Unit 16: Corporate finance

Corporate finance refers to financial decisions of companies: how to best raise and spend
the company funds → Therefore, it is closely concerned with wall the financial dealings and
the cash flows (inflows and outflows) of the company

1. What does the term corporate finance refer to ?/What does "corporate
finance" (CF) refer to?
→ Corporate finance refers to a broad term that is used to collectively identify
the various financial dealings undertaken by a corporation. Generally, the term
also applies to the various methods, procedures and configurations of the
financial operations employed by a given company
2. What is one of the main functions of corporate finance?
→ One of the core functions of responsible corporate finance is to make wise
use of the financial resources available to the company.
3. What do you think are important objectives of corporate finance? / What
are main objectives
→ Some main objectives of CF are making wise financial resources, developing
an operating budget, and tracking income. The general goal of corporate finance
is to ensure that the company is achieving the maximum profits while incurring
the minimum amount of expenditure.

6. In 'Planning the finance" what should financial managers take into

consideration?
→ In " Planning the finance" financial managers should take into consideration
on questions like
。 How much finance is required by the company?
。 What are the sources of finance?
o How to use the finance profitably?
4. What is the ultimate/general goal of corporate finance?

The general/ultimate goal of corporate finance is to ensure that the company is

achieving the maximum profits while incurring the minimum amount of
expenditure.

5. What does corporate finance include?

➡CF includes planning, raising investing and monitoring of finance in order to

achieve the financial objectives of the company.
7. What sources of finance can finance managers think of when they want
to raise more capital?

➡ Finance can be collected from many sources, e.g., shares, debenture, banks,
financial institutions, creditors, ete

8. How is the capital of a firm basically classified?

They are fixed capital and working capital. Fixed capital is used to purchase
fixed assets like land, buildings, machinery, ... Working capital is used to
purchase raw materials and to pay the day-to-day expenses like salaries, rent,
taxes, electricity, bills,

10. What are the tasks of finance managers in monitoring the finance?

The finance manager has to minimize the cost of finance, the wastage and
misuse of finance and the risk of investment of finance. He also has to get
maximum return on the finance.

11. What are functions of corporate finance management?

Functions of CF are to make wise use of the financial resources available to the
company, the management of investment, creating and managing the process for
issuing shares of stock or offering coporate bonds, and and acquisitions of
property of other companies, mergers, corporate restructures or the selling of
company assets

12. What are the tasks of financial managers in raising the finance?

The finance managers raise (collect) finance for the company. Finance can be
collected from many sources, e.g., shares, debenture, banks, financial
institutions creditors, ete.

13. What are the tasks of financial managers in investing the finance?

The finance manager uses the finance to achieve the objectives of the company
 Unit 17: Funding the business
BY WHICH WAYS THE COMPANIES COULD RAISE THE CAPITAL
FOR THEMSELVES?
• DEBT FINANCING: MONEY RAISED HAS TO BE PAID BACK
TO OUTSIDE CREDITORS (TRADE CREDIT, ISSUING NEW
BONDS, BANKS LOAN OR BANK OVERDRAFT. )
• EQUITY FINANCING: MONEY RAISED COMES DIRECTLY
OR INDIRECTLY FROM THE OWNERS OF THE BUSINESS.
WHO HOPE TO HAVE IT PAID BACK IN THE FORM OF
MORE PROFITS (SALE OF ASSETS, REINVESTED
EARNINGS…)
What does gearing mean? Type of gearing?
• Gearing is the relationship between equity capital invested in the
business and long-term debt.
• Gearing ratios are important financial metrics because they can help
investors and analysts understand how much leverage a company
has compared to its equity.
• Type of gearing: high gearing-The company has a larger proportion
of debt versus equity; and low gearing- The company has a small
proportion of debt versus equity.
+ Low gearing includes 4 main sources of capital: owner’s capital-
The funds the owners have, venture capital-Funds invested from
venture firms, unlisted securities market-Funds from outside
investors in OTC market, stock exchange-Funds raised from
investors who buy shares of the company.
+ High gearing is long term loans- FUNDS INVESTED
FROM BANKS, PENSION FUNDS WITH THE REQUIREMENT
OF COLLATERAL
What is advantages and disadvantages of these sources?/ Pros and
cons
 Low gearing:
OWNER'S CAPITAL is the
amount of money and resources an VENTURE CAPITAL is a
owner invests into their business to type of financing that investors
help it succeed provide to startup companies and
ADVANTAGE: The owners small businesses that are believed to
have a claim on all the net profits. have long-term growth potential.
DISADVANTAGES: Owner’s
capital is the most exposed form of ADVANTAGE: The advantage of
capital because: venture capital is that the venture
+ A return is received only after capital company doesn’t usually
all other calls on company profits interfere in the running of the
have been satisfied company.

+ In the case of bankruptcy, the DISADVANTAGE: However,

owner’s equity will be repaid only the venture capital company usually
after everyone else including demands a much faster and higher
employees, creditors, banks. rate of return than an owner would
expect from his/her own capital.

UNLISTED SECURITIES STOCK MARKET (LISTED

MARKET is a financial instrument SECURITIES MARKET) is a place
that is not traded on any of stock where shares in company are bought
exchange, but through over-the- and sold
counter (OTC) market.
ADVANTAGES: The stock exchange
ADVANTAGE:Raise money from has the advantage of providing the
 outside investor; Without losing much long-term opportunity of raising
control of the company. capital by issuing fresh shares.

DISADVANTAGES: This source of DISADVANTAGES: However, at

funds is available only to small and least 25% of the equity must be in
medium company. public hands there by reducing the
control of the original owners.

High gearing

LONG-TERM LOANS are the loan that mature in more than one year

Advantage: Long-term loans provide companies opportunities to raise capital.

In times of prosperity, long term loans can give the owners much better returns
because net profits will be a much higher percentage of equity: After interest
payments and On the long- term debt. Disadvantage: In harder times, the
owner’s earnings will drop dramatically because interest payments soak up most
of the company’s profits.
 Unit 18: Management of working capital

Concept: Working capital includes inventories and liquid/working resources

needed by a company to carry out trading/business or production.

Permanent working capital Temporary working capital

Vốn lưu động dài hạn Vốn lưu động tạm thời

Is tied up in keeping the Is needed from time to time to deal with

business flowing throughout seasonal, cyclical or unexpected fluctuations
the year in the business

 Permanent working capital is used to maintain the business throughtout the year
2. For what purpose is permanent working capital required?

Permanent working capital is tied up in keeping the business flowing throughout

the year

3. For what purpose is temporary working capital needed?

temporary working capital is needed from time to take account of seasonal,

cyclical or unexpected fluctuations in the business. The latter type is usually
serviced from an overdraft facility

4. Heu can working capital be classified?

Working capital can initially be broken down into two types: permanent and
temporary. Permanent working capital is tied up in keeping the business flowing
throughout the year, while temporary working capital is needed from time to
time take account of seasonal, cyclical or unexpected fluctuations in the
business. The latter type is usually serviced from an overdraft facility.

5. Which type is usually for servised from an overdraft facility?

an overdr

The latter type is usually serviced from an overdraft facility.

6. What will happen if working capital is raised in production or
margins...? (có cho) câu 2 đoạn 1

there will be a drop in profit it working capital is raised without a corresponding

rise in production or margins

7. How is profitability determined? (co cho) cau 1 đoạn 1

Profitability is determined in part by the way in which a company manages its

working capital

8. what are 3 major applications of working capital?

They are Inventories Debtors,Cash

9. What are included in inventories of a company? / What are inventories

further divided into?

