UNIT 5 MONEY Study Material Glossary Assignments

UNIT 5: MONEY_study material_glossary_assignment
FINANCE IN BRIEF
One of the main features of globalisation is a free flow of capital. Capital

always looks for places where it will be most profitable and earn the
greatest return on investment. Individuals have an option of putting
their money on deposit in a bank in order to get interest. That money is
lent out to people, businesses and governments who need financing for
their projects. Another option for individuals is to buy some bonds, i.e.
to invest in an organisation or a country. As long as they don’t default, an individual gets
interest payments and eventually get their bonds repaid.
Individuals with money to invest can also purchase shares in a company and share in the
profitability of one’s chosen company. If a company is doing well, dividends will be more
than what one would get from bonds and the shares will only increase in values, giving one
a capital gain if one decides to sell them.
If a company goes bankrupt, individuals will be among the last to be paid back and there is
a possibility that one will only get a part of what one had put in or even lose all the money.
This is the trade-off between risk and return – the higher the risk of your investment, the
more you can expect a pay back in return on investment.
Banks make their money on the difference between what they pay out in interest on
deposits and what they get in as interest from its loans.
Venture capitalist invest in different start-ups knowing that most will fail but that some will
do reasonably well, and one or two will pay back all the money that they lost on unprofitable
projects. Investors use the world’s financial markets to channel money into profitable
investments and projects.
Investors are usually institutions like banks, insurance companies, mutual funds (unit trusts
in Britain) and pension funds who are investing money of private individuals indirectly.
Markets that investors use are different:

• currency markets,
• stock markets (for trading shares or equities),
• commodities markets (for trading commodities like meat, gold, property – buildings
and land).
• futures markets (for currencies, equities, bonds and commodities). A future is a
fixed-price contract to buy a certain amount of something for delivery at a fixed
future date.
• options markets for currencies, equities, and bonds. Here, an investor buys the right
to buy or sell a certain amount of these things at a certain price and particular date in
the future. This is a form of betting on how prices will move.
Some of those markets, like stock markets, are based in particular buildings, with trading
floors, but most trading today is screen-based and telephone-based.
Market Leader Intermediate New_BE2_summer semester/S.R.D. Page 1

Bond and currency markets are ‘virtual’ – selling and trading takes place by phone and
computer between issuers, brokers, and traders. A broker is an intermediary between an
issuer of securities such as bonds, a seller of property, etc.
PERSONAL BANKING
Current accounts
Current account is an account which allows customers to take out or
withdraw money with no restrictions. Money in the account does not
usually earn a high rate of interest – the bank does not pay much for
borrowing your money. Many people also have a savings account
which pays more interest but has restrictions on when you can
withdraw your money. Banks usually send monthly statements listing
recent sums of money going out, called debits, and sums of money coming in, called credits.
Almost every person today has a debit card allowing them to make withdrawals and do
other transactions at cash dispensers. Most people also have a credit card which can be used
for buying goods and services as well as for borrowing money. In some countries people pay
their bills with cheques. In other countries banks don`t issue chequebooks and people pay
bills by bank transfer directly from their current accounts. These transactions include
standing orders, which are used to pay regular fixed sums of money, and direct debits,
which are used when the amount and payment date are not fixed.
Note the differences!

BrE: current account
AmE: checking account
BrE: cash dispenser, cash machine

AmE: ATM (Automated Teller Machine)
BANKING PRODUCTS AND SERVICES BrE: cheque

AmE: check
Central banks like the Bank of England and the European Central Bank set interest rates – the
‘price of money’, and they control money supply (the amount of money circulating in an
economy). These controls have an enormous effect on the economy as a whole, and on the
financial markets.
Commercial banks or retail banks offer loans – fixed sums of money that are lent for a fixed
period. They also offer overdrafts, which allow customers to overdraw an account – they can
have a debt, up to an agreed limit, on which interest is calculated daily. This is cheaper than
a loan if, for example, you only need to overdraw for a short period. Banks also offer
mortgages who people who want to buy a place to live. These are long-term loans on which
a property acts as collateral or a guarantee for the bank. If the borrower does not repay the
mortgage, the bank can reposes the house or flat, the bank takes it back from the buyer and
sells it.
Banks exchange foreign currency for people going abroad, and sell traveller`s cheques which
are protected against loss or theft. They also offer advice about investments and private

pension plans – saving money for when you retire from work. Increasingly, banks also try to
sell insurance products to their customers.
Banks also create credit – make money available for someone to borrow, because the money
they lend, from their deposits, is usually spent and so transferred to another bank account.
The capital a bank has and the loans it has made are its assets. The customers` deposits are
liabilities because the money is owed to someone else. Banks have to keep a certain
percentage of their assets as reserves for borrowers who want to withdraw their money. This
is known as the reserve requirement. For example, if the reserve requirement is 10%, a bank
that receives a €100 deposit can lend €90 of it. If the borrower spends the money and write a
cheque to someone who deposits the €90, the bank receiving that deposit can lend €81. As
the process continues, the banking system can expand the first deposit of €100 into nearly
€1000. In this way, it creates credit of almost €900.
Before landing money, a bank has to assess or calculate the risk involved. Generally, the
greater the risk, the higher the interest rate they charge. Most retail banks have standardized
products for personal customers, such as personal loans. This means that all customers who
have been granted a loan have the same terms and conditions – they have the same rules for
paying back the money.
Banks have more complicated risk assessment methods for corporate customers – business
clients. However, businesses today prefer to raise their own finance rather than borrow from
banks.
Banks have to find a balance between liquidity – having cash available when depositors
want it – and different maturities – dates when loans will be repaid. They also have to
balance yield – how much money a loan pays – and risk.
TYPES OF FINANCIAL INSTITUTIONS
Financial institutions are the firms that provide financial services and advice to their clients.
The financial institutions are generally regulated by the financial laws of government
authority.
Various types of Financial Institutions are as follows:
1. Commercial banks
2. Credit unions
3. Stock brokerage firms
4. Asset management firms
5. Insurance companies
6. Finance companies
7. Building Societies
8. Retailers
The various financial institutions generally act as the intermediaries between the capital
market and debt market. But the service provided by financial institution depends on its

type. The financial institutions are also responsible to transfer funds from investors to the
companies. Typically, these are the key entities that control the flow of money in the
economy.
The services provided by the various types of financial institutions may vary from one
institution to another. For example, the services offered by the commercial banks are -
insurance services, mortgages, loans and credit cards. The services provided by the
brokerage firms, on the other hand, are different and they are - insurance, securities,
mortgages, loans, credit cards, money market and check writing.
The insurance companies offer insurance services, securities, buying or selling service of the
real estates, mortgages, loans, credit cards and check writing.
The credit union is co-operative financial institution, which is usually controlled by the
members of the union. The major difference between the credit unions and banks is that the
credit unions are owned by the members having accounts in it.
The stock brokerage firms are the other types of financial institutions that help both the
corporations and individuals to invest in the stock market.
Another type of financial institution is the asset management firms. The prime function of
these firms is to manage various securities and assets to meet the financial goals of the
investors. The firms also offer fund management advice and decisions to the corporations
and individuals.
INVESTMENT BANKING
Investment banking is a field of banking that help companies in

acquiring funds. In addition to the acquisition of new funds,
investment banking also offers advice for a wide range of transactions a
company might engage in.
Traditionally, banks can be either engaged in commercial banking or
investment banking. In commercial banking, the institution collects
deposits from clients and gives direct loans to businesses and
individuals. Through investment banking, an institution generates funds in two different
ways. They may draw on public funds through the capital market by selling stock in their
company, and they may also seek out venture capital or private equity in exchange for a
stake in their company.
An investment banking firm also does a large amount of consulting. Investment bankers give
companies advice on mergers and acquisitions, for example. They also track the market in
order to give advice on when to make public offerings and how best to manage the business'
public assets. Some of the consultative activities investment banking firms engage in overlap
with those of a private brokerage, as they will often give buy-and-sell advice to the
companies they represent.
The line between investment banking and other forms of banking has blurred in recent years,
as deregulation allows banking institutions to take on more and more sectors. With the

advent of mega-banks which operate at a number of levels, many of the services often
associated with investment banking are being made available to clients who would
otherwise be too small to make their business profitable.
Careers in investment banking are lucrative and one of the most sought after positions in the
money-market world. A career in investment banking involves extensive travelling, long
working hours and an often cut-throat lifestyle. While highly competitive and time intensive,
investment banking also offers an exciting lifestyle with huge financial incentives that are
appealing to many people.
MERGERS AND ACQUISITIONS
In the world of business, it is not unusual for various industries to undergo a series of
mergers and acquisitions as the business landscape undergoes some type of change. Often,
an acquisition or merger is undertaken for the purpose of combining resources in order to
provide a higher quality of goods and services to consumers. However, there is a significant
difference between a merger and an acquisition.
Mergers and acquisitions, or M&A as they are also known, are both
means by which two or more business entities become one larger
entity. In the case of a merger, this is often a process that is entered
into after a long period of evaluation on the part of the respective
officers and owners of the companies involved. When the idea is to
merge companies together, there is usually a sense that all parties
involved in the creation of the new and larger entity are equals in
the process and will be treated as such as the structure of the new
entity is planned and put into operation.
With an acquisition, the scenario is a little different. When one company decides to acquire
another company, the process usually involves a buyout or purchase of that business. There
are not necessarily any plans to continue all the operations of the acquired company; often
the resources of the acquisition are absorbed into the resources held by the purchasing
company while the acquired business simple stops to exist.
Mergers and acquisitions also tend to differ in one other important aspect. While mergers are
generally situations where all parties want the combination of companies to take place, that
is not necessarily the case with an acquisition. Hostile takeovers are an example of an
acquisition that is not accomplished with the enthusiastic support of the officers and
shareholders of the acquired business. At best, there may be a sense of grudging acceptance
that the takeover will occur whether or not shareholders and officers want the acquisition.
It is not unusual for many different industries to go through periods where mergers and
acquisitions are the norm. During the 1990’s, local and national teleconferencing companies
often merged in order to provide a broader suite of services to their customers. The textile
industry has seen its share of both mergers and acquisitions, especially during the last thirty
years of the 20th century. Even industries such as food service and retail go through periods
where competitors merge in order to secure a major share of the consumer market, or where

companies are acquired in order to gain access to assets while also minimizing the number of
direct competitors within the industry.
VENTURE CAPITAL
Venture capital (risk capital or start-up capital) is the term used when investors buy part of a
company. A venture capitalist places money in a company that is high risk and has a high
growth potential. The investment is usually for a period of five to seven years. The investor
will expect a return on his money either by the sale of the company or by offering to sell
shares in the company to the public.
New businesses, or start-ups, are private companies that are not allowed to sell shares to the
general public. Therefore, they have to find other ways of raising business capital. Some very
small companies are able to operate on money their founders – the people who start the
company – have previously saved, but larger companies need to get capital from somewhere
else. Everybody knows that banks are usually risk-averse. This means they are unwilling to
lend to new companies where there is a danger that they won`t get their money back. For
that reasons, there are firms that specialize in finding venture capital – funds for new
enterprises.
Some venture capital or risk capital companies use their own funds to lend money to
companies, but most of them raise capital from other financial institutions. Some rich people,
who banks call high net worth individuals, and who companies usually call business
angels or angel investors, also invest in start-ups. Although new companies present a high
level of risk, they also have potential for rapid growth, and high profits, if the new business
is successful.
Because of this profit potential, institutions like pension funds and insurance companies are
increasingly investing in new companies, particularly hi-tech ones.
When investing venture capital, the investor may want to receive a percentage of the
company’s equity, and may also wish to have a position on the director’s board. Because of
the high level of risk involved, investors in start-ups usually expect a higher than average
rate of return – the amount of money the investment pays - on their capital. If they cant` t get
a quick return in cash, they can buy the new company`s shares. If the company I successful
and later becomes a public company, which means it is listed on a stock exchange, the
venture capitalist will be able to sell their shares then, at a profit. This will be their exit
strategy.
There are three different types of venture capital investment:

Early stage financing includes seed financing, start-up financing and first stage financing.
1. Seed financing refers to a small amount of venture capital given to an entrepreneur or
inventor who wishes to start a business. It may be used to build a management team,
for market research or to develop a business plan.

2. Start up financing refers to venture capital that is given when a business has been
operating for less than a year. Their product will not have been sold commercially
yet, and they will just be ready to start doing so.
3. First stage financing is used when companies wish to expand their capital and to
proceed full scale and enter the public business arena.
Another type of venture capital investment is expansion financing. This covers second and
third stage financing and bridge financing.
1. Second stage financing is an investment used to expand a company that is already on
its feet. The company is trading and has growing accounts and inventories, although
it may not yet be showing a profit.
2. Third stage financing is an investment to companies that are breaking even or
becoming profitable. The venture capital is used to expand the business. It may be
used in the acquisition of real estate or for further in-depth product development.
3. Bridge financing covers a variety of different meanings. It is a short term, interest
only investment. It is used when company restructuring is taking place. The money
can also be used if an initial investor wants to liquidate his position and sell his stock.
Another common form of venture capital is acquisition financing, in which the investment
is used to acquire a percentage or the whole of another company. Venture capital can also be
used by a management group to buy out another a line of products or business, regardless of
their stage of development. The company they buy out can either be a private or a public
company.
ISLAMIC FINANCING
Islamic financing is a form of financing which conforms with Islamic laws surrounding money
and the practice of doing business. Islamic financing is also known as Islamic banking, and
numerous financial firms around the world offer Islamic banking to Muslim customers,
especially in the Middle East. You don't necessarily have to be Muslim to take advantage of
Islamic financing, however, and some non-Muslims find the terms of Islamic financing to be
more agreeable than those of secular banking and financial arrangements.
Two issues in Islamic law are of concern which it comes to Islamic banking. The first is riba,
which is commonly translated as “usury,” better known as “exploitative interest.” Islamic
law specifically prohibits charging or paying interest, and since most loans include a rate of
interest, devout Muslims cannot use traditional financing to buy cars and homes or to
finance an education. Muslim law also prohibits involvement in haraam or forbidden
business practices, which include the manufacture and sale of alcohol and pornography.
Banking institutions which offer Islamic financing pledge not to involve their funds in
haraam industries, so that Muslims can avoid the taint of forbidden businesses. They also use
a variety of creative techniques to get around the prohibition on paying interest so that
Muslims can still get loans and financial assistance.
For example, a bank might buy a home or car and lease it to a customer, or sell it in
instalments, for a profit. Since the bank is not charging interest, the loan is considered to be

acceptable. A bank might also offer a business loan in return for a share of the profits for a
set period of time, distinguishing this as a fee, rather than as interest. A variety of other
techniques may be used in Islamic financing to connect the Muslim community with sources
of loans which can be used for improvement.
Islamic financing started in Egypt, and spread from there through the Middle East as
Muslims began to see the appeal of religiously acceptable financing. There is some debate in
the Muslim community as to whether or not Islamic financing is fully acceptable, however.
Some people argue that riba is a term with a fluid and unclear definition, and that the Qu'ran
prohibits involvement in loans in general, not just usurious interest. Others feel that without
Islamic banking, the Muslim world would not have an opportunity to compete on an equal
footing due to a lack of financial liquidity, so Islamic financing's benefits outweigh the
possible drawbacks.
STOCKS AND SHARES
Stocks and Shares are the two sides of the same coin. Basically, they both
mean the same thing. The difference between the two lies in the
technical definition of the two. When an investor holds the ownership
certificates of a particular company then it is known as shares. The
people who own them are called stockholders and shareholders. Those
persons become the part owners of the company in accordance to the
number of stock they own. The holder is entitled to claim anything attached to the stock right
from the company's earnings to rights of voting.
Stock is a general term for shares. Stock is the ownership of certificate (either in physical or
dematerialized form) of any company. Hence we can say that stock is the share of any
company. Thus, stock ownership means holding of ownership certificates of one or more
companies. Shares are certificates which represent ownership rights of the holder in a
specific company.
Stocks generally are of 3 types:
a) Common stock or ordinary shares: It gives an ownership right to the holders of the
stock and hence the share holders are entitled to the earnings of the company
according to their stake. Holders also get dividends on those stocks when given by
the company.
b) Preferred stock or preference shares: Its holders enjoy the privilege of receiving fixed
dividends (e.g. 5% of the shares` nominal value) that must be paid before holders of
ordinary shares receive a dividend. Holders or preference shares have more chance of
getting some of their capital back if a company goes bankrupt – stops trading because
it is unable to pay its debts. If the company goes into liquidation – has to sell all its
assets to repay part of its debts – holders of preference shares are repaid before other
shareholders, but after owners of bonds and other debts. If shareholders expect a
company to grow, they generally prefer ordinary shares to preference shares, because
the dividend is likely to increase over time.

c) Convertible preferential stocks: The holders of these stocks have the option of
converting them to common stocks of the issuing company.
Stock Certificate of a company comes in two forms:

a) Physical Stock Certificates: The Stock Certificates were basically plain pieces of
papers on which the company specifications and name of the holder were written.
These forms of certificates are not generally used nowadays because of the
inconveniences related to them such as preservation problems, time consuming
affair, etc.
b) Dematerialized Stock Certificates: For the sake of convenience the shares in the
physical form have been converted into electronic forms and are deposited in the D-
mat accounts. Nowadays most of the stock certificates are in the dematerialized form.
Whenever a person buys a stock of a specific company he becomes the shareholder of
that company.
In Britain, stock is also used to refer to all kinds of securities, including government bonds.
The word equity or equities is also used to describe stocks and shares.
The places where shares are listed are called stock markets or stock exchanges.
This is the procedure when the company decides to go public – to list their shares on the
stock market:
1. A successful company wants to raise capital or to expand and decides to go public –
to change from a private company to a private limited company (PLC) by selling
shares of the company to outside investors.
2. The company gets advice from an investment bank about how many shares to offer
and at what price.
3. The company gets independent accountants to produce a due diligence report. It is a
detailed examination of a company and its financial situation.
4. The company produces a prospectus which explains its financial position, and gives
details about senior managers and the financial results from previous years (sales,
costs, debts, profits, losses etc.). This document also serves to invite the public to buy
shares by stating all the terms if sale.
5. The company makes a flotation or IPO – initial public offering.
6. An investment bank underwrites the stock issue – guarantees to buy the shares if
there are not enough buyers.
BUYING AND SELLING SHARES

