I. Match the words their definitions.
| a) profit | 1) material wealth in the form of money or property |
| b) turnover | 2) a person who possesses something |
| c) capital | 3) the number of times merchandise is bought, sold and restocked in a certain period of time |
| d) share | 4) an instance of selling or buying |
| e) owner | 5) one of equal parts, as the capital stock in a corporation |
| f) interest | 6) the financial return after all expenses have been accounted for |
| g) loan | 7) an establishment that performs financial transact tions |
| h) trade | 8) a charge for a loan of money |
| i) bank | 9) money lent with interest to be repaid |
II. Complete the sentences below using the information of the text.
1. When two firms agree to join together it is called a … . 2. When one company purchases sufficient voting shares in another company to give it control of that company it is called a … . 3. There are three types of …: horizontal, vertical and lateral. 4. … reduces the risk for the company because it becomes less dependent on one market or one product. 5. Retained … is the key internal source of finance. 6. Companies issue two main types of …: ordinary and preference. 7. … is vital to a firm, both for growth and for survival. 8. … occurs when the firm sells its debts for less than their face value to receive immediate cash. 9. When the firm leases capital equipment it avoids the cost of … it.
III. Say whether these statements are true or false, and if they are false say why.
1. Turnover is a popular base to measure the size of a firm. 2. Internal or organic growth of firms is a slow process. 3. Takeovers take place between two firms agreeing to join together. 4. The integration that takes place as a result of the new company reorganizing its activities can be only horizontal. 5. Vertical integration occurs when a company moves into a new product area or market as a result of the merger/takeover. 6. The key external source of finance is retainedprofits. 7. The main external long-term source of finance is capitalinvested. 8. Sole traders and partners issue shares. 9. Companies issue three main types of shares. 10. A sole trader may also obtain long-term loan capital by issuing debentures. 11. Debentures are long-term loans which receive interest which must be paid. 12. Bankoverdrafts are based on a current account. 13. Hirepurchase and creditsale agreements can also be used by the firm to finance the purchase of fixed assets. 14. Companies refuse to produce a cash-flow analysis as part of their published accounts.
IV. Answer the following questions.
1. What are popular bases to measure the size of a firm? 2. How do firms grow? 3. What takes place between two firms agreeing to join together? 4. When do takeovers occur? 5. What kinds of integration do you know? 6. What kind of integration is also known as conglomerate integration? 7. What are the advantages of vertical integration? 8. What does growth require? 9. What are the major sources of finance for a public corporation in the public sector? 10. Is the key internal source of finance retained profits or diversification? 11. What choice must owners make? 12. Where can sole traders and partners find their own capital? 13. What are the two main types of shares which companies issue? 14. In what way may also a company obtain long-term loan capital? 15. What other major external sources of finance in addition to share and loan capital do you know? 16. Why is finance vital to a firm?