33 “ FINANCIAL SITUATION AT HANOI CONSTRUCTION ASSOCIATION ONE MEMBER LIMITED COMPANY

The research project of financial situation and solutions to improve thefinancial situation implemented at Hanoi Construction Association One MemberLimited Company has the following purp

MINISTRY OF FINANCE ACADEMY OF FINANCE

Ha Noi - 2021

I hereby declare that this thesis is my own work and effort It has not been submitted anywhere for an award Where other sources of information have been used, they have been acknowledged

Graduation thesis author

Bui Linh Trang

I would like to take this opportunity to express my deepest gratitude andappreciation to the people who have given me their assistance throughout mystudies during the preparation of this thesis They are my teachers, my colleagues,

my family and my friends I would like to express my great thanks to all of them

First of all, I would especially like to thank my advisor, PhD Ngo Thi KimHoa , for her continuous encouragement and especially for her academic andcreative guidance She has been my source for inspiration throughout my thesis.Without her support, I would not be able to complete my thesis And I reallyappreciate her patience in reading and correcting my thesis

Secondly, I am indebted to all my teachers at Academy of Finance for theirguidance and help with valuable lessons throughout four years of study

Moreover, I would like to thank especially chief accountant, and the staffs ofHanoi Construction Association One Member Limited Company, for their valuablesupports during the internship period Without their helps, it would be impossiblefor me to finish this work

Last but not least, many thanks to my family, friends and classmates for theirgreat love and care in both spirit and health during preparation for theundergraduate thesis

This study investigated the factual state of financial efficiency at HanoiConstruction Association One Member Limited Company from the viewpoint of afourth year student of Faculty of Corporate Finance, Academy of Finance Thepaper aims at finding out the drawbacks in the company’s financial and the reasons,and more importantly suggesting main methods to improve the efficiency offinancial in the company In achieving these aims, the graduation paper surveys thecurrent situation of financial and assess that whether it is effective or not Fromreceived results, the study argues the most practical implications at HanoiConstruction Association One Member Limited Company to improve the efficiency

of financial of the company in the year to come

DECLARATION

ACKNOWLEDGEMENT

ABSTRACT

LIST OF ABBREVIATIONS

CHAPTER I 2

OVERVIEW OF FINANCIAL SITUATION OF A COMPANY 2

1.1 Corporate finance and corporate financial management 2

1.1.1 Corporate finance and corporate finance decisions 2

1.1.2 Corporate financial management 4

1.2 The financial situation of a company 8

1.2.1 Definition of financial situation of a company 8

1.2.2 Indicators for assessing financial situation of a company 14

1.3 Determinants of financial situation of a company 35

1.3.1 Subjective factors affecting corporate financial management 35

1.3.2 Objective factors affecting corporate financial management 36

CHAPTER II: 37

THE FINANCIAL SITUATION OF HANOI CONSTRUCTION ASSOCIATION ONE MEMBER LIMITED LIABILITY COMPANY 37

2.1 Overview of HaNoi Construction Association One Member Limited Liability Company 37

2.1.1 The establishment and development of HaNoi Construction Association One Member Limited Liability Company 37

2.1.2 The business characteristics of the company 38

2.1.3 Overview of financial performance of a one-member limited liability company of Hanoi Construction Association 45

2.2 The financial situation of Hanoi Construction Association One

Member Limited Company 46

2.2.1 The company’s of assets and Assets structure 46

2.2.2 The company’s of Capital and structure Capital 52

2.2.3 The company’s Revenues, Expenses and Income 62

2.2.4 The company’s cash flow situation of the business 67

2.2.5 The company’s debt and Liquidity of the compay: 72

2.2.6 The company’s asset utilization efficiency and Profitablity 79

2.2.7 The company’s profit distribution 87

2.3 General assessment of the financial status of Hanoi Construction Association One Member Limited Liability Company 88

2.3.1 These achievements 88

2.3.2 Limitations exist 89

CHAPTER 3: 90

SOLUTIONS TO IMPROVE FINANCIAL SITUATION OF HANOI CONSTRUCTION ASSOCIATION ONE MEMBER LIMITED LIABILITY COMPANY 90

3.1 The strategies of Hanoi Construction Association One Member Limited Liability Company in the future 90

3.1.1 Socio-economic context 90

3.1.2 The strategies of Hanoi Construction Association One Member Limited Liability Company of in the future 96

3.2 Solutions to improve financial situation of Hanoi Construction Association One Member Limited Liability Company 99

3.2.1 Strengthen debt management, improve the efficiency of commercial credit policy 99

3.2.2 Strengthen in inventory management 113

3.2.3 Strictly manage and improve the efficiency of capital in money 103 3.2.4 Promote bidding activities, increase revenue and manage

production and business costs in an economical and effective way 105

3.2.5 Improve operational efficiency, exploitation and use of capital 109

3.2.6 Improve business performance 111

3.2.7 Other solutions 111

3.3 Conditions needed for implementing the solutions 114

3.3.1 On the business side 114

3.3.2 On the State side 114

CONCLUDE 116

LIST OF REFERENCES

LIST OF ABBREVIATIONS

BEP Basic Earnings Power

CA Current Assets

CL Current Liabilities

EBIT Earnings Before Interest and Tax

EBT Earnings Before and Tax

ROA Return on Assets

ROE Return on Equity

NI Net income

NWC Net working capital

ROS Return on Sales

VND Viet Nam dong

Table 2.1: Indicators reflecting the business performance of HaNoi Construction Association One Member Limited Liability Company in the

