ABSTRACT Thesis Title: Improve the financial management efficiency of PV Gas Pages: 60 University: Vietnam National University Graduate School: International School Date: December 2022 D
INTRODUCTION
General research background on the Gas industry and PV Gas
Financial analysis provides managers with the reality aspect of their business by way of evaluating fluctuations in financial indicators; advantages and disadvantages of current financial position, business performance, and debt situation, among others Based on preliminary evaluations, comprehensive and effective measures as well as strategies are given to improve profitability, liquidity, or other business goals, thus creating value for shareholders The analysis of financial statements not only provides financial information for managers and shareholders but also brings usefulness to other stakeholders such as investors, customers, suppliers, lenders, workers, and regulatory agencies Financial analysis is particularly crucial for organizational decision-making and forecasting
The oil and gas industry provides more than half of the world’s primary energy needs, Reddy and Xie and Bos et al Crude oil and natural gas are among the most traded commodities (In 2017, the volume of world crude oil exports was about USD
844 billion, and the export of natural gas reached USD 432 billion after a strong increase over the past decades (International Trade Center, 2018)) Improvements in exploration and production activities during recent years, in particular in the United States (the U.S.), in hydraulic fracturing, horizontal drilling, drilling fluids and other techniques, shale oil, and gas exploration and production have changed the industry substantially, Reddy and Xie and Hsu et al.; Recent growth in supply (reaching 95 million barrels per day in 2018, BP plc (2019)) is mainly driven by high-cost producers, especially in the U.S and Canada, while demand growth mainly comes from emerging economies, as a result of their rising prosperity Natural gas production reached 3309 million tons of oil equivalents in 2018 The strong growth is broad-based—increases in low-cost supplies to react to increasing supplies of liquefied natural gas (LNG)
Overall, this growth in oil and gas supply also enhances investments in the industry Particularly, inorganic growth strategies such as mergers and acquisitions are commonly applied to corporate investments by oil and gas companies Although the industry receives more than its fair share of attention from the media and represents a significant share of the global mergers and acquisitions (M&A) market (according to Thomson Reuters (2018), the oil and gas industry is in the top ten industries in terms of M&A deals and it has the highest total transaction value, which reached more than USD 4 trillion in 2017), researchers have paid much less attention to oil and gas investments such as M&A transactions (Hsu et al, 2017)
Cross-border M&A transactions are challenging (Shimizu et al., 2006), and often fail due to involving two or more countries and the different cultural, economic, political, institutional, and regulatory environments Specific for the oil and gas industry is that the choice of the target firm and target country must depend above all on the availability of resources and much less on other conditions, favorable or unfavorable, regulatory uncertainty, risk of nationalization, and other kinds of financial, political, and institutional uncertainties
PetroVietnam Gas Joint Stock Corporation is a major member unit of the Vietnam National Oil and Gas Group, focused on gas collecting, production, and trade, bringing the gas sector together to satisfy the demands of the country's economic growth PV Gas has expanded in size over the years, and its commercial operations have produced excellent achievements PV Gas stock has been gaining popularity among market participants Despite a steep downturn in the global oil and gas market during the last year, the company's operations experienced some challenges but nevertheless produced favorable results
Products branded PETROVIETNAM Gas is one of the strong brands in the LPG trading market in Vietnam Products bearing the PETROVIETNAM Gas brand have been trusted and chosen by consumers nationwide and highly appreciated for their prestige and gas quality during the past 20 years PV Gas is the only company that trades in PETROVIETNAM Gas branded products nationwide Currently, the Company is occupying the largest market share in the North and is one of the three units with the largest market share in the country
The main activities of PV Gas are collecting, transporting, storing, and processing gas and gas products; distributing and trading in dry gas, liquefied natural gas (LNG), compressed natural gas (CNG), liquefied petroleum gas (LPG), condensate; infrastructure investment, distribution of crude gas and liquid gas products; distribution of LPG from refineries and petrochemicals and other sources; design consultancy, investment project formulation, construction investment implementation, management, operation, maintenance and repair of gas and gas- related works and projects In addition to the above main activities, PV Gas also researches applications related to the gas field in order to improve the situation of exploitation, use, and trading of gaseous fuels PV Gas is also one of the exporters and importers of raw gas products and related materials and equipment in order to create all business conditions for the gas industry
The products and services that PV Gas provides are diverse, but most of them are related to the gas industry such as:
- Transportation and storage of gas and gas products
- Consulting design, operation, maintenance, and repair of gas works
LPG products of PV Gas
History of formation and development
The idea of a gas industry in Vietnam has been formed since the early 90s when the gas output associated with Bach Ho field, if not brought ashore for use, would have to be burned offshore Therefore, on September 20, 1990, PV GAS was established on the basis of Vung Tau Petroleum Works Management Board with the original name of Gas Company and with the main function and task of collecting, importing, transporting, storage, processing, distribution, and trading of gas and gas products
First gas system – Cuu Long gas system:
Immediately after its establishment, under the direction of the Government and the Vietnam Oil and Gas Group, PV GAS immediately embarked on the implementation of the first gas system - Bach Ho gas system Cuu Long gas system, including an Offshore gas compressor rig, Pipeline system to transport gas from oil and gas fields in Cuu Long basin, to shore and up to Phu My, Dinh Co gas processing plant, storage, and liquid product export port at Thi Vai, gas distribution stations In order to bring gas ashore soon to meet the demand for gas, the system is divided into stages for implementation
At the beginning of the second quarter of 1995, the part of bringing gas to shore was completed; The first gas stream was brought ashore on April 26, 1995, from Bach Ho field to supply Ba Ria Power Plant with a capacity of 1 million m3/day, contributing to reducing the huge foreign currency expenditure from the state budget State to import diesel as fuel for Power Plants
Following that, together with the completion of the small air compressor rig, the large offshore compressor rig, and the onshore gas pipeline system, the capacity to bring gas ashore was gradually increased to 2 million m3/day in early 1997 and 3 million m3/day at the end of 1997, over 5 million m3/day in 2002 to transport more gas sources from other fields in Cuu Long basin: Rang Dong field 2002, Ca Ngu Vang, Phuong Dong 2008, Su Tu Vang field , Su Tu Den 2009, North Dome, Dragon, Doi Moi 2010, Te Giac Trang 2011, Hai Su Den, Hai Su Trang 2013, Dai Hung in
2015, Thien Ung in 2016… to power plants, fertilizer plants, public customers other industries in Ba Ria Vung Tau, Dong Nai, Ho Chi Minh City
The completion of the construction and operation of Dinh Co gas processing plant and PV GAS liquid product storage and export port at the end of 1998 was an event of great technical, economic, and social significance festival For the first time, LPG and Condensate are produced in Vietnam Since May 1999, PV GAS has met most of the domestic LPG demand with good quality and competitive prices, replacing the products that Vietnam has had to import from abroad for a long time
Up to now, Cuu Long Gas System is constantly being developed, with offshore compressors, and gas pipeline systems nearly 390 km long from Cuu Long basin to shore (design capacity: 2 billion m3 of gas/year) , to consumers in Ba Ria Vung Tau, Dong Nai, Ho Chi Minh City, Phu My Gas Distribution Center, Dinh Co Gas Processing Plant (design capacity: 2 billion m3 of gas, 350 thousand tons of LPG and
130 thousand tons of Condensate/year), Liquid product storage and export port at Thi Vai (designated storage capacity: over 71,000 tons of LPG, 46,000 m3 of Condensate;
2 wharves of 60,000 DWT and 2,000 DWT)
Second gas system – Nam Con Son gas system:
Promoting the great achievements gained from the Cuu Long Gas System, PV GAS continues to deploy the second gas system - Nam Con Son Gas System with the participation of foreign partners who are Oil Corporations and Gas Groups gas pipeline system in the world, including a pipeline system over 400 km long from fields in Nam Con Son basin, Nam Con Son gas processing plant In December 2002, Nam Con Son gas system completed important items, the first gas flow from Lan Tay and Lan Do fields was brought ashore to consumers After that, Nam Con Son Gas System in turn received more gas sources from other fields in Nam Con Son basin (Dragon Doi, Rong Doi Tay in 2006, Chim Sao, Dua in 2011, Hai Thach, Moc Tinh in 2013) ); becoming the gas system with the largest capacity today, over 7 billion m3 of gas/year, significantly increasing the gas output PV GAS supplied to the market
RESEARCH OVERVIEW AND RESEARCH GAP
