group assignment analysis of steel companys financial report

- Iron ore is mined at Na Rua iron mine, Tan Giang ward, Cao Bang town, Cao Bang province.Business activities:- Provide all kinds of iron and steel, services related to mining, explorati

GROUP ASSIGNMENT Analysis of Steel Company’s

Financial Report

Lecturer: Tô Thụy Thùy Dương

Course: Principles of Accounting

ARCH 23, 2021

I Introductions of selected companies

1 TNB- Vnsteel - Nha Be Steel Joint Stock Company

2 CBI- Cao Bang Iron and Steel Joint Stock Company

3 T DS- Thu Duc - Vnsteel Steel Joint Stock Company

II Data Analysis

3 Total assets turnover ratio

4 Day’s sale uncollected

5 Sale inventory

C Solvency Ratio

1 Debt to Asset ratio

2 Times interest earned ratio

3 Working capital ratio

D Profitability ratios

1 Return on assets

2 Return on equity

3 Gross margin ratio

4 Profit Margin Ratio

E Market ratios

1 Earnings per share

2 Book value per share

3 Price to earnings ratio

4 Price to book ratio

III References

I Introductions of selected companies

1 Vnsteel- Nha Be Steel Joint Stock Company (TNB : UPCOM)

- The forerunner of Nha Be Steel Factory is Viet Thanh Company (VITHACO) built by a number

of Chinese investors in 1967

- In 1992, the Factory was renamed Nha Be Steel Factory

- On 01/01/2008, Nha Be Steel Joint Stock Company officially operated u

nder the model of Joint Stock Company

- As of December 31, 2009, the Company was a subsidiary of Vietnam Ste

- Purchase, sale and installation of air-conduction equipment systems

- Construction of civil, industrial, bridge and road, water supply and drainage systems, technical infrastructure works in urban areas - industrial zones

2 Cao Bang Iron and Steel Joint Stock Company

- Cao Bang Iron and Steel Joint Stock Company was established under Decision

No 2155 / QD-HĐQT October 5, 2006 of the Board of Directors of Vietnam C

oal - Mineral Industry Group with the main business activity of manufacturing

- Iron ore is mined at Na Rua iron mine, Tan Giang ward, Cao Bang town, Cao B

ang province

Business activities:

- Provide all kinds of iron and steel, services related to mining, exploration, refining and mineral processing,

- Mine design consultancy, investment consultancy, mining, refining and processing all kinds of minerals;

- Consulting, technology transfer in the fields of geology, mining and metallurgy;

3 Thu Duc - Vnsteel Steel Joint Stock Company (UpCOM)

- Thu Duc Steel Joint Stock Company has its origins in the 1960s with the original

name Vietnam Metal Company - VI KIMCO, operated and managed by a

Vietnamese owner

- On July 27, 1988, VIKIMCO Steel Rolling Factory

changed its name to Thu Duc Steel Factory

- From April 15, 2016: Thu Duc Steel Joint Stock

Company officially changed its name to Steel - Vnsteel

Joint Stock Company

Business activities:

- Manufacturing, trading, importing and exporting steel and steel products; raw materials and fuels, metal scrap for steel production; materials, equipment and spare parts for steel production, construction, transportation, mechanical engineering, industry

- Manufacture and sale of construction materials

- Producing and trading in oxygen, nitrogen, and argon in gas and liquid form; purchase, sale and installatio

n of gas production and use equipment systems

- Port operation business

- Forwarding services, transporting goods, warehouse and factory rental services

- Construction and business of high-rise buildings, offices and houses

II Data Analysis

is difficult for the company to pay the debt when it is due But that does not mean that the company will

be bankrupt because there are many ways to raise more capital

b Formula

Current ratio =

c Data from selected companies

2018 2019 20200.00

d Chart 2: Acid- test ratio

efficiency of capital use And we can see that CBI had an acid- test ratio under 0,5, it will not be able to pay all t

he short-term immediately and the enterprise may have to sell goods and assets urgently to repay the debt

B Activity ratios

1 Account receivable turnover ratio

The Accounts Receivable Turnover ratio provides useful information for evaluating how efficientmanagement has been in granting credit to produce revenue It is calculated as Net Sales divided by Average Accounts Receivable

Account Receivable Turnover ratio =

In this chart, we can see that:

- The company with high receivables turnover ratio is CBI, whereas the lowest is TNB

- Receivables turnover ratio of CBI and TNB is increased over time, whereas TDS is decreased

- A high receivables turnover ratio can indicate that a company’s collection of accounts receivable is efficient and the company has a high proportion of quality customers that pay their debts quickly

- A low receivables turnover ratio might be due to inadequate collection process, bad credit policies, or customers that are not financially viable or creditworthy

The asset turnover ratio, also known as the total asset turnover ratio, measures the efficiency with which

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

Total assets turnover =

TNB

Beginning balance of total assets 439,061,168,792 564,646,371,631 535,559,690,902

