1、LOGOModule 5 Money and FinanceGdut Functions of Money Medium of exchange A unit of account: measuring the value of goods and services A temporary store of valueFinance The management of money 财务管理；财政 Ministry of Finance; Money used to support an undertaking, fund: 资金 finances the money that an organ
2、ization or person has, and the way that they manage it 财源，财力，财务状况 V：fund，to provide money for a projectContents Money expression A bank loan A culture of debt Choosing an investment Company finance Business costsMoney expression Money often costs too much. Ralph Waldo Emerson, Essayist1. Its expensi
3、ve to borrow money. 2. Pursuing money only makes you neglect the more important things in life. Invoice invoice sb (for sth) | invoice sth (to sb/sth) to write or send a bill for work you have done or goods you have provided Be invoiced for the goods N. list of goods sold or services provided with t
4、he price(s) charged, esp sent as a bill Compare: bill, check; receipt, voucher A bank loan A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower. In a loan, the borrower initially receives or borrows
5、an amount of money, called the principal (本金), from the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later time. Typically, the money is paid back in regular installments, or partial repayments. The loan is generally provided at a cost, referred to as int
6、erest on the debt, which provides an incentive for the lender to engage in the loan. Types of loans Secured loan: a loan in which the borrower pledges some asset (e.g. a car or property) as collateral(抵押物) for the loan. Eg: mortgage loan Unsecured loan: monetary loans that are not secured against th
7、e borrowers assets. Eg: credit card debt Demand loan: short term loans (typically no more than 180 days) that are atypical in that they do not have fixed dates for repayment and carry a floating interest rate which varies according to the prime rate. They can be called for repayment by the lending i
8、nstitution at any time. Demand loans may be unsecured or secured. Security for a loan Mortgaged property A car / house: mortgage loan Borrowers do not have a clear title over it and cannot sell it without the lenders consent. A guarantor A person, the guarantor, agrees to pay back the debt if the bo
9、rrower cant or wont. Useful TermsOutgoing (日常开支日常开支): the money that you have to spend regularly, for example on rent or foodSecurity (抵押品抵押品): jewelry, insurance policies, real estate, etc that can be used to guarantee that one will pay back borrowed money or keep a promise, e.g. lend money on secu
10、rity.Civil Service (政府机关政府机关)/Civil or Public Servant (公务员公务员): Body of government employees entrusted with the administration of the country, and mandated to carry out the policy of the government.Blue-chip stocks (蓝筹股蓝筹股): Stocks issued by large companies are called blue chip stocks. Because the c
11、ompanies are well established, with somewhat predictable earnings, their stock prices tend to fluctuate less than other equities and thus have relatively stable prices. These companies often pay steady dividends, giving the investor income in addition to the potential for capital appreciation. A cul
12、ture of debt Alan Greenspan: American economist served as Chairman of the Federal Reserve of the United States from 1987 to 2006. Useful Terms Remortgaging (再抵押再抵押): A remortgage (also known as refinancing) is the process of paying off one mortgage with the proceeds (收益收益) or earnings from a new mor
13、tgage using the same property as security. Often the purpose of switching is to secure a more favorable interest rate from a different lender. Down-payment (定金定金/首期款首期款): a deposit or first installment on something before the full amount is paid. Negative equity (负资产负资产): Negative equity occurs when
14、 the value of an asset used to secure a loan is less than the outstanding balance on the loan. In the United States, assets (particularly real estate, whose loans are mortgages) with negative equity are often referred to as being underwater, and loans and borrowers with negative equity are said to b
15、e upside down.Equity: 1. finance the money for business activities (capital) that a company obtains by selling shares rather than from loans:股本to issue/raise equity an equity interest/stake (in sth) equity holdings/investments equity markets/prices/values an equity analyst/investor/trader 2. (Financ
16、e ; Stock Exchange ) equities pl.shares in companies, especially ordinary shares; the business of trading shares:普通股票to buy/hold/invest in/sell/trade equities 3. (also home equity, especially in AmE) U) the value of a property after all debts have been paid:抵押资产的净值 Equity = assets- liabilities They
17、have 10 years of mortgage payments left and about $75 000 equity in their home.Home equity loan （房屋净值贷款）（房屋净值贷款） a type of loan in which the borrower uses the equity in their home as collateral (抵押物). useful to finance major expenses such as home repairs, medical bills or college education. A home e
