Evaluation business efficiency of 584 nha trang sea product joint stock company

ACADEMY OF POLICY AND DEVELOPMENT INTERNATIONAL SCHOOL OF ECONOMIC AND FINANCE GRADUATION THESIS Topic: "Evaluation business efficiency of 584 Nha Trang Sea Product Joint Stock Company” Supervisor: Dr Doan Anh Tuan Student: Ngo Thi Truc Linh Student ID Class: TC CLC Hà Nội, tháng 3/2020 ABSTRACT Nowadays, food safety is an important issue, often concerned by the media and the public In the recent years, the food market has many confidence crises with consumers In particular, it is impossible not to mention the crisis of traditional fish sauce Therefore, the fish sauce market - an indispensable spice in Vietnamese family meals, has made important changes, getting closer to transparency to win trust from consumers, along with that is the healthy competition in the market Recognizing the importance, being facilitated and guided by Mr Doan Anh Tuan, I chose 584 Nha Trang Sea Product Joint Stock Company - whose main business is to produce traditional fish sauce to make a training report with the content "Evaluation business efficiency of 584 Nha Trang Sea Products Joint Stock Company" Special thanks to the chief accountant – Mr Truong Nguyen Anh Tuyen and 584 Nha Trang Sea Products Joint Stock Company staff for your help in my internship period in the company I have gained a lot of practical knowledge as well as an opportunity to apply the knowledge I learned to complete this report CHAPTER 1: THEORETICAL BASIS FOR FINANCIAL CAPITAL 1.1 The concept of financial capital 1.1.1 Definition For each business in particular and the economy in general, which always plays a very important role Depending on each socio-economic situation, there are many different views and judgments about financial capital that have been made It is any economic resource measured in terms of money used by entrepreneurs and businesses to buy what they need to make their products or to provide their services to the sector of the economy upon which their operation is based But in this thesis, I give some definitions according to International Financial Reporting Standards (IFRS) A financial concept of capital is adopted by most entities in preparing their financial report Under a financial concept of capital, such as invested money or invested purchasing power, capital is synonymous with the net assets or equity of the entity Under a physical concept of capital, such as operating capability, capital is regarded as the productive capacity of the entity based on, for example, units of output per day In IFRS, there are two concepts of financial capital maintenance as follows: Physical concept of capital and Financial concept of capital About Financial capital maintenance, under this concept, a profit is earned only if the financial (or money) amount of the net assets at the end of the period exceeds the financial (or money) amount of net assets at the beginning of the period, after excluding any distributions to, and contributions from, owners during the period Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power Under the concept of financial capital maintenance where capital is defined in terms of nominal monetary units, profit represents the increase in nominal money capital over the period Thus, increases in the prices of assets held over the period, conventionally referred to as holding gains, are, conceptually, profits They may not be recognized as such, however, until the assets are disposed of in an exchange transaction When the concept of financial capital maintenance is defined in terms of constant purchasing power units, profit represents the increase in invested purchasing power over the period Thus, only that part of the increase in the prices of assets that exceeds the increase in the general level of prices is regarded as profit The rest of the increase is treated as a capital maintenance adjustment and, hence, as part of equity And about physical capital maintenance, under this concept, a profit is earned only if the physical productive capacity (or operating capability) of the entity (or the resources or funds needed to achieve that capacity) at the end of the period exceeds the physical productive capacity at the beginning of the period, after excluding any distributions to, and contributions from, owners during the period Under the concept of physical capital maintenance when capital is defined in terms of the physical productive capacity, profit represents the increase in that capital over the period All price changes affecting the assets and liabilities of the entity are viewed as changes in the measurement of the physical productive capacity of the entity Hence, they are treated as capital maintenance adjustments that are part of equity and not as profit The principal difference between the two concepts of capital maintenance is the treatment of the effects of changes in the prices of assets and liabilities of the entity In general terms, an entity has maintained its capital if it has as much capital at the end of the period as it had at the beginning of the period In short, capital is a prerequisite of any business to participate in production and business activities 1.1.2 Classification 1.1.2.1 Classified by source 1.1.2.1.1 Equity Equity is typically referred to as shareholder equity (also known as shareholders' equity), or owner equity (for privately held companies), which represents the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company's debt was paid off Equity is found on a company's balance sheet and is one of the most common financial metrics employed by analysts to assess the financial health of a company Shareholder equity can also represent the book value of a company Equity can sometimes be offered