Through Table 2.3, we can see that at the end of 2017, 2018, and 2019, the company's working capital was positive. Specifically, at the end of 2017, it was 22,885,594,487 VND; at the end of 2018, it was 14,611,549,900 VND; at the end of 2019, it was 14,242,325,719 VND, showing that the company ensured the principle of financial balance. Part of the company's short-term assets were financed by long-term capital. However, the company's working capital tended to decrease. At the end of 2018 compared to the end of 2017, it decreased by 8,274,044,587 VND due to an increase in short-term assets of 59,280,394,953 VND and an increase in short-term debt of 67,554,439,540 VND. The increase in short-term debt is mainly due to an increase in short-term prepayments from buyers, an increase in short-term payables, and an increase in short-term borrowings and financial leasing debts. The Company's increase in short-term borrowings and loans is associated with the condition that the Company is promoting production, ensuring the progress of projects, and ensuring the ability to pay debts, which is considered reasonable. At the end of 2019 compared to the end of 2018, the Company's working capital decreased by VND 369,224,181 due to an increase in short-term assets of VND 33,256,757,552 and short-term debt of VND 33,625,981,733. The increase in short-term debt is mainly due to an increase in payables to sellers, an increase in prepayments from buyers, and a decrease in borrowings. The increase in short-term assets is mainly due to an increase in cash and cash equivalents; an increase in receivables and an increase in inventories. Although working capital decreased, we can see that at the end of 2019 compared to the end of 2018, working capital was higher than at the end of 2018 compared to the end of 2017, which means that at the end of 2019, the company is making efforts to ensure the principle of financial balance, so that financial operations are safer and more stable.
The Company's working capital needs at the end of 2018 compared to the end of 2017 increased by VND 5,629,804,860, which means that the regular and continuous asset items (Inventories, short-term receivables) are not enough to cover short-term payables, so the Company incurred VND 5,629,804,860 in demand for loans and long-term capital. The Company actually increased short-term debt and increased equity, but it was still not enough to cover inventories and short-term receivables. At the end of 2019 compared to the end of 2018, the working capital needs decreased by VND 52,887,239,333, showing that the
Short-term occupation has offset the regular asset items continuously, the company does not have a need for short-term loans and long-term capital sources; reducing the pressure on capital mobilization of the Company.
At the end of 2019 compared to the end of 2018, the company focused on using appropriated capital (appropriated capital increased by 65,199,461,225 and reduced short-term debt by 31,573,479,492 VND. Thus, it can be seen that the company's financial situation is less risky.
2.3.3. Analysis of debt situation and payment ability
2.3.3.1. Debt situation analysis
Analyzing the debt situation means monitoring the management of receivables and payables. From there, grasp the amount of misappropriated and misappropriated assets of the enterprise; and manage bad debts, receivables that cannot be collected, payables that have no source for payment. The analysis of the debt situation only stops at examining the scale of receivables (misappropriated) and payables (misappropriated), and comparing data from years to see if the enterprise's debt tends to increase or decrease. (Table 2.4)
As of December 31, 2019, the company's receivables were mainly short-term receivables of VND 176,539,111,023, an increase of VND 6,156,133,213, equivalent to 103.61% compared to the beginning of 2019. Short-term receivables at the end of 2019 were VND 176,028,323,925, and at the beginning of 2019 were VND 169,872,190,712, an increase of VND 6,156,133,213, equivalent to 103.62%, of which the majority were receivables from Nam Ninh Construction and Trading Consulting Joint Stock Company - the uncollected loan interest was VND 11,584,357,331. The prepaid insurance expense at the end of the year was 57,247,553,828 VND, an increase of 31,073,937,168 VND compared to the beginning of the year, equivalent to 218.72%. Prepayments to sellers for future service provision are capital sources that are being appropriated, so the company needs to strictly control this capital source. Other short-term receivables in 2018 were 120,093,796,629 VND, in 2019 were 43,218,326,654 VND, a decrease of 76,875,469,975 VND compared to 2018, equivalent to 35.99%. This is an achievement of the company in recovering some of the capital that is being appropriated.
