The efficiency of the company's working capital is also low. That is why the company's return on equity is very low. Moreover, the company cannot take advantage of these capital sources to serve its production and business expansion strategy.
With the current profitable business situation and strong equity potential, the company can gain the trust of lenders and access other sources of capital easily. Obviously, considering the use of debt, especially long-term debt, is a very important direction that the company needs to consider in its business strategy. A reasonable debt ratio will help the enterprise expand production and business, amplify profits while still ensuring business safety.
Competition in price, quality of goods and services is increasingly fierce. Moreover, electronic goods from China, Thailand, ASEAN countries,... high-tech countries and the problem of "counterfeit goods" have increased competition for the Company.
In fact, enterprises can mobilize capital for production and business through many forms, in addition to the owner's capital, retained profits, there are also other forms such as: commercial credit, bank credit, lease-purchase credit, bond issuance... This is a limitation of enterprises. In the company's capital, over 74% is equity, the rest is a part of short-term loans, and commercial credit. This brings initiative and safety in business but does not take advantage of the power of financial leverage in increasing profits, does not take advantage of the interest tax shield. The efficiency of the company's working capital is also low. That is why the profit margin on the company's equity is very low. Moreover, the company does not take advantage of these capital sources to serve its production and business expansion strategy.
With the current profitable business situation and strong equity potential, the company can gain the trust of lenders and access other sources of capital easily. Obviously, considering the use of debt, especially long-term debt, is a very important direction that the company needs to consider in its business strategy. A reasonable debt ratio will help the enterprise expand production and business, amplify profits while still ensuring business safety.
The company invests a lot in assets but has not fully utilized the operating capacity of the assets. The efficiency of asset utilization in general as well as the efficiency of fixed assets and current assets is still low. This situation occurs because the company's asset management capacity is still weak. This causes waste of enterprise resources, increases the cost of capital, thereby reducing business efficiency.
In the process of investing in assets, the company has not calculated and balanced its asset structure, leading to over-investment in some types of assets. The company's large cash reserves help ensure the company's ability to pay immediately, but also increase costs. In addition, other non-profitable assets such as customer receivables account for the highest proportion of the company's assets, which also reduces the efficiency of asset use. Total assets continue to increase while revenue decreases, showing that the company's management capacity is still limited.
According to the business registration certificate, the company is allowed to do business in many fields. In addition to the production and trading of electronics, broadcasting equipment, and household appliances, the company is also allowed to buy and sell construction machinery and equipment, equipment for the packaging industry, computer software production, and many other industries... Currently, the company only invests in
Production and trading of digital receivers, rice cookers, computer speakers, blenders, induction cookers, other areas that have not been invested in.
The company does not have any other investment activities, including short-term or long-term financial investments. The company also reserves a lot of assets in the form of cash, in addition to other assets such as inventories and receivables which are also quite high. These assets are all non-profitable assets, so they reduce the efficiency of business capital. This also shows that the company's investment activities are not flexible. With the current capital, the company can diversify its investment forms to contribute to increasing profits and reducing losses when risks occur in its main business activities.
Chapter 2 Conclusion
In addition to the introduction to DET Vietnam Joint Stock Company, chapter 2 focuses on analyzing the current financial capacity, pointing out the achievements and limitations.
In general, the company has a healthy financial situation, relatively good financial capacity, stable business and has the premise to expand and develop strongly. Besides the achieved results, the company still has some limitations that need to be overcome to increase production and business efficiency. The analysis in this chapter 2 will be the basis for proposing solutions to overcome those limitations, in order to improve the financial capacity of the company.
CHAPTER III: SOLUTIONS TO IMPROVE THE FINANCIAL CAPACITY OF VIETNAM TELECOMMUNICATIONS ELECTRONICS TECHNOLOGY INVESTMENT AND DEVELOPMENT JOINT STOCK COMPANY
3.1. The Company's development orientation in the coming time
Since its establishment, the Company has determined its direction to continuously improve the quality of products and services so that each customer can see each step closer to the brands that have been affirmed in the world. Therefore, the Board of Directors as well as all officers and employees of the Company are always united, trying to promote dynamism and creativity to strive to exceed the planned targets in the coming time.
