Chuyên đề thực tập financial situation of thanh do joint stock company

OVERVIEW OF FINANCIAL SITUATION OF A COMPANY

C ORPORATE FINANCE AND CORPORATE FINANCE MANAGEMENT

1.1.1 Corporate finance and financial decisions

Corporate finance encompasses the economic relationship concerning the creation and utilization of a company's monetary resources to support its operations It focuses on the financial structure of a corporation, including funding strategies and management actions aimed at maximizing corporate finance Additionally, corporate finance involves capital allocation methods and research, with the primary objective of enhancing shareholders' wealth by effectively managing resources while balancing profitability and risk.

The economic relations associated with the creation, distribution and use of corporate monetary funds constitute the financial relationships of a company. Generally, there are several financial relationships as following:

The relationship between companies and the government is defined by state funding for businesses and the financial responsibilities companies have, including tax payments and various fees.

- Relationship between companies and other economic entities: This involves payment relationships in borrowing and lending, capital investment, purchasing or selling of properties, products, goods and other services.

The relationships within enterprises, encompassing interactions between companies and their employees, shareholders, and internal departments, significantly influence financial decisions These dynamics are evident in the distribution of salaries, wages, bonuses, and fines to employees, as well as in the allocation of net income among various departments Additionally, they play a crucial role in determining dividend distributions to shareholders and the establishment of corporate funds.

Chuyên đề thực tập Tốt nghiệp

Financial managers are tasked with making crucial financial decisions to achieve corporate finance objectives, encompassing both short-term and long-term strategies Long-term decisions, known as strategic financial decisions, consist of investment decisions (capital budgeting), financing decisions (determining sources of finance), and dividend decisions In contrast, short-term financial management focuses on working capital management, which involves overseeing current assets and current liabilities.

Investment decision, also known as capital budgeting, involves evaluating the overall value of assets and distinguishing between different types, such as fixed assets and current assets This process is crucial for determining the potential returns on investments and ensuring optimal allocation of resources.

Decision on investment in current assets: How much money should a company put in inventories, accounts receivable, marketable securities, etc.

Decision on investment in fixed assets: Decision on new asset purchase or replacement, long-term investment, financial lease, etc.

Deciding on asset structure, which indicates the ratio between current assets and fixed assets Also it refers to investment in fixed assets, operating leverage, and break-even analysis.

Investment decisions are crucial as they significantly impact a business's value A well-made investment can enhance the company's worth and, in turn, increase the owner's asset value Conversely, poor investment choices can diminish business value, leading to a loss of wealth for the owners.

Financing decision: This decision associates with sources of finance and how to organize capital structure That means:

Decision on short-term financing: decision on short-term loan or use of commercial credit; decide whether to take a short-term bank loan or use a company bills.

Long-term financing decisions involve choosing between long-term bank loans and corporate bond issues for debt, determining the use of equity through retained earnings or new share issuance, and establishing an optimal capital structure.

Raising fund decision is a significant challenge for corporate financial managers.

To make informed capital mobilization decisions, financial managers must evaluate the pros and cons of various capital raising tools, while accurately assessing the current financial landscape and making reliable forecasts.

Decisions regarding profit distribution involve determining a company's dividend policy, where financial managers must decide whether to allocate net profits for shareholder dividends or to retain them for reinvestment These choices are crucial as they influence the company's approach to dividends and can significantly impact the overall value of the business and its share price in the market.

Effective working capital management involves critical short-term policies, such as cash reserve decisions, management of receivables, implementation of payment discounts, and considerations regarding fixed asset depreciation The soundness of these decisions directly influences the risks and benefits faced by the enterprise and its owners.

Financial managers play a crucial role in maximizing business value through strategic financial decisions Each decision involves a careful balance between risk and return, as the goal is to minimize risks while maximizing profits for the owner This balancing act makes it challenging for managers to analyze and select the most appropriate financial strategies.

To maximize business profits, managers must make crucial financial decisions, which can be categorized as either long-term or short-term Long-term financial decisions, often referred to as strategic financial decisions, play a vital role in shaping the overall direction and sustainability of the business.

The graduation internship topic encompasses crucial aspects such as investment decisions, financial decisions, and profit distribution strategies, particularly focusing on dividend policies within corporations Additionally, it addresses short-term financial decisions linked to current assets and liabilities, emphasizing the importance of effective working capital management.

Investment decisions relate to the total value of assets (current assets and non- current assets) Investment decisions affect the left side of the balance sheet include:

- Decisions on current assets investments: Inventories, trade policy, and short- term financial investments, etc.

- Decisions on non-current assets investments: Acquisition of new fixed assets, old fixed assets disposal, project investments and long-term financial investments, etc.

- Decisions on the structure of short-term and long-term assets: Operating leverage usage and break-even point, etc.

Financing decisions include decisions about which sources of finance to choose for investment decisions Major capital mobilization decisions of a company include:

- Decisions on short-term capital mobilization: Short-term loan or commercial credit usage and short-term bank loan or corporate bills usage, etc.

- Decisions on long-term capital mobilization: Long-term debt or equity, long- term borrowing from banks or corporate bonds issuance, etc.

- Decisions on capital structure: Debt ratio, financial leverage, and the optimal capital structure.

The dividend policy of a company governs the distribution of profits, requiring the CFO to choose between allocating after-tax profits for dividends or retaining them for reinvestment Additionally, the CFO must determine the appropriate dividend policy and assess its impact on the company's overall value and stock market price.

- Participate in the evaluation and selection of investment project decisions.

Project evaluation and selection involve multiple departments within a company, with a primary focus on the economic value added (EVA) of each project Financial managers gather data on proposed cash flows and utilize metrics such as Net Present Value (NPV) and Internal Rate of Return (IRR) to make informed investment decisions and identify the most viable projects.

Determining capital needs and organizing sources of finance for all business ativities and investment requirements of a company.

F INANCIAL SITUATION OF A COMPANY

- Definition and objectives of financial situation of a company

Financial situation is the status of the assets, liabilities, and owners' equity (and their interrelationships) of an organization, as reflected in its financial statements

Assessing a company's financial health involves analyzing various factors, including revenue and cash reserves If a business is investing heavily in production equipment, office space, and new hires without ensuring these expenditures contribute to long-term stability and growth, it may jeopardize its financial viability Excessive spending that does not enhance the company's overall performance can lead to difficulties in covering essential expenses, such as utilities and employee salaries Consequently, businesses may be compelled to freeze or reduce salaries to maintain operational viability.

Evaluating a corporation's financial situation involves a thorough analysis of various aspects of corporate finance to determine its health This assessment identifies the causes and impacts of different factors affecting financial performance, enabling managers to make informed decisions that enhance the efficiency and effectiveness of the organization.

Objectives of financial situation assessment:

- To present a comprehensive understanding of business activities of a company.

- To provide sufficient useful information to investors, creditors and other users so that they can make right decisions

- To assist managers of a company in forecast and adjustment to realistic conditions.

1.1.1 Indicators for assessing financial situation of a company

Financial managers analyze assets and asset structure by examining balance sheet data, comparing total assets at the beginning and end of a period or against previous years This analysis includes both absolute numbers and relative figures, allowing for the assessment of fluctuations in the enterprise's size.

The graduation internship project focuses on analyzing assets over various business periods, emphasizing the importance of examining fluctuations in key financial metrics such as cash reserves, short-term investments, receivables, inventories, and long-term assets This analysis is crucial for evaluating both the historical and current financial conditions of enterprises, providing a foundation for predicting their future financial potential.

When analyzing total assets at the end of the period versus the beginning of the year, it is crucial to assess both the proportion of each asset type within the total assets and the trends in asset allocation This evaluation should reflect the nature of the business and the fluctuations within each department, as the significance of each asset type can vary greatly depending on the business model.

When analyzing the structure of the enterprise's assets, there should be assessments on the overall asset structure as well as some important asset components of the enterprise.

The current asset ratio: is the ratio describing the propotion of current asset in total asset of a company, it is calculated by dividing the current assets by total assets

Current asset ratio = Currnet asset

The non-current asset ratio measures the proportion of non-current assets to a company's total assets, calculated by dividing non-current assets by total assets or by using the formula (1 – Current asset ratio).

Non-current asset ratio = Non-currnet asset

The current asset ratio and non-current asset ratio illustrate the overall structure of a company's assets, highlighting the balance between short-term and long-term assets While there are no universal standards for these ratios, their values can differ significantly based on the industry and specific business strategies employed.

Sources of finance and capital structure

A company can secure capital through various funding sources, which encompass all avenues available for financing investments and operational activities.

There are two ways to classify sources of finance: by ownership and by term

Capital is categorized into liabilities and shareholders' equity based on ownership Liabilities represent future obligations that a company must settle, primarily arising from bank loans that incur interest expenses In contrast, shareholders' equity consists of the capital contributed by the company's owners.

Capital structure refers to the proportion of liabilities in relation to shareholders’ equity, indicating how a company's assets are financed The debt ratio specifically measures the percentage of assets funded by debt Key criteria for assessing an enterprise's capital structure include these fundamental financial metrics.

The debt ratio reflects the percentage of liabilities paid to the enterprise's capital, or what percentage of its assets are derived from liabilities.

Equity ratio reflects the percentage of equity in total assets In general, the capital of an enterprise is formed from two sources: equity and liabilities.

So the following formula is formed:

In addition, the capital structure is reflected in the debt to equity ratio:

Debt ratio to equity (D/E) = Total Debts

Beside, capital is the source of assets, so analysis of assets is also essential when considering the capital situation.

In term of consnider company's financial models, the combination of liabilities and equity is important to ensure sufficient resources and reduce average cost of

Chuyên đề thực tập Tốt nghiệp capital Resources for business operations and development can be reviewed and assessed through corporate financing policies:

Net working capital = Long-Term soueces – Non-current assets

Net working capital = Current assets - Short-term sources

A positive Net Working Capital (NWC) indicates that companies possess surplus long-term capital, allowing them to fully finance fixed assets and long-term investments This surplus also partially supports short-term fixed and liquid assets, maintaining a balanced financing structure Furthermore, it signifies that the revenue generated from current assets and short-term investments will enable the business to meet its due debts while also allocating funds for additional expenditures.

A negative Net Working Capital (NWC) indicates that long-term capital is only partially allocated to long-term assets, leading to an imbalance in financing, as the remaining funds are used for short-term financing Additionally, this situation reveals that the cash generated from current assets and short-term investments is inadequate to meet short-term liabilities, resulting in a lack of liquidity.

When net working capital (NWC) equals zero, it indicates that current assets match short-term liabilities, or that long-term sources are equal to fixed assets This financing structure suggests that only fixed assets are funded by long-term capital, while current assets rely on short-term financing Such a situation can lead to instability in a company's production and business operations, particularly in industries characterized by slow capital turnover.

Figure 1.1: Financing models of a company

In order to facilitate the flexible use of financial resources, consider the following funding models:

Model 1: Fixed assets and part of current assets are financed by long-term financing sources while temporary working capital are financed by temporary financial resources By applying this model, businesses can reduce payment risk, ensuring higher level of safety and reduce the cost of capital use However, there is one weakness that there is no flexibility in the organization of capital use.

Model 2: All fixed assets, current assets and part of current assets are secured by long-term capital, and part of the remaining temporary assets is secured by temporary capital By using this model, we can ensure high affordability and safety Nevetheless, companies must utilize more long-term and medium-term loans as to pay more for the use of capital.

Model 3: All fixed assets and part of current assets are secured by regular capital, while part of current assets and all temporary assets are secured by temporary capital.

- By term capital classified into temporary capital and permanent capital

D ETERMINANTS OF FINANCIAL SITUATION OF A COMPANY

Objective factors are uncontrollable elements that significantly influence business operations Managers must stay attuned to these factors, as they can both present opportunities and impose limitations on achieving business objectives Understanding these dynamics is crucial for effective management and strategic planning.

Different types of businesses, including state-owned enterprises, joint-stock companies, limited liability companies, private enterprises, and foreign-invested enterprises, each select distinct legal forms These variations lead to unique organizational structures, influencing capital mobilization, production methods, business operations, and profit distribution strategies.

Different business sectors possess unique economic and technical characteristics that influence various aspects of operations The nature of each sector impacts the composition and capital structure of businesses, as well as the regulatory environment Consequently, the size of capital required for production and operations significantly affects capital turnover rates, including both fixed and working capital, which in turn influences investment and payment methods.

The business environment encompasses all external factors that significantly influence a company's operations, particularly its financial activities Key elements of this environment include economic stability, which directly impacts turnover and capital requirements; fluctuations in market prices, interest rates, and taxes that affect profitability; and the presence of competitors and advancements in technology, which compel businesses to continually innovate their products and enhance their techniques.

Subjective factors refer to internal factors which come from the specific characteristics of a company

- Financial strength: Financial strength is reflected in the total capital (owner’s equity, working capital) that businesses can raise into business, the ability to

The graduation internship topic focuses on the effective management of capital sources within a business Financial strength is demonstrated through the ability to meet both short-term and long-term debt obligations, as well as the profitability ratios of the enterprise.

Human potential is showcased through knowledge and experience that meet the high demands of businesses Loyal employees are dedicated to their organizations, demonstrating specialization and skill These dynamic workers excel in collaboration and are adept at seizing and maximizing business opportunities.

In today's digital age, advanced technology significantly enhances access to information, enabling businesses to operate more efficiently Companies that leverage robust technology platforms can accelerate their growth and streamline operations, ultimately reducing expenses in areas like marketing and advertising.

Company culture plays a crucial role in the long-term success of a business, as it significantly enhances work efficiency When employees feel comfortable and aligned with the company's operating culture, they tend to be more proactive and engaged in their tasks, ultimately driving better performance and growth.

Managerial competencies encompass the ability to effectively manage, plan, and implement ideas within enterprises, leveraging both professional and social knowledge This involves harmonizing financial factors, human resources, and technology to optimize the use of company resources Consequently, the qualifications of business managers significantly influence overall business operations.

THE S0054ATUS OF FINANCIAL SITUATION IN THANH DO

O VERVIEW OF T HANH D O J OINT S TOCK C OMPANY

2.1.1 Establishment and Development of Thanh Do JSC

- Name of enterprise: Thanh Do Joint Stock Company

- Address: Group 4, block 5, Cao Loc town, Cao Loc district, Lang Sơn province.

- Owner's equity: VND 25,684.28 million (December 31, 2019).

- Form of ownership: Joint stock company

Principal activities: Retailing other goods in general trading and food wholesale shops; wholesale computers, peripherals and software (wholesale of computer equipment, printers, barcode readers, office and home appliances);

Thanh Do JSC, founded in 2004 in Lang Son Province, is a prominent company registered under enterprise registration certificate No 4900225821 This certificate was initially issued by the Lang Son Department of Business Registration and Investment on February 11, 2004, and has undergone 13 amendments, with the latest update occurring on August 20, 2015.

At the time of establishment, the charter capital of the company is 1 billion VND, but becomes to 20 billion in August 2015 At present, Thanh Do Joint Stock Company has

5 supermarket branches in Hanoi and Lang Son The main business types of the company are: Supermarket, wholesale, retail, distribution of products to districts in Lang Son province.

Table 2.1 Ownership structure of Thanh Do JSC

No Name of shareholder Address

Amount of capital contribution (VND)

P306 - D5 collective 8/3 Quynh Mai ward, Hai Ba Trung district, Hanoi

P302 CT4C, X2 Linh Dam, Hoang Liet, Hoang Mai, Hanoi

No 15 Gieng Tien, Chi Lang Ward, Lang Son City, Lang Son

Thanh Do specializes in retailing through supermarket chains and wholesalers, serving distributors effectively The company operates a robust network with branches and stores located in Hanoi City and Lang Son Province, which includes three supermarkets in Lang Son and three retail outlets in Hanoi Products are distributed via direct retail channels and through wholesalers, ensuring a comprehensive reach in the market.

The company has a system of supermarkets and buffet shops in Lang Son province and Hanoi city, including:

At Lang Son 1 Thanh Do 1 supermarket: 96 Phai Ve, P.Dong Kinh

2 Thanh Do 2 Supermarket: Bac Son district

3 Buffet shop: Huong Ha (P.Vinh Trai)

At Hanoi 4 Thanh Do Supermarket 3: 352 Giai Phong

5 Thanh Do Supermarket 4: 27 Lac Trung

6 Thanh Do Supermarket 4: 886 Duong Lang

Since 2019, the Company has restructured its operations in Hanoi by establishing a new legal entity, Truong Ha Joint Stock Company, leading to a reduction in the size of Thanh Do Company.

Joint Stock Company, located at 352 Giai Phong, Hanoi, was formerly known as Truong Ha Company It specializes in consulting and supplying supermarket equipment, including pricing, shelves, and surveillance cameras Additionally, the company offers supermarket business consulting services and operates several supermarkets in Hanoi while distributing various products.

2.1.2 Organizational structure of Thanh Do JSC

Figure 2.1: Chart of organization structure of Thanh Do JSC

Through the organizational chart of the Company's management apparatus, the functions and tasks of each department can be clearly seen as follows:

BOARD OF MANAGEMENT BOARD OF MANAGEMENT

The General Meeting of Shareholders holds the highest decision-making authority within a Joint Stock Company, responsible for electing the Board of Directors in accordance with the company's charter.

- The Board of Directors appoints and dismisss the CEO position The Executive Director appoints and dismisses the titles: Deputy Director of the Company, heads and deputy heads of departments;

- The legal representative of Joint Stock Company is the Chairman of the Board of Directors.

According to the organizational chart of Thanh Do Joint Stock Company we can see that the Company has a simple apparatus of 2 rooms:

The Finance and Accounting Division, encompassing Internal Accounting and Sales Accounting, is responsible for executing accounting operations in strict accordance with state regulations and accounting standards This division plays a crucial role in updating and monitoring the company's financial ratios, providing essential reports and advice to the Board of Directors regarding the company's financial and accounting status.

The Sales Department encompasses both Planning and Sales divisions, with the Planning Department focusing on researching, strategizing, and organizing the execution of the company's business strategies It is responsible for personnel organization and administrative functions, as well as reporting and advising the Board of Directors on company resources and business performance.

- The head and decision making of the Company is Mr Vu Quoc Tai, Chairman of the Board cum General Director Assist the General Director include:

Deputy General Director is Ms Vi Thi Huong who is in charge of Planning - Business Department.

Chief Accountant is Ms Dao Thi Thu Thuy in charge of Accounting Department.

Thanh Do Joint Stock Company operates with a simple organizational structure, primarily focused on the retail of essential goods The Board of Directors manages financial functions, relying on financial statements provided by the Accounting Department for decision-making.

Accounting Department will be taken into consideration, considered by the Board of Directors and the decision of the General Director is final.

2.1.4 Advantages and Disadvantages of Business Activities of Thanh Do JSC

The company specializes in wholesale and retail operations within the supermarket sector, offering a wide range of affordable and diverse products that have earned the trust of many consumers In Lang Son province, it holds the largest market share among competitors in the same industry Furthermore, since 2014, the company has successfully expanded into the construction materials market, which has begun to contribute to its revenue and profits.

The company implements a clear and effective business strategy focused on expanding production and business activities By enhancing competitiveness against local rivals, it aims to create stable employment opportunities for its workforce.

The company always has customer policies suitable to each business period such as promotions, discounted items to attract consumers.

Thanh Do Joint Stock Company boasts a diverse range of business offerings and a robust customer base supported by an extensive distribution network, positioning it for short-term growth However, in the long run, the company will encounter significant competition as major distributors expand their operations and new entrants, such as Big C and VINMART, establish supermarket chains and mini markets, potentially threatening its market share.

2.2 Assest and asset structure of Thanh Do Joint Stock company

Table 2.1: Asset structure of Thanh Do Joint Stock Company in 2016-2019 (Unit: million dong) Itmes

IV Non-current assets in progress 2,323.60 1.70% 2,077.22 1.77% 3,422.48 2.72% 4,767.88 4.26%

1 Long-term work in progress - - - -

3 Investments in equity of other entities 1,500.00 1.10% 1,500.00 1.27% 1,500.00 1.19% 1,500.00 1.34%

VI Tother non-current assets 1,280.98 0.94% 1,050.28 0.89% 259.36 0.21% 11,377.31 10.18%

(Excerpt: Financial Statements of Thanh Do Joint Stock Company for the period of 2016-2018)

Table 2.2: Difference in assets structure Thanh Do Joint Stock Company in 2016-2019 Items

Difference 2018-2019 Difference 2017-2018 Difference 2016-2017 Amount Proportion

IV Non-current assets in progress 246.38 11.86% -1,345.26 -39.31% -1,345.40 -28.22%

1 Long-term work in progress - - - -

3 Investments in equity of other entities 0.00 0.00% 0.00 0.00% 0.00 0.00%

VI Tother non-current assets 230.701124 21.97% 790.92 304.95% -11117.95 -97.72%

Between 2016 and 2019, the total assets of enterprises experienced a significant increase, primarily driven by current assets The overall asset structure remained relatively stable, with short-term assets, particularly inventory and accounts receivable from customers, constituting a substantial portion of corporate assets.

Between 2016 and 2019, short-term assets showed a steady increase, starting from VND 79.75 billion in 2016 In 2017, they rose by VND 23 billion, marking a 29.07% increase to VND 102.94 billion, followed by a smaller rise of VND 2.66 billion, or 2.59%, to VND 105.59 billion in 2018 By the end of 2019, short-term assets had grown by VND 18.7 billion, representing a 17.78% increase The significant growth in the first two years was primarily driven by a VND 10 billion increase in short-term internal receivables, attributed to the company's investment in a new branch in Hanoi for business expansion Additionally, there was a notable rise of approximately VND 10 billion in customer short-term receivables, with the 2019 increase largely resulting from this factor.

Receivables: Receivables from customers in 2016 were VND 2.39 billion, in

In 2017, Thanh Do's investment of VND 10 billion in affiliated units led to an increase in total assets to VND 32.78 billion, with short-term receivables rising significantly from VND 1.33 billion to VND 21.65 billion This surge in receivables is attributed to year-end orders from partners in preparation for the Lunar New Year, particularly from customers owing debts related to products distributed to Truong Ha Joint Stock Company, which shares shareholders with Thanh Do While this increase in receivables appears reasonable, it highlights the need for Thanh Do to manage its debts carefully By 2018, receivables decreased by over VND 1.61 billion, reflecting effective sales and recovery management However, by the end of 2019, customer receivables surged by VND 21.3 billion, possibly due to the company's policy of extending debt repayment periods.

The graduation internship program collaborates with its partners to enhance support, while also serving as a strategic solution to retain major partners amid intense market competition.

G ENERAL ASSESSMENT ON THE FINANCIAL SITUATION OF T HANH D O J OINT

From 2016 to 2019, Thanh Do has achieved some remarkable results:

Between 2016 and 2019, Thanh Do consistently improved its business results, demonstrating resilience despite heightened competition from local supermarkets and convenience stores, including Vinmart, Dong Tien supermarket, and Lasvilla supermarket.

In 2019, the company enhanced its solvency and interest payment capabilities, ensuring that short-term assets can be readily converted into cash to meet short-term debt obligations, thereby alleviating debt repayment pressure on the business.

- Thirdly, Thanh Do has improved profitability targets by saving cost of sales thereby contributing to increasing profits for the company and owners.

- First, assets structure is irrelevant because too much capital invested into current assets Moreover, inventories and account receivable accounted for very large proportion of current assets (Inappropriate asset structure)

The company's capital structure reveals a concerningly high debt ratio, particularly in the short term This situation is exacerbated by weak operating cash flow and significant repayment pressures, which hinder the business's ability to meet interest obligations.

- Third, the company's working capital is not large that the capital depends mainly on temporary capital, the financing model is very risky due to the small scale of equity;

- Fourth, the efficiency of asset exploitation decreases over years due to capital tie up in invetories and account receivable

- Fifth, fixed costs like Selling cost, genaral and administration cost greatly which lead to the reducing the company's operating

- Lending policies of the bank are not really favorable for small and medium enterprises while this is the main type of business in Vietnam in recent years.

The fluctuating economic situation, coupled with the Covid-19 pandemic, has led to a decline in consumer shopping behavior, as people increasingly avoid crowded places like supermarkets This shift in preferences has significantly impacted the revenue of numerous businesses.

The retail industry experiences high inventory turnover, necessitating significant short-term assets to support operations Consequently, companies often rely on short-term loans to finance their inventory needs effectively.

- Currently, there are many competitors in the area that make it difficult for businesses to reach customers so businesses are trying to make policies that are beneficial to partners.

- Ability to manage financial strength is not really effective, specifically, high interest expenses and receivables have not been thoroughly managed.

- The qualification of a part of the labor force at the enterprise is not high, some new departments have replaced personnel, making some assessments and decisions not really reasonable.

- The company has not focused on information technology, has not really expanded its sales channels, and has not had quick and reasonable ways to reach consumers.

SOLUTIONS TO IMPROVE THE FINANCIA SITUATION OF

S OCIAL ECONOMIC BACKGROUND AND DEVELOPMENT ORIENTATION OF T HANH

In 2019, the global landscape was marked by complexity and numerous challenges, including a slowdown in the world economy and global trade, heightened strategic competition, and escalating trade tensions among major economies Gold prices surged while crude oil prices experienced significant volatility, leading to increased risks in international markets Concurrently, many countries adopted looser financial and monetary policies The situation in the region and the East Sea became increasingly intricate, compounded by internal economic difficulties, natural disasters, climate change, and epidemics that severely impacted production and daily life.

In 2019, despite numerous challenges in both regional and international contexts, Vietnam's economy demonstrated significant positive changes, achieving all 12 targets set by the National Assembly for the second consecutive year, with five targets exceeded The GDP growth rate reached 7.02%, surpassing the National Assembly's goal of 6.6% to 6.8%, positioning Vietnam among the leading high-growth countries globally Inflation was effectively controlled at a low rate of 2.79%, the lowest increase from 2016 to 2019 The financial, monetary, and exchange markets operated with proactivity and stability, with foreign exchange reserves totaling approximately 79 billion USD and state budget revenue reaching 1,400 trillion dongs, while public debt decreased An effective monetary policy helped stabilize the foreign exchange market and improve the national credit rating, further enhancing Vietnam's reputation as a top country for global competitiveness.

In 2019, the total social development investment capital reached approximately 33.8% of GDP, highlighting the significant role of the private sector, which accounted for 45.3% of GDP Continued improvements in transport infrastructure were noted, alongside strengthened national defense and security, and maintained social order The country also achieved notable advancements in foreign affairs and international economic integration, with strong development in foreign relations Key sectors, including science and technology, labor, employment, social security, and welfare, reported positive outcomes Additionally, substantial efforts were made in combating corruption and waste, leading to important achievements that elevated the nation's prestige and standing.

Vietnam is experiencing a notable increase in average income, achieving the second highest growth rate in the region This economic advancement is driving Vietnamese consumers to spend more, reflecting a positive outcome in output growth.

Table 3.1: Growth rate of per capita income in ASEAN region

The retail industry is a crucial sector of Vietnam's economy, consistently experiencing high growth rates ranging from 50% to 100%.

The national GDP growth in Vietnam is significantly influenced by the retail sector, which constitutes a large proportion of the total GDP Investing in retailing represents a strategic investment in the future economic development of Vietnam.

Table 3.2: Retail growth vs GDP

The current surge in retail sales and consumer services revenue indicates a significant increase in consumer demand compared to last year With a robust supply of goods available in the market, production and consumption needs are being effectively met This growing consumer market is driving enthusiasm within the retail sector.

The retail industry is a crucial sector in the Vietnamese economy, significantly contributing to its overall growth Investing in and developing this industry is essential for fostering robust economic advancement in the country.

In early 2020, the Covid-19 pandemic, which originated in China, had a profound impact on the global economy, severely affecting Vietnam as well The crisis led to lockdowns affecting one-third of the world's population and the closure of non-essential businesses According to Moody's, the GDP of G20 countries fell by 0.5%, with the US and euro area experiencing declines of 2% and 2.2%, respectively China's economic growth was projected at a mere 3.3%, significantly low for the nation However, Vietnam's government acted swiftly, successfully controlling the outbreak by May 16, 2020, which mitigated the pandemic's negative effects on its economy compared to other nations.

The following is a forecast of the impact of the Covid-19 epidemic on the personal consumption (retail) industry in Vietnam.

Table 3.4:Forecasting the impact of the Covid-19 epidemic on Vietnam's economy in 2020 under 3 scenarios (updated on 9/4/2020)

Comparisi on (compare d to the same period in 2019)

FORECAST THE LEVEL OF IMPACT (% CHANGED FROM NO COVID-19 DISEASES)

Baseline Scenario Positive Scenario Negative Scenario

(%) 2nd quarter 6 months 2020 2nd quarter 6 months 2020 2nd quarte r

Excerpt: Updated report of Vietnam economic growth scenario 2020 in the context of the

Dr Can Van Luc and author of BIDV Training and Research

According to the research, all three retail scenarios experienced negative impacts, projecting a 2% decline for the industry and individuals under a positive scenario by 2020, while a negative scenario anticipates a 4% decline.

3.1.2 Objectives and development orientation of Thanh Do Joint Stock Company

To develop effective strategies, Thanh Do evaluates its current status, which includes a diverse range of business offerings, a strong base of loyal customers, and an extensive distribution network that supports growth and expansion While the company enjoys short-term advantages for growth, it faces significant long-term challenges due to the increasing competition from major distributors like Big C and the emergence of other players such as VINMART and various mini supermarkets, which threaten its market share.

Table 3.5: Swot analysis model of Thanh Do JSC

Market  Having participated in the distribution for a long time, therefore, it has a large market share

 Prestige, known by many consumers.

 Large number of loyal customers

 There are many businesses doing business in the same field, in addition, there are shops and small supermarkets sold at convenient locations for consumers.

 Diversified and diversified products suitable to common needs and income of the majority of the population in the province.

 Promotion policies from time to time

 No high-end products yet.

 There are many distribution channels both inside and outside the

Chuyên đề thực tập Tốt nghiệp province

Market  Expanding market share to neigh- boring provinces

 In the province, especially in the city with the participation of some famous distributors such as Media Mart, Dien May Xanh, that is inevitable to share the market.

 Diverse goods, guaranteed quality, competitive prices

 Diversifying products and services further, towards a large supermarket to meet the needs of the people is a challenge, from which businesses compete in the same field.

 Expansion of distribution channels through optional store network.

 Ability to compete with other competitors in the area.

 New distributors are also developing markets to potential districts.

In a highly competitive market, Thanh Do Joint Stock Company has successfully maintained its position and stability, even as new distributors strive to capture market share The company's operations not only generate jobs and income for both direct and indirect employees but also contribute significantly to the local budget, with an annual contribution exceeding 1,000 million VND Furthermore, Thanh Do consistently pays its taxes on time, without incurring any penalties for late payments, ensuring that its scale and performance remain robust.

The retail market in Lang Son is segmented into urban and rural areas, with key locations including a store at 96 Phai Ve in Dong Kinh ward and a buffet shop named Huong Ha in Vinh Trai ward Thanh Do faces competition from various players like Vinmart and Dien May Xanh, prompting the company to explore strategies for expanding its market presence into the surrounding districts and communes of Lang Son province.

Research conducted in 2020 revealed that consumers in rural areas prioritize price over quality and service, often perceiving modern supermarkets as more expensive than local markets However, Thanh Do supermarket offers competitive pricing, matching that of traditional stores With traditional small shops as the main competitors, the company is confident in its sales policies and pricing strategy To capitalize on this confidence, Thanh Do plans to secure an additional 3 billion in loans, backed by collateral, alongside 2 billion in equity capital to invest in two new stores in the densely populated Dinh Lap and Bình Gia districts, where retail supermarkets are currently lacking.

To achieve these goals, Thanh Do has set up strategies such as:

Labour plays a crucial role in the long-term growth of an enterprise, prompting Thanh Do to prioritize hiring suitable employees and enhancing their skills through continuous knowledge updates The company ensures that it meets all obligations to its workforce, providing competitive salary policies and welfare benefits With a current team of 80 employees, Thanh Do evaluates departmental and individual performance to streamline operations and reduce unnecessary positions, ultimately aiming to minimize costs Additionally, the company is assessing salary structures while considering the recruitment or transfer of existing staff for its upcoming expansions in Dinh Lap and Binh Gia districts.

S OLUTION TO IMPROVE THE FINANCIAL SITUATION Ò T HANH D O J OINT S TOCK

From the above analysis results, I would like to have some suggestions to improve the financial situation of the company as follows:

3.2.1 Inhence inventory management and credit policy of Thanh Do JSC

To enhance its asset structure, Thanh Do should prioritize effective liability management by boosting debt collection efforts and optimizing accounts payable turnover This can be achieved by revising payment policies, considering flexible repayment terms for customers, and implementing incentives for timely payments Strategies such as early payment discounts can encourage prompt customer payments, but it is crucial to carefully calculate these discount rates and compare them with prevailing bank interest rates to ensure financial viability.

In 2019, the company's solvency ratios showed some improvement, yet the quick solvency ratio remained concerning, with an instant solvency ratio below 0.04 This indicates a questionable ability to meet short-term debts, particularly in the face of liquidity risks or unexpected events, such as a warehouse explosion Such vulnerabilities could jeopardize the company's reputation with partners and creditors, highlighting the urgent need for effective improvement strategies.

To minimize interest expenses, the company must strategically plan its borrowing costs Additionally, since loans serve as the primary funding source for inventories, Thanh Do should negotiate with suppliers to reduce deposits, extend payment cycles, and increase allocated capital, thereby alleviating repayment pressure.

To enhance solvency, Thanh Do must prioritize the assessment of customers' financial information, ensuring timely debt recovery and minimizing the risks of bad debts.

3.2.3 Increase equity and reduce interest expenses

Thanh Do should seek to raise additional capital from both existing and new shareholders to enhance its long-term funding This strategy will not only support short-term financial needs but also help lower interest expenses and alleviate debt pressure.

3.2.4 Improve business cost management solutions

The recent global economic crisis has negatively impacted our country's economic stability, leading to rising consumer goods prices and diminishing purchasing power Additionally, costs for fuel, electricity, and water have surged, contributing to increased business management expenses General and administrative costs, which encompass selling expenses like advertising and shipping, as well as employee salaries, insurance, depreciation, and utility services, represent a significant portion of overall expenditures To enhance competitiveness and boost profits, businesses must focus on reducing operational costs.

To minimize holding costs, establish an optimal inventory level that adequately supports business operations without excess Regular communication with suppliers is essential, and adopting a just-in-time inventory model can further reduce holding expenses.

To effectively reduce production costs, it is essential to minimize selling expenses, particularly transportation costs, which should be optimized by determining the distance between supplier warehouses and selecting the most efficient routes This includes transporting maximum quantities without exceeding tonnage limits and considering peak demand periods due to rising incomes Additionally, since the company's main products are consumer goods with short shelf lives, careful management of transportation is crucial to mitigate preservation risks that could affect product quality and lead to increased costs Furthermore, marketing costs must be strategically managed by clearly identifying target customers and understanding their psychology to maximize promotional reach while minimizing the frequency of promotions.

To effectively reduce inventory costs, businesses should identify an optimal inventory level that adequately supports operations without incurring excessive holding and storage expenses Regular discussions with suppliers are crucial, and adopting a just-in-time model, similar to Toyota's, can help minimize inventory-related costs However, it is essential to accurately determine the required inventory amount to ensure smooth business processes are maintained.

To enhance departmental and individual performance evaluations, it is essential to identify and minimize unnecessary positions, ensuring salaries align with employee productivity For stores planning expansion, recruiting suitable personnel is crucial Implementing policies that encourage long-term commitment from the workforce will ultimately reduce recruitment costs over time.

- Finally, minimize risks from factors of fire, power short-circuit fire At shops, supermarkets and warehouses, there are many types of flammable goods To reduce

When considering the risks associated with graduation internship projects, purchasing insurance for goods and facilities is a wise decision Although the company has already insured its warehouse goods, it remains crucial to stay vigilant, particularly during the summer months when the use of electrical equipment surges, heightening the risk of fire.

3.2.5 Find potential markets, diversify products and approach customers

To expand our business in Lang Son province, we are actively seeking customers and targeting other districts that currently lack modern retail options, primarily relying on household and traditional shops This presents a feasible opportunity for growth, as customers in these areas prefer shopping at stores that offer a variety of choices Additionally, the Thanh Do system provides competitive pricing, making it an attractive option for local consumers.

