Financial analysis a case of hoang anh gia lai group in vietnam

Nguyen, Thi Kim Oanh Keywords: financial analysis, financial management, Hoang Anh Gia Lai Group This paper analyzes the corporate financial management of Hoang Anh Gia Lai Group and res

MASTER IN FINANCIAL MANAGEMENT

Financial Analysis: A case of Hoang Anh Gia Lai Group in Vietnam

Graduate student: Nguyen, Anh Tuan Supervisor: Dr Nguyen, Thi Kim Oanh

HANOI, 2019

ABSTRACT

Thesis Title: Financial Analysis: A case of Hoang Anh Gia Lai Group in Vietnam Pages：69

University: Vietnam National University

Graduate School: International School

Date: Octorber, 2019 Degree: Master

Graduate Student: Nguyen Anh Tuan Supervisor: Dr Nguyen, Thi Kim Oanh Keywords: financial analysis, financial management, Hoang Anh Gia Lai Group This paper analyzes the corporate financial management of Hoang Anh Gia Lai Group and research the solutions to solve their problems in financial management, which focuses on analyzing the corporate financial management in specifically based on income statement, balance sheet, cash flow statement from 2014 to 2018 About analyzing the financial structure, the thesis will analyze the asset and capital

of Hoang Anh Gia Lai Group About analyzing the capital and the manufacturing business, the thesis will use some formulas to calculate the temporary capital sources coefficient, regular capital sources coefficient, the coefficient between regular capital sources and long-term assets, etc About the situation of receivable and payables, the thesis will use some formulas to calculate the coefficient of overall solvency, the coefficient of quick solvency and the coefficient of instant solvency About analyzing the performance of Hoang Anh Gia Lai Group’s operation, the thesis will focus on analyzing the performance of using the assets (short-term assets and long-term assets) and analyzing the performance of using the capital (owner’s equity, loans, costs) In conclusion, the thesis will show the oriented development of Hoang Anh Gia Lai Group, the necessity of improving financial management at Hoang Anh Gia Lai Group and give solutions to improve

financial management at Hoang Anh Gia Lai Group

ACKNOWLEDGEMENT

By extending my most sincere appreciation to International School, Vietnam National University, Hoang Anh Gia Lai Group, and my supervisor Dr Nguyen Thi Kim Oanh, I would like to express my thanks and gratitude for their input in helping me complete this master thesis

Thank you! Author Nguyen Anh Tuan

TABLE OF CONTENTS

ABSTRACT 2

ACKNOWLEDGEMENT 3

TABLE OF CONTENTS 4

LIST OF TABLES 7

LIST OF FIGURES 8

LIST OF ABBREVIATIONS 9

CHAPTER 1: INTRODUCTION 10

1.1 The reasons for choosing the research topic 10

1.2 Research objectives 10

1.3 Scope of research 10

1.4 Research methods 11

1.5 The signification of the thesis 11

CHAPTER 2: LITERATURE REVIEW 12

2.1 The definition, characteristics and classification of analysis the corporate financial management 12

2.1.1 The definition of analysis the corporate financial management 12

2.1.2 The characteristics and classification of analysis the corporate financial management 13

2.2 The database for analyzing the corporate financial management 15

2.2.1 Income statement 16

2.2.2 Balance sheet 16

2.2.3 Cash-flow statement 18

2.2.4 Presentation of financial statement (Financial statement disclosure) 19

2.3 Methods of analysis the corporate financial management 20

2.3.1 Comparative method 20

2.3.2 Descriptive statistics method 21

2.3.3 Exclusion method 21

2.3.4 Analysis and synthesis method 21

2.3.5 Other methods 22

2.4 Content of analysis the corporate financial management 23

2.4.1 Analyzing the corporate financial structure 23

2.4.2 Analyzing the capital sources and the manufacturing business 24

2.4.3 Analyzing the situation of receivables, payables and solvency of corporate 25

a Analyze the situation of receivables, payables 25

b Analyze the solvency of corporate 27

2.4.4 Analyzing the performance of corporate’s business 29

2.5 Process of analyzing the corporate financial management 30

2.5.1 Prepare for analyzing the corporate financial management 30

2.5.2 Perform analysis 31

2.5.3 Complete the analysis 31

CHAPTER 3: ANALYZING THE FINANCIAL MANAGEMENT OF HOANG ANH GIA LAI GROUP 32

3.1 Introduction of Hoang Anh Gia Lai Group 32

3.1.1 History of Hoang Anh Gia Lai Group 32

3.1.2 Characteristics of business operations 34

3.1.3 Characteristics of organization operation 35

3.1.4 Accounting and financial operation 37

3.1.4.1 Accounting book form 37

3.1.4.2 Consolidate financial statements 38

3.2 Analyzing the financial management of Hoang Anh Gia Lai Group 39

3.2.1 Analyzing the corporate financial structure of Hoang Anh Gia Lai Group 39

a Analyze the structure of assets of HAGL Group 41

b Analyze the structure of capital of HAGL Group 44

3.2.2 Analyzing the capital and the manufacturing business of Hoang Anh Gia Lai Group 45

3.2.3 Analyzing the situation of receivables, payables and solvency of corporate

of Hoang Anh Gia Lai Group 47

a Analyzing the situation of receivables and payables of Hoang Anh Gia Lai Group 47

