EKF TUKE

Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk

Akademick rok 2009/2010
11. 01. 2010

Obsah:
1 INGELIGENT BUSINESS ...................................................................................................................... 1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 COMPANIES ...................................................................................................................................... 1 COMPANY PERFORMANCE, ANNUAL REPORT, FINANCIAL STATEMENTS............................................................. 2 MARKETING ................................................................................................................................... 3 OUTSOURCING .............................................................................................................................. 4 RECRUITMENT ................................................................................................................................... 5 BUSINESS ETHICS ................................................................................................................................ 6 LEADER ............................................................................................................................................ 7

2 ECONOMICS ..................................................................................................................................... 8 2.1 2.2 2.3 2.4 2.5 TREE ECONOMIC ISSUES, OIL PRICE SHOCK IN THE 70S ..................................................................... 8 DEMAND, SUPPLY AND EQUILIBRIUM ............................................................................................. 9 THE ROLE OF THE MARKET IN THE SOCIETY .............................................................................................. 12 PRODUCTION POSSIBILITY FRONTIER ..................................................................................................... 12 ROLE OF GOVERNMENT IN THE LIFE OF SOCIETY ........................................................................................ 14

3 ENGLISH FOR THE FINANCIAL SECTOR.............................................................................................. 15 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 CENTRAL BANKING....................................................................................................................... 15 BONDS .......................................................................................................................................... 16 STOCKS AND SHARES ......................................................................................................................... 16 MERGERS & ACQUISITION ............................................................................................................ 17 FOREIGN EXCHANGE AKA FOREX......................................................................................................... 18 BANKING PRODUCTS AND SERVICES ............................................................................................. 18 THE ORGANIZATION OF THE FINANCIAL INDUSTRY ..................................................................................... 19 FINANCING INTERNATIONAL TRADE ....................................................................................................... 20

Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk

1 Ingeligent Business
1.1 Companies
In all over the world, especially in Slovakia, there are many different types of companies. We can say that COMPANIES are group of people who work or perform together, so they are business organizations. We know four basic kinds of companies: 1. SELF - EMPLOYED In this group are people who arent employed by companies. Sole-trader: its person, who provides services selling some product such as plumbers, builders etc. Freelancer: it is just one person, who provides services. Freelancer is a person who working for himself, there are people such as journalists, designers, translators, etc. 2. PARTNERSHIP - it means sharing the profit, loss and responsibility. Partnership consists of two or more persons and a lot of professional people like lawyers, accountants etc. LTD - LIMITED COMPANY WITH LIMITED LIABILITY: In this types of companies persons dont have to use personal property, such as car or house to pay the companys debts. PLC - PUBLIC LIMITED COMPANY or JOIN STOCK COMPANIES: This means that shareholders who wish to invest in the company can buy and sell parts of the company on the stock market. Anybody can buy and sell shares on the stock market. INC INCORPORATED: It isnt a typical European company. A term incorporated used especially in the USA for companies with limited liability.

3. MUTUALS - Some companies like certain life insurance companies are mutuals. So, we can say that mutuals are open to public. When we buy insurance with the company we become a member, there are no shareholders. Another kind of mutual is building societies, which lend money to people who want to buy a house or a flat. But a lot of building societies have demutualized its process when building societies become Public limited companies with shareholders. 4. NON-PROFIT ORGANISATION - There are also called CHARITIES. Non-profit organization is an organization with social aim, such as helping people, who are sick or poor and people who need to help. 1.1.1 Company structure General structure of company consists of: 1. Shareholders, 2. Companys management are consists of: Board of directors, Director (CEO - Chief executive officer), Senior Management, Middle Management, Department Managers - are created by: a) Finance, 1

Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk b) c) d) e) 3. Workforce. Marketing, Human technology, Information technology, Research and Development.

1.2 Company performance, annual report, financial statements

An Annual report is a comprehensive report on a company's activities throughout the preceding year. Annual reports are intended to give shareholders and other interested persons information about the company's activities and financial performance. Most jurisdictions require companies to prepare and disclose annual reports, and many require the annual report to be filed at the company's registry. Companies listed on a stock exchange are also required to report at more frequent intervals (depending upon the rules of the stock exchange involved). Typically annual reports will include: Chairman's report CEO's report Auditor's report on corporate governance Mission statement Corporate governance statement of compliance Statement of directors' responsibilities Invitation to the company's AGM

as well as financial statements including: Auditor's report on the financial statements Balance sheet Statement of retained earnings Income statement Cash flow statement Notes to the financial statements Accounting policies

Other information deemed relevant to stakeholders may be included, such as a report on operations for manufacturing firms. In the case of larger companies, it is usually a sleek, colorful, high gloss publication. The details provided in the report are of use to investors to understand the company's financial position and future direction. The financial statements are usually compiled in compliance with IFRS and/or the domestic GAAP, as well as domestic legislation (e.g. the SOX in the U.S.). In the United States, a more-detailed version of the report, called a Form 10-K, is submitted to the U.S. Securities and Exchange Commission. Financial statements (or financial reports) are formal records of the financial activities of a business, person, or other entity. In British English, including United Kingdom company law, financial statements are often referred to as accounts, although the term financial statements is also used, particularly by accountants.

Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk Financial statements provide an overview of a business or person's financial condition in both short and long term. All the relevant financial information of a business enterprise, presented in a structured manner and in a form easy to understand, are called the financial statements. There are four basic financial statements: 1. Balance sheet: also referred to as statement of financial position or condition, reports on a company's assets, liabilities, and Ownership equity at a given point in time. 2. Income statement: also referred to as Profit and Loss statement (or a "P&L"), reports on a company's income, expenses, and profits over a period of time.Profit & Loss account provide information on the operation of the enterprise. These include sale and the various expenses incurred during the processing state. 3. Statement of retained earnings: explains the changes in a company's retained earnings over the reporting period. 4. Statement of cash flows: reports on a company's cash flow activities, particularly its operating, investing and financing activities. For large corporations, these statements are often complex and may include an extensive set of notes to the financial statements and management discussion and analysis. The notes typically describe each item on the balance sheet, income statement and cash flow statement in further detail. Notes to financial statements are considered an integral part of the financial statements. Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities and equity are directly related to an organization's financial position. Reported income and expenses are directly related to an organization's financial performance. Owners and managers require financial statements to make important business decisions that affect its continued operations. Financial analysis is then performed on these statements to provide management with a more detailed understanding of the figures. These statements are also used as part of management's annual report to the stockholders. Employees also need these reports in making collective bargaining agreements (CBA) with the management, in the case of labor unions or for individuals in discussing their compensation, promotion and rankings. Prospective investors make use of financial statements to assess the viability of investing in a business. Financial analyses are often used by investors and are prepared by professionals (financial analysts), thus providing them with the basis for making investment decisions. Financial institutions (banks and other lending companies) use them to decide whether to grant a company with fresh working capital or extend debt securities (such as a longtermbank loan or debentures) to finance expansion and other significant expenditures. Government entities (tax authorities) need financial statements to ascertain the propriety and accuracy of taxes and other duties declared and paid by a company. Vendors who extend credit to a business require financial statements to assess the creditworthiness of the business. Media and the general public are also interested in financial statements for a variety of reasons.

1.3 MARKETING
= process of planning, designing, pricing, promoting and distributing ideas, goods and services, in order to satisfy customer needs, so as to make a profit. Companies point out how the special characteristics or features of their products and services posses, particular benefits that satisfy the needs of the people who buy them. In order to gain a 3

Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk competitive advantage over rivals, companies create brands that represent aspirations and a desirable image of life that the customer would like to identify with. Non-profit organisations are special because although they use the techniques of marketing, they have other, social goals (e.g. persuading people not to smoke). Whole activities of organisation connected with marketing are called marketing concept. 1.3.1 Marketing mix = the combination of marketing activities that an organisation engages in so as to best meet the needs of its targeted market Traditionally marketing mix includes the 4 Ps: 1. product (a tangible object or an intangible service that is mass produced or manufactured on a large scale with a specific volume of units) 2. price (the amount a customer pays for the product) 3. promotion (represents all of the communications that a marketer may use in the marketplace) 4. place (distribution of the product in markets) Getting the mix of these elements right enables the organisation to meet its marketing objectives and to satisfy the requirements of customers. In addition to the traditional Four Ps it is now customary to add some more Ps to the mix. The extended marketing mix includes 7Ps: 1. psychical layout (tangible (physical) aspects of the delivery of the product or service, for example layout of department store) 2. provision of customer service (all people who directly or indirectly influence the perceived value of the product or service) 3. processes (procedures, mechanisms and flow of activities which lead to an exchange of value) The additional Ps have been added because today marketing is far more customer oriented than ever before, and because the domination of service sector of the economy. 1.3.2 Marketing strategy = process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage. The main goal of this process should be the customer satisfaction. Marketing strategy determines the choice of target market segments, positioning, marketing mix, and allocation of resources. A marketing strategy serves as foundation of a marketing plan. A marketing plan contains a list of specific actions required to successfully implement a specific marketing strategy.

1.4 OUTSOURCING
Outsourcing is transferring business processes such as order processing or call centre management to outside suppliers and service providers. Outsourcing is an arrangement in which one company provides services for another company that could also be or usually have been provided in-house. Outsourcing is a trend that is becoming more common in information technology and other industries. 4

Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk There are many forms of outsourcing ranging from outsourcing payroll to outsourcing package handling, to everything in between. Small businesses hiring a self-employed accountant to handle the corporate tax returns are in essence hiring a tax consultant. Large corporations that hire outside customer service firms to handle their customer support are outsourcing that function of their business to focus more on their core business functions. It is entirely possible to outsource practically every business process within an organization. OUTSOURCED BUSINESS PROCESSES As mentioned previously, practically any business process not related to the core business activity can be outsourced. Some examples of commonly outsourced business processes include: PROS: Lower costs improved efficiency expand to foreign markets Accounting and Finance Sales and Telemarketing Web Design and Development Administrative Support Business Strategy, Advertising, Business Plans, Consulting Software and Technology, Database Development Writing and Translation, Copy Writing, Creative Writing

CONS: - low education and experiences for outsourcing to low labour cost countries TO OUTSOURCE OR NOT TO OUTSOURCE? That is the question many small business owners and large corporations alike are asking themselves each and every day. Risks are inherent in any new business strategy or thought process. However, like any business decision, risk can be managed. By intelligently choosing a provider that matches your intended skill requirements, carefully detailing and outlining your project requirements, and ensuring that you maintain the requirements within budget, the benefits can far outweigh the risks. Also, the talent pool and skills obtained that may be completely unavailable to the organization allow the organization to reach milestones and achieve success that may never have been possible with their current employees.

