Working Capital Turnover Analysis

Working capital turnover rate: assuming the investment coefficient remains unchanged, the working capital turnover rate has a positive impact on the efficiency of using business capital. In 2020 compared to 2019, the working capital turnover rate increased by 0.087 times, equivalent to 9.8%, making the efficiency of using business capital increase by 0.026 billion VND, although before that, in 2019 compared to 2018, when the working capital turnover rate decreased by 0.038 times, making the efficiency of using business capital decrease by 0.013 billion VND. Comparison shows that in 2019-2020, the growth rate of working capital was slower than the growth rate of net turnover, in which working capital mainly came from short-term receivables, but the growth rate of Revenue was still higher than the growth rate of working capital, showing that the company did not have urgent problems with debt collection or inventory backlog, but the scale of consumption still increased.

Thus, in general, the efficiency of using business capital decreased mainly due to the company's short-term investment coefficient decreasing, but the ratio is gradually decreasing. It can be said that the company's investment policy in fixed assets is gradually showing results, expected to bring further increase in revenue and profit.

Working capital turnover analysis

Overview: The number of working capital turnover cycles in 2020 was 0.981 times, an increase of 0.087 times compared to 2019 (equivalent to an increase of 9.8%). The number of working capital turnover cycles in 2019 decreased by 0.038 times compared to 2018, equivalent to 4.1%. This shows that the company has effectively controlled the use of working capital. This causes the number of working capital turnover days to increase and decrease over 3 years, specifically, in 2020, the number of working capital turnover days decreased by 35.78 days compared to 2019 (down 8.9%). Due to the decrease in the number of working capital turnover cycles in the period 2018 - 2019, the number of working capital turnover days in this period also increased by 16.62 days, equivalent to 4.3%.

Table 2.7: Analysis of working capital turnover rate

Unit: billion VND

Target

2020	2019	2018	2020/2019		2019/2018
			ST	TL (%)	ST	TL (%)
1. Student	0.981	0.894	0.932	0.087	9.8%	-0.038	-4.1%
- LCT	5,890.34	5,357.64	5,426.12	532.70	9.9%	-68.48	-1.3%
- Number	6,003.84	5,993.37	5,819.52	10.47	0.2%	173.85	3.0%
2. Working capital turnover period (K ld )	366.94	402.72	386.10	-35.78	-8.9%	16.62	4.3%
3. The MĐAH of the Labor Force to the Labor Force	∆ SV lđ (S lđ ) = LCT 0 /S lđ1 - SV lđ0			- 0.002		- 0.027
4. The MĐAH of S lđ to K lđ	∆K lđ (S lđ ) = ((360*S lđ1 )/LCT 0 )-K lđ0			0.70		11.53
5. LCT's MDAH to SV LĐ	∆SV lđ (LCT) = SV lđ1 - LCT 0 /S lđ1			0.089		- 0.011
6. LCT's MDAH to K ld	∆K lđ (LCT) = K lđ1 -((360*S lđ1 )/LCT 0 )			- 36.48		5.08
ST (+,-)	∆K lđ xd 1 = ∆K lđ X LCT 1 /360			-585.43		247.29

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(Source: Financial statements 2018 - 2020 and author's calculations)

Specifically:

The number of working capital turnover is influenced by two factors: average working capital balance and net cash turnover:

+ Under the condition that other factors remain unchanged, the average balance of working capital in the period 2019 - 2020 increased from 5,993.37 billion VND to 6,003.84 billion VND, which will cause the number of working capital turnover cycles to decrease by 0.002 times, while in the period 2018-2019 it decreased by 0.027 times.

+ Under the condition that other factors remain unchanged, net cash turnover in the period 2019 - 2020 increased from VND 5,357.64 billion to VND 5,890.34 billion, which will increase the number of working capital turnovers by 0.089 times. The impact is better than in the period 2018 - 2019, the number of working capital turnovers decreased by 0.011 times, showing that the company's net turnover has increased in the past 2 years.