as payment-in-kind 1.1.2.1.2 Liability A liability is something a person or company owes, usually a sum of money Liabilities are settled over time through the transfer of economic benefits including money, goods, or services Recorded on the right side of the balance sheet, liabilities include loans, accounts payable, mortgages, deferred revenues, earned premiums, unearned premiums, and accrued expenses Even marriages can change your liability In general, a liability is an obligation between one party and another not yet completed or paid for In the world of accounting, a financial liability is also an obligation but is more defined by previous business transactions, events, sales, exchange of assets or services, or anything that would provide economic benefit at a later date An essential characteristic of a liability is that the entity has a present obligation An obligation is a duty or responsibility to act or perform in a certain way Obligations may be legally enforceable as a consequence of a binding contract or statutory requirement This is normally the case, for example, with amounts payable for goods and services received Obligations also arise, however, from normal business practice, custom and a desire to maintain good business relations or act in an equitable manner If, for example, an entity decides as a matter of policy to rectify faults in its products even when these become apparent after the warranty period has expired, the amounts that are expected to be expended in respect of goods already sold are liabilities Enterprises can receive debt capital from many sources such as bank loans, corporate bond issuance, loan capital from other enterprises, 1.1.2.2 Classified by roles and characteristics 1.1.2.2.1 Fixed capital This money which is used to purchase assets that will remain permanently in the business and help it to make a profit Factors used to determine fixed capital needs: Nature of business, size of business, stage of development, capital invested by the owners, location of that area, … Fixed capital is denominated in money by fixed assets, its characteristics also depend on fixed assets When engaged in production and business, the capital value of fixed capital shifted into the production cost of fixed capital produced It is understood that fixed capital is depreciated by the number of products produced Fixed capital can be divided into types: tangible fixed assets, intangible fixed assets and capital lease A tangible asset is an asset that has a finite monetary value and usually a physical form Tangible assets can typically always be transacted for some monetary value though the liquidity of different markets will vary Tangible assets are the opposite of intangible assets which have a theorized value rather than a transactional exchange value An intangible asset is an asset that is not physical in nature Goodwill, brand recognition and intellectual property, such as patents, trademarks, and copyrights, are all intangible assets Intangible assets exist in opposition to tangible assets, which include land, vehicles, equipment, and inventory A capital lease is a contract entitling a renter to the temporary use of an asset, and such a lease has the economic characteristics of asset ownership for accounting purposes The capital lease requires a renter to book assets and liabilities associated with the lease if the rental contract meets specific requirements In essence, a capital lease is considered a purchase of an asset, while an operating lease is handled as a true lease under generally accepted accounting principles 1.1.2.2.2 Working capital Firms use working capital to run their business For example, money that they use to buy stock, pay expenses and finance credit Factors used to determine working capital needs: Size of business, stage of development, time of production, rate of stock turnover ratio, buying and selling terms, seasonal consumption, seasonal product, profit level, growth and expansion, production cycle, general nature of business, business cycle, business policies, debt ratio, … Working capital is denominated in cash from working assets, so it is influenced by current assets They include some accounts belonging to short-term assets such as: Cash and cash equivalents, short-term investments, short-term receivables, inventory, … 1.1.3 The role of capital in production and business activities Legally, capital is one of the basic factors to establish a business and go into production and business activities in the course of operation, capital plays a role of ensuring the smooth and efficient production and business process of enterprises capital helps businesses carry out production, reproduction and expand investment and business activities In today's competitive market environment, which helps businesses to be more active in business forms, proactively innovate business forms, machinery and equipment, improve technology, Since then, businesses have improved the quality of products, competitiveness, changing models, lowering product costs, checking working time for employees as well as improving operational efficiency 1.2 The concepts of efficiency of financial capital use 1.2.1 Definition Capital plays a very important role in the operation and development of the business Because the effective use of capital in an enterprise is the result of the process of managing and using capital in the production and business process so as to achieve maximum efficiency That why analyzing the efficiency of capital use in enterprises is also same way with analyzing corporate finance Besides, the efficiency of capital use also shows the correlation between the input and output of the production and business process through evaluation indicators From financial capital