Luận văn thạc sĩ phân tích tài chính công ty cổ phần x20 e

PHÂN TÍCH TÀI CHÍNH TẠI CƠNG TY CỔ PHẦN MAY X20 FOREWORDS Necessity of the research thesis During the business operation and production, the business control, determining strengths, weakness, and potentials of the business in order to develop timely solutions to exploit such potentials and strengths of X20 Joint-stock Company, and to overcome weakness aiming at maximizing the corporate values is the top and regular task of financial managers To implement this task, financial managers utilizes very useful tool as corporate financial analysis X20 Joint-stock Company is a company with financial potentials and prestige in garment and textile industry However, business results have not been really effective What are the reasons of this situation? What are the strengths not exploited and promoted by X20 Joint-stock Company? This requires the application of financial analysing tool in order to advise managers of X20 Joint-stock Company to adopt effective measures to improve business efficiency in order to increase the share price of X20 Joint-stock Company in the market From such reality, the author chooses the research thesis “Financial analysis of X20 Joint-stock Company” The researching objectives of the thesis The thesis aims at three basic goals as follows: - Firstly, systematically studying the basis of arguments on corporate financial analysis including concept and objectives of corporate financial analysis, the materials used in analysis, method and content of corporate financial analysis - Secondly, carrying out comprehensive financial analysis of X20 Joint-stock Company in the period of 2009 – 2011 on the aspects including asset and capital structure, business effectiveness, risks, cash flow, comparative analysis against the rivals in order to point out strengths and limitations about financial situation and its causes - Thirdly, basing on developing orientations of X20 Joint-stock Company and the causes to limitations in financial situation of X20 Joint-stock Company, the author proposes practical solutions for management board of X20 Joint-stock Company to improve business efficiency of the Company Subject and scope of research The thesis focuses on researching argument system and financial analysis situation of X20 Joint-stock Company with comparison with rivals in the industry The period of financial research and evaluation of X20 Joint-stock Company is from 2009 to 2011 Researching method To create basis for analysis and adoption of solutions in improving business operation effectiveness, the thesis utilizes following methods: - Research and collection of information through specialty magazines, data announced on websites, reports of the industry and companies - Synthesizing and comparing analysis on the basis of summary data of garment and textile industry as well as practical data of the company in which the student is working for in order to introduce comments, evaluation, and proposal of implementing methods - Evaluating and forecasting analysis about the needs, developing trends of the market and corporate Scientific and practical meaning of the research thesis Scientifically, the thesis focuses on the research of argument basis on corporate financial analysis, especially systematic introduction about analytical methods and content of financial analysis Practically, the thesis applies financial analysis arguments and methods in practice of X20 Joint-stock Company to determine strengths and limitations, causes of financial limitations in order to consult Management Board of X20 Joint-stock Company in management of business operations in the future Structure of the thesis In addition to the forewords, conclusion, list of reference, the main content of the thesis is divided into three chapters: Chapter 1: General theory about corporate financial analysis Chapter 2: Financial analysis of X20 Joint-stock Company Chapter 3: Solutions to improve financial management effectiveness in X20 Joint-stock Company CHAPTER 1: GENERAL THEORY ABOUT CORPORATE FINANCIAL ANALYSIS 1.1 CONCEPT, OBJECTIVES, MATERIALS AND METHODS OF CORPORATE FINACNIAL ANALYSIS 1.1.1 Concept of corporate financial analysis Financial analysis is a new concept since it is mainly developed in the 20 th century Financial analysis may be defined as a collection of methods permitting the evaluation on financial situation in the past and at present, facilitating the decision making by the management board and accurate assessment of other corporates In the last decades, the invention of new tools and development of new concepts help to screen financial analysis First of all, we will study the concept of financial analysis, its objectives; followed by the standardization of information needs and analytical tools to be used Financial analysis appeared in late 19th century, and has been developed continuously and rapidly due to various reasons as follows: - Increasing corporate management need - Development of financial market - Establishment of national and multi-national groups - Wide application of information technology and computer Financial analysis is based on accounts of the corporates The harmonious combination of accounts eases the comparison between corporates and economic organizations Currently, financial analysis is becoming essential to corporates so that they can understand their strengths, weakness in order to adopt measures to promote their strengths in parallel with the determination of causes to ineffective operation to have proper improving methods Human being activities are activities of awareness Therefore, as conducting any activities, irrespectively of simple or complicated, any individual or organization base on their awareness of objectives, natures, trends, and developing modes of the objects and phenomena In economic management, awareness, decision and action constitute a dialectical triad of scientific management, in which awareness is the basis, and premise of decision-making, while organization is the one to carry out the decision