The meaning and role of cash flow statements in vietnamese enterprise the case of ha noi milk joint stock company hanoimilk jsc

VIETNAM NATIONAL UNIVERSITY, HANOI INTERNATIONAL SCHOOL GRADUATION PROJECT THE MEANING AND ROLE OF CASH FLOW STATEMENTS IN VIETNAMESE ENTERPRISE- THE CASE OF HA NOI MILK JOINT STOCK COMPANY (HANOIMILK.JSC) Student’s name: Nguyễn Thị Ngọc Ánh Hanoi - Year 2020 VIETNAM NATIONAL UNIVERSITY, HANOI INTERNATIONAL SCHOOL GRADUATION PROJECT THE MEANING AND ROLE OF CASH FLOW STATEMENTS IN VIETNAMESE ENTERPRISE- THE CASE OF HA NOI MILK JOINT STOCK COMPANY (HANOIMILK.JSC) SUPERVISOR: MSc Nguyen Tra My STUDENT: Nguyen Thi Ngoc Anh STUDENT ID: 16071149 COHORT: AC2016B MAJOR: Accounting, Analyzing and Auditing Hanoi - Year 2020 LETTER OF DECLARATION I hereby declare that the Graduation Project “The meaning and role of cash flow statement in Vietnamese Enterprises- The case of Ha Noi Milk joint stock company (Hanoimilk.JSC)” is the results of my own research and has never been published in any work of others During the implementation process of this project, I have seriously taken research ethics; all findings of this project are results of my own research and surveys; all references in this project are clearly cited according to regulations I take full responsibility for the fidelity of the number and data and other contents of my graduation project Hanoi, 27/05/2020 Student (Signature and Full name) ACKNOWLEDGEMENT A completed study would not be done without any assistance Therefore, I gratefully give acknowledgement to their support and motivation during the time of doing this research as a requirement of completing my Degree of Accounting,analyzing and auditing First of all, I would like to thank the International School- Vietnam National University, Ha Noi (VNU-IS) where I have been for years of college VNU-IS is like my second home, which has helped me to grow, be more active and expand my knowledge - not only specialized knowledge but also soft skills as well as social knowledge It is the closeness, psychology of the school and teachers that helped me quickly integrate into the university environment And now, when I prepare to graduate, I really want to express my deepest thanks to the teachers in the Executive Board, the teachers in all departments, especially the teachers of AC program, who directly accompanies, teaches us knowledge Thanks to the enthusiastic teaching of the teachers, I have the knowledge to this project Secondly, I would like to express my endless thanks and gratefulness to my supervisor MSc Nguyen Tra My Her kindly support and continuous advice went through the process of completion of my thesis Her encouragement and comments had significantly enriched and improved my work Without her motivation and directions, the report would have been impossible to be done effectively As a part of the project, my thesis has been done by contributions of many relevant students and lecturers So far, I would like to thank the teachers and friends who helped me complete the survey to get data for my report As last, my deeply thanks come to my family and all my friends Their kindly help, care, motivation gave me strength and lifted me up all the trouble for the rest of my life TABLE OF CONTENT Contents LETTER OF DECLARATION ACKNOWLEDGEMENT TABLE OF CONTENT TABLE OF NOTATIONS AND ABBREVIATIONS LIST OF TABLE AND CHARTS ABSTRACT CHAPTER 1: INTRODUCTION 10 CHAPTER 2: LITERATURE REVIEW 13 CHAPTER 3: METHODOLOGY 18 The Survey 19 The Response 20 Results 21 Discussions 29 CHAPTER 4: FINDINGS 30 CHAPTER 5: CONCLUSION 64 REFERENCES 68 APPENDICES 70 Appendix 70 Appendix 2: 77 Appendix 3: 79 TABLE OF NOTATIONS AND ABBREVIATIONS Abbreviation Meaning CFS Cash flow statement HNM Hà Nội Milk CF Cash flow IFRS International Financial Reporting Standards AC Accounting, analyzing and auditing BS Balance sheet IS Income statement OCF Operating from cash flow ICF Investing from cash flow FCF Financing from cash flow LIST OF TABLE AND CHARTS List of table Table 1: Summary of answer about the purpose of cash flow analysis Page 38 Table 2: Cash ratio group represents the contribution of each revenue Page 45 stream to the total cash inflows in the period of HNM Table 3: Comparison of CFS preparation and indicators of the two Page 46 methods Table 4: Summary of answer about what is the risk that users of Page 56 financial information obtain information regarding Cash Flow from other financial statements, such as Balance Sheet and Income Statement Table 5: Ratio about cash of HNM in period of 2008-2010 Page 62 List of charts Chart 1- Number of students and employees who responded Page 18 Chart 2- Major /job of the respondents Page 21 Chart 3- To whom is the CFS most meaningful? Page 22 Chart 4- Which statements have the most useful? Page 23 Chart 5- which method you think is the most practical? Page 24 Chart 6- OCF is the most meaningful for a business Page 24 Chart 7- The popularity of CFS Page 30 ABSTRACT Vietnam is a developing country and aims at international integration, so its financial statements are also aiming to achieve IFRS standards Although Cash flow statement is not a mandatory financial statement in Vietnam, its significant meaning has encouraged many companies to prepare it The purpose of this research is to highlight the meaning and role of cash flow statements, especially for Vietnamese enterprises Ha Noi Milk is the company mentioned in the article because Hanoi Milk is the company that has gone through all the cycles of an enterprise: introduction, growth, maturity, decline and now is recovery Therefore, when discussing this company, we can see clearly how the change and the problems encountered affected the company through the cash flow statement The survey conducted in this study revealed that cash flow statement was especially meaningful for two groups of financial statement users: managers (36%) and investors (36%) Moreover, the study showed the possible risks of analysing cash flow from Balance sheet or Income statement instead of Cash flow statement to have better view about the meaning and role of Cash flow statement 10 CHAPTER 1: INTRODUCTION Financial statements are the most important product of the accounting process, the basic tool to disclose accounting information to the outside In particular, the Cash Flow Statement is one of the important financial statements, reflecting the formation and amount of money arising in the reporting period of the enterprise So, Does CFS really help managers and investors to make business decisions? Based on the cash flow statement, we can assess the ability to generate money in the period and in the future, evaluate the solvency of the business, evaluate the ability of investing in idle cash through business purchases of bonds, bonds, and loans This is the tool to estimate money, build a plan As a result, the Cash Flow Statement is an important general financial statement, which is of great interest to many investors, lenders, suppliers, credit institutions and financial institutions Not only that, the CFS is an important tool in the system of economic management tools in general and business management in particular Thanks to the information about cash flow on the Cash Flow Statement to make appropriate business decisions Therefore, providing CFS is essential, especially for developing economies like Vietnam that wants to integrate and call for investment from abroad Accounting Standard No (IAS7) or VAS 24 (Cash flow statement) is one of the indispensable financial statements for enterprises in the market economy However, the preparing of cash flow statements is not a mandatory report in the Vietnamese accounting system In fact, some small and medium enterprises still not have much interest in it Perhaps, it is due to the difficulty of preparing or not aware of its importance in the financial reporting system in general and in particular in the management of enterprises Therefore, my graduation thesis topic is: "The Meaning And Role Of Cash Flow Statements In Vietnamese Enterprise- The Case Of Ha Noi Milk Joint Stock Company (Hanoimilk.Jsc)" HNM is a company established in 2001 and started operating in 2003, It is a company trading in a wide range of 70 APPENDIX Appendix HÀ NỘI MILK- CASH FLOW STATEMENT (Appendix 1- finance.vietstock.vn) View by: Yearly Unit: Million Dong CashFlow Indirect Year Year Year 200801/01- 200901/01- 201001/01- 12/31KT/ĐL 12/31KT/ĐL 12/31KT/ĐL - - 13,282 -21,372 - - 11,018 14,325 12,788 26,093 -25,062 413 I CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax -37,277 Adjustments for: Depreciation of assets properties and fixed investment (Reversal provisions)/provisions of 71 Foreign exchange 107 547 -2,505 1,271 -378 -636 9,767 3,192 4,870 - - - - - - Allocation of goodwill - - - Adjustments for - - - Operating profit before 10,978 5,907 -6,442 31,475 -15,561 -12,514 (gain)/loss from revaluation of monetary items denominated in foreign currencies Loss/(profit) from investment activities Interest expense Loss/(profits) from disposal of fixed asset Interest income and dividends changes in working capital (Increase)/decrease receivables in 72 (Increase)/decrease in -57,603 42,246 -1,676 in 6,968 28,668 -3,528 545 -3,641 -1,154 -9,767 -3,192 -4,870 -501 - -1,000 - - - -2,964 -1,259 -1,845 -20,870 53,167 -33,030 inventories Increase/(decrease) payables (other than interest, corporate income tax) (Increase)/decrease in prepaid expenses Changes in available for sale securities Interest paid Corporate income tax paid Other receipts from operating activities Other payments for operating activities NET FROM CASH FLOWS OPERATING ACTIVITIES 73 II CASH FROM FLOWS - - -13,632 -6,723 -2,626 9,983 - 1,909 - - - 36,224 1,540 - - - - 1,150 - - INVESTING ACTIVITIES Payment for fixed assets, constructions and other long-term assets Receipts from disposal of fixed assets and other long-term assets Loans, purchases of other entities' debt instruments Receipts from loan repayments, sale of other entities' debt instruments Payments investment in for other entities Collections investment entities in on other 74 Dividends, interest and 1,780 378 353 - - - - - - - - - - - - 35,505 -4,804 -364 - - 25,000 - profit received Increase/(Decrease) in term deposit Purchases of minority shares of subsidiaries 10 Other receipts from investing activities 11 Other payments for investing activities NET CASH FROM FLOWS INVESTING ACTIVITIES III CASH FROM FLOWS FINANCING ACTIVITIES Receipts from equity issue and owner's capital contribution - 75 Payment for share - - - from 253,945 91,543 108,702 Principal repayments -269,493 -151,034 -70,122 Repayment of financial -5,678 -1,578 -2,821 -5,000 - -1 - - - - - - -26,226 -36,069 35,759 -11,591 12,294 2,365 repurchases Proceeds borrowings leases Dividends paid, profits distributed to owners Other receipts from financing activities Other payments for financing activities NET FROM CASH FLOWS FINANCING ACTIVITIES Net cash flows during the period 76 Cash and cash 15,111 3,627 15,852 107 -69 - 3,627 15,852 18,218 equivalents at beginning of the period Exchange difference due to revaluation of ending balances Cash and cash equivalents at end of the period 77 Appendix 2: SURVEY THE MEANING AND ROLE OF CASH FLOW STATEMENT WITH VIETNAMESE ENTERPRISE- THE CASE OF HNM What's your name? Are you a student or worker? What is your major/job? In Vietnam, Financial statements include: Balance sheet, Income statement, Cash flow statement Which one you think is the most useful? Balance Sheet Income statement Cash flow statement Have you ever heard, read or prepared any cash flow statements? Yes No CFS has methods of preparation: direct method and indirect method, which income statement using cash receipts and cash disbursements from operating activities, the net of the two values is the operating cash flow (OCF) Indirect Method: This method starts with net income and converts it to Cash flow from operating by adjusting for items that were used to calculate net income but did not affect cash So, which method you think is the most practical? Direct method Indirect method CFS has Cash Flow from Operating Activities, Cash Flow from Investing Activities and Cash Flow from Financing Activities Which source of cashflow, in your opinion, is the most meaningful for a business? CF from operating activities CF from investing activities CF from Fiancing activities 78 To whom is the CFS most meaningful? (Why?-notes to "other") Managers Investors Supplier Credit provider Employee of company Auditors Your supplement Currently, Vietnamese companies are not required to prepare a CFS in their annual financial reports Therefore, users of financial information obtain information regarding Cash Flow from other financial statements, such as Balance Sheet and Income Statement What is the risk of such practice (in your opinion)? 10 Cash flow is the movement of money (cash inflows and outflows) in a given period Cash is the most liquid asset, giving the company a high level of liquidity and flexibility What is the purpose of cash flow analysis? 79 Appendix 3: The orginal result chart of versions 80 81 Vietnamese version: 82 83 84 ... UNIVERSITY, HANOI INTERNATIONAL SCHOOL GRADUATION PROJECT THE MEANING AND ROLE OF CASH FLOW STATEMENTS IN VIETNAMESE ENTERPRISE- THE CASE OF HA NOI MILK JOINT STOCK COMPANY (HANOIMILK. JSC) SUPERVISOR:... of Ha Noi Milk joint stock company (Hanoimilk. JSC) ” is the results of my own research and has never been published in any work of others During the implementation process of this project, I have... Enterprise- The Case Of Ha Noi Milk Joint Stock Company (Hanoimilk. Jsc) " HNM is a company established in 2001 and started operating in 2003, It is a company trading in a wide range of 11 products and services,