Success and failure HEY Cash mountains and surpluses Predaco is a successful company. Over the years, it has distributed some profits or earnings to shareholders, but it has also kept profits in the form of retained earnings and built up its cash reserves; itis sitting on a cash pile or cash mountain. These reserves may be used for investment or to make acquisitions: ro buy other companies. (See Unit 34) HELD (Debt and debt problems Here are some expressions that can be used to talk about a company’s debts, or a country’s foreign debts: repayment when a company repays its debt and/or interest on it; servicing ‘debt repayment’ describes a particular amount repaid burden a company’s debt, especially when considered as a problem debt 4 crisis when a company has serious difficulty repaying its debt rescheduling when a company persuades lenders to change restructuring _ repayment dates and terms default when a company fails to make a debt repayment Note: : reschedule rea to Restructure 2 debt to default on | a debt service Turnarounds and bailouts Doomco is in financial trouble and it is being described as sick, ailing and troubled. They've called in a company doctor, Susan James, an expert in turning round companies. There may be a turnaround and Doomco may recover. But if there is no recovery, the company may collapse completely. Ms James is currently looking for another company to bail out Doomco by buying it. This would be a bailout. Bankruptcy Ifa company is in serious financial difficulty, it has to take certain legal steps. In the US, it may ask a court to give it time to reorganize by filing for bankruptcy protection from creditors, the people it owes money to. In Britain, a company that is insolvent, i.e. unable to pay its debts, may go into administration, under the management of an outside specialist called an administrator. If the company cannot be saved, it goes into liquidation or into receivership. Receivers are specialists who sell the company’s assets and pay out what they can to creditors When this happens, a company is wound up, and it ceases trading, A company in difficulty that cannot be saved goes bankrupt. 4 Business Vocabulary in Use33.1 33.2 33.3 Match the sentence beginnings (1-6) with the correct endings (a-f). The sentences all contain expressions from A opposi 1 For a group sitting on a cash mountain of £2 billion, GEC’s sale of 2 The group had a cash pile of nearly £300 million at the end of March 3 The airline has built its cash reserves 4 MCA’ earnings for the fourth quarter rose 26 per cent to $21.8 million, 5 Raytheon has announced the $2.9 billion acquisition 6 The UK tax system encourages the distribution of earnings because of higher revenue from home video and pay TV. to finance plans for global expansion. to sharcholders, rather than encouraging companies to invest. of Texas Instruments’ defence electronics business. — plenty of money for acquisitions. Satchwell to Siebe for £80 million will make litte difference. Complete the sentences with expressions from B and C opposite. There may be more than one answer. 1 Our economy could under its huge debt ~ we owe $100 billion to foreign investors and banks alone. 2 The railway company made a profit of 140 billion yen, even after paying out 300 billion yen in debt 3 MidWest bank has made a strong from the dark days of the farm debt crisis. 4 The IMPS soon might not be enough to pull the country back from debt 5 Mr Owen, chairman of Energis, is to receive a bonus of nearly £900,000 for his work in round the company. Rachel is an accountant. Correct the mistakes in italies, using expressions from D opposite. I work in the corporate recovery department of a London accountancy firm, with companies that are in financial difficulty. They may be in (1) administer, and we try to find ways of keeping them in operation, We may sell parts of the company and this, of course, means laying people off. Our US office works with a system where a company in difficulty can get (2) protectors from (3) credit, giving it time to reorganize, and pay off debts. If the company can’t continue as a going concern, it (4) goes into receivers: we (5) wind off the company and it (6) ends business, We sell the assets and divide the money up among the creditors in a process of (7) liquification. Over to you PRC ats Pee nment should bail out loss-making companies to avoid making Business Vocabulary in Use 5