Working capital management at advanced network systems vietnam limitted company

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH - PHẠM THỊ KIM DUNG WORKING CAPITAL MANAGEMENT AT ADVANCED NETWORKS SYSTEM VIET NAM LIMITED COMPANY QUẢN TRỊ VỐN LƯU ĐỘNG TẠI CÔNG TY TNHH THIẾT BỊ VIỄN THÔNG ANSV LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH HÀ NỘI - 2020 ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH - PHẠM THỊ KIM DUNG WORKING CAPITAL MANAGEMENT AT ADVANCED NETWORKS SYSTEM VIET NAM LIMITED COMPANY QUẢN TRỊ VỐN LƯU ĐỘNG TẠI CÔNG TY TNHH THIẾT BỊ VIỄN THÔNG ANSV Chuyên ngành: Quản trị kinh doanh Mã số: 60 34 01 02 LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH NGƯỜI HƯỚNG DẪN KHOA HỌC: PGS.TS PHẠM THỊ THANH HÒA HÀ NỘI - 2020 DECLARATION The author confirms that the research outcome in the thesis is the result of author‟s independent work during study and research period and it is not yet published in other‟s research and article The other‟s research result and documentation (extraction, table, figure, formula, and other document) used in the thesis are cited properly and the permission (if required) is given The author is responsible in front of the Thesis Assessment Committee, Hanoi School of Business and Management, and the laws for above-mentioned declaration rd Hanoi, September , 2019 i ACKNOWLEDGEMENT I would like to take this opportunity to express my deepest gratitude and appreciation to the people who have given me their assistance throughout my studies during the preparation of this thesis They are my teachers, my colleagues, my family and my friends I would like to express my great thanks to all of them First of all, I would especially like to thank my advisor, Assoc Prof Pham Thi Thanh Hoa, for her continuous encouragement and especially for her academic and creative guidance She has been my source for inspiration thoughout my thesis Without her support, I would not be able to complete my thesis And I really appreciate her patience in reading and correcting my thesis I am indebted to all my teachers at Academy of Finance for their guidance and help with valuable lessons thoughout four years of study Moreover, I would also like to thank all of you and your colleagues who have been working at ANSV Co., Ltd, who helped me answer the survey questionnaire as a data source for analyze and produce research results of this graduate thesis Last but not least, many thanks to my family, friends and classmates for their great love and care in both spirit and health during preparation for the undergraduate thesis in Finance Finally, I have to give myself credit because I endured to the end of my thesis instead of giving up, losing my mind or getting sick due to the stress Student Pham Thi Kim Dung ii TABLE OF CONTENTS DECLARATION i ACKNOWLEDGEMENT ii LIST OF ABBREVIATIONS v LIST OF TABLES vi LIST OF CHARTS vii INTRODUCTION Chapter 1: THEORETICAL BACKGROUND OF WORKING CAPITAL AND WORKING CAPITAL MANAGEMENT 1.1 Working capital and the sources of working capital 1.1.1 Definition and characteristics of working capital 1.1.2 Classification of working capital 1.2 Working capital management of business 1.2.1 Definition and objectives of working capital management 1.2.2 The content of working capital management 1.2.3 The criteria evaluating working capital management of the Company .17 1.2.4 Factors affecting working capital management efficiency .22 Chapter 2: CURRENT SITUATION OF WORKING CAPITAL MANAGEMENT AT ANSV CO., LTD 25 2.1 Overview of ANSV CO., LTD 25 2.1.1 Foundation and development 25 2.1.2 Characteristics of business operations 26 2.1.3 An overview of financial situation 29 2.2 current situation of working capital management at ansv company .41 2.2.1 Determining working capital requirements 41 2.2.3 Current status of working capital financing 48 2.2.4 Cash management 52 2.2.5 Receivables management 61 2.2.6 Inventory management 69 iii 2.2.7 The criteria evaluating the efficiency of working capital management 77 2.3 Evaluating the management of working capital 80 2.3.1 Achievements 80 2.3.2 Shortcomings and reasons 81 2.3.3 Reasons of shortcomings 83 Chapter 3: SOME SOLUTIONS TO IMPROVE EFFICIENCY OF WORKING CAPITAL MANAGEMENT AT ANSV COMPANY 86 3.1 Orientations and objectives for future development at ANSV company 86 3.1.1 Economic-Social context 86 3.1.2 Orientations and objectives for the future development of ANSV company 88 3.2 Some solutions to improve working capital management at ANSV company 89 3.2.1 Determining the right working capital requirements 89 3.2.2 Improving the efficiency of inventory management 90 3.2.3 Improving the efficiency of receivables management .92 3.2.4 Strengthening the management and improvement of personnel organization 96 3.2.5 Improving the management of cost 96 3.2.6 Improving the rotation of working capital by promoting access to new technologies in manufacturing 97 3.3 The conditions for implementing the measures 98 3.3.1 Some proposals to Department of Telecommunications - Ministry of Information and Communications 98 3.3.2 Some proposals to State 99 3.3.3 Some proposals to Commission for the Managenment of State Capital at Enterprises 100 3.3.4 Some proposals to Vietnam Post and Telecommunications Group 101 CONCLUSION, LIMITATION, IMPLICATION 102 REFERENCE 104 iv LIST OF ABBREVIATIONS BE C C EO JS NW RO RO VN W WC WC CT PO v LIST OF TABLES Table 2.1 The situation of assets in 2016, 2017, 2018 of ANSV Company .32 Table 2.2 The structure of capital sources in 2016, 2017 and 2018 of ANSV Company 35 Table 2.3 INCOME STATEMENT IN 2016, 2017, 2018 OF ANSV COMPANY 38 Table 2.4 Profitability ratios 2016, 2017, 2018 of ANSV company 40 Table 2.5 The actual working capital requirements 2016, 2017, 2018 of ANSV company 42 Table 2.6 The expected working capital requirements determined on the basis of actual net of revenue in 2016, 2017, 2018 of ANSV company 43 Table 2.7 The allocation working capital in 2016, 2017 and 2018 of ANSV company 45 Table 2.8 Working capital resourse of ANSV in 2016, 2017, 2018 48 Table 2.9 The situation of fluctuations by cash of ANSV Company in 2016, 2017 and 2018 54 Table 2.10 Liquidity ratios in 2016, 2017 and 2018 of ANSV company 56 Table 2.11 The indicators for evaluating the situation of managing cash in 2016, 2017 and 2018 of ANSV company 59 Table 2.12 Detail of accounts receivables 2016, 2017, 2018 of ANSV company 63 Table 2.13 The situation of receivables management policy in 2016, 2017 and 2018 of ANSV company 65 Table 2.14 The situation of accounts receivable and payable in 2016, 2017 and 2018 of ANSV company 67 Table 2.15 Inventory structure in 2016, 2017 and 2018 of ANSV company 73 Table 2.16 The efficiency of use inventory in 2016, 2017, 2018 of ANSV company 75 Table 3.1 Table of quality monitoring using inventory, finished products of ANSV Company 91 Table 3.2 ANSV debt monitoring table for age customers 95 vi L Chart 2.1 The structure of capital Chart 2.2 The structure of capital Chart 2.3 Profitability ratios 2016, 2017, 2018 of other telecommunication equipment companies Chart 2.4 Capital financing model of ANSV company at 31/12/2016 Chart 2.5 Capital financing model of ANSV company at 31/12/2017 Chart 2.6 Capital financing model of ANSV company at 31/12/2018 Chart 2.7 Liquidity ratios of other telecommunication equipment company in 2016, 2017, 2018 57 Chart 2.8 Accounts receivable turnover of telecommunication equipment companies in 2016, 2017 and 2018 Chart 2.9The efficiency of use inventory of telecommunication equipment companies in 2016, 2017 and 2018 of ANSV company vii tax on equity more than 10%, or evaluate the performance of enterprises on the ratio of after-tax profit to equity on fixed rates, not only the profit of the business this year compared to the previous year 3.3.4 Some proposals to Vietnam Post and Telecommunications Group The Group should consider the investment efficiency factor for businesses by considering investing more capital for businesses with high return on equity, from which these enterprises difficulties in capital and at the same time enhance the efficiency of production and business activities On the other hand, with a team of qualified and highly qualified staff, the Group needs to play the role of a guide and help for the Company in the management of finance in particular and in production and business activities in general Support training and retraining to improve the qualifications of financial and accounting staff in the financial management work effectively The Group needs to build a rewarding and rewarding regime for those members who have achieved good business results as well as rewarded individuals who have made contributions and initiatives in their operations, and improved production efficiency business to promote the spirit of enthusiasm, initiative and creativity in production in companies 101 CONCLUSION, LIMITATION, IMPLICATION Conclution The strengthening of working capital management is a decisive factor for the existence and development of each business The success or failure in the market depends very much on the ability to use the capital of managers finance Operating in the field of telecommunications equipment, in the past years, ANSV Co., Ltd has continuously grown in both quantity and quality, achieving many achievements in business operations However, in addition to the achieved results, the Company also revealed certain limitations in the management and use of electricity With the knowledge learned and practical, through essay, I focused on clarifying the contents of working capital management First, the thesis has generalized the theory of working capital management Secondly, the thesis has evaluated the current situation of managing the working capital of the Company in the past time and also pointed out the advantages, shortcomings and causes of the problems Thirdly, the dissertation proposes a number of recommendations to strengthen the management of working capital for the Company in the coming time in order to strengthen the management of the Company's capacities Although there have been attempts to explore, but due to limited knowledge and limited practice time, the dissertation cannot avoid shortcomings, so I hope to receive comments from teachers to discuss The text is more complete Finally, I would like to express my sincere thanks to the leaders of ANSV Co., Ltd and the staff of the relevant departments of the Company for helping me a lot in the process of completing this thesis In particular, I would like to express my sincere thanks to Assoc Prof Pham Thi Thanh Hoa - lecturer in the Department of Corporate Finance - The Academy of Finance has dedicated and thoughtful guidance to help me complete my graduation thesis Limitation Limitations of the topic are also limitations in the scope of research The study was based on data is collected at period of time (from 2016 to 2018) 102 This topic is only collected data at ANSV Co., Ltd., therefore, the verification of this scale in Vietnam has not been implemented and compared the company's content with other companies This topic stops at a certain scientific research topic It gives an overview of the work to be done to manage working capital, but the details associated with the specific daily work of the business have not been clarified Based on the results of this study, subsequent managers and researchers may continue to deploy specific contents for detailed management contents Implication This study shows how and how to determine working capital needs and allocate capital and ensure working capital, at the same time from the analysis content for each capital item, offering corrective measures source This study shows how to generalize the working capital management content and details each item on money, inventory and accounts receivable From the overall results, the implementer will carry out detailed work for each specific content Cash, accounts receivable or inventories are the current assets of the Company, the good management of this content is vital for a business, without a general understanding of capital management As a result, enterprises will not be able to make the right decisions for their daily production and business activities This study indicates that ANSV company should change its working capital needs approach and management should also carefully study the Company's financing model, as most of working capital is currently funded With temporary working capital, it is likely that this will yield a high return on capital, but any minor changes, such as bank or supplier credit policies, as well as policy payment of customers changes, the Company will fall into insolvency The company should focus on the rapid implementation of projects that shorten inventory time as well as reduce debt collection time The company should take measures to collect receivables 103 REFERENCE English Harris, Andrew "Working capital management: difficult, but rewarding." Financial Executive, May 2005, p 52+ Academic OneFile, Accessez 13Dec 2018 Pradeep Singh, 2008 "Inventory and Working Capital Management: An Empirical Analysis," The IUP Journal of Accounting Research and Audit Practices, IUP Publications, vol 0(2), pages 53-73, April Deloof, M Does Working Capital Management Affects Profitability of Belgian Firms?, Journal of Business Finance & Accounting, 30(3 & 4), 573-587, 2003 Doytch, N., & Uctum, M Does the worldwide shift of FDI from manufacturing to services accelerate economic growth? A GMM estimation study, Journal of International Money and Finance, 30(3), 410-427, 2011 Driffill, J., Psaradakis, Z., & Sola, M Testing the expectations hypothesis of the term structure using instrumental variables International Journal of Finance and Economics, 3(4), 321-325, 1998 Maynard E Rafuse, (1996) "Working capital management: an urgent need to refocus", Management Decision, Vol 34 Issue: 2, pp.59-63 JOURNAL ARTICLE Goal Programming and Working Capital Management William L Sartoris and M L Spruill Financial Management Vol 3, No (Spring, 1974), pp 67-74 Vietnamese Decree No 91/2015 / ND-CP dated October 13, 2015 on "Investing state capital in enterprises and managing and using capital and assets in enterprises"; Circular 219/2015 / TT-BTC dated December 31, 2015 of the Ministry of Finance guiding the implementation of Decree No 91/2015 / ND-CP dated October 13, 2015; Bui Van Van, Vu Van Ninh (2015), " Corporate Finance ", Finance Publisher; 104 Nguyen Minh Kieu (2012), "Basic corporate finance", Social Labor Publishing House Nguyen Trong Co, Nghiem Thi Tha (2010), "Textbook of Enterprise Financial Analysis", Finance Publisher; Prof Dr Ngo The Chi- Associate Professor Ph.D Nguyen Trong Co, “Corporate Finance Analysis” Prof Dr Ngo The Chi- Dr Truong Thi Thuy, “Financial Accounting” (2010) Pham Quang Trung (2012), "Corporate Financial Management Curriculum", National Economics University Publishing House; Academy-level project in 2010: "Improving the efficiency of managing receivables of enterprises in business activities" by MSc Vu Thi Hoa - Project leader; Nguyen Thi Hong Lan, 2013 Working capital management at Phu Yen Mineral Joint Stock Company - Master's thesis - Da Nang University in 2012 10 Nguyen Tien Nhat, 2011 Working capital management at Song Da 10 joint stock company 11 Tran Van Nha, 2013 Working capital management at Da Nang Food Joint Stock Company" MBA thesis - Danang University - 2012 12 Pham Thuy Chi, 2018 Working capital management at Traphaco JSC from 2015-2017 13 Nguyen Thi Minh Hang, 2018 Working capital management at Euro Window Join stock company 14 Financial statement through 2016, 2017 and 2018 and related period financial reports of ANSV Co., Ltd 15 Detail book through 2016, 2017 and 2018 and related period financial reports of ANSV Co., Ltd 16 Website: http://www.ansv.vn/ http://www.cafef.vn/ 105 http://finance.vietstock.vn/ https://voer.edu.vn/ https://www.stockbiz.vn 106 INTERVIEW DOCUMENTS EXPERTS / MANAGERS Subject: Receivables and inventory management ANSV Company Department / Board: Business center department Interview location: Director of Business Center department Interview content: Hello, My name is Pham Thi Kim Dung working at the Finance and Accounting Department of the Company, I am completing the thesis on Working Capital Management at the Company, I hope you spent some time exchanging some contents related to receivables management and inventories of the Company Your comments are used for the purpose of completing the thesis and contributing to the development of the Company The first question: {Receivables and inventory management}: in order to increase the operational efficiency of enterprises and save costs, he / she said the status and solutions (if any) in negotiating payment terms and handover of projects business of ANSV Company? Answer: Due to the particularity of most (90%) of the projects of enterprises that carry out the bidding of state-owned companies, the payment terms as well as the terms of time and conditions of handover and acceptance are the contents must comply with the bids, so the Company does not negotiate payment terms, handover, acceptance in accordance with the specific conditions of the Company There are currently no solutions to solve this content The second question 2: {Account receivables}: How you participate in the receivable collection process of the Company? Answer: Due to the contract management process, the Center for Business and Market Development does not participate in the handover process, acceptance and finalization of payment documents, thus will not participate in the receivable collection process collection The second question 3: {Inventory}: You said that for imported goods not following the project or overputting the project, what measures you take to accelerate the rotation of this inventory group.? 107 Answer: All shipments of the Company are imported according to the current project, the Business Center will calculate the demand for such goods in a short time, so most of them will be delivered to customers within 1-3 months next of the current project 108 INTERVIEW DOCUMENTS EXPERTS / MANAGERS Subject: Receivables and inventory management ANSV Company Department / Board: Operating Department Interview location: Head of Operating Department Interview content: Hello, My name is Pham Thi Kim Dung working at the Finance and Accounting Department of the Company, I am completing the thesis on Working Capital Management at the Company, I hope you spent some time exchanging some contents related to receivables management and inventories of the Company Your comments are used for the purpose of completing the thesis and contributing to the development of the Company The first question: {Receivables and inventory management}: In order to increase the operational efficiency of enterprises and save costs, he / she said the current situation and solutions (if any) in implementing the project of ANSV Company? Answer: Due to the implementation of projects across the country and procedures to complete the documents and sign the documents to go through many stages, many departments / sections of the customers, the Board of Salespeople tries to meet the deadline copper In addition, in some cases, when the imported goods have not arrived, the delivery and acceptance time may be slower than the contractual term In the future, we will try to minimize the special stages of completing payment documents The second question 2: { Account receivables}: How you participate in the receivable collection process of the Company? Answer: Because the debt collection depends on the time of handover, acceptance of the goods and completion of the acceptance records, the Waterfall Board plays a key role in receivable recovery The second question 3: {Inventory}: As far as I know, the inventory batches imported to warehouse then transferred to the Board of Waterfall, how you manage this inventory? At the same time, how is the responsibility to transform from inventory to receivables? 109 Answer: After receiving the goods from the warehouse, the Board of Operating Directors will carry out procedures to transport the goods to customers However, due to specific types of goods, the Company needs to complete some procedures such as technical inspection, inspection of goods codes, commodity serials In addition, due to delivery locations in many provinces and cities above water, so the handover time is relatively long, usually 2-3 months The board of sales often tries to follow the contract term In the future, we are also working to shorten the delivery time 110 INTERVIEW DOCUMENTS EXPERTS / MANAGERS Subject: Cash, account receivables and inventory management ANSV Company Department / Board: Finance and accounting departement Interview location: CFO Interview content: Hello, My name is Pham Thi Kim Dung working at the Finance and Accounting Department of the Company, I am completing the thesis on Working Capital Management at the Company, I hope you spent some time exchanging some contents related to receivables management and inventories of the Company Your comments are used for the purpose of completing the thesis and contributing to the development of the Company The first question {working capital}: Is the method of determining annual working capital requirements close to actual capital needs? You comment on the current capital allocation of the Company? Answer: Currently, the company is determining the demand for working capital through factors affecting revenue, so there is still a difference between the plan and the reality Distribution of current working capital, the largest proportion is revenue, then inventory, so I find it consistent with high revenue results of recent years The second question {Cash}: How you conduct cash management? Problems that you face when implementing cash management? Answer: The weekly finance and accounting department plans to use the money, the cash flow plan to optimize the cash balance and use the money The company always ensures availability of funds for due debts, so there is no overdue debt The proportion of money structure is making up the smallest proportion in working capital so we are seeing suitable However, sometimes the Company still encounters some unexpected payments so it takes time to arrange and balance The third question {Account receivables}: What is the role of the Finance and Accounting Departement for the management of receivables? How did the Finance and Accounting Department arrange personnel to manage receivables? 111 Answer: As soon as we received information about the project, we conducted a project evaluation on cash flow and payment, preparation documents, timelines from input-output contract, time of payment of deposits, LC payment; time to receive goods, pay taxes, receive goods to warehouses; time of handover, acceptance, trial run with customers; time to receive money at the advance, handover, acceptance and after the final acceptance; billing time; payment terms At the same time, accelerating the speed of delivery and acceptance; participating in debt recovery with customers Finance and Accounting Department arranges personnel to manage receivable debt such as invoice accounting, debt recovery accounting, bank accountant to issue guarantees, set up books to monitor debt of debtors, and return time payment term, debt age… The fourth question {Inventory}: What is the role of the Finance and Accounting Departement for inventory management? How did the Finance and Accounting Departement arrange inventory management personnel? Because the volume of inventory is not much, the Finance and Accounting Departement concentrates on participating with the Departments / Boards to allocate goods delivery and delivery time to minimize the turnaround time of inventory as well as reduce the risk of storage Company goods At the monthly, quarterly and yearly milestones, the Finance and Accounting Departement coordinates with other departments/divisions to conduct inventory and sign unconfirmed shipping confirmation with customers who have not made the transition from the goods inventory to debt The Finance and Accounting Department arranges warehouse accountants to monitor the import-export situation 112 INTERVIEW DOCUMENTS EXPERTS / MANAGERS Subject: Account payables and inventory management ANSV Company Department / Board: Supply chain Interview location: In charge of purchasing Interview content: Hello, My name is Pham Thi Kim Dung working at the Finance and Accounting Department of the Company, I am completing the thesis on Working Capital Management at the Company, I hope you spent some time exchanging some contents related to receivables management and inventories of the Company Your comments are used for the purpose of completing the thesis and contributing to the development of the Company The first question {Inventory}: How you manage inventory in accordance with the duties you are assigned? Answer: Our mission to manage inventory from the delivery of ownership from suppliers to delivery to the Company warehouse However, we join with the business department to provide the best delivery time as well as the most optimal transportation for the Company, which helps to save costs and optimize the Company's cash flow The second question {Account payables}: How is the status of payable debt management? Answer: For suppliers depending on products and suppliers, it is possible to negotiate different payment policies and delivery policies Therefore in order to match the conditions of the output project, we negotiate with suppliers the terms in accordance with the cash flow Therefore, the Company does not have overdue debts 113 INTERVIEW DOCUMENTS EXPERTS / MANAGERS Subject: Account payables and inventory management ANSV Company Department / Board: Industry Department Interview location: Storekeeper Interview content: Hello, My name is Pham Thi Kim Dung working at the Finance and Accounting Department of the Company, I am completing the thesis on Working Capital Management at the Company, I hope you spent some time exchanging some contents related to receivables management and inventories of the Company Your comments are used for the purpose of completing the thesis and contributing to the development of the Company The first question {Inventory}: How you manage the Company's inventory? Answer: At the stage of our management, we mainly manage physical inventory in the Company, because the telecommunication products are easily damaged if soaked in water, so we arrange the facilities to Storage quality assurance inventory 114 ... criteria evaluating working capital management of the Company .17 1.2.4 Factors affecting working capital management efficiency .22 Chapter 2: CURRENT SITUATION OF WORKING CAPITAL MANAGEMENT AT ANSV... current situation of working capital management, then given solutions to improve working capital management at Phu Yen Mineral Joint Stock Company; - Topic "Working capital management at Song Da... trends in economic indicators, systematize, reflect the efficiency of working capital management to evaluate the current status of working capital management at Advanced Networks System Viet Nam