Costs. Assets and Liabilities

The money that a business spends in order to produce goods or services is its costs. Different businesses have different cost structures and define and calculate their costs in different ways. One way of classifying the costs of a business is to relate them to the output of the firm.

Fixed costs are those which remain unchanged whatever the level of output, e.g. rent, heating, interest charges, salaries; variable costs change directly with the output of the business, e.g. materials.

Direct costs are directly related to the things produced. In manufacturing, for example, direct costs include raw materials and wages.

Indirect costs may include things like social security charges on top of the wages.

Overhead costs or overheads are used to mean different things, but usually cover all the regular non-production costs of running a business, such as salaries and telephone bills; they may include the cost of marketing.

Costs are also referred to as expenses or expenditure.

Things of value owned by a firm are its assets. Fixed assets are long-term assets which are for use in the business and not for re-sale (land, buildings, furniture, equipment, etc.)

Current assets are used in the course of business. They include cash, receivables, bank deposits and investments in other companies.

The assets help generate the income of the company.

Liabilities are what a business owes to those outside the business (suppliers, lenders, etc.).

Liabilities are classified as either long-term liabilities which are due for repayment after more than one year, or current liabilities which are short-term debts and debts to suppliers the company expects to pay within one year.

Exercises in Word Study

Ex.1. Form verbs from the following nouns:

expenditure, receivables, generation, cost, definition, calculation, investment, classification, repayment, expectation.

Ex.2. Give the English for:

виробляти товари та послуги; витрати; структура витрат; підраховувати витрати; основні витрати; обсяг виробництва; заробітна платня; змінні витрати; прямі витрати; сировина; непрямі витрати; накладні витрати; активи та пасиви; неліквідні активи; перепродаж; поточні оборотні активи; готівка; рахунки дебіторів; дохід компанії; довгострокові (короткострокові) зобов’язання; борг.

Ex.3. Match words from list A with words from list B that have a similar meaning:

Ex.4. Find suitable opposites to the following words and phrases:

assets, to own, current liabilities, fixed assets, withdrawal, bottom, revenue.

Ex.5. Match the nouns in the left hand column with the verbs in the right hand column:

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