b Analyzing the solvency of corporate of Hoang Anh Gia Lai Group 48

3.2.4 Analyzing the performance of corporate’s business of Hoang Anh Gia Lai Group 51

a The performance of corporate’s business of HAGL Group 51

b The performance of using the assets of HAGL Group 55

c The performance of using the capital of HAGL Group 59

CHAPTER 4: SOLUTIONS TO IMPROVE FINANCIAL MANAGEMENT AT HOANG ANH GIA LAI GROUP 64

4.1 Oriented development of HAGL Group in the future 64

4.2 The necessity of improving financial management at HAGL Group 65

4.3 Solutions to improve financial management at Hoang Anh Gia Lai Group 65

CHAPTER 5: CONCLUSION AND RECOMMENDATION 68

REFERENCES 69

LIST OF TABLES

TABLE 3.1 THE CONSOLIDATED BALANCE SHEET OF HOANG ANH GIA LAI GROUP FROM 2014 TO 2018 TABLE 3.2 THE STRUCTURE OF ASSETS OF HAGL GROUP FROM 2014

TO 2018 41TABLE 3.3 THE STRUCTURE OF CAPITAL OF HAGL GROUP FROM 2014

TO 2018 44TABLE 3.4 THE CAPITAL AND THE MANUFACTURING BUSINESS OF HAGL FROM 2014 TO 2018 46TABLE 3.5 THE SITUATION OF RECEIVABLE AND PAYABLES OF HAGL GROUP FROM 2014 TO 2018 TABLE 3.6 ANALYZING THE INDICATORS TO EVALUATE THE ABILITY FOR PAYING SHORT-TERM DEBTS OF HAGL GROUP FROM

2014 TO 2018 TABLE 3.7 ANALYZING THE INDICATORS TO EVALUATE THE ABILITY FOR PAYING LONG-TERM DEBTS OF HAGL GROUP FROM

2014 TO 2018 TABLE 3.8 THE PROFITABILITY OF BUSINESS OPERATION OF HAGL GROUP FROM

2014 TO 2018 51 TABLE 3.9 THE CONSOLIDATED INCOME STATEMENT OF HAGL GROUP FROM 2014 TO 2018 52TABLE 3.10 THE INDICATORS TO EVALUATE THE PERFORMANCE OF HAGL GROUP’S OPERATION FROM 2014 TO 2018 53TABLE 3.11 THE INDICATORS TO EVALUATE THE PERFORMANCE OF USING THE GENERAL ASSETS OF HAGL GROUP FROM 2014 TO 2018 55TABLE 3.12 THE INDICATORS TO EVALUATE THE PERFORMANCE OF USING THE SHORT-TERM ASSETS OF HAGL GROUP FROM 2014 TO 2018 56TABLE 3.13 THE INDICATORS TO EVALUATE THE PERFORMANCE OF USING THE LONG-TERM ASSETS OF HAGL GROUP FROM 2014 TO 2018 TABLE 3.14 THE INDICATOR TO EVALUATE THE PERFORMANCE OF USING THE OWNER’S EQUITY OF HAGL GROUP FROM 2014 TO 2018 TABLE 3.15 THE INDICATORS TO EVALUATE THE PERFORMANCE OF USING THE LOANS OF HAGL GROUP FROM 2014 TO 2018 60TABLE 3.16 THE INDICATORS TO EVALUATE THE PERFORMANCE OF USING THE COSTS OF HAGL GROUP FROM 2014 TO 2018 61

LIST OF FIGURES

FIGURE 3.1 CHARACTERISTICS OF ORGANIZATION OPERATION OF HAGL GROUP 36 FIGURE 3.2 THE ACCOUNTING BOOK FORM OF HAGL GROUP FIGURE 3.3 THE STRUCTURE OF SHORT-TERM ASSETS OF HAGL GROUP FROM 2014 TO 2018 43 FIGURE 3.4 THE STRUCTURE OF CAPITAL OF HOANG ANH GIA LAI GROUP FROM 2014 TO 2018 45 FIGURE 3.5 THE ABILITY TO PAY THE SHORT-TERM DEBTS FROM 2014

TO 2018 FIGURE 3.6 THE ABILITY TO PAY THE LONG-TERM DEBTS FROM 2014

TO 2018 50 FIGURE 3.7 THE PERFORMANCE OF HOANG ANH GIA LAI GROUP’S OPERATION FROM 2014 TO 2018 54

LIST OF ABBREVIATIONS

CHAPTER 1: INTRODUCTION

1.1 The reasons for choosing the research topic

More than 10 years after the world economic crisis, Vietnam’s economy has changed significantly with domestic corporations and multinational corporations in many fields as real estate, finance, agriculture, etc In recent years, the Government’s economic sector is still playing a leading role, the private corporations sector has also growth in scale and quality, it contributes to the development of the country With the market mechanism, domestic corporations and foreign corporations compete fairly with each other, at that time, corporations want to develop in this market, they must promote their financial potential, information technology and human resources

Hoang Anh Gia Lai Group is a corporation with joint stock company form with huge capital sources and large of scale Therefore, corporate financial management is an important thing to promote the development and improve the competitiveness of the corporations and expand the market shares

Thus, the thesis “Financial Analysis: A case of Hoang Anh Gia Lai Group

in Vietnam” is chosen for researching the solutions to improve the quality of Hoang Anh Gia Lai Group’s financial management

