Пойгина Л.Б., Туринова Л.А. - English for Masters. Management Part 2 (1175657), страница 18
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Another alternative is that a bank may issue a letter of credit to back the commercialpaper issue of smaller firms that cannot obtain such a rating. In any case, the credit rating agencies alwaysrequire open bank credit lines to back up outstanding commercial paper.The incentive to use commercial paper is that firms usually pay lower interest rales than bank prime ratesfor commercial paper.From a legal viewpoint, commercial paper includes all publicly issued debt, and an analyst mayoccasionally note this account title in the long-term section of the liabilities. Accountants usually do not makemistakes on debt maturities, so in this event it is safe to assume that the legal definition is being used incontrast to the financial one.IV __________________________________Trade accounts payable represent normal credit extended by suppliers for purchases of inventory andservices.
Trade accounts payable owed by one company are shown as accounts receivable on its creditors'financial statements. Find out the normal credit terms and then make a judgment about whemer the borroweris showing the ability to take advantage of discounts, which may work out to be a high effective rate ofinterest.Accounts payable represent a permanent source of "interest free" funding for the company because, as thecompany pays its accounts, financing always remains available for new purchases.
If, however, a companydoes not pay its accounts on a timely basis, its suppliers may refuse to extend it credit for new purchases.The company then either has to pay cash or finds itself without a source of inventory to continue itsoperations.
Stretching the amount of time between making purchases and paying for them is referred to as"riding the trade" and could indicate mismanagement or inadequate liquidity.V__________________________________Accruals represent unpaid costs that the company has expensed through the income statement. Theseexpenses usually are those paid at regular intervals, such as salaries and wages, utilities, and withholdingtaxes. For example, if a balance sheet is prepared in the middle of a pay period, the wages owed as of thatdate are shown as an accrual.46An analyst should look for significant amounts in this account. If a comparative analysis reveals anyunusual buildup, a liquidity crisis could be in the making.
Accruals of prior quarters' withholding taxes areespecially crucial because of potential Internal Revenue Service priority to a company's assets. Most banks donot lend money to companies with delinquent tax liabilities.VI _________________________Current maturities of long-term debt represent the principal portion of installment payments on long-termdebt due (annually, quarterly, or monthly) over the next 12 months. Unlike other current liabilities, whichdepend on the conversion of current assets for repayment, these current maturities are usually paid from acompany's net cash flow.
The analytical problem with this account is that some firms have cash flow or netcash conversion cycles shorter than one year. This means that all of the other current asset and liabilityaccounts, mentioned above, will likely be of shorter maturity than this account. Ln the case of a food servicecompany, for example, the cycle could be as short as a week. Comparing the current maturities of long-termdebt for a whole year to those shorter accounts may be misleading with regard to the liquidity problems of thefirm.Analysis of amortizing debt should include identification of its terms, conditions, security, and to whom itis owed. Some loans are structured so that no principal repayments are made until the end when the entirebalance of the loan becomes due.
An analyst must be alert to any such "bullet" loans or other "balloon"payments (substantial and irregular principal repayments) in this account since they may require refinancing.If refinancing is likely to be needed, the lender needs to determine the likelihood of such refinancing beingavailable.VII __________________________Income taxes payable represents the actual tax liability due, probably by the next tax payment date. Thetax liability shown in this account seldom matches the income tax expense from the income statement fortwo reasons.First, companies pay estimated income tax for the current year on a quarterly basis. Thus the year-end taxliability is far less than the total lax liability, ln fact, any taxes owed for previous quarters should put thecredit analyst on notice for potential IRS liens.Second, the income-taxes-payable account does not include any of the noncurrent deferred taxes that maybe recorded on the income statement - as provision for taxes — but are not due since they are only atheoretical liability for a future period.
Taxes due on a deferred basis are recorded as a reserve item.VIII ________________________Other current liabilities are usually insignificant in relation to total current liabilities. This account isusually made up of reductions to asset accounts as deferred or unearned income, unfilled subscriptions, ordeposits of some kind. For example, if a company manufactures custom-made or high-priced products, itmay require deposits before processing or shipping orders. Such deposits, which are classified as a currentliability, can be an important source of financing for these firms.Any firm that operates under contracts and calculates its income on the percentage-of-completion basis,like a construction firm, may have deferred income.
Under percentage-of-completion accounting, profits inexcess of the originally budgeted amount are not recognized until the contract is completed. This can be anespecially harsh treatment for firms doing business with governmental bodies that traditionally are slow toofficially approve the completion of the contract. In some of these cases, a cash payment may even havebeen made, but the income cannot be recognized. Assuming the contract is completed without unexpectedmishap, this liability will actually become part of net worth.In liquidation, customer deposits can also affect the value of inventory', especially if the deposits were forinventory in stock and a security interest was granted to the depositor.
