completing financial management at an thuan boat company limited

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MINISTRY OF EDUCATION AND TRAINING

<b>HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY AND EDUCATION FACULTY FOR HIGH QUALITY TRAINING </b>

<b> CAPSTONE PROJECT </b>

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<b>MINISTRY OF EDUCATION AND TRAINING </b>

<b>HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY AND EDUCATION FACULTY OF ECONOMICS </b>

System : Regular Undergraduate Program

<i><b>Ho Chi Minh City, November 2023</b></i>

<b>COMPLETING FINANCIAL MANAGEMENT AT AN THUAN BOAT COMPANY LIMITED </b>

Instructor : MBA Pham Hieu

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Finally, I would like to express my gratitude to the leadership and staff at the internship unit, An Thuan Boat Company Limited, for their support and for providing me with the necessary conditions throughout the internship and the completion of my dissertation.

Due to limitations in time, knowledge, and my own practical experience, the thesis cannot avoid errors. Therefore, I would like to receive your comments and suggestions to make this thesis more complete.

Sincerely thank!

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<b>ABBREVIATIONS USED </b>

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<b>LIST OF IMAGE AND FIGURE </b>

Image 1. 1: Business license registered for the 6th change of An Thuan Boat

Company Limited ... 5

Image 1. 2: Organizational structure of An Thuan Boat Company Limited ... 7

Image 1. 3: Organizational structure of the financial management apparatus of An Thuan Boat Company Limited ... 9

Image 1. 4: Computer accounting bookkeeping cycle at the company ... 13

Image 1. 5: Login interface of SMART PRO software ... 14

Image 2. 1: Organizational chart of financial management in the company ... 23

Image 2. 2: Corporate financial planning process ... 26

Image 4. 1: Short-term Financial Planning Process for An Thuan Ship Company Limited ... 71

Image 4. 2: Financial Forecasting Process Using the Percentage of Revenue Method ... 76

Figure 3. 1: Cash and cash equivalents over the years of An Thuan Boat Company Limited ... 48

Figure 3. 2: Receivables over the years of An Thuan Boat Company Limited ... 50

Figure 3. 3: Capital structure of An Thuan Boat Company Limited in the period 2020 - 2022 ... 52

Figure 3. 4: Profitability ratio of An Thuan Boat Company Limited from 2020 - 2022 ... 61

Figure 3. 5: Comparison of profitability ratio between An Thuan Boat Company Limited and Song Cam Shipbuilding Joint Stock Company in 2022 ... 61

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<b>LIST OF TABLE</b>

Table 3. 1: Results of implementing the 2022 financial plan ... 43

Table 3. 2: Cost estimate sheet for the fourth quarter of 2022 ... 44

Table 3. 3: Payment cycle at An Thuan Boat Company Limited... 46

Table 3. 4: Asset structure of An Thuan Boat Company Limited over the years .... 47

Table 3. 5: Cash flow from the company's operating activities over the years ... 49

Table 3. 6: Changes in the capital structure of An Thuan Boat Company Limited over the years ... 53

Table 3. 7: Results of production and business activities of An Thuan Boat Company Limited over the years ... 54

Table 3. 8: Liquidity ratio of An Thuan Boat Company Limited from 2020 - 2022 56

Table 3. 9: Operational efficiency ratio of An Thuan Boat Company Limited from 2020 - 2022 ... 57

Table 3. 10: Debt management ratio of An Thuan Boat Company Limited from 2020 - 2022 ... 60

Table 3. 11: Dupont analysis of An Thuan Boat Company Limited ... 63

Table 4. 1: Proposed debt recovery deadlines for An Thuan Boat Company Limited ... 73 Table 4. 2: Estimated Balance Sheet for Income and Expenditure in 2023 ... 75 Table 4. 3: Percentage of average revenue of indicators of An Thuan Boat Company Limited ... 78 Table 4. 4: Forecasted Income Statement for the year 2023 of An Thuan Boat Company Limited ... 78 Table 4. 5: Forecasted Balance Sheet for the year 2023 of An Thuan Boat Company Limited ... 79

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Table 4. 6: Forecasted Balance Sheet for 2023 after adjustment by An Thuan Boat Company Limited ... 81

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<b>CONTENTS </b>

<b>INTRODUCTION ... 1 </b>

1. Reason for choosing the topic ... 1

2. Objectives of the study ... 2

5. Structure of the thesis ... 3

<b>CHAPTER 1: OVERVIEW OF AN THUAN BOAT COMPANY LIMITED... 4 </b>

1.1. History of formation and development ... 4

1.2. The business sectors ... 7

1.3. Organizational structure and functions and tasks of departments ... 7

1.4. Organize the company's financial management apparatus ... 8

<i>1.4.1. Organizational structure of financial management apparatus ... 8 </i>

<i>1.4.2. Functions and duties of Accounting and Finance Department positions </i> ... 10

1.5. Accounting system ... 12

1.6. Strategy and development direction of the unit in the future ... 14

<b>CHAPTER 2: THEORETICAL BASE OF CORPORATE FINANCIAL MANAGEMENT ... 17 </b>

2.1. Enterprises, corporate finance, functions and roles of corporate finance ... 17

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<i>2.1.1. Concept of enterprise and corporate finance ... 17 </i>

