ENGLISH COURSE BOOK 3 ( a choice of grammar/technical vocabulary exercises for students of trade, banking and accounting/auditing )
Izbor tekstova i vežbanja priredio
Slobodan Rakić
FAKULTET ZA TRGOVINU I BANKARSTVO Janićije i Danica Karić UNIVERZITET Braća Karić Beograd 2007.
Slobodan Rakić ENGLISH COURSE BOOK 3 ( a choice of grammar / technical vocabulary exercises for students of trade, banking and accounting/auditing ) Recenzenti: Gramatički deo Nenad Tomović (lektor Filološkog fakulteta Univerziteta u Beogradu – Katedra za ANGLISTIKU) Zorica Prnjat (predavač na predmetu Engleski jezik II na Fakultetu za trgovinu i bankarstvo Janićije i Danica Karić – Univerzitet Braća Karić) Stručni deo – leksička vežbanja Engleski u trgovini dr Marijana Vidas-Bubanja, vanredni profesor na Višoj poslovnoj školi u Beogradu Engleski u računovodstvu i reviziji dr Jozefina Beke-Trivunac, docent Fakulteta za trgovinu i bankarstvo Janićije i Danica Karić mr Vojislav Sekerez, asistent Fakulteta za trgovinu i bankarkstvo Janićije i Danica Karić, smer – Računovodstvo i revizija Engleski u bankarstvu mr Miljana Barjaktarović, asistent Fakulteta za trgovinu i bankarstvo Janićije i Danica Karić, smer – Bankarstvo Izdavač Fakultet za trgovinu i bankarstvo Janićije i Danica Karić – Univerzitet Braća Karić Za izdavača prof. dr Gordana Ajduković, dekan Fakulteta Prelom teksta: PRIREĐIVAČ
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Posvećeno sećanju na: tetku Milicu, tetku Soku, tetku Ljubu i strinu Gospavu
Hvala na bezbrižnom detinjstvu.
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Reč Priređivača Knjiga koja je pred Vama, predstavlja samo jedan mali pokušaj da se studentima treće godine Fakulteta za trgovinu i bankarstvo Janićije i Danica Karić (prevashodno), a potom i svim drugim studentima srodnih fakulteta, omogući dalji napredak u poznavanju engleskog jezika. Knjiga ima tri poglavlja, ili tri dela: prvi, gramatički deo, drugi, vokabular u trgovini, bankarstvu i računovodstvu/reviziji, treći, izbor (adaptiranih) pisama iz oblasti poslovne korespondencije, sa posebnim poglavljem posvećenim vežbama prevođenja glavnog dela poslovnih pisama iz oblasti trgovine i finansija sa srpskog na engleski jezik. Knjiga ni u kom slučaju ne pretenduje da bude veliko naučno delo, već samo jedan skromni doprinos učenju engleskog jezika, jer i sama predstavlja izbor vežbanja (gramatičkih i leksičkih) iz već postojećih izvora. Ovaj pokušaj bi pre trebalo shvatiti kao malo bolje uređene, ili doteranije radne listove. U prvom poglavlju udžbenika, studenti treba da nadograde svoje do sada stečeno znanje (na prvoj i drugoj godini studija, i ranije, u gimnazijama ili na kursevima engleskog jezika) o tome kako dati jezik funkcioše na gramatičkom planu. Ono što je novo jeste praktična primena (u prethodnom učenju selektivno primenjivanih) znanja u jednom širem kontekstu, upotreba inverzije i pasiva u formalnom jeziku, upotreba perfektivnog participa i perfektivnog infinitiva, skraćivanje i povezivanje rečenica ovim oblicima, i upoznavanje studenata sa reportativnim glagolima u širem smislu te reči. Drugi deo udžbenika posvećen je užestručnom vokabularu, i čine ga tri dela: engleski u trgovini, engleski u reviziji/računovodstvu, i engleski u bankarstvu. Pored osnovnih vežbanja vezanih za upotrebu određenih stručnih reči/termina u određenim kontekstima, studenti će imati priliku da razviju i svoju sposobnost razumevanja stručnih tekstova, preuzetih iz stručnih časopisa (uglavnom časopisa Accountancy), koji su navedeni u bibliografskom delu knjige, a koji se nalaze bilo u okviru samih vežbanja ili u delu Further Reading. U trećem delu udžbenika, studentima će biti omogućeno ovladavanje osnovnim modelima poslovnih pisama iz oblasti trgovine, bankarstva, i revizije/računovodstva. Na odabranom korpusu, studenti će kroz vežbanja vezana za pisanje poslovnih pisama iz svojih oblasti, zatim kroz prevod sa srpskog jezika, ovladati osnovnim frazama i izrazima koji se koriste u svetu poslovne korespondencije iz navedenih oblasti.
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Posebnu zahvalnost dugujem: profesoru Dragutinu P. Dragojeviću, koji mi je pružio mogućnost da na najboljim primerima i sam naučim nešto više u vezi sa finansijama, revizijom, računovodstvom, bankarstvom i trgovinom na jednom bogatom korpusu stručnih tekstova u časopisu Accountancy; profesoru dr Marijani Vidas-Bubanji na recenziji leksičkih vežbanja iz trgovine, profesoru dr Jozefini Beke-Trivunac na recenziji leksičkih vežbanja iz oblasti računovodstva i finansija; mr Vojislavu Sekerezu, na savetima i recenziji vežbanja iz oblasti računovodstva; svojim dragim kolegama, profesorima Engleskog jezika, sa Filološkog fakulteta; mr Miljani Barjaktarović, na recenziji vežbanja iz bankarstva; Nenadu Tomoviću i Zorici Prnjat; bibliotekarima Tanji, Neni i Maši na pomoći oko izbora časopisa; Gordani Bibesković-Djordjević, rukovodiocu Računskog centra Fakulteta za trgovinu i bankarstvo i asistentu na predmetu Informacioni sistemi, mr Milijanki Ratković, asistentu Fakulteta za trgovinu i bankarstvo, smer – trgovina, na pomoći oko grupisanja pojedinih tematskih celina i utvrdjivanju njihovog najlogičnijeg redosleda; supruzi Sladjani i roditeljima Zagorki i Čedi; veoma dragim prijateljima Draganu i Jeleni Radović (koji su, na moju žalost (jer mi nedostaju), a na svoju sreću, u nadi za boljim, pronašli svoj kutak u dalekoj Australiji) na zanimljivoj zbirci poslovnih pisama, od kojih su najupečatljivija i studentima najpotrebnija uključena u izbor poslovnih pisama u trećem delu udžbenika; prijateljima iz štamparije Belpak – Dragani, čika-Belom, Bebi i Ivanu; studentima Fakulteta za trgovinu i bankarstvo, generaciji III i IV godine 2003/2004., na razumevanju i strpljenju pokazanom na časovim predavanja i vežbanja, kojih da nije bilo, ovaj materijal sigurno ne bi još neko vreme ugledao svetlost dana, medju njima posebno onima koji su bili najredovniji i najsavesnji: studentima računovodstva i revizije – Veljku Topaloviću, Ani Milenković, Ani Milošević, Mileni Simić, Gordani Nikolić, Gorici Aćimović, Sonji Djuričin, Ružici Čolović, Sladjani Grošin, Marini Bigić, Milanu Ivkoviću, Marku Jeremiću, Agoti Kišimre, Jeleni Milinković, Ani Mitrović, Ivani Petrevskoj, Jeleni Stojanović, Mirjani Stupar, Milošu Zdravkoviću; studentima bankarstva: Jeleni Belić, Jeleni Branković, Milanu Mihailoviću, Saši Jovanović, Dariji Petrov, Predragu Djordjeviću, Ivani Šakić, Ani Mušikić, Tomi Ćukiću, Branku Ćiriću, Andriji Djakoviću, Kristini Djordjević, Janji Kostić, Srdjanu Praštalu, Nemanji Savčiću, Aleksandru Vučkoviću, Jakši Milutinoviću; studentima trgovine: Jeleni Maksimović, Dragani Martinović, Aleksandri Jeremić i Biljani Dobrosavljević. Takodje, zahvaljujem se i studentima treće godine studija 2004/2005. koji su strpljivo sačekali da udžbenik izadje iz štampe. U nadi da će ova knjiga ispuniti skromnu nameru i želju priredjivača, SREĆNO!
Slobodan Rakić 5
CHAPTER ONE GRAMMAR EXERCISES
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NOUNS FORMATION Using a dictionary if necessary, complete the two columns with nouns derived from the verbs and adjectives given. Circle the suffixes. Verb
Noun
Adjective
accept agree counterfeit enter (2)
__________ __________ __________ __________ __________ __________
wise weak reliable prosperous
__________ __________ __________ __________
social (2) punctual real
__________ __________ __________ __________
complex effective aware creative
__________ __________ __________ __________
initiate
occur __________ protect __________ race (2) (rasa) __________ __________ refer __________ store __________ waste __________
Noun
Which of the following words are NOT countable: underline them. Circle those nouns which occur in the plural form only. diamond, advice, answer, jewellery, carrot, news, refreshments, information, lighting, toast, slice, penny, weather story, potato, clothing, premises, scenery, shirt, flu, housework, traffic, description, permission, homework, valuables, rubbish, tree, thunder, progress, staff, stuff, boy, water, Oxford, March, goods, sugar, skating, French, army, inch, hope, dignity, idea, rage, chair, crowd, works, sand, Africa, Uncle Tom, meat, situation, series, bread, loaf, poetry, line, money, crossroads, coin, luggage, baggage, traffic, equipment, insurance, machines, accidents, outskirts, cars, employment, policies, travel, laws, legislation, damage, means, jobs, journey, bulletins, hints.
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Regular and Irregular Plurals
NUMBER
Write the plural form-forms of the nouns below. The nouns written in italics can change their meaning depending on their regular-irregular plural form. Find the differences in meaning in those cases, and consult a dictionary if you have any problems them. 1 shop
__________
tomato
__________ index
__________
friend __________
analysis
__________ appendix
__________
knife __________
stratum
__________
ox
criterion
__________
child __________
news
__________ matrix
__________
deer
sheep
__________ aircraft
__________
match __________
path
__________ foot
__________
half
__________
way
__________ fax
__________
brief
__________
wolf
__________ mouse
__________
roof
__________
scarf
__________ bush
__________
video __________
echo
__________ quiz
__________
cargo __________
medium
__________ person
__________
party __________
shelf
__________ phenomenon __________
__________ __________
formula
Match columns A and B Column A
Column B
I’d like some ice. Have you got any chocolate? Can I have some bread? We need some paper. Buy me some soap, please. Buy me some milk, please. We need some jam. Have you got any matches? I’ve made some tea. Buy some toothpaste. Add a little water. I’ve drunk a little tea. Add a little soda. I can see a little smoke.
a wisp of………. a cube of……… a splash of……. a box of……… a sip of …….. a tube of……. a drop of…….. a bar of ……. a slice of………. a pinch of……….. a sheet of……. a jar of ……… a bottle of…… a pot of ……..
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__________
Some nouns with two possible forms in the plural have different meanings. Find them and explain the differences in meaning.
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VERB PLURAL OR SINGULAR – CONCORD Supply IS or ARE, HAS or HAVE. Put BOTH forms where POSSIBLE. 1. The government …… bringing in a new bill. 2. Congratulations …… always welcome. 3. The company ……. going to employ six staff. 4. His earnings …… so low. 5. Where …… my shorts? 6. The youth of today …… many advantages. 7. Darts …… a very interesting game. 8. The military …… occupied the house. 9. The goods …… not at stock. 10. The police …… interested in this case. 11. His manners …… unacceptable. 12. The public …… concerned about it. 13. Where …… the stairs? 14. How many people …… coming tonight? 15. Where …… Brussels? 16. The committee …… meeting now. 17. Her pyjamas …… made of cotton. 18. The cattle …… grazing in the meadow. 19. The surroundings …… not so nice. 20. There …… vermin all around the place. 21. The acoustics in this room …… very good. 22. The news …… good. 23. This crossroads …… dangerous. 24. Where …… your belongings? 25. Acoustics …… my favourite subject. 26. All the brains …… here. 27. Our company headquarters …… in London. 28. Her glasses …… on the table. 9
29. The species …… green and white spots. 30. Your trousers ……on the bed. 31. Mathematics …… often used as a test of intelligence. 32. Other species …… dangerous. 33. Athens …… in Greece. 34. Our works (factory) …… a good canteen. 35. These clothes …… not to be thrown away. 36. …… there any kennels in this area? 37. People …… often strange. 38. The series of books on lions …… not a good one. 39. There …… many series of books on birds. 40. One means …… still to be tried. 41. There …… hundreds of species of roses. 42. The black species …… a rare one. 43. All means …… at your disposal. 44. His works of art …… very interesting. 45. There …… many crossroads in this area. 46. Statistics …… a subject about which I know very little. 47. The goods you ordered …… arrived yet. 48. A group of people ……telling me what happened. 49. The majority of young people .….. not been taught how to behave. Statistics ___________ a branch of economics, but it is often said that there ___________ lies, damn lies and statistics. Recent statistics of British life (show) ___________ that the family ___________ happier than it used to be. The youth of today ___________ likely to live longer than the previous generation. People own ___________ more things than they used to, but more police ___________ employed to fight crime. Mathematics ___________ a subject which is studied more by boys than by girls, as ___________ physics. The earnings of working women ___________ getting higher all the time and many women earn more than their husbands. Good manners ___________ declining. The public (spend) ___________ more on clothes, and clothes ___________ becoming more and more expensive. Glasses ___________ worn by more people, but only a minority (favour) ___________ contact lenses. Statistics (make) ___________ us want to grind our teeth and can probably tell us if we have any teeth left to grind!
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Put the verbs written in capital letters into the correct – plural or singular – form. Sometimes both forms are possible. Explain why. 1. The book and the pencil BE __________ on the table. 2. Your ham and eggs BE__________ really good. 3. Seven thousand dollars BE __________ a lot of money. 4. Neither my mother nor my father BE__________ here. 5. Either you or your friends BE__________ supposed to do it. 6. Every person BE __________ responsible for their deeds. 7. None of them BE __________ in England. 8. None of them KNOW __________. 9. A number of people BE __________ waiting in the hall. 10. The number of the books he has read BE __________ very small. 11. It BE __________ the Browns who should be blamed for it. 12. The Government BE __________ bringing in a new bill. The Government BE __________ planning new tax increases. 13. The government HAS / HAVE __________ been entrusted to the elected politicians. 14. The company BE __________ going to employ six staff. My company SELLS farm machinery. 15. The youth of today HAVE __________ many advantages. 16. The military HAVE __________ occupied the house. The military BE __________ called in to help. 17. The police BE __________ interested in this case. The police HAVE / HAS __________ caught the murderer. 18. The public BE __________ concerned about it. 19. BE __________ there a public for that sort of book? The British public BE __________ not very interested in this sort of movie. 20. How many people BE __________ coming tonight? BE __________ there many people at the meeting? Most people SEEM __________ to like her. 21. The committee BE __________ meeting now. He is on the committee that CONTROL __________ council spending. 22. The cattle BE __________ in the shed. 11
23. The acoustics in this room BE __________ very good. Acoustics BE __________ a subject he knows little about. 24. The crossroads BE __________ dangerous. 25. Our company headquarters BE __________ in London. 26. The species HAVE __________ green and white spots. There BE __________ hundreds of species of roses. 27. Our works (factory) HAVE __________ a good canteen. 28. BE __________ there kennels in this area? 29. There BE __________ a series of quality books on birds. Other series BE __________ not so good. 30. One means BE __________ still to be tried. All means BE __________ at your disposal.
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GENDER2 Write the appropriate gender form – male or female, depending on the noun given below, for each and a single noun in the following list. neighbour
……………. actress
……………..
bridegroom
……………….
cow
……………. hen
……………..
hero
……………….
heir
.........……… lion
………..........
nun
……………….
mare
……………. nephew
……………..
creature
……………….
prince
……………. ram
………….….
shepherd
……………….
Count
……………. Negro (negro) ……………..
Duke
…………….…
Sir
……………. Earl
drake
……………….
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……………..
GRAMATIČKA PESMA
UČITELJICE, JE L’ MOGU NEŠTO DA PITAM?
Ako je hleb u vekni mekan Što se za veknu ne kaže vekan? Il’ da se kaže kako je vekna Recimo, sveža, vruća i – mekna?
Što muška beba nije – beb, Pa bi i ždrebe bilo – ždreb? Što babin deda nije – bab? Muž bubašvabe – bubašvab?
Kada se za dečka kaže – dečko, Što muška mečka nije – mečko? Ako je mala mačka – mačić, Što mala tačka nije – tačić?
Ako već imamo uz maj – Maju, A uz mart – Martu, i uz jul – Julu, Pa čak i uz gud-baj imamo – Baju – Gde je taj snaj – uz svoju snaju?
Ako uz marku, postoji Marko, Gde je, uz varku, nekakav – Varko? Gde su uz tele – telac i telka ? Gde su ti – jelci – pita se jelka?
Ako postoje, recimo, novci, A uz njih tu je i Novica, Zašto se samo kaže osnovci, Kad ima malih osnovica?
Ako uz uvo imamo – uvce, Zašto uz buve nemamo – buvce ? Imamo i ovaj predlog frišak: Da bude najmanji mišić – mišak!
Dosta je rečima bilo tesno – Nek svaka krene levo i desno! Nek traže sreću ili Srećka, Nek im je sreće puna vrećka! DRAGOSLAV ANDRIĆ
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goose
…………….
coward
……………..
fox
……………….
man-servant
…………….
customer
……………..
he-bear ……………….
wolf
…………….
Czar
……………..
guest ……………….
liar
…………….
saleswoman
……………..
spinster ……………….
waiter
………………
widow
……………….
poet
emperor
………………
executor
……………….
usher ………………
pig
……………….
tiger
………………
………………
deer
………………
drone
……………….
hind
………………
husband
………………
wizard
……………….
beau
………………
bruiser
………………
buck
……………….
captain
………………
cook
……………….
ruffian ………………
coquette
………………
virgin
……………….
sultan ………………
infant
………………
fiancé
……………….
parent ………………
thief
………………
comedian
……………….
tragedian …………….
abbot
…………........
adulterer
……………….
ambassador ………….
author
………………
benefactor
……………….
conductor ……………
god
………………
rocker
……………….
masseur………………
victim
………….……
winner
………………..
mediator ………………
schoolboy
……………….
peacock
………………..
frog
otter
………………..
he-ape (monkey) ……………..
Billy-goat
……………….
male (animal, choir, camel, cousin) …………………………
swan
……………….
countryman
…………………
policeman ……………...
doctor
……………….
lawyer
…………………
stag party ………………
Tom cat
……………….
brother-in-law …………………
step-father ……………..
acquaintance ……………….
admirer
…………………
agent …………………
animal
……………….
assistant
…………………
bird
buyer
……………….
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………………
…………………
COMPOUND NOUNS Use these words to make compound nouns to fill in the blanks: figure, sense, loyalty, revenue, production, operas. Soap________________________________ are the economic powerhouses of television ________________________________. They are cheap to make and enjoy high viewing ________________________________. And the income is secure. They tend to run forever and the stars are not paid a lot for the time they spend on screen. They make good business ________________________________ for broadcasters for they act as a focal point for the audience, building up viewer ________________________________ and attracting advertising _______________________________. Choice of Structures Put a plus ( + ) if the expression is correct and a minus ( - ) if it is incorrect. a point of view
a viewpoint
a view’s point
a window of opportunity
an opportunity’s window
a promise’s breach
a breach of promise
a sales target
a target of sales
data collection
data’s collection
a savings account
a saving account
a spending review
a review of spending
a spending’s review
an eight-hour day
an eight hours day
an eight hours’ day
a plant of recycling
a recycling plant
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Noun + Preposition Put one of the following prepositions in each gap: at, beyond, by, in, on, out of, through, under, within 1. The error was due to circumstances __________ our control. 2. __________ law, you have to carry an identity card in many countries. 3. I will be in touch __________ due course. 4. I met her quite __________ chance in the street in Munich. 5. Mr Evans will meet you __________ your arrival. 6. It started off good-humouredly but then went __________ a joke. 7. Mrs Gonzales cannot see you __________ such short notice. 8. We’re __________ luck; there’s still one left. 9. I don’t always use the car; I try to go __________ foot whenever possible. 10. A chauffer-driven car will be put __________ your disposal. 11. I attend the reception __________ the chairman’s invitation. 12. The goods seemed all right but __________ closer inspection at least 30% were defective. 13. The debt must be paid __________ full by 31st January. 14. Someone left the door open __________ mistake. 15. Roger Penrose is, __________ doubt, one of the great minds of our time.
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THE DEFINITE ( the ) and INDEFINITE ( a , an ) ARTICLES THE Zero ARTICLE ( Omission of Articles ) Put the right article ( a, an, or the ) if and where necessary 1. _____cat is _____ domestic animal. 2. _____elephants are not _____ domestic animals. 3. Yes, my name is _____ Simpson, but I am not _____ Simpson you are looking for. 4. (Certain = )_____ Mr Hosner is looking for you. (I have never seen him before.) 5. He is _____ Bush. 6. It is _____ Jonathan Swift’s novel. 7. That was _____ Van Gogh. (=one picture of his) 8. She used to be _____ Communist, but turned _____ Democrat. Now she is _____ Chairman of _____ Society. 9. Do you probably have any idea who might have killed _____ President Kennedy? 10. I have seen _____ King Charles and _____ Queen Elisabeth together with _____ President. 11. _____ professor has not come yet. 12. _____ Frenchmen and _____ Italians are known for great delicious wines. 13. What do you think we should do with _____ poor and _____ blind? 14. Do you think that _____ sick people should be treated better? 15. What is _____ position of _____ young people? Is it better than _____ position of _____ previous generations, now referred to as _____ old? 16. Do you speak _____ Spanish? – No, but I like _____ Spanish language very much. 17. She is _____ PhD, whereas her sister is _____ MA. 18. They do not like to listen to _____ BBC. 19. She has visited her colleague working for _____ UNICEF. 20. We used to be members of _____ UNESCO. 21. _____ Times is not _____ paper of _____ Labour Party.
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22. _____ Punch and _____ Time are _____ famous magazines. 23. My uncle was in _____ France when they were celebrating _____ 200th anniversary of _____ French Revolution. 24. _____ L/life can be very hard sometimes. _____ L/life of _____ friend of mine was pretty hard when you come to think of it. 25. Has Mina ever been to _____ cathedral? – Yes, but this is not _____ cathedral she has ever been to. 26. He is in _____ library now. Then he will go to _____ prison to visit his client, and after that to _____ school to pick up his little children. 27. _____ man who perpetrated _____ murder I told you all about had been put in _____ jail. His children were at _____ school when he committed the crime. 28. We are setting off at _____ sunrise, and do not intend to get back before _____ noon. 29. We had _____ dinner at _____ Leoni’s, and then went to _____ play at _____ Globe Theatre, after which we ended up in _____ Hilton. 30. Where is _____ nearest hotel? Is it possibly _____ Ritz Hotel? 31. Did you have _____ nice lunch at _____ Casablanca Hotel? 32. John _____ baker lives in _____ Baker Street. 33. Susan was born in _____ Hamburg and died in _____ Kansas City. 34. _____ expedition have been climbing _____ Alps, but have never managed to come up _____ Mont Blanc. 35. Did Jonathan want to cross _____ Sahara (Desert)? 36. _____ Antarctica and _____ Balkans are _____ geographical areas. 37. Margaret Thatcher was _____ former Prime Minister of _____ Great Britain, and was known as _____ Iron Lady. 38. People usually dream about going to _____ Australia or travelling down _____ Nile. 39. _____ Daily Mail led the way with _____ million sales _____ day. 40. Did you teach your students of _____ Dark Ages? Did you tell them that they refer specifically to _____ Medieval Europe? Last week, we learned about _____ Ancient Rome.
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41. We have read _____ excellent article on _____ racism in _____ yesterday’s Times. 42. _____ Titanic is _____ famous ship that sailed across _____ Atlantic. 43. They travelled round _____ Planet Venus. 44. _____ War of _____ 1812 was _____ first test of _____ strength of _____ United States. 45. What _____ nice ice cream! What _____ nice loll of ice cream! 46. What _____ lovely girl! 47. She has been teaching Statistics at _____ Faculty of trade and banking. 48. I like _____ beans, and _____ beans I like best are _____ kidney beans. 49. I have _____ headache and _____ toothache, and I had _____ stomach ache _____ few days ago. 50. She has _____ sore throat, and _____ horrible cough, so obviously she has _____ flu. Her friend Mary is in _____ bed with _____ measles. 51. How well do you know _____ geography of _____ Russian Federation? And _____ one of _____ U.K.? 52. _____ President was said to have lacked _____ prudence. 53. Every Monday morning, Margaret practises _____ piano, whereas her sister Marjory practises _____ cello. 3 54. _____ only Englishman who has become _____ Pope was Adrian _____ Fourth. 55. _____ CO2 stands for _____ carbon dioxide. 56. In _____ hundred years from now, _____ French that _____ people speak will probably be different from _____ French you are studying today. 57. Look! That’s _____ postman! 58. _____ Severn is _____ longest river in _____ England. 59. He is _____ Englishman. His friend is _____ American. 60. Do you take _____ milk and _____ sugar in your coffee? 61. My fiancée goes to _____ church in _____ afternoon, and her sister in _____ morning.
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The definite article THE is not used with jazz instruments. See Michael Swan.
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62. _____ ugliest woman I have ever seen was _____ kindest person I have ever met in my life. 63. _____ cheese you purchased yesterday was damp. 64. What _____ interesting story! Is it from _____ same book? 65. Your bag is under _____ bed. 66. Who do you like better, _____ Japanese or _____ Chinese? 67. They have Art classes twice _____ week. 68. When he drives his car, he drives eighty miles _____ hour. 69. Yesterday, she drove her Rolls Royce at _____ speed of 50 miles an hour. 70. What’s _____ weather like today? 71. Do you prefer _____ spring to _____ autumn? – No, but I will certainly not forget _____ spring of 1998, when we met by _____ river. 72. _____ young ought to pay more respect for _____ old. 73. What _____ pity! 74. My grandmother is _____ very stingy person. _____ more she has, _____ less she is ready to share with her family. 75. Look at _____ picture of _____ Queen Mary (the ship) sailing across _____ Red Sea! Isn’t she _____ real beauty? 76. We had gone to _____ Odeon cinema and then had _____ excellent dinner at _____ Maxim’s. 77. _____ impression gained at _____ Tate Gallery during _____ last week of _____ Picasso exhibition was stunning. 78. With _____ little patience and _____ certain amount of _____ optimism, you will reach _____ position that you want so much. 79. She studied at _____ Edinburgh University. 80. _____ chess is _____ popular game in some countries. 81. I’d like _____ slice of _____ bread with _____ butter and _____ jam on it. 82. Would you like _____ cup of coffee? 83. Do you tip _____ waiter if he gives you _____ bad service? 84. Can _____ fat man lose _____ weight and stay thin?
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85. _____ smoker should not light up _____ cigarette in _____ crowded room because _____ smoke is harmful to _____ non-smokers as well. 86. Which is more expensive on _____ market: _____ copper or _____ silver? The cost of _____ electricity is _____ important item in _____ family budget. 87. There is _____ cloud in _____ sky, and _____ stars, too. Let’s take _____ taxi, since _____ car is being fixed at _____ moment. Look, _____ sun is hidden by _____ cloud. 88. May I see _____ head of the department? I have _____ complaint. 89. She has _____ beautiful Persian carpet4 on _____ floor in _____ living-room. Take _____ vase into _____ dining room and put it on _____ table. _____ guests will be here any minute now. 90. John is late again. _____ manager has already started _____ meeting. 91. _____ thieves stole _____ valuable painting by _____ Dutch master from _____ museum, but after a few days, _____ painting was returned to _____ museum. 92. _____ snow is white, but _____ snow in _____ street in front of _____ house is already _____ dirty-looking gray. 93. _____ curiosity killed _____ cat. _____ apple _____ day keeps _____doctor away. 94. What _____ holiday comes on _____ 14th of February? 95. _____ Philippines are _____ group of _____ islands in _____ Pacific. 96. What time do you expect _____ Browns? This is _____ only free time I have. 97. Would you go on _____ expedition to _____ South Pole? 98. He crossed Europe on _____ foot. 99. My brother Michael is _____ teacher in _____ village school near _____ Cambridge. _____ job was _____ interesting, but _____ tiring one, and not wellpaid. He spent _____ most of his free time on his hobby - _____ collecting and repairing _____ antique clocks. Then he had _____ idea. _____ CBI (_____ Confederation of British Industry) was helping _____ people start up by themselves. Why not go on _____ training course, apply for _____ loan and set up _____ small business. So he sent in his resignation to _____ school, said 4
Persian rug is more frequent, according to Webster
21
_____ goodbye to _____ children, and joined _____ unemployed. He obtained _____ information from _____ different sources, took _____ advice from _____ accountant, left _____ village and learnt all about _____ antique trade. Eighteen months later he had his own shop and was earning about 2,000 pounds _____ month. “It was _____ best thing I ever did,” he says.
100. _____ Enzo Ferrari’s death in August 1988 was _____ sad occasion. However, it did release _____ Ferrari from _____ grip of his idiosyncratic ways and enabled _____ firm to move into _____ new era. _____ appointment of Luca di Montezemolo in December 1991 was _____ beginning of _____ series of _____ changes. His aim was to invest in _____ research and _____ development and to bridge _____ gap between _____ racing and production of car businesses. He also introduced _____ sponsorship although _____ constructor still has fewer names on its cars than _____ other teams. _____ CEO is steering _____ narrow course between modernising _____ company while trying to avoid diluting _____ mystique that makes _____ marque so great.
101.
PLENTY OF BUSINESS FOR BANKS
Insert ONE where more appropriate than A or AN Switzerland is _____ of _____ world’s _____ most attractive _____ M&A4 playgrounds. It has several world-class companies with _____ plenty of _____ cash to spend on _____ acquisitions and _____ rapidly restructuring corporate finance business. Until _____ couple of years ago, _____ number of _____ mega-deals could be counted on _____ fingers of _____ hand. But _____ market took off after _____ 1996. That was _____ day Sandoz and Ciba, Switzerland’s _____ second and _____ third _____ biggest pharmaceutical companies, announced they were joining _____ forces to create Novartis. Until then, it had been unthinkable that _____ two big Swiss companies, based in _____ same industry and _____ city, would risk throwing _____ thousands of _____ people out of _____ work by _____ merging. The idea of _____ giant Swiss chemical company, or _____ global insurer, is no longer unimaginable. 4
Mergers and acquisitions
22
102.
CAN CANNON BE CONFUSED WITH CANON?
_____ distinctive character of _____ trademark, in _____ particular its reputation, had to be taken into _____ account in _____ determining whether there was _____ sufficient similarity between _____ goods and _____ services covered by that and _____ another proposed mark to give rise to _____ likelihood of _____ confusion. _____ Court of _____ Justice of _____ European Communities so held, inter alia5, on _____ reference by _____ German Federal Court of Justice for _____ preliminary ruling under _____ Article 177 of _____ EC Treaty re: _____ Article 4(1)b of _____ Directive of 21 December 1988 relating to _____ trade-marks. _____ MGM applied in _____ Germany for _____ registration of _____ word trade-mark _____ “Cannon” to be used for _____ video film cassettes and _____ film production _____ distribution and _____ projection for _____ cinemas and _____ television. Canon Kabushiki Kaisha opposed _____ application on _____ ground that it infringed its earlier world trademark “Canon” registered in Germany in _____ respect of, inter alia, _____ still and _____ motion picture cameras, and _____ projectors, and _____ television filming, _____ recording, _____ transmission, _____ receiving and _____ reproduction devices, including _____ tape and _____ disc devices. In _____ course of _____ proceedings, it was held, inter alia, that _____ mark “Canon” had _____ reputation, but no _____ importance was to be attached to that _____ fact in _____ deciding whether _____ marks were relevantly similar. Article 4(1)b of _____ Directive 89/104 provides: “_____ trademark shall not be registered or, if registered, shall be liable to be declared invalid, if because of its identity with or similarity to, _____ earlier trademark and _____ identity or similarity of _____ goods or _____ services covered by _____ trademarks, there exists _____ likelihood of confusion on _____ part of _____ public, which includes _____ likelihood of _____ association with _____ earlier trademark.”
5
among other things
23
103.
CASE STUDY
FORD AND HONDA
Insert ONE where more appropriate than A/AN _____ rising costs and _____ worldwide spread of _____ shared tastes in _____ car styling have prompted _____ industry’s giants to exploit _____ global economies of scale. But _____ rivals such as Ford and Honda have approached _____ task very differently. _____ Ford is _____ of the world’s earliest multinationals. Its _____ first foreign production unit was set up in Canada in _____ 1904 – just _____ year after _____ creation of _____ US parent. For _____ years, Ford operated on _____ regional basis. _____ individual countries or _____ areas had _____ large degree of _____ autonomy from _____ US headquarters. That meant _____ products differed sharply, depending on _____ local executives’ views of _____ regional requirements. In _____ Europe _____ company built _____ different cars in _____ UK and Germany until _____ late 1960s. Honda, by _____ contrast, is _____ much younger company, which grew rapidly from making _____ motorcycles in _____ 1950s. In _____ contrast to Ford, _____ Honda was run very firmly out of _____ Japan. Until well into _____ 1980s, its vehicles were designed, engineered and built in Japan for _____ sale around _____ world. Significantly, however, Honda tended to be more flexible than Ford in _____ developing new products. Rather than having _____ structure based on _____ independent functional departments, such as _____ bodywork or _____ engines, all _____ Japan’s carmakers preferred _____ multi-disciplinary teams. That allowed _____ development work to take _____ place simultaneously, rather than being passed between _____ departments. It also allowed _____ much greater responsiveness to _____ change. In _____ 1990s _____ both companies started to amend their organisational structures to exploit _____ perceived strengths of _____ other. At Ford, Alex Trotman, _____ newly appointed chairman, tore up _____ company’s rulebook in _____ 1993 to create _____ new organisation.
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Exercise 2 a) Complete the following extract with a, an, the or / no article. “Sun Advertising”, _____ Japanese advertising agency, has beaten its main competitor _____ “Top Ad”, to win _____ contract to promote _____ “Tora’s” new soft drinks range. They are going to launch _____ 10-billion yen TV advertising campaign – one of _____ biggest ever seen in _____ Japan. _____ campaign includes _____ ad with _____ best baseball player from every major baseball team in _____ Japan. _____ Tatsuo Tokunaga, _____ director who dreams up _____ “Sun Advertising’s” campaigns, says that _____ firm tries to capture _____ people’s attention. b)
Put the following words into the correct categories in the chart.
Africa, Asia, Baltic Sea, Brazil, Broadway, Channel Islands, China, Far East, Hilton, Holiday Inn, India, London, Middle East, Netherlands, New York, Oxfordshire, Pennsylvania Avenue, Philippines, Punjab, Ritz, Sahara, Texas, Thames, United Kingdom, United States of America, Vancouver, West Indies
NO ARTICLE
THE
1. Continents and most countries 2. Countries whose name includes unions or plurals 3. States and counties 4. Geographical features and most geographical regions 5. Towns and cities 6. Island groups 7. Most streets 8. Hotels
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c)
Correct the mistakes in the use of articles in the following text.
“What’s best advert you’ve ever seen?” “Well, I remember I was reading newspaper in Holiday Inn near Heathrow airport. I had just returned to United Kingdom from a marketing trip to the New York. I’d been staying in the Ritz. Anyway the newspaper – I think it was ‘Financial Times’ – had an article about what was a best advert of the century. I think one of ‘Marlboro’s’ cigarette adverts was voted a best. I think it would be interesting to look at what adverts are popular in different cultures. Would an advert that was popular in the United States also be popular in the Africa or the Asia?” Exercise 3
BAD LINE ON BEHAVIOUR
What drives you to lose your temper on _____ telephone? Being kept waiting, being connected to _____ voice mail or being passed on to _____ someone else are all _____ common flashpoints. But what infuriates _____ people _____ most of all is talking to someone who sounds inattentive, unconcerned or insincere, according to _____ survey published today. _____ study by _____ Reed Employment Services, _____ recruitment company, found that nearly _____ two-thirds of _____ people feel that _____ ‘phone rage’ - _____ people losing their temper on _____ telephone – has become more common over _____ past five years. More than _____ half _____ respondents, who were from _____ 536 organisations, said that they themselves had lost their tempers on _____ telephone this year. _____ reasons for this are threefold, according to _____ Reed. _____ people are much more likely to express anger over _____ phone, rather than in _____ writing or _____ face-to-face. Moreover, _____ telephone usage has been rising steeply over _____ recent years.
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ADJECTIVES – COMPARISON Exercise 1 1. Let me take the ______ suitcase. You can take the other two which are not so _____. ( heavy ) 2. Jim is my _____ brother. He is _____ than I am. ( old ) 3. The sun’s _____ it was yesterday when the sky was overcast.( bright ) 4. Lily is _____ _____ friend I have. She is always ready to lend a hand. ( helpful ) 5. Some jobs are _____ others. ( dangerous ) 6. That is _____ pedestrian crossing in town. There is an accident there almost every week. ( dangerous ) 7. _____ holiday I can imagine would be to spend a couple of weeks on a sunbathed tropical island. ( good ) 8. That is _____ part of the river, and boats sometimes run around there. ( shallow ) 9. Alec is _____ I am, but he never boasts of that. ( clever ) 10. Cheryl is as _____ her sister Barbara. ( pretty ) 11. I am _____ in my family, which means that I have the most responsibilities. ( old ) 12. We all have _____ time for leisure activities than we did a year ago. (little) 13. Getting to sleep after a horror movie is _____ after a comedy. ( difficult ) 14. _____ meal is not always _____ . ( expensive ) ( good ) 15. That was _____ accident I have ever seen in my life. ( bad ) 16. Ordinary workers earn _____ money than their managers. (little) 17. Everybody ate a lot of ice-cream, but she ate _____. ( much ) 18. We did not have a lot of dinars , but she had _____ than we did. ( many ) 19. Not a single pupil did much work, but she did _____ . ( little ) 20. Which region has _____ population? ( large ) 21. John asked _____ lady for the direction. ( near ) 22. His _____ question was totally irrelevant. ( near ) 23. Mr Smith is _____ man I have ever met. He is even _____ John. (patient) 24. Jones is one of _____ names in England. ( common )
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Exercise 2 Put little, less, least or fewer in the following sentences: 1. Mary did not like swimming down that dangerous river. She likes a life with _____ excitement. 2. Today, there are _____ people in the street than yesterday. 3. Every single Indian hoped for _____ rain and _____ earthquakes than they had last year. 4. _____ birds come to my garden in winter. 5. There were _____ visitors at my last live show. Exercise 3 Use the so-called Absolute Superlative, the Emphasised Superlative Example:
You were very helpful. > You were most helpful.
1. The party was great. It was very enjoyable. __________________________________________________ 2. Sue made a lot of horrible accusations. She was so unpleasant. __________________________________________________ 3. Roger refused to give us a helping hand. It was quite unexpected. __________________________________________________ 4. Students usually skip classes. The consequences are usually unfortunate. __________________________________________________ 5. Thanks for your financial support. It’s been very generous of you. __________________________________________________ Exercise 4 Supply the Absolute Superlative with a, an where necessary 1. Madonna’s Immaculate Collection was _____ one. ( valuable ) 2. Her experiences while living in Madrid were _____ . (rewarding) 3. My colleague is _____ person in the company. ( reliable ) 4. The lemonade you made for me was _____ . ( refreshing ) 5. _____ young woman introduced herself to us. ( delightful )
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Exercise 5 Latin Comparatives 1. An army officer starts his career with an _____ rank. 2. That new design is definitely _____ the outdated ones. 3. His latest film is by all the critics _____ all his earlier films. 4. _____ making any decision, think twice. 5. Sorry I couldn’t come, I had a _____ engagement. Exercise 6 Each language has some well-known comparisons. Decide on the meaning of each of the following ones, and put them into the right context / sentence. as sly as a fox
as proud as a peacock
as busy as a bee
as thin as a rail
as black as coal
as white as snow
as cold as ice
as deep as the ocean
as blind as a bat
as pretty as a picture
as good as gold
as sharp as a razor
1. You really must gain some weight. You are_____. 2. Somehow, he always manages to get out of trouble. He’s _____. 3. Your little sister is awfully cute. She is _____. 4. The laundry has just been washed and ironed. It’s _____. 5. Cora has been working all day. She’s _____. 6. I really must get new glasses. I’m almost _____. 7. When Hal won the best-actor award, he was _____. 8. You’d better get cleaned up. Your face is _____. 9. My love for you is _____. 10. Your little girl is truly well-behaved. She’s _____. 11. Our supervisor-in-chief is never friendly. She’s _____. 12. I must admit he’s such a smart fellow. He’s _____.
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Exercise 7 Use ‘as……………as’ and / or ‘not so……………as’ comparatives 1. He’s very handsome, just like your uncle. __________________________________________________ 2. He is very tall, nothing like his sister. __________________________________________________ 3. The novel is short, just like the previous one. __________________________________________________ 4. We are so hungry, just like all the rest of the people. __________________________________________________ 5. Her students got tired, unlike her colleague’s students. __________________________________________________ 6. Teddy is very strong, just like Joe. __________________________________________________ 7. It is warmer today than it was yesterday. __________________________________________________ 8. The exercise was easier than we had expected. __________________________________________________ Exercise 8 Study the chart comparing three models of electronic notebook. Then complete the sentences. Write one word in each gap. For example: Model …… is cheaper than model…. MODEL A
MODEL B
MODEL C
WEIGHT
180 g
140 g
98 g
NUMBER OF FEATURES
8
12
16
PRICE
£ 140
£ 180
£ 220
Model A is __________ __________ model B. (price) Model A is much __________ than model C. (weight) Model C has twice __________ __________ features as model A. Model A __________ __________ __________ model B. (price) Model A is __________ __________ expensive. Model C is __________ __________ . (weight) Model B is not __________ __________ __________ model C. (price) Model A has __________ features __________ model B. Model C is __________ __________ expensive. 30
ADVERBS COMPARISON AND POSITION WITHIN THE SENTENCE Exercise 1
Put the Adverbs and Adverbial Phrases in brackets into the right order. 1
1. She arrived. (last night; in London; late) 2. Harry injured his left leg. (a few weeks ago; badly; on a broken glass) 3. That hooligan hit me. (with a shovel; on the shoulder; in broad daylight; in front of a curious crowd of people) 4. Samson broke the chains. (standing between two supporting prods; under the eyes of the astonished mob; into pieces; quickly) 5. The robber stole the money from the lady’s billfold. (from the supposedly burglar-proof strong box; with infinite care; slowly) 6. The sick little lady was able to finish her breakfast. (in peace; finally) 7. They were picking pears. (last month; in their friend’s garden; one afternoon; joyfully) 8. The nurse washes her hands. (with a lot of disinfectant; thoroughly; always; before operating on) 9. She drives. (often; by cab; to work) 10. John spoke. (to his little baby-son; two days ago; with excitement) 11. You must go. (certainly; at once; to the butcher’s) 12. She read some of her lines. (last weekend; aloud; to a critical audience) 13. The baby ate some toothpaste. (mistakenly; last night; in the dark) 14. We returned. (before breakfast; the day before yesterday; in Nottingham; at 2 am) 15. He left the room. (before supper; three times; to walk in the park; with his dog) 16. She sang. (last Monday; at the Opera; beautifully) 17. She goes skiing. (in the mountains; always; when she has time) 18. Our teacher gave lectures. (last term; four times a week; in an interesting way) 19. Her child deserted from the Army. (one morning; suddenly; in November) 20. She was born. (in 1954; June 5; in Belgrade) 1
In American English, adverbial phrases of time, purpose etc. are often put at the beginning of a sentence, for example: Late last night, the Board had a meeting. This is generally accepted and can be seen in publications intended for students to read.
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Exercise 2 Complete the texts appropriately with these adverbs: increasingly, easily, extremely, unfortunately, hugely, deeply, suitably, awfully If there is one certainty in life, it is that things change. And in the modern world things are changing_______________ fast. This is especially true in the workplace where there is no longer the concept of a job for life. People are _______________ likely to work for many different companies throughout their careers. It is _______________ common – and _______________ disturbing - for companies to say ‘Why should we train staff for them to leave for better jobs?’ ‘This is an _______________ outmoded concept because staff will move regardless of whether they receive training or not. So, how can individuals be _______________ prepared to meet the challenges of change? This is not a question that can be _______________ answered, but we at TMP Consultants believe we have developed some _______________ successful recipes that will help you get the best out of your employees while they stay with you. Exercise 2-a Re-write the following two texts on a separate sheet of paper, adding at the same time the Adverb-forms on the right-hand side where they are most suitable in the sentences. Hi! Thanks for your last e-mail. I’m sorry I haven’t got back to you sooner but we have been rushed in the office. We seem to be so busy. It seems the launch has been successful, beyond our wildest dreams in fact. We are delighted and we have had a large order from a company in China. This is fabulous news. See you soon. Thank you for your e-mail you sent. I have spoken to Eric yesterday; but he says he is waiting for confirmation from the board before we can go ahead with the proposed changes. The delay is getting on my nerves but I hope to get started on the project. As is the case, we will receive confirmation at the last minute and have to work for the next couple of months in order to get into production. 32
very terribly always remarkably obviously already absolutely already still quite frankly very soon often; suddenly flat out fast
Exercise 3 Tick the type of change expressed by the adverbs in the table Type Small
Large
of
Very large
considerably dramatically enormously gradually quickly rapidly sharply significantly slightly substantially vastly
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change Fast
Slow
TENSES
The Present Simple Tense Add “-s” or “-es” to the following verbs, and make necessary spelling changes cough __________ hop
__________
trick
lose
__________ rush
__________
match __________
read
__________ prove __________
go
__________
buy
__________ try
pay
__________
wash __________ box
__________
__________
__________
The Past Simple Tense Add “-d” or “-ed” to the following verbs, make all necessary changes pay
__________ reach __________
plead __________
video __________ rob
__________
differ __________
occur __________ stay
__________
pick
__________
crash __________ tie
__________
tip
__________
relieve __________
__________
cry
The Present Continuous Tense Add “-ing” to the following verbs and make necessary spelling changes prove __________ abuse __________
obey
hit
prefer __________
__________ meet
__________
__________
travel __________ traffic __________
dye
say
indulge__________
__________ make __________
__________
worry __________ run
__________
differ __________
die
__________
go
__________ lie
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__________
PRESENT TENSES General truths Exercise 1 Insert: buy, believe, believe, tend, promise, say, put, mean, talk 1. “Every time we __________ a foreign car we __________ someone else out of work.” (Woodrow Wyatt) 2. “Money __________ they __________; all it ever said to me was ‘Goodbye’.” (Cary Grant) 3. Democracy __________ government by discussion but it is only effective if you can stop people talking.” (Clement Attlee, British Prime Minister) 4. “Politicians are the same all over. They __________ build a bridge even where there’s no river.” 5. “In a hierarchy every employee __________ to rise to his level of incompetence.” (L. J. Peter) 6. “Not all Germans __________ in God, but they __________ in the Bundesbank.” (Jacques Delors) Exercise 2 The Present Simple Tense or Present Continuous Tense 1. Please be quiet! I (try) _____ to concentrate. 2. You (make) _____ a lot of noise. Daddy cannot sleep. 3. Food (cost) _____ more in the city than in the country. 4. Why on Earth _____ you (smell) that egg, son dear. – Because it (smell) _____ strange. 5. I want to lose weight. I (not eat) _____ anything today. 6. How _____ you (spell) your name? 7. Oh, my God. Not again. You _____ always (complain) about everything and about everybody. What (be) _____ the matter with you.1 8. You _____ (hear) anything? - I (listen) _____, but I (not hear) _____ anything. 1
The verb complain can also be used with the preposition of, but only when complaining to a doctor of an illness.
35
9. Hey!!! Why _____ you (yell) at me? 10. Mother rarely (use) _____ all the gadgets in her kitchen. 11. You (listen) _____ to me? _____ you (understand) what I (talk) _____ about? 12. He (think) _____ he (be) _____ right. He also (think) _____ of going to New Zealand next year. 13. Go and talk to her. The poor girl (cry)_____ in the park. 14. What _____ we (have) for dinner? 15. Sasha (have) _____ an outdoor barbecue on Sunday. You _____ (come)? 16. Look! A man (want) _____ to catch a bus. He (run)_____. He (seem) _____ to be giving up. I (suppose) _____ he (be) _____ tired from running. 17. The chemistry teacher: First she (take) _____ some water and (pour) _____ it into a tube. Then he (help) _____ her and (add) _____ some of this powder here and (heat) _____ it until … a Baaang! (be) _____ heard. 18. The river Danube (flow) _____ into the Black Sea. 19. ‘One swallow (not make) _____ a summer.’ 20. _____ you (taste) food while you (cook) _____ ? Or are you so experienced that you (know) _____ exactly what ingredients are needed. 21. – You (see) _____ anything? – Oh, I (look) _____, but (not see) _____ anything. 22. The chef is busy. He (taste) _____ the stew in one of the pots. 23. According to the weather forecast, it (appear) _____ to be snowing in the mountains today. 24. Who (appear) _____ in the performance? 25. I (think) _____ my daughter (see) _____ too much of that young man these days. 26. We (consider) _____ the job to be not so well paid, and therefore we (consider) _____ changing our job as well. 27. – I (wish) _____ we could all go to the moon one day! – Be quiet, David. I (wish) _____ on a falling star. And I (know) _____ my wish will come true. 28. The Earth (turn) _____ on its axis and (go) _____ around the sun. 29. She (stay) _____ with her sister until she (find) _____ a place for her to live. 30. Let me explain how to use an overhead projector. First I (plug) _____ in the projector, then I (switch) _____ it on, (place) _____ the transparency on the projector and (adjust) _____ the focus.
36
31. The judge (hear) _____ the evidence right now, so he cannot come out. 32. A:
You (look) _____ very thoughtful today. What _____ you (look) at? And
what _____ you (think) about? B:
I (think) _____ about my retirement.
A:
But you _____ (be) only 25. You only just (start) _____ your career.
B:
I (know) _____ that. But I (read) _____ an article which (say) _____ that every
sensible man (start) _____ thinking about his retirement at the age of 25. 33. They (be) _____ English, and he (be) _____ an American. 34. Where she (come) _____ from? 35. The man who (walk) _____ past the window (live) _____ next door to me. 36. You (remember) _____ our last excursion to the seaside? 37. The computer (not recognise) _____ your password and is not going to give you access. 38. Excuse me, pal, but you (sit) _____ in my place. 39. What time she _____ (finish) her work every day? 40. We (take) _____ our exam tomorrow, that’s why we (study) _____ so hard. 41. I (owe) _____ you an apology. 42. What you (do) _____ here? – I (fix) _____ the tap. 43. Who (own) _____ this umbrella? – Everybody (use) _____ it, but nobody (know) _____ who (own) _____ it. 44. Barbara often (tutor) _____ other students in her math class. This afternoon she (help) _____ Steve with his math assignment because he (not understand) _____ the material his class (work) _____ on this week. 45. ‘The early bird (catch) _____ the worm.’ 46. What the word ‘capability’ _____ (mean)? 47. There is nothing that (cost) _____ less than civility. 48. Psychopathology (refer) _____ to any form of mental illness or aberration. 49. She (declare) _____ this exhibition open. 50. Philosophy (deal) _____ with some of the most general questions about the universe and our place in it.
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Exercise 3 Mission Statements A mission statement talks in general terms about a company’s overall policies and objectives. Read the two mission statements below and use the verbs to complete them, paying attention to the verb endings. The first one has been done for you in both cases. Mission Statement 1 admit, introduce, lead, welcome, mean, work, depend, improve, stay, come, spend Restless? Yes. Dissatisfied? True. We cheerfully a d m i t it. We always __________ change and continuous improvement. Today consumers __________ more than $25 billion a year on our products. We __________ - or __________ a very close second – in all our business segments, which __________ that vigorous growth __________on our own imagination, commitment and skill. So we regularly __________ new products, __________ distribution channels and __________ round the clock to be more efficient. Most of all, we __________ absolutely, and unequivocally, 100 per cent geared towards the customer, who’s definitely No. 1 in our book. Mission Statement 2 believe, strive, cultivate, deliver, enable, help, give, endeavour, acknowledge, foster Eastman Kodak Company b e l i e v e s that a diverse group of highly skilled people, in an organisational culture which __________ them to apply their collective talents to shared objectives, __________ the greatest value to customers and shareowners alike. The company and its employees __________ to support an inclusive Kodak culture that __________ unique thinking in the context of teamwork and common business goals. Kodak __________ to provide a flexible, supportive work environment that __________ employees as partners in the business and community. To this end, it __________ employees access to a multitude of work/life resources and __________ programmes that __________ individuals balance their commitment to meeting business needs with their personal, family, and community responsibilities.
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Exercise 4 News in brief Read the following extracts about projects that various companies are currently involved in. Match the extracts in column A with those in column B. 1. Ford is aiming to corner 10% of car sales a) The chief reforms are the elimination of in the Asia-Pacific region within the next
900 jobs and the reduction of sales, general
10 years.
and administrative expenses.
2. IBM in Europe chooses schools with the
b) The firm is opting for external
technology to teach collaboration, writes
management training in a big way and is
Della Bradshaw.
using its purchasing power to push the business schools involved into adopting the very latest technology to deliver their courses.
3. Showa Shell Sekiyu and Cosmo Oil are
c) After a slow start, the compact disc
stepping up plans to cut costs and improve
version of the video cassette is now selling
cash flow.
well in North America.
4) The New Zealand government has
d) It currently has about 1% of the region’s
decided to sell the country’s second-biggest market but hopes to significantly expand its electricity generator.
operations in China, Japan, Thailand, and India.
5) Sales of DVD video should take off in
e) It is seeking commercial advisers for the
Europe next year when nearly 500,000
sale of Contact Energy, which produces
players will be sold, according to a new
27% of the country’s energy supply.
study.
39
PAST TENSES Exercise 5 Important firsts: What made the following people famous? Write true sentences, and change the form of the verb. 1. John Logie Baird
(invent)
the first flight in 1903.
2. The Wright brothers
(discover)
radium in 1902.
3. Neil Armstrong
(make)
the first commercial sewing machine in 1851.
4. Pierre and Marie Curie
(patent)
the first public demonstration of television in 1926.
5. Gutenberg
(give)
the printing press in 1434.
6. Isaac Singer
(land)
on the surface of the moon in 1969.
Exercise 6 The Bell Story Paragraph 1
Insert:
have , say , begin , introduce , open
In 1985 Simon Bell __________ his computer business at the University of Southampton. In 1987 his company __________ the Z 5000 machine which the magazine PC Journal __________ “may become the next industry benchmark”. The following year, he __________ an office in the United States and soon __________ offices in 28 countries. Paragraph 2 Insert:
amount , decide , employ , run , go
In 1989, Bell __________ public. By now, the firm __________ 750 people and sales __________ to over $159 ml. Then, two years later, employees __________ to celebrate 1 April by hanging a giant inflatable banana outside company headquarters, the first of many publicity stunts. On another occasion the CEO __________ the London marathon.
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Paragraph 3
Insert:
set up , launch , total , offer
In 1992, Bell __________ free installation of applications software as a standard option and in 1993 __________ the low-priced Explorer PCs, one of the most highly praised systems in the industry. In 1996 Bell __________ an Internet computer store, through its website www.bell.com. Last year sales __________ more than $ 10 ml a day. Exercise 7 Complete the extract choosing from these verbs: delay, choose, improve, give, make, stabilise, hinder. There are more verbs than necessary: Last year the international situation in the hydrocarbons industry __________ to some extent. However, the volatile exchange rates __________ currency management more difficult and relatively weak demand __________ expansion projects. We therefore __________ to focus our efforts on specific opportunities where our know-how __________ us a technical advantage over particularly aggressive competition. As a result we propose doubling our dividend. Exercise 8 The Past Simple Tense and/or Past Continuous Tense 1. It (rain) _____ hard when I (leave) _____ home. 2. Joan (fall) _____ off a horse and (hurt) _____ herself. The same thing (happen) _____ to Susan while she (ride) _____ her bike in the park. 3. While Jonathan _____ (get) off the bus, he suddenly (slip) _____ and (break) _____ his left arm. 4. Your cable (come) _____ just at the moment when I (leave) _____ my home. 5. Anna (talk) _____ to her friend when her teacher last (see) _____ her. 6. While the editor-in-chief (write) _____ the report, his employees unexpectedly (start) _____ fighting and screaming. 7. She (phone) _____ me when I (have) _____ dinner.
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8. Wendy (meet) _____ David at a party, and (say) _____ he _____ (wear) a red tshirt. 9. What you (do) _____ two days ago, between 7 and 10? 10. Sue (get) _____ up early this morning, (wash) _____ and (dress) _____ and then (leave) _____ to school. 11. Yesterday, I (be)_____ late, but my friend _____ (wait) for me when I finally (arrive) _____. 12. What he (do) _____ on Sunday evening? – He (go) _____ to the library. 13. The light (go) _____out when (while) we (have) _____ a class. 14. When she (drop) _____ by to see John yesterday evening, he (not be) _____ at home, but (study) _____ in the library at the university. 15. It (be)_____ my first day of class. I finally (find) _____ the right room. The room (be) _____ already full of students. On one side of the room, students (talk) _____ to each other in Spanish. Other students, for a change, (speak) _____ in Japanese, whereas some (converse) _____ in Arabic. It (sound)
_____ like the United
Nations. Some of the students, however, just (sit) _____ quietly by themselves. I (choose) _____ an empty seat in the last row and (sit) _____ down. In a few minutes, the teacher (walk) _____ into the room and all the multilingual conversation (stop) _____. 16. I (walk) _____ along Piccadilly when I (realise) _____ that a man with a ginger beard, whom I had seen three times already that afternoon, (follow) _____ me. To make quite sure, I (walk) _____ on quickly, ahead and ahead, (turn) _____ right, then left and finally (stop) _____ at a shop window. In a few minutes, the man with the beard (appear) _____ and (stop) _____ and whenever I (look) _____ round he (be) _____ still there. He (look) _____ like a very respectable type and (wear) _____ very conventional clothes. I (wonder) _____ if he was a policeman or a private detective. I (decide) _____ to try and shake him off. A 74 bus (stand) _____ at the bus stop just beside me. Then the conductor (come) _____ downstairs and (ring) _____ the bell; just as the bus (move off) _____ , I (jump) _____ on it. The man with the beard (miss) _____ the bus but (get) _____ into another 74, which (follow) _____ mine. Both buses (crawl) _____ very slowly
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along Knightsbridge. Every time the buses (pull) _____ up at a stop, the man (look) _____ out anxiously to see if I (get) _____ off. Finally, at some traffic lights, he (change) _____ buses and (get) _____ into mine. At Gloucester Road Underground, I (leave) _____ the bus and (buy) _____ a ticket at a ticket machine. As I (stand) _____ on the platform waiting for a Circle Line, my pursuer (come) _____ down the stairs. He (carry) _____ a newspaper and when we (get) _____ into the same compartment, he (sit) _____ in one corner reading it, and I (read) _____ the advertisements. He (look) _____ over the top of the newspaper at every station to see if I (get) _____ out. I (become) _____ rather tired of being shadowed like this, so finally I (go) _____ and (sit) _____ beside the man and (ask) _____ him why he (follow) _____ me. At first he (say) _____ that he (not follow) _____ me at all but (want) _____ to see whether I would notice him or not, and (explain) _____ that he (be) _____ a writer of detective stories and added again that he just (want) _____ to see if it was difficult to follow someone and be unseen at the same time. I (tell) _____ him that he (not be) _____ unseen at all, because I had seen him in Piccadilly and I (advise) _____ him that he should shave off his ginger beard if he did not want his victim to know he was being followed. 1
1
The Past Continuous Tense, Passive Mood
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PRESENT PERFECT TENSES Exercise 9 Put the verbs in brackets into the Present Perfect Simple or Continuous 1. How long _______________(you / wait)? 2. I _______________(play) tennis four times this week. 3. Look outside. It _______________(rain); the pavement is still wet. 4. You look tired. “I _______________(drive) all day long.” 5. I _______________ (know) John since we were at school together. 6. The government _______________ (announce) a drop in unemployment. 7. I _______________ (read) a book on negotiating skills but I don’t think I’ll finish it. 8. He _______________ (work) as a consultant for three different firms in the same sector of activity; I think there’s a conflict of interest and he should resign. 9. He _______________ (work) as a consultant for three different firms in the same sector of activity, but was fired from the first two. Exercise 10 Put the verbs in brackets into the Present Perfect Simple or Present Perfect Continuous Tense. 1. Nobody lives here. This place _____ empty for many years. (be) 2. We _____ (study) Banking and Trade for three years now. 3. She _____ never (see) such a bad performance before. 4. Since when _____ (know) Mary him? 5. My sister _____ (write) this essay for two hours and she _____ (not finish) it yet. _____ your brother (finish) his essay yet? 6. I never (fly) _____ in an airplane. 7. Students (read) _____ their reading assignments since 10 o’clock. 8. Roger’s mother just _____ (tidy up) the kitchen. 9. She is so very tired. She _____ (type) her letters since early dawn. 10. Jim (call) _____ Janet every night for the past week. 44
11. Look! Her eyes are red. She (cry) _____ all day. 12. _____ (arrive) she from New York recently or …? 13. How long he _____ (live) here? 14. We _____ (prepare) this exam for three months now. 15. Roman _____ (work) in his garden all day, but _____ only (plant) five daffodils so far. 16. She _____ (learn) Portuguese since 1998. 17. Oh, Jesus. It _____ (snow) all day. How is he supposed to arrive on time? 18. I (have) _____ this car for 3 years. 19. Hey, anybody at home?! The telephone _____ (ring) for almost one whole minute, and nobody _____ (make) an effort to answer it. 20. The phone _____ (ring) four times in the last hour, and each time it _____ (be) my sister’s friend. 21. They _____ (try) to concentrate for the last seventy minutes, but _____ (do) nothing worth mentioning. 22. Hello, Marge, _____ (not see) you for ages. What _____ (do) lately? 23. Professor Smith _____ (teach) at this Department for almost 25 years. 24. The pupils _____ (play) outside the school building for almost 2 hours. 25. How many beers you _____ (drink) so far? – I _____ (sit) here, at this pub for more than two hours now, and _____ (drink) up only 3. 26. I feel so embarrassed since I _____ (forget) your name. 27. I am sorry we are late. How long you _____ (wait)? 28. Mike _____ (be) ill for such a long time. _____ you (visit) him yet? 29. You know one thing, I _____ (play) the piano since I was 6. Exercise 11 Present Perfect Simple-Continuous or Past Simple Tense 1. She (play) _____ the piano yesterday, but she _____ (not win). 2. They are having a meeting now, and the question of a new policy of the bank _____ (discuss) 3. Paris is a great city. I _____ (be) there many times. 4. Tell me when _____ (arrive) you in New York, and how long _____ (stay) here. 45
5. The New York World Trade Centres _____ (destroy) in September 2001. 6. When Roger was just a little kid, he _____ (despise) sports. 7. My friend is a novelist, and _____ (write) many books. She _____ (publish) her latest book two years ago. 8. Last month, the Johnsons _____ (go) on holiday to Venice, and _____ (stay) there for twenty days already. They love travelling and _____ (visit) many countries so far. 9. The science of medicine _____ (advance) a great deal in the 19th century. Since the beginning of the 20th century, medical scientists _____ (make) many important discoveries. 10. We _____ (buy) this car two years ago and _____ (drive) 5,000 miles so far. How many miles _____ you (make) with your last Porsche? 11. Jonathan!!! Where the hell _____ you (roam)? Your guests _____ (wait) for you to come for almost four long hours!!! 12. Wow, I _____ (complete) writing my essay at last. It is not so good as I expected before, but at least I _____ (do) it before you, hear me? 13. When he _____ (hear) the bell, he _____ (leap) and _____ (dash) off to open the door, at which he _____ (see) his mother-in-law. 14. There _____ (be) a bad storm the day before yesterday. 15. He last _____ (send) me a letter when I _____ (be) in America. 16. This is the fourth time that she _____ (interrupt) us since the beginning of the meeting. 17. My parents _____ (leave) for Nottingham and I _____ (not hear) from them for a few days already. I hope they _____ (arrived) happily. 18. _____ you (understand) his last lecture? – Well, I thought I _____ (do) but now I think I _____ (forget) all he was talking about. 19. I actively _____ (ski) when I _____ (be) at the university, but then suddenly _____ (break) my arm and since that time I _____ (not do) any. 20. What films _____ you (see) this month?
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Exercise 12 Underline the correct verb form in the text below: Stella McCartney, Paul McCartney’s daughter, joined / has joined the troubled Paris fashion house Chloe barely a year ago. It took / has taken her just one year to reverse its fortunes. Previously Chloe was / has been virtually invisible as a major force in the world of fashion. But, almost single-handedly, she transformed / has transformed Chloe into the most talked about fashion brand in the world. She increased / has increased sales fivefold. Paris didn’t see / hasn’t seen anything like it since the young Yves Saint Laurent took / has taken the city by storm 30 years ago. When she was / has been clear she knew / has known what she had / has had to do. “I want to bridge the gap between the consumer and the press. At the moment fashion is just sort of stuck in the middle.” So far, Stella McCartney stuck / has stuck to her philosophy of avoiding outrageous and uncommercial catwalk creations. She kept / has kept to the simple philosophy of designing clothes that she or her friends would want to wear. As her best friends are Kate Moss, Naomi Campbell and Yasmin le Bon, it also brings her big publicity. Exercise 13 Sort the following words into two categories: used with the Present Perfect and used with the Past Simple. ago
yet
so far
the last two years
lately
since
last year
for the past three weeks
Present Perfect Past Simple
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over last month at 3 o’clock
yesterday over during the 1990s
PAST PERFECT TENSES Exercise 14 Put the verbs in brackets into one of the following tenses: Past Simple, Past Perfect Simple or Past Perfect Continuous Tenses 1. Before I _____ (come) here I _____ (visit) my new friend in London. 2. I _____ (spend) all my money before my grandparents _____ (send) me some more, so I _____ (must) borrow some more from her. 3. The police _____ (look for) the criminal for the duration of two years before they finally _____ (catch) him. 4. She _____ (be) pretty shocked that she _____ (not hear) the news before. Nobody _____ (tell) her anything about what _____ (happen). 5. The Nile _____ (become) much deeper after it _____ (rain) heavily. 6. This novel _____ (be) much shorter than he _____ (think) it would be. 7. The thief _____ (refuse) to admit that he _____ (rob) that bank and _____ (steal) the money, after which the jury _____ (convict) him. 8. John’s skin_____ (be) sunburned because he _____ (lie) in the sun. 9. Before Napoleon _____ (leave) Russia, he already _____ (lose) many soldiers. 10. When she finally _____ (get) home, her hair still _____ (be) wet from the rain. She _____ (hate) herself for not listening to her mother. 11. The moment his teacher _____ (tell) him not to, he _____ (do) that again. She _____ (not know) what do with him before, and she certainly _____ (not know) what to do with him now, she _____ (think) to herself, and then _____ (decide) to call his parents. She _____ (work) there for 25 years now, and he _____ (be) the hardest case she _____ ever (have) in her whole career as a teacher. 12. He _____ (say) what he _____ (have) to say, but later he _____ (change) his opinion. 13. How long _____ you (wait) yesterday before she _____ (come)? 14. They _____ (must) invite Christine to their party last night, because she _____ (be) very kind to them when they _____ (arrive) in London two years ago.
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15. Yesterday, I _____ (be) so very exhausted when I _____ (get back) home because I _____ (work) so hard all day long. 16. The museum _____ (burn) for a long time before the firemen _____ (reach) the building. Many pictures 5 _____ (be) already burnt. 17. When Maria _____ (ask) him what he _____ (do) with her grammar book, he _____ (avoid) the answer. 18. I _____ (feel) a bit better after I _____ (take) my medicine. 19. How your boss _____ (find out) that you _____ (come) to work late? 20. When she _____ (arrive) to the airport, the plane already_____ (leave).
5
Many pictures can also be said Many a picture, but the latter is pretty old-fashioned, and is not currently in use in everyday English.
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THE FUTURE TENSES Exercise 15 Put the verbs into the RIGHT Future Tense. Be careful about the aspect of the future action. Sometimes, several solutions are possible. Use also other forms and tenses to express the future action where necessary and possible. 1. Timothy _____ (arrive) at eight tomorrow morning. He phoned me. 2. When Timothy _____ (arrive), we _____ (have) a party. 3. Classes _____ (begin) next week, says the notice on the notice-board. 4. They _____ (complete) the bridge by the end of this year. 5. Louise _____ (not be) at the meeting in Brisbane. I am certain. 6. At this time next month, we _____ (fly) across the Pacific and you _____ (study) hard for your final exam in English. 7. I hope I _____ (finish) this report by the end of the day. 8. I _____ (open) the window? 9. I _____ (go) to watch a TV programme at nine. Before I _____ (watch) that programme, I (write) _____ a letter to my parents. 10. Susan is sick and tired of hot weather, but autumn _____ (come) soon. When autumn _____ (come) this year, she _____ (go) to the park every day and _____ (enjoy) the fresh and cool autumn air. 11. Tomorrow, my pal _____ (go) to leave for home. When he _____ (arrive) at the airport, he says that his whole family _____ (wait) already for him. 12. Radio waves from earth _____ (travel) for many years before anyone _____ (pick) them up. 13. What _____ we do? – We _____ (wait) until they _____ (come). 14. By next Wednesday, I _____ (graduate) from the Faculty for sure. 15. After Sarah _____ (graduate) with a BA, she intends to enter graduate school and work for an MA thesis. Perhaps she _____ (go) for a PhD after she _____ (get) her Master’s degree. 16. The first day of the term, everybody _____ (talk) about the holidays and _____ (show) photographs of marvellous foreign beaches, and as I have not been anywhere, I _____ (not have) anything to show. 50
17. Next January, I _____ (live) in this country for two years. 18. When _____ he (come) to see you? 19. The train from Glasgow _____ (arrive)? 20. I _____ (leave) for Manchester first thing tomorrow morning. 21. After I finish my lunch, I _____ (see) my friend. 22. By the time you return, I _____ (take) care of everything. 23. This time next year, my brother _____ (do) exactly what I am doing right now. He _____ (attend) school and _____ (study) hard for his exams, whereas I _____ (relax) in Spain and _____ (enjoy) life. 24. When we get up next morning, the sun _____ (shine), the birds _____ (sing), and my roommate still _____ (lie) there like a log. 25. Look at those horrible malicious clouds. When our lecture is over, it _____ probably (rain). 26. If I see Jim tomorrow, I _____ (invite) him to our party, and I _____ (tell) him that everything _____ (be ready) by the time he _____ (come). 27. At 2 o’clock tomorrow afternoon, my son _____ (play) football. 28. You _____ (use) your computer this evening? 29. We’re late. I expect that the film _____ already (start) by the time we arrive at the cinema. 30. Do you think that you _____ (recognise) her when she _____ (get) off the plane? – Yes, I know that she _____ (wear) a big green hat. 31. They _____ (throw) all their money on trivial things long before their holidays come to an end. 32. I _____ (come) as soon as I _____ (finish) my exercise. 1 33. I _____ (not come) before you tell me to. 1
With clauses expressing time, it is possible to use both Present Perfect Tense and Present Simple Tense, so we can say: as soon as she comes, as well as as soon as she has come. Apart from as soon as other temporal conjuctions follow the same pattern as well, and they are: when, till, until, after. COMPLETE THE FOLLOWING SENTENCES: 1. 2. 3. 4. 5.
I __________ (get) in touch when I __________ (return) from the Middle East. If they __________ (shut down) the plant, a lot of people __________ (lose) their jobs. We __________ (start) until everyone __________ (be) here. He can't make a decision until he __________ (see) the president. A project to create a bacterial cell from inanimate chemicals __________ (go) ahead as soon as it __________ (receive) approval from an ethics.
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34. They hope that it _____ (not snow) still when the right time _____ (come) for them to leave. 35. Unless you write a letter, your parents _____ (worry) about you. 36. By this time next year I _____ (take) my university degree. 37. Once he _____ (get) his degree, he _____ (study) at that university for full four years. 38. The coming election _____ (be) the main topic of conversation for the next fortnight. The party leaders _____ (speak) on TV and the local candidates _____ (address) meetings in the constituencies. 39. You please _____ (forward) this letter for me, to the Grand Hotel? I _____ (stay) there as usual for the first fortnight in August. 40. “The car _____ (not start) !” “If you get in , Tim and I _____ (give) it a push.” 41. On the news tonight, they mentioned the possibility of a power strike. Everybody _____ (look for) candles tomorrow. Exercise 16 Complete the conversation between Pietr and Dorota about their holiday plans, using the correct form of the verb in brackets. There is often more than one correct answer. Pietr:
Where _______________ you and your husband __________ (go) for your holidays, Dorota?
Dorota:
Spain
Pietr:
That _______________ (be) nice.
Dorota:
Yes. We _______________ (go) to Javea for two weeks. It’s near Alicante.
Pietr:
When __________ you __________ (fly)?
Dorota:
On Thursday night. Our plane _______________ (leave) at 9 pm from Gatwick and we _______________ (arrive) just before midnight in Alicante. We _______________
(hire)
a
car
at
Alicante
_______________ (drive) to Javea. Pietr:
It __________ (be) great to have a break.
Dorota:
Yes, but I _______________ (keep) in touch with the office by email. 52
and
Exercise 17 Choose the correct form / option to complete each of the following conversations. 1. A: (I’m seeing) / (I’ll see) the Chief Executive on Tuesday. It was arranged last week. B: I wonder if (he’ll recognise) / (he’s recognising) you. You haven’t seen him for over a year. 2. A: Look at the clouds. (It’s going to) / (It will) rain. It’s a shame. We (won’t sell) / (We aren’t selling) many soft drinks this afternoon. 3. A: Do you know what time the meeting finishes? B: Why? What (do you do) / (are you doing) afterwards? 4. A: Prices (will go up) / (are going up) if the exchange rate changes. B: What (are you doing) / (are you going to do) if that happens?
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MIXED VERBS Put the verbs in brackets into the correct tense. In some gaps, the verbs in brackets should be put in their passive form or subjunctive. Be careful about the sequence of tenses, subjunctive and causative have. Use the appropriate non-finite form, gerund or to/bare-infinitives or participles: Text 1
Bologna
Declaration
The Bologna Declaration (be) __________ a pledge by 29 countries (reform) __________ the structures of their higher education systems in a convergent way. The declaration (be) __________ a key document which (mark) __________ a turning point in the development of European higher education. The declaration (sign) __________ by 29 countries which “undertake (attain) __________ the Declaration’s objectives” and to that end “engage in coordinating (their) policies”. It (be) __________ a commitment freely (take) __________ by each signatory country (reform) __________ its own higher education
system or systems in order (create) __________ overall convergence at
European level. The Bologna declaration (be) __________ not a reform which (impose) __________ upon national governments or higher education institutions. Any pressure individual countries and higher education institutions (modal + feel) __________ from the Bologna process (modal + result) __________ only __________ from their (ignore) __________ increasingly common features or (stay) __________ outside the mainstream of Change. The Bologna process (aim) __________ at (create) __________ convergence and, thus, (be, negative) __________ a path towards the “standardisation” or “uniformisation” of European higher education. The fundamental principles of autonomy and diversity (respect) __________. The Declaration (reflect) __________ a search for a common European answer to common European problems. The process (originate) __________ from the recognition that in spite of their (be) __________ valuably different, European higher education systems (face) __________ common internal and external challenges which (relate) __________ to the growth and diversification of higher education, the employability of graduates, the shortage of skills in key areas, the expansion of private and transnational education, etc. The Declaration (recognise) __________ the value of reforms which (coordinate) __________ , compatible systems and common action. 54
Text 2
Larry
King
It (take) __________ Larry King 66 years, seven marriages and five children (discover) __________ the greatest “thrill” in life: parenthood. (Sit) __________ in the children’s room of his Mediterranean-style mansion in Beverly Hills, with his five-week-old Cannon in his arms and 15-month-old Chance (play) __________ on the floor beside him, King (say) __________ that he (pinch) __________ himself every day. “I (negative modal + believe) _______________ everything that (happen) __________ to me so far.” (Interview) _______________ nearly 10,000 people in his life, and among them six US presidents, (recognise) _______________ today around the world by the millions (watch) __________ Larry King Live on CNN every day, the man (pay) __________ “handsomely for something I (modal + do) __________ otherwise _____ for free” – it all (pale) __________ beside the joy of new father hood. “Before, I (goal-orient) ____ so __________ that the (professional) goals (be) __________ ahead of everything. I (love) __________ my children and (try) __________ to be a good father, but work always (come) __________ first. Ten years ago, if you (ask) _______________ me whether I’d rather (have) __________ a little baby or moderate a presidential debate, I (choose) ____________________ the debate. Now, the babies and the family (come) __________ first.” Although he rarely (use) __________ the word “I” today, and even though he usually (avoid) __________ (share) __________ personal experience on his show, offcamera King (be) __________ surprisingly open about his private life. He (have) __________ enough time over the years (learn) __________ how (handle) __________ the endless questions and jokes about his marriages, since he (marry) __________ twice to the same woman, a former Playboy bunny (call) __________ Alene Akins, and the age difference between him and his current wife, 26 years his junior. “I just (like) __________ diversity,” he (say) __________. “The girl I (like) __________ at 20 (be, negative) __________ the girl I (like) __________ at 30. And in the culture I (grow) __________ up in, if you (fall) __________ in love, you (get / marry) __________. I (fall) __________ in love when I (be) __________ 20 and 30, so I (get / marry) __________ . It (negative, work out) _______________ and I (pay) __________
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what I (must) __________ pay then.” He (say) __________ that “diversity” (make) __________ probably __________ him a better person, which he (prefer) __________ to (be / marry) _______________ to the same person for 50 years, (must) _______________ to make endless compromises. But he’d rather not (judge) __________ by the number of his marriages: “I (negative, make) __________ a judgement ever about people who (be) __________ single all their life.” He (say) __________ he (use / feel) _______________ uncomfortable about relationships with much younger women, but Shawn (change) __________ his perception (King (be) __________ as old as Shawn’s mother and four years younger than her father). “She (happen / be) _______________ terrific and things just (fit)__________ in,” he (say) __________(….) The only things that (worry) __________ him is that he “(be, negative) __________ around” when Cannon and Chance grow up (be) __________ in high school and college… Text 3
The GLAMAZONS are here
(Part One)
The new breed of high-maintenance woman (be) __________ also very much a high flier, and she certainly (pay) __________ the bills at Harvey Nichols with her own hard-earned cash. The Americans, of course, (have) __________ a word for her – the glamazon. She (be) __________ the future of the $171bn (£114bn) global beauty industry and the reason why the prestige end of the market (boom) __________. A glamazon (negative, modal + describe) ____________________ her beauty (spend) __________ as “pampering” or “treats” (words so beloved of mid-market women’s magazines). She (see) __________ (lavish) __________ time and money on her appearance not as an indulgence but as a need and a right. If she (have) __________ any beauty mantra, it (modal + be) the slogan of cosmetics giant L’Oreal: “Because I (be) __________ worth it.” Traditionally, the British (negative, be) _______________ quite as enthusiastic groomers as their transatlantic or European cousins. “English girls (modal + have) __________ that soapand-water Sloaney glow, which (be) _____ cute, but they (emphatic auxiliary verb + tend) _______________ (have) __________ bad hair, bad teeth, bad hands and feet,”(say) __________ one US glamazon. “It (be) __________ great (see) __________
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all these nail bars which (crop) __________ up around London – it (be) _____ about time.” “English girls” meanwhile, (complain) _______________ about American colleagues “(go) __________ way over the top” in the vanity stakes, (disappear) __________ into the loo every half hour (retouch) __________ their lip gloss.
In the
pre-nail-bar era, Englishwomen with a salon habit (keep) __________ quiet about it. Four years ago, when Bridget Page, former publisher of OK magazine, (live) __________in London, she never (mention) __________ the £100 or so she (spend) __________ every other Saturday at her favourite London salon. “I (be)__________ comfortable with myself at that time, and I (negative, feel) __________ guilty or anything, but then I (know) __________ most people – even in the magazine world where I (work) __________ - (modal + think) _______________ it odd. I (look) __________ wellgroomed, but the effort that (lie) __________ behind it (be) __________ a kind of best(keep) _____ secret.” Now that Pages (live) __________ in the Far East, where such things (be) __________ more acceptable, she (can = has chance to) _______________ (indulge) __________ enthusiastically and openly, (go) __________ to a hair or beauty salon a couple of times a week. These days, however, she (modal + come) _______________ clean in London, too. The nail bars that (take) _______________ the capital by storm – even boring old Boots (get) _______________ in on the act – (be) _____ just the tip of the iceberg. The City, which once (be) __________ a beauty retail desert, (be) _____ now full of cosmetic pit-stops and salons of all kinds. One of last year’s biggest retailing successes (be) __________ Space NK, an “apothecary” chain (sell) __________ highly upmarket, niche skincare and cosmetic products. Its founder, Nick Kinnaird, (start) __________ with a small stall in Covent Garden in the mid-1990s, and there (be) __________ now 16 prime sites across the UK. Tellingly, Space NK (open) __________ its branch in the City before it (go) __________ into Knightsbridge or Chelsea. This (be) __________ clearly the same market as that (target) _______________ now by Sephora, an even bigger cosmetic success story. When the French-(base) _____ company (open) __________ its first store in New York, it (negative, go) __________for the “ladies who lunch” enclave of the Upper East Side, but the World Trade Centre, in the heart of the financial district.
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Since (be / buy) _______________ out by luxury conglomerate Louis Vuitton Moet Hennessey in 1997, Sephora (become) __________ the second biggest cosmetic retail chain in Europe and it (captivate) __________ the US, where it (have) __________ 50 prime-site shops. The Sephora’s concept of “assisted self-service”, and its motto “Freedom, Beauty and Pleasure”, (play) __________ perfectly to the new breed of customer. Text 4
The GLAMAZONS are here
(Part Two)
Market analysts all concur that consumers (become) __________ more aware of products and their benefits. Women (inform) __________ themselves through the media, by word of mouth, and on the internet. Electronic beauty newsletters, such as Heather Kleinman’s cosmetic report, (appear / be) ____________________ increasingly influential so far. “Now, women (trade) _______________ up, but they (expect) _______________ more,” (say) __________ Piers Berezai, consumer markets analyst at Datamonitor. They (want) __________ sophisticated technology, so they get “cosmeceuticals”. These (be) __________ skincare products that (sound) __________ more like wonder drugs – nights serums and day creams (contain) __________ vitamin C, vitamin A, oxygen or alpha hydroxy acids; lipsticks with UV protection, and mascaras with vitamin B. Companies spend vast amounts on R&D, but the new magic ingredients that they (come)__________ up with (be) _____ quick (filter) __________ down to middle-market products, and customers are quick to spot this. Manufacturers (respond) __________ already __________ by (launch) __________ “super-premium” products. The best known (be) _____ the face cream, which (cost) __________ £115 for a 60m jar. This (be) _____ one of the few beauty products that (modal + claim) __________ really __________ (be) __________ rocket science: the inventor of this product, Max Huber, (be) _____ a NASA physicist who (create) __________ it while (try) __________ (heal) __________ his own third-degree burns. He (claims) to __________ (take) sound waves from the solar system and (send) __________ them through a fermented seaweed potion. It (own) ____ now __________ by Estée Lauder. The global cosmetics and toiletries market (be) __________ worth $171.4bn in 1999, and, today, (forecast) __________ by the analysts (rise) __________ to just under 58
$200bn by the year of 2003. Globalisation and rationalisation (be) _____ the watchwords. There (modal + be) __________ a bewildering number of brands and products on offer, but most are owned by just a handful of companies. Despite the boom, not all the giants (get) _______________ it right now. Revlon (post) __________ losses of $371m last year, and (restructure)__________ and (sell) __________ off non-core assets (try) __________ (cut) __________ debt. However, the biggest company of all, Paris-based L’Oreal, (have) __________ a very successful year, with sales of 10.7bn euros, and the first quarter of 2000 (remember, this text was written in 2000) (show) __________ a 15 per cent year-on-year increase. L’Oreal (modal + claim) __________ 500-odd brands in 1999, (include) __________ Lancôme, Maybelline, Helena Rubenstein, Ralph Lauren Fragrances and Giorgio Armani Parfums – not to mention recent additions such as Kiehls, an ultra-trendy prestige company. Analysts (say) _____ it (do) _______________ all the right things all this time – endless new product launches, brand acquisitions and innovations. In 1999, according to Euromonitor, the average Briton (male and female) (spend) __________ just over £38 a year on skincare and make-up. This (be) __________ higher than in Germany or Spain, and only a few pence behind the Italians. The three biggest spenders today, however, (be) _____ the French, who (spend) __________ £55.47 a head; the Americans – with £44.43 and the Japanese £74.27. But all markets (grow) __________ rapidly at this moment. In the (develop) __________ world, women (have) __________ increasingly more in common – more presence in the work-place, more stress and more money. “What (go on) _______________ in the States, and what (go on) _______________ in the UK (become) _______________ increasingly (intertwine) __________. Both markets (be) __________ full of young, professional women who (want) __________ (look) __________ groomed and (have) __________ plenty of money (spend) __________ on themselves,” (say) _____ Cynthia Clowes, make-up artist and UK representative of Stila, the fashionable US cosmetics company. At the prestige end of the cosmetics industry, the young professional woman (cultivate) __________ carefully _______________. So far, Datamonitor (define) _______________ her as “the therapeutic”, (concern) __________ with her external and internal well-being, and (look) __________ for rewards and escapes from stress.