1.2 Research objectives

This thesis focuses on analyzing the theoretical basis on analyzing the corporate financial management at Hoang Anh Gia Lai Group to evaluate the results of financial management and propose solutions to improve the company’s financial performance of financial potential of the corporation

1.3 Scope of research

Due to the prolonged development history of Hoang Anh Gia Lai Group, at the same time, financial management faced difficult from 2014, so the scope of the research lasts 5 years from 2014 to 2018 is reasonable for this thesis After this

research, we can give some solutions and advice for financial management of Hoang Anh Gia Lai Group in next five years

1.4 Research methods

When collecting materials through secondary and primary sources, the information is classified and grouped according to the content and purpose of presentation from there to serve as a basis for applying research methods

In order for a master’s thesis to be objective and reflect true, I apply research methods such as comparative method, descriptive statistics method, exclusion method, analysis and synthesis method, DuPont method, graph method

1.5 The signification of the thesis

This thesis is a basis on analyzing the corporate financial management to propose some solutions for improving the financial performance at Hoang Anh Gia Lai Group

The structure of the thesis consists of 5 parts:

Chapter 1: Introduction

Chapter 2: Literature review

Chapter 3: Analyzing the financial management of Hoang Anh Gia Lai Group

Chapter 4: Solutions to improve financial management at Hoang Anh Gia Lai Group

Chapter 5: Conclusion and recommendation

CHAPTER 2: LITERATURE REVIEW

2.1 The definition, characteristics and classification of analysis the corporate financial management

2.1.1 The definition of analysis the corporate financial management

A corporation is an independent economic entity, has the legal status, business operation in the market to carry out single, several or all stages of the investment process, from production to product consumption or services provided

in the market for making profit (Will Kenton, 2019) Corporate financial reflects the good or bad, effective or inefficient of business operation so a business with a good financial management shows that the business is doing well

Analysis of corporate financial management is use a kind of concepts, methods and tools that allow analysis the financial and accounting information and internal management information in current and in the past to evaluate the corporate financial, risks, performance of the operation and providing information

to all subjects with different objectives (Will Kenton, 2019)

The financial management has a direct relationship with production and business operation and it is also decisive significance for the existence and development of transparency and sustainability of corporate Therefore, it can be seen that analysis the financial management plays an important role, reflected on the following two aspects:

Firstly, analyzing the corporate financial management allows to evaluate the situation of distribution, use and management of capital sources types fully and accurately and outlines the potential capital of corporate On that basis, it proposed measures to improve the efficiency of using capital, accumulating and enhancing financial potential

Secondly, financial analysis helps the Government can control on economy and serves other interested subjects It also helps the Government completes and

replace inappropriate regulations to encourage corporations expand the business operation

2.1.2 The characteristics and classification of analysis the corporate financial management

Analysis the corporate financial management is becoming more and more popular in all economic units of all different economic types with a scientific and flexible implementation process The development of the economy in general and

of economic units and components in particular is clearly showing the diversity and complexity of financial activities Therefore, on the one side, the diversity and complexity create opportunities for financial analysis can improve in important ways for the development of corporate finance On the other sides, the diversity sets higher and higher requirements for corporate financial analysis Analysis of the financial management is one of the basic contents of business analysis through professional analyst, it is not only to evaluate the financial but also can identify the nature and causes of the volatility of the financial affects the results and performance of the corporation So analyzing the corporate financial management will provide focused and comprehensive financial information for those who are interested in the corporate business operation

Firstly, analyze the financial management for business administrator The business administrator is the person who directly manages the operation, so the manager needs financial information to serve for the management decisions Analyzing the financial management in order to create regular cycles to evaluate management activities in the past, the implementation of financial balance, profitability, solvency, financial risks and it also orientate the decisions of the Board of Directors such as investment decisions, financing, profit distribution and serve as a basis for financial predictions, material supply plan, capital mobilization and investment Analysis of the financial management is also the basis for checking and controlling financial activities and management activities

in the corporation

Secondly, analyze the financial management for investors Investors are the people who allocate their capital to the corporation to manage and get profit based

on the business results (income and surplus of capital) Therefore, investors who are interested in corporate finance activities in the effective of using the capital and profitability because it is most directly related to immediate and long-term benefits as well as the level of risks that may be encountered and it is a basis for investors to make decisions on whether to continue to invest or not and how to invest to maximize the profitability Investors depend on financial analysts to research the financial and economic information, clarify the prospects of business development and evaluate stocks in the stock market

Thirdly, analyze the financial management for lenders (individuals, credit institutions, banks .) They are the ones who give corporation loans to ensure business operation Their income is loan interest - a future income, so the financial analysis of lenders is not simply about determining the customer's ability to repay the loan but also evaluate performance and profitability of the corporation as a basis for evaluating loan risks For short-term loans, the source of payment is the revenue earned by the business during the life of the loan, the lender always pays attention to the business operations of the enterprise because it directly affects the solvency of the business For long-term loans: the source of payment comes from annual profit and depreciation, lenders pay more attention to the possibility of future repayment and the ability of development shown by the performance of enterprise

Next, analyze the financial management for auditing companies The types

of audits are based on the analysis of financial management to verify the transparency and objectivity of the financial situation of a corporation In addition, financial management analysis also helps auditing can predict financial trends to improve the reliability of decisions