Awareness determines decision; therefore, proper awareness will lead to proper decision, and expected action On the contrary, improper awareness will lead to improper decision The most common concept is that: Financial analysis is the consideration, research of objects, phenomena in the organic, dialectical relationship between the items constituting such objects and phenomena With such meaning, analysis is an important tool to be aware of the natures, properties, and development modes of the researched objects and phenomena Therefore, corporate financial analysis is a tool to be aware of issues related to corporate finance However, there are many subjects caring about and using economic, financial information of the corporate in various aspects and objectives 1.1.2 Objectives of corporate financial analysis The information presented in the financial statement firstly serves the people of direct interests (contributories, creditors, investment partners, clients, employees…), then corporate leaders (Board of Directors, Management Board…), and finally people of indirect interests (tax agencies, financial agencies, statistics agencies…) However, the data mentioned in financial statements fail to fully show up the contents required by users For examples, investors need to know the profitability of assets, and the capital they have or will invest as well as the possible safety (risk) in the future, the augmentation in share values… Therefore, they have to use analytical technique to present more about main relationship mentioned in financial statement to satisfy the needs of concerned people The most valuable information to users of financial statement is what will happen in the future By comparing, evaluating, and analyzing trends, analysis of financial statement aims at main objectives as follows: Firstly, to fully, timely and honestly provide financial information to shareholders, creditors, investors, management board of Company to help them to make proper decisions in the future Secondly, to make true evaluation on situation of company in the reporting period regarding capital, assets, level, rate and effectiveness of capital and asset utilization to understand the problems and their causes to propose proper measures in the planning period Thirdly, to provide information about fund raising, modes of fund raising, loaning policy with the goal to increase profit, share value; and keep safety for investment capital Financial analysis in various modes aims at serving various users such as managers, current shareholders, or people desiring to become shareholders of the corporate, financial analyst, people is participating in corporate operations, corporate creditors including banks, financial institutions, bill buyers, or bill sellers via bidding Different users will make decisions basing on different purposes Financial analysis by different user groups have to satisfy specialty issues of each group of direct or indirect interests a Groups of direct interests: Financial analysis to managers Financial analyzing activities in corporate are called as internal financial analysis, which is different from external financial analysis conducted by analysts outside the enterprise Thank to comprehensive information and clear knowledge about the enterprise, internal financial analysts have much more advantages to conduct the best financial analysis Corporate financial analysis has various objectives: - To create regular evaluating cycles about the past business operations; to carry out financial balancing, profitability, solvency, financial risks of the enterprise - To orient decisions made by Board of Directors as well as financial manager such as investment, funding, profit allocation - To act as basis to implement financial forecasts; profit, investment, cash budget planning - Finally, financial analysis is a tool to control activities of the enterprise Financial analysis highlights the importance of financial forecast, and acts as basis for managers to clarify the financial policy in particular, and policies of the enterprise in general Financial analysis to investors Shareholders as individuals or enterprises have direct concerns about the calculation of corporate values since they contribute their capital to the corporates and have to take risks Shareholder income is allocated dividend and added value of investment capital These two factors are affected by anticipated profit of the enterprise In reality, investors often evaluate profitability of the enterprise Individual shareholders of large companies in general must base on specialists (financial analysts) They specialize on researching economic-financial information, clarify corporate developing prospects, and evaluate shares in the financial markets Financial analysis experts utilize two methods to evaluate enterprises and estimate share value as follows: - Analysis basing on the research on financial statement, profitability, risk to be mentioned in this thesis - Graph analysis bases on evolvement graphs of share price and transaction volume b Group of indirect interests Financial analysis to creditors If financial analysis is developed in banks when they want to ensure the solvency of customers, financial analysis is used by lending, advancing, or selling on credit enterprises Financial analysis is for other long-term debts with short-term loans - In term of short-term loans, creditors pay special care about quick solvency of the enterprises, which means the enterprise ability to response to due debts - In term of long-term loans, creditors must be sure about the solvency and profitability of the enterprises since the solvency and interest will depend on this profitability Analyzing technique varies by nature and term of the loan; however, creditor are, irrespective of long-term or short-term loan, concerned about financial structure representing the risk level of borrowing enterprises - Regarding investors, creditor financial analysis helps them evaluate the solvency, profitability to make decision whether they should invest in or lend such enterprise Above analysis shows that corporate financial analysis is an useful tool used to determine economic value; evaluate strength, weakness of the enterprise; find out objective and subjective causes helping each subject to make option and decision in line with the objectives of their concern Therefore, corporate financial analysis is an crucial activity to all enterprise in the current market economy and international economic integration 1.1.3 Materials used in analysis Enterprise-related information source is varied Some information is obligatory and open; some only for shareholders Many information is announced by financial organizations or Economic - Financial newspapers The information may come from the enterprise or externally 1.1.3.1 Internal corporate information Financial statement system of the Company refer to extremely important information since financial statements are used to synthesize the financial situation of the Company for a specific period of time They must summarize a relatively high volume of information and be presented properly in a specific form and particular principle in order to provide users with true view about the financial power, solvency, risk, business-production outputs in the reporting period so that the Company can propose useful measures to promote the development of the Company They are also valuable information helping securities investors to make right investment decisions Documents used for analysis are financial statement of the Company, of which the most important and crucial is the balance sheet and business result report a- Balance sheet Balance sheet is a combined financial statement generally reflexing all assets of the Company in two manners including capital and capital constituting source of Company at the reporting time Therefore, balance sheet aims at describe financial power of the Company by presenting the things owned by the Company and those owed by the Company at a specific time Balance sheet is regarded as a snapshot since it is developed at the end of an accounting period This is the weak point of balance sheet when we use its data in financial analysis In structure, balance sheet is divided in to two parts in the balancing principle that asset is equal to capital source In both asset and capital source component, high liquidity is located on the top of the table and decreased as moving downwards Therefore, in the asset component, short-term assets are located upper, while long-term assets lower The same is applied to the capital source component, which is listed by order and payment request First are short-term debts (with maturity of less than year), followed by medium and short term debts, and finally owned capital All assets must be funded by a particular sponsorship such as loan or equity capital Each component has its specific economic and legal meanings Grasping economic and legal aspects of data mentioned on the balance sheet helps us to understand meaning of analytical ratios to be mentioned in the following part - Assets reflect the value of all existing properties under the management and use right of X20 Joint-stock Company at the time of reporting - In economic aspect, data mentioned in assets reflect scale and structure of existing property types of X20 Joint-stock Company at the reporting time in the form of money capital, receivables, inventories, fixed assets Basing on this, it is possible to make overall evaluation on asset scale, operation nature, and asset using level of X20 Joint-stock Company - In legal aspect, data mentioned in the assets show the existing properties under the management and use of X20 Joint-stock Company - The asset reflects the forming sources of existing assets of X20 Joint-stock Company at the time of reporting - In economic aspect, data in the Capital Source show the capital structure invested and mobilized in production and business of X20 Joint-stock Company This enables the general evaluation on financial capacity and initiative of X20 Jointstock Company - In legal aspect, data mentioned in the Capital Source show the legal responsibilities of X20 Joint-stock Company to creditors regarding payable debts, to clients regarding payables, to the owners regarding invested capital, to the State regarding payable amounts, to employees regarding payables b- Business result report: if balance sheet is regarded as a snapshot reflexing the assets, capital, capital sources, debts of the company at the reporting time, business result report is considered as a slow movie about the general business situation and results in a specific accounting year The data mentioned in this report provide the most combined information about the business patterns of the company in the period; indicate whether they generate profit or loss; and describe the use of capital potentials, labour, techniques, and business management experience of the company It is a financial statement concerned by financial analysts since it provides data about the business operations carried out by the company in the period It is also used as a instruction to forecast the operations of the company in the future Business result report indicates the profitability or loss in the period The report is prepared using the principle that it must reflect each type of revenue (revenue from business operation, service supply, financial activities, other incomes), and the costs used to get such revenues The difference between revenue and cost constitutes the profit The content of business result report may be varied by period depending on the management requirements, but has to reflect the basic items such as revenue, cost price, selling expenses, and business management expenses … c- Cash flow statement: Cash flow statement is one of important documents in the financial statement, the necessary document used and understood by managers This report specifies the reasons why the cash and money equivalents vary in the accounting period Especially, this report indicates all changes in money by three activities including business, investment