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Text 5 It was 10 o’clock at night. Eddie was tired and hungry. He __________ (spend) the last five hours talking to the company’s senior managers. He __________ (realize) that he would have to resign from his job, and also that he __________ (modal + face) the possibility of going to prison. Six months ago, everything __________ (be) fine. He __________ (have) __________ a wonderful job and he __________ (make) a lot of money. Then he __________ (meet) some people who __________ (advise) him badly. They __________ (give) him a list of companies and __________ (tell) him to buy their shares. He __________ (use) the company’s money to do this. At first the shares __________ (rise), so he __________ (buy) some more. Everything __________ (seem) so easy. Then the stock market __________ (crash) and he lost everything. Eddie __________ (telephone) his wife before leaving the office. He __________ (apologise) for not phoning earlier, explaining that he (have) __________ a difficult meeting. “You sound upset. Anything wrong?” she asked him. “I’ll tell you about it when I get back,” he __________ (reply). Text 6 When James Bond got back to his hotel room it _______________ (be) midnight. His windows were closed and the air-conditioning _______________ (be) on. Bond _______________ (switch) it off and _______________ (open) the windows. His heart _______________ (thump) still in his chest. He _______________ (breathe) in the air with relief, then _______________ (have) a shower and _______________ (go) to bed. At 3.30 he _______________ (dream) in his bed, not very peacefully, of the three black-coated men with red eyes and angry white teeth when suddenly he _______________ (wake up). He _______________ (listen). There _______________ (be) a noise. It _______________ (come) from the window. Someone _______________ (move) behind the curtains. James Bond _______________ (take) his gun from under his pillow, _______________ (get) quietly out of bed, and _______________ (creep) slowly
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towards the window. Someone _______________ (breathe) behind the curtains. Bond _______________ (pull) the curtains back with one quick movement. Golden hair suddenly _______________ (shine) silver in the moonlight. “Mary Goodnight!!!” Bond _______________ (curse). “What the hell _______________ (do) you here?” “Quick, James! Help me in!” she _______________ (whisper) urgently. Bond _______________ (put) down his gun and _______________ (try) to pull her through the open window. At the last moment, her foot _______________ (catch) in the curtain and the window _______________ (bang) shut with a noise like a gunshot. Bond _______________ (curse) again. Mary Goodnight _______________ (whisper), “I _______________ (be) terribly sorry, James!” “Sh! Sh!” _______________ (say) Bond, and quickly ____________ (lead) her across the room to the bathroom. He _______________ (turn) on the light and the shower. They _______________ (sit) down on the side of the bath. Bond _______________ (ask) again. “What the hell _______________ (do) you here? What _______________ (be) the matter?” “James, I _______________ (be) so _______________ (worry). A ‘Most Immediate’ message _______________ (come) from HQ this evening. A top KGB man, _______________ (use) the name Hendriks, _______________ (stay) at this hotel. I _______________ (know) that you _______________ (look for) him, but he now _______________ (know) that you _______________ (be) here. Listen, he _______________ (look for) you!” “I _______________ (know),” _______________ (say) Bond. “That man _______________ (be) here all right. So _______________ (be) a gunman _______________ (call) Scaramanga. Mary, _______________ HQ _______________ (say) if Hendriks _______________ (have got) a description of me?” “No, he _______________ . You _______________ just (describe) as secret agent James Bond.” “Thanks, Mary. Now I __________ (must) get you out of here. _______________ (not worry) about me, just _______________ (tell) HQ that you _______________ (give) me the message. OK?”
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“OK James.” She __________ (stand up) and _______________ (look) into his eyes: “Please, take care, James.” “Sure, sure I _______________ .” Bond _______________ (turn off) the shower and _______________ (open) the bathroom door. “Now, come on.” A voice _______________ (came) from the darkness of the bedroom: “This _______________ (not be) your lucky day, Mr. Bond. Come here both of you! Put your hands behind your necks!” Scaramanga _______________ (walk) on to the door and _______________ (turn on) the lights. His golden gun _______________ (point) directly at James Bond. Text 7 It was a deep voice, and foreign in tone; yet there (be) ___________something in the manner of pronouncing my name which (make) ___________ it sound familiar. I (turn) ___________ about (discover) ___________ who (speak) ___________, fearfully; for the doors (be) ___________ shut, and I (see) ___________ nobody on (approach) ___________ the steps. Something stirred in the porch; and, (move) ___________ nearer, I (distinguish) ___________ a tall man (dress) ___________ in dark clothes, with dark face and hair. He (lean) ___________ against the side, and (hold) ___________ his fingers on the latch as if (intend) ___________ to open for himself. -
Who it (can be) ___________?, I thought.
-
Mr Earnshaw? Oh, no! The voice (have) ___________ no resemblance to his.
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I (wait) ___________ here for an hour, he resumed, while I (continue) ___________ (stare) ___________: “and the whole of that time all round us (be) ___________ as still as death. I (dare) not ___________ (enter) ___________. You (not know) ___________ me? (look) ___________, I (not be) ___________a stranger!”
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Text 8 Mr. Heathcliff has just honoured me with a call. About seven days ago he (send) ___________ me a brace of grouse
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– the last of the season. Scoundrel! He (not be)
___________ altogether guiltless in this illness of mine; and that I (have) ___________ a great mind to tell him. But, alas! How (can) ___________ I offend a man who (be) ______________________ charitable enough (sit) ___________ at my bedside a good hour then, and (talk) ___________ on some other subjects than pills, and draughts, blisters, and leeches? This (be) ___________ quite an easy interval. I (be) ___________ too weak (read) ___________; yet I (feel) ___________ as if I (can) ___________ enjoy something interesting right now. Why (not have) ___________ up Mrs. Dean (finish) __________ her tale? I can recollect its chief incidents, as far as she (go) ___________. Yes: I (remember) ___________ her hero (run) ___________ off, and never (hear) ___________ of for three years; and the heroine (be) ___________ married. I know what to do, I (ring) ___________: she (be) ___________ delighted (find) ___________ me capable of talking cheerfully. Mrs. Dean suddenly (come) ___________ in and I did not know what to say.
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A brace of grouse – you can refer to two things of the same kind as a brace, especially two wild birds or animals that have been killed for sport or for food. For example, He had a brace of pheasants on his desk… There’s six brace of them for you Charlie. = pair, couple
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Text 9 I got Miss Catherine and myself to Thrushcross Grange; and, to my agreeable disappointment, she (behave) ___________ infinitely better than I DARE ___________ (expect) ___________. She (seem) ___________ almost over fond of Mr. Linton; and even to his sister, she (show) ___________ plenty of affection. They (be) ___________ both very attentive to her comfort, certainly. It (not be) ___________ the thorn (bend) ___________ to the honeysuckles, but the honeysuckles (embrace) ___________ the thorn. There (be) ___________ no mutual concessions: one (stand) ___________ erect, and the others (yield) ___________: and who (can) ___________ be ill-natured and bad tempered when they encounter neither opposition nor indifference? I (observe) ___________ that Mr. Edgar (have) ___________ a deep-rooted fear of (ruffle) ___________ her humour. He (conceal) ___________ it from her; but, if ever he (hear) ___________ me (answer) ___________ sharply, or (see) ___________ any other servant (grow) ___________ cloudy at some imperious order of hers, he (show) ___________ his trouble by a frown of displeasure that never (darken) ___________ on his own account. Text 10 It ended. Generally speaking, we (must) ___________ be for ourselves in the long run; the mild and generous are only more justly selfish than the domineering; and it (end) ___________ when the circumstances (cause) ___________ each (feel) ___________ that the one’s interest (not be) ___________ the chief consideration in the other’s thoughts. On a mellow evening in September, I (come) ___________ from the garden with a heavy basket of apples which I (gather) ___________ for quite a while. It already (get) ___________ dusk, and the moon (look) ___________ over the high wall of the court, (cause) ___________ undefined shadows to lurk in the corners of the numerous (project) ___________ portions of the building. I (set) ___________ my burden on the house steps by the kitchen door, (linger) ___________ to rest, and (draw) ___________ in just a few more breaths of the soft, sweet air; my eyes (be) ___________ on the moon, and my back to the entrance, when I (hear) ___________ a voice behind me (say) ___________…
“Nelly, that (be) ___________ you?”
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Text 11 In the fall of the year, when the days were shortening and the bite of the frost (come) ___________ into the air, White Fang (get) ___________ his chance for liberty. For several days there (be) ___________ a great hubbub in the village. The summer camp (passive:) (dismantle) ___________, and the tribe, bag and baggage, (prepare) ___________ to go off to the fall hunting. White Fang (watch) ___________ it all with eager eyes, and when the tepees (begin) ___________ (come) ___________ down and the canoes (load) ___________ at the bank, he (understand) ___________. Already the canoes (depart) ___________, and some (disappear) ___________ down the river by that time. Quite deliberately he (determine) ___________ to stay behind. He (wait) ___________ his opportunity (slink) ___________ out of camp to the woods. Here in the (run) ___________ stream where ice (begin) ___________ to form, he (hide) ___________ his trail. Then he (crawl) ___________ into the heart of a dense thicket and (wait) ___________ . The time (pass) ___________ by and he (sleep) ___________ intermittently for hours. Then he (arouse) _____________ by Grey Beaver’s voice (call) ___________ him by name. There (be) ___________ other voices. White Fang (modal) (hear) ___________ Grey Beaver’s squaw (take) ___________ part in the search, and Mit-sah, who (be) ___________ Grey Beaver’s son. White Fang (tremble) ___________ with fear, and though the impulse (come) __________ (crawl) ___________ out of his hiding-place, he (resist) ___________ it. After a time the voices (die) ___________ away, and some time after that he (creep) ___________ out (enjoy) ___________ the success of his undertaking. Darkness (come) ___________ on slowly, and for awhile he (play) ___________ about among the trees, (pleasure) ___________ his freedom. Then, and quite suddenly, he (become) ___________ aware of loneliness. He (sit) ___________ down (consider) ___________ , (listen) ___________ to the silence of the forest and (perturb) ___________ by it. The fact that nothing (move) ___________, nor (sound) ___________ seemed ominous. He felt the lurking of danger, (not see) ___________ and (not guess) ___________. He (be) __________ suspicious of the looming bulks of trees and of the dark shadows that (modal + conceal) ___________ all manner of perilous things.
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Text 12 Here we noticed that the sides of the tunnel (cover) __________ with quaint sculptures, mostly of (ail) __________ figures (drive) __________ in chariots. One, which (be) __________ exceedingly beautiful, (represent) __________ a whole battle scene with a convoy of captives (march) __________ off in the distance. “Well,” (say) __________ Sir Henry, after (inspect) __________ this ancient work of art, “it (be) __________ very well (call) __________ this Solomon’s Road, but my humble opinion (be) __________ that the Egyptians (be) __________ here before Solomon’s people ever (set) __________ a foot on it. If this (not be) __________ Egyptian handiwork, I must say that it (be) __________ very like it.” By midday we (advance) __________ sufficiently down the mountain (reach) __________ the region where wood (meet) __________ with. First we (come) __________ to scattered bushes which (grow) __________ more and more frequent, till at last we (find) __________ the road (wind) __________ through a vast grove of silver trees similar to those which (passive, see) _______________ on the slopes of Table Mountain at Cape Town. I (meet) __________ never before with them in all my wanderings except at the Cape, and their appearance here (astonish) __________ me greatly. “Ah!” said Good, (survey) __________ these shining-leaved trees with evident enthusiasm, “here (be) __________ lots of wood; (let) __________ us (stop) __________ and (cook) __________ some dinner; I about (digest) __________ that raw liver.” Nobody (object) __________ to this, so, (leave) __________ the road, we (make) __________ our way to a stream which (babble) __________ away not far off, and soon (have) __________ a goodly fire of dry boughs (blaze) __________. (cut) __________ off some substantial hunks from the flesh of the inco which we (bring) __________ with us, we (proceed) __________ (toast) __________ them on the end of sharp sticks, as one (see) __________ the Kafirs (do) __________ , and (eat) __________ them with relish. After (fill) __________ ourselves, we (light) __________ our pipes and (give) __________ ourselves up to enjoyment, which, (compare) __________ with the hardships we recently (undergo) __________, (seem) __________ almost heavenly. The brook, of which the banks (clothe) __________ with dense masses of a gigantic species of maidenhair fern (intersperse) __________ with feathery tufts of wild asparagus, (babble) __________ merrily at our side, the soft air (murmur) __________ through the leaves of the silver trees, doves (coo) __________ around, and bright-winged birds (flash) __________ like (live) __________ gems from bough to bough. It (be) __________ a paradise.
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THE SUBJUNCTIVE MOOD 1. Jane wishes she _____ speak several languages. (can) 2. It is high time his mother _____ him the truth. (tell) 3. I’d rather they _____ anything about her betrayal. (not say) 4. Her advisor recommended that she _____ five courses. (take) 5. If only she _____ us about it earlier. (inform) 6. He wishes he _____ a new bike. (have) 7. We wished our parents _____ here yesterday. (be) 8. It is desirable _____ no one else about it. (know) 9. Suppose he _____ (suggest) that you _____ (leave) immediately. 10. She behaves as if she _____ him. (know) 11. He talks as though he _____ the report on his own. (write) 12. It’s about time we _____ preparing our exams. (start) 13. It is important you _____ late. (not be) 14. I wish she _____ rock music. (like) 15. If only I _____ to stay up so late. (negative must) 16. She wishes she _____ two days ago. (travel) 17. I’d rather she _____ next to me every day. (not sit) 18. It is time they _____ taught a lesson!!! (be) 19. It is imperative he _____ his homework this time. (do) 20. If only they _____ how to answer your question, they would be the luckiest persons in the world. (know) 21. Susanna behaved as though she _____ crazy. (be) 22. He’d rather his children _____ more often at home. (be) 23. Suppose you _____ your letter a few days ago. (send) 24. When we visited this house two days ago, it seemed as if it _____ haunted. (be) 25. It is essential the pollution _____ (control) and eventually _____ (eliminate) by the people responsible for it. 26. We have enjoyed the dinner, but now it is really time we _____ (go). 27. I wish I _____ sociology when I was young. (study)
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28. Will you stop treating her as if she _____ a child. (be) 29. The students requested the exam _____ (be) not so difficult. 30. He introduced himself to me as if he never _____ me before. (meet) 31. I’d rather they _____ so often. (not call) 32. Now he wishes he (be) _____ a manager. His salary would be higher. 33. Suppose you _____ (win) a lot of money on a lottery! What would you do? 34. Sometimes people behave as though they _____ no brains in their heads. (have) 35. If only you _____ us know earlier. (let) 36. It is high time we _____ this apartment. (redecorate) 37. They wish they never _____ to this country. (come) 38. It’s time we _____ something to stop violence. (do) 39. He always talks as if he _____ a public meeting. (address)
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THE CONDITIONAL CLAUSES
Exercise 1 Put the verbs in brackets into the correct verb forms, paying attention to the context. Sometimes, mixed conditionals are possible. Note such sentences and discuss them. 1. If the weather (be) _____ nice next Monday, we’ll go to the mountains. 2. She won’t go unless he (invite) _____ her. 3. If the telephone (ring)_____ while I am out, please answer it. 4. If I (be) _____ you, I would take that exam. 5. If I had worn my coat, I (not catch) _____ a cold. 6. If I were you, I (not work) _____ so hard. I (be) _____ more careful. 7. I would have visited you if I (know) _____ you were living in NYC. 8. If they had the right qualifications, they (can) _____ apply for that job. 9. If he (phone) _____, please tell him that I’ll be back in five minutes. 10. If you had asked politely, people (help) _____ you for sure. 11. If he (have) _____ so much to do, he has to ask for help. 12. Students will fail the exam unless they (study) _____ harder. 13. If you (know) _____ the facts, you would help us with this problem. 14. Joanna (save) _____ some food yesterday _____ she (know) _____ you would be late. 15. If they _____ any sense (have), they _____ (not bring) that second-hand washing machine two days ago. But they obviously have no sense at all. 16. If we ran our own business, we (be)_____ more independent. 17. If you (have) _____ longer legs, you _____ (can) run faster. 18. Cancel the match if it (rain) _____. 19. If you do not take a cab, you (miss) _____ performance. 20. She must have loved him very much because she waited for him for 15 years. If she (not love) _____ him, she (not wait) probably _____ so long. 21. Look at Tom trying to start his car again. If I (be) _____ him, I (get) _____ a new battery.
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22. It’s easy to negotiate with a partner if one (know) _____ how to do it. 23. If I (have) _____ the courage, I would have answered him back. But, unfortunately, I have to admit I am a sissy. 24. If she (be) _____ older, she (have) _____ more sense. 25. I would not have thought it possible unless I (see) _____ the whole incident. 26. If you ( give ) _____ me a special price, I (put) _____ in a bigger order. 27. If you (give) _____ me 90 days to pay, I (buy) _____ it right now. 28. I (take) _____ last year’s stock if you (take off) _____ 15%. 29. I (purchase) _____ the equipment yesterday if you (throw in) _____ the accessories. 30. How long (you hold) _____ the prices if we (order) _____ today? 31. If I (pay) _____ cash how much discount (you allow) _____. Exercise 2 Complete the given sentences: We’ll manage to catch the train if _________________________________ The flight is generally postponed if ________________________________ Be careful if __________________________________________________ Unless she goes now, ___________________________________________ If you will give me the money, ____________________________________ If the worst should come to the worst, ______________________________ If I were the Prime Minister, ______________________________________ He could buy a new car if ________________________________________ If you were to stay in England just a few months longer, ________________ If the policeman hadn’t shown me the way, __________________________ The pupil would have been punished if _____________________________ Would you have married me if ____________________________________ What difference would it have made if ______________________________ Should the weather be fine, _______________________________________ Had it not been a hot day, ________________________________________
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Exercise 3
Translate the following sentences, use inversion where possible.
1. Kada bi mi dao tu knjigu, ja bih je pročitao. _________________________________________________________________ 2. Ovo će vam biti lako ako izradite sva vežbanja pažljivo. _________________________________________________________________ 3. Da sam znao da su kod kuće, ja bih ih posetio. _________________________________________________________________ 4. Išao bih na čas da nisam bolestan. _________________________________________________________________ 5. Ako ga zamolite, on će vam pomoći. _________________________________________________________________ 6. Da nije bila tako zaposlena, ona bi juče došla. _________________________________________________________________ 7. Ići će u inostranstvo ako zaradi dovoljno novca. _________________________________________________________________ 8. On se ne bi posekao da je bio malo pažljiviji. _________________________________________________________________ 9. Da je na tvom mestu, ne bi išao tamo bez preke potrebe. _________________________________________________________________ 10 Ako je to bio ponedeljak, onda mora da je bio kod svojih roditelja. _________________________________________________________________
Exercise 4
Put if or unless in the following sentences
1. _____ you don’t have persistence, you can’t be a good salesman. 2. We don’t employ people _____ they’re flexible and keen to work hard. 3. _____ you do business abroad, it’s a good idea to learn about the local culture. 4. _____ you encounter any problems with your mobile phone, we will provide a complete repair service. 5. _____ you call to tell me you’re not coming, I’ll see you tomorrow. 6. Don’t promise anything _____ you’re completely sure. 7. Your presentation will be better _____ you make good eye contact with the audience. 8. _____ you increase sales by over 20%, the company will pay you a performance bonus. 71
Exercise 5 Match the two columns below. 1. If the government lowers interest rates,
a) it loses market share.
2. If you want to play golf well,
b) people tend not to save.
3. If inflation is high,
c) it is more difficult to export.
4. If the national currency is strong,
d) you get monkeys.
5. If you have an offshore bank account,
e) you have to practise regularly.
6. If you pay people peanuts,
f) it makes borrowing easier.
7. If a firm doesn’t advertise,
g) you don’t pay income tax.
Exercise 6 Negotiating positions Expand the prompts to make conditional sentences: 1. firm orders in advance for one year
reduce the price by 10%
?
______________________________________________________________________ 2. make a firm order
agree to split the transport costs 50-50 ?
______________________________________________________________________ 3. ensure free maintenance
buy a new photocopier from us
?
______________________________________________________________________ 4. buy the turbo-diesel model
install air conditioning and a CD-player free of charge
______________________________________________________________________
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?
Exercise 7 Insert provided (that) , so long as , on condition (that) 1 1. I agree to work seven days a week……………………… _____________________________________________ 2. I agree to take a cut in salary …………………………… _____________________________________________ 3. We agree to make a special delivery …………………… _____________________________________________
1
Have a look at the following sentences showing the contexts within which these forms are used: 1. 2. 3.
She was prepared to come, provided that (=on condition, as long as, providing) she might bring her daughter. Children were permitted into the hall for these films, provided (=on condition, as long as, providing) they sat at the back. He said he was prepared to give jobs to both of us provided (=on condition, as long as, providing) I could assure him I intended to stay. Collins Cobuild, p. 1156
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INDIRECT SPEECH Exercise 1 Put the following sentences into Indirect Speech, following all the rules connected to the Sequence of Tenses 1. I will be working in this hotel until next year. He said… ____________________________________________________________ 2. Has mother returned yet? She wanted to know… ____________________________________________________________ 3. I have just heard some gossip about him. She told me… ____________________________________________________________ 4. It has been snowing since last week. He tried to explain to us… ____________________________________________________________ 5. What does it mean? Teacher asked me… ____________________________________________________________ 6. Is your mother going to retire? The nun asked me… ____________________________________________________________ 7. Don’t smoke. She told me… ____________________________________________________________ 8. Is it going to rain? My little brother asked me… ____________________________________________________________ 9. Do you love me? She asked him… ____________________________________________________________ 10. Please do not use this book. The teacher asked us… ____________________________________________________________ 11. Can you go to the meeting with me tonight. Bill asked me… ____________________________________________________________ 12. When must I return this report? She wanted to know… ____________________________________________________________ 13. I have been smoking ten cigarettes a day recently. He complained that… ____________________________________________________________ 14. I’m feeling ill. Tom said… ____________________________________________________________ 74
15. How long have you been seeing each other? She asked me… ____________________________________________________________ 16. We want to go on holiday, but we do not know where to go. She said… ____________________________________________________________ 17. Why didn’t he come to see us yesterday? She wanted me to tell her… ____________________________________________________________ 18. Why are you telling me this? She asked me… ____________________________________________________________ 19. Is what you said really true? He asked me… ____________________________________________________________ 20. Is New York bigger than London? She asked me… ____________________________________________________________ 21. Get into the lane, said my driving instructor. ____________________________________________________________ 22. I may be late, he said to me. ____________________________________________________________ 23. You should study harder. Margaret told me… ____________________________________________________________ 24. Shut the door but don’t lock it. The guard ordered me to.… ____________________________________________________________ 25. Did you finish your assignment? Marjorie wanted to know … ____________________________________________________________ 26. I expect you to be in class every day. Unexcused absences may affect your mark. Our sociology teacher said… ____________________________________________________________ 27. Are you a student who telephoned me a few minutes ago? She asked me… ____________________________________________________________ 28. I won’t need my computer, you can use it if you want to. He said… ____________________________________________________________ 29. How can I know you are not lying? The judge asked the convict… ____________________________________________________________
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30. What will you be doing tomorrow at this time? She asked me… ____________________________________________________________ 31. Have you been waiting for me since five o’clock? She asked… __________________________________________________________ Exercise 2 Step 1 Choose an appropriate verb from the box and report 1what was said in each of the sentences on the next page. 7 agree emphasise explain point out recommend remind suggest offer promise advise remind warn recommend suggest
that ……….
to + verb (somebody) to + verb (verb)+ing……….
1. “We think you are right on this point.” ____________________________________________________________ 2. “Be careful of very rapid change.” ____________________________________________________________ 3. Don’t forget people dislike change.” ____________________________________________________________ 4. “I’ll help you finish the rota.”8 ____________________________________________________________ 5. “Why not use a courier service to speed things up?” ____________________________________________________________ 1
REPORTING OR SPECIFYING VERBS ARE THOSE VERBS WHICH SPECIFY THE MEANING OF AN ORDINARY REPORTING VERB SUCH AS SAY – TELL – ASK, DEPENDING ON WHETHER THE SENTENCE STANDS FOR A STATEMENT, COMMAND OR QUESTION. LIST OF REPORTING VERBS IS IN APPENDIX 2 2 Other patterns are also possible. 8 Roster (AE) is more frequent than rota – list of people.
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6. “If I were you I’d speak to the boss first.” ____________________________________________________________ 7. “It’s a particularly important to talk about change.” ____________________________________________________________ 8. “Actually there are several problems with the new location.” ____________________________________________________________ 9. “The new reporting system works in the following way.” ____________________________________________________________ 10. “The summer is the best time for you to make these changes.” ____________________________________________________________ Exercise 3 Circle the best reporting verb for each of the following sentences. 1. I’ll send you the revised figures by the end of the week. a) promise b) warn c) apologise 2. Sorry about the delay. a) apologise b) remind
c) suggest
3. I could come in early tomorrow to speed things up a bit, if you like. a) admit b) promise c) offer 4. Our after-sales service isn’t always up to scratch, let’s face it. a) suggest b) acknowledge c) advise 5. Don’t forget to bring the sales figures. a) remind b) deny
c) insist
6. If I were you, I’d take a closer look at what our competitors are doing. a) advise b) insist c) promise 7. You will never clinch the deal if you procrastinate. a) promise b) warn c) deny 8. It wasn’t me who had sent you an infected file. a) apologise b) deny c) suggest 9. We’ve got to launch a new BX2 model by the end of September, it’s crucial. a) offer b) insist c) suggest 10. What about hiring more temporary staff? a) suggest b) offer
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c) promise
PASSIVE VOICE Exercise 1 Turn the following sentences into the passive voice. 1. In Canada people speak English and French. _________________________________________________________________ 2. They wrote the report in two hours. _________________________________________________________________ 3. She didn’t introduce me to her brother. _________________________________________________________________ 4. His father will punish him. _________________________________________________________________ 5. Someone has broken the lock. _________________________________________________________________ 6. You can’t wash this dress. _________________________________________________________________ 7. They are repairing the roads. _________________________________________________________________ 8. An earthquake destroyed the town in the 15th century. _________________________________________________________________ 9. They haven’t written her name properly. _________________________________________________________________ 10. The cook was preparing the lunch for a long time. _________________________________________________________________ 11. They had been sleeping for 10 hours before she came. _________________________________________________________________ 12. After the policemen have caught the thief, they will send him to prison. _________________________________________________________________ 13. Someone must do it before it’s too late. _________________________________________________________________
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14. That man is mending my watch. _________________________________________________________________ 15. They are holding the meeting now. _________________________________________________________________ 16. The postman has just delivered two letters. _________________________________________________________________ 17. Will you publish a new book soon? _________________________________________________________________ 18. Were they breaking the windows with large stones? _________________________________________________________________ 19. Do many people celebrate Christmas? _________________________________________________________________ 20. Have people helped him? _________________________________________________________________ 21. Did the wind shake the branches of the tree? _________________________________________________________________ 22. Had they finished the game before noon? _________________________________________________________________ 23. When will they inform us about it? _________________________________________________________________ 24. We don’t allow smoking here. _________________________________________________________________ 25. Someone will give you new instructions before you leave. _________________________________________________________________ 26. They offered me a much higher salary at the bank. _________________________________________________________________ 27. When did they announce your flight? _________________________________________________________________ 28. Has the noise frightened you? _________________________________________________________________
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Exercise 2 1. Oranges GROW in California. (Present Perfect) _________________________________________________________________ 2. Computers USE all over the world. (Present Simple) _________________________________________________________________ 3. You ever TEACH how to behave? (Present Perfect) _________________________________________________________________ 4. I SURPRISE that you ROB. (1. Past Simple, 2. Past Perfect) _________________________________________________________________ 5. A new project for the joint exploration of the space MAKE now. (Present Continuous) _________________________________________________________________ 6. Empty bottles MUST NOT / THROW. (Present Simple) _________________________________________________________________ 7. I GIVE this pen yesterday. (Past Simple) _________________________________________________________________ 8. The form HAVE TO / SIGN in the presence of the witness. (Present Simple) _________________________________________________________________ 9. He INTERVIEW now. (Present Continuous) _________________________________________________________________ 10. After my talk, I ASK to explain the point that MAKE. (1. Past Simple, 2. Past Perfect) _________________________________________________________________
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Exercise 3 Put the verbs in brackets into either active or passive voice as appropriate. Text 1 Communicado’s presentation skills training courses __________ (tailor) to each client’s individual needs, so the main focus is on the type of presentations that __________ (give) by the participants in their everyday working lives. Courses __________ (conduct) either on a one-to-one basis or in groups. They are highly participative and __________ (design) to be enjoyable as well as instructive. Communicado __________ (encourage) clients to __________ (build) on their existing social communication skills. Through a number of interesting techniques we __________ (show) clients how time can __________ (save) in preparation, how body language can __________ (use) to maximum effect and how visual aids can __________ (create) for maximum impact. For more details on how Communicado can __________ (help) your company improve its business presentations, call 0800 222 4567 now. Text 2
Use the passive only when necessary.
From trees to pulp The trees __________ (transport) to the paper mill by lorry, train or ship. First the bark __________ (remove). This __________ (burn) at a later stage so that energy can __________ (generate) for the paper-making process. Then the logs __________ (cut) into chips and __________ (cook) under high pressure for four hours to make paper pulp. Next the pulp __________ (bleach) to __________ (remove) dirt spots and __________ (improve) its ageing properties. From pulp to paper The manufacturing process also __________ (require) chemicals to strengthen the paper. The fibres __________ (mix) with additives and __________ (dilute) with water. This mixture __________ (spray) onto the paper machine where it __________ (press), then __________ (dry) and __________ (wind) onto one large reel which __________ (weigh) up to 20 tons. Each part of the process (control) by computers which automatically __________ (correct) any errors. 81
Exercise 4 Rewrite the following sentences to make the words in italics the subject of the sentence. 1. Jean-Antoine Menier invented the chocolate bar. ____________________________________________________________ 2. Abraham Verhoeven had invented the newspaper in 1605. ____________________________________________________________ 3. We are going to make 20% of our workforce redundant. ____________________________________________________________ 4. We are relocating our head office in Canada. ____________________________________________________________ 5. We were considering the new proposal for most of last week. ____________________________________________________________ 6. They have cancelled the 9.00 am flight to Hong Kong. ____________________________________________________________ 7. We are investigating the problem. ____________________________________________________________ Exercise 5 Complete the article with the passive form of the verbs in brackets. Powdered instant coffee was devised (devise) by Satori Kato but his idea (exploit) _______________ by others. The practice of drinking coffee (invent) _______________ earlier in Arabia where it (report) _______________ by ar-Razi, an Arab doctor in the 10th century. Coffee (produce) _______________ in many countries. The coffee bush (find) _______________ originally in Arabia and Ethiopia, but it (now, grow) _______________ in Brazil, Columbia, the Ivory Coast, Uganda, Angola, Kenya, and Central
America.
The
beans
(grind)
_______________
_______________ in most countries as a breakfast drink.
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and
coffee
(use)
The first coffee house (open) _______________ in Paris in 1643 and (follow) _______________ by others in Oxford, 1650, and London, 1652. Coffee bushes produce berries which contain one or two beans. The berries (pick) _______________ by hand and (put) _______________ through a pulping machine. The beans which come out (place) _______________ in large tanks where the pulp ferments. The beans (then, wash) _______________ and (spread out) _______________ to dry in the hot sun. After two weeks the beans (put) _______________ through a machine which removes the last of the skin. It is not until the coffee beans (roast) _______________ that they get their fragrant scent. After roasting, the beans (grind) _______________ between steel rollers. The best coffee (make) _______________ from freshly roasted and ground beans.
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PASSIVE OR «CAUSATIVE HAVE» 1. The tide washed the shore. _________________________________________________________________ 2. Columbus had discovered America. _________________________________________________________________ 3. Someone will do it for me. _________________________________________________________________ 4. John has just brought the mail. _________________________________________________________________ 5. David has repaired his car at the mechanic’s. _________________________________________________________________ 6. Hughes will post the letter soon. _________________________________________________________________ 7. My brother is going to send the telegram soon. _________________________________________________________________ 8. The officer will fill our forms at the police station. _________________________________________________________________ 9. Susan is giving him the reward, look at them. _________________________________________________________________ 10. No sooner did someone translate their text than they got up and went home. _________________________________________________________________ 11. Will they show me the way? _________________________________________________________________ 12. People eat a lot of bread in this country. _________________________________________________________________ 13. They formerly used the Tower of London as a prison. _________________________________________________________________ 14. John has caught the bird. _________________________________________________________________ 15. The boy is going to bring the dresses to her. _________________________________________________________________ 84
16. Someone washed my car for me yesterday. _________________________________________________________________ 17. Someone does not clean them for us every day. _________________________________________________________________ 18. I asked someone to paint the gate last week. _________________________________________________________________ 19. Someone has tuned her piano for her before. _________________________________________________________________ 20. Somebody sends Mary her dresses from Paris every week. _________________________________________________________________ 21. Your hair wants cutting. You must… _________________________________________________________________ 22. Tell someone to translate it into English. _________________________________________________________________ 23. She will ask someone to make a new one. _________________________________________________________________ 24. I’m going to tell someone to add an extra room. _________________________________________________________________
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MODAL VERBS Degrees of likelihood Part 1 This text deals with the likelihood of an earthquake in the San Francisco area. Decide where each of the phrases from a-h fits into the passage. The next big earthquake in the Bay area may come sooner than you think. There is a 67 percent chance of at least one earthquake of magnitude 7 or larger in the San Francisco Bay area between now and 2020. Such an earthquake __________ . Some
scientists
believe
that
the
67
percent
probability
estimate
_______________. They have noted several instances of pairs of earthquakes of magnitude 6.5 or larger in northern California, and they are concerned that the Loma Prieta earthquake _______________. Other fault segments in northern California _______________. Therefore it seems prudent to consider the 67 percent chance of a large earthquake within the next 20 years as a minimum estimate. Future studies are also likely to produce additional data that _______________. However, the major conclusions are not likely to change. Scientists agree that: •
Earthquakes of magnitude 7 and larger are highly likely within the Bay area during the next few decades.
•
Each of these events _______________ because each will probably be located closer to densely populated areas.
•
Action is needed now to reduce the damage and the number of deaths that _______________ even if this _______________.
a) might also be capable of producing large earthquakes b) may be too low c) could cause more damage than the Loma Prieta quake d) will result in changes in probability estimates e) could strike at any time, including today f) could be the first quake of such a pair g) may involve significant expense h) could result from future major earthquakes From United States Geological Survey. 86
Part 2 What other expressions of likelihood are there in this passage? List them. Part 3 Insert the appropriate modal verb 1. Doctor, I think the patient’s stopped breathing. You _____________ come immediately!! 2. You ____________ come to meet me at the station. It was not necessary. I __________ (get) a cab. 3. I do not think anything’s seriously wrong with the patient, but you __________ call in and see her if you have time. 4. When you have a headache, you _____________ take a rest. Since you have a splitting headache, you _________ take an aspirin and go to bed. 5. I’m expected at the hospital in half an hour. I’ll _________ go, I’m afraid. 6. She ____________ get up early tomorrow since it is a holiday. 7. Jeanie’s got a cold. I do not think she ___________ go to school today. What Jeanie has is infectious. She ___________ go to school! 8. You ____________ spend so long playing with your computer. It’s bad for your eyes. You ____________ go out with your friends. 9. – There are a lot of photographers at the airport today. They _________ be expecting someone famous to arrive. – Well, it _____________ be a film star who’s come to the film festival. – No, it ____________ be. The festival ended yesterday. 10. He ____________ (make) a mistake. Perhaps he did, when you come to think of it. 11. He ____________ (paint) it the wrong colour. It’s just possible that he did. 12. You _________ (eat) between meals. You _________ (get fat). And now you _________ wash your hands because you played in the sand. 13. You ____________ (finish) the job by now. You promised! 14. You ____________ (take) an umbrella. It is cloudy and it ___________ rain. 15. Anyone ____________ make a mistake. No one is perfect, don’t you think so? 16. The engines do not seem to be working properly. There _____ be some ice in them.
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17. Oh, look! Those three men standing there are enormous. They _____ (be) expecting someone famous to arrive. And the photographers are all running towards them. They _______ come to meet them. 18. Planes flying in cold countries in winter ______ have problems because of ice on the wings. 19. I _____ read when I was four years old, but I ____ (not) write very well. 20. Both engines have failed. I’ll try to find a place to land. We haven’t much chance of surviving, but we _____ be lucky. 21. Just have a look at those boys standing there! They _____ (be) basketball players. Our team has signed some new American players. It ___ (be) them, when you come to think of it. 22. We _____ (not) afford to pay for our journey across Africa, but we ______ make it in the end because the bicycle firm lent us the money. 23. The sky’s very dark. Do you think they’ll cancel the flight? – They _____, but I don’t imagine they will. 24. You _____ finish the job this evening. There is no hurry. 25. He ______ go by train because he _____ (not afford) the air fare. 26. I think that they probably ______ (miss) the train but we also think that they _____ (catch) it if they had run all the way to the station. 27. She _______ (not take) the money, sir. She was not in the office that day. 28. If a woman is expecting a child, and hasn’t had German measles, she ________ be vaccinated against it because it _______ carry a serious risk. 29. It’s not compulsory for children to be vaccinated against measles but in my opinion they ________ be. 30. I had a bad cut, but my mother bandaged it so I _________ go to hospital. Anyway, she took me to hospital because she thought it was infected but it was not. I really ___________ to hospital, when you come to think of it. 31. You _______ keep still. Then it ________ be so painful. You ______ (not) move the victim of an accident until a doctor comes. It _______ be very dangerous. 32. You _______ go out in winter without an overcoat. You _______ catch cold.
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33. Oh, I ________ go shopping yet because I ________ wait for the doctor who’s coming to see Jimmy. I also ________ go shopping yesterday because I had to wait for the doctor who did not come to see Jimmy till quite late. Tomorrow, I _____________ stay in all morning because the doctor’s coming to see Jimmy again, and I hope that this time he’ll be on time. 34. When he arrived in Africa, no one _________ tell him if Livingstone was alive or dead, but after a long journey, he ________ find him. 35. You always look tired these days. You __________ go to bed earlier. And you have got a bad cold, so you _________ stay in bed. 36. Do I _________ come to the hospital with you? No, it is not necessary. Exercise 4 A trainer is asking some management trainees to think about business mistakes they have made. First, the trainer gives examples of mistakes by other companies. Write down what the companies should or should not have done. Here are some real mistakes from different aspects of business. I’ll start with cultural mistakes, then marketing mistakes and if there is time I’ll move on to strategic mistakes. Right, cultural mistakes. I can’t mention company names here for obvious reasons. I’ll give you three examples I have heard of this year. Company A served pork to a group of Muslims from Kuwait. Company B lost an important contract in China because they sent a brilliant young negotiator who had just graduated from Harvard Business School with top marks. Company C lost over £1 million in a deal with the Japanese because they started the negotiation by announcing their deadlines. The Japanese then used this deadline to their advantage and the deal was concluded on the way to the airport. The Japanese were always going to agree to the deal, they were just trying to save as much money as possible. ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ _____________________________________________ 89
NON–FINITE
FORMS
GERUND, PARTICIPLES (Present, Past and Perfect) and/or “to-”/ “bare-”INFINITIVES (Perfect Infinitives) Exercise 1 Put the verbs in brackets into gerund, participle (Present or Past) or to-/bareinfinitive forms. 1. Susan avoided (answer) _____ the judge’s questions. 2. They helped her (complete) _____ her work. 3. Do you enjoy (travel) _____ abroad. 4. Will you go (ski)_____ next winter? 5. Students expect (pass) _____ the test. 6. I’m terribly sorry (keep) _____ you (wait)_____. 7. Has John remembered (cash) _____ the cheque before the bank closed? 8. Joseph offered his father (take) _____ him to the airport. 9. The driver was not able (go) _____ on until it stopped (snow) _____. 10. She does not mind (wait) _____ for him. 11. When the priest finished (speak) _____ the crowd scattered. 12. My professor began by (demonstrate) _____, and then continued (talk) _____ about history. 13. He prefers (read)_____ novels to (read) _____ poetry. 14. You will all be given an opportunity (ask) _____ questions before (leave) _____ the meeting after (hear) _____ the lectures. 15. Does she prefer (watch) _____ TV rather than (listen) _____ to the radio. 16. In spite of (sound) _____ unpractical, his ideas are worth (be) _____ taken into consideration. 17. Keep (go) _____. The top of the mountain is right in front of you. 18. People usually put off (pay) _____ their debts. 90
19. Do you think that she’ll pardon my (say) _____ so? Why do you think she always keeps (give)_____ her employees hard words (spell) _____ in English. 20. They have appreciated (have) _____ the opportunity (meet) _____ the president of the football team. 21. Did you promise (play)
_____ the violin more quietly?
22. She had a chance (complain) _____ of his (be) _____ lazy. 23. The children are considering (not go) _____ to classes tomorrow morning. 24. Don’t you think it is silly (risk) _____ (get) _____ your hair wet in winter time. 25. I appreciate your (not want) _____ (mention) _____ his (be) _____ in prison right now. 26. He was allowed (enter)_____ the country again. 27. The nurse ordered him (not get up) _____ from his bed. 28. We do not allow (smoke and drink) __________ here. 29. Is it any use her (ask) _____ her teacher (stay) _____ alone in the classroom while everybody else is outside, playing games. 30. My brother is fed up with your (be late) _____. 31. She told us (not visit) _____ Joe before Monday. 32. I recollect my grandfather’s (tell)_____ me of his times. 33. Excuse me (interrupt) _____ you, but I would like you (listen) _____ to what other people have to say. 34. I cannot understand his (be) _____ unable to understand our new lecturer. 35. Do you remember (visit) _____ Germany last week? 36. I watched the policeman (come) _____, (jump)_____ over the wall, and (catch) _____ the thief. Then they both appeared in front of the crowd. 37. Remind me (call) _____ Alice tomorrow. 38. Please, stop sometimes (consider) _____ the effects of such a project. 39. I do not mind the children’s (play) _____ in the garden, but I will certainly not have them (walk) _____ over my newly planted plants. 40. My secretary thinks that the director should stop (consider) _____ his cousin the best man for the job, which he is certainly not. 41. I remember (meet) _____ James at least forty years ago, when I remembered (be) _____ more polite than I wanted at first.
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42. Can you resist (look) _____ at the end of the book first? 43. Patients should remember (take) _____ their medicines on time. 44. It is no use (worry) _____ about the article. There is nothing we can do. 45. Listen to the baby’s (cry) _____ ! 46. I cannot stand (be) _____ hungry and thirsty! 47. Why does he always object (have) _____ a party in his own house? 48. Why do you not let me (speak) _____? 49. She has gone to France (not study) _____ French, but (study) _____ law. 50. Don’t you be surprised at my _____ (have) to work so late at night.1 51. He has always wanted his son (become) _____ a teacher. 52. They watched the priest (baptise) _____ the baby. 53. They heard her (play) _____ the piano concert, and went home very satisfied with what they heard. 54. Timothy heard his brother (say) _____ something to his secretary, but he did not heart all his brother was saying. 55. Is this magazine worth (read) _____? 56. This article is not worthy of (publish) _____. 57. She made me (cry) _____. 58. The postman was made (go) _____ to the main post office at noon. 59. I thank you for (be) _____ so generous. 60. When I heard her (unlock) _____ the front door, I got up nervously and climbed the staircase right into my own room. 61. When I was a child, I used (go) _____ to church with my family every Sunday. 62. Does he agree (go) _____ (shop) _____ with you? 63. He proposed (take) _____ the plane instead of (drive) _____. 64. My cat is accustomed to (sleep) _____ in her own bag. 65. The judge objected (change) _____ the procedural protocol. 66. I consider her (be) _____ the most powerful ruler ever. 67. Shy people usually avoid (speak) _____ to other people of their own lives. 68. We shall decide who is to go by (flip) _____ a coin. 1
This construction is not so frequent.
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69. Affiliation is the process of (join) _____ or the sense of (belong) _____ to a group. 70. Agoraphobia is usually associated with a fear of (interact) _____ with other people. 71. I do not agree that students and pupils are inferior creatures whose opinions are not worthy of / worth (listen) _____. 72. If you dislike (peel) _____ onions, try (hold) _____ them under water while (do) _____ so. 73. If ever I find you (daydream) _____ , I give you my word of promise that I’ll talk to the boss first thing in the morning, and complain of your (not pull) _____ your weight. You can bet that it will be no good (try) _____ to find excuse next time. Exercise 2
Re-structure the following sentences
1. Travelling doesn’t bother me as long as there are no delays. (mind) I don’t ______________________________________________________ 2. In my job I have to meet many people. (involve) My job ______________________________________________________ 3. I certainly did not pass on any trade secrets. (deny) I firmly ______________________________________________________ 4. There’s a danger we will lose business to our competitors. (risk) We _________________________________________________________ 5. I think it would be a good idea to get in touch with the commercial attaché. (suggest) She _________________________________________________ 6. We fully expect to double our turnover in the next two years. (anticipate) We _________________________________________________________ 7. He was late so I didn’t see him. (miss) He was late so he _____________________________________________ 8. Why on earth did you spend so much on entertainment? (justify) How can you ________________________________________________?
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Exercise 3 Re-structure the following sentences 1. I have every intention of complaining. (intend) I fully _______________________________________________________ 2. Send them the samples they requested / don’t forget, will you? (remember) Please _______________________________________________________ 3. We will provide a 24 hour-a-day-hot line. (undertake) We _________________________________________________________ 4. I anticipate receiving an answer soon. (expect) I ___________________________________________________________ Exercise 4 Verbs of perception Complete the statement using these verbs: have , go through , feel , beat , move , whisper , come , lie , shout I have worked as a night watchman here for six years and there has never been any trouble. But on the night in question at about 3 I was looking at the closed circuit TV screens in my room and saw someone ____________________ about in one of the offices. So I took my torch and went to investigate. I decided not to take the lift because an intruder would hear it _______________ so I walked upstairs as quietly as I could. I stopped on the second floor and listened to my heart _______________. I took out my revolver and took off the safety catch. At that moment I imagined myself _______________ a gun battle and I couldn’t prevent myself from _______________ afraid. I imagined myself _______________ in a pool of blood in the deserted building. Then I continued up to the third floor and walked down the corridor. I could hear two people _______________ to each other. I walked on, and through an open door I observed two masked men _______________ the contents of the CEO’s desk. Then after about 30 seconds, but it seemed like an eternity, I heard someone _______________ something for a split second, then everything went blank.
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PARTICIPLES: PRESENT, PAST, PERFECT Exercise 1 Connect the following sentences or shorten them by using the appropriate participle form of the verbs. 1. I saw her. She was giving him a kiss. ____________________________________________________________ 2. She stayed at home and thought at the same time what she should do next. ____________________________________________________________ 3. Since she didn’t know what to say, she smiled and blushed. ____________________________________________________________ 4. As she was a good student, she received a state scholarship. ____________________________________________________________ 5. If she is travelling by train, you must buy a ticket in advance. ____________________________________________________________ 6. The plane which is taking off now belongs to a successful private company. ____________________________________________________________ 7. The method which is used in this experiment is counterproductive. ____________________________________________________________ 8. John came in. He was followed by young ladies. ____________________________________________________________ 9. As they were convinced that the programme was bad, they rejected to take part in its implementation. ____________________________________________________________ 10. He had been to England ten times, so he decided to visit Germany for a change. ____________________________________________________________ 11. He was wounded towards the end of the war and then he was separated from his unit. ____________________________________________________________ 12. After he had been informed that his neighbour’s apartment had been broken into, he had a new door installed. ____________________________________________________________
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Exercise 2 Shorten the following sentences 13. He was sitting there and he was reading a book. ____________________________________________________________ 14. The article which was printed in those papers is interesting. ____________________________________________________________ 15. After he had done that, he went home. ____________________________________________________________ 16. As she hoped to find the old book, she searched everywhere. ____________________________________________________________ 17. I had seen the photographs of the place. I had no desire to go there. ____________________________________________________________ 18. As he was exhausted by his work, he threw himself on the bed. ____________________________________________________________ 19. Because he lacked the necessary qualifications, he was not considered for the job. ____________________________________________________________ 20. While walking down the street, I ran into an old friend of mine. ____________________________________________________________ 21. After Tom had watched the movie, he decided to become an actor. ____________________________________________________________ 22. Because David was not able to afford a new lorry, he used the old one. ____________________________________________________________ 23. As he was brought up by a foster family, he knew how to appreciate life. ____________________________________________________________ 24. The novel which was published a few days ago has made a great success. ____________________________________________________________ 25. As they were riding their horses, they saw something very unusual somewhere far away in the distance. ____________________________________________________________
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26. Because Susan had guessed all her answers she frankly admitted that she had nothing to hope for in her finals. ____________________________________________________________ 27. After my son had read the text again he understood what the writer wanted to say. ____________________________________________________________ 28. Because she did not want to make him suffer, she came to the party. ____________________________________________________________ 29. Since the students had nothing to do, they started screaming and running in the classroom. ____________________________________________________________
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INVERSION 1. You will never get such a chance again. Never... ____________________________________________________________ 2. I had hardly arrived when the conference was opened. Hardly… ____________________________________________________________ 3. You can get it only by luck. Only by… ____________________________________________________________ 4. A defeat must be risked very rarely. Very rarely… ____________________________________________________________ 5. He seldom speaks about it. Seldom… ____________________________________________________________ 6. He didn’t dream what would happen. Little… ____________________________________________________________ 7. I had never longed to stay with him more. Never… ____________________________________________________________ 8. We have not seen such a beautiful work of art. Nowhere… ____________________________________________________________ 9. He spoke so softly that we couldn’t hear him. So softly… ____________________________________________________________ 10. Your stay abroad can’t be prolonged. On no account… ____________________________________________________________
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11. It mustn't be done! Under no circumstances... ____________________________________________________________ 12. When we had found a shelter the storm began. No sooner...than.... ____________________________________________________________ 13. It doesn't happen often that two brothers marry two sisters. Not often... ____________________________________________________________ 14. The book will not have been finished by next Friday. Under no circumstances... ____________________________________________________________ 15. As soon as I sat at the table, the telegram arrived. No sooner… than… ____________________________________________________________ 16. To succeed, companies not only have to have the right technology but a range of related expertise that will allow them to use the technology as an effective business tool. Not only... _______________________________________________________________
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PARAPHRASING SENTENCES Paraphrase the following sentences. Note the necessary grammatical-pattern changes within the sentences paraphrased. 1. Two days ago she said that she had to go and visit her grandparents who live abroad. ‘……….’, she said. ____________________________________________________________ 2. I am sorry I cannot come to see you. I wish… ____________________________________________________________ 3. She wanted to know what he had been doing all that morning. ‘………’, she asked him. ____________________________________________________________ 4. You must take your medicines twice a day. The doctor….. ____________________________________________________________ 5. I want you to do it for me. It is my wish…. ____________________________________________________________ 6. They wished they came on time. Would to God…9. ____________________________________________________________ 7. Jennifer was not too rude. She wished…. ____________________________________________________________ 8. It is five o’clock already! Hurry up. It’s high time…. ____________________________________________________________ 9. You should go and see a doctor. He told…. ____________________________________________________________ 10. People say that she was very curious when her parents told her about John. She…____________________________________________________ 11. You should not tell him about the butcher. It is no good… ____________________________________________________________ 12. I’d rather stay at home. I feel like… ____________________________________________________________ 9
This form is not so frequent today.
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13. Two days ago we sent him a postcard. Do you remember…? ____________________________________________________________ 14. She is very impertinent. I will have to stop her…. ____________________________________________________________ 15. I haven’t played tennis for a long time. It’s… ____________________________________________________________ 16. She plays better than her brother. Her brother…. ____________________________________________________________ 17. It is believed that she’s improving all the time. She… ____________________________________________________________ 18. It appeared that they had reached an agreement. They…. ____________________________________________________________ 19. Why don’t you go and lie down?, she said to me. She suggested… ____________________________________________________________ 20. You needn’t go if you do not want to. It is not…. ____________________________________________________________ 21. I’d prefer them not to say anything. I’d rather….. ____________________________________________________________ 22. Shall I help you with the washing-up? Would… ____________________________________________________________ 23. In spite of the bad weather, they enjoyed their holiday. Although… ____________________________________________________________ 24. The weather was so bad that we had to stay indoors. It was… ____________________________________________________________ 25. You should go and see the doctor. She advised…. ____________________________________________________________ 26. I’ve never seen such a beautiful view. It’s…; Never… ____________________________________________________________ ____________________________________________________________ 27. She had never mentioned it before. It was…; Never… ____________________________________________________________ ____________________________________________________________
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28. Everybody wore a tie except my brother. My brother…. ____________________________________________________________ 29. The results of the analysis haven’t been published yet. They… ____________________________________________________________ 30. I don’t think I will have time to visit the house, she said. She said… ____________________________________________________________ 31. “She broke the record last year but she hasn’t been running so well since then,” her trainer said. Her trainer said… ____________________________________________________________ 32. Perhaps they didn’t expect you to come home so early. They may… ____________________________________________________________ 33. Your hair needs cutting. You… ____________________________________________________________ 34. There aren’t so many offices in the High Street now as there used to be. There used to be… ____________________________________________________________ 35. It is not nearly as expensive to go by bus as it is by train. Going by train… _____________________________________________________________
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PREPOSITIONS Insert the appropriate preposition: Exercise 1 Prepositions of movement above
across
against
by
along
beside
round
on
below
onto
down
in
up
out of
over
through
past
to
towards
at
Mary’s day out The sun rose __________ Mary’s house. It was a beautiful day. Mary came __________ her front door and went __________ the path, __________ the gate and __________ the street. She crossed __________ the road and walked __________ the bus stop. The bus arrived and she got __________ the bus. It went __________ the corner, __________ the High Street, all the shops and __________ the countryside. It stopped __________ the duck pond__________ the next village, and Mary got __________. She climbed __________ a stile and started walking __________ a big field. Suddenly, she saw a huge bull running __________ her! She raced __________ the far side of the field and squeezed __________ the hedge. Out of breath, she sat down __________ the grass __________ the river. She leant back __________ a rock. The sun was warm. Mary closed her eyes and listened to the water flowing __________. Soon she was fast asleep. When she awoke the sun had disappeared __________ the horizon.
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Exercise 2 Which prepositions go with the words to the right? Put a plus ( + ) or a minus ( - ) Above
Below
On
Over
Under Average Foot Arrest $5oo 75% Freezing 18 years old New management Holiday Pressure Business
At
By
During
In
On Midnight The night New Year’s Day The winter Friday afternoon The weekend Time A fortnight’s time The rush hour His forties
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Exercise 3 Adjective + preposition 1. Are you afraid _____ the dark? 2. She was angry _____ me _____ not telling her the news. 3. Canterbury is famous _____ its cathedral. 4. Bill is jealous _____ me because I’m cleverer than him. 5. I’m very proud _____ my two daughters. 6. I’m disappointed _____ you. I thought I could trust you. 7. You’re very different _____ your brother. I thought you’d be similar _____ each other. 8. Are you excited _____ going on holiday? 9. Visitors to Britain aren’t used _____ driving on the left. 10. Visitors to hot countries need to be aware _____ the risk of malaria. 11. You should be ashamed _____ what you did. 12. I am most grateful _____ all your help. 13. Who is responsible _____ this mess? 14. My son is crazy _____ a pop group called Hanson. 15. What’s wrong _____ you? You don’t look well. Exercise 4 Verb + preposition 1. Margaret applied _____ new job of a receptionist, but didn’t get it. 2. What are you all laughing _____ ? What’s the joke? 3. He died _____ a heart attack. 4. She’s suffering badly _____ sunburn. 5. Do you believe _____ magic? 6. I didn’t realise that Maria was married _____ George. 7. He’s acted _____ three major films. 8. Did you succeed _____ convincing / manage _____ convince your father you were telling the truth? 9. Compared _____ / In comparison _____ I am not very intelligent at all!
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10. We’ve complained _____our teacher _____ the amount of homework we get. 11. I think you are wrong. I don’t agree _____ you at all. 12. I’m not interested _____ what you think or say. 13. We might have a picnic. It depends _____ the weather. 14. If you have a problem, talk _____ me. 15. What did you talk _____ yesterday evening? 16. You are not concentrating on your work. What are you thinking _____? 17. What do you think _____ John? 18. Where’s the cash desk? I’d like to pay _____ this book. Exercise 5 Verb + object + preposition. Put a verb in its correct form and a preposition into the gaps. Combine the verbs with the right preposition depending on the context. Verbs:
Prepositions: _____
thank
forgive
invest
against
into
accuse
hide
invite
at
of
brainwash
hold
model
for
on
congratulate
inherit
remind
from
to
compensate
insure
shout
in
1. You __________ me so much__________ your father. You look just like him. 2. We are going to __________ all our money __________ stocks and shares. 3. We have __________ our car __________ fire and theft. 4. Everyone __________ me passing __________ my driving test. 5. She __________ by the insurance company __________ the injuries she received in the car crash. 6. My teenage daughter always __________ herself __________ her latest pop idol. She’s just had a ring put through her nose, just like him. 7. Don’t __________ the truth __________ me. I want to know everything. 8. He picked up the crying baby and __________ her tightly __________ his chest. 9. We’ve __________ 300 guests __________ our wedding.
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10. I think that TV advertising __________ people __________ buying things that they don’t really want. 11. I didn’t __________ a penny __________ my great uncle1 when he died. 12. The spectators __________ abuse __________ the referee when he disallowed the goal. 13. How can I ever __________ him __________ telling me all those lies? 14. I __________ by my employers __________ stealing, which I denied strongly. Exercise 6 Noun + preposition 1. After running __________ the stairs, I was __________ breath. 2. You make some silly mistakes, but __________ general your work has been good. 3. I went on holiday __________ my own, because sometimes I like to be __________ myself. 4. I got a cheque __________ $5oo __________ the post. 5. There has been a rise __________ the number __________ violent crimes. 6. The difference __________ you and me is that I don’t mind hard work. 7. I can think of no reason __________ her strange behaviour. 8. It took a long time to find a solution __________ the problem. 9. I need some information __________ global warming. 10. I’m having trouble __________ my car, it won’t start __________ in the mornings. 11. __________ the accident there has been quite a bit __________ damage __________ my car. 12. Investigators are trying to find the cause __________ the accident. 13. I’ll do my homework now. No, __________ second thoughts, I’ll do it tomorrow. 1
The adjective “great-” is used before nouns that refer to relatives, such as ‘aunt’ or ‘grandson’, to indicate that a relative is one generation further away than the one the noun refers to. Your great-aunt is the aunt of your mother or father, and your great-grandson is the grandson of your son or daughter. For example, William’s great-uncle, Great Aunt Alice’s recipe, our great great grandparents…, Collins Cobuild, English Language Dictionary, p. 636
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14. Did you get an invitation __________ Harry’s wedding? 15. I don’t see James any more. I haven’t been __________ touch with him for years. 16. The factory workers are _____ strike because they want more money. 17. Thousands of people are _____ work in this town. It’s really difficult to get a job. 18. I’ve got a cheque _____ a hundred pounds this morning. 19. You’re really annoying me. You’re doing it _____ purpose, aren’t you? 20. Can you tell me the difference _____ butter and margarine? 21. There have been a lot of complaints _____ your behaviour in school. 22. The trouble _____ you is that you don’t listen to anybody. 23. I’m fed up with cooking. Let’s eat out _____ a change. 24. How much do you spend a week _____ average? 25. Watch your step with Dad. He’s _____ a terrible mood. Exercise 7 Prepositions of time: “in, at, on” or “no preposition” 1. It’s my birthday _____ next week. _____ Monday. – _____ what time were you born? - _____ 8 o’clock _____ the morning. 2. I’m meeting Alan _____ this evening, _____ six. 3. What did you do _____ the weekend? - _____ Friday evening we went to a party. We slept in late _____ Saturday morning, and then _____ the afternoon we went shopping. _____ seven some friends came round for a drink. We didn’t do anything _____ Sunday. 4. The weather in England is absolutely unreliable. _____ summer it can be hot, but it often rains _____ April and June. _____ last year, the summer was awful. The best English weather is _____ spring and autumn. 5. I learned to drive _____ 1982 _____ the age of 17. My brother learned _____ the same time as me, but I passed first.
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Exercise 8 Prepositions of place: “in, at, on” 1. I met my husband _____ Italy. He was _____ a shop, buying pasta. I was _____ a queue, waiting to buy some bread. 2. Last night, I was _____ the kitchen when I lost my glasses. I looked _____ all the shelves there and _____ all the cupboards. I thought I’d put them _____ one of the drawers, but they weren’t there. They certainly weren’t _____ the table or _____ the floor. Had I left them _____ work? Were they _____ the car? Then I realised where they were. They were _____ my nose. Exercise 9 Have a look at the prepositions listed below: about, around, across, at, beyond, by, from, in, on, round/around, through, to. The functions of the above prepositions are listed below, and are marked with numbers. Read the functions carefully, and try to match each number with the sentences below. Functions: 1. approximate position
_________________________
2. from one side to the other
_________________________
3. precise location
_________________________
4. direction
_________________________
5. limit in direction
_________________________
6. close to
_________________________
7. source
_________________________
8. three-dimensional space
_________________________
9. two-dimensional space
_________________________
10. after turning
_________________________
11. direction between 2 points in space _________________________ 12. movement/destination
_________________________
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Read the sentences below and write the letters in the gaps above that match the function-s listed from 1 to 12. a) He’s sitting at his desk. b) What are you looking at? c) Warning! No unauthorised personnel beyond this point. d) London stands on the river Thames. e) A taxi will take you to the airport. f) Go straight ahead and the bank is just round / around the corner. g) I have to go to Prague next week. h) She’s left her briefcase lying about somewhere, and she doesn’t know exactly where. i) He walked across the room and looked out of the window. j) The Prime Minister lives at 1o Downing Street. k) Our campaign is aimed at the top end of the market. l) I can see him over there by the news stand. m) The cars are imported from Slovenia. n) She puts everything in her handbag. o) A painting by Miro hangs on the boardroom wall. p) We drove through Baltimore on our way to Washington. Exercise 10 Fill in the gaps with the appropriate preposition from former exercise. 1. 2. 3. 4. 5. 6.
Why is she always leaving her files lying __________? Diamonds are imported __________ South Africa. He works __________ the centre of the business district. Cairo stands __________ the River Nile. You can’t see it __________ here , but the theatre is just __________ the corner. We went __________ Spain on our way __________ France __________ Portugal. 7. She’s over there __________ the coffee machine. 8. She lives __________ Amsterdam but is moving __________ The Hague soon. 9. The best restaurant is just __________ the road. 10. From the top of the tower you can see the cathedral and the mountains _________.
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Exercise 11 Have a look at the prepositions listed below: about, around, at, beyond, by, from, in, on, through, to, until The functions of the above prepositions are listed below, and are marked with numbers. Read the functions carefully, and try to match each number with the sentences below. Functions: 1. approximately
_________________________
2. point in time
_________________________
3. limit in duration
_________________________
4. limit in time
_________________________
5. starting point in time
_________________________
6. between two points in time
_________________________
7. point of time
_________________________
8. direction inside time
_________________________
9. future direction
_________________________
10. limit in time
_________________________
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Read the sentences below and write the letters in the gaps above that match the function-s listed from 1 to 10. a) The plane leaves at nine so we must be at the airport by 8 am. b) They employ temps in the summer vacation. c) My birthday is on 3rd April. d) We got to the match in time to see the kick-off. (we arrived a little before and didn’t therefore miss anything) e) I’ll be staying in Florida April through June. *American English f) It’s two minutes to four. g) Multimedia applications began to take off in the 1990s. h) There are only two weeks to the launch. i) We have until the end of June to settle the debt. j) I’ll pick you up at 2.30. k) Please arrive on time. l) She slept all through the meeting. m) It’s impossible to extend credit beyond 30 days. n) The new procedure will be in operation from January 1. o) The new museum was opened to the public in 1999. (some time in that year) p) The store is open from 10 to 6.30 every day, except Sunday. (= until) q) Our weekly planning meeting is on Monday morning. Exercise 12 Fill in the gaps with the appropriate preposition from former exercise. 1. Easter falls _____ 5 April this year. 2. He’ll be back _____ an hour’s time. 3. He took copious notes all _____ the meeting. 4. I’ll see you _____ 6 o’clock and make sure you’re _____ time this time! 5. The government privatised massively _____ the 1990’s. 6. The financial year runs _____ 1st April _____ 31st March. 7. We arrived just _____ time to see the opening ceremony. 8. This project could take us _____ the year of 2010 and _____. 9. You have to send in your tax declaration _____ March 15 at the latest. 10. I don’t know what time she’ll arrive; _____ 3 o’clock I guess for sure, maybe just a bit later.
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Exercise 13 Tick the preposition that usually follows the verbs in the table. Some are not usually followed by a preposition. For
On
To
account agree apply belong complain depend discuss enter meet pay phone rely
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No preposition
NUMBERS Read the following numbers and write them down. Make sure you follow of the rules concerning writing-down numbers in different contexts. 23
________________________________________
13, 333
________________________________________
404
________________________________________
140, 393, 001
________________________________________
1, 554, 876
________________________________________
2, 871
________________________________________
.5
________________________________________
.7813
________________________________________
5.4
________________________________________
7%
________________________________________
78 + 89 =
________________________________________
152 – 93 =
________________________________________
25 x 18 =
________________________________________
933 : 3 =
________________________________________
5 March 1964
________________________________________
Sep. 5th 2001
________________________________________
3rd August 1306
________________________________________
June 2, 1904
________________________________________
- 15 (temp.) oC/oF
________________________________________
77-22-489-065
________________________________________ (tel. number)
55-1-33-4-88
________________________________________ (tel. number)
89 Sunrise Street, New York ________________________________________ £9.00, £15.99
__________________, _____________________
$6.83, 96p
__________________, _____________________
Room 1
________________________________________
Floor 17
________________________________________
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Flat 39
________________________________________
Room 357
________________________________________
4:15 pm
________________________________________
6:30 am
________________________________________
7.54
________________________________________
12:00
________________________________________
11:45 pm
________________________________________
Volume 7
________________________________________
Section 9
________________________________________
Chapter 3
________________________________________
Paragraph 2
________________________________________
Line 58
________________________________________
Platform 13
________________________________________
Entrance 4
________________________________________
1/3
________________________________________
12 2/3
________________________________________
15 ½
________________________________________
3/10
________________________________________
2/4
________________________________________
TEN, SEVENTY-ONE
___________________, _____________________
Guess the meanings of the following expressions with numbers: at one; in the year one; go one better; one to us; on all fours; a thousand thanks; for many tens of thousands of years; umpteen others; in two twos; to handle one’s fives; talk nineteen to the dozen; first/second cousins; on first/second thoughts; two firsts; fifth wheel; at the eleventh hour; for once; for once in a way; twice over; times out of number;
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SECTION
2
WORD-FORMATION (DERIVATION) EXERCISES
116
SECTION ONE
DERIVATION OF ADJECTIVES
Put the words in brackets into the right adjective form. Consult your dictionaries if you are in two minds about the appropriate word-ending or suffix. Text 1 (Sign) __________ countries are considering or planning (legislation) __________ reforms and / or (government) __________ action in (relevance) __________ areas of their higher education systems; (converge) __________ reforms have already been introduced or are in progress in several (Europe) __________ countries. They signal a move towards shorter studies, 2-tier degree structures, credit systems, (extern) __________ evaluation, more autonomy coupled with more accountability. Another trend is towards the blurring of boundaries between the (differ) __________ constituent subsectors of higher education. … The course has been set in the right direction and with (meaning) __________ purpose. The achievement of greater compatibility and comparability of the systems of higher education nevertheless requires (continue) __________ momentum in order to be fully accomplished. We need to support it through promoting concrete measures to achieve (touch) __________ forward steps. The 18th June meeting saw participation by (authority) __________ experts and scholars from all our countries and provides us with very (use) __________ suggestions on the initiatives to be taken. … A Europe of Knowledge is now widely recognised as (replace, negative) _______________ factor for (society) _______________ and (humanity) __________ growth and as (dispense, negative) _______________ component to consolidate and enrich the European citizenship, (capability) __________ of giving its citizens the (necessitate) _______________ competencies to face the challenges of the (novelty) __________ millennium, together with the awareness of (share) __________ values and belonging to a common social and cultural space. Taken from Bologna Declaration
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Text 2
SELLING SPACE
Gemini, Mercury and Apollo are still (live) __________ and well and generating income, and the latest spin-off to galvanise the space anoraks is the market in space antiques. In recent years, US and international collectors have started to snap up relics from the space race as fast as they can, and because NASA has changed the rules and insists on destroying everything that is surplus and (salvage) __________ from the Shuttle programme, the number of (collect) __________ items has become finite. The result is an auctioneer’s dream: a fiercely (compete) _______________ market. Earlier this year, Merrit Island, a (dust) __________ and (sleep) __________ backwater on Florida’s east coast, just a few miles away from Cape Canaveral, was the scene of (mass) _______________ auction of (among stars) scrap. ………… Bell was an eccentric. Throughout his 37 years at NASA, he hoarded equipment and memorabilia with an almost (health, negative) __________ obsession. He became a (secrecy) __________ collector of treasures from the earliest days of space travel, acquiring (reduce) __________ equipment and taking it home to keep, not for profit but because he loved the beauty of machinery and the skill with which the rocketry was built. He became a key member of the (science) _______________ team, designing (moon) __________ module sections and (electricity) _______________ systems.
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Text 3
France’s Muslims; The melting-pot that isn’t
With the red thread of the legion d’honneur discreetly peeping from his lapel, Dalil Boubakeur, rector of the Grand Mosque of Paris, toes a (care) __________ line: “We’re in a new phase. There is a good hope that Islam will be respected, accepted and, most of all, tolerated, not / as in the past / treated with mistrust.” Really? According to opinion polls, almost two-thirds of (France) __________ adults believe there are too many Arabs (and therefore Muslims) in France. The (xenophobia) _______________ (extremity) _______________ right, even as it splinters into squabbling factions, is still strong in regions with large Arab populations. And the bleak housing estates that encircle French cities have become the equivalent of the Unites States inner city ghettos – places of high crime, unemployment and (ethnicity) _______________ minorities, to be shunned by the white majority. On top of the (colony) _______________ legacy, other things worsen the position of France’s Arabs. One is establishment of (virtue) _______________ ghettos, be these either the towerblocks of the suburbs, built from the 1950s onward with the (nobility) __________ intention of providing cheap housing for migrants and other new city-dwellers, or the squalid (the Middle Ages) _______________ __________
part
such
as
Carpentras.
centres of towns in the (south)
Another
is
the
intensely
(compete)
_______________ nature of French education, which inevitably puts at a disadvantage children from poor, non-French-speaking backgrounds.… Not that experiencing it to the full is (ease) __________. France is a (seclusion) __________ republic, (respect) _______________ of all faiths but supporting none. Fair enough, but it means that the (Rome) _______________ Catholics, who for centuries did benefit from the (publicity) _______________ purse, have around 40,000 churches, whereas the Muslims, the next largest (religion) _______________ group, have only 1,550 mosques or prayer-rooms, of which only 13 are big enough to take a thousand or more at Friday prayers.
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SECTION TWO
DERIVATION OF NOUNS
Put the words in brackets into the right NOUN form. Consult your dictionaries if you are in two minds about the appropriate word-ending or suffix. Text 1 Next to the need to “achieve greater (compatible) _______________ and (compare) _______________ in the systems of higher (educate) __________ (mainly in intraEuropean (issuance) __________), the (declare) __________ wants “in particular” to increase “the international (competitive) _______________ of the ESHE. It says that the “(vital)
__________
and
(efficient)
_______________
of
any
(civilise)
_______________ can be measured by the appeal its (cultural) __________ has for other countries”. The signatory countries explicitly express their goal to “ensure that the European higher education system acquires a worldwide degree of (attraction) _______________ equal to (Europe’s) extraordinary cultural and scientific traditions”. The Declaration acknowledges the crucial role of the higher (educate) __________ (commune) __________ for the (succeed) __________ of the Bologna (proceed) __________. It says that inter-governmental (co-operate) _______________ should be “together with non-governmental European (organise) _______________s with (competent) _______________s in higher education”.
Governments also “expect
universities to again respond positively and to give their own (contribute) _______________ , and an active one, to the (succeed) _______________ of their endeavour”. It is therefore clear that higher education (institute) _______________s have a unique (opportune) _______________ to shape their own European future and to play a crucial role in the (develop) _______________ of the Bologna process. The Declaration specifically recognises the fundamental (valuable) __________s and the (diverse) __________ of European higher education. It clearly acknowledges the necessary (independent) _______________ and (autonomous)_______________ of universities. Taken from Bologna Declaration
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Text 2
Blair in a spin
In many countries, only the rich can manipulate (politics) _______________s. But, in the UK, we are proud to report, this pleasurable (experiential) __________ is available to anybody with access to a PC and a modem. On phonyblair.com, the prime minister will do whatever you command. At a click of your mouse, he nods, or shakes his head, swells to grotesque (proportional) _______________s, leers – as if at the ranks of the Women’s Institute – or spins insanely. (Not that kind of spin, but the old-fashioned sort: a rapid twirl with supplementary headbanging.) Though your powers over the prime minister are extensive, there are limits. You will not be able to force Blair to join the European single (current) __________ , even if that is your dearest wish. Nor, sadly, can you oblige the PM to divert billions of pounds from the Exchequer to a Swiss bank (accountancy) __________ set up in your name. But the (create) __________s of the site welcome (suggest) __________s from (visit) __________s, so perhaps the (facile) _______________ will become available at a later date.
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Text 3
Turning base mobiles into gold
(Manufacture) _______________s estimate that the UK has anything between 5m and 25m redundant mobile phones. Just over 500,000 of these were collected over the past year, under the Take Back joint (industrious) __________ recycling scheme. But, in Japan, (progressive) __________ toward (recycle) __________ has been rather more swift, thanks in large part to the efforts of Yokohama Metals in Sagamihara. This company salvaged gold, silver, bronze, copper and palladium from more than 3m redundant mobile phones last year, recovering 45kg of gold and more than 900kg of silver in the (proceed) __________. Each tonne of cellular phone yields about Y400,000-worth (£2,420) of precious metal, while the (recover) __________ cost per tonne is approximately half that. A further Y150,000 buys the phones and pays to get them to the recycling plant, leaving a theoretical (profitable) __________ (marginal) __________ for Yokohama of Y50,000 per tonne. The salvage process itself is quite straightforward. First, the phones are broken into little pieces on a (convey) __________ belt. Then the plastic (case) __________ is removed from the electronic (partial) __________, and the metal melted out and separated.
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Text 4
WHO’S THE DADDY OF THE TALK-SHOWS?
King says he never understood those (comment) __________s and the (accuse) _______________s that he asks “softball” questions. “I’ve asked those (men and women) __________ to present an interview to me and say it was ‘softball’.” He recalls an interview with then vice-president Dan Quayle during the 1992 presidential campaign, when he asked the Republican whether he would support his daughter if she wanted to have an (abort) _______________, and received a positive (respond) _______________. “I’ve also been criticised for calling elected (office) __________s by their first names. King has also been mocked for taking great (please) __________ in (celebrate) _______________ and for “palling around” with stars. But it seems that a few of the people he knows are not famous. That’s why many of his (refer) _______________s in (converse) _______________ sound like name-dropping…… Text 5
Blame it on the boopoles
When a (farm) __________ comes to rent a field from you, he will point out the (fertile, negative) _______________ of the land, the (abundant) __________ of holes and pitfalls, the (infest) _______________ of docks and nettles, the riot of moles, rabbits and badgers, the boggy gateways and broken fences. In short, he will explain why no better luck could come your way than a farmer prepared to tend the place for free. In the course of one such (negotiate) __________ with my (neighbourhood) _______________, however, I came across an (argue) _______________ that I had never heard before, and which has since radically affected my view of the world. The problem with the field under (discuss) _______________, I was told, was “they boopoles”. Now some (fragmental) _______________s of the old Wiltshire dialect are still in common (usage) _______________: the (habitual) __________ of putting the verb before the (subjective) _______________ (comes the cow), a (refuse) __________ to decline pronouns (he tells I about they), a general (prefer) __________ for the present tense. There are even local words like “pussyvanting” (mucking around – from French poursuivant) and “shrammed” (frozen). But boopole came as a surprise.
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Text 6
Playing games with prosperity
To last week’s (protest) __________s at the G8 summit in Genoa, whether peaceful (banner-wave) __________s or violent brick-(throw) __________s the World Trade Organisation is the power-(central) __________of a global (capital) _______________ (conspire) __________ . The WTO’s headquarters in Geneva is a nondescript concrete (build) __________ with large rolls of lurid orange carpet stacked just inside the (visit) __________s’ (enter) __________, and a courtyard overgrown with grass. With a staff of 530 and a budget of $78m, about half what the World Bank spends on travel, the WTO is the poor (relate) __________ among international organisations. But it is the centre of negotiations that could have a far bigger impact on global (prosperous) __________ than any (decide) __________ made in more imposing buildings.… Indeed, few believe the organisation could easily survive another (fail) __________ in Doha. It would “go into (hibernate) __________” says one Geneva (office) __________, and the multilateral (trade) __________ system might wither. No doubt trade deals would still be made, but they would be bilateral and regional in scope, like the proposed Free-Trade Area of the Americas or the web of the web of bilateral deals that is being woven in Asian. In short, the stakes at Doha are high. But with less than four months to go, the WTO’s members are far from reaching an (agree) _______________ on what a new trade round should be about. In previous rounds, the agenda for global trade talks was basically hammered out by America and Europe and presented to other countries as a done deal. This time, America and Europe began with fundamentally different (prior) ____________________ and (visual) __________ and, though they are inching closer, they cannot yet agree. Bush (administrative)
_______________
_______________
for
(trading)
has
yet
to
__________
win talks
fast-track
(authoritative)
from
(congressional)
_______________. Besides, even if the EU and America reach perfect (harmonise) _______________ this is no longer enough.
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SECTION THREE
MIXED DERIVATION
Text 1 When the United States Senate passes the boldest campaign-finance (reformation) __________ for 27 years, it would be (churl) __________ not to (celebration) __________. All is not (signature) ______________ and sealed – the House promises a fight, and George Bush may exercise his veto – but hats off, all the same. Well done to Senators John McCain and Russ Feingold, who had failed four times in five years to get this far, but never stopped trying. Well done, too, to those senators who managed to (repentance) _______________ of their past sins and take the steep path of self(restrain)__________ - at least until their (legalise) __________ (advice) __________s have worked out how they can get round it. …The (pain) __________ fact is that nothing will keep money, galumptious amounts of it, from pouring through America’s (elect) __________. People want to help the (politics) _______________ s whose ideas they (approval) __________ of. More (venal) __________ , they also want to help the men and women who might do them (favourable) __________s if (election) _______________. The (urgent) __________ is as old as sex, and almost as much fun for its (practice) _______________s. McCainFeingold gets rid of some of the most blatant devices, and that is well worth doing. But as Mr McCain himself often (knowledge) ____________________, curbs on giving money are bound to (failure) __________.
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Text 2
The majority doesn’t matter
However thrilling it is when your (dent) __________ cancels an (appoint) ___________, the high seldom lasts. At some point, a bad tooth needs (attend) _________. By the same token. Tony Blair’s (decide) ________ to seek (re-elect) __________ on June 7th instead of May 3rd brought the briefest of (reprieve) __________ to William Hague. A week is a long time in (politician) __________, but not even an extra four of them will give the Conservative (lead) __________ long enough to climb the Himalaya of (adversity) __________ opinion polls and topple Labour in general election. Having faced certain (defeat) __________ in May, Mr Hague now faces (certainty) __________ defeat in June. At best, he can hope to make a bigger dent than was otherwise (expectation) __________ in Labour’s (parliament) _____________ (major) __________ if he (performance) _______________s (conspicuous) __________ well during the foot-andmouth (critical) __________, or if the prime minister performs really badly. But even that is not (certainty) __________. On one (read) __________ of the opinion polls, Mr Blair stands to do better still now that he has shown a proper feeling for the plight of (farm) __________s by adjusting the election timetable. No (wonderful) __________ the Tories (acceptance) __________ with such bad (graceful) __________ the reprieve for which they had (they) __________ been arguing. A general election (of which) __________ outcome is a foregone (conclude) __________ is not likely to be a bundle of laughs for (vote) __________s either. They can stave off (boring) _________ by betting on the size of Mr Blair’s (major) __________. But in a winner-takes-it-all (democratic) _________, does the size matter, (provision) _______________ that it is big enough not to be whittled away by (deadly) _______, (defect) _________ and by-election? During 1983’s election, Francis Pym, Margaret Thatcher’s foreign (secret) __________, mused on air that “landslides don’t on the whole produce (succeed) _______________ (govern) _______________s.
126
Text 3
Dark shadows over Israel and Palestine
But after a week of (intensity) ______________ (violent) __________, the Israelis and Palestinians start talking. Six months into the al-Aqsa intifada and one month into Ariel Sharon’s (administrative) _______________, the (violent) __________ between Israel and the Palestinians is spiralling (danger) _______________. But on Israel’s (negative, easy) __________ streets a teeth-gritting (publicity) __________ mood seems to endorse the government’s black forecast that many more casualties have yet to be (infliction) __________ and sustained. Events over the past ten days have been (part) ____________ (threat)_______________. Gaza has been twice bombarded by helicopter gun ships firing missiles at buildings belonging to Force 17, an elite Palestinian unit that Israel says is (involvement) __________ in (terror) __________. The attacks were in (respond) __________ to the killing of two boys by suicide (bomb) __________ and to a mortar attack on a (settle) __________. On April 2nd, (Israel) __________ tanks shelled Bethlehem after a sniper killed an Israeli soldier guarding a (Jew) __________ (holiness) __________ site. The same day, Israel restarted the (political) __________ of (assassin) ______________ that had fallen (brief) __________ into (negative, use) __________ after Ehud Barak had left his (official) __________: a member of (Islam) __________ Jihad in Gaza was killed in his truck by helicopter-fired (precise) __________ missiles. His organisation vowed (revengeful) __________, but Israel said there would be more such killings. Mr Sharon went beyond the (punish) ________s set by Mr Barak when, on March 31st, he sent soldiers into a (Palestine)__________-controlled village to (abduction) __________half a dozen men (three of whom have since been returned). The army said it would not be bound by any lines on the map when striking the (terrorism) _______________. The steps undertaken by the prime minister would (destruction) __________ whatever is left of the Oslo infrastructure.
127
Text 4
It’s all for one and one for all
Most people will spend most of their life owing other people money. They do not (realisation) _______________ that they can (safety) _______________ money (sometimes quite a lot) by (consolidate) _______________their income, savings and debts into a single bank (accounting) _______________. The one account (allowance) _______________ you to put your (save) _______________s and (borrow) _______________s together, keeping the cost of your (borrow) _______________ to a (minimal) _______________. When you open a One account, you (negotiations) _______________
an
overall
borrowing
(facile)
_______________
that
can
(representation) _______________ as much as 95% of the (valuable) _______________ of your home. Most (borrow) __________s have little (choose) __________ about how to (management) __________ mortgage debt, other than to pay (regularity) __________ amounts (prescription) _______________ by the lender. If they want to pay off capital early, they find that some lenders charge for this, while many lenders will not credit any extra capital (repay) _______________s until the year end. This means that for most of the year interest is being charged as if for a loan that is bigger than the one that (act) _______________ exists. Take, for (instant) _______________, a mortgage of £60,000, which is (repay) _______________ over 25 years at an interest (rating) __________ of 8.55%. Your (type) __________ loan repayments would be £490 a month. If, however, your repayments were taken into (accountant) _______________ the moment they were made, you could repay your loan 11 months early, saving more than £5,000. Where you can (real) _______________ start eating into your debt is by having your salary paid into your mortgage (accountant) _______________. As salaries rise – and you can afford to repay more of your debt – the term of what, (tradition) _______________, would have been a 25-year mortgage can be cut quite (drama) _______________.
128
Text 5
Resolution in a neutral forum
You have been in a (confer) _______________ room in your lawyer’s office for the whole day, (negotiate) _______________ a crucial international contract. Term by term, detail by detail, the (law) __________have (argument) __________ it out. Someone says: “What are we going to put in for (disputable) ____________ (resolute) __________?” When you started the negotiations, you thought that the deal was a certain money(spin)__________ for both (part) __________, so no disputes could arise. Now you are not so sure. So what do you say? (Idea) __________, you might want to be able to have recourse to the courts in your own country: the other (part) __________ would (probable) __________ like to do the same in its home country. Neither is (accept) __________ to the other, for (fearful) __________ of home-team (advance) _______________ or even (locus) __________ bias. The answer is to opt for (arbitrary) _______________. This is not really a (difficulty) __________ (decide) _______________, and that is why (arbitrary) _______________ is the (recognition) _______________ way of (resolution) _______________ international (commerce) _______________ disputes. For at least a century, it has been the (domination) __________ force in dispute resolution in areas such as shipping, (commode) _______________s and (construct) _______________. You can opt for a neutral forum and have a panel of three (arbitrary) _______________s, one (choose) __________ by each party, and the third (the chairman) chosen either by the parties
or
the
two
party-appointed
(arbitrary)
_______________s.
In
(add)
_______________, you can keep your disputes away from the (publicity) __________ eye, because (arbitrary) _______________ takes place in (privacy) __________, unlike (litigate) __________ in the court. The main centres for international arbitration are: Paris, London, Geneva, Stockholm, New York, Hong Kong, and Singapore. Which is used depends on the background and (busy) _______________s of the parties.
129
Text 6
Doing the business
The need for a solid (structural) __________ within all business entities is (absolute) __________ (fundament) __________, (accordance) _______________ to Ms Angela Tripoli, a (lecture) __________ in Business (Administer) __________ at University College Dublin. “(Organisational) __________ structure concerns who reports to whom in the company and how (differential) _______________ elements are grouped together. A new company cannot go forward without this and (establishment) _______________ companies must (sure) __________ their structure (reflection) __________ their target markets, goals and (availability) __________ (technological) _______________.” (Depend) _______________ on their size and needs there are several organisational structures companies can (choice) __________ from. (Increase) _______________ though, in the (constant) __________ (evolution) __________ business environment, “many firms are opting for a kind of hybrid of all of them.” The most (recognition) _______________ set up is called the (function) __________ structure where a (fair) __________ (tradition) __________ chain of command (incorporating senior (manage) __________, middle management and junior management is put in place. The main (beneficial) _______________ of this system is clear lines of (communicate) _______________ from top to bottom but it is (general) __________ (acceptance) _______________ that it can also be a (bureaucracy) _______________ set up which does not (favourable) _______________ (speed) __________ (decide)__________making. More and more companies are organising (they) __________ along (produce) _______________ lines where companies have (separation) _______________ (divide) _______________ according to the (production) __________ that is being worked on. “In this case, the (focal) __________ is always on the product and how in can be (improvement) _______________.
130
Text 7
Court to hear key case on discrimination
The US (super) _______________ Court today hears a case which could have a big impact on the size of damages paid by US (employ) _______________ in (employ) _______________ (discriminate) _______________ lawsuits. The court agreed to hear the case, Carole Kolstad vs. the (America) __________ (Dentist) _______________ (Associate) _______________ (know) _____ as ADA, to (clear) __________ what kind of employer conduct will give rise to (punish) _______________ damages – damages awarded to (punitive) __________ and (determent) __________ an (offend) __________ - in lawsuits involving sex discrimination. However, law employment (expertise) __________s said that the suit was also (like) __________ to have a knock-on (effective) __________ on race, age, and other employment discrimination suits (bring) __________ under Title VII of the 1991 Civil Rights Act. The case involves a (woman) __________ lawyer employed as a (lobby) __________ for the ADA, a (profess) __________ trade association. A (juristic) __________ found that Ms Kolstad was (denial) __________ (promote) __________ because of (intend) __________ sex discrimination. The issue before the court is not whether this is so, but whether such discrimination must be “egregious” (that is – very bad indeed, (negative, grace) _______________)14 before (punishment) __________ damages are awarded. Title VII is (permit) _______________ of such damages where there was “(malicious) __________ or (recklessness) __________ (indifferent) __________ to the (federation) __________ protected rights of an individual.” But in Ms Kolstad’s case an Appeals Court found that the ADA’s conduct was neither “egregious” nor “(true) __________ (outrage) __________” enough to merit punitive damages. At the moment, there is (confuse) __________ over the (standardise) _______________ of conduct (necessitate) __________ to (attraction) __________ punitive damages.
