15 FINANCIAL SITUATION – a CASE STUDY OF HANOI TRADE STOCK CORPORATION

MINISTRY OF FINANCE ACADEMY OF FINANCE Major: Corporate Finance GRADUATION THESIS FINANCIAL SITUATION – A CASE STUDY OF HANOI TRADE STOCK CORPORATION Company’s name: Hanoi Trade Joint Stock Corporation Student’s name: Trần Khánh Nam Class: 55/11CL.03 Intership supervisor: Associate Professor Ph.D Nguyen Thi Ha Hà Nội – 2021 DECLARATION I hereby declare that this thesis is on my own work and effort The data and outcome which are indicated in the thesis are truthful from practice of internship company Author of the thesis Tran Khanh Nam TABLE OF CONTENTS LIST OF ABBREVIATIONS BEP Basic earnings power COGS Cost of goods sold EBIT Earnings Before Interest and Tax NWC Net Working Capital ROA Return on Assets ROE Return on Equity ROS Return on Sales USD United States Dollar VND Vietnamese Dong LIST OF TABLES LIST OF CHARTS PREFACE The importance of the research topic: In 2019, when the world economy was in conflict between US – China Commerce, with political problems have caused the instability of the World Commerce and affected business, investment decisions and global commercialization, Vietnam’s economy grew on its own way The international financial-monetary market and oil prices fluctuated complicatedly that made a negative impact on credit growth, expectations and market sentiment In Vietnam, besides the positive results which was achieved in last year, the macro economy had stability There are many difficulties and challenges such as climate affects quality and quantity of crops; the African swine fever epidemic affect the livestock industry in 63 provinces and cities directly under the Central Government; key export products have slow growth; Disbursement of public investment did not meet the plan The economy in 2019 had grew significantly Economy had improved quantity and quality, specifically, the gross domestic product has an impressive growth result of 7.02%, exceeding the target set by the National Assembly of 6.8% This is the second consecutive year that Vietnam's economic has reached over 7% since 2011 In the general growth of the whole economy, the agriculture, forestry and fishery sector increased by 2%, contributing 4.6% on the general increase The prosperity of industries also made export turnover the focus of 2019 By the end of 2019, the total importexport turnover reached 517.26 billion USD, of which the export value was 264.19 billion USD USD (up to 8.4% of an increase of 20.49 billion USD compared to 2018) The balance of trade in goods in 2019 was estimated to have an export surplus of 9.9 billion USD - the highest level in consecutive years of trade surplus As the market economy develops, corporations, groups, economic and financial systems and corporate financial situation play a crucial role "Finance" is a prerequisite to success and failure of an organization Therefore, the financial situation always attracts a lot of attention from managers and analysts to promote and maintain strengths as well as overcome weaknesses Business managers need to understand the operational and financial situation of the unit to come up with appropriate strategies and plans to improve operational efficiency Then, the units should carefully analyze their business activities, especially the financial situation to understand the reality as well as the future direction of the business Objectives and commissions: Objectives: Proposing solutions to improve the financial situation of Hanoi Trading Joint Stock Corporation To achieve these goals, I performed the following tasks: - Systemize arguments about the financial situation of the business - Study about Hanoi Trade Joint Stock Corporation in the period from 2017 to 2019 - Through a general assessment of the financial position of the corporation, including achievements, limitations and causes, and propose solutions to improve the situation Scope of the research: In this work, I focus on evaluating the financial situation and position of Hanoi Trading Joint Stock Corporation in the period from 2017 to 2019 Methodology and Data: The methods are mainly applied: + The method of comparing and synthesizing the actual data collected during the internship at the company, the financial reporting system for the year 2017-2019 and the information obtained from the accounting - finance to analyze the situation of fluctuations, development trends Then, the manager will give appropriate solutions to improve, stabilize and develop the company's financial situation + There is also a combination of other methods such as balance method, ratio method, trend analysis Thesis Structure: Regarding the topic structure, except for the introduction and conclusion, the thesis layout consists of chapters: Chapter 1: Overview of Corporate Finance Chapter 2: Financial situation Financial situation of Hanoi Trade Joint Stock Corporation in recent period Chapter 3: Solutions to enhance corporate financial situation Due to limited knowledge in both theory and practice, my writing cannot avoid errors I look forward to being guided by the company and the teachers to make my writing more complete Thank you sincerely! CHAPTER OVERVIEW OF FINANCIAL SITUATION OF A COMPANY 1.1 Corporate finance and financial management 1.1.1 Corporate finance and financial decisions 1.1.1.1 Definition of corporate finance A firm is an economic entity which carries out goods production or services supply of the market to gain profits A firm operates by combining input resources to generate outputs (maybe products or services) for profitable sales Corporate finance is economic relations in the form of arising value with the creation and the using of monetary funds of companies in course of its operation Corporate finance is the process of monetary funds of creation, distribution, using and advocacy associated with operation of companies In the other view, Corporate finance is a method of mobilizing, allocating and using financial resources of companies to achieve business goals The main financial relations in companies: ● Financial relation between companies and the State ● Financial relations between companies and laborers in enterprises ● Financial relations between companies and economic subjects and other social organizations ● Financial relations between companies and their owners USD, up 13% In 2020, there are 35 imported goods with a turnover of over billion USD, accounting for 89.6% of the total import turnover (4 items gaining over 10 billion USD, accounting for 49.4%) Export, import service of Vietnam: In 2020, service export turnover is estimated at $ 6.3 billion, down 68.4% compared to 2019 (in the fourth quarter, it reached $ 820 million, down 84.8%), of which travel services reached USD 2.5 billion (accounting for 39.8% of total turnover), down 78.8%; transportation services reached 727 million USD (accounting for 11.6%), down 83.4% Import turnover of services this year was estimated at 18.3 billion USD, down 14.5% from the previous year, of which transport services reached 8.3 billion USD (accounting for 45.2% of total turnover) 3.5% increase; tourism service reached billion USD (accounting for 22%), down 37.5% Trade deficit of services in 2020 will be 12 billion USD, nearly times higher than the service export turnover and up 10.5 billion USD compared to 2019 3.1 The strategies of Hanoi Trade Joint Stock Corporation in the future Overcoming the Covid -19 pandemic, all aspects of the economy will inevitably face many difficulties and setbacks In the coming time, Hapro will keep its corporate image as a reputable company with guaranteed quality and complete on schedule To achieve the goals and plans in the coming year, Hapro sets the business direction as follows: • Maintaining business operations: exploiting existing potentials of labor, equipment, materials, and capital to fulfill targets, adjusted plans in the coming years, fully fulfill obligations to the Bank State policy, stabilizing and constantly improving the life of workers • Actively ensure raw materials, labor, equipment, technology, designs and costs incurred in relation to main production and business activities Maintaining product quality, organizing production to ensure schedule and meet customer requirements • Investing and expanding business, trying to have more projects to increase market share, improve operational efficiency and profit Expanding and nominating markets in the North, the center and abroad • Purchase machinery and equipment for the construction sector to increase productivity, quality and reduce project time • Selecting qualified and reasonable workers in retraining and guiding staff Machines still cannot completely replace humans as the main force in the production process Strengthen the management and training to improve employees' knowledge about the process of using equipment, especially the specialized wiring system, performing maintenance and repair as planned • Regularly update product sales to compare debts and firmly grasp the financial capacity of each customer, take advantage of debt recovery opportunities, and drastically focus on debt collection in deferred customers bad debts, reducing debt risks • Strengthening cost management • Strengthen relationships with strategic partners, suppliers and customers • Ensuring capital for production, investment as well as salary policy for employees Control and manage financial activities to comply with regulations, overcome shortcomings and limitations of the company 3.2 Solutions to improve the financial situation of Hanoi Trade Joint Stock Corporation 3.2.1 Doing market research to find out potential markets and promoting the consumption of products To survive and develop in the current period, businesses need to be proactive in finding customers, enhancing product marketing, and explaining product characteristics to meet customers' needs Some measures that the company can take are: - Organizing customer conferences and giving surveys about product quality so that customers understand their needs and thereby improve product characteristics - Be proactive in finding customers and potential producers and investors - Design effective advertising campaigns: Ads must be impressive and make customers understand the superiority of the product 3.2.2 Focusing on improvement of financial management and financial analysis - Improving analytical process: Define analytical objectives and scopes to collect data and collect related documents with accurate and up to date information - Complete the assessment and analysis of the financial situation according to the criteria - Training and developing human resources for corporate finance management - Combining accounting, internal audit and financial analysis, corporate financial management - There is a clear division of work