(short term)
Current ratioCurrent assets |
= |
Short-term debt |
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The higher the value of this ratio, the better the ability of the Group to pay short-term debts and vice versa. If the current ratio is less than 1, the Group is not able to pay short-term debts. However, if this number is too high, it means that the Group has invested too much in short-term assets compared to its needs.
Quick Ratio | = | Cash and cash equivalents + receivables + investments short term investment |
Total current liabilities |
- Quick ratio:
= | Total current assets – inventories – short-term prepayments |
Total current liabilities |
The higher this index is, the better the Group's ability to pay quickly.
Abundant, however, if too high it can lead to excess cash capital leading to low capital efficiency.
- Short-term net working capital
Net short-term working capital = Total net value of current assets – Total current liabilities
In order for the Group to operate continuously and without interruption, it is necessary to maintain an appropriate level of short-term net working capital to satisfy short-term debts. The larger the net working capital, the higher the Group's solvency. However, like other indicators, if the net working capital is too high, it will lead to low capital efficiency.
c, Analysis of the Group's long-term debt payment ability
To analyze the Group's ability to pay long-term debt, we often use the ratio method to analyze information on the balance sheet and income statement.
- Balance sheet analysis: We often use the following indicators to analyze the Group's long-term debt payment ability:
+ General long-term debt ratio:
long term debt overview
Payment ratio= | Total long-term assets |
Total long-term debt |
This indicator shows the ability to use fixed assets and long-term investments to pay long-term debts. The higher this indicator is, the better the Group's ability to pay long-term debts.
+ Long-term debt ratio of next year
next year deadline
Long-term debt coverage ratio= | Expected depreciation recovery next year |
Long-term debt due next year |
This indicator shows the ability to pay long-term debt due next year with the expected depreciation capital collected. This low indicator (<1) shows that the Group needs to mobilize more capital to pay off loans due.
- Analysis of business performance report: The indicators on the business performance report show the Group's ability to generate profits in the future. If the annual profit is enough to pay the interest on the debt, the Group will not have to worry about short-term payments, only having to worry about paying the principal when due.
To analyze the ability to pay long-term loan interest in the current year and next year, we use the long-term loan interest payment ratio:
long term loan
Interest coverage ratio= | Profit after corporate income tax and interest – dividends |
Interest expense |
We can calculate this index for the current year and next year based on the forecast of next year's business results. The higher this index is, the better the Group's ability to pay interest. The Group not only has the ability to pay interest but also to pay principal.
1.2.3.4 Business performance analysis
Business efficiency is a comprehensive economic indicator reflecting the level of use of the Group's resources to achieve the highest efficiency.
Business efficiency analysis needs to combine efficiency analysis in departments and aspects of the business process such as loan efficiency indicators, costs, etc.
a) General assessment of business performance
- Analyze the fluctuations of each indicator on the business performance report. Through that, we will know the impact of the indicators and the causes affecting the analyzed profit. At the same time, compare the increase and decrease rates of the indicators on the business performance report to know the savings of expenses, the increase of revenue, in order to exploit strengths and overcome weaknesses in business operations.
For easy analysis and comparison, we often make the following table:
Target
Code | Last year | This year | Increase, reduce | ||
± | % | ||||
1. Sales and service revenue 2. Deductions 3. Net revenue from sales and service provision (10 = 01 – 02) 4. …………. | 01 02 10 | ||||
b) Analysis of asset utilization efficiency
To analyze the efficiency of asset use, the following indicators are often used:
- Asset turnover: This indicator shows how many times the assets are turned over in an analysis period. The higher this indicator is, the faster the assets move, contributing to increased revenue and being a condition for increasing profits for the Group.
asset
Number of revolutions of= | Total net revenue |
Average total assets |
Net revenue is taken from the indicator coded 10 on the consolidated income statement. It is calculated by adding up the corresponding items on the income statements of the parent company and its subsidiaries after adjusting for internal transactions.
- Return on assets (ROA): This indicator shows how much profit the Group earns after corporate income tax for every VND of assets invested by the Group in an analysis period. The higher this indicator, the better the efficiency of the Group's asset use.
return on assets (ROA)
Profitability of= | Profit after tax of the Group and minority shareholders |
Average assets |
Profit after tax is taken from the item profit after corporate income tax code 60 on the consolidated business results report. Only calculating the profit after tax of the Group without including the "minority shareholder interest" part does not fully reflect the profitability of the assets.
- Asset turnover time:
of property
Time for 1 rotation= | 365 |
Asset turnover |
This index has the opposite meaning to the asset turnover. This index shows the rotation speed of assets, the higher this index, the higher the efficiency of asset usage.
To analyze the efficiency of using the Group's assets, in addition to analyzing total assets in general, we also analyze the efficiency of using each asset item in the consolidated balance sheet. The indicators to calculate the efficiency of using each asset item are similar to calculating the efficiency of using total assets. In which, the important
especially the calculation of the efficiency of using fixed assets (long-term assets) and inventories (short-term assets).
c) Analysis of capital efficiency
To analyze the efficiency of the Group's use of equity, we use the profitability index of equity. This indicator shows how much profit one dong of equity of the Group generates. The higher this indicator, the more efficient the Group is. We can also compare this indicator with the bank loan interest rate. If this indicator is higher than the bank loan interest rate, the Group should borrow money to invest in production and business activities. On the contrary, the Group needs to narrow the scope of borrowing money to ensure safety and develop capital for business activities.
= | Profit after tax - the benefits of preferred stock – minority shareholder interests | |
Equity |
In which: - Equity is the Group's equity, excluding the interests of minority shareholders.
