mpact of goods distribution system on financial performance the case of minh thai co , LTD

Descriptive Analysis Table 4.16 Reliability of scale Table 4.17 Exploratory Factor Analysis of affecting factors to the financial performance at Minh Thai Co.,Ltd Table 4.18 Reliability

VIETNAM NATIONAL UNIVERSITY, HANOI

INTERNATIONAL SCHOOL

***************

PHAM VAN NHUNG

IMPACT OF GOODS DISTRIBUTION SYSTEM ON FINANCIAL PERFORMANCE: THE CASE OF MINH THAI Co., LTD

MASTER THESIS

HA NOI - 2021

VIETNAM NATIONAL UNIVERSITY, HANOI

INTERNATIONAL SCHOOL

***************

PHAM VAN NHUNG

IMPACT OF GOODS DISTRIBUTION SYSTEM ON FINANCIAL PERFORMANCE: THE CASE OF

MINH THAI Co., LTD

TÁC ĐỘNG CỦA HỆ THỐNG PHÂN PHỐI HÀNG HÓA ĐẾN HIỆU QUẢ TÀI CHÍNH: TÌNH HUỐNG

TẠI CÔNG TY TNHH MINH THÁI

Major: Financial Management Code: 8340202.01QTD

MASTER THESIS

Supervisor: PhD.Mai Anh

HA NOI - 2021

National University, Hanoi

The interpretations put forth are based on my reading and understanding of the original texts and they are not published any where in the form of books, monographs or articles The other books, articles and websites, which I have made use of are acknowledged at the respective place in the text For the present thesis, which I am submitting to the University, no degree or diploma or distinction has been conferred on me before, either

in this or in any other University

Hanoi, August 2021 Pham Van Nhung

Researcher：Pham Van Nhung Advisor：PhD Mai Anh

The thesis focuses on researching and examining the effects of the goods distribution system on the financial performance of Minh Thai Co., Ltd in the period 2018 - 2020, as well as the means to achieve innovation and financial performance Data used in the analysis in the thesis in addition to the company's report data, there are also 150 questionnaires to conduct the survey at Minh Thai Co., Ltd This study proves that internal factors are directly related to the financial performance of the company and indirectly related to the distribution system The company needs to have solutions to improve the problems affecting the distribution system to improve financial efficiency This study wishes to contribute to understanding the premises and results of distributed systems by providing empirical evidence on distribution forms at Minh Thai Co., Ltd to improve financial performance

Keywords: Financial performance; Distribution system

ACKNOWLEDGEMENT

During the time of preparing and completing my thesis, I received numerous support and encouragement from many people This is hereby to express my sincere gratitude to them

First and foremost, I would like to give my sincere thanks to the lecturers, especially to my supervisor Dr Mai Anh for their devoted attention, lessons and guidance, which have equipped me with key knowledge and essential skills throughout the course More importantly, everything I have learned here would undoubtedly help me tremendously in my work

Second, I wish to express my gratefulness to my colleagues at Minh Thai Co., Ltd for their enthusiastic support and creating favorable conditions for me to have more useful information to complete this thesis

I would also like to thank International School - Vietnam National University, for useful supports during studying and researching to complete this paper This course has equipped and improved and added a lot of knowledge about the different areas In addition, the course also helps me to have a relationship, have the opportunity to share information and learn from other students in the program

Sincere thanks

Pham Van Nhung

CONTENTS

DECLERATION 1

ABSTRACT 2

ACKNOWLEDGEMENT 3

LIST OF TABLES 6

LIST OF FIGURES 7

LIST OF ABBREVIATIONS 7

CHAPTER 1: INTRODUCTION 8

1 1 Background of the study 8

1.2 Questions of thesis 9

1 3 Objectives and scope of thesis 9

1.4 Research Methods 9

1.5 The structure of study 11

CHAPTER 2: LITERATURE REVIEW 12

2.1 Financial performance 12

2.1.1 Definition of financial performance 12

2.1.2 The indicators for evaluating the financial performance 13

2.1.3 The meaning of financial performance 16

2.2 Distribution Systems 16

2.2.1 Definition of Distribution Systems 16

2.2.2 Distribution System and Distributor 17

2.2.3 Functions and Role of Distribution System 17

2.3 Relationship of Distribution system and financial performance in business activities 19

CHAPTER 3: RESEARCH METHODS 21

3.1 Research Methods 21

3.2 Hypotheses 21

3.3 Designing questionnaire 22

3.4 Sample and Data Collection 23

3.5 Analyzing data plan 23

3.6 Reliability analysis by Cronbach’s alpha 25

3.7 Exploratory factor analysis (EFA) 25

3.8 Regression analysis 26

CHAPTER 4 RESULTS AND FINDINGS 28

4.1 Overview about Minh Thai Co Ltd 28

4.2 Analysis of financial performance of Minh Thai Company Limited in the period of 2018 - 2020 30

4.2.1 Analyze business results 30

4.3 Research results and analysis 39

4.3.1 Data description 39

4.3.2 Reliability analysis and scale 2

4.4 Exploratory Factor Analysis 5

4.4.1 Exploratory Factor Analysis of Affecting Factors Scale 5

4.4.2 Exploratory Factor Analysis of the financial performance Scale 9

4.5 Regression Analysis 10

4.5.1 Regression Analysis 10

4.5.2 Research model and hypotheses tested result 14

CHAPTER IV: RESULTS AND FINDINGS 16

5.1 Assessment of the financial performance through the distribution system at Minh Thai Co.,Ltd 16

5.2 The affecting factors on the performance of finance activities at Minh Thai Co.,Ltd 16 5.3 Suggestions to improve the financial performance at Minh Thai Co.,Ltd 17

