Analyzing the financial situation of enterprises a case of dna investment joint stock company

Source of information used for analyzing the financial situation of enterprises Trang 16 decision-making, and projecting future business outcomes areall part of the financial situation

ACADEMY OF FINANCE FACULTY OF CORPORATE FINANCE

TA DUY VINH CQ57.09CL.1-LT2

GRADUATION THESIS

TOPIC:

ANALYZING THE FINANCIAL SITUATION OF

ENTERPRISES

A CASE OF DNA INVESTMENT JOINT STOCK COMPANY

Major: Financial Analysis

(Advanced Education Program)

Instructor: PhD Ho Thi Thu Huong

PhD Nguyen Huu Tan

Hanoi - 2023

DECLARATION OF AUTHORSHIP

At this moment, I declare that the thesis was carried out

by myself and that the work and results are accurate andderived from the actual situation of the internshiporganization

Author

Ta Duy Vinh

TABLE OF CONTENTS

DECLARATION OF AUTHORSHIP ii

TABLE OF CONTENTS iii

ABBREVIATIONS v

LIST OF TABLES vi

LIST OF DIAGRAMS vii

PREFACE 1

CHAPTER 1: THEORETICAL BASIS FOR ANALYSIS FINANCIAL SITUATION OF ENTERPRISES 4

1.1 General theory of corporate finance 4

1.1.1 The concept of corporate finance 4

1.1.2 The role of corporate finance 4

1.2 General theory on analyzing the financial situation of enterprises 5 1.2.1 The concept of analyzing the financial situation of enterprises 5

1.2.2 Objectives of analyzing the financial situation of enterprises .5 1.2.3 Meaning of analyzing the financial situation of enterprises 6

1.2.4 Source of information used for analyzing the financial situation of enterprises 6

1.3 Method of analyzing the financial situation of enterprises 11

1.3.1 Assessment method 11

1.3.2 Factor analysis method 13

1.4 Content of analyzing the financial situation of enterprises 15

1.4.1 Analysis of assets and capital situation of enterprises 15

1.3.2 Analysis of the situation and business results of enterprises 23 1.3.3 Analysis of receivables, payables, and the ability payment of enterprises 25

1.3.4 Analysis of the ability of cash generation and cash flow situation of the enterprise 32

1.3.5 Analysis of the effectiveness of the enterprise's use of capital

37

1.3.6 Analysis of the profitability of enterprises 46

CONCLUSION OF CHAPTER 1 56

CHAPTER 2: ANALYSIS OF THE FINANCIAL SITUATION OF DNA INVESTMENT JOINT STOCK COMPANY 57

2.1 Introduction to DNA Investment Joint Stock Company 57

2.1.1 The process of formation and development of the company 57 2.1.2 Key business lines 59

2.1.3 Company structure 60

2.2 Analysis of the financial situation of DNA Investment Joint Stock Company 65

2.2.1 Analysis of assets and capital sources 65

2.2.2 Analysis of business situation and results 80

2.2.3 Analysis of the situation of account receivables and payables and the ability payment of the company 85

2.2.4 Analysis of cash flow situation 93

2.2.5 Analysis of capital performance 97

2.2.6 Analysis of capital profitability 104

2.3 General assessment of the financial situation of DNA Investment Joint Stock Company 113

2.3.1 Results achieved 113

2.3.2 Limitations and causes 115

CONCLUSION OF CHAPTER 2 116

CHAPTER 3: SOME SOLUTIONS TO IMPROVE THE FINANCIAL SITUATION OF DNA INVESTMENT JOINT STOCK COMPANY 117

3.1 Company’s growth strategy 117

3.1.1 Socio-Economic Context 117

3.1.2 Development objectives and orientations of DNA Investment Joint Stock Company 121

3.2 Solutions to improve the financial situation of DNA Investment Joint Stock Company 122

3.2.1 Financial solutions 123

3.2.2 Corporate Governance solutions 129

CONCLUSION OF CHAPTER 3 133

CONCLUDE 134

REFERENCES 135

ABBREVIATIONS

AOE Average Owner’s Equity

ATA Average Total Assets

AWC Average Working Capital

BOD Board Of Director

BOS Board Of Supervisors

BVPS Book Value Per Share

COGS Cost Of Goods Sold

CPI Consumer Price Index

DWCT Days of Working Capital Turnover

EBIT Earning Before Tax and Interest

EPS Earnings Per Share

FTA Free Trade Area

GDP Gross Domestic Product

GMS General Meeting of Shareholders

Hcp Cost ratio

Ht The ratio of owner’s equity to total assets

IF Cash inflow

N Number of Days in the period

NWC Net Working Capital

OF Cash outflow

PAT Profit after tax

ROA Return on Assets

ROE Return on Equity

ROS Return on Sales

SI Short-term Investment ratio

TAT Total Assets Turnover

TR Total Revenue

WACC Weighted Average Cost of Capital

WCT Working Capital Turnover

LIST OF TABLES

Table 2 1 Shareholder structure of DNA Investment JointStock Company in 2021 60Table 2 2 Capital sources situation of DNA Investment JointStock Company in the period of 2020-2021 65Table 2 3 Asset situation of DNA Investment Joint StockCompany in the period of 2020-2021 70Table 2 4 Balanced relationship between assets and capitalsources of DNA Investment Joint Stock Company in the period

of 2020-2021 77Table 2 5 Business situation and results of DNA InvestmentJoint Stock Company in the period of 2020-2021 80Table 2 6 Account receivables and payables situation of DNAInvestment Joint Stock Company in the period of 2020-202186Table 2 7 Liquidity and solvency situation of DNA InvestmentJoint Stock Company in the period of 2020-2021 90Table 2 8 Cash flow situation of DNA Investment Joint StockCompany in the period of 2020-2021 93Table 2 9 Business capital utilization performance of DNAInvestment Joint Stock Company in the period of 2020-202198Table 2 10 Working capital turnover of DNA Investment JointStock Company in the period of 2020-2021 101Table 2 11 Return on assets of DNA Investment Joint StockCompany in the period of 2020-2021 104Table 2 12 Return on equity of DNA Investment Joint StockCompany in the period of 2020-2021 108

LIST OF DIAGRAMS

Diagram 2 1 Organizational apparatus of DNA InvestmentJoint Stock Company 61

1 The urgency of the topic

After Vietnam underwent economic reforms that led tothe industrial revolution, modernization, and globalintegration, it transitioned from a backward, subsidizedeconomy to a market economy that was socialist in nature.When new enterprises across all economic sectors arecreated, the capital market develops with various products,trading floors, securities companies, or financial institutions work vibrantly, and Vietnam's economy becomes morevibrant than ever Maximizing business value and making themost profit are the two things that matter most toenterprises Enterprises must have a solid financial capacity

to perform production, trade, and compete successfully toaccomplish this goal As a result, the managers of theenterprise must comprehend the viability of the enterprisethrough the study and evaluation of the internal financialsituation of enterprises as well as the results obtained yearafter year

Along with the development and increasing competitivepressure of all industries and sectors in the market economy,the manufacturing and export industries today, not onlyensure the supply of goods and services and domesticdemand but also export goods to foreign countries,contributing significantly to the development of the economy.DNA Investment Joint Stock Company is one of the pioneeringenterprises in changing mechanisms, expanding, and

diversifying business fields, and improving competitiveness tosurvive and develop DNA Investment Joint Stock Companywas founded in the context of Vietnam's internationalintegration with the primary field of manufacture and export

of clothes hangers The Company has been in business forover ten years and currently holds a competitive advantage.However, along with the general trend of enterprises inVietnam, the analysis of the company's financial situationneeds to be paid more attention to; many problems exist thatneed to be analyzed and assessed For those reasons, the

author decided to write his graduation thesis on "Analysis of

the Financial Situation of DNA Investment Joint Stock Company" to improve the quality of information for

corporate governance

2 Research objectives

The goal is to analyze and assess DNA Investment Joint StockCompany's financial situation in 2020 and 2021 to suggestimprovements

 Following that, suggest ways to strengthen DNA InvestmentJoint Stock Company's financial situation in the future

3 Subjects and scope of the study

Research object: The financial situation of businesses

Research scope:

 Content: Analyzing the financial situation to supportenterprise financial management

 Space: DNA Investment Joint Stock Company

 Time: Analyze the financial situation in 2020 - 2021 andsuggest remedies for the following periods

4 Research methodology

The main methods used are synthesis method, statisticalmethod, analysis method, evaluation method, and historicalmethod to compare data, and comparative methods are alsoused to compare data between years; some studies use factoranalysis methods to evaluate the influence of factors on thefinancial situation of the company

5 Scientific and practical significant

Scientific significance: The topic has consolidated thetheoretical underpinnings of financial analysis of firms based

on the inheritance of previous research findings

Practical significance: The topic has examined the DNAInvestment Joint Stock Company from various perspectives,including the formation and development of the company, themanagement structure, and the major business sectors.Thereby analyzing and evaluating the company's financialstatus on areas such as attained results, constraints, andreasons

The thesis analyzed the financial situation of thecompany to determine the benefits and drawbacks of theresearch company based on the socioeconomic context andthe objectives and development orientation of the DNAInvestment Joint Stock Company.