The research aims to improve the financial management efficiency of PV Gas, a leading gas company, by identifying and implementing strategies that optimize financial processes and enhance overall performance Effective financial management is crucial for organizations to achieve their goals, maintain financial stability, and maximize shareholder value By focusing on PV Gas, this research investigates the specific challenges faced by the company in its financial management practices and proposes solutions to enhance efficiency
The research will involve a comprehensive analysis of PV Gas's current financial management practices, including budgeting, cost control, financial reporting, investment decision-making, and risk management It will also explore the regulatory and industry-specific factors that impact the company's financial operations The study will leverage both qualitative and quantitative research methods to gather data, analyze financial statements, conduct interviews with key personnel, and benchmark PV Gas's financial performance against industry peers
Despite the significance of financial management in achieving organizational success, there is a research gap in specific strategies tailored to the energy sector, particularly for gas companies like PV Gas While there exist general guidelines and best practices for financial management, adapting these principles to the unique challenges faced by energy companies is crucial
Furthermore, PV Gas operates in a dynamic and highly regulated industry, which necessitates research that considers the specific regulatory frameworks and market conditions influencing financial management decisions The research gap lies in the lack of studies that provide a detailed analysis of financial management efficiency in the context of gas companies, focusing on areas such as optimizing capital allocation, improving cost control mechanisms, and implementing risk management strategies specific to the energy sector
By addressing this research gap, the study will contribute to the existing body of knowledge by providing insights into the financial management challenges faced by PV Gas and proposing practical strategies to enhance efficiency The findings will not only benefit PV Gas but also other gas companies operating in similar contexts, ultimately improving the financial performance and sustainability of the energy sector as a whole.
RESEARCH OBJECTIVES AND RESEARCH QUESTIONS
Having recognized the importance of financial analysis as well as the position that PV Gas holds in the Vietnamese market, this thesis aims to analyze PetroVietnam Gas financial performance over the recent years, specifically over the last 5 years from 2017 to 2021, in order to assess the corporation’s profitability, liquidity, solvency, asset management, short term and long term financial position, as well as to make recommendations to any red flags identified during the analysis
By way of conducting the fore-mentioned financial analysis, the research aim is to investigate, synthesize, and evaluate PV Gas’s financial position over a 5-year period from 2017-2021 Based on the company’s financial data and using suitable analysis tools to evaluate the company’s financial position, profitability, liquidity, and solvency, it is possible to provide recommendations that would help improve any drawbacks in the financial performance of the company in the past, present, and future
The focal aim of this thesis is to answer the following two questions:
- What was PetroVietnam Gas’s financial efficiency in the period 2017-2021?
- What could the company do to improve its financial efficiency in the future?
Scope of research and methodology
Scope refers to how far the research area has been explored and the parameters in which the study will be operating The scope of this research covers the financial performance of one case study company, being PetroVietnam Gas, during a 5-year period from 2017-2021 This thesis will analyze the financial performance of PV Gas during this period in Vietnam
Research methodology is the specific procedures or techniques used to identify, select, process, and analyze information about a topic In a research paper, the methodology section allows the reader to critically evaluate a study’s overall validity and reliability (Wilkinson, 2002) Mixed-method has been deemed most suitable for this research Quantitative secondary data will be collected through archival documents of a case study company PVGAS This financial data will then be analyzed using various financial analysis tools such as financial ratios, common- size analysis, and vertical and horizontal analysis, among others Moreover, qualitative primary data will be collected through interviews with staff at PVGAS to investigate their perceptions of the company’s performance and company’s future prospects at the moment and once IFRS is adopted These mixed methods will together shed light on PVGAS’s financial position and prospects in order to draw recommendations.
Limitations during research
This research’s major shortcomings lay in data limitations, in terms of time lengths and sample size Despite having chosen the most accessible and appropriate methodology for the research topic, the author acknowledges that for more accurate results, the studied time period could be extended further back into the past in order to recognize any trends or impact of historic events, which could be useful for future decision making Moreover, the sample size of interviewees could be extended beyond the company’s staff to other stakeholders, which could give a more representative view of the results.
Structure of the thesis
The remainder of this thesis is structured into 4 main parts: (Chapter 2) Theoretical framework of financial efficiency, (Chapter 3) Research Methodology, (Chapter 4) Results and Discussion, and (Chapter 5) Conclusion and Recommendations.
LITERATURE REVIEW AND THEORETICAL
Definition of financial efficiency
What is corporate financial management?
To put it simply, corporate financial management is the planning to use the capital for business activities for the purpose of controlling cash flow to limit risks and profitability There are many activities that require businesses to be evenly distributed such as investment, procurement, staff salaries, maintenance costs, etc Good management is not easy, just a little mistake can cause damage have great consequences
- The role of mobilizing and exploiting financial resources to ensure the business requirements of enterprises and organizations to use capital most effectively
- The role of leverage in stimulating and regulating business activities
- The role is a tool to check the business activities of the enterprise to promptly handle if financial risks occur
Principles of corporate financial management
Re-system of financial resources
Enterprises have many different sources of finance such as Credit cards, loans, bank finance, brokerage accounts, assets inside the business, and funds and these resources will always be needed checked and monitored regularly Therefore, a systematic arrangement will be what businesses need to do to control all the above items, thereby making payment and spending plans in a timely manner
Financial management earns more than spends
When the budget spends more than the profit brings, that's when your business is having serious financial problems, if this situation continues to happen, it is easy to lead to bankruptcy Therefore, the main rule is that revenue is more than expenditure, which will help businesses avoid debt when doing business In addition, businesses also need to know the source of spending money and closely monitor it to avoid unnecessary use of the budget
Use corporate finance to make profitable investments
Using money for investment purposes is a mandatory principle for businesses to generate profits and expand brand names in the market because the value of assets of the business will have changed over time If money is properly managed, businesses will be able to generate large external revenues, thereby enriching financial resources
Balance risk ratio and profit rate to avoid a shortfall in the corporate budget Profitable investment plans will not always succeed, as there is always a certain rate of return and loss Businesses now need to balance risk and return to avoid budget deficits as much as possible The lower the risk, the lower the return, whereas the higher the risk, the higher the return Therefore, to limit spending more than revenue, businesses can diversify fields and different product categories for investment This will help the business not be affected too much if it, unfortunately, loses in certain business activities
Taxes can affect corporate financial management
Tax is an issue that businesses need to pay attention to when implementing financial management when any business activities of businesses that earn profits will be subject to tax Taxes of each region, or country will be completely different, which can have a good or bad effect on businesses Some areas have good markets, but taxes are too high due to national and regional policies, which will cause financial difficulties for businesses Example: When a business builds a factory, it will have to consider options for land and resource tax incentives in different regions Sometimes in an area that is close and convenient but with high taxes, it is easy to lose money, then choose a further area but the financial return is better in the end
Make a contingency plan for business finances
There will always be unexpected events that can't be foreseen such as fire, natural disaster, war, market changes, etc., which affect the budget of the business Therefore, in order to manage cash flow in the best way, businesses should have backup financial plans in case of emergencies as mentioned above, in order to ensure long-term development and financial security enterprise
Good corporate financial management will contribute to a stable and scientific budget allocation, which is very important for sustainable development in the market Hopefully the information that MSpace provides will be useful to you in the budget management process of your business.
