Solutions to improve the financial situation of thanh do joint stock company

"Evaluate the financial situation at Thanh Do Joint stock Company" Research objectiveProperly assess the situation of the company, analyze the financial situation andoperational efficien

I herewith formally declare that this is a study done by myself with the support ofthe instructor The figures, the results stated in the thesis are honest from the actualsituation of the internship unit

I am fully responsible for this promise!

Signature

Trinh Khanh Linh

Luận văn thạc sĩ Kinh tế

In order to complete the thesis and finish the course, I would like to express myprofound gratitude to the Academy of Finance for enabling me to have a goodstudying environment during my time at the school.

I would like to thank Dr Tran Thanh Thu assisted in the research process anddirectly guided the completion of this graduation thesis

In addition, I express my warm thanks to all my colleagues at Thanh Do JointStock Company, specially accounting department who provided me with the facilitiesbeing required and conductive conditions for my report

During the internship due to the limited theoretical and practical level, I cannotavoid the shortcomings, I am looking forward to receiving the teachers' suggestions tocomplete the thesis

Signature

Trinh Khanh Linh

Luận văn thạc sĩ Kinh tế

STATUTORY DECLARATION

ACKNOWLEDGEMENT

INTRODUCTION 1

CHAPTER 1 : THE FUNDAMENTAL REASONING FOR THE EVALUATION OF FINANCIAL SITUATION OF THE ENTERPRISES 3

1.1 CORPORATE FINANCE AND CORPORATE FINANCE MANAGEMENT.3 1.1.1 Overview of Corporate Finance 3

1.1.2 Enterprise Financial Management 5

1.2 FINANCIAL SITUATION OF ENTERPRISES 9

1.2.1 Concept of corporate financial situation 9

1.2.2 Content and indicators reflect the financial situation of the enterprise 10

1.3 FACTORS AFFECTING THE FINANCIAL SITUATION OF ENTERPRISES 23 1.3.1 Objective factors 23

1.3.2 Subjective factors 23

CHAPTER 2 : THE STATUS OF FINANCIAL SITUATION IN THANH DO JOINT STOCK COMPANY IN THE PAST TIME 25

2.1 OVERVIEW OF THANH DO JOINT STOCK COMPANY 25

2.1.1 The process of formation and development 25

2.1.2 Organize the management apparatus and business operations of the company 27

2.2 CURRENT SITUATION OF FINANCIAL SITUATION AT THANH DO JOINT STOCK COMPANY 32

2.2.1 The size and structure of the company's equity and liabilities 33

2.2.2 The size and structure of the company's assets 40

2.2.3 Business performance results 45

2.2.4 Cash flow situation 49

2.2.5 Debt situation and solvency 57

2.2.6 Asset's ultilization and profitability on using capital situation 62

2.2.7 The situation of profit distribution of the company 67

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DO JOINT STOCK COMPANY 68

2.3.1 The results achieved 68

2.3.2 Limitations and reasons 70

CHAPTER 3 : SOLUTIONS TO IMPROVE THE FINANCIAL SITUATION OF THANH DO JOINT STOCK COMPANY 73

3.1 SOCIAL ECONOMIC BACKGROUND AND DEVELOPMENT ORIENTATION OF THANH DONG JOINT STOCK COMPANY IN THE COMING TIME 73

3.1.1 Socio-economic context 73

3.1.2 Objectives and development orientation of Thanh Do Joint Stock Company 75

3.2 SOLUTIONS TO IMPROVE THE FINANCIAL SITUATION OF THANH DO JOINT STOCK COMPANY 78

3.2.1 Improve solvency and debt collection 78

3.2.2 Improve business cost management solutions 79

3.2.3 Find potential markets, diversify products and approach customers 80

3.2.4 Perform regularly, proactively and effectively the business financial analysis 81

3.3 CONDITIONS FOR IMPLEMENTING SOLUTIONS 81

3.3.1 Environmental conditions 81

3.3.2 Specific conditions for each solution 82

CONCLUDE 84

REFERENCES 85

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Figure 2.2.1: Capital structure of the Company in 2016-2019 33Table 2.2.1: Capital structure of Thanh Do Joint Stock Company in 2016-2019 (Unit:million dong) 34Table 2.2.1a: Difference in capital structure in 2016-2019 35Table 2.2.1.2: Structure of capital sources by time of capital mobilization (Unit:million dong) 38Table 2.2.2: Asset structure of Thanh Do Joint Stock Company in 2016-2019 (Unit:million dong) 41Table 2.2.2a: Difference in assets structure in 2016-2019 42Table 2.2.3.1:Business performance of the Company in the period of 2016-2019 (Unit:million dong) 45Table 2.2.3.1a: Difference in business results of the Company in the period of 2016-

2019 (Unit: million dong) 46Table 2.2.3.2: Cost use level of the Company in 2016-2019 (Unit: million dong) 48Table 2.2.4: Cash flow statement of the Company for the period of 2016-2019 (Unit:million dong) 49Table 2.2.4a: Difference of cash flow statement of the Company during 2016-2019 .51Table 2.2.5.1: Debt situation of Thanh Do Joint Stock Company in 2016-2019 (Unit:million dong) 58Table 2.2.5.2: Liquidity ratios of Thanh Do Joint Stock Company in 2016-2019 60Table 2.2.6.1: Indicator reflecting the capital's ultilization of Thanh Do in 2016-2019 62Table 2.2.6.2: Criteria reflecting profitability on using capital situation of Thanh Do in2016-2019 65Table 2.2.7: Profit distribution situation of Thanh Do in 2016-2018 67

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Rationale of the thesis

The process of globalization opens countries with opportunities to promoteeconomic growth and social development Specifically, on November 12, 2018, theResolution on ratifying the CPTPP Agreement was approved by the National Assemblyand came into effect for Vietnam from January 14, 2019; On 12/02/2020, the free tradeagreement between the European Union (EU) and Vietnam (EVFTA) was approved bythe European Parliament (EP), the developments are in a good direction;

