218. Working capital management- A case study of Thong Nhat Ha Noi joint stock company

1 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 Trinh Thi Tuyet Chinh Trinh Thi Tuyet Chinh CQ54/11.15 CONTENTS DECLARATION .1 LIST OF ABBRAVIATIONS PREFACE CHAPTER 1: OVERVIEW OF WORKING CAPITAL AND WORKING CAPITAL MANAGEMENT 1.1 Working capital and company’s working capital financing 1.1.1 Definition and features of working capital .10 1.1.2 Classification of working capital 11 1.1.3 Working capital financing 11 1.2 Working capital management .14 1.2.1 Definition and objectives of working capital management 14 1.2.2 The content of working capital management 16 1.2.3 Indicators to evaluate working capital management 25 1.2.4 Determinants of working capital management 31 CHAPTER 2: 34 WORKING CAPITAL MANAGEMENT OF THONG NHAT HANOI JOINT STOCK COMPANY .34 2.1 Overview of Thong Nhat Ha Noi Joint Stock Company 34 2.1.1 The establishment and development of Thong Nhat Ha Noi Joint Stock Company 34 2.1.2 The business characteristics of Thong Nhat Ha Noi Joint Stock Company 36 2.1.3 Overview of financial performance of Thong Nhat Ha Noi Joint Stock Company 42 Trinh Thi Tuyet Chinh CQ54/11.15 2.2 Working capital management of Thong Nhat Ha Noi Joint Stock Company .46 2.2.1 Working capital and structure of working capital investment 46 2.2.2 Working capital financing management 51 2.2.3 Determining the needs for working capital 53 2.2.4 Cash management 55 2.2.5 Inventory management 59 2.2.6 Accounts Receivable management 63 2.2.7 Evaluation indicators of working capital management 69 2.3 Assessment of working capital management 70 2.3.1 The achievements 70 2.3.2 The shortcomings and reasons .71 CHAPTER 3: SOLUTIONS TO IMPROVE WORKING MANAGEMENT OF THONG NHAT HANOI JOINT STOCK 73 3.1 Objectives and targeted performance of Thong Nhat Ha Noi Joint Stock Company 73 3.1.1 Socio-economic situation .73 3.1.2 The targeted performance of Thong Nhat Hanoi JSC 75 3.2 Solutions to improve working capital management of Thong Nhat Ha Noi Joint Stock Company 76 3.2.1 Precisely determining the working capital needs of the company 77 3.2.2 Determining a reasonable level of cash 78 3.2.3 Strengthening the management of inventories .79 3.2.4 Improving the efficiency of receivables management 80 3.2.5 Some other solutions 82 3.3 Conditions needed for implementing the solutions 83 3.3.1 Some proposals to State Level .83 Trinh Thi Tuyet Chinh CQ54/11.15 3.3.2 Some proposals to Thong Nhat Hanoi JSC 84 CONCLUSION .86 REFERENCE 87 NHẬN XÉT CỦA NGƯỜI HƯỚNG DẪN KHOA HỌC 89 Họ tên người hướng dẫn khoa học: TS Nguyễn Thu Hà 89 Trinh Thi Tuyet Chinh CQ54/11.15 LIST OF TABLE TABLE 2.2: Major financial ratios 45 TABLE 2.3: THE STRUCTURE OF WORKING CAPITAL IN 2018-2019 47 TABLE 2.4: Working capital financing 51 TABLE 2.5: Long- term financing 52 TABLE 2.7: The demand of WC in 2019 54 TABLE 2.8: The situation of cash and cash equivalent of the company .55 TABLE 2.9: LIQUIDITY RATIOS OF THONG NHAT HANOI JSC 56 TABLE 2.10: INDICATOR FOR ASSESSMENT OF PAYMENT CAPACITY 59 TABLE 2.11: INVENTORY STRUCTURE AT COMPANY IN 2019 61 BẢNG 2.12: The efficiency of using inventory in 2018 and 2019 .63 TABLE 2.13: The structure of account receivables in 2018 and 2019 65 TABLE 2.14: SITUATION OF PAYABLES AND RECEIVABLES 66 BẢNG 2.15: THE EFFICIENCY OF ACCOUNT RECEIVABLES MANAGEMENT IN 2019 AND 2018 68 TABLE 2.16: Evaluation indicators of working capital management 69 TABLE 2.17: Some key targets for 2020 76 Trinh Thi Tuyet Chinh CQ54/11.15 LIST OF ABBRAVIATIONS CPI : Consumer Price Index EBIT : Earnings before interest and taxes EOQ : Economic Order Quantity FDI : Foreign Direct Investment GDP : Gross Domestic Product JSC : Joint Stock Company NWC : Net Working Capital ROA : Return on Assets ROE : Return on Equity ROS : Return on Sales VND : Viet Nam dong WC : Working capital Trinh Thi Tuyet Chinh CQ54/11.15 PREFACE Introduction Due to the increasing trend of globalization and international integration, there are many development opportunities for domestic and foreign enterprises The competition among enterprises is getting fiercer To survive, companies have been forced to constantly change and improve the competitiveness in the current market Enterprises must understand the financial situation and production activities of the company Accordingly, financial planning strategies are proposed to improve the efficiency of production and business activities Working capital plays an essential role, which is considered as the flesh and blood of an enterprise It ensure that the process of manufacture is performed regularly and continuously Many enterprises run at loss or struggle financially because the ways they manage their working capital is inefficient Therefore, reduced operational efficiency and bad debt risk are the necessary issues that require the company should have an appropriate and reasonable strategy to handle To be aware of the importance of working capital and be inspired of the necessity of effectively managing working capital of during training time at Thong Nhat Ha Noi JSC, as well as based on knowledge and practical experiences I got during the internship, I‟m going to choose the topic: “Working capital management- A case study of Thong Nhat Ha Noi joint stock company” as my graduate thesis title Objectives and research questions  Objectives This topic learns general theoretical issues about working capital, the situation of working capital management activities at Thong Nhat Ha Noi Trinh Thi Tuyet Chinh CQ54/11.15 Joint Stock Company and solutions to enhance working capital management of the company  Research questions - What are criterias to analyze and evaluate the efficiency of working capital management? - What are the achievements and limitations of Thong Nhat Ha Noi Joint Stock Company’s working capital management? - What are the measures to improve and strengthen the efficiency of working capital management at the company? Scope of study The research focuses on working capital and methods to improve the efficiency of working capital management at Thong Nhat Ha Noi JSC Source of data: Financial statements of the company are collected from 2017 to 2019 Reasearch methodology Based on knowledge at university, books, and self-accumulation and to achieve these above objectives, several methods of studying the thesis are used as follow: Method of analyzing, summarizing, synthesizing materials and books from the theoretical background Method of comparison: The figure/.s from the reports are compared over the years, thereby having data evaluation, judgment, and conclusion of the business situation Statistical method: Statistics tables, figures from which draw conclusions, trends to evaluate the performance of the company Methods of analysis: Analyzing the current situation of business activities and working capital management, analyzing and processing research results by combining strengths and weaknesses, finding the cause, from which proposing solution Trinh Thi Tuyet Chinh CQ54/11.15 Thesis structure Besides the introduction and conclusion, the thesis consists of chapters: Chapter 1: Overview of working capital and working capital management Chapter 2: Working capital management of Thong Nhat Ha Noi Joint Stock Company Chapter 3: Solutions to improve working management of Thong Nhat Ha Noi Joint Stock Company Trinh Thi Tuyet Chinh CQ54/11.15 CHAPTER 1: OVERVIEW OF WORKING CAPITAL AND WORKING CAPITAL MANAGEMENT 1.1 Working capital and company’s working capital financing 1.1.1 Definition and features of working capital 1.1.1.1 Definition In order to carry out production and business activities, enterprises not only need fixed assets but also need to have current assets Currents assets are usually divided into two divisions: Currents assets use for production and currents assets use for circulation Currents assets use for production: Including raw materials, fuels, components, work in progress and part- finished goods Currents assets use for circulation: Including assets in circulation such as finished goods waiting for consumption, receivables, cash During the business operations, production and circulation currents assets are always mutually converted, ensuring the production process is smooth and continuous Enterprises have to pay a certain amount of money which is called working capital in order to formulate current assets Thus, we can understand that, working capital is an advanced amount of money that a firm spend to establish necessary, regular current assets for manufacturing operation In other words, working capital is the amount a firm invests in short-term or current assets that required for day-to-day operational activities 1.1.1.2 Features of working capital Working capital has main following characteristics: - Short-Term Needs: Working capital is being utilized in acquiring current assets which will be converted to cash for a short period only Trinh Thi Tuyet Chinh CQ54/11.15 ... capital and working capital management Chapter 2: Working capital management of Thong Nhat Ha Noi Joint Stock Company Chapter 3: Solutions to improve working management of Thong Nhat Ha Noi Joint. .. of Thong Nhat Ha Noi Joint Stock Company? ??s working capital management? - What are the measures to improve and strengthen the efficiency of working capital management at the company? Scope of study. .. Overview of Thong Nhat Ha Noi Joint Stock Company 34 2.1.1 The establishment and development of Thong Nhat Ha Noi Joint Stock Company 34 2.1.2 The business characteristics of Thong Nhat