The effectiveness of using current assets at gm international company limited current situation and solutions

BANKING ACADEMY ADVANCED PROGRAM FACULTY OF FINANCE GRADUATION THESIS TOPIC: THE EFFECTIVENESS OF USING CURRENT ASSETS AT G&M INTERNATIONAL COMPANY LIMITED CURRENT SITUATION AND SOLUTIONS Student name Class Student ID Academic year Lecturer : : : : : Pham Thuy Linh K20CLCD 20A4011065 2017 - 2021 Dr Nguyen Thi Lam Anh Hanoi, May 2021 Tai ngay!!! Ban co the xoa dong chu nay!!! 17014129055391000000 BANKING ACADEMY ADVANCED PROGRAM FACULTY OF FINANCE GRADUATION THESIS TOPIC: THE EFFECTIVENESS OF USING CURRENT ASSETS AT G&M INTERNATIONAL COMPANY LIMITED CURRENT SITUATION AND SOLUTIONS Student name Class Student ID Academic year Lecturer : : : : : Pham Thuy Linh K20CLCD 20A4011065 2017 - 2021 Dr Nguyen Thi Lam Anh Hanoi, May 2021 DECLARATION I hereby declare that the graduation thesis topic: “The effectiveness of using current assets at G&M International Company Limited - Current situation and solutions” is an independent research work under the guidance of my supervisor, Dr Nguyen Thi Lam Anh and not have any copying by others The content of the graduation thesis is the product that I have made efforts to research during my study at the school as well as the internship at G&M International Company Limited All the information and data furnished in the report are completely honest I would like to take full responsibility and discipline if there is a problem Hanoi, May 19th 2021 Student Phạm Thùy Linh i ACKNOWLEDGEMENT I would like to express my special thanks of gratitude to Dr Nguyen Thi Lam Anh has enthusiastically guided me through at every satges of preparing and completing the graduation thesis on the topic: “The effectiveness of using current assets at G&M International Company Limited - Current siuation and solutions” I would also like to thank the lectures at Banking Academy and the Faculty of Finance in particular for teaching and imparting knowledge to us during the past four years Although the internship was short, I am very grateful for the help from the staff in G&M Co., Ltd to complete the thesis ii TABLE OF CONTENTS INTRODUCTION .1 CHAPTER 1: THEORETICAL BASIS OF CURRENT ASSETS AND THE EFFECTIVENESS OF USING CURRENT ASSETS 1.1 Theoretical basis of current assets 1.1.1 Definition of current assets .4 1.1.2 Characteristics of current assets 1.1.3 Function of current assets 1.1.4 Classification of current assets 1.2 Theoretical basis the effectiveness of using current assets .7 1.2.1 Definition of managing current assets efficiency .7 1.2.2 Indicators for evaluating managing current assets efficiency 1.2.3 Factors affecting managing current assets efficiency 10 1.3 Overview of related researchs 13 CONCLUSION OF CHAPTER 15 CHAPTER 2: EFFECTIVENESS REALITY OF USING CURRENT ASSETS AT G&M INTERNATIONAL COMPANY LIMITED 16 2.1 Overview of G&M International Company Limited 16 2.1.1 Specifies business of Flavors and Fragrances Industry 16 2.1.2 Formation and development process of G&M International Company Limited .17 2.1.3 Organizational structure of G&M International Company Limited 18 2.1.4 Business process of G&M International Company Limited 19 2.1.5 Business situation of G&M International Company Limited 20 2.2 Effectiveness reality of using current assets at G&M International Company Limited 29 2.2.1 Current assets structure of G&M International Company Limited in the period 2018-2020 .29 iii 2.2.2 Usage reality of current assets of G&M International Company Limited in the period 2018-2020 .34 2.2.3 Analysis of effectiveness in using current assets at G&M International Company Limited in the period 2018-2020 .41 2.3 Evaluating the effectiveness in using current assets at G&M International Company Limited in the period 2018-2020 51 2.3.1 Achievements 51 2.3.2 Limitations and causes .52 CONCLUSION OF CHAPTER 58 CHAPTER 3: SOLUTIONS TO ENHANCE THE EFFECTIVENESS OF USING CURRENT ASSETS AT G&M INTERNATIONAL COMPANY LIMITED 59 3.1 Company development orientation 59 3.1.1 Socio-economic context and prospect of flavoring industry 59 3.1.2 Company development orientation in the near future 61 3.2 Solutions proposed to enhance the effectiveness of using current assets at G&M International Company Limited 64 3.2.1 Improving current asset management 64 3.2.2 Improving staff quality .68 3.2.3 Proactive risk management 69 3.2.4 Investing material and technical facilities 70 3.3 Recommendations 70 3.3.1 Recommendations to Government 70 3.3.2 Recommendations to G&M International Company Limited 71 CONCLUSION OF CHAPTER 73 CONCLUSION 74 iv LIST OF ABBREVIATIONS Abreviation words Meaning G&M G&M International Company Limited COGS Cost of goods sold DSO Days Sales Outstanding DOH Days of inventory on hand EVFTA FTA RCEP European-Vietnam Free Trade Agreement Free Trade Agreement Regional Comprehensive Economic