<i>2.1.2. Functions of corporate finance ... 19 </i>

<i>2.1.3. The role of corporate finance ... 20 </i>

2.2. Corporate financial management ... 22

<i>2.2.1. Concept of corporate financial management ... 22 </i>

<i>2.2.2. Objectives of corporate financial management ... 24 </i>

<i>2.2.3. The role of corporate financial management ... 24 </i>

<i>2.2.4. Content of corporate financial management ... 26 </i>

<i>2.2.5. Evaluation indicators for financial management effectiveness ... 29 </i>

<i>2.2.6. Factors affecting the effectiveness of corporate financial management . </i> ... 35

<b>CHAPTER 3: CURRENT STATUS OF FINANCIAL MANAGEMENT AT AN THUAN BOAT COMPANY LIMITED ... 42 </b>

3.1. Preparation and implementation of the company's financial plan ... 42

3.2. Financial inspection and control ... 44

3.3. Analyze the financial management efficiency of An Thuan Boat Company Limited ... 47

<i>3.3.1. Analyze fluctuations and asset structure ... 47 </i>

<i>3.3.2. Analyze fluctuations and capital structure ... 51 </i>

3.4. Indicators to evaluate the results of the company's financial management activities ... 53

<i>3.4.1. Results of production and business activities in the period 2020 - 2022 . </i> ... 53

<i>3.4.2. Financial ratios of the company in the period 2020 - 2022 ... 56 </i>

<i>3.4.3. Financial situation in 2022 of the company according to the Z-Score model ... 66 </i>

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<b>CHAPTER 4: SOLUTIONS TO COMPLETE FINANCIAL MANAGEMENT </b>

<b>AT AN THUAN BOAT COMPANY LIMITED ... 68 </b>

4.1. General evaluation of the financial management at An Thuan Boat Company Limited ... 68

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<b>1. Reason for choosing the topic </b>

After many years of innovating policies to build and develop a multi-sector economy, small and medium-sized enterprises in Vietnam have grown increasingly strong, contributing to creating a part of jobs for society, contributing source of revenue for the State, and increasing the national GDP. At the Conference "Small and Medium Enterprise Sector with the EVFTA Agreement" held in 2021, according to Deputy Minister Tran Duy Dong, among the total number of currently operating enterprises, small and medium-sized enterprises accounted for 97%. Among them, the limited liability company type of business accounts for the largest proportion thanks to its advantages in operation and operation. Thereby showing that the role of this type of company occupies an important position in the construction and development of the Vietnamese economy.

For limited liability businesses, finding, mobilizing, and using capital effectively with low costs in limited resources is a top priority. However, these businesses often encounter many difficulties on the development path: difficulty accessing social resources to serve production and business, not having access to credit capital of banks, inability to accumulate and concentrate capital for investment, technological innovation, expansion of production scale, little linkage with large enterprises (Chu Thanh Hai, 2020); thin capital resources, limited input production factors, and limited access to technology (Nguyen Anh Tuan, 2019); the management of working capital, particularly cash and receivables is still inefficient (Handle, 2015). The cause of the above difficulties is partly due to a lack of financial resource management, not being aware of the important role of financial management, and business owners having a low level of risk tolerance. Therefore, their financial management practices are often considered poor, leading to frequent challenges and obstacles.

An Thuan Boat Company Limited is an enterprise operating in the field of water transport. Throughout the development process, the company has gradually improved its organization, company apparatus, and general management. As a result, the

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company's business operations have become more stable and have gradually developed. However, similar to other small and medium-sized companies, the company's financial management still has many shortcomings and lacks attention from leaders, so it cannot become a tool that takes on an important role in supporting the company to improve production and business capacity, operational efficiency, and competitiveness in the market. Realizing the urgency of the above issue for small and medium enterprises in general and An Thuan Boat Company Limited in

<b>particular, the author chose the topic: “Completing financial management at An </b>

<b>Thuan Boat Company Limited” as a graduation thesis topic. 2. Objectives of the study </b>

<i><b>2.1. General objective </b></i>

Based on the theoretical framework, this study provides a detailed analysis of the financial management situation at An Thuan Boat Company Limited, with the main focus on the period from 2020 to 2022. Subsequently, an evaluation process is conducted to measure the effectiveness of the current financial management system by calculating the company's financial indicators based on the financial reports during this period and comparing them with industry peers. The purpose is to identify existing issues and then implement measures to address the identified problems, contributing to improving operational efficiency and competitiveness with industry rivals.

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The thesis was conducted at An Thuan Boat Company Limited.

- Data analysis method: The thesis uses a combination of qualitative analysis methods and quantitative analysis methods such as descriptive statistics, statistical comparison, and general analysis to evaluate the current state of management. Financial management of An Thuan Boat Company based on financial criteria and indicators.

<b>5. Structure of the thesis </b>

The thesis structure includes 4 main contents:

Chapter 1: Overview of An Thuan Boat Company Limited

Chapter 2: Theoretical base of corporate financial management

Chapter 3: Current status of financial management at An Thuan Boat Company Limited

Chapter 4: Solutions to complete financial management at An Thuan Boat Company Limited

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<b>CHAPTER 1: OVERVIEW OF AN THUAN BOAT COMPANY LIMITED</b>

<b>1.1. History of formation and development </b>

- <b>Address: Hai Thanh Village, Thuan An Ward, Hue City, Thua Thien Hue </b>

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<b>Image 1. 1: Business license registered for the 6th change of An Thuan Boat Company Limited </b>

<i>(Source: Accounting - Finance Department, An Thuan Boat Company Limited)</i>

The company is a unit operating in the form of a limited liability company with two or more members and was granted business license number: 3300375090 by the Hue Department of Planning and Investment, issued on June 10, 2005. An Thuan

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Boat Company Limited was established after separating from the new shipbuilding and boat repair workshop of Hue Fisheries Development Joint Stock Company due to the business restructuring process in 2005. As a long-standing boat building and repair company trusted by many fishermen in Thua Thien Hue province to order shipbuilding, since its establishment, the company has always tried to invest in more equipment and improve staff capacity to improve the company's ability to build, convert, and improve ships.