1.5 Recruitment
Is a process of finding new people for a particular job. In AmE its hiring. Someone who has been recruited is a recruit or a hire. Company may recruit new employees directly or use outside recruiters, recruitment agencies or employment agencies. People for very important job may be recruited by the outside specialists called headhunters. Headhunter usually persuades them to leave the organization they already work for and offer work for other company. This process is called headhunting. For recruiting new employee is responisble the Human resorces department. When the company needs new people they do all for it to find a right person. Usually HR advertise job offer in newspapers, internet websites, bilboards or maybe on radio. In this advertise they write about type of work, working position, requirements for an applicant, working conditions and about offering 5

Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk salary and bonuses. There is a contact on the company, its usually post address and phone number or e-mail address. People who are interested in this job may call and ask about interview but usually people write a letter of application. Its a letter in which people apply for this job. Then as an enclosure a curriculum vitae is written. There are written personal information about applicant, his education, latest working positions, skills and knowledge. Then applicant can write a cover letter where shortly explains why he wanted to do this job or why he thinks that he is the right person for this job. Human resources department screens all apllications which receives for a particular time and selects people who may be good for this job poisition. These people are invited for an interview. Jobs interviews are divided into 3 types: 1, traditional interview usually its just a series of standard questions about qualifications, work experiences, knowledge and expectation. This is still the model for a lot of interview today 2, case interview its an interview where is presented a problem and using a series of questions to find out how candidates would approach the problem. Its a pretty stressfull form of interview 3, behavioural interview is designed to find out how candidates usually behave in a certain situation. The guestions are usually based on anecdotes from the candidates own past. They are designed to find out about how the candidates handle tricky situations and relationships in the past. Succesful applicants are hired and put on the payroll.

1.6 Business ethics

Ethical behaviour is doing things that are morally right. Ethically responsible companies want to do the right things in areas such as: Employment and community They want to pay attention to things that affect all people, not only their employees, in the areas where the company has its offices, factories and activities. The environment They want to conduct business in ways that protect the environment to ensure that the air, rivers, nature etc. are not polluted and that animal life is not endangered. Winning new business They want to get business without engaging in corrupt behaviour, for example offering bribes. So companies want to be seen as good corporate citizens with activities that are beneficial not only for their stakeholders (their employees, shareholders and so on), but for the community and society as a whole. Ethical corporate behaviour includes: Accountability is the idea that companies are completely responsible for what they do and that people should be able to expect them to explain their actions. 6

Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk Transparency is explaining this behavior in a way that can be understood by outsiders, and not trying to hide anything. So companies may say that they demand high levels of probity and integrity, what means complete honesty, from their employees, and they do not tolerate any form of misconduct. Companies have had codes of ethics long and codes of conduct saying how their managers and employees should behave. But now they are designating executives to oversee the whole area of corporate social responsibility, which is a more systematic way. Ethical investment Investors have to take their ethical investment very seriously. They should not invest, for example, in arms companies or tobacco firms. Environment or green issues are very important. For example: Investors were involved in a project to build a large dam in the Asian country of Paradiso. They discovered that large numbers of farming people would be forced to leave the area flooded by the dam, and that the dam would also be environmentally damaging, reducing water supplies to neighbouring countries. There were green activists from the environmental organization who told to this investors. So investors withdrew from the project and tried to persuade other organizations not to invest in it.

1.7 Leader
The role of a leader is to inspire and motivate staff and to develop talent within an organization. Some management styles of leader prefer to delegate responsibility to subordinates, but others prefer to use their authority to control operations directly. Getting something done is only half of the job. Keeping staff happy at the same time is every bit as important. It is really important to have open, productive relationship with staff, rather than creating a climate of fear. A leader should give clear instructions, realistic deadlines and take care to give only constructive criticism. Also, really important is a positive working environment where workers feel valued and trusted. A leader is involved in every decision. He consults always with staff, when someone runs into problems or needs to help. A good leader gives space to staff for presentation their ideas and opinions. Employees have their own responsibility, but when it comes to an important decision, its the leader who makes them. The most significant is the way you get people to feel that they are part of a team. It gives them a real sense of belonging and that, in turn, generates responsibility towards the organization. So youve got to give employees the space they need so they can take initiatives and really move things forward. Leadership is influenced by culture, tradition, previous work experiences and the society. Leadership is the process of influencing others to get the work done. It involves motivating, influencing and directing individuals towards attainment of long term organizational goals. A leader remains in the limelight. The success or failure in an organization is attributed to leader. Traditionally, the model for leadership in business has been the army. Managers and army officers give orders and their subordinates, the people working below them, carry them out. Generally, there exist some styles of leadership, for example:

Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk Autocratic The leader takes decisions without consulting with others. What the leader says is the law. The typical autocratic leader does not involve others in the decision making process. This type of leader might resort to force, manipulation or even threats to reach their goals. Unilateral decisions are only making by leader. Democratic- We are talking about a leadership style that has the characteristics of being democratic. The democratic style is one where we see everyone getting an equal vote - both the leader and the followers. The leader influences the others in making the decision. But, it can be problematic, when there is a wide range of opinions, because there is no clear way of reaching an equitable final decision. The leader has the final say. Laissez-faire The laissez faire style is sometimes described as a "hands off" leadership style, because the leader provides little or no direction to the followers. The characteristics of the laissez faire style include the followers, who have complete freedom to make decisions concerning the completion of their work, or ask questions the leader. The leader provides the followers with the materials they need to accomplish their goals and answers questions to the follower's questions. It works best when people are capable and motivated in making their own decisions. There is no requirement on central coordination for example in sharing resources across a range of different people and groups. Effective leader can resolve any problems quickly, can take care to involve the staff, always gives clear instruction, creates a positive working environment, and makes sure that your staff feels valued, does not set unrealistic targets, or develops talent among the staff.

2 Economics
2.1 TREE ECONOMIC ISSUES, OIL PRICE SHOCK IN THE 70s
In economics there are 3 economic issues to show how society allocates scarce resources between competing uses. There are 3 economic questions: WHAT?, HOW? and FOR WHOM TO PRODUCE? Oil is an important commodity in modern economies. Oil and its derivatives provide fuel for heating, transport, and machinery. From the beginning of the 20th century the use of oil increased steadily. The price of oil fell. In 1973-74 there was a rapid change. The main oil-producing nations belonged to OPEC (Organization of Petroleum Exporting Countries). OPEC decided in 1973 to raise the price. Although higher prices encourage consumers of oil to try to economize on its use. OPEC correctly forecasted that cutbacks in the quantity demanded would be small since most other nations were very dependent on oil and had few commodities available as potential substitutes for oil. It was very profitable for OPEC members. Oil prices are traditionally quoted in United States Dollar per barrel. Between 1973-74 the price of oil tripled (from $2,90 to $9 per barrel). In 1980 price of oil was $30 per barrel. The dramatic price increases of 1973-80 have become known as the OPEC oil price shocks, because they inflicted on the world economy which had previously been organized on the assumption of cheap oil prices. People respond to prices when the price of some commodity increases, consumer will try to use less of it but producers will want to sell more of it. 8

Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk HOW? - When the price of oil increased, chemical firms developed artificial substitutes for petroleum inputs to their production processes. Higher oil prices made the economy produce in a way that uses less oil. WHAT? Firm and households reduce their use of oil-intensive products. Households switch to gas-fired central heating and buy smaller cars. Designers produce smaller cars, architects contemplate solar energy. FOR WHOM? OPEC increased revenue was spent on goods produced in the industrialized Western nations. In contrast, oil-importing nations had to give up more of their own production in exchange for the oil imports that they required. When oil price raised, than raised the buying power of OPEC and reduced the buying power of oil-importing countries such as Germany and Japan. The world economy was producing more for OPEC and less for Germany and Japan. The OPEC oil price shocks example illustrates how society allocates scarce resources between competing uses. (A scare resource is one for which the demand at a zero price would exceed the available supply)

2.2 DEMAND, SUPPLY AND EQUILIBRIUM

People satisfy their necessities on the market of goods and services. The households are consumers and they present buyers on this market. They decide what to consume and in which quantity. They fill their aims and necessities. In such a manner households are motivated to go on the market of goods and services, because the main target of consumers is to maximize the satisfaction of their necessities. So demand is a quantity of some good which are buyers willing to buy at a certain price. It follows that demand is a dependence between demanded quantity of goods and services and their price.

E. G. Market of shoes:
Prices 100 50 20 0 Demanded quantity 0 100 300 1000

It means, that if the price of pair of shoes is 100, we assume that nobody will buy this shoes, because its too much. As the price of shoes decreases, the quantity demanded rises. And when a pair of shoes is free, all the actors on the market are interested in shoes. DEMAND CURVE

Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk

100 80 60 Price 40 20 0 0

A B
500 Demanded quantity 1000

Demand curve shows the relation between price and quantity demanded, holding other things constant ( the price of related goods, consumer income and consumer preferencies). Vertical axis presents prices of shoes in Euro and horizontal axis presents corresponding quantities demanded in million pairs per year. Demand curve has a negative slope, that means that larger quantities are demanded at lower prices. The point A shows, that 100 million pairs of shoes per year are demanded at a price of 50. The point B shows that 300 million pairs of shoes per year are demanded at a price of 20. Plotting all the points and joining them up, we obtain the demand curve. This curve and generally demand describe the behavior of buyers at every prices. The next subjects which act on the market of goods and services are producers, firms, entrepreneurs, who decide what they produce and in which amount. Supply is a complex of producers decisions about amount of goods and services at certain prices. In this case producers act as sellers, who offer goods. Supply expresses amount of goods, which are sellers willing to sell at a certain price. According to the law of supply, higher quantities of a product or service are supplied at a higher price. Those who produce goods and offer services are willing to supply more at higher prices because selling their wares at higher prices provides increased revenues. E. G. On a market of shoes:
Prices 0 20 50 100 Supplied quantity 0 100 300 1000

