BANKING ACADEMY OF VIETNAM

BTEC HND IN BUSINESS (ACCOUNTING)

ASSIGNMENT COVER SHEET

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UNIT TITLE
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NGUYN TRNG NHN

F07-040
Unit 2: Managing Financial Resources and Decisions
VietSon Tours Finance as a Resource
1 of 2
Mr. Nguyen Nam Trung, ACCA, MBA

I, __________________________ hereby confirm that this assignment is my own work and not copied or
plagiarized from any source. I have referenced the sources from which information is obtained by me for
this assignment.

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Unit Outcomes
Assessors
Outcome

decision
First
attempt

Understan
d the
sources of
finance
available to
a business

LO1

Identify the
sources of
finance
available to a
business

LO2

Rework

1.1

Assess the
implications of
the different
sources

1.2

Evaluate
appropriate
sources of
finance for a
business project

1.3

Analyse the
costs of
different
sources of
finance

Understan
d the
implication
s of
finance as
a resource
within a
business

Internal
Verification

Feedback

Evidence for
the criteria

2.1

Explain the
importance of
financial
planning

2.2

Assess the
information
needs of
different
decision

2.3

makers
Explain the
impact of
finance on the
financial
statements

Merit grades awarded

2.4

M1

M2

M3

Assessors
Outcome

Distinction grades awarded

Internal
Verification

Feedback

Evidence for
the criteria

decision

D1

D2

D3

Assignment
( ) Well-structured; Reference is done properly / should be done (if any)

Overall, youve

Areas for improvement:

ASSESSOR SIGNATURE

DATE

Assessors
Outcome

Internal
Verification

Feedback

Evidence for
the criteria

decision

NAME: ..............................................................................

(Oral feedback was also provided)

STUDENT SIGNATURE

DATE

NAME : .............................................................................

FOR INTERNAL USE ONLY

VERIFIED

YES

NO

DATE

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VERIFIED BY : ................................................................
NAME

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TABLE CONTENT
Introduction ............................................................................................................................6
Identify the sources of finance available to VietSon Tours ...................................................7
Assess the implications of the different sources of finance to VietSon Tours ......................8
Evaluate appropriate sources of finance for VietSon Tours ..................................................9
Analyse the costs of different sources of finance for VietSon Tours ....................................10
Explain the importance of financial planning to VietSon Tours ...........................................11
Assess the information needs of different decision makers ...................................................12
Explain the impact of finance on the financial statements to VietSon Tours ........................13
References ..............................................................................................................................14

INTRODUCTION
Nowadays, every people have a lot of time to work without relax, so travel is a good
choice to do this. Although the economy of Vietnam is go down in 2012, the travel
industry in Vietnam are developing. The government also provide the assistance for the
company and help them in doing activities. Vietson Tours is one of the travelling
company. It is in the process to expanse the business. Expansion in this period is not
really good with a company, which set up recently, so the company will have some
difficulty to do that. Many tourists come to this country is a good opportunity of Vietson
Tours to have more profitability if they can catch it. Im a new appointed Trainee
Accountant at Vietson Tours. In this report, I will show Mr Pham Duc, who is the
investor of Vietson Tours evaluating the different sources of finance appropriate to each
expansion stage of Vietson Tours. This report include seven main part: Identify the
sources of finance available to VietSon Tours, Assess the implications of the different
sources of finance to VietSon Tours, Evaluate appropriate sources of finance for VietSon
Tours, Analyse the costs of different sources of finance for VietSon Tours, Explain the
importance of financial planning to VietSon Tours, Assess the information needs of
different decision makers, Explain the impact of finance on the financial statements to
VietSon Tours

