financial analysis of sai gon – dong xuan beer and alcohol joint stock company

MINISTRY OF FINANCE ACADEMY OF FINANCE FACULTY OF FOREIGN LANGUAGES ---*****---GRADUATION THESISFINANCIAL ANALYSIS OF SAI GON – DONG XUAN BEER AND ALCOHOL JOINT STOCK COMPANY... MINISTRY

MINISTRY OF FINANCE ACADEMY OF FINANCE FACULTY OF FOREIGN LANGUAGES

-***** -GRADUATION THESISFINANCIAL ANALYSIS OF SAI GON – DONG XUAN BEER AND ALCOHOL JOINT STOCK COMPANY

MINISTRY OF FINANCE ACADEMY OF FINANCE FACULTY OF FOREIGN LANGUAGES

-***** -FINANCIAL ANALYSIS OF SAI GON – DONG XUAN BEER AND ALCOHOL JOINT STOCK COMPANY

SUMMITED IN PARTIAL FULFILMENT OF THE

REQUIREMENTS FOR THE DEGREE OF BACHELOR OF ART IN

ENGLISH FOR FINANCE AND ACCOUNTING

I hereby declare that this thesis is my own work and effort It has not beensubmitted anywhere for any award Where other sources of information havebeen used, they have been acknowledged

Signature: …

Mông Hữu Lộc

Date: ………

Firstly, I want to express my deep gratitude to Ms Bui Thi Tuyet Mai for hersupports and advices to help me complete this study She has been anoutstanding advisor; always very flexible and willing to let her students work attheir own pace, while making sure that things are going all right I always foundher highly accessible and I thank her for the weekly meeting that kept memotivated and suggested idea to complete my study

Secondly, without the kind support of board of directors, managers andemployees of Sai Gon – Dong Xuan Beer and Alcohol Joint Stock Company fortheir participation in my study, it never becomes such a real case so I would like

to express my great acknowledgement to them

Last but not least, I also want to express my thanks to my family who gave meenthusiastic support and shared house work with me during the last years while Iwas doing my study

Thank you very much

In the business world, managers understand that constantly posting profitsrequires careful planning Corporate finance analysis determines usefulinterrelations in operating information and also enables firms to find suitableways to raise funds, usually on financial markets Therefore, this study, titled

“Financial analysis of Sai Gon – Dong Xuan Beer and Alcohol Joint Stock Company”, focuses on the following main content:

Firstly, this study analyzes the liquidity, performance and profitability position

of the company in order to determine in an effective manner by using financialtools combined

Secondly, it is carried out to evaluate the financial situation, the operational

results as well as financial progress of a business based on financial statementsRatio Analysis and Comparative balance sheet

Finally, this study also explains ways in which ratio analysis can be of assistance

in long-term planning, budgeting and asset management to strengthen financialperformance and help avoid financial difficulties

In conclusion, I hope that this study will help to identify and bring outsuggestions about weak position of business transactions at Sai Gon – DongXuan Beer and Alcohol Joint Stock Company

TABLE OF CONTENT

CHAPTER I: SOME BASIC THEORIES ABOUT CORPORATE FINANCIAL ANALYSIS

1.1 Definition, objectives and missions of corporate financial analysis.

1.1.1 Definition of corporate finance and corporate financial analysis.

1.1.1.1 Definition of corporate finance.

1.1.1.2 Definition of corporate financial analysis.

1.1.2 Objectives and missions of corporate financial analysis.

1.1.2.1 Objectives of corporate financial analysis.

1.1.2.2 Missions of corporate financial analysis.

1.2 Information used in financial analysis.

1.2.1 The balance sheet.

1.2.2 The income statement.

1.2.3 The cash flow statement.

1.3 Methods of financial analysis.

1.3.1 Comparison method.

1.3.2 Ratio analysis method.

1.3.3 DuPont analysis method.

1.4 Content of financial analysis.

1.4.1 Liquidity ratios.

1.4.2 Asset and Debt structure ratios.

1.4.3 Asset Management ratios.

2.1.1 History and development progress.

2.1.2 Some characteristics of the company.

2.1.2.1 Product key

2.1.2.2 Organization structure

2.1.2.3 Characteristics of input and output market

2.2 Financial analysis of Sai Gon – Dong Xuan Beer and Alcohol Joint stock company.

2.2.1 Financial ratio analysis.

2.2.1.1 Liquidity ratio analysis.

2.2.1.2 Asset and Debt structure ratio analysis.

2.2.1.3 Asset Management ratio analysis.

2.2.1.4 Profitability ratio analysis.

2.2.2 DuPont analysis.

CHAPTER III: RECOMMENDATIONS FOR IMPROVING FINANCIAL SITUATION OF SAI GON – DONG XUAN BEER AND ALCOHOL JOINT STOCK COMPANY.

