shareholdersare not allowed to participate in management as this is the task of the board of directors

(elected by the shareholders) and of paid managers (selected from among the directors or

recruited from the outside).

Most countries have two main types of companies:

Large companiespermitted to issue shares to the general public; if they wishshares are traded on a stock exchange

Called: public limited companies (UK), open corporations (US), Aktiengesellschaften

(D)

Small companiesownership is restricted to one or a few shareholders; no access toa stock exchange

Called: private limited companies (UK), close corporate (US), GmbH (D)

(2)Company2types of companies KapitalgesellschaftArtenIn the UK companies may be incorporated:

By registration under the Companies Acts (most important/common method) By royal charter By statute (=passing a special Act of Parliament)

Kommentar [DS1]: To set up

/found/establish/start/launch a company

eine Firma grnden

Kommentar [DS2]: To run/manage a

companyeine Firma leiten

Kommentar [DS3]: To distribute

profitsGewinne ausschtten

Kommentar [DS4]: To be fully liable

for/to have unlimited personal liability

fr etw. persnlich haften

Kommentar [DS5]: To hold shares

einen Anteil halten

Kommentar [DS6]: To issue/float

sharesAktien ausgeben

Kommentar [DS7]: To be traded on

the stock exchangean der Brse

gehandelt werden

If you refer to a specific stock exchange

the shares are traded at the London stock

exchange

Kommentar [DS8]: To incorporate a

companyeine Firma als

Kapitalgesellschaft eintragen


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Registered companieson the basis of their members liability may be classified into: Unlimited companies

- Members have unlimited liability Companies limited by guarantee

- Members are liable for the companys debts up to a stated limit- Suitable for NPOs

Companies limited by shares- Members liability is limited to the issue price of shares held by them- Adopted by most for-profit businesses- Account for the majority of registered companies-

There are two types:a) Public limited companiesits authorized and issued capital must not be less

than 50.000 pounds, of which at least 25% must be paid up at the time of

incorporation; it need not necessarily offer its shares to the general public but

may sell them privately; shares which are freely transferable may be sold to

the general public e.g. by a public offering

b) Private limited companiesmust not offer its shares or corporate bonds tothe general public; there is no minimum capital requirement (in contrast to an

Austrian of German GmbH); majority of private limited companies are small

family businesses run as companies to profit from the benefits of continuity

and limited liability;

In the US, corporation statutes distinguish between: Open corporations (publicly held)

- Its shares are hold by a large number of people Close corporations

- Small number of shareholders- May dispense entirely with the board of directors by including a provision to this

effect in its articles of incorporation

(3)Corporation1 Krperschaft, juristische PersonA corporation in this sense (law) is a group of people who have formed themselves into an

association having a legal existence separate from that of its individual members.

(4)Corporation2 Kapitalgesellschaft, brsennotierte AG, KonzernAn American corporation is the equivalent of a British private or public limited company.

In business magazines and newspapers the term is used in a narrower sense and refers to a

publicly held corporation. Since many corporations have subsidiaries it may also denote a

group of companies.

Kommentar [DS9]: Abbreviation = plc

Kommentar [DS10]: Abbreviation=

Ltd


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(5)Corporation3 wirtschaftl. Unternehmen der ffentl. HandIn the UK the term is applied to a public corporation. (=a business organisation created by an

Act of Parliament and both owned and controlled by the government)

(6)Going public Gang an die BrseA British public limited company or an American open corporation is permitted to offer its

shares to the general public and have them listed on a stock exchangebut most of them do

not avail themselves of this opportunity.

If such a business needs more capital for expansion, or its shareholders want to convert theirholdings into cash it can go public.

Other expressions for going public are:

- Taking a company public- Floating a company- Flotation of a company- Initial public offering(in international contexts) shares of a company are

traded on a stock exchange for the first time; organized generally by public

offering (=shares are made available to the public for a fixed price, deal is handled

and underwritten by a syndicate of securities firms)

Going public also involves certain disadvantages:

Disclosure requirements are much stricter and more extensive Pressure by the investing community to make short-term profits will increase Some listed companies decide to reverse the process which means that they take

their firm private by buying up all the shares in circulation and withdrawing from the

stock exchange

(7)Management1 Management, Geschftsleitung, FhrungskrfteThis term refers to the group of people that control business organisation, in particular a

public limited company or a corporation, in which case it includes the executive directors

and the managers ranking below them.

Although they all receive a salary from their company like other staff, managers are not

normal employeesthey rather represent the interests of the companys owners (=its

shareholders) vis--vis its workers, unless they pursue only their own interests.

Managers are rarely members of trade unions but have their own organisations. Modern

developments have reduced this antagonism between workers (us) and management (them)

but it can still be found in many traditional firms.

Kommentar [DS11]: Shares are

listed/quoted on the stock exchange

Aktien werden an der Brse gehandelt

Kommentar [DS12]: To go public/to

take a company public/to make an IPO

an die Brse gehen

Kommentar [DS13]: Torecruit/hire/appoint/employ a manager

einen Manager einstellen

To fire/dismiss/make redundant

entlassen

To pay a manager (salary, bonus, benefits,

stock options etc.)bezahlen


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A companys management is divided into:

- Senior management (often split into top and senior executives) led by thechief executive officer (CEO) and his deputy who work closely with the board of

directors (heads of departments)

- Middle managementmany responsibilities of the highest ranking officers aredelegated to this section;

- Junior management(8)Management2 Unternehmensfhrung

Management includes all activities involved in running a business organization. Managers

prepare and make decisions and make sure that they are carried out accordingly.Essential tasks of management include:

Identifying, formulating and setting objectives Planninglong (strategic) and short-term (tactic) plans Establishingand maintaininga suitable organizationinvolving structure and

procedures

Implementinggetting results through other people which necessitatesdelegating, motivating and commanding

Controllingmeasuring performance, comparing results with predeterminedobjectives, taking corrective action if necessary

Communicatingwith other members of the firm Establishing and maintainingcontacts with the outside world; representing the

company in negotiations with customers, suppliers, trade unions etc.

Managers rely on various techniques to achieve their goalswe distinguish between:

a) Qualitative techniquese.g. management by objectives, by results and by exceptionb) Quantitative techniques(operations research) e.g. network analysis, simulation, risk

analysis, decision trees

Another important aspect refers to the style of leadershipmanagement styleused by

executives. It ranges from very authoritarian (e.g. little confidence in subordinates, no

employee participation in goal-setting and decision making, motivation by fear, threats

and punishment) to very co-operative (e.g. motivation by participation and involvement,

complete trust in subordinates).Firms with a more co-operative style are more likely to have a continuous record of high

productivity.

(9)Executive Fhrungskraft, leitender AngestellterStrictly speaking executives are top-level managers in a business organisation e.g. the CEO,

executive directors, top-level managers that report directly to executive directors (marketing

manager, purchasing manager etc.).


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It is commonly applied not only to senior managers but also to junior managers(-executives). Even employees at the bottom end of corporate hierarchy may be called

executives to enhance their self-esteem and motivation without having to raise their

compensation e.g. field executives (salespersons), account executives

Executive is also an adjectivee.g. executive suite or jet denotes things belonging to or

reserved for top-level managers.

(10) Incorporation (of a company) Grndung (einer Kapitalgesellschaft)Before a company is set up in Britain, its promoters (people involved in its formation) must

enter negotiations on the acquisition of land, buildings and other property, obtain the

consent of the proposed directors to act as such and arrange for the companys shares to beunderwritten.

The formalities necessary for the incorporation include:

- Prescribed documents(prepared by a solicitor on the promoters instructions) include the firms memorandum of association, its articles of association, a list of

names of the first directors and a statement of the amount of capital the

company is permitted to issue;

- After payment of the proper fees a certificate of incorporationis grantedprivate limited company can start business immediately; public limited company

has to comply with certain other requirements and receive a trading certificate to

start business;

- Every company has to hold a general meetingwhere the statutory report and anymatters regarding incorporation are discussed

Definitions:

Memorandum of association(articles of incorporation in the US) = defines thecompanys powers and regulates its relations with the outside world; must contain

certain information e.g. name and location of the company, its objects (activities the

firm is allowed to engage in), limitation of liability, amount of nominal share capital

and its division into shares;

Articles of association(bylaws in the US) = regulate the companys internal affairse.g. rules of procedure at meetings, voting rights of shareholders, powers and duties

of directors etc.

