LIST OF TABLES Table 3.1 ¡ Horizontal analysis of the balance sheet scciccccsicssissniccssanvsccscisamaccevson 23 Table3.2: Horizontal analysis of the income Statement, sec ncng001066516
Trang 1VNU- UNIVERSITY OF ECONOMICS AND BUSINESS
FACULTY OF BUSINESS AND ADMINISTRATION
FINANCIAL ANALYSIS IN CEO & CIO club (IDG VN )
Supervisor's name: Dr Nguyen Thi Huong Lien
Student’s name: Tran Van Hieu
Student ID: 11050058Intake: QH2011-E
Program: International standard
Hanoi — May, 2015
Trang 2TABLE OF CONTENTS
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CHAPTER 3: FINANCIAL ANALYSIS IN CEO & CIO club 2525225552 20
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Trang 3` ›° ẼŠašˆŠˆ |
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CHAPTER 4: STRENGTHS AND WEAKNESSES OF CEO & CIO CLUB’s
FINANCIAL SITUATION BASED ON FINANCIAL ANALYSIS 43
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RECOMMENDATIONS tang nngoettagiGGGASGUAGTHUNGIEHIGHBNGGESDIIDGISSAGEEĐRRUSEEISR 46
Operating strategies of CEO & CIO club in the future 5-5:5: 52555552 46
Recommendations for improve financial situation of CEO & CIO club 47
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Trang 4lam gateful to for Dr Lien, Lecturer of Accounting-Auditing Faculty, who
show ne the road and get me go through all the parts of my thesis Her
enthusasm, encouragement in me have throughout have been extremely helpful She was always available for my questions she was positive and gave
me gewrously of her time and knowledge She was always knew where to look
for the answers to obstacles while leading me to the right source, theory,
perspedive.
I also tank all my colleagues and supervisors in CEO & CIO club, IDG VN
for ther help through all my internship time in there.
I want to express my gratitude to one and all who, directly and indirectly, have
lent their help hand to my work.
Student
TRAN VAN HIEU
Trang 5LIST OF TABLES
Table 3.1 ¡ Horizontal analysis of the balance sheet scciccccsicssissniccssanvsccscisamaccevson 23
Table3.2: Horizontal analysis of the income Statement, sec ncng0010665166663465383ã682 25
Table 5.3: Vertical analysis GF the Dalante sh@ttsscccccwrmmmnnennannnam 26
Table 3.4: Veftical analysis of thé mcoine Statement 206065 scissscccancnmnanmasanens 28
Table 3.5 Profit or loss 2012-2014 of CEO & CIO club( millions vnd) 28
Table 3.6: Current ratio of CEO & CIO club and ADC( times) - 29
Table 3.7: Quick ratio of CEO & CIO club and ADC(times) -+- 3]
Table 3.8: Cash ratio of BD CEO & CIO club and ADC( times) - - 32
Table 3.9: Receivable turnover of CEO & CIO club and ADC -. + 33
Table 3.10: Debt to total assets ratio of CEO & CIO club and ADC( percent) 35
Table 3.11: Net income margin of CEO & CIO club and ADC( percent) a7 ‘Fable:3 12: ROAvet CEO & ClO club an@iADC( percent) cvissierssncsscsuanewensawencasxenwaes 39 Table 3.13: ROEof CEO & CIO'club:and ADC ( percent) ccsissssisssssssensesvsscoeavsacovseoee’ 40 Table 3.14: ROE ratio of CEO & CIO club using DuPont analys1s - 41
Table 3.15: ROE ratio'of ADC using DuPont anal ysis ivcisssissssccssssceccsssscsseccssscessavscsvses 4]
Trang 6LIST OF FIGURES Figure 3.1: Company structure of CEO & CIO club(CEO & CIO club’s annual report,
¡1042000030 7a 22
Figure 3.2: Profit or loss 2012-2014 of CEO & CIO club ( Millions vnd) 29
Figure 3.3: Current ratio of CEO & CIO club and ADC( times$) - «+- 30
Figure 3.4: Quick ratio of CEO & CIO and ADC( times) .-cc<cc<<cccce 3] Figure 3.5: Cash ratio of BD CEO & CIO club and ADC (times) 32
Figure 3.6: Receivable turnover ratio of CEO & CIO club and ADC( times) 34
Figure 3.7: Average collection periods of CEO & CIO club and ADC ( days) 34
Figure 3.8: Debt to total assets ratio of CEO & CIO club and ADC( percent) 36
Figure 3.9: Net income margin of CEO & CIO club and ADC( percent) 38
Figure 3.10 -ROA ‘oF CBO & CTIÕ club and ADC( percent) :cssicssiiescseccsmanancarssvevscsceas OO
Flipure 3.11: ROE of CEO & ClO club:and ADC( pETCEHiaaaaaeaaaadadaaaggasaaaavse 40
Trang 7ABSTRACT
Finance is the bone in every company’s activities The health of finance will affect
every activities in any aspect of company It is important to understand the finance
situation and how is it? What strengths and weaknesses of finance situation One of the tool to do that is financial analysis This work dealt with the financial analysis of a
company, CEO & CIO club The purpose of this thesis was to assess the financial
situation of the company in the years between 2011 and 2014, by using various tools of
financial statement analysis:horizontal analysis, vertical analysis and ratio analysis in
order to recommend necessary precaution for company’s economic improvements Thewhole work consisted of two parts: theoretical and analytical
The first part described importance and methods of financial statement analysis as well as its users The second section contained basic information about the company and numerous financial analyzing tools as horizontal, vertical analysis and ratio
analysis and comparison with ADC JSC to further comprehend the ratio analysis.
