Improving the efficiency of working capital at lilama 10 joint stock company

NATIONAL ECONOMICS UNIVERSITY SCHOOL OF ADVANCED EDUCATIONAL PROGRAMS BACHELOR’S THESIS Major: Finance Topic: IMPROVING THE EFFICIENCY OF WORKING CAPITAL AT LILAMA 10 JOINT STOCK COMPANY DO THUY LINH HA NOI, 2018 NATIONAL ECONOMICS UNIVERSITY SCHOOL OF ADVANCED EDUCATIONAL PROGRAMS BACHELOR’S THESIS Topic: IMPROVING THE EFFICIENCY OF WORKING CAPITAL AT LILAMA 10 JOINT STOCK COMPANY Student : DO THUY LINH Major : Banking – Finance Class : Advanced Finance 57 B Student’s ID :11152416 Supervisor : Prof LE THI HUONG LAN ACKNOWLEDGEMENT After completing years learning at National Economics University, I had chance to accumulate and cultivate comprehensive knowledge in terms of Finance and Banking This report is carried out during my internship at LILAMA 10 Joint Stock Company First and foremost, I would like to express my profound appreciation to Ms Le Thi Huong Lan for her valuable guidance as well as positive support throughout my writing report process I also would like to give my sincere thanks to Mr Trinh Ngoc Tuan Hung who is the chief accountant as well as all staff in financial department at LILAMA 10 Joint Stock Company for their useful information and instruction I could complete my internship successfully due to their help i TABLE OF CONTENTS ACKNOWLEDGEMENT i TABLE OF CONTENTS ii LIST OF FIGURES iv LIST OF TABLES v STATUTORY DECLARATION INTRODUCTION CHAPTER 1: GENERAL THEORY OF WORKING CAPITAL AND THE EFFICIENCY OF USING THE WORKING CAPITAL IN THE ENTERPRISE 1.1 Overview of working capital in the enterprise .4 1.1.1 Concept, characteristics and role of working capital 1.1.2 Structure of working capital and factors affecting working capital 1.1.3 Working capital requirement and methods for estimating working capital requirement 1.2 The efficiency of working capital in the enterprise 1.2.1 Definition and the meaning of improving the efficiency of using working capital 1.2.2 Indicators for evaluating the efficiency of using working capital 10 1.3 Factors affecting the efficiency of using working capital .14 1.3.1 Subjective factors 15 1.3.2 The subjective factor 17 CHAPTER 2: THE STATUS OF THE EFFICIENCY OF USING WORKING CAPITAL AT LILAMA 10 JOINT STOCK COMPANY 20 2.1 Overview of LILAMA 10 Joint Stock Company 20 2.1.1 History of establishment and development 20 2.1.2 Characteristics of business activities of LILAMA 10 Joint Stock Company 22 2.2 Business performance of LILAMA 10 Joint Stock Company .32 2.2.1 Situation of assets and capital of LILAMA 10 Joint Stock Company 32 2.2.2 Financial performance of the Company .40 2.3 Analyze the situation of using working capital at LILAMA 10 Joint Stock Company 41 2.3.1 Analyze the working capital structure of the company 41 2.3.2 Financial ratio to evaluate the efficiency of using working capital at LILAMA 10 Joint Stock Company 46 ii 2.3.3 Result of using capital at LILAMA 10 Joint Stock Company 50 2.4 Assessment of efficiency of using working capital at LILAMA Joint Stock Company 51 2.4.1 Achievements .51 2.4.2 Limitation and Causes 52 CHAPTER 3: SOLUTION TO STRENTHEN THE EFFICIENCY OF USING WORKING CAPITAL AT LILAMA 10 JOINT STOCK COMPANY 56 3.1 Goals and orientation for development of LILAMA 10 Joint Stock Company 56 3.1.1 Socio- ecomomic context .56 3.1.2 Goals and orientation for development of LILAMA 10 Joint Stock Company 57 3.2 Solution to strengthen the efficiency of working capital at LILAMA 10 Joint Stock Company 58 3.2.1 Budget estimation plans 59 3.2.2 Cash Management 60 3.2.3 Strengthen the management of receivables 61 3.2.4 Strengthen the Inventory management and minimize storage costs .62 3.2.5 Improve the management of Payables 63 3.2.6 Setting up backup plan to minimize risks .64 3.2.7 Determine the reasonable working capital needs 64 3.2.8 Human resources solution 65 3.9 Focusing on market research, seeking to expand its scale 65 3.3 Recommendations .66 3.3.1 Recommendations for company management 66 3.3.2 Recommendations for the state and the finance ministry .66 CONCLUSION .68 REFERENCES 69 iii LIST OF FIGURES Figure 2.2: Organizational structure diagram at LILAMA 10 Joint Stock Company 23 Figure 2.3: Structure of accounting- Finance Department 25 Figure 2.4: Employees structure at LILAMA 10 Joint Stock Company 27 Figure 2.5: Labor Quality at LILAMA Joint Stock Company 29 Figure 2.6: The structure of working capital at LILAMA 10 Joint Stock Company 45 iv LIST OF TABLES Table 2.1: SUBSIDIARIES AND SUBTITLES UNDER THE LILAMA 10 