These are some helpful word-combinations in addition to the glossary that you will translate, memorize, and use while discussing the problems.

to start business, to exploit new opportunities, to pool resources, to share in the profits, to borrow/lend money, to be liable for, to provide a powerful incentive, to apply modern methods, to carry out life insurance, to balance the gains against losses, to change ownership, to set up a firm, to incur (un)limited liability, to carry on a business, to form partnership, to engage in business, to acquire the advantage, to hold shares, to carry on a business, to locate liability, to fuel prosperity/growth, to gain an edge.

1. Explain what a small business firm is.

2. What form of a small-scale business attracts you most? Why?

3. Isn’t a partnership less risky than a sole proprietorship? Either you agree or disagree, give your reasons.

4. Explain to a fresher what is understood under changing of ownership and why it is a severe limitation to the size of small businesses.

5.What kind of a business partner would you like to have?

6. What kind of a firm would you like to set up? Contrast advantages against disadvantages of sole proprietorship (partnerships).

7. In what ways do small businesses contribute to our economy and society?

8. Evaluate the economic and social contribution of small businesses in the United States and in Russia.

9. Give examples of the most typical small business firms.

 

For your notes:

UNIT III LARGE - SCALE BUSINESS

 

Glossary

stock основной акционерный капитал, акция

common stock обыкновенная акция

preferred stock привилегированная акция

to restrict ограничивать

to entitle давать право

to transact вести дела, заключать сделку

earnings поступления, доход

annual ежегодный

board of directors совет директоров

charter устав

legislature законодательная власть

to vote голосовать

to pool объединять в общий фонд

to raise capital/funds находить источники финансирования, привлекать средства

principal капитал; сумма, на которую начисляются проценты

interest rate=interest процентная ставка

prospectus проспект эмиссии

hire-purchase аренда с последующим выкупом

to lease арендовать

underwrite an issue гарантировать выкуп акций

Ex. 1 Arrange these words into groups according to some principle. As long as you have a good reason, there may be several principles of grouping. Translate the words.

To restrict, transaction, annual, fulfilment, to pool, holder, treatment, to pay, liable, annually, restrictive, to fulfil, routine, participation, liability, to charter, a pool, to treat, routinely, to hold, a vote, payment, to proceed, to participate, charter, restriction, to vote, to transact, proceeds.

Ex. 2 Explain the grammatical phenomenon common for the following sentences. Translate them.

1. The ownership of the corporation is divided into a specified number of shares of common stock, each share representing equal participation in the affairs of the firm.

2. Control of the corporation is centralized in a board of directors, elected at the annual stockholders' meeting, each share of stock having one vote.

3. If the corporation cannot fulfil its contracts or pay its debts, it can be sued like a person, its property being taken in payment.

Ex. 3 While reading the texts of this unit write down all the sentences with the words "like", "unlike". Translate them.

Assignments to text 1:

1. Look through the text and formulate the main ideas.

2. Read the text and divide it into some parts. Give reasons for your division.

3. Find definitions of a corporation.

4. Read the text once more and find the sentences which explain why corporation is a “legal person”.

5. Translate the text paying particular attention to grammar.

6. Draw a chart which would reflect the classification of corporations as it is described in this text. What country can one refer this classification to? Find the sentences which indicate reference to a certain country.

Text 1 The Corporation

The corporation is a legal form of enterprise designed to take advantage of large-scale production methods by pooling the wealth of many people into a single enterprise while at the same time maintaining centralized control over, and responsibility for operations. Unlike partnerships, which are established by private agreement among the partners, a corporation can be established only by a charter from the state. Indeed, in the days when most farming, manufacturing, and commercial businesses were small enough to be carried on as proprietorships and partnerships, corporate charters were issued only by а special act of the state legislature. The corporation was looked upon as a very special form of business organization largely restricted to such enterprises as canal and railroad companies, for which huge agglomerations of wealth were essential. With the development of mass production technology and increase in the amount of capital needed for efficient operation, the economic advantages of the corporate form grew rapidly.

When a corporation is established by a small group of owners, the owners merely contribute funds or property to the newly chartered company in exchange for shares of stock. However, it’s a promoter who undertakes to form a company with reference to a given project and to set it going, and who takes the necessary steps to accomplish this purpose. A promoter is anyone who participates or has an interest in setting up the company, but not someone involved in a purely professional capacity, such as a lawyer. The promoters are often the company’s first directors. When funds are to be raised from a large number of people, the frequently informal arrangements between promoters may not suffice. The first step for the promoters then is to formally register, or incorporate the firm. Nowadays in the USA corporate charters are issued usually by state bureaus.

Corporation is a legally chartered organization that is a separate and legal entity apart from its owners. Since the corporate charter establishes the corporation as a legal entity distinct and separate from its owners, the corporation is said to be a “legal person”. That is, the firm itself is legally treated like a person and can make contracts in its own name and can sue and be sued like a real person.

