THEORETICAL BACKGROUND OF WORKING CAPITAL AND
Working capital and the sources of working capital
1.1.1 Definition and characteristics of working capital 1.1.1.1 Definition of working capital
Every business engaged in production and operations must possess current assets in addition to fixed assets The structure of current assets varies across different industries, but in manufacturing enterprises, they typically consist of two main components: operating current assets and circulating current assets.
Operating current assets encompass various assets involved in the production process, including raw materials, auxiliary materials, and fuels in the storage phase, as well as semi-finished and unfinished products during the production stage.
Circulating current assets: include products/goods whose have not been consumed (inventories), cash and receivables
In the manufacturing and operational processes, current assets, including circulating current assets, are constantly in motion and interchanging To maintain a seamless manufacturing and operational flow, businesses must possess a sufficient amount of current assets Consequently, enterprises need to allocate a portion of their capital, known as working capital, to establish and sustain these essential assets.
So, the enterprise’s working capital is the advance money that enterprise use to invest in setting up current assets which are necessary for enterprise‟s manufacturing and operating activities
In manufacturing business operations, working capital undergoes constant transformation, shifting from cash to various forms throughout the production process Ultimately, after the consumption of finished products, working capital reverts to its original state as cash capital.
Working capital management at Advanced Network Systems Vietnam Limited Company is crucial for maintaining financial stability and operational efficiency Effective management of working capital ensures that the company can meet its short-term obligations while optimizing its cash flow By balancing current assets and liabilities, Advanced Network Systems aims to enhance liquidity and support sustainable growth Implementing strategic practices in working capital management allows the company to respond swiftly to market changes and invest in opportunities for expansion.
The movement of working capital through stage is described as follows:
Work-in- progress and finished goods
This movement of working capital is called “capital circulation”
When joining in manufacturing business operation, since dominated by the characteristic of current assets, working capital has following characteristics:
- Working capital in the rotation process always changes the forms of expression
- Working capital transfers all the values right in a time and get a full refund after each business cycle
- Working capital completes a circuit after a business cycle
- Working capital is very liquid for it can be converted as cash any time without losing anything
- Investments in current assets such as working capital come with less risk for it is just for short term
Effective working capital management involves establishing a capital quota for each product unit and manufacturing cycle However, in a market economy, accurately determining the working capital requirements for each cycle can be challenging Therefore, the primary focus should be on optimizing the efficiency of working capital to minimize costs.
Effective management of working capital is crucial for enterprises, as it significantly impacts financial activities Ensuring the reasonable, economical, and efficient use of working capital enhances production capabilities, leading to improved procurement, production, and consumption processes Various types of working capital play vital roles in the production and business cycle, often undergoing changes that require careful oversight.
Effective working capital management at Advanced Network Systems Vietnam Limited Company is crucial for optimizing financial performance To achieve this, it is essential to sort and analyze working capital based on specific criteria This structured approach ensures that resources are allocated efficiently, enhancing liquidity and operational effectiveness By implementing these sorting criteria, the company can better manage its assets and liabilities, ultimately leading to improved cash flow and financial stability.
Capital in cash and receivables:
- Cash: includes cash on hand, bank deposits and cash in transit
- Accounts receivables: includes mainly accounts receivables and advance payments
Capital in materials and goods: includes materials, work in progress, semi-finished products and finished products
This classification helps the business assess the level of inventory reserves, the solvency and liquidity of the investment assets in enterprise
1.1.2.2 Based on the role of working capital in the production process
Working capital in the reserved state includes the types of capital such as material capital, additive material capital fuel capital, tool & instruments,…
Working capital in the production process includes types of capital, such as: goods in process, homemade end- product, prepare items…
Working capital in circulation includes finished product, cash, short-term investment and the capital during the payment process
This classification highlights the significance of each type of working capital in production and business processes, enabling businesses to select the right capital structure for investment and maintain a balanced production capacity across all stages of their operations.
CURRENT SITUATION OF WORKING CAPITAL MANAGEMENT
Overview of ANSV CO., LTD
2.1.1 Foundation and development 2.1.1.1 The basic information
- Vietnamese name: Công ty TNHH thiết bị viễn thông ANSV
- English name: Advanced networks System VietNam Limited Company
- Headquater: No 124 Hoang Quoc Viet Street, Nghia Tan ward, Cau Giay District,
- Email: info@ansv.com.vn
- Legal capital of ANSV: VND 96.261.399.223
2.1.1.2 The process of foundation and development
ANSV was established in July 1993 in the joint venture cooperation between Alcatel Group (now Alcatel-Lucent) and Vietnam Post and Telecommunications Corporation (now the VNPT group)
In 1997, the Company expanded its production, extending its operation time to July 2016;
In 2000 Alcatel transferred new technology to produce 1000 E10 systems;
In 2006 Alcatel transferred the production technology of MSAN;
Since August 24, 2011, VNPT Technology has taken over all rights and responsibilities from Alcatel-Lucent at ANSV, holding a 51.2% stake in the company, while VNPT owns the remaining 48.8%.
- The name of the company is changed from Alcatel Network Systems VietNam to Advanced Networks System VietNam ;
Effective working capital management is crucial for Advanced Network Systems Vietnam Limited Company (LUAN.van.THAC.si) By optimizing cash flow and ensuring sufficient liquidity, the company can enhance operational efficiency and support growth initiatives Implementing strategic financial practices allows for better inventory management and timely payment processing, ultimately contributing to increased profitability and sustainability in a competitive market.
- The operating period is extended from to 20 years to 50 years starting from 05 July 1993
2.1.2 Characteristics of business operations 2.1.2.1 Function, business aspect – main products:
- Manufacture, install and carry out services relating to Alcatel 100E10 public switching, PABX internall switchboard and other new generation of telecommunication and information technology network systems;
We offer specialized technical services in GSM mobile communication and transmission, along with informatics and electronics applications in telecommunications Our expertise includes the study, development, manufacturing, and sales of software applications and network solutions within the telecommunications and broader information technology sectors.
- Consult, design, install and maintain information technology and telecom systems (including hardware and software)
- Research and develop application software products and network solutions in communication sector and other information technology sectors
- Wholesale and retail telecommunication electronic and information technology components
The principle activities of the Company are to research, develop, manufacture, distribute product and provide services related to telecommunication and information technology products
As a distributor of telecommunication products from VNPT Technology, a leading high-tech company, ANSV primarily offers domestically produced goods, complemented by high-quality imports from reputable global manufacturers in countries like France, Finland, and the USA The majority of ANSV's suppliers are longstanding partners, reflecting a commitment to long-term cooperation and reliability in the telecommunications market.
Effective working capital management is essential for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow and managing assets and liabilities efficiently, the company ensures operational stability and growth This strategic approach allows Advanced Network Systems to meet its short-term financial obligations while investing in future opportunities Prioritizing working capital management not only enhances liquidity but also supports overall business performance and sustainability.
In addition to material factors, investing in science and technology, modern equipment, and skilled human resources provides enterprises with a competitive edge This investment enables the continuous introduction of new telecommunications products to the market, offering lower prices and improved quality.
ANSV is a reputable long-term player in the Vietnamese telecommunications market, offering high-quality products at competitive prices The company distributes its offerings nationwide through a network of provincial telecommunications and thirty agents across two branches In addition to serving the domestic market, ANSV has successfully expanded its reach to international markets, exporting products to countries such as Myanmar, Laos, and Cambodia.
2.1.2.2 The organization of business operations
ANSV has the organizational structure of a model of Company Limited which is reasonable with full functions departments suitable to the business and production activities of the enterprise:
The Board of Members serves as the highest management authority within the Company, possessing full decision-making power over all matters related to its objectives, as outlined in the Company’s regulations and applicable laws Currently, the Board comprises three members, each serving a five-year term.
