1.3.3.3. Group of ratios reflecting business performance capacity
Activity ratios measure a company's business performance. To improve activity ratios, managers must know which assets are unused or not generating income, so the company needs to know how to use them effectively or eliminate them.
1.3.3.3.1. Inventory turnover
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Inventory turnover is the number of times the average inventory turns over during a period, assessing the effectiveness of a company's inventory management.
Revenue
Inventory Turnover
=
Average inventory
Number of days inventory
Number of days in a year
Inventory turnover
=
The higher the inventory turnover ratio, the better the business is generally evaluated. However, if this ratio is too high, maintaining low inventory levels may result in insufficient inventory levels to meet the consumption contracts of the next period and it may have a negative impact on the company's business.
1.3.3.3.2. Receivables turnover
Reflects the speed at which receivables are converted into cash. This ratio is an important measure of a company's operating efficiency.
Receivables Turnover
=
Sales on credit
Average KPT
Or the formula can be converted to:
Day of the year
Average collection period
=
Receivables Turnover
A higher ratio indicates good debt collection but indicates a strict credit policy that will result in lost sales and profits. Conversely, a low ratio indicates an ineffective credit policy with high risks.
1.3.3.3.3. Short-term asset turnover
Revenue
This ratio measures the company's overall efficiency in using its short-term assets.
Current Asset Turnover
=
Average current assets
This indicator shows how much revenue is generated for each dollar of a company's current assets. The more current assets are used, the higher the current asset turnover.
1.3.3.3.4. Long-term asset turnover
This ratio reflects the efficiency of using long-term assets, mainly concerned with fixed assets such as machinery, equipment and factories.
Long-term asset turnover
=
Revenue
Average long-term assets
This ratio shows how much revenue is generated for every dollar of a company's long-term assets. The more long-term assets are used, the higher the long-term asset turnover.
1.3.3.3.5. Total asset turnover
Total asset turnover
=
This ratio measures the efficiency of asset use in general without distinguishing between short-term and long-term assets. It helps managers see the company's investment efficiency.
Revenue
Average total assets
This ratio shows how much revenue is generated for each dollar of assets. The more assets are used, the higher the total asset turnover.
1.3.3.4. Group of ratios reflecting investment situation and financial structure
1.3.3.4.1. Debt to total assets ratio
Often referred to as the debt ratio (D/A), it measures the extent to which a company uses debt to finance its total assets. This means approximately what percentage of a company's current assets are financed by debt.
Debt to Equity Ratio
total assets
Total debt
= Total assets
Corporate managers often prefer high debt ratios, because the higher the debt ratio means that the company only needs to contribute a small part of the total capital, so the risk in business is mainly borne by creditors. But the higher the debt level, the less secure the business is.
1.3.3.4.2. Debt to equity ratio.
Debt to equity ratio
Total debt
=
The debt-to-equity ratio (D/E) measures a company's use of debt relative to its use of equity.
Equity
1.3.3.4.3. Interest coverage ratio
Interest payable is a fixed cost. The interest coverage ratio reflects the company's ability to cover interest payments from operating profits.
Likelihood ratio
pay interest
=
Earnings before interest and tax
Interest expense
This ratio shows the relationship between interest expenses and a company's profits, helping to assess whether the company is able to pay interest.
1.3.3.4.4. Self-funding ratio
Self-ratio
Sponsorship
Equity
=
Total capital
The self-financing ratio reflects the proportion of the enterprise's equity capital in total capital.
By calculating the debt ratio and the self-financing ratio, we can see the independence or dependence of the enterprise on creditors, the level of self-financing of the enterprise on its business capital. The higher the self-financing ratio, the more the enterprise has its own capital, is highly independent from creditors, and therefore is not bound or pressured by loans.
Lenders are often interested in these indicators and they prefer the enterprise's self-financing ratio to be as high as possible, because this shows that the enterprise's own capital accounts for a large part of the total capital, so if there is a risk in the business, the loss of creditors will be less than in the case of low enterprise equity.
1.3.3.5. Group of ratios reflecting profitability
1.3.3.5.1. Profit to revenue ratio
Revenue
This ratio reflects the relationship between profit and revenue to show how much profit is generated from 1 dong of revenue.
Profit margin
on revenue
Net profit
=
The profit margin on sales depends largely on the characteristics of the industry.
1.3.3.5.2. Ratio of profit before tax and interest to total assets
This ratio reflects the company's basic earning power, excluding the effects of taxes and the company's financial leverage.
EBIT Ratio
total assets
EBIT
=
Average total assets
The ratio shows how much profit before tax and interest is generated for each dollar of a company's assets. The ratio depends largely on the characteristics of the industry.
1.3.3.5.3. Net profit to assets ratio
Return on assets (ROA) measures a company's ability to generate profit per dollar of assets.
Net profit
ROA
=
Average total assets
This ratio shows the income of the enterprise from the assets of the enterprise participating in the business. The higher this ratio reflects the better efficiency of capital use, the capital put into operation has actually brought profit to the enterprise.
1.3.3.5.4. Return on equity (ROE)
This ratio shows how much profit one dollar of equity invested in the business has generated.
Net profit
ROE
=
Average equity
This is the indicator that investors are most interested in because it shows the return on their investment capital.
1.3.4. Dupont analysis of financial ratios
The Dupont analysis equation shows the interrelationship between financial ratios. The Dupont diagram shows the relationship between return on investment, asset turnover, return on sales, and debt level. We have
ROA = Return on Sales x Asset Turnover Ratio
Profit after tax
Net revenue
=
Net revenue
x
Total assets
(1)
ROE = ROA x Financial leverage ratio
Profit after tax
Total assets
=
Total assets
x
Equity
(2)
From (1) and (2), we have the Dupont equation:
ROE =
Profit after tax
Net revenue
Net revenue
Total assets
x
Total assets
x
Equity
Effect of the equation:
Shows the relationship and impact of factors that are indicators of asset efficiency.
Allows quantitative analysis of factors affecting return on equity using elimination methods.
Make appropriate and effective decisions based on the different levels of impact of different factors to increase profitability.
CHAPTER 1 SUMMARY
Financial analysis plays a very important role in the production and business activities of enterprises, providing complete, timely and honest financial information as well as accurately assessing the current situation of the company to make the right decisions in the future to achieve the highest efficiency.
In chapter 1, the thesis systematically outlines the theoretical issues of analyzing the financial situation of a business: the concept of financial statements, the concept of financial situation analysis, along with stating the objectives, meanings and necessary tasks in analyzing financial statements. At the same time, chapter 1 also provides theoretical bases for evaluating the financial situation of a business:
Balance sheet analysis
Overview of income statement 
Analysis of cash flow statement
Analysis of financial ratio groups 
Dupont diagram analysis
The above theoretical system has clarified the issues related to the financial activities of the enterprise, helping us have a clear theoretical basis to delve into the analysis of the financial situation of the enterprise. From there, we can better understand the financial situation of the company, evaluate the advantages and disadvantages to propose measures to overcome the existing limitations in the financial management of the company.
CHAPTER 2
FINANCIAL STATUS AT MILITARY PETROCHEMICAL COMPANY LIMITED
2.1. GENERAL INTRODUCTION OF MILITARY PETROCHEMICAL COMPANY LIMITED
2.1.1. Company introduction