In 2017, to ensure compliance with Decree 67 of the Government, the company expanded its shipbuilding and repair area to 3,000m², accommodating more than 40 ships at the same time. At the company, the workshops are invested in machinery, equipment, and technical conditions to be able to promptly meet many requests for repairing and construction ships of up to thousands of CVs. Some machines that can be mentioned include vertical and horizontal road systems, 7KW winch motors, and slope road systems with a maximum lifting capacity of up to 100 tons. Compared to before, a ship that fishermen ordered to build took more than six months to complete, but currently, each month the company can build 1-2 ships and convert about 10 ships with the support of modern machines and workers.

Since its establishment, the company has been engaged in both manufacturing and strengthening internal capabilities. The company meets the demand for the construction and repair of various types of boats, including wooden hulls, steel hulls, and hulls made of various aluminum alloys. All the company's boat construction and repair services are accepted by the fisheries inspection authorities, meeting market demands and gaining popularity among customers. In addition, An Thuan Boat Company Limited is a company operating in the field of waterway transport in Hue City, Vietnam. The company specializes in providing passenger and cargo transport services by boat on rivers and bays in the Hue area and surrounding areas. This company can provide services such as carrying tourists on the Huong River, Ben Ngu River, An Cuu River, and other famous attractions. Besides, the company can also provide cargo transportation services on boats in the region. An Thuan Boat Company Limited plays an important role in developing the tourism and waterway transportation industry in Hue, meeting the needs of tourists and businesses in the

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region.

<i>(Source: Accounting - Finance Department, An Thuan Boat Company Limited) </i>

<b>1.2. The business sectors </b>

Currently, the company operates in the following industries that have been updated on the national information system:

- Repairing and construction types of ships, floating structures, and water transport vehicles (Primary sector).

- Construction of sports and recreational boats.

- Trading in all kinds of materials and equipment for fishing.

- Trading in alternative production materials in the field of ships and boats.

- Watercraft rental services.

- Periodic repair and maintenance of boats and water transport vehicles.

- Restaurants, eateries, food stalls.

<i>(Source: Accounting - Finance Department, An Thuan Boat Company Limited) </i>

<b>1.3. Organizational structure and functions and tasks of departments </b>

The company's organizational structure model is based on the model of a limited liability company with two or more members.

<b>Image 1. 2: Organizational structure of An Thuan Boat Company Limited </b>

Board of Directors

Accounting Finance Department

-Engineering Department

Tractor Team

Carpentry - Welding Team

IronMechanical Electrical TeamMarketing -

-Bidding DepartmentDirector

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<i>(Source: Accounting - Finance Department, An Thuan Boat Company Limited) </i>

At the head of the apparatus is the Board of Directors consisting of 03 people, responsible for the management of the capital invested in the company. In particular, the Chairman of the Board plays the role of representing the Board in making management decisions, strategies, and development directions of the company.

The Director is the legal representative of the company, responsible for directing, operating, and deciding on issues in daily business operations and is responsible for the annual business results of the company.

The Accounting - Finance Department is responsible for monitoring and regularly updating newly issued policies, regulations, and tax laws to operate in accordance with the law. At the same time, the department prepares financial reports and provides timely advice to the Board of Directors and the Director. This department is also responsible for managing output costs, income, debt, and salary systems...

The Engineering Department takes on the main production and business role in the company. The department's structure consists of 3 groups: Tractor Team, Carpentry - Iron Welding Team, and Mechanical - Electrical Team. Each team is assigned specific tasks and responsibilities related to technical aspects, quality assurance, ship design drawings, and timely ship construction.

The Marketing - Bidding Department is responsible for understanding and expanding the customer base. It collects and completes documents to introduce and participate in bidding sessions organized by the government to bring projects to the company.

<i><b>1.4.1. Organizational structure of financial management apparatus </b></i>

Currently, the Accounting - Finance Department is in charge of all financial accounting work of An Thuan Boat Company Limited; it consists of 4 people, in which the department head is also the chief accountant, holding the role of organizing and directing all accounting and financial work occurring at the company. The

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remaining members are responsible for the following tasks: General Accountant, Payroll Accountant, Treasurer.

<b>Image 1. 3: Organizational structure of the financial management apparatus of An Thuan Boat Company Limited </b>

<i>(Source: Accounting - Finance Department, An Thuan Boat Company Limited) </i>

In general, the financial management apparatus of An Thuan Boat Company Limited is relatively simple and suitable for its current scale and resources. The Director is fully responsible for making decisions related to financial management in the company with the advice of the Accounting and Finance Department. The company has not had any decentralization or decentralization of power in the financial management process to relevant departments, so the operations of the financial management apparatus have not achieved optimal efficiency. In addition, simplifying the current financial management apparatus will cause financial forecasting and planning to encounter many difficulties and obstacles in the company's sustainable development process. For small businesses like An Thuan Company, combining the two accounting and finance departments into one functional department is most appropriate and reasonable for operations in the short term. But if they want to develop in scale sustainably, separating the functions and roles of the above two departments is necessary.

