Improvement ò eficiency in capital use in thanh hoa medical materials equipment joint stock company

Thesis for the Degree of Master Improvement of efficiency in capital use in Thanh Hoa medical materials equipment joint stock Company June 2017 Department of Business Administration Graduate School of Soongsil University BUI XUAN TAN Thesis for the Degree of Master Improvement of efficiency in capital use in Thanh Hoa medical materials equipment joint stock Company June 2017 Department of Business Administration Graduate School of Soongsil University BUI XUAN TAN Thesis for the Degree of Master Improvement of efficiency in capital use in Thanh Hoa medical materials equipment joint stock Company A thesis supervisor : Professor Ho Chul-Shin Thesis submitted in partial fulfillment of the requirement for the Degree of Maste June 2017 Department of Business Administration Graduate School of Soongsil University BUI XUAN TAN To approve the submitted thesis for the Degree of Master By Tan, Bui Xuan Thesis Committee Chair Kim Kun Bae (signature) Member Kwak Won Jun (signature) Member Le Hoang Ba Hung (signature) June 2017 Graduate School of Soongsil University ACKNOWLEDGEMENTS I would like to thank my supervisors Prof Ho Chul Shin, who gave me valuable assistance and advices in completing the dissertation and MBA course I also thank to all lecturers and staff of Soongsil University and Hong Duc University for their supports Thanks to Thanh Hoa Medical care and material equipment Joint stock Company who provided me information to fulfill the research Specially thanks to my wife and my friends for their encouragement during the time to study and the research TABLE OF CONTENTS ABSTRACT iv CHAPTER 1: INTRODUCTION 1.1 Reason for choosing the topic 1.2 Objectives of the study 1.3 Object and scope of the research 1.4 Contributions………………………………………………………… 1.5 Project structure CHAPTER THEORETICAL BACKG ROUND 2.1 Overview of business capital 2.1.1 Concept of business capital 2.1.2 Classification of capital of the business 2.1.3 The role of capital for business activities 15 2.1.4 Necessity to improve the efficiency in capital use in business 18 2.2 Efficiency in capital use of enterprises 20 2.2.1 Concept of efficiency in capital use of enterprises 20 2.2.2 The neccessity for improving the efficiency of business capital use 21 2.2.3 System of indicators to assess the efficiency of use of business capital 22 2.3 Factors impacting on efficiency of use of business capital 26 2.3.1 Objective factors 26 2.3.2 The objective factors 28 CHAPTER RESEARCH METHODOLOG Y 30 3.1 Time and location of the research 30 3.2 Data collection 30 -i- 3.2.1 Primary data 30 3.2.2 Secondary data 31 3.3 Data analysis methods 32 CHAPTER RESEARCH RESULTS 33 4.1 Situation of efficency of use of capital in Thanh Hoa Medical 33 4.1.1 Overview of Thanh Hoa Medical Materials Equipment 33 4.1.2 Situation of efficient use of capital in Thanh Hoa Medical .44 4.1.3 Evaluating the efficiency of capital use in Thanh Hoa 64 4.2 Some solutions to improve the efficiency of capital use in 70 4.2.1 Development orientation of Thanh Hoa Medical 71 4.2.2 Some solutions to improving the efficiency of capital use 73 CHAPTER CONCLUSION AND RECOMMENDATION 88 5.1.Conclusion 88 5.2 Recommendations 90 REFERENCES 92 -ii- LIST OF TABLES [Table 2-1] Flow method of capital …………………………………………11 [Table 4-1] Movements in labor forces of the Company …………………….….43 [Table 4-2] Asset structure of Thanh Hoa Medical Materials Equipment Joint Stock Company………………………………………………… ……………… 45 [Table 4- 3] Structure of current assets of Thanh Hoa Medical Materials……………………………………………………… ……………… 46 [Table 4-4] Structure of non-current assets of Thanh Hoa Medical Materials Equipment Joint Stock Company……………………………………… ….…… 51 [Table 4- 5] Structure of fixed assets of Thanh Hoa Medical Materials…………………………………………………………………….…… 52 [Table 4- 6] Movements in capital soruces during 2013-2015…… ……….….… 55 [Table 4- 7] Liabilities ………………………………………………………… 57 [Table 4-8] Equity……………………………………………………………… 58 [Table 4-9 ] Items to asset efficiency of use of total business capital…… …….…59 [Table 4-10]Indicators reflecting efficiency in use of working capital in Thanh Hoa Medical Materials Equipment Joint Stock Company…………… 61 [Table 4-11] Items reflecting efficiency in use of fixed assets and long-term investments in Thanh Hoa Medical Materials Equipment Joint Stock Company 63 -iii- LIST OF FIGURES [Figure 4- 1] Organizational structure of Thanh Hoa Medical Materials Equipment Joint Stock Company…………………………………………….… 36 [Figure 4- 2] Size of cash and cash equivalents………………………………… 47 [Figure 4-3] Size of short-term receivables…………………………….…………49 [Figure 4- 4] Size of inventories………………………………………………… 50 [Figure 4- 5] Movements in resources of Thanh Hoa Medical Materials Equipment Joint Stock Company in 2013-2015……………………………… …56 -iv- Closely monitoring the activities of contractors: Specifying the conditions for the progress and quality of the contract; Requesting independent monitoring consultant of the investor to agree with the contractors about specific implementation plans of each item in the bid package to meet the requirements of the investor's progress; Supervisor must be present at the site to check the quality of construction, the personnel and materials on site and handle technical problems, if necessary, immediately reporting to the Project Management Board for timely settlement plan Requiring contractors to motorize stages to speed up construction Accepting the price adjustment for the contractor if reasonable, but making the stricter conditions on progress of the project: the Contractor shall only receive compensation if completing it as committed The Project management board should be dynamic and monitor closely the implementation of the project, often contacting with the consultant, contractor partnership to accelerate progress to ensure quality Creating the most favorable conditions for contractors to carry out the assigned tasks and ensure project quality Making investment plan, asset purchases in line with the current status and asset structure of the company Activities in the past years have shown that the company continued to expand production and business operations of medical supplies, so construction has become an important activity of the company To improve the efficiency of using non-current assets, before deciding to purchase, invest in machinery and -82- equipment, it is vital to analyze and properly assess the status, quantity, quality, and synchronization, demand as well as balance of the asset structure Based on the combination of the results of the analysis and forecast of capital of the Company, the company needs to build strategies in long-term asset investment When investment is made, it is vital to consider the time of putting into operation of fixed assets as quickly as possible Some other common solutions Strengthening and training of staff, improving the quality of human resources As a qualitative solution, staff capacity improvement through recruitment, training is an issue that all Vietnam businesses are interested in The quality of the administrative staff and of the production department has a direct impact on the efficiency of use of company assets To enhance the capacity of staff of the enterprise, on the one hand, the Company should provide preference in recruitment as salaries, bonuses, benefits, work experience in order to attract high-quality human resources for the key positions in the company On the other hand, as with the current staff and the advantage of long experience in the industry, the Company should always foster and improve the capacity to work through the domestic and foreign training sessions, or assigning skilled professionals to work in the enterprise in order to improve staff capacity The company should have a clear reward policy, encouragement of staff creativity -83- Developing a clear recruitment policy and process; having training plans in line with their capacity to attract those with knowledge, skills and competencies to meet the development needs of the company.Often assigning key management personnel, especially those in finance – accounting to attend courses to improve professional knowledge, attending specialized seminars or short-term training courses to update the information for the management Besides, training, fostering, improving skills of workers is also essential, which helps workers have more new knowledge and the ability to work more effectively Application of science and engineering, new technologies in the management and production Technology transfer: as one of the company having position in the industry of medical supplies of Vietnam, plants with outdated technology were required by the Company to meet the standards on the issue of drug storage warehouses and "good manufacturing of drugs", therefore, in order to continue to operate in the field of medical supplies manufacturing, the company must quickly make technological innovation and have closed production lines Moreover, in the future, demand for high-quality medical supplies is increasing, the supply of medical supplies in the market is abundant, if not transferring to new technology, quality of products is low, the company is likely to lose its market share to those with huge capital and modern technology -84- Launching the movement of technical innovations and applying scientific and technological advances into production at the company, taking advantage of the technical innovations of the engineers, workers at the plant is inexpensive but very effective, improving productivity and product quality Application of information technology in business and production management: Currently the company only applies information technology in the accounting work, using accounting software to record, synthesize economic business operations to make reports However, there are many departments such as finance, purchasing, sales, warehouse, engineering, customer management if being supported by the software, its operation will be more efficient This is the modern means, using information and technology to manage all the resources, cover all areas from planning, statistics, auditing, analysis and administration to monitor, manage smoothly, increase flexibility to ensure timely response before constantly change of external environment However, this implementation requires large costs, the Company may consider to apply to the new plant Or the company can buy the less expensive but effective business management software of other suppliers which are used by many medical supplies companies in other industries Strengthening the capital mobilization The issue of the capital of the company in recent years shows the company's capital is still small To meet the requirements of asset purchases to serve the growing expansion of business scale, the company needs to diversify -85- capital mobilization activities, namely: Expanding relations with banks and credit institutions, ensuring credibility in the payment operations to be able to get help when needed Also, based on the capital requirements of each phase of the project, depending on the time of payment to the contractor under the contract, the Company may apply the form of long-term loans, short term loans under the contract, credit limit… Making the most use of commercial credit sources This is a cheap and flexible financing method in business Commercial credit can provide the Company with long-term funding through purchase on credit of means of transport, materials and fuel If the mobilization of other sources is difficult, utilization, full exploitation of commercial credit can held the Company to have more capital The Company may borrow money from officials and employees in the company, researching the issue of bonds or long-term debt certificates to raise capital for production and business activities Attracting joint-venture capital through capital contribution to establish joint ventures