The Board of Directors, appointed by the board of members, is responsible for overseeing and managing all operational activities of the organization in accordance with the strategies and plans established by the board Each member of the Board of Directors serves a term of five years.
The General Director serves as the legal representative of the Company, appointed and dismissed by the Board of Members This role involves overseeing the Company's manufacturing and operational activities, while also being accountable for the rights and responsibilities assigned to them.
Effective working capital management is crucial for Advanced Network Systems Vietnam Limited Company (LUAN.van.THAC.si) to ensure liquidity and operational efficiency By optimizing cash flow and managing short-term assets and liabilities, the company can enhance its financial stability Implementing strategic working capital practices helps in minimizing costs and maximizing profitability, ultimately supporting the company’s growth and competitiveness in the market.
There are three Vice directors accredited by Board of members under request of General Director
The company is organized into ten key functional departments, including the Financial Accounting Department, Human Resources Department, Business and Market Development Center, General Services Center, Industry Department, Quality Department, Technology Business Center, and Technical Support Center.
2.1.2.3 Human resourse and structure of ANSV company:
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing their working capital, the company can enhance liquidity, improve operational efficiency, and ensure financial stability Strategic management of assets and liabilities enables the organization to meet its short-term obligations while investing in growth opportunities This approach not only supports sustainable business practices but also positions Advanced Network Systems as a competitive player in the market Prioritizing working capital management ultimately leads to increased profitability and long-term success.
- Worker: 10 Staff perform contracts and technical support: 262
- Center for receiving and processing information: 5
- Technical support specialist: 41 Center for software research and development: 67
2.1.3 An overview of financial situation 2.1.3.1 The advantages and disadvantages in operating process a) The advantages :
ANSV boasts a highly valued human resource team, characterized by extensive experience and expertise The company collaborates with leading researchers in Vietnam, and an impressive 96% of its staff hold bachelor's degrees, underscoring its commitment to excellence in talent acquisition and development.
Material facilities are invested with advanced and modern technologies which satisfy international standards
The company's distribution network spans the entire country, with significant expansion into Central and Southern regions, as well as international markets like Laos and Myanmar.
current situation of working capital management at ansv company
To evaluate the working capital situation, we analyze the Company's working capital requirements and financing policy over recent years, focusing on the projected and actual working capital needs during 2016, 2017, and 2018.
Working capital requirements was determined to formula following:
= Inventories + Account receivables - Account payables
ANSV determines its working capital requirements using the indirect method, specifically the Percentage of Sales Method This approach assesses the fluctuations in the turnover ratios of the company's working capital components for the reporting year, allowing for the calculation of the necessary working capital based on projected revenue for the upcoming year.
This method was carried out to following as:
Determining the average balance of aggregate the working capital requirements in the reporting year
Effective working capital management is crucial for Advanced Network Systems Vietnam Limited Company By optimizing cash flow and managing short-term assets and liabilities, the company ensures operational efficiency and financial stability This strategic approach helps in meeting day-to-day expenses while supporting growth initiatives Implementing robust working capital strategies allows Advanced Network Systems to maintain a competitive edge in the market.
Determining the ratio of above to net revenue in the reporting year, based on that, determine the ratio of the working capital requirements for net income to net revenue
Determining the working capital requirements in the planning year Below is a summary of the actual and expected working capital requirements of the company over the years:
Table 2.5 The actual working capital requirements 2016, 2017, 2018 of ANSV company
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow and ensuring sufficient liquidity, the company can enhance its operational efficiency and support growth initiatives Implementing strategic financial practices allows for better inventory management and timely payment processing, ultimately improving profitability and stability Prioritizing working capital management enables Advanced Network Systems to navigate market challenges and seize new opportunities effectively.
Table 2.6 The expected working capital requirements determined on the basis of actual net of revenue in 2016, 2017, 2018 of ANSV company
1.Net revenue of planning year 1,150,000,000,000 2,588,292,000,000 2,695,000,000,000 2.Actual net revenue of previous year 1,128,347,779,401 2,236,394,806,850 2,709,810,466,321 3.Difference of net revenue (1-2) 21,652,220,599 351,897,193,150 (14,810,466,321) 4.The rate of the average of current assets on net revenue
5 The rate of the liabilities on net revenue 56% 50% 29%
6 The rate of working capital requirements (4-5) 10% 8% 7%
7 The working capital requirements forecast increase/decrease (3 x 6)
8.The actual working capital requirements of previous year
9.The expect working capital requirements (7+8)
The forecasted working capital requirements of the company significantly differ from the actual figures The percentage of sales method, which analyzes the relationship between power and net revenue for the reporting year, serves as the foundation for determining the working capital needs in the planning year.
Effective working capital management at Advanced Network Systems Vietnam Limited Company relies heavily on accurately forecasting future revenue and understanding the relationship between turnover and business assets To evaluate discrepancies in these forecasts, it is essential to analyze net revenue trends over the years This analysis enables the calculation of working capital requirements, particularly in light of any declines in actual net revenue observed over time.
The significant disparity between actual and forecasted working capital requirements highlights the limitations of the percentage method of revenue, which assumes a direct correlation between revenue changes and working capital needs while maintaining stable financing and dividend policies However, in practice, various factors can disrupt this relationship; for instance, certain asset items may not increase at the same rate as revenue, and the receivable debt cycle can fluctuate due to changes in sales practices, payment discount strategies, and advancements in production technology that accelerate inventory turnover These complexities contribute to inaccuracies in predicting working capital requirements.
The current approach to determining working capital requirements is inadequate, leading to potential capital waste To improve accuracy, the company should implement an extended forecasting method that includes building a statistical system to better predict working capital needs based on material requirements and fluctuations in production and business processes This will enhance the efficiency of working capital management and ensure timely adjustments.
2.2.2 Current status of working capital
To evaluate the management of working capital, we need to consider the reasonability of the allocation of working capital
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow and managing short-term assets and liabilities, the company can enhance its operational efficiency This strategic approach not only supports daily operations but also fosters growth and sustainability in a competitive market Prioritizing working capital management allows Advanced Network Systems to maintain liquidity and invest in future opportunities.
Table 2.7 The allocation working capital in 2016, 2017 and 2018 of ANSV company
Amount (VND) Rate (%) Amount (VND) Rate (%)
II Short-term financial assets
2 Short-term advances to suppliers
Effective working capital management is crucial for the financial health of Advanced Network Systems Vietnam Limited Company A significant aspect of this management involves addressing doubtful debts, which can impact cash flow and overall profitability By implementing robust strategies to monitor and manage these debts, the company can enhance its liquidity and ensure sustainable growth Prioritizing the collection of outstanding receivables and assessing the creditworthiness of clients are essential steps in mitigating risks associated with doubtful debts.
5 Deficits in assets awaiting solution
2.Provision for devalution of inventories
V The other short- term assets
3 Taxes and other receivable from the state budget
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow and managing short-term assets and liabilities, the company ensures financial stability and operational efficiency Strategic working capital practices help in maintaining liquidity, supporting growth initiatives, and enhancing overall business performance Advanced Network Systems focuses on leveraging its resources to meet operational needs while minimizing costs, thereby fostering sustainable growth in a competitive market.
Working capital was allocated as follow:
At the end of 2017, the company's cash and cash equivalents decreased by VND 9,239,015,820, reflecting a 6.6% decline from the beginning of the year This downward trend continued into 2018, with cash plummeting by 64.6%, amounting to a reduction of VND 83,954,375,102 The significant drop in cash is attributed to the company's efforts to repay short-term loans to alleviate interest burdens Despite these challenges, the company has managed its cash flow effectively to maintain a minimum balance while minimizing financial costs associated with interest payments.