131
Text 8
Growth’s financial complications
A company that seeks to (extension) __________ operations around the world needs new financial structures to match. When Hoechst, the Frankfurt-based (chemistry) __________s and drugs group, listed its shares on the New York Stock Exchange, it was a (symbol) __________ (acknowledge) ____________________ that a company which (aspirations) _______________ to be (globalisation) __________ in (operate) __________s must also be global in its (approachable) __________ to (financial) __________. (Intensity) _______________ international (competitive) _______________ and high (home) _______________ costs are forcing German (busy) _______________s – among others – into radical (structure again) _______________ and a much greater (rely) _______________ on global (secure) _______________s markets. For funding their global (ambitious) __________s, multinationals increasingly (acceptable) __________ the lowest cost of capital, they have to tap the international markets. For many non-US companies, a (vitality) _______________ (elementary) __________ is an equity listing in the US, the world’s most liquid and (efficiency) _______________ market. While most (Europe) __________ companies still focus on (tradition) _______________ (perform) _______________ (measurement) _______________s, US (fashionable) __________s are forcing them to look at new yardsticks, designed to measure the (valuable) _______________ they are (creation) __________ for (investment) _______________s, such as total shareholder return. (TSR). “If you are a global company, new (value) __________ (technical) __________s are just something that you have to take on board,” says
Nick
Pasricha
of
Ernst&Young’s
(corporation)
__________
(financial)
_______________ (practical) __________, “because a (proportionate) __________ of your investors are (subjective) __________ to that (influential) _______________.
132
Text 9
Trading on Teamwork
Schroder fun managers such as Chris Rodgers are (ultimate) _______________ (respond) _______________ for their funds’ (perform) _______________, but Schroders’ framework of team decision-making (sure)__________ that all fund managers have (accessible) __________ to the best research and (ideal) __________s. (Economy) __________s and (analyse) __________s from our (officials) __________s world-wide (contribution) _______________ research and (recommend) _______________s to (invest) _______________ committees, who set guidelines which are (adhesive) _______________ to by all fund managers. Rodgers sits on the International Asset Allocation Committee, which (determination)_______________ global targets for (expose) _______________ to equities, bonds and cash. He is also on the UK Equity Strategy team that sets (specification) _______________ guidelines that (assistance) __________ UK fund managers. He (explicable) _______________: “These (inclusion) _______________ ways to control risk, and targets for investing in specific sectors, such as construction or (pharmacy) ____________________s.” Within the guidelines, Rodgers has (discrete) _______________ in making the (choose) __________ in stocks for his own portfolios.” In the UK, two stock teams focusing on FTSE 1001 and 250 companies, meet (every week) _______________. A Schroder equity (analyses) __________ will present their unique research on a specific company before the team considers information and recommendations from (extern)__________ brokers. They (subsequent) _______________ (discussion) __________ and grade stocks. Rodger’s (per day) __________ (active) __________s (inclusion) __________ studying research notes and writing fun (perform) ____________________ report for clients. Monitoring the UK stock markets (move) _______________s is a (continue) _______________ process…
1
Financial Times Stock Exchange Index. It follows the share prices of the top 100 and 250 companies in the UK.
133
Text 10
Foreign Trade
OPEN ACCOUNT The goods, and (relevance) _______________ documents, are sent by the (export) _______________ (direct) __________ to the overseas (buy) __________, who will have agreed to (remitment) __________ (pay) __________ of the invoice back to the exporter upon (arrive) __________ of the documents or within a certain period after the invoice date. The exporter (loss) __________ all control of the goods, trusting that payment will be made by the (import) __________ in (accord) _______________ with the (origin) __________ sales contract. DOCUMENTARY CREDIT (Document) _______________ Credit is often (reference) __________ to as a Letter of Credit. This is an undertaking issued by an overseas bank to a UK exporter through a bank in the UK, to pay for the goods (provision) __________ that the exporter (compliance)
_______________
(full)
__________
with
the
(conditional)
_______________ established by the Documentary Credit. (Add) _______________ (secure)
_______________
can
be
obtained
by
obtaining
the
“(confirm)
_______________” of a UK bank16 to the (transact) _______________, thereby (transfer) _______________ the (responsible) _______________ from the importer’s bank overseas to a more (family) _______________ bank in the country of the exporter. Very few risks arise for the exporter because the (potent) _______________ problem areas of the buyer risk and country risk can be (eliminatory) __________. However, the exporter must (presentation) __________ the correct documents and (compliance) __________ fully with the terms and conditions of the credit. (Fail) _______________ to do so could result in the exporter losing the (protect) __________ of the credit.
16
This bank is then known as the confirming bank
134
Text 11
WALES, Finding its voice
The (influential) _______________ of England on the Borders region is one (instant) _______________ of the way geography has always shaped Wales’s (identification) _______________. Though smaller than Massachusetts, Wales has a great (diverse) _______________ of landscapes and (region) _______________ cultures. The south and east,
where
coal
mining
brought
(mass)
_______________
(immigrant)
_______________ and where three-fourths of the population still lives, are largely (industry) _______________ , or post-(industry) _______________, more (accuracy) _______________, urban, English-speaking, multi(race) _______________, (socialism) _______________
in
(politics)
_______________
(tend)
_______________s,
cosmopolitan in outlook. The north and west are mainly rural, Welsh-speaking, (conserve) _______________, and inward-looking. Between them lies the “sheep curtain”, the rugged central massif where few people but most of the country’s 11 million sheep live. The (mountain) _______________ terrain further reinforces regional (different) _______________s. North Wales is still hard to reach by road from the south. Goods, and ideas, too, have always flowed along an east-west axis, linking Wales to London and the world beyond. The vote for a (Wales) _______________ National Assembly exposed these fault lines. West Wales tended to vote YES. Along the border with England in the east, where turnout was much lower, the vote was (large) _______________ NO. For Greg Jones, a (succeed) _______________ orthopaedic (surgery) _______________ in Newport, a steel town in southeast Wales, (proud) _______________ in his Welsh (inherit) _______________ does not (preclusion) _______________ a deep (attach) _______________ to the idea and (institute) _______________s of the United Kingdom. “I am (fervency) _______________ in my support for the (identical) _______________, in a (culture) _______________ sense, of Wales,” he told me at his (favour) _______________ restaurant, “but as a part of the union.”
135
Text 12
DJENNE
(Technique) _______________s at the Ministry of the Rural Development said the Talo dam would cause only a slight decrease in the amount of water reaching Djénné which would (sure) _______________ the Bani flowed year-round. In Djénné such (assure) _______________s are greeted with the (skeptical) _______________ people in (has to do with village) __________ areas the world over reserve for plans from capital cities. Despite their (oppose) _______________, the government plans to begin (construct) _______________ this year and to complete the dam in 2003. In future years floods will be slower in coming and smaller. I think of Moctar Cissé’s family and the 20,000 other Djennenké, eking out their (ancestors) _______________ livings. After century upon century will it all come to an end? And what will be left of Djénné? An (art) _______________ city of buildings restored for tourists. I remember the words of a young marabout. When I asked what would become of the city, he brought out an old (hand-write) _______________ book, filled with (designer) _______________s like the ones on the (pot) _______________ from the earliest days of Djénné. He stopped at one – a grid like a ticktacktoe board that he said was a means of seeing the future – and copied it onto a piece of paper, (care) _______________ placing (Arab) _______________ letters in each of its squares. Then he spoke, as though the time to come hung in the air before him. “Many say Djénné is going to lose its (valuable) _______________, that people are going to leave. But Djénné will be well inhabited as before. Djénné of the future is Djénné of the past.” At first, the (predictable) _______________ struck me as a (wish) _______________ thinking. But now I realise how (truth) _______________ it is. Djénné’s future – its (survive) _______________ depends on its (able) _______________ to hold to the (essence) _______________s of its past. It adapts to changing (circumstantial) _______________s while guarding what lasts. This is the (ultimatum) _______________ power, its nyama, if you will – that it endures.
136
Text 13
ON ASSIGNMENT FACING FEAR
A magazine team digs deep and finds that coal mining creates a (specialty) _______________ set of (terrorists) _______________s. Blinking like “moles brought up from underground”, (photo) _______________s Vince Musi and author Simon Worrall emerge from an (negative settle) _______________ tour of Towr Colliery in Hirwaun, the last (operation) _______________ deep coal mine in Wales. Martin Broome, center, led the team four and a half miles below ground on a morning-long journey that “seemed like an (eternal) _______________,” Simon says. After a bone-jangling (descend) _______________ in an (elevate) _______________ cage, the trio walked down a (slope) _______________ tunnel to a (convey) _______________ belt on steel (roll) _______________s. “We’ll travel on this,” Martin said, and so they lay down on the belt on their bellies for a harrowing seven-minute ride. “There’s a lot of time to think,” Simon notes. “It starts with a bang, there’s nothing smooth about it, and it goes 15 miles an hour. All I could see was the soles of Martin’s boots. I tried to stay calm, but I was scared.” At the coal face the team encountered an (intensity) _______________ hot wind, (confinement) _______________ space, and “an (awe) _______________ coal-cutting machine with tungsten-steel bits.” Martin led them down a long tunnel to an area where methane gas is vented. “That was when I was (readiness) _______________ to get out,” Simon says. “We were humbled to think that people do this every day.”
137
Text 14
COMMERCIALS/ADVERTISEMENTS
FEEL THE (DRIVE) _______________ RHYTHMS OF ALL THE WORLD’S DRUMS Congas, bongos, steel drums, talking drums, tabla, sitar: they’re all here, inside Roland’s (amaze) _______________ new Handsonic (electron) _______________ (percussive) _______________ pad. There are (literal) _______________ tons of drums in this pad! – sounds from all across the earth. Sitting before this instrument, you can travel clear around the (globalisation) __________ , (create) _______________ the rhythms that have driven the (historical) _______________s of (entirely) _______________ (civilise) _______________s. Rhythm, of course, is the (found) _______________ of all music, the place where all music comes from. It’s the most (base) _______________ form of (communicate) _______________ there is. And now you can get your hands on almost every rhythm there has ever been. The Handsonic. Another breakthrough for you from Roland. WE DESIGN THE FUTURE, ROLAND
138
Text 15
JEWEL SCARABS
In a world among the clouds, (entomology) _______________ David Hawks and I keep watch for the (brilliance) _______________ jewel scarabs of Honduras’s (tropic) _______________ montane forests. We wait like fishermen with nets cast, (stand) _______________ beside lighted white bedsheets spread on the ground. When the jewels fly in, (rain) _______________ colour against the cloth, we feel like kids again. We collect jewel scarabs – to (estimation) _______________ (they) _______________ population sizes and study their (ecological) _______________ and (distribute) _______________. Dave joined me here in 1992, bringing his (passionate) _______________ for jewels with him. Since then we and others have found seven new species in Honduras, and we (discovered, again) _______________ a species once (think) _______________ (extinguish) _______________. We’ve just began to tap into these amazing populations. Not (surprise) _______________, scarabs have also (seduction) _______________ (commerce) _______________ collectors. While many sell for a few dollars, a bright red specimen might fetch $200, the finest gold, $500. With such a bounty on scarab heads, some (conserve) ____________________s worry that populations could be depleted by the trade. But our (research) _______________ suggests otherwise. (Catch) _______________ insects isn’t like (hunt) _______________ jaguars. Millions of jewel scarab eggs, larvae, and pupae remain underground, while (collect) _______________s take only adults. Meanwhile, the journey to scarab habitat weeds out all but the most determined. Many cloud forests are a (strain) _______________ trek away; others (requirement) _______________ a helicopter. What (threat) _______________ scarabs most is not insect (hobby) _______________s but (lose) _______________ of habitat as (tropic) _______________ forests are (conversion) _______________ to farms.
139
Text 16
A NEW DAWN, nuclear power
The whole (note) _______________ of a nuclear renaissance will prompt howls of (anger) _______________ protest. It is not just radical greens and technophobes who fret about (catastrophe) _______________ accidents. (activity) _______________s in countries such as (German) ____________ and (Swedish) _______________ are still demanding the (close) _______________ of today’s plants, never mind building new ones – and their (govern) _______________s are, (nature) _______________, (sense) ___________ to (election) _______________ (press) _______________s. Yet concerns about (operation) _______________ (safe) ______________, though (understand) _____________, do not add up to a damning case against (nucleus) _____________ power. On the (counter) _________: the nuclear (industrial) _____________ has learnt a lot about running its plants (safe) _______________ over the past two (ten years) ____________s. The (exist) _______________ (technological) _____________ is now (maturity) ___________ and well-understood. On the whole, nuclear-power plants (at least in the (west) ____________ world) are today (save) _______________ and wellrun. (Admit) ____________, (minority) ___________ accidents and slip-ups, such as those at Britain’s BNFL or in Japane’s Tokaimura (prefect) ____________ two years ago, continue to shake public (confidential) _____________. Given the (negative, quantity) ______________ risks that nuclear power carries, it is only right that the industry be (subjective) ____________ to the test of public opinion and due (politics) _____________ process. However, this argues for (except) _______________ (vigile) ___________, (regulate) ___________ (scrutinise) _______________ and (account) _______________ - not for bans or shut-downs. Those nuclear (operate) ____________s with a good safety record deserve to have their licences renewed, so that existing plants may run to the end of their (use) _______________ (life) _______________.
140
Text 17
AT THE HELM
Let’s talk about the state of the (globe) ______________________ economy? People have referred to it as (globe) ______________________ for a while now, but if you look at places like Africa and Afghanistan, it doesn’t seem that we’re (real) ______________________
there
yet.
How
do
you
think
(technological)
___________________ can affect those (economics) ______________________s. Larry J. Ellison: We have a global economy; what we don’t have is (equal) ______________________. If you are a very (poverty) ______________________ nation, you’re not included in the global economy. The global economy doesn’t market to nations that can’t afford to buy. (Actual) ______________________, what we really do have is a very (discrimination) ______________________ global economy. It’s not (necessity) ______________________ terribly (humanity) ______________________, however. So we look to governments and (philanthropy) ______________________ organisations to show a (sensation) ______________________of (humane) ______________________. Our (economy) ______________________driven institutions and organisations will just cull out those nations and those people that are not market (opportune) ______________________s. The great thing is, in (respond) ______________________to that, you just tax your for-profit organisations to (provision) ______________________ money for your non-profit
organisations.
That
has
proven
to
be
the
most
(efficiency)
______________________way to do things. A
corporation’s
______________________is
(prime) to
______________________
make
money.
Government’s
(object) (prime)
______________________ role is to take a big chunk of that money and give it to others. The richer corporations become, the more money that flows from corporations to government,
and
the
government
141
then
(do
distribution
again)
______________________that
money
to
people
who
are
not
so
(fortune)
______________________. How do you think technology affects (economy) ______________________cycles? Can it help us move in and out of (recede) ______________________s faster? It
should
make
(we)
______________________much
more
(efficiency)
______________________. It’s very interesting: when you have a global economy, the whole
world
goes
into
recession
at
once.
This
is
uncharted
(territorial)
______________________. We’ve never really gone into a recession all at once since 1929. I don’t think we are headed for a (depressive) ______________________ or anything
(remote)
______________________like
it.
In
(factual)
______________________, this economy has in some sense never been better (equip) ______________________
to
deal
with
______________________
no
(inflate)
a
recession.
We
______________________;
have
(basic)
the
(bank)
______________________ system is (negative, credibility) ______________________ (strength) ______________________. And we have government surpluses, not (deficient) ______________________s. Technology has also yielded huge (beneficial) ______________________s in (productiveness) ______________________ - to the United States (primary) ______________________, but also to Western Europe.
142
APPENDIX 1 TO CHAPTER ONE ‘GRAMMAR EXERCISES’ WORDS WITH SIMILAR MEANINGS
143
Put the words in the boxes into the gaps below the boxes, paying attention to the context. able – capable, arrive – get – reach, attendance – attention, chance – luck, expect – hope – wait, fit – suit – match, lay – lie, outcome – output 1. a) She has no __________ of reaching the final. b) I hope you win! Good ________!! 2. a) The umpire did not see whether the ball was in or out because he wasn’t paying _____________. b) There has been a record ___________ of over half a million people. 3. a) A champion must be ____________ of playing well under pressure. b) A champion must be ____________ to play. 4. a) I _________ she wins. I do not suppose she will but she’s so nice. b) I _________ she’ll lose. The other girl’s much better. c) I want to buy a programme. ________ for me inside. 5. a) He’s so tall that it’s difficult for him to find clothes that will ________ him. b) They asked Andre Agassi why he did not wear conventional tennis clothes but he said they did not ________ him. c) I like shorts, but they do not __________ your shirt. 6. a) You can ________ your racket under the umpire’s chair. b) You’re not allowed to __________ on the court and take a rest in the middle of a match. 7. a) He’ll ________ Wimbledon too late to play his match. b) He’ll _________ at Wimbledon too late to play his match. c) He’ll _________ to Wimbledon too late to play his match. 8. a) The _______ of his final period is quite extraordinary; he produced an enormous number of paintings. b) Rembrandt always lived expensively; the _________ was that he went bankrupt.
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benefit – profit, danger – risk, disgrace – misfortune, economic – economical, grow – grow up, shook – waved 1. – Since the railways have been owned by the state, they have never made a _________. - It would be for the ________ of everyone if we all used public transport. 2. – This carriage is so dirty that it makes me feel sick to travel in it. It’s a __________! - It was a terrible ___________ when his parents were killed in the train crash. 3. – The Government have a (n) ____________ responsibility for the state railways. - It’s more __________ to travel after ten o’clock because the fares are much cheaper. 4. – The children crossing the railway line were in __________ of being hit by the train. - The disease has spread and everyone in the city is at ____________. 5. – When I _________ I want to be an engine driver. - If the railways were handed over to private ownership, competition would ________. 6. – We __________ goodbye to our friends on the platform. -
My sister introduced me to him and we _________ hands.
meanwhile – while •
_____________ you were already on your way by car, she was still waiting at the bus-stop.
•
You were already on your way by car; ___________ she was still at the bus-stop.
at first – firstly •
He drove very slowly _________ because he was not used to the car, but afterwards he gained confidence.
•
There are several reasons against these red routes: - _________ they upset shopkeepers;
for the time being – in due course – now and then
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•
There are so few car parks in the city that everyone parks in the wrong place _________. You needn’t do anything about this ticket ________, but _________ you’ll get a letter telling you to pay a fine.
nowadays – at present – at this moment – presently There used to be very little traffic on these country roads but _________ hundreds of cars pass through every day. There’s more traffic on this road than usual _________ because the other bridge is closed for repairs and everyone comes this way. I’m afraid there isn’t a taxi free _________, sir, but I expect one will be available _________. in time – on time – from time to time In general, the service here is quite good, but there are serious delays _____________. The London train arrived _________ at 8.37 precisely. We ran all the way to the station and were just _________ to catch the train. these days – in those days It seems strange to be travelling on a tram __________. I haven’t done it since I was a child but __________ of course, they were very different. at last – eventually – in the end – in the meantime We had to wait for the bus for ages. Of course it ________ arrived but ____________ I’d had time to do all my homework. ______________!!! Here comes the bus! I thought it would never arrive. We had to wait so long for the bus that _________ we gave up and walked home.
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application – association – communication – congratulation – determination – education – examination – explanation – exploration – imagination – information – invitation – temptation 1. I sent my _____________s to her on passing the ____________. 2. What sort of __________ do you have to provide when you fill up the form? 3. I’m going to give details of my ____________ - the school I’ve attended – and an ____________ of the work I’ve been doing since I left. 4. I was very pleased to accept their __________ to the party. 5. The ___________ of unknown territory like this requires great __________, because it is very difficult to make progress and there is always the _____________ to give up. You need a certain amount of ____________, too, to find ways of solving unexpected problems. 6. This letter is a __________ from the Travellers’, saying they have accepted my _________ for membership. out of breath – out of control – out of date – out of order – out of the ordinary – out of the question – out of season – out of sight – out of stock – out of work 1. We knew that if someone was going to sponsor our trip, we would have to do something ____________ to attract their interest. 2. Seaside resorts like Blackpool are not interesting ________ when there are no holidaymakers there. 3. We went to see them off at the station and waved till their train was __________. 4. The lift’s __________ so we’ll have to walk. But, climb the stairs slowly or you’ll be __________ by the time we get to the top. 5. My brother lost his job last month, and as he’s ________ my father asked his boss if the firm could employ him. But the boss said there was no chance. It was ______________.
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6. I’m sorry, madam. That size is __________. There isn’t one left in the shop. But we can order for you. 7. People think of trams as being _________, but now they’re coming back into fashion. 8. He took his hands off the wheel and for a moment the lorry was______________. alone – lonely – single – unique career – course – profession chance – occasion – opportunity experience – experiences – experiment commemorate – memorise – remember – remind gazed – glanced – glimpsed – stared 1. They built the monument to _______________ the end of the war. __________ me to post this letter when I leave the office. When I was at school, I had to __________ whole poems and repeat them to the teacher. I do not ___________ the name of the first firm my father worked for. 2. The view was so beautiful that she ____________ at it for a long time. When she saw me come through the door covered in blood, she ________ at me in horror, unable to speak. I ____________ out of the window for a moment and __________ the back of her head as she turned the corner and disappeared out of sight. 3. Why have you decided on a ___________ as a lawyer? It’s a well-paid _________, I know, but you will have to follow a long _________ of study before you qualify. 4. They’re carrying out an ___________ to see if they get more work done in the office with different working hours. Applicants for the job will be judged on the basis of their qualifications and previous _____________. Before starting work, he went round the world and wrote a book describing his various ________________. 5. She lives _____________ in a country house, miles from the nearest town, but she says she feels at home in her surroundings, so she isn’t at all ___________. We’ve sold them all, I’m afraid. There isn’t a _________ one left.
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This is a ___________ opportunity in your life. You’ll never have the chance to travel so far again. 6. On one _________, he was looking for work and quite by __________ he saw an advertisement in the paper, which turned out to be a wonderful ___________. accept – admit – agree; adequate – suitable; appeal – like – suit; blame – fault; try on – try out; charge – cost – pay; claim – demand – insist – persist; common – ordinary – rude; dropped – fell – sank – spilled; flat – floor – ground; 1. I ________ the bottle on the floor, and it broke and __________ the milk on the ground. The coin __________ into the swimming pool and __________ gently to the bottom. 2. It’s no use opening a shop unless you have ___________resources to keep it going if you lose money at first. It’s also important to find a ____________ site within reach of your customers. 3. How much did that dress __________ you? How much did you _________ for that dress? How much did they __________ you for that dress? 4. I __________ to see the manager. The service is so poor. I __________ on seeing the manager. The service is so poor. I know you __________ that the customer isn’t telling the truth, but if you ________ in causing trouble, I’ll have to sack you. 5. You shouldn’t ___________ me for the mistake. It was not my ____________. 6. I don’t think that sort of holiday would _____________ us. I don’t think we’d _______ that sort of holiday. I don’t think that sort of holiday would_________ to us. 7. Do you __________ your mistake? Do you __________ cheques in payment? Do you __________ to the terms of the offer? 8. Is there anywhere in the shop where I can ___________ this dress? If you’d like to ________ the car, we can arrange a test drive. 9. He lives in a _________ on the seventh ________, so when you look out of the window it’s a long way to the __________ below. 10. There’s nothing special about him. He’s a very _________ person.
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I will not permit my staff to be ___________ to customers. He seems to think the world owes him a living. It’s a very ______________ tendency nowadays. appearance – look – sight – view, beat – earned – gained – won file – queue – row, shade – shadow 1. When she said that he should take more care of his _________, she gave me an unpleasant _________. You get a wonderful __________ of the surrounding countryside from the top of the tower. At first _________, the castle seems larger than it really is. 2. She __________ the school tennis championship. She ________ her best friend in the final. He _______ a reasonable amount of money in his first job and also __________ useful experience. At the Battle of Hastings, the Saxons under King Harold had a strong defensive position and at first, the Normans _______ no advantage from their attacks. Eventually, William __________ his enemies by a trick. His men pretended to run away, and some of the Saxons, thinking that they had __________ the battle, left the safety of the hill and pursued them. It can be said, of course, that William ________ his victory by superior intelligence. 3. Let’s rest here in the ________ of the tree. As he walked in the sunlight, he could see his ____________ following him. 4. The house where he grew up was one of a _________ of terraced houses. We had to stand in a ___________ to buy the tickets to enter the mansion. The entrance to the tower was so narrow that we had to go in in single __________. She was sitting in the back ____________ in the class. amusing – amused; exciting – excited; satisfying – satisfied; shocking – shocked; tiring – tired; worrying – worried; 1. It is a ____________ experience to think you have done your work as well as you can. Our aim is to have only __________ customers.
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2. He told me some _________ stories that made us smile. That’s very funny, he said with an __________ smile. 3. A thief has broken into the house, she said, with a __________ expression on her face. It was a __________ experience to come back home and find the house had been broken into, she said. 4. Go and lie down. You’ve had a very ____________ journey. The ____________ travellers were glad to rest after their journey. 5. It was such an __________ film that the children wanted to see it till the end. The children were so ___________ that they couldn’t sleep. 6. The children haven’t come home yet, he said with a ___________ look on his face. It’s always a ___________ time for children when they have to take examinations. alive – live – lively – living; amuse – enjoy – entertain; route – travel – trip – voyage; emotional – excited – exciting; famous – favourite – popular; sensible – sensitive – sensational – sentimental; 1. He is the greatest __________ film director. Good heavens! Is she still __________? She must be nearly 100. He got an electric shock because he touched a _________ wire. It’s a ____________ film, with plenty of action. 2. Claudette Colbert was a ______________- name in the 1930s; she was French but also became __________ with American audiences; she was my father’s __________ actress. 3. The film is full of scenes of violent cruelty intended to have a __________ effect, with a few ridiculously ____________ love scenes in between. No ___________ person could believe in such characters for a moment, and no one _____________ would want to watch so much unnecessary violence. 4. It’s an ____________ film, full of action. Children will love it. / The children were so ___________ that they could not keep still. / There’s a very ___________ scene at the end, when the lovers say goodbye for the last time.
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5. Our objective is to _____________ the public with films they will _____________. We may do it with serious films that make them think or light-hearted films that ________ them. 6. The film is about Columbus’s ___________ to America. / The _________ he took across the Atlantic was that of the underwater current from the Canary Islands to the West Indies. / She loves __________. She’s always planning a ________ to some distant country. arose – raised – rose; avoid – prevent; crowded – full – plenty; proof – test – trial; provide – supply; 1. The park was _________ of people because it was a holiday. The park was _________ with people because it was a holiday. There were ________ of people in the park because it was a holiday. 2. If I ask the Minister how he is going to ____________ people from using so much water, he will _______ giving a clear answer. 3. They have a contract to _________ meters to the local council. They have a contract to ___________ the council with meters. 4. The meter system has been on ________ in the Isle of Wight. Before we can introduce the system nationally, we must put it to the ________ in a limited area. On the results received so far, it does save water; the __________ of that is that consumption has fallen by 10 per cent. 5. They _________ the price of water in the areas affected by the drought. The shortage _________ because there had been very low rainfall for the previous four winters. People started to complain when the price __________. The reaction of the public has ___________ doubts in my mind. It’s been a hot summer and people have been using more water since the temperature _________. by chance – casually – eventually; custom – habit; find – get to know – meet – know; intended – pretended
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1. At first the detectives did not know what had happened to Mrs Parsons but they ___________ solved the case. Mr Parsons met the Inspector in the street, quite ________. He sat at the back of the class, not paying attention, ________drawing circles on a piece of paper. 2. He ________ to be very angry so that the criminal thought he was going to hit him. The inspector ________ to go to the cinema with his wife, but meeting Mr Parsons prevented it. 3. I did not expect to ________ the postman on his way to the house. She couldn’t _________ the letter of application she had written. I _________ Mr Parsons very well. He lives next door. During the six months she’s going to spend abroad, she hopes she will be able to _____________ people. I ________ his taste in novels rather depressing. We arranged to __________ outside the station. 4. It is the _________ here to send people cards on their birthdays. He has the irritating __________ of parking his car in my space. above all, after all, all in all, all the same, all things considered, at all costs, at all events, for all I know, not at all, once and for all 1. I do not think you have much cause for anxiety, Mr Parsons. ____________, your wife’s only been away for an hour. 2. I have no idea where she is. ___________, she may have gone to the pictures. 3. There’s probably no reason to worry. ___________, if I were you, I’d rather ring the police. 4. “Thanks very much for your help!” “__________________.” 5. There’s a dangerous criminal in the area. We must find him ____________ before he kills someone. 6. She’s very fond of crime stories, ____________ the novels of Ruth Rendell. 7. We can’t expect the police to catch every criminal, but __________ they do a fairly good job. 8. I’ve heard the arguments for and against the proposal and ________ I think those in favour are more convincing.
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9. I’ve told you a hundred times that I’m perfectly all right, so, _________, will you stop worrying? 10. She’s just disappeared without leaving a note for her husband. Of course, she may have had friends he didn’t know about. __________, that seems the most probable explanation. ashamed – shameful – shameless; blow – crash – shock; foreign – rare – strange; likely – probably; matter – mind; noticed – remarked; 1. My parents were injured in a car __________. My mother broke her leg and my father got a ____________ on the head. But, the worst of it was not the physical injuries but the _________. It took them both some time to get over it. 2. a) “He’s always complaining, but he never does any work,” she _________. b) “Yes, I’ve __________ that he spends most of his time reading the paper.” 3. – The company is planning to employ a number of workers now that the immigration laws have been changed. -
He’s a very odd person to work with. I’ve never encountered such ________ behaviour.
-
Colleagues who are really unpleasant by nature are __________, I’m glad to say, but difficult ones are common enough.
4. Oh, dear, I’ve broken this cup. – It does not __________. It was an old one. Oh, dear, I’ve broken this cup. – Never _________. It was an old one. 5. – He’s a good worker and _________ to be promoted soon. – He’s a good worker. He’ll _________ be promoted soon. 6. – You ought to be _________ of yourself, behaving like that! -
“I think it’s _________ that the person who’s done all the work gets no thanks, and her boss takes all the credit.”
-
“Well, that’s all you can expect of a man like him. He’s quite _________ where his career is concerned. He’d do anything to get promoted.”
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assist – attend; consider – regard; remain – rest – stay; 1. a) We are glad you were able to ____________ the meeting. It would have been difficult to reach a decision if you had not been here. b) I’m fortunate in having a first-class staff to __________ me in my work. c) Go and _________ to that customer over there. See what she wants. 2. a) I am going upstairs to ____________. I feel tired. b) Where are you going to _____________ when you visit London? c) If it won’t stand up, ___________ it against the wall. d) The walls are the only things that _____________ from Roman times. 3. a) I _____________ it as a very worthwhile cause. b) I _____________ it to be a very worthwhile cause. arrive at/in – reach – get to 1. What time does your flight ____________ at the airport? What time does your flight ____________ to the airport? What time does your flight ____________ London? What time does your flight ____________ in London? 2. When did my letter _________ you? – When did my letter _________ at your house? – When did my letter _________ ? 3. Do you think that they will be able to __________ the station in this fog? 4. Do you think that my letter will ___________ before Christmas? 5. Do you think that my letter will ___________ its destination before Christmas? lie - lay 1. I like _____________ on the beach so I’m looking forward to spending some time at the seaside. 2. I’m going to __________ down. I feel tired. 3. _________ your cards on the table. 4. This old coin has __________ in the earth for centuries.
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5. I’ve __________ the table. Now I’m going to serve lunch. 6. The Isle of Wight _________ off the south coast of England. 7. There is a mark on the floor of the Victory to show where Nelson _________ when he was fatally wounded. Then they carried him down to his cabin and ___________ him on his bed. 8. While you’ve been __________ there asleep, the hens have _________ a dozen eggs. expect – hope – look forward to – wait for 1. She does not _________ you to answer this letter until your exams are over. 2. I _______ it won’t rain tomorrow. I want to play tennis. 3. The weather forecast is good. I _________ it will be a fine day. 4. My parents are _________ meeting you. 5. We’ve been __________ for the bus for half an hour. 6. __________ here until she comes back. 7. I’m sorry your mother has been ill. I _________ she is better now. Please write and tell me how she is. 8. I _________ you would like to visit the New Forest. I know you are fond of trees and woods. 9. She’s been ________ to her visit so much. She can’t _________ for the holiday to begin. I _________ she won’t be disappointed when she gets there. Oh, I _______ she’ll have a good time. Carol’s family seem very nice people.
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APPENDIX 2 TO CHAPTER ONE ‘GRAMMAR EXERCISES’ REPORTING / SPECIFYING VERBS (USUAL PATTERNS)
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REPORTING / SPECIFYING VERBS A large number of verbs may be used in indirect speech to specify the way things were said. Use this table below for reference not only as a reminder of the most appropriate verb for a given purpose, but also to study the constructions that are used with it. Then do the following exercise. PURPOSE
VERB
PATTERN / CONSTRUCTION
accusation
accuse
someone of doing something
admission
admit
something that you have done something (to) having done something
advice
advise
someone / something someone on / about something doing something someone to do something
agreement
agree
to an idea, suggestion… (say ‘All right’) with someone / something (have the same opinion) to do something that something is a good idea that something should be done
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apology
apologise
(to someone) for (having done) something
begging
beg
someone to do something
complaint
complain
(to someone) about something that something has (not) been done
denial
deny
something that you have done something having done something
exclamation
exclaim
that something has happened
explanation
explain
something to someone that something has happened how, why, what…
information
inform
someone of / about / on something someone that something has happened
invitation
invite
someone to something someone to do something
offer
offer
something to someone someone something to do something (for someone) someone to do something
order
order
preference
would rather………. do one thing than another prefer……………… (doing) one thing to another (-ing) to do one thing rather than to do another 159
promise
promise
to do something (someone) that you will do something
refusal
refuse
to do something something
reminder
remind
someone of someone / something someone to do something someone that something must be done
request
someone to do something
request
something suggestion
suggest
(doing) something (to someone) that something (should) be done
threat
threaten
to do something (to someone) someone with something that you will do something (to someone)
warning
warn
someone of / against / about something someone (not) to do something someone that something may happen
wonder
wonder
if / what / why / wheter…
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Match the sentences in direct speech in column A to the appropriate incomplete reported sentences in column B. Then complete the sentences in column B, write them down in the line-space below. Be careful about the construction that you are going to use. Column
A
Column
1. I’m not going to answer your questions. 2. I didn’t do anything wrong. 3. I’ll lend you the money when you need it. 4. You stole the money, didn’t you? 5. What is going to happen to us? 6. I’d rather wait until I know her opinion. 7. Don’t forget to ring Aunt Helen! 8. Don’t cross the railway line! It’s dangerous. 9. All right. I’ll come with you. 10. Please don’t tell my parents. 11. Stop fighting! 12. It’s true! I took the money. 13. This soup is cold, waiter! 14. I’m sorry I was so rude to you. 15. Would you like to spend the weekend with us? 16. If you don’t pay me the money, I’ll take you to the court 10. 17. You shouldn’t smoke so much. 18. Why don’t you go away for the weekend? 19. The word has different meanings. It can mean a line of houses, or of 10
a) b) c) d) e) f) g) h) i) j) k) l) m) n) o) p) q) r) s) t)
They accused… He admitted… The doctor advised… She agreed… He apologised … He begged … He complained… He denied… She explained … They invited … He offered… He ordered… He said he preferred… He promised… She refused… She reminded… He suggested… They threatened… She warned… They wondered…
To take someone to the court = to sue someone is more frequent.
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B
seats in a classroom. With a different pronunciation, it can mean an argument. 20. Shall I take you to hospital?
1. ____________________________________________________________ 2. ____________________________________________________________ 3. ____________________________________________________________ 4. ____________________________________________________________ 5. ____________________________________________________________ 6. ____________________________________________________________ 7. ____________________________________________________________ 8. ____________________________________________________________ 9. ____________________________________________________________ 10. ____________________________________________________________ 11. ____________________________________________________________ 12. ____________________________________________________________ 13. ____________________________________________________________ 14. ____________________________________________________________ 15. ____________________________________________________________ 16. ____________________________________________________________ 17. ____________________________________________________________ 18. ____________________________________________________________ 19. ____________________________________________________________ 20. ____________________________________________________________
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APPENDIX 3 TO CHAPTER ONE ‘GRAMMAR EXERCISES’ IRREGULAR VERBS
163
Infinitive
Past Simple Tense
Past Participle
Serbian Equivalent
abide
abode
abode
ostati, boraviti
abided
abided
arise
arose
arisen
nastati
awake
awoke
awoken
probuditi
awaked
awaked awoke
backbite
backbit
backbitten
klevetati
backslide
backslid
backslid
spuštati se
be
was, were
been
biti
1) bear
bore
born
roditi se
2) bear
bore
borne
nositi
beat
beat
beaten
(po)tući
become
became
become
postati
* befall
befell
befallen
dogoditi se
* beget
begot
begotten
stvoriti
begin
began
begun
početi
* behold
beheld
beheld
posmatrati
beholden bend
bent
bent
saviti
bereave
bereft
bereft
lišiti
bereaved
bereaved
beseech
besought
besought
zaklinjati
* beset
beset
beset
opkoliti, napadati
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bespeak
bespoke
bespoken
iznajmiti, pokazivati
* bestride
bestrode
bestridden
opkoračiti
bestrid bet
bet
bet
kladiti se
betted
bet
*betake (oneself)
betook
betaken
prihvatiti se
bid
bade
bidden
narediti, poželeti, pozdraviti
bid
bid
bid
ponuditi cenu
bind
bound
bound
vezati
bite
bit
bitten
ujesti, gristi
bit bleed
bled
bled
krvariti
blend
blent
blent
pomešati
blended
blended
bless
blessed
blessed
blagosloviti
blow
blew
blown
duvati
break
broke
broken
slomiti
breed
bred
bred
gajiti
bring
brought
brought
doneti
broadcast
broadcast
broadcast
emitovati
* browbeat
browbeat
browbeaten
zaplašiti
build
built
built
graditi
burn
burnt
burnt
goreti
burst
burst
burst
prsnuti
bust
bust
bust
razbiti, upropastiti
busted
busted
buy
bought
bought
kupiti
carve
carved
carved
rezati
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carven cast
cast
cast
bacati
catch
caught
caught
uloviti, uhvatiti
chide
chid chided
koriti
choose
chose
chidden chid chided chosen
1) cleave
cleft
cleft
clove
cloven
cleaved
cleaved
clave
cloven
2) cleave
clove
izabrati
raseći
zalepiti
cleaved
cloved
cling
clung
clung
prilepiti se
clothe
clothed
clothed
odevati
clad
clad
come
came
come
doći
cost
cost
cost
koštati
* countersink
countersank
countersunk
frezovati
creep
crept
crept
puziti
crow
crew
crown
kukurikati
cut
cut
cut
rezati, seći
deal
dealt
dealt
deliti
* deepfreeze
deepfroze
deepfrozen
duboko zalediti
deepfreezed
deepfreezed
dig
dug
dug
kopati
dive
dived
dived
roniti
dove do
did
done
činiti
draw
drew
drawn
vući, crtati
dream
dreamed
dreamed
sanjati
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dreamt
dreamt
drink
drank
drunk, drunken
piti
drive
drove
driven
voziti
dwell
dwelt
dwelt
stanovati
dwelled
dwelled
eat
ate
eaten
jesti
fall
fell
fallen
pasti
feed
fed
fed
hraniti
feel
felt
felt
osećati
fight
fought
fought
boriti se
find
found
found
pronaći
fit
fit
fit
podesiti
fitted
fitted
flee
fled
fled
pobeći
fling
flung
flung
baciti
* floodlight
floodlighted
floodlighted
osvetljavati
floodlit
floodlit
reflektorima
fly
flew
flown
leteti
forebear
forebore
foreborne
okaniti se
* forbid
forbade
forbidden
zabraniti
forbad
forbid
* forecast
forecast
forecast
prognozirati
* foresee
foresaw
foreseen
predvideti
* foretell
foretold
foretold
proricati
* forget
forgot
forgotten
zaboraviti
forgot * forgive
forgave
forgiven
oprostiti
* forgo
forwent
forgone
odreći se
forsake
forsook
forsaken
ostaviti
* forswear
forswore
forsworn
zavetovati se
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freeze
froze
frozen
zamrznuti
* gainsay
gainsaid
gainsaid
poreći
get
got
dobiti
gild
gilded gilt girded
got gotten gilded gilt girded
girt
girt
give
gave
given
dati
go
went
gone
otići
grave
graved
graven
rezbariti
grind
ground
ground
mleti
gird
pozlatiti opasati
grinded grow
grew
grown
rasti
hamstring
hamstrung
hamstrung
onemogućiti
hamstringed
hamstringed
hung
hung
hanged
hanged
have
had
had
imati
hear
heard
heard
čuti
heave
heaved
heaved
dići
hove
hove
hewed
hewn
hang
hew
visiti
seći sekirom
hewed hide
hid
hidden
sakriti
hid hit
hit
hit
udariti
hold
held
držati
hurt
hurt
held holden (the law register) hurt
povrediti
* inlay
inlaid
inlaid
umetnuti
168
* input
input
input
inputted
inputted
* inset
inset
inset
umetnuti
* interweave
interwove
interwoven
protkati
keep
kept
kept
držati
ken
kenned kent knelt
kenned
prepoznati
knelt
klečati
kneeled
kneeled
knitted
knitted
knit
knit
know
knew
known
znati
lade
laded
laden
tovariti,
laded
vaditi vodu
kneel knit
ubaciti
plesti
lay
laid
laid
položiti
lead
led
led
predvoditi
lean
leant
leant
naslanjati se
leaned
leaned
leapt
leapt
leaped
leaped
learnt
learnt
learned
learned
leave
left
left
ostaviti
lend
lent
lent
pozajmiti (nekom)
let
let
let
pustiti
lie
lay
lain
ležati
light
lit
lit
zapaliti
lighted
lighted
lose
lost
lost
izgubiti
make
made
made
napraviti
mean
meant
meant
značiti
leap learn
169
skočiti učiti
meet
met
met
sresti
melt
melted
melted
topiti
molten * miscast
miscast
miscast
loše podeliti uloge
* misdeal
misdealt
misdealt
loše deliti (karte)
* misgive
misgave
misgiven
slutiti zlo
* mishear
misheard
misheard
pogrešno čuti
* mishit
mishit
mishit
pogrešno baciti
* mislay
mislaid
mislaid
zaturiti
* mislead
misled
misled
pogrešno voditi
* misread
misread
misread
pogrešno pročitati
* misspell
misspelt
misspelt
pogrešno napisati
misspelled
misspelled
* misspend
misspent
misspent
rasipati
* misunderstand
misunderstood
misunderstood
pogrešno razumeti
mow
mowed
mown
kositi
mowed * offset
offset
offset
izjednačiti
* outbid
outbid
outbid
više ponuditi
outbidden * outdo
outdid
outdone
nadmašiti
* outfight
outfought
outfought
nadjačati
* outgrow
outgrew
outgrown
prerasti
* output
output
output
dobiti rezultat
* outrun
outran
outrun
prestići
* outsell
outsold
outsold
bolje prodavati
* outshine
outshone
outshone
zaseniti
* overbear
overbore
overborne
nadjačati
* overbid
overbid
overbid
nuditi bolju cenu
* overcast
overcast
overcast
naoblačiti
170
* overcome
overcame
overcome
prevazići
* overdo
overdid
overdone
preterati
* overdraw
overdrew
overdrawn
otići u minus
* overeat
overate
overeaten
prejesti se
* overfeed
overfed
overfed
previše hraniti
* overfly
overflew
overflown
preleteti
*overhang
overhung
overhung
pretiti
* overhear
overheard
overheard
slučajno čuti
* overlay
overlaid
overlaid
pokriti
* overpay
overpaid
overpaid
preplatiti
* override
overrode
overridden
prejahati
* overrun
overran
overrun
pretrčati
* oversee
oversaw
overseen
nadgledati
* overshoot
overshot
overshot
pucati preko
* oversleep
overslept
overslept
prespavati
* overtake
overtook
overtaken
sustići
* overthrow
overthrew
overthrown
srušiti, poraziti
* partake
partook
partaken
učestvovati
pay
paid
paid
platiti
pen
pent
pent
zatvoriti u tor
penned
penned
pleaded
pleaded
pled
pled
* prepay
prepaid
prepaid
unapred platiti
prove
proved
proved
dokazati
plead
braniti
proven put
put
put
staviti
quit
quit
quit
napustiti
quitted
quitted
rapped
rapt
rap
171
udariti
read
read
read
čitati
* rebind
rebound
rebound
ponovo vezati
* rebuild
rebuilt
rebuilt
ponovo sagraditi
* recast
recast
recast
pretopiti, preraditi
* redo
redid
redone
ponovo uraditi
* rehear
reheard
reheard
ponovo preslušati
* relay
relaid
relaid
zameniti
* remake
remade
made
obnoviti
rend
rent
rent
tragati
* repay
repaid
repaid
još jednom platiti
* reread
reread
reread
ponovo pročitati
* rerun
reran
rerun
ponovo prikazati
* resell
resold
resold
ponovo prodati
* reset
reset
reset
namestiti
* resit
resat
resat
ponovo polagati
* restring
restrung
restrung
prenizati
* retake
retook
retaken
uzeti nazad
* retell
retold
retold
prepričati
* rethink
rethought
rethought
ponovo razmotriti
* rewind
rewound
rewound
premotati
rid
rid
rid
osloboditi
ridded
ridded
ride
rode
ridden
jahati
ring
rang
rung
zvoniti
rise
rose
risen
dići se
rive
rived
rived
rascepiti
riven rot
rotted
rotted
truliti
rotten run
ran
run
172
trčati
saw
sawed
strugati
said
sawn sawed said
say see
saw
seen
videti
seek
sought
sought
tražiti
seethe
seethed
seethed
vreti
sod
sodden
sell
sold
sold
prodati
send
sent
sent
poslati
set
set
set
staviti
sew
sewed
sewn
šiti
reći
sewed shake
shook
shaken
tresti
shave
shaved
shaved
brijati
shaven shear
sheared
shorn
shore
sheared
shed
shed
shed
gubiti (lišće…)
shine
shone
shone
sijati
shined
shined
shod
shod
shoed
shoed
shoot
shot
shot
pucati
show / shew
showed / shewed
shown / shewn
pokazati
shoe
strići
potkovati
showed / shewed shred shrink shrive
shredded
shredded
shred
shred
shrank
shrunk
shrunk
shrunken
shrived
shrived
173
izdrpati skupiti se ispovediti
shrove
shriven
shut
shut
shut
zatvoriti
sing
sang
sung
pevati
sink
sank / sunk
sunk / sunken
potonuti
sit
sat
sat
sedeti, sesti
slay
slew
slain
ubiti
sleep
slept
slept
spavati
slide
slid
slid
skliznuti
sling
slung
slung
bacati
slink
slunk
slunk
odšunjati se
slit
slit
slit
rasporiti
smell
smelt
smelt
mirisati
smelled
smelled
smote
smitten
smit
smit
sowed
sown
smite sow
udarati sejati
sowed speak
spoke
spoken
spake
spoke
sped
sped
speeded
speeded
spelt
spelt
spelled
spelled
spend
spent
spent
provoditi, trošiti
spill
Spilt, spilled
spilt, spilled
proliti
spin
spun
spun
presti
spit
spit
pljuvati
spat
spat, spitted
split
split
speed spell
govoriti žuriti sricati
span spit split
174
rascepiti
spoil
spoilt
spoilt
spoiled
spoiled
spotlit
spotlit
obasjavati
spotlighted
spotlighted
reflektorima
spread
spread
spread
raširiti
spring
sprang
sprung
skočiti
stand
stood
stood
stajati
stave
stove
stove
probiti rupu
staved
staved
steal
stole
stolen
ukrasti
stick
stuck
stuck
prionuti
sting
stung
stung
ubosti
stink
stank
stunk
zaudarati
strewn
posuti
* spotlight
pkvariti, razmaziti
stunk strew
strewed
strewed stride
strode
strode stridden
stupati
strid strike
struck
struck
udarati
stricken string
strung
strung
nizati
strive
strove
striven
boriti se, težiti
strived
strived
* sublet
sublet
sublet
izdati u podzakup
swear
swore
sworn
zakleti se
sweat
sweat
sweat
znojiti se
sweated
sweated
sweep
swept
swept
čistiti
swell
swelled
swollen
oteći
175
swelled swim
swam
swum
plivati
swing
swung
swung
njihati se
take
took
taken
uzeti
teach
taught
taught
podučavati
tear
tore
torn
cepati
*telecast
telecast
telecast
tell
told
told
prenositi preko televizije reći
think
thought
thought
misliti
thrive
thrived
thrived
uspevati
throve
thriven
throw
threw
thrown
bacati
thrust
thrust
thrust
gurnuti
tread
trod
trodden
gaziti, koračati
* unbend
unbent
unbent
olabaviti
* underbid
underbid
underbid
ponuditi nižu cenu
underbidden * undercut
undercut
undercut
izrezati donji deo
* undergo
underwent
underwent
iskusiti
* underlie
underlay
underlain
ležati u osnovi
* underpay
underpaid
underpaid
loše plaćati
* undersell
undersold
undersold
prodati ispod cene
* understand
understood
understood
razumeti
* underwrite
underwrote
underwritten
potpisati mir
* undo
undid
undone
uništiti, oparati
* unfreeze
unfroze
unfrozen
odlediti
* unmake
unmade
unmade
ukinuti, uništiti
* unsay
unsaid
unsaid
povući reč
* unwind
unwound
unwound
odmotati
* uphold
upheld
upheld
podupreti
176
* upset
upset
upset
poremetiti
wake
woke
woken
probuditi
waked
waked
* waylay
waylaid
waylaid
vrebati, nagovoriti
wear
wore
worn
nositi
weave
wove wedded
woven wove weaved wedded
wed
wed
weep
wept
wept
plakati
wet
wet, wetted
wet, wetted
ukvasiti
win
won
won
pobediti
wind
wound
wound
vijugati, duvati
winded
winded
* withdraw
withdrew
withdrawn
povući se
* withhold
withheld
withheld
zaustaviti
* withstand
withstood
withstood
odupreti se
work
worked
worked
raditi
wrought
wrought
wring
wrung
wrung
iscediti
write
wrote
written
pisati
wed
177
tkati venčati se
CHAPTER TWO ENGLISH in TRADE ENGLISH in ACCOUNTING/AUDITING ENGLISH in BANKING
178
ENGLISH in TRADE
179
INTRODUCTION TO MARKETING DEFINITIONS From the words given below choose the ones which best fit into each gap: customers , developing , distribute , needs , place , price , producing , product ( 2x ) , profit , promote , service , time , want Marketing is said to be concerned with launching the right ________________________ to the right ________________________ at the right ________________________. It is all about meeting consumer ________________________ at a ________________________. It makes it easier for ________________________ to do business with you. 11 Marketing has the aim to find out what it is that people ________________________; then ________________________ and ________________________ a ________________________ or ________________________ that will satisfy all those wants, and then determining the most appropriate way to ________________________ ________________________ and ________________________ ________________________ the product or service. 12 Marketing is also thought to be the management process responsible for identifying, anticipating and satisfying customer requirements profitability. 13
11
This definition has been taken and slightly adapted from Booth, D., Principles of Strategic Marketing, Tudor Publishing, 1990 12 This definition has been taken and slightly adapted from Stanton, W.J., Fundamentals of Marketing, McGraw Hill, 1981 13 Chartered Institute of Marketing, quoted in Hannagan T., Management: Concepts and Practices, Financial Times / Pitman Publishing, 1998
180
KEY WORDS Use the most appropriate words that match the definitions given below and then put them into the right contexts in the gaps in the following sentences. 1. users of products and services ________________________ 2. people who buy products and services ________________________ 3. business professionals who work in the field of marketing ________________________ 4. studies ________________________ 5. the extent to which consumers want something ________________________ 6. the movement of goods and services from the producer to the consumer ________________________ 7. the combination of factors that makes up a marketing plan ________________________ Marketers and all levels of management realise the essential importance of ________________________. This has become the watchword of good business. ________________________ and experience has shown that ________________________ will pay more for ________________________ and ________________________ which have high quality, and also that they expect every single aspect of the ________________________ , including ________________________ , to meet the highest standards. The job of marketers is to design a ________________________ ________________________ with a ________________________ of all the necessary components to satisfy consumer ________________________
181
MARKETING , MARKETING PEOPLE AND MARKETS Circle the most appropriate answer ( a , b , or c ). 1. Providing money to cultural or sporting activities in exchange for advertising rights. a. promotion
b. grant aid
c. sponsorships
2. A business that is specialised in offering advice and support to companies about marketing and markets. a. marketing consultancy
b. counselling service
c. company analysts
3. An economy that allows open and reasonably free exchange between private companies. a. command economy
b. conservative economy
c. free market economy
4. When too many suppliers in the same market produce similar products. a. saturated market
b. buyers’ market
c. heavy market
5. When only few suppliers produce goods that a number of people want to purchase a. weak market
b. sellers’ market
c. light market
6. When a company sells more than the competition. a. trend setter
b. multi national
c. market leader
7. When a man uses specialist knowledge of a specific market in order to account for what has happened and to predict what may (or will) happen in the future. a. market analyst
b. forecaster
c. market broker
8. If there is a particular promotional activity over a limited period of time. a. campaign
b. season
c. trend
9. The moving of goods from the manufacturer to the consumer. a. selling
b. distribution
c. orientation
10. When selling goods to other countries. a. multinational
b. exchange distribution
c. exporting
11. The proportion of the total market which one company controls. a. dominion
b. market place
c. market share
12. What a company or organization says it intends to do for its customers/clients and the community. a. corporate mission
b. strategic plan 182
c. corporate image
features, unique selling points, social, benefits, customer needs, techniques, potential buyers, marketing, profit In relation to this, we could try to define _______________. It is the process which includes planning, designing, pricing, promoting and distributing ideas, goods and services, so as to meet or satisfy _______________– their wishes and preferences in style and / or quality for example – which is all done in order to make a _______________. Usually, companies point out (emphasize) the special _______________ or characteristics of their products and services (the so-called USP – _______________). They stress that these features possess particular (specific) _______________ that may meet the needs of those people who are their _______________. There are also other categories of goals. There are the so-called _______________ goals usually present with non-profit organizations – they try to be persuasive – to persuade people not to smoke, or to give money to those people living in poor countries, but these organizations also use the _______________ of marketing.
The Classic 4 Ps (Marketing Mix) There are 4 essential features or components of marketing: PRODUCT – PRICE – PLACE – PROMOTION. However, it is possible sometimes to add yet another, fifth P, known as PACKAGING. Product means we have to decide what we are to sell; price covers choice of prices to be charged; place leads us to the question of how the product will be distributed and where people will buy it (at which POS – point of sale); promotion is very important in the context of providing support to the product which may include advertising (advertisements and commercials), special activities, the media coverage etc. Packaging refers to the last but not least important factor that could be said to be creating what we refer to as marketing mix; it understands all the materials that we use to protect and present a product before it is sold. In short, sell the right product, at the right price, through the right channels, with the right support and communication, and, not to forget, wrap it up in the right material.
183
THE 4 Ps AND 3+ Ps - the goods or services
_________________________
- the cost of the product
_________________________
- distribution
_________________________
- it aims to make people aware of the product
_________________________
The additional 3 Ps are often referred to as service Ps: - everyone involved from producer to consumer
_________________________
- anything that shows the existence of the company such as buildings, vehicles, website, stationary, staff uniforms, badges _________________________ - the interaction between everyone involved
_________________________
marketeers, market, market-oriented, put into action, market-driven, marketers, market orientation, market-led, The marketing mix (the MM) consists of all the activities we use and combine successfully in order to sell products. To _______________ a product means to make a detailed plan based on the combination of the aforementioned 4 Ps, which is later to be _______________. People who work in this area are called _______________ or _______________. However, the former can also refer to the description of an organization selling particular goods and / or services. These people often talk about _______________, the fact that everything they do is designed to meet the needs of the (particular) market. When describing themselves, they can use the following combinations: _______________, _______________, _______________.
184
Use the correct form of the words in brackets to complete the sentences. 1. European films do not export well: European movies barely_______________ (abandon/corner/penetrate) the US market. 2. In the 1970s, Kodak _______________ (corner/enter/leave) the instant photography market, until then (abandon/dominate/penetrate) by Polaroid. 3. The Hunt brothers tried to fix silver prices and to _______________ (corner/enter/leave)
the
silver
market,
_______________
(enter/drive
out/monopolize) all competitors. 4. In the 1940s, MGM _______________ (abandon/get out of/monopolize) the market on film musicals. But by the late 1950s, Warner Bros had also started buying film rights to musicals.
Read carefully the dialogue segments given below and work out the dialogue on the next page. 1. And then the fourth area is physical evidence. 2. It covers both good and services offered by the company. 3. Exactly – and the desire to buy the product. And, finally, people, which means colleagues, employees, agents and customers. The idea is to keep everyone happy, make personal contact. 4. Yes. This means any visual presence or signs suggesting the company. 5. The second area is place – also called distribution – meaning the movement of goods from the producer to the consumer. 6. Well, the identified six areas where improvement is necessary. 7. After place, process. Process is the interaction between people and systems at all stages, from market research, design, production, delivery and after-sales. 8. The first is product. 9. Promotion.
185
John: So, what have you got to report? Mary: _________________________________________________________________ _________________________________________________________________ John: Really? What are they? Mary: _________________________________________________________________ _________________________________________________________________ John: And what exactly does that term cover? Mary: _________________________________________________________________ _________________________________________________________________ John: What else? Mary: _________________________________________________________________ _________________________________________________________________ John: And after place, what is next? Mary: _________________________________________________________________ _________________________________________________________________ John: So, you mean the coordination of systems? Mary: _________________________________________________________________ _________________________________________________________________ John: Physical evidence? Mary: _________________________________________________________________ _________________________________________________________________ John: Everything visual. Right, I follow you. And what’s the next area? Mary: _________________________________________________________________ _________________________________________________________________ John: So, that is creating consumer awareness and establishing the brand identity? Mary: _________________________________________________________________ _________________________________________________________________ Which Ps are not mentioned in the dialogue above? Think of a famous company and give examples of its Ps in a marketing mix.
186
INTERNATIONAL MARKETING FINDING THE RIGHT INTERNATIONAL MIX The last stage of fitting the product to the market is fitting the market to the product – Clive James, Australian writer and broadcaster In these days of ours, the days of increasing global integration, the task which many international marketers face is not so much market entry as managing the marketing mix in different national markets. Is it better to standardise or to adapt it across different markets? Consumer tastes in cars are very different in North America, the UK, Germany, Italy, Japan and India. A ‘global’ car that does not have country-specific differentiating features (what we referred to as the so-called ‘unique selling point’) will certainly fail. The manufacturer, therefore, has to find the balance between designing a separate car for each market – which would be exorbitantly costly – and designing one car for all markets. Nissan was a pioneer in this area. It reduced the number of different chassis designs from 40 to 8 for cars meant for 75 different national markets. Some companies, however, do develop the same product for all markets regardless of the existing local preferences. Companies such as Kellogg have succeeded in changing consumption patterns. Breakfast cereal was unknown in France 20 years ago. Today it is common. Kellogg ignored the research that said that cereal would not sell in France. In contrast, Coca-Cola changes the flavour of its soft drink to conform to local tastes. Coke in the US tastes different from Coke in the UK, which in turn tastes different from Coke in India. Thus there is a spectrum of new product development strategies. Firms sometimes customise a product to every market; at other times, they offer one standardised product everywhere; and sometimes they compromise and settle somewhere in the middle. New product development that co-ordinates efforts across national markets leads to better products and services. Such opportunities are not normally available to a company that operates only in one country or is only just entering a new country. The advent of the Internet and Intranets has the potential to accelerate the process of mining all markets for relevant information and for features that can be included in new products. Unilever has four global research laboratories that develop products for their different national markets while providing inputs for global products. The laboratories co-ordinate their efforts by looking at the possibilities of melding product ideas arising from different countries. Motorola’s software development establishments co-ordinate their efforts in working on different modules of the same project. Companies also develop products in different countries in markedly different ways. Japanese companies, for example, tend to believe much more in getting new products to market and then gauging the reaction to them. the product itself may have been developed with reference to observations of present and potential customers rather than those of conventional market research. US companies, on the other hand, tend to use more formal market research methods. And for German companies, product development schedules tend to be more important. Clearly, companies decide on different launch strategies for different categories of products. Toshiba launched the DVD in Japan in November 1996, in the US in March 187
1997, and in Europe in autumn 1997. However, Intel launches its latest PC chips practically simultaneously in all countries. The launch decision also includes marketing mix decisions. When Citibank introduced its credit card in the Asia-Pacific region, it launched it sequentially and tailored the products features for each country while maintaining its premium positioning. The promotional, pricing and distribution strategies also differed from country to country. As a contrast, consider Rolex. The genuine Rolex watch is the same certified chronometer anywhere in the world; its positioning – as the timepiece for the elegant high achiever – is the same around the world, as is the advertising message. One will always find a Rolex in an upmarket distribution outlet and at a premium price. Or consider Unilever’s Lifebuoy soap, which has different ingredients in India compared to East Africa. However, Unilever positions the soap in the same way in both markets – as an inexpensive everyday soap that has antibacterial properties and protects health. 14 From the box, choose the most suitable marketing expression to complete the sentences given below. buying habits , government bureaucracy , monetary regulations , economic situation , income distribution , political stability 1. Because of tight ____________________ ____________________ company profits could not be taken out of the country. 2. Red tape and other examples of ____________________ ____________________ hinder a company’s entry into a market. 3. The country is attractive to exporters because it has enjoyed ____________________ ____________________ for the last 50 years or so. 4. The purchasing behaviour of consumers can be described as their ____________________
____________________.
5. The ____________________
____________________ is improving, leading to a
rise in employment. 6. ____________________
____________________ is a term used by economists to
describe how wealth is shared in a country.
14
Taken from The Financial Times
188
In the text, find the noun phrases that have similar meanings to the phrases below. -
things that make a product different for a particular country (par. 2) general trends in the way people buy and use goods (par. 3) ways of developing a new strategy (par. 4) places where worldwide markets are investigated (par. 6) places where software is produced (par. 6) methods of investigating markets (par. 7) programmes for developing goods (par. 7) choices about price, product, promotion and place (par. 8) a place where expensive goods are sold (par. 9) a high price for something special or unusual (par. 9)
Use the following words to complete the collocations and compounds. shopping
behaviour
target
design
consumer
position
competitive
mix
mission
standardisation
1. The most important decisions for international marketing are probably those of product ____________________ and variety reduction. 2. In international marketing, it is necessary to meet individual national requirements, in particular where ____________________ goods are concerned. 3. Licensing is an option which may enable the marketer to improve profits while retaining market ____________________. 4. In order to secure a ____________________ advantage, companies will try to make their products and services stand out from their competitor’s. 5. It is extremely important for marketers to understand the buying ____________________ of existing and potential customers. 6. A ____________________ statement is a definition of the business which usually says something about customer needs to be served, customer groups targeted, and technologies used. 189
7. A good product ____________________ is one which satisfies the needs of the customer and makes a product eye-catching in the marketplace. 8. There are numerous large ____________________ malls in Britain, which offer the customer free parking and where all the major retail brands can be purchased under one roof. 9. The main elements of the marketing ____________________ are product, price, promotion and place. 10. Marketers sometimes focus on particular segments of a given overall market, the process being known as ‘____________________ marketing’. Define the following abbreviations and insert them into the appropriate gaps below. JIT
____________________
EDI
NIC
____________________
PLC ____________________
TQM ____________________
USP
____________________ ____________________
DMU ____________________ 1. Nowadays, a company that can supply ____________________ deliveries has a strong competitive edge over suppliers who cannot. 2. In industrial firms, the group of people involved in the overall purchasing process are known as the ____________________. 3. The concept of the ____________________ proposes that, once a product has been introduced into the market, it goes through a process of growth, maturity and decline, and eventually disappears from the market. 4. A company that wants to adopt a global marketing approach has to take the emergence of ____________________ into consideration.
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PLANNING What you are going to see below is a flyer-abstract advertising marketing strategy seminars. Use the correct word from the box and fill each gap. mix , opportunities , people , physical evidence , place , plan , price , process , product , promotion , strengths , threats , weaknesses […] Success depends on good marketing. Your business needs a clear strategy to develop understanding of: 1. your present position and the market environment 2. the best marketing strategy to reach your customers and build profits for your business Any business must have a marketing _______________, which should be based on a clear SWOT analysis, i.e. understanding of the present market position in terms of: * ____________________
* ____________________
* ____________________
* ____________________
The seminar will examine ways to develop a 7-point marketing ____________________ consisting of: * ____________________
* ____________________
* ____________________
* ____________________
* ____________________
* ____________________
____________________ * ____________________ Send for details and an application form now to […] Chief Executive Marketing, Or by e-mail to […]
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CONSUMER MARKETING AND BUYER BEHAVIOUR Find definitions for the following terms that have to do with branding and marketing. -
company’s product range
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top-end / upmarket (Am. E. upscale) products
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mid-range products
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bottom-end / downmarket (Am. E. downscale) products
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entry-level product for people buying some product for the first time
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launching
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features of buying behaviour
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different customer groups or segments
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position of a product in relation to the competitor’s product
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key players in the market
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company’s policy on pricing
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ways of setting prices
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mark-up is what?
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profit margins (types of profit margins)
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discounts to distributors and consumers
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price wars
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to reach the outlets
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distribution channels
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wholesaler, distributors, resellers and / or retailers – explain the relationship between the aforementioned; who has the upper hand?
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promotion and sales force – explain its organization
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advertising and / or direct mail – who carries it out?
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packaging and designing
These questions basically refer to consumer marketing. Some different aspects should be discussed in relation to companies – products – services. Most business, however, takes place between companies; in this case, marketing can be referred to as industrial or business-to-business (B2B) marketing.15 15
Students who are more interested in this topic may have a look at the following editions:
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Read this description of a language training market. Answer the questions. In Paris, 500 organizations offer language training to companies. However, 90 per cent of sales are made by the top five language training organizations. The market is not growing in size overall. Organization A has 35 per cent of the market, and faces stiff competition from B, which has about 25 per cent of the market, and from C, D, and E, who each have 10 per cent, but who are trying to grow by charging less for their courses. 1. How many competitors are there in this market? 2. Is competition in the market strong? Can you find some other expressions for strong competition? 3. Who is the market leader? 4. Who are the two key players? 5. Who mainly makes up the competition, from the market leader’s point of view? 6. If one competitor increases its market share, can the others keep their market share at the same level?
Philip Kotler: Marketing Management: Analysis, Planning and Control, Prentice Hall, 1996, now in its 9th edition. A market leader among marketing textbooks. J H Davidston: Even More Offensive Marketing, Penguin, 1997. Very good on what characterizes people in apparently non-marketing functions in market-oriented companies. Pocket Marketing, Economist Books / Hamish Hamilton, 1993. Concise definitions of key terms. Theodore Levitt: Marketing Myopia, Harvard Business Review, Jul-Aug 1960. A seminal text still often reprinted and quoted for its examples of industries that failed to identify and respond to changes in customer needs. Nicholas Ind: The Corporate Brand, Macmillan, 1997
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Put the number that is in front of each definition into the gap after each term. 1. When a particular manufacturer’s products are generally liked (when one often buys the same product again, even over many years. 2. When a man purchases large quantities of a particular product to use it for a long time, even for years, and the ones which are usually thought about carefully and for a long period of time, with a high degree of consumer involvement. 3. When you spontaneously decide to buy a product – you see it-you buy it! 4. Aiming a high price, high quality product at a narrow group of (potential) consumers, with a lot of purchasing power. (What is purchasing power?) 5. Repeat buying, with little involvement in the purchase. 6. Items which are regularly used and bought frequently with little personal involvement. 7. Concern for the environment, for society and for a moral code in marketing. _____ marketing ethics , _____ niche marketing , _____ brand loyalty , _____ impulse buying , _____ fast moving consumer goods (FMCG) , _____ consumer durables Use the correct preposition in the gaps below: ~ People who are concerned _____ society are typically interested _____ marketing ethics. ~ That is typical _____ them. ~ Niche marketing is frequently concerned _____ aiming particular products _____ specific socio-economic groups. ~ Brand loyalty is based _____ the development _____ routine purchasing _____ low-involvement goods. ~ The success _____ shops attached _____ petrol stations depends _____ impulse purchasing. You can see motorist who suddenly decide _____ buy a music cassette, confectionery or a magazine. ~ Research _____ buyer behaviour show that when consumers make routine purchases _____ regularly used consumer products, they are not personally involved _____ the products. ~ Routine purchasing contrasts _____ the purchase _____ consumer durables […] Here there is a greater degree _____ personal involvement. ~ Clients have increasingly high expectations _____ the providers _____ professional services _____ a range _____ fields, including health, education and the law. Special government appointed committees are responsible _____ ensuring that consumers get good service and adequate protection. Called consumer watchdogs, they respond _____ reports _____ malpractice.
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MARKETING EDGE
IN THE KNOW
No matter what your business is, make yourself an expert and people will listen to you. Recently, I was participating in a roundtable discussion on entrepreneurship when one of the speakers introduced himself as ‘an expert, especially since I am now more than 50 miles from home.’ Sure, we’ve all heard that definition of expert somewhere before, but it really does have a kernel of truth to it. Frequently, people who know you locally forget that you might be one of the most knowledgeable people in your field on a regional or national level. It therefore becomes your responsibility to toot your own horn, wave your own flag, or do whatever it takes to let others (especially in the media) know you exist and are an expert source of information or advice. Being regarded as an industry expert can do wanders for your business. It’s surprising how being quoted in the newspaper, in a trade journal, on the radio or on television elevates your company in the eyes of customers, prospects, and the general public. A friend of mine, who is promotional director for the National Onion Association, is a one-person brain trust when it comes to onions. She can tell you more about the varieties, uses and benefits of onions than almost anybody on the planet. Because she outlined a plan and executed it faithfully, she has ignited plenty of interest in onions and gleaned lots of attention for the association. And although she is not a business owner, any entrepreneur can learn from her example. The first thing she did was to make absolutely certain she was knowledgeable, current, and conversant on every onion angle she could think of. She also contacted people who were highly visible experts in other fields. She quizzed them on how they achieved this distinction and what they did to cultivate their expert status. Next, to distinguish herself from her competition and set herself up as an industry leader, she talked to as many groups as possible. She developed a dandy presentation, complete with professional visuals and lots of onion samples, and contacted key organizations, service clubs, business groups, convention planners, and so on. She offered
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to do a program for them free of charge, giving it a spin that made her topics sound fun, useful, entertaining and timely. She also wrote articles, opinion pieces, industry columns, and a newsletter that demonstrated her own level of expertise. She parlayed this information into seminars that addressed the various health aspects of the onion and offered tips for the busy working person to use when preparing a meal. In addition, she networked like crazy, joining professional associations, civic groups and organizations that would improve her visibility. She also looked for causes where she might donate her services or products. In short, before contacting media people to offer herself as an expert and present a number of fresh ideas for features, she wisely established herself with a variety of audiences as a true expert in her area. When it was time to introduce herself to the media, she was prepared, professional and cheerfully indestructible. Rather than going after national coverage right away, she called local and regional radio and TV stations and print media. Letters were written, packets were mailed and phone conversations were abundant. She contacted feature editors, business and food writers, and people assigned to health and agricultural beats. Talk shows, cable programs and regular news formats were all fair game. She made sure she knew the names of the key players, researched the best times to contact them, and had several concrete suggestions in mind that might fit their medium and schedule. Finally, she made sure she didn’t let any of these key people forget her. She kept them posted on new findings and made sure they knew how to reach her. Plenty of thankyou notes went out, as well as voice-mail messages that expressed her gratitude and willingness to contribute again. Being prepared, focused and persistent pays off when wanting to be viewed as the expert in your subject. Believe me, you won’t be shedding any tears over the amount of time and effort you put forth to get your information to the press.
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TIPS FOR SUCCESSFUL MARKETING Changes in Consumption Patterns Changes in Korean consumption patterns have been caused by a number of factors such as increasing income levels, social and cultural change, and changes in consumer lifestyles. An improvement in the quality of consumption, westernisation, rationalisation, and the increasing influence of the mass media have been conspicuous forces for change. Uplift of food consumption level With recent improvements in household incomes there has been an increase of the consumption of high-quality foods and food additives, an expanded use of processed ‘instant foods’ and ‘fast foods’, and a decline in the consumption of rice and barley. These new trends carry with them the important issues of high grade and hygienic packaging, standardising and classifying product quality, and maintenance of freshness. Increase in demand of invisible goods As living conditions improve in Korea, the demand of intangible services such as education, travel and health services and communications increases. Consumption for education aids such as audio and video tapes, reference books for different educational levels, and products for adult education aimed at both office workers and house wives, is rising as interest in education grows as a means of self improvement. With the complete liberalisation of overseas travel in 1989, travel agencies are stimulating demand for travel and tourism through the development of a wide variety of new packages. New interest in health and beauty is boosting spending on health treatments and exercise, and with the expansion of medical insurance coverage, expenditures on health care are increasing rapidly. As Korea moves toward the realisation of an information society, spending on communications and information is skyrocketing. The growing demand for software accompanied by the flood of new computers is typical of the growth in service industry consumption.
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Increased demand for consumer durables Korea has shown a steep upturn in the demand for consumer durables such as passenger cars, colour TVs, VTRs, audio goods, refrigerators, washing machines, microwave ovens, and henceforth this increasing trend is expected to continue. Development of special market It is clear that consumption patterns are becoming more varied and specialised along the lines of age, educational background, sex and income level. Retail organisations specialising in these target markets are growing in number. Recently luxurious department stores aimed at mid- and upper-income group are proliferating, and shops specialising in infant supplies, school supplies and men’s and women’s ready-to-wear garments are multiplying. Increased consumption through diversified sales promotion The diversification of consumer financing such as the expanded use of credit cards for both domestic consumption and overseas travel and the increase of mailing sales and factoring ahs boosted consumption in general. Credit cards are generally issued by department stores and large specialised firms, while mailing sales are utilised generally by department stores and factoring by large corporations.
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A NEW MARKET When entering a new market, we usually send an e-mail to a potential (or possible) export partner. Therefore, we have to have the knowledge of certain words in certain contexts. Fill the gaps in the following e-mail by using the terms from the box. analysis , recommend , demand , free , develop , detailed , goods , mix , plan , supply , research , trends , do , carry out […] Dear Peter, Thanks for your letter about marketing our products in the […] region. We certainly do want to sell our ____________________ in every ____________________ market in the world, but we need to ____________________ some market ____________________ in your region. […] 1. What is the ____________________ and ____________________ like at present for our kind of products? 2. What kind of ____________________ do you think we should ____________________ in our marketing ____________________? 3. What are the market ____________________ in the sector? 4. Can you ____________________ someone to ____________________ a ____________________ market ____________________ for us? Please e-mail by return if possible. Thank you! […]
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UPMARKET AND DOWNMARKET / MASS MARKET AND NICHES Read the following texts and correct the mistakes in italics, using the right expressions from the original texts. Products, for example skis, exist in different models. Some are basic, some are more sophisticated. The cheapest skis are also called low-end or bottom-end. The most expensive ones are called high-end or top-end products, designed for experienced users, or people with a lot of money. The cheapest entry-level skis are for beginners who have never bought skis before. Those in between are mid-range. If you buy sophisticated skis to replace basic ones, you trade up and move upmarket, and if you buy cheaper ones after having bought more expensive ones, you trade down or move downmarket. Downmarket can show disapproval. If a publisher takes a newspaper downmarket, they make it more popular, but less cultural, to increase sales. In American English, we use the terms up- / down-scale instead. Mass market describes goods that sell in large quantities and the people who buy them, for example, family cars are a mass market product. A niche / niche market is a small group of buyers with special needs, which may be profitable to sell to. For example, sports cars are a niche in the car industry. Correct the mistakes: My name is Denise, from sailing boat company Nordsee Marine. We have something for everyone’s taste. If you’ve never sailed before, try our mid range model, the Classic. It’s six metres long and very easy to sail. After a year or two, many customers trade down or take upmarket to something more basic, like the entry-level nine-metre Turbosail, with more equipment and a bit more luxury. Our bottom end product is the Fantasy. It’s 15 metres long and has everything you need for comfort on long voyages. We also produce the Retro, a traditional boat. There’s a small but profitable mass market for this type of boat.
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THE DEVELOPMENT PROCESS Market research focus groups, consumer panels, surveys, original concept, sales forecasts, questionnaires, market research Anything we would like to do has to have a base, and the _______________ is that base. Before starting up designing products and services, it is important to try to find out what it is that people really want in the market. This is what we call _______________. Market research is usually carried out through _______________ or _______________. While working on our market research, we often ask people what and where they buy things they buy, we try to make them tell us their reasons for doing so. Market research can also include interviews in the street or by telephone. Sometimes, however, there may be _______________ and _______________. Here, people, ordinary people, gather and discuss product ideas in an informal way. With all this behind them, the researchers will probably want to draw up _______________, which are, in other words, estimates of how many products will be sold in the market. market, drive another company out of, corner, dominate, goods, leave, services, buyers, sellers, potential, monopolize, abandon, enter, get out of, penetrate _______________ consists of _______________ and _______________ of particular _______________ or _______________ in a place, or those that might buy them (_______________buyers). Every company can 1) _______________ / _______________ the market (when it starts selling in the market for the first time); 2) _______________ / _______________ / _______________ the market (when it stops selling there); 3) _______________ the market (when it represents the most important company selling in the market); 4) _______________ / _______________ the market (when it is the only company selling there); and finally 5) _________________________ the market (when other companies are forced by that company to leave the market, perhaps because it is no longer capable of competing with the stronger one).
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share, segmentation, growth, leader, segments Every market can grow, then we talk about the _______________ of the market. Every market has its own target groups or market _______________. If one company divides the market into large companies, small companies, home office users and leisure users, for example, then we talk about market _______________. If one company sells more than any other company or chain of companies, then we say that it is present in the market more than other companies, or that it has (the highest) market _______________, and that it is the market _______________ among other companies. stiff, competitors, intense, the competition, key players, fierce, low-key, tough, competition, rivals Companies and/or products in the same market are called _______________ or _______________. They compete among themselves to sell more, or to be more successful. Some companies are more important than others, and they are called _______________. When talking about _______________, we may say that it understands the activity of making efforts to sell more and be more successful than other companies in the same market. Competition can be _______________ , _______________ , _______________, , or _______________. If this is not the case, it can be described as the _______________ competition. All the products, businesses etc. competing in the same market are usually referred to as _______________.
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HOW TO GAIN ACCESS TO THE KOREAN MARKET? When making initial contacts with potential buyers, it is recommended that exporter should send catalogues, brochures, samples and price lists as a way of introducing themselves and their goods. Once the initial contact has been made with all the necessary pieces of information exchanged, it is advisable that the exporter should visit the country, carrying with him samples as well as related accurate data including definite price lists, time of shipment, and available quantities needed for negotiating a final contract. After the exporter has place (or made) a firm offer to his Korean customer, the offer should not be withdrawn or amended unilaterally before the validity expires. Buyers in Korea consider such an offer to constitute a contract, regardless of any formal contract in effect, and naturally expect the exporters to thoroughly meet all the terms and conditions of the offer. Once the first transaction has proven successful, and if prospects for further transactions look promising, foreign companies are advised to open a branch office for sales promotion activities, or to be represented by a sales agent to promote their business in the country.
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IT’S ABOUT TIME * The right marketing target date could give your product the attention it deserves Sometimes, a company markets the right product or service to the right people using the right media, but the marketing effort turns out to be a flop. Why? Poor timing. To get the most mileage from your marketing efforts, you have to be keenly attuned to the right and wrong times. To gain a bit of insight, consider these 10 examples: 1. You’ve created the perfect mailing package, but it arrives too early in the week, when your prospects are thinking of the busy week ahead – or too late, when your prospects are thinking of the upcoming week-end. See to it that your mailing arrives on a Tuesday, Wednesday or Thursday. 2. You have a fine product, but a limited budget, and a lot of competition. What to do? Do your marketing when your competitors have eased up. This way, you gain the largest share of your customer’s mind with the smallest marketing investment. That may mean marketing during your target company’s slow months, but it’s also when you can attract the most attention the fastest. 3. Everybody receives Christmas catalogs in September and October. If you sent yours in July and August, you’d get people thinking of your company then – and later on as well. 4. You keep abreast of current events by watching the tube, reading the paper, accessing online news services, perusing news weeklies, and subscribing to industry and community publications. Put that information to work by tying your marketing message in with what’s happening at that moment in history. 5. Be careful not to launch your marketing efforts too soon. One of the most common errors in marketing is to promote before all the bugs have been worked out, before the salespeople know all the facts and before you’re ready to fill the flood of orders and engage in guerrilla follow-up. Remember that patience is a guerrilla virtue.
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6. One marketing move that will get you nowhere is a newspaper story or a TV report about products or services that aren’t yet available. You may be so enthralled at the thought of free publicity that you release the news before people can buy what you offer. Beware: They won’t come back another time, and the media won’t give you another splash. Restraint is necessary, even with free news coverage. 7. Savvy retailers wait at least one month before having grand openings. If they don’t wait, customers will arrive only to find untrained salesman, poorly stocked shelves, slow delivery times, and messy surroundings. Polish these items to perfection before your grand opening, or it won’t be so grand. 8. Telemarketing calls that don’t get through or that reach answering devices are a waste of time and money. Find out when your prospects are most likely to be available, and do your telemarketing then. 9. Use speed in dealing with customer requests, orders, questions and complaints. People value their time more than ever. Never waist one minute of it, or they may not be back. 10. Never be in a rush to create your marketing materials. Keep in mind that when developing them, you are faced with three variables – speed, quality and economy. You may select any two but not all three. Guerrillas opt for quality and economy every time. Timing also refers to tying in with current news, with what’s on your prospects’ minds, and with what your competitors are doing. Guerrilla timing can make the difference between a campaign that fizzles or flourishes.
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BUYERS, SELLERS AND THE MARKET Customers and clients Companies: Autocomp, Best Travel, Digby and Charles, Digitco List of products / (professional) services: cheap computers, package holidays, car components, architecture Customer/client base [or clientele]: general public, companies, government organizations and the public, car companies Use the above data and fill in the table below. Company
Products / services
Customer / client base
People who buy everyday services such as train travel or telephone services are called customers. You can also talk about the users or end-users of a product or service, who may not be he people who actually buy it. For example, when a company buys computers for its staff to use, the staff are the end users. People who buy products or services for their own use are consumers, especially when considered as members of large groups of people buying things in advanced economies. A person or organisation that buys something is a buyer or purchaser. These words also describe someone in a company who is responsible for buying goods that the company uses or sells. These people are also buying managers or purchasing managers. A person or organisation that sells something is a seller. In some contexts, for example selling property, they are referred to as the vendor. People selling things in the street are street vendors. The market, the free market and market economy describe an economic system where prices, jobs, wages, etc. are not controlled by the government, but depend on what people want to buy and on how much they are willing to pay.
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Insert the number of the definition in front of each term given below. _____ market place
_____ market prices _____ market forces/pressures
_____ market reforms Definitions: 1. the way a market economy makes sellers produce what people want, at prices they are willing to pay 2. producers and buyers in a particular market economy and the way they behave 3. prices that people are willing to pay, rather than ones fixed by a government 4. changes a government makes to an economy, so that it becomes more like a market economy
Now complete the TV reporter’s commentary with expressions from the text above and the terms that you have just matched to the appropriate definitions. In China, all economic activity used to be controlled by the state. Prices were fixed by the government, not by buyers and sellers in the market ____________________ . But in the last 20 years there has been a series of market ____________________ that have allowed people to go into business and start their own companies. Market ____________________ are determined by what buyers are willing to pay, rather than by the state. There are still state-owned companies that lose a lot of money. Until recently, they have been protected from market ____________________ , but market ____________________ will eventually mean that they close down. Of course, the market ____________________ has its losers – those without work, and victims of crime, which used to be very rare.
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REAL-TIME ANALYSIS OF BUYING HABITS Compaq last week debuted a high-end customer-relationship management system that can analyze customer buying habits in real time and immediately present call-center agents with that data. The result: Agents will be able to determine what products clients will likely be interested in based on their up-to-the-minute buying patterns. Dubbed the ‘zero-latency engine’ – and unofficially called eXtreme CRM – the system can process 12,000 calls per second and more than 1 billion call-detail record transactions per day, and analyze a 111-terabyte store of customer data. Built with Compaq Proliant, Digital Alpha, and Tandem Himalaya servers, the system has an integrated data mining feature for analyzing call-detail records in real time. It can interface with the existing CRM, enterprise resource planning, and mainframe apps, and Web servers through Corba and Java interfaces. The zero-latency engine will make CRM dynamic, according to Compaq. ‘The way most people use data warehouses today is static. They offload information from their transaction databases,’ says Pauline Nist, VP and general manager of Compaq’s Tandem business unit. ‘This lets you stream transaction data live into an operational data store.’ The engine which Compaq can custom-build for users in six months, will be sold initially to large telecommunications companies. ‘Today, you might analyze records one month or 60 days in arrears, but with the high level of competition that carriers face, it’s necessary to move a lot faster,’ says Kathy Boeschenstein. GTE plans to integrate its event-detail record system with Compaq’s system to pilot internally and to offer as a service to other telcos. By feeding event-detail records – which record customer calls, Emails, credit-card transactions, and Web interactions – into the system, GTE and other carriers can analyze customers’ buying patterns and cross-sell down to any size company, and it can be used for other apps besides CRM. More on CRM: informationweek.com/757/compaq.htm
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“The most distinctive skill of professional marketers is their ability to create, protect and enhance brands.” P. KOTLER, AMERICAN MARKETING GURU
A joke: Patient: Doctor: Patient:
Doctor! I drive a BMW, I drink Moet&Chandon, I wear a Rolex watch and Christian Dior aftershave, I smoke Marlboro cigarettes, I wear Adidas leisure wear and Armani suits… So, what’s your problem then? I do not know who I really am!!! P R O D U C T S - KEY WORDS
Next to each word or phrase write the letter of the correct description. augmented product
_____
generic product
_____
clone
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perishables
_____
consumer durable
_____
manufacturing
_____
core product
_____
sell-by date
_____
fast moving consumer goods
_____
service
_____
a. Natural products, usually food, that will go bad after a certain length of time. b. Products sold in very large quantities, such as groceries. They are bought often and move through stores quickly. c. A new product, especially in the high technology sector, which is almost the same as a successful one made by a more famous manufacturer. d. Long-lasting products produced an sold in large quantities. e. A basic product with additional features and services added to the total package. f. A basic product which is bought because of a particular need, e.g. a drink for thirst. g. Products which are not known by a brand name, e.g. pharmaceutical products like paracetamol for headaches. h. Specialist expertise or advice to help companies or individuals, e.g. in legal matters, marketing. i. A time suggested for reasons of safety by which perishable goods should be used. j. The actual making of products or components for products. 209
PRODUCTS AND PRODUCT MARKETING •
augmented product i. a product now selling at a higher price ii. a product that is no longer made iii. a core product plus additional benefits such as brand name, quality styling and design features, extended warranty, after-sales service…
•
generic i. not known by a special brand name ii. for general use iii. popular with all types of consumers
•
cannibalism i. when a product eats into the competitors’ market share ii. when a product reduces sales of other products made by the same manufacturer iii. when an employee leaves his/her company to join a competitor
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sell-by date i. the limit placed on sales representatives to meet target ii. the date by which a food or drug must be sold iii. the date on which a product is sold
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launch i. when a product is taken off the market ii. when a product is tested before being sold iii. when a product is first released onto the market
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product life cycle (plc) i. the normal pattern of sales for a product ii. the process of development of a new product iii. the different stages of improvements in an old product
•
part i. a product ii. a component iii. a phase in the development of a product 210
Match the sentence beginnings with the correct endings. 1. 2. 3. 4. 5. 6.
Banks are adding new types of accounts… Apple is going to simplify its product line… Consumers have mixed feelings about supermarkets… When BMW bought Rover,… The new law will ban product placement… Following the launch of the Series 5 laptop, consumers were slow to understand… 7. With this type of equipment in the US,… a) b) c) d) e) f) g)
…product life cycles are so short that product launches are very frequent. …its product positioning in relation to Psion’s existing hardware products. …it changed its product range towards more expensive cars. …of cigarettes in movies. …extending their product portfolio into financial services. …and deliver fewer but more competitive models. …to their product mix.
PRODUCTS AND BRANDS corporate, brand awareness, generics, stand-alone, branding, own-label product, brand image, model, own-brand product, brand recognition, generic, identity, make A brand is a name a company gives to its products in order to make people easily recognize them. This may be the name of the company itself: the _______________ of the products. For products like cars, for example, you look for the make and _______________ (Ford – the make, Ka – the model). The level at which people recognize a brand is called _______________ or _______________. People usually have certain ideas about the brand, which is referred to as _______________. _______________ is creating brands and attempting to keep them in one’s customers’ minds through advertising, packaging etc. Every brand should possess a clear brand _______________, which will make people think about it in a particular way in relation to other brands. A retailer may want to put his own name on a product, and then it is called an _______________ (Br. E.) or _______________ (Am. E.). There are, however, products which have no brand name, or are not branded at all, and we call
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them_______________ products or _______________. “A brand can be a name, a term or a symbol. It is used to differentiate a product from competitors’ products. The brands guarantee a certain quality level. Brands should add value to products. It’s a synergy effect, whereby one plus one equals three. But customers must believe they get extra value for their money.” (Lynne Fielding, a marketing specialist) Brands can be divided into two broad categories: _______________ or individual brands (Ariel, Hagen Daaz ice-cream, Direct Line insurance, Marlboro) and _______________ or family brands (Heinz, Virgin, Marks and Spencer, Levis). The former brands need some additional, separate, marketing support. New brands are always welcome because customers want them. They wish to have freedom to make choice, they want a selection of different products, and they always like to rely on the quality levels guaranteed by the company. They like to trust products, which makes their shopping much easier for them. Customers also tend to identify with brands. consumer-in-the-street, visible parts, advertising, sales with a college education, brands Along with _______________, _______________ are the most _______________ of marketing for the _______________. For the skeptical small business, marketing is _______________, and of course, marketing is an important part of the business school curriculum. success, attained through identification, profitability, satisfaction Generally speaking, marketing courses usually begin with the credo of the marketing orientation, which we have already explained above. In addition to the above mentioned, the idea that _______________ and _______________ are _______________ and _______________ of customer needs. Marketing cannot be only regarded as a set of activities, but an attitude that should permeate the entire company. In this view, marketing is not just about a company selling what it makes, but about knowing what it should make in the first place.
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To saturate, sales department, sales outlets, individual, Loss leader, Sector, research and development, Market share, Niche, department, sales force, customer-oriented, Cash cow, product teams, brand (product) managers, Upmarket Some companies, usually the large ones, describe themselves as being _______________. Even in such companies, most personnel (employees) think of marketing as the preserve of the marketing _______________. Here, the head of marketing may be in charge of a team of the so-called _______________. Each may be responsible for promoting the products of the company in one or a group of countries. The _______________ and its _______________ may deal with the actual activity of getting _______________ to order products. However, there have been changes in this way of organizing things. In some companies, _______________ are organized around _______________ products – they carry out all the activities, from R & D (_______________) right through to selling. Information from the team’s direct contact with the marketplace is fed back into R & D. This has more to do with the integrated market orientation preached in business schools. There are just a few more terms that we find useful to be dealt with in this section. _______________ is a profitable product or business generating a steady flow of sales revenue. _______________ is a product sold unprofitably in order to attract customers who will then buy profitable products. _______________ is the proportion of sales that a company or product has in a particular market. _______________ represents a special area of a market which has its own particular customers and requirements. _______________ means to fill the market so completely that no more products can be added. _______________ is a part of a large market. _______________ kind of product means that that product is expensive comparing to other products of the same type.
Complete this marketer’s description of his work using expressions from the above paragraphs.
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My name’s Tomas. I’m Portuguese and I’ve been 1) _______________ _______________ for Woof dog food for the whole of Portugal and Spain since I left business school last summer. The Woof _______________ is owned by a big international group. The market for pet food in Portugal and Spain is growing very fast, as more and more people own dogs and cats, and we’re trying to increase _______________ _______________ of Woof through TV advertisements and hoardings (billboards) in the street. Research shows that people have very positive ideas about it: it has a very positive _______________ _______________ . But the supermarkets have their _______________ _______________ dog food, usually sold cheaper than our product, which is a problem. There are even _______________ _______________ sold just under the name of ‘dog food’. We have to persuade people that it’s worth paying a bit more for a _______________ product like Woof, which is far better, of course. The greatest single change in marketing in recent years has been the growth in importance of brands and branding. Brand strength is often a more important factor in company valuations than physical assets. These days it is often brands and brand names that attract take-overs, rather than physical assets or access to particular markets.
Use the brand- and branding-related words / word phrases from the box to complete the gaps in the sentences given below. brand name , brand valuation , brand loyalty , premium brand , brand identity , brand image , own-brand , intangible assets , unbranded 1. 2. 3. 4. 5. 6. 7. 8. 9.
Coca-Cola, Sony … stand for a famous _________________________ Deciding a financial value for a brand name _________________________ Paying less for products that are _________________________ Products like […] have a _________________________ which is more glamorous than that of many less well-known competitors. In the 19…s, most supermarkets began to sell _________________________ products. Not only is a brand name valuable for the main products that are being represented by the name, but also for the range of _________________________ that go with the name. Marketeers tend to establish _________________________ among their consumers so as to make them not buy similar products produced by other firms. Purchasers are usually ready to pay even a higher price for a _________________________ which they believe is of a high quality. Every single new product has to create a _________________________ so as to be easily recognised and associated with specific qualities.
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Word Combinations with PRODUCT product catalogue (Br. E.)
a company’s products of a particular type
catalog (Am. E.) product mix
the stages in the life of a product, and the number of people who buy it at each stage
product placement product line
a company’s products of a particular type
product positioning how a company would like a product to be product portfolio
seen in relation to its other products, or to competing products
product range when a company pays for its products to be product lifecycle
seen in films and TV programs
PRODUCE vs. PRODUCT produced, maker, manufactured goods, product, produce, manufactured, producer, manufacturer, service A _______________ can be something natural, something designed for selling, and a _______________. The last one may seem to sound a bit strange to you. _______________ refers to agricultural products such as crops or fruit (fresh products at a farmer’s market). If you made something, you _______________ / _______________ it. _______________ is a country or a company / person that produces things. If you say that a company manufactures something, then you are talking about a _______________ or _______________ of _______________.
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GOODS consumer durables, FMCG, components, raw materials, finished goods, fast moving consumer goods, materials Goods are often referred to the _______________ and _______________ used to make products, or can be referred to the very products that are made. Among different types of goods, we may mention the following ones: consumer goods that last a long time (_______________) and those as food products that sell quickly are _______________ (_______________). All _______________ are initially made from _______________.
Connect the following word-partnerships with the definitions and fill the gaps. luxury-brand brand image
1. A brand associated with expensive, high quality products.
brand awareness
2. The person responsible for planning and managing a branded product
brand stretching
3. The brand with the largest market share
brand loyalty
4. A famous brand with a long history
brand leader classic brand
5. The ideas and beliefs which consumers have about a brand.
brand manager
6. The tendency of a customer to continue buying a particular product 7. Using a successful brand name to launch a product in a new category 8. The knowledge which consumers have of a brand
1. Levis, which has been established for over a hundred years and is world-famous, is a ______________________________. 2. The aim of advertising campaign is to enhance ______________________________ so that consumers become more familiar with our coffee products. 3. Volvo’s _________________________ is that of a well-engineered, upmarket, safe car.
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Insert words from the box into the blank spaces in the text about Calvin Klein. Then right down the words in the blank spaces with their definitions provided below. global offensive , distinctive , street market , target , counterfeiter , copyright abuse , a network , establishing , merchandise , awareness , damage , branded , image , luxury , corporate strategy , logo , licensing rights , to rip off , to restructure , fakes , fashion designers , poor , uncover , long-term , reduce Walk into _______________ anywhere from Manila to Manchester, and someone will be selling Tshirts _______________ with the _______________ CK _______________ of Calvin Klein. If the price is very low, the T-shirts are probably _______________. CK, like most other internationally known ______________________________, has, for a long time, had problems with ____________________ selling _____ - quality _______________ bearing his brand name. … In the past, CK took a relatively passive approach to the counterfeit problem. The company has now got tougher by _______________ a _______________ of employees and external specialists to _______________ this particular _______________. The move began with a general change in _________________________ whereby CK has aggressively expanded its interests outside North America. He has been one of the leading fashion designers in the North American market since the mid-1970s, and now he is building up its fashion business in other countries. It has increased its investment in advertising and restructured its _______________ arrangements by signing _______________ deals with partners for entire regions…rather than giving ____________________ to individual countries. But as sales and brand _______________ have risen, CK has become an increasingly popular _______________ for Asian and European _______________, alongside other _______________ brands such as Gucci, Chanel…The fake goods, mostly T-shirts, jeans and baseball caps, not only _______________ the company’s own sales, but _______________ its brand _______________ by linking it to poor-quality merchandize…
Adapted
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Definitions: 1. plans of a company to achieve its objectives, _______________ 2. agreements which allow a company to make and sell a registered product locally _______________ 3. taking strong action all over the world, _______________ 4. a person who copies goods in order to trick people, _______________ 5. to copy someone else’s work, for example their designs, without permission, _______________ 6. a large number of people or organizations working together as a system, _______________ 7. goods for sale, _______________ 8. to change the way something is organized, _______________ 9. the symbol of a company or other organization, _______________ 10. to sell illegal copies of a brand as if they are the real thing, _______________ PRODUCT SELLING Note the following useful expressions in making a presentation to a company’s sales staff. Our R&D department designed the […] over a […]-year period… …and the product was finally launched this year. The core product is, of course, a […] … …but the augmented package includes […] types of […] free […] warranty and the prestige of the […] brand name. Of course, all components used in the manufacturing of the […] product have been well tested. We may offer a full after-sales service… And extended […]-year warranty with absolute confidence. Furthermore, we expect the product to experience rapid early sales for at least […] years. …before being joined by me-too products from our competitors.
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PRODUCT MANAGEMENT A classic life cycle of a product from development to decline is demonstrated by fashion items (such as toys that are spin-off products from the movie industry) or by technology products that were once state-of-the-art but are later replaced by technological innovation (such as early fax machines). Products at the end of their life cycle are described as obsolescent. – One of Europe’s most successful cars ever is the Volkswagen Golf. Since it was first launched, it has experienced many face-lifts (improvements that mostly affect appearance). After each face-lift, the car looked different. Nowadays the car is still an outstanding product and it looks radically different from the original Golf. This is a good example of an extended life cycle.
The idea of Product Life Cycle is a useful one in product management, generally speaking. Complete the sentences given below by using the terms from the box. Appeal , consumers , decision-making , development , extend , markets , penetration , portfolio , positioning , potential , quality , research , return
1. Managers have to understand the ____________________ of their products. 2. Most companies produce many different products and services. Together this is called the product ____________________. 3. Companies tend to market products at particular groups of consumers, so the product is matched to the consumer, which is called product ____________________. 4. Product management is about getting the maximum ____________________ from each product. 5. A key objective is to get the maximum market ____________________, which means reaching the most ____________________. 6. Another important objective is to ____________________ the life of the product. The typical life cycle diagram then shows a wave effect. 7. This is possible if the product ____________________ is good. This means changing or improving the product, to add to its ____________________ and ____________________. 8. Managers also try to find new ____________________ for their products. 9. In all cases, product management needs good ____________________ to help ____________________.
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PRODUCTS, SERVICES AND SERVICE Derive the appropriate word from the ones given in brackets for each sentence to fill the gap in a correct way. - We sell a very large range of goods, including fast moving ____________________ (consume) goods such as canned foods, cleaning materials and cassettes. - Of course, we also sell ____________________ (perish) goods like milk, cheese and meat, which need to be sold within a short time. - It is not only food ____________________ (produce) which have a very short shelf life. Fashion items quickly become out of date. - For larger consumer ____________________ (duration) , like music systems and TVs, we provide an after-sales service. - An important aspect of marketing goods like computers is possible _________________________ (add) value, such as free software, Internet access and technical support. - The business of a _________________________ (retail) is to sell products. - A _________________________ (serve) industry is one that offers specialist expertise or advice. Lawyers, marketers, translators and financial consultants all do this. - If you are not absolutely satisfied with any product _________________________ (purchase) in this store, you may return it and receive a complete refund or exchange it for a different item. - A _________________________ (patented) gives one person or company the right to make a particular product for a period of time. The inventor may sell or lease it to a manufacturer. - A product which was expensive to develop, manufacture and launch, and which does not have the sales that the manufacturer expected can be described as a _________________________ (flopped).
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PRICE – KEY WORDS Write the word PRICE in the middle of a large piece of paper. Then add the other key words from this exercise. As you study this section, write all the new words you learn on ht paper to create a web of price-related terms. This tip can also be used for other themes. 1. The money left after a business pays all its costs and taxes is _______________ 2. Another word for income is _______________ 3. The difference between costs and selling price is the _______________ 4. Many consumers normally look for the lowest _______________ 5. Selling something at a reduced price is called giving a _______________ 6. The price that has to be paid for a service provided by a professional, for example from an architect, doctor or lawyer, is a _______________ 7. Businesses can’t sell products if there is no _______________ 8. The synonymous word for expenses is _______________
PRICE AND PRICING STRATEGIES
‘Our goods are low-priced. Permanently, low-pricing means we charge low prices all the time.’ * ‘You mean cheap: your goods are poor quality. Our goods are highpriced, but we give customer service. And a lot of our goods are midpriced: neither cheap nor too expensive.’ * ‘You must be selling some goods at cost (what you pay for them) or at a loss (less than what you pay for them).’ * ‘Yes, we have loss leaders – cheap items to attract customers in. But it’s all below the “official” list price or recommended retail price. We have a policy of discounting, selling at a discount to the list price.’ * ‘Your goods are expensive. Customers don’t need service.’ * ‘If he goes on undercutting us, we can’t stay in business.’
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Some words such as boom – controls – cut – hike – war – leader – tag go with the word ‘price’. Find the right definition for each combination among the definitions given below, and then fill the gaps in sentences by using one of the combinations: -
a good period for sellers, when prices are rising quickly
-
an increase in price
-
when competing companies reduce prices in response to each other
-
label attached to goods, showing the price; also means ‘price’
-
government efforts to limit price increase
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a reduction in price
-
a company that is first to reduce or increase prices
1. A price __________ by […] may indicate the start of price increases by other producers. 2. Britain’s house price __________ has bone beyond London, with properties in Kent now being worth 25 per cent more than a year ago. 3. Consumers will get price __________ of eight per cent off phone bills from May. 4. When President Perez ended price __________ , electricity, phone and transport costs went up. 5. Petron is a price __________; it’s usually the first to offer lower prices. 6. The project had many design problems, pushing up the price __________ for each helicopter from $11 million to $26 million. 7. There is a price __________ between […] on the London to Amsterdam route.
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FIXING A PRICE Match the words in column A of Table A with the ones of column B of the same table. Column A
Column B Resulting combinations
penetration downfixed budgetelastic
demand priced market costs strategy
______________________________ ______________________________ ______________________________ ______________________________ ______________________________
Do the same with the following Table B words, to get the opposites. Column A Column B Resulting combinations inelastic variable premiumskimming up-
demand priced market costs strategy
______________________________ ______________________________ ______________________________ ______________________________ ______________________________
Find the correct term from Table A or B to complete each sentence below. 1. When price rises do not affect sales much ____________________ 2. When a company sells in the market widely for low profit per item ____________________ 3. High-quality, high-priced products are ____________________ 4. A company accounts term meaning the cost of things like electricity, rent, and other charges that do not increase with increases in production is ____________________ 5. Low priced goods, aiming for volume sales at the lower end of the consumer market, are ____________________ goods.
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AGGRESSIVE PRICING Use the words given in the box to complete the gaps in the following text. advance orders , aggressive pricing , policy , break even , factory gate price , high penetration , market share , premium price , price war , production costs , recommended retail price The Japanese computer games company is planning an October launch for a new game called Bird. The development of the game has taken two years but _________________________ are impressive. The company expects the product to _________________________ within one year. _________________________ are low as the labour input in this sector is relatively small. Margins in computer games are usually high, but they have promised a _________________________ strategy, with a competitive pricing _________________________. This is a change of policy for the company, whose products have always carried a _________________________, SAWA being a relatively exclusive brand. The _________________________ is expected to be round $55, with the _________________________ being around 33% of that. Such a low price may have the effect of creating a _________________________ in the computer games market. _________________________ is a new policy for SAWA, as the company aims to increase it _________________________ in the lowe end of the games market. […]
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PRICING POLICY REPORT Read the report that follows and say whether the statements are True or False. REPORT Subject: Marketing Focus Group Meeting Date: 4 December 2001 Present: ……… The following decisions were taken regarding pricing strategy for the new year. Budget-priced goods will only be sold in Category ‘C’ stores. These stores are in locations with a particular consumer profile. We expect high volume sales with low margins. Goods can only be sold at a sale price where they have already been offered at the recommended retail price for a period of not less than three months. Agents shall be instructed that from January 1, we do not allow discount on any goods not sold at a previously higher price for a period of three months. Decisions on pricing must realise margins for the retailer of up to 25%. Margins below 15% are unlikely to be economic for any of our retailers. Similarly, our own factory gate price must allow the company to cover all production costs and also to realise a profit of between 25 and 35%. Our marketing team should watch the market prices to ensure that we do not price ourselves above the going rate. Wherever possible, we should sell our products to retailers. This will cut out intermediaries and avoid retail prices being forced higher by high wholesale prices.
-
budget-priced goods are sold at a lower price than they were offered at before
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the recommended retail price is the price the manufacturer thinks a retailer should charge for a product
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a discount is a reduced price offered after a period on offer at a higher price
-
the margin is the difference between the cost of a product to a manufacturer or retailer and the price the manufacturer or retailer receives when the product is sold
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an economic price is a price that allows a reasonable profit
-
the factory gate price is the cost of producing the product for the factory
-
production costs are the expenses the manufacturer has to pay for labour
-
the market price is the price one company charges for a product
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the going rate is the price the consumers are prepared to pay
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retail price is the price consumers usually pay
-
the wholesale price is the price consumers pay when buying many examples of the same product
-
a sale price is a special low price, reduced from an earlier price; goods offered for sale at a sale price are often at the end of their life or the season is at an end; for example, camping equipment may be put in a sale at the end of summer
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PRICING STRATEGIES AND COSTS Use the word(s) from the box that best match to the contexts given below. Two terms are not to be found in the definitions. Say which ones, and find the definitions in a good dictionary for them. budget-priced, demand curve, going rate, price war, retail margin, selling costs, unit cost 1. The sum of money that we need to produce one single item is ____________________ 2. All the money that one spends on all selling aspects, including advertising, commissions and promotion, is known as the ____________________ 3. A length of time during which a number of competitors fiercely make the prices lower so as to build up market share, we call ____________________ 4. The line on a graph showing the relationship between prices and consumer demand is called ____________________ 5. The price which the market will certainly accept for a product or for services is the ____________________ Find the appropriate definitions for the terms given below. * break-even point
__________________________________________________
____________________________________________________________ * factory gate price
__________________________________________________
____________________________________________________________ * inelastic demand
__________________________________________________
____________________________________________________________ * penetration strategy __________________________________________________ ____________________________________________________________ * price sensitive buyers__________________________________________________ ____________________________________________________________ * cartel
__________________________________________________
____________________________________________________________ * cost of labour
__________________________________________________
____________________________________________________________
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* cost of production __________________________________________________ ____________________________________________________________ * cost of sales
__________________________________________________
____________________________________________________________ * commission
__________________________________________________
____________________________________________________________ * selling costs
__________________________________________________
____________________________________________________________ * direct costs
__________________________________________________
____________________________________________________________ * direct labour costs __________________________________________________ ____________________________________________________________ * fixed costs
__________________________________________________
____________________________________________________________ * variable costs
__________________________________________________
____________________________________________________________ * overheads
__________________________________________________
____________________________________________________________ * unit cost
__________________________________________________
____________________________________________________________ * labour input
__________________________________________________
____________________________________________________________
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MANUFACTURING AND SERVICES industrial, industry, industrialize, light, emerging industry, heavy, industrious _______________ refers to the production of materials and goods. If something has to do with industry, we use the adjective _______________. Do not mix this adjective with the adjective _______________. The latter is used in relation to people, and means that they are very hardworking and thorough in their jobs. The verb is _______________ to. For a newly started-up industry, we say an _______________. An industry represents a particular type of business activity, which does not have to include production, not necessarily. Steel and shipbuilding belong to the category of the so-called _______________ industries. In the 1970s, some countries turned more and more to _______________ industries, among which are (specialized) electronics, making electrical goods. The specialized electronics appeared in the 1980s and were developing throughout the 1990s and included the production of specialized parts for computers and telecommunications equipment. manufacturing industries, pharmaceuticals, cars, computer hardware, household goods, manufacturing sector, aerospace, textiles, construction, steel, defence, automobiles, food processing, defence Every _______________ consists of _______________, which are the following ones: _______________ (cars and space vehicles), _______________ (Br. E.) / _______________ (Am. E.), _______________ (computers, printers), _______________ (buildings), _______________ (Br. E.) / _______________ (Am. E.) (arms, weapons), _______________ (canned, frozen foods), _______________ (washing machines, refrigerators),_______________ (medicines), _______________ (a stronger, more useful metal than iron), _______________ (cloth and clothes). If the bolded words are used in front of the word ‘industry’, then they remain the way they have been written above (for example food processing industry), and they are used in this way when talking about particular industries. However, it is usually the case that we omit the final –s in the words mentioned above (those in the plural form), so we say the automobile industry, not the automobiles industry.
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property, financial services, telecommunications, computer software, catering, media, service sector, leisure, real estate, healthcare, tourism, retail Services or Service Industries, being essential base of the _______________, may include the following: _______________ (restaurants, bars), _______________ (programs for computers), _______________ (banking, insurance), _______________ (medical care), _______________ (sport, theme parks), (the) _______________ (books, newspapers, magazines, cinema, film, television), _______________ (Br. E.) / _______________ (Am. E.) (buying, selling and managing buildings), _______________ (retail outlets, shops), _______________ (phone, Internet services), _______________ (travel and holidays). Which of the industries listed above can be matched to one of the following problems possibly experienced by any company. -
buying a new building, being unable to find people to rent it
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making people angry by constructing mobile phone masts in beautiful countryside
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producing such a vehicle whose tires burst at high speeds
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holiday makers arriving and finding out that the hotel has not been finished yet
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lending money to someone who is not capable of repaying the loan
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selling the weapons to countries that people do not approve of
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spending money on players who never score goals
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working on and producing medicines (drugs) that underdeveloped countries cannot afford
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rejecting a book that is then brought out by another publisher and sells 30 million copies
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removing the wrong arm in an operation
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MASS PRODUCTION little workshops, CADCAM, craft industry, labour-intensive, individual, costeffective, automated, works, hand-made, ordered, factory, assembly line, manufacturing plant, production lines, industrial robots, churn out Mass production of things usually takes place at a _______________. Plant sounds more updated than _______________ or _______________. Things are mass produced on the _______________. Plants can be highly _______________ (which means that a lot of machinery is used). Even though machines are usually very pricey (expensive to buy), they usually prove to be very _______________. Some people joke and say they do not have to pay them wages! Time and again, manufacturers use _______________. They are part of the _______________ system (computer-assisted design and computer-assisted manufacturing). On the other hand, _______________ produce items _______________ by _______________ customers. In these workshops, machinery is not used, and all products are _______________ and this industry is called _______________ and is usually _______________ (which means that it takes a lot of work to produce each piece). Big companies _______________ products in large numbers on their _______________. shortage, overproduction, spare, surplus, output, at full capacity, Productivity, a glut, Capacity excess The number or type of things produced in a plant, industry or country is called _______________. _______________ is the measure of how much we have produced in relation to the number of employees. If there is a high output per employee, then productivity is also high. _______________ refers to the maximum amount that a particular plant, industry or company can produce. A company can be said to work _______________– if it is producing the aforementioned maximum amount, but if it is producing more than is needed, there is _______________ or _______________ capacity, _______________ capacity, overcapacity or _______________ capacity. These expressions can also be used in service industries. However, it may be the case that a company is producing far too many things, in which case we can talk about _______________ of these things. On the other hand, if not enough goods are being produced, there is a _______________.
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MATERIALS AND SUPPLIERS Inputs, Suppliers and Outsourcing, Just-in-time warehouses, parts, stocks, inputs, raw materials, goods, components, knowledge, capital, work-in-progress, components, labor, finished goods Dryden makes vacuum cleaners. It takes _______________ like steel and plastic, and makes some of the _______________ or _______________ used in its products. Other components are made by other companies. Materials and parts are just some of the _______________. The others are _______________ (workers and managers) and _______________ (money). _______________ is also important because Dryden is a leader in vacuum technology. Vacuum cleaners that are being made are _______________. At any one time, Dryden has _______________ worth millions of dollars in its factories and _______________: the products that have been made – its _______________– and materials and _______________. Quantities of raw materials, components, work-in-progress and finished goods in a particular place are _______________. Note: goods is rarely used in singular. suppliers, in-house, outside suppliers, outsourcing, subcontracting Dryden receives materials and components from about 20 companies, its _______________ or partners. The company is doing more _______________: using _______________ to provide components and services. In other words, it is _______________ more, using outside suppliers for goods or services that were previously supplied: within the company.
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lean production, in stock, just-in-time, handled, lean manufacturing, stored, financed, warehouses, efficiently Of course, it costs money to keep components and goods _______________: stocks have to be _______________ (paid for), _______________ (perhaps in special buildings: _______________) and _______________ (moved from one place to another). So Dryden is asking its suppliers to provide components _______________, as and when they are needed. This is part of _______________ or _______________, making things _______________: doing things as quickly and cheaply as possible, without waste. BrE work-in-progress
AmE work-in-process
BrE stocks
AmE inventories
Replace the bolded words with the correct forms of words from the text above: Let’s get the materials in only when we need them to keep costs down. It’s difficult to find the right special buildings to put our finished goods in. You’ll have to decide well in advance how to pay for all this. It’s very important that we keep these components at the right temperature. There must be a quicker and cheaper method than this. They want to introduce a system of making things efficiently. Something to think about: •
What are the advantages and disadvantages of: o Outsourcing? o Using outside suppliers? o Asking for components ‘just in time’? o Lean production?
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SALES AND COSTS SALES Sales describes what a business sells and the money it receives for it. Denise is having a sales meeting with her sales team. She says that their sales figures and turnover (money received from sales) in the last year are good, with revenue (money from sales) of 14.5 million euros, on volume of 49 boats. This is above their target of 13 million euros. They estimate that their sales growth next year will reach total of ten per cent, as the world economy looks good and there is demand for their products, so her sales forecast is nearly 16 million euros for next year, and she is relying on her team! In the text, find the words that best match to the definitions given below: a) money received from sales (2 expressions)
____________________
b) sales aimed for in a particular period
____________________
c) the number of things sold
____________________
d) increase in sales
____________________
e) statistics showing the amount sold
____________________
f) sales predicted in a particular period
____________________
Explain the following uses of the word ‘sale’: - to make a sale
______________________________
- to be on sale
______________________________
- unit sales
______________________________
- Sales
______________________________
- A sale
______________________________
- The sales
______________________________
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COSTS The money that a business spends are its costs: - direct costs
______________________________
- fixed costs
______________________________
- variable costs
______________________________
- costs of goods sold
______________________________
- indirect costs, overhead costs or overheads or expenses ______________________________ - costing
______________________________
- costings
______________________________
On the basis of the Cost-related terms and expressions, choose the correct one(s) to describe the following cases: 1. the salary of an office receptionist 2. heating and lighting of the building where the boats are made 3. the materials used in the boats, and the boat builders’ salaries 4. running the office 5. wood used in building the boats 6. the salary of a boatbuilder Read what this company owner says and try to answer the questions. If you need any help, have a look at the MARGINS and MARK-UPS section that follows. My name is Vaclav and I am the owner of a small furniture company in Slovakia. My company makes a very popular line of wooden chairs. Each costs 360 korunas to make, materials and production included. We estimate overheads, including administration and marketing costs, at 40 korunas for each chair, and we sell them to furniture stores at 500 korunas each. 1. What is the gross margin for each chair? 2. What is the net margin for each chair? 3. What is the mark-up for each chair as a percentage of total costs? 4. What is the profit margin for each chair as a percentage of the selling price?
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SALES SUCCESS There is nothing more advanced in life to learn and practice than the basics. If they were so easy, why did I have to read The Greatest Salesman in the World at least one hundred times? If such basic principles of behavior were so obvious, why would 36 million people find Mandino’s parable of the salesman Hafid so unique and inspiring? There is nothing commonplace about going back to the basics. It is our only means of replenishment.Here are some of my favorite basic lessons (in my own words) from the aforementioned book. Confront your temptations. It can be a lonely life on the road when you travel on business. When we are lonely, we have a tendency to become like little children who long for the comfort of our own homes. It’s times like these when we become vulnerable and susceptible to making bad choices. Mandino warns that giving into such temptations has destroyed many a promising career, not to mention a happy home life. It takes courage to stay focused and on track. But making temporary sacrifices always brings with it long-term rewards and satisfaction. Failure is nothing to be ashamed of. Why does it take us so long to grasp this basic principle? We mouth the words that we can only succeed by failing, but emotionally it is so hard to accept. Part of succeeding is not allowing our determination to weaken. Here’s where the challenge gets tricky. We have to experience failure to succeed, but the experience of failure tends to dampen our determination. And staying determined is what keeps us trying. One thing that helps is to talk about your failures as if they are a normal part of living. When I share mine, others always volunteer their failures, too. At those moments, some invisible healing seems to take place between us humans. Determination once again returns, and together we seem to be able to overcome any obstacles. Patience is a virtue. It’s so hard to prospect without needing to know the outcome of our work. But Mandino reminds us to follow nature’s example – nature never moves quickly. We must pass through our experiences, making sure we’re not quick to pass judgment. Time alone can bring us good news or the reward that is in store. Walking away too soon, out of impatience, robs us of life’s choicest blessings.
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Success is mind over matter. Nothing destroys your goals or your life more than giving into the motions of the moment. We tend to allow our mood swings to determine the outcome of our dreams, but success only comes when you pay no attention to the mood of the moment. Mandino says we must control our thoughts. That basic is accomplished by acting in opposition to those thoughts. You act ‘as if’ you are not angry, ‘as if’ you are not afraid. If you force yourself to whistle a happy tune, you will go far. Criticism kills, praise grows. When you approach those you serve in the marketplace with a critical eye, it puts a frown on your face and suspicion in your heart. And there is no strategy that can help you overcome the unspoken tentativeness the prospect feels about doing business with you. Your critical self is your own worst enemy. On the other hand, a generous spirit manifests an abundance of praise that brings joy to any negotiating table. With praise, you can break down barriers, overcome impossible obstacles, close the sale – and build a blockbuster business. But Mandino warned that the praise must be genuine, it must come from the heart of a loving human being.
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PLACE
DISTRIBUTION
THE CLASSIC DISTRIBUTION CHANNEL – SHIPPING METHODS The Classic Distribution Channel Generally speaking, there has been a great change in classic distribution channels, and in many fields, too. For example, supermarkets (as well as other major retailers) take much care of their own distribution, buying directly from producers, buying directly from producers, so the role of the traditional wholesaler as an intermediary has dramatically declined. Many producers, too, sell directly to their customers, thus reducing the role of High Street dealers. An example is Dell Computer Corporation, a market leader in business computer systems. Define the following terms. * agent
__________________________________________________
____________________________________________________________ * customer
__________________________________________________
____________________________________________________________ * distributor
__________________________________________________
____________________________________________________________ * haulage company
__________________________________________________
____________________________________________________________ * producer
__________________________________________________
____________________________________________________________ * retailer
__________________________________________________
____________________________________________________________ * sales representative __________________________________________________ ____________________________________________________________
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Distribution and Shipping Methods Look at the diagram, and then complete the spaces in the text that follows. Producer/Provider > Goods/Services > Intermediary > Customer/User Shipping or shipment in the marketing or selling sense, means the despatch of ____________________ from the ____________________ to the ____________________ , or to an ____________________. The entire process of moving goods or ____________________ from the producer or ____________________ to the customer or ____________________ is described as the ____________________ process. It is also known as ____________________ one of the four Ps. METHODS OF TRANSPORTATION 8 * cargo plane * delivery van * container ship * barge * despatch rider * freight train * container lorry
__________________________________________________ __________________________________________________ __________________________________________________ __________________________________________________ __________________________________________________ __________________________________________________ __________________________________________________
Define the following terms, either according to what you have already come to know so far, or using a good dictionary to help you. * air freight transportation
______________________________________________________
* despatch rider
____________________________________________________________
* shipping line
____________________________________________________________
* courier service
____________________________________________________________
* rail freight operator ____________________________________________________________ * road haulage contractor
______________________________________________________
8
These term mainly concern manufactured products rather than services. The exception might be the special delivery of documents, which could be undertaken by a despatch rider or by a courier. Despatch rider or courier firms specialize in rapid door-to-door delivery.
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MARGINS AND MARK-UPS Here are the calculations for one of N’s boats: Selling price
€50,000
Direct production costs
€35,000
Selling price minus direct production costs = gross margin =
€15,000
Total costs
€40,000
Selling price minus total costs = net margin/profit margin/mark-up=€10,000 The net margin or profit margin is usually given as a percentage of the selling price, in this case 20 per cent. The mark-up is usually given as a percentage of the total costs, in this case 25 percent.
GETTING PAID SHIPPING AND BILLING – TRADE CREDIT – ACCOUNTS Shipping and billing
When you ask to buy something, you order it or place an
order for it. When the goods are ready, they get dispatched or shipped to you. An invoice is a document asking for payment and showing the amount to pay. The activity of producing and sending invoices is invoicing or billing. Trade credit
‘Of course, we do not expect our business customers to pay
immediately. They are given trade credit, a period of time before they have to pay, usually 30 or 60 days. If a customer orders a large quantity or pays within a particular time, we give them a discount, a reduction in the amount they have to pay. With some customers, however, especially the ones we have not dealt with before, we ask them to pay upfront, before they receive the goods. Like all businesses, we have a credit policy, with payment terms: rules on when and how customers should pay. This is part of controlling cash flow, the timing of payments coming into and going out of a business.’
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Accounts ‘I’m waiting to be paid by some of my customers – my debtors, who owe me money.’ * ‘The people and organisations we sell to are our customers or accounts. The most important ones are key accounts.’ * ‘The customers that I’m waiting to be paid by are my accounts receivable / receivables.’ * ‘The suppliers and other organisations that I owe money to are my accounts payable / payables. I must remember to pay tax to the Inland Revenue Service on time!’ * ‘There are some companies that owe me money, but I get the feeling that I’m never going to get paid: they’re bad debts and I’ve written them off.’ * ‘The suppliers and other organizations that I owe money to are my creditors. I must remember to pay tax to the Inland Revenue on time!’
Now that you have read the text on Trade Credits, complete the following sentences. 1. ____________________ ____________________ is a constant problem. I get my materials from suppliers on a 30-day payment basis, but I’m supplying large companies who pay me on a 60-day payment term. 2. With some types of new wine, you can pay a special price ____________________ and wait for it to be delivered in about ten months’ time. 3. Small businesses complain that larger companies abuse ____________________ ____________________ by paying invoices too slowly. 4. We offer a two per cent ____________________ for payment within ten days. 5. We have a very strict ____________________ ____________________; our ____________________ ____________________ are that everyone pays within 30 days.
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The following exercise refers to the Accounts text. Replace the underlined word(s) or phrases with the appropriate ones. Her name is Hannah and she owns a clothing company. Her most important customers are department stores. Getting paid on time is very important and they have an employee whose job is to chase people who owe them money. Of course, they pay suppliers and other people they owe money to as late as possible, except tax authorities , who we pay right on time! Fortunately, they have not had much of a problem with people who do not pay at all, so they have not had to decide not to chase them any more. Distribution Channels in Korea Before the late 1970s, Korean manufacturers saw little need to develop a more elaborate infrastructure for marketing and distribution largely because they had enjoyed a sellers’ market. The modernisation of the distribution industry in Korea began in earnest in the very early 1980s, when the country’s economy was still in recession in the wake of the second oil shock. In spite of the sizable slowdown of economic growth, sales volume in the distribution industry surged thanks to new investment and introduction of modern management skills by big companies. Moreover, the advent of new specialty departments and discount stores further accelerated the development of the distribution industry. Highlights of development in the distribution industry in the 1980s include: -
the mushrooming of business districts
-
active participation by big companies
-
the advent of specialty department stores and discount stores
-
the spread of credit cards and instalment sales As a result of rapid industrialisation over the past two decades, the distribution
system has entered a transitional period as a new infrastructure has been established and old facilities streamlined. However, the wholesaler has continued to play a relatively small role. Most companies distribute a large portion of their products directly to the retailers. Korea’s distribution system comprises wholesale markets, open-air markets, department stores, supermarkets, chain stores, underground shopping stores, discount
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stores, and convenience stores. There are presently some 8,500 supermarkets scattered across the country. The distribution channels of imported industrial goods are in general as follows: 1. Suppliers > End users 2. Suppliers > Trading agents > End users 3. Suppliers > Importers > End users Suppliers are followed by local commission agents who have registered their business with the Association of Foreign Trading Agents of Korea. Trading agents who act on a commission basis usually have special information and experience regarding imported goods. End-users organisations sometimes conduct joint importation and distribution activities on behalf of small-scale end-users. In Korea, there are numerous end-users organisations according to the type of business. Leasing companies, established in accordance with the Facility Leasing Law enacted in 1972, provide financing for high-priced facility imports by leasing those facilities to domestic end-users or by supplying those facilities on a deferred payment basis. Leasing companies officially handle high-priced items falling under Chapter 84 to Chapter 89 on the basis of HS. Import recommendation organisations and import deliberation authorities take part in the distribution of imported goods when the goods imported are classified as import restricted items in the Annual Export Import Notice. Imports of consumer goods have both positive and negative aspects affecting consumers: on the one hand, such imports satisfy consumer’s demand for high-quality goods, whereas on the other hand some consumers are prone to diversion into black-market channels. Compared with the distribution channels for imported industrial goods, those for imported consumer goods are somewhat complicated. For example, the longest channel is as follows: trading agents (importers or exclusive distributor) > wholesalers > retailers > consumers. Moreover, several intermediaries are in general omitted in every step. The shortest path is formed when importers distribute imported goods directly to department stores or retailers. Typical retail outlets handling imported consumer goods include stores specialising in imported goods as well as department stores. In most cases, such specialty stores conduct wholesale business as well as retail business. The most well-known specialty stores in Korea are located in the Namdaemoon open-air market, in the centre of Seoul. All
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department stores have set aside sales areas for foreign goods to meet their clients’ needs. Lately, big chain supermarkets, estimated to number some 60 in Seoul alone, are also doing a thriving business in foreign goods. In addition, supermarket-type stores that sell imported consumer goods are often located in the heart of residential districts. Wholesalers, retailers, and customers. Shops. Direct Marketing. A wholesaler or shop selling a particular product, such as cars, is a dealer. A reseller sells computers. Wholesalers and retailers are distributors. Wholesalers are sometimes disapprovingly called middlemen. A shop (BrE) or store (AmE) is a place where people (consumers/customers/purchasers) are allowed to buy examples of products they are interested in. That place is also called a retail outlet/sales outlet. Types of shops: chain store – convenience store – deep discounter – department store – drugstore – hypermarket – supermarket. Say what is each of the aforementioned types of shops in charge of? Give examples either foreign or domestic. In Britain, a shopping centre or shopping precinct is a purpose-built area or building in a town with a number shops. Outside towns, there are shopping malls, where it is easy to find a parking lot. Franchises are owned by the people that run them, who we call franchisees, but they only sell the goods of one company. That company is called the franchiser/franchisor and provides goods, organises advertising and offers help and support. In return, it takes a percentage of the profits of each franchisee. Many restaurants are run like this. Direct marketing. There are direct marketing companies. They usually organise mailings for many different products and/or services. This is known as direct mail or, more often called by people the junk mail. Such a company targets its mailing lists very carefully; if, for example, sending mailshots for garden tools it is certainly not going to send them to those living in apartments! A company of such a type also does telemarketing, selling by telephone, including cold calls to people who have not had any previous contacts with the company, and people are often rude to the workers in the call centres whey this is being done.
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PLANNING A DISTRIBUTION SYSTEM From the words given in italics, choose the most appropriate ones to fill the gaps in the following sentences, paying attention to the context in which they occur: intermediaries , customer , shipment , direct selling by post , manufacturer , selling over the Internet , sales team , distributors , reps , chain , dealers. •
If you cut out a number of ___________________________________ , you can bring cost savings.
•
We are the ___________________________________, and we have to ensure that products reach every single ___________________________________ with maximum efficiency.
•
People working in sales are called a _________________________________.
•
People who are engaged in representing sales are called ___________________________________.
•
Systems of transporting goods are known as _________________________ systems.
•
People directly involved in the system of trading are known as ___________________________________.
•
A number of shops selling the same kind of products of the same manufacturer is known as a ______________________________ of shops.
•
Producers use website for more ___________________________________.
•
If they want to reach the specific target group of potential customers, sellers usually undertake ___________________________________.
Among the words in the box, find the ones that best correspond / match to the underlined words in the following sentences. consumers , mail order , producer , sales representatives , despatch , middlemen , retailers , e-business , multiples , sales forces , wholesalers
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THE FINAL WORD ON DISTRIBUTION From the words given in the box, use the ones in each particular context to fill the sentences given below. commission agents , copyright , franchise agreement , independent distributors , patent , sales force , shelf space , sole distribution agreement , vending machine 1. Agents receiving a percentage of the sales are ____________________. 2. An agreement to sell only one manufacturer’s goods ____________________. 3. All the people participating in selling a company’s goods or services are the ____________________. 4. People buying from companies and sell to retailers are ____________________. 5. A licence registering an invention and protecting ownership ____________________. 6. The amount of space given over in a shop for displaying a particular product is called ____________________. 7. An agreement to pay a licence fee to use a well-known name is called a ____________________. 8. A machine which you put coins in in order to buy confectionery or other small items is called a ____________________. 9. Ownership of the reproduction rights of intellectual property (written words, music, film, art, etc.) is protected by ____________________. Connect the terms in the left-hand side of the column with the definitions in the right-hand side. 1. vertical marketing system (VMS) 2. conventional marketing system (CMS) 3. total systems approach (TSA)
a) From the traditional point of view, there was a line which consisted of independent producers, wholesalers and retailers, each one of them being a separate business. b) Now many businesses work together in a unified system where producers, wholesalers and retailers act together, either under common ownership, or they may have contracted to work together as a single system. c) A new trend is a distribution system designed to accommodate consumer needs at minimum cost, and places every step of the distribution channel under a single control.
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In reality, the benefits to consumers of a simplified distribution process may not be so great as one might have thought. However, company profits can certainly rise. Big retailers generally use the TSA approach – method of control. In the United Kingdom they have been criticised for having influenced pressure on supplying greater quantities at lower cost and not necessarily for passing the benefits on | to consumers. The danger on the producers’ part is that they start to be dependent on the massive orders from big retailers, but the retailers may just drop them without any piece of warning, thus leaving the producer without an outlet.
SERVICES AND THE PUBLIC SECTOR The public sector is also called the state sector. Public sector marketing is also called organisational marketing, because it is organisations (universities, city authorities, arts and leisure administrations, hospitals, tourist information offices, police, ambulance and fire services), not companies, that are responsible for the services provided. Define the following terms in respect of Services and the public sector. * core product
__________________________________________________
* communication skills
__________________________________________________
* logistics
__________________________________________________
* competitive environment
__________________________________________________
* the public sector
__________________________________________________
* service providers
__________________________________________________
* accountable
__________________________________________________
* public sector services
__________________________________________________
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RETAIL OUTLETS AND SELLING METHODS Selling techniques have varied a lot and today there is a great variety of them. Some industries, such as banking, have moved enthusiastically into the so-called e-commerce, thus altering, completely, their customers’ experience. Many shops today offer e-shopping instead of the traditional one, as well as home delivery service. However, traditional street markets have not been extinguished yet in a number of towns and cities. The obvious growth in hypermarkets, supermarkets, chain stores and multiples has had a big impact on the small business sector. Many small retailers have disappeared, but some have still continued to trade profitably. One way that small specialist retailers have survived is by forming buying groups providing them with economies of scale and cost benefits. Franchises also help small businesses to go on competing. A parent company (the franchisor) grants a licence to use its name to a smaller business (the franchisee). The term in-plants is introduced – smaller shops operating within hypermarkets and supermarkets and railway stations, paying them rent, too – and these are often franchises. Another increasing factor is the growth in convenience stores – small food and grocery outlets, selling fresh milk and bread, as well as newspapers, confectionery etc. They are usually open all hours, and many can be found in petrol stations. Instead of the words in italics insert the word(s) given in the box that match to them. chain stores __________, commission __________, e-commerce __________, hypermarkets __________, large multiples __________, mail order companies __________, specialist retailers __________, warehouses __________, cold calling __________, door-to-door selling __________, franchises __________, Internet service providers (ISPs) __________, mail order__________, purchasing power __________, telesales staff __________
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(1) Companies which specialise in selling goods through a catalogue sent out through the post normally have (2) large buildings full of goods from where the goods from where the goods are dispatched. (3) Companies which own many stores have (4) strength in negotiating prices where manufacturers are concerned. Small shops do not have this. (5) Retail outlets which pay a licence fee to trade under a famous brand name often benefit from increased business, since the name is a powerful advertising. (6) Going from one house to another, knocking on doors, is highly labour-intensive type of sales operation. This type of work is normally paid on the basis of a (7) percentage of the sales achieved being paid to the seller. Another type of selling is by (8) a combination of catalogue and ordering by post. This may be complemented by (9) personnel who sell by telephone, trained to deal with customers’ calls. Another kind of telephone selling is through (10) telephoning someone who is not expecting your call but whom you think might buy your product. The idea is to get your prospective customer to agree to buy your products or receive a home visit for a demonstration. A variation on this – popular with banks and the financial services industry – is to call existing customers and offer them new products. (11) Large out of town stores selling a huge range of goods have had a serious effect on business for smaller, city centre shops. (12) Small shops offering a personalised and highly specialised service can survive better than small shops which try to compete directly with the larger outlets and other (13) retail outlets owned by the same company and trading under the same name. In recent years (14) selling over the Internet has become much more common. Customers order and pay for goods or services by accessing a website from a home or office computer. Companies wanting to trade over the Internet need access to the world wide web (www.) which is provided by one of the (15) companies that provide access to the net.
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AFTER SALES ASSISTANCE Most products, when they have just been launched onto the market, are usually delivered with a leaflet in the box, the leaflet being printed in several languages. Use the words from the box to fill the gaps in an abstract from the user manual for a new telephone. Since the […] was ____________________ , it has been an outstanding success. Well known for reliability, it does, however, come with a full two-year ____________________ and ____________________ ____________________. Utilizing the very latest technology, this ____________________ product is supported by our extensive ____________________ ____________________. Call our ____________________ ____________________ for free advice on how to solve any problems you may experience with the product. For just a small ____________________ we can as well offer a full ____________________ technical ____________________ service for all your communications equipment.
SUCCESS AND FAILURE Use the correct word (preposition) to fill the gaps below. 1. Perishable goods go _______________ in a short time. 2. If dairy products are not sold _______________ the sell-by date, they cannot be offered for sale. 3. Unsold perishable goods usually have to be thrown _______________. 4. If a safety fault 16 is discovered in a product, the manufacturer may ask customers to bring _______________ all examples of the product. 5. Thousands of new products are put _______________ the market every day, but only a few are successful. 6. Success or failure depends _______________ many factors, but the most important is the quality of the marketing. 7. Customers with a strong sense of brand loyalty are rarely prepared to switch _______________ a competitor. 8. Powerful advertising may help a new product to eat _______________ the market share of rival brands. 16
If a safety fault is found in products after they have been sold, the manufacturers usually issue a product recall. They put notices in the shops where the product is sold, and/or announcements in newspapers, asking customers to bring back the product for a repair, replacement or refund, and the recalls can involve a lot of work and cost a lot of money.
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CONSORTIUM TO DEVELOP E-COMMERCE SECURITY STANDARDS A group of PC-industry leaders said last week that they will work together to develop security standards for hardware and software used in E-commerce. The group is calling itself the Trusted Computing Platform Alliance. The Alliance will focus on several areas key to ensuring E-commerce security at the desktop level, says Phil Hester, chief technology officer at IBM’s Personal Systems Group. Among them, he says, are ‘a protected and secured storage area for confidential information, a highly reliable random number generator, support for electronic signing for authentication, and some mechanism that ensures the integrity of the BIOS so that it cannot get maliciously corrupted. While there are already a number of security products and standards in the market, smart cards among them, alliance officials say there is no current standard to ensure security at the basic hardware level. Dell Computer is not participating in the program and is taking a wait-and-see approach. ‘This is a very complex issue,’ says a company spokesman. ‘The scope of the work still needs to be defined, though we don’t preclude joining at some later date.’ Industry watchers say they’re not surprised by Dell’s noncommittal approach. ‘When it comes to these types of things, Dell is typically a follower,’ says VP of services at research firm Technology Business Research. ‘They tend to let others do the work and then jump in later.’ THE INTERNET AND e-COMMERCE The Internet service provider or ISP is the organization that provides you with Internet access. You register and open an account, then they give you an e-mail address so that you can communicate by email with other users. Email is electronic mail. It can be sent to someone, or you can be emailed. People usually reply to an email or you are emailed back. When writing an email we usually use some sort of standard, or widely acknowledged email expressions. For example:
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Robert, Thanks for your email asking for ways of reducing the sales force. Please find attached a Word document with specific plans for this. Please let me know if you can’t read this attachment. I’m copying Ruth Mitchell in on this. Do forward it to the rest of the board if you feel that’s appropriate. Looking forward to your reaction. All best wishes, Regards, Best regards or Best wishes [All the best / Best for the people you know well] ,
Tina
Sometimes, we can use abbreviations such as AFAIK (As far as I know) or HTH (Hope this helps). 1. Reply to all:
__ send an answer to the person who sent an email
2. Delete:
__ send a copy to…
3. Reply:
__ send an answer to the person who sent an email,
4. bcc: 5. cc: 6. forward:
and everyone who received a copy of it __ send a blind copy to…(the other people don’t know you’re sending the copy)
7. attach
__ send an email you have received to someone else
8. send and receive:
__ send a document, e.g. a picture, with an email __ get rid of an email you don’t want __ send all the emails you’ve written and receive all the ones that are waiting for you
Clicks-and-mortar visitors, hits, unique users, e-commerce, securely, shopping cart, credit card, generated, page views Her name’s Susan, and she owns a chain of sports shops. Last year, she started _______________ operation, selling goods over the Internet. They’ve done well. _______________ don’t have trouble finding what they want, adding items to their _______________ and paying for them _______________ by _______________ . Last year, they had two million _______________ (different individual visitors) who _______________ 35 million _______________ or _______________. That means their web pages were viewed a total of 35 million times! 251
e-tailing, bricks-and-mortar, last mile problem, traditional retailing, commerce operations, clicks-and-mortar, local stores, physical delivery, customers E-commerce or _______________ has even acted as a form of advertising and increased levels of business in our traditional _______________ shops! Pure Internet _______________ are very difficult. To succeed, I think you need a combination of _______________ and e-commerce: _______________. In our case, this has also helped us solve the _______________, the _______________ of goods to Internet _______________: we just _______________ from our local _______________! e-procurement, business-to-business, business-to-customer, business-to-government Selling to the public on the Internet is _______________ or __________ e-commerce. Some experts think that the real future of e-commerce is going to be _______________ or __________, with firms ordering from suppliers over the Internet. This is _______________. Businesses can also use the Internet to communicate with government departments, apply for government contracts and pay taxes: _______________ or __________. What type of e-commerce are the following? Choose from B2B, B2C or B2G. 1. Private individuals can rent a car without going through a call center. 2. The city is looking for construction companies to build a new airport. There are hundreds of pages of specifications you can obtain from the city authorities. 3. Car companies are getting together to buy components from suppliers in greater quantities. 4. Small businesses can get advice about wages, taxation, etc. 5. Members of the public can buy legal advice from law firms. 6. It can seem very convenient, but if you’re out when the goods you ordered arrive at your house, you’re in trouble! What are advantages and disadvantages of shopping by the Internet? Do you happen to have any experience of B2B or B2G?
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E-commerce, part II The words below are often used to talk about e-commerce. Use them to fill the gaps in the text below: - browse – directories – hits – key word – locate – Net – on-line – search – search engines – site – surfers - traffic Has your company started doing business on the _____________________? Have you spent thousands on a website, more money to register it with all the major _______________________, but you’re still getting little or no _______________________? If the answer is YES, then you need TOPSITE. The TOPSITE service places your _______________________ at the very top of the major search engine listings. So when people do a ______________________ for a _________________________ associated with your business or product, your site automatically receives many more ________________________. What’s more, TOPSITE delivers targeted visitors. These are not _______________________ who’ve already visited 35 __________________________ shopping sites, but people who’ve actually done a search for your business. Remember, we guarantee to achieve top rankings for your company on the most highly travelled search engines, portals, and __________________________. So, when your potential customers __________________________ the Internet, we make sure they can __________________________ your website. Use the best possible word to fill the gaps below, having to do with the kind of –net operations: 1. An _______________________ operates outside a company or organisation, but is not open to the public. 2. The _______________________ operates outside a company or organisation and is open to the public. 3. An _______________________ operates inside a company or organisation.
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The following are the words of Adam Rhodes, Managing Director of EFDEX, an ecommerce business in Reading, UK. ‘EFDEX stands for the Electronic Food and Drink Exchange and essentially, the service we provide to our customers is to enable them to trade electronically, through the Internet. So, if you are a buyer you can source goods through a much, much wider universe of potential suppliers and if you are a supplier, you suddenly have access to a much, much wider community of customers; and for, again relatively small organisations with limited resources and small sales teams, then that is a tremendous community to be a part of. ‘I think there are probably three key success factors in electronic commerce, and, er… I guess the first is that you really need to have a strong business proposition; a strong idea, putting it simplistically, that, that you have to have a way of bringing to the market place. And in EFDEX’s case, EFDEX was found by…er, a guy called Tim Callam-Brown, who was actually the purchasing and logistics director for …er, a company that bought all of the food and drink products which were to go on P&O cruise ships. When, when a cruise was departing from Southampton to go for 20 night in the Caribbean, Tim’s job was to buy all of the …er, everything from the shellfish to the champagne that will be required for that journey, and he found that the fluctuation in pricing was so significant that he had to actually, had to actually recruit, you know, an army of researchers who’d be out there checking who the suppliers were, what the prices were, whether the fact that the price of coffee had just declined because of some drought in South America was actually true or just another reason for hiking prices, and, and I think this is a business idea that we are then using technology to bring to the market place. So I think that’s the first thing – have a good business idea. ‘Secondly, I think that you need a management team that has experience of the market place, er, that you’re seeking to penetrate and in our case we’re in the food and drink market and we have, again, a management team from the Chief Executive downwards, all of whom have had considerable industry experience in that market place, so that is the second factor in my humble opinion. ‘And the third thing is, you need resources. In blunt terms, even the best ideas executed by the best management teams won’t be successful unless you’ve actually got the
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resources and the finance to actually bring it to a reality. So I think that many start-up companies in e-commerce will fail because frankly they run out cash. But if you have those three things: a good business idea – not just a technology, er, idea that is looking for a business home, but a business idea that uses technology – a good management team and the resources – then those will be the three most important ingredients. ‘Also, there are downsides to e-commerce, in my view. I think it’s fair to say that the ecommerce revolution will probably be as significant as the industrial revolution, er, or perhaps even more so in terms of the changes it will effect on society. I think we’re only really waking up to the wider implications of what some of those things are. I mean some of the things we’ll all read about is that as people spend more time, erm, finding solutions that are Internet-based, it perhaps can at times be at the expense of other social pastimes which is, is not a business issue, but I guess is a broader issue for society.’
HOW A MYTHICAL MERCHANT USES THREE AVENUES OF THE NET FOR E-COMMERCE Cool Sportz sits at the centre of a web of partners, all connected over the Internet using open software standards. Cool Sportz has a private company intranet to communicate with branch stores and employees in remote offices. A secure extranet links Cool Sportz to its contract manufacturers, suppliers, independent retailers, distributors and partners such as its law firm and ad agency. INTRANET
RETAIL STORES
Cool Sportz collects sales data from its 1200 retail stores around the country and fills hundreds of product reorders electronically. All stores are on the Cool Sportz intranet, a secure link that traverses the Internet. Cool Sportz also ‘pushes’ info on promotions and discounts to its stores. EMPLOYEES Instead of phoning the Human Resources department, CS staffers refer to an electronic version of the employee handbook on the company intranet. And they use a Java-based application to change their investment and health-care options and calculate their retirement benefits. Expense reports filed via the Intranet are paid within 48 hours.
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DISTRIBUTORS CS sells its CoolWear products through 2,500 independent sporting-goods stores around the country. Distributors who supply these shops use CS’s extranet to check on their commissions and read up on new merchandise marketing programmes. MANUFACTURING For years, CS has placed orders with contract manufacturers using Electronic Data Interchange, or EDI, an old software standard that is neither cheap nor flexible. Now, CS saves money by moving some of these orders over the Internet. PURCHASING CS used to order shoes, ski gear and camping goods by phone and fax. Now, CS saves time and money by sending orders electronically over the Internet. Some suppliers let CS enter their private networks to place orders. LIQUIDATION When products don’t sell, CS auctions them through an on-line brokerage. They company posts info about the goods and a minimum price. Potential buyers enter bids, and CS ships the goods to the winning bidder. OFFICE SUPPLIES To centralise purchasing of office supplies, CS lets managers in retail stores requisition everything from diskettes to display racks via their PCs. The orders are sent over the extranet from CS to suppliers, who deliver directly to the stores. PRODUCT DESING CS enlists freelance designers to create CoolWear products. The designers exchange drawings with CS over the extranet. Then CS’s staff and designers can mark them up while talking together live over the Net.
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PARTNERS To help efficiency, CS requires its law firm, accounting firm and ad agency to belong to the corporate extranet. This ensures privacy and security for e-mail and electronic files. CS’s marketers brainstorm over the Net with the ad agency. BANKING While awaiting standards for Net-based electronic banking, CS sends invoices by secure e-mail, which reduces paperwork and speeds up payment. The CFO likes collecting bills faster, but is less eager to see accounts payable go electronic. CONSUMERS CS’s website is promoted in TV ads, and gets thousands of hits a day. From surveys on its site, CS collects demographic data. And it advises registered surfers on sales and new products. A PRESENTATION ON E-COMMERCE Ok, let’s get started. Good morning everyone and thanks for coming. For those of you who don’t know me, my name is Roger Marris and I’m the Head of Business Development at Smarterwork. Perhaps I should start off by asking how many people here have heard about Smarterwork. Can you just raise your hands? OK, and of you people who have heard of it, how many of you have used the site?...Thank you. This morning, I’m going to talk to you about Smarterwork. I’m going to begin by giving you an overview of Smarterwork, then I’ll go on to tell you about our two types of users and finally I’ll explain how it all works. Feel free to ask any questions you like as we go along. Ok. What is Smarterwork? Well, I think INTERNET magazine were able to sum up what we do very well. They say, ‘Smarterwork does an excellent job of matching freelance professionals to organisations looking for particular skills.’ For example, finding someone who can translate your instruction manuals into a foreign language. We’ve been around for 14 months. We have 60,000 users of the site, which means that we have people who have come to the site, have registered and are using the site, er, on what we call a regular basis. There are 90 people in our company and I think that’s 257
interesting because I think people have an impression of on-line companies that it’s just a site, and there is no one behind it. Smarterwork is very much the leader within the UK, and now Europe, in providing business services on-line. We’ve build a platform that will allow small companies to come on to the Internet, post their requirements and then meet an approved supplier to do that work in a sort of quality-controlled environment. OK, I’ll now move on to tell you about our two types of users. We have clients on one side and suppliers on the other. Our clients are typically small businesses like yourselves. Our suppliers have all been pre-screened. What that means is that if they want to work through the Smarterwork platform, they have to prove their ability. All our suppliers have quality ratings, which have been given to them by other clients – again, like yourselves. Now these suppliers could be in any part of the world, so it means that businesses like your own ones in the South of London can work with suppliers in India, based on a quality rating. The great thing about the Internet is that it is a community bringing together clients and suppliers from all over the world. In other words: Right. The next thing I would like to do is explain how it all works. Let’s look at the chart. As you can see, it outlines the steps involved. Firstly, the client posts a project, and we can help you with this. You post this project in an area in Smarterwork called MY OFFICE. Then the suppliers visit the site and make bids and include their CV or company resume detailing the type of work they have done before. After that, the client evaluates the bids. I’d just like to highlight one of Smarterwork’s USPs here. We provide account managers free of charge; a free service to help the client choose the supplier. At the next stage, the client assigns the project to a supplier and then the client transfers the agreed fee to a secure holding account. The client and supplier, then, develop the project. The work gets completed. The client is happy. Finally, the client signs off the work and the money is paid to the supplier. And that’s where Smarterwork makes their money. We take a commission.
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THE KOREAN ECONOMY Present Status Economic Overview The popular external impression of Korea is that it is seen as a contemporary, and therefore rare economic miracle. The Korean economic achievement is indeed substantial, especially over the last decade, and is regularly held up as a model for newly industrialised countries in a similar state of development. But until the early 1960s, Korea had been continuously harassed with a vicious cycle of poverty. Only after the successful carrying out of the 1st five-year economic development plan (1962-1966), did Korea begin to maintain impressive economic performance. Between 1962 and 1990, Korea’s gross national product (GNP) expanded at an average annual rate of 8.5 per cent, from $2.3 billion to $237.9 billion, and per capita GNP increased from $87 to 5,569 at current prices. It is noteworthy, however, that the growth process during this period was neither smooth nor uniform. From 1962 to 1971, the country enjoyed both high growth and relatively low inflation rates. Although this high growth continued in the 1970’s, it was accompanied by a high level of inflation. The Korean economy experienced a severe setback in 1980, and for the next two years the growth rate was noticeably lower. In 1983, however, the country attained both high growth and price stability with the inflationary trend being held down. This outstanding performance continued in 1986 and 1987. Looking back over the past two decades, there has been a marked qualitative change in the nation’s industrial structure, backed by the quantitative GNP expansion. For example, the proportion of the agriculture-forestryfisheries sector in the total economic output fell from 36.6 percent in 1962 to 9.1 per cent in 1990, while the share of the manufacturing sector rose from 16.3 percent to 29.6 percent in the same period, and that of social overhead capital from 47.1 percent to 61.3 percent.
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Foreign Trade The Korean Government has kept pursuing an outward-looking policy regarding foreign trade, and as a result, trade volume expanded more than one hundred and twenty-eight times between 1962 and 1987. Korea’s international trade volume totalled $134.8 billion in 1990, which pushed up Korea’s share in world trade to 1.9 percent from 0.04 (or .04) per cent in 1962. although Korea suffered chronic balance-of-payments deficits, a surplus was registered from 1986 to 1989. In 1990, however, the account reverted to deficit, due to (= because of) difficulties in the transition to a democratic industrialised state, and increased protectionism abroad. Annual export growth averaged 40 per cent in the 1960s and 1970s, but dropped to 13% in the 1980’s due to the prolonged worldwide recession and growing protectionism. Until the first half of the 1960s, Korea’s export commodities were dominated by such primary industrial products as minerals and agricultural products, but the principle export items shifted to light industry products by mid-1970s, and to heavy and chemical industrial products in the subsequent period, and as a result, the Korean export structure improved. The share of primary industrial products in exports declined from 73 percent in 1962 to a mere 5.1 percent in 1990, while that of manufactured goods jumped from 27 percent in 1962 to 94.9 percent in 1990; more than 56 per cent of industrial manufactured goods was accounted for by heavy and chemical products such as electronics, machinery, ships and automobiles and 38 percent by light industrial products. Korea, which is poor in natural resources, has always depended on foreign supplies for raw materials and capital goods required for its economic development projects.
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Balance of Trade As a nation lacking natural resources, Korea has structural trade deficit problems. Only in 1986 did Korea record its first annual trade surplus and that was largely attributable to currency realignments and declining petroleum prices. Despite its structural trade deficit problems, the Korean government advocating free trade, began to decontrol imports in 1978, which resulted in a sharp increase in imports of foreign products. The phased liberalization, coupled with the international oil price hike triggered off by the 1979 oil crisis, prompted the nation’s imports to reach a record high of $4.38 billion in 1979. As a consequence, the Korean trade deficit worsened until 1981. However, the trade deficits began to drop in 1982, when international prices of raw materials started to decline. By 1987, things had reversed and the trade surplus widened, to $6.2 billion and accordingly, the current account surplus was increased to $8.4 billion. Economic Liberalization Policy Trade Policy (Trade Policy Goals) Until the 1980s, Korea’s trade policy emphasised export growth and import control as the economy suffered from chronic trade deficits and a shortage of foreign exchange. However, as the Korean economy continued to develop dramatically in the latter part of the 1980’s, and as the nation has come to assume new responsibilities commensurate with its enhanced global role, Korea has revised its trade policy. Major goals of Korea’s trade policy include: -
active participation in the formation of a new global trade order, including the […], and a greater role in the international economy;
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sustaining the momentum of Korea’s import-liberalisation program and other market-oriented measures;
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removing some of the institutional hurdles blocking increased access to the Korean market.
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(Import Liberalisation) Korea was graduated from GATT-sanctioned balance-of-payments protection in October 1989, and agreed to progressively liberalise items that had been importrestricted under this GATT provision by July 1997. In March 1991, Korea submitted to the GATT its first-phase import liberalisation schedule for the 1992 to 1994 period. Continued liberalisation has substantially increased Korea’s import liberalisation ratio. By the end of 1994, the ratio is expected to reach 98.5%.
TRADING AGENTS Foreign businessmen who want to sell to Korea but have no preliminary knowledge of business practices and trade-related laws, are invited to have representation in Korea in order to better penetrate the Korean market. There are numerous offer agencies that represent foreign suppliers in Korea. These agencies are classified into four categories: 1. Offer Sales Agents whose business encompass issuing offer sheets and conducting sales promotion activities on behalf of (in the name of) foreign suppliers on a commission basis; 2. Stock Sales Agents which are actually distributors or dealers importing and selling in accordance with agency contracts or authorisation of foreign suppliers, conducting their activities at their own expense and responsibility, 3. End-User Agents which issue offer sheets in their won name to import only those raw materials, machinery and equipment necessary for production activities at their own facilities, and 4. Foreign Sales Agents which have opened a branch office in Korea to issue offer sheets and engage in sales promotion activities on behalf of their head office or foreign suppliers.
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They have only to register with the Association of Foreign Trading Agents of Korea (AFTAK), to do the business of issuing official selling offers or quotations acceptable to competent government authorities or foreign exchange banks. Those agents who have registered with the AFTAK are called offer agents. Under the current Foreign Trade Act, offer sheets issued only by local offer agents are valid, and those offer sheets issued directly by foreign suppliers are effective only in case there is no offer agent handling the goods in Korea. Trading agents in Korea will certainly provide the following kinds of help to a foreign supplier: -
they typically employ very capable staff who can best help to link foreign suppliers with domestic end-users; as of December 1991, 7,865 AFTAK member firms were engaged in domestic sales. This number includes 403 agencies operated by foreign companies from 26 different countries. Korean trading agent concluded 33,050 agency agreements with foreign suppliers as of the end of 1991. Of this total, 53.2% was accounted for by the U.S. and Japan.
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the agency’s staff will regularly visit existing and potential clients in order to increase sales
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there are some one hundred thousand capable and specialised sales people employed by Korean Trading Agents; they are always keenly in tune to the needs of the domestic consumers as well as the capabilities of the foreign suppliers; they are also in a position to lobby foreign suppliers’ interest
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the trading agents will also enhance foreign supplier’s credibility, as they employ several engineers and technicians, in case of the machinery, to train the end-users and provide timely after-sales servicing; domestic sales by such local agents have been increasing sharply year by year. Some 82 percent of Korean imports were handled by trading agents, and this ratio is expected to further rise in the years to come
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foreign suppliers which wish to appoint an agent should make an agency agreement between both parties.
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SAMPLE AGENCY AGREEMENT Form-1 Date _______________
AGREEMENT This agreement is made between __________ (hereinafter called ‘Principal’) and __________ (hereinafter called ‘Agent’) in the Republic of Korea, and both Parties hereto have agreed as follows: 1. Sales area: Agent shall act as a (sole = with an exclusive representative right) sales agent for the Principal within the geographic area of the Republic of Korea as well as the area mutually agreed upon. 2. Sales products: __________ 3. Agent shall do its best to promote sales of the above products, and sales transactions should be confirmed in advance by Principal. 4. Commission rate will be (_____)% of the purchase amount, and such commission must be paid within (_____) days after shipment. 5. This agreement is effective from (_____ -day) of (_____ -month) 199_____ -year, and (shall) remain effective for (_____) years. This agreement shall be extended (only) by mutual agreement. 6. Principal shall observe those regulations described in international agreement provisions as regulated in Korean Anti-trust and Fair Trade Acts, against which agents shall not be bound by Principal. 7. Any disputes or claims which cannot be resolved amicably between the parties hereto shall be settled in accordance with the rules of arbitration of Korean Commercial Arbitration Board in Korea. For and on behalf of:
For and on behalf of:
Supplier:
Agent:
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Form-2 AGREEMENT This Agreement, made and entered into on (the date of Agreement) by and between (the name of the supplier), a corporation organised and existing under the laws of (the country) (hereinafter referred to as Company) and (the name of the Korean agent firm) (having its main office and place of business at (the address of the Agent firm) (hereinafter referred to as Representative). Witnesseth: WHEREAS, Company manufactures and/or sells products and WHEREAS, Representative desires to perform certain services on behalf of Company with respect to the following products: NOW THEREFORE, in consideration of mutual conditions and obligations hereinafter set forth, the parties hereto have agreed as follows:
Article 1, PRODUCTS Company hereby appoints Representative and Representative hereby accepts appointments as Company’s independent sales representative to promote and assist in the sales of the products as listed below:
Article 2, TERRITORY The sales territory designated hereto is the geographic area of the Republic of Korea as well as the area mutually agreed upon for which Representative shall have sales responsibility and in which Representative will exert its best effort for sales of the products.
Article 3, MAJOR RESPONSIBILITY (RESPONSIBILITIES) OF REPRESENTATIVE A) generate and stimulate interest in the products and furnish information to Company with regard to market trend and prospective purchasers of the Products B) participate in the sales promotion activities to benefit sales of the Products and assist and advise Company in this regard C) cooperate with and assist Company with the collection of any overdue accounts, after service information, and other matters as requested by the Company D) bear and pay all travelling expenses and others incurred by Representative in connection with the sake of the Products, and Representative shall not be entitled to any reimbursement in this respect except upon prior approval from Company
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Article 4, MAJOR RESPONSIBILITY (RESPONSIBILITIES) OF COMPANY A) Endeavour to maintain the delivery conditions on all orders accepted by Company B) Provide Representative, to the full extent, with sales and technical information and assistance regarding the Products C) All expenses of catalogues, samples, advertisements, exhibitions and seminars made for sales promotion of the products shall be responsible to company D) Company shall observe those regulations described in international agreement provisions as regulated in Korean Anti-Trust and Fair Trade Acts, against which agents shall not be bound by Company
Article 5, COMMISSION A) The commission rate as agreed upon is _____% and will accrue to Representative’s account as of the date of shipment by Company B) The agreed rate of commission shall be due and payable to Representative within _____ days of the date when Company made the pertinent delivery to the purchasers in the Territory C) No commission shall accrue to Representative based on orders not accepted by Company or on orders cancelled prior to delivery by Company D) Commission will be paid to Representative in its country in the currency of _____
Article 6, PURCHASE ORDER DELIVERY Representative is not authorised to accept any purchase orders on behalf of Company or to otherwise finalise any sales of such products without Company’s consent. Company shall ship and deliver Products purchases by virtue of purchase orders, which it has accepted and acknowledged, directly to the customers in the Territory.
Article 7, RELATIONSHIP OF PARTIES A) Representative shall have no authority to act for or on behalf of Company without Company’s (prior) consent to sign or otherwise enter into any kind of contract, undertaking or agreement, or make any promise, warranty or representation, with respect to the Products, and Company shall not be bound by any acts, obligations, or defaults of Representative, its employees or agents. B) Company shall not deal directly with customers in the Territory and in case a customer choose to deal directly with Company, the Company shall notify and consult with Representative. Company shall guarantee a fair and prevailing commission to Representative, in accordance with (the aforementioned) Article 5 of the (or this) Agreement.
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Article 8, ASSIGNMENT OF AGREEMENT Neither this Agreement nor any rights or obligations hereunder may be assigned without prior written consent of Company.
Article 9, DURATION AND TERMINATION A) This Agreement shall be effective for an initial period of _____ years from the effective date of the (or this) Agreement, and shall be extended automatically for a period of one year unless there is written notice from either party not less than _____ days prior to expiration date. Notwithstanding any other provisions herein, the Agreement may be terminated during the initial term or any extension by either party upon giving at least _____ days prior written notice to the other party and agreed. B) If either party hereto continues in default of any obligation imposed on it herein for more than _____ days after written notice by the other party has been dispatched requesting the party in default to remedy such default, the other party in default to remedy such default, the other party may terminate by registered mail to the party in default and this Agreement shall terminate on the date of dispatch of such notice. C) In the event of bankruptcy, receivership, insolvency or assignment for the benefit of creditors of either party hereto, the other party may terminate this Agreement effective immediately by giving the first party written notice to that effect.
Article 10, ARBITRATION Any dispute arising under or by virtue of this Agreement or any difference of opinion between the parties hereto concerning their rights and obligations under this Agreement or claims caused by insincerity in their transactions shall be finally resolved by arbitration. Such arbitration proceedings shall take place in Seoul in accordance with the applicable rules of arbitration of Korean Commercial Arbitration Board, but the proceedings should take place in (the) English language. The decision of the arbitration proceedings shall be final and binding upon parties.
Article 11, EFFECTIVE DATE This Agreement shall become effective as of the day and date first written above. If there are special conditions imposed by the government of either party, the date of such government approval shall become the effective date of this Agreement.
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Article 12, APPLICABLE LAW This Agreement shall be construed and interpreted in accordance with the laws of the Republic of Korea. Especially, Company shall observe those regulations described in international agreement provisions as regulated in Korean Anti-Trust and Fair Trade Acts.
Article 13, FORCE MAJEURE Neither party shall be liable to the other party for non-performance or delay in performance of any of its obligation under this agreement due to causes reasonably beyond its control including fire, flood, strikes, labour troubles or other industrial disturbances, unavoidable accidents, governmental regulations, riots and insurrections. Upon occurrence off such a force majeure condition the affected party shall immediately notify the other party with as much detail as possible, and shall promptly inform the other party of any further developments. Immediately after the cause is removed, the affected party shall perform such obligations with all due speed unless the Agreement has previously been terminated in accordance with Article 9 hereof.
Article 14, NOTICE All communication notices or the like between the parties shall be valid when made by telegraph or telex communication subsequently to be confirmed in writing to the designated addresses of the other parties.
Article 15, ENTIRETY This instrument constitutes the entire agreement and understanding between the parties hereto relative to the subject matter hereof and there are no understandings, agreement’s conditions or representations, either oral or written, expressed or implied, with reference to the subject matter hereof that are merged herein or superseded hereby. NO modification hereof shall be of any force or effect unless reduced to writing and signed by the parties claimed to be bound thereby and no modification shall be effective by the acknowledgement or acceptance of any order containing different conditions.
Article 16, COMPENSATION In the event of the agency contract being terminated by the Principal, for any reason other than wilful misconduct on the part of the agent, the agent shall be entitled to an amount to be paid to him by the principal by way of compensation for loss of goodwill suffered by the agent. Such compensation shall be an amount equal to the average annual sum, earned by the agent in respect
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of commission under the agency during the 5 years immediately preceding the said termination. In the event of the agency having subsisted for a shorter period than 5 years, the amount of the compensation shall be the average annual sum of the entire period of the agency. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorised representatives as of the date first written above: For and on behalf of:
For and on behalf of:
By: _______________
By: _______________
Typed Name:
Typed Name:
Title:
Title:
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FURTHER READING WHY PEOPLE DON’T WANT TO ACCEPT THE CONCEPT OF FREE TRADE When we begin to talk of conflicts between the welfare of individual groups and the welfare of a country, or of the world, we immediately begin to deal with one of the fundamental problems of international trade policy. And this conflict becomes particularly great when we begin to talk in terms of a growing world. We have here, in fact, one more case of the important differences between stationary and dynamic economic theory. As long as we speak of a world which is settling down at some given equilibrium, it is not hard to show that the general standard of living of all countries would be greatest under universal free trade. Under such circumstances, it is easy to show that most of the clamour for protection from ‘foreign competition’ is based largely upon selfishness of various sorts (if the other fellow can’t sell in my country, I can put my price higher). And indeed we will see shortly that selfishness of a kind is, by and large, the basic motive even in a dynamic world. Nevertheless, introducing the idea of growth makes the problem much more complicated. The trouble is that while specialising in the things one does best (relative to others) will make for a greater total output, it will also make each individual economic unit more open to shock when there is change. Yet change, we have seen, is an essential part of growth. And the change which raises the average living standard of a country may nevertheless depress the economic standard or power of obsolete groups within that country. So, also, it is with the changes which benefit the average living standards of the world as a whole, compared with the power or living standards of countries within that world. The economy of a country may become ‘obsolete’, so to speak, as well as a single industry, and this can happen equally well no matter whether all nations are socialistic or capitalistic. The obsolescence of a country’s economy may be due to two main sets of forces. In the first place, it may result from entirely impersonal, outside pressures. We have already seen that as output grows the pattern of wants will change, and likewise, that the methods of production must change. But what this means is that regions or countries whose industry is geared to the demand for one or two main products may suddenly find that those products are no longer in demand. For example, if nylon supplants cotton, or if synthetic rubber takes the place of 270
real rubber, there will be large areas of the world which are bound to experience a drop in importance, and in income, quite independently of how they are socially organised. The only way such a threatened region or nation can avoid this drop would be if its inhabitants are sufficiently resourceful to make a quick change to some other product still in demand. The reaction of Denmark, in the 1870’s, to the cheap foof an grain of Australia and the Americas is an outstanding example of a constructive response. The Danes went in for very highly specialised and cultivated products which could hold their own against the change. Unfortunately, however, not every nation has always been so intelligent. Sometimes, furthermore, it has not been possible to make such a response. But modern ideology has produced a new type of obsolescence. There may be nothing wrong with the resources or manpower of a nation so far as mere health is concerned. But the nation may become so ‘routinist’ in its attitudes, so impregnated with the love of security and serenity that it ceases to keep up with its neighbours and gradually lets its plants and methods go out of date. If such a country is still able to feed itself, it can, to be sure, lapse quietly into poverty and stagnation without causing a major disturbance. In case such a country is not able to feed its population from its own resources, a great problem is presented. Either it will have to try to live forever on the charity of its neighbours, or else it will have to seek to coerce and cajole weaker neighbours into supporting it by buying the high-priced or obsolete goods which it produces – always a difficult thing to do. To conclude, while general trade will, on average, raise the living standards of the world, it nevertheless implies certain penalties: firstly, a nation must be prepared to find some of its products out of date, and stand ready to transfer to new lines; secondly, a nation must be willing to keep up if it wishes to retain its living standard; and thirdly, the lanners of a nation will always have to keep on watch for disturbances and insecurities coming from outside. For all these reasons, the temptation is to control and cut down upon foreign trade.
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HOT PROPERTY OR NOT ? The downturn in business activity may have begun in the US, but there is little doubt that it is now a global concern. There are few hiding places left in today’s inter-connected global marketplace, and although it has become something of a cliché, it is nonetheless worth repeating that no economy is an island. It was in recognition of the threat to the UK of a severe global downturn that the Monetary Policy Committee (MPC further in the text) has reduced interest rates three times so far this year. The aim, of what some commentators have described as an insurance policy, was to boost domestic demand in order to compensate for external weakness. And as profit warnings from companies once thought to be immune from the inconveniences of the economic cycle pour in day after day, it is clear that if those interest rate cuts were indeed an insurance policy, then the MPC should not expect to retain its no-claims bonus. In fact, the MPC’s policy has been very successful / most, including myself, expect the UK to weather the current downturn with relative ease. However, this policy has not been without its difficulties. A number of commentators, including the deputy governor of the Bank of England, Mervyn King, have noted the growing divergence in economic performance between those sectors closest to the UK consumer and those most exposed to the international slowdown. Hence, while the UK tops the G10 league table for retail sales growth, its manufacturing sector is slowly but surely sliding into its third recession of the past decade. And while consumer confidence is riding high, confidence among Britain’s corporate boardrooms is very fragile. That fragility has translated into a slump in capital expenditure – business investment fell by an annualised 22% in the first quarter of this year, and a scaling back of employment plans. Much has been made recently of the emergence of a two-speed British economy, or as the Financial Times is fond of noting, its apparent ability to enjoy and endure both boom and bust simultaneously. Unfortunately, the property market is no exception. Here, too, there is a clear dichotomy between a booming residential housing market, buoyed by low interest rates, record levels of employment and strong consumer confidence, and a soggier commercial market – particularly around the capital. 272
Happy homes Comparing the two markets it is hard to believe that they belong to the same economy. Conditions have rarely been better for the residential market. Lower base rates obviously help, but competition among lenders has delivered the lowest mortgage rates in a generation. Competition in the UK mortgage market is intense. According to the Council of Mortgage Lenders, the average mortgage is less than one-tenth of 1% above the Bank of England’s base rate, while the margin between base rate and the average variable mortgage rate has all but disappeared. That contrasts sharply with the experience of only a decade ago when the average margin was closer to 1%. This is particularly important in the UK where nearly three quarters of all new mortgages are based on floating interest rates. The result has been a resurgence in buyer demand and a wave of new entrants to the housing market. Mortgage-backed borrowing has recently soared to an all-time high of nearly £13bn a month, as consumers take advantage of these cheap deals to both finance new home purchases and to re-mortgage their existing homes. The number of new mortgage approvals recently jumped to 107,000 in June, another record, while mortgage equity withdrawal – the fuel for the late 1980s consumption boom – has risen from close to zero a few years ago, to over 3% of post-tax income in the latest quarter Given the limited supply of housing stock, this surge in demand has resulted in a sharp pick-up in house prices. According to both the Nationwide and Halifax house price surveys, in the past three months prices have risen at an annualised rate of almost 15%. Although initially slow to join the fun, the capital’s housing market has once again resumed its more familiar position of leading the boom from the front. The largest data show London house prices rising at roughly double the pace of the national average of 9% year on year. While this is still a long way off the 40% year on year gains witnessed during the late 1980s, it is nonetheless a robust real rate of growth given the general market environment. And while interest rates may not all much further, buy the same token they are unlikely to rise for several months, all of which suggests that we can look forward to further solid gains in house prices over the summer.
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Space to spare The commercial property environment could hardly be more different. Here, the talk is not of boom but of slump, and the issue of whether or not the US slowdown is affecting the UK is no more an academic curiosity, it is a reality. Nowhere is this more true than in central London and the once buoyant Thames Valley. The tech-driven US downturn has impacted heavily on the commercial property market, reducing demand, and increasing vacancy rates. According to DTZ research, take-up in central London plunged to a sixyear low in June, as availability of space rose to a 15-month high. Investment in the London commercial property market reportedly halved between the first and second quarters of this year as many US-owned companies under pressure back home tightened their belts abroad. High profile examples include French-based Cap Gemini, which shelved its plans for a new London headquarters in June, and Cisco systems, the Internet bellwether, which announced plans to vacate at least two of its UK premises as part of its decision to cut 18% of its workforce this year. The past three months have seen a catalogue of job loss announcements from many of the biggest names in technology and the telecoms world. Only a year ago the Thames Valley area was bursting at the seams with bright new start-up companies. Now it is bearing the brunt of this abrupt collapse in, mainly US, demand. Take-up rates were reportedly two-thirds lower in the second quarter than the first, as many companies that had planned to occupy new premises instead put their existing offices up for sale. According to at least one major investment bank, demand for space by telecoms companies has fallen by 58% so far this year. The City of London, which played its part in bankrolling the tech-boom last year, has fared little better. Empty space in the square mile has risen by 12% in the last three months according to DTZ surveys. But it is not all doom and gloom for commercial property. A booming household sector is good news for retail demand. And the government’s planned post-war record increase in public spending is also expected to generate an increase in demand. As Figure 1 shows, while office rents have fallen sharply from very high levels, other forms of commercial property rents have help up better. And, while London and the Thames Valley may be suffering, commercial property in the north
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of the country has fared better. Indeed, it is instructive to note that while confidence among the South East’s manufacturers plunged from +80% to just +3% between the first and second quarters of this year, all other regions recorded a much smaller fall or even a rise, according to the British Chambers of Commerce. Safer to do nothing Given these widely divergent trends, it is not hard to see why the MPC feels that inaction is the safest policy. Higher rates to try and cool the residential market could deal a hammer blow to the beleaguered commercial market. Conversely, lower rates to try and ease corporate pain would only fuel residential demand. The current situation is therefore finely balanced. Investors are split between those who argue that the runaway consumer will eventually drag the corporate sector out of its gloom, and those who fear that corporate misery will spill over into the household sector via a sustained rise in unemployment. So far, the news has favoured the optimists. Unemployment has continued to fall, albeit at a reduced pace, and now stands below the politically all-important 1m mark for the first time since 1976. and across the Atlantic, hopes are high for a second half recovery, as many of the forward-looking indicators such as confidence and durable goods orders have recovered some of their former poise. However, the US recovery is likely to be muted, and one that comes despite, rather than because of, the high-tech sector. Hence, a return to 2000 levels of occupancy in places like Thames Valley seems unlikely for some, even if the economic news over the nest six months does take on a more positive tone.
