26 FINANCIAL SITUATION OF HANOI CONSTRUCTION ASSOCIATION ONE MEMBER LIMITED COMPANY

MINISTRY OF FINANCE ACADEMY OF FINANCE * BUI LINH TRANG CQ55/11.02 GRADUATION THESIS TOPIC: “ FINANCIAL SITUATION OF HANOI CONSTRUCTION ASSOCIATION ONE MEMBER LIMITED COMPANY” Major : Corporate Finance Student ID : 17523402010820 Supervisor : PhD Ngo Thi Kim Hoa Ha Noi - 2021 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 Bui Linh Trang BUI LINH TRANG i CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS ACKNOWLEDGEMENT I would like to take this opportunity to express my deepest gratitude and appreciation to the people who have given me their assistance throughout my studies during the preparation of this thesis They are my teachers, my colleagues, my family and my friends I would like to express my great thanks to all of them First of all, I would especially like to thank my advisor, PhD Ngo Thi Kim Hoa , for her continuous encouragement and especially for her academic and creative guidance She has been my source for inspiration throughout my thesis Without her support, I would not be able to complete my thesis And I really appreciate her patience in reading and correcting my thesis Secondly, I am indebted to all my teachers at Academy of Finance for their guidance and help with valuable lessons throughout four years of study Moreover, I would like to thank especially chief accountant, and the staffs of Hanoi Construction Association One Member Limited Company, for their valuable supports during the internship period Without their helps, it would be impossible for me to finish this work Last but not least, many thanks to my family, friends and classmates for their great love and care in both spirit and health during preparation for the undergraduate thesis BUI LINH TRANG ii CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS ABSTRACT This study investigated the factual state of financial efficiency at Hanoi Construction Association One Member Limited Company from the viewpoint of a fourth year student of Faculty of Corporate Finance, Academy of Finance The paper aims at finding out the drawbacks in the company’s financial and the reasons, and more importantly suggesting main methods to improve the efficiency of financial in the company In achieving these aims, the graduation paper surveys the current situation of financial and assess that whether it is effective or not From received results, the study argues the most practical implications at Hanoi Construction Association One Member Limited Company to improve the efficiency of financial of the company in the year to come BUI LINH TRANG iii CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS DECLARATION .i ACKNOWLEDGEMENT ii ABSTRACT iii LIST OF ABBREVIATIONS .v CHAPTER I 1.1.2 Corporate financial management 1.1.2.2 The role of corporate financial management 1.2.2.5 Liquidity and Solvency 28 1.2.2.7 The situation of profit distribution of the business 37 CHAPTER II: 41 THE FINANCIAL SITUATION OF HANOI CONSTRUCTION ASSOCIATION ONE MEMBER LIMITED LIABILITY COMPANY 41 2.1.2.1 Function and business lines of the company 43 2.1.2.2 Business performance characteristics of the company 2.1.2.3 The advantages and disadvantages in the process of operations of the company 2.2 The financial situation of Hanoi Construction Association One Member Limited Company 2.2.1 The company’s assets and Assets structure 2.2.2 The company’s Capital and Capital structure .12 2.2.3 The company’s Revenues, Expenses and Income 22 2.2.4 The company’s Cash flow situation 27 2.2.5 The company’s Liquidity and solvency: 31 2.2.6 The company’s asset utilization efficiency 39 2.2.7 The company’s profit distribution 47 3.1.1.1 World socio-economic context 51 3.1.1.2 Vietnam's socio-economic context 52 3.1.2.1 The company's development goals and orientations in the coming time 58 3.1.2.2 The targets of production and business plan in 2021 59 3.3.1 On the business side 75 BUI LINH TRANG iv CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS LIST OF ABBREVIATIONS BEP Basic Earnings Power CA Current Assets CL Current Liabilities EBIT Earnings Before Interest and Tax EBT Earnings Before and Tax ROA Return on Assets ROE Return on Equity NI Net income NWC Net working capital ROS Return on Sales VND Viet Nam dong LIST OF TABLES Table 2.2: Analysis of the size and structure of assets in 2020 .6 Table 2.3: Analysis of structure capital in 2020 12 Table 2.4: Analysis of capital size and structure in 2020 14 Table 2.5 Analysis of the funding model 20 Table 2.6: Analysis of business performance and results in 2020 22 Table 2.7: Analysis of Business operation of the company in 2019-2020 24 Table 2.8 Ratio of money generation of the enterprise 27 Table 2.9 Fluctuations in Receivable and To pay debt of company .32 Table 2.10: Liquidity and Solvency analysis in 2020 .36 Table 2.11: Performance analysis in 2020 40 Table 2.12: Analysis of profitability of companies in 2020 44 Table 2.12: Estimated implementation of some major targets in the 2016-2020 54 BUI LINH TRANG v CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS (Source: Report on the implementation of socio-economic development plans for 2020 and years 