24 THE FINANCIAL SITUATION OF ANH NGOC STEEL LIMITED LIABILITY COMPANY

MINISTRY OF FINANCE ACADEMY OF FINANCE - - TRAN LE PHUOC AN CQ55/11.02 GRADUATION THESIS TOPIC: THE FINANCIAL SITUATION OF ANH NGOC STEEL LIMITED LIABILITY COMPANY Major : Corporate Finance Student ID : 17523402010785 Supervisor 1 : Ph.D Pham Thi Thanh Hoa HANOI - 2021 2 ACADEMY OF FINANCE GRADUATION THESIS DECLARATION I hereby declare that this thesis is my own work and effort It has not been submitted anywhere for an award Where other sources of information have been used, they have been acknowledged Graduation thesis author TRAN LE PHUOC AN TRAN LE PHUOC AN CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS TABLE OF CONTENTS TRAN LE PHUOC AN CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS TABLE TRAN LE PHUOC AN CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS DIAGRAM TRAN LE PHUOC AN CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS PREFACE Rationale of thesis Vietnam's accession to WTO together with the removal of tariff barriers has attracted companies operating in the pharmaceutical sector from abroad with strong financial potential and modern technology From there, it will create a fiercer competitive environment for domestic pharmaceutical manufacturing and trading enterprises in terms of price, quality and product category.Facing that situation, the question for managers is how to build and maintain a competitive advantage, thereby helping their businesses survive and develop sustainably There are many factors determining the competitiveness of a business, of which corporate finance plays a very important role This is not only theoretically true but in practice has been tested in many businesses, especially in large corporations and corporations around the world Understanding the financial situation is extremely important to the survival of the business, through analysis of the financial situation helps managers see the business performance and efficiency how to use capital? Is the allocation of capital reasonable? What factors affect the business performance of the business During my internship at Anh Ngoc Steel Limited Company and being aware of the importance of this issue, I chose the topic: “ The financial situation of Anh Ngoc Steel Limited Liability Company” Rearch objective The topic goes into depth and explores issues related to the financial situation of the business such as the general theory of corporate finance, the indicators to evaluate the financial status of the business at Steel Limited Liability Company Luster TRAN LE PHUOC AN CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS Research purposes: The research project on financial status and financial solutions implemented at Anh Ngoc Steel Company Limited proposes some recommendation to improving the financial situation in Anh Ngoc Steel Company limited in the future: The thesis set out a number of tasks: + Systematize the theoretical issues of corporate finance and analyze the corporate financial situation + Review and evaluate the financial status of Anh Ngoc steel company limited in 2020 on the basis of comparison with 2019 through the results achieved in years + Proposing a number of financial solutions to improve the financial situation, improve operational efficiency at the unit in the coming time Research Methods Research methods used in the thesis include: + Methods of data collection: interviewing methods, methods observational investigation, more research method + Methods of data analysis: comparison method, factor analysis method, prediction method, Dupont method + Graphical method, charting: By images, the properties of the graph, the chart we can see the volatility, the structure, the role of the items and then analyze the relationship, the level of influence factors to the analysis criteria Research scope + In terms of space: Research on financial situation and financial measures to improve the financial position of Anh Ngoc Steel Limited Liability Company + About time: Financial activities of the company in 2020-2019 + Regarding data sources: The data are taken from accounting books, financial TRAN LE PHUOC AN CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS statements for 2018, 2019 and 2020 Thesis structure: In addition to the introduction and conclusion, the content of the essay is presented in three specific chapters as follows: Chapter 1: Overview of financial situation of company Chapter 2: Financial situation of Anh Ngoc steel company limited Chapter 3: Main solutions to improve financial situation of Anh Ngoc Steel company limited My essay was completed thanks to the help and facilitation of the Board of Directors, the uncles and sisters in the company, especially the dedicated guidance and guidance of the teacher Associate Professor Pham Thi Thanh Hoa However, due to the limited level and time, my writing cannot avoid its shortcomings So I look forward to receiving the teacher's guidance to make my thesis more complete Thank you sincerely! Hanoi, May 2021 Student Tran Le Phuoc An TRAN LE PHUOC AN CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS CHAPTER I OVERVIEW OF FINANCIAL SITUATION OF COMPANY 1.1 Corporate finance and corporate finance management 1.1.1 Corporate finance and corporate finance decisions 1.1.1.1 Corporate finance In general, corporate finance is an economic relationship in the form of the resulting value associated with the creation and use of a company's monetary funds to carry out its business