Theoretical basis of financial statement analysis...3 2.1 Definition of financial statements of the enterprise...3 2.2 Objectives of financial statement analysis...4 2.3 The meaning of f
Introduction
Research background
In a robust, integrated economy, businesses must make financial decisions that are effective and aligned with the prevailing economic context at each stage This includes prudent capital allocation and a sound capital structure that supports the efficient use of cash flows, as well as ensuring rapid capital deployment and smooth goods circulation to boost production capacity and strengthen competitiveness.
Vietnam's steel industry is a cornerstone of the heavy industry sector and a vital input for construction, mechanical engineering, manufacturing, and many other sectors Since its establishment, the steel industry in Vietnam has affirmed its crucial role by acting as an intermediary that enables cross-sector development and lays the foundation for broader industrial progress In recent years, it has continued to grow at a relatively fast pace compared with global and regional trends However, many steel companies still face financial management challenges, particularly in inventory management and optimizing capital structure.
To remain competitive as Vietnam's market economy opens through FTAs with major steel powers—such as the ASEAN-China Free Trade Area (ACFTA) and the Vietnam–Asia–Europe Economic Union, including Russia—the steel sector must accelerate modernization Although committed to the WTO, steel remains a sensitive product with high import tariffs, but protection periods will not exceed 10 years, after which competition will become transparent Vietnamese steel enterprises are largely small in scale, with average technology, and many operate mainly at the end of the value chain, leading to low added value, revenue, and profits Capital management and deployment are often limited, resulting in suboptimal capital structures, higher risks, and lower efficiency Access to timely mobilized capital to meet investment needs and to develop stage-appropriate financial indicators is essential, as capital structure and profitability are tightly linked in maximizing enterprise value Consequently, Vietnamese steel companies aiming for sustainable growth should build stable production capacity based on modern technology, adequate scale, and rigorous cost control.
Therefore, the author selected the topic “Financial statement analysis of Vietnamese steel firms: Hoa Phat Group, Nam Kim, Hoa Sen Group and Pomina Steel” for this research.
Research subjects
Within the scope of this study, the author focuses on analyzing financial statements of 4 steel companies having leading market shares in Vietnam:
- Hoa Phat Group Joint Stock Company
- Hoa Sen Group Joint Stock Company
- Nam Kim Steel Joint Stock Company
The analysis of the four leading steel companies in Vietnamese market shares is expected to provide a comprehensive picture of this industry in Vietnam.
Research objectives
An overview study aims to analyze the financial health of enterprises in Vietnam's steel industry while providing a comprehensive assessment of the sector By evaluating key financial indicators such as revenue, profitability, liquidity, leverage, and capital structure across leading steel companies, the analysis reveals how the industry is performing financially and identifies critical drivers and risks The study presents a concise picture of the sector’s trajectory, competitive dynamics, and resilience in the Vietnamese market, offering actionable insights for investors, policymakers, and industry stakeholders seeking to understand both company-level performance and the overall industry outlook.
Research method
This study uses a mixed-methods approach, combining qualitative and quantitative research methods to analyze the financial performance of steel enterprises It employs interpretation, inductive reasoning, data analysis, synthesis, and comparative techniques to describe and interpret the financial statistics of the steel sector.
Structure of research
This study uses a mixed-methods design, combining qualitative and quantitative research approaches to examine the financial status of steel enterprises By applying interpretation, inductive reasoning, rigorous analysis, synthesis, and comparative assessment, it presents statistical insights into financial performance, trends, and drivers within the steel industry The integrated methodology enables a comprehensive description of how economic factors shape the financial health of steel companies.
Theoretical basis of financial statement analysis
Definition of financial statements of the enterprise
Financial statements are the cornerstone of the accounting process, delivering a comprehensive view of a company's assets, liabilities, equity, financial position, and business performance They are designed to provide general, useful information about the enterprise’s current status and to connect the business with interested parties, serving as a public report and the main data source for analysis By presenting the economic and financial situation and enabling assessment, analysis, and prediction of performance, these statements support both internal management and external stakeholders—investors, creditors, regulators, and prospective shareholders—in understanding the current position and the results achieved The information in financial statements helps identify potential opportunities and risks, forecast production and business activity, and detect development trends, thereby underpinning strategic decision-making and the administration of the business.
Although there are differences in the financial reporting system applicable to different types of businesses, the content and form of financial statements generally include:
A balance sheet is a financial statement that presents a company's assets at their book value and shows the sources used to acquire those assets as of the reporting date By outlining what the firm owns and how those assets were financed, the balance sheet helps readers assess the overall financial position, operating capacity, and level of financial autonomy It also provides crucial insights into the business's ability to meet obligations and repay debts, supporting informed decisions for investors and lenders.
A business results report is a comprehensive financial document that summarizes an enterprise's overall performance over a specified accounting period, detailing revenues, expenses, and profits from normal business activities as well as income and expenses from other business activities This report provides users with clear insights into how the enterprise creates value and utilizes resources, helping managers and stakeholders assess profitability and evaluate the effectiveness of additional resources By analyzing the figures in the business results report, decision-makers can anticipate potential changes in economic resources under the company's control in the future and inform strategic planning for improved financial performance.
The cash flow report provides insight into financial fluctuations within a company, helping to analyze its investment activities, financing decisions, and operating performance It aims to assess the ability to generate cash and cash equivalents in the future and to show how these funds are applied to support ongoing business activities and financial investments.
Notes to the financial statements supply detailed information about a company's business operations and its financial position, offering deeper context that goes beyond what the primary statements show They enable the analysis of specific indicators—such as liquidity, solvency, and profitability metrics—and illuminate aspects of the enterprise's financial condition that are not readily apparent from the main financial statements alone.
The financial reporting system provides the most vivid, complete picture of a company’s finances, delivering essential accounting information that enables robust analysis of its financial position and its capacity to allocate and utilize capital across future operations Guided by careful assessment and judgment, the insights from financial statements empower corporate governance to make informed decisions in business management, with the objective of achieving the best possible performance in production and business activities At the same time, the financial reporting process functions as a key control mechanism, monitoring and regulating financial activities to ensure that all enterprise operations deliver high results, stay on the right track, and comply with the law.
Objectives of financial statement analysis
All economic activities of a business are interrelated, so a full, deep assessment of performance hinges on the financial statements By analyzing these statements, you can summarize the level of objective achievement through a system of economic and financial indicators In a market economy with state macro regulation, enterprises operate on a level playing field and must be transparent to stakeholders Investors, lenders, suppliers, and others have a stake in the company’s financial health, each evaluating it from a different angle; however, the core concerns center on the ability to generate cash flow, profitability, solvency, and maximum profit Therefore, financial statement analysis should reveal the organization’s capacity to generate cash, sustain profitability and solvency, and support long‑term value creation.
An in-depth analysis of financial statements delivers decision-useful information to investors, creditors, and other stakeholders, enabling informed investment and credit decisions and related judgments The information should be presented in a clear, easily understandable format so readers with a solid background in business and economics can research the data effectively.
Financial statement analysis captures the key information business owners, investors, creditors, and other stakeholders need Because investors’ cash flows are tied to the enterprise’s cash flows, the analysis translates financial data into insights about the amount, timing, and risk of the company’s expected net cash flows This helps users assess liquidity, profitability, and cash flow patterns to support informed decisions about investing, lending, or strategic planning In essence, the goal is a clear, actionable view of how much cash the business can generate, when it will be available, and what risks could affect those net cash flows.
An in-depth analysis of financial statements delivers essential insights into a company’s economic resources, equity, and liabilities, the results of its operations, and events that alter its sources of capital It also highlights the obligations tied to these resources and the effects of economic activities, enabling business owners to forecast the enterprise’s future development with greater accuracy.
Analyzing corporate financial statements involves examining and comparing current financial data with historical results to guide future strategic direction This process enables a comprehensive assessment of strengths and weaknesses in enterprise management and supports authentic measures to strengthen economic activity It also serves as a key basis for forecasting a company's production and business development trends.
The meaning of financial statement analysis
Financial activities are tightly interwoven with production and business operations, so every production decision and operational move directly influences the company’s finances Likewise, the financial position—whether strong or weak—shapes the pace and scope of production and business processes, acting as a motivator or constraint Because of this interdependence, analyzing financial statements is essential for business owners and external stakeholders to gauge financial health, evaluate performance, and inform strategic decisions that align operations with fiscal reality.
Internal financial analysis is the set of financial research activities conducted by in-house analysts within a company, distinct from external financial analysis performed by non‑inside experts When analysts have full access to business information, they can deliver more precise and actionable insights that support strategic decision‑making Consequently, business managers must balance multiple goals—creating jobs, improving product and service quality, lowering costs, and protecting the environment—while seeking profits and prudent debt management Achieving this balance requires comprehensive information to assess the firm’s financial condition, monitor profitability, evaluate solvency and repayment capacity, and identify financial risks This information also underpins the board’s financial decisions regarding investments, funding, and dividend policy.
Investors primarily worry about debt repayment capability, prevailing interest rates, solvency, and risk, so they need clear information on a company’s financial conditions, operations, business results, and growth potential to assess safety and investment viability They seek up-to-date data on financial performance, operational efficiency, and potential returns to determine whether the business can meet obligations and create long-term value Management quality and operating activities also matter, as strong governance and effective execution reduce risk and boost investor confidence A transparent view of financial conditions, operations, results, and prospects underpins safer and more efficient investment decisions.
For lenders and suppliers for businesses: Their concern towards the ability to repay the business By analyzing the financial statements of businesses, they pay special attention to the amount of money and assets that can be converted into cash quickly, thereby comparing and knowing the instant solvency of the business.
For state agencies such as Tax, Finance and employees for enterprises: Through analysis of financial statements will show the financial status of the business On that basis, the exact amount of tax that the company must pay is calculated, the finance agency and the governing body will have more effective management measures Besides business owners, investors and workers, they have the same basic information needs as they are related to their rights and responsibilities, to their current and future customers.
From the above implications, we see that financial statement analysis is important for all administrators in a market economy that is closely related It is a useful tool used to determine economic value, evaluate strengths and financial weaknesses of enterprises On that basis,discovering objective and subjective causes helps each force administrator choose and make decisions that are appropriate to the goals they care about Therefore, analyzing financial statements is an effective tool for business executives to achieve the best results and efficiency.
Source of information used for financial statement analysis 6
Financial statements are the most comprehensive reports on a company’s assets, equity, and liabilities, its financial position, operating results, cash flow, and profitability for a given period They provide economic and financial information mainly for users of accounting data to evaluate, analyze, and estimate the company’s financial health and business performance Financial statements serve as the primary data source for corporate finance analysis, and within the financial reporting framework the Balance Sheet and the income statement (report on business results) are essential documents in the enterprise information system.
Other sources of information indicate that the existence, development, and recession dynamics of enterprises are shaped by many factors These include internal factors within the organization and external factors in the market and environment, as well as subjective factors such as managerial judgment and objective factors such as measurable data The way these factors are classified depends on the criteria used to categorize influencing factors, and those criteria influence analysis, forecasting, and strategic decision-making.
- Internal factors: Internal factors are factors of business organization such as management level, industries, products, goods, services of business enterprises, technological processes, labour capacity.
External factors are objective conditions that shape a business’s financial outlook, including socio-political regimes, rates of economic and technological growth, and financial and monetary policies, as well as tax policies In practice, analysts should go beyond reviewing financial statements and collect a broad range of information related to the company’s financial health, such as general economic context, currency movements, tax considerations, and state payables, along with sector-specific data about the enterprise and relevant legal and economic information that could impact its performance.
Not all information gathered can be quantified; some documents cannot be expressed in precise quantities and must be described through the business's economic life To obtain the data needed for financial analysis, the analyst must collect all information relevant to the operation of the business Completeness measures the amount of information, while suitability reflects its quality.
Methods in analyzing financial statements
To analyze an enterprise's financial statements, analysts frequently integrate a range of techniques, including the comparative method, exclusion method, forecasting method, and Dupont analysis, each chosen for its relevance to different aspects of the study Among these, the comparative method stands out as widely used in both general economic analysis and financial statement assessment, because benchmarking highlights differences and unique characteristics of the subject under study The primary aim of comparison is to provide a clear basis for understanding how the object differs from peers or standards and to support decision-making by stakeholders When applying the comparative method, analysts should ensure they select truly comparable entities, adjust for material differences, use consistent time periods and data definitions, and interpret results with awareness of context, limitations, and data quality This approach yields actionable insights and strengthens the credibility of the financial analysis for investors, managers, and other interested parties.
+ Comparable conditions of criteria: Research targets to be compared must ensure consistency in economic content, consistency in calculation methods, time and units of measurement.
Comparative origin can be spatial or temporal, depending on the analysis goal; spatial comparisons involve evaluating one unit against another, one department against another, or one area against another, and are often used to determine an enterprise’s current position relative to competitors as well as industry and regional averages; when comparing spatially, the origin and analytical reference points can be exchanged without changing the conclusions Temporal comparisons use bases such as previous periods (previous period, previous year) or the plan and estimate.
