247. “FINANCIAL PERFORMANCE A CASE STUDY OF VICENZA DEVELOPMENT INVESTMENT JOINT STOCK COMPANY”

The regular analysis of the financial situation will clearly show the realsituation of financial activities, the results of production and businessactivities in the period of the enterpr

Major Corporate Finance

Internship unit: Vicenza development investment joint

stock company.

Address: Lot A, Le Mon Industrial Park, Quang

Hung Ward, Thanh Hoa City, Thanh Hoa Province

INTRODUCTION

Currently, the restructuring of the economy and strong integration aswell as the increasingly fierce competition among economic sectors havecreated difficulties and challenges for businesses Facing such landmarkchallenges, every business needs a certain amount of preparation to be able toaffirm its position To affirm that as well as survive and develop more andmore sustainably, it requires businesses to have a thorough grasp of thesituation, the results of production and business activities as well as beproactive in each of their steps to have proper and reasonable futureconstruction and development plans For that reason, businesses must alwayspay attention to the financial situation - the most important factor that directlyaffects the company's production and business activities as well as the long-term development of businesses in the future hybrid

The regular analysis of the financial situation will clearly show the realsituation of financial activities, the results of production and businessactivities in the period of the enterprise so that they can be fully, rightly andreasonably determined and the level of influence of the factors that cansimultaneously evaluate the potential, efficiency of production and business

as well as the risks and future prospects of the company to help businesseswith their owners superiors can give effective solutions and accuratedecisions to improve the quality of economic management, improveproduction and business efficiency of enterprises

Stemming from that fact I chose the topic: Financial performance: a

case study of Vicenza development investment joint stock company

OBJECTIVES AND RESEARCH QUESTIONS

Thesis “Financial performance: a case study of Vicenza

development investment joint stock company” is selected to address the

following basic goals:

 Systematizing theoretical issues about the corporate financial situation

 Analyzing and assessing the current financial situation of Vicenzadevelopment investment joint stock company

 Proposing some solutions to improve the financial situation of Vicenzadevelopment investment joint stock company

Research questions:

 How assets and asset structure fluctuate?

 How sources of capital and capital structure fluctuate?

 How revenues, expenses and income fluctuate?

 What is the situation of the cash flow?

 How the liquidity is expressed?

 How asset utilization efficiency and profitability fluctuate?

 Is the profit distribution reasonable?

SCOPE OF STUDY

Based on the financial statements we conduct:

 General analysis of the financial situation

 Analyzing assets and asset structure

 Analyzing sources of capital and capital structure

 Analyzing revenues, expenses and income

 Analyzing cash flows

 Analyzing liquidity

 Analyzing asset utilization efficiency and profitability

 Analyzing profit distribution

From the above factors we can assess the current financial situation of the company

Scope of space: Vicenza development investment joint stock company.Scope of time: Assessing the current financial situation of Vicenzadevelopment investment joint stock company in the period of 2018 – 2019and proposing some solutions to improve the financial situation in 2020

METHODOLOGY AND DATA

The research project is based on the simultaneous use of generalmethods of analyzing financial and economic activities such as the method ofselecting the study area, collecting and analyzing data, analyzing financialindicators, comparing and statistics

The research topic uses data from financial statements in the period of

2018 – 2019 of Vicenza development investment joint stock company

THESIS STRUCTURE

Besides the introduction and conclusion, the thesis is structured into 3chapters

 Chapter 1: Overview of financial situation of a company

 Chapter 2 : Financial situation of Vicenza development investment joint

stock company.

 Chapter 3: Solutions to improve the financial situation of Vicenza

development investment joint stock company.

CHAPTER 1 OVERVIEW OF FINANCIAL SITUATION OF A COMPANY 1.1 Corporate finance and financial management

1.1.1 Corporate finance and financial decisions

1.1.1.1 Definition of corporate finance

Enterprise is an economic organization that carries out production andsupply of goods to consumers through the market for the purpose of making aprofit The business process of the enterprise is also the process of combiningthe inputs such as factories, equipment, materials and labor to create theoutput factor of goods and consumption of goods to make a profit

With each legal form of organization, the enterprise has an appropriatemethod to create the initial capital, from which the enterprise purchasesmachinery, equipment and materials After production is complete, thebusiness sells the goods and earns sales proceeds From the sales proceeds,the enterprises use it to offset the material expenses already consumed, paywages to laborers, other expenses, pay taxes to the State and the remaindershall be profits after tax The enterprise then uses this share of profits todistribute to accumulating and consuming purposes Thus, the operationprocess of an enterprise is also the process of creating, distributing and usingmonetary fund constituting the financial activities of the enterprise

Within the process of creating and using an enterprise's monetary fund,these are economic relations in the form of value that constitute the financialrelations of the enterprise and cover the following major financial relations:

 Financial relationship between enterprises and the State

This relationship is reflected in the enterprise's fulfillment of financialobligations to the State, such as paying taxes and fees to the budget

 Financial relations between enterprises and economic entities and other

social organizations

The financial relationship between enterprises and other economic entities

is very diverse and rich, which is reflected in the payment of material rewardswhen enterprises and other economic entities provide goods and services toeach other (including financial services) In addition to financial relationswith other economic entities, businesses may have financial relations withother social organizations, such as enterprises that provide grants to socialorganizations

 Financial relationship between the enterprise and its employees

This relationship is reflected in the enterprise's payment of wages, bonusesand material penalties to employees in the course of engaging in businessactivities of enterprises

 Financial relationship between an enterprise and its owners

This relationship is reflected in the owners making investments,contributing capital or withdrawing capital from enterprises and indistributing the enterprises' profit after tax

 Financial relations within the enterprise

This is the payment relationship between the internal divisions of thebusiness in the business operation, in the formation and using of theenterprise's funds, as well as when distributing business results andperforming internal accounting enterprise

From the above issues, some definitions can be drawn as follows:

 In essence, corporate finance is economic relations in the form of arising

value associated with the creation and using of monetary funds of the enterprise in the course of its operation.