Corporate finance deals with the financial structure of a corporation, including its funding and the steps taken by the management to maximize the value of the corporation Corporate finance also involves methods and research used to organize and distribute financial capital The ultimate goal of corporate finance is to optimize the value of a company through the preparation and execution of capital, while balancing both profitability and risk The arising economic relations associated with the creation, distribution and usage of corporate monetary funds constitute the financial relationships of the enterprise In total, there are several financial relationships as following: - Relationships between enterprises and the State: This is expressed in the state funding of operating businesses and the financial responsibilities of companies, such as the payment of taxes and fees, etc - Relationships between enterprises and other economic entities: This involves payment relationships for borrowing and lending, capital 10 TRAN LE PHUOC AN 10 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS payment terms This can ensure that the appropriation of customers does not affect the company's operations - Implement the customer classification policy before signing the contract: + For traditional customers, check the debt situation to make sure the customer has no history of bad debt and is able to pay off the debt + For large value contracts, require customers to deposit a percentage of the contract value, from 10-30% of the total value + For new customers, before signing the contract, it is necessary to carefully understand customer information, especially the solvency and commercial reputation - There are policies for customers to enjoy payment discounts if customers pay early ahead of time For different types of customers, a different discount rate will be applied: For reputable customers with longterm business relationships with the company, the discount rate will be higher than a small amount of other customers ; For customers that the company has not yet grasped much about solvency, prestige and reliability, the company needs to implement payment methods immediately, or can sell with a moderate amount of goods to create a relationship with a partner -Creating a debt monitoring system, the company needs to organize a team of specialized staff to urge debt collection on time The Finance and Accounting Department can appoint someone to undertake this work, requiring professional training and a high sense of responsibility 93 TRAN LE PHUOC AN 93 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS -Capture to set up reserve funds for bad debts Currently, there are some debts which are overdue for more than months Appropriation according to the rate: 20-30% of the value Specifically, for example, for a debt from Project Management Unit 6, total value: 1,300 million, the company makes a provision of 390 million to the reserve fund for bad debts The setting up and use of provisions for bad debts comply with the regulations of the Ministry of Finance For an irrecoverable debt, the company clearly identifies the cause Secondly, strengthen in inventory management One of the key issues to speed up capital turnover is good inventory management practices For construction enterprises, inventory is the building material in the entry period, but when the construction is in progress, working in progress is classified as inventory To manageinventory well, the company needs to coordinate many measures from the procurement, transportation and storage in stock Therefore, the urgent thing that the company must is to have a good method of managing the cooperative, specifically: - Planning for production and business activities on the basis of the situation of the reporting year Carefully check the quality of imported raw materials, if detecting poor quality products, request the supplier to exchange goods or compensate the company for damage -With the characteristics of a company operating in the construction field, the company's main cooperative focuses on working in progress For effective management, the company needs to pay attention to the project implementation schedule and timely handover of the project Project implementation progress management should implement the following contents: 94 TRAN LE PHUOC AN 94 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS + Before implementing a project, specific construction progress must be made For large-scale and prolonged construction works, the work construction progress must be made for each period on a monthly, quarterly or yearly basis + The company is obliged to set up a detailed construction schedule, arrange a reasonable execution order, to ensure compliance with the project implementation progress according to the approved plan + The investor, the construction contractor, the supervision consultant and related parties are responsible for monitoring and monitoring the construction progress and adjusting the progress in case of need but must not affect the total the progress of the project + Encourage speeding up on the basis of ensuring the work quality In case the speeding up the construction progress brings higher efficiency to the project, the contractor is considered to reward under the contract, in case of prolonged damage, the violating party must compensate for the damage and be fined for the violation Thirdly, strictly manage and improve the efficiency of capital in money In 2019, the