33 “ FINANCIAL SITUATION AT HANOI CONSTRUCTION ASSOCIATION ONE MEMBER LIMITED COMPANY

MINISTRY OF FINANCE ACADEMY OF FINANCE * BUI LINH TRANG CQ55/11.02 GRADUATION THESIS TOPIC: “ FINANCIAL SITUATION AT HANOI CONSTRUCTION ASSOCIATION ONE MEMBER LIMITED COMPANY” Major : Corporate Finance Student ID : 17523402010820 Supervisor : PhD Ngo Thi Kim Hoa Ha Noi - 2021 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 i 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 ii 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 iii TABE DECLARATION ACKNOWLEDGEMENT ABSTRACT LIST OF ABBREVIATIONS CHAPTER I OVERVIEW OF FINANCIAL SITUATION OF A COMPANY 1.1 Corporate finance and corporate financial management 1.1.1 Corporate finance and corporate finance decisions 1.1.2 Corporate financial management .4 1.2 The financial situation of a company .8 1.2.1 Definition of financial situation of a company .8 1.2.2 Indicators for assessing financial situation of a company 14 1.3 Determinants of financial situation of a company 35 1.3.1 Subjective factors affecting corporate financial management 35 1.3.2 Objective factors affecting corporate financial management 36 CHAPTER II: .37 THE FINANCIAL SITUATION OF HANOI CONSTRUCTION ASSOCIATION ONE MEMBER LIMITED LIABILITY COMPANY .37 2.1 Overview of HaNoi Construction Association One Member Limited Liability Company 37 2.1.1 The establishment and development of HaNoi Construction Association One Member Limited Liability Company 37 2.1.2 The business characteristics of the company 38 2.1.3 Overview of financial performance of a one-member limited liability company of Hanoi Construction Association 45 iv 2.2 The financial situation of Hanoi Construction Association One Member Limited Company .46 2.2.1 The company’s of assets and Assets structure .46 2.2.2 The company’s of Capital and structure Capital 52 2.2.3 The company’s Revenues, Expenses and Income 62 2.2.4 The company’s cash flow situation of the business .67 2.2.5 The company’s debt and Liquidity of the compay: 72 2.2.6 The company’s asset utilization efficiency and Profitablity 79 2.2.7 The company’s profit distribution 87 2.3 General assessment of the financial status of Hanoi Construction Association One Member Limited Liability Company 88 2.3.1 These achievements .88 2.3.2 Limitations exist 89 CHAPTER 3: 90 SOLUTIONS TO IMPROVE FINANCIAL SITUATION OF HANOI CONSTRUCTION ASSOCIATION ONE MEMBER LIMITED LIABILITY COMPANY .90 3.1 The strategies of Hanoi Construction Association One Member Limited Liability Company in the future .90 3.1.1 Socio-economic context 90 3.1.2 The strategies of Hanoi Construction Association One Member Limited Liability Company of in the future 96 3.2 Solutions to improve financial situation of Hanoi Construction Association One Member Limited Liability Company 99 3.2.1 Strengthen debt management, improve the efficiency of commercial credit policy .99 3.2.2 Strengthen in inventory management 113 v 3.2.3 Strictly manage and improve the efficiency of capital in money 103 3.2.4 Promote bidding activities, increase revenue and manage production and business costs in an economical and effective way .105 3.2.5 Improve operational efficiency, exploitation and use of capital .109 3.2.6 Improve business performance 111 3.2.7 Other solutions .111 3.3 Conditions needed for implementing the solutions 114 3.3.1 On the business side 114 3.3.2 On the State side 114 CONCLUDE .116 LIST OF REFERENCES vi LIST OF ABBREVIATIONS BEP Basic Earnings Power CA Current Assets CL Current Liabilities EBIT EBT ROA ROE NI Earnings Before Interest and Tax Earnings Before and Tax Return on Assets Return on Equity Net income NWC Net working capital ROS Return on Sales VND Viet Nam dong vii Bảng Table 2.1: Indicators reflecting the business performance of HaNoi Construction Association One Member Limited Liability Company in the last years 45 Table 2.2: Analysis of the size and structure of assets in 2020 47 Table 2.3: Analysis of structure capital in 2020 53 Table 2.4: Analysis of capital size and structure in 2020 54 Table 2.5 Analysis of the funding model 61 Table 2.6: Analysis of business performance and results in 2020 63 Table 2.7: Analysis of Business operation of the company in 2019-2020 65 Table 2.8 Ratio of money generation of the enterprise .67 Table 2.9 Size of company liabilities 72 Table 2.10: Liquidity and Solvency analysis in 2020 77 Table 2.11: Performance analysis in 2020 79 Table 2.12: Analysis of profitability of companies in 2020 83 Table 3.1: The main targets of the plan for the year 2021 .98 Biểu Figure 2.1: Overview of the company's financial situation in the period of 2018 - 2020 46 Figure 2.2: Changes in the size and structure of assets in the period of 2019 - 2020 48 Figure 2.3: Changes in the size and structure of capital resources in the period of 2019 - 2020 .56 viii its payment needs In order to reserve a reasonable amount of capital in cash, the company needs to implement some of the following measures: - 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 105 - 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 106 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 107  Construction is a particular type different from the commercial and production business Revenue is recognized only after completion, the acceptance 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 108 - 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 for the company The works, work items before handing over to customers need to be checked, accepted and handed over in detail 109 - 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