Gok Smart. “gs 8 kt Adams (1957-), creator of the Preparation of the accounts ‘The accounting process starts with inputs, and these are things such as sales documents (eg invoices), purchasing, documents (eg receipts), payroll records, bank records, travel and entertainment records. The data in these inputs is then processed by specialized software: 1 Entries are recorded chronologically into ‘journals’ 2 Information from the journals is posted (= transferred) into ‘Tedgers,, where it accumulates in specific categories (eg cash account, sales account, or account for one particular customer) 3 A ‘trial balance’ is prepared at the end of each accounting period: this is a summary of the ledger information to check whether the figures are accurate. It is used directly to prepare the main financial statements ‘Gncome statement, balance sheet and cash flow statement) ‘The financial statements of large companies have to be checked by an external firm of auditors, who ‘sign off on the accounts’ (= officially declare the accounts are correct) ‘They are publicly available, and appear in the company’s annual report. Users of financial statements include: shareholders, potential shareholders, creditors (lenders, eg banks), customers, suppliers, journalists, financial analysts, government agencies, ec. Profit and Loss Account ‘The profit and loss account (= income statement, or just ‘the P&L!) summarizes business activity over a period of time. It begins with total sales (= revenue) generated during a month, quarter or yeat. Subsequent lines then deduct (= ‘subtract) all of the costs related to producing that revenue. ‘At this point look at the example on page 40, and then retum to this text. Balance Sheet ‘The balance shect reports the company’s financial condition ‘on a specific date. The basic equation that has to balance is: ‘Asoets = Liabilities + Shareholders’ equity. @ An asset is anything of value owned by a business. A “iability’ is any amount owed to a creditor. Shareholders’ equity (= owners’ equity) is what remains from the assets afterall ereditors have theoretically been paid. Its made up of two elements: share capital (representing the original investment in the business Spepiine "Beale that piofitis the difference between revenue and expense. Thi ‘when shares were first issued) plus any retained profit serves) that has accumulated over tie At this point look at the example on page 41, and then retur to this text, Note the order in which items are listed: Assets are listed according to how easily they can be ‘tamed into cash, with ‘current assets’ being more liquid than ‘fixed assets © Liabilities are listed according to how quickly creditors have to be paid, with ‘current liabilities’ (= bank debt, money owed to suppliers, unpaid alaries and bills) being paid before ‘long-term liabilities’ Figures for ‘current assets’ and ‘current liabilities’ are particularly important to a business. The amount by which, the former exceeds the latter is called “working capital’, “This gives a quick measure of whether there is enough cash, freely available to keep the business running. Cash flow statement ‘Companies need a separate record of cash receipts and cash payments. Why is this? Firstly for the reason given above ~ ‘tshows the real cash that is available to keep the business running day to day (profits are only on paper until the ‘money actually comes in). Secondly, there are many sophisticated techniques that accountants can use to ‘manipulate profit, whereas cash is real money. It cash that pays the bills, not profits. ‘There are many reasons why companies can have problem with cash flow, even if the business is doing well. ‘Amongst them are: © Unexpected late payments, and non-payments (bad debis). © Unfoseseen costs: a larger than expected tax bill, a strike, ate © An unexpected drop in demand. @ Investing too much in fixed assets. Solutions might include: © Credit control: chasing overdue accounts. @ Stock control: keeping low levels of stock, minimizing work-in-progress, delivering to customers more quickly. @ Expenditure control: delaying spending on capital equipment. © A sales promotion to generate cash quickly. @ Using an outside company to recover a debt (called ‘factoring’. 38 Further information wuwmoncyexta.comidcionary * wiwicperformance comielossaryhim * wowtutor2unet (Revision NotesAt9 ACCOUNTING AND FINANCIAL STATEMENTS CFO CChief Financial OFficer> is on the Board. 3 senior managers below resort to CFO. Cost centers: discrete business units where budgets are trent. Profit canter: unite where profits are generated Variance analysis: comparing planned costs Cor income) with actaal costs Com income? Corting methods (eq standard TF Sirginl ctings 1, Financial Controtler Pranning: preparing forecasts ‘and budgets Monitoring: comparing planned Sanding with actual Spending Producing Finaacial dats for the Senior management tear Analysing rudjor investesent * Valuing assets Ratio analysis (uses): to anal performance in mere depth, to compare coopanies in the same industry Secifions Ratio analysis Ctypes): liquidity ration, erofrtabllty ratios, leverage Codebt) ratios, 2. Treasurer activity ratios aed Managing cash flow Raising new Funds 3. Chief Accounting Officer ; Keaging the company's books Preparing financial statements Preparing tare returns Developing strategies to minmie taxes: Se ene ACCOUNTING - AND FINANCE Causes of cash-flow problems Licte payeatnts and non-paynents Untoraseen costs Unexpected changes in deraand Over-borrowing From the bank ‘to Finance Expansion glans Debt Financing Short terse trade credit, bank loan? Long term: issuing bonds Solutions Credit control Stork