The working capital turnover period is also affected by two factors: average working capital balance and net turnover:

+ Under the condition that other factors remain unchanged, the average balance of working capital in the period 2019 - 2020 increases from 5,993.37 billion VND to 6,003.84 billion VND, which will increase the working capital turnover period by 0.7 days and increase by 11.53 days in the period 2018 - 2019.

+ Under the condition that other factors remain unchanged, the net cash turnover in the period of 2019 - 2020 increased from VND 5,357.64 billion to VND 5,890.34 billion, which will reduce the working capital turnover period by 36.48 days, while in the period of 2019 compared to 2018, it increased by 5.08 days. Showing that the increase in net turnover affects the net turnover period in 2019 - 2020, which is better than in 2018 - 2019.

In the period 2018 - 2019, the amount of working capital wasted due to changes in working capital turnover rate was 247.29 billion VND.

In the period 2019 - 2020, the amount of working capital saved due to changes in working capital turnover rate is 585.43 billion VND.

Although there was waste in the period of 2018 - 2019 due to an increase in working capital turnover, the period of 2019 - 2020 showed that the enterprise had good control over working capital turnover. It can be seen that the enterprise has implemented a good plan for using working capital to avoid increased waste.

In relation to the above factors, we see that net turnover increases faster than the growth rate of working capital. Specifically, in the period 2019-2020, both working capital and net turnover increased, but the growth rate of net turnover was higher (9.9%) than the average growth rate of working capital (0.2%), proving that the company has strengthened working capital management, has a plan to increase revenue more, thereby increasing net turnover. Improve the number of working capital turnover, prevent the downward trend of working capital turnover .

Inventory turnover analysis

Table 2.8: Inventory turnover rate analysis

Unit: billion VND

Target

2020	2019	2018	2020/2019		2019/2018
			ST	TL (%)	ST	TL (%)
1. Inventory turnover ratio (SV tk )	4,495	3,725	3,068	0.770	20.68%	0.657	21.43%
- Cost of goods sold (Cost of goods sold)	4,033.89	3,643.62	3,872.58	390.27	10.71%	- 228.96	-5.91%
- Average inventory value ( Stock )	897.36	978.14	1,262.35	- 80.78	-8.26%	- 284.21	-22.51%
2. Inventory turnover period (K tk )	80.08	96.64	117.35	- 16.56	-17.13%	- 20.71	-17.65%
3. The MĐAH of the S tk to the SV tk	∆SV tk (S tk )=GV 0 /S tk1 - SV tk0			0.3353		0.8914
4. The MĐAH of S tk to K tk	∆K tk (S tk ) = ((360xS tk1 /GV 0 )-K tk0			(7.9816)		(26.4208)
5. Teacher's and student's communication	∆SV tk (GV) = SV tk1 -GV 0 /S tk1			0.4349		(0.2341)
6. Teacher's MĐAH to K tk	∆K tk (GV)=K tk1 - ((360*S tk1 )/GV 0 )			(8.5778)		5.7139
ST (+,-)	GV 1 /360 x ∆K tk			(96.1158)		57.8315

(Source: Financial statements 2018-2020 and author's calculations)

Overview: In 2020, the inventory turnover rate was 4,495 times, the inventory turnover period was 80.08 days, indicating that in 2020, the inventory turnover was 4,495 times, each turnover took 80.08 days. In 2019, the inventory turnover was 3,725 times, each turnover took 96.64 days. In 2018, the inventory turnover was 3,068 times, each turnover took 117.35 days. The inventory turnover rate in 2020 compared to 2019 increased by 0.77 times, equivalent to 20.68%, the inventory turnover period decreased by 16.56 days, equivalent to 17.13%. In 2019 compared to 2018, the inventory turnover rate increased by 0.657 times, equivalent to 21.43%, causing the inventory turnover period to decrease by 20.71 days, equivalent to 17.65%. Because the total cost of goods sold in 2020 increased compared to 2019, but the cost of goods sold in 2019 decreased compared to 2018 because although the number of inventory turnover cycles increased steadily over the past 3 years, but if in the period of 2018-2019 the company had a deficit of 57.8315 billion VND of inventory, then in the period of 2019-2020 the company saved 96.1158 billion VND of inventory.