 In form, corporate finance is monetary funds in the process of creation,

distribution, using and movement associated with the operation of the business

 Investment decisions: are decisions related to the total value of assets andthe value of each asset part (fixed assets and current assets) Investmentdecisions affect the left (the assets portion) of the balance sheet.Investment decisions are considered the most important of corporatefinance decisions because they create value for the business A rightinvestment decision will contribute to increase the value of the business,thereby increasing the value of the property for the owner, whereas awrong investment decision will damage the value of the business resulting

in damage to the business owners

 Financing decisions (capital decisions): These are decisions regardingwhich funds to choose for investment decisions Determining the capitalsource that affects the right of the balance sheet (the capital) The decision

to raise capital is a big challenge for the financial administrators of thebusiness In order to make proper financing decisions, financial managersmust have a firm grasp of the advantages and disadvantages of usingcapital raising tools, accurately assess the current situation and forecastcorrect market movements - future prices before making a decision toraise capital

 Dividend decisions: associated with the decision on dividend distribution

or dividend policy of the business Financial managers will have to choosebetween using most of the after-tax profits to pay dividends, or keep it forreinvestment These decisions are related to how the company shouldpursue dividend policy and whether the dividend policy will affect thevalue of the company or its stock price in the market

In addition to the three main types of decisions in corporate financementioned above, there are many other types of decisions related to thebusiness operations of the business such as mergers and acquisitions, financialrisks prevention decisions in production and business activities,

In short, financial managers must make financial decisions to maximizebusiness value With every financial decision, the manager must always facethe contradiction between risk and profit A wise financial decision is adecision that can maximize the value of the business, so that the financialdecision must ensure to minimize risks and maximize profitability for theowner This is very difficult for financial managers in the process ofanalyzing and making decisions to choose the appropriate financial decisions

1.1.2 Financial management

1.1.2.1 Definition of financial management

Corporate financial management is the selection, decision making andorganization of financial decisions to achieve the operational objectives of thebusiness Because financial decisions are associated with the creation,distribution and use of monetary funds during the operation of the business,corporate financial management is also considered as the planning andorganization process, implement, adjust and control the process of creating,

distributing and using monetary funds to meet the operation needs ofenterprises.

Corporate finance management includes the activities of managersrelated to the investment, purchase, financing and asset management of anenterprise to achieve its objectives It can be seen that corporate financialmanagement involves three main types of decisions: investment decisions,capital decisions and dividend decisions, in the most beneficial way forbusiness owners

Corporate finance management is a part and the most important content

of corporate management, it has close relationship and affects all aspects ofbusiness operations Most corporate management decisions are based on theresults drawn from the financial evaluation of corporate finance management.This comes from the role of financial management for the business

1.1.2.2 The role of financial management in a company

Currently, with the transition to a multi-sector economy operatingunder the market mechanism, enterprises must have full autonomy inproduction and business and financially The operation of enterprises facesmany challenges due to the competition of other businesses together withunpredictable market fluctuations Under these conditions, the operations ofenterprises must be based on the planning work both in terms of strategy(long term) and tactics (short term)

Strategically, businesses need to identify long-term business plans andgoals In addition to strategic decisions, corporate managers must alsoconsider tactical decisions Short-term business operations are alwaysassociated with generating specific decisions and these are all tactical

All strategic and tactical decisions of businesses are selected mainlybased on financial analysis In short, the role of corporate financial

management is becoming more and more important today for the businessoperations because:

 Financial status of the business concerned and affecting all activities of thebusiness

 Business scale and capital needs for business activities are growing Alongwith the development of the financial market, the financial instruments forraising capital are richer and more diverse Therefore, financial decisions,investment decisions of financial managers greatly affect the businesssituation and efficiency of the business

 Financial situation information is an important basis for business managers

in controlling and directing business activities

The role of financial management for the operation of enterprises isreflected in the following main aspects:

a Raising capital to ensure business activities take place normally and continuously

Monetary capital is a prerequisite for the operation of the business Inthe course of operation, enterprises often generate short-term and long-termcapital needs for regular business activities, as well as for investment anddevelopment of enterprises if not raising capital timely and sufficiently, itwill make the operations of enterprises difficult or impossible to implement,

so the assurance for the activities of enterprises is carried out normally andcontinuously depends heavily on the organization of capital mobilization ofcorporate finance

Financial managers base on considering the financial market situation,capital needs and specific conditions of the enterprise, thereby making themost optimal decisions in organizing the mobilization of capital to meet needsactivities of the business A proper financing policy not only helps businesses

reduce financial risks, but also has a great impact on the implementation ofthe goal of maximizing business value.

b Organizing the thrifty and efficient use of capital, contributing to raising the efficiency of business activities of the enterprise

