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Companies can increase the money with which they run their business in a number of ways. Besides borrowing money and buying on credit, they can use some other processes of financing. Two ways of increasing money are described here.
(This article was written in 90’s. Let’s see what were happening at that time . . . )
( dividends – bonds – borrowing money – buying on credit )
First, they may provide bonds. Bonds are a special kind of promissory note, a written promise to pay back the money owed. They can be in various currencies, or forms of money used in different countries, such as the pound in England or the mark in Germany. These bonds can easily be resold to other people or to other countries. The company that uses bonds guarantees to pay a particular amount of money as interest regularly for a certain period of time. This continues until the time when the company has to pay back the money owed.
Payments of interest must be made on time; it doesn’t matter whether the company is making earnings or losing money. Another process companies may use is to provide other forms of promissory notes called stocks. Bonds and stocks are opposite methods of providing money for a company. The people who buy stocks provide capital which is invested in the business. They have a share in the profits and in making decisions, but they must also share the losses.
The people who own stocks receive dividends, that is, periodic payments of the earnings oi a company. On the other hand, according to the law, the people who own bonds have no control over the decisions of the company.
A. Line 4, ‘they’ refers to .
B. What do the following mean in the text?
1. ‘currencies’ (line 6):
2. ‘dividends’ (line 20):
C. Mark the statements as True (T) or False (F).
1. People who buy stocks cannot take part in deciding how the company will manage its business.
2. Companies have to pay interest only if they have been earning money.
3. Bonds and stocks are two of the ways of increasing money.