ANALYSIS OF FINANCIAL RATIOS IN BASIC LEVEL OF BANK CREDIT

Analyze customer needs assessment, review of many factors. One important factor here is the financial situation as well as financial indicators during the operation of the Customer. However, for each business lines of customers will have different characteristics lead to financial indicators have certain characteristics. Therefore, in addition to analyzing and assessing the financial situation, the basic financial indicators of each customer, it is necessary to consider comparisons with peers or similar occupations in fields initiative to have an objective view and more comprehensive

ANALYSIS OF FINANCIAL RATIOS IN BASIC LEVEL OF BANK CREDIT

I / REASON FOR CHOOSING THE TOPIC

Credit is one of the basic activities, the most important in the operation of commercial banks This activity brought profits high proportion of the income of the Bank However, credit is also very much latent business risks The risk of credit granting activities stem from many factors both objective and subjective, come from customers as well as from the Bank itself Thus, the Bank needs to implement synchronous measures to manage credit risk, contribute to improving operational efficiency The solution should be implementing drastic and strict and serious approach from the stage of the customer, customer analysis, the proposed loan, after loan control and supervise debt collection

Analyze customer needs assessment, review of many factors One important factor here is the financial situation as well as financial indicators during the operation

of the Customer However, for each business lines of customers will have different characteristics lead to financial indicators have certain characteristics Therefore, in addition to analyzing and assessing the financial situation, the basic financial indicators of each customer, it is necessary to consider comparisons with peers or similar occupations in fields initiative to have an objective view and more comprehensive

Within the framework of this course exercises, the author will consider analysis

of basic financial indicators of Hai Ha Limited Company, associated with the comparison of operating unit same lines as Vietnam petroleum Corporation

II / ANALYSIS OF FINANCIAL INDICATORS IN CREDIT TO HAI HA LIMITED COMPANY.

Hai Ha Limited Company was established on 09.08.2015 with equity sources initially modest level of 3 billion, focused primarily active in the field of land transport activities, Water Transportation However, so far the company's scale has been expanded, sources equity increased rapidly and reached 295 billion VND in 31/12/2014 Activities of the company is constantly expanding in both size, field of

activity Business operations of the Company primarily in current time: oil trading, petroleum transportation

Within the scope of this article, the authors review the basic financial indicators (liquidity indicator, rotation indicator, performance indicators and targets capital structure) of Hai Ha Limited Company download a body of the Bank associated with the comparison of the above criteria with Petrolimex Hai Ha Limited Company and Petrolimex have field operations business mainly petroleum, petroleum transportation However, Petrolimex has a larger scale of operations Co Haiha lot (about 13 times) Petrolimex has field operations more diverse, besides petroleum business, the Group consists of numerous subsidiaries, associated companies and joint ventures and other equity units with diverse activities including construction activities, real estate, banking, insurance However, operations of the Group mainly focused centers around the spindle is oil trading activities Besides, in the financial account of the

Group were approved by the Ministry of Finance under the Official Letter No 956 / BTC-CDKT 18/01/2007 But basically, accounting and financial regime still comply with the current text of cost accounting of Vietnam Accounting Standards Therefore, the author will consider analytical evaluation of financial indicators of the Company Hai Ha tied to the comparison with Petrolimex in this essay

The basis for analysis include: financial statements audited fiscal 2014, the spreadsheet of financial ratios, the annual report and the actual operational status of

the unit is assessed (The financial statements have been audited by the Company in

2014 and Petrolimex Hai Ha are shown in the Annex to this essay)

2.1 ANALYSIS LIQUIDITY RATIOS

Current ratio Quick ratio (Acid

PETROLIME

The ratio of the Company Hai Ha tended to increase over the years analyzed, reflecting the liquidity of the company improved in recent years The reason stems from the increased speed increased short-term assets (117.79%) in 2014 faster than the rate of increase of current liabilities (116.59%)

(i) Current ratio

Current ratio of the company Hai Ha are greater than 1, in particular: 1.05 in

2013, 2014 was 1.06 It can be seen, the solvency of the Company in the short term is guaranteed

Similarly, liquidity in short of Petrolimex's guaranteed: 2013 1.00, 2014 ratio was 0.97

Thus, the current ratio of the company Hai Ha is guaranteed but not improved significantly from 2014 compared with 2013 However, the current ratio of the company in 2014 Shanghai Ha better than the corresponding coefficient of Petrolimex Due primarily business quite similar to the structure of current assets of 2 units have certain similarities: The value of inventories relatively large proportion of short-term asset value, besides , trade receivables item has a relatively large value The value of inventories accounted for a large proportion of short-term asset structure, so in addition to assessing the liquidity of the two units via the current ratio

is necessary to evaluate the quick liquidity ratio to reflect more accurately the solvency of debts due in the short term

(ii) Quick ratio (Acid Test)

Although the current ratio of the company Hai Ha better than Petrolimex, finished the quick ratio of Petrolimex in 2013 and 2014 two better than the Hai Ha Thus, we can see the proportion of items such as inventories, short-term assets of the Company Hai Ha larger than Petrolimex However, the quick ratio of the company Hai Ha has improved in 2014 compared with 2013: ratio increased from 0.22 in 2013

to 0.47 in 2014

Through the quick ratio, can be seen both 2 units consider analysts maintain a short-term assets with high liquidity (cash, short-term financial investments, customer receivables) at less than 50% of total short-term assets This may be regarded as specific operation of petroleum business in Vietnam, it is necessary to maintain a sizable amount of inventories

(iii) Cash ratio

Cash ratio is the ratio reflects the solvency of the Company immediately Cash ratio = (Cash + Short-term financial investments) / Current Liabilities Cash ratio over the years of the company Hai Ha respectively: 2013: 0.11, 2014: 0.41 Petrolimex Score: 2013: 0.21, 2014: 0.33 Through the coefficient on, we can see the two units are to maintain an amount of cash, payment deposit, term deposits at banks and short-term investment securities with similar density

2.2 ANALYSIS OF OPERATING HIGHLIGHTS ROTATION

Average collection period Inventory turnover

Days sales in inventory

PETROLIME

(i) Average collection period

In 2013, Company management Haiha relatively good receivables, accounts receivable turnover in 2013 reached round 20.42 Thus, the average customer receivables are recovered on average within 18 days Turnover ratio of receivables in fiscal year 2013 the Company's Hai Ha better than Petrolimex (this index was 14.66) However, in fiscal 2014 accounts receivable turnover of both units are on a downward trend While Petrolimex has slightly decreased, the index of Hai Ha company declined sharply from 20.42 to 9.34 The reason stems from specific business lines, the specific characteristics of businesses and business relationships Petrolimex has a thickness of several years of operation and generate an output market

is relatively stable, the company Hai Ha again are in the process of developing additional markets for their products The company must always maintain a level of trust business includes hundreds of customer related transactions including large customers such as Vinh Phuc Company (the balance was 4,307 million VND Receivables) , Hai Duong petroleum Company (20.746 million VND), in Ngoc Mai (32.155 million VND) This is the level of accounts receivable as per the business is

in the early stages of the development of business networks Most customers are trading steady relationships, often with company Haiha so although accounts receivable turnover show signs of decline in 2014, still can assert control enterprises this accounts receivable

(ii) Inventory turnover and Days sales in inventory

Due to the nature of the oil and gas business activities should Company Petrolimex Hai Ha and maintain a sizable inventory review in relation to the scale of operations of each unit

The table above can be seen the rotation of inventories, reflected by 2 index is the inventory turnover and the average number of days of inventory turnover of Petrolimex better than the company Hai Ha Specifically, the only inventory turnover: Petrolimex (2013: 12.28 Round, 2014: 19.74 round), the Company Hai Ha (2013: 2.54 round, 2014: 5.39 round); on the "number of days per cycle inventory": Petrolimex (2013: 30 days, 2014: 18 days), the company Hai Ha (2013: 144 days, 2014: 68 days) However, Petrolimex is the perennial activity for the day, has a rich experience and traditional petroleum business, extensive distribution network across the country

to work with the inventory index above is understandable Particularly for companies Hai Ha, although system inventory turnover or the average number of days of inventory turnover is limited compared to Petrolimex, but the company itself has also enhanced inventory management capabilities warehouses over the years In 2013, the inventory cycle is 2:54 Within the year 2014, the turnover has been increased is 5:39 laps As a result, only the "number of days per cycle inventory" has been reduced from

