Enhancing the efficiency of capital use in the new technology application and tourism one member company limited (newtatco)
OVERVIEW OF RESEARCH AND THEORETICAL
Overview of the enterprise's capital
Capital is a broad term that can describe anything that confers value or benefit to its owners, such as a factory and its machinery, intellectual property like patents, or the financial assets of a business or an individual
While money itself may be construed as capital, capital is more often associated with cash that is being put to work for productive or investment purposes In general, capital is a critical component of running a business from day to day and financing its future growth
Capital is typically cash or liquid assets being held or obtained for expenditures In a broader sense, the term may be expanded to include all of a company’s assets that have monetary value, such as its equipment, real estate, and inventory But when it comes to budgeting, capital is cash flow
In general, capital can be a measurement of wealth and also a resource that provides for increasing wealth through direct investment or capital project investments Individuals hold capital and capital assets as part of their net worth Companies have capital structures that include debt capital, equity capital, and working capital for daily expenditures
How individuals and companies finance their working capital and invest their obtained capital is critical for their prosperity
Capital is used by companies to pay for the ongoing production of goods and services to create profit Companies use their capital to invest in all kinds of things to create value Labor and building expansions are two common areas of capital allocation By investing capital, a business or individual seeks to earn a higher return than the capital's costs
At the national and global levels, financial capital is analyzed by economists to understand how it is influencing economic growth Economists watch several metrics of capital including personal income and personal consumption from the Commerce Department’s Personal Income and Outlays reports Capital investment also can be found in the quarterly Gross Domestic Product report
Typically, business capital and financial capital are judged from the perspective of a company’s capital structure In the U.S., banks are required to hold a minimum amount of capital as a risk mitigation requirement (sometimes called economic capital) as directed by the central banks and banking regulations
Other private companies are responsible for assessing their capital thresholds, capital assets, and capital needs for corporate investment Most of the financial capital analysis for businesses is done by closely analyzing the balance sheet
A business can acquire capital by borrowing This is debt capital, and it can be obtained through private or government sources For established companies, this most often means borrowing from banks and other financial institutions or issuing bonds For small businesses starting on a shoestring, sources of capital may include friends and family, online lenders, credit card companies, and federal loan programs
Like individuals, businesses must have an active credit history to obtain debt capital Debt capital requires regular repayment with interest The interest rates vary depending on the type of capital obtained and the borrower’s credit history
Individuals quite rightly see debt as a burden, but businesses see it as an opportunity, at least if the debt doesn't get out of hand It is the only way that most businesses can obtain a large enough lump sum to pay for a major investment in the future But both businesses and their potential investors need to keep an eye on the debt to capital ratio to avoid getting in too deep
Issuing bonds is a favorite way for corporations to raise debt capital, especially when prevailing interest rates are low, making it cheaper to borrow In 2020, for example, corporate bond issuance by U.S companies soared 70% year over year, according to Moody's Analytics.2
Average corporate bond yields had then hit a multi-year low of about 2.3%.3
Equity capital can come in several forms Typically, distinctions are made between private equity, public equity, and real estate equity
Private and public equity will usually be structured in the form of shares of stock in the company The only distinction here is that public equity is raised by listing the company's shares on a stock exchange while private equity is raised among a closed group of investors
When an individual investor buys shares of stock, they are providing equity capital to a company The biggest splashes in the world of raising equity capital come, of course, when a company launches an initial public offering (IPO) In 2021, the Duolingo IPO valued the company at $5 million and shook the Nasdaq market.4
A company's working capital is its liquid capital assets available for fulfilling daily obligations It is calculated through the following two assessments:
Accounts Receivable + Inventory – Accounts Payable
Working capital measures a company's short-term liquidity More specifically, it represents its ability to cover its debts, accounts payable, and other obligations that are due within one year
Note that working capital is defined as current assets minus its current liabilities A company that has more liabilities than assets could soon run short of working capital
Any business needs a substantial amount of capital to operate and create profitable returns Balance sheet analysis is central to the review and assessment of business capital
Trading capital is a term used by brokerages and other financial institutions that place a large number of trades daily Trading capital is the amount of money allotted to an individual or a firm to buy and sell various securities
Effective use of business capital of the enterprise
Business efficiency is an economic category that reflects the level of use of resources, material and financial resources of an enterprise to achieve the highest results in the production and business process with the lowest total cost Constantly improving economic efficiency is the top concern of any manufacturing industry in general and the concern of enterprises in particular, especially it is an urgent and topical issue for domestic enterprises Vietnam today Improving the efficiency of capital use is both a question and a challenge for businesses today Any business enterprise has a production function of the form:
Q = f(K, L) where: K is capital and L is labor
Therefore, the production and business results of enterprises have a functional relationship with the factors of resources, capital, technology Evaluated in a micro-scale, with an enterprise in a short time, these input resources are lost limit This requires businesses to find ways to exploit and use capital, make the most of their available resources, on that basis to compare and choose the best business and production plan for their business
Production and business efficiency is an economic category expressing the concentration of in-depth economic development, showing the level of exploitation of resources and the level of cost of those resources in the process of reproduction and support help achieve business goals
The general formula for determining business efficiency:
Business performance = Results output - Initial cost
