(Luận văn thạc sĩ) analysis of financial statements of thacogroup in nietnam

VIETNAM NATIONAL UNIVERSITY, HANOI INTERNATIONAL SCHOOL *************** MAI DUC THAO ANALYSIS OF FINANCIAL STATEMENTS OF THACOGROUP IN VIETNAM MASTER THESIS HA NOI - 2020 VIETNAM NATIONAL UNIVERSITY, HANOI INTERNATIONAL SCHOOL *************** MAI DUC THAO Analysis of financial statements of Thacogroup in vietnam PHÂN TÍCH BÁO CÁO TÀI CHÍNH CỦA TẬP ĐOÀN THACO, VIỆT NAM Major: Master in Financial Management Code: 8340202.01QTD MASTER THESIS Supervisor: Dr Nguyen, Thi Kim Oanh HA NOI - 2020 ABSTRACT Thesis Title: Analysis of financial statements of Thacogroup in Vietnam Pages: 66 University: Vietnam National University, Hanoi Graduate School: International School Date: Octorber, 2019 Graduate Student: Mai, Duc Thao Degree: Master Supervisor: Dr Nguyen, Thị Kim Oanh Keywords: financial analysis, ratio analysis, automobile industry Thacogroup is the largest automotive corporation in Vietnam and has shown immense success of the last few years Understanding the performance of such a powerful automotive corporation is vital for the overall industry development therefore this topic is considered highly significant and important within industry financial management This research aims at analyzing Thacogroup financial performance over the the last years from 2014 to 2018, in order to assess the corporation’s profitability, liquidity, solvency, asset management, short term and long term financial position, as well as to make recommendations to any red flags identified during the analysis The quantitative financial analysis flagged up a number of main areas that required further investigation: cash management, return on equity, operating efficiency, inventory management, and accounts receivable These issues were then further investigated using semi – structured interviews The red flags raised during the financial analysis were adequately explained by the interviewed individuals, who were all senior management at Thaco The interviewees recommended three way for improving business performance of Thaco: (1) more comprehensive information systems for a more decentralized management, (2) less bureaucratic procedures regarding completion of paperwork and processing of requests as well as payments, and (3) the need to reduce and eliminate resistance to change and fear of the unknown ACKNOWLEDGEMENT By extending my most sincere appreciation to International School, Vietnam National University, Thacogroup Vietnam, and my supervisor Dr, Nguyen, Thi Kim Oanh, I would like to express my thanks and gratitude for their input in helping me complete this master thesis Thank you! Mai, Duc Thao TABLE OF CONTENTS ABSTRACT ACKNOWLEDGEMENT LIST OF TABLES LIST OF FIGURES CHAPTER 1: INTRODUCTION 1.1 General research background on automobile industry and Thacogroup 1.1.1 General research background .7 1.1.2 About Thacogroup 1.2 Research aim and research question 13 1.2.1 Research aim 13 1.2.2 Research question .14 1.3 Scope of research and methodology .14 1.3.1 Scope of research 14 1.3.2 Research methodology 14 1.4 Limitations during research 15 1.5 Structure of the thesis 15 CHAPTER 2: LITERATURE REVIEW 16 2.1 Definition and objectives of financial statement analysis .16 2.1.1 Definition 16 2.1.2 Objectives 17 2.2 Sources of information 18 2.2.1 Balance sheet 18 2.2.2 Income statement 19 2.2.3 Statement of cash flows 20 2.2.4 Related documents 21 2.3 Financial statement analysis framework .22 CHAPTER 3: METHODOLOGY 29 3.1 Research type 29 3.2 Research methods 29 3.3 Justification of chosen methods 30 3.4 Data collection and analysis 31 3.5 Methodological limitations 33 CHAPTER 4: FINDINGS AND DISCUSSION 34 4.1 Data Sources and Interviewees’ Profiles 34 4.1.1 Data Sources .34 4.1.2 Interviewees’ Profiles 34 4.2 Content Analysis 34 4.2.1 Financial Analysis 34 4.2.2 Common – Size Analysis 39 4.2.3 Ratio Analysis 40 Horizontal Analysis 46 4.3 Semi – Structured Interviews 48 4.3.1 Interview Questions 48 4.3.2 Interviewee Profiles 49 4.3.3 Interview Response Analysis .50 4.3.3a Cash Management issue 51 4.3.3b Return on Equity issue 52 4.3.3c Operating Efficiency issue 52 4.3.3d Inventory Management issue 53 4.3.3e Accounts Receivable issue .54 4.3.3f Overall financial performance 54 4.3.4 Summary 55 CHAPTER 5: CONCLUSION AND RECOMMENDATIONS 57 LIST OF REFERENCES 60 APPENDICES 63 Appendix 1: Horizontal Analysis 63 LIST OF TABLES Table 1: Consolidated Statement of Financial Position 36 Table 2: Consolidated Statement of Profit and Loss 37 Table 3: Consolidated Statement of Cash Flows 38 Table 4: Liquidity 40 Table 5: Extracts from Thacogroup financial reports 41 Table 