(TIỂU LUẬN) ANALYSIS OF FINANCIAL STATEMENTS AT HOA PHAT GROUP JOINT STOCK COMPANY IN 2019 2020

NATIONAL UNIVERSITY OF ECONOMICS

PRACTICE REPORT
SUBJECT: SECURITIES INVESTMENT ANALYSIS
TOPIC: ANALYSIS OF FINANCIAL STATEMENTS AT HOA

PHAT GROUP JOINT STOCK COMPANY IN 2019-2020

GRADE: CLC 61A CORPORATE FINANCE
NAME: TRAN HO NAM
STUDENT CODE: 11193600
TEACHER: NGUYEN MINH HUE

Hanoi, 2022


Table of contents
INTRODUCTION........................................................................................................................ 3
PART I......................................................................................................................................... 3
THEORETICAL BASIS FOR ANALYSIS OF FINANCIAL STATEMENTS................................3
1.

Goals and meaning of financial statements..........................................................................3

2.

Sources of information used for financial statement analysis...............................................4

3. Methods in financial statement analysis.................................................................................6
4. Content of financial statement analysis..................................................................................9
PART II..................................................................................................................................... 27

ABOUT HOA PHAT GROUP JOINT STOCK COMPANY........................................................27
1.

Company name and address.............................................................................................27

2.

Main business lines...........................................................................................................27

3.

History of formation and development..............................................................................27

4.

Organization chart...........................................................................................................29

5.

Shareholder structure......................................................................................................29

6.

Board of Directors............................................................................................................30

PART III.................................................................................................................................... 31
ANALYSIS OF HOA PHAT GROUP'S FINANCIAL STATEMENTS 2019-2020........................31
1. Assessing the efficiency of hoa Phat's fixed capital use in 2019 and 2020................................31
2.

Assessing the efficiency of hoa Phat's working capital use in 2019, 2020.............................33

3. Capital structure and capital formation sources in 2020........................................................34
4. Capital financing plans for the company...............................................................................38
5.

Ros, ROA, ROE targets in 2019 and 2020 of Hoa Phat......................................................40

PART III.................................................................................................................................... 42
CONCLUSION........................................................................................................................... 42
REFERENCES........................................................................................................................... 43

2


INTRODUCTION
The analysis of financial statements aims to generally assess the financial situation, business
performance, potentials as well as financial limitations of enterprises in general and hoa Phat Group
Joint Stock Company (HPG) in particular. The analysis of financial statements of Hoa Phat Group
Joint Stock Company is in the general condition of economic groups, state-owned corporations in
Vietnam is still very new, sketchy and exists many limitations. Therefore, I chose the topic:
"Completing the analysis of financial statements at Hoa Phat Group Joint Stock Company" to
study.
The thesis in addition to the introduction, conclusions and list of references, the list of
abbreviations, diagrams, accompanying annexes are presented in three chapters with the following
basic contents:

PART I
THEORETICAL BASIS FOR ANALYSIS OF FINANCIAL
STATEMENTS

1. Goals and meaning of financial statements
Objectives of the financial statements:
The basic purpose of the topic is a system of theoretical issues on the financial data of
Hoa Phat Group Joint Stock Company to analyze the basic financial statements on the
analysis of corporate financial statements in the market economy, relying on Hoa Phat Group
Joint Stock Companyand analyzing the causes affecting the company's financial situation and
assessing the reality. the state of the financial situation at Hoa Phat Group Joint Stock
Company, specifying the advantages and limitations that exist in terms of the financial
situation at the Company. From there, propose solutions to improve and propose financial
capacity at Hoa Phat Group Joint Stock Company.
The meaning of financial statements:
Financial activities have a direct relationship with production and business activities.
Therefore, all production and business activities have an impact on the finances of the
business. On the contrary, good or bad financial situations have a driving or inhibiting effect
on the production and business process. Therefore, the analysis of financial statements is
important for the business owner himself and external objects related to the finances of the
business.
For business managers:

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Financial research activities in the enterprise are called internal financial analysis, so
complete information and understanding of the business, financial analysts in the business
have many advantages to be able to analyze finance best. Therefore, corporate managers
must also pay attention to various goals such as creating jobs for workers, improving the
quality of goods and services, lowering the lowest costs and protecting the environment.
Businesses can only achieve this goal when the business is profitable and pays off debts.
Therefore, more than anyone else, business managers need to have enough information to
implement financial balance, in order to assess the past financial situation to conduct

financial balance, profitability, solvency, repayment of debts, financial risks of the business.
Besides, orienting the decisions of the financial management board, investment decisions,
financing, analysis of dividend yields.
For investors:
Their concerns are primarily in payback, profitability, capital insolvency and risk.
Therefore, they need information about financial conditions, operating situation, business
results and the potential of the business. Investors are also interested in managing
management. This creates safety and efficiency for investors.
For lenders and suppliers of goods to businesses:
Their concerns are directed at the ability of the business to repay debts. By analyzing
the financial statements of the business, they pay special attention to the amount of money
and assets that can be converted into money quickly so that they can compare and know the
instant solvency of the business.
For state agencies such as tax and finance agencies and employees for enterprises:
The analysis of financial statements will show the financial situation of the business.
On the basis that it will accurately calculate the tax rate that the company must pay, the
Finance Agency and the governing body will take more effective management measures.
Besides business owners, investors,... Workers have the same basic information needs as they
do because it relates to rights and responsibilities, to their current and future customers.
From the above meanings, we see that the analysis of financial statements plays an
important role for every manager in the market economy that is closely related to each other.
It is a useful tool used to determine economic value, assess the strengths and financial
weaknesses of the business. On that basis, discover objective, subjective causes that help
each manager choose and make decisions that are consistent with the goals they are
interested in. Therefore, financial statement analysis is a powerful tool for business managers
to achieve the highest results and efficiency.
2. Sources of information used for financial statement analysis
2.1. Sources of information from the balance sheet

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Concept: A balance sheet is a composite accounting statement that reflects the general
situation of the assets of the enterprise at a certain time, in the form of currency according to
the value of assets and sources of asset formation.
Meaning: The CSC table is an important document to analyze and evaluate in a general
way the situation and business results, the level of capital use and the financial and economic
prospects of the enterprise.
By reviewing the "Assets" section, it allows for a general assessment of the capacity and
level of use of assets. Legally, the asset portion represents the "potential number" that the
enterprise has the right to manage and use long-term associated with the purpose of obtaining
future benefits. When considering the "Capital" section, economically, users see the financial
situation of the business. Legally, the user sees the responsibility of the enterprise for the
total amount of capital registered for business with the State, the number of assets formed by
bank loans, borrowing other objects as well as the responsibility to pay debts to employees,
with shareholders, with suppliers, with the Budget.
Content and structure: The SSC is structured in the form of a balance sheet, full of
accounting accounts and arranged targets according to management requirements. The
financial statement consists of two parts: the asset part: reflecting the value of the assets and
the capital part: reflecting the source of asset formation. The two parts "Assets" and "Capital
Sources" can be divided between the sides (left and right) or one side (top and bottom). Each
section has a total number and the total number of the two parts is always equal because the
same amount of assets reflects the same amount of assets according to the accounting
equation principle.
2.2. Sources of information from business results reports
The report on business results reflects the situation and results of the business activities
of the business, including results from the main business activities and results from other
financial activities and activities of the business.
The report on business results has the following effect:
- Analyze and evaluate the implementation of the plan, estimate of production costs,

capital price, revenue of consumption of goods products, cost situation, income of
other activities as well as the corresponding results of each activity
- Assess the development trend of the business, take measures to exploit the potential as
well as limit overcoming future existences.
* Information provided by the business results report The business results report the
business results report presents information on revenues, expenses, profits (or losses) arising
from ordinary business activities and activities outside the normal business activities of the
enterprise during a business period, division of the cost of corporate income tax and the net
profit of the enterprise in that period.
2.3. Sources of information from the cash flow statement

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Cash flow statements are a component of the corporate financial reporting system,
providing information that helps users assess changes in net assets, financial structure, ability
to convert assets into money, solvency and ability to generate cash flows during the operation
of the business.
The cash flow report is used to check the status of the cash flow of the enterprise, assess
previous predictions about cash flows; examine the relationship between profitability and net
cash flow and predict the likelihood of the magnitude, duration, and speed of future cash
flows, thereby providing information to management entities.
* The main effect of the cash flow statement is:
- Provide information to assess the ability of the business to generate money, cash
equivalents and needs in the use of funds.
- Provide information to the subjects using the analysis report evaluating the time as
well as the certainty of generating funds in the business.
- Provide information on sources of money formed from business activities, financial
investment activities to assess the impact of such activities on the financial situation of
the business.

