FINANCE
6-hour English Vocabulary Intensive Module BBA EDHEC S2 Prepared by Andrew PTASINSKAS
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Contents : PART 1 : TECHNICAL VOCABULARY Vocabulary focus on securities, derivatives, trading and related grammar.
Gap-Fill Grammar / Vocabulary Warm-Up Stocks and Shares Market Price Idioms Types of Shares Increases and Decreases Derivatives : Futures and Options
PART 2 : PROFESSIONAL VOCABULARY Vocabulary focus on careers in finance.
Personal Finance Career overview: Financial Planning and Wealth Management
Corporate Finance Career overview
Common Finance Interview Questions 2
PART 1 : TECHNICAL VOCABULARY Gap-Fill Grammar/Vocabulary Warm-Up FINANCIAL STATEMENTS AND PROFITABILITY RATIOS Read the following extract from an article about accounting ratios. Choose the best word to fill each gap from A, B, C or D below. The financial statements of a business provide important information for people outside the business who do not have access to the internal accounts. For example, existing and (1) …....... shareholders can see how much profit a business made, the value of its assets and the level of cash (2) …....... . Although these figures are useful, they do not mean a great deal by themselves. In order to (3) …....... any real sense of the figures in the final accounts, they need to be properly analyzed using accounting ratios and then (4) …....... with either the previous year’s ratios or against averages for the industry. The profitability of a company is important and a key (5) …....... of its success. In the profit and loss account the figures shown for gross profit and net profit mean very little by themselves. However, by (6) …....... them as a percentage of sales they become much more useful. The figures can then be evaluated against those of previous years, or with those of similar companies.
1 A) Eventual
B) Promising
C) Aspiring
D) Potential
2 A) Reserves
B) Stocks
C) Quantities
D) Stores
3 A) Reach
B) Find
C) Take
D) Make
4 A) Differentiated
B) Opposed
C) Compared
D) Balanced
5 A) Measure
B) Evidence
C) Mark
D) Proof
6 A) Indicating
B) Expressing
C) Outline
D) Pronouncing
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EVALUATING COMPANY PERFORMANCE Now read the following extract from an article about evaluating company performance. Think of the best word to fill each gap. It is clear that (0) …. is a need for companies in both the public and private sectors to develop appropriate performance measures. Setting performance targets and then evaluating achievements against these targets should provide a basis (1) …. improved management. It is important that these measures are not concerned simply (2) …. financial issues. However, many difficulties will confront anyone (3) …. is tasked with developing a system aimed (4) …. setting up such targets. For example, the way in (5) …. objectives are set can present serious problems. In many cases, objectives are (6) …. vaguely drafted that useful performance measures can rarely (7) …. developed. Also, there is the difficulty of measuring quality, where the danger is that quantity rather (8) …. quality is emphasized, because, in almost (9) …. cases, quantity is easier to evaluate. Therefore, we get a somewhat distorted picture (10) …. easily measurable aspects of performance take precedence over those that are more difficult to measure. (11) …. the importance of evaluating performance is recognized, the difficulties involved should not be overlooked. An awareness of these difficulties and an understanding of their possible impact should, however, lead (12) …. the development of more effective and better balanced systems.
1) :_______________________ 2) :_______________________ 3) :_______________________ 4) :_______________________ 5) :_______________________ 6) :_______________________ 7) :_______________________ 8) :_______________________ 9) :_______________________ 10) :_______________________ 11) :_______________________ 12) :_______________________
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Stocks and Shares Complete the sentences using these words: arbitrageurs market-makers
bears shareholders
bulls stags
insiders stockbrokers
People who buy stocks and shares are called _______________ in Britain, and stockholders in the USA (although most of the shares of all leading companies are held by institutional investors such as pension funds and insurance companies). People who buy securities expecting their price to rise sot hey can resell them before the next settlement day are known as _______________. People who sell shares hoping to buy them back at a lower price before the next settlement day are called _______________. People who buy new share issues, hoping to resell them at a profit are known as _______________. Shareholders place their orders with, and sometimes seek advice from _______________, who are members of the Stock Exchange, but who can work anywhere with a telephone and a computer screen connected to the Stock Exchange. Brokers in turn buy shares from and sell them to _______________, who are wholesalers in stocks and shares, and who guarantee to make a market at all times with brokers. _______________ are people who occupy a position of trust within an organization and possess information not known to the public ; buying or selling shares when in possession of such information that affects their price is illegal. _______________ are people who buy stakes in companies involved (or expected to be involved) in takeover bids.
Does anyone know of any famous cases of insider trading ?
