Financial statement analysis company KIDO corporation

Financial statement analysis Company: KIDO Corporation Student’s name: Phạm Khánh Vy Student’s ID: 11208521 Class: LSIC 62 Lecturer: Dr Trần Tất Thành Table of Contents Preface I INTRODUCTION: II ANALYSIS OF FINANCIAL STATEMENT: a b Sources and uses of cash analysis In 2019 – 2020 period In 2020 – 2021 period Standardized balance sheets: Standardized income statements: a b c d e Financial ratios analysis: 12 Liquidity ratios: .12 Financial leverage ratios: 13 Turnover ratios: .14 Profitability ratios: 15 Market value ratios: 16 Dupont analysis 17 III CONCLUSION 18 Table of Figures Figure 1: Sources and uses of cash in 2019 - 2020 Figure 2: Sources and uses of cash in 2020 - 2021 Figure 3: Common-size balance sheet in 2019 - 2021 (Assets) Figure 4: Common-size balance sheet 2019 - 2021 (Liabilities & Equity) Figure 5: Kido Group's 2019 common-size income statement 10 Figure 6: Kido Group's 2020 common-size income statement 11 Figure 7: Kido Group's 2021 common-size income statement 12 Figure 8: Liquidity ratios in years and Ind .13 Figure 9: Financial leverage ratio 14 Figure 10: Turnover ratio from 2019 to 2021 and Ind 15 Figure 11: Profitability ratio from 2019 - 2021 and Ind 16 Figure 12: Market value ratio in 2019 - 2021 and Ind 17 Figure 13: Dupont equation in 2019 - 2021 and Ind 18 Preface One of the factors that helps the business reach its objectives is financial activity Poor financial performance will hold back the rest of the department, preventing the organization from accomplishing its goals The expansion of an enterprise's commercial activity is therefore dependent on solid financial management To assess whether a company's financial performance is robust or bad, financial analysis is crucial Through financial analysis, the company's financial state will be revealed, and from there, corrective action will be implemented My understanding of Kido Group's financial situation has improved as a result of my research, which also allowed me to identify the sources and extent of the issues affecting Kido Group's finances Using such data, comment, assess, and suggest some improvements to the company's operations I INTRODUCTION: Company’s background: KIDO Corporation was established in 1993 and has become one of the leading Food & Flavor companies in Vietnam In its 22-year history, KIDO Group has remained the market leader in confectionary across a wide array of products such as confectionery, cookies and ice - cream under the KIDO brand name In 2015, aiming to expand and develop into essential food, KIDO Group was officially established By promoting existing platforms, KIDO continues to maintain and develop its leading position in the frozen industry with Ice-Cream, Milk & Dairy products and expands its product portfolio to the food and beverage industry mainly with cooking oil, instant noodles, seasoning seeds, sauces, coffee, convenient packaged foods to take care of Vietnamese family kitchens and meet customers’ needs throughout the day Currently, KIDO is leading the ice cream market with 43.5% market share (According to Euromonitor) and over 30% market share in cooking oil (According to internal data) All the staff at KIDO share a common mission and goal – to “Flavor your life” – and to become the leading foodstuff group in Vietnam and the Southeast Asia region Aiming to gain an immediate foothold in the foodstuff and spice markets, as well as to meet consumer requirements, KIDO has invested continuously in factories and on research into new products The group has also signed Mergers & Acquisitions and strategic partnerships in a bid to expand its operations Whenever a new product is launched onto the market or a partnership is signed, it marks a step forward in KIDO's development, brings the KIDO brand and essential food products closer to Vietnamese consumers The food product industry: The vast majority of the food consumed by the world's population is produced through an extensive network of farmers and businesses that make up the food industry The entire spectrum of food production and distribution is included in the food industry Agriculture and animal husbandry, the manufacture of farm machinery and agrochemicals, food processing, labeling and packaging, storage, and distribution, regulatory frameworks, finance, marketing, retailing, catering, and research and development are all included According to the company's total market share of the entire industry, which ranges from 29% to 30%, KIDO will continue to occupy the No spot in Vietnam's entire industry in 2020 and 2021 KIDO Group Joint Stock Company (KIDO) still reached KIDO's net sales of VND 10,497 billion in 2021 despite the Covid-19 pandemic's effects, an increase of 26.1% over the same period in the previous year In comparison to 2020, KIDO's after-tax profit increased by 97.3% to VND 653 billion The company's overall industry market share ranges from 30% to 32%, demonstrating that KIDO's market share is still growing year after year II ANALYSIS OF FINANCIAL STATEMENT: Sources and uses of cash analysis a In 2019 – 2020 period Figure 1: Sources and uses of cash in 2019 - 2020 Figure shows us sources and uses of cash and its changes in total assets and total liabilities and equity of Kido Group in the period of 2019 – 2020 Overall, it is crystal clear that the total assets and the total liabilities and equity of 2019 have an increased compared to that of 2020 The total assets of Kido Group have increased by nearly thousand billion dong from 2019 to 2020 In more detail, there was an significant increase in cash, inventory, other current assets and other non-current assets by about 577, 303, 80 and 30 billion dong, respectively, which contribute to the total uses of cash However, the decrease in account receivables and net FA also made a contribution to the total uses of cash Although the current account receivables and the longterm receivables reduced slightly by about 400 billion dong, Kido Group still spent a lot on account receivables (approximately 2328 billion) Moreover, increase in A/P (244 billion dong), N/P (12 billion dong) and other CL (863 billion dong) also contribute to the sources of cash At the same time, LT debt and C/S decreased, contribute to the uses of cash, but C/S was still spent approximately 7699 billion dong b In 2020 – 2021 period Figure 2: Sources and uses of cash in 2020 - 2021 Figure also illustrates the sources and uses of cash as well as the changes in Kido’s assets and liabilities and owner’s equity in the 2020 – 2021 period In general, it is clear that there is a significant grow in the total assets and total liabilities and equity in 2021 compared to that of 2020 In particular, the total assets grew remarkably from about 12,349 billion to 14,072 billion in the period between 2020 and 2021, which increase by nearly 1,800 billion in years In this period, it is witnessed that there were remarkable increase in A/P (212 billion dong), N/P (381 billion dong), other CL (997 billion dong) and LT debt (936 billion dong), which played an important role in increasing the sources of cash Moreover, there were decreases in other current assets (150 billion dong), Net FA (135 billion dong), which also contribute to the sources of cash Besides, cash, account receivables (both long-term and short-term), inventory and other non-current assets all experienced slight increase in during this time period, by about 179, 231, 1283, 316 billion donng, respectively These increases made a significant impact on the uses of cash Moreover, reduced common stock value (by 804 billion dong) was one of the uses of cash  General comment: On the whole, the total assets and total liabilities and equity of Kido Group grew steadily in from 2019 (11,932 billion) to 2021 (14,072 billion), resulting a shift of about 2,140 billion dong Moreover, the sources of money and the uses of money in the period 2020-2021 are more than 1,000 billion higher than the period 20192020 In which, in the period of 2020-2021, due to the Covid-19, the company was experiencing expenses and debts as well as increasing storage of goods in order to keep firm running and compete with other rivals in the industry As a result, the increases in long-term debts and inventory had led to the more cash use Standardized balance sheets: Figure 3: Common-size balance sheet in 2019 - 2021 (Assets) Figure 4: Common-size balance sheet 2019 - 2021 (Liabilities & Equity) From Figure and Figure 4, from 2019 to 2021, the assets and liabilities and equity makeup altered, and each item is calculated as a percentage of the total assets Overall, it is witnessed remarkable changes in the percentage of cash, inventories, net FA and other assets (both current and non-current) which led to changes in total current and non-current assets Cash and cash equivalent increased notably from 2019 (4,40%) to 2020 (8,92%), then grew slightly to 9,10% in 2021 This is related to Kinh Do reducing the proportion of investment in short-term and long-term assets, instead choosing to store cash and cash equivalents In which, the ratio of other current assets increased slightly by 0.44% in 2020, but decreased by 1.90% in 2021 Besides, the ratio of other non-current assets also decreased steadily from 2019 to 2021, from 34 42% down to 31.65% Reducing the ratio of short-term assets also shows that enterprises reduce the scale of production The proportion of short-term receivables in total assets from 2019 to 2021 is somewhat positive because it continuously decreased from 22.83% to 18.14% This proves that the company has quite good control over debt management and has effective trade credit policies during this period Inventory accounts for a large proportion of total assets The inventory ratio increased slightly in 2019-2020, from 7.61% to 9.81% However, from 2020 to 2021, the inventory ratio nearly doubled, to 17.73%, although most of Kinh Do's products are seasonal and have a short shelf life This shows that the company is not really using capital effectively In addition, the increase in inventory ratio is 10 also due to the impact of Covid-19, causing the demand for goods to decrease and increase the inventory of Kinh Do The proportion of net fixed assets gradually decreased over the years, decreasing from 23.90% (2019) to 21.67% (2020) and 18.06% (2021) Account payables increased from 2019 to 2020 by 1.86%, but it rose by 0.86% in the period of 2020-2021 Note payables grew 2.13% throughout the years Longterm debt ratio accounted for a fairly high ratio in 2021 Although in 2019-2020, the debt ratio decreased slightly from 9.15% to 6.84%, but increased sharply in 2021 with 12.65% C/S from 68.35% in 2019 to 48.99% in 2021 The proportion of liabilities tends to increase over the years but is still under control, showing that the company is having smart business policies Standardized income statements: Figure 5: Kido Group's 2019 common-size income statement 11 Figure 6: Kido Group's 2020 common-size income statement 12 Figure 7: Kido Group's 2021 common-size income statement For the income statement, each line item is converted to a percentage of net sales In general, managers and investors want costs as a proportion of net sales to go down over time while earnings as a percentage of net sales rise Kido's Cost of Good Sold (COGS) increased with time, going from 73.18% in 2019 to 78.40% in 2021, as shown by Figures 5, 6, and This cost component accounts for the majority of the company' overall cost The cost of goods sold for the business includes both the price of delivered services and finished goods Due to the COVID-19 pandemic that occurred in the latter part of 2019, more items were consumed, the company's production capacity was increased, and the manufacturing requirements were raised, all of which raised the cost of goods supplied Sales increased as a result of the increase in COGS Additionally, the costs of doing business, such as selling charges, administrative costs, and other expenditures, significantly decreased in 2021 to 13.56%, whereas they stayed at 17.36% and 21.09% in 2020 and 2021, respectively Reduced costs for client transportation, employing sales employees, buying equipment, and acquiring sales tools all contributed to this decline Additionally, the decreased cost of outsourcing services, recruiting managerial staff, and depreciating physical assets used in the office all made a significant contribution to the cost reduction It is also important to note that the figure for interest expense decreased slightly over the three-year period, from 2.01% (2019) to 1.65% (2021) But during the past three years, Earning Before Interest and Taxes has significantly increased, going from 5.73% in 2019 to 8.04% in 2021 This is so that the increase in COGS does not stand out as much as the decrease in costs Again, though, the rise in Earnings Before Interest and Taxes was so notable in comparison to the decline in interest expense that it caused Taxable Income to rise continuously over time Additionally, taxes were drastically reduced from 1.0% in 2019 to 0.32 in 2021, which caused a net income growth that was more than twice as large in 2021 as it was in 2019 (6.06% vs 2.72%) 13 To summarize, the business has consistently produced excellent results, particularly during the Covid-19 epidemic of 2021 Regarding costs, cost of goods sold, and taxes, the corporation revenue has been sharply rising Financial ratios analysis: a Liquidity ratios: Figure 8: Liquidity ratios in years and Ind  Current ratio: Current assets(CA ) Current ratio (CA) = Curent liabilities (CL) – assess the company’s ability to pay off short-term debt As Figure, the current ratio of Kido Group shows the ability to pay for the short-term debt from its short-term assets In 2019, the current ratio was 1,83, implying that the short-term debt was secured by 1,83 dong for every dong of short-term debt Similarly, the current ratio declined to 1,44 in 2020 and 1,30 in 2021, which meant that for every dong of short-term debt, 1,44 dong in 2020 and 1,30 in 2021 of current assets were secured The current liquidity ratios of the firm were much lower compared to the Industry average which was 2,08 times This could indicate that the business may be at risk of default  Quick ratio: Quick ratio = Current assets−Inventory – measures the dollar amount of liquid assets Current liabilities available against the dollar amount of current liabilities of a company The quick ratio of Kido Group có xu hướng giảm nhiều thời gian từ 2019 đến 2021, từ 1,49 times 0,84 times, sụt giảm tỷ lệ tốn nhanh cơng ty hàng tồn kho tăng khoản nợ lưu động tăng nhanh So sánh với trung bình 14 ngành, năm 2019, tỷ lệ toán nhanh nằm ngưỡng đẹp, cao mức trung bình ngành (1,43 times) 0,06 times Tuy nhiên, năm tiếp theo, tỉ lệ toán nhanh doanh nghiệp giảm nhanh 1,12 times năm 2020 0,84 times năm 2021, thấp trung bình ngành 1,43 times (by 0,31 times (2020) and 0,56 times (2021)) Điều cho thấy khả Công ty với tài sản ngắn hạn khơng tính đến hàng tồn kho, khơng đủ để toán cho khoản nợ ngắn hạn The company need either increase current assets or reduce current liabilities b Financial leverage ratios: Figure 9: Financial leverage ratio  Total Debt ratio: Total debt (TD) TA−TE Total Debt ratio = Total asset (TA) = TA – Total Debt to total assets is a ratio which visualize how financially stable a company is Throughout the period from 2019 to 2021, the Kido’s debt tends to increase, from 0,316 to 0,510 However, the ratio still remained at a safe level, still around 0,5 and below industry average It demonstrates that the corporation had a large degree of financial independence, and the majority of its assets were funded by stock  Equity Multiplier: TA TD Equity Multiplers (EM) = TE =1+ TE – The equity multiplier is a risk indicator that measures the portion of a company’s assets that is financed by stockholder’s equity rather than by debt The equity multiplier ratio of Kinh Do in 2019, 2020 was lower than the industry average, which is 1,77 In 2021, however, the ratio grew to 2,04, 0,27 times higher than the industry average The ratio indicates that the company is using a high amount of debt to finance assets and more reliance on debt As a result, Kido carried more financial leverage, which could be financially riskier 15 c Turnover ratios: Figure 10: Turnover ratio from 2019 to 2021 and Ind  Receivables Turnover: Receivables Turnover = Salⅇs – The receivables turnover ratio measures the AR number of times a company collects its average accounts receivable balance It is a quantification of a company’s effectiveness in collecting outstanding balances from clients and managing its line of credit process From the table above, it is witnessed that there was a steady increase from 2,7 times in 2019 to 4,12 times in 2021 The ratio of Kido Group was much under the industry average which is 14,09 Consequently, a low receivables turnover ratio implies that the company’s collection of accounts receivable was not efficient and the number of high-quality customers who pay their obligations promptly was low, Kido should reassess its credit policies to ensure the timely collection of its receivables  Total Asset Turnover: Sales Total Assets Turnover (TATO) = TA – the asset turnover ratio measures the value of a company’s sales or revenues relative to the value of its assets The asset turnover ratio can be used as an indicator of the efficiency with which a company 16 is using its assets to generate revenue From 2019 to 2021, the ratio of total asset turnover was not change a lot There was just a slight increase from 0,639 to 0,696 times