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For a longer horizon, financial projections permit you to make estimates about future sales levels, expansion costs, or general business conditions and see how such conditions would affect your company’s financial results in the years to come.

The preparation of pro formas and projections is a complex exercise that requires a sound knowledge of financial accounting. The pro forma statements show how an expected sales increase will change the company’s profit and loss statement and balance sheet forecast for next year.

Source: www.newyorkfed.org

1. pilot program – пилотная программа

2. credit union – кредитный союз

3. targeted funds – целевые средства

4. application n – заявка, заявление

applicant n– заявитель

5. sole proprietorship – единоличное владение

6. short-term (current) assets – текущие (краткосрочные) активы

7. long-term (fixed) assets – долгосрочные (внеоборотные) активы

8. seasonal commercial loan – сезонный коммерческий кредит

9. installment loan – кредит с погашением в рассрочку

10. collateralized loan – обеспеченный кредит

11. credit card advance – аванс по кредитной карте

12. lump sum – единая сумма

13. compensating balance – компенсационный остаток

14. deposit account (DA) – депозитный счет

15. executive summary – резюме

16. five Cs (capacity to repay, capital, collateral, conditions, character) – пять аспектов оценки при предоставлении кредита

17. pledge n – залог, обеспечение, заклад; дар; обет; обещание

pledge v – закладывать, связывать обещанием, заверять

18. reference n – ссылка; справочник; упоминание; рекомендация; отношение; полномочие

19. net worth – чистая ценность

20. profit and loss statement (P&L) – отчет о прибылях и убытках

21. ratio analysis – анализ коэффициентов

22. gross profit margin – маржа валовой прибыли

23. operating profit margin – маржа операционной прибыли

24. extraordinary items – экстраординарные события (чрезвычайные обстоятельства)

25. quick ratio (acid test ratio) – коэффициент быстрой ликвидности

26. checking account – чековый (текущий) счет

27. current ratio – коэффициент текущей ликвидности

28. debt ratio – отношение заемного капитала к собственному

29. turnover ratio – коэффициент оборачиваемости

30. collection period ratio – средний срок инкассации поступлений

31. days to sell inventory ratio – средний срок продажи запасов

32. days purchases in accounts payable ratio – средний срок оплаты поставщиков

33. pro forma – гипотетический

Exercise 1*. Find synonyms to the following terms and make sentences of your own using these synonyms.

quick ratio; long-term assets; preferred stock; leverage; margin trading; face value; inventory; all-equity financed firm; income statement; strike price

Exercise 2. Make a dialogue between an entrepreneur who needs to raise funds for his business and a commercial banker. As a banker, you should decide whether you are going to extend credit to this business and explain why you consider reasons for viewing this enterprise an attractive credit opportunity.

Exercise 3. Write a loan application for your business. Invent a bank’s response denying a loan and supplying reasons for a denial.

Exercise 4. Write a business plan for your company using the following outline.

Sample Business Plan

Title Page

Name of Company, Date, Contact Information, etc.

Table of Contents

Executive Summary

Business Concept

Company

Market Potential

Management Team

Distinct Competencies

Required Funding and its Use

Exit Strategy

Main Sections

I. Company Description

Mission Statement

Summary of Activity to Date

Current Stage of Development

Competencies

Product or Service

Description

Benefits to Customer

Differences from Current Offerings

Objectives

Keys to Success

Location and Facilities

II. Industry Analysis

Entry Barriers

Supply and Distribution

Technological Factors

Seasonality

Economic Influences

Regulatory Issues

III. Market Analysis

Definition of Overall Market

Market Size and Growth

Market Trends

Market Segments

Targeted Segments

Customer Characteristics

Customer Needs

Purchasing Decision Process

Product Positioning

IV. Competition

Profiles of Primary Competitors

Competitors’ Products/Services & Market Share

Competitive Evaluation of Product

Distinct Competitive Advantage

Competitive Weaknesses

Future Competitors

V. Marketing and Sales

Products Offered

Pricing

Distribution

Promotion

Advertising and Publicity

Trade Shows

Partnerships

Discounts and Incentives

Sales Force

Sales Forecasts

VI. Operations

Product Development

Development Team

Development Costs

Development Risks

Manufacturing (if applicable)

Production Processes

Production Equipment

Quality Assurance

Administration

Key Suppliers

Product / Service Delivery

Customer Service and Support

Human Resource Plan

Facilities

VII. Management and Organization

Management Team

Open Positions

Board of Directors

Key Personnel

Organizational Chart

VIII. Capitalization and Structure

Legal Structure of Company

Present Equity Positions

Deal Structure

Exit Strategy

IX. Development and Milestones

Milestones May Include Some or All of the Following:

Financing Commitments

Product Development Milestones

Prototype

Testing

Launch

Signing of Significant Contracts

Achievment of Break-even Performance

Expansion

Additional Funding

Any Other Significant Milestones

X. Risks and Contingencies

Some Common Risks Include:

Increased Competition

Loss of a Key Employee

Suppliers’ Failure to Meet Deadlines

Regulatory Changes

Change in Business Conditions

XI. Financial Projections

Assumptions (Start Date, Commissions, Tax Rates, Average Inventory, Sales

Forecasts, etc.)