In addition, regarding the financial management information system, the Accounting - Finance Department is fully equipped with appliances, equipment, and machinery to serve the operational activities of employees. The company also regularly pays attention to and invests in specialized software, making the department's working process more convenient and professional. It can be seen that

Chief Accountant

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the financial management information system of An Thuan Boat Company Limited is used mainly for accounting activities at the company. In the current context of scale and resources, this system can help the company complete accounting tasks such as financial consolidation, cost accounting, or performing other accounting operations, tax operations... However, because the company's financial activities have not been focused on, the financial management information system is still relatively simpler than other companies.

<i><b>1.4.2. Functions and duties of Accounting and Finance Department positions </b></i>

<i>● Chief accountant </i>

The chief accountant is the person in charge of managing and supervising arising activities, checking and verifying sources of revenue and expenditure in the company; analyzing and forecasting future financial resources; coordinating with general accounting in performing periodic tax reports, tax declaration and finalization at the end of each quarter and year. In addition, the chief accountant is also the manager of the accounting staff; from there, improves work efficiency, maintains routines and general regulations when working in the department, and promotes all the strengths of each accountant.

The main duties of the chief accountant at the company include:

- Manage the activities of the accounting department.

- Prepare tax reports and work directly with tax authorities if there are problems.

- Supervise the settlement process.

- Participate in preparing quarterly and annual financial statements.

- Collect and process accounting information and data.

- Provide accounting information and data according to legal regulations.

- Ensure capital sources, check economic contracts.

<i>● General accountant </i>

In a company, the general accountant has the main function of synthesizing,

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processing, and checking economic transactions arising in the company, including:

- Accounting expenses, income, and other arising operations into the software.

- Monitor the company's debt and propose backup plans if necessary.

- Support the chief accountant in preparing tax reports and periodic financial statements.

- Store accounting data according to state regulations.

- Participate in coordinating inventory work.

<i>● Payroll accountant </i>

For a service-oriented company like An Thuan Company, the number of formal and temporary employees is substantial. Therefore, the payroll accountant plays a crucial role in closely controlling the documents used as a basis for salary calculations to ensure accuracy in determining wages for workers at the end of each period. At the end of the period, the payroll accountant will rely on attendance records and relevant documents to calculate the appropriate salary for each employee in the company.

Duties of payroll accountant:

- Record data and reflect fluctuations in quantity and quality of labor and working time.

- Carry out the work of calculating salary, insurance, personal income tax, bonuses, etc. for employees according to the current regime and distribute salaries to employees.

- Check the use of salary funds, union fees, insurance,... to control cash flow, and propose measures to improve salary funds.

- Prepare labor reports, payroll...

<i>● Treasurer </i>

The function of the treasurer in the company is to manage funds, monitor revenue and expenditure issues, and ensure transparency in the use of funds. The treasurer's duties include:

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- Pay for business transactions, save transaction information for verification in case of necessity.

- Control and manage activities related to revenue and expenditure.

- Handle financial risks, undertake inventory, and compare legal documents.

- Make full reports about cash funds and bank deposits.

<i>(Source: Accounting - Finance Department, An Thuan Boat Company Limited) </i>

The Company applies accounting standards and the Vietnamese business regime issued under Circular 133/2016/TT - BTC dated August 26, 2016 and circulars guiding the implementation of accounting standards of the Ministry of Finance in the preparation of financial statements.

Regarding accounting policy:

- The company's currency unit is the Vietnam Unit (VND).

- The company's annual accounting period according to the calendar year begins on January 1 and ends on December 31 of each year.

- Value-added tax is recorded using the credit method.

- Inventories are recorded at cost. The cost of inventories includes purchasing costs, processing costs and other directly related costs incurred to bring the inventories to their present location and condition. Inventories are accounted for using the regular declaration method. Inventory value is determined according to the weighted average method.

- Tangible fixed assets and intangible fixed assets are recorded at cost. During use, tangible fixed assets and intangible fixed assets are recorded at cost, accumulated depreciation, and residual value. The straight-line method of depreciation of fixed assets is based on the useful life of the assets as follows: buildings and architecture 5 - 40 years; machinery and equipment 5 - 15 years; transport vehicles 6 - 15 years; office equipment 3 - 8 years; computer software 3 - 8 years; other assets 6 years.

Regarding accounting form: The company uses computer accounting combined

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with book organization in the form of a general journal.

<i>Note: </i>

: Enter daily data

: Print books and reports at the end of the quarter and year

: Compare quarterly and annually

<b>Image 1. 4: Computer accounting bookkeeping cycle at the company </b>

<i>(Source: Accounting - Finance Department, An Thuan Boat Company Limited) </i>

Currently, the accounting software used at the company is SMART PRO software, a product of Nang Unit Software Company. The software supports accountants to quickly enter data thanks to the interface of only one input screen, not divided into multiple subsystems. While entering data, the software also supports opening multiple file categories at the same time and allows viewing and editing other terms. Besides, at the end of each period, the software will automatically transfer and determine business results; at the same time, when accountants render financial statements, the software will automatically check the financial statements if the Financial status statement is not balanced, comparing data between the Business Results Report and the accounts 911. In addition, there are many other support functions such as data storage and decentralization functions, inventory management

Accounting documents

Summary table of similar accounting

vouchers

Accounting ledger General journal General ledger Subsidiary ledger

Financial statement Management accounting report ACCOUNTING

SOFTWARE

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functions, cost extraction and allocation functions, and debt management functions.