efficiency analysis, manager of company can evaluate the process of examining a company’s performance in the context of its industry and economic environment in order to arrive at a decision or recommendation Moreover, the efficiency of capital use not only shows the evaluation of business results, it also reflects the management, capital exploitation and use capacity of enterprises in order to maximize the profit while minimizing costs 1.2.2 Factors affecting the efficiency of financial capital use 1.2.2.1 Objective factors 1.2.2.1.1 Political and legal environment The political stability of our country is a favorable first hunger for the business environment Especially after joining the WTO in 2007, the government has had many monetary and monetary policies to help promote domestic production and business activities In addition, the government is increasingly improving the legal environment, shortening time and simplifying procedures for establishing businesses, building a friendly and healthy business environment 1.2.2.1.2 Economic environment As the economy grows, an increase in per capita income will lead to an increase in people's spending needs Therefore, the competitive pressure on domestic enterprises is increasing, but businesses still have many opportunities to develop production and business activities to meet the increasingly demanding Vietnamese market Vietnam is a market with a fast growing up speed, great potential and attractive to domestic and foreign investors Forecasts from reputable experts all agree that GDP growth in the period of 2020-2025 will reach 7% per year The increase in GDP has led to an increasing demand for quality products and models This is both a challenge and an opportunity for businesses to improve the quality of products and services and increase competitiveness in the market 1.2.2.1.3 Social and cultural environment Currently, Vietnam's population is estimated at over 95 million It is predicted that Vietnam's population will reach 104 million by 2030 Of which 40% to 50% of the population will live in urban areas The number of people of working age accounts for more than 50% Along with that is the change of shopping habits to better suit the pace of development The need for safe and healthy food is also more focused The youth's shopping culture also greatly affects businesses 1.2.2.1.4 Technology environment The booming telecommunication system has created a new era It is followed by the outstanding development of production equipment as well as operating and management technologies People have developed machines to shorten the production process, increase labor productivity as well as reduce labor costs 1.2.2.2 Subjective factor 1.2.2.2.1 Industry environment The company belongs to the seafood industry specializing in producing fish sauce, seafood and related products, the source for the company's activities comes from the fishermen The company's operations depend heavily on local seafood production The company also has many competitors in the same industry that have greater advantages with modern technical production lines and shorter production time However, traditional production-oriented production is also an advantage of enterprises in the market when this production method takes more time but in return, the product quality is greatly improved compared to the competitors operate by industrial methods 1.2.2.2.2 Manager level For each enterprise, after having sufficient capital for production and business activities, managing and using that capital source in an effective manner is a very important issue Enterprises with a good administrator, professional competence and management capacity can maximize profits achieved on the unit of capital very quickly, thereby helping businesses expand and improve better Strategies and policies appropriate to the situation of the business will be able to maximize the resources of the business, the employees, help improve staff capacity and improve productivity 1.2.2.2.3 Labor force 1.2.3 Methods of assessing the efficiency of financial capital use 1.2.3.1 Comparison method Comparative method is a method often used in the analysis process to determine the trend of fluctuations in the accounts of businesses In order to apply this method, criteria need to ensure consistency in the standard such as the same measurement unit, the same percentage or the time unit, etc Content comparison may be as follows: - Longitudinal comparisons to assess the ratio of capital to total capital of enterprises - Compare horizontally to see the relative, absolute change over the years - Compare operational efficiency in actual operation with the plan set out earlier to determine the level of business striving 1.2.3.2 Ratio method Ratio method is the method based on certain financial ratios In enterprise financial analysis, financial ratios are classified into several groups such as: liquidity, profitability, capital and asset structure, business capacity, Each ratio group consists of individual reflection indicators, each division of financial activity Depending on 10 49 2.2.3.2.3 DuPont Chart in 2017 of 584 Nha Trang Sea Product Joint Stock Company Diagram 4: DuPont analysis in 2017 Return on Equity 22.49 Profit Margin 4.20 Net income 11,620 million VND 50 2.2.3.2.4 DuPont Chart in 2018 of 584 Nha Trang Sea Product Joint Stock Company Diagram 5: DuPont analysis in 2018 Return on Equity 22.38 Net income 18,294 million VND 2.2.3.2.5 DuPont Chart in 2019 of 584 Nha Trang Sea Product Joint Stock Company Diagram 6: DuPont analysis in 2019 51 Return on Equity 16.79 Net income 17,224 million VND 2.2.3.2.6 DuPont analysis by trend DuPont analysis is a useful tool for isolating different factors that contribute to ROE In other words, this