Sáng nay lại tiếp tục vào học môn mới “chính sách tài chính” và được “anh giảng viên” thông báo sơ khởi kết quả thi của môn “vấn đề tài chính chiến lược” đã thi hồi tháng trước. Vậy là đã biết điểm thi của 02 môn đầu tiên, nhưng còn chờ điểm của 02 bài tiểu luận này nữa.
Lần đó, vừa mới nộp bài tiểu luận về “phân tích báo cáo tài chính của công ty VinaMilk năm 2007” với các nhận xét đầy hiệu quả chẳng hạn như: công ty hoạt động “siêu lợi nhuận, hiệu quả tuyệt vời”… thế nhưng ngay tối hôm đó lên mạng Intenet đọc tin tức thì thấy mình đã bỏ sót không phân tích các nhân tố tác động ở tầm vĩ mô như: tốc độ tăng trưởng kinh tế quốc dân GDP, tốc độ phát triển bình quân ngành, lãi suất tiền gởi tiết kiệm, tỉ lệ lạm phát… Cũng may là VinaMilk vẫn còn lãi chút đỉnh sau khi khấu trừ các khoản biến động giá cả ở tầm vĩ mô, chứ không thôi thì hỏng bét cả một bài tiểu luận rồi còn gì…
Thật ra, do ai cũng chỉ lo quan tâm đến tốc độ tăng trưởng kinh tế GDP không thôi, mà thường quên hẳn đi một nhân tố vô cùng quan trọng đó chính là tỉ lệ “lạm phát” chỉ vì nó có cái tên không mấy “thân thiện” nên chẳng ai muốn “dòm ngó” đến để làm gì cả!
Lại một lần nữa phải khâm phục các “kinh tế gia” của Hiệp chủng quốc Huê Kỳ khi đã nghĩ ra một cái tên gọi khác cho nó khá là “hấp dẫn & bí hiểm” đó là: Chỉ số giá tiêu dùng – Consumer Price Index hoặc đơn giản chỉ gọi vắn tắt là CPI.
Chỉ số CPI này theo định nghĩa bằng tổng nhu cầu tối thiểu của 4 gia đình Hoa Kỳ sống tại thành thị sử dụng bình quân trong ngày.
Thế là hàng ngày báo chí khắp thế giới thường loan báo tin tức đại khái như “chỉ số tiêu dùng tháng này tăng hơn 5%” nghe cứ như là nền kinh tế đã phát triển được hơn 5% nên mọi người đã thoải mái hơn trong việc chi tiêu & shopping của mình. Nhưng thực ra là để mua được lượng nhu yếu phẩm có giá $100 Mỹ kim tháng trước thì nay phải tiêu tốn đến tận $105 Mỹ kim… Hay nói túm lại đó chính là “lạm phát” đó, nhưng khi nghe nói chỉ số tiêu dùng hoặc CPI tháng này tăng 5% nghe nó “sang trọng & quý phái” hẳn ra…
Phân tích báo cáo tài chính là việc căn cứ vào những số liệu của các báo cáo tài chính như:
- Báo cáo thu nhập công ty (Lãi / Lỗ)
- Báo cáo thu nhập chủ đầu tư (cổ đông)
- Bảng cân đối kế toán
- Lưu chuyển tiền tệ.
Rồi từ đó phân tích các chỉ số tài chính cũng như các chỉ số hoạt động để xem tình hình kinh doanh của công ty ra sao, đồng thời đưa ra được phương hướng phát triển công ty trong tương lai.
