39 Financial performance

- Finance
Please study the input and exercises in the units in this Company Finance section (Units 39-46) in the
order given, as each unit re[ies on knowledge of previous units.
Finance is the way money is made, lent, used, etc. To describe the finandal situation of a
government, organization or person, you talk about their finances. The way that something is paid
for is the way that it will be financed - its financing. A financier is someone who works in finance at
a high level, providing money for particular companies, projects, etc.
Financial reporting is the information that a company gives about its finances. Financial
performance is how well, or badly, a company is doing from a financial point of view.

- Financial reporting
Maria Malone is the chief finance officer {CFO) of a
large international media company, based in the UK,
with activities in television and publishing. She's
talking to new trainees in the finance department:
'As with all companies, investors and analysts want
to know how the company is being run and how
their money is being used. Each year we produce an
annual report with three key sets of figures:
• profit and loss (P&l) account
• balance sheet
• cashflow statement
'These are the three key financial statements in US companies publish their results
financial reporting. They give the basic information every quarter - every three months.
about our financial results (see Units 40-42).'

The financial year

'Our financial year ends on 31 March, although other companies choose other dates. Soon after this,
we publish preliminary resiults or prelims. The full report and accounts are published a few
months later. As a UK company, we also publish interim results or interims after the first six months
of our financial year.'

Shareholders, bondholders and lenders

'We use shareholders-' money from the shares that we issue to operate and invest in the business.
Some of the profit we make is normally paid out to them, usually in the form of dividends in
relation to the number of shares that they each hold. Our shares are traded - bought and sold - on
the London stock market.
'We borrow money in the form of bonds. We pay percentage interest on those bonds and then later
repay the principal- the-amount of money originally lent to us. Our bonds are traded on bond
markets.
'We also borrow money fro111 banks in the form of loans, and we pay interest on thiis lending.
'Of course, our shareholders, bondholders and lenders aH take a keen interest in 01..ir accounts!
'The results we publish can affect share prices; good results cause prices to rise if the market
believes the company is undervalued. However, poor results often cause a drop in 'share price, as
hwestors feel the company is overvalued.'

86 Business Vocabulary in Use Advanced

39.1 Complete these sentences with appropriate forms of expressions from A opposite.
1 The separation between shareholders and managers allowed for firms to be __ .. ,........................................
without further involving the in the running of the corporation.
2 The firm helped companies that could not obtain from conventional banking
sources.
3 The company is in a terrible state - its .. ...............................................are in crisis and production is falling.

39.2 Complete the crossword with the correct form of words from A, B, C and D opposite.

Across
3 and 7 down one of the three key financial statements (6, 3, 4, 7)
6 what you get for lending money (8)
8 what you normally get if you own shares (9)
10 another of the three key financial statements: statement (8)
12 Final information about a company's performance is found in the report and accounts. (4)
14 the third of the key financial statements (7, 5)
15 information about the first part of the year (7, 7)
Down
1 the executive in charge of money: chief. . . (7, 7)
2 If you think a company's shares are cheaper than they should be, they are . (11)
3 results that are not final (7)
4 the adjective from finance (9)
5 the owner of bonds {10)
7 see 3 across
9 abbreviation for 1 down (3)
11 people and institutions that lend money (7)
13 money borrowed from a bank is a... ......
. (4)

Over to \IIJ1J
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.,....�-�'"t.l:'

• Why do companies spend money on making their annual reports look attractive?
Who are they intended for?
• Why might a company see its annual report as a marketing tool?

Business Vocabulary in Use Advanced 87