- Profit after tax on the income statement includes the interests of minority shareholders. However, to accurately see the efficiency of the Group's use of equity, it is necessary to exclude the interests of minority shareholders.
1.2.4.3.4 Cost-effectiveness analysis
The Group's expenses during the period usually include: Cost of goods sold, selling expenses, Group management expenses, etc. These are expenses incurred to earn profits during the period. To evaluate the efficiency of cost use, the following indicators are often used:
- Profit margin compared to cost of goods sold
with cost of goods sold
Profit margin vs.= | Net profit from operating activities | x 100 |
Cost of goods sold |
2 WDHAMMAN – Cash Flow Ratios – University of Stellenbosch Business School: http://www.iassa.co.za/articles/038_sum1993_05.pdf
- Pre-tax profit margin compared to total cost:
before tax vs total cost
Profit marginProfit before tax | |
= | Total cost |
Pre-tax profit is taken from item number 50 in the consolidated income statement. Total expenses are the sum of items number 11, 22, 24, 25, 32 in the consolidated income statement.
The higher these indicators are, the less the Group has to spend to generate a profit, which means the Group is operating effectively.
However, for a Group with many businesses in many different business lines or businesses in a production chain, these indexes are not very meaningful, because each different industry has a different profit margin, the calculated index is only the average index of the whole market.
1.2.4.4 Business performance analysis for investors
Investors (shareholders) are often interested in indicators such as: earnings per common share, ratio of market value to par value of a share, dividend payout ratio, and dividend yield to make investment decisions.
- Earnings per share (EPS):
Income per Shares (EPS) | = | Group's profit after tax - preferred dividends |
Average number of shares outstanding during the year |
This indicator shows how much profit each common stock of the investment group brings, the higher this indicator is, the more attractive the investment group is.
The average number of shares outstanding during the year can be obtained from the group's financial statements. Usually, groups of companies also disclose this indicator on the consolidated business results report, code 20.
- Ratio of market price to par value of 1 share.
with par value of shares
Market price to price ratio= | Market price of 1 share |
Face value of 1 share |
Shows how many times the value of each share on the stock market is compared to its face value (stock score coefficient). This indicator must be considered very carefully, if this indicator is high, it may be due to the financial capacity of the group of companies being strong, having business prospects, but it may also be due to overconfidence, exaggeration of the Group's prospects.
- Dividend payout ratio:
= | Dividend per share | x 100 |
Earnings per share (EPS) |
This indicator shows how much dividend each share receives in a period. The value of this indicator depends on the purpose of each investor. If this indicator is high, it means that investors receive a lot of dividends, but it also means that the group of companies retains little profit for reinvestment, which can reduce future profits.
- Dividend yield:
share
Rate of return= | Dividend per share | x 100 |
Market value of a share |
This indicator shows how much dividend an investor gets for every 1 dong invested. This indicator has the same meaning as the dividend payout ratio.
CHAPTER II: CURRENT STATEMENT OF PREPARATION AND ANALYSIS OF CONSOLIDATED FINANCIAL STATEMENTS IN VIETNAM
2.1 Current status of consolidated financial reporting in Vietnam
2.1.1 Research on how to prepare consolidated financial statements in 2007 at Vietnam Water Supply, Drainage and Environment Construction Investment Corporation (WIWASEEN)
2.1.1.1 Prepare financial statements before consolidation
List of Subsidiaries consolidating Financial Statements with the Parent Company. Voting rights holding ratio of VIWASEEN Corporation, and interest ratio of VIWASEEN Corporation in these Companies.
Table 04: List of Subsidiaries and the interest ratio and voting rights ratio of VIWASEEN Corporation in these companies.
STT
Subsidiary name | Rate of Benefit | Voting rights ratio | |
1 | Water Supply and Drainage Construction Joint Stock Company No. 1 (VIWASEEN.1) | 52% | 52% |
2 | Construction Mechanical Joint Stock Company No. 2 for Water Supply and Drainage (VIWASEEN.2) | 52% | 52% |
3 | Drilling and Construction Joint Stock Company (VIWASEEN.3) | 56% | 56% |
4 | Electricity, Water, Installation and Construction Joint Stock Company (VIWASEEN.4) | 51% | 51% |
5 | Water Supply and Drainage Drilling and Construction Joint Stock Company No. 11 (VIWASEEN.11) | 51% | 51% |
6 | Water Supply and Drainage Construction Joint Stock Company No. 12 (VIWASEEN.12) | 50.3% | 50.3% |
7 | JSC. Construction and Production of Water Equipment (VIWASEEN.14) | 52.6% | 52.57% |
8 | Water Supply and Drainage Construction Joint Stock Company No. 15 (VIWASEEN.15) | 53% | 53% |
9 | Investment and Construction Joint Stock Company (VIWASEEN Hue) | 20% | 51% |
10 | JSC. Human Resources Development, Trade and Tourism - VIWAMEX | 50.5% | 50.5% |
11 | WASE Water Supply and Environment Consulting JSC | 51% | 51% |
12 | CT. WASECO Water Supply and Drainage Construction | 100% | 100% |
(Source: Accounting books of VIWASEEN Corporation)
In which, VIWASEEN Hue Joint Stock Company, although only 20% owned by VIWASEEN Corporation, is still considered a subsidiary of VIWASEEN Corporation and performs the consolidation of Financial Statements normally like other subsidiaries because the investors of VIWASEEN Hue Company have agreed to give VIWASEEN Corporation over 50% voting rights. Therefore, the Corporation