contro! Expenditure control Marketing initiatives Using an outside company to recover 4 debt Equity financing Reinwested earrings Sale of assats Issue of new shares (© httpifv3 areport.com = www sec.gow/investorfpubsibegfinstmiguide.htm-~ vw quickrba comnvaccounting 39Accounting and financial statements ‘Study the simplified financial statements for an imaginary retail store. All figures are in €000s. The convention in accounting is that a negative figure is shown by a bracket. To understand the figures, work from the right: @ the right-hand column shows totals for each major category © the central colurnn shows information that is used in producing the figures to the right © the left-hand column shows details ofthe calculations in the central column. Vocabulary in financial statements is surprisingly non-standard, with many companies using a mixture of US and European terms, See the right-hand coluran for alternatives, more detail ete. Profit and Loss Account (Income Statement) For the Year Ended December 31, 20XX Gross sales Less: Sales returns: | Less: Sales discounts Net sales Cost of goods sold Purchases Salaries of manual workers Tansport costs | Cost of ods sold | Gross profit i Operating expenses | Selling expenses Salaries for sales staff Advertsing Total selling expenses | General expenses | Salaries for administrative stalt | Insurance Rent Light, heat and power Office supplies ~ Miscellaneous Total general expenses Total operating expenses Operating proft Non-operating income | e2iT0A Depreciation eBiT | Interest paid on bank joans Net income before taxes Less: Income tax Net income (or loss) alter taxes Dividends. Retained profit Ln ne RRR 40 640 6 4 (10) 630 200 20 a (os 280 e2 16 100 82 6 18 0 2 i 90 (190) 90 & 96 (40) 85 © 70 (ag) 60 a) eaT ‘Revenue’ line) jeome J turnover / sales / the top ‘Cost of goods sold’ (= direct costs) includes ‘manufacturing costs, salaries of manual (= blue- collar) workers ete "Operating expenses’ (= indirect costs / ‘overhead) include salaries of sales and office staf, rmatketing costs, uly bis ete, ‘Non-operating income’ includes profits from Investments in other companies. “EBITDA’ stands for Earnings Before Interest, Tax, Depreciation and Amortization. “Barnings' (= proft / the bottom tine) ‘Depreciation’ and ‘Amortization’ are very similar, ‘and are often used in the same way. However, ‘depreciation’ can reler to the loss in value of tangible asset (eg 2 vehicle), and ‘amortization’ to the loss in valve of an intangible asset (eg the purchase of a licence or trademark]. This loss over lime is treated as a cost and writen off (= subtracted from the prot) over several years. “Anterest' refers to money paid to the bank for loans (or received from the bank for cash balances). ‘Dividends’ is money paid to shareholders, ‘Retained profi’ is transferred to the Balance Sheet, where it joins the amounts from previous years.Balance Sheet, December 31, 20XX ASSETS Current assets Cash at bank 15 aS taut Accounts receivable Inventory Total current assets 200 180 Fixed assets Building and improvements Less: accumulated depreciation 300 (90) 210 Equipment and vehicles Less: accumulated depreciation 120 (80) 40 Furniture and fixtures 20 Less: accumulated depreciation (8) 12 Total fixed assets Intangible assets Total Mangible assets Total assets LIABILITIES AND EQUITY Current Habilities Bank debt | Accounts payable Accrued taxes Accrued salaries Total current liabilities 17 Long-term liabilities Mortgage Bonds payable (due Mer 2018) 20 Total long-term liabilties Total liabilities ‘Shareholders’ equity Share capital (900,000 shares @ €1) Rotained profit Total owners’ equity ‘Total liabiliies & equity SB 9 ACCOUNTING AND FINANCIAL STATEMENTS. ‘Accounts receivable isthe amount owed tothe business by customers (= creditors). ‘Inventory’ isthe value of raw materials & stock. “Current assets’ may also include ‘markstable secures’ (€ shares intended for disposal wihin one year). “Flxtures' are part of a building that cannot be moved, such os lights. “Fixed assets’ may also include long-term financa investments “Intangible assets’ include patens, trademarks & ;gooduil(eputaton, contacts and expertise of ‘companies that have been bough). ‘Bank debt’ (= oan capita) also includes any overdraft (= temporary nogative balance} ‘Accounts payable’ isthe money owed to suppliers. “Accrued” items are those where an expense has been incurred, but the money isnot yet paid. ‘Accrued selares' ‘ypleally includes future bonuses, ‘Another tem, ‘provisions’ can appear under current liabilties. These are amounts set aside for anticipated ‘onetime payments that are not part of regular operations ~ perhaps a lawsuit, oF @ compensation package for ‘employees being laid of ‘A ‘mortgage’ is 2 long-term bank loan to buy @ propery With bonds, the ‘principal’ (= amount resed by issuing the bonds) is repayable to the bond holders at ‘maturity’ “Share capital ( = common stock, Am) is amount raised at inal flotation on the stock market. ‘Retained profit’ (= eserves | Reiained earnings). The figure showing here is mare than the €47,000 transfered from the income statement because iis en ammount accumulated aver several years. al9.1 Fill in the missing letters. 1. On a balance sheet, ‘assets’ are what you ow_ and “iabilties’ are what you ow_. 2 The loss in value of a tangible asset over time is called 4 “an. This loss is ‘w____en o__ in the accounts over several years. The 1 in value of en Intangible asset is called ‘am__ N 3 The term ‘debtor’ is now often replaced with ‘accounts Je’. Similarly, ‘creditor is often replaced with P. 4 The total value of raw materials + work-in-progress + unsold stock is called ‘in, y: 5 Expenses that have been incurred but are not yet paid are called 'acc____d expenses’. 