No APENDIX PagesPart 3 The failure of VINASHIN in financial management Part 4 Experimental lessons about management taken out from 4.2 The lesson of the investment capital management -
Trang 1No APENDIX Pages
Part 3 The failure of VINASHIN in financial management
Part 4 Experimental lessons about management taken out from
4.2 The lesson of the investment capital management - to avoid
4.3 The lesson of the inspection and supervision of the approriate
INTRODUCTION
Vietnam economy is on the rise, import- export demand is growing, especially when Vietnam's integration with the economy and become the 150th member of the International Trade Organization WTO Although shipping market at home and and abroad have certain difficulties currently, huge opportunities for growth is also latent Vinashin Group was founded with a vision is the leading shipbuilding industry in Vietnam Prime Minister Nguyen Tan Dung
Trang 2said on date that Vinashin converted in group model "Vinashin must be the core of the shipbuilding industry in Vietnam." While Mr Pham Thanh Binh, Chairman of Vinashin at that time said proudly: " a new red dot: Vietnam has made one’s appearance on the map of shipbuilding industries world
Being expected and invested a lot and , Vinashin has achieved initial success, Vinashin brands is recognized on the international field , highly qualified labor, modern competence, shipbuilding industry ‘s material facilities has been perfected gradually these great achievements expected to contribute significantly for purpose developing sea- economic of Vietnam in an attempt to expoilt every condition advantages of a country having much of sea and island However, in the years 2008-2010, along with the plunge of the world economy in general, the shipbuilding industry in particular, the vessel Vinashin also revealed its serious weaknesses, especially in the work of corporate governance Up to June 2010, total assets of Vinashin was about 104,000 billion but total debt is 86 000 billion, chatered capital is not only low but also utilized therefore the accounts payable / equity ratio was nearly 11 times , fell into financial imbalance seriously, was prone to be brought to ruin,manufacturing was brought
to a standstill, , workers changed jobs, nearly 17,000 people gave up their job, nearly 5,000 people lost their jobs
Thus,why did Vinashin - from a powerful economic groups fall into a debt crisis? Vinashin
is likely to be recovered to avoid shipbuilding industry of Vietnam starting again from the beginning,isn’t it? During the course of Corporate Finance with guidance with all his heart of teacher Dang Ngoc Dai, group 2 has grasped lessons about financial management needing be taken out after bankruptcy of Vinashin to complete essay of the group
However, time and knowledge is still restricted hence group 2 wish nothing better than getting the contribution of the teacher and classmates IeMBA D01 to complete the essay fully
PART 1: INTRODUCTION ABOUT VINASHIN GROUP 1.1 An overview of the economic group Vinashin:
Vinashin Business Group abbreviated VINASHIN is an economic group specializing in ship
Trang 3operation under public ownership Group was established on 05.15.2006 on the basis of organization and rearrangement of the Corporation of Vietnam Shipbuilding Industry Before restructuring was accomplished, the Group operates following model the parent company – subsidiary company Includes parent company is Vietnam Shipbuilding Industrial Group, 24 subsidiaries, 6 associated companies and 10 joint- venture company
1.2 Process of formation:
- The predecessor of the group is 91 Corporation established in January 31, based on Decision No 69/TTg January 31st, 1996 of the Prime Minister about the establishment
of the Vietnam Shipbuilding Industry Corporation
- On May 15, 2006, the Prime Minister signed Decision No 103/2006/QD-TTg on approving the pilot scheme to form an multiple ownership economic group, in which Public ownership domitate , on the basis of arrangement and organization the Vietnam Shipbuilding Industry Company
- On May 15, 2006, the Prime Minister also signed Decision No 104/2006/QD-TTg about the establishment of the parent company - Vietnam Shipbuilding Industry Group Accỏding to this decision, the parent company - Vietnam Shipbuilding Industry Corporation was established basing on reorganizing management, operating agencies
an units member entering in the accounts of Vietnam Shipping Industry Company seafood This event marked the official birth of Vinashin
1.3 Development:
When Vinashin was a newly formed organization,it was known as "steel punch"
of the economy Vinashin is expected to be the core, the leading enterprise to develop Vietnam shipbuilding industries still at a start and underdeveloped at that time, as well
as serving for the purpose expanding the Marine Economic, to meet the needs of
national defense and security of Vietnam And indeed, since its inception in 1996 until being converted into model of economic group, Vinashin reached many important achievements:
Trang 4- First step,significant technical and material facility of the shipbuilding industry was formed synchronously with 28 shipyards operating with an advanced level of technology, quality of ship products recognized all over the world , having brand name and reputation in the shipbuilding industry in the world