5.3.1 Improve the inventory 17

5.3.2 Improve the operating expense 17

5.3.3 Improve the average collection period 18

CONCLUSION 20

REFERENCES 21

APPENDIX A: QUESTIONAIRE – VIETNAMESE VERSION 23

APPENDIX B: QUESTIONAIRE – ENGLISH VERSION 25

LIST OF TABLES Table 3.1 Hypotheses

Table 3.2 Encoded Data

Table 4.1 Minh Thai’s key performance indicator in the period of 2018-2020 Table 4.2 Revenue growth of Minh Thai Company Limited from 2018 – 2020 Table 4.3 The revenue stucture from sale of Minh Thai Co.,Ltd from 2018 –

2020 Table 4.4 Profit growth of Minh Thai Co., Ltd in the period of 2018 – 2020 Table 4.5 Structure of the company's profit before tax from 2018 – 2020

Table 4.6 The ability to generate profits of Minh Thai Co., Ltd from 2018 –

2020 Table 4.7 The performance of using asset of Minh Thai Co.,Ltd from 2018 –

2020 Table 4.8 The influence of factors on the efficiency of using fixed assets of

the company in the period of 2018-2020

Table 4.9 The influence of factors on the efficiency of using short-term

assets of the company in the period of 2018-2020

Table 4.10 The profitability of Minh Thai Co.,Ltd in the period 2018 – 2020

Table 4.11 The influence of factors on the profitability of assets at Mainh

Thai Co.,Ltd in the period 2018-2020

Table 4.12 The influence of factors on the ratio on sales at Minh Thai Co.,Ltd

Table 4.15 Descriptive Analysis

Table 4.16 Reliability of scale

Table 4.17 Exploratory Factor Analysis of affecting factors to the financial

performance at Minh Thai Co.,Ltd Table 4.18 Reliability statistics and exploratory factor analysis of affecting

factors to the financial performance, 2nd time Table 4.19 Exploratory Factor Analysis of the Financial performance Scale

LIST OF FIGURES Figure 2.1 Dupont analysis model

Figure 2.2

Figure 3.1

Financial coefficient tower model Hypotheses

Figure 4.1 Overview of the distribution system of Minh Thai Co., Ltd

Figure 4.2 Research module result

LIST OF ABBREVIATIONS

ROA Return on Assets

ROE Return on Equity

ROS Return on Sales

ACOP Average Collection Period

CPVs Critical Profit Variables

INV Inventory

SAG Sales growth

OPEX Operating expense

ACOP Average collection period

FP Financial performance

Table 4.20 Partial correlation of regression coefficients – 1st time

Table 4.21 Partial correlation of regression coefficients – 2nd time Table 4.22 Adjusted R square

Table 4.23 ANOVA analyzing

Table 4.24 The result of regression coefficients model – 2nd time

Table 4.25 Hypotheses Tested Results

Table 5.1 The financial performance at Minh Thai Co.,Ltd

CHAPTER 1: INTRODUCTION

1 1 Background of the study

In order to stand firmly in the market and constantly develop under increasingly competitive conditions and scarce resources, a business needs to make effective use and evaluate their efficiency in using resources Among businesses, financial resources are always number one The financial resources to ensure the business operations to achieve the goals Or understand correctly, financial resources are the ability to mobilize capital to meet the business’ activities and the ability to ensure financial safety of the business From the perspective of capital management, the financial structure of the business is the ratio between Debt and Equity A financial structure is considered optimal when the average cost of capital is lowest, and at the same time the maximum value of the business Corporate financial efficiency is the efficiency of mobilizing, using and managing capital

in business (Truong Ba Thanh and Tran Dinh Khoi Nguyen, 2001) In order to assess whether the financial structure of a business is optimal or not, whether to bring maximum value in financial performance or not, it is necessary to have targets to measure and evaluate financial indicators and financial performance logically

The relationship between distribution system and financial performance of a business was very positive and getting a lot of attention from academics Anderson et al (1997) suggests that the good performance of the distribution can reduce costs, increase revenue and efficiency and effectiveness of business assets used Better distribution system can assist the business in maintaining its relationship with customers by reducing cycle time required (Lambert and Pohlen, 2001) Other studies supporting the relationship between distribution and financial performance concluded that the cost of inventory and the quality very big influence on retail agencies (Schramm-Klein and Morschett, 2006) Meanwhile, research Shang and Marlow (2005) concluded that the financial performance of manufacturing firms increased due to their distribution system are improved Thus, the company can have more benefits from the improvement of logistics performance

Some problems in the distribution network might occur, such as, production, inventory locations, and the placement of the warehouse Therefore, the decision- making process should take into account all the factors and improve coordination with all entities in order

to improve business performance, the author chooses the topic: Impact of goods distribution system on financial performance: case of Minh Thai Co., Ltd” in order to propose suggestions to further improve the business results of the business as a research topic for my graduation thesis

The graduation thesis focuses on research to achieve the following purposes:

- Systematize the basic theoretical issues about financial performance of a company

- Research, analyze and evaluate the current state of financial performance at Minh Thai Co.,Ltd through the targets in finance.focusing on results of the period for 2018-2020

- The analysis focuses on four critical profit variables (CPVs): 1) Sales growth, 2) Inventory turnover, 3) The operating expense percentage, 4) The average collection period (often called the days sales outstanding) These are the factors that combine to produce profit for a business

- Findings some solutions to improve financial efficiency more and more associating with the distribution system

1.2 Questions of thesis

- How the distribution system affect on the financial performance at Minh Thai Co.,Ltd ?

- What are the main elements of distribution system affecting on the financial performance at Minh Thai Co.,Ltd ?

- What are solutions to improve the financial performance through distribution system at Minh Thai Co.,Ltd ?