6 The extent to which a firm relies on debt financing rather than equity financing is called its ‘lev__age’ 9.2 Underline the correct words from those in ital he terms ‘drect costs’ and Variable costs! are chose | synonyms. They both refer to things like raw materials costs and the wages of manual (= blue collar) workers. But: 4 10 emphasize costs which increase in proportion to any | rise in output, say 'dlrect costs / variable costs to emphasize costs which can be identified with one ! particular product, say “direct casts / variable costs. Similarly, the terms ‘fixed costs’, ‘indirect costs’ and ‘operating costs’ are close synonyms. They’ all refer to things ike advertising, rent and the salaries of office staf. But ‘© to emphasize costs which stay the same at all levels of ‘output in the short term, say SYixed costs / operating costs ‘© to emphasize costs which result from the whole business (rent, tities, ete), not any particular products, say ‘indirect costs / operating: costs. A synonym here Is ‘overhead’ (BrE overheads). | @ to emphasize costs resulting from the day-to-day activities of the business (products and processes), say ted costs / operating costs. ‘There are many other types of ’costs’ referred to in finance: ‘and accounting, Two of the most important are: «© “capital expenditure / capitalism expenditure — the costs, | of buying or upgrading physical assets lke buikiings and machinery; often referred to in business as ‘capex’ ‘9 Tmark-up cosis / marginal costs ~ the costs of increasing ‘output by one more unit t i \ 2 | a I ¥ Accounting and financial statements: Exercises 9.3 Put these words into three groups, so that all the ‘words in a group have a similar meaning: costs, ‘earnings, expenditure, expenses, income, profit, revenue, sales, spending, turnover. 9.4 Put the words into the correct column, ‘accounts payable cost of goods sold ledger shareholders’ equity EBITDA trial balance invoices j operating expenses current assets | Profit and loss account Preparation of a Balance sheet 9.5 Put the solutions for managing cash flow 1-6 into the correct category below. 1 Justin-time manufacturing 2. making payments to suppliers in instalments (= part payments) 3 leasing fived assets rather than buying them 4 offering a discount for early settlement (= complete payment) of a bill 5 improving sales forecasting so that the warehouse holds, less inventory 6 cancelling the office Christmas party Credit control o0 Stock control, OO Expenditure contol: [} 9.6 Put the sources of new funds 1-6 into the correct, category below. Issuing new shares Issuing new bonds (note that only large companies dé this) Trade credit (asking suppliers if you can pay them ister) Reinvested earnings Sale of assets (eg a building, or a part of a company) Bank loan or bank overdraft (= temporary negative balance) ankwns Debt financing (money raised has to be paid back to outside creditors): OO Equity financing (money raised comes directly or indirectly from the owners of the business, who hope to have it paid back in the form of more profits): [) C) CI]9.7. Match topics 1-5 with the conversation extracts a}-e) below. 1 2 profit centers [] 3 variance analysis (J 4. standard versus marginal costing (1) 5 valuing assets [} 2) ‘How are we going to show the depreciation of our new ‘machinery in the accounts? We could write it off in a straight line over six years, but we're losing most of the value in the ealy years. | think we should do it on a percentage bass, say 25% every yea, so that the book value is moce realistic" by ‘We allocated a budget of €200,000 for R&D last quarter, but there seems to be an overspend of €25,000. I need to find out what’ going on” ©) "'dlke to see earnings broken down according to our major product tines" 6) ‘All our marketing activities are shown under one budget heading, n the future Id ke to see separate figures for the different areas of marketing so that we can have more contro of spending.” €) ‘Should we accept this order? The profit margins are low. But, on the other hand, the machines will be tunning ‘anyway, there isn't much extra labour required, and other variable costs are low. So its probably worth it! 9.8 Study the collocations below. Check any unknown words in a dictionary. budgeted, escalating, estimated, increasing, likely rising, unexpected, unforeseen ‘bring down, calculate, cut, figure out, lower, _mneet, pay, reduce, work out “ring in eam, generate, jeopardize, make, plough back, put at risk, reinvest accu ppoinate baer, apie, dubious, exact, misleading, precise, rough, round eet anc, cack ack, ect en, sy Go oes go rough, en, mani, masage, te Sues Publish, release, study costs costs 1 Tosome people, finance is a dry and technical area of | business. n fact, ts fascinating G@agree — CG disagree 2. When an auditor looks at an income statement they will because be partcualy interested in i i | i | | i | © ACCOUNTING AND FINANCIAL STATEMENTS Now divide the words in each box into three groups, based on their meaning. budgeted, escalating. unexpected, estimated, increasing, unforeseen costs kel ising a costs profits figure the figures 9.9 Match the definitions 1-4 with the examples of financial ratios a)-f) below. 