Apply financial statement analysis on traphaco joint stock company tra

NATIONAL ECONOMICS UNIVERSITY CENTER FOR ADVANCED EDUCATIONAL PROGRAMS - ASSIGNMENT APPLY FINANCIAL STATEMENT ANALYSIS ON TRAPHACO JOINT STOCK COMPANY (TRA) Subject: Financial Reporting and Analysis Student ID Student Class Instructor : Nguyen Hai Ha Anh : 11150189 : Auditing EEP 57B : PhD Pham Xuan Kien Hanoi, 2018 TABLE OF CONTENT INTRODUCTION I An overview of TRAPHACO II Financial statement analysis .5 The liquidity of short-term assets and the short-term debt-paying ability The long-term debt-paying ability .8 Profitability Appendix 11 INTRODUCTION Financial analysis is the process of reviewing and evaluating a company’s financial statements to get acknowledged of the financial health of the company and assist in more effective decision making of investors, creditors, management and other users I am using the case of TRAPHACO to apply financial analysis The analysis will be focusing on TRAPHACO’s liquidity of Short-Term Assets; Related Debt-Paying Ability, Long-Term Debt-Paying Ability and Profitability through presentation of financial statement and calculation of financial ratios I An overview of TRAPHACO Trading name TRAPHACO Joint Stock Company Stocks TRA Charter capital 246,764,330,000 VNĐ Headquarters address No 75 Yen Ninh, Ba Dinh District, Hanoi Industry Healthcare Products Pharmaceutical and Medical Country of origin Vietnam Phone number (+84-4) 3683 0751 Fax (+84-4) 3681 5097 Email info@traphaco.com.vn Website http://www.traphaco.com.vn Important Trademarks November 28, 1972 May 1994 Founded as the medicines production Group of the Railway Health Service with the first products of serum, fluids, distilled water serving hospitals of the railway sector during the war First used the name TRAPHACO and served as pharmaceutical & 16, medical material - equipments Company - Ministry of Communications and Transport September 27, 1999 Equitized into a joint stock company: Pharmaceutical and medical material and equipments Joint Stock Company - Ministry of Communications and Transport July 5, 2001 Changed the company’s Company 2006 Set up Traphaco High-Technology Joint Stock Company (Traphaco CNC) 2009 name into TRAPHACO Joint Stock Traphaco was recognized as the No pharmaceutical brand in Vietnam Named: TOP 10 Vietnam’s Gold Star, 2013 TOP 10 Corporate with Social Responsibilities Asia-Pacific’s Global Performance Excellence Award Top 10 outstanding Vietnamese Award from Ministry of Industries and Trade for Boganic 2015 Top 10 Vietnam’s Responsibilities Gold Star Award for Corporate Social Gold prize National Quality Award Received National Quality Gold Award 2015 2016 Be in top 40 and top 50 listed companies in Vietnam Be in top 10 Prestigious Pharmaceutical Company of Vietnam 2016 Be selected as National Brand – Vietnam Value TRAPHACO’S BUSINESS SCOPE » Produce and trade pharmaceutical products, chemicals and medical equipment, liquors, beers and beverages (excluding bar operation) » Purchase, cultivate and process pharmaceutical herbal ingredients » Manufacture prescription medicines » Import and export pharmaceutical materials and products » Produce and trade cosmetics and foods » Provide consulting services and technology transfer in medical and pharmaceutical fields II Financial Statement Analysis The liquidity of short-term assets and the short-term debt-paying ability 1.1 Financial ratios analysis VND in million Ratios Days’ Sales in Receivables (a)= Grossreceivables Net Sales/365 Accounts Receivable Turnover (b) Net Sales = Average Gross Receivables Accounts Receivable Turnover in Days = Average Gross Rece ivables 365 = Net Sales/365 (2) Days’ Sales in Inventory = Ending Inventory Cost of goods sold /365 Cost of goods sold Inventory Turnover = Average Inventory Inventory Turnover in Days= 365 Average Inventory = Cost of goods sold /365 (5) Operating Cycle = Accounts Receivable Turnover in Days + Inventory Turnover in Days = (3) + (6) 2016 2017 143,073+ 3,975 1,998,334 /365 131,074+4,819 1,870,442/365 26.86 days 1,998,334 147,048+233,843 [ ] 26.52 days 1,870,442 135,893+147,048 ] 10.49 