18、quity loan creates a lien (扣押权) against the borrowers house, and reduces actual home equity. Lien：right to keep sbs property until a debt owed in connection with it (for repair, transport, etc) is paid Equity Borrowing (房屋淨值貸款房屋淨值貸款) Home equity borrowing Equity financing - or equity loans - are a f
19、lexible form of borrowing secured by your home. Home equity loans let you draw on the investment you have in your home to do a variety of things, such as: Renovate or make home improvements Buy a new car Purchase an investment property Finance school or medical fees Consolidate your debts Equity Bor
20、rowing (房屋淨值貸款房屋淨值貸款) Equity explained Equity is the difference between what you owe on your property and its current market value. For example, if your home is worth $200,000 and the principal remaining on your mortgage is $40,000, the portion of your home which you own - the equity - is $160,000.E
21、quity Borrowing (房屋淨值貸款房屋淨值貸款) How it works You can use the equity in your home as security for a loan. Most lenders will allow you to borrow some or all of the value of the equity. Because the value of your home almost always exceeds the debt, it is less risky lending against equity. Hence interest
22、 rates on these loans are often lower. Equity Borrowing (房屋淨值貸款房屋淨值貸款) Advantages of equity borrowing Let you use your largest source of wealth - your home Flexible, quick form of finance Can be used for a wide range of needs, from paying bills to investing in shares Interest rates can be lower. Equ
23、ity Borrowing (房屋淨值貸款房屋淨值貸款) Disadvantages of equity borrowing: As with any mortgage secured against your home, if you default on payments the lender may call in or suspend the loan Can extend the time needed to pay off your mortgage Your house can decline in value, reducing your equity. Borrow and
24、spend policy:good or evil Debt is good. - more spendingmore economic growth - improve the living standard Debt is evil If asset values crash more debt more money in the market potential risk of inflation unstable society and market Too much debt not payable bad debt bankruptcy unemployment A Culture
25、 of Debt Remortgage your home: to borrow more money against the value of your house when you have already done so once To make a down-payment: to put a deposit or first installment on something before paying the full amount Asset value will crash: the value of peoples properties will fall suddenly T
26、o be in negative equity: when your debts are greater than your assets. Presentation P 49, speaking 5 Ponder over the following questions: What factors shall be considered when choosing an investment? Figure out the priority. What would be the risks? Which cinema will you consider a better choice and
27、 why? What are the disadvantages and advantages? Use the language box to make your presentation. Mutiplex (综合性多厅影院综合性多厅影院): A building, especially a movie theater or dwelling, with multiple separate units.p.a. (每年每年): per annumIndependent Cinema (独立电影院独立电影院): An independent cinema is usually a small
28、 cinema playing independent films or art films. An independent film is a film that is produced mostly outside of a major film studio. The term also refers to art films which differ noticeably from most mass marketed films. In addition to being produced by independent production companies, independen
29、t films are often produced and/or distributed by subsidiaries of major studios. In order to be considered independent, less than half of a films financing should come from a major studio. Independent films are sometimes distinguishable by their content and style and the way in which the filmmakers p
30、ersonal artistic vision is realized. Usually, but not always, independent films are made with considerably lower budgets than major studio films. Generally, the marketing of independent films is characterized by limited release designed to build word-of-mouth or to reach small specialty audiences.Co
31、mpany finance How to manage the companys finance? What small business would you like to set up? Think of the financial risks of such a venture and list them out. Financial risks Cashflow problems from late payment by customers. Taking out loans they cannot service properly Not keeping cash reserves
32、for times of difficulty Not insuring themselves against business risk. Not setting aside enough money for marketing and advertising Not providing for their own retirement Financial terms Variable cost: expenses that change in proportion to the activity of a business. Fixed cost: business expenses th
33、at are not dependent on the level of goods or services produced by the business What are they? Rent, salary, fuel consumption, raw material, maintenance fee, manufacturing overheads, electricityFinancial terms Current assets: cash and other liquid assets that can or will be converted to cash or used