1.1 Identify the sources of finance available to a business

Vietson Tours is a partnership. It also a small business and new company. Financial is motive
power after business for making profit. Business must have equity for their attempt to making
revenue. You can donate your money for company and it is a good ways to grant it. The equity
can come from the relationship such as family or friends, they always ready to loan money or
buying stock on your company.
Bank is also a good choice to borrowing, they have many loans for small company. If the
company have present customers, they can pay their money to buy goods or service, it means the
company can use their cash to buy the product or inventory sell. With Vietson Tours company,
they are own 30.000 for cash expense but the total start-up expense is about 5.000, so they
have to borrowing 5.000 from the bank or outside sources.
Rent is a way to grant the computer, equipment, land, office, vehicles and different devices, it
helps the company decrease the first expenses because at the beginning the company dont have
a large amount of money to buy them. Private placement, which the people buy the stock of the
company can own one part of that company.
On Vietson Tours company, Mr Pham Duc and Mrs Le Nga are the investors of the Vietson Tour
because they have contributed 167,000 to purchase two mini bus currently in its possession.
The sources of finance include equity and borrowings.
On the equity include retained earning and sell the share, on the borrowings have borrow from
the bank, invoice discounting, lease ( Operating lease and finance lease), hire purchase,
overdraft, factoring and Government grant.
Sources of finance of Vietson Tours company are leasing (500 rent equipment or land on total
start-up expenses). Vietson tours company loan the bank with 10% interest rate in current
interest rate and long-term interest rate on 3 years following the assumptions.
The company buy equipment such as computer, furniture on account and they don't need to pay
immediately, purchase day to day cost until pay all debts but the interest rates will be high, so it
is the hire purchase of Vietson Tours. They obtain the government grant because the tax rate in
year 1 is 18,08% which is higher than the tax rate in year 2 ( 17,00%).
The retained earnings of Vietson tours is inside equity for example, in this year, your company
Vietson Tours do business and make profit, about 10$ and you take about 20% of your profit and
pay it to the investors so the dividend is 2$, the money remain is 8$ and you use this remain to
invest on your company to make another profit. 8$ is retained earning.

1.2 Assess the implications of the different sources

Debts financing: Borrowing money from sources outside with a promise to pay back, which is
debts. Although the definition have the disadvantage meaning, almost new company like Vietson
Tours often change to debts, which can grant to the activities of the company. The popular
sources to have borrowing capital is from bank, it can be from a private company, friends or the
member of the family. So the debts financing effect directly with the company.
With equity include retained earning and sell the shares, in financial, the dividend is not
allowable for tax corporation. It means dividend don't relate with tax corporation, you have to
pay tax corporation of the profit, which your company make, so the dividend don't need to pay
tax corporation. In legal, Vietson tours can pay the dividend in case of profit which they make.
When the company make some profit, one part of it should be shared for the investors or your
company will lost charismatic, so the number of people invest to your company will be
decreased.
With borrowing from the bank invoice discounting lease overdraft and factoring, the interest
expenses are allowable for tax corporation in Financial side, after you pay the interest rate of
loan money and expenses, the remain is the profit, which must be paid for tax corporation. In
legal side, they have to pay debts include principal, interest and regardless of profitability, when
you lend the money and you have to pay back it, the creditors don't care about the profitability. If
our company have bankruptcy, the owner of the company or owner's equity is the last person
who have to be paid.
On the other hand, the borrower or creditor will be the priority person who have to be paid.
About control dilution, when our company issue the ordinary shares, many people will buy it and
there are more investors or stockholder on your company, you will be less control on Vietson
Tours.
About the issued preference share, the buyer of this share will have one part on the company but
they don't have any permission to control Vietson Tours company, although they are the first
priority to get the dividend, which is higher than another investors.

