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Graduation thesis Academy of finance DECLARATION I here with formally declare that this thesis is the presentation of result of my own research during the time of internship in Agricare Viet Nam Co.,Ltd, and has not been submitted for a degree to any other universities or institutions To the best of my knowledge, the thesis does not contain material previously published or another people, except where due acknowledgement is made in the text Ha Noi, May, 2016 Student Dinh Thi Thien Hue Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance ACKNOWLEDGEMENTS During graduation thesis, I have collected a lot of knowledge about working capital at Agricare Viet Nam Co.,Ltd First of all, I would like to thank all professor lecturers whose experience helped me a lot in developing the thesis I also express my great gratitude to my supervisor M.A Tran Thu Hoai for her inspiring guidance, suggestions and critical evaluation of the work for the successful completion of my thesis Secondly, I would like to give thanks to all lecturers at Academy of Finance for their enthusiasm through the teaching and support process Thirdly, I would like to express my sincere thanks to all staff of Agricare Viet Nam Co Ltd for giving me assistance and corporation that helped me in writing this thesis Last but not least, I would like to thank my parents and friends for their care, support, encouragement, without which my thesis would not have been accomplished Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance ABSTRACT In the context of development of global economy, Vietnam enterprises have less competitive advantages than international companies Agricare Viet Nam Co.Ltd, as many other companies, has to face many difficulties from globalization In this study, author analyzed working capital management of Agricare Viet Nam Co.Ltd to assess its efficiency and effectiveness From the results, author drew out the current situation of working capital management, identified strength, weakness and other outstanding points In the end of study are some recommendations that might be applied to improve the efficiency and effectiveness of working capital management Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance LIST OF ABBREVIATIONS No Abbreviations Full Phrase AR Accounts Receivables A/R Account receivables CCC Cash conversion cycle EOQ Economic order quantity FA’s Financial accounting statement JIT Just in time P&L Profit and loss WC Working capital WCM Working capital management Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance LIST OF TABLES Table 2.1 Business performance results of Agricare Viet Nam from 2012 to 2014 Table 2.2 Cash and cash equivalents Table 2.3 Cash management efficiency ratios Table 2.4 Receivables management efficiency ratios Table 2.5 Inventories management efficiency ratios LIST OF FIGURES Figure 1.1 Classification of working capital Figure 1.2 Typical inventory cycle Figure 1.3 EOQ and Inventory Cost Chart 2.1: Structure of current asset of Agricare Viet Nam in 2014 Chart 2.2: Comparing working capital from 2012 to 2014 Chart 2.3: Comparing working capital with fixed capital and total capital Chart 2.4: Cash and cash equivalent in total working capital Chart 2.5: Proportion of receivables in total working capital Chart 2.6: Proportion of inventories in total working capital Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance TABLE OF CONTENT LIST OF TABLES CHAPTER 1 LITERATURE REVIEW OF WORKING CAPITAL MANAGEMENT 1.1 Introduction of working capital in enterprises 1.1.1 Definition of working capital 1.1.2 Classification of working capital 1.1.3 Role of working capital 1.1.4 Structure of working capital 1.1.5 Factors affecting working capital 1.2 Working capital management 1.2.1 Working capital management and its objectives 1.2.2 Managing working capital 10 1.2.3 Working capital management efficiency ratios 16 CHAPTER MANAGEMENT AT AGRICARE VIET NAM CO.LTD 26 2.1 General overview of Agricare Viet Nam Co., Ltd 26 2.1.1 History of the company’s establishment and development 26 2.1.2 Business fields and products 26 2.1.3 Organizational structure of Agricare Viet Nam Co.Ltd 28 2.1.4 Financial situation of Agricare Vietnam Co.Ltd 29 2.2 Working capital management situation in Agricare Viet Nam Co., Ltd 