Financial situation of dolexphar international pharmaceutical joint stock company

AbbreviationsFull meanings1 BEP Basic earning power ratio2 COGS Cost of goods sold3 Dolexphar Dolexphar International Pharmaceutical Joint Stock Company4 EBIT Earnings before interest an

I hereby declare that this thesis is my own research, work and effort It has notbeen submitted to any university or institution for award or degree Where other sources

of information have been used, they have been acknowledged

Graduation thesis author

Le Thuy Duong

LIST OF ABBREVIATIONS

3 Dolexphar Dolexphar International Pharmaceutical Joint Stock Company

4 EBIT Earnings before interest and taxes

This report is the result of my five - month internship experience at DolexpharInternational Pharmaceuticals Joint Stock Company Through it, I want to express mygratitude and thanks to many people who have trained, supported and encouraged meduring my internship

Firstly, I would like to send my greatest gratitude to my supervisor, PhD DangPhuong Mai at Academy of Finance, who put all her effort in supporting and guiding

me She has provided me with so much help from the beginning Her knowledge,professional experience and dedication are not only a motivation and inspiration for me

to finish my work but also are very helpful to me

Secondly, I want to express my sincere thanks to Dolexphar InternationalPharmaceuticals Joint Stock Company where I experienced the internship It was myhonor to work with these people They have provided me many useful practicalexperiences which I have never been through before I learned a lot there and wouldapply all these lessons to further promote my future career

Last but not least, I want to say thank you to all the lecturers of Academy ofFinance, who have been working hard to enrich our knowledge, giving us lessons tofunction well in the future Gratefully thanks to all their support, helping and teachingduring four years

On the process of accomplishing this thesis, there is no doubt that this thesiscontains many shortcomings due to the shortage of practical experience and knowledge

It is my honor to receive advices, guidance from lectures of the academy and seniors ofthe company, in order to complete successfully this thesis

1 Rationale of the study

In the current economy, Vietnam has been integrating more deeply with theinternational market through world trade organizations and agreements In addition tothe opportunities to expand the business market, the challenge for domestic enterprises

to survive and develop in the context of the economy is increasing fierce competitionwith foreign enterprises is very large Faced with that situation, in order to ensure thesurvival and development of enterprises, business managers, in addition to grasping theneeds of the market, must constantly improve their management skills and capabilities,and at the same time master financial situation of their business to make correct,accurate and timely decisions, in order to ensure the implementation of effective andsustainable production and business strategies

To achieve this, enterprises need to periodically check and monitor theirproduction and business activities as well as their financial situation seriously and fully.From there, promote the positive side, overcome the limitations of corporate financialactivities, find out the basic causes that have affected these aspects and proposenecessary solutions to improve the operation finance creates a premise to increaseproduction and business efficiency Therefore, it can be seen that deeply understandingand understanding the financial situation is an extremely important and necessary job.Understanding the financial situation is an extremely important tool for the management

of business administrators

Being a student at the Academy of Finance who is preparing to enter the realbusiness environment, I understand the importance of analyzing and evaluating thefinancial situation of businesses During my internship at Dolexphar InternationalPharmaceutical Joint Stock Company, I found that the company's financial situation isquite good However, there are still some weaknesses, such as high receivables turnover,lower financial ratios compared to the previous year, Therefore, stemming from thepractical significance of the governance issues in corporate financial situation, after aperiod of time working as an intern in Dolexphar International Pharmaceutical Joint

Stock Company, I went into the study and completed the graduation thesis with topic : " Financial situation of Dolexphar International Pharmaceutical Joint Stock Company " with the aim of providing solutions to improve the financial position of the

company

2 Purposes and Research questions

Firstly, the purpose of the thesis is to systematize the theoretical issues about thefinancial situation of the company and the indicators that reflect the financial situation

Secondly, through the data collected on financial statement for 2019, 2020 and

2021, the thesis will evaluate the financial position of Dolexphar InternationalPharmaceutical Joint Stock Company Thereby drawing out the achievements andexistence of the financial situation of the company

Finally, the thesis is aimed to propose some solutions to resolve existed financialproblems of the company which helps to improve the financial situation of the company

in the future

3 Scope of the study

- Research object: Thesis researching on the financial situation of enterprises

- Scope of research: Research the financial situation of Dolexphar InternationalPharmaceutical Joint Stock Company in the period of 2020-2021

4 Data and Research methodology

- Data: The thesis approaches both primary data and secondary data Primary data

is mostly the analysis results and calculated financial and business ratio from thefinancial statements of the firm Secondary data is referent documents from reports,newspapers, websites that will be mentioned in the appendix part at the end of the thesis

- The thesis used a combination of methods such as Statistics method, quantitativeanalysis method, qualitative analysis method, comparison method, correlation method,exclusion method

5 Overview of research

Regarding the study of the company’s financial situation, the following studiedhave been conducted:

(1) Huynh Thi Hang (2009), “Financial situation of Ben Tre Pharmaceutical

Joint Stock Company” in the period of 2008-2009.

The thesis presents basic theories of the financial situation of enterprises; find outthe current situation and point out the achieved results and limitations of the financial

situation at Ben Tre Pharmaceutical Joint Stock Company; propose measures to improvethe financial situation at Ben Tre Pharmaceutical Joint Stock Company.

(2) Bui Thi Phuong Van (2015), “Financial situation of Central Pharmaceutical

Joint Stock Company 1-PHARBACO ” in the period of 2014-2025.

The thesis presents basic theories of the financial situation of enterprises; find outthe current situation and point out the achieved results and limitations of the financialsituation at Central Pharmaceutical Joint Stock Company 1-PHARBACO; proposemeasures to improve the financial situation at Central Pharmaceutical Joint StockCompany 1-PHARBACO

(3) Nguyen Tien Phong (2020), “Financial situation of Nam Duoc

Pharmaceutical Joint Stock Company” in the period of 2019-2020.

