31 FINANCIAL SITUATION OF VICEM HOANG THACH CEMENT COMPANY LIMITED

MINISTRY OF FINANCE ACADEMY OF FINANCE FACULTY OF CORPORATE FINANCE -🙡🙡🙡 - GRADUATION THESIS TOPIC: FINANCIAL SITUATION OF VICEM HOANG THACH CEMENT COMPANY LIMITED Student: Pham Thi Thuy Chinh Class: CQ55/11.05 Supervisor: Assoc Prof Doan Huong Quynh Hanoi – 2021 Graduation Thesis Finance Academy of DECLARATION I declare that this thesis is made by myself, as a result of the threemonth internship at the Department of Accounting of Vicem Hoang Thach cement company limited Any ideas, techniques, quotations and other material from work of other people included in this study are fully acknowledged in references I also declare that this thesis is not submitted to any other organization, thus this is the only published version submitted to my thesis reviewers Author of the thesis Pham Thi Thuy Chinh Student: Pham Thi Thuy Chinh Class: CQ55/11.05 Graduation Thesis Finance Academy of ACKNOWLEDGEMENT Although I have tried my best, but because of limited research conditions and knowledge, my thesis could not avoid errors I hope that I can receive the bits of advices from teachers to make my research project more complete I would like to express my deepest gratitude to my supervisor, Assoc Prof Doan Huong Quynh, lecturer of Academy of Finance, who has given immeasurable help, constant guidance with many careful instructions, comments and valuable advice to me whenever I need Without her support, I am not able to complete this thesis And I appreciate her patience in reading and correcting my thesis I also want to show my sincere thanks to all the staff at the accounting department of Vicem Hoang Thach Cement company limited Student: Pham Thi Thuy Chinh Class: CQ55/11.05 Graduation Thesis Finance Academy of TABLE OF CONTENTS DECLARATION i ACKNOWLEDGEMENT ii TABLE OF CONTENTS .iii LIST OF ABBREVIATIONS vi LIST OF CHARTS vii LIST OF TABLES .viii PREFACE CHAPTER ONE: THEORETICAL BACKGROUND OF FINANCIAL SITUATION OF A COMPANY 1.1 1.1.1 Corporate finance and financial management Corporate finance and financial decisions 1.1.2 Financial management 11 1.2 Financial situation of a company 15 1.2.1 Definition of financial situation 15 1.2.2 Indicators for assessing financial situation of a company 16 1.3 Factors determining the financial situation of a company .37 1.3.1 Internal factors 37 1.3.2 External factors 39 CHAPTER 2: FINANCIAL SITUATION OF VICEM HOANG THACH CEMENT COMPANY LIMITED 41 2.1 Overview of Vicem Hoang Thach Cement Company Limited 41 Student: Pham Thi Thuy Chinh Class: CQ55/11.05 Graduation Thesis Finance Academy of 2.1.1 Establishment and Development of Vicem Hoang Thach Cement Company Limited 41 2.1.2 Business characteristics of Vicem Hoang Thach Cement Company Limited: 42 2.1.3 General information on financial performance of Vicem Hoang thach Cement Company Limited 48 2.2 The Financial situation of Vicem Hoang Thạch Cement Company Limited 52 2.2.1 Assets and asset structure of Vicem Hoang Thach Cement Company Limited 52 2.2.2 Sources of capital and Capital structure of Vicem Hoang Thach Cement Company Limited 60 2.2.3 Revenues, Expenses, Incomes 68 2.2.4 Cash flow 74 2.2.5 Liquidity and Solvency 81 2.3 Assessment of Hoang Thach financial situation 100 2.3.1 The achievements 100 2.3.2 Shortcomings and reasons: .101 CHAPTER 104 SOLUTIONS TO IMPROVING THE FINANCIAL SITUATION OF VICEM HOANG THACH CEMENT COMPANY LIMITED 104 Student: Pham Thi Thuy Chinh Class: CQ55/11.05 Graduation Thesis Finance Academy of 3.1 Objectives and strategic development directions of Vicem Hoang Thach Cement Company Limited 104 3.1.1 Socio-economic context .104 3.1.2 Objectives and strategic development directions of Vicem Hoang Thach Cement Company Limited 108 3.2 Solutions to improving financial situation of Vicem Hoang Thach Cement Company Limited 110 3.3 Conditions needed for implementing the solutions .122 3.3.1 The State .122 3.3.2 Vicem Hoang Thach Cement Company Limited .123 CONCLUSION 124 REFERENCES 126 APPENDIX 127 Student: Pham Thi Thuy Chinh Class: CQ55/11.05 Graduation Thesis Finance Academy of LIST OF ABBREVIATIONS Abbreviated words Meanings COGS Cost of goods sold EBIT Earnings before interest and tax NI Net income NWC Net working capital OCF Operating cash flow BEP Basic earnings power ROA Return on Assets ROE Return on Equity ROS Return on Per Percentage VND Vietnamese dong Student: Pham Thi Thuy Chinh Class: CQ55/11.05 Graduation Thesis Finance Academy of LIST OF CHARTS Chart 1.1: DUPONT analysis diagram 36 Chart 2.1: The structure of Vicem Hoang Thach Cement company limited 43 Chart 2.2: Model of finance-accounting department 47 Chart 2.3: Hoang Thach’s assets structure 2019-2020 56 Chart 2.4: Capital structure 2019-2020 63 Table 2.4: Hoang Thach’s