After newly issued shares have been sold (usually by investment banks) for the first time
(this is called primary market) they can be traded again and again at the stock market on
which the company is listed. This is called a secondary market.
Major stock markets, like New York and London, have a lot of requirements about
publishing financial information for shareholders. Most companies use over-the-counter
markets such as NASDAQ in New York which has fewer regulations.
The nominal value of a share – the price written on it – is rarely the same as its market price
– the price it is currently being traded at on the stock exchange. This price can change every
minute during trading hours, because it depends on supply and demand – how many sellers
and buyers there are. Some stock exchanges have computerized automatic trading systems
that match up buyers and sellers. Other markets have market makers – traders in shares
who quote buying and selling prices (or bid and offer prices).
The spread or difference between these prices is their profit or mark-up.
Most customers place their buying and selling orders with a stockbroker – someone who
trades with the market makers.
Investors tend to classify the shares available in the equity markets in different categories:
• Blue chips: Stocks in large companies with a reputation for quality, reliability and
profitability. More than two-thirds of all blue chips in industrialized countries are
owned by institutional investors such as insurance companies and pension funds.
• Growth stocks: Stocks that are expected to regularly rise in value. Most technology
companies are growth stocks. And don`t pay dividends so the shareholders` equity
or owners` equity increases. This causes the stock price to rise.
• Income stocks: Stocks that have a history of paying consistently high dividends.
• Defensive stocks: Stocks that provide a regular dividend and stable earnings, but
whose value is not expected to rise or fall very much.
• Value stocks: stocks that investors believe are currently trading for less than they are
worth – when compared to the company`s assets.
SKILLS: DEALING WITH FIGURES
How do we pronounce numbers in English?
100 = the word hundred remains in its singular form regardless of the number preceding it.
The only exception are phrases like "hundreds of people took part in today`s parade".
100 = one hundred
200 = two hundred
300 = three hundred ...
1,000 = the same rule applies with the word thousand (always a singular form!)
1,000 = one thousand
2,000 = two thousand

8,000 = eight thousand

208,000 = two hundred and eight thousand (BrE)
or
(two hundred eight thousand (AmE)
*In American English `and` is never pronounced when people discuss numbers.*
The same rule applies to three-digit numbers:

we write: 450
and say: four hundred and fifty (BrE)
but: four hundred fifty (AmE)
1,000,000 = one million (always in a singular form!). The only exception are phrases like
`millions of people all over the world waited for the presidential inauguration`
1,000,000,000 = one billion
1,000,000,000,000 = one trillion
16,500,000 = 16.5 million
3,200,000 = 1.2 million (written) = three point two million (pronounced)
4,400,000,000 = 4.4 billion (written) = four point four billion (pronounced)
0 =has several names, depending on context:

zero: formal usage
naught / nought: mostly British English
love: in tennis
nil: in sports, mostly British English ("The score is two-nil.")
oh: used when spelling numbers (like telephone, bank account)
nothing: in general sport scores, mostly American English ("The score is ten to nothing.")
6 = half a dozen
12 = a dozen, used mostly in commerce
1000 = a grand, colloquially used especially when referring to money (both in BrE and AmE).
FRACTIONS
½ = a half (one half)
¼ = a quarter (one fourth); 2/4 = two-quarters...
1/3 = one-third; 2/3 = two-thirds; 3/3 = three thirds; 5/3 = five thirds...
1/8 = one-eighth; 3/8 = three-eighths; 6/8 = six-eights...
6/7 = six-sevenths; 7/7 = seven-sevenths...
1/10 = one-tenth; 2/10 = two –tenths...
1/5 = one-fifth; 2/5 = two fifths; 3/5 = three fifths...
6/10 = six-tenths; 7/10 = seven-tenths...
Integral number + a fraction is pronounced like this:

1 1/2 = one and a half

4 1/4 = four and a quarter

3 1/3 = three and one third
5 2/8 = five and two eighths
PERCENTAGES
1% = one percent/ per cent
15% = fiften percent/ per cent
100% one hundred percent/ per cent
DECIMALS
Numbers with a decimal point are normally read so that each number after the decimal pint
is pronounced separately:
0.5 = point five

0.005 = nought point zero zero five
0.268 = nought point two six eight (BrE)
zero point seven five four (AmE)
point two six eight (BrE + AmE)
1.55 = one point five five
2.457 = two point four five seven
88.5 = eighty-eight point five
o
DATES
In British English, the day usually comes before the month. However, other usages are also
common. In writing, the and of are generally left out from the written date, particularly when
the date stands alone.
The three forms of writing dates are:

a) The 13th of May 2010 = form rarely used now in written form, but still fully used in
spoken English
b) 13th May 2010 (omitting `the` and `of``)
c) 13 May 2010 (omitting the ordinal suffix `th` )
In American English the day comes before the month in a date, so we say:
December 10, 2008 = "December ten(th) two thousand eight".
In British English this form is still used for certain official celebration dates (e.g. Fourth of
July).
The comma before the year is optional. It is usually used in American English
(e.g. June 7, 2010) but seldom used in British and International English, so we normally see
dates written like this:7 June 2010

In abbreviated froms of month names we normally leave the period or full stop out:
e.g. 7 Aug 2010
How can we write dates on official documents?