Development orientation
Stabilize and develop, continue to invest in technological innovation to improve production capacity; operate effectively, ensure planned dividends for employees.
Diversify products, diversify industries, develop services, and conduct general business;
Build and develop the company's brand, expand domestic distribution channels.
By many measures to create conditions and have the best policies to take care of the lives and retain workers.
Prospects and future development plans
- Maintain an average annual revenue growth rate of 15% to 18%, increase the proportion of products consumed in the southern provinces and mountainous areas in total sales revenue.
- Expand distribution channels in potential localities, develop separate policies for each region.
- Strengthen communication work, enhance market and consumer guidance.
- Coordinate with authorities to take drastic measures to combat counterfeit and fake goods.
Targets to strive for
Measures envisaged for implementation
- Save costs to reduce product prices. Increase price competitiveness.
- Continue to innovate, combine diversification, and focus on investing in new products.
- Reduce inventory, avoid backlog of old and outdated goods.
3.2. Solutions to improve the Company's financial capacity
3.3.1. Measures to increase revenue Basis for proposing measures
Revenue is the total value of economic benefits an enterprise receives during the accounting period, arising from the enterprise's normal production and business activities, contributing to increasing equity (According to Accounting Standard No. 14 - Ministry of Finance)
Table 3.1. Revenue summary table for 3 years 2010-2012
Unit: 1,000 VND
Item
2012 | Proportion % | 2011 | Proportion % | Year 201- | Proportion % |
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Net revenue from insurance and services | 9,910,082 | 99.9 | 8,910,108 | 99.9 | 9,068,546 | 99.9 |
Financial revenue | 5,987 | 0.1 | 6,789 | 0.1 | 5,768 | 0.1 |
Other income | - | - | - | |||
Total revenue | 9,434,070 | 100 | 8,916,897 | 100 | 9,074,315 | 100 |
Source: Accounting Department of DET Vietnam Joint Stock Company
Table 3.2. Table of revenue increase and decrease difference over 3 years 2011 - 2013
Unit: VND
Item
Difference | Difference | |||
2011/2010 | 2012/2011 | |||
Amount | Rate (%) | Amount | Rate (%) | |
Net revenue from insurance and services | (158,437,735) | (1.7) | 517,973,847 | 5.81 |
Financial revenue | 1,020,532 | 17.7 | (801,562) | (11.81) |
Other income | - | 0 | ||
Total revenue | (157,417,203) | (1.73) | 517,172,286 | 5.8 |
Source: Accounting Department of DET Vietnam Joint Stock Company
Looking at the revenue summary table of the past 3 years, we see that net revenue from sales and service provision accounts for the highest proportion of total revenue, accounting for more than 99%. Financial revenue accounts for a very small proportion. There is no other income.
Through the revenue increase and decrease difference table, in 2011, revenue decreased by 158 million VND, equivalent to 1.7% compared to 2010. In 2012, revenue increased by 517 million VND, equivalent to 5.81%. Thus, revenue decreased, affecting the company's financial situation, causing the company's net profit to decrease. Specifically, in 2011, revenue decreased by 1.73%, profit decreased by 1.6%, in 2012 revenue increased by 5.81%, profit increased by 5.68%.
Table 3.3. Profit difference table in 3 years 2011 - 2013
Unit: VND
Target
Difference 2012/2011 | Difference 2011/2010 | |||
Amount | Rate (%) | Amount | Rate (%) | |
Profit after tax | 38,246,867 | 5.68 | (11,117,431) | (1.6) |
Source: Accounting Department of DET Vietnam Joint Stock Company
So, to increase profits we must increase revenue, that is, increase the company's net sales and service revenue.
Content of measures implementation
+ Continuously improve product quality to meet product requirements
Product quality is the leading factor determining the quantity of products sold by the Company. Good product quality creates a strong brand for the Company, increases competitiveness in the market, thereby leading to easier product consumption and greater revenue. To increase revenue, the leading solution for every business is that the products sold must have better quality than other products, and for DET Vietnam Joint Stock Company, this solution is also really reasonable.
