Chapter 2 financial ratios analysis of vinhomes joint stock company in the period of 2019 – 2021

HỌC VIỆN CHÍNH SÁCH VÀ PHÁT TRIỂN VIỆN ĐÀO TẠO QUỐC TẾ Gi ng ả viên h ướng dẫẫn: Th.S Nguyêẫn Trẫần Khánh Sinh viên thực hiện: Đỗẫ Trung Thành Mã sinh viên: 5093106395 Lớp: QTKD CLC 9.3 Hanoi, June 2022 TABLE OF CONTENT Chapter 1: Literature review on financial ratios analysis .4 1.1 Overview of financial statements 1.1.1 Definition of financial statements 1.1.2 Categories of financial statements 1.2 Overview of Financial ratios analysis 1.2.1 Role of financial ratios analysis 1.2.2 Categories of financial ratios analysis 1.2.2.1 Short-term solvency or liquidity ratios 1.2.2.2 Long-term solvency or financial leverage ratios 1.2.2.3 Asset management or turnover ratios 1.2.2.4 Profitability ratio Chapter 2: Financial ratios analysis of Vinhomes Joint Stock Company in the period of 2019 – 2021 10 2.1 Short-term solvency or liquidity ratios 10 2.2 Long-term solvency or financial leverage ratios 14 2.3 Asset management or turnover ratios 2.4 Profitability ratios 16 18 2.5 Market value ratios 20 2.6 Evaluation of financial ratios analysis at Vinhomes JSC in the period of 2019 – 2021 21 2.6.1 Achievements 21 2.6.2 Limitations and causes 23 Chapter 3: Solutions to improve financial ratios of Vinhomes JSC towards 2025 .23 3.1 Solutions to improve Short-term solvency or liquidity ratios 3.2 Solutions to improve financial leverage ratios 3.3 Solutions to improve turnover ratios 25 3.4 Solutions to improve Profitability ratios 25 23 24 3.5 Solutions to improve Market value ratios 26 Reference 27 Chapter 1: Literature review on financial ratios analysis 1.1 Overview of financial statements Financial analysis (also referred to as financial statement analysis or accounting analysis or Analysis of finance) refers to an assessment of the viability, stability and profitability of a business, sub-business or project (Kieso et al., 2007) Financial statements are written records that convey the business activities and the financial performance of a company Financial statements are often audited by government agencies, accountants, firms, etc to ensure accuracy and for tax, financing, or investing purposes According to Kieso et al (2007), it is performed by professionals who prepare reports using ratios that make use of information taken from financial statements and other reports These reports are usually presented to top management as one of their bases in making business decisions Financial statements include :  Balance sheet  Income statement  Cash flow statement 1.1.1 Definition of financial statements Acorrding to the Vietnam accounting system in 2015, “Financial statement is a economy, financial information system of accounting unit was represented by document which follow by standard and regime of accounting Specically, finacial statement which includes displaying about asset, equity, payable as well as the result of bussiness activities of the company happened in the same period Therefore, we can assess the financial situations and coming up with the solutions” 1.1.2 Categories of financial statements Balance Sheets A balance sheet provides detailed information about a company’s assets, liabilities and shareholder’s equity Assets are things that a company owns that have value This typically means they can either be sold or used by the company to make products or provide services that can be sold Assets include physical property, such as plants, trucks, equipment and inventory It also includes things that can’t be touched but nevertheless exist and have value, such as trademarks and patents And cash itself is an asset So are investments a company makes Liabilities are amounts of money that a company owes to others This can include all kinds of obligations, like money borrowed from a bank to launch a new product, rent for use of a building, money owed to suppliers for materials, payroll a company owes to its employees, environmental cleanup costs, or taxes owed to the government Liabilities also include obligations to provide goods or services to customers in the future Shareholders’ equity is sometimes called capital or net worth It’s the money that would be left if a company sold all of its assets and paid off all of its liabilities This leftover money belongs to the shareholders, or the owners, of the company Income Statements An income statement is a report that shows how much revenue a company earned over a specific time period (usually for a year or some portion of a year) An income statement also shows the costs and expenses associated with earning that revenue The literal “bottom line” of the statement usually shows the company’s net earnings or losses This tells you how much the company earned or lost over the period Cash