3.1 Development orientation of company.

3.2 Recommendations for improving financial situation of company.

CONCLUSION

REFERENCES

LIST OF ABREVIATIONS

DSO : Days’ sales outstanding

EBIT : Earning before interest and tax

ROA : Return on assets

ROAE : Economic return on assets

ROE : Return on equity

ROI : Return on investment

LIST OF TABLES, CHARTS AND FIGURES

Figure 2.1: Organization structure of Sai Gon – Dong Xuan Beer and

Alcohol Joint Stock Company

Table 2.1: The liquidity ratios

Table 2.2: Asset and Debt structure ratios

Table 2.3: The asset management ratios

Table 2.4: Profitability ratios

Table 3.1: Business plan of the company in 2013

Table 3.2: Relation between current assets and equity

Table 2.5: DuPont analysis

Chart 2.1: Liquidity ratios

Chart 2.2: The debt ratio

Chart 2.3: Short-term asset ratio

Chart 2.4: Days’ sales in inventory

Chart 2.5: Days’ sales outstanding

Chart 2.6: Fixed asset turnover and Total asset turnover

Chart 2.7: The profitability ratios

1 Rationale of the study

As the competition in business is becoming more and more acute, financialsituation now is the concern of not only the business owners but also the concern

of many components of the economy such as investors, lenders, government andemployees Thereby they will see the actual situation of the enterprise after eachbusiness cycle, and analyze business activities Through the analysis, they canmake the right decisions related to business and create conditions to improvefinancial viability of the enterprise

The regular analysis of the financial situation will help businesses find the actualsituation of financial activities, business activities results in the period as well asdetermine fully and correctly potential, efficiency of the businesses Besides, italso presents business risks so managers can bring out effective solutions,accurate decisions to improve the quality of economic management and theproduction efficiency of the business Therefore, the financial analysis of abusiness is very essential

Financial statements is the primary document used to analyze the financialsituation of enterprises because it shows a general way about the situation,capital, asset indicators as well as the financial situation, business performance

of the enterprise However, the information that financial statements provide isincomplete because it does not explain clearly about financial activities, risks,

prospects and trends development of the business Analysis of the financialsituation will be filled for this deficiency.

Carrying out my internship period in Sai Gon – Dong Xuan Beer and AlcoholJoint Stock Company, I have a chance to study the company’s financial situationand find the solution to improve or overcome shortcomings Thus, I chose the

study “Financial analysis of Sai Gon – Dong Xuan Beer and Alcohol Joint Stock Company” with the aim of having an overview of financial activities, risks and

economic efficiency of Sai Gon – Dong Xuan Beer and Alcohol Joint StockCompany

2 Aims of the study

This study gains a full view of financial situation, advantages and disadvantages

of financial activities in order to find out solutions to improve the efficiency offinancial activities Moreover, some recommendations are brought out to get abetter management method at Sai Gon – Dong Xuan Beer and Alcohol JointStock Company

3 Methodology

In order to perform this study, I first choose the method of analyzing,summarizing, comparing and synthesizing materials and books to form thetheoretical background Besides, I also use charts, tables and factual data forsupport From the collected information and data, I can assess and analyze thefinancial situation to draw conclusion and find out feasible solutions to improveeconomic efficiency of Sai Gon - Dong Xuan Beer and Alcohol Joint StockCompany

4 Scope of the study

This study is intended, as the title suggests: “Financial analysis of Sai Gon – Dong Xuan Beer and Alcohol Joint Stock Company”, to touch upon the

background and characteristics of Sai Gon – Dong Xuan Beer and Alcohol JointStock Company Besides, by using financial statements, this study analyzes thecurrent financial situation of the company and brings out some practicalrecommendations to improve economic efficiency of the company

5 Organization of the study

The study is divided into three chapters:

Chapter 1: Some basic theories about corporate financial analysis.

