SUMMARY OF FINDINGS, CONCLUSIONS, AND RECOMMENDATI- 123docz.net

This chapter presents the summary of the findings, conclusions and recommendations of the study. It also included the three solution groups to complete the financial management system of VNPT.

Summary of the Findings

Integration and market openness have been inevitable trends of globalization process for all countries in the world including Vietnam. In the process of integration and market openness, besides existing advantages, there have been a number of challenges. One of those challenges is that economic subjects must face increasingly fierce competition, especially subjects in developing countries like Vietnam. The important thing to do is a firm foothold in a fierce competitive market in finding the solutions to improve its own financial effectiveness. To do so, it is required to tackle a number of issues including the completion of financial management system.

With such approach to issues, the main focus of this study was the current status of system financial management of VNPT and its effect on financial management efficiency of company. The specific objectives of this study are: (1) To identify the profile of the company in terms of the following:

Type of the company and Size of the company; (2) To determine the current status of financial management system of VNPT in terms of the following:

Capital mobilization, Capital management and use, Asset management, Revenue, expense and profit distribution management; (3) To assess the

financial management efficiency of VNPT in terms of the following financial ratios: the asset turnover ratio and the debtor days ratio; (4) To determine the effects of the financial management system to the financial management efficiency of VNPT; (5) To identify the problems encountered in carrying out the financial management system of VNPT; (6) To propose actions that will respond to the problems encountered in carrying out the financial management system of VNPT. In order to obtain the main objectives of study, the researcher used the descriptive method to get data which includes:

Primary data was collected by sending questionnaires to 169 respondents (CFO of VNPT, director of financial department of VNPT, deputy director of financial department of VNPT, CFO of VNPT’s subsidiaries) working in VNPT and its subsidiaries and secondary data was from the annual financial reports of VNPT from 2010 to 2012.

From a theoretical point of view, this research studied and synthesized the different studies of economists and international and domestic managers;

thereby the dissertation filters reasonable ideas and highlights the derived results for this study more specifically:

1) Identify the Profile of the Company Type of the Company

It was last June 24,2010, the parent company - Vietnam Posts and Telecommunications Corporation changed the operating model to one member limited liability company of the State owned by Decision 955/QD- TTg of the Prime Minister.

Size of the Company

VNPT has 164 subsidiaries with more than 90,000 employees.

2) For the current status of financial management system of VNPT - Capital mobilization in VNPT

Capital mobilization of VNPT both ensures the autonomy and the security.

The financial management system created new initiative in capital mobilization in helping to address shortage of capital in the context of capital scarcity as currently.

However, in financing activities, now, VNPT’s main capital mobilization channel is bank loans. The bank loans kept more than 70% of capital in the investment projects of VNPT.

- Capital management and use in VNPT

Generally, capital management and use in VNPT are rather strict, not only facilitating to increase the self-control, self- responsibility of VNPT but also strengthening examination, supervision on representative owners of State capital.

However, investment in the outside of business lines includes sensitive fields such as finance, banking, real estate, and security which have high financial risk with little effectiveness.

- Asset management in VNPT

Asset management of the VNPT has relatively clear separation between ownership and rights to use assets.

However, asset management of VNPT is also heavy on assets perspective preservation, and not much attention to the aspects of effective use of State assets.

83 - Management of revenue, expense and profit distribution

The managing revenue, cost and profit distribution is quite clear, explicit to ensure balance between benefit of State, cooperation and temporary and long-term benefit of workers, cooperation, contributing to encourage for saving and improving efficiency in production business at VNPT.

3) For assessing the financial management efficiency of VNPT

The assessment of the financial management efficiency of VNPT is in terms of the following financial ratios: the asset turnover ratio and the debtor day ratio.

The asset turnover ratio Table 23

The Asset Turnover Ratio of VNPT from 2010 to 2012

Year 2010 2011 2012

Sales Revenue 101,569 120,800 130,000

Net Assets 69,499 71,807 73,968

The asset turnover ratio 1.46 1.68 1.76

Unit: Billion dongs

The debtor days ratio Table 24

The Debtor Day Ratio of VNPT from 2010 to 2012

Year 2010 2011 2012

Debtors 13,003 14,737 15,193

Sales turnover 104,869 125,100 134,495

The debtor days ratio 45.26 43.0 41.23

Unit: Billion dongs

4) For the effects of the financial management system to the financial management efficiency of VNPT

Financial management system of VNPT had been conducted well so sales revenue and net assets increased steadily from 2010 to 2012. It leads to the asset turnover ratio to increase and the debtor day ratio to decrease.

