Current situation of fund raising activities in hung ha paper co ltd and some suggestions for improvement”

In the modern economic world, especially when the number of bankrupt enterprises isrising, fund-raising activities have become more and more important, for everycompany in general, and f

I hereby declare that this thesis is my own work and effort with the support from mysupervisor, MA.&MSc Tran Huong Giang The content and results of research on thistopic are honest and have not been submitted anywhere for any award Where othersources of information have been used, they have been acknowledged

The data and results described in the thesis are derived from the actual situation of thepractice company

Hanoi, April 25th, 2013

Student

Nguyen Thi Lan Oanh

Besides my personal effort, the support both from my department and the companyduring my internship plays a very important role in finishing this graduation thesis.Firstly, I would like to express my deep and sincere gratitude to my supervisor,MA.&MSc Tran Huong Giang Her wide knowledge and her logical way ofthinking have been of great value for me Her understanding, encouraging andpersonal guidance have provided a good basis for the present thesis I also wish tothank all the teachers in Faculty of Foreign languages in general and MA.&MSc.Tran Huong Giang in particular for their enthusiasm in helping students finish theirimportant graduation thesis

Secondly, I also want to thank Hung Ha paper Co Ltd for giving me permission tocommence this thesis in the first instance, to do the necessary work and to usedepartmental data

I have furthermore to thank the Director, Mr Dinh Nhu Kiem and the Chiefaccountant, Ms Pham Thi Vinh as well as all staff in Finance – Accountingdepartment of Hung Ha paper Co Ltd for instructing and advising me during myinternship process

My friends from Foreign Language Faculty also supported me in my thesis I want tothank them for all their help, support, interest and valuable hints

Especially, I would like to give my special thanks to my family whose patient loveenabled me to complete this work

Once again, many thanks for everyone who directly or indirectly helps me completethis graduation thesis

Finally, because of limitation of time and knowledge, mistakes are unavoidable, so Iwish to have more opportunities I also wish to receive more contribution andsuggestions to make my thesis better.

In the modern economic world, especially when the number of bankrupt enterprises isrising, fund-raising activities have become more and more important, for everycompany in general, and for Hung Ha paper Co Ltd in particular Therefore, my thesis

with the topic “Current situation of fund-raising activities in Hung Ha paper Co Ltd and some suggestions for improvement” will point out the importance of having a

healthy and effective fund-raising activities

The main content is reflected in three chapters The first chapter is about the literaturereview for every company, mainly showing some basic definitions, ways to raise fund

in business and some factors affecting fund-raising activities In chapter 2, by taking ascenario in Hung Ha paper Co Ltd, the thesis focuses on an actual situation of fund-raising activities From that, chapter 3 points out the company’s strengths andweaknesses and suggests some solutions to improve the current fund-raising activities

in Hung Ha paper Co Ltd

In conclusion, the thesis has already been complete in comparison with proposedobjectives and targets in the introduction

4 BIDV Bank for Investment and Development of Vietnam

5 Co Ltd Company limited

12 ODA Official Development Assistant

13 Sacombank Saigon Thuong Tin Commercial joint stock bank

14 SeAbank Southeast Asia commercial joint stock bank

15 VIB Vietnam International Commercial joint stock bank

16 Vietinbank Vietnam bank for industry and trade

18 WTO World Trade Organization

LIST OF FIGURES

PageFigure 2.1 The structure of Hung Ha paper Co Ltd 21

LIST OF TABLES

PageTable 2.1 Capital structure of Hung Ha paper Co Ltd in 2011 23Table 2.2 Capital structure of Hung Ha paper Co Ltd in 2012 25Table 2.3 Change of share capital in 2011 – 2012 27Table 2.4 Change of retained profits in 2011 – 2012 29Table 2.5 Change of occupying capital in 2011 – 2012 30Table 2.6 Change of occupied capital in 2011 – 2012 30Table 2.7 Change in structure of trade credit in 2011 – 2012 31Table 2.8 Change of bank loan proportion in 2011 – 2012 32Table 2.9 Change of bank loan structure in 2011 – 2012 33Table 2.10 Change of bank short-term loans and borrowings in 2011

