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Mid-Term Exam

The document is a midterm exam for an English in Banking and Finance course. It consists of 4 sections - Reading Comprehension, Matching, Fill in the Blanks, and Translation. The Reading Comprehension section provides a text about balance sheets and asks 3 questions about firm assets, liabilities, and what "balance" means in the context of a balance sheet. It also includes matching, fill in the blank, and translation exercises related to financial terms.

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Trinh Trinh
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64 views3 pages

Mid-Term Exam

The document is a midterm exam for an English in Banking and Finance course. It consists of 4 sections - Reading Comprehension, Matching, Fill in the Blanks, and Translation. The Reading Comprehension section provides a text about balance sheets and asks 3 questions about firm assets, liabilities, and what "balance" means in the context of a balance sheet. It also includes matching, fill in the blank, and translation exercises related to financial terms.

Uploaded by

Trinh Trinh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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English in Banking – Finance

Midterm exam
(Time: 75 minutes)

I. Reading Comprehension (3.0 marks)


Read the following text and use your words to answer the questions below:

The balance sheet


(1) The balance sheet is a snapshot of the firm. It is a convenient means of organizing and
summarizing what a firm owns and what a firm owes, and the difference between the two at a
given point in time. Assets are classified as either current or fixed. A fixed asset is one that has a
relatively long life. Fixed assets can be either tangible, such as a truck or a computer, or
intangible, such as a trademark or patent. A current asset has a life of less than one year. This
means that the asset will convert to cash within 12 months. For example, inventory would
normally be purchased and sold within a year and is thus classified as a current asset.
(2) The firm’s liabilities are the first thing listed on the right-hand side of the balance sheet.
There are classified as either current or long-term. Current liabilities, like current assets, have a
life of less than one year and are listed before long-term liabilities. Account payable is one
example of a current liability. A debt that is not due in the coming year is classified as a long-
term liability. A loan that the firm will pay off in five years is one such long-term debt.
(3) Finally, by definition, the difference between the total value of the assets and the total value
of the liabilities is the shareholders’ equity, also called common equity or owners’ equity. This
feature of the balance sheet is intended to reflect the fact that, if the firm were to sell all of its
assets and use the money to pay off its debts, then whatever residual value remained would
belong to the shareholders. So, the balance sheet “balances” because the value of the firm’s
assets is equal to the sum of its liabilities and shareholders’ equity.
Questions
1. What are firm’s fixed assets?
2. How are firm’s liabilities classified?
3. What does “balance” mean?

II. Match each word/phrase with its definition (2.5 marks):


1 Maturity a. A borrower's pledge of specific property to a lender, to secure repayment of a loan.
. Taxpayer b. An individual or entity that is obligated to make payments to municipal or
2 Collateral government taxation agencies.
. Store card c. The date at which something becomes due for payment or repayment.
3 Preferred stock d. Stock with dividend priority over common stock, normally with a fixed dividend
. rate, often without voting rights.
4 f. A type of credit cards but you are restricted to using them in certain shops or stores.
.
5
.
III. Use words/phrases in Exercise II to fill in the gaps (1.5 marks)

1. Size and ............................................................... shape a loan's interest rate.

2. Customers can use ....................……………………………to buy goods on shop.

3. Banks have the right to sell customers' ........................................... in case they cannot pay on time.

IV. Translation (3.0 marks) Translate into Vietnamese

In late 2009, Canwest Global Communications Corporation, then the largest media company in
Canada, filed for bankruptcy as it had amassed a debt of $4 billion. The Winnipeg-based
company owned a range of broadcasting and printing businesses, including the National Post
newspaper. As a part of the bankruptcy process, Canwest’s newspaper arm was sold to a group
of creditors led by National Post CEO Paul Godfrey, through a newly formed company,
Postmedia Network. Canwest’s broadcasting arm was sold to Shaw Communications.
A firm’s choice of how much debt it should have relative to equity is known as a capital structure
decision. Such a choice has many implications for a firm and is far from being a settled issue in
theory or practice. In this chapter, we discuss the basic ideas underlying capital structures and
how firms choose them.

A firm’s capital structure is really just a reflection of its borrowing policy. Should we borrow a
lot of money, or just a little? At first glance, it probably seems that debt is something to be
avoided. After all, the more debt a firm has, the greater is the risk of bankruptcy. What we learn
is that debt is really a double-edged sword, and, properly used, debt can be enormously
beneficial to a firm.

A good understanding of the effects of debt financing is important simply because the role of
debt is so misunderstood, and many firms (and individuals) are too far conservative in their use
of debt. Having said this, we can also say that firms sometimes err in the opposite direction,
becoming too much heavily indebted, with bankruptcy as the unfortunate consequence. Striking
the right balance is what the capital structure issue is all about.

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