Topics covered by the 2nd progress test

• Exchange rates (MK U24)

• Accounting, financial statements (MK U13, R)

• Stocks and shares (MK U15, R)

• Bonds (MK U16, R) + Derivatives (MK p 100)

• Takeovers, mergers and buyouts (MK U17,R)

• Graph description

Types of exercises you can expect:• Read the definition/explanation and provide the right term

• Make strong word partnerships, use the expressions to answer questions

• Find the odd one out & explain your answer

• Fill in the missing words

• Fill in the missing prepositions

• Compare X and Y

• Explain X

• Translate (key terms) into or from Croatian

• Write questions

• Fill in a text to describe a graph

Exchange rates - Match left + right + below

• the United States• fixed• an ounce of• over / undervalued• the Bretton Woods• promissory• in terms of• gold• pegging against

• gold• currencies• agreement• Tresury• convertibility• exchange rates• gold• note• the dollar

establish, exchange for, adjust, issue, define, abandon

What do you know about the period of gold convertibility?

• establish fixed exchange rates (1944)• defined in terms of gold and the US dollar• pegging against the dollar• issue a promissory note• The United States Treasury• exchange for 1/35th an ounce of gold• adjust undervalued /overvalued currencies• the Bretton Woods agreement• gold convertibility was abandoned (1971)

Match left + right + below

• purchasing power• floating• unofficial• stable• impact of• money market• financial• exchange• capital

• world currency• controls• exchange rates• speculation• trends• systems• parity• exchange rates• gains

reflect, establish, follow, deregulate, abolish,chase

What do you know about floating exchange rates and the abolition of exchange controls?

• gold convertibility was replaced• floating exchange rates• unofficial world currency• reflect purchasing power parity• establish stable exchange rates• underestimate the impact of speculation• follow money market trends• deregulate financial systems (1970s & 1980s)• abolish exchange controls• chase capital gains

Supply the missing prepositions

• leave ____ the mercy ___ market forces• intervene ___ exchange markets• hedge ____ currency fluctuations• rise or fall ____ 50 %• lose value ____ another currency• appreciate or depreciate ___ 50 % _____ the

currency of major trading partners• diverge __ more than +/- 2.25 % ___ the

central parity

• leave at the mercy of market forces• intervene in exchange markets• hedge against currency fluctuations (protect against)

• rise or fall by 50 %• lose value against another currency• appreciate or depreciate by 50 % against the

currency of major trading partners• diverge by more than +/- 2.25 % from the

central parity

Review: M & A

What is missing?

• ~ between• ~ talks• ~ proposal• ~ agreement

• conglomerate ~• defensive ~

• horizontal ~• vertical ~

What is missing? MERGER

• a merger between similar banks but to merge with a similar bank

• merger talks• merger proposal n. + n.• merger agreement

merger ≈ integration• conglomerate merger • defensive merger • adj. + n.• horizontal merger / integration• vertical merger / integration

What is missing?

friendly ~hostile/unfriendly ~leveraged ~creeping ~~ battle~ bid What is missing?

leveraged ~ (LBO)employee/staff ~ management ~ (MBO)

What is missing? TAKEOVER

friendly takeoverhostile/unfriendly takeoverleveraged takeovercreeping takeovertakeover battletakeover bid What is missing? BUYOUT

leveraged buyout (LBO)employee/staff buyoutmanagement buyout (MBO)

Mergers and acquisitions

Success Money Investments in R&D Acquisition of other companies

(takeovers, buyouts)Merger - integration:Comp. in unrelated fields ConglomeratesCompetitors = horizontal m/i ver Distributors = forward m/i LBOti Suppliers = backward m/ical stripped of assets

& split up

acquisitionsfinanced by debt

TYPES

1. ACQUISITION / TAKEOVER

2. FRIENDLY TAKEOVER

3. HOSTILE TAKEOVER

4. MERGER

5. JOINT VENTURE

6. LEVERAGED BUYOUT

7. CORPORATE RAID

Cooperation of two or more individuals or

businesses, each agreeing to share profit, loss

and control, in a specific enterprise

Combining two or more companies to form a new

one

Corporate action in which a company buys most, if

not all, of the target company's ownership stakes

in order to assume control of the target firm 

JOINT VENTURE

MERGER

ACQUISITION / TAKEOVER

A takeover that a company being taken over agrees to.

A takeover that a company taken  over does not want and doesn’t agree to.

Acquisition of another company using borrowed money (bonds or loans) to meet the cost of acquisition. Often, the assets of the company being acquired are used as collateral for the loans in addition to the assets of the acquiring company.

FRIENDLY TAKEOVER

HOSTILE TAKEOVER

LEVERAGED BUYOUT

Handouts check• Takeovers1 reinforcing your company’s position

2 reducing competition

3 rationalizing production

4 optimizing the use of a plant or capital

5 diversifying products or markets

6 searching for synergy

7 grow 8 launch 9 buy

10 increase 11 persuade 12 sell

13 friendly 14 hostile 15 board

16 poison pill 17 white knight

Handouts check• LBOs1b 2g 3d 4h 5f 6a 7e 8c

1 borrowed

2 financed

3 stock market value

4 asset-stripping

5 conglomerates

A LITTLE BIT OF EVERYTHING

1. A yearly meeting to which companies have to invite all shareholders.

• WHAT IS AN AGM?

2. The amount of interest paid by a bond.

WHAT IS A COUPON?

3. To fail to repay a loan at the scheduled time, or to fail to respect a contract.

WHAT DOES IT MEAN TO DEFAULT?

4. Financial instruments such as options that are based on underlying securities.

WHAT ARE DERIVATIVES?

5. A share in the annual profits of a limited company, paid to shareholders.

WHAT IS A DIVIDEND?

6. To issue shares (offer them for sale to the public) for the first time.

WHAT DOES IT MEAN TO FLOAT A COMPANY?

7. An arrangement to buy or sell a commodity or currency or financial instrument at an agreed price at a future date.

WHAT IS A FUTURES CONTRACT?

8. Mergers or takeovers among companies producing the same type of goods or services.

WHAT IS HORIZONTAL INTEGRATION?

9. Buying a company’s shares with money borrowed on the security of the company’s assets.

WHAT IS A LEVERAGED BUYOUT?

10. A lender’s estimation of a borrower’s present and future solvency.

WHAT IS CREDIT STANDING?

CREDIT RATING?

CREDIT WORTHINESS?

11. When the exchange rate is determined by supply and demand only.

• WHAT IS A FREELY FLOATING EXCHANGE RATE?

12. Responsibility for debts up to the value of the company’s share capital.

WHAT IS LIMITED LIABILITY?

13. Companies whose shares are traded on a stock exchange.

WHAT ARE LISTED / QUOTED COMPANIES?

14. The date when the principal of a redeemable security (a loan, a bond, etc.) becomes repayable.

WHAT IS MATURITY DATE?

15. The highest point on the business cycle; to reach the highest point.

WHAT IS A PEAK?

16. A defense against a raider: taking action which makes the company less attractive.

WHAT IS A POISON PILL?

SHARK REPELLENT?

17. Salable papers, traded on stock exchanges, that yield an income (dividend, interest, etc.).

WHAT ARE SECURITIES?

18. A security representing a portion of the nominal capital of the company.

WHAT IS A STOCK?

19. A person who buys new share issues, hoping to resell them at a profit if the issue is oversubscribed.

WHO IS A STAG?

20. Money invested in a new business and thus open to a rather large risk of loss.

WHAT IS VENTURE CAPITAL?