Measuring financial efficiency
Efficiency is getting more output from the same resource or getting the same output from fewer resources There are efficiency ratios that are used to measure production or financial efficiency, or a combination of both Some indicators of financial performance include:
Operating efficiency ratio: This ratio is used to measure how efficiently a company's assets are used With this type of ratio, managers can divide into
“operating profit” and “operating efficiency” The operating profit index provides information about a company's overall profitability And performance-related indicators will help management monitor the effectiveness of asset use in the business In general, the operating ratio will indicate how quickly a business's current assets or liabilities are converted (Rashid, 2018)
Solvency ratio: Based on the solvency ratio, the analyst can assess the ability of the business to meet its long-term obligations Going into solvency ratio analysis will give managers insight into the level of financial leverage that the company is using currently Some solvency ratios also help investors see if the company has enough financial strength to pay interest continuously or pay other fixed fees If there is not enough cash flow, there is a high probability that it will lead to default (Fraser, Ormiston, and Fraser, 2010)
Formula: Debt to Equity Ratio =Total Debt/Equity of Equity
The debt-to-equity ratio will reflect the level of risk in setting up and operating the company's capital Based on this ratio, the management can see the amount of debt the company is carrying to be able to run the business It can be short-term, long- term debt or mortgage loans The debt-to-equity ratio gives investors an overview of the company's financial strength If this ratio is greater than 1, the company's assets are made up of debts Conversely, if this ratio is less than 1, the company's assets are made up of the owners' existing capital If the debt-to-equity ratio is small, the company currently has little debt If this ratio is increasing every quarter, it means that the business is facing difficulties in paying its debts and is at risk of bankruptcy in the future (Hadhek, 2015)
Profit margin: Common profit-related ratios often include profit margin, profit-to-sales ratio Based on these ratios, the analyst can calculate the current profitability of the business and calculate the net profit of each shareholder in the company Through the rate of return based on revenue, investors can capture the exact amount of money earned after investing capital As for the rate of return, it will tell us exactly what the rate of return on assets is and what the rate of return on equity is
From there, it is possible to make a plan to adjust the company's business activities to suit the actual situation (Handayani & Winarningsih, 2020)
According to Venanzi (2010) Corporate financial performance measured in terms of accounting-based ratios has been viewed as inadequate as firms began focusing on shareholder value as the primary long-term objective of the organization Corporate managers have been facing a period where a new economic framework that better reflects economic value and profitability had to be implemented in their companies The increased efficiency at the capital markets requires that capital allocation within companies become more efficient: a value based management framework that better reflects opportunities and pitfalls, is therefore necessary Subsequently, value metrics were devised that explicitly acknowledged that both equity and debt have costs, and thus there was a need to incorporate financing risk- return into performance calculations The focus of this article is a review of the main value-based measures: the economic value added (EVA), the cash flow return on investment (CFROI) and the shareholder value added (SVA) The objective is contributing to the developing dialogue on the appropriateness of different financial performance measures by reviewing their differences as well as their similarities in terms of measurement, association with market financial performance and DCF approach, implications on managerial incentives, and by highlighting their respective strengths and weaknesses
According to Bacidore, Boquist & Milbourn & Thakor (1997) Refined economic value added (REVA) provides an analytical framework for evaluating operating performance measures in the context of shareholder value creation Economic value added (EVA) performs quite well in terms of its correlation with shareholder value creation, but REVA is a theoretically superior measure for assessing whether a firm's operating performance is adequate from the standpoint of compensating the firm's financiers for the risk to their capital In this article, comprehensive statistical analysis of both REVA and EVA is used to estimate their correlation with and their ability to predict shareholder value creation REVA statistically outperforms EVA in this regard Moreover, the realized returns for the
1988-92 period for the top 25 REVA firms were higher than the realized returns for the top 25 EV A firms
(ii) Analysis of Financial statements
Research framework
Charles (2012) has designed a framework for analyzing financial statements as per the following table:
Phase Sources of information Output
1 Articulate the purpose and context of the analysis
The nature of the analyst’s function, such as evaluating an equity or debt investment or issuing a credit rating
Communication with client or supervisor on needs and concerns
Institutional guidelines related to developing specific work products
Statement of the purpose or objective of analysis
A list of specific questions to be answered by the analysis
Nature and content of report to be provided
Timetable and budgeted resources for completion
2 Collect data Financial statements, other financial data, questionnaires, and industry/economic data
Discussions with management, suppliers, customers, and competitors
3 Process data Data from the previous phase Adjusted financial statements
Analyze/interpret the processed data
Input data as well as processed data
Phase Sources of information Output
5 Develop and communicate conclusions and recommendations
Analytical results and previous reports
Institutional guidelines for published reports
Analytical report answering questions posed in Phase1 Recommendation regarding the purpose of the analysis, such as whether to make an investment or grant credit
6 Follow up Information gathered by periodically repeating above steps as necessary to determine whether changes to holdings or recommendations are necessary
Step 1: Articulate the purpose and context of analysis
It is essential to clarify the purpose when conducting an analysis Understanding of purpose is especially important in analyzing financial statements because there are many available techniques and significant amounts of data Some analytical tasks are well defined, in which case the purpose of the analysis requires little decision from analysts For instance, a periodic credit rating of an investment - grade debt portfolio or a company's equity analysis report may be guided by institutional rules such that the intention of analysis given Moreover, formats, procedures and sources of information may also be provided For other analytical tasks, determining the purpose of the analysis requires the analyst to make a decision Analysis’s aims orient further decisions on the approaches, tools, data sources, and formats to report analytical results and the relative importance of various aspects of the analysis
Analysts get the data needed to answer specific questions An important part of this step is to gain an understanding of the company's business, financial performance and financial situation (including trends over time and compared with competitors) Additionally, information about the economy and industry is essential to understand the environment that the firm operates Analysts often adopt a top down approach whereby they get an understanding of macroeconomic such as the prospects of the economy and inflation; and identifying the prospects of the company in the expected macroeconomic environment
After obtaining the financial statements and other information, the analyst processes this data with appropriate analytical tools For example, data processing may involve calculating ratios; preparing common-size financial statements; creating charts; performing statistical analyzes, such as Monte Carlo simulations; implementing equity valuation; or using any of the analytical tools that are suitable for the task A comprehensive financial analysis during this stage will include:
- Read and assess financial statements each time period to analysis This includes reading footnotes and understanding which accounting standards have been applied, what accounting choices have been made, and what operating decision have been made that impact on financial statements
- Make any necessary adjustments to the financial statements when occurring problems reflect differences in accounting standards, accounting choices or executive decisions
- Collect common-size financial reporting data and financial ratios (measuring of various aspects of company performance based on financial factors) On the basis of common-size financial statements and financial ratios, analysts can assess firm’s probability, leverage, liquidity, efficiency and valuation
Step 4: Analyze/Interpret the processed data
When the data has been processed, the next step is interpreting the output The answer to a specific financial analysis question is seldom the numerical answer alone; the answer to analytical questions bases on interpretation of results and the use of this result to support conclusions or recommendations The answers to the specific analytical questions can themselves achieve the underlying purpose of analysis, however, a conclusion or recommendation is required To support making decision, the analysis will cite information such as target value, relative performance, expected future performance given the company's strategic, management quality and any other important information
Step 5: Develop and communicate conclusions/recommendations
Communicating conclusions or recommendations in an appropriate format is the next step in the analysis An appropriate format would change by the analysis task, by firms and / or by audience
The process does not end with the report If a capital investment is made or a credit rating is assigned, periodic review is required to determine whether the original conclusions and recommendations are still valid Follow up may involve repeating all the above steps in the process on a periodic basis.
