Luận văn hv chính sách và phát triển financial statement analysis at song minh development investment joint stock company in the period of 2018 2020

Financial statement analysis at SONG MINH Development Investment Join Stock Company in the period of 2018-2020 .... In order to expand and develop over time, Song minh Development Inves

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ACADEMY OF POLICY AND DEVELOPMENT

INTERNATIONAL SCHOOL OF ECONOMICS AND FINANCE

Hanoi, Jun 2021

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ACADEMY OF POLICY AND DEVELOPMENT

INTERNATIONAL SCHOOL OF ECONOMICS AND FINANCE

Hanoi, Jun 2021

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ACKNOWLEDGEMENTS

SONG MINH Development Investment Joint Stock Company gave me a lot of experience on construction and the documents related to the company’s privacy I would like to thank and wish SONG MINH Development Investment Joint Stock Company success in the future

I would like to thank the Academy of Development and Policy for giving

me the opportunity to participate in a reality project and let me learn valuable knowledge in the 4 year-period

Finally, I would like to thank Mrs Dang Thuy Nhung for following closely and helping me to edit and build this thesis from the most basic stages

to the details so that I can complete the thesis

Thank you sincerely!

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Table Categories

Table 1.1: Contracts that the company get involved 25

Table 2.1: Balance sheet 35

Table 2.2 Income statement 44

Table 2.3 Cash flow statement 47

Table 2.4: Short term solvency ratios 50

Table 2.5: Long-term solvency ratios 52

Table 2.6: Asset utilization ratios 54

Table 2.7: Profitability ratios 55

Table 2.8 DuPont Analysis 57

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Charts, Pictures Categories

Pictures 1.1: Organizational structure 26

Picture 1.2: Business orientation of SONG MINH 29

Chart 2.1 Assets, Liabilities and Owners' Equity structure of Song Minh 39

Chart 2.2 Current assets structure of Song Minh 41

Chart 2.3 Liabilities and Owners’ Equity structure of Song Minh structure of Song Minh 42

Chart 2.4 Short term solvency ratios 50

Chart 2.5 Long term solvency ratios 52

Chart 2.6 Asset utilization ratios 54

Chart 2.7 Profitability ratios 55

Chart 2.8 DuPont Analysis 59

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Table of Contents

OVERVIEW OF THE RESEARCH PROJECT 1

CHAPTER 1: LITERATURE REVIEW ON FINANCIAL STATEMENT ANALYSIS 3

1.1 Overview of financial statements 3

1.1.1 Definition of financial statements 3

1.1.2 Functions of financial statements 3

1.1.3 Categories of financial statement 4

1.2 Overview of the financial statements analysis 6

1.2.1 Definition of financial statements analysis 7

1.2.2 Roles of financial statements analysis 7

1.2.3 Process of financial statement analysis – EIC analysis 8

1.2.4 Financial statements analysis methods 10

1.3 Factors affecting financial statements analysis 20

1.3.1 Subjective factor 20

1.3.2 Objective factor 21

CHAPTER 2: FINANCIAL STATEMENT ANALYSIS OF SONG MINH DEVELOPMENT INVESTMENT JSC.’S FROM 2018 TO 2020 22

2.1 Overview of SONG MINH Development Investment Join Stock Company 22

2.1.1 Establishment and Development 22

2.1.2 Functions and areas of activity 23

2.1.3 Organizational structure 26

2.1.4 Business orientation of SONG MINH Development Investment Join Stock Company toward 2030 27

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2.2 Financial statement analysis at SONG MINH Development

Investment Join Stock Company in the period of 2018-2020 29

2.2.1 EIC analysis 29

2.2.2 Balance sheet analysis 35

2.2.3 Income statement analysis 43

2.2.4 Cash flow statement analysis 47

2.2.5 Ratio analysis 49

2.2.6 DuPont identity 57

2.3 Assessment 59

2.3.1 Advantages 59

2.3.2 Limitations 60

CHAPTER 3: SOLUTIONS TO IMPROVE THE FINANCIAL SITUATIONS OF SONG MINH DEVELOPMENT INVESTMENT JSC TOWARD 2025 63

3.1 Economic Background towards 2025 63

3.2 SWOT analysis 65

3.3 Solutions to improve the financial situations of Song minh Development Investment Join Stock Company 67

3.3.1 Solution for the inefficient in generating profits 67

3.3.2 Solution for lack of short-term receivable management 69

CONCLUSION 71

REFERENCES 72

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OVERVIEW OF THE RESEARCH PROJECT