With the selection of optimal investment projects on the basis ofconsideration and comparison between the profitability rate, capitalmobilization cost and the level of risk of investment projects financialmanagement has created a premise for the use of capital savings and achievehigh efficiency

The organization of timely and sufficient capital mobilization will helpbusinesses to seize business opportunities, increase business revenue andprofits The selection of appropriate forms and methods of raising capital,ensuring the optimal capital structure can help businesses reduce capital usecosts, contribute to increasing profits and return on equity of the business

On the other hand, by raising the maximum amount of existing capitalinto business operations, enterprises can avoid losses due to capitalstagnation, increase asset turnover, reduce the amount of borrowed capital,thereby reducing interest payment loans, contributing to increasing profit aftertax of the business

c Comprehensively inspect and supervise all aspects of the enterprise's production and business activities

The business operation process of an enterprise is also the process ofmobilizing and transforming the form of monetary capital Therefore, throughthe review of daily revenues and expenditures of money, and especiallythrough the analysis and evaluation of the financial situation of enterprisesand the implementation of financial indicators, financial managers have

promptly and comprehensively control the business activities of theenterprise, thereby pointing out the shortcomings and untapped potentials tomake appropriate decisions, adjusting activities to achieve the goals set out bythe business.

1.1.2.3 The contents of financial management in a company

Corporate finance management covers the following main contents:

a Participating in the evaluation and selection of investment decisions

Prospects of a business in the future depend heavily on large-scalelong-term investment decisions such as decisions on investment intechnological innovation, business expansion, production of new products

To lead to investment decisions require businesses to consider economic,technical and financial considerations In particular, the financial aspect mustconsider the capital expenditures for investment and estimated incomebrought about by investment In other words, consider cash outflows and cashflows related to investments to assess financial investment opportunities It isthe process of making an estimate of the investment capital and assessing thefinancial efficiency of the investment

b Identifing capital needs and organizing capital mobilization to meet promptly and sufficient capital needs due to the activities of enterprises

All activities of the business require capital Financial managers mustdetermine the capital needs necessary for the operations of the enterprise inthe period, followed by organizing the mobilization of capital sources in atimely, full and beneficial manner for the activities of the enterprise In order

to make a decision on selecting the appropriate form and method of capitalmobilization, consideration should be given to various aspects such as: capitalstructure, advantages of each form of capital mobilization and the cost ofusing each capital source

c Effectively using the existing capital, strictly managing the revenues and expenditures, ensuring the solvency of the enterprise.

Financial administrators must find all measures to mobilize themaximum amount of existing capital of enterprises into business activities,promptly release the stagnant capital, closely monitor and implement well thepayment and recovery proceeds from selling goods and other revenues,strictly managing all expenses incurred during the operation of the enterprise,regularly seeking measures to establish a balance between revenue and capitalexpenditure in cash, ensuring for businesses always have the ability to paydue debts

d Profit distribution, deduction and using of enterprise funds

Properly distributing after-tax profits, as well as setting up and makinggood use of enterprise funds will make an important contribution to enterprisedevelopment, improve the material and spiritual life of workers in enterprises,harmoniously resolving the immediate interests of owners and the long-termbenefits - the development of enterprises

e Regularly controlling the operations of the business

Through daily revenue and expenditure situation, financial statements,the implementation of financial indicators that allow control of the operation

of the business On the other hand, through the periodical analysis of thefinancial situation of the enterprise to evaluate the efficiency of capital use,the strengths and weaknesses in management, and forecast the financialsituation of the enterprise, thereby help leaders and business managers topromptly make appropriate decisions to adjust business and financialactivities of enterprises in the coming period

f Implementation of financial planning

The financial activities of the business need to be anticipated throughfinancial planning and when the financial plan is good, the enterprise canmake appropriate financial decisions to achieve the goals of the business Theprocess of implementing financial plans is also the process of proactivelyoffering effective solutions when the market has fluctuations

1.2 Financial situation of a company

1.2.1 Definition of financial situation

The financial position of an enterprise is the economic position it mayhave, including the specific situation of the number of assets it holds, theequity that the company currently has as well as the debt that the companyneeds to pay with business results that the company has achieved

From the above definition, it is possible to see the financial situation of

a company associated with the existence and development of the companyitself The continuous updating, analyzing and assessing this financialsituation helps businesses to understand the situation of what their assets are,including capital, scale, debt how to pay, whether the business results arepositive or not and then make strategies suitable for the company'sdevelopment orientation in the long term in the fields of investment, businessand finance activities with economic conditions that the company is having.Therefore, the continuous updating, analyzing and assessing the financialsituation plays an extremely important role for any business in the path ofexpanding and asserting its position

To be able to meet the continuity in updating, analyzing and assessingthe financial situation, the enterprise uses the most comprehensive andconvenient tool - the financial statements Financial statements are a summary

of important financial figures of a business in a given period The financialreporting system will provide an overall picture of the financial resources andperformance of a business in the reporting period (the reporting period isusually made quarterly, six months and the whole year) Under the currentfinancial regime, the annual financial statements of the enterprise will beprepared and presented in compliance with certain accounting regulations,including four closely related types of reports forming a system Financialreports, the four types of statements are as follows:

 Balance sheet: is a general financial report, generally reflects all existingassets and capital to form the assets of the enterprise at a given time Thebalance sheet reflects the data on the total value of the assets and availablecapital of the enterprise at the time of making the financial statement, sothe balance sheet is considered as a snapshot all financial resources of theenterprise at a time, usually at the end of the year, quarter or month

 Income statement: is a general financial report that generally reflects thesituation and results of business in an accounting period The figures in theincome statement provide the most comprehensive information about thebusiness results of the enterprise in the period and indicate that theactivities were profitable or loss, it also reflects the situation model ofusing the potentials of capital, labor, technology and business managementexperience of enterprises This is a financial report of great interest toentities because it provides data on the business results that the companyhas made in a period For financial managers it is also used as a guide toestimate how the business will perform in the future

 Cash flow statement: is a general financial report reflecting the situation ofmoney - collection and payment according to three activities: business

activities, investment activities and financial activities in a certain period.Through this report, it will show in the period where the business hastaken money and spent it Through the cash flow statement, we can see therelationship between profit and net cash flow The profit is determined bythe difference between the cash inflow and the outflow The term moneyflow also helps assess the ability to pay debt on time, evaluate the ability

to create money from endogenous or exogenous In addition, it helpssubjects predict future cash flows to valuate businesses Cash flowstatements provide the source of the cash flow of an enterprise, the cashflow of an enterprise is real and less affected by the principles ofaccounting

 Notes to the financial statements: is an integral part of the system ofcorporate financial statements, explaining and supplementing informationabout the business situation and financial situation of the enterprise in thereporting period that other financial statements cannot be presented clearlyand in detail Notes to the financial statements are an inseparable partwhen reading and analyzing financial statements for corporatemanagement decision-making The information presented in the notes tothe financial statements will help to better identify the items and elements

in the combined financial statements

Thus, through the financial reporting system, the owner of the businesscan understand the financial situation of the company and thereby will makethe appropriate strategies, policies and decisions to bring the enterprise to anew level, a new position

1.2.2 Indicators for assessing financial situation of a company

1.2.2.1 Assets and Asset Structure

Assets are material possessions used for production or consumptionpurposes of an enterprise Assets are also one of the two key components thatmake up the balance sheet of the enterprise financial reporting system In thebalance sheet, legally, the assets reflect the value of all existing assets at thetime of reporting, under the management and use of the enterprise On theeconomic side, the figures in the assets section reflect the size and structure ofthe types of capital and assets of the enterprise currently available at the time

of making the report : capital in cash, accounts receivable, inventories, fixedassets, through which a general assessment can be made of the size of thecapital and the level of capital allocation of the enterprise When preparingthe balance sheet, the assets are divided into two parts which are short-termassets and long-term assets

 Short-term assets are assets of the entity that have short-term in using,rotation or recovery (within 12 months or in one business cycle) Short-term assets include major items such as cash in cash, short-terminvestments, short-term receivables and inventories

 Long-term assets are assets of the unit that have long-term in using,rotation or recovery (more than 12 months or in many business cycles) andare of great value (from VND 10 million or more) Rules of value mayvary from country to country and from time to time Long-term assetscomprise essential items such as long-term receivables, fixed assets,construction in progress and long-term financial investments

For the assets in the balance sheet, the assets will be arranged indescending order of liquidity, whereby the assets with high liquidity arearranged at the top of the table and descending when move down In addition,

to reflect the level of investment in the assets of the enterprise, analysts can

use the asset structure ratios to understand better, the formula of the assetstructure ratios as follows:

 Rate of investment in short-term assets = short−term assets total assets

 Rate of investment in long-term assets = long−termassets total assets

Of course, it is also necessary to base on the business industry and thespecific business situation of the enterprise to assess the reasonableness ofinvesting in the assets of the enterprise For the analysis of the financialposition of an enterprise, analysts will mainly use the classification of assetsbased on the classification in the balance sheet to conduct calculations andassessments to achieve efficiency optimal analysis contributes to helpingowners understand the current property situation to make the necessarydecisions

1.2.2.2 Sources of Capital and Capital Structure

Capital is the source of the increase in total assets of the enterprise, thestudy of capital sources to make a decision on the loan policy As assets,capital is also one of the two key components that make up the balance sheet

of the corporate financial reporting system In the balance sheet, legally, thesource of capital reflects the source of the existing assets of the enterprise atthe reporting time This shows how much the enterprise has a legalresponsibility to pay the debt and the creditors know the limit of the owner'sliability for the debt of the business In terms of economy, data on capitalsources show the scale and structure of capital sources invested and mobilized

in production and business activities, investment activities of enterprises.Through this, it is possible to make a general assessment of the level of

financial autonomy and financial risk of the enterprise In order to organizeand select the appropriate and effective method of raising capital, it isnecessary to classify capital sources When preparing the balance sheet, thecapital divided into two parts is liabilities and owner's equity, the liabilitiesare divided into two more sections: short-term debt and long-term debt.