and finance The use of cash flow statement enables managers to follow the cash flow out and in to help the enterprises to calculate the solvency for the due debts Cash flow statement does not carry out calculations such as income statement Any non-monetary transaction will not be reflected in the cash flow statement However, net income mentioned in the top of cash flow statement similar to the last line of the income statement is the profit of X20 Joint-stock Company By series of adjustments, cash flow statement explains the income into cash d- Notes to financial statement: Notes to financial statement are a integral part of financial statement used by the enterprise to report or analyze data information mentioned in the balance sheet, Business result report, Cash flow statement as well as other necessary information upon the request of specific 10 strength such as motor racing suit, vests, jacket, clothes, shirts in outstanding markets of United State and EU in the shifting from processing to FOB - The goal in this period is to stabilize the situation, rapidly get adapted to new management mechanism, create powerful growth rate since 2013 By 2018, X20 Jointstock Company can try to become a multi-sector company (textile, garment, trading in equipment, real estate investment, real estate for lease, financial investment …) with the expected annual growth rate of 7-10%) - Product quality, labour yield improvement, and model research must be well implemented with special focus on the improvement of clothing textile, recovery and expansion of market share in the south market 3.1.2 Human resource development - To re-organize the current payroll; streamline the organization to reduce the indirect rate - To provide periodic instruction and inspection of salary payment to member units; to review and re-adjust economic - technical standard system; to ensure strict management of lump sum expenses; to well maintain the early delivery of salary unit price for economic - export products - To carry out garment worker training courses on regular manner The Company provide support in teachers, meal and accommodation expenses for member units to organize on-site skill improvement for employees; to be in cooperation with universities to provide advanced training for technical force as the key for improvement of product quality, personnel performance, and to satisfy need for highquality employees in the following years 3.1.3 Investment in science - technique - technology - To deploy and complete projects including constructing apartments for employees, building new factories in the industrial park in northwest of Thanh Hoa railway station, completing the construction of textile factory in Hoa Xa Industrial Park in Nam Dinh to put it in operation, upgrading and repairing the plants for production To implement general plan on upgrading machineries and equipment to reach advanced level Since 2012 to the first half of 2013, the Company will complete the supplementation of power looms for Nam Dinh Textile Factory, furnish garment 82 equipment and replace some one-needle sewing-machine, two-needle sewing machine, button holing machine, button attaching machine By the end of 2014, the Company will complete the upgrade from 30-40% sewing machines of all types - To enhance technical, technological, and quality management in the factories; to promote technical initiatives in the company; to research the effective application of advanced technologies, especially the initiatives in technological revision, increase in labor output, product quality, and reduction in production cost - To carry out significant repair and maintenance of equipment; to renovate garment equipment invested since 2004 backwards; to add fabric quality testing devices - To conduct comprehensive research and deployment of financial investments to some other sectors such as stock market, trade in garment materials, chemical, colouring agents for textile sector, and acquisition of shares from some joint stock companies to improve capital efficiency of X20 Joint-stock Company; to enhance the use of management methods to develop and effectively use the state capital invested in X20 Joint-stock Company 3.1.4 Adjustment of state capital structure and capital source plan - To ensure sufficient capital source for basic construction serving big projects such as multi-storey apartment project in Thanh Tri, new construction of plant for Factory 20B, renovation and replacement of old machineries, investment in specialized machineries, upgrading and repair of plants to meet the requirements of the tasks - To enhance management, supervision of purchasing to serve business and production but avoid capital lock-up; to regularly check, settle inventories; to continue maintain healthy condition of financial operations of X20 Joint-stock Company - To actively supervise the debt collection, especially some export customers; to periodically compare debts with each customer; to consider the signing of ecnomic contract to have the most favourable payment mode 3.1.5 Business and production plan in 2012 and 2013 Table 3.1 - Business and production plan Indicator Unit 83 2012 2013 Basic construction investment plan: - Employee apartment construction project - Facility construction for factory 20B project - Machinery upgrading investment project - Plant upgrading investment Million dongs Million dongs Million dongs Million dongs 25,000 10,000 12,000 4,000 40,000 11,000 10,000 5,000 Million dongs people Million dongs Thousand dongs 172,500 4,100 174,660 172,500 4,250 188,700 3,550 3,700 Net revenue Million dongs 890,000 925,000 Total expenditures Million dongs 851,187 885,109 Pre-tax profit After-tax profit Million dongs Million dongs 38,813 31,050 39,891 31,913 17 18.5 Chartered capital Total number of employees Total salary fund Average income for one person/month 10 Annual dividend rate 3.2 SOLUTIONS % FOR IMPROVING THE EFFICIENCY OF FINANCIAL MANAGEMENT IN X20 JOINT STOCK COMPANY Solution 1: Continuing the efficient management in investment and use of fixed assets Fixed assets are crucial to the business and production capacity of a enterprise Fixed assets in an enterprise are considered as “muscle and bones of a living body” From that point, below are a number of measures to improve the efficiency of using fixed capital and fixed assets of X20 Joint Stock Company Fixed assets of X20 Joint Stock Company is mobilized into business and welfare, which demonstrates that the company has fully exploited the capacity of its fixed assets As analyzed above, the efficiency of using fixed assets has increased compared to previous years; however, such efficiency of using fixed assets is not so high compared to other companies in the same industry Therefore, the question is that the company must not only fully exploit its fixed assets, but also effectively exploit its existing fixed assets On the other hand, it is necessary to carefully consider the higher effectiveness and efficiency of the investments in purchasing fixed assets 84 In order to improve the efficiency of using fixed capital, the company can apply the following measures: - Management of fixed assets in objects Well preserving the assets which are being used Identifying and defining the causes of wear and tear for active remedies Focusing on procurement of fixed assets when it’s absolutely necessary and ensures the property objectives and long-term business directions of X20 Joint Stock Company This will help the company utilize the operational capacity of fixed assets, avoid using fixed assets for only the first phase and then not using them for the next phases due to being no longer appropriate to the company’s business objectives - Changing the method for calculating the depreciation of management facilities and means of transport Currently, X20 Joint Stock Company is calculating the depreciation of fixed assets using the linear method The advantage of this method is simple to calculate But this method often does not accurately reflect the actual level of depreciation of fixed assets, which results in the slow return of fixed capital, vulnerability to the adverse effects of invisible wear Therefore, the linear method is suitable to calculating the depreciation of fixed assets which are buildings and structures However, the intangible level of wear and tear of other fixed assets such as means of transport and transmission, and communication equipment is very large, which requires the company to have appropriate depreciation method to recover the initial investment capital such as the declining balance depreciation method - Investing in innovation of fixed assets to improve the production performance Currently, the depreciation coefficient of fixed assets of X20 Joint Stock Company is approximately 78.7% by the end of 2011, the accumulated amortization is VND211,942 (million) on the historical price of VND281,902 (million) This requires the company to review the status of fixed assets The assets to be liquidated should be liquidated immediately to recover the capital For the fixed assets with low production capacity due to wear of historical cost, the company should invest in replacing and innovating them However, it is important to consider the level of modernization of 85 replaced machinery and equipment Although replacing machinery and equipment will bring high productivity, saving of materials and labor, it also gives a lot of risks to the ability to achieve profits of X20 Joint Stock Company Therefore, it is necessary to consider the new break-even level output compared to the increase in profit per unit of increased product Solution 2: Increasing the management over current assets and current capital In order to achieve the set goals, X20 Joint Stock Company must carry out to consolidate the financial management including the management of current capital From the actual status of current capital management with its operational orientation, it is necessary to overcome some limitations in the management of current capital, thereby improving the efficiency of using current capital of X20 Joint Stock Company: - Estimating the need of current capital: To enhance the efficiency of using current capital, it is important for every company to estimate the minimum needs of current capital It is the optimal amount of capital to ensure the continuous and effective production process and to help the initiative, reasonable and economical organization, management and use of current capital The fact shows that X20 Joint Stock Company has no specific methods to determine its current capital needs Therefore, the company needs to choose a method of determining current capital needs in accordance with its characteristics and particular situation To properly determine the needs of current capital necessary for the production process for each quarter and each year associated with the targets and business directions of such periods This can promote the effect of the estimate and will actually be effective There are many methods of determining current capital needs such as: the regression method, the method based on the specific criteria of the balance sheet By studying the characteristics of production and business activities of X20 Joint Stock Company, we find that the company can apply the method of percentage of revenue to determine the current capital needs of the planning periods Good use of this method in estimating the need for current capital will help the managers have a ground to properly orient the funds and measures to better funding, which will bring efficiency of using capital to the Company 86 The principal contents of this method is to determine the law of the relationship between the current assets and the sales of the previous years for a ground to estimate the current capital needs of the following year on the basis of the following year’s sales, after eliminating the capital tie-up of the suppliers This method is simple, easy to apply, reflects the relationship between assets, capital sources and sales of X20 Joint Stock Company However, the exact level of capital need depends on the estimated revenue Therefore, it requires the estimator must be knowledgeable about the business, the rules of the relationship between sales, assets, and capital and profitability issues - Being active in preparing the plan for mobilization and use of current capital After determining the need for current capital, the next job to be active in the work of raising funds for current capital is to identify the most beneficial financing for current capital needs In the next year, X20 Joint Stock Company should well organize the work of sales, payment and debt collection to limit the accounts receivable, while enhancing the company's reputation in the process of payment to suppliers and encouraging customers to advance part of the goods’ value to the company to proceed the increase of capital tied up from customers These are lawful and reasonable capital that the company should exploit to supplement to the current capital needs However, when using capital tied up from the suppliers, the company should also pay attention to: + Creating good relationships with the suppliers, considering them as strategic partners in the company’s business activities + Closely combining between the credit purchase plan to the goods production and consumption plan to ensure the supply of raw materials needed as scheduled + Planning for estimation of revenue and expenditure in cash, ensuring the solvency at all times, the most important is to respect the rules on payment to the suppliers: payment on time and with the amount as committed The company needs to classify correctly its debts: debts payable, due debts, overdue debts to have the plan for payment in installments in order to reduce the financial burden at the same time Well 87 implementing the above matter will strengthen the trust of partners and become the basis for the credit purchase of goods with the necessary volume Besides, X20 Joint Stock Company should develop a plan to mobilize provisional current capital to take the initiative and achieve the contracts and unexpected orders, which are the opportunities to bring the high profits for the company - Enhancing the management of provisional and inventory capital In the past time, the management of inventory has not been very effective in the management of current capital of X20 Joint Stock Company The inventory in bulk reduces the turnover speed of current capital, which results in huge waste of capital The fact shows that the amount of materials reserved for the production process accounts for a considerable share in the volume of inventories The reasons are as follows: - In recent years, as the prices of input raw material for the production of X20 Joint Stock Company have significantly reduced, the supply department has to buy a large quantity of necessary raw materials for reservation to avoid the impacts of the increasing prices of raw materials - The economic downturn has had significant impacts on the consumption of finished goods and goods of every business The declining purchase power of the economy makes the company’s consumption of finished products and goods more difficult Therefore, in order to strengthen the management of inventory in the near future, X20 Joint Stock Company needs to address and implement the following matters: - For the procurement of materials, it is necessary to base on the needs of the company to determine the correct amount of materials and goods to be purchased during the period, not to reserve too many materials in the warehouse at the same time The company should import the raw materials several times with moderate volume each time to avoid the accumulation of capital in order to save capital At the same time, the company should take measures to accelerate the production process in order to reduce the consumption of inventory raw materials 88 - The company should regularly check the inventories in order to detect the types of low quality materials due to long-term inventory to take measures in time to recover capital - The company should proceed with setting up provisions for inventories devaluation; this will help the company get the necessary financial resources to offset losses in the case of price reduction of inventories - The company should focus on the estimation of input material prices A large part of the company’s raw materials are imported from abroad Besides, the prices of raw materials account for 60 - 70% of the cost of products produced by the company Therefore, the risk of fluctuations in input raw material prices is huge, including the risk of exchange rate The company needs to closely monitor and implement estimation of the raw material prices, buy raw materials in time at reasonable prices in order to maintain stable output prices To effectively implement the above solutions, it requires the managers to capture the characteristics of each type of raw materials and goods traded by the company as well as the movement of goods and materials in the market to have appropriate corrective measures - Good management of cash capital In the late 2011, the amount of capital in cash of X20 Joint Stock Company is high, thus the company needs to implement the following measures: - Actively planning to balance the revenues and expenditures in cash for each month, quarter or year on the basis of estimation of revenues and expenditures to arise to find the funding if the budget deficits or to invest the idle cash for the purpose of profit At the same time, the company should establish minimum cash in hand on the basis of the spending safety as decided by the managers This will help the company to have the necessary amount to ensure needs of revenues and expenditures in cash which may arise without falling into the passive status - In the cash management, the company should take measures to reduce the interval between the time when customers pay the bills and the time when amounts paid to the company’s funds, while reducing the speed of payments to partners The company should open accounts in various banks to shorten the transit of revenues and 89 to prolong the transit of expenditures For example, the company should understand customers’ accounts at the banks to ask the bank to transfer money into accounts opened in the same system with the customers’ accounts In contrast, the company should pay from the account opened in the bank different from the seller’s bank, so the company will extend the transit time of the payment Solution 3: Closely managing the costs in production Currently, the proportion of the actual cost in total net revenue of X20 Joint Stock Company is higher than many competitors’, mainly due to high production costs resulting the high actual cost of goods This makes low ROE of only 13% An enterprise shall be considered to be effective if its ROE is 18% or more Using the DuPont analysis shall show how to achieve this goal If the assets continued to be exploited effectively, the turn round of total assets were 1.6 times and the coefficient of lever increased to 2.5 times, the coefficient of net profit to be achieved should be 4.5%, which is a significant increase compared with 3.78% in 2011 This can only be achieved by increasing revenue and saving costs Table 3.2: DuPont analysis in determination of the targeted ROE Targets In 2010 Coefficient of net profit Turn round of total assets Coefficient of financial lever ROE In 2011 8.16% 3.78% 1.11 1.47 2.6 2.35 23.6% 13% In the past year, the cash costs increased from the previous year Besides, the production was facing many difficulties due to high cost of raw materials, which was caused by objective reasons This requires the company to review these expenses, specifically analyze every element constituting this expense item to have closer management measures The company should have more specific norms for each expense, as a basis for closer cost control Solution 4: Paying attention to the searching market to expand the consumption revenue and business diversification 90 In 2011, the revenue from national defense products accounts for the major proportion which is 66.33% Besides, the general downturn of the economy has led to demands for all commodities falling sharply To remedy this situation, the company should pay more attention to the investment in the market research and expansion; increase the spending on advertising and marketing Besides, in the product consumption, the company should provide flexible handling measures to attract and entice customers to actively participate in trade fairs, exhibitions and sales with gifts, and transport products to consumers Diversifying the business lines, improving the quality of exported goods, improving the sale and consumption stages to increase the sales revenue and profit after tax of the company To this, the company should take measures as follows: + To request the suppliers to strictly perform the signed contracts with respect to the quality, type, design and specifications This is essential to ensure the quality of exported goods + To strengthen the preservation of goods in storage to avoid decreasing quality of goods during storage The company should invest in storage to have specialized storage facilities necessary to ensure the quality of goods To well organize the inventory for being easy to access, to see and to maintain to avoid frequent checks causing costly inventory + To conduct the market surveys to design the goods in accordance with customer needs + On the improvement of sale and consumption stages: The company should enhance the marketing, advertising and selling goods in the barter agreement manner, reduce the selling price to stimulate consumption, and well implement the signing stage, the delivery stage and the after-sales stage Solution 5: Well implementing the financing for business In the period from 2013 to 2015, X20 Joint Stock Company should not raise capital by issuing additional shares The company should rely on the used capital from retained earnings and capital from external borrowings 91 In addition, the company should continue maintaining good relationships with the suppliers; ensure the prestige of payment in order to continue to receive preferential trade credit conditions, limiting the use of loans to pay interest Solution 6: Performing financial investments in order to diversify business lines in a selective way Current cash balance of X20 Joint Stock Company is relatively high, while the ratio of investments in the total assets of X20 Joint Stock Company is negligible Therefore, the company should use part of this amount for financial investment in a selective manner in accordance with certain strategy The company should select while diversifying business lines on the basis of investments in the companies of the same industry or the auxiliary companies in the methods of acquisition, selling and merger to increase the ratio of holdings, in order to increase the scale of operation, ability to support and growth of the company Besides, the company should focus on the use of its land to develop the real estate projects This is considered a proper policy when the company has the large financial resources and ability to raise capital One area currently considered as having high profit ratio is education and training The managers of the company should develop a long-term development plan and suitable investment plan to develop its textile training centers and preschools Solution 7: Well implementing the distribution of profits The experimental studies show that the stability of share price and the tendency of increasing share price while the fluctuation and decline of dividends will cause the negative impacts to the share price In addition, it is estimated that the business in the coming years will face difficulties and more intense competition; the company will need more capital Therefore, we recommend the company should maintain low dividend payment in the years to come, in order to prioritize profits for reinvestment This is the most effective way to increase equity without increasing the number of outstanding shares Solution 8: Recommendations on reduction of the State ownership in X20 Joint Stock Company The actual practices of state-owned enterprises show that holding a large proportion of the state capital in enterprises does not create the flexibility and 92 activeness in operation of the enterprises, and the business efficiency has little breakthrough Therefore, the state should sell its shares in the company to the strategic managers, shareholders and employees in the company in order to create the cohesion of their benefits with the company Solution 9: Other solutions - Developing the effective communication channels and shortening the period from design stage to product release to the market: For the successful of a textile company, it requires grasping the changes in consumer tastes Therefore, X20 Joint Stock Company should develop good communication channels with its outlets to capture the changes in the needs and tastes of customers with respect to color and style, etc to constantly change patterns and product design In addition, the company should have the appropriate investments in design activities, shortening the period from designing patterns to releasing such patterns to the market in a rapid process: Design => the department of design and test manufacture => mass production to the market This shortening is considered one of the most important factors to the success of a textile company - Planning work: X20 Joint Stock Company continues to promote the role of the planning and organization of production, to develop the construction, to distribute the targets, to thoroughly operate all activities, to organize in order and discipline the monitor of the implementation of the plans in the company, and to adjust itself in time in cases of the impacts to the production process in order to match the actual situation - The management organization: X20 Joint Stock Company should reorder organization model in the new direction, implement the decentralization in order to reduce the concentration and distribution of the wider powers for the member units, conduct the rearrangement of the company’s departments, and consolidate the organization model of staffs During its operation, the company’s management should continue to adjust its model in accordance with the development orientation, business form and scale of production as well as the executive management of all levels and sectors in the company to meet the requirements for development and the activeness in the production of the company, and constantly improve the highly professional management and organization model 93 - The Quality Management Process: X20 Joint Stock Company should apply the management systems ISO 9001: 2000; ISO 9001: 14000 and SA 8000, thoroughly grasp the thematic resolutions of the Party Committee of the company with respect to improving the labor productivity and product quality, effectively maintaining the ISO quality management systems, assuring the quality of stored goods to meet the requirements of customers - The solution of raw materials: X20 Joint Stock Company should strictly implement the provisions on procurement of raw materials for the production of national defense goods; monthly, quarterly and annually plan for raw materials in accordance with the situation; find the stable and prestigious suppliers who are mostly the domestic suppliers; have reasonable reservation of raw materials to ensure timely supply of raw materials for production and avoid congestion capital due to inventory - The personnel: To meet the management requirements of X20 Joint Stock Company, it requires the company’s managers in general and financial managers in particular to be fully capable and qualified Because the capacity and qualification of managers are very important and critical to the development and success of X20 Joint Stock Company Therefore, the company should have a plan for training its personnel, especially the young officers who are qualified and professional, develop its policy of recruiting and attracting the talents, and consider this is prerequisite and crucial to the development of X20 Joint Stock Company 94 CONCLUSION By analyzing financial situation of X20 Joint-stock Company, we can see that the company has many problems in financial management as follows: - The business and production expenditure are not managed well; the costo n revenue is relatively high, resulting in low return on sales of the company - Although X20 Joint-stock Company gains positive change in fixed asset management and use, the using efficiency is low due to economic recession The working capital management is poor, especially inventory - X20 Joint-stock Company needs to improve production and labor organizing skill, management capacity; minimize damages, losses during the production to sabe the cost and reduce product price - The liabilities rate of X20 Joint-stock Company is low compared with other enterprises in the garment and textile industry; therefore, the owned capital effectiveness is low From above situation, the thesis recommends solutions to enhance management of fixed assets and current assets, especially cost management in production to increase income for shareholders of the Company We hope that these solutions will contribute to improve business-production results, and financial effectiveness for X20 Joint-stock Company thời gian tới 95 REFERENCE Vietnamese ASS.PROF Vu Cong Ty, (2002), Investment project selection method, Financial Publisher ASS.PROF Vu Cong Ty, (2004), Corporate finance: Practice, Financial Publisher ASS.PROF Vu Cong Ty, (2008), Corporate Finance cirriculum, Financial Publisher Nguyen Tan Binh (2005), Financial management analysis, Statistics Publisher Nguyen Tan Binh(2005), Corproate operation analysis, Statistics Publisher Nguyen Tan Binh (2007), Short-term financial management , Statistics Publisher Nguyễn Hải Sản (2005), Corprate financial management, Statistics Publisher Trần Ngọc Thơ (2005), Modern corporate finance, Statistics Publisher Nguyen Thanh Liem (2008), Financial management, Da Nang Publisher English Aswath Damodaran (1997), Corporate 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