Gross profit margin is an important indicator in financial analysis,measuring the ratio of gross profit a company earns from production and sales compared to revenue.. Operating profit m
Analyzing and Interpreting Financial Statements
Introduction
IDICO Corporation (Industrial Construction Corporation) is a joint stock company operating in the field of industrial construction and infrastructure investment (VietstockFinance vn , 2002)
Field of activity: IDICO Corporation mainly operates in the field of industrial construction and infrastructure investment The company has participated in the construction of many important projects such as bridges, highways, factories, seaports, industrial parks and other infrastructure projects (VietstockFinance vn , 2002)
As a leading construction company in Vietnam, IDICO operates on a nationwide scale, contributing significantly to the country's economy and infrastructure development Their projects enhance the quality of life for citizens and attract investment, fostering economic growth and advancement IDICO's contributions are essential to Vietnam's progress and prosperity.
Typical projects: IDICO Corporation has participated in the construction of many important projects, including national highway projects, road and bridge projects, power plants, industrial parks and other infrastructure works These are projects with great influence and important contributions to the country's economic and infrastructure development (VietstockFinance vn , 2002)
Partners and customers: IDICO has established partnerships and cooperation with many companies, organizations and governments in Vietnam and internationally The company's customers include construction companies, industrial enterprises, governments and investment institutions (VietstockFinance vn , 2002)
Development strategy: IDICO Corporation focuses on improving technical capacity, investing in advanced technology and developing high-quality staff The company also aims to expand its scale of operations and expand its market into fields related to industrial construction and infrastructure (VietstockFinance vn , 2002)
Sustainable commitment: IDICO is committed to implementing projects with high quality, ensuring safety and environmental protection.The company values maintaining long-term relationships with customers and partners, and adheres to business ethics and rules of fairness.(VietstockFinance vn , 2002)
Financial performance of the company
Net profit 2054691195297 578027279840 Net sales revenue 7485389751718 4301236491241
Beginning assets 495132028862 726542767957 Ending assets 1086919534730 495132028862 Average Asset 791025781796 610837398410 Beginning Shareholder's equity 3000000000000 3000000000000 Ending Shareholder's equity 3299999290000 3000000000000 Average Shareholder's Equity 3149999645000 3000000000000
Beginning Inventory 549370891448 539706732282Ending Inventory 1094750884655 549370891448Average Inventory 822060888052 544538811865Net Credit Sales 7485389751718 4301236491241
Beginning Shareholder's equity 3000000000000 3000000000000 Ending Shareholder's equity 3299999290000 3000000000000 Average Shareholder's Equity 3149999645000 3000000000000
IDICO's Gross profit margin difference between 2022 and 2021 is 0.24 Gross profit margin is an important indicator in financial analysis,measuring the ratio of gross profit a company earns from production and sales compared to revenue The increase in Gross profit margin from 0.17 in 2021 to 0.41 in 2022 shows that IDICO has a higher gross profit level and can be due to many factors such as increased selling prices, improved production efficiency or adjust costs This shows that IDICO is likely to generate larger gross profits in 2022 than in 2021.
IDICO's operating profit margin difference between 2022 and 2021 is 0.17 Operating profit margin is an important financial indicator, measuring the ratio of operating profit that a company earns from its main business activities compared to revenue The increase in Operating profit margin from 0.17 in 2021 to 0.34 in 2022 shows that IDICO has improved profit performance from its main business activities This can be explained by increased revenue from business activities, improved profit margins, reduced costs or more efficient financial management.
IDICO's Net profit margin difference between 2022 and 2021 is 0.14 Net profit margin is an important financial index, measuring the percentage of net profit that a company earns from business activities after deducting all costs, including operating costs and financial costs government and taxes The increase in Net profit margin from 0.13 in 2021 to 0.27 in 2022 shows that IDICO has improved its net profit performance This can be explained by increased net profit from core business activities, reduced costs or more efficient financial management.
IDICO's ROA difference between 2022 and 2021 is 1.65 ROA is a financial ratio that measures a company's ability to generate profits from its assets The significant growth in ROA from 2021 to 2022 shows that IDICO has improved its financial performance There are a number of factors that can explain this growth, including increased net profit from core business activities, improved asset management and increased capital investment A high ROA shows that IDICO has used assets effectively and generated high profits from business activities.