Chapter one conceptualizes about corporate financial analysis as well as itsobjectives and missions Moreover, this chapter presents an overview offinancial statement such as the balance sheet, the income statement and the cashflow statement Based on the literature review, chapter one also elaborates onmethods and content of financial analysis

Chapter 2: Financial analysis of Sai Gon – Dong Xuan Beer and Alcohol Joint Stock Company.

Chapter two presents an overview and development progress of Sai Gon – DongXuan Beer and Alcohol Joint Stock Company This chapter also presents thecrucial part of the study which analyzes the financial situation of the company

Chapter 3: Recommendations for improving financial situation of Sai Gon – Dong Xuan Beer and Alcohol Joint Stock Company.

As titled, chapter three is going to give some recommendations for improvingfinancial situation of Sai Gon – Dong Xuan Beer and Alcohol Joint StockCompany.

6 Significance

It is hoped that this study, to some extent, will be a useful reference material andinspiration for managers and administrators to build strategic plan in the nearfuture

CHAPTER I: SOME BASIC THEORIES ABOUT CORPORATE FINANCIAL ANALYSIS.

1.1 Definition, objectives and missions of corporate financial analysis.

1.1.1 Definition of corporate finance and corporate financial analysis.

1.1.1.1 Definition of corporate finance.

Corporate finance is an area of finance dealing with financial decisions thatbusiness enterprises make and the tools and analysis used to make thesedecisions The primary goal of corporate finance is to maximize corporatevalue while managing the firm’s financial risks

The discipline can be divided into long-term and short-term decisions andtechniques Capital investment decisions are long-term choices about whichprojects receive investment, whether to finance that investment with equity ordebt, and when or whether to pay dividends to shareholders On the otherhand, short term decisions deal with the short-term balance of current assetsand current liabilities; the focus here is on managing cash, inventories, andshort-term borrowing and lending (such as the terms on credit extended tocustomers)

1.1.1.2 Definition of corporate financial analysis.

Financial analysis (also named financial statement analysis or accounting analysis or analysis of finance) refers to an assessment of the viability,

stability and profitability of a business, sub-business or project

Corporate financial analysis examines the use of financial statements inassessing a firm's financial health, its strengths, weaknesses, recentperformance and future prospects Special issues dealing with financialstatement information are emphasized in some depth These issues include:market efficiency, asset pricing, corporate restructuring and businessvaluation, debt ratings and financial distress.

1.1.2 Objectives and missions of corporate financial analysis.

1.1.2.1 Objectives of corporate financial analysis.

Financial activities of the business including the following basic contents:determine the capital needs of the business and look for ways to raise capitaland use it efficiently Financial activities play an important role in productionand business activities and are crucial in survival and development ofenterprises This role has been shown since the establishment of the businesswhen setting up the initial project, scheduled activities and capitalmobilization

To be able to set up an enterprise, owners need to have a certain amount ofcapital, including: fixed capital, working capital and other specialized capital.Moreover, enterprise needs to take effective capital mobilization and use itefficiently on the basis of respect for the principles of finance, credit and lawenforcement The analysis of the financial situation will help the businessmanagers and the government to know clearly about financial activities anddetermine fully the cause and the impact of each indicator to the financialsituation of enterprise From which managers make effective measures inorder to stabilize and improve the financial situation of enterprises

People are only interested in the financial situation of enterprises in differentaspects such as: the investors, the lenders, suppliers, customers However, theproblem that people are most interested in is the ability to generate cash flow,profitability, solvency and the maximum profit of the business Therefore, inanalyzing the financial situation of the enterprise, we need to achieve thefollowing main objectives:

Firstly, financial analysis have to provide complete, timely, truthful and

useful information systems which is necessary for business owners and otherparticipants such as: investors, corporate board, lenders, superiormanagement agencies and other users of financial information, to help themmake right decision when investing and lending

Secondly, financial analysis have to fully provide the most important

information for business owners, investors, lenders and other users offinancial information in evaluating ability and stability of cash inflows orcash outflows of business, the efficiency of using capital, and liquidity of theenterprise

