Chap 1

Finance is referred to the monetary relationship between two parties

parties -> persons -> personal finance
parties -> corporation -> corporate finance ( tập trung vào cái này ) -> corporate
financial management
parties -> public -> government finance
parties -> different countries -> national finance
Financial management is management of above issues
Corporate financial is referred to the monetary referred to the monetary
relationship between a company and another party.
⁃ COMPANY and person -> relationship can be investor
Stakeholder -> any parties have relationship with the company (vs: government,
investor,…)
-> relationship can be Bank - financial market, financial institution
-> relationship can be Bank - customers, supplier, government, employee
Company A Bank Company B
Surplus Shortage
6% 9% 12%
• The role of corporate financial management: 3 roles
⁃ Capital budgeting -> fixed asset
purpose: improve the profitability of the company
⁃ Capital structure management -> longterm debt & equity
purpose: help the company enough fund to invest fixed assets
⁃ Working capital management -> Capital asset & Current liability
purpose: pay due debt & operate smoothly, provide liquidity for the company
• the (final) goals of corporate financial management
Chức năng của quản trị tài chính (Financial management ...SAPP
Academyhttps://knowledge.sapp.edu.vn › knowledge › f9-tóm-...
maximize the profit ( not the goal )
profit = revenue - expense ( can manipulate -> not a goal )
-> Maximize the shareholders’ wealth
listed company, shareholders’ wealth is stock price - determined by demand and
supply
unlisted company, don’t have stock
The shareholders’ wealth is the amount of money you will have when you sell the
company.
Shareholder wealth is the value that shareholders have in the company, also
referred to as shareholders' equity, it is calculated as the difference between
assets and liabilities. Individually, shareholder wealth is measured in terms of the
number of shares you own and the market value of those shares.
Chap 2
Proprietorship: name for a form of a business, just have 1 owner - an individual
Partnership: have more than one owner, at least 2
2 types of owner/members
general member: the one who manage the company (famous, skilled,…)
limited member: unnecessary, but need money to contribute to the company
Corporation: name for a business, more than 3 owners, the capital of the
company will be divided into equal parts
shareholders/ stockholders
⁃ Double taxation: means for some form you have to pay the income tax
twice
ex: corporation:
revenue -cost = profit before tax/ pretax income
• corporation income tax (1)
net income
-> pay dividends to shareholders -> individual income tax (2)
Proprietorship
revenue - cost = profit before tax/ pretax income
income tax
net income
⁃ Limited liabilities
proprietorship và general member of partnership thì có unlimited liabilities
vd:
limited company -> nếu 1 công ty phá sản, thì bản thân sẽ ko phải trả toàn bộ số
tiền để bồi thường, chỉ trả phần mình sỡ hữu
unlimited liabilities -> phải sử dụng personal asset để trả nợ cho công ty
⁃ Ability to raise capital : only company can raise money through issue stock
⁃ Limited life
⁃ ability to transfer the capital
corporation -> easy to transfer capital to other form

slide 7
Intrinsic Value is the true value of the company in the long run
Intrinsic Value is depend on different of opinions of investors, so it’s not
maintaining the same.
Học về Intrinsic Value under the view of financial management
vd: P = $10 (stock price)
IS = $ 8 ( Intrinsic Value )
-> sell
nhưng có nhiều IS nên phải cẩn thận khi make decision
⁃ Finance within the organization
Shareholder 1 ……. 3
Board of Director (BOD)
-> owner - principal
Board of Management (BOM)
CFO CEO. COO
-> employees - agent
goal of owner is stick with the goal of the company
wealth of owner is the wealth of the company
owner is wealthy when their stock price is high
• Agency costs/ theory
2 parts:
Principal - process the money but not manage the money
Agent - who do something for u
• Compensation package
3 components:
⁃ salary
⁃ bonus - depend on the performance
⁃ stock option - rights to buy the stock in the future at a determined price
A company is going to buy a jet for only CEO to use.
the cost to buy and use the jet is $1m.
The benefit of using the jet for the CEO is $100000
The CEO owns 5% of the company
Does the CEO buy the jet?
-> buy
share holder -> share profit and also cost
face the risk of agency cost, to reduce you need to give him a lot of share
• Stockholder-Debtholder Conflicts
asset is money
debtholder will possess the money, money belongs to the debtholder
-> the principal
but debtholder do not manage the money
stockholder will be the agent -> who manage it.

Share: is one unit of stock of company; một cổ phiếu là một đơn vị cổ phần, chứng
tỏ bạn làm chủ một phần công ty.
Stock: cổ phần: represents shares of ownership of a company. Cổ phần của một
công ty là trị giá của công ty đó.

chap 3
In Vietnam, we don’t have Statement of stockholders’ equity
IN US: 4 financial statements
Balance sheet
Income statement
Statement of cash flow
Statement of stockholders’s equity

Current assets: assets use in on year

Gross FA: fixed asset
Liquidity of an asset: show/ measure the ability to convert the assets into cash.
⁃ Formular:
Capital expenditure (capex)
the amount of money that we invest in the fixed asset
Capex(t) = GV of FA(t) - GV of FA(t-1)
biến đổi:
Capex(t) = GV of FA(t) - GV of FA(t-1)
= ( NV of FA(t) + Accumulated Dep(t)) - (NV of FA(t-1) + Acc dep (t-1))
= NV of FA(t) - NV of FA(t-1) + Depreciation (t)

Fixed assets are less liquid than current assets, as they cannot be easily converted
to cash without selling them, while current assets are more liquid and readily
available to pay liabilities and short-term obligations.
• The compare profitability of fixed assets and current assets. -> cái nào more
profitable for the companies.
Current asset Fixed asset

high liquidity low liquidity

less risky more risky
less profitable more profitable
if you want to be safe -> less profitable
If you want to be profitable -> more risky

⁃ Accts payable: an amount of money we have to pay to supplier in the

future, dont have to pay the interest
Accruals: an amount of money we have to pay the employees and the
government in the future, dont have to pay the interest
Note payable: an amount of money we have to pay the bank and the financial
instutitions in the future, have to pay interest
Long-term debt -> dont have to pay the interest
Common stock: the amount of money that the owner contributed to the company
Retained earnings: a part of net income that the company decide to reinvest in
the company, accumulated assets
How to list Liabilities and Equity in the Balance Sheet: base on the maturity of that
liability
-> list shorterm liabilities first / list current liabilities
tóm lại cái nào trả trước thì list trước
⁃ debt and liabilities:
debt is narrower
we have 2 kinds of liabilities:
⁃ have to pay the interest
⁃ dont have to pay the interest
• Equation:
Net income (t) = Dividend(t) + Addition to retained earnings (t)
year t
Equity(t)= Equity (t-1) + Addition to RE (t)
Equity (t)= Equity (t-1) + Net income (t) - Dividend (t)

• Income statement: financial performance of the company

ques: acc dep this year can be lower than last year or not?
yes
when we sell our equipment -> dep this year will decrease
definitions:
⁃ Sale: amount of money you collect or have to collect in the future
⁃ COGS:
Cost of goods sold (COGS) refers to the direct costs of producing the goods sold
by a company. This amount includes the cost of the materials and labor directly
used to create the good. It excludes indirect expenses, such as distribution costs
and sales force costs.
• EBIT: earning before income tax
• Depreciation is non-cash expense
• Net income different from cash flow because:
+ Non cash expenses
+ Accounting rules
⁃ EPS (Earning per share) = Net income / No. of shares
⁃ DPS (Dividend per share) = Dividend / No. of shares
• Equity
whether or not the company pay the dividend -> if they has lots of cash -> pay the
dividend, and otherwise
• Statement of Cash Flows (2018)
the source and the use of cash
assets decrease -> we have money -> source of cash
assets increase. -> we lose money -> use of cash
L&E decrease -> we lose money -> use of cash
L&E increase -> we have money -> source of cash

A company has the following information:

2022 2021
Net income 400 300 100
Depreciation 200 150 50
Account 115 125 -10
receivable
Account payable 216 198 18
Accruals 189 214 -25
Note payable 100 120 -20
Inventory 312 388 -76
Fixed assets (GV) 1050 980 70
calculate the net cash from operating activities
= 400 + 200 + 10 + 18 -25 +76 = 679

