FINANCIAL PERFORMANCE A CASE STUDY OF HANOI TELECOMS ELECTRICITY JOINT STOCK COMPANY

I wish to express my genuine thanks and gratefulness to the Academy Of Finance and Advanced Educational Programs for granting me this exceptional opportunity to be an intern at Hanoi telecoms electricity jointstock company. I sincerely respect and appreciate the hard work of Mr. Vu Van Ninh, my Academic Supervisor. Without his thoughtful direction and admirable patience, this work would have never been an accomplishment. In each period, his supervision and support helped this Graduation Thesis to be finished effectively. I also want to acknowledge with much appreciation the important role of the staff of Hanoi telecoms electricity jointstock company, especially Mrs. Vu Thi Xuan Hoa – Chief of Financial – Accounting Department who allowed me to utilize every single fundamental record and materials to finish this report. Without their support during the internship period, it would be impossible for me to finish this work.

FULL NAME: NGUYỄN QUỲNH ANH

I wish to express my genuine thanks and gratefulness to the Academy

Of Finance and Advanced Educational Programs for granting me thisexceptional opportunity to be an intern at Hanoi telecoms electricity joint-stock company

I sincerely respect and appreciate the hard work of Mr Vu Van Ninh, myAcademic Supervisor Without his thoughtful direction and admirablepatience, this work would have never been an accomplishment In eachperiod, his supervision and support helped this Graduation Thesis to befinished effectively

I also want to acknowledge with much appreciation the important role ofthe staff of Hanoi telecoms electricity joint-stock company, especially Mrs

Vu Thi Xuan Hoa – Chief of Financial – Accounting Department - whoallowed me to utilize every single fundamental record and materials to finishthis report Without their support during the internship period, it would beimpossible for me to finish this work

I assure you that this is my own research project, the data and results stated in the graduation thesis are honest and come from the practical situation of the intern.