Finally, analyze the financial management for employees of the corporation These are the people whose income is salary However, in some joint

stock companies, employees have a certain share in the corporation For these corporation, employees have income from paid wages and shared profits Both of these incomes depend on the results of production and business activities Therefore, financial analysis helps them orientate their stable jobs and assured their efforts in production and business operation of the corporation

Thus, the analysis of the financial management is a useful tool used to determine the economic value, to evaluate SWOT of a corporation and find out objective and subjective reasons, help each subject can select and make decisions suitable for the purpose they are interested in

2.2 The database for analyzing the corporate financial management

Analyzing corporate financial management can use many different documents but the most important document used in analyzing the financial management is the financial report According to the international accounting standard, the financial report provides information about financial position and financial situation as well as the cash flow of a unit that greatly helps users in making economic decisions, it also reflects the management efficiency of the unit administrator's resources To achieve this purpose, the financial report provides information on assets, debt, equity, income and expenses (including interest and losses), equity changes and cash flow, these information helps user who use financial report can predict the future cash flows A financial report includes: balance sheet, income statement, cash-flow statement, financial statement disclosure and equity fluctuations report which includes in financial statement disclosure in Vietnam All these reports must be continuous and consistent in time

to ensure comparability and the information presented in the report is information reflecting comprehensively the situation of assets, liabilities, owners' equity at the time of making financial statements, situation and business operation results in the reporting period The content presented in these reports follows:

2.2.1 Income statement

The income statement is a general financial report reflecting the results of production and business operation in the period of the corporation, including business results and other results (Steven Bragg, 2019) The data on this statement provide the most comprehensive information on the situation and the results of using the potential of capital, technical labor and management experience of the business The indicators presented in the income statement include sales of goods and services, revenue deductions, net sales, cost of goods sold, gross profit, revenue, financial expenses (including interest expenses), selling expenses, corporate management expenses, net profit, other income, other costs, other profits, earning before interests and taxes (EBIT), corporate income tax, deferred tax expense, after-tax profit and earnings per share

The financial analyst uses the indicators in the income statement as a basis for calculating the performance indicators of corporation, especially the efficiency

of capital use The main indicators used for analyzing are: Sales revenue, profit from business operation, EBIT These are the main indicators showing the operation results of the corporation

2.2.2 Balance sheet

The balance sheet is the general financial report reflecting the overall value

of existing assets and the sources of those assets at a given time (Adam Hayes, 2019) The balance sheet has a very important statement in corporation management, it obtains information about the fluctuation of assets and capital sources of the corporation, the financial situation reflected by the financial capacity and financial structure, etc With this role, the financial analyst uses the balance sheet as a basis for calculating the analysis indicators such as the solvency index and the situation of ensuring capital for business operation, financial structure therefore making comments, evaluating the general financial situation of the business, analyzing the use of capital, the ability to mobilize capital into the business operation of the corporation

The structure of the balance sheet consists of two parts reflecting capital (assets) and capital sources (sources of asset formation)

- Assets: reflects the entire value of existing assets at the time of making the report under the management and use of the corporation Economically, the assets reflect the size and structure of the assets of the corporation that exist in any tangible and intangible form Legally, the number of indicators on the asset part represents the capital under management and use of the corporation

Structure of assets includes:

+ Short-term assets are assets under the ownership of the corporation that the use time, revocation of circulation in a year or a business cycle, including cash and cash equivalents, short-term investments, short-term receivables, inventory and other short-term assets

+ Long-term assets include assets that exist in the corporation for a long time and their value has gradually shifted to products in many business cycles and other assets are not reflected in the short-term assets indicators Long-term assets include long-term receivables, fixed assets (tangible and intangible fixed assets, depreciation of fixed assets, construction in progress expense), properties investments, long-term investments and other long-term assets

- The source of capital: reflects the capital sources that the corporation managing and using at the time of making the report Economically, when considering the source of capital, managers can see the financial situation of the corporation being managed and used, the potential and financial capacity, the level

of independence of corporation Legally, it represents the legal responsibility of the corporation to the capital formed from different sources

Capital structure includes:

+ Liabilities (short-term and long-term liabilities): this is the amount of capital that corporation can mobilize from factors outside the corporation and must pay to creditors after a certain period

+ Owner's equity (equity and capital sources and other funds): owned by the corporation owner or capital contributors, not debts, no commitment to pay, used without period It includes equity surplus, other capital of owners, treasury stocks, asset revaluation differences, exchange rate differences, funds and projections storage, undistributed after-tax profit, construction investment capital

Accounting balance sheet is the most important and necessary data source

to analyze the financial management of the corporation The analyst compares almost of the indicators in the balance sheet to understand the overall financial situation of the corporation through using fixed assets, receivables and payables, debts, capital situation and capital structure

2.2.3 Cash-flow statement

The cash flow statement reflects the cash flow from all business operations

of the corporation including business operation, financial activities and investment activities According to the International Accounting Standard, the cash flow statement and other financial statements used to provide information that allows users to evaluate the change of pure assets of the corporation, financial structure (including solvency) and the ability to influence the cash and method of measuring the timing of cash flow to adapt the changing of circumstances and opportunities Cash flow information is useful in evaluating a corporation's ability to make cash and cash equivalents, it also allows users to compare the present value of future cash flows of other corporations (Chris B Murphy, 2019)

Cash flow statements can be prepared in direct and indirect methods:

- The direct method: Calculating the net cash flow at the end of the reporting period is based on the addition of net cash flow from various activities of the corporation with the effect of changing foreign exchange rate In this method, cash flow is reflected actual size arising from each business operation of the corporation

+ Cash flow from business operation includes two flows of cash flow in the business sector: Cash flow is the sum of revenue from sales and other revenues

from business operation; Cash flow is an aggregate of payments to suppliers of goods and services, payments to employees, interest payments, payment of corporate income taxes and other business operation

+ Flow from investment activities includes two flows of cash flow in the field of investment activities: Cash flow is the sum of revenues from liquidation and sale of fixed assets and other long-term assets, recovered lending, reselling debt instruments of other corporations and collecting loan interests, dividends and divided profits; Cash flow is the sum of expenditures for procurement and construction of fixed assets and other long-term assets, loans and purchases of debt instruments of other corporations and capital contribution to other corporation

+ Flowing from financial activities includes two flows of cash flow in the field of financial activities: Cash flow from issuing shares, receiving capital contributed by owners and short-term loans and long-term loans; Cash flow is the sum of payment of contributed capital to owners, repurchase of issued shares, principal repayments, repayment of finance liabilities and dividends, profits paid

to owners owned

- The indirect method: Determines net cash flow based on the addition of net cash flow of the business activities, investment activities and financial activities However, it is different from the direct method that net cash flow from business activities is determined based on the original profit before tax after adjusting for fixed asset depreciation and projections storage, interest, loss of unrealized exchange rate and investment activities, interest expenses; and profit from business operations before changing working capital

The cash flow statement provides indicators of using cash and cash flow from business operations

2.2.4 Presentation of financial statement (Financial statement disclosure)

The financial statements disclosure is an integral part of the corporate financial statements used to describe or detailed analysis of the data presented in

the income statement, balance sheet, cash flow statement and other necessary information to help the honest and rational presentation of financial statements

The information presented on the financial statement disclosure includes information on the operational characteristics of the corporation, accounting period, currency unit, standards and applied accounting policies, additional information for submission items in the income statement, balance sheet, cash flows and other information In addition to the financial statements, analysts need

to gather additional financial and accounting information to make the analysis clearly and completely

Gathering enough documents is a prerequisite for good analytical work After the necessary documents have been collected, the analyst will conduct a financial analysis

2.3 Methods of analysis the corporate financial management

The method of corporate financial management analysis is a system of methods to approach research and evaluate events, phenomena, relations, flows and changes of finance in business operations of corporation There are some methods of financial analysis:

2.3.1 Comparative method

Comparison is the method commonly used in business analysis in general and financial analysis in particular to determine the trend, the level of volatility of the indicators When comparing, analyst often compare financial indicators with each other to understand the level of volatility of the research objects In order to make the comparison exactly, the indicators must be consistent with the economic content, calculation unit, calculation method and environmental conditions of the indicators

The comparative objective in financial analysis is to determine absolute volatility, relative volatility and volatility trends of the analysis indicators Absolute volatility is determined on the basis of comparing the value of the indicator between the two periods: analysis period and base period Relative

volatility is the comparison between the actual number and the original adjusted with a Ratio of the relevant indicator in the direction of determining the scale of the analytical indicator

2.3.2 Descriptive statistics method

Descriptive statistics method is a method that describe the basic features of the data in a study It provides simple summaries about the sample and the measures with simple graphics analysis, it becomes a form the basis

of virtually every quantitative analysis of data The most recognized types of descriptive statistics are measures of center: the mean, median, and mode therefore analyst can find out the trend of economy and solutions for managing finance (Anonymous, n.d)

2.3.3 Exclusion method

Exclusion method is a method of determining the influence of each factor

on business operation by eliminating the influence of other factors This method allows to clearly identify the cause of the volatility of analytical indicators and may accept for analyzing the cause-effect relationship The condition for using the exclusion method is these factors which are related to the analytical indicators of analysis

This method helps to evaluate the influence of individual factors to all factors, when one factor fluctuates but other factors are not changed, each factor takes place from quantity factor to quality factor in hypothetical conditions But in fact, market is affected by many factors and these factors do not occur sequentially, when a factor fluctuates so other factors are fluctuating too Therefore, the exclusion method should only be used as a reference method in financial analysis

2.3.4 Analysis and synthesis method

Analysis and synthesis method is a method that combines two scientific methods as analysis method and synthesis method Analysis method breaks up the unknown problem into simpler parts which can be recombined to find solutions or

go from unknown to know and find out desire results Opposite to analysis method,

synthesis method combines all of results to find out a new result or go from known

to unknown (rkdskool, 2018)

Both analysis method and synthesis method should go together because Synthesis require help of analysis and analysis leads to synthesis and synthesis makes purpose of analysis clearly so both of them are interdependent

2.3.5 Other methods

Beside above popular methods, analysts also use some other analytical methods such as regression methods, indexing methods, graphing methods, etc (Morse, 2016) The above methods are used for certain analytical purposes:

- Regression method is a method used to estimate and forecast future events based on studying data reflecting past events to find rules about their relationship The relationship between future events and past events is reflected in the regression equation In fact, the regression method analyzes the influence of one or more variables (explanatory variables or independent variables) on another variable (outcome variable or dependent variable) to predict the outcome based on the known values of the explanatory variable

