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PART I. BUSINESS AND ITS FORMS TEXT 1 WHAT IS BUSINESS? Business is a word which is commonly used in many different languages. But exactly what does it mean? The concepts and activities of business have increased in modern times. Traditionally, business simply meant exchange or trade for things people wanted or needed. Today it has a more technical definition. One definition of business is the production, distribution, and sale of goods and services for a profit. To examine this definition, we will look at its various parts. First, production is a creation of services or the changing of materials into products. One example is the conversion of iron ore into metal car parts. Next these products need to be moved from the factory to the marketplace. This is known as distribution. A car might be moved from a factory in Detroit to a car dealership in Miami. Third is the sale of goods and services. Sale is the exchange of a product or service for money. A car is sold to someone in exchange for money. Goods are products which people either need or want; for example, car can be classified as goods. Services, on the other hand, are activities which a person or group performs for another person or organization. For instance, an auto mechanic performs a service when he repairs a car. A doctor also performs a service by taking care of people when they are sick. Business, then, is a combination of all these activities: production, distribution, and sale. However, there is one other important factor. This factor is the creation of profit or economic surplus. A major goal in the functioning of an American business company is making a profit. Profit is the money that remains after all the expenses are paid. Creating an economic surplus or profit is, therefore, a primary goal of business activity. distribution goods service profit marketplace dealership GLOSSARY , , ,

surplus expenses make a profit 1. 2.


, , , ,

4. 5. 6. 7. 8.

TASK 1: Think and answer: What is one modern definition of business? How does this modern meaning of business differ from the traditional one? What factors have brought about these changes? What does production involve? What example of distribution is given in the text? Can you think of another example? How do goods differ from services? In addition to production, distribution, and sale, what other factor is important in defining business? What is profit? In general, what do companies do with their profits? TASK 2. What other definitions of business can you think of? Try to give your own idea of what business is. TASK 3. Retell the text using the questions above as the plan. TEXT 2 TYPES OF BUSINESSES IN THE USA

A business may be privately owned in three different forms. These forms are the sole proprietorship, the partnership and the corporation. The sole proprietorship is the most common in many western countries. For example, more than 80 per cent of all businesses in the US are sole proprietorships. But it is evident that sole proprietorships do not do the greatest volume of business. They account for only 16 per cent of all business receipts, for example, in America. What kind of business is likely to be a sole proprietorship? First of all, service industries such as laundromats, beauty shops, different repair shops, restaurants, etc. The second type of business is a partnership, which is an association of two or more people to carry on business for profit. When the owners of a partnership have unlimited liability they are called general partners. If the partners have limited liability, they are limited partners. There may be a silent partner as well a person who is known to the public as a member

of the firm but without authority in management. The reverse of a silent partner is a secret partner a person who takes part in management but who is not known to the public. Any business may have the form of the partnership, for example in such professional fields as medicine, law, accounting, insurance and stockbrokerage. Limited partnerships are a common form of ownership in real estate, oil prospecting, quarrying industries, etc. A business corporation is an institution established for the purpose of making profit. It is operated by the individuals. Their shares of ownership are represented by stock certificates. A person who owns a stock certificate is called a stockholder. The privately owned business corporation is one type of corporations. There are some other types, too. Educational, religious, charitable institutions can also incorporate. Usually such a corporation does not issue stocks and is nonprofit. If there is profit, it is reinvested in the institution rather than distributed to private stockholders. In some western countries, cities, states federal government and special agencies can establish governmental corporations. A few examples of these are state universities, state hospitals and city owned utilities. Governmental corporations are nonprofit as a rule and usually they do not issue stock certificates.

sole proprietorship

partnership account for liability general partner

limited partner silent partner secret partner stockbrokerage real estate oil prospecting

GLOSSARY , , [] ( ) [] ( )

quarrying industry stock certificate charitable issue stocks nonprofit city owned utilities

( ) ,

TASK 1. Use the right word from the ones listed below and translate the sentences. 1. More than 80 per cent of all business ___ are not from sole proprietorships. 2. Is this bank owned publicly or ___? 3. Limited partnership is a common form of ownership in ___. 4. Less than 20 per cent of European businesses are partnerships or ___. 5. ___ are the partners with unlimited liability. 6. What kind of ___ is better: buying stocks or buying real estate? 7. A university can be a ___ corporation. 8. The Red Cross is an international ___ organization. 9. I want to buy some ___ in IBM and General Motors. 10. The group of people from different countries is going to ___ a corporation. ____________________________________________________________ 1 corporation; 2 real estate; 3 investment; 4 charitable; 5 establish; 6 general partner; 7 stocks; 8 nonprofit; 9 receipts; 10 privately 1.

3. 4. 5. 6. 7.

TASK 2. Discuss the following questions: What are three different ways that a business can be privately owned? Name some businesses that are not likely to be sole proprietorships. Why do you think so? What is the difference between a general partner and a limited partner? In what professional fields are the partnerships found? Who can own a corporation? What kinds of corporations usually don't issue stocks? What world-known corporations can you name?

TEXT 3 RUNNING A BUSINESS UNDER ENGLISH LAW If you want to set up a business under English law, the first question to consider is whether or not to form a limited company (or corporation). A corporation is a kind of artificial legal person, with the right to sue and be sued. It may consist of a single person, or several persons, but in each case it has a legal identity separate from these individuals. The members of a limited company have limited liability. This means that if the business has difficulties, the members can be made pay its debts only up to a certain limit. The company's liability itself is not limited; as long as the business has money or assets, creditors may sue. But they cannot sue the members as individuals beyond their stated limits. In Britain, a limited liability company has the word "limited" or the abbreviation "ltd." after its names. The equivalent to this kind of company can be found all over the world: for example Societe Accreditee (SA) in France and Kabushiki Gaisha in Japan. Certain very large companies are registered as public limited companies (PLC). They raise capital by selling shares to the general public, and these shares are listed on the Stock Exchange. Selling shares is one of the ways in which companies raise capital. A share is ownership of a proportion of the company, and thus the right to a proportion of any profit it makes (dividend). Shareholders cannot insist on the payment of a dividend every year, since this is up to the director to decide. But if they are dissatisfied with the management of the company, as members they have the right to remove the directors. The more shares a member holds, the more voting rights he will have in general meetings. Shares may be acquired when the company is first set up; or at a later share issue. Or they may be bought or received from an existing shareholder. Sometimes a company gives existing members the right to buy shares from another member before he is allowed to sell them to a new member. Each share is equal in value. But that value may be greater or less than the nominal value. For example, a member of a successful company who bought shares at $10 each may be able to sell them at a premium perhaps $12 each. But he may also find that he has to sell them less than their nominal value at a discount. Sometimes a company issues shares at a premium: for example, it sells $10 shares at $15 each. Another way for a company to raise capital is by issuing debentures or bonds, in return for loans. Debentureholders are entitled to an annual