last 2 years 45

Table 2.2: Analysis of the size and structure of assets in 2020 47

Table 2.3: Analysis of structure capital in 2020 53

Table 2.4: Analysis of capital size and structure in 2020 54

Table 2.5 Analysis of the funding model 61

Table 2.6: Analysis of business performance and results in 2020 63

Table 2.7: Analysis of Business operation of the company in 2019-2020 65

Table 2.8 Ratio of money generation of the enterprise 67

Table 2.9 Size of company liabilities 72

Table 2.10: Liquidity and Solvency analysis in 2020 77

Table 2.11: Performance analysis in 2020 79

Table 2.12: Analysis of profitability of companies in 2020 83

Table 3.1: The main targets of the plan for the year 2021 98

Biểu Figure 2.1: Overview of the company's financial situation in the period of 2018 - 2020 46

Figure 2.2: Changes in the size and structure of assets in the period of 2019 - 2020 48

Figure 2.3: Changes in the size and structure of capital resources in the period of 2019 - 2020 56

1 Research background

Currently, the deep changes of the world economy as well as the domesticeconomy have posed many difficulties and challenges for businesses, making thecompetition among economic sectors more and more should be harsh Besides,globalization has become an inevitable trend of the world economy, Vietnam is notout of that inevitable trend Globalization has opened up new opportunities forbusinesses and organizations, but it means that businesses are facing many newchallenges with increasingly fierce competition from the market economy Enterprises not only compete with enterprises in the same industry and field butalso have to compete with many competitors with strong financial potential both athome and abroad

In this situation, the urgent requirement for managers is how to build andmaintain a competitive advantage, thereby helping their businesses survive anddevelop sustainably This has forced businesses not only to rise up in the process ofproduction and business but also to know how to maximize their potential toachieve the highest business efficiency From these practical requirements,enterprises need to understand the results of their business activities and theirfinancial status in each period in order to make appropriate decisions to minimizerisks in activities, especially especially in financial management as well asorientation for the development of the entire enterprise in the future To do so, thefinancial managers must evaluate and analyze the business activities as well as thefinancial activities of the enterprises on a regular basis in detail and efficiency.Recognizing the importance of analyzing the financial situation and assessingthe financial status of a business, I have researched, researched and selected toimplement the topic: “ Financial stituation of Hanoi Construction Association OneMember Limited Company ”

2.Research question and purpose

The research project of financial situation and solutions to improve thefinancial situation implemented at Hanoi Construction Association One MemberLimited Company has the following purposes:

- Proposing a number of major solutions to contribute to improving thefinancial situation in the future

At the same time, set out a number of tasks:

- Systematize the theoretical issues of corporate finance and analyze thecorporate financial situation

- Find out the current financial situation of the company in 2020 on the basis

of comparison with 2019

- From the assessment of the current situation of the business to propose anumber of major solutions to contribute to improving the financial situation in thefuture

- Research subjects: Financial situation of Hanoi Construction AssociationOne Member Limited Liability Company

- Figures are taken from accounting book, financial statements in 2019,2020

4 Methodology and Data

4.1 The method of data collection

Through collecting an overview of the internship unit from relevantdepartments, the intern's financial statements over the years 2019 and 2020;current legal documents related to research issues; publications, books andnewspapers inside and outside the Academy

4.2 Methods of data analysis

From the collected data, to have the appropriate information to complete thefinal thesis, the methods used are:

Evaluation methods: including techniques: comparison, division, correlation

relationship, ranking, graph,

Factor analysis method: includes methods: continuous replacement, number

difference, balance, analysis of the nature of the factors

Prediction method: is the corporate financial analysis method used to

forecast corporate finance, including the following main methods: probabilitycalculation method, sensitivity analysis, regression, linear planning, using modeleconometric

- Thesis "The financial situation at Vinaconex Joint Stock Company" in 2013

by Bui Van Lam Based on many analytical methods such as comparison, detailthat determines the impact of the coefficients on the company's finances Sincethen, it has proposed to propose the award to contribute to perfecting the analysis

of the financial situation to serve the needs of financial management, productionand business to meet the requirements of the market

- Thesis "Financial situation at Construction and Infrastructure DevelopmentJoint Stock Company No 18" in 2015 by Hoang Duc Anh - Academy of Finance.The main structure of the thesis is analysis of the current situation on the financialsituation and analyzing financial indicators to propose solutions to improve the

efficiency of capital use, the efficiency of financial management of the Company,thereby knowing strengths and weaknesses and solutions to overcome

- Thesis "Financial situation at Vinaconex 25 Joint Stock Company", 2016 byauthor Bui Van Lam - University of Da Nang The thesis contributes tosystematizing theories about analyzing the financial situation At the same time,from assessing the current situation of analyzing the financial situation to create acompany, the sis has come up with a solution to complete the financial analysis ofVinaconex 25 Joint Stock Company

- Thesis "The financial situation at Binh Minh Import - Export InvestmentJoint Stock Company" by Chu Hong Anh - Academy of Finance The thesispresents basic theoretical basis, analyzes the current situation and recommendssolutions to improve the financial performance of the company