Flow Statements Cash flow statements report a company’s inflows and outflows of cash This is important because a company needs to have enough cash on hand to pay its expenses and purchase assets While an income statement can tell you whether a company made a profit, a cash flow statement can tell you whether the company generated cash A cash flow statement shows changes over time rather than absolute dollar amounts at a point in time It uses and reorders the information from a company’s balance sheet and income statement The bottom line of the cash flow statement shows the net increase or decrease in cash for the period Generally, cash flow statements are divided into three main parts Each part reviews the cash flow from one of three types of activities: (1) operating activities; (2) investing activities; and (3) financing activities 1.2 Overview of Financial ratios analysis 1.2.1 Role of financial ratios analysis Financial ratios show the state of your business’s financial health either at a certain point in time or during a specific period These ratiosare one way to measure your business’s productivity and performance and drive your decisions and strategies around growth For example, a common financial ratio called current ratio (which we’ll review in detail shortly) is helpful in determining if your business has the necessary cash flow to grow Another financial ratio, inventory turnover (which we’ll also review shortly), indicates how quickly or slowly your inventory is moving and if you need to make any tweaks to better align your product with market demand Calculating and analyzing financial ratios not only helps you track how your company’s current performance compares to its performance in the past, but you can determine how your business stacks up against the competition by comparing your financial ratios with industry standards Financial ratios are grouped into four broad categories—liquidity, safety (or leverage), profitability and efficiency Within these categories, there are several financial ratios, and each help you measure different aspects of your business’s productivity—using assets, generating profits, moving inventory 1.2.2 Categories of financial ratios analysis 1.2.2.1 Short-term solvency or liquidity ratios Financial Ratio Which Financial Function Statement(s) Current Ratio Measure your company’s Balance Sheet ability to pay both short Formula to Calculate Ratio Current Assets / Current Liabilities and long-term debts Quick Ratio Measure your company’s Balance Sheet (Current Assets - ability to generate cash to Inventory) / Current pay short-term financial Liabilities debts—how much money you have in liquid assets (excluding inventory) compared to liabilities Income Statement and Balance Sheet how many time Cash Ratio immediately payment when outdated debts and Cash and cash equivalent/Total liabilities debts due 1.2.2.2 Long-term solvency or financial leverage ratios Financial Ratio Function Which Financial Statement(s) Formula to Calculate Ratio Debt Ratio (debt to asset) Debt Ratio (debt to asset) Balance Sheet Total Liabilities / Total Assets Debt-to-Equity Ratio See the total deb financial liabili against shareho equity Balance Sheet Total Liabilities / Share holders’ Equity 1.2.2.3 Asset management or turnover ratios Financial Ratio Function Inventory Turnover See how long it takes for inventory to be sold and replaced during the year Measure your company’s ability to generate sales through assets Asset Turnover 1.2.2.4 Which Financial Statement(s) Income Statement and Balance Sheet Formula to Calculate Ratio Cost of Goods Sold / Inventory Income Statement and Balance Sheet Net Income / Average Total Assets Profitability ratio Financial Ratio Which Financial Statement(s) Function Formula to Calculate Ratio Gross Profit Margin Profit Margin Measure how much money you have from sales after subtracting the cost of goods sold (COGS)—money your company earns on the dollar See how much your company earned after deducting all expenses Income Statement (Revenue − Cost of Goods Sold) / Revenue Balance Sheet (Revenue − Expenses) / Revenue Return on Equity Measure how efficiently your company is using its equity to generate profit Income Statement and Balance Sheet Net Income / Average Shareholders’ Equity Return on Assets Measure how efficiently your company is using its assets to generate profit Income Statement and Balance Sheet Net Income / Average Total Assets 1.2.2.5 Financial Ratio P/B Market value ratio Function represents the minimum value of a company's equity and measures the book value of a firm on a per-share basis Which Financial Statement(s) Formula to Calculate Ratio Balance Sheet Total Equity − Preferred Equi ty/ Total share outstanding P/E hows what the market is willing to pay today