Financial Statements (Balance Sheet, Income Statement, Cash Flow Statement)

Break Even Analysis

Key Ratio Projections (Quick Ratio, Current Ratio, D/E, D/A, ROE, ROA, Working

Capital)

Financial Resources

Financial Strategy

XII. Summary and Conclusions

Business law is the body of rules, whether by convention, agreement, or national or international legislation, governing the dealings between persons in commercial matters.

Business law falls into two distinctive areas: (1) the regulation of commercial entities by the laws of company, partnership, agency, and bankruptcy and (2) the regulation of commercial transactions by the laws of contract and related fields.

In civil law countries, company law consists of statute law; in common law countries it consists partly of the ordinary rules of common law and equity and partly statute law. Two fundamental legal concepts underlie the whole of company law: the concept of legal personality and the theory of limited liability. Nearly all statutory rules are intended to protect either creditors or investors.

There are various forms of legal business entities ranging from the sole proprietor, who alone bears the risk and responsibility of running a business, taking the profits, but as such not forming any association in law and thus not regulated by special rules of law, to the registered company with limited liability and to multinational corporations. In a partnership, members «associate,» forming collectively an association in which they all participate in management and sharing profits, bearing the liability for the firm’s debts and being sued jointly and severally in relation to the firm’s contracts or tortious acts. All partners are agents for each other and as such are in a fiduciary relationship with one another. An agent is a person who is employed to bring his principal into contractual relations with third parties.

It is inevitable that in certain circumstances business entities might be unable to perform their financial obligations. With the development of the laws surrounding commercial enterprises, a body of rules developed relating to bankruptcy when a person or company is insolvent (i.e., unable to pay debts as and when they fall due), either he or his creditors may petition the court to take over the administration of his estate and its distribution among creditors. Three principles emerge: to secure fair and equal distribution of available property among the creditors, to free the debtor from his debts, and to enquire into the reasons for his insolvency.

Business law touches everyday lives through every contractual dealing undertaken. A contract, usually in the form of a commercial bargain involving some form of exchange of goods or services for a price, is a legally binding agreement made by two or more persons, enforceable by the courts. As such they may be written or oral, and to be binding the following must exist: an offer and unqualified acceptance thereof, intention to create legal relations, valuable consideration, and genuine consent (i.e., an absence of fraud). The terms must be legal, certain, and possible of performance.

Contractual relations, as the cornerstone of all commercial transactions, have resulted in the development of specific bodies of law within the scope of business law regulating (1) sale of goods, i.e., implied terms and conditions, the effects of performance, and breach of such contracts and remedies available to the parties; (2) the carriage of goods, including both national and international rules governing insurance, bills of lading, charter parties, and arbitrations; (3) consumer credit agreements; and (4) labour relations determining contractual rights and obligations between employers and employees and the regulation of trade unions.

Business law, on national and international levels, is continually evolving with new areas of law developing in relation to consumer protection, competition, and computers.

Source: Encyclopedia Britannica

Sources of Law.

Constitutional Law is based on a formal document that defines broad powers. Federal constitutional law originates from the U.S. constitution. State constitutional law originates from the individual state constitutions.

Statutes and Ordinances are legislation passed on the federal, state, or local levels.

Common Law is based on the concept of precedence – on how the courts have interpreted the law. Under common law, the facts of a particular case are determined and compared to previous cases having similar facts in order to reach a decision by analogy. Common law applies mostly at the state level. It originated in the 13th century when royal judges began recording their decisions and the reasoning behind their decisions.

Administrative Law – federal, state and local level. Administrative law is made by administrative agencies that define the intent of the legislative body that passed the law.

The sources of law have both vertical and horizontal dimensions. Vertical dimensions include federal authority, state authority, and concurrent authority. Federalism refers to this form of government, in which there is national and local authority. Federal authority covers laws related to patents, pensions and profit sharing, and labor issues. State authority covers business association, contracts, and trade secrets. Concurrent authority covers security law, tax law and employment law. Note that employment law refers to non-union relationships; labor law refers to union relationships.

The horizontal dimension is related to the separation of power between the executive branch, which creates administrative law, the legislative branch, which creates statutes, and the judicial branch, which creates common law. The judicial system in the U.S. has a pyramid structure consisting of fewer higher level courts and more lower level courts: