Financial statements analysis at huu nghi food joint stock company

Like most businesses, at Huu Nghi Food JSC, the financial position, and performance analysis through financial statements analysis only focus on calculating general indicators, not speci

DECLARATION

I hereby declare that this is my independent scientific research with the support of my supervisor and that I do not copy the work of others The data and research results in the thesis are honest and have clear origins

I take full responsibility for this pledge!

Thesis author

Do Phan Thuy Chi

TABLE OF CONTENT

CHAPTER 1: INTRODUCTION 1

1 General research background on the Confectionery manufacturing industry and Huu Nghi food JSC 1

1.1.1 General research background 1

1.1.2 About Huu Nghi Food JSC 2

1.2 Research aims and research questions 5

1.2.1 Research aims 5

1.2.2 Research questions 5

1.3 Scope of research and methodology 5

1.3.1 Scope of research 5

1.3.2 Research methodology 6

1.4 Limitations during the research 6

1.5 Structure of the thesis 6

CHAPTER 2: LITERATURE REVIEW 7

2.1 Preview of previous studies 7

2.2 Theoretical preliminaries 9

2.2.1 Definition 9

2.2.2 Objectives 10

2.3 Sources of information 12

2.3.1 Balance sheet 12

2.3.2 Income statement 13

2.3.3 Statement of cash flows 14

2.3.4 Related documents 15

CHAPTER 3: DATA AND METHODOLOGY 17

3.1 Research type 17

3.2 Research methods 18

3.3 Justification of chosen methods 18

3.4 Data collection and analysis 20

3.5 Methodological limitations 21

3.6 Data Sources and Interviewees’ Profiles 22

3.6.1 Data Sources 22

3.6.2 Interviewees‟ Profiles 23

3.7 Data analytical framework 23

CHAPTER 4: RESULTS AND FINDINGS 25

4.1 Content Analysis 25

4.1.1 Financial Analysis 25

4.1.2 Common–Size Analysis 29

4.1.3 Ratio Analysis 31

4.1.4 Horizontal Analysis 40

4.2 Semi–Structured Interviews 42

4.2.1 Interview Questions 42

4.2.2 Interviewee Profiles 44

4.2.3 Interview Response Analysis 45

4.3 Benchmarking 50

4.4 Major Findings of the Study 53

4.4.1 Achievements 53

4.4.2 Limit and causes 54

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS 57

5.1 Conclusion 57

5.2 Recommendations 58

REFERENCES 66

LIST OF TABLES

Table 1: Statement of Huu Nghi Food Financial Position 26

Table 2: Statement of Profit and Loss 27

Table 3: Statement of Cash Flows 28

Table 4: Liquidity Ratios 31

Table 5: Extracts from Huu Nghi Food financial reports 33

Table 6: Operating Asset Management 33

Table 7: Financial risk 35

Table 8: Profitability 37

Table 9: DuPont Analysis 39

Table 10: Horizontal Analysis of Huu Nghi Food 41

Table 11: Interviewees‟ s Profiles 44

Table 12: Extract from financial statements 48

Table 13: ROE - benchmarking 51

Table 14: ROA -benchmarking 51

LIST OF FIGURES

Figure 1: Process of analyzing financial statements 23

Figure 2: Huu Nghi Food‟s Liquidity financial ratios 32

Figure 3: Huu Nghi Food‟s Financial Risk Financial Ratios 35

Figure 4: Huu Nghi Food's Profitability Financial Ratios graph 37

Figure 5: ROE -benchmarking 51

Figure 6: ROA - benchmarking 52

CHAPTER 1: INTRODUCTION

1 General research background on the Confectionery manufacturing industry and Huu Nghi food JSC

1.1.1 General research background

In recent years, Vietnam has constantly promoted opening cooperation with countries in the region and the world It has made vital development steps in all aspects, including the economy, politics, culture, etc Therefore, the development and competition among domestic enterprises are becoming increasingly fierce The harsh elimination requires businesses to consider their

strategies and steps carefully Thus, “strength wins, weakness loses” is an

inevitable rule of today‟s economy with many opportunities and challenges Analyzing financial position and performance is an effective tool to help managers and external partners with economic and legal relations with the business make the right and most appropriate decisions

According to the Ministry of Industry and Trade, the revenue growth of the confectionery group is about 15 %/year, with the total market sales estimated at 51 trillion VND The development orientation of the Vietnamese confectionery industry to 2030 is to innovate modern production equipment, automate, and improve quality, food safety, and hygiene Invest in building a stable raw material area to produce high-class confectionery products

Besides some famous confectionery brands in the country and abroad, such as Hai Chau, Hai Ha BiBica, Kinh Do, Trang An, and Meiji Within Vietnamese Confectionery manufacturing, Huu Nghi Food is proud to be one

of the biggest and most prestigious confectionery manufacturers and traders in Vietnam and the region

1.1.2 About Huu Nghi Food JSC

Source: website Huu Nghi Food

Huu Nghi Food JSC (HUUNGHI FOOD), formerly Huu Nghi Premium Confectionery Factory, was established and officially operated on December

8, 1997 In 2006, after nine years of operation, Huu Nghi High-class Confectionery Factory was equitized and renamed to Huu Nghi High-class Confectionery JSC In the same year, Huu Nghi built a distribution system in the North according to a modern and professional model After one year of implementation, in 2007, Huu Nghi made a distribution system in 32 provinces and cities from Hue to the North 2008 marked the milestone of Friendship in the South, deploying the distribution system in the Central, Central Highlands, and the South In June 2009, to follow the development trend of the market and expand its business lines, Huu Nghi High-class Confectionery JSC officially changed its name to Huu Nghi Food JSC

Also, Huu Nghi formally implemented the construction of the first Huu Nghi Bakery system in Hanoi In 2010, Huu Nghi continued to upgrade the domestic distribution system, established an export department, and expanded the Bakery system In May 2015, Huu Nghi established the sales department for the MT and Horeca channels In 2017, Huu Nghi Food JSC officially participated in distributing sauces and condiments After 20 years of

accompanying Huu Nghi, in April 2018, Vietnam Tobacco One Member Company Limited successfully divested from Huu Nghi JSC From 2013 up

to now, Huu Nghi‟s revenue and profit have continuously increased over the years

Huu Nghi Food JSC has two branches, 3 factories in Hanoi, Ha Nam, and Binh Duong, a thriving distribution network with hundreds of distributors, and more than 140,000 retail stores nationwide Huu Nghi‟s products include many types of confectionery, such as Tipo custard, Kexo, Bolero, Salsa, Arita, Suri, and Joli candies, moon cakes, cakes, jams, and other processed foods JSC Huu Nghi is developing dry cake product lines to meet customer's tastes Along with the dried bakery products that have existed for a long time, the fresh products under the Huu Nghi brand have been finding their place in the market with strategic developments such as Lucky, Staff, Braha, and Sandwich In 2006, Huu Nghi‟s Staff cake was the first product on the market to hit the salty cake segment After more than 20 years with many changes, Huu Nghi fresh cake has always been a favorite product

of consumers

For a long time, the Huu Nghi brand has become a familiar name to consumers and gradually asserted its leading position in the Vietnamese confectionery industry To do that, Huu Nghi has conquered the market with quality product lines and traditional values Currently, Huu Nghi Food is the leading manufacturer of mooncakes and Tet jam in Vietnam and has supplied

to big customers such as Samsung, Foxconn, Canon, Viettel, Vietcombank, etc

Vision: To become the leading trademark in spreading typical values of

each Vietnamese families to the region and the whole world

Mission: To create products that connect family members and deliver familiar feelings to each customer and Vietnamese family

Up to now, the manufacturing facilities of Huu Nghi Food have been accredited for compliance with FSSC 22000, ISO 220000:2018, and Halal standards Our products have also been certified as High-Quality Vietnamese Goods for many consecutive years

Since its establishment, Huu Nghi Food has received numerous awards and merits from the Prime Minister, the Ministries, and the Government, such as:

 The Emulation flag of the Ministry of Industry and Trade in 2016;

 The Emulation flag of the Ministry of Industry and Trade in 2015;

 The Emulation flag of the Government in 2014;

 The Emulation flag of the Ministry of Industry and Trade in 2013;

 Certificate of Merit awarded by the Minister of the Ministry of Industry and Trade in 2012;

 The Emulation flag of the Ministry of Industry and Trade in 2011;

 The Second-class Labor medal of the President in 2011;

 The Third-class Labor medal of the President in 2001, 2003;

 The Excellent emulation flag by the Ministry of Trade from 1999-2007 Like most businesses, at Huu Nghi Food JSC, the financial position, and performance analysis through financial statements analysis only focus on calculating general indicators, not specifically analyzing weaknesses and strengths of the Company‟s financials Therefore, the analytical information used or provided by the Company to the outside is not convincing Stemming

from the above situation, the topic: “Financial statements analysis at Huu Nghi JSC” was selected by the author to carry out the Master„s thesis

1.2 Research aims and research questions

1.2.1 Research aims

This thesis aims to analyze Huu Nghi Food's financial performance over the recent years, specifically over the last years from 2017 to 2021, to assess the corporation's profitability, liquidity, solvency, asset management, short-term and long-term financial positions by using financial statement analysis,

as well as to make recommendations to any red flags identified during the analysis By conducting the fore-mentioned financial analysis, the research aim is to investigate, synthesize, and evaluate Huu Nghi‟s financial position over 5 years from 2017-2021 Based on the Company‟s financial data and using suitable analysis tools to assess the Company‟s financial position, profitability, liquidity, and solvency, it is possible to provide recommendations that would help improve any drawbacks in the financial performance of the Company in the past, present, and future

1.2.2 Research questions

Research questions for the thesis are built as follows:

(1) How was Huu Nghi Food‟s financial situation in 2017-2021?

