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Lesson 6.

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Lesson 6.


Accounting shows a financial picture of the firm. An accounting department records and measures the activity of a business. It reports on the effects of the transactions on the firms financial condition. Accounting records give a very important data. It is used by management, stockholders, creditors, independent analysts, banks and government.

Most businesses prepare regularly the two types of records. That is the income statement and balance sheet. These statements show how money was received and spend by the company.

One major tool for the analysis of accounting records is ratio analysis. A ratio analysis is the relationship of two figures. In finance we operate with three main categories of ratios. One ratio deals with profitability, for example, the Return on Investment Ratio. It is used as a measure of a firms operating efficiency.

The second set of ratios deals with assets and liabilities. It helps a company to evaluate its current financial position. The third set of ratios deals with the overall financial structure of the company. It analyses the value of the ownership of the firm.

Comprehension questions.

1. What is the purpose of accounting?

2. Who uses the data provided by accounting firms?

3. What are the two types of records which most businesses prepare?

4. What can you know analyzing the income statement and balance sheet of a company?

5. What is the purpose of the ratio analysis?

6. What categories of ratios in finance do you know?


record , ,

to record ,

to measure

transaction ,

firms financial condition

to provide data



income statement

balance sheet

to receive

to spend

ratio analysis


Return on Investment Ratio

Efficiency ,

to evaluate

value ,


overall financial structure

Vocabulary practice

Exercise 1. Choose the necessary word and put it in the sentence.

1. An accounting helps the activity of a business. | 1. to profit

2. Do you know the effect of your last on financial condition of the firm? | 2. profit

3. Accounting records provide for stock-holders, independent analysts. | 3. efficiency

4. The second type of ratio helps the company its current financial position. | 4. ownership

5. is one the two main records which most of the businesses prepare regularly. | 5. to evaluate

6. The of the company includes real estate in California. | 6. transaction

7. I am sure of the of this transaction. | 7. data

8. Our companys current is very high. | 8. income

9. They from the association with that corporation. | 9. to measure

accounting department

to total accounts

to turn in the report



profit and loss statement

assets and liabilities

net worth )


a financial statement

a pay check

gross ,

gross pay

net ,

net pay



fiscal year ()

Exercise 4 (. 43). Translate from Russian into English

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6. .

7. ?

svetka999 :

1 - 3 2009 19:54
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admin :

2 - 3 2009 20:57
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