These two documents constitute a binding contract between the company and its members,

and can be altered only by special resolution of its members.The articles of incorporation in the US also contain some provision dealing with internal

affairs.

Kommentar [DS14]:Step 1prescribed documents

Step 2payment of proper fees

Step 3the certificate of incorporation is

granted


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UNIT 2COMPANIES IICORPORATE GOVERNANCE

(1)Company3legal aspects, management and controlKapitalgesellschaftjuristische Aspekte, Geschftsfhrung,

Verfgungsgewalt

The main characteristics of a company are its legal personalityas well as the separation of

ownership and management. In contrast to sole traders and partnerships, companies are

legal entities (artificial or legal persons), having a legal existence independent of that of

their individual members.

The company has its own lifeneither the death of a member nor a transfer of shares

affects the existence of the enterprise. It can enter into contracts, hold property, buy and

sell or sue and be sued in its own name.

However, a company can act only through its properly constituted agents. The companys

members as such cannot be held individually responsible for its actionsthe directors and

officers may in certain cases be held personally liable if the company fails to comply with the

provisions of the Companies Acts.

As a legal entity the company is owner of its business assets and liable for all its debts and

obligations. The liability of its shareholdersis limited to the issue price of the shares held by

them. If the company fails a shareholder is personally liable only for any amount remaining

unpaid on the shares held by him.

Once set up, a company continues in existence until it is brought to an end e.g. by winding

up or liquidation. When a company is wound up or liquidated its assets are disposed of its

creditors are paidand the remaining amount of money (if any) is distributed to itsshareholders. Liquidation may follow a decision at a general meeting of shareholders

(=voluntary liquidation)or it may be ordered by court (=compulsory liquidation).

Ultimate control of a company is in the hands of the members (the shareholders), who

exercise it by voting at meetings (voting power is proportional to the number of shares held).

The principal meeting of shareholders is the annual general meeting(AGM).

The members, however, do not have any power to participate in the management of their

business. Management, supervision and day-to-day control over the company are vested in

its board of directors (elected by and responsible to the shareholders).

Companies are required to make a certain minimum amount of information available to the

publicdisclosure requirements:

- Every year a company must send a copy of the directors annual report, a copy of itsaudited balance sheet and a copy of its profit and loss account to the Registrar of

Companies

- It must keep certain statutory books e.g. register of members, minutes books as wellas proper books of account

Kommentar [DS1]: To wind up/toliquidate companyeine Firma

schlieen/auflsen

Related expressions:

To shut down/close a company

To go bankrupt / to face bankruptcy / to

be threatened by bankcruptcy

Kommentar [DS2]: To hold an AGM /

eine Jahreshauptversammlung abhalten


To appoint a meetingein Meeting

festsetzen

To postpone a meetingein Meeting

verschieben

Kommentar [DS3]: To vest control in

die Kontrolle liegt bei; jemand ist

bevollmchtigt etw. zu tun


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(2)Company4advantages and disadvantagesKapitalgesellschaftVor-und Nachteile

The major advantages of a company are the following:

Continuous existence, independent of its members or directors Shares are freely transferableand therefore can easily be sold without affecting its

capital or existence

The shareholders liability is limited; this limitation encourages individual andinstitutional investors to put their money into corporate equities companies can

raise huge amounts of capital necessary for large-scale operations

The major disadvantages are:

Disclosure requirementsmake it difficult to conceal their business affairs; their booksmust be available for inspection by their members and the general public

The directors and managers have direct controlover the companys affairs withoutbeing effectively accountable to the real owners

Conflictsbetween the shareholders (want a high dividend), its directors andmanagers (want to plough back profits) and its workers (interested in higher wages)

Lack of personal contactwith customers and employees Slow and inflexible decision-making

(3)Company5legislation KapitalgesellschaftGesellschaftsrechtCompanies are subject to detailed legal regulations designed mainly to protect shareholders,

creditors and the general public from possible abuses of the legal entity concept.

The relevant piece of legislation in the UKis the Companies Act of 1948.

In the USthe federal government has drawn up a Model Business Corporation Actand

has recommended the individual states to adopt it.

(4)Shareholder Aktionr, Gesellschafter einer KapitalgesellschaftThe members of a company are called its shareholders, their membership coincidingexactly with legal ownership of its shares.

The normal methods of becoming a member are

- by subscribing the memorandum of associationsubscribers become the firstmembers

- by applying for an allotment of shares- by having shares transferred from an existing member

Kommentar [DS4]: = zur Einsicht

bereit liegen

Kommentar [DS5]: To be accountable

(to sb) for sth(jemandem gegenber)

fr etw. verantwortlich sein

Related expression:

To hold sb accountable for sthjemanden

fr etw. verantwortlich machen


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(7)Board of directorsFhrungsgremium einer britischen/amerikanischen Kapitalgesellschaft

(erweiteter) Aufsichtsrat

Verwaltungsrat

The board of directorsis a group of people elected by the shareholders at the annual

general meeting. Any person may act as a director, which means that he is not required to

be a member of the company.

In the UKthe board of a public limited company must consist of at least two directorsin

private limited companies there may be just one.

In the USthere must be at least three directors

The powers of a companys boardare laid down in its articles of association (US = bylaws)and are vested in the directors collectively, meaning that they can act only properly

convened as a board.

In most companies, the directors elect a permanent chairman, who takes the chair at board

meetings and also presides over meetings of the shareholders. He is the firms leading

representative in its dealings with the outside world.

A companys board of directors is responsible for both management and supervision. It sets

general company policy and supervises day-to-day management, which it delegates to paid

managers.

American and British company law permits board members to be appointed as managers

(=executive directors). In contrast, Austrian and German lawrequire a two-tier board

system, under which no member of the supervisory board (Aufsichtsrat) may at the same

time be a member of the management board (Vorstand).

British and US boards comprise executive and non-executive directors. An executive director

(full-time or inside director) is a member of the board who in addition to his board

duties, carries out management functions.

A non-executive director(part-time or outside director) is a board member who helps to

plan, decide and supervise the companys policy but has no management responsibilities

himself.

A companys chairmaneither an executive or a non-executive directoris the head of its

board. The most senior executive director is referred to as the CEO. The position of CEO can

be filled by the chairman in this case he would have to be an executive chairman. Under

this arrangement the second in command is the managing director (UK) or the president

(US) called Chief operating officer (COO)he reports to the CEO and deputises for him.

In a company that has a non-executive chairman the managing director/president is theCEO. A large company would additionally appoint an executive director as its COO.

Another option is for a company to combine the roles of managing director/president and

chairman in a single person, making that person the CEO.

Under German and Austrian company law the roles of non-executive chairman

(Aufsichtsratsvorsitzender) and managing director/president (Vorstandsvorsitzender) are

clearly defined and always kept apart.

Kommentar [DS8]: It is laid down thates steht geschrieben dass

Kommentar [DS9]: To preside oversthetw. leiten; den Vorsitz habe

Kommentar [DS10]: To beresponsible forfr etw. verantwortlich

sein

Related expression:

To be in charge of sth


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While the CEO and the COO are general managers with overall responsibilities for thecompanys operations, the other executive directors are in charge of specific areas e.g.

finance, marketing, purchasing etc.

The term director usually indicates that they are members of the board.

(8)Annual general meeting JahreshauptversammlungEvery company must hold an annual general meeting in every calendar year to provide its

members with the opportunity to express their collective will.

The agenda of an AGM usually comprises:

- Declaration of a dividend- Consideration of the companys accounts and directors report- (re-)election of directors- Appointment and remuneration of auditors

Any general meeting which is not an AGM is called an extraordinary general meeting.

Such a meeting may be convened at any time by the directors, but a qualified minority of

shareholders may also request one in which case the directors must call it.

The articles of association usually stipulate that company meetings are to be under the

control of the chairperson of the board of directors. Failing such a provision, the members

present appoint their own chair.

No business may be conducted unless a specified minimum number of members (=quorum;

min. 2 members) are present.

Each member has the right to attend a general meeting in person or by a proxy, who need

not be a member of the company himself. Normally, resolutions are passed by a simplemajority of votes. Minutes must be kept of all general meetings and signed by the

chairperson.