- Graph method is a method of presenting and analyzing by charts, graphs and maps The graph method uses numbers combined with drawings, lines and colors to represent the quantity characteristics of the phenomenon Therefore, beside the analytical effect that helps us to understand the basic characteristics of visual phenomena easily and quickly, the graph method is also a method of presenting a statistical information in general and attractive The graph may indicate: The structure of some phenomena and the transformation of the structure, the development of the phenomenon over time, comparing the levels of phenomena, the relationship between the phenomena, popularity of the phenomenon Common types of graphs include: Column diagrams, pictograms, area charts (squares, circles, rectangles), kinks and spider web charts

2.4 Content of analysis the corporate financial management

2.4.1 Analyzing the corporate financial structure

Data on the balance sheet reflects the scale of assets and the ability to mobilize capital of corporation in business operation Therefore, looking at the balance sheet, we can know that the corporation scale has expanded or shrunk base

on mobilizing capital scale Thus, we can generalize the development trend of the corporation We compare:

+ The ending period with the beginning period of Total assets and Total Working Capital to determine the trend of fluctuations and scale of changes in assets and capital sources of corporation

+ The ending period with the beginning period of each indicator on the balance sheet to know the change of total assets and total capital

 Analyzing the corporate financial structure divide into two analyses as structure of assets analysis and structure of capital sources analysis:

- Structure of assets analysis is carried out by calculating and comparing the fluctuations of the mid-term period with the base period on the rate of each asset over total assets

+ Formula: Rate of each asset = (Value of each asset/total assets) x 100%

+ This indicator helps managers can evaluate the allocation of capital to each asset of corporation Through the structure of assets analysis, managers will understand the investment and using mobilized capital to maximize the profit of corporation

- Structure of capital sources analysis is carried out by calculating and comparing the fluctuations of the mid-term period with the base period on the rate

of each capital source over Total Working Capital

+ Formula: Rate of each capital source = (Value of each capital source/Total Working Capital) x 100%

+ This indicator helps managers can evaluate the structure of mobilized capital sources to understand the responsibilities of corporation in business

operation, the level of financial independence and the fluctuation trend of the structure mobilized capital sources

2.4.2 Analyzing the capital sources and the manufacturing business

To ensure the capital sources for business operation, corporation needs to mobilize the capital sources from the capital of the owners, loans capital, legal debts and other sources such as overdue debts, illegal appropriation of stakeholders All capital sources are allocated into two groups which are Regular Working Capital and Temporary Working Capital:

- Regular Working Capital is a source of capital that corporation can use regularly and long term in business operations It includes equity, loans, long-term debts and is invested to long-term assets, and the rest is invested to short-term assets The difference between Regular Working Capital and long-term assets or between Temporary Working Capital and short-term assets is called regular working capital

- Temporary Working Capital is a source of capital that corporation use to operate in a short-term It includes short-term debts, short-term loans, overdue loans and appropriations of stakeholders

 Analyzing the capital sources and the manufacturing business focus on analyzing the balance between assets and its corresponding capital sources

To analyze this sector, analysts use the following indicators:

- Temporary Working Capital ratio:

+ Formula: Temporary Working Capital ratio = Temporary Working Capital/Total Working Capital

+ This ratio shows that the proportion of the Temporary Working Capital over Total Working Capital and if this ratio is higher, indicating that the level of financial dependence is high so managers must be careful because they will meet disadvantages in making financial decisions

- Regular Working Capital ratio:

+ Formula: Regular Working Capital ratio = Regular Working Capital/ Total Working Capital

+ This ratio shows that the proportion of the Regular Working Capital over Total Working Capital and if this ratio is higher, indicating that the corporate financial is stable and it also promotes the business operation of corporation

- The Regular Working Capital to long-term assets ratio:

+ Formula: The Regular Working Capital to long-term assets ratio = Regular Working Capital/Long-term assets

+ This ratio shows that the proportion of Regular Working Capital over Long-term assets If this ratio is bigger than 1 so the stability and sustainability of the corporate financial is higher

- Current Ratio:

+ Formula: Current Ratio = Current Assets/Current Liabilities

+ This ratio shows that the proportion of current assets over current debts

If this ratio is bigger than 1 so the stability and sustainability of the corporate financial is higher

2.4.3 Analyzing the situation of receivables, payables and solvency of corporate

The situation of receivables, payables and solvency of corporate decides to implement payment obligations, the development of corporation, distribution profits This indicator also reflects the quality of financial management of corporation and the ability to pay debts

To analyze the situation of receivables, payables and solvency of corporate, analysts must use income statement, balance sheet, cash flow statement, presentation of financial statement and other data

a Analyze the situation of receivables, payables

- Ratio of receivables and payable debts:

+ Formula: Ratio of receivables and payable debts = (Total receivables/total payable debts) x 100%

+ This ratio reflects the relationship between receivables and payable debts

of corporation and it depends on business characteristics, business lines, ownership forms, financial mechanisms of corporation

+ This ratio is bigger than 100 percent so the capital source of the corporation is occupied too much In contrast, this ratio is smaller, indicating that corporation occupies a lot of capital sources But the corporation occupies or occupied also reflect the bad financial situation and affects the reputation and business performance of corporation

- Accounts Receivable Turnover Ratio:

+ Formula: Accounts Receivable Turnover Ratio = Net Credit Sales/ Average Accounts Receivables