31 2.2.1 Working capital structure 31 2.2.2 Cash management situation in Agricare Viet Nam Co., Ltd 36 2.2.3 Account receivable management situation in Agricare Viet Nam Co., Ltd 39 2.2.4 Inventory management situation in Agricare Viet Nam Co., Ltd 42 2.2.5 Other management situation in Agricare Viet Nam Co., Ltd 44 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance CHAPTER III SOLUTIONS FOR IMPROVING WORKING CAPITAL MANAGEMENT IN AGRICARE VIET NAM CO.LTD 45 3.2.1 Cash management 47 3.2.2 Receivables management 48 3.2.3 Inventory management 49 3.2.4 Other recommendations 49 CONCLUSION 51 REFERENCE 58 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance 10 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance Utilizing economically raw materials to save as much expense as possible This plan should be controlled closely by the factory management and managers 3.2.4 Other recommendations Due to quality of management department determines directly working capital management efficiency So, human resource should be paid attention to by strengthening recruitment and professional training activity for employees especially in financial management, spontaneously, completing award and punishment policy transparently in using capital - Regularly tracking on working capital using and measuring working capital demand to avoid waste and making right decision in daily operations For long-term orientation, the firm should put up a market-research team that is in charge of collecting and progressing information, making estimations and right decision - Opening books that follow each debt with specific information about customers, credit term, etc according to debt classification: before due, overdue, bad debts to put up timely solutions However, these solutions must ensure to be effective but not worsen relationship between the firm and customers - Making provision for loan loss to compensate damage in time to avoid the bad influence on daily operation of the firm - Broadening the scale of trading In spite of passively waiting for export contracts, the firm had better purposely look for inside Vietnam contracts, building retail market for its products to increase revenues For efficiency of working capital management in firms, the role of the government and provincial authorities are very vital The government should 66 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance continue stabilizing and clarifying regulations in business law and corporate law to create a healthy business environment for firms Along with inflation restriction policy currently, the government should consider the policy encouraging business activities for firms such as tax reduction, business procedure simplifying, step-by-step completion in financial market and instruments to help firms have more investment and financing opportunities 67 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance CONCLUSION Every firm needs working capital for daily operational activities Most of firms realize that working capital management is considered vital for their survival However, working capital management is not an easy task to comprehend Due to the complexity of this topic, the thesis will focus on some outstanding aspects which are brought in three main parts including Chapter Presenting some fundamental concepts related to working capital management The target is providing readers foundation to comprehensive more clearly about the next core contents Chapter The thesis gives out the information introducing about Agricare Viet Nam Co.Ltd, which is the object of the research Along with overview about the establishment, development, functions, organizational structure, business activities of the firm, the report also analysis its financial and business outcomes over three years now In general, the company has experienced good performance with positive profit growth, financial criteria such as liquidity ratios, assets management ratios and profitability ratios have improved significantly However, the firm seems not be really good at expenses management, which has increasing trend in recent years The main content of the whole thesis, which evaluates the real situation of Agricare Viet Nam Co.Ltd in working capital management Working capital management of the firm has been analyzed in some aspects including working capital structure of the firm; policy in working capital management specifying cash management, inventory management, receivables management; assessing working capital management efficiency ratios basing on calculations In conclusion, working capital management of Agricare Viet Nam Co.Ltd has a lot of improvement especially the receivables management 68 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance However, the efficiency has not been explored as expected in the firm The more details are presented in the analysis of this part Chapter The thesis summarizes the main achievements that Agricare Viet Nam has experienced in working capital management, and also points out the restrictions that the firm has been stuck in Form such disadvantages, the thesis raises out some personally recommendations to help the firm improve the current situation in managing working capital more effectively and efficiently These contributions may have constraints in reality, however, it is essential for the firm to consider for references After internship time in Agricare Viet Nam, the writer has had opportunities to approach the realistic situation which is out of books Such experiences will be the most valuable lessons at university At the end of the thesis, I would like to give my most sincere thanks to my teacher, my internship guide, my friends and my family for support and love to complete my internship course 69 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance APPENDIXES Table 2.6: Balance Sheet of GG Viet Nam Limited Company BALANCE SHEET Currency: VND 2014 2013 Balance Balance 100 30,222,353,336 21,351,832,174 I Cash and cash equivalents 110 1,457,849,029 519,618,067 Cash 111 V.01 4,577,432,447 2,541,897,762 Cash equivalents 112 - - II Short-term investments 120 - - Short-term investments 121 - - ASSETS Code s Notes A - CURRENT ASSETS Provision for investments (*) (2) V.02 Short-term 129 - III Current account receivable 130 23,204,669,806 12,960,954,517 Trade receivable 131 2,925,229,702 Advances to suppliers 132 12,452,257,364 3,458,712,964 Inter-company receivables 133 - - Construction contractor 134 receivables based on agreed progress billings - - 8,646,032,000 119,532,000 (818,849,260) (1,023,767,382) Other receivables 135 Provision for doubtful debts (*) 139 V.03 10,406,476,935 70 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance 140 IV 2,506,894,614 3,684,517,602 Inven tories Inventories 141 2,506,894,614 3,684,517,602 Provision for obsolete inventories (*) 149 - - V Other current assets 150 3,052,939,887 4,186,741,988 Short-term prepaid expenses 151 881,597 - VAT Deductibles 152 Tax and other receivables from State 154 V.05 4 Other current assets 158 3,052,058,290 4,186,741,988 B - NON-CURRENT ASSETS 200 10,043,425,925 7,629,682,800 I Long-term receivables 210 - - Long-term trade receivables 211 ( ) ( ) (200 = 210 + 220 + 240 + 250 +260) Paid-in capital in wholly owned 212 subsidiaries Long-term inter-company receivables 213 V.06 Other long-term receivables 218 V.07 Provision for doubtful long-term 219 receivables (*) II Fixed assets 220 625,904,802 3,381,648,188 221 V.08 625,904,802 3,381,648,188 - Cost 222 2,016,989,731 6,262,444,274 - Accumulated depreciation (*) 223 (1,436,084,929) 2,880,796,086) 224 V.09 Tangible assets Finance leases 71 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance - Cost 225 - Accumulated amortization (*) 229 Intangible assets 227 - Cost 228 - Accumulated amortization (*) 229 ( ) ( ) ( ) ( ) V.10 Construction in progress 230 V.11 III Investment property 240 V.12 - Cost 241 - Accumulated amortization (*) 242 IV Long-term financial investments 250 Investments in subsidiaries 251 ( ) ( ) 5,400,000,000 - V.13 5,400,000,000 - ( ) ( ) Investments in associates, jointly 252 controlled entities Other long-term investments 258 Provision for long term investments 259 (*) V Other long-term assets 260 4,017,521,123 4,248,034,612 Long-term prepaid expenses 261 V.14 3,942,443,123 4,172,956,612 Deferred tax assets 262 V.21 Other long-term assets 268 75,078,000 75,078,000 TOTAL ASSETS (270 = 100 + 200) 270 40,265,779,261 28,981,514,974 RESOURCES A LIABILITIES (300 = 310 + 330) 300 9,218,799,019 8,869,390,179 72 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance I Current liabilities 310 Short-term loans