- Quantitative: The economic efficiency of the performance of each socio-economic task is expressed in the correlation between the results obtained and the costs incurred Efficiency is only achieved when the output is greater than the input cost The greater the effect, the greater the difference
- Qualitative: High economic efficiency shows effort, management level of each stage, each level in the industrial system, the attachment of solving economic requirements and objectives with socio-political requirements and goals
There are many different ways of classifying economic efficiency, but here the thesis only deals with the issue of improving the efficiency of capital use in enterprises Thus, we can understand capital efficiency as follows:
Efficiency in using business capital of an enterprise: Is an economic category that reflects the level of exploitation and use of capital of an enterprise in production and business activities in order to maximize profit at the lowest cost within a certain period of time
The efficiency of capital use is a complex issue related to all elements of the production and business process, so enterprises can only improve efficiency on the basis of using the basic elements of the production and business process effective business processes In order to achieve high efficiency in the business process, enterprises must solve problems such as: ensuring savings, mobilizing more to expand their production and business activities and enterprises must achieve the objectives set forth in the use of its capital
The efficiency of capital use is quantified through a system of indicators on operational ability, profitability, capital turnover It reflects relationship between inputs and outputs of production and business processes through monetary measures
1.2.2 The need to improve efficiency in the use of business capital
To conduct a production and business process, there must be capital, the amount of capital spent must not be lost or lost but must make a profit Profitable capital investment has a direct impact on the existence and development of the business Therefore, the effective organization and use of capital is an objective requirement for the production and business process of enterprises The strengthening of organization and efficiency of capital use in enterprises is due to the following reasons:
Due to the role of capital in the production and business process of enterprises: Capital is an indispensable prerequisite of any business, economic, technical or service sector In addition, capital is also a condition to use other potential sources, to develop production and business for the expanded reproduction process With that important role, it is required that businesses are always interested in improving the efficiency of capital use
That is the goal to be achieved by using capital in the production and business process of enterprises
Due to the business purpose of the enterprise: In the current market economy, the first goal of enterprises is profit In order to survive and develop, the production and business activities of enterprises must create profit Therefore, profit is considered a leverage factor, a basic indicator to evaluate the effectiveness of VKD use Therefore, how to produce and do business to get high profits is the goal of all businesses To achieve that requires businesses to strengthen the organization and improve the efficiency of VKD use, thus achieving high profits, contributing to promoting business development
Due to the current situation of enterprises: The general situation of enterprises in our country today is that the efficiency in using business capital is still not high Lack of capital, having to regularly mobilize capital from outside to meet production and business activities is very common in our country's enterprises today, capital is lost, stagnant and sometimes happens lack of artificial capital Therefore, in order to be able to compete with other enterprises and successfully realize the set goals, enterprises must use capital savings rationally, strengthen management, and improve the efficiency of capital use ensure financial safety, preserve and develop capital
Due to the requirements of the new management situation for enterprises: Currently, the economy operates under the market mechanism, state-owned enterprises exist in parallel with enterprises of many other economic sectors In order to survive and develop in the new mechanism, businesses must actively capture market demand, invest in renewing machinery and equipment, improve technological processes and find ways to lower costs and create competitiveness picture for the product At the same time, they must preserve their capital before market changes and constantly invest in expanding production and business scale Therefore, the issue of improving the efficiency of capital use is becoming more and more practical and urgent
From the above issues, it can be seen that improving the efficiency of business capital is an inevitable and very important meaning in the financial management of enterprises in the context of a competitive market economy intense It determines the survival, growth and development of each enterprise in the new mechanism
1.2.3 Indicators reflect the efficiency of the use of business capital
Factors affecting the efficiency of the enterprise's use of working capital
1.3.1.1 Group of factors affecting the efficiency of business capital use
* Improve the profitability of the business
-Enterprise profitability is very important for managers, because total profit and net profit are indicators to evaluate business performance of managers
- Return on assets (ROA): This is a general indicator used to evaluate the profitability of an investment capital Depending on the specific situation of the analyzed enterprise and the scope of comparison, people choose income before tax and interest or income after tax to compare with total assets
- The ROA indicator provides investors with information about the profits generated from the amount of invested capital ROA in joint stock companies is different and depends a lot on the industry, this is why when managers ask why when using ROA to compare companies over financial years The assets of an enterprise are formed from borrowed capital and equity capital, both of which are used to finance the activities of the enterprise The result of converting investment capital into profit is shown in ROA, the higher the ROA, the more profitable the business, the less investment costs On the other hand, investors should pay attention to the interest rate that businesses have to pay on debt If the business does not generate much return on assets, that is a bad sign Conversely, if ROA is better than the cost of borrowing, it means that the business is creating a level of profit for the business
- Return on equity (ROE): This index is an accurate measure to evaluate how much capital invested and accumulated generates how much profit This coefficient is often analyzed by investors to compare with stocks of the same industry in the market, thereby referencing when making investment decisions in stocks of enterprises When ROE is higher, it proves that the enterprise uses capital effectively, harmoniously combining different types of capital sources in the enterprise to create its competitive advantage in the process of capital mobilization and expansion, so when the The higher the ROE, the more attractive it is to investors When calculating ROE, investors can evaluate angles, such as: ROE is less than or equal to bank interest, so if the enterprise has a bank loan equivalent to or higher than shareholders' equity, the profit generated only to pay interest on bank loans If the ROE is higher than the bank loan interest rate, it is necessary to evaluate whether the enterprise has borrowed from the bank and fully exploited its competitive advantage in the market to assess whether this enterprise can increase the ROE ratio in the future or not