34、 within one year. Fixed assets: plant, property, equipment, and other assets expected to last for more than one year. Accumulated depreciation represents the cumulative value of fixed assets that have been expensed or depreciated. Current liability: claims of creditors that are to be repaid within o
35、ne year. Long-term debt: debts that come due one year or longer after the date on the balane sheet. Owners (shareholders) equity: claims of the proprietor (业主，老板), partners, or stockholders against the assets of the firm; the difference between total assets and total liabilities. Dividends：an amount
36、 of the profits that a company pays to shareholders Accounts payable: a account sub-ledger that records amounts that a person or company owes to suppliers , but has not paid yet (a form of debt), sometimes referred as trade payables. Eg: When an invoice is received, it is added to the file, and then
37、 removed when it is paid. In households, accounts payable are ordinarily bills from the electric company, telephone company, cable television or satellite dish service, and other such regular services. In a business, there is usually a much broader range of services in the A/P file most business ent
38、ities, Accounts Receivable is typically executed by generating an invoice and either mailing or electronically delivering it to the customer, who, in turn, must pay it within an established timeframe, called credit terms or payment terms. Operating income: gross income minus operating expenses, also
39、 called EBIDA (earning before interest depreciation, taxes and amortization (分期偿还) ) Financial statement财务报表：a formal record of the financial activities of a business, person, or other entity. The objective of financial statements is to provide information about the financial position, performance a
40、nd changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions Balance sheet: also referred to as statement of financial position or condition, reports on a companys assets, liabilities, and Ownership equity at a given point in time. Income sta
41、tement: also referred to as Profit and Loss statement (or a P&L), reports on a companys income, expenses, and profits over a period of time. Profit & Loss account provide information on the operation of the enterprise. These include sale and the various expenses incurred during the processing state.
42、 Statement of retained earnings: explains the changes in a companys retained earnings over the reporting period. Statement of cash flows: reports on a companys cash flow activities, particularly its operating, investing and financing activities. Income statement (损益表) Balance sheet (资产负债表 assets 资产；
43、liabilities债务) Cash flow statement (现金流量表)To check whether a business is healthy, you need to look at Cash flow Cash flow The flow of cash into and out of a business over a period of time. Watching the cash inflows and outflows is one of the major management tasks of an owner. The outflow of cash is
44、 measured by those checks you will write every month to pay salaries, suppliers, and creditors (债权人 CF：debtor债务人). The inflows are the cash you receive from customers, lenders, and investors. Inflows Loans Incomes of the sales of your product or service . Outflows Labor cost Tax Loan repayment Produ
45、ction costCan you name some typical inflows and outflows for a company?Useful TermsTypical Inflows and Outflows Useful TermsTypical Inflows and OutflowsPrincipal: 本金本金 Useful TermsTypical Inflows and Outflows Inflows outflows Positive cash flow Inflows outflows Negative cash flowUseful TermsNet Chan
46、ge in Cash (现金的净值变化现金的净值变化): Net Change in cash is the increase or decrease in cash from the beginning to the end of a year. Net Change in Cash represents the sum of: Cash From Operating Activities Cash From Investing Activities Cash From Financing Activities Foreign Exchange Effects. Comparing a co
47、mpanys net change in cash to those generated by its industry peers is a good way to gauge the health of its cash flow situation. A company not generating the same amount of cash as competitors is bound to lose out when times get rough. However, since profitability is composed of items that are not c
48、ash-based, net change in cash does not do a very good job of indicating the overall financial well-being of a company. purposesOwners and managers require financial statements to make important business decisions that affect its continued operations. Financial analysis is then performed on these sta
49、tements to provide management with a more detailed understanding of the figures. These statements are also used as part of managements annual report to the stockholders. Employees also need these reports in making collective bargaining agreements (CBA) with the management, in the case of labor union
50、s or for individuals in discussing their compensation, promotion and rankings. Prospective investors make use of financial statements to assess the viability of investing in a business. Financial analyses are often used by investors and are prepared by professionals (financial analysts), thus provid