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Read the following text and then decide whether the statements following are TRUE or FALSE.
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1. 2.
A company can only be floated once. Banks underwrite share issues when they want to buy the shares. 3. It is easier for a company to be quoted on an unlisted securities market than on a major stock exchange. 4. Unlimited companies do not publish annual reports. 5. The market price of a share is never the same as its nominal value. 6. On the London Stock Exchange it is possible to make a profit without ever paying anyone any money. 7. If a company issues new shares, it has to offer them to existing shareholders at a reduced price. 8. A scrip issue can be an alternative to paying a dividend. 9. American corporations with large amounts of cash can spend it by buying their own shares. 10. Companies do not have to sell their shares at their nominal value.
TRUE TRUE
FALSE FALSE
TRUE
FALSE
TRUE TRUE
FALSE FALSE
TRUE
FALSE
TRUE
FALSE
TRUE TRUE
FALSE FALSE
TRUE
FALSE
Add appropriate words from the text to these sentences : 1. Offering shares to the public for the first time is called _____________ a company. 2. A company offering shares usually uses a merchant bank to _______________ the issue. 3. The major British companies are _______________ on the London Stock Exchange 4. In London, share transactions have to be _______________ every two weeks. 5. The value written on a share is its ________________________. 6. The value listed in the newspapers is its ______________________.
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Market Price Idioms Classify the following expressions according to whether you think they mean, then underline all the ‘positive’ and ‘negative’ phrases or indicators in the examples: a) the price rose a little b) the price rose a lot c) the price fell a little d) the price fell a lot e) the price was almost unchanged. 1. After early losses, the Dow Jones rallied to finish ten points up. 2. Boeing shares plummeted after a 747’s engine fell off at Lille Lesquin Airport. 3. Peugeot continued to drift, finishing 75 cents down. 4. Apple stock suffered a small setback, losing $2.15. 5. Gold slipped back a little to $385.40. 6. In France, the CAC 40 index failed to halt its slide, finishing 6 points down. 7. In Tokyo, shares rebounded, the Nikkei closing at 20677.83 8. Nintendo shares went through the floor, finishing at 0.14. 9. In Milan, shares eased slightly in subdued trading. 10. Airbus leapt to an all-time high after news of their Concorde 2.0 jet was released. 11. Volkswagen staged a comeback, finishing up 14. 12. Silver was steady at six hundred and thirty-five cents an ounce. 13. ‘Envies de Saisons’ skyrocketed following the huge success of its freshly pressed orange juice with EDHEC students. 14. Thirty-five points were wiped off the TSX as shares took a beating in Toronto. 8
Types of Shares Translate the following into French. After, complete the sentences using the appropriate phrase. Note: some words might night have a direct translation, in this case, write a short phrase indicating its meaning. English: French: A security Barometer stocks Deferred shares Mutual fund Preference shares or preferred stock Blue chips Equities Ordinary shares Defensive stock Growth stock Participation certificates 1. Another name for stocks and shares is _______________, because all the stocks or shares of a company – or all those of a particular category – have an equal nominal value. 2. _______________ (U.S.: common stock) are often the only kind of shares with voting rights. 3. Some companies issue _______________ ,which, like shares, grant their holders part of the ownership of a company, but usually without voting rights. 4. _______________, as their name suggests, usually receive a fixed dividend, which must be paid in full before any dividend is paid on other shares. But because interest payments are tax deductible, and dividends are not, many companies now issue bonds instead. 5. _______________ (or stock), do not receive a dividend until other categories of shares have had a dividend paid on them, but might earn a higher dividend if the company does well. 6. Securities in companies that are considered to be without risk are known as _______________. 7. Widely-held stocks that can be considered as indicators of present and future market performance, are known as _______________ (U.K), or bellwether stocks (U.S.). 8. A _______________ or share is one that is expected to appreciate in capital value; it usually has a high purchasing price and a low current rate of return. 9. A _______________ or income stock or share is one that offers a good yield but only a limited chance of a rise or decline in price. 10. A way of spreading risks is to invest in a unit trust (U.K.) or a _______________ (in the U.S.), organizations that invest small investors’ money in a wide portfolio of securities. Remember: A share and a stock are the same thing. A share = British English, a stock = American English. In Britain, ‘a stock’ can also refer to either a block of shares with a nominal value of £100, or various kinds of fixed-interest securities. 9
Increases and Decreases In English, we have many different verbs to demonstrate increases, or rises, and decreases, or falls: Advance Dip Jump Drop Plummet
Rally Rocket Recover Slip
Tumble Drift Leap Rebound Ease Plunge Revive Slump
Sink
Which ones mean to increase? Which ones mean to decrease? Refer back to the Market Price Idioms chapter for some help. Now, get into pairs and have a discussion using the new vocabulary and talk briefly about the performance of companies indexed on the CAC 40:
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Derivatives: Futures and Options What is a derivative? French: __________________________________________________________________________ __________________________________________________________________________