Thirdly, financial analysis must provide fully information about the sources

of equity, debt, the result of the process, events, transactions which changethe capital and liabilities of the business

1.1.2.2 Missions of corporate financial analysis.

The missions of corporate financial analysis is based on the principles ofcorporate finance to analyze and assess the current situation and prospects offinancial activities and indicate the advantages and disadvantages ofmonetary income and expenditure so as to carry out effective measures to

further improve the production efficiency of the enterprise In order toachieve the main objectives, the basic missions of corporate financial analysisare:

i Analysis of general financial situation of the business

ii Analysis of the situation and solvency of the business

iii Analysis of the reserve current assets

iv Analysis of the performance ratios

v Analysis of the profitability

1.2 Information used in financial analysis.

1.2.1 The balance sheet.

A balance sheet is a snapshot of a business’ financial condition at a specificmoment in time, usually at the close of an accounting period For example, theamounts reported on a balance sheet dated December 31, 2011 reflect that

instant when all the transactions through December 31 have been recorded.

A balance sheet comprises assets, liabilities, and owners’ or stockholders’equity Assets and liabilities are divided into short- and long-term obligationsincluding cash accounts such as checking, money market, or governmentsecurities At any given time, assets must equal liabilities plus owners’ equity

An asset is anything the business owns that has monetary value Liabilities arethe claims of creditors against the assets of the business

A balance sheet helps a small business owner quickly get a handle on thefinancial strength and capabilities of the business Is the business in a position

to expand? Can the business easily handle the normal financial ebbs and flows

of revenues and expenses? Or should the business take immediate steps tobolster cash reserves? The balance sheet also allows other participants - like acreditor - to see what a company owns as well as what it owes to other parties

as of the date indicated in the heading This is valuable information to thebanker who wants to determine whether or not a company qualifies foradditional credit or loans Others who would be interested in the balance sheetinclude current investors, potential investors, company management, suppliers,some customers, competitors, government agencies, and labor unions

The balance sheet provides information that is useful when assessing thefinancial stability of a company A number of financial ratios use numbersfrom the balance sheet including gearing, the current assets ratio and the quickassets ratio However, ratios based on profits and cash flow is at least asimportant for assessing financial stability: the most important of these areinterest cover and cash interest cover If any assets or (more commonly)liabilities that belong to the company in their economic effect do not appear onthe balance sheet because accounting standards do not require it, they arereferred to as off-balance sheet A balance sheet is usually presented in twosections that must reach to same total - this requirement that the two sectionsbalance is the reason it is called a balance sheet

1.2.2 The income statement.

An income statement (US English) or profit and loss account (UK English)(also referred to as a profit and loss statement (P&L), revenue statement,statement of financial performance, earnings statement, operating statement, orstatement of operations) is one of the financial statements of a company andshows the company's revenues and expenses during a particular period Itindicates how the revenues (money received from the sale of products andservices before expenses are taken out, also known as the "top line") aretransformed into the net income (the result after all revenues and expenses havebeen accounted for, also known as "net profit" or the "bottom line") It displaysthe revenues recognized for a specific period, and the cost and expensescharged against these revenues, including write-offs (e.g., depreciation andamortization of various assets) and taxes The purpose of the income statement

is to show managers and investors whether the company made or lost moneyduring the period being reported The important thing to remember about anincome statement is that it represents a period of time This contrasts with thebalance sheet, which represents a single moment in time

Income statements should help investors and creditors determine the pastfinancial performance of the enterprise, predict future performance, and assessthe capability of generating future cash flows through report of the income andexpenses To a serious investor, income statement analysis reveals much morethan a company's earnings It provides important insights into how effectivelymanagement is controlling expenses, the amount of interest income andexpense, and the taxes paid Investors can use income statement analysis tocalculate financial ratios that will reveal the rate of return the business is

earning on the shareholders' retained earnings and assets (in other words, howwell they are investing the money under their control) They can also compare

a company's profits to its competitors by examining various profit margins such

as the gross profit margin, operating profit margin, and net profit margin.