At the end of 2018, account receivables represented a significant portion of working capital, declining to 58.77% from 70.75% in 2016 and 56.22% in 2017 This decrease of VND 59,482,749,383, or 10.7% from the beginning of the year, was largely due to a rapid reduction in short-term trade receivables The company successfully implemented effective receivables recovery measures, negotiating more favorable payment terms with customers and accelerating project acceptance, thereby enhancing cash flow and ensuring the stability of working capital.
In 2017, inventories rose significantly by 24.34%, amounting to VND 58,288,373,362, which represented 30.12% of the company's working capital structure This increase was driven by the company's acquisition of additional goods to support upcoming projects slated for early January 2018 However, by the end of 2018, inventories experienced a slight decline, decreasing by 3.89% to VND 11,577,545,278.
Other short-term assets: Accounting for a small proportion of the total working capital structure, at the end of 2018 short-term assets accounted for 1.15%
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow and managing short-term assets and liabilities, the company can ensure operational efficiency and financial stability Implementing strategic practices in working capital management allows the organization to meet its obligations, invest in growth opportunities, and enhance overall profitability Prioritizing this aspect of financial management is essential for sustaining competitive advantage in the rapidly evolving market.
SOME SOLUTIONS TO IMPROVE EFFICIENCY OF WORKING
Orientations and objectives for future development at ANSV company
In the first quarter of this year, our country's economy is navigating a landscape of steady global growth, yet remains influenced by unpredictable factors While major economies like the United States, Japan, and the European Union show signs of improvement, China's growth is gradually declining Although global trade recovery appears positive, it encounters significant challenges due to increasing protectionism among large nations and shifts in trade policies and corporate income taxes in America, which impact our economy and those of neighboring countries.
In our country, besides the advantages from the positive results achieved in
In 2017, Vietnam's economy encountered significant challenges, including adverse weather conditions, climate change, increased import taxes on key goods to the U.S., and inherent economic issues like low labor productivity and competitiveness However, through the combined efforts of the government and the people, positive developments emerged in the country's economic performance during the first quarter of 2018.
In the first quarter of 2018, Vietnam's GDP experienced a remarkable growth of 7.38% compared to the same period last year, marking the highest increase in a decade This growth was evenly distributed across all three sectors: agriculture, forestry, and fisheries rose by 4.05%; industry and construction surged by 9.70%; and services increased by 6.70% Notably, the manufacturing industry achieved a significant boost of 13.56%, representing the highest growth rate in seven years.
The macroeconomic environment remains stable, with a notable recovery in agricultural production Industrial production and services are on the rise, particularly in the processing sector Key indicators such as finance, currency, investment development, business establishment, travel services, and import-export activities have shown significant growth Additionally, the average consumer price index reflects this positive trend.
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company It involves optimizing the balance between current assets and liabilities to ensure sufficient liquidity for daily operations By implementing strategic financial practices, the company can enhance its operational efficiency, reduce costs, and improve profitability Proper management of working capital also supports sustainable growth and enables the company to respond swiftly to market changes.
In the first quarter, the Consumer Price Index (CPI) rose by 2.82%, significantly lower than the previous year's 4.96%, while average inflation increased by 1.32%, down from 1.69% The interest and foreign exchange markets remained relatively stable, with a flexible exchange rate and an increase in foreign exchange reserves The gold market showed stability, and the stock market experienced substantial growth, with the VN-Index surpassing 1,170 points, reflecting a 19% increase Market capitalization is estimated to have risen by 16.7% compared to the end of 2017, reaching 82% of the GDP for that year.
In the current fiscal period, total investment for social development reached over VND 331 trillion (approximately US$14.56 billion), marking a 10.4% increase compared to the previous year Notably, the private sector played a significant role in this growth, contributing VND 138.8 trillion (around US$6.11 billion), which represents 41.9% of the overall investment.
Despite rising costs in public services and fuel, the consumer price index (CPI) remained stable, with a 0.27% decrease in March compared to the previous month In the first quarter, the average CPI rose by 2.82%, while average inflation increased by 1.34%.
- Tax rates imposed on automobiles imported from ASEAN countries were reduced to 0%, in addition to sharp declines in pork and vegetable prices contributed to stabilising market prices
The state budget has maintained a positive outlook with steady revenue and expenditures, alongside a balanced monetary-financial situation Additionally, banking interest rates have remained stable, and the stock market has successfully returned to its highest levels seen in the past decade.
A recent survey indicates that over 75.4% of manufacturing enterprises reported stability and improved business and production activities compared to the previous quarter Furthermore, an impressive 89.6% of these companies anticipate even better performance in the upcoming second quarter of this year.
- Only 24.4% of businesses had a lower number of orders in the first quarter and 9.2% of businesses predicted that their orders will decrease in the second quarter of 2018
Overall, 2018 was still a challenging year for all businesses However, there are also opportunities for businesses to assert their financial strength and the financial management of business owners
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow and managing short-term assets and liabilities, the company ensures operational efficiency and financial stability This strategic approach enhances liquidity, allowing for timely investments and the ability to meet financial obligations Implementing robust working capital management practices not only supports growth but also strengthens the company's competitive position in the market.
3.1.2 Orientations and objectives for the future development of ANSV company
In response to market demand and production capacity, the Company is developing a comprehensive business strategy for the upcoming years, starting with a focus on 2019.
Orientations for the future development of ANSV company
To enhance business performance and competitiveness in the coming years, it is essential to focus on promoting production and expanding market reach This involves modernizing vehicles and technology, as well as improving management capabilities, which collectively contribute to establishing a sustainable market position.
To enhance operational efficiency, it is crucial to refine management strategies and optimize the organizational structure Key leadership roles should be filled by individuals with proven capabilities, enabling a broader distribution of responsibilities This approach will foster greater proactivity and creativity among staff members.
Enhancing the physical and spiritual well-being of employees is crucial for fostering a productive work environment By investing in the professional development and quality of the workforce, Cong Company can establish a strong foundation for sustainable growth and success.
Objectives for the future development of ANSV company
Some solutions to improve working capital management at ANSV company
The analysis of ANSV company's working capital management reveals both achievements and significant limitations Despite the positive outcomes, the company struggles to address existing challenges effectively To enhance working capital management, I propose several solutions aimed at overcoming these issues and optimizing financial performance.
3.2.1 Determining the right working capital requirements
ANSV's current method for determining working capital requirements is inadequate, as the company lacks effective strategies for managing receivables and inventories, which is evident in the data and analysis presented in Chapter 2.
ANSV Company can enhance its financial management by employing the direct method to assess working capital needs at each stage of production and circulation By evaluating material reserves, unfinished products, and accounts receivable or payable, the company can effectively address its significant challenges related to inventory and short-term receivables, which dominate its working capital structure While this direct calculation method may be more time-consuming and complex, it provides a clear understanding of the working capital requirements for various goods and stages of business, making it particularly suitable for a large-scale operation like ANSV.
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow and ensuring sufficient liquidity, the company can meet its operational needs and invest in growth opportunities Implementing strategic financial practices enhances overall efficiency and supports sustainable business development Prioritizing working capital management enables Advanced Network Systems to maintain competitiveness in the dynamic market landscape of Vietnam.
3.2.2 Improving the efficiency of inventory management
An analysis of the company's inventory over the years 2016, 2017, and 2018 reveals that inventory constitutes a significant portion of the company's assets, with work-in-progress items dominating in 2016 and 2017, while finished goods took precedence in 2018 To align inventory levels with the specific characteristics of the company and the telecommunications sector, it is essential to implement strategies for reducing inventory to a more manageable level Furthermore, the company's inventory management practices currently lack professionalism Adopting the Economic Order Quantity (EOQ) model could optimize inventory calculations, leading to reduced storage costs and improved capital efficiency in purchasing materials However, careful consideration is necessary when applying the EOQ model, as it is best suited for items with stable suppliers and consistent material requirements throughout production and operations.