payment of interest, and this is not linked to the company's profits and losses. In general, they have the right to sell their debentures back to the company (that is, call in their loan), or sell them on to someone else. A limited liability company is not the only way to run a business. A single person may operate as a sole trader, and even if he employs many people, he alone is responsible for management and, thus, for any debts. Another way to run a business is for two or more people to form a partnership in which they share management, profits, and liability to debts. The share is not necessarily an equal one, but depends upon the partnership agreement among them. This usually reflects the amount of capital each partner has invested in the business. Partnership can be formed very easily and the legal position of partners is not very different from that of sole traders. Unlike members of a company, partners may find their personal property is at risk if they are sued by creditors. It is also possible to form an unlimited company. Since members' liability is unlimited this is, in effect, similar to a partnership. If the advantage of forming a company is that it offers members some protection in case of bankruptcy, the disadvantage is that there are many regulations to observe in setting it up and running it. Under English law, there must be a minimum of two people, and they must sign a document called memorandum of association. The memorandum contains the name of the company, its objects, whether it is limited by shares or guarantee, and the amount of share capital. As well as the memorandum, there are several other documents a new company has to register. When this has been done it receives a number and a certificate of incorporation and is ready to do business.

set up private limited company (ltd.) public limited company (PLC) artificial legal person sue legal identity limited liability

GLOSSARY , , (, ) ()

share company assets raise capital stock exchange nominal value at a premium at a discount debenture debentureholder bond be entitled annual payment interest sole trader memorandum of association certificate of incorporation voting right

, ; ( )

1. 2. 3. 4. 5. 6. 7.

TASK 1. Give the English equivalents of the following words and word partnerships: 8. 9. 10. 11. 12. 13. 14. 15.

TASK 2. Complete the sentences inserting the right word from the text and translate them: 1. The members of a limited company have ___. 2. ___ companies raise their capital by selling shares at the Stock Exchange. 3. ___ is ownership of a proportion of the company.

4. The more shares a member holds, the more ___ he will have in general meetings. 5. A ___ is a kind of artificial legal person, with the right to ___ and to be ___. 6. A single person may operate as a ___. 7. Another way to run a business is for two or more people to form ___. 1. 2. 3. 4. 5. 6. 7. 8. TASK 3. Insert the right preposition or particle: If you want to set ___ a business ___ English law, the first question to consider is whether or not to form a limited company. A corporation may consist ___ a single person, or several persons. They raise capital ___ selling shares to the general public, and these shares are listed ___ the Stock Exchange. Shareholders cannot insist ___ the payment of a dividend every year. This is ___ ___ the director to decide. If they are dissatisfied ___ the management of the company, they have the right to remove the directors. A member of a company may be able to sell shares ___ a premium or ___ a discount. Unlike members of a company, partners may find their personal property is ___ risk.


PART II. SALES AND DISTRIBUTION TEXT 4 A CAREER IN SALES: LUCRATIVE, VITAL AND INTERESTING Sales is the cornerstone of a market economy. It is the very idea of buying and selling goods which is integral to capitalism. A career in sales, therefore, is at the center of a free market society. It is a career for a sociable person, built on interaction between people. Social contact is a very important part of a career in sales. One must be able to understand the needs of his or her customer and the expectations on both ends of the deal. It is also a career that is not stagnant. Because his job is personality driven, a salesperson must constantly press the flesh. This means going out and meeting with clients, checking on merchandise and inspecting the market conditions. It is an interesting, energetic and important field of work. So what jobs are available? How do you land one? Who is hiring? What prerequisites do you need? In answer to the last question, the most important thing for someone getting into sales is the so-called sales personality, a person who is gregarious and knows how to settle deals. Without these qualities, a career in sales would be the wrong choice for anyone. As Michael Pickford of the Commonwealth Recruiting agency (which takes applications for and places people on sales positions) puts it, "There are various things you need to be salesman, it doesn't really matter what's the level you're talking about. Outgoing personality is very important if someone is shy and retiring they're not going to sell anything. Someone who has very good negotiation skills, communication skills, the ability to present themselves and their product in a very effective manner (is also important). And, in addition to that, relationship management skills, because obviously when you make a sale it's something you don't do just once; you keep going back to that customer, so you have to be able to manage the relationship with that individual or individuals. As a sales representative's career progresses, of course, the more senior positions will naturally have a corresponding prerequisite of more and more experience. But to begin with, anyone with the aforementioned sales personality, eagerness and a driver's license (it isn't a static job) should be able to find success in sales. One of the entry-level positions available is that of merchandiser, who checks on the way a certain line of products is presented in the stores. It consists, among other things, of going to the client stores every day to see

that their product is put on the shelves, how it is put up and how the advertising and promotional materials are set up. A merchandiser can expect to earn a base salary of $600 or $700 a month. The sales representative is another low-level or entry-level position. Some firms combine the two positions. But for the most part a sales representative's role differs from a merchandiser in that the merchandiser is more concerned with the product and its presentation, whereas a sales representative is more concerned with the contractual and business agreement between the manufacturer and the client: how many units of a certain product are needed, how the product is selling, taking and filing sales orders, checking how the present or future needs of the client can be met. It also means establishing sales accounts and strengthening already established contacts with clients. Once again, a sales representative will need to have a driver's license so that he or she can travel to the various locations selling the product and check with the store or client. They are footsoldiers of the sales firm. A sales representative can expect to earn from 700 to 1,500 dollars a month, but with the added incentive of a sales commission. A sales commission is a percentage of the sale between the client and the manufacturer. This is an important bonus to the salary because it can often be quite lucrative. If the commission is a high percentage, or the product is costly, a sales representative can sometimes earn more from the commission than from the salary. It is a tried and true practice of manufacturing companies, because it gives the sales representative a stake in the successful establishment and maintenance of a contract with a client. An experienced sales representative often will progress to becoming a sales manager or sales supervisor. These positions are still very much concerned with establishing and maintaining a good client base, but in addition are concerned with running a team of sales representatives. These positions will also be concerned with the broader view of a company's sales policy. Many times a sales manager will be called upon to write up sales forecasts so the company can estimate what their profits may be like in the future in a given client area. These jobs are more executive in nature than the sales representative, but are still very much concerned with client relations. A sales supervisor or sales manager can expect to earn somewhere between 1,300 and 2,500 dollars a month. A regional sales manager (someone in charge of an entire region such as Moscow, St. Petersburg, the Urals, etc.) can expect to make slightly more. Further up the career ladder is the position of sales director. Once again, this position is centered on sales and clients, but with an even broader