To determine the trend and growth rate of analytical criteria, the baseline for comparison is defined as the criterion's value in the previous period or across a series of prior periods (such as the previous year) With this baseline, the target value in the current analysis period is compared to target values in different base periods, enabling a clear assessment of how the metric evolves over time.
To evaluate the implementation of objectives and tasks, start with the planned values of the key analytical criteria as the benchmark Then conduct a comparison between the actual results and the planned targets for the research objectives, enabling a precise assessment of performance and the identification of any variances for corrective action.
The analysis criteria of the financial statements of the business 8
2.6.1 Overall assessment of the capital mobilization situation of the enterprise
End-of-year fluctuations in total capital, compared with the beginning of the year and with prior years, serve as a key criterion for evaluating a company's ability to mobilize capital during the year Yet, capital changes can arise from various factors, so fluctuations in total capital alone do not fully reflect the enterprise's financial health A thorough analysis should combine capital fluctuation with an examination of capital structure and other capital dynamics to draw well-grounded conclusions To analyze capital growth trends, analysts use a relative-base method, comparing the growth rate of total capital over time to a fixed base period.
2.6.2 Overall assessment of the level of financial independence of enterprises
An enterprise’s level of financial independence and autonomy reflects its right to determine its financial and operating policies and the degree of control it exercises over its affairs To assess this independence, analysts typically rely on criteria that reveal how freely the organization can fund its activities, make strategic decisions, and govern its operations without undue external influence These indicators help gauge the true extent of financial autonomy and guide stakeholders in evaluating the enterprise’s resilience and long-term viability.
- Sponsorship coefficient: is an indicator reflecting the financial self-sufficiency and the level of financial independence of the enterprise This indicator shows, in the total
Within an enterprise’s capital structure, equity typically represents a small portion of total capital A higher value of this indicator signals stronger financial self-sufficiency and greater financial independence, indicating the enterprise relies less on external funding Conversely, a lower equity share points to weaker financial autonomy and a reduced level of financial independence, suggesting greater vulnerability to external financing.
The long-term asset self-financing ratio, also called the equity coverage of long-term assets, is a key indicator of a company's ability to fund its long-term assets with its own equity When the ratio exceeds 1, it shows that the enterprise's equity is more than enough to cover or finance long-term assets, signaling stronger financial resilience This excess equity provides financial security, reducing reliance on external financing and helping the business withstand difficulties.
The self-financing coefficient of fixed assets, also known as the equity ratio on fixed assets, gauges a company's ability to fund its long-term fixed assets from equity Because fixed assets are long-term resources that reflect the enterprise’s material and technical capacity and are not easily liquidated, a coefficient below 1 means that investment or asset-sale decisions must be approached with caution to avoid insolvency Conversely, a coefficient of 1 or higher indicates that equity is sufficient to cover fixed assets, enabling investors and creditors to base management decisions on a sound financial base, though risks may still be present In practical terms, a value ≥ 1 signals financial resilience in supporting fixed assets, while a value < 1 signals higher risk and potential liquidity pressure for the business.
Solvency is a clear indicator of a company's financial health and its ability to meet obligations A healthy financial position signals efficient operations, ensuring the business can cover expenses and pay creditors on time In contrast, a weak financial situation reveals inefficiency, undermines solvency, and damages reputation When solvency cannot be guaranteed, the business faces ongoing difficulties across activities and may eventually fall into bankruptcy.
General solvency coefficient is a key solvency indicator that measures an enterprise's overall ability to meet its obligations in the reporting period It shows whether the company's total assets can cover its payable debts When the general solvency coefficient is at or above 1, the business is solvent and able to cover its liabilities; when it falls below 1, the company cannot guarantee debt coverage The lower the coefficient, the weaker the solvency position, with values significantly under 1 signaling higher insolvency risk.
The solvency ratio of short-term debt is an indicator of a company's ability to meet its short-term obligations Short-term liabilities are debts due within a year or a business cycle When this ratio is approximately 1, the enterprise can pay its short-term debts, indicating a normal or positive financial situation Conversely, a ratio below 1 means the enterprise cannot guarantee timely payment of its short-term debts, and the smaller the value, the weaker the short-term solvency.
Quick solvency ratio measures a company's immediate ability to meet its short-term debts using cash and cash equivalents, including cash on hand, bank deposits, and cash in transit The indicator is calculated from cash, bank deposits, cash in transit, and other cash equivalents Theoretically, a quick solvency coefficient of 1 or higher signals adequate and often redundant solvency to cover immediate liabilities, while a value below 1 suggests a lack of fast solvency In practice, a ratio of 2 or more is taken as a strong indication of the ability to quickly pay short-term debt, especially for new businesses.
Instantaneous solvency coefficient, also known as the current solvency coefficient, measures a company's ability to cover short-term debts using cash and cash equivalents on hand Since cash and near-cash assets are readily available, analysts compare the coefficient to debts maturing within a short horizon—often three months—to assess immediate liquidity A coefficient value of 1 or higher indicates immediate solvency, meaning the enterprise has a surplus and can meet short-term obligations promptly, while a value below 1 signals a solvency shortfall When instant solvency cannot be guaranteed, company leaders should implement emergency financial measures to avert bankruptcy and preserve operational stability.
Profitability is the indicator that measures how much profit an enterprise earns per unit of input or per unit of output, reflecting the results of production When profit per unit is higher, profitability and overall business efficiency rise; when profit per unit is lower, profitability and efficiency decline Therefore, profitability is the most direct and concentrated expression of a business's performance Analysts typically assess overall profitability using key criteria and metrics that relate returns to costs and production outputs.
Return on Equity (ROE) is a key measure of a company's capital efficiency, showing how effectively management uses shareholders' equity to generate profits It represents the profit after tax earned for each unit of equity invested in the business The higher the ROE, the more efficiently the company deploys its equity, while a lower ROE suggests weaker utilization of invested capital.
Return on Sales (ROS) is a profitability metric that expresses net profit after tax as a percentage of net revenue A higher ROS indicates greater profitability of net revenue and higher business efficiency, while a lower ROS signals reduced profitability and lower efficiency.
Return on assets (ROA) measures the basic profitability of a company’s assets and how efficiently management uses those assets It represents the profit generated per unit of assets deployed in the business process, typically expressed as profit before tax A higher ROA indicates stronger asset efficiency and more effective asset management, while a lower ROA signals less efficient asset use.
