The financial statement analysis of saigon alcohol beer and beverage corporation

PREFACE Vietnam's economy has been recovering strongly in recent years, however as emerging economy, it can be cliallenging for entrepreneurs to build a proíĩt and sustainable business Without the preparation and the building capacity with a long- tenn Vision, many businesses will be left stmggling to keep up and eventually sold to others institutions to avoid bankmptcy It poses an urgent need for managers, corporate executives, especially corporate finance managers to understand and have basic knowledge of corporate finance analysis so that they can analyze, have proper evaluation of the economic efficiency of enterprises according to the System of economic and financial indicators As a result, the business owner knows the financial status of his business, knows the strengths and weaknesses to make thnely and accurate decisions For other stakeholders interested in the business such as current shareholders, employees, the State, financial analysts through tìnancial infonnation will make decisions for different purposes Recognizing this, I decided to choose the subject: “The/inancỉal statement analysỉs of Saỉgon Alcohol Beer and Beverage Corporation ” with the aim of providing the most objective, unbiased infonnation about the company SABECO The content of this report is mainly focus on analyzing perfonnance using various but traditional methods to have a broader look about Saigon Alcohol Beer and Beverages Corporation over years, combine with the íluctuation of macroeconomic and industry to come up with conclusions about the health of the company I have tried to be extremely meticulous in preparing this report despite the various limitations faced as very limited information about surgical industry 1, Objectives and Aims of The Study • Objectives of the study The study focus on financial analysis and find Solutions to improve financial perfonnance in Saigon Alcohol Beer and Beverages Corporation • Aims of the study The study aims at investigating the data analysis in financial statement for SABECO Three main purposes of the study are summarized below: - To systematize basic theories of analysis of corporate financial statements From there, you can see the methods and contents of financial analysis in the enterprise - To analyze and evaluating the financial situation and business performance through financial reports of Saigon Alcohol Beer and Beverages Corporation in comparison with some companies in the same industry - To identifying the strengths and weaknesses of the financial situation of the company and propose some Solutions to improve the financial capacity of Saigon Alcohol Beer and Beverages Corporation 2, Methods of The Study To finish this study, the reseacher carried out some following methods: - Rationale: Research topics are based on the govemment's circulars, enterprise tĩnancial reports and reliable textbooks, books and websites related to the analysis of tĩnancial reports of enterprises 2 - Approach: The topic uses qualitative research methods by collecting information from tìnancial reports, analyzing and evaluating financialindicators to improve tĩnancial capacity of Saigon Alcohol Beer and Beverages Corporation - Data source sand methods of data collection: + Data on the theoretical basis of analyzing corporate tĩnancial reports from the curriculum, lecture, prestige books + Infonnation from the website of Saigon Alcohol Beer and Beverages Corporation include: Financial statement, annual report of 2016, 2017, 2018, history of formation and development of the company, development orientation The financial System of 2016, 2017, 2018 is taken from websites of three companies in the same industry: Vietnam Dairy Products Joint Stock Company, Masan Group Corporation, Hanoi Beer Alcohol and Beverage Joint Stock Corporation These three companies are one of the most reputable brands of Vietnam operating in the field of foods and drinks Products, with the source structure equivalent In order to facilitate the comparison, the writer have taken the Symbol of each company's code as the sign to make the tables and fonns and use it to analyze: • VNM: Vietnam Dairy Products Joint Stock Company • MSN: Masan Group Corporation BHN: Hanoi Beer Alcohol and Beverage Joint Stock Corporation 3 Sabeco's Industry Peers 250,000 45 40 35 30 M illi o ns V 25 20 15 10 5 0 0 SAB VNM MSN 173,146 41.06 222,898 18.04 98,868 16.99 10.65 7.95 2.65 BH N ■ Market Capital P/E P/B 22,948 37.63 3.8 1 Figure 1.2 - Sabeco 's Industry Peers; Source: Vietstock 3, Design of The Study The study consists of three chapters: - Chapter 1: Literature review: The basic theoretical issues in analyzing íĩnancial statements of corporations - Chapter 2: The study: including three parts: • Give an overview about Saigon Alcohol Beer and Beverage Corporation • Data analysis • Main findings through the analysis done - Chapter 3: Challenge opportunities and Solutions: Offer recommendations and a limitation of the study and suggestions for further study This chapter discuss about the study results and Solutions to improve the financial capacity of Saigon Alcohol Beer and Beverage Corporation CHAPTER 1: LITTERATURE REVIEW 1.1, An Overview of Financial Statements 1.1.1 The defìnỉtỉon of Fỉnancỉal Statements Accounting and íĩnancial statements are general statements made on the basis of accounting methods that aggregate data from accounting records based on tĩnancial indicators that arise at certain times or periods Financial and accounting reports systematically reílect the situation of assets, liabilities, and Capital use and business results of enterprises in certain periods, and they are explained It helps the users to use financial information to identify the financial status and business situation of the unit to make appropriate decisions Financial statements (or tìnancial report) is a fonnal record of the financial activities and position of a business, person, or other entity Relevant financial infonnation is presented in a structured manner and in a fonn easy to understand They typically include basic financial statements, accompanied by a management discussion and analysis: • A balance sheet or statement of financial position, reports on a company's assets, liabilities, and owner’s equity at a given point in thne • An income statement or statement of comprehensive income, statement of revenue & expense, P&L or profit and loss report, reports on a company's income, expenses, and protĩts over a period of thne A profit and loss statement provides information on the operation of the enterprise These include sales and the various expenses incurred during the stated period • A cash flow statement reports on a company's cash flow activities, particularly its operating, investing and financing activities • A Statement of changes in equity or equity statement or statement of retained eamings, reports on the changes in equity of the company during the stated period For large corporations, these statements may be complex and may include an extensive set of footnotes to the financial statements and management discussion and analysis The notes typically describe each item on the balance sheet, income statement and cash flow statement in further detail Notes to financial statements are considered an integral part of the financial statements 1.1.2 Types of Fỉnancỉal Statements The Principal financial statements of a Corporation are the balance sheet, income statement, and statement of cash flows Notes accompany these tĩnancial statements To evaluate the tĩnancial condition, the protĩtability, and cash flows of an entity, the User needs to understand the statements and related notes The most basic statement is the balance sheet; the other statements explain the changes between two balance sheet dates In addition, in order to meet the requirements of economic and íĩnancial management, the steering requirements that sectors, companies, production groups, joint ventures and joint ventures can stipulate other íĩnancial accounting reports However, within the scope of the research, it will be mentioned the basic reports as described above 1.1.2.1 Balance sheet The balance sheet provides an overview of assets, liabilities and stockliolders' equity as a snapshot in time The date at the top of the balance sheet tells you when the snapshot was taken, which is generally the end of thefiscal year The balance sheet equation is assets equal liabilities plus stockliolders' equity, because assets are paid for with either liabilities, such as debt, or stockliolders' equity, such as retained eamings and additional paid-in Capital Assets are listed on the balance sheet in order of liquidity Liabilities are listed in the order in which they will be paid Short-term or current liabilities are expected to be paid within the year, while long- term or noncurrent liabilities are debts expected to be paid after one year The statement of financial position shall include line items that present the following amounts: 1 Property, plant and equipment; 2 Investment property; 3 Intangible assets; 4 Financial assets (excluding amounts shown under (e), (11) and (i)); 5 Investments accounted for using the equity method; 6 Biological assets within the scope of IAS 41 Agriculture; 7 Inventories; 8 Trade and other receivables; 9 Cash and cash equivalents; 10.The total of assets classitĩed as held for sale and assets included in disposal groups classitĩed as held for sale in accordance with 1FRS 5 Non-current Assets Held for Sale and Discontinued Operations; 11.Trade and other payables; 12.Provisions; 13.Financial liabilities 14.Liabilities and assets for current tax, as deíĩned in IAS 12 Income Taxes; 15.Deferred tax liabilities and deferred tax assets, as defined in IAS 12; 16.Liabilities included in disposal groups classified as held for sale in accordance with IFRS 5; 17.Non-controlling interests, presented witliin equity; and 18.Issued Capital and reserves attributable to owners of the parent An entity shall present additional line items, headings and subtotals in the statement of financial position when such presentation is relevant to an understanding of the entity’s financial position 7.7.2.2 Income Statement Income statements show the profitability of a business The income statement is for a period of one year and shows the total sales revenue for the year Subtracted from sales revenue is the cost of goods sold or the expenses a company incurs in producing