Suggested capital mobilization project for purchasing new vehicles in order to conduct the driving training operation at the driving test centers – ho chi minh city college of transportation

MEIHO UNIVERSITY Graduate Institute of Business and Management MASTERS THESIS Suggested Capital Mobilization Project for Purchasing New Vehicles in order to Conduct the Driving Training Operation at t[.]

MEIHO UNIVERSITY Graduate Institute of Business and Management

MASTERS THESIS

Suggested Capital Mobilization Project for Purchasing New Vehicles in order to Conduct the Driving Training Operation

at the Driving Test Centers – Ho Chi Minh City College of Transportation

In partial fulfillment of the requirements for the degree of

Masters of Business Administration

Advisor: Dr Chih-Shing Tau Co-advisor: Dr Nguyen Van Hoa Graduate Student: Nguyen Thi Thuy Ngan

December, 2010

I also wish to thank to Nguyen Van Hoa for his kindness on evaluating my thesis as a second supervisor and his willingness to help me whenever I need

Then I am indebted to thank Mr Nguyen Trong Diep, my boss as well as my classmate, and many of my colleagues to support me and encourage me to complete this task so that I will not procrastinate in doing it I would like to express my deep sense of gratitude to all

experts, especially to Mr Duong Tu Luc, Mrs Truong Thi Huong Viet, Mrs Le Minh Thu,

Mr Nguyen Minh Tri, and Mr Quach Hong Ha, for their valuable advice on in some stages

of my research Special thanks go to my friends who had always directly and indirectly supported me as well as offered me much of valuable instructions, suggestions and advice during my study process

Above all, a special thank to my husband, my sons for the great love and encouragement for me throughout the 2-year EMBA course My deepest thanks go to my parents and parents-in-law who helped me to look after my sons while I was studying and injured after a serious accident

Lastly, I offer my regards and blessings to all of those who supported me in any respect during the completion of the study

Suggested Capital Mobilization Project for

Purchasing New Vehicles in order to Conduct the Driving Training Operation at the

Driving Test Centers– Ho Chi Minh City College of Transportation

ABSTRACT

Socializing education, health, cultural activities is an important and long-term method in economic, social development strategy of Vietnam To perform socializing policy, the government encourages public career departments to implement to mobilize capital by contributing shares, contributed capital from worker in the departments, mobilizing other cooperated capital resources via cooperation, association with enterprises, economic organization, financial organization, domestic and abroad individuals to invest in building material facilities

HCM City College of Transportation is a state school; it has a driving-training center and a driving-test center to teach driving and serving the test to issue driving license Because the requirement of learning driving will continue to increase therefore the college has advocated to mobilize capitals to purchase driving-school cars in order to increase driving-training flow Hence, the capital mobilization project for the driving test center is very important The research aimed at seeking out solutions for optimal capital mobilization project for purchasing new vehicles in order to conduct the driving training operation at the Driving Test Centers– Ho Chi Minh City College of Transportation The In-depth interview was conducted with interviewees are academic experts and experts in transportation, education, finance They are now the senior managers; experts have a lot of experiences in the domain of learning and work to find out effectively capital mobilization project Their responses were analyzed to get the answers for the research questions

Keywords: Driving Test Centers, Capital Mobilization Project, Capital Loan from Bank,

Capital from Staff Members, Capital Budget

Suggested Capital Mobilization Project for

Purchasing New Vehicles in order to Conduct the Driving Training Operation at the

Driving Test Centers – Ho Chi Minh City College of Transportation

Contents

ACKNOWLEDGMENTS I ABSTRACT II Contents III Tables V Figures VI

Chapter1 Introduction 1

1.1 Background and Motivation 1

1.2 Research Purposes, Objectives and Questions 4

1.3 Research Scope and Limitations 5

1.4 Research Procedure 6

1.5 Definition of Terms 7

Chapter2 Literature Review 9

2.1 General Theory of Production Investment Capital 9

2.1.1 Capital definition 9

2.1.2 Characteristics 10

2.1.3 The role of business production capital 12

2.2 Structure of Business Production Capital 12

2.2.1 Fixed capital 13

2.2.2 Current capital 14

2.3 Forms of Capital Mobilizing 15

2.3.1 Provision resource from internal of enterprise 15

2.3.2 Provision resource from external 16

2.4 Factors Influence the Ability of Corporate Capital Mobilization 19

2.4.1 Real financial situation of enterprise 19

2.4.2 Influential factor 19

2.5 The Basis for Determining Investment Requirement That Needs to Be Mobilized 20

2.5.1 Liquidity ratios 21

2.5.2 Activity ratios 21

2.5.3 Financial leverage ratios 22

2.5.4 Profitability ratios 22

Chapter 3 Research Methodology 24

3.1 Research Method 24

3.1.1 Descriptive statistics 24

3.1.2 In-depth interview 25

3.1.3 Participants of in-depth interview 25

3.1.4 Design the questions 26

3.2 Reliability and Validity 27

3.3 Data Collection 28

3.3.1 Primary data 28

3.3.2 Secondary data 28

3.4 Data Analysis 29

Chapter 4 Research Results and Analysis 31

4.1 Status of Driving Test Centers and the Needs to Learn Driving 31

4.1.1 Status of the driving test centers 31

4.1.2 Demand of society to learn driving 32

4.1.3 Preliminary survey about contributed ability 33

4.2 Regulations on Raising Capital 33

4.3 Evaluating Selection of Feasible Plan 35

4.4 Select the Most Feasible Plan 35

4.4.1 Estimates of revenue – expenditure of investment plan to supplement driving cars by raising capital from staffs of center 36

4.4.2 estimates of revenue – expenditure of investment plan to supplement driving cars

by capital loans from bank 38

4.4.3 The opinions of experts 40

4.3.4 Conclusion 42

Chapter 5 Implications, Conclusions and Recommendations 44

5.1 Conclusions 44

5.1.1 Status of facilities (driving car) of driving test centers and supply and demand on learning of society 44

5.1.2 Find out the options for raising capital for driving test centers 45

5.1.3 Evaluation and selection of optimal capital mobilization for driving test centers 45 5.2 Solution to Implement Optimal Plan for Raising Capital for Center 45

5.2.1 Exploring the possibility of raising capital 45

5.2.2 Process of investment plans to supplement driving the car for the driving test centers with raising capital from officer of center 46

5.3 Limitations of Research Topics 47

References 48

Attachment 1 49

Attachment 2 51

Attachment 3 61

Tables

Table 1 Summary of Interviewees’ Biography 25

Table 2 Presents theIncrease in Training Scale of 5 Years From 2006 to 2010 33

Table 3 Waiting Time of Students to Learn Driving in Some Driving Center 33

Table 4 Estimated Revenue - Expenditure of Investment Plan to Supplement Driving Cars by Raising Capital from Staffs of Center 36

Table 5 Specific Content of Basic Expenses - Expenditure of Investment Plan to Supplement Driving Cars by Raising Capital from Staffs of Center 36

Table 6 Estimated Revenue - Expenditure of Investment Plan to Supplement Driving Cars by Capital Loan from Bank 38

Table 7 Specific Content of Basic Expenses - Expenditure of Investment Plan to Supplement Driving Cars by Capital Loan from Bank 39

Table 8 Presents the General Opinions of Three Experts 41

Table 9 Presents the General Opinions of Two Experts 42

Table 10 Compares the Feasibility of Two Options 42

Figures

Figure 1 The Basic Steps for Research Methodology 7

Figure 2 Capital Mobilization Diagram 10

Figure 3 Capital Mobilization Diagram - Phase 1 11

Figure 4 Capital Mobilization Diagram - Phase 2 11

Figure 5 Capital Mobilization Diagram - Phase 3 12

Suggested Capital Mobilization Project for Purchasing New Vehicles in order to Conduct the Driving Training Operation

at the Driving Test Centers – Ho Chi Minh City College of Transportation

Chapter1 Introduction

This chapter displays: (1) Background and Motivation, (2) Research purposes, Objectives and Questions, (3) Research scope and Limitations, (4) Research procedure, (5) Definition of some keywords

1.1 Background and Motivation

Socializing education, health, cultural activities is an important and long-term method in economic, social development strategy of Vietnam “Socialization is expansion

of investment sources, exploitation of human, material and financial potentiality in society Promoting and using resources of community effectively to create good conditions in order for education, health, cultural activities to grow faster, have better quality are a long-term policy, are a precept to perform the social policy of the Party and State; this is not a temporary method that means palliative in the short-term because the State is lack of expense for these activities When the community has high income, the State budget is abundant, we still implement socialization, because education, medical and culture are long-term achievements of the community, they will develop increasingly with huge resource of the whole population” (No 90/cp resolution of the Government (August 21st 1997) on direction and socializing policy of education, health, cultural activities)

To perform socializing policy, the government encourages public career departments

to implement to mobilize capital by contributing shares, contributed capital from workers

in the departments, mobilizing other cooperated capital resources via cooperation,

association with enterprises, economic organization, financial organization, domestic and abroad individuals to invest in building material facilities

For transportation business, performance of policy to step up tasks that socialize driving-training assignment, attract human resource within social from organizations, individuals to invest, establish new driving-training centers to meet increasing driving-learning requirement of the community In 2008-2009, Driving-training centers have developed both quantity and training scale of every center There were 49 new driving-training centers (4th quarter of 2007: 8; 2008: 25 and 2009: 16) in 21 provinces, cities, increasing the number of car driving-training centers of the whole country from 168 to

217 with total training flow currently of 100.000 trainees, increasing by 69% compared to September 2007

Socialization policy for driving-training in Ho Chi Minh City has also deployed strongly; during 2 years 2008 and 2009, there were 8 new driving-training centers, increasing the number of driving-training centers in the city from 26 to 34 (among them, there were 19 public schools), with investment in material facilities, transports and teachers of driving-training schools, it has enhanced the total training flow currently of 18.000 trainees, increasing by 80% compared to the beginning of year 2008 Financial resource to perform is the capital of the owner, career capital, shareholders’ capital, banks’ loan capital As for public schools, the capital that staffs, workers, teachers contribute in many different forms has contributed considerably to the development of the school

The importance of the topic:

According to No 1327/QD-TTg resolution (August 24th 2009) of the Prime Minister

in approving road transportation development programming of Vietnam until 2020 and orientation until 2030, the amount of cars with many different categories until 2020 will

be 2.8 – 3 millions, therefore the requirement of learning driving will continue to increase, anticipatively until 2020 there will be about 6 million people having car driving license, addition to the requirement in compensating for 4% retired people Within next 11 years, the whole country needs to train, test to award driving license to about 4.8 million people, average of every year is 430.000 people, while training ability is only 300.000 people per

year (achieve the rate of 69.80% compared to the demand), it leads to waiting situation in

a long time to learn driving car in Ho Chi Minh City and some of South Provinces as Dong Nai, Dong Thap because training competence increases slowly compared to driving-learning demand

HCM City College of Transportation is a state school; it has a driving-training center

to teach driving with current training flow of 540 trainees; since 2004 the college has advocated to mobilize capitals to purchase driving-school cars in order to increase driving-training flow, but due to many reasons, the center has not completed that avocation Until 2005, driving-test center of the college started operating with main objective of organizing, serving the test to issue driving license Until now because of severe competition of other driving-test centers, the amount of candidates who come to the Center to take exam have reduced

From reasons above, the college has commissioned to train driving to the test center with specific target:

driving-• In first phase 2010 – 2011: Every year, the center must train minimum 1,000 trainees

To meet that data, the Center needs 25 tourist cars or 10 touring cars, 12 trucks; investment capital is about 7,000 million VND

• In next years, the center needs to continues to invest with the aim of training minimum 4,000 trainees every year (the Center needs 100 touring cars or 10 touring cars, 12 trucks; investment capital is about 28,000 million VND)

The capital mobilization project for the Driving Test Centers is very important because:

• Solve expense difficulties: HCM City College of Transportation is an achievement unit having revenue, in 2009:

o Total revenue is 36,800 thousand VND (including achievement revenue of 24,000 million VND, service revenue of 10,000 million VND, and state budget of 2,800 million VND)

o Total expense is 35,400 million VND

So in the beginning phase of 2010-2011, the college spends balance investment by achievement capital source in the Center, those are 10 touring car, 2 trucks equivalent to 3,700 thousand VND

The remainder of year 2010 is 3,300 million VND and for investment capital of next years the college doesn’t have ability to invest

From the real situation above, as the person in charge of finance in the Driving Test

Centers, the author has chosen the theme: “Suggested capital mobilization project for

purchasing new vehicles in order to conduct the driving training operation at the Driving Test Centers– Ho Chi Minh City College of Transportation”

Performing capital mobilization project successfully will:

• Be the premise for mobilizing capital to implement investment to develop other businesses of the College

• Help to raise income for staffs, officials, teachers through priority policy for investors, make close-nit, effort to perform issued job, solve employment for relatives of investors

• Each investor will be a non-salary entrance employee of the college; will be a resource to provide trainees firmly and in long-term, help the center develop solidly

1.2 Research Purposes, Objectives and Questions

As presented above, the purpose of this study is to build up projects and select an optimal one for raising the investment capital for purchasing new vehicles in order to conduct the driving training operation at the Driving Test Centers This operation is a part

of the strategy of diversification to take full advantage of the available resources and achieve more efficient operations at Driving Test Centers

Based on the above mentioned purpose of the study, the objectives of this thesis are

as follows:

• Assessing the reality of the vehicles currently owned by the Driving Test Centers, to identify the demand for obtaining the driver’s licenses and the competition among the driving training centers

• Proposing feasible capital mobilization projects for the Driving Test Centers

• Evaluating and selecting the optimal capital mobilization project for the Driving Test Centers

• Suggesting possible solutions to implement capital mobilization project for the Driving Test Centers

From the planned objectives, collected data and information were used to answer to the following main research questions:

1 How are reality of the vehicles owned by the Driving Test Centers, the demand for obtaining the driver’s licenses and the competition among the driving training center?

2 What are the feasible capital mobilization projects for Driving Test Centers?

3 Which are the most appropriate capital mobilization projects for Driving Test Centers?

4 What are the solutions to implement capital mobilization project for Driving Test Centers?

1.3 Research Scope and Limitations

In Vietnam, the mobilization of investment capital in state offices, such as Ho Chi Minh college of Transportation, which is an educational office, is bound by many regulations on state finance as well as the regulations of the ministry and department Hence, the research focuses on assessing the real status of equipments and facilities currently owned by the Driving Test Centers, identifying the demand for obtaining the driver’s licenses and the competition among the driving training centers, analyzing and proposing feasible capital mobilization projects and, finally, suggesting possible solutions

to implement capital mobilization project for the Driving Test Centers accordance with the Law of Vietnam

Due to limited time, collecting data is only conducted in Ho Chi Minh City in which have highest population density and the most economic development in the country in the period from October, 2010 to November, 2010

1.4 Research Procedure

From the research matter was to seek an optimal project to mobilize investment capital for Driving-Test Center to exist and develop in an environment with increasing severe competitiveness This was also the motivation of the research Based on the research purpose, the objectives were set up and concretize with research questions The next step was reviewing the relevant literature on mobilization investment capitals to propose a theory framework for the research Later the data was collected from In- depth interview and secondary data source The following step was to conduct qualitative analysis and make the comparisons to answer the research question

Finally, the conclusions and suggestions were made, marking the end of the research process

The basic steps for research methodology were based on:

Figure 1 The Basic Steps for Research Methodology

1.5 Definition of Terms

• Capital mobilization: Mobilized capital resource includes savings account of

customers, fixed deposit of organizations and individuals, savings deposit of population, mobilized capital from bill of exchange, deposit certificate

• Official staff means people who are working in the driving-test center

• Idle capital means the capital of officials, staffs that they haven’t invested in

anything in a long time If together investing to purchase cars, they will achieve many benefits in the future and so does the driving-test center It means both are profitable

• Driving-training: driving-training center is the type of training office, has to gather

enough condition about class, driving-learning ground, teacher, lesson plan and has to

be issued license according to regulations Driving-training office must have the professional system of class, expert bureau, and teacher, driving-school car, driving-ground and driving-road

The person who wants to achieve type A1, A2, A3, A4, and B1 driving license has

to be trained, self-educated theory subjects but must register in the center to review, take the exam; for type A4, B1, he/she has to be tested, issued graduation certificate

The person who wants to achieve type B2, C, D, E and F driving license has to be trained concentratively in driving-training center that has to be allowed to train and examined to achieve graduation certificate according to regulations

The driving-training center will help the person who passes the training program (receives graduation certificate) register for the driving-test in the center When passing, Transportation ministry will provide him/her with the license

Chapter2 Literature Review

The chapter 2 provides a comprehensive overview of this study on capital mobilization Theory basis on build up projects and select an optimal one for raising the investment capital These sections are presented in the following: (1) General theory of production investment capital; (2) Structure of business production capital; (3) Forms of capital mobilizing; (4) Factors influence the ability of corporate capital mobilization; (5) The basis for determining investment requirement that needs to be mobilized

2.1 General Theory of Production Investment Capital

2.1.1 Capital definition

Investment and development is a couple of category for economic development Investment is an operation of using capital, resources for business production in a long time to achieve profit and social economic benefit (Thuy, 2008)

Development investment is a direct investment to increase property value, create new capacity, or renovate, expand, improve existing capacity because of development objective; it plays an important role in expanding reproduction

Therefore, capital is the most essential factor for economic development as well as corporate development This issue has more and more important meaning for developing small and medium enterprises

“Investment capital is the value of existing corporate properties; it is expressed by money” (Huong, 1998)

Under physical view, capital is classified into 2 kinds: Real capital (work tool, workforce) and financial capital (paper-money, metal-money, securities and valuable documents as money) According to classified form: tangible capital (work tool, workforce, paper-money, metal-money, securities…) and intangible capital (business advantage, invention certificate, corporate establishment cost…) Based on alternative mode, it can be classified into fixed capital and current capital

Source to take corporate capital includes 2 fundament sources: own-capital source and loan-capital source Own-capital is under the ownership of enterprise and members, shareholders in the company Loan-capital includes bank credit, debenture issue, and commercial credit

2.1.2 Characteristics

According to Tho (2007), business production capital is the whole of corporate properties that are illustrated by money (work tool, workforce, cash, other valuable documents…) and attached to business production operation of the enterprise Hence business production capital has characteristics as following:

• Capital is the medium to achieve economic development purpose and improve physical and spirit life of workers

• Capital is valuable’ it means that capital can be purchased, sold, exchanged in the market as well as can be used in a phase or the whole of reproduction line So capital is also a kind of merchandise

• Capital can create profit: business production operation of an enterprise is effective, so it will make more capital

When participating in business production, capital always changes physical form according to time and space When taking part in the production line, all of the capital mobilization is illustrated in below diagram:

TLSX: Materials for production operations

Phase 1: capital that operates within the scope of circulation firstly can be accumulative currency capital; it is brought out the merchandize purchasing market including materials for production operations and labor capacity In this phase, capital changes from currency capital form to production capital form

Figure 3 Capital Mobilization Diagram - Phase 1 Phase 2: capital runs out of circulation area and gets in production operation Here, production factors that are called goods service factors are produced, whereas there

is new value (due to the value of labor capacity creating)

Figure 4 Capital Mobilization Diagram - Phase 2

Phase 3: After manufacturing to create H’, capital turns back to operate in circular area under merchandize form When finishing this phase, capital under merchandize form changes to starting currency capital form but the quantity can be different

Figure 5 Capital Mobilization Diagram - Phase 3

2.1.3 The role of business production capital

According to Tho (2007), capital demand is the condition to maintain production, innovate technical equipment, expand production, improve product quality, increase employment and worker’s income, and contribute in developing social Therefore:

• Business production capital is the important tool to implement corporate business tasks

• Business production capital reflects the economic benefit relationship among companies in investment issues

• Business production capital allows companies to make their choice in analyzing market demand: what to produce? How to produce? And who to produce for? The objective is to attain the most effective result

2.2 Structure of Business Production Capital

There are many ways to classify However, if we are based on corporate business production procedure and the nature of working capital, on the purpose of using capital that companies have, it will be classified into fixed capital and current capital That fundamental difference is that if fixed capital joins the production line such as means of production, current capital is labor If current capital creates entity of goods product, fixed capital is the mode to change current capital into goods product (Giao, 1999)

On the other hand, if all of current capital is switched to the value of goods product

in one time and taken back immediately after enterprises consume goods, fixed capital participates much in business production line and moves in the value of goods product under depreciation form

Capital Structure of a company refers to the composition or make up of its capitalization and it includes all long-term capital resources It is the mix of a firm’s permanent long-term financing represented by debt, preferred stock, and common stock equity (Paramasivan et al, 2009) Capital structure is the ratio of debt over equity (cited in Trung 2010)

2.2.1 Fixed capital

Definition

Corporate fixed capital is the part of investment capital; its characteristic is to alternate gradually each part in many production periods and complete circulation circle after fixed asset expires

According to state regulations, means of production are consider fixed assets only when there are enough two conditions: large value (more than 10 million VND) and duration more than 1 year (Tho, 2007)

According to Thuy (2008), in companies, fixed capital plays an important role

in production line It decides to innovate technique, innovate production technology, equip technical material facilities, and use new technology achievements; it is an important factor to ensure reproduction expansion and continue to enhance worker’s life So using fixed capital is an important matter in both objects on display and value

Structure of fixed capital

It is the density of every kind of fixed capital compared to the whole of fixed capital in a given period It is noted that density relationship in capital structure is a rough quota that depends on many factors such as: ability of consuming products in the market, ability to attract investment capital, business production direction and target, technical equipment standard, manufacturing scale (Tho, 2007)

Researching fixed capital structure has an important meaning for mobilizing and using capital When studying fixed capital structure, it is necessary to study on two points of view: planning content and relationship of each component compared to the whole The given problem is that have to establish an appropriate structure with technical economic characteristic of companies and science development standard (Thuy, 2008 and Huong, 1998)

According to Tho (2007), there are many ways to classify, but based on the nature, we can classify into two types:

Visible fixed assets include:

• House, architecture object

• Machine, equipment

• Transport

• Management equipment and tool

• Other fixed assets

Invisible fixed assets include: invention certificate, author copyright, position advantage

2.2.2 Current capital

Definition

Corporate current capital is advanced amount of money for current asset and circulation asset to ensure the production and reproduction process of companies Current capital includes the value of current asset such as: main material, secondary material, packing, fuel, spare parts, unfinished product… and circulation capital such as: end-product, goods that are purchased outside to consume product, cash capital (Tho, 2007)

According to Huong (1998), unlike fixed capital, current capital changes the whole to product after every reproduction period Within business production process, current capital is changed continuously via 3 phases: reserving,

manufacturing and consuming In each of those phases, current capital is expressed under many different forms; it can be item forms or value forms

It can be realized that current capital is the physical condition that can’t be lack in reproduction process If enterprise doesn’t have capital enough, organizing

to use capital will meet many difficulties, and then production procedure also meets

an obstacle or interruption

Current capital structure

It is the ratio relationship among components of current asset In different companies, current capital structure is not the same Determining current capital structures reasonably will contribute in using current capital effectively (Tho, 2007)

In order to manage and use current capital effectively and based on rotation procedure, capital can be classified into 3 kinds:

• Reserve fund: is a part to buy material, spare parts… reserved to manufacture

• Capital within production procedure: is a direct capital part to serve for production period

• Circulation capital: such as end-product, cash capital

2.3 Forms of Capital Mobilizing

According to Tho (2007) and Giao (1999), there are many ways to classify capital provision resource for enterprises If relying on the place of provision, we can classify provision resource under general form into inside provision resource and outside provision resource On that basis, we can classify more specifically

2.3.1 Provision resource from internal of enterprise

Depreciating fixed asset

Depreciating fixed asset specifying the level of depreciation can be depend on the reality of using fixed asset as well as human’s subjective desire For state companies, it has to depend on intention of State; other companies can choose

using duration and specific depreciation calculation method by themselves In our financial policy, companies can choose and adjust fixed asset depreciation and consider this to be inside capital provision resource

Accumulating re-investment

Accumulating re-investment depends on 2 specific factors and all achieved profit in every business period and policy of after-tax profit distribution For state companies, all achieved profit will have to be used for

• Paying money to use state budget capital according to regulations

• Paying assigned amount of money

• Establishing special funds

Adjusting asset structure

This mode doesn’t increase total number of business production capital but it affects very much in raising capital for necessary operations on the basis of decreasing capital in unnecessary areas

2.3.2 Provision resource from external

Provision from state budget

With this form, companies will receive specified amount of capital from state budget Normally, this form doesn’t ask for many critical conditions from companies that are provided capital as other capital mobilizing form However, increasingly this form is narrow on both size and scale Currently, person who can get this form is state enterprises to maintain the role of economic adjustment tool, investment projects in public goods production fields, public operation that individuals don’t want or don’t have ability

Contributing in an investment via stock issuance

This is the form that enterprises are provided capital directly from stock market When they have capital requirement and choose this form, they consider and issue stock to sell in stock market Basic feature is to increase capital but not

increase loan of companies because stockholders become shareholders of companies So many managers indicate that this form is internal provision resource However, there are only joint-stock companies, state enterprise to be able to issue And enterprises have to disclosure financial information according to corporate law

Borrowing by issuing bond in capital market

This is direct capital provision form; enterprises issue necessary amount of capital under normal bond form that has specified dead-line and sell to the public Basic feature is to increase capital and increase loan of enterprises There are also advantages and disadvantages:

Advantages: Can mobilize necessary amount of capital, expenditure of using capital is lower than borrowing from bank, supplier cannot control closely as borrowing from bank and enterprises

Disadvantages:

• Asking enterprises to understand financial technique clearly to avoid mature loan pressure

• Still having special profit when economy regresses and inflation increases highly

• Bond issuance cost is quite expensive because enterprises need commercial banks’ assistant

• Enterprises need to meets requirements: Fixed asset has to be smaller than the total of capital and long-term loan

• Enterprises have to satisfy conditions according to statutory, then they will be allowed to issue bond

Borrowing capital from commercial banks

This is the form under short-term, mid-term and long-term specific form from commercial banks This is credit relationship between lender and borrower With this form, enterprises can mobilize a large amount of capital, on time and can invite

other enterprise to joint together to appraise the project if they need huge investment This form asks enterprises to be much prestigious, to negotiate patiently, accept critical appraising procedure and commercial banks can control their business operation within lending period

Commercial credit from suppliers

In business, trade relationship among enterprises normally don’t finish at a point, it means time difference appearance between financial flow and physical flow Process that enterprise owes customer and process that enterprise appropriates customer’s money always occur simultaneously If money that enterprise appropriates is larger than money that enterprise is appropriated, surplus money will get the nature of commercial credit or supplier credit Apart from commercial credit, there is customer’s deposit

This is an important short-term credit form (payment from 30 to 90 days), especially for small and medium enterprises, developing enterprises

Leasing-purchasing credit

This form is implemented among enterprises that use specific machines and equipments that they start to lease or buy Enterprise is received not only machines, equipments but also consultant and training

However, there are disadvantages such as: business expenditure of using machines is high and the contract is relatively complex

Joint venture capital

In this form, Joint Venture Company associates with one ore some other companies to create capital for any joint venture operation

Advantages: Company will have necessary amount of capital for one or several activities without increasing loan

Disadvantage: All companies participate in joint venture operations and share achieved profit together

Official development assistant (ODA)

The partner that enterprise can seek and receive this capital resource is cooperation programs of government, nongovernmental organizations or other international organizations

ODA financing form can be assistance form without return or lending form with preferential condition about interest rate and payment duration This form has low expenditure of using capital However, to receive this capital resource, enterprises have to accept critical statutory Simultaneously, enterprises must have condition to work with government office and foreign experts

Foreign direct investment (FDI)

In this form, enterprise receives not only capital but also engineering – technology as well as advanced management mode and share export market However, capital mobilization according to this form requests management control

of foreign enterprise (economic organization) depending on the rate of capital contribution

2.4 Factors Influence the Ability of Corporate Capital Mobilization

2.4.1 Real financial situation of enterprise

According to Tho (2007) and Giao (1999), first of all, it is necessary to consider financial situation of enterprise at the time of capital mobilization by calculating fundamental financial target such as: payment ability, loan indicator, operation index, gain index, simultaneously re-calculating quotas according to different mobilization projects, on that basis, affirming specific objective, mobilization project

re-2.4.2 Influential factor

According to Tho (2007) and Giao (1999), some factors influence the ability

of corporate capital mobilization are presented below:

Sponsored policy

Analyzing, choosing and using sponsored policy; it means which section of asset mobilization resource is chosen for and how to influence current sponsored policy and business period as well as competitor

Creditor

If they are banks and financial organizations, their business power potential is

a necessary assurance in the case that enterprise needs to extend duration of debt payment because of any reason Moreover, we need to consider the motive when participating in their corporate financial resource

Potential management solutions

Absolutely studying and exploiting potential management solutions for mobilization resource This issue has significant meaning for enterprise in difficult financial situation, low payment ability

Financial plan for payment

Today’s financial resource will have to pay when coming mature, so enterprise needs to have financial plan for payment

2.5 The Basis for Determining Investment Requirement That Needs to Be Mobilized

When enterprise considers general impacts of financial decision, for appropriate investment decision and financial strategy to support development plan inn the future, the matter to know the past is anticipated beginning step for the future Although computing and analyzing some of financial ratio cannot replace crystal shuttlecock, they can measure corporate achievements and help you make right questions (Tho, 2007)

According to Ildiko & Tamas, 2009 (cited in Tho, 2007), some key financial ratios used to analyze are presented below

liabilityCurrent

assetCurrent ratio

Quick ratio

Quick ratio is calculated based on current assets that can be converted into cash quickly; sometimes it is called “liquid asset” The bigger this ratio is, the more financial difficulty the company meets

liabilityCurrent

Inventory-

asset Current ration

2.5.2 Activity ratios

This ratio measures business activities of a company To increase operating ratio, managers have to know which assets may be used or not used to generate income to know how to use them more effectively or eliminate them

Turnover ratio of account receivable

It is used to review the payment of account receivable carefully When customers pay all of their bills, then account receivables turn a circle

receivableAccount

salesNet turnover

receivable

Inventory turnover ratio

It is the standard to appraise the effective of using corporate inventory

salesNet turnover

2.5.3 Financial leverage ratios

Financial leverage ratio measures the level that the company funds its business activities by lending When a company borrows money, the company always has to make a series of fixed payment Because shareholders only can receive the remaining after paying creditors, the debt is considered to create leverage For companies, financial leverage ratio will help managers choose the most appropriate capital structure their companies Via financial leverage ratio, investors can see financial risks of the company; thereby it leads to investment decision for the company Normal leverage ratio is:

assetsTotal

sliabilitieTotal

ratio

Equity

sliabilitieTotal

ity assets/Equ

rateInterest

taxesandinterest before

Earningssolvency

incomeNet

(ROS)sales

on

100assetsTotal

profitNet (ROA)

assets

on total

100Equity

profitNet (ROE)equity

on

Economic efficiency of business activities reflects business production quality and reflects skills of using resources (such as labor, machines, equipment, material, and capital) to achieve the final goal which is to maximize profit

Chapter 3 Research Methodology

This chapter presents research methodology of the thesis It includes: (1) Research method: presenting In-depth interview, Interviewees and design the questions; (2) Reliability and Validity; (3) Data collection and (4) Data analysis

3.1 Research Method

According to the research purposes, survey method was chosen to perform a combination of two approaches: (1) descriptive statistics, (2) in-depth interview to calculate and select out optimal plans for raising capital for Driving Test Centers

The descriptive statistics- use of financial instruments are tables, financial index to evaluate the attractiveness of the capital mobilization plan The in-depth interview from the results of descriptive statistics, the feasible plan for raising capital is found Authors used expert opinion to evaluate and select the most feasible plan to mobilize capital for the center

• Profitability ratios ROI, ROS, ROE

Profitability ratio measures the company’s income and other factors that make profit such as revenue, asset, and equity capital

salesNet

incomeNet

(ROS)sales

on

100assetsTotal

profitNet (ROA)

assets

on total

100Equity

profitNet (ROE)equity

on

3.1.2 In-depth interview

The purpose of conducting in-depth interview is to obtain comments, ideas, advice and suggestions from the experts, but other forms cannot be done, in order

to evaluate and select the most feasible plan to mobilize capital for the organization

It was done by direct interviews of academic experts and experts in transportation, education, finance Researchers based on the results of financial analysis of capital raising plans and objectives of Driving center, the College of Transport, to consult experts to select the most feasible plan to mobilize capital for the Center Data collected in-depth interviews are evaluated and analyzed to find out optimal plans for raising capital for driving test

3.1.3 Participants of in-depth interview

There are five experts for interviews They are the senior managers, experts who have a lot of experience in the domain of learning and work Experts are currently working in, schools and large enterprises in the transport, education, and finance sector in the area of Ho Chi Minh Table 1 summarizes the profile of interviewees

Table 1 Summary of Interviewees’ Biography

Expert Gender Years of

working Age Position and company Major

A Male 30 51

Manger of Testing control and issuing driver license – Department of Transportation

Ho Chi Minh City

Engineer & Business Administration

B Female 15 48 Deputy state audit – region V, senior auditor Master of Financial Accounting

C Male 15 38

Chief of Integrated Division 2 state audit – region IV – Auditor

Master of Accounting – Audit

D Female 31 52

Deputy Head of the administrative – cultural… , Department of Finance, Ho Chi Minh City

