Professional Documents
Culture Documents
Financial decisions
Financial system
Introduction to finance
Finance is the study of applying specific value to things we own, services we use, and
decision we make
Finance examines the effective and efficient acquisition and utilisation of capital
Value
Decisions making
Uncertainty
Introduction to finance: Example #1
You have just won a 10 billion VND jackpot. After paying taxes,
your debts and satisfying your wants (such as laptops, cars,
luxury items, charity) there are 5 billion VND left, but you do not
have any business idea. What will you do with your money?
You are the owner of the company ABC which is the poultry producer in
Vietnam. Your products are sold to foodservice, retail, and frozen entrée
customers. The Company’s primary distribution is through retailers and
restaurants throughout the Vietnam. Recently, your consultant advised you
to export your products to Thailand. If you decided to undertake the
proposal, how can you get the capital you need to undertake it?
Corporate finance
•Deals with a firm’s decisions in acquiring and using the cash that is
received from investors or from retained earnings
•Organise the firm in a manner that will attract capital
•Raise capital (such as bonds, stocks) cách tổ chức của công ty phải là ngta muốn đầu tư => attract capital
sử dụng các công cụ như bond và stock để raise capital
•Which projects to fund
•How much capital retain for ongoing operations and new projects
•How to minimise taxation
sau khi có vốn thì quyết định xem nên đầu tư vốn đó vào dự án nào
•Pay back capital provider số vốn còn lại cho việc vận hành và phát triển dự án mới
làm thế nào để giảm số thuế phải đóng
capital providers: bond holders, stock holders - cách để trả họ tiền
Là quyết định của doanh nghiệp trong việc thu hút và dùng cash đc nhận từ nhà đầu tư (RE)
nó chung công dụng của finance đối với cá nhân và doanh nghiệp là khác nhau
Finance as an area of study
Investment
•Portfolio theory: How can an investor achieve a better trade-off
between risk and return? cái này là chỉ mình cách để mua securities đồ đó => theo nguyên tắc portfolio: làm sao để có một cái trade off tuyệt vời giữa risk và return
• Asset pricing: How much is a particular security worth? What is the
relationship between long-term interest rates and short-term interest
rates? cách để định giá tài sản
Corporate finance
•Asset management: What new assets should the company acquire? How
much should it pay for these assets?
•Capital structure: How much should the company borrow?
•Working capital management: How much cash should the company
hold? How much inventory?
•Payout policy: How much should the company pay out to its
shareholders?
•Mergers and acquisitions: Should the company take over another
company?
Why study finance?
To make decisions
To manage your personal resources (e.g. to borrow money to buy a new car, to
refinance your shop house at a lower rate…)
When and how should they use other people’s money to satisfy their wants and needs?
Risk – management decisions:
How and on what terms should they seek to reduce the economic uncertainties they face or
to take calculated risks?
Financial decisions of households
Strategic planning: deciding what businesses it wants to be in. That involves the evaluation of
costs the benefits spread out over time.
Capital budgeting: identifying ideas for new investment projects, evaluating them, deciding which
ones to undertake and then implement them.
Working capital management: controlling the day – to – day prosaic financial affairs of the
business.
Financial decisions of firms
F + X = I + D
Sources of revenue
Financial
Markets
Surplus Deficit
Units Units
Financial
Intermediaries
Six parts of the Financial system
1. Money
2. Financial instrument
3. Financial markets
4. Financial institutions
5. Regulatory agencies
6. Central bank
Six parts of the Financial system
1. Money
•Anything is generally accepted in payment for goods or services or
in repayment of debts
Wealth: net worth or the excess of assets over liabilities. (money, bonds, common stock, art, land,
furniture, cars, and houses...)
Liquidity of an asset reflects the relative ease and speed with which an asset can be converted into a
medium of exchange
Rio wins A$20 million in blackjack, he puts it under his bed, quits his job.
Mary is a financial manager with earnings of A$100,000 per annum. She blows it all,
every paycheck.
Financial instruments generate increases in wealth that are larger than from holding money.
Financial instruments can be used to transfer purchasing power into the future
Transfer of risk
They are responsible for making sure that the elements of the financial system—including its
instruments, markets, and institutions—operate in a safe and reliable manner.
6. Central bank
Central banks control the availability of money and credit to ensure low inflation, high growth
and stability of financial system