To manage the liquidity of enterprises, it is necessary to manage short- term solvency and quick solvency
- Improve short-term solvency ratio: This is an important criterion for each enterprise, so it is necessary to well manage short-term debts which are covered by convertible assets equivalent to cash term of those debts Enterprise managers need to compare with the average value of the industry and compare with the ratios of the previous year to adjust the coefficients on the financial statements accordingly When the value of this ratio decreases, it means that the company's ability to repay debts decreases and is also a sign of potential financial difficulties On the contrary, when the value of this ratio is higher, it means that the debt solvency of enterprises increases, which is a good sign However, when the value of this ratio is too high, it means that the enterprise has invested too much in current assets This may be due to the lack of good management of current assets, so there is still a large amount of idle cash or receivables, increasing interest expenses and reducing profits of enterprises
- Improve quick ratio: Enterprise managers need to pay attention to cash and cash equivalents, short-term debts, these contents affect the quick ratio When the quick ratio is lower than the previous year, it means that changes in credit policy and financing structure have weakened the solvency of enterprises, and vice versa However, this ratio also needs to depend on the needs of the construction industry Specifically, the construction industry is a capital-intensive industry and has large receivables, thus allowing this ratio to be maintained lower than 1 In addition, because enterprises' debts are not concentrated for payment in the same period , so the quick ratio less than 1 does not mean unsafe, but just the amount of current assets is larger than the liabilities that need to be paid immediately in the nearest period, it can prove that the safety is guaranteed
* Choosing the optimal capital structure in the direction of reducing liabilities, increasing equity
Choosing the optimal capital structure between assets and equity and liabilities requires financial management to ensure balance, appropriateness, and science An optimal capital structure when the average cost of capital is lowest, then generates the greatest firm value Enterprise managers can use one or more capital sources to finance production and business activities, can use short-term capital, long-term capital, use debt capital, or equity, appropriate capital from customers depending on the time, reputation, brand and business activities of enterprises in each period Financial managers can establish an optimal capital structure on the basis of qualitative and quantitative impacts on the capital structure of enterprises When the capital structure of the enterprise has not reached the optimal level, the enterprise can continue to use more debt and use funding sources to meet the business activities of the enterprise On the contrary, when the capital structure of the enterprise reaches the optimal point, the use of more debt will burden solvency and interest expenses Thus, establishing the optimal capital structure is an important content in financial management policy in general and capital management in particular When developing a capital management policy, any enterprise should aim to: mobilize a lot of capital at the lowest cost, determine the optimal capital structure, and maintain the optimal capital structure All three of the above objectives are directed towards the ultimate goal of building and ensuring an optimal capital structure in terms of both size and cost of capital Only in this way will new businesses have the opportunity to invest in depth, expand production scale, and diversify forms of effective capital management
* Inspect and supervise the management and use of enterprise assets
- Construction enterprises need to use capital in money safely and effectively
Businesses need to pay attention to and improve capital management activities with promotional money ensure that the optimal bank balance has been accurately determined and maintained continuously through suitable businesses, the structure and size of current assets, the short term maturity is properly adjusted, increases the increase solvency and cash flow The higher the cash turnover, the more times the money is used in a period or the business maximizes the use of money At the same time, business results (revenue, profit) are positively changed, so working capital must be well managed to increase short-term asset profitability
- Canceling receivables, reducing bad debt ratio and shortening debt term
The DN bidding game is based on bid installation and removal methods If the company wins the bid, the enterprise will automatically advance a part of the cost to implement the project, and when the job is handed over, it will collect money from the investor Therefore, the indicators that reflect the scale and time of job recovery are as low as possible
The value of overdue debt recognizes amounts not paid on time according to the original agreement, which can be classified in detail by overdue period (30 days, 45 days, 60 days ) When monitoring work, debt collection is not actively implemented or the investor has financial difficulties, the ratio of overdue debt to total credit sales tends to increase, although this ratio Small but large works do the absolute opposite, so managers have to regularly monitor and tighten the financial situation of the investor to reduce the ratio of uncollectible debts to total credit sales down lowest level
- Strictly check to set the optimal quantity, reduce inventory, reduce dangerous production and business costs
Cash conversion cycle shows the average number of days from when a business uses money to buy raw materials, create finished products, sell goods and collect money Thereby, it is possible to show the password relationship between money management activities and accounts receivable and inventory management Therefore, depending on the conditions of each enterprise to shorten the number of days of existence and the average collection period, thereby significantly reducing the cash conversion cycle, improving the efficiency of using investment capital
During inventory management, materials are expected otherwise
To fully and promptly meet the actual demand for use can be done for a number of reasons such as not correctly forecasting the demand for raw materials, miscalculating the optimal order quantity, so deciding to import goods Goods are not well managed, leading to losses and shortages, disrupting production and business activities, and reducing the initiative in business
On the other hand, in inventory management, because the works that have not yet been completed and accepted, the works have not been finalized, so the enterprise has not yet recorded and transferred the revenue as the ratio of receivables, production and business expenses unfinished is not transferred