TABLE OF CONTENTS

DECLARATION i

ACKNOWLEDGEMENT ii

ABSTRACT iv

LIST OF ABBREVIATIONS v

LIST OF FIGURES vi

LIST OF TABLES vi

TABLE OF CONTENTS vii

INTRODUCTION 1

1 RATIONALE OF THE STUDY 1

2 AIMS OF THE STUDY 2

3 SUBJECTS AND SCOPE OF THE STUDY 2

3.1 Subjects of the study 2

3.2 Scope of the study 2

4 ORGANIZATION OF THE STUDY 3

CHAPTER 1: LITERATURE REVIEW 4

1.1 BASIC DEFINITIONS 4

1.1.1 Finance 4

1.1.2 Sources of finance 4

1.1.3 Fund-raising activities 4

1.1.3.1 Definition 4

1.1.3.2 Role of fund-raising activities in business 4

1.2 WAYS TO RAISE FINANCE BUSINESS 5

1.2.1 Internal sources 5

1.2.1.1 Personal sources 6

1.2.1.1.1 Savings and other “nest-eggs” 6

1.2.1.1.2 Borrowing from friends and family 6

1.2.1.1.3 Credit cards 7

1.2.1.2 Retained profits 7

1.2.1.3 Sales of assets 8

1.2.1.4 Debt collection 8

1.2.1.5 Share capital – invested by the founder 9

1.2.2 External sources 9

1.2.2.1 Commercial bank 9

1.2.2.1.1 Bank overdrafts 9

1.2.2.1.2 Bank loans 10

1.2.2.2 Share issue – outside investors 10

1.2.2.3 Business angels 11

1.2.2.4 Government grants 12

1.2.2.5 Leasing or Hire purchase 12

1.2.2.5.1 Leasing 12

1.2.2.5.2 Hire purchase 13

1.2.2.6 Trade credit 13

1.3 FACTORS AFFECTING FUND-RAISING ACTIVITIES IN BUSINESS 14

1.3.1 Internal factors 14

1.3.1.1 Financial ability of enterprise 14

1.3.1.2 Types of business 14

1.3.1.3 Business strategy of enterprise 14

1.3.1.4 Reputation and prestige of enterprise 15

1.3.1.5 Business result of enterprise 15

1.3.2 External factors 16

1.3.2.1 Economy – society situation 16

1.3.2.2 Financial market development 16

1.3.2.3 System of State laws 17

CHAPTER 2: CURRENT SITUATION OF ACCOUNTING FOR PRODUCTION COSTS AND COST PRICE OF FINISHED PRODUCT IN HUNG HA PAPER

COMPANY LIMITED 18

2.1 OVERVIEW ABOUT HUNG HA PAPER COMPANY LIMITED 18

2.1.1 History 18

2.1.2 Functions, business field and products 19

2.1.2.1 Functions 19

2.1.2.2 Business field and products 19

2.1.3 Business market 19

2.1.4 Organizational structure 20

2.2 CURRENT SITUATION OF FUND-RAISING ACTIVITIES IN HUNG HA PAPER COMPANY LIMITED 22

2.2.1 Ways to raise finance used in Hung Ha paper Company Limited 22

2.2.2 Fund-raising activities in 2011 22

2.2.3 Fund-raising activities in 2012 25

2.3 EVALUATION OF FUND-RAISING ACTIVITIES IN HUNG HA PAPER COMPANY LIMITED 27

2.3.1 Detailed analysis of fund-raising activities in Hung Ha paper Co Ltd 27

2.3.1.1 Share capital – invested by the founders 27

2.3.1.2 Retained profits 28

2.3.1.3 Trade credit 29

2.3.1.4 Bank loans 32

2.3.1.4.1 Bank short-term loans and borrowings 33

2.3.1.4.2 Bank long-term loans and debts 34

2.3.2 Strong points 35

2.3.3 Weaknesses 36

CHAPTER 3: SOME SUGGESTIONS FOR IMPROVING THE FUND-RAISING

ACTIVITIES IN HUNG HA PAPER COMPANY LIMITED 38

3.1 COMPANY ORIENTATION 38

3.2 SOLUTIONS TO RAISE FUND EFFECTIVELY BY HUNG HA COMPANY LIMITED39 3.2.1 Continue promoting some effective ways that company has used 39