The author

Nguyễn Quỳnh Anh

ACKNOWLEDGMENTS i

PLEDGE ii

APPENDIX iii

LIST OF ABBREVIATIONS vi

LIST OF TABLES vii

LIST OF CHARTS viii

PREFACE 1

CHAPTER 1: OVERVIEW OF FINANCIAL SITUATION OF COMPANY 4

1.1 Corporate finance and corporate finance decisions 4

1.1.1 Business finance concept and business finance relationships 4

1.1.1.1 Business finance concept 4

1.1.1.2 Business finance relationships 5

1.1.2 The financial decisions of the business 6

1.2 Enterprise Financial Management 8

1.2.1 Business financial management concept 8

1.2.2 The role of corporate finance management 9

1.2.3 Content corporate finance management 10

1.2.4 Corporate value and goals of corporate financial governance 11

1.2.4.1 Corporate value 11

1.2.4.2 Goals of corporate financial governance 13

1.3 Financial situation of the business 13

1.3.1 Concept of corporate financial situation 13

1.3.2 Content and criteria reflect the situation of the business 14

1.3.2.1 Capital situation of the business 14

1.3.2.2 The situation of capital allocation of enterprises 16

1.3.2.3 Business performance of the enterprise 17

1.3.2.4 Cash flow situation of the business 18

1.3.2.5 The situation of debt and solvency of the business 22

1.3.2.6 Situation of performance and efficiency of business operations of the enterprise 26

1.4 Factors affecting the financial analysis of the business 30

1.4.1 Objective factor 31

1.4.2 Subjective factor 32

CHAPTER 2: CURENT FNANCIAL SITUATION OF HANOI TELECOMS ELECTRICITY JOINT STOCK COMPANY 33

2.1 The process of formation and development of Hanoi telecoms electricity joint stock company 33

2.1.1 Establishment and development process 33

2.1.1.1 Basic information about the company 33

2.1.1.2 History of formation and development 34

2.1.2 Operating characteristics 35

2.1.2.1 Business lines and areas 35

2.1.2.2 Business characteristics of the company 35

2.1.2.3 Overview of financial performance of Hanoi telecoms electricity joint stock company 40

2.2 Current financial situation of Hanoi telecoms electricity joint stock company 41

2.2.1 Assets and Asset Structure 41

2.2.2 Sources of Capital and Capital Structure 42

2.2.3 Business results 45

2.2.4 Cash flows 48

2.2.6 Asset utilization efficiency and Profitability 52

2.3 Assessment of the financial situation of Hanoi telecoms electricity joint stock company 59

2.3.1 Achievements 59

2.3.2 Shortcomings and reasons 61

CHAPTER 3: SOLUTIONS TO IMPROVE THE FINANCIAL SITUATION OF HANOI TELECOMS ELECTRICITY JOINT STOCK COMPANY 63

3.1 Objectives and targeted performance of Hanoi telecoms electricity joint 63

3.1.1 Socio-economic situation 63

3.1.2 The targeted performance of Hanoi telecoms electricity joint stock company 65

3.2 Solutions to improve the financial situation of Hanoi telecoms electricity joint stock company 66

3.3 Conditions needed for implementing the solutions 69

CONCLUSION 72

REFERENCES 73

LIST OF ABBREVIATIONS

ADI: Average days in inventory

ADR: Average days in receivables

DSI: Days sales in inventory

HATEC: Hanoi telecoms electricity joint stock company

LIST OF TABLES

Table 2.2.2: Capital fluctuation situation 43

Table 2.2.3 Business results of the company 46

Table 2.2.5 The liquidity ratios 50

Table 2.2.6.1 DSI 52

Table 2.2.6.2 Working capital 55

LIST OF CHARTS

Chart 2.2.1 The asset structure ratios 41

Chart 2.2.4 The criteria in business cash flow management 48

Chart 2.2.6.1 Inventory turnover 53

Chart 2.2.6.2 Receivable turnover 54

Chart 2.2.6.3 Fixed assets turnover 56

Chart 2.2.6.5 Profitability ratios 58

1 Introduction

With the development of the country in the last decade, along with thegrowing trend of globalization and business both at home and abroad, it hashad a great and profound impact on Vietnam's market economy Nam,especially in management, capital mobilization and capital utilization Mosteffective on respect of financial, credit and law enforcement principles Sobusinesses compete with each other extremely fierce and must constantlychange to survive and develop sustainably and have a foothold in the market.Along with the plans and intentions set for the development of the businesswill also face the risks and limitations in it Financial situation analysis is also

an information tool for administrators, investors, etc Each object isinterested in the financial situation of businesses through many differentangles to management and investment

Therefore, in order for businesses to achieve the desired effect, analyzingthe financial situation will help businesses to clearly see the current financialsituation, find out the cause and the degree of influence of the factorsaffecting the situation financial picture From there, there is an effectivesolution to stabilize and develop the financial situation

Hanoi telecoms electricity joint stock company (HATEC) wasestablished in 2004, the company has been operating for more than 15 yearsand created a great reputation in the domestic telecommunications industry.The regular analysis of the financial situation will help business managers seethe status of financial activities, which can identify the strengths andweaknesses of the business as a basis for proper operation with the economy

in the future and propose optimal solutions to improve the financial situation

of the business Although the accounting system is relatively complete, the

financial statements of HATEC have never been analyzed, the figures shown

in the reports of enterprises are only useless figures

From applying the knowledge learned and fact finding at Hanoi telecomselectricity joint stock company with the enthusiastic help of Mr Vu Van Ninhand his brothers and sisters in the accounting department of the company, Ihad an overview and insight More about the importance of financial situation

in the company Aware of that, I chose the topic:

“Financial performance: a case study of Hanoi telecoms electricity joint stock company”.

2 Objectives and research questions

Any business at any stage will still have the potential and undetectedrisks, so it is necessary to go through the analysis of the corporate financialsituation to be able to point out the strengths and the weaknesses forbusinesses to recognize the financial fluctuations of the company in the futureand thereby be able to do business most effectively

Assessing the financial situation regularly is extremely important andmeaningful Through analyzing the financial situation, we can fully andaccurately assess the stages of the business process, and improve theefficiency in each process At the same time, financial analysis is also anindispensable tool in the management of superior agencies, financial agenciesand banks to assess the state of the state's policies, capital issues

Therefore, it is necessary to conduct in-depth research and analysis oncosts, revenues and business results in order to give an overview of theachievements and shortcomings in the financial situation of the enterprise,and to answer research questions:

- Basic theory about the financial situation of the company like?

- What is the reality of the business situation of the business?

3 Scope of study

- Research subjects:

From the financial statements of the business such as: balance sheet,report of business results, will be conducted to synthesize, analyze,compare data to achieve research objectives

- Research scope:

Analyze the company's financial statements for at least the latest 3 years

2017, 2018, 2019 to assess the current financial status and development trends

of the company

4 Methodology and Data

Collect data through internship reports and documents

Statistical method: A statistical method of collecting collectedinformation and data to compare and produce results

Methods of financial analysis: A method based on figures in financialstatements to assess the performance of enterprises, find out the causes andsolutions to overcome them

Comparison method: A method based on available data to conductcomparison and comparison of relative and absolute numbers

Chapter 1: Overview of financial situation of a company.

Chapter 2: Curent financial situation of Hanoi telecoms electricity joint

stock company.

Chapter 3: Solutions to improve the financial situation of Hanoi

telecoms electricity joint stock company.

CHAPTER 1:

OVERVIEW OF FINANCIAL SITUATION OF COMPANY

1.1 Corporate finance and corporate finance decisions

1.1.1 Business finance concept and business finance relationships

1.1.1.1.Business finance concept

In response to the continuous development of the domestic economy andthe increasingly innovative requirements of businesses, the need for corporatefinancial management is increasingly important

Enterprise is an economic organization carrying out productionactivities, supplying goods to consumers through the market for profit-makingpurposes The business process of the business is also the process ofcombining the inputs such as factories, equipment, materials and labor tocreate the output of goods and consumption goods to make a profit

During the operation of an enterprise, it is also the process of creating,distributing and using monetary funds which constitute the financial activities

of the enterprise In the process that has generated, creating the movement ofcash flows (cash flows), including cash inflows, cash flows associated withdaily investment and business activities of businesses

According to the Corporate finance curriculum (2015) from the aboveissues, the following comments can be drawn:

- In essence, corporate finance is economic relations in the form of

arising value associated with the creation and use of monetary funds of the enterprise in the course of its operation.