Financial situation of listed firms in the steel industry in Vietnam
Overview of formation and development of Vietnam’s steel industry
The steel industry is a key industry in the national economy, an input to many other industries Steel is considered an indispensable strategic material of many industries and construction with a very important role in the cause of industrialization and modernization in Vietnam Vietnam's steel industry started in the 1960s when the Chinese-assisted Thai Nguyen Iron and Steel Complex produced its first batch of iron in 1963 However, due to difficulties and multifaceted war, Thai Nguyen Iron and Steel Complex had the first batch of steel in 15 years later In 1975, Gia Sang steel rolling factory, aided by Germany, went into production The designed capacity of the whole Thai Nguyen Iron and Steel Complex is up to 100,000 tons In 1976, the country unified the ferrous metallurgy company established on the basis of the mini steel mill factories of the old regime in Ho Chi Minh and Bien Hoa with a capacity of about 80,000 tons of rolled steel per year.
From 1976 to 1989, the steel industry faced many difficulties due to the country's economic difficulties and the source of steel from the Soviet Union and socialist countries was still plentiful so it did not develop and maintained the output level of 40,000 - 85,000 tons/year.
From 1990 to 2000, Vietnam's steel industry advanced under the new open policy, marked by key innovations and rapid development The establishment of Vietnam Steel Corporation in 1990 and four joint ventures producing steel in 1990, followed by four more in 1996 (including Vinakyoei, Vinausteel, VPS, and Nasteel), raised the country's total steel production capacity to over 1 million tons per year, and by 2000 domestic production met nearly 50% of domestic demand Between 2000 and 2010, the sector experienced robust growth, with demand for finished steel products rising on average 9.1% annually; domestic production of finished steel increased from 2.4 million tons to 7.8 million tons, and supply of some domestic steel products rapidly increased to completely replace imports According to the Vietnam Steel Association, semi-finished steel (square billet) production also increased sharply by about 20% during 2000–2010.
By 2010, Vietnam remained heavily reliant on steel imports, sourcing 2.4 million tons of square billets, which represented 47% of the country’s total demand During the same period, Vietnam was a net importer of finished steel products, with flat steel being particularly dominant, as domestic production could not meet demand and it accounted for about 70% of total net steel imports.
From 2010 to 2018, despite the lingering effects of the global financial crisis and the economic downturn, the steel industry sustained an average annual growth of around 7–8%, driven by major capacity expansions and new steel complexes Capacity rose from about 10 million tons in 2010 to 13 million tons by 2015 as large-scale projects came online, boosting overall output Domestic producers largely met the demand for most construction steels, yet the sector still relied on imports for substantial volumes of raw steel and for certain product categories, including hot-rolled coils, alloy steels, and mechanically fabricated steel.
Over the past two decades, Vietnam’s steel sector has expanded in both the number of players and production capacity From about 20 factories with capacities above 50,000 tons per year in 2000, the industry grew to around 40 steel manufacturers by 2018, led by Hoa Phat Group with a 15 million tons/year capacity and Thai Nguyen Iron and Steel JSC at 600,000 tons/year; roughly 20 mid-sized firms operate at 120,000–300,000 tons/year, while the remaining plants run at 50,000–100,000 tons/year Despite notable progress in recent years, the domestic steel industry remains relatively nascent on the regional and global stage, accounting for only about 0.48% of world steel output.
Business operation characteristics of listed steel enterprises
Economic and technical characteristics of the business industry are key factors shaping corporate financial management Enterprises typically operate one or a few business lines, each with distinctive economic and technical traits that significantly influence the financial organization of the company Consequently, these characteristics must be considered when planning the firm's financial structure In the steel sector, listed enterprises pursue several core activities, each driven by these industry-specific determinants.
The steel industry is highly capital-intensive and follows a long production cycle, requiring large-scale upfront investments in fixed assets such as factory construction, production lines, and transport infrastructure The construction and commissioning of integrated production plants often take a long time, so the initial phase cannot always operate at full capacity, resulting in a slow payback period In addition, working capital needs are substantial due to high levels of inventories and receivables, making robust financing essential to maintain operations and safety against financial losses To manage risk and ensure resilience, steel enterprises typically rely on a mix of long-term capital, with a meaningful equity stake and leveraged debt to mobilize additional funds.
The steel industry faces high business risk due to the substantial capital required to acquire fixed assets for production and long-term use Because these assets require large upfront investment and the future is inherently uncertain, longer investment horizons tend to elevate risk Moreover, volatility in exchange rates and market interest rates can destabilize the input and output markets that steel enterprises rely on, making fixed-asset investments particularly risky.
Vietnam's steel industry currently exhibits structural weaknesses: most manufacturing firms are small-scale with average production technology, and many operate only at the downstream end of the value chain, leaving the steel production process comprised of multiple stages with limited value addition and, consequently, lower revenue and profits These firms rely heavily on imported semi-finished inputs—steel billets—making profit margins susceptible to fluctuations in global prices By contrast, a handful of large-scale players have built integrated iron and steel complexes with closed production lines that leverage upstream raw materials and achieve cost advantages, thereby expanding market share; examples include Hoa Phat, Formosa Ha Tinh, Pomina, and Dana-Italy steel Capital constraints push the majority of Vietnamese steel enterprises toward processing, as building a full ore-to-rolled-steel operation requires heavy investment and a long payback period, while competitiveness increasingly hinges on securing cheap materials Therefore, a focus on downstream manufacturing and processing is a key driver of added value in Vietnam's steel industry.
Vietnam's domestic steel industry has shown strong growth in recent years but remains a trade-deficit sector due to product imbalances It comprises two main sub-sectors: long steel, produced from square billets for construction, and flat steel, which includes hot rolled steel, cold rolled steel, steel pipes, corrugated iron, and color-coated products The current production capacity can fully meet, and in some cases exceed, domestic demand for steel billet, construction steel, and cold rolled steel (about 7–8 million tons per year) However, key products such as cold rolled sheets, hot rolled sheets, and alloy steel are not produced domestically and must be imported, creating a dependency for essential inputs used by manufacturing industries like shipbuilding, mechanical engineering, and general fabrication, which together drive demand of around 10 million tons per year.
Vietnam's steel industry suffers a serious imbalance in product structure that undermines performance and competitiveness The sector is dominated by high raw-material costs, while domestic supplies of scrap steel and iron ore are very limited, making imports of iron ore, billets, scrap steel, and coking coal essential for production and exposing firms to input-price and exchange-rate volatility Exchange-rate fluctuations reduce proactivity and negatively affect enterprise performance Competition is fierce both within the industry and from cheap steel imports from China, and a wave of new steel complexes will expand domestic supply further, pressuring producers to lower production costs and product prices Yet many Vietnamese mills still rely on backward production technology, resulting in higher consumption of raw materials, electricity, and labor and lower product quality Capital constraints amplify fixed costs, making large-scale operators with better capital investment able to price more aggressively, while smaller firms struggle to reduce costs per ton; examples include Pomina Steel, Hoa Phat Steel, and Thai Nguyen Steel, which often maintain lower prices due to scale.