- Provide information to assess the solvency and determine the money needs of the
business in the next period of operation.
3. Methods in financial statement analysis
3.1. Comparison method
This is a method that is widely used in economic analysis in general, financial analysis
in particular. When using the comparison method, it is necessary to pay attention to the
following issues.
First, comparison conditions.
- At least two quantities must exist.
- Quantities (indicators) must ensure comparison. It is the unity of economic content, on
the method of calculation, the agreement on time and units of measurement.
Second, identify the original root comparison of comparative origin depending on the
purpose of the analysis. Concrete:
- When determining the trend and speed of development of the analysis target, the
original comparison is determined as the value of the analysis target in the previous
period or a series of previous periods (the previous year). At this time, we will
compare this mid-term target with the previous period, this year with the previous year
or a series of previous periods. To detect the law of the transformation of each
financial phenomenon, analyze based on the data source of many years of that
phenomenon and choose a typical year to root, comparing the remaining years with
the original year, based on the law of large numbers to consider fluctuations over time,
If it is cyclical, it means the law of volatility.

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-

When assessing the implementation of the set objectives and tasks, the original
comparison is the number of plans, estimates and norms of the analytical targets. At

that time, make a comparison between the reality and the plan, estimate, norms of the
target. This result not only examines the implementation of the objectives but also
assesses the quality of forecasting and financial planning.
- When determining the position and ranking of enterprises, the original comparison is
determined as the value of the average financial indicators of the industry, the
standards and rating standards of the evaluation organization, professional ranking
published or analytical indicators of competitors.
Third: The commonly used comparison technique is absolute numerical comparison, relative
numerical comparison, vertical comparison, horizontal comparison...
- Compare by absolute number to see the absolute numerical fluctuation of the
analytical indicator (CTPT)
- Compare by relative numbers to see how much the rate or rate of increase or decrease
of CTPT increase or decrease. In fact, it is common to use relative numbers to study
indicators in relation to other indicators to evaluate the economic relations of
enterprises through the ratio system. In order to assess the financial situation and
operational efficiency of enterprises if only comparing the information available in the
financial statements of enterprises is not enough but it is necessary through the
analysis of financial ratios (coefficients) and economic indicators. Financial ratios
include: ratios reflecting solvency, operability, profitability, efficiency of using assets,
speed of capital rotation ... These indicators show the relationship between different
items in financial statements. When comparing financial coefficients or ratios, we can
give us more useful information.
- Vertical comparison (also known as vertical analysis technique) is the comparison by
the relative number of each department with the whole, or one part with another of the
whole to evaluate the structure, proportional relationship of the elements in the whole
with 2 or more components.
- Horizontal comparison (also known as horizontal analysis technique) is the
comparison of each indicator over time or in different dimensions that have
similarities.
3.2. Method of exclusion

The exclusion method is applied to determine the degree of influence of each
independent factor on the research target. When determining the effect of one factor on the
analytical indicators, it is assumed that the remaining factors do not change. This method
consists of two forms: the continuous replacement method and the difference number
method.
3.3. Application of Dupont financial model - ROA

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The Dupont financial model is often used to analyze the link between factors that affect
financial indicators to be analyzed. Thanks to the analysis of the relationship between the
factors, it is possible to detect the factor that has influenced the analytical target in a strict
logical sequence and the analyst will be aware of the causes and improve the possible
weakness.
The Dupont financial model is often used to analyze the return on total assets (ROA),
return on equity (ROE). If you analyze the return on assets (ROA), it takes the following
form:

From the above model it can be seen that, in order to improve the profitability of a coasset that the enterprise is using, corporate governance must study and consider what

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measures are available for the continuous improvement of the profitability of revenue and the
movement of assets.
Thus, financial analysis under the Dupont model has great significance for corporate
governance, not only evaluating business performance in a deep and comprehensive way, but
also fully and objectively evaluating the factors affecting business performance. Thereby, the
system of meticulous and authentic measures to strengthen the improvement of the business