6 Structure of the thesis

In addition to the introduction, conclusion, references,and appendices, the thesis is divided into three chapters asfollows:

Chapter 1: Theoretical basis for analysis financial situation of enterprises

Chapter 2: Analysis of the financial situation of DNA Investment Joint Stock Company

Chapter 3: Solutions to improve the financial situation of DNA Investment Joint Stock Company

CHAPTER 1: THEORETICAL BASIS FOR ANALYSIS FINANCIAL SITUATION OF ENTERPRISES

1.1 General theory of corporate finance

1.1.1 The concept of corporate finance

In general, corporate finance is a system of economicrelations in the form of value that emerges from the process

of social distribution and is associated with the creation anduse of monetary funds of enterprises to serve the productionand business requirements of enterprises as well as thegeneral needs of society

1.1.2 The role of corporate finance

Corporate finance is a crucial stage in the financialsystem in general and in the economic activities ofenterprises in particular Information about corporate finance

is essential for managers inside and outside the business

For managers inside the company, corporate finance is acrucial foundation for creating financial plans, deciding thedirection and goals of investment, and at the same time,taking action to use resources sensibly to produce excellentresults

For managers outside the business, corporate financewill show the efficiency of business operations and thesoundness and safety of the company's financial position.Thereby, managers will make reasonable decisions, such asinvestors will decide on their investment; lenders also have aplan for loans already made to businesses; State agenciescan assess the compliance with regulations on financialmanagement, tax, and environmental safety, ensuring theinterests of employees of enterprises

1.2 General theory on analyzing the financial situation

of such things and phenomena in dialectical relationshipevidence with other things and phenomena

In the field of corporate financial management, analysis

is also an effective tool for studying the financial position of

an enterprise Financial activities have a close relationshipwith other activities in the enterprise Therefore, to be aware

of the content, form, and development trend of corporatefinance, it is necessary to divide corporate finance according

to appropriate criteria to see the internal economicrelationships, the relationship evidence with other activities inthe course of business activities of the enterprise Thus, it can

be said that: “Financial analysis of an enterprise is acollection of methods that allow to assess the financialsituation of the past and present and to predict the futurefinancial situation of an enterprise Thereby helping managersand interested parties make effective management decisions,

in line with the goals they are interested in”

1.2.2 Objectives of analyzing the financial situation of enterprises

Every enterprise has many people interested in itsfinancial situation, such as enterprise managers, investors,credit providers, salary earners in enterprises, state agencies,etc Each audience is interested in business finance fromdifferent perspectives But in general, they are all interested

in generating cash flow, profitability, solvency, liquidity, andmaximum profit From there, it is possible to fully assess thestrengths and weaknesses in business management and findmeasures to overcome the limitations and enhance economic

activities It is also an essential basis for forecasting thebusiness development trends of enterprises.

1.2.3 Meaning of analyzing the financial situation of enterprises

Analyzing the financial situation of enterprises hasdifferent meanings for each individual and organization:

For business administrators: financial analysis will createsystematic and scientific evidence for managers, which willhelp corporate governance overcome shortcomings andpromote positive aspects On that basis, propose practicalsolutions to choose and decide the optimal plan for thecompany's business activities

For investors: financial analysis helps to assess theprofitability, position of the enterprise, enterprise risks,enterprise valuation, safety, and efficiency of the capitalinvested in the enterprise

For credit providers: financial analysis will help assessthe ability and payment terms of the business

For state management agencies: financial analysis helpsassess the performance of enterprises' obligations to theState, assess compliance with the policies and regimes issued

by the State, and the contributions or impacts of theenterprises to the socioeconomic situation and policies

1.2.4 Source of information used for analyzing the financial situation of enterprises

Evaluating the current state of business operations andfinancial situation, creating financial projections to aid in

decision-making, and projecting future business outcomes areall part of the financial situation analysis A necessarydatabase that provides complete, timely, and relevantinformation is required to conduct a financial analysis.

There are many ways to categorize information forfinancial analysis According to the scope and contentreflected, the data used in the analysis comes from twoprimary sources: information from the accounting system(information within the enterprise) and information fromoutside the accounting system (information outside theenterprise)

1.2.4.1 Information from the accounting system (information within the enterprise)

It mainly consists of financial statements and someaccounting records, such as balance sheets, incomestatements, cash flow statements, detailed reports ofproduction and business expenses by the factor, reports onbusiness results of the company, reports on the increase ordecrease in fixed assets, report on the increase, or decrease

in equity, report account receivables, reportaccount payables,

- Corporate financial reporting system: Financial statementsare reporting systems that reflect the entity's main economicand financial information and are prepared in accordance withcurrent accounting standards and regimes The financialstatements provide the most concise information on theassets, equity, and liabilities, as well as the financial situation,

business results, and cash flow situation during the enterpriseperiod Financial statements primarily provide economic andfinancial information to accounting information users inassessing, analyzing, and forecasting an enterprise's financialsituation and business results The corporate financialreporting system includes four reports:

+ A balance sheet is a consolidated financial statement thatbroadly reflects the total value of existing assets and thesource of a company's assets at a given time Data on theBalance Sheet show that the total value of existing assets isdetermined by the asset structure and the capital sourcesthat form the assets The balance sheet data is used tocalculate capital growth indicators

+ A profit and loss report is a consolidated financialstatement that reflects a given company's situation andbusiness results in a given period, including business andother operating results The profit and loss report data areused to calculate operating profitability and growth indicators

in business results Combine the data from the profit andloss report with the data from the Balance Sheet to calculatecapital profitability and long-term growth

+ The Cash Flow report reflects the amount of moneyincurred and used by the enterprise during the reportingperiod The information on the enterprise's cash flow assiststhe subjects in using the enterprise's reporting period Theinformation on the cash flow of the enterprise helps thesubjects to use the financial statements as a basis to assess

the ability of the enterprise to create money and use suchfunds in production and business activities Data fromthe cash flow report is used to calculate cash flow growthtargets.

