KEY 7 April 2011 A) FINANCIAL ANALYSES AND STATEMENTS Complete the blanks using the appropriate English expression: By providing and storing RELIABLE data and arranging them in various STATEMENTS, tables, and aggregates (e.g. consolidated statements), financial accounting makes it possible to COMPILE ANALYSES which give an ACCURATE picture of the current and ANTICIPATED financial positions of the firm. From this VIEWPOINT, the following aspects of the financial department´s work APPEAR as the most important: - to keep RECORDS of all economic activities of the firm for a certain period of time and show its results, I.E. of and how it achieves a profit or suffers a loss. The resulting document is the PROFIT AND LOSS ACCOUNT//INCOME STATEMENT. - to KEEP TRACK of capital structure and sources of financing, which is ESSENTIAL for ensuring a long-term stability and thus the firm´s independence, we use BALANCE SHEET//STATEMENT OF FIN.POSITION. - to ensure the firm´s short-term SOLVENCY and liquidity so that it can MEET all its immediate financial OBLIGATIONS, we use the CASH FLOW STATEMENT. B) BALANCE SHEET Complete the table using with the following English equivalents: ROZVAHA – BALANCE SHEET AKTIVA - ASSETS PASIVA - LIABILITIES Dlouhodobý majetek / Stálá aktiva 1 Fixed assets Vlastní kapitál / Vlastní jmění 2 Equity / Total equity - dlouhodobý nehmotný majetek 3 Intangible fixed assets / Intangible assets - základní kapitál / základní jmění 4 Registered capital / Legal capital (statutory equity) - dlouhodobý hmotný majetek 5 Tangible fixed assets / Tangible assets - kapitálové fondy 6 Capital funds / Other equity accounts - dlouhodobý finanční majetek 7 Financial investments/Long-term financial assets /Investments - fondy ze zisku 8 Funds created from net profit / Reserves (appropriated retained earnings) - hospodářský výsledek (zisk) 9 Profit (loss) (of previous years + of current period) Oběžný majetek / Oběžná aktiva 10 Current assets / Non-fixed assets Cizí zdroje 11 Liabilities -zásoby 12 Inventory -rezervy 13 Reserves / Allowances - krátkodobé pohledávky 14 Short-term receivables / Current receivables - krátkodobé závazky 15 Short-term payables / Short term liabilities - dlouhodobé pohledávky 16 Long-term receivables - dlouhodobé závazky 17 Long-term liabilities / Long-term liabilities - finanční majetek 18 Financial assets / Current liquid assets - bankovní úvěry (a výpomoci) 19 Bank loans / Bank loans and other credit Ostatní aktiva 20 Other assets Ostatní pasiva 21 Other liabilities Celkem aktiva 22 Total assets Celkem pasiva 23 Total liabilities / Total liabilities and equity C) DISTRIBUTION OF PROFITS Complete the text using the words from the box: Profit is one of the key INDICATORS of a successful ENTREPRISE. It should always be BORNE in mind that any profit is SUBJECT to the income tax (AM – corporate tax), the rates of WHICH differ between individuals and corporations and from time to time are changed according to the OVERALL economic situation. When comparing FIGURES, it has to be clear if they relate to profits before or after tax, the LATTER being the net profit, also known as net income. It is distributed into reserves to be ALLOCATED to the reserve fund, RETAINED profits for re-investment and dividends as rewards for shareholders who invested their money and became co-owners by buying shares. The PROFIT is written in black, the LOSS in red. The final result is shown on the BOTTOM LINE. As a rule, profit and loss accounts are accompanied by ENCLOSURES showing the methods of evaluation, depreciation and other relevant information. D) DEFINITIONS Find an expression which fits the definitions below: to gradually reduce the value of machinery, a vehicle or other asset over a particular period of time, as stated in a company’s accounts: DEPRECIATE to reduce the cost of an asset in a company’s accounts over a period of time, especially an intangible asset (= one you cannot touch): AMORTIZE products that are only partly manufactured at the end of an accounting period, valued at the cost of the materials, labour and some regular costs : WORK-IN-PROGRESS/WORK IN PROCESS one of the costs involved in running a business, such as staff pay, electricity, materials, etc: OPERATING EXPENSE the difference between the value stated on shares that a company issues and the higher amount it receives for them: SHARE PREMIUM tax on profits made during a particular accounting period which only needs to be paid during a later period. (Companies keep an amount of money separate in their financial records to pay for this): DEFERRED TAX recording a company’s financial activities in a way that hides the true situation: CREATIVE ACCOUNTING to write or send a bill for work you have done or goods you have provided: TO INVOICE the usual way of keeping a company’s financial records, in which each amount spent, received, etc. is recorded with a credit in one account and a debit in another: DOUBLE-ENTRY BOOK-KEEPING Costs such as rent, interest, insurance premium, etc., that are paid in advance of actually incurring them and (as opposed to deferred charges) / money paid for goods or services upfront (this money is considered an asset on the balance sheet): PRE-PAID EXPENSES E) Describe the working capital flow using the chart below: LOSSES DIVIDEND PAYMENTS LOAN REPAYMENTS NEW INVESTMENTS WORKING CAPITAL FLOW PROFITS LOANS SALE OF ASSETS RETURN ON INVESTMENTS ↓ ↓ CASH DISTRIBUTION AND SALES COSTS MATERIALS WORK IN PROGRESS F) 1. Mezi nehmotná aktiva, jejichž hodnotu lze těžko přeměnit na peněžní prostředky, patří hodnota podniku, autorská práva a ochranná známka. Intangible assets, whose value is difficult to turn into cash, include goodwill, copyright and trademark. 2. Celková hodnota akcií podniku v jakémkoli daném okamžiku se nazývá tržní kapitalizací. Lze ji vypočítat počtem vydaných kmenových akcií násobeno jejich tržní cenou. Total value of a company´s shares at any given moment is called market capitalization. It can be worked out by a number of issued ordinary shares times/multiplied by their market price. 3. Hmotná aktiva jsou vlastnictvím, které má materiální čili fyzickou hodnotu. Tangible assets are a property that has a material or physical form. 4. Provozní kapitál je rozdíl mezi oběžnými aktivy a krátkodobými závazky. Working/operating capital is the difference between current assets and short-term liabilities. 5. Položky, o nichž firma předpokládá, že je bude vlastnit déle než jeden rok, se nazývají stálá aktiva. Items which a firm expects to keep for more than one year are called fixed assets. G) Complete the sentences using the verbs from the box: RETAIN DEFER INCUR OWE DISGUISE ACCRUE 1. The firm accrued debts of over $10 m. 2. Creative accounting uses all available accounting procedures and tricks to disguise the true financial position of a company. 3. An incurred expense is one that is purchased, but not paid for yet. An example would be buying an item with a credit card. 4. Creditors are the amounts that a business owes to its suppliers or to people who have made loans, shown as liabilities on its balance sheet. 5. Tangible assset is a physical thing that is owned by a company or person, such as goods, machines, buildings and cash. 6. The vast majority of capital spending by companies is financed from retained earnings. 7. The lenders agreed to defer the first debt repayment. 8. Fixed assets are depreciated over four years.