FM1 REVISION

 Forms of Business Organization

1. Sole proprietorships: A business form for which there is one owner. This single owner
has unlimited liability for all debts of the firm.
Advantages Disadvantages
Easy to set up Lack of capital
Freedom to make a decision Lack of continuity
Tax benefit (chỉ chịu thuế cá nhân) Lack of knowledges and skills
Unlimited liabilities

2. Partnerships: A business form in which two or more individuals act as owners

- General partnerships: all partners have unlimited liabilities for the debts of the firm ()
- Limited partnership: include general partners (can be more than 1, and have unlimited
liabilties), limited partners (can be more than 1, and have limited liabilities in the amount
of the capital they have introduced)
Advantages Disadvantages
 Easy to set up  Limited capital
 Combine knowledges and  Unlimited liabilities
skills  Potential for differences and conflicts
 Availability of capitals and  Slower and more difficult for decision-
credits making
3. Limited liabilities companies (LLCs): A business form that provides its owners (called
“members”) with corporate-style limited personal liability and the federal-tax treatment
of a partnership.

Advantages Disadvantages
Limited liabilities Do not issue shares
Unlimited life Transfer of ownership difficulty

4. Corporations: A business form legally separate from its owners = an “artificial entity”
created by law.
Advantages Disadvantage
Limited liabilities Double tax (corporation tax -> personal income
Unlimited life tax)
Separation of ownership and Separation of ownership and management
management (agency problem)
Easy transfer of ownership
 Easier to raise capital

 The Goal of the Firm

- Maximization of shareholders’ wealth (the basic objective) represented by the market
price per share of firm’s common stock. Việc tối đa hóa tài sản của cổ đông cần cân nhắc:
sử dụng long-term view (long-run perspective), the time value of money (the future cash
flow), risk, …
- Profit maximization: Maximizing a firm’s earnings after taxes (EAT). Maximizing
earnings per share is often advocated as an improved version of profit maximization. ->
not a basic objective.
- Agency problem
- CSR
 Chief financial officer (CFO)
 Simple interest/ Compound interest/ Annuities
Simple interest (lãi đơn) tiền lãi chỉ được tính trên tiền gốc

Ví dụ: Assume that you deposit $1,000 in an account earning 7% simple interest for 2
years. What is the accumulated interest at the end of the 2nd year?
SI = 1000 x 7% x 2 = 140
Ví dụ: Find the simple interest earned after 3 years on $500 at an interest rate of 6%.
SI = 500 x 6% x 3 = 90
Ví dụ: Find the simple interest earned after 4 years on $800 at an interest rate of 5%.
SI = 800 x 5% x 4 = 160
Ví dụ: Find the principal invested if $178 interest was earned in 2 years at an interest rate
of 4%.
178 = P0 x 4% x 2 => P0 (the principle, the deposit, the original amount) = 2225
Ví dụ: Find the rate if a principal of $8,200 earned $3,772 interest in 4 years.
3772 = 8200 x i x 4 => i (interest rate) = 11,5%
Ví dụ: Nathaly deposited $12,500 in her bank account where it will earn 4% interest.
How much interest will Nathaly earn in 5 years?
SI = 12500 x 4% x 5 = 2500
https://math.libretexts.org/Courses/Las_Positas_College/Foundational_Mathematics/
07%3A_Percents/7.04%3A_Solve_Simple_Interest_Applications (làm thêm nếu muốn)
FV (Future value) giá trị tương lai của 1 khoản tiền hoặc 1 dòng tiền với mức lãi suất đã
cho

PV (Present value) giá trị hiện tại của 1 khoản tiền hoặc 1 dòng tiền trong tương lai mà
có thể nhận được với mức lãi suất đã cho
Compound interest (lãi kép) tiền lãi tính trên cả tiền gốc lẫn cái khoản tiền lãi sinh ra
Công thức FV với lãi kép

Ví dụ: You saved VND 10 million in 3 years with a compound interest of 7% per year.
How much will you receive at the end of the third year?
FV = 10 x ( 1 + 7%)^3 = 12,25 million VND
Ví dụ: Julie Miller wants to know how large her deposit of $10,000 today will become at
a compound annual interest rate of 10% for 5 years.
FV = P0 (1+i)^n = 10000 x (1+10%)^5 = 16105,1
Ví dụ: How long does it take to double $5,000 at a compound rate of 12% per year?
10000 = 5000 x (1 + 12%)^n => n ≈ 6,12
Ví dụ: At a compound interest rate of 10% per year, $45,000 one year ago is now
equivalent to?
FV= PV x (1+i)^n = 45000 x (1+10%)^1 = 49500
Ví dụ: You have invested $1000 in a bank where your amount gets compounded daily at
5% annual interest. Then what is the future value of the amount you have invested for 10
years?
FV = 1000 x (1+ 5%)^10 = 1628,89
Ví dụ: David borrowed $5000 from a bank at a rate of 7% per annum compounded
annually. How much he has to pay back at the end of 4 years?
FV = 5000 x (1+7%)^4 = 6553,98
Ví dụ: What is the value on January 1, 2026, of $40,000 deposited on January 1, 2019,
which accumulates interest at 12% compounded annually?
FV = 40000 x (1+12%)^7 = 88427,26
Ví dụ: If you deposit $4000 into an account paying 6% annual interest compounded
quarterly, how much money will be in the account after 5 years?
CT mở rộng