- Using fixed assets for the right purposes, with high technical coefficients, saving fuel costs, machine shifts, major repairs
The value of fixed assets does not fully reflect the efficiency of using fixed assets in the enterprise, does not properly reflect the ability to exploit fixed assets in production and business because there is still a large amount of machinery and equipment that is outsourced for each work item (Enterprises outsource themselves or through subcontractors), contributing to revenue and profit for enterprises Therefore, if the cost of construction machinery is fully calculated, the profitability coefficient of tangible fixed assets is much smaller because outsourcing costs have been deducted to determine the after-tax profit
Because investment funds in enterprises are limited, not enough to invest in purchasing fixed assets of great value, enterprises use short-term capital to invest in long-term assets On the other hand, the process of survey, investment and procurement often buy used machinery and equipment, quality from 65% to 80%, medium technology To meet the job requirements, enterprises do not implement the bidding method, but apply the competitive offer form, so it is difficult to control the price, quality and origin of goods
1.3.1.2 Using the Dupont equation to show the impact of the component criteria on the total ROE
In order to improve the ROE aggregate target, construction enterprises need to focus on the components affecting the efficiency of capital use, such as:
+ Accounting for revenue and transferring cost of goods in the right period and at the right time when expenses are incurred; dossiers of acceptance and payment of completed volumes with full certificates of work quality The data reflects truthfully, has high reliability, adheres to the principle of prudence when accounting and finalizing works, forecasting financial risks, thereby preserving capital and ensuring corporate profits
Using predictive models
1.4.1 Using least squares (OLS) method to estimate regression model coefficients
In economics, it is often necessary to consider the dependence of one variable on other variables to test economic theory or to predict economic variables The theory of linear regression describes the influence of independent variables (Xi) on the dependent variable (Y) to be studied The multivariable linear regression model has the following formula:
- Assumptions of the classical linear regression model
Regression error assumptions ensure that population regression estimates based on a sample using the least squares method are linear best unbiased (BLUE) estimates
- Properties of the sample regression function according to OLS
When the assumptions are satisfied, the OLS estimator has the properties:
(2) having the smallest variance in the class of unbiased linear estimators,
Thus, the OLS estimator is the best estimator in the class of unbiased linear estimators
1.4.2 Using the Linkert scale to analyze groups of indicators affecting the efficiency of business capital use
Questionnaire construction is a critical art that must have many decisive considerations about the content, words, form, order These considerations have a decisive influence on the whole research Questionnaire related to:
- Decide the purpose, scope and content of the question
- Choose the answer type using the ability to collect information from respondents
- Use words to make matters interesting
The following thesis will address some questions about the structure that can be used in the research
Questionnaire is widely used and is a useful tool that can collect information, providing data according to the available structure; data can be checked without the presence of the researcher; Clear data, convenient for analysis work However, it also takes time to develop, test and perfect the questionnaire; The data obtained is simple and limited in scope, with little flexibility in the answer
Intermittent questions/Linkert scale questions
Questions on the Linkert scale are usually in the form of 5, 7 or 9 choices
Descriptive statistics are used to describe basic characteristics of data, providing a simple summary of the sample and measurements Descriptive statistics are used to describe what the data is and indicate what
When describing a large set of observations with a single index, there is a risk of biasing the original data or omitting important details Despite this limitation, descriptive statistics can provide a good summary for comparison between different units
Quantitative research examines patterns of meaning synthesized from systematic observations of human words, actions, and interactions and human vestiges In qualitative research, people look for meaningful patterns in words and actions and interpret the meaning of the patterns based on the social formations of the people who first had those words and actions
There are many ways to conduct interviews: conducted formally through surveys, on the internet, over the phone, or face-to-face The interviews had questions and answers given according to the process of quantitative research
Qualitative data analysis: classification and coding
There are many methods and techniques for analyzing qualitative data Often, analytical methods are closely related to study designs and data collection methods The paper addresses one of the most basic techniques used in qualitative research: data classification To classify data it is necessary to put 'codes' on meaningful units of data through the process of 'coding'
Classification is a major part of qualitative data analysis House's investigation grouping observed patterns in data into groups meaningful Thus groups are created by grouping the encrypted data This association is based on commonalities between the coded observations The groups are then aggregated based on the relationships between the groups
Code and encryption are indispensable in the data analysis process Codes are concepts and characteristics through clear criteria Codes may be constructed prior to data collection or may be newly generated during coding
In qualitative research, discussion of coding is often focused on the inductive process of finding themes and categories, assisting the researcher in organizing and interpreting data
The coding process and the coding process tend to be different in qualitative research and quantitative research In quantitative research, codes are often generated prior to data collection Concepts and hypotheses are preformed, and their codes are constructed from theory or from existing literature Predefined categories are used to structure the collected data
In qualitative research, coding is the process of generating ideas and concepts from raw data such as interview transcripts, archives, and reports The coding process refers to the research steps: identification, ordering, conceptualization, and classifications Coding involves identifying events, characteristics, phrases, behaviors, or stages of a process and classifying them by 'labels'
The coding and data processing technique is based on the underlying theory In the theoretical underpinning approach, the dynamics of coding are emphasized The labeling of concepts and categories in the early stages of coding work is called open coding In subsequent stages, the researcher begins to refine specific categories and their characteristics, examining each strain closely type Focusing on associations and relationships among a few categories is called selective coding
Initial encryption or open encryption?