management organization, contributing to constantly improving the business efficiency of the
business in the next business periods.
3.4. Balanced contact method
The balanced relationship method is the method based on the balance of quantity
between the two sides of the elements and of the business process. When factor indicators are
related to analytical indicators are expressed as totals or differences. The balanced contact
method is used to determine the influence by the difference of each factor between periods
(the actual period compared to the planned period, the current period compared to the
previous period), between independent factors.
4. Content of financial statement analysis
4.1. General analysis of the financial situation of the enterprise.
A general analysis of the financial situation is the consideration and general assessment
of the financial situation of the enterprise. This work will provide the user with information
about whether the financial situation of the business is positive or not. The general
assessment of the corporate financial situation is carried out through the following basic
criteria:
4.1.1. General assessment of the capital mobilization situation of enterprises
The fluctuation (increase or decrease) of the total capital sources at the end of the year
compared to the beginning of the year and compared to previous years adjacent is one of the
indicators used to assess the ability of enterprises to organize and raise capital in the year.
However, due to the increase and decrease of the capital of the enterprise due to various
reasons, the fluctuation of the total capital sources does not fully reflect the financial
situation of the enterprise, so when analyzing, it should be combined with the consideration
of the capital structure and the fluctuation of capital sources to have appropriate comments.
To analyze the growth trend of capital, the analysts used a method of comparing the
original relative number (yi/y0; i=1,2,...,n) to compare the growth rate over time of the total
capital with a fixed root period:

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To find out if the pace of capital growth (capital mobilization) is consistent between periods,
analysts use a relatively continuous numerical comparison method (yi/y(i-1)." From there,
contact the actual situation to assess the situation of capital mobilization of the enterprise.

4.1.2. General assessment of the level of financial independence of enterprises
The level of independence and financial autonomy of the enterprise reflects the ability
of the enterprise to make decisions about the financial and operational policies of the
enterprise as well as the control over such policies. To generalize the level of financial
independence of the business, analysts often use the following indicators:
Funding coefficient: is a criterion that reflects the financial self-assurance and the level
of financial independence of the business. This indicator indicates that, of the total capital
sources of the enterprise, equity accounts for some parts. The greater the value of the target,
the higher the financial self-assurance, the greater the level of financial independence of the
enterprise and vice versa, when the value of the target is smaller, the lower the financial selfassurance capacity of the enterprise, the level of financial independence of the business
decreases.

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Long-term asset self-financing ratio (or equity-to-long-term asset ratio): is an indicator that
reflects the ability to cover long-term assets with equity. This indicator is determined:

The higher the long-term TS self-financing coefficient, indicating that the greater the
equity invested in long-term assets. This helps the business to ensure itself financially but the
business efficiency will not be high because the capital invests mainly in long-term assets,
less used in the revolving business for profitability.
Fixed asset self-financing coefficient (Equity-to-fixed asset ratio): is a criterion that
reflects the ability to meet the fixed asset division (already invested) with equity.

Since fixed assets are long-term assets that mainly reflect the entire facilities and
techniques of the company, it is not easy to cede or liquidate, so in cases the company needs
to consider the most feasible option.
4.2. Analysis of financial structure and the situation of ensuring capital sources for
production and business activities
Financial structure analysis is the evaluation of the rationality of the capital structure in
relation to the asset structure of the enterprise. Analyzing capital funding policies helps the

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users of information to be aware of the capital mobilization policy in relation to the business
strategy of the enterprise.
For internal enterprises, financial structure analysis is the basis for corporate
managers to identify the strengths and weaknesses of the current financial structure, thereby
finding ways to achieve the optimal financial structure. In addition, analyzing financial
structures also helps business managers see financial risks, so that there are timely solutions
to take businesses away from unnecessary risks.
For those outside the business, they analyze the financial structure to assess the level
of credit risk before making a loan decision. On the other hand, analyzing the relationship
between capital and assets helps lenders assess their ability to compensate for debts in case
the business is at risk of bankruptcy. Or for state managers, analyze the financial structure of
enterprises to limit the instability of the economy due to inefficient enterprises and excessive
debt, there is a risk of default, bankruptcy.
Financial structure analysis includes:
-

Analysis of asset structure.
Analysis of capital structure.
Analyze the relationship between assets and capital sources.