Business performance 68 Chart 2.5: Changes of Net Revenue, COGS, NI 73 Chart 2.6: Hoang Thach’s Liquidity ratios 2019-2020 83 Student: Pham Thi Thuy Chinh Class: CQ55/11.05 Graduation Thesis Finance Academy of LIST OF TABLES Table 2.1 Hoang Thach’s Asset structure 2019-2020 52 Table 2.2 Hoang Thach’s Capital structure 2019-2020 61 Table 2.3 Net working capital 2019-2020 .66 Table 2.5 Analysis level of cost used in core operating activities 72 Table 2.6: Analysis of sources and uses of cash 75 Table 2.8: Cash flow ratios 79 Table 2.8 Hoang Thach’s liquidity ratios in 2019 – 2020 .82 Table 2.9: Hoang Thach’s solvency ratios in 2019-2020 85 Table 2.10 Asset utilization efficiency 2019-2020 87 Table 2.11: Hoang Thach’s profitability 2019-2020 .91 Table 2.12 compare Hoang Thach’s indicator with other companies 94 Table 2.13: Dupont System 2019-2020 96 Table 3.1 The change of DFL, ROE when changing ROA in 2021 115 Student: Pham Thi Thuy Chinh Class: CQ55/11.05 Graduation Thesis Finance Academy of PREFACE Introduction Rationale of the study Vietnam's economy is in the process of transformation and operation under the market mechanism, opening and integrating with the global economy In the context of economic crisis, the process brings new opportunities for market expansion and access as well as a lot of challenges to Vietnamese companies, effectively using and managing capital is always a concern of companies that aims to improve business performance In the context of globalization, businesses need to be treated equally on the same playing field "Strong win, weak lose" is an inevitable rule in today’s competitive economy Such harsh challenges and difficulties force Vietnamese businesses to carefully consider every decision, especially during the covid-19 pandemic, which greatly affects their competitiveness and the companies’ overall health In the market economy, where the economic relationship comes to, the field of impact and control of finance will also reach out there In fact, the more economic relations have, the more financial activities have In the business operations, each enterprise must handle series of financial issues such as: where to invest, how much, how to raise capital, management and use of capital, capital conservation and development, debt and repayment, revenue and profit distribution, Operating in the market economy with dizzying pace of change and many risk factors, enterprise managers must always be careful when making decisions Because only a small mistake can make enterprises pay dearly So what managers depend on to make the most appropriate decision? That requires managers to collect and process existing information to analyze and assess Student: Pham Thi Thuy Chinh Class: CQ55/11.05 Firstly, when signing a contract, the company may add terms of payment as well as incentives when customers pay early; the company need to attach special importance to measures to manage receivables from credit of goods and services If the profitability is greater than risk, the company can expand (loosen) the credit, while if the profitability is smaller than the risk, the company must narrow (tighten) the credit of goods and services Secondly, Conduct classification of customers into target groups to devise suitable policies to each type of object; On the other hand, to minimize payment risks, the company should take measures to prevent risks if customers lose their ability to pay such as: Deposit with money or assets, advance a part of construction money, require bank guarantees or determining the credit limits that can be provided to customers based on their credit rating and credit standing However, the company needs to ensure the ability of due debts payments The company also needs to agree with customers on payment terms clearly, have incentives for customers who pay in advance and on time, as well as the obligatorily handling measures if customers violate the debt recovery to manage and monitor debt regularly and take measures to recover debts most effectively, this is very meaningful for companies want to expand their sales network to provinces and cities across the country In addition to receivables management, the company should enhance cash management by implementing some solutions such as: Planning specific cash flows in detail and regular monitoring, closely supervise the implementation of plans Take full advantage of the idle amount of cash available to make a profitable investment There are ways of receivable recovery: First and foremost, it is essential to analyze receivables in detail in order to determine potential problems and take appropriate actions to increase or guarantee target revenue Secondly, payment discount To collect the receivables by deadline, discount interest rate