- 70,000 employees, in which 12,500 people have universitarian and above universitarian academic standard , more than 55,000 technical worker with fair qualifications, more than 5,000 people attain internationall certified.Technology was designed , initially ,the technical design for 58,000 tons, 115,000 tons ships were made Supporting industries branches were built, advanced a step in the localization rate of building and repairing ships
- The annual average growth rate in 1996-2007 period reached 35% -40% / year, was profitable, net sales in 2008 reached 29,000 billion Until the end of 2009,Vinashin had contributed 3,300 billion into the state budget equity had just over 100 billion and only can buid 1000-3000 tons the ship, until now, equity has increased to 8,000 billion, the worth assets is 104,000 billio; can build 53,000 tons cargo, 105,000 tons tankers , ship loading to 6900 cars, oil floating storage
- Until March 2009, already had many orders and preliminary shipbuilding contract agreement worth about $ 12 billion 279 ships worth over $ 1.8 billion were completed and transferred,including: 59 vessels with tonnage 6.500-15.000 tons;9 vessels with tonnage 22.500-34.000 tons; 9 ships with tonnage 53.000 tons; 6 container ships, a vessel can load 4900 cars, floating warehouses containing 150,000 tons of oil and many other ships Among the ships, 155 vessels valued at over $ 1.1 billion had been exported
to foreign shipowners; 124 vessels worth $ 700 million had been sold to domestic owners In addition, completing a variety of other aquatic facilities to meet diverse needs
of the economy and national defence and security
- Ocean liner fleet with total load 700 thousand tons was formed from self-building and purchasing of foreign countries.It contributed to increase the marine transportation capacity of the country
Trang 5- Large plates, 150 ton derrick, 450 ton crane, 2,000 tons hydraulic press were manufactured successfully;……….that five years ago must be imported 100%
PART 2: FINANCIAL ANALYSIS OF VINASHIN GROUP
2.1 Index
2.1.1 Flexible Index
The index is used to measure the ability to convert liquid assets into cash the and short-term debt solvency of investment and Petroleum Transportation shares company- Vinashin
Liquid assets Ratio of current payment=
Short-term debt
Unit: million
Cash and cash equivalents 44.070.135.245 5.453.573.892
Các khoản đầu tư tài chính ngắn hạn
-short-term receivables 1.099.583.421.54 3 1.429.198.028.894 Inventory 2.172.390.809.29 1 647.890.059.581
Other short-term assets 158.385.295.172 25.370.443.990
Liquid assets
3.474.429.661.25
1 2.107.912.106.357 Accounts payable 6.907.419.920.78 4 5.683.458.544.923
Short-term liabilities 4.218.843.034.01 8 2.387.876.671.739 Ratio of current payment 0,823550351 0,882755852
Ratio of quick payment 0,308624626 0,611431094
Ratio of cash payment 0,010446024 0,002283859
2.1.2 Ratio of current payment :
- 2009 shows a short-term debt was only secured by 0.88 dong working assets, in
2010, a short-term debt was only secured by 0.82 dong working assets
- Ratio of current payment of in period 2009 - 2010 decreases 0.0 59% This ratio decreased slightly due to increased short-term debt rate
- This ratio shows lower solvency and also was a sign that companies use short-term debt too much and warned about the financial difficulties
2.1.3 Ratio of quick payment :
Trang 6Shows the solvency of a company The ratio of payment VINASHIN the company in period 2009 - 2010 decreased 0.30%
Quick Ratios of VINASHIN in 2010 was 0.61, indicating that the VINASHIN has 61% liquid assets for every debt due to date Quick ratio 0.61 billion, said that if the company's inventory is stagnant, not worth the company will fall into financial difficulty called the "inability to pay." That the inventory of 2010 increased 3 times compared to 2009 shows the VINASHIN will get financial difficulties in the future if they do not remedial measures
2.1.4 The ratio of cash payments:
Payment ability of company is quick, period 2009 - 2010 increased 5 times
2.2 Indicators of asset management:
This ratio is used to measure the business activities of the company To improve the ratio of activities, we must know the property not used o not generate income, as a result, companies need to know how to use them effectively or remove them The ratio
of activity may be called the efficient ratio, or ratio of rotation
Active ratio is expressed through the criteria:
Net Revenue Turnover of accounts receivable =
Receivables
Net income Inventory turnover =
Inventory
Net income Rotation of fixed asset =
Fixed asset
Net Income Rotation of total asset =
Total asset
short-term
receivables 1.099.583.421.543 1.429.198.028.894 -329.614.607.351
-Fixed assets 3.398.343.709.334 3.693.818.828.108 -295.475.118.774
Trang 7Total assets 6.917.335.636.819 5.825.413.550.112 1.091.922.086.707
Net sales 15.828.000.000 710.811.215.666 -694.938.215.666
Inventory 2.172.390.809.291 647.890.059.581 1.524.500.749.710
Number of accounts
receivable
Number of inventory
Efficiency of using
Efficiency of using