In this early stage of data organization, it is necessary to read each line of data carefully to identify ideas and concepts without much concern for relationships Coding can be started by finding information relevant to the original goal and interest of the study It is necessary to keep an open mind to new problems that arise
Coding is dynamic work By labeling codes to identify events, meanings, activities, or phenomena, researchers begin to group similar cases or events and distinguish different cases or events After the open coding phase comes the finishing stage Many researchers suggest that open coding should be continued until nothing new and interesting emerges, some codes begin to become dominant, and associations between codes begin to form Fort These are signs that we need to continue building centralized and integrated coding In the process of performing the analysis, broader categories and characteristics will be discovered
The move from open encryption to selective encryption is not a well- defined step Many cautions that although there are general guidelines that show the evolution of coding from defining new concepts to completing and integrating existing types, the coding process should not be thought of as linear A new idea is discovered later, or more data is gathered, the original concept may have new ideas, need to broaden horizons or have an open mind to new possibilities happen
CURRENT STATUS OF CAPITAL EFFICIENCY IN NEW
Main lines, sectors of business
- Domestic and foreign Investment of consultancy Open a real estate trading floor
- The construction of works of tourism, civil and industry; construction and installation of irrigation, wastewater treatment for environmental protection; construction of transportation projects: roads, bridges, leveling and installation of systems of electricity, water for works
- Construction of power projects Construction of power to the voltage level of 500kV
- Research and application of technologies in production and business in the solutions areas of buildings (BMS), electronics, refrigeration, food technology, computer equipment, measurement, automatic control, printing materials and the means of transportation
- Supply and installation of maintenance and repair of equipment for the construction, automatic fire fighting system, fire alarm system, burglar alarm, monitoring sales, hardware and software of computer, office machines
- Sales of agricultural supplies; medical equipment; petroleum and petroleum products; products of agriculture, forestry, aquatic products, vegetables, food, arts and crafts; transport vehicles, construction machinery and spare parts, supplies and materials in paper industry, chemicals (excluding hazardous chemicals), plastic, grocery, electrical and mechanical appliances, supplies of electrical equipment, electronics, telecommunications, information technology equipment, garment materials, garments
- Production of construction materials; mining and mineral processing; forest products processing; production of biological compounds, fertilizers, processing and packaging plant protection drugs; growing and processing of vegetables, flowers, fruit and high technology
- Wholesale, dealers of car and other motor vehicles Services of Maintenance, repair of automobiles, motorcycles
- Agency of airline tickets, purchase and consignment of goods; advertising and related services
- Business hotels and offices for leasing; Business of travel, domestic travel, international travel, services for tourists and business of transportation of passengers; commercial business: direct import, temporary import for re- export of goods
- Services of sports, entertainment Activities of sports clubs
- Services for the sending of workers and laborers to work overseas.
Business Activities of Newtatco
- Technology fields a Power Construction: Supply of equipment and construction and installation of electric works with the voltage level up to 500kV b Building Technology: Building Management System (BMS), air- conditioning, Refrigeration Electrical Engineering, CCTV, fire alarm, information, telecommunications c Information technology d Technology for irrigation industry: high pressure waterproofing, composite e Technology Transfer: environmental treatment technology, clean water; Automatic car park f TV technology
- Investment fields a Investments and investment consultancy; b Real estate consultancy c Office, Commercial Center for Leasing
- Services fields a Hotels and tourism b Agency of Motorcycle, air ticket,… c Labor export activities d Services of Operation and management of buildings
In the industries in which the New Technology Application and Tourism One Member Co., Ltd is engaged in activities, the main industry is the construction and installation of high, medium and low voltage electrical infrastructure works, civil electrical works The characteristics of the industry that affect the efficiency of capital use are mainly in the following areas: + Construction products have a relatively long construction period, usually over a year, there are projects lasting from 5 to 10 years to complete Therefore, the production cycle is long, investment capital for construction and production is stagnant, and the turnover of capital in production and business activities takes a long time to affect capital turnover
+ Construction products are fixed at one location because there are many costs incurred that affect construction business results such as costs for construction of construction camps, labor mobilization, transportation and maintenance Manage materials and equipment at the construction site
+ Construction products are delivered to customers at the estimated and bid prices therefore revenue has been determined before the product is delivered to the customer
+ To produce and create construction products requires the company to use correspondingly large capital, but in fact equity cannot meet production and business needs, so Newtatco regularly must mobilize capital from other capital sources, mainly credit capital Therefore, the capital structure by source has a low ratio of equity to liabilities, affecting the efficiency of capital use of the Company
+ In the stage of importing materials and equipment in large volume, the inventory value and production in progress are high
+ The deployment of outdoor construction should be affected by weather factors, in addition, the works are distributed in places that make it difficult for input control, easy to cause loss and waste
+ Many projects have been completed and put into use and handed over to the operating unit, but the payment and settlement work takes a long time because it depends on external units (receiving unit, audit unit, etc.) competent departments to approve) leading to outstanding debt, low capital turnover, affecting the efficiency of capital use.
Analysis of factors affecting capital use and efficiency of capital use at New
2.5.1 A brief overview of the production and business situation of New Technology Application and Tourism One Member Co., Ltd in the 2018-
Table 2.1 Production and business results of the company in the period of
From the data of production and business results, we see that the company's profit increased steadily from 2017 to 2019, during this period the company's business results were very good in 2018 increasing by 38% compared to 2017; 2019 increased 346% compared to 2018, although 2017-
2019 revenue decreased slightly This shows that the company's capital efficiency is very good, with each revenue stream earning a higher profit compared to the previous year However, this is also one of the characteristics of the construction industry, because 2017-2018 is the first stage of projects implemented by Newtatco, so the initial cost will be higher
From the end of 2019 to 2021, we can see a sudden growth in the company's after-tax profit, but the following analysis into the 2020 financial statements, it can be seen that this profit comes from the first investment the company's previous investment rather than from the revenue realized during the year (Profit from dividends, distributed profit is VND 100 billion – according to the company's income statement) Therefore, according to the company's main business line, which is the construction sector, the profit in the period 2020-2021 decreased significantly compared to previous years Profit after tax in 2021 decreased by 88% compared to 2019, the cause of this decline is due to the impact of the covid-19 pandemic, which has lasted from the end of 2019 until now, which has affected the entire economy general and the construction industry in particular To prevent the epidemic, the government has taken various measures to prevent and minimize its consequences In which, there are measures such as social distancing that freezes all of the Company's projects, restricted movement between construction sites, to ensure production and business activities, staff, The company's employees have to alternate shifts, even eat and sleep at the project to promptly meet the job requirements Besides, the restriction of trade during the pandemic, causing the supply to be interrupted, the import of raw materials is difficult, and the source of goods is also overpriced while the cost of construction products is too high was fixed from the estimate and bid, resulting in the efficiency of the projects reduced to the lowest level Although in difficult economic conditions, the company has also made efforts to ensure profitable production and business, the whole company has firmly stepped through the pandemic In order to study in detail the production and business activities of Newtatco company, the thesis will analyze the current state of efficiency in using capital of the company in the following sections, thereby finding out the disadvantages, limitations, and advantages and propose measures to contribute to improving the efficiency of the company's capital use