view and more managerial control over a sales team than a supervisor or manager. In addition, it is the sales director who sets the sales agenda for the company. It is a very high level job and has correspondingly high salary bracket. In some companies a sales director can expect to earn upwards $150,000 a year. lucrative customer merchandise hire prerequisite position negotiation merchandiser line of products earn salary sales account bonus bracket GLOSSARY , , , , ,

TASK 1. Match the words and word partnerships with their synonyms: 1. stagnant a. firm foundation 2. lucrative b. passive / dead 3. entry-level positions c. contact 4. cornerstone d. recruit 5. gregarious e. sociable / companionable 6. hire f. low positions 7. incentive g. high positions 8. maintain h. stimulus 9. high-level jobs / senior jobs i. provide 10. estimate j. expensive 11. bonus k. calculate the cost / value 12. complete l. additional payment 13. costly m. write up 14. interaction n. profitable TASK 2. Give the English equivalents of the following words and word partnerships:

1. 2. 3. 4. 5. 6.

2. 3. 4. 5. 6.

7. 8. 9. 10. 11. TASK 3. Think and answer: What type of personality is sure to gain success in sales? What does a job of merchandiser involve? In what way is a sales rep's role different from a merchandiser's? Who might be called "footsoldiers of the sales"? In what way is a sales manager concerned with a company's sales policy? Why is the position of sales director considered to be a very high-level job? TEXT 5 MARKETING STRATEGIES

Marketing people do not like to admit that they have anything to do with sales, but obviously the whole purpose of marketing is to create a situation in which a sale can be made. Buying, selling, market research, transportation, storage, advertising these are all parts of the complex area of business known as marketing. In simple terms, marketing means the movement of goods and services from manufacturer to customer in order to satisfy the customer and to achieve the company's objectives. Marketing can be divided into four main elements that are known as four P's (E. Jerome McCarthy. Basic Marketing): product, price, placement and promotion. The marketing strategies of determining product, price, placement and promotion are not planned in isolation. Marketing analysts often look at a combination of these four factors. This combination of the four P's is known as marketing mix. In order to develop a successful marketing mix, researchers first ask two important questions: Who is going to buy the product? What is the potential to sell this product? The product element of marketing refers to the good or service that a company wants to sell. Next a company considers the price to charge for its product. There are three pricing options the company may take: above, with

and below the prices that its competitors are charging. Most companies price with the market and sell their goods or services for average prices established by major producers in the industry. The third element of the marketing process placement involves getting the product to the customer. This takes place through the channels of distribution. A common channel of distribution is: manufacturer wholesaler retailer customer. Wholesalers generally sell large quantities of a product to retailers, and retailers usually sell smaller quantities to customers. Finally, communication about the product takes place between a buyer and a seller and is known as promotion. There are two major ways of promotion: through personal selling, as a department store; through advertising, as in a newspaper or magazine, etc. 1. 2. 3. 4. 5. 6. research storage advertising customer placement promotion competitor channels of distribution wholesale retail GLOSSARY


TASK 1. Find the English equivalents for the following: 7. 8. 9. 10. 11. 12. TASK 2. Complete the sentences inserting the right word from the text and translate them: There are three ___ options the company may take: above, with and below the competitors' prices.

2. In simple terms, marketing means the movement of goods and ___ from the manufacturer to customer. 3. The ___ element of marketing refers to the goods or service that a company wants to sell. 4. ___ often look at a combination of these four factors. 5. Wholesalers generally sell large quantities of product to ___. 6. A company considers the ___ to charge for its product. 1. 2. 3. 4. 5. 6. TASK 3. Discuss the following questions: What is marketing? Is it the same thing as selling? How would you define the function of marketing? What are the four main elements of marketing? What does the third element of marketing involve? What is the common channel of distribution? Is advertising necessarily a part of a marketing strategy? TEXT 6 WHOLESALING AND RETAILING Wholesaling is a part of the marketing system. It provides channels of distribution, which help to bring goods to the market. Generally indirect channels are used to market manufactured consumer goods. It could be from the manufacturer to the wholesaler, from the retailer to the consumer or through more complicated channels. A direct channel moves goods from the manufacturer or producer to the consumer. Wholesaling is often a field of small business, but there is a growing chain movement in the western countries. About a quarter of wholesaling units account for one-third of total sales. Two-thirds of the wholesaling middlemen are merchant wholesalers who take title to the goods they deal in. There are also agent middlemen who negotiate purchases or sales or both. Usually they don't take title to the goods they deal in. But sometimes they take possession though. These agents don't earn salaries. They receive commissions. This is a percentage of the value of the goods they sell. Wholesalers simplify the process of distribution. For example, the average supermarket stocks 5,000 items in groceries alone; a retail druggist can have more than 6,000 items. As a wholesaler handles a large assortment of items from numerous manufacturers he reduces the problem of both manufacturer and retailer. The storekeeper does not have to deal directly

with thousands of different people. He usually has a well-stocked store and deals with only a few wholesalers. Retailing is selling goods and services to the ultimate consumer. Thus, the retailer is the most expensive link in the chain of distribution. Being middlemen, they make their profit by charging the customer 25 to 100 per cent more than the price paid for the item. The retailers operate through stores, mail-order houses, and vending machine operators. There are different types of retail stores: department stores, discount houses, cooperatives, single line retailers. The major part (over 95 per cent) of retail establishments concentrate on a single line of merchandise, for example food, hardware, etc. But nowadays there is a trend for many single line stores to take on a greater variety of supplies. The retailer performs many necessary functions. First, he may provide a convenient location. Second, he often guarantees and services the merchandise he sells. Third, the retailer helps to promote the product through displays, advertising or sales people. Fourth, the retailer can finance the customer by extending credit. Also the retailer stores the goods in his outlet by having goods available. wholesaling retailing consumer chain movement middleman merchant wholesaler take title to the goods deal in agent middleman purchase ultimate mail-order house vending machine discount house GLOSSARY , , , , ,