⁃ ..
Balance Sheet
Cash (1)
+ Other assets ( FA or CA)
= Total asset
- Liabilities
= Equity (2)

CF statement
Cash from Operating activites
+ …Investing
+… financing
= change in cash (1)

BS
Cash mới ( sau khi add change in cash) (1)
+ Other assets ( FA or CA)
= Total asset
- Liabilities
= Equity mới (2)

Statement of change in Equity

Initial Equity
+ New stock/ repurchase stock
- Dividend payment
= Change in equity (2)
Nhóm 4: Profitability Ratios
The higher the better
The margin ratio (i.e: net profit margin) indicates the ability to manage the cost of
a company.
 Correct
Because profit margin – NI/Sales = (Sales-Costs)/Sales = 1- Costs/Sales
Costs/Sales = 1-PM
High margin product -> luxury product
Low margin product -> normal products

ROA = Net income/Total assets

= $253.6/$3,497 = 7.25%

ROE = Net income/Total common equity

= $253.6/$1,952 = 12.99%  13.00%

ROIC= [EBIT(1  T)] / Total invested capital

= $295.6 / $2,652.4 = 11.14%
Nhóm 5:
EPS (Earning per share) = Net income / No. of shares outstanding
§ P/E = Price/Earnings per share
= $12.17/$1.014 = 12.00x
1usd from earning per share, we pay 12 usd
P/E ratio shows how much the market is willing to pay for $1 of the EPS
The higher the ratio is, the more potential for the development of the company.
§ M/B = Market price/Book value per share
= $12.17/($1,952/250) = 1.56x
BVPS(book value per share) = Total equity/ number of shares outstanding
The higher the ratio is, the more potential for the development of the company.
The DuPont Equation
ROE = NI/E=NI/A X A/E =ROA X EM (equity multipler)
EM=A/E=(D+E)/E = D/E + 1
EM = A/E = 1/(E/A) = 1/ (A-D)/A = 1/ (1-D/A)
ROE = NI/S (SALE) x S/A x A/E
=PM x TATO x EM
3 yếu tố ảnh hưởng tới ROE:
Focuses on expense control (PM), asset utilization (TATO), and debt utilization
(equity multiplier).
“Window dressing”
Now: Current ratio = ½. Go to a bank, borrowing money in 1 month
Current ratio = Current assets/Current liabilities
Current ratio = (1+1)/(2+1) = ⅔
 Tăng asset và liability -> tăng current ratio
Current > 1
Current ratio = 2/1
Current ratio = (2+1)/(1+1) = 3/2
 Tăng asset và liability -> giảm current ratio

Chap 5 Time value of money

Cash flow timeline is the timeline that show the cash flow in each time.
Lumpsum: single amount of money
Multiple cash flow: have more than 1 cash flow
- Annuity: 2 kind of annuity
+ Ordinary annuity: the CF occur at the end of the year
+ Annuity due: beginning of the year
- Perpetuity: last forever
- Uneven (unequal) cash flow:
The amount of money today will be more valueable than that amount in the
future.
Inflation
opportunity costs = interest rate
Future value:
FV = PV*(1+r)^n
FV:future value
PV:present value
r: interest rate
n: number of periods
You deposit $1000 in 5 years.
The interest rate is 10%
How much money do you have after 5 years.
FV= 1000*(1+10%)^5 = 1610.5
You have a cash inflow of $1000, you have a cash outflow of $1610 in the future
FV= -1000*(1+10%)^5 = -1610.5
You have a cash outflow now, you have a cash inflow in the future

Present value
PV =FV/(1+r)^n
You want to have $10000 in 5 years
If the interest rate is 10%, how much money do you have to deposit now?
PV=10000/(1+10%)^5= 6209,2

We have two persons

A patient Can invest money now
B impatient Must comsume money now
Interest rate = 10%
Each of them has $100
There is an investment opportunity that costs you $100
This investment will give you $120 after 1 year.
Which person will select to invest in the investment opportunity?
A -> invest bởi vì make profit hơn so với interest 10%
B -> cũng invest
Now
He will borrow $109.1 and consume all of this amount.
He will use his own money of $100 to invest in the investment opportunity
After 1 year
He will have to pay the loan = $109.1 * 1.1 = $120
He can pay the loan from the money he receives from the investment.
 Can have more money
He can pay the loan from the money he receives from the investment → He can
consume more money ($109.1) now The benefit of the investment = $120 after
1 year = $120/1.1 = $109.1 now