 Equity is the equity owned by the business owner, including the equitypaid out and the additional portion from the business results Equity at atime can be determined by the following formula:

Equity = Total assets – Liabilities

 Liabilities are expressed in cash the obligations that an enterprise isresponsible to pay to other economic factors such as loans, accountspayable to sellers, the state and employees in the enterprise

 Short-term debt is the total value of liabilities that are due within 12months or under a normal business and production cycle, such as tradepayables, intra-company payables, other short-term borrowings andfinance lease liabilities at the reporting time

 Long-term debt is the total value of long-term liabilities of the enterprise,including those with the remaining payment term of 12 months or more or

on a normal business and production cycle at the reporting time such as: :trade payables, intra-company payables, other long-term payables, long-term borrowings and finance liabilities at the reporting time

As for the capital source, the balance sheet will be arranged according

to the urgency of the repayment request, so the capital sources are arranged inorder from debt to equity In order to ensure effective business operations, an

enterprise usually has to combine both equity and liabilities The combination

of these two sources depends on the characteristics of the industry in whichthe business operates, depending on the manager's decision based on theconsideration of the business and financial situation of the business In order

to create this coordination, managers need to understand the current capitalstructure of the enterprise and the capital structure ratios as the best supporttool in this part The capital structure ratios are expressed through the maincriteria such as debt ratio, equity ratio and debt-to-equity ratio as follows:

 The debt ratio reflects the percentage of liabilities in the capital of theenterprise or in the assets of the business that is formed by the source ofliabilities

Debt ratio = Totalcapital ( Totaldebt

¿total assets)

 Equity ratio reflects the percentage of equity of the enterprise

Equity ratio = Equity sources Total capital

In general, the capital of an enterprise is made up of two sources ofliabilities and equity, so it can be determined:

Debt ratio = 1 - Equity ratio

And Equity ratio = 1 - Debt ratio

 In addition, the capital structure is reflected by the debt-to-equity ratio asfollows:

Debt-to-equity ratio = Equity sources Total debt

For the analysis of the financial position of the business, the analystwill mainly use the existing capital figures based on the balance sheet toconduct calculations and assessments to achieve efficiency optimal analysis

contributes to help owners understand the current capital situation to make thenecessary decisions

1.2.2.3 Revenues, Expenses and Income

 Revenues

a Revenue from sales

When the enterprise produces the product, it will sell that number ofproducts, the value it earns from selling the product is called sales So salesrevenue is the value of all economic benefits that an enterprise earns from thesale of products, goods and services in a given period

How to determine sales revenue as follows:

Revenue from sales = ∑

i=1

n

Q ti × P i

Inside:

Q ti: quantity of products and goods sold in the period

P i: selling price of a product unit

i: Product type i

Net sales revenue = sales revenue - revenue deductions

Deductions include: trade discounts, sales rebates, returned goods value andindirect taxes (if any)

The time to record sales is when the enterprise has delivered theproduct and goods to the customer and is accepted by the customer, regardless

of whether or not the business has earned money

b Revenue from financial activities

In recent years, along with the rapid and strong development of thefinancial market, especially the stock market, has created new investmentchannels for businesses to diversify investments to minimize business risks,

on the other hand to use the idle temporary capital in operation to improve theefficiency of capital use Therefore, financial activities of some businesseshave brought financial revenue to businesses

Therefore, revenue from financial activities is the value of theeconomic benefits that an enterprise earns during the period from financialactivities, including interest income from deposits, loan interests and interestsfrom sale foreign currencies, profits distributed from capital investmentoutside the company such as capital contribution to joint ventures, associates,dividends divided from investment in stocks, interest in bonds, pricedifference when investing in stock…

c Other revenue

Are the revenues generated during the period due to irregular activities.Other revenues of an enterprise include some of the following principal items:proceeds from the sale, liquidation of fixed assets; proceeds from insurancemoney to be compensated by organizations when insurance enterprisesparticipate; fines from customers for violating economic contracts withenterprises

 Expenses

a Business production costs

In the course of conducting production and business, enterprises mustconsume material and labor In terms of material, it is the consumption ofmaterials, raw materials, wear and tear of fixed assets and for labor, it isexpressed through salaries, allowances for employees and deductions fromsalary

Thus, the concept can be drawn: the cost of production and business is

a monetary expression of all material and labor costs that the enterprise hasspent to implement the production and consumption of products in a whilecertain period

b Financial expenses

It is the cost incurred in the period related to the financial activities ofthe enterprise such as loan interest for the operation of the enterprise,expenses related to the investment out of the company, exchange ratedifferences upon payment, payment discount, provision for devaluation ofsecurities investments

c Other expenses

This is the expense incurred in the period related to other activities ofthe enterprise, such as expenses incurred from the sale, liquidation of fixedassets, recovery of written-off debts, amount of fines or payment from thecompany for collecting fines, expenses for business risks such as floods, fires,explosions

 Income

After a business operation cycle, the enterprise will be able to earn aprofit, which is the difference between the revenue and the cost had spent toachieve that revenue from the activities of the enterprise businesses in a givenperiod

 Profits from production and business activities:

= Net sales revenue - cost of goods sold - selling expenses - administration expenses

Or can identify

= Net sales revenue - total cost of products, goods and services sold in the

period

 Profit from financial activities:

Profit from financial activities = Revenue from financial activities - financial

expenses - indirect taxes (if applicable)

 Other profits:

Other profits = Other revenue - other expenses - indirect taxes (if applicable)

 Profit before tax of an enterprise is determined as follows:

Profit before tax = Profits from production and business activities + profit

from financial activities + other profits

 Profit after tax

Profit after tax = Profit before tax - corporate income tax

It should also be noted that the way of determining profit as above isfor accounting, that is determining according to the actual operation of theenterprise in a past operating period As for the financial planning of aninvestment project or financial plan for the operation of a business in thefuture, to simplify, people often only consider for main production andbusiness activities Disregard for financial investments and other activities