+ Perform well in revenue management and planning
The company should regularly carry out sales revenue management to accurately and comprehensively evaluate the company's business results, find out the advantages, limitations, opportunities and challenges in revenue work. To do this, the company should establish a specialized department to manage revenue, propose the most reasonable business plans to contribute to increasing the company's revenue.
The company makes a revenue plan, sets out planning targets that are progressive, not too high, not too low, and close to reality. Make plans for each month and each specific item.
+ Strive to save costs, reduce product prices and implement flexible pricing policies.
- Lower input costs.
- Reduce fixed costs: reduce domestic transportation costs and ocean freight costs.
- Reduce wage costs: The company can lower this cost by reducing the rate of indirect labor by adjusting the increase rate of indirect labor lower than the increase rate of direct labor.
- Reducing selling costs: Selling costs are one of the components that make up the cost of the entire product of the Company. In the past year, the Company's work of saving selling costs was assessed as not really effective, the rate of increase in selling costs was higher than the rate of increase in sales revenue. To reduce product costs, one of the solutions to be mentioned is to reduce this cost of the Company. The Company needs to arrange tightly, reasonably, with the right quantity needed and suitable to the requirements of the job and of each market.
The company needs to implement a flexible pricing policy, in line with market trends. For regular customers, the company should offer price incentives, payment priority, and try to keep prices from fluctuating much when the market increases. For potential customers, it is necessary to offer price incentives to create favorable conditions for them to become regular, long-term customers of the company.
+ Strictly manage capital in payment, use payment discount tools to speed up debt collection process.
One of the important conditions for enterprises today in expanding their business, expanding the market and attracting customers is to increase capital mobilization and at the same time use investment capital more effectively. To do this, the Company needs to strictly manage its payment capital by:
Find potential partners
The company needs to have strict and convenient terms for debt collection when drafting economic contracts, ensuring debt collection ability.
Use customer payment discounts to encourage customers to pay early and on time.
+ Invest in market research and consumer tastes
For any enterprise, the consumer market is always one of the most important factors, because the market is the place to test whether the company's products are accepted by consumers or not. Therefore, investing in market research plays a very important role in product consumption activities, increasing revenue of all enterprises in general and Son Ha International Corporation in particular.
Market research and consumer tastes help the Company understand what the market needs, purchasing power as well as the competitive situation in the market, thereby helping the Company to set out production directions, organize production and consumption of products. Based on market research and consumer tastes, the Company can improve the adaptability of products in the market. To do this well, the Company should organize a specialized department to research the market and consumer tastes.
+ Expand advertising and sales promotion activities
Products and goods that want to be consumed must not only have good quality, reasonable price, beautiful design but also must convey that information to consumers. To do this, the Company must do well some measures such as: advertising, sales promotion to stimulate more demand for the Company's products.
In general, the Company has used many forms of advertising to promote its sales activities. The Company should continue to develop these activities and at the same time, should have more activities to advertise its products in new markets such as foreign markets, rural and mountainous markets, etc.
+ Other solutions
Improve the quality of human resources, especially the quality of sales staff. Strengthen support measures to promote consumption and increase revenue. Strengthen activities against smuggled and counterfeit goods.
Evaluate the effectiveness of the measure
After implementing the measure, the forecast net revenue in 2013 increased by the same amount as in 2012 compared to 2011, which was 5.81%. Then the forecast net revenue after improvement is:
Revenue = 9,428,082,363 + 9,428,082,363*5.81% = 9,975,853,948 VND.
Difference between net revenue after improvement and initial revenue in 2012:
= 9,975,853,948- 9,428,082,363 = 547,771,585 VND
Table 3.4. Summary table of revenue after improvement.