All of those prove that financial management system of VNPT affects positively to financial management efficiency of the Group.

5) For the problem encountered by financial management system of VNPT

Firstly, through studying the financial management system of VNPT, capital mobilizations of VNPT’s subsidiaries meet many difficulties and limitations.

Secondly, under condition of limited budget resources, financial management system provides investment out of main business operations to VNPT which is 30% of total capital source which is too large, leading to widespread investment without efficiency.

Thirdly, the revenue of VNPT increased steadily from 2010 – 2013 but the profit of VNPT also decreased.

Conclusions

1) For the profile of the company

VNPT is one member limited liability company of the State owned which has 164 subsidiaries with more than 90,000 employees.

2) For the current status of financial management system of VNPT - The assets and equity of VNPT had tended to increase over the

years from 2010 to 2012.

- The conservation assets and equity of VNPT is high.

- The rate of total payable liabilities over owner capital was 2.74 fold, 2.33 fold respectively in in 2011, 2012. A recent study showed that this rate of world’s big economic corporations was 1-3 folds.

- The revenue of VNPT had tended to increase over the years from 2010 to 2012.

- But the profit of VNPT had tended to decrease over the years from 2010 to 2012.

3) For assessing the financial management efficiency and determining the effects of the financial management system to the financial management efficiency of VNPT

Generally, the financial management system of VNPT is fairly good so it has positive effect on financial management efficiency of VNPT.

4) For the problem encountered by financial management system of VNPT

There are three problems encountered by financial management system of VNPT:

- Capital mobilizations of VNPT’s subsidiaries meet many difficulties and limitations.

- Investment out of the main business operations without efficiency.

- Revenue of VNPT increased steadily from 2010 – 2012 but profit of VNPT also decreased.

Recommendations

Firstly, complete capital mobilization of VNPT’s subsidiaries

Through studying the financial management system of VNPT, capital mobilization of subsidiaries under VNPT remains limited. The extension of capital mobilization regulation for subsidiaries of VNPT parallel with responsibilities and effectiveness of mobilized capital’s use is the correct direction facilitating subsidiaries to hold the chances, expand the production and business and comply with legal foundation of subsidiaries with units having independent legal entity.

The proposed extension of capital mobilization regulation for subsidiaries of VNPT is based on the following grounds:

VNPT comprises many business institutions joining each other in terms of finance, technology, product, and market.

Relations between members of VNPT mainly depend on firmly economic ground instead of mechanical administrative ground. On other hand, it should be acknowledged that the final objectives of financial execution and management are to obtain the effectiveness, profit for the whole Group. The effectiveness, profit of the whole Group is not integral to the effectiveness,

profit of the member companies. Strong member units will create the strength of the whole Group. The direction and support of the Group play an important role in the strength of member units.

Furthermore, in the course of socio-economic development in local and international the trend of hierarchy and decentralization develops more and more. Above analysis indicates that the extension of capital mobilization regulation for subsidiaries of VNPT is in line with the rule of movement.

However, in the current condition of VNPT, the extension of capital mobilization regulation for member units of the Group also requires certain conditions including the capacity of financial management system of subsidiaries, the capacity of capital absorption of subsidiaries, the effectiveness of capital usage as well as the supervision of the Group.

Evidently, the financial management system of VNPT has not yet motivated the subsidiaries exploit totally the capital source. Specifically, VNPT only permitted subsidiaries to have the loan, credit guarantee in certain limitations. Moreover, it should be noted that the extension of capital mobilization does not only relate to the settlement of internal relations of VNPT but also be attached to relations with banks. Generally, because of being familiar with centralization regime, most of State owned banks require VNPT to guarantee in order to increase the reliability, even in the case that guarantee is unnecessary, the bank remains to conduct guarantee regime. In addition, the fact that the bank is often familiar with large limit loans, little interest in small limit loans in compliance with requirements of subsidiaries.