Based on the result of financial analysis, there are some proposed recommendations
to improve the company’s financial situation.
Trang 8Define the significance of research
In the 21th century, everyone tends to run their own business However, some
entrepreneurs have lack of knowledge of understanding their financial statements Thus, financial analysis is vital knowledge for those who are involved with a business Financial analysis provides valuable information about a company’s financial
condition, based on main financial statements The first statement is a balance sheet
which demonstrates a company’s financial situation over a certain period of time The second one, an income statement reports an organization’s financial performance over specified period of time The measurement that company’s output and input is called a
statement of cash flows In fact, financial analysis is required for many financialmanagement decisions of a company In addition, every companies use a different form
of financial statements depending on where they run a business The aim of this
bachelor thesis is to analyze financial statements of CEO & CIO club through widely
used tools and methods The analysis has been made based on intra-company
comparisons within CEO & CIO club, between its same items and relationships in four accounting periods and with ADC, a company with the same industry with the club The result will be useful for the company to estimate future risks and potential This
work consists of two parts: theory and analyze The theoretical part focuses on briefly
explaining the basic tools of analyzing financial statements as well as its usage The analytical part includes financial statement analysis of CEO &CIO club, and also basic characteristics of the chosen company Finally, there is an evaluation of the company financial strengths and weaknesses as well as some recommendations for CEO & CIO
club’s further improvements
Trang 9Purpose and research questions
With the thesis title “ Financial analysis in CEO & CIO club ( IDG VN ), the purpose
of this thesis is analysing financial statements of CEO & CIO club to understand the
company financial strengths and weaknesses and recommendations for furtherimprovement
Together with this purpose, the research will answer two questions:
- How the quality of financial statements in CEO & CIO club compare with ADC
to 2014 Therefore, some analysis and conclusions may be still subjective and can be
improved
Outline of the thesis
Besides this introduction part, the thesis is divided into 5 main chapters:
e Chapter 1: Literature review and theoretical framework on financial analysis.
This chapter will provide theoretical framework for the research It includes
fundamental concepts about financial analysis and the tools to analyse financial
statements that used in this research
e Chapter 2: Research methodology
Trang 10This chapter will describe detail research method from preparing for collecting data to
analysing data.
e Chapter 3: Financial analysis in CEO & CIO club.
This chapter will give data after using analysed tools, and then show analysis results
e Chapter 4: Strengths and weaknesses of CEO & CIO club’s financial situation
based on financial analysis.
This chapter will answer two research questions by providing assessment about financial statements in CEO & CIO club Besides, it will also give some suggestions to
further improve finance operations in CEO & CIO club.