Inventories can be further divided into inventories of raw materials, work in

progress and finished goods

I. . What are the task of finance managers in managing inventories? (Nhiệm

vụ của người quản lý tài chính trong việc quản lý hàng tồn kho là gì? ) ( cô
cho )

-The finance manager has to minimize (Nhà quản lý tài chính phải tối thiểu hóa:

+ the stocks of raw materials (lượng nguyên liệu thô)

+ the level of the work in progress (lượng bản thành phẩm)

+ the quantity of finished goods (lượng thành phẩm).

11.What are debts further divided into?

Debts are divided into long term debts and day- to-day debts

12.What are the tasks of financial management in managing debtery ?

(Nhiệm vụ của người quản lý tài chính trong việc quản lý khoản phải thu)

-It's the task of a finance manager to see that generous credit terms are
negotiated with suppliers but minimal credit is offered to customers. A balance
must be achieved between getting and giving good credit terms to attract
customers and maintain positive relationships with suppliers on one hand, and
minimizing cash outlay on the other hand.

Hoặc là c2 :

-The finance manager has to minimize

+ the stocks of raw materials

+ the level of the work in progress

+ the quantity of finished goods

13.What happens to the production system of a company if its inventories

are controlled too stringent?

if its inventories are controlled too stringently the production system of a

company can lead to disruption in production

14.What is one of the principal functions of financial management? (co cho)

cau3 đoạn1 one of the principal functions of financial management is to provide
the correct amount of working capital at the right time and in the right place to
realize the greatest return on investment

(Một trong những chức năng quản lý tài chính là cung cấp đúng số vốn lưu động
vào đúng thời điểm và đúng nơi để thực hiện lợi tức đầu tư lớn nhất)

15.What can cause the disruption in production?

the disruption in production cause by the delay in receiving raw materials caused
the disruption in production

16.What does the "just-in-time" philosophy refer to ?

The just-in-time philosophy, developed in Japan, is aimed at reconciling these

often conflicting interests and keeping inventory costs to a minimum

17.What is cash further divided into?

Cash is further divided into cash is needed for normal and abnormal
requirements
18. What are the task of financial management in managing cash ? (Nhiệm
vụ của người quản

lý tài chính trong quản lý tiền mặt?)

-It's the task of finance manager to ensure that adequate cash is always available
for meeting the company's day-to-day debts and that there is also a small reserve
on hand to meet contingencies.

19. What is the vicious circle in the business?

the vicious circle in the business is the diagram start from over-stringent cost
control lead to disruption in production that makes failure to meet customer
orders, we have to face up with the loss of customer goodwill - the results to
make the loss of sales
Unit 19: Marketing

01. distinguish between selling concept and marketing concept

Selling concept includes:

- resisting consumers have to be persuaded by vigorous hard -

selling techniques to buy non – essential goods and services
- products are sold rather than bought

Marketing concept includes:

- you don't sell what you make, you make what will be bought
- as well as satisfying existing needs, marketers can also
anticipate and create new ones
02. How to identify market opportunities?
- Market opportunities - profitable possibilities of filling
unsatisfied needs on creating new ones in areas in which the
company is likely to enjoy a differential advantage.
- It is isolated by market segmentation
- The company must take account of the existence of
competitors
03. Why does a firm have to conduct marketing research?
- Minimize the risk of launching a product or service solely on
the basis of intuition or guesswork
- Collecting and analyzing information about the size of a
potential market and the consumer's reactions
04. What is the 4Ps?
- They are product, place, promotion and price.
+ Products include quality, features (standard and optional),
style, brand name, size, packaging, service and guarantee.
 + Place in marketing mix includes such as distribution
channels, location of point of sale, transport, inventory size.
+ Promotion groups together advertising, publicity, sale
promotion and personal selling.
+ Price includes the basic list price, discount, the length of
payment period, possible credit terms.
05. What is the producer market?
It contains all the raw materials, manufactured parts and components
that go into consumer goods, plus capital equipment such as buildings
and machines, supplies such as energy and pens and paper, and
services ranging from cleaning to management consulting.
Unit 20: Setting the price