3.2.2 Some solutions to raise fund effectively 42

3.2.2.1 Seeking external sources 42

3.2.2.2 Using internal sources 43

3.2.2.3 Expand market share 44

3.3 SOME RECOMMENDATIONS TO APPLY TO THOSE SOLUTIONS ABOVE 45

3.3.1 Recommendations for authorities 45

3.3.2 Recommendations for company 46

CONCLUSION 48

REFERENCES 50

APPENDIX – BALANCE SHEET

1 RATIONALE OF THE STUDY

Sources of finance are important to every business from new small enterprises to bigcompanies, because no business venture can exist and survive without finance

One of the primary goals of starting a business is to make money However, it takes anundeniable amount of capital in order to properly launch and sustain a business Thisamount of money for a given venture has to do with the unique goals and needs of theentrepreneur It is crucial for a new business to develop resources and additional means

to obtain further capital because without proper financing, a new enterprise may find itextremely difficult to compete with an already established competition In addition, thelack of funding may also lead to a company closing or even worse, bankruptcy

When a company is growing rapidly, its current financial resources may be inadequate.Few growing companies are able to finance their expansion plans from cash flowalone They will therefore need to consider raising finance from other sources toachieve their objectives

However, fund raising is a difficult task, especially for the new, small and mediumenterprises Fewer than 40 percent of entrepreneurs seeking new business funding eachyear actually get that funding Therefore, knowing which sources are available andhow to access those sources, which is part of fund raising program of a company isnecessary and plays an important role

Recently, I have an opportunity of internship in Hung Ha paper Co Ltd, studying theirmanagement system, enterprise culture and going into the details of fund-raising

activities at Finance - Accounting department It is a small company of manufacturingKraft paper, which also faces this difficulty in fund-raising activities.

From this situation, it is, to my mind, an urgent need to prioritize in proposing somesuggestions for improvement the fund-raising activities of this company Therefore, I

choose “Current situation of fund-raising activities in Hung Ha paper Company Limited and some suggestions for improvement” as my graduation thesis topic.

2 AIMS OF THE STUDY

The general aim of this thesis is to study current situation of fund-raising activities inHung Ha paper Co Ltd and through that, propose some suggestions for improvement.The specific aims of the research are:

First, it is to contribute to the background theory of fund-raising activities, which isdone by pointing out definitions, ways and factors affecting fund-raising activities.Second, it is to illustrate how a company does fund-raising activities by taking thescenario at Hung Ha paper Co Ltd as a case for study

Third, it is to review the company’s achievements and limitations and to suggestpossible solutions to improve the fund-raising activities in the future

3 SUBJECTS AND SCOPE OF THE STUDY

3.1 Subjects of the study

- Fund-raising activities in a Limited company

3.2 Scope of the study

- Contents: fund-raising activities

- Space: Hung Ha paper Co Ltd.

4 ORGANIZATION OF THE STUDY

Apart from the introduction dealing with the rationale, aims, methods, subjects and

scope, and organization of the study and the conclusion with references and

appendixes, this thesis is divided into three chapters:

Chapter I: Literature review This chapter gives a general overview of fund-raising

activities by companies in general

Chapter II: Current situation of fund-raising activities in Hung Ha paper Company Limited This chapter analyzes the actual situation of fund-raising activities in Hung

CHAPTER 1

LITERATURE REVIEW1.1 BASIC DEFINITIONS

1.1.3 Fund-raising activities

1.1.3.1 Definition

Fund-raising activities refer to obtaining capital from investors or venture capitalsources (Jeffrey Timmons, Stephen Spinelli, and Andrew Zacharakis, 2004, p10)

1.1.3.2 Role of fund-raising activities in business

A business without a funding source will flounder under the weight of its own debt.Funding is the lubricant and fuel on which a business runs It makes possible thesmooth design, production and marketing of a product; and it keeps theadministrative functions efficient It also moves the company forward by fuelinggrowth and expansion

In one article, named “Role of fund-raising activities in business”, Mike Stauton has

asserted the importance of fundraising activities to company survival and development.According to him, raising fund for small business is not the easiest step of starting a

small business but it is necessary One major reason why small businesses fail is thatthe owner lacks necessary funds People always raise questions on how enterprises canraise the money needed to start and develop a small business.