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BALANCING ACT, by David Kern from Kern Consulting The mood of the UK financial markets has changed dramatically since June. Previous widespread expectations that the MPC will continue to cut interest rates, to counter the adverse effects of the global economic slowdown, have been replaced by growing fears that the build-up of inflationary pressures may force an early base-rate rise. Markets often exaggerate, and there is as yet no need to tighten monetary policy. Indeed, further UK interest-rate reductions cannot be ruled out if the international situation worsens. However, the sharp contrast between declines in manufacturing, and robust growth in consumer spending and the service sector, is creating a major policy dilemma. The prospect of further base rate cuts has clearly diminished. My expectation is that base rate will start edging up before the end of the year, rising to 6% during 2002. The imbalances in the UK economy have widened. Manufacturing output fell 0.7% in the first quarter of 2001, there were further declines in April and May, and employment in the sector is steadily falling. However, services expanded 0.8% in the first quarter, and the gap between demand and total GDP is set to widen. Private spending remains robust, with retail sales showing annual growth of more than 6% in April and May, while the expansionary Budget will boost public spending, adding to the gap between what we spend and produce. Not surprisingly, excess consumption has caused prices to rise and the external deficit is widening. Inflation, until recently well below its 2.5% target, is now on a clear upward trend and is bound to cause the MPC concern. The labour market remains right – the rise in average earnings is about 5.5%, well above the 4.5% figure that the MPC considers consistent with the 2.5% inflation target. Meanwhile, the current account deficit (the gap between imports and exports) is forecast to balloon, from £16.2bn in 2000 to £20bn in 2001. The UK has so far coped well with the global slowdown, and the outlook remains benign. However, the imbalances in the economy and the expansionary fiscal policy are making economic management more difficult. The MPC cannot easily afford to cut interest rates further, and this must add to the pressures facing those sectors exposed to international competition and suffering from sterling’s strength against the euro: manufacturing, agriculture and tourism. 276
The UK’s large external deficit is a structural imbalance that cannot be sustained indefinitely. However, the deficit allows us to consume, as a country, more than we produce in the short term, and this dampens inflationary pressures. Without the cushion provided by the current account deficit, inflation may rise sharply, forcing the MPC to raise interest rates, thus worsening the imbalances in the economy. A collapse in sterling is by no means imminent. Indeed, the UK would benefit from a gentle fall in the pound against the euro, particularly if it coincided with a recovery in the euro against other currencies. But as long as the euro remains weak, the government cannot afford to allow sterling to fall to a level considered appropriate for joining the euro. Thus Gordon Brown remains cautious before starting the process of deciding whether the UK meets his five tests for euro entry.
EMERGENCY SERVICES Even the best-run and most successful businesses can get into trouble. The slowdown in the US and eurozone economies, together with the general uncertainty in the UK, have created an environment where companies are increasingly facing difficulties. Encouragingly, we are seeing more cases where advice is sought before problems become insurmountable. Often, the key factor determining whether a business survives is the speed with which problems are identified and remedial action is taken. Signs of trouble The preparation and review of reliable management information is the starting point for spotting problems. This is common sense, a quality which directors of companies that go bust often lack. The amount of information prepared may be limited by a company’s resources, but, at the very least, management accounts, including aged lists of debtors and creditors, should be produced within one to two weeks of each month-end. Cash flow, p&l and balance sheet forecasts for the next 12 months are also essential. The regular review of this information will help identify the reasons for any deterioration in the financial position and assist in working capital planning.
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Other signs of trouble will depend on the nature of a company’s operations. For example, if most orders are received some time in advance, the state of the order book should be closely monitored. If a large proportion of sales is to any one customer, a close eye should be kept on its financial position and the health of the business relationship. For all companies, the level of disputes with customers should be kept under observation. In contracting businesses, it is important to provide fully for the costs of remedial works that the company is required to undertake. If you are running a dot.com that relies on funding from a US parent company, make sure it continues to be willing and able to provide funds. Serious signs of trouble include receiving writs from creditors and getting behind on payments of PAYE and VAT. If they have not already done so, directors of companies in these positions should seek professional advice immediately. They risk being personally liable for the company’s debts and being disqualified from acting as directors. Ask for help It is important to seek advice as early as possible if a business is facing financial problems that could threaten its solvency. Some directors like to consult the company’s auditors in these situations, whereas others prefer to speak to someone completely independent. If a full business review is required it should be undertaken by a firm with appropriate resources and corporate recovery expertise. The company’s lenders should be contacted as soon as the financial problems become apparent. Providers of finance will play a key role in any recovery plans, so it is vital that their goodwill is retained. As a general rule, bankers hate surprises. They are much less likely to support a business whose directors cannot be trusted to keep them fully informed. Often, the company’s lenders will require accountants of their choice to undertake an independent business review to help them decide the level of future support they can provide. The reviewing accountants should identify the company’s problems and propose practical solutions. They will aim to work closely with the directors and will give their views on any proposals the directors have put forward. Sometimes, directors find it
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difficult to make decisions that will have a major impact on a company, such as closing an unprofitable part of the business so that the remainder can survive. An independent expert’s advice can help them make these decisions. There will be occasions when formal insolvency is unavoidable. However, this does not necessarily mean that the company will cease trading. Under current legislation, it is common for a company to continue trading in administration or administrative receivership, and this can result in the survival of part or all of its business. Cooperation is key Administrators and receivers are not unpleasant bully boys looking to sack everyone as soon as possible and close everything down. Our principal objective is to maximise realisations for the company’s creditors, and to do this, we have to work with its staff, not against them. Frequently, the best strategy is to trade the company for a short period to facilitate the sale of its business as a going concern in which the buyer takes on the workforce. Employees’ support is crucial for this strategy to be successful. Even if a controlled wind-down is more appropriate, the administrator or receiver will still need key members of staff to cooperate. From day one, therefore, communication with the company’s staff will be an absolute priority for the administrator or receiver. Some issues are confidential, but we always try to be as frank and open as possible with employees. Redundancies are often inevitable, and the effects can be devastating for some staff. However, people usually accept the situation without hostility provided they feel they have been treated sympathetically and not kept in the dark. Although we are not the bad guys we are sometimes made out to be, administration and receivership are not pleasant for those involved. The best way to avoid them is to identify potential difficulties and address them as soon as possible. There are still too many businesses that go under because advice is not sought until it is too late.
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IS IT TIME TO CELL, CELL, CELL? Looking beyond hysterical and often misleading hype, David Pilling splits fact from fiction and looks at the potential commercial applications of cloning…If ethical and technical obstacles could only be overcome, the potential market would be huge.…Cloning of people is, perhaps, the ultimate taboo. It conjures up images of megalomaniac millionaires producing armies of replicas in their own image. Every few months, it seems, a new story about a breakthrough in cloning hits the headlines. Since February 1997, when the world first learned that a Scottish scientist, Dr Ian Wilmut, had cloned Dolly the sheep from an adult cell, further stories of cloning endeavours have come thick and fast. First, there was Cumilina, one of dozens of mice cloned in a windowless laboratory in Hawaii. Not only were clones ‘manufactured’, but so were clones of clones of clones. Then there was the group of South Korean scientists at a fertility clinic in Seoul’s Kyunghee University, who claimed that they had successfully cloned a human embryo from an adult body cell. The experiment was aborted for ethical and legal reasons. (The validity of that experiment is still disputed by many scientists, who complain that the procedure was never peer-reviewed in an established academic journal.) This year researchers at the Oregon Regional Primate Research Center reported that they had used a technique called ‘embryo splitting’ to create identical, two-cell embryos from an eight-cell embryo. Just one monkey, named Tetra, survived to birth. And in March, the birth of five cloned piglets was announced by Dolly’s parent – pun intended – company. So, why are scientists working so hard on a technique that still invokes unease in many lay people and even among some scientists? Why is so much of this controversial science being practised by the private sector, and how do they hope to make money from developing it? First, it might be helpful to examine exactly how Dolly the sheep was created. In short, what is a clone?
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Copycats A clone is an identical copy. Identical twins, which occur when a fertilised egg splits into two, are natural clones. Dolly was made taking a single cell from the mammary gland of an adult ewe and injecting its nucleus with a micro-pipette into the egg of a sheep. The egg had been enucleated, which means that its DNA had been removed, leaving only a gooey substance called a cytoplasm. After an electric shock was passed through the egg, the cytoplasm somehow reprogrammed the nucleus to start dividing and to build a new organism. The dividing cells were implanted in the uterus of a sheep that had been chemically ‘tricked’ to believe she was pregnant. Several months later, Dolly was born. The only genetic material involved was from the mammary gland cell. Dolly was an identical twin of her mother/sister. But why did the PPL Therapeutics, the private company spun out from Scotland’s state-funded Roslin Institute, want to clone a sheep in the first place? Milked for all it’s worth The answer in fact is that PPL did not. Cloning was for PPL merely a by-product of what it was really truing to do: produce human proteins in sheep milk, namely a protein called alpha-1 antitrypsin, which can be used to treat emphysema, and, possibly, cystic fibrosis. The commercial benefits of such a treatment would be potentially huge. […] As with so much in the speculative biotechnology industry, it is very difficult to estimate the potential market for such products. However, it should be noted that a substantial proportion of today’s new drugs are proteins, mainly grown at great expense in huge vats. Several proteins, including growth factors and a product used in patients suffering from extreme anaemia, garner more than $500m annually. Producing proteins could be of huge benefit. This ‘animals as protein factories’ strategy is only one potential commercial application of cloning. There are several others, some seemingly within reach of today’s scientists and some that remain more distant goals.
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easyPeasy If you had told me five years ago I’d be running a coffee shop, I’d have thought you were crazy, said Stelios Haji-Ioannou. We may be sitting sipping cappuccino on the mezzanine level of the Kensington High Street branch of his latest venture, easyEverything, but to call this giant internet store a coffee shop is stretching the definition of the term to its limits. But it does highlight the point that five years ago, at the tender age of 28, this audacious young entrepreneur was concentrating his efforts on an entirely different project. To be more precise, he was preoccupied with establishing his low-cost, Lutton-based airline, easyJet, whose inaugural flight took off in November 1995. its fleet of brightly painted orangeand-white aircraft have since come to dominate the tarmac at Lutton Airport. It is there, in the big orange shed and open plan offices that serve as the company’s headquarters, that Stelios has created the management style that he describes as ‘unconventional, open and relaxed’. So it comes as no surprise to hear that he prefers everyone to call him by his first name, to call him Mr Haji-Ioannou, well, it just wouldn’t sound right. Greek Strategy As the super-rich son of a Greek shipping magnate, Stelios could well have stayed at home minding the family store, but, although he recognises it as a cliché, he needed, he says, to prove himself outside the confines of his father’s expertise. True, he didn’t have to go convincing financial backers how worthy his plan was: his father put up the initial £5m to get the airline off the ground. But he could, as he rightly points out, quite easily have blown the lot. Instead, in the four-and-a-half years since it took to the skies, easyJet has grown into a success story that will have escaped only the most blinkered few. In the course of building up an airline business operating 28 routes with 18 aircraft (and another 15 on order), and with a profit of £1.50 a head on each of its 1.7m passengers, Stelios has established himself as a champion of the people. The Robin Hood of the low-cost air
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travel. The David of the airways – fighting the Goliath – British Airways. He takes obvious delight in recounting the history of his feud with ‘the world’s favourite airline’. At first BA were very dismissive, but I am sure they have a corporate strategy that says, at the launch of any new airline, ‘We welcome the competition’. But, behind the scenes, there is a very different assessment of the situation. He first realised that BA was taking him very seriously indeed about a year after easyJet was launched. I went to a conference where I introduced myself to Bob Ayling. I wasn’t known then and I said to him, ‘I run this small airline in the UK.’ He then said he had heard of me and invited me to go and have coffee with him back in London. I went over to his office, and, within an hour of talking, he asked me if I was willing to sell my company. But if Mr Ayling, who recently resigned after claiming that his four years at BA’s helm had ‘taken their roll’, thought Stelios would be a pushover, he had made a serous misjudgement of character. It was that conversation, perversely, that gave me the strength to carry on. I thought that, if Bob Ayling wants this, then it has probably more value than even I realise. When BA had finally accepted that this little upstart of a company wasn’t for sale, it adopted a different approach: it launched its own low-cost subsidiary, Go, but Stelios was definitely determined to make marketing capital out of the new carrier. His extraordinary stunt of buying up 10 seats on Go’s inaugural flight and filling them with easyJet staff, dressed in bright orange boiler suits and baseball caps, has achieved almost legendary status, and gained him more publicity than £1,000 could possibly have hoped to have bought. He went on to delight Go’s 147 Rome-bound passengers by giving them tokens for free flights anywhere on the easyJet network. Even now, he can suppress his giggles when talking about it. But his jockey, laid-back exterior belies the tough adversary that lies a fraction below the surface, and BA’s encounter with this formidable opponent is far from over. The two airlines have been locked in legal combat for almost two years: Stelios is trying to prove that Go is on the receiving end of an illegal cross-subsidy from its parent company.
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I believe the crunch is coming. In the beginning, it was all conjecture. Would they lose money? Would they make money? Would they run it as a business? Or was it just a spoiler? They burnt £20m in the first year. We are now well into the second year and I suspect they may have lost all their start-up money now. The point is that they have failed completely to fill those aeroplanes. It doesn’t take a genius to work out that if your planes are half-empty, you are burning cash. Such passion is met with a patient denial by Go. A spokesman says: ‘Our position with respect to the original £25m investment made in Go by British Airways is the same as it was when we announced out first year results in Sept. 1999. We have used less than half. In fact, our cash position has strengthened considerably from strong forward sales.’ Not to be outdone, easyJet’s planes are running at between 75% and 80% capacity. In January, our quietest month, we were at 75.6% and we have been up to 80%. And the airline is not just popular with back-packers and shell-suited tourists, off to Palma de Majorca: In a recent survey of business travellers carried out by Barclaycard, we were ranked fifths favourite, ahead of airlines line KLM and Lufthansa. Over the last two years, easyJet has pulled out all the stops to maxims the efficiency of the ticketing process by increasing the number of seats sold over the internet, and the figures now exceed half of all bookings. How does Stelios account for such a high proportion of online sales? It is a very simple product. We give incentives and discounts for booking on the net and we also give internet customers a head start. The whole of the summer schedule was released on the web well in advance of being available over the phone. We have even shifted the emphasis of our advertisements so that the website address appears in a larger font than the telephone number. There has been talk of flotation for some time now, and Stelios confirms that the schedule has provisionally been set for the autumn. Our financial year ends in September, so we’re hoping to float sometime between then and December. Obviously there is not a lot of information I can give you, but I can say that up to now it has been a very good year.
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The Future’s Orange He is typical of the new breed of entrepreneur whose prime motivation is more about building a brand that can be applied to any number of businesses than establishing dominance in any one sector. Sir Richard Branson has done it with Virgin. Jeff Bezos is selling far more than books under the Amazon banner. And now the tentacles of Stelios’ orange empire are stretching out to encompass not only his new chain of internet cafes, but also easyRent-a-car, due to launch this month, and an internet bank, not surprisingly called easyBank, which he anticipates coming online in the autumn. Our brand values are quite simple. We provide a well-defined quality product at the best possible price. The word quality is probably the most abused term in marketing. People think of quality as being expensive, whereas I think quality is meeting customer expectations / and even surpassing them. Although back in 1995 Stelios was too focused on his airline to worry about what would come next, the name ‘easy’ was deliberately chosen because it could be applied to almost any product. But why internet cafes? I had never stepped inside an internet café until September 1998. I popped into a little place behind Oxford Circus because I was trying to do a deal to sell more seats over the net. I couldn’t help noticing that, in spite of its small size and nerdy atmosphere, it was really quite busy. I thought to myself: there must be a business there. I went back to the office, did some number-crunching on a spreadsheet and realised that to make this a viable business you need to make it very big and very cheap. When this man says big, he means very big indeed / between 400 and 558 screens at each of the five London locations. As for cheap, he says: With easyEverything, we have brought the internet down to the lowest common denominator – a pound. Anybody with a pound in their pocket can walk in here and get up to six hours’ access to the net. New branches are about to open in Edinburgh, Amsterdam and Rotterdam, with ambitious plans to expanding throughout Europe and the US over the next couple of years. Outside those territories, we are planning to franchise out the concept, and we have already had enquiries from Turkey, China, and Israel.
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Is it legal? And as if his legal tussles with BA weren’t enough, Stelios has been rattling his sabre at KPN, the Dutch equivalent of BT, which he accuses of ripping off his idea by opening a Rotterdam café with the identical layout to easyEverything: They must have come into one of our shops, taken a lot of pictures, and gone back to Holland and said, ‘Let’s see if we can copy that’. I think they’ll suffer from the same problems as any daughter of a huge company. They’ll never be focused enough. If he has created such a stir among the airline and telecoms giants of this world, what must be going through the minds of the bigwigs at Avis, Hertz et al? he promises a radical approach to car hire, driven by three factors: internet sales, which will make it very cost-efficient; just one model of car, recently confirmed to be a Mercedes A type; and fewer sites but each with 500 cars available to rent. That is how we will deliver this unbelievable cost-base, he explains. Heaving spread his wings so far in the space of such a short time, what does he see for easyGroup five years further down the line? I once famously said ‘The internet is for nerds. You can’t fill aeroplanes with the internet. So, I’m the last person to predict where we’ll be in five years’ time.
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B2B / ELECTRONIC PROCUREMENT/ Business to business trading online benefits big and small Online trading environments linking buyers to suppliers are growing exponentially in numbers and users. The major drivers behind the move towards electronic procurement have been large corporations, which can reap enormous cost savings from handling business/to/business transactions online simply because of economies of scale. Early adopters of electronic procurement include BP Amoco, Boeing, Boots, Harley Davidson, National Power, Pepsi Cola and Xerox. BP Amoco, has gone online with the 15% of its procurement that accounts for over 50% of the number of individual transactions, and expects to shave $200m off its $20bn procurement bill as a result. But SMEs (small and medium-sized enterprises) can also benefit from e-procurement. Online cooperatives can enable small businesses to combine, to exert the bargaining and buying power of larger organisations. One of the earliest of these enabled SMEs operating in the chemical industry to buy goods in bulk, with the associated cost savings redistributed among the companies involved. At the moment, this type of site mostly benefits SMEs in vertical markets, but this is changing. Adair Turner, former director general of the Confederation of British Industry, recently announced his return to the business arena with a dot.com that will ultimately offer any ‘connected’ SME the benefits of online bulk buying on all sorts of MRO (maintenance, repair and operations) goods, ranging from computer supplies to electricity. The site www.grouptrade.com is already open for companies to pre-register prior to trading, which will begin this summer. It is a very simple web-based concept. We can aggregate the demands from SMEs and shift the balance of power towards the buyers, at the same time as we provide major suppliers with a new channel to market. It’s an approach that will offer huge savings to the 600,000 of the UK’s 1.3m SMEs already online, and a powerful incentive for others to follow their lead. Taking MRO online offers the potential for quite amazing savings that go straight to the bottom line. According to KPMG, non-production purchasing inefficiencies cost British business £100bn every year. The popularity of this type of site is also growing in the business to consumer area of online trade. A Swedish website has recently expanded into Britain, offering bulk buying discounts on all manner of goods, from computers and car tyres through Gucci aftershave and golf clubs to perfume and picnic sets – and the more people who want to buy, the bigger the savings.
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ENGLISH in ACCOUNTING/AUDITING
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ACCOUNTING , INTRODUCING ACCOUNTING , PHRASES WITH ‘ACCOUNT’ The words from the box given below should be inserted into the blank spaces within the sentences. Note: Accountancy stands for the theory of keeping financial records. Accounting refers to the activity of keeping financial records. Account is a record of money received and spent. Accountant is a person who keeps and works with financial records. account , accounts , accountant , accounting , accountancy 1. Will you please check that the figures have been entered correctly in the bank _______________. 2. My nephew is studying _______________. 3. The management of the company have not made up their mind concerning _______________ policies. 4. A bookkeeper writes details of financial transactions in the _______________. 5. If _______________ want to stay informed about what is going on in _______________, they have to read_______________ magazines. 6. She has been working as an _______________ for the IBM for several years now. 7. The draft _______________ for this year have been completed by the chief _______________. 8. The management of the company approve the _______________ at the end of the _______________ year. 9. Each branch has to maintain its own full _______________ system. 10. An _______________ for consignment to Thailand has been opened. 11. _______________ is said not to be an exact science. 12. Every business manager needs a certain amount of _______________ knowledge so as to be able to comprehend what he reads in the company _______________.
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Phrases The word account is now used in everyday English to form phrases with different meanings. The best way to remember them is to practice using them in short sentences and appropriate contexts.
account for
people say
on one’s own account
report
give account of
under no circumstances
on account of
consider explain
on account
big customers
on no account
for themselves
take something into account
because of
by all accounts
on credit
accounts
represent
1. How does your manager ____________________ the sudden fall in the stock value. 2. Agents buy and sell goods ____________________ . 3. The lawyer was given a detailed ____________________ of the customer’s business deals in the last five years. 4. The draft ____________________ have to be adjusted ____________________ the discovery that the major debtor had gone bankrupt. 5. Raw materials usually _______________ 28.5% of manufacturing cost. 6. When you are a regular customer in a shop, you are in time allowed to buy items ____________________. 7. Please, when you meet him, ask him to _______________ this year’s poor performance ____________________. 8. ____________________, they will profit to a great extent if the deal goes through. 9. My company has won three new ____________________ in South Asia.
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Say how we call the following: 1. if a company has supplied goods but has not received any money for the supplied goods, it is called ____________________. 2. this is made by companies when selling goods for more than it costs to produce them, then they make ____________________; when the situation is quite an opposite one, then the companies make ____________________. 3. the goods bought by a company are called ____________________. 4. the company’s goods available to be sold are called ____________________. 5. the act of taking the money out of an account is called ____________________. 6. when there are customers who have not paid for the received goods yet, they are ____________________. 7. reduction in price offered to customers is called ____________________. 8. each account has two sides: the credit and the debit sides; the difference between the two sides is called ____________________. 9. what you draw up to check that the two sides of an account are the same is ____________________. 10. the cost of transporting goods is called ____________________. 11. the official books for keeping accounts are ____________________.
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READING 1
WHAT IS ACCOUNTING?
Something to think about: -
What are the main purposes of accounting?
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Tell the difference between accounting and accountancy.
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Do you think accountancy only describes the past or it can be useful in dealing with the future? Explain. State your reasons.
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To what extent do you think accounting is objective? How resistant do you think accounting is to subjective judgements?
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Do you think that accountancy is important whatever the type of economic system a country has? Explain.
Accounting contains elements both of science and art. The important thing is that it is not merely a collection of arithmetical techniques but a set of complex processes depending on and prepared for people. The human aspect which many people, especially accountants, forget, arises because: 1) most accounting reports of any significance depend, to a greater or lesser extent, on people’s opinions and estimates; 2) accounting reports are prepared in order to help people make decisions; 3) accounting reports are based on activities which have been carried out by people. But what specifically is accounting? It is very difficult to find a pithy definition that is all-inclusive, but we can say that accounting is concerned with the following: the provision of information in financial terms that will help in decisions concerning resource allocation, and the preparation of reports in financial terms describing the efforts of past resource allocation decisions. Examples of resource allocation decisions are: should an investor buy or sell shares? Should a bank manager lend money to a firm? How much tax should a company pay? Which collective farm should get the extra tractor? As you can see, accounting is needed in any society requiring resource allocation and its usefulness is not confined to “capitalist” or “mixed” economies. An accountant is concerned with the provision and interpretation of financial information. He does not, as an accountant, make decisions. Many accountants do of course get 292
directly involved in decision making but when they do they are performing a different function. Accounting is also concerned with reporting on the effects of past decisions. But one should consider whether this is done for its own sake or in order to provide information which it is hoped will prove helpful in current and future decisions. We contend that knowledge of the past is relevant only if it can be used to help in making current and future decisions, for we can hope that we shall be able to influence the future by making appropriate decisions but we cannot redo the past. Thus the measurement of past results is a subsidiary role, but because of the historical development of accounting, and, perhaps, because of the limitations of the present state of the art, “backward looking” kind of accounting sometimes appears to be an end in itself, and not as a means that will help in achieving a more fundamental objective. 17 Comprehension questions: 1. How many reasons are give to support the idea that accounting involves a human element? 2. Circle the reasons which, according to the text, show human influence on accounting. a. Accounting summaries describe human action. b. Accounting systems are artificial creations. c. Accounting is affected negatively by human judgement. d. Accountancy is based on the subjective ideas of individuals. 3. Some decisions regarding resource allocations are important for a capitalist, some for a mixed and some for a state-controlled economy. Some, however, can be relevant for more than just one type of economy. Put a plus [+] in each case in the table given below.
17
“Foundation in Accounting”, Lewis, R. and Gillespie, I. , Prentice Hall, 1986)
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Important for: Capitalist Mixed
Resource allocation decision
State-
Economy Economy controlled Economy
Should an investor buy or sell shares? Should a bank manager lend money to a firm? How much tax should a company pay? Which collective farm should get the extra tractor? 4. Find the place in the text where it is said that management decision-making is part of an accountant’s job. Words in the context: -
In “a set of complex processes…”, the word complex means: i. different ii. confusing iii. complicated iv. unusual
-
In “to find a pithy definition…”, the word pithy means: i. accurate ii. short iii. understandable iv. comprehensive
-
In “the provision of information…”, the word provision means: i. providing ii. researching iii. producing iv. organisation
-
In “this is done for its own sake…”, the words for its own sake mean: i. to provide work ii. for one person/company only iii. to solve problems iv. for no other purpose
-
The meaning of the phrase state of the art is: i. technology ii. government controls iii. knowledge and techniques iv. understanding
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READING 2 Special Report, Information Imperative: OPEN ALL HOURS 18 How can you offer online transparency to business partners and customers while protecting what needs to stay private? There are plenty of arguments for increased business-to-business collaboration. But there are just as many security implications of giving other companies access to your information. Recent statutory and regulatory developments such as the Turnbull Report and the new Data Protection Act reinforce directorial responsibility for integrity, security and privacy of information. If you decide to share information with a partner, you are still likely to be held responsible for it – even if your partner doesn’t safeguard it as carefully as you would. Then, there’s the concern that one partner will get their hands on another’s confidential information, which at worst could lead to someone poaching someone else’s business. It could even be your business – if you tell your suppliers too much about your customers, what’s to stop them from deciding to cut out the middleman? An additional worry that is currently being voiced in the US is that if too much information is shared with partners, companies could find themselves in trouble for monopolistic practices. This is bad enough if you have shared the information deliberately – how much more aggravating if you have divulged it accidentally through lax security. Looming larger than all of these concerns put together is the realization that once you connect to the internet you are opening your doors to all and sundry. You can no longer simply barricade your business against intruders. When you send out an invitation to welcome guests, unwelcome visitors may sneak in behind them.
18
Accountancy, October 200, p. 66 (adapted)
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Reasons to be cheerful Early claims suggested that e-commerce would turn the whole world into one big online marketplace – and a security nightmare. But according to David Pattinson, e-business director of EMEA at Walker, this is not the case: ‘Most companies don’t see much value in buying pencils cheaply from Malaysia – they’re more interested in forming relationships of trust with valued partners. This approach helps minimize risk, because the group can agree to create its more secure infrastructure, such as an extranet based on a virtual private network (VPN). If you do need to trade with a wider group, then ‘trust’ infrastructures such as Identrus (www.identrus.com) may become valuable adjuncts to technological mechanisms, such as PKI (public key infrastructure) and digital certificates. Spoiled for choice? One possible approach to controlling what gets seen by outsiders is to hold the information that is to be shared separately from that which is to be kept secret, perhaps in a ‘demilitarized zone’, separated from critical systems by fire-walls. Jeremy Roche, president of product strategy, R & D (research and development) at Coda, says: ‘Information such as summary data from your accounts is likely to be low in sensitivity compared with the detailed information within your applications. Putting that sort of information in a separate area for external access is an attractive option for some companies.’ True collaboration is likely to require companies to access one another’s systems directly. Roche argues: ‘Although there are easier ways to share information, giving your suppliers and partners direct online access does tie them in nicely.’ But, with this approach, it’s vital to be able to give different groups of users access to different information – perhaps down to the level of individual users and individual data fields. These are capabilities that should be intrinsic to your applications and database anyway; despite the publicity given to hackers and denial-of-service attacks, such as Code Red, most information security breaches originate internally – though the distinction between internal and external threats is increasingly academic.
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Remote workers and business partners all present the same level of risk, at least in terms of the danger of interception. And, as Graeme Cox, MD of security company DNS, points out, wireless networks make the notionally internal external. ‘To prove to ourselves how widespread an issue this has become, we walked up and down one street in Edinburgh with a wireless “sniffer” product. In the course of that we were able to connect to five company networks.’ So, as Pattinson asserts: ‘It makes sense to have one set of security policies that can safeguard information from both internal and external threats.’ Face the future Safe B-2-B e-business may be a difficult nut to crack, and nothing can ever be 100% secure, but there are strong incentives to manage the risk intelligently. Some companies, such as BT and Consignia, are already using claims about superior security as a marketing tool. Michael Harrison, a board member of the government-backed Information Assurance Advisory Council, says: ‘There are already companies that insist on doing business electronically. It doesn’t take much of a leap of faith to anticipate some insisting on evidence that it is being done safely.’ In a future where trading partners will be auditing one another for security, or looking for some form of independent certification, pulling up the drawbridge and sitting tight will not be a viable option.
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INTRODUCING ACCOUNTING 2, EXPRESSING CHANGE, PREPOSITIONS OF CHANGE INTRODUCING ACCOUNTING 2
1. Buildings, machinery, money in the bank and money owed by customers are called ____________________, whereas the loss in value of the aforementioned things is called ____________________. 2. Borrowed money is known as ____________________, and the extra money paid by
a
company
or
a
person
for
borrowing
money
is
called
____________________. 3. The total amount of money which owners of the company have to pay in order to start it up is called ____________________. 4. When the owner takes certain amounts of money (cash) or goods from the company for his own private use, ____________________. 5. People buy them wishing to invest in the company, and they are ____________________. 6. The extra amount paid for a company above the value of its assets is called ____________________. 7. The purchase of another company ____________________. 8. An official examination of the accounts is called ____________________. 9. A financial plan for the future is called____________________. 10. A
statement
of
the
financial
position
____________________ sheet.
298
of
the
company
is
called
EXPRESSING CHANGE Mark the following descriptions expressing change in sales as positive, negative or neutral. to be stable
_____
to dwindle
_____
to rocket
_____
to deepen
_____
to fall
_____
to slump
_____
to diminish
_____
to improve
_____
to decline
_____
maintain same level
_____
remain constant _____
to descend
_____
to double
_____
to escalate
_____
to grow
_____
to escalate
_____
to recover
_____
to increase
_____
to retain position
_____
to shrink
_____
to soar
_____
to decrease
_____
to deteriorate _____
to drop
_____
to expand
_____
to hold firm
_____
to jump
_____
to reduce
_____
to rise
_____
to slow down _____
to suffer
_____
PREPOSITIONS OF CHANGE Note: If you use the wrong preposition, it could give the wrong information to the person you are either talking or writing to. Prices rose TO $100. is not the same as Prices rose BY $100. TO gives us a new level – the prices were lower than $100. Now they are sharply 100 dollars. BY gives us the difference between levels – for additional 100 dollars, which means that it is 100 dollars higher than it used to be.
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Choose the most appropriate prepositions. 1. Labour costs have fallen _____ 22% of total production costs _____ 14% in the last ten years. That’s 8%!!! a. between/for
b. from/on
c. up/off
d. from/to
2. We witnessed a dramatic fall in sales to the UK _____ 1997 and 2000. a. among
b. between
c. from
d. into
3. The company has been selling 20,000 units _____ $23 each for weeks. a. in
b. for
c. at
4. A 14.89% drop in sales reduced the profit _____ 38.11%. a. by
b. on
c. in
5. They have increased their retail floor space _____ 5% _____ a total _____ 48,000m2. a. to/by/off
b. by/to/of
c. from/for/in
d. of/by/in
6. The total of 1,450 jobs are expected to be created _____ the end of next year. a. to
b. at
c. by
d. in
7. Capital investment _____ the year stands _____ 6,000 pounds. a. of/in
b. for/at
c. from/on
d. off/into
8. Pre-tax profits reached a peak _____ 5m dollars two weeks ago, but have become lower since. a. from
b. for
c. off
d. of
9. Weekly sales have levelled _____ _____ 34,000 pounds. a. off/at
b. at/off
c. of/to
d. off/on
10. Increased efficiency has resulted in a lowering of the break-even point _____ 2,770 _____ 2,500 units. a. from/to
b. between/to c. from/onto 300
d. from/up
READING 3
THE ACCOUNTING EQUATION
Something to think about: -
What was the progress in accountancy like in the past? Was it quick or slow? Explain.
-
Say what a balance sheet represents.
Accounting is at least the second oldest profession in the world. But while earlier professionals rapidly got to grips with basic techniques and even introduced refinements, it is remarkable that generations of tax collectors and merchants staggered on for thousands of years before finding a satisfactory general method of keeping a record of their affairs. This should serve as a warning. The problem is common sense but the answer is not. It is highly contrived and in some respects still imperfect. It begins with a particular way of looking at a business which we present in the next section. A business may be pictured as a box. The box has contents and by virtue of owning the box, the owner has a claim to the value of the contents. Others also may have a claim on the contents, by virtue of having lent money to the business or of having supplied goods or services to the business for which they have not yet been paid. These are the creditors of the business. As the business buys and sells goods and services, so the value of the contents of the box will increase or decrease, depending on whether the business makes a profit or a loss. These changes in value of contents must be equalled by changes in value of claims on contents. Specifically, the claims of the owners will vary, so that the total value of claims is always equal to the value of the contents. Now we may list the value of the contents of the business box at any time say down the left side of a piece of paper. On the right side, we may list the value of claims on those contents. The claims of third party creditors will be known. The claims of the owners will amount to whatever is necessary to make the total value of claims equal to the total value of contents.
301
Such a list of contents (on the left) balanced by a list of claims (on the right), constitutes a simple balance sheet. A balance sheet is a presentation of the state of affairs of a business in a succinct, systematic and recognisable format. Restating the original theory, with the picture of the business as a box, we can write: £ contents
=
£ claims on the contents.
In accounting terms, this becomes: (1) Assets = Equity + Liabilities, where Assets are simply what is held in the business, Equity is the claim of the owners, and Liabilities are the claims of third parties. By transferring liabilities to the other side of the equation, we may write Assets – Liabilities = Equity or, using a technical term (2) Net Assets = Equity Finally, we may split Equity into the capital originally put into the business, on the one hand, and the reserves, on the other, in which case Reserves represent profits which have been reserved or kept in the business. The equation now becomes (3) Net Assets = Capital + Reserves. (1), (2), and (3) above are forms of the fundamental accounting equation. 19 19
“Management in English Language Teaching”, White, R. et al (Cambridge University Press, 1991)
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Comprehension questions: 1. Think what the “oldest profession” in the first line of the text might be. 2. Which of the following statements are true / false? a. Other professions progressed at a similar rate to accounting. b. Accounting’s problem for a long time was how to record monetary transactions. c. The problem which accountants faced was an artificial one. d. Accounting’s method of keeping financial records is based on common sense. 3. Match the parts from Column A with the parts from Column B so as to make true sentences according to the text. Column A
Column B
Whatever the total worth of a business…
…the owner of that business has a part right to those contents’ value.
As the worth of a business increases or
…the owner’s and creditors’ rights to
decreases…
that amount will equal it.
If someone is an unpaid supplier of money,
…the owner’s and creditors’ rights to
goods or services to a business…
the total value also do.
If we imagine a business as a box with
…there is a right to some of its
contents…
contents.
4. In the following equations, in accordance with the text, supply the missing elements: The claims on a business at any time = _______________ + _______________ Total value of contents of business at any time = _______________ - _______________ 5. Now that you have read the text, match the technical auditing / accounting terms on the left with the right definition on the right.
303
reserves
the things of monetary worth which a company owns
liabilities
the value of a company’s initial capital
assets
profits which have not been paid out
net assets
non-owner claims against the company
equity
owner’s claims against the company
capital
the company’s worth minus its debts to external creditors
Words in the context: Find the right synonymous words or word-phrases in the text that correspond to the following ones: - continued with difficulty
_________________________
- brief
_________________________
- to be exact
_________________________
- began to deal with
_________________________
- system
_________________________
- act
_________________________
- forms
_________________________
- due to
_________________________
- improvements
_________________________
- artificial
_________________________
Choose from the following ones: get to grips with , refinements , staggered on , serve , contrived , by virtue of , specifically , constitutes , succinct , formal
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READING 4
INTERNAL CONTROL
“KEEP IT LONG”
The APB hopes that its briefing paper will contribute to developing a model of how auditors might report on the reliability of internal control By Steven Leonard In 1992, the Cadbury Committee recommended that listed companies’ annual reports should include a statement by the directors concerning the effectiveness of internal control, and that the auditors should report on it. The initial guidance for directors, which was published in 1994, focused on internal financial control. However, the Combined Code demanded the directors’ annual review of the effectiveness of internal control to ‘cover all controls, including financial, operational, and compliance controls and risk management. Following the publication of the Turnbull report in 1999, the guidance for directors was broadened. It became explicitly based on the presumption that a company’s board should adopt a risk-based approach to establishing a sound system of internal control whereby the controls and the monitoring of their effectiveness are embedded in the business processes by which an entity pursues its objectives. NO CONSENSUS Since Cadbury, the Auditing Practices Board has issued two discussion papers on the subject of providing assurance on internal control. These explained the issues associated with providing such assurance, and explored different approaches. Responses to these papers indicate that there is still some way to go before a consensus is reached on how auditors should perform engagements to provide assurance, and in particular how conclusions should be reported. The APB has recently published a briefing paper, Providing Assurance on the Effectiveness of Internal Control, which it hopes will contribute to developing a model of how auditors might be able to express assurance. APB briefing papers are intended to deal with issues that require continuing debate and development, and as a consequence do
305
not set out mandatory requirements. The briefing paper is also intended to help directors, regulators and others to appreciate better the considerable challenges associated with reporting on the effectiveness of internal control and in particular the advantages of providing assurance through a narrative, rather than a standardized ‘short-form’ report. THE FRAMEWORK The paper sets out a framework for forming an opinion on the effectiveness of internal control. The framework describes the key considerations relating to the following processes undertaken by management:
risk identification
risk assessment
designing internal controls, and
operating internal controls in accordance with the design.
The paper discusses the complex judgments involved in evaluating each of the processes, and why auditors may be able to provide only a moderate level of assurance with respect to the more judgmental of the processes – such as risk identification, risk assessment, and internal control design. These processes are judgmental because companies and their internal control needs differ by industry, size, culture and management philosophy. When designing a system of internal control there are many options when it comes to the nature and extent of controls that may be implemented. Internal controls, for example, may be preventative and detective in nature, and may be performed by people or information technology systems. There is a balance to be achieved between the cost of implementation of controls and the benefits derived from them. Consequently, one company’s internal control system may be very different from another’s in relation to similar business processes. Following the concepts described in the briefing paper will, almost invariably, give rise to a lengthy narrative report. Such a report is necessary in order to communicate
306
effectively the various judgments the practitioners have made, the reasoning underpinning those judgments, and the context in which the opinion is given. Owing to the lack of generally accepted suitable criteria, and the difficulties of communicating conclusions, a standardized short-form report to the effect that internal control is effective or adequate is likely to lead to misunderstandings and unfulfilled user expectations. To understand more fully why a narrative report is considered necessary, it is instructive to compare an engagement to provide assurance on internal control effectiveness, with an engagement to report on financial statements. When reporting on financial statements, the auditor’s report is included in the annual report and cross-refers to the financial statements (which include the description of the accounting policies employed). The basis of accounting is referred to in the auditors’ report and is available to the report’s users by consulting accounting standards. Auditors of financial statements do not usually permit their audit reports to be published separately from the financial statement. DON’T PUBLISH By contrast, when providing assurance on internal control, there is no vehicle like an annual report that informs the user about the system of internal control and the judgments made in devising the system. In a narrative report on internal control, the inclusion of a description of the applicable risks and the systems design can be likened to the primary financial statements and the description of the key considerations to the accounting policies. An important element of the briefing paper is an illustration (which runs to nine pages) of a narrative report based on an imaginary engagement to provide assurance on the effectiveness of a company’s system of internal control over the recording revenue. It is likely to be impractical to circulate such lengthy reports widely, and, therefore, it seems most likely that practitioners will provide reports on internal control’s effectiveness to those who have instructed them, and that the reports will not be published.
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ONE MORE INSIGHT INTO Accounts In American English, the profession is called accounting, whereas in British English it is called accountancy. Insert the words in the box into the blank spaces below:
accounts , companies , accountancy firms , accountancy , accountant , financial records , accountants , bookkeepers Hi, I’m Fiona, and I am an _______________. I work in Edinburgh for one of the big ____________________. We look at the ____________________ or ____________________ of a lot of companies. We work with the ____________________ of those ____________________, and the people who work _______________ them: the ____________________. I like my profession: ____________________. audit (2x), accurate , specialists , auditors , a true and fair view , fairly Sometimes, we act as _______________: ____________________ outside accountants who ____________________ a company’s accounts, that is we check them at the end of a particular period to see if they give _______________ (an ____________________ and complete picture). An _______________ can take several days, even for a _______________ small company. window dressing , accused , creative accounting , presented When a company’s results are ____________________ in a way that makes them look better than they really are, even if it follows the rules, it may be ____________________ of ____________________ or ____________________. Of course, I never do this!!!
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RESULTS
Part One
Insert the right article in the passage below, and circle the correct word or phrase (a or b). _____ FIRM reports its performance in _____ particular period in its results. Results for _____ particular year are shown in a company’s a) daily b) annual report, which, among other things, contains a) a profitable and lost account b) a profit and loss account. In _____ theory, if _____ company makes more money than it spends, it a) does a profit b) makes a profit. If not, it makes _____ loss. But, it is possible for _____ company to show _____ profit for _____ particular period because of _____ way it presents its activities under the a) accounting standards b) accountable standardization or acc. rules of one country, and _____ loss a) below b) under _____rules of _____ another. a) An in front of tax b) A pre-tax profit or loss, it depends, is one before tax has been a) done b) calculated. A) An acceptance profit b) An exceptional profit c) An acceptable profit or loss, is for something that is not normally repeated, for example, _____ sale of _____ subsidiary company or the a) coasts b) costs of restructuring. A company’s a) grotto b) gross profit is before a) charges b) changes like these are taken a) apart b) away c)up. Then comes it a) net
b) netto profit. A) Dropping b) bottom
line is the final figure for profit or loss. This is what they really worry about!!! If a company is making _____ loss, _____ commentators may say that it is a) in the blue b) in the red and they may also use expressions with a) red ink b) pink ink, saying for example that the company is
a) bleeding b) flooding red ink or
haemorrhaging red ink. What we call profit and loss account in British English is called income statement in American English.
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BANKING RELATED VOCABULARY
Match the words and then complete the following sentences. account bank (2) base central cheque overdraft sort standing withdraw
1.
bank book cash charges code facility number order rate statement
All correspondence with the bank must include the company ______________ ______________.
2.
The company _______________ _______________ should be kept in a safe place when not being used.
3.
The office needed money, so had to _______________ _______________ from the account.
4.
Each branch of the bank has its own unique _______________ _______________.
5.
The bank will set _______________ _______________ which are payable for each transaction carried out by the bank.
6.
Interest rates are calculated as a small percentage above _______________ _______________.
7.
The _______________ _______________ in Britain is the Bank of England and in Germany it’s the Bundesbank.
8.
The bank can be asked to pay the rent for the building automatically every month by _______________ _______________.
9.
The _______________ _______________ each month lists all the money which has gone into and out of the account.
10.
The company has negotiated an _______________ _______________ which allows them to spend more than they actually have in the account.
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CASH ACCOUNTS authorization , batch , beneficiary , brought , carried , cleared , contra , discrepancies , petty cash , remitter , threshold , transaction
1.
Small amounts of money which are paid out for things such as petrol, soap and bus fares are usually recorded in the _______________ _______________ book.
2.
The account which receives payment is known as the _______________ , while the account sending payment is the _______________.
3.
Each single movement of money in the account is known as a _______________.
4.
At the beginning of each month, the balance from the previous month is recorded at the top of the account as _______________ forward and at the end of the month as balance _______________ forward.
5.
The bank statement should be checked against the cash book to make sure that the figures are the same and that there are no _______________.
6.
When several payments are made by computer banking they are normally transmitted to the bank together in a _______________.
7.
If double entry has taken place within the cash book, the item does not need to be entered in another book as double entry and the item is known as a _______________.
8.
When a cheque is received and paid into an account it will be debited to the account once it has been _______________.
9.
Before instructions can be transmitted to the bank it is necessary to have _______________ from one, two or possibly three executive officers.
10.
There will normally be a maximum amount of money which can be transferred from an account and this is known as the _______________.
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READING 5 COST AND MANAGEMENT ACCOUNTING - OVERHEADS Something to think about: -
Express the term “overhead” in another way.
-
Which are easier to allocate more accurately, direct costs or overheads? Explain why this is so.
The costs of a business are of two types – direct and indirect. The direct costs vary directly with production. If one additional unit of production is made, there will be a measurable increase in direct cost. When one unit less is made, there will be similar measurable decrease in direct cost. Direct – or raw – material is normally the largest component of direct cost. It includes all items of material that are of sufficient size to warrant the effort of charging directly to the job. Small items such as glue, paint and small quantities of nails, screws, rivets, do not merit the clerical effort involved in charging directly to the job, and would be recovered as an overhead. Direct wages will vary directly with production where remuneration is based upon piecework only. This means that a specific amount is paid when a production operation is successfully finished. If it is not finished, no payment is made. In this book it is assumed that direct labour is of this nature. Many organisations remunerate labour on the basis of a large basic wage, topped up with a productivity bonus. The basic element is paid regardless of the level of production. In such cases wages will not vary directly with production and fall into the category of an indirect cost or overhead. Overhead is a general term applied to all the costs involved in running a business, other than direct costs. It covers the costs of running the work’s organisation; product research and development; the administration of the business; selling and distributing the product; and the cost of raising finance. Overheads are diverse, covering the whole of the business organisation. The management accountant has the problem of allocating these costs to the individual product lines being manufactured.
312
Cost centres To help in this task, the organisation is split up into cost centres. These are areas of activity to which are gathered all costs of a like nature. A maintenance department, canteen and stores are examples of cost centres. Normally, centres will identify with physical areas of the organisation. A stores cost centre is a physical area in which materials are kept, while awaiting issue to production. A centre may also not be identifiable with a physical area. The finance cost centre will gather together all the costs of raising finance for the business, other than from owners or shareholders. It is a function of the administration department, and cannot be identified with a physical area of the business. Where a cost centre has a product which is being manufactured, it is known as a product centre. Examples are a machine shop which is machining parts for assembly into the saleable product in an assembly shop. Where a centre has a product that is saleable, thus giving rise to an income, it is also known as a profit centre. It is capable of showing a profit or loss on its overall activities. Cost allocation The management accountant’s task is to allocate the many,, diverse overheads, onto the cost of each product manufactured. It is a major task requiring the use of many different bases of allocation. The allocation of direct cost to a product can be precise. In the case of overhead allocation an element of logical guesstimation enters. There is a twofold process, firstly to collect all overhead costs onto the product or profit centre; and secondly, to load the overheads onto each product passing through the centre. 20
20
Accounting for Management, Counsell, R.E. (Cassell, 1980)
313
Comprehension questions: 1. If, according to the text, “…direct costs vary directly with production”, what does this statement suggest about the so-called “indirect” costs? 2. Which of the following statements are not true about “overheads”? a. They include all costs of a business. b. They exclude those costs which can be directly related to a product’s production. c. They relate to certain aspects of the business only. d. They are difficult to relate to individual products of a company. 3. How are the “cost centres” used by the management accountants in dividing a company’s costs? 4. What important division can be made between types of cost centre within a business? 5. What is the relation between a product centre and a profit centre, according to the text? Do they overlap and if they do in what way? Words in the context: In the text, identify words or phrases that best correspond to the following meanings: Meaning
Word / Phrase in the text
element/part
______________________________
justify/make worthwhile (2 answers) ______________________________ ______________________________ payment
______________________________
fixed/known
______________________________
given an additional amount
______________________________
different kinds/various
______________________________
divided
______________________________
similar/the same
______________________________
exact
______________________________
having two stages
______________________________
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BUYING AND SELLING TEST 1.The book / file which contains a list of all company sales arranged by date is known as the __________. a) sales account
b) sales card
c) sales invoice
d) sales day book
2.A __________ is not recorded in double entry. a) cash discount
b) refund
c) trade discount
d) cash sale
3.Faulty goods which are sent back to the supplier by the customer are known as __________. a) returns
b) provisions
c) recovers
d) discounts
4.A __________ system should make sure that debtors do not owe too much money. a) quality control b) credit control
c) credit note
d) credit transfer
5.A company sells goods on credit, but if customers never pay for the goods the money owing is known as __________. a) bad debts
b) debits
c) bad payment
d) bankrupts
6.The estimated expense of not being paid by debtors is known as a / an __________. a) allowance
b) devaluation
c) proviso
d) provision
7.If you calculate different percentages for debts which have been owing for different lengths of time, you can prepare a / an __________ schedule of debtors. a) progressive
b) ageing
c) reducing
d) increasing
8.In many countries, a tax is added to the price of goods and services, but some goods may be __________ and no tax is due. a) exempt
b) exceptional
c) excused
d) uncovered
9.At the end of an accounting period, details of tax collected and tax paid are given to the authorities on an official form called a __________ a) statement
b) declaration
c) return
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d) confirmation.
READING 6 TIME TO CLARIFY THE OBLIGATIONS OF THE AUDITOR Pre-reading Instructions >
Paragraph One – Insert the right article: a, the, an or / *nothing Paragraph Two – The same instruction as for P1 Paragraph Three – Insert the appropriate preposition Paragraph Four – The same instruction as for P3 Paragraphs Five, Six, Seven – Insert the appropriate words from the words given below:
sustaining , contain , audit regulation , auditor’s signature , audit firms , insurance policy , consultancy assignments , feature , pay-out terms , price , accounts , financial state , risk In the remaining paragraphs (8-12) insert the verbs in brackets into the right verb form. (1)
_____1990s pose fundamental problems for _____ UK accounting firms. In
addition to _____increased commercial pressures, _____ profession faces _____ threat from _____public policy makers. There is _____ increasing suspicion about _____ effectiveness of _____ self-regulation. Who audits _____ auditor? And who should do so? (2)
_____ root of _____ regulatory debate is _____ auditor’s position between, on
_____one hand, _____ managers of _____ public companies, and, on the other, their owners and _____ other groups such as _____ employees, _____ pension fund beneficiaries, _____ creditors and _____ government departments which rely on _____ accuracy of _____ audited accounts. _____ auditor is hired by _____ managers to protect _____ interests of this latter group of _____ ‘stakeholders’.
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(3)
There are obvious tensions when the interests _____ the two groups diverge –
perhaps because _____ suspected fraud or more typically because managers have an interest _____ the reported results being well received _____ investors and others. Economists analyse such divergences _____ interest between one party and the agent employed _____ work _____ its behalf as a principal/agent problem. (4)
Traditional solutions _____ professional self-regulation backed _____ _____
legal redress as a last resort appear _____ be ripe _____ reform. Recent financial scandals have cast doubts _____ whether the threat _____ public disgrace is sufficient _____ safeguard audit standards. These doubts are confirmed _____ the experiences _____ investors who have sought redress _____ auditor malpractice _____ the courts. Almost all such cases are settled _____ _____ court _____ any clarification _____ the legal duties. The Caparo case, which clarified auditors’ responsibilities, underlines the gulf between what users expect, and what the auditor is prepared _____ offer. (5)
The _________ __________ is treated by users of company __________ as an
assurance of the quality of the information they __________ – a kind of __________ __________ against the __________ that the company’s true __________ __________ is not what it appears. (6)
The leading __________ __________, whose strong brand names command a
substantial __________ premium, have an interest in __________ this belief. Yet, attempts to make a claim on this policy show that __________
__________ are
unreliable and highly uncertain. (7)
The most common form of __________ __________ proposed is to prevent
auditors (from) carrying out __________ __________ of several EC markets.
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__________ for their audit clients – a
(8)
The Nera study __________ (show) that the major accounting firms __________
(rely) heavily on audit clients for their non-audit business. But it also __________ (find) the firms __________ (manage) to avoid the regulations in these countries. (9)
A second mechanism, __________ (favour) in Italy and Spain and __________
(suggest) elsewhere, __________ (be) to have periodic compulsory rotation of auditors, to prevent too cosy a relationship between the audit partner and the management of the firm. But this __________ (cause) potentially high disruption costs and __________ (raise) questions as to the quality of the audit scrutiny during the transition period. (10)
A third solution, favoured by some accounting firms, __________ (be)
_______________ (introduce) measures __________ (reduce) the intensity of competition for the audit contract _______________ (remove) the temptation __________ (reduce) audit quality as a means of __________ (cut) costs. (11)
Protection from competition __________ (modal + reduce) the tendency of the
client __________ (question) the value for money __________ (offer) by the auditor. But the idea that protectionism __________ (guarantee) higher standards __________ (hold) no more water in this context than elsewhere. (12)
None of the models for reform __________ (suggest) by the other EC states really
__________ (address) the principal/agent problem which __________ (underlie) the need for reform. If the question of auditor’s independence __________ (tackle), more fundamental issues need _______________ (address). 21
21
Financial Times, 9 April 1992
318
Comprehension questions: 1. (A) How many main areas of discussion are there in this text? One, three or five? 2. (B) On the basis of your answer to 1A, choose from the following the area(s) you think the text discusses. i.
Auditing’s theoretical functions.
ii.
The problem of ensuring honest auditing.
iii.
The types of legal punishment needed for dishonest audits.
iv.
The reasons why auditors are in a difficult position.
3. (A) From what is said and implied in the text, what method of control of auditing exists in Britain now? (B) Is this system of control considered entirely satisfactory? What sentences in the text give you the answer? 4. (A) Who are the stakeholders mentioned in line 31 of the above text? *End of P2. (B) What is the auditors role in relation to these stakeholders? 5. From the list below choose the definition of the principal/agent problem which appears in the text: The principal/agent problem in relation to auditing is caused by: i.
auditors working for the stakeholders
ii.
auditors owing their main loyalty to the company managers
iii.
managers always wanting their company results to appear favourable
iv.
auditors having responsibility to people other than those who use them
6. (A) In Britain, if the user of an auditor’s report felt the report was dishonest, which of the following steps could this person take? (More than one answer is possible.) i.
Report the auditor to the auditor’s professional association.
ii.
Get the police to prosecute the auditing company.
iii.
Take the auditing company to court and get monetary compensation.
iv.
Tell newspapers about the auditing company.
(B) In the opinion of the authors, how effective are the actions which can be taken against dishonest auditors? Which sentence in the text tells you this?
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7. (A) What is the ‘insurance policy’ for those who make use of company reports? (B) How good an ‘insurance policy’ is it, according to the text? 8. (A) Various proposals for improving auditing standards are discussed in the text. Match the proposals on the left with their disadvantages according to the text. PROPOSAL
DISADVANTAGE of proposal
i.
ii.
Lessen the amount of
a. Produces problems of
competition for audit
continuity and quality
work.
maintenance.
Forbid auditors to do
b. Restrictive practices do
other work for companies
not normally raise
which they audit.
standards.
iii. Require companies’
c. Audit firms have
auditors to change from
managed to avoid such a
time to time.
regulation.
(B) What do the authors of the text think in general of these proposals? Why do they think this? Words in the context: 9. Match the words which have been used in the text in a specific way with their correct definitions on the right. beneficiaries diverge safeguard malpractice gulf sustain periodic rotation disruption scrutiny
dishonest/illegal behaviour disturbance/upset careful inspection those who gain from an action/event change protect become different from time to time maintain gap/wide space 320
10. In English, as in other languages, there is a tendency for certain words to occur together. This tendency is called collocation. There are no rules about this and the best way to learn it is to notice which words appear together when you are reading. To get an idea of how collocation works, try to match together the words below which you think occurred together in the text. At first, try the exercise without looking at the text. Afterwards compare your answers with the text and try to understand what they mean. After that, confirm your answers with the answer key. First Part of Collocation
Second Part of Collocation
pose
redress
the root of
competition
to work
the debate
legal
premium
ripe for
the problem
price
period
transition
reform
intensity of
problems
holds
no water
addresses
on its behalf
Viewpoint: How do you think the work of auditors could be made more effective? Should the government pay auditors, not the companies they audit? Should auditors be civil servants?
321
ADJUSTMENTS Match the following examples (1-9) with the correct word or phrase from the following. _____ error of omission, _____compensating error, _____ error of commission, _____ error of principle, _____ error of original entry, _____ an overcast account, _____ reversal of entries, _____ an undercast account, _____ journal 1.
Magda Glyda has added up the figures to produce a figure which is less than it should be.
2.
The sales account and the purchases account were both added up wrongly by the same amount.
3.
Maria Gonzales forgot to record the transaction in the accounts.
4.
Reinhardt Mann recorded the purchase of the lorry in the purchases account but it was a fixed asset.
5.
Pierre Barber has corrected the error and recorded it in this book.
6.
Anna Benelli made a mistake in the invoice but entered the same figure in both the sales and the customer’s accounts.
7.
Lesley Brunovsky entered the correct amount in the correct accounts but as a debit where it should have been a credit, and a credit where it should have been a debit.
8.
Garry Blues has added up the figures wrongly to produce a total which is greater than it should be.
9.
Theo Koch entered the correct amount but in the wrong customer’s account.
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MAKING CHANGES (FROM A FIRM OF ACCOUNTANTS TO A CLIENT)
adjustments , the audited accounts , ended 30 April 2002 , do not hesitate to contact , with the final accounts , accumulated , change , the bank overdraft , cheque for £2,500 , provision for bad
Dear Mr Lee, We have pleasure in enclosing five copies of the full accounts for the period __________. We are also sending you a list of the adjustments which you need to make to your Nominal Ledger so that the opening balances at 1 May 2002 agree with ____________________. - Please, put in the details of a ______________________________ drawn in December 2001 for Customs and Excise into bank payments. These details are missing so the Nominal Ledger understates ______________________________. - Increase bank payments by £185.20 and code it direct to purchases. This will cover various small differences which have ______________________________ over the years. - Make new Nominal Ledger code headings for ____________________________ debts. - _________________ the present code headings for plant and equipment at cost to 0011. We feel it is better to separate the cost and depreciation of the fixed assets in the Nominal Ledger to make it easier to compare ______________________________. It also makes it easier to find any ______________________________ which have been made. If you have any problems with these changes or would like to discuss them further, please ______________________________ us.
Yours sincerely,
Lydia Triffs
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PROFIT AND LOSS
(For many businesses, the main reason for the accounting function is to calculate profits earned or losses incurred. The Profit and Loss Account is used to compare actual results with projected results. And for future planning, as well. Organisations with a financial interest in the company will also wish to see the P&L Account.)
Fill in the missing words: administrative expenses , cost of sales , distribution , dividend , extraordinary , ordinary , retained , turnover 1. As AZDESIGNS Ltd is a small printing company, all their printing contracts are known as______________ activities. 2. Recently, a film comp0any paid AZDESIGNS a large amount of money to use the company’s premises when they were making a film. This was recorded in the Profit and Loss Account as ____________________ income. 3. Income which the company makes in its normal activities is known as ___________. 4. At the end of the year, some of the profits may be shared out among the shareholders who will receive a ____________________. 5. The costs of getting the goods to the customers are shown as ____________________ costs in the Profit and Loss Account. 6. Materials which are used up in manufacturing and workers’ wages are recorded as _____________________. 7. The secretary’s salary and expenses incurred in the office are shown as ___________. 8. The company may decide to keep some of the profits at the end of the year and the amount is shown as ____________________ profits.
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END OF YEAR – confusing words 1. On the first day of the new financial year, the company counts and records all the materials, parts, machines, stationery etc. in the annual stockpile / stock-take. 2. New regulations mean that the accountants must publicize / publish the Trading and Profit and Loss Account in one of four formations / formats. 3. If the information in the Trading and Profit and Loss Account is only for inside / internal use, the company can decide to present the information as it wishes. 4. The law states how much information must be disclosed / enclosed in the Trading and Profit and Loss Account. 5. The company’s turnover is descended / derived from the sale of manufactured goods. 6. The notes which are appended / adhered to the Trading and Profit and Loss Account explain how the figures have been compiled. 7. The company wishes to approximate / apportion Motor Expenses equally between Distribution Costs and Administrative Expenses. 8. The auditor’s remuneration / compensation for their services should be shown in the notes. 9. The accountants have to accredit / accrue Corporation Tax on ordinary activity profit when they are preparing the Trading and Profit and Loss Account. 10. The final tax figure will probably be different to the book figure so an amount has been transferred to the defect / deferred taxation account. 11. It is necessary to state the emoluments / emollients of the Chairman in the notes.
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READING 7
THE AUDITING FRAMEWORK
Something to think about: 1. Which paragraph do the following statements refer to? 1. Emphasizes the importance of company-specific knowledge for auditor. 2. Shows that there is a need for the auditor to collect substantial quantities of data. 3. Sums up the prior-to-job suppositions of an auditor. 4. Describes the process engaged in working out an audit. 5. Points out that Internal Control Systems (ICSs) have a great influence on the nature of the audit. 2. In your opinion, which of the following statements are or may be true of auditing? 1. The auditor doesn’t take into consideration that the company is regulating its own finances. 2. The auditor presumes that a company is observing all standard accounting procedures. 3. It is clear to the auditor that a company may use different assumptions over time. 4. The auditor will believe, before an audit, that all necessary company information has been supplied. 3. What actions do you think enable an auditor to maintain or abandon assumptions made at the beginning of an audit? 4. If an auditor is wrong in judging that the ICS of a company is satisfactory, does that prevent (and if it does, how) a satisfactory audit? 5. What ‘fail-safe’ mechanism is there even if an auditor wrongly judges the company’s ICS? 6. Which informal equivalents match each of the following formal words? (Turn next page.)
326
assignment
direct
underlying
used
utilised
starts
prior
collections
a priori
list
evidential matter
job/task
enumerate
making agree
formulate
already held
firsthand
basic to
jeopardize
risk
initiates
previous/earlier
corroborating
data/facts
retracting
supporting
reconciling
doing again
compilations
make
The auditing framework When the independent auditor begins an audit assignment, he assumes that 1) the internal control system of the enterprise is appropriate and effective; 2) generally accepted accounting principles have been applied in all accounting processes underlying the financial statements; 3) the generally accepted accounting principles utilized have been applied consistently between the current and the prior periods, and 4) there is an adequate amount of the informative financial disclosure in the financial statements and footnotes. Evidence gathering and its evaluation enable the auditors to reject or confirm these a priori assumptions. We are thus in a position to define auditing. Auditing is the analytical process of gathering sufficient evidential matter on a test or sampling basis to enable a competent professional to express an opinion as to whether a given set of financial statements meets established standards of financial reporting (or not).
327
Now we can enumerate the major steps of the auditing process: 1. become acquainted with the firm – its environment and its accounting, personnel, production, marketing and other systems 2. review and evaluate the management and the accounting control system in operation 3. gather evidential matter on the integrity of the system 4. gather further evidence related to the representations made in the financial statements 5. formulate a judgment opinion on the basis of the evidence available. Getting acquainted Auditing is an analytical process applied to everyday business situations. Hence, it is closely related to existing business practices. Without firsthand knowledge of the nature of these practices and their larger setting, the auditor would have to rely exclusively on available financial data. This would jeopardize both audit efficiency and effectiveness. Therefore, a getting-acquainted phase (which usually includes a visit to a client’s facilities and certain analytical preliminary tests and inquiries) initiates the typical audit process. While ‘getting-acquainted’ preliminaries to the conduct of an audit are standard procedures today, they were quite novel prior to 1965. Initially, such procedures were described as the ‘business approach to auditing’. Control system review The auditor’s evaluation of the control systems operating within the enterprise has a direct influence on the scope of the examination he undertakes and the nature of the tests he conducts. However, even though preliminary evaluation of control systems is an essential ingredient of planning the audit scope, we must remember that eventually both the system and the data it produces are covered by the audit process.
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Example The Brothers Three shopping Centre has leased space to Mr. Hines, who operates a quality restaurant named THE DUNCAN INN located within it. Lease payments are based on a minimum monthly amount sufficient to cover taxes and insurance on the building, plus a graduated percentage of the restaurant’s gross sales to diners, and bar patrons. No percentage payments are due on catering services. Bar and restaurant receipts of The Duncan Inn are collected in cash and from credit card billings. A select few patrons have the privilege of open credit with monthly billings. In planning the initial audit of The Duncan Inn’s financial statements, a CPA finds that virtually no internal control exists over cash bar receipts. Hence, tests covering cash bar receipts are scheduled more comprehensively than those extending to credit card sales. Evidential Matter Evidential matter supporting financial statements consists of the underlying accounting data and all corroborating information available to the auditor. The auditor tests underlying accounting data by analysis and review, retracing some of the procedural steps followed in the original accounting process and reconciling the events with the information reported. The auditor’s evidential material is the result of the tests, selected observations, and statistical sampling where large compilations of data are involved. The auditor must always balance the natural desire for more evidential matter to support an opinion against the costliness and social usefulness of completely reconstructing the underlying data and processes that produced the financial statements. One key justification for independent audits, as we have see, is the economy that results from producing expert opinion-based judgments from limited but reliable evidential matter. 22
22
A New Introduction to Financial Accounting, May, R.G., Mueller, G. and Williams, T.H. (Prentice Hall)
329
Comprehension questions: Now that you have read the text, revert to the Pre-reading tasks and find the answers supplied by the author of the text. Compare your answers with the author’s ones and discuss any possible differences, and try to find good arguments for each of your own answers. According to the text:
What factor does an auditor have to consider when deciding how much data to collect during an audit?
Why can external audits claim economy as one of their main advantages?
Looking at both sections of the example in the text: o What are the two elements involved in Mr. Hines’s lease payments? o Which element of the restaurants income is not subject to satisfactory ICs? o In what ways could the auditor deal with this problem?
330
BUSINESSES a) subsidiary
b) group
c) non-profit-making
d) stock-exchange
e) partnership
f) directors
g) private limited
h) debentures
i) public limited company
j) holding company
k) annual general
1. The holder of these has lent the company money but has no voting rights. 2. A group of five accountants have decided to form an association to carry on business in common and make profit. 3. The investors give these people the power to run the company. 4. This company holds more than 50% of the voting shares in another company. 5. Members of the public can only invest in this company if they are invited to do so. 6. Investments in many companies can be made by buying shares on this market. 7. The public at large can be shareholders in this company. 8. The golf club was set up with no intention of making a profit. 9. Fifty-one per cent of the voting shares of this company are held by another company. 10. This is the meeting which is held once a year for the shareholders. 11. This exists when several companies are in a relationship of owning and being owned.
For your information: In Britain, Ltd is the abbreviation used after the name of a private limited company. Only private investors can invest in this company. Plc is the abbreviation used after public limited companies. Members of the public can buy shares in these companies on the stock exchange.
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FALSE PRACTICES 1
Complete the following gaps, then work out the exercise by choosing the right word. Noun
Verb
Noun
Verb
fraud
__________
deceit/deception
__________
pilfering
__________
__________
waste
misappropriation
__________
__________
break
__________
forge
falsification
__________
__________
err
embezzlement
__________
1. When valuing the stock, there are many reasons why the manager makes an allowance of 0.5% for natural ____________________ of items. 2. We had to make sure that employees could not ____________________ small items from the office. 3. The bookkeeper tried to ____________________ over $200,000 but the auditor became suspicious when he found changes to some invoices. 4. In order to avoid paying tax he decided to ____________________ the documents by understating profits. 5. Several people lost large sums of money due to the ____________________ of pension funds. 6. A serious ____________________ was found in the draft accounts before they were published. 7. They discovered that the signature on the cheque was a ____________________.
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SHARES AND SHARES ISSUE appropriation, bonus, denomination, interim, issued, nominal, ordinary, preference, preliminary, redeemable, uncalled 1. This company has issued shares in $5 ____________________. 2. At the end of the financial year, profits are first of all allocated to pay fixed percentage dividends on ____________________ shares. 3. The ____________________ shareholders have voting rights but do not have a fixed percentage dividend. 4. The company have decided to issue ____________________ shares free of charge to their existing share holders. 5. The company is allowed to issue a total amount of shares known as the authorized share capital or____________________ capital. However, the _______________ capital may be less than that. 6. There were large ____________________ expenses in starting the company. 7. They have only asked for some of the amount payable on the shares, so there is still a lot of ____________________ capital. 8. 2005/2013 written behind a debenture means that it is ____________________ during that time. 9. The final accounts should include an ____________________ account which shows how the company will use the profits. 10. After trading for six months, the company paid out an ____________________ dividend. A company has issued 10,000 shares and the following extract has been taken from the bank account. Bank Application and Allotment Application monies Allotment monies First call Second call H. Jay
$ 1550 1500 3600 2700 0075
Application and Allotment Refund
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$ 50
Use the information in this extract to fill in the missing words (from the box) in the text below. __allotment, __application, __applications, __call, __excess, __first, __forfeited, __issued, __nominal, __oversubscribed, __refund, __reissued, __second The company [1] 10,000 6% preference shares of $1 each. Investors who wanted to buy the shares had to pay 10% on [2], 20% on allotment, 40% on the first [3] and 30% on the [4] call. The sale was very popular and the issue was [5]. [6] were received for 15,500 shares. A [7] of the money for 500 shares was made. An [8] was made on the basis of two shares for every three applied for, for the remaining 15,000. The [9] application monies were set off against the [10] monies asked for. The holder of 1,000 shares didn’t pay the [11] and second calls and his shares were [12]. These shares were then [13] at 75% of [14] value to H. Jay.
334
READING 8
TAX ACCOUNTING
METHODS OF DEPRECIATION In this text, we shall have a look at an important concept of tax accounting, that of depreciation. In the text, different methods of calculating depreciation will be examined. We shall also see how a chosen method can affect strongly the amount of tax that a firm/company has to pay. Something to think about: -
Explain what the taxation system in a country is all about?
-
What can you say about the taxation system in your country?
-
How did taxation of any kind ever start? Explain and give examples.
-
How does the taxation system in your own country encourage individual and business enterprise?
-
Would you propose any changes in the taxation system in your country or any other country that you know? What are the changes?
-
What methods of depreciation are you familiar with?
-
Do you know the two accelerated methods of depreciating assets?
By definition, fixed assets are those which will provide services over a number of years and the matching convention tells us that we should recognise the expense in the same period as we recognise the associated revenue. Thus we must not write off, or expense, the whole cost of the asset in the period in which the asset is acquired, but should instead convert the asset into an expense over its life. This gradual conversion is known as depreciation. How should we compute the depreciation charge for each year? An obvious way would be to compare the current value of an asset at the end of the year with its value at the start of the year and say that the difference is depreciation. But as we have already emphasised, traditional accounting practice is based on historic cost and not current values; consequently, that method is generally not acceptable. The traditional approach is
335
to estimate the total expenditure to be written off, i.e. the cost of the asset less its estimated scrap value, and then to write off that expenditure over the estimated life of the asset by using one of the methods that we shall describe. It would be helpful to look at a simple example. If a firm purchased a machine on 1 January 199X for £22,000, which is expected to last for four years and then be sold for”2,000: Estimated residual value
£ 2,000
Amount to be written off over 4 years
£20,000
The life of the asset is usually measured in time, but in some instances may be measured on the basis of actual usage. Depreciation on the basis of “actual usage” is rare. In order to consider the difficulties inherent in estimating the life of an asset, we should think about the reasons why most fixed assets, other than land, have a limited life. These reasons may be classified as physical wear and tear, and obsolescence. Obsolescence may be of the asset itself, e.g. a new machine may make the use of the original asset, an older machine, uneconomic because the new machine is faster or requires less labour. Obsolescence may also be caused by the object produced by the asset, if, for example, it goes out of fashion. In the latter case, the degree of obsolescence will depend on the specific nature of the asset; some assets may be easily adapted to alternative uses while others may have only one use, the original. None of the above variables can be determined with any accuracy; obsolescence, in particular, is rapidly increasing in importance because of rapid changes in technology. Deciding how much should be written off and over what period is not the only problem, for there are a number of depreciation methods from which to choose. A firm’s management must decide which one to employ, and a user of financial statements who wishes to compare the financial performance of a number of companies must appreciate the effects of the various methods. In practice, we find two main methods of depreciation – the straight line basis and accelerated depreciation. There is another method, the annuity method which takes account of the interest costs involved in investing in a long-lived asset; this method has many theoretical attractions but is rarely used.
336
Heading 1
__________________________________________________
The total expected cost is simply spread over the number of years of expected service giving the amount of depreciation expense per annum. Original cost minus expected residual value ________________________________________ Expected number of years in use
Heading 2
__________________________________________________
With these methods, the depreciation charge in the earlier years of use its greater than in the later years. Accelerated methods include (a) the Sum of Year’s Digits Method and (b) the Reducing Balance Method.
Heading 3
__________________________________________________
Let n be the asset’s life; the years are each represented by a digit: 1, 2, 3, 4, … n. Having fixed on n, t he digits are summed and the fractions of the asset cost are charged to the years in reverse order so that the earlier years are charged more than the later years.
Heading 4
__________________________________________________
Here, the depreciation charge for each year is a fixed percentage of the “net amount” of the asset (cost less accumulated depreciation to date) at the start of the year. 23
23
See Footnote 1 above.
337
Comprehension questions: 1. There are four headings (1-4) which have no title. Try to name them by using the following headings in this exercise, deciding at the same time which of them are main (put an M) and which are subsidiary (put an S). -
The reducing balance method
__________
-
Accelerated methods
__________
-
Straight-line basis
-
Sum of the year’s digits method __________
__________
2. Conjunctions are very important when you want to show the logical relationships between ideas in a text. You should try to match the conjunctions given in the list below with the correct meanings on the right hand side which they have in the text. Read carefully the sentences in which the following conjunctions are typed in bold style, and then choose your answer. More than one answer is possible. and
in other words
thus
in the case that
but
on the other hand
as
also
consequently
so that we can
i.e.
in the way
if
because of this
in order to
from the cause that
while
in contrast
for
for this reason
3. Which of the endings agrees most closely with the text:
338
a) Accounting convention requires that the cost of fixed assets… i. be matched to the period in which they provide income. ii. be extended over the year when they are bought. iii. be spread over a period greater than their working life. iv. be written off as a one-time expense. b) It is not acceptable that depreciation be measured as value at purchase minus present value because… i. only scrap value can be estimated with any degree of accuracy. ii. one year is too short a period to calculate loss in value. iii. the conventions of accounting base values of assets on costs at the time they were purchased. iv. it is too difficult to estimate current value. 4. The appropriate choice of depreciation methods is particularly important for two groups. Which two groups, according to the text? 5. Using the straight-line basis for calculating depreciation, work out the amount of depreciation per annum for the example given in lines 4-8, page 49. 6. What is the main feature of the accelerated methods of calculating depreciation? 7. Say whether, according to the text, the following statements are true or false. a) The cost of an asset is usually written off over a period of time. b) Depreciation is never calculated on the basis of how much an asset is used. 8. a) Using the information about the sum of the year’s digits method in lines of Heading 3 of the text, and with the facts given below, work out the depreciation charge in each of the years. Facts: Depreciation will be spread over three years. The total net cost of the asset is £12,000. b) Using the information about the reducing balance method in lines of Heading 4 and the facts given below, work out how long it will take to depreciate the value of the asset. Facts: The total net cost of the asset is £10,000. Fixed percentage charge for depreciation is 20%.
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Words in the context: Try to put the words given below into the gaps in the sentences. Then think about how they were used in the text above and check your answers. The words to be inserted: convention , associated , compute , scrap , residual , inherent , determined , appreciate , takes account of , accumulated 1. Usually obsolescent machinery has to be _________________________. 2. Trying to _________________________ future costs at a time of growing inflation is difficult. 3. Rules which are generally followed but are not obligatory are ________________________. 4. Given their shortage of foreign exchange, there are _________________________ difficulties in trading with Eastern Europe. 5. _________________________ the taxes of self-employed workers can be very complex. 6. Any sensible system of taxation must _________________________ the need to encourage business enterprise. 7. The difficulties of exporting are sometimes not _________________________ by companies wishing to expand. 8. Together with the income produced by a new product, there are _________________________ costs. 9. Owing to its inefficient management, the company _________________________ debts of £10,000,000 up to now. 10. After a company has paid a dividend there is a _________________________ amount known as retained profits.
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PARTNERSHIPS In Britain, groups of professional people such as accountants, lawyers, dentists and vets often form partnerships. 1. If a partner is liable only to the amount of capital he invested he is a _____ partner. a) liability
b) limited
c) corporate
d) dead
2. The partners want an official agreement about their share in the partnership, so they are going to draw up a / an _____ of partnership. a) deed
b) transaction
c) title
d) instrument
3. If there isn’t an official written agreement, but a partner signs a balance sheet which shows that profits haven’t been shared equally, agreement would be _____ a) implied
b) stated
c) drawn
d) believed.
4. Partners can choose to produce fixed capital accounts or _____ capital accounts. a) changeable b) moving c) variable d) fluctuating 5. A partner who doesn’t take an active part in the business is called a _____ partner. a) silent b) dead c) sleeping d) inactive 6. When partners can’t or don’t want to continue in partnership, there is a _____ of the partnership. a) divorce
b) decomposition
c) amalgamation
d) dissolution
7. When this happens a _____ Account is opened to record the transaction. a) Sales b) Realization c) Distribution d) Liability 8. When the partnership comes to an end, the debts or liabilities are _____ a) discharged b) disposed c) distributed d) dissolved. 9. One partner, who owes the partnership money, will have to cancel his _____ to the partnership firm. a) deal
b) claim
c) indebtedness
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d) articles.
GIVING ADVICE The following phrases are from two different letters: the first one is a letter to firm of accountants asking for advice and the second one is the reply. They are all mixed up. Rearrange them so as to finally make the two aforementioned letters. 1. We look forward to hearing from you. Yours sincerely, Ian Blest 2. Thank you for your letter of 26 January regarding the setting up of a partnership. I am now writing to give you my first thoughts which you may want to discuss further. 3. So far, we have agreed that Mr Ford will give $ 20,000 as capital but will not take part in the running of the business. Mr Grant will manage the business but contribute only $3,000. Mr Blest will provide $8,000 as capital and assist in the business if and when required. 4. I trust that you will find these points useful. If you wish to discuss anything further, please let me know. 5. Dear Mr Blest 6. Yours sincerely, Camilla Simone 7. Turning to profit sharing , I think it would be best for each of the partners to receive interest on their capital investment and then decide how to share the remaining profits. 8. First of all, I suggest that as Mr Ford is not going to be involved in the daily management of the partnership he should be made a limited partner. This means that his liability is limited to the amount of capital invested by him. he can receive a fixed amount of interest on his investment or an amount based on the profits. I feel that Mr Grant, as the managing partner, and Mr Blest who will be actively involved, should receive salaries for their work. 9. Dear Ms Simone 10. We now need financial advice about the structure of the partnership and would be g would assist us. We have planned our next meeting for 21 February, and would like your ideas then. 11. Two friends and myself have discussed setting up a partnership and we are now wri advice. 12. Finally, the law does not require you to draw up a legal deed of partnership, but I th should have a written agreement. It is also useful to know: When a letter begins with the name of the recipient, e.g. Dear Ms Simone, it can end with Yours sincerely-Best wishes-Kind regards, but not with Yours faithfully. The latter expression is only used when the letter begins with Dear Sir/Madam or Dear Sirs.
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READING 9
ACCOUNTING POLICIES
Something to think about: -
Who are financial statements important to?
-
Should they give a true picture of a company?
-
Do they always do so?
-
Should we represent the company being run as well as possible?
-
Define the term depreciation.
Locate the following headings in the correct places in the text to follow. i.
Property disposals
ii.
Basis of accounting and consolidation
iii.
Pensions
iv.
Intangible assets.
Find the appropriate translations for them. Match the following formal words with their informal equivalent. When you have read the text, check your answers on the true context. modified compliance facilitate acquisition disposal elimination tangible incurred realisable rationalisation deferred foreseeable
when sold removal postponed changed physical/visible near make easier as legally required organise better purchase sale become costs
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Accounting Policies Heading 1
________________________________________
The accounts have been prepared under the historical cost convention, as modified by the revaluation of certain fixed assets, in compliance with the provisions of the Companies Act 1985 and applicable United Kingdom Accounting Standards. The group accounts are the result of the consolidation of the accounts of the Company and its subsidiaries, with appropriate adjustments, no profit and loss account for the Company has been included as allowed by Section 230 of the Companies Act 1985. In order to facilitate the preparation of the Group accounts, the accounts of most overseas subsidiary undertakings indicated on pages 46 and 47 are made up annually to 31 July. The results of businesses acquired or sold are included in the profit and loss account from the date of acquisition or to the date of disposal. Foreign currencies Assets and liabilities in foreign currencies have been translated at the quoted rates of exchange at 31 August 1991. Differences arising on translation of investments in overseas subsidiaries together with exchange gains or losses on related borrowings in foreign currencies are dealt with in reserves. Other exchange differences are reported as part of the trading profit. Profits and losses arising in foreign currencies have been translated at the average rates of exchange for the period 1 August 1990 to 31 July 1991. Fixed assets Profits and losses arising on the disposal of fixed assets are based on historical cost. Heading 2
________________________________________
The accounting treatment for additions to goodwill is considered on an individual basis and elimination against reserves has been selected as appropriate for the current year. Brands, both acquired and created within the Group are included at their current cost. Such cost, which is reviewed annually, is not subject to amortisation. 344
Depreciation No depreciation is provided on land. Other tangible fixed assets are depreciated on a straight line basis over the period of their estimated useful lives, which vary widely, and are mainly as follows: Freehold properties Long-term leasehold properties Short-term leasehold properties Plant and equipment Road transport Progress payments are not depreciated Leasing Assets held under finance leases are included within tangible fixed assets. Operating lease charges are written off as they are incurred. Stocks Stocks and work in progress are valued at the lower of cost, including an addition for production overheads where appropriate, and net realisable value. Research and development expenditures All revenue expenditure is charged against profits in the year in which it is incurred. Rationalisation and closure costs Continuing rationalisation costs are charged before stating the trading profit. Closure costs of major sites are treated as an extraordinary item. Heading 3
___________________________________
Profits and losses unrelated to the closure of major sites are reported as part of the trading profit.
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Taxation Taxation is provided on the basis of the profits included in the profit and loss account adjusted for fiscal purposes. Deferred taxation is accounted for on all timing differences to the extent that it is considered such differences may reverse in the foreseeable future and has been computed at the rates of tax anticipated to be applicable when the timing differences are expected to reverse. Heading 4
___________________________________
In accordance with local conditions and practices in the country concerned, the Group makes contributions to various funded retirement schemes which cover the majority of employees. The charge to the profit and loss account is based on the cost of providing pensions on a systematic basis over the periods benefiting from the scheme members’ services. Any difference between the charge to the profit and loss account and the contributions paid to the scheme is included, in the balance sheet, as an asset or liability. Convertible bonds The Group has changed its accounting policy which complies with the Accounting Standards Board’s consensus relating to supplemental interest. Prior year figures have been restated accordingly. Provision is being made annually through the profit and loss account for the supplemental interest which would be payable on the 9 January 1993 redemption date on the whole of the Convertible Bonds which were outstanding at 31 August 1991.
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GROUP PROFIT AND LOSS ACCOUNT FOR THE FINANCIAL YEAR ENDED 31 AUGUST 1991
NOTE
1991
1990
$m
$m
1 External sales 2 Net operating costs 1 Trading profit 3 Interest 3 Supplemental interest *i Profit before exceptional item 6 Exceptional item *ii Profit on ordinary activities before taxation 7 Taxation Profit on ordinary activities after taxation Minority interests *iii 9 Extraordinary items after taxation Profit attributable to … 11 Dividends *iv 26 Profit retained *v 12 Earnings per Ordinary share *vi Before exceptional item After exceptional item
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BALANCE SHEETS At 31 August 1991 NOTE
THE GROUP
THE COMPANY
$m
$m
Fixed assets *vii 13 Intangible assets 14 Tangible assets 15 Shares in subsidiary undertakings Current assets *viii 16 Stocks 17 Debtors *ix Short term deposits Cash at bank and in hand Creditors due within one year *x 18 Borrowings 18 Other Net current assets Total assets less current liabilities *xi Creditors due after more than one year 19 Borrowings 19 Other 20 Provisions for liabilities and charges *xii Capital and reserves *xiii 23 Called up shared capital *xiv 24 Share premium account *xv 25 Revaluation reserve *xvi 26 Other reserves Shareholders funds *xvii
ANNUAL REPORT
348
Words in the context: Insert the *i, *ii … or write the whole term in front of the right definition given below: ____________________ that part of company profits distributed to shareholders ____________________ those who owe money to the company ____________________ money reserved for future charges (e.g. deferred taxation and pensions) ____________________ net value of company and emergency funds ____________________ the profit/loss resulting from recalculating the value of an asset ____________________ debts that must be paid very soon by the company ____________________ income from company shares sold at above face value ____________________ assets of a long-lasting, unchanging nature ____________________ section which shows ownership of company ____________________ income or expenditure of an unusual nature ____________________ part of a subsidiary company not owned by the holding company ____________________ profits not distributed to shareholders ____________________ amount shareholders have been asked to pay ____________________ extra interest payment if the company pays off a bond ____________________ company’s annual net income divided by number of equity shares ____________________ those debts the company must pay within twelve months ____________________ assets consumed in the production process Comprehension questions: - Explain the term amortisation. - Are the brands treated differently in the accounts? - Once the brand value has been included in the company accounts, how is it dealt with? - Choose the ending which best matches the sentences below, according to the text:
349
1. Finished products and unfinished production are included in these accounts: - always at cost, including where necessary an amount for production overheads - either at cost or net realisable value, depending on which is lower - at both cost and net realisable value - either as cost or net realisable value, irrespective of the amount of each 2. When dealing with sales of property, the company: - has a special category in the accounts to include them in - treats cases when important factories are closed as a special category - includes only important property sales in its accounts - always includes gains and losses in calculating trading profits 3. When the accounts talk of ‘timing difference’ in relation to deferred taxation, which of the following do they mean? - The company can decide when to pay this deferred taxation. - Those taxes will probably never have to be paid. - Some taxes are paid at different times of the current financial year. - Some taxation does not need to be paid in the present financial year.