FV = 4000 x (1+6%/4)^(4x5) = 5387,42

Ví dụ: If you deposit $5000 into an account paying 6% annual interest compounded
monthly, how long until there is $8000 in the account?
8000 = 5000 x (1+6%/12)^(12xt) => t = 7,85
Ví dụ: Larry invested $27,000 in a savings account that pays an annual interest rate of
1.8%. The savings account is set to compound quarterly (4 times per year). How much is
in Larry’s account after 5 years?
FV = 27000 x (1+ 1,8%/4)^(4x5) = 29536,74175
Ví dụ: Becky invested 19,800 in a CD that pays an annual interest rate of 5.3%. The CD
is set to compound daily (365 times per year). How much is in Becky’s account after 9
years? Note: Ignore the extra day from leap years
FV= 19800 x (1+5,3%/365)^(9x365) = 31901,31
Công thức PV với lãi kép

Ví dụ: The future value is $300 after one year at annum interest rate of 8%, the
present value will be …?
PV = 300/(1+8%)^1 = 277,78 $
Ví dụ: Assume that you need $1,000 in 2 years. Let’s examine the process to determine
how much you need to deposit today at a discount rate of 7% compounded annually.
PV = 1000/(1+7%)^2 =873,44
Ví dụ: Jake invests in an annuity with an annual fixed interest rate of 6.2%. The annuity
compounds monthly (12 times per year). If after 10 years, the account balance is
$27,839.45 how much was the beginning investment?
CT mở rộng: PV = FV / (1 + r/n)^(n*t)
PV = 27839.45/(1+6,2%/12)^(12x10) = 15000
Ví dụ: EZ Photo Company needs five copying machines in 2 1/2 years for a total cost of
$15,000. How much money should be deposited now to pay for these machines, if the
interest rate is 8% compounded semiannually?
PV = 15000 / (1+8%/2)^(2x2,5) = 12328,91
Ví dụ: Thuy needs $1,850 in eight months for her college tuition. How much money
should she deposit lump sum in an account paying 8.2% compounded monthly to achieve
that goal?
PV = 1850 / (1+8,2%/12)^(12x(8/12))= 1751,91
Ví dụ: How much should be invested at 10.3% for it to amount to $10,000 in 6 years?
PV = 10000 x (1+10,3%)^6 = 5553,25
Ví dụ: Mr. and Mrs. Tran are expecting a baby girl in a few days. They want to put away
money for her college education now. How much money should they deposit in an
account paying 10.2% so they will have $100,000 in 18 years to pay for their daughter's
educational expenses?
PV = 100000/ (1+10,2%)^18 = 17407,3
Ví dụ: According to the Law of 70, if an amount grows at an annual rate of 1%, then it
doubles every seventy years. Suppose a bank pays 5% interest, how long will it take for
you to double your money? How about at 15%?
With 5% interest, it’ll take about 14,21 years
With 15% interest, it’ll take about 4,96 years
Ví dụ: How much should be invested in an account paying 9% compounded daily for it
to accumulate to $5,000 in five years?
PV = 5000/ (1+9%/365)^(365x5)= 3188,32
Ví dụ: If $4,000 is invested at 4% compounded annually, how long will it take to
accumulate to $6,000?
4000 = 6000/(1+4%)^t => t = 10,34
Ví dụ: If $5,000 is invested now for 6 years what interest rate compounded quarterly is
needed to obtain an accumulated value of $8000.
5000 = 8000/ (1 + x/4)^(6x4) => x = 7,91%
Annuities (dòng niên kim) là 1 dòng các khoản tiền bằng nhau tại những thời điểm xác
định cách đều nhau
 Ordinary annuities: dòng niên kim cuối kỳ
 FVA
Ví dụ: Find the future values of these ordinary annuities. Compounding occurs once a
year.
a. $500 per year for 2 years at 14%.
FVA = 500 x ((1+14%)^2 - 1)/14%) = 1070
b. $250 per year for 1 year at 7%.
FVA = 250 x ((1+7%)^1-1)/7%) = 250
c. $300 per year for 8 years at 0%.
FVA = 300 x ((1+0%)^8-1)/0%) = 2400
Ví dụ: Suppose you save $10,500 at the end of every six months for your retirement. If
you can earn 11% per year (APR) on your investments, how much will you have saved
by the time you retire in 25 years?
Đáp án: 2585283,5
Ví dụ: The treasurer of ABC International expects to invest $100,000 of the firm's funds
in a long-term investment vehicle at the end of each year for the next five years. He
expects that the company will earn 7% interest that will compound annually. The value
that these payments should have at the end of the five-year period is calculated as:
Đáp án: 575073,9
Ví dụ: Genevieve has decided to start saving up for a vacation in two years, when she
graduates from university. She already has $1,000 saved today. For the first year, she
plans on making end-of-month contributions of $300 and then switching to end-of-
quarter contributions of $1,000 in the second year. If the account can earn 5%
compounded semi-annually in the first year and 6% compounded quarterly in the second
year, how much money will she have saved when she graduates?
Ví dụ: You are a financial adviser. Your client is thinking of investing $600 at the end of
every six months for the next six years with the invested funds earning 6.4%
compounded semi-annually. Your client wants to know how much money she will have
after six years. What do you tell your client?
Ví dụ: McDonald’s major distribution partner, The Martin-Brower Company, needs at
least $1 million to build a new warehouse in Medicine Hat two years from today. To date,
it has invested $500,000. If it continues to invest $50,000 at the end of every quarter into
a fund earning 6% quarterly, will it have enough money to build the warehouse two years
from now? Show calculations to support your answer.
Ví dụ: The Saskatchewan Roughriders started a rainy-day savings fund three-and-a-half
years ago to help pay for stadium improvements. At the beginning of every quarter the
team has deposited $20,000 into the fund, which has been earning 4.85% compounded
semi-annually. How much money is in the fund today?
Ví dụ: The Saskatchewan Roughriders started a rainy-day savings fund three-and-a-half
years ago to help pay for stadium improvements. At the beginning of every quarter the
team has deposited $20,000 into the fund, which has been earning 4.85% compounded
semi-annually. How much money is in the fund today?
Ví dụ: Carlyle plans to make month-end contributions of $400 to his RRSP from age 20
to age 40. From age 40 to age 65, he plans to make no further contributions to his RRSP.
The RRSP can earn 9% compounded annually from age 20 to age 60, and then 5%
compounded annually from age 60 to age 65. Under this plan, what is the maturity value
of his RRSP when he turns 65?
 PVA