The thesis presents basic theories of the financial situation of enterprises; find outthe current situation and point out the achieved results and limitations of the financialsituation at Nam Duoc Joint Stock Company; propose measures to improve the financialsituation at Nam Duoc Joint Stock Company

It can be seen that the above studies have provided a general theoretical systemabout the financial situation and financial indicators, deeply analyze the financialsituation of companies in general and pharmaceutical companies in particular in certainperiods, thus offering solutions to improve the financial situation of those However,there has been no research assessing the financial situation of Dolexphar InternationalPharmaceutical Joint Stock Company in 2020 and 2021 Thereby, it can be affirmed thatthis thesis topic does not overlap with the published theses, dissertations or researchworks of the same type

6 Thesis structure

The thesis contains three chapters:

Chapter 1: Theoretical background of financial situation of a company

Chapter 2: Financial situation of Dolexphar International Pharmaceutical JointStock Company

Chapter 3: Solution to improving the financial situation of DolexpharInternational Pharmaceutical Joint Stock Company

Chapter 1: Theoretical background of financial situation of a company

1.1 Corporate finance and financial management

1.1.1 Corporate finance and financial decisions

1.1.1.1 Definition of corporate finance

Enterprise is an economic organization that conducts production and supplyactivities of goods to consumers through the market for the purpose of making a profit.The operating process of an enterprise is also the process of combining inputs such asplant, equipment, materials and labor forces to generate outputs which are goods andthen consume goods to make a profit

In the process of creating and using the enterprise's monetary fund, there areeconomic relations in the form of value that constitute the financial relations of theenterprise and include the main financial relationships:

 Financial relations between enterprises and the state

 Financial relations between enterprises and other economic entities and othersocial organizations

 The financial relationship between the enterprise and the employees in theenterprise

 Financial relationship between the business and its owners

 Financial relations within the business

From the above issues, some observations can be drawn:

In essence, corporate finance is a set of economic relationships in the form of creating value while creating and using monetary funds of business in the operating process.

In terms of form, corporate finance is a set of monetary funds in the process of creation, distribution, usage which go hand in hand with business activities.

1.1.1.2 Financial decisions

Financial decisions refer to decisions concerning financial matters to a businessconcern Corporate finance basically concerns three main decisions which areinvestment decision, financing decision and dividend decision

The investment decision:

Investment Decision relates to the determination of total amount of assets to beheld in the firm, the composition of these assets and the business risk complexions of thefirm Major investment decisions of the business include:

- Current assets investment decision: fund remaining, inventory, sale policies,short-term financial investment…

- Fixed- assets investment decision: fixed assets purchasing, projects investment,long-term financial investment…

- Assets structure decision

Investment decision is considered the most important decision in corporatefinance because it creates value for the business A right investment decision willcontribute to increase the asset value for the owner, whereas a wrong investmentdecision will cause loss of business value leading to property damage for the businessowner

The financing decision:

The financing decision is about the amount of finance to be raised from variouslong-term sources, this determines the various sources of finance, as well as it alsoprovides the cost of each source of finance The main sources of finance areshareholders’ funds and borrowed funds

The shareholders’ funds or owners’ funds consist of equity capital and retainedearnings, whereas borrowed funds refer to finance raised as debentures or other forms of

debt The borrowed funds contain risk because they involve a commitment of fixedinterest payment, although there will be loss in the organization On the other hand,owners’ funds have less risk because there is no such commitment regarding payment ofdividends and replacement of the capital amount Financing decisions involve analyzingthe risk and cost associated with each source of finance Both sources have their ownmerits and demerits

The dividend decision:

Dividend decisions are an important aspect of corporate financial policy sincethey can have an effect on the availability as well as the cost of capital Dividenddecision determines the division of earnings between payments to shareholders andretained earnings The Dividend Decision, in Corporate finance, is a decision about theamount and timing of any payments made to the company’s stockholders A company’sultimate objective is the maximization of shareholders’ wealth It must, therefore, bevery vigilant about its profit-sharing policies to retain the faith of the shareholders.Dividend payout policies derive enormous importance by virtue of being a bridgebetween the company and shareholders for profit-sharing

1.1.2 Financial management

1.1.2.1 Definition of financial management

Corporate financial management is the selection, decision making andorganization of financial decisions in order to achieve the operational objectives of theenterprise Therefore, the financial decisions of the enterprise are associated with thecreation, distribution and use of monetary funds during the operation of the enterprise

1.1.2.2 The role of financial management of company

Nowadays, the role of corporate financial management is becoming more andmore important Because the financial situation is related to and affects all the activities

of the business

The role of financial management is reflected in the following main aspects:

a) Mobilizing capital to ensure the normal and continuous operation of the enterprise.

Monetary capital is the premise for business activities In the course of businessoperations, short-term and long-term capital needs often arise Failure to mobilize timelyand sufficient capital will make the operation of the enterprise difficult or impossible todeploy Ensuring the normal and continuous operation of the business depends greatly

on the organization of capital mobilization

Therefore, financial managers need to make the most optimal decision inmobilizing capital sources (internal and external) on the basis of considering the marketsituation, capital needs and specific conditions of the business

b, Organize the economical and efficient use of capital, contributing to improving the business performance of the enterprise

The timely and adequate mobilization of capital will help businesses seizebusiness opportunities, increase revenue and profit Enterprises can reduce the cost ofcapital, increase profits and return on equity of the enterprise by choosing appropriateforms and methods of raising capital

In addition, the selection of optimal investment projects on the basis of carefulconsideration and comparison between profitability ratios, capital mobilization costs andrisk levels of investment projects has created a premise for the economical andefficient use of capital

c, Comprehensively inspect and supervise all aspects of the enterprise's production and business activities

Through the daily review of cash receipts and expenditures, and especiallythrough the analysis and assessment of the enterprise's financial position and the timelyimplementation of financial targets, financial managers can can timely andcomprehensively control all aspects of business activities, thereby pointing outshortcomings to provide timely solutions to meet the needs of the business

1.1.2.3 The content of financial management

a, Participate in the evaluation and selection of investment decisions

The prospect of an enterprise in the future depends greatly on long-terminvestment decisions on a large scale such as investment decisions in technologicalinnovation, production and business expansion, etc Arriving at an investmentdecision requires businesses to consider many aspects of economic, technical andfinancial In which, in terms of finance, capital expenditures for investment must beconsidered and expected income from investment must be considered; In other words,looking at the cash outflows and inflows associated with an investment to assess afinancial investment opportunity.

b) Determining capital needs and organizing capital mobilization to promptly and fully meet capital needs due to business activities.

All business activities require capital The financial manager must determine thecapital needs needed for the business's activities during the period (including long-termcapital and short-term capital) In addition, capital must be mobilized in a timely,sufficient and beneficial manner for the business's activities Financial managers need toconsider many aspects such as: capital structure, advantages of each form of capitalmobilization, costs for using each source of capital…

c, Effectively use existing capital, strictly manage revenues and expenditures and ensure the solvency of the enterprise.

Financial managers must find all ways to mobilize the maximum amount ofexisting capital of the enterprise into business activities, timely release stagnant capital,closely monitor and perform well the payment and recovery and closely manage allexpenses during the operation of the business In addition, enterprises must always beable to pay debts when they are due by regularly finding ways to establish a balancebetween cash receipts and disbursements

d, Distributing profits, setting up and using the enterprise's funds

Realizing the distribution of profit after tax, setting up and using the enterprise'sfunds well will make an important contribution to the development of the business,improve the material and spiritual life of employees in the enterprise, and solvedecisions in a harmonious way between the interests of the owner and the business

e, Regularly monitor the operation of the enterprise

Periodically analyze the financial situation of the enterprise to assess theefficiency of capital use, strengths and weaknesses in management, thereby makingappropriate and timely decisions to adjust business operations.

f, Implement financial planning

With a good financial plan, the business can make appropriate financial plans toachieve the goals of the business Implementing a financial plan helps businessesproactively come up with effective solutions when the market fluctuates

1.2 Financial situation of a company

1.2.1 Definition of financial situation of a company

Financial situation of a company is the performance of creating and using thecompany's monetary funds It shows the overall aspects of capital resources, capitalallocation, cash flow capacity, business result, liquidity as well as operations andprofitability of a company In another word, the financial situation is an overall picture

of the business’s financial strengths and business’s information that lenders, investors,providers and shareholders care about

1.2.2 Indicators assessing financial situation of a company

The financial position of a company is usually judged through the assessment offinancial statements and other financial indicators such as asset and capital structure,liquidity ratios, profitability ratios

1.2.2.1 Asset and asset structure

Assets are all the resources that a business controls and holds Through the use ofthese assets, a company can obtain certain economic benefits in the future The totalassets of an enterprise are expressed in many physical forms, such as machinery,factories, supplies, goods, and equipment Or in many cases, property also appears inspecial physical forms such as patents and copyrights

Based on the time of investing, using and liquidating totally an asset, assets can bedivided into current and non-current assets Current assets are usually of low value andhave a relatively short useful life, within 1 year or 1 normal business cycle of thebusiness In addition, they are also frequently changed in value forms during use.Specifically, current assets of an enterprise include: cash and cash equivalents, short

term investment, inventories, short term receivables and other current assets In contrast,non-current assets of a business include assets with long useful life, turnover, andrecovery (more than 1 year or over many business cycles) They are rarely changed back

to value form during the course of a business Typically, non-current assets contain:fixed assets, tangible and intangible assets, long term investment, long term receivables,real estate investment and other long term assets

Assets structure is the proportion of assets that a company currently holds, shown

in the balance sheet To evaluate the efficiency of the asset structure, we consider thecurrent asset ratio and non-current asset ratio

Current asset ratio shows the proportion of current assets in the total asset value.

Current asset ratio = Current Assets Total assets

Non-current asset ratio shows the proportion of non-current assets in the total

asset value

Non- current asset ratio = Non−current Assets Total assets

The asset scale and asset structure help managers to decide which kind of assetshould be invested, should they increase or decrease the inventories as well as decidinghow much inventories are relevant to meet the manufacturing and market needs,imposing payment policies Understanding the asset structure helps enterprises to makemore accurate and correct decisions about reasonable financial sources, especially in thebalance between short-term debt and long-term debt

1.2.2.2 Capital and capital structure

The source of capital, or in another way, is the financial relationship between thebusiness and the investors, the bank or the shareholders Enterprises exploit capital, that

is, exploit a certain amount of money That amount will be made for the investment inthe assets of the entity Corporate capital is divided into two main categories: owner'sequity and liabilities

Owner's equity is the initial capital that the enterprise itself spends to carry outproduction and business activities Or the profit that the company earns from thatbusiness

A business to operate cannot be without loans from other individuals ororganizations Buy goods, services and raw materials from other sellers but businessescannot afford to pay immediately That unpaid portion is included in the liability portion

of the enterprise

Owner’s equity + Liabilities = Total capital

Corporate capital is one of the indispensable components Capital contributes toproviding resources for the construction, investment and development activities of theenterprise

Capital structure is the particular combination of debt and equity used by acompany to finance its overall operations and growth The capital structure decides theaverage cost of capital use of the company

In order to assess the impact of capital structure, managers need to consider thesefinancial indicators:

Debt ratio measures the percentage of debt in the total capital of the company.

The higher the debt ratio is, the lower the company’s independence is

Debt ratio = Totalliabilities Total capital

Equity ratio shows how much percentage equity is accounted for the total capital.

The higher the equity is, the more independent the company is

Equity ratio = Totalcapital Equity

The capital structure is also evaluated through the debt equity ratio (D/E)

Debt Equity ratio = Total liabilities Total equity

Assessing the financing policy of the company

The financing activity of the company is assessed through the main indicatorcalled Net working capital (NWC)

Net Working Capital = Current Assets - Short-term Liabilities

Or Net Working Capital = Long-term Capital - Long-term Assets

Net working capital is a liquidity calculation that measures the company's ability

to pay off its current liabilities with current assets This measurement is important tomanagement because it shows the firm’s short-term liquidity as well as management’sability to use its assets efficiently

NWC is a stable source of long-term capital to establish or finance the permanentcurrent assets necessary for the operation of the business It creates a level of safety forthe firm in business, helping the financial status of the firm be more secure

3 models of financing:

Model 1: When current assets are larger than current liabilities That is, working

capital is always positive

At that time, there will be a stability in the business operations of the businessbecause there is a part of working capital that regularly funds current assets to use forbusiness operations

Model 2: When current assets are less than current liabilities, then working capital

will be negative

This is a worrying sign for businesses operating in the industrial or constructionsectors In the special case where regular working capital < 0 (i.e the business buildslong-term assets with short-term capital) is a sign of misuse of capital, the balance ofpayments is definitely off balance, debt solvency ratio < 1 However, for the commercialindustry, this financing method is still possible because this industry has a fast capitalturnover rate