+ This indicator shows how many times that the receivables turnover in the analysis period, if this indicator is higher so corporation recovers money in time, less capital appropriation However, this indicator is too high, so the payment method of corporation is too tight which will affect the volume of consumption goods This indicator shows the reasonable of receivables for each specific goods

of corporation in the market

- Day Sales Outstanding:

+ Formula: Day Sales Outstanding = (Account Receivables/Total credit Sales) x Number of Days

+ This indicator is smaller so the speed of money recovery is faster and less capital appropriation

+ Through analysis, analysts know the situation of recovering money of corporation, thereby promote the recovery solutions to stabilize the corporation financial and the duration of the analysis may be 90 days, 365 days

- Accounts Payable Turnover Ratio:

+ Formula: Accounts Payable Turnover Ratio = Net Credit Purchases /Average Accounts Payables

+ This indicator shows how many times that the payable turnover in the analysis period, if this indicator is higher so corporation pay debts in time, less capital appropriation However, if this indicator is too high so it will affect the using capital sources This indicator shows the reasonable of payables for each specific goods of corporation in the market

- Day Payable Outstanding:

+ Formula: Day Payable Outstanding = (Average Accounts Payable/ Cost

of Goods Sold) x Number of Days

+ This indicator is smaller so the speed of pay debts is faster and less capital appropriation

+ Through analysis, analysts know the situation of pay debts of corporation, thereby promote the mobilizing capital sources solutions to stabilize the corporation financial

b Analyze the solvency of corporate

 Ability to pay the short-term debts:

- The ability to pay the short-term debts ratio:

+ Formula: The ability to pay the short-term debts ratio = Total short-term assets/Total short-term debts

+ This indicator shows how the company can pay short-term debts and if this indicator is higher so the ability to pay the short-term debts of corporation is greater If this indicator is high so that a part of short-term assets is invested from

a stable source of regular capital, which is a factor that increases the autonomy in financial activities

- The Quick ratio:

+ Formula: The Quick ratio = (Current assets – Inventories)/Current Liabilities

+ This indicator shows how quickly that the corporation can pay the term debts and the ratio is high so the corporation can pay short-term debts quickly

short-However, if the ratio is too high and prolonged, it can lead to reduce the efficiency

of using capital

- The cash flow to debt ratio:

+ Formula: The cash flow to debt ratio = Cash flow from Business Operation/Total debt

+ This indicator shows the ability of the corporation can pay debt from the cash flow from business operation The ratio is higher so the ability of the corporation to pay the debt is higher

 Ability to pay the long-term debts:

- The Debt Ratio:

+ Formula: Debt Ratio = Total debts/Total assets

+ This indicator shows the ability to pay long-term debts with net value of fixed assets and long-term investments This ratio is higher so the ability of the corporation to pay long-term debts is greater and contributing to stabilizing the financial situation

- The Interest Cover Ratio:

+ Formula: The Interest Cover Ratio = PBIT/Interest charges

+ This indicator shows the ability of the corporation to pay the interest loans with profits from business operations If this ratio is larger than 1, it proves that the corporation obtain profits from business operations If this Ratio is smaller than

1, it proves that the corporation is loss from business operations and it affects to the ability to pay interest loans

- The Leverage Ratio:

+ Formula: The Leverage Ratio = Non-current liabilities/Capital employed + This indicator shows the percent of assets financed by loans If this ratio

is higher than 50 percent, it proves that the autonomy is lower, financial risk is higher

2.4.4 Analyzing the performance of corporate’s business

The performance of the corporate’s business is a general economic indicator reflecting the level of use of physical and financial resources of corporation to achieve the highest efficiency Business performance analysis is a basic content of financial analysis to help the corporation develops continuously Business performance of corporation is an indicator to evaluate business results of the corporation to increase competitiveness for corporation Analyzing the performance of corporate’s business based on some indicators as long-term assets, short-term assets, owners' equity, and loan capital, costs, etc

Evaluate the business performance to know business operations efficiency, business trends of corporations, affecting factors and it bases on some indicators such as return on assets, return on equity, return on investment capital, return on sales

- Return on assets:

+ Formula: Return on assets = Net income/Total assets

+ This indicator shows that corporation spend one unit of investment assets will make how much profit after taxes and the indicator is higher, it proves the good efficiency of using assets It helps corporation make a decision to invest in building factories, buying more machines and equipment, expanding market share

- Return on equity:

+ Formula: Return on equity = Net Income/Average of shareholders’ equity

+ This indicator shows that corporation spend one unit of owner’s equity will make how much profit after taxes and the indicator is higher, it proves the good efficiency of using owner’s equity It helps corporation make a decision to increase the owner’s equity

- Return on sales:

+ Formula: Return on Sales = Operating Profit/Net Sales

+ This indicator shows that corporation spend one unit of sales will make how much profit after taxes and the indicator is higher, it proves the good

efficiency of using cost It helps corporation make a decision to expand the market shares

- Earning per Share:

+ Formula: Earning per Share Ratio = Net Income – Preferred Dividends/End-of-Period Common Shares Outstanding

+ This indicator shows that how effective or profits the company operates,

if this ratio is higher, the more profitable it is considered

2.5 Process of analyzing the corporate financial management

2.5.1 Prepare for analyzing the corporate financial management

- Planning analysis: The analysis plan must be defined in terms of content, scope, time and organization of analysis

+ The analytical content should clearly identify the problems that are analyzed as a whole of financial activities or only specific issues

+ The scope of analysis can be all units or several units selected as points + The time includes preparation time and time for the analysis

+ Assign responsibilities

- Collect the documents: The documents used in the financial analysis are income statement, balance sheet, cash flow statement, presentation of financial statement.