Corporations can be classified as domestic, foreign, or alien. A domestic corporation is one that is incorporated in the state that is doing business. In other states where it plans to do business, it must register as a foreign corporation. If it plans to do business in another country, it must be registered as an alien corporation.

Corporations owned by a very small number of shareholders are called close. A close corporation is one that is privately held. That is, its stock is not traded on the stock exchanges and all the stock is held by a relatively small number of people. On the other hand, an open corporation is owned by a large number of shareholders. These corporations are also referred to as publicly held or public corporations. The stock of these corporations is traded publicly on stock exchanges.

The phrase «going public» indicates a situation where private corporations offer shares of stock for sale to the general public in the hope of raising money to finance growth. The opposite of this action is indicated by the phrase «taking a corporation private». This means one or a few shareholders or corporate officers buy the stock owned by other shareholders, and a formerly open corporation becomes a close corporation. Acting like that they make a formally “open” corporation a “close” one.

Assignment to text 2:

1. Read the text and explain the meaning of the word “flotation”.

2. Look through the text once more and find the words or word-combinations which would substitute the word “flotation” and word-combination “raising finance”.

3. What types of securities are described in this text?

4. Divide the text into some logical parts. Mark the key sentence for every paragraph. Make annotation of the text using the following key-patterns:

· The article deals with…

· As the title implies the article describes…

· It is specially noted…

· … is discussed in detail.

· Much attention is given to…

· It should be emphasized that…

· The article gives a detailed analysis of…

· It draws our attention to…

· The text gives valuable information on…

· The text is of great help to…

· The article is of interest to…

Text 2 Flotation. Raising Finance

A company may finance its activities in a number of ways. It could simply obtain an overdraft from its bank. It could buy equipment on hire – purchase terms or lease it.

For borrowing of substantial sums and/or for long-term borrowing, it will often issue bonds (debentures-Br) at a fixed rate of interest; their attraction will depend on their tax advantages and a comparison of levels of income derivable from interest rate and dividends on shares.

Initial finance for most companies is provided by shares. The act of issuing shares (GB) or stocks (US) for the first time is known as floating a company (making a floatation). A company may issue shares by various methods: it could invite tenders or subscriptions directly from the public (usually through the agency of an investment bank (issuing house)). It might sell them to the investment bank, for it to resell them to the public, by issuing a prospectus or inviting subscriptions or it might place them with the investment bank, either for sale and resale to selected clients of the investment bank or for inviting clients to subscribe. The investment bank is rewarded by its profit on resale or by commission especially where it underwrites an issue. Any commission for underwriting an issue must not exceed 10 per cent.

There are 3 basic types of securities: common stock/ shares, preferred stock/shares, and bonds. Common stock is shares of ownership in a corporation. Preferred stock is shares of a corporation that usually do not confer voting rights but do give preference with respect to dividends and assets. Bonds are written promises that the borrower will pay the lender at some stated future date, a sum of money (principal) and the stated rate of interest. Before buying stocks and bonds, you must understand the pricing of stocks and bonds, which are reported, in many daily newspapers.

 

 

Assignment to text 3:

1. Read and translate the headline. What information do you expect to find in the text?

2. Read the text. Have you found anything beyond your expectations?

3. Make up an outline of the text supplementing every item with key words and word combinations.

4. Find the sentences which describe advantages of a corporation.

5. Taking advantage of the text give different definitions of a share.

6. Translate the text.

 

Text 3 Becoming a Shareholder

A person may become a shareholder by subscribing to the memorandum and having one or more shares allotted to him, or by having shares transferred to him by an existing shareholder, or by applying for shares and having them allotted to him.

The ownership of the corporation is divided into a specified number of shares of common stock, each share representing equal participation in the affairs of the firm. The owners of the company called common shareholders or common stockholders receive certificates of common stock or shares in proportion to their participation in the firm. A man who invests 10 percent of the total capital receives 10 percent of the common shares. Each share entitles its holder to participate in the earnings of the firm in common with their shares. For example when there are 100,000 shares, each share is entitled to one hundred- thousandth of any earning. Also, each share entitles the owner to one vote in the annual stockholders meeting. So, a share is an item of property and normally freely transferable. It gives its holder an interest in the company measured by a sum of money and entitles him to the rights contained in the articles. The value of shares is generally their market price.

Basically, there are three values considered in assessing common stock: book value, market value, and par value. Book value is the difference between the assets of a company and what a company owes (its debts and liabilities) divided by the number of shares of common stock. Market value is the price the shares are selling for on the stock market. Par value is the value the corporation originally printed on each stock certificate.

By pooling together the individual contributions of a large number of stockholders - often hundreds of thousands - a corporation can accumulate immense amounts of capital. It is free of the size limitations of the proprietorship and the partnership and can grow as large as the most efficient production technique requires.