Model 3: If current assets equal short-term liabilities, or permanent capital equals

the value of fixed assets, then net working capital will have a value of zero

This way of financing shows that only fixed assets are financed by long-termcapital, while current assets are financed by short-term capital This case also does notcreate stability in production and business activities of enterprises, especially forindustries with slow capital turnover

1.2.2.3 Revenues, Expenses, and Income

a, Revenues

Revenue is the value of all sales of goods and services recognized by a company

in a period Revenue (also referred to as Sales or Income) forms the beginning of acompany’s income statement and is often considered the “Top Line” of a business

From the accounting perspective the revenue can be divided into:

Financial income is income generated from financial investment activities or

capital activities Revenue from financial activities includes interest, income from realestate leasing, dividends received, profits distributed from joint ventures and associates,profit from capital transfer, exchange rate difference and other incomes( sale of realestate, rental price of premises)

Other income generated from sources other than the company's normal

income-generating businesses, including any income not generated from the sale of thecompany's products and services Other income can be as unpredictable as thecompany's core operating income, as other income generating activities are infrequentand cannot be considered a guaranteed source of income over the long term Otherincome includes: Income from capital transfer, securities transfer, income from realestate transfer, income from transfer of investment projects; transfer the right toparticipate in investment projects, income from ownership, right to use property, incomefrom intellectual property royalties, technology transfer, income from property rental inany form, income from property transfer, asset liquidation (except real estate), othervaluable papers, income from deposit interest, loan interest,

b, Expense

Expense is understood as the value of resources used in production and businessactivities to achieve revenue and profit goals The nature of expense is a trade-off foranother result, this result is expressed in physical form such as products, factories, money

or not in physical form such as knowledge or services

Thus, the expense of an enterprise is the total cost of production, cost of productconsumption, management of the enterprise and indirect taxes that the enterprise mustspend to carry out business activities in a certain period of time

In production and business activities, in order to achieve profit goals and maximizeenterprise value, it is necessary for businesses to spend certain expenses Expenses incurred

by businesses include:

Operating expenses are all expenses that a business needs to pay to be able to

achieve its ultimate business goals

Operating expenses usually include cost of goods sold, selling expenses, generaland administrative expenses

Cost of goods sold: For enterprises producing and providing services, cost ofgoods sold includes production costs (raw materials, labor, general production) related

to products consumed or services performed

Selling expenses: Selling expenses include expenses for product consumption,such as advertising, shipping, commissions, etc Businesses always have to find ways toattract and search for customers Selling expenses come in many different forms, butthese costs vary widely from company to company and from industry to industry

Administration expenses: Business administration expenses include expenses forthe general operation of the organization, such as salaries of the board of directors,salaries of administrative staff, depreciation of office buildings, electricity - water –telephone, corporate office

Financial expenses are expenses related to securities trading, business capital

contribution and loan interest expenses In finance expenses, interest expense is usuallyreported as a separate item on the income statement Most businesses have to use loan

capital, so interest expense is an important component to evaluate the efficiency of usingloan capital and profitability of the unit.

Other expenses are costs incurred as a result of events or transactions that are

separate from the normal operation of the business Other costs of the business mayinclude:

Expenses for liquidation and sale of fixed assets (including costs of bidding forliquidation); Remaining value of fixed assets liquidated or sold (if any); Fixed assetsused for capital contribution to subsidiaries, joint ventures, investments in associates andother long-term investments; Fines payable for breach of economic contracts,administrative fines,

c, Income:

Income is the difference between the revenue and expenses that the business hasspent to achieve that revenue from its activities in a certain period It is considered thefinal financial results of business and production activities of the enterprise It is also thebasis and foundation to evaluate the economic efficiency of enterprises ' operations

Income = Revenues - Expenses

Operating income is an accounting figure that measures the amount of profitrealized from a business's operation, after deducting operating expenses such as cost ofgoods sold (COGS) , wages and depreciation It shows how much of a company'srevenue will eventually become profit

Operating income is a synonym for Earnings before interest and taxes

(EBIT) EBIT can be calculated as following:

EBIT = Net revenues from sales and services rendered COGS Sales expenses General administration expenses

-Or EBIT = Net revenues - Operational expenses

Income before taxes (or Earnings before taxes EBT) is the income fromoperations plus or minus non - operating income

EBT = EBIT - Interest expenses

NI = EBT- Taxes

Net profit or Net income (NI) is the excess of an entity's revenue over its expensesduring a given period of time Usually, net income appears immediately after thesubtraction of income taxes expense

Cash Flow will be divided into 3 main types: Operating cash flow, investmentcash flow and financial cash flow

Operating cash flow: This is the basic and common cash flow, calculated based on

the actual results from the business activities of the business

Investing cash flow: Calculated based on the business's investment or acquisition

of goods Through this cash flow, the business will consider and make a decisionwhether to invest more or reduce investment for a certain item or not

Financing cash flow: Calculated based on borrowing or debt repayment, dividend

payment, repurchase/new issue of shares In addition, this cash flow is also money fromshareholders contributing more capital, money mobilized through borrowing capitalfrom other companies, banks, etc

There are some indicators used to assess the situation of the company's cash flow:

Cash flow margin ratio shows the level of making money of operating activities

compared to the net sales

Operating cash flow ratio = Cash flow¿operating activities ¿

Net sales

Interest coverage ratio is used to evaluate if the cash flow from operating

activities is able to cover the interest paid

Cash flow¿operating activities+Interest paid+Taxes paid ¿

Interest paid

Current liabilities coverage ratio is used to judge the ability in paying current

liabilities through the net cash flow of the company, thereby evaluating whether the cashflow from operations is enough to cover current liabilities or not

Current liabilities coverage ratio = Cash flow¿operating activities ¿

Current liabilities

Cash generating power ratio shows the company's ability to create cash purely

from operations, compared to the total cash inflow The higher the ratio is, the better theability in generating money for operating activities is

CFO+Cash investinginflow +Cash financinginflow

1.2.2.5 Liquidity and Solvency

Corporate liquidity is the company's ability to raise cash when needed There aretwo main determinants of a company's liquidity position The first is the ability toconvert assets into cash to pay off short-term liabilities (short-term liquidity) Thesecond is its debt capacity Debt capacity is a company's ability to settle existing debt aswell as its ability to raise cash through new debt