<b>Image 1. 5: Login interface of SMART PRO software </b>

<i>(Source: Accounting - Finance Department, An Thuan Boat Company Limited) </i>

<b>1.6. Strategy and development direction of the unit in the future </b>

<i><b>● Strategic objectives </b></i>

An Thuan Boat Company Limited strives to become one of the leading

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enterprises in the field of building and repairing all types of sea transport vehicles in Thua Thien Hue province. Bring maximum work efficiency and maximize economic benefits for customers in the context of economic integration. Build a team of professional and courageous leaders; build a team of dynamic, enthusiastic and highly qualified employees.

An Thuan Company aims to:

- Average revenue growth: 20% per year

- Average profit growth: 25% per year

- Expand new industries, improve service quality

<i><b>● Mission </b></i>

The core values that An Thuan Company is pursuing are belief in people, creative spirit, team spirit and differences of company members. At An Thuan, the entire board of directors and employees have determined: An Thuan Boat Company Limited is a business but always values profession over the business; put responsibility first, wholeheartedly focus on the fishermen's trips to the sea; try our best to help fishermen improve their ability to exploit and catch seafood.

<i><b>● Development direction </b></i>

In the coming years, An Thuan Boat Company Limited will focus all resources on developing the main business of building and repairing all types of waterway vehicles. Increase investment in technical facilities towards the goal of building iron-hulled ships with large capacity. As follows:

<i>First, consolidate the existing market. In the current integration trend, many </i>

opportunities open up as well as more risks and challenges, causing difficulties for small and medium enterprises. Therefore, to survive and develop, An Thuan Company urgently has to make decisions to maintain and consolidate the market share it previously captured. To do this, the company must diversify the products and services provided to the market. Regarding the quality and price of services provided, the company always tries to bring the best quality services and reasonable prices to customers. On the other hand, the company will optimize business processes to

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reduce costs and increase competitiveness in the market. At the same time, it promotes the process of quick capital turnover and limits backlog and misappropriation of capital.

<i>Second, manage existing human resources. The company has policies to </i>

reorganize and streamline the staff such as pay based on work results, voluntary resignation; and recruiting, training and developing technical staff. At the same time, the company is also building and developing a professional management team, developing the employee management capacity of department heads in the company.

<i>Third, consolidate and develop current marketing and bidding capacity. </i>

Currently, the company's marketing and bidding process is still relatively simple, and there are not many mechanisms to promote customer development. Therefore, the company aims to develop and complete marketing and bidding processes such as the bidding process, contract implementation and debt payment process, and brand development process... In addition, the company is ready to train a team of marketing and bidding personnel who understand the shipbuilding and repair consulting market.

<i>(Source: Accounting - Finance Department, An Thuan Boat Company Limited) </i>

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<b>CHAPTER 2: THEORETICAL BASE OF CORPORATE FINANCIAL MANAGEMENT </b>

<b>2.1. Enterprises, corporate finance, functions and roles of corporate finance </b>

<i><b>2.1.1. Concept of enterprise and corporate finance </b></i>

According to the 2014 Enterprise Law: “An enterprise is an economic organization with its own name, assets, a stable transaction office, and business registration according to the provisions of law to carry out activities business". In particular, business is "the continuous implementation of one, several or all stages of the investment process, from production to consumption of products or provision of services on the market for profit".

Nowadays, the market economy is increasingly developing, businesses have to face more and more fierce market competition and elimination. The challenges in their operations create significant pressure on enterprises, forcing them to manage, adapt, and operate more efficiently, especially in the utilization and management of their financial resources.

In reality, there are various definitions of the concept of corporate finance in financial theories.

Corporate finance is concerned with three areas namely capital budgeting, capital structure and net working capital management. Among them, capital budgeting is the process of forming and managing costs for long-term investments; capital structure is the ratio between debt financing sources such as short-term and long-term debt, and equity capital; and the term net working capital is used to describe the difference between current assets and current liabilities (Stephen A. Ross, 2010).

In the same vein, corporate finance is a system of value transfer flows that reflect the movement and transformation of financial resources in the distribution process to establish or utilize monetary funds to support the business production activities of the enterprise. The movement of corporate monetary funds is an external manifestation of corporate finance (Tran Thi Hoa, 2014).

Similarly, corporate finance is the process of establishing, distributing, and

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utilizing a business's monetary funds. This process is associated with economic relationships that arise throughout the business's operations, contributing to achieving the business's goals (Nguyen Minh Kieu, 2014).

According to the definition provided by the Ministry of Finance (2014), the term corporate finance describes "monetary funds in the process of establishing, distributing, using, and mobilizing associated with enterprise operations". In general, in essence, corporate finance has an economic relationship with the creation and use of an enterprise's monetary fund in the form of value arising during the enterprise's operations.

Thus, although there are differences between the concepts of corporate finance among authors, there is still a general consensus that corporate finance is a system of value circulation cycles associated with Economic relationships, reflecting the mobilization of financial resources, creation and transformation of monetary funds during the business operations of the enterprise.