IDICO's Return on Equity (ROE) difference between 2022 and 2021 is 0.46 ROE is a financial ratio that measures a company's ability to
IDICO's Return on Equity (ROE) growth from 2021 to 2022 indicates enhanced financial performance and shareholder profitability This growth is attributed to increased core business profit, optimized capital management, and improved asset performance IDICO's high ROE demonstrates its effective use of shareholder equity to generate returns, showcasing its ability to leverage investments for shareholder benefit.
IDICO's Inventory Turnover Ratio difference between 2022 and 2021 is 1.16 Inventory Turnover Ratio is a financial metric that measures a company's sales frequency and inventory management The growth in Inventory Turnover Ratio from 2021 to 2022 shows that IDICO has improved its management performance and optimized its sales and inventory management processes This difference may indicate that IDICO has increased sales speed, reduced inventory time, and maximized operating profits A high Inventory Turnover Ratio shows that the company has better inventory management and is capable of selling quickly.
IDICO's Accounts Receivable Turnover Ratio surged by 4.73 between 2021 and 2022, reflecting an improvement in the company's collection practices and receivables management This ratio, which measures the frequency of customer payments and the efficiency of managing receivables, demonstrates that IDICO has accelerated its collection process, leading to reduced average collection times The improvement may be attributed to enhanced debt collection policies, improved customer relations, or optimized collection procedures.
IDICO's Accounts Payable Turnover Ratio difference between 2022 and 2021 is 8.9 Accounts Payable Turnover Ratio is a financial indicator that measures the frequency of a company's debt payments to suppliers or sellers The growth in Accounts Payable Turnover Ratio from 2021 to 2022 shows that IDICO has improved its debt management performance and processed payments to suppliers quickly. This difference shows that IDICO has increased the speed of debt payment and financial management related to suppliers This may indicate that the company has improved its payment process, enhanced its financial management, and optimized its purchasing process. Assets Turnover Ratio:
IDICO's Assets Turnover Ratio difference between 2022 and 2021 is 2.42 Assets Turnover Ratio is a financial ratio that measures the ability to use assets to generate revenue The growth in Assets Turnover Ratio from 2021 to 2022 shows that IDICO has improved its financial performance and ability to leverage assets to generate revenue This difference shows that IDICO has increased its asset utilization rate and efficiency in generating revenue from its assets This may indicate that the company has improved its production processes, asset management, and optimized business operations.
The difference in Day's Sales in Inventory (DSI) between 2022 and 2021 for IDICO is: 2022 DSI - 2021 DSI = 90.29 - 56.27 = 34.02 Day's Sales in Inventory (DSI) is a financial ratio used to measure the average time it takes a company to sell out its inventory The lower the DSI value, the faster the company will sell out inventory and better manage inventory turnover In this case, IDICO has an increase in DSI from 2021 to 2022 This shows that IDICO takes longer to sell out of inventory in 2022 compared to 2021 There can be many reasons for this These increases include unstable growth in sales or delays in inventory management IDICO may need to consider measures to improve management and optimize inventory turnover in the future.
IDICO's Current Ratio witnessed a notable increase from 2021 to 2022, demonstrating the company's enhanced liquidity and ability to meet short-term financial obligations This improvement signifies either an increase in short-term assets or a decrease in liabilities, or both The positive change in Current Ratio suggests IDICO's effective financial management, efficient capital utilization, and increased stability in fulfilling its financial commitments.
IDICO's Quick Ratio difference between 2022 and 2021 is 1.07 Quick Ratio, also known as Acid-Test Ratio, is a financial ratio that measures a company's ability to meet its short-term financial obligations using assets that are quickly convertible to cash or cash equivalents The growth in Quick Ratio from 2021 to 2022 shows that IDICO has improved its ability to pay short-term financial obligations and strengthen its liquidity This difference shows that IDICO has increased the value of its convertible assets or reduced its short-term financial obligations, or both This may indicate that the company has strengthened financial management, improved liquidity and created stability in its ability to pay financial obligations.