Today these are the common ways in which we can write dates on all our official documents
and correspondence:
a) 20/12/2006,
b) 20-12-2006,
c) 20-12-06
d) 20.12.2006
e) 20 December 2006
f) 20 Dec 2006
Pronounced: [The] 20th [of] December 2006 (The 'of' and 'the' are included in speech, but not
in writing.)
*Remember, when reading or writing in American English, the day and month will be in
reverse order than shown here! Therefore, we will write: December 20, 2006/Dec. 20, 2006
TIME OF DAY
The English language uses a twelve-hour clock (unlike Croatian which uses 24-hour clock) so
we write and say:
10:00 a.m. (or A.M.) for ten o'clock in the morning

5:00 p.m. (or P.M.) for five in the afternoon
*a.m. = latin, ante meridiem

*p.m. = latin, post meridiem
Listening: Raising business capital (CB, p.41)

When selecting new companies to invest in, venture capitalists look at:
The business’s market (its customers)
The industry (its competitors)
The management team
When selecting a market to invest in, venture capitalists select large and fast-growing
markets because they provide high returns.
Some businesses succeed in winning over their competitors because of their intellectual
property (ideas or knowledge that only their owner can use and exploit), patents and
copyrights (protect intellectual property and the owner’s rights).

When evaluating management teams, venture capitalists check the following:

How well they understand the market and the industry that they are going into
How much they can be trusted when they talk about their potential for success
Do individual managers have the personal commitment to deliver on the plans (how
motivated is the manager to work very hard to achieve the objectives)
Reading: Reporting financial success (CB, p41)

Find words or phrases in the articles that have the following meaning:
Article 1:
1. Individuals or organisations that invest money:
2. Declared their optimism:
3. A suddenly changed situation:
4. Money people spend on goods and services:
5. Market for buying and selling houses:
6. Money you get in return of declaring tax:
7. Organisations selling to the public:
8. Money earned from sales:
9. The last part of the year:
10. Have a part/a role in something:
11. Total turnover:
12. Part of the company outside its headquarters:
13. Difference between the price of the final product and the cost of producing it:
14. Future predictions based on present evidence:
Article 2:
1. To perform better then it was predicted:
2. Profits:
3. An increase in value:
4. Profit before tax is deducted:
5. Pay great attention to:
6. High-class/expensive:
7. Not the largest, or the second largest but…:
8. Decreasing or freezing prices to get competitive advantage:
9. Rise strongly:
10. Not doing well (for companies, stores):
11. Constant increase:
KEY:
Article 1: investors/sound a strong note of optimism/a turnaround/consumer spending/housing market/tax
refund/retailers/revenues/the fourth quarter/contribute to/overall sales/division/gross margin/forecast.

Article 2: beat expectations/earnings/gains/pre-tax profit/cultivate/upmarket/the third largest/price

pressure/soar/ailing/growth.
LANGUAGE: DESCRIBING TRENDS
Trend: The direction in which the market is heading. The three categories of trends are:
major, intermediate and short-term. Trends move in one of three directions: up, down,
sideways.
Types of Graphs
Graphs are pictures that help us understand amounts and trends. These are also called data.
There are many kinds of graphs:
a) A circle graph is shaped like a circle. It is divided into fractions that look like pieces
of pie, so sometimes a circle graph is called a pie chart. Many times the fractional
parts are different colours and a key explains colours.
b) A bar graph uses bars to show data. The bars can be vertical (up and down), or
horizontal (across). The data can be in words or numbers.
c) A line graph shows points plotted on a graph. The points are then connected to form
a line.

d) A histogram is a special kind of bar graph. The data must be shown as numbers in
order.
e) A picture graph uses pictures or symbols to show data. One picture often stands for
more than one vote so a key is necessary to understand the symbols.
WHICH WORDS DO WE USE TO DESCRIBE LINE GRAPHS
a) To describe an increase in value, price etc.

VERBS: go up, improve, soar, increase, double, rise, grow, shoot up, take off, recover, pick
up, expand, gain, rocket, double, triple, jump
NOUNS: an increase, an improvement, a rise, a growth, an expansion, a recovery
b) To describe a decrease in value:

VERBS: come down, go down, plummet, plunge, slump, decrease, decline, fall, shrink, drop,
halve,
NOUNS: a drop, a fall, a decrease, a decline, a slump, shrinkage, aplunge
c) To describe an absence of change

Remain stable, remain steady, stabilize, flatten off, level off, stay at the same level, remain
constant
d) Reaching a top value

Reach a peak, top out, peak
e) Reaching bottom value

Reach a low point, bottom out, hit a low
f) Improving in value
Pick up, rally
g) Constant changes in value

Fluctuate
EXPRESSING VARIOUS DEGREES OF CHANGE IN A LINE GRAPH

(What kind of change can be noticed? How have the trends changed in a certain period?)
Adjectives (used to describe nouns): substantial, rapid, encouraging, slight, spectacular,

disastrous, moderate, disappointing, steady, enormous, tremendous, considerable, sharp,
dramatic, sudden, gradual, quick, abrupt,
Adverbs (used to describe verbs): dramatically, considerably, sharply, significantly,

substantially, moderately, spectacularly, slightly, tremendously, disappointingly,
dramatically, suddenly, steadily, gradually, quickly, abruptly,
Examples of use:

Adjective Meaning Adverb

a slight rise in costs very small Costs rose slightly
a gradual rise in profits slow and over a long period Profits have risen gradually
of time.
a steady increase in the slow but regular and The interest rate has increased
interest rate continuing. steadily
a significant fall in profits noticeable and important. Profits fell significantly
a sharp fall in sales very large and sudden Sales have fallen sharply.
PREPOSITIONS – examples of use

• Profits rose by 5% to $ 2.7 bn.
• Profits have gone up from 3 million to 4 million euros.
• Our business grew by 8% last year.
• There has been an increase in sales of 2 million euros.
• Sales have increased by 4 million euros.
• Last year profits stood at 2 million pounds.
• Sales reached a peak of $7 million in June.
• Profits reached a low point of $1 million in April.
EXERCISES ON DESCRIBING TRENDS
Ex 1: Complete the sentences on the right. The meaning must stay the same.
There has been a sharp fall in sales. Sales ……………………………………………….