for a stock based on its past or future earnings Balance Sheet Share price/ EPS EPS This financial ratio calculates how much profit the company is generating per share In other words, it tells you how much money shareholders would receive if the company were to be liquidated Income Statement and Balance Sheet Net profit/ Number of common share Chapter 2: Financial ratios analysis of Vinhomes Joint Stock Company in the period of 2019 – 2021 2.1 Short-term solvency or liquidity ratios Financial year 2019 2020 2021 Current Assets 139,555 102,312 94,437 Current Liabilities 121,557 103,385 75,401 0.98962 1.1408 Figure Current ratio 1.252463 (Source: Calculated from financial statements) According to the calculation, the current ratio of 1,25 indicates that a company has just enough money to pay its short-term debts in 2019, Look at carefully into these figures, which means that in order to pay off dong of short-term debt, enterprises need to use an average of 1.25 VND of short-term assets After sightly go down by 0.98 in the following year but rehabilitate in 2021 by 1,14, about 15% compared with 2020 By compared to the industry average of 2.1 times, this number is still quite low but enough to maintain the company's solvency Liquid assets are kept in huge reserve, reflecting inefficient use of assets, because this firm is not operating and is not profitable… And then the actual solvency of the enterprise will not be high Short-term liabilities are debts that the enterprise is required to pay in the period, so the enterprise must use the assets that the enterprise actually has, the firm converts these assets into cash and uses that money to pay the current liabilities and due debt The assets that can be converted into cash the fastest are the short-term assets, which are the assets that the enterprise is managing and under the right of use of the enterprise Financial year 2019 2020 2021 139,555 102,312 94,437 60,297 42,984 28,579 Current Liabilities 121,557 103,385 75,401 Quick Ratio 0.652023 0.57385 0.87343 Figure Current Assets Inventory As can be seen from the table in 2019 the quick ratio of VHM is just 0.65, solvency of enterprises is assessed as positive However, to assess whether if this coefficient is ideal or not, it has to consider business conditions of the enterprise In 2020, this number continually decrease to 0,57, it means that the company could be in a circumstances when they had difficulty paying debts and in order to pay debts, enterprises may have to sell goods and assets urgently to pay debts, when they had difficulty paying debts and in order to that enterprises may have to sell goods and assets urgently to pay debts Short-term debt may be large but if it doesn't need to be paid immediately, the quick solvency of the business could also be considered as a big problem In the year 2021, this number has been improved moderately from 0.57 to 0.87, equivalent to nearly half of this figures in 2020 To explain this trend, at this time the current liabilities has been solved, by falling down from 103,385 Billion VND to 75,401 On the other hand, this coefficient equals is ideal, this indicator allows for a better assess the bankruptcy risk of the enterprise However, because prepaid expenses as well as receivables… have a much slower conversion to cash, other criteria can be used to supplement 10 Cash Raito Financial year 2019 2020 2021 Cash and 13,332 13,714 4,626 cash equivalent Current Liabilities 121,557 103,385 75,401 0.109677 0.13265 0.061352 Figure Cash ratio Compared with other short-term liquidity ratios such as the current ratio, or the quick ratio, the cash ratio is more demanding on liquidity Inventories and short-term receivables are excluded from the formula because there is no guarantee that they can be quickly converted to cash in time to meet short-term liabilities Looking into the detail, there are two contrasting trends here from 2019 to 2021, current liabilities of VHM is gradually paid off, dropping from 121,577 Billiion VND to 75,401 Billiion VND, stand for 37,9% debts have been gone Hence, the number of cash and cash equivalent is 4,626 Billiion VND, this’s also the reason why cash ratio of this period is 0,06 The cash ratio shows how quickly a company can pay off its debts, since cash and cash equivalents are the most liquid assets Although a large amount of debt has been paid off, this coefficient is very low compared with its ideal recommendation, fluctuating from 0,5 to In the future, the enterprise will face many difficulties in paying the debt 11 Financial year 2019 2020 2021 Net Income 51,627 71,547 84,986 Average Total Asset 84,986 215,326 230,516 0.261746 0.332273 0.368677 Figure Total asset turnover Total asset turnover ratio tells us how much revenue for dollar of assets