Robert Higgins, one famous author also agrees with Mike Stauton’s opinion about the

role of fund-raising activities in business He wrote in his work “Analysis for Financial Management”: Fund is the lifeblood and nerve center of a business; just as circulation

of blood is essential in the human body for maintaining life; fund is essential to smoothrunning of the business It has been rightly termed as universal lubricant that keeps theenterprise dynamic No business, whether big, medium or small can be started or runwithout an adequate amount of fund Right from the very beginning, fun is needed topromote or establish the business, acquire fixed assets, make investigations such asmarket surveys, etc, develop product, keep men and machine at work, encouragesmanagement to make progress and create values Thus the importance of fund-raisingactivities cannot be over-emphasized and the subject of business finance has becomeutmost important both to the academicians and practicing managers

1.2 WAYS TO RAISE FINANCE BUSINESS

There is a number of ways of raising finance for a business The type of finance chosendepends on the nature of the business Large organizations are able to use a widervariety of finance sources than a smaller ones A small business can also borrow fromfamilies and friends In contrast, companies raise finance by issuing shares Largecompanies often have thousands of different shareholders One way of categorizing thesources of finance for a company is to divide them into sources which are from withinthe business (internal) and from outside providers (external)

1.2.1 Internal sources

The main internal sources of finance for a start-up are as follows:

1.2.1.1 Personal sources

These are the most important sources of finance for a start-up Most start-ups make use

of the personal financial arrangements of the founder This can be personal savings orother cash balances that have been accumulated It can be personal debt facilities whichare made available to the business It can also simply be the found working or nothing!These are some forms of personal sources:

1.2.1.1.1 Savings and other “nest-eggs”

An entrepreneur will often invest personal cash balances into a start-up This is acheap form of finance and it is readily available Often the decision to start a business

is prompted by a change in the personal circumstances of the entrepreneur – e.g.redundancy or an inheritance Investing personal savings maximizes the control theentrepreneur keeps over the business It is also a strong signal of commitment tooutside investors or providers of finance

Re-mortgaging is the most popular way of raising loan-related capital for a start-up.The way this works is simple The entrepreneur takes out a second or larger mortgage

on a private property and then invests some or all of this money into the business Theuse of mortgaging like this provides access to relatively low-cost finance, although therisk is that, if the business fails, then the property will be lost too

1.2.1.1.2 Borrowing from friends and family

This is also common When self-financing is not enough to provide the needed capitalfor a start-up, business owners usually turn to their families, relatives, friends forfurther financial support Friends and family who are supportive of the business ideaprovide money either directly to the entrepreneur or into the business

These people tend to provide much needed support to the entrepreneur and enjoy theexcitement and success of the new venture This can also be quicker and cheaper toarrange (certainly compared with a standard bank loan) and the interest and repaymentterms may be more flexible than a bank loan.

However, borrowing in this way can add to the stress faced by an entrepreneur,particularly if the business gets into difficulties Another downside of this source is thefact that the entrepreneur may give up more ownership of their company The morepartners involved, the more profit will be divided among all members And thesupporters sometimes feel that they have the right to offer suggestions concerning themanagement of the business Their suggestions may sometimes be contrary to theentrepreneur’s strategy and may even strain personal relationships

1.2.1.1.3 Credit cards

This is a surprisingly popular way of financing a start-up In fact, the use of creditcards is the most common source of finance amongst small businesses It works likethis Each month, the entrepreneur pays for various business-related expenses on acredit card 15 days later the credit card statement is sent in the post and the balance ispaid by the business within the credit-free period The effect is that the business getsaccess to a free credit period of around 30-45 days!

1.2.1.2 Retained profits

This source of finance is only available for a business which has been trading for morethan one year This is the cash that is generated by the business when it tradesprofitably – another important source of finance for any business, large or small.Note that retained profits can generate cash the moment trading has begun Forexample, a start-up sells the first batch of stock for £5,000 cash which it had bought for

£2,000 That means that retained profits are £3,000 which can be used to financefurther expansion or to pay for other trading costs and expenses.

With this source of finance, enterprise does not have to be repaid and no interest ispayable

However, it is not available for a new business Moreover, business may not makeenough profit to plough back

1.2.1.3 Sales of assets

This money comes in from selling off fixed assets, such as: a piece of machinery that is

no longer needed This is a medium-term source of finance

This is a good way to raise finance from an asset that is no longer needed However,there is a limit to the number of fixed assets a firm can sell off because business doesnot always have surplus fixed assets which they can sell off And this can be a slowmethod of raising finance

1.2.1.4 Debt collection

A debtor is someone who owes business money A business can raise funds bycollecting the money owed to them (debts) from their debtors This is a short-termsource of finance

One advantage of this source is that no additional cost in getting this finance, it ispart of the businesses’ normal operations However, there is a risk that debts owedcan go bad and not be repaid In addition, not all businesses have debtors, i.e thosewho deal only in cash

1.2.1.5 Share capital – invested by the founder

The founding entrepreneurs may decide to invest in the share capital of a company,founded for the purpose of forming the start-up This is a common method offinancing a start-up The founder provides all the share capital of the company,retaining 100% control over the business

The advantages of investing in share capital are covered in the section on businessstructure The key point to note here is that the entrepreneur may be using a variety ofpersonal sources to invest in the shares Once the investment has been made, it is thecompany that owns the money provided The shareholder obtains a return on thisinvestment through dividends (payments out of profits) and/or the value of the businesswhen it is eventually sold

A start-up company can also raise finance by selling shares to external investors – this

is covered further below

that it is only used when needed Bank overdrafts are excellent for helping a businesshandle seasonal fluctuations in cash flow or when the business runs into short-termcash flow problems (e.g a major customer fails to pay on time).

a bank overdraft However, they don’t provide much flexibility

Interest – Banks are providing a service by lending money in the form of overdraftsand loans and banks will charge for this service When a business takes a loan, it willagree to pay it back over a period of years but it will also pay an extra charge Thischarge, called interest, is a percentage of the value of the loan

The interest rate is set by the State bank and it varies The higher the interest rate is, thegreater the percentage of the loan that the business must repay In other words, if theState bank raises interest rates, a business with a loan will find it has to pay the bankmore each month as it pays off its debt Likewise, a fall in interest rates will mean thatthe business will have lower costs (and therefore more profit)

1.2.2.2 Share issue – outside investors

Share issue is an important source of finance for limited companies A share issueinvolves a business selling new shares that entitle the shareholders to share in the

control of the business Each share gives the shareholder a vote on the direction of thecompany This usually means that the shareholder can elect the board of directors ofthe company each year If the shareholder does not like the way the directors arerunning the business, they can elect new directors This is a good incentive to thedirectors to run the business well and make a profit which will be paid to theshareholders in the form of dividends The more shares a person holds, the morecontrol they have over a company If one company wanted to take another companyover, it could arrange to buy over 50% of that company’s shares This would give it amajority of control and, therefore, ownership.

Issuing new shares can raise a lot of capital that can be used for expansion (buyingmore fixed assets, etc) It is a long-term source of finance If the total number ofshare rises, the votes of existing shareholders will have slightly less significanceand they will have less control The business will also have to pay dividends on alarger number of shares

1.2.2.3 Business angels

Business angels are the other main kind of external investor in a start-up company.They are wealthy, entrepreneurial individuals who provide capital in return for aproportion of the company equity They take a high personal risk in the expectation

of owning part of a growing and successful business Business angels areprofessional investors who typically invest £10,000 - £750,000 They prefer toinvest in businesses with high growth prospects Angels tend to have made theirmoney by setting up and selling their own business – in other words they haveproven entrepreneurial expertise In addition to their money, angels often make theirown skills, experience and contacts available to the company Getting the backing

of an angel can be a significant advantage to a start-up, although the entrepreneurneeds to accept a loss of control over the business

Venture capital, or “private equity”, is also mentioned as a source of finance for ups Venture capital is a specific kind of share investment that is made by fundsmanaged by professional investors Venture capitalists rarely invest in genuine start-ups or small businesses (their minimum investment is usually over £1,000,000; oftenmuch more) They prefer to invest in businesses which have established themselves.

start-A start-up is much more likely to receive investment from a business angel than aventure capitalist

1.2.2.4 Government grants

Governments, successful entrepreneurs such as Bill Gates and large corporations, whokeen on promoting their social responsibilities, are all increasingly seeking to help thesmaller business sector with grants and soft loans While the sums may be small theycan make a big difference to a project’s viability Often the problem is identifying whatgrants are actually available, although the Internet has made the research easier

These grants don’t have to be repaid However, not all businesses may be eligible for agrant, only certain conditions may apply, e.g location

1.2.2.5 Leasing or Hire purchase

1.2.2.5.1 Leasing

This method allows a business to obtain assets without the need to pay a large lumpsum up front It is arranged through a finance company Leasing is like renting anasset It involves making set repayments This is a medium-term source of finance.This source can help business have the use of up to date equipment immediately.Moreover, payments are spread over a period of time which is good for budgeting.However, it can be expensive and the asset belongs to the finance company

Like leasing, this source can help business have the use of up to date equipmentimmediately, and, payments are spread over a period of time which is good forbudgeting In addition, once all repayments are made the business will own the asset.However, this is an expensive method compared to buying with cash.