Therefore, the extension of capital mobilization regime requires the combination of both inside and outside of VNPT.

The extension of capital mobilization regime of subsidiaries VNPT performed not only in relation with banks but also in capital mobilization via the issuance of bonds, stocks of subsidiaries is required to normalize in the direction of strengthening the activeness of subsidiaries joining in capital market.

To extend the capital mobilization regime of subsidiaries of VNPT, it is required to focus on handling the main problems as follows:

- In general, perform the capitalization for VNPT and foster the listing in the security market.

- For VNPT itself, set the instruction frame including: target, limit, loan and procedure instead of approval for each case in the current time.

- For the State, consider and adjust the strict regulations on capital mobilization of VNPT, and establish the credit regime in the direction of unblocking the capital source for the central companies, economic group based on the happenings of macroeconomic situation.

- Parallel with the extension of capital mobilization regime for subsidiaries of VNPT, it is required to cooperate synchronously with the strengthening of supervision, administration regime and the system of final criteria on effectiveness, the extension of capital mobilization regime for member units under the Group can become true and obtain the achievement as expected.

Secondly, complete investment out of main business operations

To set target VNPT is to guarantee the capital and assets (including State capital and assets; for the completion of State capital and assets

management of mobilized capital of VNPT) to be safe and increase the effectiveness of usage. To reach the target, it is required to continuously fulfill the management and usage of capital by the following solutions:

Investment in the outside of main business and production, internally investments in VNPT obviously had warnings. So, it is required to have clearer and more specific regulations for the investment in the outside of main business lines (which support in main business and production, which not support in main business and production), internal investments in VNPT to mitigate the risks and raise the effectiveness of State capital use in VNPT.

In addition, it is required to redefine the strategic objectives, missions of VNPT in the next 5-10 years in which VNPT tends to be a globally competitive corporate in the industry and the distribution of resources will be conducted mainly toward above objectives.

To correct the limitations of investment in the outside VNPT, it is required to reassess the capital, assets of VNPT accurately and restructure the group toward centralized objectives as increasing the financial management efficiency of VNPT in new situation. Publicize the information, transparency of information at least under existing criteria applied to companies listed in security market at present. Annually, VNPT shall draw a report on the degree of strategic achievement’s implementation audited under international standard to submit the National Assembly and publicize the information to whom concerning activities of VNPT.

Raise the role in advising, moderating, supervising related parties to investment decisions, project sponsorship and distribution polices in inner VNPT.

Thirdly, complete the management of revenue, expenses, and profit distribution

The management of revenue, expenses and profit distribution for VNPT can be regarded as the central point, the core of the whole financial management system of the State to increase financial effectiveness. To fulfill the management of revenue, expenses and profit distribution, VNPT is required to perform the key solutions as follows:

- Reassess the managerial situation of revenue, expenses and profit distribution in VNPT in recent years. Also, reassessment of managerial situation shall be conducted from considering the establishment of limits and plans to the deploying of the measurements in reality. On that basis, compare to public documents regulating on management of revenue, expenses, profit distribution, especially in Decree 09/2009/NĐ-CP of the Government, and reflect the unsuitability of legal documents to study and adjust.

- Continue to study and establish the assessment criteria on managerial situation and use of revenue, expenses and profit distribution in VNPT to set a premise for management and use.

The central establishment of such criteria is to focus on the conservation and increase of capital use effectiveness, and guarantee the increase of financial effectiveness of VNPT.

- Complete the system of economic and technical regulations in compliance with conditions, operating characteristics of VNPT both assuring the scientific and actual requirements, innovation of plan making on revenue, cost for innovating the ways of profit distribution in

direction of focusing on long term benefit of VNPT.

- Correct the course of statistics, accounting, revenue, expenses, profit and profit distribution of VNPT in the direction of assuring the sufficient recording and timely reflection. For the management of revenue, expenses and profit distribution, it is required to focus on expense management because of only good management on expenses and cost reduction results in extending the production and business and increasing revenue and profit.

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SUMMARY OF FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS