Equally important is preparation of cash budget. This analysis forces the businessman to think ahead by estimating firms income and expenses. It will also warn you about possible deficits that could require additional funding. By carefully projecting your financial needs, you can avoid some of crises that would otherwise arise from shortage of funds in future. A sound finance for long term will help you to make profit.
It is essential to distinguish few different concepts of profit. Profit in everyday life means advantage or good obtained from something. Besides it can mean money gained in business. Profit for accountant means simply difference between total receipts and total costs. For economist profit has much wider meaning. It is revenue derived from use of resources minus opportunity cost of using those resources. The economist attaches cost to use of retained earnings, since they could have yielded revenues if used outside business. Besides economist would value the time of owner-managers in accordance with what they could have earned outside business.
VIII. Read the text about securities. Write a suitable word to fill each of the gaps.
bond convertible portfolio unit
gilts index preference value
inflation tend price
prices redeemable securities
Most investors seek, above all, security. They even call their investments ______. By building up a _______ of investments. You can be pretty confident that, in the long run, the _______ of your shares will stay a little ahead of _______. Many small investors pay their money to a _______ trust, which can invest more securely and profitably than the individuals could if they acted separately.
Every stock exchange has its _______, to show share _______ are moving from day to day, in London, the Financial Times-Stock Exchange 100-share index (known as the FT-SE 100 for short), which is pronounced Footsie, calculates the average _______ of shares of 100 major companies. This index started at 100 on 1 January 1984.
Instead of buying shares in a business, you may prefer simply to ______ money to it. You receive in return a certificate, called a ______. The safest business to lend money to is the Government. UK Government bonds are called ______ (because they are printed on gilt-edged paper). If you lend to a company, you may receive bonds or _______ shares. ______ preference shares give the holder the right to convert them into ordinary shares at a later date; ______ preference shares give the company the right to buy them back or redeem them.
IX. A businessman gives his partner advice on his investments in a number of ways. Perhaps the most obvious is when he uses the verb advise:
I would strongly advise you not to go playing the market. The pattern here is:
to advise (someone) to do (something).
You can also use the noun advice:
Let me give you some advice,
Let me give you a piece of advice.
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But there are many other ways of giving advice to people:
I suggest that you (do) ,
If I were you, Id (do) ,
Why not (do) ,
How about (doing) ,
What about (doing) .
X. You meet a friend who has some money to invest. Give him some advice. Use the phrases listed in the tasks above.
Unit 3.2. Brands and Advertising
Text 1
Brand Names
Consumers always have incomplete information about product availability, quality, and alternative prices. Such imperfect information leads them to rely on brand names, which lessen the costs of acquiring product information. By relying on brand names and the company reputations associated with them, consumers can make reasonable purchases without searching or investigating products each time they buy.
Many economists have criticized the fact that consumers put so much reliance on brand names. The problem is that this consumer reliance gives companies with established brand names market power over the price they can charge. When companies differentiate their products with unique brand names and associated advertising and promotional campaigns, they can charge more than others for truly identical products. Brand names lead consumers to make what these economists consider to be artificial distinctions between different products. Companies with respected brand names, therefore, can increase prices without losing significant sales.
Because consumers rely on and pay for reputations, companies have incentives to establish reputations by maintaining and improving the quality of their products. This incentive would be lost if all companies were required by law to sell indistinguishable products. If consumers could not identify the companies that produced the products they bought, individual companies would have no incentive to improve the quality of their products. In fact, each company would have an incentive to decrease the quality of its products. Economist Marshall Goldman has pointed out that this is exactly what occurred in the Soviet Union when brand names were eliminated after the 1917 communist revolution. That is why firms in the Soviet Union were required to identify their output with production marks. Without brand names consumers do not know from current purchase experiences which products to buy and which ones not to buy in the future.
This mechanism of repeated purchase, where good past performance and a good reputation are rewarded with future profitable sales, and where poor performance is punished. As a result, companies with superior reputations, representing good past performance have something to loose if they perform poorly.
Because companies with valuable brand names that fail to perform have more to lose than companies without valuable brand names, consumers who buy brand name products are paying for something. They are buying the added assurancethat the brand name company took necessary measures to protect its reputation for quality.
Finally, it is important to recognize that brand names operate in marketplaces where the government sets product quality standards. The obvious question is: why not rely on government standards to assure company performance? There are two main answers. First, government standards often cannot easily show performance. For example, although the government may grade agricultural commodities, such as vegetables, for colour, size, they cannot define and grade characteristics such as taste that are quite important to consumers. Second, government agencies that rate and assure quality are far from perfect. To assure the quality of the products they buy, consumers are right to rely not just on government standards, but also on brand names.
Text-study
