Business and finance

Banks and businesses

Most businesses need to borrow money to finance (= pay for) investments (= things they need to buy in order to help the company, e.g. machines). The money they borrow from the bank is called a loan, and on this loan they have to pay interest, e.g. if you borrow £1,000 and the interest rate is 10%, then you have to pay back £1,000, plus £100 in interest.

Businesses and profit

One of the main aims/objectives (= the things that you hope to do/achieve) of a company is to make a profit (= earn/receive more money than it spends) make a loss). If a company does not make a profit or a loss, it breaks even.

Most companies are happy if they can break even in their first year of business. Companies receive money from selling their products – this money is called the turnover. The money that they spend is called the expenditure (fml). They spend money on these things: raw materials (= materials in their natural state used to make something else, e.g. coal and oil are important raw materials used to make plastics); labour (= employees); overheads (= necessary costs for a company, e.g. rent for buildings, electricity, telephone)

Rise and fall

Business people often need to talk about the movement of sales, prices, interest rates, profit and loss, etc. Here are some of the words used to describe these trends (= movements):

Note: rise, increase, and fall are also used as nouns: a slow rise in interest rates, a steady increase in sales, a sharp fall in profits, a dramatic (= sharp) rise in inflation. We can also use be up/down: prices are up by 10%; profits are down by £2m.

Businesses and the economy

In order to grow/expand (= get bigger) and thrive/prosper (= do well / be successful), many companies want or need the following: low inflation, so prices do not go up

low interest rates, so the company can borrow money without paying a lot of interest economic and political stability (= things remain steady and stable and there are no sudden changes in the economic and political situation) a healthy/strong economy (= in good condition), and not an economy in recession (= in a period of reduced and slow business activity) tax cuts (= tax reductions / lower taxes), so they can keep more of their profit. This often depends on government expenditure, e.g. The government will not be able to reduce taxes if public expenditure continues to rise.