Luận văn phân tích tài chính doanh nghiệp bằng tiếng anh theo format của trường học viện tài chính

Luận văn phân tích tài chính doanh nghiệp bằng tiếng anh theo format của trường học viện tài chính. Good luck

TABLE OF CONTENTS Academy of Finance GLOSSARY OF TERMS BEP CATA EBIT EPS NWC Per Break-Even Point Current Assets to Assets Earnings Before Interest and Tax Earnings Per Share Net Working Capital Percentage OCF Operating Cash Flow ROA Return on Assets ROE Return on Equity ROS Return on Sales USD United States Dollar VND Vietnamese Dong Academy of Finance LIST OF TABLES Table Table 2.1: Capital structure ratios Table 2.2: Structure of Liabilities and Equity in 2016 Page 40 41 Table 2.3: Analysis of Dai Dong Tien’s NWC 46 Table 2.4: Dai Dong Tien’s solvency ratios 47 Table 2.5: Structure of Dai Dong Tien's assets in 2016 Table 2.6: Dai Dong Tien’s asset utilization efficiency ratios Table 2.7: Dai Dong Tien’s liquidity ratios Table 2.8: Source of cash and use of cash of Dai Dong Tien in 2016 49 53 56 59 Table 2.9: Analysis of Dai Dong Tien’s cash flow 60 Table 2.10: Dai Dong Tien’s cash flow ratios 63 Table 2.11: Dai Dong Tien’s Income Statement in 2016 Table 2.12: Dai Dong Tien's profitability ratios 65 67 LIST OF CHARTS Academy of Finance Academy of Finance PREFACE Research problem Mining is one of the most important industries to every country It supplies the consistent material source for a nation’s needs Available natural resources help a country decrease its dependence on the material import, thus lead to the industrial growth, especially in developing countries like Vietnam Practically, mining industry requires a long-term investment along with many potential risks Before investing in machinery and equipment for manufacture, every single project related to mining has to get through the geological investigation and survey to evaluate the quantity and content of the mine It is followed by the variety of procedures related to the exploded areas, which is very risky due to either the possible changes in policies or environmental issues Also, the higher level of exact forecast that geological evaluation creates, the higher costs are made, leading to the high proportion of cost in the product price and low profitability Additionally, the lack of local authority’s mining management, as well as illegal actions of mining entities have been arising without the strict rules and punishment have been making a negative impact on the national environment, especially the natural resources, while the quality of investment projects are not guaranteed For any industrial organization, it is imperative to enhance its effective operation and prevent the environmental pollution As many other Vietnamese company supplying mining and transport services, Dai Dong Tien’s turnover has experienced a fluctuated period However, in this erotic economic climate, Dai Dong Tien still remains the leading position in the Academy of Finance local area, and its financial performance plays an important role in that success During the time being a student I was able to build up my knowledge and understanding of the preparation and interpretation of financial statements, management reporting and performance management The topic “Evaluation of Dai Dong Tien’s financial performance” relates to my chosen career, as a future financial manager, I am required to analyze information from a variety of sources and use this to make effective financial decisions The research report has enabled me to further develop my graduate level skills including research, analysis and interpretation of data, using the information gathered to effectively contextualize it alongside the economic climate and overall business strategy and draw effective conclusions from this Purpose Analyzing and evaluating the financial statements in order to find out the strength and the shortcomings of Dai Dong Tien’s financial performance and position, thus provide some useful suggestions for their future Scope of research Case study In this work, I focus on evaluating the financial performance and position of Dai Dong Tien Limited Liability Company Time constraint I am evaluating the Dai Dong Tien’s financial performance through financial statements and related documents in the three-year period from 2014 to 2016 Methodology Academy of Finance a Statistical methods • Data collection For completing the financial analysis, financial statements from the years 2014 to 2016 were used This includes balance sheets, profit and loss statements and cash-flow statements from each year obtained from the company's annual reports and additional data from its official website All other information used in this thesis was gained from the literature chronicled at the end and from knowledge acquired during my years of study • Data summarization Calculating appropriate data and displaying that information in the form of tables, graphs, or charts b Comparison methods Structural changes can generally be described by two types of statistical indicators: • Absolute indicators, which indicate the difference in the magnitude • of two relative structures; Relative indicators, which indicate the same value of two different relative magnitude ratios in different periods of time c Analysis of proportions Structure analysis of the compound indicators (both absolute and relative) d Econometrics models The tasks of defining a company’s financial position compound indicator structure deviation are as follows: Academy of Finance • Analysis of structural deviation trends comparing the base of actual and • comparative data; Analysis of the actual constituent parts’ ratio deviation scale as • compared with the base situation; Defining the compound indicator rate if the change rate of an indicator is known The information gathered was then used to calculate the financial ratios of Dai Dong Tien The results realized are mentioned in the part “2.3 Assessment of the company’s financial performance” with elaborations on how they could be used to improve deficient areas which in the long run would enhance the financial stability of the company as well as augmenting the output of the firm Thesis structure The work includes four parts  Preface  Chapter 1: Theories of firms’ financial performance evaluation This part will focus on theoretical knowledge of financial analysis This is comprised of explanations of the analytical methods used in the evaluation of company’s financial structure  Chapter 2: Evaluation of Dai Dong Tien’s financial performance in recent time This part includes an introduction to the company and its current position in the industry It will also specialize on the practical part in which the outcome of the financial analysis will be followed by explanations and elaborations where necessary Academy of Finance  Chapter 3: Solutions for improving Dai Dong Tien’s financial performance The final part of the analysis will be concerned with suggestions of applicable recommendations for the betterment of the firm It will focus on practical solutions that can be implemented internally in the shortest possible time to improve the financial condition of the company 10 Academy of Finance CHAPTER 1: THEORIES OF FIRMS’ FINANCIAL PERFORMANCE EVALUATION 1.1 Corporate finance and financial management 1.1.1 Corporate finance and financial decisions a What is corporate finance? Corporate finance consists of the financial activities related to running a corporation In another way, corporate finance, is the study of ways to solve these three problems: - Choosing long-term investments to proceed Should a proposed investment be made? That is, which major of business will you concern and which kind of buildings, facility, etc will - you need? The way the company pays for it Where will you get the long-term financing to pay for your investment? Will you bring in other owners or will you borrow the money? or - combination of both ways? How to manage the firm’s daily financial activities What’s your decisions when collecting from customers and paying suppliers? - When the business is successful, how will you share in the rewards These are just some of the questions a corporate financial officer attempts to answer on a consistent basis But all things considered, the primary goal of corporate finance is to figure out how to maximize a company's value by making good decisions about investment, financing and dividends In other words, how should businesses allocate scarce resources to minimize expenses and maximize revenues? b Financial management decisions 83 The global financial crisis this time is considered as the most severe since the Great Depression in the period 1929 - 1933 This situation has caused a significant impact on the Vietnamese economy • In 2013 The high risk of inflation combined with the market stagnation could make the situation more difficult Although during the first months of 2013 the CPI rose only 3.53% compared to December 2012, but there was still some potential inflation risks because the economy underlying problems had not been solved Bad debt situation had not improved, so the credit line remained stuck, the economy was not absorbing capital Likewise, surplus of money, lack of funds was extended Assessment to capital remains in difficulty, especially with small and medium enterprises The ability to pull off the lending rate is not so strong, it's definitely hard to meet the expectations of the company, due to inefficient operations of businesses and commercial banking system Lending rates are still high, especially interest rate for medium - long term debts This will not stimulate the company expanding investment market and is still at risk of bad debts increase for companies struggling to recover production In addition, in 2013, the world economic situation showed other erratic movements, having adverse effects on an open economy like Vietnamese However, the economy has, more or less, got some achievements: Inflation remained under control; total means of payment and credit was controlled as appropriated; average interest rates and lending rates fell sharply; exchange rate was basically stable, foreign exchange reserves increased Bachelor Thesis Dang Xuan Hoa 84 rapidly; dollarization significantly reduced; the trade balance was improved by promoting exportation • In 2014 Vietnam’s GDP in 2014 is higher than the 5.25% growth of 2012 and 5.42% of 2013 showed positive signs of the economy when the political landscape has many uncertainties when China place illegal oil rig HD 981 in the exclusive Vietnam economic zone GDP also had shown signs of recovery that helped to maintain macroeconomic stability - goals that Vietnam pursued for several years up to now Although Vietnam's economy showing signs of recovery, but when considering the structure of GDP by economic sectors, it can be seen that private enterprises contributed approximately mere 10% and did not change during 2005 - 2013 Meanwhile, individual economic sectors contributed the most to GDP, accounting for approximately 32% from 2007 - 2013 This, in a way, showed that current economy is quite fragment and smallscale developing Labor productivity in Vietnam has been increasing in recent years, an average number of 3.7% year over the period 2005 to 2014, contributing to narrowing the gap in labor productivity compared to other countries in the region Later labor productivity increased in 2012, 2013 and 2014 was by respectively 3.05%, 3.83% and 4.34% The reason is that labors from the agricultural sector have lower productivity than from the industries or services • In 2015 Bachelor Thesis Dang Xuan Hoa 85 GDP growth accelerated in 2015 supported by both investment and private consumption Net trade performance weakened, reflecting high import growth compared to exports Short-term economic prospects are well oriented so far A pro-growth policy mix (accommodative monetary policy and relaxed fiscal policy) coupled with improving increasing incomes and solid private sector confidence will allow for a further increase in domestic demand Exports will likely rise but at a gradual pace reflecting moderate acceleration in external demand growth and weak commodity prices GDP growth is set to pick up speed to 6.5% by 2017 In the longer term, the economy may maintain a fast-growth pace with the implementation of the Trans-Pacific Partnership Fiscal policy turned accommodative to counter an economic downturn in 2012-2013 High fiscal deficits have pushed public debt to over 60% GDP Going forward, there are few if any signs that this trend will reverse significantly after 2016 First, weak commodities prices will remain a drag on government revenues growth despite some improvement in tax collection (broadened tax base e.g.) and higher duties on petroleum products Second, the policy stance will likely remain broadly accommodative with a further reduction in corporate income tax planned in 2016 (20% from 22% in 2015), and still solid growth of public expenditures The external liquidity position is weak with FX reserves covering hardly months of imports Currency risk is elevated with devaluations in 2015 External conditions are not fully supportive in the short run The current account surplus weakened in 2015 as imports (led by high domestic demand) growth outpace exports FDI inflows are strong as the country is seen as a strong alternative to China but strong short term capital outflows (due to the Fed’s tightening) are still a drag Bachelor Thesis Dang Xuan Hoa 86 Risks related to the banking system have fallen with improving liquidity (higher FDI, accommodative monetary policy) and lower NPL (2.9% in Q3 2015 vs a 3% end-year target) However, a cause of concern still stems from weak profitability and low capital buffers The business environment is improving at a gradual pace Vietnam's standing on the Ease of Doing Business ranking improved to 90th (from 93rd) over the past year In particular, progress was made on the tax environment (+4 positions) and insolvency resolution (+2 p) As a member of the TPP project, further improvement is likely in the medium term especially on investor protection, on enforcing contract laws and insolvency resolution • In 2016 According to data issued by the Government Statistics Office (GSO), GDP expanded by 6.2% in 2016, just shy of the government’s projection of 6.3% and slightly above the IMF’s estimate of 6.1% While this was the first time in four years that growth had slowed – from 6.7% in 2015 – per capita GDP rose 5% to a new high of $2215 This strong rate of growth came despite weakened returns from the agriculture sector, which saw yields reduced due to adverse climatic events Drought conditions, the worst in some 30 years, impacted coffee and rice production, while flooding in some regions eroded rice harvests Environmental factors, combined with lower commodity prices in some markets, saw agriculture’s growth trimmed to 1.36% for 2016, its lowest since 2011 The main factor at play in the downturn was a decrease in the volume and value of rice exports, which fell by 25.8% and 21.2% to 4.88m tonnes and $2.2bn, respectively The strong rate of economic expansion was also reflected in bank lending, with credit growth hitting 21.82% for Bachelor Thesis Dang Xuan Hoa 87 the year, slightly higher than the estimate of between 18% and 20% from the State Bank of Vietnam (SBV) An even economic footing was successfully maintained in 2016, as while GDP growth came in marginally below targeted levels, inflation also rose at a slower rate than predicted Vietnam’s consumer price index rose 2.66% in 2016, well down on the 5% increase forecast by the government However, pressure might be exerted on the index in 2017, as price rises gained momentum late in the fourth quarter of last year, with December’s consumer price index pushed up by increases in medical and education costs to 4.74% y-o-y, according to GSO data Despite this jump, the government has projected inflation of 4% for 2017 One factor helping keep inflation in check was the stability of the local currency, with the dong only depreciating by 1.2% against the dollar throughout the year Unlike a number of emerging economies, which saw sharp falls in the value of their currency push up the cost of imports, Vietnam’s dong maintained a steady course For example, following the US presidential election in late November, Malaysia’s ringgit fell by 6.5% to a 19-year low against the dollar, while Indonesia’s rupiah depreciated by roughly 2% Investor appetite remained strong through 2016, with foreign direct investment (FDI) rising sharply Actual foreign investment inflows rose by 9% last year, reaching a record high of $15.8bn, according to data issued by the Ministry of Planning and Investment at the end of the year Additional funds for existing investment projects and new FDI commitments combined to total $24.4bn – an increase of 7% on the 2015 figure The main beneficiaries of FDI were the manufacturing and processing sector, which accounted for 63.7% of all inbound investments; the Bachelor Thesis Dang Xuan Hoa 88 automotive wholesale, retail and repair sector with 7.8% of the total; and real estate with 6.9% 3.1.2 The development strategies of Dai Dong Tien In general, the objectives and the development strategy of Dai Dong Tien for the coming period is to continue to maintain developing stably and sustainably, improve the company’s competitiveness, remain its position in the market; Dai Dong Tien will try to expand the scale of investment business; enhance training and improving employees’ lives and contribute to maximize company’s profit On the basis of the overall developing plan of the Corporation as well as its actual condition, the company set out orientations and develop goals in the coming period to be a public joint stock company with a healthy financial situation and strong competitiveness in the mining and transport market in Yen Bai province To achieve those goals, company also outlined the strategy in more detail as follows: - Financial strategy: The company should classify debts, restructure existing debts to be recovered as well as proposed measures for effective recovery For fixed assets, the company should plan to push investing on machinery innovation: repair or remove outdated equipment, improve business efficiency to meet current development needs - Human development strategy: Due to the high number of employees, DAI DONG TIEN may focus on training high-quality labors, thus increase the proportion of skillful workers The company should maintain the higher training for key staffs of the company, while ensuring benefits for employees Bachelor Thesis Dang Xuan Hoa 89 3.2 Solutions for improving Dai Dong Tien’s financial performance 3.2.1 Solvency raising Solvency indicators is an important factor of corporate financial analysis because it is the basic measure to evaluate the risk level and financial security of the business Through the analysis, it can be seen that in recent years, the Company has not incurred overdue debts, solvency has been ensured It is imperative to make sure that solvency of the company is always kept at a reasonable level by enhancing the efficiency of inventories management and debt utilization Therefore, in the near future, to improve liquidity and reduce financial risks, the Company needs to focus management on the following issues: Firstly, Dai Dong Tien should tighten inventories control, especially the manufacturing costs of unfinished goods, try to minimize the amount of capital being stagnant by improving productivity, shorten the life of construction Secondly, based on the capital needs, the company can minimize the shortterm bank loans, or consider replacing with long-term equity, ensuring restructuring towards appropriate funding, has decreased interest payments pressures Besides, the company also may consider the close relationships with customers to raise fund from low-interest loans or appropriated funds In addition, the company also needs to identify a reasonable level of capital reserves, the balance between expenditure needs of the business and cash reserves, thus ensures payment needs, while ensuring resources to pay term debts Bachelor Thesis Dang Xuan Hoa 90 3.2.2 Strengthening accounts receivable management The result of analysis in chapter shows that the accounts receivable took a majority in the Company's short-term assets structure In late 2016, the Company's capital is rather large appropriation, which are mainly receivables from customers The increase in accounts receivable will raise debt management expenses, debt recovery expenses Therefore, the rapid recovery of the account receivables to preserve capital and limit the costs incurred is a very important step To manage these items, the Company can apply some of the following measures: • Specify the contract term before signing, includes:  The percentage of the product value that customers must prepay  Payment term  Payment method,  The penalty terms for violating the contract If either party violate the contract, they must be responsible for compensation and fully implement the terms agreed in the contract The contract terms have to be read carefully by the Economic Strategy Department, ensuring the balance between the costs, profitability and financial condition of the customer • Set up a reasonable discount policy for high valuable contracts, regular customers, or for early payments Offering incentives to customers is to stimulate early payments, reduce capital being occupied, increasing the • rotation of the working capital and also total capital Closely supervise the receivables and make a specific recovery plan with details as follows:  Establish a department specializing in managing and tracking all accounts receivable Besides, the company should open books for accounts monitoring in detail, especially accounts receivable from customers and investors At the same time, companies also need Bachelor Thesis Dang Xuan Hoa 91 to classify debts by debtors, repayment capacity, term of debt associated with the agreed payment due to actively urge  customers to pay on time Implement flexible levy policy in order not to lose market but still able to recover doubtful debts 3.2.3 Pushing up cost-saving, lowering product prices and profit maximization Saving the cost of doing business and lowering product price are important factors which directly increase profits for businesses Therefore, any company strives to minimize unreasonable costs Assessing the actual financial performance of the company shows that there is a large proportion of cost of goods sold also in revenue; management costs have decreased now, but still lower than the revenue so that profit can not be maximized for the business To remedy that situation, the company shall apply the following measures: • Review and make specific plan for business expenses and for product price Completing this work is to create favorable conditions for the inspection and monitoring of business expenses while implementing • product cost reduction In difficult conditions, raw material price is getting higher and higher, the company should actively search for other markets with low-cost inputs For long-term suppliers, the company should consider leverage • relationships to apply for discounts Formulate norms, minimize enterprise management cost Companies need to reallocate the departmental agencies, streamline apparatus thus able to save the expenses like wages, office costs, etc while they can create stable working environment Bachelor Thesis Dang Xuan Hoa 92 3.2.4 Increasing products and services sales for higher revenue Revenue maximizing is the basic objective that every business oriented In the context of the current difficulties, the increase in profits encounter many problems Therefore, to promote product sales revenue and profits, Dai Dong Tien should apply some measures as follows: • In mining and transport industry, the company needs to develop a policy to operate more independently This forced the company to be more proactive in seeking new contracts and self-organizing However, selfcontrol will give the company greater opportunity in the search for • profits Accelerate the execution of construction works when the quality is still taking place Accelerating the construction of this wheel to help accelerate the revenue, while creating a convenient basement for later • steps of the business The company should actively seek customers with strong demand, regular and long-term to conclude contracts for services supplying, • giving the company a broad and stable market To effectively meet customers’ requirements, there should be more incentives to maintain a close relationship, payment method can be diversified, fast and convenient, together with full and verified consultancy 3.2.5 Implement of risk measures in business In current market, the business may encounter unexpected risks If inputs, outputs or financial markets experience increased volatility, the financial position of the Company will be affected Therefore, a company should proactively implement risk prevention measures namely: • Companies need to create production plan, estimate product sales activities during the year, thereby have reasonable reserve plan to buy Bachelor Thesis Dang Xuan Hoa 93 raw materials, not to mention raise number of long-term contracts signed with suppliers to limit the impacts of high market price Stimulate investing in modern equipment and high-technology to enhance productivity, shorten the production and service supplying period, in order to reduce inventories capital The company need to focus on insurance for the property in order to overcome the risk of damage occurring, ensure the fluent of business process 3.2.6 Complete and improve accounting system and financial analysis at the company Implement of financial analysis will provide a overall and insight view into the financial situation of the company, about the strengths, weaknesses, achievements and constraints existing In the future, the company should have a separate department responsible for this task To ensure effectively financial analysis, Dai Dong Tien should focus on measures as follows: • Complete the analysis process comprises the phases of preparation and planning analysis, analyzing and analysis reporting In each stage, there are different specific tasks, requiring the analysis to have a full • understanding of the company’s situation Complete analysis of financial situation in the company namely: building a system of indicators analysis, financial analyzing through balance sheet and statement of income; financial analyzing through the breakeven point; evaluate business risks and financial risks through financing breakeven; assessment of the financial situation over the solvency models, the indicators of profitability, efficiency, not to mention the management ability Bachelor Thesis Dang Xuan Hoa 94 • Combine the work of accounting and auditing with financial analysis in the company’s financial management For this, there will be a need of a financial specialization department, training of staff with expertise and competence in corporate finance 3.3 Recommendation The state should build average indicators for the transport industry so that the company will have accurate basis for evaluating its position, then find out the strengths and weaknesses to take appropriate measures In addition, there should be an estimating system for the market situation, the price of raw materials thus companies specialized in mining and transportation can conveniently make plan for reasonable trade or materials reserve The government should maintain and upgrade the policies to support businesses, create more favorable conditions for enterprises to supplement capital for production and business activities The fiscal policies can be lowering interest rates for loans and fund addition, simplifying the process of credit, more extension for income tax payment, etc Another effective support is setting up a complete legally regulations, guidelines must be specific to point out the development strategies of the comprehensive business Bachelor Thesis Dang Xuan Hoa 95 CONCLUSION Analyzing the level of key financial measures and their relationships can provide valuable insights to Dai Dong Tien and its managers Comparisons of measures from year to year signal whether the business financial performance is satisfactory and whether the financial position is improving or deteriorating It is often very difficult to compare the absolute levels of financial measures for different company due to fundamental differences in the size, capital requirements, and cash flow produced by the operations Combining my theoretical knowledge with practical experience at university, my final thesis has achieved the following results: Firstly, the thesis pointed out the most common understanding of the financial performance of Dai Dong Tien Ltd Secondly, the thesis was evaluated by real financial performance of Dai Dong Tien which finds out the strengths and shortcomings to overcome Thirdly, the thesis has boldly launched a number of approaches in the purposes to raise the efficiency of production and business of Dai Dong Tien Due to limitation of time and experiences, my thesis, without doubt, still includes various shortcomings, thus I would like to receive feedbacks from teachers and readers to enhance my thesis completion Finally, I would like to sincerely thank the managers and employees in Dai Dong Tien, especially M.Fin Ngo Thi Kim Hoa who has dedicated to help me complete this essay I would like to express my sincere thanks to your precious help Bachelor Thesis Dang Xuan Hoa 96 Hanoi, May 23th, 2017 Author REFERENCES Bui Van Van, Ph.D., Vu Van Ninh, Ph.D., and other lecturers, Giao trinh Tai Chinh Doanh Nghiep, Finance publisher, 2006 Vu Van Ninh, Ph.D., and other lecturers, Corporate Finance – University Textbook, Finance Publisher, 2014 Stephen A Ross, Randolph W Westerfield and Bradfort D Jordan, Fundamental of Corporate Finance, 6th Edition, McGraw-Hill, 2002 Bachelor Thesis Dang Xuan Hoa 97 Kaplan Schweser, Schwesernotes™ 2015 CFA Level I Book 4: Corporate Finance, Portfolio Management, and Equity Investments, Kaplan Inc., 2014 Bachelor Thesis Dang Xuan Hoa