Financial analysis of Licogi joint stock company 14

Reason:

The global financial crisis in recent years has led to a large-scale economic recession, affecting many countries, including Vietnam. The consequence is that the demand for the company's products has decreased. At the same time, the prices of input factors such as equipment, copyright, electricity pole rental, electricity bills, etc. have increased sharply, making it difficult for the company to manage costs (raw material costs, interest costs, etc.), affecting business results.

- Although the company has initially recognized the role of financial analysis, the company's Board of Directors has not yet properly assessed the importance of financial analysis. Financial analysis is only considered an activity accompanying the annual accounting book closing. In addition, the use of results is mainly in the field of financial management and has not yet become a part of the basis for the Board of Directors to make decisions, or orient the activities of functional departments or apply to other areas such as investment business planning, project management and evaluation, etc.

- Currently, the task of financial analysis of the company is only undertaken by the general accountant. The number of analysts is lacking, the level of analysts is weak because the general accountant is only trained in accounting, financial knowledge and experience is very limited. The data used for analysis is mainly based on financial statements, and financial statements only describe the financial situation at the end of the reporting period, so they often do not reflect the financial situation of the company specifically.

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- Financial analysis is entirely internal and subjective, without connection or comparison with other businesses in and outside the industry, and cannot determine the actual situation of the company. In addition, the company has not yet assessed the impact of objective factors on changes.

changes in financial expenditures and the magnitude of the company's financial ratios such as the inflation or deflation of the economy, complex developments of the world and regional economy, consumer price index...

CHAPTER 4: SOLUTIONS AND RECOMMENDATIONS TO IMPROVE THE FINANCIAL SITUATION OF LICOGI 14 JOINT STOCK COMPANY.

4.1. Development orientation and goals of Licogi 14 Joint Stock Company

The socio-economic development strategy to 2020 sets out the development orientation of the construction industry, including the following contents:

Develop the construction industry to reach the advanced level in the region, meet the construction needs of the whole province and have the capacity to bid for construction projects in the province and other provinces in the country. Apply modern technology, improve the quality and effectiveness of planning, design capacity, construction and architectural aesthetics. Develop consulting activities and construction joint stock companies, focusing on strong joint stock companies in each field of transportation, hydropower, irrigation, bridges and roads... Strengthen state management of planning, architecture and construction.

Selectively build a number of major projects of the Province such as the first road system to solidify all communes; build the City's administrative center... with reasonable steps, suitable for capital, technology, market conditions, promoting high efficiency.

Regarding infrastructure, complete the upgrading and construction of key national highways, focusing on routes to all communes, urban areas and routes connecting regions to major economic development centers of the Province, large river bridges, develop and upgrade the transportation system in each region, including rural traffic, ensuring smooth traffic all year round. In which, focus on civil and industrial construction, industrial development investment, housing and urban development, constantly enhance the Company's brand, strive to build the Company into a strong economic group in the following years.

At the same time, enhance competitiveness, integrate with the regional economy, achieve sustainable growth, and produce and trade effectively on the basis of accumulated analysis of joint stock companies and improve the material life and working conditions of employees, and fulfill social responsibilities well.

Some specific targets in the development orientation of Licogi 14 Joint Stock Company in the period 2015-2020:

Strive for an average annual growth rate of 18% - 20%; by 2020, the production and business value will reach 1,000 billion VND; in which the construction and installation sector will decrease by 55% - 58%; industrial production and other business activities will increase by 42% - 45%.

By 2020, strive for revenue value to account for 85% of production and business value, profit on capital ratio to reach 30%-35%; profit on revenue ratio to reach 8%-10%, strive for profitable business and high economic efficiency.

Strive to complete and put into operation major projects of the province such as new urban planning projects, projects of some traffic routes; irrigation reservoir projects; projects to build the City's administrative center; investment in the traffic system to all communes...

4.2. Some solutions to improve the financial situation of Licogi 14 Joint Stock Company

4.2.1. Increase revenue:

- Develop appropriate business strategies and plans that are appropriate to the Company's actual situation:

The right business strategy and plan allows the Company to shape the direction that the Company will reach in the future, it will indicate the goals that the Company needs to achieve to achieve the set goals. When there is a suitable business strategy and plan, it allows the Company to maximize

resources for production and business, thus increasing the Company's operating efficiency, contributing to increased profits.

- Develop and implement marketing plans and policies, promote market research and explore customer needs.