Calculating the rate:

FV=PV x ( 1+r) ^n
(1+r)^n = FV/PV
r = (FV/PV) ^(1/n) -1
You bought an asset 5 years ago at the price of $5000. Now the value of the
asset in the market is $11000. What is your rate of return when you invested in
this asset?
R = (11000/5000) ^ (1/5) -1 = 0.1708

Calculating the number of the period

FV=PV x ( 1+r) ^n
(1+r)^n = FV/PV
n = Ln(FV/PV)/ ln (1+r)
You want to have $20000 to buy a house in the future. If you have $5000 now and
you can invest this amount of money and earn a return of 15% per year, how long
will it take you to buy the house.
n = ln(20000/5000) / ln (1+15%) = 9,91 years

Annuity: An annuity is a series of equal cash flows, or payments, made at regular

intervals (e.g., monthly or annually). The payments must be equal, and the
interval between payments must be regular.
- Annuity: 2 kind of annuity
+ Ordinary annuity: the CF occur at the end of the year
+ Annuity due: beginning of the year
- Perpetuity: last forever
- Uneven (unequal) cash flow:
The amount of money today will be more valueable than that amount in the
future.

Calculating the PV of ordinary annuity of C in n- year

PV = C * (1-1/(1+r)^n)/r
An asset can generate an ordinary annuity of $5000 in the next 5 years. If you
want to have a return of at least 10%, what is the amount of money you want to
pay to buy this asset.
PV = … (vở)
 The maximum amount of money you’re willing to pay

Calculating the FV of ordinary annuity of C in the n-year

FV=PV x (1+r)^n
FV = [C * (1-1/(1+r)^n)/r] x [1+r)^n]
 = C* ((1+r)^n-1)/r
You deposit in your bank account $5000 at the end of each year for the next 5
years. What will you have in your bank account after 5 years if your depositing
rate is 10%.
FV=5000 x ((1+10%)^5-1)/10%
= 30526

Calculate the PV of a five-year ordinary annuity of $5000 with the first cash flow
starting 3 years from now. The rate will be 10%

Perpetuity
The PV of perpetuity of C
PV = C/r
Because it lasts forever -> we don’t have to calculate FV of perpetuity

Calculating the PV and and FV of annuity due:

FV of annuity due = FV of ordinary annuity * (1+r)
PV of annuity due = PV of ordinary annuity * (1+r)

An investment opportunity will cost you $100000. This investment will give you
$10000 at the end of the year in the next 18 years. What is the rate of return for
this investment?
PV = C * (1-1/(1+r)^n)/r
100000 = 10000*(1-1/(1+r)^18)/r
 r = 7,08%

You borrow 200000 to buy a house now. You have to pay $18000 at the end of
each year to pay the loan. The borrowing rate is 10%. How long does it take you to
pay the loan.

200000 = 18000*(1-1/(1+10%)^n)/10%

Calculating the annuity

You borrow $200000 to buy a house now. The borrowing rate is 10%. You have to
pay the loan in 5 years. Calculating the amount of money you have to pay at the
end of each year, given that this amount includes botth interest and principal
payment.
Loan payment schedule
Year Beg. bal Tot. pay Int. pay Prin. Pay End. Bal
1 200000 52759,5 200000 32759,5 167240,5
2 167240,5 52759,5 16724,1 36035,4 131205,1
3 131205,1 52759,5 13120,5 39639,0 91566,1
4 91566,1 52759,5 9156,6 43602,9 47963,2
5 47963,2 52759,5 4796,3 47963,2 0

You borrow $200000 to buy a house now. The borrowing rate is 10%. You have to
pay the loan in 20 years. Calculating the amount of money you have to pay at the
end of each year, given that this amount includes botth interest and principal
payment.
Calculate the principal payment you have to pay in year 16.

The relationship between the present value and the interest rate.
PV = FV / (1+r)^n
 Negative
The relationship between the present value and the number of period.
 Negative