Nastavne jedinice za kolegije Poslovni engleski I.

i Poslovni
engleski II., za studije Računovodsvo i financije i
Trgovinsko poslovanje

Autor: Gjurgjica Mimica Bezjak, prof.

Recenzenti: mr. sc. Jasenka Bubić

mr. sc. Jasmina Rogulj

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 Zahvala

Zahvaljujem mr. sc. Jasenki Bubić koja mi je svojim stručnim savjetima

svesrdno pomogla osmisliti ove nastavne jedinice.

Autorica

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1. ACCOUNTING

Key vocabulary : Financial accounts give us information about financial

performance of a company. The balance sheet shows
company`s assets and capital + liabilities. The debit is recorded
on the right side and the credit is recorded on the left side.
The total of assets must equal the total of liabilities.
The balance sheet shows the liquidity of the company and the
current ratio between assets and liabilities.

WHAT IS ACCOUNTING ?

Accounting includes describing, measuring, recording, interpreting economic activities

and creating a data base for different users necessary for making business decisions.

Bookkeeping refers to accurate recording of economic changes into appropriate account

books in currency unit terms.

Accounting records economic changes based on some categories, such as :

1. assets
2. liabilities
3. capital
4. expenditures
5. revenues

1. Assets represent the resource controlled by the entrepreneur achieved by past activities
and expected to receive inflow by future economic profits.

2. Liabilities are the entrepreneur`s present pecuniary obligations, resulting from past
transactions and past events. An outflow from the resource is expected for their settling.

3. Capital is the entrepreneur`s own source of securing funds and represents the
remaining assets after all obligations have been settled.

4. Expenditures represent the decrease of economic gain in an accounting period in the

form of cash outflow, assets reduction or creation of obligations. That results in capital
decrease with the exception of that connected with the distribution to capital sharers.

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5. Revenue represents the increase of economic gain in an accounting period in the form
of cash inflow, assets increase or reduction of obligations, resulting in capital increase,
with the exception of that connected with payments by capital sharers.

All business transactions are recorded on accounts i.e. the debit is recorded on the
right side, and the credit is recorded on the left side.

There are four major types of accounts each with a debit and a credit side .
The changes of the basic categories mentioned above are recorded on them :

1. Assets accounts
2. Capital and liabilities accounts
3. Expenditures accounts
4. Revenue accounts

The transactions are recorded as follows :

LEFT SIDE RIGHT SIDE

1. Assets : increase decrease

2. Liabilities decrease increase

3. Expenses increase

4. Revenue increase

5. Capital increase decrease

WHAT IS THE PURPOSE OF A BALANCE SHEET ?

A balance sheet shows the financial position of the company and tells the creditors
whether the operation is capable of paying its current and future obligations.
The balance reflects the CURRENT RATIO between the assets and liabilities, the

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RELATIONSHIP between financing by owners and creditors, the company`s
LIQUIDITY ( the ability of the operation to convert assets to cash ) as well as the
COMPARISON between different periods.

Its disadvantage is that it often doesn`t reflect the real value of the property, as it`s
based on cost principle only and doesn`t take in consideration other elements ( i.e.
clients` loyalty ). It`s also limited due to its static nature and reflects the situation
on the balance sheet date which may alter soon thereafter.

LANGUAGE FOCUS : The Passive

Present simple

Read the examples. Complete the grammar rules and answer the questions .

All business transactions are recorded on accounts.

It is based on cost principles only.

The debit is recorded on the right side, the credit is recorded on the left side.

Write passive or active in the gaps :

Use the .................................... form when the person that does the action is

important.

Use the .............................. .form when the person that does the action isn`t

important or when we don`t know who does the action.

How do we make questions in the passive?

When do we use by after the verb ?

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Practice

1. Complete the description of an annual report. Use the Present Simple passive form
of the verbs in brackets.

An annual report -------------------- ( prepare ) by the management of the company

whose stock -------------------- ( trade ) publicly. In the report the company`s

financial affairs --------------------- ( discuss ). An annual report performs a useful

function in a free market system as necessary information ( transmit ) from the

company to its shareholders and investing public through it.