67
Table 2.4: Debt analysis table of Song Da - Hanoi Joint Stock Company
Unit: VND
Target
December 31, 2019 | December 31, 2018 | December 31, 2017 | Difference 2019 vs 2018 | Difference 2018 vs 2017 | |||
Amount | Proportion (%) | Amount | Proportion (%) | ||||
A. Accounts receivable | 176.539.111.023 | 170.382.977.810 | 132,900,791,299 | 6.156.133.213 | 103.61 | 37,482,186,511 | 128.20 |
I. Short-term receivables | 176,028,323,925 | 169.872.190.712 | 132,900,791,299 | 6.156.133.213 | 103.62 | 36,971,399,413 | 127.82 |
1. Short-term customer receivables | 48,498,877,868 | 29,690,135,061 | 42.024.124.263 | 18,808,742,807 | 163.35 | (12,333,989,202) | 70.65 |
2. Short-term prepayment to seller | 56,719,909,766 | 29,368,289,491 | 21,237,870,756 | 27,351,620,275 | 193.13 | 8,130,418,735 | 138.28 |
II. Long-term receivables | 510,787,098 | 510,787,098 | - | 0 | 100.00 | 510,787,098 | - |
B. Accounts Payable | 194.975.412.937 | 129,775,951,712 | 82,689,377,770 | 65,199,461,225 | 150.24 | 47,086,573,942 | 156.94 |
I. Short-term payables | 194.975.412.937 | 129,775,951,712 | 82,689,377,770 | 65,199,461,225 | 150.24 | 47,086,573,942 | 156.94 |
1. Short-term payables to suppliers | 57,874,624,676 | 36,613,340,481 | 41,638,558,088 | 21,261,284,195 | 158.07 | (5,025,217,607) | 87.93 |
2. Short-term prepayment by buyer | 87,983,413,367 | 47,868,482,518 | 23,275,805,000 | 40,114,930,849 | 183.80 | 24,592,677,518 | 205.66 |
3. Taxes and amounts payable to the State | 19,696,054,151 | 6.466.682.111 | 1,365,227,123 | 13,229,372,040 | 304.58 | 5,101,454,988 | 473.67 |
4. Must pay employees | 1,846,109,319 | 1,491,763,485 | 0 | 354,345,834 | 123.75 | 1,491,763,485 | - |
5. Costs payable | 26,209,891,542 | 34,611,398,128 | 15,442,016,533 | (8,401,506,586) | 75.73 | 19,169,381,595 | 224.14 |
9. Other payables | 1,365,319,882 | 2,724,284,989 | 967,771,026 | (1,358,965,107) | 50.12 | 1,756,513,963 | 281.50 |
II. Long-term payables | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
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(Source: Finance - Accounting Department, Song Da - Hanoi Joint Stock Company and author's calculation)
The company's payables at the end of 2019 were 194,975,412,937 VND, an increase of 129,775,951,712 VND compared to the beginning of 2019, equivalent to 150.24%. The company's payables do not have long-term payables, but are all short-term payables. The payables show the scale of the company's capital appropriation. And we see that this scale is larger than the scale of the appropriated amounts. Therefore, the company is appropriating more than being appropriated. This could be a good sign for the company.
Short-term payables not only have slight fluctuations, in addition to the appropriation of sellers, buyers' advances and appropriation of employees; the company's short-term payables increased due to administrative fines for tax violations regarding natural resource tax and environmental protection fees for sand mining activities. The company needs to have a plan to fulfill its obligations to the State Budget.
