Question 1: What are some functions of money ?

What is the most important

function?
Money has four functions . Firstly, the most important function of money is a
medium of exchange, which is anything widely accepted in payments for goods
and services and in settlement of debts and as medium of exchange, money helps
facilitate and promote trade because money is the most common medium of
exchange. The second function of money is a measure of value, money measures
value in its units of accounts. The unit of account is the unit in which prices are
quoted and accounts are kept. Money also functions as a store of value because it
can be used to make purchases in the future, this function can suffer from inflation.
The last function of money is a standard of deferred payment, it refers to when you
buy something and do not pay for it immediately, your payment is expressed in
terms of money to be paid in the future.
Question 2: What are two types of money? What are some main differences
between them ?
The most important types of money are commodity money and token money.
Commodity money is a useful good that serves as a medium of exchange. Token
money is a means of payment whose value or purchasing power as money greatly
exceeds its cost of production or value in uses other than as money.
The difference between commodity money and token money is that while
commodity money acts as a medium of exchange, token money acts as a means of
payment. The value of commodity money is equal to the material contained in it
but token money’s value or purchasing power as money greatly exceeds its cost of
production or value in use other than as money. Token money is lighter and easier
to exchange goods and services than commodity money.
Question 3: What are some functions of the central bank ? How can the
central bank implement the monetary policy?
The first function of a central bank is that they act as bankers for the government to
collect and spend government revenues, manage the issues and redemption of
government debt, consulting and lending for government financing activities. The
second function of the central bank is the banker of the banking system that holds
and transfers bank deposits, supervises their operations, acts as a lender of the last
resort, and provides technical and advisory services. Central banks also function to
regulate the monetary system for domestic and international policy goals, using a
variety of direct and indirect tools and controls over financial institutions. And the
central bank plays a monopoly role in issuing coins and notes that circulate as
national currency.
To implement monetary policy, the Central Bank mainly uses three monetary
tools: reserve requirement; discount rates, open market operations, and many other
controls over financial institutions.
1. Function of taxation
- The main function of taxation is to raise funds for government expenditures,
serving as the main source of the Gov’s budget revenue.
- Income taxes are one of the ways in which governments can redistribute wealth in
the society, ensure social equality, reduce the gap between the rich and the poor
- Control supply and demand, production and consumption in the market, stabilize
prices, control inflation.
For example, indirect excise duties can be designed to dissuade people from
smoking, drinking alcohol and so on.
- Encourage or discourage investments in certain industries, adjust allocation of
scarce resources, regulate AD
- Affect foreign trade (raise export & limit import), protect national
production, ensure the balance of trade.
- Taxes serve as an important tool for macroeconomic regulation
2. What is tax avoidance? How do individuals and Firms avoid paying
taxes?
Tax avoidance is using legal ways to avoid paying tax.
Individuals take advantage of tax law loopholes to reduce their income tax
liability. Some employers give highly-paid employees perks instead of taxable
money, such as company cars, free health insurance, subsidized lunches,… Life
insurance policies, pension plans and other investments by which individuals can
postpone the payment of tax, are known as tax shelters. Donations to charities that
can be subtracted from the income on which tax is calculated are described as tax-
deductible.
Companies can avoid paying tax in some ways. For example: making tax
loss ( bring forward capital expenditure so that at the end of the year all the profits
are used up) and tax haven ( multinational companies often set up their head
offices in countries or regions where tax rates are low),…
3. What is tax evasion?
Tax evasion is the illegal way of reducing tax payment
- Making a wrong income declaration. For example, self-employed people
undeclared part-time evening jobs with small and medium – sized family firms, on
which no one pays any tax or national insurance
- Criminal organizations, meanwhile, tend to pass money through a series of
companies in very complicated transactions in order to disguise its origin from tax
inspectors – and the police; this is known as laundering money.
- Making wrong accounting records and tax return (Lập hồ sơ kế toán và khai thuế
sai)
- Smuggling and trade fraud (buôn lậu và gian lận thương mại)
Question 2: What is the basic purpose of accounting?
The basic purpose of accounting is to produce accounting information used by
decision makers in making economic decisions and taking specific action.
Question 8: What are financial statements used for?
Financial statements are used as a basis for business decisions such as allocation of
financial resources, development of new products, and expansion of operations.
They are also used for determining income taxes liabilities.
Definition of accounting?
Definition: Accounting is the process of identifying, measuring, recording,
classifying, summarizing, analyzing, interpreting and communicating financial
transactions. revenue to finance
Financial transactions purchasing materials, issuing shares to raise capital
Functions: Accounting helps in keeping systematic records to ascertain financial
performance and financial position of an entity and to communicate the relevant
financial information to interested user group
Accounting book ?
Source documents. act as evidence for financial transaction's bank statements,
receipts, invoices, bill, confirmation of order/delivery
Book of original entry journal records of financial transactions for the first time.
Ledger accounts. periodical records from journals, in the form of T-account.
Final accounts / financial statements. end products of account process, official
documents to the public
Accounting process?
Identify transactions and collect source documents.
Record transaction for the first time in a journal/ book of original entry.
Post/ Transfer information from journal to ledger accounts periodically.
Do a trial balance to make sure that Total credits are equal to total debits.
Use information in the ledger accounts to make financial statements.
Question 24: How commercial banks earn profit?
Banks earn profits based on the difference spread between saving and lending
interest rate when accepting deposit and making loans, between buying and selling
exchange rate when exchanging the national currency and also make profit from
fees and commissions
Question 24: What are three common financial statements? What do they
show?
Three common financial statements are balance sheet, income statement, and cash
flow statement. A balance sheet shows a company’s financial situation on a
particular date. It lists the company’s assets, liabilities, and shareholders’ funds.
period of time.Income statement (Profit and loss account) It shows how much
money a company makes and spends over a period of time. It lists total sales,
gross profit, costs of goods sold (chi phí trực tiếp), operating expenses (chi phí gián
tiếp), net profit (bottom line- profit or loss). Cash flow statement It shows cash
flow in and out of a company in a period of time. It lists cash flow into 3
categories: Operating activities, Investing activities, Financing activities.
Question 4: What is financial analysis? For what purpose is financial analysis
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.
Financial analysis may be used internally to evaluate issues such as employee
performance, the efficiency of operation and credit policies, and externally to
evaluate potential investments and the credit - worthiness of borrowers among
other things.