4.3. Analysis of debt shape and solvency
The freedom to compete in the market economy is increasingly driving the developed
economy, financial relationships arise more and more, the diversity leading to the
appropriation of each other's capital in the market is often the case. Therefore, analyzing the
situation of receivable and payable debts is important in the process of detecting signs of
possible financial risks. In addition, in the market economy, most enterprises are self-reliant
in financial activities, collecting compensation and carrying out an expanded re-production
process, so that the analysis of receivable and payable debts is more important in providing
information about the receivable structure to come up with appropriate recovery measures.
At the same time, it is seen that the structure of payables introduce timely payment measures
to improve the efficiency of capital use.
 Analysis of receivable debts:
Analysis of receivables
Receivables of the enterprise include: Receivables of customers, upfront payments to
sellers, other receivables,... When analyzing receivables, using a vertical comparison method,

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take each specific receivables in turn divided by the total receivables to determine their
proportion of the total receivables:

In addition, in order to be specific and consider the change of each factor in the analysis
of asset structure, we can combine vertical and horizontal analysis, making an analysis of the
structure of each receivable amount similar to the asset structure analysis table template.
Through the analysis, it is possible for managers to come up with policies to recover
debts in a timely manner and in accordance with each receivable, reducing the amount of
capital misappropriated, contributing to improving business efficiency.
Customer receivable analysis

In receivables, receivables of customers often account for a large proportion and have
important implications for the asset situation of the business. When analyzing customer
receivables, analysts often compare the end-of-term number with the number of the
beginning of the period or through many times to see the scale and speed of fluctuations of
customer receivables, the structure of customer receivables. Through this, managers can
make appropriate decisions such as strengthening the supervision of receivables of each
customer, making appropriate promotional and discount policies for each specific audience,...
Customer acquisition analysis, analysts often use the following indicators:
 Number of rounds receivable to customers:

In it:
 Average customer receivable debt is calculated as follows:

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Net revenue derived from the target code 03 of the business results report. The target of
the number of rounds to be collected by customers said that in the analysis of how many
rounds of receivables are collected, the higher this target shows that the business recovers
goods in a timely manner, less capital is misappropriated. However, the number of rounds
receivable to customers is too high is also not good because it can affect the output of goods
consumed because the payment method of the business is too strict.
 The time of a rotation must collect customers:

This indicator indicates how long it takes to recover the debts that have to be collected
by the business. The shorter this target demonstrates that the faster the return of capital, the
less likely the business is to be misappropriated. On the contrary, the longer the time of a
rotation demonstrates that the slower the rate of capital recovery, the more capital the
business is being misappropriated. However, this quota is too short is also not good for
businesses because it is too rigid and inflexible, leading to poor consumption of goods. The

duration of the analysis period is calculated in years of 365 days.
When analyzing this indicator, analysts can compare the average collection period of
the analysis period with the original period to see the situation of debt recovery so that there
are debt recovery measures to contribute to stabilizing the financial situation.
- Analysis of liabilities:
Analysis of payables
The payables of the enterprise include paying the seller, having to pay employees,
having to pay loans,... When analyzing accounts payable, it is common to use a vertical
comparison method with the total payables, taking the value of each specific payable amount
divided by the total value of the payables, determining their proportion. The formula is
calculated as follows:

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In addition, to be specific and consider the change of each factor in the analysis of the
structure of liabilities, it is possible to combine vertical analysis and horizontal analysis,
making a breakdown of the structure of each payable amount similar to the form of the Asset
Structure Analysis Table.
Analysis of the amount payable to the seller
In accounts payable, having to pay the seller has important implications for the
solvency and reputation of the business. When the accounts payable to the seller are unable
to pay, signs of financial risk appear, the reputation of the business decreases. When the
payments to sellers are paid on time, the reputation of the business is enhanced, contributing
to improving the brand. When analyzing the situation of paying the seller, we use the
following indicators:
 Number of spins payable to the seller:

In it:
 Average customer receivable debt is calculated as follows:

The cost of goods sold is derived from the target code 11 of the business results report.
The round-trip target payable to the seller reflects in the analysis of how many rounds the
seller pays. This target is higher, proving that the enterprise pays the goods in a timely
manner, less misappropriation of the capital of the objects. However, if this target is too high,
it is not good because it is possible that the business is overpaying money always pay ahead
of time, affecting
Effective use of capital.

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 The time a spin must be paid to the seller:

The shorter this target demonstrates the faster the ability to pay money, the less the
business will misappropriate the capital of its partners. On the contrary, this target is higher,
the higher the business shows that the ability to pay slowly, the amount of capital occupied
by the enterprise is more can affect the reputation and brand of the business in the market.
The duration of the analysis period is 365 days.
When analyzing this target, it is possible to compare the time of an analysis cycle with
the original period to see the situation of payment of debts of the enterprise so that there are
measures to mobilize capital, contributing to stabilizing the financial situation.