Kommentar [DS11]: To call a meeting

eine Versammlung einberufen

Related expression:

To convene a meeting

Kommentar [DS12]: To pass a

resolutioneine Resolution

verabschieden


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UNIT 3BUSINESS COMBINATIONS

(1)Merger FusionIn British English, the term mergercovers three distinct methods of combining businessenterprises:

a) A large business swallows upor absorbsa smaller oneit acquires the latterand winds it up, thus extinguishing its identity (German expression: Fusion durch

Aufnahme)

b) Two or more companies merge into a new one, which is specifically established forthat purpose. All the original companies lose their identities.

c) One company acquires a majority interest in another, effectively making it asubsidiary. The firm taken over retains its legal existence, although it will becontrolled economically by the parent company. ( German expression: unechte

Fusion)

The urge to merge is driven by a desire to obtain economic benefits that would be

unattainable for each company separately. One of the benefits could be the achievement of

economies of scale(=cost savings due to an increase in the size of operations). Anotherpotential positive effect derives from economies of scopeor synergies (e.g. merger betweena bank and an insurance company enables them to cross-sell their financial products).

Mergers will only be successful if the businesses involved fit together well. There must be

some compelling commercial or industrial logic behind a merger, otherwise it is likely to run

into trouble.

The greatest danger to mergers is the inevitable clash of corporate culturespeople maynot get along with each other.

(2)Takeover bid (ffentliches) bernahmeangebotCompanies often try to take over others, either in order to add them to their portfolio of

subsidiaries or to strip them off their assets (=break them up and sell off the valuable bits).

Friendly/agreed takeover bid= a company agrees its bid with the victims board ofdirectors;

Unfriendly/contested/hostile takeover bid= a company goes over the boards headsand appeals to the targets shareholders directly; the victims management are likelyto fight backfor instance:

- making optimistic profit forecasts and generally trying to convince theirshareholders that they would be better off with the present management in

charge

- White Knight= a third, more acceptable, company may be called in to fend offthe unwelcome suitor

- poison pills= target company takes on huge debts or grants existingshareholders favorable stock options to dilute the bidders position

Kommentar [DS1]: =auslschen

Kommentar [DS2]: =Konflikt,Kollision, Aufeinanderprallen

Kommentar [DS3]: To appeal toshareholdersdie Aktionre ansprechen;an diese appellieren

Kommentar [DS4]: To fend off a bidein bernahmeangebot abwehren

Related expression:To reject a bidTo refuse a bidTo turn down a bid

Kommentar [DS5]: To take on debtSchulden auf sich nehmen

Kommentar [DS6]: =abschwchen


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In a takeover, payment for the shares acquired can be in cash (cash bid), in the form ofsecurities of the bidding company (paper bid) or some combination of the two.

A takeover financed mainly by bank loans and/or junk bonds is referred to as a leveraged

takeover/buyout.

(3)Buyout Unternehmensaufkauf; bernahme eines UnternehmensTaking over a company is sometimes referred to as a buyoutespecially if it is acquired byits own management (management buyout)or its employees (employee buyout).

Since neither a companys management nor its employees normally have enough funds of

their own for a buyout, most of the purchase price is raised from banks or through junk

bonds (leveraged buyout).

A company so acquiredwith possibly more than 80% of the necessary finance in the form

of debtmay find that interest charges absorb most of its profits. Such deals are very risky.

Occasionally, a company is taken over by an outside management team (management buy-in).

When a publicly held corporation (=one with a large number of shareholders) is taken over

by a small number of people in a buyout, it is effectively taken private (=converted into a

privately held corporation).

(4)Group of companies Konzern

enterprises controlled by itssubsidiaries

may be set up by the parentcompany or

parent company acquires>50% of the equity of an

existing firm

wholly-owned = parentholds 100% of equity

associated company =parent holds 20-50% of

equity

controls one/more

subsidiares (holding >50% ofsubsidiarie's equity capital)

-non-operating = restrictsits activities to managing the

group's subsidiaries

-operating = additionallyengages in the production

and distribution ofgoods/services

holding/parentcompany

Subsidiary

Sub-Subsidiary

Sub-Subsidiary

Subsidiary

Sub-Subsidiary


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Although a group operates for all practical purposes as a single enterprise, the separate legalpersonality of each group member is strictly maintained e.g. a creditor of a subsidiary can

make no claim against the holding company.

Subsidiariesmust be clearly distinguished from mere branches, sales offices etc. which arejust separate establishments without a legal personality of their own.

Inone important respect groups are recognized as single enterprisesnot only must eachgroup member publish accounts relating to its own activitiesbut the holding company

must also make public consolidated accounts(=assets, liabilities, revenues and expenses ofall group members have been summarized + all intra-group receivables and payables have

been netted out), relating to the activities of the group as a whole.

Groups may be formed in two ways:

Vertical integration= combining firms from different stages in the chain ofproduction and distribution (Example: a retailer and a wholesaler) Horizontal integration= businesses from the same stage are combined (Example:

two retailers/wholesalers)

Other types of groups are:

Conglomerate(Mischkonzern) = subsidiaries operate in completely unrelatedindustries (e.g. beverages, textile, food, technical equipment)

Multinational group= has subsidiaries in at least two countries other than that inwhich it is based

Groups combine the advantages of size e.g. economies of scale with the flexibility of

decentralized management. The overall policy of the group is laid down by its headquarters

(= top management at the parent company), while the individual subsidiaries are givenconsiderable latitude in managing their affairs (longer or shorter leash).

(5)Holding company MuttergesellschaftIn a strictly legal sense, a holding company is any company that controls at least one

subsidiary (=by owning more than 50% of its equity capital).

In journalistic and business usage, however, the term usually refers to a so called non-

operating/pure holding company(=restricts its activities to the management of the

subsidiaries; carries out financial and corporate planning for the subsidiaries and performs

general management services for them)

(6)Monopoly MonopolMonopolyis commonly applied to a market with more than one supplier if it is dominatedby a single large company having for instance on 80% share, with the remaining amount

being divided between a number of smaller firms.

Kommentar [DS7]: To net sth outetw. saldieren


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Being the only or dominant supplier in a market incurs certain advantages e.g. it is easier toincrease prices without a substantial decline in the quantity demanded especially if there are

no close substitutes for the product in question (elasticity of substitution is low).

To achieve the goal of being a monopolist a company operating in a market with many

sellers may try to buy up its competitors in order to exert control or it mayjoin forces with

them to form a cartel.

To weaken the impression that monopolies always result from the machinations of profit-

greedy businesses and are bad for the general public, it is important to mention that there

are also so called natural monopoliesstate-owned/controlled railway enterprises, post,

telecommunications, water, gas electricity etc.; competition would lead to duplication and a

waste of resources;

Another type of state-created monopoly is intellectual propertyby granting artists,

inventors and firms the exclusive rights to use their works of art, inventions and brands,governments create artificial monopolies;

(7)Cartel KartellThis term denotes a voluntary association of business enterprises on a contractual basis

providing for the adoption of some uniform business policy by its membersespecially

regarding production, sales and prices.

Cartels- fix prices- restrict output (by assigning production quotas to their members)- divide/carve up markets- may even have their own selling organisations

In short, they are combinations in restraint of tradeintended to restrict competition.

(8)Trust2wettbewerbshemmender Unternehmenszusammenschluss (Kartell,Monopol)

A trust is a combination of firmsformed with the intention or effect of restricting

competition. They may be created in a number of ways:- By establishing a trust in the legal sense of the word (see:trust1)- By setting up a holding company- By entering into an explicit or implicit contract to restrain competition

Kommentar [DS8]: To join forces withsbsich mit jemandenzusammenschlieen

Kommentar [DS9]: To assign sth to sb.

jem. etw. zuweisen

Kommentar [DS10]: Divide/carve upmarketsMrkte aufteilen


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KEYWORDS UNIT 4FINANCIAL MANAGEMENT

(1)Financial management Kapitalwirtschaftbetriebliche Finanzwirtschaft

It is concerned with planning, implementing and controlling all inflows and outflows of

funds. It deals with raising (sourcing)and allocating (using)the funds required by the

enterprise in order to achieve its objectives.