In the context that Vietnam is increasingly deeply involved in the globalmarket, we see great opportunities ahead, this is an opportunity and also a challengefor Vietnamese enterprises in the quest to gain a foothold in the international market

The world economy is showing many complicated changes, leading toVietnam's economy are also affected, the most influential part is to mention thatbusinesses, in which small and medium enterprises are occupying a large percentage

of the economy, and also the place to create a major job in Vietnam Therefore, thehealth of small and medium enterprises also greatly influence Vietnam'scompetitiveness in the international arena Therefore, businesses have to proactivelymaintain their financial situation, leveraging the potential and resources available todrive business operations

To implement effective management of business operations, the organization ofassessment and analysis of the financial situation of enterprises must often be heldregularly This is important not only for the business but also by investors, creditors,employees interested in making important ideas and decisions The evaluation of thefinancial situation is the introduction of the current state of the business, determiningthe factors affecting the business situation to bring the legal timely, an overview tostabilize and improve the efficiency of business production and business

From the implications of the evaluation of corporate finance, after theinternship period at Thanh Do Joint stock company, with the guidance of her teacher

DR Tran Thanh Thu and the help of officers in the Financial-accounting department

of the company, i chose to study and perform the final thesis with the subject:

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"Evaluate the financial situation at Thanh Do Joint stock Company" Research objective

Properly assess the situation of the company, analyze the financial situation andoperational efficiency of the company for the last 4 years; Find the strengths that need

to be promoted, as well as the limitations and causes thereby offering solutions toimprove the efficiency of business operations of the company

Research subject and scope

Research object: The topic aimed to find out the true situation of the financial situation

of enterprises through the Financial Statements of Thanh Do Joint Stock Company.Scope of research:

- Space: content to assess the financial situation of Thanh Do Joint StockCompany

- About time: in 4 years from 2016-2019

- About source of data: the data is collected from the accounting department andfinancial statements of Thanh Do Joint Stock Company

Research Methodology

The project uses the following methods:

- Methods of collecting data from the company's accounting department, datafrom financial statements and related books

- Methods of listing, comparing and analyzing to see trends of indicators

- The evaluation method introduces strengths and limitations to offer solutions toimprove the financial situation of the company

Structure of graduate thesis

The thesis is divided into three main chapters:

Chapter 1: The fundamental reasoning for the evaluation of the financial situation of the enterprise

Chapter 2: The financial situation and efficiency of production and business activities of Thanh Do Joint stock company in 4 years of 2016-2019

Chapter 3: Some solutions to improve business performance at Thanh Do Joint Stock company

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CHAPTER 1 : THE FUNDAMENTAL REASONING FOR THE

EVALUATION OF FINANCIAL SITUATION OF THE

ENTERPRISES

1.1 CORPORATE FINANCE AND CORPORATE FINANCE MANAGEMENT

1.1.1 Overview of Corporate Finance

1.1.1.1 Definition

- Enterprises: (according to the Enterprise Law) “Enterprise is an economicorganization with its own name, assets, stable transaction office, and is allowed toregister its business in accordance with the provisions of law for real purposes currentbusiness activities ”

- Corporate finance is an important tool, describing the process of mobilizing,distributing and using capital sources to finance the investment in the assets of theenterprise to create profit for the company owner

1.1.1.2 Corporate Finance decisions

Depending on the conditions, specific circumstances of business activities thatthe business owner make different decisions, usually enterprises interested in research

3 decisions mainly decision on investment, decision on capital and decision to divideprofit

- Investment decisions: are decisions relating to the total value of assets and the

value of each asset department (fixed assets and mobile assets) The major investmentdecisions of the business, including:

Decision on investment in working assets: Decision on inventory, decision on

sales policy, decision on short-term financial investment.

Decision on investment in fixed assets: Decision on purchasing fixed assets,deciding on project investment, deciding on long-term financial investment

Deciding on the structural relations between investment in current assets andinvestment in fixed assets: Decision on using business leverage, deciding breakeven point

Investment decisions are considered the most important of corporate financedecisions because they create value for the business A right investment decision willcontribute to increase the value of the business, thereby increasing the value of the

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property for the owner conversely a wrong investment decision will damage the value

of the business resulting in property damage to the business owner

- Capital mobilization decisions: These decisions are associated with decisions

on what kind of capital sources to choose to provide for investment decisions Major

capital mobilization decisions of enterprises include:

Decision on short-term capital mobilization: decision on short-term loan or use

of commercial credit; decide whether to take a short term bank loan or use a companybill

Decision to mobilize long-term loans: decide to use long-term debt throughlong-term bank loans or corporate bond issues; decision to issue share capital (ordinaryshares or preferred shares); decide the structural relationship between debt and equity(using financial leverage); decide to borrow to buy or rent property

Capital raising decisions are a significant challenge for corporate financialmanagers In order to make the right capital mobilization decisions, financial managersmust have a firm grasp of the advantages and disadvantages of using capital raisingtools, accurately assessing the current situation and forecasting correct market

movements - future prices before making a decision to raise capital.

- Decisions on profit distribution: These decisions are associated with the

distribution of dividends or dividend policy of the business

Financial manager will have to choose between using after-tax profits to paydividends to shareholders or keep to reinvest These decisions relate to how anenterprise should pursue a dividend policy and whether the dividend policy will affectthe value of the business or the company's share price in the market

Besides, in addition to three major decisions above, there are many otherdecisions relating to the business activities of the company such as the decision onpurchasing, merging, the decision to prevent financial risk in production and business

activities…

Based on implementation time, it can be divided into 2 groups: short-termfinancial decisions and long-term financial decisions

- Long-term financial decisions: These are strategic decisions that have

long-lasting effects on the survival and development of businesses Each of these decisions

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requires administrators to carefully consider, methodically and scientifically analyze toensure to minimize the risks that may occur Under long-term financial decisionsinclude decisions on long-term investment, decisions on long-term capital mobilizationand decisions on profit distribution policies of enterprises.

- Short-term financial decisions: These are operational decisions, which do not

significantly affect the survival and development of the business, so it is also calledtactical financial decisions Main short-term policies include: decisions on capitalreserve in cash, decisions on receivable debts, decisions on implementation ofpayment discounts, decisions on reserve capital reserves, decisions on depreciation offixed assets The reasonableness and correctness of these decisions affect certainrisks and benefits for the enterprise as well as its owners

In short, financial managers must make financial decisions to maximizebusiness value With every financial decision, the manager must always face theconflict between risk and profit A wise financial decision is a decision that canmaximize the value of the business, so that the financial decision must minimize risksand maximize profits for the owner This is very difficult for managers in the process

of analyzing and making decisions to choose the appropriate financial decisions

1.1.2 Enterprise Financial Management

1.1.2.1 Definition

Corporate financial governance is the choice, decision making, and organization

of financial decision making to achieve the operational objectives of the enterprise.Because the financial decisions of the business are associated with the creation,distribution and use of monetary funds in the course of the operation of the business,therefore, corporate finance management is also seen as the process of creating,distributing and using the Monetary Fund to meet the operational needs of thebusiness

1.1.2.2 Contents of enterprise financial management

- Tham gia đánh giá, lựa chọn quyết định dự án đầu tư

The construction and selection of investment projects are carried out by manydepartments in the enterprise From a financial perspective, the key consideration isthe economic efficiency of the project, which is to consider and weigh the costs, the

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risks that may be encountered, and the potential for profit, ability to implementprojects In analyzing the selection and evaluation of projects that are optimal and havehigh profitability, the financial manager is the one who considers the use of investmentcapital; based on the participation in the evaluation and selection of investmentprojects, it is necessary to find out the development orientation of enterprises, whenconsidering investing capital to implement investment projects, attention should bepaid to strengthening competitiveness of enterprises to ensure immediate and long-term economic efficiency.

- Determining capital needs and organizing capital mobilization to meet theactivities of enterprises

All business activities of the enterprise require capital When going intobusiness, corporate financial management needs to identify the urgent capital needs forthe activities of the enterprise during the period Working capital is composed of long-term capital and short-term capital, it is important to mobilize sufficient capital to meetthe operational needs of the business The organization of mobilizing capital sourcesgreatly affects the performance of an enterprise To decide on the appropriate form andmethod of capital mobilization, enterprises need to consider and consider in manyaspects such as capital structure, capital cost, advantages and disadvantages of variousforms method of raising capital

- Effective use of existing capital, strict management of revenues, expendituresand ensure the ability of business payment

Corporate financial management must find ways to mobilize the maximumamount of existing capital for business activities, free up stagnant capital, closelymonitor and implement well the recovery of sales and receivable, strict management ofexpenses incurred during the operation of the business; regularly seek measures toestablish a balance between revenue and expenditure with money to ensure theenterprise is always able to pay

- Make profit distribution, make deductions and set up corporate funds

Appropriate distribution of after-tax profits as well as the appropriation andgood use of enterprise funds will make an important contribution to businessdevelopment and improvement of workers' lives Profit is the goal of business

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activities, which is an indicator that businesses must pay special attention to because itrelates to the existence and expansion of the business It can not be said that thebusiness operates well and has high efficiency while the operating profit decreases, theenterprise needs to have an optimal method of distributing the enterprise's profits Indetermining the ratio and form of enterprise funds such as development investmentfund, financial reserve fund, reward and welfare fund.

- Ensure regular inspection and control of the operational situation of the businessThrough daily revenue and expenditure situation, the implementation offinancial indicators allows to regularly check and control the operation of the business

On the other hand, through periodic analysis of corporate financial situation to assessthe strengths and weaknesses in management Thereby, helping business leaders intime to make appropriate decisions to adjust business operations of enterprises in thenew period

- Implementation of financial planning

The financial activities of the business should be anticipated through financialplanning Good implementation of financial planning is an essential tool for businesses

to be proactive in giving timely solutions when there are market fluctuations Theprocess of implementing a financial plan is also an appropriate financial decision-making process to reach the goals of the business

1.1.2.3 The role of corporate financial management

Financial management is closely related to other activities in an organizationsuch as asset management, marketing management or human resource management.Besides, financial management also helps managers to plan and estimate reasonablecosts for situations arising in the future In addition, good financial management willhelp businesses easily find new sources of profits such as equity investments, loans.Specifically, corporate financial management has the following role:

- Raising capital to ensure the normal and continuous activities of enterprisesMonetary capital is a premise for business activities In the course of operation,enterprises often generate short-term and long-term capital needs for regular businessactivities, as well as for investment and development of enterprises Failure tomobilize in time and sufficient capital will make business activities difficult or

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impossible to implement Therefore, the assurance for business activities is carried outnormally and continuously depends greatly on the organization of capital mobilization

of enterprise finance

Financial managers take into consideration the financial market situation,capital needs and specific conditions of the enterprise, thereby making the mostoptimal decision in organizing the mobilization of capital sources (within , outside,meet the needs of the business operations.A proper financing policy not only helpsbusinesses minimize financial risks, but also has a great impact on the realization ofthe goal of maximizing Enterprise value

- Organizing the use of capital in an efficient and efficient manner, contributing

to raising the efficiency of business operations of the enterprise

With the selection of optimal investment projects on the basis of considerationand comparison between the profitability rate, capital mobilization cost and the level

of risk of investment projects the financial management has created a premise forthe use of capital savings and high efficiency

The organization of timely and sufficient capital mobilization will helpbusinesses to seize business opportunities, increase business revenue and profits Theselection of appropriate forms and methods of capital mobilization, ensuring optimalcapital structure can help businesses reduce capital use costs, contribute to increasingprofits and return on equity of the business

On the other hand, by raising the maximum amount of existing capital intobusiness operations, enterprises can avoid losses due to capital stagnation, increaseasset turnover, reduce the amount of borrowed capital, thereby reducing interestpayment loans, contributing to increasing profit after tax of the business

- Comprehensively inspect and supervise all business activities of the enterprise.The business operation process of an enterprise is also the process of mobilizingand transforming the form of monetary capital Therefore, through the review of dailyrevenues and expenditures of money, and especially through the analysis andevaluation of the corporate financial situation and the implementation of financialindicators, financial administrators can control promptly and comprehensively theactivities of the enterprise, thereby pointing out the shortcomings and untapped

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potentials to make appropriate decisions, adjusting activities to achieve title of thebusiness.

1.2 FINANCIAL SITUATION OF ENTERPRISES

1.2.1 Concept of corporate financial situation

Enterprise financial situation is a term referring to the operation of an enterprise

in the relationship between business activities and production activities Morespecifically, the financial position reflects all activities that occur in the period of theenterprise The financial position of an enterprise is based on the related accountingrecords and financial statements, in order to understand the financial position of thecompany, we need to assess the financial situation

Assessing the financial situation of an enterprise is to use financial information

to give opinions on the advantages and disadvantages in its production and businessactivities, thereby proposing solutions to improve its operational efficiency businessand increase profits

- The role of assessing corporate financial situation

Assessing the financial situation of the business is important not only for thebusiness but also for managers, investors, creditors, employees, when givingopinions and resolving issues important regulations

For managers: are business executives, managers need to understand thefinancial status of the company in the past period to continue financial balance, ensureappropriate decisions are made In addition, managers need to use that information tocontrol their operations

For investors: are shareholders, individuals or units who benefit (or bear risks)from the capital allocation for business use They are especially interested in thebusiness performance of businesses because their income is the profit from businessactivities

For creditors: are those who lend to businesses to meet the needs of productionand business, businesses will have to pay interest to investors, so they need to evaluatethe performance of the business to know how your money is being used and whether

or not the business is able to repay

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For employees: is the main labor force of the enterprise, their income is thesalary, which depends on the business results, so analyzing business performancehelps the staff mind, contribute to the business.

1.2.2 Content and indicators reflect the financial situation of the enterprise

1.2.2.1 Situation of size and capital structure of the business

The concept of capital is an element, a necessary prerequisite for the formationand development of business activities of an enterprise In order to turn business ideasand plans into reality, it takes a large amount of capital to form the assets needed forproduction and business activities

The size of the capital is reflected in the equity and liabilities data

In the management work, people often use a number of methods of capitalclassification as follows:

- Based on the ownership relationship:

The capital of the business is divided into two categories: equity and liabilities

Asset

LiabilityEquity

Equity: is the equity owned by the business owner, including the equity andadditional capital from the business results

Equity at a time can be determined by the formula:

Equity = Value of total assets – Liabilities

Liabilities are expressed in cash the obligations that the business is obligated

to pay to various economic actors: loans, trade payables, to the State, to employees inthe business,…

To ensure effective business operations, businesses often have to coordinateboth sources: equity and liabilities The combination of these two sources depends onthe characteristics of the industry in which the business operates, depending on themanagement's decision, taking into account the business and financial situation of thebusiness

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- Based on the time of capital mobilization and use:

Enterprises' capital sources are divided into 2 types: regular capital andtemporary capital

 Temporary fund means a capital source of short-term nature (less than oneyear) that the enterprise can use to meet the needs of a temporary nature arising in itsproduction and business activities This source of capital includes short-term loansfrom banks and credit institutions, and other short-term debts

 Regular funds is the sum of stable capital sources that businesses can use forbusiness activities This capital source is often used to procure, form fixed assets and a part ofcurrent assets that are frequently necessary for the business activities of the enterprise

The regular capital of an enterprise at a time is determined by the following formula:

Regular funds = Equity + Long-term debt

Or:

Regular funds = Value of total assets - Short-term liabilities

On the basis of determining the regular capital of the enterprise, it is alsopossible to determine the regular working capital of the enterprise

 Regular working capital is a stable source of long-term capital to form or financethe current working assets necessary for the business operation of the enterprise

The working capital of a business at a time is determined by the following formula:

Regular working capital = Total regular capital of the enterprise -

Long-term assets

Or:

Regular working capital = Short-term assets - Short-term liabilities

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Regular funds can be considered through the following diagram:

1.2.2.2 The situation of scale and capital structure

Capital is a concept that indicates the source of an enterprise's capital.Specifically, it shows which businesses have raised capital from

Capital structure is a concept often used to indicate the proportion of capitalsources in the total price that businesses mobilize and use in business activities

The decision on the capital structure is a very important financial issue of thebusiness because:

- The capital structure of the enterprise is one of the determinants of the averagecost of capital of the enterprise

- The capital structure influences the rate of return on equity or earnings pershare and the financial risk of a joint stock enterprise or company

Capital structure of an enterprise is expressed through the following maincriteria:

Debt ratio = Total liability

Equity ratio reflects the percentage of equity in total assets In general, thecapital of an enterprise is formed from two sources: equity and liabilities.

So the following formula is formed:

Share holder equity ratio = 1 - Debt ratio

In addition, the capital structure is reflected in the debt to equity ratio:

Debt ratio to equity = Total liability

The ratio of capital invested in short-term assets:

Current assets to total assets = ratio Current assets

Total assets

Capital invested in long-term assets ratio:

Non-current assets to total assets =

ratio

Non-current assets Total assets

This index shows the proportion of short-term capital and long-term capitalsource on a business capital In other words, it shows the state of facilities ofenterprises

1.2.2.3 Bussiness performance of the enterprise

Business performance is a term indicating the degree to which businessobjectives are achieved Specifically, business results are often expressed by profit inthe period and the efficiency of using available resources of the enterprise From thatresult, the manager will propose measures to improve the current situation

efficiency of activities created by the business Therefore, businesses always try tomaximize profits by increasing revenue, reducing costs,

- The profit structure shows the proportion of profit of each activity in the totalprofit, indicating the main areas of activity that businesses need to focus on

- Profits from activities are calculated as follows:

Operating profit = Revenues - Cost of goods sold – Administration expenses Operating profit = Financial income - Financial expenses

Other profit = Other income - Other expenses

b, Expense

- Definition: It is a monetary expression of losses in production labor in a given period

- To accurately analyze the performance of enterprises in the course ofproduction and business, it is necessary to consider the following cost factors:

Cost of good sold to net sales = COGS

Net sales

Administration expense ratio = Administration expense ratio

Net sales

Sellings expense ratio =

Sellings expense ratio

Net sales

These indicators help managers realize the proportion of each expense in thetotal cost, thereby making accurate decisions to minimize the high proportion ofexpenses

1.2.2.4 Cash flow situation of the business

Cash flow situation consists of raising capital and using capital in cash of theenterprise, showing where the capital comes from and what it is used for Capital incash is a part of short-term assets in the enterprise, which has the highest liquidity,exists directly in the form of value, including cash in funds, deposits in banks orfinancial institutions and funds are transferring

The situation of capital mobilization and use of cash is shown as follows:

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- Capital of pound comprises cash and bank deposits, the proportion of types ofcash in cash is calculated by:

Proportion of capital in cash = Value of each kind

Cash and cash equivalents

- The ability to generate money is shown by the total amount of moneycollected in the period and the amount of money collected in each different activity.The analysis is made on the basis of determining the proportion of the cash flow ofeach activity in the total revenue stream of the enterprise through the following generalformula:

The proportion of the

cash inflow of each

activity

=

The total amount collected for each activity

x 100 The total amount collected in the period

This ratio represents the contribution of each activity to the enterprise's moneycreation, in other words it is the ability to make money of each activity

The cash flow of the business is circulated in the course of business activities,investment activities and financial activities, so when analyzing the target of theproportion of cash inflow of each activity, it is usually calculated separately forbusiness activities, investment activities and financial activities Specifically:

The proportion of cash

flow from operating

activities

=

The total proceeds from operating

The total amount collected in the period

The proportion of cash

flow from investing

activities

= The total proceeds from investing

The total amount collected in the period

The proportion of cash

flow from fianacial

If the enterprise operates in normal business and production activities, in thecash-in period, it mainly comes from its business activities, which mainly come fromsales activities So, it is also possible to consider more criteria reflecting therelationship between proceeds from operating activities with net sales.

The ratio of proceeds

This indicator reflects the percentage of net cash flow from business activities

of the enterprise to the net sales revenue, it shows how much cash a company can earn

on average from 100 dong of sales revenue after deductions are made The higher thetarget, the better the sales situation and the collection of sales proceeds in the productconsumption activities of the business

The ability to generate money from the cash outflows of an enterprise isdetermined by the following formula:

Coefficient of creating money from

cash outflow in the period =

Total amount inflow in the period Total amount outflow in the period

1.2.2.5 Debt situation and solvency of the company

The debt situation shows the financial strength of the business expressedthrough the recovery of accounts receivable and the payment of debts

Solvency "is the ability to meet long-term fixed expenditures and have thenecessary amount of money to expand and grow" (Investopedia defined)

a, The criteria reflecting the debt situation of the enterprise include:

Indicators reflecting the size of liabilities: indicators reflecting receivable andpayable debts on the accounting balance sheet

Indicators reflecting debt structure:

- The ratio of receivable to payable

The ratio of receivable to payable = Receivable x 100%

index is less than 100%, it means that the amount of capital appropriated by businesses

is smaller than the amount of capital appropriated

- Short-term receivables turnover

- Average collection period

Receivables turnover

This indicator reflects the average time to collect short-term receivables, theshorter the time to collect money, the faster the collection speed of goods, the lesscapital appropriated by enterprises On the contrary, the longer the collection time, theslower the collection speed of goods, the more capital the business has occupied.However, the too short time of collecting money will make it difficult for buyers,

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discouraging buyers should affect the ability to sell products and the competitiveness

of businesses in the market

When analyzing, it is necessary to calculate and compare with the prescribedselling time for customers If the collection period is greater than the prescribed sellingtime to customers, the collection of receivables is slow; in contrast, the number of daysthe seller is willing to sell is greater than the time it takes to recover the money sold,proving that the debt recovery is earlier than the time plan

b, Solvency ratio

- Current ratio

Current ratio = Current assets

Current liability

This is also known as the ability to pay short-term debt ratio

Total current assets comprise short-term financial investments The currentliabilities are due within 12 months This ratio reflects the ability to convert assets intomoney to cover short-term debts, so this ratio also shows the level of guarantee to payshort-term debts of the business

To evaluate this coefficient, it is necessary to base on the average coefficient ofthe enterprises in the same industry It should be noted that this coefficient variesamong different businesses An important basis for evaluation is to compare thecurrent solvency coefficient at the previous time of the enterprise

Normally, when this coefficient is low (especially when it is less than 1), itshows that the ability of the enterprise to repay the debt is weak and also a warningsignal of potential financial difficulties encounter in repayment This high coefficientindicates that the enterprise has a high ability to be ready to pay its due debts.However, in some cases, this coefficient is too high, which probably does not reflectgood corporate payment capacity Therefore, to better assess, it is necessary toconsider the situation of the business

- Quick ratio

As an indicator that more closely assesses the solvency of an enterprise, which

is determined by current assets minus inventory divided by short-term debt,inventories are excluded because in current assets, inventory is considered a less liquid

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asset This coefficient indicates the ability to pay short-term debts of the enterprisewithout having to make an urgent liquidation of inventories, which is determined bythe formula:

Quick ratio = Current assets – Inventory

- Interest Coverage Ratio

Interest expenses

This coefficient indicates the ability of the enterprise to pay interest on its loanand also reflects the level of risk that may be faced by creditors

1.2.2.6 Performance and efficiency of capital utilization situation

a, Capital utilization performance

Capital use efficiency indicates whether the level of exploitation and use ofresources of an enterprise is effective and reasonable An efficient use of capital iswhen that enterprise has high capital efficiency