1.3 Evaluate appropriate sources of finance for a business project.

Although you are investing for the Vietson Tours company or try to expanse the activities of
company, you have many choice to choose source of finance, which is suitable for your
company, but each source of finance have advantages and disadvantages.
Partnership:
Borrowing money from the bank is very difficult because partnership is new company, it have
unstable work and do business, the mortgage such as land, large equipment building, inventory is
not enough to keep the loan, it means the risk will be high, so the bank is hard for you to loan the
money. Regard to Vietson Tours, the company don't have ability to purchase all the expenses of
start-up the company, so they should loan money from the bank. Borrowing money from the
bank in this expansion from sole trader to partnership is not suitable.
Hire purchase is a good choice when you set up the business at first period time. In this time,
your assets are not large, so hire purchase help you have more ability to secure your finance and
be free to buy the other things that the Vietson Tours need. In Vietson Tours, some large
equipment such as computer, air conditional, furniture, cars can buy in hire purchase. Beside
that, it can have some disadvantage, the interest rate can be high, you must make sure that you
can follow the payments or they will take back the assets which you buy. In conclusion, hire
purchase in this stage is necessary.
Retained earning include income which your company make by doing business and dividend.
The advantage of it is easy to reinvestment. You can have the plan to expanse your business by
making services and goods or format the development. If the retained earning is high so the
dividend for stockholders can be low, they won't like it. In Vietson Tours, retained earning
can be suitable in this stage.
Private company:
In this time, Vietson tours company will have brand in the market, your company may be do well
and stable the business, company's assets are higher and large than partnership, it can't be
difficult for the company to loan money from the bank. So it is a suitable source of finance in
this stage to make the company develop and expanse faster.
With hire purchase, Vietson Tours can pay all the interest and they are complete payments of the
hire purchase. Your company can go on to do it if the company's business is bad in this time. So
the hire purchase in this expansion stage can be suitable or unsuitable base on doing
business.

Retained earning of the private company is necessary to reinvestment, but in this period, the
dividend of your company has to make the stockholder satisfy if you want them keep invest to
Vietson tours company.
Public company:
When Vietson Tours company become public company, it will be a large company in Vietnam,
Hire purchase is unnecessary in this stage. It can make more expense when your company pay
the interest of hire purchase.
The government will help you to expanse the business buy giving the government grant. The
biggest advantage of it is that you don't need to pay back the money, which you receive from the
government. The government will make some assistance to produce money without nervous
about pay debt. Beside, many support programs will follow with extra support such as help to
design the types of your business. But the disadvantages also have. One of them is time, which
need a long time to have the acceptance from the government. You can't have the ability to wait
the answer.
2.1 Analyse the costs of different sources of finance for Vietson Tours.
Share capital:
In Vietson Tours company, they pay the dividend for the stockholder by dividend in cash or scrip
dividend.
With dividend in cash, it means the stockholder will be received the direct cash from the
company for paying dividend. Vietson Tours is a partnership, so they don't have the legal
provision for paying dividend. If the company pay the dividend, it will be effect with tax. The
company must to pay double tax, one for tax of profits that the company make by doing business
or it call tax corporation and tax for the dividends, which are paid for stockholder or it can call
personal tax.
About Scrip dividend, instead of paying dividend in cash, the Vietson Tours company issue more
stock for the stockholder. So the company won't purchase the cash for stockholder, the company
con keep the cash for the company.
Borrowed funds:
When loan the money, the interest is the main cost. For example, Vietson Tours have a debt
5.000 borrowing from the bank and the interest rate is 10% per year. So 500 is the interest cost
that the company must pay for the creditor.
Tax relief on interest will decrease the cost of debt. 500 is the money the company have to pay
each year for interest rate. So base on the tax corporation this cost can be reduce, which will be
necessary for the partnership.
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Arrangement fees will be the cost that the Vietson tours have to pay when the company loan the
money. For example, the cost happen in checking references or prints the relevant document.
Government Grant:
The government give the company some grants to help them expanse the business. It usually
have without cost but not easy to have the government grants. The company must have the
condition, which suitable with the government's requests. So it will be have the cost for changing
to different business. For instance, Vietson tours is a company tours, they can use the money to
open more tour, which travel or visit the island such as Hoang Sa or Truong Sa of Vietnam, it
can help to protect sovereignty of Vietnam, so the government may be give the company some
government grants.
Retained earning:
The opportunity cost appear when the company have more than one choice when doing the
business.

2.2 Explain the importance of financial planning to Vietson Tours

Financial planning is very important with a company because it relevant to financial target,
which was established and the way to use sources of finance to achieve that target. Furthermore,
making the financial planning is a part of job, which spend a lot of time and resources, so it need
the join of many part of company.
The Vietson tour company must the financial planning in some case and show it, which follow
the law and the request of partners. It will spend a lot of resources, time and it can incur many
risk because some parts in financial planning can't show the right information or use it to make
the bad purpose competitive.
The benefits of financial planning are that the market and investors can be able to have a
knowledge a lot with the business, make the truth. Following the financial planning that the
management use to manage and make suitable spending expenses and orienting the business.
This table show the assumption of Vietson tours about cash budget in three year.