The supply is a complete description of the quantity that seller would like to sell at each and every possible price. For producing any goods producer have some costs therefore at a zero price, the producers are not motivated to produce and supply shoes because its expensive and unprofitable. Producers want to sell their products at the highest price. At higher prices it becomes increasingly lucrative to supply shoes and there is a corresponding increase in quantity of pairs that would be supplied. 10

Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk SUPPLY CURVE
120 100 80 60 40 20 0 0 200 400 600 800 1000 1200

Prices

Supplied quantity

The supply curve shows the relation between price and quantity supplied, which are producers willing to produce and sell, holding other things constant ( technology, input costs, government regulation). The higher is the price of good, the higher is the supplied quantity. EQUILIBRIUM If we transfer demand curve and supply curve into the one diagram, the point where these two curves cut across, it is called Market Equilibrium. It is a situation on the market, when the forces which act there are on a balance, and the final price and amount are equal with this price and amount at which the sellers are willing to sell and buyers are willing to buy. They can trade as much as they wish and there is no incentive for any further price changes. In real economic the point of equilibrium can be achieved rarely and only for short time.

This point presents satisfaction of each subject on the market. Its appropriate for producers, but it doesnt mean that they dont want to sell goods at a higher price. They are content that they can sell all goods which are produced at some price. And its appropriate for buyers, even though they would buy at a lower price, but they can buy all products at acceptable prices. If the price is lower than equilibrium price, demanded quantity exceeds supplied quantity, there are not enough goods on the market, and not everyone will be content. This is called excessive demand. But producers dont want to produce at this low price level, therefore if consumers want to satisfy their necessities, they have to pay more, and producers raised the price till the level of equilibrium price. And analog, when price is higher than equilibrium, supplied quantity exceed demanded, and producers have redundant supplies. And this is excessive supply. In this case there is surplus of goods, and if they want to sell it, they have to mark down, because its too high price for buyers. It activates decreasing supplied quantity and increasing demanded quantity. 11

Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk Conclusion: The market price is not always equilibrium price. And therefore there is excessive demand or excessive supply and depends on the level of price. Market price is optimal but actual price which develops from relation between demand and supply.

2.3 The role of the market in the society

Markets bring together buyers and sellers of goods and services. In some cases, such as a local fruit stall, buyers and sellers meet physically. In other cases, such as the stock market, business can be transacted over the telephone or internet. Generally speaking, a market is a shorthand expression for the process by which households decision about consumption of alternative goods, firms decision about what and how to produce, and workers decision about how and for whom to work are all reconciled by adjustment of prices. Prices of goods and resources (such as labour, machinery and land) adjust to ensure that scarce resources are used to produce those goods and services that society demands. Much of economics is devoted to the study of how markets and prices enable society to solve the problems of what, how, and for whom to produce. For better understanding of how markets and prices enable society to solve those problems, I have chosen one example. Suppose, student wants to buy a lunch. He goes to school canteen because he cant spend money in restaurant because of higher prices. The question for whom is in restaurant solved with its higher prices because they fit to people with better paid jobs but not to students. From the sellers viewpoint, the restaurant owner has to pay skilled workforce like chef, unskilled waiters and rent. So he has to put higher prices of menus if he wants to make a profit. He has to solve questions how and what to produce and prices are guiding his decision and students too. If the prices of menus in the restaurant are lower, the students will eat there but the restaurant owner will have to pay lower wages or move to other place. It might lower his profit or he might lose the workforce. There were mentioned several types of market: market for lunches, labour market, market for rented buildings As we could see adjustments in prices encourage parts of society to make every day a decision.

2.4 Production possibility frontier

The law of scarcity states that goods are scarce because there are not enough resources to produce all the goods that people want to consume. Each economy has to decide how to cope with limited resources. Imagine that only two goods are produced in economy - guns and butter. We have two extreme possibilities. Point A shows the extreme when all butters and no guns are produce, while point B shows the opposite extreme. The curve between A and B is called PPF. PPF is a tool of hypothetical economy. Is a concave curve, which shows the maximum combination of output that economy can produce using all available resources. Each point on this curve mans that economy produce efficiently. Points (G) which lie inside the frontier are inefficient because society is wasting resources. It is feasible combination of goods and we can produce more of one good without sacrificing output of the other good. Economy has spare resources which can use but it doesnt use them. Points (H) that lie outside the PPF is called unattainable. It is impossible to produce this output combination because economy has not so much resources. 12

Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk The frontier represents a trade- off. By transferring workers from one industry to the other economy can produce more of one good, only when produces less of the other good. The PPF is closely related to the law of diminishing returns. In each industry, the more workers there are, the greater is the total output of the good produced. But each additional worker adds less to total industry output than the previous one. The reason is that : Workers have at disposal a fixed total amount of facilities. The first worker has sole use of all these facilities. When a second or third worker is added, the two workers must share the facilities. Societys problem is therefore to make a choice between the different points that lie on the PPF. It might select the point A with no guns or the point C with a more balanced mixture of butter and guns. Depending on societys preferences between butter and guns, it might choose any point on the PPF. The relation between PPF and economic growth is very close. The economy can produce capital goods and consumer goods. For example food and computer. The more capital goods economy produces, the bigger economic growth is reached. Economic growth is represented by the moving the PPF up. Production possibility frontier A

Butter output

Guns output

Economic growth

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Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk

Consumer goods - food

Capital goods computer

2.5 Role of government in the life of society

In every society governments provides such services as national defense, police, firefighting services, administration of justice, education system and medical services. After governments make transfer payments. These are payment made to individuals without requiring the provision of any services in return. These are for example : social security, retirement, pension and unemployment benefits. So the largest parts of the government expenditures create the provision of goods and services for police, schools and transfer payments. These expenditures are financed chiefly from taxes and from government borrowing. Same country the government spending is large so it needs large taxes revenues. In contrast the less tax revenue means smaller government sector. Government spend part of their revenues on particular goods and services, so hey directly affect what is produce. After government affect for whom output is produced through their tax and transfer payments. By taxing the rich making transfers to the poor persons. So the government ensures that the poor are allocated more of what is produce and the rich get less. The government also affect how goods are produced, for example through the regulations it imposes. The scale of government activities in the modern economy is highly controversial. Same governments take a large share others a smaller share. Different shares affect the questions what, how and for whom to produces. Some experts believe the large government sector makes the economy inefficient, reducing the number of produced goods and eventually allocated to consumers. The high tax rates reduce the incentive to work. In the first possibility, if the large part of earnings goes to the government, we prefer work fewer hours and spend more time to other activities. Or in the second possibility, we work more, so that we have work for a large after- tax income. So if the taxes are high some people work more others less. After the government affect how much is produced by the economy. The role of government is in the central in the process by which society allocates its scarce resources.

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Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk

3 English for the financial sector

3.1 CENTRAL BANKING
A central bank, reserve bank or monetary authority, is an entity responsible for the monetary policy of its country or of a group of member states, such as the European Union. Its primary responsibility is to maintain the stability of the national currency and money supply. The aim of monetary policy is to keep inflation low & stable. Controlling the rate of inflation, because of maintaining the stability, involves changing interest rates. The aim is to protect the value of the currency. When the bank is setting interest rates, it is trying to keep demand in the economy in line with the long-term ability of an economy to supply goods & service through the labour (people employed) and capital (machinery, plant and equipment) in the economy. Generally, when interest rate: rises: the demand will tend to be reduced, falls: the level of demand rises. When the central bank sets the base rate for lending to commercial banks, it affects the whole structure of interest rates in a country. Central bank also provides financial services to the government and to the banking system. In some countries central bank supervises and regulates the banking system and whole financial sector it collects financial data, publishes statistics, provides financial information for customers, prints and issues currency. Some central banks also participate in clearing cheques and setting debts among commercial banks. Another activities that central bank does always: decides the countrys minimum interest rate, keeps minimum deposits of commercial banks reserves, manage reserves of gold and foreign currencies, lends money to banks in difficulty (acting as a bailout = lender of last resort to the banking sector during times of financial crisis)

Central bank never: decides all of countrys interest rates, issue securities for companies, lends money to small businesses, manages the assets of wealthy individuals.

Position and independence ratio of central banks is different in countries all over the world. Efficient independence of Central bank depends on: Financial independence managing its own budget (main aim is assuring currency stability), Institutional independence CB is forbidden to accept or require directions from government or another institution, Functional independence - full responsibility for currency stability, Personal independence members of executive body could not be called off by government.

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3.2 Bonds
Bonds are interest-paying securities issued by companies that need to borrow or we can say that bond is a promise of company to pay back your original investment at a maturity date and that company will pay you interest payments at regular intervals, too. So bonds are something as loans to local and national governments and to large companies. The holders of bonds generally receive fixed interest payments , once or twice a year and they get back their money, known as the principal, on the maturity date this is the date when the loan ends. Governments issue bonds to raise money. Companies issue bonds known as corporate bonds. More and more companies now issue own bonds rather than borrow from banks, because this is often cheaper. Borrowers, the companies issuing bonds, are given credit ratings by credit agencies. So they are rated according to their ability to repay the loan to the bondholders. The highest grade AAA (or Aaa) means that there is almost no risk that the borrower will default, so there is almost no risk that fail to pay the principal or pay interest. This highest grade is given only to top-quality institutions with minimal credit risk. Lower grades BBB, C, Baa etc. mean an increasing risk of the borrower becoming insolvent, so they are unable to pay interest or repay the principal. Bond is a tradeable instrument, we can buy and sell it during its life. Its value will tend to rise and fall as interest rate changes. If interest rates rise, new borrowers have to pay a higher rate, existing bonds lose value. If interest rate fall, new borrowers pay lower rate, the value of existing bonds rises. So the yield of a bond depends on its purchase price as well as its coupon or interest rate. Other types of bonds: Convertible bonds or convertibles are bonds that the owner can later change into shares. When interest rates are higher, some companies issue these convertible bonds. These bonds pay lower interest rates than ordinary bonds, because the buyer gets the change of making a profit with the convertible option. Zero coupon bonds are bonds that pay no interest, but are sold at a big discount on their par value, which is 100%, and repaid at 100% at maturity. Because they pay no interest, their owners dont receive money every year, instead they make a capital gain at maturity. Junk bonds are bonds with a low credit rating and high chance of default, but they pay a high interest rate. Some of these are known as fallen angels it means bonds of companies that were previously in a good financial situation, while other are issued to finance leveraged buyouts. Municipal bond or muni is a bond issued by a state, city or other local government, or their agencies. These bonds may be generated obligations of the issuer or secured by specified revenues. Interest income received by holders of munical bonds is often exempt from the federal income tax and from the income tax of the state in which they are issued. Municipal bonds issued for certain purposes may not be tax exempt.