1 There was significant growth in sales. Sales ……………………………………………….
2 There was a gradual rise in the price. The price …………………………………………..
3 There was a slight fall in profits. Profits ………………………………………………
4 There has been stability in costs. Costs have remained ……………………………..
5 There has been a steady rise in sales. Sales have ………………………………………….
Ex 2: Complete this report on sales by using a different word each time.
Last year started well. In the first quarter sales……………………………significantly. The

second quarter was even better: sales increased (1) ………………………….. They continued
to (2) …………………steadily in the third quarter and reached a (3)
………………………………..at 90,000. By the end of September, sales had (4)
…………………………………up (5) …………………………….almost 50 per cent. In the last
quarter there was a slight (6) ………………………………………., but it was still a good year.
This year has been very different. Sales (7) ……………………………….in the first half of the
year – up one month and down the next – but in the last three months they have remained
(8) …………………………………. .

Ex 3: Match the description on the left with an appropriate line graph on the right.
Production grew more and more rapidly

over the first three quarters but then
reached a peak. Since then, it has quickly
dropped.
Production grew rapidly in the first quarter,

but reached a plateau of about 70. Since
then it has remained more or less stable.
Production has dropped slowly but steadily

over the year.
Production started the year in a stable

position, but then plunged in the third
quarter. It has now flattened out at a level of
20.
Production fell considerably over the first

three quarters, reaching a low of 20. Since
then it has staged a partial recovery.

Production has fluctuated all year.
Production started off steady, but fell

sharply in the last quarter.
Production showed a marginal rise in the

first three quarters, but then suffered a
sharp drop.
After a considerable drop in the first two

quarters, production bottomed out at 20.
Since then it has started to rise.
Production has experienced a strong, steady

growth over the whole year.
There has been a slight increase in

production over the year.

There was a rapid drop in production in the

first quarter, but it bottomed out at about
20.
Ex 4: Adjectives on the left are used to describe the degree of change. Do you know the
corresponding adverbs? Write them on the empty lines below.
A dramatic fall to fall …………………
An abrupt rise to rise ………………..
A sudden decline to decline ………………
A moderate grow to grow ………………
A slight increase to increase ……………..
A rapid drop to drop …………………
A gradual decline to decline ……………
A steady recover to recover ……………
Erratic sales to sell …………………..
A constant levelling off to level off ………………
*erratic: changing often or not following a regular pattern, so that it is difficult to know what
will happen next.
Ex 5: Represent the following verbs in a line graph (draw each graph next to the table).
to stagnate to bottom out
to surge to crash
to tumble to soar
to top out to plunge

to slump to plummet
GLOSSARY FOR UNIT 5
• default noun, verb

failure to do sth that is required by an agreement or by law, especially paying a debt:
The country is trying to avoid a default on its foreign debt.
They are in default of their obligations.
If something happens by default it happens because nothing has been done to make things
happen differently or because sb has not done what they should have done:
He became Chief Executive of the merged company almost by default.
They won their lawsuit by default.
• return on investment (abbr ROI) (also return on capital)

a measure of how much profit an investment produces compared with the amount originally
invested
NOTE: Return on investment is also sometimes used to describe figures such as:
return on assets (abbr. ROA)
a measure that is used to see how well a company is using its assets to produce profits. It
shows the profits for the year as a percentage of the recent total assets:
• return on equity (abbr. ROE)

a measure used to see how much profit a company is producing compared to the value of its
shareholder equity (= total assets minus all the money the company owes):
The firm failed to achieve its target of a 20% return on equity.
• interest noun
the extra money that you have to pay when you borrow money:
You’ll have to pay interest on the loan.
The money was repaid with interest.
COLLOCATIONS
to charge/pay interest
interest charges/payments
annual/monthly interest
• interest rate (also rate of interest) noun

the cost of borrowing money, usually expressed as a percentage of the amount borrowed:
Interest rates are low and unlikely to be raised soon.
The Bank of England has cut interest rates by half a percentage point.
Interest rates of 2.75% are low by past standards.

• loan noun
money that an organization such as a bank lends and sb borrows:
The government offers low-interest loans to small companies.
Many people take out a loan to buy a new car.
COLLOCATIONS:
a high-interest/an interest-free/a low-interest/no-interest loan
a long-term/short-term loan
consumer/corporate/personal loans
to apply for/arrange/take out a loan
to get/give sb/make sb a loan
WHICH WORD?
loan/facility/home loan/mortgage/overdraft
All these words are used to describe money that banks lend to customers.
Loan is the most general word and is used about money lent both to individuals and
businesses. Loans can be paid back over short or long periods of time and can be small or
large.
Mortgages or home loans are used by individuals to buy homes. The amount borrowed is
large and paid back over a number of years.
Overdrafts are used by individuals and businesses. An overdraft differs from a loan in that
there is not a particular amount of money that is lent at a particular time. It is an
arrangement to borrow up to an agreed amount whenever you need it. You obtain the
money through your bank account.
Facility is used to describe any arrangement in which a person or company can borrow
money during a particular period of time up to an agreed amount. This can be an overdraft,
or it may have special conditions and be established for a particular purpose: The company has
secured a short-term facility to fund the purchase.
• bond noun
an agreement by a government or an organization to pay back the money an investor has
lent plus a fixed amount of interest on a particular date; a document containing this
agreement:
Government bonds are usually considered to be a safe investment.
The company are to issue bonds backed by its revenue from travel insurance.
COLLOCATIONS:
to buy/hold/invest in/issue/redeem/sell/trade bonds
high-yield/long-term/twenty-year bonds
a bond broker/investor/trader
• deposit noun, verb

an amount of money that is paid into a bank or savings account:
Deposits can be made at any branch.

I wish to make a deposit of $5 000.

