Facoltà di Lingue e Letterature Straniere

Corso di Laurea in Lingue e Cultura per l’Impresa


Reading Comprehension/Writing section 23/05/07

Read the following passage and answer the questions.

Credit out of control

They say money makes the world go round. But it isn’t money: it’s credit. When the corporations of the world buy, they buy on credit. (1) ______, no one asks to see your cash. Indeed, if everyone were to demand immediate payment in cash, the world would literally go bankrupt. Finding customers may be hard enough, but nowadays getting paid is even harder. And with the amount of international trade increasing every year, credit is rapidly going out of control.

In Germany, Denmark and Sweden, whose governments strictly regulate business-to-business relations, companies pay on time. They have to. Late payers may actually be charged by their creditors for the services of a professional debt collector. But in Britain companies will regularly keep you waiting a month past the agreed deadline before paying your bill. The French and Italians, too, will delay payment almost indefinitely, and push creditor companies to the edge of bankruptcy.

But bad debt does not necessarily mean bad business. One hundred years ago the legendary Tokushichi Nomura was racing round the streets of Osaka in a rickshaw to escape angry creditors. They are not angry now, for today Nomura is the biggest investment bank in Japan. Nomura knew what all good financial directors know: that what distinguishes an effectively managed business from a badly managed one is the way it manages its money. (2) ______, a key factor in successful money management is the skill with which a company can make its creditors wait, while at the same time putting pressure on its debtors.

So how can the risk of excessive debt be minimized? From the supplier’s point of view, pre-payment would be the ideal solution: make the customer pay before they receive the goods or services. But it is a confident supplier indeed who would risk damaging customer relations by insisting on money in advance. Good relations with your biggest customers – those who by definition owe you the most money – are essential in order to keep them returning to you in the future. And the prospect of a bigger order next time puts you in a difficult position when payment is late again this time.

We might expect modern technological advances to have improved the situation, but they haven’t – quite the opposite, in fact. (3) ______, it was common for companies to employ credit controllers who carefully checked the credit situation of current and potential customers. Now you get a telephone call or e-mail from a customer, your computer runs a simple credit check and you deliver immediately. Buyers have almost instant access to goods… and to credit.

(4) ______, it’s a no-win situation. If you charge interest on unpaid debts, you risk penalising customers with genuine cash-flow problems. There is a delicate balance of power between debtor and creditor, and unfortunately it often seems to be in favour of the debtor. It is cash, and not promises to pay, that finances a company’s new projects. People forget their promises, and creditors tend to have better memories than debtors.

Write all answers on the blank answer-sheet provided, and not on this question-sheet. In order to earn maximum points, you should give answers which are both complete and to the point; and you should use your own words wherever possible.

1.  The following words and expressions have been removed from the text. On your answer sheet, indicate where you think they should go by linking the letters to the numbers.

a) In the past

b) And increasingly

c) For more and more companies

d) And if your credit is good

2. Why is credit going out of control, according to the article?

3. What happens in Germany, Denmark and Sweden if companies do not pay punctually?

4. “…bad debt does not necessarily mean bad business.” What does the author mean?

5. Why is pre-payment for goods and services not a realistic solution to the problem of

customer debt?

6. Why have modern technological advances not improved the situation?

7. The author says that it is a “no-win” situation for companies who give credit. What does he



The saying, “money makes the world go round” is quoted in the article. How important do you consider money to be in your life? Your answer should be 80-100 words in length.

Sample Answers

  1. 1-d, 2-b, 3-a, 4-c.

2.  This is happening because the world’s corporations buy on credit, not with cash. International trade is increasing every year, and so the situation is going out of control.

3.  In Germany, Denmark and Sweden, business relations are strictly regulated by the government, and if companies do not pay punctually, they may have to pay for the services of a professional debt collector.

4.  The author means that not paying on time can be a good business strategy. He adds that knowing how long to make creditors wait, while at the same time putting pressure on debtors to pay, is a factor in good money management. He gives the example of T. Nomura who, one hundred years ago owed a lot of money to creditors. He knew how to manage his money, and nowadays Nomura is the biggest investment bank in Japan.

5.  Pre-payment is not a realistic solution to the problem of customer debt, because by insisting on payment in advance you could damage relations with your customers; and good relations are very important, especially with your biggest customers.

6.  Whereas in the past, companies employed credit controllers who checked the credit situation of customers, nowadays the credit check is done quickly by computer; so it could be said that customers have quicker access to companies’ credit.

7.  He means that companies who give credit automatically have a problem: charging interest on late debts is not a solution, because this could put some of their customers in difficulty; and so, creditor companies often find themselves without the cash they need in order to plan ahead and grow.