A great variety of sources can be tapped to raise funds. Funds may be raised internally

(internal finance).The ultimate source of internal finance is the revenue generated by

selling goods, services, capital assets etc. Sales revenue is partly used up in the current

period as cash expenditure on materials, labour services etc. while what is left over (cash

flow) can be allocated for investment purposes or to repay debts.

On the other hand, funds may be obtained from outside sources(external finance) e.g. from

partners or shareholders, or from creditors (creditors funds).

The financial resources provided by shareholders, partnersincluding retained earnings

are called owners funds or equity capital.

A modern financial manager is also concerned with the outflow of funds, including current

expenditures on materials, labour etc. as well as such items as tax and interest payments or

profit distributions. Since short-term inflows and outflows cannot be perfectly co-ordinated,

a business organization will need a pool of cash and maybe short-term credit facilities to

even out discrepancies.

This raises the issue of liquidity(=whether a firm will be able to meet its short-term

financial obligations as and when they fall due).

Outflows of funds also comprise investments(=expenditures whose benefits will not accrue

until some time in the future).

The planning process in the field of financial management is often referred to as

budgeting.

(2)Funds1 Barmittel, finanzielle MittelThis term often refers to cash(i.e. banknotes, coins, current account balances at banks)and

other financial resources that can be readily converted into cash.

(3)Funds2

Kapital

The expression funds may also be used to describe the capital of a company, as for instance

in shareholders funds.

(4)Funding1 Finanzierung, MittelbereitstellungFunding denotes the provision of pecuniary resourcesfor a particular purpose, and is

therefore synonymous with financing.

Kommentar [DS1]: To raise funds

Mittel beschaffen


To obtain funds

Kommentar [DS2]: To allocate funds

Mittel verwenden

Related expression:

To spend (funds) on

Kommentar [DS3]: Current

expenditure = either already in use or in

the near future e.g. maintenance costs,

salaries etc.

Kommentar [DS4]: To even out sth

etw. ausgleichen

Kommentar [DS5]: =zuflieen, sich

ansammeln

Kommentar [DS6]: =finanziell


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(5)Capital structure [P1] KapitalstrukturThe capital structure of a firm is the composition of its capital, mainly with regard to the

relative shares of creditors funds (debt)and owners funds (equity).

The relationships between these two elements can be expressed in the form of ratios,

referred to as capital (structure) ratios.

(6)Equity capital [P1] EigenkapitalThis term refers to the owners fundsin a business organisation i.e. the funds provided by

the proprietor(s) together with those internally generated.

These do not all exist in liquid form they may have long been invested in various assets

but simply represent the proprietary interest(s) in the organization.

(7)Share [P1; P2S1; P3; P7] AktieThe term is defined asany of the equal parts into which a companys capital is divided,

entitling its owner to a proportion of the profitsand giving him certain other rights e.g. to

vote at general meetings of the company and to share in the proceeds of a voluntary

winding up.

A company may issue many different types of shares, and the rights of their holders depend,

to some extent, on the type of share involved.

A share normally has a nominal value (face or par value), which means that a certain

sum of money is shown on the face of the certificate.This does not necessarily imply that shares have to be issued at parmany companies issue

them above par (at a premium) or below par (at a discount) to allow for last-minute changes

in market conditions.

Issues below par are prohibited under Austrian law. In the US and Canada, companies are

permitted to issue no-par-valueshares (=have no face value)they simply represent a

given fraction (e.g.1/10.000) of the capital of the company involved, which means that

dividends have to be expressed as a fixed amount of money per share.

In the US, shares are often collectively referred to as stock(e.g. common stock for

ordinary shares; preferred stock for preference shares etc.)

(8)Dividend [P1;P2] DividendeA companys dividend is that portion of its profits which is distributed to the holders of

shares ranking for dividend. It may be paid out annually or twice a year.

It is expressed either as a percentage of the face value of the shares on which it is paid, or as

a fixed sum per share.

Dividends are usually paid out in cash(cash dividend) but profits may also be distributed

by way of shares (stock dividends).

The dividend policyof a company is the responsibility of its directors - its shareholders

havingat best- only an indirect say. Of course, there are constraints, the main one being

the amount of profits, or earnings generated. If there is no or little profit in a year, the

Kommentar [DS7]: To be entitled to a

proportion of the profitseinen Anspruch

auf einen Anteil am Gewinn haben

Kommentar [DS8]: To pay out adividendeine Dividende ausschtten


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(12)Bond [P1; P2] Anleihe, SchuldverschreibungA bond is a debt security, which means that it represents a loan made by the holder to the

issuer. It has to be redeemedthe principal has to be repaid by the issuer at maturity,

although there are certain exceptions (irredeemable bonds).

The amount to be repaid (redemption price) need not be the same as the issue price and

both may vary from the nominal value of the security.

The reason for this is that the difference between the issue and the redemption price is an

element of the return to be obtained from the bond, and can be used to modify or even

replace other elements e.g. the interest rate.

Most bonds are interest-bearing securitiesthe interest rate can be fixed or variable.

A zero-couponor deep-discount bond is non-interest-bearing and the return to investors is

merely the difference between the higher redemption and the lower issue price.

Bonds may be issued by central governments, in which case they are known as government

bonds, Treasury bonds(US), government stocks(UK) etc.

If issued by local governments they are called local authority stocks, corporation stocks

(UK) or municipal bonds (US).

It is also possible for debt securities to be issued by companiesused to be called

debentures (UK) but now corporate bonds which is the standard expression in the US as

well as in the UK.

In business jargon, high risk corporate bonds are termed junk bonds.

(13)Bank lending [P1] Kreditgeschft der BankenLending by banks, can be classified in a number of ways: according to maturity (=the time

allowed for repayment; short-, medium-, long-term), according to the purpose for which the

funds lent are used, or according to the security provided by the borrower(s) involved.

(14)Credit2 Kredit, DarlehenIn banking, the term denotes an amount of money placed at a persons or an organisations

disposal and is therefore synonymous with loan. In this sense it is used more frequently in

the US. In Britain the expression normally refers to lending in general rather than to a

specific amount lent.

(15)Security (for a loan) (Kredit-) SicherheitSince a lender has to bear the risk of the borrowers default, he may wish to provide himself

with a second line of defence on which to fall back should the borrower fail to meet his

obligations.

For this reason, the lender may insist on some kind of security for the (re)payment of

principal and interest, in addition to the borrowers personal liability.

Securities for loans include guarantees(= a third party undertakes to be secondarily liable

for the debt in question), and pledges(=shares, bonds or even goods are delivered into the

custody of the lender for the term of the loan granted).

Kommentar [DS14]: To redeem sthetw. zurckzahlen, auslsen

Kommentar [DS15]: To default on

ones debtsseine Schulden nicht

bezahlen

Kommentar [DS16]: To provide

security for a loanSicherheiten fr einen

Kredit bereitstellen

Kommentar [DS17]: =Verwahrung


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Moreover there are arrangements under which the lender retains an interest or lien in realor personal property.

The most important variety is the real estate mortgage.

(16)Principal1 Kreditsumme, DarlehenssummeThe term principal may be used to describe an amount lent/borrowed exclusiveof any

interest payable on it. It is frequently employed in conjunction with interest e.g. repayment

of the principal and payment of interest.

(17)Interest1[P1] ZinsenInterest is the price charged by a lender for the temporary use of funds. It is normally

expressed as a percentage per annum of the principal (=the amount lent).

This percentage is termed the interest rate. The rate set for a particular borrower is

determined by his creditworthiness and such macroeconomic factors as credit supply and

demand, rate of inflation and monetary controls.

(18)Overdraft Kontoberziehung, KontokorrentkreditThe term overdraft has two slightly different meanings. On the one hand,it refers to the

extent to which a current account at a bank is overdrawnon the other hand, it denotes a

type of short-term loan.

In the latter case, a bank simply permits the holder of a current account to overdraw it up to

a specified amount, the credit line.The account holder can draw on his credit line at any time during an agreed period. If part or

all of the overdraft is repaid before this period has expired, he is allowed to borrow again,

provided that the credit line is not exceeded.

Interestis charged on the balance outstanding from time to time (=the amount overdrawn

at the end of each day). Moreover, the bank may levy an additional charge typically called a

monthly charge or commitment fee (=Bereitstellungsprovision).

This can be either a fixed amount, or a small percentage of the total credit line or of the

unused portion thereof.

The reason for this is that, although the borrower may not make use of the overdraft facility

at any given time, the bank must nevertheless have sufficient funds ready against a possible

call on its resources. Additionally, it may also insist that the account holder deposit easily

saleable shares or other property as security.Overdrafts help to solve the problem of co-ordinating cash outflows (e.g. wages) and inflows

(e.g. sales revenues).

(19)Factoring [P1, S1-2; P3] FactoringFactoring is a commercial service designed to assist firms selling goods and/or services on

credit. Under a typical factoring agreement, a specialized financial institution (factor):

(1)purchases all or a specific group of a sellers accounts receivable with or withoutrecourse to him for credit losses

Kommentar [DS18]: =Pfandrecht

Kommentar [DS19]: To overdrawones account sein Konto berziehen

Kommentar [DS20]: To draw on sth

aus etw. schpfen

Kommentar [DS21]: To levy a charge

eine Gebhr einheben

Kommentar [DS22]: To use anoverdraft facilityvon einer

Kontoberziehung Gebrauch machen


To grant an overdraft facilityTo apply for/request

Kommentar [DS23]: To call on

resourcesMittel in Anspruch nehmen

Kommentar [DS24]: To use/engagethe services of a factordie Dienste eines

Factors in Anspruch nehmen

Kommentar [DS25]: =Regress


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KEYWORDS UNIT 5SECURITIES MARKETS

(1)Investment2 Finanzinvestition, -anlageThe term investment is used to describe the acquisition of financial assets such as bank

deposits, shares, bonds or Treasury bills. This form of investment is undertaken to generate

current investment income (e.g. dividends, interest) and/or capital gains.

The investment industry acts as an intermediary between the ultimate providers and users

of capitalcomprises organisations like stock exchanges, investment companies and banks.

(2)Investor Kapitalanleger, InvestorInvestorsthe ulimate purchasers of securitiesmay be classified in various ways. An

important distinction is the one between private and institutional investors:

Private = rich individuals who put their money into shares, bonds, property Institutional = organisations such as insurance companies, banks, pension funds,

investment funds etc.; they have more funds at their disposal than their private

counterpartsenables them to pursue a more diversified investment policy; spread

the risk over a wider range of investment media e.g. shares, bonds, property

(3)Yield [P1-2] Rendite, EffektivverzinsungYield is defined as the income derived from a financial investment, expressed as a

percentage of the value of that investment.

If a share trading at e.g. 150 pence pays a dividend of 12 pence the yield is 12p/150p *

100 = 8%;

In the case of shares, we have to distinguish between the dividend yield(=the last dividend

expressed as a percentage of the current share price) and the earnings yield(=earnings per

share).

(4)Portfolio1 Portfolio, PortefeuilleThis term denotes the entire collection of financial investments(shares, bonds) held by a

private or an institutional investor.

The main task involved in managing an investment portfolio is to achieve the optimal mix in

terms of return and risk.

(5)Investment fund [P1] InvestmentfondsInvestment funds are financial institutions typically set up for the purpose of pooling the

moneys of small investors, putting them into a wide range of securities and/or other

investment media for the benefit of their clients.

Kommentar [DS1]: To acquire

financial assets (Mittelherkunft)

Kommentar [DS2]: To undertake an

investmenteine Investition vornehmen

Kommentar [DS3]: To have funds atones disposalMittel zur eigenen

Verfgung haben

Kommentar [DS4]: To purse a policy

eine Politik verfolgen

Kommentar [DS5]: To distinguish

between somethingzwischen etw.

unterscheiden

Kommentar [DS6]: To holdinvestments (shares, bonds)

Kommentar [DS7]: For the purpose of

doing something (ing-form)zu dem

Zweck etw. zu tun


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They are professionally managed, and should theoretically be able to achieve a better returnthan a private investor or a portfolio. They have usually more funds at their disposal than

private investors and can therefore buy a greater variety of investment media to spread the

risk.

(6)Securities WertpapiereSecurities are transferable certificates of ownership or indebtedness. From a legal point of

view, it should be noted that securities are not mere acknowledgements of the rights to

which they relate, but rather embodiments of them.

Such rights (e.g. the claim to payment of a certain sum of money) can only be exercised in

connection with the instrument involved.There are two basic types of securities:

Equity securities= embody ownership rights e.g. shares Debt securities= represent creditorship rights e.g. bonds

(7)Securities markets WertpapiermrkteThese markets provide a framework for buying and selling securities. They are basically

concerned with long-term or permanent financial instruments like shares or bonds and

therefore part of the capital market.

The main securities markets are:- Stock exchanges= are tightly organized, with trading floors, strict adherence to

business hours, limitations on membership etc.

Before a companys shares can be traded on any of the larger stock exchanges, it has

to meet a number of stringent tests e.g. with regard to amount to capital, disclosure

requirements and likelihood of an active market;

- Over-the counter markets= operate more flexibly, relying exclusively on telephoneand computer links;

(8)Share [P1] AktieThe term is defined as any of the equal parts into which a companys capital is divided,entitling its owner to a proportion of the profits and giving him certain other rights e.g. to

vote at general meetings.

(9)Blue chips erstklassige Aktien, SpitzenwerteBlue chips are top-quality, large-cap stocks(= shares of big companies with an excellent

reputation). They enjoy premium status as investments.

Kommentar [DS8]: To manage aninvestment (fund)

Kommentar [DS9]: To achieve return

Rckflsse (Ertrge) erwirtschaften

Kommentar [DS10]: To embody rights

Rechte beeinhalten

Kommentar [DS11]: To be concerned

with financial instruments

Kommentar [DS12]: To trade shares

on the stock exchange -

Kommentar [DS13]: To be dividedinto (shares)


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(10) Bond1 Anleihe, Schuldverschreibung, ObligationA bond is a debt security, which means that it represents a loanmade by the holder to the

issuer.Therefore, it has to be redeemedthe principal has to be repaid by the issuer at

maturity. The amount to be repaid (=redemption price) need not be the same as the issue

price and both may vary from the nominal value of the security.

The difference between the issue and the redemption price is an element of the return to be

obtained from the bond and can be used to modify or even replace other elements e.g. the

interest rate.

The interest rate can be fixed(fixed-interest or fixed-interest-bearing bonds)or variable

(variable-interest bonds or floaters).

A zero-coupon, or deep-discount bond is non-interest-bearing and the return to investors is

merely the difference between the higher redemption and the lower issue price.Another important feature of a bond is its maturity(=the time before it is redeemed).

Bonds may be issued by:

- Central governmentsgovernment bonds, Treasury bonds (US), government stocks(UK), gilt-edged securities (UK)

- Local governmentslocal authority stocks (UK), corporation stocks (US), municipalbonds (US)

- Companiescorporate bonds (UK, US); with high risk = junk bonds; may carry anoption for their holders to convert them into ordinary shares at a predetermined

price and within a specified period of time (convertible bonds);

Bonds may be traded on a stock exchange if the issuer meets certain requirements. The

segment of a stock exchange devoted to bond trading is the bond market.

The features most closely watched by bond investors are the current bond yield(=its annual

interest payments expressed as a percentage of its current market price) and the bond price.

Bonds are bought for two main reasons: first, for the interest income they generate, and

second, for possible capital gains (=profits derived from buying low and selling high).

(11) Gilt-edged securities britische StaatsanleihenGilt-edged securitiesor simply gilts are used by the British government to raise long-

term funds.

(12) Primary market Primrmarkt, EmissionsmarktThe term is usually applied to the market for new issues of securities(=the market whose

main function is the raising of fresh capital).

They are normally not housed in dedicated buildings but consist of loose associations of

specialized banks and investors, both private and institutional.

Kommentar [DS14]: To repay

something (loan, principal)

Kommentar [DS15]: To obtain return

from something

Kommentar [DS16]: To bear interest

Zinsen bringen, verzinst sein

Kommentar [DS17]: To raise funds

(Mittelherkunft)


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(13) Rights issue Emission von jungen Aktien (auf Bezugsrechtsbasis)A rights issue is an issue of new shares to existing shareholders, usually on favourable terms.

A company wishing to increase its capital may be forced by law to use this method.

Alternatively, it may decide to do so because it is often cheaper and less complicated.