between the Finance Department and the Accounting Department so that each department undertakes a certain number of tasks without overlapping in order to improve work efficiency 3.2.3 Review investments and deposits in subsidiaries and associates Dividends from investments in subsidiaries and associates decreased moderately Therefore, Hapro should reconsider all financial investments If subsidiaries, affiliates or any project take their business lightly and not guarantee profits, the parent company must urge their production, otherwise they will withdraw capital to avoid losses 3.2.4 Boost the revenue from sales of goods and services in order to reap higher profits To dominate the market, promote sales and service provision, product consumption companies need to apply some of the following measures: Firstly, we need to improve product quality, diversify goods and services and set prices in line with customer tastes that businesses are aiming for Applying a new policies that can flexible on selling prices match the law of market supply and demand and attractive selling methods for customers with high demand, familiar customers, customers making payments on time (payment discount, sales discount, commercial discount), Second, increase marketing activities This involves: - Building a market information system in order to provide the latest information on technical and economic activities related to all domestic and foreign fields - Make an effective advertisement method: advertising show customers the information of the product and the company, the advertisement had the highest effective when the content of must really impress people - Make use of information collection equipment to analyze and propose necessary solutions for the company's growth In addition to have higher revenue, cost management is a key in maximizing corporate revenue This issue deserves consideration in the case of Hapro Can refer to the following ways: Firstly, cost savings Control the cost of raw materials at the input: price negotiations can be conducted between the company and the supplier If the supplier fails to deal with it, the company will find another supplier with good price Carefully select the optimal materials to meet the needs of quality, quantity and time This can help cut down on inventories leading to capital stagnation and related costs such as storage costs, storage costs Secondly, cost management Create a real cost norm to allocate into specific categories Regularly check costs in all activities to manage cost usage and propose solutions to achieve efficiency Thirdly, recruitment The company should hire experienced and reliable workers and staff more often Hence, this can improve productivity and further save wages and salary costs 3.2.5 Liquidity raising Solvency ratios are an important element of corporate financial analysis because they are the primary measure of a firm's financial safety and risk level Through analysis, it can be seen that in recent years, the Company has not incurred overdue debts and the solvency is guaranteed It is necessary to ensure that the company's solvency is always maintained at a reasonable level by improving inventory management and debt utilization Therefore, in the coming time, to improve liquidity and minimize financial risks, the Company needs to focus on the following issues: Firstly, Hapro should tighten inventories control, especially the manufacturing costs of unfinished goods, try to minimize the amount of capital being stagnant by improving productivity, shorten the life of construction Secondly, Based on capital needs, the company can reduce long-term equity, or consider replacing it with an appropriate short-term bank loan, ensuring restructuring in the direction of appropriate funding, reducing spending equity use fees In addition, the company may also consider close relationships with customers to raise capital from low-interest loans or set-up funds In addition, the company also needs to identify a reasonable level of capital reserves, the balance between expenditure needs of the business and cash reserves, thus ensures payment needs, while ensuring resources to pay term debts 3.2.6 Measures to strengthen cost management The cost of production and business has a negative impact on the profitability of the company, so the reduction of cost items means an increase in profit while other factors are unchanged Through the above analysis, it can be seen that in 2019 the company completed many key projects, but did not bring much revenue to the company, which means that the company's COGS also decreased sharply during the year Besides, with the use of financial leverage to a large extent and mostly short-term loans, the company's financial costs are very large and tend to increase during the year This raises the issue of needing more strict management of these expenditures Below are some measures a company can refer to to better perform its cost management duties: - The company needs to be proactive in purchasing raw materials, it needs to have a team of in-depth research, researching the domestic and foreign market situation to be able to choose the best source of goods with suitable quantity and price In the context of a constant output price, a lower input price will be the factor that reduces cost of goods sold We know that, in the cost of goods sold including the purchase price and the purchase cost, with