1.2.3 The cash flow statement.

In financial accounting, a cash flow statement, also known as statement of cash flows, is a financial statement that shows how changes in balance sheet

accounts and income affect cash and cash equivalents, and breaks the analysisdown to operating, investing, and financing activities Essentially, the cashflow statement is concerned with the flow of cash in and out of the business.The statement captures both the current operating results and theaccompanying changes in the balance sheet As an analytical tool, thestatement of cash flows is useful in determining the short-term viability of acompany, particularly its ability to pay bills International Accounting Standard

7 (IAS 7) is the International Accounting Standard that deals with cash flowstatements

The cash flow statement includes only inflows and outflows of cash and cashequivalents; it excludes transactions that do not directly affect cash receipts andpayments These non-cash transactions include depreciation or write-offs onbad debts or credit losses to name a few The cash flow statement is a cashbasis report on three types of financial activities: operating activities, investingactivities, and financing activities Non-cash activities are usually reported infootnotes

The cash flow statement is intended to provide information on a firm's liquidityand solvency and its ability to change cash flows in future circumstances.Moreover, it also provide additional information for evaluating changes inassets, liabilities and equity and improve the comparability of different firms'operating performance by eliminating the effects of different accountingmethods.

The cash flow statement has been adopted as a standard financial statementbecause it eliminates allocations, which might be derived from differentaccounting methods, such as various timeframes for depreciating fixed assets

1.3 Methods of financial analysis.

1.3.1 Comparative method.

In order to apply the comparison method, the financial indicators must be unity

of space, time, content, characteristics, unit of account and the purpose ofanalysis that determining the base year

Comparative analysis can be used for single comparison to compareperformance of a particular business or an enterprise through time (forexample, comparison of performance in Years 1, 2, 3) It can also be used formulti-comparison of one enterprise with other enterprises Content ofcomparison method:

The first is comparison of the number made in this period with previous periods

to see a clearly change in corporate finance Evaluate the growth or lack in thebusiness activities

The second is comparison between numbers done and numbers planed to know

clearly about the achievement of the enterprise

The third is comparison between enterprise’s ratios with the industry average to

evaluate financial situation of their business

The final is Vertical Compare to consider the proportion of each indicator with

overall to see the financial structure of the enterprise

1.3.2 Ratio analysis method.

Financial statement analysis is the process of analyzing financial statements of

a company so as to obtain meaningful information about its survival, stability,profitability, solvency and growth prospect The financial statement analysiscan be performed by using a number of techniques such as comparative

statements, common size statements and ratio analysis Ratio analysis is the

most popularly and widely used technique of financial statement analysis

In a simple word, ratio is a quotient of two numerical variables, which showsthe relationship between the two figures Accordingly, accounting ratio is arelationship between two numerical variables obtained from financialstatements such as income statements and balance sheet The income statement

or profit and loss account shows the operating results in terms of net profit orloss of a company for a specific period

The balance sheet, on the other hand, shows the financial position of thecompany at the end of that period Accounting ratios are used as an importanttool of analyzing the financial performance of the company over the years andits comparative position among other companies in the industry

Ratio analysis is the process of determining and interpreting numericalrelationship between figures of financial statements Since an absoluteaccounting figure often does not provide much meaning by itself, it has to beanalyzed in relation to other figures so that significant information about thecompany's financial performance can be derived

Ratio analysis is a process of determining and presenting the quantitativerelationship between two accounting figures to evaluate the strengths andweakness of a business It is important from the point of view of investors,creditors and management for analysis and interpretation of a firm's financialhealth

1.3.3 DuPont analysis method.

DuPont analysis (also known as the DuPont formula, DuPont Model, DuPont equation or the DuPont method) is a method for assessing a company's return

on equity (ROE) breaking its into three parts The name comes from theDuPont Corporation that started using this formula in the 1920s

The DuPont Analysis is important determines what is driving a company'sROE; Profit margin shows the operating efficiency, asset turnover shows theasset use efficiency, and leverage factor shows how much leverage is beingused

The method goes beyond profit margin to understand how efficiently acompany's assets generate sales or cash and how well a company uses debt toproduce incremental returns

Using these three factors, a DuPont analysis allows analysts to dissect acompany, efficiently determine where the company is weak and strong and

quickly know what areas of the business to look at (i.e., inventorymanagement, debt structure, margins) for more answers The measure is stillbroad, however, and is not a substitute for detailed analysis.

The DuPont analysis looks uses both the income statement as well as thebalance sheet to perform the examination As a result, major asset purchases,acquisitions, or other significant changes can distort the ROE calculation.Many analysts use average assets and shareholders' equity to mitigate thisdistortion, although that approach assumes the balance sheet changes occurredsteadily over the course of the year, which may not be accurate either

1.4 Content of financial analysis.

1.4.1 Liquidity ratios.

Liquidity ratios are probably the most commonly used of all the business ratios.Creditors may often be particularly interested in these because they show theability of the business to quickly generate the cash needed to pay the bills The lack of liquidity can make business to be unable to pay mature debts andwent bankrupt Therefore attention should be paid to the solvency of thebusiness

Liquidity ratios are sometimes called as working capital ratios because that, in

essence, is what the measure The Liquidity ratios are:

Current ratio =

Current ratio shows the relationship between current assets and short-term debt.Current assets include cash, short-term securities which is easy to transfer into

cash, receivables, and the cash reserves… Short-term debts include short-termloans of commercial banks and other credit institutions, payables… Bothcurrent assets and current liabilities have a term of less than one year.

This ratio represents short-term solvency of the business which shows theability to generate cash to meet its short-term obligations From this ratio wemake comparisons with the reference rate such as: the industry average, therate of the previous period to get better evaluated

Quick ratio =

The Quick ratio, also known as the acid test ratio, serves a function that is

quite similar to that of the current ratio The different between the two is thatthe quick ratio subtracts inventory from current assets and compare theresulting figure (also called the quick current assets) to current liabilities.Inventory is often the least liquid current asset and t can be turned to cash onlythrough sales Some of the inventory may later turn out to be damaged,obsolete, or lost So, the quick ratio gives a better picture of the ability to meetthe short-term obligations regard ness of the sales levels Over time, a stablecurrent ratio with a declining quick ratio may indicate that too much inventoryhave been built up

A very short-term creditor might be interested in the cash ratio It is calculated

by dividing cash by current liabilities:

Cash ratio =

Cash ratio shows the relationship of money (cash and cash equivalents as term securities ) and mature debts Mature debts includes short-term, medium-term and long-term debts Quick ratio does not reveal all the solvency of the

short-business because it only cares about short-term debts How can a short-businesshandle their mature long-term debts to pay if they do not plan before and does

it make the poor liquidity of the business? The cash ratio shows quite clearlyabout this situation but it also is very sensitive, so the business needs todetermine carefully because if the cash ratio is too low, the business have tosell other assets such as short-term securities for payment and if it is too high, it

is proved that too much cash reserved in business which lead to missingprofitable opportunities

Interest coverage ratio =

This is also a needed factor to consider when analyzing the financial statements

of a business This ratio shows the ability to pay loan interest of business aswell as the level of risk of creditors when lending

1.4.2 Asset and Debt structure ratios.

Asset and Debt structure ratios indicate the degree of financial leverage thatbusinesses are using to enhance their return This ratio is used to measure thepercentage of assets financed by creditors, compared to the percentages thathave been financed by business owners

Researching indicators of balancing capability aims to show that business had areasonable capital structure or not? When researching these ratios, we focus on:Debt ratio and Short-term asset ratio

Debt ratio =

This ratio shows the percentages of debt in total assets of business and is used

to determine the obligations of the business owners for the creditors in the

capital contribution Debt ratio is the concern of not only creditors but alsoinvestors and owners Creditors often prefer a low debt ratio because the lowerthis ratio is, the more debts are guaranteed in case of corporate bankruptcy.Meanwhile business owners prefer a high ratio because they want to increaseprofits quickly and want fully control over the business But if the debt ratio istoo high, enterprises are prone to be poor liquidity.

Short-term asset ratio is calculated by:

Short-term asset ratio =

This ratio reflects the relationship between fixed assets and current assets withtotal assets Through this ratio, we can see the type of business ismanufacturing or commercial business as well as the asset structure ofbusiness

1.4.3 Asset Management ratios.

Asset Management ratios (also called activity ratios or performance ratios) is

used to evaluate the efficiency of the business assets All capital of business isused to invest in other assets such as fixed assets, current assets Therefore, theanalysts are not only interested in measuring the efficiency of total assets, butalso focus on the efficiency of each component of the total assets of thebusiness Revenue is mainly used in the calculation of these ratios to review theperformance of the business

Inventory turnover =

Thus the cost of goods sold figure occur over entire year, whereas theinventory figure is for one point time So, it is better to use an average

inventory measure In general, the higher this ratio is, the more efficiently theenterprises are managing inventory.