involved in the operation of the business This ratio is often useful for businesses in capital-intensive, property-intensive sectors, and is often associated with businesses in sectors such as manufacturing, banking, insurance, and hospitals , schools, etc Because the total asset turnover ratio varies greatly between companies in different fields In 2019 with 0.26 in this figure, it shows that with Dong of investment, investors receive 0.26 Dong profit In next two years 2020 and 2021, it went up to 0.33 and 0.36 respectively due to the ỉncreasing in net income of Vinhomes Joint Stock Company from 51,627 Billion VND in 2020, it became 84,986 Billion VND which is the result of 64% net income in 2019 The same trend was recorded in 2020 when total asset increased 155% compared with 2019 and keep that figure steadily to 2021 2.2 Long-term solvency or financial leverage ratios Financial year 2019 2020 2021 132,526 126,196 99,109 Figure Total Liabilities 12 Total Shareholders Equity Debt-toEquity Ratio 64,715 89,130 131,407 2.047841 1.415864 0.754214 A high D/E ratio is often associated with high risk; it means that a company has been aggressive in financing its growth with debt The company's debt to equity ratio in 2019 is 2.04 times, it shows that for every dong of debt, there will be 2.04 dong of guaranteed equity A high D/E ratio is often associated with high risk; it also means that a company has been aggressive in financing its growth with debt In the following year, this figure showed an downward trend with 1,41 in 2020 and 0,75 in 2021, stand for 30% and 62,5% respectively compared with 2019 Changing in longterm debt and assets tend to have the greatest impact on the D/E ratio because they tend to be larger accounts compared to short-term debt and short-term assets If investors want to evaluate a company’s short-term leverage and its ability to meet debt obligations that must be paid over a year or less, they can use other ratios It is clearly that the amount of total shareholders equity has been boosted significantly from 64,715 in 2019 to 131,407 in 2021, about more than 50% compared with the first year in the table If a lot of debt is used to finance growth, a company could potentially generate more earnings than it would have without that financing If leverage increases earnings by a greater amount than the debt’s cost (interest), then shareholders should expect to benefit However, if the cost of debt financing outweighs the increased income generated, share values may decline The cost of debt can vary with market conditions Thus, unprofitable borrowing may not be apparent at first v Financial year 2019 2020 2021 64,715 89,130 131,407 Figure Total Equity 13 Total Assets Equity Multiplier 197,241 0.328101 215,326 230,516 0.413931 0.570056 Generally, a high equity multiplier indicates that a company is using a high amount of debt to finance assets A low equity multiplier means that the company has less reliance on debt Company maintains this index at a stable level ranging from 0.32 to 0.57 in years from 2019 to 2021 In 2019, for every 10 dong of capital used by the enterprise, there would be 3,2 dong of equity, this upward trend could explained by the go up of total equity of VHM with 103.05% new equity has been added to the firm, showing a big amount of new captial running into the company, leading to the amount of total assets aslo increased 16,7% in 2021 when compared with 2019, from 197,241 billion VND to 230,516 billion VND However, a company's equity multiplier can be seen as high or low only in comparison to historical standards, the averages for the industry, this figure of real estate calculated by Mirae Asset Vietnam Research is approximately 0.75, which means these figure of VHM are still below average of the industry 2.3 Asset management or turnover ratios Financial year 2019 2020 2021 24,171 45,611 36,526 Figure COGS 14 Inventory 60.297 Inventory turnover 0.400866 42,984 28,579 1.061116 1.278071 The inventory turnover ratio tells us about the inventory management ability of the business, the inventory turnover is understood as the number of times that the average inventory is turned over during the business period The larger the inventory dialing system, the less inventory, the company's products are sold quickly, capital is not stagnant in inventory It means that the business will be less risky if it sees in the financial statements, the inventory item has a decrease in value over the years However, if this index is too high, it is not good because it means that the amount of inventory in the warehouse is not much, if the market demand increases suddenly, it is very likely that the business will lose customers and be won by competitors or market shares Starting with 0.4 times in 2019, in 2020 this figure had a huge improvement by more than 50% to 1,5 before reaching its peak in 2021 with 1.6 times It is understandable when the number of inventory in 2020 has decreased 29,8 % compared with the previous year while COGS in three years has a upward tendency from 24,171 billion VND to just 36,526 billion VND in 2021 Financial year 2019 2020 2021 Revenue 51,627 71,547 84,986 Acount Receivables 24,171 45,611 36,526 Figure 15 Receivables turnover 0.928827 1.566402 1.612485 Receivables turnover indicates the debt management status of a business and the company's ability to recover capital on its liabilities in business periods.If this ratio is too high, it may not be good because enterprises may tighten sales credit, thus affecting the revenue of enterprises Therefore, when evaluating the ability to convert receivables into cash, it is necessary to consider the sales credit policy of enterprises In 2019 , this figure of VHM was just 0.92, due to improper debt collection process of the business, bad credit policy or due to customers On the other hand, revenue increased from 51,627 billion VND to 84,986 billion VND in three years, while the same trend could be seen in acount receivables when in 2021, this figure has rised 50% compared with 2019 Besides, The real estate industry tends to have a long term of debt due to the specificity of the industry, acorrding to the balance sheet of VHM in 2021, long-term assets in progress (production and contruction) and long-term receivables have a proportion of 26% in total assets of VINHOME JSC Receivables turnover in next years is around 1,5 and 1,6, which nearly doubled with 2019, shows that the ability of company to collect debts from customers, partners, and suppliers is good and the company has reputable customers and suppliers, quality, sales policy, and effective operation 2.4 Profitability ratios Financial year 2019 2020 2021 51,627 71,547 84,986 Figure Revenue 16 COGS 24,171 45,611 36,526 Expenses 12,368 18,213 18,177 Profit Margin 0,4711 0,3942 4,583 0.531815 0.362503 0.570212 Gross Profit Margin If a company's gross profit margin wildly fluctuates, this may signal poor management practices and/or inferior products On the other hand, such fluctuations may be justified in cases where a company makes sweeping operational changes to its business model, in which case temporary volatility should be no cause for alarm On the other hand, these figure of VHM remain steadily from 2019 to 2022, around 0,75 This trend could be explained by the same upward trend of both revenue and expense in three year, this average figure in real estate industry according to SBV, MBS Research in 2020 is 27%, which means this figure of VHM is much more better than the other firm with almost double Meanwhile after reach to 45,611 billion VND in 2020, the expense of VHM has decreased 20% in 2021, this is also the reason why gross profit margin in 2021 of VHM has similar record with 2019, after went down to 0.36 in 2020 Financial year 2019 2020 2021 21,747 27,351 38,824 64,715 89,130 131,407 197,241 215,326 230,516 Figure Net Income Shareholders’ Equity Total Asset 17 Return on Equity 0.3854 0.3556 0.3521 0,1372 0,1326 0,1742 (ROE) Return on Assets (ROA) The ROA ratio specifically reveals how much after-tax profit a company generates for every one dollar of assets it holds It also measures the asset intensity of a business The lower the profit per dollar of assets, the more asset-intensive a company is considered to be Highly asset-intensive companies require big investments to purchase machinery and equipment in order to generate income In 2019, with the coefficient recorded for 0,1372, which means with 100 dong of assets, investors could get 13 dong of profit Compared with the average ratio in this field, about 7%, showing that the potential of using capital by the company is quite good In 2021, this figure remain unchanged by the changing in total asset is not too fluctuating, then the next year, ROA of VHM JCS go up to 0.17, instead of receiving 13 dong profit, now investor can benefit more dong for every 100 dong assets The ROE ratio expresses the percentage of net income relative to stockholders’ equity, or the rate of return on the money that equity investors have put into the business The ROE ratio is one that is particularly watched by stock analysts and investors A favorably high ROE ratio is often cited as a reason to purchase a company’s stock Companies with a high return on equity are usually more capable of generating cash internally, and therefore less dependent on debt financing As can be seen from the table, this figure is remain steadily in three first year then slow down a little in 2021, from 0.38 to 0.35, which means, one coin of equity creates 35 or 38 dong of profit This has