Cash Sales
Cash from Receivables
Total Revenue
Cash Expenses
Bill Payments
Pay for 2 mini bus
Total start-up Expense
Cash requirement
Total Expense

Year 1
175,000
133,700
308,700
112,800
144,204
167,000
5,000
30,000
459,004

Year 2
278,250
253,883
532,133
266,400
199,521

Year 3
315,000
306,327
621,327
289,200
219,625

465,921

508,825

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Vietson Tours make short financial planning (in one year). It illustrates the cash sales, cash from
receivables, cash expenses and bill payments on year one, year two and year three. All of them
increase year by year.
The benefits of financial planning are that the market and investors can be able to have a
knowledge a lot with the business, make the truth. Following the financial planning that the
management use to manage and make suitable spending expenses and orienting the business.
2.3 Assess the information needs of different decision makers.
Owner:
The person who own the assets of the company and run the business. You need to care about the
market share, who are your competitors, what do you do to take care of customers and product
them the best service in your company and the price of service and product of company. The
profitability include expense and revenue, it evaluates the activities of the company, it does the
work good or bad. The efficiency also access the work of company and employees. The last
thing that the owner caring about is liquidity, which is able to pay the ready money.
Bank or lender:
The creditors like bank or lender, whom you loan from also have to know the profitability, they
have to make sure that the debtors can possible to pay back the loan. Planning business, which
will show the income expense or liability in the future of company and they have to know about
that. Gearing ratio is also important because if the company have the high level of gearing ratio,
it will be easy to downturn in the business, they keep continue to pay the debt in spite of bad
sales.
Customers:
The customer use services or buy goods of the company, so the price is the first thing that they
have to concern. What service that the company product and the brand of the company, Is it a
famous or a big company.
Government:
The government will give the assistance to the company and the company must to pay tax to the
government. They usually care about the size of the company, define the location of the
company to have a suitable support, the employees, capital and industry. Profit is also cared by
the government because the activities of business impact with the financial of a country.
Investors:
Investors buy, sell or invest the stock. Like other decision makers, they want to know and care
the profitability, efficiency, liquidity and business plan. Shareholder investment of the company,
who are the shareholder, who have the largest stock of the company. The current situation of the
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company is very important with the investors, they make the decision to keep invest to the
company or not.
2.4 Explain the impact of finance on the financial statements to VietSon Tours
Cash flow include inflow and outflow.
Inflow is the money that the company receive from the customer who buy the company's
services or goods and from selling the assets.
Out flow is payments, the company pay for the supplier, tax such as tax corporation and the
interest rate of lenders.
To manage the cash flow ( inflow and outflow) the company have to prepare the plan for cash
flow for next year, next two or three year. Because with a correct plan can alert for the problem,
which can occur.
Choosing the right partner and customers is also the way that company manage the cash flow.
The customers who have able to pay on time are a good choice. With the partners, the company
usually consider carefully before they sign a contract.
Management working capital is decisions relevant with working capital and short-term finance.
The purpose of management working capital is that the company can continue with the activities
and it have enough cash flow for short-term debts and expense of activities.
The problem happen when the company manage the cash flow is that the financial planning is
not actually correct. The customers don't or never pay the payment on schedule.

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Reference

Riley, J., 2012. Sources of finance - choosing the right source. [Online] Available at:
http://www.tutor2u.net/business/gcse/finance_choosing_right_sources.htm [Accessed 1 November
2014].
VietSmart ESM, 2011. Lp k hoch ti chnh cho doanh nghip. [Online] Available at:
http://www.cfo.edu.vn/tvct/Tu-van,22,28,33,Ke-hoach-tai-chinh-la-gi-Tai-sao-doanh-nghiep-can-kehoach-tai-chinh-,page=0 [Accessed 3 November 2014].

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