Table 2 9: Long-term solvency assessment criteria
Unit: VND
INDICATORS
2017 | 2018 | 2019 | 2018 vs 2017 | 2019 vs 2018 | |||
Amount | Amount | Amount | Difference Amount | 2018/20 17 | Difference Amount | 2019/2 018 | |
1. Sales and supply revenue service | 55,541,549,658 | 51,449,979,401 | 30,674,405,528 | (4,091,570,257) | 92.63 | (20,775,573,873) | 59.62 |
2. Discounts minus revenue | (46,348,182) | - | (436) | 46,348,182 | - | (436) | - |
3. Net revenue on sales and service | 55,495,201,476 | 51,449,979,401 | 30,674,405,092 | (4,045,222,075) | 92.71 | (20,775,574,309) | 59.62 |
4. Cost of goods sell | 47,813,978,384 | 43,870,033,220 | 23,791,477,991 | (3,943,945,164) | 91.75 | (20,078,555,229) | 54.23 |
5. Gross profit on sales and service | 7,681,223,092 | 7,579,946,181 | 6,882,927,101 | (101,276,911) | 98.68 | (697,019,080) | 90.80 |
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6. Operating revenue
financial
22,233,615 | 10,007,646 | 9,063,802 | (12,225,969) | 45.01 | (943,844) | 90.57 | |
7. Financial costs | - | - | 57,375,284 | - | - | 57,375,284 | - |
7.1. Interest expense | - | - | 57,375,284 | - | - | 57,375,284 | - |
8. Selling expenses | 1,914,415,822 | 683,275,000 | 1,124,881,691 | (1,231,140,822) | 35.69 | 441,606,691 | 164.63 |
9. Management costs business | 5,085,633,179 | 6,476,170,944 | 5,592,046,649 | 1,390,537,765 | 127.34 | (884,124,295) | 86.35 |
10. Net operating profit business | 703,407,706 | 430,507,883 | 117,687,279 | (272,899,823) | 61.20 | (312,820,604) | 27.34 |
11. Other income | - | - | - | - | - | - | - |
12. Other costs | 5,392,998 | 48,401,222 | 20,714,906 | 43,008,224 | 897.48 | (27,686,316) | 42.80 |
13. Other profits | (5,392,998) | (48,401,222) | (20,714,906) | (43,008,224) | 897.48 | 27,686,316 | 42.80 |
14. Total profit |
pretax accounting
Corporate Income Tax
698,014,708 | 382,106,661 | 96,972,373 | (315,908,047) | 54.74 | (285,134,288) | 25.38 | |
15. Tax costs Corporate Income Tax | 140,681,541 | 86,101,577 | 35,012,513 | (54,579,964) | 61.20 | (51,089,064) | 40.66 |
16. Profit after corporate income tax | 557,333,167 | 296,005,084 | 61,959,860 | (261,328,083) | 53.11 | (234,045,224) | 20.93 |
(Source: Business performance report of INTECH Technology Investment Group Joint Stock Company in 2017, 2018,
2019)
Looking at the company's business performance analysis table, we see: Net revenue in 2018 compared to 2019 decreased by 20,775,573,873 VND, equivalent to a decrease of 40.38%, in 2018 compared to 2017 decreased by 4,091,579,257 VND, equivalent to a decrease of 7.37%. This is an alarming situation regarding the Company's revenue because the general situation of the industry is improving.
Cost of goods sold is the main input cost of the company, so it also has a big impact on the company's production and business results. In 2019, cost of goods sold decreased by VND 20,078,555,229, equivalent to a decrease of 45.77% compared to 2018. In 2018, cost of goods sold also decreased by VND 3,943,945,164, a decrease of 8.25%. This is completely reasonable because sales revenue and service provision are clearly decreasing.
- Company management expenses:
+ The financial cost that the enterprise spent in 2019 was 57,375,284 VND and is also the interest expense, this cost arises from the enterprise's financial debt. This is also an unusual sign that the Company is having difficulty in spending in the enterprise as well as affecting the production and business situation.
+ Selling expenses in 2019 increased by 441,606,691 VND compared to 2018, corresponding to an increase of 64.63%, however, in 2018 compared to 2017, it decreased by 1,231,140,822 VND, corresponding to a decrease of 64.31%. This shows that in 2019, the company's management realized a significant decrease in revenue, so they used selling expenses (specifically advertising expenses) to salvage the situation. This is also a lesson learned for INTECH Technology Investment Joint Stock Company because in 2018, when the operating situation was positive, the company cut back.
Sales spending, not focusing on advertising costs led to a decline in revenue for 2019.
+ Business management costs in 2018 compared to 2017 increased by 27.34%, equivalent to an increase of VND 1,390,537,765. Meanwhile, in 2019 compared to 2018, business management costs decreased by 13.65%, equivalent to VND 884,124,295. From 2017 to 2019, the Company has shifted its cost structure, the Company gradually shifted to focusing on business management costs but neglected sales. This caused abnormalities in the financial situation, the administrator recognized the problem and took specific measures.
