GLOSSARY OF KEY TERMS

balance sheet	Statement of the financial position of a company at a particular time, such as the end of the financial year or the end of a quarter, showing the company’s assets and liabilities; the company balance sheet for 1990 shows a substantial loss; the accountant has prepared the balance sheet for the first half-year COMMENT: the balance sheet shows the state of a company’s finances at a certain date; the profit and loss account shows the movements which have taken place since the last balance sheet
liability	Responsibility for a payment (such as the repayment of a loan); liabilities = debts of a business, including dividends owed to the shareholders; the balance sheet shows the company’s assets and liabilities; current liabilities = debts which a company has to pay within the next accounting period (in a company’s annual accounts, these would be debts which must be paid within the year and are usually payments for goods or services received)
equity capital	A company’s capital which is invested by shareholders, who thus become owners of the company (note that preference shares are not equity capital, since they involve less risk and do not share in the profitability of the company)
surplus	Extra stock, something which is more than is needed: a budget surplus = more revenue than was planned for in the budget; to absorb a surplus = to take a surplus into a larger amount
deficit	Amount by which spending is higher than income; the accounts show a deficit = the accounts show a loss; to make good a deficit = to put money into an account to balance it; balance of payments deficit or trade deficit = situation when a country imports more than it exports and so pays out more in foreign currency than it earns: deficit financing = planning by a government to cover the shortfall between fax income and expenditure by borrowing money
leverage	(a) relation between a company’s capital borrowed at a fixed interest and the value of its ordinary shares (also called “gearing”); (b) borrowing money at fixed interest which is then used to produce more money than the interest paid
maturity	Date of maturity or maturity date = date when a government stock or an assurance policy or a debenture will become due for payment

Ex. 4. Ask all the types of questions to the following sentences.

The overall results of the assets and liabilities of the balance sheet equal to each other.
This is an obligatory condition for the correctness of its compilation.

Ex. 5. Fill in a missing word. Choose from the box.

Liabilities, equity, deficit, maturities, earnings, interest rates, assets, surplus

Like other financial intermediaries, commercial banks facilitate the flow of funds from ... spending units (savers) to … spending units (borrowers). Three financial characteristics stand out. First, most banks own few fixed. They have few fixed costs and thus low operating leverage. Second, many banks … are payable on demand or carry short-term … so depositors can renegotiate deposit rates as market … change. This creates significant asset allocation and pricing problems. Third, banks operate with less … capital than nonfinancial companies, which increases financial leverage and the volatility of … .

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