JSC 26 Table 2.2: Situation of assets at LILAMA 10 Joint Stock Company ( million VND) .33 Table 2.3: Situation of capital at LILAMA 10 Joint Stock Company(million VND) 37 Table 2.4: Financial performance of the Company (million VND) .40 Table 2.5: Sources of working capital at LILAMA 10 Joint Stock company (million VND) 42 Table 2.6: Current asset structure of the company (million VND) 43 Table 2.7: Solvency of the Company (million VND) 46 Table 2.8: Cash indicator (million VND) .47 Table 2.9: Accounts Receivable Turnover of the company (million VND) 47 Table 2.10: Inventory turnover of the Company (million VND) 48 Table 2.11: Scale of working capital at LILMA 10 Joint Stock Company (million VND) 49 Table 2.12: The demand of Net working capital of the company (million VND) 49 Table 2.13: Indicators to evaluate the efficiency of working capital (million VND) 50 Table: 2.14: Debt Structure of the company (million VND) 53 v STATUTORY DECLARATION With the understanding of copyright infringement, I could assure that this report is not involved in plagiarism because it is written by myself This report was followed by the requirement of Advanced Educational Program and based on the available data, which I collected from my internship time Hanoi, / / 2019 Signature INTRODUCTION Capital is the most decisive and indispensable factor in establishing and maintaining the operation of a business In the expanding and growing market conditions, enterprises have a multitude of options for the capital which is used Therefore, finding sources of mobilization, methods of mobilization and how to make the best use of capital sources are also more complex than ever Enterprises need to provide administrators and employees with the necessary knowledge as well as a general plan of managing and using capital Enterprises always have two main capital divisions: fixed capital and working capital Depending on the type of business, the structure of these two types of capital compared to the total capital will be different For manufacturing enterprises, fixed capital tends to account for a larger proportion Fixed capital is a source of funding for long-term assets of enterprises, such as factories, machines, etc These are essential resources for enterprises to be able to implement production and business activities Working capital is the capital that businesses use to maintain that business Working capital is used to buy short-term and highly liquid assets For fixed capital, businesses often focus on the scale and cost of capital, but with working capital, management and reuse are much more complex Using this capital to be most effective is always one of the top concerns and a difficult problem for managers in the company because of its diversity as well as the its impact LILAMA 10 Joint Stock Company is not an exception Given that fact that LILAMA 10 Joint Stock Company is an enterprise operating in the field of construction and installation, the demand for working capital of the company is very large in order to make sure the production and business activities taking place continuously Therefore, improving the efficiency of using working capital is one of the most top concerns of the company Due to the above reasons, after the period of internship, I decided to choose the topic: “Improving the efficiency of working capital at LILAMA 10 Joint Stock Company” as a graduation topic Research purpose: The topic has main research objectives: Firstly, systemizing the basic issues of efficiency in using working capital in the enterprises in general 2      Secondly, apply the theories to study the status of efficiency of using capital of at LILAMA 10 Joint Stock Company Thirdly, based on the situation, propose some solutions to improve the efficiency of using working capital at the Company Research objects and research scope: Research object: Efficiency of using working capital of the Company Scope of research: Research on the using of working capital at LILAMA 10 Joint Stock Company in the period of 2015-2018 Research method: This topic uses a combination of research methods, which are mainly methods of statistics, comparison, analysis and synthesis The layout of the research topic: The topic consists of chapters: Chapter 1: General theory of efficiency of working capital and the efficiency of using working capital in the enterprise Chapter 2: The efficiency of using working capital at LILAMA 10 Joint Stock Company Chapter 3: Strengthening the efficiency of using working capital at LILAMA 10 Joint Stock Company