(2) What solutions may be proposed to improve the financial position and performance at Huu Nghi Food JSC in the future

1.3 Scope of research and methodology

1.3.1 Scope of research

+ About the content: Analyzing the financial position and performance using financial statements at Huu Nghi Food JSC and firm strategy in the future

+ About space and time: Research and analyze the financial position and

1.3.2 Research methodology

Research methodology is specific procedures or techniques used to identify, select, process, and analyze information about a topic In a research paper, the methodology section allows the reader to evaluate a study‟s validity and reliability critically Quantitative secondary data will be collected through archival documents of a case study company Huu Nghi Food This financial data will then be analyzed using mixed-method financial analysis tools such

as financial ratios, common-size analysis, and vertical and horizontal analysis, duPont analysis Moreover, primary qualitative data will be collected through interviews with staff at Huu Nghi Food to investigate their perceptions of the Company‟s performance These mixed methods will together shed light on Huu Nghi‟s financial position and opportunities to draw recommendations

1.4 Limitations during the research

This research‟s significant shortcomings include data limitations regarding time lengths and sample size Despite having chosen the most accessible and appropriate methodology for the research topic, the author acknowledges that for more accurate results, the studied period could be extended further back into the past to recognize any trends or impact of historical events, which could be helpful for future decision-making Moreover, the sample size of interviewees could be extended beyond the Company‟s staff to other stakeholders, giving a more representative view of the results

1.5 Structure of the thesis

The thesis is composed of five chapters:

Chapter 1: Introduction

Chapter 2: Literature review

Chapter 3: Data and Methodology

Chapter 4: Results and Findings

Chapter 5: Conclusion and Recommendations

CHAPTER 2: LITERATURE REVIEW

In this chapter, the previous studies will be reviewed to offer a panorama

of what is going to be investigated After that, some conceptions or notions are given to introduce the reader to the background for understanding the remainder of the theory There are a lot of different phrases that relate to financial analysis and could be included in this thesis; nevertheless, the author decided to focus on a few of them The terms clarified below aim to cover the thesis's fundamental points More specific definitions will be defined in the following chapters when they become relevant throughout the following parts

of the thesis

2.1 Preview of previous studies

The important meaning of economic-financial management, financial position, and performance through financial statement analysis has been mentioned in many research works, some of which can be mentioned as follows:

Nguyen Thi Ngoc Lan in the doctoral thesis defended in 2019 at the Academy of Finance with the topic “Improving the analysis of the financial situation in construction enterprises through financial statements analysis ” follows the direction of completing financial position and performance through financial statements analysis, including completing the organization

of analysis, completing the analytical methods and completing the content - a system of financial position and performance indicators to serve the management of the financial position and performance of the construction enterprise

Master‟s thesis in economics by Nguyen Thi Trinh in 2019 on the topic:

“Completing the content of analyzing the financial statement at the Complete Materials and Equipment JSC”, the thesis has mentioned the following issues:

Analyze and survey the current state of content; analyze the financial statement in the company in making decisions, thereby proposing complete solutions on the content of analyzing the company‟s financial position next time

Nguyen Thi Quynh in 2019 with the topic of her master‟s thesis:

“Analysis of the financial statement of Bibica JSC” has had basic theoretical issues regarding the Analysis of financial position and performance in enterprises through financial statement analysis including the financial system, methods of financial analysis at Bibica JSC according to the following contents: general assessment of the company‟s financial position and performance, financial structure analysis, analysis debt situation, and solvency, analyzing the efficiency of production and business activities based

on financial statement analysis On that basis, the author suggests several solutions and conditions for implementing solutions to improve the financial capacity of the company

Therefore, for research-oriented works, the authors have provided a theoretical basis for financial position and performance analysis and presented their studies on the current situation of financial position and performance analysis through financial statement analysis or improved limitations of companies The meaning of financial statement analysis in the financial management of the company is very important

Consequently, there is no experimental research on financial statements analysis at Huu Nghi Food JSC in the period of 2017 - 2021 as the author is researching As mentioned above, in Chapter 1, we see that the confectionery industry is considered a potential development industry in Vietnam For a long time, Huu Nghi Food JSC has become a familiar name to consumers and gradually asserted its leading position in the Vietnamese confectionery industry The reason is to study the financial situation of the company through

financial statement analysis so that propose recommendations for the company to improve its financial position and performance

From the above comments, the author believes that it is necessary to study and analyze financial statements at Huu Nghi Food JSC Within the framework of this thesis, the author focuses a lot on the financial statements analysis The previous relevant research results will be selectively inherited

by the author

2.2 Theoretical preliminaries

2.2.1 Definition

Financial performance: in a broader sense, refers to the degree to

which financial objectives are being or have been accomplished and is an essential aspect of financial risk management It is the process of measuring the results of a firm's policies and operations in monetary terms It measures a firm's overall financial health over a given period It can also be used to compare similar firms across the same industry, industries, or sectors in

aggregation.” (Verma 2020)

Financial analysis refers to “the study of financial information about companies, projects, etc., to understand their costs, profits, cash flow, etc Financial analysis is converting financial data into useful information for decision making.” (Cambridge Dictionary 2019a) In other words, financial analysis can be defined as a core that determines the capability of surviving in the market and the potential level or degree to which a company or product can make a profit

The financial statement is “an official document of the firm, which

explores the entire financial information of the firm The main aim of the financial statement is to provide information and understand the financial

DeMarzo, and Harford (2015, 54) briefly define financial statements as

“accounting reports issued by a firm quarterly or annually that present past information a snapshot of the firm‟s financial position”

Profitability is a term that is composed of two words: profit and ability

The phrase profit stands for "money that is earned in trade or business after paying the costs of producing and selling goods and services” (Cambridge Dictionary 2019c), and the word ability, according to the Lexico Dictionary (2019), means “possession of the means or skill to do something” Therefore, following Tulsian (2014, 1), the term profitability can be defined as “the ability of a given investment to earn a return from its use” In other words, profitability measures the profits of the business and displays the success or failure of the Company

2.2.2 Objectives

According to James et al (2006), financial statement analysis is considered a three-legged stool The three-legged stool represents analysis objectives based on the following:

- Determining the economic characteristics of the industry in which a company participates and the relationship of those economic characteristics to the financial ratios

- Describing the strategies which a company pursues to distinguish itself from rivals as a basis for assessing the Company's competitive advantages, the sustainability of the Company's earnings, and risks

- Evaluating financial statements, including accounting concepts and methods, and the quality of the information they provide

In a different light, Ciaran (2006) claimed that the role of financial statement analysis is taking prepared financial reports, combined with other data and information, in examining the past, current, and future performance

and financial status This is done to make an investment, credit, and other economic decisions The authors emphasized that there are certain concepts in financial analysis Generally, analysts tend to examine the performance of firms and forecast the potential opportunities and financial position Analysts are also concerned about factors that may create risks in the Company‟s future performance Financial analysis will provide systematic and scientific evidence for users Corporate finance activities involve many entities such as managers, investors, banks, suppliers, state authorities, etc., so each object has different analysis objectives For instance, lenders often provide in two forms short-term and long-term debt For short-term debts, debt holders usually pay attention to the current financial status, the liquidity of floating assets, and the asset turnover By contrast, for the long-term one, analysts constantly aim to predict cash flows and assess the profitability of businesses in a long-term period However, short-term or long-term lenders are interested in capital structure because capital structure includes both potential risks and safety for lenders In addition, the primary concern of managers from a financial analysis is to clarify the financial structure, business efficiency, and risk issues However, there is a different consideration between owners and managers Typically, the owner is concerned about the profitability of their investment, how to increase owners‟ equity, and attain higher returns from invested capital Therefore, financial analysis from the perspective of owners

is more synthetic than that from managers The study goal ultimately depends

on the economic interest of individuals and organizations related to the business As a result, applying in-practice analysis requires the flexibility of analysts in each stage

2.3 Sources of information

Subramanyam (2009) discussed the four primary sources of financial information: balance sheet, income statement, statement of cash flows, and notes to financial statements Each subsection below will, in turn, discuss these sources in more detail

2.3.1 Balance sheet

The balance sheet presents the resource of a firm (assets) and the claims

on those resources (liabilities and shareholders‟ equity) as of a specific date The balance sheet derives its name from the fact that it reports the following equation:

Asset = Liabilities + Shareholders‟ Equity Assets are future economic benefits that can be acquired or controlled by

a specific entity due to past transactions or events (Harrison, 2006) Assets are sources that have the potential to bring a Company future economic benefits: the ability to generate cash flows in the future (such as accounts receivable, inventories, and investment securities) or to reduce future cash outflows (as prepaid) or to afford potential service for operating activities (such as with assets and equipment)

Liabilities are the future sacrifices of economic benefits arising from the current obligation of a specific entity to transfer assets or provide services to other entities of transactions or events in the past (Botosan et al 2005) Hence, liabilities represent a current obligation of a company to make payments by cash, goods, or services in predictable quantities at a predictable time Liabilities reflect managers‟ expectations of future sacrifices of resources to meet existing obligations

The shareholders‟ equity in a company is a residual interest or claim That is, the owner has a claim for property not required to satisfy the requirements of creditors (Fernandez, 2002) Therefore, the valuation of assets and liabilities in the balance sheet will determine the total shareholders‟ equity value

Typically, analysts evaluate the relationship between items in the balance sheet when assessing a company's financial situation and credit risk (Palepu and Healy, 2013) For instance, exceeding current assets over current liabilities suggests that a company has sufficient liquid resources to pay short-term lenders (Penman and Penman, 2007) A relatively low percentage of long-term debt to shareholders‟ equity indicates that a company is likely to have long-term assets to repay long-term debt at maturity or at least an ability

to borrow new debt financing using the use of long-term assets as collateral to repay debt coming due (Dewatripont and Tirole, 1994)

2.3.2 Income statement

The income statement provides information about a company's profitability over a period of time (Palepu and Healy, 2013) Analysts and investors usually interchange the terms net income, earnings, and profit when referring to the bottom-line amount in the income statement (Hillman and Keim, 2001) The income statements mainly reflect the results of operating decisions (for example, product mix and pricing, sourcing of production and marketing, and use of plants and equipment) It also reports the amount of money involved in investment decisions, such as interest and dividends income, and financing decisions, such as interest expenses Other comprehensive income items, which are reported as a part of total income in the shareholders' equity statement, reflect profits and losses from changes in

the value of some assets and liabilities, which are not recorded in net income until those profits and losses are realized

2.3.3 Statement of cash flows

Statement of cash flows reports for a while net cash flows from three main business activities: operating, investing, and financing (Palepu and Healy, 2013) The purpose of this statement is simple but essential: providing the sources and use of cash for financial statement users The statement of cash flows provides information to complement the income statement and to demonstrate how cash flows differ from accrual-based income (Carslaw and Mills, 1991) Because the cash flow statement shows how companies generate and use cash, it is also a valuable tool for assessing how they implement financial strategies (Mills and Yamamura, 1998) Cash flows connect operating, investing, and financing activities They allow each of these three activities to continue smoothly and efficiently The statement of cash flows can also help assess a company's past ability to generate free cash flow and predict free cash flow in the future

The statement of cash flows classifies cash flows as relating to three different activities: operating, investing, or financing

Operating: Selling goods and services is one of the most important ways

a company generates cash Assessing cash flow from operations for several years shows which activities have provided the necessary cash to maintain operating capacity (and the extent to which companies must rely on other cash resources) (Broome, 2004)

Investing: The acquisition of long-term assets, especially property, plant, and equipment, often represents significant ongoing using cash If companies are to grow, they must acquire additional long-lived productive assets (Palepu and Healy, 2013) Companies get a portion of the cash needed to achieve

those types of assets from the sale of assets Such cash flows are rarely enough to cover the cost of new purchasing, though

Financing: A company obtains cash from short-term and long-term loans and from issuing preferred and common stock It uses cash for these loans, pays dividends, and reacquires shares of outstanding preferred and common stock (Subramanyam, 2009)

2.3.4 Related documents

Notes to financial statements

Financial statements report the accounts and amounts in the balance sheet, income statement, and cash flow statement, but they do not explain how to determine those accounts and the amount (Subramanyam, 2009) The notes would provide essential details about the accounting methods and principles used by the Company to measure assets, liabilities, revenues, costs, profits, and losses They generally summarize the key accounting principles used by the Company Furthermore, the notes also indicate important details about important financial statement estimates, such as the fair values of investment securities, income taxes, and intangible assets (Fraser et al.2010)

Management discussion and analysis

Many companies accompany the financial statements and notes with extensive narrative and quantitative discussion and analysis from managers (Smith and Taffler, 2000) The management discussion and analysis of the financial statement provide insight into management strategies and assessments of the Company's performance In some cases, this paper also offers a glimpse of managers' expectations about the future of the Company

Managers’ and independent auditor’s attestations

Managers‟ attestation and the independent auditor‟s attestation provide a statement of (and take responsibility for) the quality and effectiveness of the internal control system and the fairness of the financial statements and notes

in reporting a company‟s financial situation, performance, and cash flows An independent audit adds credibility and reliability to financial statements and notes prepared by management (Wright and Davidson, 2000)

CHAPTER 3: DATA AND METHODOLOGY

This chapter discusses the methods used to analyze the data collected encompassing the research questions, research methods, data collection and limitations, data sources, and data analytical framework

3.1 Research type

This research aims at analyzing Huu Nghi Food's financial performance over the recent years, specifically over the last 5 years from 2017 to 2021, to assess the corporation‟s profitability, liquidity, solvency, asset management, short-term and long-term financial position, as well as to make recommendations to any red flags identified during the analysis Based on the Company‟s financial data and using suitable analysis tools such as financial ratios, common-size analysis, and vertical and horizontal analysis, among others, to evaluate the Company‟s financial position, profitability, liquidity, and solvency, it is possible to provide recommendations that would help improve any drawbacks in the financial performance of the Company in the past, present, and future The selected research type of this thesis paper is mixed - methods, which focuses on describing, interpreting, contextualizing, and gaining in-depth insight into specific concepts or phenomena (Morse, 2016) Since the purpose of this research is to investigate closely and critically scrutinize the financial performance of Huu Nghi Food in Vietnam during 2017 - 2021, mixed – methods - that is, a balanced combination of both qualitative and quantitative methods, have been deemed a suitable choice for the researched cаse An in-depth justification of chosen mixed - method is presented below sub-sections To obtain the best results from the selected method, the reseаrcher uses a wide range of financial analysis tools to conduct

an in-depth financial analysis and considers the perception аnd perspective of

individuals who might influence or have a close encounter with the financial data of Huu Nghi Food

3.2 Research methods

The primary purpose of this sub-section is to set forth and justify the mixed - methods used in this research The first quantitative method is a content analysis of the document archives and financial reports of Huu Nghi Food in Vietnam from 2017 - 2021 This step was decided to be crucial for sufficient comprehension of the Company under investigation The findings that follow in subsequent chapters will outline the fore - mentioned content analysis Additionally, the quantitative method was mixed with a qualitative method to accurately identify critically sensitive areas requiring extensive views and perceptions of involved individuals

The second - qualitative method used in this research is semi-structured interviews conducted among Huu Nghi Food staff with a reasonably high level of involvement with the Company‟s operations and performance Eight individuals were interviewed in May and June 2021 Six interviews were done

in person, one interview was done via phone, and the last interview was done via email All interviewees were of Vietnamese origin; therefore, the interviews were all conducted in Vietnamese language, after which they were noted in English and analyzed in the English language

3.3 Justification of chosen methods

Mixed – methods have been chosen for this research, the Quantitative method being the analysis of financial data and the Qualitative method being semi-structured interviews The choice of research method for this thesis has been deemed appropriate for several reasons The first reason is close adherence to the research aim and research questions For the topic “Financial

Statements analysis at Huu Nghi JSC ”, the focal objective of this thesis is to answer the two research questions:

(1) How was Huu Nghi Food‟s financial situation in 2017-2021?

(2) What solutions may be proposed to improve the financial position and performance at Huu Nghi Food JSC in the future?

To answer the first research question, the researcher considers a quantitative analysis of the Company‟s financial data over the period

This can shed light on the past, present, as well as future financial situation of the Company However, due to the nature of financial report preparation, not everything is reflected through the analysis of mere financial data Therefore, to answer the second research question, the researcher considers a qualitative approach through semi–structured interviews with relevant individuals within the Company who have reasonably high exposure

to the financial reports preparation process and have an adequate understanding of the Company‟s performance and prospects It is believed that the combination of the two methods mentioned above will allow this thesis to draw acceptable and meaningful conclusions regarding Huu Nghi Food‟s financial performance and recommendations for future improvements The second reason for choosing the mixed method is the advantage of incorporating both qualitative and quantitative aspects to achieve a high level

of scientific rigor in mixed-methods research, as Dewasiri et al (2018) outlined The authors believe that a balanced combination of both methods can achieve much more scientifically justified research results than when compared to the non–mixed one Using both financial analysis tools and semi–structured interviews can help contribute to the depth of the financial

figures by attributing dry and rough figures to the opinions and untold truths behind them

The third reason for choosing the mixed – method is the diversification

of the research methodology of this project The researcher believes that stand-alone financial analysis would not be sufficient to form a high–quality research thesis Similarly, stand-alone interviews of eight individuals would not suffice to do a good thesis Therefore, it is considered that a combination

of the two supplements each other so that the results of this thesis can be viewed and used for practice or further research