Theo lý thuyết, công ty muốn hoạt động có hiệu quả thì mọi khâu của nó như: sản xuất, kinh doanh, lưu kho, công nợ… đều phải hoạt động đạt hiệu quả. Nhưng nếu công ty tùy tiện chỉnh lý một vài con số cho “đẹp đẽ” nhằm tô vẽ cho chỉ tiêu lợi nhuận thì thường sẽ gặp phải các bất hợp lý ở những chỉ tiêu tài chính khác: tốc độ luân chuyển vốn, kỳ thu tiền bình quân, tỉ trọng vốn lưu động…
Mọi người hãy phân tích 02 báo cáo tài chính đã được kiểm toán bởi công ty KPMG Vietnam thử xem liệu mình có thể đạt được mức độ “phân tích gia” đẳng cấp quốc tế chưa nhé.
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1. Introduction
The financial statements are basically included four types of statements: Income statement, Statement of shareholders’ equity, Balance sheet and Cash flows. These statements provide major information about company’s performance to both direct managers inside and investors or other related organizations outside.
This paper tries to analyze several financial figures throughout considering the actual income statement and balance sheet of VinaMilk Corp. in 2007, as well as point out some suggestions for getting higher operating efficiency.
2. History of Company in Brief
The original company was founded in 1976, and then became a publicly listed company in 2005 which had a state-owned 47.6%, capital 1,752,756,700,000 VND with outstanding volume 175,275,670 shares. According to UNDP’s appraisal, VinaMilk Corp. is ranked in the thirteenth among the 200 leading firms at Vietnam market in 2007 (Cheshier, S & Penrose, J 2007). Besides, VinaMilk also has an estimated plan on issuing more 5% of outstanding shares and shorting them on Singapore Stock Exchange for this year 2008 (VinaMilk 2008).
3. The Financial Analysis on Major Ratios
3.1 The Operating Performance
The simplest technique to review a company’s performance is conducting an evaluation of operating activities through its income statement. This evaluating combined with contemporary information on market will notify us about the overview of company’s capability in business, such as criteria of price/earning, earning per share, dividend payout and dividend yield on common stock.
The following Table 3.1 illustrates the VinaMilk’s income results at year ended December 31, 2007. All the figures of value are converted into the equivalent of Singapore Dollar at the estimated exchange rate of 10,000 VND / SGD and demonstration in using unit of 100 SGD, exception for earnings per share.
Table 3.1 The Income Statement of VinaMilk
As year ended December 31, 2007
Data source: Annual Report 2007 VinaMilk (VinaMilk 2008).
Based on the above information, we easily find that EPS of VinaMilk in 2007 has approximately increased 26% compared to 2006, and brought out an earning of $.5607 for each dollar invested in holding company’s shares or equivalent to an interest level of 56.07% PA. This reward can help to triumph over both the highly inflation’s rate of Vietnamese economy incurring in 2007 to local shareholders, and the exchange difference to foreign investors.
3.2 Performance of the Business
After having overall EPS information, we also continue to view some more ratios about the performance of company, such as:
a. Price/Earnings
The price/earnings ratio tells us the market value of a share over the earnings from holding this share, which can be defined by the formula as follows (Fridson, M & Alvarez, F 2002, pp. 322-325):
P/E ratio = Market value per share / Earnings per share
Due to the quotation statistic on Hochiminh Stock Exchange, the P/E ratios for VinaMilk as at January 15th and October 2nd, 2008 are (Hochiminh Stock Exchange 2008):
P/EJan15 ratio = $15.04 / $.5607 = 26.82 times
P/EOct02 ratio = $9.49 / $.5607 = 16.93 times
It means that the investors are strong confidence in the outlook and earnings growth of VinaMilk Corp., but the P/E ratio on October 2nd, 2008 is declined 9.89 times (equivalent to 16.93 – 26.82) or decreased in 36.88% comparing to on January 15th, 2008 because of the meltdown crisis of global stock exchange markets recently.
On the other hand, according to the data on FPT Securities, the price/earnings ratios for businesses in a range of industries in Vietnam market on June 30, 2008 illustrate in the Figure 3.1 as follows (FPT Securities 2008):
Figure 3.1 The Average Price/Earnings Ratios for Businesses
In Vietnam Market on June 30, 2008
Data Source: Vietnam Stock Market Report: Quarter II – 2008 (FPT Securities 2008).