RESEARCH METHODOLOGY
Research methods
This research aims at analyzing PV GAS financial performance over the recent years, specifically over the last 5 years from 2017 to 2021, in order to assess the corporation’s profitability, liquidity, solvency, asset management, short term and long term financial position, as well as to make recommendations to any red flags identified during the analysis Basing on the company’s financial data and using suitable analysis tools such as financial ratios, common-size analysis, vertical and horizontal analysis, among others, to evaluate the company’s financial position, profitability, liquidity, and solvency, it is possible to provide recommendations that would help improve any drawbacks in the financial performance of the company in the past, present, and future Additionally, for accurate identification of critically sensitive areas that require extensive views and perceptions of involved individuals, the quantitative method was mixed with a qualitative one
The second qualitative method used in this study is a semi-structured interview conducted among employees at PV GAS who have a reasonable level of involvement in the company's operations and performance The content of the interview will help the author understand the assessment of the board of directors on the business and financial situation in the past At the same time, the orientations on business development in the coming time will be able to help the author come up with solutions to improve the efficiency of financial management All the interviewees were of Vietnamese origin, so the interviews were conducted in Vietnamese, then they were recorded into English and analyzed in English.
Justification of chosen methods
For this study, mixed techniques were used, with semi-structured interviews serving as the qualitative component and the analysis of financial data serving as the for this thesis has been deemed appropriate The research purpose and research questions are closely followed, which is the initial justification
In order to answer the first research question, the researcher considers a quantitative analysis of a company's financial data over the regarded period of time This can shed light on the past, present, as well as future financial situation of the company However, due to the nature of financial reports preparation, not everything is reflected through the analysis of mere financial data Therefore, in order to answer the second research question, the researcher considers a qualitative approach being through semi – structured interviews with relevant individuals within the company, who have reasonably high exposure to the financial reports preparation process and who have an adequate understanding of the company’s performance and future prospects It is believed that the combination of the above mentioned two methods will allow this thesis to draw adequate and meaningful conclusions regarding PV GAS’s financial management efficiency and recommendations for future improvements
The second reason for choosing mixed – method is the advantages of incorporating both qualitative and quantitative aspects to achieve a high level of scientific rigor in mixed methods research as outlined by Dewasiri et al (2018) The authors believe that a balanced combination of both methods can achieve much more scientifically justified research results than when compared to the non – mixed one Using both financial analysis tools and semi – structured interviews can help contribute to the depth of the financial figures by attributing dry and rough figures to the opinions and untold truths behind them
The third reason for choosing a mixed – method is diversification of the research methodology of this project The researcher is of the opinion that stand-alone financial analysis would not be sufficient to form a high – quality research thesis Similarly, standalone interviews of individuals would not suffice to make an adequate thesis Therefore, it is considered that a combination of the two supplement each other in a way that the results of this thesis can be considered and used for practice or further research.
Data collection and analysis
Quantitative data is collected directly from information published by PV GAS in the period 2017 - 2021 The main sources of information collection include: Financial statements, annual reports, government studies related to business lines,published articles, discussion forums, industry analysis reports, among others By using this kind of data collection, the reseаrcher hаs better control over the gаthered informаtion as they are tailored for purpose, but can be quite general in nature
Interview questions focused on mid-level managers on issues related to PV GAS production and business activities in the past Some issues such as: Causes of growth, Why 1 ratios or financial ratios are not reached or weak The interviewers belong to the finance - accounting department and the direct sales departments Estimated time for each interview is 15 minutes The number of people expected to be interviewed is 5 people Due to the fact that all interviewees are already existing staff of the company, they might have a biased or rather internal view on the research matter Therefore, combined with data sources from outside the company is a good balance to make sure the thesis is not of internal nature in its entirety and adds meaningful value to the literature on financial analysis of PV GAS company.
Methodological limitations
Two methods were used for the purposes of this study including (1) content analysis of the company's archives and financial statements and (2) semi-structured interviews conducted among employees PVGAS members who have a reasonable level of involvement in the operations and performance of the company For a research paper of relatively small scope like this one, it can be argued that using the two methods can overwhelm the research objective with too great a flow of information and the analysis may be too large face the risk of losing the proper depth However, after careful consideration, the two methods described above were chosen for this research paper because it is believed that such dual dimensions of the data source as well as the layers of views are completely independent formulation obtained directly through semi-structured interviewing, in fact, enhances the depth of interpretation and analysis After justifying the choice of methodology, the researcher maintains an open mind to any potential criticism of the limitations of the methodology
With regard to interviews, three limitations in particular were noted during the conduct of this study First, the sample population that participated in the interviews was quite small - only a handful of people were interviewed, which may imply that the sample and results are under representative Secondly, the interviewee is conducted entirely in Vietnamese, potentially causing the risk of mistranslation, misunderstanding and incomplete message transmission To the best of his ability, the researcher made sure to provide high-quality translations and identify themes in the interviewees' responses.