difficult to change objective factors, the company can actively reduce the purchase price by sourcing raw materials with low purchase price through joint venture such as creating close relationships with suppliers Buying raw materials at a low price is an important issue, but another issue that the company must pay attention to is that purchasing costs include transportation, handling, storage Suppliers must Ensure low shipping costs to avoid overbought The item is cheaper but the shipping cost is more expensive Therefore, it is necessary to choose suppliers and means of transportation to limit costs of transporting, storing goods, - In addition to the key field of export, the company also operates real estate management business invested by the company and supermarkets in Vietnam, so selling expenses and administrative expenses account for a large proportion of the total cost public ty These items tend to increase when businesses have perfected and launched a series of new products or new supermarkets in the past year Therefore, the company needs to review and closely check the implementation of these estimates, classify and verify the expenses for wrong purposes, have timely measures such as: compensating the responsible person, deducting salary deduction, bonus cut 3.2.7 Improve the efficiency of using fixed assets: For a business operating in the exporting, importing and domestic trade field, fixed assets always account for a quite large proportion in the asset structure and always carry certain characteristics, certain effects on the entire production and business activities of the company Therefore, in order to contribute to improving the financial position of the company, it is impossible to ignore the improvement of the efficiency of fixed assets In the coming time, the company can take many specific measures as follows: In order to improve the efficiency of using fixed assets, the company first needs to classify and re-evaluate the old, outdated and unused fixed assets to liquidate and sell at the best price, quickly recover capital to re-invest, other new fixed assets On the other hand, the company needs to strengthen management and supervision of fixed assets, select and determine an appropriate depreciation method to avoid being affected by intangible depreciation and buy insurance for fixed assets For fixed assets with large intangible depreciation, the company should apply the fast depreciation method to quickly recover invested capital, accelerate the progress of fixed assets renewal, not cause big changes to the business activities company The issue that the company needs to consider is that the evaluation and valuation of fixed assets must include both economic and technical aspects The company should build, train or hire a team of good experts in asset valuation, especially for complex investment projects, to avoid ineffective investment, especially for construction investment basic construction, limit the loss of capital or the cost is too large higher than expected 3.2.8 Continue to strengthen the existing market, actively searching for new exciting markets • The company should have a strategy to build and develop its brand, such as promoting marketing, advertising by leaflets, on the mass media, through sponsorship programs Get closer to all interested parties • The company still has to pay attention to its old market, adopt policies to encourage familiar customers, investors, partners, and improve the quality of the project The company has a good relationship with familiar markets that can be utilized to expand into new markets and improve business results • One of the important factors to attract customers is that the company continuously improves the quality of construction products and services In addition, the company must diversify its business lines to minimize market risks, but must have a plan to avoid spreading investment that is both wasteful and ineffective, even causing great risks to the company 3.2.9 Improve the quality of financial analysis in the company: From the theoretical analysis in chapter and in practice in chapter 2, we see that the quality of corporate financial analysis in Hapro is very important Especially, Company has changed to Joint stock model Some of staff are not used to it Therefore, the company leaders need to pay more attention to financial analysis Management Board: Recognizing the correct role of corporate financial analysis for your business Thereby, setting out unified scientific criteria and guidelines to make the way for financial analysts to implement Business financial analysis needs to ensure the link between human resources, information, analytical methods and facilities To achieve this, company management is the deciding factor On the leadership side: Recognize correctly the role of corporate financial analysis in its business Since then, giving unified scientific criteria and guidance as the way for financial analysts to perform Business financial analysis needs to ensure the link between human resources, information, analytical methods and infrastructure To achieve that, the company's leadership is the deciding factor Information quality: the company's accounting department needs to provide data scientifically, honestly and accurately to ensure the quality of the output of the analysis Because accounting information is the input to the corporate financial analysis