1.2.2.6 Trade credit

Trade credit, also known as supplier credit, vendor credit, or B2B financing, is thelargest use of capital from business to business and remains the number one alternative

to personal and small business loans

Trade credit is an agreement where a customer can purchase goods on account (withoutpaying cash), paying the supplier at a later date Usually when the goods are delivered,

a trade credit is given for a specific amount of days -30, 60 or 90 Basically, this is acredit a company gives to another for the purchase of goods and services The amount

of days for which a credit is given is determined by the company allowing the credit,and is agreed upon by both the company allowing the credit and the company receiving

it With the extension of the payment date, the company receiving the credit essentiallycould sell the goods and use the net proceeds to pay back the debt This type of credit issometimes given to encourage sales At times, a supplier may give a discount, if thecustomer pays within a certain period of time For example, a 2% discount if payment

is received within 10 days of issuing a 30-day credit

Trade credit also includes advances from customers.

1.3 FACTORS AFFECTING FUND-RAISING ACTIVITIES IN BUSINESS

There are lots of factors affecting fund-raising activities in business Some of them arelisted below divided into 2 groups: internal factors and external factors:

1.3.1 Internal factors

1.3.1.1 Financial ability of enterprise

Need of finance for investment activities of enterprises is very big and continuouslygenerating The general situation of current enterprises is that internal sources of fund

is limited and often not enough to meet the need When the enterprise does not haveenough financial ability, it cannot carry out its investment projects Therefore, to haveenough finance to realize investment activities, the enterprise has to raise more fundsunder many forms When doing fund-raising activities, the enterprise has to pay anexpense, called fund raising expense If the enterprise has a high self - financingability, it can reduce this expense

1.3.1.2 Types of business

For the type of business, if state-owned enterprises switch the ownership such asimplementing equitization, switch the management mechanism, there will be moreopportunities in fund-raising activities If the companies are allowed to issue shares andpublic stocks which are listed publicly on the stock market, the ability to diversifyinvestment fund-raising activities is more favorable

1.3.1.3 Business strategy of enterprise

Each enterprise builds itself a particular business strategy The business strategy of theenterprise is built basing on determining its current position in the market, its strongpoints, weaknesses, opportunities, challenges as well as predicting changes in business

environment in the future Through business strategy, enterprise will be able to decide

to narrow or expand the fund-raising activities in terms of scale, to change the rate ofall kinds of finance sources, to increase or reduce mobilization expense With such atremendous effect, if the business strategy is chosen correctly, finance sources areexploited and fund-raising activities will be effective

1.3.1.4 Reputation and prestige of enterprise

This can be considered as intangible assets of enterprise Prestige includes prestige ofenterprise in the market and prestige of members in Broad of Directors Reputation ofenterprise is a highly valuable asset in fund-raising activities because when in themarket, the business has already created its own image, investors and creditors willtrust in the company It can help the enterprise stabilize and easily increase the number

of capital, as well as reduce fund raising expense

1.3.1.5 Business result of enterprise

Business result of enterprise is one of the factors creating reputation and prestige ofenterprise in the market If the enterprise makes profits, investors and creditors will see

it be safe investment environment and believe that the funds which they invest in thatcompany will be lucrative Thus, they are willing to invest in that company The fund-raising activities of the enterprise, therefore, will be more favorable

On the contrary, if the business result of enterprise is not good, investors and creditorswill be more cautious, serious and careful if they have the intention to invest in thiscompany Not everyone is willing to adventure with his money

1.3.2 External factors

1.3.2.1 Economy – society situation

Business activities of enterprise in general, and fund-raising activities in particular, arenot separated from business environment, especially, economy – society environment