Specifically:

Regarding inventory: Assuming other factors remain unchanged, the increase in inventory turnover is due to the influence of two factors: average inventory and cost of goods sold. Changes in average inventory have an opposite impact on inventory turnover. Specifically, in 2020 compared to 2019, the average inventory value decreased by VND 80.78 billion, equivalent to 8.26%, causing the inventory turnover to increase by 0.3353 cycles and the inventory turnover period to decrease by 7.9816 days, causing the inventory turnover rate to increase. The reason is that in the company's inventory structure, the main cost of unfinished production and business of projects that have not been accepted at the end of the year has decreased, showing that the project progress is good, and the inventory of raw materials is consistent with the current situation of the projects.

Considering both factors at the same time, we see that in the period 2018-2020, the growth rate of capital is smaller than the growth rate of cost of goods sold, which shows that the company has reserved and controlled inventory reasonably and effectively.

Regarding Cost of Goods Sold: Assuming other factors remain unchanged, changes in cost of goods sold have a positive impact on inventory turnover. Specifically, in 2020 compared to 2019, cost of goods sold increased by VND 390.27 billion, causing inventory turnover to increase by 0.4349 cycles and inventory turnover period to decrease by 8.5778 days, while in 2019 compared to 2018,

The cost of goods sold decreased by 228.96 billion VND, causing the inventory turnover to decrease by 0.2341 times, and the inventory turnover period to increase by 5.7139 days. The reason for the change in total cost of goods sold is due to the scale of consumption, the objective reason may be due to the increase in prices of input factors, causing the cost of goods sold to increase, or the subjective reason may be due to the company's capital usage efficiency decreasing, causing the cost of goods sold to increase.

The fact that the cost of goods sold increased but the rate of increase of cost of goods sold was greater than the rate of increase of average inventory, combined with the reason that the total cost of goods sold increased due to increased consumption scale, this is considered reasonable with the current production and business situation of the company.

Analysis of receivables turnover rate

Table 2.9: Analysis of receivables velocity

Unit: billion VND

Target

2020	2019	2018	2020/2019		2019/2018
			ST	TL (%)	(ST)	TL (%)
1. Number of debt collection cycles (SV pt )	2.16	2.38	3.29	- 0.22	-9.33%	- 0.91	-27.66%
- Net revenue (DTT)	5,639.75	4,889.83	5,100.65	749.92	15.34%	- 210.82	-4.13%
- Average bank receivables army (Spt)	2,610.13	2,051.84	1,548.19	558.29	27.21%	503.65	32.53%
2. Debt collection period (K pt )	166.61	151.06	109.27	15.55	10.29%	41.79	38.25%
3. The MĐAH of S pt to SV pt	∆SV pt (S pt ) = DTT 0 /S pt1 -SV pt0			- 0.51		-0.81
4. The MĐAH of S pt to K pt	∆K pt (S pt ) = ((360*S pt1 )/DTT 0 )-K pt0			41.10		35.5
5. The DTT's MDAH to the SV pt	∆SV pt (DTT) = SV pt1 -DTT 0 /S pt1			0.287		-0.103
6. The MDAH of DTT to K pt	∆K pt (DTT) = K pt1 -((360*S pt1 )/DTT 0 )			- 25.55		6.2
ST (+,-)	D 1 x ∆K pt = DTT 1 /360 x ∆K pt			243.61		567.64

(Source: Financial statements 2018 - 2020 and author's calculations)

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