Inventory turnover measures give some indication of how many times businesssell product per year Whereas Receivables turnover now look at how fast wecollect on those sales The Receivables turnover is calculated by dividing netsales by accounts receivables It is better to use an average accounts receivablesmeasure

Receivables turnover =

This ratio make more sense if it is converted to days, so the Days sales outstanding is:

Days’ sales outstanding (DSO) =

DSO is used to appraise accounts receivable It represents the average length oftime that the company must wait after making a sale before receiving cash,which is the average collection period The DSO may be short or long, it isbelong to the enterprise’s credit policy or the customers do not paying on time.This ratio is very important because the larger the DSO is, the larger accountsreceivables is, so it is difficult for enterprise to raise capital when their capital

is occupied

Fixed asset turnover =

This ratio measures how effectively the firm uses its plant and equipment tomake profit Fixed assets are determined by the remaining value at the time ofthe report Net fixed assets are calculated by subtract historical cost fromaccumulated depreciation It is better to use average net fixed asset measure

Our final asset management ratio is the Total asset turnover As the namesuggests, the Total asset turnover is:

Total asset turnover =

That means, one dollar of assets creates how much dollar of Net sales and this

is the tool to measure how effectively the firm uses its assets to make profit

1.4.4 Profitability ratios.

With a business, profit is the final indicators to evaluate the production andbusiness activities Only when the business makes profit do they can pay debtswithout affecting the capital and be able to reinvest with the aims of expandingmarket shares However, profit does not fully reflect the business situation If

we only look at the profit to evaluate the operation of the business, it can easilylead to mistakes, because profit assessment should be compared relatively tothe cost, the assets and the owner’s equity

Profitability is very important to evaluate business results and is the finalanswer of a business process It is a concern of investors and policyadministrators because it shows the business efficiency and businessperformance management

Profitability includes the following ratios:

Profit margin =

It is calculated by dividing net profit after tax by net sales It shows the profitper dollar of sales This ratio is generally as high as possible but it also depends

on the specific types of business

Economic return on assets (ROA E ) =

ROAE is calculated by dividing earning before interest and tax (EBIT) by totalassets This means that one dollar of assets creates how much dollar of EBIT.This ratio shows the raw earning power of firm’s assets, before the influence oftaxes and leverage It is useful for comparing companies with different taxsituation and different degrees of financial leverage.

Return on investment (ROI) is a measure of profit per dollar investment Thetotal investment is the same as the total assets

Return on investment (ROI) =

This means that one dollar of assets creates how much dollar of net profit The next ratio is Return on equity (ROE) It is the ratio of net profit to equity,

so ROE measures the rate of return on owner’s investment

Return on equity (ROE) =

It shows the profitability of the equity, so investors can use this ratio to analyzeprofitability of the business when they when they decide to invest in This ratioshows that one dollar of equity creates how much dollar of net profit

Another content of this part is DuPont analysis, which shows how the profitmargin, the total asset turnover ratio, and the use of debt interact to determinethe return on equity Managers and investor can use the DuPont system toanalyze ways of improving enterprise’s performance

First we consider the interactive relationship between the ratio of return onequity (ROE) and return on assets ratio (ROI)

ROI = Profit margin x Total asset turnover

= x =

ROI shows the rate of return of the asset depends on two factors:

The first is net income of the business per revenue

The next is one dollar of assets creates how much revenue

Next, we consider the ratio of return on equity of the enterprise (ROE)

ROE = = x x =

= Profit margin x Total asset turnover x Equity multiplier

= ROI x Equity multiplier.

From here we can see that using of debt can amplify the efficiency return onequity if the business is profitable in the period The greater the debt is, thehigher the profit is, and vice versa

CHAPTER II: FINANCIAL ANALYSIS OF SAI GON – DONG XUAN BEER AND ALCOHOL JOINT STOCK COMPANY.