single line retailer establishment

merchandise extend credit outlet

TASK 1. Use the right word from the ones listed below and translate the sentences: 1. ___ is one function a retailer may perform. 2. You can buy newspapers, cigarettes, and cookies from a ___. 3. She doesn't like to go shopping, she prefers to do it by ___. 4. Usually a wholesaling ___ stands between the producer and the retailer. 5. They use both direct and indirect ___. 6. A wholesaler doesn't deal with the customers, a ___ does. 7. Agent middlemen do not ___ to the goods they deal in. 8. The firm ___ good quality of the product. 9. A wholesaler is an important ___ between a producer and a consumer. 10. A ___ simplifies the problems of manufacturers. ____________________________________________________________ 1 channels of distribution; 2 take title; 3 link; 4 retailer; 5 extending credit; 6 middleman; 7 guarantees; 8 mail-order; 9 wholesaler; 10 vending machine 1. 2. 3. 4. 5. 6. 7. 8. 9. TASK 2. Think and answer: What is the aim of wholesaling? Which channel of distribution is preferable: direct or indirect? Give your reasons. What is the difference between a merchant wholesaler and an agent middleman? How does a wholesaler simplify the process of distribution? What would a retailer have to do without wholesalers? What are four different types of retail stores? In what way does a retailer serve a customer? In what way does a retailer serve a manufacturer? Which per cent of the price of the good sold goes to the retailer?


PART III. INTERNATIONAL TRADE TEXT 7 INTERNATIONAL MARKETING The simplest way to enter a foreign market is through exporting. The company may passively export its surpluses, or it may make a commitment to expand exports to a particular market. In either case the company produces all its goods in the home country though it may make changes to them for the export market. There are two types of exporting: indirect and direct. Indirect exporting means working through independent middlemen such as agents and dealers. Indirect exporting can be done with little investment and therefore involves less risk. Direct exporting involves setting up export department or even an overseas sales branch which actively uses the company's own employees. This will give the seller more presence and control in the market but obviously means heavier investment. A second method of entering a foreign market is through joint ventures with foreign companies. There are four types of joint ventures. Licensing is the simplest way for a manufacturer to produce its goods in the foreign market. The company enters into an agreement with a licensee offering the right to use a manufacturing process, trademark, patent or other item of value for a free or royalty. Once again the company gains entry into the market at little risk but there are potential disadvantages. The company has less control over the licensee than if it had set up its own production facilities. Another option is contract manufacturing. This means contracting with foreign manufacturers to produce the product. It has the drawback of less control over the manufacturing process and the loss of potential profits on manufacturing. On the other hand, there is also the opportunity to form a partnership or buy out the local manufacturer later. Joint ownership ventures consist of the company joining with foreign investors to create a local business in which they share joint ownership and control. Joint ownership may make sense for political and economic reasons. It also has certain drawbacks. Above all, there is the danger of disagreement over crucial issues such as investment and marketing. One firm may want to put money back into the company while the other wants to take it out.

Besides exporting and joint ventures there is also the possibility of direct investment in other words developing foreign-based assembly or manufacturing facilities. If the foreign market is large enough, local production facilities offer many advantages. The company may have lower costs in the form of cheaper labor, raw materials and transport. The company will gain a better image in the host country because it creates jobs. It also develops a deeper relationship with government, customers, suppliers and distributors. Finally, by direct investment the company keeps full control over investment and marketing policies. The main disadvantage is that the firm faces many risks such as devalued currencies, declining markets or even government takeover.

surplus commitment middleman branch joint venture licensing licensee royalty facilities

ownership assembly takeover 1. 2. 3. 4. 5. 6. 7.

GLOSSARY , , , , ,

TASK 1. Find the English equivalents for the following: 8. 9. 10. 11. 12. 13. 14. 15. 16. 17.

TASK 2. Discuss the following questions: 1. What are two methods of entering a foreign market? 2. What types of exporting do you know? 3. What can you say about indirect exporting? 4. How many types of joint ventures are there? 5. What does direct exporting involve? 6. Is licensing the simplest way for a manufacturer to produce goods in the foreign market? Why? 7. What is contract manufacturing? 8. How does joint ownership operate? 9. What does direct investment mean? 10. Why do you think joint ventures, rather than direct investment are becoming more common in international trade? 11. What problems does the company face in trying to enter a foreign market? 12. What is the simplest way for a company to enter a foreign market? TEXT 8 THE TRICKS OF THE TRADE Unfair trade practices come in many guises. Some are straightforward, like tariffs and quotas. Others are more subtle, like nitpicking import regulations and government subsidies to domestic industries, whatever the strategies used, no country can claim that it always plays fair. Tariffs. Mountainous tariff barriers remain a favorite defence against imports in developing countries. Taiwan slaps charges 50% on textiles, and Brazil demands 105% on wine and sausage. Even developed countries resort to old-fashioned walls. Quotas. No form of protectionism is more effective than outright quotas. Japan limits imports of numerous goods, including leather, beef and citrus fruits. Italy in return restricts imports of Japanese cars to 2,200 a year or less than 1% of the Italian market. Regulations and standards. Imagine how confused a professional football team would be if it faced a different set of game rules every time it played away from home. That is precisely the predicament of the world's exporters. Every nation has its own product standards, customs procedures, health and safety regulations and testing requirements. The multiplicity of national standards within Western Europe alone forces Philips, the Dutch

electronics company to manufacture 29 outlets, ten kinds of plugs and twelve varieties of cords. Government Procurement Policies. Governments are among the biggest customers in world trade, and they almost always favor the home team. In the USA the Pentagon is required by Congress to buy such items as uniforms and food from American companies. The Pentagon almost never buys foreign aircraft or other weapon systems, even from NATO allies. Government Subsidies. Most nations use loans, grants or other subsidies to help their industries compete against imports and build up export markets. Countries frequently stimulate export by giving grants or loans to foreign governments. quota subsidy resort to predicament procurement loan grant GLOSSARY , , , - , , , , ,

1. 2. 3. 4. 5. 6. 7.

TASK 1. Translate the following word partnerships into Russian: build up export markets 9. customs procedures unfair trade practices 10. mountainous tariff barriers NATO allies 11. in return nitpicking import regulations 12. slap charges on smth. health and safety regulations 13. multiplicity of national weapon systems standards testing requirements 14. to resort to old-fashioned walls outright quotas TASK 2. Enumerate the tricks of the international trade. Give the gist of every trick. TASK 3. Give examples of your own to illustrate the barriers on the way to a foreign market.