Furthermore, financial relationships are also intertwined with corporate financial activities. For each type of business and different forms of capital ownership, financial relationships in corporate finance exist in various forms. However, overall, corporate financial relationships often include economic relationships expressed and measured through value metrics. Specifically:

<i>● Financial relationships between enterprises and the State </i>

Through the State providing capital for business operations, it implies that the State is the owner of the enterprise; and the enterprise fulfills financial obligations to the State, such as paying fees, charges, taxes, and mandatory contributions.

<i>● Financial relationships between enterprises and other entities </i>

Through relationships such as payment relationships and material rewards and punishments in providing goods and services to entities (suppliers, customers, etc.) or in lending to and borrowing from banks, credit institutions, and financial institutions...; payment relationships in capital investment in businesses or other economic organizations; financial relationships in funding social organizations.

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<i>● Financial relationships within the internal structure of the enterprise </i>

Through the financial relationship between businesses and employees such as payment of salaries, bonuses, fines..., payments between departments within the business, relationships among investors, owners, and shareholders in profit distribution...

Financial activities and financial relationships always coexist and are interconnected, all aiming toward the common economic and financial goals of the enterprise.

<i>(Source: Tran Dinh Tuan, 2008) </i>

<i><b>2.1.2. Functions of corporate finance </b></i>

Corporate finance needs to fulfill the following basic functions to facilitate the smooth operation of the business production and operations. Specifically:

<i>● Capital funding function for business operations </i>

Business capital is a prerequisite for the activities of businesses; therefore, to meet the capital needs for production and business activities, corporate finance needs to perform the function of establishing sources of funds for business. Corporate finance needs to calculate capital requirements, mobilize, select appropriate capital sources and use them for the right purpose and nature to maximize the efficiency of capital utilization.

For small and medium-sized enterprises with relatively low initial capital investment, it requires maximizing the mobilization of various capital sources to meet investment portfolios. At the same time, the utilization of capital also requires to be done effectively.

<i>● Director and monitoring functions to ensure effective business operations </i>

Through financial activities such as income and expenditure management, corporate finance monitors the financial situation to ensure funding for business operations. In addition, by analyzing the proportion, structure of capital sources, capital utilization corporate finance assists administrators in accurately evaluating

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capital funding in line with the characteristics of business operations. Along with that, corporate finance can also examine compliance with financial discipline within the company concerning relevant parties through financial relationships with suppliers, customers, the government, and employees.

<i>● Business results distribution function </i>

The function of distributing business results is evident in the financial relationships between businesses and other entities such as the government, suppliers, shareholders, employees, etc. Corporate finance must ensure the preservation and development of the business's capital. This function also demonstrates the comprehensive nature of corporate finance throughout the business operation, allowing administrators to calculate investment and business efficiency by comparing output results with the input factors.

<i>● Forecasting function </i>

In addition to the mentioned functions, corporate finance also supports businesses and government regulatory agencies in forecasting the development trends of enterprises.

<i>(Source: Bui Huu Phuoc, 2020) </i>

<i><b>2.1.3. The role of corporate finance </b></i>

<i>● Tool to exploit and attract financial resources to ensure capital needs for </i>

<i>business investment activities </i>

In today's market economy, capital is considered an asset, a fundamental input, and an extremely important factor in the production and business activities of any organization or enterprise. Modern enterprises today have the conditions and capabilities to proactively exploit and attract capital sources in the market to serve their business and development goals through leverage tools such as dividends or interest rates on bonds and stock issuance to raise capital, choosing suitable investment options, and flexibly using available capital sources. Therefore, for sustainable operation, enterprises must have capital, and creating capital is the task of corporate finance.

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<i>● Tools for efficient and economical capital utilization </i>

In addition to ensuring capital, using capital economically and effectively is also one of the survival and development of businesses. In particular, using capital economically means not letting capital be idle and not being used in vain; effective capital use prioritizes investing in items with high-profit potential, ensuring the safest return on investment and early capital recovery. Corporate financial administrators have the ability to analyze, evaluate, and select appropriate investment projects, strategically allocate capital structure, and maximize profits to both preserve and enhance the profitability of business capital, forecast development trends, and adjust ratios accordingly.

<i>● Tools to stimulate business production and operations </i>

In a market economy, a business's economic relationship network is expanded over a large area including relationships with commercial banks, financial organizations, internal business units, or joint venture capital contributors. From these relationships, businesses have many possibilities to increase output, income, and profits by skillfully using tools such as investment, interest rates, dividends, prices, prices, discounts, salaries, bonuses... to attract capital, stimulate consumption, and increase production efficiency to promote growth in business activities.

<i>● Tool to monitor business production and operations </i>

The enterprise's financial situation most clearly reflects all production and business activities and is expressed through specific financial indicators such as payment ratio, debt ratio, capital use efficiency, profit margins, capital structure... From this, administrators can understand whether the corporate financial situation is good or bad, and identify areas for improvement in the production and business process. With information on the economy and finance, administrators will have a basis to make corresponding decisions. The results of implementing those decisions will be reflected through financial indicators; thereby, managers can know whether their decisions are appropriate or have limitations to take the most timely handling and adjustment measures.

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It can be seen that corporate finance plays a role as a tool for examining, monitoring, and analyzing the business's operational situation. To use financial examination tools effectively, business administrators need to organize accounting and statistical work well, establish a system of financial indicators, research, and apply advanced financial management methods and techniques to business management processes.

