Assignment financial statement analysis of vinamilk in the period 2019 2021

Vinamilk's sources of cash increased throughout the period as a result of a decline in cash balance by approximately 554 billion VND, declining inventory by about 78 billion VND, and dec

NATIONAL ECONOMICS UNIVERSITY

Subject: Business Finance

Lecturer: Dr Tran Tat Thanh

Assignment: Financial Statement Analysis of Vinamilk in the period

2019-2021

Name: Hoang Tue Linh

Student ID: 11202135

Table of Contents

PREFACE 4

I INTRODUCTION 5

II ANALYSIS OF FINANCIAL STATEMENT 6

1 Sources and Uses of Cash 6

a Period 2019-2020 6

b Period 2020 – 2021 6

a Standardized balance sheets 8

b Standardized income statements 9

3 Financial ratios analysis 11

a Liquidity ratios 11

b Financial leverage ratios: 12

c Turnover ratios: 12

d Profitability ratios: 13

e Market value ratio: 14

4 Dupont analysis 15

III CONCLUSION 17

REFERENCES 18

TABLE OF FIGURES

Figure 1: Sources & Uses of Cash (2019-2020) 6

Figure 2: Sources & Uses of Cash (2020-2021) 7

Figure 3: Common-size Balance sheet (2019-2020) 8

Figure 4: Common-size Balance sheet (2020-2021) 8

Figure 5: Common-size Income statement (2019) 10

Figure 6: Common-size Income statement (2020) 10

Figure 7: Common-size Income statement (2021) 10

Figure 8: Liquidity ratios of Vinamilk 10

Figure 9: Financial leverage ratios of Vinamilk 11

Figure 10: Turnover ratios of Vinamilk 12

Figure 11: Profitability ratios of Vinamilk 13

Figure 12: Market value ratios of Vinamilk 14

Figure 13: Dupont analysis 14

Financial activity is one of the contributing parts to the company’s achievement of its goals The remainder of the department will be held back by poor financial performance, which prevents the company from achieving its objectives Therefore, sound financial management is crucial to the expansion of an enterprise's commercial activities Financial analysis is essential for determining if

a company's financial performance is strong or weak The company's financial status will be revealed through financial analysis, and from there, steps will be taken to rectify the situation

Researching Vinamilk’s finance has helped me better understand the current financial position, and determine the causes and extent of factors affecting Vinamilk’s finances From that information, make comments, evaluate, and propose some solutions to boost the business’s operations

I INTRODUCTION

Vietnam Dairy Joint Stock Company (Vinamilk) is a Vietnam-based food manufacturer The company's primary business activities include the production, marketing, and distribution of dairy products, particularly milk in all its forms and other products produced from it, as well as healthy food and non-alcoholic drinks Additionally, it offers farmers other technical assistance for breeding and growing operations, runs a polyclinic for medical treatment, and offers packaging and transportation services The business started out as the government-owned Southern Coffee - Dairy Company in 1976, changing its name to the Vietnam Dairy Company in 1993 Following its IPO on the Ho Chi Minh Stock Exchange in

2003, the business officially changed its name to Vietnam Dairy Products Joint Stock Company

Vinamilk is a prominent company in Vietnam at the moment, reaching over 31 countries and bringing in over 1.5 billion USD annually It also makes important contributions to the nation and its citizens Vinamilk is the first business from Vietnam to appear on Forbes Asia's list of the 200 Best Under A Billion, which recognizes 200 of the region's best small and midsize businesses Vinamilk has grown into an economic success story in the wake of Vietnam's decision to join the WTO after nearly 40 years of development with policies that encourage the use of new technology and innovation

Vinamilk desires to be one of the most favorite brands in every region and territory Their business philosophy is “We keep in our mind and our heart that the quality and innovation are always our most important companions We act with a customer-centered approach and commit to responding to all their needs” To preserve its consistently leading position in the local market and increase shareholder value, Vinamilk also keeps expanding its current geographic reach and product line

II ANALYSIS OF FINANCIAL STATEMENT

1 Sources and Uses of Cash

a Period 2019-2020

Figure 1: Sources & Uses of Cash (2019-2020)

The given graph shows how Vinamilk's sources and uses of cash have changed over the course of three years, along with changes to its assets, liabilities, and owner's equity Overall, total assets, total liabilities, and total equity have grown somewhat from 2019 to 2020

