Giáo Trình TACN

PART ONE
COURSEBOOK
CHAPTER 1 BACKGROUND FOR

ECONOMICS
CHAPTER 2 PUBLIC FINANCE
CHAPTER 3 MONEY, BANKING AND
FINANCIAL MARKETS
CHAPTER 4 BUSINESS
ADMINISTRATION
CHAPTER 5 ACCOUNTING
CHAPTER 6 INTERNATIONAL
ECONOMICS
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CHAPTER 1
BACKGROUND FOR ECONOMICS
UNIT 1: ECONOMICS
UNIT 2: ECONOMIC SYSTEMS
UNIT 3: MICROECONOMICS
UNIT 4: MACROECONOMICS
UNIT 5: DEMAND AND SUPPLY
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UNIT 1 ECONOMICS
PREVIEW
1. Look at the following photos and can you guess what their names are.
(a) (b)
(c)
2. Who are they?
A.
He was born in Prussia on May 5, 1818. He began exploring sociopolitical theories at
university among the Young Hegelians. He became a journalist, and his socialist
writings would get him expelled from Germany and France. In 1848, he published
The Communist Manifesto with Friedrich Engels and was exiled to London, where he
wrote the first volume of Das Kapital and lived the remainder of his life.
B. C.
He was an economist and His best-known work, 'The General Theory of Employment,
philosopher who wrote what is Interest and Money', was published in 1936, and became a
considered the "bible of benchmark for future economic thought. It also secured his
capitalism," The Wealth of position as Britain's most influential economist, and with the
Nations, in which he details advent of World War Two, he again worked for the treasury.
the first system of political In 1942, he was made a member of the house of lords.
economy.
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READING
READING
What is Economics?
Ever wonder why food costs rise
when gas prices spike? Ever
question why U.S. politicians worry
when other countries talk of going
bankrupt? Ever wonder why you
can’t get a good interest rate on
your savings account? All of these
phenomena can be explained
through economics.
Economics is the study of how people choose to use resources.
Resources include the time and talent people have available, the land, buildings,
equipment, and other tools on hand, and the knowledge of how to combine them to
create useful products and services.
Important choices involve how much time to devote to work, to school, and to
leisure, how many dollars to spend and how many to save, how to combine resources to
produce goods and services, and how to vote and shape the level of taxes and the role of
government.
Often, people appear to use their resources to improve their well-being. Well-being
includes the satisfaction people gain from the products and services they choose to
consume, from their time spent in leisure and with family and community as well as in
jobs, and the security and services provided by effective governments. Sometimes,
however, people appear to use their resources in ways that don't improve their well-
being.
Economics is the study of the production and consumption of goods and the
transfer of wealth to produce and obtain those goods. Economics explains how people
interact within markets to get what they want or accomplish certain goals. Since
economics is a driving force of human interaction, studying it often reveals why people
and governments behave in particular ways.
There are two main types of economics: macroeconomics and microeconomics.
Microeconomics focuses on the actions of individuals and industries, like the dynamics
between buyers and sellers, borrowers and lenders. Macroeconomics, on the other hand,
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takes a much broader view by analyzing the economic activity of an entire country or
the international marketplace.
A study of economics can describe all aspects of a country’s economy, such as
how a country uses its resources, how much time laborers devote to work and leisure,
the outcome of investing in industries or financial products, the effect of taxes on a
population, and why businesses succeed or fail.
People who study economics are called economists. Economists seek to answer
important questions about how people, industries, and countries can maximize their
productivity, create wealth, and maintain financial stability. Because the study of
economics encompasses many factors that interact in complex ways, economists have
different theories as to how people and governments should behave within markets.
Adam Smith, known as the Father of Economics, established the first modern
economic theory, called the Classical School, in 1776. Smith believed that people who
acted in their own self-interest produced goods and wealth that benefited all of society.
He believed that governments should not restrict or interfere in markets because they
could regulate themselves and, thereby, produce wealth at maximum efficiency.
Classical theory forms the basis of capitalism and is still prominent today.
A second theory known as Marxism states that capitalism will eventually fail
because factory owners and CEOs exploit labor to generate wealth for themselves. Karl
Marx, the theory’s namesake, believed that such exploitation leads to social unrest and
class conflict. To ensure social and economic stability, he theorized, laborers should
own and control the means of production. While Marxism has been widely rejected in
capitalistic societies, its description of capitalism’s flaws remains relevant.
A more recent economic theory, the Keynesian School, describes how
governments can act within capitalistic economies to promote economic stability. It
calls for reduced taxes and increased government spending when the economy becomes
stagnant, and increased taxes and reduced spending when the economy becomes overly
active. This theory strongly influences U.S. economic policy today.
As one can see, economics shapes the world. Through economics, people and
countries become wealthy. Because buying and selling are activities vital to survival
and success, studying economics can help one understand human thought and behavior.
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COMPREHENSION
COMPREHENSIONQUESTIONS
QUESTIONS
1. What do resources include?
2. What can be considered as important choices?
3. What purpose do people use their resources for?
4. What does the term “well-being” mean?
5. Why does economics reveal the ways people and government behave?
6. What are two types of economics?
7. What does microeconomics study?
8. What does macroeconomics study?
9. What can you learn from the economic theory of Adam Smith?
10. What is the difference between the economic theory of Adam Smith and
Marxism theory?
11. What does the recent economic theory of the Keynesian School indicate?
12. In general, how can people benefit from studying economics?
VOCABULARY
VOCABULARYEXERCISES
EXERCISES
1. Complete the following passage with the words/ phrases in the box
relationships Theories study economic distribution
econometric monopolistic distributing monopoly economists
policy Analyze consumption government economy
Economists study the ways a society uses scarce resources such as land, labor,
raw materials, and machinery to produce goods and services. They analyze the costs and
benefits of (1) ………….. and consuming these goods and services. Economists conduct
research, collect and analyze data, monitor (2) …………… trends, and develop
forecasts. Their research might focus on topics such as energy costs, inflation, interest
rates, farm prices, rents, imports, or employment.
Most economists are concerned with practical applications of economic (3)
………….. in a particular area, such as finance, labor, agriculture, transportation, real
estate, environment, natural resources, energy, or health. They use their understanding
of economic (4) ………… to advise business firms, insurance companies, banks,
securities firms, industry and trade associations, labor unions, (5) ………. agencies, and
others. On the other hand, economists who are primarily theoreticians may use
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mathematical models to develop (6) ……….. on the causes of business cycles and
inflation, or the effects of unemployment and tax legislation.
Depending on the topic under study, (7) …………. devise methods and
procedures for obtaining the data they need. For example, sampling techniques may be
used to conduct a survey, and (8) …………. modeling techniques may be used to
develop forecasts. Preparing reports usually is an important part of the economist's job.
He or she may be called upon to review and (9) ………… all the relevant data, prepare
tables and charts, and write up the results in clear, concise language. Being able to
present economic and statistical concepts in a meaningful way is particularly important
for economists whose research is policy directed.
Economists who work for government agencies assess economic conditions in
the United States and abroad and estimate the economic effects of specific changes in
legislation or public policy. For example, they may (10) ………… how the dollar's
fluctuation against foreign currencies affects import and export markets. Most
government economists are in the fields of agriculture, business, finance, labor,
transportation, utilities, urban economics, or international trade. Economists in the U.S.
Department of Commerce study domestic production, distribution, and (11)
……………. of commodities or services; those in the Federal Trade Commission
prepare industry analyses to assist in enforcing Federal statutes designed to eliminate
unfair, deceptive, or (12) ………… practices in interstate commerce; and those in the
Bureau of Labor Statistics analyze data on prices, wages, employment, productivity, and
safety and health. An economist working for a state or local government might analyze
regional or local data on trade and commerce, industrial and commercial growth, and
employment and unemployment, and project labor force trends.
2. Match the words with the definitions below.

a) product e) growth
b) economic output f) gross domestic product (GDP)
c) inflation g) demand
d) economics h) goods
1. the study of how money works and is used.
2. is rising prices.
3. the value of goods and services produced in a country or area.
4. the value of all goods and services produced in a particular country.
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5. output in the economy increases
6. something made to be sold.
7. the materials and components used to make products, or the products that are
made.
8. the amount of goods and services that people want in a particular period.
LANGUAGE FOCUS
Present Simple
A. Permanent situations
The present simple is used to talk about actions and situations that are generally or
permanently true:
- The American Economic Association has about 18,000 members from all over the
world, most of whom are working as economists in academia, business, government,
international and not-for-profit agencies.
- The Association publishes seven journals. About 4,000 libraries subscribe to the
journals and individual members receive journals with membership.
B. The present simple is also used to talk about scientific or other facts:
- Economics is the study of the production and consumption of goods and the transfer of
wealth to produce and obtain those goods.
- Economics explains how people interact within markets to get what they want or
accomplish certain goals.
- Resources include the time and talent people have available, the land, buildings,
equipment, and other tools on hand, and so on.
PRACTICE
Exercise 1: Complete the following text using the verbs in the box.
discuss develop define ask publish change
Current Issues in Economics

Economists study changes occurring in specific countries or individual sectors of an
economy; some (1) ………… fundamental questions about the nature of economic
decisions; some address proposals to (2) …………. government policies.
Leading economists develop issues in two lectures sponsored by the American
Economic Association at its annual meeting. The address of the President of the
Association and an invited lecture called the Ely Lecture, named for a founder of the
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Association, (3) ………….. issues of the speakers' choice. More economists (4)
……….. their own issues in symposia where they present their work. The symposia
sometimes address more focused topics than the newspaper headlines and also (5)
……….. deeper understanding of economic phenomena. Economists from all over the
world present their latest research at the Annual Meetings of the American Economic
Association and economic agencies (6) ……….. annual reports that discuss significant
issues for the nation and the world.
Exercise 2: Match the first half of the sentences in column A with their endings in
column B to make complete sentence.
A B
1. Economists who work for government a) … how the dollar's fluctuation against
foreign currencies affects import and
agencies …
export markets
2. They estimate the economic effects of b) … in the fields of agriculture, business,
finance, labor, transportation, utilities,
…
urban economics, or international trade.
3. For example, they may study … c) … to assist in enforcing Federal statutes
designed to eliminate unfair, deceptive, or
4. Most government economists are … monopolistic practices in interstate
5. Economists in the U.S. Department of commerce
d) … specific changes in legislation or
Commerce study … public policy
6. Economists in the Federal Trade e) … assess economic conditions in the
United States and abroad.
Commission prepare industry analyses … f) … prices, wages, employment,
productivity, and safety and health.
7. Economists in the Bureau of Labor
g) … domestic production, distribution,
Statistics analyze data on … and consumption of commodities or
services.
GLOSSARY
GLOSSORY
- economics (n) [ˌiːkəˈnɒmɪks]: The social science that deals with the production,
distribution, and consumption of goods and services and with the theory and
management of economies or economic systems – kinh tế học
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- economy (n) [ɪˈkɒnəmɪ]: the management of the resources, finances, income, and
expenditure of a community, business enterprise, etc. – kinh tế
- resource (n): an economic or productive factor required to accomplish an
activity, or as means to undertake an enterprise and achieve desired outcome –
nguồn lực.
Example: Three most basic resources are land, labor, and capital; other resources
include energy, entrepreneurship, information, expertise, management, and time.
- combine (v) [kəmˈbaɪn]: to integrate or cause to be integrated; join together – kết
hợp
Example: Economics studies how to combine limited resources to produce goods
and services.
- combination (n) [ˌkɒmbɪˈneɪʃən]: the act of combining or state of being
combined – sự kết hợp
- choice (n) [tʃɔɪs]: the act of choosing; selection/ or a number or variety from
which to choose – sự lựa chọn
Example: We provide a variety of clothes in our shop, and our customers can have a
wide choice of styles and colors.
- choose (v) [tʃuːz]: to select from a number of possible alternatives; decide on and
pick out.
- well-being (n) a good or satisfactory condition of existence; a state characterized
by health, happiness, and prosperity; welfare – chọn
Example: Well-being includes the satisfaction people gain from the products and
services they choose to consume, from their time spent in leisure and with family and
community as well as in jobs, and the security and services provided by effective
governments
- satisfaction (n) [ˌsætɪsˈfækʃən]: the fulfillment or gratification of a desire, need,
or appetite – sự thỏa mãn
- consume (v) [kənˈsjuːm]: to purchase economic goods and services – tiêu dùng,
tiêu thụ
Example: The time consumed on that project was excessive
- consumption (n) [kənˈsʌmpʃən]: expenditure on goods and services for final
personal use – sự tiêu thụ
Example: Economics is the study of the production and consumption of goods and
the transfer of wealth to produce and obtain those goods.
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- produce (v) [prəˈdjuːs]: to make or manufacture – sản xuất
Example: Toyota produces automobiles for export.
- production (n) [prəˈdʌkʃən]: the creation or manufacture for sale of goods and
services with exchange value – sự sản xuất
Example: Value-added tax is a tax levied on the difference between a commodity's
price before taxes and its cost of production.
- microeconomics (n) [ˌmaɪkrəʊˌiːkəˈnɒmɪks]: The study of the operations of the
components of a national economy, such as individual firms, households, and
consumers – kinh tế học vi mô
- macroeconomics (n) [ˌmækrəʊˌiːkəˈnɒmɪks]: The study of the overall aspects
and workings of a national economy, such as income, output, and the
interrelationship among diverse economic sectors – kinh tế học vĩ mô
- theory (n) [ˈθɪərɪ]: A set of statements or principles devised to explain a group of
facts or phenomena, especially one that has been repeatedly tested or is widely
accepted and can be used to make predictions about natural phenomena – học
thuyết
Example: The general equilibrium theory studies simultaneously every market for
every commodity.
- theoretical (adj) [ˌθɪəˈrɛtɪkəl]: Of, relating to, or based on theory.
- capitalism (n) [ˈkæpɪtəˌlɪzəm]: The economic system in which the means of
production is privately held – chủ nghĩa tư bản
Example: In capitalism, the most important means of production is money rather
than land (as in feudalism) or labor (as in socialism).
- conflict (v) [ˈkɒnflɪkt]: a state of opposition between ideas, interests, etc.;
disagreement or controversy – mâu thuẫn
Example: Conflicts that are not readily resolved may cause the person to suffer
helplessness and anxiety.
- behavior (n) [bɪˈheɪvjə]: manner of behaving or conducting oneself – hành vi
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UNIT 2 ECONOMIC SYSTEMS
PREVIEWdi
PREVIEW
Discussion
1. What is the economic model of Vietnam?
2. Why is the Vietnamese economic model called “multi-sector” economy?
3. What are economic sectors existing in Vietnam’s economy?
READING
READING
Free market economy:
An economic system in which the market – that is the relation
between producers and consumers, buyers and sellers, investors
and workers, management and labour – is supposed to be
regulated by the law of supply and demand. Business firms are
supposed to compete freely, and any attempt at hindering free
competition (“restrictive practices”) is punishable by law.
Direct government intervention is theoretically ruled out although the government will
influence the economic situation through its fiscal and budgetary policies.
Planned economy:
A system whereby the structure of the market is deliberately planned by the state, in
which production and consumption quotas are fixed beforehand, and where there is no
real competition between industrial or commercial organizations. In the former Soviet
model, for instance, all the means of production and the channels of distribution are
state controlled. Private ownership does not exist in this field.
In practice, there is wide gap between the theoretical model and economic realities: the
so-called market economies rely more and more on Government planning and
intervention, whereas in planned economies, such capitalistic notions as profit tend to be
reintroduced.
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Mixed economy:
An economic system in which some goods and services are produced by the
government and some by private enterprise. It lies between a command economy and a
complete laissez-faire economy. In practice, most economies are mixed; the significant
feature is whether an economy is moving towards or away from a more laissez-faire
situation.
COMPREHENSION
COMPREHENSION QUESTIONS
QUESTIONS
Using the information in the text, answer the questions below.
4. What is a market economy?
5. What is the role of the law of supply and demand in the market economy?
6. How do companies compete in the market economy?
7. How does the Government influence the economy in the market economy?
8. What do you think are the disadvantages of a market economy?
9. What is a planned economy?
10. Can companies compete freely in the planned economy?
11. What do you think are the disadvantages of a planned economy?
12. What are the differences between a market economy and a planned economy?
13. What is a mixed economy?
VOCABULARY EXERCISES
1. Complete the following passage with suitable words.
Market, planned and mixed economies
Three main sets of decisions need to be made by the economic system - what to
produce, how to produce, and how to share out the product of the economy. A (1)
………. economy is one in which answers to the three questions above are determined
by buyers and sellers interacting with each other without (2) …………. interference. By
contrast, a (3) ………… economy is one in which a central planning agency such as the
government makes the major economic decisions. A (4) ………… economy includes
elements of both the market and the planned economies.
Those (and there are few of these left today) that favour the centrally planned economy
argue that the government (central planners) are best placed to meet the (5) ……….. of
all the people of a particular society. Those in favour of the free market argue that
central planning wastes resources and that the market makes sure that consumers get
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what they want produced, while (6) …………. firms supply it at a profit. The reality is
that most societies operate some form of mixed economy.
In the UK we have a mixed economy. Most (7) ……….. are made by the market - e.g.
when you buy goods in supermarket you vote with your money for the goods that you
want to buy. However, some decisions are made by the government e.g. those relating
to road building, school and hospital construction, the (8) ………… of medicines in
hospitals etc.
In the UK, the emphasis is on letting the market make most decisions because of its
high level of efficiency in responding to customer preferences. However, some
decisions must be made by the government on behalf of society e.g. decisions about
military spending, and public education.
2. Match the words/ phrases from 1 -10 with definitions from a – j
1. mixed economy a) inputs that are used in the production of goods or
services including land, labor, capital and
2. planned economy entrepreneurship
3. market economy b) the system of production and distribution and
consumption
4. production factors c) governments controlling some aspects of the
economy and the private sector controlling others
5. distribution channel d) an economic system that is primarily capitalistic
6. consumption but there is some degree of government ownership
of the means of production
7. economic system e) The chain of businesses or intermediaries through
which a good or service passes until it reaches the
8. intervention end consumer
9. state capitalism f) economic decisions are made by the state or
government
10. state socialism g) The using up of goods and services by consumer
purchasing or in the production of other goods.
h) an economic system in which the government
owns most means of production but some degree of
private capitalism is allowed
i) economic decisions and the pricing of goods and
services are guided solely by the aggregate
interactions of a country's citizens and businesses
j) any interference in the affairs of others
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LANGUAGE FOCUS
The passive
A. Focus on actions
We often use the passive to focus on something that happens to someone, when we do
not want to focus on the person who does the action:
- Over 36% of Guatemalan workers are employed in the agricultural sector.
We use the passive here because we do not know, or need to say who employs them.
Now study the same function of the passive in the following sentences extracted from
the reading text:
- Market economy is an economic system in which the market is supposed to be
regulated by the law of supply and demand.
- Business firms are supposed to compete freely.
- Direct government intervention is theoretically ruled out.
B. Systems and processes
The passive is often used to talk about systems and processes:
- Many of the world’s diamonds are mined in South Africa. The stones are sent to
Amsterdam, where they are sold to international dealers. The stones are cut in
Antwerp, and they are then sold on to jewellers.
PRACTICE
Exercise 1: Put the verbs in brackets in the following sentences into the passive
form.
1. Ancient systems were pretty simple. Trade (do) ……………. using systems like
barter trade which was very straight forward.
2. In modern monetary economies, treaties and agreements (make) ……………every
day.
3. In modern economics, therefore, an economic system can (describe) ………….. as an
organized manner in which a particular government chooses to allocate goods and
services in the country.
4. There are about three or four basic questions in economics. One is, which goods are
to
(produce) …………….. ?
5. The other one is: how are the goods going to (produce) …………..?
6. The third question is: who is going to get those goods and services that (produce)
………………….
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7. The fourth question addresses how change is going to (effect and accommodate)
………………………. in an economy.
8. Many governments actually have their own peculiar systems, which suit their needs
and their
aspirations. But consensus has it that all these systems can (classify) ………….. into
just three main ones.
Exercise 2: Systems and processes
Read this information about DHL, a company that delivers parcels and documents
worldwide. Put the verbs into the present simple passive.
DHL FROM START TO FINISH

One phone call is all it takes to get your shipment moving.
Quick off the mark
As soon as you book your shipment over the
phone, your details (1) are programmed
(program) into DHL system. Within minutes, a
courier receives a pick-up message
Rapid collection
The data (2) ………….. (transfer) to a printer in
the van, so our driver will know where you are.
Your consignment (3) ……………… (collect) and a bar code scanner (4)
……………….. (use) to record all the details of the shipment. That shipment (5)
………… (drive) to a DHL centre, where the most suitable air route (6) ……………
(choose).
Prepared for take off
Your shipment (7) ………….. (check in) by DHL ground staff at the airport, and
they make sure that it (8) ………….. (load) onto the right flight.
Satellite technology
While the plane is in the air, all the details of the shipment (9) …………..
(transmit) to the local DHL import agents. As soon as the plane lands, the
information (10) …………. (give) to customs.
Personal delivery
As soon as your shipment (11) ………….. (clear), it (12) ………… (deliver) to its
final destination. All the information about delivery (13) ………… (hold) on
computer, allowing you to check delivery with one quick phone call.
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Exercise 3: Put the following sentences into passive voice.
1. People have defined an economic system variously to include government policies,
which is very important especially in modern times.
An economic system …………………………………………………………
2. In a pure market economy, also known as a laissez-faire economy, the government
plays a very limited role in what is produced.
In a pure market economy, also known as a laissez-faire economy, a very limited
role ………………………………………………………
3. The government does not direct the private sector to produce certain goods and
services.
The private sector ………………………………………………………………
4. In a command economy, the government directs producers to make and deliver goods
and services in specified amounts.
In a command economy, producers ……………………………………………
5. In a mixed economy both market forces and government decisions determine the
production and distribution of goods and services.
In a mixed economy, the production and distribution of goods and services
……………………………………………………………………………
GLOSSARY
GLOSSARY
- attempt (v) [əˈtɛmpt] - to make an effort (to do something) or to achieve
(something); try - cố gắng.
Example: He attempted to reach the dying man but did not succeed.
He did not attempt the last question in the exam.
- attempt (n) - an effort made to accomplish something – sự cố gắng, sự nỗ lực
Example: They failed in their attempt to climb the Everest.
She made no attempt to run away.
- suppose (v) [səˈpəʊz] - to believe or assume as true; take for granted; to assume
(something), as for the sake of argument – cho rằng, giả sử
Example: Suppose you won a million dollars in the lottery.
- be supposed to do sth: to have the reputation of (being etc).
Example: He is supposed to be the best doctor in the town.
- hinder (v) [ˈhaɪn dər] - to prevent from doing, acting, or happening; stop: cản
trở, ngăn cản.
Example: All these interruptions hinder my work.
All the interruptions hinder me from working.
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- hindrance (n) (-drəns) - a person, thing etc that hinders – người, việc gây cản trở
Example: I know you are trying to help but you're just being a hindrance.
- punishable (adj) [ˈpʌnɪʃəbəl] - liable to be punished or deserving of punishment
- bị trừng phạt.
- Punish (v) - To subject to a penalty for an offense, sin, or fault.
Example: The students who were caught cheating were punished by the principal.
- intervention (n) [ˌɪntəˈvɛnʃən] - the act or fact of intervening – sự can thiệp.
- rule out: exclude sth / sb: loại trừ, không chấp nhận.
- fiscal policy: the policy of a government in relation to taxation and government
expenditure as a means of affecting aggregate economic activity: chính sách tài
khóa.
- budgetary (adj) connected with the way money is spent in a budget (thuộc về)
ngân sách.
- deliberately (adv) not freely: có chủ ý sẵn.
- quotas (n) a fixed amount of sth that must be done, given or received: chỉ tiêu.
- exist (v) to happen or be present in a particular situation or place: tồn tại.
- laissez-faire (n) policy of non-interference: chính sách không can thiệp/ hoàn
toàn tự do.
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UNIT
UNIT 3 3 MICROECONOMICS
PREVIEW
PREVIEW
A> Study the following chart and give your own explanation.
Limited SCARCITY of unlimited

Resources goods and services wants
ECONOMIZING PROBLEM
(must make choices)
Society’s 3 opinions for dealing with scarcity
Economic Improve the use of Reduce

Growth available resources Wants
Allocative Productive Equity Full

Efficiency Efficiency Employment
MICROECONOMICS
(Flowchart depicting the processes involved in efficient allocation)
B> Read carefully the brief introduction about the study of microeconomics.
The discipline of Economics is broadly classified into: microeconomics and
macroeconomics. Microeconomics is a branch of economics that deals with the how
consumers and firms behave while making decisions on the allocation of scarce
resources. It looks at a compartmentalized view of an economy and focuses more on the
basic theories of demand and supply. This is in regard to market place where
transactions of goods and services take place. Broadly speaking, microeconomics
analyzes how the behavior of economic agents i.e. households (consumers) and firms
(suppliers / producers) affect supply and demand for goods and services. In turn, it
determines the prices and how it influences how much quantity is demanded and how is
supplied.
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Microeconomics seeks to analyze market mechanisms and determine relative
prices that lead to allocation of scare resources among several alternative uses. One of
the major goals of microeconomics is to study the different situations under which
markets break down and efficient allocation is not achieved. Ideally efficiency is
maximized under perfect competition which acts as a benchmark to compare other
market structures. Microeconomics helps lay down the theoretical conditions needed for
perfect competition.
READING
READING
THE THEMES OF MICROECONOMICS
The Rolling Stones once said: “You can’t always get what you want.” This is true. For
most people (even Mick Jagger), that there are limits to what you can have or do is a
simple fact of life learned in early childhood. For economists, however, it can be an
obsession.
The first important them of microeconomics is about limits – the limited incomes
that consumers can spend on goods and services, the limited budgets and technical
know-how that firms can use to produce things, and the limited number of hours in a
week that workers can allocate to labor or leisure. But microeconomics is also about
ways to make the most of these limits. More precisely, it is about the allocation of scarce
resources. For example, microeconomics explains how consumers can best allocate
their limited incomes to the various goods and services available for purchase. It
explains how workers can best allocate their time to labor instead of leisure, or to one
job instead of another. And it explains how firms can best allocate limited financial
resources to hiring additional workers versus buying new machinery, and to producing
one set of products versus another.
In a planned economy such as that of Cuba, North Korea, or the former Soviet
Union, these allocation decisions are made mostly by the government. Firms are told
what and how much to produce, and how to produce it; workers have little flexibility in
choice of jobs, hours worked, or even where they live; and consumers typically have a
very limited set of goods to choose from. As a result, many of the tools and concepts of
microeconomics are of limited relevance in those countries.
In modern market economies, consumers, workers, and firms have much more
flexibility and choice when it comes to allocating scarce resources. Microeconomics
20
describes the trade-offs that consumers, workers and firms face, and shows how these
trade-offs are best made.
The idea of making optimal trade-offs is an important theme in microeconomics.
Let’s look at it in more detail.
Consumers
Consumers have limited incomes, which can be spent on a wide variety of goods and
services or saved for the future. Consumer theory describes how consumers, based on
their preferences, maximize their well-being by trading off the purchase of more of
some goods with the purchase of less of others. We will also see how consumers
decided how much of their incomes to save, thereby trading off current consumption for
future consumption.
Workers
Workers also face constraints and make trade-offs. First, people must decide whether
and when to enter the workforce. Because the kinds of jobs – and corresponding pay
scales – available to a worker depend in part on educational attainment and accumulated
skills, one must trade off working now (and earning an immediate income) with
continued education (and the hope of earning higher future income). Second, workers
face trade-offs in their choice of employment. For example, while some people choose
to work for large corporations that offer job security but limited potential for
advancement, others prefer to work for small companies where there is more
opportunity for advancement but less security. Finally, workers must sometimes decide
how many hours per week they wish to work, thereby trading off labor for leisure.
Firms
Firms also face limits in terms of the kinds of products that they can produce, and the
resources available to produce them. The Ford Motor Company, for example, is very
good at producing cars and trucks, but it does not have the ability to produce airplanes,
computers, or pharmaceuticals. It is also constrained in terms of financial resources and
the current production capacity of its factories. Given these constraints, Ford must
decide how many of each type of vehicle to produce. If it wants to produce a larger total
number of cars and trucks next year or the year after, it must decide whether to hire
more workers, build new factories or do both. The theory of the firm describes how
these trade-offs can be best made.
A second important theme of microeconomics is the role of prices. All of the
trade-offs described above are based on the prices faced by consumers, workers and
21
firms. For example, a consumer trades off beef for chicken based partly on his/her
preferences for each one, but also on their prices. Likewise, workers trade off labor for
leisure based in part on the “price” that they can get for their labor – i.e., the wage. And
firms decide whether to hire more workers or purchase more machines based in part on
wage rates and machine prices.
Microeconomics also describes how prices are determined. In a centrally planned
economy, prices are set by the government. In a market economy, prices are determined
by the interactions of consumers, workers and firms. These interactions occur in
markets – collections of buyers and sellers that together determine the price of a good.
In the automobile market, for example, car prices are affected by competition among
Ford, General Motors, Toyota, and other manufacturers, and also by the demands of
consumers. The central role of markets is the third important theme of
microeconomics.
COMPREHENSION
QUESTIONS
1. In a planned economy, who makes decisions on the allocation of scarce

resources?
2. Why are many microeconomic tools and concepts of limited relevance in Cuba
and North Korea?
3. What does the term “trade-offs” mean?
4. What can you learn from the consumer theory?
5. Give some examples explaining the trade-offs made by consumers.
6. Give some examples explaining the trade-offs made by workers.
7. Give some examples explaining the trade-offs made by firms.
8. What limits or constraints does the Ford Motor Company have to face?
9. What does the theory of the firm indicate?
10. What are three important themes of microeconomics?
VOCABULARY
EXERCISES
1. Complete the summary of Microeconomics with suitable words
a) Microeconomics is concerned with the (1) …………….. made by small economic
units – consumers, workers, (2) ………………, owners of (3) ………………., and
business firms. It is also concerned with the (4) ………………. of consumers and firms
to form markets and industries.
22
b) Microeconomics relies heavily on the use of (5) ……………, which can (by
simplification) help to explain how economic units behave and predict what behavior
will occur in the future. Models are mathematical representations of theories that can
help in this explanation and prediction process.
c) Microeconomics is concerned with positive questions that have to do with the
explanation and prediction of the phenomena. But microeconomics is also important for
normative analysis, in which we ask what (6) …………… are best – for a firm or for
society as a whole. Normative analyses must often be combined with individual value
judgments because issues of equity and fairness as well as of economic efficiency may
be involved.
d) A (7) ………….. refers to a collection of buyers and sellers who interact, and to the
possibility for sales and (8) …………… that results from that interaction.
Microeconomics involves the study of both perfectly (9) ……………. markets, in
which no single buyer or seller has an impact on price, and noncompetitive markets, in
which individual entities can affect price.
e) To eliminate the effects of inflation, we measure (10) …………. (or constant-dollar)
prices, rather than (11) …………….. (or current-dollar) prices. Real prices use an
aggregate price index, such as the CPI, to correct for inflation.
2. Identify different sectors of the economy
We generally describe the economy as consisting of three sectors:
➢ The primary sector: agriculture, and the extraction of raw materials from the
earth;
➢ The secondary sector: manufacturing industry, in which raw materials are
turned into finished products (although of course many of the people working for
manufacturing companies do not actually make anything, but provide a service –
administration, law, finance, marketing, selling, computing, personnel, and so
on);
➢ The tertiary sector: the commercial services that help industry produce and
distribute goods to the final consumers, as well as activities such as education,
health care, leisure, tourism, and so on.
Identify which sector does each of these following activities belong to?
advertising assembling building
calculating prices cutting metal digging iron ore
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distributing added value laying cables maintenance
marketing products milling metal mining coal
packaging products pressing metal pumping oil
smelting iron transportation welding metal
LANGUAGEFOCUS
LANGUAGE FOCUS
Study the sentences from the reading text:
- Consumers have limited incomes, which can be spent on a wide variety of goods
and services, or saved for the future
- For example, while some people choose to work for large corporations that offer
job security but limited potential for advancement, others prefer to work for
small companies where there is more opportunity for advancement but less
security.
RELATIVE CLAUSES
A clause that generally modifies a noun or noun phrase and is introduced by a relative
pronoun (which, that, who, whom, whose), a relative adverb (where, when, why), or a
zero relative. Also known as an adjective clause.
A relative clause is a post-modifier--that is, it follows the noun or noun phrase it
modifies.
Relative clauses are traditionally divided into two types: restrictive and nonrestrictive.
❖ A restrictive element, or defining clause:
A piece of information that is crucial to the meaning of a sentence. The mistake of
marking it out with commas would signal its status as additional rather than essential
information, leading to confusion and inaccuracy. Consider the different meanings
implied in the two versions of this sentence:
- 'The two students, who were found guilty of plagiarism, failed the course'
- 'The two students who were found guilty of plagiarism failed the course.'
In the first version, the fact that the students were guilty of plagiarism is not signaled as
the reason for their failure. This is presented as additional information and as such may
be just a coincidence. In the second version, the plagiarism is presented as a restrictive
element: it is crucial information and thus indicates that it is the reason why the students
failed the course. (Tory Young, Studying English Literature: A Practical Guide.
Cambridge Univ. Press, 2008)
24
❖ Nonrestrictive clause
A word, phrase, or dependent clause that provides added (though not essential)
information to a sentence but does not limit (or restrict) the element it modifies. A
nonrestrictive element is usually set off with commas. Contrast with restrictive element.
PRACTICE
Exercise 1: Identify which of the following clauses in italics are restrictive and
which are nonrestrictive.
1. "A man who carries a cat by the tail learns something he can learn in no other way."
(Mark Twain)
2. "A person who won't read has no advantage over one who can't read." (Mark Twain)
3. "Audrey Wishard McMillan, who was born in India, was the daughter of Americans
living abroad and was educated in a school for children of American missionaries."
(Judy Green and Jeanne LaDuke, Pioneering Women in American Mathematics.
American Mathematical Society, 2009)
4. "Human beings, who are almost unique in having the ability to learn from the
experience of others, are also remarkable for their apparent disinclination to do so."
(Douglas Adams, Last Chance to See. Harmony Books, 1991)
5. "It is impossible to imagine Goethe or Beethoven being good at billiards or golf."
(H. L. Mencken)
6. "Many other technologies resulted from serendipity. A well-known example is
penicillin, which was discovered by accident by Sir Alexander Fleming.
(Everett M. Rogers, Diffusion of Innovations, 5th ed. Free Press, 2003)
7. "The book was a life of Brahms, which had been standing askew on one of the
shelves here and which the dampness had left permanently misshapen."
(David Markson, Wittgenstein's Mistress. Dalkey Archive Press, 1988)
8. "Men are the only animals that devote themselves, day in and day out, to making one
another unhappy." (H. L. Mencken)
Exercise 2: Complete the following sentences with suitable relative pronouns:
which, who, whom, that, …
1. "It is not the employer …………. pays the wages. Employers only handle the
money. It is the customer ………….. pays the wages." (Henry Ford)
25
2, "Animals, ………….. we have made our slaves, we do not like to consider our
equal."
(Charles Darwin)
3. "Peace is not merely a distant goal …………. we seek, but a means by……………..
we arrive at that goal." (Martin Luther King, Jr.)
4. "I like to keep a bottle of stimulant handy in case I see a snake, ………… I also keep
handy." (W.C. Fields)
5. "The essence of childhood, of course, is play, ………….. my friends and I did
endlessly on streets / that we reluctantly shared with traffic." (Bill Cosby)
6. "Titmice, ………….. had hidden in the leafy shade of mountains all summer,
perched on the gutter." (Annie Dillard, Pilgrim at Tinker Creek, 1974)
7. "Every generation imagines itself to be more intelligent than the one …………. went
before it, and wiser than the one ……………… comes after it." (George Orwell)
8. "The Hon Freddie belonged to the class of persons ………….. move through life with
their mouths always restfully open." (P.G. Wodehouse, Something Fresh, 1915)
9. "She was a small, hunched old lady with hair that was still jet black; it was held flat
with tortoise-shell combs from ……………. it crinkled and bucked like something
powerful."
(Anne Tyler, Morgan's Passing. Random House, 1980)
10. "She had given Laura a ten-dollar tip, far and away the biggest ………….. she'd
ever received--and Laura had split it the next day with Billy, …………. almost never
got tipped because people knew he was simple and had no real concept of money."
(Antoinette Stockenberg, A Month at the Shore. St. Martin's, 2003)
GLOSSARY
GLOSSARY
- limits (n) [ˈlɪmɪt]: The greatest or least amount, number, or extent allowed or
possible – giới hạn, phạm vi
Example: A withdrawal limit of $200; no minimum age limit.
- limited (adj) = scarce (adj) – khan hiếm

- obsession (n) [əbˈsɛʃən]: the domination of one's thoughts or feelings by a
persistent idea, image, desire, etc.- sự ám ảnh
- consumers (n) [kənˈsjuːmə]: One that consumes, especially one that acquires
goods or services for direct use or ownership rather than for resale or use in
production and manufacturing – người tiêu dùng
26
- allocate (v) [ˈæləˌkeɪt]: distribute according to a plan or set apart for a special
purpose – phân phối, phân bổ
Example: "I am allocating a loaf of bread to everyone on a daily basis.”
- allocation (n): sự phân bổ
- flexible (adj): Responsive to change; adaptable – linh hoạt
- flexibility (n): sự linh hoạt
- trade-offs (n) an exchange that occurs as a compromise – sự đánh đổi
Example: "I faced a tradeoff between eating and buying my medicine"
- maximize (v) [ˈmæksɪˌmaɪz]: To increase or make as great as possible – tối đa
hóa
Example: "the ideal of maximizing opportunity through the equalizing of
educational opportunity" (Robert J. Havighurst).
- determine (v) [dɪˈtɜːmɪn]: to cause, affect, or control; fix or decide causally –
quyết định, xác định
Example: Demand usually determines supply.
- compete (v) [kəmˈpiːt]: To strive against another or others to attain a goal, such
as an advantage or a victory – cạnh tranh
Example: The stores will inevitably end up competing with each other for increased
market shares.
- Competition (n) [kompəˈtiʃən] - the act of competing; rivalry – sự cạnh tranh
Example: There's a lot of competition for this job.
- competitor [kəmˈpetitə] noun - a person etc who takes part in a competition; a
rival – đối thủ cạnh tranh
Example: All the competitors finished the price war.
27
UNIT
UNIT 4 4 MACROECONOMICS
PREVIEW
PREVIEW
Discuss with your partners of the same group about the major economic totals or
aggregates of your country.
1. Do people find it easy or difficult to find jobs?
2. On average, are prices rising quickly, slowly, or not at all?
3. How much total income is your country producing per year, and how rapidly is
total income growing?
4. Is the interest rate charged to borrow money high or low? Rising or falling?
5. Is the government spending more than it collects in tax revenue?
6. Is the nation as a whole accumulating assets in other countries or is it becoming
more indebted to them?
7. What level is the Vietnamese dong? Will it rise or fall?
READING
READING
Macroeconomics provides us with a bird’s eye view
of country’s economic landscape. Instead of looking
at behavior of individual businesses and consumers –
called microeconomics – the goal of macroeconomics
is to look at overall economic trends such as
employment levels, economic growth, balance of
payments, inflation and so on.
Just as the speed of an engine is regulated by its supply of fuel, macroeconomics

is influenced mainly by macroeconomics policies, including monetary policy and fiscal
policy. Monetary policy which controls a nation’s money supply is supervised by each
country’s Central Bank, while fiscal policy which controls a government’s revenue
and spending is in the hand of the Ministry of Finance. The basic objectives of these
two main macroeconomic policies are to promote economic growth and to keep
inflation under control.
Just as a driver uses the accelerator to speed up or slow down a vehicle, central
banks control the economy by increasing or decreasing the money supply. By carefully
28
regulating the supply of money to fuel economic growth, a central bank works to keep
the economy from overheating or slowing down too quickly.
Monetary policy is essentially a guessing game. There is no one statistic to tell us
how fast an economy is growing, and there is nothing that tell us how quickly the
economy will respond to changes that may take months or years to implement. Central
banks try to keep one eye on unemployment, resulting from economic slowdowns and
one eye on inflation resulting from an overheated economy.
The economy at large can also be controlled by regulating fiscal policy,
government revenue and spending. Taxation and government spending greatly influence
a country’s economic growth. Just as a family’s economic health is influenced by a
parents’ earning and spending habits, a nation’s economic health is influenced by
governmental fiscal policies, such as taxation, spending and government borrowing.
What's the difference between macroeconomics and microeconomics?
Microeconomics is generally the study of individuals and business decisions,
macroeconomics looks at higher up country and government decisions.
Macroeconomics and microeconomics, and their wide array of underlying concepts,
have been the subject of a great deal of writings. The field of study is vast; here is a
brief summary of what each covers:
Microeconomics is the study of decisions that people and businesses make
regarding the allocation of resources and prices of goods and services. This means also
taking into account taxes and regulations created by governments. Microeconomics
focuses on supply and demand and other forces that determine the price levels seen in
the economy. For example, microeconomics would look at how a specific company
could maximize it's production and capacity so it could lower prices and better compete
in its industry.
Macroeconomics, on the other hand, is the field of economics that studies the
behavior of the economy as a whole and not just on specific companies, but entire
industries and economies. This looks at economy-wide phenomena, such as Gross
National Product (GDP) and how it is affected by changes in unemployment, national
income, rate of growth, and price levels. For example, macroeconomics would look at
how an increase/decrease in net exports would affect a nation's capital account or how
GDP would be affected by unemployment rate.
While these two studies of economics appear to be different, they are actually
interdependent and complement one another since there are many overlapping issues
29
between the two fields. For example, increased inflation (macro effect) would cause the
price of raw materials to increase for companies and in turn affect the end product's
price charged to the public.
COMPREHENSION
1. Answer the following questions according to the text.
1. What are two major macroeconomic policies?
2. What are the main tools of monetary policy?
3. What are the main tools of fiscal policy?
4. What are the main objectives of these two policies?
5. What is the difference between microeconomics and macroeconomics?
6. Why is it said that microeconomics and macroeconomics are interdependent and
complement one another?
2. According to the text, choose the best answer A, B, C or D
1. Macroeconomics does not study:
A. the behavior of individual businesses and consumers
B. overall economic trends
C. the world economy
D. interactions among economic factors in the whole economy
2. Macroeconomics is influenced mainly by:
A. monetary policy
B. fiscal policy
C. open door policy
D. answers A & B
3. Which one is not an economic policy?
A. monetary policy
B. insurance policy
C. fiscal policy
D. open door policy
4. The purpose of regulating the money supply by the central bank is to:
A. keep inflation under control
B. promote economic growth
C. keep the economy from overheating or slowing down too quickly
D. all the answers above
30
5. Fiscal policy deals with:
A. government’s revenue and spending
B. taxation
C. government’s borrowing
D. all the answers above
VOCABULARY
EXERCISES
1. Match the words or phrases in column A with their definitions in column B
A B
1 unemployment rate A the percentage rate per year that is paid by
borrowers to lenders
2 inflation rate
B the total value of goods and services produced in a
3 productivity country in a single year in constant prices
C the number of jobless individuals who are actively
4 interest rate
looking for work divided by total of those employed
5 government budget deficit and unemployed
D the excess of the nation’s imports of goods and
6 foreign trade deficit services over its exports of goods and services
7 nominal gross domestic E the total value of goods and services produced in a
country in a single year in current (actual) prices
product (GDP) F the average amount of output produced per employee
8 real GDP or per hour of work
G the excess of government expenditures (on goods,
services and transfer payments) over the government’s
tax revenues
H the percentage rate of increase in the economy’s
average level of prices
2. Complete the following sentences by using appropriate words or phrases in

bold from the reading text. (Not all words are used)
1. A rapid rise in prices is called ……………..
2. Japan has a …………….. surplus because it exports more than its imports.
31
3. ……………… rests on the relationship between the rates interest in an economy.
4. Does inflation cause …………….. ?
5. Macroeconomics is the study of overall ……………….
6. Increases in real GNP are called …………….
7. Monetary policy should be contrasted with …………….. which refers to government
borrowing, spending and taxation.
8. Fiscal policy consists of ……………. and taxation.
9. The central bank has the ability to alter the ……………… and thus influence interest
rate.
LANGUAGE
LANGUAGE FOCUS
FOCUS
Relative clauses (2): where, with, what

❖ Where: The relative where is used to refer to places
- The hotel where we stayed was very expensive.
Where is not used if there is a preposition at the end of the clause:
WRONG: The hotel where we stayed in was very expensive
RIGHT: The hotel we stayed in was very expensive
❖ Use of “with”: When we want to describe what someone or something has, we
can uses a relative clause or with + a noun. So we can say:
- I’m thinking about buying a computer that has a faster chip.
Or: I’d like to buy a computer with a faster chip.
❖ Use of “what”: We can use the relative pronoun what to replace the thing(s)
that … So we can say:
- I went to buy some parts, but they didn’t have the things that we needed.
OR: I went to buy some parts, but they didn’t have what we needed
PRACTICE
Exercise 1: Rewrite the following sentences using “where”.
1. I’ve got the details of the hotel that you’ll be staying in.
I’ve got the details of the hotel where you’ll be staying.
2. Would you like to visit the factory that we make the cars in?
…………………………………………………………………………………….
3. I recently went back to the town I used to work in.
…………………………………………………………………………………….
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4. Ivrea is the town in which Olivetti has its headquarters.
…………………………………………………………………………………….
5. Is this the building that they filmed the Coke advertisement in?
…………………………………………………………………………………….
Exercise 2: Complete the sentences using with or that and the phrases in the box.
has a better view a color monitor a bit more expensive

has a lot of mistakes a matching tie has all the latest information
a £2000 credit limit a sense of humor
1. I’ve got a new credit card with a £2000 credit limit