Unit: VND
Target
2013 | 2012 | Value Difference | Proportion | |
Net revenue | 9,975,853,948 | 9,428,082,363 | 547,771,585 | 5.8% |
Table 3.5. Summary table of revenue - cost - profit
Unit: 1000 VND
2012 | Proportion | 2013 | Proportion | Difference | ||
Net revenue | 9,434,070 | 100 | 9,975,853 | 100 | 541 | 5.8% |
Expense | 8,722,473 | 92.5 | 8,772,473 | 87.9 | ||
Profit | 711,597 | 7.5 | 1,203,380 | 12.1 | 491 | 69% |
Just first
Source: Accounting Department of DET Vietnam Joint Stock Company
Looking at the revenue - cost - profit summary table, we see that in 2012, for every 100% of revenue, profit accounted for 5.81% of revenue and if costs remained the same as .
Thus, if revenue increases by %, profit also increases by 10.39% according to the forecast method.
3.3.3. Some other measures to improve the financial situation to increase revenue and expenses
+ Develop funding policies and determine appropriate capital structure
Capital decisions are the most important decisions for a business, including decisions on funding sources and capital structure. First of all, it is necessary to ensure adequate and timely capital mobilization for normal and continuous business operations. In order to be proactive in capital in business, the company needs to take the following measures:
- Develop capital mobilization strategies suitable to the market situation and business environment of each period.
- Create trust for capital suppliers by enhancing the company's reputation: stabilizing and rationalizing financial indicators, paying debts on time...
- Demonstrate the purpose of capital use by providing business results and capital turnover efficiency in the past year and prospects for the coming year.
Regarding capital use: When implementing, the company must base on the plan for mobilizing and using business capital that has been established as a basis for adjusting to suit the actual situation of the company. If there is an unusual need, the company needs to have a proactive plan to provide timely supply to ensure continuous business operations, avoiding the situation of having to stop production due to lack of business capital. If there is excess capital, the company must have timely handling measures to ensure the promotion of strengths and profitability of capital. In order to have a plan for mobilizing and using capital that is close to reality, it is necessary to rely on the actual situation of capital use during the period and assess the conditions as well as the trend of supply and demand changes in the market.
The company's capital structure is currently a safe capital structure with over 74% being equity. However, studies also show that businesses with high growth rates also have high debt-to-equity ratios. Therefore, the company should increase borrowing, especially long-term debt, in forms such as bank loans and bond issuance . In addition, the company should consider raising capital through joint ventures. This is a popular form today in which businesses can mobilize other businesses to contribute capital, cooperate in production, bear risks and share profits.
To build a reasonable capital structure, enterprises in general and companies in particular must clearly understand the cost of using each type of capital source and forecast the capital needs of their enterprises. In fact, there is no general formula for determining an optimal capital structure. However, enterprises can determine the optimal capital structure.
The appropriate capital structure is based on six factors: business risk (stability or volatility in revenue), fixed and variable cost structure, fixed assets (mortgage value), the enterprise's ability to deduct income tax, corporate governance (for public joint stock companies), and the quality of the enterprise's information (including accounting and business planning).
+ Improve the ability to forecast the demand for each type of capital during the period
To improve the efficiency of capital use in general, the company needs to accurately determine the needs of each type of capital (working capital, fixed capital) that the company needs to ensure production and business during the period. Avoid shortages that cause interruptions in the company's operations, but also avoid excesses that cause waste, reducing the efficiency of capital use. To do this, the company needs to accurately analyze the financial indicators of the previous period, the main fluctuations in each type of capital, the difference between the plan and the implementation of the needs of each type of capital in the previous periods.
When planning working capital, it is necessary to base on the business capital plan to ensure that it is consistent with the actual situation through analyzing and calculating economic and financial indicators of the previous period along with predictions about the business situation, growth potential in the coming year and expectations about market fluctuations.
+ Actively exploit and use business capital reasonably and flexibly, with measures to prevent possible risks.
Based on the capital needs that the company has identified, evaluate the company's current financial capacity, the amount of capital lacking, compare the cost of raising capital from funding sources to choose a suitable and timely capital mobilization channel, avoid excess capital, causing waste or lack of capital that disrupts the company's business operations, and at the same time limit possible risks.