2.5.2 Analysis of capital structure of the company Newtatco
Capital structure has a great influence on the efficiency of capital use in enterprises Determining a reasonable capital structure with the company's capital needs to avoid capital stagnation, ensuring a reasonable capital turnover and effective use of capital
Based on the company's balance sheet data for 5 years (2018-2021), the capital structure table is summarized as follows:
(Source: Consolidated financial statements after audit – Newtatco Company) From 2018-2021, we can see that the company's equity decreases, in 2021 it has decreased by about 21%, indicating a decrease in capital funding for the company, the cause is also related to Newtatco's particularity is that it is a
100% state-owned company and in the face of the industry's anticipated difficulties, capital preservation is a top priority However, the company has also made good use of credit sources to turn around capital to maintain profitable production and business
In the years 2018-2021, liabilities account for only 28-34% of total capital, equity capital is enough to finance all of the company's debts, equal to the average debt-to-equity ratio In the construction industry, this is a safe capital structure, the company has no pressure on debts In the current difficult context of the economy, which may face a recession, it is acceptable to maintain the above capital structure
From the balance sheet of Newtatco, the summary of working capital structure for the period of 2018-2021 is as follows:
Tỷ lệ % Tỷ lệ % Tỷ lệ % Tỷ lệ %
Biểu đồ 2.1 Cơ cấu vốn công ty Newtatco 2018-2021
Total working capital in the period of 2018 -2021 accounts for a large proportion and continuously increases Newtatco's working capital structure includes the following years of accounts: Cash and cash equivalents, short- term financial investments, receivables, inventory and other short-term assets
In which inventory and short-term accounts receivable are the most important, always maintaining over 78% of the company's total current assets A review of these accounts shows us the efficiency of the company's use of working capital
The first is cash and cash equivalents: in the period of 2018-2021, this indicator always remains at a high level of 16% to 27% of total current assets Because the Company mainly operates in the field of construction, it is also necessary to maintain a large amount of cash to meet production and business needs, as well as to order materials and equipment However, the current storage facade is large and does not promote the full use of capital The company may consider switching to short-term financial investments so that it can both earn profits and be as certain as the company's payment requirements when needed
In 2019, 2020 the company has partially shifted to short-term investments, but by 2021, almost all investments have been withdrawn and cash reserves increase to 27% of total current assets This move may be due to the complicated developments of the covid-19 pandemic, the unusual movements of the stock and bond markets, which made the company's management want to withdraw short-term investments to preserve capital
The company's short-term receivables in 2019 increased by 29.1 billion (equivalent to 7.96%) compared to 2018; In 2020 it increased by 119.5 billion (equivalent to 30.2%) compared to 2019 and in 2021 it decreased by 213.9 billion (equivalent to -41.5%) compared to 2020 However, the proportion of these amounts is larger than 50% of the total working capital of the Company This shows that the capital efficiency of the company is not high, compared to the capital that is occupied large and lasts over the years The reason for this is that the company's debt collection has not been effective, causing a large backlog of capital Besides, a part also comes from objective reasons, because the investor has not arranged capital for payment, the inspection and audit work still takes a long time Debt collection in 2021 has improved, but the amount of outstanding capital is still very large, the company should focus more on completing payment records and debt recovery
Table 2.2 Table of figures for the average collection period for the period
The company's average collection period in 2018 is 227 days, equivalent to 1.6 turnover of short-term receivables, and this indicator tends to increase in the period of 2018-2021, showing that the work of making payment records and debt collection is slow and inefficient A high amount of capital is wasted, causing a lot of waste and additional costs The company can speed up the debt collection period by improving the quality of the debt accounting team and the team making payment records with the investor
Besides, the amount of inventory tends to decrease gradually over the years from 2018 to 2022, looking more deeply at the notes to the company's financial statements, the amount of inventory is mainly production and business expenses unfinished, the inventory of raw materials is almost non- existent, which shows that the inventory management stage is very good, the stage of completing the acceptance procedure with the investor is doing well, the purchased materials, the Finished construction items are checked and accepted promptly with the investor
Newtatco's other short-term assets, accounting for only a small proportion (1-3%) of the total structure of current assets, include deductible value-added taxes, short-term prepaid expenses, advances and tends to decrease This shows that the company is well managing advances and recovering advances, properly fulfilling its tax and state budget obligations
The following are indicators to evaluate the efficiency of working capital of Newtatco Company:
SOLUTIONS TO IMPROVE THE EFFICIENCY OF CAPITAL
Promote management and collection of receivables
The company's capital being occupied tends to increase and is not profitable, while the Company has to borrow a large amount of capital to meet production and business needs and has to pay monthly interest expenses Therefore, in order to reduce the occupied capital, paying attention to debt recovery is very necessary for the Company The Company may take the following measures:
- Determining the appropriate credit policy: When signing contracts, especially with new customers, contracts of great value, the Company must first of all do a good job of checking and considering the financial situation of customers customers can refuse to customers with weak financial capacity or deep debt In new signed contracts, the Company must specify in detail and clearly the terms of payment such as payment term, payment method In addition, it also stipulates both penalties when customers violate the discipline of payment time through penalty interest rates and also incentive measures when customers make quick payments, early payments such as discounts sales, sales discounts
- Strengthening debt control and recovery: For debt management, the Company must open a book to monitor details of payment terms and amounts, and regularly urge customers to pay debts on time Perform debt classification to see which debts are due to pay, thereby taking appropriate measures to recover debts The first is to send a notice requesting the customer to repay the debt to the Company according to the deadline For overdue debts, the Company has sent a notice but the customer has not yet paid, depending on the nature of the debt and the financial ability to repay the debt as well as the relationship between the customer and the Company , the Company can apply appropriate measures such as: debt extension but penalties through interest rates, debt trading through debt trading companies or more rigid can be recovered and liquidated collateral assets, thanks to the intervention of the Law Besides, the company also needs to make provision How to make a provision, how much is the provision, the company needs to base on the term and nature of the debts to make appropriate provision Making provisions is very necessary, although trusting in the reputation and solvency of customers, in business, risks are always hidden not only due to subjective reasons but also due to unanticipated objective factors previously been Therefore, it is required that the Company establish a financial reserve fund to avoid the risk of not being able to recover overdue debts, reducing financial difficulties for the Company
Faced with the current debt and financial situation, the company needs to continue to reduce short-term loans and focus on exploiting sources of capital without cost At the same time, ensure the payment of liabilities on time to ensure their reputation and credit relationship.