Solvency analysis
Solvency is the ability to reflect the financial potential of the business to pay off debts,
these debts include both short-term and long-term debt. Therefore, solvency analysis not only
helps corporate managers have appropriate financial plans to improve the efficiency of
current and future financial activities, but also provides useful information that investors and
lenders are interested in assessing the financial quality and operational efficiency of the
business to bring. Decide whether to invest or lend money. When assessing solvency, the

analyst usually through the data on the Balance Sheet and The Financial Statement
Explanation is expressed through indicators such as current solvency coefficient, fast
solvency, general solvency,... After calculating these indicators, make a table for evaluation
by comparing the analysis period and the planning period to comment and make the
necessary assessments.
General solvency analysis: General solvency coefficient: is a indicator that reflects the
general solvency of the enterprise in the reporting period. This indicator indicates: with the
total number of assets available, the enterprise is guaranteed to cover the liabilities or not. If
the target value "General solvency coefficient" of the enterprise is always ≥1, the enterprise
ensures general solvency and vice versa; this value <1, the enterprise does not guarantee the
ability to cover debts. The smaller the value of the "General Solvency Coefficient" than 1,
the more the business loses its solvency.

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This indicator also indicates whether or not all existing assets will ensure the ability to
pay the liabilities of the enterprise. This target is higher, proving that the solvency of the
business is good, which is an important factor attracting lenders to lend. Conversely, if this
target is too low and prolonged, it can lead to bad prospects for the business of dissolution or
bankruptcy.
Short-term solvency analysis: Short-term solvency analysis is an assessment of the
ability to meet debt payment obligations for a period of less than one year from the date of
incurred by the business. Short-term debts include accounts payable to sellers, payable to
employees, short-term loans,... The short-term solvency analysis includes the following
contents: Short-term debt solvency coefficient, fast solvency coefficient, and instant solvency
coefficient.
 Short-term debt solvency coefficient:

This indicator indicates whether or not the total value of short-term assets currently

exists that the business guarantees short-term solvency. The higher this indicator shows the
ability of the business to pay short-term debt as possible and vice versa. This high indicator
shows that a part of the short-term asset is invested from stable capital sources, indicating
autonomy in financial activities. If this target is low, i.e. short-term assets do not compensate
for short-term debt, indicating that the business is having difficulty repaying debts due to
adversely affect business performance.
 Quick solvency factor:

This indicator measures the liquidity of the number of times that cash, receivables and shortterm financial investments guarantee short-term debt. Here, inventory is excluded when
calculating the quick solvency factor because they have a longer conversion time to money

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than the remaining short-term assets. This indicator, if too high and prolonged, is not good,
can lead to reduced capital efficiency. But this indicator is too low, lasts as long as possible
because there may be financial risks, the risk of bankruptcy may occur.
 Instant payment coefficient (Instant solvency coefficient):

This indicator indicates the immediate solvency of money for overdue and due debts at
any time. This high target proves the solvency of the business is abundant, but if it is too high
and prolonged, it shows that the business is having a large amount of idle money, stagnant
leading to low capital efficiency. This low and prolonged quota indicates that the business
can no longer afford to repay the debt.
Long-term debt solvency analysis: Long-term solvency analysis is an assessment of
the ability to meet debt payment obligations for a period of more than one year. Long-term
debts include accounts payable to sellers, workers' payables, long-term loans,... Long-term
solvency analysis includes the following contents: long-term debt solvency coefficient and
interest payment ability coefficient.
 Long-term debt solvency ratio:

This indicator indicates the ability to pay long-term debt for the entire net value of fixed
assets and long-term investments,... This target is as high as possible to demonstrate the longterm solvency of the business in the future, contributing to the stability of the financial
situation. If this target is low, it is not possible to confirm that the long-term solvency in the
future of the business is bad. However, businesses still need to take early action on this
target.
 Interest payment capacity ratio:

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This indicator represents the level of profit guaranteed for the ability of the enterprise to
pay interest. This coefficient proves the ability to offset interest expenses as much as
possible, thereby increasing the credibility of the business, lenders are willing to decide to
provide capital to the business.
Net working capital analysis: Net working capital is the difference between regular
capital and fixed asset and long-term investment value.
Net working capital = Regular capital sources – Fixed assets and long-term investments.
Indicators showing the origin of working capital or external analysis of working capital:
-