2. I’ll send you a brochure that has all the latest information
3. Have you got a computer …… …………………………………………. ?
4. We’re looking for someone … ………………………………………….
5. I’d prefer a room …………… ………………………………………….
6. We’ve received an invoice …… ………………………………………….
7. He’s bought a Gucci shirt …… ………………………………………….
8. I wish I had a boss ………… ………………………………………….
Exercise 3: Rewrite these sentences using “what”.
1. He was selling something. I wasn’t interested in
I wasn’t interested in what he was selling.
2. You asked me to do something. I have done it.
I have done …………………………………………………….
3. You want a computer to do some things. This computer can do them.
This computer ………………………………………………….
4. You need something. We can deliver it tomorrow.
We can ………………………………………………………..
5. I’m sorry, you said something. I didn’t hear it.
I’m sorry, I didn’t ……………………………………………….
GLOSSARY
GLOSSARY
- trend (n) [trɛnd] - The general direction in which something tends to move – xu
hướng, xu thế
33
Example: She follows all the latest trends in fashion; an upward trend in share
prices.
- employment (n) [ɪmˈplɔɪmənt] - the state of being employed or having a job –
việc làm
Example: They are looking for employment.
- growth (n) [grəʊ] - become larger, greater, or bigger; expand or gain – sự tăng
trưởng
Example: The problem grew too large for me.
Her business grew fast.
- balance of payments (n) - the difference over a given time between total
payments to foreign nations, arising from imports of goods and services and
transfers abroad of capital, interest, grants, etc., and total receipts from foreign
nations, arising from exports of goods and services and transfers from abroad of
capital, interest, grants, etc. – cán cân thanh toán.
Example: A favorable balance of payments exists when more payments are coming
in than going out.
- inflation (n) [ɪnˈfleɪʃən] - The rate at which the general level of prices for goods
and services is rising – lạm phát
Example: Inflation results from an increase in the amount of circulating currency
beyond the needs of trade.
- money supply (n) – lượng cung tiền.
Cách tính lượng cung tiền:
➢ M1-A: Currency plus demand deposits.
➢ M1-B: M1-A plus other checkable deposits.
➢ M2: M1-B plus overnight repos, money market funds, savings, and small (less
than $100M) time deposits.
➢ M3: M-2 plus large time deposits and term repos.
- government’s revenue (n) – thu nhập của chính phủ
- promote (v) [prəˈməʊt] - contribute to the progress or growth of – thúc đẩy
Example: One of important objectives of fiscal policy is to promote economic
growth.
- overheating economy (adj) - An economy that is growing very quickly, with the
risk of high inflation – kinh tế tăng trưởng quá nóng.
Example: Overheating economies tend to crash, experience high inflation, or both.
- make regarding (v) = consider (v) – xem xét
- national income (n) - The total income of the persons in a nation
- interdependent (adj) [ˌɪntədɪˈpɛndənt] - mutually dependent; depending on each
other – phụ thuộc lẫn nhau.
34
UNIT
UNIT 5 5 DEMAND AND SUPPLY
PREVIEW
PREVIEW
One of the best ways to appreciate the relevance of economics is to begin with the
basics of supply and demand. Supply-demand analysis is a fundamental and powerful
tool that can be applied to a wide variety of interesting and important problems. To
name a few:
Understanding and predicting how changing world economic conditions affect
market price and production
Evaluating the impact of government price controls, minimum wages, price
supports, and production incentives
Determining how taxes, subsidies, tariffs, and import quotas affect consumers
and producers
We begin with a review of how supply and demand curves are used to describe the
market mechanism. Without government intervention (e.g., through the imposition of
price controls or some other regulatory policy), supply and demand will come into
equilibrium to determine both the market price of a good and the total quantity
produced. What that price and quantity will be depends on the particular characteristics
of supply and demand. Variations of price and quantity over time depend on the way in
which supply and demand respond to other economic variables, such as aggregate
economic activity and labor costs, which are themselves changing.
READING
READING
The Demand Curve
Demand describes how price influences buyer
behavior. If the price of a specific good or service
increases, the quantity a buyer will purchase will
decrease. If the price decreases, the quantity a
buyer will purchase will increase.
However, more than just price influences how
much a buyer wishes to purchase. In order to
focus on the influence of price on a buyer, we
must hold all the other possible influences
constant.
35
Economists call factors other than the price of the specific good that influences how
much a buyer purchases the shift factors of demand, or society’s income, prices of other
goods, expectations, and tastes.
Demand curve shows the price influence on buyers. In the terminology of economics, a
price change causes a movement along a given demand curve. An increase in price will
decrease the quantity demanded.
We must be able to illustrate on our model
how influences other than price, called shift
factors, affect decisions to buy. On our
demand model, we illustrate a change in one
of these factors by a shift of the entire
demand curve to the right or to the left. In
the language of economics, if higher
incomes cause the buyers of a specific good
to be willing and able to buy more at various
prices, this event is expressed as an increase
in demand and is modeled as a shift of the
demand curve to the right. If buyers are
willing and able to buy less at all of the
various prices, there is a decrease in demand,
and the demand curve shifts to the left.
The Supply Curve
The seller, just like the buyer, will be
influenced by prices when deciding how
much to provide or produce. But for the
seller, as the price of a good or service
rises, the quantity supplied will increase.
As price decreases, the seller will produce
less and the quantity supplied will
decrease.
Other forces beside price affect sellers’ willingness and ability to sell at various
prices. These forces are called shift factors and include changes in prices of inputs,
36
technology, taxes, and suppliers’ expectations. These factors are held constant as we
discuss how price influences the seller.
In the language of economics, any change in price will cause a change in
quantity supplied. On the graph this is shown as a movement along a given supply
curve. However, our model must also illustrate how the shift factors influence seller
decision-making.
A change in one of these factors is said
to cause a change in supply and is
modeled as a shift of the entire curve.
An increase in the costs of producing a
good would result in a decrease in
supply. We would model it by shifting
the supply curve to the left.
You need to be clear on the
difference between an increase in
supply and an increase in quantity
supplied. An improvement in
production technology would cause an
increase in supply. An increase in price
results in an increase in quantity
supplied.
Equilibrium is a situation in which there is no tendency for change. A market will be in
equilibrium when there is no reason for the market price of the product to rise or to fall.
This occurs at the price where quantity demanded equals quantity supplied. At this
price, the amount that consumers wish to buy is exactly the same as the amount that
producers wish to sell.
Supply and Demand Curves
Demand and supply curves are simply graphs
of demand and supply schedules. Equilibrium
occurs where the supply and demand curves
intersect at an equilibrium price of $3 and an
equilibrium quantity bought and sold of 8.
Excess supply or excess demand at any price
is simply the horizontal distance between the
supply and demand curves.
37
COMPREHENSION
1. According to the reading text, answer the following questions.
1. What is the definition of “demand”?
2. What is the difference between “demand” and “quantity demanded”?
3. How do prices of a good influence its demand?
4. What factors cause the whole demand curve shift to the left or to the right?
5. What is “supply”?
6. What is the difference between “supply” and “quantity supplied”?
7. How do prices of a good influence its supply?
8. Will the supply curve of beer shift to the right or to the left if there is an increase
in its production costs?
9. When is a market in equilibrium?
2. According to the reading text, choose the best answer for each of the following
questions.
1. Which of the following statements about the law of demand is false?
A. Price and quantity demanded are inversely related.
B. An increase in price results in a decrease in demand.
C. A decrease in price results in a decrease in demand.
D. The shift factors of demand are held constant.
2. Which of following is NOT an example of a change in demand?
A. Reduced national income causes fewer sports cars to be purchased.
B. The demand curve for steak shift to the right as the barbecue season heats up.
C. Higher prices for beer cause a decrease in quantity of beer demanded.
D. A successful advertising campaign by pizza institute results in buyers being
willing and able to purchase more pizza at each possible price.
3. The law of supply state that as price increases,
A. sellers are motivated to produce more
B. supply increases
C. quantity supplied increases
D. supply decreases
E. A and C
4. Which of the following is a shift factor of supply?
A. A change in price
38
B. A reduction in production costs
C. Higher family incomes
D. Government-imposed price ceilings
5. Which of the following indicates a change in supply?
A. Technological improvement in the production process
B. Movement along a particular supply curve
C. Higher prices, causing an increase in quantity supplied
D. Quantity supplied decreases as price increases
6. If the demand for tennis rackets increases, which of the following is NOT likely to
happen?
A. The price of rackets will increase.
B. The price of rackets will decrease.
C. The racket demand curve will shift to the right.
D. The quantity of rackets sold will increase.
7. An increase in supply occurs if
A. demand increases
B. price increases
C. production costs decrease
D. A and B
8. If the supply of wheat increases
A. the supply curve will shift to the right.
B. the market price of wheat will decrease.
C. the market quantity of wheat will increase.
D. A, B and C
9. If labor costs in the auto industry rise,
A. the demand for cars will decrease.
B. the price of cars may increase.
C. fewer cars may be bought and sold.
D. B and C
10. An increase in taxes on hard liquor will cause,
A. an increase in the market price of hard liquor
B. a decrease in the market price of hard liquor
C. a decrease in quantity demanded for hard liquor
D. an increase in the quantity supplied of hard liquor
39
VOCABULARY
VOCABULARY EXERCISE
EXERCISES
Complete the following text with words/ phrases from the box
different prices increase individual supply curve
vertical axis decrease demand table
demand curve line quantity
horizontal axis shift factors model
market possible prices
A (1) ……………… shows the quantity of a specific good that a buyer plans to
purchase, at (2) ………….., in a specific time period, while holding other things ((3)
…………….) constant. To model this table, a graph is used to illustrate what the table
shows. Price is measured on the (4) ……………. of the graph and quantity per time
period is measured on the (5) ……………. of the graph. Values from the table are
plotted on the graph. This is an individual (6) …………….. . If we knew what the
buyers were willing and able to purchase at the various prices on a demand table, then
we could model a (7) ………….. demand curve for specific goods or services.
Just as with demand, a table can be made to show how price influences a seller’s
decision to sell. The table expresses a range of (8) …………… and shows the quantity
the seller is willing and able to sell at each of those prices, holding other factors
constant. The table will indicate that quantity supplied increase with an (9) ……………
in price for the specific good or service. On the other hand, quantity supplied will
decrease with a (10) ……………... in price.
The vertical (11) ………….. on a graph represents price and the horizontal line shows
(12) ………………. per time period. Plotting the price/ quantity combinations from the
table onto the graph creates a model of an (13) ……………………
If we knew how much all sellers of the specific good or service were willing to make
available at the various possible prices, we could create a (14) ………….. of an
individual supply curve.
LANGUAGE
LANGUAGE FOCUS
FOCUS
Study the sentences from the text:
- If the price of a specific good or service increases, the quantity a buyer will
purchase will decrease.
- If the price decreases, the quantity a buyer will purchase will increase.
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Conditional sentences
❖ Zero conditional
We can talk about general facts or things that are always true using an if sentence. This
kind of sentence has the present tense in both parts.
Example: if interest rates fall, company profits rise
In statements like this, if means the same as when or every time. This is sometimes
called the zero conditional
❖ If + present + will
When we want to talk about future events that will happen, or are likely to happen, we
use:
If + present (condition) - future (result)
Examples:
- If the government raises taxes, consumer spending will fall.
The if-clause can also come in the second part of the sentence:
- Consumer spending will fall if the government raises taxes.
❖ If or when?
When we talk about events that will take place in the future, we can use if or when:
- I’m flying to the States tonight. I’ll give you a ring if I can find a phone.
(The speaker is not sure if he will be able to find a phone or not.)
- I’m flying to the States tonight. I’ll give you a ring when I get there.
(The speaker has no doubt that the plane will arrive safely.)
PRACTICE
Exercise 1: Match the first part of the sentences in column A with the right endings
in column B.
A B
1 Governments expect something in A something is wrong with the
return management.
2 Every time Peter chairs a meeting B it gets there the following morning.
3 People are more productive C I usually look after them.
4 If you send a letter by Datapost, D if they give aid.
5 If inflation rises, E if we launch a new model.
6 When you have a high staff turnover, F it goes on for a long time.
7 If anyone from our Hamburg office G if they work in pleasant surroundings.
visits, H the value of people’s savings goes
8 We spend a great deal on promotion down.
9 I always fly Club Class I when I go on a long haul flight.
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Exercise 2
You have been asked to speak on these topics at a meeting. Write short paragraphs
about what you think will happen during the next two or three years, and what you and
your company will do.
1. Interest rates
I think that interest rates will rise again during the next two or three years. If they do,
we will have to try to reduce our costs and the amount we borrow as much as possible,
and we will not be able to expand.
2. Your market share
……………………………………………………………………………………………
……………………………………………………………………………………………
……………………………………………………………………………………………
………………
3. New competitors
……………………………………………………………………………………………
……………………………………………………………………………………………
……………………………………………………………………………………………
………………
4. The political situation
……………………………………………………………………………………………
……………………………………………………………………………………………
……………………………………………………………………………………………
………………
GLOSSARY
GLOSSARY
- market price (n): the price at which buyers and sellers trade the item in an open
marketplace - giá thị trường
E.g: One of the roles of demand and supply is to determine the market price.
- analyze (v) [ˈæn lˌaɪz]: examine or study sth, especially by separating sth into
parts: phân tích
E.g: He tried to analyze exactly what was going on to give the results of the inspection.
- analysis (n): study of sth by examining into parts- sự phân tích
E.g: Samples are sent to the laboratory for analysis.
42
- minimum wages (n): the least amount of regular money you earn for work or
service- lương tối thiểu
E.g: Several ASEAN countries have raised their minimum wage standards recently to
adjust their respective salary levels to the rising costs of living and to provide their
citizens with higher purchasing power.
- incentives (n) [ɪnˈsɛntɪv]: sth for encouragement- khuyến khích
E.g: The government should give farmers an incentive to improve their land to reach
the highest productivity in agriculture.
- subsidies (n) [ˈsʌbsɪdɪ]: money granted by government to help an industry- trợ
cấp
E.g: The country’s economy is near to collapse after the end of Soviet subsidies.
- market mechanism (n) [ˈmɛkəˌnɪzəm]: the manner in which consumers and
producers can determine the price and the quantity the things produced- cơ chế
thị trường
E.g: In this case, the market mechanism shows that $ 75 is the balancing point.
- equilibrium (n) [ˌiːkwɪˈlɪbrɪəm]: (Economics) the economic condition in which
there is neither excess demand nor excess supply in a market - cân bằng
E.g: The equilibrium price occurs where the supply of goods matches the demand for
goods
- vary (v) [ˈvɛərɪ]: change or be different in size, amount etc- thay đổi
E.g: Demand varies with the season.
- variety (n) [vəˈraɪɪtɪ]: several different sorts of the same thing- nhiều loại khác
nhau
E.g: There is a variety of standard terms in warranties.
- various(adj): being different- khác nhau
E.g: High inflation at this time can be explained with various reasons, including
increasing salary.
- Variation (n): change in the amount or level of sth- sự thay đổi, khác nhau
E.g: There are significantly regional variations in house prices in this city.
- Behavior (n) [bɪˈheɪvjə]: way of behaving - hành vi
E.g: Annu is conducting a survey on whether consumer behavior differs between men
and women.
- Quantity (n) [ˈkwɒntɪtɪ]: amount or number of sth- số lượng
E.g: The financial manager has to minimize the quantity of finished goods in inventory.
43
- Constant (adj) [ˈkɒnstənt]: unchanged- không đổi
E.g: When studying the influence of price on the quantity demanded we have to keep
other factors constant.
- Move (v): change place or position- di chuyển
E.g: Don’t move while I am taking photo!
- Movement (n): the act of changing place of position, act of moving - sự di
chuyển
E.g: A movement along the demand curve occurs when there is a change in price.
- quantity demanded (n): the quantity of goods or services buyers are willing and
able to buy at a certain price in a period of time - lượng cầu
- quantity supplied (n): the quantity of goods or services sellers are willing and
able to sell at a certain price in a period of time- lượng cung
E.g: The lowering of the price leads to increase in quantity demanded and decrease in
quantity supplied.
- expectation (n) [ˌɛkspɛkˈteɪʃən]: strong hope or belief that sth will happen- sự
mong đợi, sự mong muốn
E.g: The sharp increase in the price of petrol last night was out of consumers’
expectations.
- illustrate (v) [ˈɪləˌstreɪt]: explain by using pictures or diagrams- thể hiện, minh
họa
E.g: Her speech about the hunger in South Africa was clearly illustrated with many
pictures and figures.
- shift factors (n): things that cause shift of a demand/ supply curve- yếu tố ngoài
giá
- curve (n): line or surface that bends gradually- đường cong
E.g: The change in one shift factor such as consumer’s taste causes a shift of the
demand curve to the left or to the right.
- willingness (n): readiness- sự sẵn sàng
E.g: Fortunately, the partner showed their great willingness to discuss the problem.
44
CHAPTER 2
PUBLIC FINANCE
UNIT 6: PUBLIC FINANCE
UNIT 7: FISCAL POLICY
UNIT 8: TAXATION
UNIT 9: DIFFERENT TYPES OF TAXES
UNIT 10: INSURANCE
45
UNIT 12
UNIT 6 PUBLIC FINANCE
PREVIEW
PREVIEW
Whole-class discussion
1. What is public finance concerned
with?
2. Where does the government’s revenue
comes from?
3. What is “deficit spending’?
4. How can the government raise more
money apart from its revenue to finance
the deficit?
READING
READING
Where Does the Money Come From?
Federal Budget 101
The federal government raises trillions of dollars in tax revenue each year, though there
are many different kinds of taxes. Some taxes fund specific government programs,
while other taxes fund the government in general. When all taxes for a given year are
insufficient to cover all of the government’s expenses—which is often the case— the
U.S. Treasury borrows money to make up the difference.
Total federal tax revenues in fiscal year 2014 are projected to be $3 trillion. These
revenues come from three major sources: income taxes paid by individuals, accounting
for 46 percent of all tax revenues; payroll taxes paid jointly by workers and employers,
accounting for 34 percent; and corporate income taxes paid by businesses, making up 11
percent. There are also a handful of other types of taxes like customs duties and excise
taxes that make up much smaller portions of federal revenue. Customs duties are taxes
on imports, paid by the importer, while excise taxes are taxes levied on specific goods,
like gasoline. This pie chart below shows how much each of these revenue sources are
expected to bring in during fiscal year 2014.
46
Once they are paid into the Treasury, income taxes and corporate taxes are designated
as federal funds, while payroll taxes become trust funds. Federal funds are general
revenues, meaning Congress and the president can decide to spend them on just about
anything when they conduct the annual appropriations process. But trust funds can be
used only to pay for very specific programs. The vast majority of trust fund revenues
pay for Social Security and Medicare.
Lên kế hoạch về chi ngân sách
Borrowing
In most years, the federal government spends more money than it takes in from tax
revenues. To make up the difference, the Treasury borrows money by issuing bonds.
Anyone can buy Treasury bonds, and, in effect, lend money to the Treasury by doing so.
According to the Congressional Budget Office, the federal government is expected to
borrow $616 billion in fiscal 2014. Borrowing constitutes a major source of revenue for
the federal government. Down the road, however, the Treasury must pay back the
money it has borrowed and pay interest as well.
47
How Does the Federal Government Borrow?
To finance the debt, the U.S. Treasury sells bonds and other types of
securities.(Securities is a term for a variety of financial assets.) Anyone can buy a bond
or other Treasury security directly from the Treasury through its website,
treasurydirect.gov, or from banks or brokers. When a person buys a Treasury bond, she
effectively loans money to the federal government in exchange for repayment with
interest at a later date.
Most Treasury bonds give the investor—the person who buys the bond—a pre-
determined fixed interest rate. Generally, if you buy a bond, the price you pay is less
than what the bond is worth. That means you hold onto the bond until it matures; a bond
is mature on the date at which it is worth its face value. For example, you may buy a
$100 bond today and pay only $90. Then you hold it for five years, at which time it is
worth $100. You also can sell the bond before it matures.
If the Federal Government Has Lots of Debt, Who Does It Owe Money To?
The federal debt is the sum of the debt held by the public—that’s the money borrowed
from regular people like you and from foreign countries—plus the debt held by federal
accounts. Debt held by federal accounts is the amount of money that the Treasury has
borrowed from itself. That may sound funny, but recall from above that trust funds are
federal tax revenues that can only be used for certain programs. When trust fund
accounts run a surplus, the Treasury takes the surplus and uses it to pay for other kinds
of federal spending. But that means the Treasury must pay that borrowed money back to
the trust fund at a later date. That borrowed money is called “debt held by federal
accounts;” that’s the money the Treasury effectively lends to itself. One-third of the
federal debt is debt held by federal accounts, while two-thirds of the federal debt is held
by the public.
Debt Held by the Public
Debt held by the public is the total amount the government owes to all of its creditors in
the general public. That includes Americans as well as foreign individuals and the
governments of foreign countries.
Approximately half—the largest portion—of debt held by the public is held
internationally by foreign investors and central banks of other countries who buy our
Treasury bonds as investments. In 2010, these countries included China, which held the
48
most ($1.1 trillion), followed by Japan ($800 billion), Middle Eastern countries ($173
billion), Russia ($168 billion), Brazil ($164 billion) and Taiwan ($152 billion).
The next largest portion is held by domestic investors, which includes regular
Americans as well as institutions like private banks. (A bank may invest some of its
own assets in Treasury bonds.) This portion constitutes over a third of the federal debt.
The U.S. Federal Reserve Bank and state and local governments hold the remainder of
the federal debt. (The Federal Reserve's share of the federal debt is not counted as debt
held by federal accounts, because the Federal Reserve is considered independent of the
federal government. The Federal Reserve buys and sells Treasury bonds as part of its
work to control the money supply and set interest rates in the U.S. economy.)
COMPREHENSION
QUESTIONS
1. What does the U.S. Treasury do when revenue from taxes is not enough to cover
all of the government’s expenditures?
2. How much is the Federal government going to collect in tax revenues in fiscal
year 2014?
49
3. What type of taxes contributes the largest proportion of tax revenues?
4. What are federal funds?
5. For what purpose are these funds used?
6. What are trust funds?
7. For what purpose are these funds used?
8. By what way does the Treasury borrow money?
9. Who does the Federal Government owe money to?
VOCABULARY
EXERCISES
Exercise 1: Match the words or phrases from a - j with their definitions from 1 – 10
a. redeem f. floating debt
b. treasury bills g. consoles
c. perpetual loans h. transfer
d. national debt i. obligation
e. budget j. maturity
1. Debts that are payable for a period of time that has no fixed end
2. The movement of money from one person or group of persons to another, or from one
place or country to another
3. Consisting mainly of short-term bills, or money borrowed at call
4. The date on which a bill of exchange, promissory note, debenture or loan stock
becomes due for payment or repayment
5. The relation between debtor and creditor
6. Interest-bearing securities or bonds having no maturity date
7. The total amount of money borrowed by the central government of a country on
which it has to pay interest.
8. An account of probable income and expenditure during a stated period.
9. To pay off, esp. loan stock, debentures and preference shares or stock.
10. Short-term government securities, sold at a discount, bearing no interest rate.
Exercise 2: Choose the word that best completes the sentence.
1. Government securities with terms of more than one year are called:
A. government bonds. B. bills of exchange.
C. Treasury bills. D. capital bills.
2. Money that a government has required to be accepted in settlement of debts is:
A. currency value. B. legal tender.
50
C. barter money. D. commodity money.
3. Which of the following activities is one of the responsibilities of the Bank of England
to the banking system?
A. Assisting banks that are in a difficult financial position.
B. Loaning money to other countries that are friendly to the UK.
C. Issuing new bonds to finance the PSBR.
D. Auditing the various agencies and departments of the government.
4. The difference between a bank's actual reserves and its required reserves is its:
A. required reserve ratio. B. net worth.
C. profit margin. D. excess reserves.
5. If the quantity of money demanded exceeds the quantity of money supplied, then the
interest rate will:
A. change in an uncertain direction. B. fall.
C. rise. D. remain constant.
6. Which of the following events will lead to an increase in the demand for money?
A. An increase in the supply of money.
B. A decrease in the price level.
C. An increase in the level of aggregate output.
D. An increase in the interest rate.
7. Which of the following events will lead to a decrease in the equilibrium interest rate?
A. A decrease in the price level.
B. An increase in the discount rate.
C. A sale of government securities by the central bank
D. An increase in the level of aggregate output.
8. The motive for holding money that encourages investors to hold bonds when interest
rates are low, with the hope of selling them when interest rates are high, is the:
A. precautionary motive. B. peculation motive.
C. s profit motive. D. transactions motive.
9. The opportunity cost of holding money is determined by:
A. the inflation rate. B. the interest rate.
C. the discount rate. D. the level of aggregate output.
10. The demand for money represents the idea that there is:
A. a positive relationship between the interest rate and the quantity of money
demanded.
51
B. a negative relationship between the price level and the quantity of money
demanded.
C. a negative relationship between the level of aggregate output and the quantity of
money demanded.
D. a negative relationship between the interest rate and the quantity of money
demanded.
LANGUAGE
LANGUAGE FOCUS
FOCUS
Study the following sentences from the reading text:
- Customs duties are taxes on imports, paid by the importer, while excise taxes are
taxes levied on specific goods, like gasoline.
- The federal debt is the sum of the debt held by the public—that’s the money
borrowed from regular people like you and from foreign countries—plus the
debt held by federal accounts.
The phrases in bold in the above sentences are “participle phrases”.
Participle phrases
❖ Relative clauses can have a continuous verb form (with an –ing ending) or a
passive verb form (with an –ed ending).
- The people who are making the real decisions are all at Head Office.
- Food which is sold in supermarkets needs a relatively long shelf-life.
In this case, we can simplify the sentences by leaving out both the relative pronoun and
the verb “be”. The phrases reduced from relative clauses are called participle phrases.
- The people making the real decisions are all at Head Office.
- Food sold in supermarkets needs a relatively long shelf-life.
❖ Most participle phrases are derived from two sentences or clauses with the same
subject. Participle phrases contain no subject, so the subject in these sentences is
understood to be the noun in the main clause nearest the participle phrase.
- These are the technologies classified as traditional.
- The law creating an extension service was passed in 1898.
PRACTICE
Exercise 1: Put an –ing ending or an –ed ending for the verbs in brackets.
1. The products ……………. (attract) most interest were smaller and lighter models.
2. There’s a lot of noise from the builders …………… (work) next door.
52
3. This is a new drug ……………. (develop) at our Cambridge laboratories.
4. I was talking to a man …………… (go) to the same conference as us.
5. The “assets” include everything ………………… (own) by the company.
6. LVMH fought a battle with Gucci …………….. (run) by Domenico De Sole.
7. Tom took me to the restaurant …………… (call) “Noodle Heaven”
8. The train ………………. (go) to Brussels leaves from here.
9. This model ……………. (launch) last year is selling very well.
Exercise 2: Make up complex sentences using participle phrases from two
sentences with the same subject.
1. The share of federal tax revenue is paid by corporations. That share of federal tax
revenue has declined substantially over time.
……………………………………………………………………………………………
………………………………………………………..
2. Debt is held by federal accounts. That debt is the debt that the federal government has
borrowed from itself.
……………………………………………………………………………………………
………………………………………………………..
3. Medicare is a federal program. That program provides health care coverage for senior
citizens and the disabled.
……………………………………………………………………………………………
………………………………………………………..
4. The debt ceiling is the limit. The Congress sets that limit on the total amount that the
U.S. Treasury can borrow.
……………………………………………………………………………………………
………………………………………………………..
5. Some people consider deficit spending to be a hindrance to the government and the
economy. They argue that a deficit only shifts the burden to future generations because
it must be paid for eventually, just like any other loan.
……………………………………………………………………………………………
………………………………………………………..
GLOSSARY
GLOSSARY
- finance (n) [fɪˈnæns ˈfaɪnæns]: monetary resources; funds, especially those of a
government or corporate body – tài chính, vốn
53
E.g. The government is worried about the state of the country's finances.
- finance (v) to give money for (a plan, business etc) – cấp vốn
E.g. Will the company finance your trip abroad?
- financial (adj) [fɪˈnænʃəl faɪ-] - concerning money
E.g. The company is in financial difficulties.
- financier (-siə) (n): a person who manages large sums of money
- public finance (n): the study of how the government (or public) sector pays for
(or finances) expenditures through taxes and borrowing – tài chính công
E.g. Public finance adapts and applies the fundamental microeconomic theory of
markets to the public sector and government activity.
- Insufficient (adj) [ˌɪnsəˈfɪʃənt]: of a quantity not able to fulfill a need or
requirement – thiếu, không đủ
E.g. "insufficient funds"
- customs duties (n): a government tax on imports or exports – thuế hải quan, thuế
xuất nhập khẩu
E.g. "They signed a treaty to lower duties on trade between their countries"
- excise taxes (n): tax placed on the sale or manufacture of a commodity, typically
a luxury item e.g., alcohol – thuế tiêu thụ đặc biệt
E.g. In Canada, both the federal and provincial governments impose excise taxes on
inelastic goods such as cigarettes, gasoline, alcohol.
- mature (v) [məˈtjʊə -ˈtʃʊə]: to become due for payment or repayment – đến hạn
(thanh toán)
E.g. My insurance policy matures when I reach sixty-five.
- mature (adj): due or payable: “a mature bond”
- face value (n) - the value printed or written on the face, as of a bill or bond – giá
trị bề mặt
E.g. The face value of their stock was $225,000,000, although few of them ever sent a
message.
- surplus (n + adj) [ˈsɜːpləs] - An amount or a quantity in excess of what is needed
/ being more than or in excess of what is needed or required – thặng dư
E.g. Canada produces a surplus of raw materials.
- deficit (n) [ˈdɛfɪsɪt dɪˈfɪsɪt] - the amount by which an actual sum is lower than
that expected or required – thâm hụt
E.g. They're ready to cut the budget deficit for the next fiscal year.
- creditor (n) [ˈkrɛdɪtə] - a person or commercial enterprise to whom money is
owed – chủ nợ
E.g. But if you buy a bond, you are the creditor because the money you pay to buy the
bond is actually a loan to the issuer.
54
UINT
UNIT8 7 FISCAL POLICY
PREVIEW
PREVIEW
Last month the government urged the National Assembly to increase the budget deficit ceiling from 4.8 percent of
gross domestic product this year to 5.3 percent next year, saying it needs money for public spending.
The government earned some VND543.8 trillion (US$25.74 billion) over the first nine months, or 66.6 percent of the
target, and may fail to meet the target this year, the Ministry of Finance reported last week.
Government spending was estimated to be VND684.5 trillion ($32.4 billion) as of September, or 70 percent of the
target and up 7.4 percent year on year, the ministry said.
(Source: Thanhniennews.com: Saturday, October 19, 2013 16:50)
Read the extract about Vietnam Government’s spending and revenue and discuss in
groups:
1. What does the Government spend money on?
2. How can the Government generate its revenue?
3. Does the Vietnam Government run a budget deficit?
4. Is deficit spending helpful or harmful?
READING
READING
Government spending and taxation directly affect the overall performance of the
economy. For example, if the government increases spending to build a new highway,
construction of the highway will create jobs. Jobs create income that people spend on
purchases, and the economy tends to grow. The opposite happens when the government
increases taxes. Households and businesses have less of their income to spend, they
purchase fewer goods, and the economy tends to shrink.
When the government spends more than it receives, it runs deficit. Governments
finance deficits by borrowing money. Deficit spending – that is, spending funds
obtained by borrowing or printing instead of taxation – can be helpful for the economy.
For example, when unemployment is high, the government can undertake projects that
use workers who would otherwise be idle. The economy will then expand because more
money is being pumped into it. However, deficit spending also can harm the economy.
When unemployment is low, a deficit may result in rising prices, or inflation. The
55
additional government spending creates more competition for scarce workers &
resources and this inflates wages and prices.
Fiscal policy is a government policy related to taxation and public spending.
Fiscal policy and monetary policy, which is concerned with money supply, are the two
most important components of a government’s overall economic policy, and the
government uses them in an attempt to maintain economic growth, high employment,
and low inflation.
Fiscal policy can be either expansionary or contractionary. It is expansionary or
loose when taxation is reduced or public spending is increased with the aim of
stimulating total spending in the economy, known as aggregate demand. Expansionary
policy might occur, when a government feels its economy is not growing fast enough or
unemployment is too high. By increasing spending or cutting taxes, the government
leaves individuals and businesses with more money to purchase goods or invest in new
equipment. When individuals or firms increase their purchases, they raise demand,
which requires additional production, creating jobs, generating more spending. The
result is higher employment and a growing economy.
On the other hand, fiscal policy is contractionary or tight when taxation is
increased, or public spending is reduced in order to restrict demand and slow down the
economy. A tight fiscal policy is more likely when inflation is high. A contractionary
fiscal policy reduces the amount of money in the economy available for purchasing
goods, thus decreasing spending, demand, and ultimately, pressure on prices.
To determine its fiscal policy, a government must make judgments about a
number of factors, including the level of economic growth or unemployment likely in
the future. These factors will affect the amount of revenue raised through taxes and the
amount of money required for government programs. Once these determinations are
made, the government can decide how to raise revenue and how to allocate it. Revenue
is generated through a combination of different taxes – for example income tax, sales
tax, or customs duties – and can be allocated to build new roads, fund government
programs, or to pay expenses such as government employees’ salaries.
Another important decision a government must make regarding fiscal policy is
whether or not to run a budget deficit by spending more money than the government
raises. Deficits can be financed in two ways – borrowing or printing more money. If the
government borrows money, it will decrease the supply of money available in the
economy for lending, and the cost of borrowing money, the interest rate, may rise. If the
56
government prints more money, it will increase the supply of money in the economy,
without a corresponding increase in available goods; prices – and inflation – are likely
to rise.
Decisions on fiscal policy are inevitably influenced by political considerations,
such as beliefs about the size of the role that governments should play in the economy,
or the likely public reaction to a particular course of action. Few governments will find
it easy to raise taxes or to decrease funding for programs that have strong support from
Tại sao phải
the public, such as social security or defense. Fiscal policy decisions can be influenced
nghiên cứu
các chính by other outside factors as well. In today’s global economy, a government also needs to
sách của consider the fiscal policies of other countries, which may tempt companies to relocate
quốc gia khác
by offering them generous tax programs or other government – controlled benefits.
Some countries may find their fiscal policy decisions constrained by the requirements of
the International Monetary Fund (IMF), which often grants aid packages subject to
conditions relating to fiscal policy.
COMPREHENSION
QUESTIONS
1. In what way do government spending and taxation affect the economy? Give
examples.
2. What is deficit spending? Is it useful or harmful for the economy? Why?
3. What are the government’s major economic policies mentioned above?
4. What are they aimed at?
5. Under what circumstances can fiscal policy be expansionary? Why?
6. Under what circumstances can fiscal policy be contractionary? Why?
7. What factors should be considered in making decisions on the fiscal policy?
8. Why should the government consider the fiscal policies of other countries?
VOCABULARY
VOCABULARYEXERCISES
EXERCISES
1. Choose the word that best completes the sentence.
1. Monetary policy is one of the tools that a ………………… Government uses to

influence its economy.
a. nation b. national c. nationality d. native
2. Macroeconomic stability means ………………., low inflation, high economic growth
and so on.
a. low unemployment b. low competition c. high production d. b & c
57
3. The job of the Central Bank is to ……………. the amount of money and credit in the
economy.
a. examine b. investigate c. provide d. control
4. "Narrow" money supply or …………….. is currency in circulation and the currency
in easily accessed checking and savings accounts.
a. M1 b. M2 c. M3 d. –
5. All governments intervene through their ……………….. policies in a bid to achieve
certain policy objectives.
a. economy b. microeconomic c. macroeconomic d. economical
6. Monetary policy involves the use of interest rates to control the level and rate of
………….. of aggregate demand in the economy.
a. grow b. growth c. growing d. grown
7. Fiscal policy involves the use of government spending, taxation and
……………………. to influence both the pattern of economic activity and also the
level and growth of aggregate demand, output and employment.
a. investing b. savings c. borrowing d. depositing
8. It is also a means by which a ……………… of income & wealth can be achieved.
a. distribution b. distributing c. redistributing d.
redistribution
9. Government spending can be classified into three main areas: ………………..,
current government spending and capital spending.
a. transfer payments b. debt payments c. balance of payments d. –
10. Spending on …………. (e.g. improvements to our motorway network) helps
provide the capacity needed for other businesses to flourish.
a. transport system b. infrastructure c. accommodation d. industry
2. Complete the following text using the words or phrases from the box.
actions expansionary declines solvency revenues
benefits correction spending contractionary fiscal deficits
The global crisis that had its roots in the 2007 meltdown in the U.S. mortgage market is
a good case study in fiscal policy. The crisis hurt economies around the globe, with
financial sector difficulties and flagging confidence hitting private consumption,
investment, and international trade (all of which affect output, GDP). Governments
responded by trying to boost activity through two channels: automatic stabilizers and
58
fiscal stimulus—that is, new discretionary (1) …………… or tax cuts. Stabilizers go
into effect as tax (2) …………. and expenditure levels change and do not depend on
specific (3) ………… by the government. They operate in relation to the business cycle.
For instance, as output slows or falls, the amount of taxes collected (4) ………. because
corporate profits and taxpayers’ incomes fall, particularly under progressive tax
structures where higher-income earners fall into higher-tax-rate brackets.
Unemployment (5) ………… and other social spending are also designed to rise during
a downturn. These cyclical changes make fiscal policy automatically (6) ………….
during downturns and (7) ………….. during upturns.
Fiscal deficits and public debt ratios (the ratio of debt to GDP) have expanded sharply
in many countries because of the effects of the crisis on GDP and tax revenues as well
as the cost of the fiscal response to the crisis. Support and guarantees to financial and
industrial sectors have added to concerns about the financial health of governments.
Many countries can afford to run moderate (8) ……….. for extended periods, with
domestic and international financial markets and international and bilateral partners
convinced of their ability to meet present and future obligations. Deficits that grow too
large and linger too long may, however, undermine that confidence. Aware of these
risks in the present crisis, the IMF in late 2008 and early 2009 called on governments to
establish a four-pronged fiscal policy strategy to help ensure (9) …………: stimulus
should not have permanent effects on deficits; medium-term frameworks should include
commitment to fiscal (10) ………. once conditions improve; structural reforms should
be identified and implemented to enhance growth; and countries facing medium- and
long-term demographic pressures should firmly commit to clear strategies for health
care and pension reform. Even as the worse effects of the crisis recede, fiscal challenges
remain significant, particularly in advanced economies in Europe and North America
and this strategy remains as valid as ever.
(Written by:
- Mark Horton - Division Chief in the IMF’s Middle East and Central Asia Department,
and - Asmaa El-Ganainy - Economist in the IMF’s Fiscal Affairs Department.)
LANGUAGE
LANGUAGEFOCUS
FOCUS
Study the following sentences from the reading text:
- Households and businesses have less of their income to spend, they purchase
fewer goods.
- When the government spends more than it receives, it runs deficit
- The additional government spending creates more competition for scarce
workers and resources and this inflates wages and prices.
59
Comparing nouns
We can compare quantities and amounts by using more, less, fewer, (not) as much as,
(not) as many as, etc. The correct word depends on whether the noun in question is
countable or uncountable.
❖ COUNTABLE
The board decided that the company needed more/fewer retail outlets.
Our Paris office doesn’t employ as many people as our Munich office.
The R&D Department has the most/fewest people working for it.
❖ UNCOUNTABLE
I spent more/less time on the project than I had expected.
We didn’t make as much money on the deal as we had hoped.
Of all our surveys, this produced the most/least information.
PRACTICE
Exercise 1: Complete the sentences with more, less, much, many or fewer.
1. Eurotunnel may never make a profit because the tunnel cost substantially
……………. money to build than they had expected.
2. Because of ATMs, banks don’t have as …………… branches as they used to.
3. They made 2,000 staff redundant, so now they employ …………… people than they
did last year.
4. Now that I’m in management, I don’t spend as ………….. time at home.
Exercise 2: Answer the questions comparing the present with five years ago. Use more
than, less than, fewer than, not as much as, not as many as in your answers. You can
use these phrases without a noun if the context is clear.
1. Do you do a lot of work at the weekends?
I don’t do as much work as I used to, or I don’t do as much as I used to.
2. Do you have a lot of free time?
…………………………………………………………………………………………
3. Do you go to a lot of parties?
…………………………………………………………………………………………
4. Do you listen to a lot of music?
…………………………………………………………………………………………
5. Do you get a lot of sleep?
…………………………………………………………………………………………
6. Do you buy a lot of books?
…………………………………………………………………………………………
60
GLOSSARY
GLOSSARY
- inflation (n) [ɪnˈfleɪʃən]: rise in prices resulting from an increase in the supply of
money, credit - lạm phát
E.g. For example, if the inflation rate is 2%, a $1 pack of gum will cost $1.02 in a
year. Most countries' central banks try to sustain an inflation rate of 2 to 3%.
- inflationary (adj) [ɪnˈfleɪʃənərɪ]: Of, associated with, or tending to cause
inflation
E.g. inflationary spiral: vòng xoáy lạm phát
inflationary wage claims: những đòi hỏi tăng tiền lương do lạm phát
- deficit (n) [ˈdɛfɪsɪt dɪˈfɪsɪt]: The amount by which a sum of money falls short of
the required or expected amount; a shortage – thiếu hụt
E.g. One's deficit adds to one's debt, and, therefore, many analysts believe that
deficits are unsustainable over the long-term.
- budget deficit: sự thâm hụt, thiếu hụt ngân sách
- deficit spending: A situation in which a company, or especially a government,
spends more money than it collects for a given period of time, usually a quarter
or a year - bội chi
E.g. Companies and government finance deficit spending with borrowing; for
example, the U.S. government could issue Treasury securities.
- Government revenue (n) [ˈrɛvɪˌnjuː]: the money received from taxation, fees,
fines, intergovernmental grants or transfers, securities sales, mineral rights, and
resource rights as well as any sales that are made - thu nhập của chính phủ
- judgment (n): opinion about sth: cách nhìn nhận, đánh giá
- grant (n) [grɑːnt]: An amount of money given, usually by a government or
nonprofit organization, to fund certain projects – khoản viện trợ
E.g. The United States government makes many grants, often of an educational or
scientific nature.
- grant (v) - To bestow; confer - viện trợ, giúp đỡ
E.g. the International Monetary Fund (IMF) often grants aid packages to countries
subject to conditions relating to their fiscal policy.
- expansionary (adj) [ɪkˈspæn ʃəˌnɛr i] : Tending toward or causing expansion -
mở rộng, nới lỏng
- contractionary (adj): tight, become smaller in size/ number - thắt chặt, thu hẹp
- inevitably (adv): as in or was sure to happen - một cách tất yếu, hiển nhiên
- global economy (n): nền kinh tế toàn cầu
- International Monetary Fund (IMF): quỹ tiền tệ quốc tế
61
UNIT
UNIT 10 8 TAXATION
PREVIEW
PREVIEW
➢ Benjamin Franklin, who wrote that: “In this world

nothing can be said to be certain except death and
taxes”
Make a list of all the different types of taxes you can think of and give the definitions
of these types of taxes.
Example:
- Customs duty: tax you pay if you import something from another continent.
The following pictures might help you:
62
READING
READING
Read the following text and decide which paragraphs could be given the following
headings.
………….. Advantages and disadvantages of different tax systems

…………. Avoiding tax on profits
…………. Avoiding tax on salaries
………… Tax evasion
………… The functions of taxation
Most of the money to run the Government comes from taxes of all sorts – on personal
and corporate incomes, on sales of goods, on imports and on inheritances. The ultimate
source of all tax money is the same – people.
A The primary function of taxation is, of course, to raise revenue to finance

government expenditure, but taxes can also have other purposes. Indirect excise duties,
for example, can be designed to dissuade people from smoking, drinking alcohol, and so
on. Governments can also encourage capital investment by permitting various methods
of accelerated depreciation accounting that allow companies to deduct more of the cost
of investments from their profits, and consequently reduce their tax bills.
B There is always a lot of debate as to the fairness of tax system. Business profits,
for example, are generally taxed twice: companies pay tax on their profits (corporation
tax in Britain, income tax in the USA), and the shareholders pay income tax on
dividends. Income taxes in most countries are progressive; and one of the ways in which
governments can redistribute wealth. The problem with progressive taxes is that the
marginal rate – the tax people pay on any additional income – is always high, which is
generally a disincentive to both working and investing. On the other hand, most sales
taxes are slightly regressive, because poorer people need to spend a larger proportion of
their income on consumption than the rich.
C The higher the tax rate, the more people are tempted to cheat, but there is a
substantial ‘black’ or ‘underground’ economy nearly everywhere. In Italy, for example,
self- employed people – whose income is more difficult to control than that of company
employees – account for more than half of national income. Lots of people also have
undeclared part- time evening jobs (some people call this ‘moonlighting’) with small
and medium – sized family firms, on which no one pays any tax or national insurance.
At the end of 1996, the Director of the Italian National Institute of Statistics calculated
the size of the underground economy and added 16.7% to Italy’s gross national product
63
(GNP) figure, and then claimed that Italy had overtaken Britain to become the world’s
fifth largest economy.
D To reduce income tax liability, some employers give highly- paid employees lots
of ‘perks’ (short of perquisites) instead of taxable money, such as company cars, free
health insurance, and subsidized lunches. Legal ways of avoiding tax, such as these, are
known as loopholes in tax laws. Life insurance policies, pension plans and other
investments by which individuals can postpone the payment of tax, are known as tax
shelters. Donations to charities that can be subtracted from the income on which tax is
calculated are described as tax-deductible.
E Companies have a variety of ways of avoiding tax on profits. They can bring
forward capital expenditure (on new factories, machines, and so on) so that at the end of
the year all the profits have been used up; this is known as making a tax loss.
Multinational companies often set up their head offices in countries such as Monaco, the
Cayman Islands, and the Bahamas, where taxes are low; such countries are known as
tax havens. Criminal organizations, meanwhile, tend to pass money through a series of
companies in very complicated transactions in order to disguise its origin from tax
inspectors – and the police; this is known as laundering money.
COMPREHENSION
According to the text, are the following statements TRUE or FALSE?
1 Taxes can be designed both to discourage and to encourage spending.
2 The same amount of money can be taxed more than once.
3 Progressive taxes may discourage people from working extra hours.
4 Sales taxes are unfair because poor people spend more than the rich.
5 The Italian government knows that about one seventh of national income
escapes taxation.
6 “Loopholes” are a common form of tax evasion.
7 If you pay a lot of your income into a pension fund or a life insurance policy
you never have to pay tax on it.
8 A company that makes an unusually large profit during a tax year might
quickly decide to spend it, for example, on a new factory or equipment
VOCABULARY
VOCABULARYEXERCISES
EXERCISES
1. Find words in the text that mean the following.
…………………….. 1 reducing the value of a fixed asset, by charging it against
64
profits
…………………….. 2 something which discourages an action
3 an adjective describing a tax that is proportionally higher for
…………………….. people with less money
…………………….. 4 spending money to buy things, rather than saving it
…………………….. 5 working for yourself, being your own boss
6 a tax on incomes that pays for sickness benefit,
…………………….. unemployment benefit, and old-age pensions
…………………….. 7 non-financial benefits or advantages of a job
…………………….. 8 a way to delay the payment of tax to a later time
9 an adjective describing expenditures that can be taken away
……………………. from taxable income or profits
……………………. 10 a country offering very low tax rates to foreign businesses
2. Which terms do the following sentences define?
1. The tax people pay on their wages and salaries is called
A capital transfer tax B income tax C wealth tax
2. A tax on wages and salaries or on company profits is a/an
A direct tax B indirect tax C value-added tax
3. A tax levied at a higher rate on higher incomes is called a
A progressive tax B regressive tax C wealth tax
4. A tax paid on property, sales transactions, imports, and so on is a/an
A direct tax B indirect tax C value-added tax
5. A tax collected at each stage of production, excluding the already-taxed costs from
previous stages, is called a/an giá trị gia tăng giữa các giao dịch (giá trị tăng thêm)
A added-value tax B sales tax C value-added tax
6. Profits made by selling assets are generally liable to a
A capital gain tax B capital transfer tax C wealth tax
7. Gifts and inheritances over a certain value are often liable to a
A capital gain tax B capital transfer tax C wealth tax
8. The annual tax imposed on people’s fortunes (in some countries) is a/an
A added-value tax B capital transfer tax C wealth tax
9. Making false declarations to the tax authorities is called
A fiscal policy B tax avoidance C tax evasion
10. Reducing the amount of tax you pay to a legal minimum is called
A creative accounting B tax avoidance C tax evasion
65
LANGUAGE
LANGUAGEFOCUS
FOCUS
Study the sentences extracted from the reading text:
- Indirect excise duties, for example, can be designed to dissuade people from
smoking, drinking alcohol, and so on.
- Governments can also encourage capital investment by permitting various

methods of accelerated depreciation accounting that allow companies to deduct
more of the cost of investments from their profits, and consequently reduce their
tax bills.
Verbs + -ing form or to + infinitive

In English, some verbs are followed by –ing form, but others are followed by to +
infinitive.
Verbs + -ing form or infinitive
❖ The following verbs are usually followed by the –ing form:
avoid consider delay deny dislike
enjoy involve look forward to postpone suggest
finish justify mind practice can’t stand
can’t help like miss risk carry on
put off
❖ The expressions below are followed by the –ing form:

It’s a waste of time/ money …. It’s no use ……
There’s no point (in) ……… It’s (not) worth …….
- It’s not worth repairing the machine. It would be cheaper to buy a new one.
❖ The following verbs are usually followed by to + infinitive:
afford agree arrange attempt claim
decide demand deserve expect fail
guarantee hesitate hope learn manage
neglect offer plan prepare pretend
promise refuse seem tend threaten
train want would like
66
PRACTICE
Exercise 1: Complete the sentences using the verbs from the box in the –ing form.
apply buy film lose meet negotiate speak wait
1. We don’t know the final cost of the TV program until the production company
finishes filming.
2. Rupert Murdoch of News International risked ……………. millions of pounds
when he launched his satellite company Sky TV.
3. If you do a business course in England you will be able to practice …………
every day.
4. I have had to put off …………. the designers because I am too busy this week.
5. As a buyer for a large chain store, part of my job involves …………..
competitive prices with suppliers.
6. I’m afraid the manager is busy at the moment. Would you mind ………… a few
minutes?
7. There’s no point …………. for the shares now – the offer closed last week.
8. It’s a waste of money ………….. a Pentium PC if you only want a computer for
word processing.
Exercise 2: Complete the newspaper articles, using the verbs in the boxes in the
infinitive form.
A do discover give prefer
Infotech – One man and his data log
Scientists in a field in Devon are hoping (1) to discover a little more about the
eating habits of sheep when a new research project gets under way next week.
They are planning (2) …………. the sheep miniature computers which will
monitor their eating habits. Farmers have known for a long time that sheep seem
(3) ………..some types of grass to others, but so far no-one has tried (4)
………… any expepriments
B earn hire last pay
When a C++ can mean good money
Things are looking good for software engineers, according to Tony Coombes of
the recruitment consultancy Systems Resources. “There are a lot of big
companies who want (1) to hire engineers for short-term contracts, and most of
them will agree (2) ………. good money. Someone with two years’ experience,
and who has been trained in C++ and Visual Basic, could expect (3) ………..
about £1000 a week.” Most of the contract work tends (4) ……… for about six
months, but some permanent jobs are becoming available.
67
Exercise 3: Complete the following letter. Put the verbs in brackets into either the
–ing form or the infinitive with to
Dear Mr. Williams,
Thank you for your letter of 12 June in which you stated that, following the visit of your
chief buyer Mr. Lindfield, you are considering (1) placing (place) an order for our
Riesling 92 table wine.
We can arrange (2) …………… (supply) you with an initial order of 1,000 cases, and I
enclose our current price list, which I believe you will find very competitive. If you
decide (3) ……………. (go) ahead with the order, we will agree (4) ………… (give)
you the 14% quantity discount you mentioned, and details are enclosed. Please note that
we guarantee (5) ………….. (deliver) firm orders within four weeks.
You mentioned also that you wanted (6) ……….... (market) the wine under your own
brand name, which will involve (7) ………….. (change) the labels. I would suggest (8)
…………. (get) the labels printed here, because it is probably not worth (9) ………….
(print) them in the UK and (10) ………… (send) them here. I have contacted our
personal printer for a quotation and I hope (11) ………….. (be) able to send you a price
soon.
Please do not hesitate (12) ………….. (contact) me if you have any further queries. I
look forward to (13) …………. (hear) from you soon.
Yours sincerely,
Piet Moewe
Piet Moewe
Managing Director
GLOSSARY
GLOSSARY
- tax (n) [tæks] - a compulsory financial contribution imposed by a government to
raise revenue, levied on the income or property of persons or organizations, on
the production costs or sales prices of goods and services, etc. - thuế
E.g. income tax; a tax on tobacco.
"Read my lips: no new taxes" [George Bush speech during election campaign -
later, he raised taxes]
- tax (v) impose or levy a tax on (someone or something) - đánh thuế
E.g. "If you tax too high, the revenue will yield nothing" [Ralph Waldo Emerson]
68
- impose (v) [ɪmˈpəʊz] - To establish or apply as compulsory; levy - đánh thuế
E.g. The government have imposed a new tax on cigarettes.
- taxation (n) [tækˈseɪʃən]: the act or principle of levying taxes or the condition of
being taxed
E.g. “Vietnam Pocket Tax Book 2013” is based on current taxation regulations and
practices including certain legislative proposals and measures as at 31 March 2013.
- Tax evasion (n) The illegal avoidance of taxes – trốn thuế
E.g. UBS paid $780 million and admitted it fostered tax evasion in 2009 to avoid U.S.
prosecution.
- Inheritance (n) [ɪnˈhɛrɪtəns]: something that is or may be inherited; property
passing at the owner's death to the heir or those entitled to succeed; legacy - tài
sản thừa kế
E.g. In most countries, inheritances are taxed if they are valued over a certain
amount.
- dissuade (v) [dɪˈsweɪd]: To deter (a person) from a course of action or a purpose
by persuasion or exhortation - không khuyến khích
E.g. I tried to dissuade him from his foolish intention.
- deduct (v) [dɪˈdʌkt]: subtract or take away (an amount or part) from a total –
khấu trừ
E.g. income tax is deducted from one's wages.
- deductible (adj) [dɪˈdʌktɪbəl]: that can be deducted, especially with respect to
income taxes.
- progressive tax (n) Income tax that takes a larger percentage of a larger income
and a smaller percentage of a smaller income – thuế lũy tiến
- tax liability (n) Debt to a government incurred by a tax payer as accrued or
assessed taxes – thuế phải nộp
E.g. Tax liability is shown as a short-term liability in financial statements.
- tax bill (n) money owed for taxes – hóa đơn thuế
- loophole (n) [ˈluːpˌhəʊl] a means of escape or evasion, esp. a means or
opportunity of evading a law, contract, etc. – kẽ hở
E.g. They exploit some loophole in the law to avoid prosecution.
- tax shelter (n) A financial arrangement, such as the use of special depletion
allowances, that reduces taxes on current earnings – cách tránh thuế.
E.g. An example of tax shelter is the use of depreciation of assets.
- tax inspector (n) an official responsible for assessing and collecting income tax
and some other taxes – thanh tra thuế
- regressive tax (n) Taxation that takes a larger percentage of a lower-income and
a smaller percentage of a higher income – thuế lũy thoái
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UNIT
UNIT11: 9 DIFFERENT TPYES OF TAXES
PREVIEW
PREVIEW
Questions for whole-class discussion:
1. What are direct taxes? Give examples
2. What are indirect taxes? Give examples
3. What are business taxes and personal taxes?
Give examples.
4. What are regressive, proportional, or progressive
taxes? Give examples
5. Whether you can get refund in case you pay any
extra tax by mistake?
READING
READING
Business Taxes versus Personal Taxes

Because businesses and households are the main players in the circular flow of the
economy, it makes sense that some taxes are levied on businesses and some on
households. Taxes on businesses are usually calculated as a percentage of the profits of
the businesses, or what's left after the company pays its suppliers, workers, etc. and also
after it takes accounting deductions for things like depreciation of its assets. (In other
words, the tax is a percentage of what's left over, not a percentage of what the company
brings in in revenue.) This means that suppliers and workers are effectively paid with
pre-tax dollars, but that the profits are taxed before they are distributed to shareholders
or other owners. That said, corporations may end up indirectly paying other types of
taxes during the course of their business activities. These taxes could include property
taxes on land or buildings that a company owns, customs duties and tariffs that are
charged on production inputs that come from foreign countries, payroll taxes on a
company's employees, and so on.
Personal taxes, on the other hand, are levied on individuals or households. Unlike
business taxes, personal taxes are generally not levied on the "profits" of a household
(how much a household has left over after paying for what it buys) but rather on the
revenue of a household, or what the household brings in in income. It's not surprising,
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then, the most prevalent personal tax is an income tax. That said, personal taxes can also
be levied on consumption, so let's take a look at income taxes versus consumption taxes.
An income tax, not surprisingly, is a tax on the money that an individual or household
makes. This income can either come from labor income such as wages, salaries, and
bonuses or from investment income such as interest, dividends, and capital gains.
Income taxes are generally stated as a percentage of income, and this percentage can
vary as the amount of a household's income varies. (Such taxes are referred to as
regressive and progressive taxes, and we will discuss them shortly. Also, capital gains
are generally taxed at a different rate than other income.) In addition, income taxes are
often subject to what are known as tax deductions and tax credits.
A tax deduction is an amount that is subtracted from the amount that is counted as
income for tax purposes. Common tax deductions are those for interest paid on home
mortgages and donations to charity, for example. This doesn't mean that a household
gets back the entire amount of the interest or the donation, however, since a tax
deduction just means that those amounts aren't subject to the income tax. A tax credit,
on the other hand, is an amount that is subtracted directly from a household's tax bill. To
illustrate this difference, consider a household with an income tax rate of 20%. A $1 tax
deduction means that the household's taxable income decreases by $1, or that the
household's tax bill deceases by 20 cents. A $1 tax credit means that the household's tax
bill decreases by $1.
Consumption taxes, on the other hand, are levied when an individual or household buys
stuff. The most common consumption tax (in the U.S. at least) is a sales tax, which is
levied as a percentage of the price of most items that are sold to consumers. Some
common exceptions to the sales tax are grocery items and clothing, for reasons that we
will discuss later. Sales taxes are usually levied by state governments, which means that
rate differ from one state to the next. (Some states even have a sales tax of zero
percent!) In some other countries, the sales tax is replaced by the quite similar value-
added tax. (The main difference between a sales tax and a value-added tax is that the
latter is levied at each stage of production and is thus levied on both businesses and
households.)
Consumption taxes can also take the form of excise or luxury taxes, which are taxes on
specific items (cars, alcohol, etc.) at rates that may differ from the overall sales tax rate.
Many economists feel that consumption taxes are more efficient than income taxes in
fostering economic growth.
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COMPREHENSION
1. How are taxes on businesses accounted?
2. What does the term “pre-tax dollars” mean?
3. How are personal taxes computed?
4. What is personal income tax?
5. What is a tax deduction?
6. What is a tax credit?
7. On what are consumption taxes imposed?
8. What is the main difference between a sales tax and a value-added tax?
9. What do consumption taxes include?
VOCABULARY
VOCABULARYEXERCISES
EXERCISES
1. Complete the following passage with suitable words
Taxes can also be categorized as either regressive, proportional, or progressive, and the
distinction has to do with the behavior of the tax as the taxable base (such as a
household's income or a business' profit) changes:
A (1) ……………... tax is a tax where lower-income entities pay a higher
fraction of their income in taxes than do higher-income entities. (Regressive
taxes can also be thought of as taxes where the marginal tax rate is less than the
average tax rate.)
A proportional tax (sometimes called a flat tax) is a tax where everyone,
regardless of income, (2) …………. the same fraction of income in taxes.
(Proportional taxes can also be thought of as taxes where (3) …………… and
average tax rates are the same.)
A (4) …………… tax is a tax where lower-income entities pay a lower fraction
of their income in taxes than do higher-income entities. (Progressive taxes can
also be thought of as taxes where the marginal tax rate is higher than the (5)
…………… tax rate.)
In addition, a lump-sum tax is a tax where everyone pays the same dollar amount in
taxes, regardless of income. A lump-sum tax is therefore a particular kind of regressive
tax, since a fixed amount of money is going to be a higher fraction of income for lower-
income entities and vice versa.
Most societies have progressive income-tax systems, since it is (rightly or not) viewed
as fair for higher-income entities to contribute a higher (6) …………. .. of their income
in taxes, since they are spending a much lower fraction of their incomes on basic
necessities. Progressive income-tax systems also partially balance out other tax (7)
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………… that are likely to be regressive in nature. For example, an excise tax on cars is
likely to be a regressive tax since lower-income households spend a (8) ………….
fraction of their income on cars, and thus on the tax on cars. Lower-income households
also tend to spend larger fractions of their incomes on necessities such as food and
clothing, so a sales tax on such items would also be quite regressive. (This is why it's
typical for unprepared foods to be exempt from sales taxes, and in some states clothing
is exempt from sales tax as well.)
The main function of most taxes is to raise (9) …………… that the government can use
to provide goods and services to the public. Taxes that have this goal are referred to as
"revenue taxes." Other taxes, however, are put in place not specifically to raise revenue
but instead to (10) …………. for negative externalities, or "bad" behaviors where
production and consumption has negative side effects for society. Such taxes are often
referred to as "sin taxes," but in more precise economic terms are known as "Pigovian
taxes," named after economist Arthur Pigou.
Because of their differing objectives, revenue taxes and sin taxes differ in their desired
behavioral responses from producers and consumers. Revenue taxes, on one hand, are
viewed as best or most efficient when people don't change their work or consumption
behavior very much and instead let the tax just act as a transfer to the government. (A
revenue tax is said to have low deadweight loss in this case.) A sin tax, on the other
hand, is viewed as best when it has a large effect on the behavior of producers and
consumers, even if it doesn't raise very much money for the government.
2. Match the words in column A with their definitions in column B
A B
1 personal income tax A A system of taxation in which persons or corporations are
assessed at a greater percentage of their income according to
2 sales tax the theoretical ability to pay
B Minimizing tax burden through legal means such as tax-
3 excise tax
free municipal bonds, tax shelters, IRA accounts, and trusts
4 regressive tax C imposed on people’s wages and salaries
D A technicality in some legislation or regulation that makes
5 progressive tax it possible to avoid certain consequences or circumvent a rule
without breaking the law, such as in the use of a tax shelter.
6 loopholes E The tax rate that would have to be paid on any additional
dollars of taxable income earned.
7 tax avoidance
F people who pay taxes
8 tax evasion G A tax system that provides that average tax rates decrease
with increases in individuals' income brackets.
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9 marginal tax rates H levied on the sale of goods and services that is usually
calculated as a percentage of the purchase price and collected
10 tax payers by the seller
I Illegal by reducing tax burden by underreporting income,
overstating deductions, or using illegal tax shelters.
J placed on the sale or manufacture of a commodity, typically
a luxury item e.g., alcohol
LANGUAGE
LANGUAGEFOCUS
FOCUS
In the reading text, some words with “prefixes” are used, for example:
“indirect; refund; pre-tax dollars”
PREFIXES
A prefix is placed at the beginning of a word to modify or change its meaning. Study
the following list of some common prefixes in English.
(Note that elements like "auto-" or " bio-"are not prefixes, because these are
"combining forms")
Prefix Examples Prefix Examples

anti- anti-aircraft, antibiotic, in- / il- / infertile, inappropriate,
anticlimax, Antarctic im- / ir- impossible
counter- counter-attack, counteract infra- infrared, infrastructure
dis- or di- disadvantage, dismount, inter- interact, interchange
disbud, disincentive
ex- exit, exclude, expand non- non-economic, non-price,
non-governmental, non-
financial
extra- Extracurricular over- overconfident,
overburdened,
post- postpone, post-graduate semi- semicircle, semi-conscious
pre- pre-adolescent, prelude, un- unacceptable, unreal,
precondition, pre-tax dollar unhappy, unmanned
trans- transnational, transatlantic under- Underdeveloped
transnationalism
re- reorganize, restructure,
reappraisal, redistribute
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PRACTICE
Exercise 1: Match prefixes in column A with their definitions in column B
A B A B
1 anti- A before in time, 9 in- / il- / im- / I after in time or order
2 counter- place, order or ir- J between, among
3 dis- importance 10 infra- K negation, removal,
4 ex- B not enough 11 inter- expulsion
5 extra- C out 12 non- L not
6 post- D opposing, against, 13 over- M opposition,
7 pre- the opposite 14 semi- opposite direction
8 trans- E outside, beyond 15 un- N excessively,
F below 16 under- completely
G absence, negation 17 re- O not, without
H across, beyond P half, partly
Q again
Exercise 2: Complete the following sentences with words from the table above.
1. The ………………… of progressive taxes is that the marginal rate – the tax people
pay on any additional income – is always high, which is generally a …………….. to
both working and investing.
2. Latin America is one of the most …………….. regions in the world due to their
annual per capita income being less than 1,000 USD.
3. ………………… as an economic process involves the global ………………. of the
production process, in which various stages of the production of any product can occur
in various countries, typically with the aim of minimizing costs.
4. ……………. means an estimation of the value of a property, conducted by a person
licensed to do so after an appraisal was previously conducted.
5. More than a dozen variable factors could …………, with their permutations running
into the thousands.
6. Income taxes are one of the ways in which governments can ……………. wealth.
7. Life insurance policies, pension plans and other investments by which individuals can
……………… the payment of tax, are known as tax shelters.
8. Perks refer to ………………. benefits or advantages of a job.
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GLOSSARY
GLOSSARY
- income tax (n) a tax levied on the annual incomes of individuals and
corporations – thuế thu nhập
E.g. Its two basic types are: (1) Personal income tax, levied on incomes of
individuals, households, partnerships, and sole-proprietorships; and (2) Corporation
income tax, levied on profits (net earnings) of incorporated firms.
- wealth tax (n) a tax on personal property; capital levy – thuế tài sản, thuế bất
động sản
- direct tax (n) A tax, such as an income or property tax, levied directly on the
taxpayer - thuế trực thu
E.g. Taxes on income or assets are direct taxes, as the person or organization on
whom they are levied must pay them directly.
- Indirect tax (n) a tax levied on a commodity that is paid by the consumer as part
of the market price - thuế gián thu
E.g. Customs duties levied on imports, excise duties on production, sales tax or value
added tax (VAT) are examples of indirect taxes because they are not levied directly on
the income of the consumer or earner.
- Business Taxes (n) one of five major types of those taxes (1) corporate franchise
tax, (2) employment (withholding) tax, (3) excise tax, (4) gross-receipts tax, and
(5) value added tax (VAT) – thuế doanh nghiệp
- Personal Taxes (n) Tax paid on one's personal income as distinct from the tax
paid on the firm's earnings – thuế thu nhập cá nhân
- Levy (v) Impose or collect an amount (such as a tax) by compulsion or legal
authority – đánh thuế, áp thuế
- pre-tax (adj) The gross amount paid for a good or service before taxes are taken
out – trước thuế
- customs duties (n) the duties levied by a government on imported goods –thuế
hải quan
- tariffs (n) a tax or duty to be paid on a particular class of imports or exports the
reduction of trade barriers and import tariffs - thuế quan
- payroll taxes (n) Income tax and other statutory deductions made by the
employer from the employee's gross salary or wages – thuế tính trên bảng lương
- capital gains (n) profit from the sale of assets, as bonds or real estate – thu nhập
từ bán tài sản
76
E.g. Long-term capital gains usually are taxed at a lower rate than is regular income
or dividends.
- mortgages (n) [ˈmɔːgɪdʒ]: A legal agreement that conveys the conditional right
of ownership on an asset or property by its owner (the mortgagor) to a lender
(the mortgagee) as security for a loan.
E.g. Buying a home includes making mortgage payments to the bank or lending
institution who offers the loan.
- donations (n) [dəʊˈneɪʃən]: Any contribution that a company makes to charities,
education, science, arts, literacy, religion, etc. sự quyên góp, khoản tiền quyên
góp
E.g. The cost of the contribution may be deducted from the company's adjusted gross
income. Donations save companies money in taxes.
- taxable income (n) Gross income from which standard deductions and other
allowances have been subtracted – thu nhập chịu thuế
- value-added tax (n) Indirect tax on the domestic consumption of goods and
services, except those that are zero-rated (such as food and essential drugs) or are
otherwise exempt (such as exports) – thuế giá trị gia tăng
Example: VAT is levied at each stage in the chain of production and distribution from
raw materials to the final sale based on the value (price) added at each stage.
77
UNIT
UNIT 36 10 INSURANCE
PREVIEW
Discuss the following questions
1. Which of the following companies are life insurance companies and non-life
insurance companies?
2. By 2013, how many insurance companies have been operating in Vietnam?

Among them, how many are non-life insurers? And how many are life insurers?
I.READING
Reading
Throughout human history, unexpected economic losses have occurred. Such
losses would continue to occur whether or not a system of insurance had ever been
devised. But through the operation of insurance system, losses can be predicted in
advance, it allows the cost of losses to be financed and redistributed in advance.
The first definition of insurance that we will examine is the finance one. In this
instance, insurance is a financial arrangement that redistributes the costs of unexpected
losses. The insurance arrangement involves the transfer of many different exposures to
loss to one insurance pool, which combines the numerous exposures.
An insurance system accomplishes the redistribution of the costs of losses by
collecting a premium payment from every participant in the system. In exchange for the
payment of the premium, the insured receives a promise from the insurance system to
78
be compensated in the event of a loss. In most insurance systems only a small
percentage of those insured suffer losses. Thus, an insurance system redistributes the
costs of losses from the unfortunate few members who experience them to all the
members of the insurance pool (including those who suffer losses) who have paid
premiums.
An insurance system is able to operate because all the insured are willing to
substitute a relatively small certain outlay, the insurance premium, for a relatively large
uncertain loss.
It is generally assumed that most people find the possibility of suffering a large
loss unpleasant to contemplate. Therefore, people are willing to pay an insurance
premium to be relieved of the uncertainty about a loss, as well as to be compensated if
the loss actually occurs. Thus, even if no loss occurs during a year, as will be the case
for most insured, value has still been received in the form of an eliminated unpleasant
mental state, the anxiety about a loss.
It is sometimes said that insurance is like gambling. The law however has found
a mean of distinguishing between gambling contracts, which it will not enforce, and
insurance contracts, which it will. Contracts of insurance form a special class of contract
in that the law requires parties to them, the insured and the insurer, to exercise the
utmost good faith towards each other.
II. Comprehension / Interpretation
1. In what way, losses can be predicted before they occur?
2. Why the predictability of losses in advance is basic to an insurance system’s
operations?
3. What is insurance in financial definition?
4. What does the insurance agreement involve?
5. How can an insurance system accomplish the redistribution of the costs of
losses?
6. What does the insured receive when a loss occurs?
7. Why are people willing to pay an insurance premium?
8. Is insurance like gambling? Why?
9. What do you know about contracts of insurance?
79
Match the words or phrases in the box with their definitions

renewal policyholder whole life insurance beneficiary
premium proceeds group insurance insurer
general agent accident insurance claim term life insurance
a basic type of permanent life insurance which can provide

1. ……………………. lifetime protection at a level premium. Premiums must
generally be paid for as long as the policy is in force.
2. …………………….. a policy issued to replace one that has expired.
3. ……………………... the insured who is named on the insurance policy.
life insurance that covers the insured person for a specific
4. ……………………... period of time and pays a death benefit only if the insured
dies during that term. This type of insurance does not build
up a cash value.
5. …………………….. the person named in a life insurance policy to receive the
proceeds.
covers the medical expenses as the result of a bodily injury
6. …………………….. or death. This does not cover self-inflicted injury, intentional
harm from another person, homicide, sickness or death from
natural causes.
7. …………………….. an independent agent that represents one or more insurance
companies.
an insurance program designed to offer health insurance to
8. ……………………... persons belonging to a group (business, association,
professional group, etc.) and their families. As a group,
premiums are typically less expensive and choice of benefits
broader than purchasing individual health policies.
9. ……………………… in life insurance, the policy benefits that are payable upon
the maturity of the policy or death of the insured.
10. …………………… the amount of money an insurer charges to provide
coverage.
11. ……………………. the insurance company
12. ……………………. a formal request for payment or services covered by the
insurance policy.
80
III. Vocabulary
GLOSSARY
- accomplish (v): to succeed in doing or completing sth/ to achieve: hoàn thành
- compensate (v): bồi thường
- economic losses (n): những tổn thất về kinh tế
- experience (v): to have a particular situation after you or happen to you:
trải qua, nếm mùi
- exposure (n): nguy cơ, sự rủi ro
- occur (v): to happen: xảy ra
Something unexpected occurred.
- devise (v): to invent sth new or a new way of doing sth: tạo ra
- the predictability of losses in advance: khả năng dự đoán trước các tổn thất
- cost of unexpected losses: chi phí cho các tổn thất ngoài dự kiến
- premium payment / payment of premium: thanh toán/ trả phí bảo hiểm
- the insured (n): người mua bảo hiểm
- insurance pool/ insurance fund (n): quĩ bảo hiểm
- participant (n): a person who is taking part in an activity or event
- to be willing to do sth: ready to undertake: sẵn lòng, sẵn sàng
They are willing to accept responsibility.
- contemplate (v): to thing about whether you should do sth or how you should do
sth: suy ngẫm
He contemplated what the future would be like without money.
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CHAPTER 3
MONEY, BANKING AND
FINANCIAL MARKETS
UNIT 11: MONEY AND ITS

FUNCTIONS
UNIT 12: MONETARY POLICY
UNIT 13: BANKING BUSINESSES
UNIT 14: FOREIGN EXCHANGE

MARKETS
UNIT 15: FINANCIAL MARKETS
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UNIT
UNIT13 11 MONEY AND ITS FUNCTIONS
PREVIEW
PREVIEW
Look at the symbols and find out the corresponding country and currency and their
code. The first one is done as an example.
Symbols Currencies (Code) Symbols Currencies Symbols Currencies
₹ India rupee (INR)

£ ₩
€ ¥ ₪
¢ $ ฿
₫ ₴
READING
READING
The concept of money: Money is anything accepted
by general consent as a medium of economic
exchange. It is the medium in which prices and
values are expressed. It circulates from person to
person and country to country, then facilitating trade,
and it is the principal measure of wealth.
The functions of money: All modern societies use money. With money people
can easily trade goods and services with one another. That is money promotes trade.
Money serves as a medium of exchange, a measure of or a unit of account, a store of
value and a standard of deferred payments. We discuss each of these functions of
money in turn.
Money as a Medium of Exchange: Workers exchange labour services for
money.
People buy or sell goods in exchange for money. Money is a medium through which
people exchange goods and services.
What is a medium of exchange? A medium of exchange is anything that is widely
accepted in payment for goods and services and in settlement of debts. Money is the
most common medium of exchange.
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Money as a Measure of Value: The second function of money is as a measure of
value. Just as we need measurements for distances, weights, and energy, so we need
measurements for the value of things offered at the market. Money measures value in its
units of accounts. The unit of account is the unit in which prices are quoted and account
are kept. In Britain, prices are quoted in pound sterling. In the United States dollar, and
in Vietnam VND. The use of such units helps simplify the exchange of goods.
Money as a Store of value: Money also functions as a store of value. Money is a
store
of value because it can be used to make purchases in the future. This means that if we
choose not to buy with our money today, we can save it to buy in the future. If money
were a perfect store of value, we could buy the same items next year as we could today
with the same amount of money. But money does function poorly as a store of value
when there is inflation in the economy.
Money as a Standard of Deferred Payments: The last function of money is a
standard
of deferred payments or unit of account aver time. When you buy something but do not
pay for it immediately, your payment is expressed in terms of money to be paid in the
future. With the wide use of installment buying, this function of money has become
increasingly important.
Different kinds of money: The most important types of money are commodity
money, and token money.
Commodity Money: Commodity Money is a useful good that serves as a medium of
exchange. As a result, the value of commodity money is about equal to the value of the
material contained in it. The principal materials used for this type of money have been
gold, silver and copper.
In ancient times various articles made of these metals, as well as of iron and
bronze, were used as money, while among primitive people such commodities as shells,
beads, elephant tusks, furs, skins, and livestock served as medium of exchange. The
gold coins in circulation in the US before 1933 were examples of commodity money.
Token Money: Token money is a means of payment whose value or purchasing
power as money greatly exceeds its cost of production or value in uses other than as
money. A $10 note is worth far more as money than as a 3x6 inch piece of high quality
paper. Similarly, the monetary value of the most coins exceeds the amount you would
get by melting them down and selling off the metal they contain.
84
COMPREHENSION
QUESTIONS
1. What is the concept of “money”
2. What are the functions of money?
3. What is a medium of exchange?
4. How is money used as a medium of exchange?
5. How is money used as a unit of account? / a store of value and as a standard of
deferred payment?
6. What do you think is the most important function of money? And Why?
7. What are two main types of money?
8. Give some types of token money?
9. What are some main differences between commodity money and token money?
VOCABLARY EXERCISES
1. Complete the following passage with suitable words
Economists say that the invention of money belongs in the same category as the great
inventions of ancient times, such as the wheel and the inclined plane, but how did
money develop? Early forms of money were often (1) ………….. money-money that
had value because it was made of a substance that had value. Examples of commodity
money are gold and silver coins. Gold coins were valuable because they could be used
in (2) ……….. for other goods or services, but also because the gold itself was valued
and had other uses. Commodity money gave way to the next stage-representative
money.
Representative money is a certificate or (3) …………. that can be exchanged for
the underlying commodity. For example, instead of carrying the gold commodity money
with you, the (4) …………. might have been kept in a bank vault and you might carry a
paper certificate that represents-or was “backed”-by the gold in the vault. It was
understood that the certificate could be (5) ………… for gold at any time. Also, the
certificate was easier and safer to carry than the actual gold. Over time people grew to
trust the paper certificates as much as the gold. Representative money led to the use of
fiat money-the type used in modern economies today.
Fiat money is money that does not have (6) ……….. value and does not represent an
asset in a vault somewhere. Its value comes from being declared “legal tender”-an
acceptable form of (7) …………. -by the government of the issuing country. In this
case, we accept the value of the money because the government says it has value and
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other people value it enough to (8) ………… it as payment. For example, I accept U.S.
dollars as income because I’m confident I will be able to exchange the dollars for goods
and services at local stores. Because I know others will accept it, I am comfortable
accepting it. U.S. (9) …………. is fiat money. It is not a commodity with its own great
value and it does not represent gold-or any other valuable commodity-held in a vault
somewhere. It is valued because it is legal tender and people have faith in its use as
money.
There have been many (10) ………….. of money in history, but some forms have
worked better than others because they have characteristics that make them more useful.
The characteristics of money are durability, portability, divisibility, uniformity, limited
supply, and acceptability.
2. Choose the best answers.
Question 1/7: Which of the following is not a function of money?
A. Measure of value.
B. Store of value.
C. Inflation stopper.
Question 2/7: When is money created?
A. When a bank customer signs the loan documents and the bank credits the
customer's account with the amount of the loan.
B. When, at the end of the month, a company pays the salaries of its employees
using a cash transfer.
C. When a customer repays a loan to the bank.
Question 3/7: Which body issues all the banknotes and coins in Finland?
A. The Finnish parliament.
B. Commercial banks.
C. Bank of Finland.
D. None of the above. All the banknotes and coins in Europe are issued exclusively
by the European Central Bank.
Question 4/7: You are about to purchase your first flat and need to take out a bank loan
for the purpose. When you take out a loan, the equivalent amount of money is created.
Later, when you repay your debt to the bank in full, a slightly larger amount of money
than originally created will cease to exist. Explain why.
86
A. Before you have repaid the loan in full, you have decided to buy a slightly bigger
flat for which you have had to take a new loan.
B. Because of the interest charged by the bank, the sum of euro that you pay back to
the bank is slightly higher than the loan received, and therefore the amount of
money destroyed bigger.
Question 5/7: When does the bank have a debt to you?
A. When you withdraw banknotes from an ATM.
B. When you deposit money into your own account.
C. When you pay your electricity bill with a cash transfer.
Question 6/7: What does central bank money consist of?
A. Banknotes and banks' deposits with the central bank.
B. The public's deposits with commercial banks.
C. The gold in the possession of the central bank.
Question 7/7: Which is higher overall: the amount of debts or the amount of
receivables?
A. The amount of debts is always higher.
B. The amount of receivables is slightly higher.
C. Both exist in equal amounts.
LANGUAGE
LANGUAGEFOCUS
FOCUS
Study the following sentences from the reading text.
- A medium of exchange is anything that is widely accepted in payment for goods
and services and in settlement of debts
- When you buy something but do not pay for it immediately, your payment is
expressed in terms of money to be paid in the future.
The expressions: “in payment for; in terms of” are common in English.
Noun + preposition combinations

❖ Noun + prepositions
ability in excitement about Optimism
advantage of application example of order for
for experience of, in price of
alternative to fall in, of payment for
advice on fear of protection from
cheque for focus on pessimism about
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agreement with/ about hope of preparation for
approval of increase in, of reason for
belief in interested in rise in, of
benefit of/from invitation to request for
cause of involvement in reply to
cheque for information about reference to
comparison with insurance against responsibility for
complaint about investment in satisfaction with
cost of knowledge of similarity to
decrease in. of lack of solution to
decision about/ on matter with substitute for
demand for method of success at/in
division into need for suitability for
disappointment with objection to tax on
doubt about opinion of trouble with
difficulty with opposition to wait for
difference between worry about
❖ Prepositions + nouns
at a good price at a profit/loss at cost price

at your convenience at short notice by post
by hand by return by cheque/ credit card
by law by car, bus, airmail by mistake
by accident by chance in advance
for sale for lunch in cash
for a change for pleasure in connection with
in charge of in writing in favour of
in stock in a hurry in the market (companies)
in the end in change of in general
in bulk in financial terms in my opinion
in other words in the pipeline in debt
on application in touch on loan
on holiday in trouble on a trip
on hold on sale on television
on the basis of on business on time
on hand on the phone to my mind
on the market (products) on order up to date
on the whole out of date up to you
out of order out of business
under pressure with reference to
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PRACTICE
Exercise 1: Complete the sentences using a noun from box A and a proposition
from box B
difference solution of to
request invitation of for
experience reply of for
trouble advantage to between
cheque price to with
1. Thank you very much for your invitation to the launch party.
2. At the moment the bank is considering our ………………… a larger overdraft, and it
will let us have a decision next week.
3. In my opinion, the ………………… having a credit card is that you can pay for
things over the phone.
4. Have we received a …………………. that letter we sent them last week?
5. Yes, they have paid us. We received a ……………… £1800 a few days ago.
6. I don’t think he would be suitable for the job in Tokyo. He has had very little
……………. working overseas.
7. In the long term, inflation is linked to the ……………….. raw materials.
8. Is there any ……………….. these two fax machines? They look the same to me.
9. We had a lot of ……………….. one of our customers who wouldn’t pay us, so we
took legal advice.
10. Let me know if you can think of a ………………. the problem.
Exercise 2: In the following telephone conversations, fill in the blanks with the
missing prepositions
A A: Hello, Finance
B: Good morning. I’m calling (1) ……..... reference to a cheque I’ve just had
from you. I’m afraid you have put the wrong year on it (2) …………. mistake.
The bank have just returned it because it is(3) ……….. date.
A: I’m so sorry. It must be because it’s January. If you send it back we’ll issue a
new one (4) ………… return.
B A: Hello, can you put me through to the Marketing Department, please?

B: Yes, of course… I’m afraid the line’s busy. I’ll have to put you (1) ………
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hold for a moment.
A: OK …
C: Hello, Marketing
A: Could I speak to the person who is (2) ………… charge of booking advertising
space, please?
C: I’m afraid she’s away (3) ……….. business at the moment. Can I help you?
A: Well, we are currently offering some attractive discounts for next month’s
issue of Face magazine.
C: Well, (4) …………… the whole we don’t book advertising space (5)
…………. such short notice, but if you’d like to give us details of your rates
(6) ………… writing, we’ll look at them and let you know.
Exercise 3: Complete the following advertisement with the missing prepositions
THE MOST IMPORTANT INVESTMENT YOU’LL EVER MAKE

More and more parents are looking to independent schools to provide an
alternative (1) to state education.
However, the cost (2) sending a child to boarding school from 7 to 18
can be as much as $150,000, and annual increases (3) school fees are
often greater than inflation.
So there is a need (4) specialist advice, and we at knight Willis have
many years of experience (5) helping parents plan for their children’s
education (6) advance. Early planning can help to achieve reductions
(7) over 75%, and (8) the whole, the earlier the school fee plan
is started, the greater the savings.
If you would like our advice (9) the best way to plan for your child’s
future, please fill in the reply-paid form below. We will send you examples
(10) different school fee plans, and we can discuss these (11) the
phone or at a meeting (12) your own convenience.
GLOSSARY
GLOSSARY
- currency (n) [ˈkarənsi] - money in any form when in actual use as a medium of
exchange, especially circulating paper money – tiền tệ
E.g. US dollars and Euro are considered as strong currencies.
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- consent (n) [kənˈsɛnt] - acquiescence to or acceptance of something done or
planned by another – sự đồng lòng, sự chấp nhận chung
E.g. You have my consent to leave
- consent (v) - to give assent or permission (to do something); agree; accede
E.g. I had no choice but to consent to the plan.
Her father consented to her marrying me although I was just a poor student.
- medium of exchange (n) - something generally accepted as representing a
standard of value and exchangeable for goods or services – phương tiện trao đổi
E.g. A medium of exchange is most commonly a currency, but it may be a commodity
such as gold, silver, or even seashells.
- a measure of value (n) - unit by which value of a thing is accounted and
compared – thước đo giá trị
- a store of value (n) – anything with value that may be stored and retrieved at a
later date with the expectation that it will still have value – phương tiện cất trữ
E.g. The most common store of value is money, which generally will still be money
after being buried underground for some number of years. Other stores of value include
real estate, securities and precious metals.
- a standard of deferred payments (n) – phương tiện trả chậm
E.g. As of 2010, the US dollar and the euro are the most generally accepted
standards of international deferred payments.
- payment (n) [ˈpeɪmənt] - The act of paying or the state of being paid / a sum of
money paid / wages, etc. – thanh toán, khoản thanh toán
E.g. He sought payment of a sum which he claimed was owed to him.
It is reasonable to expect proper payment for this work
- Installment buying (n) - a system for paying for goods by installments in which
the payments are made at regular times – mua trả góp
- commodity money (n) – common goods that are used as mediums of exchange –
tiền hàng
E.g. Examples of commodities that have been used as mediums of exchange include
gold, silver, copper, salt, peppercorns, large stones.
- token money (n) - a form of money which represents a greater value than its
intrinsic value – tiền dấu hiệu
- purchasing power (n) - The value of a particular monetary unit in terms of the
goods or services that can be purchased with it – sức mua
- monetary value (n) - the amount of value an item or a service has in relation to
if it were sold for cash to a willing buyer – giá trị tiền tệ, giá trị bằng tiền
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UNIT
UNIT 9: 12 MONETARY POLICY
PREVIEW
PREVIEW
Discussion
1. What are two main tools of
monetary policy?
2. What are the objectives (or goals) of
monetary policy?
READING
READING
A. Quantitative Tools of Monetary Policy
❖ Reserve requirement
By law, the Fed (the Federal Reserve System) controls the percentage of deposits banks
keep in reserve by controlling the reserve requirement of all US banks. The percentage
of deposits the Fed sets as the minimum amount of reserves as bank must have is called
the reserve requirements. The amount banks must keep in reserve depends on the Fed
requirements and partly on how much banks feel they need for safety (the cash they
need to keep on hand at any time to give depositors who claim some of their deposits in
the form of cash). The amount most banks need for safety is much smaller than what the
Fed requires. For them, it’s the Fed’s reserve requirements that determines the amount
they hold as reserves. Thus, the reserve requirements play a central role in how much
money banks have to lend out. By changing the reserve requirements, the Fed can
increase or decrease the money supply. If the Fed increases the reserve requirement, it
contracts the money supply; banks have to keep more in reserve so they have less
money to lend out.
❖ Discount rate
A second tool of monetary policy concerns other alternative banks have if they are short
of reserves. A bank can go to its bank (the Fed, the banker’s bank) and take a loan. The
discount rate is the rate of interest the Fed charges for those loans. An increase in the
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discount rate makes it more expensive for banks to borrow from the Fed. A discount
rate decrease makes it less expensive for banks to borrow. Therefore changing the
discount rate is the second way the Fed can expand or contract the money supply.
❖ Open market operations
Changes in discount rate and reserve requirement are not used in day-to-day Fed
operations. They are used mainly for major changes. For day-to-day Fed operations, the
Fed used a third tool: open market operations – the Fed’s buying and selling
government securities (the only type of asset the Fed is allowed by law to hold in any
appreciate quantity). These open market operations are the primary tool of monetary
policy. When the Fed sells Treasury bonds, it collects back some of its IOUs, reducing
banking system reserves and decreasing the money supply. Thus, to expand the money
supply, the Fed buys bonds. To contract the money supply, the Fed sells bonds.
B. The central bank’s control over the supply of money

The central bank’s control over the supply of money is the key mechanism of monetary
policy. By making more or less money available, the central bank can shift aggregate
demand. The resulting shifts can alter the rate of output, the price level, and the number
of available jobs.
We earlier saw how fiscal policy can help bring about the desired expansion. Were the
government to increase its own spending, aggregate demand would shift to the right. A
tax cut would also stimulate aggregate demand by giving consumers and business more
disposable income to spend.
❖ Expansionary monetary policy
Monetary policy may be used to shift aggregate demand as well. If the central bank
lowers reserve requirements, drops the discount (bank) rate, or buy more bonds, it will
increase bank lending capacity. The banks in turn will try to use that expanded capacity
and make more loans. By offering lower interest rates or easier approvals, the banks can
encourage people to borrow and spend more money. In this way, an increase in the
money supply will result in a rightward shift of the aggregate demand curve.
❖ Restrictive monetary policy
Monetary policy may be used to cool an overheating economy. Excessive aggregate
demand may put too much pressure on our production capacity. As market participants
bid against each other for increasingly scarce goods, prices will start rising.
The resulting inflation will redistribute real incomes (perhaps unfairly) and may disrupt
investment and consumption plans.
The goal of monetary policy in this situation is to reduce aggregate demand. To do this,
the central bank can reduce the money supply by (1) raising reserve requirements, (2)
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increasing the discount rate, or (3) selling bonds in the open market. All of these actions
will reduce bank lending capacity. The competition for this reduced pool of funds swill
drive up interest rates. The combination of higher interest rates and lessened loan
availability will curtail investment consumption, and even government expenditure.
COMPREHENSION
COMPREHENSIONQUESTIONS
QUESTIONS
1. What is the monetary policy?
2. How does the Fed control the percentage of deposits banks keep in reserve?
3. What is called reserve requirement?
4. What determines the amount banks hold as reserves?
5. What is the central role of the reserve requirements?
6. What is the second tool of monetary policy?
7. What is the discount rate?
8. How can the central bank shift aggregate demand?
9. How can the banks encourage people to borrow and spend more money?
10. What is the difference between expansionary monetary policy and restrictive
monetary policy? Bỏ
11. When will prices begin rising?
12. What can the central bank do to reduce aggregate demand?
13. When might the central bank want to reduce the money supply?
VOCABULARY
VOCABULARYEXERCISES
EXERCISES
1. Match up the following words and definitions
1 supply A a state of balance, for example when supply meets
demand
2 demand
B government or central bank measures concerning the rate
3 market forces of growth of the money supply (the amount of money in
circulation)
4 equilibrium
C government measures concerning taxation, public
5 fiscal policy expenditure, and so on
D supply and demand
6 monetary policy E the willingness and ability of consumers to purchase
goods and services
F the willingness and ability to offer goods and services for
sale
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2. Match up the words below into pairs that mean the same
boost companies flexible firms expenditure
expenses production raise increase mistake
output variable error excess stimulate
surplus costs reduce spending lower
3. Match up the words below into pairs of opposites
boom depression flexible growth increase

demand sluggish stimulate supply deflate
saving consuming contraction cut rigid
buoyant
4. Complete the text below using these words
boom employment interest rates output recession

demand equilibrium money supply price saving
SHOULD THE GOVERNMENT INTERVENE IN THE BUSINESS CYCLE?
Keynesianism
The great depression of the 1930s demonstrated that, at least in the short run, the market
system does not automatically lead to full employment. In The General Theory of
Employment, Interest and Money (1936), John Maynard Keynes argued that market
forces could produce an equilibrium with high unemployment in indefinite duration. For
example, if people are worried about the possibility of losing their jobs in the near
future they will probably start (1) ……………….. money and consume less, which will
lead to a fall in demand, and consequently in production and employment. In such
circumstances, producers will clearly not be interested in making new investments. So
people’s savings will remained unused, and the economy will settle into a new (2)
…………….. at a lower level of activity – with fewer goods being produced, fewer
people employed, and reduced rates of income and investment. Classical economic
theory stated that in the long run, excess savings would cause (3) ………………… to
fall and investment to increase again. Keynes disagreed, arguing that market economies
are inherently unstable and without a self-correcting mechanism, except perhaps in the
long run – but as he famously put it, “in the long run, we are all dead.”
Keynes therefore recommended governmental intervention in the economy, to
counter the business cycle. During an inflationary (4) ………………, governments
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could decrease their spending or increase taxation. During a recession, on the contrary,
they could increase their expenditure, or decrease taxation, or increase the (5)
………………… and reduce interest rates, so as to stimulate the economy and increase
output, investment, consumption and employment. Keynes also argued that even a small
amount of additional government spending or an increase in private investment causes
(6) ………………. to expand by an amount greater than itself, because of the multiplier
effect: the new money is repeatedly re-spent, except for the proportion that people
choose to save.
Monetarism
In the 1950s and 1960s, monetarists, most notably Milton Friedman, began to argue that
Keynesian fiscal policy had negative long run effects. Unlike Keynesians, monetarists
insisted that money is neutral, meaning that in the long run, changes in the money
supply will only change the (7) …………………. level and have no effect on output
and employment. They argued that governments should abandon any attempt to manage
the level of (8) …………………… in the economy through fiscal policy. On the
contrary, they try to make sure that there is constant and non-inflationary growth in the
money supply.
Monetarists argue that recessions are not caused by long-run market failures but
by short-run errors by firms and workers who do not reduce their prices and wages
quickly enough when demand falls. When economic agents recognize that prices and
wages have to fall, the economy will come back to normal. Since the government will
not be able to recognize a coming (9) ………….. any more quickly than the companies
that make up the economy, it will only be able to act at the same time as everyone else
is recognizing the need to cut prices and wages. Consequently, its fiscal measures will
take effect when the economy is already recovering, and so will merely make the next
swing in the business cycle even greater.
LANGUAGE
LANGUAGEFOCUS
FOCUS
Word formation
- The amount banks must keep in reserve depends on the Fed requirements and
partly on how much banks feel they need for safety (the cash they need to keep on
hand at any time to give depositors who claim some of their deposits in the form
of cash). The amount most banks need for safety is much smaller than what the
Fed requires.
There are lots of word groups like this in English. Verbs can be made into nouns and
vice versa, and nouns can be made into adjectives and adverbs, by adding suffixes
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Examples:
Verbs Nouns Adjectives Adverbs

Analyze Analysis Analytic analytically
Capitalize capital capitalist
capitalist
PRACTICE
Exercise 1: Complete the table below, then mark the stressed syllable in each word.
Some boxes will contain several words.
Verbs Concrete and Nouns for Adjectives Negative

abstract nouns people or adjectives
organizations
deposit
Determination
unemployed
consumer
expansionary
operate
non-
governmental
discount
supplier
Inflationary
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Exercise 2: Complete the sentences below, using the correct forms of the words in
the table above.
1. Monetary policy refers to the measures …………… by …………….. to influence
economic activity, specifically by manipulating the ………… of money and credit and
by altering rates of interest.
2. …………… trends after World War II, however, caused governments to adopt
measures that reduced inflation by restricting growth in the money supply.
3. The Fed uses three main instruments in regulating the money supply: open-market
……………. , the ……………… rate, and reserve requirements.
4. ………….. monetary policy, increases aggregate spending on goods and services—
by …………….., businesses, governments, and foreigners.
5. To …………… its fiscal policy, a government must consider a number of factors,
including the level of economic growth or unemployment likely in the future.
6. FDIC (Federal …………… Insurance Corporation) insurance covers all deposit
accounts, including checking and savings accounts, money market deposit accounts and
certificates of deposit. The standard insurance amount is $250,000 per ……………, per
insured bank, for each account ownership category.
Exercise 3. Complete the sentences below, using the correct forms of the words in
brackets.
1. The (consult) …………….. believed that the company needed stricter financial
(manage) ………………. and suggested withdrawing (profit) …………… product
lines.
2. the newly (industry) ………………. countries still need a lot of (invest)
……………..
3. The investigators talked to the chief (account) …………… who gave them some
(value) …………….. information.
4. It would be (advice) …………….. to (consult) …………….. a lawyer before talking
to the investigators.
5. The raiders thought the large company had become (manage) …………….. . The
managers accused the raiders of being (profit) ………………
6. A company’s (manage) …………….. are (account) ………………. to the
shareholders.
7. In (account) ………………., there are various ways of (value) ……………. Assets.
8. For years I thought my investment (advice) ………………. was absolutely (value)
……………… . But then he told me to buy some dot.com stocks which soon became
totally (value) ………………..
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GLOSSARY
GLOSSARY
- reserve requirement (n) The required percentage of reserves (deposits) that
banks and thrifts must hold in cash or in deposits at the central bank - dự trữ bắt
buộc
E.g. Reserve requirements serve as a safeguard against a sudden and inordinate
demand for withdrawals.
- money supply (n) A measure of the total amount and value of money in an
economy - lượng cung tiền
E.g. The Federal Reserve, or the Fed, manages the money supply, trying to prevent
either recession or serious inflation by changing the amount of money in circulation.
The Fed increases the money supply by buying government bonds in the open
market, and decreases the supply by selling these securities.
- discount rate (n) - The interest rate charged by a central bank on loans to its
member banks – lãi xuất chiết khấu
E.g. A change in the discount rate is usually followed by similar changes in the
interest rates charged by banks and money markets.
- security (n) [sɪˈkjʊərɪtɪ] - Financing or investment instruments (some negotiable,
others not) bought and sold in financial markets, such as bonds, debentures,
notes, options, shares (stocks), and warrants - chứng khoán
- primary market (n) - Financial market in which newly issued securities are
offered - thị trường sơ cấp
E.g. The primary market can at times be more volatile than the secondary market
because it is difficult to determine the underlying value of new issues.
- bond (n) [bɒnd] - A debt instrument that certifies a contract between the
borrower (bond issuer) and the lender (bondholder) as spelled out in the bond
indenture - trái phiếu
E.g. When an investor buys bonds, he or she is lending money.
- aggregate demand (n) - Aggregate demand is the sum of consumption
expenditure, investment expenditure, government expenditure, and net exports –
tổng cầu
E.g. The decline in credit availability reduces aggregate demand, which tends to
increase unemployment, a classic unintended consequence of the policy.
- Restrictive (adj) [rɪˈstrɪktɪv]- Tending or serving to restrict; limiting – thắt chặt,
hạn chế
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UNIT
UNIT14 13 BANKING BUSINESS
PREVIEW
PREVIEW
a> Match up these terms with the definitions below
cash card home banking overdraft current account (GB) or checking

cash dispenser loan standing order account (US)
credit card mortgage deposit account (GB) or time or
notice account (US)
1. an arrangement by which a customer can withdraw more from a bank account than
has been deposited in it, up to an agreed limit; interest on the debt is calculated daily
2. a card which guarantees payment for goods and services purchased by the cardholder,
who pays back the bank or finance company at a later date
3. a computerized machine that allows bank customers to withdraw money , check their
balance, and so on.
4. a fixed sum of money on which interest is paid, lent for a fixed period, and usually
for a specific purpose
5. an instruction to a bank to pay fixed sums of money to certain people or organizations
at stated times
6. a loan, usually to buy property, which serves as a security for the loan
7. a plastic card issued to bank customers for use in cash dispensers
8. doing banking transactions by telephone or from one’s own personal computer,
linked to the bank via a network
9. one that generally pays little or no interest, but allows the holder to withdraw his or
her cash without any restrictions
10. one that pays interest, but usually cannot be used for paying cheques (GB) or checks
(US), and on which notice is often required to withdraw money
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b> Discussion
1. Which of the banking facilities listed above do you use?
2. What other services do commercial banks offer in your country?
3. What changes have there been in personal banking recently?
4. What further changes do you foresee in the future?
READING
READING
Read the text below and write short headings (one or two words) for each
paragraph
TYPES OF BANK
1…………………………………
Commercial or retail banks are businesses that trade in money. They receive and hold
deposits, pay money according to customer’s instructions, lend money, offer investment
advice, exchange foreign currencies, and so on. They make profit from the difference
(known as a spread or a margin) between the interest rates they pay to lenders or
depositors and those they charge to borrowers. Banks also create credit, because the
money they lend, from their deposits, is generally spent (either on goods or services, or
to settle debts), and in this way transferred to another bank account – often by way of a
bank transfer or a check rather than the use of notes or coins – from where it can be lent
to another borrower, and so on. When lending money, bankers have to find a balance
between yield and risk, and between liquidity and different maturities.
2 …………………………
Merchant banks in Britain raise funds for industry on the various financial markets,
finance international trade, issue and underwrite securities, deal with takeovers and
mergers, and issue government bonds. They also generally offer stockbroking and
portfolio management services to rich corporate and individual clients. Investment
banks in the USA are similar, but they can only act as intermediaries offering advisory
services, and do not offer loans themselves. Investment banks make their profits from
the fees and commissions they charge for their services.
3 ……………………………
In the USA, the Glass-Steagall Act of 1934 enforced a strict separation between
commercial banks and investment banks or stockbroking firms. Yet the distinction
between commercial and investment banking has become less clear in recent years.
Deregulation in the USA and Britain is leading to the creation of “financial
supermarkets”: conglomerates combining the services previously offered by banks,
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stockbrokers, insurance companies, and so on. In some European countries (notably
Germany, Austria and Switzerland) there have always been universal banks combining
deposit and loan banking with share and bond dealing and investment services.
4 ………………………………
A country’s minimum interest rate is usually fixed by the central bank. This is the
discount rate, at which the central bank makes secured loans to commercial banks.
Banks lend to blue chip borrowers (very safe large companies) at the base rate or the
prime rate; all other borrowers pay more, depending on their credit standing (or credit
rating, or creditworthiness): the lender’s estimation of their present and future solvency.
Borrowers can usually get a lower interest rate if the loan is secured or guaranteed by
some kind of asset, known as collateral.
5 ………………………………
In most financial centres, there are also braches of lots of foreign banks, largely doing
Eurocurrency business. A Eurocurrency is any currency held outside its country of
origin. The first significant Eurocurrency market was for US dollars in Europe, but the
name is now used for foreign currencies held anywhere in the world (e.g. yen in the US,
DM in Japan). Since the US$ is the world’s most important trading currency – and
because the US has for many years had a huge trade deficit – there is a market of many
billions of Eurodollars, including the oil-exporting countries’ “petrodollars”. Although a
central bank can determine the minimum lending rate for its national currency it has no
control over foreign currencies. Furthermore, banks are not obliged to deposit any of
their Eurocurrency assets at 0% interest with the central bank, which means that they
can usually offer better rates to borrowers and depositors than in the home country.
COMPREHENSION
COMPREHENSION QUESTION
Which of the following three paragraphs most accurately and concisely summarizes
the text, and what is wrong with the others?
First summary
Commercial banks hold customers’ deposits and make loans. Investment banks raise
funds for industry. Deregulation in Britain and the US is leading to the creation of
financial conglomerates similar to the universal banks that have always existed in
German-speaking countries. A country’s minimum interest rate is usually fixed; banks
charge progressively higher rates to less secure borrowers. Many banks also do
Eurocurrency business – lending foreign currencies, notably dollars, at lower rates than
in the currencies’ home countries.
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Second summary
Commercial banks receive deposits and make loans. Merchant and investment banks
arrange security issues and offer other investment services. Yet the traditional
distinction between commercial and investment banks is now breaking down. Domestic
interest rates are fixed by central banks. Many banks also have branches abroad that do
Eurocurrency business, making loans in other European currencies.
Third summary
Commercial banks receive deposits, lend money, and provide other services. Merchant
and investment banks lend money to industry. British and American banks are now
joining together in conglomerates. The interest rates that banks charge depend the
borrowers’ creditworthiness. European banks also do a lot of Eurodollar and petrodollar
business.
VOCABLARY EXERCISES
1. Find words or expressions in the reading text which mean the following.
………………… 1. to place money in a bank; or money placed in a bank

………………… 2. the money used in countries other than one’s own
………………… 3. how much money a loan pays, expressed as a percentage
………………… 4. available cash, and how easily other assets can be turned into
cash
………………… 5. the date when a loan become repayable
6. to guarantee to buy all the new shares that a company issues, if
………………… they cannot be sold to the public
………………… 7. when a company buys or acquires another one
………………… 8. when a company combines with another one
………………… 9. buying or selling stocks or shares for clients
………………… 10. taking care of all a client’s investments
………………… 11. the ending or relaxing of legal restrictions
12. a group of companies, operating in different fields, that have
………………… joined together
………………… 13. a company considered to be without risk
………………… 14. ability to pay liabilities when they become due
………………… 15. anything that acts as a security or a guarantee for a loan
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2. The reading text contains a number of common verb-noun partnerships (e.g. to
lend money, to finance international trade). Match up the verbs and nouns below to
make common collocations
Verbs Nouns Common collocations
charge advice ……………………………..
do bonds ……………………………..
exchange business ……………………………..
issue currencies ……………………………..
make deposits ……………………………..
offer funds ……………………………..
pay interest ……………………………..
raise loans ……………………………..
receive profits ……………………………..
underwrite security issues ……………………………
LANGUAGE
LANGUAGEFOCUS
FOCUS
Study the following sentences from the reading text.
- Commercial or retail banks are businesses that trade in money

- They make profit from the difference (known as a spread or a margin) between
the interest rates they pay to lenders or depositors and those they charge to
borrowers.
- Investment banks in the USA are similar, but they can only act as intermediaries
offering advisory services, and do not offer loans themselves.
- Investment banks make their profits from the fees and commissions they charge
for their services.
The verbs in bold in these sentences are followed by a preposition. Let’s study “Verb +
preposition combinations”
VERB + PREPOSITION COMBINATIONS
❖ Verb + preposition
Here is a list of common verbs and the prepositions that normally follow them:
account for apply for comply with look at
agree on belong to consist of look for
agree with complain to depend on pay for
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talk to think of hear about rely on
think about wait for hear from take care of
write to
Examples:
- After several hours, the committee agreed on a joint statement.
- I really like the new design. What do you think of it?
- The new building will have to comply with tough planning regulations.
❖ Verb + object + preposition

The following verbs can be followed by an object and a preposition:
ask someone for invest something in

blame someone for protect someone from
borrow something from provide someone with
congratulate someone on spend something on
divide something into supply someone with
insure something against thank someone for
- We spent too much on advertising last year.