IDICO's Solvency Ratio difference between 2022 and 2021 is 0.13 Solvency Ratio is a financial ratio that measures a company's ability to meet its long-term financial obligations using its long-term assets The growth in Solvency Ratio from 2021 to 2022 shows that IDICO has improved its ability to pay long-term financial obligations and strengthen its financial sustainability This difference shows that IDICO has increased the value of its long-term assets or decreased its long-term financial obligations, or both This may indicate that the company has improved financial management, increased equity and created stability in its ability to pay long-term financial obligations. Interest Coverage Ratio:
The difference in interest coverage ratio between 2022 and 2021 of IDICO is: Interest Coverage Ratio in 2022 - Interest Coverage Ratio in 2021 = 14.66 - 0.44 = 14.22 Interest Coverage Ratio is a financial ratio used to measure a company's ability to pay interest on debt It measures the ratio between operating profit (or pre-tax profit) and interest expense In this case, IDICO has a significant increase in its interest coverage ratio from 2021 to 2022 This shows that IDICO has improved its ability to pay interest and potentially increase its operating profit (or bottom line) before tax) compared to interest expense in 2022 compared to 2021 This increase may reflect a significant improvement in the company's financial situation and IDICO's ability to manage debt.
IDICO's Debt-to-Equity Ratio difference between 2022 and 2021 is -0.42 Debt-to-Equity Ratio is a financial ratio that measures the ratio between a company's debt and equity The change in Debt-to-Equity Ratio from 2021 to 2022 shows that IDICO has had a change in its financial structure and level of use of different capital sources This negative difference shows that IDICO has reduced the ratio of debt to equity, possibly through reducing debt levels or increasing equity This may indicate that the company has improved its financial balance,reduced financial risk and increased sustainability.
Efficiency
IDICO's Inventory Turnover Ratio difference between 2022 and 2021 is 1.16 Inventory Turnover Ratio is a financial metric that measures a company's sales frequency and inventory management The growth in Inventory Turnover Ratio from 2021 to 2022 shows that IDICO has improved its management performance and optimized its sales and inventory management processes This difference may indicate that IDICO has increased sales speed, reduced inventory time, and maximized operating profits A high Inventory Turnover Ratio shows that the company has better inventory management and is capable of selling quickly.
IDICO's Accounts Receivable Turnover Ratio difference between 2022 and 2021 is 4.73 Accounts Receivable Turnover Ratio is a financial ratio that measures how often money is recovered from customers and how well a company is managing its receivable assets. The growth in Accounts Receivable Turnover Ratio from 2021 to 2022 shows that IDICO has improved its collection process and receivable asset management This difference shows that IDICO has collected money from customers more effectively, reducing the average time to collect receivables This may indicate that the company has improved its debt collection policy, enhanced customer management, and optimized its collection process.
IDICO's Accounts Payable Turnover Ratio difference between 2022 and 2021 is 8.9 Accounts Payable Turnover Ratio is a financial indicator that measures the frequency of a company's debt payments to suppliers or sellers The growth in Accounts Payable Turnover Ratio from 2021 to 2022 shows that IDICO has improved its debt management performance and processed payments to suppliers quickly. This difference shows that IDICO has increased the speed of debt payment and financial management related to suppliers This may indicate that the company has improved its payment process, enhanced its financial management, and optimized its purchasing process. Assets Turnover Ratio:
IDICO's Assets Turnover Ratio witnessed a significant 2.42 increase between 2021 and 2022 This ratio gauges a company's capacity to convert assets into revenue The positive difference in IDICO's Assets Turnover Ratio suggests an improvement in their financial performance and efficiency in utilizing their assets It may reflect enhancements in production processes, asset management, and business optimization, leading to a more effective conversion of assets into revenue.
The difference in Day's Sales in Inventory (DSI) between 2022 and 2021 for IDICO is: 2022 DSI - 2021 DSI = 90.29 - 56.27 = 34.02 Day's Sales in Inventory (DSI) is a financial ratio used to measure the average time it takes a company to sell out its inventory The lower the DSI value, the faster the company will sell out inventory and better manage inventory turnover In this case, IDICO has an increase inDSI from 2021 to 2022 This shows that IDICO takes longer to sell out of inventory in 2022 compared to 2021 There can be many reasons for this These increases include unstable growth in sales or delays in inventory management IDICO may need to consider measures to improve management and optimize inventory turnover in the future.
Liquidity
IDICO's Current Ratio difference between 2022 and 2021 is 1.43 Current Ratio is a financial ratio that measures a company's ability to meet its short-term financial obligations using its current assets The growth in Current Ratio from 2021 to 2022 shows that IDICO has improved its ability to pay short-term financial obligations and strengthen its liquidity This difference shows that IDICO has increased the value of its short-term assets or decreased its short-term financial obligations, or both This may show that the company has strengthened financial management, improved capital turnover and created stability in its ability to pay financial obligations.
Reflecting a financial health improvement, IDICO's Quick Ratio witnessed a growth of 1.07 from 2021 to 2022 This metric, showcasing a company's ability to settle short-term obligations with quick-to-liquidate assets, suggests IDICO's enhanced ability in meeting such obligations This improvement can be attributed to an increase in convertible assets, a reduction in short-term liabilities, or a combination of both Ultimately, this indicates a strengthened financial management strategy, increased liquidity, and stabilized ability to fulfill financial commitments.
Solvency
IDICO's Solvency Ratio witnessed a positive change of 0.13 between 2021 and 2022, reflecting an enhanced ability to fulfill long-term financial commitments The increased ratio suggests either an augmentation in long-term assets or a reduction in long-term obligations Consequently, IDICO's improved financial management practices, augmented equity, and enhanced stability in meeting long-term liabilities are evident.
The difference in interest coverage ratio between 2022 and 2021 of IDICO is: Interest Coverage Ratio in 2022 - Interest Coverage Ratio in 2021 = 14.66 - 0.44 = 14.22 Interest Coverage Ratio is a financial ratio used to measure a company's ability to pay interest on debt It measures the ratio between operating profit (or pre-tax profit) and interest expense In this case, IDICO has a significant increase in its interest coverage ratio from 2021 to 2022 This shows that IDICO has improved its ability to pay interest and potentially increase its operating profit (or bottom line) before tax) compared to interest expense in 2022 compared to 2021 This increase may reflect a significant improvement in the company's financial situation and IDICO's ability to manage debt.
IDICO's Debt-to-Equity Ratio difference between 2022 and 2021 is -0.42 Debt-to-Equity Ratio is a financial ratio that measures the ratio between a company's debt and equity The change in Debt-to-Equity Ratio from 2021 to 2022 shows that IDICO has had a change in its financial structure and level of use of different capital sources This negative difference shows that IDICO has reduced the ratio of debt to equity, possibly through reducing debt levels or increasing equity This may indicate that the company has improved its financial balance,reduced financial risk and increased sustainability.
IDICO's Debt-to-Capital Ratio difference between 2022 and 2021 is 0.05 Debt-to-Capital Ratio is a financial ratio that measures the ratio between a company's total debt and total capital The change in Debt-to-Capital Ratio from 2021 to 2022 shows that IDICO has had a change in its financial structure and level of use of different capital sources This difference shows that IDICO has increased the ratio of debt to total capital, possibly through increasing debt levels or reducing equity This may indicate that the company is using a large portion of debt to finance business operations.
Conclusion
IDICO's financial health has seen notable enhancements from 2021 to 2022 Improved Current Ratio and Quick Ratio indicate enhanced short-term debt servicing capacity Furthermore, an increased Solvency Ratio suggests improved long-term financial stability and sustainability However, IDICO requires attention to its Debt-to-Equity and Debt-to-Capital ratios, as the proportion of debt to equity and total capital has increased.
2022 This may can create financial risks and affect the company's financial balance The general assessment is that IDICO has made some improvements in solvency and financial sustainability, but still needs to pay attention and carefully manage issues related to debt structure and capital use.
HAC BUSINESS PLAN FOR NEXT YEAR
Production Units Sales Units COGS/ Unit 50
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Beginning cash balance 140,000 177,567 234,020 271,680 315,667 359,700 422,620 479,307 548,600 624,220 712,447 813,280 Revenue (income cash flow)
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Budgets
Budget Definition
A budget is an estimation of revenue and expenses over a specified future period of time and is usually compiled and re-evaluated on a periodic basis Budgets can be made for a person, a group of people, a business, a government, or just about anything else that makes and spends money.