Although the report --------------------- ( address ) to shareholders, it may well

------------------------ ( find useful ) by other people who have a stake

in the business - stakeholders such as employees, suppliers, customers

and lenders .

2. Chose the passive or the active form of the verbs in brackets.

What ------------------ an analyst ( do)? Well, he or she -----------------( analyse)

the financial results of companies that --------------------- ( list ) on the Stock

Exchange. By ˝ listed ˝ we mean that these are companies in which you and I can

invest, they are open to the public and of course , they are therefore also open to

the professional investors and the managers of investment funds. Today most analyst

------------------------ ( employ ) either by banks or by brokerage firms which

------------------------- ( specialise ) in buying and selling different types of financial

investment.

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Here is an example of the sort of work that an analyst ---------------------- ( produce )

for the sector he or she ---------------------- ( specialise ) in.

Bibliography :

Graham Tullis & Tonya Trappe : New Insights Into Business , Longman 2005

Zakon o računovodstvu, Narodne novine br 109/2007.

Mike Macfarlane : International Express Pre-Intermediate, Oxford University Press,

2007
Sakar, V.: Financijski izvještaji. INTEGRA seminar 15. 2. 2006. E 29

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2. ANNUAL REPORTS

Key vocabulary: The profit represents income minus expenditures.

Income statement shows income and expenditures.
The cash flow statement shows whether the
company is generating or consuming cash. The Balance sheet
shows what the company has and what it owes.
Auditors report - a summary by independent public accountants

What is an annual report ?

An annual report is prepared by the management of a company whose stock is traded

publicly. It discusses the company`s financial affairs. An annual report performs a useful
function in a free market system, transmitting information from the company to its
shareholders and investing public. Although the report is addressed to shareholders, other
people who have a stake in the business - stakeholders such as employees, suppliers,
customers, and lenders - will find it informative.

MTS Employee Supplement to the 1994 Annual Report

There are several different statements included in a company`s Annual Report available
to its shareholders. The most important are the profit and loss account ( in the USA called
an Income statement ), the balance sheet and the cash flow statement.

A. INCOME STATEMENT shows income and expenditures.

B. THE BALANCE SHEET shows what the company has, and what it owes at the end
of the year.

C. THE CASH FLOW STATEMENT shows whether the company is generating or

consuming cash.

A. THE INCOME STATEMENT shows :

1. Total income
2. Expenditures
3. Profit before tax
4. Profit tax
5. Net profit for the year

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B. THE BALANCE SHEET shows :

1. ASSETS

1.1 Intangible assets

1.2 Current assets ( inventories, receivables, claims, current financial assets, cash
and cash equivalents )

1.3. Prepaid expenses and accrued income

1.4 Total assets

2. CAPITAL AND LIABILITIES

2.1 Shareholders` Equity ( subscribed share capital, reserves, retained earnings, profit
for the year )

2.2 Long term loan liabilities

2.3 Current liabilities ( Trade payables, short term portions of long term loans, other
short term liabilities )

2.4. Deferred income

C. CASH FLOW STATEMENT shows :

3.1 Cash flow from operating activities ( cash receipts , cash payments to suppliers,
cash payments to employees, cash payments for taxes and contributions, cash
payments for interest, cash payments for investments etc )
Net cash from operating activities

3.2 Cash flow from investment activities ( Cash payments for supply of long term
tangible and intangible assets)
Net cash used in investment activities

3.3. Cash flow from financial activities ( cash receipts from increase in capital and
reserves, cash receipts from foreign exchange differences, cash receipts from
interests on term deposits of related parties, cash receipts from other invest-
ments, cash payments for loan repayments )
Net cash used in financial activities

3.4 Net increase in cash and cash equivalents

Cash flow statement can also indicate negative cash flow.

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Other elements included in Annual Reports are :

D. AUDITOR`S REPORT - a summary by independent public accountants showing

whether the financial statements are complete, reliable and accurate.