model breaks down the return on equity ratio to explain how companies can increase their return for investors Investors are not looking for large or small output numbers from this model Instead, they are looking to analyze what is causing the current ROE The management can use this formula to pinpoint the problem area whether it is a lower profit margin, asset turnover, or poor financial leveraging Once the problem area is found, management can attempt to correct it or address it with shareholders Equity multiplier calculated by dividing total assets by stockholder's equity This index gradually decreases year by year It means the company is not relying on financial leverage and raised additional capital from issuing shares, attracting more investors to become shareholders Equity multiplier depends on total assets divided by total equity In this period, we can see that this index decreased because of the rapid increase in capital 52 from investors but in contrast, the increase in assets, especially long-term assets, was not as fast That has led to a decline in the index ROE can be calculated by multiplying net profit margin, the asset turnover ratio, and the equity multiplier together, so ROE can be deconstructed into the constituent financial metrics for observation The ROE index during this period had a noticeable variation that reflected a change in the company The index hit the highest level of 32.87 in 2016 Then it dropped sharply to about 22 By using the DuPont identity, we can break down the cause of a decline in ROE in 2017, 2018 In 2017, the company unexpectedly doubled its equity And year later, equity still increased by a number almost as large as the previous year The amplitude of capital increase of these years is the same, and revenue did not increase significantly for the previous year As a result, the Company's ROE remained the same 2.2.4 Conclusion from financial capital use of 584 Nha Trang Sea Product Joint Stock Company 2.2.4.1 Advantages 584 Nha Trang Sea Product Joint Stock Company has been taking the right steps, positive changes, bringing better business results over the years This is clearly shown in the company's financial statements Through the above indicators, it can be seen that, after receiving a large amount of investment capital, the company had a significant increase in revenue However, the percentage is not equal to the figures for the previous years The increase in capital indicates an expansion of the company The advantages of the business performance are to have a low level of risk, high liquidity Although not growing fast but the steps of the company are always firm And the company also invested in machinery, infrastructure, equipment, to improve 53 production, improve products and service quality In addition, the company invested heavily in improving product quality, fully meeting quality standards on food safety 2.2.4.2 Disadvantages However, enterprises still have some imperfection such as low capital efficiency According to the ROE indicator in the last years, the profit that a company makes on all capital it uses is not effective compared to previous years The company may consider adjusting to operate more effectively on equity The ROE and ROA have decreased and are no longer at a good level In the future, if the management does not come up with effective methods, the development of the company will be difficult to guarantee The company's revenue in the most recent year increased but profits fell slightly The company should consider adjusting the strategy accordingly, reducing costs and increasing revenue from some other business activities 2.2.4.3 Reasons The company does not have a highly specialized economic and financial analyst, but the accountant undertakes this task, so the analytical efficiency is not high The company does not have a wide marketing strategy, although it has invested more in technology such as creating an online shopping web site and not having an advertising strategy to bring customers more exposure to the technology platform The company also faces many restrictions in the management of machinery, labor The amount of capital used for fixed assets is still low, indicating that the company is still slow in scaling up 54 CHAPTER 3: SOLUTIONS TO IMPROVE THE EFFICIENCY OF CAPITAL USE AT 584 NHA TRANG SEA PRODUCT JOINT STOCK COMPANY 3.1 Development orientation of the company in the future With the increasingly rapid pace of change in the domestic economy and the world, in order to improve competitiveness, businesses must choose the right strategy and suit the business situation as well as the situation of the economy Therefore, the company has set general development directions for the following year: - Keeping sesame and developing production and business activities, raising production speed, increasing the company's revenue next year higher than the previous year - Minimum expenses to increase profits, bring better efficiency for production and business activities - Improve product quality, improve designs, diversify items to attract more customers - Improve the material and spiritual life for the company's employees so that they make the best effort - Training and improving the professional capacity of leading officials - Invest in modernizing equipment, machinery and factories 3.2 Solutions to improve the efficiency of capital use at 584 Nha Trang Sea Product Joint Stock Company 3.2.1 Solutions for fixed capital 3.2.1.1 Revaluation of fixed assets The cost of a fixed asset and its residual value may not reflect its true value Therefore, the company should periodically evaluate its fixed assets so that their values 55 are in line with market prices In addition, it helps to manage the fluctuation of fixed assets in order