TEXT 9 PROTECTIONISM AND FREE TRADE The General Agreement of Tariffs and Trade (GATT), an international organization set up in 1947, had the objectives of encouraging international trade, of making tariffs the only form of protectionism, and of reducing these as much as possible. The most favored nation clause of the GATT agreement specified that countries could not have favored trading partners, but had to grant equally favorable conditions to all trading partners. The final GATT agreement including services, copyright, and investment, as well as trade in goods was signed in Marrakech in 1994, and the organization was superseded by the World Trade Organization. It took nearly 50 years to arrive at the final GATT agreement because until the 1980s, most developing countries opposed free trade. They wanted to industrialize in order to counteract what they rightly saw as an inevitable fall in commodity prices. They practised import substitution (producing and protecting goods that cost more than those made abroad), and imposed high tariff barriers to protect their infant industries. Nowadays, however, many developing countries have huge debts with Western commercial banks on which they are unable to pay the interest, let alone repay the principal. Thus they need to rollover (or renew) the loans, to reschedule (or postpone) repayments, or to borrow further money from the International Monetary Fund, often just to pay the interest on existing loans. Under these circumstances, the IMF imposes severe conditions, usually including the obligation to export as much as possible. Quite apart from IMF pressure, Third World governments are aware of the export successes of the East Asian "Tiger" economies (Hong Kong, Singapore, South Korea and Taiwan), and of the collapse of the Soviet economic model. They were afraid of being excluded from the world trading system by the development of trading blocks such as the European Union, finalized by the Maastricht Treaty, and the North American Free Trade Agreement (NAFTA), both signed in the early 1990s. So they tended to liberalize their economies, lowering trade barriers and opening up to international trade.



clause copyright commodity price import substitution repay the principal rollover interest 1. 2. 3. 4. 5. 6.

, , , ( ) ,

TASK 1. Translate the following internationalisms into Russian: tariff 7. tariff barriers international organization 8. commercial banks protectionism 9. export partners 10. Asian "Tiger" economies investment 11. Soviet economic model industrialize 12. liberalize the economy

TASK 2. Find the English equivalents of the following words and word partnerships: 1. 2. () 3. 4. () 5. 6. 7. 8. , 9. 10. 11. , 12. , , , 13. 14. 15. 16. 17. , - 18. 19.

20. 1.

3. 4. 5.

TASK 3. Think and answer: Why do many countries impose tariffs? What was the most favored nation clause of the GATT agreement? Why were many developing countries for a long time opposed to GATT? Why have many developing countries recently reduced protectionism and increased their international trade? What events mentioned in the text do the following dates refer to: 1947, the 1980s, the early 1990s, 1994? TEXT 10 THE ROLE OF LOGISTICS IN INTERNATIONAL TRADE

Transport today is not just getting things from point A to point B. Ever since the first oil shock in 1973 and its recessionary impact on international business, more and more large companies, particularly those with international operations, have been looking at transport differently. They are becoming aware that the movement of goods from one location to another involves a whole range of operations that include not only transport and delivery, but the location of factories and warehouses, supplies, packaging, stocking and inventory management, handling and preparing orders. This larger view of transport operations is often called logistics or physical distribution. Business people now realize that tighter control of logistical operations is a major means of reducing costs and improving profit margins. Today companies are creating logistics departments, divisions and even fully-fledged subsidiaries to control all their logistical needs better. The role of a logistics manager is to balance the cost of possession of stocks with their transportation costs. He has the advisory role of moderating the (often conflicting) demands of the company's financial, commercial and marketing operations. A company's logistical strategy should be based on four factors: The structure of its clientele. (The number of delivery outlets will determine the number of warehouses the company needs.) The type of goods and their destination. (Yogurt from the local market is shipped differently from radar equipment to Africa.)

The size and nature of the company. (A small manufacturer and a big trading firm have different logistic operations.) Corporate strategy. (Companies may have different priorities: pay more for warehouses or increase transport costs to provide better customer service.) There is no problem in getting any product to any client at any time. The problem is how to do it at the most efficient cost to the company and the client. A logistical system can improve just-in-time delivery: delivery on guaranteed date for a fixed price. The advent of computerization has proved crucial to this kind of development. Computers keep track of production status, register and manage stock, and optimize delivery schedules. Thinking along lines like these can save substantial sums of money. Companies have eliminated intermediaries and deal directly with shippers, therefore they are in a better position to negotiate shipping prices and services. Because of centrally controlled computers, the system is efficient there is no duplication and all the orders are consolidated. Computer software systems will keep customers informed in real time of ship arrivals, where on the transport route their containers are, and customs information that will allow them to handle formalities before their merchandise arrives in the country of destination. Electronic data processing in international trade has the immediate effect that information goes faster than a physical shipment and will become available as a print-out at the receivers end before the goods arrive. Savings as a result of this can be very substantial.

warehouse supplies packaging stocking inventory management profit margin

subsidiary delivery outlet ship stock

GLOSSARY () , , , ,

schedule intermediary clientele demand

TASK 1. Work out the pronunciation of the following words and practise saying them in English: logistics; supplies; inventory; subsidiaries; clientele; corporate; crucial; intermediary; schedule; negotiable; particularly. 1. 2. 3. 4. 5. 6. 7. 8. TASK 2. Give the English equivalents of the following: 9. 10. 11. 12. 13. 14. 15. 16. TASK 3. Give the Russian equivalents of the English word partnerships: recessionary impact 6. optimize delivery schedules improve profit margins 7. provide better customer service handling and preparing orders 8. delivery for a fixed price fully-fledged subsidiaries 9. transport route corporate strategy 10. country of destination TASK 4. Discuss the following questions: What is the larger view of transport operations called and what does it involve? What is the role of the logistics manager? What does "just-in-time delivery" mean? How can the advent of computerization prove crucial to the development of logistical systems? What is the role of electronic data processing in international trade?

1. 2. 3. 4. 5. 1. 2. 3. 4. 5.


TEXT 11 TAX SYSTEM Taxation is the process by which the people pay the expenses of carrying on the government. Taxation is as old as government. Even the earliest and simplest societies needed some method of maintaining order and providing for justice, and those services could not be provided without cost. Many kinds of taxes have been used and are being used throughout the world. The main taxes can be divided into those paid on income and capital, called "direct" taxes and those paid when money is spent, called "indirect" taxes. Income tax, in effect, redistributes wealth from the rich toward the poor (via social programs). It is a fairly simple tax to collect, as many employers pay the tax directly for the employees, deducting it from the salary before it is paid. However, it is generally a progressive tax: more is paid as income rises. This may become a drawback if there is no incentive to work harder because people may feel that they earn relatively less and pay more tax. If the rates of a tax should be lower when applied to a larger sum, the tax would be called regressive. A tax is called proportional if the rate of taxation remains the same, whether it is applied to a small sum or a very large one. The amount of tax paid is proportional to the sum to which the tax is applied, because the rate is a constant flat rate. The tax on houses and farms is an example of a proportional tax because the rate is the same whether the house or farm is large or small. Indirect taxes are paid on goods and services. The taxes are paid by the shops or manufacturers, but then passed on to the consumers in the form of higher prices. In the United Kingdom, for example, the Value Added Tax or VAT is the most important indirect tax. The advantage of this tax is that it is directly in line with inflation. If the prices rise, so does the tax. However, the burden of this tax falls more heavily on the less well off. Taxes also may be identified according to the base on which they are applied. For example, the property tax is levied on both land and buildings (real estate), and personal property. The inheritance tax is placed on the value of property a person inherits. The estate tax is placed on the estate before it is divided among heirs. Sales tax, levied on sales, may apply either to all kinds of sales or only to certain kinds. If sales taxes are placed on luxury goods they are called luxury taxes and generally represent a high rate of taxation.

Excise taxes are those placed on a specific commodity, or thing, by the government. Tobacco and liquor taxes are excise taxes. Customs duties and tariffs are taxes placed on the importation of goods from outside the country. A license tax is one placed on the right to do something, as for example, to sell liquor, tobacco; to get married; to own a dog; to go hunting or fishing. Countries vary in the balance of their taxation: some rely more on income taxes, while others gain a larger proportion from indirect taxation. However, a balance is generally thought to be the fairest system. There are some other principles of taxation. Everyone agrees that the taxes and those who collect them should be able to understand the tax laws. The system should be stable so that the taxpayer knew in advance that he must pay the tax to be able to save money for it. And it should be possible to expand the tax system to collect more money in periods of emergency, when the government must spend more money and to reduce the amount of taxes in normal times, when the government expenditures are at minimum. This is called the principle of elasticity. The government of a country needs to raise taxes in order to provide goods and services that will be shared by consumers. Defense spending is one of the main items in this category. Governments maintain armed forces and spend money on such costly items as aircraft carriers and tanks. Law enforcement is another priority for the government. In addition, other services such as health and education would only be affordable to the rich if the government did not provide them. Another part of governmental spending is allocated to caring for those who do not have an income. The very poor, the unemployed, and dependent children are provided for out of taxation. The countries with the lowest tax in the world are: Bahrain, Brunei, Kuwait, and Qatar (where there is no tax at all). The highest taxation rate is in Norway. Some people pay more than 100% of their taxable income. The highest recorded personal tax demand is one for $336 million on the estate of Howard Hughes. taxation expenses direct tax indirect tax income GLOSSARY , , ,

flat rate value added tax (VAT) be in line with smth burden base levy inherit heir excise tax custom duty emergency expenditure defence dependent tax demand

() - , , , , (),

TASK 1. Write out all the partnerships with the word "tax" from the text and translate them into Russian. TASK 2. Give your comments on the statements: 1. Only the modern societies need some method of maintaining order and providing for justice. 2. Income tax being a progressive one has no drawbacks at all. 3. In case of proportional tax the rate is lower when applied to a larger sum. 4. Sales tax is applied only to certain kinds of sales. 5. Excise taxes are placed on the importation of goods from outside the country. 6. The estate tax is placed on the estate after it has been divided among heirs. 7. VAT in the most important indirect tax in the US. 8. Direct taxes are paid when money is spent. 9. Many employees pay the income tax directly for the employers. 10. The lowest rate of taxation is in Bahrain, Brunei, Norway and Kuwait. TASK 3. Describe the tax system of Russia using the active vocabulary and your list of kinds of taxes. TEXT 12

TAXATION AND HOW TO AVOID IT 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. There is always a lot of debate as to the fairness of tax systems. Business profits, for example, are generally taxed twice: companies pay tax on their profits (corporation tax in Britain, income tax in the USA), and shareholders pay income tax on dividends. Income taxes in most countries are progressive, and are 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. The higher the tax rates, 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 1986, 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 (GNP) figure, and then claimed that Italy had overtaken Britain to become the world's fifth largest economy. To reduce income tax liability, some employers give highly-paid employees lots of "perks" (short for 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.

Companies have a variety 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 Liechtenstein, 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. revenue excise duties depreciation accounting tax bill marginal rate consumption self-employed part-time job gross national product (GNP) tax liability perquisite donation tax deduction avoid taxes capital expenditure tax loss

GLOSSARY , , , ( ) () , , , ,

1. 2. 3. 4.

TASK 1. Translate the words and word partnerships in Russian: redistribute wealth 5. free health insurance disincentive 6. subsidized lunches "black" or "underground" 7. loopholes economy 8. life insurance policy moonlighting 9. tax shelter

10. charity

11. laundering money

TASK 2. Match the words and word partnerships with their synonyms: 1. dissuade a. allow 2. permit b. distract 3. consequently c. integrity 4. debate d. staff 5. fairness e. discussion 6. company employees f. leave smb. behind 7. overtake g. put off 8. postpone h. headquarters 9. head offices i. hide / keep secret 10. disguise j. as a result TASK 3. Say whether the following statements are true or false: 1. Business profits are taxed twice. 2. The lower the tax rates, the more people try to cheat. 3. Criminal organizations pass money through several firms to hide its origin from tax inspectors. 4. All people having part-time jobs pay taxes and national insurance. 5. Income tax in most countries is regressive. 6. You don't have to pay taxes on donations to charities. 7. There are some legal ways to avoid taxes. 8. Both income taxes and sales taxes are progressive. 9. Corporation tax in Britain is the same as income tax in the US. 10. The purpose of excise taxes is to distract people from alcohol and tobacco.