+ Financial statement notes are financial statements andverbal explanations that use some economic and financialindicators not shown in the preceding financial statements

- Management reporting system: Every business has differentmanagement report requirements based on the needs of themanagers as well as the specific business activities However,

in general, a business's primary management reportingsystem typically consists of the following:

+ Estimated report: An estimate is a detailed, defined actionplan that includes the unit's operational objectives It is theanticipated calculation, detailed and comprehensive resourcecoordination, and how to mobilize and use resources to carryout specific workloads using a quantity and value indicatorssystem The estimated reports include consumptionestimates, production estimates, estimates of the cost ofsupplies and supplies for production, and direct laborestimates

+ Report on implementation situation: Information about theimplementation process is critical for managers to understandthe actual business results through steps such as supply,production, and consumption As evidenced by the followingreports: report on revenue, cost, and profit of each type of

product, goods, and service; inventory norms observedreport; report on employment and productivity

+ Control and evaluation report: The manager will comparethe practice to the established plan during the controlprocess This report is to help in determining which stages ofunscratched work are completed, as well as to detectunreasonable points in the planning process, allowing fortimely adjustments Revenue control reports cost controlreports, and profit control reports are examples of controlreports

+ Analysis report: Analysis of the relationship between cost,volume, and profitability; examination of factors influencingproduction and financial planning implementation.Furthermore, enterprises can create other administrativeaccounting reports based on each specific period'smanagement and administration requirements

- Other sources of information: In addition to the system offinancial statements and management reports, whenanalyzing the financial situation of the business, analysts alsocombine the use of many different data sources, such asdetailed reports, accounting documents, statisticaldocuments,

1.2.4.2 Information from outside the accounting system (information outside the enterprise)

Information from outside the accounting system is used

to investigate the causes and factors influencing the businessenvironment and how the company's policies affect its

financial situation This source of information strengthens theconclusions of the financial situation analysis Thisinformation is divided into three categories: generalinformation about the economic situation, information aboutthe enterprise's business, and information about thebusiness's characteristics.

- General information about the economy: Information thatreflects the general economic situation at a given time and isrelated to the business's operations is critical to consider.Because enterprise business activities are influenced byvarious macroeconomic factors, the financial analysis should

be viewed in the context of domestic and regional economies.Combining this information will allow for a completeassessment of the financial situation while also forecastingthe risks and opportunities to the business's operation

- Information about the business of the enterprise: Thisinformation reveals how the performance of businessesdepends on the characteristics of the economic sector,including the financial sector's characteristics of the product'sentity, the technical procedures to be followed, theproduction structure's influence on profitability, the capitalcycle, and the rate at which economic cycles develop as well

as the size of the market and its future growth prospects

- Information about the performance characteristics of thebusiness: To assess the financial situation, the analyst muststudy the operational characteristics of the business, such asthe objectives and business strategy of the company;

financial and credit policies of enterprises; technologicalfeatures and investment policies of enterprises; seasonalityand cyclicality in business activities; and businessrelationships.

1.3 Method of analyzing the financial situation of

enterprises

The purpose of the analysis method is to synthesize themethods, formulas, models, and so on used in the analysisprocess to study the nature and laws of the movement ofeconomic phenomena Methods are used in financial situationanalysis to learn their indicators, meanings, relationships, andchanges, reflecting the company's financial situation andperformance To choose the proper method for financialsituation analysis, it is necessary to rely on the type ofbusiness, production and business characteristics, resources,purpose of study, and so on

However, nowadays, the following main methods areused to analyze the financial situation of enterprises

1.3.1 Assessment method

It uses the assessment method when analyzing thefinancial situation of an enterprise to assess the financialsituation and trends of financial fluctuations of the enterprise.From there, find out the issues that need attention and offersolutions to improve the financial management level for theenterprise

1.3.1.1 Comparative method

This method is commonly used in economic analysis ingeneral and financial analysis in particular In analysis, twocomparative techniques are widely used:

- Absolute comparison technique: to see the variation in theabsolute number of the analytical criteria

- Relative comparison technique: to see the actual increaseand decrease of the indicator compared to the base period.The use of the comparative method is intended to:

- Evaluate the growth rate and trend of the indicator throughthe comparison between this period and the previous period

- Evaluate the implementation of tasks and plans that theenterprise has set by comparing the value of the target of theactual period with the value of the target of the plan period

- Evaluate the competitiveness of an enterprise by comparingthe results of one enterprise with other enterprises of thesame size and area of operation or by comparison with theindustry average

1.3.1.2 Division method

An economic phenomenon is composed of many parts If

we only study economic phenomena through aggregatecriteria, it is not possible to deeply understand that economicphenomenon Therefore, it is necessary to have standards toanalyze each part, each specific aspect of production andbusiness activities, or in other words, to use the divisionmethod Segmentation divides research events and financial

results into many parts and groups according to specificcriteria.

The division method breaks down the process andresults into different parts to understand the process andresults in other aspects consistent with the target's interestanalysis for each period Usually, in the analysis process,people often detail the generation process and the resultsachieved through economic indicators according to thefollowing criteria:

- Details according to the constitutive elements of theresearch target: the division of the research target into partsconstituting the indicator itself

- Details about the process and financial results emerge overtime: the division of the process and results in the order ofoccurrence and development

- Details according to the arising space of the phenomenonand financial results: the division of the process andoutcomes according to where the research target firstappeared and grew

1.3.2 Factor analysis method

1.3.2.1 Dupont analysis

It is an analysis method that is based on the mutualrelationship of financial indicators, transforming a compositeindicator into a function of variables The link between theindicators allows one to identify the factors that influencedthe analytical quota in a strict logical sequence

Profitability and growth analysis using the Dupontanalysis is significant for corporate governance Based on thismethod, it is possible to assess the profitability and growth ofenterprises in-depth and comprehensively, thoroughly, andobjectively evaluate the factors influencing enterpriseprofitability and growth Set up a system of authenticationmeasures to improve enterprise management organization,thereby contributing to future enterprise profitability andgrowth.

1.3.2.2 The method of analyzing the influence of factors

This method is used to verify the specific level of eachfactor to the research indicator Usually, in financial situationanalysis, the following methods are used:

- Method of sequential replacement: Sequential replacement

is used when the economic equation defines the indicatorexpressed in the form of integration and injury This is amethod of determining the influence of each factor byreplacing the factors in turn and consecutively from theoriginal period value to the analysis period to determine theindicator's value when that factor changes Then, comparingthe value of the calculated indicator with the value of theunmodified indicator of the factor to be determined willcalculate the degree of influence of that factor

- Method of differences: The difference method is also used to

determine factors' effect on the target's volatility reflectingthe study subjects The conditions, content, and sequence ofapplication of the difference method are the same as the

sequential replacement method, differing only in that itdetermines the degree of influence of which factor directlytakes the difference in the value of the analysis periodcompared to the original period of that factor multiplied bythe value of the analysis period of the elements in front andthe actual value of the factors behind it.

- Method of balances: The balance method is also used to

determine factors' effect on the target's volatility reflectingthe study subject The balance method is applied in theconditions of economic equations defining the targetsexpressed in total and effective To determine the degree ofinfluence of which factor, it is necessary to calculate thedifference in the value of the analysis period compared to theoriginal period of that factor The total number of factorsinfluenced equals the specific object of the analyticalindicator

1.3.2.3 Method of analyzing the properties of factors

After determining the degree of influence of the factors,

to be able to make a reasonable assessment and prediction,based on which the decision is made and how to make thedecisions, it is necessary to analyze of the nature of theinfluence of the factors The analysis is carried out throughfour steps:

Step 1: Specify the level of influence and the direction of

impact of that factor on the analytical indicator: how thatfactor changes and how much that change makes theanalytical indicator increase or decrease

Step 2: Determine the causes affecting that factor: why does

that factor change? Both objective and subjective reasons

Step 3: Evaluation of factors: whether that factor change is an

achievement or a defect, reasonable or unreasonable

Step 4: Provide management measures.

1.4 Content of analyzing the financial situation of

enterprises

1.4.1 Analysis of assets and capital situation of

enterprises

1.4.1.1 Analysis of capital situation of enterprises

The enterprise's capital is indispensable for establishingand conducting business activities To meet the need forcapital for business activities, enterprises can mobilize fromvarious sources, such as equity and loans

Analysis of capital situation is simply an examination of

an enterprise's size, volatility, and capital structure In otherwords, we are analyzing the capital situation is analyzing thecapital mobilization situation of the enterprise to determinethe size, structure, and volatility of the enterprise's capitalmobilization sources Additionally, it aids in addressing thefollowing queries: How does the enterprise obtain funding?Does the capital that was raised suffice to fund theenterprise's needs for manufacturing and commercialoperations? It also helps to understand the enterprise'scapital mobilization policy and the degree of financial riskthrough that approach, whether the enterprise is financiallyindependent or dependent From there, determining factors

affecting the process of developing and putting into practicecapital mobilization policies, particularly those that have animpact on the size and structural imbalance of the capitalsources that enterprises have mobilized, the causes leading

to such risks, and solutions to re-establish the crucial balance

to ensure the investment capital needs and long-term goalsfor the enterprise

Utilize the following two groups of indicators to analyzethe capital situation of enterprises:

First, the collection of indicators shows the size and

variation of capital sources, including the debt and equity onthe enterprise's balance sheet By comparing the end of theperiod with the beginning of the period, the middle of theanalysis period with the base period, or the end of this periodwith the end of previous periods, both absolute and relativenumbers can be used to assess the growth and decline oftotal capital as well as each type of capital source By doing

so, we can observe the size and fluctuations of the capitalmobilized scale, determine the source of the enterprise'scapital mobilization (internal or external, short-term, or long-term, borrowed or appropriated, etc.), and determine whetherthe capital mobilization meets the capital requirements forthe production and business process?

Capital indicator volatility depends on the following:Enterprise capital mobilization policy: financial structureobjectives, cost of capital, funding requirements, capital

mobilization capacity for each source, etc.; Results of thebusiness, the policy of distributing profits, etc.

Second, the group of indicators includes the capital

structure indicator, which depicts the share of each type ofcapital in the total capital, as determined by the capitalsources listed on the balance sheet of the enterprise.According to the following formula:

The proportionof each capitalsource (%)= The value of each type of capital

Total value of scale capital x 100(1.1)

Calculate the proportion of each type of capital and compare

it to the proportion of that type at the end of the periodcompared to the beginning of the period, the middle of theanalysis period compared to the base period, or theconclusion of this period compared to the ends of previousperiods As a result, the structure of mobilized capital may beseen, as can the capital mobilization policy and changes inthe enterprise's capital mobilization policy, as well as thelevel of financial risk through that policy The enterprise iseither self-sufficient or financially dependent on others, andits independence or dependency tends to increase ordecrease as the period progresses The fluctuation of capitaldepends on the enterprise's capital mobilization policy, such

as financial structure objectives, capital use costs, fundingneeds, and the ability to mobilize for each source of capital Inaddition, this volatility depends on the results of businessactivities and profit distribution policies

1.3.1.2 Analysis of assets situation of enterprises

The analysis of an enterprise's asset situation is anassessment of the production and business scale and thevariation and structure of the enterprise's assets during theperiod In doing so, the enterprise's production and businesscapacity, competitiveness, usage and allocation of capital,and the rationality or irrationality of the enterprise'sinvestment strategy in the period are assessed, and fromthere, adjustments to the enterprise's investment policy aresuggested.

Two categories of indicators are applied when analyzingthe asset situation of enterprises:

First, the group of indicators represents the size and

variation of the scale of assets: including the value of totalassets and each asset class on the balance sheet

The enterprise's capacity for production and financialpotential is reflected in the total asset value, which alsoshows the enterprise's level of market competitiveness Thevalue of segment assets demonstrates the amount of capitaldedicated to each activity and particular investment needs bythe enterprise However, it should be paired with theinvestment proportions of different types of assets toassess the appropriateness and consistency of theenterprise's investment structure over time

To analyze asset size, use the comparative approach tocompare volatility, increase/decrease in total assets, andeach asset class between the analysis period and the baseperiod, or the conclusion of the current period with the end of

the preceding period absolute and relative By doing so, it will

be possible to observe the size and variations in theenterprise's production and business scale, as well as itscapacity for production and business growth over time

The following factors determine the volatility of asset size:Characteristics of production and business lines, input andoutput marketplaces, the management level of theenterprise, investment policy, and enterprise businessstrategy…

Second, the group of indicators representing asset

structure is the indicator reflecting the proportion of eachtype of asset in the total, derived based on the value of theasset section on the enterprise's balance sheet, using thefollowing formula:

The proportionof each asset (% )= Each asset class

'

s the value Total value of scale assets x 100(1.2)

To assess asset structure, it is essential to ascertain theproportion of each type of asset and then apply thecomparative method to compare the proportion of each kind

of asset between the analysis period and the base period orthe end of the current period and the ends of prior periods.Thus, we can see the enterprise's investment and capitalallocation strategy In addition, by observing the change inasset structure, we can observe the difference in theenterprise's investment strategy and the amount invested incompany operations, each field, and each asset class

An enterprise's asset structure is influenced by itsbusiness line's characteristics, the market's influence, and thetechnological methods used in product production.Enterprises operating in trade and services often have fewernon-current assets than current assets due to less investment

in fixed assets Businesses operating in the manufacturingsector are the opposite In various manufacturing enterprises,the proportion of non-current and current assets is alsodifferent and low due to the characteristics of the productiontechnology process