From the above data, we note that the VinaMilk’s P/E value is higher than the average P/E ratio of the food manufacturing industry. So, the company’s operation gets in touch with efficient among the food producers.
b. Dividend Payout
The dividend payout ratio indicates the proportion of profit paid out to shareholders in the form of dividends, which can be formed as below (Fridson, M & Alvarez, F 2002, pp. 317-320):
Dividend payout ratio = Annual dividends per share / Annual earnings per share
According to the Annual Report 2007 of VinaMilk, the investors’ dividends for 2007 are $.29 per share, so the company’s dividend payout ratio is:
Dividend payout ratio = $.29 / $.5607 = 51.72%
It means that VinaMilk used slightly over half of the net income for encouraging its shareholders and company also would like to attract more investors by giving a high dividend payout percentage.
c. Dividend Yield on Common Stock
The dividend yield ratio measures the dividends rate of return to common shareholders at the current market value, which can be described by the formula: (Thompson, Strickland & Gamble 2008, p.99)
Thus, the dividend yield ratio of VinaMilk Corp. at October 2nd, 2008 is:
Dividend yield on common stock = $.29 / $9.49 = 3.06%
By this figure of 3.06%, the company is classified as a “typical” dividend yield with developing at a normal growth rate.
3.3 Profitability
Now we continue to consider more certain profitability ratios by evaluating data from both income statement and balance sheet.
a. Net Profit Margin
The net profit margin (or net return on sale) ratio shows how much after-tax profits are generated by each dollar of sales, which can be defined by the formula: (Fridson, M & Alvarez, F 2002, pp. 280-283)
Net profit margin = Net profit after taxes / Net sales
In case of VinaMilk, the net profit margins of company are:
In 2007, net profit margin = 963,448 / 6,648,193 = 14.49%
In 2006, net profit margin = 659,890 / 6,245,619 = 10.57%
The company’s net profit margin in 2007 has slightly increased 3.92% (or equivalent to 14.49% – 10.57%) comparing to 2006 because the net profit after taxes increased more than the growth of net sales. It also shows that company operation is a little bit more efficient.
b. Gross Profit Margin
The gross profit margin ratio indicates the total margin available to cover operating expenses beyond cost of goods sold and still yield a profit, which can be shown in the following formula (Atrill, P & McLaney, E 2006, pp. 178-179):
Gross profit margin = Gross profit / Sales revenue
So, the gross profit margins of VinaMilk are:
In 2007, gross profit margin = 1,812,421 / 6,648,193 = 27.26%
In 2006, gross profit margin = 1,567,505 / 6,245,619 = 25.10%
The results show that the gross profit margin of company in 2007 has slightly increased 2.16% (equivalent to 27.26% – 25.10%) comparing to 2006, and had a portion of a little greater than ¼ to net sales.
For further evaluation, we must consider another type of financial statements that is the balance sheet. The following tables 3.2 and 3.3 illustrate the VinaMilk’s balance sheet as year ended at December 31, 2007.
Table 3.2 The Balance Sheet of VinaMilk
As year ended December 31, 2007
Data source: Annual Report 2007 VinaMilk (VinaMilk 2008).
c. Return on Assets
The return on assets (ROA) ratio measures the rate of return on the total assets utilized in the company, which can be formula as follows (Investopedia 2008):
Return on assets (ROA) = Net profit after taxes / Total assets
In situation of VinaMilk Corp, the return on assets ratios are:
In 2007, return on assets (ROA) = 963,448 / 5,425,117 = 17.76%
In 2006, return on assets (ROA) = 659,890 / 3,600,533 = 18.33%
We can see that the company’s total assets in 2007 had increased up 33.63%, but the return on assets slightly decreased -.57% (equivalent to 17.76% – 18.33%) comparing to 2006. It means that the company’s management on assets in 2007 is a little bit of inefficiency.