- Could you supply us with 200 units a month?
- Management blamed the union for provoking the strike.
PRACTICE
Exercise 1: Complete the following letter with the correct prepositions.
Dear Mr. Hall,
Thank you for your letter of 18 May regarding the Kinderbox range of children’s
paints. The answers to the questions you raised are as follows:
1. All Kinderbox products fully comply (1) with European and British safety
standards. The paints are non-toxic and washable. Each pack in the Junior range
consists (2) ………. A paint-box with eight colors, a paintbrush, and a leaflet in
English.
2. The average delivery time for orders to England over DM5,000 is four days.
We do not rely (3) ………. rail transport, so delivery would not be affected by
the current train strike. We also take care (4) …….. insurance and export
documentation.
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3. The level of discount we offer depends (5) ……… the size of the orders and
their regularity. I would be happy to talk (6) ……… you about this.
4. Goods may be paid (7) ………. in Deutschmarks or sterling, and we offer
flexible credit arrangements, so I am confident we could agree (8)….. suitable
credit terms.
Please do not hesitate to contact me if you have any further questions, and I look
forward to hearing (9) ……… you.
Yours sincerely,
W. Habisreutinger
Wolfgang Habisreutinger
Sales Manager
Exercise 2: Complete the following sentences with a preposition if it is necessary. If

it is not necessary, leave a blank.
1. Rich immigrants find it fairly easy to enter ……. the United Kingdom, but people
without money do not.
2. When you see the tax inspector, you will have to account ………………. all the
money you have received over the past six years.
3. If they won’t help you, you should complain ……………… their Head Office.
4. If you need information about Senegal, phone ………….. the embassy.
5. We have offered Helen a job in New York, but she says she needs a few days to think
………………….. it.
6. I’m looking ……………. that letter from Marlino’s – have you seen it?
7. Yesterday the Prime Minister met …………….. the Head of the European
Commission at 10 Downing Street.
8. The next item on the agenda is promotion, and I would like to discuss ………… the
plans we have for next year.
Exercise 3: Give the following people advice using the words in brackets.
1. I have a great business idea, but I have no money.
(borrow … from) You ought to borrow what you need from the bank.
2. I have inherited £50,000 from my aunt who died last month
(invest … in) You ought to …………………………………………………………..
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3. What should I do with my £200 clothing allowance?
(spend … on) You ought to …………………………………………………………..
4. Do you think it is safe to keep this valuable painting in my office?
(insure … against) Yes, but you ought to …………………………………………….
GLOSSARY
GLOSSARY
- cash dispenser (n) - a computerized device outside a bank that supplies cash or
account information when the user inserts his cash card and keys in his
identification number - automated teller machine (ATM) - máy rút tiền
- standing order / banker's order (n) - an instruction to a bank by a depositor to
pay a stated sum at regular intervals – lệnh thường trực
- deposit account / time deposit account / savings account (n) - bank account
that earns interest and usually requires notice of withdrawal – tài khoản tiền gửi
có kỳ hạn
- current account / checking account (n) - non interest-bearing bank account
which allows the accountholder to write checks against the funds in the account –
tài khoản tiền gửi không kỳ hạn
- retail banking (n) - banking services that are offered to individual customers
through local branches of the bank – hoạt động ngân hàng bán lẻ
- bank accounts (n) - funds deposited in a bank that are credited to and subject to
withdrawal by the depositor – tài khoản tiền gửi ngân hàng
- merchant bank (n) – a financial institution that specializes in services such as
acceptance of bills of exchange, hire purchase or installment buying,
international trade financing, long-term loans, and management of investment
portfolios – ngân hàng đầu tư
- portfolio (n) [pɔːtˈfəʊlɪəʊ] - a group of investments held by an investor,
investment company, or financial institution – danh mục đầu tư
- intermediary (n) [ˌɪntəˈmiːdɪərɪ] - Firm or person (such as a broker or
consultant) who acts as a mediator on a link between parties to a business deal,
investment decision, negotiation, etc. – công ty hay người trung gian
- deregulation (n) [diˌrɛg yəˈleɪ ʃən] - the act of freeing from regulation
(especially from governmental regulations) – thả nổi
- collateral (n) [kɒˈlætərəl kə-] - Property acceptable as security for a loan or other
obligation – tài sản thế chấp
- credit standing (n) - reputation for discharging financial obligations – tiêu chuẩn
tín dụng
- credit rating (n) (= credit standing) - an evaluation of the creditworthiness of an
individual or business enterprise – tiêu chuẩn tín dụng
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UNIT
UNIT 16 14 THE FOREIGN EXCHANGE MARKET
PREVIEW
PREVIEW
a> Discussion
1. How many different currencies can you name?
2. How is the value (the exchange rate) of your currency
determined?
3. Has the exchange rate, compared to the US dollar or
the euro, remained constant over the last few years?
4. Do you know the history of your currency over the
past 50 years?
a> Exchange rates
Look at the timeline below, showing key dates in the development of exchange rate
systems around the world. Match the dates with the events (a – e) below.
1944 1971 1973 1992 2002
a. Most industrialized countries switched to a system of floating rates. However,

governments and central banks occasionally attempted to influence exchange rates by
intervening in the markets. So there was a system of managed floating exchange rates.
b. The Bank of England lost over £5 billion in one day attempting to protect the value of
the pound sterling. After this, governments and central banks intervened much less, so
there was almost a freely floating system.
c. A fixed exchange rate system was started. The values of many major currencies were
pegged (or fixed) to the value of the US dollar. The American central bank, the Federal
Reserve, guaranteed that it could exchange an ounce of gold for $35.
d. Twelve states of the European Union introduced a single currency, the euro, to
replace their national currencies.
e. Gold convertibility ended because the Federal Reserve no longer had enough gold to
back the dollar, due to inflation.
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READING
READING
The foreign exchange market is the market in which such national currencies as dollars,
pesos, deutschemarks, yen, francs, and others are exchanged. It is not an organized
market with fixed hours and a physical meeting place, such as the New York Stock
Exchange or Chicago Board of Trade. The foreign exchange market is an over – the –
counter (OTC) market, the primary communication instruments being the telephone and
the computer. The market has developed rapidly in the past quarter century, and the
volume of activity has escalated dramatically in response to the growth in the volume of
world trade in goods and services, and especially in response to the expansion of
international capital flows – the acquisition of financial and real assets across national
borders. Total worldwide foreign exchange market transactions in 1996 were
approximately $1.2 trillion, or $1,200 billion per day. More than 90 percent of these
transactions are associated with capital flows. Among the most important financial
centers are New York, London, Tokyo, Paris, Frankfurt, Hong Kong, and Zurich.
Among them, London is the world’s largest foreign exchange centre. Banks here trade
almost $200 billion each day in foreign currencies.
London’s trading position arises partly from the large volume of international
financial business generated here – insurance, Eurobonds, shipping, commodities and
banking. London also benefits from its geographical location which enables it to trade
not only with Europe through-out the day but also with the US and the Far East,
whereas time difference makes it difficult for those two centres to trade with each other.
When banks in London begin trading at 8 a.m. they can deal with banks in Tokyo, Hong
Kong, Singapore whose trading day is just ending. From 1 p.m. London banks can trade
with banks in New York: before they close at 5 p.m., their counterparts may be in Los
Angeles or San Francisco. The foreign exchange market thus trades 24 hours a day.
The foreign exchange market enables banks and international corporations to trade
foreign currencies in large amounts. Capital flows arising from trade in goods and
services, international investment and loans together create this demand for foreign
currency.
Foreign exchange trading is divided into spot and forward business. Generally
speaking, spot transactions are undertaken for an actual exchange of currencies
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(delivery or settlement) two business days later (the value date).
Forward transactions involve a delivery date further into the future, possibly as
far as a year or more ahead. By buying or selling in the forward market a bank can, on
its own behalf or that of a customer, protect the value of anticipated flows of foreign
currency from exchange rate volatility.
Broadly speaking, there are four types of participants in the market: the market
maker, customers, dealers and brokers. Customers such as importing & exporting
companies or multinational corporations, are in the market because they require foreign
currency in the course of their cross-border trade or investment business. Central banks
participate as market makers who at any time quote bid (buying) rates and offer
(selling) rates for currencies – dollars to the pound, deutschemarks to the dollar and so
on. Other banks or corporations participate as dealers who trade foreign currencies on
their own accounts. They can earn a profit on the difference between their buying and
selling rates, but, clearly they have to be ready to change their prices very quickly so
that they avoid holding large volumes of a depreciating currency, or being short of a
rising currency. The fourth type of participant, the brokers, acts as intermediaries
between the banks. They are specialist companies with the telephone lines to the banks
throughout the world so that at any time they should know which bank has the highest
bid rate for a currency and which the lowest offer rate. By calling a broker, therefore, it
should be possible for banks to find the best dealing rate currently available. The broker
doesn’t deal on his own account but charges a commission for his services.
COMPREHENSION
1. What is the foreign exchange market?
2. Why is it considered to be an OTC market?
3. Why is London the world’s largest foreign exchange centre?
4. What are two types of transactions in the foreign exchange market?
5. How many types of participants are there? Who are they?
6. For what purposes do multinational corporations need foreign currencies?
7. What do the terms “bid rates” and “offer rates” mean?
8. How do brokers participate in the foreign exchange market?
110
VOCABULARY
EXERCISES
1. Match up the half-sentences below.
1 To ‘peg’ a currency A the amount of a country’s money that residents were
against something means to able to change into foreign currencies.
2 A clean floating B fix its value in relation to it.
exchange rate C make a profit by making capital gains or by investing at
3 Exchange controls used higher interest rates
to limit D is determined by supply and demand.
4 Speculators buy or sell E trying to insure against unfavorable price movements by
currencies in order to way of futures contracts.
5 ‘Market forces’ means F the determination of price by supply and demand (the
6 ‘Hedging’ means quantity available and the quantity bought and sold).
2. Which six of these verbs are defined below?
abolish Adjust appreciate convert diverge

fluctuate peg suspend revalue establish
1 to make changes to something
2 to change something into something else
3 to end something permanently
4 to end something temporarily
5 to go up or down (in quantity, value, etc.)
6 to move away from what is considered normal
LANGUAGE
LANGUAGEFOCUS
FOCUS
Describing trends and graphs
If we want to show changes in the value of a currency, trends in the economy or any
other quantities which change over time, we often use graphs. There are a number of
commonly used words and phrases to describe upward and downward movement, as
well as the rate and size of the change.
1. The phrases in the box are used to describe trends and graphs. Put them in the
table below, according to the word category. One has been done for you.
dramatic increase gradual rise rapid decline
fall sharply level off slight drop
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gradually decrease moderate growth sudden climb
Speed Size
Verbs Fall Adjectives
Nouns Adverbs Sharply
2. Do you know any other words and phrases that can be added to the table?
3. Look at the graph showing the development of the GBP / USD exchange rate
and complete the description using words and phrases in the box
Steady dramatic gently Substantial

Down Falling weakening Rose
The graph above shows the fixed rates up until 1971, and the subsequent variations of
the floating pound/dollar over the following years. The variability of the £/$ rate from
1971 is obviously (1) ............... and can be seen more clearly in the graph above - from
a high of $2.44 at the end of 1980, right (2) ................ to a low of $1.05 (caused by the
severe weakness of the pound) in February 1985.
By February, 1991, it had almost reached $2 and, after (3) ............... back, in September
1992, it actually (4) .................. above $2 for the first time in 20 years. And then
Norman Lamont (UK's Chancellor of the Exchequer) decided to take the pound out of
the ERM. This immediately devalued the pound, and the results were (5) .............. - the
pound plummeted in value, falling to $1.75 within a month, and to just over $1.40 in
five months.
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Anyone starting a two-week holiday in early September, 1992, might have seen a $1000
hotel bill effectively rise by over £100 from the day they arrived to the day they actually
paid the bill. And in six months the pound had been devalued by more than 25%. From
this point on, the exchange rate rose and fell fairly (6) ................., hitting a low of $1.38
in June, 2001. Even the events of "9/11" seem to have had very little effect on the short
term value of the dollar, but in January 2002 the dollar started a fairly (7) ................
drop in value, with the sterling rate reaching a peak towards the end of 2004 of $1.94.
May 2005 saw the pound (8) ................. and the dollar strengthening. This trend was
already in place before events of 7/7 in London, which appear to have had very little
effect on the value of the pound against the dollar. Through 2005, the dollar
strengthened and the pound weakened, and the end of the year saw the rate at only
$1.73. But it wasn't long before the worsening American economic situation saw this
trend reversed.
GLOSSARY
GLOSSARY
- exchange (v) [ɪksˈtʃeɪndʒ]: To give in return for something received; trade – trao
đổi
E.g. Can you exchange a dollar note for two 50-cent pieces?
- exchange (n) - the act, process, or an instance of exchanging
- exchange rate (n) - the rate at which the currency unit of one country may be
exchanged for that of another – tỷ giá hối đoái
E.g. What is the rate of exchange between the U.S. dollar and the yen?
- float (v) [fləʊt]: To find a level in relationship to other currencies solely in
response to the law of supply and demand – thả nổi
E.g. allowed the dollar to float.
- intervene (v) [ˌɪntəˈviːn] - to take action to affect the market forces of an
economy, esp to maintain the stability of a currency – can thiệp
E.g. to intervene in the affairs of another country.
- convert (v) [kənˈvɜːt] - to exchange (a security or bond) for something of – đổi
E.g. He has converted his house into four separate flats.
- convertibility (n) - the quality of being exchangeable (especially the ability to
convert a currency into gold or other currencies without restriction) – sự chuyển
đổi, khả năng chuyển đổi
- equivalent (adj) [ɪˈkwɪvələnt] - equal or interchangeable in value, quantity,
significance, etc – tương đương
E.g. A metre is not quite equivalent to a yard.
Would you say that `bravery' and `courage' are exactly equivalent?
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- acquire (v) [əˈkwaɪə] - To gain possession of – nhận, đạt được
E.g. The company acquired a 50% stake in Saab for $4m.
- acquisition (n) [ӕkwiˈziʃən] - the act of acquiring / something acquired
E.g. the acquisition of more land; Her recent acquisitions included a piano.
- transaction (n) [trænˈzækʃən] - the act of transacting or the fact of being
transacted – giao dịch
E.g. They have always been honest in their transactions with us.
- benefit (n) [ˈbɛnɪfɪt] - something that is advantageous or good – lợi ích
E.g. The field trip was of great benefit to the students.
- trade (v) [treɪd] - to exchange (one thing) for another – trao đổi
E.g. I traded my watch for a bicycle.
- Trade (n) - the buying and selling of goods – sự trao đổi, thương mại
E.g. Japan does a lot of trade with Britain.
- participate (v) [pɑːˈtɪsɪˌpeɪt] - to be one of a group of people actively doing
something – tham gia
E.g. Did you participate in the discussion?
- participant (n) a person who participates (in a particular activity) – người, đối
tượng tham gia
E.g. the participants in the Olympic Games.
- quote (v) [kwəʊt] - to state the current or market price of (a stock, bond, etc.) -
ấn định, xác định
E.g. He quoted a price for the repairs.
114
UNIT
UNIT 17 15 THE FINANCIAL MARKETS
PREVIEW
PREVIEW
Quiz: How much do you know about the stock market?

By Walter Hamilton
January 29, 2013, 5:04 p.m.
1. How many stocks are in the Dow?
A. 10 B. 30 C. 50 D. 100
2. What percentage of Americans own stocks?
A. 26% B. 31% C. 42% D. 46%
3. When was the last peak in the Dow Jones industrial average?
A. December 1999 B. January 2006 C. October 2006 D. October 2007
4. When was the last trough in the Dow Jones industrial average?
A. March 2007 B. March 2008 C. March 2009 D. March 2010
5. How much did the Dow plunge from peak to trough?
A. 54% B. 59% C. 63% D. 78%
6. Which country had the best-performing stock index last year?
A. U.S. (Dow) B. Germany (DAX C. China (Shanghai) D. Greece
(Athex)
115
READING
READING
FUNCTIONS OF FINANCIAL MARKETS
Financial markets perform the essential economic function of channeling
funds from households, firms, and governments that have saved surplus funds by
spending less than their income to those that have a shortage of funds because they
wish to spend more than their income. This function is shown schematically in
Figure 1.
Those who have saved and are lending funds, the lender-savers, are at the left, and those
who must borrow funds to finance their spending, the borrower-spenders, are at the
right. The principal lender-savers are households, but business enterprises and the
government (particularly state and local government), as well as foreigners and their
governments, sometimes also find themselves with excess funds so they lend them out.
The most important borrower-spenders are businesses and the government (particularly
the federal government), but households and foreigners also borrow to finance their
purchases of cars, furniture, and houses. The arrows show that funds flow from lender-
savers to borrower-spenders via two routes. (See the Figure above)
116
STRUCTURE OF FINANCIAL MARKETS
Now that we understand the basic function of financial markets, let's look at their
structure. The following descriptions of several categorizations of financial markets
illustrate essential features of these markets.
Debt and Equity Markets
A firm or an individual can obtain funds in a financial market in two ways. The
most
common method is to issue a debt instrument, such as a bond or a mortgage, which is a
contractual agreement by the borrower to pay the holder of the instrument fixed dollar
amounts at regular intervals (interest and principal payments) until a specified date (the
maturity date), when a final payment is made. The maturity of a debt instrument is the
number of years (term) until that instrument's expiration date. A debt instrument is
short-term if its maturity is less than a year and long-term if its maturity is ten years or
longer. Debt instruments with a maturity between one and ten years are said to be
intermediate-term.
The second method of raising funds is by issuing equities, such as common
stock, which are claims to share in the net income (income after expenses and taxes) and
the assets of a business. If you own one share of common stock in a company that has
issued one million shares, you are entitled to 1one-millionth of the firm's net income
and 1 one-millionth of the firm's assets. Equities often make periodic payments
(dividends) to their holders and are considered long-term securities because they have
no maturity date. In addition, owning stock means that you own a portion of the firm
and thus have the right to vote on issues important to the firm and to elect its directors.
The main disadvantage of owning a corporation's equities rather than its debt is
that an equity holder is a residual claimant; that is, the corporation must pay all its debt
holders before it pays its equity holders. The advantage of holding equities is that equity
holders benefit directly from any increases in the corporation's profitability or asset
value because equities confer ownership rights on the equity holders. Debt holders do
not share in this benefit, because their dollar payments are fixed.
The total value of equities in the United States has typically fluctuated between
$4 and $20 trillion since the early 1990s, depending on the prices of share. Although the
average person is more aware of the stock market than any other financial market, the
size of the debt market is often larger than the size of the equities market: The value of
debt instruments was $41 trillion at the end of 2005, while the value of equities was $18
trillion at the end of 2005.
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Primary and Secondary Markets
A primary market is a financial market in which new issues of a security, such
as a bond or a stock, are sold to initial buyers by the corporation or government agency
borrowing funds. A secondary market is a financial market in which securities that
have been previously issued can be resold.
The primary markets for securities are not well known to the public because the
selling of securities to initial buyers often takes place behind closed doors. An important
financial institution that assists in the initial sale of securities in the primary market is
the investment bank. It does this by underwriting securities: It guarantees a price for a
corporation's securities and then sells them to the public.
The New York and American stock exchanges and NASDAQ (National
Association of Securities Dealers Automated Quotation System), in which previously
issued stocks are traded, are the best-known examples of secondary markets, although
the bond markets, in which previously issued bonds of major corporations and the U.S.
government are bought and sold, actually have a larger trading volume. Other examples
of secondary markets are foreign exchange markets, futures markets, and options
markets. Securities brokers and dealers are crucial to a well-functioning secondary
market. Brokers are agents of investors who match buyers with sellers of securities;
dealers link buyers and sellers by buying and selling securities at stated prices.
When an individual buys a security in the secondary market, the person who has
sold the security receives money in exchange for the security, but the corporation that
issued the security acquires no new funds. A corporation acquires new funds only when
its securities are first sold in the primary market. Nonetheless, secondary markets serve
two important functions. First, they make it easier and quicker to sell these financial
instruments to raise cash; that is, they make the financial instruments more liquid. The
increased liquidity of these instruments then makes them more desirable and thus easier
for the issuing firm to sell in the primary market. Second, they determine the price of
the security that the issuing firm sells in the primary market. The investors who buy
securities in the primary market will pay the issuing corporation no more than the price
they think the secondary market will set for this security. The higher the security's price
in the secondary market, the higher the price that the issuing firm will receive for a new
security in the primary market, and hence the greater the amount of financial capital it
can raise. Conditions in the secondary market are therefore the most relevant to
corporations issuing securities. It is for this reason that books like this one, which deal
with financial markets, focus on the behavior of secondary markets rather than primary
markets.
118
Exchanges and Over-the-Counter Markets
Secondary markets can be organized in two ways. One is to organize exchanges,
where buyers and sellers of securities (or their agents or brokers) meet in one central
location to conduct trades. The New York and American stock exchanges for stocks and
the Chicago Board of Trade for commodities (wheat, corn, silver, and other raw
materials) are examples of organized exchanges. The other method of organizing a
secondary market is to have an over-the-counter (OTC) market, in which dealers at
different locations who have an inventory of securities stand ready to buy and sell
securities “over the counter” to anyone who comes to them and is willing to accept their
prices. Because over-the-counter dealers are in computer contact and know the prices
set by one another, the OTC market is very competitive and not very different from a
market with an organized exchange.
Many common stocks are traded over-the-counter, although a majority of the
largest corporations have their shares traded at organized stock exchanges such as the
New York Stock Exchange. The U.S. government bond market, with a larger trading
volume than the New York Stock Exchange, is set up as an over-the-counter market.
Forty or so dealers establish a “market” in these securities by standing ready to buy and
sell U.S. government bonds. Other over-the-counter markets include those that trade
other types of financial instruments such as negotiable certificates of deposit, federal
funds, banker’s acceptances, and foreign exchange.
Money and Capital Markets
Another way of distinguishing between markets is on the basis of the maturity of
the securities traded in each market. The money market is a financial market in which
only short-term debt instruments (generally those with original maturity of less than one
year) are traded; the capital market is the market in which longer-term debt (generally
those with original maturity of one year or greater) and equity instruments are traded.
Money market securities are usually more widely traded than longer-term securities and
so tend to be more liquid. In addition, as we will see in Chapter 4, short-term securities
have smaller fluctuations in prices than long-term securities, making them safer
investments. As a result, corporations and banks actively use the money market to earn
interest on surplus funds that they expect to have only temporarily. Capital market
securities, such as stocks and long-term bonds, are often held by financial intermediaries
such as insurance companies and pension funds, which have little uncertainty about the
amount of funds they will have available in the future.
119
COMPREHENSION
1. What is the main function of financial markets?
2. How many categorizations of financial markets are mentioned in the text?
3. What is the debt market?
4. What is the equity market?
5. What is a debt instrument?
6. Do shareholders of a corporation receive fixed dollar amounts at regular
intervals?
7. In which type of financial markets are fresh shares issued and sold?
8. Why are the primary markets for securities not well known to the public?
9. What are two ways of organizing secondary markets?
10. What are differences between Exchanges and OTC markets?
11. On the basis of the maturity of the securities traded in each market, what are
financial markets classified into?
VOCABULARY
Exercise 1: Match the words or phrases in the box with their definitions (1-10)
bankruptcy bubble collateral institutional investors raise capital

bears bulls day traders issue shares
1. a name for investors who buy shares because they expect their price to rise
2. a name for shareholders who sell because they expect the price to fall
3. a period of rapidly rising shares, followed by a quick collapse
4. assets a borrower uses to secure or guarantee a loan
5. certificates representing part-ownership of a company
6. financial organizations that own a lot of shares
7. people who buy and re-sell shares in a very short time, often just a few hours
8. to get money from investors with which to run a business
9. to offer securities for sale, to financial institutions and the public
10. when you have no money to pay your debts, so you have to sell your assets
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Exercise 2: There is a logical connection among three of the four words in each of
the following groups. Which is the odd one out, and why?
1 annual report – external auditors – financial statements – stockbroker
2 blue chip – defensive stock – growth stock – rights issue
3 bonus issue – dividend – over-the-counter – shareholder
4 creditor – market-maker – shareholder – stockbroker
5 debt – equity – share – stock
6 face value – market value – nominal value – par value
7 float – liquidation – share issue - underwriter
8 institutional investor – insurance company – liabilities – pension fund
9 mutual fund – portfolio – risk – underwriter
LANGUAGE
LANGUAGEFOCUS
FOCUS
Understanding market reports
1. In Unit 14, you look at some words or phrases for describing trends and graphs,
such as increase, decrease and level off. In order to make financial reports more
varied and interesting, financial journalists use a wide range of words or phrases
to describe different movements in the markets. The language they use is often
more dramatic and colorful in order to attract your attention. Can you think of
any examples of this kind of language which you have seen or heard recently.
2. Look at the following headlines and decide what type of movement they are
describing. Then put the words and phrases in the table below. You will add
more later.
IT stocks take a beating; strong
Oil prices rally after Monday’s fall rupee blamed
Stocks stage another

Chinese stocks Telecom goes through
comeback
take a tumble the roof
Global coffee prices under Boeing sees quarterly profits

pressure slide
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To go up To go down To stay the same
3. Read the following financial market report from the radio news. Have the
following prices gone up , gone down , or stay the same The first one has
been done as an example.
1 Stocks in Japan 5 Stocks in Germany 9 Vodafone
2 Stocks in France 6 Lufthansa 10 Copper
3 France Telecom 7 Stocks in Britain 11 Gold
4 Thomson 8 British Energy 12 Silver
The financial market report:
Reporter: In Tokyo today, the Nikkei 225 was firmer at eight thousand, five hundred and sixty-nine point
three three. Stocks around Europe also advanced this morning, following Friday’s late surge on Wall Street,
when the Dow Jones gained eighty points. In Paris, the CAC-40 is up twenty points, although France Telecom
plunged three euros fifty to thirteen fifty-five after the company issued a profit warning, and Thomson
dropped one percent to eighteen point thirty-four. The DAX in Frankfurt is also up, by thirty-six points,
although Lufthansa tumbled four percent to seven point fifteen. In London, the Footsie 100 has climbed to
four thousand, two hundred and twenty point one. British Energy jumped to five pounds twelve after they
published their six-monthly results. Notable losers in London, however, include Vodafone, which slumped to
one pound sixteen.
On the commodity markets, copper, which seemed to be going through the roof last week, is steady at
seventy-nine point seven cents a pound. Gold has slipped to three hundred and sixty-two dollars an ounce,
while silver is almost unchanged at four point forty-four.
4. Read the report again add the words or phrases to the table in Question 2
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GLOSSARY
GLOSSARY
- Instrument (n) [ˈɪnstrəmənt] - a formal legal document, as a draft or bond –
công cụ
E.g. negotiable instruments
- Contractual (adj) [kənˈtræktjʊəl] - relating to or part of a binding legal
agreement – theo hợp đồng
E.g. "contractual obligations"
- Intervals (n) [ˈɪntəvəl] - the period of time marked off by or between two events,
instants, etc. -
- Principal (n) [ˈprɪnsɪpəl] - the original amount of a debt on which interest is
calculated – vốn gốc
E.g. Use the higher premiums to pay the interest and principal on the debt.
- primary market (n) - that part of the capital markets that deals with the issuance
of new securities – thị trường sơ cấp
- Securities (n) [sɪˈkjʊərɪtɪ] - Piece of paper that proves ownership of stocks,
bonds, and other investments – chứng khoán
E.g. Examples of a security include a note, stock, preferred share, bond, debenture,
option, future, swap, right, or warrant or virtually any other financial asset.
- Underwrite (v) [ˈʊndəˌraɪt ˌʌndəˈraɪt] - to undertake to purchase at an agreed
price any unsold portion of (a public issue of shares, etc.) – bảo lãnh
E.g. Investment bankers often assume the securities underwriting function in order to
guarantee that the issuer will receive all the funds needed from the sale.
- Liquid (adj) [ˈlɪkwɪd] - Easy convertibility into cash – có khả năng chuyển đổi
thành tiền mặt, có tính lỏng
E.g. A liquid asset or security can be easily bought or sold with little or no impact on
price.
- Liquidity (n) [lɪˈkwɪdɪtɪ] - Available cash or the capacity to obtain it on demand
– khả năng chuyển đổi thành tiền mặt, khả năng thanh toán nợ ngắn hạn
E.g. A bank can increase its liquidity by shortening the average term of its loans.
- common stocks - stock other than preferred stock which entitles the owner to a
share of the corporation's profits and a share of the voting power in shareholder
elections – cổ phiếu thường
E.g. "over 40 million Americans invest in common stocks"
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CHAPTER 4
BUSINESS ADMINISTRATION
UNIT 16: CORPORATE FINANCE
UNIT 17: FUNDING THE BUSINESS
UNIT 18: MANAGEMENT OF

WORKING CAPITAL
UNIT 19: MARKETING
UNIT 20: SETTING THE PRICE
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UNIT
UNIT18:16 CORPORATE FINANCE
PREVIEW
PREVIEW
a> Discussion
1. What do you think creates success of a company?
2. If you are running a big company, what can you do in order to maximize the
value of your business?
3. If you have a new project, but you don’t have enough money to invest in it,
which sources of capital can you access to?
b> Vocabulary
You are going to read the text about Corporate Finance, before you read, check your
understanding of corporate finance vocabulary by matching the words or phrases in
the box with their definitions from 1 – 10.
market share dividend invest profitability risk
maximize equity debts return investment
1. An amount of money borrowed by one party from another

2. Funds contributed by stockholders through direct payment and through retained
earnings
3. A portion of a company's profit paid to common and preferred shareholders
4. To increase or make as great as possible
5. Property acquired for the purpose of producing income for its owner
6. The profit or loss you have on your investments, including income and change in
value
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7. To lay out (money or capital in an enterprise, esp by purchasing shares) with the
expectation of profit
8. The uncertainty associated with any investment
9. The percentage of total industry sales that a particular company controls
10. The quality of affording gain or benefit or profit
READING
READING
Corporate finance is a broad term that is used to collectively identify the various
financial dealings undertaken by a corporation. Generally, the term also applies to the
various methods, procedures, and configurations of the financial operations employed
by a given company. In most instances, corporations will have a specific financial
division that is charged with the task of managing corporate finance in all aspects of
financial operation.
One of the core functions of responsible corporate finance is to make wise use of
the financial resources available to the company. As part of this action, the financial arm
of the corporation will attempt to develop an operating budget that addresses all the
needs of the company in terms of expenses, as well as work with other departments to
track income generated from various operations and investments currently in place.
Ultimately, the goal is to ensure that the corporation is achieving the maximum benefit
from available financial resources, while incurring the minimum amount of expenditure
required attaining those benefits.
Corporate finance may take on many different aspects as part of the overall
management of the finance of the company. The functions may include the management
of investments such as acquiring and selling stocks, bonds, and other investment
ventures related to other companies. Corporate finance can also involve creating and
managing the process for issuing shares of stock or offering corporate bonds to generate
resources for expansion projects. When acquisitions of property or other companies,
mergers, corporate restructures, or the selling of company assets is involved, the actions
are considered to be part of the corporate finance function.
Corporate finance includes planning, raising, investing and monitoring of finance
in order to achieve the financial objectives of the company. The followings are included
in corporate finance.
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Planning the finance:
The finance manager plans the finance of the company. He takes decisions on questions
like:-
1. How much finance is required by the company?
2. What are the sources of finance?
3. How to use the finance profitably?
Raising the finance:
The finance managers raise (collect) finance for the company. Finance can be collected
from many sources, e.g., shares, debentures, banks, financial institutions, creditors, etc.
Investing the finance:
The finance manager uses the finance to achieve the objectives of the company. There
are two types of corporate finance: fixed capital and working capital. Fixed capital is
used to purchase fixed assets like land, buildings, machinery, etc. While working capital
is used to purchase raw materials. It is also used to pay the day-today expenses like
salaries, rent, taxes, electricity bills, etc.
Monitoring the finance:
The finance manager monitors the finance of the company. He has to minimize the cost
of finance, the wastage and misuse of finance, and the risk of investment of finance. He
also has to get maximum return on the finance. Monitoring the finance is an art and
science. It is a very complex job.
Finance is the life blood of business. It is required by all types of companies. Under the
best of circumstances, responsible corporate finance activities promote the wise use of
all financial resources, actively look for ways to enhance the financial picture of the
corporation, and in general make sure there are assets on hand to maintain company
operations. Chief financial officers and their immediate staff often have the authority to
approve or deny various uses of corporate finance, although some issues may be
deferred to a board of directors, or are subject to a vote by the shareholders of the
company.
COMPREHENSION
COMPREHENSION QUESTIONS:
QUESTIONS
1. What does the term “corporate finance” refer to?
2. What is one of the main functions of corporate finance?
3. What do you think are important objectives of corporate finance?
4. What does corporate finance include?
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5. In “Planning the finance” what should financial managers take into
consideration?
6. What sources of finance can finance managers think of when they want to raise
more capital?
7. How is the capital of a firm basically classified?
8. How are fixed capital and working capital often used?
9. What are the tasks of finance managers in monitoring the finance?
VOCABULARY
EXERCISES
1. Fill in the gaps in the following text with suitable words or phrases from the
box.
risks investments equity Returns finance options
evaluation dilution corporate value Liability short term
The field of corporate finance deals with the decisions of finance taken by corporations
along with the analysis and the tools required for taking such decisions. The principle
aim of corporate finance is enhancing the (1) ………….. and at the same time reducing
the financial (2) ………… of the company. In addition to this, corporate finance also
deals in getting the maximum (3) ………… on the invested capital of the company. The
major concepts of corporate finance are applied to the problems of finance encountered
by all type of firms.
The discipline of corporate finance can be split into the short term and the long term
techniques of decisions. The (4) …………. of capital are the long term decisions
relating to the projects and the methods required to finance them. On the other hand, the
capital management for working is considered as a (5) ………… decision that deals
with the short term current liabilities and asset balance. The main focus here rests on the
management of inventories, cash and, the lending and borrowing on a short term basis.
Corporate finance is also associated with the field of investment banking. Here, the role
of the investment banker is the (6) ………… of the various projects coming to the bank
and making proper investment decisions regarding them.
The Capital Structure:
A proper finance structure is required for achieving the set goals of corporate finance.
The management has to therefore design a proper structure that has an optimal mix of
the different (7) …………. that are available.
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Generally, the sources of finance will comprise of a mix of (8) ……….. as well as debt.
If a project is financed through debt, it results in causing a (9) …………. to the
concerned company. Hence in such cases, the flow of cash has various implications
regardless of the success of the project. The financing done by equity carries a lower
risk regarding the commitments of the flow of cash, but the result of this is the (10)
………. of the earnings and the ownership. The cost involved in equity finance is also
higher in the case of debt finance. Hence, it is understood that the finance done through
equity, offsets the reduction in the risk of cash flow. The management has to hence have
a mix of both the options.
LANGUAGE
LANGUAGEFOCUS
FOCUS
Study the following sentence in the reading text.
“One of the core functions of responsible corporate finance is to make wise use of the
financial resources available to the company.”
“make wise use of” is one of common collocations with “make” in English.
Collocations with “make” and “do”

Make Do
make an arrangement do a job
make an announcement do damage
make an attempt do research
make an offer do sport
make a mistake do (somebody) a favour
make a suggestion do an exercise
make a contribution do (somebody) an injury
do business
PRACTICE
1. Look up the dictionary for any allocations in the table above if you are
not sure about their meaning.
2. Fill in the gaps with DO or MAKE:
1. Will you ……………. me a favour?

2. It’s your turn to …………… the dishes today.
3. I will …………….. a list of the things we need.
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4. Ok, I will …………….. an exception for you.
5. Please, don’t …………….. mistakes.
6. I need to go out now, it’s urgent. I have to ………………. a phone call.
7. The good students always …………….. their homework.
8. My father won’t ………….. the cleaning.
9. My husband never helps me ……………….. dinner.
10. The workers I hire always ……………….. a good job.
11. I always ……………….. the washing up myself.
12. The students don’t like to ………… quizzes.
13. The menu was so good that it was difficult for us to ………………. a choice.
14. The soldiers are obliged to …………… their beds every morning.
15. …………. an effort to finish before lunch.
16. The doctor asked me to …………… exercise.
17. I don’t know how people …………… money without hard work.
18. We have to ………….. a decision quickly.
19. They wanted to …………… an offer to build the bridge.
20. Can anybody ………….. a suggestion? I am completely in the dark.
21. If you want to buy that car, I am sure we can ………….. a deal.
22. Let’s go out tonight and …………… the town.
23. I ……………. an appointment to visit my doctor yesterday.
24. Jim, I told you not to ………….. a mess in the living room!
25. How much money does your father …………… ?
26. I like …………… business with Jack.
27. I usually …………. the cleaning on Saturday morning.
28. Sue cooks but I …………. the dishes.
29. Let’s …………… a date for the 15th.
30. I’d be happy if you would …………… the honors.
31. He ……………. everything by hand, he’s amazing.
32. How much profit did your company …………….. last year?
GLOSSARY
GLOSSARY
- Acquire (v) /əˈkwaɪər/ /-ˈkwaɪɚ/ : to get something – đạt được
E.g. He acquired the firm in 2008.
- Acquisition (n) /ˌæk.wɪˈzɪʃ.ən/: the process of getting smth
E.g. The acquisition of huge amounts of data has helped our research enormously.
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- Benefit (n), (v) /ˈben.ɪ.fɪt/: a helpful or good effect, or something intended to help
– lợi ích
E.g. The discovery of oil brought many benefits to the town.
- Corporate finance (n) /ˈkɔːpərət ˈfaɪnæns/ - the process of providing companies with
money to invest in their businesses – Tài chính doanh nghiệp
E.g. He was the head of the US bank's Italian corporate finance division.
- debenture (n) /dɪˈben.tʃər/ : a type of loan, often used by companies to raise money,
that is paid back over a long period of time and at a fixed rate of interest – trái khoán
- dilution (n) /daɪˈluːʃən/ /dɪˈluːʃən/: the process or action of making something less
strong or valuable or the process or action of making a company's shares less valuable
by making more shares available: việc/ quá trình làm giảm bớt giá trị
E.g. The company is working to prevent dilution resulting from stock splits or similar
transactions.
- expenditure (n) /ɪkˈspendɪtʃər/ : the total amount of money that an organization or
person spends – khoản chi tiêu
E.g. We're primarily concerned with keeping expenditure down.
- fixed capital (n): money that a company has invested in assets such as buildings,
machinery, etc. - vốn cố định
E.g. In many companies there is more working capital than fixed capital.
- investment (n) /ɪnˈvestmənt/: the act of putting money into a business to buy new
stock, machines, etc., or a sum of money that is invested in a business in this way: việc
đầu tư, khoản đầu tư
E.g. The company has increased its investment in research.
- Maximize (v) /ˈmæksɪmaɪz/ : to make something as big in amount, size, or importance
as possible – tối đa hóa
E.g. Banks must maximize profits for shareholders.
- Maximum (adj) /ˈmæksɪməm/: being the largest amount or number allowed or
possible:
E.g. This puts the total maximum cost of the computer at £750
The maximum rate of interest on loans is 1% a month.
- minimize (v) /ˈmɪnɪmaɪz/: to reduce something to the smallest possible level or
amount – giảm thiểu
E.g. We rented an office in the cheap part of town to minimize costs.
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- Minimum (n) /ˈmɪnɪməm/: the smallest amount or number allowed or possible – mức
tối thiểu
E.g. Wage increases are being kept to a minimum because of the recession.
- merger (n) /ˈmɜːdʒər/: a situation when two or more companies, organizations,
departments, etc. join together – việc sát nhập
E.g. The boards finally approved the merger between the two energy groups.
- monitor (v) /ˈmɒnɪtər/: to watch a situation carefully for a period of time in order to
discover something about it: giám sát
E.g. The government had agreed to allow the inspectors to monitor the refueling
process.
- wastage (n) /ˈweɪstɪdʒ/: the fact of wasting something, or the amount of something
that is wasted: sự lãng phí
E.g. Wastage of resources should be avoided at all costs.
- Working capital: the money that a company needs to operate and produce its goods
or provide its services, for example to make payments to employees, suppliers, etc.
before it has been paid by customers – vốn lưu động
E.g. The joint venture will cost the group just $200,000 in working capital.
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UNIT
UNIT 19 17 FUNDING THE BUSINESS
PREVIEW
PREVIEW
a> Discussion
In Vietnam, what are capital sources for companies to raise for their business? Look at
the following pictures for suggestions and explain briefly about these sources of funds.
b> Put the sources of new funds 1-6 into the correct category below.
1 Issuing new shares
2 Issuing new bonds (note that only large companies do this)
3 Trade credit (asking suppliers if you can pay them later)
4 Reinvested earnings
5 Sale of assets (e.g. a building, or a part of a company)
6 Bank loan or bank overdraft (= temporary negative balance)
Debt financing (money raised has to be paid back to outside creditors):

Equity financing (money raised comes directly or indirectly from the owners of the
business, who hope to have it paid back in the form of more profits):
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READING
READING
To ensure a company’s long- term survival and prosperity, finance managers need to
make decisions about the gearing of the company. Gearing is the relationship between
equity capital invested in the business and long-term debt. The higher gearing (in other
words, the greater the proportion of long-term debt), the more exposed the company is
in times of economic difficulty.
The first form of equity is owner’s capital. This is the most exposed form of capital
since a return is received only after all other calls on a company’s profits have been
satisfied. In an extreme case – bankruptcy – the owner’s equity will be repaid only after
everyone else, including employees, creditors, banks, etc., has received what they are
owed. On the other hand, in successful times, the owners have a claim on all the net
profit of company.
An owner does not need to rely on his or her own funds. She/ he can go to other sources
of equity finance. There are three main sources: firstly, venture capital: this is usually
provided by venture firms interested in financing high- growth companies. However,
the provider usually demands a much faster and higher rate of return than an owner
would expect from his/ her own capital. On the other hand, the venture capital company
does not usually interfere in the running of the company.
Another source of equity finance is the unlisted securities market – sometimes called
the second or third market. This has the advantage of allowing a company to raise
money from outside investor without losing much control of the company.
The last source is available only to large companies – the Stock Exchange. If a
company gains a listing on the Stock Exchange, this will provide the long-term
opportunity of raising capital by issuing fresh shares. However, at least 25 percent of the
equity must be in public hands – thereby reducing the control of the original owners.
Companies prepared to increase their gearing can raise capital through long-term loans.
They can go to sources such as the clearing banks, merchant banks and even pension
funds. However, in all three cases they will usually secure their debt over the fixed
assets of the business and, of course, interest must be paid, usually linked to bank base
rate.
In times of prosperity, a high gearing will give the owners a much better return as net
profits will be a much higher percentage of equity after interest payments on the long –
term debt. However, in harder times, the owner’s earnings will drop dramatically as
interest payment soak up most of the company’s profits.
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COMPREHENSION
Read the text carefully and complete the chart 19.1
Chart 19.1
Sources of funds Advantages/ Disadvantages