From 2016 to 2018, ANSV consistently achieved an inventory rotation rate exceeding the industry average of 6.9, demonstrating the company's effective inventory management This efficiency, coupled with prompt delivery, installation, and swift acceptance of goods, minimizes inventory holding time As a result, ANSV significantly reduces storage costs and interest expenses on bank loans.
To enhance inventory management, it is crucial to address the outdated technology equipment identified in the company's inventory list, which has resulted from process errors Additionally, it is essential to align with market forecasts to ensure the import of substantial quantities of materials and products.
Effective working capital management is essential for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow, the company ensures that it can meet its short-term obligations while investing in growth opportunities Implementing strategic financial practices allows for better inventory management and accounts receivable processes, ultimately enhancing overall operational efficiency Prioritizing working capital management contributes to the company's stability and long-term sustainability in a competitive market.
Table 3.1 Table of quality monitoring using inventory, finished products of
Quanti ties Technology Test day Current technology
Core Platform x 3/15/12/2015 27 ADSL copper cable technology
Operator Position x 5/1/9/2016 237 ADSL copper cable technology
- ISAM x 9/5/11/2016 48 ADSL copper cable technology
- PON x 1/12/2015/8 50 ADSL copper cable technology
- PON x 15/1/2017/3 20 ADSL copper cable technology
The inventory inspection cycle at ANSV is currently insufficient, occurring only once a month, which is not aligned with the company's scale and leads to significant waste of capital and storage costs due to excess raw materials and finished products Increasing the inspection frequency to twice a month would enable better coordination among the accounting, sales, and technical departments, allowing for more effective monitoring of inventory levels and timely identification of obsolete materials This proactive approach would facilitate quicker capital recovery and help minimize related costs.
Investing in inventory management software like iBom, Ecount, or BS Silver is essential for the company to effectively monitor and control the quantities of raw materials and finished products This investment enhances operational efficiency and ensures accurate inventory tracking.
Effective working capital management at Advanced Network Systems Vietnam Limited Company is enhanced through specialized software designed to streamline all warehouse operations This software facilitates the management of importing, exporting, inventory control, material adjustments, and report generation, as well as overseeing online orders By utilizing this system, administrators can make timely and informed decisions regarding warehouse management, ultimately improving overall efficiency.
3.2.3 Improving the efficiency of receivables management
Over the past three years, the Company's short-term receivables have declined significantly, particularly in accounts receivable from customers, prompting a reduction in capital appropriation and improved receivables collection efforts Despite this decrease, accounts receivable remain elevated, necessitating the implementation of additional management measures to enhance the efficiency of receivables management.
To enhance revenue and profit while managing risks, the Company should establish tailored commercial credit policies that evaluate the implications of selling on credit This approach aims to attract customers and boost product consumption, while also ensuring prompt recovery of outstanding debts Additionally, the Company must implement specific incentives to address cases of stagnant debts effectively.
Offering discounts for upfront payments can incentivize customers to complete their purchases Businesses may implement a tiered discount system based on the total value of items bought, adapting their discount strategies to specific situations or times This approach not only encourages immediate payment but also enhances customer satisfaction and loyalty.
Many companies impose penalty interest rates for delayed payments on goods, with most businesses currently applying a fixed rate of 150% of standard bank penalties This approach encourages customers to prioritize timely payments.
The structure of capital at end of 2016, 2017, 2018
Source: Financial Statement in 2016, 2017, 2018 of ANSV Company
Effective working capital management is crucial for the financial health of Advanced Network Systems Vietnam Limited Company Analyzing the current asset situation reveals the importance of maintaining sufficient liquidity to meet operational needs By optimizing asset utilization, the company can enhance its cash flow and support sustainable growth Implementing strategic financial practices will ensure that the company remains competitive in the market while effectively managing its resources.
Table 2.1 The situation of assets in 2016, 2017, 2018 of ANSV Company
IV Other short-term assets 1,161.91 0% 5,052.69 1% 15,987.91 2% 10,935.22 216% 3,890.78 335%
III Long-term assets in progress - 0% 59.92 0% 22.17 0% (37.75) -63% 59.92
IV The other long-term assets 7,199.34 22% 2,858.63 6% 12,092.80 29% 9,234.17 323% (4,340.71) -60%
Source: Financial Statement in 2016, 2017 and 2018 of ANSV Company
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow and managing short-term assets and liabilities, the company ensures operational efficiency and financial stability This strategic approach not only supports day-to-day operations but also facilitates growth opportunities and enhances overall profitability Prioritizing working capital management allows Advanced Network Systems to maintain a competitive edge in the dynamic market landscape.
According to chart 2.1 and table 2.1, we can see the structure of assets in
2016, non-current assets is low, equivalent to that is the increase of proportion of current asset Meanwhile, the proportion of current assets and non-current assets in
2018 has not changed much compared with 2017
In 2017, total assets experienced a significant decline of VND 293 billion, representing a 22% decrease compared to 2016 This reduction was primarily attributed to a drop in current assets, which fell by 24% due to substantial changes in debt recovery practices The company improved its debt collection efforts, leading to a reduction in accounts receivable by VND 362 billion, or 40% from the previous year, while inventory reserves increased.
In 2017, non-current assets increased by 52% compared to 2016, because the company tended to invest in assets (such as machines, software…) and expanded business scale
In 2018, the company's total assets decreased by VND 152 billion, representing a 15% decline compared to 2017 This reduction was primarily attributed to cash payments made towards bank loans.
In 2018, the company's current assets decreased by 15% compared to 2017, largely due to significant expenditures aimed at sustaining favorable production activities Concurrently, improved measures for receivables recovery led to a reduction in accounts receivable by 11%, amounting to a decrease of 59 billion VND Additionally, accelerated sales efforts resulted in a 4% decline in inventories, equivalent to a reduction of 11 billion VND Non-current assets also saw a 15% decrease from the previous year, primarily because the company successfully negotiated better credit policies with banks, which reduced long-term deposits.
Comment about the assets structure:
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow, managing inventory efficiently, and ensuring timely collections, the company can enhance its financial stability and operational efficiency A strategic approach to working capital not only supports day-to-day operations but also enables the company to invest in growth opportunities and respond to market changes effectively Prioritizing working capital management will ultimately lead to improved profitability and sustained competitive advantage in the industry.
The significant proportion of current assets within total assets is influenced by the nature of production and business activities, particularly for companies established over 20 years ago, which have accumulated extensive equipment and facilities that are now at depreciated values.
2.1.2.3 The structure and situation of capital sources a) The structure of capital sources
The structure of capital sources at end of 2016, 2017, 2018
Source: Financial Statement in 2016, 2017 and 2018 of ANSV Company
Effective working capital management at Advanced Network Systems Vietnam Limited Company is crucial for maintaining financial stability and operational efficiency The structure of capital sources plays a significant role in this process, as it determines how resources are allocated and utilized within the organization By optimizing capital sources, the company can enhance its liquidity, support growth initiatives, and ensure timely fulfillment of financial obligations Implementing strategic working capital management practices will ultimately lead to improved profitability and a stronger competitive position in the market.
Table 2.2 The structure of capital sources in 2016, 2017 and 2018 of ANSV Company
2 Short-term advances from customers
3 Taxes and amounts payable to the state budget
6 Other short-term payable 52,760.3 1,32% 3,282.9 24,27% 931.1 31,34% (2,351.8) -72% (49,477.4) -94% 7.Short-term loans and obligations under finance leases
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow and ensuring sufficient liquidity, the company can enhance its operational efficiency and meet its financial obligations Implementing strategic working capital practices allows the organization to invest in growth opportunities while minimizing financial risks Prioritizing effective inventory management and timely accounts receivable collection further strengthens the company's financial position, ultimately contributing to its long-term sustainability and profitability.
