Bài tập lớn môn kế toán ĐH Bách Khoa

 These are four important items that investors should pay attention on income statement as follow:1, Gross profit:  This section shows the profit of company after subtracting the dire

Student list:

Nguyen Hoang Bao Ngoc 2052614

Analyse Khang Dien’s financial

statements

HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY

School of Industrial Management

KHANG DIEN HOUSE TRADING AND INVESTMENT JOINT STOCK COMPANY

Consolidated financial statementsFor the year ended 31 December 2020

CONTENTS

Pages

INTRODUCTION

Financial statement analysis is the process of analyzing a company's financialstatements for decision-making purposes External stakeholders use it tounderstand the overall health of an organization as well as to evaluatefinancial performance and business value Internal constituents use it as amonitoring tool for managing the finances

Financial accounting calls for all companies to create a balance sheet, incomestatement, and cash flow statement which form the basis for financialstatement analysis

THE COMPANY

Khang Dien House Trading and Investment Joint Stock Company, togetherwith its subsidiaries, operates as a real estate investment and developmentcompany in Vietnam The company trades in and leases houses andwarehouses; constructs house for sale and lease; invests in the construction

of infrastructure projects; undertakes engineering and industrial constructionworks; and provides real-estate consulting and brokerage services

The Company’s shares were listed on the Ho Chi Minh City Stock Exchange(“HOSE”) with code KDH in accordance with Decision No 11/QD-SGDHCMissued by HOSE on 21 January 2010

The Company’s registered head office is located at Room 1 and 2, 11th Floor,Saigon Centre, 67 Le Loi Street, Ben Nghe Ward, District 1, Ho Chi Minh City,Vietnam

I, Analyze consolidated the income statement

that investors have to pay a close attention to Why? Discuss whether the company’s performance related to these items appeared to be improving, deteriorating, or remaining stable

 These are four important items that investors should pay attention on income statement as follow:

1, Gross profit:

 This section shows the profit of company after subtracting the directcost of earning that commonly named cost of good sold (COGS) or thecost associated with providing its services from revenue (sales)

 Most important measure to determine the financial performance of acompany It assess business’s efficiency by using its labor, raw materialand other supplies Thus, its increasing or decreasing over the timehelps company to find out the reasons causing a fluctuation This helpsthe business in taking corrective actions whenever pricing the products

or giving too much discounts

2, Net profit after tax

 This financial term used to indicate a company’ s profit or earningsafter all tax and expenses have been paid

 It used to provide an indication of the profitability of a company byafter-tax profit margin The higher after-tax margin is, the moreeffective the company runs Which determine the firm can provides itsinvestors and shareholders though dividends and share buyback Whenthis performance combines with other measure, it can accuratelydepict the overall health of a company

 Net profit represents the number of sales dollars remaining afterdeducting the following: All operating expenses, Interest, Taxes,Preferred stock dividends (but not common stock dividends) These arededucted from the company's total revenue and provide net profit

[Companies that increase net income have more cash to invest in the

company's future, pay dividends, and buyback stock.]

3, Earning per share (EPS)

 Which is an absolute important financial measure, which assess theprofitability of the business It is calculated by dividing the companynet income with its total common stock EPS index shows how muchmoney a company makes for each share It is also necessary for acompany to adjust for extraordinary items

 The higher a company’s EPS, the more profitable it would be Thus,investor will pay more for a company’s shares if the company hashigher profits per its share Beside that, investors should consider EPS

of a company to other competitors in order to make a more informedand prudent investment decision

4, Gross revenue and net revenue

 Gross revenue is the total amount of sales recognized for a reportingperiod before deducting all expenses This figure shows businesses’ability to generate sales and potential for growth

 Gross revenue demonstrates a company’s value to externalstakeholders Since gross revenue is a pure calculation of all theincome the business earned, investors or other stakeholders can seehow much money the company has earned Gross revenue can thendetermine if the company is a worthy investment

 Gross revenue and net revenue are often used to assess a company’sfinancial health Neither gross revenue and net revenue alone illustrate

a company’s performance well These metrics are best used together

 EVALUATE THE COMPANY PERFORMANCE

A common size on income statement is to express each item as a

percentage of total sales in order to standardize the income statement It

helps investor have a overview of company performance that they are

improving, deteriorating or remaining stable

Khang Dien House (KDH) Corporation Standardized Income statement in 2020

Items

(billions VNĐ)

2019 vs 2020

Common-size income

Commo n-base year income

Combin

ed Commo n-size and base income

Profitability ratios are financial metrics used by analysts and investors to

measure and evaluate the ability of a company to generate income (profit) relative

to revenue, balance sheet assets, operating costs, and shareholders’ equity during

a specific period of time They show how well a company utilizes its assets toproduce profit and value to shareholders

Khang Dien House (KDH)

Corporation

Financial ratio (%)

 In general, Khang Dien revenue in 2020 is 4,616 billions VNĐ, while the

common-base revenue is thus 1.62 It can show that the business is

expanding and representing a 62 percent increase Despite revenue increasegreatly, all expense also increase Thus net revenue decrease by 0.73%.