RESULTS AND DISCUSSION
Financial Analysis
The part offers a more thorough study of the firm in addition to the researched qualitative information about its history that is offered in section 1.1 The company's consolidated audited financial statements for 2017 to 2021 were obtained from the website and subjected to a thorough analysis using a range of financial analysis tools to determine the company's profitability, solvency, asset management, short- and long-term financial position, and to provide suggestions for any warning signs that accumulate Financial ratios, general scale analysis, and vertical and horizontal analysis, among other analytical techniques, are used to evaluate the company's financial status, profitability, computation of liquidity, and solvency
The company's asset structure tends to increase in the period 2017 - 2021 from VND 61,889 billion to VND 78,768 billion, up 27.27% During this period, the demand for assets focused mainly on short-term assets, accounting for over 60% of the total asset structure The company's long-term assets account for about 40%
Thus, it can be seen that the company has quite high liquidity and easily adapts to the ups and downs of the market
Table above shows the capital structure of Petrogas The main source of capital of the enterprise is from equity, accounting for over 65% of the capital structure and peaked in 2019 when equity accounted for about 79.79% This can be seen that corporate capital from abundant equity, low external debt is not under much financial pressure and is doing business effectively Of course, the shares of companies listed on the stock exchange will also be higher The opportunity for the subject is the investor to choose the shares of this company to invest profitably
Appendix 2 shows the company's income statement Profit after tax of enterprises increased sharply in the period 2017-2019, increasing from 9,938 billion VND to 12,086 billion VND But in the period from 2019 to 2021, it decreased sharply from VND 12,086 billion in 2019 to VND 8,852 billion in 2021
Appendix 3 shows the cash flow from operating activities of Petrogas using the indirect method Cash flow in the period 2017-2021 is mainly derived from cash flow from operating activities and expenditures from investment and financial activities Cash flow from business activities in the period 2017-2021 decreased sharply by VND 14,386 billion in 2017 to VND 7,595 billion in 2021, equivalent to a decrease of 47.21% compared to 2017 Cash flow spent on investment activities also had The strong volatility during this period decreased from VND 8,691 billion in 2017 to VND 4,722 billion in 2019 and increased sharply to VND 6,755 billion in
2021 Cash flow from investment activities is positive in 2020 ( 99 billion dong) Cash flow from financial activities is also quite difficult to predict when spending on financial activities increased sharply from VND 5,729 billion in 2017 to VND 10,188 billion in 2019 but in the period of 2019 - 2021, spending on operations finance dropped sharply to VND 774 billion in 2021.
Common – Size Analysis
Overall scale analysis is used to compare the weighting of items in the financial statements to the totals of the financial statements, even though it often does not disclose a large amount of analytical information across the succession of financial quarters When comparing across time, it is clear that the company's share of financial data items varies during the study's financial periods As a result, additional analysis—referred to as horizontal analysis in the next subsection—is seen to be significant and required
Table 4.2: Common-Size Consolidated Statement of Financial Position
Table 4.2: Common-Size Consolidated Statement of Financial Position
Common-Size Consolidated Statement of Profit and Loss
Profit/Loss from associate companies 0% 0% 0% 0% 0%
Ratio Analysis
An evaluation of a company's liquidity, operational asset management, solvency (or financial risk), and profitability is carried out as part of a financial ratio study (Needles et al, 2014) The calculation and discussion of each of these financial ratio clusters is provided below
Table 4.3: Extracts from Petro financial reports
Inventory 1,645,376 1,948,260 1,574,703 1,662,573 3,241,216 Account receivable 9,174,883 10,213,711 10,358,798 10,239,200 16,920,192 Account payable 2,324,293 2,663,844 1,913,893 2,676,586 6,630,916
The management of Petrogas' operational assets is assessed using the second set of financial parameters in this research, which is crucial if the firm is to prosper Successful businesses carefully control their operational assets and liabilities throughout the operating cycle, according to research The estimated ratios demonstrate comparable broad trends in Petrogas' operational assets In particular, all three turnovers tend to decline steadily between 2017 and 2021, a time during which the inventory for 2018 is 32.35, down almost 50 percent from the 60 it was in 2017 from December 26, 2017, to September 7, 2021, the trend of receivables turnover similarly begins to decline, falling by 62.60% from 2017 These patterns indicate a decline in inventory sales, debt repayment, and creditor payments for Petrogas robust, thus raising questions about how the business is doing Businesses aim to have as few days of inventory and uncollected sales as feasible because those metrics correspond to regular cash inflows; likewise, the greater the number of days payable, the better since those metrics correspond to regular cash inflows with moderate cash outflows Table 6 shows that while the number of days in inventory is still only 6 to
14 days, the number of days receivable is much higher at 14 to 37 days, and the number of days paid is often between 8 and 26 days These suggest that the handling of accounts receivable may have a problem
Figure 4.2: Financial Risk Ratio of PV Gas
The company's solvency, also known as financial risk, is the subject of the third cluster of financial ratios The debt-to-equity ratio and the return-to-equity ratio were the two ratios picked for this analysis To evaluate a company's capital structure and determine its level of financial risk, the debt-to-equity ratio is determined by dividing all liabilities by shareholders' equity company To determine the net income produced for each dollar invested in the firm, return on equity is determined by dividing net income by average shareholder equity Outside investors should pay particular attention to this Given the debt-to-equity ratio, although the overall trend is stable and healthy, it seems to have a slight downward trend in 2021 down from 15.46 in 2020 to 13.58 in 2021 Needles et al (2014) say that a higher ratio indicates more financial risk because it shows that the company is relying on debt financing rather than equity provided by shareholders Petrogas' return on equity shows an increasing trend over the 2017-2021 period, whereby the company's income per dollar invested has nearly doubled since 2017 (4.55) to 2021 (8.75) As it is an important indicator for outside investors, a substantial increase in return on investment could predict financial advantages for Petrogas in the coming years
In terms of currency, Petrogas's net income fluctuate continuously in 2017 at VND 9,938 billion and increased to VND 12,086 billion in 2019 equivalent to an increase of 21.61% compared to 2017 but net income tended to decrease until In 2021, net income is only 8,852 billion VND compared to a decrease of 26.67% compared to 2019 At the same time, shareholder's capital also increased sharply from 43,272 return on equity fluctuates significantly despite a significant increase in equity This demonstrates that there is a productive approach to make money, understand how to make the most of investment cash, and lessen the probability of running into financial difficulties in the near future
The evaluation of a company's profitability is the focus of the fourth cluster of financial ratios The three key ratios of profit margin, asset turnover, and return on assets may be used to evaluate the profitability of Petrogas in its whole Net income is multiplied by net sales to determine profit margin Net sales divided by the average value of all assets equals asset turnover Net income is multiplied by the typical total assets to compute return on assets These figures are computed using the financial information gathered in Table 9 The gross margin and asset turnover appear to steadily decline from 23.5 and 2.9 in 2017 to 17.71 and 1.11 in 2021, respectively, between 2017 and 2021 This demonstrates that since 2017, the ratio of income generated to income or total assets has continuously dropped However, ROA ratios have fluctuated a lot during this period and have been on a downward trend in the last two years
As a conclusion to the ratio analysis, it's critical to include the DuPont analysis in order to have a more thorough and broad perspective of the business's performance The DuPont study is an enhanced version of the ROE analysis that provides a more thorough understanding of what is the primary driver of the ROE, information that is essential for investors to know DuPont analysis is computed as follows:
DuPont Analysis = Profit Margin x Asset Turnover x Equity Multiplier Whereby:
Profit Margin = Net Income / Revenue
Asset Turnover = Revenue / Average Total Assets
Equity Multiplier = Average Total Assets / Average Shareholders’ Equity
Thus, it can be seen that in the period 2017-2021, the ROE index fluctuates continuously, increasing and decreasing unevenly In the period from 2017-2019, the ROE index continuously decreased from 4.55 in 2017 to 3.84 in 2019 but in the period 2020-2021 this index suddenly increased to 8.75, equivalent to an increase of 127.86% compared to the previous year 2019 and also the peak during this period Such a sudden rise and fall represents an important sign for investors to pay attention to the company's asset management.