Strict inventory management
In recent years, the company's inventory has always been large, but the inventory is mainly the cost of unfinished business Every year the company receives many new projects plus old ones that have not been completed, so this cost accounts for a large proportion in inventory Therefore, in the coming time, the company needs to take measures to reduce inventory
The large production-in-progress costs in construction enterprises are mainly due to the prolonged construction time of construction works The construction time is prolonged due to the size and complexity of the project construction On the other hand, because the construction production is single-to-order, each product has its own design, each separate work has its own volume according to its own design project to both ensure completion time, each project has requirements on technology, comfort, aesthetic and safety even if it is built according to the model design, each work must be supplemented and changed to suit geological and climatic conditions, conditions for supply of materials at specific construction sites Therefore, it can be said that construction products that have no similarity cannot be mass- produced, but must be manufactured individually according to orders On the other hand, it is also from this feature that labor productivity in construction is not high, which explains why the construction time is often very long
Therefore, in order to effectively release inventory, shorten construction time, speed up construction, focus on finishing construction works and work items while still ensuring standard requirements Skill To do this, the company needs to have a detailed preparation right from the planning stage, to have contingency plans for possible bad cases by sending people down to the site to investigate geological conditions, topography, climatic conditions, supply of materials to avoid shortage of materials as well as excess of materials causing loss and stagnation of capital.
Strengthening management and investment of fixed assets
Asset management is very important First of all, every year, the Company must conduct an inventory of fixed assets, classify fixed assets according to the criteria of fixed assets in use, not in use, pending liquidation, sale, lease, lease, leased or leased fixed assets borrow This classification is very necessary for the Company to monitor the status of assets on a regular basis, systematically so that the Company can make appropriate decisions for each type of asset Such decisions may be decisions on liquidation or sale of fixed assets with low use efficiency that are not needed to avoid capital stagnation, which may be decisions on repair to continue bringing in vehicles, machinery and equipment put into use or decide to invest in new fixed assets The company needs to further improve the regulations on management and use of fixed assets, and decentralize the management of fixed assets in a reasonable and clear manner in order to improve the responsibility of each department in the process of use The promulgation of regulations on management of fixed assets must be accompanied by regular inspection and supervision of the implementation and observance of regulations by departments
When putting fixed assets into use, the Company needs to choose a depreciation method and a reasonable depreciation rate as a basis for timely and full recovery of the advance investment capital in fixed assets Thereby creating favorable conditions for the Company to quickly concentrate capital to invest in renewing fixed assets
In order to improve the efficiency of asset use, the Company must use machinery and equipment at full capacity, maintain production capacity and extend operating time Therefore, the Company must make a reasonable plan for the use of fixed assets based on the business operation plan and the current situation of the Company's assets
The company needs to well implement the regime of maintenance and repair of fixed assets, develop a plan to upgrade fixed assets to exploit the full capacity of machinery, equipment and means of transport, maintain operational capacity, and prolong service life of fixed assets, avoiding premature or abnormal damage of fixed assets, which increases the cost of using fixed assets as well as damages due to decommissioning
For investment activities, procurement and renewal of fixed assets, the Company needs to properly analyze and evaluate the current status of quantity, quality and synchronization of fixed assets From that, the Company determined the demand for quantity, capacity and uniformity of fixed assets in the following years Based on the results of analysis and forecast of the Company's capital capacity, the Company needs to develop a fixed asset investment strategy The investment strategy, in addition to determining the quantity of fixed assets to be purchased, must also determine the level of technology that those fixed assets must meet This is a very important task that determines productivity, service and product quality Investing in fixed assets in a reasonable and right way has great significance in improving the competitiveness of the Company and at the same time increasing profits
In summary, doing well in the procurement and investment of capital construction combined with the strengthening of management, use, repair, maintenance and upgrading of vehicles, machinery and equipment is very important to improve productivity, reduce input costs, thereby improving the efficiency of the Company's asset use
In the immediate period, the company should immediately implement the following measures:
- With a large amount of fixed assets but almost no depreciation and a serious shortage of fixed assets as analyzed in the chapter, the company needs to accurately determine the demand for construction machinery and equipment, setting up investment projects to improve capacity in accordance with the direction of industry development, focusing on the main machinery and equipment for the construction of key projects that the company participates in, including: transportation construction equipment (Spreaders, Asphalt Mixing Plants, road rollers, transport trucks, excavators ); construction (Cranes, concrete pumps, concrete batching plants ),
- Carry out the review and liquidation of motorbikes and equipment that are no longer needed, old equipment that are depreciated, obsolete, damaged, unusable or inefficiently used, unsuitable for the work assigned to them the Company's main business areas for reinvestment
- To balance, coordinate the use and management of motorbikes and equipment in a timely manner between the works constructed by the company, not to stop the motorbikes and equipments due to subjective reasons;
- Well organize the major repair of motorbikes and equipment to ensure the equipment is always in the best working condition.