Ví dụ: A financial adviser is reviewing one of her client’s accounts. The client has been
investing $1,000 at the end of every quarter for the past 11 years in a fund that has
averaged 7.3% compounded quarterly. How much money does the client have today in
his account?
PVA = 1000 x (
Ví dụ: A savings annuity already contains $10,000. If an additional $250 is invested at
the end of every month at 9% compounded semi-annually for a term of 20 years, what
will be the maturity value of the investment?
Ví dụ: Rodriguez is planning on having an annual gross income of $50,000 at the end of
every year when he retires at age 65. He is planning for the account to be emptied by age
78, which is the average life expectancy for a Canadian man. If the account earns 5.1%
compounded annually, what amount of funds needs to be in the account when he retires?
Ví dụ: When Sinbad retires, he expects his RRSP to pay him $2,000 at the end of every
month for 25 years. If his retirement annuity earns 3.8% compounded quarterly, how
much money does he need to have in his RRSP when he retires?
Ví dụ: Sandy’s parents would like to have an annuity pay her $500 at the beginning of
every month from September 1, 2012, to April 1, 2017, to help with her university tuition
and living expenses. On May 1, 2017, they would like to give her a graduation gift of
$5,000. If the annuity can earn 6.15% compounded quarterly, how much money must be
in the account on September 1, 2012? (Use years and months in the calculations)
Ví dụ: Suppose you have won a lottery that pays $1,000 per month for the next 20 years.
But, you prefer to have the entire amount now. If the interest rate is 8%, how much will
you accept?
Ví dụ: You determine that you can afford $550 per month for a car. What is the highest
price you can pay for a car if the interest rate is 7% compounded monthly and you want
to repay the loan in 3 years?
Ví dụ: Find the monthly payment for a car costing $15,000 if the loan is amortized over
five years at an interest rate of 9%, compounded monthly.
Ví dụ: Mr. Jackson bought his house in 1995, and financed the loan for 30 years at an
interest rate of 7.8%. His monthly payment was $1260. In 2015, Mr. Jackson decides to
pay off the loan. Find the balance of the loan he still owes.

 Annuities due: dòng niên kim đầu kì

 Balanced sheet/ Income statement/ Statement of cash flows
 Operating Cycle
 Classification of Working Capital
 Current Asset Investment Policy, Current Asset Financing Policy
 Cash management, BAT model
 Credit and Collection Policies; Credit Decision
 Inventory cost, EOQ model
 Cash-Flow Forecasting
 Project Evaluation: PBP, NPV, IRR, PI
 Accrued Expenses, Trade credit, Bank credit, Factoring
 Lease, Bond, Common stock, Preferred stock