Question 4: What are different sources of data needed in financial analysis?

The primary source is the financial data provided by the company itself in its
annual reports and required disclosures. Market data is also available for financial
analysis. Market prices of securities of publicly-traded corporations, stock price
indices for industries and for the market as a whole can be found in the financial
press and the electronic media daily. Another source of information is economic
data such as GDP, CPI. Economic data is available from government and private
sources. Besides financial statement data, market data and economic data, people
also need to examine events that may help explain the company’s present condition
and may have a bearing on its future prospects.
Question 8: How are financial ratios classified?
Ratios can be classified according to the way they are constructed and their general
characteristics. By construction, ratios can be classified as a coverage ratio, a
return ratio, a turnover ratio and a component percentage. According to their
general characteristics, they can be classified into a liquidity ratio, a profitability
ratio, an activity ratio, a financial leverage ratio, a shareholder ratio and a return on
investment ratio.
Question 2: What four factors mentioned would contribute to a country’s
production efficiency?
● Climate: A certain climate in a particular country may allow that country to grow
agricultural products in abundance.
● Natural resources: such as oil or coal are abundant in other countries.
● Labor force: Countries with a large pool of unskilled laborers are able to produce
products which are labor intensive more cheaply than countries with highly paid,
skilled labor forces.
● Geographical location: Countries like Singapore and Panama engage in banking
and trading because they are located on world trade routes.
Question 3: According to the text, what is the main difference between
Smith’s theory and Ricardo’s theory?
The main difference between Smith’s theory and Ricardo’s theory is absolute
advantage and comparative advantage. Smith theorized that in a free market,
countries produce whatever they can most efficiently grow or manufacture, or what
is of the greatest advantage to them. In other words, if they can make money
growing cotton than making cloth, they grow cotton and export it. Meanwhile,
David Ricardo refined Smith’s theory to one of comparative advantage. He
theorized that an exporting country does not have to be the most efficient producer
of the product, it only has to be more efficient than the country which imports the
product.
Question 16: Why do governments encourage exports and restrict imports?
How do governments encourage exports and restrict imports?
(Why do governments encourage exports? How do governments encourage
exports?
Why do governments restrict imports? How do governments restrict imports?)
Tại sao chính phủ khuyến khích xuất khẩu và hạn chế nhập khẩu? Chính phủ
khuyến khích xuất khẩu và hạn chế nhập khẩu như thế nào?
● Governments encourage exports because a country enjoys an advantage if it
exports more than it imports. Wealth accrues to the exporting country. / because it
can help increase wealth, increase (promote) production, and create employment
for the population.
● Governments have special programs to encourage exports (To encourage
exports, the governments have special programs) such as providing marketing
information, establishing trade missions, subsidizing exports and providing tax
benefits or incentives.
● Governments restrict imports to protect domestic industries, to limit devaluation
of their currencies, and to provide employment for the population.
● To restrict / limit / control imports, governments impose tariffs and quotas.
Or: Governments restrict / limit / control imports by imposing tariffs and quotas.
Question 2: What are the reasons for imposing trade barriers?
One of the most common reasons that nations use trade barriers is to protect
domestic employment. The second reason is to protect relatively young domestic
industries that are not mature enough or large enough to compete with larger, more
mature foreign producers. The third reason that nations commonly use trade
barriers is to avoid / prevent unfair trade practices of foreign firms. The fourth
reason for imposing trade barriers is to prevent dumping. The fifth reason that trade
barriers are often needed is to protect firms and industries that produce output vital