Contributions
This thesis provide the general picture about financial situation of CEO & CIO club
through three analysis: horizontal, vertical and ratio analysis From that, we know how financial situation of CEO & ClO club with comparing ADC JSC My thesis also give some suggestions to further improve the finance of the club for the stable future
development
Trang 11CHAPTER 1 : LITERATURE REVIEW AND THEORETICAL
FRAMEWORK ON FINANCIAL ANALYSIS
Financial analysis is a company’s fundamental performance that is aimed to provide
essential information about its financial position in the form of financial statements Basically, it is valuable for company’s internal as well as external users to make a
decision External and internal users including lenders, shareholders, investors, owners and managers have special needs depending on the types of decisions to be made They
focus on three characteristics of a company: solvency, profitability and liquidity For
instance, a short-term creditor, such as a bank, is particularly interested in ability of the
borrower to pay obligation when they come due Therefore, creditors concentrate onthe liquidity of the borrower before lending money The most important characteristics
of useful information are relevance and reliable In order to have relevance and
reliable, accounting information must be timely as well as verifiable In addition to
being relevant and reliable, accounting information should be comparable and
consistent Information that lacks either of these characteristics is consideredinsufficient for decision making Comparability refers to the ability to make relevantcomparisons between two or more companies in the same industry at a point in time
Consistency refers to the ability to make relevant comparisons within the same
company over a period of time
1.1.Financial statement
Financial statements are a set of formal records that is used as a main source in
analyzing financial statements There are three primary financial statements: balance sheet, income statement and statement of cash flows Balance sheet is a summary of companies’ financial condition on a specific date It presents what the organization
owns as well as what the organization owes to its external users and internal owners.The statement has three parts: assets, liabilities and ownership’s equity According to
Trang 12financial equation, assets must equal liabilities plus stockholder’s equity The aim of
Income statement is to show how profitable the firm has been over a certain accounting
period It reports a summary of how the business incurs its revenues and expensesthrough both operating and non-operating activities A result of this statement is given
as net profit or loss Income statement is the most important report that investors,creditors and analysts are interested in
basis, intercompany basis and basis of industry averages (Weygandt, Keiso and
Kimmel 2008, 207)
The /ntra-company basis is used to compare items or financial relationship within acompany in current year with the same item or relationship in one or more years TheIntracompany basis is also useful for detecting changes in financial relationship andsignificant trends
The /ntercompany basis compares an item or financial relationship of one companywith the same item or relationship in other one or more competing companies Thiscomparison is useful to determine a company’s competitive position
The /ndustry averages compare an item or financial relationship of a company to
industry averages published by financial organizations The industry averages show aposition of a company’s relative performance within the industry
Trang 13I.3.User of financial analysis
Users of financial statement information include managers, creditors, stockholders,
investors and regulatory agencies These individuals and organization can be divided into two groups as internal and external according to their interests in financial
statement information Their purposes of using accounting information are different
than one another External users include shareholders, customers, regulators, lenders,
government and other suppliers that who are not directly involved in running an organization Internal users include managers and employees that who are directlyinvolved in running and managing the organization
Shareholders/owners use accounting reports to decide whether to buy, hold or sell stock As well as shareholders have a right to elect a board of directors to oversee their
interests in an organization
“Regulators often have legal authority over certain activities of organizations Tax
authorities require organizations to file accounting reports in computing tax Other
regulators include utility boards that use accounting information to set utility rates and securities regulators that require reports for companies that sell their stock to the public
“(Wild 2008, 5)
Lenders/Creditors are individuals or organizations who loan money or other valuableresource to an organization Banks and loans, mortgage and finance companies arelenders Lenders use accounting information to ensure that the organization can repayits loans with interests
Government/Legislators look for information to monitor and evaluate government
receipt and expenses.
Trang 14Investors focus on an organization’s profitability and potential for growth On the other word, investors fully rely on financial statements information in making their invesment decisions.
“Mavagers utilize financial statement information in many of their financing, invesment or operating decisions They need very detailed information to plan and
contr›Ìl an organization’s human and material resources effectively “ (Spiller 1990, 5)
Empiayees often have an interest in the continued and profitable operations of theirfirm They use accounting information to monitor the viability of their pension plans
1.4.Tool of financial analysis
“Vanous tools are used to evaluate financial statements Financial statement analysis
consists of applying analytical tools and techniques to financial statements and otherrelevant data to obtain useful information Three of the most common tools of financial
statement analysis are: horizontal analysis, vertical analysis and ratio analysis” (Wild
2008 540)
1.4.1.Horizontal analysis
Horizontal analysis, also called trend analysis, is a tool for evaluating a series of financial statement data over a period of time Its purpose is to investigate whether an
increese and decrease that has taken place The analysis is used mainly in
intra-company comparisons The advantage of horizontal analysis 1s that the changes can be expressed in amounts as well as in percentages “Horizontal analysis of changes from period to period is relatively straightforward and is quite useful However,
complications can occur in making the computations If an item has no value in a baseyear or preceding year and a value in the next year, no percentage change can be
computed If a negative amount appears in the base or year or preceding period and a
Trang 15positive amount exists the following year, no percentage change can be computed.
“(Weygandt, Keiso and Kimmel 2001, 720)
1.4.2.Vertical analysis
“ Vertical analysis is a tool that consists of the study of a single financial statement in
which each item is expressed as a percentage of a significant total The use of vertical
analysis is especially helpful in analyzing income statement data such as the percentage
of cost of goods sold to sales” (Hermanson, Edwards and Salmonson 1989, 781)
1.4.3.Ratio analysis
Ratio analysis is used to evaluate various aspects of a company’s operating and financial performance such as its efficiency, liquidity, profitability and solvency The trend of these ratios over time is studied to check whether they are improving or deteriorating Ratios are also compared across different companies in the same sector
to see how they stack up, and to get an idea of comparative valuations Ratio analysis is
a cornerstone of fundamental analysis
Ratios are most widely used tools of financial analysis, due to they provide clues to
and symptoms of underlying conditions Like other analysis tools, ratios are usuallyfuture oriented, and it helps accountant analysts to uncover conditions and trends
difficult to detect by inspecting individual components making up the ratio Besides, a ratio expresses a mathematical relation between two quantities It can be expressed as a
percent, rate as well as proportion Moreover, usefulness of a ratio analysis fully depends on a user’s skillful interpretation “The ratio analysis can be used to evaluatethree fundament qualities of a company: liquidity, solvency and profitability.” (Wild
2008, 549)
Trang 161.4.3.1 Liquidity ratios
Common liquidity ratios include the current ratio, the quick ratio and cash ratio.Different analysts consider different assets to be relevant in calculating liquidity Someanalysts will calculate only the sum of cash and equivalents divided by current
liabilities because they feel that they are the most liquid assets, and would be the most
likely to be used to cover short-term debts in an emergency A company's ability toturn short-term assets into cash to cover debts is of the utmost importance when
creditors are seeking payment Bankruptcy analysts and mortgage originators
frequently use the liquidity ratios to determine whether a company will be able tocontinue as a going concern
Liquidity ratios are used to indicate a company’s short-term debt paying ability.Usually, short-term creditors such as suppliers and bankers are interested in assessing
liquidity of a company The most used liquidity ratios are current ratio, quick ratio,
cash ratio, inventory turnover and receivables turnover ratio “Current ratio indicates
the ability of a company to pay its short-term financial obligations from current assets
and, in this way, shows the strength of the company’s working capital position The
current ratio ts computed by dividing current assets by current liabilities.” (Hermanson,Edwards and Salmonson 1989, 786)
The current ratio is a popular financial ratio used to test a company's liquidity(also
referred to as its current or working capital position) by deriving the proportion of current assets available to cover current liabilities The concept behind this ratio is to ascertain whether a company's short-term assets (cash, cash equivalents, marketable securities, receivables and inventory) are readily available to pay off its short-term liabilities (notes payable, current portion of term debt, payables, accrued expenses and
taxes) In theory, the higher the current ratio, the better
Trang 17reason, the ratio excludes inventories from current assets.
The quick ratio measures the amount of liquid assets available for each unit of current
liabilities Thus, a quick ratio of 1.5 means that a company has 1.50 of liquid assets
available to cover each 1 of current liabilities The higher the quick ratio, the better the
company's liquidity position Also known as the “acid-test ratio" or "quick assets ratio
“ Quick ratio also known as the acid-test ratio, is a conservative variation of the
current ratio The quick ratio measures a company’s immediate debt paying ability
Only cash, receivables, and current marketable securities are included in the numerator.Less liquid current assets, such as inventories and prepaid expenses, are omitted.Inventories may take several months to sell; prepaid expenses reduce otherwisenecessary expenditures but do not lead eventually to cash receipts The quick ratio iscomputed as follows” (Edmonds etal 2006,538)
- - Current Assets — Inventories
ee =m=.=-ẻ=-<=- ằ he
Current Liabilities
Inventory turnover indicates the number of times on average the inventory is sold
during the period Its purpose is to measure the liquidity of the inventory The
inventory turnover is computed by dividing cost of goods sold by the average
inventory Unless seasonal factors are significant, average inventory can be computedfrom the beginning and ending inventory balances.” (Weygandt , Keiso and Kimmel
2001, 689)
Trang 18Although the first calculation is more frequently used, COGS (cost of goods sold) may
be substituted because sales are recorded at market value, while inventories are usuallyrecorded at cost Also, average inventory may be used instead of the ending inventory
level to minimize seasonal factors.
This ratio should be compared against industry averages A low turnover implies poor
sales and, therefore, excess inventory A high ratio implies either strong sales or
ineffective buying.
High inventory levels are unhealthy because they represent an investment with a rate of
return of zero It also opens the company up to trouble should prices begin to fall
Cost of goods sold
inventery turnover =.
° Average inventory
Receivables turnover is used to evaluate the liquidity of a firm’s receivables In fact,
liquidity might be measured by how quickly certain assets can be converted to cash.Therefore, main purpose of receivables turnover is to measures how many times
account receivables are collected during the period The receivable turnover IS
computed as follow By maintaining accounts receivable, firms are indirectly extendinginterest-free loans to their clients A high ratio implies either that a company operates
on cash basis or that its extension of credit and collection of accounts receivable isefficient A low ratio implies the company should re-assess its credit policies in order
tc ensure the timely collection of imparted credit that is not earning interest for the
firm.