finished goods to sell Also deducted from the revenue are expenses for operating costs and depreciation If a company is publicly owned, its income statement must also report eamings per share Eamings per share is a measure of company profitability It is calculated by dividing net income by the total shares of stock Wlien looking at the income statement of a company, the profitability isn't just the gross profit, it is also important to look at the ratio of expenses as a percentage of profit If a company has high profits but also has high expenses, the company could be mismanaged In addition to items required by other IFRSs, the profit or loss section or the statement of profit or loss shall include line items that present the following amounts for the period: 1 Revenue, presenting separately interest revenue calculated using the effective interest method; 2 Gains and losses arising from the derecognition of tĩnancial assets measured at amortised cost; 3 Finance costs; 4 Impairment losses (including reversals of impainnent losses or impairment gains) 5 Detennined in accordance with Section 5.5 of IFRS 9; 6 Share of the profit or loss of associates and joint ventures accounted for using the equity method; 7 If a financial asset is reclassitĩed out of the amortised cost measurement category so that it is measured at fair value through profit or loss, any gain or loss arising from a difference between IAS 1 IFRS Foundation A785 the previous amortised cost of the financial asset and its fair value at the reclassification date (as detĩned in IFRS 9); 8 If a financial asset is reclassitĩed out of the fair value through other comprehensive income measurement category so that it is measured at fair value through profit or loss, any cumulative gain or loss previously recognised in other comprehensive income that is reclassitĩed to profit or loss; 9 Tax expense; 10.A single amount for the total of discontinued operations (see IFRS 5) 1.1.2.3 Statement of cash flows The period of 2017-2018 is the period of recontmcting fof Sabeco in business All ROA, ROE and net proíĩt margins are slowly decreasing Balancing the cost of input materials through the use of derivative contractswith selfmade canned packaging makes Sabeco's costs more tightly controlled In addition, Sabeco also increased the selling price of Products, promoting marketing strategies to help product sales are stronger This resulted in a Sharp increase in revenue (11.9% in 2017 and 5.1% in 2018) Financial leverage remained steady, with ROA and ROE not changing much 2.4Summary of findings Based on the periodical reports and financial analysis data of the years, it can be assessed that SAB has a quite good financial status and business results reílect the actual operation of the company over the years Basic indicators of debt, borrowing, liquidity, asset efficiency, provisioning, equity are met Results of business proíĩtability of SAB is acceptable but can be improved overtime if don’t correctly The structure of Capital changes, especially short-tenn debt, long-tenn debt transíer from the use of equity to the use of loans and the Capital to occupy, creating the premise to use leverage in the most effective way This is also the source of Capital for short-tenn assets, so the company will avoid solvency in the short tenn Payables management: The rotation has to pay the seller a positive sign and at a reasonable level, while taking advantage of the misappropriated funds but still ensuring the repayment of debts within a reasonable period of time Company's liquidity is getting better Current ratio and quick ratio are average and safe compared to other companies in the same industry Business effectiveness: Asset use efficiency has been improving, total asset tumover and inventory tumover have increased over the past three years, showing positive signs in sales activities, assets are used more effectively CHAPTER 3: DRAWBACKS AND RECOMMENDATION 3.1Drawbacks In addition to the good results and positive signals, there are still existing issues affecting the company’s financial situation in the Corning thne that Sabeco needs to consider to take measures to hnprove: - Financial structure: In the Capital stmcture of SAB, short-tenn debt account for a very high propotion, while long-term debt accounts for very low share According to the objective of the company is to expand business activities, Sabeco could increase the long-tenn debt to invest more in fixed assets such as machinery and equipment, instead of just borrowing short tenn to finance its manufacturing activities - Through 2016, 2017 and 2018, the cashflow from financing activities are all negative, providing the liquidity of this activity is not good Companies need to have more efficient use of money However, cash and cash equivalents account is still increasing and the company’s debt ratio is relatively low suggests that there are still more room to take avantage of 3.2Solutions • Monitoring debt structure and situation to improve the solvency of SAB - For payables to the seller: To maintain the prestige of the company for business partners, especially for suppliers when the debt to pay the seller occupied a large proportion in the debt to pay the public MSN must ensure the ability to pay