Horizontal Analysis
Short-term trade accounts payable 2,324 2,664 1,914 2,677 6,631
Net cash flows from operating activities 14,386 12,422 12,681 7,330 7,595
Short-term trade accounts payable 100.00% 114.63% 82.36% 115.19% 285.33%
Net cash flows from operating activities 100.00% 86.35% 88.15% 50.95% 52.79%
Financial analysts frequently utilize horizontal analysis, which compares the current year's numbers using one-dollar amounts and rates % with the preceding base year, to get insight into year-to-year variations Instead of a 5-year set like the dataset used in this study, this technique performs best when comparing two years As a result, the author uses the two most variable years from 2017 to 2021 to perform the horizontal analysis based on the prior analytical technique These key elements are present at this time:
- Long-term assets fluctuate continuously without trend, in the period from 2017-2019, long-term assets tend to decrease from VND 23,632 billion in 2017 to VND 20,363 billion in 2019 In the period of 2020 again showed signs of going upstream and trending up and peaking in 2021
- Similar to long-term assets, short-term liabilities also fluctuate continuously in the period 2017-2021
- Inventories nearly doubled, and short-term receivables and short-term payables nearly tripled
- Net cash flow from operating activities nearly halved
The liabilities and operational cash flow were evident and appropriate based on the findings from the prior study, which raised a red flag for the author on the financial analysis of the company's current performance
Trend analysis is a term used to describe a version of horizontal analysis performed across a number of years rather than simply two The two-year horizontal analysis's red-flagged entries from above were chosen for trend analysis Horizontal analysis and trend analysis are different in that the former compares current numbers to the base year, whilst the latter compares current figures to the preceding year (in this case, the previous year is 2017) The findings of the trend analysis further support what was found during the horizontal analysis, which showed that the biggest fluctuations for all listed commodities took place in 2019 and 2021
Why horizontal analysis applied to long-term assets?
The key advantage of using horizontal analysis is that it allows for the visual identification of anomalies from long-running trends By presenting data on a comparative basis, changes in the data are more readily apparent In addition, the use of horizontal analysis makes it easier to project trends into the future Yet another advantage of this form of data presentation is when trends can be compared to those of competitors or industry averages, to see how well an organization’s performance compares with that of other entities.
A further advantage is that it requires little skill to spot anomalies in a trend, while other forms of analysis may require extensive experience to discern whether the numbers in a presentation are indicative of problems.
Impact of Reporting Standards on Horizontal Analysis
A horizontal analysis is most useful when the underlying financial information is consistently reported, based on the applicable financial reporting framework Examples of these frameworks are generally accepted accounting principles and international financial reporting standards Ideally, every business within an industry should apply an accounting framework in the same way, so that their reported financial information can be compared When a business takes an unusual position in regard to reporting standards, its financial statements will not be as readily comparable to those of its competitors The unusual application of accounting standards may be described in the footnotes that accompany a firm’s financial statements.
SEMI STRUCTURED
On the basis of the quantitative analysis presented in prior sections, the following semi – structured interview questions were designed and asked to the interviewees:
Question 1: Ratio analysis shows a significant decrease in return on equity while net income and equity increase sharply What could be the explanation for this?
Question 2: Lead time to customers and inventory time tends to increase, while time to suppliers tends to decrease Is this a potential cause for concern about the company's performance?
Question 3: What is PV Gas's business strategy in the future?
Question 4: In your opinion, what can the company improve in terms of financial performance in the coming time?
Interviewees are selected from senior staff at PV Gas who have a reasonable level of involvement in the company's operations and performance Five individuals were interviewed within two weeks in October 2022 four interviews were conducted in person, one by telephone All interviewees are Vietnamese men The professional range of the interviewees spanned representing Finance, Accounting, Human Resources, Marketing and Sales and General Manager This scope was deemed appropriate for the purposes of this study due to its high involvement in financial performance management, and therefore, a high level of understanding and understanding of the financial performance of the company
Question 1: Ratio analysis shows a significant decrease in return on equity while net income and equity increase sharply What could be the explanation for this?
There could be some ideas and methods, as well as how some transactions are handled, that are obstacles or disparities that might have an impact on financial measurements Divergences in net profit and net income might occur from various treatment techniques Some respondents showed astonishment and surprise when questioned about their worries over the decline in return on equity Interviewee 1 clarified the decline in return on equity was mostly caused by the influx of fresh capital from the prior year when given further information from the author's financial records and computations While net income fell from 9,938 to 8,852 trillion dong between 2017 and 2021 (an increase of 1,206 times from 43,272 to 52,193 trillion dong) Since net income is used to compute return on equity, the denominator has significantly increased, which is why this ratio has decreased According to him, the volatility does not give outside investors any reason to be alarmed and can be explained entirely logically
Question 2: Accounts payable turnover and inventory period tend to decrease, while payables turnover to suppliers tends to decrease Is this a potential cause for concern about the company's performance?
Interviewees' opinions on the idea of using financial ratios to measure operating efficiency were split between those who thought turnover ratios and corresponding days ratios were accurate and useful and those who thought they were merely theoretical and offered very little in the way of actual economic explanation The interviewee, who supported the turnover ratios and their usefulness, acknowledged that there is some worry about payment timeliness, but it is not very serious Because of the strategic choice to boost inventory purchases, which therefore led to an increase in accounts payable, which was also important in the first interview question, the turnover of inventory and payables have both dropped Concern over payment delay was only at a level that was acceptable for regular business and was not cause for alarm over PVGAS's operational effectiveness
4.5.3.3 Business model and growth drivers for the period 2021-2025
Question 3: What is PV Gas's business strategy in the future?
Through interviews with business leaders, PV GAS governance model: consists of 2 pillars:
The first pillar: Promoting the achievements that PV GAS has achieved over the past 30 years Participating in the construction and development of all stages of the domestic gas/LNG/gas product value chain; gradually reaching out internationally to ensure the sustainable development of PV GAS Holding the position as a leading enterprise in investing and importing gas and LNG for electricity production and other consumers Traditional products include gas for electricity, nitrogen, low pressure gas, LPG, condensate, CNG
The second pillar: Product diversification; Participating in the production and sales of end products to enhance product value to quickly adapt to the market Focusing on deep processing/processing, diversifying gas products to increase value and output of gas and gas products Research and develop renewable energy sources, energy transformation, industrial gas Participating in investment in gas/LNG power plants on the basis of promoting the potential and strengths of the gas-electricity value chain, ensuring enhanced competitiveness of the final output, electricity
PV GAS development objective: To build and develop PV GAS - a key unit in the gas industry that plays a pivotal role, leading the gas market of Vietnam, contributing to ensuring national energy security Specifically
● Average revenue growth is 7 - 9%/year
● Domestic market share: 100% dry gas; more than 50% of LNG; over 70% LPG
● The ratio of profit after tax/Charter capital is over 20%/year
PV GAS' mission: "Bringing clean energy from nature to serve socio- economic development and bring practical benefits to the country, shareholders, employees, partners and social community
Principle: Developing PV GAS on the principle of constantly improving the efficiency of corporate governance, applying digital technology, ensuring publicity, transparency and harmonizing the interests of shareholders, the State and people labor
4.5.3.4 Solutions to improve financial performance
Question 4: In your opinion, what can the company improve in terms of financial performance in the coming time?