PART IV. MONEY MATTERS AND TERMS OF PAYMENT TEXT 13 MONEY What is money? Money is one of the most important inventions of humankind. Without it a complex, modern economy based on the division of labor, and the consequent wide-spread exchange of goods and services, would be impossible. When you buy a candy bar, you may pay for it with a coin or paper note. The storekeeper knows that you will eat the candy, and that he will never be able to get it back from you. He also knows that he can eat neither the coin nor the note you gave him. Why does he accept the coin or the note for candy? It is because the coin is money. At first sight answering the question what money is seems obvious; the man or woman in the street would agree on coins and banknotes, but would they accept them from any country? What about cheques? They would probably be less willing to accept them than their own country's coins and notes. What about credit cards and gold? The gold standard belongs to history but even today many rich people in different parts of the world would rather keep some of their wealth in the form of gold than in official, inflation-prone currencies. The attractiveness of gold, from aesthetic point of view, and its resistance to corrosion are two of the properties which led to its use for monetary transactions for thousands of years. In complete contrast, a form of money with virtually no tangible properties whatsoever electronic money seems set to gain rapidly in popularity. All sorts of things have been used as money at different times in different places. It is almost impossible to define money in terms of its physical form or properties since these are so diverse. Therefore any definition must be based on its functions. Functions of Money Money is anything that people agree to use to pay for goods, services, or debts. Money also measures the value, or worth, of things. The metal in a coin or the paper in a bill has little useful value itself. But people agree to use coins and paper bills as money because money is the most convenient means of payment known.

Because many things, ranging from gold to entries on computer tape, have been used as money, it cannot be defined by the functions it serves to act as a medium of exchange and a standard of value. The third function of money as a store of wealth is something money shares with many other types of objects. A medium of exchange is simply an item used to make it easy to exchange things. Money is a go-between in trade. A farmer sells his wheat for money. He then uses the money to buy a tractor from a machinery dealer. In both cases, money is the thing spent. Money is accepted and desired only because it may be exchanged for other goods. Without money, there would be little buying and selling. In a very primitive economy, and in a few isolated cases in a complex economy, people directly barter goods and services. Barter is a system of direct exchange of goods. In ancient times somebody could exchange a sheep, for example, for anything else in the market-place that they considered to be of equal value. Barter, however, was a very unsatisfactory and inefficient system because people's precise needs seldom coincided. It required that one locate someone who wanted the particular good one provided, and just by coincidence happened to have available for exchange a particular good one wanted. In a modern economy with millions of products it would require an extensive search to locate such a person. People needed a more practical system of exchange, and various money systems developed based on goods which the members of a society recognized as having value. Cattle, grain, teeth, shells, feathers, skulls, salt, elephant tusks, leather, nails, rice, quartz and tobacco have all been used. Precious metals gradually took over because, when made into coins, they were portable, durable, recognizable and divisible into larger and smaller units of value. The use of money as a medium of exchange allows one to split this barter process into two parts. All one has to do is locate a person who wants one's particular goods, receive money in exchange for it, and then locate another person who has available the goods one wants who is sure to take money in payment for it. Another function of money is to serve as a standard of value. This standard-of-value function is overwhelmingly important because a modern economy requires numerous comparisons of values. Money tells the price of things. The price of anything is the number of money units, such as roubles or dollars, for which it can be sold.

A business firm which does not have all money it needs for its activities must borrow from others. A merchant may borrow to buy a store, to buy goods to sell, or to pay his employees. He promises to repay the debt in future. All debts are expressed in terms of money. In principle, this standard of value need not be the same as the medium of exchange. In Colonial America, for example, merchants kept their financial records in British pounds, but most of the medium of exchange they received consisted of Spanish coins. Obviously, however, it is convenient to use the same item both as a medium of exchange and as a standard of value, and modern money normally fulfills both roles. The third function of money is to serve as a store of wealth. This is not a distinctive function of money, but money has certain peculiarities as a store of wealth. People are saving money to spend at some time in the future. If we had a picture of what all people were doing with their money at any particular time, such as nine o'clock this morning, it would show that most of the money is being held as a store of wealth. Some people hold their money longer than others. On the average, every dollar in circulation is spent once every twenty days. Unlike other forms of wealth, it has no transaction costs. Someone who decides to hold wealth in, for example, corporate stock has to undergo a certain amount of trouble and cost first to buy stock and then to sell it again in order to buy another item. All of those costs and inconveniences can be avoided by holding one's wealth in the form of money. How well does money fulfill its functions? The medium of exchange function is fulfilled very well. The occasional inconveniences of being unable to cash a check, or to pay a bus fare with a $100 bill, are trivial when looked at in a larger context. Money does not perform well, however, as a standard of value or store of wealth because the value of money itself is not stable or predictable. For example, someone who currently lends $100 at 15% interest does not know whether the purchasing power received back, both as repayment of principal and as interest, will be more or less than the purchasing power of the $100 lent because of the effect of inflation or deflation. In other words, you are not sure you will be able to buy the same amount of goods or services in a year after you get back both money you lent and the $15 interest. Money Classification It is convenient to classify the numerous moneys that exist into three types. One is full-bodied commodity money money that has a value as a

commodity (gold or silver, for instance) fully equal to its value as money. A coin is a piece of metal, usually disc-shaped, which bears lettering, designs or numbers showing its value. Until the eighteenth and nineteenth centuries coins were given monetary worth based on the exact amount of metal contained in them, but most modern coins are based on face value, the value that governments choose to give them, irrespective of the actual metal content. Coins have been made of gold (Au), silver (Ag), copper (Cu), aluminium (Al), nickel (Ni), lead (Pb), zinc (Zn), plastic, and in China even from pressed tea-leaves. Because coins can be awkward to carry, representative full-bodied money was developed, which consists of paper money that is freely convertible into full-bodied money. Most governments now issue paper money in the form of notes, which are really promises to pay. This money is credit money, or fiat money money that does not have a value as a commodity equal to its face value and that cannot be exchanged for full-bodied commodity money. Paper money is obviously easier to handle and much more convenient in the modern world. Cheques, bankers' cards, and credit cards are being used increasingly and it is possible to imagine a world where money in the form of coins and paper currency will no longer be used. One might ask why people are willing to exchange valuable goods and services for pieces of paper called $10 bills. The answer is that these pieces of paper are valuable because we know that other people are willing to take them in exchange for their goods. The same is ultimately true to gold it is considered valuable because we know that other people treat it as valuable.

division of labor coin paper note accept currency debt means of payment medium of exchange standard of value store of wealth barter borrow merchant

GLOSSARY , () , ,

repay circulation transaction corporate stock cash a check lend purchasing power principal interest deflation full-bodied money commodity face value representative fullbodied money promise to pay credit money fiat money bill

, , , , ( ) , ( ) , (.)