Payments are placed on deposit to earn interest.
OPPOSITE: WITHDRAWAL
2 (Economics) deposits [pl.]
the total amount of money that has been paid into bank accounts in a particular area or
country:
The combined banks would have deposits of more than $22 billion.
COLLOCATIONS
to ask for/require/take a deposit
to pay/put down a deposit
to forfeit/lose a deposit
to reclaim/repay/return a deposit
a refundable/returnable/non-refundable deposit
• share dividend noun

an amount of profits that a company pays to its shareholders in the form of shares rather
than cash
• shareholder equity (also shareholders' equity)

(AmE usually stockholder equity) noun
the value of a company as shown in its financial records, which is its assets minus its
liabilities (= the money that it owes)
• stock market (also market) noun [C] (usually the stock market)
the business of buying and selling shares in companies and the place where this happens; a
stock exchange:
The company was floated on the stock market (= its shares were sold to the public) in 2004.
to invest in the stock market
It is the only company of its type to be listed on the stock market.
COLLOCATIONS:
the stock market closes/opens
the stock market falls/rallies/rises
a stock market collapse/crash/slump
• share noun [C]

any of the units of equal value into which a company is divided and sold to raise money.
People who own shares become owners of the company and receive part of the company’s
profits:
shares in British Airways
The retailer will issue 24 million new shares worth €3 billion.
• currency market noun

a market in which traders buy and sell currencies:

The euro weakened against the dollar on the currency markets. the star performers in the currency
market buying rupees in the international currency markets
SYNONYM: FOREIGN EXCHANGE MARKET (or FOREX)
• commodity market (also commodities market) noun

business or trade in commodities; a place where this is done:
The price of cotton collapsed on the world commodity market.
• future noun
a contract to buy or sell a particular amount of sth, such as a raw material, currency or
shares, at a particular time in the future and for a particular price. Futures are traded in
organized markets (futures exchanges):
coffee/gold/oil/energy futures bond/commodity/stock futures
COLLOCATIONS:
to buy/offer/sell/trade (in) futures
futures expire/trade a futures broker/trader
• trading floor (BrE also dealing floor) noun

(Stock Exchange)
an area in a stock exchange where dealers meet each other and buy and sell shares:
The news of the rise in interest rates was greeted with shock on the trading floor.
• option /; AmE / noun

the right to buy or sell a fixed quantity of shares, currencies or commodities (= for example,
grain, coffee, cotton or metals) for a particular price within a particular period or on a
particular date:
The five directors earned more than $3 million through the sale of shares and options. She has an
option to buy 100 000 shares.
COLLOCATIONS:
to buy/exercise/sell/trade/write an option
an options contract the options exchange/market
• index noun, verb

1 (Economics; Finance) (plural indices // or indexes, especially in AmE)
a system that shows the level of prices, wages, etc. so that they can be compared with those
of a previous day or time:
the cost-of-living index an index measuring consumer confidence
an index of business activity
********************MAJOR STOCK MARKET INDEXES/INDICES*********************

 NASDAQ-100™ // noun [sing.] = technological index on the New York Stock Exchange

a list of 100 shares traded on the NASDAQ, chosen to give a guide to share prices in general:
The NASDAQ Stock Market did its annual reshuffling of the NASDAQ-100 on Friday.
 Dow Jones™ /; AmE / noun = industrial index, New York Stock Exchange
1 (usually the Dow Jones™) (also the Dow™) [sing.]
used to refer to the Dow Jones Industrial Average:
The Dow Jones slipped below the 10 000 level yesterday.
the Dow Jones average/index
2 [U]
a company in the US that publishes measures (indexes) of the share prices of important
companies. Its most famous measure is the Dow Jones Industrial Average:
the Dow Jones Stock Index of shares in European companies
Dow Jones Averages™
 Nikkei Index noun [sing.]

one of the measures of the share prices of the companies that are traded on the Tokyo Stock
Exchange
 FTSE 100 Index (also FTSE 100) // (also Footsie, informal) noun [sing.]
an average of the share prices of the 100 largest companies traded on the London Stock
Exchange:
The FTSE 100 Index fell 11 points to 3567. FTSE 100 companies/stocks
 the DAX (also spelled Dax) // noun [sing.]Deutsche Aktienindex

a share index of shares in 30 of the most important companies on the Frankfurt stock
market:
Frankfurt’s DAX index gained 0.2% in late trade. Traders said the Dax would remain volatile.
Germany’s blue-chip Dax has fallen sharply recently. See note at INCREASE
 CAC 40 noun [sing.]

a measurement of how well the Paris stock exchange is performing, calculated using the
share prices of the 40 largest companies on the stock exchange:
In Paris, the CAC 40 closed up 1.5 per cent. INDEX
 the Hang Seng Index (also the Hang Seng) noun [sing.]
a figure which shows the average price of shares on the Hong Kong stock exchange:
The Hang Seng Index was up 35.81 points. The Hang Seng closed down 1.73 per cent.
******************************************************************************************************
• EPS (AmE spelling usually eps)

profit a company makes in a particular period divided by the number of shares.
Slower sales in South America are expected to reduce EPS by 42 cents.

an EPS estimate/forecast
• capital gain noun

a profit that is made from the sale of property or an investment:
The sale of the land and buildings generated a capital gain of $2.3 billion.
OPPOSITE: CAPITAL LOSS
• securities market (also securities exchange) noun

a place where shares, bonds, etc. are bought and sold; the business activity involved in this:
• broker/trader (stock broker; commodities broker)

a person or company that buys and sells things, for example shares, bonds, etc., for other
people:
an insurance/money/mortgage broker
• bankrupt adjective, verb, noun

1 without enough money to pay what you owe, especially when this has been officially
decided by a court:
a bankrupt software company
Her husband went bankrupt two years ago.
SYNONYM: INSOLVENT
VOCABULARY BUILDING
When a company fails
a) Technical words
• to be/go insolvent (= to be unable to pay debts)
• to liquidate/wind up a company (= to sell its assets, pay its debts, etc.)
• a company is put/goes into liquidation
b) Neutral Words
• to be/go bankrupt
• to go out of business
c) Informal/idiomatic words
a company
• goes under
• goes bust
• goes belly up
• goes to the wall
• borrower /; AmE ; / noun [C]

a person or company that borrows money, especially from a bank:
We offer the same rates of interest to new and existing borrowers.
The bank has lost a lot of money from lending to high-risk borrowers.