to the security and defense of the nation.
Question 3: What are the most common used trade barriers?
There are 4 most common sorts of trade barriers: tariffs, quotas, subsidies and
embargoes.
● Tariffs are simply taxes placed on imports. A tariff is added to the price of the
imported goods.
● Quotas on imports are designed to restrict imports and promote exports. A quota
is a quantity restriction placed on a good, service or activity.
● Subsidies are often placed to protect domestic industries. Subsidies may be
intended to make certain key goods affordable to citizens of the nation.
● An embargo can be the most extreme of trade barriers. Embargoes basically
prohibit the import or export of anything with another country.
1. What are the benefits of international business for the exporting nations?
- Firstly, when the countries export goods, they receive money, thus their
economies tend to grow.
- Secondly, increased production for exporting helps create more jobs for the
population.
- People in importing countries have more choices of goods. When competing
between products, domestic products will be favored because they have lower
prices. In addition, the government can raise revenue by imposing tariffs.
- Moreover, the development of world trade leads to the development of other
industries such as transportation, distribution, marketing, and insurance
(International business brings benefits to exporting countries and importing
countries. Exporting countries receive money, increase production, expand their
market and develop their economies. Consumers of importing countries can have a
wider choice of goods and services at lower prices.)
2. What are the benefits of international business for the importing nations?
- Firstly, consumers of the importing countries can choose to buy either imports or
domestic goods (domestically produced goods). And the increased competition
between domestic goods and imports causes prices to become lower.
- Secondly, imposing tariffs on imports creates revenue for the government.
3. What are the disadvantages of international business for the importing
nations?
- They have to face more competition from foreign competitors to remain/ keep
their market share/ remain their position in the market.
- If they are less competitive compared with their foreign rivals, they may lose
their market share.
4. Why do particular countries produce goods or services more efficiently
than others?
- Particular countries can have different reasons for more efficient production of
goods and services such as their climate, location, labor forces, natural resources,
and other conditions.
- For example, the tropical climate helps Vietnam to grow rice and other
agricultural products in abundance. Vietnam is the second-largest rice exporter in
the world, following Thailand…
7. Why do governments want to encourage exports? How can they encourage
exports?
Firstly, Governments subsidize exports because they can improve Employment
opportunities when exports require more manpower. Secondly, encouraging
exports also helps increase income, from which the standard of living can be better.
The last reason is wealth often accrues to exporting countries.
To encourage exports, Government may be programs that provide marketing
information, establish trade missions, subsidize (trợ giá) exports and provide tax
benefits or incentives. For example, Government subsidies allow companies to
export their products and sell them cheaply overseas, which is known as dumping
(Governments try to encourage exports because a country enjoys an advantage if it
exports more than it imports. Wealth accrues to the exporting countries. Countries
have special programs to encourage exports. They may be programs that provide
marketing Information, establish trade missions, subsidize exports and provide tax
benefits or incentives)
9. Why and how does the government restrict imports?
The first reason is to protect domestic employment. Allowing cheap imports into a
country may destroy jobs by forcing domestic companies to cut costs, lay off
workers, or even go out of business. Government restricts imports in order to
shield domestic infant industries from foreign competition. Young domestic
industries need time to mature enough to compete with large foreign producers.
Finally, restricting imports prevents the country from depending on these imports
and allows greater reliance on domestic production. To restrict imports the
Government can use quota systems; tariffs; or subsidize.