E. REPORT OF MANAGEMENT usually from the President of the board who takes
responsibility for the validity of the financial information and states that the report
complies with legal requirements.

F. SELECTED FINANCIAL DATA - a summary of the company`s financial

condition and performance over five years including gross profit and net income.

G. NOTES

VOCABULARY PRACTICE

Match words from 1 - 6 with their definitions from a - f .

1. Annual report a. A statement showing income less expenditure

2. Current liabilities b. People who own a company`s shares

3. The Profit and Loss account c. Summary by independent public accountants

4. Auditor`s report d. Present debts

5. Shareholders e. The President of the Board of directors,

responsible for all operations

6. A Chief Executive Officer - CEO f. A report prepared by the management of a

company discussing its financial affairs and
business results.

LANGUAGE FOCUS : RELATIVE PRONOUNS

Read the examples and complete the grammar rules :

There are several different statements that companies include in their Annual Reports,
which shareholders can legally expect to see.

An annual report is prepared by the management of a company whose stock is traded

publicly.
A CEO is the person in the company who has the most power and authority.

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We use relative pronouns which, that , who, whose to give additional information about
Somebody or something already mentioned.
___________ is used only for people.

___________ is used only for things.

___________ is used for both people and things.

___________ is used to denote possession.

PRACTICE - Complete the text with an appropriate relative pronoun.

Sammy Moreno has been appointed Human Resources Director for Europe and takes

over from Rosa Wasserman ________ retires at the end of April. Sammy, _______

______ career has included key strategic assignments in both Latin America and Asia,

doesn`t underestimate the challenges _________ lie ahead. " This is a difficult time for

organisations like ours _________ are working to consolidate positions on the European

market", he says. "The new regulations and legislation ______ have been introduced

recently, will complicate my tasks ", says Sammy, _________ responsibilities will

include providing policies, assistance and guidelines to regional HR directors.

Bibliography

Tonya Trappe & Graham Tullis : Intelligent Business - Coursebook, Intermediate,

Pearson-Longman, 2008.

Graham Tullis & Tonya Trappe : New Insight into Business, Student`s book, Longman
2004.

Mark Powel , Ron Martinez, Rosi Jillett : New Business Matters - Upper intermediate,
Coursebook, Thomson,2004.

Ian MacKenzie : English for the Financial Sector, Student`s book, Cambridge University
Press, 2008.

Sakar, V., dipl.oecc.: Financijski izvještaji, Integra seminar od 15.02.2006.

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3. RATIO ANALYSIS

Key vocabulary : A ratio analysis represents a comparison of figures appearing in a

financial statement. A ratio is obtained by dividing one figure by
the other. Ratios must be observed considering certain standards.
Ratios are used by managers, creditors and investors to evaluate
the situation.
There are Liquidity, Solvency, Activity. Profitability and
Operating ratios.

In order to be able to interpret and understand the facts stated in a financial statement we
need a deeper analysis called a ratio analysis.

The ratio analysis is a comparison of the facts and data reported in the financial
statement.
A ratio expresses the relationship between two figures and is computed by dividing one
figure by the other figure. New information is thus generated by placing two figures into
relation with each other.

Therefore a ratio analysis goes beyond the figures reported in a financial statement as it
gives them meaning which enables us to evaluate different aspects of a financial
situation.
A ratio analysis provides us with answers to some fundamental questions about the
business :

- Are the profits reasonably satisfactory ?

- Is the level of debt acceptable ?

- Is the use of stock adequate ?

- Are claims on customers reasonable ? Do they come on time?

Ratios in themselves are neutral, they only express numerical relationships between the
related figures.
In order to assess whether a computed ratio is acceptable or not for a specific situation it
must be compared to some standard.