d. Return on Equity
The return on equity (ROE) ratio measures the rate of return on the book value of shareholders’ total investment in the company, which can be defined by the formula below (Fridson, M & Alvarez, F 2002, pp. 287-291):
Return on equity (ROE) = Net profit after taxes / Shareholders’ equity
For VinaMilk’s condition, the return on equity ratio is:
In 2007, return on equity (ROE) = 963,448 / 4,224,315 = 22.81%
In 2006, return on equity (ROE) = 659,890 / 2,683,699 = 24.59%
At this time, the shareholders’ capital in 2007 had improved up 36.47%, but the return on equity lightly decreased -1.78% (equivalent to 22.81% – 24.59%) comparing to 2006. It is also indicated that the efficiency is declined in term of using capital.
4. The Additional Evaluation on Specific Managing Ratios
Due to understanding transparently about the company’s operations, we have to continue focusing on more specific managing ratios, such as: liquidity, gearing, and operations ratios.
4.1 Liquidity
This group of ratios indicates the company’s ability in payment of its obligations on due date.
a. Current Ratio
The current ratio measures how much of current asset are available to cover each dollar of current liabilities, which can be calculated as follows (Fridson, M & Alvarez, F 2002, pp. 268-271):
Current ratio = Current assets / Current liabilities
In case of VinaMilk, the current ratios are:
In 2007, current ratio = 3,172,434 / 933,357 = 3.40
In 2006, current ratio = 1,996,391 / 754,356 = 2.65
It means that each dollar of current liabilities in 2007 is secured by $3.40 of current assets, and the company’s management in term of using working capital is not productively comparing to 2006 because of the increasing +0.75 (equivalent to 3.40 – 2.65) in current ratio.
b. Quick Ratio
The quick (or acid test) ratio measures the company’s ability to pay off its short-term from current assets exclusive of inventories, which can be presented in the formula below (Fridson, M & Alvarez, F 2002, pp. 268-271):
Quick (or Acid test) ratio = (Current assets – Inventories) / Current liabilities
Thus, the VinaMilk’s quick ratios are:
In 2007, quick ratio = (3,172,434 – 1,669,871) / 933,357 = 1.61
In 2006, quick ratio = (1,996,391 – 965,826) / 754,356 = 1.37
It shows that the company has a quick ratio proficient enough to meet its obligation without any liquidity problems on due date.
c. Inventory to Net Working Capital
The inventory to net working capital ratio is a measure of inventory balance, which can be defined by the following formula (American Express 2008):
For the situation of VinaMilk, the inventories to net working capital ratios are:
= 1,669,871 / 2,239,077 = 0.75
= 965,826 / 1,242,035 = 0.78
It indicates that the scale of inventory to net working capital is so high that it could be threatened for the company in maintaining the reasonable leverage of net working capital.
d. Cash Ratio
The cash ratio indicates how much of the current obligations can be covered by cash and alike-cash assets, which can be determined in the formula below: (12Manage 2008)
Cash ratio = (Cash + Cash Equivalents) / Current liabilities
For the VinaMilk’s case, the cash ratios are:
In 2007, cash ratio = 117,819 / 933,357 = 0.13
In 2006, cash ratio = 156,895 / 754,356 = 0.21
With this extent of cash forms, the company must properly manage all due date of obligations to avoid a shortage of cash in payment.