in 2020 and to 0,765 times in 2021 The industry average was 1,32, higher than total asset turnover ratio in 2021 by 0,555 times, which illustrates that the company work’s efficiency was weak  Inventory turnover: COGS Inventory Turnover = Average Inventory – the inventory ratio is the number of times a company has sod and replenished its inventory over a specific amount of time The Kinh Do’s inventory turnover ratio fell quickly from 6,14 to 3,39 times in 2021 while the industry average was 48,91 The fast turn of this ratio may indicate that a company’s purchasing is not keeping pace with market demand, that it’s experiencing delays somewhere in the supply chain or that a particular item is seeing a surge in demand Moreover, the low ratio of Kinh Do may point to weak sales and/or decreasing market demand for the goods d Profitability ratios: Figure 11: Profitability ratio from 2019 - 2021 and Ind  Profit Margin: Profit margin (PM) = Net income – Profit margin is the ratio of profit remaining Sales from scales after all expenses have been paid In the case of Kido Group, the compaby’s profit margin went up steadily over the period, from 2,72% to 6,06% While net revenue and profit after taxes both rose, profit after tax climbed more quickly than net sales, which was the reason for the elevation The profit margin ratios for the last three years were staggeringly greater when compared to the industry average by -4,579.33% While the industry on average was constantly 17 losing money for every products they make, Kido was profiting at a slight margin.  As a result, Kido's profit margin demonstrated that they efficiently managed their resources The larger coefficient net profit margins demonstrate Kido's potentiality as a business within an inflationary environment  Return on Assets: Return on Assets (ROA) = Net income – Return on assets (ROA) is a ratio that TA measures a company’s profitability relative to its total assets It shows how well (or poorly) a company is using everything it owns – from machinery to vehicles and intellectual property — to earn money Despite the gradually grow over the threeyear period, the ROA of Kido was still under the industry average which was 7,30% It may indicates that the company may mott able to make maximum uses of its assets for getting more profit  Return on Equity: Return on equity (ROE) = Net income – Return on Equity indicates that the more TE effectively a company utilizes its owner’s equity, the more appealing the stock is to investors It also presents the relationship between assets management, debt management, and profitability ratios From the Figure , we can see that there was an increase in return on equity in 2019 – 2021 The company's return on equity in 2019 was 2.54%, which means that for every 100 dongs of equity used in production and business activities, it generated 2.54 dongs of after-tax profit Kido's return on equity in 2020 was 1.75 percent higher than in 2019 (4.29-2.54), and in 2021, the figure continued to rise with a ROE of 9.48%, almost twice as high as in 2020 This rise may be attributed to Kido's net income growing more quickly relative to equity This is a sign that the company's profitability is increasing, as will be particularly evident in 2021 However, compared to the industry average (12,90%), the ratio of Kido Group still lower, which means that the company earns relatively little compared to its shareholder’s equity e Market value ratios: 18 Figure 12: Market value ratio in 2019 - 2021 and Ind  Price earnings ratio: The Price Earnings Ratio (P/E Ratio) = Market price per share – The price earnings EPS ratio conveys how much investors will pay per share for $1 of earnings and tells investors how much a company is worh Overall, there was a remarkable declined during the period, from 68,49 to 21,09 times in 2021 In addition, the ratio of price earnings was much higher than of the industry, by 7,76 times It means that investors had to pay more to purchase a share of the company’s earnings  Price to book value ratio: Market price per share The Price to book Ratio (P/B) = Book Value per share – The price to book value ratio is the market price per share divided by the book value per share During the three-year period, the ratio of perice to book value went up steadily to 1,97 times in 2021, 1,48 times higher than in 2019 and 0,87 times higher than 2020 Moreover, the company’s ratio was under