1. What are the main ideas?

- The difference between setting the prices now and in the
past.
- Roles of setting the prices.
- The most common mistakes in the setting the price.
- The different ways of setting-prices
2. What is the role of setting price?
- It's major determinant of buyers choices
- One of the most important element determining company
market share
- It's only element produces revenue in the marketing mix
3. What are the most common mistake in setting price?
+ Price is too cost oriented. That price is too cost oriented is when
the price of a product or service does not accurately reflect its
production or supply costs. In this case, the price has been set too
high or too low compared to its actual costs.
+ Price is set independently of the rest of the marketing mix rather
than as an intrinsic element of marketing-positioning strategy.
+ Price is not revised often enough to capitalize on market
changes.
+ Price is not varied enough for different product items and market
segments.
 Unit 21: What is accouunting?
1. What is accounting?
- Accounting provides financial information about an economic entity over
a period of time. Accounting refers to the design, maintenance and interpretation
of the information in the accounts book.
- Accounting helps you to use the past in order to take action in the present
and change the future
2. What are three main areas of accounting?
- Financial accounting:
Concept : Financial accounting refers to information describing the
financial resources, obligations, and activities of an economic entity (either an
organization or an individual).
Purposes: Financial accounting information is designed primarily to assist
investors and creditors in deciding where to place their scarce investment
resources.
Users: Investors, creditors, accountants, managers, employee are users of
financial accounting information
Management accounting:
Concept: Management (or managerial) accounting involves the
development and interpretation of accounting information.
Purposes: Setting the company’s overall goals, evaluating the performance
of departments and individuals, deciding whether to introduce a new line of
products - and in making virtually all types of managerial decisions.
Users: Users of management accounting information are a company's
managers and employees.
Tax accounting:
Concept: Tax accounting is the preparation of income tax returns and tax
payment. Tax accounting refers to the calculation of how much tax an individual
or a company should pay or trying to reduce this figure.
 Purposes: Tax accounting information is used for the preparation of
income tax return and tax planning.
The most challenging aspect of tax accounting is tax planning. Tax
planning means anticipating the " tax effects " of business transactions and
structuring these transactions in a manner that will minimize the income tax
burden
 Unit 22: Financial statements

1. What are the forms of financial statements?

- Journals: is sometimes called the book of origional entry
• In daily business operations recordings of daily transactions are
first made in a journal.
•
• In the journal, bookkeepers record sales, uses of raw materials,
and purchases.
- Ledger:
Periodically, bookkeepers transfer figures from the journals to ledgers.
→ known as posting.