Current ratio

This ratio is also known as the short-term debt solvency ratio This ratio iscalculated by dividing the total short-term assets by the short-term liabilities of thebusiness

Current Ratio = Current Liabilities Current Assets

Quick ratio

Is a more rigorous assessment of the solvency of the business, determined bycurrent assets minus inventory and divided by the amount of current liabilities Here,inventory is excluded, because in current assets, inventory is considered a less liquidasset This ratio indicates the ability of the business to pay short-term debt withouthaving to make urgent liquidation of inventory

Quick ratio = Current assets−inventory Current liabilities

Cash ratio

This ratio more closely assesses the solvency of the enterprise

Cash ratio =Cash∧cash equivalents Current liabilities

Here, money includes cash, deposits, money in transit Cash equivalents are term investments in securities, other short-term investments that can be easily converted

short-to cash within three months and are subject short-to significant risk

Interest coverage ratio

This ratio indicates the ability of the business to pay interest on loans and alsoreflects the level of risk it may face to its creditors

Interest coverage ratio =Profit before interest∧tax(EBIT ) Interest payable∈the period

1.2.2.6 Asset utilization efficiency and Profitability

a, Asset utilization efficiency

Total asset ratio

The asset turnover ratio, also known as the total asset turnover ratio, measures the

efficiency with which a company uses its assets to produce sales The asset turnoverratio formula is equal to net sales divided by the total or average assets of a company Acompany with a high asset turnover ratio operates more efficiently as compared tocompetitors with a lower ratio

Total asset turnover = Average totalasset Net sa les

Inventory management

Inventory management helps companies identify which and how much stock toorder at what time It tracks inventory from purchase to the sale of goods The practiceidentifies and responds to trends to ensure there’s always enough stock to fulfillcustomer orders and proper warning of a shortage

Inventory management is vital to a company’s health because it helps make surethere is rarely too much or too little stock on hand, limiting the risk of stockouts andinaccurate records

The inventory turnover ratio, also known as the stock turnover ratio, is an

efficiency ratio that measures how efficiently inventory is managed The inventoryturnover ratio formula is equal to the cost of goods sold divided by total or averageinventory to show how many times inventory is “turned” or sold during a period Theratio can be used to determine if there are excessive inventory levels compared to sales

Inventory turnover ratio = Cost of goods sold Average inventory

Day’s sales in inventory shows how long it takes the company to sell itsinventories during a year The lower the ratio is, the quicker the inventories sold, which

is a good signal for the business of the company

Day’s sales in inventory = Inventory turnover ratio360

Accounts Receivable management

Accounts receivable (AR) management is the practice of obtaining customerpayment within a given period of time Organizations that sell products and services use

AR management to ensure the proper tracking and management of every step involved

in collecting payment after the customer places an order It’s a vital component ofbuilding liquidity and profitability and avoiding bad debts

The accounts receivable turnover ratio, also known as the debtor’s turnover ratio,

is an efficiency ratio that measures how efficiently a company is collecting revenue –and by extension, how efficiently it is using its assets The accounts receivable turnoverratio measures the number of times over a given period that a company collects itsaverage accounts receivable

Accounts receivable turnover ratio = Average Accounts Receivable Net sales

The days' sales in accounts receivable ratio (also known as the average collection

period) is the number of days it took on average to collect the company's accountsreceivable during the past year

Day’s sales in Accounts receivable = Accounts receivable ratio360

Working capital management

Working capital management is a business strategy designed to ensure that acompany operates efficiently by monitoring and using its current assets and liabilities totheir most effective use

The working capital turnover ratio measures how well a company is utilizing its

working capital to support a given level of sales A high turnover ratio indicates thatmanagement is being extremely efficient in using a firm's short-term assets andliabilities to support sales Conversely, a low ratio indicates that a business is investing

in too many accounts receivable and inventory assets to support its sales, which couldeventually lead to an excessive amount of bad debts and obsolete inventory write-offs

Working capital turnover ratio = Average working capital Net sales

The return on working capital indicates whether the company uses too muchworking capital or not

Return on working capital = Net profit after taxes Working capit al

Fixed assets management

Fixed asset management is the process of tracking and maintaining anorganization’s physical assets and equipment Asset types include vehicles, computers,furniture and machinery

Fixed Asset Turnover ratio is an efficiency ratio that indicates how well or

efficiently a business uses fixed assets to generate sales The higher the ratio is, the moreeffective a company uses its fixed assets

Fixed asset ratio = Average Net sales

¿assets¿

b, Profitability

Profitability ratios are financial metrics used by analysts and investors to measureand evaluate the ability of a company to generate income (profit) relative to revenue,balance sheet assets, operating costs, and shareholders’ equity during a specific period oftime They show how well a company utilizes its assets to produce profit and value toshareholders

A higher ratio or value is commonly sought-after by most companies, as thisusually means the business is performing well by generating revenues, profits, and cashflow The ratios are most useful when they are analyzed in comparison to similarcompanies or compared to previous periods

Basic earning power ratio (BEP)

The Basic Earning Power Ratio (BEP) is a measure of the company’s efficiency atproducing earnings relative to its assets The BEP ratio can demonstrate the business’sability to generate adequate profits over the long term by reviewing several years toassess the company’s efficiency and earning trends Simply put, BEP is a quick healthcheck on the company’s profitability.

Basic Earning Power = Total Assets EBIT

Return on sales (ROS)

Return on sales (ROS) is a ratio used to evaluate a company's operationalefficiency This measure provides insight into how much profit is being produced perVND of sales An increasing ROS indicates that a company is improving efficiency,while a decreasing ROS could signal impending financial troubles

ROS =Net profit after tax Net sales

Return on assets (ROA)

Return on assets (ROA), as the name suggests, shows the percentage of netearnings relative to the company’s total assets The ROA ratio specifically reveals howmuch after-tax profit a company generates for every one dollar of assets it holds It alsomeasures the asset intensity of a business The lower the profit per VND of assets, themore asset-intensive a company is considered to be Highly asset-intensive companiesrequire big investments to purchase machinery and equipment in order to generateincome

ROA =Average total assets Net profit after tax

Return on equity (ROE)

Return on equity (ROE) – expresses the percentage of net income relative tostockholders’ equity, or the rate of return on the money that equity investors have put

into the business The ROE ratio is one that is particularly watched by stock analysts andinvestors A favorably high ROE ratio is often cited as a reason to purchase a company’sstock Companies with a high return on equity are usually more capable of generatingcash internally, and therefore less dependent on debt financing.