debts and ensure timely payment to partners with a large proportion of balance - For receivables: Improving the efficiency of receivables management and business efficiency, the íĩrst solution is that the company needs to adjust its policy of selling goods and collecting money properly Specitĩcally, it is considered to reduce the payment period to low, gradually to the industry average, follow the roadmap and careful consideration to the ability to pay and response from customers to level along with the most reasonable adjustment - Improving the quality of cash flow: There should be measures to strictly manage cash flow from business activities of the Company: + Make budget tồrecasts and tồrecast revenues in a scientihc way to be active in the payment process in the period + Set up a reasonable reserve of cash Capital while ensuring the necessary liquidity in the period in order to maintain the prestige and ensure the protĩtability of the idle cash Capital Improve business efficiency - Improve asset efficiency: + Fixed assets are material and technical facilities of an enterprise, it retlects the existing production capacity Machinery and equipment are hnportant and necessary conditions to increase productivity and productivity, reduce production costs and lower production costs Quarterly, annual, the company should carry out inventory of fixed assets in order to thnely capture the status of fixed assets If assets are no longer usable or not used, they shall be liquidated or sold in thne for Capital recovery + Organize management of production process business smoothly, rhythmically limit the idle time of machinery, such as downtime due to production errors Wlien this process is implemented in a synchronized manner, it will help the company maximize thecapacity of machinery and equipment, improve labor productivity, reduce production costs and increase proíĩts In order to achieve this, the material supply department, the technical department and the factory workshops must coordinate effectively in production planning, repair planning and timely changes in production output by the the market flow Improve the quality of human resources: + The company applies the technological line to the production of reíĩned copper Products and the business process needs to be tlexible, so the human resources of the company must be professionally qualiíĩed + For managers of enterprises, it is necessary to enhance training and management knowledge such as attending business management classes and psychological classes for laborers + For laborers directly involved in production: To raise the knowledge of laborers about the operation of the production line, the way of operation and evaluation of output Products, which have been met as required and guided On the other hand, it is necessary to ensure the laborers to implement labor safety and incentive policies for workers such as incentive policies, technical incentives and cost savings Appropriate fonns of handling violations when they occur, and the implementation of the welfare regime for laborers 3.3Limitations of The Study As the study is mainly based on secondary data, the nature of the secondary data’s limitation would have affected the study The tĩgures shown in financial statements are likely to be a least several months out of date, and so it will not give a complete and accurate picture of the company’s current tìnancial position This research need to be interpreted carefully They can provide insights to the company’s perfonnance or financial situation However on their own, they simply cannot show whether the company is in good or bad shape It dehnitely requires some quantitative information for an infonned analysis to be made 3.4Suggestions for Further Study To be successful in analyzing financial statement of a company, this study calls for further researches in giving out tips to use effectively other analyzing skills besides the methods used on this study CONCLUSION According to the analysis of the financial situation, the financial situation of the company is quite good, but there are still some difficulties After researching at Saigon Alcohol Beer and Beverage Corporation in conjunction with the theories studied at my university, I chose to study the topic of “The financial statement analysis of Saigon Alcohol Beer and Beverage Corporation” as my graduation thesis By analyzing the results of the company and the upcoming challenges and risks that the company should overcome, I also contribute some measurements to support the company’s business activities in the future Hopefully, with this limited capacity, the company can find my contribution useful ... Objectives and Aims of The Study • Objectives of the study The study focus on financial analysis and find Solutions to improve financial perfonnance in Saigon Alcohol Beer and Beverages Corporation. .. situation of the company and propose some Solutions to improve the financial capacity of Saigon Alcohol Beer and Beverages Corporation 2, Methods of The Study To finish this study, the reseacher... limitation of the study and suggestions for further study This chapter discuss about the study results and Solutions to improve the financial capacity of Saigon Alcohol Beer and Beverage Corporation