There are three kinds of standards :

1. The past ratios

2. Industry averages ( available from published sources )

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3. Budget ratios

Users of Ratio Analyses

The users of Ratio Analyses are as follows :

1. Managers - to assess effectiveness and efficiency of their operations

2. Creditors - to evaluate the solvency and to assess the risk of future loans

3. Investors - to evaluate the performance of the operations and establish the dividend
pay out ratio ( dividends paid / earnings )

Classes of ratios

Ratios are classified by the type of information they provide :

1. Liquidity

2. Solvency

3. Activity

4. Profitability

5. Operating

Creditors focus on solvency, profitability and liquidity ratios.

Investors and owners highlight the profitability ratio.

Managers are interested most in operating ratios but also in activity ratios.

Operating ratios are finally important for all stated groups.

Limitations of the Ratio Analysis

Although indispensable to owners, creditors and management in evaluating the financial

conditions and operations, ratios are only indicators, not solutions to problems and they
can`t show exactly where the problem lies. If they deviate from past, budgeted or
industry ratios they only indicate there may exist a problem, so more research into the
nature of the problem is necessary. The insight is much better if more than one indicator
is taken in consideration.

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LANGUAGE FOCUS - COLLOCATIONS

Collocations are words that very often go together.

Look at the groups of words. Cross out the noun that does not go with the verb in each
group.

1. launch : a satellite, a rocket, a budget, a new product

2. set up : a satellite, a company, a joint venture, an organisation

3. raise : money, capital, the price, a rocket

4. make : money, a profit, an investment, a cost

5. take : an elevator, a risk, an investment, a decision

Now use an appropriate verb and noun from the exercise above to paraphrase the
sentence:

1. They have just put something new on the market with great success.

__________________________________________________________

2. We`ll try to borrow money to finance a new venture.

____________________________________________________________

3. Young people often don`t hesitate to do something that is dangerous and could

have bad results in order to succeed.

_______________________________________________________________

4. They have made an agreement with another company to work together on a

business activity.

_______________________________________________________________________

5. You have to put money into a business activity if you want to make a profit later.

________________________________________________________________________

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BIBLIOGRAPHY

Christine Johnson : Intelligent Business Coursebook , Pre-Intermediate, Pearson-

Longman, 2008.

Sakar, V.: Financijski izvještaji, Integra seminar, 15.02. 2006.

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4. BANKING

Key vocabulary :

A bank is a financial institution licensed by a government. Its primary activities include

borrowing and lending money. Many other financial activities were allowed over time.
For example banks are important players in financial markets and offer financial
services such as investment funds.

History
The first state deposit bank, Banco di San Giorgio (Bank of St. George), was founded in
1407 at Genoa, Italy.

Origin of the word

The name bank derives from the Italian word banco "desk/bench", used during the
Renaissance by Florentine bankers, who used to make their transactions above a desk
covered by a green tablecloth. However, there are traces of banking activity even in
ancient times.

In fact, the word traces its origins back to the Ancient Roman Empire, where
moneylenders would set up their stalls in the middle of enclosed courtyards called
macella on a long bench called a bancu, from which the words banco and bank are
derived. As a moneychanger, the merchant at the bancu did not so much invest money as
merely convert the foreign currency into the only legal tender in Rome—that of the
Imperial Mint.

The earliest evidence of money-changing activity is depicted on a silver drachma coin

from ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350–325
BC, presented in the British Museum in London. The coin shows a banker's table
(trapeza) laden with coins, a pun on the name of the city.

In fact, even today in Modern Greek the word Trapeza (Τράπεζα) means both a table and
a bank.

Traditional banking activities

Banks act as payment agents by conducting checking or current accounts for customers,
paying cheques drawn by customers on the bank, and collecting cheques deposited to
customers' current accounts. Banks also enable customer payments via other payment
methods such as telegraphic transfer, EFTPOS, and ATM.

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Banks borrow money by accepting funds deposited on current accounts, by accepting
term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend
money by making advances to customers on current accounts, by making instalment
loans, and by investing in marketable debt securities and other forms of money lending.

Banks provide almost all payment services, and a bank account is considered
indispensable by most businesses, individuals and governments. Non-banks that provide
payment services such as remittance companies are not normally considered an adequate
substitute for having a bank account.