4.2 Gearing
The main purpose of gearing usage is the company’s shareholders expect to get more profit by borrowing money on interest from others. Therefore, we must look carefully over these borrowed funds through considering of ratios as follows:
a. Debt to Assets
The debt to assets ratio measures the extent of borrowed funds using to finance the company’s operations, which can be defined by formula (Thompson et al 2008, p.98):
Debt to assets = Total debt / Total assets
In case of VinaMilk, the debt to assets ratio is:
In 2007, debt to assets = 1,073,230 / 5,425,117 = 19.78%
In 2006, debt to assets = 862,150 / 3,600,533 = 23.95%
We see that the company’s debt to assets ratio in 2007 has decreased -4.17% (19.78% – 23.95%) comparing to 2006 and it is a little bit better in term of debt.
b. Debt to Equity
The debt to equity ratio measures the creditors’ funds versus the owners’ funds, which can be defined by formula (Fridson, M & Alvarez, F 2002, pp. 268-271):
Debt to equity = Total debt / Shareholders’ equity
For VinaMilk’s situation, the debt to equity ratio is:
In 2007, debt to equity = 1,073,230 / 4,351,887 = 24.66%
In 2006, debt to equity = 862,150 / 2,738,383 = 31.48%
It also shows that the company has a better circumstance in 2007 because the company financed up to ¾ of its operations comparing to about 2/3 in 2006.
c. Long-term Debt to Capital Structure
The long-term debt to capital structure ratio indicates the balance of debt and equity in the company’s long-term capital structure, which can be described in formula below (Thompson et al 2008, p.99):
Long-term debt to capital structure = Long-term debt / Shareholders’ equity
In situation of VinaMilk, the long-term debt to capital structure ratio is:
In 2007, long-term debt to capital structure = 139,873 / 4,351,887 = 3.21%
In 2006, long-term debt to capital structure = 107,794 / 2,738,383 = 3.94%
We find that the extent of long-term debt is inconsiderable to the company’s capital structure because of its insignificant portion.
d. Times Interest Earned
The times interest earned ratio measures the company’s ability to cover its interest costs, which can be formed as follows (Atrill, P & McLaney, E 2006, pp. 193-194):
Times interest earned = Earnings before interest and tax / Interest charges
So, the VinaMilk’s times interest earned ratios are:
In 2007, times interest earned = 955,381 / (11,667 + 50,571) = 15.29
In 2006, times interest earned = 662,774 / (43,591 + 21,192) = 10.23
Based on the VinaMilk’s cash flow statement as year ended December 31, 2007 we find that the company’s interest charges are included the two expenditures of interest expense and interest paid. From result figures above, the company’s profit coverage is so strong to cover all of its interest charges and the creditworthiness in 2007 is better than it in 2006.
e. Current Liabilities to Equity
The current liabilities-to-equity ratio determines the short-term financing portion versus that provided by owners, which can be calculated by the formula:
Current liabilities to equity = Current liabilities / Shareholders’ equity
For VinaMilk’s scenario, the current liabilities to equity ratios are:
In 2007, current liabilities to equity = 933,357 / 4,351,887 = 21.45%
In 2006, current liabilities to equity = 754,356 / 2,738,383 = 27.55%
Through the figures, we can see that the short-term debts of company only get portions around ¼ of shareholders’ equity and it is even reduced down to 21.45% in 2007, just nearly 1/5 of owners’ capital.
4.3 Operations
Last but not least, we are going to analyze all ratios reflected the company’s operations such as inventory, turnover, receivables and payables.
a. Inventory Turnover
The inventory turnover ratio measures the number of inventory turns per year, which can be defined by the following formula (Investopedia 2008):
Inventory turnover = Net sales / Inventory
Thus, the VinaMilk’s inventory turnover ratios are:
In 2007, inventory turnover = 6,648,193 / 1,669,871 = 3.98
In 2006, inventory turnover = 6,245,619 / 965,826 = 6.47
We certainly find that the inventory in 2007 is increased so high that reduced the inventory turnover -2.49 turns (equivalent to 3.98 – 6.47) or decreased in -38.49% comparing to 2006. It means that the company’s operation on sales in 2007 is less efficient than its sales in 2006.