Low gearing (i) Owner’s capital
(ii) …………………….
(iii) ……………………
(iv) …………………….
High gearing Long-term loans
VOCABULARY
EXERCISES
Study the following text
A Capital
Capital is the money that a company uses SHAREHOLDERS
to operate and develop. There are two
main ways in which a company can (Share capital) (Dividends)
raise capital, that is find the money it
COMPANY
needs. it can use share capital or loan
capital, from investors. These are people
or organizations who invest who invest Loans Repayments
in the company; they put money in and
interests
hoping to make more money. LENDERS
B Share capital
Share capital is contributed by shareholders who put up money and hold shares in
the company. Each share represents ownership of a small proportion of the
company. Shareholders receive periodic payments called dividends, usually based
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on the company’s profit during the relevant period. Capital in the form of shares
is also called equity.
A venture capitalist is someone who puts up money for a lot of new companies.
C Loan capital
Investors can also lend money, but then they do not own a small part of the
company. This is loan capital, and an investor or a financial institution lending
money in this way is a lender. The company borrowing it is the borrower and may
refer to the money as borrowing or debt. The total amount of debt that a company
has is its indebtedness. The sum of money borrowed is the principal. The
company has to pay interest, a percentage of the principal, to the borrower,
whether it has made a profit in the relevant period or not.
D Security
Lending to companies is often in the form of bonds or debentures, loans with
special conditions. One condition is that the borrower must have collateral or
security: that is, if the borrower cannot repay the loan, the lender can take
equipment or property, and sell it in order to get their money back. This may be
an asset which was bought with the loan.
E Leverage
Many companies have both loan and share capital. The amount of loan capital that
a company has in relation to its share capital is its leverage. Leverage is also
called gearing in BrE. A company with a lot of borrowing in relation to its share
capital is highly leveraged or highly geared. A company that has difficulty in
making payments on its debt is overleveraged.
1 Choose the correct expressions in brackets from A, B, and C above to complete

the text.
“I started 15 years ago with (1) capital / dividends of $A50,000. We had one small
restaurant in Sydney and now we have twenty throughout Australia. My (2) borrowers /
shareholders were members of my family: my parents, brothers and sisters all put up
money. They didn’t receive any (3) dividends / shares for the first five years: we put all
our profits back into the company! Now we want to increase the amount of (4) equity /
dividends, so we are looking for outside (5) borrowers / lenders.
(6) Lenders / Shareholders have been very helpful. We obtained $A50,000 of (7) loan
capital / share capital from a bank when we started. Now we have paid off all the (8)
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dividends / principal and (9) interest/ shares after seven years. We have taken out other
loan recently, but our (10) lending / indebtedness is not bad in relation to the size of the
business.
2 Answer these questions, using expressions from C, D or E above.
1 You want to raise money for your company, but you do not want to sell shares. What
can you use instead? (2 expressions)
2 You want to raise money and you want to reassure lenders that they will get their
money back if your company cannot repay. What would you offer them? (2
expressions)
3 You are interviewed by a financial journalist who wants to know why you are
borrowing money. What do you tell them that you want to increase? (2 words)
4 The journalist writes an article saying that your company has a lot of debt in relation
to its share capital. Which two expressions might she use in her article?
5 A few months later the journalist writes an article saying that your company has too
much debt in relation to its ability to pay. Which expression might she use in her
article?
LANGUAGE
LANGUAGEFOCUS
FOCUS
Study the sentence from the reading text:
“To ensure a company’s long- term survival and prosperity, finance managers
need to make decisions about the gearing of the company”
“Capital is the money that a company uses to operate and develop.”
Expressing purpose
Purpose with to, in order to and so as to
Use to , so as to, and in order to to express purpose in the affirmative form.
Examples:
• He is looking for a part time job to save some pocket money.
• She wakes up early in order to be on time to work.
• They visited him so as to offer their condolences for the death of his wife.
Use so as not to and in order not to to express purpose in the negative form.
Examples:
• They woke up early in order not to be late.
• She exercises regularly so as not to get fat.
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•He helped the new policewoman so as not to fail in her first mission.
Purpose with so that
You can also express purpose with so that. In this case you generally need to use a
modal.
Examples:
• She told him to play quiet so that he wouldn't disturb the neighbors.
• He got a visa so that he can travel to the USA.
• He decided to stay in England for a while so that he could practice his
English
PRACTICE
Complete the following sentences with suitable expressions of purpose.
1. Concentrate on your exercise …………. make any mistakes.
2. You have to wake up …………. on time.
3. You have to registrate ……………. participate in the forum.
4. She left work early ………… be at home when he arrives.
5. Ships carry life boats ………….. the crew can escape when the ship sinks.
6. I will go to university ………….. continue my studies.
7. He exercises regularly ……………….. be overweight.
8. ……………… you can produce a good essay, you need to edit your writing
before you hand it in.
9. she works hard ……………. she can earn a living.
10. These men risk their lives …………… we may live more safely.
GLOSSARY
GLOSSARY
- bankruptcy (n) /ˈbæŋ.krəpt.si/: a situation in which a business or a person becomes
bankrupt – tình trạng phá sản
E.g. The company was forced into bankruptcy.
- finance (v) /ˈfaɪ.næns/: to provide the money needed for something to happen: bù
đắp, cấp tài chính cho
E.g. The local authority has refused to finance the scheme.
- debt financing (n): borrowing money on credit with a promise to repay the amount
borrowed, plus interest – việc huy động vốn vay
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E.g. Debt financing can come from selling bonds, bills, or notes to lending
institutions, individuals, and sometimes, to investors.
- equity financing (n): issuing additional shares of common stock to an investor – huy
động vốn chủ sở hữu
- fresh share (n): Stocks offered first time to the public – cổ phiếu mới
E.g. They have just issued thousands of fresh shares to attract new investors and
increase their capital.
- gearing (n) /ˈɡɪə.rɪŋ/ or /ˈɡɪr.ɪŋ/ ~ leverage: the amount a company has borrowed
compared to its share capital – hệ số vốn
E.g. You must look at the company's gearing level and its ability to service its debt.
- ownership (n) /ˈəʊ.nə.ʃɪp/: the fact that you own something – quyền sở hữu
E.g. Do you have any proof of ownership of/for this car?
Rates of home ownership have remained relatively constant.
- Overdraft (n) /ˈəʊ.və.drɑːft/ /ˈoʊ.vɚ.dræft/: a draft or withdrawal of money in
excess of the credit balance on a bank or building-society cheque account – sự rút quá
hạn mức số dư trong tài khoản ngân hàng
E.g. For example, if an account holder has $1,000 in the account and withdraws
$1,200, this is an overdraft of $200.
- Prosperity (n) /prɒsˈper.ɪ.ti/ or /prɑːˈsper.ə.t̬ i/: the state of being successful and
having a lot of money – Sự thịnh vượng
E.g. A country's future prosperity depends, to an extent, upon the quality of education of
its people.
- venture capital (n) money that is invested or is available for investment in a new
company, especially one that involves risk – Vốn mạo hiểm
E.g. They'll need to raise £1 million in venture capital if they're to get the business off
the ground.
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UNIT
UNIT20 18 MANAGEMENT OF WORKING CAPITAL
PREVIEW
PREVIEW
A case study of Toyota
Toyota Motor Corporation's vehicle production system (TPS) is a way of "making things" that is
sometimes referred to as a "lean manufacturing system" or a "Just-in-Time (JIT) system," and has
come to be well known and studied worldwide.
Based on the basic philosophies of Just-in-Time, the TPS can efficiently and quickly produce
vehicles of sound quality, one at a time, that fully satisfy customer requirements.
Just-in-Time
Productivity improvement —
- Making only "what is needed, when it is needed, and in the amount needed!"
Producing quality products efficiently through the complete elimination of waste, inconsistencies,
and unreasonable requirements on the production line.
In order to deliver a vehicle ordered by a customer as quickly as possible, the vehicle is efficiently
built within the shortest possible period of time by adhering to the following:
❖ When a vehicle order is received, a production instruction must be issued to the beginning
of the vehicle production line as soon as possible.
❖ The assembly line must be stocked with required number of all needed parts so that any
type of ordered vehicle can be assembled.
❖ The assembly line must replace the parts used by retrieving the same number of parts
from the parts-producing process (the preceding process).
❖ The preceding process must be stocked with small numbers of all types of parts and
produce only the numbers of parts that were retrieved by an operator from the next
process.
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READING
READING
Profitability is determined in part by the way in which a company manages its working
capital. Basically, there will be a drop in profit if working capital is raised without a
corresponding rise in production or margins. So, one of the principal functions of
financial management is to provide the correct amount of working capital at the right
time and in the right place to realize the greatest return on investment.
Working capital can initially be broken down into two types: permanent and temporary.
Permanent working capital is tied up in keeping the business flowing throughout the
year, while temporary working capital is needed from time to take account of seasonal,
cyclical or unexpected fluctuation in the business. The latter type is usually serviced
from an overdraft facility.
Both types of working capital have three major applications: firstly inventories,
secondly debtors and finally cash.
Over-stringent cost control
Loss of sales Disruption in production
Loss of customer goodwill Failure to meet customer orders
Inventories can be further divided into inventories of raw materials, working in progress
and finished goods. These three can soak up an enormous amount of excess working
capital if not well managed. It is the job of the financial manager to minimize the stocks
of raw materials, the level of the work in progress and the quantity of finished goods.
However, over-stringent control can lead to disruption in production caused by the
delay in receiving raw materials, a failure to take account of costly price rises in the
pipeline, a failure to keep the production volume required by future sales and resulting
expensive and damaging effects on customer goodwill. As one can see from the
foregoing diagram, this can become a vicious circle where the loss of goodwill finally
leads to loss of sales and results once again in stringent cost controls.
The just-in-time philosophy, developed in Japan, is aimed at reconciling these

conflicting interests and keeping inventory costs to a minimum.
On the debtor side, working capital is required to finance the gap between payment due
to suppliers and payment owed by customers. It is the task of financial management to
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see that generous credit terms are negotiated with suppliers, but minimal credit is
offered to customers. Again, a balance must be achieved between getting and giving
good credit terms in order to attract customers and maintain positive relationships with
suppliers on one hand and minimizing cash outlay on the other hand.
Finally, cash is needed for both normal and abnormal requirements. Sound cash
management will ensure that adequate cash is always available for meeting the
company’s day-to-day debts and that there is also a small reserve on hand to meet
contingencies.
COMPREHENSION
1. For what purpose is permanent working capital required?
2. For what purpose is temporary working capital is needed?
3. What does the term “overdraft facility” mean?
4. What are included in inventories of a company?
5. What happens to the production system of a company if its inventories are
controlled too stringently?
6. What can cause the disruption in production?
7. What does the “just-in-time” philosophy refer to?
8. What are the tasks of financial management in managing debtors?
9. What are the tasks of financial management in managing cash?
VOCABULARY
VOCABULARYEXERCISES
EXERCISES
1 Just-in-time
Of course, it costs money to keep
components and goods in stock: stocks
have to be financed (paid for), stored
(perhaps in special buildings: warehouse)
and handled (move from one place to
another). So, Dryden is asking its
suppliers to provide components just-
in-time, as and when they are needed.
This is part of lean production or lean
manufacturing, making things
efficiently: doing things as quickly and
cheaply as possible, without waste.
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Replace the words in speech bubbles with the correct forms of words from the text
above.
1 Let’s get the materials in only when we need them to keep the cost down.
2 It’s difficult to find the right Special buildings to put our finished goods
in.
to pay
3 You’ll have to decide well in advance how for all this.
4 It’s very important that we keep these components at the right temperature.
5 There must be a quicker and cheaper method than this!
6 They want to introduce a system of making things efficiently.
2. Put the solutions for managing cash flow 1-6 into the correct category below.
1 just-in-time manufacturing
2 making payments to suppliers in installments (= part payments)
3 leasing fixed assets rather than buying them
4 offering a discount for early settlement (= complete payment) of a bill
5 improving sales forecasting so that the warehouse holds less inventory
6 cancelling the office Christmas party
Credit control:
Stock control:
Expenditure control:
LANGUAGE
LANGUAGEFOCUS
FOCUS
Expressions with “time”
The word “time” appears in a lot of expressions used in production and operations like
“just-in-time”. Write each word in the box next to its definition:
changeover time cycle time downtime lead time

lag time overtime set-up time time-to-market
1 when equipment (or the whole line) stops working and
…………………… production is lost.
2 time between one job/ batch finishing and the next one
…………………… beginning (includes time taken to prepare machinery for a new
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process)
3 time required from receiving a customer order to final
…………………… delivery; it includes order processing, pre-pack time, in transit
time, receiving and inspection
4 time taken for a given job / batch to pass through all the
…………………… operations needed
5 extra hours that someone works, beyond their contractual
……………………. obligation (and often paid at a higher rate)
6 time taken to prepare machinery and equipment for a new job /
……………………. batch
7 time required from the initial concept for a new product to
……………………. when it first goes on sale
8 any period of delay between one event and another (eg.
…………………… between giving an instruction and the operation beginning)
GLOSSARY
GLOSSARY
- credit term (n): the arrangements made for giving credit, especially the amount of
money, the period of borrowing, etc. – điều khoản tín dụng
e.g. Financial management should negotiate with suppliers to have generous
credit terms.
- customer goodwill (n) /ɡʊdˈwɪl/: part of a company's value that includes things that
cannot be directly measured, for example, its good reputation or its customers' loyalty –
uy tín khách hàng
e.g. The company's assets are worth £200 million, plus goodwill.
- debtor (n) [ˈdɛtə] : someone who owes money – người vay nợ, khoản nợ
- fluctuate (v) [ˈflʌktjʊˌeɪt]: to change, especially continuously and between one level
or thing and another – dao động, biến động
e.g. Her wages fluctuate between £150 and £200 a week.
- fluctuation (n) /ˌflʌk.tjuˈeɪ.ʃən/ - sự biến động, sự dao động
e.g. “ fluctuations in share prices/the exchange rate/temperature”
- Inventory (n) [ˈɪnvəntərɪ -trɪ]: the amount or value of a firm's current assets that
consist of raw materials, work in progress, and finished goods; stock – hàng tồn kho
e.g. Inventory may be accounted on a last-in-first-out or a first-in-first-out
basis, which each has advantages and disadvantages.
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- maintain (v) /meɪnˈteɪn/: to continue to have; to keep in existence – duy trì
e.g. The army has been brought in to maintain order in the region.
- profitable (adj) /ˈprɒf.ɪ.tə.bl̩ / or /ˈprɑː.fɪ.t̬ ə-/: resulting in or likely to result in a profit
or an advantage – có thể sinh lợi
e.g. Over the years it has developed into a highly profitable business.
- profitability (n) /ˌprɒf.ɪ.təˈbɪl.ɪ.ti/ /ˌprɑː.fɪ.t̬ əˈbɪl.ə.t̬ i/ - khả năng sinh lời
e.g. The company needs to return to profitability extremely soon.
- permanent (adj) /ˈpɜː.mə.nənt/ /ˈpɝː-/: lasting for a long time or for ever – vĩnh cửu,
lâu dài
e.g. She is looking for a permanent place to stay.
Are you looking for a temporary or a permanent job?
- Permanent working capital: vốn lưu động thường xuyên
- temporary working capital: vốn lưu động không thường xuyên
- take account of: To take into consideration – xem xét, xử lý
e.g. Temporary working capital is needed from time to time to take account of
seasonal, cyclical, or unexpected fluctuations in the business.
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UNIT
UNIT 6: 19 MARKETING
PREVIEW
PREVIEW
Marketing always plays a very important role in the company’s success. There are some
different definition of marketing, a modern definition of marketing is by Peter Drucker,
Management: Tasks, Responsibilities, Practices: “There will always, one can assume,
be a need for some selling. But the aim of marketing is to make selling superfluous. The
aim of marketing is to know and understand the customer so well that the product or
service fits him and sells itself. Ideally, marketing should result in a customer who is
ready to buy.”
Now complete the following definition of marketing, by inserting these verbs in the
gaps below:
design develop identify influence modify persuade
Marketers have to: (1) …………….. or anticipate a consumer need; (2) ……………. a
product or service that meets that need better than any competing products or service;
(3) ………………… target customers to try the product or service; and, in the long
term, (4) …………………… it to satisfy changes in consumer needs or market
conditions. Marketers can (5) ………………. particular features, attractive packaging,
and effective advertising, that will (6) ……………… consumer’s wants. Marketing thus
combines market research, new product development, distribution, advertising,
promotion, product improvement, and so on.
READING
READING
Look quickly through the following text and decide which paragraphs are about these
subjects:
…………… - company-to-company marketing
…………… - identifying market opportunities
…………… - the marketing mix
…………... – the selling and marketing concepts
…………... – the importance of market research
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THE CENTRALITY OF MARKETING
1. Most management and marketing writers now distinguish between selling and
marketing. The “selling concept” assumes that resisting consumers have to be persuaded
by vigorous hard-selling techniques to buy non-essential goods and services. Products
are sold rather than bought. The “marketing concept”, on the contrary, assumes that the
producer’s task is to find wants and fill them. In other words, you don’t sell what you
make, you make what will be bought. As well as satisfying existing needs, marketers
can also anticipate and create new ones. The markets for I-phones, video games,
personal computers, and genetic engineering, to choose some recent examples, were
largely created rather than identified.
2. Marketers are consequently always looking for market opportunities – profitable
possibilities of filling unsatisfied needs of creating new ones in areas in which the
company is likely to enjoy a differential advantage, due to its distinctive competencies
(the things it does particularly well). Market opportunities are generally isolated by
market segmentation. Once a target market has been identified, a company has to decide
what goods or service to offer. This means that much of the work of marketing has been
done before the final product or service come into existence. It also means that the
marketing concept has to be understood throughout the company, e.g., in the production
department of a manufacturing company as much as in the marketing department itself.
The company must also take account of the existence of competitors, who always have
to be identified, monitored and defeated in the search for loyal customers.
3. Rather than risk launching a product or service solely on the basis of intuition or
guesswork, most companies undertake market research (GB) or marketing research
(US). They collect and analyze information about the size of a potential market, about
the consumers’ reactions to particular product or service features, and so on. Sales
representatives, who also talk to customers, are another important source of information.
4. Once the basis offer, e.g., a product concept, has been established, the company has
to think about the marketing mix, i.e. all the various elements of a marketing program,
their integration, and the amount of effort that a company can expend on them in order
to influence the target market. The best-known classification of these elements is the
“4Ps”: product, place, promotion and price. Aspects to be considered in marketing
products include quality, features (standard and optional), style, brand name, size,
packaging, services and guarantee. Place in a marketing mix includes such factors as
distribution channels, locations of points of sale, transport, inventory size, etc.
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Promotion groups together advertising, publicity, sales promotion and personal selling,
while price includes the basic list price, discounts, the length of the payment period,
possible credit terms, and so on. It is the job of a product manager or a brand manager to
look for ways to increase sales by changing the marketing mix.
5. It must be remembered that quite apart from consumer markets (in which people buy
products for direct consumption) there exist enormous producer or industrial or business
markets, consisting of all the individuals and organizations that acquire goods and
services that are used in the production of other goods, or in the supply of services to
others. Few consumers realize that the producer market is actually larger than the
consumer market, since it contains all the raw materials, manufactured parts and
components that go into consumer goods, plus capital equipment such as buildings and
machines, supplies such as energy and pens and paper, and services ranging from
cleaning to management consulting, all of which have to be marketed. There is
consequently more industrial than consumer marketing, even though ordinary
consumers are seldom exposed to it.
COMPREHENSION
1. Answer the following questions

1. What does the term “market opportunities” in the second paragraph mean?
2. Why should the production department should understand the marketing concept?
3. Why must the company consider the existence of competitors?
4. What are the elements of the marketing mix?
5. What aspects are considered in marketing products?
6. What factors are included in promotion?
7. Which is larger, consumer market or producer market?
2. Look at the following diagrams from Marketing Management by Philip
Kotler.
The first diagram contrasts the selling and the marketing concepts. Fill in the four
spaces with the following words or expressions:
• Coordinated marketing • Market
• Customer needs • Profits through customer satisfaction
Starting point Focus Means Ends

Factory Products Selling and promoting Profits through sales
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(a) The selling concept
(1) ………………………. (2) ……………………….. (3) ……………………….. (4) ………………………………..

…………………………… ……………………….. ……………………….. ……………………………….
(a) The marketing concept
3. Which of the following among three paragraphs most accurately summarizes the
reading text, and why?
First summary
Marketing means that you don’t have to worry about selling your product, because you
know it satisfies a need. Companies have to identify market opportunities by market
segmentation: doing market research, finding a target market, and producing the right
product. Once a product concept has been established, marketers regularly have to
change the marketing mix – the product’s features, its distribution, the way it is
promoted, and its price – in order to increase sales. Industrial goods – components and
equipment for producers of other goods – have to be marketed as well as consumer
goods
Second summary
The marketing concept has now completely replaced the old-fashioned selling concept.
Companies have to identify and satisfy the needs of particular market segments. A
product’s features are often changed, as are its price, the places in which it is sold, and
the way in which it is promoted. More important than the marketing of consumer goods
is marketing of industrial or producer goods.
Third summary
The marketing concept is that a company’s choice of what goods and services to offer
should be based on the goal of satisfying consumers’ needs. Many companies limit
themselves to attempting to satisfy the needs of particular market segments. Their
choice of action is often the result of market research. A product’s features, the methods
of distributing and promoting it, and its price, can all be changed during the course of its
life, if necessary. Quite apart from the marketing of consumer products, with which
everybody is familiar, there is a great deal of marketing of industrial goods.
149
VOCABULARY
VOCABULARYEXERCISE
EXERCISE
Match up the words or expressions on the left with the definitions on the right.
1 distribution channel A all the companies or individuals involved in moving a
particular good or service from the producer to the
2 to launch a product
consumer
3 market B an idea for a new product, which is tested with target
consumers before the actual product is developed
opportunities
C attributes or characteristics of a product: quality, price,
4 market research reliabilities, etc.
D dividing a market into distinct groups of buyers who
5 market have different requirements or buying habits
segmentation E places where goods are sold to the public – shops,
stores, kiosks, market stalls, etc.
6 packaging F possibilities of filling unsatisfied needs in sectors in
7 points of sale which a company can profitably produce goods or services
G someone who contacts existing and potential
8 product concept customers, and tries to persuade them to buy goods or
services
9 product features
H collecting, analyzing and reporting data relevant to a
10 sales specific marketing situation (such as a proposed new
product)
representative
I to introduce a new product onto the market
J wrappers and containers in which products are sold
LANGUAGE
LANGUAGEFOCUS
FOCUS
Ways of explaining the meaning of words
❖ One method of learning new vocabulary while developing reading skills is to use
the context. Many times in the context, the sentence or passage in which the
word occurs, will explain the meaning of the word. One way to spot items
defined by context is to look for words which are synonyms for the verb “to be”.
Examples are: such as, refer to, consist of, involve, include, mean
150
❖ Besides words that indicate definitions, there are other techniques of using
context to arrive at a meaning. Sometimes the verb in the sentence will explain
what the function of the subject is, for example:
- A creditor lends money which usually is paid back in a certain time with interest.
Similarly, the object or another element of the sentence may suggest the meaning
of a word.
PRACTICE
1. Read paragraph 4 again and write down the expressions that indicate
definitions, examples and explanations.
2. Fill in the gaps in the following sentences with words in the box.
forms of include are examples of refers to relate to such as
1. Business may …………….. the production of goods: making airplanes, building

houses, and so on.
2. Producing computers, processing foods are ………………... production.
3. Lending money, trading stocks and bonds, and selling insurance policies
…………….. the securing of capital for business activities.
4. Other ………………… business include merchandising, which is the selling of
products, and providing various services, …………… accounting, distributing, and
repair.
5. The four factors of production …………….. land, labor, capital, and
entrepreneurship.
6. Land ……………. a piece of real estate where we might build a factory and all the
raw materials used for production.
GLOSSARY
GLOSSARY
- Marketing (n) [ˈmɑːkɪtɪŋ]: All activities a company conducts in order to acquire
and retain customers or clients.
E.g: At all points of the modern marketing system people have formed associations and
eliminated various middlemen in order to achieve more efficient marketing.
- Marketer (n): company or person who works in marketing – công ty; người hoạt
động trong lĩnh vực marketing
E.g: A good marketer can find a way to sell even an unattractive product.
- Anticipate (v) [ænˈtɪsɪˌpeɪt]: to foresee and act in advance of – liệu trước, lường
trước
151
E.g: He anticipated the fall in value by selling his goods early.
- satisfy (v) [ˈsætɪsˌfaɪ]: to fulfil the desires or needs of (a person) - làm hài lòng
E.g: The apple didn't satisfy my hunger.
I told him enough to satisfy his curiosity.
- target customers / target consumers (n): It is people or a group of people who
are targeted to buy a certain product. - khách hàng mục tiêu
E.g: Defining a target customer is the first step in the market segmentation process.
The old people are target customers of this new mobile phone.
- market condition (n): the state/ situation in the market- điều kiện thị trường
E.g: Any change in the price of the product is closely related to the current market
condition.
- research (n): study of sth- sự nghiên cứu
E.g: He is doing a research on how customers react to their new dishes.
- research (v): study or examine- nghiên cứu
E.g: Researching the target customers’ taste is a very necessary step when making a
new product.
- wants (n) [wɒnt, wɔnt] - something that you feel you need, or you really desire,
but not having it doesn't mean you die – nhu cầu
E.g: The company needs to respond to the wants of our customers.
- needs (n): a basic living essential i.e. if you don't have it, you could die. needs
are the things which make ones satisfaction arise when attained. Needs can be
natural or man-made. – nhu cầu thiết yếu
- market segmentation (n): process of dividing the market according to
similarities that exist among the various subgroups within the market - phân đoạn
thị trường
E.g: - There are four basic market segmentation strategies: behavior segmentation,
demographic segmentation, geographic segmentation, and physiographic segmentation.
- Good market segmentation can orient the manufacturers to avoid the mistakes in
setting the price.
- loyal customers (n): regular buyers of a company or a shop- khách hàng thân
thiết
E.g: Shops often have a lot of supporting programs for loyal customers.
- potential (adj): can be developed in the future- tiềm năng
E.g: Canon is one of the potential clients of the company.
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- marketing mix (n): set of different substances together in marketing- tổ hợp
marketing
E.g: The marketing mix includes 4Ps: product, price, place, and promotion.
- promote (v) [prəˈməʊt]: help sth happen or develop- thúc đẩy, xúc tiến
E.g: To promote the product successfully, Ms Ross was responsible for the advertising
campaign
- sales promotion (n) [prəˈmoʊ ʃən]: Stimulation of sales achieved through
contests, demonstrations, discounts, exhibitions or trade shows, games,
giveaways, point-of-sale displays and merchandising, special offers, and similar
activities - xúc tiến thương mại.
E.g: Generally, promotion is communicating with the public in an attempt to influence
them toward buying your products and/or services.
- distribute (v) [dɪˈstrɪbjuːt]: To supply (goods) to retailers - phân phối
E.g: Phat Viet company distributes Naris cosmetics in the North of Vietnam
- distribution (n): All activities that involve efficient movement of finished
products from the end of the production line to the consumer - sự phân phối
E.g: The selection of distribution channels and sales representation is key to successful
marketing.
- guarantee (v) [ˌgærənˈtiː]: To assume responsibility for the quality or
performance of, e.g. guarantee a product - bảo hành
E.g: This watch is guaranteed for six months.
- guarantee (n) A promise or an assurance, especially one given in writing, that
attests to the quality or durability of a product or service.
- brand name (n): a word, name, etc., used by a company to identify its products
or services distinctively – nhãn hiệu
E.g: Adidas is a brand name of sporty clothes.
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UNIT
Unit 7 20 SETTING THE PRICE
PREVIEW
PREVIEW
1. Read the following passage.
Is Price All That Matters?
Too many salespeople, professionals and business owners
labor under the belief that customers are only looking for the
cheapest possible price on everything. As a result, they
undervalue what they sell, discount when they shouldn’t, and
needlessly throw away profits.
The fact is, however, price is not the only thing that matters to buyers. And for most
people, it’s not even the biggest one. Not by a long shot. In fact, price always comes in
last in surveys of buying behavior, both among consumers and business purchasers.
2. What factors do you think are more important than price? Discuss with your
partners and make a list of the factors that matter to buyers.
READING
READING
How are prices set? Through most of history, prices were set by
buyers and sellers negotiating with each other. Sellers would ask
for a higher price than they expected to receive, and buyers would
offer less than they expected to pay. Through bargaining, they
would arrive at an acceptable price.
Setting one price for all buyers is a relatively modern idea. It was given impetus
by the development of large-scale retailing at the end of the nineteenth century.
Through most of history, price has operated as the major determinant of buyer
choice. This is still true in poorer nations, among poorer groups, and with commodity-
type-products. However, non-price factors have become relatively more important in
buyer-choice behavior in recent decades. Yet price still remains one of the most
important elements determining company market share and profitability.
Price is the only element in the marketing mix that produces revenue, the other
elements represent costs. Yet many companies do not handle pricing well. The most
common mistakes are that: pricing is too cost oriented, price is not revised often enough
to capitalize on market changes, price is set independently of the rest of the marketing
154
mix rather than as an intrinsic element of market-positioning strategy, and price is not
varied enough for different product items and market segments.
Companies handle pricing in a variety of ways. In small companies, prices are
often set by top management rather than by the marketing or sales department.
In large companies, pricing is typically handled by divisional and product-line
managers. Even here, top management sets the general pricing objectives and policies
and often approves the prices proposed by lower levels of management. In industries
where pricing is a key factor (aerospace, railroads, oil companies will often establish a
pricing department to set prices or assist others in determining appropriate prices. This
department reports either to the marketing department or top management. Others who
exert an influence on pricing include sales managers, production managers, finance
managers, and accountants.
COMPREHENSION
According to the text, decide whether the following sentences are true (T) or false (F).
1. Through most of history, sellers and buyers made bargaining to reach suitable
price
2. One price set for all buyers is a traditional trend.
3. Price has played an important role in buyer choice.
4. Companies with sound pricing strategies can gain market share and
profitability.
5. All elements in the marketing mix represent costs.
6. Prices should be various for different products and different market segments.
7. Prices are mostly set by pricing departments in any companies.
8. Pricing departments in some industries such as aviation, railroads, and oil
companies set the price independently.
VOCABULARYEXERCISES
1. Matching the phrases in column A with their definitions in column B
A B
1 price boom A a reduction in price
2 price controls B label attached to goods, showing the price; also means “price”
3 price cut C a good period for sellers, when prices are rising quickly
4 price hike D a company that is first to reduce or increase prices
5 price war E when competing companies reduce prices in response to each
6 price leader other
7 price tag F government efforts to limit price increases
G an increase in price
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2. Complete the sentences using phrases in exercise 1 above.
1. A ……………. by Mills may indicate the start of price increases by other producers.
2. Britain’s house …………………. has gone beyond London, with properties in Kent
now worth 25% more than a year ago.
3. Consumers will get ………………. of 8% off phone bills from May.
4. When President Perez ended …………… , electricity, phone and transport costs went
up.
5. Petron is a ………………; it’s usually the first to offer lower prices.
6. The project had many design problems, pushing up the ………………. for each
helicopter from $11 million to $26 million.
7. There is a ……………… between Easyjet and KLM on the London to Amsterdam
route.
LANGUAGE
LANGUAGEFOCUS
FOCUS
Study the expressions extracted from the reading text:
- commodity-type-products - product-line managers - production managers
- buyer-choice behavior - sales managers - finance managers
These expressions are called compound nouns
Compound Nouns
❖ A compound noun is two nouns together. Compound nouns are common in
English and are particularly common in business language.
❖ When we use two nouns together, the first noun is like an adjective and describes
the second noun.
Examples:
“I can also report that manufacturing – despite the … exchange rate – grew last year
by 1.6%; manufacturing productivity grew by 4.4% and manufacturing exports by
11.8%” – Chancellor Cordon Brown’s budget speech. (The Times website)
❖ We can use more than two nouns. To understand the meaning, start at the end:
- An executive search company: a company that search for executives
- A government training course: a course of training provided by the government
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PRACTICE
Choose the one word in each group that does not make a common compound noun with
the words in bold in column A.
A B
1 sales forecast / figures / trade / target
2 market forces / sector / check / share
3 price offer / list / range / rise
4 brand image / leader / loyalty / process
5 tax relief / benefits / output / allowance
6 product manager / range / features / share
7 advertising slogan / campaign / line / agency
8 production market / line / capacity / target
9 working conditions / trend / hours / lunch
10 stock option / decision / market / exchange
GLOSSARY
GLOSSARY
- price (n) [praɪs]: The amount as of money or goods, asked for or given in
exchange for something else. - giá
E.g: Sellers often increase the price of a product if more people want to buy it.
- price (v): To fix or establish a price for - định giá
E.g: The shares are priced at 330p.
- discount (n) [dɪsˈkaʊnt ˈdɪskaʊnt]: A reduction from the full or standard amount
of a price or debt - giảm giá
E.g: On holidays such as Christmas, stores usually give discounts to customers.
- set (v): fix sth- thiết lập
E.g: Setting the price is very important in business because it decides the profitability of
a company
- negotiate (v) [nɪˈgəʊʃɪˌeɪt]: try to reach an agreement by formal discussion-
thương lượng
E.g: In the past, people used to negotiate with each other to buy something.
- negotiation (n) [nɪˌgəʊʃɪˈeɪʃən]: the state of negotiating- sự thương lượng
E.g: We have had meaningful negotiations and I believe we are close to a deal.
- bargain (v) [ˈbɑːgɪn]: discuss prices, conditions to reach a satisfactory agreement
- trả giá, mặc cả
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E.g: She bargained for over an hour, finally reducing the price by half.
- impetus (n) [ˈɪmpɪtəs]: something that encourage a process to develop more
quickly - thúc đẩy
E.g: The spread of retailing quickly gave an impetus to use one- price policy.
- retail (n) [ˈriːteɪl]: The sale of goods or commodities in small quantities directly to
consumers – bán lẻ
E.g: A company can distribute its products in many channels: retail, wholesale etc.
- determinant (n) [dɪˈtɜːmɪnənt]: An influencing or determining element or factor:
- yếu tố quyết định
E.g: Education is the second most important determinant of recreational participation.
- market share (n): the part of a company in the market- thị phần
E.g: Nokia has the largest market share in mobile phone market in Vietnam.
- profit (n): money that you make in business- lợi nhuận
E.g: The employees will benefit if the company’s profit continues to increase.
- profitable (adj): that makes or likely to make money- có lợi nhuận, lãi
E.g: FPT is one of the most profitable companies in Vietnam.
- profitability (n): the state of being able to make money- khả năng sinh lời
E.g: Price also plays an important part in the company’s profitability
- market-positioning strategy (n): plan of action to position the market – chiến
lược định vị thị trường
E.g: To be successful, the company made a lot of effort to study and implement various
market- position strategies.
- market segments (n): part of the market- phân đoạn thị trường
E.g: Prices should be various for different market segments.
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CHAPTER 5
ACCOUNTING
UNIT 21: WHAT IS ACCOUNTING?
UNIT 22: FINANCIAL STATEMENTS
UNIT 23: BALANCE SHEET
UNIT 24: INCOME STATEMENT
UNIT 25: FINANCIAL ANALYSIS
UNIT 26: AUDITING
159
UNIT
UNIT 21 21 WHAT IS ACCOUNTING?
PREVIEW
PREVIEW
Parmalat goes bankrupt
Accounting scandal: after accounting scandal
Apple may have to
restate profits
Ahold pays $1.1bn to

settle accounting
EMI shares dive after scandal
accounting scandal
Discussion:
What is accounting? Why is it necessary for companies and organizations?
Is there one way of doing a business’s accounts, or lots of different possible
ways?
To some people, finance is a dry and technical area of business. In fact, it’s
fascinating. Agree Disagree
Here’s what I know about a famous financial scandal that was in the news …
READING
READING
ACCOUNTING FROM A USER’S PERSPECTIVE
Many people think of accounting as simple a highly technical field practiced by only
professional accountants. In reality, nearly everyone uses accounting information daily.
Accounting information is the means by which we measure and communicate economic
events. Whether you manage a business, make investments, or monitor how you receive
and use your money, you are working with accounting concepts and accounting
information.
To understand and use accounting information in making economic decisions, you need
to understand the following:
The nature of economic activities that accounting information describes.
The assumptions and measurement techniques involved in developing accounting
information.
The information that is most relevant for making various types of decisions.
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Exhibit 21-1 illustrates how economic activities flow into the accounting process. The
accounting process produces accounting information used by decision makers in making
economic decisions and taking specific actions. These decisions and actions result in
economic activities that continue the cycle.
Exhibit 21-1 The accounting process
TYPES OF ACCOUNTING INFORMATION

Just as there are many types of economic decisions, there are many types of accounting
information. The terms financial accounting, management accounting, and tax
accounting are often used in describing the types of accounting information most widely
in the business community.
Financial Accounting
Financial accounting refers to information describing the financial resources,
obligations, and activities of an economic entity (either an organization or an
individual). Accountants use the term financial position to describe an entity’s financial
resources and obligations at one point in time, and the term results of operations to
describe its financial activities during the year.
Financial accounting information is designed primarily to assist investors and creditors
in deciding where to place their scarce investment resources. Such decisions are
important to society, as they determine which companies and industries will receive the
financial resources necessary for growth, and which will not.
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Financial accounting information also is used by managers and in income tax returns. In
fact, financial accounting information is used for so many different purposes that it
often is called “general purpose” accounting information.
Management Accounting
Management (or managerial) accounting involves the development and interpretation
of accounting information intended specifically to assist management in running the
business. Managers use this information in setting the company’s overall goals,
evaluating the performance of departments and individuals, deciding whether to
introduce a new line of products – and in making virtually all types of managerial
decisions.
A company’s managers and employees constantly need information to run and control
daily business operations. For example, they need to know the amount of money in the
company’s bank accounts; the types, quantities, and dollar amounts of merchandise in
the company’s warehouse; and the amounts owed to specific creditors. Much
management accounting information is financial in nature but is organized in a manner
relating directly to the decision at hand.
Tax Accounting
The preparation of income tax returns is a specialized field within accounting. To a
great extent, tax returns are based upon financial accounting information. However, the
information is often adjusted or reorganized to conform with income tax reporting
requirements. We introduce the idea of tax accounting information to contrast it with
financial and management accounting information. Although tax information is
important for a company’s successful operation and is related to financial and
management accounting information, it results from a different system and complies
with specialized legal requirements that relate to a company’s responsibility to pay an
appropriate amount of taxes. Laws and regulations governing taxation are often
different from those underlying the preparation of financial and management accounting
information, so it should not be a surprise that the resulting figures and reports are
different.
The most challenging aspect of tax accounting is not the preparation of an income tax
return, but tax planning. Tax planning means anticipating the “tax effects” of business
transactions and structuring these transactions in a manner that will minimize the
income tax burden.
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COMPREHENSION
1. What is the basic purpose of accounting?
2. What are three types of accounting information?
3. Why is financial accounting is considered as “general purpose” accounting
information?
4. For what purposes is management accounting information used?
5. What are differences between financial accounting and management accounting?
6. How is tax accounting information different from financial accounting
information?
7. Why is “tax planning” more challenging than the preparation of an income tax
return?
VOCABULARY
VOCABULARYEXERCISES
EXERCISES
1. Match the words or phrases in the box with their definitions (1-10).
assets tax accounting

expenditure financial accounting
cost accounting bookkeeping
liabilities auditing
income management accounting
1 anything owned by a company – cash, buildings, machines, etc.

2 calculating how much tax an individual or a company should pay – or trying to
reduce this figure
3 checking and evaluating financial records
4 determining the unit cost of a manufactured product, including indirect costs
5 keeping financial records and preparing financial statements
6 money that a company will have to pay to someone else – bills, debts, interest,
taxes¸ etc.
7 recording transactions (purchases and sales) in ledgers
8 the money that a company receives from supplying goods or services
9 the money that a company spends
10 the use of a company’s accounting data by its managers for planning and control
163
LANGUAGE
LANGUAGEFOCUS
FOCUS
Useful collocations
Study the collocations below. Check any unknown words in a dictionary
budgeted, escalating, estimated, increasing, likely, rising, unexpected, costs
unforeseen
bring down, calculate, cut, figure out, lower, meet, pay, reduce, work costs
out
bring in, earn, generate, jeopardize, make, plough back, put at risk, profits
reinvest
accurate, approximate, ballpark, deceptive, dubious, exact, figure
misleading, precise, rough, round
announce, check, cook, doctor, examine, falsity, go over, go through, the figures
issue, manipulate, massage, publish, release, study
Now divide the words in each box into three groups, based on their meaning.
budgeted, escalating, unexpected, costs
estimated, increasing, unforeseen
likely rising
costs
profits
figure
the figures
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GLOSSARY
GLOSSARY
- accounting (n) /əˈkaʊn.tɪŋ/ /-t̬ ɪŋ/: the skill or activity of keeping records of the money
a person or organization earns and spends or (UK accountancy) the job of being an
accountant – nghề kế toán
e.g. He works in his accounting department.
- accounts (n) /əˈkaʊnts/: an official record of all the money a person or company has
spent and received – tài khoản
e.g. I keep my own accounts.
- accountant (n) /əˈkaʊn.tənt/ /-t̬ ənt/: someone who keeps or examines the records of
money received, paid, and owed by a company or person – kế toán viên
e.g. I want to become a chief accountant after graduating.
- Financial Accounting (n) a type of accounting that deals with providing financial
reports about a company's profits, debts, cash flow, etc. so that investors, banks, etc. can
measure the company’s performance – kế toán tài chính
- Management (managerial) accounting (n)/: the activity of preparing and using
financial information about a company in order to support management decisions – kế
toán quản trị
e.g. Management accounting is one of the most fundamental aspects of business
administration.
- tax accounting (n): accounting methods to prepare information on a person's income
or a company's earnings for the tax authority, rather than, in the case of companies, for
its executives, shareholders, etc.: tax accounting rules/standards – kế toán thuế
- deceptive (adj) /dɪˈsep.tɪv/: making you believe something that is not true – lừa đảo
e.g. It's deceptive - from the outside the building looks small, but inside it's quite
big.
- dubious (adj) /ˈdjuː.bi.əs/ /ˈduː-/: thought not to be completely true or not able to be
trusted - không rõ ràng
e.g. He has been associated with some dubious characters.
- falsity (n) /ˈfɒl.sə.ti/ /ˈfɑːl.sə.t̬ i/: the state of not being correct – giả mạo
e.g. Events have shown the falsity of such beliefs.
- an economic event: sự kiện kinh tế
- jeopardize (n) /ˈdʒep.ə.daɪz/ /-ɚ-/: to put something such as a plan or system in
danger of being harmed or damaged – gây nguy hại,nguy hiểm
e.g. She knew that by failing her exams she could jeopardize her whole future.
165
- manipulate (v) /məˈnɪp.jʊ.leɪt/: to control something or someone to your advantage,
often unfairly or dishonestly – lợi dụng
e.g. Throughout her career she has very successfully manipulated the media.
- measure (v)/ˈmeʒ.ər/ /-ɚ/: to discover the exact size or amount of something, or to be
of a particular size – đo đạc, tính toán
e.g. This machine measures your heart rate.
- misleading (adj) /ˌmɪsˈliː.dɪŋ/: causing someone to believe something that is not true –
gây hiểu nhầm
e.g. Adverts must not create a misleading impression.
- obligation (n) /ˌɒb.lɪˈɡeɪ.ʃən/ /ˌɑː.blə-/: the fact that you are obliged to do something:
trách nhiệm
e.g. If you have not signed a contract, you are under no obligation to pay them
any money.
- preparation (n) /ˌprep.ərˈeɪ.ʃən/ /-əˈreɪ-/: the things that you do or the time that you
spend preparing for something – việc chuẩn bị
e.g. The teacher didn't seem to have done much preparation for the class.
- tax return (n) a form that some people must fill in to give information about how
much they have earned in a year – kê khai thuế
e.g. Every company has to prepare tax returns to hand in the tax authority.
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UNIT
UNIT22 22 FINANCIAL STATEMENTS
PREVIEW
PREVIEW
Put the words into the correct column.
accounts payable cost of goods sold ledger shareholders’ equity
EBITDA trial balance invoices operating expenses
current assets
Preparation of accounts Profit and loss account Balance sheet
READING
READING
All businesses need to maintain financial records in order to find out if they are making
a profit. These records exist in several forms. In daily business operations recordings of
business transactions are first made in a journal. This journal is sometimes called the
book of original entry. In the journal, bookkeepers record sales, uses of raw materials,
and purchases. Periodically, bookkeepers transfer figures from the journals to ledgers.
This activity is known as posting. The ledger is a book containing all the accounts of a
company. An account is a financial record which contains information about a group of
similar transactions. For example, all sales activities are recorded in one account.
Another account may be a record of all the costs of raw materials.
Nowadays, a more sophisticated system of accounting is needed. The design,
maintenance, and interpretation of the information recorded in the accounts are referred
to as accounting. Accountants use the information in the accounts to construct financial
statements. These statements are analyzed by management and used as a basis for
business decisions such as allocation of financial resources, development of new
products, and expansion of operations. The most important of these financial statements
are the balance sheet and the statement of income and expenses. These statements are
also used for determining income taxes liabilities.
Companies generally include three financial statements in their annual reports. The
profit and loss account (GB) or income statement (US) shows earning and expenditure.
It usually gives figures for total sales or turnover and costs and overhead. The first
figure should obviously be higher than the second, i.e. there should be a profit. Part of
167
the profit goes to the government in taxation; part is usually distributed to shareholders
(stockholders) as dividend, and part is retained by the company.
The balance sheet shows a company’s financial situation on a particular date, generally
the last day of the financial year. It lists the company’s assets, its liabilities and
shareholders’ (stockholders’) funds. A business’s assets include debtors or accounts
receivable as it is assumed that these will be paid. Liabilities include creditors or
accounts payable, as these will have to be paid. Negative items on financial statements,
such as creditors, taxation, and dividends paid, are usually enclosed in brackets.
In accordance with the principle of double-entry bookkeeping (that all transactions are
entered as a credit in one account and as a debit in another), the basic accounting
equation is Assets = Liabilities + Owners’ (or Shareholders’) Equity. This can be
rewritten as Assets – Liabilities = Owners’ Equity or Net Assets. This includes share
capital (money received from the issue of shares), share premium (GB) or paid- in
surplus (US) (any money realized by selling shares at above their nominal value), and
the company’s reserves, including the year’s retained profits. Shareholders’ equity or
net assets are generally less than a company’s market capitalization (the total value of
its shares at any given moment, i.e. the number of shares times their market price),
because net assets do not record items such as good will.
The third financial statement has various names, including the source and application of
funds statement, and the statement of changes in financial position. This shows the flow
of cash in and out of the business between balance sheet dates. Sources of funds include
trading profits, depreciation provisions, sales of assets, borrowing, and the issuing of
shares. Applications of funds include purchases of fixed assets or financial assets,
payment of dividends, repayment of loans, and- in a bad year – trading losses.
COMPREHENSION
1. Why do businesses need financial statements?
2. What are financial statements used for?
3. How profits are usually split?
4. How many financial statements do companies include in their annual report?
5. What does the profit and loss account show?
6. What does the balance sheet show?
7. What do a business’s assets include?
8. What do liabilities include?
9. What do a company’s net assets consist of?
10. Where is flow of cash both in and out of the company recorded?
168
VOCABULARY
VOCABULARYEXERCISES
EXERCISES
1. Underline the correct words from those in italics.
The term “direct costs” and “variable costs” are close synonyms. They both refer to
things like raw materials costs and the wages of manual (= blue collar) workers. But:
• to emphasize costs which increase in proportion to any rise in output, say (1)
direct costs / variable costs
• to emphasize costs which can be identified with one particular product, say (2)
direct costs / variable costs
Similarly, the terms “fixed costs”, “indirect costs” and “operating costs” are close
synonyms. They all refer to things like advertising, rent and the salaries of office staff.
But:
• to emphasize costs which stay the same at all levels of output in the short term,
say (3) fixed costs / operating costs
• to emphasize costs which result from the whole business (rent, utilities, etc.), not
any particular products, say (4) indirect costs / operating costs. A synonym here
is “overhead” (BrE overheads)
• to emphasize costs resulting from the day-to-day activities of the business
(products and processes), say (5) fixed costs / operating costs.
There are many other types of “costs” referred to in finance and accounting. Two of the
most important are:
• (6) capital expenditure / capitalism expenditure – the costs of buying or
upgrading physical assets like buildings and machinery; often referred to in
business as “capex”
• (7) mark-up costs / marginal costs – the costs of increasing output by one more
unit.
2. Now look at the income statement from Barclays Bank, and complete it
using words from the box
intangible assets tax fee commission
premiums consolidated assets intangible assets
169
Barclays PLC
(1) ……………………… income statement – IFRS
For the year ended 31st December
2005 2004
£m £m
Continuing operations
Interest income 17,232 13,880
Interest expense (9,157) (7,047)
Net interest income 8,075 6,833
Fee and commission income 6,430 5,509
Fee and commission expense (725) (662)
Net (2) ………………… and (3) ……………… income 5,705 4,847
Net trading income 2,321 1,487
Net investment income 858 1,027
Principal transactions 3,179 2,514
Net (4) ………………… from insurance contracts 872 1,042
Other income 147 131
Total income 17,978 15,367
Net claims and benefits paid on insurance contracts (645) (1,259)
Total income (5) ………………… of insurance claims 17,333 14,108
Impairment charge and other credit provisions (1,571) (1,093)
Net income 15,762 13,015
Operating expenses excluding amortization
of (6) ……………. (7) …………………. (10,448) (8,514)
Amortization of (8) ……………. (9) …………………. (79) (22)
Operating expenses (10,527) (8,636)
Share of post-tax results of associates and joint ventures 45 56
Profit on disposal of associates and joint ventures --- 45
Profit before tax 5,280 4,580
(10) ……………………….. (1,439) (1,279)
Net profit for the year 3,841 3,301
IFRS = International Financial Reporting Standards
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LANGUAGE
LANGUAGEFOCUS
FOCUS
Talking about figures