Therefore, the profit of an investment project or business plan of anenterprise is determined as follows:

Earning before interest and tax (EBIT) = Net sales revenue - total cost of

production and business

In contrast, cash outflows are formed from spending on procurement of fixedassets, purchasing raw materials, paying salaries, paying taxes to the state,refunding repaying capital to investors, paying dividends to shareholders,paying loan interests to creditors

Thus, it can be understood: cash flow reflects the movement ofincoming and outgoing money arising in a certain period from the activities ofenterprises Cash flow of an enterprise includes: cash outflows, cash inflowsand net cash flows

 Cash outflow: is the arising cash flow out of the enterprise during itsoperation Cash outflows are expenses spent by the enterprise to invest inasset purchases, pay material purchases, pay wages, pay taxes, payinsurance, buy services provided by outside, pay debts loans, interestpayments, dividends to owners

 Cash inflow: a cash inflow that goes into the business during its operation.Cash inflow is the proceeds from selling products, goods, providingservices, borrowing capital, issuing stocks, liquidating assets, withdrawinginvestment capital…

 Net cash flow: is the difference in cash flow between the cash inflow andthe outflows of an enterprise during an operating period of the enterprise

In order to serve the assessment of cash flow situation, people usuallyclassify cash flow of enterprises into 3 categories: cash flow from operatingactivities, cash flow from investing activities and cash flow from financialactivities

 Cash flow from operating activities: this is the most important cash flow ofthe business because it reflects the cash flow in and out mainly from theregular production and business activities of the business This cash flow

is greatly influenced by the sales and purchase policy of the business, thepayment discount policy, the level of management of receivable andpayable debts

 Cash flow from investing activities: it is the cash flows in and out frominvestment and procurement activities, forming long-term assets ofenterprises and financial investments Cash flow from investing activities

is affected by many factors such as business lines, development lifecycle

of enterprises, products, macroeconomic situation this is the cash flowwith great impact to the ability of your business to make long-term money

 Cash flow from financing activities: Cash flow from financing activitiesdirectly reflects the cash flow from capital raising decisions for enterprises'operations such as decisions on borrowing, repaying debts and issuingstocks, call for capital contribution, share acquisition, profit distribution.

The classification and reporting of cash flows by activities will provideinformation to users assessing the impact of such activities on the financialsituation and on the amount of cash and cash equivalents generated in period

of the business This information is also used to assess cash flow relationshipsbetween the above activities

Among operating cash flow of businesses, cash flow from businessactivities is the most important cash flow because this is the most regular cashflow and the most sustainable source of business activities In order to findthe most effective cash flow management measures, analysts often considersome of the following criteria in business cash flow management as follows:

 Target time converted into cash: is the period of time from when theproducts, goods or services of an enterprise convert into cash Threefactors that play an important role in the study of cash flow cycle areaverage days in receivable, average days in payables and average days ininventory

- Average days in receivable: is the average number of days from the timethe customer owes to the debt recovery from the customer

ADR = Average receivable revenue per day Average receivables

- Average days in payables: is the average number of days from the time ofbuying raw materials and goods until the enterprise has to pay the supplier

ADP = Average value of goods payable per day Average payables

- Average days in inventory: is the average number of days from the timeraw materials, goods are stored to the time of delivery and sold tocustomers.

ADI = Average cost of goods sold per day Average inventory Average time converted into money = ADR + ADI – ADP

Obviously, the larger the number of days in inventory, the longer thedays for customers or the smaller the average number of days to repay thedebt, the greater the time of money conversion and vice versa

 Ratio of money generated from business activities: this indicator is usuallyreviewed over a quarterly, 6-month or annual basis to help administratorsassess the ability to generate money from business activities compared tosales gain

Ratio of money generated from business activities

= Cash outflow¿operating activities ¿

Revenue¿sales¿

 Ratio of revenue in cash to sales: this indicator reflects the level of moneycollected from sales in the period Thereby assessing the ability to recovermoney from sales

Ratio of revenue in cash to sales = Revenue ∈cash Revenue

¿ sales¿

 Ratio of interest payment guarantee from operating net cash flow: thiscoefficient is used to evaluate whether the ability to generate money fromproduction and business activities meets the loan interest paymentrequirements

Ratio of interest payment guarantee from operating net cash flow

= Operatingnet cashflow+ interest expenses interest expenses

 Ratio of assessment of solvency of operating net cash flow: this index isused to consider the ability of enterprises to pay short-term debts throughoperating net cash flows Through that, assessing the ability to makemoney from business operations of the business to pay off the debt or not.

Ratio of assessment of solvency of operating net cash flow

= Operatingnet cashflow Total current liabilities

1.2.2.5 Liquidity

In the enterprise, the primary concern is the viability of the business, abusiness can only exist if it meets the payment obligations due The ability tomeet those obligations is called corporate liquidity Of course, assessing theliquidity of the business is also a very important factor in ensuring theexistence of the business To assess the liquidity of businesses, analysts oftenuse some of the following criteria to calculate and master the current solvency

of enterprises: current ratio, quick ratio, cash ratio and interest coverage ratio

 Current ratio: This ratio reflects the ability to convert assets into money tocover short-term debts, so this coefficient also shows the level ofguarantee to pay short-term debts of businesses

Current ratio = Short−term assets Short−term debt

 Quick ratio: This coefficient indicates the ability to pay short-term debt ofthe enterprise without having to carry out an emergency liquidation ofinventory

Quick ratio = Short−term assets−inventory Short−term debt

 Cash ratio: This ratio is especially useful to assess the solvency of abusiness in a period of economic crisis when inventories are not sold andmany debts are difficult to recover.