6: Operating Asset Management 42 Table 7: Financial risk 43 Table 8: Profitability 44 Table 9: DuPont Analysis 46 Table 10: Interviewees' Profiles 50 Table 11: Extract from financial statements (profit and loss account) 54 LIST OF FIGURES Figure 1: Thacogroup's Liquidity Financial Ratios graph 40 Figure 2: Thacogroup Financial Risk Financial Ratios 43 Figure 3: Thacogroup's Profitability Financial Ratios graph 45 CHAPTER 1: INTRODUCTION 1.1 General research background on automobile industry and Thacogroup 1.1.1 General research background Financial analysis provides managers with the reality aspect of their business by way of evaluating fluctuations in financial indicators; advantages and disadvantages of current financial position, business performance, debt situation, among others Based on preliminary evaluations, comprehensive and effective measures as well as strategies are given to improve profitability, liquidity, or other business goals, thus to create value for shareholders The analysis of financial statements not only provides financial information for managers and shareholders but also brings usefulness to other stakeholders such as investors, customers, suppliers, lenders, workers, regulatory agencies Financial analysis is particularly crucial for organizational decision making and forecasting The automobile industry in Vietnam ranks fourth in the ASEAN region, only after Indonesia, Thailand, and Malaysia (Vietnamnews, 2019) Experts claim that Vietnam is a highly potential market for automobile growth whereby production in 2018 constituted per cent of that produced globally and is expected to grow 10 per cent in 2019 (Nguyen Thanh Dam, 2019) On a monthly basis, in 2018, the average car sales in Vietnam have risen 17% (Hockey, 2018) Within the Vietnamese automobile industry, Thacogroup is a key player constituting almost half of market share, therefore it is noteworthy that its financial performance significantly affects the overall performance of the industry More detailed introduction of the company follows later in this thesis 1.1.2 About Thacogroup Thacogroup was established in April 1997 with the founder being Mr Tran Ba Duong, who now (2019) holds the position of Chairman of Board of Management It is the largest automotive corporation in Vietnam and has shown immense success of the last few years This enterprise manages the manufacturing and assembly of passenger cars, trucks, and buses in Vietnam at market share of 40% and localization rate of 16-50% Thaco vehicles are considered quality and affordable cars for the Vietnamese, whilst having scored top of Vietnam Automobile Manufacturers’ Association sales charts in 2014-2015 It continues to place in the top two rank as the most profitable private companies in 2017 Beside the continuous goal to maintain its mountaintop position domestically, Thaco aims to expand its operations to the ASEAN region, and even further internationally with the vision to utilize modern technology in their products, create a global platform, and spread its wings to become a multi-industry conglomerate on a regional scale Thaco’s focus of operations currently lays in two main areas being: manufacturing and maintenance of their vehicles The enterprise’s owned passenger car brands currently include South Korean Kia, Japanese Mazda, and French Peugeot As of 2019, Thaco employs approximately 22 thousand employees across the country Thaco’s corporate culture takes employees as the core of the sustainable development Employees are encouraged to have strong ambitions, positive work attitude, creativity, and continuous personal development The highlight feature of Thaco’s corporate culture is the 8T principles (T being the first letter of the principal words in Vietnamese): “Dedication - Honesty - Intelligence - Confidence Respect - Prestige - Commitment - Convenience” Due to the nature of manufacturing and maintenance industry, Thaco’s employees are trained to perform work with utmost discipline to ensure high quality and corporate vision, which constitutes one of the company’s biggest intangible assets Apart from adequate and systematic training, Thaco’s corporate culture is also manifested by way of compensation and benefits In terms of corporate social responsibility, Thaco supports social community through various channels such as national defense, social welfare, traffic safety, education, culture, musical, sports, charity Through their active involvement and significant contributions to the social community, in 2015, Thaco has been acknowledged and honored by the following awards: Certificates of Merit from the Prime Minister, Excellent Emulation Flags from the