Text organization.

The statements below express the main ideas of the text. Number them so that they are in the same order as the ideas in the text. The first one is given for you:

	Statement	Order
a.	Every weekday, enormous amounts of commodities, currencies and financial securities are traded on spot markets.
b.	Options are merely one type of derivative instrument.
c.	As well as currencies and commodities, there is now a huge futures market in stocks andshares.
d.	Many producers and buyers of raw materials want to hedge, in order to guarantee next seasons prices.
e.	Futures, options and other derivatives exist in order to diminish the effects of future changes in prices, exchange rates, interest rates, and so on.
f.	Many companies nowadays also arrange currency swaps and interest rate swaps with other companies or financial institutions.

8Viewpoint:

How popular are the above-mentioned derivative instruments in our country?

BUYOUTS

Lead-in: Discuss when, in your opinion, buyouts take place.   Key words and phrases 1. takeover –злиття, поглинання підприємства 2. synergy (synergism) – синергізм (явище, коли результат перевершує суму окремих ефектів) 3. stockholder value – (економічна) вартість акціонера 4. raider (бірж.) –скупник акцій 5. to make a loss –зазнати витрат (збитків) 6. buyout – викупактивів, акцій діючого підприємства 7. cash reserves –резерв грошової готівкі 8. leverage buyouts –викуп контрольного пакету акцій за рахунок кредиту 9. challenge –складна задача, виклик 10. hostile takeovers and buyouts –поглинання підприємств без згоди керівництва 11. to lay-off workers –звільняти працівників

“You can’t buy a company merely by buying its shares”

(Sir James Goldsmith (1933-1997), Anglo-French financier)

In the 1960s, a big wave of takeovers in the US created conglomerates – collections of unrelated businesses combined into a single structure. Many of these conglomerates consisted of too many companies and not enough synergy. After the recession of the 1980s, there were many large companies on the US stock market with good earnings but low stock prices.

Such conglomerates were not maximizing stockholder value. The individual companies might have been more efficient if liberated from central management.

Conventional financial theories argue that stock markets are efficient. Raiders in the 1980s discovered that it was untrue. Although the market could understand data concerning companies’ earnings, it was highly inefficient in valuing assets, including land, buildings and pension funds.

Theoretically, there was little risk of making a loss with a buyout. The ideal targets for buyouts were companies with huge cash reserves that enabled the buyer to pay the interest on the debt, or companies with successful subsidiaries, or companies that are not sensitive to a recession, such as food and tobacco.

Takeovers using borrowed money are called ‘leverage buyouts’ or ‘LBOs’. Leverage means having a large proportion of debt compared to equity capital. If a company is bought by its existing managers, we talk of a management buyout or MBO.

Raiders and their supporters argue that the permanent threat of takeovers is a challenge to company managers and directors to do their job better and that well-run businesses are at little risk. The threat of raids forces companies to put their capital to productive use. Fat or lazy companies that fail to do this will be taken over by raiders who will use assets more efficiently.

LBOs, however, seem to be largely an American phenomenon. German and Japanese managers and financiers, for example, seem to consider companies as places where people work, rather than assets to be bought and sold. Hostile takeovers and buyouts are almost unknown in these two countries, where business tends to concentrate on long-term goals rather than seek instant stock market profits. Workers in these companies are considered to be as important as shareholders. The idea of a Japanese manager restructuring a company, laying off a large number of workers (as frequently happens in the US and Britain), is unthinkable. Lay-offs in Japan are instead a cause for shame for which managers are expected to apologize.

ØComprehension:

1. What is a conglomerate?

2. What are stock markets inefficient in?

3. Are companies with huge cash reserves the ideal targets for buyouts?

4. Is there any difference between ‘LBO’ and ‘MBO’?

5. The permanent threat of takeovers is a challenge to a company, isn’t it?

6. Why do you think LBO is a typically American phenomenon?

7. What is the status of workers in German and Japanese companies?

Summarizing.