1 Origin of the study:

In the continuous development of the country's economy, the field of construction, technical infrastructure and transportation, is an important area not only for the country but also especially important to large, small businesses,

at home or abroad With the repair of infrastructure, a large number of companies can face many obstacles when doing this work when they do not know how to improve, repair as well as related regulations There are a few subsidiaries formed by large cooperation with expertise related to construction, infrastructure, and transportation However, it is extremely difficult for both small domestic and foreign companies to work directly in this field Companies will spend a lot of time and resources to improve their understanding of construction fields, technical infrastructure, and not only that it can also cause obstacles to the development of companies, enterprise Therefore, the development of construction companies is becoming bigger and bigger

In order to expand and develop over time, Song minh Development Investment Joint Stock Company needs to use the Financial statement analysis This would help to understand more about its financial situation, the operation and figure out the weakness and then create several solutions fit to the company situation With the understanding about the importance of financial statement

analysis, I chose the graduation thesis topic “Financial statement analysis at Song minh Development Investment Joint Stock Company in the period of 2018-2020”

2 Objective of the Study

Object of the Study is:

- Common goal: analyzing the financial situation of Song minh Development Investment Joint Stock Company in the period of 2018-

2020

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- Detail goals: the detail goals include 3 main aspects:

o Literature review on financial statements analysis

o Financial statement analysis of Song Minh Song minh Development Investment Joint Stock Company in 2018-2020

o Solutions to improve the financial situations of Song minh Development Investment Joint Stock Company toward 2025

3 Scope of the Study

- Space of research: Song minh Development Investment Joint Stock Company

- Time implement assess: 2018- 2020

- Time implement resolve: 2021- 2025

- Content of research:

- The subject of research: Financial activities at Song minh Development Investment Join Stock Company

- The objective of research: Financial activities

4 Research Methodology of the study

- Data collection method: collect the information through the financial statement and further documents about Song Minh

- Processing data method: process the correct data from financial statements and further documents about Song Minh for the analysis

- Using analysis methods: EIC analysis, common-size analysis, trend analysis, ratio analysis, DuPont identity

5 Structure of the study

The graduation thesis consists 3 chapter:

- Chapter 1: Literature review on financial statement analysis

- Chapter 2: Financial statement analysis at Song minh Development Investment Join Stock Company in the period of 2018-2020

- Chapter 3: Solutions to improve the financial situations at Song minh Development Investment Joint Stock Company

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CHAPTER 1: LITERATURE REVIEW

ON FINANCIAL STATEMENT ANALYSIS

1.1 Overview of financial statements

1.1.1 Definition of financial statements

According to the Institute of Certified Public Accountants (AICPA): “The financial statement is created for the purpose of periodically evaluating or reporting about the investing situation and the result achieved The financial statement system reflects the combination of recorded events, accounting principles and the evaluation apply mainly on noting the events

According to Vietnam Accounting system (2010), Financial statement is

a kind of accounting report, reflecting a general overview of assets situation, capital, the situation and result of a firm’s business activities in a specific period

of time With that, Financial statements not only provide the necessary for the outsiders of the company like: investors, creditors, tax organization, … but also provide the information for the firm manager, help them evaluate, analyze the financial situation like the results of the firm production activities Financial statement is a combination of a balance sheet, income statement, cash flow statement and notes

According to the scope of the study, the author applies the definition for financial statements from Viet Nam Accounting system (2010) in this thesis

1.1.2 Functions of financial statements

According to Nguyen Nang Phuc (2009), financial statements play a really important role in analyzing the financial activities of the company In addition,

it is also important to business operations All of that are express to several key opponents:

- The financial statement provides an overview about the economy and finance, this helps in analysis of the situation and the outcome of productivity, it also analyzes the current financial situation of the company

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over a period of time In that perspective, this helps to check, supervise the use of capital and the abilities to increase it on productivity Financial statement also evaluates the execution of the company’s financial economic policy

- The information on the financial statement is the important base of the analysis, it also discovers the potential of the economy With that info, it can give several forecasts on the productivity situation and the development trend of the company That is the important info to base on, that helps the company make its decision on operation and productivity, this info also helps the investor, the creditor, future stockholder make their decision too

- Financial statement provides helpful info on analysis of the asset, equity situation, the situations and results productivity on a specific period of time and the current financial situation of the company like: the movement, the size of the company’s asset and capital structure, payment capacity of the company, …

- The data on financial statements are an important base in order to calculate the further economic ratios, this number will then help evaluate and analyze the efficiency in productivity, the use of capital

1.1.3 Categories of financial statement

In the financial statement categories, there are a lot of different kinds of reports, sheets and statements, but for the wide use of investors, managers, … These are four of the most familiar when talking about financial statement:

1.1.3.1 Balance sheet

- Definition:

According to “FSA Gibson 12e”, The balance sheet is a photo from the accountant of firm’s financial position by the control on the company’s resources, which is from its asset generated by owner’s equity and liabilities on

to call for capital on the company’s productivity in the future

1.1.3.2 Income statement

- Definition:

According to “FSA Gibson 12e”, The income statement is the movie about the activities of the firm from the time its start to the end of a period It collects the info about revenues and expenses, gain and loss, and close with the amount

of net income Additionally, the accounting equation for the income statement is:

Revenue – Expenses = Income

- Function:

The income statement: According to “FSA Gibson 12e”, it provides information about the productivity results of the company in a specific period

of time, provides information about the current financial duty of the company

to the government From the number analysis of the income statement, it helps the company’ management, helps the ones use the information to evaluate the changing potential about the economic resources which the company could control in the future, evaluate the profit generated and the effectiveness of using the added resources, which the company could use

- Function:

Cash flow statement: According to “FSA Gibson 12e”, it provides the information about the financial fluctuation in the company, help analyze the investment, financial and business activities of the firm, in order to evaluate the abilities to create cash flow and cash equivalent in the future, as well as using this resources for further business activities, financial investment of the firm

1.1.3.4 Notes

- Definition:

According to “FSA Gibson 12e”, The notes to the financial statements are

an integral part of the financial statements The notes to the financial statements are the explanation and the added complicated information from balance sheet, income statement, cash flow statement

- Function:

Notes to the financial statements: According to “FSA Gibson 12e”, it provides the more detailed information on the business production situation, financial situation of the company, helps the analysis to be more detailed in several parts and reflects the financial situation that the financial statement does not provide

1.2 Overview of the financial statements analysis

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1.2.1 Definition of financial statements analysis

According to Nguyen Nang Phuc (2009), Financial statements analysis is the process of considering, checking, contrasting and comparing the date about finance in current time to the period of time in the past The financial statements analysis might provide to the information user the info on evaluating the potential, the business efficiency, also the financial risk of the firm in the future

1.2.2 Roles of financial statements analysis

According to Nguyen Nang Phuc (2009), The basic purpose of the financial statements analysis is providing the necessary information, to help the information users see through an objective evaluation about the financial power, the abilities to generate profit and further development in business production of the firm With that, financial statements analysis is attractive to many people, who use the data differently, like: the board of directors, investors, creditors, suppliers, stockholders in the present and future, customers, insurances, workers, … Every subject using the information of the firm has different needs about different information Through that, every subjects that uses the information tends to focus on many different angles of the firm’s “the financial picture”

In order to achieve the basic purpose of the financial statements analysis, the role of it is reflected to several following aspects:

- Financial statements analysis must provide the full information, which is useful for the investors, lenders and other people for different info to help them make the right decision on investing or lending

- Financial statements analysis must provide the full information to the firm’s owner, investors, lenders, other people for different info on evaluating the abilities and the assurance of the cash flow coming in and out, the efficiency of using its assets, the situation and the payment capacity of the company

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- Financial statements analysis must provide the information about the owner’s equity, debts, results of the production activities, events and situations that can make a change in the capital and debts of the firm The regularity of the financial statements analysis is understandable, its help the corporate governance saw the picture of the current financial situation clearer, confirm and see the drawback, the stage of effect from the firm’s financial situation From that, provide useful solutions to stabilize and build up the financial situation

1.2.3 Process of financial statement analysis – EIC analysis

There are a large number of ways to analyze the financial statement but one of the most popular methods is the EIC analysis (top down EIC) EIC Analysis stands for Economic Industry Company Analysis The acronym EIC stands for economic, industrial, and corporate analysis The individual conducting the EIC analysis looks at the entire economy and then determines which industries are the most appealing in light of the current economic situation Finally, the analyst highlights the most appealing companies within the appealing industry

1.2.3.1 Economy analysis

The economy analysis is the understanding of important economic parts affecting the business activities, industry, region, … of the economy through the eyes of experts This process is based on the real activity and the whole economy conditions With this, the company can make better decisions The economy analysis provides information on several aspects like inflation rate, exchange rate, … Every firm can be impacted by external factors

So in order to recognize the factors outside either it is opportunities or threats, the company should have an in-depth look at the evaluation of the economics element

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A large number of companies tend to invest in organizing the plan for everyone to two times and play several economic scenarios in mind for 2 or 3 year times After that, the company will analyze each scenario in order to know which of these situations can affect the company A specific project can be evaluated to match the economic situation and financial feasibility by the economic analysis

The analysis also gives the owner of the company a detail situation on the current economic environment and helps the company see its ability on development With this, the vision over the market strengths and weaknesses

1.2.3.2 Industry analysis

Industry analysis is the process of understanding and evaluating one specific business industry from the market supply and demand, the level of competitiveness in the industry, future potential and the effect from the external components… In the process of evaluating and selecting stock, industry analysis is one of the most important parts because it provides an in-depth look

at the production environment, the benefit over other competitors, the chance

of development and the financial risk of the firm

Industry analysis has an important role in basic investment method:

- The understanding of the business structure and business environment of the company: it provides an in-depth look at the production environment, the benefit over other competition, the chance of development and the financial risk of the firm With the credit analysis, Industry analysis helps evaluate the abilities to pay out the debts

- Evaluate the opportunities with efficiency: the investor can perform a down investment method through Industry analysis in order to identify the potential for the growth of profit and development of the industry

top Portfolio diversified: Industry analysis helps the portfolio manager to select industries and fields in order to maximize the investment

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1.2.3.3 Company analysis

Company analysis is a process that includes financial situation analysis, goods and services analysis and the competitive strategy of the company Company analysis will be started after the analyst figures out the external factors, macroeconomics, demographic, government, technology and society that can impact the industry competitively

The function of Company analysis is:

- Provide the overview of the company, including: the basic understanding about business activities, investment activities, corporate management and the strength and weakness of the company

- Explain characteristics relevant to the industry which the company operates in

- Analyze the need for goods and services of the company

- Analyze the goods and services supply, including analyzing the expenses

- Analyze the factors affecting the price of a company’s goods and services

- Explain the financial ratio, compare in time and competitors

Company analysis usually include forecasting the financial statement, especially when its purpose is the company valuation

1.2.4 Financial statements analysis methods

1.2.4.1 Common-Size analysis (vertical analysis)

According to Investopedia, the approach of evaluating financial information known as common-size analysis involves representing each item

in a financial statement as a percentage of a base amount for the same time period This examination can be used for a company's balance sheet or income statement

In Common-Size analysis, the following equations is used:

Common Size Amount = (Analysis Amount / Base Amount) x 100%

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When one item is compared to the base item, a vertical analysis of items from the company's statements is performed Vertical is commonly applied for

a single period Common-Size calculates the weight from each segment divided

by the overall amount like total asset, total liabilities, …

Common-Size analysis helps the user see clearer the factors that push the company’s profit Additionally, it also helps highlight the factors affecting the financial situation of the firm The financial statement users can easily compare the financial performance with the company in the same industry

This method also helps investors figure out the trend that standard financial statements might not find out Common-Size analysis helps highlight any trend in a single period, despite it being a negative or positive thing

1.2.4.2 Trend Analysis (horizontal analysis)

According to Investopedia, Horizontal analysis is a type of financial statement analysis that compares historical data across many accounting periods, such as ratios or line items Horizontal analysis can utilize absolute or percentage comparisons, with the figures in each subsequent period given as a percentage of the baseline year's value, with the baseline amount indicated as

100 percent

If you use horizontal analysis on a company's financial data, it's easy to predict its development and success The goal of the horizontal analysis is to predict the dynamics

1.2.4.3 Ratio Analysis

According to Stephen Ross (2011), Ratio Analysis is a quantitative method in order to understand more about the liquidity, the efficiency in operation and the firm’s profit with the data on financial statements

Investors and analysts use Ratio Analysis to evaluate financial performance of the company This can be seen through the past and financial

a) Short-term solvency or liquidity ratios:

Liquidity ratios is the evaluating of a firm’s abilities to turn assets into cash and the abilities to make cash in order to meet the upcoming debts in a short period of time (1 year) Liquidity ratios analysis must be considered fully and comprehensive about current payment

Liquidity ratios are particularly relevant to short-term creditors for obvious reasons Understanding these ratios is critical for financial managers who engage with banks and other short-term lenders on a regular basis One benefit of examining current assets and liabilities is that their book and market values are likely to be comparable These assets and liabilities simply do not live long enough to become significantly out of sync Current assets and liabilities, like any sort of near-cash, can and can change quickly, thus today's values may not be a trustworthy indication to the future

A current ratio of at least 1 is expected unless there are exceptional circumstances; a current ratio of less than 1 indicates that net working capital (current assets less current liabilities) is negative

It is unrealistic to expect a corporation to have enough cash equivalents and marketable securities to meet current liabilities, so analysts rarely give the cash ratio much weight when analyzing a firm's liquidity If the company is forced to rely on cash equivalents and marketable securities for funding, Its cash and solvency could be jeopardized

b) Long-term solvency or financial leverage ratios

Long-term solvency ratios are used to assess a company's capacity to meet its debts in the long run, or, more broadly, its financial leverage Financial leverage ratios, or simply leverage ratios, are two terms used to describe these ratios Three regularly used measurements, as well as several modifications, are examined

 Total debt ratio:

it

The total-debt-to-total-assets ratio indicates how much debt has been utilized to fund a company's assets The computation takes into account all of the company's debt, not simply its payable loans and bonds, as well as all assets, including intangibles

When a company's total debt-to-total-assets ratio is 0.4, creditors finance 40% of the company's assets, while owners (shareholders) equity funds 60%

 Debt- equity ratio:

DEBT- EQUITY RATIO = 𝐓𝐨𝐭𝐚𝐥 𝐝𝐞𝐛𝐭

Higher leverage ratios typically imply a company or stock that poses a greater risk to investors The D/E ratio, on the other hand, is difficult to evaluate across sector groupings because acceptable debt levels vary Because the risks associated with long-term liabilities differ from those associated with short-

A high equity multiplier, in general, suggests that a corporation is heavily reliant on debt to fund its assets When the equity multiplier is low, the corporation relies less on debt

However, the equity multiplier of a firm may only be compared to historical standards, industry averages, or the business's peers to determine whether it is high or low

 Times interest earned ratio:

TIMES INTEREST EARNED RATIO = 𝐄𝐁𝐈𝐓

𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭

The TIE ratio is a measure of a company's capacity to meet its debt commitments based on current income Earnings before interest and taxes (EBIT) divided by total interest payable on bonds and other debt is the formula for calculating a company's TIE number

The outcome is a number that indicates how many times a company's pretax earnings could pay its interest expenses

The TIE of a corporation reveals its ability to repay its debts

A higher TIE score indicates that a corporation has sufficient cash after paying its obligations to continue investing in the firm

c) Assets management or turnover ratios

 Total asset turnover:

TOTAL ASSET TURNOVER = 𝐒𝐚𝐥𝐞𝐬

𝐓𝐨𝐭𝐚𝐥 𝐚𝐬𝐬𝐞𝐭𝐬

The asset turnover ratio compares the value of a company's assets to the value of its sales or revenues The asset turnover ratio is a metric that measures how effectively a corporation uses its assets to produce income

A company's ability to generate revenue from its assets is measured by its asset turnover ratio The higher the asset turnover ratio, the more efficient it is

A low asset turnover ratio, on the other hand, suggests that a corporation is not effectively leveraging its assets to produce revenues

This indicator aids investors in determining how efficiently businesses use their assets to create revenue The asset turnover ratio is used by investors to compare companies in the same sector or group Large asset sales as well as considerable asset purchases in a given year can have an impact on a company's asset turnover ratio

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Inventory turnover calculations can allow firms to make better decisions about the price, production, marketing and acquisition of fresh inventories Low sales and maybe extra inventory mean slow turnover, while a quicker ratio involves strong sales and insufficient inventory The largest inventories turnover tends to be high-volume, low-margin sectors, such shops and supermarkets

The receivables turnover ratio is an accounting metric that determines how efficient a firm is in collecting its accounts receivable, or money owed by customers or clients This ratio assesses how successfully a firm manages and uses the credit it gives to consumers, as well as how fast that debt is recovered and paid A company with a high accounts receivable turnover ratio is one that

is efficient in collecting payments due

Comparing a company's ratio to that of its counterparts in the same industry might help determine if it is competitive

A high receivables turnover ratio may suggest that a firm's accounts receivable collection is effective and that the firm has a large number of high-quality customers who pay their bills on time

Inefficient collection, poor credit procedures, or clients that are not financially viable or creditworthy might all contribute to a low receivables turnover ratio

d) Profitability ratios

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Profitability ratios are a group of financial indicators that are used to evaluate a company's capacity to create profit over time in relation to its revenue, operational costs, balance sheet assets, or shareholders' equity, utilizing data from a certain moment in time

Higher ratio outcomes are typically more beneficial, but when compared

to the outcomes of similar firms, the company's own previous performance, or the industry average, these ratios reveal considerably more information

 Net profit margin:

NET PROFIT MARGIN = 𝐍𝐞𝐭 𝐈𝐧𝐜𝐨𝐦𝐞

𝐒𝐚𝐥𝐞𝐬 (unit:%)

The net profit margin, sometimes can be called as net margin, is a percentage of sales that reflects how much net income or profit is created It is the ratio of a company's or business segment's net profits to revenues The net profit margin is usually reported as a percentage, but it can also be stated as a decimal The net profit margin shows how much profit a firm makes out of each dollar of revenue it receives

Investors can use the net profit margin to see if a company's management

is making enough money from its sales and if operational and overhead costs are under control One of the most crucial indications of a company's overall financial health is its net profit margin

If a ROE is judged adequate, it will be determined by what is regarded as usual in the industry or among firm peers

ROE may be used to estimate sustainable growth rates and dividend growth rates, assuming that the ratio is broadly in line with or slightly over its peer group average Although there are certain drawbacks, ROE can be a decent place to start when estimating a stock's growth rate and dividend growth rate in the future

1.2.4.4 DuPont Identity

The DuPont identity is an approach to assessing basic performance pioneered by DuPont DuPont analysis is a strategy for dissecting the many sources of return on equity (ROE) The deconstruction of ROE allows investors

to focus on particular important financial parameters to find strengths and problems

The DuPont analysis, pioneered by the DuPont Corporation, is a paradigm for assessing basic performance DuPont analysis is a strategy for dissecting the many sources of return on equity (ROE)