b. Days of Inventory
The days of inventory ratios indicates the company’s efficiency on inventory management, which can be described in the formula below (Atrill, P & McLaney, E 2006, pp. 180-181):
Days of inventory = (Inventory x 365) / Cost of goods sold
In the condition of VinaMilk, the days of inventory ratios are:
In 2007, days of inventory = (1,669,871 x 365) / 4,835,772 = 126.04
In 2006, days of inventory = (965,826 x 365) / 4,678,114 = 75.36
At this moment, we surely notice that the company’s days of inventory in 2007 is expanded so highly considerable up 67.25% comparing to 2006. It shows that the company’s management on inventory in 2007 is not as efficient as in 2006 and the finished goods are kept in inventory too long before shorting them out.
c. Net Working Capital Turnover
The net working capital turnover ratio determines how successfully the net working capital is used to generate sales, which can be found in the formula as follows: (BizMiner 2008)
Net working capital turnover = Net sales / Net working capital
For the VinaMilk’s scenario, the net working capital turnover ratios are:
In 2007, net working capital turnover = 6,648,193 / (3,172,434 – 933,357) = 2.97
In 2006, net working capital turnover = 6,245,619 / (1,996,391 – 754,356) = 5.03
The company’s net working capital just took nearly three turns in 2007, and reduced two turns comparing to 2006. It shows that the company’s operation in 2007 is less successful in management of working capital than it does in 2006.
d. Asset Turnover
The asset turnover ratio measures how many sales are generated by each dollar of assets, which can be described in the following formula (Investopedia 2008):
Asset turnover = Sales / Total assets
In case of VinaMilk, the asset turnover ratios are:
In 2007, assets turnover = 6,675,031 / 5,425,117 = 1.23
In 2006, assets turnover = 6,289,440 / 3,600,533 = 1.75
Each dollar of assets in 2007 has produced to $1.23 of sales, but declined -$.52 (equivalent to 1.23 – 1.75) or decreased -29.71% comparing to 2006. It indicates that the company is less efficient in management of total assets in 2007.
e. Fixed Asset Turnover
The fixed asset turnover ratio measures how good the company is in its utilization of fixed assets, which can be found in the formula below (Sohel 2008):
Fixed assets turnover = Sales / Fixed assets
Now the VinaMilk’s fixed assets turnover ratios are:
In 2007, fixed assets turnover = 6,675,031 / 1,646,962 = 4.05
In 2006, fixed assets turnover = 6,289,440 / 1,071,980 = 5.87
At that time, each dollar of fixed assets in 2007 has only produced to $4.05 of sales, and declined -$1.82 (equivalent to 4.05 – 5.87) or decreased -31.01% as well comparing to 2006. It also indicates that the company is less efficient in management of fixed assets in 2007.
f. Average Collection Period
The average collection period indicates how long it takes for company to get money from it customers after doing business with them, which can be defined in the follows formula (Atrill, P & McLaney, E 2006, pp. 181-182):
Average collection period = (Trade accounts receivable x 365) / Sales for year
So, the VinaMilk’s average collection periods are:
In 2007, average collection period = (505,234 x 365) / 6,675,031 = 27.63
In 2006, average collection period = (393,898 x 365) / 6,289,440 = 22.86
With assumption that the company gives credit to all customers, the average collection in 2007 is around four weeks and increased 4.77 days (equivalent to 27.63 – 22.86) or 17.26% comparing to 2006. It means that the customers in 2007 are more postponed in payment than they do in 2006.
g. Accounts Receivable Turnover
The accounts receivable turnover ratio measures the cycle of accounts receivable turn over during a year, which can be defined by the formula (Money-Zine 2008):
Accounts receivable turnover = Annual credit sales / Accounts receivable
In the VinaMilk’s circumstance, the accounts receivable ratios are:
In 2007, accounts receivable turnover = 6,675,031 / 505,234 = 13.21
In 2006, accounts receivable turnover = 6,289,440 / 393,898 = 15.97
At that time, the accounts receivable in 2007 are cycled 13.21 times, but reduced –2.76 cycles (equivalent to 13.21 – 15.97) or decreased in -17.82% comparing to 2006. It shows that the company gives more credit to customers in 2007.