*Foreign exchange rate includes: Fixed exchange rate and Floating exchange rate
Advantages
✔ Attract foreign investments
✔ Encourage exports, limit imports and luxury
consumption, ensure the balance of trade
✔ Raise competitiveness of domestic products,
support national industry
Disadvantages
✔ Raise the burden of the national debts and
public spending
✔ Push up the input costs and products prices,
result in higher CPI or inflation
✔ Cause difficulties to the related industries
and the people’s life
⇨ It is necessary for the Central Bank to
control the exchange rate fluctuation

2. What are the benefits of developing multinational

corporations?

Multinational corporation is a company that designs, produces and markets

products in many countries.

*The advantages of development of multinational firms include:

✔ For the firm:
+ Expand business opportunities, production and market scales
+ Exploit comparative advantages to improve production efficiency
+ Develop global philosophy of management, marketing and production
✔ For the local country:
+ Promote technology transfer, new skill training, investments and job creation
+ Raise the local residents’ living standard and working skills

What do countries benefit from the world trade? Its disadvantages?

6. Advantages of world trade:

+ Increase producers’ supply of goods and profits, improve competitiveness
+ Enable consumers to benefit from wider choices, higher quality and lower prices
+ Assist countries to exploit comparative advantages, create wealth, push up
economic growth
+ Raise opportunities for market expansion and specialization
+ Promote the world’s economic efficiency
✔ Disadvantages of world trade:
+ Language barriers
+ Cultural differences
3. What are financial ratios? How are they classified by construction?
A financial ratio is a comparison between one bit of financial information and
another. By construction, ratios can be classified as a coverage ratio, a return ratio,
a turnover ratio, a component percentage.
✔ A coverage ratio is a measure of a company’s ability to satisfy
(meet) particular
obligations.
✔ A return ratio is a measure of the net benefit, relative to the
resources expended.
✔ A turnover ratio is a measure of the gross benefit, relative to
the resources expended.
✔ A component percentage is the ratio of a component of an item
to the item.
4. What aspects of the company operation can we evaluate from financial ratios?
There are 6 aspects of operating performance and financial condition we can
evaluate from financial ratios:
✔ A liquidity ratio: provides information on a company’s ability to
meet its short-term, immediate obligations.
✔ A profitability ratio: provides information on the amount of
income from each dollar of sales.
✔ An activity ratio: relates information on a company’s ability to
manage its resources (that is, its assets) efficiently.
✔ A financial leverage (gearing) ratio: provides information on the
degree of a company’s fixed financing obligations and its ability
to satisfy these financing obligations.
✔ A shareholder ratio: describes the company’s financial condition
in terms of amounts per share of stock.
✔ A return on investment ratio: provides information on the
amount of profit, relative to the assets employed to produce that
profit.