policy should be applied However, the discount rate should be equal or lower than the bank rate Thirdly, debt comparison Debt comparison involves in provision of detailed information of receivables so that customers confirm in the paper of debt comparison This is the base for customers to fulfill the payment obligations Debt comparison should be done monthly or quarterly especially with the group of customers who had high loan balance Fourthly, revision, acceptance of the projects in order to collect partly based on the completion level Besides, the company should regularly follow the receivables recovery, search for the reasons to propose solutions such as loans extensions or making allowances for bad debts 3.2.3 Improve the efficiency of debt use First: Improve the efficiency of loan use: The company can borrow more when it lacks capital to finance its business activities to enjoy the benefits that the use of debt brings However, in order to use debt effectively, the company needs to clearly determine the necessary capital needs, appropriate debt ratio and the purpose of using debt to have the best direction Besides, the profitability of each dollar of asset ROA indicates whether the company's asset use is effective or not, so through ROA we can evaluate the efficiency of capital use for total assets Suppose that in 2021, the company increases its ROA ratio to 17.49%, corresponding to an increase of 107% compared to 2020 While the ratio of debt and total assets remains unchanged, that is, the D/E ratio is still 0.85 times From measuring EBIT increase while corporate income tax is unchanged, we can determine: Table 3.1 The change of DFL, ROE when changing ROA in 2021 Item 1.EBIT(VND) 2.Interest(VND) 3.DFL(time)=1/(1- 2021(estimated) 790,567,678,395.36 13,899,142,130 1.0179 2020 381,916,752,848 13,899,142,130 1.0378 2) 4.D/E(time) 0.85 5.ROA(%) 17.49 6.ROE(%) 14.72 Source: Calculations from financial statements 0.85 8.45 17.80 Per(%) 107 (-1.99) 107 20.95 From the table above, it can be seen that when the company's ROA increased by 107% to 17.49%, EBIT also increased by 107%, and caused the company's financial leverage to decrease by 1.99% to 1.0179 times In addition, the company's ROE increased sharply when ROA increased to 107% Therefore, an increase in ROA can cause financial leverage to decrease, helping the company to reduce financial risks and at the same time increase ROE to 17.8% This is a measure the company can combine with measures to improve capital efficiency, when the company reasonably cuts costs to increase its EBIT Besides, the company should look for low-cost sources of debt In addition to borrowing capital from banks, the company can issue bonds inside the company for workers with idle capital to buy or issue to the outside market Sometimes many companies can borrow from workers' idle savings to avoid high interest rates from borrowing from credit institutions 3.2.4 Adjusting the working capital financing policy, establishing net working capital for the company Net working capital (NWC) is the long-term source of funding for the enterprise's working assets to ensure its business Long-term capital is invested first to form long-term assets, the rest and short-term capital is invested to form short-term assets Then, the difference between long-term capital and long-term assets is called net working capital The level of safety or financial risk of an enterprise depends on the size of the net working capital Through the analysis of the Company's financing activities, we can see that net working capital (NWC) of the company is at negative level, proving that the company is using capital wrongly, not only that working assets is not funded by long-term funding, a part of short-term capital is also used to finance the long-term assets This shows that the company has violated the principle of financial balance, especially the company is a construction business Thereby it makes a lot of influence on the company's business operations, the company's operations can be interrupted at any time To overcome this imbalance, the company can take measures such as: Performing debt restructuring by proposing to commercial banks for approval of new long-term loans to replace short-term debts This will help convert the company's current short-term debts into long-term liabilities, helping to increase the company's long-term funding to ensure it is appropriate for using long-term funding to fund long-term assets Negotiate to extend or continue to borrow debts which are due, but still ensure the timely payment of loan interests This will help the company ensure the continuity of production and business activities without interruption in the short term 3.2.5 Improve the efficiency of using fixed assets For an