times 13.22 times 365 10.49 365 13.22 34.79 days 27.61 days 306,311 1,003,653/365 334,029 829,784/365 111.40 days 1,003,653 (313,185+306,311)/2 146.93 days 829,784 (306,311+324,029)/2 3.24 times 2.63 times 365 3.24 365 2.63 112.65 days 138.78 days 34.79 + 112.65 27.61 + 138.78 147.44 days 166.39 days Working Capital = Current Assets – Current Liabilities 841,551 – 354,737 486,814 Current Assets 841,551 Current Ratio = Current Liabilities 354,737 2.37 times 204,507+10,600+143,073 10 Acid-Test Ratio = Cash Equivalent + Marketable Securities+ Net Receivables 354,737 Current Liabilities 1.01 times 11 Cash Ratio = [ 204,507+10,600 354,737 745,856 – 380,753 365,103 745,856 380,753 1.96 times 160,904+8,600+131,074 380,753 0.79 times 160,904+8,600 380,753 Cash Equivalents + Marketable Securities Current Liabilities 12 Sales to Working Capital = Sales Average WorkingCapital 0.61 0.45 1,998,334 (636,599+ 486,814)/2 3.56 times 1,870,442 (486,814+365,103)/2 4.39 times Computations in details: a, Traphaco JSC Days’ Sales in Receivables Years Ended December 31, 2017 and 2016 (in millions) 2016 Account receivables 143,073 Provision for doubtful debts 3,975 Gross receivables (A) 147,048 Net Sales 1,998,334 Average daily sales on account (net sales on account divided by 365) (B) 5,474.89 Days’ sales in receivables (A ÷ B) 26.86 days 2017 131,074 4,819 135,893 1,870,442 5,124.50 26.52 days b, Traphaco JSC Accounts Receivable Turnover Years Ended December 31, 2017 and 2016 In millions 2016 Net sales (A) 1,998,334 End of year receivables 143,073 Beginning of year receivables 228,504 Provision for doubtful debts: End of 2017 4,819 End of 2016 3,975 End of 2015 5,339 Ending gross receivables 147,048 Beginning gross receivables 233,843 Average gross receivables (B) 190,446 Accounts receivables turnover (A ÷ B) 10.49 times 1.2 Comments 2017 1,870,442 131,074 143,073 135,893 147,048 141471 13.22 times  The decrease in Days’ Sales in Receivable from 26.86 days at the end of 2016 to 26.52 days at the end of 2017 indicates a positive trend in the control of receivables  The turnover of receivables increased between 2016 and 2017 from 10.49 times per year to 13.22 times per year For Traphaco, this would be a positive trend  The number of days’ sales in inventory has increased from 111.40 days at the end of 201 to 146.93 days at the end of 2017 This represents a negative trend  Inventory turnover indicates the liquidity of the inventory For Traphaco, the inventory turnover decreased from 3.24 to 2.63  There was an increase in inventory turnover in days for Traphaco from 112.65 days in 2016 to 138.78 days in 2017 This represents an unfavorable trend  For Traphaco, the operating cycle increased, which is a negative trend The 2017 Traphaco data produced a days’ sales in ending receivables of 26.52 days and a days’ sales in ending inventory of 146.93 days, for a total of 173.45 days In this case, there is an increase, considering the year-end number This indicates less liquidity at the end of year than during the year  Traphaco had approximately 486,814,000,000 VND in working capital in 2016 and 365,103,000,000 in working capital in 2017  The current ratio was 2.73 times at the end of 2016 and 1.96 times at the end of 2017 This indicates a negative trend considering liquidity  The acid-test ratio was 1.01 at the end of 2016 and 0.79 at the end of 2017 This represents a negative trend  There has been a major decline in the liquidity of company at the end of 2016 and 2017, as measured by the Current ratio and the Acid-test ratio Reduced liquidity leads to greater risk for creditors and investors  The cash ratio was 0.61 at the end of 2016 and 0.45 at the end of 2017 Traphaco’s cash ratio decreased materially at the end of 2017 in relation to the end of 2016  The sales to working capital ratio increased from 2016 to 2017, 3.56 and 4.39 times respectively This tentatively indicates a slightly more profitable use of working capital in 2017 in comparison to 2016  In summary, most of the ratios had a negative trend, it means that Traphaco JSC may not be in a good position liquidity as indicated by the ratios, so it is necessary for the firm to improve its liquidity The long-term debt-paying ability 2.1 Financial ratios analysis Ratios 2016 Times Interest Earned = 283,179+898 Recuring Earnings , Excuding Interest 898 Expense , Tax Expense , Equity Earnings ¿ Noncontrolling Interest 316.34 Interest Expense , Including Capitalized Interest Fixed Charge Coverage 283,179+898+1,938 = 898+1,938 Recuring Earnings , Excuding Interest Expense ,Tax Expense , Equity Earnings ¿ Noncontrolling Interest + Interest Portion of Rentals 100.85 times Interest Expense , Including Capitalized Interest + Interest Portionof Rentals Total Liabilities 362,691 Debt Ratio = Total Assets 1,377,453 Debt/Equity Ratio = Total Liabilities Shareholder s' Equity Debt to Tangible Net Worth Ratio Total Liabilities = Shareholder s' Equity−Intangible Ass ets 2017 322,649+ 2,583 2,583 125.91 322,649+ 2,583+2,897 2,583+2,897 59.87 times 390,854 1,509,702 26.33% 25.89% 326,691 1,014,763 390,854 1,118,848 32.19% 31.93% 326,691 1,014,763−38,599 390,854 1,118,848−44,463 33.47% 36.38% 2.2 Comments  The computation for times interest earned for the years 2016 and 2017, these are very high numbers, a relatively high, stable coverage of interest over the years indicates a good record  From the perspective of long-term debt-paying ability, the lower these ratios are, the better the company’s debt position In general, all indicators except debt to tangible net worth ratio were smaller than that of the previous year, so it means that the Traphaco’s long-term debt-paying ability is quite good and it should maintain this Profitability 3.1 Financial ratios analysis Ratios Net Profit Margin = Net Income Before Noncontrolling Interest , Equity Income∧Nonrecurring Items Net Sales Total Asset Turnover Net Sales = Average Total Assets 2016 210,596 1,998,334 2017 241,103 1,870,442 10.54% 12.89% 1,998,334 1,296,523+1,377,454 ( ) 1,870,442 1,377,454+1,509,702 ( ) 1.49 times 1.30 times 210,596 1,296,523+1,377,454 15.75% 241,103 1,377,454+ 1,509,702 16.70% Return on Assets Net Income Before Noncontrolling Intere st of Earnings∧Nonrecurring Items = Average Total Assets Net Income Before Noncontrolling Interest = ¿ Nonrecurring Items Average Total Assets Net Income Before Noncontrolling Interest × ¿ Nonrecurring Items Net Sales Net Sales Average Total Assets ROA = (1) ×(2) Operating Income Margin = Operatingincomes Net Sales 10.54% × 1.49 12.89% × 1.30 15.70% 16.76% 281,231 1,998,334 323,663 1,870,442 14.07% 17.30% Operating Asset Turnover = Net Sales Average Operating Assets 1,998,334 951,425+1,172,947 1,870,442 1,172,947+1,348,799 1.88 times 1.48 times 281,231 951,425+1,172,947 323,663 1,172,947+1,348,799 25.48% 25.67% Return on Operating Assets = Operating incomes Average Operating Assets DuPont Return on Operating Assets = 14.07% × 1.88 Operating Income Margin × Operating Asset Turnover 26.45% = (5) × (6) 17.03% × 1.48 25.20% 10 11 12 13 1,998,334 Sales to Fixed Assets = Net Sales ¿ 240,255 Average Net Assets( Exclude Construction¿¿ Progress) 8.32 times ¿ Return on Investment 210,596+898 ×(1−20 %) Net Income before Noncontrolling Interest 1,204,758 ¿ Nonrecurring Items +[ ( Interest Expense ) × ( 1−Tax rate ) ] 17.54% Ave rage (Long−term Liabilities+ Equity) 210,596 Return on Total Equity = 990,8092 Net Income before Nonrecurring Items−¿÷idends on Redeemable Preferred Stock 21.25% Average Total Equity 210,596 Return on Common Equity = 990,8092 Net Income before Nonrecurring Items−¿ Preferred Dividends 21.25% Average Common Equity 1,998,334−1,003,653 Gross Profit Margin Gross profit 1,998,334 = Net Sales 49.77% 3.2 1,870,442 465,325 4.02 times 241,103+1253 ׿ ¿ 19.03% 241,103 1,066,806 22.60% 241,103 1,066,806 22.60% 1,870,442−829,784 1,870,442 55.64% Comments Most of the ratios in 2017 of Traphaco JSC are higher than previous year except Total Asset Turnover and Operating Asset Turnover ratio These result express the fact that this company run this operation better than that of 2016 and it should maintain this APPENDIX Balance Sheet at the end of 2017 11 12 Income Statement at the end of 2017 13 14 Balance Sheet at the end of 2016 15 16 17 18