1.3.1.3 Analysis of the balanced relationship between assets and capital sources

Analyze enterprise capital mobilization policies throughthe balanced relationship between assets and capital sources

to appropriately assess the level of independence, autonomy,safety, efficiency, and financial stability in capital mobilizationactivities for financing enterprise assets At the same time, itgives corporate executives and other management entitiesinformation about the degree of financial independence andautonomy in the financing, the stability and security of capitalmobilization policies, and how to spot risk in funding activities

so that managers may make the best management decisions

We use three categories of indicators to analyze thebalanced relationship between assets and capital sources

First, assess the degree of financial independence and

reliance by looking at the enterprise's capacity to

self-finance with equity for assets at various levels Usually, thefollowing coefficient is applied:

+ The ratio of owner’s equity to total assets is a measure of

an enterprise's degree of financial independence Theindicator shows the enterprise's capacity for financial risk andits level of financial independence and leverage The degree

of independence in asset financing is positively correlatedwith the size of the indicator value (closer to 1) and viceversa

The ratio of owner ’ s equity¿total assets ( Ht )= Owne r

'

s equity Totalassets (1.3)

Second, for financial stability in the financing, each

asset class must be financed with a specific source of capital.Capital utilization to finance enterprise-required capitalactivities is based on the value-time balance principle; thisrequires managers must consider both factors, capitalstructure safety while maintaining a reasonably low cost ofcapital to achieve the desired efficiency of capital use Thisissue is frequently investigated through the balancerelationships between current liabilities with current assets,non-current liabilities, and owner's equity with non-currentassets From there, it is possible to determine whether themethod used to finance the enterprise's assets is reasonable

or not Current assets are typically funded by short-termcapital, while non-current assets are usually sponsored byequity and non-current liabilities Therefore, the enterprise'sfinancial position is solid and secure if equity and non-current

liabilities are greater than non-current assets and currentassets are greater than current liabilities Conversely, ifequity and non-current liabilities are less than non-currentassets, the enterprise must utilize short-term capital tofinance non-current assets; such use of capital does notuphold the principle of financial balance, financial risk isincreased, and the enterprise’s solvency is not assured.

Analysis of stability in financing is the study of thebalance between long-term capital and non-current assetshorizontally and vertically via the ratio of long-term capitalsources to non-current assets and net working capital ratio,determined as follows:

The ratio of long−term capital sources¿non−current assets= Long−term capital sources

Non−current assets (1.4)

This ratio represents the extent to which long-term capital isutilized to finance non-current assets The more positive theratio's outcome, the more stable and long-lasting theenterprise's finances will be In contrast, the lower the value

of the ratio, the greater the pressure on the firm to pay thecurrent liabilities, and the financial balance is in a terrible andunstable situation Because of this, enterprises should notraise short-term capital to finance non-current assets.Instead, they should raise long-term capital to finance non-current assets, with some of it going toward current assets

Net working capital (NWC) = Long-term capital sources –non-current assets

(1.5)

Or: NWC = Current assets – Current liabilities

(1.6)

Net working capital is a long-term source of capital to financecurrent assets to ensure the business activities of enterprisestake place regularly and continuously NWC value rangesfrom greater than 0 to less than 0 and everything in between.This indicator shows how the enterprise finances workingcapital, assessing the level of safety or financial risk in theoperation of the enterprise Using the NWC indicator in thestudy can clearly show the impact of factors on the indicator

Third, when assessing the enterprise's financing

activities, the financial analyst must estimate the cost ofcapital to evaluate the efficacy of the capital mobilizationpolicy The following formula is used to calculate the weightedaverage cost of capital (WACC):

In which: i: are each type of mobilized capital

nvi: Mobilization level of capital source i

fi: The proportion of capital i

NV: Total funding need (Total amount of capital expected tomobilize)

cpi: Cost of capital use i

Utilizing the methods of comparison, detail, balance, anddifference to analyze each indicator to assess and evaluatethe enterprise's finance activities and compare the indicators

between the analysis period with the base period and withindustry averages (if any), using the method of balance andthe method of differences to assess the degree of influence offactors on the analytical criterion and using the factoranalysis method to examine the actual impact of each factor

on the variation of the analytical criteria Based on the value

of each indicator, the outcomes of comparisons, and theactual situation of the enterprise to assess the enterprise'sfinance activities: the level of stability, the degree ofindependence, the change in the level of independence, andthe efficiency of the enterprise’s financing policy

Enterprises need to pay attention to factors that affectthe indications of financing activity to make reasonablefinancing policies, such as operational size, business,production processes, financial performance, profit-sharingplans, the enterprise's investment policy, and capitalmobilization strategy (using internal or external capitalsources, borrowed capital, appropriated capital) (expansion ofinvestment scale or downsizing of investment scale; short-term or long-term investment; investment for production andbusiness or financial investment ), market interest rates

1.3.2 Analysis of the situation and business results of enterprises

Analyze the situation and business results of enterprises

to assess the business outcomes of enterprises as a whole aswell as of each area of activity and evaluate the enterprise'soperational effectiveness and cost management practices

Thereby assisting management subjects in choosingappropriate options for each aim of interest.