2016-2020; Expected plans for 2021 and directions and tasks for years 2021-2025) 54 Table 3.1: The main targets of the plan for the year 2021 59 BUI LINH TRANG vi CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS LIST OF FIGURES Figure 1.1: Company funding model 20 Figure 2.1: Organizational structure operating of the company 43 Figure 2.2: The company's accounting system .2 Figure 2.3: Fluctuations in capital assets in 2019 - 2020 Figure 2.4: Fluctuations in capital structure of company in 2019 - 2020 .16 Figure 2.5: Receivable and Payable fluctuations trends of company in 31/12/2019 and 31/12/2020 34 BUI LINH TRANG vii CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS PREFACE Research background Currently, the deep changes of the world economy as well as the domestic economy have posed many difficulties and challenges for businesses, making the competition among economic sectors more and more should be harsh Besides, globalization has become an inevitable trend of the world economy, Vietnam is not out of that inevitable trend Globalization has opened up new opportunities for businesses and organizations, but it means that businesses are facing many new challenges with increasingly fierce competition from the market economy Enterprises not only compete with enterprises in the same industry and field but also have to compete with many competitors with strong financial potential both at home and abroad In this situation, the urgent requirement for managers is how to build and maintain a competitive advantage, thereby helping their businesses survive and develop sustainably This has forced businesses not only to rise up in the process of production and business but also to know how to maximize their potential to achieve the highest business efficiency From these practical requirements, enterprises need to understand the results of their business activities and their financial status in each period in order to make appropriate decisions to minimize risks in activities, especially especially in financial management as well as orientation for the development of the entire enterprise in the future To so, the financial managers must evaluate and analyze the business activities as well as the financial activities of the enterprises on a regular basis in detail and efficiency Recognizing the importance of analyzing the financial situation and assessing the financial status of a business, I have researched, researched and selected to implement the topic: “ Financial stituation of Hanoi Construction Association One Member Limited Company ” BUI LINH TRANG 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, 20-40% to maintain the ability to meet spending needs when unexpected events occur that affect normal revenue and expenditure activities of company BUI LINH TRANG 65 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS - 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 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 3.2.4 Promote bidding activities, increase revenue and manage production and business costs in an economical and effective way The management of revenue and expenses of the company is limited, making the profit scale of the business relatively low Net revenue from sales and service provision in 2020 reached 24,575 million VND, an increase of 4,096 million VND compared to 2019 with a growth rate of 20%, showing that the company is on the BUI LINH TRANG 66 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS way to get rid of difficulties in the business process The real estate market has started to be active again And the credit loosening policy has brought results as expected, the revenue of the business has been better than the year Increasing revenue in the period is the most important task in the business plan and financial goals of the business in the coming years Enterprises can apply the following measures to increase revenue from construction activities: • Improve the quality of construction products in order to increase the competitiveness of businesses on the table, increase the likelihood of winning the bid for large projects: With specific characteristics, construction products are notuhIt is allowed to have works, items that not guarantee quality luhaccording to cost estimate design requirements To improve quality luhProducts require modern fixed assets, the construction organization must ensure the correct design, correct process.DAt the same time, during the construction process, there must be strict inspection and supervision by technical staff to ensure that the works are in accordance with technical indicators, suitable to the terrain, climate and ensure labor safety for worker Improving quality luhBuilding products helps the company increase its prestige and competitiveness in the marketuhRoad construction, which helps with investmentuh, easy contract signing • Expanding the operating market, looking for potential customers, competing on bid with other businesses in order to increase the chances of winning the bid: Due to being a newly established and young business, however, the Board of Directors and staff members of the company are reputable and experienced in the construction field