In Lang Son City and Hanoi, the company primarily focuses on trading essential goods at affordable prices, without catering to high-income customers through premium products To address a broader market, diversifying the product range and services to appeal to various income levels is essential Administrators should prioritize understanding customer needs across different income brackets, conduct thorough information gathering, and develop products that attract a wider customer base.

Vietnam's rapidly growing number of Internet users is significantly influencing consumer behavior, as highlighted in MBS's Retail Sector Report To effectively engage this audience, businesses should consider leveraging Internet advertising and promoting products on social media platforms tailored to local retail customers Additionally, adjusting delivery policies, such as offering free delivery for orders over 1 million VND within a close radius, can enhance customer satisfaction and open up new collaboration opportunities with partners from Chengdu and beyond.

3.2.6 Perform regularly, proactively and effectively the business financial analysis

Analyzing business operations is crucial for enterprises, especially in today's rapidly changing economic landscape This analysis provides insights into current performance, enabling businesses to adapt and thrive amidst evolving market conditions.

Chuyên đề thực tập Tốt nghiệp situation of the business, from which the administrator can make the right business decisions.

C ONDITIONS FOR IMPLEMENTING SOLUTIONS

The People's Committee of Lang Son province and city must prioritize support for businesses by implementing effective policies that foster a conducive environment for growth This focus on business development not only enhances job creation for workers but also alleviates societal burdens and contributes positively to the local budget.

In response to the economic challenges posed by the Covid-19 pandemic, provincial and city leaders are urged to provide timely support for businesses through tax payment extensions, as outlined in Decree 41/2020/ND-CP The Thanh Do Corporation qualifies for this tax payment extension due to its classification as a small business.

In the challenging economic landscape caused by the Covid-19 pandemic, banks must collaborate closely with the government to foster a supportive environment for small businesses, particularly in regions like Chengdu The BIDV bank's Lang Son branch, which is a primary lender for these companies, should prioritize the swift disbursement of affordable credit packages, as well as consider extending or reducing debt for its customers to ensure their financial stability.

Enhancing employee skills and qualifications is crucial for any business, as people remain the most valuable asset Thanh Do Joint Stock Company boasts a workforce primarily composed of university and college graduates, with most employees sourced locally.

In small and underdeveloped cities like Thanh Do, the retail service industry's mindset remains limited, resulting in a low quality of human resources As competition intensifies and product offerings become saturated with similar prices and quality, the service quality provided by employees becomes a key concern for consumers Additionally, the effectiveness of planning staff and market development is closely tied to the company's overall business strategy To address these challenges, the company must prioritize human resource development by improving the skill levels of its workforce, offering internal training programs, and facilitating access to new knowledge to enhance employee awareness and critical thinking.

Establishing strong customer relationships is crucial for businesses in Lang Son city, where the market is small and the area is limited With little differentiation in business location, pricing, and convenience among competitors, fostering trust and loyalty with customers becomes essential for sustained success in retail.

At this time, the emotional factor will influence customers' purchasing decisions.

Thanh Do, as the first large-scale retail enterprise in Lang Son with a long operational history, should leverage its strong reputation to negotiate better terms with suppliers, particularly regarding deferred payments In light of the challenges posed by the Covid-19 pandemic, it is crucial for the company to proactively engage with banks to discuss options for rescheduling existing loans, reducing the burden of old debts, and securing new loan packages at favorable interest rates.

To enhance labor productivity and streamline operations, the company must overhaul its existing management systems, which currently lack structure and complete procedures This deficiency necessitates increased oversight from the Board of Directors By implementing significant changes to the current system, the company can optimize its operational efficiency and reduce business costs.

To enhance efficiency and reduce operational costs, the company should focus on improving processes related to logic, sales, human resources, and labor safety while minimizing redundant personnel Establishing streamlined operational procedures will enable automation and drive better business outcomes.

Chuyên đề thực tập Tốt nghiệp reduce errors, reduce costs, increase labor productivity, and improve business indicators.

My internship at Thanh Do Joint Stock Company provided valuable insights into the significance of financial decisions in business Leveraging my university knowledge and the support of Dr Tran Thanh Thu from the Corporate Finance Department, alongside the Accounting team at Thanh Do, I successfully completed my thesis on the "Financial Situation of Thanh Do Joint Stock Company."

Drawing on my extensive knowledge from the Academy and practical experience, I have assessed and analyzed the financial status of Thanh Do Joint Stock Company for the years 2016 to 2019 Based on my findings and expertise, I have proposed several solutions aimed at enhancing the company's financial performance I trust that these insights will be beneficial for the management of the company.

The implementation of this topic faces challenges due to limited capacity and short practice time, highlighting the complexity of the issue that necessitates extensive practical experience I welcome feedback and suggestions from the faculty and colleagues at Thanh Do Joint Stock Company to enhance my thesis.

I would like to express my gratitude to Dr Tran Thanh Thu for her invaluable assistance in completing my graduation thesis, as well as to all the members of Thanh Do Joint Stock Company for their enthusiastic guidance during my practical experience at the company.

Tiêu đề	Financial Situation of Thanh Do Joint Stock Company
Tác giả	Trinh Khanh Linh
Người hướng dẫn	Ph.D. Tran Thanh Thu
Trường học	Academy of Finance
Chuyên ngành	Corporate Finance
Thể loại	Graduation Thesis
Năm xuất bản	2020
Thành phố	Hanoi

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Số trang	105
Dung lượng	0,95 MB