-

-

-

-

If Net Working Capital < 0 (i.e. Regular Capital – Fixed Assets and Long-Term

Investments < 0) means that regular capital is not sufficient to fund Fixed Assets and
Long-Term Investments, this shortfall is offset by a portion of temporary capital or
Short-term Debt. Financial balance in this case is not good because the business is
always under pressure on short-term debts. Businesses need to make long-term
adjustments to create a new balance towards sustainability.
If Net Working Capital = 0 (i.e. Regular Capital – Fixed Assets and Long-Term
Investments = 0) means that regular capital is sufficient to fund all fixed assets and
long-term investments. The financial balance in this case is more progressive and
sustainable but also unsafe and there is a risk of loss of sustainability.
If Net Working Capital > 0 (i.e. Regular Capital – Fixed Assets and Long-Term
Investments > 0), in this case The regular capital is not only used to finance Fixed
Assets and Long-Term Investments but also used to partially finance the working
assets of the enterprise's financial balance is very good and safe at the moment. Full.
However, in order to assess the long-term financial balance, we need to consider
working capital over the time series to estimate the prospects for future financial
balance. Analyzing too many periods of net working capital has the following cases:
If the net working capital decreases and is negative: the assessment of the financial
safety and sustainability of the Enterprise decreases, as the enterprise must use
temporary capital to finance fixed assets. Businesses will be under pressure to make
short-term payments and risk bankruptcy if they do not pay on time and have low
business efficiency.
If net working capital is positive and increases over the years: assess the safety level
of the Enterprise is good because not only Fixed Assets but also Working Assets are
funded with regular capital. However, for a thorough analysis it is necessary to
consider the parts that constitute regular capital sources. In order to achieve such a
safe level, enterprises must increase equity sources or increase long-term debt. If the
owner is increased, it will increase the financial independence of the enterprise but
reduce the effect of debt leverage. On the contrary, increasing long-term debt, the
financial leverage effect will work but besides, it is at risk of using debt. If working

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-

capital is positive and increased due to the continuous liquidation of fixed assets
reduces the size of fixed assets, it is not possible to conclude that the financial safety
may be that the enterprise in the recession period must liquidate fixed assets.
If net working capital is stable: That is, net working capital does not increase, does not
decrease or has increased or decreased, it indicates that the activities of the Enterprise
are in a stable state. However, in this case it is also necessary to consider the source of
funding to obtain that stability. In addition, Net Working Capital is also calculated as
the difference between Liquid Assets and Short-Term Investments and Short-Term
Debt:

Net working capital = Liquid assets and Short-term investments – Short-term debt
This balance sheet clearly shows how net working capital is used: Working capital is
allocated to inventory receivables or items such as money. It emphasizes flexibility in the use
of Working Capital in the Enterprise. Therefore, the analysis according to this indicator is an
emphasis on the internal analysis of the enterprise. In addition, the relationship between the
elements of Liquid Assets and Short-Term Investment and Short-term Debt also
demonstrates the solvency of the Enterprise.
4.4. Analysis of production and business performance of enterprises
Business efficiency is an integrated economic indicator that reflects the level of use of
resources and finances of enterprises to achieve the highest efficiency. Analyzing business
performance helps interested subjects measure the profitability and effectiveness of business
management of the business. Therefore, improving business efficiency is one of the
extremely important measures of businesses to promote a high-growth economy in a
sustainable way.
Business performance analysis is the process of looking at the relationship between the

output and the inputs, including the following contents: an assessment of asset utilization
efficiency including short- and long-term, profitability analysis, investment performance
analysis, and capital efficiency analysis.
4.4.1. Analysis of asset utilization efficiency
Asset utilization efficiency analysis not only analyzes the efficiency of total asset use
but also analyzes the performance of short- and long-term assets by building and analyzing
aggregate, detailed indicators suitable for each asset group. From the above analysis, it is
possible to introduce measures to improve the efficiency of using assets, making the most of
the capacity of the asset.
When analyzing the effectiveness of the use of assets often use the following indicators:

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 Performance of total assets:

This indicator indicates the operation of the asset and the ability of the business to generate
sales through the use of assets. This indicator is higher and demonstrates that the asset is used
effectively, contributing to increasing revenue, facilitating increased profits. But if this target
is too low, the unit is wasting capacity, businesses need to take measures to improve.
 The cost of assets compared to net revenue:

This indicator indicates that in an analysis period, the enterprise obtains a net revenue, how
many investment assets are needed, this target is lower to show that the enterprise uses assets
effectively, saving assets.
 Inventory rotation:

This indicator said that in the analysis of how many rounds of investment capital for
inventory spins, this target is higher to show that the inventory is constantly moving that is a
factor to increase revenue, contributing to increasing profits for businesses.