2.3.3.2. Analysis of the Company's solvency
When analyzing the company's solvency, it uses a system of indicators including: General solvency ratio; short-term debt solvency ratio, quick solvency ratio to evaluate the company's ability to secure debts with assets. (Table 2.5)
Table 2.5: Solvency analysis table of Song Da Joint Stock Company
- Hanoi
Target
2019 | 2018 | 2017 | Difference 2019 vs. 2018 | Difference offset 2018 vs 2017 | |
1. General solvency | 1,182 | 1,203 | 1,270 | (0.021) | (0.067) |
2. Ability to pay short-term debt | 1,054 | 1,063 | 1,139 | (0.009) | (0.076) |
3. Fast payment ability | 0.155 | 0.109 | 0.096 | 0.046 | 0.013 |
4. Ability to pay interest | 1,463 | 1,692 | 1,891 | (0.229) | (0.199) |
(Source: Finance - Accounting Department, Song Da - Hanoi Joint Stock Company and
(Author's calculation) In general, the company's solvency is not good. The overall solvency at the end of 2019 decreased by 0.021 compared to the end of 2018; at the end
2018 decreased by 0.067 compared to the end of 2017 due to the increase in liabilities and total assets of the Company, liabilities increased more than total assets. The reason is that in 2019, the company borrowed a lot, mainly increased short-term debt. The company borrowed to serve a number of key projects such as the mineral exploitation project of lot 1A, 1B in the coastal area of Nghia Hung district, Nam Dinh province; the headquarters of the Department of Labor - Invalids and Social Affairs of Nam Dinh province, Nguyen Truong Thuy High School, Phase 2. Focusing on increasing the company's borrowing capital in the current business conditions is appropriate but will make the company financially dependent and increase risks. The company's general solvency ratio at the end of 2017, 2018, 2019 were 1.270; 1.203 and 1.182 respectively, all ensuring general solvency. The ability to pay short-term debts at the end of 2019 was 1.054; at the end of 2018 was 1.063; at the end of 2017 was 1.139, showing that the ability to meet the short-term debts of the enterprise with short-term assets at the end of the year compared to the beginning of the year has decreased, the short-term debts of the enterprise are mainly short-term loans. Short-term debts increased more than short-term assets, so the short-term debt payment indicators tended to decrease. The ability to pay quickly tended to increase. Specifically, at the end of 2019 compared to the end of 2018, it increased from 0.109 to 0.155; at the end of 2018 compared to the end of 2017, it increased by 0.013, showing that the ability to meet short-term debts, specifically the debt occupied by the enterprise in cash, has increased. The reason is that the company's cash reserves were relatively good due to the increase in demand deposits. Demonstrates the company's proactive debt repayment.
The interest coverage ratio shows how many times the total pre-tax profit and interest expenses generated in each period can ensure that the company can pay the interest expense and the total interest payable from debt capital mobilization. In the period 2017 - 2019, this indicator of the company was greater than 1, proving that the company's business activities were highly profitable and that was the basis for ensuring the company's healthy payment situation. However, this indicator of the company is on a downward trend. In 2018, the interest coverage ratio decreased by 0.199 compared to 2017 because interest expenses increased more than profits.
Profit before tax and interest expense; 2019 decreased by 0.229 compared to 2018 due to both profit before tax and interest, and interest expense decreased, in which profit before tax and interest expense decreased more.
2.3.4. Analysis of business results and efficiency at the Company
2.3.4.1. Analysis of business results at the Company
Analysis of the Business Results Report at Song Da - Hanoi Joint Stock Company is mainly by comparison method: Calculating the indicators on the business results report and the indicators of cost ratio, profit ratio, then comparing the absolute and relative numbers between the analysis period and the previous periods. From there, determine the factors affecting the increase and decrease in the after-tax profit of the enterprise. In addition, when analyzing, a number of ratios reflecting the level of costs and ratios reflecting business results are used to analyze, evaluate and explain the causes. (Table 2.6: Table of analysis of fluctuations in indicators on the business results report of Song Da - Hanoi Joint Stock Company and Table 2.7: Table of analysis of some indicators on the business results report).
From Table 2.6, the company's net revenue from sales and service provision in 2019 reached 191,260,162,167 VND, an increase of 95,606,883,525 VND, reaching a rate of 199.95% compared to 2018. The main reason is that in 2019, revenue from sand mining and office rental revenue increased. Cost of goods sold in 2019 increased by 91,701,631,094 VND compared to 2018, reaching a rate of 211.77% due to fluctuations in input material prices, the cost of sand mining operations increased sharply from 4,199,793,947 VND to 98,353,784,829 VND. The ratio of cost of goods sold to net revenue of the company in 2019 was 90.84%, in 2018 it was 85.77%, showing that the cost of goods sold increased but the company wasted cost of goods sold; the company needs to review the management and use of cost of goods sold and have a plan to effectively reduce product costs. Because the growth rate of cost of goods sold is faster than the growth rate of net revenue from sales and CCDV, the Gross profit from sales and service provision in 2019 increased by VND 3,905,252,431, reaching a rate of 128.69% compared to 2018 (Gross profit from
Sales and service provision in 2019 reached 17,514,815,185 VND, in 2018 reached 13,609,562,704 VND). Gross profit scale increased, gross profit margin on net revenue of the company decreased from 14.23% in 2018 to 9.16% in 2019. Showing that although the company's business activities have achieved certain achievements, the management of cost of goods sold is not effective.