<i>(Source: Tran Dinh Tuan, 2008) </i>

<i><b>2.2.1. Concept of corporate financial management </b></i>

Through the analysis of the functions and roles of corporate finance, we can see that every business decision, from research and development of products, decisions to bring products to the market, pricing decisions, capital mobilization decisions, decisions related to recruitment and compensation (salary, bonuses, benefits) for employees, decisions to buy or lease machinery and equipment, are closely related to the financial activities of the enterprise and fall within the scope of financial management of enterprises. It is evident that financial management is an integral part of business management and has a close relationship that influences the activities of the enterprise.

According to Hirawati (2021), corporate financial management is concerned with planning, analyzing, and controlling financial activities. Additionally, in accordance with Vesna, Katerina, and Nikolche (2017), Financial management encompasses the planning, organization, direction, and control of various financial activities, including the procurement and utilization of an organization's assets. It applies fundamental management principles to effectively manage the financial

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resources of the organization.

<b>Image 2. 1: Organizational chart of financial management in the company </b>

<i>(Source: Nguyen Minh Kieu, 2014) </i>

Most generally, according to Nguyen Minh Kieu (2014), corporate financial management is an activity related to the process of procurement, investment, and asset management of the business to achieve set objectives. This illustrates that financial management is related to three main decisions of a business: investment decisions, capital mobilization decisions, and profit distribution decisions in the most beneficial way for the business owner and shareholders.

Board of Directors

Deputy Director of Production and

Deputy Director of Finance

Deputy Director of Marketing

<b>Finance Department </b>

Capital investment planning Cash management

Transaction relations with

commercial banks and investment banks

Accounts receivable management Dividend distribution

Financial analysis and planning Relations with investors

Scholarship fund management Insurance and risk management Tax analysis and planning

<b>Accounting Department </b>

Cost accounting Cost management Data processing Financial records

Reporting to government agencies Internal control

financial statementing Financial planning Financial forecasting

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<i><b>2.2.2. Objectives of corporate financial management </b></i>

Most businesses share a common goal of surviving and achieving sustainable development in the future. To achieve this common goal, businesses will implement actions and decisions to maximize revenue, maximize profits, or maximize the benefits that businesses can achieve. Effective corporate financial management is a condition that helps administrators ensure that the financial resources of the enterprise are managed and used effectively to create value for the entire enterprise; including cash management, asset management, and capital management (Hirawati, 2021). Corporate financial managers need to identify and prioritize investment projects, allocate financial resources appropriately, and ensure that business activities achieve maximum profits.

Besides, having a proper financial management cycle will ensure the sustainable development of the business, that is, corporate financial management needs to ensure that the business has enough financial resources to maintain business operations and meet short-term financial needs. Therefore, managers must forecast cash flows,

<i>ensure that debts are paid on time, and manage financial risks effectively (Tran Dinh Tuan, 2008). </i>

<i><b>2.2.3. The role of corporate financial management </b></i>

In the management activities of a business, financial management always plays an important role, this activity determines the independence and success of a business in the process of formation, survival, and development. In particular, in today's international business environment, due to competition and mutual elimination between businesses taking place increasingly fiercely around the world, financial management has also become more crucial than ever. Through understanding the concept of corporate finance and the role and function of corporate finance in the financial system and sustainable development of businesses, the primary roles of corporate financial management are highlighted in the following points:

<i>● Efficient mobilization and utilization of business capital </i>

The capital needs of businesses always change in an upward direction, with new

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businesses requiring capital for initial operations, and existing businesses needing additional funds for research and development, expanding production scale, entering new markets, or acquiring other companies. Corporate financial management helps financial managers accurately determine their needs through financial indicators and their own acumen. Managers can identify strengths and limitations in the financial situation at each stage of the business. Additionally, financial management helps business leaders plan short-term, medium-term, and long-term financial strategies based on a comprehensive evaluation of every financial factor influencing the business's existence, such as strategies involving participation in currency or capital markets, expansion or contraction of production scale, and more. This enables managers to forecast and evaluate the effectiveness of investment and collaboration activities, propose split or merge plans, and detect competitive threats.

<i>● Promotion and regulation of business production and operations </i>

Stemming from the nature of corporate finance, the financial-economic relationships are a fundamental and indispensable part of any business. In the current conditions, both nationally and globally, these relationships are becoming increasingly complex and diverse. Therefore, financial management assumes the role of regulating economic interests among various entities in the economy. On the other hand, through financial plans, businesses generate reasonable purchasing power for production factors, attracting additional labor to meet production and business operation needs. Using financial and cost factors, businesses can establish reasonable selling prices, thus accelerating the consumption process and increasing the capital turnover. On the other hand, salary-bonus systems and profit distribution policies create trust among stakeholders and enhance the company's reputation. The role of regulating and promoting production and business operations by corporate financial management is evident in every managerial decision.

Furthermore, corporate financial management also plays a role in controlling the use of the company's assets, preventing misuse, and avoiding losses for the business. It is evident that financial management in a business is an essential activity in the cycle of managing the production activities of the enterprise. However, the

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positive impact of financial management on a business depends on various factors such as government policies, state management systems, business sectors, business environment, organizational structure, and financial systems within the enterprise, as well as the capabilities and qualifications of business managers.