Capital use efficiency can be analyzed according to 2 contents: Working capitalutilization efficiency and fixed capital efficiency

- Working capital efficiency, also known as working capital turnover rate, isshown by the following criteria:

Average working capital

This indicator reflects the turnover of working capital in a given period, usually

1 year The average working capital is determined by the arithmetic average method,the working capital at the beginning and the end of the quarters of the year The largerthe turnover of working capital, the higher the efficiency of working capital

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Days Working Capital = 360 days

Working capital turnover

This indicator reflects how many days it takes a working capital rotation Theshorter the rotation, the faster the rotation will be and vice versa

In addition, on the balance sheet, the target of Inventories and Receivables are 2items accounting for a large proportion in the current assets, considering the factorsrelated to these two indicators such as after:

Average value of inventory in the period

Normally, inventory turnover is high compared to other enterprises in theindustry, indicating that: The organization and management of the company's reservesare good, the business can shorten the business cycle and reduce the amount of capitalput into inventory If the inventory turnover is low, it often proves that the enterprisemay have excessive stock of supplies, resulting in a stagnant stock or slowconsumption of the product From there, it can lead to reduced cash flow of businessesand may put businesses in financially difficult situations in the future This criterion isgreatly influenced by the characteristics of the business sector and the policy oninventory capital of the enterprise

From the inventory turnover, we can calculate the average number of days inwhich an inventory rotation takes place

Inventory turnover

b, Effective use of capital

The efficiency of capital use reflects the level of capital exploitation, use andmanagement, which makes them maximize profits in order to maximize theprofitability of their owners Therefore, the coefficient of profitability is the mostaccurate reflection of capital efficiency

- Basic Earnings Power (BEP)

Total assets

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This criterion reflects the profitability of assets or business capital regardless ofthe effect of the origin of business capital and corporate income tax This indicator has

a great effect in considering the relationship with loan interest rates to assess whetherthe use of loans has a positive or negative impact on the profitability of equity

- Returns on sales

ROS = Net profit after tax

Net revenues

This coefficient reflects the relationship between profit after tax and net revenue

of the enterprise It shows, when making a revenue in a period, how much profit abusiness earns

- Returns on assets (ROA)

Average total assets

This ratio is also known as the net rate of return on assets This coefficientreflects how much profit each taxpayer uses during the period

- Returns on equity (ROE)

Average shareholder’s equity

This criterion reflects all aspects of the level of financial management,including the level of revenue and cost management, the level of asset management,the level of capital management of enterprises

- DuPont Analysis

The profitability of an enterprise's equity is a result of a series of measures andmanagement decisions To see the impact of the relationship between the level of costmanagement, capital management, capital management to the profitability of theowner of the business, a system of criteria has been developed to consider Theinfluence of factors on the rate of return on equity

- Earnings per share (EPS)

1.2.2.7 Profit distribution situation of the business

Profit distribution policy has great significance for businesses, a change inprofit distribution policy will change the price of stocks in the stock market affectingshareholder's income The optimal rational profit distribution policy has a positiveeffect on the development of the business and the increase in enterprise value

- Dividend per share (DPS)

DPS =

Total dividends paid - Any special dividends

Share outstandings

This indicator reflects how much dividends each year usually yields

- Dividend payout ratio

1.3 FACTORS AFFECTING THE FINANCIAL SITUATION OF ENTERPRISES

1.3.1 Objective factors

Objective factors are factors that cannot be controlled by the enterprise; inmanagement, the managers must constantly grasp these factors because it affectsbusiness operations in different trends, both create opportunities and limit the ability torealize the goals of the business

- Type of business: each enterprise chooses different legal forms such as: owned enterprises, Joint-stock companies, Limited liability companies, Privateenterprises, Foreign-invested enterprises Each type of business will have differentorganizational arrangements, so there will also be different forms of capitalmobilization, production and business, and profit distribution

State Characteristics of business lines: each of the different fields will have differenteconomic and technical characteristics, namely: The nature of the business sectoraffects the composition, capital structure of business, regulations The size of capitalfor production and business thus affects the rate of capital turnover (fixed capital andworking capital) affecting investment methods, payment methods

- Business environment: Business environment includes all externalconditions that strongly affect all activities of the enterprise, including financialactivities Business environment includes: Stability of the economy (directlyaffecting the level of turnover and capital demand of enterprises); effects on marketprices, interest rates and taxes (impacting profitability); competitors and technicalprogress (requires businesses to always find ways to innovate products, improvetechniques),

1.3.2 Subjective factors

Subjective factors are factors of business potential such as:

- Financial strength: Financial strength is reflected in the total capital (owner’sequity, working capital) that businesses can raise into business, the ability toeffectively manage the capital sources in business Financial strength is reflected in theability to pay short-term, long-term debts, profitability ratios of enterprises, etc

- Human potential: Demonstrated in knowledge and experience capable ofmeeting high requirements of the business, successfully completing the assigned

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tasks, the staff of loyal businesses is always oriented towards the business highlyspecialized, skilled workers capable of solidarity, dynamic take advantage andexploit business opportunities

- Technology: Nowadays, digital technology is extremely developed, whichhelps people to access information faster A company with good technologyplatform can develop business a faster and easier, on the other hand, developinginformation technology to help businesses reduce expenses such as marketing andadvertising costs,

- Company culture: company culture is very important to the long-termdevelopment of the business Company culture helps increase work efficiency, inparticular, if the members feel comfortable with the operating culture of the company,they will be more proactive in their work

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CHAPTER 2 : THE STATUS OF FINANCIAL SITUATION IN THANH

DO JOINT STOCK COMPANY IN THE PAST TIME

2.1 OVERVIEW OF THANH DO JOINT STOCK COMPANY

2.1.1 The process of formation and development

2.1.1.1 Name and address of the company

- Name of enterprise: Thanh Do Joint Stock Company

- Address: Group 4, block 5, Cao Lộc town, Cao Lộc district, Lạng Sơnprovince

- Phone: 025861686

- Fax: 025861628

- Tax code: 4900225821

- Business license: 4900225821

- Charter capital: VND 25,000 million

- Owner's equity: VND 25,684.28 million (December 31, 2019)