and borrowings 311 Trade payables 312 Advances from customers 313 Tax and statutory obligations 314 Payables to employees 315 9,218,799,019 8,869,390,179 V.15 2,000,000,000 2,000,000,000 4,046,019,519 3,908,632,280 1,360,654,256 1,113,687,007 V.16 1.111.579.374 1.174.622.948 141.447.654 18.055.122 245.805.187 302.805.187 Construction contractor payables 318 based on agreed progress billings Other payables 319 V.18 313.293.029 351.587.635 II Non-term liabilities 330 - - 73 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance Long-term trade payables 331 Long-term inter-company payables 332 Other long-term liabilities 333 Long-term loans and debts 334 V.20 Deferred tax liabilities 335 V.21 Provision for severance allowances 336 Long-term provision 337 B OWNERS’ EQUITY (400 = 410 + 400 430) 31,046,980,242 20,112,124,795 I Capital 410 V.22 31,046,980,242 20,112,124,795 Contributed legal capital 411 Share premium 412 Other owners’ capital 413 Treasury share (*) 414 Assets revaluation reserve 415 Foreign exchange differences 416 Investment and development fund Financial reserve fund V.19 30,079,360,000 17,249,980,000 ( ) ( ) 417 92,764,795 1,103,493,636 418 2,000,000,000 462,187,687 Other funds belonging to owner’s 419 equity 10 Undistributed earnings 420 691,855,447 1,286,463,472 II Other funds 430 0 Bonus and welfare fund 431 Subsidized fund 432 Fund for in use welfare fixed assets 433 TOTAL LIABILITIES AND 440 V.23 40,265,779,261 28,981,514,974 74 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance OWNERS’ EQUITY (440 = 300 + 400) REFERENCE Vietnamese Financial statements of Agricare Viet Nam 2012, 2013, 2014 PGS.TS Nguyễn Trọng Cơ, TS Nghiêm Thị Thà (2010), “Giáo trình Phân tích tài doanh nghiệp”, NXB Tài Chính English MA Bui Van Van and MA Vu Van Ninh, corporate finance, financial publisher, 2013 Peter Atrill and Eddie Mclaney, financial accounting for non- specialists (fifth edition), pearson education, 2006 75 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance NHẬN XÉT CỦA ĐƠN VỊ THỰC TẬP Họ tên người nhận xét: Ông Đàm Quang Thắng Chức vụ: Tổng giám đốc công ty trách nhiệm hữu hạn Agricare Viet Nam Nhận xét trình thực tập tốt nghiệp Sinh viên: Đinh Thị Thiên Huế Khóa: 50; Lớp: 51.01 Học Viện Tài Chính Đề tài: Vốn lưu động số biện pháp nâng cao hiệu quản lý vốn lưu động công ty trách nhiệm hữu hạn Agricare Viet Nam (Working capital and some solutions to improve its management efficiency at Agricare Viet Nam Co.Ltd) Nội dung nhận xét: Về tinh thần thái độ thực tập sinh viên ………………………………………………………………………………… Về ý thức kỷ luật, tuân thủ quy định đơn vị thực tập ………………………………………………………………………………… Về kỹ giao tiếp, kỹ mềm ………………………………………………………………………………… Về kiến thức chuyên môn ………………………………………………………………………………… Người nhận xét (ký tên, đóng dấu) 76 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance 77 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance SUPERVISOR’S JUDGEMENT Name of supervisor: Trần Thu Hoài Comment on graduation thesis of: Student: Đinh Thi Thiên Huế Class: CQ50/51.01 Topic: “ Working capital and some solutions to improve its management efficiency at Agricare Vietnam Co.Ltd” “ Hanoi, / /2016 Mark - In number: In word Supervisor : 78 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance REVIEWER’S JUDGEMENT Name of reviewer: Comment on graduation thesis of Student: Đinh Thị Thiên Huế Class: CQ50/51.01 Topic: “Working capital and some solutions to improve its management efficiency at Agricare Vietnam Co.Ltd” Hanoi, / /2016 Mark - In number: In word Reviewer : 79 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance 80 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ... of working capital ● To get a better understanding of working capital management at Agricare Viet Nam Co. Ltd ● To evaluate the current situation of organization and management of working capital. .. Receivable to working capital = Working capital This ratio indicates which proportion of account receivable in working capital ● Inventory to working capital: Inventory to working capital = Inventory... data and analysis of the enterprise’s working capital management ● Chapter 3: SOLUTIONS AND RECOMMENDATIONS This chapter suggests some recommendations to improving working capital management efficiency
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