1 Liquidity ratios: these measure ability to tur assets into cash to pay short-term debts. C] 2 Profitability ratios: these measure abiity to generate pofts COO 3. Leverage (Debt) ratios: these measure the degree to which a company relies on borowed funds. [7] 4. Activity ratios: these measure the effectiveness of the use of resources from an operational point of view. [-] 28) Debt to overs’ equity = Total labilties / Total owners equity ) Net profit margin = Net income before taxes / Net sales ©) Working capital = Curent assets / Current abilities 4) Return on equity = Net income after tax / Total owners’ equity ©) Inventory turnover = Cast of goods sold / Average inventory (mid point between inventory at beginning and ending of accounting period) 4) Eamings per share = Net income after taxes / Number of shares issued 3 When an auditor looks at a balance sheet they will be particularly interested in ... because ... 4. Here's what | know about a femous financial scandal that was in the news .. 2i ‘apprbactie trom the point of view at finandis ‘worth taking a nioment to go over the stage before that, namely the ‘Any provider of funding Wil base thelc decison largely on the business BOW Vol customers that have these need pans ofgantzational structure, détale about she management team, and the qualifications of" il enter the market and then grow the business): ic “Smmunicatlon strategy (how you will reach your customers), sales, es calls, average value per sae, etc) ws lescription of your service or product, emphasizing the benefits. Funding Request specify the amount of funding you are asking for (you can give best andl Finonclals.forecasied income statement, balance sheet, cashflow statement, and capital +> gexpenditure budget “Append Cvs. of key: > slawiyer and accou “ash Back shal companies that have-ahigh growth potential (paticlery.in areas lke “tasinoloay where RED and startup costs ore high and femay be many years before any ‘Notice that the sources of funding above fallinto two categories. ‘Equity fu Yo exchange shares in the company forthe funding you require: nvestors~ business angels “ata verre capitaits-axpect this in exchange for the money they are giving and the risk t hey Back f the busines fal). "Debt funwng’ ts where You get 3 ling of creat which you have to pay back: bank loans, overdrafts, credit eras, et. ‘Often you need some sort of collateral (guarantee) before you can get this perhaps your. Hose 55 fal. To minimize risk they will analyse any befoie making a decision. What they hope is that they wil find 2. where they can come in at the beginning, take 4 large stake, help the company grow, and then sell their stake at a huge profit later. This ‘ext strategy is ‘fundamental to their busiriess model and they have.no interest in being involved over the {ong term. They have thio‘options: ether 19 make atrade sale’ (sell tha start-up toa larger “company inthe same industry) or go for ar IPO ~ initial public offering. ln an IPO they sell their stake when the coimpany is ist listed on the stock market. ‘There are many Internet sites with help for small business. This official US government site has many useful articles and resources: hetpivrww.sba.goviindex tint ‘And this site has information specifically about funding: _httpulwunw.-business-funding-guide.com! vtordt ; Busnes pon secetire Vemomorey6 | New busine ‘search for the keiworde | business" 23 find out yourgléfindneng: cal” Jeu ind ary amples Df uceestl companies that agoiswaneed at Discussion El Decide which of the motivations below is most and least important when you start & business. Number the factors from 1-7 (1 = most important; 7 = least important). [having total personat control Bitte freedom of being your own boss Eimaking money quicldy so that you can sell the business ithe satisfaction of providing quality goods and services Bite excitement of taking risks Cisetting up a business for your children Bithe ability to work at home Reading EB Read the ttle of the article opposite. What source of business funding do you think the author recommends? EB Read the article and decide whether statements 1-7 below agree with the authors ‘opinions. Write Yes (¥) if they agree with the author or No (N) if they disagree.” ‘Venture capital is a good source of funding for new businesses. Business schools give misleading advice on funding sources. Investors always respond promptly to funding applications. “The process of obtaining funding will proceed ata fast pace. Entrepreneurs who get funding rarely keep total control, ‘Venture capitalists have few good ideas to choose from. Self-funding your own business ideas is to difficult to be practical. EEX Read the article again and match the headings below to paragraphs 1-6. One heading is not needed. a Prepare for the worst ¢ Watch every penny ‘b Start small f Keep your integrity Choose partners carefully g. Identify markets 4 Consult widely Listening EB D 213 Listen to Alex Vecchia, a Californian business angel. How do his views differ from the writer ofthe article? EG Listen again and complete the notes surimarizing what Alex says potential investors will be looking for. ‘The team must prove its honesty, determination and 1 needs market knowledge and business 2 ‘The business 3 ____ financial forecasts ‘must show a high 4 The deat must have a realistic business 5 everything must be ready for the 6 potential process Discussion Work ifi small groups. Your group has just won €500,000 on the Euro lottery. Discuss ‘which company to invest in. Present your choice to the class and explain why. Breezewatt ~ produces mini wind turbines which can generate 50 per cent ofthe electricity needs of the average home. ‘NewClear ~ produces high precision, high value components for nuclear power stations. Fluban ~ has developed a vaccine against bird flu which lias proved very_promising in clinical trials.[CIES THE ART OF DOING IT yourself WHAT advice would I give to new entiepreneurs who need funding? Forget about your business plan and buy a lottery ticket - your chances are better. My point s that when you need venture funding no one will give you ‘any money until you already have a marketable product. In other words, funding comes just when you don’t need it ‘A myth spread by business schools is that the way to start a venture is to create a great business plan, perfect your pitch, and then present this to investors, starting with venture capitalists. If that doesn’t work, you knock on the door of angel investors. But ask any entrepreneur who has called on venture capitalists and they will probably tell you that it is almost impossible to even get calls retumed. if venture capitalists do respon and you are invited to present your idea, the proces will dtag on for many months While you borrow more and survive, ‘on hope. If you do hit the jackpot, you are required fo let the investors make many of the business decisions in exchange foran investment. Tobe fais, most business plans don't deserve funding. Venture capitalists receive hundreds of plans every weak, ‘and few are worth the paper they are printed on. Everyone jumps on the same new trend, othe ideas are 50 far outthat they have no chance of succes. ‘And great ideas aren't enough it takes experienced management, excellent execution, and a receptive market It’s hard for even the best venture capitalists to identify the potential successes. Sowhatshould an entrepreneur do? What all new entrepreneurs should ‘understand is that, even if you have a realistic business plan for a great idea that can change the world, you need to develop it yourself until you can proveit, Focus on validating your idea and building it up. Raise money to get started by begging and borrowing from. family and friends. And be prepared to dip into your savings and credit cards, ‘obtain second mrtgnges, and. perhaps Took for consulting werk or customer advances. There is no-single recipe for developing your business idea yourself, but there are some essential ingcedients. Here are some pointers: ‘hace your” ideas with those “who have done it before. You can learn a lot from the experiences of seasoned entrepreneurs, and they are much more approachable than you think. If you caa’t find anyone who is excited about youride, the chances are it isn’t worth being excited about, This may be time to reflect deeply and come up with another. eee, Speak to anjore who can help you understand your target customers, If you can sell your concept, some castomers may help you fund it or agree to be a test site or a valuable reference. Customers. don't usually know what they want, but they always know what they don't need. Make sure that there is a real need for your product. Your idea may be grand and Rave the potential to change the world, but you fre only going to do this one step ata time. Look for simple solutions, test them and learn from the feedback. If you're starting a restaurant, work for Zomeone else frst. If you're creating a softwaze product, leam by doing some consulting assignments or create some Ullities. You don’t have to start with the ultimate product Focus on revenue and profitability from the stat. Find creative ways to earn cash by selling tactical products, prepaid licenses or royalties. Pay Employees patially instock. Look for access to free hardware or premises. ‘And sweep the floors yourself In short, use any method to avoid costs |. EESSEES pEREESNTRESEEEEEE S| Ive going «Take Tonger than you think, There will likely be product problems, unhappy customers, employee tumover, and lois of financial challenges. You may even fail a number of times before you achieve your goals. By learning from exch success and failure alike, you increase the octds that pu ental make it Never forget the importance of business ethics and your own values. Ethics need to be carefully sewn into the fabric of any start-up. And the only way to reach long-terin success is by achieving outstanding customer satisfaction. With a lot of luck arid hard work you may build a successful company that _mackets products customers really want. itis very likely thatby this stage. you receive the phone calls from venture capitalists. This is the time to think of exit strategies and decide if ‘you want to ovin a small piece of big pie ora large piece of a small pie. | Fiepusivese 7%ie siete * Discussion I Workin small groups. You are financial advisors to start-ups and small companies. What sources of funding would you recommend in these situations? ® pusvBooiEs isatemping DON BEAL is on inventor. He help for all sorts of everyday tasks or problems: gardening, household repairs, cleaning, ironing, et. It needs £8,000 to cover start-up costs. ‘S* FIXA is a start-up providing home agenoy providing clerical hel to has patented a new type of car other companies. treeds a new engine which is 50 per cent more ‘photocopier/printer but it does cfficent than existing engines. ‘ot have the cash avaiable to He needs money to produce buy ‘a prototype but wants to keep ‘contro of his business, ‘ASCs a small enginooring ‘company that has temporary ‘cashflow problems. It needs ££1,500 to pay for raw materials, ‘They ate expecting to be paid £5000 in outstanding bills inthe HEA Read the advice leaflet below about business funding. Match each type of funding with the correct desc next two weeks. bank foan equity finance friends and family” grants “leasing ovérdsaft self-furding Drawing on personal savings and credit cards can cover start-up cost without having o wait for other people's decisions. “The downside isthe using credit cards can be ‘expensive inthe long tre, Regular repayments con make it easier to budget. ‘On the other hend, repayment schemes can cause ‘ash low problems. You may also