Complete the following sentences to summarize the text above:

1. Takeovers in the USA created…

2. After the recession of the 1980s many companies had good earnings but low…

3. In the 1980s raiders discovered that stock markets were…

4. Theoretically, with a buyout there is little risk of…

5. If takeovers use borrowed money, they are called…

6. We talk of a management buyout when a company is bought by….

7. Hostile takeovers and buyouts seem to be typically… phenomenon.

8Viewpoint:

Are hostile takeovers and buyouts known in Ukraine?

11.PRINCIPLES OF TAXATION

Lead-in: What is the main purpose of taxation? Key words and phrases 1. taxation – оподаткування 2. tax revenues –податкові надходження 3. to provide medical care –забезпечувати медичною допомогою 4. to charge fees –вимагати, призначати плату 5. gross domestic product –внутрішній валовий продукт 6. to raise money –діставати гроші 7. the ability-to-pay principle –принцип платоспроможності 8. the benefits principle –принцип пільг 9. income and wealth –дохід і багатство 10. horizontal (vertical) equity –горизонтальна (вертикальна) справедливість 11. taxable income –оподаткований дохід 12. tax brackets –ступінь податкової шкали 13. tax rates –податкова ставка

Taxation is a system of raising money 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 use tax revenues to pay soldiers and police, to operate schools and hospitals, to provide food to the poor and medical care to the elderly, and for hundreds of other purposes. Without taxes government could not exist.

Taxation is the most important source of revenues for modern governments, typically accounting for 90 per cent or more of their in­come. The remainder of government revenue comes from borrowing and from charging fees for services. Countries differ considerably in the amount of taxes they collect. In the United States, about 28 per cent of the gross domestic product, a measure of economic output, goes for tax payments. In Canada about 36 per cent of the country's gross domestic product goes for taxes. In France the figure is 44 per cent, and in Sweden it is 51 per cent.

In addition to using taxation to raise money, governments may raise or lower taxes to achieve social and economic objectives, or to achieve political popularity with certain groups. Also, some economists consider taxation an important tool for maintaining the stability of a country's economy.

Most economists believe that a tax system should follow two main principles: fairness and efficiency. Economists consider two principles of fairness: the ability-to-pay principle and the benefits principle.

The ability-to-pay principle holds that people's taxes should be based upon their ability to pay, usually as measured by income or wealth. One implication of this principle is horizontal equity, which states that people in equal positions should pay the same amount of tax.

A second requirement of the ability-to-pay principle is vertical equity, the idea that a tax system should distribute the burden fairly across people with different abilities to pay. This idea implies that a person with higher income should pay more in taxes than one with less income. But how much more?

Taxes may be proportional, progressive, or regressive. A proportional tax takes the same percentage of income from all people. A progressive tax takes a higher percentage of income as income rises. A regressive tax takes a smaller percentage of in­come: as income rises, poor people pay a larger fraction of their in­comes in taxes than rich people. Which is fairest: a proportional, progressive, or regressive system?

A progressive, proportional, or even slightly regres­sive system all can achieve vertical equity's requirement that a richer person should pay more in taxes than a poorer person. Most industrialized nations have progressive income tax systems, which impose a heavier tax burden as one's income increases. In the United States, the individual income tax system divides taxable income into different tax brackets – ranges of income with different tax rates.

In addition to being fair, a good tax system should be efficient.

Three measures of effi­ciency are administration costs, compliance costs, and excess burden.

Each society must find the best trade off between fairness and efficiency.

ØComprehension:

1. What is taxation?

2. In what way do governments use tax revenues?

3. Is taxation the most important source of revenues for modern govern­ments?

4. Countries differ considerably in the amount of taxes they collect, don’t they?

5. How many principles should a tax system follow?

6. What are the requirements of the ability-to-pay principle of taxation?

7. What tax systems do most industrialized nations have?

8. Name three measures of tax efficiency.

True-false questions:

1. Taxation is the most important source of revenues for govern­ments.	
2. Taxation is an important tool for maintaining the stability of a country's economy.	
3. Most industrialized nations have regressive income tax systems.	
4. No tax system is perfectly efficient.	
5. Each society must find the best trade off between fairness and efficiency.	

8Viewpoint:

Is it possible to make the system of taxation perfect?

Дата добавления: 2015-11-14