When doing business in a market economy, a company must always be aware that it must be ready to deal with any changes and complex fluctuations that may occur at any time. Unusual risks in business such as: inflation, rising market prices, etc., which managers often cannot fully anticipate. Therefore, to limit possible losses, the company needs to take preventive measures so that when business capital in general and working capital in particular are depleted, the company can immediately have a source of compensation, ensuring that business operations continue. Specifically, the measures that the company can apply are:
- Purchase cargo insurance for goods in transit as well as goods in warehouse.
- Provision for financial reserve fund, bad debt fund, inventory price reduction reserve fund.
The company's participation in insurance creates a solid foundation, a reliable economic shield, helping the company have the financial conditions to effectively withstand all risks and unexpected losses without greatly affecting working capital.
- At the end of the period, the company needs to check, review, and re-evaluate goods and materials, cash capital, and compare accounting books to handle differences.
+ Have measures to effectively use temporarily idle cash capital
The analysis shows that the company's cash capital accounts for a relatively large proportion. Therefore, the organization, management and use of cash capital is important to the company's business activities in general and the efficiency of capital use in particular.
In the past 3 years, the company's money has been mainly in the form of cash and bank deposits. With such a large amount of cash and bank deposits, the company has lost the opportunity to invest in other activities that promise more profits such as financial business, real estate...
+ Strengthen the management of receivables, minimize the amount of capital occupied
As analyzed, the company's receivables still account for a high proportion and are increasing very quickly. The company needs to take the following measures to strengthen the management of receivables and minimize the amount of capital occupied :
- For retail customers with small volumes, the company continues to implement the policy of "buying outright and selling in installments", not leaving debt or only providing low discounts to small but regular customers.
- For large customers, before signing a contract, the company needs to classify customers and carefully understand their payment ability. The contract must always have strict regulations on time, payment method and penalties for breach of contract.
- Open a detailed ledger of debts, arrange receivables by age. This way, the company will easily know which debts are due so that it can take measures to urge customers to pay. The company needs to periodically summarize sales activities, check customers' debts in terms of quantity and payment time, and avoid letting receivables fall into bad debt status.
- The company should apply financial measures to promote product consumption while limiting capital occupation such as payment discounts and penalties for late payment violations.
- If customers pay late, the company needs to consider specifically to come up with appropriate policies such as debt payment deadlines, debt reduction to maintain existing relationships and only ask the authorities to intervene if applying the above measures does not bring results.
- When purchasing goods or paying in advance, full payment must be requested by the person making the property insurance contracts to avoid loss or damage to goods based on the principle of "full delivery, full payment" or sanctions applied in the contract signing.
+ Improve inventory management capacity, reduce storage costs
The large amount of inventory during the year, accounting for a relatively high proportion of total working capital, has caused capital congestion and increased storage costs. The company needs to implement the following measures to increase the efficiency of inventory management:
- Make a business plan based on the situation of the reporting year, detailing the quantity by month and quarter. Check the quality of imported goods. If the goods are of poor quality, the seller must be asked to compensate to avoid losses for the company.
- Maintain inventory well. Every month, the goods accountant needs to check the books, detect the remaining goods to handle, find measures to release the remaining goods to quickly recover capital.
- Regularly monitor the fluctuations of the commodity market. From there, predict and decide to promptly adjust imports and the amount of goods in stock before market fluctuations. This is a very important measure to preserve the company's capital.
+ Better organization of goods consumption
- Build and expand the service system in markets with demand. Through the system of organizing research work, learn about customer preferences. This is the bridge between the company and customers. Through that, the company can collect more necessary information and provide appropriate solutions to better serve the needs of customers, strengthening customers' trust in the company.
- Implement the motto "customer is king", apply preferential policies on price, payment terms and means of transportation for units that purchase a lot, regularly or have long transportation distances.
- Strengthen cooperation, expand consumer markets, promote marketing, market research, grasp customer tastes. Expand the market to the southern region and highlands.