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This type of study may be used by an investor to evaluate the operational efficiency of two similar companies DuPont analysis may be used by managers

to discover strengths and flaws that need to be addressed

The DuPont analysis is an expanded return on equity formula, calculated by:

ROE = Profit margin x Asset turnover x Equity multiplier

Given the DuPont identity, it appears that the ROE may be boosted by raising the amount of debt held by the company However, keep in mind that growing debt raises interest expenditure, which lowers profit margins and lowers ROE As a result, ROE may increase or decrease depending on the situation More importantly, the use of debt financing has a variety of additional consequences and a company's capital structure strategy determines how much leverage it utilizes

The analysis of ROE is a useful method for tackling financial statement analysis in a methodical manner

1.3 Factors affecting financial statements analysis

1.3.1 Subjective factor

According to Michael (2016), external elements that influence the study

of a company's financial status include the political and social environment, economic growth rate, scientific and technological advancements, monetary policy, and so on can be called the Subjective factors

Growth motivation and Direct conduct can be influenced by subjective factors Despite the fact that objective factors only influence subjective impressions in part, they can have a significant direct impact on outcomes There are 3 external factors that have connections with each other: industry environment, national environment and macroeconomic

The industry analysis environment needs to evaluate the competitive structure of that industry, including the competitive position of the company

The macroeconomic analysis also needs to be considered The company needs to consider the macroeconomic factors, social situation, government, national policy, international and technological advancements that can make an impact on the firm

1.3.2 Objective factor

According to Michael (2016), internal elements that belong to the company organization are referred to as objective factors The objective factor analysis can help point out the strengths and weaknesses of the firm It would help figure out the way for the company to maximize its benefits and the function of the differences in abilities, the capital and the abilities to create, keep a stable benefit In conclusion, to create and keep a stable benefit over others, the company needs to have efficiency in operation, top-notch product development over time and responsibilities to customers The strengths will help the company stand out in its field, but opposite that, the weakness will lead

to poor performance

2.1.1 Establishment and Development

SONG MINH Development Investment Joint Stock Company (SONGMINH DEI., JSC) is a collection of dynamic architects and engineers together with a team of consultants and experienced workers in the construction field, technical infrastructure, trading, transportation The Company’s operating model follows a flat structure with each member as the basis for forming the strength of the whole Company

Up to now, the company has been directly involved in the design of many medium and large-scale projects, key projects of the projects of the province as well as outside the province Facing the market mechanism and the innovation

of the country, the company has continuously improved the technical qualifications and professional skills in management and designed the staff to achieve greater efficiency This has made the company to become a trustworthy company in the industry and a strong standing company in the market The projects proceeded by the company are of high quality and right on progress, meeting many high requirements of investors, so investors inside and outside the province are satisfied and appreciated

- Address of head office: Number 46, Alley 81, Trung Kinh street, Trung Hoa ward, Cau Giay district, Hanoi city

- Phone: 0961086688

- Email: lethuan1601@gmail.com

- Representative:

 Mr.: Le Van Thuan

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 Position: General Director of the Company

 Certificate of Business Registration: No 0107983426 issued by the Business Registration Office - Department of Planning and Investment of Hanoi City on September 1, 2017

- Total years of experience in the construction industry: 04 years

- Charter capital: 10,000,000,000 VND (ten billion VND)

2.1.2 Functions and areas of activity

The main industry that the company invests vastly on is Construction, exploitation and repair of large and medium sized projects There have been 5 huge main projects, one was already finished and there were still three on the horizon of finishing

The company also sign up for several different sector:

- Producing gas, distributing gas fuel by mains

- Exploiting, treating and supplying water

- Wastewater treatment and drainage

- Collecting, treatment and disposal of non-toxic and toxic waste

- Recycling of scrap

- Treating pollution and other waste management activities

- Construction and Demolition of railway and road works, public utility and other civil engineering

- Prepare surface in construction

- Installation of electrical systems, water supply and drainage, heating and air-conditioning, other construction systems

- Other specialized construction activities

- Wholesale of cars and other motor vehicles

- Retail sale of small cars (with 12 seats or less);

- Car dealerships and other motor vehicles

- Maintenance and repair of cars and other motor vehicles

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- Selling spare parts and accessories of cars and other motor vehicles

- Agents, brokers, auction

- Wholesale of all kinds (food, beverages, tobacco, pipe tobacco, made products, footwear, household appliances, metals and metal ores of solid, liquid, gaseous fuels and related products important, )

ready Cargo and passenger transportation activities

- Warehousing and storage of goods

- Support services directly to railway, road, and waterway transport

- Cargo handling

- Other supporting services related to transport

- Providing catering services under irregular contracts with customers (party, meeting, wedding );