Divestment of long-term financial investment
The investment in capital contribution to projects and capital contribution to joint ventures and associates has not been effective, leading to the need to make provision for investments in these companies
In order to improve the efficiency of asset use as well as the efficiency of these long-term financial investments, the company needs to divest financial investments, invest in joint ventures, associates and other investments to concentrate investment capital in machinery, equipment and human resources for the main business lines divest all capital contributions to companies operating inefficiently and outside the industry: Song Da 207 Joint Stock Company, Song Da 25 Joint Stock Company, Song Da 7 Urban and Industrial Park Joint Stock Company, Phat Phat Joint Stock Company Hai Ha Economic Zone Development Transfer of investment project for hydroelectricity and construction material mine Tien Son - Hoa Binh.
Build optimal capital structure
In the long term, the capital structure of the company is unbalanced The ratio of debt to total assets is very large, in which bank debt accounts for a high proportion, and equity is very small With such a capital structure, the company will be heavily dependent on external sources, not autonomous in business, and potentially risky Therefore, the company needs to establish an appropriate capital structure and take measures to maintain the optimal capital structure This is the central content of the company's capital mobilization and use policy
The establishment of the optimal capital structure plays a very important role for businesses in the process of capital management and use However, enterprises cannot reach the optimal structure point but only get close to that optimal structure point To build the optimal capital structure and improve the efficiency of the company's capital use, it is necessary to base on a number of factors as follows:
- Determine the cost of capital of the sources that can be mobilized at the time of capital raising Each source of capital a company can raise has a different cost of capital Using bank loans, the company must pay interest on bank loans according to the mobilizing interest rate from time to time If the company uses capital to issue bonds, the company has to pay periodic interest, and at the same time calculates additional bond issuance costs If the company mobilizes from the form of lease-purchase credit, the company has to bear a high cost to the finance leasing company because the business unit has included their profit in the expenses the company has to pay Therefore, when determining the capital structure to finance its operations, the company needs to determine the cost of using different types of capital to consider choosing the cheapest and most appropriate form of capital mobilization for the purpose of using capital
- The company's capital use plan: The choice of any form of capital mobilization must be based on the company's capital use plan If using capital to supplement working capital, use short-term capital sources (short-term loans, commercial credit) If mobilizing capital to invest in fixed assets for long-term use, the form of financing by long-term loans (long-term loans, finance leases, and equity mobilization) should be used With the selection of the above mobilization methods, the company will have a balance between the mining time and the payback time Thereby, the company has enough capital to finance its activities according to the implementation schedule, and at the same time increases the ability to repay capital on time
- In the short term, the company needs to restructure short-term and medium-term loans with high interest rates to reduce loans At present, with a relatively low proportion of equity, the company needs to mobilize equity from retained earnings Self-financing with retained earnings is an important and attractive source of finance because it has low cost and does not depend on outsiders However, capital reinvestment from retained earnings can only be realized when the company operates efficiently The company should attach importance to the investment policy from retained earnings Therefore, it is necessary to set a goal of having a large enough amount of residual profit to meet the increasing capital needs, reducing the ratio of debt to total capital, which currently accounts for a very high proportion.
Enhanced cost management
- Building an internal cost norm system to serve cost management, the norm system mainly includes: direct labor norm, raw material norm, machine shift cost norm
- Manage materials at construction sites closely during the production and construction process to minimize unnecessary consumables, conduct monitoring between the delivery of materials and use in each department, each team to promptly detect the parts that do not fulfill the norm, waste materials The reduction of material costs is not only in the volume but also in the purchase price The company needs to choose suppliers who meet the requirements in terms of quantity and quality, sell them to the company at a favorable price and convenient transportation After completing the work, the company needs to strengthen the recovery of excess materials to avoid waste The company also needs to pay attention to the preservation of raw materials
Facing unfavorable developments of the economy in general and the difficulties of the construction industry, each enterprise operating in this field has to face many difficulties and challenges Enterprises that want to survive and develop must minimize the negative impacts from the outside, improve the internal capacity of the business to operate more effectively Therefore, the effective management and use of capital must be prioritized in the operating policies of the unit The inefficient operation of many enterprises, especially in the management and use of capital, has brought topicality to the research topic
Through the research process, the topic has systematized the theoretical basis for the efficiency of capital use in enterprises, applied to analyze the current situation at one-member limited liability companies applying new technology and tourism Thereby clarifying the achieved results as well as the remaining limitations and causes in the management and use of capital of the company Although still limited in many aspects, the author has proposed some solutions to improve the efficiency of capital use of Newtatco, such as solutions to strictly manage inventory, strengthen the management and recovery of assets receivables, strengthening the management and investment of fixed assets, building the optimal capital structure, etc Hopefully these solutions will be a small part of useful contribution for Newtatco Company in improving the efficiency of capital use and production and business efficiency
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Appendix 01 SURVEY QUESTIONS ASSESSMENT OF CAPITAL USE IN ENTERPRISES
The survey consists of 14 questions including:
Quest 1-4: General information of the interviewee
Quest 10-11: Evaluate the efficiency of the use of assets (Q4)
Quest 12-14: Evaluate the profitability of the business (Q5)
Summary table of preliminary investigation and processing data