 

Assignment to text 4:

1. Look through the text and explain the interconnection between the title and subtitles of the text. Suggest your own headline for the text.

2. Read the text and find the sentences which focus on differences in forms of businesses.

3. Find the sentences which describe functions of a board of directors.

4. Read the paragraph about limited liability of stockholders. Try to reduce the paragraph to 2-3 sentences which would explain the notion of limited liability of stockholders.

 

Text 4 Organization of the Corporation

Directors and Management. In a partnership, any individual partner can transact business for the firm. In small corporations the major shareholders often manage the business but in large corporations with thousands of shareholders such an arrangement would lead to immediate chaos and a breakdown of operations. Instead, control of the corporation is centralized in a board of directors elected at the annual stockholders' meeting, each share of stock having one vote. The board elects its own officers which include a chairperson, vice-chairperson, and a secretary. The board holds periodic meetings, typically once a month. The board of directors acts on behalf of the stockholders to set corporate policy, to make major decisions, and to hire management to carry on the day-to-day operations of the firm.

Profits and dividends. The profits from the operation of the firm accrue to the equity of the stockholders, and are distributed by the board of directors. The board decides how much of the profit is to be paid out to shareholders as dividends. The remainder of the profits constitutes retained earnings and is reinvested in the firm, thereby increasing the stockholders' equity.

Limited liability of stockholders. In a partnership, all agreements entered into or debts contracted by the firm are personally binding on all the partners. Since the shareholder has given up all immediate control over the corporation, he must be protected in some degree from liability for its actions. This is done by defining a limit to the liability of the individual stockholder.

Agreements and debts contracted by the directors and management are binding on the corporation, but not on the shareholders personally. If the corporation cannot fulfil its contracts or pay its debts, it can be sued like a person and like a person its property can be taken in payment. The stockholder can lose all he has invested in the company, but he has no personal liability beyond this. As an individual, he is in no way responsible for the debts of the company. This aspect of corporate organisation is called limited liability.

 

 

Discussion

These are some useful word-combinations in addition to the glossary that you will translate, memorize and use while discussing the problems:

To take advantage of (smth.), to maintain control, to develop mass-production technology, to issue corporate charter, to make contracts in one's name, to give up control, to fulfil contracts, to pay debts, to take in payments, to pool wealth (capital), to establish a corporation, to have an independent legal personality, to sue, to finance activities, to obtain an overdraft, to borrow money, to issue bonds/shares, to invite tenders, to confer voting rights, to give preference, to subscribe to the memorandum, to receive certificates of stock, to accumulate capital, to transact business, to act on behalf of (smb.), separate and legal entity, legal person, initial finance.

1. Discuss the main differences between corporations and small businesses. Use the table provided.

2. Is being a director the same as being an entrepreneur?

3. What types of securities have you learnt from this unit? Explain the difference between them.

4. What benefits can you expect being a shareholder?

5. What is a corporation? How does a corporation finance its activities?

 

For your notes:

 

Form of Ownership	Advantages	Disadvantages
Sole proprietorship	-Simple to start -Proprietors own all profit -Personal satisfaction -Sole decision maker -No tax on business as distinct from owner -Easy to dissolve	- Unlimited financial liability - Hard to raise funds for expansion -Often have no one to share management burden
Partnership	- Few restrictions on starting - Pooling of funds, talents and borrowing power - More chance to specialize than the sole proprietor -Personal satisfaction -No tax on business as distinct from owners	- Unlimited and joint financial liability -Potential for personal disagreements -Relative impermanence - Frozen investment
Corporation	-Separate legal entity -Limited financial liability of owners - Easy transfer of ownership - Greater financial capability - Permanence	- Special and double taxation - Complex and costly to form and dissolve -Government regulation and public disclosure requirements

UNIT IV CORPORATE FINANCE

 

Glossary

stock exchange биржа

to transfer перемещать, перечислять суммы

to sustain(losses) потерпеть (убытки)

to tap capital зд. наращивать капитал

return оборот, прибыль, доход

cumulative накопленный, совокупный, кумулятивный

arrears (pl) задолженность, долг.

to recover получать обратно, возмещать, покрывать, взыскивать, инкассировать

to repay возвращать (долг), возмещать (ущерб),

оплачивать

leverage повышение доходности, использование заемных средств для получения дополнительного дохода, «плечо»

income доход

fluctuation колебание, неустойчивость

utilities (pl.) предприятия общественного пользования

power utilities энергетические сооружения (услуги)

public utilities коммунальные сооружения (услуги)

IOY=I owe you долговая расписка

share capital акционерный капитал (сумма номинальных стоимостей всех акций)

issued share capital выпущенный акционерный капитал

collateral залог

indebtedness задолженность, сумма долга