Excessive steel production costs erode profits, restricting the ability to finance capital from retained earnings and increasing dependence on loans The industry faces higher input costs, including raw material prices and volatile exchange rates, while facing intensified competition from global giants as Vietnam joins Free Trade Agreements With the economy still recovering from crisis and recession, many steel firms are downsizing or flirting with insolvency This challenging environment calls for a careful re-evaluation of operations and finances and for strategic restructuring to overcome the crisis and restore sustainable performance.
Overview of the financial situation of listed steel enterprises
According to statistics from the Vietnam Steel Association (VSA), about 400 enterprises were involved in steel production and the steel industry in the country as of 2015 Of these, 103 were large-scale steel enterprises under VSA, while the remaining firms were predominantly small private companies and steel rolling enterprises in craft villages serving the domestic industrial and steel sectors When grouped by capital size, these enterprises fall into three categories: large-scale firms with average total assets above 5,000 billion VND (about 27%), medium-sized firms with total assets from 1,000 to 5,000 billion VND (about 40%), and small firms with average total assets below 1,000 billion VND (about 33%).
The size of business capital signals a firm's production and financial capacity and is a key determinant of its financial structure and overall performance In the research sample, enterprise capital size rose steadily, with an average annual growth rate of about 8% from 2010 to 2015 During 2010–2011, total assets grew much more than in the previous year, while the growth rate of total assets subsequently decreased, culminating in a sharp drop in 2015, when the year‑over‑year growth was only around 2% in the following year.
The statistics show that enterprises have a growth rate of total assets next year compared to the previous year of 19% in 2011 and the following years decreased to 7% in 2012 and 9% in
From 2011 to 2015, Vietnam's steel industry saw growth in 2011 driven by favorable market conditions and government preferential credit policies that encouraged expansion investments; Dana-Italy Steel Joint Stock Company registered a total assets growth of 102%, while Hoa Phat Group JSC, Tien Len Steel Joint Stock Company, Thai Nguyen Iron and Steel JSC, and Bien Hoa Steel Joint Stock Company increased total assets by about 20–50% Yet, 2012–2015 followed the global steel cycle, with intense competition from cheap imports and oversupply compressing demand and keeping plant utilization under 80% By 2013, many enterprises narrowed or moderated production, though some new steel plant projects still pushed assets up slightly In 2015, Vietnam’s economy posted its strongest GDP growth in five years, but the world steel market remained quiet and volatile; domestic producers faced rising competition, particularly from low-priced Chinese steel, while many Vietnamese firms remained small-scale with weaker technological capacity and limited competitiveness As a result, firms pursued cost-saving measures and productivity improvements, but asset growth slowed sharply to about 2% in the following year, reflecting reliance on external financing rather than internal capital The rapid, investment-driven expansion into steel refining and rolling with outdated technology created unbalanced development, high financial costs, poor efficiency, and increased risks when the economy cooled.
Asset structure reflects the level of investment in a company’s assets and the proportional relationship between each asset category and total assets It is primarily shaped by the business line characteristics and the enterprise’s strategy In steel enterprises, the asset investment structure is relatively stable and not overly large, with the share of long-term assets in total assets increasing from 34.3% to 54.1% during 2010–2013, most of which is invested in property This shift toward longer-term assets signals a focus on durable capital and aligns asset management with the company’s strategic direction.
Solvency measures a company's ability to meet its debt obligations, and higher solvency indicates stronger financial capacity and better access to financing, which are central to a business’s viability For steel enterprises, solvency is assessed through current solvency, quick solvency, and instant solvency, with the current solvency ratio reflecting the ability to convert assets into cash to cover short-term debts and signaling the level of assurance to pay those obligations The quick ratio provides a stricter test by excluding inventory from current assets, while instant solvency becomes particularly useful in times of economic difficulty when inventories cannot be readily consumed and receivables are harder to collect In the sample of listed steel enterprises, solvency appears relatively stable, with average instant solvency above 1, suggesting financial balance and basic stability in operations However, quick solvency and instant solvency are relatively low overall due to the steel industry’s high share of inventories and accounts receivable in total current assets, with inventories and receivables comprising about 80% of short-term total assets in 2010–2015, and the rising trend contributing to declines in these measures.
During 2010–2011, net sales rose rapidly as economic recovery and the 2009 government stimulus measures boosted construction industry output, which in turn increased demand for steel and other steel products Steel exports reached a record 1.3 million tons, generating about US$1.3 billion—up 162.92% in volume and 174.18% in value—while total steel capacity expanded as several new projects came online.
From 2011 to 2012, net revenue in the steel industry decreased as monetary tightening to curb inflation cut public investment in real estate, the main source of steel consumption, leading to a sharp drop in demand and inventories exceeding more than 800,000 thousand tons; overinvestment in construction projects by steel-making enterprises caused supply to outpace demand, while exchange-rate fluctuations added further pressure In 2013, net sales showed signs of a slight recovery despite ongoing difficulties, but in 2014 and 2015, the growth rate of net sales rose sharply due to steel price movements, with falling steel prices prompting enterprises to offer larger discounts to agents to stimulate consumption The government responded with measures such as ATIGA special preferential tax rates, tighter steel imports from China, and reviews of anti-dumping duties on stainless steels from China, Indonesia, Malaysia, and Taiwan, alongside increased public investment in infrastructure and controlled loan interest rates Revenue increased rapidly, but profit growth remained very low, and the gap between revenue and profit indicators indicated that, despite higher sales, production costs were still very high, undermining overall profitability for steel enterprises.
Big costs come from causes such as:
Steel production incurs substantial costs, with raw materials and electricity representing the bulk of expenses This cost concentration stems from older technology and lower labor productivity, which limit operating efficiency and drive up overall production costs Consequently, modernizing equipment and boosting workforce efficiency are key levers for reducing costs in the steel industry.
Domestic steel producers, whose core activity centers on rolling, rely on imported billets and scrap steel from abroad to feed their mills This dependence drives up production costs as raw material prices remain high and frequently swing, leading to volatility that can slow output and even halt production at times.
In the steel industry, companies primarily rely on loans to fund production and business activities, so profitability is closely influenced by interest costs When interest rates are low, steel enterprises tend to expand activity and invest, boosting profits; higher rates raise borrowing costs and compress margins, reducing profitability.