ROE =Average total equity Net profit after tax

1.2.2.7 Profit distribution

To ensure the distribution of profits that can harmonize the interests of the parties,

as well as the long-term development, requires financial managers to adhere to some ofthe following principles:

First, the principle of profit has been realized This principle implies that when

making a profit distribution, it should be based on the profit made, not on the planned orexpected profit

Second, the principle of net profit That is, the company is only distributed to the

owners after fully fulfilling the income tax obligations to the State

Third, the principle of solvency assurance This principle implies that, despite the

division of profits, above all, it is necessary to ensure the ability to pay due debts, aswell as to ensure the ability to pay the owners and shareholders

Fourthly, profit distribution must ensure harmony between the interests of entities

such as creditors, owners, the State, and employees

The basic content in the profit distribution of an enterprise is:

Profit before income tax:

-Carrying forward losses from previous years to ensure capital offset forproduction and business activities The time limit for transferring losses is prescribed bythe State in the Law on Corporate Income Tax In Vietnam, enterprises are allowed tocarry forward losses for a period of 5 years If at the end of the prescribed time limit forloss transfer, the enterprise has not yet transferred all the losses, the remaining lossesmust be used by the following years' after-tax profits to make up for it

- Corporate income tax payment

- Offsetting the loss of previous years has expired, deducted from profit beforetax Set up a reserve fund to cover possible future losses

- Set up a development investment fund to meet capital needs for future expansioninvestment Meeting different consumer needs of owners such as deductions for bonusand welfare funds, executive bonus funds, profit sharing, dividend distribution, etc

For a joint stock company, the distribution of profits expressed through dividend

policy Dividend policy represents a company's decision between paying dividends toshareholders versus reinvesting its profits into the company itself Dividend policy has acertain impact on share prices in the market, which in turn affects the interests ofowners

1.3 Factors determining the financial situation of a company

1.3.1 Internal factors

Legal form of the company

According to the 2020 Enterprises Law, there are four main types of businesses:Limited Liability Company, Joint Stock Company, Partnership, Private Company Eachdifferent type of business has its own advantages and disadvantages, which influence thefinancial situation of the company The differences between each type of businessesinclude: Reputation, capital mobilizing capacity, investing risks, procedures and costs ofcompany's formation and organizing management

Economic - technical characteristics of the industry

The operation of the company usually comes along with one or some certainbusiness industries Each different industry has its specific characteristics that affect thefinancial power of the company due to its manipulation towards asset structure, workingcapital demand, business cycle, For example, companies working in the field oftrading need a higher proportion of working capital and their net working capitalturnover are also higher than those of companies working in the fields of agriculture andindustry, especially heavy industry Additionally, companies manufacturing productsthat have short - production cycles usually have sustainable working capital demand, aswell as usually receive sales money This makes sure that these companies can balancetheir incomes and expenditures, and sufficient capital for operation

By contrast, companies manufacturing products with long - production cyclesneed greater working capital The enterprises operating in the manufacturing industryare very different in the period of the year, and revenue and expenditure in money oftenhave a time match That is what has to be considered in financial organization, in order

to ensure sufficient capital and cash in and out balance Different business fields areaffected differently by the volatility of the economy

Organizing and managing qualifications

This is the internal factor of the business that decides the financial situation of acompany In the market economy, every business or organization needs to choose theirown management structure The appropriate and scientific management structure helpsthe company to use their resources efficiently, making proper decisions and well -conducting them, therefore, upholding the financial situation of the company The largerthe scale of the company is, the more efficient and relevant the management structurethat the company needs

1.3.2 External factors

Political and legal factors

These factors cause a significant impact on the formation and exploitation ofbusiness opportunities and achievement of business goals Stable politics is a crucialprerequisite for operation that the change in political situation can pose positive impacts

on some certain kinds of business but negative influences on the others The completelegal system and the strictness in law enforcement will create a healthy competitiveenvironment for businesses, avoiding fraud and smuggling The level of legal andpolitical stability allows businesses to assess the risk level of the business activities, aswell as its effect on the operation of the business Therefore, doing research on politicaland legal factors is required when the company joins the market

Economic factors

Although these factors can facilitate market joining and expansion, they alsocounteract the development of other industries Factors that influence a company'sfinancial situation, change in purchasing demand or developing trend of different kinds

of product, economic factors include:

- Foreign trade: The closing and opening trend of the economy influence thedeveloping opportunity of the company, the competitive conditions, the outstandingtechnology and capital strength

- Inflation and inflation control: This affects incomes, accumulations, purchasingand investments

- Economic structure: This impacts the roles and developing trends of industries,which leads to the change in developing trends of the businesses

- Speed of economic growth: Shows the general developing trend of the economyrelated to the ability to expand or narrow the operation size of each enterprise

Competitors

This includes companies producing and trading similar or substituted productscompared to the company Competitors cause a huge impact on the operation of thecompany, forcing companies to compete to survive on the market Competitiveenvironment directly affects the achievability of financial objectives, for example, costminimisation may become essential if a competitor is able to grow market share because

it is more efficient For this reason, companies always have to improve the quality of theproducts, renovate technology, and enhance the quality of service and customer care

Chapter 2: Financial situation of Dolexphar International Pharmaceutical Joint Stock Company

2.1 Overview of Dolexphar International Pharmaceutical Joint Stock Company

2.1.1 Establishment and Development of Dolexphar International Pharmaceutical Joint Stock Company

2.1.1.1 Detailed information of the company

- Company name: Dolexphar international pharmaceutical joint stock company

- Location: Lot D and Lot C-2, Dai An Expanded Industrial Park, Lai Cach town, CamGiang district, Hai Duong province

- Abbreviated trading name: Dolexphar

- Legal form: Joint stock company

 March 1, 2018

Phase 1: After 2 years of construction and completion, Dolexphar has officiallycome into operation with 5 production lines and 8 dosage forms The factory meets ISO

22000 and HACCP standards issued by the quality development standards researchinstitute

 March 3, 2019

Phase 2: With a synchronous investment in production lines and a team ofqualified and experienced personnel, on March 22, 2019, Dolexphar was one of the firstfactories to be approved by the Food Safety Authority The Ministry of Health grantedthe factory certificate of GMP standard with 8 types of products

 March 7, 2021

Phase 3: After 1 year of starting the extended Dolexphar factory project on July

31, 2021, Dolexphar has been granted GMP certificates by the Food Safety Department

- Ministry of Health for 10 additional product types, bringing the total The number ofcertified product types of the company has increased to 18 types of products, increasingthe company's scale to be able to produce enough to meet most of customers'requirements for health food products

2.1.2 Business characteristics of Dolexphar International Pharmaceutical Joint Stock Company

2.1.2.1 Main fields of activity and characteristics of the company's production and business

- Business fields: Trade, service, production

+ Registration and publication of product standard certification.