Cash ratio = Cash+cashequivalents Short−term debt

 Interest coverage ratio: This ratio indicates the solvency of the enterpriseand also reflects the level of risk that may be faced by creditors

Interest coverage ratio = Interest expenses payable∈the period EBIT

1.2.2.6 Asset utilization efficiency and Profitability

In the process of analyzing and assessing the financial position of anenterprise, in order to measure the management and operational capability ofexisting assets in the enterprise, analysts often use asset use efficiency ratio tocalculate the level of business operations of the enterprise

Those factors are as follows:

 Inventory turnover: This indicator reflects how much inventory capitalrotates in a period

Inventory turnover = Cash+cashequivalents Short−term debt

From the inventory turnover, we also calculate the average number ofdays it takes to perform an inventory turnover

Days sales in inventory(DSI) = Inventory turnover360

 Receivable turnover: This is an indicator reflected in a period, how manytimes the receivable debt is circulated, it reflects the debt recovery speed

Days sales outstanding (DSO) = Receivable turnover360

 Working capital turnover: This indicator reflects the turnover of workingcapital in a given period, usually a year

Working capital turnover = Average working capital Net sales

From the working capital turnover, it is possible to calculate the daysworking capital - the indicator reflects how many days it takes to perform aworking capital turnover

Days working capital = Number of days∈the period (360 days)

Analysts also need to assess the profitability of an enterprise in addition

to calculating the level of business activity Therefore, analysts used the group

of performance factors to measure and calculate profitability Coefficients arethe combined results of a series of management measures and decisions.Operational efficiency coefficients include the following main criteria:

 Return on sales (ROS): This coefficient reflects the relationship betweenprofit after tax and net revenue of the enterprise It shows, when making aco-revenue in the period, how much profit an enterprise can make

ROS = Profit after tax Net sales

 Basic earning power (BEP): This criterion reflects the profitability ofassets or business capital regardless of the effect of the origin of businesscapital and corporate income tax

BEP = Average total assets EBIT

 Return on assets (ROA): This coefficient reflects how much profit is usedfor each dong used in the period

ROA = Average total assets Profit after tax

 Return on equity (ROE): This coefficient measures the after-tax profitearned on each owner's equity during the period This indicator reflects thesummary of all aspects of the level of financial management, including thelevel of revenue and cost management, the level of asset management, thelevel of capital management of enterprises

ROE = Average total equity Profit after tax

 Earnings per share (EPS): This indicator reflects how much profit after

ordinary shares (or common shares) in the year

EPS =

Profit after tax−dividends paid¿preferred shareholders ¿

The total number of ordinary shares outstanding

1.2.2.7 Profit distribution

After carrying out production and business activities and gaining

profits, the enterprise will proceed to distribute those profits The distribution

of profits will not change the amount of profit, but it will affect the interests

of entities in the profit distribution process and on the other hand, the

distribution of profits can create motivation for promote production and

business development in the future and may increase the stock price in the

market Therefore, profit distribution is considered as one of three strategic

financial policies, having a great and long -lasting influence on the

survival and development of an enterprise

To ensure that the distribution of profits can harmonize the interests

between the parties, as well as the long-term development, requires financial

management to adhere to the following principles:

 Firstly, the principle of profitability has been implemented This principle

implies that when making a profit distribution, it should be based on the

profits made, not on planned profits or expected profits This avoids many

companies when shareholders require an advance of dividends for the

whole year, while the profits have not been made, just the expected profit

plan, then it is likely that the case will happen business risk leads to not

achieving the profit as planned, then it is essentially taking capital todivide profits.

 Secondly: principle of net profit That is, the company is only distributed

to the owners after fulfilling the income tax obligations towards the state

 Thirdly: the principle of solvency guarantee This principle clearly impliesthat, although it is a profit sharing, above all, it is necessary to ensure thesolvency of due debts, as well as to ensure the solvency for owners andshareholders This principle was born because the profit is different fromthe cash flow of the business Sometimes owners or shareholders maymistakenly believe that having a profit is having money, but the reality isnot so Therefore, when considering a profit distribution, the financialmanager must balance the cash inflows and cash outflows to ensurepayment of the due debt and enough money to distribute the profits to theowner

 Fourthly, profit distribution must ensure the harmony of interests amongentities such as creditors, owners, the state and workers The reality showsthat the distribution of profits is the division of economic interests, whereall conflicts in society are mainly conflicts of interests and risks.Therefore, every entity participating in the activities of making profits has

a benefit in it, so it is necessary to ensure the principle of harmonizing theinterests to limit conflicts, contributing to create motivation for the stableand long-term development of the business

On the other hand, profit distribution must ensure harmony betweenimmediate benefits and long-term benefits for the development of businesses,

in fact it is dealing with the relationship between steady income at present butgrowth low with growth rapid in future but risky.

