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Иностранные языки, филология и лингвистика

A corporation can get capital by borrowing. It is called debt funding. If a corporation borrows money, they give notes or bonds. They are also negotiable. But the interest has to be paid out whether the business is profitable or not. When running a corporation, management must consider both the outflow and the inflow of the capital.



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Lesson 7


Corporations need financing for the purchase of assets and the payment of expenses. The corporations can issue shares in exchange for money or property. Sometimes it is called "equity" funding. The holders of the shares form the ownership of the company. Each share is represented by a stock certificate, which is negotiable. It means that one can buy and sell it. The value of a share is determined by the net assets divided by the total number of shares outstanding. The value of the share also depends on the success of the company. The greater the success, the more value the shares have.

A corporation can get capital by borrowing. It is called debt funding. If a corporation borrows money, they give notes or bonds. They are also negotiable. But the interest has to be paid out whether the business is profitable or not.

When running a corporation, management must consider both the outflow and the inflow of the capital. The outflow is formed by the purchase of inventory and supplies, payment of salaries. The inflow is formed by the sale of goods and services. In the long run the inflow must be greater than the outflow. It results in a profit.

In addition, a company must deduct its costs, expenses, losses on bad debts, interest on borrowed capital and other items. It helps to determine if the financial management has been profitable. The amount of risk involved is also an important factor. It determines the fund raising and it shows if a particular corporation is a good investment.

Active Vocabulary


покупка, купля, приобретение

payment of expenses

оплата расходов


собственность, имущество

equity funding

акционерный (долевой) способ образования денежного фонда предприятия

debt funding

образование денежного фонда предприятия с помощью займа

holders of the shares

держатели акций

stock certificate

сертификат акций


оборотный, могущий быть переуступленным, проданным

net assets

стоимость имущества за вычетом обязательств


долговое обязательство, облигация


зд. долговая расписка


доля, фиксированный процент

to pay out


to run a corporation

руководить корпорацией


приток денег


утечка денег


материально-производственные запасы







Comprehension Questions

  1.  Why do all corporations need financing?
  2.  What does equity funding mean?
  3.  What does debt funding mean?
  4.  How is the value of a share determined?
  5.  What activities produce an inflow and outflow of capital?
  6.  What can happen if an enterprise has a greater outflow of capital than inflow?
  7.  Why is the risk involved an important factor in determining fund raising.

Vocabulary Practice

Choose the necessary word and put it into the sentence.

  1.  … funding is a financing formed by borrowing.
  1.  equity
  1.  They have borrowed much money and they have to pay a big … .
  1.  negotiable
  1.  Financing by shares is called … funding.
  1.  interest
  1.  That is a very profitable deal, for that purpose we need extra … .
  1.  inventory
  1.  You can sell your shares and … . They are … .
  1.  funding
  1.  The current assets of the company usually include cash and … .
  1.  inflow
  1.  As a result of this deal we'll have greater … than outflow.
  1.  bonds
  2.  debt



It's so nice to see you, Frank. Sorry, I couldn't come to your office today.


Never mind. Have a seat. Let's start by having some coffee.



So, Frank, I guess it might be right time for me to invest in that computer company. As my stockbroker, what can you suggest?


I am sure they are doing extremely well and they would welcome your investment.


But why do they need my investment if they are doing so well?


OK. I think I should explain to you a little about corporate finance.


Go ahead. If it concerns my money I am always interested.


If a corporate enterprise wants to expand it need financing.


You are right.


So, there are two basic types of financing – equity and debt.


What's the difference between them?


If the money is supplied by the owners of the business, it is called equity funding. And the use of money supplied by loans is called debt funding.


So, as investor, what am I?


Well, as an investor you become a partial owner of a business and receive equity. You get shares or certificates of common stock which represent your portion of ownership.


You did right buying the stock for me. By the way, are there any documents, which show the financial state of the company?


Oh, yes. You've just reminded me. I've brought a copy of the company's Annual Report for you to look over. You should read it very carefully. And if you have anything to ask, do it, please.


Thanks a lot, Frank. I will. Does this company pay dividends on its stock?


Yes. In fact, I’ve studied their annual report and I can say that they have good management. Their business is doing very well; the value of their stock has been rising. It can be an excellent long-term investment, I am sure.


But if I want to sell my shares very soon?


No problem. Undoubtedly you can make profit on the sale. But it seems to me you'll want to keep this company in your portfolio.


Thank you for your advice. You are wise as usual.


Well, my advice now is to study the Annual Report of the company. You need several days for that. Then we'll meet and talk again.

Active Vocabulary


биржевой маклер

if it concerns smth.

если речь идёт о чём-то


заем, ссуда

partial owner


Annual Report

годовой отчёт

to pay dividends

платить дивиденды

long-term investment

долгосрочный вклад

to make a profit on the sale

получить прибыль при продаже

Vocabulary Exercises

Exercise 1. Make up a sentence according to the model.

Model: How should the company pay the expenses? (borrow from the government)

The company should pay the expanses by borrowing from the government.

  1.  How can we form an equity funding? (issue shares)
  2.  How can a business sell more shares of stock? (offer a dividend)
  3.  How should we know about the financial state of the company? (look over the Annual Report)
  4.  How should he invest his savings? (buy common stock)
  5.  How should they make people buy their bonds? (increase the interest)
  6.  How can this company make a profit? (raise investment capital)

Exercise 2. Respond to the following statements according to the model.

Model: It takes a month to sell the bonds.

You need a month to sell the bonds.

  1.  It will take a half of the year to pay off the debts.
  2.  It takes her several days to count up net assets.
  3.  It won't take the company much time to repay the loan.
  4.  It will take him the rest of his life to learn how to run the corporation.
  5.  It takes them 2 days to sell the goods.
  6.  It will take them much time to decrease the outflow.
  7.  It will take him a month to raise the capital.

Exercise 3. Answer the questions.

  1.  What kind of funding is preferable: equity or debt?
  2.  What shares of what enterprise in your own town would you buy? Why.
  3.  Imagine that your business is going to get capital funds by borrowing. What bond interest would you charge?
  4.  What should you do to produce more inflow of capital?
  5.  How can you calculate the net assets of your enterprise?
  6.  What traits of character does a stockbroker need?

Grammar Exercises

Exercise 1. Make the sentence negative.

  1.  They were discussing the possibility of the purchase of inventory from 5 till 6 p.m. yesterday.
  2.  He was running the corporation during two months.
  3.  During our last classes the lecturer was speaking about equity funding.
  4.  Our accountant was calculating assets, liabilities and net worth two days before yesterday.
  5.  They were electing the new Board of Directors for two hours at their annual meeting.

Exercise 2. Put up 4 questions of different type.

  1.  The company was doing extremely well when he was the manager.
  2.  I was examining the Annual Report when Mr. Stevenson called on me.
  3.  She was making a profit on the sale of the goods till she could get them.
  4.  He was holding a position of a stockbroker when I met him last year.
  5.  The shop was attracting many customers when famous companies supplied it.
  6.  They were investing money in this business for two years.

Translate into English.

  1.  Наше предприятие нуждается в денежных фондах для покупки оборудования.
  2.  Я предпочитаю акционерный способ образования денежного фонда предприятия. Он привлекает большее количество капитала.
  3.  Акции и облигации могут быть переуступлены, куплены, проданы.
  4.  Я хочу купить десятипроцентные облигации.
  5.  Мы намерены выплатить все долги к началу финансового года.
  6.  Ты получишь хорошую прибыль при продаже этих товаров.
  7.  Он является совладельцем компании SONY.
  8.  Покупка акций этой компании – хороший долгосрочный вклад.
  9.  Если речь идёт о моих деньгах, я изучу годовой отчёт компании.


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