<i>(Source: Bui Huu Phuoc, 2020) </i>

<i><b>2.2.4. Content of corporate financial management </b></i>

<i><b>2.2.4.1. Financial planning and budgeting </b></i>

Financial planning and budgeting is the first step and has a decisive relationship with the remaining stages in the business's financial management cycle. This activity serves as the foundation for selecting future financial operations of the business and provides the basis for evaluating achieved results.

The process of financial planning and budgeting in a business typically involves

the following five steps:

<b>Image 2. 2: Corporate financial planning process </b>

<i>(Source: Nguyen Minh Kieu, 2014) </i>

- Step 1: Research and forecasting the environment

To develop a financial plan, a business must research the factors directly and indirectly affecting the financial activities of the enterprise. Managers need to study the external business environment to identify opportunities, potential challenges, and

Research and Forecasting the Environment

Establishing objectives

Developing implementation plans to achieve objectives

Analyzing and evaluating plans

Selecting the optimal plan Feasible

Not feasible

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existing influences affecting the financial operations of the business. Additionally, an internal environment analysis helps identify the strengths and weaknesses of the business, suggesting effective solutions to leverage strengths and address weaknesses.

- Step 2: Establishing objectives

Financial objectives of a business include profit, sales, and efficiency goals. These financial goals must be clearly defined, measurable, and highly feasible. Therefore, these objectives should be established based on the current situation of the business at the time of planning, and the results from the environmental forecasting process. Moreover, managers need to define the responsibilities and authorities of each department in achieving these objectives.

- Step 3: Develop implementation plans to achieve objectives

Based on the established objectives, managers develop feasible plans to achieve these goals. These options must be scientifically grounded, and the most promising options are analyzed and evaluated.

- Step 4: Analyze and evaluate plans

Managers conduct an analysis, calculating financial indicators for each plan to compare. and evaluate strengths and weaknesses, the feasibility of implementation, and the potential for development. This analysis guides timely and suitable solutions for each plan.

- Step 5: Selecting the optimal plan

After analyzing the plans, the most optimal plan will be selected. Along with that, managers disseminate this plan to competent departments and individuals and allocate human and financial resources for implementing the plan.

2.2.4.2. Fixed capital management, working capital management, and financial investment capital management

<i>● Fixed capital management </i>

Fixed capital is the total amount of money when evaluating fixed assets. Fixed

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assets are labor materials that have long-term use value, with a physical form that does not change from the beginning of use until liquidation, participating in many production cycles. Managing and preserving fixed capital is an important content in the capital management activities of enterprises. To manage fixed capital effectively and mobilize the maximum efficiency of machinery and equipment into production and business activities, businesses need to periodically evaluate and re-evaluate fixed assets to ensure the exact value of fixed assets; regularly upgrade to continuously improve the performance of fixed assets; choose an appropriate depreciation plan to ensure quick capital recovery based on the characteristics of fixed assets and the Ministry of Finance's regulatory framework on assets. After each operating period, businesses need to evaluate the efficiency of using fixed capital, thereby enhancing strengths and finding causes and measures to overcome weaknesses in the company's use of fixed capital.

<i>● Working capital management </i>

In general, funds associated with the acquisition of significant fixed assets have a long-term maturity, so issues in investment decisions for fixed assets may pose a risk to the requirements of daily production/service operations, especially when the impact of cash flow is not clearly analyzed before investing (Handle, 2015). Working capital is the amount of money regularly used to purchase and form necessary current assets to serve the production and business process. Current assets are assets that an enterprise puts into regular and continuous production and business activities and participates in a production cycle. Working capital management includes cash capital management, inventory management, accounts receivable management, and short-term investment management. In addition, businesses also need to analyze and accurately calculate the amount of working capital needed for a business cycle; exploit existing working capital financing sources appropriately; regularly evaluate the situation and efficiency of working capital use, check whether working capital is stagnant at any point or stage to find effective measures.

<i>● Financial Investment Capital Management </i>

Businesses can invest in financial assets such as bonds, stocks, and participate

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in joint venture capital contributions with other businesses to ensure the business's idle operating capital and increase financial income for the business. enterprise. In the current trend of the economy, investment in financial assets is growing and bringing greater benefits to businesses. Therefore, financial investment capital management has also become an essential activity, playing an important role for businesses.

<i>(Source: Nguyen Minh Kieu, 2014) </i>

<i><b>2.2.5. Evaluation indicators for financial management effectiveness </b></i>

The efficiency of financial management activities is often of interest to investors because it is associated with their economic benefits at the present and in the future. The condition for a business to grow is that it must have high financial efficiency. At the same time, there is always investment activity in the business, and this investment also always requires capital. However, whether a business needs to mobilize capital from loans, debt, or increase equity is still a question that needs to be analyzed according to each period of business operation. Because corporate financial management is mainly based on two aspects: capital management, asset management, and how assets are mobilized to operate for profit. Therefore, to evaluate the effectiveness of financial management activities, we rely on evaluating the effectiveness of capital management and asset management using the following indicators:

2.2.5.1. Indicators for evaluating the efficiency of production and business investment

This indicator includes performance indicators to measure an enterprise's ability to exploit and use business capital.

<i>● Inventory turnover ratio </i>

Inventory turnover ratio is an important index to measure the turnover rate of inventory in a certain period. This index gives the average number of inventory turnovers in a year. A high inventory turnover ratio can indicate that a business is effectively managing inventory and is able to optimize working capital. However, it

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