However, that effort still could not help INTECH return to prosperity.
It can be seen that the change in cost structure and the decrease in revenue have significantly reduced the Company's profits, as shown below:
- Net profit from the company's production and business activities in 2019 decreased by 72.66%, equivalent to a decrease of VND 312,820,604 compared to 2018, and in 2018 decreased by 38.8%, equivalent to VND 272,899,823 compared to 2017. This is an alarming sign that production and business activities are ineffective.
- The company's pre-tax profit is the total profit of its operations. Compared to 2018, in 2019, total taxable income decreased by VND 285,134,288, equivalent to a decrease of 24.62%; in 2018, compared to 2017, it decreased by VND 315,908,047, equivalent to a decrease of 45.26%.
- Corporate income tax is calculated by multiplying total taxable income by tax rate. Corporate income tax in 2019 decreased by VND 51,089,064, equivalent to a decrease of 59.34%, in 2018 decreased by 38.80%, equivalent to a decrease of VND 54,579,964, due to the company's total taxable income decreasing while the tax rate remained unchanged.
- Profit after tax is calculated by total taxable income minus corporate income tax payable. This is an indicator to evaluate the results of production and business activities. Profit after tax in 2019 decreased by VND 234,045,224, equivalent to a decrease of 79.07% compared to 2018, in 2018 compared to 2017 decreased by VND 261,328,083, equivalent to a decrease of 46.89%. Although the company has fluctuations in the business situation, it still achieves profit in general. That profit is reproduced by the company to improve the business situation.
Through analyzing the company's business results report, we see that the company's business situation is still profitable, however, the decrease in profit from the following year compared to the previous year is a sign that the company needs to take stronger improvement actions.
2.2.5.2 Profitability analysis
Table 2.10: Profitability analysis
Target
2017 | 2018 | 2019 | |
Profit margin on return on sales (ROS) | 1% | 0.58% | 0.2% |
Return on Assets (ROA) | 2.31% | 1.05% | 0.23% |
Return on Equity (ROE) | 4.58% | 2.38% | 0.5% |
The 2017 sales profit is 1%, meaning that for every 100 VND of net revenue, there will be 1 VND of profit. In 2018, it is 0.58%, meaning that for every 100 VND of net revenue, there will be 0.58 VND of profit. The 2019 sales profit is 0.2%, meaning that for every 100 VND of net revenue, there will be 0.2 VND of profit.
The return on equity in 2019 reached 0.5%; that is, every 100 VND of equity generated 0.5 VND of profit after tax, in 2018 it reached 2.38%; that is, every 100 VND of equity generated 2.38 VND of profit after tax, in 2017 it increased to 4.58%, that is, every 100 VND of equity generated 4.59 VND of profit after tax. This is also a good thing for the company that has used equity effectively, creating increasing profits.
According to the calculation results, the asset turnover in 2019 decreased compared to 2018 and 2017, proving that in 2019 the company used assets inefficiently, so the profitability decreased sharply.
Through analyzing the profit indicators, we see that the profit indicators are moving abnormally in a negative direction. This is another basis to prove that the company is using capital less and less effectively, creating a clearly lower profit level.
Thus, although financial indicators do not provide specific numbers, through ratios they help us to evaluate the efficiency, solvency and investment situation of the enterprise within one year of operation.
2.6. Evaluation of financial analysis results at INTECH Technology Investment Group Joint Stock Company
2.6.1. Advantages
During the period 2017 - 2019, the financial situation of INTECH Technology Investment Group Joint Stock Company had the following positive aspects:
- Regarding payment ability: Through the analyzed data, we can see that the Company's payment ability is still maintained at a safe level. Payment indicators are achieved.
Although the good level tends to decrease, it still maintains the financial stability of the Company. The assets are still enough to cover the debts, ensuring that production and business activities remain normal.
- Regarding asset utilization efficiency: Through the analyzed data, we see that asset utilization efficiency tends to decrease, showing that the Company is gradually using assets less effectively. Although it is not yet alarming, measures to maximize efficiency are still needed.
- Regarding the interest payment ratio: Through the analysis data, we see that although interest only arose in 2019, it is still guaranteed. The company has good and safe interest payment ability for credit providers.
- Regarding business performance: Through the analysis data, we see that the Company's revenue and profit suddenly decreased, proving that the Company's operations in 2019 were off track and needed measures to correct the business strategy. The Company still controls and maintains operating costs, but still needs to take actions to change so that the Company can develop further.
2.6.2. Limitations
Besides the achieved results, financial statement analysis at INTECH Technology Investment Group Joint Stock Company still has limitations such as:
- Regarding capital structure: In the capital structure of the Company, there are only short-term debts and equity, while long-term debts account for quite a bit. This is only suitable if the Company does not invest in additional long-term assets or is focusing on production and business. Although it can be seen that equity is high, accounting for a large proportion of total capital, investment in long-term assets will require bringing as many benefits as possible and in as short a time as possible, while long-term assets have