The respondents demonstrated a strong belief and loyalty towards the performance as well as the potential future of PVGAS, as shown by the preceding five interview questions and replies The capacity to support more comprehensive information systems across the organization, so as to establish a more decentralized administration with a bottom up approach rather than top down approach as current, was one of the recognized options for improvement, as suggested by the respondents This has been suggested for some time but hasn't been put into practice yet despite being seen to improve collaboration among employees at all levels Interviewee 5 serves as an example of how this has mostly been caused by the influence of politics for a significant firm in Vietnam, but is close to being substantially accomplished in the near future The completion of paperwork, handling of requests, and processing of payments, according to the interviewees, was also a significant way to improve performance in the company because, in their opinion, particularly those working in
HR, this could speed up processes in the company, which will in turn improve overall efficiency and effectiveness of tasks under performance The two biggest barriers to strategic improvement were found as resistance to change and fear of the unknown.
Summary
Chapter 4 deals with the analysis of Petrogas' business performance through financial analysis, Common - Size Analysis, Ratio Analysis, and Horizontal analysis through annual reports for the period 2017-2021 and the Interviews with staff of PV
Gas The analysis results show that the company's total assets focus mainly on short- term assets and total capital is mainly equity Therefore, the company has high liquidity and always has capital available for business activities Regarding business results in the period 2017-2021, although the revenue is quite large, the cost of goods sold is quite high, so the profit after tax is still quite low compared to the net revenue Regarding cash flow, enterprises in the period 2017-2021 spend a lot on investment activities and financial activities only receive cash flow from business activities Days of inventory management and receivables from customers are still not effective as this indicator has increased year by year during this period The company's ROE and ROA during this period also fluctuate continuously, increasing and decreasing without trend, which shows that the business activities of this enterprise are unstable and ineffective In addition to analyzing the business performance of PVgas, this chapter 4 also mentions the development orientation of the business in the period of 2021-2025 which is Participating in the construction and development of all stages of the domestic gas/LNG/gas product value chain; and Product diversification
CONCLUSIONS AND RECOMMENDATIONS
Conclusions
5.1.1 The role and function of financial management of the management apparatus
Although the finance and accounting departments have been separated into two departments, the functions between the two departments are still intertwined and not specific Current financial management activities mainly focus on managing working capital and finding funding sources for the company's production and business activities Modern financial management activities have not been properly paid attention to and implemented Therefore, financial management should focus on the following activities: Financial analysis, planning, and control; Working capital management; Planning funding plans and finding attractive funding sources; Finding potential investment opportunities, assessing investment opportunities, and planning optimal investment budgets for each development stage; Building the optimal financial structure, capital structure, and reasonable dividend policy; Managing business risks and financial risks of the Company
5.1.2 Financial risk management activities at the Company
Financial decisions do not take risk into account, the forecast results may be optimistic and may be far from the actual results that can be achieved Therefore, when making a business plan, it is advisable to consider the problem under different economic situations and consider the planning targets only as expected results Increasing uncertainties lead to worse changes in the business results of enterprises Therefore, instead of waiting for the government to intervene or find a way to accurately forecast changes, businesses need to first turn to a proactive risk management approach The most important issue of risk management is to build a risk management program
5.1.3 Effective management of investment capital
With the current capital management mechanism, it has lost autonomy and independence in the investment of member units The company always gives itself investment opportunities but does not really attach importance to investment efficiency This is one of the reasons leading to the result that the management and use of capital are not high, and bad debts arise Therefore, it is necessary to have solutions to manage investment capital
Internal investment is an in-depth investment to develop production and business, creating conditions to expand scale and improve product quality To do so, it is necessary to develop investment to expand the size of member units, invest in new technology transfer and especially the investment must be in accordance with the requirements of the market, avoiding investment in movement It is necessary to have a focused investment policy for affiliated units in key fields in order to enhance financial potential and competitiveness in domestic and foreign markets
The Company's long-term investment is the process of using capital to form tangible fixed assets, intangible fixed assets, and financial assets necessary to meet the Company's operations with the objective of is to determine a reasonable capital structure in order to maximize profits over a long period of time Therefore, the construction and selection of long-term investment projects need to be carefully considered in all aspects, especially financial matters The company needs to comply with the project construction process, from information collection, and information processing combined with appropriate project evaluation methods such as net present value (NPV) method, internal rate of return (IRR), profitability index (PI), payback period (PP) On that basis, making accurate and reasonable selection decisions such as capital needs, financial resources support for the project, and especially drawing conclusions about the effectiveness of the project, the payback period, the level of the project's risks, etc., which means that the project must achieve the goal of maximizing profit and risk reduction
In addition, the Company also conducts external investment in the form of joint ventures, associations, securities investments, etc in order to maximize profits and minimize risks in the process of expanding the company's scale These are the activities the company is interested in and it's growing trend However, the effectiveness of these investments has not been clearly evaluated Therefore, the Company needs to determine the value of assets contributed as capital and the value of assets of the partner contributing capital Evaluate the effectiveness of capital contribution in capital contribution companies year by year to see the increase and decrease in the value of contributed capital From there, the management board makes decisions on whether to continue to invest or contribute capital.