- In terms of form, corporate finance is monetary funds in the process

of creation, distribution, use and advocacy associated with the operation of the business.

There are other ideas that corporate finance is the method of mobilizing,

allocating and using the financial resources of enterprises to achieve business objectives However, in our opinion, this idea identifies "corporate finance" -

an objective economic category - with financial activities (or corporatefinancial management), a subjective activity of corporate governance

According to the newspaper Ketoan7e.com, it defines: "Corporatefinance is the economic relations arising in connection with the process ofcreation, distribution and use of monetary funds in the course of businessoperations of the enterprise In order to achieve a certain goal, corporatefinance is a part of the financial system, where financial resources emerge and

at the same time, it is the place that attracts an important part of corporatefinancial resources Corporate finance has a great influence on social life, thedevelopment or recession of production

1.1.1.2.Business finance relationships

Within the process of creating and using an enterprise's monetary fund,these are subtle relations in the form of value that constitute the financialrelations of the enterprise and cover the following major financial relations:

- Financial relations between enterprises and the State

This relationship is expressed by the State allocating, supporting capitaland contributing equity capital according to certain principles and methods toconduct production and business and share profits At the same time, thisrelationship is reflected in the enterprise's fulfillment of financial obligations

to the State, such as paying taxes and fees to the State budget as prescribed bylaw

- Financial relations between enterprises and economic entities andother social organizations.

The financial relationship between enterprises and other economicentities is very diverse and rich, which is reflected in the payment andmaterial punishment when enterprises and other economic entities providegoods and services to each other (including financial services)

- Financial relationship between the enterprise and its employees

This relationship is reflected in the enterprise's payment of wages,bonuses, and material penalties for employees in the course of its businessoperations

- Financial relationship between an enterprise and its owners

This relationship shows in terms of payment in borrowing and lending,capital investment, purchase or sale of assets, supplies and goods, and in thedistribution of profit after tax of the enterprise

- Financial relations within the enterprise

This is a quite complicated financial relationship, reflecting the financialrelationship between the production and business departments, between themanagement departments, between members of the enterprise, betweencapital ownership and use rights capital To be reflected in the enterprise thatpays salaries and wages and pays bonuses and fines to its employees;payment relations among departments in the enterprise, in the distribution ofafter-tax profits of the enterprise; dividend distribution to shareholders,establishment of corporate funds

1.1.2 The financial decisions of the business

Enterprise financial decision is an expression of the intention (policy) ofthe enterprise on the mobilization, allocation and use of its financial resources

of the enterprise enterprise Depending on the conditions and specificcircumstances of production and business activities, business owners makedifferent decisions, usually the owners make basic financial decisions such as:

Investment decisions: are decisions related to the total value of assetsand the value of each asset part (fixed assets and movable assets) Investmentdecisions affect the left (the assets portion) of the balance sheet The majorinvestment decisions of the business include:

- Decision on investment in working assets

- Decision on fixed asset investment

- Deciding the structural relationship between investment in movableassets and investment in fixed assets

Capital mobilization decisions (capital decisions): are decisionsregarding which capital sources to choose to provide for investment decisions.Determining the capital source that affects the right of the balance sheet (thecapital) Major capital mobilization decisions of enterprises include:

- Decision to raise short-term capital

- Decision to raise long-term capital

Profit distribution decision: associated with the decision on dividenddistribution or dividend policy of the business Financial managers will have

to choose between using most of the after-tax profit to pay dividends, or keep

it for reinvestment These decisions relate to how an enterprise should pursue

a dividend policy and whether the dividend policy will affect the firm's value

or its share price in the market

Long-term financial decisions: these are strategic decisions that havelong-lasting impact on the survival and development of businesses Each ofthese decisions requires administrators to carefully consider, methodically andscientifically analyze to ensure to minimize the risks that may occur

Under long-term financial decisions include:

- Long-term investment decision: is the decision to choose whichbusinesses should invest in opportunities, or investment projects under limitedfinancial resources to maximize the value for the owner

- Decision on long-term capital mobilization: is a decision on whichsources to raise long-term capital from, with what scale to maximize value forowners

- The decision on corporate profit distribution policy: is a decisionabout how much profit should be allocated to the owner, how much profit isre-invested back to the business to maximize the value for owner

Short-term financial decisions: these are operational decisions, which

do not greatly affect the existence and development of enterprises; therefore,

it is also known as tactical financial decisions

Under short-term financial decisions included:

- Decision to reserve capital in cash

- Decision on receivable debts

- Decision on payment discount

- Decision on inventory reserves

- Other short-term financial decisions

1.2 Enterprise Financial Management

1.2.1 Business financial management concept

In business activities, investment activities of businesses, there are manyfinancial problems that arise requiring managers to make financial decisions -right and implementation to stand firm and develop

In order to survive and develop in business activities, the activities of thebusiness must be based on the planning work both strategically andstrategically.

