Title ​​PRINCIPLES OF FINANCE ✅

PRINCIPLES OF FINANCE 1. Overview 2. Risk and return -> tại sao có và giải thích được mức độ 3. Time value of money -> điều làm nên sự khác biệt giữa kinh tế và tài chính 4. Financial market 5. Personal market 6. Corporate finance -> TCDN khác kế toán như nào dù đều liên quan tới balance sheet? Người ta sinh ra corp fin để làm gì? 7. State budget Materials: bài tập Lý thuyết tài chính có thể giải quyết đc các bài tập trong đề kiểm tra dù GK hay CK (Thầy viết chương Giá trị thời gian của tiền) Giữa kỳ: thể hiện tốt thì đc điểm cao hơn thế nữa - mua sách bài tập và luyện tập cả chương (3 điểm bài tập) - công thức đúng, thay số đúng nhưng đáp số sai = full điểm, miễn là không gian dối - dơ tay phát biểu chăm chỉ - nội dung thầy dạy là những gì thầy giảng trên lớp, không có trong slide How to get high grade? - attend all classes - take note and answer the questions -> learn actively (understand in the class) - review the lessons regularly - practice homework - contact: [email protected] CHAPTER 1: OVERVIEW OF FINANCE 1. DEFINITION OF FINANCE Finance is the study of acquisition and investment of cash and other financial assets to maximize the value or wealth of the individual or firm (Study -> relate to science) Three overlapping functional areas, called the pillars of finance: - institutions and markets: chịu trách nghiệm trong việc phân phối tiền trong 1 hệ thống tài chính, nền kinh tế - investments: tối đa hoá nguồn lực sẵn có bằng việc đầu tư thế nào, vào cái gì
- financial management: - corporate finance: việc huy động tiền và nhìn dưới góc độ doanh nghiệp - personal finance Why should we study finance? - To manage your personal resources - To deal with the world of business - To pursue interesting and rewarding career opportunities: làm việc tại ngân hàng, các quỹ,... Q: The goal of finance: Profit or value? At first glance, profit may seem like the ultimate goal of finance as it provides the means for survival, growth, and reward for businesses and their stakeholders. A profitable business attracts investment, fuels innovation, and supports economic activity. However, the profit focus has significant limitations: - While profit is an essential indicator of business health, it encourages short-term decision-making. For example, prioritizing quick returns can lead to lower-quality products, reduced investments in innovation, and a loss of long-term competitiveness. - Societal Consequences: Investments focused purely on generating profits, such as excessive investment in real estate, often misallocate resources (when resources like capital, labour are directed to the sectors that do not necessarily contribute to the societal growth). When housing prices rise far beyond their actual value due to investor-driven buying, societal issues emerge, such as housing shortages and affordability crises. Unlike profit, value focus has a broader scope, encompassing both: - Value for Owners: Maximizing long-term wealth for business owners through sustainable practices. - Value for Society: Contributing to societal well-being by creating surplus value, such as innovative products that can improve the quality of life. The U.S. Example: America’s wealth stems from its strategic allocation of resources to high value-created businesses. Companies like Apple, Amazon, and Intel don’t just generate profits; they also create products and services that benefit society globally. Their focus on value ensures long-term success and societal progress. In contrast, businesses that focus solely on profit often produce inferior products, harming their reputation and their ability to sustain themselves in the long run. 2. FINANCIAL DECISION -> 2 Important financial decisions a. Individual or households' financial decisions

- a system which include financial markets and fincial institution. its main function is chanelling funds from surplus units to deficit units Example of financial institution: commercial bank, insurance companies, investment banks - surplus unit: excess money but dont know how to use it to generate more (unit can be: government, household,...) - deficit unit: need money, know how to do with money but having no money -> financial system solves this problem: surplus having more money from their capital, deficit having capital to use it effectively -> both sides gain benefits - Finanancial assets/instruments/securities characteristics: + profitability, + riskiness: value of asset can decline over the time, or lose all the value (eg: buy stock from company, company went bankrupt and stock means nothing) -> financial assets make you gain money and also lose money + liquidity: buying financial assets, you always have the chance to sell it to someone thanks to the financial market * assets/instruments/securities are the same - Principal actors of finacnial system: households 4. FLOW OF FUNDS In direct fiance: financial market is just a place for transaction of funds from surplus to deficit in indirect finance: intermediary uses funds on their will Q: Example of direct finance: Example 1: Corporate Bonds A company issues bonds to raise capital directly from investors. Investors purchase the bonds, and in return, the company promises to pay interest and repay the principal at a later date. There is no intermediary between the company and the bondholders. Example 2: Stock Market When a company issues shares of stock in an Initial Public Offering (IPO), it raises capital directly from investors in the market. Investors buy shares, and the company receives the funds directly. The stock exchange serves as a marketplace but doesn't act as a financial intermediary. Q: Example of indirect finance: Example 1: Buying insurance -> insurance is now a financial intermediary, using fund to invest through financial markets to reach deficit units Example 2: Bank Loans