- Form of ownership: Joint stock company

Principal activities: Retailing other goods in general trading and food wholesaleshops; wholesale computers, peripherals and software (wholesale of computerequipment, printers, barcode readers, office and home appliances);

2.1.1.2 The process of birth and business development

In 1998, originating from a small grocery store on Phai Ve street, Lang Soncity, by 2004, Thanh Do Joint Stock Company was established According to thecertificate of enterprise registration of joint stock company No 4900225821 issued byLang Son Department of Business Registration and Investment in Lang Son provincefor the first time on February 11, 2004, changed for the 13th time on August 20, 2015

On the first day of establishment, the company only had chartered capital of VND1,000,000,000, after many years of operation, the company increased its charter capital

to VND 20,000,000,000 in August 2015

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Shareholders participating in the capital contribution include:

Amount of capital contribution (VND)

Percentag e

1 Le Hong Phan

P306 - D5 collective 8/3Quynh Mai ward, Hai BaTrung district, Hanoi

24.746.000.000 98,98%

2 Mai Thanh Tung

P302 CT4C, X2 Linh Dam,Hoang Liet, Hoang Mai,Hanoi

127.000.000 0,51%

3 Vu Quoc Tai

No 15 Gieng Tien, ChiLang Ward, Lang Son City,Lang Son

127.000.000 0,51%

At present, Thanh Do Joint Stock Company has 5 superstate branches in Hanoiand Lang Son The main business types of the company are: Supermarket, wholesale,retail, distribution of products to districts in Lang Son province

2.1.1.3 Main consumption market

- Supermarket, wholesale and retail business: mainly in Hanoi market (9 stores),there are currently 3 stores in Lang Son

- Product distribution: 2 districts in Lang Son province

- Training labor to make use of human resources in Lang Son

Mode of consumption:

Goods of the company are consumed through 02 channels of wholesale and retail

- Wholesale to sales agents in districts in the province: The company has avehicle system to distribute goods directly to districts in the province of Lang Son such

as Van Lang, Cao Loc

- Retailing at supermarket chains, buffet stores of the company

Distribution network:

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The company has a system of supermarkets and buffet shops in Lang Sonprovince and Hanoi city, including:

At Lang Son 1 Thanh Do 1 supermarket: 96 Phai Ve, P.Dong Kinh

2 Thanh Do 2 Supermarket: Bac Son district

3 Buffet shop: Huong Ha (P.Vinh Trai)

At Hanoi 4 Thanh Do Supermarket 3: 352 Giai Phong

5 Thanh Do Supermarket 4: 27 Lac Trung

6 Thanh Do Supermarket 4: 886 Duong LangSince 2019, the Company has separated the entire supermarket system in Hanoiand accounted into a new legal entity, Truong Ha Joint Stock Company, the current size

of Thanh Do Company has shrunk Truong Ha Joint Stock Company and Thanh DoJoint Stock Company have the same capital shareholders, with offices in 352 Giai Phong(Hanoi), previously Truong Ha Company specializes in consulting and providingsupermarket equipment: prices , shelves, cameras, supermarket business consulting andoperating a number of supermarkets in Hanoi, distributing some items

2.1.2 Organize the management apparatus and business operations of the company

Trading in a wide range of products requires a good management team.Besides, there must be measures to organize and manage production and businessflexibly and timely to make reasonable decisions to bring the highest efficiency

2.1.2.1 Organizational model and executive management

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CHART OF ORGANIZATION STRUCTURE OF

- The Board of Directors appoints and dismisss the CEO position TheExecutive Director appoints and dismisses the titles: Deputy Director of the Company,heads and deputy heads of departments;

- The legal representative of Joint Stock Company is the Chairman of the Board

of Directors

a, Board of the company

- Including 3 people:

Mr Vu Quoc Tai: born in 1980 - Chairman

Mr Le Hong Phan: Born in 1967 - Member

CHAIRMAN

OF THE BOARD

CHEIF

MANAGING DIRECTOR

TAX ACCOUNTANTINTERNAL

n Department Planning - Sale

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Mr Mai Thanh Tung: born in 1972 – Member

b, The board of directors of the company includes:

Mr Vu Quoc Tai - Director

Ms Vi Thi Huong - Deputy Director

c, Organizational structure and labor arrangement:

Operational scale of enterprises: Small and medium enterprises

Number of employees by December 31, 2019: 80 people, in addition thecompany also employs additional seasonal workers

d, The function of each part:

- Chairman of the Board of Directors cum Director of the company is the personwho runs all activities of the company, responsible to the Board of Directors for theperformance of assigned rights and duties The Director has the right to appoint,dismiss and dismiss titles as deputy heads of departments, request the competentauthority to appoint and dismiss titles such as Deputy Directors, Chief Accountant ofthe Company

- The company director is the person who runs all activities of the company,takes responsibility before the board of directors for performing the assigned rightsand tasks, assisting the director with deputy directors and specialized sections othersubjects The director is the person who decides the issues related to the day-to-dayoperations of the company, organizing the implementation of the company's businessplans and investment plans

- Functional departments:

Functional departments play a very important role in the management of theCompany's operations, each has its own duties and has a close relationship in theprocess of operating activities, organizing production activities The Company'sgeneral business, each department has a manager, from 1 to 2 deputy assistants for themanager to directly manage and be responsible to the head and the director for hisactivities, and at the same time hold a position advising the Director in makingmanagement and directing decisions in the production and business process

Department of Organization - Administration: Functioning to advise theDirector of the organization of the labor force, organization and personnel for the

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divisions in the company Drafting and promulgating the Company's internal rules andregulations based on the regime documents issued by the State Monitoring andguiding the inspection of the implementation of labor safety regulations, coordinatingwith other departments in the Company to deal with the policies, emulation andcommendation discipline for taking care of the lives of officials and employeesemployees in the Company.