Dolexphar is a company operating in the field of pharmaceuticals, formularesearch, production of health food, cosmetics and medical equipment With modernsynchronous production lines, strictly complying with GMP principles in production.Machinery and equipment are always invested in new technology, ensuring productivityand quality

Regarding the organization of production and business activities, the Companycurrently has 1 factory at Lot D and Lot C-2, Dai An Expanded Industrial Park, LaiCach town, Cam Giang district, Hai Duong province with a scale of nearly 11,000 m2

- Dolexphar's working principle:

Exchange: Formulation consulting to support customers in researching anddeveloping products combined with high technology to create products of the bestquality, unique and breakthrough formulas and differentiate from other products on themarket

Product registration: Registering for publication of product standard certificationfor all businesses operating in the field of pharmaceuticals and health foods with the

following criteria: "According to regulations - Quickly - Low cost"

Implementation: Dolexphar controls product quality comprehensively from inputmaterials to finished products Dolexphar's health food factory has a large area, isequipped with modern and closed production lines, and strictly follows GMP principles

in production, which helps Dolexphar to bring many products to the market high qualityproduct line

- Characteristics of production and business:

+ System of equipment and machinery:

Modern, synchronous production lines, strictly comply with GMP principles inproduction Machinery and equipment are always invested in accordance with new

technology, ensuring productivity and quality For example, automatic vial excavator,automatic labeling machine, fluidized bed mixer dryer, Korean soft capsule line, etc.

+ HR team:

Has a high level of expertise More than 60% of pharmaceutical staff, especially20% are university pharmacists who graduated from Hanoi University of Pharmacy withexperience Therefore, customers will be assured of the staff making the product

- Products and trademark of Dolexphar

The company only focuses on outsourcing and manufacturing products according

to customers' orders Products are products of the company with a variety of designs andcolors from hard capsules, soft capsules, tablets, to meet customer's criteria Inaddition, the company also advises on formulas and receives product registration

Dolexphar is one of the GMP companies in the country On 31/07/2021 wasgranted the 2nd Certificate with 18 types of products meeting the standards of goodmanufacturing practice Moreover, Dolexphar is one of the few health foodmanufacturing companies whose laboratories are ISO 17025 certified With thecriterion: "Quality products for golden health", the company always puts consumers'health first, offering high-quality and truly effective products For customers, thecompany always does the right thing - does what it has committed to, ensuringmaximum benefits for customers Besides, the company always provides quality andeffective products at reasonable prices, with stylish style In addition, the companyalways improves products continuously and meets the health care needs of thecommunity with high quality products Therefore, the company has built own brand andhave a loyal customer base, such as Uy Duoc Pharma, Bao Tam Pharma, Gia ThuanPharma, etc

- Consumption market and competitive position:

The consumption market of the company's goods and services is the domesticmarket, in which the North and Central markets are the main ones, and the southern

markets are concentrated in Ho Chi Minh City In which the North includes Hanoi,Hung Yen, Thai Binh and the Central is ThanhHoa.

In terms of competitiveness, the pressure in the market is becoming more andmore intense when many enterprises participate in the pharmaceutical market.Especially, in the context of the Covid-19 epidemic, there are unpredictabledevelopments Although the quality of some domestic drugs is similar to that of foreigndrugs, the price is cheaper, but consumers still prefer to choose foreign drugs due tolimitations in technology and high-quality personnel Besides, consumer psychology isused to using old products, afraid to change new products Moreover, the epidemicmakes the pharmaceutical market a potential market, which increases competitionbetween enterprises in the same industry

2.1.2.2 Highlight products, projects:

- Highlight products:

Some outstanding products are produced at Dolexphar's factory such as Sinobec Herbal cough syrub; Vshine A+ multi-micronutrient effervescent nuggets; GingkoBiloba Pro - Support to enhance brain performance; etc

-One of the typical products of Dolexphar is syrup (typically a functional food inthe form of syrup) All Dolexphar syrups are manufactured under GMP standards, fullymeeting the following standards:

• Clean production environment

• The most optimal production conditions: temperature, light, humidity, etc

• Each stage of production is supervised and evaluated by experts and technicalstaff

• Homogeneous production process

→ This is the basis for Dolexphar to create quality, uniform products that fullymeet safety criteria

Chart 2.1 The production of Dolexphar’s syrup

Right from the early days of establishment, Dolexphar company has been oriented

to become a leader in applying high technology to the production of functional foods, sothe company has invested in the production line system syrup includes:

• Solution handling system

• Automatic Filling Machine

• Automatic capping and labeling machine

- Highlight project: The company has implemented an investment project:

Pharmaceutical and functional food factory The project objective is to producepharmaceuticals and functional foods, with a project scale of 40,000,000 products(tablets, packages, vials)/month In which, the main products are pharmaceuticals andfunctional foods Pharmaceuticals include hard capsules, soft capsules and tablets.Functional foods include packages of nuggets, syrups and drinking tubes The totalinvestment capital of the project is thirty-five billion VND The project has an estimatedland area of 5,420 m2 and is implemented at Lot C-2, Dai An Industrial Park Extension,Lai Cach town, Cam Giang district, Hai Duong province With an expected land area of5,420 m2

3 Transfer tested materials

to the factory

2 Take samplesfor testing of materials

1 Enter

materials into

the warehouse

4 Mix stock solutions, mix homogeneously

5 Take samples

of finished products for testing

6 Close the jar/

box of the

finished

product, label it

2.1.2.3 Management structure of the company:

Chart 2.2 Organization of Dolexphar International Pharmaceutical Joint Stock

Company

Function:

- The Board of Directors: is an indispensable part - the company's management agency,

the highest management agency, planning strategies, supervising production andbusiness activities

- Board of manager:

+ General Manager:

 Organize the implementation of decisions of the Board of Directors

 Proposing a plan to arrange organizational structure, internal managementregulations of the company

 Managing and operating the general business activities of the company Directlygrasp the financial situation, make plans, assign tasks to subordinates and directly check

the implementation Directly manage functional departments and run the board ofdirectors.