350
ACQUISITIONS Translate the following phrases into Serbian, and then try to explain each of them: -
joint venture a takeover bid showing interest in another company launching a bid consolidated accounts a financial honeymoon minority (majority) interest agreeing the book value of assets
______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ______________________________
EARNINGS (2) Use the words given in bold to form (a) word(s) that fits in the blank spaces below. The adjectives needed in the sentences below are formed with the suffixes –ly, -ible, -ory. –al. 1. Wages are earnings which are calculated and paid _______________. (week) 2. The payroll contains details of all the _______________ working for a company. (employ) 3. The employer makes a _______________ for tax from the workers’ gross salary. (deduct) 4. In the UK, people who have worked and paid into National Insurance can claim benefits from the State. These include _______________ benefit and a pension for ____________. (employ, retire) 5. When calculating how much tax to pay, personal _______________ is set against the amount someone earns. (relieve) 6. To provide for their old age, people may pay monthly _______________ to a pension scheme, and the _______________ may be tax _______________. (contribute, pay, deduct) 7. Pension schemes operated by a company may be non-_______________. (contribute) 8. The law in some countries says that an employee who is ill should get a certain amount of pay which is known as _______________ sick pay. (statute) 9. In some companies the employees have a holiday _______________ of 20 days. (entitle) 10. Employees receive an increase each year as they are paid an _______________ salary. (increment) 11. The government sets the tax band _______________ between one tax threshold and the next. (wide) 351
TAXES and TAXATION Use the words from the list to match each of the given definitions below. _____ capital gains tax - _____ corporation tax - _____ creative accounting - _____ excise duty - _____ income tax - _____ loophole - _____ money laundering - _____ progressive tax - _____ tax deductible (deductable) - _____ tax evasion - _____ tax haven - _____ tax loss - _____ tax shelter - _____ value added tax 1. People pay it on the money they earn. 2. Companies pay this tax on their profits. 3. Profits from the sale of assets may be subject to this tax. 4. Government tax on things such as cigarettes, alcohol and petrol. 5. This kind of tax means that the more money you earn, the higher rate you have to pay. 6. A clever but still legal way of reducing the amount of tax to an absolute minimum. 7. A country such as Liechtenstein and the Bahamas where tax is low. 8. A mistake in the law which allows people to avoid paying tax. 9. These payments are not subject to tax. 10. In the accounts the company is seen to make this if capital expenditure is brought forward to use up profits. 11. This tax is added to the price of goods and services. 12. Avoiding paying tax by giving false information to the authorities. 13. Investment schemes which allow people to postpone paying tax. 14. Handling money made from illegal activity.
352
The following phrases are from different letters written by an accountant concerning tax matters, but they are all mixed up. 1. Yours sincerely, M.D. Tippet, The Tippet Partnership 2. We notice from our files that your 2001 Income Tax return has not been completed yet. 3. Yours faithfully, … 4. We would recommend that you make payments on account of $2.345 on 1 January 2002 and 2,346 on 1 July to avoid interest charges. 5. Dear Sir/Madam 6. Dear Mr Pendergast 7. We also enclose the Corporation Tax return and trust that you will be able to agree our figures in due course. 8. Dear Ms Post, We have recently received a copy of your 2000&2001 tax assessment. As this is incorrect we have lodged a Notice of Appeal. 9. On behalf of Collins Enterprises Ltd, we enclose a copy of the financial accounts for the year ended 30 March 2001 together with a copy of our Corporation Tax computation. 10. We would like to complete it and would be grateful if you could let us have the details of dividends received from your UK shareholdings for the year ended 5 April 2001. Yours sincerely, MD Tippet The Tippet Partnership Letter 1 __________ Letter 2 __________ Letter 3 ___________
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READING 10
RATIO ANALYSIS
Once you understand how a set of accounts is constructed, you need to be able to analyse them to find out what they really disclose. Interpreting and analysing financial statements will enable you, as a manager, to compare the performance of your company this year with last year, to compare your company with its competitors, and to detect weaknesses which you can improve. Absolute figures in financial statements do not tell you much. For example, to be told that Retail Stores Plc $196 million profits before tax is not a useful piece of information unless it is related to, say, the turnover which produced the profit or to the capital employed to the group. Ratio analysis is a useful tool with which to interpret financial accounts. But for ratios to meaningful, they must be compared with equivalent ratios calculated for previous years and with those of the industry in which the company is positioned. Industrial rations are produced by a variety of clearing houses for industrial statistics. Ratios reduce the amount of data contained in the financial statements to workable form. This aim is defeated if too many are calculated. You must learn which combination of ratios will be appropriate to your needs. Ratios lead you to ask the right questions; however, they seldom provide conclusive answers. In the examples on these pages, no attempt is made to compare Retail Stores’ ratios with these industrial averages for the retail sector. Liquidity Your first concern as a manager is to ensure the short-run survival of the company. Is the company able to meet its short-term obligations? Current Ratio = Current assets
265
Current liabilities
316
0.84 times
354
Most commentators prefer to see a company with more current assets than current liabilities. But in the retail sector, most companies work on cash sales (i.e. no debtors), which makes for healthy liquidity. Quick Ratio = Current assets – Stocks
265-136
Current liabilities
0.41 times
316
In some manufacturing companies, stocks are too high and contain obsolete, unsellable items. To provide a more rigorous test of the company’s ability to meet it’s short-term obligations, this item is removed from the calculation. Capital structure The net assets of a company can be financed by a mixture of owners’ equity and long-term debts. Gearing ratios analyse this mixture, by measuring the contributions of shareholders against the loans provided by the lenders of loan capital. Retail Stores Plc has no retail debt; but the significant ratio is:
=
Long term debt ------------------Net assets
x 100
The profit and loss account provides another useful angle on the capital structure. Is there a healthy margin of safety in the profits to meet the fixed interest payments on long-term debt? An overgeared company may show signs of running out of profit to pay this fixed burden. Times interest earned Profit before taxes = -------------------------------Interest charges
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To be sure that their dividend is safe, shareholders will want profits compared with the dividend payable: Dividend cover
=
Profit for the financial year ----------------------------------Dividend payable
=
117 ----57
= 2.05
Activity and efficiency The ratios showing stock turnover and average collection period help managers and outsiders to judge how effectively a company manages its assets. The figure of sales is compared with the investment in various assets. The following rapid stock turnover is typical of the retail sector. Manufacturing companies tend to show a much slower turnover. Stock turnover
=
Sales -------Stock
=
19971.84 -----------136
=
14.69 times.
The following rapid collection period is typical of the retail sector which tends to avoid substantial credit sales. Manufacturing companies’ collection periods can often creep up to 60 days and more. Average collection period
=
Debtors ----------------Sales per day
=
34 -------------------1998 + 300 356
=
5 days.
Similarly, managers should aim to extend the period of credit taken to pay suppliers. Too long a period, however, will lead to poor trade relations with suppliers. And may even be an indication of cash flow problems. Profitability This ratio shows management’s use of the resources under its control. Profit margin
=
Profit before taxes ----------------------Sales
x 100 =
196 -------1998
x 100
= 9.8%
Extraordinary items are excluded from this ratio because they do not represent normal operating profit. Profit on total assets
=
Profit before taxes ------------------------- x 100 = Total assets
196 ---------------- x 100 = 970 + 265
15.8%
Profit is closely related to the assets employed by the company. Some analysts calculate the return on specific assets, e.g. the inventory. Return on owners’ equity
=
Profit before taxes -----------------------Owners’ equity
x 100 =
196 ------- x 100 = 858
22.8%
If the quoted company fails to earn a decent return, the share price will fall and prejudice chances of securing additional capital or long-term debt on beneficial terms. 24 24
The Manager’s Handbook, Young Arthur (Sphere Reference, 1986)
357
Comprehension questions: 1. Which part of the text does each of the following main ideas refer to? a. Only the most suitable ratios should be worked out. b. Even ratios are only an aid to business decisions. c. Individual figures in financial statements are not very useful in isolation. d. Financial statements enable managers to judge their company’s performance. e. Ratios, to be useful, need comparison with those of other companies. 2. Various types of ratios have been described in the text above. On the basis of the given facts in the text, identify the group of people for whom each ratio would be most useful. The following groups are the possible ones: a. shareholders of a company
______________________________
b. a company’s debtors
______________________________
c. investment analysts
______________________________
d. employees of a company
______________________________
e. management of a company
______________________________
f. a company’s creditors
______________________________
g. rival companies
______________________________
Explain in your own words why you think so. 3. Which purpose(s) are financial statements useful for: Purposes: - to identify faults in a company - to evaluate company performance on profit figure only - to judge a company’s results against its rivals - to relate a company’s present and past performance - to judge company performance without regard to capital used
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4. Make true sentences by connecting the following two halves into a meaningful whole. Use the IF conjunction. - Ratios provide useful information…
- …they are related to requirements.
- Ratios fail to make financial aspects…
- …excessive numbers of them are provided.
- Ratios are really effective…
- …they are considered solutions in
themselves. - Ratios are misused…
- …they are seen in an industry-wide context.
5. Each of the following ratios has its own MAIN function. Match them. The ratios: current ratio , quick ratio , gearing , times interest cover , dividend cover , stock turnover , average collection period , profit margin , return on total assets , return on owners’ equity. Main functions: 1. allows shareholders to judge their chance of receiving payment 2. helps a company decide its debt collection policy 3. shows if a business can pay its most urgent debts 4. shows profits compared to all a company’s capital 5. shows if funds are available to pay long-term debt costs 6. shows equity capital of a company compared to loan capital 7. permits management to evaluate its use of assets 8. provides a more accurate picture of short-term debt strength 9. shows profit compared to non-loan capital 10. shows profits compared to sales earnings 6. a) Which type of company tends to have a faster stock turnover, a manufacturing company or a retail company? Explain why. b) Which would be better for a company, a high average debtor collection period and low creditors’ payment period or vice versa? Explain why.
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7. According to the text, which of the following statements are true and which are false? Give the true answer to the wrong ones. a) A firm with a current ratio of 2 would be in a healthy situation. b) A manufacturing company’s stocks should always be included in calculating its liquidity. c) The higher the percentage of a company for gearing, the smaller is its long-term debt. d) A bank which had lent money to a company would be happy if its times interest earned ratio rose. e) A shareholder might consider selling his/her shares in a company if its figure for dividend cover fell. Words in the context: From the words in the box, choose the best possible matches for the words given below the box which have been used in the text above. Be careful about the context in which they have been used. set/group – useful – show/tell – make more difficult – non-comparative – strict/accurate – discover – view/picture – located – charge/cost - disclose
____________________
- detect
____________________
- absolute
____________________
- positioned
____________________
- workable
____________________
- combination
____________________
- rigorous
____________________
- angle
____________________
- burden
____________________
- prejudice
____________________
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FURTHER READING INTERNATIONAL ACCOUNTING STANDARDS – ESPERANTO OR THE TOWER OF BABEL? Later this year, the International Organisation of Securities Commissions (IOSC) is to publish its assessment of the International Accounting Standards Committee’s core set of standards. Its endorsement of the IASs would be of significant importance to the IASC. However, it would not be the end of the process of the IASC becoming the global standard-setter and of its standards becoming the ‘Esperanto of financial accounting and reporting’. On the contrary, it is only the beginning. Three elements of the supporting infrastructure are not settled satisfactorily yet, and consequently amount to obstacles: the IASC’s standard-setting process, the implementation of IASs, and their enforcement. The IASC’s standard-setting process should be acceptable to different jurisdictions and countries. Using the analogy of the façade of a Greek temple, the standard-setting process would be its foundation. If the process did not attract enough support, the questions of implementation and enforcement would not even arise: the temple would collapse. Ideally, IASs should be adopted or implemented worldwide. Implementation in the European Union and the US – the outside pillars of the temple – is essential if the IASC is to become the global standard-setter and its standards the ‘Esperanto of financial accounting and reporting’. If one of the outer pillars were missing, the temple would be unstable. Given EU and US commitment, other parts of the world will probably follow in due course. But even these conditions would not be enough for IASs to become the ‘world language’. There should be a proper enforcement mechanism. Otherwise, the looked-for harmonisation might be more like the Tower of Babel. The IASC’s current structure is no longer acceptable to important constituents involved in international accounting standard-setting. Acknowledging this, the IASC’s Board formed a working party in 1997 to consider how strategy and structure should be revised, and important progress has been made. Is Sao Paolo this March, the Board agreed on the necessary amendments to the IASC constitution. The new Structure seems to be 361
supported by important constituents around the world, although it has been criticised by the observer delegation of the European Commission, which says that the IASC has given in to US pressure by adopting the independent technocrat model instead of the representativeness model. The new structure should become operative from 2001 onwards. Recently, there have also been important developments in the implementation of IASs. The US Securities and Exchange Commission has approved and issued for public comment a concept release on the use of IASs. It solicits comment on their quality and raises questions about the supporting infrastructure. Although this is a step in the right direction, it remains unclear when and on what conditions the SEC will eventually endorse IASs for foreign listings and offerings. Unfortunately, an endorsement of IASs for US domestic listings and offerings is not under consideration at all. In the European Union, the situation is quite different. The introduction of the euro and the close co-operation and even mergers of European stock exchanges should be accompanied by uniform accounting standards. The use of different GAAPs among listed companies in the EU is one of the biggest impediments to the efficient functioning of capital markets. Furthermore, the EU needs to act quickly, because many European companies have adopted US GAAP instead of IASs for their consolidated accounts. All listed companies in the EU should therefore be required to use IASs instead of national accounting standards in their consolidated accounts, and be exempted from the Fourth and Seventh Directives, despite the loss of the EC’s, or individual European countries’, direct influence on the standard-setting process due to the introduction of the independent technocrat model. This would improve cross-border comparability considerably, and prevent a growing number of European companies from adopting US GAAP, over which the EU has no control. A new European body could be established to provide legal backing for the use of IASs and the necessary implementation guidance to ensure their consistent application in the EU. However, it should not act as a ‘European’ interpretation committee – the IASC’s Standing Interpretations Committee interprets IASs on a worldwide basis. It is not enough just to require the use of IASs. Without a proper enforcement mechanism, their interpretation and application might diverge between jurisdictions or
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countries. The accountancy profession and the securities commissions have an important role to play here – although the quality of the different branches of the profession and the role of securities commissions differ around the world. The International Forum on Accountancy Development that the International Federation of Accountants established last year should pursue its objective of ensuring that, worldwide, audited financial statements meet certain minimum requirements. The securities commissions, especially within the EU, should coordinate their activites. Hoever, considering the current developments within the EU, it would be more appropriate to establish a ‘European SEC’. A side effect of this would be that the chance of the SEC’s endorsing IASs would increase. Although important steps have been taken over the past year, there is still a long way to go before the IASC becomes the true global standard-setter. But it is an achievable goal.
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HOW THEY ARE ACCOUNTING FOR GOODWILL ON ACQUISITION Davis Service Group (textile maintenance and site services) has attributed an indefinite estimated useful economic life to a goodwill arising on the acquisition of Midland Laundry Group in its accounts for the year ended 31 December 1999. The accounting policy note on goodwill states that in accordance with FRS 10, Goodwill and Intangible Assets, goodwill arising on acquisitions from 1 January 1998 is capitalised as an intangible asset. Where such goodwill is regarded as having a limited estimated useful economic life, it is amortised through the p&l account on a straight-line basis over its life. Where it is regarded as having an indefinite life, it is not amortised but is subject to an annual impairment review and any impairment charged the p&l account. The note goes on to say: ‘In estimating the useful economic life of goodwill, account is taken of the nature of the business acquired, the stability of the industry, the extent of continuing barriers to market entry and the expected future impact of competition. Its life is regarded as indefinite where the goodwill is capable of continued measurement and the durability of the acquired business can be demonstrated.’ With the exception of Midland laundry, the directors consider that all Davis’s acquisitions SINCE 1 January 1998 HAVE ESTIMATED USEFUL ECONOMIC LIVES FOR GOODWILL OF BETWEEN FIVE AND 10 YEARS, depending on the business acquired. The acquisition of Midland Laundry on 8 November 1999 gave rise to goodwill of £24.3m. In the continuation of the accounting policy note on goodwill, the group explains why this has been treated differently. The directors consider that the nature of the Midland Laundry business in terms of essential products and services supplied, which are not subject to changes in fashion, coupled with the fact that demand from an identified and stable customer base is likely to continue for the foreseeable future, supports the business’s durability. This goodwill is therefore regarded as having an indefinite useful life and is not amortised. In order to give a true and fair view, the financial statements depart from the Companies Act’s requirement to amortise goodwill over a finite period. Instead, an annual impairment review is undertaken and any impairment identified will be charged to the p&l
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account. It is not possible to identify the effect of this departure, because no finite life for goodwill can be identified. In line with most other companies, Davis eliminated goodwill arising on acquisitions prior to 1 January 1998 against reserves.
REPORTING CURRENCY Question: Is it acceptable for an entity located in a hyperinflationary economy to report in a hard currency in its IAS financial statements? Answer: Paragraph 4 of IAS 21, The Effects of Changes in Foreign Exchange Rates, states that an enterprise normally uses the currency of the country in which it is domiciled and requires disclosure of the reasons for selecting a different currency. The selection of the appropriate reporting currency should reflect the economic circumstances of the enterprise’s operations, and is not simply a free choice. Judgement is involved, and a number of circumstances must be considered. Unfortunately, IAS 21 does not elaborate further on the matter of reporting currency. The IASC’s Framework for the Preparation and Presentation of Financial Statements (paras 17, 35, 39, and 46), together with para 20 of IAS 1, Presentation of Financial Statements, indicate that financial statements should provide information about an enterprise’s performance that is useful and reflects the economic substance of the underlying events and circumstances. In hyperinflationary economies, enterprises that substitute a hard currency for their domestic inflationary currency may not meet these general requirements of Framework and IAS 1. Inflation and currency devaluation often do not move in tandem, and significantly different results can emerge. In addition, third party users of financial statements may take undue comfort from the hard currency financial statements. Economies that are experiencing hyperinflation often have currency and capital controls. Thus, investors or lenders may be even les likely to be able to realise investments in the hard currency.
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ACCOUNTING FOR THE NEW ECONOMY – accounting issues associated with Internet businesses These accounting issues are not a new problem. What have changed are the medium in which transactions happen and their relative importance to the results and position of the business. Only if the rules are not clear, the mischief may begin. ‘Revenue’ is not defined in the UK company law, nor is it the subject of a UK accounting standard. However, this does not mean that there are no generally accepted accounting principles on the subject. There are the long-standing (but not for much longer!) principles to be found in the fundamental accounting concept of prudence in SSAP2, Disclosure of Accounting Policies, and – on what constitutes a realised profit – in the ICAEW’s 1982 Technical Release 481, which are both currently being the subject of review for two reasons: - they are now out of step with other authoritative literature… and – individual standards may not place the same emphasis on cash and realisation into cash that the prudence concept in SSAP2 requires. Instead, ‘realisation’ often now appears more synonymous with ‘reliable measurement’ rather than convertibility to cash. In the absence of a specific UK standard, reference is often made to IAS 18… which is found to be helpful in explaining the basic conditions for recognising revenue from sales of goods and services. In the US, the accounting literature on revenue recognition includes broad conceptual discussions as well as some industry-specific guidance. At present, the US’s Emerging Issues Task Force is considering a raft of specific e-business issues. Meanwhile, the Securities and Exchange Commission has recently issued a Staff Accounting Bulletin, which refers to current literature and then sets out that revenue generally is ‘realized or realizable and earned’ when all of the following four conditions are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the seller’s price to the buyer is fixed or determinable; and collectibility is reasonably assured. While it is perhaps invidious to use such a succinct statement from US GAAP, it is a good summary of the conditions for revenue recognition, common to the various national literatures. Therefore, the principles should be borne in mind, in considering the following issues.
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Accounting Solutions
ACQUISITION: incentive payments
Question: A company is acquiring a highly specialised business. In addition to the consideration payable to the vendors, the company intends to enter into an arrangement under which it will make payments or grant options to certain key employees (who are not shareholders). These payments are being provided as an incentive for the employees to continue to work on an important project that is expected to be completed in two years. The employees will also receive their normal bonuses related to their performance. The company is arguing that the incentive payments are an essential part of the consideration payable for the business and should be included in goodwill. Is the company’s treatment acceptable? Answer: No. The incentive payments that the company is making are not being given to the vendors of the business, but rather to key employees. So, the payments cannot for part of the consideration. Nor is it possible to argue that the incentive payments represent an existing liability of the acquired company, because the vendors had no obligation to make the payments to its employees whether or not the acquisition took place. Capitalising these costs on the grounds that they represent the acquisition of a separable intangible asset (the employees’ know-how) is not acceptable. This is because it is not an asset over which the acquirer has control, since the employees could simply walk away. Finally, the argument that these payments can somehow be treated as incidental costs of the acquisition and, therefore, fall to be capitalised under FRS 7, Fair Values in Acquisition Accounting, is also not valid. This is because the acquisition could take place without incurring these costs – albeit the company would have less assurance that the employees would stay. In substance, these incentive payments are being made in respect of a postacquisition service. While not linked to performance, they are to encourage the employees to stay and earn the performance bonuses that they will be entitled to if they complete the assignment. In that respect, they are like a top-up to the performance bonuses the employees will receive. Accordingly, the payment / cost of the options should be charged in the post-acquisition p&l account. 367
OUR DEVELOPING ECONOMY – Traditional accounting is not good at coping with rapid change. Should this worry us? – More and more economic activity is intangible and immaterial. The service sector accounts for a rising share of output and employment, not only in such developed economies as the UK and the US, but also in rapidly developing economies, such as Singapore. In both the manufacturing and service sectors, intangible assets such as brands, intellectual property, know-how and copyrights have become more important. Economic activity is less about manipulating physical commodities, more about processing and analysing information, making judgments, providing services and manipulating images. Science is breeding entirely new industries and families of products, and the media and cultural industries employ a growing share of the workforce. Less and less of what we value as consumers or as investors can be stockpiled at ports, loaded onto trains, stored in warehouses or weighed on scales. The idea of the ‘knowledge-driven economy’ is not just a description of hi-tech industries; it describes a set of new sources of competitive advantage that can apply to all sectors, all companies and all regions. One consequence of these forces is that companies are increasingly difficult to value reliably and accurately. It is not just that more of a company’s assets are intangible and immaterial, but also that company fortunes are likely to change quite radically, very quickly. Thus it becomes increasingly difficult to match investment in one period with a change in performance in a subsequent period. Traditional accounting is not good at coping with rapid and discontinuous change. Should this worry us, and if so, what should we do about it? Traditional accounting’s inadequacy in coping with the new economy causes several problems. Company insiders, or those close to it, are much better placed to assess intangible assets’ strengths than outsiders, who lack specialist knowledge. The more a company comes to rely on esoteric know-how for its competitiveness, the more difficult it becomes for the average outside investor to assess the true value of this knowledge. Companies that rely on intangible assets may find it harder to raise capital than those with the kind of assets that investors or bankers may regard as security.
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Alternatively, the unregulated disclosure of information about intangible assets can create quite a different problem: not too little, but too much capital. Without proper regulation of information disclosure about intangibles, it may be possible for companies to manipulate perceptions of their value, leading investors to overvalue them: e-commerce companies come to mind. The current approach to accounting for intangible assets makes it difficult to unravel the contributions that different people and occupations make to a business. Knowledge workers face a risk that they may give away their knowledge capital to their employers too cheaply. Broadly speaking, accountants and regulators can make three responses to these pressures. One is to be radical and to endorse they type of new intellectual capital balance sheets that the Swedish insurance company Skandia has drawn up. These attempt to measure in great detail not just the intellectual capital within the company, but the value of its brands and its relationships with key customers. But these balance sheets are difficult to translate into hard financial numbers and, more importantly, they can be both vague and cumbersome, and no better than traditional reporting at dealing with rapid change. Had IBM been judged against the Skandia system in 1984, it would have seemed to be in rude good health, just before the mainframe world started collapsing around it. A second approach is to tread very carefully and incrementally, adding new categories to traditional accounts, only when they are fully proven. In fact, however, the risks of slow incrementalism are even greater. The accounting system might gradually lose its credibility and purchase. That is why a third, hybrid, approach is probably the most attractive. For example, companies might be encouraged to create ‘safe-havens’ in their accounts, in which they could record capitalised values for risk investments in new products and processes. They could publish rolling and revisable accounts, which would provide investors with not just a snapshot of a company, but multiple viewpoints on it track record. A further innovation would be to encourage companies in particular industries to publish information on intangible aspects of their business that are known to be relevant to their stock market value. Thus customer acquisition and retention costs might be particularly relevant for
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mobile phone companies or banks. Traditional accounts would then become augmented over time by properly regulated non-financial information. Finally, we need to recognise that accurately recording the value of intangible assets will still be a problem. Accounting works best when it is recording the value of observed transactions that leave a physical trail. But that could all change. Accounts will be able to value intangibles more accurately when they are traded in more sophisticated markets – which we need to start developing now.
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IN FAVOUR OF FRAMEWORKS I agree fully with Ron Paterson’s concerns about the proposed application of the G4+1 frameworks to capital and revenue grants. Unlike Mr Paterson, however, I see the problem with grants (and deferred tax deductible expenses) as minor flaws in the frameworks – they do not justify the rejection of the fundamental approach in those frameworks. Mr Paterson’s objections to the so-called balance sheet approach in the frameworks are well rehearsed, but it is worth dealing with general concerns before focusing on the specifics issue of grants. Both the G4+1 and Mr Paterson agree that the determination of income and expenses starts with the transactions of the period – for example, the determination of sales revenue starts with the cash receipts from sales. However, accountants have also to account for incomplete transactions and with events that are not transactions, and this is where differences arise. The G4+1 solves the problem by determining first the appropriate balance sheet carrying amounts: income or expenses are the balancing figures. For example, they define sales revenue as the receipts from sales transactions for the period, adjusted by opening and closing debtors. Mr Paterson solves the same problem by using the notions of prudence and matching to determine income or expenses: any balance sheet amounts are the balancing figures. For example, he uses prudence and matching to determine sales revenue: debtors are the balancing figure. Let’s look at two other examples of the contrasting approaches. Under the G4+1 frameworks, the cost of a manufacturing company’s sales is the amount of the transactions (purchases, wages and appropriate overheads) adjusted by opening and closing stocks and creditors. Under Mr Paterson’s approach, prudence and matching are used to adjust the transactions and determine cost of sales: stock and creditors are balancing figures. The G4+1 defines gains and losses on financial instruments by reference to any transactions in those instruments and the changes in their carrying amounts. Mr Paterson uses prudence and matching to adjust the transactions and determine the gains and losses: the balance sheet carrying amounts are the balancing figures. The approach adopted in the G4+1 frameworks is a familiar one. It is operational – accountants can define and measure such things as debtors, stocks, creditors, and the cost or fair value of financial instruments. The approach often calls for judgment and rigour, but that is surely what financial reporting should be all about. 371
Mr Paterson’s approach also calls for judgment, but it lacks rigour. Accountants cannot define and measure income and expenses without first defining and measuring assets and liabilities. Furthermore, prudence and matching are conflicting ideas. Prudence suggests that all costs should be written off; matching implies that some of them should be carried forward to a later period. Judgment must be used to decide whether to give priority to prudence or matching. The former frameworks resolve this by only carrying costs forward when they represent assets. So, why do I share Mr Paterson’s concerns about the former proposals on government grants? Under the G proposal, many capital grants would be recognised immediately as income rather than spread over the related asset’s useful life. Many revenue grants would be recognised as income before the related expenditure is incurred. However, the substance of the arrangement is that they are made as a mans of subsidising certain expenditure, eg, a government may want to encourage a company to undertake specific research. If the financial statements are to represent such an event faithfully, the grant or subsidy must be matched with the associated expenditure. Such a conclusion does not mean that matching should take over everywhere else. Far from it; the balance sheet approach works well in virtually all other cases. The approach does, however, seem to break down when dealing with grants. The G standard-setters should acknowledge this problem. In addition, they might note that their frameworks have also given trouble on the related issue of accounting for deferred taxes on tax-free income and non tax-deductible expenditure. Applying the same frameworks and the same underlying approach to deferred taxes, the US Financial Accounting Standards Board, the International Accounting Standards Committee and the Canadian ASB have adopted significantly different answers on this issue; this is one of the reasons why the UK’s ASB has proposed a different underlying approach to deferred taxes. The G standard-setters could insist on pursuing the proposals in their recent discussion paper. This will play into their critics’ hands and undermine other efforts to use their frameworks to improve financial reporting. It would be much better if the G standard-setters admitted that they have got it wrong on government grants. They should admit that there might be minor flaws in their frameworks, which they will fix if time permits. In the meantime, however, they should retain the current accounting treatment for government grants, which reflects the substance of the transactions.
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HIDDEN GEARING UK businesses have traditionally rented commercial property on relatively long leases of up to 25 years. Under existing UK accounting standards, such leases are classified as operating leases and are therefore not reflected in tenants’ balance sheets. However, lease accounting proposals developed by the G4+1 group of international standard-setters, and published in a discussion paper […] would result in many property leases being capitalised at significant values in tenants’ balance sheets, which could be very significant for some companies. This article examines the potential impact of these lease accounting proposals on the accounts of UK commercial property tenants, and explores some possible consequences for the UK commercial property market. Lease accounting proposals The proposed accounting treatment of leases is grounded in common international definitions of assets and liabilities, which are in line with those adopted by the ASB in its Statement of Principles. Assets are defined in terms of access to future economic benefits arising from past transactions and events. This leads to the logical conclusion that future benefits a lessee is likely to derive from exclusive access to a property during the period of a lease constitute an asset for the lessee. Similarly, lessees’ obligations to make future rental payments seem clearly to represent a liability (characterised as a present commitment to transfer future economic benefits). Therefore, unlike under existing UK practice, a lessee will have acquired both an asset and liability when entering into a lease that does not transfer to the lessee a substantial proportion of the physical asset’s expected life-time benefits. If accounting standards are developed in line with the […] proposals, initial lease assets and liabilities will be measured as the present value (PV) of future minimum lease payments, and will have to be capitalised in a lessee’s balance sheet if material. The lease asset will then be amortised. The lease liability will be reduced each year by the amount of rent paid, less a finance charge calculated at a constant periodic rate on the capitalised
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amount outstanding (effectively the discount rate used to calculate the PV of rent payments). Although annual amortisation charges may remain constant (in case a lessee adopts straight-line amortisation), the finance charge element of rental payments will reduce each year. In the early years of a lease, a lease asset’s net book value will decline faster than the lease liability, resulting in a decline in the book value of net assets. This decline will reverse later in the lease term. Some UK commercial property leases contain terms that may affect the minimum rentals to be taken into account when calculating a tenant’s initial lease asset and liability. If a lease contains break clauses, then only payments due up to the next break date should included, as payments after this date could be avoided. However, if operational circumstances effectively preclude a lessee from exercising a break option, the break option’s existence should be ignored in the initial capitalisation. When a break option lapses, the lease asset and liability will have to be recalculated based on minimum rents due up to the next break date. Most long-term UK commercial property leases contain provision for regular upward-only rent reviews. The group propose that future rent increases be estimated at the outset of a lease, and [be] used to compute the capitalised lease asset and liability. These estimates would have to be reviewed regularly, and the carrying value of the liability adjusted if necessary (with a corresponding adjustment to the lease asset’s book value). The ASB dissents from this proposal because it believes that future rent rises are likely to be difficult to measure reliably. Instead, it prefers capitalisation of the PV of future rents fixed at the level of initial rent payable, with the lease liability adjusted each time the rent is raised. Leases for some retail premises (particularly in shopping centres) include provision for rents partially based on turnover. In this situation, the base rents payable will not represent the minimum amount likely to be paid. The discussion paper proposes that, in these circumstances, minimum lease payments should be calculated by reference to the amount of rent that would have been payable for a similar property under a lease with no provision for rent contingent on turnover. Some leases, however, require tenants to pay an accommodation charge that covers both occupancy of the premises and provision of ancillary services. These services
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are considered to be provided under ongoing executory contracts, which are not capitalised as lease assets or liabilities. Future committed accommodation charges therefore need to be apportioned between property rental and provision of ancillary services, with only the former element used to calculate the initial lease asset and liability. Lessees of surplus property that they sublet to other tenants will be affected by the proposals, too. Their balance sheets should record as a liability the PV of minimum rental payments they are obliged to make. Their lease asset should equal the PV of minimum rental payments due from subtenants, plus the PV of benefits expected to accrue between expiry of the sublease and head lease. Illustration of accounting impact The following example illustrates the accounting impact for a tenant that enters into a 15year lease at an initial rental of £250,000 a year. This is the current market rent for a medium to large industrial unit in may parts of the UK, a 7,000 sq ft office in central London, a large retail unit in may provincial cities, or a standard retail unit in a major shopping centre. A 15-year term is standard for new leases in may shopping centres. It has been assumed that rent rises of 25% will occur every five years, and the tenant’s relevant cost of capital (to discount future rent payments) is 8%. Before commencement of the lease, it has been assumed that the tenant has net operating assets of £3m and debt of £1m, resulting in equity of £2m and a gearing ratio of 50%. To isolate the impact of the lease accounting proposals, a simplifying assumption has been made that non-lease net operating assets remain at £3m for the duration of the lease, and non-lease debt remains at £1m. The three graphs (p. 85) chart the lease’s annual impact on gearing, net assets, and profitability. The latter is a comb9ination of straight-line amortisation charges and constant periodic rate finance charges, totalling £4.8m over the lease term irrespective of the accounting treatment adopted. The new accounting treatments only affect the apportionment of this charge to different years. Four scenarios are shown in each graph: scenario A shows the position under existing UK accounting practice, with the lease treated as an operating lease and therefore not capitalised. Under the new accounting proposals, this treatment would still apply if a
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tenant had the unusual right, and operational ability, to terminate the lease any time at every short notice. Scenario B shows the position under the new proposals if a tenant has a right to break the lease every five years, and has the operational ability to exercise this right. In these circumstances, only the first five years’ rentals will initially be capitalised, at a PV of £1m. Scenarios C and D illustrate the impact of a lease with no exercisable break options. Scenario C adopts the G4+1 preference of incorporating expected future rent rises in the initial capitalisation, resulting in an initial PV of £2.6m. Scenario D illustrates the ASB preference of only taking rent rises into account when they occur, with the initial PV being £2.1m. In both these scenarios it has been assumed that actual rent rises are in line with initial expectations. These graphs show that a lease with no exercisable break options, accounted for in accordance with the G4+1 preferences, will raise gearing and lower net assets more than the other scenarios over the period of the lease. It will also result in higher p&l account charges in the early years of the lease. Consequences for the property market The UK commercial property market is likely to change significantly as tenants seek to avoid the sizeable effects shown in the illustration on their reported gearing, net assets, and timing of cost recognition. We predict that the following changes may occur: •
it is probable that the sale and leaseback market will change, as occupiers perceive little accounting benefit in capitalising a 25-year lease liability in comparison to recognition of a loan. Prospective landlords who are able to offer more flexible leaseback terms, including regular tenant break options, are likely to find favour in this changed market. Occupiers will have to accept lower values or higher rents.
•
Tenants whose leases expire may insist on negotiating new leases with greater flexibility and shorter terms. (Under the Landlord and Tenant Act 1954, landlords are obliged to offer new leases to existing tenants on the same terms as expiring leases, but tenants are not obliged to accept these terms.) This may result in market rents rising to compensate landlords for a
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reduction in the security that long-term leases now offer. The relative power of landlords and tenants in specific sectors and regions will an important factor in this process. In prime retail sites, where there is a shortage of good quality space, landlords historically have dictated terms and insisted on long leases. Such landlords will be in a strong position to demand higher rents for shorter leases. •
Rather than allowing forthcoming break options to lapse, tenants of property in areas where supply exceeds demand may negotiate a deferral of their break option. Such negotiations should also be used to introduce more break options later in a lease.
•
Owner-occupied freehold commercial property might become a more attractive option for many businesses. Although this route has certain advantages, especially as an owner can benefit from rising property values, it does not overcome all of the accounting disadvantages of leases introduced by the G4+1 proposals. For example, if an interest-only loan is used to fund the property purchase, gearing will not fall until the loan is repaid at the end of its term. Furthermore, as a freehold is likely to cost more than the PV of may leases, initial gearing may be higher under the owner-occupancy option.
Changing the balance of a property portfolio takes time, because opportunities for renegotiation occur only periodically. All occupiers of UK commercial property should therefore now begin planning to minimise the adverse impact on their accounts should the ASB adopt the […] proposals in the near future.
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THE EXPECTATIONS GAP This is our second article reporting the findings of a research study that the ICAEW’s Centre for Business Performance sponsored. The first one (as of July) discussed stakeholders’ perceptions of elements comprising the audit expectations gap; this month (the month of August), we report stakeholders’ views on the desirability of establishing an independent body for listed company audit to address these issues. The research study revealed that the aspects of the expectations gap that caused most concern were auditor independence and quality of audit. The solution a number of authors have recommended would involve creating an independent agency to oversee audit regulation. To investigate stakeholder perceptions of the structure and function of such an agency, three models were developed: An Auditing Council; a Commission for Audit; and a UK Securities and Exchange Commission (SEC). An Auditing Council would be a private body analogous to the Financial Reporting Council. A Commission for Audit would be a public sector body analogous to the Audit Commission for local and health authorities in England and Wales. A UK SEC, modelled on the US SEC, would be a public sector body with overall responsibility for City regulation, including that of listed company audit. More bureaucracy An Auditing Council received the most support, a Commission for Audit the least, with a UK SEC provoking the strongest reactions both for and against. Arguments in favour of increased regulation were generally framed in terms of increased openness that would ‘materially enhance the credibility of audits’; arguments against expressed fears that it would be ‘cumbersome’ and add a ‘further tier of bureaucracy’. Overall, there was a significant degree of support to make the case for establishing an independent regulatory body. This is consistent with previous studies’ findings and recommendations. If such an independent body were to be created, the authors suggest it should be structured to match the expectations gap’s main components as revealed by the study: independence, monitoring and discipline. Such a body might be called a Listed Companies Audit Board, structured into three panels of responsibility: an auditor independence panel; an audit quality panel; and a disciplinary panel. Whether the LCAB might be a private body, a private body with statutory recognition or a public body is open to debate. An auditor independence pane’s role would be to set up and monitor independence standards and guidelines, for example by restricting non-audit services in whole or in part, or by setting up procedures formally to authorise provision of non-audit services. It can be argued that providing audit services should be remunerative in itself and not conditional, or perceived as conditional, on the auditor providing non-audit services. The role of an audit quality 378
panel would be to set up and maintain a register of auditors whom the panel recognised as capable of undertaking listed company work, and to monitor the quality of audit work done. A possible consequence of such a licensing procedures that it might lead to increased competition for listed company audits. These are increasingly dominated by the Big Five firms, partly because of the reputation effect. External validation procedures might allow other firms to join the register and compete against the Big Five, especially for the audit of middle or lower-ranking listed companies, where the importance of global reach is less significant. Failure to observe standards of auditor independence and quality, and ignoring guidelines, would result in referral to a disciplinary panel. Sanctions against a firm, a firm’s office or a partner might include ‘naming and shaming’, fines, or removal from the register of listed company auditors. The new regulatory framework for the profession as a whole, based around the Accountancy Foundation, tackles the main components of the expectations gap as identified in the study. Auditor independence is dealt with via the new Ethics Standards Board, monitoring of audit quality via the existing Joint Monitoring Unit, and discipline by the new Investigation and Disciplinary Board. Effective delivery There may still be doubts about whether the Accountancy Foundation, a private body without statutory backing, will be sufficiently authoritative and independent to take on powerful interests, such as the Big Five firms, and whether, although at arm’s length from the profession, it will be perceived to be independent of it. However, it can be argued that what matters is not so much the precise function and structure of such a body – whether public or private – but effective delivery, and perceived effective delivery, of what is promised. This is the challenge the Accountancy Foundation faces. The expectations gap has been there for some time, and whatever changes are made, some problems will inevitably remain. Our research study’s analysis and recommendation will be a source of alternative possibilities for regulation of listed company audit, if the new framework is later judged unsuccessful.
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NOT ONLY FAIR, BUT FAITHFUL (AS WELL) New UK GAAP on pension accounting proposes that companies recognise the fair value of their interest in their sponsored pension plan assets and liabilities. Liabilities are to be discounted on a best-estimate assumption basis using a standard prime corporate bond rate, and actuarial gains and losses are to be recognised immediately. FRS 17 represents a significant departure from existing UK GAAP…, which focuses on the income statement rather than the balance sheet effects of pension costs. FRS 17 is intended to be consistent with the ASB’s intention to introduce a broader concept of performance reporting within a fair value accounting framework (FRED 22). These developments come at a sensitive time for many UK companies sponsoring defined benefit pension schemes, since the value of their pension commitments is sensitive to a period of declining bond and equity market values, the abolition of dividend tax credits for pension funds, and the imposition of stringent new solvency standards (the minimum funding requirement) that guarantee minimum pension funding levels (and are also based on market valuation of pension assets and liabilities). The increased cash flow strain that meeting the MFR is likely to call for, and the greater transparency that FRS 17 demands, also increases the value of the option facing firms that are sponsoring under-funded pension schemes – to terminate their defined benefit arrangements. The proposed introduction of FRS 17 in a period of regulatory and economic uncertainty raises a number of interesting questions about the potential value relevance of companies’ pension assets and liabilities to the share market. Does the share market take account of the interest-rate sensitivity associated companies’ assumed ownership of net pension assets or liabilities, as FRS 17 implies? Does it associate the interest-rate sensitivity of pension assets and liabilities with their share price returns? If so, are these figures valued at a fair value or on a going concern basis? Empirical evidence on this issue is of considerable importance. Professionals around the world disagree over whether pension funding risks should be explicitly incorporated into companies’ fair valuation of pension assets and liabilities and whether the resulting volatility in actuarial gains and losses should be immediately written off against profits. The interest-rate sensitivity of pension assets and liabilities is likely to be of interest to financial analysts, given that the magnitude of these figures in many cases now approaches or even exceeds the total stock market capitalisation of many UK listed corporations, and the associated volatility in realised gains or losses will likely swamp other drivers of corporate financial performance. There is also some public policy significance, given ongoing changes affecting the regulation of ownership and the accountability 380
of UK pension funds. This issue is empirically examined by developing an asset-liability valuation model of a company’s equity, which incorporates various elements comprising the value of the pension fund’s net worth to the sponsoring company. The valuation model has previously been used to value, for example, banks, and insurance companies. A ‘variable effects’ event study methodology is used to investigate whether unanticipated changes in interest rates had a differential effect on the relationship between a company’s equity valuation and its monthly share price returns over the four years prior to the issue of new UK GAAP. Since the status of firms’ pension funding is measured irregularly, every three years, then if the share market values these pension components correctly, unexpected changes in interest rates on them will be associated with share price returns. Unanticipated changes in interest rates should also have a differential effect, depending on the level of funding. The empirical analysis focuses on an industry-matched pair sample of 90 UK firms that either did or did not voluntarily switch to market valuation of pension assets and liabilities between 1995 and 1998, ie, after the MFR was introduced but before its full implementation, and before FRS17 was issued. Consistent with our hypotheses, for the sample of companies switching to market-based disclosures, pension asset and liability valuation components are sensitive to unexpected changes in interest rates. For companies with underfunded schemes, monthly share price returns are sensitive to the impact of unexpected changes in interest rates on pension assets and liabilities. These empirical results apply even after controlling for the effects of the unexpected changes on other components of value, and to alternative specifications of the unexpected rates when defined in relation to an alternative duration-matched pension liability rate. Share-price returns, then, are sensitive to UK companies’ discretion to use marketbased pension valuation assumptions that affect various components of their interest in pension assets and liabilities. The results imply that the returns of companies switching to market-based valuations of pension assets and liabilities are a reasonably accurate reflection of their underlying pension funding situations. The evidence suggests that pension assets and liabilities are considered to be value-relevant in the share market’s assessment of share-price returns, at least for those companies with under-funded pensions. According to the ASB, fair value financial reporting is intended to provide a faithful representation of all changes in economic conditions that affect a company’s assets and liabilities. If so, their managers should be fully accountable for controlling risks affecting business operations, including the interest-rate sensitivity of their pension assets and liabilities.
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WE NEED A STANDARD FOR REVENUE Revenue issue is increasingly an issue internationally, and this paper is intended to contribute to the international debate. If you take only one paperback to read on the beach this summer… well, choose something non-technical. Have a break. You deserve it. But if you have some free time before or after your holiday, or if you can find a bit more room in your suitcase, the Accounting Standards Board would like you to read its discussion paper, Revenue Recognition, which was published early in July 2001. I should explain that this article isn’t simply a sales pitch, aiming to boost publications income. The ASB is always pleased to receive responses to its discussion papers and exposure drafts, but in this case, it is particularly keen to hear from accountants working in different industries about how its proposals for revenue recognition might work in practice. Why look at revenue recognition now? Certainly, it has been in the new recently. There has been much discussion about the range of different revenue policies that software companies adopt. Separately, the Auditing Practises Board has issued a consultation paper on ‘aggressive earnings management’, which identifies revenue recognition as a key concern. These developments didn’t prompt the ASB’s project, which has been running for well over a year, but they do point up the growing need for a standard on revenue recognition in the UK. But why is the ASB starting from scratch, you might ask? In the interests of international harmonisation, why not just pick up the best rules from elsewhere? The simple answer is that standard-setters the world over have acknowledged the need for a rethink. Increasingly, revenue recognition is an international issue, and the discussion paper is offered as a contribution to the international debate. For example, while IAS 18 sets out what has generally been seen as best practice for traditional business models, many find that it doesn’t include enough guidance to enable its underlying principles to be interpreted and applied in the complex situations of modern business. We can expect the International Accounting Standards Board to be discussing the UK paper. The US has many accounting standards and EITF abstracts dealing with revenue, most of them industry-specific; the rules are lengthy, detailed, and spread over documents issued by the FASB, the EITF, the AICPA and the SEC. But, the FASB is now acknowledging the need for one consistent, comprehensive model, so that revenue recognition problems are not dealt with purely on an issue-by-issue basis. The ASB’s intention is to develop a single accounting standard, setting out general principles for revenue recognition that all entities can apply. Most probably it would still be necessary to develop application notes (or something similar) for certain 382
industries. Nevertheless, if industry-specific guidance is based on more fully-developed general principles, inconsistencies in practice should be significantly reduced. But it isn’t as simple as just writing down what the ‘right answers’ are. There are as many different views of how revenue should be recognised and measured, even what it should represent, since many different practices are being adopted at present. And traditional drivers of revenue recognition – concepts such as ‘earning’, realisation, accruals/matching and prudence – don’t always lead to consistent answers, particularly when the questions are difficult. How should incomplete performance be reflected in revenue? What impact should the existence of customer rights of return have? How should rights to uncertain revenues, such as royalties, be accounted for? To stand any chance of developing agreed general principles, we need to go back to the fundamentals and try to build an agreed framework. This is what the discussion paper tries to do, and this is why it is a weighty 154 pages long. Its key proposals are quite easily encapsulated in the six pages of summary, but arguably more important is the discussion leading to those proposals. For many businesses, the paper will simply reflect what is already seen as best practice. Nevertheless, it will inevitably challenge some existing practises and approaches, because the ASB’s goal is, ultimately, to achieve greater consistency in revenue reporting. And consistency is important. Certainly, analysts are unhappy when they cannot meaningfully compare the accounts of companies operating in the same sector. More fundamentally, however, accounts should reflect the substance of a transaction, and not merely its legal form – which means, among other things, that the way a transaction is labelled should not alter how it is accounted for. Yet consider a simple example. You go into a shop, hand over some money and leave with a product. You can keep the product, but you also agree with the shopkeeper that, at any time within the next three months, you can bring it back and have your money returned if you want to. In the event, you don’t take the product back, but was the initial transaction a ‘sale with an option to return’, or a ‘loan with an option to buy’? Was your initial payment a deposit to secure the loan of the product, or a payment for it? When did a sale take place? Issues such as this are not inherently industryspecific: they are the sort of general issues of principle that the paper discusses. But if general principles are to be made workable, they need to tested against real-life examples, by the people familiar with what the practical difficulties will be. And that is why the ASB would like to hear your views on how its proposals should be developed and implemented. Comments are requested by 31 October.
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IT’S REMUNERATION – SO RECORD IT! The possibility that share option grants could be recognised as an expense has attracted much criticism, particularly from preparers. In ‘Share options – logic breaks down’, John Dyson says that ‘granting share options is not remuneration’ and that, consequently, no cost should be recorded in the p&l account. He also links share option costs with goodwill amortisation, and asserts that a business should be ‘valued on a multiple of earnings excluding those two items’. I disagree. It’s true that goodwill amortisation provides little or no useful information and should be largely excluded from equity analysis, but that should not be applied to share options. Granting options to an employee is indeed remuneration and needs to be measured at fair value and charged against profit. I believe that many analysts and investors are well aware that accounting for share options is an issue, and are concerned about the effect that significant option grants, as well as repricing existing options, have on valuation. Institutional investors have asked me more questions about how they should deal with this than about any other accounting problem. Three reasons for not recognising share options are commonly cited: The problem is already dealt with by the diluted EPS. This is only partly correct. A diluted earnings per share figure only recognises the intrinsic value of past share option grants. It is useful, but incomplete, information: a charge for the fair value of options grants is needed as well as the diluted EPS disclosure. The cost is borne by the existing shareholders and not the company. Yes, share options represent a cost to shareholders. But you could regard any expense in this way. What are accounts for if not to report on how shareholders are affected by decisions that management has made on their behalf? Since there is no cash outflow, it must be irrelevant for equity valuation, so it should not be an accounting charge either.
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Agreed, a grant of share options does not represent a cash outflow, but that does not stop it being an important economic event that affects performance. We do not exclude the cost of acquiring a subsidiary from financial statements just because the consideration happens to be equity. In DCF analysis, share option grants’ expected future annual value should be included in cash flow forecasts as ‘cash flow equivalents’, and the aggregate value of all outstanding options must also be taken into account to deal properly with share options in equity valuation. In my view, none of these points amounts to a valid reason for not recording options as an expense. Share option grants represent a real cost to shareholders – effectively, management is transferring value to employees by writing call options on behalf of investors. Shareholders give up part of their upside to employees when share prices rise, but suffer the full loss if prices fall. Indeed, in some cases shareholders suffer a further transfer of value if prices fall and options are then repriced. Some commentators also seem unaware of the value of the options granted. This can be significant, even though the options may be granted at-the-money. In the US, because of FAS 123, the average value of options granted is about a third of the share price at grant date, and it is fairly common to see companies grant options over more than 3% of their issued shares each year. This equates to shareholders giving up more than one percent of market capitalisation in return for employee services. For a company valued at, say, 20 times earnings, this represents a share option cost equal to 20% of profit. Obviously, the true cost varies for reasons other than simply the number of options granted, but this is why we need proper accounting. I agree that measuring the cost is difficult and subjective, but this is no reason to ignore it. Aside from the debate over whether to expense or not, there has been similar disagreement over how this expense should be measured. This is a complex subject, and I do not offer any definitive solution. However, like most respondents to the discussion paper, I favour the use of grant date measurement, because, among other reasons, I believe that an equity instrument arises at this point. Any subsequent changes in value are simply part of sharing equity returns with other classes of equity investor, and should not be recognised as remuneration (although they are important for investors and should be disclosed).
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A grant date approach also has a more practical advantage, in that it avoids the volatility that would arise under vesting date measurement. Volatility is not a reason to reject appropriate accounting, but in this case it would almost certainly lead to investors adding back all elements of share option costs in measuring performance. Although the grant date approach does create difficulties, such as applying it consistently to both real and phantom options, it will still provide investors with the most useful information. Accepting that share option grants are a cost does not mean that option schemes cannot add value. They can be highly effective as incentives, help to align employee’s and shareholder’s interests, and improve cash flow. But to make effective judgments about company performance, we must recognise the cost as well as the benefit. Although many investors are well aware of the valuation problems that employee share options can cause, in most cases they do not have enough information to reliably take account of it in their analysis. It is time that the ASB, the IASB and other regulators ensured that companies provide us with relevant and useful information.
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HISTORY IS NOT BUNK ‘I’m gonna sit right down, and write myself a letter,’ Sir David Tweedie hummed to himself, ‘and make believe that it came from you.’ So it was (perhaps) that he sat down last year with the other members of the old International Accounting Standards Committee to draft a valedictory statement, explaining their endeavours for the benefit of the incoming board, several of whom then turned out to be the same people. This was duly published in December. However it came to be written, the statement offers some useful clues to the thinking that has guided the work of the IASC, particularly when it comes to issues of measurement. It concedes that the measurement section of the IASC’s Framework ‘is not as helpful at present as it could be’. You can say that again; the section runs to a grand total of three paragraphs, simply listing a number of different measurement bases without any very profound discussion of their relative merits. Certainly the Framework doesn’t justify the increasing use of fair values that has become a feature of the IASC’s pronouncements. The December statement puts forward the argument for using fair values that the Framework fails to provide. Building on the premise that a major purpose of financial reporting is helping users to predict future cash flows, it reasons that ‘Fair value measurement represents the present value of future cash flows and therefore can show directly the potential contribution of an asset to future cash flows of an enterprise or the claim on future cash flows in the case of a liability.’ QED? One obvious snag with basing measurement on future cash flows is that they are necessarily unknown and will only emerge in the fullness of time. Unless an external market price is available, the fair value of each item has to be derived from the company’s own cash projections. A bigger snag is that only some of the future cash flows can be directly associated with particular items in the balance sheet. Financial assets and liabilities present no problems, because they represent direct rights to receive or pay cash. However, receipts and payments generated by future operating activities will have, at best, only an indirect relationship with the non-financial items that are currently on the balance sheet. It is possible to try to force such a relationship (indeed, both the UK and IASC standards on impairment of assets depend on such an attempt), but this kind of exercise soon leads into very deep and muddy water. And it quickly raises questions about the ‘missing’ assets that are needed to plug the gap between the overall value of a company and its reported net assets, whether rationalised as goodwill, other intangibles, ‘real options’ or whatever. It would certainly be unwise to expect that using fair values for every item in the balance sheet would neatly encapsulate the present value of all the expected future cash flows of the company. 387
The Holy Grail? For the sake of argument, however, let’s pretend that these snags do not exist. Imagine that all the future cash flows could be foreseen with certainty, and that they could all be linked to existing assets and liabilities. Would this facilitate an ideal form or reporting? It would certainly convert the balance sheet into a true statement of the company’s economic net worth, which some accountants would regard as the Holy Grail. But it would be less obvious how to present the movements between one balance sheet and the next in an informative way. With perfect foresight, every year’s balance sheet would be founded upon the same future cash flows. As a result, apart from changes in the discount rate, the reported performance for each year would be confined to the effects of rolling the forecast one year on, so that the current year’s cash flows would fall out while the remaining ones were brought a year closer. That may be fine for a valuation model, but it doesn’t provide much insight into the year’s activity, certainly when compared to our traditional p&l account in which the actual revenues achieved in the year are offset by associated costs. Boring is good Yet this seems to be the kind of reporting that a fair value model aspires to, only worse: worse because the snags have to be added back in. since we don’t have perfect foresight, the performance statement would also have to include further components, representing changes in the estimates of future cash flows and the variances relating to previous assumptions. In fact, all of this closely resembles the requirements of our recent standard on pension accounting, but a full fair value approach would extend the same methodology across the board. And we would still have the more intractable problem of linking most of the future cash flows to existing non-financial assets and liabilities. In comparison, boring old historical cost accounting system seems quite attractive. By measuring everything at the amounts at which transactions were undertaken, the link with historical cash flows is preserved. Perhaps paradoxically, this may give users a sounder basis for making their own predictions of future cash flows than a fair value model is likely to do. And in any case, although facilitating the prediction of future cash flows is certainly an important use for accounts, it is not their primary use. A faithful account of the results of an expired period is the first thing that many users want, and is unlikely to be provided by an approach that concentrates on the unknown future to the neglect of the relatively verifiable past.
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ENGLISH in BANKING
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PERSONAL BANKING INTERNET BANKING – first-e, the internet bank25 OPEN ACCOUNT TODAY Next time you find yourself in a High Street Bank, look around your and think how much it must cost to run – a prestige address, a nice office for the manager of the bank, a number of personnel and glossy leaflets. You might as well enjoy it – if nothing else, you are paying for it. The first-e doesn’t apply overheads and bank charges, which means better interest rates for clients. First-e offers high interest on every pound you put in, and they accrue interest on a daily basis, paying it on a monthly basis. There is no tax deduction, as long as you fill in the form they give you. The bank uses the most advanced and secure systems available today to protect your assets, which means that your money is equally safe as it is in a High Street Bank. They provide a number of sophisticated layers which include advanced or hi-tech encryption technology to protect all first-e customers. All you have to do is: complete and submit the on-line application form, after which you will receive a letter of confirmation (a confirmatory e-mail), after which, again, it will be possible for you to have access to your (personal) account and transfer money from your current bank account; then print, sign and post the relevant documents to the bank. Once the bank has received the aforementioned documents (printed and signed), they will straightforwardly confirm that your account is fully active. Your funds can be transferred on-line from one first-e account to another in an easy way, instantaneously and free of charge. Also, the online transfer facility (service) can be used to transfer funds to and from another bank account in the UK, charge excluded. Transfers to another bank normally take three working days to complete. Finally, a word on our experiences from the past: we have all once stood in bank queues, desperately trying to find a deposit slip and fill it in while standing up with a biro on a chain that doesn’t work, trying in vain to get an appointment with some junior manager for an overdraft. With first-e, all of that will be changed, and banking will be made easy and convenient (customer-friendly). The bank has done everything they can to make their services as friendly and simple as possible. 25
first-e is the internet bank, and a trademark used by Banque d’Escompte for banking on the internet. The contents of this site have been issued by Banque d’Escompte which is a French bank, member of the French Banks Association (AFB). Banque d’Escompte is regulated by the Commission Bancaire from the Banque de France and licensed by the Comite des Etablissements de Credit et des Entreprises d’investissements
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In the text, find the words that mean: i.money kept in the bank to earn interest
_____________________
ii.money spent on the general running of a business, not related to producing goods or selling services
_____________________
iii.what customers pay the bank in return for its services
_____________________
iv.amount the bank will pay customers on their deposits
_____________________
v.arrangement allowing customers to take out more money from their account than they have put in
_____________________
vi.funds belonging to an individual
_____________________
Fill the gaps in the following table, using the synonymous or antonymous words from the text: Words/word phrases
Synonyms
Opposites
Put money into account
X
Fill in a form
X
Risky
X
Old-fashioned
X
Present
X
As soon as possible
X
Difficult
X
Cheap
X
Money in your account Complicated
X X
Without charge Impersonal
X X
Explain the following expressions as they are given in the text: -
glossy leaflets
__________________________________________
-
accrue interest on a daily basis
__________________________________________
-
encryption technology
__________________________________________
-
deposit slip
__________________________________________
-
relevant documents
__________________________________________
-
in vain
__________________________________________ 391
Use the following words with the appropriate nouns to complete the sentences below. Use the verbs only once: - apply – offer – deduct – fill – protect – open – submit – transfer – hand – accept 1) The bank _____________________________________ of 5% on all deposits. 2) The customer was asked to ________________________________________ and ______________________________________ at the desk. 3) With internet banking, it is possible to ________________________________ on-line from one account to another. 4) So as to reduce costs, many interest banks don’t _______________________________. 5) In order to _____________________________, or to open a new account, you have to ______________________________. 6) A great number of people _____________________________ at a bank when they start their first job. 7) Interest is paid gross, which means the bank doesn’t _____________________________. 8) Customers needn’t worry about security because the bank uses very sophisticated encryption technology to ______________________________. Explain the following terms, referring to WHO IS WHO in finance: Tax inspector ___________________________________________________ _____________________________________________________________________ Tax consultant ___________________________________________________ _____________________________________________________________________ Bank manager ___________________________________________________ _____________________________________________________________________ Commodity trader ___________________________________________________ _____________________________________________________________________ Accountant ___________________________________________________ _____________________________________________________________________ Finance director ___________________________________________________ _____________________________________________________________________ Market analyst ___________________________________________________ _____________________________________________________________________ Financial advisor ___________________________________________________ _____________________________________________________________________ Insurance broker ___________________________________________________ _____________________________________________________________________ Stockbroker ___________________________________________________ _____________________________________________________________________ 392
Explain the following terms, referring to WHAT IS WHAT in finance: P/L account ___________________________________________________ _____________________________________________________________________ Balance sheet ___________________________________________________ _____________________________________________________________________ Cash budget ___________________________________________________ _____________________________________________________________________ Tender ___________________________________________________ _____________________________________________________________________ Share certificate ___________________________________________________ _____________________________________________________________________ Business plan ___________________________________________________ _____________________________________________________________________ Insurance certificate ___________________________________________________ _____________________________________________________________________ Contract ___________________________________________________ _____________________________________________________________________ Letter of credit ___________________________________________________ _____________________________________________________________________
PERSONAL FINANCE – traditional banking, new ways of banking and personal investing – (Lisa’s and Kevin’s stories on personal finance) Lisa’s story: My name is Lisa, an I have an account at my local branch of one of the big high-street banks. I have a current account for writing cheques, paying by debit card and paying bills. It is a joint account with my husband. Normally, we’re in the black, but sometimes we spend more money than we have in the account and we go into the red. This overdraft is agreed by the bank up to a maximum of $500, but we pay quite a high interest rate on it. I also have a deposit account or savings account for keeping money longer term. This account pays us interest (but not very much, especially after tax!). We have a credit card with the same bank too. Buying with plastic is very convenient. We pay off what we spend each month, so we don’t pay interest. The interest rate is even higher than for overdrafts! Like many British people, we have a mortgage, a loan to buy our house. We
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have a savings account at a building society which is going to be demutualised 26 and turned into a bank with shareholders. All the members will get a windfall, a special onceonly payment of some of the society’s assets to its members. We have some unit trusts, shares in investment companies that put money from small investors like me into different companies. My cousin in the US calls unit trusts mutual funds. I also pay contributions into a private pension, which will give me a regular income when I stop working. I’ve never joined a company pension scheme and the government state pension is very small! Kevin’s story: My name is Kevin. I wasn’t happy with my bank. There was always a queue, and on the bank statement that they sent each month they took money out of my account for banking charges that they never explained. So I moved to a bank that offers telephone banking. I can phone them any time to check my account balance (the amount I have in my account), transfer money to other accounts and pay bills. Now they also offer Internet banking. I can manage my account sitting at my computer at home.
EXERCISES Use the most appropriate words or phrases from Lisa’s and Kevin’s stories to replace the underlined parts: 1) I want to swap £500 from my savings account to my ordinary account, because I don’t want to have the situation where I’ve spent more than I’ve put in. 2) How much is in my savings account? What is the amount in there at the moment? 3) On the savings account, what’s the percentage you pay to savers every year? 4) How much extra money have you added to my savings account in the last three months? 5) On the last list of the all the money going out of and coming into the account, there’s an amount that you’ve taken off the account that I don’t understand. 26
Some companies, like certain life insurance companies, are mutuals. When you buy insurance with the company you become a member. Profits are theoretically owned by the members, so there are no shareholders. In Britain, another kind of mutual is building societies, which lend money to people who want to buy a house. But a lot of building societies have demutualised: they have become public limited companies with shareholders, and this process has been known as the process of demutualization.
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ELECTRONIC CASH – MONDEX PAYMENT SYSTEM Mondex is electronic cash. It is stored securely in a smart card. For consumers, it offers all the convenience, control and flexibility of cash in the familiar form of a card. Retailers will receive funds immediately without the need for authorisation or settlement when consumers pay for goods and services with a Mondex prepayment card. The receipt of value in a Mondex transaction is as immediate and certain, of course, as ordinary cash. However, Mondex value can be banked easily at any time of the day or night. It complements credit and debit cards, delivering new levels of efficiency, cost savings and marketing opportunities for all retailers and service providers. In the new Mondex payment system, monetary value is stored in an Integrated Circuit Chip known as the electronic purse. Purses are held by all participants in the system – personal cardholders, retailers, service providers and banks as well. For personal cardholders, the purse will be a standard, plastic IC card. This can be loaded with electronic value through a Mondex telephone / bringing a new dimension in money management and electronic cash transactions, or in much the same way as cash is currently obtained, for example from a cash machine or a bank branch. To check how much money remains on their card, all cardholders will receive a Mondex balance reader. It is a small lightweight device in the form of a key ring. When paying for goods or services, the exact amount is simply transferred from the card to the retailer’s purse in a Mondex point-of-sale device. No PIN, authorisation or signature is required – just like cash. Telephones are specially adapted to enable cardholders to access their bank account at any time, to withdraw or pay-in value down the telephone line, order and pay immediately for goods and services from a retailer, send and receive money to or from friends and family. For a retailer, this device means that value can be deposited directly into their account at any time of the day and night. The Mondex wallet will make person-to-person payments possible. Electronic cash can be transferred between any Mondex card and a separate purse held in the wallet. The wallet will also read the balance on the card and/or the wallet as well as maintain a log of the last ten transactions. Mondex electronic purse consists of a 4-digit lock code. By pressing the lock key on devices such as a wallet or telephone, the cardholder’s money is kept secure and their transactions private.
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Use the following words to make sentences of your own, based on the text above. Add any other word(s) that you find necessary to connect the parts below: a. electronic money / security / ordinary cash / lock function / not easy / steal. b. POS / by retailer / payment / customer c. company / service / call / provider d. once / pay money / account / make / deposit e. Mondex system / flexibility / easy to use f. wallet / reader / not heavy / carry g. Mondex / to transfer / personal cardholders / (more formal expression for and) / customers – retailers Use the most appropriate word / word phrase to complete the following sentences: 1) When a person _______________________________ card, they must __________________________ the payment _________________________ in order to __________________________ the payment. 2) The number 2683 _________________________ of 4 ______________________. 3) Once a client has _________________________ the _______________________, he doesn’t ________________________ money to the bank any more. 4) The final _________________________ of his account was $234. I have now ___________________________ $50 so $180 still ________________________. Which word used in the text mean almost the same as the following ones: -
amount of money _________________________________
-
adds to
-
ATM
-
not heavy
-
record (v.)
_________________________________ _________________________________ _________________________________ _________________________________
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PICTURES USED IN TALKING ABOUT FINANCE Find examples, picture samples, that best illustrate the following descriptions. broken line
column
curve
dotted line
fluctuating line
histogram/bar graph horizontal axis
line graph
pie chart
row
segment
table
vertical axis
undulating line
solid line
DESCRIBING TRENDS (the alternatives standing for the ways to describe change) What are the opposites of the words given below: rise
________________________
increase
________________________
go up
________________________
climb
________________________
shrink
________________________
expand
________________________
deteriorate
________________________
get better
________________________
collapse
________________________
hit bottom
________________________
Match the following words with the graphs given below: 1. decline
2. collapse 27
3. stay/remain the same/ retain the same position
4. reach a peak
5. edge down 28
6. recover
7. increase steadily
8. fluctuate
9. rise slightly
27 28
synonymous word: downswing to have a slight decline; opposite: to edge up – to slightly increase (or raise share price)
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FINANCIAL NEWS Every day an important piece of financial news is being made somewhere in the word. Choose from the words in the box the most appropriate ones to fill the following short new report. ahead, currencies, weaker, firmed, exception, slipped, fell, recovered, business The dollar opened ____________________ in London yesterday, having ___________________ back sharply in the Far East overnight. During the day, however, it ____________________ its losses against most leading ___________________, with the __________________ of sterling , which held its ground and closed almost a cent __________________ at 1.4385 (1.4295). Sterling also ____________________ over one pfennig to 3.7900 (3.7785) against the Deutschmark. Replace the words in italics with the synonymous ones: varied, slightly, falling, increase, fall, the possibility, range, leading, busy, generally, advances. Share prices again closed higher in active trading on the Northland Stock Exchange, based on a firm domestic bond market and hopes of a drop in interest rates here and in the USA. Prospects of lower interest rates aided gains for banks in general, with Quintorp Bank leading the way with a $1.69 rise. Major electrical stocks were somewhat lower, with the MacOng Corporation easing $1.05. Industrial issues closed broadly higher, with blue-chip issues showing the most volume and the largest gains. In other market news, prices closed higher in Tokyo and Sydney, mixed in London and Milan and lower in Frankfurt, Paris and Zurich.
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TYPES OF COMPANIES For each of the following five main types of legally constituted companies, tick the correct characteristics, or just write ‘possibly’ if the characteristic could apply. Public LC
Private LC
SOLE TRADER
PARTNERSHIP COOPERATIVE
SINGLE INDIVIDUAL OWNS COMPANY
_______________________________________________________________________
2+ OWNERS/DIRECTORS
_______________________________________________________________________
QUOTED ON STOCK EXCHANGE
_______________________________________________________________________
WORKERS RUN THE COMPANY
_______________________________________________________________________
UNLIMITED LIABILITY
_______________________________________________________________________
LIMITED LIABILITY
_______________________________________________________________________
OWNER IS SELF-EMPLOYED
_______________________________________________________________________
KEY TERMS IN FINANCIAL PLANNING Read the following definitions carefully: i. ii. iii. iv. v. vi. vii. viii. ix. x.
It shows how a business might make profits, and is calculated from the relationship between profit and the capital invested in the company, and between profit and turnover. It is the total amount of sales, before costs are deducted. The main product or service the business provides. The profit the business makes before costs are considered. The costs involved in creating a new business. The normal costs of a business, which do not change if production rises. They are also referred to as indirect costs or fixed costs. A calculation of profit after deducting the cost of sales and overheads. All the costs directly associated with producing the products. The amount of sales a company needs to cover all costs. All costs directly concerned with getting customers to buy products and moving them to the customer.
Insert the number of the definition that best suits the meaning of the word(s) below: break-even point gross profit margin setting-up costs
core activity net profit margin turnover
cost of sales profitability
overheads selling costs
Which of the following costs are variable [V] and which are fixed [F]? administrative production
advertising selling
distribution storage
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labour
COST IDENTIFICATION Costs seem to be a major challenge to all companies, and good cost scrutiny is of an essential importance. Read the definitions and complete the phrases that follow, by combining an appropriate word from the box with the word cost(s). Define the remaining ones. - analysis – centre – fixed – labour – manufacturing – operating – price –sales – selling – variable Definition
Type of cost / Cost of…
Usual expenses (rent, heating, lighting), which don’t change by the volume of production Expenses that increase with increased production (labour, raw materials) All those costs directly related to production All those costs directly related to getting someone to buy a product The cost of employing workers and staff
MASTER
BUDGET
- administrative – budget – capital – cash – fixed – forecast – summarise – income – raw – sheet – turnover – variable In business planning, a company financial controller needs to prepare a master budget. This is a budget ________________________ statement which shows __________________________ income and expenditure, and also a balance __________________________. The master budget __________________________ various forecasts, or budgets. Each of the following needs its own __________________________: sales, showing expected __________________________, production, showing all overheads and costs, both __________________________ and __________________________, such as labour, __________________________ materials and components. A separate __________________________ expenditure budget shows major spending on equipment and machinery. Another budget shows all general and __________________________ expenditure that the business needs. Also, a __________________________ budget shows estimated income and expenditure of cash, i.e. not cheque or credit card payments or payments by banker’s order. 400
Which words in the above text mean almost the same as: estimated
______________________
investment
_____________________
revenue
______________________
spending
_____________________
income and expenditure plan
________________________
a regular payment to a creditor’s bank account, where the creditor can change the amounts paid ________________________
29
THE ONE ACCOUNT 30 Use the most suitable words to fill the gaps below: Joe took a _________________ from a bank so that he could buy a new car. The car cost £10,000, and the bank agreed to _________________ him £8,000. About a year later, Joe lost his job and started to worry about his _________________. How could he ___________________ it with no salary coming in? Out of the £8,000 that he had originally _________________, he still ________________ more than £5,000. Read the text in the next page, and answer the following questions: 1. My house is valued at £50,000. Can I borrow £60,000? 2. My house is valued at £50,000. I need an 80% mortgage. Can I borrow an extra £10,000? 3. I plan to retire in 20 years. Can I have 25 years to pay off my mortgage? 4. I want to pay off some of the capital on my mortgage early. Do you make a charge for this? 5. I want to pay off some of the capital on my mortgage early. Will you credit the repayments immediately? 6. If interest rates go up, does that mean that I’ll have to pay more?
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Sales, income, receivables and revenue – indicate money received. Costs, liabilities, expenditure, outgoings, overheads, payments and expenses indicate money paid out. Turnover refers to total money received for all goods and services, sometimes referred to as invoiced sales. The invoice is, of course, the document which records the sale and requests payment. The word turnover is also used in the phrase staff turnover, to indicate the extent to which employees leave the company and are replaced.
30
Taken from The Sunday Times, slightly adapted
401
The vast majority of people will spend most of their lives owing other people money. They do not understand that they can save money, and sometimes large sums of money of theirs, by just consolidating their income, savings and debts into one single bank account. Of course, this is not the traditional way that people run their personal finances, with salaries going into one account, savings into another and a completely different arrangement to pay off the mortgage. The One account allows people to put their savings and borrowings together, keeping the costs of their borrowing to a minimum. When they open the One account, they negotiate an overall borrowing facility that can represent as much as 95% of the value of their home. Thus, a couple with a £100,000 house – needing an 80% mortgage – might set up a loan facility of £95,000, which gives them an additional £15,000 to call on when required. Once the lending facility has been agreed (upon), they can dip into it whenever they want, and, which is of an equal importance, pay it off however they choose. They must satisfy the bank that they will have repaid the debt by the end of an agreed term, such as 25 years. The main proviso is that they must have repaid the debt by the time they retire. Their salary must be paid into the account and they must pay interest (calculated daily) at a current rate. At the same time, the One account is run like any other ordinary bank account (they get a chequebook and bank cards, and there are no restrictions on the number of withdrawals). On the face of it, only a foolish person would put his money into one bank earning interest at, say 6%, and then borrow the same amount from another bank at 10%. But this is precisely what the majority of people are doing – they are funding mortgages at rates much higher than they are getting for their savings. And for much of the time, they are not getting any interest at all on money in their ordinary bank accounts. Most borrowers have little choice about how to manage mortgage debt, other than to pay regular amounts prescribed by the lender. If they want to pay off capital early, they find that some lenders charge for this, while many lenders will not credit any extra capital repayments until the year end. This means that for most of the year, interest is being charged as if for a loan that is bigger than the one that actually exists. Take, for instance, a mortgage of £60,000, repayable over 25 years at an interest rate of 8.55%. Your typical loan repayments would be £490 a month. If, however, your repayments were taken into account the moment they were made, you could repay your loan 11 months early, saving more than £5,000. Where you can really start eating into your debt is by having your salary paid into your mortgage account. As salaries rise – and you can afford to repay more of your debt – the term of what, traditionally, would have been a 25-year mortgage can be cut quite dramatically.
402
Find the word(s) in the text that has/have similar meanings: -
ongoing opportunity to get extra credit without asking the lender
-
period of time in which a loan must be repaid
-
rate of interest which is set at the present time
-
action of taking money from your bank account
-
money which you deposit with a bank, which earns interest for you
-
if you can do this, you are able to pay for something because you have enough money
-
putting everything together
-
to be available
-
take part of it at any time
-
an important restriction
-
it seems obvious
-
fixed
-
gradually reducing (your debt)
-
salary
-
total
-
extra
-
pay into (an account)
-
pay off (a debt)
Use the correct verb / phrasal verb and noun combination to complete the following sentences. Use the following verbs for the above combinations: pay , earn , set , run 1) He ___________________________________________ of 8% on his account. 2) She wanted to start her own business, so she asked the bank to ____________________________________. 3) He lost his job and with no regular income it was difficult to ____________________________________. 4) He was an accountant, so it was not surprising that he was good at ____________________________________.
403
CASH TERMS Combine the following words with the word cash, by putting the word cash in front of or after the following words: advance, budget, delivery, flow, hard, petty, price, ready, settlement -
small amounts of money in notes and coins for regular, small purchases
-
money in notes and coins, not cheques or credit card transfers
-
cash which comes in to a company from sales, after costs, overheads, etc.
-
payment when the customer receives the goods
-
plan of cash income and expenditure
Now define the remaining ones: 1. 2. 3. 4.
_____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ CORPORATE BANKING COMPANIES AND THEIR BANKS
Read the following two letters from the banks to their corporate customers, and find the word(s) or word phrase(s) with the similar meaning: - each year or every year - go above a specified maximum level - keep something at the same level - by the year - amount that partly meets costs but does not cover them completely - fixed amount that has to be paid for a service - having the same value - place where a company carries out its business activities - payable at the end of the month - accounts which earn interest - the bank is going to reconsider the contract - the key landing rate of banks in Britain - is not allowed under the contract
404
___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________ ___________________________
Dear Mrs Phipps On the attached, you will find the Bank’s proposed Schedule of Charges which will take effect as from 1 January, and will be reviewed annually. We very much regret that we are unable to continue offering ‘free banking’ to our customers. This recent change of policy is due to increasing costs, and we feel that if we are to continue to maintain the professional level of personal service that we have always provided to our customers, we must now obtain a contribution to our expenses. You will note that our charges are below the average levied by other UK banks, as we wish to remain competitive in this market. The charges will be debited to your account monthly in arrears. The minimum balance requirement for those accounts which are interest bearing has been reduced from USD 100,000.00 to USD 50,000.00 or currency equivalent. This reduction in the minimum balance requirement will therefore compensate for some of the charges which will have to be paid by yourselves. If you have any questions concerning the new charges, would you please telephone either myself or my colleague, James Samuel. Yours sincerely, ______________________________ Wendy Bracewell, Account Manager Dear Sirs Re: Banking Facilities The Bank is pleased to offer John Best Ltd (The Company) banking facilities on the terms referred to below but otherwise subject to normal banking terms and conditions. Facilities: Withdrawals may be made under the following facilities provided that the total amount of withdrawals at any time shall not exceed the limit. Overdraft limit: £35,000 Availability: The Bank may at any time discontinue all or any of the facilities and / or may demand repayment of all sums owing. The facilities are due for review in twelve months’ time. Interest rate: Interest on the overdraft facility is to be charged at 2.25% per annum over the Bank’s Base Rate as published from time to time. Fees: An arrangement fee of £120 will be payable. Security: The repayment of all monies owed in respect of the facilities will be secured by: Business Premises at 44 Park Road, Bristol. All costs and expenses, as mentioned in the General Terms and Conditions attached to this letter, shall be payable by the Company. To accept this offer, please arrange for the enclosed copy of this letter to be signed and returned. Yours faithfully, _________________ Graham Collins, BRANCH MANAGER
405
SETTING UP A BUSINESS Look at the four formulae below and then complete the conversation: Contribution = sales revenue – variable costs Profit = Total value of contributions – total costs; or Profit = Revenue – {variable costs + fixed costs} Break-even volume of production = Fixed costs / Unit contribution Teacher:
All products sold should make a contribution to the business.
Student:
What is contribution?
Teacher:
It is the total selling price of all goods sold by the company, _____________________
_______________________, less
_____________________
_______________________.
Student:
So, it’s like margin.
Teacher:
Yes, it’s the same as the gross profit margin. But, to calculate profit, you have to consider ______________________ costs. In other words, the total value of contributions less ______________________ and _______________________ costs.
Student:
I see. And when you’ve made enough contributions, you reach your breakeven point.
Teacher:
Yes, that’s right. Then you start to make profit.
Student:
How do you calculate the break-even point?
Teacher:
You have to divide the ____________________ _________________ by the __________________ ________________ or the contribution made by a single item that you sell.
Student:
So, if you raise your price, you increase the value of the contributions.
Teacher:
Yes, but you must not raise your price so much that you lose sales. If demand is __________________, sales may fall.
406
COMPANY ACCOUNTS The financial data produced by British Airways and published on the Internet for investors. Summary group profit and loss account Audited for the year to March 31, 1998 £ million 1998 1997 Most of our revenue was earned from our main business, airline operations 7,881
7,608
761
751
8,642
8,359
2,211
2,248
551
506
Selling costs
1,217
1,187
Other operational costs
4,159
3,872
In total, therefore, our overall Group operating costs were
8,138
7,813
Income from other activities earned This gave us total Group turnover of Our expenses comprised Pay and other employee costs Depreciation of fixed assets
Deducting this from our Group turnover left a Group operating profit of Other income and charges amounted to The net profit on sale of fixed assets during the year was Net interest payable amounted to This produced a Group profit before tax of Then we provided for tax totalling This produced a Group profit after tax of
504
546
80
256
164
20
( 168)
( 182)
580
640
( 133)
( 90)
447
550
Profit or loss from subsidiaries in which we have a minority interest This left a Group profit attributable to shareholders of
13
3
460
553
From this we allowed for dividends representing a total of ( 176)
(154)
Finally, this left a profit retained in the business of
399
284
Earnings per share The standard measure of a company’s profitability is calculated by dividing profit attributable to shareholders by the average number of shares. On this basis, our earnings per share were 44.7p 55.7p 407
Summary Group Balance Sheet Audited for the year to March 31, 1998 £ million 1998 1997 The Group’s fixed assets comprised Our fleet Property Computers, ground and other equipment Investments in other businesses Added together, these represented total fixed assets of Our current assets, mainly money we are owed, our ‘cash-in-hand’ and stock, represented Most passengers book and pay for tickets in advance. This money, and amounts owing to creditors that are payable within one year, totalled Deducting this, gave us net current liabilities of Adding this to the total fixed assets left us with total assets less current liabilities of In addition, we owed to creditors amounts due after more than a year including: Long term borrowings of We have also made provision for other liabilities and charges We also had contributions from a minority shareholder in one of our subsidiaries of Thus our assets less liabilities represented The money invested in the British Airways Group comprised: Our share capita, some 1,038.9 million 25p shares Our reserves Connect the following terms with the correct definitions: Terms
Definitions
Turnover
Amount deducted each year from profits to allow for the fact that assets such as equipment lose their value as they get older Total sales during a trading period People the company owes money to, e.g. suppliers Past profits not paid out as dividends but retained in the business Short-term assets used in operations, e.g. cash, items held in stock Money which shareholders have put into the business Long-term assets owned by the company, e.g. buildings, machinery Expenses of running a business including salaries, rent, etc. but not including the direct costs of manufacturing Result of deducting the operating expenses from turnover Part of a company’s profits paid to shareholders Debts that must be paid within one year
Operating costs Operating profit Depreciation Fixed assets Dividend Current assets Creditors Current liabilities Share capital Reserves
408
Read the following pieces of information: Income from sales Income from consultancy Total Costs: electricity Phone Rent Office supplies Advertising Other selling costs Depreciation Total Profit before tax
50,000 2,500 52,500 500 800 10,500 2,400 4,200 2,900 700 22,000 30,500
Now that you have read the pieces of information above, use the following words and word phrases to complete the sentences below. - was earned – allowed – added to this – comprised – deducting this – overall – amounted to – left – totalled Most of my income ________________________ from sales which ______________________ £50,000. _________________________, I received consultancy fees of £ 2500. This __________________________ a total turnover of £52,500. My expenses ______________________________ : electricity, phone, office rent and office supplies of £14,200. my advertising and selling costs were £7100. I ______________________________ £700 for depreciation. Thus, my _____________________________ operating costs were £22,000. _____________________________ from my turnover ________________________ an operating profit before tax of £30,500. Since you have read the two summaries, find the words in them which fit each of these definitions: -
a standard measure of how profitable the company is
-
money which the company has available to spend immediately
-
the total amount of profit which is given out to the shareholders in dividends
-
goods and supplies which the company has bought but not yet used
-
money which is set aside for possible future expenses
409
Another insight into Balance Sheet understanding and analysis Wallers Bank plc 31st December 1990 1990
1989
£000
£000
Assets Cash and due from banks Loans to banks and public bodies Investment securities Advances to subsidiaries Leased assets Acceptances for customers Premises and equipment Liabilities Current, deposits, and other accounts Deferred taxation Proposed dividends Acceptances for customers Capital resources Share capital Reserves Minority interests Loan capital
410
254 095
235 809
1 159 082
998 129
598 820
572 218
4 795
3 856
MANAGING COMPANY FINANCES OVERHEADS – CASHFLOW PROBLEMS + OTHER DIFFICULTIES – FINANCIAL CONTROL – PRICING POLICIES – OPERATIONS CONTROL – OTHER ASPECTS OF PROFITABILITY
OVERHEADS The following are 16 fixed costs. Categorise them according to the headings: 1. accountancy fees, 2. books, newspapers, 3. car and van hire, 4. car hire purchase agreements, 5. electricity account, 6. employee National Insurance contributions, 7. employer’s liability insurance, 8. equipment, machinery, 9. leasing of computers,
10. mortgage payments, 11. professional indemnity insurance, 12. rent, 13. salaries, 14. secretarial support, 15. stationery and printing, 16. telephone
Services _______________________________________________________ Insurance _______________________________________________________ Property _______________________________________________________ Vehicles _______________________________________________________ Employee costs _________________________________________________ Administration _________________________________________________ Professional fees _________________________________________________ Equipment _______________________________________________________ Miscellaneous_______________________________________________________ CASH FLOW PROBLEMS AND OTHER HURDLES Define the following terms: a. cashflow _________________________________________________________ __________________________________________________________________ b. to reschedule overdraft payments _______________________________________ __________________________________________________________________ c. liquidity problem ___________________________________________________ d. liquid assets ___________________________________________________ e. bad debts ___________________________________________________ f. to go into liquidation _____________________________________________ g. to record a credit deficit _____________________________________________ h. debit balance ___________________________________________________ i. capacity problem ___________________________________________________ __________________________________________________________________ j. opportunity cost ___________________________________________________
411
FINANCIAL CONTROL 31 Businesses have to work out the most efficient ways to produce products and services at a profit. This test has to do with the key terms of financial control. Profitability ROI Liquidity Leverage BEP Efficiency
The amount of products or services a company needs to sell to cover all its costs Ratio of total debts to total assets Measure of profitability obtained from dividing net income by total amount invested Ratio of total sales to total costs of inventory (goods in storage) Ratio of cost to benefit Measure of how well a business can meet its short term cash needs PRICING POLICIES
Read the following interview and complete it with the following words: competition, cost plus, discount, margin, marginal cost, market price, penetration strategy, skimming strategy Journalist: Horst: Journalist: Horst:
Journalist: Horst: Journalist: Horst:
So, in terms of pricing, what mistakes do small companies often make? They take the cost of sales, and add to it – inventing a _____________________. This is a ______________________ _____________________ approach. What’s the alternative? First, fix a price somewhere near or below the competition, the ______________________ ______________________. This can get you market share, using a so-called _______________________ ______________________. What about ______________________ _____________________; just a bit above variable costs? Marginal cost pricing only works if you have a lot of spare stock. It can help with a ____________________ policy. And how can pricing help to build up market share? First, a low price is essential to build up market share in many markets. This is the penetration strategy approach. Or you can have a _______________________ ________________________, with high margins to help to pay costs quickly. This is often used with hi-tech goods. They start expensive but prices come down quickly once the ______________________ arrives.