- Retained ernings accumulated to the prior year end
- Retained ernings accumulated to the curent year end
Source: Financial Statement in 2016, 2017 and 2018 of ANSV Company
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow and ensuring adequate liquidity, the company can meet its short-term obligations and invest in growth opportunities Implementing strategic financial practices allows the organization to maintain a competitive edge in the market Prioritizing working capital management not only enhances operational efficiency but also supports long-term sustainability and profitability.
According to Table 2.2, ANSV's total resources have shown a consistent year-over-year increase However, in 2017, resources decreased by 293 billion VND, reflecting a 22% decline compared to 2016, primarily due to fluctuations in various indicators.
Liabilities decreased by 337 VND billion equivalent to decreasing rate 30% in
2017, showing that the company have finance qualification to pay well and pay current liabilities on time
Equity in 2017 increased by 44 VND billion to rate of 22% compared to 2016
At end of the year 2018, total resoures decreased by 152 VND billion, with decreasing rate 15% compared to 2017, due to has decreased by liabilities, specifically
Liabilities in 2018 decreased by 16% compared to 2017, due to current liabilities was decreased, in which the main reason short-term loans decreased by 125 VND billion
Equity decreased by 10% in 2018, the main reason is profit in 2017 decreasely Comment about the structure of resourses:
The capital structure of the Company has remained relatively stable from 2016 to 2018, with high liabilities and low equity This indicates a significant debt ratio, demonstrating the Company's reliance on financial leverage While this strategy can lead to high profit margins for owners, it also exposes the Company to considerable financial risks.
Working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company Effective management of working capital ensures the company maintains sufficient liquidity to meet its short-term obligations while optimizing its operational efficiency By focusing on inventory management, accounts receivable, and accounts payable, the company can enhance its financial stability and support sustainable growth Implementing strategic working capital practices allows Advanced Network Systems to navigate market challenges and capitalize on opportunities, ultimately driving profitability and long-term success.
2.1.2.4 The situation of profit, revenue and expenses
Table 2.3 INCOME STATEMENT IN 2016, 2017, 2018 OF ANSV COMPANY
1 Net revenue from good sold and services rendered 2,240,393 2,710,836.6 2,242,409.6 (468,427) -17% 470,444 21%
3 Net revenue from good sold and services rendered 2,236,398 2,709,810.5 2,239,089.1 (470,721) -17% 473,413 21%
5 Gross profit from good sold and services rendered 261,607 233,800.0 155,359.4 (78,441) -34% (27,807) -11%
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow, the company ensures it can meet its short-term liabilities while investing in growth opportunities Strategic management of working capital enhances operational efficiency and supports sustainable business development Prioritizing liquidity and financial stability allows Advanced Network Systems to navigate market fluctuations and maintain a competitive edge in the industry.
15 Current corporate income tax expenses 23,061 15,683.5 5,374.1 (10,309) -66% (7,377) -32%
16 Net profit after corporate income tax 91,646 62,204.0 20,170.7 (42,033) -68% (29,442) -32%
Resources: Income state in 2016, 2017 and 2018 of ANSV Company
Effective working capital management is crucial for Advanced Network Systems Vietnam Limited Company (LUAN.van.THAC.si) to ensure financial stability and operational efficiency By optimizing cash flow and managing short-term assets and liabilities, the company can enhance its liquidity and support sustainable growth Implementing strategic practices in working capital management allows LUAN.van.THAC.si to meet its financial obligations while investing in future opportunities.
Business activity results serve as key indicators for assessing organizational effectiveness in capital utilization, particularly regarding working capital As shown in Table 2.3, the company's after-tax profit has declined over the years, with a notable 32% decrease in 2017 compared to 2016, and a further 68% drop in 2018 relative to 2017 Despite this decline in profit, the after-tax profit margin on equity remains relatively high at 93.5%, 55.66%, and 15.31%.
2.1.2.4 Some of the ratios reflecting the return and liquidity
Table 2.4 Profitability ratios 2016, 2017, 2018 of ANSV company
Source: Financial Statement in 2016, 2017 and 2018 of ANSV Company
Profitability ratios 2016, 2017, 2018 of other telecommunication
Source: Summarize from website http:// www.stockbiz.vn; http://ctin.vn/
Working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company Effective management of working capital ensures liquidity, operational efficiency, and the ability to meet short-term financial obligations By optimizing inventory levels, accounts receivable, and accounts payable, the company can enhance its cash flow and overall financial health Implementing strategic working capital management practices allows Advanced Network Systems to maintain a competitive edge in the market and support its growth objectives.
The analysis of the table reveals that the Company's operating efficiency indicators significantly surpass the telecommunications industry average Despite fluctuations in the business environment, the Company consistently achieves strong results in Return on Sales (ROS), Return on Assets (ROA), and Return on Equity (ROE), demonstrating stability and resilience over the years.
The company's total assets reveal that current assets constitute the largest share, indicating the need for effective financial management Recent business performance has shown volatility, highlighting the importance of focusing on working capital management to enhance future performance The following section of the dissertation will analyze the company's historical approach to managing working capital.
2.2 current situation of working capital management at ansv company 2.2.1 Determining working capital requirements
To evaluate the working capital situation, we analyze the Company's working capital requirements and financing policy over the past few years, focusing on the projected needs and actual demand for working capital in 2016, 2017, and 2018.
Working capital requirements was determined to formula following:
= Inventories + Account receivables - Account payables
ANSV determines its working capital requirements using the indirect method, specifically the Percentage of Sales Method This approach assesses the fluctuations in the turnover ratios of the company's working capital components for the reporting year, allowing for an accurate calculation of the working capital needs based on the projected revenue for the upcoming year.
This method was carried out to following as:
Determining the average balance of aggregate the working capital requirements in the reporting year
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow and ensuring sufficient liquidity, the company can meet its short-term obligations and invest in growth opportunities Implementing strategic financial practices enhances operational efficiency, allowing for better inventory management and supplier relationships Ultimately, strong working capital management contributes to the overall financial health and sustainability of the organization.
Determining the ratio of above to net revenue in the reporting year, based on that, determine the ratio of the working capital requirements for net income to net revenue
Determining the working capital requirements in the planning year Below is a summary of the actual and expected working capital requirements of the company over the years:
Table 2.5 The actual working capital requirements 2016, 2017, 2018 of ANSV company
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow, the company ensures sufficient liquidity to meet its operational needs Strategic management of current assets and liabilities enhances financial stability and supports growth initiatives Implementing efficient inventory control and receivables management further strengthens the company's financial position, allowing for timely investments and improved profitability Overall, robust working capital management is key to sustaining competitive advantage in the dynamic market landscape.
Table 2.6 The expected working capital requirements determined on the basis of actual net of revenue in 2016, 2017, 2018 of ANSV company
1.Net revenue of planning year 1,150,000,000,000 2,588,292,000,000 2,695,000,000,000 2.Actual net revenue of previous year 1,128,347,779,401 2,236,394,806,850 2,709,810,466,321 3.Difference of net revenue (1-2) 21,652,220,599 351,897,193,150 (14,810,466,321) 4.The rate of the average of current assets on net revenue
5 The rate of the liabilities on net revenue 56% 50% 29%
6 The rate of working capital requirements (4-5) 10% 8% 7%
7 The working capital requirements forecast increase/decrease (3 x 6)
8.The actual working capital requirements of previous year
9.The expect working capital requirements (7+8)
The company's forecast for working capital requirements shows significant discrepancies when compared to actual figures To determine the working capital needs for the planning year, the percentage of sales method is employed, which analyzes the relationship between the company's power and net revenue for the reporting year.
Effective working capital management at Advanced Network Systems Vietnam Limited Company relies heavily on accurately forecasting future revenue and understanding the relationship between turnover and business assets To identify deviations in these forecasts, it's essential to analyze historical net revenue trends This analysis will guide the calculation of working capital requirements, particularly in light of any observed declines in net revenue over the years.