Banks borrow most funds from households and non-financial businesses, and lend most
funds to households and non-financial businesses, but non-bank lenders provide a
significant and in many cases adequate substitute for bank loans, and money market
funds, cash management trusts and other non-bank financial institutions in many cases
provide an adequate substitute to banks for lending savings.

Wider commercial role

The commercial role of banks is not limited to banking, and includes:

· issue of banknotes (promissory notes issued by a banker and payable to bearer on

demand)
· processing of payments by way of telegraphic transfer, EFTPOS, internet banking
or other means
· issuing bank drafts and bank cheques
· accepting money on term deposit
· lending money by way of overdraft, instalment loan or otherwise
· providing documentary and standby letters of credit (trade finance), guarantees,
performance bonds, securities underwriting commitments and other forms of off-
balance sheet exposures
· safekeeping of documents and other items in safe deposit boxes
· currency exchange
· acting as a 'financial supermarket' for the sale, distribution or brokerage, with or
without advice, of insurance, unit trusts and similar financial products

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LANGUAGE FOCUS : - ING FORM

We can use the -ing form of the verb as a noun and after prepositions.

o When used as a noun it can be the subject, object, or complement of a sentence. For
example :

1. Providing documentary letters of credit is an important commercial role of banks.

2. banking business" means :

a. receiving from the general public money on current, deposit, savings or other similar
account repayable on demand or within less than [3 months] ... or with a period of call or
notice of less than that period;

b. paying or collecting cheques drawn by or paid in by customer.

3. Another function of a bank is safekeeping of documents and other items in safe

deposit boxes.

o The -ing form can also be used after a preposition. This includes to when it is a
preposition and not part of the infinitive :

1. Banks borrow money by accepting funds deposited on current accounts, by accepting

term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend
money by making advances to customers on current accounts, by making instalment
loans, and by investing in marketable debt securities and other forms of money lending.

2. E- banking enables users to make all sorts of transactions from your home without
ever going to a bank.

3. We all look forward to having cheaper and faster services.

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PRACTICE :

Rewrite each of the following sentences using -ing forms of the verbs in bold :

1. An important role of the bank is to lend money to its clients.

______________________________________________________________________

2. Part of the work of a commercial bank is to issue letters of credit and guarantees for
trading companies.

________________________________________________________________________

3. Although I hate queuing up in a bank I can`t get used to ( do ) my money

transactions using the Internet banking.

________________________________________________________________________

4. The client objected to ( pay ) such high interest rate on the loan. So he decided not
to take it.

------------------------------------------------------------------------------------------------------------

5. Banks lend money by ( make ) advances to customers on current accounts.

________________________________________________________________________

6. One of the key functions of a cash dispenser is to provide you with cash from your
account.

_______________________________________________________________________

BIBLIOGRAPHY :

1. WIKIPEDIA, the free encyclopaedia

www. Wikipedia.org/wiki/Bank

2 , Eric H. Glendinning, John McEwan : OXFORD ENGLISH FOR INFORMATION

TECHNOLOGY, Oxford University Press, 2006.

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5. CULTURAL DIFFERENCES

Key vocabulary :

Good business is based on cultural awareness. The differences in doing business and
social etiquette in different countries , if not properly understood , can be a cause of
cultural clash, which can jeopardize one`s chances of winning the contract. When
travelling abroad on business people should carefully prepare themselves for encounters
with new social and business customs. If they want to do business successfully abroad,
travellers to countries with a different culture should be open -minded, tolerant,
interested in other cultures and respectful of other people`s customs, beliefs and
opinions.

There is a saying that in business as in life " all human beings are captives of their
culture ". Both our views, beliefs and behaviour are greatly conditioned by our culture.
That`s what corporate travellers abroad ought to keep in mind when they go to faraway
countries to do business.

It is essential to prepare their journey carefully and learn as much as possible about the
country and the culture they are going to encounter.