The company does not incur any sales costs, which saves the company some money; the projects the company can contract are due to the company's reputation, capacity and existing relationships.
The company's administrative expenses in 2019 increased by VND 41,721,769,935 compared to 2018, equivalent to 122.89% (VND 586,389,217,074 in 2019 and VND 701,596,717,134 in 2018). The ratio of administrative expenses increased by 2.92% in 2019 and 2.67% in 2018. The main reason is the increase in administrative staff costs, partly reflected in the increase in the number of employees and wages, which ensure a better living standard for employees. In addition, other administrative expenses increased quite rapidly, and the company considers managing these expenses well.
Financial revenue in 2019 was VND 331,676,681,922, down VND 215,766,008,095 compared to 2018, equivalent to 60.59%. Financial revenue decreased sharply mainly due to dividends and profits distributed from subsidiaries, joint ventures, associates and other investments. In addition, the financial expenses of the enterprise in 2019 compared to 2018 were VND 23,348,777,098, the reason being that in 2018 the company had a reversal of financial investment depreciation provision, in 2019 the company's financial expenses were realized exchange rate difference losses and financial investment depreciation provision, the company had no interest expense.
The company's other profits in 2019 decreased significantly, down 655,036,749 VND. The reason was that the company's other expenses in 2019 arose from penalties for late payment of environmental tax and resource protection fees.
Table 2.6: Analysis table of fluctuations in indicators on the business results report of Song Da - Hanoi Joint Stock Company
Unit: VND
INDICATORS
2019 | 2018 | 2017 | Difference 2019 vs 2018 | Difference 2018 vs 2017 | |||
Amount | Rate (%) | Amount | Rate (%) | ||||
1. Sales and service revenue | 191.260.162.167 | 95,653,278,642 | 91,998,310,616 | 95,606,883,525 | 199.95 | 3,654,968,026 | 103.97 |
2. Revenue deductions | - | - | - | - | - | - | - |
3. Net revenue from sales and service provision | 191.260.162.167 | 95,653,278,642 | 91,998,310,616 | 95,606,883,525 | 199.95 | 3,654,968,026 | 103.97 |
4. Cost of goods sold | 173,745,346,982 | 82,043,715,888 | 80.133.126.645 | 91,701,631,094 | 211.77 | 1,910,589,243 | 102.38 |
5. Gross profit from sales and service provision | 17,514,815,185 | 13,609,562,754 | 11,865,183,971 | 3,905,252,431 | 128.69 | 1,744,378,783 | 114.70 |
6. Financial operating revenue | 4,703,680,821 | 6,899,434,456 | 4,459,340,253 | (2,195,753,635) | 68.17 | 2,440,094,203 | 154.72 |
7. Financial costs | 6,212,735,468 | 7.006.707.660 | 5,103,859,740 | (793,972,192) | 88.67 | 1,902,847,920 | 137.28 |
- Including: Interest expense | 6,212,735,468 | 7.006.707.660 | 5,103,859,740 | (793,972,192) | 88.67 | 1,902,847,920 | 137.28 |
8. Selling expenses | - | - | - | - | - | - | - |
9. Business management costs | 12,258,372,273 | 8,440,868,174 | 12,408,105,988 | 3,817,504,099 | 145.23 | (3,967,237,814) | 68.03 |
10 Net operating profit | 3,747,388,265 | 5,061,421,376 | (1,187,441,504) | (1,314,033,111) | 74.04 | 6,248,862,880 | -426.25 |
11. Other income | 4,500 | 16,207,504 | 5,773,751,160 | (16,203,004) | 0.03 | (5,757,543,656) | 0.28 |