h. Accounts Payable Period
The accounts payable period indicates how long the company takes to pay its credit purchases, which can be calculated by the formula below (Atrill, P & McLaney, E 2006, pp. 182-183):
Accounts payable period = (Trade accounts payable x 365) / Purchases for year
For the situation of VinaMilk, the accounts payable periods are:
In 2007, accounts payable period = (621,376 x 365) / (6,675,031 + 1,669,871)
= 226,802,240 / 8,344,902 = 27.18
In 2006, accounts payable period = (436,869 x 365) / (6,289,440 + 965,826)
= 159,457,185 / 7,255,266 = 21.98
These calculations are based on the assumption that the total amount of sales and inventory at the company are fully granted by credits from suppliers. We simply find that the period of using free finance from suppliers in 2007 is nearly four weeks, and increased 5.2 days (equivalent to 27.18 – 21.98) or 19.13% comparing to 2006. It is as normally as in trading affairs.
i. Days of Cash
The days of cash ratio refers to the number of days of cash on hand, which can be determined by the following formula (Payne 2001):
Days of cash = (Cash x 365) / Net sales for year
In VinaMilk’s case, the days of cash ratios are:
In 2007, days of cash = (117,519 x 365) / 6,648,193 = 6.45
In 2006, days of cash = (156,195 x 365) / 6,245,619 = 9.13
So, we find that the company’s cash on hand in 2007 is reduced -2.68 days (equivalent to 6.45 – 9.13) or decreased -29.35% comparing to 2006. It means that the company’s management in 2007 has less efficient in term of cash on hand than it has in 2006.
j. Cash-to-Cash Cycle
The cash-to-cash cycle indicates the number of days for cash to finish a rotation of moving through the business operation, which can be defined by the formula as below (Jacob & Bierley 2008):
Cash-to-cash cycle = Days inventory + Days receivable – Days payable
For the VinaMilk’s scenario, the cash-to-cash cycles are:
In 2007, cash-to-cash cycle = 126.04 + 27.63 – 27.18 = 126.49
In 2006, cash-to-cash cycle = 75.36 + 22.86 – 21.98 = 76.24
And now, we notice that the cash-to-cash cycle of the company in 2007 takes 126.49 days for each rotation, and highly increase more 50.25 days (equivalent to 126.49 – 76.24) or 65.91% comparing to 2006. It shows that the company’s operations in 2007 are inefficiency in general. The following Figure 4.3 illustrates the company’s cash-to-cash cycles.
Figure 4.3 The VinaMilk’s cash-to-cash cycles
In summary, after analyzing all the company’s financial statements, we realize that the VinaMilk’s financial situation is good and healthy enough for investors putting their capital to company. For 2007, we are absolutely attracted by the company’s EPS and dividend payout levels of 56.07% and 51.72% in sequence. In addition, the company is also creditworthy as well because of the low debts (a portion of 24.66% debt to equity and 3.21% of long-term debt to capital structure) and high times interest earnings (equivalent to 15.29 times in 2007).
But, we excessively notice that VinaMilk is generally not efficient in operating management and using the gearing which are reflected on the unconsidered amount of both long-term and short-term debts, and the small in assets turnover ratio (each dollar of assets just bring out $1.23 in sales).
6. Recommendations
Based on the VinaMilk’s financial analysis previously, there are some solutions for company to enhance its performance as follows:
- The VinaMilk’s managers should effectively utilize the company’s assets to reach the higher manufacturing capability and proficiency.
- The shareholders should have to craft certain long-term business plans for future investment and exercise the financial leverages to boost up the efficiency of shareholders’ equity.
- The company’s managers should find the way for improving the efficiency of inventory management or changing inventory cost allocation method to reduce the current 126.04 days of inventory down to a more reasonable value, such as 45 days.
