Financial analysis of vietnam LPG trading joint stock company

VIETNAM NATIONAL UNIVERSITY, HANOI INTERNATIONAL SCHOOL *************** LE THAI HUNG FINANCIAL ANALYSIS OF VIETNAM LPG TRADING JOINT STOCK COMPANY MASTER THESIS HA NOI 2022 VIETNAM NATIONAL UNIVERSITY[.]

VIETNAM NATIONAL UNIVERSITY, HANOI

INTERNATIONAL SCHOOL

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

LE THAI HUNG

FINANCIAL ANALYSIS OF VIETNAM LPG TRADING JOINT STOCK COMPANY

MASTER THESIS

HA NOI - 2022

VIETNAM NATIONAL UNIVERSITY, HANOI

INTERNATIONAL SCHOOL

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

LE THAI HUNG

FINANCIAL ANALYSIS OF VIETNAM LPG TRADING JOINT STOCK COMPANY

PHÂN TÍCH TÀI CHÍNH CÔNG TY CỔ PHẦN KINH DOANH LPG VIỆT NAM

Major: Financial Management Code: 8340202.01QTD

MASTER THESIS

Supervisor: Assoc.Prof Dr Nguyen Thi Minh Hue

HA NOI - 2022

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ABSTRACT

Thesis Title: Financial analysis of Vietnam LPG Trading joint stock company Pages: 75

University: Vietnam National University

Graduate School: International School

Graduate Student: Le Thai Hung

Supervisor: Assoc Prof Dr Nguyen Thi Minh Hue

This study focuses on analyzing the overview of the financial situation of Vietnam LPG trading joint stock company in the period 2018-2020 based on the data announced by the company and checked annually The study also offers solutions to improve the company's financial position in the period 2021-2025

By applying financial analysis methods such as: comparative method, division method, factor analysis method, comparative relationship method, forecasting method, Dupont method, and the collection of primary and secondary data, analysis results have shown the current status of assets and capital of the Company, considered the financial indicators of the company and compared with the group of competitors same sector Through these tables and data, the thesis also shows some achieved results, limitations and causes

The thesis also proposes solutions to improve the financial situation of Vietnam LPG trading joint stock company such as: Company development orientation

in the coming time; Manage reasonable expenses and expenses incurred in the company; Reasonable and effective debt recovery; Improve efficiency of capital use and strengthen capital management; Completing the financial analysis of the Company; Completing the organizational process and content analysis of the Company's financial position

With the most sincere and profound gratitude, I would like to thank Assoc.Prof.Dr Nguyen Thi Minh Hue, who directly guided me throughout the process of researching and completing the thesis

I would like to thank the Leaders and employees at Vietnam LPG Trading joint stock company for spending their time to help me obtain information and synthesize data for analysis during my researching and completing this thesis

Due to the limited research time and knowledge, it is inevitable that mistakes and omissions can be avoided in the completion of the thesis I look forward to receiving your comments and feedback

Thank you sincerely!

Hanoi, , 2022

Thesis author

Le Thai Hung

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TABLE OF CONTENTS

CHAPTER 1: GENERAL INTRODUCTION 1

1.1 Research topic: 1

1.2 Research purposes 2

1.3 Research object and research scope 2

1.4 Research methodology 2

1.5 Research paper overview: 3

CHAPTER 2 5

THEORETICAL BASIS OF CORPORATE FINANCIAL ANALYSIS 5

2.1 An overview of corporate financial analysis 5

2.1.1 Concepts and objectives of corporate financial analysis 5

2.1.1.1 Concept 5

2.1.1.2 Meaning of corporate financial analysis 5

2.1.1.3 Objectives of corporate financial analysis 5

2.1.2 Data in corporate financial analysis 7

2.1.3 Corporate financial analysis method 8

2.1.3.1 Comparative method 8

2.1.3.2 Split method 9

2.1.3.3 Factor analysis method 9

2.1.3.4 Relation and comparison method 10

2.1.3.5 Predictive method 10

2.1.3.6 Dupont method 11

2.2 Financial analysis content 11

2.2.1 Overall assessment of the company’s financial situation 11

2.2.2 Analysis of financial indicators 12

2.2.2.1 Liquidity ratio - the company’s ability to pay 12

2.2.2.2 Activity Ratios - measures the level of activity relative to a company’s assets 13

2.2.2.3 Financial leverage ratios - show how a company’s use of debt affects its operating performance 14

2.2.2.4 Profitability ratios - represent the ability of assets and equity to generate profits 16

2.2.2.5 The market value ratio shows how the company is valued by investors 17

2.3 Factors affecting corporate financial analysis 18

2.3.1 Factors from inside the business 18

2.3.2 Factors from outside the business 20

CHAPTER 3 22

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RESEARCH APPROACH AND METHODOLOGY 22

3.1 Research process 22

3.2 Data in the research 23

3.3 Preliminary research and formal research 23

3.4 Data analysis method 24

CHAPTER 4: RESEARCH RESULTS 25

4.1 Overview of Vietnam LPG Trading Joint Stock Company 25

4.1.1 History of formation and development 25

4.1.2 Main business lines 25

4.1.3 Organizational structure and financial management apparatus 27

4.1.4 In term of the financial management mechanism of the Company 28

4.1.5 Organization of the accounting apparatus and accounting work 29

4.2 Financial analysis results of Vietnam LPG Trading Joint Stock Company 31

4.2.1 Analyze the current state of assets and capital of the company 31

4.2.2 Analysis of business results of Vietnam LPG Trading Joint Stock Company in the period of 2018 - 2020 33

4.2.2.1 General financial situation of the company (as of December 31, 20220): 33

4.2.2.2 Analysis of the company’s business performance: 34

4.2.2.3 Analysis of debt situation and solvency 35

4.2.3 Dupont analysis 37

4.3 Comparative analysis with companies in the same industry 38

4.3.1 Compare business results: 40

4.3.2 General comment: 46

4.4 Evaluation of the financial situation of Vietnam LPG Trading Joint Stock Company 47

4.4.1 Some results achieved 47

4.4.2 Limited and causes 48

4.4.2.1 Restrictions 48

4.4.2.2 The cause of the restriction 49

CHAPTER 5: SOLUTIONS TO IMPROVE THE FINANCIAL SITUATION OF VIETNAM LPG TRADING JOINT STOCK COMPANY 51

5.1 The development direction of the company in the coming time 51

5.1.1 Production growth: 51

5.1.2 Financial plan targets for the period of 2021 – 2025: 53

5.2 Solutions to improve the financial situation of Vietnam LPG Trading Joint Stock Company 56 5.2.1 Manage reasonable cost, amount arising in the company 56

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5.2.2 Recover debts in a reasonable and effective manner 56

5.2.3 Improve capital efficiency and strengthen capital management 56

5.2.4 Complete the financial analysis of the company 57

5.2.5 Improve the organizational process and complete content analysis of the company’s financial position 58

5.3 Other recommendations 60

CONCLUSIONS 61

REFERENCES 62

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LIST OF FIGURE

Figure 4.1.2 Main business lines PVGAS LPG 26

Figure 4.1.3 DIAGRAM OF ORGANISATIONAL STRUCTURE 27

Figure 4.1.5 Organization of the accounting apparatus and accounting work 30

Figure 4.2.: Accounting form at Vietnam LPG Trading Joint Stock Company 31

Figure 4.2.2.2 : Business results of Vietnam LPG Trading Joint Stock Company in 2018 - 2020 35 Figure 4.3.1.1 Compare business results 40

Figure 4.3.1.2 Compare business results 41

Figure 4.3.1.3 Compare business results 42

Figure 4.3.1.4 Compare business results 43

Figure 4.3.1.5 Compare business results 44

Figure 4.3.1.6 Compare business results 45

Figure 5.2.4 Dupont financial analysis chart 58

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LIST OF TABLE

Table 3.1 – Progress of research steps 22

Table 4.2.1: Analysis of company assets and capital for the period of 2018 - 2020 32

Table 4.2.2: Capital structure of Vietnam LPG Trading Joint Stock Company in 2020 33

Table 4.2.2.2: Revenue and operating expenses of the company 34

Table 4.2.2.3: Analysis of the company’s performance in the period of 2018 - 2020 36

Table 4.2.3 Dupont analysis 37

Table 5.1.1 Production growth (North) 51

Table 5.1.1.2 Production growth (Sounth) 51

Table 5.1.1.3 Production growth (Whole market) 52

Table 5.1.2.1 Financial plan targets for the period of 2021 – 2025 (North) 53

Table 5.1.2.2 Financial plan targets for the period of 2021 – 2025 (Sounth) 54

Table 5.1.2.3 Financial plan targets for the period of 2021 – 2025 (PVGAS LPG) 55

CHAPTER 1: GENERAL INTRODUCTION 1.1 Research topic:

Aside from the quality of the product or service, a company cannot be viable in the long run if it is not financially successful Effective financial management helps businesses answer the following questions: How is the business doing? Is the business currently making

a loss or a profit? How much cash do they have on hand? Is there enough money to meet short-term financial obligations? How to use assets effectively? Compare growth rate and net profit with competitors in the same business? Where does the capital come from?…

Most businesses, whether they’ve been in business for many years or just starting up, have four financial goals: profitability, liquidity, efficiency and stability Therefore, corporate financial management plays an important role in businesses

VIETNAM LPG TRADING Joint Stock Company (PV GAS LPG) is a member unit

of PetroVietnam Gas Joint Stock Corporation (PV GAS) During the construction and development phase, PV GAS LPG has successfully completed the key objectives in implementing the development strategy to 2015 and development orientation to

2025 Continuously from 2003 to now, the company’s market share has always been maintained and reached 20 - 25%, leading the market share among LPG trading companies nationwide With the goal of maintaining the position of VIETNAM LPG as the leading gas brand in the country in terms of scale, market, capital, management, human resources and ability to cooperate, integrate and compete in the country, VIETNAM LPG always constantly innovating to provide customers with the best products and services

However, for many years, the LPG market has still experienced fierce competition from key enterprises in order to compete for market share by many different tricks, which are difficult to control and manage, leading to many times unstable gas market The reality is that large businesses want to increase their scale to ensure efficiency, while small businesses want

to lower the conditions for independent existence

Faced with that situation, the requirement for Vietnam LPG Trading Joint Stock Company is to quickly optimize the company’s production and business activities; perfecting all aspects of the business model, in which the focus is on financial management From the analysis of financial indicators in production and business activities of the company, the company will find solutions to help improve financial management capacity, support production activities, thereby improving business efficiency of the Company

Recognizing the importance of the problem, the author chooses the topic “Financial analysis of Vietnam LPG Trading Joint Stock Company” as the master’s thesis with the desire

to be able to contribute to solving a part of the financial management work at the Company in the near future

1.2 Research purposes

On the basis of theory and assessment of the company’s financial status in production and business activities, the goal of the research is to help managers and business executives have more information to serve the improvement of financial position of the company From the results of financial analysis for Vietnam LPG Trading Joint Stock Company, the research will have specific objectives:

- Evaluate the company’s production and business activities in the past period, through the financial analysis of the company

- Provide basic information for financial projections, serving the decisions of the Board of Directors in accordance with the actual situation of the business such as decisions on investment, financing, profit distribution, etc

- Evaluate the achievements and limitations in production and business activities of the company

- Proposing solutions to improve the financial situation of Vietnam LPG Trading company in the coming time

1.3 Research object and research scope

Research object: Financial analysis in production and business activities of Vietnam LPG Trading Joint Stock Company

Research scope: Financial analysis of Vietnam LPG Trading Joint Stock Company in the period from 2018 - 2020

Data processing method: descriptive, statistical, and evaluative analysis methods The thesis uses statistical and evaluation methods based on secondary data and statistical methods over time to evaluate the financial situation and business performance through the financial statements of Vietnam LPG Trading Joint Stock Company

Comparative analysis method for comparison between LPG Company and a number

of gas cylinder production and trading enterprises in the same industry

1.5 Research paper overview:

Financial analysis provides useful information for those interested in the business performance of an enterprise The financial analysis not only reflects the financial position of

an enterprise at a point in time, but it also provides information about the business results of the enterprise at a certain time in the period, besides The information from the analysis is also

an important basis for information users to make decisions

Financial analysis issues in enterprises in general have been interested by many students and chosen as research topics such as:

Bui Van Lam (2011) in the thesis: "Analysis of the financial situation at Vinaconex 25'' joint stock company has studied the database for analysis The thesis has mentioned the basic issues of analysis such as the system of analytical criteria, methods, databases and organization of analysis In the thesis analysis methods have used the regression method to analyze the financial position of the enterprise, the information obtained from the analysis will be more reliable However, in the system of analytical criteria, it is not clear how the payment criteria are, not analyzed in detail the solvency of the enterprise, while the information from the analysis of the solvency indicators is not clear Liquidity is essential for business decision making

Ngo Thi Quyen (2011) in the thesis: "Analysis of the financial situation of But Son Cement Company": through the process of giving general theories on financial analysis and analyzing the financial situation of the enterprise The thesis has made recommendations and solutions to improve the analysis of the financial situation at the company such as strengthening the management of receivables, strengthening measures to reduce cost of goods sold to achieve profit highest returns, enhancing return on equity

Nguyen Manh Cuong (2013) in the thesis: "Improving the financial analysis of the joint stock commercial bank for foreign trade in Vietnam" has also systematized the general theoretical issues of analyzing the financial situation From the content of the analysis, a complete method of analyzing the financial situation has been proposed However, the financial analysis indicator system only analyzes the financial structure, solvency, and operational efficiency, but has not analyzed risks in business activities The risks that businesses face need to be analyzed clearly to avoid unfortunate losses and based on that managers can develop appropriate strategies or business directions to reduce risks in the future business

Master's thesis "Analysis of financial statements to strengthen financial management

at the post office of Nghe An province" (2015) by author Tran Thi Hoa, has generalized the theoretical issues of financial statement analysis business itself, the research results are meaningful to many stakeholders However, the analysis content is not deep and spread, some important indicators such as the structure of each item of assets, the level of financial independence of the companies are not mentioned and analyzed by the thesis

In general, previous studies have synthesized and systematized the basic theoretical issues about the system of financial analysis indicators in enterprises, then analyzed in order

to clearly show the financial situation in Vietnam businesses However, the above dissertations have not gone into deep analysis and comparison with industry data, in order to have the most accurate results and information to serve the information users On the other hand, there has not been any previous research to carry out financial analysis at Vietnam LPG Trading Joint Stock Company Therefore, the author's thesis will aim to fill the gap of the above research by analyzing the finance at Vietnam LPG trading joint stock company

1.1 Contribution of the research :

The research focuses on analyzing financial ratios through the financial statements of companies in the same industry from analyzing and comparing the financial ratios of LPG with companies in the same industry, evaluating the efficiency of LPG in the stages, thereby pointing out the advantages and disadvantages, the financial relationships arising in the production and business process of Vietnam LPG Trading Joint Stock Company, in order to maximize the profits of the business Through the analysis results, the research will help company leaders make decisions on how to manage production and business stages and assets If the business is financially managed optimally, the business will reach the value of sustainable development

1.2 Structure and layout of the research:

In addition to the introduction and conclusion, the appendix and the list of references

to the content of the research paper are presented in 05 chapters:

Chapter 1: General introduction to the research topic

Chapter 2: Theoretical basis of corporate financial analysis

Chapter 3: Research model

Chapter 4: Research results

Chapter 5: Solutions to improve the financial situation of Vietnam LPG Trading Joint Stock Company

CHAPTER 2 THEORETICAL BASIS OF CORPORATE FINANCIAL ANALYSIS

2.1 An overview of corporate financial analysis

2.1.1 Concepts and objectives of corporate financial analysis

2.1.1.1 Concept

Financial analysis is the process of understanding the results of management through methods and tools for collecting and processing information reflected in financial statements and other information in order to evaluate the financial situation of a business, assessing the risk, level and quality of the performance of that business, the ability and potential of the business, helping information users make financial decisions and management decisions to overcome weaknesses, make full play of strengths

Corporate finance is a system of economic relations in the form of value arising in the process of distributing financial resources associated with the creation and use of monetary funds of the business to serve it’s production and business requirements and the general needs

of society

The financial activities of the business have a close and dialectical relationship with other activities in the business Therefore, in order to properly perceive the nature, properties and development trends of corporate finance, it is necessary to divide and resolve corporate financial activities into components in the dialectical relationship between the departments and consider in a dialectical relationship with other economic activities of the business or analyze the financial position of the business

2.1.1.2 Meaning of corporate financial analysis

Financial activities have a direct relationship with production and business activities of

a business and have decisive significance in the formation, existence and development of the business Therefore, all production and business activities have an impact on the financial position of the business On the contrary, the good or bad financial situation has a stimulating

or inhibiting effect on the production and business process Therefore, it is necessary to regularly and promptly assess and check the financial position of the business through the analysis of it’s financial position

2.1.1.3 Objectives of corporate financial analysis

For managers, financial analysis has the following specific goals:

- Create regular cycles to evaluate the management performance in the past period, the performance of financial balance, profitability, solvency and financial risks in the operation of the business

- Ensure that the decisions of the Board of Directors are consistent with the actual situation of the business, such as decisions on investment, financing, profit distribution

- Provide the basis for financial projections

- Work as the basis for inspection and control of activities and management in the business

For investors: Investors who assign their capital to the business to manage and use, get benefits and also bear risks Those are shareholders, individuals or other entities and businesses These objects are directly interested in the calculation of the value of the business The income of investors is the divided profit and the surplus value of the capital These two factors are largely influenced by the profit earned by the business Therefore, analyzing the financial situation for investors to evaluate the business and estimate the value of shares, based on the study of financial statements, profitability, and risk analysis in business

For lenders: who are banks, other businesses lending to the business to meet capital needs for production and business activities When lending, they must be sure of the business’s ability to repay the loan Their income is interest on loans Therefore, analyzing financial performance for a lender is to determine a customer’s ability to repay a loan However, the analysis for long-term loans and short-term loans has different features For short-term loans, short-term credit providers are especially interested in the business’s ability

to pay immediately In other words, the ability of the business to cope when the debt is due For long-term loans, the long-term credit provider must be sure of the repayment capacity and profitability of the business, whose repayment of capital and interest depends on profitability However, both short-term and long-term lenders are interested in the financial structure of the borrowing business

For wage earners in the business: The wage earners in the business are the employees

of the business, whose main source of income is from the paid salary Besides salary income, some employees also have a certain capital contribution in the business Therefore, in addition

to the income from the salary paid, they also have the profit to be shared Both of these incomes depend on the business results of the business Therefore, analyzing the financial situation helps them to orient themselves to stable jobs and rest assured to devote themselves

to production and business activities of the business depending on the assigned work

From the above problems, it can be seen that: Analysis of the financial situation of a business is a useful tool used to determine the economic value, to assess the strengths and weaknesses of the business, to find out objective and subjective causes, to help each individual choose and make decisions that are suitable for the purposes they are interested in

2.1.2 Data in corporate financial analysis

Corporate financial statements have great significance not only for agencies, units and individuals outside the business, but also in directing and operating production and business activities of the business Financial statements not only show the financial position of the business at the time of reporting, but also show the operating results that the business achieved in that situation By reviewing and analyzing financial statements, users of information can accurately assess the financial strength, profitability and prospects of the business

According to the Current corporate accounting regime (Circular 200/2016/TT-BTC of the Ministry of Finance), the Financial statement system, which is applicable to all businesses

in all fields and all economic sectors in the country, includes the following 4 statement forms:

 Balance sheet (Form B01 – DN);

 Income statement (Form B02 – DN);

 Cash flow statement (Form B03 – DN);

 Notes to the financial statements (Form B09 – DN)

A balance sheet is a financial statement that describes the financial position of a business at a given point in time The balance sheet is presented as one side reflects the assets, the other side reflects the capital of that business This is a meaningful financial statement for the subject having business relationship, subject having ownership relationship, subject having management relationship with the business The balance sheet helps analysts look at the size, type of business, and the degree of financial autonomy The balance sheet is an important data that helps analysts assess the financial balance, solvency and capital balance of

a business (Phan Duc Dung, 2013)

The income statement helps information users to analyze, check and evaluate the business results of the business in the quarter or in the period, compare with the previous quarter of the previous period or compare with the other businesses in the same industry to get

an overview of the business’s operating results and movement trends in that period or quarter The income statement consists of 2 parts, part 1 reflects business results, part 2 reflects the performance of the business’ obligations to the State The income statement reflects the results of production and business activities, reflecting the financial position of the business in

a certain period (Dinh Thuy, n.d) This statement helps analysts compare revenue and expenses, evaluate the efficiency of using capital, labor, technology and business management level of the business

The cash flow statement reflects the cash inflows and outflows in a business period The cash flow statement along with the balance sheet and income statement form a complete picture of the financial position of the business Based on the cash flow statement, it shows from what source the business generates money, how it spends it for what purposes, and helps users evaluate its ability to pay debts and pay future dividends

Notes to the financial statements are an integral part of a business’s financial statements that explain a number of issues about the business operations and financial position

of the business in the statement period where other financial and accounting statements cannot present clearly and in detail Notes to the financial statements are prepared together with the Balance Sheet and the Income Statement This statement provides detailed information on production and business situation, fluctuations in some important assets and capital sources, and the accounting regime selected by enterprises

2.1.3 Corporate financial analysis method

According to Thai Ba Can (2014), businesses want to understand the influencing factors, the degree and trend of impact of each factor on the financial situation of enterprises This can only be done on the basis of financial analysis

2.1.3.1 Comparative method

The condition for applying the comparative method is that the financial indicators must be consistent in terms of space, time, content, nature, payment unit Based on the analysis objective, determine the base period for comparison The comparative base is selected as the time or space origin, the analytical period is selected as the statement period or the planning period, the comparative value can be selected as absolute, relative or average

In terms of space, it is possible to compare this unit with another, this department with another, this area with another The comparison of space is often used when it is necessary to determine the current position of the business compared to competitors, compared to the industry average, the regional average It should be noted that, when making spatial comparisons, the origin and the analysis point can be interchanged without affecting the analytical conclusion

In terms of time, the selected comparative base is the past periods (previous period, previous year) or plans and estimates

Types of comparative method: In the analysis of financial position, the comparative method is often used by horizontal comparison (horizontal analysis) and vertical comparison (vertical analysis) Horizontal comparison is the comparison and contrast of fluctuations in both absolute and relative numbers on each indicator Vertical comparison is the use of ratios, coefficients showing the relationship between indicators and between reports to draw conclusions

To serve the specific purpose of the analysis, comparative methods are often used in the following forms: absolute numerical comparison, relative numerical comparison, relatively simple numerical comparison, proportional relative numerical comparison, combined relative numerical comparison, dynamic relative numerical comparison, structure relative numerical comparison, strength relative numerical comparison, comparison with average number

2.1.3.2 Split method

This method is used to subdivide the process and the general result into different parts

to serve the perception of that process and result under different aspects in accordance with the target of interest of each object in each period In the analysis, the generation process and results of financial activities of the business through economic indicators are detailed according to the following indicator:

 Details according to the composition of the research target: subdividing the research target into parts constituting the target itself;

 Details by time of generation process and economic results: subdividing the process and results according to the chronological order of arising and development;

 Details according to the arising space of the phenomenon and economic results: subdividing the process and results according to the place of origin and development of the research target

2.1.3.3 Factor analysis method

Difference method: is a method also used to determine the influence of factors on the

variation of the indicator reflecting the research object The conditions, content and application sequence of the difference number method are the same as the continuous replacement method, the only difference is that in order to determine the influence level of any factor, the difference in the value of the analysis period is used directly compared to the base period of that factor

According to this method, with each change of the indicator we can determine, the change of the result needs to be studied by relying on the correlation between the factors to make the payment equation

Continuous replacement method: is a method of determining the influence of each

factor by successively and successively replacing the factors from the value of the base period

to the analysis period to determine the number of the indicator when that factor changes Then, comparing the value of the newly calculated indicator with the unchanging indicator value of the factor to be determined will calculate the level of influence of that factor

According to the method of continuous replacement, we can determine the influence

of the factors to determine the values of the indicators when the factors change

Characteristics and conditions for applying the continuous replacement method:

 Determine the indicator reflecting the research object

 Determine the factors affecting the indicator reflecting the research object The relationship between the indicator reflecting the research object and the influencing factors must have a close relationship, usually expressed in the form of a product or a quotient

Arrange the influencing factors and determine their influence on the indicator reflecting the research object in the order of pre-determined quantitative factors, then quality factors; in case there are many quantitative factors or many quality factors, the main factor shall be determined first and then the secondary factor

Substitute the value of each factor affecting the indicator reflecting the research object

in turn It should be noted that as many factors as possible, it will be replaced as many times

as possible, and the replaced factors will be kept the same replaced value (analysis period) until the last replacement

2.1.3.4 Relation and comparison method

Relation and comparison is an analytical method used to study and consider the economic relationship between economic events and phenomena, and at the same time consider the balance of economic indicators during the operation Using this method, it is necessary to pay attention to internal, stable, general and repeated relationships, backward relationships, forward relationships, overall balance, partial balance, etc Therefore, it is necessary to obtain adequate and appropriate information on all aspects related to value transfer flows, the movement of resources in the business and the economic relationship of the business with related parties

2.1.3.5 Predictive method

Predictive method is one of the methods of corporate financial analysis used to forecast corporate finance There are different methods to predict future economic and financial indicators; in which, the regression method is used quite commonly

In this method, analysts use historical figures, data that have taken place over time or happened at the same time to establish relationships between related phenomena and events

This relationship is expressed in the form of an equation called a regression equation

Based on the regression equation one can interpret the results that have taken place, estimate and predict the events that will happen in the future Regression method is often used

in the form of simple regression, multiple regression to evaluate and forecast the financial results of the business

2.1.3.6 Dupont method

Is an analytical method based on the interrelationships between financial indicators, thereby transforming a composite indicator into a function of a series of variables That function is created by many variables that are closely related to each other, creating the accuracy and rigor of each indicator In other words, the Dupont analysis method aims to analyze the influence of one criterion on the composite criterion From there, we know the level of influence of the factor analysis on the financial situation of the business

In addition, through the Dupont analysis method, the analyst can also see the influence

of the factors That is also important information to be grasped when analyzing financial situation

2.2 Financial analysis content

2.2.1 Overall assessment of the company’s financial situation

An overview of the financial position of a business is the review and making of preliminary and initial judgments about the financial status and financial strength of the business Thereby, managers understand the level of financial independence; financial security and difficulties that the business is facing to make necessary decisions on investment,

cooperation, joint venture, association, purchase and sale, and lending

Financial analysis of a business includes many different contents depending on the purpose of the analysis However, basically, when analyzing a business’s finances, analysts often focus on the following main contents:

 Overall assessment of the business’s financial situation;

 Analysis of structure and fluctuations of assets and capital sources (Analysis of capital mobilization and use of the business);

 Analysis of funding situation and level of capital guarantee for business activities;

 Analysis of debt situation and solvency;

 Analysis of cash generation and cash flow situation;

 Analysis of the business situation and results of the business;

 Analysis of break-even and decision making;

 Analysis of performance and efficiency of capital use;

 Analysis of financial rises and forecasting of financial needs

2.2.2 Analysis of financial indicators

Financial analysts calculate a few key financial metrics to measure a company’s performance

These financial metrics are no substitute for the crystal ball, but they can help managers ask the right questions For example, the CFO might expect a few questions about the company’s debt ratio and the share of profit declines due to interest payments Similarly, financial indicators can alert him/her to potential areas of difficulty If a branch/unit has a low return on capital, the director will ask the branch/unit to explain

Most financial ratios have descriptive names that tell the user how to calculate the ratio or how to understand its value

The most important types of financial ratios are:

2.2.2.1 Liquidity ratio - the company’s ability to pay

 Current ratio: One of the most widely used measures of a company’s solvency

If the current ratio decreases, it shows a decrease in solvency and is also a sign of financial difficulties

If the current ratio is high, it means that the company is always ready to pay its debts However, if the current ratio is too high, it will reduce operating efficiency because the company has invested too much in current assets or in other words, the management of current assets is not effective (for example: too much idle cash, receivables, backlog inventory) If a company has a lot of inventory in stock, it will have a high current ratio, but

we know that inventory is an asset that is difficult to convert into cash, especially stagnant, poor quality inventory As a result, in many cases, the current ratio does not accurately reflect the company’s ability to pay

 Quick ratio: Quick ratios are calculated based on current assets that can be quickly converted into cash, sometimes referred to as “Assets with liquidity”

“Assets with liquidity” includes all current assets except inventory

Quick ratio Rq=

Current assets – inventory

Current liabilities

2.2.2.2 Activity Ratios - measures the level of activity relative to a company’s assets

Activity ratios measure a company’s business To improve activity ratios, managers must know that unused assets do not generate income, so the company needs to know how

to use them effectively or get rid of them The activity ratio is sometimes called the efficiency ratio or turnover ratio

 Accounts receivable turnover ratio: Receivables are sales invoices that

have not been collected due to the company’s policy of selling on credit and unpaid advances, prepayments to sellers

The accounts receivable turnover ratio is used to carefully review the payment of accounts receivable etc When a customer pays all of their bills, then the receivables turn around

Account receivables turnover ratio=

Revenue

Receivables

When analyzing this ratio, in addition to comparing between years and comparing with companies in the same industry, the company needs to carefully consider each receivable to detect overdue debts and take measures to deal with them

 Inventory turnover ratio: Inventory turnover ratio is a measure of how efficiently a company uses its inventory

Inventory turnover ratio=

Cost of goods sold

Inventories

 Sales-to-fixed assets ratio: This ratio shows how much revenue per dollar

of fixed assets generates Thereby evaluating the efficiency of using fixed assets in the company

Sales-to-fixed assets ratio=

Net revenue

Fixed assets

 Sales-to-total assets ratio: Sales-to-total assets ratio measures how much revenue per dollar of assets involved in the production and business process

Sales-to-total assets ratio =

Net revenue

Total assets

 Sales-to-equity ratio: Sales-to-equity ratio is a very useful metric in analyzing a company’s finances, which will be discussed in more detail later Sales-to-equity ratio measures the relationship between revenue and equity

will assess whether the company has borrowed too much or not? The bank also considers whether the company maintains its debt within the allowable limit?

Credit providers rely on financial leverage ratios to set lending rates for the company (because the more debt a company has, the greater its financial risk) In developed countries, this

the more the company borrows, the higher the interest rate

For the company, the financial leverage ratio will help financial managers choose the most appropriate capital structure for their company Through the financial leverage ratio, investors can see the financial risks of the company, thereby leading to their investment decisions

Common leverage ratios are:

 Debt ratio: This ratio shows what percentage of a company’s assets are financed by debt

Debt ratio =

Total liabilities

Total assets

Total liabilities: including all current and non-current liabilities at the time of

preparing the financial statements, including: short-term loan liabilities, long-term debt due to borrowing or issuing long-term bonds

Total assets: all assets of the company at the statement date

 Debt-to-equity ratio

Debt-to-equity ratio =

Total liabilities

Equity

 Equity multiplier ratio: Another ratio that is also used to calculate the level

of borrowing (financial risk) a company is incurring is the ratio of total assets to equity

Equity multiplier =

Total assets

Equity

 Times interest earned ratio

Annual interest is a fixed financial cost and used when we want to know how

much the company is willing to pay interest More specifically, we want to know how well the borrowed capital can be used, how much profit can be generated and if it is enough to cover the interest on the loan This ratio is used to measure the extent to which profits are generated by using capital to secure annual interest payments If the company is too weak in this respect, creditors can go to litigation and declare bankruptcy

Times interest earned ratio =

Pre-rent and loan interest

Loan interest

In the above formula, the numeric element reflects the amount the company could use to pay interest on its loans during the year The total profit before tax and interest must be taken here because interest is included in expenses before income tax

is calculated The denominator is loan interest, which includes interest paid on short- and long-term loans, including interest on bond issuance

2.2.2.4 Profitability ratios - represent the ability of assets and equity to generate

profits

Profitability ratios measure a company’s earnings relative to other factors that generate profits

profits such as sales, total assets, and equity

This type of ratio includes the following indicators:

 Net profit margin ratio: this indicator shows how much profit is generated per dollar of revenue

Profitability ratio =

Net profit

x 100 Net revenue

 Return on total assets ratio (ROA): this indicator measures the profitability per dollar invested in the company

Return on total assets ratio =

Net interest

x 100 Total assets

 Return on equity ratio (ROE): this is an indicator that investors are very interested in because it shows the ability to generate profit of a dollar of

capital they spend to invest in the company

Return on equity ratio =

Net profit

x 100 Equity

The difference between return on assets and return on equity is due to the fact that the company uses debt If the company has no debt, the two ratios will be equal

2.2.2.5 The market value ratio shows how the company is valued by investors

Equity investors are particularly interested in several values that have a strong influence on the stock’s market price, such as:

 Earning per share (EPS): Earning per share is the most important factor that determines the value of shares because it measures the income contained in a share or in other words it represents the income that investors have due to buy shares

Earning per share =

Net income of common stockholders

Number of common shares

Net income of common stockholders is usually calculated by subtracting the preferred stock interest from net profit

 Payout ratio

Dividend payout ratio =

Dividend per share

Earning per share

In which:

Earning per share =

Total dividend

Number of common shares

Payout ratio shows that the company pays most of its income to shareholders

or keep it for reinvestment This factor determines the market value of shares

 Price earning ratio (P/E)

Price earning ratio =

Market value per share

Earning per share

This is also an indicator that investors are very interested in because it shows how expensive

or cheap shares are compared to earnings

 Dividend yield

Dividend yield =

Dividend per share

Market value per share

As we all know, the investor’s income consists of two parts: dividends and price difference due to share transfer If a stock’s dividend yield is low, that’s not necessarily a bad thing, because investors can accept a low dividend payout ratio in order to save most of the profits for reinvestment They expect a fast growth in dividends and enjoy a large spread in share prices

2.3 Factors affecting corporate financial analysis

2.3.1 Factors from inside the business

First, the capacity of business managers Business managers have an important role in financial management decision making Therefore, if the management team in particular, and the employees of the business in general, are not aware of the necessity and importance of financial management (or are not aware correctly), this activity will give the desired effect

However, awareness alone is not enough, managers themselves need to have management qualifications, expertise and experience to effectively implement the above mentioned financial management contents Managers must also have a deep understanding of the business conditions of the business, it’s essential to have the ability to forecast fluctuations

in raw materials, technology, loan interest rates, etc That helps managers make financial decisions in line with the business situation of the business, which can be flexibly adjusted when there are fluctuations in the market

In addition, the manager’s point of view also greatly influences decision-making A conservative manager often makes prudent decisions such as holding a lot of capital in cash, holding a lot of inventory, limit customers to buy on credit, use a lot of equity instead of borrowing capital, choose the method of uniform depreciation, only replace when fixed assets fail… In contrast, dynamic managers are often bold in decision making, always looking for new solutions to reserve money, low inventory, prefer to use debt capital, like to innovate technology… even though it may face many risks

Secondly, the method of raising capital in the business The business can raise capital

to use for it’s production and business activities by issuing stocks, bonds, raising capital contributions from investors, borrowing capital from credit institutions or commercial banks, finance leases, operating leases of fixed assets, commercial credit or supplementing capital from retained earnings Funds raised from these sources are grouped into two basic categories: equity capital and debt capital

Using equity to finance assets is a preferred safe option because there is no pressure to repay debt, even though the cost of capital is higher than debt capital However, equity cannot meet 100% of the capital needs of the business Therefore, managers must combine the use of equity with debt capital Using debt for business operations increases the risk of financial bankruptcy, puts pressure on managers in the decision-making process An unreasonable capital raising decision, inefficient asset management leads to low operating results that are not enough to repay the debt That can make the business insolvent

Thirdly, the capital structure used in the business Capital structure shows how much debt a business uses and how much equity in its total capital In theory there is an optimal capital structure for the business The optimal structure will create conditions for the business

to use capital at the lowest cost with the highest efficiency But, in reality, there is no optimal capital structure, but the manager can only determine a reasonable capital structure between liabilities and equity in each period in order to achieve the lowest average cost of capital, achieving the target set by the business

In addition, the structure of capital term also affects the efficiency of financial

management There are two options for using capital to form assets of the business Firstly,

using short-term capital to form a part of current assets (usually cash and short-term receivables); the remaining assets (long-term receivables, inventory and fixed assets) are formed by long-term capital With this option, the business will operate safely but the cost of capital used is high and only suitable for low or medium growth businesses, the market has

many unpredictable fluctuations Secondly, the manager can decide to use short-term capital

to finance all current assets and part of non-current assets (long-term receivables and fixed assets); the rest of non-current assets are financed by long-term capital Under this option, the cost of capital used is reduced but the financial risk increases and is only suitable for businesses with high growth rates, certain business conditions in the long run

Fourthly, the corporate governance apparatus Financial management is a difficult activity, requiring the coordination of many departments in a business Therefore, the organizational structure and arrangement of the management apparatus in the business have

an influence on the efficiency of financial management The unified corporate governance apparatus, clearly decentralized, non-overlapping and highly specialized will create good conditions for corporate financial management The departments operate independently but still ensure the linkage in space, operations and the ability to coordinate between these departments, contributing to improving the quality of decisions made by managers to improve financial management efficiency

2.3.2 Factors from outside the business

In addition to the subjective factors, there are also objective factors affecting the effectiveness of financial management Objective factors includes:

Firstly, the state’s macro management mechanism and policy on financial management State functional agencies such as the Ministry of Finance, line ministries, etc.,

on the basis of their functions and tasks, have researched and issued many documents and circulars guiding regulations related to asset and capital management in particular, financial management of the business in general Those are requirements that may be mandatory or guide businesses in the management process

If the state makes appropriate regulations for production and business activities, financial management activities of the business will contribute to improving the efficiency of financial management On the contrary, if these regulations are not suitable or reduce the autonomy of the business, it will cause difficulties and reduce the effectiveness of financial management

In addition, when the state promulgates economic policies that directly affect the business, such policies may restrict or encourage the fields of production and business activities of the business; planning economic zones, territories and countries with trade activities will open up opportunities or disrupt production and business activities Since then, these policies affect the efficiency of financial management in the business

Secondly, the level of market development All corporate governance decisions in general and financial management decisions in particular are only effective when consistent with the actual conditions of the market

The more the market grows, the more options businesses have to solve a problem Particularly:

- When the financial market is highly developed, managers can easily and flexibly choose options such as: Budget surplus and deficit; make up for the shortfall when customers misappropriate capital; various forms of fundraising…

- If the market for raw materials, machinery and equipment, and the labor market has the participation of many suppliers, diversified types, large scale, competitive prices, quick delivery manufacturing enterprises easily determining the size, time of ordering, fixed assets to be invested, the number of employees to be recruited in accordance with the requirements of the business, the method of financing

- With the highly developed technology market and information sources, businesses will easily collect diverse and reliable information and modern information processing tools contribute to accurate and effective financial management decisions

In short, the developed market helps managers make flexible decisions, be able to

cope with risks in the operations of manufacturing enterprises and improve the efficiency of financial management

Thus, Chapter 2 summarizes, generalizes, and refers to the basic theoretical issues used in the process of corporate financial analysis, including: nature, objectives, meaning and content of financial statement analysis as well as the importance of financial management for the business In corporate financial analysis, the comparative method is most commonly used The content of financial analysis has two main forms: analysis of indicators and analysis of the relationship between indicators on financial statements In this chapter, I also present some contents of financial statement analysis such as general assessment of financial position, analysis of typical financial ratios of the business, indicators on solvency, indicators on reflecting capital structure and asset structure, performance indicators, profitability indicators, analysis of structure and fluctuations of assets, analysis of capital efficiency These will be the foundation to serve the research model and research results in the next chapter

CHAPTER 3 RESEARCH APPROACH AND METHODOLOGY

This chapter will detail research methods with main parts such as research design, scale, sample, information collection and information processing

3.1 Research process

The research process of the topic will be carried out according to the necessary steps

to carry out a research, briefly described by the model as follows:



Develop research protocol

 Collect data  Analyze

data 

Interpret and write report results



Explore existing studies



The progress of the steps is arranged in Table 3.1

Table 3.1 – Progress of research steps

period

1 Identify research topic Identify and clarify the research problem

Find out the existing research on the topic

of financial analysis of the business 20/7/2021

30/8/2021

Collect primary data: financial statements, business plans for 2018 - 2021 from the Finance and Accounting Department of Vietnam LPG Trading Joint Stock Company

30/9/2021

5 Analyze data Analyze data and test hypotheses about the

company’s business activities 20/10/2021

results

Write a report on research results, conclusions and recommendations, and complete the thesis

31/10/2021

3.2 Data in the research

• Financial statements, business results announced by Vietnam LPG Trading Joint

Stock Company at the Annual General Meeting of Shareholders on April 27, 2021

• Information is collected from the business plans of Vietnam LPG Trading Joint

Stock Company, period 2018 - 2021 from the company’s accounting department

3.3 Preliminary research and formal research

Collect information from Vietnam LPG Trading Joint Stock Company and some other secondary information related to the importance of analyzing corporate financial situation The purpose of analyzing and researching this information is to build a foundation and assist

in the process of defining research problems and formulating research hypotheses

Preliminary research is the first stage of the research process First of all, the author observes and learns about production and business enterprises to find out and realize the competitiveness and factors affecting the competitiveness of a production and business enterprise in the current economic period The next step is to carry out formal research to understand and analyze the published financial statements and income statement of Vietnam LPG Trading Joint Stock Company; reports and business plans from the company’s finance

and accounting department

Purpose:

- Determine information about the financial capacity of Vietnam LPG Trading Joint

Stock Company

- Learn and identify the factors affecting the financial indicators and financial analysis

of the company

3.4 Data analysis method

The research used the following research methodologies:

• Descriptive, statistical, and evaluative analysis: The thesis uses statistical and evaluation methods based on secondary data and statistical methods over time to evaluate the financial situation and business performance through the financial statements of Vietnam LPG

Trading Joint Stock Company

• Comparative analysis method for comparison between LPG Company and a number

of gas cylinder production and trading enterprises in the same industry

From the obtained results, clarify the strengths and weaknesses of the company’s financial situation and propose a method to solve the situation and complete the analysis of the financial situation at Vietnam LPG Trading Joint Stock Company

CHAPTER 4: RESEARCH RESULTS 4.1 Overview of Vietnam LPG Trading Joint Stock Company

4.1.1 History of formation and development

Vietnam LPG Trading Joint Stock Company (PVGAS LPG), formerly known as PetroVietnam Northern Gas Joint Stock Company, was established under Decision No 826/QD-DKVN dated April 12, 2006 of the Vietnam Oil and Gas Corporation (now the Vietnam Oil and Gas Group) on the basis of Enterprise 2 under the Gas Products Processing and Trading Company

The company was granted business registration certificate by the Business Registration Office - Hanoi Department of Planning and Investment No 0102311149 for the first time on June 25, 2007, and registered for the 16th change on August 7, 2020

Vietnam LPG Trading Joint Stock Company was officially listed on the Hanoi Stock Exchange according to Decision No 507/QD-TTDGHN dated January 7, 2009 of the Hanoi Stock Exchange Center with the code securities is PVG