Through analyzing theses on the financial situation of the enterprisesmentioned above, the author has a deeper insight into the process of analyzing thefinancial situation of an enterprise Understand the method of analyzing thefinancial situation However, in the studies on this topic, there is no research on thefinancial situation of the one member limited liability company of HanoiConstruction Association Therefore, the thesis has focused on researching thefinancial situation of the company to offer solutions to improve financial efficiency

in this business

6 Thesis structure:

Chapter 1: Overview of financial situation of a company

Chapter 2: The financial situation of Hanoi Construction Association One

Member Limited Liability Company

Chapter 3: Solutions to improve the financial situation of Hanoi Construction

Association One Member Limited Liability Company

Due to the limited knowledge as well as pratical experience, the limitationsand shortcomings in my article cannot be ignored I look forward to receiving thesuggestions from the company and the teachers in the Corporate Finance subject tomake my final thesis more complete

Hanoi, May 2021

The author of thesis

Bui Linh Trang

1 CHAPTER I OVERVIEW OF FINANCIAL SITUATION OF A COMPANY

1.1 Corporate finance and corporate financial management

1.1.1 Corporate finance and corporate finance decisions

1.1.1.1 Definition of corporate finance

The textbook of Corporate Finance of the Academy of Finance published in

2015 states that:

In essence, corporate finance is the economic relationship in the form ofvalue arising associated with the creation and use of monetary funds of anenterprise during the operation of the business

In terms of form, corporate finance are monetary funds in the process ofcreating, distributing, using and mobilizing associated with enterprise operations.Thus, it can be understood, the superficial manifestation of corporate finance

is the cash flows arising in the process of creating and using monetary fundsassociated with the enterprise's operations However, the internal content of thosecash flows is economic relations in the form of value between enterprises andentities in the distribution of financial resources

1.1.1.2 Financial decisions of the company

Although not completely unified in the concept of corporate finance in terms

of language; However, there is a consensus when different conceptions aboutcorporate finance are that: corporate finance is actually interested in studying threemain decisions, which are investment decisions, capital decisions and decide todistribute profits

+ Investment decision: are decisions related to the total value of assets and

the value of each part of assets (fixed assets and liquid assets) The investmentdecision affects the left side (the assets part of the balance sheet) Majorinvestment decisions of a company include:

- Decisions on investment in liquid assets: decisions on inventory, decisions

on inventory, decisions on sales policies, decisions on short-term financialinvestments

- Decision on investment in fixed assets: decision to purchase fixed assets,decide on project investment, decide on long-term financial investment

- Deciding on the structural relationship between investment in liquid assetsand investment in fixed assets: Deciding to use leverage and deciding break-evenpoint

Investment decision is considered the most important decision in corporatefinance because it creates value for the business A correct investment decision willcontribute to increasing the value of the business, thereby increasing the value ofassets for the owner, otherwise a wrong investment decision will damage the value

of the business, leading to damage property for business owners

+ Financing decision : are decisions related to choosing which source of

capital to provide for investment decisions Capital decisions affect the right side

of the balance sheet (capital portion) Major capital raising decisions of businessesinclude:

- Decision to mobilize short-term capital: decision to borrow short-term oruse commercial credit

- Long-term capital mobilization decision: Decision to use long-term debtthrough long-term bank loans or corporate bonds; decision to issue share capital(common shares or preferred shares); decide the structural relationship betweendebt and equity (financial leverage); decide to borrow to buy or rent property,

To make the right financing decisions, financial managers must have a firmgrasp of the advantages and disadvantages of using capital mobilization tools;accurately assess the current situation and properly forecast market movements -future prices before making a decision to raise capital

+ Dividend dicision: Attached to decisions about the dividend distribution or

dividend policy of the business Financial managers will have to choose betweenusing the majority of their after-tax profits for dividends or withholding forreinvestment These decisions relate to how a firm should pursue a dividend policy

and whether the dividend policy affects the firm's value or the company's stockprice on the stock market or not.

1.1.2 Corporate financial management

1.1.2.1 Definition of financial mangement

Corporate financial management is the selection and making of financialdecisions, the organization implementing those decisions to achieve the financialperformance of the business, which is to maximize profits, continuously increasethe enterprise value and the competitiveness of the business in the market

1.1.2.2 The role of corporate financial management

The role of financial governance in business operations is reflected throughthe following main aspects:

a) Raising capital to ensure the normal and continuous operation of thebusiness:

Monetary capital is the money for the operations of the business During theoperation of the business, there are often short-term and long-term capitalrequirements for regular business activities, as well as for investment anddevelopment of enterprises Failure to promptly and adequately mobilize capitalwill make business operations difficult or impossible Therefore, ensuring businessactivities are carried out normally and continuously depends greatly on theorganization of capital mobilization of corporate finance

The enterprise's financial manager on the basis of considering the financialmarket situation, capital needs and specific conditions of the business, then makesthe best decision in organizing the mobilization of capital sources (inside, outside)

to meet the needs of business activities A proper sponsorship policy not only helpsbusinesses minimize financial risks but also has a great impact on the achievement

of the goal of maximizing business value

b) Organizing the use of capital economically and effectively, contributing toimproving the efficiency of business operations of enterprises

With the selection of optimal investment projects on the basis ofconsideration and comparison between the rate of return, the cost of capitalmobilization and the level of risk of investment projects financial managers havecreated a premise for the use of capital economically and effectively.