reflected effectiveness in using equity of the company in this period The company needs to make more efforts to improve the efficiency of equity 2.5 Market value ratios 18 Financial year 2019 2020 2021 Figure P/B 4.31 3.3 2.72 P/E 13.05 10.77 7.6 EPS 0.00500123 0.00491993 0.00901489 In 2019, its figure was recorded by 4,31 before showing a downward trend the next years with 3,3 and 2,71 respectively, but when compared with the average figures of the industry according to SBV, MBS Research is 1,7, VHM still proved its potential in term of investment Shareholders would receive in the event that the firm was liquidated, all of the tangible assets were sold and all of the liabilities were paid However, its value lies in the fact that investors use it to gauge whether a stock price is undervalued by comparing it to the firm's market value per share If a company’s BVPS is higher than its market value per share, which is its current stock price, then the stock is considered undervalued With P/E, in essence, the price-to-earnings ratio indicates the dollar amount an investor can expect to invest in a company in order to receive $1 of that company’s earnings By 2019, VHM has a ideal coefficient with 13,1, much more higher then the avergane in this industry with only 9,0 in 2021, investors have higher expectations for future earnings growth and are willing to pay more for them as it indicates a positive future performance After that, VHM can hold that number when this figure in 2019 has decreased to 10,77 then keep falling to 7,6 in 2021 , which means below average at this time Stocks of companies having a low price-to-earnings ratio are often considered to be undervalued A company with a low P/E ratio is usually an indication of weak current as well as future performance This could prove to be a poor investment 19 It is typical for a company to announce earnings per share (EPS) that have been modified for unusual items and possible share dilution The greater a company's EPS, the more successful it is thought to be.Earnings per share is one of the most important metrics employed when determining a firm's profitability on an absolute basis It is also a major component of calculating the price-to-earnings (P/E) ratio, where the E” in P/E refers to EPS By dividing a company's share price by its earnings per share, an investor can see the value of a stock in terms of how much the market is willing to pay for each dollar of earnings 2.6 Evaluation of financial ratios analysis at Vinhomes JSC in the period of 2019 – 2021 2.6.1 Achievements 84,986 90,000 80,000 71,547 70,000 Billion VND 60,000 51,627 50,000 38,948 40,000 28,207 30,000 24,319 20,000 10,000 2019 Revenue 2020 Column1 2021 0 In general, the company's business process from 2019 to 2021 has markedly changed when VHM JSC showed positive signs in terms of numbers in the revenue segment from VND 51,627 billion to VND 84,986 billion, from VND 51,627 billion 20 to VND 84,986 billion That led to an increase in profit from business activities by 60% compared to 2019 Moreover, the enterprise showed stability in its capital structure in 2021, increasing slowly by 3.55% compared to 2019, showing that the enterprise has made great efforts in business expansion The company's financial ratios maintain the current debt solvency quite well at 1.14 in 2021, one of the good signals to attract investors Besides, the decrease in the company's debts shows its ability to operate sustainably and effectively The debt index in 2019 was VND 132,526 billion, but by 2021 it will only be VND 99,109 billion, a decrease of about 25% compared to the first year Vertical analysis of balance sheet VHM JSC 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 64,715 89,130 131,407 132,526 126,196 99,109 197,241 215,326 230,516 2019 2020 2021 Billion VND Assets Liabili琀椀es Equity 2.6.2 Limitations and causes In addition to the positive signs, the company needs to focus on keeping costs to a minimum in order to prepare for future unexpected factors that may occur again such as the 2019 pandemic Besides, businesses need to increase the amount of cash to 21 deal with short-term debts that need to be resolved, this index is only at 0.87% in 2021 Chapter 3: Solutions to improve financial ratios of Vinhomes JSC towards 2025 3.1 Solutions to improve Short-term solvency or liquidity ratios Control overhead expenses There are many types of overhead that you may be able to reduce such as rent, utilities, and insurance by negotiating or shopping around You can also look at where you expend time and energy One example: If your company has a paper trail, going digital can save you time and money that's now spent submitting and accepting paper checks Sell unnecessary assets Eliminating items such as surplus business equipment