3.3 Stocks and shares

Stocks and shares are certificates representing part ownership of a company. The people who own these certificates are called stockholders and shareholders. The places where the stocks and shares of companies are bought and sold are called stock markets or stock exchanges.

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Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk If a company has only one type of share, we call them ordinary shares. Some companies also have preference shares whose holders receive a fixed dividend (e.g. 6% of the shares nominal value) that must be paid before holders of ordinary shares receive a dividend. Holders of preference shares have more chance of getting some of their capital back if a company goes bankrupt stops trading because its unable to pay its debts. Buying and selling shares: After newly issued shares have been sold for the first time (usually by investment banks) this is called the primary market. Then shares can be repeatedly traded at the stock Exchange on which the company is listed, what is called the secondary market. Categories of stocks and shares: 1. 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 2. growth stocks stocks that are expected to regularly rise in value. Most technology companies are growth stocks and dont pay dividends, so the shareholders equity or owners equity increases. This causes the stock price to rise. 3. income stocks stocks that have a history of paying consistently high dividends 4. defensive stocks stocks that provide a regular dividend and stable earnings, but whose value is not expected to rise or fall very much 5. value stocks stocks that investors believe are currently trading for less than they are worth

3.4 MERGERS & ACQUISITION

The Main Idea One plus one makes three: this equation is the special alchemy of a merger or an acquisition. The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. Two companies together are more valuable than two separate companies - at least, that's the reasoning behind M&A. Distinction between Mergers and Acquisitions These two terms are often used like they were synonyms but there is a slight difference between them. When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded. A merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals." Both companies' stocks are surrendered and new company stock is issued in its place. (For example, Daimler-Benz and Chrysler merged together, and a new company, DaimlerChrysler, was created.) Benefits and contributions Staff reduction Economies of scale Acquiring new technologies Improved market reach and industry visibility

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3.5 Foreign Exchange aka FOREX

The foreign exchange market trades currencies. It lets banks and other institutions easily buy and sell currencies. The purpose of the foreign exchange market is to help international trade and investment. A foreign exchange market helps businesses convert one currency to another. For example, it permits a U.S. business to import European goods and pay Euros, even though the business's income is in U.S. dollars. The foreign exchange market is the largest and most liquid financial market in the world. Traders include large banks, central banks, currency speculators, corporations, governments, and other financial institutions. The average daily volume in the global foreign exchange and related markets is continuously growing. Of the $3.98 trillion daily global turnover, trading in London accounted for around $1.36 trillion, or 34.1% of the total, making London by far the global centre for foreign exchange. In second and third places respectively, trading in New York accounted for 16.6%, and Tokyo accounted for 6.0%. In addition to "traditional" turnover, $2.1 trillion was traded in derivatives. In a typical foreign exchange transaction a party purchases a quantity of one currency by paying a quantity of another currency. The modern foreign exchange market started forming during the 1970s when countries gradually switched to floating exchange rates from the previous exchange rate regime. This means that exchange rates are since then adjustable. But there was still some influence from banks side to intervene in the markets. This system brings to some currencies disadvantage due to inflation and economic situation in particular country. Such a problem could be resolved if different countries decide to introduce single currency system. Example is European Union. 16 European countries accepted mutual currency known as EURO.

3.6 BANKING PRODUCTS AND SERVICES

Each bank offers a number of products and services that can be used by clients- individuals and companies. Main products, that offer banks are accounts, loans and debit or credit cards. We differ two types of accounts: a current account and a saving account. A current account is an account which allows customers to take out or withdraw money with no restriction. Money in the account does not usually earn a high rate of ineterest, the bank doesnt pay much for borrowing money. However, many people also have a saving acccount or deposit 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. Nearly all customers have a debit card allowing them to make withdrawals and do other transactions at cash dispensers (ATM). Most customers have a credit card which can be used for buying goods and services as well as for borrowing money. In some countries, people pay bills with cheques. In other countries , banks dont issue chequebooks and people pay bills by bank transfer. These include standing ordes, which are used to pay regular fixed sums of money, and direct debits, which are used when the amount and payment date varies. Commercial 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 to people who want to buy a place to live. These are long-term loans on which the property acts as collateral or a guarantee for 18

Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk the bank. If the borrower doesnt repay the mortgage, the bank can repossess the house of flat- the bank takes it back from the buyer, and sells it. Banks exchange foreign currency for people going abroad, and sell travellerss cheques which are protected against loss or theft. They also offer advice about invesments and private pension plans- saving money for when you retire from work. Increasingly, banks also try to sell insurance products to their customers. Banks offer clients to use online or internet banking. Internet banking is very popular, because clients have access to account 24 hours a day, 7 days a week. With Internet banking clients can: Check their balance whenever they want Pay bills withhout writing cheques or queuing at the bank Transfer money between current and saving account Print a statement at any time Set up, change and delete standing orders View and cancel direct debits Apply for a loan Aply for a new or increased overdraft Order foreign currency or travellers cheques

3.7 The organization of the financial industry

1. Banks a. commercial receive customers deposits ( money you put in the bank ) and make loans ( an amount of money borrowed from a bank for a fixed period ). They offer overdraft or mortgages. b. private manage the assets of wealthy individuals . c. investment advise and rise money for companies, such as insurance companies, investment funds and pension funds, sell and trade financial products, arrange mortgages, issue stocks and bonds and arrange or fight off a takeover bid. 2. Investment companies invest customers money and the money of lots of small investors in funds and other companies. 3. Money market individuals and companies can borrow and invest in the short-term. 4. Currency market individuals and companies can buy and sell foreign currency. Currency is the money used in a particular country. 5. Futures and derivatives market financial instruments are traded. 6. Insurance companies offer life insurance, provide pensions and give financial advice to other companies. 7. Inter-bank clearing system financial institutions settle credits and debits among themselves. 8. Regulatory authorities ensure that financial institutions comply with laws and regulations. Twenty-five years ago the financial industry in most countries had two characteristics : 1) All the banks and financial institutions in that country were owned in that country, and there were few international links, so they were national banks belonging to that country. 2) Financial institutions were specialized. Such as institutions that lent to people who wanted to borrow to buy houses-that means arranging mortgages- were called building societies. Other specialized institutions like retail banks where individuals and companies kept 19

Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk bank deposits and which made loans, insurance companies, investment banks which dealt with big companies. Now many banks have become universal banks. Lots of institutions do all the things like insurance, mortgages, advice and raising capital for companies. And the other great change is that so many of the financial institutions are now international. That means plenty of small countries around the world and all their financial institutions are now owned by foreigners.

3.8 Financing international trade

International trade is exchange of capital, goods and services. In most countries it represents significant share of gross domestic product. Without international trade, nations would be limited just to the sources produced in their own country. There are two common ways of financing foreign trade, by: Bill of exchange and Letter of credit Bill of exchange is an order written by an exporter instructing an importer to pay a specified amount of money at a specified time. A bill of exchange requires three parties: the drawer the drawee and the payee Drawer (intermediate) is the party that issues a bill of exchange. He gives the order to the drawee. Drawee is the party upon whom the bill is drawn (buyer). Payee (exporter) is the party to whom the bill is payable. If payee uses bank draft, the buyer pay to the bank which pays money to payee. If exporter uses trade draft, drawee pays money directly to him. Bill is generally payable 30, 60 or 90 days from the bill of lading date. The bill of lading is document which confirms, that the goods have been received for shipment, describing them and giving details of where they are going. Drawer can also endorse bill of exchange to the bank before it matures. Bank guarantees to pay the bill if the buyer doesnt and exporter can send it at a discount in the financial markets. It means that he gets most of the money immediately and doesnt need to wait for the buyer to pay the bill. Discount represents the interest the buyer could have received on their money until the bills maturity date. Bills of exchange are not often used nowadays. Another way, how to finance international trade is use of Letter of credit. Letter of credit is a method of payment for goods in which the buyers bank guarantees to pay a specified amount of money to the sellers on presentation of specific documents, before a certain date and according to the International Chamber of Commerce rules. Letter of credit requires four parties: the issuing bank the advising (confirming) bank the buyer and the seller 20

Vypracovan tmy na odborn skku z cudzieho jazyka anglick jazyk As first, the applicant (the buyer) completes a contract with seller. Then buyer fills in letter of credit application form and sends it to his (issuing) bank for approval. The issuing bank approves the application form and sends the letter of credit details to the sellers bank (the advising bank). The advising bank authenticates the letter of credit and sends the details to seller. The seller checks the details of the letter of credit and if something is wrong, sends it to the buyer to correct it. 1. CONTRACT Seller 4. Advice of letter of credit Buyer 2. Letter of credit application

Advising bank 3. L/C

Issuing bank

If everything is OK, seller ships the goods. Then seller presents the documents to his advising bank, which examines them against the details and the International Chamber of Commerce rules. The advising bank sends the documents to the issuing bank for payment or acceptance. If documents are OK, buyer pays to issuing bank (and collects the goods). And finally issuing bank send money for goods to advising bank, which pays the seller and notifies him, that the payment has been made.

Seller 5. Goods 6. Documents

Buyer 8. Pay immeditely or promise to pay in future. Issuing bank 9. Money

10. Payment 7. Documents

Advising bank

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