Английский язык: Сборник текстов и упражнений. Бодргина Л.И - 63 стр.

                                  UNIT 13
                             SUCCESS IN BUSINESS

       For many companies “success” means constant growth and expansion.
       The large corporation has grown to its present size in part because it has
found innovative ways to raise new capital for further expansion. Five primary
methods used by corporations to raise new capital are:
       Issuing Bonds. A bond is a written promise to pay a specific amount of mon-
ey at a certain date in the future or periodically over the course of a loan, during
which time interest is paid at a fixed rate on specified dates. Should the holder of
the bond wish to get back money before the note is due, the bond may be sold to
someone else. When the bond reaches “maturity”, the company promises to pay
back the principal at its face value.
       Bonds are desirable for the company because the interest rate is lower than
in most other types of-borrowing. Also, interest paid on bonds is a tax deductible
business expense for the corporation. The disadvantage is that interest payments
ordinarily are made on bonds even when no profits are earned. For this reason, a
smaller corporation can seldom raise much capital by issuing bonds.
       SALES OF COMMON STOCK. Holders of bonds have lent money to the
company, but they have no voice in its affairs, nor do they share in profits or
losses. Quite the reverse is true for what are known as “equity” investors who buy
common stock. They own shares in the corporation and have certain legal rights
including, in most cases, the right to vote for the board of directors who actually
manage the company. But they receive no dividends until interest payments are
made on outstanding bonds.
       If a company’s financial health is good and its assets sufficient, it can create
capital by voting to issue additional shares of common stock. For a large company,
an investment banker agrees, to guarantee the purchase of a new stock issue at a
set price. If the market refuses to buy the issue at a minimum price, the banker will
take them and absorb the loss. Like printing paper money, issuing too much stock
diminishes the basic value of each share.
       ISSUNG PREFERRED STOCK. This stock pays a “preferred” dividend. That
is, if profits are limited, the owners of preferred stock will be paid dividends be-
fore those with common stock. Legally, the owners of this stock stand next in line
to the bondholders in getting paid. A company may choose to issue new preferred
stock when additional capital is desired.
       Borrowing. Companies can also raise short-term capital- usually working
capital to finance inventories-in a variety of ways, such as by borrowing from
lending institutions, primarily banks, insurance companies and savings-and-loan
establishments. The borrower must pay the lender interest on the loan at a rate de-
termined by competitive market forces. The rate of interest charged by a lender
can be influenced by the amount of funds in the overall money supply available
for loans. If money is scarce, interest rates will tend to rise because those seeking
loans will be competing for funds. If plenty of money is available for loans, the
rate will tend to move downward.
                                          63