Ending balance of total assets 564,646,371,631 535,559,690,902 361,673,763,204

Net Sales

Average Total Assets

Total Assets Turnove

For TDS, this company has a high total asset turnover and increases every year, which shows thatkeeping a high inventory turnover reduces the risk that their inventory will become unsellable due to spoilage, damage, theft, or technological obsolescence In contrast, CBI has a low total asset turnover, whic

h indicates that the company is not effectively using its assets to generate sales

3 Day’s sale uncollected

The Days’ Sales Uncollected ratio indicates how much time is likely to pass before we receive cash receipts from credit sales It is calculated as Accounts Receivable divided by Net Sales times 365 days

Day’s sale uncollected = Receivable Account

Net Sales

x 365

All three companies have fluctuated over time TNB had the largest volatility among the 3 companies A sharp increase in Day’s Sales uncollected can cause a company serious cash flow problems For TDS, the collection time is also very high, but gradually decreases over the years

5 Days’ Sales in inventory

Days’ Sales in Inventory is a ratio that reveals how much inventory is available in terms of the number of days’sales It is calculated as Average Inventory divided by Cost of Goods Sold multiplied by 365

Days’ Sales in Inventory =

Average Inventory

COGS

x 365

- It’s the ratio of total debt and total assets.

- Judging from debt to asset ratio:

- If ratio > 1, the company has more debt than assets

- The lower the ratio, the better

b Formula

Debt to Asset ratio =

c. Data from selected company

ii. Cao Bằng Company

1. Data Table

CBI

Total liabilities 2,396,235,068,210 2,171,942,928,746 1,767,476,486,443Total assets 2,553,263,236,435 2,195,605,688,617 1,863,069,141,891Debt to Asset ratio 0.938499029 0.9892226733 0.9486907634

d Charts 3: Debt to Asset ratio

- Based on the charts, we can see that:

- The company with the highest debt to asset ratio is CPI, whereas the lowest is TDS

- The debt to asset ratio of both TDS and TNB has the tendency to decrease over the years, whic

h positively displays the potential of the company

- However, the debt to assets ratio of CBI has fluctuated over time

+ When comparing the ratio between 2019 and 2020 of the companies, TNB has decreased more than CBI and TDS

- All of the ratios are below 1, meaning that a considerable portion of assets is funded by equity,therefore a lower chance of bankruptcy

2 Times interest earned ratio

b. Formula

Times interest earned =

c. Data from selected companies

ii Cao Bằng Company

d Charts 4: Times interest earned ratio

e Conclusion:

- Based on the given charts:

- 2019: CBI has the lowest TIE rate

- Both TNB and CBI have a slightly variable proportion of TIE over the years

- TDS holds the top position in terms of TIE rate and significantly increases in 2020

- TDS undergoes the most volatility:+ The TIE ratio increased sharply by nearly 3 times from

2019 to 2020 due to a sudden decrease in interest expenses

- TNB has slightly fluctuated in all 3 numbers over the years, but the TIE rate increased slightl

y when compared from 2018 to 2020

- CBI also has slight fluctuations in income and interest expenses, but the TIE ratio will be negative in 2019

→ In general, based solely on the TIE ratio, we can conclude that TDS has a very positive chance o

f fulfilling long-term debt, in which the CBI has a low ability to pay interest on the debt of the firm

3 Working capital ratio

a Definition

- An indicator that reflects an enterprise's ability to pay its current liabilities with its current assets

- A representation of the difference between a firm’s current assets and current liabilities

b. Formula

Working Capital Ratio =

c. Data from selected companies

i. Nhà Bè Company

1 Data table

Current Assets 421,149,803,478 383,742,553,326 219,854,435,058Current Liabilities 375,630,099,283 333,812,721,580 153,965,226,186Working capital ratio 1.12118226 1.149574383 1.427948638

ii Cao Bằng Company

2 Data table

Current Assets 855,027,117,324 620,319,096,367 408,754,442,748Current Liabilities 1,290,147,481,065 1,304,302,353,755 1,081,009,230,842Working capital ratio 0.6627359506 0.4755945541 0.3781229902

iii Thủ Đức Company

3 Data table

Current Assets 550,074,641,327 435,088,175,797 361,838,511,803Current Liabilities 274,819,802,311 156,198,227,825 74,288,575,865

2.001582989 2.785487274 4.870715417

d Charts 5: Working capital ratio

e Conclusion:

- In general, both TNB and TDS companies have working capital ratios greater than 1 ove

r the years, suggesting that there won't be any major potential liquidity problems

- In contrast, CBI in the last 3 years has a working capital ratio less than 1 and tends todecrease, indicating that the company is deteriorating

- TNB's working capital ratio fluctuated over 3 years and increased slightly from 2018 to2020

- TDS has seen a sharp increase in working capital, nearly doubling from 2019 to 2020

→ Conclusion, based only on working capital ratio, TDS has the highest financial solvenc

y potential compared to the other two companies

D Profitability ratios

1 Return on assets ( ROA,%)

a Definition :

- Return on assets (ROA) is a financial ratio that shows the percentage of profit a compan

y earns in relation to its overall resources

d Chart 6: Return on Assets

e Conclusion:

Based on chart below :

- In 2018, Thu Duc Steel Joint Stock Company had the highest rate of return on assets, Nha Be Steel Joint Stock Company ranked second This shows that in 2018, Thu Du

c company made a lot of profit from the company's current total assets

- Last Ranking is the rate of profit on the resource of the company Cao Bang Iron Stoc

k company fell sharply in 2019, increased in 2020 but still had a low rate

c Data from Company: ( ROE,%)

VNsteel- Nha Be Steel Joint Stock Company 7,55 9,79 10,14Cao Bang Iron and Steel Joint Stock Company 11,99 -563,61 75,25

d Chart 7: Return on Equity

- The Gross Margin Ratio (Gross Profit Margin Ratio) is a profitability ratio that compares the gros

s margin of a company to its revenue It shows how much profit a company makes after payingoff its Cost Of Goods Sold (COGS)

- The ratio indicates the percentage of each dollar of revenue that the company retains as grossprofit

b Formula:

c Data from Company:

VNsteel- Nha Be Steel Joint Stock

Gross Margin Ratio 0,039 0,066 0,06

Cao Bang Iron and Steel Joint Sto

ck Company 2018 2019 2020

Total Revenue 1,803,432,879,761 2,369,646,837,008 2,153,515,519,216

Cost of Goods Sold

1,627,798,096,534 2,375,608,470,878 1,950,587,214,591

Gross Margin Ratio 0,097 -0,0025 0,094

Thu Duc-Vnsteel Joint Stock C

d Chart 8: Gross margin ratio

e Based on the chart above:

Overall, all three companies have very stable gross margins In particular, the company with the highest gross profit margin is Cao Bang Iron and Steel Joint Stock Company and the lowest is Thu Duc-Vnsteel Joint Stock Company

4 Profit Margin Ratio

a Definition:

- The Profit Margin Ratio is a profitability ratio that measures the amount of net income earned wi

th each dollar of sales generated by a company

- The Profit Margin Ratio shows what percentage of sales are left over after all expenses are paid

by the business

b Formula :

c Data from Company:

VNsteel- Nha Be Steel Joint St

ock Company

2018 2019 2020

Net Income 14,273,903,638 18,995,200,169 20,254,444,124Net Sales 2,098,961,368,119 1,962,208,326,136 1,877,576,543,846Profit Margin Ratio 0,0068 0,0097 0,01

Cao Bang Iron and Steel Joint St

Thu Duc-Vnsteel Joint Stock C

d Chart 9: Profit Margin ratio

0.04

0Profit margin ratio

TNB CBI TDS

e Conclusion

Based on the chart above:

- Thu Duc-Vnsteel Joint Stock Company has the highest profit margin among the 3 companies, and is maintaining a stable level

- Cao Bang Iron and Steel Joint Stock Company has the lowest profit margin and is on thedecrease over time

E Market ratios

1 Earnings per share

a Definition

- Earnings per share is the portion of a company's profit that is allocated to each outstanding share

of its common stock demonstrating the ability to make a profit of the business

- A higher EPS indicates greater value because investors will pay more for a company's shares if they think the company has higher profits relative to its share price

b Formular

1.56Earning per share

TNB CBI TDS

d Conclusion

- Theoretically, TNB and TDS companies both achieve EPS> 1,500 Both companies' profits are good However, in 2019, the company CBI, the EPS dropped to a negative level The company's profit in 2019had a loss of capital

- TNB's EPS ratio remains stable and increases over the years (though only a small increase compared to th

e ideal growth index) TNB's profitability is the best among 3 companies

- In 2018, TDS's EPS is highest among 3 companies shareholders will benefit the most However, after that, net income dropped, causing EPS to decline

2 Book value per share

c Formula

outstanding 122,253,930,000 122,253,930,000 122,253,930,000

2018 2019 2020 0

d Conclusion

- TDS has the highest book value per share, but tends to decrease slightly

- TNB's BVPS increased steadily over the years and remained stable the real value of companiesincreased

- CBI has the lowest book value and is not stable, plummets in 2019 and increases in 2020 business

is facing many problems in production and business activities and it may be unreasonable to invest inshares of this business

3 Price to earnings ratio

aaaaa Definition

The Price Earnings Ratio (P/E Ratio) is the relationship between a company’s stoc

k price and earnings per share (EPS) It is a popular ratio that gives investors a better sense of the value of the company The P/E ratio shows the expectations of the market an

d is the price you must pay per unit of current earnings (or future earnings, as the casemay be)