Пойгина Л.Б., Туринова Л.А. - English for Masters. Management Part 2 (1175657), страница 17
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Summarizing exercisea) Sum up the main points presented in Text 5. Write the plan of the text in the form ofstatements.b) Develop your plan into the summary.5. Discussing exercise The text is states that "one of the best solutions for the analyst is to look to outside appraisers".Why? Provide your own reasoning.43 Discuss the advantages of the equity method of accounting. Discuss the issue why disregarding the intangibles account can obscure important informationabout the company , its operations, and its real value in liquidation.6.
Translation exerciseTranslate from Russian into English paying attention to special vocabulary. The following wordcombinations can be of use:To merit unsecured loans; stable cash flow; to determine debt payment capacity; to evaluate assets interms of ...; to provide a "back door" out of the transaction; cash flow analysis; in contrast to the idea; theconcept of going concern; from the collateral viewpoint; to be reviewed in terms of marketability; to add tothe firm's liquidity; an item's fungibility; to be converted into cash at market value; assets on the balancesheet; to be presented in order of liquidity; to be sold and then collected; to be used with raw materials andlabor; to be unencumbered; to be pledged to other lenders; to affect asset quality; the controllability of theassets; environmental or other regulatory risk; to take into account in seizing the asset.Даже большие банки имеют немного заемщиков, которые заслуживают необеспеченные кредиты.В то время, как некоторые кредиторы полагают, что надежный и устойчивый поток денежных средствявляется — ключом к определению способности возвращать долги, другие кредиторы оцениваютактивы с точки зрения их ценности как имущественного долга, обеспечивающего "заднюю дверь" изсделки, если, анализ потока денежных средств оказался негодным.
В отличие от этой идеи, одним изосновных принципов, руководящих бухгалтерами,, является концепция действующего предприятия.С точки зрения активы, должны рассматриваться с учетом их реализуемости их на рынке(способности добавить ликвидность фирме). Важной частью надежности цены имущественного залогаявляется диапазон использования изделия, то есть полезность для других. Как пример, промышленныйреактивный самолет может иметь ограниченное использование для строителя недвижимости в случаеспада в этой промышленности; однако, нефтяная компания может его использовать, если, конечно,нет общего спада экономики С1раны.
Почти все имеет некоторый диапазон использования. Например,цена судна может значительно упасть во время спада международной торговли, но кое-что можновернуть, так как оно может быть разрезано на металлолом.Еще одним основным фактором в анализе ценности является ликвидность. Этот показательизмеряет как быстро актив может быть конвертирован в денежные средства по или близко к рыночнойстоимости. Активы в балансовом отчете представлены в порядке их ликвидности:• Дебиторская задолженность, её просто необходимо получить;• Товарные запасы которые должны быть проданы и затем получены денежные средства; и• Основные средства, которые должны использоваться с сырьем и рабочей силой, чтобысоздать что-то полезное, которое после этою должно быть продано, а деньги получены.• Наконец, экспертиза активов должна также определить следующее:• Не заложены ли активы (а именно, не заложены другим кредиторам).
Хотя обременения незатрагивают качество актива, они затрагивают возможность кредитора использоватьактив, если необходимо.• Насколько быстро актив может терять ценность из-за износа, поломок и устаревания.• Управляемость актива - может ли он быть легко перемещен иди спрятан трудным заемщиком.• Имеется ли риск для окружающей среды или любой другой законодательный риск,который кредитор должен принять во внимание при овладении активом.44Text 61. Skimming exerciseSkim through Text 6 and identify the best suitable for each logical part:a)b)c)d)e)0g)h)Commercial PaperAccrualsIncome Taxes PayableConcept of Current LiabilitiesOther Current LiabilitiesAccounts PayableCurrent Maturities of Long-term DebtNotes Payable to BanksCurrent LiabilitiesI_________________________Current liabilities are subject to the same questions raised before concerning how current is current .
Theissue here is tied to the cash generating cycle of the firm, the cash budget. A company normally pays itscurrent liabilities (or short-term debt) when current assets are converted to cash.A company's current liabilities may include notes payable to banks, commercial paper, accounts payable,accruals, loan repayments to officers or affiliates, and current-year income taxes. Thus, this area is moreimportant for short-term loan analysis than for long-term loan analysis.