need to provide ‘security, such as business assets, ora quaranto, ‘This canbe a very flexible option for short-term or ay to-day requirements. ‘The disadvantage is that they usally beara higher Your get your funding, whi the investor only reales thelr investment when the business is doing wel You also get their expertise. ‘On the downsie, i's hard to raise this finance, and your own influence and share ofthe profits wil be smaler, i ‘These appéar to be a source of cheep financing onever, theres often strong competion, and you may be required to provide matching funds, | You may also need to prove a wider benefit tothe | community You ean spread the cost of acquiing assets, and interest rate than other oans, ‘maintenance may be covered But t's more expensive than i you buy outvight, ad you don't ven te assets unl tha end ofthe agreement. t They might be wing to provide an interest-free oan or not require secu Gh te oer ar, tuning trom is sure can pt at on your lationship 283) Loot again at your ansivers in 1. Would you change any of your recommendations? [EFF Find words or phrases in the leaflet with the following meanings the amunt of money you'pay back each month money coming into and out of your business an iter you agree to give if you fail to pay 4 person who takes responsibilty if you fail to pay debt which you pay back without any additional charge money you provide alongside goverument fading: the cost of Keeping something working souRURe(GEBEEED rortnorsnsoractive vocabulay practice on tho DVD-ROM Seventh Heaven Angel Investors Group ean Scan reading Bil Read the seven steps in an application procedure. Put the steps in order 1-7, The seven steps to heaven b Soteening tneetiig. If they didn’t turn you down at Step 2, our review committee will invite you to a screening mesting. Be prepared to male a ten-minute pitch and answer any questions that conse up, Self-assessment. Before putting forward your business plan for our consideration, you must work Cut if angel capital - and specifically capital from our group ~ is right for your company. Die diligence. If your presentation is successful, interested investors will check out the statements made in your business plan, presentation, and financial projections. They will go over your team's ‘background and track record in detail Funding. When ell partes are happy withthe terms and language contained in the term sheet, the deal Gan go through. oe Online application. Once you have decided to submit a plan, complete our application online, This isdesigned to identify the most important details about your business so that our intemal review committee can weed out the non-starters, ‘Term sheet. On successful completion ofthe due diligence process, interested angel group members will draze up a term sheet that sets out the structure of the investment deal, including type of equity and board of directors representation. Presentation to membership, Ifyou get through the screening meeting, you will be invited to make 12 50-minute presentation to our full membership, the goal being to convince members that your ‘proposal is worth investigating in detail. EBB Use the phrasal verbs in 5 to complete the sentences ‘Only two per cent of business plans Problems often in the early stages. Business angels may ‘proposals for no apparent reason. ‘Angels always an entrepreneur's background thoroughly. Its worth gettinga lawyer to any contracts rather than trying to wriie them yourself ‘The term sheet the conditions ofthe deal. Alot of hard work is necessary before the deal finaly. In your pitch, you should ___clear and convincing arguments. Get help if you can't. how much finding to apply for. ‘The screening meeting allows investors to poor applications at an early stage. the complete funding process. BSoosousann x Listening 2/244 Listen to four entrepreneurs explaining why their proposals were turned down. Decide which reason from the list below each person mentions. ‘i skills the management team —_ no track record or proof of concept “finanlal forecast Based Gn assumptions too complex : inadequate financial returns not scalable: no growth potential ack of trust: lack of market awareness “no eicar exit route Discussion and presentation FB Work in small groups. You work for a corporate finance firm bringing together investors and wort "basins ange” entrepreneuts. Using relevant phrases and vocabulary from the previous exercises, draw up Vist ale fidancing « of Dos and Don'ts for start-ups looking f6r funding. aan $€3 Work with a partner from a different group. Present and compare your lists.Trends, graphs and figures Trends Read the text and then study the bullet points below. (Average || Tw aw od A SO WD Fw ‘he chart shows the US stock market (Dow Jones index) for last year and the first quarter ofthis year. ‘As can be seen from the chart, last year started on a positive note. The market rose until late February when It almost reached the 11,000 level. Buy interest rates were rising, and investors decided to take profits ‘There was a sharp fall during the month of Mareh and the Dow bottomed outa just over 10,000. At that point investors started buying agaln ~ strong economic fumbers apd global liquilty (central banks printing money) offered support to the market. Over the summer} the Dow was flat, trading in a range from 10,300 to 10,700. The market was unable to break out of this range, even though company profits were increasing. What was th reason? Itwas almost entirely due to the | price of ol, which had ellmbed dramatically trom $42 a Darrel atthe start of the year to $68 in August. This price rise was caused by the hurricane season in the Gull of Mexico and