process, if the input information is inaccurate, the results of the output analysis report cannot truly reflect the financial position of the company In addition to financial statements, financial analysis performers also need to rely on their company's corporate governance reports for close and timely assessment The quality of human resources for financial analysis: The person in the financial management must have foresight, sharp thinking, and at the same time must have a firm knowledge of both accounting and finance These people must have the moral qualities of being objective and honest Regarding the current financial situation of Hapro, I would like to propose a plan to hire an independent financial analyst from independent accounting and auditing firms to help the company lay the foundation first for your financial analysis engine 3.3 Conditions needed for implementing the solution The State needs to improve management capacity, demonstrate its role in a market economy; Performing justice in competition; Implementing transparency management Facilitate and support enterprises in obtaining loans for investment and development, maximizing the effectiveness of policies to support enterprises to import and export with lower loans due to Covid-19 pandemic Besides, effectively implementing the policy of supporting interest rate for real estate loan for domestic market CONCLUSION Researching the corporate financial situation is always important to businesses in any industry Recently, the sudden volatility of the global economy has posed many challenges for businesses, increasing the competitiveness between corporations Therefore, businesses need to make the right decisions to seize opportunities and minimize risks in operations, especially in financial activities In that context, it is required that the company have a clear grasp of its situation and activities to be able to affirm and enhance its brand value Based on general arguments about the financial situation and assessment of the financial position of Hanoi Trade Joint Stock Corporation, I have clearly seen the bottlenecks and challenges faced by businesses in improving operations Analyzing your financial situation is a big deal that requires a great deal of knowledge and experience However, during the internship, I was directed and helped not only by teacher Nguyen Thi Ha but also from the management Hanoi Trade Joint Stock Corporation from Finance - Accounting department I have tried many times to combine the acquired knowledge and research on the internship's financial situation in reality to propose methods to improve the company's performance Because the level of arguing and knowledge in practice were limited, my thesis is inevitable of mistakes I look forward the advices from the mentors and the company’s managers to better my thesis I would like to express my gratefulness to my instructor Ph.D Nguyen Thi Ha, and all the staffs from Hanoi Trade Joint Stock Corporation in supporting me with this graduation thesis Hanoi, 25th Jan 2021 Student Tran Khanh Nam REFERENCES Annual Report of Hanoi Trade Joint Stock Corporation 2017, 2018, 2019 Separate Financial Statements of Hanoi Trade Joint Stock Corporation 2017, 2018, 2019 GS.TS.NGND Ngô Thế Chi, PGS.TS.NGƯT Nguyễn Trọng Cơ, 2015, “Giao trình phân tích tài doanh nghiệp”, NXB Tài PGS.TS Bùi Văn Vần, PGS.TS Vũ Văn Ninh, 2015, “Giao trình Tài doanh nghiệp” NXB Tài GS.TS.NGND Ngơ Thế Chi, TS Trương Thị Thủy (đồng chủ biên), 2013, "Giáo trình kế tốn tài chính", NXB Tài Ph.D Pham Thi Van Anh, Ph.D Diem Thi Thanh Hai, 2018, “Basic Corporate Finance”, Financial Publisher Website: www.gso.gov.vn http://cafef.vn/ https://finance.vietstock.vn/ https://www.stockbiz.vn/Industries.aspx?view=2 https://www.gso.gov.vn/du-lieu-va-so-lieu-thong-ke/2020/12/thong-caobao-chi-ve-tinh-hinh-kinh-te-xa-hoi-quy-iv-va-nam-2020/ NHẬN XÉT CỦA NGƯỜI HƯỚNG DẪN KHOA HỌC Họ tên người hướng dẫn khoa học: Phó giáo sư Tiến sĩ Nguyễn Thị Hà Nhận xét trình thực tập Sinh viên: Khóa: CQ55 Trần Khánh Nam Lớp: 11CL.03 Đề tài: “Financial situation of Hanoi Trade Joint Stock Corporation” Nội dung nhận xét: Về tinh thần thái độ thực tập sinh viên Về chất lượng nội dung luận văn - Sự phù hợp tên nội dung đề tài với chuyên ngành - Độ tin cậy tính đại phương pháp nghiên cứu Hà Nội, ngày … tháng … năm 2021 Điểm: - Bằng số: - Bằng chữ: Người nhận xét (Ký tên) NHẬN XÉT CỦA NGƯỜI PHẢN BIỆN Họ tên người phản biện: Nhận xét trình thực tập Sinh viên: Khóa: CQ55 Lớp: Trần Khánh Nam 11.03CLC Đề tài: “Financial situation of Hanoi Trade Joint Stock Corporation” Nội dung nhận xét: - Sự phù hợp tên nội dung đề tài với chuyên ngành - Đối tượng mục đích nghiên cứu - Độ tin cậy tính đại phương pháp nghiên cứu - Nội dung khoa học Điểm: - Bằng số: - Bằng chữ: Người nhận xét (Ký ghi rõ họ tên) ... Overview of Corporate Finance Chapter 2: Financial situation Financial situation of Hanoi Trade Joint Stock Corporation in recent period Chapter 3: Solutions to enhance corporate financial situation. .. distribution of personal income, so the business activities of enterprise are also affected CHAPTER FINANCIAL SITUATION OF HANOI TRADE STOCK CORPORATION 2.1 Overview of Hanoi Trade Joint Stock Corporation. .. Branch of Hanoi Trade Joint Stock Corporation in Ho Chi Minh City + Branch of Hanoi Trade Joint Stock Corporation in Dong Thap + Branch of Hanoi Trade Joint Stock Corporation in Hung Yen + Branch