enterprise operating in the field of cement production, fixed assets always occupy a large proportion in the asset structure and always bring certain characteristics and influence to the entire production and business activities of the company Therefore, in order to contribute to improving the financial situation of the company, it is impossible to ignore the efficiency improvement in the use of fixed assets In the coming time, the company may implement many specific measures as follows: In order to improve the efficiency of use of fixed assets, the company should first classify and re-evaluate old and outdated assets, do-not-use to liquidate and sell them at the best possible price, quickly recover capital to reinvest in other new fixed assets Last year, the company also liquidated and sold some fixed assets, at the same time invested in new procurement of some equipment and put to use some of the completed capital construction projects, so the company needed to maximizing raise capital the existing fixed assets into production and business, and developing maintenance plan for these devices to promote the highest productivity of fixed assets and increase the efficiency of using fixed assets On the other hand, the company should strengthen the management, supervision of fixed assets, select and determine the appropriate depreciation method to avoid being affected by intangible wear and purchase of fixed assets insurance For fixed assets with large intangible depreciation, the company should apply the rapid depreciation method to quickly recover investment capital, speed up the renovation of fixed assets without causing big changes to production and business activities of the company The issue that the company needs to pay attention to is the evaluation and valuation of fixed assets must include both economic and technical aspects The company should build, train or hire a team of skilled experts in appraising the value of fixed assets, especially in complex investment projects, avoiding inefficient inefficient investment, especially for capital construction investment, limiting the capital loss or the cost of the project is too high compared to the estimate 3.2.6 Pushing up cost-saving, lowering product prices and profit maximization The company should actively seek customers with strong demand, regular and long-term to conclude contracts for services supplying, giving the company a broad and stable market Saving the cost of doing business and lowering product price are important factors which directly increase profits for businesses Therefore, any company strives to minimize unreasonable costs Assessing the actual financial situation of the company shows that there is a large proportion of cost of goods sold also in revenue; management costs have decreased now, but still lower than the revenue so that profit can not be maximized for the business To remedy that situation, the company shall apply the following measures: Firstly, cost savings Control the cost of material at the stage of input: negotiation of price can be conducted among the company and the suppliers If the suppliers cannot deal, the company can find other supplier with optimal price so that it can secure the target profits In difficult conditions, raw material price is getting higher and higher, the company should actively search for other markets with low-cost inputs For long-term suppliers, the company should consider leverage relationships to apply for discounts Carefully select the optimal materials which meet the demand of quality, quantity and timeliness This can help cut down on the inventories which leads to capital stagnant and related expense namely preservation costs, warehouse costs… Secondly, cost management Review and make specific plan for business expenses and for product price Completing this work is to create favorable conditions for the inspection and monitoring of business expenses while implementing product cost reduction Create the norm of actual expenses to allocate into specific types Regularly examine the actual expenses in every activity in order to manage the situation of cost utilization and suggest solutions to obtain the efficiency For financial expenses, due to the use of large financial leverage, financial expenses always account for a large proportion of the total cost of the company The company needs to have a detailed debt repayment plan for each creditor, ensuring timely repayment to avoid damaging the company's reputation and avoiding unnecessary financial penalties At the same time, the company needs to have a plan to restructure capital resources in the long term to reduce the unwanted impact of financial leverage as currently Thirdly, recruitment The company ought to recruit more regularly workers and