A shareholder that does not subscribe for an additional issue of shares would not be able to

maintain his proportionate interest in the issuing company. Since a rights issue does not

change the earnings of the company involved, the increase in the number of shares will

reduce the earnings per share and possibly the dividend per share (dilution).

To protect existing shareholders from the effects of dilution, new shares are offered to them

on a pro rata basis e.g. one new share for every three shares held.

Shareholders not interested in the new issue may sell their rights. Rights issues aresometimes referred to as cash callsshareholders have to fork out large sums to protect

their interests in the issuing company.

(14) Underwriting UK: Emissionsgarantie; US: FremdemissionThe term refers to specialised services offered by financial institutions to companies that

wish to raise capital by issuing securities.

In Britain, underwriting denotes the provision of a guarantee by an issuing house or broker

to take up any part of a new issue that is not taken up by the public.

In the US, this is referred to as pure underwriting and represents only one variant of

underwriting in generalAmerican corporations prefer firm commitment underwriting =

an investment bank buys the whole issue outright, and sells it at a slightly higher price for its

own account (bought deals).

All types of underwriting are offered by securities firms (e.g. issuing houses (UK); investment

banks (US)). They form an underwriting syndicate (underwriting group) to pool the risk

involved and to ensure a successful distribution of the securities to be issued.

The syndicate is headed by the lead or managing underwriter who is normally the original

sponsor of the issue.

(15) Underwriter2 EmissionsgarantAn underwriter is an issuing house, broker or investment bank that engages in underwriting.

(16) Stock exchange [P1-4] (Wertpapier-) BrseA stock exchange is a market for securities such as shares and corporate bonds as well as

government bonds.

It is tightly organizedonly members are allowed to transact business there. If private

individuals or institutions want to buy or sell certain securities, they have to instruct a

broker, who will carry out the transaction on their behalf.

Kommentar [DS18]: To issue shares

Kommentar [DS19]: To fork out

something (for something)Geld

lockermachen

Kommentar [DS20]: To distribute

securities (e.g. shares)


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Stock exchanges are mainly secondary marketsthey are concerned less with issuing newsecurities than with buying and selling those that have already been issued.

Although stock exchanges play only a subordinate role in the raising of fresh capital, they

have strong indirect influence on primary marketsmany new issues would be much more

difficult if investors did not know that they could sell their acquired securities in a well -

organised market.

The two best-know stock exchanges in the English-speaking world are the:

- New York Stock Exchange- International Exchange in London

Other important exchanges are the American Stock Exchange and the Alternative

Investment Market in Londonspecialise in the shares of new and smaller companies,

which would be unable to meet the stringent listing requirements of the two main

exchanges.

(17) Capital gain Veruerungs-, Spekulationsgewinn;realisierter Kursgewinn, Wertzuwachs

Capital gains are profits arising from the disposal (e.g. sale) of capital assets such as

property, shares and bonds. They occur when such an asset is sold at a price exceeding its

cost price e.g. its purchase price. If the selling price is lower than there is a capital loss.

(18) Speculation SpekulationSpeculation is an activity by means of which an operator tries to exploit short-term price

fluctuations,basically by buying low and selling high. Anything of value and subject to price

changes may become an object of speculation e.g. commodities, securities, currencies etc.

A speculator is not interested in the current income (dividend, interest) to be derived from

long-term investments, but concentrates on quick capital gains.

In doing so he obviously has to assume risksif his forecast of price movements turns out

to be wrong, he will make a capital loss.

(19) Stock exchange indices [P1] BrsenindizesOn stock exchanges people are interested not only in individual price movements but also in

general trends. Since these can best be measured by index figures, there are a number of

stock exchange indices to meet this information need.

Such indices may be:

- Narrow-basede.g. Financial Times Stock Exchange 100 index, Dow JonesIndustrial Average (comprises the common stocks of 30 leading US corporations)

- Broad-basede.g. Standard & Poors index (includes 500 widely held commonstocks)

- Sectoral indicese.g. FT Gold index

Kommentar [DS21]: To arise from

sich aus etw. ergeben

Kommentar [DS22]: To be subject to

etw. ausgesetzt sein

Kommentar [DS23]: To assume risk

ein Risiko bernehmen


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KEYWORDS UNIT 6 - BANKING

(1)Commercial bank Geschftsbank, KommerzbankCommercial bank is the name given to those non-governmental banking institutions whose

original purpose were essentially to finance production and distribution of goods by lending

short-term funds, to accept current account deposits and to offer cheque-drawing facilities.

As a consequence of the diversification of commercial banks into many other operations e.g.

consumer and personal lending, credit cards, mortgage banking etc., the term full-service

bank has been promoted as being more descriptive of the functions performed by

commercial banks.

(2)Retail banking Mengen-und Kleinkundengeschft der BankenThe term refers to standardised banking services, including personal loans, small-scale

savings and checking accounts as well as funds transfers.

These are offered mainly to private individuals, but also to small business enterprises,

through the branch networks of commercial banks.

By contrast, wholesale bankinginvolves interbank transactions as well as financial

transactions between banks and governments and between banks and large companies.

(3)Bank lending Kredit- bzw. Aktivgeschft der BankenLending by banks, can be classified in a number of ways:

According to maturity (=the time allowed for repayment) short-term, medium-term, long-term

According to the purpose for which the funds lent are used According to the security provided by the borrower(s) involved

Short-term financehas a duration of up to one year. It includes overdrafts, discount loans,

acceptance credits and ordinary short-term loans.

Medium-term financeusually comes in the form of ordinary loans, which have a duration of

between one and five years. It is also possible to extend revolving credits beyond the usual

one-year period.

Loans and other forms of bank lending may be either unsecured or secured. Security can

take the form of some property or a charge upon it (e.g. mortgage) or it may be provided by

means of a guarantee.

Kommentar [DS1]: To provide

security (for a loan)Sicherheiten fr

einen Kredit bereitstellen

Kommentar [DS2]: To extend credit

einen Kredit (-rahmen) erweitern


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(4)Current account2 Girokonto, KontokorrentkontoA current accountor cheque accountis a bank demand deposit account from which

withdrawals can be made in cash over the counter or through an automated teller machine

(ATM).

The holder of a current account is provided with a personalized cheque book (=a booklet of

blank cheque forms bearing his name and account number and is usually issued with a

cheque card).

Moreover, the account holder is entitled to a number of banking services e.g. credit

transfers, standing orders, overdraft facilities etc.

As current account deposits earn little or no interest, many customers arrange for amounts

in excess of their current needs to be transferred to deposit accounts on which interest is

paid.

(5)Cheque [P1] ScheckA cheque is a written order to a bank, given and signed by a person who has a current

account with that bank, to pay a certain sum of money to, or to the order of, a second,

specified person (means also organization), or to bearer.

(6)Standing order DauerauftragIn a banking context, a standing order is a written instruction given by a customer to his bankto pay a stated sum of money from his current account to a named party (payee) at certain

specified points in timeusually regular intervalsuntil further notice or until the date

indicated.

It is a convenient arrangement for the payment of regularly recurring fixed amounts e.g.

instalments, rents, insurance premiums, subscriptions etc.

The customer has to specify the payees name, the amount to be paid atagreed intervals

and the duration of the order.

(7)Direct debiting Lastschrift-Einzugsverkehr, AbbuchungsverfahrenIt is an ideal method for paying varying amounts at irregular intervals. It is more flexible than

a standing order and the payeenot the payergives instructions to the bank for payment.

Direct debiting works as follows:

By previous arrangement between the parties involved the debtor signs a generalauthority entitling his creditor to claim the amounts due from the debtors bank

Example: a supplier or goods/services sends the buyer an invoice in the ordinary way

and after a few days, submits through his own bank a direct debit form for the

invoice amount to the buyers bank; the latter then debits the buyers accountwith

Kommentar [DS3]: To open/close anaccount

Kommentar [DS4]: To withdraw

money (from an account)Geld abheben

Kommentar [DS5]: To have money in

an account

Kommentar [DS6]: To be entitled to

somethingzu etw. berechtigt sein

Kommentar [DS7]: Bis auf Weiteres

Kommentar [DS8]: To sign a direct

debit mandate / to set up or arrange a

direct debit eine Einzugsermchtigung

erteilen

Kommentar [DS9]: To debit an

accountein Konto belasten

To debit an amount to/from an account

einen Betrag von einem Konto abbuchen


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the amount in question, transferring it to the suppliers bank for the credit of hisaccount.