If western companies wish to do business with the Far East, for example, say Japan or
China they must be prepared to be very patient and wait a long time to get any results.
Decisions take a long time in that part of the world and it can take a year or more before
they strike a deal. Trying to put pressure on Japanese or Chinese people in a negotiation
can spoil the business and will never lead to success.

They must try to be as broad-minded as possible, as they come across different kinds of
cultures which affect business in different ways. They ought to be aware of a number of
things. There are different attitudes towards work and towards resolving problems, so
they should have a very open attitude to how people approach work or else they may
meet with a complete failure.

To avoid cultural clashes travellers abroad should be able to understand and accept the
different social and business customs that exist between their culture and the country they
are going to.

In order to do this they must be open -minded, which means being able to see things
from the other persons` point of view and not judging one culture as inferior to another
or believing that the way things are done in their culture is the best way.

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It also includes being adaptable, tolerant, sensitive and respectful of other people, and the
different ways in which people of other cultures interpret the world and their different
values.

LANGUAGE FOCUS : MODAL VERBS - NECESSITY, ADVICE. POSSIBILITY

PROHIBITION

must, mustn`t ; should, shouldn`t; ought to ; may, might ; can, can`t ; could

To express necessity or obligation we use must

If you want to success abroad you must be open-minded.

Must not ( mustn`t ) expresses prohibition.

You mustn`t assume that your culture is superior to other cultures.

Should and shouldn`t express advice, you think it`s a good idea to do or not to do
something.

You should be tolerant. You shouldn`t put pressure on Chinese people.

Ought to also expresses a somewhat stronger advice.

Travellers abroad ought to be aware of cultural differences.

May , might, can and could all express possibility.

If you disregard other people`s feelings and customs, you may lose the contract.

If you do not prepare your journey carefully, you could cause cultural clash.

Can`t can express prohibition too.

You can`t smoke in a meeting room.

● The form of a modal verb is the same for all persons. I, she, we, they may come.

● To make questions we put the modal verb in front of the subject . Can I smoke here ?

● To make the negative we add not to the modal verb. The short form `nt can`t be
used with may. You can`t park here. They may not like your gift.

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● All modal verbs except ought are followed with the infinitive without to
You shouldn`t disregard cultural differences. One ought to show respect.

PRACTICE :

Re- write these sentences using may, might, should, shouldn`t, ought to, can, can`t,
could, must, mustn`t as indicated.

1. If you want to export successfully to Japan it is necessary to be prepared for

important cultural and language differences. ( must )

___________________________________________________________________

2. Avoid middlemen so as to speed delivery. ( shouldn`t )

_______________________________________________________________________

3. It`s a good idea to quote in local currency. ( should ).

_______________________________________________________________________

4. The Japanese enjoy giving and receiving beautifully presented gifts. It is very
important to give them prestigious brands, as status is observed very much.(ought to)

________________________________________________________________________

5. Patience pays dividends. It is possible that it takes several visits before an order
comes through. ( may )

_______________________________________________________________________

6. It is imperative not to try to get by in Japan without hiring a good interpreter who can
also explain Japanese customs and traditions. ( mustn`t )

________________________________________________________________________

7. It is probable that relationship building activities and a successful social

programme are more important than a business meeting. ( can )

________________________________________________________________________

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8. It is not permitted to introduce politics as a topic of conversation. ( can`t )

________________________________________________________________________

9. If your Japanese host gets confidence in you and consider you a suitable partner,
there is a possibility that they set up a joint venture with your company. ( might )

________________________________________________________________________

10. If you are met with stone silence, it is possible that it means you have offended
them somehow. ( could )

________________________________________________________________________

BIBLIOGRAPHY :

Mark Powell, Ron Martinez, Rosi Jullett : NEW BUSINESS MATTERS, Thomson, 2004
David Cotton, David Falvey, Simon Kent : MARKET LEADER - Intermediate Business
English, Pearson Education Ltd, 2000
Liz Taylor : INTERNATIONAL EXPRESS Intermediate,
Oxford University Press, 1997
Graham Tullis, Tonya Trappe : NEW INSIGHT INTO BUSINESS, Longman, 2004

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