employees that are experienced and reliable Hence, this can raise the productivity in production and further save the wage and salary expenditure 3.2.7 Complete and improve accounting system and financial analysis at the company Implement of financial analysis will provide an overall and insight view into the financial situation of the company, about the strengths, weaknesses, achievements and constraints existing From the theoretical analysis in chapter and in practice in chapter 2, we see that the quality of corporate financial analysis in Vicem Hoang Thach Cement Company Limited is very important Therefore, the company leaders need to pay more attention to financial analysis In the future, the company should have a separate department responsible for this task To ensure effectively financial analysis, Hoang Thach should focus on measures as follows: On the side of management: Recognize properly the role of corporate financial analysis in your business From there, it is necessary to set out unified scientific criteria and guidelines to make the way for financial analysts to perform Business financial analysis should ensure the linkage of human resources, information, analytical methods and infrastructure To achieve it, the company's leadership is the deciding factor The quality of information: the accounting department of the company needs to provide data scientifically, honestly and accurately to ensure the output quality of the analysis Because accounting information is the input of corporate financial analysis process, if the input information is not accurate, the output of the analysis reports cannot truly reflect the financial situation of the company In addition to financial statements, people who conduct financial analysis also need to rely on governance reports of their company to have close and timely assessments The quality of human resources analyzing finance: People who perform financial management must have vision, sharp mindset, at the same time must master the knowledge of both accounting and finance These people must have ethical qualities that are objective and honest Regarding the current financial situation of Vicem Hoang Thach Cement Company Limited, I would like to propose the option to hire independent financial analysts from independent accounting and auditing companies to help the company lay the first foundations for its financial analysis apparatus 3.2.8 Promote human resource training: The number of investment projects increases more and more in both scale and type, so the Company must build a team of qualified and capable managers, technicians and executives to perform well investment works at the moment Bring into play achievements as well as rectify shortcomings in human resource development policies in recent years Therefore, the Company should carry out practical solutions: Pay close attention to recruitment works Accurately assessing the capacity and qualification of workers to attract skilled workers as well as improving general qualification, saving training costs and retraining in the future Concretize the recruitment plan by contacting universities and vocational schools, creating jobs for newly graduated students Concretize the recruitment plans right at the grassroots units such as funding support and allow participant construction units to recruiting and training their own human resources Have attractive and practical policies to attract more good people to meet requirements and new tasks of the Company Enhancing the training and retraining of professional knowledge and competency for employees in the Company (opening training courses on corporate governance, project management, foreign languages teaching classes for employees, opening courses to foster more knowledge for technical employees specialized in the work quality management and supervision) Pay special attention to improving professional skills for investment advisors Having an appropriate and reasonable salary policy with the capacity and effort of employees, creating motivation to encourage employees to be enthusiastic and creative to work In addition, the Company needs to promulgate reasonable remuneration policies for employees so that they can be assured of long-term service and dedication Fair regimes of reward and punishment For units operating inefficiently, lacking the sense of responsibility for the common work, there should be forms of reprimand criticism, even material punishment, to raise the sense of collective building, ensure the common investment is carried out successfully Organize and arrange working conditions in a scientific manner, well implement labor safety protection and minimize labor accidents In addition, it is necessary to organize healthy cultural movements to serve the