Strategically, business objectives, long-term activities must be clearlydefined to develop the business and its financial policies In terms of tactics, it

is necessary to identify the short-term work, specific operations to serve thestrategic plan of the business

Corporate financial management is the selection, decision making andorganization of financial decisions to achieve the operational objectives of thebusiness Because the financial decisions of an enterprise are associated withthe creation, distribution and use of monetary funds during the operation ofthe enterprise; therefore, corporate financial management is also seen as theprocess of planning, implementing, adjusting and controlling the creationprocess, distribution and use of monetary funds to meet business operationsneeds

Corporate finance management includes the activities of managers(managers) related to three main types of decisions: investment decisions,capital mobilization decisions, and decisions on how to distribute profits forthe most beneficial to the business owner

Corporate finance management is a part, the most important content ofcorporate governance, it has close relationship and affects all aspects ofbusiness operations

1.2.2 The role of corporate finance management

The role of financial governance in enterprises has changed dramaticallyover time, with the role of financial management becoming increasinglyimportant for its operations, because:

- The financial position of the business concerned and affecting allactivities of the business.

- Business scale and capital needs for business activities are growing.Along with the development of the financial market, financial instruments forraising capital are becoming richer and more diverse Therefore, financialmanagement decisions, investment decisions of financial administratorsgreatly affect the business situation and efficiency of the business

- Information about the financial situation is an important basis forbusiness managers to control and direct the activities of enterprises

The role of financial governance for the operation of enterprises isreflected in the following main aspects:

- Raising capital ensures business activities take place normally andcontinuously

- Organizing the use of capital in an economical and efficient manner,contributing to raising the efficiency of business operations of the enterprise

- Check and comprehensively supervise the business productionactivities of the enterprise

1.2.3 Content corporate finance management

Corporate finance management covers the following main contents:

- Participate in the evaluation and selection of investment decisions

- Identify capital needs and organize the mobilization of capital to meetpromptly and adequately the capital demands of the enterprises' activities

- Effectively use the existing capital, strictly control the revenues andexpenditures, and ensure solvency of the enterprise

- Profit distribution, deduction and use of enterprise funds

- Regularly control the operations of the business

1.2.4 Corporate value and goals of corporate financial governance

"Enterprise value is the value of an enterprise's entire assets The value

of each asset constituting the enterprise's total assets cannot be separated from each other and cannot be assessed on the basis of market value.

Enterprise value must be considered on the whole of assets, not the value

of each separate asset, including tangible and intellectual property assets of the enterprise.

An asset, if separated, may not promote its use value, but when combined with another asset, it may promote its use value The value of each individual asset is determined based on its contribution to the operation of the entire enterprise so it is not relevant to the market, regardless of the optimal and best use value of the asset that asset, as well as the amount it brings when sold.

The value of assets in use of an enterprise tends to be higher than the market value of the asset when the enterprise is doing business efficiently, earning higher profits than the enterprise producing the same product self; conversely, they tend to be lower than market value when enterprises are inefficient The value of assets in use also tends to be higher than the market value when businesses have patents, licenses, contracts for the production of special products, or businesses of particular prestige, or other forms of intellectual property which other businesses of the same type of business do not have "

According to the Vietnam Criteria of Appraisal No 12: Appraisal ofEnterprises (Symbol: VNĐ 12) issued together with the Circular No.122/2017 / TT-BTC dated November 15, 2017 of the Ministry of Finance, Itdoes not give the general concept of enterprise value but is classified into 3types of enterprise value as follows:

"The value of a continuously operating enterprise is the value of an existing enterprise under the assumption that it will continue to operate after the time of valuation.

The value of an enterprise operating for a definite period is the value of

an enterprise operating under the assumption that its age is limited because it

is forced to terminate its operation after a defined time in the future.

The value of a liquidated enterprise is the value of the enterprise assuming that its assets will be sold separately and the enterprise will soon cease to operate after the time of price appraisal "

Therefore, enterprise value is the total current value of cash flows thatinvestors receive in the future brought by businesses

The general formula for determining the value of an enterprise:

V: Is the business value

CF t: Is the cash flow businesses bring to investors

r: discount rate (the required return rate of investors)

From the above formula, it shows that the value of an enterprise depends

on the following factors: cash flow, future cash flow growth rate and requiredprofitability rate of investors Therefore, business value will vary in the same

direction as the increase in cash flow, but in the opposite direction with theincrease of the risk brought back.

1.2.4.2.Goals of corporate financial governance

Every business has different goals in each development period From theperspective of today's economists, it is often proposed that the goal ofcorporate financial management is to maximize the value of the owner, ormaximize the company's stock price in the market As:

- Ensure regular and adequate supply to ensure business operations

- Ensuring a full profit for shareholders will depend on the earningsability, market price of the stock, shareholder expectations

- Ensure optimal fund use, use money with maximum efficiency andminimum costs

- Investment security is guaranteed, which means that funds need to beinvested in safe projects in order to achieve a full rate of return

- Planning is needed to ensure a balance between c and equity

1.3 Financial situation of the business

1.3.1 Concept of corporate financial situation

The financial position of an enterprise is the economic position it mayhave, including the specific situation of the number of assets it holds, theequity that the company currently has as well as the debt that the companyneeds to pay with business results that the company has achieved The currentand historical data, documents and financial situation are aimed at assessingthe potential, business performance and future risks of enterprises

To assess the financial position in order to make financial decisions tomaximize cash flow and minimize risks requires corporate finance managers

to understand the basis of cash flow formation by financial decisions made

1.3.2 Content and criteria reflect the situation of the business

Enterprises in the course of production and business activities will haveslight or strong fluctuations and increase or decrease in their assets and capitalsources Based on the analysis of the financial situation and the ratios in theanalysis of the financial statements, we can see the fluctuations of assets andcapital in each period Since then, businesses will have appropriate measuresfor investment and production, and improve the efficiency of capital use inbusiness

1.3.2.1.Capital situation of the business

In order to meet the capital needs for production, business andinvestment activities, enterprises must analyze the increase, decrease, slight orstrong fluctuation of capital sources to see whether they are autonomous orfinancially dependent Possible risks in capital exploitation Capital sources of

an enterprise include equity and liabilities

- Owners' equity is the capital owned by the business owner, so thebusiness has no responsibility to pay that capital to others The equity datahelps show how much of the value of the assets of the business is used toguarantee debt repayment

Equity is the equity owned by the business owner, including the equitypaid out and the additional portion from the business results Equity iscalculated by the formula:

Equity = Value of total assets – Liabilities

When it comes to the equity of the business, one must always considerthe form of ownership of that business Because the form of ownership willdetermine the nature and form of capital creation of the business itself

In the case of a convenient business environment and high businessefficiency, the increase in loan capital is a good measure to help businessesgrow quickly and sustainably The ratio of equity to total assets is calculated

by the following formula:

Debt to equity ratio = Equity sources Total debt

The ratio of the two basic sources of capital that businesses use tofinance their operations Each part of the ratio has its characteristics and therelationship between them is widely used to assess the financial structure ofthe business The higher the proportion, the greater the financial autonomy ofthe business and vice versa

- Any business that wants to go into operation not only depends onequity but also has to take advantage of relationships to mobilize additionalcapital from outside such as: Borrowing from banks, borrowing from creditinstitutions and applications other economists

Therefore, liabilities are expressed in cash the obligations that theenterprise is responsible to pay to other economic actors such as: Debts,payables to sellers, the State, and laborers in the business When the growthrate of liabilities is greater than the growth of equity is an alarming sign of thefinancial situation of the business

Debt ratio = Totalassets Liabilities

The debt ratio reflects the percentage of liabilities in the capital of theenterprise or in the assets of the business that is formed by the source ofliabilities The higher this ratio proves that the company's business dependsheavily on debt, which will make it difficult for businesses to be able toborrow, and increase the burden of debt payment when due

1.3.2.2.The situation of capital allocation of enterprises

The production and business activities of an enterprise that can becarried out must have basic elements such as labor materials, labor objectsand labor force To get these factors, businesses must spend a certain amount

of monetary capital, consistent with the size and conditions of the business

It can be said that the business capital of an enterprise is the entireadvance paid by the enterprise to invest in forming the assets necessary for itsproduction and business activities

- Working capital or short-term assets: In order to form working assets,

an enterprise must advance a certain amount of monetary capital to purchasethose assets, which is called its working capital Working capital is the sum ofmoney advanced by an enterprise to invest in forming the current workingassets necessary for its production and business activities In other words,working capital is a monetary representation of working assets in theenterprise.Assets with a short payback period, about 12 months or a businesscycle Short-term assets include cash and cash equivalents, short-termfinancial investments, short-term receivables, and inventories

Rate of investment in short-term assets = Short−term assets Totalassets

Therefore, in order to improve business efficiency, it is necessary toregularly analyze and give measures to use short-term assets

- Fixed capital or long-term assets: As a part of business capital, fixedcapital is the total advance paid by the enterprise to invest in the formation offixed assets used for production activities business of the business In otherwords, fixed capital is a monetary representation of fixed assets in anenterprise The properties have a long shelf life, great value Including: long-

term receivables, fixed assets, long-term real estate, long-term financialinvestments

Rate of investment in long-term assets = Long−term assets Totalassets

The meaning of this indicator shows how much of the long-term assets

in 100 dong total assets Analysts often consider the volatility of assets bycalculating the indicators showing the proportion and structure of each type ofassets compared to the total number of assets to see that the asset structure hasbeen suitable business or not to have a plan to adjust

1.3.2.3.Business performance of the enterprise

Business performance of the enterprise reflects its operational capacity inthe course of business operations, marking the development of the enterprisethrough each period Thus, business results are very important for businessmanagers in planning for the future and overcoming shortcomings In thecourse of operation, due to subjective as well as objective reasons, thebusiness results of enterprises are affected Evaluating business results helpsbusinesses see the affecting factors, the level and trend of impact of eachfactor Since then propose measures to further improve the achieved results

In order to evaluate the operating results, enterprises will have toconsider the business results report The income statement is an consolidatedfinancial statement, which generally reflects the business situation and results

of an enterprise's operating period and details of its main business activities

In other words, the report on business results is a means to present theprofitability and current status of business operations of the enterprise

Analyzing business and production results associated with the operationprocess of enterprises, so analyzing business and production results has theeffect of helping enterprises guide all production and business activities so

that there is unite to coordinate in the most rhythmic match and achieve highefficiency.

Analyzing your business performance can also allow you to assess howyour business goals are progressing In order to draw out the shortcomings,find out the causes so that they can be thoroughly overcome, and havegrounds to be able to predict and plan rational and optimal business strategiesand plans and most optimal

Analyzing business and production results is one of the importantmeasures to prevent risks In order to improve the efficiency of productionand business activities and minimize risks, enterprises must conduct ananalysis of conditions within the enterprise that affect production andbusiness operation results, while paying attention to external factors likecompetitors, markets, customers, etc On the basis of enterprise analysis, wepropose measures to prevent possible risks

1.3.2.4.Cash flow situation of the business

For an enterprise, when carrying out activities, there will be inflows andoutflows Cash inflows are formed by mobilizing capital such as borrowingfrom banks, issuing stocks, bonds, selling products and goods to collectmoney from customers, receiving interests divided from contributed capital,from loans, withdrawing external investment capital to enterprises Incontrast, cash outflows are formed from spending on procurement of fixedassets, purchasing raw materials, paying salaries, paying taxes to the state,refunding repaying capital to investors, paying dividends to shareholders,paying loan interests to creditors

Thus, it can be understood: cash flow reflects the movement of incomingand outgoing money arising in a certain period from the activities of

enterprises The cash flow of an enterprise includes cash outflows, cashinflows, and net cash flows.

- Cash outflow: is the arising cash flow out of the enterprise during itsoperation Cash outflows are expenses spent by the enterprise to invest inasset purchases, pay material purchases, pay wages, pay taxes, pay insurance,buy services provided by outside, pay debts loans, interest payments,dividends to owners

- Cash inflow: a cash inflow that goes into the business during itsoperation Cash inflow is the proceeds from selling products, goods,providing services, borrowing capital, issuing stocks, liquidating assets,withdrawing investment capital…

- Net cash flow: is the difference in cash flow between the cash inflowand the outflows of an enterprise during an operating period of the enterprise

In order to serve the cash flow management as well as to assess the cashflow situation, the cash flow of an enterprise is divided into 3 categories: cashflow from operating activities, cash flow from investing activities and cashflow from financing activities

- Cash flow from operating activities: this is the most important cashflow of the business because it reflects the cash flow in and out mainly fromthe regular production and business activities of the business This cash flow

is greatly influenced by the sales and purchase policy of the business, thepayment discount policy, the level of management of receivable and payabledebts

- Cash flow from investing activities: it is the cash flows in and outfrom investment and procurement activities, forming long-term assets ofenterprises and financial investments Cash flow from investing activities isaffected by many factors such as business lines, development lifecycles of

enterprises, products, macroeconomic situations this is the cash flow with agreat impact on the ability of your business to make long-term money.

- Cash flow from financing activities: Cash flow from financingactivities directly reflects the cash flow from capital raising decisions forenterprises' operations such as decisions on borrowing, repaying debts andissuing stocks, call for capital contribution, share acquisition, profitdistribution

The classification and reporting of cash flows by activities will provideinformation to users assessing the impact of such activities on the financialsituation and on the amount of cash and cash equivalents generated in theperiod of the business This information is also used to assess cash flowrelationships between the above activities

Among operating cash flow of businesses, cash flow from businessactivities is the most important cash flow because this is the most regular cashflow and the most sustainable source of business activities In order to findthe most effective cash flow management measures, analysts often considersome of the following criteria in business cash flow management as follows:Target time converted into cash: is the period of time from when theproducts, goods or services of an enterprise convert into cash

Three factors that play an important role in the study of cash flow cycleare average days in receivable, average days in payables and average days ininventory

- Average days in receivable (ADR): is the average number of days from the time the customer owes to the debt recovery from the customer

ADR = Average receivable revenue per day Averagereceivables

- Average days in payable (ADP): is the average number of days from the time of buying raw materials and goods until the enterprise has to pay the supplier.

ADP = Average value of goods payable per day Average payables

- Average days in inventory (ADI): is the average number of days from the time raw materials, goods are stored to the time of delivery and sold to customers

ADI = Average cost of goods sold per day Averageinventory

Average time converted into money = ADR + ADI – ADP

The larger the number of days in inventory, the longer the days forcustomers or the smaller the average number of days to repay the debt, thegreater the time of money conversion and vice versa

- The ratio of money generated from business activities: this indicator isusually reviewed over a quarterly, 6-month, or annual basis to helpadministrators assess the ability to generate money from business activitiescompared to sales gain

Ratio of money

generated from business

activities

¿Cash outflow¿operating activities Revenue¿ ¿sales¿

- The ratio of revenue in cash to sales: this indicator reflects the level ofmoney collected from sales in the period Thereby assessing the ability torecover money from sales

Ratio of revenue in cash

Revenue∈cash Revenue¿ sales¿

- The ratio of interest payment guarantee from operating net cash flow:this coefficient is used to evaluate whether the ability to generate money fromproduction and business activities meets the loan interest paymentrequirements.