4.1.2 Main business lines

The Company’s main business is trading LPG (accounting for about 95% of the Company’s total revenue) and mainly distributing industrial and civil LPG products (Including retailing of civil gas cylinders, selling tank trucks to households for direct consumption, LPG filling stations, selling ships, in which: The Company’s LPG products are provided to customers who are residential consumers, commercial and service consumers, accounting for about 40%, and industrial LPG for businesses and ship sales (accounting for about 60%)

The Company’s LPG product is one of the leading brands in supplying LPG products

in the Vietnamese market, PVGAS LPG is currently the enterprise occupying the largest market share in the North with an output of 195,000 tons, accounting for 17% of the market And after one year of operation, the output in the southern region (from Quang Nam to Ca Mau) reached 63,000 tons, accounting for 5.4% of the market share The products bearing the PETROVIETNAM GAS brand of PVGAS LPG have been trusted and selected by consumers nationwide and highly appreciated for their gas quality over the past 20 years With the advantage and potential from the parent company - PetroVietnam Gas Joint Stock Corporation, PVGAS LPG ensures material facilities and a stable source of goods with a system of warehouses (Dung Quat LPG Warehouse, Thi Vai LPG Warehouse, Thi Vai Port Warehouse, Dinh Co Gas Processing Plant, Ca Mau Warehouse - Ca Mau Gas Processing

Plant, etc.); LPG filling station system; General agents, agents and a system of affiliated stores covering the whole country…

Figure 4.1.2 Main business lines PVGAS LPG

Source: Website of Vietnam LPG Trading Joint Stock Company (http://pvgaslpg.vn)

The Company’s business products include industrial gas tanks, gas cylinders of 6kg -

12 kg - 20 kg - 45 kg Using JIS G3116 SG255/SG295 steel gas cylinders made in Japan/Korea, PVGAS LPG’s products have a variety of gas cylinders and valves that meet international standards, meeting the needs of consumers in each area and are encouraged to replace any substandard products on the market

Currently, we can identify the special product of PETROVIETNAM GAS branded gas cylinders supplied by PVGAS LPG in the whole territory of Vietnam, through the main tank color and the highest output is pink one; in addition, there are gray, dark blue, light blue, red cylinders On all gas cylinders of PVGAS LPG, there is a typical logo of the PETROVIETNAM flame with the dark green background of the oil and gas industry and the words PETROVIETNAM GAS

In addition to trading in gas cylinders, PVGAS LPG also has outstanding ability to install gas systems used for HORECA, industrial kitchens at enterprises, factories, service facilities, etc With a stable source of goods from parent company PV GAS from Dinh Co Gas Processing Plant, Ca Mau gas processing plant and imported goods of good quality, meeting international standards, PVGAS LPG is ready to promptly and quickly respond to the increasing and diversified demands of consumers

The Company’s business LPG products are imported from the following main sources: Domestic sources from Dinh Co Gas Processing Plant, Dung Quat Oil Refinery under Vietnam Oil and Gas Group and imported sources from abroad

In the context of the LPG distribution market with fierce competition among market participants, with the presence of major fuel companies in the world, PVGAS LPG always holds a large and stable market share in the North and Central regions Currently, the Company is one of the leading businesses in the Northern market (accounting for about 17% market share in the North)

4.1.3 Organizational structure and financial management apparatus

Figure 4.1.3 DIAGRAM OF ORGANISATIONAL STRUCTURE VIETNAM LPG TRADING JOINT STOCK COMPANY IN 2020

APPENDIX 1: DIAGRAM OF ORGANISATIONAL STRUCTURE

VIETNAM LPG TRADING JOINT STOCK COMPANY IN 2020

According to the company’s organizational chart, affiliated branches and key warehouses will report directly to the Board of Directors Finance and accounting department will be the unit in charge of work related to investment, asset management, budget allocation, credit management, risk analysis and management, cost management, Internal control,

GENERAL MEETING OF SHAREHOLDERS

BOARD OF CONTROLLERS BOARD OF DIRECTORS

INTERNAL AUDITING BOARD COMMITTEE OF DIRECTORS

NT

ADMINISTR ATIVE ORGANIZATI

ON DEPARTME

NT

FINANCE DEPARTME

NT ACCOUNTIN

NT

SAFETY - QUALITY DEPARTME

NT

TECHNICAL SERVICE DEPARTME

NT

KEY WAREHOUSES (4 warehouses)

DEPENDENT BRANCHES (18 Branches)

forecasting, etc The Chief Accountant is also the Head of finance and reports directly to the Board of Directors The Committee of Directors, including the Director and Deputy Directors,

is responsible for reporting to the Board of Directors and is subject to the supervision and direction of the Board of Directors in the day-to-day business of the company (according to the Business Charter of Vietnam LPG Trading Joint Stock Company)

4.1.4 In term of the financial management mechanism of the Company

Before 2019, PVGAS LPG’s main business areas were mainly in the region

With the type of stock listed joint stock company, the financial management mechanism that Vietnam LPG Trading Joint Stock Company complies with the financial management principles of the State, while ensuring the regulations for a listed company and in accordance with the characteristics of the Company All activities in the Company are subject to this mechanism, especially activities related to capital mobilization and use This mechanism addresses many issues, in which, special attention is paid to issues related to capital use, capital preservation, cost control, profit distribution, such as:

- In activities using direct or indirect investment capital, purchasing assets, the Director has the right to decide on activities using less than 10% of charter capital; from 10% to 50%

of the charter capital decided by the Board of Directors; more than 50% of the charter capital decided by the General Meeting of Shareholders

- In capital mobilization activities, the Board of Directors decides on loan contracts with

a value greater than the Company’s charter capital, other loan contracts with a value equal to

or lower than the charter capital decided by the Director

- The Company is responsible for preserving capital by measures such as: Strictly observe the regime of management, use of capital and assets, distribution of profits and accounting regime according to the State’s regulations;

- The Leaders of the Company must strictly manage expenses to reduce costs and service costs in order to increase profits In case of increasing costs, it is necessary to clearly analyze the causes and responsibilities for handling according to regulations Expenditures must have lawful and valid vouchers and be accounted into expenses as prescribed by law

- Profits realized by the Company after paying corporate income tax, the rest will be distributed as dividends; setting aside investment and development funds, bonus and welfare funds, financial reserve funds, and other funds in accordance with law; setting up bonus fund for the Leaders of the Company

- The Board of Directors decides the financial plan of the Company and approves the Annual General Meeting of Shareholders The financial plan is built based on the production