for many years, so in the coming time, The company can look for potential customers, expand relationships to expand marketuhRoads are not only in Hanoi, but also in neighboring provincesuh Ha Nam, Hai Phong, Vinh Phuc • Construction is a particular type different from the commercial and production business Revenue is recognized only after completion, the acceptance BUI LINH TRANG 67 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS of the project may be the acceptance of a part or the whole of the project Therefore, one of the solutions to increase net revenue in the period besides increasing the number and scale of construction works is: enterprises need to quickly complete these works, ensure on schedule scheduled and accepted on time To this, businesses need to apply the following measures: - Maximize capacity of machinery, equipment, means of transport in service of construction; - Improve labor productivity for employees, ensure compliance with discipline and labor safety; - Promote valuable construction technical initiatives, organize training for managers and workers directly in the construction, and have timely reward policies for outstanding collectives and individuals to motivate the spirit of enthusiastic production workers; - Quickly and promptly purchasing construction materials to ensure the construction is carried out on schedule • Promote Marketing activities To this well, businesses need to implement the following activities: - Building market information systems to provide and update the latest information on technical and economic activities related to the construction field of the company - Regularly research the domestic and regional market on important issues such as legal mechanism, market demand, competitor analysis, input factors such as raw material prices modern and advanced scientific technology From there, determine the opinions of customers about the company's construction products, current and future requirements of customers for the company's construction products, the position of construction products of the company company in the market compared to other businesses BUI LINH TRANG 68 CQ55/11.02 ACADEMY OF FINANCE - GRADUATION THESIS Implement effective advertising measures such as advertising on local media or participating in social work programs, local charity work - Build development, improve the company's reputation, the company needs to build a strategyuhlong-term overall in promoting thYesbrand That is: promote thYesBranding is associated with continuous improvement in qualityuhbuilding products, bringing durability to construction works, euhtrusted by customers • Cost saving solutions: * For cost of goods sold: - Set the norm of consumption of raw materials, labor, and general production costs for the purpose of construction under the norm Build up the planned cost, regularly monitor and check the actual implementation of the actual price, whether it is close to the planned price or not, then take correct and timely handling measures - Choosing raw materials, exploiting rationally, saving raw materials, organizing the purchase to save and efficiently - Have a plan to reserve inventory in a reasonable way, in accordance with the needs of construction and consumption in the coming time, to avoid the situation of too large reserves causing capital stagnation, and costly storage costs to increase COGS products of the business - Regularly update market information and analyze the effects of macro factors in order to have a reasonable inventory reserve measure - Train staff members, improve skills, increase labor productivity in order to reduce labor costs in finished product prices - Choosing a supplier of building materials that ensures quality and prestige, and also enjoy preferential policies such as payment discount, commercial discount - The company also needs to strengthen the quality management of the works, work items, check and supervise construction to avoid technical errors, incorrect construction of drawings, and must be re-done because of that will cause big loss BUI LINH TRANG 69 CQ55/11.02 ACADEMY OF FINANCE GRADUATION THESIS for the company The works, work items before handing over to customers need to be checked, accepted and handed over in detail - To tie the responsibility of each work item under construction to the responsibility of each part, individual employees, if something goes wrong, those people must take part of the responsibility * Financial expenses: Financial expenses of the Company are mainly interest expenses Enterprises need to minimize these costs in the coming time to increase profits for businesses in the context that their BEP is smaller than the average interest rate, by: • Restructuring capital sources in the direction of increasing the proportion of equity, paying down debt to reduce interest expenses • Implement debt restructuring, long-term debt rollover with short-term debt, enhance the ability to appropriate capital from suppliers and other entities to significantly reduce interest expenses 3.2.5 Improve operational efficiency, exploitation and use of capital The overall performance of the company is on an upward trend Number of capital cycles