Net sales
Receivable turnover ratio =
———— -Account receivable
One metric used by analysts and lenders to determine a company’s financial strength is
its cash ratio The cash ratio is an accounting measurement of a company’s liquidity.
Trang 19The higher the cash ratio, the more liquid the company is, and the better able it is to
pay off short-term obligations under duress The cash ratio is a conservative view of a
company’s liquidity because it does not include inventory or accounts receivable ascash or near cash Other measurements of liquidity, such as the current ratio, do count
these assets because they can be sold to meet short-term debts However, it’s not
always possible to sell such assets quickly Therefore, the cash ratio measures only
money a company can access immediately for emergency needs or debts
1.4.3.2.Solvency ratios
Solvency ratio, with regard to an insurance company, means the size of its capitalrelative to the premiums written, and measures the risk an insurer faces of claims itcannot cover A company’s solvency ratio should also be compared with 1scompetitors in the same industry rather than viewed in isolation For example,companies in debt-heavy industries like utilities and pipelines may have lowersolvency ratios than those in sectors such as technology To make an apples-to-applescomparison, the solvency ratio should be compared for all utility companies, for
example, to get a true picture of relative solvency
Solvency ratios are used to analyze a company’s ability to cover its long-term
obligations Usually, long-term creditors and stockholders show an interest in a
company’s ability to pay its interests when it comes due and to repay face value of debt
at maturity Mainly used ratios are debt to total assets ratio, debt to equity ratio and
time interest earned ratio “Debt to total assets ratio measures the percentage of a
company’s assets that are financed by debt It is computed by dividing total liabilities
by the total assets.” (Edmonds et al 2006, 540)
Total debt to total assets is a leverage ratio that defines the total amount of debt relative
to assets This enables comparisons of leverage to be made across different companies.The higher the ratio, the higher the degree of leverage, and consequently, financial risk
Trang 20Like all other ratios, the trend of the total debt to total assets should also be evaluated over time This will help assess whether the company’s financial risk profile isimproving or deteriorating.
Total debts
Debt to total assets ratio = ———————_
Total assets
“Debt to total equity is used to compare creditor financing to owner financing It
demonstrates what proportion of equity and debt the firm is using to finance its assets.
This ratio is calculated as follows.” (Edmonds et al 2006, 540).
A measure of a company's financial leverage calculated by dividing its total liabilities
by stockholders’ equity It indicates what proportion of equity and debt the company is
using to finance its assets The debt/equity ratio also depends on the industry in which
the company operates For example, capital-intensive industries such as automanufacturing tend to have a debt/equity ratio above 2, while personal computercompanies have a debt/equity of under 0.5
Total liabilities Debt to total equity ratio =
Total equity
Time interest earned provides an indication of the company’s ability to meet interest payments as they come due It is calculated by dividing earnings before interest
expense and taxes (EBIT) by interest expenses
A metric used to measure a company's ability to mect its debt obligations It is
calculated by taking a company's earnings before interest and taxes (EBIT) and
dividing it by the total interest payable on bonds and other contractual debt Ít is
usually quoted as a ratio and indicates how many times a company can cover its
interest charges on a pre-tax basis Failing to meet these obligations could force a
company into bankruptcy.
Trang 21the different stages of an income statement We'll also show you how to calculate the
effective tax rate of a company The last three ratios covered in this section - Return on
Assets Return on Equity and Return on Capital Employed- detail how effective a
company is at generating income from its resources
“Projitability ratios measure the income or operating success of an enterprise for a
given period of time Income, or the lack of it, affects the company’s ability to obtain
debt and equity financing It also affects the company’s liquidity position and the
company’s ability to grow As a consequence, both creditors and investors areinterested in evaluating earning power — profitability Profit ability is frequently used
as the iltimate test of management’s operating effectiveness.” (Weygandt, Keiso and
Kimmel 2002, 690) Commonly used profit ability ratios are net income margin, return
on assets and return on equity
Net income margin, sometimes called operating margin, or profit margin is calculated
by divil:ng net income by net sales The result of this calculation is often expressed as
a peremtage For instance, a high net profit margin ratio shows how effective your
business is at converting sales into profit On the contrary, a low net profit margin demonstrates that a company is not generating enough sales, or that a company is
unable © contro] its production costs
Trang 22Profit margin is very useful when comparing companies in similar industries A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors.
calculated as follows “(Edmonds et al 2006, 544)
ROA gives an idea as to how efficient management is at using its assets to generateearnings Calculated by dividing a company's annual earnings by its total assets, ROA
is displayed as a percentage Sometimes this is referred to as "return on investment".