Partnership v LIST OF FIGURES Figures Page Diagram 2.1: The organizational structure of G&M Chart 2.1: Sales from goods and services sold of G&M in the period 2018-2020 18 23 Chart 2.2: Cost of goods sold of G&M in the period 2018-2020 26 Chart 2.3: Income before tax of G&M in the period 2018-2020 28 Chart 2.4: Assets structure of G&M in the period 2018-2020 29 Table 2.1: Income Statement of G&M in the period 2018-2020 21 Table 2.2: Expenses of G&M in the period 2018-2020 25 Table 2.3: Assets of G&M in the period 2018-2020 30 Table 2.4: Current assets of G&M in the period 2018-2020 32 Table 2.5: Cash and cash equivalent of G&M in the period 2018-2020 35 Table 2.6: Accounts receivable of G&M in the period 2018-2020 37 Table 2.7: Inventory of G&M in the period 2018-2020 40 Table 2.8: Liquidity ratios of G&M in the period 2018-2020 42 Table 2.9: Receivables turnover of G&M in the period 2018-2020 46 Table 2.10: Inventory turnover of G&M in the period 2018-2020 48 Table 2.11: Return on current assets of G&M in the period 2018-2020 50 vi INTRODUCTION Reasons for choosing the topic Current assets play an important role in business operations of any enterprise Whether a business can survive in the market or not is mostly based on the current assets of that business This is the type of capital that the enterprise often has to spend in purchasing and maintaining machinery, equipment and goods It can be said that the rational management and use of current assets will increase business performance, as well as maximize profits for the company Current assets are also a measure that reflects the volatility of an enterprise's business Through the analysis, businesses can actively change to be able to easily adapt to the fluctuations of the business environment G&M International Company Limited is one of the few companies operating in the Flavors and Fragrances industry in Vietnam, specializing in the supply of stabilizers, food and industrial flavorings In the near future, the company aims to expand the market, so improving the management of the company's assets becomes more necessary than ever In the context that the economy is having negative impacts due to the impact of the Covid-19 epidemic taking place around the world, all industries are more or less affected, including the Flavors and Fragrances industry During the period of operation, the company has a certain standing in the industry, but in terms of asset management, especially current assets, the company has faced difficulties and little experience The effective use of current assets plays a very important role, directly affecting the business activities of the company Realizing the importance of effective use of current assets as well as assessing the impact of the epidemic on the company, during my internship here, I focused on learning about the current situation of using current assets at the company Therefore, I decided to conduct a thesis with the topic "The effectiveness of using current assets at G&M International Company Limited - Current situation and solutions" in order to contribute somewhat to the improvement of management of current assets that the Company is dealing with, and at the same time, the company assist in the development and achievement of the set business goals Research targets The thesis is carried out with the item of starting searching from the basic theory of current assets and the effectiveness of using current assets From those theories, through the observation and analysis of the current situation of using current assets at G&M International Co., Ltd in the last three years, the thesis evaluates the achieved results, the remaining limitations, indicating the cause of the condition Thereby, the thesis offers solutions and recommendations to help the company improve as well as improve the efficiency of using current assets Object and scale of research Research object: Current assets and effectiveness of using current assets of a company Research scale: Current situation of current assets and use of current assets at G&M International Co., Ltd in the period of 2018-2020 From there, the thesis offers measures and recommendations to improve the efficiency of using current assets at the company Research questions The thesis is researched to answer three main questions: - What are current assets? What is the effective use of current assets? - What is the current situation of using current assets at G&M International Company Limited in the period of 2018 - 2020? - What are the solutions to improve the effectiveness of using current assets at G&M International Company Limited in the coming period? Research methods In order to have a complete and accurate thesis, I have applied what I have learned to analyze the financials of a company The thesis has applied mainly methods such as the general analysis method, horizontal comparison method, and