31
A key function in financial planning is to keep control of investments, or spending. All the terms in this section are important in ensuring the efficiency of a business. Good planning often means making separate calculations and judgements for different activities in the same business. In this way, profitable units can be further developed. Weak units can be changed or abandoned. The correct term for these units is strategic business unit or SBU. A company treats each separate SBU as an individual cost centre.
412
COMMODITY MONEY, PAPER MONEY AND BANK MONEY If we were to reconstruct history along hypothetical, logical lines, w would naturally follow the age of barter by the age of commodity money. Historically a great variety of commodities have served at one time or another as a medium of exchange: cattle (from which comes the Latin stem ‘pecuniary’ and also the words ‘capital’ and ‘chattel’), tobacco, leather and hides, furs, olive old, beer or spirits, slaves or wives, copper, iron, gold, silver, rings, diamonds, wampum beads or shells, huge rocks and landmarks, and cigarette butts. Each of the abovementioned has some advantages and some disadvantages. Cattle are not divisible into small change; but while it is being hoarded such money is likely to increase by reproduction, giving the lie to the doctrine of Aristotle that ‘money is barren’. Wine and beer do not improve with keeping, although wine may. Olive oil provides a nice liquid currency which is as minutely divisible as one wishes. Iron will rust and is of so little value that one would need a cart instead of a pocketbook. The value of a diamond is not proportional to weight but varies with its square; therefore, if cut up into pieces it loses the value. The yearly additions to (by mining) or subtractions from (by use in teeth or jewellery) the accumulated stock of precious metals are small in percentage terms; so that the total amounts and value of these substances do not fluctuate widely. Silver has lustre but will tarnish in air. Gold keeps its attractive sheen, but unless mixed with an alloy is very soft. Gold’s high specific gravity makes detection of counterfeiting and admixture easy; but through most of historical time, gold’s scarcity value has been so great per ounce as to require inordinately minute coins for small purchases. Most kinds of money tended once to be of some value or use for their own sake. Thus even wampum had decorative uses, and paper money began as warehouse or mint receipts for so much metal. But the intrinsic usefulness of the money medium is the least important thing about it. The age of commodity money gives way to the age of paper money. The essence of money, its intrinsic nature, is typified by paper currency. Money, as money rather than a commodity, is wanted not for its own sake but for the things it will buy! We do not wish to use money up directly; but rather to use it by getting rid of it; even when we choose to use it by holding it, its value comes from the fact that we can spend it later on. Money is an artificial, social convention. If for any reason a substance begins to be used as money, all people will begin to value it even if they happen to be teetotallers or vegetarians or disbelievers in its intrinsic usefulness. As long as things can be bought and sold for a given 413
substance, people will be content to sell and buy with it. Paradox: money is accepted because it is accepted! The use of paper currency (dollar bills, fives, tens, etc.) has become widespread because it has many conveniences as a medium of exchange. Currency is easily carried and stored away. By the printing of more or fewer zeros on the face value of the bill, a great or small amount of value can be embodied in a light, transportable medium of little bulk. By the use of decimal points it can be made as divisible as we wish. By careful engraving, the value of the money can be made easily recognisable and can be protected from counterfeiting. The fact that private individuals cannot create it at will in unlimited amounts keeps it scarce, i.e., an economic rather than a free good. Given this limitation in supply, modern currencies have value – i.e. can buy things – independently of any gold, silver, or government backing. The public neither knows nor cares – and needs not know or care – whether its currency is in the form of the so-called ‘silver certificates’, federal reserve notes, or in copper or silver coin. So long as each form of money can be converted into any other at fixed terms, the best is as good as the worst. Along with the age paper money there is finally also the age of bank money, or bank checking deposits. Today, at least nine-tenths of all transactions, by value if not number, take place by checks. An executive will have his salary paid directly into his bank account, after income and social security taxes have already been withheld at the source by his employer. His rent or dentist bills will be paid by check, which his wife may not even give him the privilege of signing. Except then for a little petty cash for lunches and carfares, he may hardly handle any hard cash at all in the course of a year’s time.
414
OPERATIONS CONTROL Another very important aspect of managing company finances is keeping control of operations – this term means all aspects of organisational activity. Read the following text, read the terms from A to I, and try to find the words and / or word phrases to be replaced by them. Operational control brings financial rewards. A number of businesses and organisations have a strategic approach to management. Good operational control is essential. One important tool is the strategic business unit. With this approach it is possible to see the individual contribution that each product makes to the overall company profitability. A further useful tool is the idea of the breakeven point. Using this tool, prices may be raised or cut, but with a proper understanding of the effect. Businesses should also make sure that there is a continually low level of inventory. Holding components or finished products is a waste of resources. It is better to operate a just-in-time approach. Storage is therefore kept to a minimum. Control operations should focus on quality, service, efficiency and effective evaluation of the processes involved. There are three kinds of operational control: precontrol, concurrent control and postcontrol. The benefits of good operational control are shown in terms of increased profit and long term security for the business. A) a focus on the quality of inputs in the production process B) analysis of each separate product as a separate cost centre C) goods in storage D) gross profit margin E) planning, controlling, and monitoring all the activities of the business, so that efficiency is maintained, waste is cut to a minimum, quality is enhanced, customer satisfaction improves and profitability goes up F) policy of taking delivery of goods only when they can be used, and producing to order G) monitoring quality after the production of output of service H) evaluation of the conversion of inputs to outputs as it happens I) demonstrating the volume required at a certain price to produce the required profit
415
OTHER ASPECTS OF PROFITABILITY Match the word phrases with the similar phrases in right-hand column: Capital employed Budgeted income statement Current assets Current liabilities Debtors Net income Stock Turnover Work-in-progress
Forecast profit and loss account Income after all costs have been deducted Total invoiced sales Money invested in the business People who owe money Work which has been contracted but not yet invoiced Finished goods Cash or other items of value which can easily be converted into cash Debts due for payment
Management should be careful with forecasts, because budgeting is not a science and forecasts cannot be exact.
THE IMPACT OF GLOBALISATION ON COMPANIES merger
when one company gains control of another by buying the majority of its shares
acquisition
when two companies, combine to form one new company
securities
a way of assessing the value of a company for shareholders; it includes both dividend payments and the increase in value of the shares over the year
restructuring
traditional way of assessing a company’s performance by dividing its profits by the number of its shares
total shareholder return earnings per share
investments, especially stocks, shares and bonds changing the capital base of a company, i.e. the kinds of stocks and shares that comprise the company’s capital
•
What do you understand by the term ‘global company’?
•
Which companies have merged recently? Explain.
416
Switzerland is one of the world’s most attractive M&A 32 playgrounds. It has several world-class companies with plenty of cash to spend on acquisitions and a rapidly restructuring corporate finance business. Until a couple of years ago, the number of mega-deals could be counted on the fingers of one hand. However, the market took off after 1996. That was the day Sandoz and Ciba, Switzerland’s second and third biggest pharmaceutical companies, announced they were joining forces to create Novartis. Until then, it had been unthinkable that two big Swiss companies, based in the same industry and city, would risk throwing thousands of people out of work by merging. The ideas of one giant Swiss chemical company, or one global insurer, is no longer unimaginable. However, the Ciba/Sandoz press release sent shock waves through the Swiss banking establishment. It revealed that Morgan Stanley had served as bankers for Sandoz and J.P. Morgan had acted for Ciba. The only Swiss bank involved was UBS, and it was given the minor role of banker for the Swiss stock market. Until then, Swiss companies had relied on their Swiss bankers to manage their deals. The days when Switzerland’s most powerful bankers dominated the boards of Switzerland’s most powerful companies are over. A banker’s presence on a client’s board could prevent an investment bank from winning new advisory mandates. The restructuring of Switzerland’s pharma and chemical industries has probably led to more investment banking fees being generated over the past couple of years than had been earned in the past century. More recently, the restructuring has spread to the financial services sector and much of the lucrative advisory work has once again fallen to non-Swiss banks. When Hoechst, the Frankfurt-based chemicals and drugs group, listed its shares on the New York Stock Exchange, it was a symbolic acknowledgement that a company which aspires to be global in operations must also be global in its approach to finance. Intensifying international competition and high domestic costs are forcing German businesses among others into radical restructuring and a much greater reliance on global securities markets. For funding their global ambitions, multinationals increasingly accept that to achieve the lowest cost of capital, they have to tap the international markets. For many non-US companies, a vital element is an equity listing in the US, the world’s most liquid and efficient market. While most European companies still focus on traditional performance measures, US fashions are forcing them to look at new yardsticks, designed to measure the value they are creating for investors, such as total shareholder return. ‘If you are a global company, new valuation techniques are just something you have to take on board,’ says Nick Pasricha of Ernst&Young’s corporate finance practice, ‘because a proportion of your investors are subject to that influence.’
32
Mergers and acquisitions
417
From the previous reading, find the best words or word phrases to complete the sentences below: 1. When a company makes an official statement that is published in the newspapers, this is called a ________________________________________. 2. If a company ___________________________________ its bank, it means that it trusted it completely and would never use another bank. 3. The directors of a company, the people elected by shareholders to carry on the management of that company, are often called the ______________________. 4. Requests to a bank to act for a company are called ______________________. 5. When a company offers its shares for purchasing by the general public, it gets a _____________________ on the stock exchange. 6. A _____________________ stock market is one in which investment can be traded quickly and easily. Which words or word phrases from the previous reading mean: a) mergers between very large companies
____________________
b) expanded suddenly
____________________
c) coming together to form a more powerful group ____________________ d) earning lots of money
____________________
e) wishes to be
____________________
f) get funds from the international markets
____________________
g) ways to measure something
____________________
h) accept
____________________
418
BANK ORGANISATION The following text is about bank organisational structures and how to describe them. It is a short report concerning the reorganisation. The Allied Bank is reorganising its operations into three business sectors: - corporate banking and international banking operations {to be headed by Bernard Rogers, currently Director of International Banking Operations and Deputy General Manager} - the finance operations sector, including foreign exchange operations, short-term money market operations and accounting {headed by Lucy John} - branch network and retail banking sector {David Lacey has been named Deputy General Manager with responsibility for the aforementioned}
Find the definitions for the following words. Choose from the definitions in the next page: - credit policy
_________________________________________________
- comptroller’s dept. _________________________________________________ - bullion
_________________________________________________
- line division
_________________________________________________
- commercial paper _________________________________________________ - municipal bonds
_________________________________________________
- merchant bank
_________________________________________________
- clearing bank
_________________________________________________
- wholly-owned subsidiary ___________________________________________ - syndicated loan
_________________________________________________
- documentary credit_________________________________________________ - correspondent banking
___________________________________________
- currency option
_________________________________________________
- bonds
_________________________________________________
- floating rate note
_________________________________________________
- financial futures
_________________________________________________
- divestment
_________________________________________________
- USM flotation
_________________________________________________
- investment trust
_________________________________________________
- unit trust
_________________________________________________
- offshore funds
_________________________________________________
Definitions: 419
i. a report presented each year, giving details of the company’s activities and financial performance during the previous financial year ii. formed or structured in a new way iii. sections of a company which deal with different products or services from each other iv. people who buy goods or services v. in your own country, not abroad vi. management of a client’s collected investments vii. short-term documents usually sold by big US corporations, promising to pay a specified sum of money on a particular date; they may be sold again by the buyer viii. documents issued by a local government authority, promising to repay loans at a certain time ix. bars of gold or silver x. employees, staffers xi. buildings and surrounding land xii. a department which controls the internal finances of a company xiii. deciding the main aims of an organisation xiv. plans for the lending of money xv. the selling-off of interests xvi. a very large loan for one borrower, arranged by several banks xvii. money overdrawn on bank accounts to agreed limits xviii. documents promising to pay sums of money at specified times xix. money placed in countries with very low taxes xx. the joining of two or more companies into one xxi. a bank which is a member of a central organisation through which cheques are presented for payment xxii. activities where one bank acts as an agent for another bank xxiii. a contract where the buyer has the right to demand purchase or sale of a specified currency, but no obligation to do so xxiv. a bank mainly concerned with the financing of international trade xxv. an organisation which collects and pools money from many small investors and invests it in securities for them xxvi. a company entirely owned by another company xxvii. a limited company formed to invest in securities xxviii. a method of financing international trade where the bank accepts a bill of exchange from the exporter for the invoice amount, in return for receipt of the invoice and certain shipping documents xxix. the buying of a majority of the shares of companies xxx. contracts to buy or sell currencies, bonds and bills, etc. at a stated price at some future time xxxi. note on which interest rates are fixed periodically, and which can be traded on the market xxxii. document given for a deposit repayable on a fixed date, the currency being dollars which are deposited outside the USA xxxiii. the keeping of financial records and their periodic examination xxxiv. the starting of a new limited company, where the shares are not included in the official list on the Stock Exchange The following text is an abstract from an annual report of one of the world’s largest banks. On the basis of the text, draw up and complete the organisation chart.
420
To service the needs of different client groups effectively, the Bank is organised into three broad groups: the Domestic Banking Group, the Corporate Banking Group and the International Banking Group. The basis of the Bank’s strength continues to be its domestic banking operations. The Domestic Banking Group’s network of 295 branches provides a full range of banking services nationwide and is the largest network in the country. The Corporate Banking Group is responsible for servicing the complex needs of over 200 of the nation’s largest corporations. Of the Bank’s total domestic deposits and domestic loans outstanding, the Corporate Banking Group accounts for 25 per cent and 40 per cent respectively. The Bank continues to develop and expand its international operations, and in fiscal 1991, foreign earnings surpassed those of the country’s other leading banks for the fourth consecutive year. Since January 1 1990, the Bank has opened six new representative offices and has upgraded the Rome representative office into a full service branch. Our strong international presence is currently maintained through 12 branches, 18 representative offices, two agencies and 10 subsidiaries and affiliates. The International Banking Group includes regional departments which assume responsibility as follows: the Americas; Africa, Middle East and Europe; Asia and Oceania. The Group includes both the Correspondent Banking Department, which is in charge of the Bank’s correspondent banking network of some 1,500 institutions, and the Merchant Banking Department. Also, within this Group, the International Treasury Department specialises in foreign exchange and funding operations, while the International Planning Department is responsible for strategic planning. The International Business Supervision Department is responsible for the assessment of country risk and corporate credits, as well as for systems development and for ensuring compliance with regulations regarding international business. The bank continues to respond well to market dynamics both at home and abroad. Part of the Bank’s strength lies in the wide spread of its representation and in its ability develop sophisticated new services to meet the changing patterns in banking opportunities. The Bank’s aim is to ensure the continued prosperity of the group by means its dedication to service and by expanding the scope of its activities, both geographically and functionally. We believe that we have the right organisation to do this in the period ahead.
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The ORGANISATION OF THE EUROPEAN SYSTEM OF CENTRAL BANKS (ESCB) and European Central Bank – Success of ECB Critical for Banking Industry The ESCB is composed of the European Central Bank and the national central banks of the European Union member states. In accordance with the ESCB Statute, the primary objective of the ESCB is to maintain price stability. The basic tasks to be carried out by the ESCB are to define and implement the monetary policy of the European Union, to conduct foreign exchange operations, to hold and manage the official foreign reserves of the Member States, and to promote the smooth operation of payment systems. To add, the ESCB contributes to the smooth conduct of policies relating to supervision of credit institutions and the stability of the financial system. It also has an advisory role on matters which fall within its field of competence. Finally, in order to undertake the tasks of the ESCB, the ECB shall collect the necessary statistical information. The ECB is run by a six-member executive board headed by the ECB President and Vicepresident. The four other members are in charge of payment systems, banking supervision, international relations, organisation, statistics, banknotes and information systems. The ECB took over from national central banks in setting interest rates from January 1999. interest rates are now set by the ECB’s governing council which consists of the six-member executive board and the presidents of the national central banks of the participant countries. The all-powerful council will ensure the continued influence of national central banks in the decision-making process. The majority of the presidents of the NCBs versus the six ECB ‘insiders’ will ensure that national interests will not be ignored under the European Monetary Union (EMU). Some critics, however, have argued that this could give rise to a potentially destabilising situation. The ECB’s legal mandate is to pursue monetary policy with a view to the whole of the EMU area and without favouring one country over another. Yet, if several national central bank presidents were to form voting pacts, they could in theory outmanoeuvre the six executives. Compared to the national central banks, the ECB will be relatively small. While the Bank of France and the Bundesbank each employ more than 10,000 staff, the ECB will have to do with only 500 employees. The comparison is not entirely fair because the ECB’s staff will be primarily engaged in research, security and payments systems, while most of the staff at NCBs are involved in areas such as logistics and administration. Because the national central banks will remain large and important, the transition to the new regime will not mark a sudden shift. The Bundesbank will continue to exist and fulfil all its current functions except setting interest rates.
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Say what the following expressions in the left-hand column denote: Organisational structure
Responsibility
Change
Comparison
Consist of Transition Be headed by Contribute to Be composed of Undertake Give rise to Be run by Relatively small Compared to Take over from Ensure Be in charge of Shift Now that you have read the text, say which words or word phrases from the text have the similar meaning: -
an obligation conferred by law
-
to get an advantage by being more skilful than your opponents
-
in opposition to
-
conforming to a law or regulation
-
an agreement between several parties to vote in the same way for their own advantage
Use the following verbs to make the collocations as they appear in the text above: 1) set
_______________________________________
2) fulfil
_______________________________________
3) conduct
_______________________________________
4) hold / manage
_______________________________________
5) define / implement / pursue _______________________________________ 6) collect
_______________________________________
7) maintain
_______________________________________ 423
MEASURING COMPANY PERFORMANCE Key terms in measuring company / financial performance In your books and (good) dictionaries, find the definitions for the following phrases which are commonly used in considerations of the financial strength of a company: a) company accounts ___________________________________________________ _____________________________________________________________________ b) opening balance ___________________________________________________ _____________________________________________________________________ c) closing balance ___________________________________________________ _____________________________________________________________________ d) capital expenditure ___________________________________________________ _____________________________________________________________________ e) interest paid ___________________________________________________ _____________________________________________________________________ f) abbreviated accounts _____________________________________________ _____________________________________________________________________ g) debts equity ___________________________________________________ _____________________________________________________________________ h) extraordinary items ___________________________________________________ _____________________________________________________________________ i) liquid assets ___________________________________________________ _____________________________________________________________________ In the following sentences, use other words than the ones in italics to replace them: a. Unpredictable and exceptional costs should be a separate item in the financial report. b. The trading income needs to be increased each year so that the company can make decisions to buy new plant and equipment. c. The company accounts have been checked and approved by an independent financial expert. d. Shareholders expect to see the short description of the company’s financial positions. e. Income during the present tax year is less than last year. f. Pre-tax earnings are down. g. The total value of a company once all liabilities have been paid. h. A successful company needs property and investments that can be easily converted into cash.
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Instead of the words underlined in the following Balance Sheet Sample, use the ones given here: BANK OVERDRAFT, CAPITAL RESERVES, CREDITORS, LAND, ORDINARY SHARES, PLANT, PREFERENCE SHARES, SHARE CAPITAL, STOCK TAX, WORKING CAPITAL
BOGUS INDUSTRIES Balance sheet as at 31 December 2001 ASSETS Fixed assets (1) Property Buildings (2) Equipment and machinery Total fixed assets Current assets (3) Raw-materials, work in progress, finished goods = (3) goods held in storage Debtors Cash in bank Total current assets Current liabilities (4) People owed money (5) Money owed to the bank (6) Money owed to the government Total current liabilities (7) Net current assets Net assets CAPITAL (8) Money invested in the company and represented by shares (9) Shares paying a variable dividend to shareholders (10) Shares held in a special fund used to pay off creditors if the company goes into liquidation (11) Shares paying a fixed dividend to shareholders Total
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FOREIGN EXCHANGE Read the text and say whether the following statements are true or false: In a quiet week, the US dollar continued its upward course, again trading at nearly three Deutschmarks. The dollar was supported by commercial demand, as normal interbank trading declined and the market’s major operators began squaring their positions for the year end. The forecast of lower US interest rates and of a cut in the Federal Reserve discount rate did not lead to any downturn in the US currency and the dollar closed at DM 2.9925. The DM was hardly changed, moving in a narrow range in lack-luster trading in Frankfurt. There was no central bank intervention to weaken the dollar against the mark. Trading volumes were low as the markets decline towards the end of the year. Sterling has been volatile lately, due to its status as a petrocurrency, and at the beginning of the week, it fell against the dollar and other major currencies, as North Sea oil prices eased on the European spot market. Friday saw a slight recovery, however, due to the covering of short positions, and at close of trading the pound stood at USD 1.3016. Falls in oil prices have opposite effects on the pound and the yen, as Japan needs to import nearly all its considerable energy requirements. This has meant that the yen has continued its steady climb, levelling slightly towards the end of the week. Against the dollar, it has remained little changed since mid-January, but the yen has outperformed European currencies for most of the year. Sterling started the year at around JPY 325, touching a peak of JPY 344 on May 14. It closed on Friday at JPY 337. i.
The report was written in mid-January.
ii.
The dollar firmed up against the DM during the week.
iii.
Big banks were more interested in balancing their currency positions than in normal trading.
iv.
Possible changes in the US interest rates and the discount rate did not affect the dollar rates.
v.
The DM was traded in large amounts in Frankfurt.
vi.
The exchange rates of the British pound have changed quickly recently.
vii.
Banks were dealing in sterling on Friday in order to square their currency positions.
viii.
Falls in oil prices mean that the yen rates go up.
ix.
The yen rate against the dollar has been roughly the same for eleven months.
x.
It is possible to buy more yen with Swiss francs now than it was earlier in the year. 426
BANKS THAT MAKE PROFITS Connect the words in the left-hand column with their respective definitions: - net interest margin
a) money reserved to cover bad debts
- provisions
b) profit as a percentage of shareholders’ capital
- return on equity
c) difference between interest income and interest payments
- money transmission system d) method of transferring funds from one person to another On the basis of the text below, replace the words in bold with their synonyms: (1) Banks are affected by the state of the UK economy in general. (2) The UK has a very established loan market. (3) It’s difficult for a large bank to increase loan and deposit volumes. (4) The UK’s seven principal banks set aside about £6.5bn of bad debt provisions. (5) Banks have closed thousands of b ranches over the last ten years. (6) Many routine banking tasks are dealt with by computer. (7) Technologically, British banks are behind their French competitors. (8) A bank branch is expensive to operate. (9) Few people change banks in Britain. (10)
Most UK banks still make huge profits.
What do the following terms mean, according to the text: -
troubled rash trading let its operating costs run out of control customer inertia stripping out costs reaped most of the benefits
Which words in the text mean the following: -
total amounts or quantities system of local offices spread around the country highest level recorded over a period designed so as to be of maximum benefit to the consumer when the value of a deposit is added to an account balance banks with the biggest share of the market 427
Andrew Buxton, chairman of Barclays, ought to have looked a troubled man as he presented his bank’s annual results last week. In the last year, Barclays had lost a chief executive, dropped £205m on rash trading in the bond markets, another 153 million pounds ob bad loans to Russian customers, and had let is operating costs run out of control. Yet, Barclays somehow managed to make profits of £1.9bn. In the same year, Lloyds TSB reported a 14-percent increase in its pre-tax profits to £3.29bn, equivalent to an after-tax return on shareholders’ equity of 33 percent. And other British banks made similar profits. So, where do these profits come from? And why have they not been lost to the competition from other institutions? The first part of the answer lies in the condition of the UK economy at large. In principle, bank profits are built for the most part on the volumes of loans they make and the deposits they collect; the margins between the interest rates for these two sides of their balance sheet gives them their profits or losses, too. But in a mature market such as the UK, it is hard for a very large bank to expand loan and deposit volumes much beyond the level of the economy as a whole, and even harder to widen net interest margins. The biggest factor in bank profits has therefore been the level of bad debts. In 1992, when banks’ accounts showed the worst of the effects of the last UK recession, the seven principal banks set aside £6.45bn of bad debt provisions between them. Last year, the total for the same group is estimated to have been around £2.6bn. The other side of British banks’ profitability reflects an interplay between technology-based efficiency gains and customer inertia. Banks have become more efficient over the past decade, stripping out costs as new computer systems and telecommunications networks have enabled them to set up industrial-scale processing plants for tasks that used to be handled by clerks in the back of each branch. Branches are expensive to run. And the network has been whittled down from a peak of 21,800 branches in 1985 to around 15,000 today. Each branch, too, has fewer staff. One of the most frequent complaints is the disappearance of the human touch in the bank branch. Yet customers have reaped most of the benefits of the banks’ efficiency gains – cash dispensed at the touch of a button by machines, instant account balances, transfers and even loans available over the telephone. However, British banks remain years behind their French rivals in electronic banking. Nor is the UK’s money transmission system the most consumer-friendly in the world. Customers in New Zealand and Canada get deposits credited instantaneously, while in the UK they must wait days. Competition in financial services has been steadily increasing since the 1980’s. Yet the British consumer is more likely to swap a wife or husband than a bank. With such undemanding customers, leading banks could have years of fat profits ahead of them.
428
MERGERS AND ACQUISITIONS. BANK MERGERS SURVIVAL OF THE BIGGEST How big is (really) big? A wave of mergers and acquisitions has completely reshaped the face of the international finance industry. Across a range of financial sectors, the tables are being cleared for a handful of giants, with room still for niche players but little space for the middle-sized. The most dramatic changes came in the investment banking area, where a range of specialised or regional investment banks found new commercial banking parents. Many investment bankers now believe the battle for membership of dominant firms is reaching its closing stages. In a lot of industries such as telecoms, pharmaceuticals etc., it is not unusual to see five global giants survive. Five seems to be a magical number. In investment banking, too, you will see a handful of global firms which have the cost base but also have the revenue base to support this vision. Some banks have already reached the conclusion that they cannot realistically hope to be part of that select group, and have scaled back their investment banking ambitions. In the UK, both Barclays and National Westminster have sold most of their equity operations and now concentrate solely on debt – more closely linked to their traditional banking business. Spiralling pay packets for traders and investment bankers have made it difficult for the mid-sized contenders to stay in the race. They have to pay people just as much or more, but don’t get as much revenue out of them as a global firm. In the retail banking sector, some of the talk sounds familiar. The Chairman of First Union has recently warned smaller traditional banks that they were a ‘declining and dying business. Merger mania will last until there are 10 or 12 or maybe 15 dominant financial services.’ But with very few exceptions, consolidation in the retail banking sector remains national in character. ING’s takeover of Banque Bruxelles Lambert in Belgium represents one example of a cross-border deal. But most efforts to cross national boundaries have not worked so far. In the US, there remains plenty of room for consolidation without stretching overseas. The number of commercial banks has shrunk from 11,462 in 1992 to 9,215 this year, but that still leaves the US with far more financial institutions in proportion to its population than comparable countries. In countries such as the UK and France, there may be room for further consolidation, but banks in the Netherlands and Ireland already have to look abroad for a second home market. Retail banking has proved resistant to economies of scale. In specific activities such as credit card processing, unit costs fall rapidly with size. In banking more generally, however, the complexity of operations reduces the benefits resulting from size. That may be changing with increasing Information Technology use in banking. The costs of software development are one of the biggest factors with 14 banks estimated to be spending more than $1 billion a year on Information Technology.
429
Connect the terms with their definitions: - consolidation - equity operations - unit cost - cost base - niche - parent company - retail banking - investment bank - commercial bank
a) division of a bank dealing with share issues and share trading b) bank acting as an intermediary between companies and the investing public c) bringing together of two or more companies, as in a merger d) provision of basic banking services to individuals and companies e) place in the market for a specialised product or service f) company owning more than 50% of another company g) total cost divided by the number of items handled h) large size providing the means for costs to be minimised i) bank involved in international trade and corporate banking
Which word(s) in the text have the similar meaning: 1] people or companies competing to win something or gain an advantage over something 2] temporary phase when everybody wants to merge 3] merger or takeover between companies in different countries Word fields: Find the words in the text which belong to the following two categories: Words meaning TO GET BIGGER Words meaning TO GET SMALLER _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _________________________________________________________________ What do the following expressions mean, according to the contexts given in the text? -
wave of mergers reshaped the face of the international financial industry tables are being cleared reaching its closing stages handful vision concentrate solely on comparable countries has proved resistant to unit costs fall rapidly with size
430
SHARE CAPITAL AND DEBT Capital is said to be the money used by a company to operate and develop. There are two main ways in which a company can raise capital (find the money it is in need of). It can either use share capital or loan capital, from investors – people / organisations that invest in the company. By investing, they hope to make more money. Share capital Share capital is contributed to by shareholders who put up money and hold shares in the company. Each share represents ownership of a small proportion of the company. Shareholders receive periodic payments called dividends, usually based on the company’s profit during the relevant period. Capital in the form of shares is also known as equity. Loan capital Investors can also lend money – in that case they don’t own a small part of the company. This is loan capital. An investor or a financial institution lending money in this way is a lender. Since the company borrows that money, it becomes a borrower, and may refer to the money as borrowing or debt, the total amount of debt being known as the company’s indebtedness. The sum of money which is borrowed is known as the principal. The company has to pay interest, which means the percentage of the principal, to the borrower, whether it has made a profit in the relevant period or not. Security This lending to companies is often in the form of bonds or debentures – these being loans with special conditions. One condition is that the borrower must have collateral or security – if a borrower cannot repay the loan, the lender can take equipment or property, and sell it in order to get their money back. This may be an asset which was bought with the loan.
431
Leverage Many companies have both loan and share capital. The amount of loan capital that a company has in relation to its share capital is its leverage. In British English, it is called gearing. A company with a lot of borrowing in relation to its share capital is highly leveraged or highly geared. A company that has difficulty in making payments on its debt is overleveraged. EXERCISE From the words in brackets, use the correct ones to fill the gaps: She started 16 years ago with (capital / dividends) of $A50,000. She had one small restaurant in Sydney an now she has twenty all over Australia. Her (borrowers / shareholders) were members of her family: her parents, brothers and sisters all put (out / up / off) money. They did not receive any (dividends / shares) for the first five years: they all put all their profits back into the company! Today, they want to increase the amount of (equity / dividends), so they are looking for outside (borrowers / lenders). (Lenders / Shareholders) have been very helpful. They (obtained / dismissed) $A50,000 of (loan capital / share capital) from a bank when they started. Now they have paid off all the (dividends / principal) and (interest / shares) after seven years. They have taken out other loans recently, but their (lending / indebted-ness) is not bad in relation to the size of the business.
432
MERGERS, TAKEOVERS AND SELL-OFFS STAKES AND JOINT VENTURES A stake – an interest – a holding in a company: the shares that one investor has in a company. A majority stake – interest – holding: when 50%+ of the shares of a company are owned by one investor, giving them control over how it is run. A minority stake – interest – holding: when one investor owns less than 50% of the shares of a company. It is also possible for a company to ally or join forces with another company working in the same area, thus forming alliances and / or joint ventures. It is also possible for them to remain separate companies or to form a brand new company which they both have a holding in. Extracts on mergers and takeovers:
General Oil and PP have announced they are going to merge, which is thought to be the biggest ever merger in the oil industry. Blighty Telecom is to split into two, and demerge its fixed line and mobile businesses as part of on-going restructuring. The aim of this demerger is to cut debt by £10bn. Ciments de France is to acquire Red Square Industries of the UK for 3.1 billion euros, which is a friendly bid, as RSI are likely to welcome it and accept it. But the takeover comes only a year after they rejected a hostile bid, an unwanted one. Abbot Bank is doing badly, and may become the victim of predator. There were rumours of a possible takeover by Bullion, but it says it won’t play the white knight for Abbot by coming to its defence. This leaves Abbot exposed to acquisition, and it may be prey to a big international bank. Abbot does have a poison pill, however, in the form of a special class of shares that will be very expensive for a predator to buy.
433
CONGLOMERATES 1985: Low-price genera retail Cotton Stores acquires Bestco supermarkets and diversifies into food retailing. 1990s: Cotton makes a series of acquisitions of retail and non-retail businesses, and becomes the parent company in a conglomerate or combine, with the other businesses as its subsidiaries. 2000: Shareholders complain that Cotton Group is unfocussed. They demand that its CEO should dispose of non-retail companies, which they describe as non-core assets, and reinvest the money in its main, core activity: retailing. They say that this divestment and restructuring is necessary for future growth and profitability. EXERCISE Use the right word to fill each gap below: A company with d____________________ may decide to limit its a___________________ by selling those s___________________ that do not fit _____ ______ its overall s____________________. The board of the p_________________ c________________ may talk about d_______________________ and r____________________ , and getting ____ _____ particular businesses. In this case, the group d___________________ o_____________________ its n____________________-c_________________ a_____________________, and uses the money to i___________________ in and concentrate _____ its c_____________________ activities.
434
CHECK TEST 1 Complete each sentence with the correct word. The first letter of each word has been given: i.
If you want to borrow money to buy a hose, you should ask the bank for a M…
ii.
The bank has raised its interest R… to 16%.
iii.
If you have not enough money in your account to pay your bills, you will have to ask for an O…
iv.
The general running costs of a company, such as electricity and rent, are known as O…
v.
The amount stored on a smart card or in your bank account, is called the B…
vi.
With the Mondex smart card, you can T… funds from one card to another.
vii.
Whereas you pay interest on a mortgage, you E… interest on a savings account.
viii.
He has settled some of his debt, but he still O… $4,000.
ix.
Some banks C… for their services in order to cover their costs.
x.
The total sales during a trading period is called T…
xi.
A company which owns one or more subsidiaries is called a P… company.
xii.
The strategy formulated by a government or central bank for maintaining the stability of the currency and reducing inflation is called monetary P…
xiii.
A fall in business activity which affects the national economy is called a R…
xiv.
When two companies combine to form one new company it is called a M…
xv.
Banks have maximised profits because new technology has made them more E…
From the words in brackets, underline the one which best fits in: (1) Bank customers who are not business customers are called (single, personal, individual, general) customers. (2) If you pay by credit card, you have to (authorise, withdraw, deposit, transfer) the transaction by signing a payslip. (3) A device which the retailer uses to receive electronic payments is called (an ATM device, a cash machine, a POS device, an electronic purse) (4) At the age of 60 or 65, people generally (withdraw, resign, retire, retreat) from work. (5) The bank granted a loan for a two-year (repayment, rate, time, term). (6) The bank withdrew the facility after the company has (exceeded, reached, touched, stayed within) their overdraft limit too often.
435
(7) The customer signed the contract to show that he (applied, admitted, accepted, received) the terms and conditions. (8) Interest is charged at the current rate, which is 2.5% above the (lowest, base, average, minimum, maximum). (9) These rates are fixed until 1 January when they will be (re-valued, reviewed, retained, reinstated). (10)
Possessions acquired by a company for long-term use (e.g. buildings) are called
(long-term assets, fixed assets, current assets, tangible assets). (11)
The part of a company’s after-tax profits distributed to shareholders is called
(dividends, reserves, earnings per share, retained profit). (12)
Money which a company sets aside to cover bad debts is listed in the balance
sheet as (deductions, retained profit, reserves, provisions). (13)
People who are owed money are called (creditors, debtors, lenders, liabilities).
(14)
Current liabilities are (added, divided, reduced, deducted) from current assets to
give net current assets. (15)
The costs of salaries, heating, lighting and rend (amounted, added, totalled,
summed up) to almost 2.4 million. (16)
Measuring the profitability of a company by dividing the profit attributable to
shareholders by the number of shares in issue is called (earnings growth, earnings per share, dividend, total shareholder return). Use the word/words that best fill the gaps below: (17)
Stocks, shares and bonds can collectively be called …
(18)
To sell its shares to the general public, a company must be … on the stock exchange.
(19)
One of the functions of a central bank is to … the activities of banks operating in
the country and to make sure that their customers are …. (20)
When a central bank tries to prevent inflation, it is said to be … price …
(21)
Banks make profit on the … between the … received on loans and the interest paid on …
(22)
The principle that the larger the company is, the lower its average costs is called …
(23)
Banks which provide basic services to individuals and businesses through their
branch network are called…
436
(24)
Profits reached a … last year, when bad debts were at their …, and the customer
base expanded. (25)
Lloyds TSB is one of the … banks in the UK.
437
FURTHER READING THE INVISIBLE MAN Just as there are those who fantasise about committing the perfect crime, there are also individuals (so I am told) who spend their idle moments contemplating the foolproof fraud. In years of advising in forensic cases I cannot say that I have encountered a ruse that is entirely flawless, but I have certainly seen some that were fiendishly clever. Most attempts to dream up the perfect swindle work on the McDonald’s principle: you may not make much profit from a single Big Mac, but you undeniably sell an awful lot of them. A couple of years ago, a celebrated American hacker turned fantasy into reality. Using his exceptional computer skills, he managed to divert a few cents from millions of bank accounts into his own pocket, rightly guessing that no one would notice such a tiny discrepancy. In the end, as I recall, he was detected only by pure chance. When the matter came up to light and made global headlines, the thief became an instant folk hero. Partly because of the sheer ingenuity of his scheme, and partly because no one suffered any real loss, people around the world found it difficult not to admire his audacity. Crime without a culprit But if this was a crime without a victim, one of the more unusual frauds I have come across was just the opposite: it was, in a sense, a crime without a perpetrator. A UK company acted as a type of clearing house for a battery of small importers – they found it more cost-effective to validate orders, confirm delivery dates, deal with any Customs red tape, check that the goods were received in suitable condition and forward them to the purchaser. 438
Inevitably, there were occasions when the goods were damaged in transit, or in some way not as specified. When this happened, the clearer put in a claim to the overseas supplier and passed on the refund to the importer. A member of the company’s staff was quick to spot the opportunity. He realised that when a claim was relatively modest, as most were, it generally went through without query. Moreover, damaged goods were seldom returned, but were usually discarded as having no realisable value. Modestly at first, and then with increasing frequency, he began to add small sums to the amount claimed. Each time he made a full payment of the money the importer was expecting, and put the rest in his pocket. As is so often the way with fraud, the scope of his ambition soon widened. From time to time, an importer would be entitled not only to payment for defective products, but also compensation for loss of profits or even damage to reputation. These claims were uncommon, but, as the fraudster realised the potential, they gradually became more frequent. It might be wondered why such compensation claims were never challenged. The explanation is that he was careful to submit the demands only to suppliers who enjoyed a long business relationship with the importer in question, and who were disinclined to quibble. Moreover, as he dealt with a wide range of suppliers, he only needed to target them occasionally. Year by year his takings grew, and it seemed almost impossible that he would be caught. The suppliers were unaware of his existence, and assumed that the claims he generated came directly from their customers. He was the invisible man, siphoning off cash without appearing to be involved in the transaction.
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Alas, all good things come to an end. On one occasion, a supplier was concerned that a particular importer had happened to suffer the loss of a business opportunity because of a botched delivery. Anxious to make amends, he telephoned the managing director to offer his personal apologies. The puzzled managing director said that only a small portion of the goods had been defective and no opportunity had been lost. The supplier replied that the claim he had received suggested otherwise. To begin with, they assumed that a simple clerical error was to blame. But as they talked, it became apparent that there was another explanation. Although that put an end to the dishonest money-making scheme, it is interesting to note that no prosecution followed and the thief suffered nothing worse than the loss of his job. Partly because his employer wished to avoid damaging publicity, and partly because it would have been a huge task to review several years’ claims, the company decided to chalk it up to experience and leave it at that. Too much temptation If there is a lesson to be drawn from this, it is that minor discrepancies in paperwork are not always clerical errors. However, as companies and auditors will work on the principle of materiality, small ‘mistakes’ tend to go uninvestigated. Is there a solution to this? It is unrealistic to expect a detailed search every time an apparent error of a few pence emerges. But when such discrepancies tend to crop up repeatedly, this could well be a warning that something more serious is afoot. Another point to bear in mind is that the thief in the story I’ve just told was able to practise his deceptions because his work went unchecked. I have said on more than one occasion that this is always a dangerous arrangement. I always believe that companies have a responsibility to avoid dangling temptation in front of their staff. The overwhelming majority of employees are honest, but there is little point in putting that to the test.
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E-FINANCE A REWARDING JOURNEY When the going gets tough – and the current economic uncertainty is already affecting business performance and job security – large organisations need to be able to trim operating costs to the bone and react swiftly to market changes. However, multinationals and corporates, with multiple layers of reporting and accounting, and diverse finance and control systems are often hampered by their sheer size and complexity. Their response is often to batten down the hatches and weather the storm, holding their strategic course, whole cutting back on non-essential expenditure. Unsurprisingly, investment in IT is often a casualty. However, putting the right technological infrastructure into the heart of the company is exactly what smart organisations need to do, both to cope with the downturn and to be ready for the networked future. When e-finance is embedded into an organisation, running costs can be cut by 20% and the web-enabled company becomes a much more agile beast, ready to restructure or re-focus in a dramatically reduced timescale. When manual transactions are consigned to history, when orders are generated through the internet, and when the whole supply chain is supported through web-enabled self-service systems, operating costs tumble. Equally, all the paperwork connected to staff expenses, office supplies procurement and other basic administrative finance tasks is dealt with electronically, so finance professionals can concentrate on things that really matter to the business, rather than the paper-filled in-tray. Given that around 60% of a finance department’s costs are eaten up by transaction processing, it’s easy to see how a technical solution that eliminates manual processes can make a chief financial officer sleep more easily when the threat of recession looms. Flexibility and speed are just as important, and there are many examples of the world’s leading companies using technology to increase both. Motorola, for instance, decided to reshape its global semiconductor operations from a regional to a product-based structure. The fact that executives were given only 45 days’ notice of this massive reorganisation, and that all the necessary management information was available from day one, was only possible because Motorola had made the right IT investments. Their new system gave them the agility to restructure in a very short timeframe, and their technology infrastructure meant that business-critical information was available for whoever needed it, wherever they happened to be.
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Where to start? However, transforming a traditional finance department into a modern e-finance function doesn’t happen overnight. It demands effective prioritisation and ruthless execution, while tackling the most fundamental elements of any business. But some CFO’s, while recognising the need for change, can be bewildered by the choices of packages facing them. Just knowing where to start can be a blockage in itself. My own firm has worked alongside many companies on their transformation process, and has developed a methodology and tool kit specifically tailored for finance. In under six weeks, companies’ current practices and readiness can be assessed, a list of opportunities for improvement identified, and a roadmap created, which will move the finance function in the direction of the e-business world. First, a comprehensive information-gathering exercise is carried out. Working closely with the CFO and an agreed list of employees, the team gathers information on specific needs and key issues. This work focuses on the four pillars of net readiness: leadership, governance, technology and organisational competence. Leadership covers old-style and new thinking and whether there is a dedicated e-strategy team in place. Participants are also quizzed on whether management is driving an e-business focus across the organisation, and how closely internet projects fit into the company’s overall strategic directions. Ready for the net Managers are asked whether competitive advantage through the net is regarded as a priority within their organisation, and questioned on the roles and responsibilities of people leading the company. Technology investigations will cover the scalability of IT systems already in place, as well as the operational and technical skills within the company. The competence pillar relates to how the organisation responds to customers, as well as the experience and professionalism of the internet teams, and their ability to execute company strategy. This in-depth research provides a net readiness scorecard giving an assessment in each of the four pillars. A net IQ is then calculated, based on the sum of the net ready scores in the four areas, and provides an important stake in the ground. Within two weeks, the organisation gains a snapshot of its strengths and weaknesses, bench-marked against industry best practice, and a litmus test of all 442
technical, political and emotional issues involved in change. All the opportunities for improvement are analysed, with ‘quick wins’ and ‘must haves’ at the top of the agenda. These are processes that are easy to implement and will bring major benefits to the company in a relatively short time. Examples include implementing an online expense reporting and reimbursement system, which can cut administrative costs as well as speeding up the time it takes to pay an employee; web-based reporting, which makes current information available to people who need it, in the format they want; and eprocurement, where complex arrangements with multi-suppliers can be handled electronically in an integrated system. A clearly defined roadmap is also created, to show the organisation how to move from its current state to its ideal. A marathon, not a sprint This methodology, with its diagnostic tools, gives an organisation a welcome boost at the start of the e-finance transformation, but completing the journey takes somewhat longer. Fortunately the path has been cleared by the pioneers, such as Cisco, the world leader in network systems for the internet. Cisco has seen phenomenal growth in the past decade, and used a range of web-based solutions to achieve it. The company estimates that it has saved around $1.35bn through web-enabled process transformation across the whole value chain. As well as slashing operating costs, it has managed to improve productivity and effectiveness dramatically. Just looking at its workforce improvements, all internal purchasing has been automated and expenses are handled online. Some 30,000 employees now take advantage of a range of self-service processes, and two expense clerks are now delivering a two-day reimbursement of expenses for 16,000 employees in the US. In the commercial area, ordering is now online, via a ‘networking products marketplace’, and there are pricing and configuration tools online. A total 90% of orders are now dealt with electronically, and their progress can be checked online. The sales teams’ productivity has increased by 15%, and configuration errors have been driven down from 15% to 2%. Overall, Cisco has managed to halve the cost of its finance operations, while driving up the quality and timeliness of its management information. Full automation of its finance systems means it can virtually close the business overnight, and get an accurate picture of its performance whenever it needs one.
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Change of role With global policies, standards and chart of accounts, executives have worldwide compatibility and control. The implementation of e-finance has also transformed the role of finance managers, because their traditional work has been eliminated through automation, or embedded in workflow or online procedures. Now, 60% of finance staff time is spent supporting the business. Former ‘number crunchers’ are now working on financial analysis for different parts of the business, providing additional insight and value to Cisco’s operations. They are much more project-based and are often called in to investigate, analyse and make recommendations to those leading the business. Freed from the basic processes of handling transactions, finance’s key role is to help the organisation translate strategy into execution. Clearly, going through the whole transformation process and coming out the other side with such impressive benefits to the business was more of a marathon than a jog around the park. The whole programme was developed into bitesized chinks, breaking down the more complex elements into 90-day projects. First, Cisco had to re-engineer its processes, and then automate them, and that called for longer-term planning that would see pay-back over 12 months in some areas, and over several years in others. But, because of the pioneering efforts of companies such as Cisco, the rewards can come a bit faster for those embarking on e-finance transformation today. Many of the first-movers were breaking new ground, and had to learn as they went along. Today, the experience gained through the transformation journey is being made available to newcomers, and there are many off-she-shelf packages. Putting it all together The technical infrastructure typically contains a number of key elements. A communications network infrastructure enables the business to connect to the internet, and this acts as a medium through which all information is transferred. An organisation’s website is the face it presents for internal and external transactions, and the site’s design and capabilities are critical. Finance needs to ensure that security and good corporate governance standards are met. The website is linked to operational systems for transaction capture, such as electronic procurement or employee self-service, and these are underpinned by a control room, with monitoring and exception tools. Middleware is 444
used to collect all the data and transport it to a warehouse, where it can be stored for analysis by specialist analytical applications, covering customer or product profitability, customer management, statutory reporting and specialist tax systems, for instance. A single information portal allows users to get to all this information, and as the portal is accessed through the web, it is open for business any time, anywhere, and across a range of media. Ensuring a smooth ride However, it takes more than just software and hardware to create successful e-finance. It calls for management sponsorship and commitment, which will make the journey a lot less bumpy. CFOs need to have a clear vision of where they want their function to be and how it will support / and drive / the business in the future. They need to inspire change among their peers; setting out defined targets and monitoring progress as projects go through their life cycle. The end results will be well worth it. Executives will be able to know exactly what the business is doing at any given time and remain in control, however strong the economic turbulence. Instead of being wrong-footed by market changes, their organisation will be flexible and agile enough to change direction quickly, and able to deal with competition from established rivals and newcomers alike.
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FINANCIAL INSTRUMENTS MORE THAN MEETS THE EYE The draft standard Financial Instruments and Similar Items, published in December 2000 by the Joint Working Group (JWG) of standard-setters, was, at 300 pages, one of the weightiest accounting proposals ever. It has to date generated surprisingly little reaction, except from banks, whose opposition to its proposals has been widely reported. Yet, if converted into an accounting standard, it will fundamentally change accounting for potentially all companies – commercial and industrial companies as well as financial institutions. The purpose of this article is not to explain the proposals in detail; a brief summary may be found in Panel 1. Rather, the objective is to outline some of the implications of implementing the proposals. As will be seen, these are surprisingly wideranging. The JWG’s work is being taken over by the new International Accounting Standards Board; but these proposals will not be finalised next week or next month. Such is the complexity of the subject and the controversy that surrounds it that it may well be four to five years before a final standard appears; and five to six years before it comes into effect. This timing is important, as it means that is unlikely to be part of International Accounting Standards by 2005, when all EU listed companies will have to publish IAS group accounts. Instead, the existing (or amended) IAS on financial instruments (IAS 39) will still be in place. This is a half-way house towards full fair value accounting, that is, it requires some instruments to be fair valued and some to be kept at cost, and it allows hedge accounting in strictly defined circumstances. Any such half-way house is inevitably unsatisfactory (as evidenced by the need for the 200 interpretative questions and answers that have been published in the last year) and it was finalised by the old IASC in the knowledge that a full fair value approach was being developed for the longer term.
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But, what will the longer term be like? It will involve stating at fair value all financial instruments, whether they have a market value or not. In the absence of a market value, fair value will have to be determined by using a model. Inevitably, there are concerns about the reliability of the numbers that result from using a model / especially when the gains or losses (the movement in the fair value from start to end of year) go into income. At the same time, as developing these proposals on financial instruments, the IASB will be working on a separate project on reporting financial performance. International Accounting Standards – and those of most countries other than the UK – currently use a p&l account alone for presenting performance. Only the UK actually requires a statement of total recognised gains and losses (STRGL), though both IAS and US GAAP encourage a similar presentation. But both the UK and the IASB are working on proposals to enhance the reporting of performance to encapsulate gains and losses that are currently presented outside the p&l account – STRGL items in the UK and often reserve movements elsewhere. The UK proposal […] is to combine the p&l account and the STRG into a single performance statement comprising three sections: operating, finance/treasury; and other gains and losses. Very broadly, the sub-total after finance/treasury would equate to the current p&l account, and ‘other’ would equate to the STRGL. The international reform of reporting financial performance may or may not be based on FRED 22, but the important issue that links this subject with financial instrument accounting is that of where the numerous and potentially volatile gains and losses resulting from the full fair value approach will be shown. Finance/treasury – a kind of expanded interest line – is perhaps the obvious location for gains and losses on financial instruments, but some commentators would be happier to locate them in ‘other’, on the not very scientific basis that the lower down the combined performance statement they are, the less attention they are likely to obtain. A more sophisticated approach is to subdivide the gains and losses, and treat them differently according to their nature – for example, some elements in interest/treasury and some in ‘other’. A number of implications arise from the swings in value of instruments and the reporting of those swings as gains and losses.
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First, the overall measure of performance will become more volatile. This will make reported performance harder to budget – various add backs and adjustments will be needed for some purposes; harder to control – it will not be so easy for management to ‘come in on budget’ or in line with market expectations; and, finally, harder to explain to the market. Against that, once users have become accustomed to the new information, it should be a richer source of understanding of both what is happening in the company and what is happening in the economy that affects the company. In particular, traditional measures such as interest cover, based on the interest line in the p&l account, are likely to lose their current meaning. Already, the interest area is becoming more complex as discounting is introduced into various aspects of accounting – for example provisions, and (soon) retirement benefits. Under the JWG proposals, the interest are will become more important in many ways, but certainly more volatile. Second, the same can be said for balance sheet measures of gearing. Variations in the carrying value of all financial instruments, but of own debt in particular, will make the balance sheet gearing a less stable measure. To some degree, these problems will be mitigated if gains and losses of financial instruments are presented in ‘other’; but even this will not be pain-free. Nowhere is this more true than in the controversial area of gains and losses on the revaluation of a company’s own debt. Gains and losses on own debt will arise primarily from two sources: the loan is fixed rate and market rates have changed since the loan was taken out. For example, a company took out a 10-year loan of 100 five years ago at 10%. If market rates are now 6%, the loan will be a burden and the fair value of the liability might be say 115. A loss of 15 will have arisen. Note that the 15 loss will reverse over the remainder of the term, as the loan is repayable at 100. The loan is floating rate, or is fixed rate but the rate is still current; but the company’s credit rating has deteriorated since the loan was taken out. This makes the yield on this company’s debt higher, and hence its fair value goes down – say to 90. This gives rise to a gain of 10. This too will reverse over the remaining term (i.e., there will be a loss) if the company recovers its financial position and is able to repay the debt at 100.
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The arithmetic of this can be seen fairly easily, as can the way in which it reflects the underlying economics. But this leaves the question: what does it mean in accounting terms? The balance sheet values may mean something, but – especially in the second case above (deterioration in own debt) – the meaning of a company reporting a gain when its credit deteriorates and a loss when things improve is not obvious. See the first part of Panel 2. Enter the changes where not entered. The source of the difficulty lies in the fact that a credit deterioration is shown as a transfer between debt holders (whose entitlements reduce by 5) and equity holders (whose entitlements increase by 5 – that is, who make a profit). Even more counterintuitively, the gearing appears to improve. But this is not the whole of the picture. Things look much more realistic if we do the same exercise but based on market values of equity and debt. See the second part of the same panel. The numbers are illustrative only, but we can be fairly sure that if the value of the debt has reduced due to credit concerns, the value of the equity will have reduced more (ie, equity holders are the first to lose). We note that here the (market value) gearing has worsened – which is what one would expect to see. As accountants, we are not used to calculating gearing on a market value basis, but it is sounder from a theoretical point of view. More practically, the question is how we can reform financial reporting to capture better the more meaningful data that the second half of the panel shows. Implicit in the 200, of course, are various intangibles, including goodwill – some of which may have been purchased and amortised, but much of which may be inherent, and hence not recognised by present day accounting. But if the components of the 200 could be shown as assets on the balance sheet, then the company would in an ideal world impair them by 85, offset that by a loss in the value of the debt of 5, and show the 80 as the loss attributable to the equity holders. This would mean something seriously worthwhile – if it could be done. But present-day accounting is a long way from there. Indeed, we can be fairly sure that a standard based on the JWG proposals will be in place some time before we properly capture those components of the market capitalisation in the financial statements.
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Panel
2 Equity shareholders’ funds
Balance sheet Start of year Change in year End of year Market capitalisation Start of year Value ‘loss’ End of year
70
Debt 30
Total enterprise
Gearing
100
% 25
200
230
% %
(5) %
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HONG KONG Since its return to Chine in 1997, Hong Kong has continued to thrive by building on its strengths as a major global centre for finance, logistics and business of proportions that far exceed its small size and population of 6.9m. And its proximity to mainland China is creating great opportunities for economic growth. Hong Kong enjoys low taxes (personal income tax 15%, business profits tax 16%, no VAT, no sales tax, no capital gains tax). It has an excellent regulatory framework, the rule of law upheld by an independent judiciary, and strong anti-corruption enforcement. More than 850 international corporations have a regional headquarters in Hong Kong, while more than 2,100 have set up regional offices. Hong Kong’s inflation rate is nil. GDP growth in 2001 is forecast to be just under 4%. And per capita GDP of US$24,400 is actually greater than that of the US itself. More than 80% of GDP is derived from services. Hong Kong has the second largest stock market in Asia, is the world’s ninth largest banking centre, and seventh largest forex market. An important legacy that the British left is an economy built on free enterprise and free markets open to all. Hong Kong has no tariffs, no import quotas, no restrictions on investments inward or outward, and no foreign exchange controls. It has been rated by the US Heritage Foundation as the world’s freest economy for the past seven consecutive years. Another British legacy is a system of accounting and auditing and professional self-regulation on a par with those of the most highly-developed nations in the world. Companies Ordinance The basic requirement to prepare annual accounts is set out in the Companies Ordinance […], which requires that those accounts should give a true and fair view of the company’s state of affairs at the end of its financial year and of its results for the year. Strictly speaking, the companies ordinance only applies to Hong Kong incorporated entities. While many Hong Kong-listed companies are not incorporated in Hong Kong, the Listing Rules and GEM (Growth Enterprise Market) Rules specify that, with minor exceptions, the Ordinance’s disclosure requirements must also be applied. Sections of the Companies Ordinance deal with the form and content of financial statements, including minimum line
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items, disclosures in the directors’ report, and financial statement disclosures relating to directors and officers. A company that has subsidiaries at the end of its financial year must publish consolidated financial statements. A company is deemed to be a subsidiary of another company if the other company can control the composition of its board of directors, or the other company controls more than 50% of its voting power or share capital. Group accounts need not be prepared if the holding company is itself a wholly-owned subsidiary. The Companies Ordinance is administered by the Legal Services Division of the Companies Registry, a government agency. More than 500,000 Hong Kong companies and 6,000 overseas companies are registered. Securities and Futures Commission The primary regulatory body for the securities and futures markets is the Hong Kong Securities and Futures Commission (SFC). It was established in 1989 in response to inadequacies exposed by the stock market crash of 1987. the SFC is an independent, nongovernmental statutory body, accountable to the chief executive of the Hong Kong Special Administrative Region. The SFC’s objective is to promote fair, efficient and orderly securities and futures markets in Hong Kong by effective regulation and guidance. Through its corporate finance division, the SFC oversees the stock exchange and the futures exchange, and enforces statutory requirements, regulations and rules of conduct. It does not have the authority to establish accounting standards. The relative roles of the SFC and SEHK (The Stock Exchange of Hong Kong Ltd) in relation to the regulation of listed companies are set out in a Memorandum of Understanding Governing Listing Matters signed between the two organisations. The SFC has front-line regulatory responsibility for takeovers and merger activity, for regulating offers of investment products, and enforcing laws involving market malpractices. Since March 2000, the SFC has taken over the front-line regulation of all exchange participants (brokers and dealers) from the two exchanges. However, the stock exchange remains the front-line regulator for all companies listed on the main board and the GEM.
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Stock Exchange Requirements The SEHK was opened in 1986 after the four exchanges that existed at that time had got unified. The SEHK has two separately administered markets, the main board and the GEM. Conglomerates, finance and property companies dominate the main board. The GEM, established in 1999, is geared towards growth companies, particularly those engaged in innovation and technology. In May 2001, 816 companies were listed on the SEHK’s main board (including 54 incorporated in mainland China), plus 11 overseas listings. Those companies had a market capitalisation of US$620bn (ninth largest in the world). The GEM market had 75 listed companies with a market capitalisation of US$10bn. The principal stock market index is the Heng Seng Index, a measure of 33 companies representing approximately 70% of the SEHK’s total market capitalisation. The Main Board Listing Rules contain a number of financial disclosure requirements. Mostly, they expand on the Companies Ordinance’s provisions, for example in respect of disclosure of directors’ emoluments and details of subsidiaries. For main board listed companies, the various SEHK accounting requirements have been consolidated in Appendix 16, Disclosure of Financial Information, of the Listing Rules. For listed banks, additional reporting requirements are set out in Appendix 15, Bank Reports. The requirements establish a minimum level of disclosure with respect to financial and other information in annual reports, interim reports and public announcements. GEM Rules are generally, though not entirely, consistent with the Listing Rules’ requirements. The SEHK routinely reviews listed companies’ interim and annual reports and accounts, and makes enquiries about any apparent breach of the disclosure requirements, or failures to observe HKSA (the Hong Kong Society of Accountants) accounting standards and guidelines or to disclose material departures. Offending companies that cannot satisfactorily resolve the queries will be in breach of the exchange’s rules. Effective 1 April 2001, companies, whose primary listing is on the SEHK main board are permitted to adopt IAS instead of Hong Kong GAAP (Generally accepted accounting practices). They must explain any significant differences with Hong Kong GAAP, including a reconciliation of the financial effect on net profit or loss. Overseas-incorporated issuers and applicants that have or will have a secondary listing on the SEHK are permitted to follow US GAAP. The current accounting standards requirements for SEHK and GEM-listed companies are summarised in Panel 1, and are the following: 453
Main Board of SEHK •
Listed enterprises (whether or not incorporated in Hong Kong) with a primary listing on the SEHK’s main board, and those applying for such a primary listing, are required to prepare financial statements in accordance with either Hong Kong GAAP or IAS. Those that choose IAS are required to explain any significant differences with Hong Kong GAAP, including a reconciliation of the effect on net profit or loss.
•
Enterprises incorporated or otherwise established in the People’s Republic of China, with a primary listing on the SEHK’s main board (these shares are called H Shares), are required to comply with either Hong Kong GAAP or IAS. […]
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Overseas enterprises for which the Hong Kong listing is a secondary listing may use Hong Kong GAAP, IAS or US GAAP.
Growth Enterprises Market •
Companies listed on GEM may choose either IAS or Hong Kong GAAP, provided that they apply the standards consistently. In exceptional cases, GEM-listed companies may be permitted to prepare financial statements using other standards, but they are required to provide a reconciliation to either Hong Kong GAAP or IAS.
•
Starting in November 1999, a specific exemption was granted for GEM registrants incorporated overseas and either already listed or being simultaneously listed on the New York Stock Exchange or the Nasdaq market. Such companies may prepare their financial statements in accordance with US GAAP, subject to certain conditions.
SEHK’s website has hyperlinks to all listed companies’ websites (www.hkex.com.hk). GEM-listed companies are required to publish their annual and interim financial report on the GEM’s own website, www.hkgem.com. The listing requirements are administered by the listing, regulation and risk management division of Hong Kong Exchanges and Clearing Ltd.
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Banks and Insurance Companies Hong Kong has one of the highest concentrations of banking institutions in the world – 62 of the world’s 100 largest banks have an operation there. At 30 June 2000, there were 268 authorised banking institutions with a network of 1550 local branches. In addition, there were 124 local representative offices of overseas banks in Hong Kong. The Hong Kong Monetary Authority (HKMA) prescribes certain financial information to be reported periodically to the HKMA as well as certain accounting and reporting requirements for banks’ general-purpose financial statements. As noted earlier, Appendix 15 of the SEHK Listing Rules also sets out bank reporting requirements. The Insurance Authority regulates insurance companies in Hong Kong based on the Insurance Ordinance. The Authority has established certain accounting and reporting requirements for the general-purpose financial statements of insurance companies.
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CHAPTER THREE BUSINESS CORRESPONDENCE IN ENGLISH
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Tehnike efektivnog pisanja (poslovnih) pisama Komunikacija je ulje koje podmazuje točkove trgovine. Ipak, uprkos ovoj činjenici, mali je broj poslovnih ljudi koji su i formalno obučeni za efektivno komuniciranje s drugim (poslovnim) ljudima u pisanoj formi. Mngo se toga nauči o porezima, poslovnim modelima i pravnim pitanjima, ali se malo nauči o osnovama efektivne (pisane) komunikacije. Činjenica je da su neki ljudi veoma vešti govornici, ali kada na red dođe stavljanje ideja na papir, tada se hvataju za glavu i ne znaju koju – kakvu formu da daju svom pisanom izrazu. Šteta, baš šteta – prava je ironija da se danas, u eri sve razvijenije komunikacije na daljinu – sve značajnija uloga daje upravo pisanoj komunikaciji. Do problema u komunikaciji i do nerazumevanja dolazi upravo iz razloga što učesnici u određenom komunikacionom činu nisu u stanju da saopšte svoje potrebe i očekivanja, ili to učine ali vrlo nespretno. Priprema Kada se radi o usmenim pregovorima, mnogi poslovni ljudi ostavljaju sebi vremena pre sastanka da se pripreme, i često isprobavaju situacije u kojima bi mogli da se nađu u toku pregovaranja. Mnogi prave koncept, navodeći kratko sva ona pitanja koja bi želeli da u toj komunikaciji stave na dnevni red, kao što su pitanja uslova sklapanja ugovora, termina isporuke, cenovnika i slično. Ključna stvar je, očigledno, dobro planiranje. Planiranje se može smatrati i ključem u pisanoj komunikaciji. Istina, mnogi taj aspekt često zanemaruju. Ono o čemu bi trebalo svakako voditi računa jeste sledeće: • • •
•
• • •
Šta je to što želite da istaknete? Postoji li bilo kakva relevantna informacija koju biste želeli da saopštite osobi kojoj se obraćate (pisanim putem)? Koji je redosled izlaganja ideja najlogičniji? Da li ćete pismo početi rečenicom koja predstavlja izraz vaših želja i očekivanja, ili ćete prvo obratiti pažnju na ono što je zapravo dovelo do toga da se nekome obratite pisanim putem i što je uslovilo da se pojave neka vaša očekivanja? Da li ćete prvo naglasiti negativnu stranu a završiti afirmativno, ili ćete to učiniti obrnutim putem? Da li možete predvideti pitanja koja će primalac vaše poruke možda imati u vezi sa sadržajem vašeg pisma? Ako je odgovor potvrdan, da li ste u stanju da na neka pitanja u startu date odgovor u vidu preciznih podataka, konkretnih ponuda i sl.? Kako će primalac reagovati na vaše pismo? Može li se išta učiniti da bi se osigurala pozitivna reakcija (ili makar da se ublaže efekti negativne reakcije)? Da li pišete pravoj osobi? Da li je umesno davati (lične) komentare u pismu? Ili je to možda bolje učiniti usmeno, putem telefonskog razgovora ili u direktnom susretu sa tom osobom?
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Kome se obraćam? Razmislite dobro kome je pismo upućeno. Nećete se istim tonom obraćati potencijalnom radniku i važnom poslovnom partneru/klijentu koji se nedavno požalio na proizvod i kojeg želite da smirite u njegovom besu, niti ćete se istim tonom obratiti nekom dužniku od kojeg želite da dobijete ono što vam duguje. Sledeće stavke su bitne u ovom kontekstu: - da li ćete pisati formalnim stilom ili ćete dozirano koristiti i neformalni stil - imajte u vidu kako pismenost tako i veštine razumevanja koje odlikuju primaoca33. Poruka Potrudite se da vam ideje budu jasne. Pored toga što je veoma važno da znate šta želite da saopštite primaocu, takođe je važno, iako ne uvek očigledno, šta zapravo ne želite da saopštite. Nikada nemojte kititi pismo nevažnim stavkama koje mogu skrenuti čitaocu-primaocu pažnju sa važnih stavki. Zatim se potrudite da jednom jasno definisane ideje izložite logičnim redom: da li je potrebno dodatno objašnjenje u uvodnom delu pisma, kako bi sadržaj imao smisla? Da li se treba pozvati na prethodne razgovore, dogovore, korespondenciju? Da li da iznesete prvo negativne stavke, a zatim izgladite probleme i završite pismo afirmativno, ili ćete prvo saopštiti dobru vest, a zatim izraziti svoju opreznost ili svoj negativni komentar? Jednostavnost Uvek pišite jednostavnim stilom. Ne trudite se da impresionirate primaoca. Nikada nemojte koristiti dve reči, kada je jedna sasvim dovoljna. Neka vam rečenice budu kratke, jasne. Držite se teme. Budite koncizni, ali pri tome nemojte izostaviti išta od onoga što želite reći. Izbegavajte dvosmislenosti. Proverite (eventualne) greške Nemojte se oslanjati na wordprocessor's spellchecker. Učinite to i sami – pročitajte pismo, jer vaš wpspellchecker neće detektovati grešku tipa: I was a wear of the problem., iako ste vi želeli da kažete da ste bili aware. Proverite da li ste sve činjenice dobro definisali, tzv. factual errors, kao što je na primer broj fakture na koju se pozivate, ime, prezime, kompanija za koju radi ili položaj primaoca. U protivnom, vaše pismo će odati vašu neprofesionalnost. 34 33
Uvek možete da dozirate neformalni način obraćanja kada pišete konsultantu u želji da obavi odredjena istraživanja na nivou vaše kompanije. U protivnom, nikada nemojte koristiti previše stručne reči, fraze i izraze kako biste svom potencijalnom klijentu pokazali svoju dobru potkovanost stručnim terminima, jer ćete ga tako verovatno samo još više zbuniti. 34 Nekada nije dovoljno ni samo iščitati pismo još jednom ili dva puta. Potrebno je dati sebi dovoljno vremena, odmoriti mozak, jer često znamo šta smo hteli da kažemo, pa neke greške ne vidimo. Stoga je korisno zamoliti svog kolegu ili sekretaricu da to pismo još jednom pročita, jer četvore oči vide više i bolje od dvoje. Neka prenoći, kao što kaže naš narod, jutro je pametnije od večeri. Ovo je posebno važno kada pismo sastavljate u besu, srdžbi ili pod velikim pritiskom/stresom. Savetuje se i iščitavanje pisma naglas.
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Oblik/forma pisma Ukoliko pismo pišete na listu hartije bez zaglavlja, onda ćete svoje ime i adresu staviti u gornji levi ugao pisma, iznad datuma. Uloga zaglavlja jeste da omogući primaocu laku identifikaciju kompanije koja je uputila pismo i lakše lociranje kontakt telefona, faksimila, poštanske i adrese stanovanja, pozivne brojeve za unutrašnjost i inostranstvo, kao i poštanski broj. Danas se sve češće navode i email i Web-site adresa, s obzirom na to da je sve veći broj korisnika koji imaju pristup internetu. Pored ovoga, zaglavlje ističe i logo kompanije, što je takođe jedno od važnih obeležja imidža kompanije. Ovakav obrazac (sa zaglavljem), trebalo bi da koristite samo za prvu stranicu pisma, dok sve ostale stranice treba da budu obični listovi.
Saveti pošiljaocima: • • • • • • • • • •
budite pozitivni imajte u vidu mišljenje i stavove primaoca obavezno se raspitajte za puno ime i prezime, i titulu/položaj primaoca odaberite stil izbegavajte generalizacije/uopštavanja jasno dajte poruku svom primaocu recite što je preciznije moguće šta nameravate, a onda pređite na dokaze izbegavajte nagomilavanje (najčešće zastarelih) fraza i izraza, klišea koji ničemu ne služe pišite kao što govorite svedite svoje pismo na manji broj reči, a da ne narušite razumljivost
Sada ćemo da se pozabavimo malo detaljnije pisanjem poslovnih pisama, tj. egzotičnim primerima poslovnih pisama sa australijanskog podneblja.
And this time, in English, of course.
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THE CHOICE OF BUSINESS LETTER SAMPLES AS USED ON THE AUSTRALIAN TERRITORY
TRADE
Sales, Announcements
Announcement of limited special offer I am writing to announce our [amount: e.g. 10]% Special Discount Offer, which is running for the month of [month]. This offer is only available to select clients, and applies to all orders across our entire range of products. It’s our way of saying “Thanks” for your business. I hope you can take advantage of this offer.
PS: If you would like a copy of our current catalogue, please contact my office.
Announcement of price increase As you are no doubt aware, prices for [details: e.g. raw material, labour, distribution etc.] have risen sharply in the last [period of time: e.g. three months]. We have absorbed these additional costs for as long as possible. Unfortunately, however, we are no longer in a position to do so. Enclosed is our new price list, which will be effective from [date]. Please take the time to review it. I hope that you understand the reasons for our decision, and that we will be able to continue to serve you in future. In an effort to minimise the impact of the increase on your business, orders received before [date of increase] will be filled at current prices. 460
Announcement of special offer It is not every day that I can write to our customers with good news. Today, however, is one of those days. I am happy to advise that, for a limited time, we are reducing prices on certain products in our catalogue. In particular: [Insert details of special pricing.] [Optional: Some products are in short supply, and orders will be filled on a “firstcome-first-served” basis.] If you would like to place a larger than usual order, or arrange to have your order delivered in lots, please contact me directly and we can discuss mutually acceptable terms. This price reduction is in effect until [date], or until otherwise advised.
General Notice – change of policy It has previously been our policy to [detail previous policy]. Unfortunately, rising prices have placed significant pressures on our margins, with the result that we have been forced to review this policy. [Alternative: Unfortunately, some customers have abused this policy by [details].] As from [date], our new policy will be [details]. We regret having to implement this change in policy. However, under the circumstance, we feel there is no alternative. Of course, our company [alternative: business] will continue to offer the best service possible to its customers. Should you have any questions concerning our new policy, please call.
461
Announcement of early payment discount I am writing to confirm the completion of your company’s three month “probation”, and to advise that, as of [date], we have established a credit account for your company with a limit of $[amount]. Our standard payment terms of [number] days still apply. However, as a valued credit customer, we are happy to advise that an early payment discount of [amount]% will apply to all payments received within [number] days of the invoicing date. If you have any questions concerning your new credit account, or our discount policy, please call.
Sales, Orders Acceptance of order with delivery in lots and payment by instalments I am writing to advise that your Purchase Order dated [date] has been accepted. The goods will be shipped to you in the following lots: [Detail the quantity in each lot and the delivery schedule e.g.: Lot 1. — 1 January 1999 — 25 cartons Lot 2 — 1 March 1999 — 50 cartons] We request payment for each lot within seven (7) days of delivery. Delivery of each subsequent lot is conditional upon prompt payment for the previous lot. Please confirm, in writing, that these terms are agreeable to you. Upon receipt of your letter, I will process the first lot.
462
Cancellation of order due to expiration of delivery date I refer to our Purchase Order dated [date] and bearing Order No.[number]. The Purchase Order specifically requested delivery on or before [date]. Unfortunately, due to your delay in shipping the order, our customer has cancelled their order. Consequently, we have no option but to cancel ours. Please confirm by return that our order has been cancelled, and that our account has been re-credited with the purchase sum.
Confirmation of verbal purchase order [Salutation] re: Confirmation of verbal Purchase Order
I refer to our [optional: telephone] conversation of [date], and confirm your request to purchase [details of goods/services ordered]. I further confirm that the agreed purchase price is $[amount]. Delivery is scheduled for [date]. Enclosed (*) is a copy of our invoice for the same, which you will note is payable by [date]. Unless I hear from you to the contrary within seven (7) days of the date hereof, I will consider the order confirmed, and that you agree that the above accurately documents the terms of our contract.
463
Letter accompanying goods sold on approval Accompanying this letter [is/are] the [name of product/s] that you ordered. I am writing to confirm that the goods have been supplied on an “approval” basis. In the event that you are not satisfied with the [name of product/s], you can return the goods to our warehouse within [number] days for a full refund or credit. Our warehouse is located at [address]. If we do not receive the returned goods, or otherwise hear from you within this period, you will be deemed to have accepted the goods. I am sure, however, that you will be quite satisfied with your selection.
Misapplication of early payment discounts re: Entitlement to discount Thank you for your recent cheque for $[amount]. It would appear that, in calculating the amount of the cheque, you have applied an “early payment” discount of [amount]% against our invoice [number]. Unfortunately, the terms of our discount policy stipulate that, in order to qualify for the discount, payment must be received within [number] days of the invoice date. Our invoice was issued on [date]. We did not receive your cheque until [date]. Accordingly, I am unable to grant the discount. I have credited your account with the sum of $[amount], leaving a balance of $[amount]. Please forward a cheque for the same at your earliest convenience. [Optional: If you believe that I have made an error in calculating your entitlement to a discount, please contact me personally so that we can resolve the discrepancy.]
464
Notice of shipping delay Thank you for your recent order. Unfortunately, we are unable to fill your order at this time due to an unexpected [insert details of reason(s) underlying inability to fill order]. We will “back order” your order, and ship it immediately the goods become available, which we anticipate will be in [period] days. We apologise for the inconvenience, and hope that you will understand our predicament. If you are unable to wait for delivery, please contact me directly so that I can arrange an appropriate credit or advise you of alternate supply options.
Notice to cancel back-ordered goods We refer to our Purchase Order No.[number] dated [date]. On [date] we received a partial shipment of goods, together with a notice that the remainder had been “back ordered” due to stock restrictions. Unfortunately, we are not in a position to await delayed delivery and have sought an alternate supplier. Please cancel the balance of our order, and arrange for our invoice to be adjusted accordingly. If the goods are already in transit, we will instruct the delivery agent to return them to your premises.
465
Notice to cancel order for delayed goods Thank you for your recent letter [alternative: telephone call] advising of a delay in shipping the goods requested in our Purchase Order No.[number] dated [date]. I have checked with our customer [alternative: sales staff] and, unfortunately, we cannot delay our order. Accordingly, please treat this letter as an official cancellation of our Purchase Order. We appreciate that the delay was caused by factors beyond your control, but unfortunately we must obtain the goods as soon as possible to meet our own contractual obligations.
Notice to elect to accept damaged / non-conforming goods On [date] we took delivery of goods ordered in our Purchase Order No.[number], dated [date]. An inspection of the goods revealed that some were damaged [alternative: defective/non-conforming]. [Alternative: An inspection of the goods revealed that some did not conform to the required specifications.] Particulars are as follows: [Detail each item, or lot of items, and the nature of the damage, defect or nonconformity.] I am writing to advise that we are prepared to accept the abovementioned goods on condition that we are allowed a deduction of $[amount] from the purchase price, in compensation for the damage [alternatives: defect/non-conformity]. Please confirm your acceptance of our proposal by [date]. If we do not hear from you by then, we will assume that our proposal is unacceptable, and arrange to have the damaged [alternatives: defective/non-conforming] goods returned at your cost for a full refund.
466
Purchase order with delivery terms Thank you for your recent quote for [details of product]. I am writing to confirm that your quote has been accepted and enclose (*) our Purchase Order. As advised when we initially requested your quote, it is imperative that delivery occur on or before [date], as we have contractual obligations to our customers in terms of delivery. Our Purchase Order is conditional upon your company [alternative: business] being in a position to deliver as stipulated. If you are no longer able to guarantee delivery by this date, please advise immediately.
Purchase order with payment terms Enclosed (*) is our Purchase Order for [briefly detail product(s) and quantity]. We propose the following payment terms; namely, [10]% of payment with order, [40]% upon delivery, with the balance payable within [14] days of delivery. Our cheque for $[amount] is also enclosed(*). If you accept our terms, please arrange to deliver the goods to our warehouse [alternative: office] at [address] by [freight method] immediately. We shall infer acceptance should our cheque be deposited. If you have any further questions, please contact me. [*Enclosed: (1) Purchase Order (2) Cheque] *(1) Purchase order Purchase Order [no.] Quantity Product code
Product
Price [Sub-total: ($) _____ ] [optional: Freight: ($) _____ ] Total: ($) _____
[Special delivery/handling instructions] [optional: Delivery address] [General notes] [optional: Signature] [optional: Name of person signing] 467
Request for authorization to substitute I refer to your Purchase Order No.[number] for [describe product and quantity]. Due to logistical [alternative: supply] difficulties, we are unable to supply the product ordered at this time. However, we are able to supply the following: [Provide sufficient product details to enable purchaser to compare the two products.] With your permission, we would like to substitute the product described above for that specified in your Purchase Order. There is a price differential of -$[amount], which means a saving of $[amount] [Alternative: There is a price differential of +$[amount], which means an additional cost of $[amount]. However, due to the circumstances, we will happily discount that amount by [amount]%, leaving only a $[amount] difference.] Please advise at your earliest convenience whether our proposal is acceptable.
Request for refund for non-delivered goods I refer to my letter dated [date] in which I provided notice that your company [alternative: business] had failed to deliver the goods ordered in my Purchase Order dated [date]. Having received no response to my letter, nor delivery of the goods, I hereby cancel my order and request an immediate refund of $[amount]. If the goods are in transit, they will be rejected and your delivery agent instructed to return them to your office at your cost.
468
Sales, Returns and Deliveries Returning product for refund On [date], I purchased a [details of product] from your company [alternative: business]. I wish to return your product for a full refund as it did not meet with my expectations. [Alternative: I wish to return your product for a full refund because it did not perform in the manner promised/suggested in your advertising.] In particular, your product [detail problem(s) with product]. Please forward details of your customer satisfaction policy and return procedures. In particular, please advise where I should return the product and detail how I can collect the refund.
Notice of non-conforming goods We received your latest shipment of [detail products] on [date]. This delivery corresponded with our Purchase Order No.[number] and your Invoice No.[number]. Unfortunately, several items included in the delivery did not conform with the sample products shown to us prior to placing the order. [Alternative: Unfortunately, several items included in the delivery did not conform with the specifications contained in our Purchase Order.] In particular, [detail items that did not conform and the nature of their nonconformity]. Accordingly, I am writing to formally reject the above goods. I would appreciate if you could provide me with details of your returns policy, and arrange for a credit to be issued for the goods concerned. I shall instruct the freight company to invoice your company [alternative: business] directly. Please advise if you have any preferences in terms of freight carriers.
469
Return of product on free trial Thank you for providing us with an opportunity to trial your [name of product]. While we found the product to be well designed and presented, it does not fulfil our specific needs; namely [detail your specific requirements]. As requested, I am returning the product to you in its original packaging. Notice that quantity received was short In our Purchase Order No.[number] dated [date] we ordered [quantity of product type]. When we received delivery of the goods on [date], the shipment was [number] short. [Alternative: The following items were missing from our order when it was delivered:] [Detail missing items.] If this was an oversight on the part of your warehouse staff, I would appreciate if you could deliver the outstanding items as soon as possible. If you are unable to ship the items for any reason, please contact me immediately so that we can discuss alternative arrangements. Notice to stop goods in transit On [date] one of your drivers collected certain goods from our office [alternative: warehouse] at [address]. The delivery address was marked as [delivery address]. Attached (*) is a copy of your consignment documentation. You are hereby instructed and authorised to hold the goods in transit. Do not deliver the goods to the addressee at this time. I will contact you shortly with instructions concerning the return of the goods. We agree to cover your costs in stopping and holding the delivery. If you have any questions concerning these instructions, please contact me immediately. [*Attached: Copy of consignment documentation]
470
Sales, Promotions Follow-up letter to request for product information Thank you for your recent telephone call. As requested, I have enclosed (*) our product literature for [name of product]. Once you have had an opportunity to read about our product, we will be happy to assist you with any questions you have. If you would like to talk to a sale representative about an order, or if you have any specific questions, please call [telephone number]. I hope that we are able to do business with you soon.
[*Enclosed: Product literature] Invitation to visit trade stand (or similar promotional activity) As you are no doubt aware, the [name of trade show etc.], a premier industry event, will be held at [place] on [date]. Our company [alternative: business] will be hosting a stand at the show, staffed by a number of our sales and technical employees. In addition to providing sales and product literature, they will be available to answer any product or service queries. [Optional: We also plan to launch our new [product/service], and will be holding demonstrations throughout the day.] I hope to see you there. If you would like to make an appointment to meet with myself or members of my staff, please contact me directly and I will be happy to arrange this.
471
Letter of introduction I am writing to advise you that [Mr/Mrs/Ms full name and qualifications], a representative of our company, plans to visit [recipient’s general geographical area] in the near future. [First name] will be introducing [herself/himself] to our valued customers and [explain the purpose of visit/other planned activities]. [S/he] will be contacting you shortly to make an appointment to visit your office, with a view to [detail purpose of visit]. I hope that you are able to make time to meet with [first name], as [s/he] has a great deal of experience and expertise in [area], which I am sure will be of interest and benefit to you.
Letter to customer encouraging upgrade to new product re: We were wrong! For some time now we have been telling our valued customers that there is no better product on the market than our [name of old product]. We now realise that we were completely wrong! Why? Because we have just released the significantly improved [name of new product]. [Name of new product] has the following features: [Insert list of new and improved features.] The [name of new product] has a list price of $[amount]. However, because you already own a [name of old product], we are happy to offer it to you at $[amount]. If you would like to benefit from the features of the new and improved [name of new product], please contact me.
472
Media release MEDIA RELEASE FOR IMMEDIATE RELEASE [alternative: EMBARGOED UNTIL [time am/pm], [date]] Headline [The headline is designed to capture the attention of the recipient. It should be a short, single sentence summary of the overall “message” of the media release.] First paragraph [The first paragraph is the most important aspect of the media release. It should either make the most important point of the release, or summarise the contents of the release and explain the heading.] Subsequent paragraphs [The balance of your press release must communicate the body of your message, including the “Who, What, Where, When and Why”. The press release should not be more than five or six brief paragraphs. It certainly should not exceed a single, typed page.]
Notice of product launch You may have heard about the impending launch of our new product line, [name]. I am writing to let you know that you can now inspect [alternative: trial] our new products at our display room [alternative: warehouse] at [address]. If you are unable to visit our display room [alternative: warehouse], you can request a copy of our new brochure [alternative: catalogue] by telephoning our office on [insert telephone number]. I look forward to seeing you soon.
473
Complaints – Received and Sent
Notice of product defect claim I am writing to advise that we have received notice from a customer of an alleged defect concerning a product supplied [alternatives: manufactured/imported] by your company [alternative: business]. We have requested further particulars of this claim. [Alternative: We have been provided with the following preliminary information:] [Outline details supplied.] In the event that this matter proceeds any further, we will be looking to your company [alternative: business] for indemnification against the claim and reimbursement of any legal fees and associated costs. Accordingly, please provide us with details of your [company’s/business’] policies in relation to such claims. I would appreciate your written response within seven (7) days of the date hereof. Response to customer complaint concerning pricing Thank you for your recent letter dated [date], in which you expressed your dissatisfaction concerning our pricing schedule. I have reviewed our schedule, and compared it with those of our competitors. In all regards the comparison was favourable, especially when the quality of our products, our warranties and our after-sales service are considered. We set our pricing at levels that ensure our ability to offer products and services second to none. I am certain that if you were to compare our pricing from this perspective, you would agree that we offer our customers excellent value. In particular, [outline the specific benefits/services provided by your company]. I hope that I have allayed your concerns, and look forward to doing business with you in future.
474
Complaint for refund outside warranty period I refer to the work that your company recently performed on [item repaired], which included: [Itemise work done.] According to your quotation, your company guarantees its workmanship and parts for [number] days. Although that time period has expired, I am writing to advise that the [item repaired] is again in need of repair. Enclosed (*) is a report from [name of company/business], who has inspected the [item]. The report concludes that the current problem stems from the poor workmanship of your technician during the original repair. [Alternative: The report concludes that the parts used by your company/business were second-hand [alternative: defective], and are the cause of the current difficulties.] In particular, [name of company/business] found [summarise findings]. Accordingly, I hereby request a full refund of the $[amount] that I paid your company. I also claim $[amount], being what [name of company/business] charged to correct your company’s [alternative: business’] poor workmanship. If I do not receive payment within seven (7) days of the date hereof, I will file a complaint with the Consumer Affairs Department and pursue legal remedies.
Complaint for refund within warranty period I refer to the work that your company recently performed on [item repaired], which included: [Itemise work done.] According to your quotation, your company guarantees its workmanship and parts for [number] days. I am again experiencing problems with [item]. In particular, it is [detail nature of problem]. I would be pleased if you could arrange to have one of your technicians visit my office [alternative: home] immediately to assess the problem. I expect that you will rectify the problem at your own expense. 475
Quotations and Proposals Letter accompanying the proposal Enclosed is (*) our proposal for [detail briefly the nature of the proposal]. The immediate benefits to your company [alternative: business] in pursuing this project will be [detail nature of benefits, including any cost-saving measures]. As detailed in the proposal, the project’s initial cost of $[amount] will be recovered within [period], possibly sooner. I will contact you next week to answer any questions that you may have. [*Enclosed: Proposal]
Notice rejecting quote or tender Thank you for the quote that you recently provided in response to our request for pricing on [detail nature of quoted product/service]. Unfortunately, I must advise on this occasion that your quote was unsuccessful. We appreciate the time and effort that you expended in preparing your quote, but on this occasion it was decided to award the contract to another company [alternative: business] because [detail briefly the reason for rejecting the quote]. I will be recording your company’s [alternative: business’] details, and you will be invited to quote on any future contracts of this nature.