A closer look reveals that from 2019 to 2020, the total Asset increased by 3.723 billion VND Vinamilk's sources of cash increased throughout the period as a result of a decline in cash balance (by approximately 554 billion VND), declining inventory (by about 78 billion VND), and decreasing net fixed assets (by approximately 1 billion 40 billion VND) Additionally, there were notable increases in Other Current Liabilities, Long-Term Debt, and Common Stock of 1.897 billion, 46 billion, and 3.915 billion VND, respectively

Throughout the 2019–2020 year, Vinamilk's accounts receivable and other current assets increased, which increased the company's cash uses In the instance of Vinamilk, the drop in Notes Payable by 1.544 trillion VND and the decrease in Accounts Payable by 583 trillion VND also drove the uses of cash

b Period 2020 – 2021

Figure 2: Sources & Uses of Cash (2020-2021)

Looking over the balance sheets for Vinamilk during the period 2020-2021, we see that quite a few things changed

More specifically, throughout the time period, the Cash balance increased by 237 billion dong Because Vinamilk really paid out 237 billion dong to boost the amount in its checking account, this is a net usage Additionally, the firm spent 1.868 billion VND to boost its inventory, 631 billion VND to grow its other accounts receivable, and 3.310 billion VND to increase its other current assets Over the course of the year, fixed assets decreased by around 1.147 billion VND Due to Vinamilk's successful collection of roughly 1.150 billion VND from Net Fixed Assets, this is a source of cash By the end of the year, it had also borrowed

an extra 970 billion dong for accounts payable The addition of 2.008 billion dong and 2.202 billion dong to other current liabilities and common stock, respectively, helped bring Vinamilk's total cash sources to above 6 trillion VND

 General comments:

Overall, Vinamilk's total Assets, Liabilities, and owner's Equity expanded gradually over the last three years from 2019 to 2021, resulting in a shift of more than 8 trillion dong The sources and uses of money are, however, around

1 trillion more in the 2019–2020 period than they are in the 2020–2021 period Because the pandemic COVID-19 started in later 2019, it may be feasible to justify this by noting that the firm did not keep an extensive amount of inventory on hand As a consequence, its transactions may still be completed rapidly between 2019 and 2020 Furthermore, Vinamilk’s financial situation had not been severely affected by the breakout of the pandemic in 2019, which

helped the firm operate better than in the period of 2020-2021 when the business was facing an increase in Expenses and Debts that ensure the operation and competition with its rivals in the same industry However, Vinamilk had been still regarded as the top business in Vietnam’s dairy industry

2 Standardized financial statements

a Standardized balance sheets

Figure 3: Common-size Balance sheet (2019-2020)

Figure 4: Common-size Balance sheet (2020-2021)

The given figures demonstrate how Vinamilk's assets, liabilities, and owner's equity developed over the course of three years beginning in 2019 Keep in mind that each line item on the balance sheet is expressed as a proportion of total assets (or Total Liabilities & Equity)

Taking a closer look, despite a minor gain of 0.04% between the years of 2020 and

2021, the percentage of cash and cash equivalents decreased from 5.96% to 4.40%

in that time Accounts Receivable (both short-term and long-term) increased

progressively, taking up 10, 1, 10, and 9, % of total assets over the years,

respectively The increase in Accounts Receivable has led to an increase in the company's net sales, showing that Vinamilk has put in place a suitable collection procedure to increase its revenues

Inventory as a percentage of total assets decreased between 2019 and 2020,

however data for that index dramatically rose by 2.6% in 2021 Inventory

decreased by 1.02% in the 2019–2020 year, which helped to increase the

company's total assets On the other hand, the Inventory amount increased

significantly between 2020 and 2021 This is a result of the Covid-19 pandemic's consequences as well as the rising demand for dairy products The increase in other Current Assets from 39.4% to 48.1% over the past three years is also noteworthy Over a period of three years starting in 2019, Net Fixed Assets had a significant decline of 4.7%

Regarding Total Liabilities & Equity, Accounts Payable of Vinamilk reduced by 1.88% from 2019 to 2020, followed by a slight increase of 1.19% in the 2020-2021 course Other Current Liabilities rose remarkably, accounting for 13.4%, 16.3%, and 18.6%, respectively The date for Long-term Debt remained stable at 1.18% over the year 2019-2020 before declining to 0.78% in 2021 Additionally, having increased by 2.96%, the Common Stock of the firm fell to 66.5% during the

research period

b Standardized income statements

Figure 5: Common-size Income statement (2019)

Figure 6: Common-size Income statement (2020)

Figure 7: Common-size Income statement (2021)

For the income statement, each item is calculated as a percentage of net sales Overall, managers and investors anticipate that throughout the period, Expenses as

a percentage of net sales will decline and Profit as a percentage of net sales will rise

Examine the income statement for Vinamilk in more detail The cost of doing commercial activities, which includes selling, general and administrative, and finance costs, falls by 1.9% over time Additionally, the figures for Cost of Goods Sold (COGS) increased significantly between 2019 and 2021 by 3.6% COGS, which includes the cost of finished goods sold as well as the cost of services, is a significant factor in total profitability The consequences of COVID-19 in late

2019, the rising customer demand, the growth of manufacturing scale, and better

production standards are to blame for the company's increase in COGS The business's revenues have increased as a result of lower expenses and higher COGS The progressive drop in the Earnings before Interest and Taxes (EBIT) number, which is 1.7% over the course of three years, has also been caused by the increase

in COGS and the decrease in Expenses Interest Expenses saw a slight fluctuation, reducing to 0.14% after this index rose by 0.03% between 2019 and 2021, which led to the decrease in Taxable Income The research period witnessed a moderate fall in Taxes, from 3.91% in 2019 to 3.66% in 2021 This has caused the Net Income to decline over the period

3 Financial ratios analysis

a Liquidity ratios

LIQUIDITY RATIOS

Quick ratio =

Figure 8: Liquidity ratios of Vinamilk

- Current ratio: The current ratio is a liquidity ratio that measures a

company’s ability to pay short-term obligations or those due within one

year Generally, it can be seen that current ratios experienced a gradual

upward trend from 2.06 in 2019 to 2.38 in 2021 The solvency of Vinamilk was always guaranteed at around 2 and the company had a greater ratio compared to the industry average in 2021, which means that the company was effective in paying short-term debts by its current assets during the period

- Quick ratio: The quick ratio measures the dollar amount of liquid assets

available against the dollar amount of current liabilities of a company The quick ratio of Vinamilk climbed from 1.72 in 2019 to 2.09, which was because of a slight decline in the Inventory However, in the following year, the increase in Inventory resulted in a reduction in the quick ratio Besides, the quick ratio was greater than the industry average in 2021; therefore, the business was able to pay its short-term debts with its liquid assets

b Financial leverage ratios:

FINANCI AL LEVERA GE RATIO

Total Debt ratio = TD/TA times 0.335 0.305 0.328 1.23

Equity Multiplier (EM) =

Figure 9: Financial leverage ratios of Vinamilk

- Total Debt ratio: Total debt to total asset is a ratio used to visualize how

financially stable a company is During the period from 2019 to 2020, Vinamilk’s debt to assets remained stable at a safe level, below 1 and below the industry average It shows that the company’s financial autonomy was relatively high, and most of the business’s assets are financed by its equity Hence, investing in Vinamilk was not as risky as in other firms

- Equity Multiplier (EM): The equity multiplier is a ratio that measures the

portion of a company’s assets financed by stockholder’s equity This ratio of Vinamilk was greater than the industry average in 2021, which indicates that the corporation relied more on financing from debt and other liabilities It means that the firm had a lower debt burden, and it would be able to sustain

a healthy business with its own cash flow

c Turnover ratios:

TURNOVER RATIO

2019 2020 2021 Ind Receivables Turnover = Sales /

Total Asset Turnover (TATO) = Sales/

Inventory Turnover = COGS /

Figure 10: Turnover ratios of Vinamilk

- Receivables Turnover: The receivables turnover ratio measures the

efficiency with which a company is able to collect on its receivables or the credit it extends to customers This ratio of Vinamilk saw a steady decline from 12.7 in 2019 to 10.71 in 2020, and it was lower than the industry average This leads to the fact that the company’s collection of accounts receivable was not efficient and Vinamilk had a low proportion of quality consumers that pay their debts quickly

- Total Asset Turnover (TAT): The asset turnover ratio shows how

efficiently the firm uses its assets to produce revenue compared to other businesses in the same industry Between 2019 and 2021, this ratio of Vinamilk fell from 1.283 to 1.172, lower than the industry average ratio (1.37), which illustrates that the company worked less efficiently in this period

f

- Inventory Turnover: Inventory turnover measures how efficiently a

company uses its inventory Despite its rise from 2019 to 2020, this ratio declined significantly to 5.11 in 2021 In addition, the inventory turnover ratio of Vinamilk was much lower than the industry average, which implies

a sign of weal sales of the company

d Profitability ratios:

PROFITABILITY RATIO

2019 2020 2021 Ind.

Profit Margin (PM) = Net Income /

Sales % 18.40% 18.29% 17.01% 12.99%

Return on Assets (ROA) = Net Income

Return on Equity (ROE) = Net Income

Figure 11: Profitability ratios of Vinamilk