Additionally, weak cost management, poor competitiveness, and a lack of proactive output have hampered performance From 2010 to 2013, profits declined sharply due to difficulties in the steel industry In the 2014–2015 period, several companies posted substantial losses despite government support policies and an improving macroeconomic environment.
Within the Vietnamese steel industry, Hoa Phat Group Joint Stock Company dominated market share with 68.92% in 2012, 99.36% in 2013, 77.39% in 2014 and 79.92% in 2015, while Hoa Sen Group Joint Stock Company held 33.05% in 2012, 15.66% in 2013, 17.08% in 2014 and 15.57% in 2015 Despite many small firms posting losses during 2012–2013, these large groups maintained substantial profits due to strong financial resources and high competitiveness In contrast, smaller enterprises faced financial difficulties, weaker competitiveness, and intense domestic and international competition Tang Len Steel Group Joint Stock Company posted a loss of 154,370 million dong in 2015, and Vietnam Italy Steel Joint Stock Company lost 24,197 million dong in 2012 (the 2013 loss figure is not provided here).
26458 million, in 2015 lost VND 45108 million,
Profitability of steel enterprises declined sharply in 2010–2013, with ROS dropping from 5.25% to 0.71%, ROA from 7.39% to 0.13%, ROE from 18.68% to -0.94%, and BEP from 1.05% to 3.15%, in which ROE fell the fastest and BEP showed the slowest change From 2013–2015, profitability began to recover as ROE rose from -0.94% to 8.41%, ROA from 0.13% to 3.76%, ROS from 0.71% to 1.68%, and BEP from 3.15% to 7.64%, with ROE increasing the fastest and ROS the slowest These patterns indicate that steel enterprise performance remains unstable, highly dependent on external factors, unable to take the initiative in output markets, with outdated production technology and weak management, which hinders financing and makes loans harder to obtain.
Debt structure by time of debt usage
The steel industry is a heavy industry, so the capital demand is high, but due to the limited financial potential, the use of debt to finance capital is essential and popular for businesses. industry in the steel industry Such liabilities may be due to bank loans, commercial credit debts, or corporate debt instruments issued on domestic and foreign financial markets In the period 2010-2015, the size of liabilities tended to increase and is shown by the general data. The above table shows that from the period 2010-2014, the scale of liabilities of enterprises in the sample increased rapidly from VND 1,750 billion to VND 2,900 billion, corresponding to an increase of 65.7% and year to year 2015 and showing signs of mitigation In terms of liabilities structure, it is possible to recognize that the ratio of short-term debt to total average debt of regular businesses is high, respectively from 75% to 80% in the period of 2010-2015,and at the same time The ratio of long-term debt maintained at 20-25% Regarding the fluctuation trend, although the proportion of short-term debt tended to decrease leading to long-term debt, the scale of long-term capital was too small, so the level of solvency and debt repayment pressure in short term is still high for businesses The ratio of short-term debt to total debt of listed steel enterprises in the sample shows that 60% of enterprises have a high proportion of short-term debt at over 90% 20% of enterprises have short-term debt ratio of80-90% The remaining 20% of enterprises have short-term debt ratio below 80% Large enterprises such as Hoa Phat, Hoa Sen, Pomina maintain this ratio in the range of 80-85% of total debt, but this proportion is still quite high Small businesses like Thu Duc Steel JSC and Bien Hoa JSC also have short-term debt to total debt ratio of 100% in some years.
The use of long-term debt to finance high-level projects and assets provides financial security for businesses, especially large-scale enterprises, to invest in fixed assets At a high level In contrast, the use of short-term debt to a large extent reflects the unstable financial potential, there is no strategy in the financing policy to attract stable capital sources for the purpose of sustainable growth On the other hand, it also increases risks for businesses, especially those using short-term debt to invest in forming long-term assets, violating the principle of financial balance, leading to the risk of insolvency math In addition, businesses may be exposed to disadvantages due to fluctuations in loan interest rates and inflation, causing the increase in capital use costs, which directly affects the efficiency of production and business activities. 3.3.5 Equity structure of steel enterprises
Financial solutions for industry businesses steel listed in Vietnam
Socio-economic context, prospects and orientation of the steel industry
Global economic prospects for 2015 and 2016 show signs of recovery but carry considerable risks and uncertainty The United States is on a rebound with positive indicators—employment improvement and growth that has at times exceeded 2 percent—yet sustainability remains in question India has delivered solid growth but is gradually moving toward a manufacturing-led model similar to China’s China’s growth rate is slowing, while Europe remains entangled in a debt crisis Persistent concerns center on China’s slower growth and potential spillovers, shaping the otherwise uneven global outlook.
UN experts say that despite a brighter US economic outlook, the appreciation of the dollar could weigh on exporters in 2016, and Chinese oil prices may restrain global investment in the energy sector Emerging economies are expected to improve modestly in 2016, with growth around 3.5%, and the outlook points to a gradual rise to about 4% on average from 2016 to 2020, before easing to roughly 3.6% in the following period.
In December 2016, the OECD lowered its growth forecast, trimming world GDP growth for 2016 from 3.6% to 3.3% and excluding regions at risk of deflation The strong dollar was expected to weigh on the industrial sector, and global trade could suffer as US goods become more expensive on the world market Six years after the US economy began its recovery, the first signs of a slowdown appeared, with declines in industrial production and softer corporate profits.
Beyond global challenges such as climate change, conflicts, and rising defense costs, the world economy faced headwinds, while Vietnam posted a domestic GDP growth of 6.21% in 2016, below the 6.7% target but achieved despite unfavorable world prices, trade conditions, weather, and marine environment, validating the effectiveness of government measures The industry and construction sector expanded by 7.06%, with processing and manufacturing accelerating by 11.90% and contributing 1.83 percentage points to overall growth, while the mining sector fell by 4.00% due to lower oil prices and reduced crude oil and coal output The shift toward processing and manufacturing highlights a move toward more sustainable development The construction industry grew strongly at 10.00%, adding 0.60 percentage points to growth Vietnam’s geographic advantages, including a long coastline, position the country to play a significant role in a major international maritime route that handles up to 50% of international trade, and a peaceful, stable environment makes Vietnam an attractive destination for global investors As developed economies transition to a knowledge-based economy, Vietnam stands to benefit from technology transfer and investment, and can acquire modern governance mechanisms as capital and technology flow in.
Development orientation and prospect of Vietnam's steel industry
According to the Ministry of Industry and Trade, steel production in 2016 rose significantly, yet it met only about 40% of domestic demand and left the country with a sizable trade deficit This gap underscored the need for expanding local capacity and reducing reliance on imports, as policymakers considered strategies to boost domestic supply and improve the trade balance.