Net incomeReturn on Assets(ROA) =
Average assets
The amount of net income returned as a percentage of shareholders equity Return on
equity measures a corporation's profitability by revealing how much profit a company
generates with the money shareholders have invested.
‘Return on equity (ROE) is often used to measure the profitability of the
stockholders’ investment ROE is computed as follows.” (Edmonds et al 2006, 544)
Net income
Return on Equity( ROE) Saquity( ) Average total common shareholder s' equity
Trang 23DuPont Analysis
A method of performance measurement that was started by the DuPont Corporation in
the 1920s With this method, assets are measured at their gross book value rather than
at net book value in order to produce a higher return on equity (ROE) It is also known
as "DuPont identity” It is believed that measuring assets at gross book value removes
the incentive to avoid investing in new assets New asset avoidance can occur as
financial accounting depreciation methods artificially produce lower ROEs in the initial years that an asset is placed into s service If ROE is unsatisfactory, the DuPont analysis helps locate the part of the business that is underperforming.
“Ultimately, the most important, or “bottom line” accounting ratio is the ratio of net
income to common equity (ROE)
Standard DuPont analysis decomposes ROE into the three multiplicative ratios of
Profit Margin, Asset Turnover, and Leverage as follows:
ROE =[Net income/ Sales* Sales/Total Assets * Total Assets/BVEquity].” (Brigham
and Houston, 2001)
We have ROE broken down into net profit margin (how much profit the company getsout of its revenues), asset turnover (how effectively the company makes use of its
assets) and equity multiplier (a measure of how much the company is leveraged) The
usefulness should now be clearer
If a company's ROE goes up due to an increase in the net profit marginn or asset
turnover, this is a very positive sign for the company However, if the equity multiplier
is the source of the rise, and the company was already appropriately leveraged, this 1ssimply making things more risky If the company is getting over-leveraged, the stock
might deserve more of a discount despite the rise in ROE The company could be
Trang 24under-leveraged as well In this case it could be positive and show that the company is
managing itself better
1.5.Limitations of financial analysis
Significant business decisions are frequently made using one or more of the above
analytical tools However, there are some limitations of these tools and of the financial
statements on which they are based In other words, financial statement analysis is
based on financial statements of a firm, and those financial statements does not providekey nonfinancial information like quality of revenues, types of customers and riskfactors Some of the limitations include:
e “Financial statements contain numerous estimates Estimates are used in
determining the allowance for uncollectible receivables, periodic depreciation,
the costs of warranties, and contingent losses To the extent that these estimates
are inaccurate, the financial ratios and percentages are inaccurate.” (Weygandt,
Keiso and Kimmel 2002, 706)
e Financial statements provide financial statistic of past performance of a
company; however, they are not forward looking Therefore, past performancecannot guarantee future results of an analyzed company
e The cost principle is used to prepare financial statements Financial data is not
adjusted for price changes or inflation and deflation.
e Companies may have different fiscal year ends making comparison difficult if
the industry is cyclical
e Diversified companies are difficult to classify for comparison purposes
Trang 25CHAPTER 2: RESEARCH METHODOLOGY
In my thesis, I use the annual financial report of CEO & CIO club and ADC JSC to
analyse data that assess financial situation of the two company There are some main
reasons that I choose ADC JSC to compare with CEO & CIO club First, there are nofinancial about the overall industry that CEO & CIO club in Secondly, ADC is acompany in them same field business with CEO & CIO club: event organizing,
education ADC is a good company that famous in that field I use the data about ADC from internet I use vertical, horizontal and ratio analysis to do the thesis In vertical analysis, also called trend analysis, is a tool for evaluating a series of financial
statement data over a period of time Its purpose is to investigate whether an increaseand decrease that has taken place The analysis is used mainly in intra-companycomparisons Vertical analysis is a tool that consists of the study of a single financialstatement in which each item is expressed as a percentage of a significant total Two
methods will show us what parts and their proportion in company’s assets and how
they changed in the researched time It give us the general picture about the financial
picture of the company From that, I use ratio analysis to know more deeply in financial situation of the company By compare CEO & CIO’s ratio with ADC one, it
made more clear about where the company stand and what strengths and weaknesses in
Trang 26The data from annual report of the club are the raw data To do the analysis, first I
know what the analysis I will analyze: Vertical, Horizontal and ratio analysis Whattype of data I want to do, how to process raw data to the data I needed
Trang 27CHAPTER 3: FINANCIAL ANALYSIS IN CEO & CIO club.
3.1, Company profile
3.1.1 Introduction
CEO & CIO club are one in three brands of IDG VN: IDG Public Sector, IDGLeadership Academy and CEO & CIO club First launched in 2007, CEO & CIO Club
is the organization established for Chief Executive Officers and Chief Information
Officers The Club’s mission is “Toward a connected- integrated- developed CEO &
CIO community” The Club provides an active platform for members to communicate,exchange information and experiences, update the latest technology solutions, define
[T strategies, and share common interests Through ten of monthly mectings
nationwide and Business trips to 26 countries in the world, Club has play a vital role in connecting its members, partners, associations from both IT and non-IT industry.
By 2012, the Club has attracted more than 400 C-level members and more than 70
partners all over the world In the coming time, besides meetings, Club will focus more
on training programs, consultancy services and work closely with related ministries,
local and global associations to bring more networking, cooperation opportunities formembers and partners Since 2007, Club has been sponsored and supported by morethan 70 organizations from both IT and non-IT organizations Club promises to be agood bridge for vendors to build up its brand, open more connections and many other
PR opportunities
By 2012, CEO&CIO Club has recruited more than 400 members The range ofmembers has extended to all C-levels such as CEO, CIO, CFO, CTO, CSO, etc About
70% Club members come from ICT industry; the rest comes from other sectors such as
Banking, Finance, Real Estate, Education, etc The strategic objective until 2020 iskeeping the development of the Club In 2020, the Club will consist of thousands of
Trang 28¢ Data Rental/ Data Management/ Data SurveySupplying construction and solutions for IT system Conducting market research
Providing a wide range of data lists from the Government to organizations and
companies in ICT industry and other ICT applied industry
¢« Corporate brand promotion and PR
Website, logo, and other marketing material design Advertising and PR promotion
on Club's website and annual Almanac Interview and PR program with Press,
media agencies as requested
se Training programs
Executive Training program for C-levels Soft Skill training programs Specialized
Training program for IT Managers Tailored training program for Businesses
¢ Consulting servicesConsulting IT systems, IT and ICT Strategies, programs and projectsPromoting investment in the industry from both domestic and overscas sources.Finding partners in State Management agencies and Businesses Other requested
consulting services.
Trang 29Seat Ra ASAIN _~©XÄÁcuc hd: Buta d A babi Wehbe Ans Ana ee tk uc eee Tae
Decisions Managers Legal
Accounting Marketing Human Resources Entry Level
Figure 3.1: Company structure of CEO & CIO club(CEO & CIO club’s annual
report, 2012)
The company had focus human resources on marketing department, they produced the services and marketing it to club members and recruiting new members for the club The company had size of small company, about ten employees, so the work are
flexible Accounting was take responsible of a person in IDG accountant The main
are marketing department, they run the services to the customers and recruiting new
members.
Trang 303.2 Research analysis and results
3.2.1.Horizontal analysis
The tables below show horizontal analysis of CEO & CIO club From the tables, we
can see what increase or decrease has taken place during analyzing three years of CEO
&CIO club It is reflected in a percentage.
3.2.1.1 Horizontal analysis of the balance sheet
Table 3.1 : Horizontal analysis of the balance sheet
2013/2012 | 2014/2013 | 2014/2012 Total Assets -69.89% | -29.66% -78.82%
Current Assets -73.10% -35.60% -82.7%
Cash and cash equivalents E -75.11% | -6.90%|_ -76.82%
Cash -75.11% - 76.82%Cash equivalents 0.00% 0.00% _ Account Receivables -73.47% | -90.77% | -97.55%
Account receivable -73.4% 100.00%Trade creditors - -Other receivables -100.00% 561.00%
Inventory 0.00% 0.00%
Inventory 0.00% 0.00%
Other current assets -49.59%
Short-term prepaid expenses -61.38% 0.00%
Valued added tax deductible — ~100.00% | 0.00% -100.00%
Taxes and receivables from State 0.00% 0.00% 0.00%
Trang 31EQUITY
LIABILITIES -48.17% 27.43% -20.77%Current liabilities -37.04% 37.43%
| _Trade payables 14.77% | _-80.37% -77.47%
Advances from customers -100.00% - -57.46%
Taxes and payables to the State 430.30% -77.14% 21.21%
Budget
Payables to employees 10.40% | 136.11% | 160.67%
Payable expenses -84.93% 83.76% -71.74% Other current payables 282.80%|_ -22.19% 197.85% Long-term liabilities | -39.12% 7.37% -35.03%
On the table above, it has been demonstrated that a number of significant changes
have occurred in CEO & CIO club financial structure from 2012-2014
For instance, the company’s total assets have been decreasing sharply every fiscal year.
It decreased 78.82% from 2012 to 2014 The reason is current assets and account receivable decreased unbelievable rate, -73.10%,-35.60%,-82.7% in current assets and -73.47%, -90.77%, -97.55% in account receivable The club have no inventory so
it unchanged in 3 year The fixed assets have been empty from 2012 to 2013 due to
depreciation cost From that, the club’s total assets have been decreasing 69.89%, 29.66%, -78.82% when we compare three time: 2013/2012, 2014/2013 and2014/2012 In the Liabilities and Owners’ Equity side, the most contribution to thedecreasing is in Owners’ Equity part It had been decreased -625.28%, -76.24%, -
-1,178.24% It due to the increased in Undistributed earnings with the high rate, increase 91.85 % from 2012 to 2014 From horizontal analysis of balance sheet, we see
Trang 32the club had reduce the company size due to hard economy We should pay attention to
the negative value of Owners’ Equity due to the increasing in undistributed earning It
prove that the company face many year of loss
3.2.1.2 Horizontal analysis of the income statement
Table 3.2: Horizontal analysis of the income statement
decreased from 2012 to 2014 and witnessed 58.07% drop In that case, it will affect all
other component in that income statement’s component The net operating income
have been decreasing deeply from 2012 to 2013 ,-2707.97% percent and little enhancement from 2013 to 2014 The net sales with the same trend, decreasing -
44.45%, -24.50%, -58.07% respectively The net profit had been decreasing from
2012 to 2013 and little enhance from 2013 to 2104 From Gross sales, net operating
incomie and net profit, both three of them made huge drop from 2012 to 2014 The
comp:any reduce both in the size and the activities The net operating income and netprofit were reduced longer spaced than gross sales The company had faced difficulty
Trang 33in control expenses and the sources of revenue From that point of view, we see the
operating activities of the club have been reduced and in bad efficiency.
3.2.2.Vertical analysis
The following tables illustrate Vertical analysis of CEO & CIO club All items on the
tables are shown as a percent
3.2.2.1 Vertical analysis of the balance sheet
Table 3.3: Vertical analysis of the balance sheet
2012 2013 2014Total Assets
Other current assets 5.54% 9.45% 13.43%
Short-term prepaid expenses 4.36% 5.59% 7.94%
: ¬—
— Valued added tax deductible 0.12% 0.00% 0.00%
Taxes and receivables from State 1.16% 3.86% 5.49%
Trang 34Payable expenses 16.07% 8.05% 21.12% Other current payables 2.14% | 27.26% 30.14%
Long-term liabilities 36.28% 73.31% | 112.23%
Unrealized turnover 36.28% 73.31% | 112.23% OWNERS’ EQUITY -4.84% | -116.62% | -292.12%
Owners's equity -4.84% | -116.62% | -292.12%
Paid in capital 57.68% 191.58% | 272.27%Undistributed earnings |_ -62.52% -308.2% | -564.39%TOTAL LIABILITIES AND OWNERS’ 100.00% 100.00% | 100.00%
EQUITY
In total assets, the main part is current assets with 93.31%, 83.38%, 76.38% over
total assets in three years 2012, 2013, 2014 respectively Follow it is accountreceivable and long-term assets In current assets, there is no inventory
In total liabilities and owners’ equity, the liabilities is greater than total liabilities and
owners’ equity with 104.84%, 216.63%, 392.12% in overall So we see the negative
part in Owners’ equity with -4.84%, -116.62%, -292.12% in overall The
undistributed earning have significant affect in that The club have huge currentliabilities
Account receivable had large part in current assets The company had account
receivable that customers had to pay, often after 50- 60 days after the they received the
service Unrealized turnover was contradict to account receivable, when the companyreceived the money from customers before they receive the service It contributed largepart in current liabilities
3.2.2.2 Vertical analysis of the income statement.
Trang 35Table 3.4: Vertical analysis of the income statement.
Finance charge 0.00% 0.00%
0.00% | 0.00% 0.00%Administrative expenses 33.36% 56.22% 44.83%
Net Operating income 0.17% -8.16%
The Cost of goods sold and Administrative expenses are two most dominated parts in
net sales proportion, 66.46%, 52.03%, 64.81% with cost of goods sold and 33.36%,
56.22%, 44.83% with Administrative expenses When the club managers want toenhance the net profit, they need to care most about the most two important parts: Cost
of goods sold and Administrative expenses
Profit or loss 2012-2014 of CEO & CIO club
Table 3.5 Profit or loss 2012-2014 of CEO & CTO club( millions vnđ)
2012 2013 2014
Net profit 80,781,258 -131,207,809 -116,032,853
1
Trang 363.2.3.1 Liquidity ratio
3.2.3.1.1.Current ratio of CEO & CIO club
Table 3.6: Current ratio of CEO & CIO club and ADC( times)
Current ratio 2012 2013 2014
CEO & CIO 1.36 0.58 |
ADC mỊ