increasing tension in the Middle East. I mid-October the markets started to rally ( strongly, and went from 10,200 to 10,900 over jst four weeks. This sudden jump was as a result of comments made by 4 member of the Federal Reserve, who | indicated that interest rates would soon stop rising, = This is positive for business as the cost of borrowing se seen si From November fo nay the market remained more or less unchanged, falling to break through the February highs i Over the last few months the market has advanced i E i | again. The economic backdrop remains healthy: company profits are good, consumer spending is up, and interest rates are close to reaching a peak. The ‘only dark cloud is the price of oil, which has risen back to the $70 level and looks certain to go up further. The next hurricane season is approaching and production worldwide cannot be significantly expanded. REESE Fer ererrerarterrrrerererrecrsen| © Inany text describing trends there will be verbs and nouns of movement. Examples in this text are fll, bottom cut, be flat, increase, ete. ® The mind map opposite lists verbs of movement. Note that words describing the same type of movernent are often used in different contexts. For example, share prices ‘rally’ whereas profits or economies ‘grow’. Use a {300d dictionary to check on points of usage such as this. © Note the use of verb tenses in the text: reacted, were rising, had climbed, hus risen, ete. There is a summary of ‘verb forms and uses in the mind map opposite. © A text describing trends will include many examples of linking words. (See units 20-22.) Examples here are event ‘hough, due fo, asa result of and es (meaning ‘because’) Transitive and intransitive verbs ‘When using verbs of movement it is impartant to know whether they are: © Transitive ~ needing an object — shown in the dictionary with aT © Intransitive ~ used without an object ~ shown in the dictionary with an ‘T. So the following verbs are transitive and need an object (the budget): We cut / lowered | raised | reduced the budget But these examples are wrong (no object): The budget entlowered--resed-treuend, ‘The following verbs are intransitive and are used without an object: iH Costs went doton [el | dectined [rose But these examples are wrong (there is an object): We soent down fll declined #- rose costs. Many verbs like increase and decreese can be used both with and without objects Adjectives and adverbs of movement = __ In the text, Some nouns are qualified with adjectives (sharp, sudden) and some verbs with adverbs (dramatically, significantly). Adjectives used to describe movement include: slow, sight, ‘gradual, steady, quick, rapid, significant, sharp, substantial, dramatic. Adverbs are formed by adding -ly to the adjective, and sometimes one or two other letters change as wel.13 TRENDS, GRAPHS AND FIGURES Upward: go wp, increase, rise, raise, qurt Up © raise, Climb, pice up, grom, expand, double, ‘show an upward trend \ i Rapid upward: jam, rocket, soar, take off Donmuard: go down, decrease, fall, drop, sip back, reduce, lower, bring down C* lower, cant, shrine, halve, show a downward trend Rapid donmward: pluamet, collapse, crash, slime Highs and lows: peak, reach « peaks botton alt, hit & low Volatility: Auctuate, be volatile Stability: stay the same, be Hat, be relatively? unchanged; level off / out Graph, chart, bar chart, pie chart, table, diagram Title, row / column Gwith headings, horizontal ais Clabeled with wonthe), vertical axis Chewing the values For.) Carve, golid line, dotted line, dashed lina, segment, shaded ares, slope (steep or shallow As can be seen from the chart, The gragh / My next side shows Looking now at the figures for the third quarter ve ban see = Good ard tad: ingrove (+ gat better, Strengthen, rezover, bonnce backs deteriorate Co get morse), weaken Single points: be above / below, stand at States: be up / down AND Fiqures io Action in progress Present: sates are rising strongly at the moment Past: sales were citing wore strongly last year A great deal more than, way over Somenbat more then, well over Just over, slightly more than Around, abot, roughly, domentere in the’ cegion of, apronvataly Almost, nearly, sot quite, just short oF z : 7 eee Looking back From the present to the past: sales have cigen by O% this year: From the past to earlier in the past: sales had risen to a high level, but in 2006 ‘the market began to change Far less than, aowhere near, nothing Ike 45 mach 45 Locking back at an action in progress Action in progress up to & point in the pasts sales had head cising strongly, but then new competitors entered the market Action in progress up to the present: sales have been cising in all our major markets 3713.1 Match each phrase on the left with its closest synonym (same meaning) on the right. 1 drop by 50% 2) deteriorate 2 rise by 100% ©) recover 3 get better «) double 4 get worse raise i 5 bounce back @) expand 6 grow 1) lower | 7 put up 9) hake 8 bring down h) improve ! 13.2. Match each verb on the left with its closest antonym (opposite meaning) on the right. 1 tise 2) plummet 2 raise b) be flat 3 take off ©) bottom out 4 expand @) fall 5 fluctuate ©) lower 6 peak 4) shrink 13.3, Complete each sentence with a phrasal verb from the box. 1 if your pices are too high, you have to them 2. tf your prices are too low, you have to thematic \ 3 If sales each thelr lowest level, they 4 If sales recover after a period of downward movement, they 5 sales go up a litle after being lat for some time, they 6 if sales go up a lot after being flat for some time, they 7 if profits were going up - or down — and then become stable, they 8 if profits go down a litte after a period of growth, they 13.4 Underline the correct words in italics. 