Finance Department: is responsible for fully and accurately recording allfinancial and economic activities of the Company, providing information about theCompany's activities to help management and public administration leaders Theproduction and business are accurate, timely, providing information to partners in thecooperation process

Department of Planning - Sales: Responsible for planning constructionmaterials production and operating the network of petroleum agents for the Company

- General characteristics of the accounting apparatus at the Company

Thanh Do Joint Stock Company is a small and medium-sized enterprise TheCompany's accounting system is organized in a scientific and reasonable manner toprovide information accurately, promptly, fully and truthfully and promote thefunctions and important roles in the management The Company's production andbusiness activities meet the requirements of the market economy

Thanh Do Joint Stock Company has business lines including production, andtrading However, the organization of accounting work in the Company isconcentrated All recording and processing of data are done at the Company'saccounting department

Currently, most departments in the Company are equipped with computers toimprove operational efficiency Especially, every accounting department has its ownmachine and has an accounting software program installed, which ensuresconvenience in recording and accounting This is an important condition in providingaccurate and timely economic information to managers, at the same time promotingand improving the professional qualifications and labor productivity of accountants

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Accounting department includes: Chief accountant cum general accountant,accountants, with university degree and a cashier with Intermediate Accounting level.Each employee has his or her own function and task.

Organization chart of accounting system:

Chief Accountant (Manager): Is the general manager of the activities of theAccounting Department Be responsible to the Director for the reasonable honesty inaccounting All summing up data from accounts, making ledgers, financial statements

is done by Chief Accountant Responsible for dealing with banks to secure thebusiness capital of the Company

Taxes, capital in cash, inventories, supplies and production accountant:Tracking accurately, fully and promptly the existing amounts and fluctuations of cashcapital, short-term investments, Receivables and advances Keep track of material-related issues at the factory Responsible for monitoring and marking production teams

so that the wage labor department has a basis for paying employees

Payment accountant: Monitor the increase or decrease of the cost of fixedassets, asset depreciation, monitor the payment of salaries, salary deductions toemployees, responsible for writing financial invoices for customers, delivery andreceipt of documents with banks and tax reporting

Chief accountant

Treasurer

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Treasurer: is the cash fund manager at the Company, conducting cashcollection and payment when there are sufficient valid documents Keeping notes incash fund, making fund report, preserving cash at the fund Besides, he is also thestorekeeper of lubricants in the Company's petroleum business.

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- Form of accounting organization at the Company:

The company is using accounting software Cads Every day, based on theoriginal documents such as receipts, payment notes, debit notes, credit notes, purchaseinvoices, sales invoices, receipts the accountant will conduct inspection andclassification license Documents belonging to any part of the operation are reflected

in that section and preserved and archived The computer will process information andbook types such as numbers, detailed accounting cards, statistical ledgers At the end

of the machine, it will make accounting tables and financial statements when required

2.2 CURRENT SITUATION OF FINANCIAL SITUATION AT THANH DO JOINT STOCK COMPANY

General information

- The company mainly wholesale and retail items in the form of supermarketbusiness With reasonable prices, diverse and abundant items, many consumers knowand trust In Lang Son province, the company has the largest market share compared toother companies of the same type of business In addition, since 2014, the companyhas expanded its business of construction materials, which has initially started togenerate revenue and profits

- The company has a clear, effective business strategy Always looking for ways

to expand production and business activities, enhance competitiveness with othercompetitors in the area, create stable jobs for employees

- The company always has customer policies suitable to each business periodsuch as promotions, discounted items to attract consumers

Thanh Do Joint Stock Company has diversified business items, a large number

of close customers with a wide distribution network, capable of developing andexpanding business scale In the short term the company has an advantage to grow.However, in the long term, before the expansion of the scope of activities of majordistributors, not to mention many other distributors have consulted and found locations

to open supermarket chains such as Big C; with the appearance of VINMART and anumber of mini supermarkets the market share of the company will face fiercecompetition from these competitors

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2.2.1 The size and structure of the company's equity and liabilities

2.2.1.1 Capital structure situation according to ownership relations

To ensure effective business operations, businesses often have to coordinateboth sources: equity and liabilities The combination of these two sources depends onthe characteristics of the industry in which the business operates, depending on themanagement's decision, taking into account the business and financial situation of thebusiness

Figure 2.2.1: Capital structure of the Company in 2016-2019

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Table 2.2.1: Capital structure of Thanh Do Joint Stock Company in 2016-2019 (Unit: million dong)

1 Short-term trade payable 18,462.40 13.54% 5,690.38 4.84% 10,461.12 8.33% 18,299.14 16.37%

2 Short-term advance from customer - - - - 12,122.75 9.65% 430.61 0.39%

3 Taxes and amounts payable to the State Budget 10.76 0.01% 11.17 0.01% 203.78 0.16% 18.68 0.02%

4 Payables to employees 349.77 0.26% 299.77 0.25% - - -

-9 Other short-term payables 704.88 0.52% 704.88 0.60% 842.45 0.67% 1,967.33 1.76%

10 Short-term borrowings and finance lease liabilities 90,625.67 66.45% 89,924.85 76.43% 81,166.16 64.60% 70,457.43 63.01%

11 Provision for short-term payables 121.25 0.09% 121.25 0.10% 121.25 0.10% -

-12 Bonus and welfare funds 226.30 0.17% 226.3 0.19% 226.3 0.18% 208.23 0.19%

13 Science and technology development fund 198.04 0.15% 198.04 0.17% 198.04 0.16% -

1 Owner's equity 25,000.00 18.33% 20,000.00 17.00% 20,000.00 15.92% 20,000.00 17.89% Ordinary shares with voting rights - - 20,000.00 17.00% 20,000.00 15.92% 20,000.00 17.89%

11 Undistributed profit after tax of current year 684.28 0.50% 480.25 0.41% 300.82 0.24% 132.23 0.12%Undistributed profit after tax of previous year 684.28 0.50% 480.25 0.41% 300.82 0.24% 132.23 0.12%

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