The company should set up a marketing department to serve market research. This is an urgent need for the company to build a pricing policy and a promotional policy for the business in the market. This is the basis for the company to offer competitive prices, increase the number of products consumed and gain higher profits as well as increase the company's competitiveness in the current fierce market economy.
+Improve business management capacity
Business management capacity plays a decisive role in the survival of the business, therefore, improving business management capacity is extremely important and needs to be done regularly and continuously. To do that, the Company needs to:
One is : Improve the level of education, understanding of economics, society, culture, law, etc. for managers and employees in enterprises. It is necessary to equip business owners, directors, managers and employees with bachelor's degree education and basic knowledge of economics, society, culture, law, etc.
Second: Strengthening the capacity of business owners, directors and managers in enterprises in business administration and strategic management. In all conditions, entrepreneurs need to regularly update new knowledge and necessary skills (competitive management skills, business leadership skills, change management skills, presentation skills, negotiation and communication skills, etc.) to be competitive enough in the market and access the knowledge economy.
To be competitive in the long term, businesses need to build a sustainable development strategy. In particular, focus on competitive strategies and strategic skills such as: Strategic management, risk management, and sensitivity in management, business analysis, forecasting and strategic development orientation...
3.4. Some suggestions and recommendations
- The State needs to build a system of average indicators for each industry so that companies have an accurate basis for evaluating their position, finding strengths and weaknesses and then taking appropriate measures.
- The State needs to create a favorable environment for business activities, reducing unnecessary cumbersome procedures in applying for investment licenses to expand production and business activities.
- Currently, import companies are facing unequal competition between imported goods and smuggled goods, which is a large difference in price.
The reason for this is that smuggling is still rampant on an uncontrollable scale. Although this issue has been of concern for a long time, no one can confirm whether or when it can be stopped. The proliferation of smuggled goods of all types has caused many difficulties for the company in selling goods in the domestic market and that may be the direct cause of the reduction in the efficiency of the company's working capital. To help the company escape this situation, the State needs to strengthen coordination with relevant departments to prevent smuggling as soon as possible.
- The government needs to promote the development of the financial market, especially the money market, so that businesses can diversify their investments as well as choose methods of capital mobilization. With a developed money market, companies can invest their temporarily idle capital effectively and at the same time easily mobilize capital when needed.
- Further strengthen the role of associations, clubs, director clubs and professional and technical organizations in the development of enterprises.
Chapter 3 Conclusion
Chapter 3 of the thesis has proposed some specific solutions to overcome the limitations, contributing to improving the financial situation of DET Vietnam Joint Stock Company. The above solutions are based on clear and specific analysis of the current financial situation of the Company in Chapter 2 and based on the development orientation of the Company in the coming time as well as the development prospects of the industry in general.
In addition, Chapter 3 also mentions a number of recommendations to the government and relevant agencies, departments and associations to create more favorable conditions for the development of businesses in general and of electronics and refrigeration companies in particular.
CONCLUDE
In an increasingly competitive market economy, only businesses that are able to grasp market needs and adapt to its operating mechanism can survive and develop.
DET Vietnam Joint Stock Company is one of the companies that has affirmed its position in the domestic market. With its development policies and strategies, the Company has known how to use and link its resources in the most effective way to gain a solid reputation and position in the market. In the coming time, the Company's goal is to continuously increase investment in domestic market research, propose effective measures to promptly respond to market changes, and maximize the effectiveness of resources, specifically here, to improve the efficiency of capital use to create a strong financial source for the Company. The Company's accounting work also fully complies with the reporting regimes issued by the State and always exceeds the set targets. With the existing traditions and strengths along with the correct policies of the Executive Board, Vietnam Telecommunications Technology Investment and Development Joint Stock Company will certainly achieve further success in the development process to affirm its class in the electronics and refrigeration industry.
in particular and in the market economy in general.
I hope that my proposed solutions will contribute to the building and development of the company in the coming years.
Once again, I would like to sincerely thank Ms. Chu Thi Thu Thuy and the staff of Vietnam Telecommunications Technology Investment and Development Joint Stock Company for helping me complete this graduation thesis.
Student practice