can provide a small sum of capital and reduce the average cost of equipment maintenance Change your payment cycle Talk to your vendors about opportunities for discounts if you pay early, which can save you hundreds to thousands of dollars On the flip side, you can consider offering your customers discounts for submitting payments ahead of schedule Look into a line of credit A line of credit could help you cover gaps in cash flow due to payment schedules Some business lines of credit offer access to up to $100,000 per year, with no annual fee for the first year If you're considering this, compare terms before choosing a lender to work with Revisit your debt obligations If you have short-term debt, switching to longterm debt can require smaller monthly payments and give you more time to pay off the sum On the flip side, switching long-term debt to short-term debt may mean higher monthly payments, but it can also mean that your debt will be paid off more quickly Also consider options like debt consolidation and loan refinancing, which may help lower monthly payments now, while also saving you money in the long-term 3.2 Solutions to improve financial leverage ratios 22 Increased Revenue The most logical step VHM can take to reduce its debt-to-capital ratio is that of increasing sales revenues and hopefully profits This can be achieved by raising prices, increasing sales, or reducing costs The extra cash generated can then be used to pay off existing debt Debt Restructuring Restructuring debt provides another way to reduce the debt-to-capital ratio If VHM is largely paying relatively high interest rates on its loans, and current interest rates are significantly lower, the company can seek to refinance its existing debt This will reduce both interest expenses and monthly payments, improving the company's bottom-line profitability and its cash flow and increasing its stores of capital This is a common and straightforward method used to broker better terms for the company and their outflows 3.3 Solutions to improve turnover ratios Generally, almost every companies prefer higher inventory turnover ratios The need for improving the ratio arises when a stock turnover ratio is lower than industry standards A lower ratio indicates that the company does more stocking than is required Generally, inventory operation is more efficient if the product sale is faster This is because the inventory churning would be faster, and thereby the inventory turnover ratio would be better This means the business needs less blockage of funds/investment in inventory for ongoing business operations So, it is best to have a proper plan for improving the inventory turnover ratio by concentrating on better sales or lowering the blockage of funds on a stock 3.4 Solutions to improve Profitability ratios Increaseing business' profitability will depend on a number of factors - such as the business sector you work in, the size of your business, or its operating costs However, VHM could review these options: 23  Locating areas in your business that could be improved or made more efficient - e.g general business processes or administration  Using key performance indicators (KPIs) to analyse strengths and weaknesses - e.g rising costs or falling sales  Assessing general business costs - e.g overheads, how discounted deals with loyal customers affect profits, how productive staff are  Reviewing areas of business waste and reduce them - e.g power supply costsregularly reviewing the pricing of products  Testing the prices of any products review before making the changes permanent  Improving profitability through your best customers - use up-selling, cross selling and diversifying techniques to improve profit margins 3.5 Solutions to improve Market value ratios Expand your market , a potential buyer will consider market viability Therefore, ensure your market is growing or has the potential to grow If you’re in a declining industry, the company’ll either need to reverse this or look to expand into a growing industry.Diversifying to gain a new revenue stream and increase cash flow will help raise the value of business in the eyes of a buyer This is important because a commercial viability analysis will be one of the first things a potential buyer will be interested in Maintain physical assets helps to generate value Failing to so can see assets decay beyond repair Tangible assets such as machinery, equipment and property are relatively easy to register and protect through insurance and maintenance 24 Reference Financial statements Vinhomes Joint Stock Company in periods 2019 – 2021 MB Securities (2020) - “Real estate outlook” Ross Westerfield Text book “ Copporate Finance” – Tenth Edition Investor Publications (2007) “Beginners' Guide to Financial Statement” 25