When analyzing the enterprise's situation and businessresults, we concentrate on analyzing three essential contents:Analysis of the income statement report, analysis of theenterprise's cost management condition, and analysis of theenterprise’s operational effectiveness

First, analysis of the income statement report of the

enterprise, including the criteria on the income statement ofthe enterprise, which indicate the scale of income, costs, andthe enterprise's business results throughout the period inquestion viewed accumulatively and specifically in each field

of operation From there, compute and assess the indicatorsshowing the usage of expenses and the indicators reflectingthe enterprise's business outcomes

Second, utilize the following criteria to analyze the cost

management activity in enterprises:

(1) Cost ratio (Hcp)= Total cost

Totalrevenue

(1.8)

This ratio shows how many units of expenses the enterprisemust incur for each unit of revenue made during the period Adecrease in this ratio indicates a substantial ability to saveand manage costs of the enterprise

(2)The ratio of cost of goods sold¿net revenue= Cost of goods sold

Net revenue

This ratio shows how much of the cost of goods sold per unit

of net revenue the enterprise earns The management of cost

of goods sold expenses is better when the ratio of COGS – to –net revenue is lower and vice versa

(3) The ratio of selling expense¿net revenue= Selling expense

Net revenue (1.10)This ratio shows the amount of sales expenses needed togenerate 1 unit of net revenue The enterprise is moreeffective at reducing selling costs, lowering the sellingexpense–to–net revenue ratio, and vice versa

Third, when analyzing the enterprise's operational

effectiveness utilizing the following indicators:

(1) Returnon sales (ROS)= Profit after tax

This indicator displays how many units of profit before tax are

in 1 unit of revenue earned by the enterprise during theperiod

(3)

Operating profit margin=Net profit¿operating activities ¿

Net revenue+financial income(1.14)

This indicator displays how many profit units there are forevery unit of the net revenue generated by the enterprise'score activities

(4) Sales profit margin=Net profit¿sales ¿

Net revenue(1.15)

This indicator displays how many units of profit the enterprisehas generated from the sale of goods and the provision ofservices for every unit of net revenue

To analyze the situation and business performance ofthe enterprise, use the comparative approach to compare thecriteria on the income statement, the indicators indicating thesituation of cost management, and the effectivenessindicators between the analysis period and the base period,both in absolute and relative terms and assessing theoutcomes and overall performance of the entire enterprise aswell as each area of operation to quickly identify the effectiveand ineffective areas and the management stages in theoperation process that need to be altered to boost theenterprise's competitiveness and profitability

1.3.3 Analysis of receivables, payables, and the ability payment of enterprises

1.3.3.1 Analysis of receivables, payables of enterprises

Production and business activities are ongoing, andlarge-scale, widely reaching payables and receivables arecreated As a result, frequently monitoring the receivablesand payables is a good management strategy for enterprisemanagers.

Accounts receivables are the financial assets of theenterprise in the form of capital goods and services incirculation; the enterprise will benefit from these assets in thefuture since other businesses and organizations areappropriated in the payment stage These assets must berecouped

Accounts payables are a financial resource that anenterprise has mobilized to finance its business activities; itshows the enterprise's duty to pay suppliers and other objectsboth inside and outside the enterprise for materials,commodities, and products that they have delivered to theenterprise Payables include debts the enterpriseappropriates from other individuals and organizations insideand outside the enterprise in the payment stage

Analytical data on receivables and payables size,structure, debt collection quality, and repayment will giveindicators to enable managers to analyze the quality of theirmanagement and develop more suited terms for purchasingand selling on credit for enterprises

The following categories of indicators are employedwhile analyzing the receivables and payables situations ofenterprises:

First, the group of indicators representing the extent of

the receivables and payables: Includes the value ofreceivables and payables (total and details) on the balancesheet of the enterprise

Second, the collection of indicators represents the

structure of receivables and payables and the level ofreceivables and payables management: indicating whetherthe enterprise's level of capital appropriation and capitalbeing appropriation is high or low

(1) The ratio of receivables¿total assets= Total receivables

Total assets (1.16)

This ratio illustrates the number of units that are appropriatedfor each unit of assets The level of capital that the enterprise

is appropriated increases as this ratio rises and vice versa

(2)Provision for receivables ratio= Total provision for receivables

Totalreceivables (1.17)

The sum of the provisions for current and non-currentreceivables constitutes the provision for doubtful debts Thehigher this coefficient, the greater the risk of capital loss inpayment, and it is a dangerous indicator of trade credit policy

as well as the receivables management situation of theenterprise

(3) The ratio of payables¿total assets= Total payables

Total assets (1.18)

This ratio represents the extent to which assets are financedthrough capital appropriation The higher this ratio, the higherthe level of capital appropriation of the enterprise and viceversa