The disparity between actual and forecast working capital requirements remains significant, despite net revenue The percentage method of revenue is simplistic, as it assumes that working capital needs will fluctuate in direct relation to revenue changes, while maintaining stable financing and dividend policies However, this assumption often proves inaccurate; for instance, certain asset items may not increase at the same rate as revenue, and the receivable debt cycle can vary due to changes in sales patterns, payment discount strategies, and faster inventory turnover from production technology enhancements These factors contribute to inaccuracies in predicting working capital requirements.
The current approach to determining working capital requirements is inadequate, leading to potential capital waste To enhance accuracy, the company should implement a statistical system for forecasting working capital needs, particularly if the percentage ratio method based on revenue continues to be used This extended forecasting method will allow for timely adjustments in response to fluctuations in production and business processes, ultimately improving the efficiency of working capital allocation and ensuring more effective resource management.
2.2.2 Current status of working capital
To evaluate the management of working capital, we need to consider the reasonability of the allocation of working capital
Effective working capital management is crucial for Advanced Network Systems Vietnam Limited Company, as it ensures optimal liquidity and operational efficiency By strategically managing assets and liabilities, the company can maintain financial stability and support growth initiatives Implementing best practices in working capital management allows Advanced Network Systems to enhance cash flow, reduce costs, and improve overall financial performance Prioritizing efficient inventory management and receivables collection further strengthens the company's position in the competitive market.
Table 2.7 The allocation working capital in 2016, 2017 and 2018 of ANSV company
Amount (VND) Rate (%) Amount (VND) Rate (%)
II Short-term financial assets
2 Short-term advances to suppliers
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company A key aspect of this management involves addressing the issue of doubtful debts, which can significantly impact cash flow and financial stability By implementing robust strategies to minimize doubtful debts, the company can enhance its liquidity and ensure smoother operations This proactive approach not only safeguards the company's assets but also fosters a healthier financial environment for future growth.
5 Deficits in assets awaiting solution
2.Provision for devalution of inventories
V The other short- term assets
3 Taxes and other receivable from the state budget
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow, the company ensures it meets its short-term obligations while also investing in growth opportunities Implementing robust financial strategies allows for better inventory management and timely payments to suppliers This proactive approach not only enhances operational efficiency but also strengthens relationships with stakeholders, ultimately contributing to the company's long-term sustainability and profitability.
Working capital was allocated as follow:
At the end of 2017, the company's cash and cash equivalents decreased by VND 9,239,015,820, reflecting a 6.6% decline from the beginning of the year This downward trend continued in 2018, with cash decreasing by 64.6%, amounting to VND 83,954,375,102 The significant reduction in cash was primarily due to the company's efforts to repay short-term loans, thereby alleviating interest burdens To maintain financial stability, the company has managed its cash flow to ensure a minimum balance while effectively minimizing interest costs.
Capital financing model of ANSV company at 31/12/2016
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow and ensuring sufficient liquidity, the company can maintain smooth operations and meet its financial obligations Strategic management of working capital enhances operational efficiency, reduces costs, and ultimately contributes to the company's growth and profitability Prioritizing working capital management allows Advanced Network Systems to navigate market challenges and seize opportunities for expansion.
Capital financing model of ANSV company at 31/12/2018
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow and ensuring sufficient liquidity, the company can meet its operational needs and invest in growth opportunities Implementing strategic financial practices enhances overall efficiency, allowing the organization to navigate market challenges and maintain a competitive edge Prioritizing working capital management ultimately supports long-term sustainability and profitability for Advanced Network Systems Vietnam.
Table 2.8 Working capital resourse of ANSV in 2016, 2017, 2018
Amount (VND) Propor tion (%) Amount (VND) Propor tion (%) Amount (VND) Rate (%) Amount (VND) Rate (%)
1, Long-term capital resourses 201,609,941,803 246,289,339,268 220,270,339,325 (26,018,999,943) -10.56% 44,679,397,465 22.16% a, Non-current liabilities 254,835,445 0.13% 599,621,077 0.24% 254,835,445 0.12% (344,785,632) -57.50% 344,785,632 135.30% b, Equity 201,355,106,358 99.87% 245,689,718,191 99.76% 220,015,503,880 99.88% (25,674,214,311) -10.45% 44,334,611,833 22.02%
II, Temporary working capital resources 1,129,358,852,680 86.96% 791,559,611,796 80.07% 665,965,144,338 78.86% (125,594,467,458) -15.87% (337,799,240,884) -29.91%
2, Short-term advances from customers 7,876,328,612 0.70% 48,683,801,544 6.15% 23,889,940 0.00% (48,659,911,604) -99.95% 40,807,472,932 518.10%
3, Taxes and payable to the state budget 42,363,715,089 3.75% 16,769,092,830 2.12% 6,078,195,411 0.91% (10,690,897,419) -63.75% (25,594,622,259) -60.42%
7 Short-term loans and obligations under finance leases 14,231,992,099 1.26% 180,351,131,088 22.78% 56,377,295,869 8.47% (123,973,835,219) -68.74% 166,119,138,989 1167.22%
8.Bonus and welfare funds 4,032,829,070 0.36% 17,492,820,421 2.21% 35,761,895,099 5.37% 18,269,074,678 104.44% 13,459,991,351 333.76% Total working capital resourse 1,298,649,283,978 100% 988,603,209,538 100,00% 844,523,768,886 100,00% (144,079,440,652) -14.57% (310,046,074,440) -23.87%
Resourse: Financial statement in 2016, 2017 and 2018 of ANSV company
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow and managing short-term assets and liabilities, the company can ensure operational efficiency and financial stability Implementing strategic financial practices allows Advanced Network Systems to meet its obligations, invest in growth opportunities, and enhance overall profitability Prioritizing working capital management not only supports day-to-day operations but also positions the company for long-term success in a competitive market.
To evaluate the organization's working capital and the appropriateness of its financing model, we categorize working capital based on the timing of capital mobilization and utilization.
The capital financing model of the Company during 2016, 2017, and 2018 reveals a high-risk approach, as it relies on working capital to temporarily fund operations Analysis shows that both fixed and part of the temporary assets are consistently backed by this temporary capital, while regular labor and all temporary assets are supported by regular capital While this strategy can yield significant returns on investment, it also exposes the Company to substantial risks related to supplier credit policies, customer repayment terms, and overall credit management Additionally, the reliance on banking institutions alters the Company's production and business dynamics, further increasing associated risks.
In 2017, the source of regular power resources rose, but in 2018, it declined due to a significant drop in the company's net profit after tax compared to the previous year Despite a decrease in permanent working capital resources, the Company maintained its production and business activities without facing overdue debts from suppliers, including banks The proportion of this capital source steadily increased from 13.04% in 2016 to 19.93% in 2017 and further to 21.14% in 2018 Recognizing the growing financial risks, the owner opted to increase retained earnings for reinvestment in the Company.
Between 2016 and 2018, temporary working capital resources constituted a significant portion of total working capital, with percentages of 86.96%, 80.07%, and 78.86%, respectively This gradual decline suggests that the company is prioritizing financial safety by reducing its reliance on excessive financial leverage and capital appropriation Notably, short-term trade payables have also decreased over the years, indicating a positive trend as the company minimizes its use of risky financial tools to manage its resources effectively.
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow and ensuring sufficient liquidity, the company can meet its short-term obligations and invest in growth opportunities Implementing strategic financial practices allows for better inventory management and accounts receivable collection, ultimately enhancing overall operational efficiency Advanced Network Systems is committed to maintaining a robust financial position, which is essential for sustaining competitive advantage in the market.