1 3 Objectives and scope of thesis

The organization structure of a business is one factor to achieve more profit This structure has low impact on profit (Pelham and Wilson, 1996) However, there have several scholars concluded that distribution system has positive impact on business performance (Liu and Ma, 2005; Cho et al.,2008) The five determinants of distribution are linked to financial performance Therefore, the conceptual model is developed to identify the study for these reasons, the hypotheses are:

H1 Sales growth will be positively related to financial performance of Minh Thai Co.,Ltd H2 Inventory will be positively related to financial performance of Minh Thai Co.,Ltd H3 The operating expense percentage will be positively related to financial performance of Minh Thai Co.,Ltd

H4 The average collection period will be positively related to financial performance of Minh Thai Co.,Ltd

1.4 Research Methods

The data were collected from agencies of Minh Thai Co., Ltd in Hai Dong province of Vietnam to test hypotheses There were 115 questionnaires sent out, 10 of which were

percent This response rate is considered high because most of the agencies are willing to participate in this study In terms of sample characteristics, the average of working period for their business is 3 years The type of business of agencies involve in this study include beverage This study adapted 5-item Likert type scale The primary data collection for this study was quantitative method which focus on survey The questionnaires in this study were designed with based on literature review The questionnaires were delivered to one key respondent in each agencies Most of the respondents are the owners due to small structure of organization

Through the questions on the survey, the author has eliminated conflicting answers to

be able to give relatively reliable survey results to assess the current situation of using indicators to evaluate effectiveness financial results at Minh Thai Co., Ltd

In order to answer the three main questions ò the study, the author uses following methods for data collecting and analyzing:

Secondary data: According to Saunders et al (2009), secondary data is the

information which is collected from public resources such as books, journals, and the articles is collected by previous researchers in line with current studies’ objectives Major advantage of secondary data is less time consuming and lower effort to collect to the researchers (Srivastava and Rego, 2011) In this study, secondary data is collected from annual reports and actual data of business at Minh Thai Co.,Ltd which are about financial concepts as well as previous empirical evidences about the impacts of Sales growth; Gross margin percentage; Inventory turnover; Operating expense percentage; Average collection period.to the financial performance Figures were collected from annual reports

at Minh Thai Co.,Ltd in the period from 2018- 6/2020

Primary data collection and analysis: Primary data is considered as the information

that is self-collected by the researchers without reliance on public sources (Guffey et al., 2010) According to Saunders et al (2009), primary data has the advantage of directly supporting the studies but the researchers often take time to collect this information In this study, primary data is collected through surveys of questionnaire with relevant respondents In more detailed, a survey of questionnaire is established to collect the assessment from agencies of Minh Thai Co.,Ltd and their assessments are made up in term of Sales growth; Gross margin percentage; Inventory turnover; Operating expense percentage; Average collection period These quantitative data would be processed by software SPSS version 21.0 with methods such as reliability test Cronbach Alpha,

exploratory factor analysis, one-way ANOVA and multiple linear regression analysis The author found out solutions to attain the above objectives

1.5 The structure of study

Chapter 1: Introduction - This is to provide brief introduction about background

of the study, purpose, objects and scope of study

Chapter 2: Literature review - This chapter is aim to provide literature review

about theories of study

Chapter3: Research methods - This chapter will provide methodologies to match

with the study and objectives; Analys the current situation at Minh Thai Co., Ltd

Chapter 4: Results and Findings This chapter will show the results and findings after researching at Minh Thai Co., Ltd

Chapter 5: Solutions This chapter will propose some recommendations for improving the financial performance at Minh Thai Co., Ltd

CHAPTER 2: LITERATURE REVIEW

According to the several previous standard studies, the company finacial performance can

be divided into three types: operational, financial and stratergic performance The The operaional performance is more relative to improvement of the organization activities, such as logistics cost reduction, on-time delivery, inventory turnover, and circle time reduction The company’s financial performance is measured based on the relationship between total revenue and cost that can by proxy by profitability, return-on-investment, and return-on-sales Finally, the strategic performance is the improvement of market goals, such as sales, market shares, growth in sales and market share In this study, I focus on the company financial performance as dependent variables to evaluate the rolls of distribution system

2.1 Financial performance

2.1.1 Definition of financial performance

According to Investopedia “Financial performance is a subjective measure of how well a firm can use assets from its primary mode of business and generate revenues The term is also used as a general measure of a firm's overall financial health over a given period The financial performance identifies how well a company generates revenues and manages its assets, liabilities, and the financial interests of its stakeholders” (https://www.investopedia.com/terms/f/financialperformance.asp)

Based on the definition we see that evaluating your business's financial performance is indispensable that any business owner, investment advisor, finance officer, manager and investor needs to make smart decisions for the long-term development of his business

• The first point of view: Corporate financial efficiency refers to the efficiency of mobilizing, managing and using capital in the business process

• The second point of view: Financial efficiency is the efficiency of capital mobilization Meanwhile, the efficiency of management and use of capital belongs to business efficiency

Either way, financial performance reflects the relationship of the economic benefits an enterprise receives and the costs it must spend to obtain such economic benefits

The nature of corporate finance is monetary relationships directly associated with the organization, mobilization, distribution, use and management of capital in the business process

2.1.2 The indicators for evaluating the financial performance

There are three indicators used commonly to reflect the core problems of corporate financial performance Includes: Return on total assets (ROA), Return on sales (ROS), Return on equity (ROE)

2.1.2.1 Return on total assets (ROA): this is a profitability ratio that provides how much profit a company is able to generate from its assets In other words, return on assets (ROA) measures how efficient a company's management is in generating earnings from their economic resources or assets on their balance sheet ROA is shown as a percentage, and the higher the number, the more efficient a company's management is at managing its balance sheet to generate profits

The formula for ROA is: ROA= Net Income/Average Total Assets 2.1.2.2 Return on sales (ROS)

This is a financial ratio that calculates how efficiently a company is generating profits from its top-line revenue It measures the performance of a company by analyzing the percentage of total revenue that is converted into operating profits ROS is a measure of how efficiently a company turns sales into profits Therefore, ROS is used as an indicator

of both efficiency and profitability Investors, creditors, and other debt holders rely on this efficiency ratio because it accurately communicates the percentage of operating cash a company makes on its revenue and provides insight into potential dividends, reinvestment potential, and the company's ability to repay debt ROS is used to compare current period calculations with calculations from previous periods This allows a company to conduct trend analyses and compare internal efficiency performance over time It is also useful to compare one company's ROS percentage with that of a competing company

The formula for ROS is: ROS= Profit/ Net sales 2.1.2.3 Return on equity (ROE)

This is a ratio that provides investors with insight into how efficiently a company (or more specifically, its management team) is handling the money that shareholders have contributed to it In other words, it measures the profitability of a corporation in relation to stockholders’ equity The higher the ROE, the more efficient a company's management is

at generating income and growth from its equity financing ROE is often used to compare

a company to its competitors and the overall market The formula is especially beneficial when comparing firms of the same industry since it tends to give accurate indications of which companies are operating with greater financial efficiency and for the evaluation of

The formula for ROE is: ROE= Net Income/ Shareholder equity

2.1.2.4 Some other indicators

In addition to the three commonly used ROA, ROS, and ROE indicators, to evaluate the financial performance of an enterprise, we can also use a number of other indicators such as:

 Solvency ratio

A solvency ratio is a key metric used to measure an enterprise’s ability to meet its term debt obligations and is used often by prospective business lenders A solvency ratio indicates whether a company’s cash flow is sufficient to meet its long-term liabilities and thus is a measure of its financial health It can indicate the likelihood that a company will default on its debt obligations The main solvency ratios are the debt-to-assets ratio, the interest coverage ratio, the equity ratio, and the debt-to-equity ratio

long-A solvency ratio is one of many metrics used to determine whether a company can stay solvent in the long term This is a comprehensive measure of solvency, as it measures a firm's actual cash flow, rather than net income, by adding back depreciation and other non-cash expenses to assess a company’s capacity to stay afloat

The formula for solvency = Total asset value / Total liabilities

 The asset turnover ratio

It measures the value of a company's sales or revenues relative to the value of its assets The asset turnover ratio can be used as an indicator of the efficiency with which a company is using its assets to generate revenue The higher the asset turnover ratio, the more efficient a company is at generating revenue from its assets Conversely, if a company has a low asset turnover ratio, it indicates it is not efficiently using its assets to generate sales

Asset turnover is the ratio of total sales or revenue to average assets

This metric helps investors understand how effectively companies are using their assets to generate sales

The formula for asset turnover = Total Sales/ Average total assets

 Inventory turnover ratio

Inventory turnover is the rate at which a company replaces inventory in a given period due

to sales Calculating inventory turnover helps businesses make better pricing, manufacturing, marketing, and purchasing decisions Well-managed inventory levels show that a company's sales are at the desired level, and costs are controlled The

inventory turnover ratio is a measure of how well a company generates sales from its inventory

Inventory includes all the goods a company has in its stock that will ultimately be sold Inventory turnover indicates the rate at which a company sells and replaces its stock of goods during a particular period

The formula for inventory turnover = Cost of Goods Sold / Average Inventory (for the same period)

 Average collection period

It is a measure of how many days it takes a firm, on average, to collects its receivables It indicates the efficiency of the collection process and the lower it is the shorter the cash cycle of the business is, which has a positive impact on its profitability

The formula for Average Collection Period (ACP) = 365 / Accounts Receivable Turnover The Du Pont financial analysis model is a useful method of illustrating the relationships between asset turnover ratio, operating profit margin ratio, return on assets, and return on equity

Figure 2.2: Financial coefficient tower model

(Source: Neely, 2007) [58, tr.14]

2.1.3 The meaning of financial performance

Financial performance of the business is a matter of concern for both internal and external investors as well as stakeholders Indeed, through the evaluation of financial performance, investors will be in the right direction to make a reasonable investment decision as well as take steps to adjust capital appropriately

2.2 Distribution Systems

2.2.1 Definition of Distribution Systems

Distribution is the activity of both selling and delivering products and services from manufacturer to customer

In the scope of marketing, it can be said that distribution is one of Ps (Place) in marketing strategy deciding the success of any business Distribution is simply described as the process of delivering products/services from manufacturers to customers (Corrigan, 2019) Having good distribution system would help companies transfer products/services to customers in the shortest time from which increasing market share and profit (Kersting, 2012) In addition, effective distribution network also has significant contribution in creating and enhancing customer satisfaction level

Distribution is an important stage in the reproduction process and is one of the three aspects of the production relationship system, directly related to the economic interests of organizations, entities and individuals in society Distribution is both a driving force for production development and a measure of conformity between production and consumption

In a market economy, goods are produced for sale in order to make a profit Therefore, how to distribute, in the most effective form with the lowest cost to maximize profits is

one of the important contents that businesses need to research in the course of real business context

There are many different views on the distribution system stemming from the different views of the researcher According to Philip Kotler: "A distribution system is a collection

of interdependent organizations, supporting the transfer of ownership of a certain goods or service, transferring it from producers to consumers."

In the book Textbook of Commercial Economics - University of Economics and Business, co-authored by Prof Dr Dang Dinh Dao and Prof Dr Hoang Duc Than - gives the view

on the goods distribution system: “The organization process rational distribution channels and organize the transfer of goods and services This is a process that involves operating and transporting goods and services from the producer to the user with the most efficient conditions This process solves issues: Change of property ownership, movement of goods through the stages of transport, storage, packaging, loading and unloading, providing market information to manufacturers

2.2.2 Distribution System and Distributor

The main difference between a distribution system and a distributor is that a distributor is

a type of business, while a distribution system is a business facility

The distributor is often referred to as the "middleman" in the flow of products through the distributor channel This is because of the distributor's common position between the product maker and the retailer that sells to consumers Distributors try to acquire products from manufacturers that meet their quality and price standards They then mark up the products and try to earn a profit by reselling them to retailers at a higher price point Distributors usually move products in bulk, while retailers break bulk into consumable units for customers

Distribution system buy products from manufacturers, store them in warehouses and ship them to retailers or directly to their stores

2.2.3 Functions and Role of Distribution System

Distribution is an important element of operations as, without a role that tracks and improves the relationship between manufacturers and customers, a business cannot ensure the best possible service If bottlenecks happen in distribution, deliveries fall short, customers, retailers and suppliers get angry, and trust is lost For product distribution to be truly successful a continuous feedback loop needs to be implemented to ensure everyone

is happy with the process and that any improvements that can be made, are made

In terms of drop shipping and customers buying items online, merchants and customers do not get to try the product before they buy so they trust that the item will arrive just like in the pictures and descriptions This means that the distribution channel needs to be efficient at providing responses and comments across the whole channel

Distribution management refers to the main activities of distributing a product, which includes:

(1) Packaging: Providing adequate packaging or a product so it can be transported safely

(2) Inventory management: Maintaining a good level of inventory is hugely important

to distribution Management of inventory is one of the main responsibilities for distribution management

(3) Order processing: Once an order comes in from a customer, distribution management needs to plan for the delivery This involves collecting the stock, loading it and delivering it in a timely manner Approval needs to be sent and invoicing done for this step to be valid

(4) Logistics: Mode of transport is important to consider for all orders If they require overseas shipping there must be agreements in place for permits to be approved quickly Loading and handling need to be decided so that all equipment that could

be needed is available onsite

(5) Communication: Clear communication is needed both on and offsite at distribution centers This is to ensure that the correct products are shipped and customers know when they will receive their items If a shipment is delayed, distribution management needs to notify all interested parties immediately

Distribution system could not only enhance the level of customer satisfaction but also help the company to save much cost and time, increase market share, and enhance the sales volume (Darbari, Agarwal, & Jha, 2015) As a result, developing good distribution system

is seen as one of the most important factors deciding the business success

There tends to be a bit of confusion between what a distributor is and how they differ to a wholesaler In general, a distributor works closely with a manufacturer in order to sell more goods and gain better visibility on these goods Distributors normally will find wholesalers who will resale their products A wholesaler works more closely with retailers

to match their needs through buying products in bulk at a discount Therefore distribution

is an important part of the distribution channel as it acts as the medium between the manufacturer and their customers

From a marketing perspective, one of the most important functions of distributors is that they can forecast market needs Distributors are clearly closer to the market and are better placed than manufacturers to forecast what their customers will need By providing this information to the manufacturer, the latter is better able to provide superior value to consumers

Finally, distributors provide market information They are well-placed to share information about the market, about competitive activity and so forth From a manufacturer’s viewpoint, this information is invaluable for future competitiveness in the market

In order to maximize profit generation via sales, a business needs to determine which distribution method would be ideal for it and distribution channels may vary depending on: Business characteristics; Market characteristics; Product characteristics and Competitor characteristics

A business probably is not hitting the revenue goals because distribution strategy is in trouble It means to increase reach and ultimately revenues, businesses have long sought

to build suitable distribution strategy

2.3 Relationship of Distribution system and financial performance in business activities

For the small or mid-size company, the understanding that improvements in the current supply chain/ distribution system will help reduce costs of goods sold, days in inventory and overall hidden operational expenses is one thing

There are many issues these companies face that keep them from embarking on improved supply chain management and discovering its benefits on financial performance

The importance of a reliable distribution system for getting products to market goes without saying Implementing improvements in a distribution system does not need to be

a major investment in time and money However, it does require an understanding that the distribution system has significant impact on the financial performance of the company and the commitment to:

- Look at the distribution system that impacts the financial measurements

- Identify the internal business processes that affect distribution system

- Determine what can be done to improve those business processes that will improve distribution system and bottom line

Relationship of distribution system and financial performance can conduct an analysis of

a company’s business that will help determine business processes and costs associated with (Abdikani SA, Mahad MA, Mohamed HD (2018)

Unstable distribution system will affect the financial health of the business because the expected sales growth is not achieved as planned Inventory is the inevitable consequence when goods cannot be sold Inappropriate distribution system cannot

guarantee an effective saling function that leads to backlog

Inventory also entails a series of implications for storage costs, storage causing losses for businesses (Jighyasu G, Sourabh B (2011) the relationship of Financial and Inventory Performance of Manufacturing Firms)

Financial stagnation occurs when inventory of goods as well as the pressure to release inventory are serious problems that no business wants to face This not only affects immediate sales but also damages reputation and brand name in the long run

Using resources effectively is always the top concern of businesses Ineffective distribution system is a clear demonstration of waste of resources Financial investment for building a sales team is not small Besides, marketing expenses are upfront high costs Distribution system mismatch resulted in revenue, so the cost of money for marketing as

"through your money around"

The financial performance has not been guaranteed, the low ratio of revenue to marketing cost showing that the resources of the business have been wasted

Effectiveness of financial investment was not guaranteed, the interest rate on the cost of marketing revenue is low shows that resources were being wasted

CHAPTER 3: RESEARCH METHODS

This chapter has given an overview description of Minh Thai Limited Liability Company where the research was conducted In addition, it would be provided detail research method from preparing for collecting data to analyzing data

3.1 Research Methods

This part has presented the research philosophy and the used methods to carry out the survey that compose of designing questionnaires, selecting sample and data, analyzing data plan Data processing was conducted by software SPSS 21.0 consist of Cronbach’s Alpha confidence coefficient analysis, exploratory factor analysis and multiple linear regression analysis

Figure 3.1: Hypotheses

This study present result for specific performance measure of financial There are four hypotheses in this study and the measures were examined for reliability and validity Factor analysis is used to obtain the value of validity This study required

a minimum KMO value of 0.50 and a minimum of factor loading value of 0.4 Cronbach’s alpha is used to measure each dimension This study required a minimum Cronbach’s alpha value of 0.60 The value is considered low (Singh, 2007)

3.2 Hypotheses

H1 Sales growth will be positively related to financial performance of Minh Thai Co.,Ltd H2 Inventory will be positively related to financial performance of Minh Thai Co.,Ltd

Sales growth (H1)

performance of Minh Thai Co.,Ltd

H4 The average collection period will be positively related to financial performance of Minh Thai Co.,Ltd

3.3 Designing questionnaire

Since primary data is collected from survey of questionnaire with the staffs at Minh Thai Co.,Ltd, questionnaire design is considered as important context The objective of questionnaire design is to make clear and can did questionnaire to the respondents so that they can easily understand the contents as well as providing correct answers (Saunders et al., 2009) Questionnaire was designed in Vietnamese, and divided into two main parts (see appendix B):

- Part I included questions about variables which regarding respondents

- Part II was designed to collect assessments from staffs about the factors impact to the financial performance at Minh Thai Co.,Ltd

This part comprised 23 variables in total Assessing influenced factors of financial activities included 21 variables to measure four above components while the research used two variables to measure the financial performance This measurement based on a 5-point rating scale which corresponding to 1 = strongly disagree, 2 = somewhat disagree, 3

= neither agree nor disagree, 4 = somewhat agree, 5 = strongly agree Participants gave points for 23 following opinions (see appendix B):

 Sales growth:

- Volume of goods in handling

- Revenue earned from sales

- Time of order processing is suitable

- Time of delivery and payment are suitable

- Criterias for carring relationship between company and its partners are suitable

 Inventory :

- Quantity of inventory is suitable

- Value of inventory is suitable

- Cost of inventory is reasonable

- Cost of renting warehouse is suitable

- Cost of checking inventory is suitable

 The operating expense percentage:

- Cost of Marketing and Advertisement

- Cost of Developing and expanding the market share

- Transportation cost is suitable

- Cost of handiling complaint is suitable

- Cost of mistakes in delivery

 The average collection period:

- Time of Receivables is suitable

- Cost of managinge average collection period

- Cost of Debt collection and payment policies

- Cost of Updating to collect receivables from debtor

- Cost of Processing Fluctuations in receivables

- Amount of Provision ratio for bad debts

 The financial performance:

- Financial performance of Minh Thai Co.,Ltd is fairry good

- You are satisfied with the company's financial performance?

3.4 Sample and Data Collection

After the survey’s questionnaire is prepared, the next important part is to determine how many employees that will participate in the survey Saunders et al (2009) denote that there are two types of sampling techniques: probability sampling and non-probability sampling Hair et al (2011) suggested that the minimum sample should be from 100 or

150 Norusis (2005) indicates that the sample size should quality the rule of big number of which the sample pool for data analysis must be exceeded the minimum of 30 observations According to statistic from Minh Thai Co.,Ltd, the number of staffs who are working for Minh Thai Co.,Ltd is 115 people To gather to information, 115 questionnaires were given to staffs directly or by email It took about 10 to 15 minutes to answer the questionnaires Such application reduces the anxiety to the respondents in the way of providing information It means that survey’s questionnaire brings anonymity advantage and the respondents are not worry about their identities to be exposed and therefore all information related to the respondents are kept in privacy Investigation process was conducted in the period from 10th Jan 2018 to 30th Dec 2020 Among 115 questionnaires provided to staffs of Minh Thai Co.,Ltd, the researcher collected 105 responses that reached a ratio of 95,4%

3.5 Analyzing data plan

At first, collected data will be input and screened to identify missing samples After

Table 3.2: Encoded Data

N0 Label Explanation

SALES GROWTH = SAG

1 SAG 1 Volume of goods in handling

2 SAG 2 Revenue earned from sales

3 SAG 3 Time of order processing is suitable

4 SAG 4 Time of delivery and payment are suitable

5 SAG 5 Criterias for carring relationship between company and its partners are

suitable

INVENTORY = INV

6 INV 1 Quantity of inventory is suitable

7 INV 2 Value of inventory is suitable

8 INV 3 Cost of inventory is reasonable

9 INV 4 Cost of renting warehouse is suitable

10 INV 5 Cost of checking inventory is suitable

OPERATING EXPENSE = OPEX

11 OPEX 1 Cost of Marketing and Advertisement

12 OPEX 2 Cost of Developing and expanding the market share

13 OPEX 3 Transportation cost is suitable

14 OPEX 4 Cost of handiling complaint is suitable

15 OPEX 5 Cost of mistakes in delivery

AVERAGE COLLECTION PERIOD = ACOP

16 ACOP 1 Time of Receivables is suitable

17 ACOP 2 Cost of managinge average collection period

18 ACOP 3 Cost of Debt collection and payment policies

19 ACOP 4 Cost of Updating to collect receivables from debtor

N0 Label Explanation

20 ACOP 5 Cost of Processing Fluctuations in receivables

21 ACOP 6 Amount of Provision ratio for bad debts

THE FINANCIAL PERFORMANCE = FP

22 FP1 The financial performance of the company is fairy good

23 FP2 Are you satisfied with the company's financial performance?

The data collected would be cleaned and processed by software SPSS 21.0 Some methods of processing data used in this study were as following

3.6 Reliability analysis by Cronbach’s alpha

Cronbach's Alpha's tool was used to evaluate the internal stability of each variable Cronbach's Alpha coefficients are indicators that the analyst bases to eliminate inconsistent variables and limit the junk variables in the research model In other words, the reliability of any given measurement refers to the extent to which it is a consistent measure of a concept, and Cronbach’s alpha is one way of measuring the strength of that consistency The value of alpha (α) is computed by correlating the score for each scale item with the total score for each observation and then comparing that to the variance for all individual item scores Its result may be between negative infinity and 1 however, only positive values of alpha have meaning In general, alpha coefficient ranges in value from

0 to 1, and the increase of this value means that the correlations between the items increase (Amit Choudhury, 2010) Many methodologists recommend a minimum α coefficient that acceptable reliability score should be between 0.6 and 0.8 (or higher in many cases) However, lower thresholds are sometimes used in the literature (Reynaldo et al., 1999) In this paper, scales have got Cronbach’s alpha coefficient ≥ 0.6 will be accepted Besides assessing the reliability of scales, Cronbach’s alpha analysis also helps

to check whether any item is not consistence with the rest of the scale through item-total correlations Item-total correlation performs the correlation of one variable with others in the same scale; the higher correlation value, the better correlation between that item and the others Variables have item-total correlations > 0.3 will be accepted; the others which have item-total correlations < 0.3 will be eliminated from analysis data

3.7 Exploratory factor analysis (EFA)

Exploratory factor analysis is considered as an interdependence technique that to be

necessary for research as well as to find out relationships for different variables The appropriate level of internal correlation between the observed variables in the research concepts is expressed by the Kaiser-Meyer-Olkin (KMO) coefficient, which measures the suitability of the sample and the significance level of the Barlett test KMO has an appropriate value in the range between 0.5 and 1.0 and Sig < 0.5, factor analysis is more appropriate factor analysis (Hair, 1988) In case of KMO has value smaller than 0.5 or Sig

is greater than 0.5, it indicates that factor analysis may not be appropriate Researcher could be identifies the quantity of factors to extract in the model by analyzing exploratory factor They should use a number of factors equal to the number of the eigenvalues of the correlation matrix that are greater than one (DeCoster, 1998) Therefore this study will be plot the eigenvalues in descending order then the number of factor will equal to the number of eigenvalues that occur prior and have greater than 1.0 values The results of EFAs were used for interpreting factor matrixes The varimax rotation process was utilized to produce multiple group factors Factor loadings which indicate correlations between the variables and the factors are required to have greater than 0.5 values Then, a factor can be interpreted in terms of the variables that have high load on it

3.8 Regression analysis

Regression analysis is a modeling technique for analyzing the relationship between a real-valued dependent variable Y and one or more independent variables X1, X2, X3,…., Xk (Ragsdale, 2007) The regression analysis aimed to identify a function that describes the relationship between these variables as closely as possible so that we can assess the impact of each independent variable on dependent variable as well as predict the change

in dependent variable when there is any change in independent variables

At first, it is necessary to test assumptions for regression analysis According to Green W H (1991), when the quantity of sample is larger than 100 (n> 100), following five tests are required

(1) Partial correlation of regression coefficients Independent variables correlate significantly with the dependent variable (for each independent variable) T test with significance level of partial regression coefficient with 95% confidence (Sig ≤ 0.05)

(2) The model’s relevant There is a linear relationship between independent variables and dependent variables Test F: Analysis of variance (ANOVA) with Significance (Sig.) 95% confidence (Sig ≤ 0.05)

(3) Multiple Collinearity of independent variables with Variance Inflation Factor (VIF) <10

(4) The autocorrelation testing The Durbin Watson coefficient used to test the autocorrelation in residuals from regression analysis (also called serial correlations) with a value from 0 and 4 where:

 0 to < 2 is positive autocorrelation (common in time series data)

 2 is no autocorrelation

 > 2 to 4 is negative autocorrelation (less common in time series data)

The estimated standard residue will differ from the residue OLS estimations are still linear estimates, not deviations, but estimates now are no longer valid

(5) Heteoskedasticity It refers to the circumstance in which the variability of a variable is unequal across the range of value of a second variable that predicts it OLS estimation of regression coefficients is not effective When the number of observed variables is larger than 100, the White test is used (White, H 1980)

The regression model in this research is:

Y = b0 + b1 X1 + b2 X2+……+bk Xk + ε

Where:

- Y = FP = (independent variable) Scores on the financial management activities

SAG, X2 = INV, X3 = OPEX, X4 = ACOP – dependent variables)

R-square (coefficient of determination) will provide a goodness-of-fit measure With higher R-square value, the model is higher fit for analysis

CHAPTER 4 RESULTS AND FINDINGS

This chapter describes the reality of business results of Minh Thai Co., Ltd in the stage from 2018 to 2020 in generally and financial management activities in particularly in the same period, survey data collected and show analysis results from software SPSS 21.0

4.1 Overview about Minh Thai Co Ltd

Minh Thai Company Limited is a distributor of Vinamilk in Hai Duong Province, Vietnam The company distributes products via three main channels: grocery stores, supermarkets (also called as modern trade), and industrial zones (known as key account)

in the area of Hai Duong Province Minh Thai Company has charter capital (self-declared according to Notice No 03 / TB-CT dated December 1, 2008 of the company): VND 11,000,000,000 (Eleven billion Vietnam dongs) and legal capital: VND 6,000,000,000 dong (Six billion Vietnam dongs) Currently, with a workforce of nearly 120 highly qualified personnel, Minh Thai Company is capable of achieving the goals set out in the above areas In the period from 2018 to 2020, Minh Thai's business and production situation was not stable, revenue increased but not much increased over the years As for profit, it increases but not much, and the average income of an employee is also stable over the years The reason for increasing in turnover but it was not significantly for profit due to the following factors:

- In the context of fluctuating world economy due COVID 19 pandemic, our country could not avoid those effects Consumers cut spending more, so the company has introduced measures to stimulate buyers such as discounts, focusing more on service, so the increased cost leads to lower profit after tax

- The State also has policies to support businesses to help them overcome this difficult period by reducing corporate income tax to 25% This is a good signal to help businesses reduce the tax burden Stimulating production to increase sales According to Minh Thai Co., Ltd’s financial results was cited in annual report in 2020 The company’s total assets

as of December 2020 reached VND 51.157 million and an average growth rate was 7.8% per year in the period of 2018-2020

Table 4.1: Minh Thai’s key performance indicator in the period of 2018-2020

Source: The annual reports of Minh Thai from 2018 to 2020

The figures in Table 4.1 showed that in three years from 2018 to 2020 total assets of Minh Thai have increased by VND 3.675million The gross revenue has raised VND 15.140 million in the same period in which revenue of selling increased 8.9% in the stage from 2018-2020