to make plans for depreciation and handle damaged assets by repairing or reselling them moreover, enterprises may find that fixed assets are used less effectively to plan for more efficient use of resources There are also other types of fixed assets with high market prices after many years such as land and factories, the company should also re-evaluate to avoid confusion causing loss of the company's assets 3.2.1.2 Take advantage of fixed asset capacity Most of the company's machinery and equipment have not been used at full capacity Therefore, the consideration to increase the capacity of using machines is also a measure to save labor force, reduce raw material and labor costs, and avoid long-term downtime leading to machinery broken The company needs to have a specific plan in arranging production plans, avoiding overlap in order to improve the productivity of machinery and equipment 3.2.1.3 Improve the efficiency of investment in renovation of fixed assets Science and technology development require the company to apply more modern machines to the production process, improve the process to meet the needs of customers The company should consider discarding outdated, outdated, heavily damaged machinery and replacing it with more modern equipment However, in order to purchase new equipment, the company needs to consider and carefully evaluate the effectiveness of this activity From there, we can assess the suitability with the size of the business, bring the greatest efficiency as well as avoid wasting capital 56 3.2.2 Solutions for working capital 3.2.2.1 Cash management accordingly Cash helps financial operations of the company So the cash management in the business is very important Managers should focus on managing the company's cash to minimize solvency risks, increase the efficiency of using money and avoid financial fraud If the company reserves too little cash, it will lose the initiative in cash-need transactions or flexible solvency or investment opportunities The company needs to determine a suitable amount of cash to meet the demand for regular activities such as: - Regular expenses in service of business and production activities - Provision for unplanned expenses - Provisions for possible risks of the enterprise - Provision for newly arising investment opportunities 3.2.2.2 Inventory management Inventory accounts for a large part of the value of current assets As a company operating in the manufacturing industry, the amount of inventory is usually very large Management should focus on managing inventory, focusing on production to meet the increasing demand in the holiday seasons of the year Avoiding goods shortages reduces sales Therefore, the planning of production and stockpiling of goods should be in harmony, also avoiding the case of long-term stockpile stockpiling that results in loss, decrease in value or expiration 3.2.2.3 Receivables management Receivables usually come from customers of the company good management of receivables helps the company to have a short debt recovery time to increase sales and 57 take advantage of the available cash To minimize receivables, the company may use the following measures: - Analyzing and assessing customers' credit ability to make appropriate plans and policies, avoiding excessive debt, capital appropriation - Closely monitoring the status of receivables, there are clear regulations on the rights and responsibilities of the parties regarding the time of debt payment, payment method, if any, there will be sanctions - The company should have a department in charge of debt management and collection, be able to persuade customers to pay, commit to recover debts, and solve difficult situations in debt recovery 58 CONCLUSION For an enterprise, improving and using capital effectively is very important, determining the success of the company's production and business activities 584 Nha Trang Sea Product Joint Stock Company is a long-time operating enterprise in fish sauce and fisheries, the company has made constant efforts and efforts and achieved significant achievements But in order to maintain and improve efficiency in the future, the company must try harder in the management and production Although the internship time at 584 Nha Trang Seafood Joint Stock Company is not much, it helped me have practical experiences about the knowledge taught by teachers in the school as well as in the professional working environment I would like to thank 584 Nha Trang Seafood Joint Stock Company and Academy of Policy and Development for creating the opportunity to help us complete my internship, thereby helping me gain a lot of knowledge for my future career I would like to express my special thanks to the accounting department of the company and Mr Doan Anh Tuan for following me closely during time to write graduation thesis and making detailed reports, giving a lot of attention and dedication to me Due to the limited time as well as the young level, it is inevitable errors in graduation thesis Therefore, I hope to receive sympathy as well as suggestions from the teachers to be more complete and more practical Best regards, Ngo Thi Truc Linh 59 60 ... of 584 Nha Trang Sea Product Joint Stock Company Company name: 584 Nha Trang Sea Product Joint Stock Company Vietnamese name: Cong ty Co phan Thuy san 584 Nha Trang Short name: 584NhaTrangSeaCom... Director of Sales Company Van Thuan Deputy Director of Business Company 20 2.1.4 Areas of business activities of 584 Sea Product Nha Trang Joint Stock Company 584 Nha Trang Sea Product Joint Stock Company. .. recent years 2.2.1 Evaluation of business performance of 584 Nha Trang Sea Product Joint Stock Company 2.2.1 Overview of business performance of 584 Nha Trang Sea Product Joint Stock Company 2.2.1.1