2.1 Overview about Sai Gon – Dong Xuan Beer and Alcohol Joint stock company.

2.1.1 History and development progress.

2.1.1.1 Overview about the company

Sai Gon – Dong Xuan Beer and Alcohol Joint Stock Company, engages in theproduction and sale of alcohol beverages primarily in Vietnam

Full name: Công ty cổ phần bia, rượu Sài Gòn – Đồng Xuân.

International transaction name: Sai Gon – Dong Xuan Beer and Alcohol Joint Stock Company.

Abbreviated name: DOLICO.

Address: Khu 6 - thị trấn Thanh Ba - huyện Thanh Ba - tỉnh Phú Thọ Website: www.dolico.com.vn

Tel: 0210 3885 604

2.1.1.2 History and development progress.

Sai Gon – Dong Xuan Beer and Alcohol Joint Stock Company is one of thebiggest producers of beer and alcohol in Vietnam Founded in 1965, withmore than 40 years of development, Sai Gon – Dong Xuan Beer and AlcoholJoint Stock Company has been still standing and constantly growing

History of construction and development of Sai Gon – Dong Xuan Beer andAlcohol Joint Stock Company can be generalized by the following periods:

From 1965 to 1975:

Founded on 15/09/1965, called Dong Xuan Alcohol enterprise, the companylocated in Thanh Ba Town – Thanh Ba - Phu Tho province, with an area of 22.393 m2 right on Highway 2 After 2 years of construction with the initialworkforce of 35 people, the enterprise have entered into production andreleased the first two products in 1967 which was 70 degrees ethanol andwhite alcohol Initial machinery and equipment was very primitive, the cost

of fixed assets was only 450.300 VND In early time, because of war againstsabotage of America toward the North, the enterprise’s loss-making was30.504 VND until 1967 The following year, the number of employeesincreased and production gradually began to stabilize and prosper Until

1975, production was 153.935 liters of ethanol and 440.314 liters of alcohol;the number of employees was 94 people, with fixed assets at historical costwas 1.019.618 VND

brink of bankruptcy Faced with that reality, People Committee of Phu ThoProvince and provincial Department of Industry has organized manymeetings on how to resolve the difficulties The Board of Directors hasstrengthened employees, found solution to overcome difficulties and makedecisions innovatively Products had gradually improved with new models, inline with consumer preferences Since 1991, the enterprise began to prosperand has been entering a new path.

In 1994, by decision of People Committee of Vinh Phu Province 54/QDUB,the enterprise have renamed into Dong Xuan Alcohol Company In 1995 netprofit was up to the 156.515.806 VND

From 1995 to 2006:

This is the flourish period of the company After a profitable business,completely overcome the losses of the previous year, the company’s theboard of directors has invested a production line of German beer modern atKm9-Bac Thang Long-Noi Bai with area of 15.630 m2 By 1997 the companyhad launched the first product with high quality

Currently, the company has two plants:

The first is Ethanol Plant, Saigon - Dong Xuan Alcohol Company in Thanh

Ba - Phu Tho, with capacity of 1.5 million liters of ethanol per year, 2 millionliters of alcohol per year for livelihoods and exports

The second is Beer Plant, Saigon - Me Linh in Me Linh - Ha Noi, with a

capacity of 40 million liters of beer per year Total number of employees atthis time is more than 200 people

From 2007 to present:

According decision of 113/QD-UBND on 19/1/2007 of People Committee ofPhu Tho Province on the transfer of the funds at Dong xuan Beer and AlcoholJoint Stock Company held by the State to Saigon Beer Alcohol BeverageJoint Stock Corporation (SABECO), the company officially became amember of Saigon Beer Alcohol Beverage Joint Stock Corporation

Initially, the company has achieved some remarkable achievements:

i 12 of the 14 products of the company have achieved gold medals

at domestic and international trade fairs.

ii Gold Cup for Public Health 2001.

iii Awarded Silver Globe “Made in Vietnam” in 2002 and Golden Globe “Made in Vietnam” in 2004.

iv Winning the Gold Cup at “Import - Export and Consumption Fair” (Exempo) in 2004.

v Vietnam Quality Award in 2005, 2006, 2007 which were awarded

by the Ministry of Science and Industry.

2.1.2 Some characteristics of the company.

2.1.2.1 Key products

The Company's products are high quality and many products achieveinternational standards