company's cash-based capital management is not really effective when considering the fast solvency and cash solvency of the business Therefore, the company needs to take measures to ensure that its cash reserve is sufficient for its payment needs In order to reserve a reasonable amount of capital in cash, the company needs to implement some of the following measures: 95 TRAN LE PHUOC AN 95 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS - Maintain a cash amount at 6-8% of total assets, ensure immediate solvency, and meet basic needs such as: + Demand for transactions: Currently, some indicators of the solvency of the business are much lower than the industry average Need to use 20-30% of cash reserves to meet daily transaction needs such as payment for raw materials, wages, taxes, paying urgent debts in the process normal operation of the company, helping to ensure the solvency of due debts and improving the solvency of the business + Investment needs: The company needs to have a certain amount of money to be ready to seize favorable investment opportunities in business, to avoid leaving idle money Typically, the investment brings great profits to the company in 2018, revenue increases thanks to the revenue from real estate transfer, usHing 40-50% of the cash reserve to fulfill the investment needs The company gets some profits over a period of 1-3 years + Demand for contingency: Provision for a stable amount of cash, 2040% to maintain the ability to meet spending needs when unexpected events occur that affect normal revenue and expenditure activities of company - Proactively formulate and implement the annual cash flow plan: Cash inflow management: + Accelerating cash collection is accelerating cash recovery (increasing the turnover of receivables), using an attractive sales policy such as applying discounts when customers pay works early Strictly manage cash flow into businesses from providing consulting services, construction investment 96 TRAN LE PHUOC AN 96 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS Cash outflow management: + Strictly manage cash payments in the business through the development of regulations and contents on the management of cash payments, avoid confusion, loss, and self-seeking behavior Strict management of cash advances (subject, level of cash advance ) + All cash payments must go through the fund and cannot be spent outside the fund Daily fund disbursement must be conducted by the cashier on the basis of legitimate and legal cash receipts In addition, it is necessary to increase the time for capital appropriation - Strengthen checking the money management system: Strengthening the inspection of the money management system also reduces the risk of cash flow Comply with the principle that all cash revenues and expenditures must go through funds, not revenues and expenditures outside the fund, for bank deposits, periodically compare the balance between the accounting books of the enterprise and the balance of the bank to timely detecting and handling the differences, if any, to minimize losses Fourthly, strengthen the management of liabilities In the capital component of the company, using up to 85.4% comes from debt capital, of which mainly short-term liabilities Put considerable pressure on debt management, and at the same time create a negative impact on the reputation, image of the business, and the cooperative relationship between the parties Therefore, in order to effectively use debt capital, propose the following solutions: 97 TRAN LE PHUOC AN 97 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS - Manage liabilities of each supplier For this management, the following forms are required: + Detail book of a supplier's debt + Debt reconciliation or debt confirmation sheet + The balance sheet of the suppliers -Manage detailed debt by each invoice and by payment term For this management, the following forms are required: + Report the age of the bills (usually divided by week or month) List of bills due to be paid List of overdue invoices + List of bills owed by a supplier - Managing debt according to each purchase contract + Have an effective tool to monitor debt collection and expenditure + Develop buying and selling policies + Categorize groups of customers and sellers for effective debt management + Currently, the enterprise has some long-term and overdue debts It is necessary to prepare reports on management analysis, overdue debt customers, due in time to control and promptly recover debts Fifthly, identify financing policies, build a reasonable capital structure in the direction of increasing the proportion of equity, reducing loan capital In recent years, the company's liabilities always account for a large proportion of the total capital, the debt ratio has always remained at over 70% 98 TRAN LE PHUOC AN 98 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS and higher than the average of the construction industry The proportion of short-term debt is high and accounts for 100% in 2019, making the cost of capital and interest expenses increase Through analysis of chapter 2, we can see that the BEP index of the company is only 0.4%, the market interest rate is about 10% / year, the use of high debt ratio will affect the profit as well as the profitability targets High debt also affects the solvency of the company in the short term as well as in the long term The company needs to perform the following work steps: - On the basis of the business plan for the year 2020 - 2021 and the opportunities and challenges coming from the Construction market, enterprises need to propose a reasonable capital structure With the growth target in 2021, businesses should use debt at 60-70% of total capital to amplify profitability of owner equity, make good use of the advantages of financial leverage and "tax shield " - Adjusting to increase equity and reduce debt, reduce debt to maintain at the industry average: 60-70%, especially to reduce short-term loans, the company is maintaining high short-term debt Over 90%, it is necessary to reduce the proportion of short-term loans to 70-80%, reduce pressure on payment, reduce risks for businesses -Develop a long-term capital mobilization plan, in order to access this loan, the company needs to build a long-term investment plan, most feasible, especially to focus on business expansion The plan to expand operations in 2021 on the one hand helps businesses attract a reasonable long-term capital source, on the other hand, in order to realize the goals set out in 2021, contributing to revenue recovery 99 TRAN LE PHUOC AN 99 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS Sixthly, strive to use economical operating costs, especially enterprise management costs Cost is an element that directly affects business profits Therefore, in order to increase profits, in addition to effective business, reducing business costs is an effective measure to improve financial ability In 2019, in addition to being greatly affected by fluctuations from revenue to the profit of the business, the cost of business management is the indicator that contributes to the negative net profit of business Aiming at the goal of increasing profits for businesses It is necessary to take the following measures: -High cost of business management, partly due to arising from the inventory management Inventory is at a high level, together with costs arising from the maintenance and maintenance, working in progress accounts for a major proportion in the inventory, due to the slow speed of completion of works, the cost of management staff higher Requiring businesses to come up with a reasonable inventory management plan, and at the same time have a labor cost management plan consistent with the company's growth - Establishing a suitable cost standard and having a reasonable spending plan, companies need to develop a standard cost for each project to point out the expected expenditures and determine in which case they should be spent However, in reality, the cost is always changing so the norms need to be reviewed regularly to ensure their validity - Streamlining the management apparatus in a reasonable way, applying details and details of the number of project managers and warehouse managers for each specific project or warehouse Using personnel appropriately, ensuring that each employee performs their own tasks, does not appear overlapping or underemployed 100 TRAN LE PHUOC AN 100 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS - Monitoring the operational status of the management facilities to exploit in the most effective way Last but not least, other solutions • Appropriately record and classify revenues and expenses in the period, avoid general accounting, causing big fluctuations in the performance and efficiency evaluation indicators of the company • To limit the risk of fluctuations in construction demand due to cyclical activities, construction contractors need to increase the flexibility of the production apparatus through the use of subcontractors, seasonal workers, and hiring of machinery construction machinery • Building development, enhancing the company's reputation: Promoting the brand associated with continuous improvement in product quality and service quality in order to expand market share, increase opportunities to access projects projects and construction works to increase revenue and profit • Focusing on analyzing the company's production efficiency, requiring the company to focus on analyzing the financial situation to serve the assessment, in order to make appropriate financial decisions to increase the efficiency of production business • Improving the quality and qualifications of human resources, improving the employee remuneration policy Human is always a very important factor in deciding the success or failure of the business Especially in the field of construction, workers' skills make a great decision on implementation progress, improve quality, save costs, lower costs Therefore, focus on improving the quality and 101 TRAN LE PHUOC AN 101 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS qualifications of human resources Force is of utmost importance The company needs: -Regularly urge the implementation of tasks of each individual, each department, combined with inspection and assessment to help manage sufficient information to ensure no mistakes due to lack of information handling - There are training policies for ministries of workers and employees, in parallel with finding suitable human resources, with expertise to improve labor productivity - Improve technical facilities, create a comfortable and effective working environment for employees - Strengthening the self-inspection and supervision, closely combining the guarantee of the State's financial regime and the implementation of the internal spending mechanism in order to minimize product costs and increase the efficiency of production and business Strengthen debt collection to completely settle due