the industry average, and it could be a signal to investors that a stock may be undervalued In other words, the stock price is trading at a lower price raltive to the value of the company’s assets A low P/B could also mean that the company is earning a low return on assets Dupont analysis 19 Figure 13: Dupont equation in 2019 - 2021 and Ind The Dupont analysis is an expanded return on equity formula, calculated by multiplying the net profit margin by the asset turnover by the equity multiplier It also shows the connections between asset management, debt management, and profitability ratios ROE = Profit margin × Total asset turnover × Equity multiplier Net income Sales Assets × × Sales Assets Total equity Since ROA = Profit margin × Total asset turnover, we also have ROE = ROA × Equity multiplier ROE = According to the Figure, both ROA and ROE of Kido Group grew steadily from 2019 to 2021 In more detail, the reason for the increase in these ratios in 2020 and 2021 is due to the increase in profit margin (from 2,72% to 6,06%), total assets turnover (0,64 to 0,77) and equity multiplier (from 1,46 to 2,04) The ratios of PM and equtiy multiplier are higher than the industry average The higher Kido's profit margin demonstrated that they efficiently managed their resources The larger coefficient net profit margins demonstrate Kido's potentiality as a business within an inflationary environment However, the equity multiplier ratio grew to 2,04, 0,27 times higher than the industry average The ratio indicates that the company is using a high amount of debt to finance assets and more reliance on debt As a result, Kido carried more financial leverage, which could be financially riskier In addition, the industry average of total assets turnover was 1,32, higher than total asset turnover ratio in 2021 by 0,555 times, which illustrates that the company work’s efficiency was weak Furthermore, although the ROA and the ROE went up during the period, ROA grew from 1,47% to 4,64% and ROE grew from 2,54% to 9,48% However, the ratio was still under the industry average which was 7,30% and 12,90%, 20 respectively Although by comparison, the company is still controlling and performing weaker than other companies in the industry But the positive side is that there are prospects in the future because the factors of that dupont are gaining momentum (positive trend) III CONCLUSION In a word, Kido Group has been running ineffectively and poorly for the past three years Even though the company was nonetheless successful in a losing sector of the economy, their profits were insufficient to cover their assets and equity The liquidity ratio (Figure 7) and turnover ratio both showed that the business did a dismal job of liquefying and collecting sales (Figure 9) As a result, the company frequently experiences financial difficulties since they occasionally lack the funds to pay off their short-term debt Although the price-to-earnings ratio (Figure 11) indicates that the company is valuable and worthwhile of investment, the price-tobook value ratio demonstrates that shareholders were not receiving as much value as they ought to (Figure 11) All of this makes sense given the company's inefficient asset management, slow turnaround times for sales reimbursements, and poor cash Numerous indications point to the fact that they are putting the company's finances in danger In order to be viable in the market, the corporation should establish new policies and fix its issues as soon as possible 21 References: Kido’s general information: https://www.kdc.vn https://www.stockbiz.vn/Stocks/KDc/Overview.aspx Kido’s Financial Statements: https://www.kdc.vn/nha-dau-tu/bao-cao-tai-chinh Food industry averages ratios: https://www.stockbiz.vn/IndustryOverview.aspx?Code=3000 https://www.stockbiz.vn/Industries.aspx?Code=3000&view= 22 ... dependent on solid financial management To assess whether a company' s financial performance is robust or bad, financial analysis is crucial Through financial analysis, the company' s financial state... Figure 5: Kido Group's 2019 common-size income statement 10 Figure 6: Kido Group's 2020 common-size income statement 11 Figure 7: Kido Group's 2021 common-size income statement ... the company is having smart business policies Standardized income statements: Figure 5: Kido Group's 2019 common-size income statement 11 Figure 6: Kido Group's 2020 common-size income statement