spiritual life of the construction workers 3.3 Conditions needed for implementing the solutions 3.3.1 The State Maintain the stability of politics, invest in economic-social infrastructure to create the positive economic background and environment so that enterprises can grow Control the inflation, reduce the mobilized capital cost from banks and credit organizations This can make it easy for enterprises maintain its operating activity Currently, due to the terrible impact of COVID-19, almost all the banks and credit organization had decreased its interest rate which is a cure for enterprises especially manufacturing corporations Build a professional forecast system of market situation, the price of input resources and so on The enterprises can rely on those expectation to set up long-term plans Promptly tax refund to enterprises therefore the company can supplement the capital for its production 3.3.2 Vicem Hoang Thach Cement Company Limited Financial plans are specifically set up and the rate of progress should be supervised Improve methods of examining financial situation Regularly train the workers to raise the awareness of the major Secure the labor forces to be the company’s long-term competitive edge Initiatively find new customers and have incentive policies to retain old customers, maintain relationships with suppliers to purchase with cheaper prices Build solid capital sources such as changing the structure of business capital, increasing equities, reducing debts and so on This will allow the company compete other rival companies and enhance its brand value CONCLUSION Research the corporate financial situation is always important to enterprises in any industry Recently, the unexpected fluctuation of global economy had resulted in many challenges to enterprises which raises the competitiveness among corporations Enterprises thereby necessitate to make proper decisions to seize opportunities and reduce the risk in operations especially in financial activity In that context, the company necessitates to clearly understand the situation and its activities so that it can affirm and enhance its brand value In accordance with general arguments of financial situation and assessment of financial situation in the case of Vicem Hoang Thach Cement Company Limited, I have been clear of the bottlenecks and challenges that enterprises have confronted improving their operations Analysis of financial situation is a giant issue that requires an amount of knowledge and experiences However, in the period of internship, I was oriented and supported not only by teacher Doan Huong Quynh but also managers of Vicem Hoang thach Cement Company Limited from Financial – Accounting department I have made many attempts to combine absorbed knowledge and research on the financial situation of the intern unit in practice in order to propose methods to advance the company’s operation efficiency 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 Mrs Doan Huong Quynh, teachers of Corporate Finance Department and all the staffs from Vicem Hoang Thach Cement Company Limited in supporting me with this graduation thesis REFERENCES Analyzing the financial situation of Dan Viet Steel Company Nguyen Thi Ngoc Mai - Hai Phong Private University – 2017 Nguyen Trong Co, Nghiem Thi Tha (2015), Corporate financial analysis, Finance Publishing House, Ha Noi Bui Van Van, Vu Van Ninh (2013), Corporate finance, Finance Publishing House, Ha Noi Financial statements, Vicem Hoang thach Cement Company Limited (2019,2020) Annual financial statements, Vicem Hoang Thach Cement Company Limited (2019, 2020) 6.https://www.stockbiz.vn/IndustryOverview.aspx?Code=2353 7.https://www.stockbiz.vn/Industries.aspx?Code=1000&view=2 8.https://nhandan.com.vn/tin-tuc-su-kien/bao-cao-danh-gia-ket-qua-thuchien-nhiem-vu-phat-trien-kinh-te-xa-hoi-5-nam-2016-2020-va-phuonghuong-nhiem-vu-phat-trien-kinh-te-xa-hoi-5-nam-2021-2025-621157/ APPENDIX 1.Balance sheet, income statement, cash flow statement and note to the financial statement of Vicem Hoang Thach Cement Company limited 2.Confirm of supervisor Reviews of internship unit Reviews of instructors Reviews of reviewers ... 2: FINANCIAL SITUATION OF VICEM HOANG THACH CEMENT COMPANY LIMITED 2.1 Overview of Vicem Hoang Thach Cement Company Limited 2.1.1 Establishment and Development of Vicem Hoang Thach Cement Company. .. improve financial performance of Vicem Hoang Thach Cement Company Limited in the near future? Scope of the study - Subject of study: The financial situation of Vicem Hoang Thach Cement Company Limited. .. theory of corporate finance, the indicators to assess the financial situation of Vicem Hoang Thach Cement Company Limited The topic ‘? ?Financial situation of Vicem Hoang Thach Cement Company Limited? ??’