tiểu luận lý thuyết tài chính diary of principles of finance

Introduction Finance plays an important role in the economy Being an economic students, I have to research and learn about the finance to widen my knowledge and apply theories and concepts to solve practical problems in my work and life as well My first financial subject is Principles of Finance, which provides a fundamental knowledge and concepts about finance In addition, a learning diary of my lecturer - Mrs Mai Linh is the best idea and an effective method for me to review what I have learned, reflect my further research and motivate myself as well There are lots of useful things that I have learned such as financial markets, financial institutions, financial instruments, how the money has changed as time goes by, how I could make decisions on investment and others concepts However, one most interesting thing that attracts me through this subject is the financial crisis That sounds strange because most my friends are interested in the positive and bright sides of finance But for me, crisis means opportunity and it’s also right in finance In fact, my family had a financial crisis when I was in grade My father lost his job because of the crisis of export - import company in 2009 and we fell on hard times When I grow up and hear about the story of financial crisis 2007-2008 that gives me many thoughts So I decide to research deeply to find the reasons why it has a big effect to world’s economy including Vietnam Many people say that the 10-year cycle of a globally financial crisis is true when they look back in history So they believe that it may have one in this year or next year Furthermore, on these days, there was a report on the VTV1 news: “Vietnamese shares suffered one of their sharpest drops ever on Thursday after Wall Street’s worst losses in eight months triggered a surge of global selling that hit markets in Asia” I wonder if the financial crisis will come back and will be more serious than before What would happen? Will Vietnam also be affected? What about banking system? What would happen if people try to withdraw their deposits at the same time when they hear this news? What could I to manage risks? Are there any solutions? There are a number of questions about this issue that come to my mind As a result, I decide to find answers for these questions and further research about financial crisis in this diary I- Diary of Principles of Finance Introduction to Corporate Finance On the first day of course, my lecturer told my class to learn more at home about Corporate Finance in order to know about how many types of firms, the ownership and the control of corporations and the financial decisions of firms as well It was not so new to us about four major types of firms that we have learned in Macroeconomics subject: sole proprietorships, partnerships, limited liability companies and corporations But this was a chance for us to learn deeper in financial aspect One special thing I realized that the 80/20 rule was applied in these types of firms in U.S Statistics indicate that only 19% of corporations are responsible for 84% of U.S revenue In contrast, 81% others including sole proprietorships, partnerships and limited liability companies accounted for only 16% revenue of U.S So why few people choose corporation because of double taxation of corporation profits The corporation pays federal and state taxes on its profits When dividends are paid to shareholders, they are treated as income and taxed again Furthermore, forming a corporation requires investing more money and time than another business entity They need to file the appropriate registration, fulfill capital requirements, and formally list the corporate directors among other things But few corporations accounts for the majority of U.S revenue Because one of the advantages of corporation is the ease of funding Corporations can transfer ownership by buying or selling its shares Public corporations have a much easier time than private companies to exchange shares, but regardless, corporation offers its members the easiest means for transferring ownership Also, a corporation has no limit to its life If owners die or want to dissolve their shares, they simply sell or transfer their ownership to someone else This is the first time that I know about the differences between ownership and the control of a corporation I had always thought that the owner was also the operator who directly run the company However, in a corporation, direct control and ownership often separate Rather than the owners, the board of directors and Chief Executive Officer possess direct control of the corporation According to organizational chart of a typical corporation, the board of directors, representing the stockholders, controls the corporation and hires the Chief Executive Officer who is then responsible for running the corporation The Chief Financial Officer oversees the financial operations of the firm, with the Controller managing both tax and accounting functions and the Treasurer who is responsible for capital budgeting, risk management and credit management activities As I work in Business Ideas Team - an Foreign Trade University ’s club that focus on entrepreneurship and social innovation so I usually discuss about a popular question relating to types of business: What is the best form of business for startup? Through this lesson, I can evaluate the pros and cons of each business structure The answer is that it depends Sole proprietorship is best for business owners with no or few employees, such as consultants, who can handle legal risks with adequate insurance or not have assets to protect Meanwhile, partnership - a common structure in the real estate industry is best for businesses that will be owned and operated by several individuals Corporation is best for the businesses that need liability protection and flexibility to grow into a large organization It’s a popular structure for manufacturers and restaurants On the other hand, the limited liability company (LLC) is popular among businesses that are just starting out and not totally sure how much they will grow in the first year or so In conclusion, it depends on the objectives, resources, industry entry and other factors of startup but the owners have to identify and evaluate well the company’s situation Financial System As I learn about financial system, it includes six parts: money, financial instruments, financial markets, financial institutions, regulatory agencies and central bank These concepts help me make better financial decisions Due to the flow of funds through financial system, I can understand how the funds are transferred in direct and indirect way in economy If I want to further education such as study abroad or buy a house or start a new business, I could know where I get the funds to it, how to make a loan and minimize the risk This lecture also provides a conceptual framework for understanding how financial works and how it changes over the time Thanks to this lesson, I know an more effective way to handle the transfer of resources over time that takes place through the financial system For example, I am saving for my own retirement by saving money in a bank account A more effective way for me to save for retirement through an insurance company or mutual fund retirement account whose sole function is to provide retirement income In financial markets lesson, I understand its definition, role and structure in financial system They not only contribute to increase the production and efficiency in the overall economy and provide the liquidity but also improve the wealth of individual participants by providing investment returns to lenders and profit, opportunities for borrowers In addition, everyday we are showered with newspaper, television, online magazine and online computer reports of financial market indicators These include interest rates, exchange rates and indicators of stock market performance Thanks to this financial markets rates section, I can read these numbers and understand the meanings So that I can make better decisions in investment in the future Time value of money This is the section that usually gives me a headache with numbers But it is very interesting when I finally solve these problems This lesson provides one of the most useful tools to evaluate projects, investment and cash flows Actually, the tools allow me to compare cash flows that occur at different point in time The first tool is a visual method for representing a stream of cash flows: the timeline Afterwards, I can establish three important rules for moving cash flows to different points in time Three rules of time travel are comparing and combining values, moving cash flows forward in time and back in time By using these rules, I can calculate the present value and future value of costs and benefits of a general stream of cash flows By converting all cash flows to a common point in time, I compare the costs and benefits and thus assess its net present value (NPV) Through NPV, I could decide to invest the project or not, or any other financial decisions In reality, I have applied this tools to calculate and evaluate my financial plan of social business projects in my club - Business Ideas Team It helps me to identify the possibility of projects, the cash inflows, outflows and net present value II - Further research Financial Crisis Financial crises occur when there is a disruption in the financial system that causes such a sharp increase in adverse selection and moral hazard problems in financial markets that the markets are unable to channel funds efficiently from savers to people who have investment opportunities As a result, financial frictions increase sharply and financial markets stop functioning Then economic activity will collapse One of the World’s Most Devastating Financial Crises is The Great Depression of 1929 - 1939 This was the worst financial and economic disaster of the 20th century Many believe that the Great Depression was triggered by the Wall Street crash of 1929 and later exacerbated by the poor 10 policy decisions of the U.S government The Depression lasted almost 10 years and resulted in massive loss of income, record unemployment rates, and output loss, especially in industrialized nations In the United States the unemployment rate hit almost 25 percent at the peak of the crisis in 1933 The financial crisis of 2007–2008, also known as the global financial crisis and the 2008 financial crisis, is considered by many economists to have been the worst financial crisis since the Great Depression of the 1930s Triggered by the collapse of the housing bubble in the U.S., the crisis resulted in the collapse of Lehman Brothers (one of the biggest investment banks in the world), brought many key financial institutions and businesses to the brink of collapse, and required government bailouts of unprecedented proportions It took almost a decade for things to return to normal, wiping away millions of jobs and billions of dollars of income along the way In addition, leverage ratios of investment banks increased significantly between 2003 and 2007 Prior to the crisis, financial institutions became highly 11 leveraged, increasing their appetite for risky investments and reducing their resilience in case of losses Much of this leverage was achieved using complex financial instruments such as off-balance sheet securitization and derivatives, which made it difficult for creditors and regulators to monitor and try to reduce financial institution risk levels These instruments also made it virtually impossible to reorganize financial institutions in bankruptcy, and contributed to the need for government bailouts Source: The financial crisis of 2007-2008 (Wikipedia.com) 12 13 ... of questions about this issue that come to my mind As a result, I decide to find answers for these questions and further research about financial crisis in this diary I- Diary of Principles of. .. Principles of Finance Introduction to Corporate Finance On the first day of course, my lecturer told my class to learn more at home about Corporate Finance in order to know about how many types of firms,... for only 16% revenue of U.S So why few people choose corporation because of double taxation of corporation profits The corporation pays federal and state taxes on its profits When dividends are