Two of the more common forms of derivatives are Futures and Options. Contracts can be made on futures markets to buy and sell currencies, various inancial assets, and commodities at a future date, but with the price ixed at the time of the deal. Making contracts to buy or sell a commodity or inancial instrument at a pre-arranged price in the future as a protection against price changes is known as hedging. This is a way to offset potential loss. Traders or speculators might wish to buy or sell a currency at a future price if it is expected to appreciate or depreciate, or if interest rates are expected to change. Prices of foodstuffs – wheat, maize, coffee, sugar etc. are frequently affected by adverse weather conditions. Therefore, both producers and buyers often prefer to hedge, so they can guarantee a price for the next season. When commodity prices are expected to rise, future prices are higher. When they are expected to fall, they are lower. There is also a big futures market in stocks and shares. One can buy options giving the right to buy and sell securities at a ixed price in the future. A call option gives its holder the right but not the obligation to buy securities or a commodity or currency at a certain price during a certain period of time. A put option gives its holder the right to sell securities, currencies, commodities, etc. at a certain price during a certain period. The buyer of a share option pays a premium per share to the seller, and only risks this amount. The seller of an option (also known as the writer) risks losing an unlimited amount of money, depending on the performance of the underlying share, especially if the person does not possess it. If you expect the value of a share that you own to fall below its current price, you can buy a put option at this price (or higher): if the price falls, you can still sell your shares at this price. Alternatively, you could write a call option giving someone else the right to buy the share at the current price: if the market price remains below this price, no-one will take up the option, and you earn the premium. The price at which the holder of a call or put option may buy or sell the underlying security is known as its exercise or strike price. Call options with an exercise price below the underlying share’s current market price, and put options with an exercise price above the share’s market price, are described as being “ in-the-money”. Call options with an exercise price higher than a share’s current market price, and put options with an exercise price lower than the market share’s market price, are “ out-of-the-money”.
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PART 2: PROFESSIONAL VOCABULARY Personal Finance Career overview: Financial Planning and Wealth Management Financial planners and wealth managers help individuals plan their financial futures. How are you going to cover your retirement needs? What do you have to do today to put your children through college? This work can be personally and financially rewarding and requires excellent interpersonal skills. A good financial planner understands investments, taxes, estate planning issues and knows how to listen. This work can be done within a company or on your own as a sole proprietorship. Most planners go solo or work within smaller practices. It's essential then that you have a certain amount of entrepreneurship given that you will be running your own business. The work pays well and is rewarding if you like to help people. Increasingly, it pays to obtain the Certified Financial Planner (CFP) or Certified Trust and Financial Advisor (CTFA) designation. An alternative designation popular outside of the United States is the Chartered Wealth Manager. The job outlook for this profession is considered to be good and it is expected that career opportunities and salaries will grow substantially in the next decade. Let’s look at a job posting and see what kind of profile recruiters are looking for:
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Questions about the position: What is a community bank?
What kind of decisions do you think you will have to help the clients make?
Does the work culture described in the posting match what you are looking for in a potential future job?
What interests you most about this position? What interests you the least?
Discuss your answers with a partner
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Corporate Finance In corporate finance, you'll deal with the financial decisions made by the company you work for, with the goal of maximizing the value of the corporation while minimizing risk. Corporate finance and accounting professionals are responsible for managing a business's money-forecasting: where it will come from, knowing where it is, and helping its managers decide how to spend it in ways that will ensure the greatest return. They pore over spreadsheets that detail cash flow, profitability, and expenses. They look for ways to free up capital, increase profitability, and decrease expenses. If any department wants to make a big expenditure, it usually has to be approved by the finance department first to ensure that the company is in a position to spend. They'll look at the best growth path for the company, whether that's through acquiring other companies or reinvesting in the business to expand internally. Corporate finance includes two key functions: accounting and finance. Accounting concerns itself with day-to-day operations. Accountants balance the books, track expenses and revenue, execute payroll, and pay the bills. They also compile all the financial data needed to issue a company's financial statements in accordance with government regulations. Finance professionals analyze revenue and expenses to ensure effective use of capital. They also advise businesses about project costs, make capital investments, and structure deals to help companies grow. In spite of their different roles, finance and accounting are joined at the hip: The higher levels of accounting (budgeting and analysis) blend with financial functions (analysis and projections). Thus, finance and accounting are often treated as one, with different divisions undertaking particular tasks, such as cash management or taxes. If you want to pursue a career in this field, you'll probably have to get an advanced degree or certification-a CPA (Certified Public Accountant), MBA, or CFA (Chartered Financial Analyst), depending on the career. You'll also need to keep track of the regulatory changes that affect how information is reported.
