V. Answer the questions using the text “Corporate Finance”.

1. Why do all corporations need financing?

2. What does equity funding mean?

3. What does debt funding mean?

4. How is the value of a share determined?

5 What activities produce an inflow and an outflow of capital?

6. What can happen if an enterprise has a greater outflow of capital than an

inflow?

7. Why is the risk involved an important factor in determining fund

raising?

VI. Read and translate the Dialogue.

MaryIt's so nice to see you, Frank. Sorry, I couln't come to your office

today.

Frank Never mind. Have a seat. Let's start by having some coffee.

Later.

MarySo Frank. I guess it might be right time for me to invest in that

computer company. As my stockbroker, what can you suggest?

Frank I am sure they are doing extremely well and they would welcome

your investment.

Mary But why do they need my investment if they are doing so well?

Frank OK. I think I should explain you a little about a corporate finance.

MaryGo ahead. If it concerns my money I am always interested.

FrankIf a corporate enterprise wants to expand it needs financing.

Mary You are right.

Frank So there are two basic types of financing: equity and debt.

Mary What's the difference between them?

FrankIf the money is supplied by the owners of a business it is called

equity funding. And the use of money supplied by loans is called

debt funding.

MarySo as an investor, what am I?

Frank Well, as an investor you become a partial owner of a business and

receive equity. You get shares or certificates of common stock

which represent your portion of ownership.

MaryYou did right buying the stock for me. By the way, are there any

documents which show the financial state of the company?

FrankOh yes. You've just reminded me. I've brought a copy of the

company's Annual Report for you to look over. You should read it

very carefully. And if you have something to ask do it, please.

MaryThanks a lot, Frank. I will. Does this company pay dividends on

its stock?

FrankYes. In fact, I studied their Annual Report and I can tell that they

have good management. Their business is doing very well, the value

of their stock has been rising. It can be an excellent long-term

investment, I am sure.

Mary But if I want to sell my shares very soon?

Frank No problem. Undoubtedly you can make a profit on the sale. But it

seems to me you'll want to keep this company in your portfolio.

Mary Thank you for your advice. You are wise as usual.

Frank Well, my advice now is to study the company's Annual Report. You

need several days for that. Then we'll meet and talk again.

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