The study's significant findings are derived from the achievements and limitations analysis of Huu Nghi Food, which is given below.
4.4.1 Achievements
About the liquidity of short-term assets
The current ratio in 2017 was about 1,01, and in 2021 to 1,05.
Significantly, 2019 is the most significant ratio in 5 years, about 1,54. It shows that Company has maintained quite a good, and Cash Conversation Cycle (-73,9 in 2017 to -243,5 in 2021) shows that the company has a pretty good policy for recovering capital, avoiding capital misappropriation.
About operating assets management
Although the day's inventory on hand increased slightly, the day's sales were uncollected, and days payable increased sharply. The resulting cash conversion cycle is a negative number, also referred to as the financing period, has decreased from -73,9 in 2017 to -243,5 days in 2021, which shows that the number of days that the Company misappropriates the supplier's capital is greater than the number of days that the customer misappropriates the Company's capital. Short-term debt ratios are both above 1, showing that the Company guarantees its solvency in the short term.
About the financial structure
The Company has a higher structure of current assets than long-term assets, showing that the Company‟s current solvency is more secure.
Profitability Ratio:
From 2017 to 2019, profit margin and asset turnover gradually declined overall (23.83% to 22,94%), with a slight peak in 2019. These imply that the proportion of income generated compared to revenue or total assets has
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decreased since 2017. However, on the front, Huu Nghi Food‟s performance was still considered at its best around 2017-2019, with impressive performance and financial figures published on the market during Covid-19.
4.4.2 Limit and causes 4.4.2.1 Limit:
Besides the advantages, the Company still has the following disadvantages:
About the liquidity of short-term assets
The analysis results show that there is an improvement in the current ratio, which leads to the ability of the business to meet its debts in the high, but this result is only the initial recovery, not yet firm, showing that long-term solutions are still required to improve the liquidity of short-term assets, especially is the risk without ensuring cash for the payment.
About profitability
The company„s profitability indicators such as return on assets (ROA) (decreased 3,53% to 3,03%), and return on equity (ROE) (decreased 16,91%
to 10,22%) over the 5 years are not stable and are at a very low level. It can be said that in 2021 the profit margin of revenue was only 3,03% times, while in 2017 it was only 3,53% times. This shows that the efficiency of asset use, poor equity, and poor cost management lead to low profits.
About operating assets management
The calculated ratios present similar overall trends in Huu Nghi Food‟s operating assets. Specifically, all three turnovers show a tendency of decline over the period from 2017 to 2021, whereby inventory turnover sharply increased from 8,7 to 12,8 in 2019, but in 2021 this ratio decreased to 7,7.
Receivables turnover also decreased halved, and payables turnover almost
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declined halved with a sudden peak in 2021. These indicate that there is potentially a problem in inventory management.
About the financial structure
In terms of capital structure, short-term debt accounts for a very large proportion of total capital, while short-term solvency is just enough to show the risk of future payment.
Huu Nghi Food‟s net income in 2017 was 49 billion VND and 52 billion VND by 2021. At the same time, the owner‟s capital has drastically increased from 301 billion VND in 2017 to 536 trillion VND in 2021
Therefore, it can be seen that even though the monetary values of both net income and shareholder‟s equity have both significantly increased, the percentage return on equity significantly decreased. This indicates inefficiency in income generation and failure to utilize invested capital to the fullest potential and is likely to lead to financial issues in the near future.
4.4.2.2 The cause of the limitations:
- Subjective reasons:
Firstly, due to the manager„s point of view and attitude; company managers do not have the right view of the importance of financial statement analysis. This is also the common position and performance of many Vietnamese enterprises today. Therefore, from the organization of analysis work to the organization of personnel for analysis work, there has not been any attention and clear orientation. The analysis of financial statements has not been carried out regularly and continuously.
Second: Due to the qualifications of analysts, the company does not have a full-time officer in charge of financial statement analysis, and there is
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no financial analyst, but the assessment of the company‟s financial position is done by the chief accountant.
The company does not have a process to analyze and evaluate the financial position and performance on a quarterly and annual basis and has not assessed limitations in financial management at the company.
There has not been a flexible combination between accounting, auditing, and analysis and evaluation.
- Objective reasons
The legal document system often changes, there is no mandatory regulation on analyzing the financial position and performance of enterprises;
Our country has no statistics on the industry average financial indicator system;
There is no unified regulation on analytical content, analytical criteria, or how to determine analytical criteria based on different points of view, so the company still has difficulties in choosing analytical criteria as well as target determination formulas.
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