3.4 Data collection and analysis

Data collection plаys а cruciаl pаrt in аny reseаrch pаper аnd this thesis

is no exception There are generally two primary sources to gаther research dаtа which аre primаry аnd secondаry (Hox and Boeije, 2005) The primary dаtа sources аre obtained directly by the researcher for the specific research,

in this case, via interviews This data type will give the results more openness and personalized attributes, yet they can sometimes be raw and chaotic However, secondаry dаtа which is often synthesized from different sources and authors for the specific research, by mаinly getting information from books, documents, the internet, and published databases, among others (Hox and Boeije, 2005) Using this kind of data collection, the reseаrcher has better control over the gathered information as they are tailored for purpose but can

be general This thesis utilizes both sources of data, primary and secondary data sources, the concepts of which have been described above The first type, preliminary data, is derived from in–depth semi–structured interviews conducted among Huu Nghi Food staff in the form of real-time note-taking The second type, secondary data, is derived from the Company‟s financial reports, where financial data will be deducted and critically analyzed using

financial analysis tools The combination of both types of data collection in the thesis helps build a stronger foundation for research discussion and conclusions

Moreover, one cаn breаk the secondаry dаtа into internаl аnd externаl sources By doing this, the reseаrcher would have а wide vаriety of dаtа First are the internal sources, the Company‟s internal documents, and financial reports, which are included in the thesis in the form of figures, numbers, and files of the research objects of the Company Huu Nghi Food Secondly, the external sources refer to the information аbout the firm аnd overall business

of Huu Nghi Food, which is not necessarily prepared by the Company itself and cаn eаsily be collected viа web pаges, published articles, discussion forums, industry analysis reports, among others Once again, a combination of both internal and external data sources contributes to the thesis‟ reliability and credibility together with non–biases Due to the fact all eight interviewees are already existing staff of the Company, they might have a biased or rather internal view on the research matter Therefore, combined with data sources from outside the Company is a good balance to ensure the thesis is not internal and adds meaningful value to the literature on the company's financial analysis

3.5 Methodological limitations

The two methods used for this research included (1) content analysis of company archival documents and financial reports and (2) semi-structured interviews conducted among Huu Nghi Foodstaff, who have a reasonably high level of involvement with the Company‟s operations and performance For a research paper of a relatively small scope like this one, it can be argued that using two methods can result in the research objective being inundated by

losing adequate depth However, after careful consideration, the two methods described above were chosen for this research paper because it has been believed that such double dimensions of data sources and eight layers of entirely independent perspectives directly acquired through semi–structured interviews would enhance the depth of interpretation and analyses Having justified the choice of methodology, the researcher maintains an open mind to any potential criticism of methodological limitations

Concerning the interviews, a second distinctive limitation has come to attention in conducting this research Firstly, the sample population that participated in the discussions was reasonably small - only eight interviewees, which might imply the lack of representativeness of the sample and the results Secondly, the interviewees were conducted entirely in Vietnamese, potentially imposing the risk of mistranslation, misinterpretation, and incomplete conveyance of messages To the best abilities, the researcher has ensured high-quality translation and theme identification in the interviewees‟ answers

3.6 Data Sources and Interviewees’ Profiles

3.6.1 Data Sources

The research data was collected from two main sources: primary and secondary Preliminary data were obtained from conducting semi-structured interviews with individuals who might influence or have a close encounter with the financial data of Huu Nghi Food– that is, the company's internal staff Secondary data was obtained both internally and externally Internal secondary data consists of internal documents, financial reports, figures, numbers, аnd files of Huu Nghi Food In contrast, external secondary data consists of external information about the firm аnd overall business of Huu

Figure 1: Process of analyzing financial statements

Nghi Food collected via web pаges, published articles, discussion forums, and industry analysis reports

3.6.2 Interviewees’ Profiles

Eight individuals were interviewed in May and June 2021 Six interviews were done in person, one interview was done via phone, and the last interview was done via email All interviewers were of Vietnamese origin; therefore, the interviews were all conducted in Vietnamese and translated into English

3.7 Data analytical framework

The analyzing financial statements are as per the following table:

Step 1: Define the goal of the analysis This is an important job that

determines the quality of the analysis report and affects the satisfaction level

of the users The determination of the analysis objective depends on the decision-making purposes of the users of the financial statements

Step 2: Then, the analyst will identify the contents to be analyzed to

achieve those goals Suppose the analysis aims to evaluate the efficiency of working capital management and use In that case, it is necessary to analyze the turnover rate of short-term assets in general, the turnover rate of each essential short-term asset item (inventories), receivables from customers), net working capital, and the length of the business‟s operating cycle Determining

Step 3: Collect analytical data

Step 4:

Process analytical data

Step 5:

Develop and communicate conclusions/re commendation

s

Step 6: Follow up

the right content to analyze (not redundant, not lacking) will provide helpful information for users to make reasonable decisions

Step 3: Analysts get the data needed to answer specific questions An

essential part of this step is understanding the Company's business, financial performance, and financial situation (including trends over time and compared with competitors) Additionally, information about the economy and industry is essential to understand the environment in which the firm operates Analysts often adopt a top-down approach whereby they understand macroeconomics, such as the economic and inflation prospects, and identify the company's opportunities in the expected macroeconomic environment

Step 4: When the data has been processed, the next step is interpreting

the output The answer to a specific financial analysis question is seldom the numerical answer alone; the answer to analytical questions is based on analyzing results and using these results to support conclusions or recommendations The answers to the specific analytical questions can achieve the analysis's underlying purpose However, a conclusion or recommendation is required To support making the decision, the research will cite information such as target value, relative performance, expected future performance given to the Company's strategy, management quality, and other important information

Step 5:Communicating conclusions or recommendations appropriately is

the next step in the analysis An appropriate format would change by the analysis task, by firms, and/or by the audience

Step 6: The process does not end with the report If a capital investment

is made or a credit rating is assigned, a periodic review is required to determine whether the original conclusions and recommendations are still valid Follow-up may involve repeating all the above steps in the process periodically

CHAPTER 4: RESULTS AND FINDINGS

4.1 Content Analysis

4.1.1 Financial Analysis

Besides the qualitative information researched about the Company's background – presented in section 1.1, the following will present an analysis

of the Company in more depth The Company‟s audited financial reports from

2017 to 2021 were obtained from the Company‟s website and analyzed using

a wide range of financial analysis tools to assess the corporation‟s profitability, liquidity, solvency, asset management, short-term and long-term financial position, as well as to make recommendations to any red flags identified during the analysis Analysis tools such as financial ratios, common-size analysis, and vertical and horizontal analysis, among others, were used to evaluate the Company‟s financial position, profitability, liquidity, and solvency All financial reports used for analysis in this research were fully audited

Table 1: Statement of Huu Nghi Food Financial Position

Currency: VND

Account Name 2017 opening

Current Assets 513.259.786.918 553.555.702.788 608.972.823.547 904.736.039.643 812.527.295.969 906.266.587.213 Long-term Assets 193.348.384.867 331.830.521.148 462.244.749.006 522.310.778.348 957.658.993.691 1.070.448.971.676

Total Assets: 706.608.171.785 885.386.223.936 1.071.217.572.553 1.427.046.817.991 1.770.186.289.660 1.976.715.558.889

Current Liabilities 408.802.852.204 549.433.003.098 501.507.291.378 589.398.080.420 773.488.829.502 865.364.608.346 Long-term

Table 2: Statement of Profit and Loss Currency: VND

Total Net Revenue: 1.396.041.171.048 1.660.808.043.999 1.739.482.446.320 1.471.493.003.496 1.602.617.895.650

Cost of goods sold 1.063.379.586.740 1.291.873.374.287 1.340.528.299.416 1.067.983.372.178 1.169.084.130.034

Table 3: Statement of Cash Flows

Ending Cash Balance

and Cash Equivalents 271.267.305.137 7.028.966.160 20.479.771.672 21.786.999.656 52.343.205.211 52.122.110.519

4.1.2 Common–Size Analysis

Despite not revealing significant analytical information, common-size (or vertical) analysis compares the proportion of financial statement items to their totals across various financial periods Reaching across the years, it can

be seen that there are many fluctuations in the proportion of financial data items across the financial periods under study Therefore, it is deemed essential and necessary to conduct further analysis, referred to as horizontal analysis, in the next section

Common-Size Statement of Financial Position

Liabilities and owner’s equity situation

Current liabilities are a large proportion of Total liabilities ( about 62%

in 2017 and 2021, 44%)

In 2017 Long-term liabilities takes up 4% of total liabilities, this proportion increased strongly to 30% in 2018 and stable at about 29-34% in the next years

Owner‟s equity is stable proportion over 4 years 2018-2019, with fluctuation of about 23-27% In 2017 about 34%

In general, over the past five years, the company„s structure has changed obviously, especially, since the proportion of assets has changed in the last two years

Statement of Profit and Loss

The cost of goods sold accounts proportion is quite larger and of total net revenue over 5 years but has to tend decline to 72,9% in 2021, selling and administrative expenses (SG&A) fluctuate up and down about 2%

From table 2 and the common-size profit and loss above, we can see that the total revenue of the company increases gradually In 2017 total revenue is VND 1396 billion, and in 2021 is VND 1.602 billion Besides, the profit after tax decreased from VND 62 billion to VND 52 billion, due to the decline strongly of financial activity profit, in other words, the increased sharply of interest expense from VND 6 billion to 54 VND billion

4.1.3 Ratio Analysis

A financial ratio analysis proceeds to comprehensively evaluate a company‟s liquidity, operational asset management, solvency (or financial risk), and profitability Each of these financial ratio clusters is calculated and discussed below

Table 4: Liquidity Ratios

Quick ratio (except

Inventories and

Short-term receivables)