Ratio of interest

payment guarantee

from operating net

cash flow

¿Operatingnet cashflow+interest expenses interest expenses

- The ratio of assessment of solvency of operating net cash flow: thisindex is used to consider the ability of enterprises to pay short-term debtsthrough operating net cash flows Through that, assessing the ability to makemoney from business operations of the business to pay off the debt or not

Ratio of assessment of

solvency of operating net cash flow

¿Operatingnet cashflow Total current liabilities

1.3.2.5.The situation of debt and solvency of the business

a Assess the debt situation of the business

Liabilities are a very complex but not least issue, including accountsreceivable and accounts payable The fluctuation of increase or decrease ofaccounts receivable as well as liabilities has a great impact on thearrangement of capital sources so that the business operation of the business

as well as a great impact on business performance guaranteed Thearrangement of capital structure also shows the financial strength ofenterprises By analyzing the debt situation of enterprises, analysts can assessthe quality of financial activities, grasp the observance of payment discipline

in payment and financial security of businesses For businesses that oftenincur debts to the Budget, with internal units, it is also necessary to considerthese payment relationships In general, when analyzing debt situation,analysts must select, calculate and compare the following criteria and rely onthe fluctuations of criteria to comment:

There are 2 groups of indicators reflecting the debt situation ofenterprises, including:

- Norms reflecting the size of liabilities: including the indicatorsreflecting "receivable debts" and "liabilities" on the balance sheet

Using comparison method to compare the receivable and payable debtsfigures on the balance sheet between the end of the period and the beginning

of the period, and also based on the value of each criterion and comparisonresults , the actual situation of the business, the industry to assess the debtsituation of the business in the period

- The group of indicators reflecting the debt structure, and the level ofdebt management, including: The ratio of receivable debts to payable debts,coefficient of accounts receivable, coefficient of accounts payable, collectioncoefficient debt repayment, average debt recovery period, debt repaymentcoefficient, average loan repayment period

+ This indicator reflects the business account is appropriated against theaccount go to accounts application and is calculated according to thefollowing formula:

The ratio of accounts receivable to liabilities = Receivables Debt

If this rate of pay greater than 100%, demonstrates the amount of capital

of the business is accounted for using the larger amount of capital thatbusiness travel occupancy On the contrary, if this norm is smaller than 100%,

demonstrates the amount of capital the business is accounted for using thesmaller number of capital misappropriation.

+ Receivables coefficient:

Receivables coefficient = Receivables Totalassets

This indicator shows the level occupied the capital of the business In thetotal assets of the business, how much capital is misappropriated

+ Payables coefficients:

Payables coefficients = Totalassets Payable

This norm reflects the extent to which the capital of business and said intotal assets of the business, how much is financed with funds goingoccupancy

b Assess the solvency of the business

- Current ratio:

Current ratio = The total value of short−term assets Short−term debt

Current ratio is a financial index used to measure the capacity paymentshort-term debt of the business

Liquidity ratios short-term debt for know every lesbian, short-term debtthat businesses are keeping, the enterprise how many assets, short term canuse to pay

- Quick ratio

Quick ratio = Long−term assets−Inventory Short−term debt

Quick ratio is a rate of finance used to measure the ability to mobilize

Short-term assets here is worth the short-term assets does not includevalue of inventory.

- Cash ratio

Cash ratio = Cash∧cashequivalents Short−termdebt

This ratio reflects the ability to use money and the types of assets thatcan immediately transfer the money to pay the short term debts of thebusiness

Demonstrating the ability to offset short-term debt by the amount are ofbusiness Because money has special importance decision liquidity shouldthis norm be used to evaluate the rigorous solvency short term of the business.This norm in business ranged from 0.1 – 0.5 is acceptable

- Interest coverage ratio

Interest coverage

EBIT Interest expenses payable∈the period

Interest coverage ratio is a critical factor in the indicator of capitalstructure Accrued interest is an expense, fixed source to pay interest on theloan is the gross profit after deducting cost of sales and expense managementbusiness It shows profit before interest tax and can enough offset the interest

on the loan or not (not related to money, so nothing to do with ability to payboth) Solvency of the enterprise's financial capability and that business hasbeen to meet the needs of payment of debts to individuals and organizationswith ties for business loans or debt The ratio of the ability to pay interest onlyfor know the ability to pay the interest of the borrower, not to know the ability

to pay both the original and the interest out stars

In fact, a business can operate good financial and healthy, will notstate delays debt, solvency abundantly On the contrary, when a business statedebt delays, prolonged, then sure, the quality of financial activities ofenterprises is not high (including debt management), the real financialsituation is not bright, low solvency So, can say, through the analysis of thedebt situation and solvency of the business, managers can assess the qualityand effectiveness of financial operations It is also the purpose of the analysis

of the debt situation and solvency

1.3.2.6.Situation of performance and efficiency of business operations of the enterprise

a Operational ratio group

- Inventory turnover

This is a pretty important indicator reflecting how many times aninventory capital rotates in a period and is determined by the formula:

Inventory turnover = Average inventory value Cost of goodssold

Inventory turnover shows the number of times that inventory has averageturnover in a period, showing good or poor corporate governance

This ratio is high, showing that the turnover rate of goods in thewarehouse is fast, indicating that the enterprise sells goods quickly and viceversa, if this coefficient is small, the inventory turnover rate is low

- Days sales in inventory (DSI)

Days sales in inventory (DSI) = Inventory turnover360

This indicator indicates how many days it takes to convert inventory intomoney This index is inversely proportional to the inventory turnover

inventory is not stagnant However, this index is too low, which is not goodbecause it means that the amount of goods stored in the warehouse is notmuch, if the market demand increases suddenly, it is very likely that thebusiness will lose customers and competitors scramble for market share.