1 The verbs ‘rise’ and ‘grow’ are similar. However, rise / grow is more common for longer periods of time, and where there is a total increase in size (eg describing the economy). 2 The phrasal verb ‘grow up’ refers to the change from being a child to being an adult. It can also J cannot be used to refer to things like profits, the economy. : 3 The phrasal verb ‘fal down’ refers to movement towards the ground. it can also / cannot be used to refer to things like sales, profits Trends, graphs and figures: Exercises 4. We can ‘raise /lower" prices oF ‘put up / bring down" prices. However, the fist two examples / last two examples are slightly more formal, and can refer to a change in the level or standard of something as well as prices. 13.5 Puta tick (/) if the sentence is possible. Put a cross (X) if itis not. The answers depend on whether the verb is transitive, intransitive or both. 1 We cut costs by 5%, 2 We fell costs by 5%. 3. Profits cut by 5%, 4 Profits fell by 5%. 5 We raised prices by 2%. 6 We rose prices by 2%. 7 8 9 Inflation raised by 2%, Inflation rose by 2%. We increased sales by 4%. 10 Sales increased by 46. 11 We went up market share by 3% 12. Market share went up by 3% oooo0ono0o0000 13.6 The -ing form of many verbs can be used as an adjective, eg an increasing demand for oil. Make adjectives from the verbs in the box using the information in brackets. expand — grow rie shrink soar 1 3__shtinking budget (decreasing in size) 2 an business (increasing in size) Ba problem (increasing over a fong period) ae inflation (ineteasing) 5 —________costs (Teaching a very high level) 13.7 Fill in the missing letters in these adverbs using the information in brackets. Sales increased ... 1 ra2id_ly (quickly) 2 gti (Slowly and by small amounts) 3 st ily (ina constant, regular way) 4 i. ly (a litte) 5 mar lly (fractional) 6 sic ly (in a large and noticeable way) 7 sh. ly (Suddenly and by a large amount) 8 ot lly (Suddenly and surprisingly) Note that ‘dramatically’ can refer to both good and bad ‘changes (unlike in many Latin languages).13.8 Puta tick (/) if the sentence makes sense. Put a cross (X) if it does not. 1 Profits have risen steadily over recent years. [7] 2. Sales plummeted marginally in July. 3. The price of oil soared gradually last year.) 4 Share prices dropped back slightly last week, C] 5. Unemployment numbers levelled out sharply. [7 13 TRENDS, GRAPHS AND FIGURES: 13.12 It is very common to use approximate figures ~ particularly in speech. Match each approximate figure ap) to an exact figure 1-6 below. 2) just over 150 4) far less than 150 ) around 150 J) way, way over 150 ©) just short of 1501) nowhere near 150 ©) roughly 150 1) slightly more than 150 ©) not quite 150 somewhat more than 150 13.9 Write the nouns for these verbs. Sometimes the 4) almost 150) 1) 150 give or take afte formis the same, | 9) some 150 ©) somewhere in the region of 150 1 cut 6 improve | 1) 180 or so ) nothing lke as much as 150 2 deteriorate ______ 7 increase | Yeo ooo 3 fall__.._____ 8 recover 12 146 200 4 grow 9 reduce 3 154 ao 5 hale 0 ise | 4 190 oO | 5 240 a 13.10 Rewrite the ‘verb + adverb’ sentences as |éwoo OOOOO0 i ‘adjective + noun’ sentences. 1 Sales fll slightly. There was 2 slight fall in sales. 2 Profits rose steadily. We saw a in profits, 3. The economy improved gradually. There was a Et in the economy. 4 We need to reduce costs sharply. We need to see a in costs. 13.11 Underline the correct words, 1 dike you to look at the blue segment on this next bar chart / pie chart. 2 I'd ke to draw your attention to the heading / tile at the top of each column ofthis table. 3 I'm sony, the heading / ttle ofthis next slide is off the screen, but atleast you can see the graph. 4 The horizontal axs is marked with J labeled withthe months of the year. 5 Sales growth has been very rapid ~ as you can see from the steep / shallow slope of this graph © Prepare two graphs. They could be about your company (sales, profits, costs, etc) oF your country (inflation, lunemployment, house prices, etc). You could take graphs from an article on the Internet or in print, in English or in your own language. Remember to label the two axes. © Speaking practice 1. Tell a partner about the graphs. Your partner should ask for more information (eg ‘'m sorry, can you explain that again?’ “What were the reasons for that?’ 13.13 Fill in the gaps with a preposition where | ecessary (in one case there is no preposition). Choose | from: at, between, down, from, in, into, of, on, to, with, 1 Last year sales Tose 7m €7.5m. So | that's an increase €0.5m. 2 Last year there was an increase sales 8%. | 3. Our market share’now stands 28%. 14 One five (= one out of every five) of our products never makes a profit. 5. Two milion ‘euros were spent on television advertising, 6 Unemployment figures have been relatively stable for some time, fluctuating 43% and 4.6% 7 There hasn't been much movement the unemployment figures for some time 8 Sales rose line predictions. 9 From January ‘st to now, sales have gone up by €0.5m, So that’s a year date increase of 8%. 10 Over the last twelve months, sales have gone up by 0.5m. So thals a year- -year increase of 8%. 11 tn this ple chart, sales are broker by region. 12. Inti pie chart, the whole country is divided —__ five regions. © Speaking practice 2. Regroup and work with a new partner — you are going to repeat the exercise and explain the graphs again. This time speak stowly and focus on accuracy rather than fluency. Take a moment to review pages 56-57 before you begin. ‘© Writing practice. Write a short report based on the two graphs,