4.4.2. Profitability Analysis
 Ros-Return on Sales (ROS- Return on Sales) analysis:

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Revenue has a direct impact on the final profitability of the business, therefore, to
increase profit after tax, it is necessary to maintain the growth rate of revenue faster than the
rate of increase of costs then to achieve sustainable development.
This target reflects with 100 vnd of net revenue, how much profit after tax. The higher
this target, the higher the profitability of capital, the more the business controls costs. For
managers, this is an important factor to decide whether to scale up production and attract
outside investment.

 Return on Investment (ROI) analysis
Analyzing the profitability on investment capital is the basis for managers in the
enterprise to have an overview of the equity and loans of the business. From there, it is
possible to make a decision whether to continue borrowing more money to invest in the
business or raise capital from shareholders. This indicator is determined as follows:

This target indicates how much capital invested in the business can bring to the
business. At the same time, compare this year with the previous year, compare with
businesses in the same industry to assess the efficiency of using investment capital.

 Return on Assets (ROA) analysis:

This target indicates how much capital invested in the business can bring to the
business. At the same time, compare this year with the previous year, compare with
businesses in the same industry to assess the efficiency of using investment capital.

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The basic profitability on total assets reflects the efficiency of asset use in the
enterprise, demonstrating the level of management and use of assets. This indicator indicates
how much profit a unit of assets used in the business process generates on average before tax.
This target indicates how much profit in the analysis period, enterprises investing 100
VND of assets will earn. This target is higher and proves that the efficiency of using the
assets of the enterprise is good, contributing to improving the investment capacity of the
enterprise.
According to the Dupont model, the ROA indicator is also analyzed as follows:
From the above model it can be seen that the higher the number of turnovers of the
asset, the greater the production capacity of the asset. In order for the profitability of the asset
to be greater, it is necessary to improve the number of asset turnovers, on the one hand
increase the size of net revenue, on the other hand, use reasonable savings of assets, make the
most of the invested asset capacity, reduce inventory and unfinished products. In addition,
the return on total assets also depends on two factors: profit after tax and net revenue, these
two factors are related in the same direction. Thus, in order to increase the size of net revenue
in addition to reducing revenue deductions, expanding market share, at the same time
strengthening the ability to control costs in production and consumption, lowering production
costs or improving product quality to increase the selling price, Increased revenue leads to
increased business profits.

 Return on Equity (ROE) analysis:

This indicator indicates how much profit will be generated after tax for every 100 vnd
of equity. This target is higher, making it possible for managers to raise new capital in the
financial markets to finance the growth of the business. On the contrary, if this target is

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small, it proves that business efficiency is low, businesses will have difficulty attracting
investment capital. However, high return on equity is not always favorable because
businesses cannot take advantage of business leverage from external sources of loans.
 According to the Dupont model, the ROE is modified as follows:

Similar to the ROA target stated above, when analyzing the factors affecting the
profitability of capital, in order for ROE to be high, the profit-to-revenue ratio must be high,
the number of rounds
High property spin,... Thereby introducing measures to improve the efficiency of each
factor contributing to accelerating the return on equity.
4.5. Analysis of cash flow situation
Analyzing the flow of money based on the cash flow report will help managers know
where the money of the business is generated and what it is used for. Thereby predicting the
future amount of money of the business, knowing the current payment capacity as well as
knowing the fluctuations of each target and each item on the cash flow report.
When analyzing the Cash Flow Statement, analysts often consider the volatility of each
item and each item in each activity affecting the volatility of both net cash flow flow during
the period. Thereby making appropriate comments and recommendations to promote the
amount of money flowing in each activity as well as for net cash flow in the enterprise.
 At the same time, analysts also calculate and compare the indicators:

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From the analysis of the above indicators will show how much the ability to generate
money from each activity contributes a percentage to the total net amount circulated during
the period of the business. What's more, by analyzing those indicators, it will show which of
the money generated from the activity is primarily in those three activities of the business.

On the other hand, depending on the characteristics of the business, the requirements of the
person using the information will analyze in depth one of the aspects of the cash flow
statement.
Table 2.3. Analysis of cash flow statements

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