- Receivables turnover

This is the only goal reflected in the accounts receivable rotation is howmuch the ring It reflects the recovery of the debt of the business how

Receivables turnover = Average receivables Net sales

Rotation of accounts receivable for know the accounts receivable have toturn how many rounds in a report certain to achieve revenue in the period it.This coefficient is as large as proved to speed recovery of accounts receivablegood because the enterprise is not much investment in accounts receivable

- Days sales outstanding (DSO)

Collection period average reflects the average length of time to collectmoney sale of the business since the time of delivery until collected moneysales States collect money average depends primarily on policies sold oncredit and the payment institution's business

Days sales outstanding (DSO) = Receivables turnover360

When states collect the money on average too long in comparison withbusinesses in the industry, it's easy to engage to status doubtful Therefore,when considering the collection period on average to consider in relation tothe revenue growth of the business Note when calculating this target, we usenet revenues are indirect taxes

- Performance using total assets

Performance using total assets = Totalassets average Net sales

This norm indicates a property brings, how many sales If as in theperiod, the total assets of the business are relatively stable, little change, thenthe total average may use the average of the total assets beginning states andend states If the total assets are the changes large fluctuations must becalculated according to the material more meticulously at the same time whenthe rotation of the total assets, then the value of number of molecules and thedenominator in the formula must be taken in the same period The rotation ofthe total assets is the indicator reflecting performance using synthetic theentire assets of the business, this norm is as high as possible The value ofindicators as high, proving the same property which obtained the level ofbenefits and more so the management level the property the higher thecapacity payment and capacity to profit of the business as high If the contrary

is proved to the assets of the business have not been used effectively

- Performance using short-term assets

Performance using short-term assets = Totalassets short−term average Net sales

Performance using short-term assets, said a short-term asset creation ishow much net revenue This norm expresses the movement of short-termassets in the states, this norm is as high proved short-term assets motor as fast,performance using short-term assets is high, thereby contributing to generatenet revenues as high and is base to increase the profitability of the business

- Fixed assets turnover

Fixed assets turnover = Average Net sales¿assets¿

Performance using fixed assets for know 1 long-term assets create is howmuch net revenue This norm expresses the movement of fixed assets in theperiod, this norm is as high proved fixed assets motor as fast, performanceusing short-term assets high, from that contributed to net revenues as high and

is base to increase the profitability of the business

b Profitability ratio group

- Return on sales (ROS)

Return on sales (ROS) = Profit after tax Net sales

This coefficient reflects the relationship between profit after tax and netsales in any of the business It is, when making a revenue in the period, thebusiness can collect is how much profit This norm is as high demonstrateseffective use of cost as possible It is a factor to help administrators expandmarkets, increase revenue If this indicator is low, the management shouldstrengthen control over the cost of parts

- Basic earning power (BEP)

Average totalassets

This criterion reflects the profitability of assets or business capitalregardless of the effect of the origin of business capital and corporate incometax

- Return on assets (ROA)

Return on assets (ROA) = Profit after tax Totalassets

Rate is also called rate of return, net of assets This coefficient reflectsthe per capital use in the states created how much after-tax profit ROA willgive you the information about the account, the interest generated from theamount invested (or the amount of assets) ROA for the corporation there is a

big difference and is more dependent on business That is why when usingROA to compare companies, it's better to compare the ROA of each companyyear by year and compared between the companies similar The effect of thetransfer of investment capital into profit is expressed through the ROA.

- Return on equity (ROE)

Return on equity (ROE) = Profit after tax Total equity

This is an indicator that investors are very interested This coefficientmeasures the profit after tax earned per dollar of capital owners in the states.ROE reflects all aspects of the financial management including thequalification management of revenue and expense, level of propertymanagement, the administrative capital of the business The company toachieve ROE higher competitive ability, the stronger, therefore, ROE willhelp investors evaluate the company in the same industry to determineinvestment options

1.4 Factors affecting the financial analysis of the business

Usually we classify factors affecting the financial situation of enterprisesinto subjective and objective factors

- Political and legal factors

Political and legal factors strongly influence the formation andexploitation of business opportunities and the fulfillment of businessobjectives An important prerequisite for the business is that it is politicallystable, changing politics can have both a beneficial effect and an inhibition ofbusiness development In order to create a healthy competitive environmentfor businesses, it is absolutely necessary to have a complete legal system andstrict implementation Therefore, studying the political and legal factors isnecessary indispensable requirements when businesses participate in themarket

- Economical factors:

+ Foreign trade: The open and close trend of the economy influencesbusiness development opportunities, competitive conditions, and the ability touse national priorities for technology and capital

+ Inflation and its ability to control inflation affect income,accumulation, consumption, stimulate or inhibit investment

+ The change in economic structure affects the position and developmenttrend of economic sectors, leading to a change in the development direction ofenterprises