The liquidity of the borrower's assetsand the relationship between assets and current liabilities may change significantly over a long period. Topay snort-ten n liabilities, however, the firm will need to have sufficient cash on hand or convert assets tocash quickly enough to nay the current liabilities as they come due. Thus, review of the timing of a liability'srepayment terms is the essence of debt evaluation.From the loan applicant's viewpoint, the level of current liabilities, and especially their relationship tocurrent assets, is a sensitive point because borrowers know that bank analysis frequently focuses on it.Therefore, borrowers take care to arrange the fiscal year end to occur at a time when short-term financingneeds will be the lowest.
Think about suggesting to Macy's executives that they close the financialstatements on November 30. At that time of year, most of the retailer's assets are invested in inventory; theretailer is just beginning to enter its busiest season, when 35 percent of its total sales occur in just 30 days.Thus, short-term borrowings are bound to be high as the firm strains to provide the supply and variety ofmerchandise demanded by its customers. Liquidity will look very low.Before charge accounts were common, retail stores frequently made their fiscal year-end report onJanuary 31 (after an "inventory' reduction sale"). However, now that charge accounts are common, if storeschose that alternative, their receivables would be unacceptably high.
Therefore, most retail stores current ])'release year-end statements either at June30 or July 31. These dates allow the stores to collect most of theiraccounts receivable from their Christinas selling season and also to have low inventories (because July is intheir slowest quarter). The absence of accounts receivable and inventory permits the stores to use their cashto pay down liabilities and present a financial statement that looks better than one with assets and liabilitieshigh relative ю equity.II_______________________Notes payable to banks frequently represent the short-term financing of a company's current assets(accounts receivable and inventory).
A company with seasonal financing needs may have a seasonal line ofcredit. For example, a retail company may use a bank loan to increase its inventory prior to Christmas. As thecompany sells its inventory, it creates accounts receivable or cash. When these accounts are collected or cashsales accumulate, the bank loan is repaid. Therefore, short-term bank debt may fluctuate, depending on whenin the cash conversion cycle a company prepares its balance sheet. Further, most lending institutions expectthat during the slow part of the year the borrower w i l l evidence its nonseasonal self-sufficiency by payingback all lines of credit. This period is called a clean-up period.If a company's bank debt represents a seasonal or revolving line of credit, the analyst must determine itsterms, including payout requirements, if applicable.
Since the company may have loans from more than one45bank, the evaluation should cover the purpose, expiration date, interest rate, and security pledged on eachcredit line. The evaluation should also assess the adequacy of these lines of credit for the company's needs. Acompany may have asset-based financing, which is a term for loans secured by certain assets. Asset-basedfinancing is usually maintained at a set percentage level in relation to the assets financed.Current corporate finance theory attempts to quantify the obvious tendency for firms that are rapidlygrowing and are not seasonable to require permanent increases in inventories and accounts receivable.
Suchfirms do not earn sufficient profits to cover their growth requirements.While some institutions have funded this requirement for inventories and accounts receivable with longterm debt, thereby matching long-term funding with long-term needs, this may not.be the best solution. Aproblem occurs because long-term loans usually have a built-in amortization rate, and this rate may not beconsistent with the rate of profits or cash flow needed to repay the loan, just as mentioned in the lastparagraph.
Further, inventories and accounts receivable needs may continue to grow. While lines of credit atone time were considered synonymous with seasonal borrowing, today banks offer a line of credit to supportaccounts receivable where no clean-up period is expected and repayment at year end is expected to comefrom renewal of the credit line or other refinancing. (Sometimes this type of loan is called a one-yearrevolving credit.)Ultimately, slowed growth and profits over a period of time should result in less use of the credit' line anda gradual lowering of the credit-line amount each time it comes up for renewal.
A credit line typically hasone year or less maturity, is secured by accounts leceivable al a minimum, and typically provides advancesmade against a borrowing base. While, this is technically a mismatch of financing - short-term financing for along-term need banks prefer the control that a one-yearcommitment provides, given that the companies using this type of service tend to be undercapitalized.III _________________________Commercial paper usually represents unsecured short-term borrowings from investors for up to 270 daysin amounts of $100,000 or more. This form of financing is usually only available to well-regarded companieswith an established credit rating (as conferred by such investment services as Moody's Investors Service orStandard & Poor's).
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