In business activities of enterprise, activities of fund raising and use of funds arealways affected directly by economic targets such as growth rate, income,unemployment, inflation, etc The economy growth, production development facilitates

to accumulate more, and to create an environment for businesses to raise fundfavorably On the contrary, the recession, crisis, increase in inflation make investmentenvironment of the enterprises narrow, which prevents enterprises from raising finance

No nation can develop if society environment is not stable Political or foreign policystability also affects strongly to the relation between enterprise’s capital and othercountries in the region and all over the world This is also a factor affecting to fund-raising activities of enterprises

1.3.2.2 Financial market development

With two financial flows: direct and indirect, financial market is the place whereenterprises can raise finance with many different terms and ways for production andbusiness activities A developed financial market facilitates enterprises to have moreopportunities to choose and exploit sources of finance appropriate with their businesscharacteristics A developed financial market requires a public information system,competition based on State intervention at the appropriate level In Vietnam, financialmarket which is developing helps to supply capital for business activities, as well as toattract investors and creditors to participate in the market

In the wide and deep integration, the developed international financial market is theplace where supplies capital for enterprises to grow Economic integration has theeffect of stimulating the Vietnamese development, making Vietnamese economyrapidly move to market economy, making business activities comply with the rules ofthe market The development of money market and capital market facilitates funddiversification to develop the enterprises Today, Vietnam has joined WTO andactually integrated into the world economy, the large scale of international capitalmarket is an opportunity to develop and invest in Vietnamese enterprises.

1.3.2.3 System of State laws

The activities of enterprises affect strongly to the economy of any nation Therefore,activities of enterprises have to be under strict control of the State The Statepromulgates Investment Law, Construction Law, Tax Law, etc and states the decreesguiding the implementation, as well as other legal documents

In these legal constraints, the elements of fund-raising activities are changed andtherefore, it affects to scale and effectiveness of fund-raising activities, because thechange of the State policy affects to the ability of attracting capital as well as thequality of the finance sources of the enterprises If the enterprises have policiesstimulating investment, as well as ensuring to attract investment capital to projects, itwill increase the ability of attracting capital Otherwise, it will affect negatively tofund-raising activities of the enterprises

CHAPTER 2

CURRENT SITUATION OF ACCOUNTING FOR

PRODUCTION COSTS AND COST PRICE OF FINISHED PRODUCT IN HUNG HA PAPER COMPANY LIMITED2.1 OVERVIEW ABOUT HUNG HA PAPER COMPANY LIMITED

2.1.1 History

Hung Ha paper Co Ltd was established on October 10th 2002 according to BusinessCertificate No 0102006288 Hung Ha paper Co Ltd is in manufacturing business fieldand produces paper and Kraft paper

The predecessor of Hung Ha paper Co Ltd was a small private enterprise After aneffective operating time and with a big effort, Mr Dinh Nhu Kiem (Director, cum,Chairman of the Broad) wanted to establish a company of producing paper which hasbigger scale and modern production line With the permission of Hanoi People’sCommittee, Service of Planning and Investment of licensed Business License for him

to establish Hung Ha paper Co Ltd

Since its foundation, Hung Ha paper Co Ltd has experienced a miserably hard stagewith many challenges of market mechanism, it has managed a lot to have the successtoday Sales in the first year was VND16,237,200,000 – an admirable number to a newcompany, and it always increased in the following years And now, annual net income

is VND20-30 billions

Broad of Directors of the company has built a dynamic work environment, sciencemanagement mechanism Today, the company has enthusiastic, skilled employees,passionate Broad of Directors They are building the company stronger and stronger

with more profit With the collective efforts, now, the company is taking firm steps andgradually asserting its reputation in the paper production industry.

2.1.2 Functions, business field and products

2.1.2.1 Functions

 Maintaining and increasing business capital of the company

 Manufacturing profitably and maximizing profit

 Expanding business to increase income and payable to state budget

 Creating employment for employees in company and ensuring their lives

 Executing business activities exactly following to current regulations and laws

2.1.2.2 Business field and products

 Producing paper and Kraft paper

 Trading Kraft paper and paper industry equipment

 Selling, buying and consignment agency

 Consulting technology transferring in paper industry

 Printing types of Kraft paper products

 Importing and exporting paper and Kraft paper raw materials

2.1.4 Organizational structure

FIGURE 2.1: THE STRUCTURE OF HUNG HA PAPER CO LTD

(Source: Administration and Personnel department)