144 days to 68 days

Thus, we can see though to maintain inventory levels while sizable new market entry, limited capital resources, the current retail price of petroleum complex, but over the years, the company Shanghai Ha was actively seeking partners to consumption, expanding both in width and depth, has contributed actively to improve the performance indicators for managing the Company's inventory

2.3 ANALYSIS INDICATORS PERFORMANCE FEEDBACK

31/12/2013 31/12/2014 31/12/2013 31/12/2014

Total asset

turnover 1.44 1.93 3.50 3.83 Fixed assets

turnover 7.74 17.83 11.94 12.66

Hai Ha and Petrolimex company operating in the field of business is petroleum operations With different scale of operation, but can see the indicators reflecting operating efficiency similar

For indicators Return on assets, in 2013 the Company Hai Ha lower than Petrolimex, but by 2014, this indicator of the company Hai Ha has preeminence However, some indicators of Hai Ha company still lower than Petrolimex as: Gross margin, asset turnover Total

However, through panel indicators of performance, can easily see the two units are impaired on business performance in 2014 compared to 2013 For the Company Hai Ha and Petrolimex, 2014 are the expansion of business activity, reflected by the increase in revenue from sales operations and service delivery as well as the total value of assets Particularly for companies Hai Ha, 2014, revenues increased from 3.220 billion to 8.519 billion, an increase of approximately 2.65 times; total assets increased from 2238 billion to 4414 billion, an increase of approximately 1.97 times Causes of the deterioration of the performance indicators comes from: Revenue increased, however, with the growth rate that is việ corresponding increase costs, especially the cost of financial and business management costs caused profit after tax

of the company Hai Ha is not as high as expected In addition, developments on the world oil market in the country over time and not really favorable made profits of the Company did not perform as expected However, when comparing the indicators on

the unit experienced senior operations and large scale as Petrolimex, visible indicators

of the profitability of the company reached an average level compared with other enterprises operating in the same trades

2.4 ANALYSIS OF DEBT INDICATORS

Some indicators of liabilities of the two units is expressed through the following summary:

31/12/2013 31/12/2014 31/12/201 3 31/12/2014

Times interest earned -

income (interest coverage) 1.45 1.07 2.99 1.15 Times interest earned - cash

flow (interest coverage) 62 3,821 23.76 27.35

Hai Ha and Petrolimex Company is maintaining a capital structure with a debt ratio at a high level and tends to increase The use of leverage loan financing of business activities, but also entails certain risks on the liquidity of the business

The Company's debt ratio Haiha higher than Petrolimex This is also a factor to consider for the decision of credit increase to the Company Hai Ha Debt ratio was 87.1% in 2013, in 2014 continued to grow at 93.3% - a high level Therefore, the continuation of additional equity sources are essential to ensure safe operations and enhance liquidity for twos

For coefficient Times Earned interest - income (interest coverage) reflects earnings before interest and taxes / interest expenses of 2 units have similarities, reflecting operational efficiency as well as the use of tools financial leverage is quite effective in financial years 2013 and 2014

III / CONCLUSIONS AND RECOMMENDATIONS

To consider an assessment of a customer to provide credit decision should perform on a variety of factors General financial analysis and analysis of financial indicators in particular contributed a major part in the customer analysis

For the financial indicators of the Company Hai Ha as analyzed above, we can see, the basic financial indicators of the Company relative gain in the average of the petroleum business However, with certain specific characteristics of the Company should take the index to a poor level better than its peers in industries as some indicators about inventory management, debt indicators, However, when considered from the perspective of financial indicators, we can see the company has the financial situation is relatively stable, reflecting operational efficiency in recent years This is also a plus factor to form a judgment granting credit for this enterprise