 32.21% is a profit margin of the company in 2019 compared to 25% in

2020 While the revenue increased 2 times, there is a significant decline onnet profit It illustrates that the company isn’t able to effectively provide itsproducts at a price s higher than its cost and mismanaged expenses There isnot much profit generating capacity of a business

 It is noticeable that the company experience the downward trend inEBIT margin over 2 years EBIT margin falls by 8.1% from 42.3% in 2019 to34.2% in 2020 It shows that, as mention above, the company ineffectivelymanage all operating costs, including cost of goods sold, selling andadministrative expenses of the business

Conclusion: 2020 marked the company’s success thanks to a 61% increase inrevenue Beside that, there are also mistakes in controlling the expenses.Overall, they are deteriorating in company performance but not significantly

II, Analyze consolidated balance sheet

that investors have to pay a close attention to Why? Discuss whether the company’s performance related to these items appeared to be improving, deteriorating, or remaining stable

1 Total asset

 In general, the total assets of Khang Dien Group in 2020 compared to

2019 increased to VND 697147167, accounting for 5% Total assetsincreased although short-term assets decreased 363721390 accountingfor 8.6% but long-term assets increased 193807 accounting for 0.2%.Despite the difference, the increase in total assets shows that Khang DienGroup is developing and expanding in scale

 Total assets increased mainly due to the cash and cash equivalentsincreased by 56%, Inventory increased by 4%, and other revenuesincreased slightly

 Conclusion: The asset structure of enterprises tends to decrease

short-term assets and increase long-short-term assets.

2 Liabilites

 In general, the liabilities of Khang Dien Group in 2020 compared to 2019increased to VND 20340732, accounting for 3.5% Liabilities increasedbecause Non-Current-Liabilities increased sharply by approximately 500million VND, accounting for 50%, although Current-Liabilities decreasedslightly by 363721390 VND, accounting for 8.6% Liabilities increasedcompared to the previous year, but Khang Dien's economic situation isstill growing, showing that this debt is for investment

3 Cash and cash equivalents

In general, Khang Dien's cash increased in 2020 compared to 2019 Cash andcash equivalents increased by approximately 660 million VND, equivalent to36% Specifically, the increase in cash and cash equivalents was due to asharp increase in Cash Equivalents of about VND 731 million, equivalent to50%, although Cash decreased slightly by VND 70 million, equivalent to arate of 19%

 EVALUATE THE COMPANY PERFORMANCE

Khang Dien House (KDH)

 Overall, there is some happy middle ground where the debt ratio is nottoo high for creditors but not too low for investors The general rule of thumbacross all industries is that debt ratios should be around 50% In 2020, if thecompany wants to use 1 dong of capital, the company has to borrow VND0.4225 from outside This ratio has decreased by 2.15% compared to 2019showing that the Company's debt payment ability is getting better andbetter

 Current ratio: went up from 1.2 to 1.4 This ratio was improved due to

an

increase in cash and cash equivalent for business activities It illustrates thatthe company’s ability ensure secure and available liquidity to pay short-termcompensation and site clearance

 Short-term assets are enough to cover short-term liabilities of KhangDien, but are low and tend to decrease over the years with short-term debtsolvency ratio decreasing from 3.09 (end of 2019) to 2, 69 (end of 2020).Considering Quick ratio is good, both at threshold better than 1, showing thatKhang Dien's ability to convert assets into cash to cover debts is good

 Positive growth was maintained with ROS reaching 25% and ROAreaching 8%, remarkably ROE extended from 12% to 14% despite theincrease in owner’s equity because the company achieved profit growth

Conclusion: Thereby, it shows that the economic growth of Khang Diencompany is increasing year by year and the company has a policy of beingable to pay dividends from shareholders as well as designated amounts tocompensate cover any loss And the company's ability to control cash flow isgood Increasing cash equivalents indicate that the company's short-terminvestments have maturities of no more than 3 months, with good controland good debt solvency

III Analyze the firm’s investing and financing activities in cash flows statement.

Discuss whether you agree or disagree with the investing and financingstrategies that your company appears to be employing

3.1 Cash flows from investing activities

3.1a General comment about 2020:

In 2020, the company had positive net cash flows from investing activities,about 11B VND Cash was received by collection term deposits, sale of fixedassets and interest received Although 47 percent of receipt of cash camefrom collection of term deposits (which was a factor that createdunsustainable capital growth), 53 percent of receipt of cash came frominterest received (which was a factor that created safe capital growth) Theamount of interest received was not greater than that of purchase andconstruction of fixed assets and other long-term assets but it accounted forabout 77 percent of cash spent on these assets

In sum, it was impossible to infer whether the company had unsafe or safecapital growth partly because the expenditure on fixed assets and otherlong-term assets decreased, with 48B (compared with 200B in previous year)

3.1b Analysis changes from 2019 to 2020

Net cash flows used in 2019 was at 200B VND but the situation changes in

2020 About 11B VND of net cash flows received from investing activities in

2020 The significant change was likely attributable to the two criticalactivities that were purchase and construction of fixed assets and other long-term assets and payment of term deposits Spending on fixed and long-termassets decreased dramatically from 234B VND in previous year to 48B VND

in current year, by nearly 80 percent In addition, the company did not send

money to the bank in 2020, therefore, there was a hundred percent decline

in payment of term deposits (from 92B VND to 0 VND)

In general, the company spent slightly on investing in other entities (at about9.6B VND) while reduced remarkably in expenditure on long-term assets Inour opinion, the company can rise investment in long-term assets orpayment of deposits even if the net cash flow is negative It shows that theproduction capacity and business capacity of the enterprise are on the trend

of development It is also necessary to analyze in detail the business status

of the investee to make a reasonable assessment of the possibility of profitand loss in the following year

Items Current year

Previous year Change

Change (%) CASH FLOW FROM INVESTING ACTIVITIES

Purchase and construction of fixed assets

and other long-term assets

(48,030,51 1)

(234,743,6 60)

186,713,1

Proceeds from disposal of fixed assets 102,000 - 102,000

Payment of term deposits

-

(92,490,64 1)

92,490,64

Collection of term deposits 32,490,641 60,000,000

(27,509,35

Payment for investments in other entities (9,600,000) -

(9,600,000 )

Interest received

36,854,149

66,422,658

(29,568,50

Net cash flows from (used in) investing

activities

11,816,27

9

(200,811, 643)

212,627,

922

3.2 Cash flows from financing activities

3.2a General comment about 2020:

In 2020, the company had positive cash flow from financing activities, about486B VND Majority of cash flow in was from drawdown of borrowings, at2,019B VND This amount was much greater than the amount of repayment

of borrowings and payment of dividend The company increased its equityand borrowed from banks to expand its scale, and at the same timeproactively paid off the loan principal at 956B VND to reduce the proportionand value of loans However, the borrowed amount was more than therepayment amount, so the solvency risk was also worth paying attention to

3.2b Analysis changes from 2019 to 2020

Items

Current year

Previous year Change

Change (%) CASH FLOW FROM FINANCING

ACTIVITIES

- Issuance of new shares

104,000,00

0 96,500,000 7,500,000 8%Capital contribution from

non-controlling interests 1,020,000 - 1,020,000

Repurchase of issued shares

(419,064,794) -

(419,064,794)

Drawdown of borrowings

2,019,565,

003

534,764,08

0

1,484,800,

Repayment of borrowings

(956,905,152)

(720,624,757)

(236,280,3

Dividend paid

(262,289,235)

(207,011,676)

(55,277,55

Net cash flows from (used in) financing

activities

486,325,8

22

(296,372, 353)

782,698,1

75

About 296B VND of net cash flows used in financing activities in 2019,however, in 2020, net cash flows received was at 486B VND The noticeablechange was likely attributable to the two critical activities that weredrawdown of borrowings and repurchase of issued shares Drawdown ofborrowings increased substantially by about 278 percent, with a range from534B VND to 2,019B VND In terms of repurchase of issued shares, cashspent on it increased to 419B VND corresponding to nearly a quarter of cashreceived from drawdown of borrowings In addition, cash using in repayment

of borrowings rose by 236B VND corresponding to 33 percent Meanwhile,there was a slight growth the payment of dividend and the receipt ofissuance of new share, about 27 percent and 8 percent respectively