Cash held for year-end disbursementto a profit-sharing plan would also be reported in this account.2. Scanning exerciseScan through the text to find information on 4 aspects:a) A clean-up period;47b) Loan applicant's viewpoint;c) Deferred income;d) Asset-based financing.3. Vocabulary Study exerciseGlossarycurrent liabilitiesthe cash budgetthe cash generating cyclea short-term debtnotes payable to bankscommercial paperaccounts payableaccrualsloan repayments to officers or affiliatescurrent-year income taxesshort-term loan analysislong-term loan analysisthe liquidity of the borrow's assetsfrom the loan applicant's viewpointthe short-term financing of a company's current assetsa seasonal line of credita short-term bank debtnonseasonal self-sufficiencya clean-up periodpayout requirementsexpiration dateinterest rateasset-based Financinga built-in authorization ralerenewal of the credit linea gradual lowering of the credit-line amountto issue a letter of creditcredit rating agenciestrade accounts payablepurchase of inventory and servicesa high effective rate of interest"siding the trade"to indicate mismanagementinadequate liquiditysalaries and wagesutilitieswithholding taxesto reveal any unusual build upa liquidity crisisaccruals of prior withholding taxespotential Internal Revenue service priority to...current maturities of long-term debtinstallment payments of long-term debtanalysis of amortizing debtto have deferred incomepercentage-of-tompetition accountingcustomer depositsa profit-sharing plan48a) find the following Russian word-combinations in Text 6 and translate them into Russian:Текущие обстоятельства; цикл получения денежных средств;бюджет денежныхсредств;оплачивать текущие обязательства, векселя банкам; коммерческие бумаги;счетакредиторов; начисления; выплаты кредита управляющим или филиалам; налоги на доход текущегогода; анализ краткосрочного кредита; ликвидность активов заемщика; соотношение между активамии текущими обязательствами; возможность достаточно быстро конвертировать активы в деньги;являться сутью оценки домов; с точки зрения заявителя на кредит; уровень текущих обязательств;установить конец бюджетного года; потребности краткосрочного финансирования; часть активоврозничного продавца; обеспечить поставку и разнообразие товаров; готовить годовые отчеты;отсутствие счетов дебиторов и товарных запасов;краткосрочное финансированиетекущихактивов компании; компания с потребностями сезонного финансирования; иметь сезоннуюкредитную линию; использовать кредит банка; конверсионный цикл денежныхсредствкомпании;испытыватьмежсезонное самообеспечение; период подчистки; возобновляетсякредитная линия; финансирование, основанное наактивах;кредиты,гарантированныенекоторыми активами; поддерживаться на уровне установленного процента от финансируемыхактивов; современная теория корпоративных финансов; количественно определить очевидныетенденции потребностей; иметь встроенную вставку амортизации; соответствовать нормеприбыли; постепенное понижении сумм кредитования; гарантировать счета дебиторов поминимуму; предусматривать авансы, оплаченные под сумму заимствования; рассогласованиефинансирования; необеспеченное краткосрочное заимствование от кредиторов; с юридической точкизрения; торговые счета дебиторов; закупка товарных запасов и услуг; показывать как счет дебиторав финансовых объемах кредитора; выяснять нормальные сроки кредита; постоянные источникбеспроцентного финансирования; списать через отчет о доходах; показывать как начисления;приоритет налоговой службы по отношению к....; текущие погашения долгосрочного долга; иметьотлаженные доход; стать частью чистой стоимости; план распределения прибыли в конце года.b) find the following English word-combinations in the text and translate them into Russian.To pay short-term liabilities; to have sufficient cash on hand; to convert assets to cash; the timing of aliability's repayment terms; the essence of debt evaluation; to be a sensitive point; to arrange the fiscal yearend; to be invested in inventory; percent of total sales; to provide the supply and variety of merchandise; theabsence of accounts receivable; to fluctuate; the cash conversion cycle; by paying back all lines of credit; torepresent a seasonal or revolving line of credit; to maintain at a set percentage level; in relation to the assetsfinances; to qualify the obvious tendency for firms; permanent increases in inventories and accountsreceivable; matching long-term funding with long-term needs; to be consistent with the rate of profits;against a borrowing base; a mismatch of financing; to represent unsecured short-term borrowing; to back thecommercial paper issue of smaller firms; to back up outstanding commercial paper; to be shown as accountreceivable on creditors financial statements; to find out the normal credit terms; to take advantage of discounts;to represent a permanent source of " interest free" funding; to pay accounts on a timely basis; to extend creditfor new purchases; to represent unpaid costs; to expense through the income statement; to be paid at regularintervals; to be prepaid in the middle of a pay period; to be shown as an accrual; to look for significantamounts in die account; to lend money to companies with delinquent tax liabilities; to depend on theconversion of current assets for repayment; to be paid from a company's net cash flow; to be made up ofreductions to assets accounts; under percentage-of-competition accounting; to be granted to the depositor; foryear-end disbursement to a profit-sharing plan.4.
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