476
FINANCE Letter to bank manager querying new fees I refer to my company’s overdraft account, number #[number], which is operated under the name of [name of account]. It was recently brought to my attention that we are being charged a sum of $[amount] per month. This is described on our monthly bank statements as “[quote from bank statement]”. Could you please advise me of the basis for the imposition of these new charges. I have not received notification of any new charges, nor have I agreed to amend the original terms pursuant to which my company established its overdraft account. I would appreciate your prompt attention to this matter.
Letter to a bank requesting overdraft I am writing to make an appointment with you to discuss my company’s [alternative: business’] options with respect to establishing and operating an overdraft account. Our customer-base has expanded (and is still expanding) rapidly, giving rise to an unprecedented number of monthly sales. Unfortunately, as you can understand, this is having a temporarily deleterious effect on our cash flow. I have taken the liberty to prepare a current profit and loss statement (as at [date]), as well as a chart depicting our cash flow projections until the end of the current financial year. These are attached (*). Please let me know when you have an opening in your schedule to meet with me to discuss this matter. If you require any further information, please advise prior to our meeting. [*Attached: (1) Current profit and loss statement (2) Chart depicting cash flow projections]
477
Acceptance of instalment payment proposal I refer to your letter [alternative: telephone conversation] dated [date], in which you outlined a proposal to repay your outstanding account by instalments. We are prepared to accept payment of the overdue amount on the following basis: 1. First payment of $[amount] on [date]. 2. Subsequent equal payments of $[amount] on the first of each month, with the final payment due on [date]. Please be advised that we expect your company [alternative: business] to adhere strictly to the above timetable. Failure to do so may result in the termination of this instalment agreement, with the result that all outstanding monies will immediately become due and payable. As you can appreciate, we are unable to offer you further credit until the outstanding amount has been paid in full. Account balance discrepancy re: Account balance query Your Statement of Account dated [date] indicates an account balance of $[amount]. This does not agree with our records, which reveal an account balance of $[amount], a discrepancy of some $[amount]. Below is a detailed reconciliation of invoices and payments for the last [period] months: Date: Invoice No.: Amount: Date paid: Date: Invoice No.: Amount: Date paid: [Repeat as appropriate.] I would appreciate if you could instruct your accounting department to crosscheck the above information against their records of invoices and payments and, if necessary, reissue an amended Statement of Account. If you do not have a record of any of the above payments, or if the reconciliation above is missing one or more invoices, please contact me immediately so we can rectify the problem. 478
Request for credit information re: Request for documentation in support of Credit Application Thank you for your Purchase Order dated [date]. In order to assess your request for credit, we require that you complete the enclosed (*) Credit Application form. We also ask that you provide the following information and documentation in support of your application: [Edit or modify as appropriate:] (a) Bank (and branch): (b) Accountant (name and telephone number): (c) Current trade reference (no.1): (Company name and telephone number) (d) Current trade reference (no.2): Once we receive the completed documentation, we should be in a position to respond to your request within seven (7) days. If your order requires immediate attention, we would ask that you forward payment for your initial order, or contact my office to discuss COD terms.
Acknowledgement of credit reference re: Acknowledgment of Credit Reference Thank you for providing us with a trade reference in support of [name of company/business]’s recent credit application. We appreciate your assistance and reiterate that your reference will be treated with the strictest confidence. If at any time you are obliged to alter your credit terms for [name of company/business] in a manner which may be of interest to our company [alternative: business], we would appreciate hearing from you.
479
Acknowledgement of debt re: Acknowledgment of debt I refer to your letter dated [date] in which you requested an extension of time to pay your outstanding account. Before we consider your request, we require formal, written acknowledgment of the debt. To this end, I have prepared this letter which details the amount that you presently owe, according to our records. If you agree with our calculations, please sign and return the enclosed (*) copy of this letter at your earliest convenience. Should your records differ from that set out below, please contact me immediately so that we may resolve the discrepancy. [*Enclosed: Copy of letter, amended as below:] ___________________________ [To appear on the enclosed copy:] I/We confirm and acknowledge that I/we owe the sum of $[amount] to [name of your company/business], being for [details of what was purchased]. I/We further confirm that the sum is due and payable and that I/we have no defence to, credits or rights of set-off against the abovementioned amount. Signed this________________________ day of ________________________, 20 __ ________________________ (Signature) ________________________ (Name) ________________________ (Witness) ________________________ (Signature) ________________________ (Name) ________________________ (Witness)
[Note: Add or remove provision for signatures as appropriate.]
480
Agreement to pay debt by installments I refer to our recent discussions concerning the matter of [briefly detail nature of the matter], and in particular your letter dated [date]. [Alternative: I refer to our recent discussions concerning this matter [briefly detail nature of the matter], and in particular our telephone conversation on [date].] I am writing to confirm our agreement concerning your company’s [alternative: business’] outstanding account; namely: 1. The balance of your account due and payable in accordance with our standard contractual terms as at [date] is $[amount]. This is comprised of the following purchases: [List Purchase Orders, the goods purchased, the date of the order, the date of delivery and the amount.] 2. The outstanding balance will be repaid by monthly [alternatives: fortnightly/weekly] installments of $[amount] until the account is cleared. 3. In the interim, further orders will be on a COD [alternative: pre-payment] basis. 4. No interest will be payable on the outstanding balance. [Alternative: Interest will be paid daily on the outstanding balance at the rate of [amount]% p.a.] It is regrettable that we have had to implement these measures, as you are a valued customer. I appreciate that your company [alternative: business] is experiencing a short-term cash flow problem, and look forward to reinstating our normal credit procedures once the outstanding balance has been paid. Please acknowledge your acceptance of these terms by signing and returning the enclosed (*) copy of this letter. If I can be of any further assistance, please call. [*Enclosed: Copy of letter with following amendments:] ___________________________ [To appear at the end of the enclosed copy:] I have read and agree to the above terms.
________________________
Print name: ___________________ Date: ___________
481
Letter to bank requesting credit reference re: [Name of company requesting credit] We operate a [nature of business] business. It is our policy to offer established customers certain credit terms to facilitate the purchase of our products. [Name of company requesting credit], which we understand is a customer of your bank, recently completed an application for a line of credit. Your bank was named as a referee in support of the application. A copy of the relevant portion of the application is attached (*) for your records. Could you please provide the following details, so that we can assess the application for credit: [List details required.] If there is any additional information that you consider might be of assistance to our assessment, or if you have any comments that you wish to add, your assistance would be greatly appreciated. Of course, we undertake to treat any information and/or comments supplied in the strictest confidence.
Credit application approval Thank you for your Credit Application, dated [date]. I am writing to confirm our acceptance of your application. Your account details are shown below: [Insert account details.] As this is a new account, I would like to take this opportunity to summarise our credit terms: [Detail general credit terms.] We would appreciate if you could quote your account number on each purchase request. Should you have any questions concerning these terms, or the operation of your account in general, please call.
482
Rejection of credit application re: Credit Application Thank you for your recent Credit Application, which has been reviewed by our credit department. Unfortunately, we are unable to extend credit to your company [alternative: business] at this time. We would be happy to receive a further application for credit terms after you have traded with us on a COD [alternative: pre-payment] basis for at least three months, by which time we will be in a better position to judge your overall credit requirements. In the interim, we look forward to doing business with you. Credit reference CONFIDENTIAL re: Credit Reference I refer to your letter dated [date] requesting a Credit Reference for [name of company/business]. We have conducted business with [name of company/business] for [number] years [alternative: months]. Its accounts are rarely [alternative: frequently] in arrears. In general terms, our company [alternative: business] provides [name of company/business] with a credit limit of $[amount]. Our normal credit terms require payment within [number] days. [Name of company/business] presently owes the following amounts: $____ (Under 30 days) $____ (30-60 days) $____ (60-90 days) $____ (90+ days) The above information may or may not be commercially sensitive. We trust that you will treat this information in strict confidence, and will not divulge it or any portion thereof to any third party (including the applicant) without first obtaining our written consent. [Note: Before you release this information, you should ensure that your customer has consented to its release. If you are not provided with a copy of the signed consent form, telephone your customer to check.]
483
Request to contact credit manager I refer to my letter dated [date] in which I drew your attention to the fact that your account has been in arrears for [number] days, which is in excess of our standard credit terms. Our two companies [alternative: businesses] have been doing business for some time now, and we have not encountered difficulties in the past with respect to payment of our accounts. This leads me to the conclusion that your company [alternative: business] may be experiencing difficulties meeting our account on this occasion. As an indication of our appreciation of your business and the goodwill between our companies [alternative: businesses], we do not require immediate payment of our account. However, we would ask that you contact our office so that we can discuss the situation, and agree upon a course of action for both payment of our account and the processing of future orders.
First and Second reminder(s) of overdue account (1) This letter is to serve as a friendly reminder that our account [alternative: invoice] dated [date] [alternative: for the month of [month]] is outstanding. I have enclosed (*) a copy of the account [alternative: invoice], in case the original went astray in the mail or has been misplaced. Please attend to payment at your earliest convenience. [*Enclosed: Copy of outstanding account/invoice] (2) I refer to my letter dated [date], which drew your attention to our outstanding account [alternative: invoice] dated [date] for $[amount]. The absence of a response to my letter is somewhat of a surprise, given your previous record of prompt payment. I would appreciate it if you could contact me immediately so that we can resolve this matter.
484
Grant of request for extension of payment deadline Thank you for your recent letter explaining your delay in paying our outstanding invoice. I appreciate your frankness and efforts to inform us of your current situation. Your letter has convinced me of your good faith and that you are making every effort to settle the account at the earliest opportunity. As such, I am pleased to accommodate your request for an extension of our payment deadline, until [date]. If you believe that you are unable to meet this deadline, please contact me so that we can discuss your payment options. Letter accompanying final payment Enclosed (*) is our cheque for $[amount], in final payment of our outstanding account. I would like to again express my gratitude for your patience in this matter. As you are aware, we recently suffered from a temporary cash flow “crunch”, which I am pleased to announce has been rectified. I will contact you shortly to discuss the reactivation of our terms of credit. Partial payment of debt in good faith I refer to your outstanding invoice [number], dated [date], and apologise for the delay in payment. [Alternative: I refer to your letter dated [date] in which you demanded payment of $[amount], and apologise for the delay in payment.] Unfortunately, we too are experiencing problems in collecting our accounts receivable, with the result that we are unable to pay accounts as promptly as we would like. As a sign of our “good faith” in this matter, I have enclosed (*) a cheque for $[amount]. I anticipate being in a position to pay the balance by [date]. I hope that you will be able to accommodate our request for an extension.
485
Notice of default of installment agreement I refer to my letter dated [date], in which I outlined the terms upon which we were prepared to accept repayment of your outstanding account by instalments. In particular, it was stipulated that you would pay instalments of $[amount] each [period]. You are in breach of those terms. Accordingly, I hereby demand payment in full of the outstanding balance; namely $[amount] within seven (7) days of the date hereof. If we do not receive payment on or before [date], we will have no option but to refer this matter to our solicitors.
Notice of dishonoured cheque Your cheque for $[amount], drawn on [name of bank], dated [date] and bearing cheque no.[number], was refused by your bank. We would appreciate immediate payment of our account via bank cheque or electronic funds transfer. Our trading account details are: [Insert details of bank account for deposit.] Alternatively, please confirm that you have rectified the problem with your account, and we will represent your cheque. Your account has been debited with the “dishonour” fee charged to us by our bank. Notice of disputed invoice I am writing with regard to your Invoice No.[invoice number], dated [date], for $[amount]. The amount of the invoice is incorrect because the goods specified in the invoice were defective, as previously communicated. [Alternative: The amount of the invoice is incorrect because the goods specified in the invoice were not received, as previously communicated.] [Alternative: The amount of the invoice is incorrect because the goods specified in the invoice were charged at a rate higher than that agreed; namely $[amount].] [Alternative: The amount of the invoice is incorrect because our payment of $[amount] on [date] has not been credited.] Once you have provided us with an amended invoice, we will forward payment immediately. 486
Notice of unpaid invoice Thank you for your cheque dated [date] for $[amount]. I am writing to clarify, however, to which invoice(s) this payment relates. Our records indicate the following outstanding invoice(s): [Detail invoice dates, numbers and amounts.] Our accounting department has assumed that your cheque was in payment of invoice(s) number [numbers]. Could you please forward your cheque in payment of the remaining invoice(s) (a total of $[amount]) immediately. If there is an error in our record of your account, I would appreciate being advised of this as soon as practicable so we can amend our records. Part payment of debt with request to pay balance by installments I refer to your outstanding invoice [number], dated [date], and apologise for the delay in payment. [Alternative: I refer to your letter dated [date], in which you demanded payment of the sum of $[amount], and apologise for the delay in paying your invoice.] Unfortunately, we too are experiencing problems collecting our accounts receivable, and the consequential effect on our cash flow means that we are unable to pay your account in full at the present time. Enclosed (*) is a cheque for $[amount], which I hope you will accept as a sign of our “good faith” in this matter. I propose repaying the balance by periodical payments of $[amount] per [period e.g. week, month etc.]. I hope that you will understand the reasons underlying this request, and can accommodate us until our cash flow position improves. Rejection of request for extension Further to your letter dated [date], I advise that, after reviewing your request and the nature of the outstanding account, we are unable to agree to your request for an extension of time for payment. While we understand the difficulty of your situation, we must insist on receiving payment of the outstanding amount by [date]. [Alternative: While we understand the difficulty of your situation, we must insist that you adhere to the previously agreed schedule for payment. Consequently, we expect to receive your cheque for $[amount] on [date].] 487
Request for information concerning disputed charge I refer to your letter dated [date] and thank you for bringing this matter to my attention. To assist me in clarifying the nature of the charges in dispute, could you please provide the following information: - Copies of cheque stubs/statements evidencing payment. - Copies of returned goods authorisations. - Copies of delivery records for returned goods. - A list of goods not received. - A list of goods which were damaged on delivery. - A list of non-conforming goods. [Delete from or add to list as appropriate.] Once I have this information, I should be in a position to resolve the matter quickly.
488
First and Second letter(s) of demand (to company director) (1) WITHOUT PREJUDICE 35
I refer to the Director’s Guarantee dated [date] which you signed in support of a Credit Application by [name of company]. A copy of the Guarantee is enclosed (*) for your information. As you are aware, our credit terms require payment to be made within [number] days of the invoice date. Your company’s account balance stands at $[amount], which has been overdue for [number] days, despite numerous demands for payment. Details of our invoices are as follows: [Provide dates, reference and invoice amounts, as well as corresponding Purchase Order details.] In accordance with the terms of the Director’s Guarantee signed by you, I hereby demand payment of all outstanding monies due and owing by [name of company]; namely $[amount]. If payment is not received within seven (7) days of the date hereof I will have no alternative but to instruct our solicitors to institute debt recovery proceedings against you personally, with a view to liquidating your assets to satisfy the debt. Your company’s credit account has been suspended until this matter is resolved. I regret that this matter has led to a demand for payment against you personally, but in the circumstances we have no other option.
35
Fraza 'without prejudice' se često koristi u korespondenciji ili drugim dokumentima koji se mogu interpretirati kao dokumenti koji sadrže priznanja (admissions) koja mogu da ugroze prava autora. Na primer, ova fraza se veoma često koristi u slučajevima kada želimo da onemogućimo da se korespondencija izmedju dve ili tri strane tokom pregovaranja u vezi sa privrednim sporom (commercial dispute) koristi protiv autora kao priznanje dugovanja ili činjenica.
489
(2) re: Overdue account
As you are aware, our credit terms require that invoices be paid within [number] days of issue. Your account is currently $[amount] overdue. This amount has been outstanding for [number] days. Below are the details of your Purchase Orders that comprise the outstanding amount: [Provide details of the date, reference number and amount of each Purchase Order.] Please forward your cheque for the outstanding amount immediately. I have enclosed (*) a stamped, pre-addressed envelope for your convenience. Your account has been placed on “credit hold” until this matter is resolved. If you are experiencing difficulties paying our accounts, I would appreciate if you could contact me directly so that we can discuss this matter further.
Second reminder of overdue account I refer to my letter dated [date], which drew your attention to our outstanding account [alternative: invoice] dated [date] for $[amount]. The absence of a response to my letter is somewhat of a surprise, given your previous record of prompt payment. I would appreciate it if you could contact me immediately so that we can resolve this matter.
490
Settlement of disputed account (sporni račun) WITHOUT PREJUDICE re: Settlement of disputed account I refer to your letter dated [date], in which it is claimed that my company [alternative: business] owes you [alternative: your company/business] $[amount], being for [briefly state why they claim to be owed money]. Despite again checking our records, I am unable to discover the basis for your claim. [State reasons why the claim is unjustified.] Our companies [alternative: businesses] have been doing business for some time now, and I certainly value our relationship. It is unfortunate that this matter was not resolved earlier, before valuable time and energy was expended in making claims and counterclaims. In the spirit of fostering our ongoing relationship, I would like to finalise this matter on the basis that we pay $[amount] in full and final settlement of your claim. I hope you will understand the importance of achieving a resolution in which all parties are satisfied with the result. If you are happy to accept our settlement offer, please contact me directly and I will prepare a brief written agreement.
491
Miscellaneous Letter Samples Invoice – Tax invoice [Insert your letterhead] (3) or [Your name] [Company/business] [Australian Business Number] (4) [Address] [Telephone no.] [Facsimile no.] [Email address] [Date] [Recipient’s name] (4) [Recipient’s position] (4) [Recipient’s company/business] (4) [Recipient’s address] (4) [Australian Business Number] (2) TAX INVOICE [Invoice no.] Quantity (4)
Code
Product
Price (inc. GST) (1,5) GST Payable (5) [Sub-total: ($) _____ ] [optional: Delivery charges: ($) _____ ] Total GST: ($) _____] (1,5) Total: ($) _____
[General notes] The total price includes GST for this supply. (1,5) The terms of this invoice are 14 days. Please submit payment before [date]. NOTE: Please read footnotes 1 to 5 below carefully before generating an invoice. Items in green to be retained or removed depending on the choice you make in line with the instructions in the footnotes, referenced in red on the invoice.
(1) Where the GST payable is 1/11th of the purchase price (i.e. 10%), you have the option of listing individual prices, excluding GST, in this column. Where the GST payable is less than 1/11th of the purchase price (e.g. in the case of long-term residential accommodation), you must list individual prices exclusive of GST. In both cases, you must remove both the "(inc. GST)" and "The total price includes GST for this supply" details, and include a figure stating the total GST payable on all items in the totals column. (2) It is always preferable to state the recipient's ABN. If this is not known, you must include the recipient's full address details. (3) Only use company letterhead where it contains your ABN or where you can otherwise print your ABN on the letterhead. (4) Not required if the invoice is less than $1000, but it is prudent to include these details (especially the recipient's ABN) where available. (5) The "GST Payable" column is only required for "hybrid" invoices; that is, invoices which include a combination of products/services that attract GST and products/services which are GST free. In such cases, list the GST exclusive price for all items, then include details of the GST payable for each item that attracts GST. Include details of the total GST payable in the totals column. Remove the "The total price includes GST for this supply" section.
492
Thanking customer for product suggestion Thank you for your recent letter. We always appreciate feedback and suggestions from our customers. Your suggestion, that [briefly summarise suggestion], is particularly useful and it is obvious that you have given this matter some considerable thought. I have forwarded your letter to our [department name] department for further investigation.
Apology for delay in shipment Thank you for your recent letter [alternative: telephone call]. I have pursued this matter with our sales department. It appears that when your order for [quantity and description of product] was received, we were unable to fill the order immediately because [reason]. We anticipate being in a position to ship your order by [date]. I appreciate, however, that this might not be convenient. As such, I will hold your order pending your approval of the revised shipping date. I apologise for any inconvenience our oversight may have caused.
Apology for delay in shipment and proposal for alternative delivery date Thank you for your Purchase Order dated [date] bearing your Order No.[details]. I am writing to advise that due to [explain nature of the problem], we are unable to ship the goods before [date]. As you have specifically requested delivery by [date], I thought that I would write immediately to advise you of this delay. I hope that you are able to provide us with an extension and apologise for the inconvenience this may cause. If our proposed delivery date is not agreeable, please contact me so we can discuss alternative arrangements.
493
Response to product complaint offering replacement I refer to your letter dated [date]. I was very sorry to hear about the problems that you encountered with our product. We take pride in the effort we make to ensure 100 per cent customer satisfaction. A replacement will be shipped to you at once. Thank you for taking the time to draw this matter to my attention. I trust the replacement will meet your expectations. Agreement to modify the terms (and conditions) of contract I refer to the contract between our companies dated [date]. [Alternative: I refer to your Purchase Order dated [date].] I am writing to confirm that we have agreed to amend the terms of the contract [alternative: Purchase Order] as follows: [Description of changed terms.] Please sign and return the enclosed (*) copy of this letter to signify your agreement to the amended terms. I have enclosed a pre-addressed envelope for your convenience. Once I receive the endorsed copy, I will fulfil the contract [Purchase Order] according to the modified terms. [*Enclosed: (1) Copy of letter (2) Pre-addressed envelope] ___________________________ [The information below should appear on the enclosed copy of the correspondence:] I, _____________________, hereby acknowledge that the terms of the contract between my company and [name of your company/business] dated [date] have been modified as outlined above. [Alternative: I _____________________, hereby acknowledge that the terms of the Purchase Order dated [date] have been modified as outlined above.] ________________________ (Signature) ______?_________________ (Name) ________________________ (Date)
494
Agreement to mutually terminate the contract I refer to our recent [optional: telephone] discussion, in which it was agreed that the arrangement entered into by our two companies [alternative: businesses] to [briefly detail the nature of the agreement] would be terminated immediately. In order to document this agreement and avoid any doubts that might arise in future, I have prepared a general form of “release” (*), in which we both agree to terminate the agreement and release one another from our respective obligations pursuant to the agreement. Please sign both copies of this letter and return one signed copy. The other copy is for your records. [*Enclosed: Copy of letter] ___________________________ [To appear on both copies:] Whereas [name of your company/business] and [name of recipient’s company/business] (“the Parties”) entered into an agreement on [date] to [briefly detail terms of agreement] (“the Agreement”). Whereas the Parties now wish to terminate the Agreement. In consideration of the mutual termination contained herein, the Parties do hereby mutually terminate the Agreement effective from the date of the last signature appended below. The Parties further provide that said termination shall be without further recourse by either party against the other and this document shall constitute mutual releases of any further obligations under the Agreement, all to the same extent as if the Agreement had not been entered into in the first instance. ________________________ (Signed) [Company Seal] ________________________ (Witness) ________________________ (Date) ________________________ (Signed) [Company Seal] ________________________ (Witness) ________________________ (Date)
495
BUSINESS LETTERS – TRANSLATION EXERCISES TRADE 1. Greška u sadržaju isporuke Hvala Vam na urgentnoj isporuci robe. Ustanovili smo, pak, određene diskrepance između tovarnog lista i sadržaja kontejnea. Između ostalog, naša porudžbina je sadržavala i …, umesto kojih smo dobili …; takođe, nedostaje ….. naručenih …., kao i … robe. Ostala isporuka je u saglasnosti sa porudžbinom. Molimo Vas da reklamiranu robu koju niste isporučili dostavite avionom u vidu dopunske isporuke. Pogrešno isporučena roba biće Vam takođe vraćena avionom. U nadi da neće biti problema sa budućim isporukama… _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ 2. Greška u količini robe Iskreno nam je žao što vam je isporučeno svega 58 od 95 komada naručene robe. Nakon što smo obavili proveru, utvrdili smo da su radnici zaduženi za pakovanje permutovali broj, pa smo se sa njima dogovorili da organizujemo iz istih stopa pošiljku robe koja vam nije isporučena. Zahvaljujemo na vašem razumevanju i budite uvereni da se ovakve greške više neće ponoviti. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________
496
3. Neispravni proizvodi Hvala Vam na dopisu od … u kojem nas obaveštavate o neispravnim … koje su vam juče isporučene. Dopustićete da Vam se iskreno izvinimo zbog nastale greške. Za nastali problem odgovorno je naše novo-primljeno osoblje na poslovima pakovanja i špedicije proizvoda koje je neispravne proizvode slučajno upakovalo u Vašu porudžbinu. Kurirskom isporukom ćemo Vam još koliko u toku današnjeg dana isporučiti ispravnu robu, koja će nadamo se stići ne kasnije od … Zahvalni smo na strpljenju koje ste pokazali u ovoj konkretnoj situaciji, i još jednom primate naše izvinjenje u vezi sa neugodnošću kojoj ste bili izloženi. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ 4. Moguće storniranje Želeli bismo da se raspitamo za porudžbinu pod br. … koju smo Vam juče poslali. Čuli smo za vremenske neprilike koje su pogodile i Vašu kompaniju, i samim tim Vas onemogućile u ispunjavanju obaveza po prosleđenoj porudžbini. Imajući u vidu svu neprijatnost kojoj je Vaša firma izložena zbog nepogodnih vremenskih prilika u rejonu, obaveštavamo Vas da nećemo odmah i nepromišljeno stornirati porudžbinu, već ovom prilikom želimo da Vam damo na znanje da ćemo sačekati da se situacija u oblasti smiri i stabilizuje. Ako smatrate da bi trebalo stornirati porudžbenicu ili ako imate neke druge planove u vidu, molimo Vas da nas o tome obavestite. Svesni smo situacije u kojoj se Vaša firma nalazi. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________
497
5. Nedostatak sirovina Sa velikim žaljenjem moramo da Vas obavestimo da će doći do kašnjenja u dostavljanju Vaše porudžbine. Do ovog kašnjenja je došlo zbog neblagovremene isporuke sirovina. Plašim se da naša kompanija neće biti u mogućnosti da realizuje Vašu porudžbenicu pre… Ukoliko prihvatate izvinjenje, molimo Vas da nam potvrdite da li se slažete sa odlaganjem isporuke do navedenog datuma. Zahvaljujemo na razumevanju. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ 6. Loši vremenski uslovi Hvala za faks poruku u vezi sa porudžbinom br. XPY koju je trebalo da Vam isporučimo … Izvinjavamo se zbog prekoračenja utvrđenog – dogovorenog roka. Kašnjenje je usledilo zbog izuzetno jakog mraza i velikih snežnih nanosa koji su blokirali saobraćaj na toj deonici puta. Robu smo, ipak, poslali danas, i sva relevantna dokumenta su predata banci. Još jednom primite naše izvinjenje zbog kašnjenja isporuke, i nadamo se da ćete robu dobiti u neoštećenom stanju. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________
498
7. Prekid platnoga prometa Žao nam je što Vam još uvek nije stigla uplatu koju je naša kompanija izvršila još prošlog meseca. Tek pre izvesnog vremena smo dobili obaveštenje o prekidu platnog prometa sa Vašom zemljom. Banka daje sve od sebe da pronađe rešenje kojim bi se uplata ipak prosledila Vašoj kompaniji, i nadamo se da će ista biti izvršena do kraja ove nedelje. Izvinjavamo se na naprijatnostima kojima ste možda bili izloženi usled ovakvih okolnosti, i nadamo se da ćemo u daljoj saradnji slične neprijatnosti unapred moći da predvidimo, kao i njihovo prevazilaženje. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ 8. Konačna ponuda Hvala na upitu od … Ovim bismo želeli da potvrdimo telefonski razgovor koji smo danas obavili sa Vama, prilikom kojeg smo vas obavestili da smo trenutno u mogućnosti da isporučimo isključivo jedan deo zahtevane robe sa lager, što je u skladu sa priloženom detaljnom ponudom. Najmanje … nedelje-dana od datuma prijema Vaše potvrde da prihvatate ovu isporuku nam je potrebno da bismo Vam dostavili ostatak poručene robe. Cene su nuðene za isporuku na paritetu FOB luka u …. Pakovanje : drveni sanduci. Isporuka : gore navedeno. Plaćanje : podnošenje dokumenata preko menice. Nadamo se da Vam naši uslovi i rokovi isporuke odgovaraju. Garantujemo punu saradnju po ovom pitanju. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________
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9. Opomena pred podnošenje tužbe Ovim vas obaveštavamo da ćemo ovaj slučaj predati advokatu radi dalje naplate, ako najkasnije do … ne dobijemo Vaš ček na €… _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ 10. Povećanje rabata Zahvaljujemo na vašem dopisu od … u kojem tražite dodatni rabat od …% iznad uobičajenog trgovinskog rabata, a na osnovu vaše porudžbine od … komada robe. Cenimo vašu porudžbinu, ali mislimo da ipak moramo da naglasimo da su ponuđene cene već svedene na minimum i da je nemoguće drugde nabaviti istu robu po ceni koju mi nudimo. Ukoliko se odlučite da povećate svoju porudžbinu na veliko za 25%, spremni smo da Vam izađemo u susret i odobrimo zahtevani rabat od …%. Očekujemo da nam potvrdite da li prihvatate ovaj naš predlog. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ 11. Storniranje porudžbine Pozivamo se na našu porudžbinu od ... Sa žaljenjem vas obaveštavamo da nam, imajući u vidu činjenicu da isporuku niste obavili u ugovorom specifikovanom roku, ne preostaje ništa drugo do da našu porudžbinu storniramo do daljnjeg. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________
500
12. Konačna isporuka Veza: Isporuka … Sa zadovoljstvom Vas obaveštavamo da smo izvršili isporuku zahtevane robe I to u skladu sa u Vašem akreditivu br…. navedenim odredbama. Ovom prilikom takođe potvrđujemo naš dnašnji telegram koji glasi: UGOVOR … AKREDITIV … Artikala ISPORUČENO VOZOM … 5. MARTA U prilogu dostavljamo sledeće primerke tovarnih dokumenata, kako ne biste imali neprilika oko preuzimanja isporučene robe po prispeću iste: Faktura br. … u duplikatu Otpremnica br. … u duplikatu Neutrživ tovarni list br. … Polisa osiguranja br. … Hvala za plasiranu porudžbinu. Budite uvereni da ćemo u budućnosti sa najvećom pažnjom obraditi svu vašu korespondenciju, upite i porudžbine. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ 13. Otvoreno pokriće od svih rizika Ubeđen sam da ste svakako upoznati sa činjenicom da spadamo u Vaše stalne klijente unazad nekoliko godina, i da smo svo vreme kod vas osiguravali pojedinačne isporuke naših artikala za Italiju. Ovih dana bismo želeli da naš izvoz proširimo na teritoriju SADa. Stoga, interesuje nas da li biste bili u mogućnosti da nam obezbedite otvoreno pokriće od svih eventualnih rizika za € …., kojim bi se osigurale naše redovne isporuke do luke… Očekujemo Vaš brzi odgovor. Unapred zahvalni,… _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________
501
14. Odobravanje načina pakovanja Porudžbina br. … za … pojedinačnih artikala robe. Hvala na dopisu od … iz kojeg smo shvatili da je predmetna roba, upakovana u kartonske kutije, isporučena vozom broj… Takođe smo shvatili da ste sa nadležnim odborom Vaše firme ovo pitanje pakovanja gorenavedene porudžbine već razmotrili i da ste došli do zaključka da će pakovanje u kartonskim kutijama sprečiti eventualnu krađu do koje uvek lako dođe kada roba nije zaštićena na odgovarajući način. Isto tako, ove kutije su izuzetno dobro zaštićene od vlage, lake su i lako se njima manipuliše. Na osnovu stavova naših kupaca, uvideli smo da su vaše primedbe prilično razumne, i nadamo se da će ovakav način pakovanja biti na obostrano zadovoljstvo kako nas tako i naših kupaca. Ako se ovaj način pakovanja pokaže kao dobar, možete i u daljoj saradnji da nastavite sa ovakvim načinom upakivanja artikala. Čim dobijemo željenu robu, javićemo Vam naš stav. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ 15. Neopoziv dokumentarni akreditiv Zahvaljujemo na vašoj profakturi br. … i sa zadovoljstvom vam prilažemo našu porudžbinu br. … za 300 artikala. Dali smo nalog svojoj banci, …, da u vašu korist otvori neopoziv dokumentarni akreditiv na €… sa rokom važnosti do …. Ovaj akreditiv će ubrzo potvrditi naša korespondentska banka u …. Ovlašćeni ste da naplatite menicu na ukupan iznos fakture u roku od … dana, na teret naše banke, a po osnovu ovog akreditiva. Pre akceptiranja ove menice, naša banka će zahtevati da priložite sledeća dokumenta: Original čistog konosmana sa kopijama. Komercijalnu fakturu, … primeraka Potvrdu o osiguranju, … primerka. Molimo vas da se potrudite da isporuka bude izvršena na vreme i u roku važnosti akreditiva. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________
502
16. Ponuda na osnovu istraživanja tržišta Naša kompanija je proizvođač ukupnog asortimana … proizvoda pod nazivom… Na osnovu obavljenog istraživanja tržišta, došli smo do podataka da je evidentan manjak proizvoda visokog, čak vrhunskog kvaliteta kada je ova oblast u pitanju. Stoga smo uvereni da bi ovaj asortiman naših proizvoda bez problema mogao da tu prazninu popuni, ne samo zato što zadovoljava najrigoroznije zahteve samog tržišta na koje će biti plasirani, već i propisa. Ukoliko su Vam potrebne bilo kakve dodatne informacije u vezi sa navedenim asortimanom, slobodno se obratite Odseku za marketing i plasman na tržištu, g. …, na telefon… _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ 17. Potvrda sa načinom isporuke Hvala na porudžbini …artikala od …. Sa zadovoljstvom konstatujemo da pretendujete da budete naši ozbiljni, ako ne i najozbiljniji kupci u budućnosti. Ovim putem želimo da potvrdimo isporuku … poručene robe i to po cenama koje su u dopisu navedene, i da najavimo organizovanu isporuku robe sledećeg meseca avionom. Ne sumnjamo niti najmanje da ćete biti zadovoljni kvalitetom i stanjem robe kada je primite. Želja nam je, takođe, da Vas upoznamo sa činjenicom da naša kompanija trguje širokim asortimanima roba, kao što ćete videti iz priloženog kataloga. Nadamo se da ćete, nakon realizacije prve porudžbine, nastaviti da poslujete sa nama, i nadamo se da će ova isporuka označiti početak jedne uspešne, u obostranu korist, saradnje. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________
503
18. Zahtevanje profakture Hvala na uzorku koji ste nam prosledili. Ukoliko nalazite da je cena od €… po …paketu proizvoda prihvatljiva za isporuku FOB …, budite ljubazni i dostavite nam profakturu, nakon čega će naša kompanija da izvrši plasiranje porudžbine za … paketa robe. Kada je u pitanju dozvola od naših organa za obavljanje posla, tu ne očekujemo da bi moglo doći do komplikacija. Čim dobijemo navedenu dozvolu, otvorićemo neopoziv akreditiv u korist Vaše kompanije. Bili bismo Vam veoma zahvalni kada biste nam poslali svoj odgovor u najkraćem mogućem roku. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ 19. Poskupljenje zbog poreza Veoma nam je žao što moramo da Vas obavestimo da smo silom prilika prinuđeni da cene naših proizvoda uvećamo za 8%, zbog činjenice da je došlo do povećanja poreskih obaveza. Imajući u vidu još i činjenicu da su naše cene ionako dosta niske, veoma nam je teško da ih, sada kada su poreske obaveze dospele i narasle, održimo u granicama u kojima su one bile pre povećanja poreskih obaveza prema državi. Nadamo se da ćete pronaći razumevanje za teškoće sa kojima se naša kompanija trenutno suočava. Unapred zahvalni,… _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________
504
20. TOVARNA DOKUMENTA 1. Tovarni list (potvrda i dokaz o ugovoru koje koristi drumski, železnički i vazdušni prevoznik) / neutrživ dokument / _____________________________________________ ________________________________________________________________________ 2. Konosman /Brodski tovarni list (dokument koji se koristi za pomorski prevoz) / utrživ dokument / ______________________________________________________________ ________________________________________________________________________ 3. Faktura - Profaktura / Komercijalna faktura / Konzularna faktura ________________________________________________________________________ 4. Polisa osiguranja (Potvrda o osiguranju) ________________________________________________________________________ 5. Potvrda o poreklu ________________________________________________________________________ 6. Certifikat o vrednosti ________________________________________________________________________ 21. Produžavanje akreditiva Ugovor br. 489 koji se odnosi na … artikle Žao nam je, ali do ovog trenutka nismo dobili niti jednu jedinu vest od strane Vaše kompanije u vezi sa gorenavedenom porudžbenicom. I sami znate, gorenavedeni ugovor je pravosnažan za isporuku u mesecu … - …, tako da smo očekivali od Vas makar neko obaveštenje u vezi sa navedenom isporukom. Ni najmanje ne sumnjamo da postoji valjan razlog za zakašnjenje u isporuci. Da bismo u ovoj novonastaloj neprijatnoj situaciji zaštitili našu kompaniju, telegramom smo Vas obavestili da akreditiv ostaje i dalje na snazi. Ovaj akreditiv će pokriti isporuku do kraja narednog meseca, i duboko smo uvereni da ćete nam pružiti bilo kakvu informaciju u vezi sa novonastalom situacijom i isporukom što je pre to moguće. Očekujemo vaš hitan odgovor. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________
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22. Zahtev za uslovima plaćanja Naši kupci su nam uputili izvestan broj upita u vezi sa tkaninama koje je Vaša kompanija reklamirala na Novosadskom sajmu. Da li biste bili ljubazni da nam pošaljete uzorke svojih proizvoda za kompletan asortiman namenjem za sledeću sezonu jesen-zima, uključujući i navode cena. Ukoliko uzorci koje dobijemo budu prihvatljivi, ukoliko nam cene proizvoda budu prihvatljive, i ukoliko možete da garantujete promptnu isporuku istih, prihvatili bismo da značajnu porudžbinu Vaših proizvoda plasiramo na …tržištu. Naš uobičajeni način plaćanja dobavljačima zasniva se na mesečnim situacijama, što ne znači da, ukoliko Vi budete imali bilo kakve komentare, i ukoliko se ne budete slagali sa politikom naše kuće kada je plaćanje u pitanju, ne bismo razmotrili i Vaše zahteve i pokušali da pronađemo zajednički jezik, razmatrajući i druge mogućnosti. Unapred smo Vam zahvalni što ćete pažljivo razmotriti naš zahtev i očekujemo Vaš odgovor. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ 23. Status distributera Naša kompanija je u prethodnoj godini ostvarila pristojan obim prodaje proizvoda Vaše kompanije na čitavoj teritoriji… Uzimajući u obzir kretanje prodaje u godinama koje su pred nama, smatramo da smo u mogućnosti da osiguramo neprekidni plasman Vaših proizvoda, pa u skladu sa tim i verujemo da bismo svoje planove najbolje ostvarili ako biste nam dali status distributera Vaše kompanije za ovu teritoriju. Ako razmatrajući ovaj naš predlog dođete do zaključka da ova naša ideja ima osnova, vrlo rado ćemo prihvatiti da se sastanemo sa predstavnicima Uprave Vaše kompanije. Na tom sastanku bismo svi zajedno sagledali sve aspekte poveravanja distribucije. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________
506
FINANCE 1. Molba banci za posredovanje u međunarodnom plaćanju Hvala Vam za dopis od (datum). Ovim putem želimo da potvrdimo da još nismo dobili uplatu iznosa od (iznos). Zato Vas molimo da u naše ime posredujete kako bi ta uplata legla. U vezi sa ovom stvari, prilažemo Vam svu relevantnu dokumentaciju koja se na taj dug odnosi. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ ________________________________________________________________________ 2. Molba za odobrenje prekoračenja kredita Naša firma je upravo potpisala veoma značajan i vredan ugovor po našu kompaniju sa preduzećem (naziv preduzeća). Imajući u vidu toliku vrednost ugovora, mi finansijski nismo u mogućnosti da isplatimo dobavljače, koji očekuju da naša uplata legne oko deset dana pre nego što naša potraživanja od firme s kojom smo sklopili ugovor budu regulisana. Da bismo uspešno prebrodili taj krizni period, bili bismo vam veoma zahvalni ako biste nam odobrili kratkoročan kredit u iznosu od... Želeo bih da se sa vidim sa Vama što je pre to moguće, i bio bih zahvalan ako biste mi zakazali sastanak za dan ... radi razgovora o pojedinostima naše molbe i kako bismo otkolonili sve eventualne poteškoće u vezi sa realizacijom iste. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ ________________________________________________________________________
507
3. Traženje preporuke od banke Upravo smo primili povratnu informaciju od firme ... iz mesta ... u kojoj se kaže da je ta firma ugledna i da je njen potencijal (obrtni kapital) u potpunosti iskorišćen. Međutim, nismo u potpunosti sigurni da li da ovom našem poslovnom partneru odobrimo plaćanje na odloženo. Bili bismo Vam veoma zahvalni ako biste nam protumačili ovu preporuku i dali svoje mišljenje. Naročito nas zanima da li Vi smatrate da bi bilo pametno da se upustimo u dalju saradnju sa ovom firmom samo na osnovu plaćenih predračuna? _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ ________________________________________________________________________ 4. Molba banci za plaćanje na osnovu odobrenog akreditiva Predmet: __________________ Neopozivi akreditiv br.... u vrednosti od ... Od: ______________ U vezi sa gore navedenim podacima, ovim putem Vam prilažemo originalnu kreditnu dokumentaciju, koja se sastoji iz dole navedenih dokumenata: 1. 2. 3. 4. 5. 6.
___ kopije originalne potvrde o kvalitetu robe ___ kopije računa paket teretnica sa izuzetkom 1 originala i 3 neprenosive kopije inspekcijski nalaz – originalni izveštaj ___ primerka paking-liste dokaz – potvrda da smo primaocu za navedenu pošiljku poslali svu relevantnu (prateću) dokumentaciju 7. menica 8. ___ kopije potvrde o analizi robe Molimo Vas da navedeni iznos doznačite direktno na naš račun, i da nas o tome blagovremeno obavestite. Naš račun je _______________. Naziv računa ____________. Broj računa _____________. Zahvaljujemo na saradnji.
508
_____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ ________________________________________________________________________ 5. Molba posredniku za nekretnine da pregovara o najamnini Predmet : Najamnina za poslovne prostorije Za približno ___ meseci će ponovo biti sprovedena revizija najamnine za naše poslovne prostore. Zato bih želeo da što pre počnete sa pregovorima, kako bismo bili u mogućnosti da u naš budžet za iduću godinu uključimo i kiriju. Naša firma bi Vam, i ja lično, bila zahvalna ako biste prihvatili da pregovarate u naše ime, imajući u vidu Vaše veliko iskustvo i vaše profesinalno poznavanje tržišta, što bi u pregovorima moglo biti od neprocenjive koristi, a u vezi sa iznosom koji će biti pošten i konkurentan. Takođe, smatram da bi bilo dobro da Vas dodatno obavestim da su naši susedi, koji imaju u najmu prostor sličan našem, nedavno imali reviziju i da je došlo do korekcije u kontekstu veoma malog povećanja. Koliko ja znam, sada plaćaju _____ po kvadratnom metru poslovnog prostora, a mi bismo bili više nego zadovoljni ako bismo i sami mogli da postignemo takvu cenu. Nadam se da će Vam ova informacija biti od nesumnjive pomoći u pregovorima koje ćete, nadamo se iskreno, voditi u naše ime sa našim najmodavcem. Verovatno još uvek imate kopiju našeg ugovora, ali Vam, u slučaju da je nemate, prilažemo u pismu. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________
509
6. Nalog za sprovođenje revizije Predmet: Godišnji izveštaj za godinu ________ Prilažem odgovarajuću dokumentaciju, koja uključuje i knjigu nabavki, prodaje i gotovinskih isplata, kao i bankarske izvode za navedeni period. Verujem čvrsto da je sve u redu sa dokumentima. Ako budete smatrali potrebnim, dostaviću vam, po Vašem potraživanju, i potvrde o čekovima i o prijemu gotovine. Molio bih Vas da sa sprovođenjem revizije počnete u najkraćem mogućem roku, jer direktor naše banke želi da vidi izveštaj čim bude zaključen. Iz priloženog ćete videti da je promet bio nešto ispod predviđenih _______, kao i to da je neto dobit mala, čak i kada se uporedi sa manjim prometom. Razlog za ovakve rezultate mogao bi se naći u činjenici da su na naše poslovanje veoma mnogo uticale političke i ekonomske promene, tj. nemiri, u _______. Kao posledica, tamo su nam ostala veoma brojna nenaplativa potraživanja, o čijim pojedinostima možete videti iz priloženih dokumenata. Naravno, dodatni razlog jeste činjenica da je konkurencija sve oštrija, što je učinilo da smanjimo maržu. Trenutno, naše investicije su usmerene na drugu stranu, tako da veće količine robe izvozimo za ______, kao i na područje _________, što smanjuje zavisnost naše firme od _______. Nadam se da imate dovoljno podataka koji su Vam potrebni, a u slučaju da Vam zatrebaju bilo kakve dodatne informacije, nemojte se dvoumiti i pozovite nas. ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________
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7. Odgovor na pitanje o računovodstvenoj stavki Posle Vašeg jučerašnjeg telefonskog poziva u vezi sa sa iznosom gotovine od .... koji je podignut dana _____, potvrđujem da je bio potrošen za plaćanje troškova službenih putovanja na ostrva _______, koja su plaćena našem zastupniku u Nigeriji, dok je ______ izgubljeno. Ove stavke će biti prikazane u našem godišnjem izveštaju za ____ godinu. ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ 8. Pismo računovođi o direktorovim troškovima Predmet: obrazac P11D – kraj finansijske godine dana .... Hvala vam za pismo koje je upravo jutros stiglo. Sa zadovoljstvom ću Vam dostaviti u nastavku pisma podatke koje ste tražili. 1. Potvrđujem da sam do dana ... upravljajo vozilom marke ... (prva registracija na dan...), čija je osnovna cena iznosila _____. Nakon tog datuma, taj automobil sam zamenio automobilom marke ... po ceni od ..., za šta prilažem ugovor o lizingu i dokumente o prvoj registraciji. 2. Za to vreme, prešao sam između _____ i _____ kilometara. 3. Sve troškove u vezi sa upotrebom vozila u (istina vrlo ograničene) privatne svrhe sam platio iz svog džepa. 4. Kompanija mi nikada nije plaćala privatno zdravstveno osiguranje, a i sve putne troškove, uključujući tu avionske karte, rent-a-kar usluge i taksi usluge (bez troškova goriva u vrednosti od _______) su iznosili ____ i isplaćeni su mi u gotovom, dok sam iznos od ______ dobio u vidu čekova preduzeća na moje ime. Hotelski troškovi nisu tu uključeni. 5. Troškovi reprezentacije su iznosili _______. 6. Kompanija mi nije platila telefonske račune za kućni fiksni telefon, jer imam posebnu telefonsku liniju, a mobilni telefon nemam. 7. Jedina povlastica koju sam iskoristio na račun kompanije su troškovi dodatnog penzijskog osiguranja za mene i za ______, sekretara kompanije. U prilogu Vam dostavljam obrazac ... _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________
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9. Molba agenta osiguravajućeg društva za reviziju ponude Predmet: Penzijsko osiguranje Upravo sam pregledao naše penzijsko osiguranje i žena je zabrinuta što moja polisa uključuje naknadu članovima najuže porodice u slučaju smrti, što sa njenom nije slučaj. Zamolio bih Vas da nas informišete o tome na koji način bismo mogli to da regulišemo. Takođe nosim se mišlju da povećam osiguranje života, u vezi sa penzijskim, sa _____ na ______ (uneti samo valute i iznose). Molim Vas da me obavestite u kojoj će to meri uticati na moju mesečnu premiju. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ ________________________________________________________________________ 10. Nalog kupca svojoj banci Uskoro će Vam inostrani trasanti priložiti sledeće menice. Molili bismo Vas da ih u naše ime prihvatite i da ih isplatite po dospeću, na taj način što ćete moj račun zadužiti sa ... Sami inostrani trasanti će snositi sve vaše troškove. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ 11. Nalog prodavca stranoj banci Kompanija (ime kompanije), sa sedištem u ulici broj ..., grad..., nas je zamolila da kod vas povučemo (navesti iznos) za isporuku tekstilnih materijala u skladu sa priloženom fakturom. Prilažemo menicu zajedno sa transportnim dokumentima. Bili bismo vam veoma zahvalni ako biste prihvatili menicu a potom je vratili nama. Isto tako, voleli bismo da istovremeno toj kompaniji predate dokumenta. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________
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12. Neovlašćeno korišćenje kreditene kartice Veza: Prijavljeno neovlašæeno korišæenje kreditne kartice na ime ... U vezi sa dopisom koji ste uputili, i kojim nas obaveštavate da ste izgubili kreditnu karticu koju je neko u međuvremenu neovlašćeno koristio, ovim putem bismo želeli da Vas obavestimo da je neophodno da svojeručno potpišete i vratite nam priložene formulare kojima ćete nam dati ovlašćenje za otkrivanje podataka kako bismo mogli da Vam izvršimo adekvatnu nadoknadu za transakcije koje je izvesna osoba izvršila na prevaru sa Vašeg računa. Kada dobijemo natrag formulare, policija će biti obaveštena u vaše ime. Takođe, u saradnji sa našim Odeljenjem za prevare, potrudićemo se da Vam se izvrši puna nadoknada. Ukoliko vam je potrebna bilo kakva pomoć ili dodatna informacija, nemojte se ustručavati da stupite u kontakt sa nama. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ ________________________________________________________________________ 13. Neplaćena menica Veza: MENICA (br....) Upravo smo od naše banke dobili natrag menicu broj ... na iznos od ... koja ima rok dospeća na dan ..., i koja je označena videti sa trasantom. Naša je pretpostavka da se ovde radi o običnom previdu koji ste počinili, i mi smo voljni da Vam odobrimo dodatno vreme – rok – da isplatu po datoj menici izvršite. U slučaju da se ni do isteka ovog novog roka ne izvrši uplata sa vaše strane, i pod uslovom da ne stupite sa nama u vezu u međuvremenu kako biste nam pružili opravdan i valjan razlog za dodatno kašnjenje uplate, sa žaljenjem moramo da konstatujemo da će nam izvršavanje zvaničnog protesta biti jedino raspoloživo sredstvo za naplatu potraživanja. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ ________________________________________________________________________
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14. Obaveštenje o ukradenoj kreditnoj kartici Želeo bih ovim putem da Vas obavestim da mi je ... ukradena kreditna kartica broj ... zajedno sa ostalim ličnim dokumentima. Kartica je korišćena na prvaru u međuvremenu, pa bih stoga želeo da mi se izvrši procena, a zatim i nadoknada za sve transakcije koje su na prevaru obavljene sa mog računa, kao i da se zaustavi svaki eventualni pokušaj novih transakcija i zaduženja po računu. Bio bih Vam veoma zahvalan kada biste brzo reagovali u vezi sa ovim problemom. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ ________________________________________________________________________ 15. Nemogućnost odobrenja kredita. Veoma nam je žao što nismo u mogućnosti da Vam izađemo u susret i odobrimo kredit koji ste tražili u iznosu od ...., u skladu sa Vašim dopisom od dana... Imajući u vidu činjenu da Vaša kompanija nije u mogućnosti da ponudi punu garanciju, samo smo delom sprečeni da Vam odobrimo zahtevani kredit, jer ste Vi naš dugogodišnji klijent sa dobrim bonitetom. Glavni razlog zbog kojeg smo u nemogućnosti da Vam pružimo potraživanu uslugu jeste priličan pritisak koji na nas vrši Narodna Banka da ograničimo kredite u skladu sa naporima naše vlade da se zaustavi sve veći inflatorni talas u zemlji. Bojim se da će oni iz privredne delatnosti pružanja usluga, poput Vas, biti prvi na udaru ovakvih napora i odluka koje smo prinuđeni da donesemo u skladu sa njima. Još jednom kažem da nam je žao što Vam nikako ne možemo pomoći ovom prilikom, i nadam se da ćete uspeti da sve potrebne finansije obezbedite kod drugog kreditora. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ ________________________________________________________________________
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16. Odobrenje kredita Sa izuzetno velikim zadovoljstvom, obaveštavamo Vas da smo, nakon preispitivanja svih faktora relevantnih u vezi sa ovim kreditom, u prilici da Vam odobrimo zahtevani kredit u iznosu od... Kao što smo se dogovorili na sastanku dana..., u mogućnosti smo da Vam odobrimo kredit sa kamatom po tekućoj kamatnoj stopi od ..., koju ćemo Vam obračunavati na svakih pola godine. Banka veruje da će kredit da bude isplaćen u celosti banci najkasnije do ugovorenog ... dana..., tokom kojeg perioda će Banka zadržati sve obveznice i obične akcije koje ste deponovali, a čija je ukupna vrednost, izražena u evrima, ... , kao garanciju da će kredit biti vraćen do isteka ugovorenog roka. Slažemo se da se za žiranta uzme ..., Vaš saradnik, a za preostalih ... evra. Kao garancija za taj iznos neće morati da se uključi vaš vozni park, koji broji ... kamiona. Prilažemo Vam sve potrebne formulare koje ćete potpisati, zajedno sa svojim saradnikom, žirantom. Po prijemu uredno potpisanih dokumenata, obratićemo Vam se, nakon čega će novac biti plasiran na Vaš tekući račun. Želimo Vam puno sreće u nameri da sprovedete ovaj plan obnove i očekujemo vesti od vas. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ ________________________________________________________________________ 17. Prijava krađe kreditne kartice Pozivajući se na naš prekjučerašnji razgovor telefonom, kada sam prijavila krađu kreditne kartice broj... koja se desila dana..., želim da naglasim da sam karticu poslednji put koristila dana... za kupovinu... Još bih jednom želela da mi potvrdite da ćete kreditnu karticu odmah stornirati, otvoriti novi račun na moje ime i poslati mi ga na moju kućnu adresu. Zahvaljem na Vašoj poslovnosti po ovom pitanju. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________
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18. Zahtev za otvaranje ličnog računa U vezi sa razgovorom koji smo obavili dana..., molio bih Vas da mi otvorite tekući račun na moje ime.U prilogu Vam dostavljam uzorak potpisa i preporuku gospodina..., koji posluje sa Vašom filijalom. Takođe, u prilogu ćete pronaći i ček na .... evra, koji bih želeo da deponujem na svoj novi tekući račun. Očekujem da ćete mi uskoro potvrditi svoju spremnost da mi otvorite račun. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ________________________________________________________________________
19. Zahtev za otvaranja računa firme Molimo vas da za nas otvorite tekući račun na ime ABC Company. Prilažemo uzorke potpisa partnera od kojih je svaki ovlašćen da potpisuje za naš račun. Molimo vas da otvorite račun br. 1 sa 5000 DEM i odobrite u našu korist 500 DEM na račun br. 2. Zahvaljujemo na promptnom izvršenju našeg zahteva. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ ________________________________________________________________________
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20. Zahtev za (odobrenje) zajma Obraćam Vam se sa molbom da mi zakažete sastanak kako bismo razmatrili sve eventualne mogućnosti za odobrenje zajma za modernizaciju... Moja kompanije već punih deset godina radi sa istom, sada već uveliko zastarelom opremom, pa su i troškovi održavanja vrlo veliki i ozbiljno prete da ugroze proizvodnju i umanje planiranu dobit, od koje ne bih štetu imao samo ja, već i društvena zajednica u kojoj živim. Na tržištu je očigledna stalna potražnja, koja je iz dana u dan sve veća, za našim proizvodom, ali zbog svih navedenih problema, kompanija ima značajna kašnjenja u realizovanju porudžbina, da ne govorimo o tome da nismo u stanju da primamo nove kupce. Prema svojoj slobodnoj proceni, rekao bih da bih bio zadovoljan ako biste mi odobrili zajam u iznosu od oko .... evra, kojim nameravam da kupim novu opremu. Kao garanciju za (nadam se) odobreni zajam, mogu da ponudim ... evra u obveznicama, dodatnih ... evra u običnim akcijama kompanije ..., kao i vozni park svoje firme koji se sastoji od ... kamiona i ... luksuznih automobila, po trenutnoj tržišnoj vrednosti od ... evra i ... evra,.... (see footnote). Obavezao bih se da po ugovoru zajam vratim najkasnije do isteka ove godine. U prilogu ćete naći kopiju bilansa stanja preduzeća i imena dva saradnika koji su spremni da budu garanti da ću u roku ispoštovati sva svoja dugovanja prema Vama. _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________
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21. Zahtev za prekoračenje računa U vezi sa našim razgovorom od juče, molim dozvolu za prekoračenje na svom računu do DEM 5.000 u periodu od 1. aprila do 1. avgusta 2000. Kao što sam juče objasnio, u tom periodu ću imati izvesne troškove oko investiranja povezanog sa proširenjem mog poslovanja. Rezultati tog proširenja se neće osetiti pre juna, kada bi trebalo da primim značajna sredstva od klijenata iz zemlje i inostranstva. Kod vas će kao garancija biti deponovane potvrde deonica u vrednosti od 3.500 DEM. Zahvaljujem na brzom odgovoru. ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ _______________________________________________________________
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BIBLIOGRAPHY CHAPTER ONE
GRAMMAR SECTION
Cotton, David & David Falvey & Simon Kent, Market Leader Course Book (Intermediate Business English), Pearson Education Limited, Harlow, 2000 Cotton, David & David Falvey & Simon Kent, Market Leader; Practice File (Intermediate Business English), Pearson Education Limited, Harlow, 2000 Đorđević, Radmila, Gramatika engleskog jezika, II izdanje, Autor, Beograd, 1997 Eckersley, L.G., A Comprehensive English Grammar for Foreign Students, Longman, London, 1976 Fowler, W. S., Synthesis Plus Workbook, Thomas Nelson & Sons, 1993 Fowler, W. S., Synthesis, Thomas Nelson & Sons, 1993 Grba, G. & K. Radovanović, Better English 1, ZZUNS, Beograd, 1999 Grba, G. & K. Radovanović, Better English 2, ZZUNS, Beograd, 2000 Hlebec, Dr. B., Gramatika Engleskog jezika (za srednje škole), ZZUNS & dr., Beograd, 1991 Johnson, Christine, Market Leader, Business English – Banking and Finance, Pearson Education Limited, Harlow, 2000 Johnson, Christine, Market Leader, Test File, Pearson Education Limited, Harlow, 2000 Jovković, Dr Lj., Mastering English Grammar and Structure, Workbook, Beograd, 2000 Pilbeam, Adrian, Market Leader, Business English – International Management, Pearson Education Limited, Harlow, 2000 Popović,Lj./Marina Popović, Gramatika engleskog jezika kroz testove, IP Zavet, Beograd, 1996 Popović, Lj. i Vera Mirić, Gramatika engleskog jezika sa vežbama, IP Zavet, Beograd, 1995 Quirk, R. and S. Greenbaum, A University Grammar of English, Longman, London, 1977 Smith, Tricia, Market Leader, Business English – Business Law, Pearson Education Limited, Harlow, 2000
519
Soars, Liz and John with Jo Devoy, New Headway English Course, Upper-intermediate Level – Workbook, Oxford University Press, London, 2000 Soars, Liz and John, New Headway English Course, Intermediate Level – Workbook, Oxford University Press, London, 1997 Soars, Liz and John with Jo Devoy, Headway English Course, Pre-intermediate Level – Student's Book, Oxford University Press, London, 2000 Stojić, R. Svetlana, English Grammar Exercises for 1st year students, Faculty of Philosophy, Belgrade University, Belgrade, ________ Strutt, P. , MARKET LEADER – Business Grammar and Usage, Business English, Longman, London, 2001 Thomson, A. J. & A. V. Martinet, A Practical English Grammar – Exercises 1-2, Oxford University Press, London, 1995 Thomson, A. J. & A. V. Martinet, A Practical English Grammar, Oxford University Press, London, 1977 Vlahović, N., English Grammar Exercises, Stručna Knjiga, Beograd, 1995 CHAPTER TWO
ENGLISH IN TRADE
Wright, David McCord, A Key to Modern Economics, MacMillan, New York, 1954 Sweeney, Simon, Professional English / Marketing, Pearson Education Limited, Harlow, 2002 (Series Editor: Nick Brieger) Mascull, Bill, Business Vocabulary in Use / Cambridge Professional English , Cambridge University Press, Cambridge, 2002 Cvejić, Miroslava, Basic Business Communication – II (doštampano) Zadužbina Ilije Kolarca, Beograd, 2000
izdanje,
Mojašević, Milka i Mirjana Šoškić, Engleski za ekonomiste – English for Economists, Savremena Administracija, Beograd, 2003: iz bibliografije: David Mc Cord Wright, A key to modern economics, MacMillan, New York, 1954 Cotton, David & David Falvey and Simon Kent, Market Leader Upper Intermediate Business English Course Book, Pearson Education Limited, Third Impression, Harlow, 2002
520
ENGLISH IN ACCOUNTING AND AUDITING Sneyd, Michael R., Professional Reading Skills Series – Accounting, Prentice Hall International, 1994 Pohl, Alison (Series Editor, Nick Brieger), Test Your Professional English – Accounting, Pearson Education Limited, Harlow, 2002 Mascull, Bill, Business Vocabulary in Use / Cambridge Professional English , Cambridge University Press, Cambridge, 2002 ENGLISH IN BANKING Mascull, Bill, Business Vocabulary in Use / Cambridge Professional English , Cambridge University Press, Cambridge, 2002 Johnson, Christine, MARKET LEADER – Banking and Finance (Business English), Pearson Education Limited, Harlow, Third Impression, 2001 Pohl, Alison (Series Editor, Nick Brieger), Test Your Professional English – Accounting, Pearson Education Limited, Harlow, 2002, part: banking technical terminology section of the book Corbett, Jim, English for International Banking and Finance, Cambridge University Press, Tenth Printing, Cambridge, 2000 Sweeney, Simon (Series Editor, Nick Brieger), Test Your Professional English – Finance, Pearson Education Limited, Harlow, 2002 Takođe, studentima se savetuje da u cilju što preciznijeg ovladavanja srpskom bankarskom terminologijom u tu svrhu koriste još i: Milojević, Dobrivoje, Leksikon bankarstva sa stručnom terminologijom na nemačkom i engleskom jeziku, Autor, MeGraf štampa, Beograd, 2003
521
(FURTHER) READING MATERIAL. MAGAZINES The Economist, April 7th – 13th 2001, adapted The Economist, July 28th – August 3rd 2001, adapted The Economist, May 19th – 25th, adapted The business FT weekend magazine 29/07/00, adapted National Geographic, February 2001, adapted National Geographic, June 2001, adapted Oracle, January – February 2002 Accountancy, August 2001 Accountancy, June 2000 Accountancy, May 2000 Accountancy, April 2000 Accountancy, September 2001
CHAPTER THREE BUSINESS CORRESPONDENCE IN ENGLISH Marks LL.B., Phillip, ‘133 Australian Business and Legal Letters, Maximedia, Kiama, Australia, 2001 Ashley, A., Commercial Correspondence, Oxford University Press, Oxford, 1995 Hermes / poslovna pisma, KOŠ&CO., Beograd, 2004 Dodatna informacija o izvoru: (CD-rom izdanje), sa INCOTERMS propisima Studentima se takođe savetuje da, u svrhu vežbanja pisanja poslovnih pisama, koriste: Štros Bračko, Marina i Maryanne Lawrence i Miki Bačič, Engleski 1 – studijski materijal, , Centar za Tehnološko Usposabljanje, Gospodarska Zbornica Slovenije, Višja Strokovna Šola, Beograd-Ljubljana, 2002 U cilju ovladavanja srpskom terminologijom i frazama i izrazima koji odgovaraju engleskim ekvivalentima, studentima takođe mogu koristiti klasično izdanje (u obliku knjige) i CD-rom verziju – i jedna i druga verzija se mogu naći u biblioteci Fakulteta za trgovinu i bankarstvo: Savremena poslovna pisma – 503 poslovna pisma sa komentarima
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DICTIONARIES – used and suggested COLLINS COBUILD, Collins Birmingham University International Language Database, ENGLISH LANGUAGE DICTIONARY, HarperCollins Publishers, London, 1994 MACMILLAN ENGLISH DICTIONARY (for Advanced Learners), MACMILLAN Education, Oxford, 2002 REČNIK ENGLESKO-SRPSKI MARKETINGA, IP (Izdavačko preduzeće) Žarko Albulj, Beograd, 2002 RJEČNIK MARKETINGA, autori: A. Ivanović i P.H.Collin (Prevod sa engleskog jezika – Olja Grubač), Prvo izdanje, Ars Libri i Besjeda, 2002 LONGMAN BUSINESS ENGLISH DICTIONARY, Fourth Impression, 2001 Dragojević, Dragutin P., RAČUNOVODSTVENI I REVIZORSKI I INFORMATIČKI REČNIK ENGLESKO-SRPSKI I SRPSKO-ENGLESKI, Privredni Savetnik, Beograd, 2000 Dragojević, Dragutin P., ENGLESKO-SRPSKI / SRPSKO-ENGLESKI REČNIK OSNOVNIH TERMINA RAČUNOVODSTVA REVIZIJE I INFORMATIKE, Pricewaterhouse Coopers, Beograd, 2004 Cvejić, Miroslava, ENGLESKO-SRPSKI REČNIK FINANSIJSKIH IZRAZA, IŠP Savremena Administracija d.d., Beograd,1992 Babić, Ante Dr., ENGLESKO-HRVATSKI EKONOMSKI RJEČNIK – ENGLISHCROATIAN ECONOMIC DICTIONARY, MATE-Nakladnička kuća, Zagreb, 2001 Cvejić, Miroslava i Dr Larisa Kolomejceva-Jovanović, POSLOVNI REČNIK ENGLESKO-RUSKO-SRPSKI, RUSKO-ENGLESKO-SRPSKI (iz serije TROJEZIČNI REČNICI), Savremena Administracija, Beograd, 1997 OXFORD DICTIONARY OF ACCOUNTING, New (Second) Edition, Edited by R. Hussey, Oxford University Press, Oxford, 1999 Gligorijević, Vera, ENGLESKO-SRPSKI – SRPSKO-ENGLESKI EKONOMSKI REČNIK, ENGLISH-SERBIAN – SERBIAN-ENGLISH DICTIONARY OF ECONOMICS, Savremena Administracija, Beograd, 2000
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TABLE OF CONTENTS Page number
List of topics
8
CHAPTER ONE – GRAMMAR EXERCISES
9
NOUNS , Formation
10
NUMBER , Regular and Irregular Plurals
11-14
VERB PLURAL OR SINGULAR , Concord
15-16
GENDER
17-18
COMPOUND NOUNS
19-28
ARTICLES , Definite-Indefinite-Zero Article
29-32
ADJECTIVES , Comparison
33-35
ADVERBS
36
T E N S E S – Verb Changes
37-41
PRESENT TENSES – General Truths
42-45
PAST TENSES
46-49
PRESENT PERFECT TENSES
50-51
PAST PERFECT TENSES
52-55
FUTURE TENSES
56-71
MIXED VERBS
72-73
SUBJUNCTIVE MOOD
74-78
CONDITIONAL CLAUSES
79-82
INDIRECT SPEECH , Reporting Verbs – Introduction
83-88
PASSIVE VOICE
89-90
CAUSATIVE HAVE
91-94
MODAL VERBS
95-102
NON-FINITE FORMS: Gerunds, Infinitives and Participles
103-104
INVERSION – Formal
105-107
PARAPHRASING SENTENCES
108-118
PREPOSITIONS
524
119-120 121
NUMBERS SECTION 2 – WORD FORMATION / DERIVATION EXERCISES
122-124
DERIVATION OF ADJECTIVES
125-129
DERIVATION OF NOUNS
130-147
MIXED DERIVATION
148-160
APPENDIX 1 TO CHAPTER ONE ‘GRAMMAR EXERCISES’ Words with similar meanings
161
APPENDIX 2 TO CHAPTER ONE ‘GRAMMAR EXERCISES’
162-166
Reporting / specifying verbs (Usual patterns)
167-180
APPENDIX 3 TO CHAPTER ONE ‘GRAMMAR EXERCISES’ Irregular Verbs
181
CHAPTER TWO ENGLISH IN TRADE, ENGLISH IN ACCOUNTING/AUDITING, ENGLISH IN BANKING
182
ENGLISH IN TRADE
183
Introduction to Marketing – Definitions
184
(Introduction to Marketing) Key Words
185
Marketing, Marketing People and Markets – Multiple Choice Test
186
The Classic 4 Ps
187
The 4 Ps and 3+ Ps
190-193
INTERNATIONAL MARKETING – Finding the right international mix (reading), Exercises
194
Planning
195-197
Consumer Marketing and Buyer Behaviour
198-199
MARKETING EDGE – In the Know (reading)
200-201
TIPS FOR SUCCESSFUL MARKETING (reading)
202
A New Market
203
Upmarket and Downmarket, Mass Market and Niches
204-205 206
The Development Process, Market Research HOW TO GAIN ACCESS TO THE KOREAN MARKET (reading)
525
207-208
IT’S ABOUT TIME (reading)
209
Buyers, Sellers and the Market
211
REAL-TIME ANALYSIS OF BUYING HABITS (reading)
212
PRODUCTS – Key Words
213
Products and Product Marketing
214-218
Products and Brands
218
Produce vs. Product
219
Goods
221
Product Selling
222
Product Management
223
Products, Services and Service
224-225
Price – Key Words, Price and Pricing Strategies
226
Fixing a Price
227
Aggressive Pricing
228
Pricing Policy Report
229-230
Pricing Strategies and Costs
231-232
Manufacturing and Services
233
Mass Production
234-235
Materials and Suppliers
236
Sales and Costs – Sales
237
Costs
238-239
SALES SUCCESS (reading)
240
Place / Distribution, The Classic Distribution Channel – Shipping Methods
241
Distribution and Shipping Methods, Methods of Transportation
242
Margins and Mark Ups, Getting Paid: Shipping and Billing, Trade Credit, Accounts
243 244-246
Accounts Distribution Channels in Korea (reading)
246
Wholesalers, Retailers, and Customers. Shops. Direct Marketing.
247
Planning a Distribution System
526
248
The Final Word on Distribution
249
Services and the Public Sector
250-251
Retail Outlets and Selling Methods
252
After Sales Assistance, Success and Failure
253
CONSORTIUM TO DEVELOP E-COMMERCE SECURITY STANDARDS (reading)
-258 258-259
THE INTERNET AND E-COMMERCE HOW A MYTHICAL MERCHANT USES THREE AVENUES OF THE NET FOR E-COMMERCE (reading)
260-261
A PRESENTATION ON E-COMMERCE (reading)
262
THE KOREAN ECONOMY /present status/ , Economic Overview (reading)
263
THE KOREAN ECONOMY , Foreign Trade
264
THE KOREAN ECONOMY , Balance of Trade, Economic Liberalisation Policy, Trade Policy (Trade Policy Goals)
265-266
Import Liberalisation , Trading Agents
267
Sample Agency Agreement – Agreement , Form 1
268-272
Sample Agency Agreement – Agreement , Form 2
273-274
FURTHER READING – Why people don’t want to accept the concept of free trade
275-278 279
HOT PROPERTY OR NOT ? (reading) BALANCING ACT (reading)
280-282
EMERGENCY SERVICES (reading)
283-284
IS IT TIME TO CELL, CELL, CELL? (reading)
285-289
EASY PEASY (reading)
290
B2B – ELECTRONIC PROCUREMENT (reading)
291
ENGLISH IN ACCOUNTING / AUDITING
292-294
Accounting, Introducing Accounting, Phrases with Accounting
295-297
Reading 1 What is Accounting?
298-300
Reading 2 Special Report, Information Imperative: Open All Hours
301
Introducing Accounting 2, Expressing Change, Prepositions of Change
527
302
Expressing Change, Prepositions of Change
3003
Prepositions of Change – Multiple Choice Test
304-305
Reading 3 The Accounting Equation
306-310
Reading 4 Internal Control – Keep it long!
311-312
One more insight into accounts
313
Banking-related Vocabulary
314
Cash Accounts
315-317 318 319-324
Reading 5 Cost Management Accounting – Overheads Buying and Selling Test – Multiple Choice Test Reading 6 Time to Clarify the Obligations of the Auditor
325
Adjustments
326
Making Changes (from a firm of accountants to a client)
327
Profit and Loss
328
End of Year – confusing words
329-333
Reading 7 The Auditing Framework
334
Businesses
335
False Practices 1
336-337
Shares and Shares Issue
338-343
Reading 8 Tax Accounting – Methods of Depreciation
344
Partnerships – Multiple Choice Test
345
Giving Advice
346-349 350
Reading 9 Accounting Policies Group Profit and Loss Account – Example
351-353
Balance Sheets – Example
354
Acquisitions, Earnings (2)
355
Taxes and Taxation
356
Letter Writing – from an accountant concerning tax matters
357-363
Reading 10 Ratio Analysis
364
FURTHER READING
-366
- International Accounting Standards – Esperanto or the Tower of Babel?
528
367
HOW THEY ARE ACCOUNTING FOR GOODWILL ON ACQUISITION (reading)
368
REPORTING CURRENCY (reading)
369
ACCOUNTING FOR THE NEW ECONOMY (reading)
370
ACCOUNTING SOLUTIONS: ACQUISITION (reading)
371-373
OUR DEVELOPING ECONOMY (reading)
374-375
IN FAVOUR OF FRAMEWORKS (reading)
376-380
HIDDEN GEARING (reading)
381-382
THE EXPECTATION GAP (reading)
383-384
NOT ONLY FAIR BUT FAITHFUL (AS WELL) (reading)
385-386
WE NEED A STANDARD FOR REVENUE (reading)
387-389
IT’S REMUNERATION – SO RECORD IT! (reading)
390-391
HISTORY IS NOT BUNK (reading)
392
ENGLISH IN BANKING
393
PERSONAL BANKING (reading)
394-396
Personal Banking – exercises
396-397
Personal Finance – reading and exercises
398
ELECTRONIC CASH – MONDEX PAYMENT SYSTEM (reading)
399
Electronic Cash – Mondex Payment System – exercises
400
Pictures used in talking about finance, Describing trends
401
Financial News
402
Types of Companies, Key Terms in Financial Planning
403
Cost Identification, Master Budget
404
The One Account – introduction into the reading
405
THE ONE ACCOUNT (reading)
406
The One Account – exercises
407
Cash Terms, Corporate Banking – Companies and their Banks
408
CORPORATE BANKING – COMPANIES AND THEIR BANKS (reading)
409
Setting up a business – dialogue completion
410
COMPANY ACCOUNTS (reading)
529
411-413 414
Summary Group Balance Sheet, Definitions, Exercises Managing Company Finances, Overheads, Cash Flow Problems and Other Hurdles
415 416-417
Financial Control, Pricing Policies – dialogue completion COMMODITY MONEY, PAPER MONEY AND BANK MONEY (reading)
418
OPERATIONS CONTROL (reading)
419
Other Aspects of Profitability, The Impact of Globalisation on Companies
420
GLOBALISATION (reading)
421
Globalisation – exercises
422-423
Bank Organisation – definition finding
424
ABSTRACT FROM AN ANNUAL REPORT (reading)
425
THE ORGANISATION OF THE EUROPEAN SYSTEM OF CENTRAL BANKS – ESCB and THE EUROPEAN CENTRAL BANK (reading)
426
The European Central Bank – exercises
427
Measuring Company Performance
428
Balance Sheet – Bogus Industries – filling the gaps
429
FOREIGN EXCHANGE (reading)
430
BANKS THAT MAKE PROFITS – pre-reading activities
431
BANKS THAT MAKE PROFITS (reading)
432
MERGERS AND ACQUISITIONS. BANK MERGERS. SURVIVAL OF THE BIGGEST (reading)
433 434-435
Survival of the Biggest – exercises SHARE CAPITAL AND DEBT (reading)
436
Mergers, Takeovers and Sell-offs. Stakes and Joint Ventures.
437
Conglomerates
438-440
Check Test 1
441
FURTHER READING
-443
- The Invisible Man
444-448
E-FINANCE. A REWARDING JOURNEY (reading)
530
449-453
FINANCIAL INSTRUMENTS. MORE THAN MEETS THE EYE (reading)
454-458
HONG KONG (reading)
459
CHAPTER THREE BUSINESS CORRESPONDENCE IN ENGLISH
460
Tehnike efektivnog pisanja (poslovnih) pisama. Priprema.
461
Kome se obraćam? Poruka. Jednostavnost. Proverite (eventualne) greške.
462
Oblik/forma pisma. Saveti pošiljaocima.
463
The Choice of Business Letter Samples as Used on the Australian Territory Trade: Sales. Announcements: Announcement of limited special offer. Announcement of price increase.
464
Announcement of special offer. General notice – change of policy
465
Announcement of early payment discount. Sales. Orders Acceptance of order with delivery in lots and payment by instalments.
466
Cancellation of order due to expiration of delivery date. Confirmation of verbal purchase order.
467
Letter accompanying goods sold on approval. Misapplication of early payment discounts.
468
Notice of shipping delay. Notice to cancel back-ordered goods.
469
Notice to cancel order for delayed goods. Notice to elect to accept damaged/non-conforming goods.
470
Purchase order with delivery terms. Purchase order with payment terms.
471
Request for authorization to substitute. Request for refund for non-delivered goods.
472
Sales, Returns and Deliveries Returning product for refund. Notice of non-conforming goods.
473
Return of product on free trial. Notice that quantity received was short. Notice to stop goods in transit.
474
Sales, Promotions. Follow up letter to request for product information. Invitation to visit trade stand (or similar promotional activity)
531
475
Letter of introduction. Letter to customer encouraging upgrade to new product
476
Media release. Notice of product launch.
477
Complaints – Received and Sent. Notice of product defect claim. Response to customer complaint concerning pricing.
478
Complaint for refund outside warranty period. Complaint for refund within warranty period.
479
Quotations, Proposals. Letter accompanying the proposal. Notice rejecting quote or tender.
480
Finance Letter to bank manager querying new fees. Letter to a bank requesting overdraft.
481
Acceptance of instalment payment proposal. Account balance discrepancy.
482
Request for credit information. Acknowledgement of credit reference.
483
Acknowledgement of debt.
484
Agreement to pay debt by instalments.
485
Letter to bank requesting credit reference. Credit application approval.
486
Rejection of credit application. Credit reference.
487
Request to contact credit manager. First and second reminder(s) of overdue account.
488
Grant of request for extension of payment deadline. Letter accompanying final payment. Partial payment of debt in good faith.
489
Notice of default of instalment agreement. Notice of dishonoured check. Notice of disputed invoice.
490
Notice of unpaid invoice. Part payment of debt with request to pay balance by instalments. Rejection of request for extension
491
Request for information concerning disputed charge.
532
492
First and second letters of demand (to company director) 1
493
First and second letters of demand (to company director) 2
494
Settlement of disputed account
495
Miscellaneous letter samples – Invoice Tax Invoice
496
Thanking customer for product suggestion. Apology for delay in shipment. Apology for delay in shipment and proposal for alternative delivery date.
497
Response to product complaint offering replacement. Agreement to modify the terms and conditions of contract
498
Agreement to mutually terminate the contract.
499
BUSINESS LETTERS – TRANSLATION EXERCISES TRADE: Greška u sadržaju isporuke. Greška u količini robe.
500
Neispravni proizvodi. Moguće storniranje.
501
Nedostatak sirovina. Loši vremenski uslovi.
502
Prekid platnoga prometa. Konačna ponuda.
503
Opomena pred podnošenje tužbe. Povećanje rabata. Storniranje porudžbine.
504
Konačna isporuka. Otvoreno pokriće od svih rizika.
505
Odobravanje načina pakovanja. Neopoziv dokumentarni akreditiv.
506
Ponuda na osnovu istraživanja tržišta. Potvrda sa načinom isporuke.
507
Zahtevanje profakture. Poskupljenje zbog poreza.
508
Tovarna dokumenta. Produžavanje akreditiva.
509
Zahtev za uslovima plaćanja. Status distributera.
510
FINANCE: Molba banci za posredovanje u medjunarodnom plaćanju. Molba za odobrenje prekoračenja kredita.
511
Traženje preporuke od banke. Molba banci za plaćanje na osnovu odobrenog akreditiva.
512
Molba posredniku za nekretnine da pregovara o najamnini.
513
Nalog za sprovodjenje revizije.
533
514
Odgovor na pitanje o računovodstvenoj stavki. Pismo računovodji o direktorovim troškovima.
515
Molba agenta osiguravajućeg društva za reviziju ponude. Nalog kupca svojoj banci. Nalog prodavca stranoj banci.
516
Neovlašćeno korišćenje kreditne kartice. Neplaćena menica.
517
Obaveštenje o ukradenoj kreditnoj kartici. Nemogućnost odobrenja kredita.
518
Odobrenje kredita. Prijava kradje kreditne kartice.
519
Zahtev za otvaranje ličnog računa. Zahtev za otvaranje računa firme.
520
Zahtev za odobrenje zajma.
521
Zahtev za prekoračenje računa.
522
BIBLIOGRAPHY – Chapter One Grammar Section
523
Bibliography – Chapter Two English in Trade
524
Bibliography – Chapter Two English in Accounting and Auditing English in Banking
525
Bibliography – (Further) Reading material. Magazines. Chapter Three Business Correspondence in English
526 522-537
Bibliography – Dictionaries (both used and suggested) Table of Contents
538
Izvodi iz recenzija: Gramatički deo
539
Izvodi iz recenzija: Leksički deo
540
O AUTORU
534
Изводи из рецензија везаних за граматички део књиге
... Веома је инструктивно што су све граматичке вежбе прожете примерима из аутентичних текстова из савремене енглеске штампе и публицистике. ... Примери текстова покривају потребе свакодневне комуникације, али и терминологију привредно-пословне комуникације. ... Рад кореспондира са најсавременијим методама у настави енглеског као страног језика, које се примењују и у најсавременијим страним уџбеницима, а базиран је и на вишегодишњем ауторовом раду са студентима. Рад је конципиран тако да се може користити, не само на часу, већ и у самосталном раду. (извод из рецензије Зорице Прњат) Материјал ... има многе квалитете који га препоручују са штампу боље од било чије рецензије. Захтеви и вежбања су јасно формулисани, грађа је поређана логички и поступно, а поред тога (аутор) је укомпоновао различите стилове енглеског језика. Иако је фокус на граматици, вокабулар, без кога сува граматика не функционише, даје додатну препоруку. ... Као... предност, могу навести да су текстови написани тзв. живим језиком, најчешће публицистичким стилом. ... Грађа омогућује рад са студентима са различитим нивоима знања, тако да једни кроз контекстуално јасне примере лако могу стећи ново знање или надокнадити оно што су пропустили..., док остали могу лако да обнове и прошире постојеће знање. (извод из рецензије Ненада Томовића)
535
Изводи из рецензија везаних за лексичка вежбања и обраду стручних текстова
Аутор...вежбања поставља тако да студентима омогућава не само усвајање енглеског термина за одређени економски појам, већ и усвајање самог значења тог појма, односно обнављање знања које је студент из појединих области требало да стекне из других предмета. Такође бих истакла добар избор текстова аутора као што су Котлер, Левис, Давидсон, као и увођење најновијих области савременог пословања везаног за феномене е-економије и е-трговине... (извод из рецензије Марјане Видас-Бубање) Појава једног оваквог уџбеника је веома значајан допринос научној и стручној литератури из ове области. Веома квалитетан избор текстова који прате савремене трендове у пословању банака, изузетно јасан и прецизан начин на који аутор објашњава банкарске појмове, као и адекватне граматичке структуре омогућавају упознавање студената са великим бројем стручних банкарских термина. (извод из рецензије Миљане Барјактаровић) Посматрано са становишта рачуноводствене материје која је обрађена у текстовима, текстови су поређани по редоследу градива које се обрађује по годинама студија на Рачуноводственом смеру нашег факултета... Израда одговарајућег стручног речника захтева тимски рад како стручњака за енглески језик, тако и стручњака за рачуноводство и финансије. У том смислу, ова књига може да буде подстицај да се у оквиру Клуба за рачуноводство студената ФТБ окупи тим студената који би започели пројекат израде одговарајућег стручног речника, под надзором својих професора. (извод из рецензије Јозефине Беке-Тривунац) Додавши ову нову збирку текстова свом ... стваралачком опусу, аутор је пружио велики квалитативни допринос извођењу наставе на рачуноводствено-ревизорском смеру... Адекватан избор текстова, успешно прилагођених наставним садржајима, од сада омогућава студентима упознавање са читавим корпусом специфичних и стручних рачуноводствених термина на енглеском језику. ... Имајући у виду наставно-педагошке квалитете аутора, али и потпуно непостојање сличне литературе не само на Универзитету БК, већ и шире, намеће се недвосмислен закључак да ова књига представља велики допринос савладавању савременог енглеског језика за рачуновође. (извод из рецензије Војислава Секереза)
536
O AUTORU Slobodan Rakić je rodjen 1971. godine u Beogradu, gde je završio osnovnu školu i Filološku gimnaziju. 1997. diplomirao je na Katedri za anglistiku Filološkog fakulteta u istom gradu. Predavao je u beogradskim osnovnim školama Filip Kljajić-Fića i Josif Pančić, gimnazijama: Trinaestoj beogradskoj, Desetoj beogradskoj i Filološkoj gimnaziji, kao i na Filološkom fakultetu, Fakultetu za menadžment i Fakultetu za menadžment u sportu BK Univerziteta. Tokom NATO agresije, bio je član tima prevodilaca Rektorata Univerziteta u Beogradu. Saradjivao je sa Institutom za razvoj malih i srednjih preduzeća (Škola jezika), Centrom dečijih letovališta, Kancelarijom UNICEF-a u Beogradu i Slavističkim centrom Filološkog fakulteta. Za izdavačku kuću PLATO je preveo dve knjige: Kuća droge od Irvinga Velša i E, pa ne bih vas više zadržavala od Dejvida Nobza; takodje, prevodio je za potrebe BK Televizije i Fakulteta za trgovinu i bankarstvo. Član je Udruženja naučnih i stručnih prevodilaca Republike Srbije. Saradjuje sa Višom stručnom školom CPU iz Ljubljane i DELTA bankom. Student je poslediplomskih studija na Filološkom fakultetu, smer Nauka o jeziku. Objavio je tri univerzitetska udžbenika English Grammar Practice-Book 3, English Grammar Practice-Book 4 i English Course Book 1. Trenutno radi kao predavač na Fakultetu za trgovinu i bankarstvo Janićije i Danica Karić na predmetu Engleski jezik III – IV, na smerovima: Trgovina, Bankarstvo i Računovodstvo i revizija. Oženjen je i živi u Beogradu.
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