Table of Contents

Excutive summary: ...................................................................................................................... 2

Overview of the Company .....................................................Error! Bookmark not defined.
LO 1 Understand the sources of finance .................................................................................. 2
Equity financing ........................................................................................................................... 2
Debt financing ............................................................................................................................... 3
LO 2 Understand the implications of finance as a resource within a business ..... 4

Bibliography ......................................................................................................................... 7

Excutive summary:
A business wants to survive and sustainable development requires activities: market
demand study, analyze the current situation of the economy, the business major. From
there, map out the development strategy in short and long term, the final aim is to
increase the property value for owners.
One of the important activities such as financial analysis and evaluation of financial
performance, through finding solutions that improve financial performance. this
report illustrates different sources of finance and the implications of finance as a
resource within FPT

Understand the sources of finance

there are two sources of finance that we can use to rise the capital of firm.Debt
financing includes long-term loans get from the bank and Equity financing is
private investor money you get in exchange for a share of ownership in the
business.In addition,FPT have big equity and the risk rate of FPT is very low also
Interest rate of Vietnam banks for FPT is low about 4%-5%.we can use these
advantages to rise the capital for the project because we can maximize profit also
reduce risk for project.

Equity financing
Having an investor help expand business without debt. But we must share the profits
with the capitalist.
Advantages to equity financing:

It's less risky than a loan because you don't have to pay it back, and it's a good
option if you can't afford to take on debt.

May add more credibility to your business.

Less dilution

No channel profits into loan repayment.

more cash on hand for expanding the business.

There's no requirement to pay back the investment if the business fails.

Disadvantages to equity financing:

It may require returns that could be more than the rate would pay for a bank
loan.

Take time and effort for capital raising

Take more time to solve arising issues

Less control and share profits

Debt financing

The business relationship with a bank that loans you money is very different from a
loan from an investor -- and requires no need to give up a part of your company. But
if you take on too much debt, it's a move that can stifle growth.
Advantages to debt financing:

The bank or lending institution has no say in the way you run your company
and does not have any ownership in your business.

The business relationship ends once the money is paid back.

The interest on the loan is tax deductible.

Loans can be short term or long term.

Principal and interest are known figures you can plan in a budget

Disadvantages to debt financing:

Money must paid back within a fixed amount of time.

If you rely too much on debt and have cash flow problem,you will have
trouble paying the loan back.

If you carry too much debt you will be seen as "high risk" by potential
investors which will limit your ability to raise capital by equity financing in
the future.

Debt financing can leave the business vulnerable during hard times when sales
take a dip.

Debt can make it difficult for a business to grow because of the high cost of
repaying the loan.

Assets of the business can be held as collateral to the lender. And the owner of the
company is often required to personally guarantee repayment of the loan.

Understand the implications of finance as a resource within a business

Cost of Equity:
Ke = Rf + ( RM Rf )

Rf is risk free rate or Government bonds

RM is market return or marker index return.in this we calculate average of vnindex

from 21/5/2013 to 14/3/2014

Calculate with exel we have RM = 0,346998

is risk factor of the firm.in case of FPT = 1,61

Ke = E(R) = (7,15%-5,5%)+1,61(0.346998-(7,15%-5,5%)) = 14,5 %

Deposit rates :
Vietcombank : 7.5%
Vietinbank: 7%
Techcombank: 7.7%
Average deposit rate : ( 7.5 + 7 + 7.7 )/3 = 7.4%

Cost of Debt :
Interest rate = Deposit rate + Spread ( default = 5% )
= 7.4 + 5 = 12.4%

In this case of FPT will use both equity and debt financing because the two forms of
financing together can work well to reduce the downsides of each. Business owners
can utilize a variety of financing resources also reduce tax.After calculating, the cost
of equity is bigger than the cost of debt so,debt finance will be used like a major
capital of firm and the other is equity finance.this is make sure to get profit which low
risk.

The accounting impacts of the capital raised by the chosen method in

the financial statements.

The significance of financial statement analysis is the process of reviewing, inspecting,

collate and compare financial data. Through this information to help users evaluate
potential business efficiency as well as the risks to future economic decisions. Financial
statement often includes the balance sheet, the income statement and statement of cash
flows. Balance sheet accounting is a method of accounting and is a major accounting
statements reflect the general situation of the property in two ways now classified as
capital structure and capital formation is the source of firm.In case of the capital sources
selected for use as equity and loans.we can see this capital has impacts on balance sheet
also financial statement. The income statement is very important because it shows all
expenses and income received in certain time. One more importance statement is cash
flow statement because investors and business managers want to know there is enough
cash to meet business opportunity or not , has the ability to dominate in the new
business opportunities arising or not ? Lenders want to know whether the business has
the ability to repay the loan on time or not ?.over all impacts of the capital raised in the
firm which using equity finances and debt finance for :

-the firmblance sheet is more transparents

-the firmcash flow statement is liquidity

-the firmincome statement which using major capital is equity finance will
maximize profit

Bibliography
Close price. (2014, March 25). Retrieved March 25, 2014, from www.hsx.vn:
http://hsx.vn/Lich-su-giao-dich-VN30INDEX-1.chn#

Financial

Planning.

(2012).

Retrieved

March

20,

2014,

from

http://toolkit.smallbiz.nsw.gov.au/: http://toolkit.smallbiz.nsw.gov.au/part/3/15/70
Neil Kokemuller, Demand Media. (2012). The Advantages and Disadvantages of Debt and
Equity Financing. Retrieved March 20, 2014, from http://smallbusiness.chron.com/:
http://smallbusiness.chron.com/advantages-disadvantages-debt-equity-financing55504.html

Appendix