Articulate the purpose and context of analysis
It is essential to clarify the purpose when conducting an analysis Understanding of purpose is especially important in analyzing financial statements because there are many available techniques and significant amounts of data Some analytical tasks are well defined, in which case the purpose of the analysis requires little decision from analysts For instance, a periodic credit rating of an investment - grade debt portfolio or a company's equity analysis report may be guided by institutional rules such that the intention of analysis given Moreover, formats, procedures and sources of information may also be provided For other analytical tasks, determining the purpose of the analysis requires the analyst to make a decision Analysis’s aims orient further decisions on the approaches, tools, data sources, and formats to report analytical results and the relative importance of various aspects of the analysis
Analysts get the data needed to answer specific questions An important part of this step is to gain an understanding of the company's business, financial performance and financial situation (including trends over time and compared with competitors) Additionally, information about the economy and industry is essential to understand the environment that the firm operates Analysts often adopt a top down approach whereby they get an understanding of macroeconomic such as the prospects of the economy and inflation; and identifying the prospects of the company in the expected macroeconomic environment
After obtaining the financial statements and other information, the analyst processes this data with appropriate analytical tools For example, data processing may involve calculating ratios; preparing common-size financial statements; creating charts; performing statistical analyzes, such as Monte Carlo simulations; implementing equity valuation; or using any of the analytical tools that are suitable for the task A comprehensive financial analysis during this stage will include:
- Read and assess financial statements each time period to analysis This includes reading footnotes and understanding which accounting standards have been applied, what accounting choices have been made, and what operating decision have been made that impact on financial statements
- Make any necessary adjustments to the financial statements when occurring problems reflect differences in accounting standards, accounting choices or executive decisions
- Collect common-size financial reporting data and financial ratios (measuring of various aspects of company performance based on financial factors) On the basis of common-size financial statements and financial ratios, analysts can assess firm’s probability, leverage, liquidity, efficiency and valuation
Step 4: Analyze/Interpret the processed data
When the data has been processed, the next step is interpreting the output The answer to a specific financial analysis question is seldom the numerical answer alone; the answer to analytical questions bases on interpretation of results and the use of this result to support conclusions or recommendations The answers to the specific analytical questions can themselves achieve the underlying purpose of analysis, however, a conclusion or recommendation is required To support making decision, the analysis will cite information such as target value, relative performance, expected future performance given the company's strategic, management quality and any other important information
Step 5: Develop and communicate conclusions/recommendations
Communicating conclusions or recommendations in an appropriate format is the next step in the analysis An appropriate format would change by the analysis task, by firms and / or by audience
The process does not end with the report If a capital investment is made or a credit rating is assigned, periodic review is required to determine whether the original conclusions and recommendations are still valid Follow up may involve repeating all the above steps in the process on a periodic basis
This research aims at analyzing PV GAS financial performance over the recent years, specifically over the last 5 years from 2017 to 2021, in order to assess the corporation’s profitability, liquidity, solvency, asset management, short term and long term financial position, as well as to make recommendations to any red flags identified during the analysis Basing on the company’s financial data and using suitable analysis tools such as financial ratios, common-size analysis, vertical and horizontal analysis, among others, to evaluate the company’s financial position, profitability, liquidity, and solvency, it is possible to provide recommendations that would help improve any drawbacks in the financial performance of the company in the past, present, and future Additionally, for accurate identification of critically sensitive areas that require extensive views and perceptions of involved individuals, the quantitative method was mixed with a qualitative one
The second qualitative method used in this study is a semi-structured interview conducted among employees at PV GAS who have a reasonable level of involvement in the company's operations and performance The content of the interview will help the author understand the assessment of the board of directors on the business and financial situation in the past At the same time, the orientations on business development in the coming time will be able to help the author come up with solutions to improve the efficiency of financial management All the interviewees were of Vietnamese origin, so the interviews were conducted in Vietnamese, then they were recorded into English and analyzed in English
For this study, mixed techniques were used, with semi-structured interviews serving as the qualitative component and the analysis of financial data serving as the for this thesis has been deemed appropriate The research purpose and research questions are closely followed, which is the initial justification
In order to answer the first research question, the researcher considers a quantitative analysis of a company's financial data over the regarded period of time This can shed light on the past, present, as well as future financial situation of the company However, due to the nature of financial reports preparation, not everything is reflected through the analysis of mere financial data Therefore, in order to answer the second research question, the researcher considers a qualitative approach being through semi – structured interviews with relevant individuals within the company, who have reasonably high exposure to the financial reports preparation process and who have an adequate understanding of the company’s performance and future prospects It is believed that the combination of the above mentioned two methods will allow this thesis to draw adequate and meaningful conclusions regarding PV GAS’s financial management efficiency and recommendations for future improvements
The second reason for choosing mixed – method is the advantages of incorporating both qualitative and quantitative aspects to achieve a high level of scientific rigor in mixed methods research as outlined by Dewasiri et al (2018) The authors believe that a balanced combination of both methods can achieve much more scientifically justified research results than when compared to the non – mixed one Using both financial analysis tools and semi – structured interviews can help contribute to the depth of the financial figures by attributing dry and rough figures to the opinions and untold truths behind them
The third reason for choosing a mixed – method is diversification of the research methodology of this project The researcher is of the opinion that stand-alone financial analysis would not be sufficient to form a high – quality research thesis Similarly, standalone interviews of individuals would not suffice to make an adequate thesis Therefore, it is considered that a combination of the two supplement each other in a way that the results of this thesis can be considered and used for practice or further research
Quantitative data is collected directly from information published by PV GAS in the period 2017 - 2021 The main sources of information collection include: Financial statements, annual reports, government studies related to business lines,published articles, discussion forums, industry analysis reports, among others By using this kind of data collection, the reseаrcher hаs better control over the gаthered informаtion as they are tailored for purpose, but can be quite general in nature
Consolidated statement of financial position
Consolidated Statement of Financial Position (Currency: Billion VND)
II Short-term financial investments 13,577 21,602 24,915 21,613 24,8
2 Long-term prepayments to suppliers 62 68 79 74 70
4 Long-term inter- company receivables
7 Provision for long-term doubtful debts
IV Long-term assets in progress 6,572 1,235 3,021 2,303 4,871
VI Other long-term assets 1,123 1,368 854 1,074 3,794
1 Short-term trade accounts payable 2,324 2,664 1,914 2,677 6,631
2 Short-term advances from customers 204 238 203 228 105
3 Taxes and other payables to state authorities
6 Short-term inter- company payables
7 Construction contract progress payments due to suppliers
10 Short-term borrowings and financial leases
11 Provision for short- term liabilities 9
2 Long-term advances from customers
4 Intercompany payables on business capital
8 Long-term borrowings and financial leases 7,312 3,396 1,456 1,964 7,51
12 Provision for long- term liabilities 24 45 837 1,7 2,146
9 Fund to support corporate restructuring
10 Other funds from owner's equity 6 6 6 6 6
- Accumulated retained earning at the end of the previous period
- Undistributed earnings in this period 5,735 7,489 10,05 7,709 8,527
12 Reserves for investment in construction
II Other resources and funds
1 Subsidized not-for- profit funds
2 Funds invested in fixed assets
Consolidated Statement of Profit and Loss
Consolidated Statement of Profit and Loss (Currency: Billion VND)
8 Share of associates and joint ventures' result
Share of associates and joint ventures' result
16 Current corporate income tax expenses
Profit after tax for shareholders of parent company
Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows (Currency: Billion VND)
Depreciation of fixed assets and properties investment
Foreign exchange (gain)/loss from revaluation of monetary items denominated in foreign currencies
Loss/(profit) from investment activities
Loss/(profits) from disposal of fixed asset
3 Operating profit before changes in working capital
(other than interest, corporate income tax)
(Increase)/decrease in prepaid expenses
Changes in available for sale securities
Other receipts from operating activities
Other payments for operating activities
Net cash flows from operating activities
1 Payment for fixed assets, constructions and other long- term assets
2 Receipts from disposal of fixed assets and other long-term assets
3 Loans, purchases of other entities' debt instruments
4 Receipts from loan repayments, sale of other entities' debt instruments
5 Payments for investment in other entities
6 Collections on investment in other entities
7 Dividends, interest and profit received
8 Increase/(Decrease) in term deposit
9 Purchases of minority shares of subsidiaries
10 Other receipts from investing activities
11 Other payments for investing activities
Net cash flows from investing -8,691 -7,315 -4,722 99 -6,755