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Let’s look at a job posting and see what kind of profile recruiters are looking for:
Corporate Finance Manager at eBay San Jose, CA 95125 The role and responsibilities: The Senior Finance Manager of Corporate Center Operations will be responsible for accurate and timely budgets, forecasts, reporting, analysis and insights to executives and operational leaders for the Corporate Center Legal and HR organizations. This individual will partner with stakeholders throughout the organization to align strategy, operating efficiencies, and priorities against key performance measures and business objectives. Reporting to the Director of Finance within Corporate Center Operations, this individual will also support the financial consolidations for all corporate functions along with the consolidated monthly financial reviews. Responsibilities: • 6+ years of finance or accounting experience • Bachelors and / or Master’s degree in finance or accounting • Proficient in Microsoft applications • Ability to executive within a multi-task environment with tight deadlines • Excellent communication and relationship building skills • Proven ability in strong leadership in managing operations or projects • Previous experience with ERP* systems and reporting * Enterprise resource planning (ERP) is the integrated management of core business processes, often in real-time and mediated by software and technology.
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Benefits and Challenges of a Career in Corporate Finance Careers in corporate finance are stable and highly in demand. In short, they are a vocation that’s ripe with opportunities although they are accompanied by trials that you must overcome. Here are some of the most common perks and challenges of corporate finance jobs: Benefits 1. Promising Career Path As you join a company fresh from college, you usually land in an entry level position such as junior finance analyst. This position requires you to work long hours, and you’ll be dealing with complex financial theories that include costing, budgeting, financial forecasting, cash flow, and monitoring costs incurred by various departments. Adeptness in this level will lead you to higher responsibilities. These include corporate development, cash management, treasury, auditing, and finance management. As expected, your rank and compensation will rise as your responsibilities increase. 2. Company Recognition and Trust. Your regular communication and constant supply of helpful financial information is a great help to top management in their formulation of crucial management decisions. Although you are not doing the job alone, your efforts, diligence and performance never go unnoticed. In time, you will be able to gain company trust. Trust is a very important factor in getting a managerial position. 3. More Opportunities As you become more adept at what you do, more opportunities for training and development will come. These will make you a better worker and your importance in the company will grow. The skills you accumulate will give even greater opportunities for higher pay. Challenges 1. Accuracy and Consistency In accounting and finance, you are dealing with numbers that represent real costs. This requires accuracy and consistent adherence to procedures. One erroneous entry can make you spend hours just to trace it. You should do your job with utmost care and presence of mind. 2. Deadlines This is one of the factors that compel accountants to work long hours. As an accountant, you cannot escape pre-set daily, weekly and monthly deadlines. Transactions should be posted as they occur, especially if costs associated with them are needed for billing purposes. These same transactions are also needed for the generation of monthly management and financial reports. A corporate finance job is a profession that deals with live numbers and real challenges. It requires intelligence, diligence, patience, and computer skills. Your work may test your endurance, but it can promise a rewarding career that will always make you proud. You must congratulate yourself for choosing a career in corporate finance. Source: https://marionswendell.wordpress.com/2013/09/27/the-perks-and-challenges-of-corporate-finance-jobs/
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Based on what you’ve just read, do you feel as if you have the required personality and skill set for a career in corporate finance? In the two columns below, write down what would make you a suitable candidate and what points you would need to improve upon to pursue a career in this field. Current qualities I possess:
Qualities I would need to improve upon:
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Common Finance Interview Questions Here is a list of 12 common interview questions asked to business graduates. They are just a warm-up. Take some time to prepare answers to the following questions and then have a mock interview a partner – take turns asking each other questions. Once finished, we will work on finance specific questions found here: http://fr.slideshare.net/alexmicheal307/top-12-finance-interview-questions-and-answers
1. What motivates you? 2. What is your greatest achievement? 3. What can you bring to this role that you are certain other applicants cannot? 4. What hurdles or obstacles have you overcome? 5. What would previous coworkers, managers or professors say about you? 6. Where do you see yourself in five years? 7. Are you willing to relocate? 8. Are you willing to work all hours? 9. What was the worst class you had in university? 10. What other industries are you looking into? 11. Do you play sports? 12. If you could pick only one, what stock would you pick and why?
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