Figure: 4.1: Overview of the distribution system of Minh Thai Co., Ltd

Minh Thai Co.,Ltd always advocates sales policy for agents, and has a policy to take care of dealers, supermarkets and industrial parks in Hai Duong province The company does not sell directly to consumers because it does not want to confront with conflicts including conflicts between the company and its agents, between the company and consumers Under this type of distribution channel, the company must apply more cutting-edge technologies on warehouse and management activities to make it automation and cut workforce down for better operation expenses The company's products will be distributed through agents, supermarkets and then delivered to consumers This channel is

(1)

Minh Thai

Co Ltd

Custo mers

mainly applied and this type of distribution helps the company to expand the distribution channel, improving products consumption The use of this channel has various advantages such as: relatively tight control throughout channel, fast capital turnover, the ability to satisfy large markets

Besides, the company must pay attention to more management activities and quite consuming Moreover, the system of agents, supermarkets and industrial parks operating

time-in the form of vertical association is completely time-influenced by the company Therefore, the company always knows the market situation as well as its market share in different areas exactly

4.2 Analysis of financial performance of Minh Thai Company Limited in the period

of 2018 - 2020

4.2.1 Analyze business results

4.2.1.1 Analysis the situation for revenue

* About revenue growth

Table 4.2: Revenue growth of Minh Thai Company Limited in the period of 2018 – 2020

Unit: VND million

Indicators 2018 2019 2020 2019/2018 2020/2019

Net Revenue 31.765 58.189 46.905 +20,05% -7,13% Financial revenue 3.290 2.085 2.738 -36,64% +31,35% Other income 574 277 1.692 -51,74% +510,8%

Source: Synthesized and calculated from the Company's financial statements in the

period of 2018-2020

The above table we can see, net revenue of the company increased by 20,05% in

2019 It thanked to advertising, market expansion, focusing on strategic agencies But in 2020 gross revenue from sales dropped sharply in 2020 due to the impact of the COVID-19 pandemic Major customers such as KENMAXK Industrial Zone, NAM SACH Industrial Zone, Ngo Quyen Industrial Zone, Supermarket such as: Intimex, TATO mark, Tay Bac Mark, Hai Duong Mark have decreased their orders

 About revenue structure

Table 4.3: The revenue structure from sale of Minh Thai Co.,Ltd (2018-2020)

Net revenue from Vinamilk’s liquid milk 56,14% 56,27% 54,74%

Net revenue from Vinamilk’s yogurt 25,53% 23,36% 22,30% Net revenue from Vinamilk’s powdered milk 15,81% 16,23% 18,95% Net revenue from Vinamilk’s fruit juice 1,14% 2,98% 2,84%

Net revenue from Vinamilk’s soymilk 0,88% 0,62% 0,74% Net income from other products (meal powder,

nutritional milk for adults, sweetened condensed

milk, cream, cheese, sugar, rice milk) 0,50% 0,53% 0,42%

Source: Synthesized from the Company's financial statements in the period of 2018-2020

From the above table, in general, the structure of the company's profit before tax in the period of 2018-2020 is quite stable, the change is not significant This reflected the structure of production and business activitíes were not much change in phase For two main products include: liquid milk and yogurt have been reduced; meanwhile powdered milk has increased slightly The proportion of net revenue from fruit juice doubled in 2019 and then decreased in 2020 The

proportion of net revenue from other products was negligible

b Analysis of profit situation

 About profit growth

Table 4.4: Profit growth of Minh Thai Co., Ltd in the period of 2018 – 2020

Unit: VND million

Indicators 2018 2019 2020 2019/2018 2020/2019 Gross Revenue 35.903 45.262 28.132 26,07% -37,85% Profit Before Taxes 36.133 45.436 27.962 25,75% -38,46% Profit After Taxes 28.119 33.825 20.649 20,29% -38,95%

Source: Synthesized and calculated from the Company's financial statements in the

From the above table, we can see that the company's profit increased sharply in 2019 and then dropped sharply in 2020 The strong increase in profit in 2019 was due to the strong increase in revenue, plus well-controlled costs The sharp drop in profit in 2020 is due to the decline in revenue due to the impact of the COVID-19 pendamic, stagnant goods and slow consumption, especially due to the impact of the inventory

 About profit structure

Table 4.5: Structure of the company's profit before tax in the period of 2018 – 2020

Indicators 2018 2019 2020

Profit from Vinamilk’s liquid milk 62,90 69,92% 48,55% Profit from Vinamilk’s yogurt 36,02 27,28% 40,68% Profit from Vinamilk’s powdered milk -3,66 -0,20% -3,40% Profit from Vinamilk’s fruit juice -8,75 -5,27% -0,10% Profit from Vinamilk’s soymilk 11,67 6,32% 11,87% Profit from Vinamilk’s other products 1,82 1,95% 1,40%

Source: Synthesized, calculated from the data of the Finance - Accounting Department of

Minh Thai Co., Ltd

In the profit structure we can seethat profits from liquid milk and yogurt products account for most of the company's profits account for most of the company's profits The proportion of profits from liquid milk products increased slightly in 2019 and decreased sharply in 2020 The proportion of profits from yogurt products decreased sharply in Table 4.6 The ability to generate profits of Minh Thai Co., Ltd in the period of 2018 –

20202019 and then increased sharply in 2020 The proportion of profits from other products was low

c The ability to generate profit from sales

Table 4.6: The ability to generate profits (2018 – 2020)

Indicators 2018 2019 2020

Cost/Revenue 67,44% 64,84% 74,07% Selling expenses/Revenue 3,36% 3,11% 2,85% Management expenses/Revenue 4,27% 4,74% 5,78% Financial expenses/Revenue 0% 0% 0%

Profit Ratio/Revenue 26,64% 28,30% 18,48%

Source: Synthesized, calculated from the data of the Finance - Accounting Department

of Minh Thai Co., Ltd