2.2.4.1 The situation of cash management
The company is actively optimizing its cash reserves and planning weekly cash flow expenditures to ensure timely debt payments and avoid overdue obligations Additionally, it is exploring further strategies to enhance cash flow in order to capitalize on emerging business opportunities.
ANSV uses a method of determining reasonable cash reserves by taking an average daily amount of money multiplied by the number of days reserved
The company strategically manages its cash flow by forecasting short-term revenues and expenditures on a weekly, monthly, and quarterly basis, adapting to the unique timelines of each telecommunications project Given the complexities of contract-based sales and the installation of equipment, accurately predicting cash flow presents challenges To enhance its forecasting, the company also considers potential borrowings and other capital gains For outgoing payments, cash flow predictions are grounded in revenue plans, payroll, tax obligations, and supplier repayments By analyzing income sources against cash outlays, the company implements measures to balance revenue and expenditures Additionally, strict cash management practices are enforced to prevent losses and misuse of funds.
Firstly: All cash revenues and expenditures of the company are made through funds, not collected outside the fund, self-collected and self-financed
Second: The Company strictly manages all advances, advance levels, and payment terms so that it can recover the advance payment promptly
- Thirdly: The company uses SMS banking and internetbanking tools of banks through various levels of management such as bank accounting, debt recovery
Working capital management at Advanced Network Systems Vietnam Limited Company involves comprehensive oversight of accounting functions, including supplier and bank accounting The chief accountant and General Director play crucial roles in effectively managing cash flow, ensuring the company maintains optimal liquidity and financial stability.
In order to better understand the situation of managing cash of the Company, we analyze table 2.9 on the situation of cash of ANSV Company:
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow and ensuring sufficient liquidity, the company can meet its short-term obligations and invest in growth opportunities Implementing robust financial strategies allows for better inventory management and accounts receivable processes, ultimately enhancing operational efficiency Prioritizing working capital management not only supports day-to-day operations but also contributes to the long-term financial stability and competitiveness of the company.
Table 2.9 The situation of fluctuations by cash of ANSV Company in 2016, 2017 and 2018
Amount (VND) Propor tion (%) Amount (VND) Propor tion (%) Amount (VND) Rate
Resourse: Notes to the financial statements in 2016, 2017 and 2018
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow and ensuring sufficient liquidity, the company can meet its short-term obligations and invest in growth opportunities Implementing strategic financial practices allows Advanced Network Systems to maintain operational efficiency and enhance overall profitability, ultimately contributing to its competitive advantage in the market.
The above analysis shows that in the beginning of 2017, cash equivalent has increased by 46.100.000.000 VND, from 0% to 35.46% and to the end of the year
In 2018, bank deposits with maturities of less than three months decreased significantly by 15 billion, representing a decline of 32.57% At the start of 2017, the Company had a high proportion of interest-earning deposits; however, by early 2018, these deposits diminished as the Company utilized them to settle supplier payables and repay borrowings.
In the Company's total capital, cash in bank consistently represents a larger share than cash in hand, with proportions recorded at 98.17% in 2016, 98.41% in 2017, and 98.41% in 2018 However, both cash in hand and cash in bank experienced a decline over the years, with cash in hand decreasing by 9,239,015,820 VND in 2017.
2016 and 83,954,375,102 VND in 2018 compared to 2017, indicating that in the year, the Company used a large amount of money to pay for suppliers and borrowings In
In 2018, the amount of cash held in banks significantly exceeded the cash in hand, highlighting the convenience of bank transactions for large payments and receipts Additionally, conducting transactions through banks is safer for the Company compared to cash handling This approach not only minimizes cash storage costs but also allows the Company to earn interest on non-term deposits.
Liquidity ratios of other telecommunication equipment company in 2016, 2017, 2018
Resourse: Summazing from website https://www.stockbiz.vn; http://ctin.vn/
The analysis of the solvency coefficients indicates significant changes, prompting a review of the Company's cash capital reserves in relation to its cash expenditure needs This assessment is further detailed in Table 2.11, which outlines the Company's solvency ratios.
The current ratio indicates a company's ability to convert assets into cash to meet short-term liabilities, reflecting its capacity to repay these obligations Notably, this ratio has shown an upward trend from 2016 onwards.
In 2018, the Company demonstrated a robust ability to meet its current liabilities, with a ratio exceeding 1, which is favorable compared to industry peers in telecommunications This strong ratio highlights the Company's effective financing policy that prioritizes financial balance, enabling proactive capital utilization while ensuring stability and continuity in its business operations However, this approach may also elevate the risk and cost associated with the capital employed by the Company.
Current ratioQuick ratioCash ratio
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow and ensuring sufficient liquidity, the company can meet its operational needs and invest in growth opportunities Implementing robust financial strategies allows for better resource allocation and enhances overall financial stability Prioritizing working capital management not only supports day-to-day operations but also positions the company for long-term success in a competitive market.
The quick ratio is a key indicator of a company's short-term liquidity, measuring its ability to meet short-term obligations with its most liquid assets Similar to the current ratio, a quick ratio below 1 indicates potential financial challenges, often due to decreasing current assets alongside rising inventory and current liabilities To ensure financial security, it is crucial for the company to monitor its collection and payment policies closely Currently, ANSV's quick ratio is lower than that of its peers in the telecommunications industry, highlighting the need for improvement in this area.
The cash ratio, defined as the proportion of cash and cash equivalents to current liabilities, serves as a key indicator of a company's liquidity and its ability to swiftly repay current assets A robust cash ratio is advantageous for creditors when assessing the potential for extending credit Variations in this ratio can indicate different financial strategies, with a ratio below 0.2 over time suggesting a risky financial policy that may jeopardize timely debt repayments and impact negotiations with suppliers and banks While leveraging supplier and bank capital can yield significant benefits for owners when profit margins are favorable, maintaining proactive payment and credit policies can mitigate risks Companies that focus on aligning debt repayment strategies with collection periods and prioritize project quality can effectively narrow their collection periods and enhance financial stability.
When comparing ANSV's solvency ratio with similar enterprises in the industry, it is found to be average Despite a slight decline in solvency ratios towards the year's end, the company's consistent efforts to maintain these ratios at previous levels is commendable.
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing working capital, the company can enhance its liquidity, ensuring that it meets short-term obligations while investing in growth opportunities Strategic management of resources enables the organization to maintain operational efficiency and improve overall financial health Implementing best practices in working capital management not only supports stability but also positions the company for future expansion and competitiveness in the market.
Table 2.11 The indicators for evaluating the situation of managing cash in 2016, 2017 and 2018 of ANSV company
6, Average daily cost of sale Dong 5,410,385,251 6,783,590,262 5,708,848,508
II, The indicators for evaluating the situation of cash flow
11, Cash inflows from operating activities Dong 2,214,203,162,293 3,718,474,993,683 2,573,645,376,849
Effective working capital management is crucial for Advanced Network Systems Vietnam Limited Company (LUAN.van.THAC.si) to ensure financial stability and operational efficiency By optimizing cash flow, managing inventory, and streamlining accounts receivable and payable, the company can enhance its liquidity and support sustainable growth Implementing strategic financial practices allows LUAN.van.THAC.si to mitigate risks and seize new opportunities in the competitive market Prioritizing working capital management not only strengthens the company's financial position but also fosters long-term success and resilience in the industry.
13, Cash outflows from operating activities Dong 1,999,771,716,874 3,842,381,148,124 2,517,753,435,750
14, Net cash by operating activities Dong 214,431,445,419 (123,906,154,441) 55,891,941,099
17, Ratio of generating money from business operations (11/16) time 2.51 3.87 3.53
18, Ratio of ensuring interest payment from net cash flow (14/15) time
19, Ratio of ensuring liability payment from net cash flow (14/16) time
Resourse: Financial statement in 2016, 2017, 2018 from ANSV company
Working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company Effective management of working capital ensures that the company maintains sufficient liquidity to meet its short-term obligations while optimizing its operational efficiency By focusing on inventory management, accounts receivable, and accounts payable, the company can enhance its financial stability and support sustainable growth Prioritizing working capital management not only improves cash flow but also strengthens the overall financial health of the organization.