The number of receivables turnover: From 2009 to 2010, the number of receivables
turnover was reduced from 0.49 down to 0.014 times The reason was that the company's net sales in 2010 decreased compared to 2009 was 694 938 215 666 VND, and the short-term accounts receivable of the company also fell compared to 2009 was 329,614,607,351 VND
Examining short-term receivables:
Short-term receivables 1.099.583.421.543 1.429.198.028.894 -329.614.607.351
Receivable under the contract
The amount receivable in 2010 decreased compared to 2009 was 112 709 628
894 so that it can be concluded that company could not sell more goods than in 2009
On prepaid custo mers, in 2010 decreased 93,307,228,311 compared with 2009
It can be said that companies worked more inefficiently than in 2009
In terms of other receivables, in 2010 also decreased 86.362.059.543.compared with 2009
Trang 8By considering the short-term receivables separately, we can see that companies make business fall down Therefore, if companies do not have good debt- recovery regime, will lead to slow recovery of capital, capital of the company is nonmarketable and the customer appropriate capital .It will cause difficulties in the payment of company
On the number of inventory turnover ,in 2010 reduced compared to 2009 (from 1097timess in 2009, down 0.007 times in 2010) Reduced number of inventory turnover proved that quality of product of enterprises is lower and lower so that the quantity of sold goods is less, stagnant goods bring about a reserve account for inventory.It makie the company difficult in revolving capital to expand production
2.3 Leverage ratio:
Financial leverage ratio assess thelevel which a corporate sponsor for its business operations by borrowed capitalt For companies, financial leverage ratio will help financial managers select the most reasonable capital structure for the company.Through leverage ratio ,investors see the financial risks of company to decide investment decisions
Leverage ratio is expressed through the criteria:
Total debt Ratio debt/asset =
Total asset
Total debt 6.907.419.920.784 5.683.458.544.923 1.223.961.375.861 Total assets 6.917.335.636.819 5.825.413.550.112 1.091.922.086.707 Ratio debt/asset
Ratio debt/asset
This ratio in 2010 increased 0.02% compared to 2009 This shows the percentage of assets financed with loans of the company has increased
2.4 The index "Profitability":
This ratio measure the income of the company with other factors making a profit
as net sales, total assets and equity
This ratio is shown on the criteria:
Trang 9Net Income
Rate of Interest (TLL) =
Sales of goods
Income before taxes and interest of loan
The ratio of property income (TNTS) =
Total asset
Net income
Rate of profit on total assets(ROA) =
Total asset
Net Income
Rate of profit on equity (ROE) =
Equity
Incomes before taxes -171.113.797.796 6.010.902.023 -177.124.699.819
Total assets 6.917.335.636.819 5.825.413.550.112 1.091.922.086.707
Comments:
- Vinashin used too much short-term debt
- Too much inventory
- Indicators TNTS, ROA, ROE in 2010 were negative, the group lost
PART 3: THE FAILURE OF VINASHIN IN FINANCIAL MANAGEMENT ENTERPRISE
3.1 overview of incident:
Besides the great achievements that Vinashin has achieved, the group has also infected many mistakes, that peak was the bankruptcy of Vinashin in 2010 The case not only caused damage to private corporations but also harmed the economy directly
Trang 10In 2008, the global financial crisis makes the world economic decline, a number
of financial institutions, large economic group in the world with hundred years of
operation collapsed,; our economy was affected sharply, export market was narrowed, manufacturing is sluggish, economic growth slowed and; Vinashin was affected significantly, especially on markets and capital
Banks tightened lending, investment projects being implemented could not complete to enter in manufacturing due to lack of capital Many shipbuilding contracts signed could not continue to get loans to finish on schedule
Ocean trafic industry was brought to a standstill, the master canceled the contract and the shipbuilding agrement worth more than 8 billion USD In 2010 ,the shipbuilding contracts were likely to be canceled coming up to 700 million USD
On the other hand, the forecast is still inadequate, the project invests too much, spread, beyond the capacity to balance finance Some projects are not really necessary,
so many projects have only been allocated 50% of the total capital Charter capital is limited, its own capital in projects is very low, some projects are invested by 100% loans Therefore, most projects are in-progress, as the industrial parks clearance projects
of, export shipbuilding projects, these projects haven’t been enter to utilize but still paying interest Investment in fleet development including the purchase of too old foreign ships, in- efficient operations Develop business apidly, making capital contribution outside the main business sector is so huge, loanning and guaranteeing for lending associated companies, many units work inefficiently, do not pay their debts and are uncontrolled The inefficient use of capital has caused serious financial consequences for Vinashin Group