OPPOSITE: LENDER
• pension fund noun [C]

an amount of money that is invested and then used to pay pensions:
There will be an investigation into the way the bank managed its pension fund.
• unit trust (BrE) (AmE mutual fund) noun [C]

(Finance)
an organization that manages a fund that is invested in a wide range of shares, bonds, etc.
The fund is divided into small units which are bought and sold, usually by people who only
invest a small amount of money:
Investing in a unit trust reduces risks for small investors.
a unit trust company
• bank statement
a printed record of all the money paid into and out of a customer’s bank account within a
particular period
The monthly bank statement showed a balance of $1000.
• execute on sth
to complete a task or perform an activity properly:
The firm now has the necessary skills and funding to execute on its business plan.
• spin-out noun or spin-off

a company that is formed to develop and use the results of research done at a university or
college
Cambridge has produced 120 spin-outs over the last ten years. ;
A spin-out company was formed to market the equipment.
CASE STUDY 5: ANGEL INVESTMENTS
Background:
Angel Investments is a venture capitalist company – a company that finances new businesses,
i.e. looking for profitable companies to invest in. Your task is to look at various companies
mentioned in the course book, analyse each one, and decide, as a representative of Angel
Investments how to allocate EUR 10m.
Remember! You don`t have to invest in all the companies. Consider which one has the
greatest growth potential, and which one would give you the greatest return on investment.

Facts about the company:
Company Angel Investments (AI)

Based in Warsaw, Poland
Activity Investing money in companies –
start-up or small companies and
larger, established companies with
growth prospects
Money available for EUR 10 million
investment
Companies for potential Unibrand; Technoprint; On-line
investment Fashions; Amazon Ventures
The four investment options:
Unibrand
Plan to increase sales by at least 10% this year
Excellent sales opportunities in South America and Asia (opening 20 new sales offices
there)
Launched a new perfume and expect it to be successful
Technoprint
Had excellent year with inkjet sales (increased 14% worldwide although prices have fallen
due to strong competition)
Sales of cartridge increased by over 12%
Sales of laser printers remained steady
New laser printer has great potential (expect it to dominate the market)
Plan to reduce costs by outsourcing components from low cost countries
OLF
Report outstanding performance (visits to the website increased to 82,000 daily)
Over 400,000 regular users
Launching a multimedia advertising campaign to promote new ranges of jewellery and
travel accessories
Expect to increase sales target by 50% and to become the leading on-line designer clothing
company
Amazon Ventures (AV)

Has fantastic possibilities
Brazilian government helped to build a new road to the company’s sites
Area is rich in diamonds
Expect profits of EUR 200m this year and to declare dividend for the first time

Plans to issue new shares to finance exploration of two new sites
_______________________________________________________________________
PORTFOLIO ASSIGNMENT
CASE STUDY WRITING TASK

Write an e-mail to the CEO of Angel Investments giving a list of your recommendations
about the investment. Explain which company/companies you would invest in and give the
reasons why.
To help you there is a writing model for this task on page 133 in your course books.

UNIT 5 MONEY Study Material Glossary Assignments

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UNIT 5: MONEY_study material_glossary_assignment

One of the main features of globalisation is a free flow of capital. Capital

Markets that investors use are different:

Market Leader Intermediate New_BE2_summer semester/S.R.D. Page 1

Note the differences!

BrE: cash dispenser, cash machine

BANKING PRODUCTS AND SERVICES BrE: cheque

Market Leader Intermediate New_BE2_summer semester/S.R.D. Page 2

TYPES OF FINANCIAL INSTITUTIONS

Market Leader Intermediate New_BE2_summer semester/S.R.D. Page 3

Investment banking is a field of banking that help companies in

Market Leader Intermediate New_BE2_summer semester/S.R.D. Page 4

MERGERS AND ACQUISITIONS

Market Leader Intermediate New_BE2_summer semester/S.R.D. Page 5

There are three different types of venture capital investment:

Market Leader Intermediate New_BE2_summer semester/S.R.D. Page 6

Market Leader Intermediate New_BE2_summer semester/S.R.D. Page 7

STOCKS AND SHARES

Market Leader Intermediate New_BE2_summer semester/S.R.D. Page 8

Stock Certificate of a company comes in two forms:

BUYING AND SELLING SHARES

Market Leader Intermediate New_BE2_summer semester/S.R.D. Page 9

SKILLS: DEALING WITH FIGURES

How do we pronounce numbers in English?

Market Leader Intermediate New_BE2_summer semester/S.R.D. Page 10

8,000 = eight thousand

The same rule applies to three-digit numbers:

0 =has several names, depending on context:

Integral number + a fraction is pronounced like this:

Market Leader Intermediate New_BE2_summer semester/S.R.D. Page 11

4 1/4 = four and a quarter

0.5 = point five

The three forms of writing dates are:

Market Leader Intermediate New_BE2_summer semester/S.R.D. Page 12

How can we write dates on official documents?

10:00 a.m. (or A.M.) for ten o'clock in the morning

*a.m. = latin, ante meridiem

Listening: Raising business capital (CB, p.41)

Market Leader Intermediate New_BE2_summer semester/S.R.D. Page 13

When evaluating management teams, venture capitalists check the following:

Reading: Reporting financial success (CB, p41)

Market Leader Intermediate New_BE2_summer semester/S.R.D. Page 14

Article 2: beat expectations/earnings/gains/pre-tax profit/cultivate/upmarket/the third largest/price

LANGUAGE: DESCRIBING TRENDS

Market Leader Intermediate New_BE2_summer semester/S.R.D. Page 15

WHICH WORDS DO WE USE TO DESCRIBE LINE GRAPHS

a) To describe an increase in value, price etc.

Market Leader Intermediate New_BE2_summer semester/S.R.D. Page 16

NOUNS: an increase, an improvement, a rise, a growth, an expansion, a recovery

b) To describe a decrease in value:

NOUNS: a drop, a fall, a decrease, a decline, a slump, shrinkage, aplunge

c) To describe an absence of change

d) Reaching a top value

e) Reaching bottom value

g) Constant changes in value

EXPRESSING VARIOUS DEGREES OF CHANGE IN A LINE GRAPH

Adjectives (used to describe nouns): substantial, rapid, encouraging, slight, spectacular,

Adverbs (used to describe verbs): dramatically, considerably, sharply, significantly,

Market Leader Intermediate New_BE2_summer semester/S.R.D. Page 17

Adjective Meaning Adverb

PREPOSITIONS – examples of use

EXERCISES ON DESCRIBING TRENDS

MAJOR STOCK MARKET INDEXES/INDICES*