The timely and sufficient capital mobilization will help businesses takeadvantage of business opportunities, increase revenue and business profits.Choosing the right form and method of capital mobilization, ensuring the optimalcapital structure can help businesses reduce the cost of capital, contribute toincreasing profits and return on equity of enterprise

On the other hand, with the maximum mobilization of existing capital inbusiness activities can help businesses avoid losses due to capital stagnation,increase asset turnover, reduce the amount of loans, thereby reducing interestpayments loans, contributing to increase the profit after tax of the business

c) Comprehensively inspect and supervise all aspects of production andbusiness activities of the enterprise

The business operation process of an enterprise is also the process ofmobilizing and transforming monetary capital form Therefore, by examining thedaily monetary revenues and expenditures, and especially through analyzing andevaluating the financial position of the business and the implementation offinancial indicators, financial managers can control in time and comprehensivelyall aspects of business activities, thereby pointing out shortcomings, untappedpotentials to make appropriate decisions, adjusting activities to achieve title out ofthe business

1.1.2.3 The contents of financial management in a company

Corporate financial management often includes the following main contents:Participate in evaluation, selection, investment projects and business plans.The construction and selection of investment projects are done jointly by manyparts of the business From a financial perspective, the main thing to consider isthe main financial efficiency that is to consider and weigh the costs, the risks that

can be encountered and the possibility of profitability, ability to carry out theproject In the selection analysis, evaluation of optimal projects, projects with highprofitability, the financial manager is the one who considers how to use investmentcapital; on the basis of participating in the evaluation and selection of investmentprojects, it is necessary to find out the business development orientation, whenconsidering investing capital to implement investment projects, attention should bepaid to enhancing competitiveness to ensure immediate and long-term economicefficiency.

Determine capital needs, organize the mobilization of capital sources to meetthe operation of enterprises All activities of the business require capital Enteringinto business operations, corporate financial management needs to determine theessential capital needs for the operations of the business in the period Workingcapital includes long-term and short-term capital, and it is important to organizethe mobilization of capital to fully meet the operating needs of the business Themobilization of capital sources has a great influence on the performance of anenterprise In order to decide on the appropriate form and method of capitalmobilization, enterprises need to consider and consider in many aspects such as:capital structure, costs for the use of capital sources, advantages anddisadvantages benefits of capital mobilization

To well organize the use of existing funds, strictly manage revenues andexpenditures, and ensure the solvency of the enterprise Corporate financialmanagement must find ways to contribute to maximum mobilization of existingcapital in business operations, freeing up stagnant capital sources Closely monitorand implement well the sales and other revenues, strictly manage expenses arisingduring the operation of the business Find ways to restore the balance betweenrevenue and expenditure in money to ensure that businesses are always able to pay

On the other hand, it is also necessary to clearly define the expenses in thebusiness of the enterprise, the taxes that the enterprise must pay, determine whichexpenses are the costs for the business operation and the expenses belonging to theother activities

Perform well the distribution of profits, setting up and using the funds of thebusiness The proper distribution of profit after tax as well as appropriation andgood use of corporate funds will make an important contribution to thedevelopment of the business and to improve the lives of employees Profit is thegoal of business operation is an indicator that enterprises must pay specialattention to because it is related to the existence and expansion of the business Itcannot be said that a good enterprise has high efficiency while operating profit isreduced Enterprises need to have optimal methods in distributing corporateprofits In determining the rate and form of the enterprise's funds such asdevelopment investment fund, financial reserve fund, bonus fund and welfarefund.

Ensure regular inspection and control over the business operations of thebusiness and perform well financial analysis Through the situation of daily moneycollection and spending, the implementation of financial indicators allows toregularly check and control the operation of the business On the other hand,periodically need to conduct analysis of corporate financial situation Financialanalysis to assess the strengths and weaknesses of the financial and businessperformance of the business, thereby helping business leaders in overallassessment of the performance of the business enterprises, strengths andweaknesses in business operations such as solvency, material rotation, capital,business performance, from which right decisions can be made in terms ofproduction and finance,

Perform well financial planning The financial performance of the businessshould be foreseen in advance through financial planning Good implementation offinancial planning is an essential tool to help businesses proactively come up withtimely solutions when there are market fluctuations The financial planning process

is also the appropriate financial decision-making process to achieve the businessgoals

1.2 The financial situation of a company

1.2.1 Definition of financial situation of a company

a) Definition of financial situation of a compay

Assessment of corporate financial situation is a combination of methods thatallow assessing the past and present financial situation, predicting the futurefinancial situation of the business, helping managers to make the Effectivemanagement decisions, consistent with the goals they care about

b) Objective of corporate financial assessment

The goal of assessing the financial position of a business is different for eachaudience Specifically:

- For business managers: need information about the financial situation of thebusiness to control and direct the business and production situation of the business,

to orient decisions on investment and structuring financial resources, distributingprofits, assessing business performance to take measures to adjust accordingly,implementing financial balance, profitability, solvency and forecasting risks Riskrisk, especially financial risk signals in the business, from which to make financialforecasts and plans and appropriate financial decisions, to easily conductinspection and control management in the business

- For investors: need information about the financial assessment of thebusiness to clarify the development prospects of the business, estimate the value ofshares on the financial market to make a major investment decision corpses bringhigh profits in the future

- For lenders: for short-term loans, the lender is interested in counting theimmediate solvency of the business (also known as the enterprise's ability torespond to the maturity of the loan); For long-term loans, lenders are concernedwith the profitability of borrowed capital, invested capital and factors causingpayment risks and long-term financial risks to determine their repayment capacity.pay capital and interest and make loan decisions

- For people with salary in the business: the benefits of this group of peopleare the income and promotion opportunities that the business gives them, so

assessing their financial situation helps them orient their jobs and invest financefor the future.

- For state management agencies: State management agencies (tax agencies,financial inspection agencies, Statistics ) use the results of corporate financialassessment to inspect and supervise the business performance of enterprises in theeconomy, thereby proposing policies, management mechanisms and financialsolutions suitable to the actual situation of the business, creating Favorable legalcorridor environment contributes to helping enterprises improve production andbusiness efficiency

Thus, assessing the financial position of the business is a useful managementtool that helps to provide information to management entities, as a basis for makinguseful management decisions to preserve and increase your interests at the business

c ) The sequence of steps to conduct corporate financial analysis

To accurately analyze corporate financial situation, analysts need to follow 3main steps: Information gathering, information processing, prediction anddecision

- Collect information:Financial analysis uses all sources of information

capable of explaining and disclosing the current financial status of the business,serving the financial prediction process It includes inside information to outsideinformation, of which accounting information is concentrated in the corporatefinancial statements are particularly important sources of information

- Information processing:Information collected must be handled in a

systematic and scientific manner Depending on different analytical objectives,information users have analytical angles and apply different analytical methods tocalculate, compare, explain, evaluate, and determine the cause for the process.process prediction and decision-making

- Prediction and decision making:It can be said that the goal of financial

analysis is to make financial decisions For business owners, financial analysisaims to make decisions related to the business goals of growing, developing, and

maximizing business value For lenders and investing in a business, it's aboutmaking financing and investment decisions,

d ) The sequence of steps to conduct corporate financial analysis

To accurately analyze corporate financial situation, analysts need to follow 3main steps: Information gathering, information processing, prediction anddecision

- Collect information:Financial analysis uses all sources of informationcapable of explaining and disclosing the current financial status of the business,serving the financial prediction process It includes inside information to outsideinformation, of which accounting information is concentrated in the corporatefinancial statements are particularly important sources of information

- Information processing:Information collected must be handled in asystematic and scientific manner Depending on different analytical objectives,information users have analytical angles and apply different analytical methods tocalculate, compare, explain, evaluate, and determine the cause for the process.process prediction and decision-making

- Prediction and decision making:It can be said that the goal of financialanalysis is to make financial decisions For business owners, financial analysisaims to make decisions related to the business goals of growing, developing, andmaximizing business value For lenders and investing in a business, it's aboutmaking financing and investment decisions,

e ) Documents used in corporate financial analysis

In order to be able to accurately and comprehensively assess an enterprise'sfinancial position, analysts need to use a combination of documents includingexternal and internal documents:

* Documents outside the enterprise: are financial ratios, industry averages,legal documents prescribing the accounting regime, management regime for eachbusiness line

* Internal corporate documents: are quarterly and annual financial statements,detailed accounting books that track accounts, business plans for each period of thecompany In which the main and most important documents are the financialstatements of the unit Specifically

Accounting balance sheet: is the main financial statement, which generallyreflects the entire situation of assets and sources of asset formation at a given time.Reporting business results: means a general financial report, generallyreflecting the situation and results of business activities in an accounting period ofthe enterprise in details for each production and business activity (sales and serviceprovision; activities) financial activities and other activities).

Statements of cash flows: is an integral part of the corporate financialreporting system, providing information to help users evaluate changes in netassets, financial structure, ability to convert assets into money, liquidity and theability to generate cash flows during the operation

Notes to the financial statements: is a detailed explanation of some generalindicators reflected in other financial statements and at the same time a statement

of the applied corporate accounting policies to record economic transactionsarising in the enterprise The report reader has additional information necessary forevaluating the financial position of the business

The above documents are the basis for analysts to get data and information,correctly determine the financial indicators of the business and make reasonablecomment

f)

Analytical metho d

To analyze corporate finance, one can use one or a combination of differentmethods in the corporate financial analysis methods system Here, the writer wouldlike to present some basic methods as follows:

Evaluation method

The evaluation method is always used in corporate financial analysis, and isalso used in many stages of the analysis process Usually when assessing peopleoften use the following techniques:

Comparative method:This is a widely used method in economic analysis ingeneral and financial analysis in particular When using the comparison method, it

is necessary to pay attention to the problems of comparison conditions, the basisfor comparison and the commonly used comparison technique is absolutenumerical comparison, relative numerical comparison, vertical comparison,horizontal comparison

Method of division (details): This is a method of breaking down the financialperformance and process according to certain criteria to serve the purpose ofprocess awareness and that result under different aspects consistent with the target

of interest of each subjects in each period

Contact method for comparison and ranking:is an analytical method used tostudy and evaluate research objects based on economic and financial relationships

of phenomena, processes and results of corporate financial operations with relatedparties The ranking of research subjects should be based on quantitative andqualitative information that reflects the average basic financial characteristics ofthe subjects of the same type, the main environmental impacts on researchsubjects

Graphical method: visually reflect the analyzed data graphically, graph,

thereby describing trends, fluctuations level of research indicators or showingstructural relationships of parts in a whole Graphical method includes many formssuch as bar graph, circle This method clearly, visually shows the increase ordecrease or the relationship between the indicators

Factor analysis metho d

The method is used to set up the formula for calculating financial andeconomic indicators in relation to the influencing factors, thereby determining theinfluence level of each factor and analyzing the nature of the influence of factors

to analytical criteria

• The method of determining the influence of the factors:is the method used

to determine the specific influence of each factor on the research criteria Thecommonly used methods to determine the influence of the factors are: theconsensus substitution method (used when the analytical indicator is related to theinfluencing factor, expressed in the form of an injury or injury equation ), thedifference number method (the consequence of the continuous substitution methodapplied on the basis of complying with the order of factors), the balance method(applied when analytical criteria are related to multiplication influence factor assum or difference)

• Methods of analyzing the properties of the factors:implementation afterdetermining the influence of factors, in order to evaluate and reasonably predict,

on which basis to make decisions and how to implement those decisions Theanalysis must specify the influence level, determine the subjective and objectiveproperties of each influencing factor, evaluate specific predictions and determinethe significance of the factors affecting the researched indicator , consider

 Method of forecasting

Is the corporate financial analysis method used to forecast corporate finances.There are many different methods to forecast economic and financial indicators,but often people use the following methods: probability calculation method,sensitivity analysis, regression method, linear planning method, method usingeconometric model

 Method of analyzing the interaction relationship between financialcoefficients (DUPONT analysis method)

The return to equity is the result of a combination of a range of corporatemanagement measures and decisions To see the impact of the relationship betweencost management, capital management, capital management to the profitability ofthe business owner, a system of indicators has been built to analyze the thatimpact.

The main ones to be considered are:

- The interaction relationship between the after-tax return on business capitaland the after-tax rate of return on revenue and the entire capital turnover

- The interaction relationship between the after-tax return on equity and theafter-tax rate of return on revenue, the total capital turnover, and the capital-to-equity ratio

1.2.2 Indicators for assessing financial situation of a company

1.2.2.1 Assets and Asset structure

By analyzing the situation of assets, investors will know how companiesallocate their mobilized capital and understand whether the use of raised capital issuitable for the business or not

The structure of assets in analyzed by calculating and comparing thefluctuation between the analysis period and the base period in proportion of eachasset, including current and non-current assets, receivable , inventories and cash,etc in total assets

The analysis of proportion of each asset allows finance, managers andinventors to assess the allocation and usage of capital; however, they cannot knowthe affecting factors to the fluatuations in asset structure Therefore, it is necessary

to apply a combination of both horizontal and absolute analysis, as well as analysis

of each type of asset over total assets to see their trends over time Thereby, we canevaluate the appropriateness of the allocation The assessment must be based onthe business nature and the fluctuation of each part of the enterprise At the samethe time, the evaluation data used is the ones of enterprise over the years, alongwith information about the general structure and competitors of the industry in thelatest years

1.2.2.2 Sources of Capital and Capital Structure

Basically, they are divided into equity sources and borrowed funds.

Equity is the share of capital owned by the owner of an enterprise, includingthe capital invested by the owner and the additional capital from the businessresults Equity at a time can be determined by the formula:

Equity = Total assets - Liabilities

Liabilities are monetary obligations that an enterprise has the responsibility topay to various economic actors: Loans, payables to the seller, to the State, toemployees in the enterprise

To ensure a highly efficient business operation, normally an enterprise mustcombine both sources of capital: equity and liabilities

In order to have a reasonable assessment of the capital mobilization andcreation policy of the business, we need to analyze in depth the structure andvolatility of capital through data in the capital source on the Balance Sheet

Regarding the way of analysis: comparing each source of capital between theend of the period and the beginning of the period in both relative and absoluteterms, the proportion of each type of capital in the whole to determine thedifference in amount, rate and proportion Capital structure analysis aims to assessthe financial ability of the business, as well as the degree of autonomy in business

or the difficulties faced by the business When conducting the analysis, it isnecessary to define a number of indicators:

Debt ratio: shows the firm's use of debt in organizing capital sources and italso shows the firm's use of financial leverage

 Debt Ratio

Debt ratio =

Total debt of the business includes all short-term and long-term debts

The total capital resources include the sources of capital used by the business

Normally, creditors prefer a moderate debt ratio because the lower it is, themore debt is secured in the event of a business bankruptcy Meanwhile, ownersprefer a high debt ratio because they hold a large amount of assets and only invest

a small amount of capital and financiers use it as a financial policy to increase.profit However, if the debt ratio is too high, the business will easily fall intoinsolvency

 Equity ratio

Equity ratio =

Equity ratio in return measures the equity contribution of the owner in thecurrent total capital of the business The greater the equity ratio, the moreindependent and financially independent the business is However, the equity ratio

is too high, without being bold enough to borrow capital, it will not take advantage

of and promote the effects of financial leverage

* Analysis of WC Financing Model:

Consider the relationship between the items on the balance sheet: betweenshort-term assets with short-term funding and between long-term assets and long-term funding through net working capital ( NWC) From there, assess whether thebusiness has ensured the principle of financial balance or not

Net working capital (NWC) is a long-term, stable source of capital that isused to finance the net working assets needed for the business of the business Theregular working capital is determined by the following formula:

NWC = Long-term sources of fund - Long-term Assets

Or NWC = Current Assets – Current liabilities

Long-term sources of fund has stability that an enterprise can use in itsbusiness activities This capital is often used to procure and form fixed assets and apart of working assets is often necessary for the business of the business

Temporary capital resources are short-term capital sources that enterprisescan use to meet the requirements of temporary nature arising in the production andbusiness activities of enterprises Temporary capital sources include short-termloans from banks and credit institutions, and other short-term liabilities.

term assets

term debt Net

Short-working capital (NWC)

Medium and long term debt

term assets

Long-Equity

Figure 1: Company funding model

 NWC > 0: According to the first formula, it proves that enterprises havesurplus long-term capital; Equity and long-term debt allow full financing for fixedassets and long-term investments, while it partially funds short-term fixed andliquid assets, and corporate finance is balanced According to the second formula,the proceeds from current assets and short-term investments will enable thebusiness to not only be able to pay due debts, but also to spend a certain amount ofmoney Therefore, corporate finance will balance in the short term

 NWC <0: According to the first formula, it shows that long-term capital isonly partially secured for long-term assets, while the remaining part of the capital

is used in short-term to finance long-term assets Thus, corporate finance is notbalanced According to the second formula, it shows that money that can be

Sources of

Funds

obtained from current assets and short-term investments is insufficient to covershort-term debt so short-term balances are not guaranteed in the short.

 NWC = 0: If current assets are equal to short-term liabilities, or regularcapital is equal to fixed assets, NWC = 0 This kind of financing shows that onlyfixed assets are financed by long-term capital, while current assets are financed byshort-term capital This case does not create stability in the production andbusiness activities of enterprises, especially for industries with slow capitalturnover

In order to facilitate the flexible use of financial resources, consider thefollowing funding models:

1 st Model: Fixed assets and part of current assets are financed by long-term

financial resources while temporary working capital are financed by temporaryfinancial resources By applying this model, businesses can reduce payment risk,ensuring higher level of safety and reduce the cost of capital use However, there isone weakness that there is no flexibility in the organization of capital use

2 nd Model: All fixed assets, current assets and part of current assets are

secured by regular capital, and part of the remaining temporary assets is secured bytemporary capital By using this model, we can ensure high affordability andsafety Nevetheless, companies must utilize more long-term and medium-termloans as to pay more for the use of capital

3 rd Model: All fixed assets and part of current assets are secured by regular

capital, while part of current assets and all temporary assets are secured bytemporary capital

1.2.2.3 Revenues, Expenses and Income

* Revenue targets: Turnover from business activities is the total proceeds

from the sale of products, goods, supplies and services after deducting paymenttaxes, sales discounts, returned sales (if there are valid vouchers) and is accepted

by the customer to pay (regardless of whether the money has been collected ornot) Revenue from business activities has 3 criteria:

+ Revenue from sales and service provision: is the total amount of money

from the sale of goods, products and services which has been accepted by thecustomer (regardless of whether the payment has been received or not)

Revenue from financial activities: includes revenues from activities of

association, equity contribution, asset lease, deposit interest, loan interest, incomefrom securities trading (bonds, bills, stocks) the reversal of the provision forimpairment of securities set up in the previous year but has not been used up

+ Other income: is the proceeds from irregular activities other than

revenues such as: from the sale of materials, goods, redundant assets, tools, toolswhich have been fully distributed, damaged or not need to use payables thatcannot be paid due to creditors, recoverable, reversal of inventory discounts, badreceivables from the previous year but not used up and unusual revenues other

* Cost: Including all costs related to the business process of the enterprise

such as cost of goods sold, financial expenses, selling expenses and enterprisemanagement expenses

+ Cost of goods sold: reflect the total cost of goods, investment properties,

production costs and finished products sold, direct costs of completed servicevolume provided, other costs included in cost price

+ Selling expenses: This cost reflects the costs incurred in the sale of

products, goods and labor, including costs of packaging, transportation,introduction, and product warranty These costs include: staff costs, depreciationcosts of fixed assets, costs of services purchased from outside

+ Administrative expenses: This cost reflects the general management costs

of the enterprise including business management costs, administrative managementcosts, and other general costs related to the operation of the enterprise This costincludes: cost of management staff, cost of management materials, cost of officesupplies, taxes, fees and charges,

+ Financing expenses: Are the expenses for financial investment outside

the enterprise, for the purpose of rational use of capital sources, increasing income

and improving business efficiency of the business These expenses include: assetrental, purchase and sale of bonds, stocks, treasury bills, provision for securitiesdevaluation, other expenses related to investment outside the enterprise, expensesfinancial operations.

+ Other costs: are irregular expenses such as expenses for sale and

liquidation of fixed assets, expenses for actual losses, expenses for recovery ofwritten off debts, and other erratic expenses

* Profit: Profits are simply understood as a residual amount between the

total revenue and the total expenditure in the operations of the business Profitsfrom business activities include:

+ Profits from sales and service provision: This is the difference between

net sales of goods and services less the cost of the entire product (including cost ofgoods and sales and management expenses)

+ Profits from financial activities is the revenues greater than the expenses

of financial activities, including activities of leasing assets, buying and sellingbonds, securities, buying and selling foreign currencies, interest on bank depositsbelonging to working capital, loan interests belonging to sources of capital andfunds, dividends and interests from capital contribution to joint ventures, and thereversal of the balance of the reserves for short-term and long-term securitiesinvestment

+ Other profits: is other income than other expenses, including liabilities

without creditors, recovery of bad debts, which have been cleared of excesssupplies and assets after clearing depreciation shortages, loss of materials of thesame type, differences in liquidation, sale of assets, profits discovered in previousyears this year, balances of reversal of provisions for devaluation of inventories,bad receivables , the excess product warranty deduction when the warranty expires

* Earnings per share: This is the portion of the profit the company

allocates for each common share that is circulating in the market EPS is used as anindex showing the profitability of the business, calculated by the formula:

EPS = (Net income - dividend preference shares) / average number of shares

in circulation

Proportion of each item compared to net revenue

Total cost / net

Total cost Net revenue

Proportion of financial

revenue / Revenue =

Financial revenue Net revenue

Proportion of other income

Other income Net revenue

The rate of profit

before tax / revenue =

EBT

Net revenue

1.2.2.4 Cash flow of the business

From the perspective of corporate financial managers, the assessment of theability of the business to generate money to consider the payment criteria of duedebts is extremely important To evaluate these ratios in terms of corporate finance,financial managers use the cash flow target on the CFS For an enterprise, whenperforming economic activities, cash inflow and cash outflow will arise in theenterprise

Content of the enterprise's cash flows:

Cash flow of a business includes cash inflow, cash outflow, net cash flow

* Cash inflows: Cash flows that arise into the business during its operations,

including revenues from selling products, goods, providing services, borrowing,issuing stocks, bonds,

* Cash outflow: Cash flow arises out of the business during its operation,

including spending on property purchases, paying for raw materials, payingsalaries, debt repayments, loan interests,

* Net cash flow: Is the difference between the cash inflow and the cash

outflow of the business

Net cash flow = Cash inflow – Cash outflow

In the operating cash flow of a business, the cash flow from operatingactivities is the most important cash flow, this is the most frequent and stable cashflow for the operations of the business

To evaluate the cash flow situation of an enterprise, assess some of thefollowing criteria:

Cash conversion cycle ( CCC):

* Days sale outstanding: Is the average number of days from giving debt to acustomer until recovery of a customer's receivable debt is recovered

Days sale outstanding =

* Days payable outstanding: Is the average number of days from purchasing

raw materials or goods until the business pays the supplier

Days payable outstanding =

* Days inventory outstanding: It is the average number of days between thetime NVL, the goods are stored in the warehouse until it is sold to the customer

Days inventory outstanding = Cash conversion cycle = Days sale outstanding+ Days inventory

outstanding - Days payable outstanding

Enterprises always come up with a reasonable strategy between theappropriated capital and the appropriated capital, in order to meet the differentoperational goals of the business, while increasing the ability to create money tocreate liquidity and ensure guarantee the ability to pay debts in order to reduce thetime to convert money into money of the business

Criteria for assessing the cash flow of an enterprise:

* Coefficient of money generation from operating activities: This indicator

helps administrators to evaluate the ability of the business to generate money frombusiness operations compared to the revenue achieved

Coefficient of moneygeneration

from operating activities =

* Cash revenue and sales: Reflecting the ability to recover money from

sales

Coefficient of cash revenue and sales =

* Loan interest payment guarantee ratio from net operating cash flow:

assessing whether the ability to generate money from production and businessactivities can meet the interest payment requirement or not

Coefficient of loan interest

Payment guarantee ratio =

from net operating cash flow

* The coefficient for evaluating the solvency of the net operating cash flow:

examining the ability to pay short-term debts of the enterprise through the netoperating cash flow, evaluating the ability to generate money from the businessactivities whether the business has enough debt repayment

The coefficient for evaluating

the solvency of the net =

operating cash flow

Based on the analysis of cash flow indicators, managers need to plan andcontrol the movement in and out of cash flow, ensuring balance, harmony, noredundancy or shortage in excess, according to business performancerequirements to maximize enterprise value

1.2.2.5 Liquidity and Solvency

Considering the situation of solvency and liquidity is also a very importantcontent when evaluating the situation of creating and allocating capital of theenterprise The improper capital creation and allocation can also directly affectliquidity and solvency by investing too much capital in accounts receivable orraising too much external capital, especially short-term capital On the contrary,the structure of funding sources and the appropriate allocation of capital inaccordance with the specific production and business conditions of the industry,this increases the financial health of the business

a) Regarding the debt

The group of indicators reflecting the debt structure, debt management levelincludes: receivable coefficient, payable ratio, debt recovery coefficient, debtrecovery period, debt repayment coefficient, repayment period in debt

Receivable to total assets ratio =

This indicator shows the degree of capital appropriation of the business,shows how much capital is occupied in the total assets of the enterprise

Payables to total assets ratio =

This indicator shows the degree of capital appropriation of the business,shows how much of the enterprise's total assets is financed by appropriatedcapital

Accounts receivables turnover =

Debt recovery coefficient reflects the turnover rate of the enterprise'sreceivables during the period, it shows the firm's ability to recover debts If thisindicator is larger, the debt collection period is shorter and vice versa

Days sales outstanding =

In which the period in the reporting period can be 30 days (by month), 90days (by quarter) or 360 days (by year)

Accounts payable turnover =

This target shows the average number of times in the period the enterprisecan repay the occupied capital in the payment process to related parties

Days payable outstanding =

This indicator reflects how many days on average the repayment period ofappropriated debt in the enterprise's payment

b) Liquidity and Solvency

term loans, payables to sellers, taxes and payables to employees, long-term debtdue, other payables are for a term less than 12 months.

 This ratio reflects the ability to convert assets into money to cover term debts, so this coefficient also shows the firm's ability to pay short-term debts

short-To evaluate this coefficient, it is necessary to base on the average coefficient ofenterprises in the same industry It should be seen that this coefficient is different

in different industries

Quick ratio

* Quick ratio is a measure of an enterprise's ability to pay off short-termdebts in a period, not based on the sale of materials and goods This coefficient isdetermined by the following formula:

Quick ratio =

* In general, if this ratio is high, the solvency of the business is good,ensuring that the business can borrow easily in the future But if the proportion ofaccounts receivable is large in total short-term assets, the enterprise should alsoconsider the ability to recover debts to ensure the financial autonomy of thebusiness

Cash ratio :

* In addition to the two above factors, in order to more closely evaluate thesolvency of the business, it is also possible to use the instantaneous ratio of theratio This ratio is determined by the following formula:

Cash ratio =

* Here money includes cash, deposits, money in transit Cash equivalents areshort-term investments in securities, other short-term investments that can beeasily converted to cash within a period of 3 months and without significant risks