with domestic and foreign partners The joint venture with other companies in the same field, especially foreign companies not only help the company reduce capital difficulties but also learn from the experience, access to advanced manufacturing, creating high-quality products, improving the competitiveness on the domestic market and towards integrating into foreign markets -86- The selection of method of raising capital must be based on the specific situation and capital structure of each period to ensure profitability, having adequate capital for business activities and not adversely affecting the financial situation of Company -87- CHAP TER CONCLUSION AND RECOMMENDATION 5.1.Conclusion In the context of the rapid development economy, businesses are facing both opportunities and challenges The problem is not only the existence but also growth and development in the fierce competition Business capital is one of the indispensable elements for the formation, survival and growth of any business The management and use of captial always has an important role in the management of production and business of enterprises As a company specialized in manufacturing and trading medical supplies, Thanh Hoa Medical Materials Equipment Joint Stock Company has made great progress in terms of both quality and scale With the potential of the company in particular and the medical supplies industry in general, Thanh Hoa Medical Materials Equipment Joint Stock Company can confirm its position in the domestic market and catch up with international integration Stemming from this situation, the topic of "Improving efficiency in capital use of Thanh Hoa Medical Materials Equipment Joint Stock Company " has deeply studied basic theoretical issues of capital, efficiency of use of capital, -88- analysis, assessment of the situation in the capital efficiency of the company in order to propose solutions to improve the efficiency of capital use From the set objectives, this dissertation completed the following basic contents: First: The dissertation has studied and systematized the basic theories of production and business, improving the efficiency of use of capital in production and business + Capital and its role and characteristic in the enterprise + The concept of efficiency in capital use and the system of indicators reflecting efficiency in capital use under three groups as efficiency in use of capital, fixed capital and working capital + The factors that affect the efficiency of use of capital in enterprises are analyzed in two groups: Group of objective factors and group pf subjective factors Second, the dissertation has a detailed analysis to assess the status of efficiency of use of capital in Thanh Hoa Medical Materials Equipment Joint Stock Company, from which to draw some comments to help the Company to know achivements, shortcomings and its reasons in use of capital Third: From the analysis of the situation and the causes, the dissertation has proposed solutions and recommendations on improving the efficiency of use of production and business capital in Thanh Hoa Medical Materials Equipment Joint Stock Company -89- It is said that improvement in the efficiency of capital use is extremely difficult and complex in terms of perception and actual reasoning Though being mentioned and studied a lot, the content of improving the efficiency in use of capital is large and complex Therefore, despite many attempts, the ability and qualifications are limited, the dissertation cannot avoid limitations I am looing forward to comments from teachers, friends, managers so that my dissertation is more completed 5.2 Recommendations In order to achieve the goal of improving overall business efficiency and effective use of assets in particular, in addition to efforts from Thanh Hoa Medical Materials Equipment Joint Stock Company in the implementation of these above solutions, it is necessary to have coordination of Vietnam Medical Equipment Corporation and support through the State's policy Developing a roadmap for the price of medical supplies under the laws of the market: The prices of medical supplies must have a reasonable roadmap so that business and production of medical supplies and consumers can measure all market movements, to be active in the production plans, minimize unexpected factors of market volatility, in line with the trend of integration and ensuring benefits for the State, producers and consumers -90- The State should build a system of average indicators for each sector so that the Company has an accurate basis for evaluating their position, find out the strengths and weaknesses to take appropriate measures The State should create a favorable environment for business operations, reduce unnecessary cumbersome procedures in applying for the investment license to expand production and business activities Currently, the company is facing unequal competition between imports and smuggled goods, which has a big difference in price The reason is that smuggling has been problematic Although this issue is of interest for a long time, no one can confirm whether or when to terminate that situation or not That the smuggled goods is rampant in all categories have caused difficulties for the company in the sale of goods in the domestic market and it may be a direct cause to reduce efficiency in capital use of the company To help the Company get out of this situation, the State should strengthen coordination with relevant departments to prevent smuggling thoroughly as soon as possible The Government should promote the development of financial market, especially the monetary market so that enterprises can diversify investment choices as well as methods to mobilize capital With a developed monetary market, the company may invest idle capital in an effective manner and be easy to mobilize capital when needed -91- -92- REFERENCES -93- Academy of Finance, Corporate Financial Management Textbook Finance 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