In 2016, crude steel production reached 5,154.3 thousand tons, up 20.5% from the previous year; rolled steel output reached 5,351.5 thousand tons, up 26.8%; and production of rebar and angle steel reached 4,702.9 thousand tons, rising 9.9% With current production capacity, the Ministry of Industry and Trade assessed that Vietnam's steel industry can meet 100% of domestic demand for billet, construction steel and cold-rolled steel (about 7–8 million tons per year) However, the status of rolled steel sheet categories is not specified in the data.
Hot-rolled steel is a vital input for numerous industries, including cold-rolled steel production, corrugated iron, steel pipes, shipbuilding, and manufacturing machinery With an annual demand of about 10 million tons, it is not produced domestically, leaving the country fully dependent on imports In response to this dependency, the Ministry of Industry and Trade has developed a strategic plan to boost domestic hot-rolled steel production and reduce reliance on imports.
The 2017 outlook estimates crude steel production at 5,590.9 thousand tons, up 16.6% from the 2016 estimate, while rolled steel output is projected at 5,840.3 thousand tons, an 18% increase over 2016 projections to meet domestic and export steel demand.
Solutions to capital structure to improve profitability
Capital structure shapes every aspect of a business, especially financial risk and the return on equity, and thus drives the viability and growth of a company A careful analysis of the current capital structure reveals its strengths and weaknesses within the steel industry's development in Vietnam's socio-economic context Drawing on the findings from Chapters 1 and 2, the research team presents a set of targeted solutions to optimize the capital structure for steel enterprises listed on Vietnam’s stock market Turning these solutions into practice will require strong commitment and decisive action from the enterprises.
- Due to the ever-changing capital structure, enterprises need to build a target capital structure for each specific development stage and socio-economic situation at that stage.
Enterprises must establish a detailed target capital source structure to serve as the backbone for organizing and mobilizing capital sources in a timely, economical, and effective way This framework aligns funding with strategic objectives, supports optimal liquidity management, and reduces financing costs while enhancing overall capital efficiency After an economic crisis, businesses often face significant challenges due to objective factors, making a robust capital-source plan essential to navigate uncertainty and sustain growth.
Because each steel enterprise has unique characteristics, there is no one-size-fits-all target capital structure suitable for all firms or even for similar businesses; capital structure needs differ over time within the same company as it progresses through its development stages The target capital structure of steel enterprises is distinct and evolves with time, requiring planning that adapts to different development stages and periods To set an effective target, steel enterprises should follow guiding principles, evaluate the key influencing factors, and integrate forecasts of future changes with their development strategy and period-specific targets, ensuring the target capital structure can be achieved in practice.
To build an effective target capital structure, steel enterprises should derive their approach from the fundamental elements of the business and tailor solutions around three sets of factors Group 1 comprises factors that influence willingness to use debt, Group 2 covers factors that affect the demand for debt, and Group 3 includes factors that determine the ability to raise debt By assessing these groups—how management attitudes and risk tolerance shape debt readiness, how market conditions and growth prospects drive debt demand, and how balance-sheet strength, credit access, and collateral affect debt capacity—companies can design a coherent capital-structure plan and secure appropriate debt financing for sustainable growth.
Group 1: Factors affecting the willingness to use debt: the psychology of managers is shown by the tendency to accept risks and the level of acceptance to share control of the operation of the business Enterprises that managers have many years of experience, dare to take risks, accept to share control of businesses will tend to borrow more.
Group 2: Factors affecting the demand for debt: from the strategic goal and the internal capital potential of the enterprise, the business administrator will determine the loan needs of his business Businesses that do not have plans to expand business or have abundant internal capital will use less debt, businesses with business expansion plans but limited capital sources need large debt.
Group 3: Factors affecting the ability to mobilize loans: Enterprises with transparent information and a wide network of contacts have good ability to access and mobilize loans.Enterprises with large scale, many collaterals or having good growth potential can also borrow capital more easily.
Enterprises improve the efficiency of using financial leverage
The estimation model shows that the capital structure of steel enterprises listed on Vietnam's stock market is negatively related to profitability, with the current high debt levels hindering profitability and signaling ineffective capital management This situation prevents these firms from fully leveraging financial leverage from diverse debt sources Financial leverage is a double-edged sword: when used wisely it can amplify return on equity (ROE) and earnings per share (EPS), but if mismanaged it can cause ROE and EPS to fall sharply Consequently, steel enterprises should adjust their capital structure to unlock the benefits of financial leverage and generate positive effects for profitability and shareholder value.
An analysis of the capital structure shows that steel enterprises listed on Vietnam's stock market carry a high debt ratio, and the impact of capital structure on profitability is inverse, with the negative effect most evident in ROE (return on equity).
To meet the capital needs of steel enterprises, options such as loans, bond issuance, and financial leasing are key strategies Today, HPG, VIS, and HSG are the leading steel players by market share and capital scale among listed steel companies, yet VIS’s capital size remains smaller than foreign-invested peers To expand scale and competitiveness, VIS should increase its use of debt and grow equity over time, while other enterprises consider capital-mobilization forms like issuing common bonds or convertible bonds to amplify the effects of financial leverage Depending on their specific conditions, other firms can apply new capital-mobilization approaches, raise loan usage, and gradually adjust their capital structure toward a higher debt ratio and improved capital profitability.
Groups of enterprises with a low BEP face a situation where financial leverage has the opposite effect of reducing ROE, so they should adjust their capital structure toward a lower debt ratio Typically, group companies like NKG and KMT tend to reinvest profits, but retained earnings cover only a small part of their capital needs, forcing them to seek additional capital sources To reduce the debt ratio and strengthen equity, these businesses can raise capital by issuing new shares.
Although the stock market is not currently showing strong growth, ongoing market restructuring creates favorable conditions for businesses to raise capital by issuing shares Enterprises can also lower their debt ratios by negotiating with creditors to convert debt into equity When expanding capital, to reduce the debt ratio, the growth rate of equity must surpass the growth rate of debt, helping optimize capital structure in a softer market environment.
For steel manufacturers with a low break-even point (BEP), the preferred strategy is to prioritize cost control, revenue optimization, and profit management to generate endogenous capital and lift the equity ratio, thereby strengthening resilience to financial leverage As business results improve, firms should implement measures to increase capital to mitigate the negative effects of leverage and maintain a stable capital structure In addition to categorizing firms by BEP, the study also groups enterprises by production and business characteristics The value chain of listed steel companies is highly concentrated at stages such as R&D, production, and distribution, so each business group requires a distinct target capital structure Manufacturing generally benefits from a relatively stable capital structure with a low debt ratio and an equity-biased mix, given the heavy investment in fixed assets and R&D for new products Companies like Hoa Phat Steel, Viet Y Steel, and Tien Len Steel typically report equity shares of 69%–83% If these firms achieve higher profit margins than their cost of capital mobilization, they could consider raising debt to capitalize on the tax shield and amplify ROE.
Distribution enterprises often have high debt ratio, equity accounts for a small proportion.
Across the distribution sector, firms primarily rely on short-term financing—bank loans, commercial credits, and the use of supplier-appropriated capital Although these funds may not incur explicit interest, they push the real cost into higher input prices, since the interest is embedded in purchase costs Using appropriated capital is convenient but risky: it is short-lived and unstable, increasing insolvency risk for the business In steel distribution, debt ratios are notably high—roughly 69% to 92% for players such as Nha Be Steel, Vietnam Steel Joint Stock Company, and Bac Viet Steel Company Even when capital requirements appear modest and turnover is rapid, distribution firms should strengthen their equity base to enhance financial security and avoid insolvency, protecting both profits and reputation.
External capital sources that businesses can mobilize include bank credit sources, financing from the stock market, and other financial instruments and intermediaries that help mobilize idle investor capital; in practice, listed steel enterprises mainly mobilize external funds from borrowed capital, so the research team identifies additional exogenous capital sources that steel companies can raise capital from, including bank lending, capital market finance, and other instruments and intermediaries that channel investor idle funds.
Bank credit today hinges on credit ratings; large firms with strong financials and high creditworthiness can access loans more easily, often leveraging the reputation and networks of their board of directors as trust signals Small businesses face a tougher path: to access capital, they typically must pledge assets or provide guarantees, which creates a significant barrier to capital access To build a robust credit relationship network and mobilize credit, enterprises can pursue several strategies, including nominating board members to participate in mass organizations and business associations, and actively engaging in forums and social activities to build trust and close cooperation with banks in a spirit of mutual support.
Steel enterprises can diversify their capital mobilization through medium- and long-term credit instruments such as financial leasing, ordinary bonds, and bonds with transfer and conversion rights Firms in production, mining, and construction with large fixed-asset investment needs but limited financial capacity may find financial leasing especially suitable Essentially, financial leasing is a form of bank credit that uses physical assets as collateral; it enables financing up to 100% of the investment and often requires no upfront collateral The cost is determined by the agreement between the parties, and while the interest rate may be higher than cash loans, it gives the enterprise proactive control over equipment selection, supplier choice, and design This enables acquisitions of fixed assets to satisfy production and working-capital needs Although this option carries a higher capital cost than other medium- and long-term credits, it remains a viable capital mobilization channel for steel enterprises with small capital bases, weaker financial strength, and higher technology risk, especially under current conditions.
Corporate bonds are a major form of capital mobilization that steel enterprises can leverage, a financing instrument widely used in global markets and in many developed economies In Vietnam today, capital raised through corporate bonds remains small relative to other funding sources, but large Vietnamese firms should consider bond issuance as a strategic option to diversify funding and support growth A key opportunity lies in introducing Vietnamese corporate bonds to foreign investors, which represents a highly promising source of capital that has been underutilized Foreign investors, especially large institutional buyers with robust finances, are attracted to bond investments in developing markets like Vietnam due to strong growth potential and relatively attractive yields compared with those in developed countries When domestic capital is limited, leveraging foreign capital through corporate bonds can offer a convenient and effective mechanism for Vietnamese enterprises to mobilize funds.
- For small-sized enterprises, the issuance of bonds is difficult or not eligible for issuance,businesses can look to investment funds or venture capital companies, because these are financial intermediaries It is the willingness to accept the risk of investing in small businesses, even newly established businesses if their projects are attractive and able to generate profit.
Enterprises improve the quality of corporate governance
Corporate governance encompasses the management of all critical business activities, including corporate structure, strategic direction, technology and R&D, human resources, production operations, product development, and financial stewardship Effective corporate governance strengthens stakeholder relationships, improves access to capital, reduces funding costs, and optimizes the capital structure of the business To achieve these outcomes, enterprises should apply international governance standards to ensure high quality and consistency with global best practices An analysis of listed steel companies shows they often carry high debt ratios; while greater leverage can raise financial leverage, boost ROE, and create firm value, poor use of leverage increases capital costs and can undermine profitability Therefore, steel enterprises must enhance management, organization, and utilization of capital to fully realize the advantages of financial leverage while safeguarding sustainable performance.
To improve the quality of corporate governance, the research team offers some solutions as follows:
Effective corporate governance begins with raising awareness of its core principles and prioritizing the protection of shareholder and stakeholder rights It also emphasizes greater transparency and accountability across governance processes, while clearly defining the Board of Directors’ responsibilities in risk monitoring to safeguard long-term value and stakeholder trust.
Second, establish a distinct management standard for steel enterprises by integrating core corporate governance rules with the sector’s specific characteristics to drive alignment with international standards Companies can seek targeted advice from economists, legal experts, and governance specialists who will tailor guidance to their operations This approach enhances transparency, accountability, risk management, and strategic decision-making, ultimately boosting competitiveness in global markets.
Strengthening the control committee and internal audit department is a strategic lever for detecting weaknesses in the management system and driving improvements Global data indicate that companies with effective internal controls and audit functions deliver timely reports, transparent and accurate financial statements, lower fraud risk, and higher production efficiency Financial management remains the core of corporate governance, so steel enterprises should strengthen the coordination among the Board of Directors, Supervisory Board, and Chief Financial Officer when making financial decisions and determining capital structure In this context, the role of the CFO must be elevated; beyond traditional accounting duties, CFOs should provide strategic recommendations to the Board based on rigorous financial analysis and forecasts.
Effective cash flow management suitable for each group of businesses
Effective cash flow management is a core component of corporate finance that determines a business's ongoing viability When cash flow is well managed, a company maintains solvency for its due debts and can avoid taking on loans to cover obligations Cash flow management directly shapes the enterprise's capital structure; poor cash flow control can lead to unplanned financing, undermining financial autonomy and strategic flexibility Ignoring urgent liquidity needs increases risk to solvency, reputation, and profitability, underscoring the importance of proactive cash flow planning for sustainable growth.
Effective cash flow management hinges on the financial manager’s ability to understand how money moves through the business and adjust operations accordingly For steel enterprises, this requires a specific set of tasks: planning and forecasting cash flow to anticipate needs, increasing cash inflows, strictly controlling cash outflows, and flexibly deploying financial measures to address any cash deficit.