+ Deputy General Manager:

 Develop appropriate strategies and business plans, ensuring their consistency withshort-term and long-term goals

 Lead and motivate subordinates to motivate employees to form productive,effective teams

 Monitor all operations and business activities, ensure business objectives areachieved, consistent with overall strategy and mission

 Make sound investment decisions to drive revenue and increase profits

+ Production Manager:

 Responsible for making monthly, quarterly and annual business plans, anddirectly monitoring and checking the business process

 Consulting departments to implement company strategy

 Supervising the implementation of the plan

+ Technical director:

 Being the main person in charge of all technical issues of the company

 Develop the technological aspects of the company's strategy, thereby ensuringalignment with the set business goals

 Identify and implement new technologies for competitive advantage

 Helping departments use technology more efficiently

- Departments:

+ Production Planning Department: Making business plans and promoting thecompletion of the plan by month, quarter and year Manage goods, import and exportgoods and coordinate goods for stores, agents and branches Advise and assist the Board

of Directors in developing sales strategies, implementing monthly, quarterly and annualstrategies

+ Product development department: research to replace old products, learn newproducts, cooperate with the sales department to make suggestions on good, high-profitand beneficial drug products for the community

+ Quality control department: check the quality, specifications, and expiry date ofproducts before warehousing, issue certificates of standardization for warehousing,allow warehousing and monitor products by keeping test sheets

+ Finance and accounting department: accounting, economic statistics of the company'sbusiness results Timely grasping the financial policies of the State to provide the Board

of Directors to help make timely and correct decisions in all production and businessactivities of the company

+ Administration Department: manage and track incoming and outgoing dispatches andpapers in accordance with the State's regulations, ensuring the safety of documents andthe company's seal Advising the Board of Directors in developing and perfecting humanresource policies, human resource management regulations, company rules andregulations, salary scale system, work quality assessment system, management Laborcontracts, personnel records

+ Warehouse: preserving goods, managing inventory of imported and exported drugsand medical equipment, monthly, quarterly and yearly inventory reports

2.1.3 Advantages and disadvantages to financial performance of Dolexphar International Pharmaceutical Joint Stock Company

Advantages:

The outbreak of the Covid-19 pandemic caused a sudden increase in the demandfor pharmaceuticals, especially for resistance-boosting drugs Hospitals and individualcustomers have the need to stockpile drugs to prevent epidemics.

Vietnam's population currently has an income of more than 1200 USD, of whichthe size of the pharmaceutical industry is only about 1 billion USD and the supply fromdomestic companies, enterprises and corporations is more than 55% of the demand.people's demand This shows that the pharmaceutical industry needs to be expanded anddeveloped more strongly to be able to provide for everyone's drug use needs Besides,Vietnam has joined WTO, this is a great opportunity for the pharmaceutical industry

Besides, the Vietnamese functional food market has experienced strong growth inrecent years According to statistics, up to now, more than 70% of functional foodsconsumed in our country are domestically produced The functional food market inVietnam has a large number of products, a variety of categories and great potential forgrowth when consumers tend to increase the use of healthy foods This is also the reasoncontributing to the significant increase of enterprises engaged in production and business

in this field Dolexphar is a company whose main products are functional foods This is

an opportunity for the company to increase profits

For Dolexphar International Pharmaceutical Joint Stock Company, productquality is the top goal With the criterion: "Quality products for golden health", thecompany will bring to the market quality products that are really effective for publichealth The company has been operating for six years Therefore, it has built a brand andreputation, has a stable customer base, and provides quality products, effective,dedicated style to serve customers

Disadvantages:

The survey results also show the leading difficulties of pharmaceutical enterprisesduring the Covid-19 pandemic Specifically, 78.6% of enterprises encountereddifficulties when the needs of users of pharmaceutical products changed; 57.1% ofenterprises had difficulties in accessing new customers, supply chain disruptions inbusiness, increase in input prices and 35.7% difficulties with competition amongenterprises in the industry

Imported pharmaceutical materials currently account for about 80-90% of thedemand in Vietnam In which, China and India are the two largest suppliers ofpharmaceutical raw materials, accounting for 63.7% and 16.7% of the proportion ofimported pharmaceutical materials, respectively, in 2019 The epidemic has almost cutoff the chain Raw material supply of the pharmaceutical industry in the first 6 months

of the year because China and India - the two largest factories supplying pharmaceuticalingredients in the world - were interrupted with a very high number of people infectedwith Covid The scarcity of raw materials in the global supply chain along with hightransportation and distribution costs in the context of the Covid-19 epidemic have led to

an increase in raw material prices

In terms of competitiveness, Vietnam is a country that has to import a large source

of raw materials from abroad, leading to high prices and competitive prices in themarket In fact, it mainly focuses on producing drugs with low value, relatively cheapprice, and low competitiveness, so it is difficult to compete with imported drugs

Consumer demand for pharmaceutical products changes, reducing demand inhospital channels, non-essential drug products, increasing demand for disease preventionproducts The change has caused certain difficulties for pharmaceutical enterprises,because in fact, the market share of vitamin and immune boosting products belongs toforeign products, the number of Vietnamese enterprises capable of producing hasdecreased from more than 4,190 enterprises to 300 enterprises after Decree No 15/2018/ND-CP tightened HS-GMP production standards for health protectionproducts/functional foods from July 2019 Meanwhile, masks or hand sanitizer are notthe main business items of pharmaceutical companies The market share of theseproducts also faces competition from more than 100 enterprises producing medicalsupplies, personal hygiene products, etc

Besides, not all pharmaceutical enterprises will benefit, but the business situation

of pharmaceutical enterprises is relatively divergent during the Covid-19 pandemic Inaddition to businesses with large profits and strong growth, the pharmaceutical industryalso recorded many businesses with reduced profits, including enterprises that recordedlosses due to the impact of the epidemic Although the situation has improved after