Analysis of Working Capital Efficiency at the Company.

Chart 2.14: Fluctuations in other current assets items.

Unit: VND.

1,600,000,000

1,400,000,000

1,200,000,000

1,000,000,000

800,000,000

600,000,000

400,000,000

200,000,000

1,430,943,387

1,408,287,157

1,170,442,241

133,816,390

Deductible VAT

Taxes and government receivables

119,777,097

2011 2012 2013

(Source: Accounting Department).

The company's other current assets mainly consist of two main items: deductible VAT and Taxes and receivables from the state. The fluctuations of the two items are as follows:

In 2011, the company's deductible VAT was VND 1,430,943,387, accounting for 100% of the total value of other fixed assets.

In 2012, deductible VAT decreased by 18.20% compared to 2011 to VND 1,170,442,241, accounting for 89.74% of the total value of other fixed assets. In this year, a new item appeared, which is taxes and receivables from the state, with a value of VND 133,816,390, accounting for 10.26% of the total value of fixed assets.

In 2013, the company's VAT was VND 1,408,287,157, an increase of 20.32% compared to 2012 and accounted for 92.16% of the total value of other working assets. Taxes and receivables from the state decreased by 10.49% compared to 2012 to VND 119,777,097, accounting for 7.84% of the total value of other working assets.

The amount of corporate income tax that the company must pay to the state is always less than the amount of tax the company has provisionally paid, so the remaining amount is entered by the company into code 152 "taxes and receivables from the state" on the balance sheet for tracking.

The company's other current assets are increasing, although not significantly, but the company needs to manage the value of other current assets more closely to avoid excessive increases. Reduce the amount of deductible VAT by increasing revenue further, promoting sales, avoiding excess and waste of capital.

2.2.2. Analysis of the efficiency of working capital use at the company.

2.2.2.1. General analysis of working capital efficiency.

In the production and business process, working capital is constantly operating, it is a part with a fast circulation speed. The circulation speed of working capital is an indicator reflecting the overall quality, level of business management and corporate finance. Accelerating the circulation speed of working capital contributes to solving the capital needs of the unit, improving the efficiency of capital use.

The efficiency of the company's working capital use is shown in the following summary table:

Graduation thesis Associate Professor, Dr. Phan Dinh Nguyen

Table 2.15. Working capital turnover situation.

Unit: VND.

Target

2011

2012

2013

Difference

2012/2011

2013/2012

Relative

Absolute (%)

Relative

Absolute (%)

1. Net revenue.

35,253,421,588

47,278,474,643

69,088,638,800

12,025,053,055

34.11

21.810.164.157

46.13

2. Average working capital.

12,063,432,083

15.175.240.139

25,276,437,125

3.111.808.056

25.80

10.101.196.986

66.56

3. Working capital turnover

2.92

3.12

2.73

0.19

6.61

(0.38)

(12.27)

4. Number of days for capital turnover

mobile.

123.19

115.55

131.71

(7.64)

(6.20)

16.16

13.98

5. Working capital coverage ratio.

0.34

0.32

0.37

( 0.02)

(6.20)

0.04

13.98

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(Source: Accounting Department).

Changes in net revenue and working capital value affect average working capital turnover and working capital turnover ratio.

Through table 2.15, we can see that net revenue and working capital value increase over the years, however, with different growth rates, the number of working capital turnovers as well as the working capital turnover ratio fluctuate erratically. That erraticity is shown through the following charts:

Chart 2.15: Fluctuations in net revenue and average working capital.

Unit: VND.

80,000,000,000

69,088,638,800

60,000,000,000

40,000,000,000

47,278,474,643

35,253,421,888

Revenue

20,000,000,000

25,276,437,125

15.175.240.139

12,036,432,083

TSLD

average

2011 2012 2013

(Source: Accounting Department).

Chart 2.16. Average number of working capital cycles.

3.2

2.8

2.6

2.4

3.12

2.92

2.73

Year Year Year 2011 2012 2013

Number of VLD revolutions

average

Unit: Rounds/year.

(Source: Accounting Department).

Through table 2.15 and two charts, we can see: In 2011, the company's net revenue was 35,253,421,588 VND, the average working capital was 12,063,342,083 VND. The average number of working capital turnovers was 2.92 times/year, with each turnover taking 123.19 days. The working capital turnover ratio was 0.34, meaning that to generate 1 VND of net revenue, the company lost 0.34 VND of working capital.

In 2012, net revenue increased by 34.11% compared to 2011 to VND 47,278,474,643, while average working capital increased by 25.80% compared to 2011. This made the average number of working capital turnovers this year to be 3.12, an increase of 0.19 compared to 2011. The average number of working capital turnovers decreased by 7.64 days to 115.55 days/turn. In this year, to create one dong of net revenue, the company only spent 0.32 dong of working capital, a decrease of 0.02 dong compared to 2011. The increase in the number of days per average working capital turnover and the decrease in the working capital utilization ratio showed that the company used working capital better than in 2011. At the same time, it also helped the company save capital. The amount of saved capital is calculated according to the following formula:

Number of days per round

average rotation

∆V=

Business

collect

net year n+1

year n+1

Number of days per round

average turnover of year n

360

In 2012, the company saved the following capital:

∆V= 47,278,474,643 x

115.55

- 123.19

= (1,003,354,295) VND

360

Rapid turnover of working capital not only saves capital but also increases the ability to generate money and increase profits for the company.

In 2013, although the net revenue rate increased by 46.13% compared to 2012, the excessive increase in working capital caused the working capital turnover to decrease by 0.38 times, lower than in 2011. The average working capital turnover was 2.73 times/year, the number of days

One rotation increased by 13.98 days compared to 2012 to 131.71 days/rotation. The responsibility ratio increased to 0.37.

With the situation in 2013, the company's management and use of working capital is gradually losing efficiency. Therefore, the company needs to have measures to improve and take advantage of this asset source. On the other hand, the company needs to always seek and expand the consumption market to contribute to accelerating sales, and at the same time have better inventory management and sales credit policies to improve the efficiency of asset use in the unit.

2.2.2.2. Working capital return ratio.

Managers are not only interested in the ability to convert current assets into cash and the turnover rate of those assets, but also aim for the long term, such as evaluating the profitability of the enterprise. This is a basic factor that shows the ability to pay of the enterprise. The ultimate goal of production and business activities is profit. The higher the profit, the more the enterprise affirms its existence in the market. If we only look at the high or low business performance results to evaluate the good or bad performance of the enterprise, it is not accurate. Therefore, to more accurately evaluate the performance of the enterprise, we use the profitability index of working capital. This index of Jadeluck Company Limited is shown in the following table:

Graduation thesis Associate Professor, Dr. Phan Dinh Nguyen

Table 2.16: Profitability of working capital

Unit: VND.

Target

2011

2012

2013

Difference

2012/2011

2013/2012

Relative

Great

opposite to (%)

Relative

Great

opposite to (%)

1. Profit

after tax

2,605,864,255

(2,021,371,927)

(575,636,017)

(4,627,236,182)

(177.57)

1,445,735,910

(71.52)

2. Value of working capital

average

12,063,432,083

15.175.240.139

25,276,437,125

3.111.808.056

25.80

10.101.196.986

66.56

3. Profitability of short-term capital

limit (%)

21.60

(13.32)

(2.28)

(34.92)

( 161.66)

11.04

(82.90)

(Source: Accounting Department).

Through table 2.16 we can see that two factors directly affect short-term capital profitability including after-tax profit and average working capital value.

The higher the profit of the company, the better. However, the company's profit has been decreasing over the years and is in a bad situation. The company is in a state of loss-making business, showing:

In 2011, the company's after-tax profit was VND 2,605,864,255. A garment company with such profit is quite good.

In 2012, the company's after-tax profit decreased and lost an amount almost equivalent to the profit in 2011, a loss of VND 2,021,371,927. Business activities were assessed as poor and ineffective.

In 2013, despite measures to improve sales and minimize costs, the company's profit was still negative 575,636,017 VND. Although not low, this still shows ineffective operations.

Decreased and negative corporate profits negatively impact the profitability of working capital. To see this, look at the following chart:

-5

-10

-15

-20

21.60

2011

2012

-2.28

2013

Short-term TS profitability

-13.32

Chart 2.17: Profitability of working capital.

(Source: Accounting Department).

Through the chart we see that short-term asset profitability, also known as working capital profitability, fluctuates erratically and is in an unfavorable state.

In 2011, every 100 dong of current assets generated 21.60 dong of profit. The company uses current assets very well.

In 2012 and 2013, because the company's profit was negative, the profitability of short-term assets was also negative.