For joint stock companies, profit distribution is expressed throughdividend policy Dividend policy represents a company's decision betweenpaying profits to its shareholders versus reinvesting profits in the companyitself Dividend policy has a certain impact on the market share price, whichwill affect the interests of the owners To evaluate a dividend policy of a jointstock company, people mainly use the profit distribution coefficient as a basisfor evaluation

Profit distribution coefficient includes the following criteria:

 Dividend per share (DPS)

This index measures the dividend payment per ordinary share thatinvestors can receive from investing in ordinary shares

DPS =

Profits are used¿pay dividends¿ordinary shareholders ¿

Number of common shares outstanding

 Price-Dividend ratio (D/P)

This indicator reflects the relationship between the dividend of acommon stock and the market value of the common stock This indicator is tomeasure the actual profitability that shareholders usually receive frominvesting in a common stock

D/P = Market price per share DPS

 Dividend pay-out ratio

This criterion reflects the relationship between the dividends usuallyreceived compared to the income of a common stock This indicator indicateshow much a company income for stock to pay dividends to shareholders.

Dividend pay-out ratio = DPS EPS

Through the dividend pay-out ratio, analysts will evaluate and estimatethe rate of return on reinvestment of profits, thereby being able to estimate thefuture rate of income growth

1.3 Determinants of financial situation of a company

1.3.1 Objective factors

Usually the financial situation of an enterprise is always changing overthe reporting period, these changes appear to be due to many impact factors,but there are some factors that are outside the control of enterprise Itcontinuously impacts on the business activities of the enterprise in differenttrends, both creating opportunities and limiting the ability to perform thegoals of the enterprise, these factors are called objective factors affecting thefinancial situation of the enterprise Business operations require regularunderstanding of these factors, their operating trends and their impact on theentire business operation of the enterprise The main objective factors arepolitical and legal factors, economic factors and competitors

 Political and legal factors

Factors in the political and legal environment have a strong impact onthe formation and exploitation of business opportunities and the fulfillment ofbusiness objectives Political stability is an important prerequisite for businessactivities, political change may have a beneficial effect on this group ofbusinesses or inhibit the development of other businesses The complete legalsystem and the strictness in law enforcement will create a healthy competitive

environment for businesses, avoiding fraud and smuggling The degree ofpolitical and legal stability of a country allows businesses to assess how risky,the business environment is and how it affects the business, so examine thepolitical and legal factors are indispensable requirements when businessesenter the market.

 Economic factors

It is possible to create favorable conditions for penetrating andexpanding markets and categories of this product but limiting thedevelopment of other industries Factors affecting corporate finance, changes

in consumer demand or development trends of industries and economicfactors include:

- Foreign trade activities: The trend of opening and closing of the economyinfluences business development opportunities, competition conditions andthe ability to use national advantages in technology and capital

- Inflation and its ability to control inflation affect income, accumulation,consumption, stimulate or inhibit investment

- The change in economic structure affects the position and developmenttrend of economic sectors, leading to a change in the direction ofdevelopment of enterprises

- Economic growth: Shows the general development trend of the economyrelated to the ability to expand or narrow the size of business of eachenterprise

 Competitors

Includes manufacturers, dealers of the same products as the business, orsales of replaceable products Competitors have a great influence onbusinesses and businesses that are able to compete to be able to survive in the

opposite direction, they will be pushed out of the market Competition helpsbusinesses to improve their operations to better serve their customers,improve their dynamism but always be pushed back.

 Financial strength is expressed on the total capital (including equity,mobilized capital) that businesses can mobilize into business, the ability toeffectively manage capital resources in the business Financial strength isreflected in the ability to pay short-term, long-term debt, profitabilityratios of businesses

 Human potential: Demonstrated in knowledge and experience capable ofmeeting high requirements of the enterprise, successfully completing theassigned tasks, the staff of loyal businesses is always oriented towards thebusiness and highly specialized, skilled workers capable of solidarity,dynamic take advantage and exploit business opportunities

 Intangible potential: As the factors that create the power of businesses inthe market, intangible potentials are shown in the ability to influencechoices, accept and make decisions

CHAPTER 2 : FINANCIAL SITUATION OF VICENZA

DEVELOPMENT INVESTMENT JOINT STOCK COMPANY

2.1 Overview of Vicenza development investment joint stock company

2.1.1 The establishment and development of Vicenza development

investment joint stock company

The company was established with full name as Vicenza developmentinvestment joint stock company in Lot A, Le Mon Industrial Park, QuangHung Ward, Thanh Hoa City, Thanh Hoa Province

Vicenza Company is a member unit of Urban Development InvestmentCorporation, established in October 2013 with a charter capital of VND500,000,000,000, corresponding to a total number of shares of 50,000,000and value per share is 10,000 VND The entire shares of the company areowned by the shareholders in the board of directors including threeshareholders: Mr Do Duc Ty - Chairman of the Board of Directors, Mr DucDuc Thang - General Director and Ms Vu Thi Nhung - Deputy GeneralManager

After being established, in October 2014, Vicenza Company invested inline 3 to produce high-quality large-scale ceramic tiles with digital printingand polishing with Nano technology with a capacity of 3 million m2 / year.Mainstream is the line of semi-porcelain bone porcelain tiles, digital printing,Nano technology polishing in size of 600x600mm This is a high-classproduct line with outstanding criteria in terms of quality and aesthetics, fromwhich marks the official Vicenza brand in the high-end product segment ofVietnam's ceramic tiles market With the research and mastering of newtechnology, June 2016 Vicenza development investment joint stock company

is honored to be certified as a science and technology enterprise