Benefits of budgeting
Creating a budget helps businesses forecast income and expenses and spot potential cash flow problems A budget should also be updated monthly or quarterly to help companies spot potential opportunities and problems and react to them in a timely fashion.
Forecasting expenses and sales through budgeting allows managers to anticipate financial needs and plan resource allocation The budgeted cost of sales can guide the determination of raw materials and labor requirements, ensuring alignment between plans and resources Additionally, budgets provide financial controls by providing benchmarks for actual performance comparisons, enabling managers to identify areas for improvement and optimize operations.
28 when they must limit spending, and when they have extra cash to spend on reducing debt or increasing inventory.
Comparing year-to-date performance to the budget may help a manager decide how to approach a problem or challenge As an account item climbs over budget, it becomes a manager's priority to control cash outflows Budgets also help companies project cash flow, This helps managers reduce spending during certain periods, or alerts companies that they need to increase their access to capital sources, such as lines of credit or loans.
An effective manager is not just looking to meet budget, but also looks for ways to improve With weekly or monthly performance numbers compared to budget, a manager is a first-level systems analyst for operations.
Budget planning can be informed by analyzing the previous year's budget Managers should participate in the process as they have unique perspectives on factors like staff training that contribute to performance Forecasting provides managers an opportunity to propose improvements beyond their departments, fostering financial success in the upcoming year.
Limitations of Budgeting
Budgeting is based on a lot of assumptions in estimating expenses and revenues These are generally based on trends and the market scenario prevailing when making the budget Budgets can also be based on the predictions made for the coming year considering the data available at the time of budgeting.
Budgeting exercise can be, at times, a very time-consuming exercise It involves an extra workforce to get the estimates as accurate as possible Especially for a big company with various departments, budgeting exercise takes a huge effort The time consumed may be low in cases where the company uses budgeting software, and the employees are well-trained If the company uses a zero-based budgeting technique, the time, cost, and effort involved can be considerably large.
Budgeted numbers are considered sacrosanct by all the departments And there is usually very little flexibility after the budgeting exercise finishes The entire focus of senior management is on the budget, and all the strategies revolve around the budgeted numbers Any change in the market situation does not generally evoke the management’s attention to make any drastic change in the strategy due to budget constraints Instead, the company should shift as per the market and book more profit rather than stick to the budget.
Some managers believe that all the funds that are allocated to their department need to be spent It is believed that if they do not use as
Inadequate budgeting can result in funds allocated in the current budget not being fully utilized, while the subsequent budget allocates reduced funding This inefficient use of resources wastes funds and negatively impacts a company's profitability.
The allocation of expenditure between the departments is generally the call senior management takes Managers of some departments may raise issues in the method used for the allocation of these expenses, and this may create controversies It is not possible to consider suggestions from all the departments regarding budgeting methods and allocation of expenses.
The budgeting exercise is argued to be numbers-driven It focuses on the quantitative aspect of the business or improving the company’s profitability And does not consider the subjective or qualitative aspect The fact that the stakeholders, including the customers of the company, care about the quality of services along with the cost of it is totally side-tracked These are taken for granted as a part of the budget but not really seen in the budget.
At times when a particular department is unable to meet the budgeted targets, they end up blaming the other department that provides services to it for not providing the necessary support They even conflict on the transfer price that is decided internally between the departments This creates unnecessary tensions, and the company as a whole may not be able to run efficiently.
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VietstockFinance, vn (2002) IDC: Tổng Công ty idico – CTCP - IDICO - tải tài liệu, VietstockFinance Available at: https://finance.vietstock.vn/idc/tai-tai-lieu.htm?doctype=1 (Accessed: 29 November 2023).
Sanjay Borad, S., 2022 Limitations of Budgeting [online] eFinanceManagement Available at: https://efinancemanagement.com/budgeting/limitations-of-budgeting(Accessed: 29 November 2023).
Chron Contributor, 2021 Budget [online] Investopedia Available at:https://www.investopedia.com/terms/b/budget.asp(Accessed: 29November 2023).