Master of Financial Accounting

E Male 5 30

Project Appraisal Expert Foreign Trade Bank Ho Chi Minh City

Master of Finance and Banking

(1) Mr A is Duong Tu Luc - Automobile Engineers, bachelor of business

administration, Manager of testing control and issuing Drivers License – Department of Transportation Ho Chi Minh City already has 30 years experience in the management of entire operations on driving training, driving testing and driver’s profile in Ho Chi Minh City

(2) Mrs B is Truong Thi Huong Viet - Master of finance and accounting, deputy

state audit – region IV, senior auditor, already has 15 years experience in accounting – audit field in the state and businesses in the provinces of Ho Chi Minh City, Vung Tau, Binh Duong, Binh Phuoc, Tay Ninh, Long An

(3) Mr C is Nguyen Minh Tri - Master of Accounting - Audit, Chief of Integrated

Division 2 state audit – region IV – Auditor, has 15 years experience in the field of accounting- audit at state and business in the provinces of Ho Chi Minh, Vung Tau, Binh Duong, Binh Phuoc, Tay Ninh, Long An

(4) Mrs D is Le Minh Thu - Master of finance and accounting, deputy head of

administrative – cultural - Department of Finance Ho Chi Minh, has 31 years experience in financial management from budget that invested for education, health, physical education transportation, etc in areas of Ho Chi Minh City

(5) Mr E is Quach Hong Ha - Expert, has 5 years experience in the field of

investment project appraisal for large enterprises, small in the areas Ho Chi Minh City

3.1.4 Design the questions

With the purpose of this study is to build up projects and select an optimal one for raising the investment capital for purchasing new vehicles in order to conduct the driving training operation at the Driving Test Centers, questions used for in-depth interview was designed to find out optimal plans for raising capital for Driving Test Centers After designing the questionnaire, the researcher consulted two academic experts to evaluate, edit and enhance reliability before using Then, use in-depth unstructured interview with 7 questions were designed to ask the experts

1 How would you assess the needs to learn driving of people are living and working in Ho Chi Minh?

2 How would you assess the satisfaction for learning driving need of driving training center in Ho Chi Minh?

3 According to you the driving training center in Ho Chi Minh City should invest, expand facilities, and invest more cars used for training and testing?

4 According to you, how to invest, expand facilities?

5 How would you evaluate plan of raising capital "number …" at the Driving Test Centers?

6 According to you, to implement plan of raising capital that has good effect, what we need to do?

7 According to you, difficulties that we may meet when implementing the plan for raising idle capital from staff members, what we need to do to avoid or overcome these difficulties?

Note: plan of raising capital, "No " means that a feasible plan has been drawn

from the financial analysis

3.2 Reliability and Validity

To ensure the indicators selected to present and measure the construct in an accurate and consistent manner, two critical things were considered Validity was concerned with the accuracy of the research findings The questionnaire used as tool of measurement in the research were considerable to be valid if a construct measures what it is supposed to measure Otherwise, reliability was concerned with the consistency of the research findings The questionnaire was considerable to be reliable as a scale if the questions are answered by respondents consistently (Hair, Babin, Money & Samouel, 2003 cited in Vinh, 2006)

As mentioned above, after designing the questionnaire, the researcher consulted two academic experts who have more knowledge and experience to evaluate and edit to enhance reliability before use

Interviewees are the academic experts and experts in transportation, education, finance They are now the senior managers; experts have a lot of experiences in the domain of learning and work Experts are currently working in schools and large enterprises in the transport sector, education, and finance in Ho Chi Minh Therefore, the information collected has reliability and validity

3.3 Data Collection

Research data were collected from two sources: primary data and secondary data

3.3.1 Primary data

Primary documents are documents that researcher collect, interviews in person

or basic resource with little or no annotated Some research items have very little materials, hence they need to find out and discover unknown sources Researcher need to establish methods for recording and data acquisition (Kotler, 2003)

To have ideas, consult of experts on the evaluation and selection of optimal plan for raising capital for Driving Test Centers, researcher has carried out in-depth interviews, in September and June 10 of 2010 in Ho Chi Minh City with the participation of academic experts and experts in transportation, education, finance

In the interview, at first, the interviewer introduces the purpose of the study and says thank the experts who has participated the interview Then, respondents were asked to speak as specific as possible about the plans for raising capital Then, the interviewee is requested to speak about the raising capital plan as much as possible And then is opinions on the advantages and disadvantages of the capital raising plan To do so, the interviewer must use the questions to find out like "What ?",

“Why ?”, and "How …?” Data collected in-depth interviews will be recorded by recording and hand-written notes The answers will be stored for analysis and later they will find out common solutions to choose the best plan

3.3.2 Secondary data

A type of material derived from primary materials through the treatment stage like: analysis, explanation, discussion or interpretation Secondary data sources such as newspapers, magazines, television and statistical information etc (Kotler,