The cash conversion cycle experienced an upward trend over the years 2016, 2017, and 2018, with increases of 12, 3, and 9 days, respectively This indicates that the duration of cash movement through the various stages of the business operation cycle has extended.
The situation of cash flow: Although the ratio of generating money from the
Over the past three years, the company's business operations have declined but remain positive, indicating effective activities during this period Although the ratio of net cash flow available for liability payments has decreased slightly, this is primarily due to an increase in tax obligations and other liabilities, which has impacted the overall cash flow ratio.
2.2.5 Receivables management 2.2.5.1 The situation of account receivable management
Expert interviews with key company leaders, including the Chief Financial Officer and the Director of Business Center and Market Development, revealed that critical contract elements such as payment policies and delivery timelines remain largely unchanged However, the company can enhance efficiency by expediting the handover, acceptance, and testing processes, ultimately reducing the time from inventory to debt and facilitating quicker conversion from debt to cash.
* The sales policy of ANSV company
ANSV primarily sells to telecommunication companies and has adopted a selling on credit strategy to incentivize buyers Sales are largely driven by customer bids, with payment terms typically ranging from 30 to 90 days post-project completion or goods supply Retail companies usually collect payments immediately, while certain projects may extend credit terms up to 8 months.
Working capital management at Advanced Network Systems Vietnam Limited Company is crucial for maintaining financial stability and operational efficiency Effective management of working capital ensures that the company can meet its short-term obligations while optimizing its liquidity By focusing on efficient inventory management, receivables collection, and payables management, the company enhances its cash flow and supports sustainable growth This strategic approach to working capital not only mitigates financial risks but also positions Advanced Network Systems Vietnam for long-term success in a competitive market.
* Analyzing the financial situation of customers
Accounts receivable turnover of telecommunication equipment companies
Resourse: Summazing from website www.stockbiz.vn; http://ctin.vn/
The accounts receivable turnover is significantly influenced by average revenue from sales and service provision, as well as short-term receivables As shown in Table 2.14, there was an increase in sales revenue in 2017, followed by a decline in 2018.
In 2017, the accounts receivable turnover improved by 0.46 rounds, resulting in an average collection period of 14 days, a decrease from 2016 This upward trend continued in 2018, with a further increase of 0.59 in accounts receivable turnover, maintaining the average collection period at 14 days compared to 2017.
The Company's accounts receivable turnover is strong compared to industry peers, indicating efficient debt recovery and enhanced working capital management As the turnover ratio improves and the average collection period shortens, it reflects the Company's effective debt collection strategies and swift project execution.
The company's receivables are a crucial aspect of its financial health, but it also relies on capital from various individuals and organizations To accurately assess the company's financial situation, it is essential to compare its accounts receivable with its accounts payable, as illustrated in the following table.
Working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company Effective management of working capital ensures that the company maintains sufficient liquidity to meet its short-term obligations and operational needs By optimizing inventory levels, accounts receivable, and accounts payable, the company can enhance its financial stability and operational efficiency Implementing strategic working capital practices allows Advanced Network Systems to support growth initiatives while minimizing financial risks.
Table 2.14 The situation of accounts receivable and payable in 2016, 2017 and 2018 of ANSV company
34,887,034,351 3.80% 27,340,686,590 4.92% 21,739,278,036 4.38% (5,601,408,554) -20% (7,546,347,761) -22% d Provision for short-term doubtful debt
(13,418,088,570) -1.46% (10,566,020,472) -1.90% (7,968,364,020) -1.61% 2,597,656,452 -25% 2,852,068,098 -21% e Deficits in assets awaiting solutions
Effective working capital management is crucial for Advanced Network Systems Vietnam Limited Company (LUAN.van.THAC.si) to maintain liquidity and operational efficiency The company focuses on managing trade payables and short-term advances from customers, ensuring a balanced cash flow By optimizing these financial elements, LUAN.van.THAC.si can enhance its financial stability and support sustainable growth in the competitive market.
7,876,328,612 0.70% 48,683,801,544 6.15% 23,889,940 0.00% (48,659,911,604) -100% 40,807,472,932 518% c Taxes and amounts payable to the State budget
7 Short-term loans and obligations under finace leases
Working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company Effective management of working capital ensures the company maintains sufficient liquidity to meet its short-term obligations while optimizing its operational efficiency By focusing on key components such as inventory management, accounts receivable, and accounts payable, the company can enhance its financial stability and support sustainable growth Prioritizing working capital management ultimately contributes to the overall performance and competitiveness of Advanced Network Systems in the Vietnamese market.
Over the past three years, the company's capital turnover has surpassed its capital appropriation due to increased payables, highlighting its reliance on external funding to enhance production and efficiency This strategy, while beneficial, poses financial risks if cash flow is not adequately managed, potentially jeopardizing the company's ability to meet obligations and exposing it to state and supplier policy changes Notably, short-term liabilities have decreased significantly, with payables dropping by VND 337.8 billion in 2017 and VND 125.9 billion in 2018 The rate of capital appropriation has declined more rapidly than occupied capital, with a difference of VND 213 billion in 2017 and VND 163 billion in 2018 To mitigate risks, the company is prioritizing the recovery of receivables, which, despite a decrease over the years, still represent a substantial portion of total capital Key receivables from major clients like VNPT Group and Mobifone require careful management to prevent large capital appropriation Additionally, the company must closely monitor account payable terms to maintain its reputation, advocating for flexible payment strategies to ensure a balanced capital structure.
2.2.6 Inventory management 2.2.6.1 The situation of inventory management
Interviews with experts and managers, including the Chief Financial Officer and Branch Manager in Hanoi, reveal that the company has successfully optimized timelines for receiving and delivering goods This efficiency enhances inventory management by streamlining the acceptance of goods, converting inventory into receivables, and ensuring effective storage solutions.
Effective working capital management is crucial for the success of Advanced Network Systems Vietnam Limited Company By optimizing cash flow, the company can ensure operational efficiency and financial stability Implementing strategic financial practices allows for better allocation of resources, ultimately enhancing profitability and growth Prioritizing working capital management helps the company navigate market challenges and seize new opportunities.
The Company continues to experience delays in the handover and acceptance process, failing to shorten the timeframe as initially planned This situation highlights ongoing challenges in inventory management.
Reserve stocks are essential assets that businesses hold for future sales, particularly in the telecommunications sector Given the rapid technological advancements in this industry, products can quickly become outdated, prompting companies to place orders based on specific project needs and successful bids After securing a project, it's crucial to identify the required equipment immediately and submit tenders, collaborating with suppliers to evaluate goods for bidding Once a bid is won, the company orders the necessary quantities and specifications to fulfill project requirements, maintaining minimal inventory and ensuring timely delivery to customers.
To optimize profits, the Company can strategically manage a small inventory of telecommunication materials based on USD price forecasts and anticipated demand from network operators However, before establishing inventory levels, it is crucial for the Company to thoroughly analyze customer needs and the technical specifications of products, as telecommunications technology can become outdated quickly.
Despite ANSV's detailed inventory reserves tailored to specific order needs and anticipated demand, the company's method for determining inventory levels remains insufficient This inadequacy stems from the ongoing challenge of establishing a reasonable import quantity for goods.
Effective working capital management at Advanced Network Systems Vietnam Limited Company is crucial for optimizing the inventory of raw material reserves This management is influenced by various factors, including shipping logistics, supplier reliability, and storage and shipping costs Relying solely on the business plan may not yield the most efficient stock reserves, highlighting the need for a comprehensive approach to inventory management.