(8)Bank statement KontoauszugA bank statement is a summary of all transactions involving a customers accountwithin a

certain period of time. The details of payments made and received are shown e.g. date of

payment, amount paid or received, method of payment etc.

Statements are supplied to customers regularly or, for instance, whenever a payment has

been made to the account in question.

(9)Bank chargesBankgebhren, Kontofhrungs-und Manipulationsgebhren

In the UK and the US, bank customers usually have to pay an account charge for the conduct

of a current account and for related banking transactions, unless they keep a certain

minimum balance in their accounts throughout the full charging period.

Such a periodical account charge is usually collected at the end of each charging period

charges for specific services e.g. stopping a cheque may have to be paid either when they

arise or at the end of each charging period.

(10) Bank deposits (Bank-) EinlagenIn everday commercial usage, the term bank deposit refers to an amount credited to a

deposit account held by a customer with a particular bank. Such credits may be the result of

cash, cheque, drafts or similar instruments lodged with the bank, or of transfers to the

customers account.

On the basis of withdrawal, deposits may be classified into demand and time deposits:

- Demand deposit(current account or sight deposits) = may be withdrawn by thecustomer or transferred by him to someone elses account at any time, without prior

notice to the bank; usually bear little or no interest

- Time deposit= based on a contract stipulating that the depositor may not make anywithdrawal prior to maturity (fixed deposit) or prior to the expiry of the agreed

period of notice (notice deposit); cannot be withdrawn by cheque, nor can they be

transferred to other accounts;

(11) Savings account SparkontoFunds held in savings accounts constitute interest-bearing time deposits. Savings accounts

simply form part of the wide range of investment products offered by commercial banks and

thrift institutions.

Kommentar [DS10]: To credit an

accounteinem Konto etwas

gutschreiben

Kommentar [DS11]: To charge sth.

the bank charges a fee

Kommentar [DS12]: To lodge sth with

sbetw. bei (einer Bank) hinterlegen,

deponieren


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Generally speaking, savings accounts with a high degree of flexibility e.g. with instant accessto the account balance, earn interest at a lower rate than those which are subject to more

stringent conditions e.g. notice period, limitations on the number of withdrawals per quarter

etc.

Traditionally, savings account deposits could be withdrawn only upon presentation of a

passbook, in which all transactions relating to the account were recorded. Nowadays,

passbooks are often dispensed withinstead, savers are issued with special cards enabling

them to make withdrawals, and sometimes even deposits at ATMs.

Savings accounts are a very safe form of investment because in many countries they are

covered by government insurance schemes.

Their holders are typically risk-averse, low-to-medium-income earners, who use their

savings accounts to gradually accumulate funds.

(12) Merchant bank Merchant BankA typical UK merchant bank offers some or all of the following highly specialisedbanking

services:

Acceptance of bills of exchange, especially in connection with foreign trade Export and project finance where long-term credit is required Foreign exchange dealing and advisory services Investment management on behalf of private and institutional clients

Domestic/international securities underwriting and trading Advice on mergers, acquisitions, and venture capital investment

Issuing houses, moreover, may take equity positions in commercial and industrial

companies.

(13) Investment bank Investmentbank, EffektenbankInvestment banks act as intermediariesbetween, on the one hand, companies and

government institutions wishing to raise capital and, on the other, between individual and

institutional investors.

They are mainly engaged in marketing bond and other securities issues (underwriting),

syndicating international loans, selling and buying securities on the open market, andproviding investment advice. Furthermore they also assist with mergers and acquisitions.

(14) Building society BausparkasseBritish building societies were originally owned by their savers and borrowers, and served

the same purpose as Austrian Bausparkassen and American savings and loan

associations finance the purchase or building of owner-occupied dwellings (=Wohnung)

by their members.

Kommentar [DS13]: To dispense with

sthauf etw. verzichten

Kommentar [DS14]: To be issued with

(von jmd). etw. erhalten

Kommentar [DS15]: To accumulate

sth (funds)etwas (Kapital) ansammeln,anhufen

Kommentar [DS16]: On behalf of sb

im Auftrag von jmd.

Kommentar [DS17]: To be engaged in

sich mit etw. befassen


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Finance was provided mainly in the form of long-term home loans, secured by mortgages onthe properties involved.

The main differencesbetween Austrian Bausparkassen and British building societies are:

- Bausparkassen have not been, and are not being converted into universal banks- In Austria a member must have saved a specified amount with his society before he

can get a loan

- Intererst paid on Bausparkassen deposits is supplemented with a governmentbonus

(15) Electronic banking elektronische Zahlungsverkehrs- undInformationsleistungen

Electronic bankingor e-bankinginvolves the use of computers and telecommunications

technology in performing banking services, with a view to eliminating paper-based records

and offering costumers direct accessto bank payment and information systems.

E-Banking is often referred to as self-service banking.E-Banking customers receive plastic

cards and/or personal codes, which permit them to access the system involved.

(16) Electronic funds transfer elektronischer ZahlungsverkehrThis term covers any transmission of funds initiated through a customer-or teller-operated

terminal e.g. an ATM or a POS terminal, a telephone or similar instrument, or a computer.Messages originated by these devices instruct a financial institution to debit or credit an

account, or cause such entries to be made automatically.

EFT is a fast, paperless type of payment service, which has to be distinguished from transfers

based on cheques, bank drafts, credit transfer forms, or similar paper instruments.

The main advantages of EFT are increased speed and reduction in paperwork.

(17) Central bank [P1, first 3 bullet points] Zentralbank, NotenbankA central bank is typically charged with all, or at least most, of the following functions:

It is responsible for an adequate supply of legal tender(= banknotes and coins thathave to be accepted in settlement of debts); usually the central bank is the sole note-issuing bankin a particular country;

It is the bankers bankperforms certain tasks for commercial and specializedbanks, just as these perform services for their own customers;

Commercial banks keep accounts with the central bankused to settle the net

positions resulting from the clearing of cheques and credit transfers;

Commercial banks borrow directly or indirectly from the central bankcentral bank

acts as a lender of last resort;

Kommentar [DS18]: Save (an

amount) with a building society

Bausparen

Kommentar [DS19]: To besupplemented withdurch etw. ergnzt

werden

Kommentar [DS20]: with a view to

doing somethingmit der Absicht etw. zu

tun

Kommentar [DS21]: to transmit funds

Kapital bermitteln, bertragen

Kommentar [DS22]: to distinguish

sth. from sthetw. von etw.

unterscheiden

Kommentar [DS23]: legal tender =gesetzliches Zahlungsmittel

Kommentar [DS24]: lender of last

resort = Refinanzierungsinstitut letzter

Instanz


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Additionally, the central bank is frequently charged with supervising and regulatingthe banking system of the country in which it operates.

It also acts as a banker to its government, typically managing the national debt,handling or superintending the issue of government stocks and Treasury bills, making

short-term advances to the government etc.

Kommentar [DS25]: to be chargedwithmit etw. beauftragt, betraut sein

Kommentar [DS26]: to superintend

sthetw. berwachen, beaufsichtigen


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KEYWORDS UNIT 7PAYMENT

(1)Credit card KreditkarteCredit cards are typically issued by specialist credit card companies e.g. VISA card,

MasterCard, Diners Club, American Express.

Such cards are a convenient alternative to cash, especially when goods or services are

purchased form a remote location, for instance on the internet.

A credit card serves as evidence that the card-issuing company has granted a line of creditto

the cardholder, who must maintain a special account with it. This line of credit (credit limit)

is the maximum amount that he may have outstanding at any one time.

Every card bears the signature of its holder and is embossed by the issuing institution with

his name, the card number and the expiry date. If the cardholder wishes to pay by credit

card the only thing he has to do is present his card. The retailer checks whether the card is

still valid, swipes it through a special machine to obtain online authorization for the

transaction from the card issuer, and then prints out a sales slip, which the cardholder is

asked to sign.

The retailer sends the sales slip to the card-issuing institutions, which credits his account

with the amount claimed less a discount, and debits the amount involved to the cardholders

account.

At the end of each month, the card issuer sends a fully itemized (=aufgegliedert) statement

to the cardholder. If the cardholder pays the whole amount outstanding within a stipulated

period after the date of statement, he is not charged any interest on the sum due, a nd

therefore no extra charges are incurred on the purchase(s) made.