2.5.2 Perform analysis

- Develop a system of indicators and analytical methods

- Determine the causes and effects of factors on the analysis indicator by quantitative and qualitative methods

- Determine and predict social factors affecting the financial situation of corporations

- Write a general analysis report

2.5.3 Complete the analysis

- Making the report of the analysis including situations, direction, solutions and recommendations

- After making the analysis report, analyst should provide information to users and put it into storage Analysis records include: Analysis report, the financial reporting system used, the documents of financial reporting system, etc

If analysts have a good preparation for analysis so the perform analysis will

be greater At that time, the results of analysis report bring to the corporation will

be larger influence

CHAPTER 3: ANALYZING THE FINANCIAL MANAGEMENT OF HOANG ANH GIA LAI

GROUP

3.1 Introduction of Hoang Anh Gia Lai Group

3.1.1 History of Hoang Anh Gia Lai Group

Hoang Anh Gia Lai Group (HAGL Group) is also known by its name as Hoang Anh Gia Lai Joint Stock company with trading code on HOSE stock market

is HAG Headquarter of HAGL Group is located at 15 Truong Chinh Road, Pleiku city, Gia Lai province with phone number is 084.059.382.00.12 and the website is www.hagl.com.vn

Formerly a small wooden workshop founded in 1993, HAGL Group has been developing for over 17 years and now become a private corporation operating

in many different fields Nowadays, HAGL Group has 36 companies and 4 affiliate companies focus on rubber, mineral, real estate, hydroelectric, wood and rock production and now with chartered capital of 9,274 billion VND and 49,206 billion VND of total assets, HAGL Group is one of the corporations with the largest charter capital and total assets With the advantages of large capital, human resources, abundant materials and long history, HAGL Group focuses on expanding investment in real estate business such as building commercial centers, high-class apartments office for lease, a chain of hotels and resorts to exploit the promising tourism potential These are all sectors with large investment rates, long exploitation time and high profitability for HAGL Group

Hoang Anh Gia Lai Group’s culture:

HAGL Group focuses on human resources because it is the cornerstone for the success of corporation To achieve the good and professional business environment for employees, HAGL Group has built the full process about labor safety, organize the training courses on occupational safety for employees, fully

equipped with labor protection clothing and support the cost of health testing Besides, HAGL Group also build some policies about recruitment, training, salary and wages

Recruitment and training policies:

HAGL Group recruit on evaluation about ability, experiences, degree for each position HAGL Group focuses on fairly opportunities,regardless of gender, religion or nationality Female employees are given the same conditions to work, develop their capacity and promote as men HAGL Group does not employ children of school age in the project areas

HAGL encourages and creates favorable conditions for employees to maximize their capabilities at work The Group regularly organizes training courses, inviting foreign experts on technical training in all fields to improve quality, enhance expertise and promote the potential available to each individual Determining long-term investment and development in your country, Hoang Anh Gia Lai Group has sent officials and students to study at Lao National Universities, Cambodia and Myanmar

Salary and Wages policies:

HAGL Group develops a remuneration policy based on the following criteria: capacity, work efficiency, level of contribution to the overall development

of HAGL Group All benefits, health insurance, social insurance, unemployment insurance are implemented by HAGL Group in accordance with the current provisions of the labor law of the host country In addition, employees also enjoy welfare regimes such as bonuses on major holidays, participation in tours, vacations, etc HAGL Group has a special remuneration policy for competent workers working in large cities voluntarily working in Pleiku City and project areas HAGL Group also supports shuttle and housing at the project to help employees feel secure in their work

3.1.2 Characteristics of business operations

Until now, business segments that bring the main revenue source for HAG are Real Estate, mining raw material production With the projects being implemented and exploited in many areas at present, revenue and profit of HAGL Group from operating is expected to increase dramatically next years

In real estate field, HAGL Group is doing well business and it bring back over 80 percent of HAGL Group’s revenue With the huge real estate projects and land funds, HAGL Group creates chain of apartments to sell to customers before the projects is complete and they can get profit from this and reinvests other projects as mining raw material, agriculture Besides selling the apartments, HAGL Group also operates a chain of resorts and hotels for travelling to maximize the profits based on their brand name HAGL Group’s resorts and hotel are located over the country from north to south of Vietnam But with the competitive of market from huge corporations as Vingroup, FLC Group in this fields, HAGL Group has a trouble to reach a market shares Thus, the net sales, profit after taxes and return of this field is quite low, so now HAGL Group is selling these chain actively in next times

In the mining raw materials field, HAGL Group has brand name for producing the joinery to export to some countries in Asia and Europe With the huge quantity of wood from many sources as self-plant and importing, HAGL Group produces the joinery can bring the net sales about 600,000 million VND every year Besides producing the joinery, HAGL Group also mines the granite and iron to supply for building their real estate projects so they do not need to import the material from other sources which can reduce the price to compete and maximize their profits

In the agriculture field, HAGL Group is investing in rubbers at Tay Nguyen and some countries in South East Asia as Laos, Cambodia Now, HAGL Group has total 47,122 hectares includes 4,972 hectares in Vietnam, 20,361 hectares in Laos and 21,789 hectares in Cambodia HAGL Group built and operated a rubber