- Office operations

- Architectural management consulting and related technical consultancy

- Market research and opinion polls

- Other professional, scientific and technological activities have not yet been classified

- Motor vehicle rental

- Organization of trade introduction and promotion

- Exploiting all kinds (stone, sand, gravel, mineral clay and peat fertilizer, )

- Support services for exploitation of crude oil and natural gas from mines and others

Here is the list of big contract that the company get involved in:

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Table 1.1: Contracts that the company get involved

YEAR IN PROCESS

INVESTOR / GENERAL CONTRACTOR

1

Crushing construction stone

in quarry from the “Dự án

Thành Hưng Investment and Construction Joint Stock Company

2

Producing and supplying all

kinds of streams gravel

(pebbles) in and sand for the

Thành Hưng Investment and Construction Joint Stock Company

3 Supply of construction

materials, sand, stone and

gravel for Pac Ma and

Mường Tè - Lai Châu

hydropower construction

Mường Tè

- Lai Châu

2018 (processing)

4 Transport of construction

materials, sand, stone and

gravel for Pac Ma and

Mường Tè - Lai Châu

hydropower construction

Mường Tè

- Lai Châu

2018 (processing)

5 Fixing the headquarters of

Ministry of domestic affairs

Hà Nội 2018

(finished)

Ministry of domestic affairs (Bộ Nội Vụ)

Source: Song Minh Development Investment Joint Stock Company’s profile

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2.1.3 Organizational structure

(Source: Song Minh Development Investment Joint Stock Company’s profile)

Pictures 1.1: Organizational structure

- Board of directors: they have the right to elect or hire the person to become general director of the company and the vice directors They also can set the company’s present and future strategies and take responsibility for financial management

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- Director: have responsibility for company activities and development, can change the team’s structure below the vice directors, make decisions after viewing the report of vice directors, be able to lay off members in all the departments and below, take legal responsibility for the company decision and sign the contracts

- Vice general director: managing the business department, the project management department, Office of Administrative Organization, Planning - Engineering Department, Financial-accounting department Making decisions if new ideas of staff can reach the director, Analysis the contracts

- Business department: conducting market analysis, building business networks, negotiating and sending the contracts to vice general directors

- Project management department: organizing construction activities, consulting on issues related to the project’s processing management At the same time, searching and finding the most effective plans to develop projects

- Planning - Engineering Department: advising on the progress of production and business plans, ensuring the development objectives of the Company and investment planning, construction as prescribed, organizing vehicles, tools and staff members in the construction activities

- Financial-accounting department: advising and assisting in the fields of finance and accounting; capital and asset management; internal inspection and control; cost management and economic performance analysis

- Office of Administrative Organization: is the organization and training of personnel, operating and managing all activities of the Company Plan, arrange and train methodically for the staff of the company to suit the tasks

of each period

2.1.4 Business orientation of SONG MINH Development Investment

Join Stock Company toward 2030

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With the goal of becoming a reputable and strong company in the field of construction, technical infrastructure and transportation, the company always try create the best quality and effective products The covid-19 situation made the “Nam Cum 4” project slow down quite a lot The company is trying to push forward the four remaining projects, which was the “Nam Cum 4” project When the company finishes it can join others project or do construction on house hold

Besides, the owner of the company is also trying to diversify industries,

in the near future, the company will produce tea, participate in environmental treatment and agricultural land improvement according to Japanese BiO technology and the main project is distributing Japanese iron paint in Vietnam The members of the company’s staff have done several research on the Japanese iron paint The company is doing more research on the paint on some iron surfaces and compared it to local products But it still needs to be tested in hash condition after the research After that the sample of the products will be ready to be delivered to several local shops in order to take some opinion on the products and find the retailer for the paint Transportation for the product can be depend on the construction side of Song Minh, the website of the company is in the process of development According to plan, the release of the products will be in 2028

On the other hands the company also have a big side project is the

“SongMinh tea”, which is a high quality “Shan Tuyết’’ tea, which is a Vietnamese specialty tea has large gray-white buds, under the tea leaves are covered with a layer of white, fine fluff, with that people call it snow tea “Shan Tuyết’’ tea soothing scented, yellow watercolor and condense like honey Tea

is processed according to the manual method of ethnic Tay, H'mong, Dao The product lineup of SongMinh tea is very diverse with Dragon-tail tea (dragon-claw tea), “Bach tra”, …

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Source: Song Minh profile’ documents

Picture 1.2: Business orientation of SONG MINH 2.2 Financial statement analysis at SONG MINH Development

Investment Join Stock Company in the period of 2018-2020

2.2.1 EIC analysis

2.2.1.1 Economy analysis

The world’s economy according to the United Nation (2018, 2019, 2020):

In 2018, economic growth accelerated in more than half of the world's economies Developed economies grew at a steady pace of 2.2%, with growth rates in several nations approaching their potential and unemployment rates in numerous developed economies falling to very lows East and South Asia, among developing countries, maintained a reasonably robust growth trajectory

in 2018, rising by 5.8% and 5.6 percent, respectively Many commodity exporting countries, particularly gasoline exporters, are gradually improving,

Finishing the large

unfinished projects

Japanese iron paint in Vietnam Song Minh Tea

Research

on a high quality

“Shan Tuyet’’

tea

research

on the paint on some iron surfaces

comparing

to local products

Construction on housing and others big infrastructure projects

Developing

a website

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while they remain vulnerable to price volatility In 2018, global economic growth remained stable at 3.1%, with a fiscally induced increase in the United States offsetting slower growth in certain other large economies

Global economic activity is forecast to grow at a robust 3% rate in 2019, but there are growing indications that growth may have peaked Since the beginning of 2018, growth in global industrial output and merchandise trade volumes has slowed, particularly in the trade-intensive capital and intermediate goods sectors Leading signs suggest that many countries' economies would slow in 2019, owing to rising trade conflicts, financial stress and volatility, and

an undertone of geopolitical concerns Simultaneously, several developed economies are experiencing capacity limits, which could slow development in the short term

The global economy grew at its slowest pace since the global financial crisis in 2019 The economic crisis has been well coordinated, with growth in practically all major economies moving downward Except for Africa, annual growth slowed in all geographic regions Approximately two-thirds of the world's countries are expected to have seen lower GDP growth in 2019 than in

2018 The decreasing trade activity and more muted domestic investment are mostly to blame for the slowdown in GDP growth across developed and developing regions in 2019 World industrial production slowed in parallel with declining merchandise trade, and the Global Manufacturing Purchasing Managers' Index plummeted to its lowest level since 2012 Private consumption, on the other hand, kept up quite well for most countries during the year, owing to tight labor markets and low inflationary pressures Nonetheless, there are signs that household spending in several global economies has begun to decline, with consumers becoming less optimistic

In 2020, the world's gross GDP is expected to fall by 4.3 percent, the greatest drop since the Great Depression During the Great Recession of 2009,

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however, global output fell by 1.7 percent Given the tight lockdown measures that many governments in Europe and some states in the United States of America enacted early on during the outbreak, the pandemic plainly affected the developed economies the hardest In 2020, output in developed economies

is expected to fall by 5.6 percent, with growth expected to pick up to 4.0 percent

GDP growth in 2018, the highest rate since 2008, reached 7.08 percent, reinforcing the timeliness and efficiency of government solutions, drastic direction at all levels of authorities and localities Impact on the overall growth rate for the entire agricultural, forestry and fishing industry grew by 3,76%, representing 8,7% of the overall growth rate, while the industrial and construction sectors grew by 8,85%, representing 48,6% In addition, 42.7% was represented by the service sector

The economy's current-price size was 5,535.3 trillion VND in 2018; GDP per capita was estimated at 58.5 million VND (equal to 2,587 USD), a gain of

198 USD over 2017 The agricultural, forestry and fishing industries contributed 14,57% of the GDP in the economic structure of 2018, the others

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were 34,28% for the industry and construction sector, 41,170% for the service sector, 9,98% for the product tax less production subsidies The numbers for the same figure in the economic structure were 15.34%, 33.40%, 41.26%, 10% respectively

In 2019, Viet Nam's socio-economic status occurred in the setting of the global economic situation continuing to slow Commercial conflicts between the United States and China, as well as geopolitical challenges, have greatly worsened the insecurity of the global trading system, hurting business confidence, investment choices, and global trade Unexpected swings in international monetary and financial markets, as well as complex adjustments

in oil prices, have had an influence on credit growth, market attitude, and predictions On a national level, the macroeconomic system was stable, however Viet Nam faced several difficulties and challenges, despite the positive results of 2018 growth, the difficult weather has a big impact on productivity and crop yields; the cattle industry faced difficulties due to African swine fever, which occurred in all 63 provinces and cities directly under the Central Government; slow down the growth of some key export products GDP had a significant result in 2019, with an increase of 7.02 percent, above the national assembly objective of 6.6 percent to 6.8 percent, over the target set GDP grew by 7.48 percent during the third quarter; 6.97 percent in the fourth quarter The growth rate of this year was higher than it was from the period of 2011-2017, however this figure still lower than 2018, at 7.08% 4.6%

of overgrowth was the agricultural, forestry, and fishery sector, which expanded by 2.01% Additionally, there was a slight growth in the industrial and construction sector by 8.90 percent, it consumed 50.4% of the overall growth, the rest of the overall growth was service (45%), it increased 7.3%

In 2020, GDP rose by 2.91 percent (in the first quarter, by 3.68 percent; in the second quarter, by 0.39 percent; in the third quarter, by 2.69 percent; and in