In British English, “and” is used after hundred when saying figures; in American
English it is not.
Example: 1,234,567,890
(British English) one billion, two hundred and thirty-four million, five hundred and
sixty-seven thousand, eight hundred and ninety
(American English) one billion, two hundred thirty-four million, five hundred sixty-
seven thousand, eight hundred ninety
Barclay’s consolidated statements are expressed in millions of pounds sterling; to get
the total figure you need to add zeros. For example, their operating expenses were
£10,527,000,000: ten billion, five hundred (and) twenty-seven million pounds. These
large figures can also be said decimals: ten point five two seven billion pounds. See
Unit 15 for more on saying decimal numbers.
PRACTICE
Work in pairs and take turns to test your partner. One person finds one of the following
figures from the income statement of Barclays PLC., and read it out. The other person
says which figure (1-6) it is. Use a calculator if you need to.
1. the largest figure
2. the largest negative figure (in brackets)
3. total income over the two years
4. total net profit over the two years
5. total tax paid over the two years
6. the increase in operating expenses since the previous year
GLOSSARY
GLOSSARY
- the profit and loss account (GB) or income statement (US): A statement
showing the revenues, expenses, and income (the difference between revenues
and expenses) of a corporation over some period of time – bảng báo cáo kết quả
kinh doanh
E.g. In assessing the overall financial condition of a company, you'll want to look at
the income statement and the balance sheet together, as the income statement captures
the company's operating performance and the balance sheet shows its net worth.
171
- Overheads (n) [ˈəʊvəˌhɛdz] (GB) or overhead (US): business expenses, such as
rent, that are not directly attributable to any department or product and can
therefore be assigned only arbitrarily – chi phí gián tiếp, chi phí hoạt động
E.g. We have to cut costs in order to reduce overheads.
- Liabilities (n) [ˌlaɪəˈbɪlɪtɪz]: The financial obligations entered in the balance
sheet of a business enterprise – khoản nợ, vốn vay
E.g. In business, liabilities refer to money a company owes its creditors and any
claims against its assets.
- accounts receivable (n): sum of money owed to customers for goods or services
purchased o credit: khoản phải thu
- accounts payable (US) or creditors (GB): sum of money owed to suppliers for
purchases made on credit: khoản phải trả
- double-entry bookkeeping: every transaction is recorded in one account as a
sum received and other as a sum paid: ghi sổ kép
- equation: statement that two mathematical expression are equal: phương trình,
công thức
- share premium (GB) or paid-n surplus (US): chênh lệch cổ phần
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UNIT
UNIT 23 23 BALANCE SHEET
PREVIEW
PREVIEW
Discussion
1. What information does a balance sheet
provide?
2. What principles are applied in
preparing a balance sheet?
3. For whom is the information of the
balance sheet useful?
READING
READING
Introduction to Balance Sheet
The accounting balance sheet is one of the major financial statements used by
accountants and business owners. (The other major financial statements are the income
statement, statement of cash flows, and statement of stockholders' equity) The balance
sheet is also referred to as the statement of financial position.
The balance sheet presents a company's financial position at the end of a specified date.
Some describe the balance sheet as a "snapshot" of the company's financial position at a
point (a moment or an instant) in time. For example, the amounts reported on a balance
sheet dated December 31, 2012 reflect that instant when all the transactions through
December 31 have been recorded.
Because the balance sheet informs the reader of a company's financial position as of one
moment in time, it allows someone—like a creditor—to see what a company owns as
well as what it owes to other parties as of the date indicated in the heading. This is
valuable information to the banker who wants to determine whether or not a company
qualifies for additional credit or loans. Others who would be interested in the balance
sheet include current investors, potential investors, company management, suppliers,
some customers, competitors, government agencies, and labor unions.
We will begin our explanation of the accounting balance sheet with its major
components, elements, or major categories:
Assets
Liabilities
Owner's (Stockholders') Equity
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Assets
Assets are things that the company owns. They are the resources of the company that
have been acquired through transactions and have future economic value that can be
measured and expressed in dollars. Assets also include costs paid in advance that have
not yet expired, such as prepaid advertising, prepaid insurance, prepaid legal fees, and
prepaid rent. (For a discussion of prepaid expenses go to Explanation of Adjusting
Entries.)
Examples of asset accounts that are reported on a company's balance sheet include:
cash; petty cash; temporary investments; accounts receivable; inventory; supplies;
prepaid insurance; land; land improvements; buildings; equipment; goodwill; bond issue
costs, etc.
Liabilities
Liabilities are obligations of the company; they are amounts owed to creditors for a past
transaction and they usually have the word "payable" in their account title. Along with
owner's equity, liabilities can be thought of as a source of the company's assets. They
can also be thought of as a claim against a company's assets. For example, a company's
balance sheet reports assets of $100,000 and Accounts Payable of $40,000 and owner's
equity of $60,000. The source of the company's assets are creditors/suppliers for
$40,000 and the owners for $60,000. The creditors/suppliers have a claim against the
company's assets and the owner can claim what remains after the Accounts Payable
have been paid.
Liabilities also include amounts received in advance for future services. Since the
amount received (recorded as the asset Cash) has not yet been earned, the company
defers the reporting of revenues and instead reports a liability such as Unearned
Revenues or Customer Deposits.
Examples of liability accounts reported on a company's balance sheet include:
notes payable; accounts payable; salaries payable; wages payable; interest payable;
other accrued expenses payable; income taxes payable; customer deposits; warranty
liability; lawsuits payable; unearned revenues; bonds payable, etc.
Owner's Equity—along with liabilities—can be thought of as a source of the company's
assets. Owner's equity is sometimes referred to as the book value of the company,
because owner's equity is equal to the reported asset amounts minus the reported
liability amounts.
174
Owner's equity
Owner's equity may also be referred to as the residual of assets minus liabilities. These
references make sense if you think of the basic accounting equation:
Assets = Liabilities + Owner's Equity
and just rearrange the terms:
Owner's Equity = Assets - Liabilities
"Owner's Equity" are the words used on the balance sheet when the company is a sole
proprietorship. If the company is a corporation, the words Stockholders' Equity are used
instead of Owner's Equity. Examples of stockholders' equity accounts include:
• Common Stock
175
• Preferred Stock
• Paid-in Capital in Excess of Par Value
• Paid-in Capital from Treasury Stock
• Retained Earnings
• Etc.
COMPREHENSION
QUESTIONS
1. What does the balance sheet present?
2. For what purpose does a banker need information of the balance sheet?
3. Who else are interested in the balance sheet?
4. What are three major categories listed in the balance sheet?
5. What are assets of the company?
6. Give examples of asset accounts that are reported on a company's balance sheet.
7. What are liabilities of the company?
8. Give examples of liabilities that are reported on a company's balance sheet.
9. What is owner’s or stockholders’ equity?
10. Give examples of stockholders' equity accounts
VOCABULARY
VOCABULARYEXERCISES
EXERCISES
1. Another name for the balance sheet is ………………
A. Statement Of Operations B. Statement Of Financial Position
2. The balance sheet heading will specify a ………………….
A. Period Of Time B. Point In Time
3. Which of the following is a category or element of the balance sheet?
A. Expenses B. Gains C. Liabilities D. Losses
4.Which of the following is an asset account?
A. Accounts Payable B. Prepaid Insurance C. Unearned Revenue
5. What is the normal balance for an asset account?
A. Debit B. Credit
6. What is the normal balance for liability accounts?
A. Debit B. Credit
7. What is the normal balance for stockholders' equity and owner's equity accounts?
A. Debit B. Credit
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8. Client Jay pays ABC Co. $1,000 in December for ABC to perform services for Jay in
45 days. ABC uses the accrual basis of accounting. In December ABC will debit Cash
for $1,000. What will be the other account involved in the December accounting entry
prepared by ABC (and what type of account is it)?
A. Accounts Receivable (asset) B. Prepaid Services (asset)
C. Service Revenues (revenue) D. Unearned Revenues (liability)
9. ABC Co. performed services for Client Kay in December and billed Kay $4,000 with
terms of net 30 days. ABC follows the accrual basis of accounting. In January ABC
received the $4,000 from Kay. In January ABC will debit Cash, since cash was
received. What account should ABC credit in the January entry?
A. Accounts Receivable B. Service Revenue C. Owner's Equity
10. ABC Co. follows the accrual basis of accounting and performs a service on account
(on credit) in December. The service was billed at the agreed upon amount of $3,500.
ABC Co. debited Accounts Receivable for $3,500 and credited Service Revenue for
$3,500. The effect of this entry on the balance sheet of ABC is to increase assets by
$3,500 and to
A. Decrease Assets By $3,500
B. Increase Owner's (Stockholders') Equity By $3,500
2. Fill in the missing words
1 On a balance sheet, “assets” are what you ………… and “liabilities” are what you
……..
2 The loss in value of a tangible asset over time is called “……………….”. This loss is
……………… in accounts over several years. The loss in value of an intangible asset is
called “………………….”
3 The term “debtor” is now often replaced with “……………………..”. Similarly,
“creditor” is often replaced with “ …………………………”
4 The total value of raw materials + work-in-progress + unsold stock is called
“ ……………………….”.
5 Expenses that have been incurred but are not yet paid are called “ ………………….”
6 The extent to which a firm relies on debt financing rather than equity financing is
called its “…………………”
LANGUAGE
LANGUAGE FOCUS
FOCUS
Study some accounts titles on the balance sheet: accounts payable; accounts receivable
177
In which: payable = pay (v) + able (suffix)
Receivable = receive (v) + able (suffix)
Common suffixes — verb to adjective
VERB – VERB – VERB –
SUFFIX
ADJECTIVE ADJECTIVE ADJECTIVE
-ABLE able, can do agree – agreeable expand – expandable laugh – laughable

pass – passable remark – remarkable pay – payable
-IBLE able, can do access – accessible force – forcible sense – sensible

flex – flexible permit – permissible force – forcible
-ANT performing please – pleasant rely – reliant ignore – ignorant

agent resist – resistant vacate – vacant comply – compliant
-ENT performing excel – excellent depend – dependent confide – confident

agent urge – urgent differ – different equal – equivalent
-IVE causing effect attract – attractive create – creative select – selective

posses – possessive prevent – preventive destruct – destructive
-ING causing effect amuse – amusing excite – exciting confuse – confusing

relax –relaxing surprise –surprising amaze – amusing
-ED receiving effect amuse – amused excite – excited confuse – confused

relax – relaxed surprise – surprised overwhelm –
overwhelmed
-EN receiving effect freeze – frozen lighten – lightened darken – darkened

braze – brazen shorten – shortened widen – widened
PRACTICE
Complete the following sentences with suitable words
1. They create ideas. They are ……………. or they have ……………. minds.
2. She is expecting a baby. She is an …………… mother and we congratulated the
…………….. mother.
3. They don’t permit smoking here. Smoking is …………..
4. They urge us to come immediately. This …………….. matter needs our attention.
5. Today’s news interests me. We have ……………….. news. We are ……………
readers.
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UNIT
UNIT 24 24 INCOME STATEMENT
PREVIEW
PREVIEW
Match the words or phrases in column A with synonyms or their definitions in
column B
A B
1 revenue A indirect costs including salaries of sales and office
2 cost of goods sold staff, marketing costs, utility bills, etc.
B earnings before interest, tax, depreciation and
3 operating expenses amortization
4 non-operating income C direct costs including manufacturing costs, salaries of
manual workers, etc.
5 EBITDA
D money paid to the bank for loans or received from the
6 earnings bank for cash balances
7 depreciation E profits from investments in other companies
F profit
8 interest
G income or turnover
9 dividends H the loss in value of an intangible asset
10 amortization I money paid to shareholders
J the loss in value of a tangible asset
READING
READING
Income statement (= the profit and loss account or just the P&L’) summarizes
business activity over a period of time. It begins with total sales (= revenue) generated
during a month, quarter or year. Subsequent lines then deduct (= subtract) all of the
costs related to producing that revenue.
Study the simplified financial statements for an imaginary retail store. All figures are in
€000s. The convention in accounting is that a negative figure is shown by a bracket. To
understand the figures, work from the right:
• the right-hand column shows totals for each major category
• the central column shows information that is used in producing the figures on the
right
• the left-hand column shows details of the calculations in the central column.
The Income statement contains uniform categories of sales and expenses:
Net Sales
Cost of Goods Sold
Selling and Administrative Expenses
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Net sales
Net sales are the total sales during the time period being analyzed minus any
allowances for returns and trade discounts. The amount allowed for returns will vary
considerably between different types of businesses. A small retail store may have a few
returns compared to a manufacturing operation. It is commonly figured as a small
percentage (1 percent or 2 percent) of total sales. An amount allowed for trade discounts
recognizes the discrepancy between a standard or “catalog” price and the actual price
paid by customers. An allowance for trade discounts decreases total sales to reflect
prices actually paid.
Cost of Goods Sold
Cost of goods sold is also called the cost of sales. For retailers and whole-salers it
is the total price paid for the products sold during the accounting period. It is just the
price of the goods. It does not include selling or administrative expenses (these expenses
are listed elsewhere on the income statement).
For service and professional companies, there will be no cost of goods sold.
These types of companies receive income from fees, commissions, and royalties and do
not have inventories of goods. The costs to generate services will be included in the
selling and administrative expense and the general expense sections of the income
statement.
For retailers and whole-salers, the cost of goods sold may be computed several
different ways using either a direct or indirect method. This means it will be an actual
accounting of the prices of goods sold based on inventory (direct) or an estimate by
deduction (indirect), such as deflating sales. Most small retail and wholesale businesses
will compute the cost of goods sold directly by taking the value of inventory at the
beginning of the accounting period (original inventory), adding the value of goods
purchased during the accounting period (new inventory) and then subtracting the value
of the inventory on hand at the end of the accounting period (remaining inventory).
These calculations will yield the amount of inventory consumed during the accounting
period.
Selling and Administrative Expenses
Two types of expenses are recorded on an Income statement for all types of
companies: selling expenses and general and administrative expenses.
• Selling expenses are expenses incurred directly and indirectly in making sales.
They include salespeople’s salaries, sales office costs, commissions, advertising,
warehousing and shipping. In general, selling expenses are the expenses of order taking
and order fulfilling.
• General and administrative expenses are operating expenses not directly
associated with the sale of goods.
They include non-sales personnel salaries, supplies, and other operating costs necessary
to the overall administration of the business. General and administrative expenses are
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commonly considered “overhead” expenses, and include rent, utilities, telephone, travel
and supplies.
Income Statement for the year ended December 31, 20XX

Revenues
Gross sales 640
Less: Sales returns 6
Less: Sales discounts 4
(10)
Net sales 630
Costs of goods sold
Purchases 290
Salaries of manual workers 30
Transport costs 30
Cost of goods sold (350)
Gross profit 280
Operating expenses
Selling expenses
Salaries for sales staff 82
Advertising 18
Total selling expenses 100
General expenses
Salaries for administrative staff 52
Insurance 6
Rent 18
Light, heat and power 10
Office supplies 2
Miscellaneous 2
Total general expenses 90
Total operating expenses (190)
Operating profit 90
Non-operating income 5
EBITDA 95
Depreciation (10)
EBIT 85
Interest paid on bank loans (6)
Net income before taxes 79
Less: Income tax (19)
Net income after taxes 60
Dividends (13)
Retained profit €47
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COMPREHENSION
QUESTIONS
1. What does the income statement summarize?
2. What does the right-hand column show?
3. What does the central column shows?
4. What does the left-hand column shows?
5. How are net sales computed?
6. What is “cost of goods sold” for retailers and wholesalers?
7. How is cost of goods sold of a retailer computed?
8. What do selling expenses include?
9. What do general and administrative expenses include?
10. What are financial ratios used based on the income statement?
VOCABULARY
VOCABULARYEXERCISES
EXERCISES
1. Which of the following names is NOT associated with the income statement?
A. P & L B. statement of financial position C. statement of operations
2. The income statement heading will specify which of the following?
A. a point in time B. a period of time
3. Amounts earned by a company in its main operating activities are ………….
A. revenues B. gains
4. A company disposes of equipment that it no longer uses in its business. The amount
received by the company is more than the amount the asset is carried at in the
accounting records. The company will report a(n) …………….
A. expense B. gain C. loss D. revenue
5. On December 1 a company borrowed $100,000 at 12% per year. The interest will be
paid quarterly, with the first payment due on March 1. What should the company report
on its income statement for December?
A. nothing B. interest expense of $1,000
6. Is a retailer's Interest Expense an operating expense or a non-operating expense?
A. operating expense B. non-operating expense
7. Net Sales minus the Cost of Goods Sold equals ………..
A. gross profit B. income from operations C. net income
8. The combination of Selling Expenses and Administrative Expenses is referred to as
…….
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A. general expenses B. Operating Expenses C. total expenses
9. Gross Profit minus Operating Expenses is best defined as ………….
A. net income B. net sales C. operating income
10. When a company changes its book depreciation from an accelerated method to the
straight-line method, it is considered to be a(n) ………….
A. discontinued operation B. extraordinary item C. change in accounting
principle
2. Investors and many people working in finance need to understand the basic
terms in financial statements. Decide which of the alternatives (a – c) each
definition describes.
1. A charge for arranging a transaction (e.g. buying or selling securities)
a. commission b. fee c. tax
2. A charge for a service performed by a bank.
a. commission b. fee c. tax
3. Payments for an insurance policy.
a. commissions b. premiums c. tariffs
4. A reduction in the value of an asset, charged against profits
a. amortization b. loss c. waste
5. Adjective meaning after all deductions have been made
a. gross b. net c. zero
6. Adjective meaning for a whole group of companies
a. consolidated b. corporate c. mutual
7. Adjective meaning one year or less in financial statements
a. annual b. long-term c. short-term
8. Part-ownerships (less than 50%) of other companies
a. conglomeration b. liabilities c. minority interests
9. Things of value that cannot by physically touched, such as reputation (goodwill),
brand names and trademarks
a. intangible assets b. liabilities c. tangible assets
10. The net worth of a company – the amount by which assets exceed liabilities
a. dividends b. profit c. shareholders’ equity
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LANGUAGE
LANGUAGEFOCUS
FOCUS
Organizing information
The reading text describing the income statement is written in a method that organizes
information. We refer to this method as classification. Just as the account groups
together similar financial transactions, and the income statement groups together similar
accounts. For example, the income statement classified total expenses of the company
into two main groups: “costs of goods sold” and “operating expenses” which may be
further divided into “selling expenses” and “general and administrative expenses”. In
addition, the income statement also contrasts the differences between expenses and
revenue. To provide information about revenue, gross sales and net sales should be
compared. This method of organizing information is called comparison and contrast.
PRACTICE
Write a paragraph in which you use classification method and method of comparison
and contrast to organize information about revenue and expenses, as well as to define
profit or loss illustrated in the income statement of a sample company on page 181.
GLOSSARY
GLOSSARY
- Summarize (v) [ˈsʌməˌraɪz]: be a summary of/ give a summary of – tổng hợp
E.g. "The abstract summarizes the main ideas in the paper"
- Generate (v) [ˈdʒɛnəˌreɪt]: to produce or bring into being; create – tạo ra
E.g. The government’s revenue is mainly generated from the collection of different
types of taxes.
- Net sales (n): gross sales reduced by customer discounts, returns, freight out,
and allowances – doanh thu thuần
- Minus (pre) [ˈmaɪnəs] - Reduced by the subtraction of; less – trừ đi
E.g. Ten minus four is six.
- allowances (n) [əˈlaʊəns] - A price reduction, especially one granted in
exchange for used merchandise – giảm giá, chiết khấu
E.g. The dealer gave us an allowance on our old car.
- Returns(n) [rɪˈtɜːn]: the yield, revenue, or profit accruing from an investment,
transaction, or venture – lợi nhuận
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- trade discounts (n) - The amount by which a company reduces its price per unit
when selling units (usually in large quantities) to a reseller – chiết khấu thương
mại
E.g. Trade discounts exist to encourage large orders, which, while they may reduce
profit margin, increase revenue and therefore raw profit
- the accounting period (n) - The period of time reflected in financial statements
– kỳ kế toán
E.g. Usually, the accounting period is either the calendar year or a quarter.
- administrative expenses (n) - An expense that a company is required to spend
but that is difficult to associate with a specific item – chi phí quản lý
- commissions (n) [kəˈmɪʃən] - a sum or percentage allowed to agents, sales
representatives, etc., for their services – tiền hoa hồng
E.g. He got a commission for bringing in new clients.
- Royalties(n) [ˈrɔɪəltɪ] - payment to the holder of a patent or copyright or resource
for the right to use their property – phí bản quyền, …
E.g. "he received royalties on his book"
185
UNIT
UNIT25 25 FINANCIAL ANALYSIS
PREVIEW
PREVIEW
Discussion
➢ As a manager, you want to reward employees based on their performance. How

do you know how well they have done? How can you determine what
departments or divisions have performed well?
➢ As a manager of a corporation how do you know when existing capacity will be
exceeded and enlarged capacity will be needed?
➢ As a lender, how do decide the borrower will be able to pay back as promised?
➢ As an investor, how do you predict how well the securities of one company will
perform relative to that of another? How can you tell whether one security is
riskier than another?
READING
READING
1. Financial analysis
Financial analysis is the selection, evaluation, and interpretation of financial data,
along with other pertinent information, to assist in investment and financial decision-
making. Financial analysis may be used internally to evaluate issues such as employee
performance, the efficiency of operations, and credit policies, and externally to evaluate
potential investments and the credit-worthiness of borrowers, among other things.
The analyst draws the financial data needed in financial analysis from many
sources. The primary source is the data provided by the company itself in its annual
reports and required disclosures. The annual report comprises the income statement, the
186
balance sheet, and the statement of cash flows, as well as footnotes to these statements.
Certain businesses are required by securities laws to disclose additional information.
Besides information that companies are required to disclose through financial
statements, other information is readily available for financial analysis. For example,
information such as the market prices of securities of publicly-traded corporations can
be found in the financial press and the electronic media daily. Similarly, information on
stock price indices for industries and for the market as a whole is available in the
financial press.
Another source of information is economic data, such as the Gross Domestic
Product and Consumer Price Index, which may be useful in assessing the recent
performance or future prospects of a company or industry. Suppose you are evaluating a
company that owns a chain of retail outlets. What information do you need to judge the
company’s performance and financial condition? You need financial data, but it doesn’t
tell the whole story. You also need information on consumer spending, producer prices,
consumer prices, and the competition. This is economic data that is readily available
from government and private sources.
Besides financial statement data, market data, and economic data, in financial
analysis you also need to examine events that may help explain the company’s present
condition and may have a bearing on its future prospects. For example, did the company
recently incur some extraordinary losses? Is the company developing a new product? Or
acquiring another company? Is the company regulated? Current events can provide
information that may be incorporated in financial analysis.
The financial analyst must select the pertinent information, analyze it, and
interpret the analysis, enabling judgments on the current and future financial condition
and operating performance of the company.
2. Classification of financial ratios
In financial analysis, broad categories of ratios are used. A ratio is a
mathematical relation between one quantity and another. Suppose you have 200 apples
and 100 oranges. The ratio of apples to oranges is 200/100, which we can more
conveniently express as 2:1 or 2. A financial ratio is a comparison between one bit of
financial information and another. Consider the ratio of current assets to current
liabilities, which we refer to as the current ratio. This ratio is a comparison between
assets that can be readily turned into cash – current assets – and the obligations that are
due in the near future – current liabilities. A current ratio of 2:1 or 2 means that we have
twice as much in current assets as we need to satisfy obligations due in the near future.
187
Ratios can be classified according to the way they are constructed and their general
characteristics. By construction, ratios can be classified as a coverage ratio, a return
ratio, a turnover ratio, or a component percentage.
• A coverage ratio is a measure of a company’s ability to satisfy (meet) particular
obligations.
• A return ratio is a measure of the net benefit, relative to the resources expended
• A turnover ratio is a measure of the gross benefit, relative to the resources
expended.
• A component percentage is the ratio of a component of an item to the item
When we assess a company’s operating performance, we want to know if it is applying
its assets in an efficient and profitable manner. When we assess a company’s financial
condition, we want to know if it is able to meet its financial obligations.
There are six aspects of operating performance and financial condition we can evaluate
from financial ratios:
• A liquidity ratio provides information on a company’s ability to meet its short-
term, immediate obligations.
• A profitability ratio provides information on the amount of income from each
dollar of sales.
• An activity ratio relates information on a company’s ability to manage its
resources (that is, its assets) efficiently.
• A financial leverage ratio provides information on the degree of a company’s
fixed financing obligations and its ability to satisfy these financing obligations.
• A shareholder ratio describes the company’s financial condition in terms of
amounts per share of stock.
• A return on investment ratio provides information on the amount of profit,
relative to the assets employed to produce that profit.
(Unit 38 in PART II of this book will provide you more thorough understanding
about these ratios and their meaning)
COMPREHENSION
QUESTIONS
1. What is financial analysis?
2. For what purpose is financial analysis used internally?
3. For what purpose is financial analysis used externally?
4. How many sources of data are available for financial analysis?
188
5. Who provides financial data about the company’s operating performance and
financial position?
6. Where can analysts find market data and economic data?
7. What is a ratio?
8. What is a financial ratio?
9. By construction, what can financial ratios be classified into?
10. What are six aspects of operating performance and financial condition we can
evaluate from financial ratios?
VOCABULARY
VOCABULARYEXERCISES
EXERCISES
1. Match the definitions 1-4 with the examples of financial ratios a) – f) below.
1 Liquidity ratios: these measure ability to turn assets into cash to pay short-term debts.
2 Profitability ratios: these measure ability to generate profits.
3 Leverage (Debt) ratios: these measure the degree to which a company relies on
borrowed funds.
4 Activity ratios: these measure the effectiveness of the use of resources from an
operational point of view.
a) Debt to owners’ equity = Total liabilities / Total owners’ equity

b) Net profit margin = Net income before taxes / Net sales
c) Working capital = Current assets – current liabilities
d) Return on equity = Net income after tax / Total owners’ equity
Cost of goods sold
e) Inventory turnover =
Average inventory (mid point between inventory at
beginning and ending of accounting period)
f) Earnings per share = Net income after taxes / Number of shares issued
1. Which of the following usually is least important as a measure of short-term
liquidity?
A. Quick ratio B. Debt ratio
C. Current ratio D. Cash flows from operating activities
2. In each of the past five years, the net sales of Plaza Co. have increased at about half
the rate of inflation, but net income has increased at approximately twice the rate of
inflation. During this period, the company’s total assets, liabilities, and equity have
remained almost unchanged; dividends are approximately equal to net income. These
relationships suggest (indicate all correct answers):
189
A. Management is successfully controlling costs and expenses.
B. The company is selling more merchandise every year.
C. The annual return on assets has been increasing.
D. Financing activities are likely to result in a net use of cash.
3. From the viewpoint of a stockholder, which of the following relationships do you
consider of least significance?
A. The return on assets consistently is higher than the industry average.
B. The return on equity has increased in each of the past five years.
C. Net income is greater than the amount of working capital
D. The return on assets is greater than the rate of interest being paid to creditors
4. The following data available from the annual report of Fixell, Inc.:
Current assets …………. $ 480,000 Current liabilities …………. $ 300,000

Average total assets … 2,000,000 Operating income ……….. 240,000
Average total equity … 800,000 Net income ………………….. 80,000
Which of the following statements are correct?

A. The return on equity exceeds the return on assets.
B. The current ratio is .625 to 1.
C. Working capital is $1,200,000.
D. None of the above answers is correct.
5. Hart Corporation’s net income was $400,000 in 2006 and $160,000 in 2007. What
percentage increase in net income must Hart achieve in 2008 to offset the decline in
profits in 2007?
A. 60% B. 150% C. 600% D. 67%
6. If a company’s current ratio declined in a year during which its quick ratio improved,
which of the following is the most likely explanation?
A. Inventory is increasing B. Inventory is declining
C. Receivables are being collected more rapidly than in the past.
D. Receivables are being collected more slowly than in the past.
7. In financial statement analysis, the most difficult of the following items to predict is
whether:
A. The company will be liquid in six months.
B. The company’s market share is increasing or declining.
C. Profits have increased since the previous year.
D. The market price of capital stock will rise or fall over the next two months.
190
LANGUAGE
LANGUAGE FOCUS
FOCUS
Study the following sentence from the text:
“Financial analysis is the selection, evaluation, and interpretation of financial
data, along with other pertinent information, to assist in investment and financial
decision-making.”
The nouns “selection, evaluation, interpretation, information and investment” are
formed by “verbs + suffixes”
Common Suffixes — verbs to nouns
VERB – VERB –
SUFFIX VERB – NOUN
NOUN NOUN
-AL condition, quality arrive –arrival deny –denial refuse – refusal

approve – propose –proposal dismiss –
approval dismissal
-ANCE / ENCE action, state, attend – prefer – preference refer – reference

condition or quality attendance insure – insurance exist –existence
accept –
acceptance
-ATION / TION action or educate – eliminate – combine –

resulting state education elimination combination
inform – declare – immigrate –
information declaration immigration
-SION action or resulting state confuse – divide –division impress –

confusion revise – revision impression
decide – profess–
decision profession
-URE action or resulting state depart – fail – failure press – pressure

departure enclose – enclosure legislate –
erase – erasure legislature
-MENT state, act, condition agree– employ – punish –

agreement employment punishment
pay – payment argue – argument govern –
government
-AGE action, state, process break – pack – package bag– baggage

breakage pass – passage marry – marriage
191
post – postage
-ING action, state, process bless – blessing write – writing end –ending
land – landing feed – feeding seat – seating
-ERY location, collective, cream – bake –bakery brew – brewery

behavior condition creamery
PRACTICE
Complete the following passage with the noun forms of the verbs.
International travel requires passing through airports and that can be
challenging. Making a (1) -reserve- is mostly done online nowadays. The (2) -seat- is
first come, first served, so it is important to plan early. On the day of your trip, you
should plan an early (3) -arrive- to the airport. You should be there at least two hours
before the (4) -depart- of an international flight. The (5) -process- checking in can be
very long.
An agent will ask you to show your (6) -identify-. A security agent will ask you a few
(7) -quest- about the contents of your baggage. Then they will permit your (8) -enter-
into the secure area of the airport. Another agent will announce the (9) -board- of the
aircraft. At that time, you will walk down a long (10) -pass- to the door of the airplane
GLOSSARY
GLOSSARY
- Financial analysis (n): Analysis of a company' financial statements, often by
financial analysts – phân tích tài chính
E.g. Balance sheets are important to financial analysis as they provide a ready-made
means of investigating performance
- Evaluate (v) - To examine and judge carefully; appraise – đánh giá
- Evaluation (n) [ɪˌvæl juˈeɪ ʃən] - an act or instance of evaluating or appraising
– sự đánh giá
E.g. Evaluation is standard practice for the training course.
- Interpretation (n) [ɪnˌtɜːprɪˈteɪʃən] - the act or process of interpreting or
explaining; elucidation – thuyết minh
E.g. The Opposition put a different interpretation on the figures.
- Disclose (v) [dɪsˈkləʊz] - to make (information) known
- Disclosure (n) [dɪsˈkləʊʒə] - The act or process of revealing or uncovering
- Comprise (v) [kəmˈpraɪz] - To consist of; be composed of
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E.g. The advisory board comprises six members.
- Prospects (n) [ˈprɒspɛkt] - a probability or chance for future success, esp as
based on present work or aptitude
E.g. “a good job with prospects”
- Pertinent (adj) [ˈpɜːtɪnənt] - pertaining directly and significantly to the matter at
hand; relevant
E.g. “pertinent details”
- Ratio (n) [ˈreɪʃɪˌəʊ] - A relationship between two quantities, normally expressed
as the quotient of one divided by the other
E.g. Profit margin is the ratio gross profits divided by net sales.
- Liquidity (n) [lɪˈkwɪdɪtɪ] - debt paying ability
E.g. - Measured with liquidity ratios like current ratio, quick ratio, and cash ratio.
- Profitability (n) - the quality of affording gain or benefit or profit
- Leverage (n) [ˈliːvərɪdʒ -vrɪdʒ] - The use of credit or borrowed funds to improve
one's speculative capacity and increase the rate of return from an investment, as
in buying securities on margin.
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UNIT
UNIT26 26 AUDITING
PREVIEW
PREVIEW
Discussion
1. What are the names of these companies?
2. Which industry are they in?
READING
READING
Auditing is an accounting function that involves the

review and evaluation of financial records. It is done by
someone other than the person who entered the
transactions in the records. Not so many years ago, the
presence of an auditor suggested that a company was
having financial difficulties of that irregularities had been
discovered in the records. Currently, however, outside
audits are a normal and regular part of business practice.
In addition, many corporations, especially the larger ones with complex operations,
maintain a continuous internal audit by their own accounting departments.
Even those companies that do not conduct an internal audit need to maintain a system of
internal control. Most good systems will provide accounting controls against errors, as
well as a division of duties to reduce the possibility of misappropriations.
Ideally, a business should use as many internal controls as are consistent with efficient
operation. Many companies employ their own accountants to maintain an internal audit.
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They continuously review operating procedures and financial records and report to
management on the current state of the company’s fiscal affairs. These accounts also
report on any deviations from standard operating procedures; that is, the company’s
established methods for carrying on its operating and recording functions. The internal
auditors also make suggestions to management for improvements in the standard
operating procedures.
Finally, they check the accounting records in regard to completeness and accuracy,
making sure that all irregularities are corrected. Overall, the internal auditors seek to
ensure that the various departments of the company follow the policies and procedures
established by management.
The emphasis placed on different parts of the internal auditor’s report varies from
company to company. In some organizations, the auditor’s major or even sole function
is to report on the completeness and accuracy of the books of account, as the financial
records are known collectively. In more progressive companies, greater attention may
be paid to the auditor’s suggestions.
A weakness exists, however, in internal auditing. If a report is unfavorable, it may not

be shown to the person in management who can correct the problem. As a result,
management receives the false impression that things are running smoothly because
they do not know about the problems that the internal audit has uncovered. To make
effective use of an internal auditing function, management must ensure that reports are
received at all levels with an absolutely objective attitude.
COMPREHENSION
QUESTIONS
1. How is auditing done?

2. What kind of system for checking on operating and recording jobs is maintained
by many organizations?
3. What do accountants do to maintain an internal audit?
4. What is the aim of internal auditors?
5. What different emphases can be placed on an internal auditor’s report?
6. What weakness exists in the internal auditing system?
7. What happens if management receives the incorrect information?
8. How can management overcome this weakness?
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VOCABULARY
EXERCISES
1. Choose the best answer
1. In general, the term “auditors” include
a. CPAs
b. Government auditors
c. Internal auditors
d. All of the above
2. Auditing is
a. The accumulation and evaluation of evidence about information to determine
and report on the degree of correspondence between the information and
established criteria.
b. An examined and verified account.
c. One that audits accounts.
d. None of the above
3. Which order shows the audit process?
a. Accumulating and evaluating evidence -> Reporting -> Information and
Established criteria -> Competent, independent person
b. Information and Established criteria -> Accumulating and evaluating
evidence -> Competent, independent person -> Reporting
c. Competent, independent person -> Accumulating and evaluating evidence ->
Information and Established criteria -> Reporting
d. Reporting -> Competent, independent person -> Information and Established
criteria -> Accumulating and evaluating evidence
4. Auditors perform
a. Audits of quantifiable information
b. Audits of subjective information
c. Audits of quantifiable and subjective information
5. Which one is considered quantifiable information?
a. A company’s financial statement
b. Effectiveness of computer operations
c. Efficiency of manufacturing options
d. All of the above
6. Evidence
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a. Is the information used by auditors.
b. Determines whether the information being audited is stated in accordance
with the established criteria.
c. Has many forms.
d. All of the above
7. To satisfy the purpose of the audit, it is essential to obtain
a. An adequate quality of evidence
b. An adequate volume of evidence
c. A & B
8. An auditor must
a. Be qualified to understand the criteria used.
b. Be competent to know the types and amount of evidence.
c. Have an independent mental attitude.
d. All of the above
9. Why are auditing and accounting confused?
a. Auditing is usually related to accounting information.
b. Auditors have considerable expertise in accounting matters.
c. Many individuals performing audits is called CPA.
d. All of the above
10. What one is a type of audits?
a. Financial statement audits
b. Operational audits
c. Compliance audits
d. All of the above
11. An audit of financial statement
a. Is a review of any part of an organization’s operating procedures and methods
for the purpose of evaluating efficiency and effectiveness.
b. Determines whether the auditee is following specific procedures, rules or
regulations set down by some higher authority.
c. Is conducted to determine whether the overall financial statements are stated
in accordance with specified criteria.
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12. An operational audit
13. A compliance audit
2. Complete the following text with suitable words in the box
transactions complying operational audits

controls information accurately resources
An audit can usually be classified into one of the following categories:

Operational Audit
• Examines an operating process to determine if (1)………… are being used in the
most efficient and effective way to meet the unit's mission and objectives
• Internal control reviews are a major portion of an (2) ………… audit
• Activities such as cash handling, procurement, equipment inventories, and
human resources services are generally subject to this type of audit
Financial Audit
• Reviews accounting and financial (3) …………. to determine if commitments,
authorization, receipt, and disbursement of funds are properly and (4) ……….
recorded and reported
• Determines if there are sufficient (5) ………… over cash and other assets and if
adequate process controls exist for the acquisition and use of resources
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Compliance Audit
• Determines if departments are (6) ………… with applicable Federal or State
laws, NCAA and OSHA regulations, and University policies and procedures
• Recommendations from these audits usually require improvements in processes
and controls used to ensure compliance with regulations
Information Systems Audit
• Reviews the internal control environment of automated (7) …………. processing
systems and how people use these systems
• Evaluates system input and output processing controls, backup and recovery
plans, system security, and computer facilities
Investigative Audit
• May result from findings during a routine audit or from information received
from personnel
• (8) ………… are specialized and tailored to the circumstances and can include
investigation of alleged violations of laws, regulations, or University policy.
LANGUAGE
LANGUAGEFOCUS
FOCUS
Common Abbreviations
In business English, especially in Accounting and Auditing, many common
abbreviations are used such as:
- CPA stands for Certified Public Accountant
- NCAA stands for National Collegiate Athletic Association
PRACTICE
What do these following abbreviations stand for?
GAAS IAG IAPC IFAC VACO AASC AISC AFC
GLOSSARY
GLOSSARY
- audit (n) [ˈɔːdɪt]: a professional, independent examination of a company's
financial statements and accounting documents following generally accepted
accounting principles (GAAP): kiểm toán
E.g. Audits are an essential part of a company's efficiency.
- audit (v): To examine, verify, or correct the financial accounts of
E.g. Independent accountants audit the company annually.
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- auditor (n): a person who officially examines the business and financial records
of a company: kiểm toán viên
- internal audit: an auditor who is an employee of the company whose records are
audited and who provides information to the management and board of directors
- kiểm toán nội bộ
- affairs (n) [əˈfɛə]: a thing to be done or attended to; matter; business - vấn đề,
công việc
E.g. This affair must be cleared up
- record (v): to keep a permanent account of facts or events by writing them
down, filming them, storing them in a computer, etc.- ghi chép
- record (n): a written account of sth that is kept so that it can be looked at and
used in the future: sổ sách, chứng từ kế toán
- misappropriate (v) [ˌmɪsəˈprəʊprɪˌeɪt]: to apply wrongfully or dishonestly, as
funds entrusted to one's care
- misappropriation (n) - the fraudulent appropriation of funds or property
entrusted to your care but actually owned by someone else
E.g. He was accused of misappropriation of bank funds.
- procedure (n): the official or formal order or way of doing sth, especially in
business, law or politics: trình tự, thủ tục
- review (v): to carefully examine or consider sth again, especially so that you can
decide if it is necessary to make changes: rà soát
- deviation (n): the act of moving away from what is normal or acceptable, a
difference from what is expected or acceptable: sai lệch
200
CHAPTER 6
INTERNATIONAL
ECONOMICS
UNIT 27: INTERNATIONAL BUSINESS
UNIT 28: BALANCE OF PAYMENT
UNIT 29: TRADE BARRIERS
UNIT 30: TRADE SURPLUS AND DEFICIT
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UNIT
UNIT 27 27 INTERNATIONAL BUSINESS
PREVIEW
PREVIEW
Discussion:
1. What are your country’s main exports?
2. What are your country’s main imports?
3. Which countries or regions are your country’s
major trading partners?
4. Is your country’s balance of payment in surplus
or in deficit?
READING
READING
Most countries realized the advantages of world trade. Countries have developed their
economies, increased production of goods, and met market demands through increased
world trade. The interdependence among trading nations has provided increased
business opportunities.
International trade develops because certain countries are able to produce some goods
more efficiently than other countries. They exchange goods to satisfy their needs and
wants. Efficient production may be the result of several factors. A certain climate in
particular country may allow that country to grow agricultural products in abundance.
For instance, the climates in the United State and Canada are suitable for production of
large amount of wheat. Natural resources such as oil or coal are abundant in other
countries. Countries with a large pool of unskilled laborers are able to produce products
which are labor intensive more cheaply than countries with highly paid, skilled labor
forces. Another factor is geographical location. Countries like Singapore and Panama
engage in banking and trading because they are located on world trade routes.
The Scottish economist, Adam Smith (1723-1790), theorized that in a free market,
countries produce whatever they can most efficiently grow or manufacture, or what is of
the greatest advantage to them. In other words, if they can make more money growing
cotton than making cloth, they grow cotton and export it. Then they import cloth from a
country that makes cloth more efficiently than it grows cotton. In an uncontrolled free
market trade situation, there is international specialization which results in the most
efficient production of goods. Therefore, competition guarantees that countries import
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products which are most efficiently manufactured abroad and export products which are
most efficiently produced domestically. Price is determined by the supply side of the
market. Smith’s theory was a theory of absolute advantage. The English economist,
David Ricardo (1772-1823), refined Smith’s theory to one of comparative advantage.
He theorized that an exporting country does not have to be the most efficient producer
of the product; it only has to be more efficient than the country which imports the
product. Mutually beneficial trade arises when one country has a comparative
advantage.
There are several reasons why governments try to control the imports and exports of a
country. One reason is that a country enjoys an advantage if it exports more than it
imports. Wealth accrues to the exporting country. Some countries have special
programs to encourage exports. They may be programs that provide marketing
information, establish trade missions, subsidize exports and provide tax benefits or
incentives. Government subsidies allow companies to sell products cheaply. Sometimes
these subsidized companies export their products and sell them cheaply overseas. This
practice is known as dumping. Dumping is selling on a foreign market at a price below
the cost of production.
On the other hand, governments impose taxes and quotas to restrict imports of certain
products. For example, to protect Japanese farmers, Japan limits the amount of produce
that can be imported. Sometimes governments want to protect a domestic industry
because that industry provides employment for the population. Not only the industries,
but also the labor unions encourage the government to enact protectionist controls.
Protectionist measures are in the form of duties which eliminate the comparative
advantage, or quotas which restrict the import of the product altogether. There are two
forms of import tariffs: specific and ad valorem. A specific tariff is a certain amount of
tax for each unit of the product, for example $500 for each automobile. An ad valorem
tariff is based on the value of the product, for example 5% of its value. Thus, under an
ad valorem tax a Rolls Royce imported to the United States would be taxed more than a
Datsun. The imposition of the ad valorem tax depends upon first determining the value
of the product. The United States uses the free on board (FOB) method, which is the
cost of the product as it leaves the exporting countries. European countries have adopted
the cost insurance freight (CIF) method, which adds the value of place utility to the cost
of the product. A tariff increases the price of the item, raise revenue for the government,
and controls consumption through market forces. A quota has different effect on the
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market because it limits the number of items imported. While, under quota there may be
a higher price because of a limited supply, under a tariff it is the tax that creates a higher
price: the supply is not limited.
In order to import and export products, there needs to be a system of international
monetary exchange. While a few products like oil are always priced in dollars, most
products must be paid for with the legal tender of the producing country. International
trade involves the exchange of one currency for another. Most currencies are now
exchanged on a floating rate basis. There are no official exchange rates. The rates
fluctuate according to market forces. If large amounts of a country’s currency are being
exchanged, the exchange rate may vary greatly because demand, and therefore, the price
of a currency is either rising or falling. Sometimes these great fluctuations in value
threaten economic stability; then cenral banks change market forces by purchasing a
foreign currency to support its price and maintain stability.
The amount of money that goes in and out of a country is referred to as the balance of
payments. If a country is exporting more than it imports, it is receiving foreign currency
and has a balance of trade surplus. If it is importing more than it exports, it is sending
money out of the country and has a balance of trade deficit. Continued surpluses or
deficits change the demand for the currency of a country and cause its value to float
either upward or downward.
The comparative advantage which exporting countries enjoy sometimes changes. If
transportation costs increase or currency exchange rates change, it may become cheaper
to produce the product in the marketing country, especially if large amounts of exports
are involved. Exporting companies sometimes set up subsidiaries in the market
countries. The larger company is referred to as the parent company. Some countries
have laws restricting the foreign ownership of factories or other production facilities,
while others encourage foreign investment. A large company that sets up production
facilities in several different countries is referred to as a multinational. Multinational
corporations develop a global philosophy of management, marketing and production.
They choose to operate in those countries that afford them comparative advantages.
COMPREHENSION
QUESTIONS
1. How might underdeveloped countries benefit from international trade?
2. What types of business opportunities are presented as a result of interdependence
among trading nations?
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3. What four factors mentioned would contribute to a country’s production
efficiency?
4. According to the text, what is the main difference between Smith’s theory and
Ricardo’s theory?
5. Explain how exporting countries become wealthy?
6. Why would a country object to foreign countries dumping goods?
7. Why might a government subsidize an inefficient export industry?
8. What are two forms of protectionism?
9. What is one advantage of tariffs over quotas to a government?
10. Why do tariffs and quotas have different effects on the market?
11. With a floating exchange rate, what would happen to the exchange value of
currency from a country that exports more than it imports?
12. Explain why the value of the currency of a country that imports more than it
exports would tend to decrease.
13. What would be a good reason for an exporting company to set up a subsidiary in
the country that imports its products?
14. What is a parent company?
15. Why might a country encourage foreign investment or the establishment of
subsidiaries of foreign companies?
VOCABULARY
VOCABULARYEXERCISES
EXERCISES
1. Match the words in the left column with phrases in the right column that have
the same meaning.
1 advantge ……….. A. a company with a worldwide management and
2 labor pool production philosophy
3 free market ……….. B. excess of imports over exports
4 division of labor ……….. C. company which owns a subsidiary
5 overseas ……….. D. foreign
6 domestic ……….. E. beneficial condition
7 floating rate ……….. F. without government restrictionsregulating trade
8 subsidy ……….. G. worldwide
9 protectionism ……….. H. group of workers
10 dumping ……….. I. home
11 tariff ……….. J. tariff based on value
12 ad valorem tax ……….. K limit
13 specific tax ……….. L. trade restrictions to benefit domestic producers
14 quota ……….. M. below cost foreign sale
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15 currency ……….. N. labor specialization
16 exchange ……….. O. money given to cover losses and assist nonprofit
17 legal tender enterprises
18 balance of trade ……….. P. cost plus insurance plus freight
deficit ……….. Q. money value not determined by gold or fixed
19 subsidiary standard
20 global ……….. R. circulating money
21 multinational ……….. S. e.g., the dollar in the U.S., the yen in Japan
22 parent company ……….. T. branch company
23 market forces ……….. U. duty or tax
24 CIF ……….. V. unit or item tax
……….. W. supply and demand
………. X. convert
2. Select the answer which is consistent with the meaning of the sentence
1. International trade develops because certain countries are able to produce some goods
more efficiently than other countries. They exchange these goods in order to satisfy
their needs and wants.
A. Countries import the goods which they produce efficiently.
B. Countries probably export the goods which are not efficiently produced.
C. Countries probably exchange goods which they produce efficiently for goods
which other countries produce efficiently
D. Efficient exchange results from international trade.
2. A certain climate in a particular country may allow that country to grow agricultural
products in abundance.
A. This country probably has a comparative advantage in agriculture.
B. This country most likely exports farm products.
C. This country can grow food efficiently
D. All of the above.
3. In an uncontrolled free market trade situation, there would be an international
division of labor resulting in the most efficient production of goods.
A. With trade restrictions, countries specialize in what they produce.
B. The most efficient production is a result of a free market.
C. Specialization in production should be left uncontrolled.
D. Labor always favors a free market trade situation.
4. Price is determined by the supply side of the market.
A. If the demand for products increased so would the price.
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B. There is such an abundance of products for sale that prices would have to
increase.
C. If the supply is low, the price is low.
D. Supply is more of a factor than demand in determining the price.
5. A basis for mutually beneficial trade is the fact that one country has a comparative
advantage.
A. Both the importing country and the exporting country benefit from trade.
B. One country’s comparative advantage can benefit another country.
C. The comparative advantage of one country can result in trade between
countries
6. A country can accrue wealth if it exports more than it imports.
A. This country has a balance of trade deficit.
B. Demand for this country’s currency will fall.
C. This country receives money from countries which import its products.
7. Governments try to control imports of products to protect domestic industries.
A. Protectionist measures take the form of import duties and quotas.
B. Protectionist measures insure free trade.
C. Workers are always opposed to protectionism
D. All protectionist policies have the same effect on the market.
8. Selling products abroad at prices lower than the cost of production is known as
dumping.
A. Dumping is always against government policy.
B. Dumping is always beneficial to the importing country because buyers payy
lower prices.
C. Exporters dump products on foreign markets to lower domestic employment.
D. Some reasons for dumping could be inventory reduction, maintenance of
domestic employment, and continuation of high production levels.
9. Most currencies are now exchanged on a floating rate basis in which there are no
official exchange rates, and rates fluctuate according to market forces.
A. If money changers want to sell dollars for yen, the price of the dollar will
decline.
B. An exporting country with a balance of payments surplus may accumulate a
lot of foreign currency for which the demand is low, thus making their exports
more expensive.
C. The supply and demand for currencies determine the exchange rates.
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10. Multinational companies set up production facilities in countries where production
is most efficient.
A. All countries allow foreign ownership of production facilities.
B. The larger company is called the parent company; the production facilities are
referred to as a subsidiary.
C. Subsidiary companies eliminate the problem of worldwide competition.
D. Each subsidiary needs to consider only local market conditions.
LANGUAGE
LANGUAGEFOCUS
FOCUS
In the reading text, there are some conjunctions used: “for instance, in other words,
then, therefore, on the other hand, while”
Conjunctions
Types of Meaning Examples
conjunctions
Additive Add more information to what and, also, in addition, not only …
conjunctions is already there but also, moreover, further,
besides.
Conjunctions of Offer an alternative or, or else, alternatively
replacement
Comparative Link two ideas that are in the same way, likewise, just as,
conjunctions considered to be similar both … and
Contrastive Link two ideas that are but, however, in contrast, on the
conjunctions considered to be different contrary, instead, nevertheless,
yet, still, even so, neither … nor
Concessive Contrast one idea with another though, although, despite, in spite
conjunctions of, notwithstanding, whereas,
while
Conjunctions of introduce examples for example, to illustrate this,
exemplification such as.
Conjunctions of reword or sum up information that is, to put it another way, to
restatement sum up, in brief.
208
Conjunctions of highlight a cause-effect for this reason, as, because,
cause relationship between two ideas because of this, therefore, thus,
or give a reason why hence, as a result, consequently,
something happens or is the since, so.
case
Conjunctions of suggest the conditions under unless, if … then, in that case, that
condition which something happens being so.
Conjunctions of sequence events or ideas in after, afterwards, before,
time time previously, prior to, up ‘til now, to
the present, at present, second(ly),
third(ly), finally.
PRACTICE
Complete the sentences with suitable conjunctions.
1. The study used a small sample only ………….. was strongly criticized for this
reason. ……………….. , the initial premise of the research was considered questionable
in the light of previous evidence.
2. The results could be interpreted to mean that high levels of protein are beneficial to
diet generally. ………………, they could also mean that high protein levels are only
beneficial to severely overweight males.
3. Reading aloud to young children stimulates their interest in books. …………..,
visiting libraries or book fairs has been shown to increase children’s readiness to engage
with print.
4. This evidence points clearly to a fall in the number of unemployed. ………..,
anecdotal evidence from reputable charities suggests that the number of people seeking
financial support has increased.
5. …………… money has been poured into literacy programs, literacy levels among 12-
15 year olds do not appear to be improving.
6. There are many ways of interesting young children in reading. ……………, regular
trips to the library have been shown to greatly increase children’s awareness of books.
7. The chances of children not finishing their education are magnified by certain factors.
……………….. there are specific factors which will increase the likelihood of children
leaving school early.
209
8. The purpose of the study was withheld from the participants …………….. the results
would not be skewed.
9. …………. literacy levels are to improve, more resources have to be put into teacher
training.
10. The researchers …………… examined the impact of obesity on levels of childhood
activity generally. They …………. narrowed their investigation to its impact on
children’s ability to cope at school.
GLOSSARY
GLOSSARY
- accrue (v) /əˈkruː/ - to Accumulate or increase, gradually but steadily, over time
- tích lũy, dồn lại
E.g. Long-term (20 to 25 years) US corporate bond does not pay periodic interest but
instead accrues it until maturity
- advantage (n) /ədˈvɑːn.tɪdʒ/ - Any trait, feature or aspect that gives an
individual, entity or any other thing a more favorable opportunity for success -
lợi thế, lợi điểm
E.g. The advantages of Mary's plan, compared to Bob's plan, were that it required
less money and manpower, and would be completed 5 days sooner.
- deficit (n) /ˈdef.ɪ.sɪt/ - Excess of expenses over income or liabilities over assets
or amount by which expenditure is higher than income - thâm hụt
E.g. In economics, a deficit is an excess of expenditures over revenue in a given time
period
- division of labor (n) /dɪˈvɪʒ.ən əv ˈleɪ.bər/- Narrow specialization of tasks within
a production process so that each worker can become a specialist in doing one
thing, especially on an assembly line - sự phân công lao động
E.g. Social division of labor, one of the two aspects of the division of labor, is the
social structural foundation of the specialized commodity production divided between
industries, firms, and occupations of workers, or the technical division of tasks.
- dumping (n) /ˈdʌm.pɪŋ/ – exporting goods at prices lower than the home-market
prices. In price-to-price dumping, the exporter uses higher home-prices to
supplement the reduced revenue from lower export prices. In price-cost dumping,
the exporter is subsidized by the local government with duty drawbacks, cash
incentives, etc - bán phá giá hàng xuất khẩu
E.g. Dumping is legal under GATT (now WTO) rules unless its injurious effect on
the importing country's producers can be established. If injury is established, GATT
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rules allow imposition of anti-dumping duty equal to the difference between the
exporter's home-market price and the importer's FOB price.
- duty (n) /ˈdjuː.ti/ - Compulsory monetary contribution to the state's revenue,
assessed and imposed by a government on the activities, enjoyment, expenditure,
income, occupation, privilege, property, etc., of individuals and organizations –
thuế
E.g. Duty-free shops (or stores) are retail outlets that are exempt from the payment of
certain local or national taxes and duties, on the requirement that the goods sold will be
sold to travelers who will take them out of the country
- global (n) /ˈɡləʊ.bəl/ - ertaining to the entire globe rather than a specific region
or country. Often used interchangeably with the term international - toàn cầu
E.g Macroeconomic factors are national and global events which are out of your
control.
- interdependence (n) /ˌɪn.dɪˈpen.dəns/ - not controlled by any outside factors
including opinions and regulations.
- labor intensive (n) /lei.bə ɪnˈten.sɪv/- industry or process where a larger portion
of total costs is due to labor as compared with the portion for costs incurred in
purchase, maintenance, and depreciation of capital equipment - việc tận dụng lao
động chân tay
E.g. Agriculture, construction, and coal-mining industries are examples of labor
intensive industries
- multinational (adj) /ˌmʌl.tiˈnæʃ.ən.əl/- an enterprise operating in several
countries but managed from one (home) country. Generally, any company or
group that derives a quarter of its revenue from operations outside of its home
country is considered a multinational corporation - đa quốc gia
E.g. According to UN data, some 35,000 multinational companies have direct
investment in foreign countries, and the largest 100 of them control about 40 percent of
world trade.
- parent company (n) /ˈpeə.rənt ˈkʌm.pə.ni/ - firm that owns or controls other
firms (called subsidiaries) which are legal entities in their own right. Also called
parent corporation - công ty mẹ
E.g. A parent company is a company that owns enough voting stock in another firm
to control management and operations by influencing or electing its board of directors
- protectionism (n) /prəˈtek.ʃən.ɪ.zəm/ - Governmental policy aimed at shielding a
fragile economy, or a weak or critical sector, from cheaper or better imports
through imposition of high duty rates (tariff barriers), quotas, and/or inordinately
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stringent or time consuming inspection or quality regulations (non-tariff barriers)
- chế độ bảo hộ
E.g. All countries practice protectionism in one form or another but, generally,
without going to any extreme.
- quota (n) /ˈkwəʊ.tə/ - a limit on the amount of goods which can be imported /
exported or limitation on the quantity that must not be exceeded, such as an
import quota: hạn ngạch, chỉ tiêu, cô ta.
E.g. An import quota is a limit on the quantity of a good that can be produced abroad
and sold domestically. It is a type of protectionist trade restriction that sets a physical
limit on the quantity of a good that can be imported into a country in a given period of
time.
- subsidiary (n) /səbˈsɪd.i.ər.i/ - an enterprise controlled by another (called the
parent) through the ownership of greater than 50 percent of its voting stock -
công ty con
E.g. By making the acquired company your subsidiary, you have the advantages of
instant localization, name recognition and an experienced team at the helm.
- subsidize (v) /ˈsʌb.sɪ.daɪz/- to provide a financial incentive to perform or not
perform a specific action, such as the manufacture of a good. The incentive is
provided in the form of a subsidy. hỗ trợ (của nhà nước)
E.g. The government refused to subsidize the car industry.
- subsidy (n) /ˈsʌb.sɪ.di/- economic benefit (such as a tax allowance or duty
rebate) or financial aid (such as a cash grant or soft loan) provided by a
government to support a desirable activity (such as exports), keep prices of
staples low, maintain employment levels, or induce investment to reduce
unemployment - trợ cấp
E.g. The basic characteristic of all subsidies is to reduce the market price of an item
below its cost of production.
- surplus (n) /ˈsɜː.pləs/ – extent to which generation of goods, services, and
resources (such as capital) exceeds their consumption - thặng dư, số dư
E.g. Surplus of resources is the bedrock on which capitalism is built.
- restrict (n) /rɪˈstrɪkt/- having an enforced limitation or constraint of some sort -
limit: hạn chế, giới hạn
E.g. Access to the Pentagon has become increasingly restricted since the terror
attacks in 2001.
- tax benefit (n) /tæks ˈben.ɪ.fɪt/ - taxation rule that if a taxpayer recovers an
expense or loss that was written off against the previous year's income, the
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recovered amount must be included in the current year's gross income for
computing taxable income – ưu đãi về thuế
E.g. In the context of corporate finance, the tax benefits of debt or tax advantage of
debt refers to the fact that from a tax perspective it is cheaper for firms and investors to
finance with debt than with equity
- theory (n) /ˈθɪə.ri/ - a set of assumptions, propositions, or accepted facts that
attempts to provide a plausible or rational explanation of cause-and-effect
(causal) relationships among a group of observed phenomenon – thuyết, lý thuyết
E.g. In economics, the principle of absolute advantage theory refers to the ability of a
party (an individual, or firm, or country) to produce more of a good or service than
competitors, using the same amount of resources
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UNIT
UNIT 28 28 BALANCE OF PAYMENTS
PREVIEW
PREVIEW
Discussion
1. What do you know about Vietnam’s balance of
payment and balance of trade in 2013, are they
surplus or deficit?
2. What are differences between balance of
payment and balance of trade?
3. What do the terms “current account” and
“capital account” mean?
I.READING
Reading
The balance of payments is a statistical record of all the economic transactions between
residents of the reporting country and residents of the rest of the world during a given
time period. The usual reporting period for all the statistics included in the accounts is a
year. However, some of the statistics that make up the balance of payments are
published on a more regular monthly and quarterly basis. Without question the balance
of payments is one of the most important statistical statements for any country. It
reveals how many goods and services the country has been exporting and importing and
whether the country has been borrowing from or lending money to the rest of the world.
In addition, whether or not the central monetary authority (usually the central bank) has
added to or reduced its reserves of foreign currency is reported in the statistics.
A key definition that needs to be resolved at the outset is that of a domestic and foreign
resident. It is important to note that citizenship, and residency are not necessarily the
same thing from the viewpoint of the balance of payments statistics. The term
‘residents’ comprises individuals, households, firms and the public authorities. There
are some problems that arise with respect to the definition of a resident. Multinational
corporations are by definition resident in more than one country. For the purposes of
balance-of-payments reporting the subsidiaries of a multinational are treated as being a
resident in the country in which they are located even if their shares are actually owned
by domestic residents. Another problem concerns the treatment of international
organizations such as the International Monetary Fund, the World Bank, United Nations
and so forth. These institutions are treated as being foreign residents even though they
may actually be located in the reporting country. For example, although the
International Monetary Fund is located in Washington, contributions by the US
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government to the Fund are included in the US balance-of-payments statistics because
they are regarded as transactions with a foreign resident. Tourists are regarded as being
foreign residents if they stay in the reporting country for less than a year.
The criterion for a transaction to be included in the balance of payments is that it must
involve a transaction between a resident of the reporting country and a resident from the
rest of the world. Purchases and sales between residents from the same country are
excluded.
II.COMPREHENSION
Comprehension / Interpretation
QUESTIONS
1. What is the balance of payments?
2. What does the balance of payments reveal?
3. What is a key definition that needs to be resolved at the outlet?
4. What does the term ‘residents’ comprise?
5. Are there any problems that arise with respect to the definition of a resident?
What are they?
6. What is the criterion for a transaction to be included in the balance of payments?
VOCABULARY
EXERCISES
1> Match up these words and expressions with the definitions below.
autarky dumping balance of payments
deficit balance of trade invisible imports and exports
quotas tariffs barter or counter-trade
surplus protectionism visible trade (GB) or merchandise trade (US)
1. trade in goods
2. trade in services (banking, insurance, tourism, and so on)
3. direct exchange of goods, without the use of money
4. the difference between what a country receives and pays for its exports and imports
of goods
5. the difference between a country’s total earnings from exports and its total
expenditure on imports
6. the (impossible) situation in which a country is completely self-sufficient and has no
foreign trade
7. a positive balance of trade or payments
8. a negative balance of trade or payments
9. selling goods abroad at (or below) cost price
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10. imposing trade barriers in order to restrict imports
11. taxes charged on imports
12. quantitative limits on the imports of particular products or commodities
2> Fill in the gaps in the following passage with the words in the box.
investments relationship exports ownership encourage
stability trade Fuel encouragement deficit
volatility financial imports surplus finance
A country's balance of payments is made up of the current account, financial account
and the capital account. The current account measures international (1) …………… and
the net income on investments, as well as direct payments. The financial account
describes the change in international (2) ……………… of assets. The capital account
includes miscellaneous financial transactions that don't affect economic output.
The balance of payments is important because it will tell you whether a country has
enough savings and other financial transactions to pay for its consumption of (3)
…………….. It will also tell you if it's producing enough economic output to pay for its
growth.
A country with a balance of payments (4) …………… probably imports more goods,
services and capital than it exports. It is also borrowing from other countries to pay for
its imports. This can be good for a while, so the country can (5) …………… economic
growth. However, if it continues for years, then the country may be seen as a net
consumer, not producer, of the world's economic output. It may have to sell off its
assets, such as natural resource and commodities, to pay for its consumption.
Eventually, other countries may wonder if their (6) …………….. will pay off.
A country with a balance of payments (7) ………….. is probably exporting much of its
production. In addition, its government and residents are savers, providing enough
capital to (8) ……………… this production and even lend to other countries. This is a
great scenario to boost economic growth, in the short term. However, in the long term,
this country needs to (9) ………………. its residents to spend more and build a larger
domestic market. This will keep it from being too dependent on export-driven growth. It
will also allow its companies to refine goods and services, using the domestic
population as a giant test market. Finally, a large domestic market can also inoculate the
country from the (10) ……………… of exchange rate fluctuations.
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LANGUAGE
LANGUAGE FOCUS
FOCUS
Study the “noun phrases” in the following sentence extracted from the reading text:
- The balance of payments is a statistical record of all the economic transactions
between residents of the reporting country and residents of the rest of the world
during a given time period.
How are noun phrases formed and what about the order of different parts in a noun
phrase?
Noun phrases
the noun phrase is built up in this way:
Noun: people; money
Determiner + noun: the village, a house, our friends; those houses
Quantifier + noun: some people; a lot of money
Determiner + adjective + noun: our closest friends; a new house.
Quantifier + determiner + noun: all those children;
Quantifier + determiner + adjective + noun: both of my younger brothers
The noun phrase can be quite complicated:
a loaf of nice fresh brown bread
the eight-year-old boy who attempted to rob a sweet shop with a pistol
that attractive young woman in the blue dress sitting over there in the corner
Some words and phrases come after the noun. These are called postmodifiers. A noun
phrase can be postmodified in several ways. Here are some examples:
with a prepositional phrase:
a man with a gun
the boy in the blue shirt
the house on the corner
with an –ing phrase:
the man standing over there
the boy talking to Angela
with a relative clause:
the man we met yesterday
the house that Jack built
the woman who discovered radium
an eight-year-old boy who attempted to rob a sweet shop
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with a that clause.
This is very common with reporting or summarising nouns like idea, fact, belief,
suggestion:
He’s still very fit, in spite of the fact that he’s over eighty.
She got the idea that people didn’t like her.
There was a suggestion that the children should be sent home.
with a to-infinitive.
This is very common after indefinite pronouns and adverbs:
You should take something to read.
I need somewhere to sleep.
I’ve got no decent shoes to wear.
There may be more than one postmodifier:
an eight-year old boy with a gun who tried to rob a sweet shop
that girl over there in a green dress drinking a coke
PRACTICE
Read the following passage carefully and find out any noun phrases in the passage.
Then identify which patterns of pre-modifiers these noun phrases belong to and what
types of post-modifiers follow these nouns.
Trade in services
Trade in services includes the exporting and importing of intangible products –
for example, Banking and Finance, Insurance, Shipping, Air Travel, Tourism and
Consultancy.
Britain has a strong trade base in services with over 30% of export earnings coming
from services. The success of our service sector industries has been one of the strong
points in our performance over the last twenty years. In 1999 the UK became the second
largest exporters of services in the world. Strong surpluses are especially common in
financial and business services and hi-tech knowledge services. The UK is also a major
net exporter of creative services such as film and television programmes, books,
advertising and marketing services and architecture and design.
But the UK runs a deficit in international travel and transportation in part
because of rising demand for overseas holidays as living standards have improved.
Once again, rising incomes have caused a large rise in the demand for leisure and
business travel and the recent strength of the exchange rate (until recently) and the rapid
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expansion of low cost airlines offering short haul overseas breaks has also played its
part.
Britain has a comparative advantage in selling financial services to the rest of the
world. London is one of the three main financial centres in the world and has the largest
share of trading in many international financial markets. For example, around one third
of all of the currency dealing takes place in London’s trading platforms and many
overseas banks have established themselves in London’s money and capital markets.
Numerous British financial businesses have world class status in their areas of expertise.
Our UK based commercial banks, fund managers, securities dealers, futures and options
traders, insurance companies and money market brokerage businesses are part of a
complex network of financial and business services that represent a huge asset for the
UK balance of payments accounts.
III. Vocabulary
GLOSSARY
- balance of payments (n) /ˈbæl.əns əv ˈpeɪ.mənt/- set of accounts that record a
country's international transactions, and which (because double entry
bookkeeping is used) always balance out with no surplus or deficit shown on the
overall basis – cán cân thanh toán
E.g. BOP (Balance of Payment) accounting serves to highlight a country's
competitive strengths and weaknesses, and helps in achieving balanced economic-
growth.
- statistics (n) /stəˈtɪs.tɪks/ - branch of mathematics concerned with collection,
classification, analysis, and interpretation of numerical facts, for drawing
inferences on the basis of their quantifiable likelihood (probability) – số liệu,
thống kê
E.g. Statistics can interpret aggregates of data too large to be intelligible by ordinary
observation because such data tend to behave in regular, predictable manner. It is
subdivided into descriptive statistics and inferential statistics.
- export (v) /ɪkˈspɔːt/ - to send goods or services across national frontiers for the
purpose of selling and realizing foreign exchange – xuất khẩu
- import (v) /ɪmˈpɔːt/ – to get goods produced in a country other than the one in
which it is sold. Imports bring money into the producing country and can remove
money from the country in which the good is sold – nhập khẩu
E.g. Many economists believe that a nation's proper balance of trade means more
exports are sold than imports bought. Some countries set up various trade barriers
against imports, notably import quotas and tariffs.
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- criterion (n) /kraɪˈtɪə.ri.ən/- a standard by which something can be judged or
decided. In a typical context, there is more than one criterion under consideration
and thus the plural ‘critieria’ is more commonly encountered – chỉ tiêu, tiêu chí
E.g. whether in our daily lives or in professional settings, there are typically multiple
conflicting criteria that need to be evaluated in making decisions. Cost or price is
usually one of the main criteria.
- transaction (n) /trænˈzæk.ʃən/ - agreement, contract, exchange, understanding,
or transfer of cash or property that occurs between two or more parties and
establishes a legal obligation –giao dịch
E.g. A financial transaction is an agreement, communication, or movement carried
out between a buyer and a seller to exchange an asset for payment. It involves a change
in the status of the finances of two or more businesses or individuals.
- reveal (v) /rɪˈviːl/- to make known something that was previously secret or
unknown - làm rõ
E.g. A new study has revealed that there may be no such thing as getting a full ride to
college, as some colleges demand additional payments from students who are awarded
full scholarships.
- resident (n) /ˈrez.ɪ.dənt/ - citizen allowed by a state to have his or her temporary
or permanent residence within its political boundaries, and to have the right to be
an employee or employer – người cư trú
E.g. A resident can usually cast his or her ballot in local municipal and national
elections but cannot be a candidate, diplomat, or head of armed forces or the state.
- citizenship (n) /ˈsɪt.ɪ.zən.ʃɪp/ - the legal right of belonging to a particular country
by birth or naturalization - quyền công dân
E.g. Citizenship denotes the link between a person and a state or an association of
states. Possession of citizenship is normally associated with the right to work and live
in a country.
- residency (n) /ˈrez.ɪ.dən.si/ - Place where a person or firm has a physical
presence but may or may not be domiciled - cư trú
E.g. Under English law, residency is defined as a self-contained 'substantial' unit of
accommodation, such as a building, part of a building, caravan, houseboat or other
mobile home. A tent is not normally be considered to be substantial.
- comprise (v) /kəmˈpraɪz/- consist of; or be composed of - bao gồm
E.g. His proposal was comprised of many suggestions of how the two companies
would benefit from this partnership.
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UNIT
UNIT 29 29 TRADE BARRIERS
PREVIEW
PREVIEW
Discussion
1. Are there any trade barriers in Vietnam presently?
2. What should Vietnamese government do to compensate the amount of revenue
after demolishing trade barriers when joining WTO?
READING
READING
Trade barriers are any of a number of government-placed restrictions on trade between
nations. The most common sorts of trade barriers are things like tariffs, quotas,
subsidies, and embargoes. The term free trade refers to the theoretical removal of all
trade barriers, allowing for completely free and unfettered trade. In practice, however,
no nation fully embraces free trade, as all nations utilize some assortment of trade
barriers for their own benefit.
While trade barriers can be beneficial to the aggregate domestic economy they
tend to be most beneficial, and thus most commonly promoted by domestic firms facing
competition from foreign imports. Domestic firms benefit with higher sales, greater
profits, and more income to resource owners. However, by increasing domestic prices
and restricting accessing to imports, trade barriers also tend to be harmful to domestic
consumers.
Why then is it virtually every nation in the global economy imposes trade
barriers of one form or another? There are five reasons commonly used to justify trade
barriers.
One of the most common justifications for trade barriers is to protect domestic
employment. Trade barriers that restrict imports prevent the reduction of domestic
production and domestic employment. Those who promote barriers to foreign trade
often contend that other countries in the foreign sector gain a comparative advantage
due to low wages paid to their workers. Another argument put forth to impose trade
barriers and restrict imports is to protect relatively young domestic industries that are
not mature enough or large enough to compete with larger, more mature foreign
producers. Trade barrier proponents also contend that foreign firms often engage in
unfair trade practices that "unlevel" the competitive playing field. A common contention
is that foreign imports are sold in the domestic economy at prices below actual
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production cost. This practice of "dumping" might be undertaken to drive domestic
producers out of business, lessen competition, and increase the market share of the
foreign producers. A last noted argument is that trade barriers are often needed to
protect firms and industries that produce output vital to the security and defense of the
nation. Trade barriers prevent the country from depending on these imports and allow
greater reliance on domestic production. Each of these arguments provides logical,
reasonable, and necessary justification for the imposition of trade barriers. However,
each is also commonly misused especially by politically powerful domestic producers
that seek little more than to limit foreign competition, charge higher prices, gain greater
market share, and increase profits. For example, the infant industry argument is
frequently used to justify the protection of large, dominant, and MATURE domestic
firms. The national security argument is also occasionally used to protect industries that
have almost nothing to do with the security of the nation.
The first of four most common trade barriers designed to restrict imports is tariffs
on imports. Tariffs are simply taxes placed on imports. They work like any other taxes.
A tariff is added to the price of the imported goods. This leads to fewer imports
purchased, and then more domestic production is sold. The second trade barriers
designed to restrict imports and promote exports is quotas on imports. In general, a
quota is simply a quantity restriction placed on a good, service, or activity. For example,
employers often face hiring quotas for different demographic groups and sales
representatives often have quotas for sales activities. Subsidies are another of the
common trade barriers and are often placed to protect domestic industries. Subsidies
may actually be intended simply to make certain key goods affordable to citizens of the
nation, but the end result can still be to make imports non-competitive. Many food
crops, for example, are heavily subsidized, to ensure the citizenry has a constant supply
of affordable food. Steel is also often subsidized, to ensure a nation always has a
domestic steel supply, which can be crucial during times of war when normal shipping
avenues may be cut off. An embargo can be seen as the most extreme of the trade
barriers. Embargoes basically prohibit the import or export of anything with another
country. This is often done as a form of punishment, or to try to force the country to
undergo radical change internally as a result of a weakened economic state. Historically,
the embargo was used as a war tactic, and so was often considered a declaration of war.
In modern times, however, although the most brutal of the trade barriers, it is usually
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not viewed as an act of outright aggression, although a declaration of war is often
accompanied by an embargo.
A number of free trade bodies exist in the world to try to curtail the use of trade
barriers by nations. The World Trade Organization is perhaps the widest reaching of
these bodies, and it enforces strict rules against member nations, restricting the
acceptable use of things like tariffs. As a result, some countries have begun using trade
barriers that are not tariffs but have similar effects. The European Union, for example,
does not allow the import of many genetically-modified organisms, which effectively
bans the vast majority of food imports from the United States. In recent years, groups
like the WTO have begun to look at these forms of trade barriers as well, and to strip
them when possible.
COMPREHENSION
COMPREHENSIONQUESTIONS:
QUESTIONS
A. Read the text and then answer the following questions:
1. What are trade barriers?
2. What reasons do nations commonly use trade barriers?
3. What are the most common used trade barriers?
4. What results in using non-tariffs?
B. Choose the best option for each question:
1. Government-placed restrictions on trade between nations are…………………
A. Tariff B. Subsidies C. Quotas D. Trade barrier
2. All nations use some kinds of trade barriers for their own………………..
A. Interest B. Purposes C. Benefits D. Profits
3. ………………is one of the most common reasons for justifying trade barriers.
A. Protecting domestic employment B. Encouraging domestic production
C. Promoting trade barriers D. Both A and B
4. The practice of selling foreign imports in the domestic economy at prices lower than
the actual cost of production is called……………………………….
A. Dumping B. Competing C. Challenging D. Restricting
5. The price of imported goods is added with ……………………………….
A. Tariff B. Taxes C. Quotas D. Non-tariffs
6. .........................are used to prevent the import or export of anything with another
country.
A. Subsidies B. Tariff C. Quotas D. Embargoes
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VOCABULARY
VOCABULARY EXERCISES:
EXERCISES
I. Match the words or phrases in column A with their definitions in column B.
A B
1. trade surplus a. Money owed by a country to foreign creditors
2. trade deficit b. The accounts setting out a country’s transactions

with the rest of the world
3. balance of trade
c. The value of a country’s imports exceeds its exports
4. balance of payments
d. The accounts setting out a country’s total imports
5. external debt and exports
6. debt servicing e. The value of a country’s exports exceeds its imports
7. devaluation f. Expansion of the economy
8. growth g. The value of all the goods and services produced by

an economy over a period (e.g. one year)
9. recession
h. Contraction of the economy
10. gross domestic product
(GDP) i. GDP plus other forms of income such as interest,
profits and dividends received from abroad.
11. gross national product
(GNP) j. The national income dividend by the population
12. national per capita income k. The payment of interest on debts
l. Reduction in the value of a currency
2. Fill in the blanks with suitable words or phrases in the following box:
"boom and bust" disposable income market forces Retail Price Index (RPI)
budget deficit free trade natural resources social security
budget surplus globalization private sector subsidies
crops industrial base public sector trade barrier
deregulation infrastructure quota trading partners
1. European farmers receive large sums of EU money in the form of …………………
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2. If government expenditure is higher than government income, the result is a
……………………………………
3. If government income is higher than government expenditure, the result is a
…………………………
4. In a…………………. economy periods of growth are followed by periods of
recession.
5. People who work for state-owned organizations such as public hospitals and state
schools work in the …………………………
6. People who work for privately-owned organizations work in the …………………
7. Payments by the government to people with little or no other income is called
…………………………………………
8. Buildings, roads, railway lines, telephone networks and power supplies are all part of
a country's……………………………….
9. A limit on the amount of particular type of import is a ………………………………..
10. Import tariffs and quotas are types of ……………………………………………..
11. The absence of trade barriers is known as …………………………………………
12. Britain's most important ……………………are France, Germany and the USA.
13. "The world is one big market". This is one way of describing ………………………
14. The world price of coffee is not fixed. It is largely controlled by …………………
15. When a government makes something easier and less bureaucratic, this is called
…………………………………..
16. One of the main ways to measure inflation is the ………………….. which is based
on the prices of goods and services.
17. The money people have after paying for food, housing and other necessities is called
……………………….................
18. Manufacturing, mining and oil refining are parts of the UK's ……………………
LANGUAGE
LANGUAGEFOCUS
FOCUS
Study some quantifiers in the reading text: “all, some, a number of, one of , each of ,
many, the vast majority of”. They are used to precede and modify nouns. They tell us
how many or how much.
Quantifiers
quantifiers with count Quantifiers with non-count Quantifiers with both count and
nouns nouns non-count nouns
225
many trees not much dancing all of the trees/dancing
a few trees a little dancing some trees/dancing
few trees little dancing most of the trees/dancing
several trees a bit of dancing enough trees/dancing
a couple of trees a good deal of dancing a lot of trees/dancing
none of the trees a great deal of dancing lots of trees/dancing
no dancing plenty of trees/dancing
a lack of trees/dancing
PRACTICE
Complete the following sentences with suitable quantifiers in the box.
a few a great deal a little a lot a lot of a majority of
enough a lot of many much of plenty several of some
1. I'm having …………….….. of trouble passing my driving exam.

2. ………………… the movies were rated PG.
3. …………………. information proved to be outdated.
4. We're close to the project deadline, but there is still ……………. time left.
5. Although there are …………….. brilliant students in this state -- thousands, even,
only ………………. will choose to remain in the state after graduation.
6. We were able to destroy ……………… the parasites with our antigen, but of them
survived to cause trouble.
7. ………………. a student has passed through these doors.
8. Although ………………… of the lawn is open to the sun, there are …………….. of
shade trees to make it comfortable.
9. I think he drank ……………… wine last night.
10. ……………… the evidence was taken from the police safe last night.
GLOSSARY
GLOSSARY
- Assortment (n): collection of goods or services a business provides to consumer
- mặt hàng sắp xếp thành loại, loại hình
E.g. We have just provided our clients assortment of new mobile phones.
226
- Balance of Trade: The difference between a country's imports and its exports -
cán cân thương mại
E.g. If we sell more than we buy, we have a favorable balance of trade.
- Balance of payment: the difference between amount of money one country pays to
other countries, especially for imports, and the amount it receives over a particular
period - cán cân thanh toán
E.g. An increase in exports would help Vietnam’s balance of payment.
- Curtail (v): cắt, rút ngắn
E.g. We have just curtailed our expenses to save some money for buying a house.
- Dumping: Exporting goods at prices lower than the home-market prices: bán phá
giá
E.g. America has brought Vietnam Seafood Company to the court because of
dumping Shrimp.
- Embargo (v) (n): To prohibit the import/export of anything with another
country; the most extreme trade barrier: cấm vận
E.g. Cuba couldn’t develop their economy because of being embargoed by America
for a long time.
- Infant (Adj): mới, non trẻ
E.g. They want to protect their infant industry by imposing protectionism.
- Put forth to do sth: try to do sth: cố gắng làm gì
E.g. They are putting forth to win the contract of building the highest skyscraper in
the city.
- Quota: a limitation on imports: hạn ngạch
E.g. The country now has a quota on immigration.
- Restrict (v): to limit the movements or actions of someone: giới hạn
E.g. The government has restricted freedom of movement into and out of the country.
- Subsidies (n): a grant paid by a government to an enterprise to benefit the public
or to keep prices low: Trợ cấp
E.g. The company received a substantial government subsidy.
- Tariffs (customs duties): taxation on goods/services imported into a country (can
apply to exports): thuế quan, thuế xuất nhập khẩu
E.g. New import tariffs have been imposed on a wide range of agricultural products.
- Trade Barrier: government policy/regulation that restricts international trade
Hàng rào thương mại
227
E.g. Trade barriers on leather handbags are usually limited to high tariffs.
- Trade Deficit: a situation in which the value of goods that a country imports is
more than the value of goods it exports, or the size of this difference: thâm hụt
thương mại
E.g. America's trade deficit in goods and services increased.
- Trade Surplus: a situation in which the value of goods that a country exports is
more than the value of goods it imports, or the size of this difference: thặng dư
thương mại
E.g. Figures indicate the country had a trade surplus of $452 million in February.
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UNIT
UNIT 30 30 TRADE SURPLUSES AND DEFICITS
PREVIEW
PREVIEW
Whole-class discussion
1. What are main exports of Vietnam?
2. Which countries are the main exports partners of Vietnam?
3. What are the main imports of Vietnam?
4. Which countries are the main imports partners of Vietnam?
5. What is the average balance of trade in Vietnam from 1990 until 2013?
I.READING
Reading
Just like any business, a country has to keep track of its inflow and outflow of
goods, services, and payments. At the end of any given period, each country has to look
at its “bottom line” and add up its international trade and investments in one way or
another.
The narrowest measure of a country’s trade, the merchandise trade balance,
looks only at “visible” goods such as videocassette recorders, wine, and motorcycles.
Trade in visible goods is commonly referred to as the trade balance even though it
includes only those tangible goods that can actually be loaded on a ship, airplane, or
whatever means of transport to move goods from one country to another.
The current account is a better measure of trade, because it includes a country’s
exports and imports of services, in addition to its visible trade. It may not be obvious,
but many countries make a lot of money exporting “invisibles” such as banking,
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accounting, and tourism. A tourist abroad, for example, “buys” hotel and restaurant
services in the same way as a consumer at home would buy an imported appliance.
Movies and banking services have to be paid for just like bags of rice.
The current account tells us which countries have been profitable traders, running
a current account surplus with money in the bank at the end of the year, and which
countries have been unprofitable traders, having imported more than they’ve exported,
running a current account deficit, or spending more than they’ve earned.
Trade deficits and surpluses are balanced by payments that make up the
difference. A country with a current account surplus, for example, can use the extra
money to invest abroad, or it can put it in its cookie jar of foreign currency reserves. A
country running a current account deficit has to look abroad for loans or investments or
be forced to dip into its own reserves to pay for its excessive imports. All of these
payments and transfers of funds are added up in a country’s capital account.
The widest measure of a country’s trade is called its balance of payments. It
includes not only payments abroad, but the goods, services, and all transfers of funds
that cross international borders. The balance of payments adds up everything in a
country’s current account and capital account. Since all the trade in goods and services
is “balanced” by the international transfers of funds, the balance of payments should add
up to zero at the end of accounting period. Every banana, every automobile, every
investment and payment that crosses a country’s borders gets included in this final tally
of international trade and investment – the balance of payments.
I COMPREHENSION
I. Comprehension / Interpretation
QUESTIONS
1. Trade surplus means:
A. more of something is coming in more than going out.
B. the amount by which value of goods that a country sells to other countries is
more than the value of goods it buys from them.
C. amount of money that a country has left after it has paid for all things it
needs.
2. “bottom line” in the first paragraph refers to:
A. the lowest part of something.
B. what the most important part of situation is or what the most important thing
to consider is.
C. the profit of the amount of money that a business makes or losses.
230
3. What cannot be definition for the term ‘trade balance’?
A. a statement of how much money a business has earned and how much it has
paid for goods and services.
B. the difference in value between the goods a country buys from abroad and the
goods it sells abroad.
C. the net balance between a country’s exports and imports.
4. Current account in the third paragraph refers to:
A. a bank account that you can at any time.
B. part of the balance of payments account that records non-capital transactions.
C. both visible and invisible transactions.
5. What does a country gain a current account surplus for?
A. to invest overseas
B. to reserve foreign currency
C. both a & b
6. Balance of payment in the last paragraph means:
A. the total and capital account
B. the difference between what a country spends in order to buy goods and
services abroad and the money it earns selling goods and services abroad.
C. a detailed record of all financial and economic transactions between the
residents of two countries.
VOCABULARY
VOCABULARYEXERCISES
EXERCISES
1. Make colloations using one item from each box (A) and (B). Then use the
collocations to complete the sentences.
A B
competitive contractual advantage partners agreement
deeper inward mobile communications investment
trade trading surplus involvement
1. National governments encourage inward investment because it brings

benefits such as the creation of jobs, skills development and technology tranfer.
2. Low labor and manufacturing costs are a major ……………… ……………… in
the global market.
3. Import / ecport is low-risk, but has a low profit potential. If a company wants a
………………… ………………. in the global market they will look at outsourcing.
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4. Outsourcing involves a long-term …………………. ……………… with a low-cost
provider of goods and services.
5. ………………. ………………. make it easy for managers to stay in touch with
colleagues and Head Office.
6. If a country exports more to its ……………… …………….. than it imports, it has a
……………….. ………………. (= positive balance of trade).
2. Fill in the missing letters
1. It is dangerous for a company to stand aside while competitors m_ _ _ e (= joint
together), form j _ _ _ t ven _ _ _es, or create overseas divisions.
2. A ‘sub _ _ _ _ _ _ y’ (= company owned by another company) is not the same as a
‘sub _ _ _ y’ (= money paid by a government to support a business).
3. A less formal synonym for ‘bureaucracy’ is ‘r _ _ t _ _ _’.
4. A technical word for taxes on imported goods is ‘ta _ _ _ _ s’. A word for limits on
the quantity of goods that can be imported is ‘qu _ _ _ s’.
5. ‘The euro against the dollar’ (€ / $) is currently 1.28. ‘The dollar against the yen’
($ / ¥) is currently 115. These are examples of ‘ex _ _ _ _ ge r _ _ _ s’.
6. If a currency falls in value, domestic a _ _ _ts are cheaper for foreigners to buy.
GLOSSARY
GLOSSARY
- keep track of sth/ sbd (n) /ki:p trækt əv/ - pay attention to someone or
something so that you know where they are or what is happening to them - nắm
được thông tin về ai, cái gì
E.g. She keeps track of all tasks and appointments on her PDA, which beeps
throughout the day with reminders
- visible (adj) /ˈvɪz.ɪ.bl̩ / - something that is can be seen - có thể thấy, hữu hình
E.g. visible trade, in economics, is the exchange of physically tangible goods between
countries, involving the export, import, and re-export of goods at various stages of
production.
- tangible (adj) /ˈtæn.dʒə.bl̩ / - Having physical existence and/or form, or
discernible through one or more senses - hữu hình
E.g. A service is an act of labor or a performance that does not produce a tangible
commodity and does not result in the customer’s ownership of anything.
- load (v) /ləʊd/ - to put a large quantity of something into a transporting vehicle
or container - chất hàng
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- appliance (n) /əˈplaɪ.əns/ - A device or instrument designed to perform a specific
function, especially an electrical device, such as a toaster, for household use -
thiết bị, dụng cụ
E.g. There is a trend of networking home appliances together, and combining their
controls and key functions. For instance, energy distribution could be managed more
evenly so when a washing machine is on, an oven can go into a delayed start mode, or
vice versa.
- surplus (n) /ˈsɜː.pləs/ - Extent to which generation of goods, services, and
resources (such as capital) exceeds their consumption - thặng dư, dư thừa
E.g. Surplus of resources is the bedrock on which capitalism is built.
- deficit (n) /ˈdef.ɪ.sɪt/ - excess of expenses over income or liabilities over assets. :
thâm hụt, số thiếu hụt
E.g. A positive balance is known as a trade surplus if it consists of exporting more
than is imported; a negative balance is referred to as a trade deficit or, informally, a
trade gap.
- abroad (adv) /əˈbrɔːd/ - a foreign geographic region or area, relative to the
current location (or home country) of a person or object - ở nước ngoài
E.g. United States business travelers often say that they are traveling abroad to China
but would rarely say they are traveling abroad to Canada.
- reserve (n) /rɪˈzɜːv/ - minimum amount of cash or cash-equivalents (computed as
a percentage of deposits) that banks and other depository institutions (credit
unions, insurance companies) are required by law to keep on hand, and which
may not be used for lending or investing - dự trữ
E.g. Reserve requirements serve as a safeguard against a sudden and inordinate
demand for withdrawals (as in a run on a bank), and as a control mechanism for
injecting cash (liquidity) into, or withdrawing it from, an economy.
- transfer (n) /trænsˈfɜːr/ - moving funds among two or more accounts held by
the same or different entities - chuyển, chuyển nhượng
E.g. In securities trading, transfer is the delivery of a stock (share) certificate by the
seller's broker to the buyer's broker followed by conveyance of the title by recording the
change in the stock (share) register.
- automobile (n) /ˈɔː.tə.mə.biːl/ - motorized vehicle consisting of four wheels and
powered by an internal engine. - xe ô tô
E.g. Automobiles generally use gasoline to fuel the internal engine, but technological
advances have led to the design of cars that run on electricity and even water.
233
PART TWO
READING TEXTS
FOR REFERENCE
234
UNIT 31: THE ROLES OF THE CENTRAL
BANK
UNIT 32: ANALYSIS OF MARKET

OPPORTUNITIES
UNIT 33: MARKETING PLANNING
UNIT 34: THE PROMOTION MIX IN

MARKETING
UNIT 35: PRICING STRATEGIES
UNIT 36: WAYS OF ENTERING A FOREIGN

MARKET
UNIT 37: FINANCIAL ANALYSIS
UNIT 38: FINANCIAL RATIOS
UNIT 39: THE ROLES OF AUDITORS
UNIT 40: DISTINCTION BETWEEN

ACCOUNTING AND AUDITING
235
UNIT
UNIT15 31 THE ROLES OF THE CENTRAL BANK
PREVIEW
PREVIEW
The Bank of England
a> Before reading the text, can you answer these questions
1. What are the functions of a central bank?
2. How can the actions of a central bank affect individuals as well as companies?
b> Discussion
Which of the following would you expect a central bank to do? Mark them A = always,
S = sometimes, or N = never.
1. act as banker to the government and the commercial banks
2. attempt to influence the exchange rate
3. clear cheques between commercial banks
4. decide the country’s minimum interest rate
5. decide all of the country’s interest rates
6. issue banknotes
7. issue securities for companies
8. issue securities for the government
9. keep minimum deposits of commercial banks’ reserves
10. lend money to banks in difficulty
11. lend money to small businesses
12. maintain financial stability
13. manage reserves of gold and foreign currencies
14. manage the assets of wealthy individuals
15. publish monetary and banking statistics
16. supervise the banking system
236
READING
READING
The Bank of England
A. The Bank of England
The Bank of England has two core purposes. One is ensuring monetary stability, i.e.
having stable prices – low inflation – and consequently confidence in the currency. The
government sets an inflation target, and the Bank’s Monetary Policy Committee tries to
meet it by raising or lowering the official interest rate when necessary. UK banks and
building societies have to hold reserves at the Bank. These are remunerated at the
Bank’s official interest rate. If British banks need to borrow short-term funds, they do
this in the sterling money markets. The Bank can influence the amount of money and
the interest rates in these markets – this is how it implements its monetary policy. The
Bank can also deal in the foreign exchange market. It can use the UK’s foreign currency
and gold reserves to try to influence the exchange rate if needed.
The Bank’s other core purpose is to maintain the stability of the financial system.
The Bank has to detect and reduce any threats to financial stability, and make sure the
overall system is safe and secure. It monitors and analyses the behavior of the major
participants in the financial system and the wider financial and economic environment
and tries to identify potential risks. A sound and stable financial system is important and
is also necessary for carrying out monetary efficiently.
The Bank’s role also includes oversight of payment systems for transactions
between individuals, businesses and financial institutions.
The Bank sometimes acts as “lender of last resort” to financial institutions in difficulty,
to prevent panic or a loss of confidence spreading through the whole financial system.
B. Monetary Policy
At the Bank of England, in common with most central banks round the world now,
when we look at monetary policy, it involves changing interest rates. The aim of
monetary policy is to keep inflation low and stable. When you are setting interest rates,
what you are trying to do is to keep demand in the economy, what people consume, how
much they invest, in line with the long-term ability of an economy to supply goods and
services through labour, through people employed, and through the capital employed,
machinery, plant and equipment in the economy.
When interest rates rise, this will mean that individuals will tend to save more
and consume less. Also, for companies, investment decisions are more expensive and
237
that means that demand will tend to be reduced. When interest rates are cut, the opposite
happens – people will spend rather than save and companies have more of an incentive
to invest, and that means that the level of demand rises. And it is by trying to set
demand, to keep demand in line with supply in future, so that the central bank is always
looking ahead.
When the central bank sets the base rate for lending to commercial banks, it
affects the whole structure of interest rates in a country. For example, in the United
Kingdom one of the things it affects very quickly is the rate at which the banks and
other organizations lend to households for their mortgages, but of course it will also
affect the rates at which companies borrow.
Of course, that just means that the central bank controls the short-term interest
rate. What happens to other interest rates, one-year, five-year, ten-year interest rates,
can be quite different.
COMPREHENSION
b> According to A, are the following statements true (T) or false (F)
1 The Bank of England wants to prevent prices rising.