The ledger is a book containing all the accounts of a company. An

account is a financial record which contains information about a group of similar
transactions.
2. What are the roles of accounting and financial statements?
- The role of accounting:
• Nowadays, a more sophisticated system of accounting is needed.
• The design, maintenance, and interpretation of the information
recorded in the accounts are referred to as accounting.
• Accountants use the information in the accounts to construct
financial statements.
- The role of financial statements:
• The most important of these financial statements are the balance
sheet and the statement of income and expenses.
• These statements are also used for determining income taxes
liabilities.
3. What are 3 common financial statements?
 Income statement: shows earning and expenditure; and gives figures for
total sales or turnover and costs and overhead.
Profits are usually split into three categories:
+ part of profits goes to government in taxation
+ part is usually distributed to shareholders as dividend
+ part is retained by the company
Balance sheet:
+ shows a company’s financial situation on a particular date, generally the
last day of the financial year.
+ lists the company’s assets, its liabilities and shareholders’
(stockholders’) funds.
+ Components of a balance sheet: a business’s asset-include debtors or accounts
receivable as it is assumed that these will be paid., liabilities-include creditors or
accounts payable, as these will have to be paid., net asset-includes share capital
(money received from the issue of shares), share premium (GB) or paid- in
surplus (US)(any money realized by selling shares at above their nominal value),
and the company’s reserves, including the year’s retained profits.
Cash flow statement:
- The source and application of funds statement. The statement of
changes in financial position
- shows the flow of cash in and out of the business between balance
sheet dates.
- Includes operating activities, invessting activities and financing
activities.
 Unit 25: Financial Analysis
1. What is financial analysis? How is it used?
Financial analysis is the selection, evaluation, and interpretation of
financial data, along with other pertinent information, to assist in
investment and financial decision making.
Intended use:
Internally: to evaluate issues such as employee performance, the
efficiency of operations, and credit policies
Externally: to evaluate potential investments and the credit-
worthiness of borrowers, among other things.
2. How many sources of data. What are these?
Financial statement data: Financial statement data is the data provided
by the company itself in its annual reports and required disclosures. The annual
report comprises income statement, the balance sheet, and the statement of cash
flows, as well as footnotes to these statements.
Market data: Such as the market prices of securities of publicly-traded
corporations can be found in the financial press and the electronic media daily.
Similarly, information on stock price indices for industries and for the market as
a whole is available in the financial press.
Economic data:
● Gross domestic product, consumer price index, consumer spending,
producer prices, consumer prices, and the competition…. This is readily
available from government and private sources
● Purpose: Useful in assessing the recent performance or the future
prospects of a company or industry
Company events
Purpose: examine events that may help explain the company's present
condition and may have a bearing on its future prospects.
3. What is the definition of financial ratios? What are they
 A financial ratio is a comparison between one bit of financial information
and another.
Financial ratios are classified by construction: coverage ratio, return
ratio, component percentage, turnover ratio
+ Coverage ratio: is a measure of a company’s ability to satisfy
(meet) particular obligations.
+ Return ratio is a measure of the net benefit, relative to the
resources expended.
+ Turnover ratio is a measure of the gross benefit, relative to the
resources expended.
+ Component percentage is the ratio of a component of an item to
the item.
Financial ratios are classified by general characteristic:
+ Liquidity ratio provides information on a company’s ability to meet its
short-term, immediate obligations.
+ Profitability ratio provides information on the amount of income from
each dollar of sales.
+ Activity ratio relates information on a company’s ability to manage its
resources (that is, its assets) efficiently
+ Financial leverage ratio provides information on the degree of a
company’s fixed financing obligations and its ability to satisfy these financing
obligations
+ Shareholder ratio describes the company’s financial condition in terms
of amounts per share of stock.
 Unit 26: Auditing

1. What is auditing?
Auditing is an accounting function that involves the review and
evaluation of financial records. It done by someone other than the person
who entered the transaction in the records.
2. What does an auditor do? And what is the purpose of auditing?
- Continuously review operating procedures and financial
records.
- Report to management on the current state of the company's
fiscal affairs.
- Also make suggestions to management for improvements in
the standard operating procedures.
- Check the accounting records in the regard to completeness
and accuracy
- Making sure that Irregularities are corrected
Purpose: The internal auditors seek to ensure that the various departments
of the company follow the policies and procedures established by management.
3. What is internal audit?
Internal auditing: an appraisal or monitoring activity established within an
entity as a service to the entity.
Two-fold role in relation to risk management:
- Monitors the company's overall risk management policy to ensure it
operates effectively.
- Monitors the strategies implemented to ensure that they continue to
operate effectively.
4. What are the strengths and weaknesses of internal auditing?
- Strengths:
+ Knows deviations from standard operating procedures.
+ Knows the current state of the company’s fiscal affairs.
 + Helps the management in making decisions and keeps the management
in check.
- Weaknesses:
+ Internal audit may be not objective because if a report is unfavorable, it
may not be shown to the person in management who can correct the problem.
+ Management receive false impression that things are running smoothly
cause they do not know about the problems that the internal audit has uncovered.