Financial management system of vietnam posts and telecommunications group and its effects on financial efficiency of the company

For assessing the current status of VNPT’s financial management system, the dissertation focuses on studying the profile and the formation and development process of VNPT as well as VNPT

THAI NGUYEN UNIVERSITY SOUTHERN LUZON STATE UNIVERSITY Socialist Republic of Viet Nam Republic of Philippines

TO THI NGOC LAN

(ENGLISH NAME: JENNY)

FINANCIAL MANAGEMENT SYSTEM OF VIETNAM POSTS AND TELECOMMUNICATIONS GROUP AND ITS EFFECTS ON FINANCIAL

EFFICIENCY OF THE COMPANY

DOCTORAL DISSERTATION ABSTRACT

ADVISER: DR JOANNA PAULA A ELLAGA

AUGUST, 2013

In the background of deeper and wider regional and international economic

integration, enterprises have to face with more formidable competition from big

multinational economic organizations in the world In order to adapt to that situation,

many countries are incessantly increase scales of businesses, establishing and

developing economic groups In order to ensure the high efficiency of those economic

groups and State owned enterprises, it is necessary to improve efficiency of financial

management system of economic groups

With such an approach to issues, the main objectives of dissertation is study

the current status of system financial management of VNPT and its effect on financial

efficiency of company In order to obtain main objectives of study, the researcher

used the descriptive method to get data which includes: Primary data was collected by

sending questionnaires to 169 respondents and secondary data: From the annual

financial reports of VNPT from 2010 to 2012 For assessing the current status of

VNPT’s financial management system, the dissertation focuses on studying the profile and the formation and development process of VNPT as well as VNPT’s

regulations on capital mobilization, management and use of capital and assets,

management of revenues, expenses and profit distribution, thereby assessing financial

management system and its effects on VNPT’s financial efficiency from 2010 to

2012 All this proves that the financial management system of VNPT effects

positively to financial efficiency of the Group

CHAPTER I:

INTRODUCTION

There are many studies about financial management system in economic

groups under the eyes of theory, situation evaluation as well as summary of

experience in the country and foreign countries Followings are typical ones:

Firstly, the study, which was published into book, has title: “Business Groups

and financial management system in Business Groups” published in 2003, by author

Pham Quang Trung This study shows many basic theoretical matters about financial

management system in economic groups, State owned enterprises as well as

descriptions, summaries, analysis of overall picture of actual situation of applying

financial management system in economic groups, State owned enterprises in Vietnam

in the first period when economic groups, State owned enterprises started to go into

operation

Secondly, the study under form of textbook has title “Financial management of modern enterprises” published in 2009, author Duong Huu Hanh This study, although not directly mentioning words “financial management system in economic groups”,

has contents of financial management in modern enterprises under the view of

financial management of enterprises

Thirdly, the study “Establishment and management of business Groups in VietNam” in 1996 and the author Nguyen Dinh Phan In this study, the author has

written few pages of financial management in business groups; however, to some

extent, the content about this issue is limit and suggestive

Generally, about financial management system in the economic groups in

Vietnam, there are some works under the form of books which mention different

angles, but all were released from the 2000 onwards Nowadays under the impact of

regional and international economic integration, and the management of the State for

State economic groups inevitably arises many new issues in the financial management

system of economic groups in VietNam

1.1 Statement of the objectives

This study intended to analysis of financial management system of VNPT and

its effects on financial efficiency of the Group Specifically, the specific objectives of

this study are:

(1) To identify the profile of the company in terms of the following: Type of

the company and Size of the company; (2) To determine the current status of financial

management system of VNPT in terms of the following: Capital mobilization, Capital

management and use, Asset management, Management of revenue, expense and profit

distribution; (3) To assess the financial efficiency of VNPT in terms of the following

financial ratios: the asset turnover ratio and the debtor days ratio; (4) To determine the

effects of the financial management system to the financial efficiency of VNPT; (5)

To identify the problems encountered in carrying out the financial management

system of VNPT; (6) To propose actions that will respond to the problems

encountered in carrying out the financial management system of VNPT

1.2 Significance of the Study

This research will be beneficial for the following:

Investors take an interest in information about the financial efficiency

of VNPT On the one hand, they want to obtain the adequate amount of information

needed for decision-making about investments in the Group On the other hand,

owners and investors want to make sure whether invested resources are properly

evaluated and optimized

Managers need to know about financial management for current and

long-term decisionmaking

Employees are naturally interested in prosperity, economic and financial

stability of VNPT It is concerned with job security, possibilities in wage and social

policy, or other benefits provided by the employer

For researcher, provide theoretical knowledge of the financial management

system of economic groups in general and VNPT in particular

1.3 Scope and limitation of the Study

The study of current status of financial management system in VNPT is

performed from 2010 to 2012

In my case, Financial efficiency, viewed as dependent variables

Accounting information system practices; Financial reporting and analysis

practices; Capital structure management practices; Capital mobilization practices;

Capital management and use practices; Asset management practices; Revenue,

expense and profit distribution management practices, viewed as independent

variables

But time and my ability is limited, I will focus on: Capital mobilization

practices; Capital management and use practices; Asset management practices;

Revenue, expense and profit distribution management practices, viewed as

independent variables

CHAPTER II:

RELATED LITERATURE

2.1 Review of related studies

In this chapter, the author presented some related studies

2.2 Theoretical and conceptual framework

In this part, the author presented definition of finance, contents of financial

management system, factors influencing financial management system, criteria for

financial efficiency evaluation of financial management system and definition of

financial efficency

2.3 Research Paradigm

FINANCIAL MANAGEMENT SYSTEM OF VNPT AND ITS EFFECTS

ON FINANCIAL EFFICIENCY OF THE COMPANY

Company profile

 Type of company

 Size of company

Current status of financial

management system

 Capital mobilization

 Capital management

and use

 Asset management

 Management of

revenue, expense and

profit distribution

Financial Efficiency

Problems encountered

CHAPTER III:

METHODOLOGY

3.1 Data collection method

- Primary data was collected by sending questionnaires to 169 respondents

(CFO of VNPT, director of financial department of VNPT, deputy director of

financial department of VNPT, CFO of VNPT’s subsidiaries) working in VNPT and

its subsidiaries

- Secondary data: From the annual financial reports of VNPT from 2010 to

2012

3.2 Data processing method

After information is collected, information in the questionnaire will be cleaned

and processing by SPSS 16.0

3.3 Statistical treatment

This study used statistical methods to process data analysis as indicates

The asset turnover ratio

The asset

turnover ratio

= Sales Revenue

Net Assets

The debtor days ratio

The debtor

days ratio

=

Debtors

x 365 Sales turnover

CHAPTER IV:

PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

In the chapter 4 of this dissertation, the first the author focused on analyzing

the current status of financial management systems and its impact to the financial

efficiency of VNPT in the period 2010 - 2012 Capital mobilization of VNPT both

ensure the autonomy and the security The financial management system created new

initiative in capital mobilization helping to address shortage of capital in the context

of capital scarcity as currently Capital management and use in VNPT are rather strict,

not only facilitating to increase the self-control, self-responsibility of VNPT but also

strengthening examination, supervision on Representative owners of State capital

Asset management of the VNPT has relatively clear separation between ownership

and rights to use assets Management of revenue, expense and profit distribution is

quite clear, explicit to ensure balance between benefit of State, cooperation and

temporary and long-term benefit of workers, cooperation, contributing to encourage

for saving and to improve efficiency in production business at VNPT Then, the

author make some evaluation about financial efficiency of VNPT

4.1 Assess the financial efficiency of VNPT

The asset turnover ratio

This measures the productivity of the business It is calculated using the

following formula:

The asset

turnover ratio

= Sales Revenue

Net Assets

Table 1 The asset turnover ratio of VNPT from 2010 to 2012

Unit: Billion dongs

Sales Revenue 101,569 120,800 130,000

Net Assets 69,499 71,807 73,968

The asset turnover ratio 1.46 1.68 1.76

The debtor days ratio

This shows how long, on average, a business takes to collect the debts owed to

it by customers who have purchased their goods on credit It is calculated using the

following formula:

The debtor

days ratio

=

Debtors

x 365 Sales turnover

Table 2 The debtor days ratio of VNPT from 2010 to 2012

Unit: Billion dongs

Debtors 13,003 14,737 15,193

Sales turnover 104,869 125,100 134,495

The debtor days ratio 45.26 43.0 41.23

4.2 Effects of the financial management system to the financial efficiency

of VNPT

Financial management system of VNPT has been conducted well so sales

revenue and net assets increased steadily from 2010 to 2012

Sales revenue and net assets increased lead to the asset turnover ratio

increased In 2010, the asset turnover ratio was 1.46; In 2011, the asset turnover ratio

was 1.68, increasing 15.068% compared with 2010; In 2012 the asset turnover ratio

was 1.76, increasing 4.762% compared to 2011

The same, we see that financial management system of VNPT has been

conducted well so the debtor days ratio decreased steadily from 2010 to 2012

In 2010, the debtor days ratio was 45.26 days; In 2011, the debtor days ratio was 43.0

days, decreasing 5.526% compared with 2010; In 2012 the debtor days ratio was

41.23 days, decreasing 4.293% compared to 2011

All this proves that the financial management system of VNPT effects

positively to financial efficiency of the Group

CHAPTER V:

CONCLUSIONS AND RECOMMENDATIONS

5.1 Summary of the findings

For current status of financial management system of VNPT

- Current status capital mobilization in VNPT

Capital mobilization of VNPT both ensure the autonomy and the security The

financial management system created new initiative in capital mobilization helping to

address shortage of capital in the context of capital scarcity as currently

- Current status capital management and use in VNPT

Generally, capital management and use in VNPT are rather strict, not only

facilitating to increase the self-control, self-responsibility of VNPT but also

strengthening examination, supervision on Representative owners of State capital

- Current status of asset management in VNPT

Asset management of the VNPT has relatively clear separation between

ownership and rights to use assets

- Current status of revenue, expense and profit distribution management in

VNPT

The managing revenue, cost and profit distribution is quite clear, explicit to

ensure balance between benefit of State, cooperation and temporary and long-term

benefit of workers, cooperation, contributing to encourage for saving and to improve

efficiency in production business at VNPT

For effects of financial management system on financial efficiency of the VNPT

Financial management system of VNPT has been conducted well so sales

revenue and net assets increased steadily from 2010 to 2012 It lead to the asset

turnover ratio increased and the debtor days ratio decreased

All this proves that the financial management system of VNPT effects

positively to financial efficiency of the Group

For the problem encountered by financial management system of VNPT Firstly, capital mobilization of VNPT’s subsidiaries meet many difficult and

limited

Secondly, investment out of main business operations to VNPT without

efficiency

Thirdly, although revenue of VNPT increase steadily from 2010 – 2012 but

profit of VNPT decrease

5.2 Conclusions

- The assets and equity of VNPT had tended to increase over the years from

2010 to 2012

- The rate of total payable liabilities over owner capital was 2.74 fold, 2.33

fold respectively in in 2011, 2012

- The revenue of VNPT had tended to increase over the years from 2010 to

2012

- But the profit of VNPT had tended to decrease over the years from 2010 to

2012

5.3 Recommendations

Firstly, complete capital mobilization of VNPT’s subsidiaries

To extend the capital mobilization of VNPT, it is required to focus on handling

the main problems as follows:

- In general, perform the capitalization for VNPT and foster the listing in the

security market

- For VNPT itself, set the instruction frame including: target, limit, loan

procedure… instead of approval for each case in the current time

- Parallel with the extension of capital mobilization regime for subsidiaries of

VNPT, it is required to cooperate synchronously with the strengthening of

supervision, administration regime and the system of final criteria on effectiveness,

the extension of capital mobilization regime for member units under the Group can

become true and obtain the achievement as expected

Secondly, complete investment out of main business operations

To correct the limitations of investment in the outside VNPT, it is required to

re-assess the capital, assets of VNPT accurately and re-structure the group toward

centralized objectives as increasing the financial efficiency of VNPT in new situation

Raise the role in advising, moderating, supervising related parties to

investment decisions, project sponsorship and distribution polices in inner VNPT

Thirdly, complete the management of revenue, expenses, and profit distribution

- Complete the system of economic and technical regulations in compliance

with conditions, operating characteristics of VNPT both assuring the scientific and

actual requirements, innovation of plan making on revenue, cost for innovating the

ways of profit distribution in direction of focusing on long term benefit of VNPT

- For the management of revenue, expenses and profit distribution, it is

required to focus on expense management because of only good management on

expenses and cost reduction results in extending the production and business and

increasing revenue and profit