debts and overdue debts 3.3 Conditions for implementing solutions 3.3.1 For the state - Continue to further improve the quality of administrative services, reduce cumbersome and time-consuming procedures for enterprises - Promote electronic administrative transactions, data connection and sharing among departments to reduce the number of corporate reports Comprehensive, complete and specific systematization of legal documents for legal support policies for businesses 102 TRAN LE PHUOC AN 102 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS - Change insurance policy to be more suitable for seasonal workers working in construction enterprises - Ensuring supply-demand balance and stabilizing the market price of construction materials - Create favorable conditions for businesses by credit policies, finance, interest rate reduction, debt rescheduling, tax reduction, and effective solutions to cut procedures and shorten payment and disbursement time for works using state budget capital 3.3.2 For business - Seriously inspect, supervise and evaluate the progress of projects during the year, continuously appraise the quality of the work and project implementation time - Change policies related to the management of receivables and payables during the year, suitable to each type of customer - A team of management board of the company is flexible and wise in evaluating and bidding for investment projects, with a suitable project analysis team Chapter of the thesis mentioned solutions to improve the financial situation of Anh Ngoc Steel limited company in particular and businesses in the construction sector in general At the same time, chapter presents the development orientation of the company in the most subjective way Accompanying the achieved results along with the limitations, the reasons in Chapter 2, Chapter have proposed a number of solutions to remove problems, improve the financial situation of the company, promote strengths, and address weaknesses in order to maximize business value 103 TRAN LE PHUOC AN 103 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS CONCLUSION Today, in the context of our country's increasingly deep integration, the difficulties and challenges posed in the flow of globalization Besides, the stagnation and the impact of the Covid-19 epidemic have affected to industry, country and the territory, which set out the requirements for each enterprise to improve its competitiveness, take measures to self-financed and create opportunities to integrate into the regional economy and around the world That requires each business to build a strong financial plan, identify strengths and weaknesses in each field of activity in order to serve financial decisionmaking in a timely and effective manner to achieve the business goals have been set Operating in the construction field, in recent years the company has made efforts to operate, but with limited scale, capacity, low financial 104 TRAN LE PHUOC AN 104 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS autonomy, and difficulties in the construction industry When entering the restructuring period with fierce competition, over the past few years, the company's financial situation has many limitations besides its achievements The thesis has clarified the results achieved and the difficulties encountered in the past time and set out the results; restrictions and remedial solutions to contribute to improving the company's financial situation, helping the company overcome difficulties, towards growth and development goals Due to limitations in my knowledge and experience, there might be errors and misunderstandings which are unavoidable in my research, I sincerely ask for comments and feedbacks from lecturers for my improvements Besides, I would like to show my appreciation to the Board of Directors and the finance - accounting department Anh Ngoc Steel limited company for the help and support during my time of internship at the Company, and my respect to Assoc.Prof Pham Thi Thanh Hoa whose guidelines had led me to complete this report Hanoi, May, 2021 Student Tran Le Phuoc An 105 TRAN LE PHUOC AN 105 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS 106 TRAN LE PHUOC AN 106 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS REFERENCE Assoc Dr Bui Van Van - Assoc Dr Vu Van Ninh (co-editor) (2013), "Textbook of Corporate Finance", Finance Publishing House; Financial statements 2018, 2019, 2021 of Anh Ngoc Steel Company limited; Business plan and accounting documents of Anh Ngoc Steel Company limited; Economic websites: http://cafef.vn/, http://vneconomy.vn/ ,, https: //www.worldbank.org/ ; https://thoibaonganhang.vn/ ; Some theses, topics of the same topic and other topics on fixed capital, working capital, business capital, profit ; Student Science Research Journal, Finance - Accounting Research Journal, Academy of Finance 107 TRAN LE PHUOC AN 107 CQ55/11.02 ... LIMITED LIABILITY COMPANY IN THE PAST TIME 2.1 Overview of Anh Ngoc Steel Limited Liability Company: 2.1.1 The establishment and development of Anh Ngoc Steel Limited Liability Company:  Company. .. terms of space: Research on financial situation and financial measures to improve the financial position of Anh Ngoc Steel Limited Liability Company + About time: Financial activities of the company. .. chose the topic: “ The financial situation of Anh Ngoc Steel Limited Liability Company? ?? Rearch objective The topic goes into depth and explores issues related to the financial situation of the