(2)Debit card Kreditkarte mit sofortiger Belastung des KundenkontosLike a credit card, a debit card is used by its holder to pay for goods or services. However,

any amount spent is immediatelydeducted from the cardholders accountwith the issuer

bank, which means that free credita hallmark of the credit card system is eliminated.

(3)Cheque ScheckA cheque is a written order to a bank, given and signed by a person who has a current

account with that bank, to pay a certain sum of money to, or to the order of, a second,specified person (means also organization), or to bearer.

There are three parties to a cheque:

Drawer= person who makes out the cheque and signs itHe can write cheques for any sum up to his current account balance or overdraft

limit.

Payee/bearer= the person to whom the cheque is made payable Drawee (bank)= bank on which the cheque is drawn

Kommentar [DS1]: To emboss sth

etw. prgen

Kommentar [DS2]: To credit an

account witheinem Konto (einen

Betrag) gutschreiben

Kommentar [DS3]: Debit an amountto an accountein Konto mit einem

Betrag belasten

Kommentar [DS4]: To deduct (anamount) from an accounteinen Betrag

von einem Konto abziehen

Kommentar [DS5]: To make out achequeeinen Scheck ausstellen

Kommentar [DS6]: To make a cheque

payable to sbeinen Scheck auf jdn.

ausstellen

Kommentar [DS7]: To draw a cheque

on sb/stheinen Scheck auf jdn./etw.

ausstellen


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The major characteristic of a cheque is that it must be paid on demandwhen it ispresented for payment.

Cheques may be classified into order and bearer cheques:

a) Order chequeis payable to a specified person or his order, and can be transferredby indorsement and delivery

b) Bearer chequeis payable to the bearer, and can therefore be transferred by oneperson to another by mere delivery, without any formality

Cheques may be classified into open and crossed cheques:

a) Open chequeis payable in cash but only at the bank or branch of the bank onwhich it is drawn; it may also be presented for payment at a bank other than the

drawee bank, provided its holder (payee) has an account with that bank the bank

does not pay the cheque in cash but pays it into the holders account;

b) Crossed chequecannot be cashed over the bank counter but must be paid into anaccount; its purpose is to protect its owner against theft or loss;

If there are insufficient or no funds in the drawers account, the drawee bank usually

refuses to pay any cheques made out by himit dishonours the cheque(such cheques

are said to bounce)

(4)Bearer cheque InhaberscheckA bearer chequpe is a cheque made payable to the bearer. It needs no indorsement and is

paid to anyone who presents it at the drawee bank.

The person presenting such a cheque may have found or stolen it and though he has of

course no legal right to it, he may be able to get it honoured.

As a safeguard against this, the bearer cheque may be crossedit can be paid only into

an account, thus making it possible for a lost or stolen cheque to be traced back to the finder

or thief.

If the drawer of a bearer cheque wishes to withdraw money from his account, the only thing

the has to do is cash it at the drawee bankdrawer and bearer are the same person in this

case;

(5)Crossed cheque [P1,P2] gekreuzter Scheck, VerrechnungsscheckA crossed cheque is one which cannot be cashed over the bank counter but must be paidinto an account.The bank to which such a cheque is presented for payment will collect the

amount from the bank on which it is drawn (drawee bank) and credit this sum to its

customers account.

The purpose is to protect its owner against theft or loss, since the thief or finder may not

have an account and if he has one and uses it, he can easily be traced.

A crossing may be either general or special:

- General= consists of two transverse parallel lines across the face of the cheque, withor without the words and company or any abbreviation of them; the cheque may

Kommentar [DS8]: To pay sth. Into an

accountetw. auf ein Konto einzahlen

Kommentar [DS9]: To cash a chequeeinen Scheck einlsen

Kommentar [DS10]: Zahlung eines

Schecks wird verweigert


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be paid into an account at any bank, and the drawee bank will pay it to any bankpresenting it for payment

- Special= consists of the name of a bank written across the face of the cheque, withor without transverse parallel lines; the cheque must be paid into an account at the

bank stated in the crossing and the drawee bank will pay it only to that bank;

(6)Cheque card ScheckkarteA cheque card guarantees that any cheque made out by the cardholder up to a specified

amount will be honoured by the bank issuing the card, regardless of whether there are

sufficient funds in his account or not.

Thus, cheque cards act as a safeguardfor traders and others accepting cheques, because the

risk involved is shifted to the bank issuing the card (drawee bank).

To ensure that the bank does not refuse payment, the person accepting a cheque has to

make certain that the drawers signature, his account number and the cheque card number

conform to the corresponding items on his cheque card and that the card is still valid.

A cheque card may also be used, with or without a cheque, to draw cash at any branch of

the drawee bank.

(7)Clearing bank britische Geschftsbank, Clearing-BankThe term clearing bankreflects the fact that these institutions are members and co-

owners of the London Bankers Clearing House an organisation through which cheques andcredit transfers involving different members are cleared.

Clearingdenotes a process by which claims and counter-claims arising from payment

transactions carried out by clearing banks are totaled and set off against each other by a

central institution.

For each pair of banks involved (A and B) only the net position (=difference between the

total amount owed by A to B and that owed by B to A) is paid.

(8)Indorsement IndossamentThe term indorsement (or endorsement) is mainly used in connection with the transfer of

order instruments e.g. order chequestransferred by delivery and indorsement.Transfer means that the rights embodied in the instrument involved pass from one person

(transferor) to another (transferee).

An indorsement must be written on the reverse side of the instrumentto be transferred.

The person who writes it is called the indorser and the person to whom the instrument is

indorsed is refered to as the indorsee.

Kommentar [DS11]: To owe sb sth

jemandem etw. schulden

Kommentar [DS12]: Toindorse/endorse a chequeeinen Scheck

auf der Rckseite unterschreiben


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Indorsements may be either blank or special: Blank= consists only of the indorsers signature, which means that the instrument in

question becomes a bearer document and can be further transferred by mere

delivery

Special= consists of the indorsers signature and the name of the indorsee,sometimes followed by the date e.g. pay to John Brown. July 18, 2006 signed:

Henry Smith;

Any further transfer by the indorsee is possible only by means of another

indorsement.

An indorsement may also be in such a form as to prohibit further transfer of the instrument

(=restrictive indorsement) e.g. pay to John Brown only;

(9)Order cheque Namensscheck, OrderscheckAn order cheque is a cheque payable to a particular person or order. It is transferable by

indorsement and delivery.

A bank requires indorsement in the following two cases:

Where the payee (indorsee) requests payment in cash over the counteronlypossible if the cheque is open

Where the payee (indorsee) transfers the cheque to another person (who thenbecomes the indorsee)

If the drawer of an order cheque wants to draw cash from his account, he makes it payable

to himself by writing Self or Cashin the appropriate space of the cheque form. He mayalso cash a cheque drawn to Self at a bank other than the drawee bank by showing his

cheque card.

(10) Bank draft Bankenscheck, InstitutsscheckA bank draft is a negotiable instrument drawn by a bank either on itself (including a branch

or the head office) or on another bank at home or abroad.

They represent a very safe method of payment, and may be used in cases where ordinary

cheques would not be acceptable e.g. remittances to parties residing abroad.

For instance, if a bank customer wishes to make a payment to his foreign supplier, he may

purchasefor a small feea bank draft drawn by his bank on one in the suppliers country.The bank customer, or the bank itself, will then forward it to the payee, and at the same

time the bank will send to its foreign counterpart a special letter of advice containing all

details of the instrumentthis letter serves as protection against fraud, since the draft is not

paid until this communication has been received by the bank involved.


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KEYWORDS UNIT 8 FOREIGN EXCHANGE

(1)Currency1 WhrungThe term currency is applied to the money of a particular country or currency zone e.g.

dollar, euro, pound, yen etc.

Currencies may be either convertible or non-convertible:

- Convertible= currencies can be freely bought and sold in foreign exchange markets,at the rates of exchange in effect at the time of purchase or sale; the governments

allow unregulated purchases and sales, and the amounts exchanged on foreign

currency markets are large;

Examples: US dollar, euro, British pound etc.- Non-convertible= circulation is restricted by the local monetary authorities; they are

artificially pegged and usually more expensive on the official market than on the

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