TASK 1. Write out all the partnerships with the word "money" from the text and translate them into Russian. TASK 2. Find the following information in the text and discuss it: 1. The reason why people accept coins and paper notes. 2. The reasons for the use of gold for monetary transactions for thousands of years. 3. Three types of money and their definitions. 4. The definition of face value. 5. Three functions of money. 6. The definition of the barter system and the reasons of its ineffectiveness. 7. Examples of goods that were used as money. 8. Two parts of the barter process. 9. The definition of price. 10. The peculiarities money has as a store of wealth.

11. The way money fulfills its three functions. TASK 3. Make a summary of the text. Don't use more than 100 words. TEXT 14 WHAT IS CREDIT AND HOW IS IT USED? In today's world we buy goods and services with cash or credit. Cash involves the exchange of money for goods and services. Credit involves the promise to pay at some future date. Those who extend credit usually charge an amount of money, called interest, for this service. The main advantage of credit is that it makes it possible to buy more than it would be possible, if only cash were used. That is why credit has been popular since ancient times. Today it is an important part of economic life. People make use of many types of credit. These include the following: Credit cards Charge accounts Bank loans Mortgages on property Public borrowings through notes and bonds Credit cards are used every day by millions of people. These cards are offered by banks, gasoline companies, stores, credit companies, and others. Holders of a credit card can use it only in places that accept that particular card. Credit cards are made of plastic, and each card has its own identification number. When an item is bought, the seller makes an imprint of that number on a paper form. The sum involved and the names of the cardholder and the seller are also imprinted or written on the form. The completed form is then signed by the cardholder, who receives a copy. Other copies are kept by the seller. The seller later presents a copy of the form to the credit card company and receives payment. A percentage fee of a few per cent is paid by the seller to the credit company for its service. A sales record is collected on computers by the credit card company. This company sends a monthly bill to each cardholder. Interest is charged, if the cardholder does not pay the bill within a stated period of time. Some credit card companies also have a small yearly charge for cardholders.

Convenience and money safety are two reasons for the wide use of credit cards. The cardholder is protected in the event the card is lost or stolen. The cardholder must notify the company promptly of such loss. He or she is not held liable for the misuse of the lost card above a certain amount, usually $50. Along with the advantages there are also some disadvantages in using credit cards. Easy use of credit cards can encourage the buying of items that are not really needed. In addition, cardholders often give little thought to how payments will be made in future. Failure to pay on time can lead to high interest costs and can result in heavy debt. Charge accounts are forms of credit that some businesses extend to customers. A receipt is signed for the purchase, and the customer is billed for purchases at the end of the month. A charge account's main advantage is its convenience. Many businesses that allow charge accounts also accept credit cards. Bank loans or borrowing money at interest from banks is an important form of credit. Commercial loans are taken by business people and usually involve fairly large sums. Personal loans are taken by individuals for personal reasons and usually are for small sums. Interest charges on all loans vary from month to month. Naturally borrowers try to get loans when the interest cost will be lowest. Many banks charge lower rates of interest to their best customers. Buyers of land and property make use of mortgage loans for credit. A mortgage is a legal claim against property by a lender. Failure by the borrower to repay the loan and interest on time allows the lender to claim the property. A public borrowing is one that invites the general public to lend money as an investment. In return they are given interest-bearing notes or bonds. These are promises to pay back the loans, with interest, at stated periods of time. Notes are usually for shorter periods of time than bonds. cash promise to pay extend credit interest charge account bank loan mortgage on


property public borrowing note bond fee notify liable receipt commercial loan personal loan rate of interest claim

, ,

TASK 1. Match the English and the Russian equivalents: 1. to extend credit a. 2. promise to pay 3. identification number b. 4. to make an imprint c. 5. paper form d. 6. credit company e. 7. cardholder f. 8. to charge interest for the g. service h. 9. mortgage on property i. 10. to accept a card 11. sales record j. 12. to pay the bill within a k. stated period of time l. , 13. failure to pay on time 14. best customers m. 15. buyers of land and property n. o. TASK 2. Express your agreement or disagreement with the statements below: 1. Businesses that allow charge accounts do not accept credit cards. 2. Many banks charge lower rates of interest to their best customers. 3. Cash involves exchange of money for goods and services. 4. Extension of credit is free of charge.

5. 6. 7. 8. 9.

There are two kinds of bank loans: commercial and personal loans. Some credit card companies have a yearly charge for cardholders. A mortgage is a legal claim against property by the borrower. Personal loans involve greater sums than commercial loans. The lender claims property when the borrower is unable to repay the loan and interest on time. 10. Credit cards are used widely because of their convenience and safety. TEXT 15 THE LETTER OF CREDIT Perhaps the most generally used method of payment in the export trade today is the Letter of Credit (L/C). It is ideal for individual transactions or for a series, makes trade with unknown buyers easy, gives protection to both seller and buyer and overcomes the "credit gap" (i.e. the time-payment loss between order and delivery). A L/C starts with the buyer. He instructs his bank to "issue" the L/C for the amount of the purchase and in favour of the seller. This is usually done by special printed form, which contains full details of the transaction as agreed between buyer and seller. The buyer's bank sends these instructions to its agent (i.e. a bank co-operating with it) in the seller's country. On receiving these instructions, the agent bank "confirms" the credit to the seller (i.e. writes to advise the seller that the money is available to him at this bank). The seller can now execute the buyer's order, knowing that when he has done so, the money will be paid at once by the agent bank. The buyer is equally secure, because the agent bank will pay on his behalf only if the conditions of the transaction are fully carried out by the seller. For this reason, great care and accuracy are needed in giving the original instructions. TASK. Translate the above text in writing using a dictionary. Pay special attention to the passive constructions.


1. - , / . .. .: , 1994. 2. - / . .. .: , 1977. 3. .. , 1991.



. - (English for Practical Management). .: , 1992.

5. .. . . . : , 1990.

.. . (World of Work). .: , 1999.

7. - / .. . .: , 1993. 8. Comfort J., Brieger N. Marketing. New York, 1992. 9. English ( ), 1997-1998 .

Richard Powell. Law Today. Longman, 1993.

11. The Career Forum. 12, 1998.


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