2 The government sets a figure for what it thinks should be the maximum inflation
rate.
3 The government makes decisions about interest rates.
4 Commercial banks have to keep some of their funds at the Bank of England.
5 The Bank does not pay interest on commercial bank’s deposits.
6 The Bank can try to change the sterling exchange rate.
7 The Bank has to eliminate threats to financial stability.
8 The Bank supervises the clearing system: the settlement of claims between
banks.
9 The Bank always lends money to financial institutions in danger of going
bankrupt.
b> According to B, answer the questions below.
1. What is the aim of monetary policy?
2. What tools does a central bank use to control supply and demand for money?
3. What tends to happen when interest rates rise?
4. What tends to happen when interest rate fall?
5. What do commercial banks do after the central bank changes the base rate at which it
lends them money?
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VOCABULARY
EXERCISES
1. Use a word or phrase from each box to make word combinations from the text.
You can use some words more than once. Then use the correct form of some of the
word combinations to complete the sentences below.
identify exchange rates

implement policies
influence risks
maintain stability
reduce threats
1. Just like the central bank, all companies have to try to ……………… potential
financial ……………………
2. The Bank can spend the country’s currency reserves in order to ………………
………….. …………………
3. The Bank can try to ……………… ……………… to the financial system, but it
can’t eliminate them completely.
4. The Bank has to ……………. the ……………. of the financial system, but that
doesn’t mean it rescues irresponsible banks.
5. The Bank ……………… ……………… that should enable it to meet the inflation
target set by the government.
2. Check your understanding of the language Kate Barker uses by matching the
words in the box with their definitions (1 – 8)
base rate consume incentive plant

capital demand labour supply
1. encouragement or a reason to do something

2. factories, and the machines and equipment in them
3. money invested in companies, to buy buildings, machinery, etc.
4. the quantity of goods and services offered for sale by companies
5. the rate at which the central bank lends money to commercial banks
6. to spend money on goods and services
7. what people consume and how much they invest
8. work done by people employed by businesses
239
LANGUAGE
LANGUAGEFOCUS
FOCUS
Talking about figures

When discussing interest rates and monetary policy, you need to know how to say
decimal numbers.
❖ English uses a symbol like a full stop between the two parts of a decimal number.
It is called a decimal point. A comma is not used in this position. In a pure
number (without a unit of measurement), each digit after the decimal point is said
separately.
Examples: 3.5 three point five
3.51 three point five one (not three point fifty-one)
3.14159 three point one four one five nine
3.75% three point seven five percent
❖ However, if the number after a decimal represents a unit of money, length, etc., it
is usually read as a normal number.
Examples: $5.61 five dollars sixty-one (cents)
1.22 one metre twenty-two (centimetres)
❖ 0 is called zero or (mainly in British English) nought. British English also uses
oh, but only after the decimal point, never before.
Examples: 11.005 eleven point oh oh five (or eleven point double oh five)
0.501 zero / nought point five oh one
0.001 zero / nought point oh oh one (or zero / nought point double oh one)
PRACTICE
Read the following sentences out loud:
1. Right now, the euro’s worth $1.0829.
2. That’s up 0.00094 from yesterday.
3. The Bank of England’s base rate is 3.75%
4. 0.001 is also called ten to the power minus 3.
5. The share’s trading at $5.41.
6. They’re buying euros at 1.4435 and selling them at 1.4935.
7. So the spread is 0.05, or about 3.4%.
8. The three-month dollar rate is 2.75%.
9. Did you say 818.818?
10. No, you’re not listening. I said 880.808.
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GLOSSARY
GLOSSARY
- exchange rate (n): the ratio at which a unit of the currency of one country can be
exchanged for that of another country – tỷ giá hối đoái
E.g. Few countries today adopt either the extreme of absolutely fixed exchange rates
or that of pure flexible exchange rates.
- interest rate (n): the percentage of a sum of money charged for its use – lãi suất
E.g. Lenders calculate mortgage interest rates on three major factors - down
payment, credit history and the current economic market.
- banknotes (n) [ˈbæŋkˌnəʊt]: a promissory note issued by a central bank, serving
as money – tiền giấy
E.g. Banknotes have a natural advantage over coins in that they are lighter to carry
but are also less durable.
- securities (n) [sɪˈkjʊərɪtɪ]: A document indicating ownership or creditorship; a
stock certificate or bond – chứng khoán
- reserves (n) [rɪˈzɜːv]: a portion of capital not invested (a capital reserve) or a
portion of profits not distributed (a revenue or general reserve) by a bank or
business enterprise and held to meet legal requirements, future liabilities, or
contingencies – khoản dự trữ
- reserve (v): To keep back, as for future use or for a special purpose – dự trữ
- supervise (v) [ˈsuːpəˌvaɪz]: to direct, control or be in charge of (work, workers
etc.) – giám sát, kiểm soát
E.g. She supervises the typists.
- inflation (n) [ɪnˈfleɪʃən]: a steady rise in the level of prices related to an
increased volume of money and credit and resulting in a loss of value of currency
– lạm phát
- identify (v) [aɪˈdɛntɪˌfaɪ]: to prove or recognize as being a certain person or
thing; determine the identity of – xác định, xác nhận
E.g. Would you be able to identify the man who robbed you?
- mortgages (n) [ˈmɔːgɪdʒ]: A temporary, conditional pledge of property to a
creditor as security for performance of an obligation or repayment of a debt – vay
có thế chấp
241
UNIT
UNIT 31 32 ANALYSIS OF MARKET OPPORTUNITIES
I.READING
Reading
Read the following overview of the market research process. As you read it
complete charts 37.1 and 37.2.
MARKET RESEARCH
This section briefly describes the four steps in market research process, as shown
in chart 37.1: firstly defining the problem and the research objectives, secondly
developing the research plan, then implementing the plan, finally interpreting and
presenting the findings.
Defining the problem and research objectives is often the hardest step in the
research process. The manager may know that something is wrong, but not the specific
causes. For example, managers of a discount retail chain store hastily decided that
falling sales were caused by poor advertising. When the research showed that the
current advertising was reaching the right people with the right message, the managers
were puzzled. It turned out tht the stores themselves were not providing what the
advertising promised.
Chart 37.1
Defining a. ……….. b. ……….. c. …………

the problem ………… …………. …………..
and ………… ………….. …………..
research
………….. ………….. ………….
objectives
When the problem has been carefully defined, the research objectives must be set. The
research may be exploratory in order to gather information to better define the problem.
It may be descriptive – in order to describe market potential, customer attitudes, etc.
Sometimes, it may be causal – to test hypotheses about cause – and – effect
relationships: for example, would a 10 percent decrease in price lead to significantly
higher sales or not?
The second step involves developing a plan for collecting the information. The
information may be available in the form of secondary data – i.e. it already exists
somewhere or it needs to be collected specifically for this project – primary data.
242
Primary data collection calls for decisions about the research approaches, contact
methods, sampling plan and research instruments (see 37.2)
Chart 37.2
Research Research Contact Sampling plan Research
objectives approaches methods instruments
a. d. g. j. m.
____________ ____________ ____________ ____________ ___________
b. e. h. k. n.
____________ ____________ ____________ ____________ ____________
c. f. i. l.
____________ ____________ ____________ ____________
There are three main research approaches: the observational approach involves
gathering information by observing relevant people, actions and situations. For
example, a museum checks the popularity of certain exhibits by noting the floor wear
around them. This approach is most suited where the objective is exploratory.
For the descriptive research, surveys are best suited. These can be structured
using formal lists of questions asked of all respondents in the same way or unstructured
where the interview is guided by the respondent’s answers.
Finally for causal research, an experimental approach is most effective.
Experiments involve selecting matched groups of subjects, giving them different
treatments, controlling unrelated factors and checking for differences in group
responses.
We look at contact methods in more detail in Part 2. Briefly, information can be
gathered either by mail, telephone or personal interview.
Another decision which has to be made concerns the sampling plan. A sample is
segment of the population selected to represent the population as a whole. There are
three variables here: firstly, the sample unit, i.e. who is to be sampled? Secondly, the
sample size, i.e. how many should be surveyed? Thirdly, the sampling procedure, i.e.
how should the people be chosen: at random, at convenience, on the basis of
prejudgment?
Finally, in developing the research plan, a choice must be made in terms of the
research instruments. The most common is the questionnaire. In preparing the
243
questionnaire, the market researcher must decide what questions to ask, the form of the
questions (e.g. open / closed, multiple choice), the wording of the questions and their
ordering. Although questionnaires are the most common instrument, mechanical
instruments such as a galvanometer can be used: this instrument measures the strength
of a subject’s interest or emotions aroused by and exposure to an advert or a picture.
Once all these decisions have been made concerning the research plan, the
researcher must then put it into action. The implementation phase is generally the most
expensive and the most subject to error. The fieldwork must be monitored closely to
make sure the plan is correctly implemented.
The last phase is the interpretation and reporting. The researcher should try not to
overwhelm managers with statistics, but to present major findings that are useful in the
decisions faced by the management.
II.COMPREHENSION
QUESTIONS
1. In the case of the retail chain store, what should the management have done
first?
2. Can you think of another example of a causal research objective?
3. Where could the researcher find secondary data such as competitor
information?
4. What do you think are the advantages / disadvantages of structured versus
unstructured surveys?
5. What sort of experimental research could you carry if you wanted to find out
about the relationship between the weather and the incidence of psychological
depression?
III. Vocabulary
GLOSSARY
- brief: 1. (n) objectives for a campaign given by an advertiser to an agency: bản
tóm tắt hồ sơ tố tụng, bản cáo thị
2. (v) to explain to people before an assignment: giải thích cho mọi người
trước khi nhiệm vụ được giao
3. (adj) ngắn gọn, vắn tắt
- objective (n): thing aimed at or wished for, purpose: mục tiêu
- implement (v): put sth into effect, carry out: thi hành, thực hiện
- interpret (v): explain sth which is not easily understandable: giải thích, lý giải
- puzzle (v): make sb think hard: bắt ai phải suy nghĩ, nghiền ngẫm
244
- hypothesis (n): idea or suggestion that is based on known facts and is used as a
basic for reasoning or further investigation: những giả thuyết
- observation method (n): market research method based on watching
consumers: phương pháp quan sát
- respond (v): phúc đáp, trả lời
sample: 1. (n) a specimen of a product used to show what it is like: mẫu hàng, mẫu
sản phẩm
2. (v) to try out sth: thử hàng mẫu, dùng thử
- segment: 1. (n) a section of the market: phần, đoạn
2. (v) to divide a market into different parts
- represent (v): to act on behalf of a company: đại diện
- representative (n): a sales person: người đại diện bán hàng
- survey (n): an investigation of a particular market: cuộc điều tra, xem xét
- prejudge (v): make a judgment about (a person or case): phán xét về ai phán
đoán
- galvanometer (n): máy mạ kim loại
- arouse (v): đánh thức, gợi lên tình cảm của ai
- exposure (n): publicity given to a product or company: sự phơi bày 1 sản phẩm
hay 1 công ty ra trước công chúng
- monitor (v): make continuous observation of sth, record or test the operation of
sth: theo dõi, quan sát liên tục, ghi chép hoặc kiểm nghiệm hoạt động
- overwhelm (v): overpower sb/ sth by force of numbers, defeat: áp đảo bằng...,
đánh bại
- a discount retail chain store (n): cửa hàng liên nhánh bán hàng hạ giá
- exhibit (n): tang vật, hiện vật đưa ra triển lãm (hoặc làm chứng cớ)
- at convenience (n): tùy tiện, tùy thích
- fieldwork (n): việc nghiên cứu bên ngoài, việc nghiên cứu thực tế
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UNIT
UNIT 32 33 MARKETING PLANNING
I.READING
Reading
In this section you will find an edited extract from The Principles of Marketing
(Kotler and Armstrong) entitled “Strategic planning”. Read it through and complete
Chart 35.1 and 35.2.
Strategic planning is the process of developing and maintaining a strategic fit
between the organization’s goals and capabilities and its changing market opportunities.
It relies on developing a clear company mission, supporting objectives, a sound business
portfolio, and coordinated functional strategies.
The steps in the strategic planning process are shown in Chart 35.1. At the
corporate level, the company first defines its overall purpose and mission. This mission
is then turned into detailed supporting objectives that guide the whole company. Next,
top management decides what portfolio of businesses and products is best for the
company, and how much support to give each one. Each business and product unit must
in turn develop detailed marketing and other functional plans that support the company
– wide plan.
Chart 35.1
Defining a. b. c.
the ………….. ………….. …………..
company ………….. ………….. …………..
mission ………….. ………….. …………..
When management senses that the organization is drifting, it must renew its
search for purpose. It is time to ask: What is our business? Who is the customer? What
is value to the customer? What will our business be? What should our business be?
Companies traditionally defined their business in product terms such as, ‘We
manufacture video games’, or in technological terms such as, ‘We are a chemical
processing firm’. But some years ago, Theodore Levitt proposed that market definitions
stated in terms of particular customer groups or needs were better.
Management should avoid making its mission too narrow or too broad. Mission
statements should be specific, realistic and motivating. As an illustration, the
International Minerals and Chemical Corporation is in many businesses including the
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fertilizer business. As you can see in Chart 35.2, the fertilizer division does not say that
its mission is to ‘fight world hunger’. This mission leads to a hierarchy of business
objectives, marketing objectives and, finally, marketing strategy.
Chart 35.2
Business mission a.
Business objectives
Increase agricultural productivity
b.
c.
Marketing objectives
d. Reduce costs
e. f.
Marketing strategy
g. h.
The mission of fighting world hunger leads to the company’s prime business
objective of ‘increasing agricultural productivity’. This in turn leads to ‘researching new
fertilizers which promise higher yields’. But research is expensive and requires
improved profits to plough back into research programmes. So a major objective
becomes ‘to improve profits’.
Profits can be improved by increasing sales or reducing costs. Sales can be
increased by enlarging the company’s shares of the US market and by entering foreign
markets. These became the company’s current marketing objectives.
Marketing strategies must be developed to support these marketing objectives.
To raise its US market share, the company will increase its product’s availability and
promotion. To enter new foreign markets, the company will cut prices and call on large
farms abroad. These are the broad marketing strategies.
II. Comprehensiion / Interpretation
1. What is wrong with definition a company’s mission in terms of its products or
technology?
2. Do you think the following mission statement of a pencil manufacture is too
broad or too narrow?
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“We are in the communication equipment business”
3. Why is improving profits a necessary objective for the fertilizer division?
III. Vocabulary
GLOSSARY
- strategy (n): future action to achieve objectives: chiến lược
- strategic (adj): referring to a plan of action
- mission (n): long term objectives and philosophy of a company: sứ mạng, nhiệm
vụ
- portfolio (n): collection; a product portfolio – range of a company products
- drift (v): buông trôi vô hướng, phó mặc
- renew (v): đổi mới
- motivating (adj): khích lệ, khuyến khích làm việc
- illustration (n): ảnh minh họa
- fertilizer (n): phân hóa học, phân bón
- hierarchy (n): sự phân cấp
- productivity (n): measurement of output per worker: năng suất lao động
- yields (n): sản lượng
- plough back (v): reinvest in …: tái đầu tư, đầu tư lại
- promotion (n): all means of communicating a message about a product or
service: sự quảng cáo, hoạt động khuyến mại
- sense (v) that: cảm nhận được
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UNIT
UNIT 33 34 THE PROMOTION MIX IN THE MARKETING
I. READING
Reading
Advertising lets the seller repeat a message many times, and it lets the buyers
receive and compare the message of various competitors. Large-scale advertising by a
seller says something positive about the seller’s size, popularity, and success.
Advertising is also very expensive, letting the company dramatize its products
through the artful use of print, sound, and color. Advertising can reach masses of
geographically spread-out buyers at a low cost per exposure. But advertising also has
some disadvantages. Advertising is able to carry on only one way communication with
the audience. Although some forms, such as newspaper and radio advertising can be
done on small budgets, other forms. Such as net work TV advertising, require very large
budgets.
Personal selling. Personal selling is the most effective tool at certain stages of the
buying process, particularly in building up buyers’ preferences, convictions, and
actions. As compared with advertising, personal selling has several unique qualities. It
involves personal interaction between two or more people, so each person can observe
the other’s needs and characteristics and make quick adjustment. Personal selling also
lets all kinds of relationships spring up, ranging from a mater-of-face selling
relationship to a deep personal friendship. The effective salesperson keeps the
customer’s interests at heart in order to build a long-run relationship. Finally, the buyer
usually feels a greater need to listen and respond, even if the respond is a polite: ‘no
thank you’.
Sales promotion. Sales promotion includes a wide assortment of tools coupons,
contests, cents-off deals, premiums, and other and these tools have many unique
qualities. They attract consumer attention and provide information that may lead the
consumer to buy the product. They offer strong incentives to purchase by providing
inducements or contributions that give addition value to consumers.
Public relations. Public relations offer several unique qualities. It is very
believable news stories, features, and events seem more real and believable to readers
than do ads. Public relations can reach many prospects who avoid salespeople and
advertisements the massage gets to the buyers as ‘news’ rather than as sales-directed
communication. And like advertising, public relations can dramatize a company or
products.
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Marketers tend to under use public relations or use it as an afterthought. Yet a well-
thought-out public relations campaign used with other promotion mix elements can be
effective and economical.
COMPREHENSION
II. QUESTIONS
1. What are advantages and disadvantages of advertising?
2. What’s role of personal selling?
3. What can sales promotion help consumers?
4. What is a key difference between public relation and advertising?
5. Which ones have influenced you? Why?
III. Vocabulary
GLOSSARY
- message (n) a short piece of information that you give to a person when you
cannot speak to them directly: lời nhắn, thông điệp
- large-scale (a) describes an event or activity that is large in size: phạm vi rộng
- spread-out (v) to reach or have an effect on a wider or increasing area: rải khắp
- exposure (v): to remove what is covering something so that it can be seen: chào
hàng, phơi bày
- one way communication: giao tiếp một chiều
- spring up (v) to appear or start to exist suddenly: nảy sinh
- matter-of-fact selling: mua bán đơn thuần
- coupon (n): a piece of paper which can be used to obtain something without
paying for it or at a reduced price: phiếu giảm giá
- contest (n) a competition to do better than other people, usually in which prizes
are given: cuộc thi có trao giải
- cents-off-deal: bán hàng giảm giá
- premium (n): bán hàng có thưởng
- premium offer (n): giá chào đặc biệt (để quảng cáo)
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UNIT
UNIT 34 35 PRICING STRATEGIES
READING
READING
Our financial objectives in terms of price will be secured on how much money
we intend to make from a product, how much we can sell, and what market share will
get in relation to competitors. Objectives such as these and how a business generates
profit in comparison to the cost of production, need to be taken into account when
selecting the right pricing strategy for your mix. The marketer needs to be aware of its
competitive position. The marketing mix should take into account what customers
expect in terms of price. There are many ways to price a product. Let's have a look at
some of them and try to understand the best policy/strategy in various situations.
Premium Pricing.
Use a high price where there is a unique brand. This approach is used where a
substantial competitive advantage exists and the marketer is safe in the knowledge that
they can charge a relatively higher price. Such high prices are charged for luxuries such
as Cunard Cruises, Savoy Hotel rooms, and first class air travel.
Penetration Pricing.
The price charged for products and services is set artificially low in order to gain
market share. Once this is achieved, the price is increased. This approach was used by
France Telecom and Sky TV. These companies need to land grab large numbers of
consumers to make it worth their while, so they offer free telephones or satellite dishes
at discounted rates in order to get people to sign up for their services. Once there is a
large number of subscribers prices gradually creep up. Taking Sky TV for example, or
any cable or satellite company, when there is a premium movie or sporting event prices
are at their highest – so they move from a penetration approach to more of a
skimming/premium pricing approach.
Economy Pricing.
This is a no frills low price. The costs of marketing and promoting a product are
kept to a minimum. Supermarkets often have economy brands for soups, spaghetti, etc.
Budget airlines are famous for keeping their overheads as low as possible and then
giving the consumer a relatively lower price to fill an aircraft. The first few seats are
sold at a very cheap price (almost a promotional price) and the middle majority are
economy seats, with the highest price being paid for the last few seats on a flight (which
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would be a premium pricing strategy). During times of recession economy pricing sees
more sales. However it is not the same as a value pricing approach which we come to
shortly.
Price Skimming.
Price skimming sees a company charge a higher price because it has a substantial
competitive advantage. However, the advantage tends not to be sustainable. The high
price attracts new competitors into the market, and the price inevitably falls due to
increased supply.
Manufacturers of digital watches used a skimming approach in the 1970s. Once
other manufacturers were tempted into the market and the watches were produced at a
lower unit cost, other marketing strategies and pricing approaches are implemented.
New products were developed and the market for watches gained a reputation for
innovation.
The diagram depicts four key pricing strategies namely premium pricing, penetration
pricing, economy pricing, and price skimming which are the four main pricing
policies/strategies. They form the bases for the exercise. However there are other
important approaches to pricing, and we cover them throughout the entirety of this
lesson.
Psychological Pricing.
This approach is used when the marketer wants the consumer to respond on an
emotional, rather than rational basis. For example Price Point Perspective (PPP) 0.99
Cents not 1 US Dollar. It's strange how consumers use price as an indicator of all sorts
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of factors, especially when they are in unfamiliar markets. Consumers might practice a
decision avoidance approach when buying products in an unfamiliar setting, an example
being when buying ice cream. What would you like, an ice cream at $0.75, $1.25 or
$2.00? The choice is yours. Maybe you're entering an entirely new market. Let's say that
you're buying a lawnmower for the first time and know nothing about garden
equipment. Would you automatically by the cheapest? Would you buy the most
expensive? Or, would you go for a lawnmower somewhere in the middle? Price
therefore may be an indication of quality or benefits in unfamiliar markets.
Product Line Pricing.
Where there is a range of products or services the pricing reflects the benefits of
parts of the range. For example car washes; a basic wash could be $2, a wash and wax
$4 and the whole package for $6. Product line pricing seldom reflects the cost of
making the product since it delivers a range of prices that a consumer perceives as being
fair incrementally – over the range.
If you buy chocolate bars or potato chips (crisps) you expect to pay X for a single
packet, although if you buy a family pack which is 5 times bigger, you expect to pay
less than 5X the price. The cost of making and distributing large family packs of
chocolate/chips could be far more expensive. It might benefit the manufacturer to sell
them singly in terms of profit margin, although they price over the whole line. Profit is
made on the range rather than single items.
COMPREHENSION
QUESTIONS
1. What are some of financial objectives in terms of price?
2. What is premium pricing strategy? In what circumstances is it likely to be used?
3. What is penetration pricing strategy?
4. What is the main objective of penetration pricing strategy?
5. Are there any differences between penetration pricing strategy and economy pricing
strategy?
6. What types of products is the economy pricing strategy suitable for?
7. When is psychological pricing approach used?
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GLOSSARY
GLOSSARY
- Pricing strategy (n): method companies use to price their products or services –
chiến lược định giá
E.g. There are several different pricing strategies, such as penetration pricing, price
skimming, discount pricing, product life cycle pricing and even competitive pricing.
- luxury (n) [ˈlʌkʃərɪ]: Something inessential but conducive to pleasure and
comfort – hàng xa xỉ
E.g. We're going to give up all those luxuries and only spend money on essentials.
- Penetration pricing (n) – the pricing approach used to set a low price for its
product or service in hopes of building market share – chiến lược định giá xâm
nhập thị trường
- Discount (v) [dɪsˈkaʊnt ˈdɪskaʊnt]: to sell or offer for sale at a reduced price –
chiết khấu, giảm giá
E.g. Tour prices are being discounted.
- Price skimming (n): a pricing strategy in which a marketer sets a relatively high
price for a product or service at first, then lowers the price over time.
E.g. Price skimming is sometimes referred to as riding down the demand curve.
- Sustainable (adj) [səˈsteɪnəbəl]: capable of being maintained at a steady level

without exhausting natural resources or causing severe ecological damage – bền
vững
E.g. “sustainable development”
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UNIT
UNIT3536 MARKETING STRATEGY AND PRODUCT
DEVELOPMENT
READING
READING
Marketing strategy
A marketing strategy includes the following:
➢ Analysis of the wider business environment. More specifically: the political /
legal, economic, social / cultural, and technological factors operating in the
external world. (The acronym ‘PEST’ is sometimes used here).
➢ Identification and analysis of target markets for new products
➢ Sales goals in terms of volume and revenue.
➢ The marketing budget.
➢ Elements of the marketing mix, and their timing.
The term “marketing mix” is another name for the well-known four “Ps”:
product, price, place (ie distribution channel) and promotion. Some writers would add a
fifth “P”: packaging. The importance of packaging is often underestimated: it attracts
the buyer’s attention, it explains the benefits of the product inside, it describes the
ccontents, and of course it also protects the product during handling and ccontributes to
convenience and ease-of-use. And these days environmentally-friendly packaging can
give a product a competitive advantage. There is even a sixth “P”: people. This refers to
the knowledge, skills and personality of the pre-sales and after-sales staff who come
into contact with the customer.
Marketers often use the term “total product offer” to reinforce the diversity of
elements that make up a “product”. These include value-for-money (= relationship
between quality and price), brand name and image, packing, convenience of sales
channel, store surroundings, service, speed of delivery, the guarantee, etc.
Market research
How do marketers identify the need for new products? How do they decide how
to umprove existing products? One very important way is by collecting data using
market research. Other ways are listed under “origin of new product ideas”.
The easiest data to collect is information that is already available (= secondary
data). This may be internal company data such as the company’s sales figures broken
down according to different categories (customers, product lines, territories, etc.)
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Alternatively, it may be external data found in published sources such as reports form
government agencies, trade associations and professional research firms.
Another important source of secondary data is simply to look at consumer buying
patterns in more developed markets where the product is already available. Data
collected for the first time (= primary data) is more difficult and expensive to obtain, but
will give answers to the exact questions that marketers are interested in. It includes both
quanatitative information (eg carrying out a survey on a representative sample of people
using a questionnaire) and qualitative information (through focus groups, face-to-face
interviews, etc.) Another important source of primary data is looking at the activity of
competitors (= benchmarking), and this may include looking at their product range or
their marketing strategy. A new area of research is ethnography: studying people’s
behavior in natural environments.
Of all the techniques above, focus groups in particular can give very valuable
information. A small group of consumers sit in a room and discuss a variety of
predefined topics. They might be asked how they feel about a particular brand, which of
various possible new advertising campaigns they prefer, what ideas they have for
improving an existing product, etc. The interview is usually recorded for later analysis.
Market segmentation
Who is the target market for a product? An inmediate distinction is whether it is
an industrial product (B2B: business-to-business), or a consumer product (B2C:
business-to-customer) aimed at end-users. A third category might be products for use in
hospitals, schools, public transport, etc (B2G: business-to-government).
In relation to consumer products, the “mass market” is becoming an old-fashioned
concept. Products are increasingly targeted at specific market segments. There are four
basic methods for segmenting a market:
• Product-related: comfort, safety, luxury, good value-for-money, convenience,
durability, etc.
• Demographic: age, gender, eduction, family life cycle, imcome, occupation, etc.
• Psychographic: attitudes, lifestyle, opinions, values, self-image, etc.
• Geographical: region, post code, etc.
COMPREHENSION
QUESTIONS
1. How many categories does a marketing strategy include?
2. What does the abbreviation “PEST” stand for?
256
3. What are four “Ps” of the marketing mix?
4. How important is the fifth “P” – packaging?
5. What does the sixth “P” – people refer to?
6. What type of information is considered as secondary data?
7. What are sources of secondary data?
8. What type of information is considered as primary data?
9. Where is primary data collected from?
10. What does “market segmentation” mean?
GLOSSARY
GLOSSARY
- target market (n) - a group of customers that the business has decided to aim its
marketing efforts and ultimately its merchandise towards. – thị trường mục tiêu
E.g. A well-defined target market is the first element to a marketing strategy.
- Packaging (n) [ˈpækɪdʒɪŋ] - the design of such a box or wrapping, esp with
reference to its ability to attract customers – sự đóng gói, gói hàng
E.g. The packaging is made from recycled materials.
- Underestimate (v) [ˌʌndərˈɛstɪˌmeɪt] - to estimate at too low a value, rate, or the
like – đánh giá thấp
E.g. The first lesson I learnt was never to underestimate the enemy
- Reinforce (v) [ˌriːɪnˈfɔːs] - to give added strength or support to – củng cố, thúc
đẩy
E.g. This sense of privilege tends to be reinforced by the outside world
- Diversity (n) [daɪˈvɜːsɪtɪ] - the state or quality of being different or varied – đa
dạng
E.g. “the cultural diversity of British society”
- quanatitative (adj) [ˈkwɒntɪtətɪv -ˌteɪ-] - being or capable of being measured by
quantity – định lượng
- Qualitative (adj) [ˈkwɒlɪtətɪv -ˌteɪ-] - pertaining to or concerned with quality or
qualities – định tính
- Benchmark (v) To measure (a rival's product) according to specified standards
in order to compare it with and improve one's own product
- market segmentation (n) - A marketing term referring to the aggregating of
prospective buyers into groups (segments) that have common needs and will
respond similarly to a marketing action – phân đoạn thị trường
E.g. Market segmentation enables companies to target different categories of
consumers who perceive the full value of certain products and services differently from
one another.
- segment (n) [ˈsɛgmənt] - one of the parts into which something is divided; a
division, portion, or section –
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UNIT
UNIT37 37 CATEGORIES FOR FINANCIAL ANALYSIS
I.READING
Reading
Read the following text about financial ratios and complete Chart 37.1.
There are four critical areas of a company’s business which can be analyzed by
applying ratio. These are liquidity, capital structure, activity and efficiency, and
profitability.
Measurements of liquidity should answer the question: Can a company pay its
short-term debts? There are two ratios commonly used to answer this question. Firstly,
the current ratio, which measures the current assets against the current liabilities. In
most cases, a healthy company would show a ratio above 1, in other words more current
assets than current liabilities. Another method of measuring liquidity is the so-called
quick ratio – this is particularly appropriate in manufacturing industries where stock
levels can disguse the company’s true liquidity. The ratio is calculated in the same way
as above but the stocks are deducted from the current assets.
The balance sheet will also reveal the gearing of the company – this is an
indicator of the company’s capital structure and its ability to meet its long-term debts.
The ratio expresses the relationship between shareholder’s funds and loan capital.
Income gearing is also important and shows the ratio between profit and interest paid on
borrowings. Relatively high borrowings would indicate vulnerability to an interest rate
rise. Highly geared companies generally represent a greater risk for investors.
The balance sheet and the profit and loss account can be used to assess how efficiently a
company manages its assets.
Basically, sales are compared with invesment in various assets. For example, in
the retail sector, an important ratio which indicates efficiency is sales divided by stock –
the resulting figure should be much higher tha in the manufacturing factor where stock
tends to show a much slower turnover. Another example of efficiency measurement is
to calculate the average collection period on debts. This is found by dividing debtors by
sales per day. This can vary tremendous from industry to industry. In the retail sector it
may well be as low as one or two days, whereas in the heavy manufacturingand service
sectors it can range from thirty to ninety days.
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Finally, profitability ratios show the manager’s use of the company’s resources.
The profit margin figure (profit before tax divided by sales and expressed as a
percentage) indicates the operational day-to-day profitability of the business. Return on
capital employed can be calculated in a number of ways. One common method is to take
profit before taxes and divided by the total assests – this is a good indicator of the use of
all the assets of the company. From a shareholder’s point of view, the return on owner’s
equity will be an important ratio; this is calculated byy dividing the profit before taxes
by the owner’s equity and expressing it as a percentage. If the company does not earn a
reasonable return, the share price will fall and thus make it difficult to attract additional
capital.
Chart 32.1
Key indicators Ratio used Interpretation
Liquidity (i) …………………………… ………………………………….
………………………………….
(ii) …………………………. ………………………………….
………………………………….
Capital structure (i) …………………………… ………………………………….
………………………………….
(ii) …………………………. ………………………………….
………………………………….
Efficiency (i) …………………………… ………………………………….
………………………………….
(ii) …………………………. ………………………………….
………………………………….
Profitability (i) …………………………… ………………………………….
………………………………….
(ii) …………………………. ………………………………….
………………………………….
(iii) ………………………… ………………………………….
…………………………………
COMPREHENSION
Which of the ratios is likely to be the key indicator for the following groups?
1. Shareholders 2. Managers
259
3. Customers 4. Suppliers
5. Employees
LANGUAGE
LANGUAGE FOCUS
FOCUS
1. Adjective modification
Look at the following sentences from the reading text:
“This is particularly appropriate in munufacturing industries where stock levels …”
“Relatively high borrowing would indicate vulnerability to an interest rate rise.”
Now comebine two adjectives from the list below to complete the sentences:
high long lower short high
dangerous particular unusual considerable geared
1. Normally a healthy company has a current ratio above 1. This company has an
…………………. ratio of 2.
2. ……………. ……………. companies generally represent a greater risk for investors.
3. Retail companies have ……………… ……………….. collection periods on debts.
4. Most people would consider a collection period over 90 days as ……………….
5. Manufacturing companies have a ……………. ……………… stock turnover than
retail company.
2. Adjectives and adverbs
Complete the list below:
Noun Adjective Adverb
profitability profitable ………………….
efficiency ……………………… ………………………
health …………………….. ……………………..
appropriacy …………………….. ……………………..
operation ……………………… ………………………
finance …………………….. ……………………..
productivity …………………….. ……………………..
management …………………….. ……………………..
GLOSSARY
GLOSSARY
- ratio (n): proportion of something compared with another thing – hệ số
260
- liquidity (n): having assets which can be converted into cash – tính thanh khoản,
tính lỏng hay khả năng dễ chuyển đổi thành tiền mặt
- liquid (adj): easy to be converted into cash – dễ thanh khoản
- capital structure (n): cơ cấu vốn
- profitability (n): ability to make a profit – khả năng sinh lời
- disguise (v): hide sth – che dấu, che đậy
- deduct (v): to subtract from the total figure – khấu trừ
- deductible (adj): which can be deducted – được khấu trừ
- reveal (v): make sth known – tiết lộ
- vulnerability (n): sự tổn hại
- gearing (n): hệ số vốn
- assess (v): to calculate the value of – định giá
- turnover (n): total amount of sales – doanh thu
- collect (v): to make somebody pay their debts – thu
- resources (n) vốn, tài sản
- margin (n) difference between income and costs – giới hạn
- operational (adj): working, running – hoạt động
- return on capital (n) – lợi nhuận
- indicator (n): something which is significant – chỉ số
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UNIT
UNIT 38 38 FINANCIAL RATIOS
READING
READING
Financial ratios based on the balance sheet and the income statement.
To understand the financial ratios, it is useful to base on the following sample balance
sheet and income statement.
262
Financial statement analysis includes financial ratios. Here are three financial ratios that
are based solely on current asset and current liability amounts appearing on a company's
balance sheet:
263
264
Four financial ratios relate balance sheet amounts for Accounts Receivable and
Inventory to income statement amounts. To illustrate these financial ratios we will use
the following income statement information:
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UNIT
UNIT 32 39 THE ROLE OF AUDITORS
I. READING
Reading
Read the article “Auditors may assume the role of whistle – blower” by David Walker.
After you have read it, complete true / false exercise:
An auditor finds out early in his training that he is a watchdog and not a
bloodhound. From today, when Auditing Practices Committee (APC) issues its long –
awaited guideline on auditors and fraud, an auditor will also have to consider himself a
whistle-blower.
The guideline, which follows a gestation period of no less than five years, sets
out to clarify auditors’ responsibilities in relation to fraud, as well as other irregularities
and errors. It recommends that auditors take a modestly pro-active role in reporting
fraud to third parties.
The document acknowledges that an auditor’s primary duty is one of
confidentiality to the client. But the document says an auditor should also consider
throwing this narrow duty aside and think of the wider public interest.
Taking its cue from an ethical statement issued in 1998, Professional Contact in
Relation to Defaults or Unlawful Acts, the document spells out the circumstances when
the public interest could be served by a nod and a wink to the Department of Trade and
Industry or some other official authority.
Under normal circumstances, the auditor’s first step would be to alert the client’s
management to the existence of fraud. But the guideline says that if senior managers or
directors are involved in the fraud, the auditor may see fit to go over the head of the
board of directors, even non-executive directors and the audit committee, to directly
report to the regulatory authorities.
Alerting the authorities would be justified the fraud is likely to result in a
material gain or loss for any one person or group of people; is likely to be “repeated
with impunity” if not disclosed; or if “there is a general management ethic… of flouting
the law and regulation.” The strength of the auditor’s evidence is deemed important,
too.
Legal advice on the matter given to the APC said auditors should attach
importance to the wider interests of the company in any case “where the auditor
considered that the directors could not be relied upon to apply their minds property to
those interests.”
266
The advice continued: “An auditor will not be in breach of any legal duty if,
although entitles to disclose, he fails to do so. His decision whether to do so or not is
therefore a matter of professional judgment and not a matter of law. It is a decision
which should reflect the proper expectations which the public has of his profession.”
So despite the codification of responsibilities within the guideline, it is all a
matter professional judgment. It appears that the only circumstances where the auditor
of a company not in the financial sector definitely must “blow the whistle” is when he
stumbles upon treason; a practice for which there is as yet no APC guideline.
Responsibilities are different for companies covered by the special requirements
of the Financial Services Act 1986, the Building Societies Act of the same year and the
Banking Act 1987. Following Professor Grower’s reports on Investor Protection (in
1982 and 1984), companies covered by this legislation can only be authorized to
conduct business if they keep proper accounting records and have adequate internal
controls.
These Acts require that auditors make specific representations to the regulators
on these and other points and describe the circumstances when auditors should go
directly to the authorities in order to protect the interests of shareholders or depositors.
Today’s guideline – which for the first time establishes rules for auditors
reporting on companies not in the financial sector – will offer solace to auditors
confused about the precise nature of their duties.
The guideline makes it clear that the prime responsibility for detecting fraud rests
with management. The auditor must plan an audit so that he or she has a “reasonable
expectation” of spotting serious misstatements which impinge on the truth and fairness
of a set of accounts.
Thus the discovery of a major fraud after a set of accounts has been signed off is
not necessary evidence that the auditors have been failed to meet their responsibilities,
guideline will say. This is accurate – but hardly consolatory to companies who employ
auditors or investors who rely on audited accounts which subsequently prove to be less
than “true and fair”.
Investor, for one, are still reeling from the implications of the verdict in the
Caparo case earlier this month which, in layman’s terms, said that auditors do not owe
much of a duty to anybody other than existing shareholders.
Today’s guideline from the APC is pitched towards the practitioner and not the
business public at large. It is unlikely to do much to tackle the gulf between what the
267
public think auditors should do and what the auditors themselves think that they are
doing.
Research by KPMG Peat Marwick Mc Linktock shows, this gap is very wide.
Peat Marwick polled 2,191 adults in the UK, of whom 122 were categorized as
“influential” (i.e. chairman, director or partner in an enterprise employing more than 50
people), and a further 232 described as “financially aware” (owing and managing a
portfolio of shares). For the accountant worried about his or her image, the results were
disturbing. There was widespread ignorance of what auditors do, even on the part of
people in the influential and financially aware groups.
Three- quarters of the total sample thought that it was the responsibility of
auditors to check for fraud of all kinds, including 56 percent of the influential category
and 78 percent of the financially aware group.
More than 61 percent of the total believed that it was the responsibility of
auditors to check for fraud of all kinds, including 42 percent of the influential and 65
percent of the financial aware.
Other disturbing findings were that more than one third of the financially in the
know group thought that auditors guaranteed the financial soundness of a company; and
one-in-five of this group thought that audited financial soundness of a company.
Some 27 percent of the total thought that auditors checked between 91 and 100
percent of all a company’s financial transactions.
However, there is some good news for the much – misunderstood auditors:
almost two-third of the top people have a favourable impression of auditors.
This compares to a mere 33 percent who have a favourable impression of the
management consultants.
Exercise
Indicate whether the following statements are true (T) or false (F)
1. The report confirms an auditor’s first responsibility of confidentiality to his
client.
2. The report suggests auditors must also consider other publics.
3. Auditors should always go direct to the regulatory authorities in cases of
fraud.
4. There are no cases where an auditor is legally obliged to disclose information
to the authorities.
268
5. Most “professional people” are aware of what auditors do.
6. An auditor’s role is very often confused with that of an accountant.
II.VOCABULARY
EXERCISES
1. Match these three roles (the expressions are metaphors) with their best
definition:
Roles Definitions
Watchdog Responsibility for overseeing a company’s finances
Bloodhound Responsibility for informing the authorities of malpractice
Whistle- blower Responsibility for tracking down the instigators of
malpractice
2. Answer the following questions

1. In what circumstances should auditors not inform management of fraud /
malpractice?
2. Who is protected by the Financial Services Act 1986?
3. What do you think the Carapo case was about?
4. How would you summarise the responsibilities of an auditor?
III. Vocabulary
GLOSSARY
audit (n): examination of the accounts of a company: kiểm toán
auditing (n): quá trình kiểm toán
auditor (n): person who audits:nhân viên kiểm toán
bloodhound (n): chó săn khát máu
guideline (n): nguyên tắc
fraud (n): making money by not telling the truth: gian trá, gian lận, lừa đảo
fraudulent (adj): not honest
gestation (n): sự thai nghén / ấp ủ (một ý tưởng)
clarify (v): make clear: làm rõ
pro-active role (n): vai trò chủ động tích cực
acknowledge (v): accept the truth of sth: thừa nhận
throw sth aside (v): để... sang một bên
cue (n): gương tốt, điển hình
ethical (adj): hợp lẽ phải, có đạo đức
default (n): trễ hẹn trả nợ, thất bại
269
spell sth out (v): giải thích
a nod and a wrink (n): một cái gật đầu và một cái nháy mắt
see / think fit to do sth (v): quyết đinh / chọn lựa thích hợp để làm cái gì đó
justify (v): chứng minh
impunity (n): thoát nạn, được miễn tội
disclose (v): tiết lộ, phơi bày ra
flout (v): disobey sb / sth openly and scornfully: coi thường (luật pháp, pháp luật...)
deem (v): regard, consider (in passive): nghĩ rằng
breach (n): to be in breach: vi phạm (luật...)
codification (n): việc soạn / lập bộ luật, điều lệ
treason (n): sự phản ứng, phản đối
solace (n): niềm an ủi, niềm khuây khỏa
spot (n): ngay lập tức, ngay tại chỗ
misstatement (n): lời phát biểu sai, lời tuyên bố sai
impinge on/ upon sth (v): gây ảnh hưởng / tác động tới
consolatory (n) sb on sth: để chia sẻ, an ủi
reel from sth (v): cảm thấy chóng mặt / choáng váng
verdict (n): lời phán quyết, nhận định
layman (n): người không chuyên môn, nghiệp dư
pitch towards sb (v): tạo đà làm việc hăng say cho ai
tackle (v): khắc phục, giải quyết
gulf (n): sự khác biệt, hố sau ngăn cách
poll (v): hỏi ý kiến thăm dò
malpractice (n): việc làm phi pháp, hành động bất chính
270
UNIT
UNIT40 40 DISTINCTION BETWEEN AUDITING AND
ACCOUNTING
I.READING
Reading
TEXT ONE
Many financial statement users and members of the general public confuse
auditing with accounting. The confusion results because most auditing with accounting.
The confusion results because most auditing is concerned with accounting information,
and many auditors have considerable expertise in accounting matters. The confusion is
increased by giving the title “public accountant” to individuals performing a major
portion of the audit function.
Accounting is the process of recording, classifying and summarizing economic
events in a logical manner for the purpose of providing financial information for
decision making. The function of accounting, to an entity and to society as a whole, is to
provide certain types of quantitative information that management and others can use to
make decisions. In order to provide relevant information, accountants must have a
thorough understanding of the principles and rules that provide the basis for preparing
the accounting information. In addition, accountants must develop a system to make
sure that the entity’s economic events are properly recorded on a timely basis and at a
reasonable cost.
In auditing accounting data, the concern is with determining whether the
recorded information properly reflects the economic events that occurred during the
accounting period. Since the accounting rules are the criteria for evaluation whether the
accounting information is properly recorded, any auditor involved with these data must
also thoroughly understand the rules – accounting standards.
In addition to understanding accounting, the auditor must also possess expertise
in the accumulation and interpretation of audit evidence. It is the expertise that
distinguishes auditors from accountants. Determining the proper audit procedures,
sample size, particular items to examine and timing of the test, and evaluating the
results, are problems unique to the auditor.
271
II.COMPREHENSION QUESTIONS
1. Why do people confuse auditing with accounting?
2. What is the job of an accountant?
3. What is the function of accounting?
4. In your opinion, what qualifications are needed for an accountant?
5. What is the task of an auditor?
6. What is the expertise that distinguishes auditor from accountants?
TEXT TWO
AUDITING
To related parties and to outsiders of a business, any financial record should be
fair and lawful. They want it audited. Auditing is the task of checking and affirming the
fairness and reliability of financial records on the base of accounting standards. Each
country has its own auditing standards. International auditing standards aim at
developing the coordination of accounting work across the world.
Auditing is carried out in three levels: government auditing or legal auditing, a
compulsory inspection; independent auditing or certified public accounting, a consultant
service performed at the request of businesses; and internal auditing, a system of
internal control that aims at protecting the assets of a business.
An audit is an investigation of every item, in currency amount, and disclosure
which appears in the financial statements. Its process consists of: audit planning (an
internal control is analyzed to assess inherent and control risks), audit performance
(serious improperties should be found or the auditor may suffer auditing risks that
affect his fame), audit completion (audit report – auditor’s opinion – is given).
Comprehension
COMPREHENSION/ Interpretation
QUESTIONS
According to the text, are the following statements TRUE or FALSE?
1. Auditing is an accounting function that involves the review and evaluation of
financial records.
2. All countries have the same auditing standards.
3. The precision with which an auditor expresses his opinion is not important.
4. Only very large corporations need audits.
5. An auditor needs to have a good background in accounting.
6. Independent auditing is done by accountants who are not employees of the
organization whose books they examine.
272
7. The more internal controls an organization has, the more efficient is its
operation.
8. The people who keep the financial records for an organization are the same
people who carry out an audit of those records.
III. Vocabulary
GLOSSARY
confuse (v): to mistake one person or thing for another: nhầm lẫn
expertise (n): (in sth/ doing sth)
expert great knowledge or skill, esp. in a particular field: kiến thức chuyên môn,
sự lão luyện
quantitative (adj): of or concerned with quantity: định lượng
entity (n): a thing with distinct and independent existence: thực thể
criterion (pl: criteria): a standard or principle by which something is judged: tiêu
chuẩn
unique (adj) (to sb/ sth)
belonging to or connected with only one person, group or thing: chỉ liên quan,
thuộc về 1 người, 1 nhóm người, 1 đồ vật...
affirm (v) to state formally or confidently that sth is true or correct: xác nhận
compulsory (a) that must be done required by the rules: cưỡng bách
inspection (n): official examination: thanh tra
disclosure (n) the action of making sth known a thing that is made known: những ghi
chép sự công khai, không che giấu
inherent: existing as a permanent feature or quality of sb / sth: cố hữu, vốn có, tiềm
tàng
improperty: behavior that is dishonest, morally wrong or not appropriate in the
circumstances: sai phạm
273
REFERENCES
Coucom, C. (2008) IGCSE and O Level Accounting. Cambridge: Cambridge University
Press.
Emmerson, P. (2007). Business English Handbook. Oxford: Macmillan Publisher.
MacKenzie, I. (1997). English for Business Studies. Cambridge: Cambridge University
Press
Mascull, B. (2002). Business Vocabulary in Use. Cambridge: Cambridge University
Press.
Mishkin, F. S. (2007). Economics of Money, Banking and Financial Markets - 8th
Edition. Pearson Education, Inc.
French, J. T. (2000). You’re in business. (T. Y. Nguyen, Trans.) Hochiminh city:
Hochiminh city Publisher.
Yates, C. S. J. (1995). Economics. Hertfordshire: Phoenix ELT.
274

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PART ONE

CHAPTER 1 BACKGROUND FOR

UNIT 2: ECONOMIC SYSTEMS

UNIT 5: DEMAND AND SUPPLY

2. Who are they?

2. Match the words with the definitions below.

Current Issues in Economics

DHL FROM START TO FINISH

Limited SCARCITY of unlimited

Society’s 3 opinions for dealing with scarcity

Economic Improve the use of Reduce

Allocative Productive Equity Full

(Flowchart depicting the processes involved in efficient allocation)

1. In a planned economy, who makes decisions on the allocation of scarce

Example: A withdrawal limit of $200; no minimum age limit.

- limited (adj) = scarce (adj) – khan hiếm

Just as the speed of an engine is regulated by its supply of fuel, macroeconomics

2. Complete the following sentences by using appropriate words or phrases in

Relative clauses (2): where, with, what

has a better view a color monitor a bit more expensive

1. I’ve got a new credit card with a £2000 credit limit

UNIT 6: PUBLIC FINANCE

UNIT 7: FISCAL POLICY

UNIT 9: DIFFERENT TYPES OF TAXES

UNIT 10: INSURANCE

(Source: Thanhniennews.com: Saturday, October 19, 2013 16:50)

1. Monetary policy is one of the tools that a ………………… Government uses to

➢ Benjamin Franklin, who wrote that: “In this world

………….. Advantages and disadvantages of different tax systems

A The primary function of taxation is, of course, to raise revenue to finance

- Governments can also encourage capital investment by permitting various

Verbs + -ing form or to + infinitive

❖ The expressions below are followed by the –ing form:

Dear Mr. Williams,

Business Taxes versus Personal Taxes

Prefix Examples Prefix Examples

2. By 2013, how many insurance companies have been operating in Vietnam?

Match the words or phrases in the box with their definitions

a basic type of permanent life insurance which can provide

UNIT 11: MONEY AND ITS

UNIT 12: MONETARY POLICY

UNIT 13: BANKING BUSINESSES

UNIT 14: FOREIGN EXCHANGE

UNIT 15: FINANCIAL MARKETS

Symbols Currencies (Code) Symbols Currencies Symbols Currencies

₹ India rupee (INR)

Noun + preposition combinations

at a good price at a profit/loss at cost price

B A: Hello, can you put me through to the Marketing Department, please?

Exercise 3: Complete the following advertisement with the missing prepositions

THE MOST IMPORTANT INVESTMENT YOU’LL EVER MAKE

B. The central bank’s control over the supply of money

boom depression flexible growth increase

boom employment interest rates output recession

Verbs Nouns Adjectives Adverbs

Verbs Concrete and Nouns for Adjectives Negative

a> Match up these terms with the definitions below

cash card home banking overdraft current account (GB) or checking

………………… 1. to place money in a bank; or money placed in a bank

- Commercial or retail banks are businesses that trade in money

❖ Verb + object + preposition

ask someone for invest something in

- We spent too much on advertising last year.