Gross profit margin ratio = gross profit total revenue

Gross profit margin ratio = Gross profit / Total revenue In which, gross profit is calculated by the formula:... Gross profit margin ratioAccording to Figure 1, Vinamilk's gross profit m

INDIVIDUAL ASSIGNMENT

Principles of Accounting

ACC101

Lecturer: Nguyễn Thị Quế Anh

Name: Đinh Hoàng Phi Long

Student ID: SE171112

Class: ACC101_3W_2

Table of contents

A Introduction

Vietnam Dairy Products Joint Stock Company, commonly known as Vinamilk, is a company that manufactures and trades milk and dairy products as well as related machinery and equipment in Vietnam. Vinamilk is currently the market leader in the dairy processing industry, accounting for more than 54.5% of the liquid milk market, 40.6% of the powdered milk market, 33.9% of the drinking yogurt market, 84.5% of the edible yogurt market, and 79.7% of the condensed milk market. The overall aim

of the assignment is to analyze the financial position of Vietnam Dairy Products Joint Stock Company using financial ratio analysis for the years 2019-2021 Discover Vinamilk's business potentials as well as financial risks through the analysis Make appropriate recommendations for the Company's effective operation and estimate its future financial position In this assignment, I compare the financial statements of Vietnam Dairy Products Joint Stock Company for the last three years, 2019, 2020, and

2021, including the Balance Sheet and Income Statement Analyze and evaluate changes in the company's operations, asset structure, and capital sources from there

A FINANCIAL RATIOS ANALYSIS

I PROFITABILITY RATIOS

1 Gross profit margin

Gross Margin, often known as the gross profit margin, is a crucial sign of a company's profitability After deducting the cost of products sold, this indicator displays the gross profit the company makes for each dollar of revenue

Gross profit margin ratio = Gross profit / Total revenue

In which, gross profit is calculated by the formula:

Figure 1 Gross profit margin ratio

According to Figure 1, Vinamilk's gross profit margin tends to decline between 2019 and 2021, indicating that the company's production efficiency may be slowing down Cost of goods sold has not been optimized, despite the fact that total revenue and gross profit have a tendency to rise over time This indicates that Vinamilk's competitive advantage is gradually eroding

2 Net profit margin

The company's net profit margin is the amount of profit it makes from each dollar of sales after taxes, expressed as a percentage (%) In other words, how much profit the business makes after taxes for every dollar of revenue Net profit margin is an important indicator in assessing the profitability of a business

Net profit margin = Net profit ⁄ Total revenue

Figure 2 Net profit margin ratio

Figure 2 demonstrates that Vinamilk's net profit grew from 2019 to 2020 However, the net profit margin for 2021 indicates a modest decline That indicates higher risk and lower profit Vinamilk must analyze its expenses in order to maximize profit margins and raise net profit margins

3 Return on asset

Return on assets (ROA) refers to a financial ratio that indicates how profitable a company is in relation to its total assets Corporate management, analysts, and investors can use ROA to determine how efficiently a company uses its assets to generate a profit (Marshall Hargrave, 2022) The formula is calculated as follows:

Return on assets = Net income / Average assets

The average asset value is determined by:

Average assets = ( Beginning assets + Ending assets) / 2

Figure 3 Return on assets Figure 3 demonstrates the steadily declining ROA for Vinamilk from 2019 to 2021 The falling return on assets is shown by this indicator Vinamilk's Profit on Assets index has gradually decreased over the years, indicating that Vinamilk has not yet fully exploited its assets to make more profits, even though profit earned and asset value have increased steadily over the years

4 Return on equity

Return on equity (ROE) is a financial performance metric that is determined by dividing net income by shareholders' equity ROE is defined as the return on net assets since shareholders' equity equals a company's assets less its debt The ROE ratio reflects average equity on the balance sheet as well as profitability, which is displayed

on the income statement The formula is

Return on equity = Net income / Average Shareholders’ equity

Figure 4 Return on equity

Figure 4 demonstrates the downward trend in Vinamilk's Return on Equity from 2019

to 2021 This represents a decline in net profit and equity, as well as a reduction in the company's capacity to utilise capital It is clear that the company's poor decisions have

an impact on how much capital is reinvested in assets

1 Asset growth rate

The asset growth rate displays the percentage growth in relative wealth over time Negative ratios indicate slow growth The asset growth rate is unknown when the assets from one of the periods prior to the current period are zero

An assets growth rate = ( Ending assets - Beginning assets ) / Beginning assets

Figure 5 Assets growth rate

Figure 5 depicts the Vietnam Dairy Products Joint Stock Company's asset growth rate from 2019 to 2021 The company's asset growth rate peaked during this time period in

2019 at 19.63% By 2018, there has been a significant drop to 8% Less assets are created, as can be seen, and their value depreciates dramatically as well By 2021, the growth rate was beginning to increase once more, indicating that there were more assets than there were at the same time period the previous year

2 Revenue growth rate

The revenue growth rate displays the proportionate revenue growth over time (as a percentage) Negative growth is not implied by a lower ratio The growth rate of sales

is unknown if the revenue for one of the periods prior to the current period was zero With the use of this ratio, we may determine how much a company's revenue climbed from one period to the next

Revenue’s growth rate = ( Ending revenue - Beginning revenue ) / Beginning revenue

Figure 6 Revenue’s growth rate

Figure 6 displays Vinamilk's revenue growth rate over the time period 2019–2021 typically shows a dramatic decline from 7% to only approximately 2% Even while income has grown consistently throughout the years, it now appears to be slowing down Vinamilk needs more approaches and tactics to boost sales so that company may achieve a competitive edge

3 Net profit growth rate

Net profit growth – A company's net profit is the amount of money it makes after deducting all of its costs A firm's ability to pay dividends increases with a growth in net profit, and the company can utilize the gains to diversify its business and expand Net profit’s growth rate = ( Ending net profit - Beginning net profit ) / Beginning net profit

Figure 7.Net profit growth rate

Figure 7 depicts a steep decline in the growth rate of Vinamilk's net profit throughout the period of 2019–2021 The rate of growth of net profits will rise to 6.5% in 2020 from 3.4% in 2019 The net profit growth rate did, however, drastically decline in

2021, falling to -5% It is evident that the sales profit has significantly decreased from the first year

III LIQUIDITY RATIOS

1 Current ratio

Another name for current ratio is short-term ratio This indicator depicts the proportion of current assets to current liabilities, which reflects the company's current capacity to settle its short-term obligations

The formula is:

Current ratio = Current assets / Current liabilities

Figure 8 Current ratio

The graph demonstrates that Vinamilk's current ratio steadily increased from 2019 to

2021, demonstrating that they are better able to pay back their loans This is a

promising sign for the company's ability to settle its debts

2 Acid-test ratio

A ratio that shows if a business has enough liquid assets to cover its short-term liabilities without selling inventory Both inventories and pre-paid expenses are excluded from the formula above because they are difficult to easily cash out Since inventory is not included in the calculation, the acid-test ratio is much stricter than the current ratio

The formula is:

Acid-test ratio = ( Cash and cash equivalents + Short-term investments + Current

receivables ) / Current liabilities

Figure 9 Acid-test ratio

The acid test ratio for Vinamilk grew and dropped unevenly, as seen in Figure 9 Acid test ratio reached its peak in 2020, however there was only a very tiny decline in

2021 This nevertheless demonstrates their capacity to settle debt without being forced

to liquidate merchandise right away

1 Debt to asset ratio

A debt-to-assets ratio is a type of leverage ratio that assesses the relationship between

a company's total assets and its debt obligations, including both short- and long-term debt A company's debt-to-assets ratio can provide insight into the leverage of the business and its capital structure A company's dependence on its lenders increases as its level of leverage increases

Debt to asset ratio = Total liabilities / Total assets

Figure 10 Debt to assets ratio

Figure 10 demonstrates how Vietnam Dairy Products Joint Stock Company's

debt-to-asset ratio declined between 2019 and 2021 In particular, this rate will drop from roughly 38% to about 32% between 2019 and 2021 This demonstrates that this company is low risk due to its low debt ratio In the past three years, total debt has not changed significantly, which is a positive sign when the company's assets are rising quickly

2 Debt to equity ratio

The debt-to-equity (D/E) ratio, which is calculated by dividing the total liabilities of the company by the equity held by its shareholders, is used to assess a company's financial leverage In corporate finance, the D/E ratio is a crucial indicator It is a gauge of how much debt a business is using to fund operations as opposed to using cash on hand One particular kind of leverage ratio is the debt-to-equity ratio

Debt to equity ratio = Total Liabilities / Shareholder’s equity

Figure 11 Debt to equity ratio

Figure 11 demonstrates that over the three years from 2019 to 2021, Vinamilk's

debt-to-equity ratio tends to gradually decline This ratio falls by more than 14% between 2019 and 2021 This demonstrates Vinamilk's capacity to settle both

short-term and long-term loans without suffering a loss

3 Times interest earned ratio

Based on current income, the times interest earned (TIE) ratio assesses a company's capacity to service its debt Earnings before interest and taxes (EBIT) divided by the total interest due on bonds and other debt is the calculation for a company's TIE number The outcome is a figure that illustrates how many times a business could pay its interest expenses out of pretax profits The interest coverage ratio is another name for TIE

Times interest earned ratio = Earning before interest & tax (EBIT)/ Interest expense

Figure 12 Times interest earned ratio

Figure 12 displays the frequency with which Vinamilk's interest rate fell between

2019 and 2020 But in 2021, it started to rise significantly This demonstrates that this company is better able to pay down its debt Investors will therefore have faith in debt loans because they have a strong ability to pay interest

1 Inventory turnover ratio

Inventory turnover is a financial indicator that aids managers in analyzing and assessing the activities of the company throughout the year Businesses are interested

in this indication, which is one of those displayed in financial statements Inventory turnover, also referred to as the inventory turnover ratio, is a tool used by managers to assess a company's performance

Inventory turnover ratio = Cost of goods sold / Average inventory

Figure 13 Inventory turnover ratio

Figure 13 illustrates that Vinamilk's inventory turnover ratio is increasing and falling unevenly, which shows that items are sold faster and more income is received In contrast, the company has not yet streamlined COGS, hence in 2021 the inventory turnover ratio will go down

2 Days’ sales in inventory

The days sales of inventory (DSI) financial ratio shows how long it typically takes a business to convert its inventory, which includes things that are still being manufactured, into sales in days DSI can be understood in a variety of ways and is sometimes referred to as the average age of inventory, days inventory outstanding (DIO), days in inventory (DII), days sales in inventory, or days inventory The number

Figure 14 Day’s sales of inventory

Figure 14 displays the daily inventory turnover for Vinamilk The past three years have seen an uneven increase and drop Inventory turnover will last 64 days in 2019 and 54 days in 2020 It rises slightly once more in 2021, to roughly 61 days A shorter period for inventory release is indicated by this number of days That might mean Vinamilk has effectively controlled inventory but it has not yet optimized it

3 Accounts receivables turnover ratio

By analyzing how long it takes to collect the outstanding debt over the course of the accounting period, the accounts receivable turnover ratio, also known as receivables turnover, is used in business accounting to quantify how well businesses are managing the credit that they extend to their customers

Receivables turnover ratio = Net sales / Average accounts receivable

Figure 15 Receivables turnover ratio

Figure 15 demonstrates how Vinamilk's receivable turnover has been declining during the years from 2019 to 2021 Although this company's financial position is favorable and has been optimized, it still has unpaid debts and uncollectible accounts, and it is therefore beginning to deteriorate For this indicator to change from negative to

positive, businesses must continue to improve

4 Days sales receivable

Days Sales receivable is a metric used to describe how long it typically takes a business to collect payment for a transaction Days Sales receivable is frequently calculated monthly, quarterly, or annually Days Sales receivable, also known as days receivables or average collection period, is a component of the cash conversion cycle The formula is:

Days sales receivable = Average accounts receivable / Net Sales × 365

Figure 16 Days sales receivable

Figure 16 demonstrates how Vinamilk gradually extends the number of days it takes

to collect income from 2019 to 2021 25 days in 2021 compared to 22 days in 2019 This demonstrates that the business is minimizing the number of days it takes to obtain receivables

B Conclusion & Recommendation

1 Conclusion

Vietnam Dairy Products Joint Stock Company is a business with strong financial capabilities, to put it briefly with a large quantity of assets, solid earnings, and yearly growth Despite the fact that the ratios will slow down in 2021 for a variety of causes, including the covid pandemic, However, it is clear that the corporation continues to maintain good ratios, demonstrating its capacity to cover costs Debt is still kept at a manageable level

2 Recommendation

Vietnam Dairy Products Joint Stock Company must keep putting product marketing