Hung Ha paper Co Ltd now has 66 employees, in which Broad of Director has 1

General Director and 2 Deputy Directors

There are 4 departments and 2 workshops Those are:

 Administration and Personnel department;

 Business planning department;

 Finance – Accounting department;

 Technology department;

 Workshop 1 and workshop 2

Director, cum, Chairman

of the Broad

Business deputydirector

Technical deputydirector

Administration

and Personnel

Dept

BusinessplanningDept

Finance AccountingDept TechnologyDept Workshop1 Workshop2

-Finance – Accounting department includes 6 accountants One of the six persons inFinance – Accounting department is chief accountant and the rest are in charge ofdifferent responsibilities They are: Cash accountant, Bank-Liability accountant,

Payment accountant, Inventory-fixed asset accountant, General accountant

The Finance – Accounting department’s major areas of responsibility include budgetmanagement, payroll, purchasing, assets, accounting, debt management, investmentsand financial reporting This department is responsible for:

 Organizing economic accounting on business and production activities of thecompany in accordance with State law of accounts and statistics

 Summing up the results of business management, making reports on accountingand statistics, analyzing the company’s business and production activities forsetting up controls for the implementation of its plans

 Taking notes, reflecting the developments of allotment capital, loan capitalaccurately, timely, and systematically; managing all sources of capital in order

to enhance mobilization of investment capital for the company’s projects and itscommercial and service activities

 Checking the company’s credits and debits; reporting and proposing a plan ofcash receipts and expenses and other payment forms

 Undertaking domestic and international payments

 Making quarter/ half/ annual accounting works in due time and coordinatingwith another company’s specialized departments in order to calculate the profits

or losses and help the Management Board have a close control on its capitalresources and profits

 Making loan plans and using all sources of capitals: fixed capital, workingcapital, specialized capital, and capital for basic construction works to used toachieve the best possible results

 Helping the Director of the company in directing its units to implement affairs

of financial and monetary management in accordance with regulations issued bythe Ministry of Finance and the People’s Committee of Hanoi City

 Coordinating with the Business planning department to help Director in givingbusiness plans, checking plan achievements and financial finalization

 Regularly organizing further professional training for accounting – statisticalemployees

2.2 CURRENT SITUATION OF FUND-RAISING ACTIVITIES IN HUNG

HA PAPER COMPANY LIMITED

2.2.1 Ways to raise finance used in Hung Ha paper Company Limited

Hung Ha paper Co Ltd is a business operating in manufacturing sector Since its earlyfoundation, company fund structure has been altered too much to comply witheconomic situation at each period

Hung Ha paper Co Ltd has raised its funds from different sources:

 Personal sources;

 Retained profits;

 Debt collection;

 Share capital – invested by the founder;

 Commercial bank – bank loans;

 Trade credit

2.2.2 Fund-raising activities in 2011

Based on the company balance sheet on 31/12/2011, we have the following data:

TABLE 2.1: CAPITAL STRUCTURE OF HUNG HA PAPER CO LTD IN 2011

Unit: Vietnam dong

balance

Proportion (%)

Ending balance Proportion

in proportion over the beginning of the year.

 Fixed assets and long-term investment increased by VND +968,831,667 (fromVND 105,863,066,761 to VND 106,831,898,428) There was a 8.13% drop infixed capital proportion over the beginning of the year

As we can also see from the table 2.1, there were changes of historical costs andaccumulated depreciation of fixed assets Fixed capital increased because of theextraordinary repairs of fixed assets of company There was a small difference betweenthe increases of historical cost and accumulated depreciation: while historical cost grew

up by VND +9,013,354,735, accumulated depreciation only increased by VND+8,206,681,228 Making a comparison between two numbers above, we can see thatthe increase of accumulated depreciation was less than the increase of historical cost,consequently fixed capital still went up

Considering the changes of liabilities and owner’s equity, we can see that in 2011,liabilities rose by VND +24,121,691,864 but the owner’s equity decreased by VND –462,123,563 However, the increase of liabilities was more than the decrease ofowner’s equity, thereby, the total liabilities and owner’s equity still grew by VND+23,659,568,301

2.2.3 Fund-raising activities in 2012

TABLE 2.2: CAPITAL STRUCTURE OF HUNG HA PAPER CO LTD IN 2012

Unit: Vietnam dong

balance

Proportion (%)

Ending balance Proportion