Deploying and implementing marketing plans and policies: product policy, price policy, distribution policy... along with promoting market research and understanding customer needs... allows to meet consumer needs well, contributing to increasing the Company's operational efficiency.

- With product policy: focus on improving the quality of goods and services, diversifying designs, organizing the exploitation of goods sources well, organizing the storage of goods to be ready to supply when the market needs...

-With pricing policy: It is necessary to determine reasonable prices to increase sales volume while still ensuring profits.

- Organize well the business process of the company's products and services.

Organizing the business process of goods and services well requires the Company to perform well in all stages: input supply, input, storage of goods, consumption of goods, payment organization... Performing well in the stages of the above process allows the enterprise to meet the needs of customers, increase sales, cut unreasonable costs arising in the above process and thus increase the enterprise's profit expenditure.

- After-sales services such as good, convenient and quality construction warranty policies contribute to attracting a large number of customers to the company.

with the Company and increase the volume of consumed products and goods, increasing the revenue and profits achieved by the enterprise.

4.2.2. Cost reduction:

Good cost management and cost reduction are basic measures to increase profits for the Company and also create favorable conditions for the Company to lower product prices to compete in the market. Therefore, the Company needs to thoroughly implement the following measures:

- Improve the efficiency of capital use of the Company because without capital, no production and business activities will be carried out. In the coming time, the Company needs to take measures to avoid the situation of capital backlog and capital appropriation. To solve this problem, the Company needs to pay attention to debt collection by assigning responsibility to the Company's accounting department to set up a debt tracking book, monitor customer receivables according to each economic contract. When the economic contract is due for payment, the accounting department is responsible for immediately notifying the Company's management board so that they can arrange someone to collect the debt. If the payment deadline is exceeded, the accounting department must propose a solution to collect the debt for the Company.

- Lowering product costs. This is also a measure to increase profits for the Company. With the characteristics of a construction company, the Company's product costs are made up of the following cost items: material costs, labor costs and general production costs... Therefore, to lower product costs, the Company must have measures to manage the above cost items reasonably.

+ With material costs: this is the cost item that accounts for the highest proportion in the total product cost, so reducing this cost item needs to be taken seriously. But saving on material costs does not mean

Cut down on raw materials in each project and project item. This cost reduction means reducing losses in preservation and transportation costs. The company should also develop plans to improve and replace some types of raw materials to reduce costs without affecting the quality of the project and project items. However, there is one thing that the company needs to pay special attention to and prioritize, which is the quality of the projects.

+ Labor costs: Currently, at the Company, labor costs include the main and secondary salaries of indirect and direct employees. Similar to other construction companies, in order to ensure construction progress and on-time delivery, the Company uses outsourced construction teams. Most of them are freelance workers, so management and monitoring will certainly not be easy.

+ With general production costs: to reduce general production costs, the Company should eliminate unreasonable costs from the product price. It is necessary to closely check the origin of the arising cost items, to see if they arise reasonably or not. In particular, the costs of a project or project item must be borne by that project or project item and cannot be left to the next project or project item.

4.2.3. Adjusting asset structure and capital structure

* Adjust asset structure

Every year, short-term assets account for a high proportion of total assets. Most of the short-term assets are made up of inventories and short-term receivables. Such an asset structure is not really effective and somewhat wastes the Company's resources. To have a more reasonable asset structure, the Company needs to reduce the proportion of short-term assets.

In the structure of short-term assets, the Inventory item accounts for the main proportion. The Company can consider having policies to resolve inventory, sell investment projects in stages to resolve inventory more quickly. Also accounting for a large proportion of short-term assets are receivables from customers, this large item will easily put the Company at risk of facing the insolvency of partners, especially in the period when many businesses are facing difficulties in production and business activities. To limit this risk, it is recommended that the Company build an online debt management system that closely follows each customer and has an assessment of financial potential as well as brand before providing services to limit payment risks.

* Adjust capital structure

From the analysis of the Company's capital structure, we see that all liabilities are mainly prepaid by Buyers, so to create efficiency, the Company needs to have a balanced plan to find an effective financial usage plan.

In addition, the Company can also flexibly and economically use temporarily idle capital from unused reserves.

4.2.1. Perfecting the financial management system, improving staff qualifications

Currently, the Company does not have a specialized department to perform financial analysis. Financial analysis is only performed in a general way by accountants through calculating financial indicators without going into depth to research, analyze and evaluate the financial situation to find the cause and appropriate solutions.

It can be said that the human issue is always the important, core issue and the basic factor that brings success to all activities. Good regulations,