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Table 14. The profitability ratios of NTMED

Table 14. The profitability ratios of NTMED

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GRADUATION THESIS



ACADEMY OF

FINANCE



2013. Thus, ROA was relatively low; the company needs to have method increase

this ratio in order to limit risks when investing assets.

 Return on Equity (ROE) of NTMED

Return on equity measures how efficiently a firm can use the money from

shareholders to generate profits and grow the company. This ratio was 7.4% in 2012

and 7.8% in 2013; this means that every dong of equity can create more than 0.07

dong profit. This shows that the company is using its investors' funds effectively.

But ROE of the company in 2014 slumped to 1.1%, which means that the company

used equity and raise capital ineffectively.

In general, although the profit margin ratio was stable, return on asset and

equity ratio of the company was not good. That results basically show that

companies achieved profits from their operation as well as a return on investment in

inventory and other assets was not really effective. Investors and creditors can use

profitability ratios to judge a company's return on investment based on its relative

level of resources and assets. To attract and create good image to creditors and

investors, the company has to solutions to use their assets and equities sufficiently

to generate more profits.

2.2.2.5 DuPont Analysis

Table 15. DuPont Analysis

Unit: Times

Year

Profit margin



2012

0.031



2013

0.02



2014

0.027



Total Asset Turnover



1.99



0.3



0.64



Financial Leverage

0.23

0.33

0.39

ROE

0.074

0.078

0.011

ROE in 2013 reached a peak at 0.078 over three years. ROE increased from

2012 to 2013 mainly due to the increase of financial leverage although total asset

turnover and profit margin were decreased. However, ROE in 2014 decreased to

0.011 compared to 2013. Although total asset turnover ratio increased significantly,

the main reason is the slight increase of profit margin and financial leverage. So, it’s



CHU THI HUONG GIANG



CLASS: CQ50/51.02



GRADUATION THESIS



ACADEMY OF

FINANCE



necessary to increase revenue, decrease expenses in order to promote profit and

develop business operation of the company.

2.3



Evaluation about financial capacity of the company through financial



analysis:

2.3.1 Advantages

a. Asset and Capital resources

In general, the scale of asset was expanded through 3 years due to the increase

of cash and cash equivalent:

Over 3 years, cash and cash equivalent increased significantly from 240.22

million dong in 2012 to 527.4 million dong in 2014 and tended to be rising in the

future. This leads the liquidity of the company is quite high, so companies should

maintain the amount of money to limit risks in liquidity

Fixed assets accounted for a small proportion of total asset of NTMED. The

situation of fixed assets remained stable at roundly 500 million.

b. Business Operations:

Total revenue was a peak of 20,718.09 million dong at 2013 due to net sales

came from carrying out some equipment and services providing contracts.

According to NTMED’s financial statements, the company provided domestic

equipment for VINMEX International Hospital with total revenue of approximately

3 billion and maintenance services for with total revenue 2 billion in 2013. In 2014,

the company did not carry those services so revenue had a slightly decrease.

Because of the decrease of revenue, gross profit of company increased steadily

from 70.54 in 2012 to 1,316.14 million dong 2014. In general, the EBIT increased

because financial income rose significantly of the years 2012 – 2014 due to the fact

that the deposit interest in 2014 was more than that in 2013.

NTMED had a quite good profitability situation. High profit margin indicated

that they actually had high earning per each VND of revenue.

2.1.3.



Disadvantages



a. Assets and Capital Resources:



CHU THI HUONG GIANG



CLASS: CQ50/51.02



GRADUATION THESIS



ACADEMY OF

FINANCE



Firstly, the asset structure of the company was not reasonable. The current

asset accounted for almost proportion of total asset. The company did not consider

about investment in non – current asset because main business activity of company

is to provide maintenance service, maintenance and technical equipment for health

area.

Secondly, amount of receivables and receivable turnover was in bad level,

which shows that the company found difficulty to collect receivables. The situation

of receivable turnover and days sales outstanding seemed negative. Low receivable

turnover and high days sales outstanding (compared to the industry average)

indicates that a large amount of money was occupied by the customers. This caused

the company having fewer opportunities to invest in beneficial projects. Thus,

company needs to speed up the debt collection to avoid occupied capital situation.

Finally, liabilities of the company was high with the number of over 80% of

total capital, showing the ability to self-finance of the companies is low and the

working capital of the company depends heavily on external funding. Although the

proportion of debt in the capital structure reduced during 2013, total liabilities had

an upward trend in 2014. In particular, since 2014, amount of advance from

customer boomed although trade account payables had reduction.

b. Business operations

Along with the rise of revenue, NTMED’s cost had the same trend when

increased in 2013 and 2014. There are many factors effecting the change of total

cost. Among them, the most important factor and the direct effect of fluctuations in

the cost is cost of sales. Besides, the general & administration expense of NTMED

has increased in recent years and has been predicted to rise in the coming years.

Therefore, companies should try to manage and use of general & administration

expenses effectively, while continuing to reduce cost of goods sold by increasing

sales prices. But the company needs to consider cautiously because the issue of

price is very sensitive to revenue.



CHU THI HUONG GIANG



CLASS: CQ50/51.02



GRADUATION THESIS



ACADEMY OF

FINANCE



c. Asset management

Base on the decrease of total assets turnover of NTMED, we can conclude that

the efficiency of using capital in this year were not good. Although having a huge

amount of assets, company wasn’t able to exploit them to make higher revenue.

Inventory turnover has the increase trend. The company remained too much

inventories because this is one part of company’s business operations in which

company have to storage equipment using for operational and maintenance services.

However, it also brought many financial difficulties for the company because

inventory is illiquidity and can’t be turn into cash in a short time and costs many

management expenses.

d. The liquidity

Liquidity of the company is not very satisfactory because the company depended

heavily on external fund. It was reflected by the figure when liquidity ratios of

NTMED decreased over 3 years. Although the amount of current assets could cover

short-term debt, the liquidity risk is relatively high. Because, in general most of the

current assets was inventory whose liquidity are very low.



CHU THI HUONG GIANG



CLASS: CQ50/51.02



GRADUATION THESIS



ACADEMY OF

FINANCE



CHAPTER 3: SOLUTIONS AND RECOMMENDATIONS TO ENHANCE

FINANCIAL CAPACITY OF NTMED COMPANY THROUGH FINANCIAL

ANALYSIS

3.1.



Development orientation of the NTMED company in the future



3.1.1. The context of Vietnam economy and healthcare industry in the next years

According to assessment of experts, in 2015 and 2016, Vietnam’s economy

will develop more sustainable than it in 2014. Especially, Vietnam will join as

international organizations such as TPP, FTA, that open new and potential

opportunities for the country’s economy. The State Bank is responsible for flexible

monetary policy management and strives to reduce interest rates for medium – term

and long – term from 1% to 1.5% per year with market measures in order to boost

credit growth for production and trading. In addition, the State also considers and

regulates the effect of exchange rate’s change on exportation – importation,

inflation, public debt. Government also finds out tax solutions matching export and

import of goods tax reduction roadmap according to the international commitment

to simultaneously achieve an economic integration and contribute to the protection,

push up domestic production.

In addition, healthcare is one of the key industries in Vietnam today. The

technical conditions of Vietnam showed potential development of this sector in the

future. With its potential growth, projects related to healthcare sector will be

supported by the State in capital and human resources. Many plans will be built to

meet the increased demand equipment’s consumption. This is a huge opportunities

for medical companies, especially NTMED.

3.1.2. Development orientation of the NTMED

Based on the summary of the economy and petroleum sector situation in

previous section, there are development orientations of NTMED in 2015 and the

next years:

Firstly, supported by Ministry of Healthcare, although company had just new

established entity, the NTMED made every effort to develop in the field.



CHU THI HUONG GIANG



CLASS: CQ50/51.02



GRADUATION THESIS



ACADEMY OF

FINANCE



Professionally developing is a company’s strategy to ensure NTMED growing and

developing according to the goal of the Corporation as well as the wishes of the

entire Board of Directors and staffs of the company

Secondly, company signed long-term contracts with Titan Medical Inc. contractors as a general contractor. Titan Medical Inc. was good reputation in the

world, in which they supplies system inclusive of machinery, plant and equipment

associated with support services to maintain and operate equipment. This is an

important foundation for the company to experience with advanced and model

technology. So NTMED should promote this advantage by making more joint

ventures with foreign companies to provide equipment’s and training. To improve

image on the market and learn experience, the management of the company have

detailed plans to make partnership with the development companies in Vietnam and

in the world. Besides, the company also pays attention to the improving knowledge

and skills for staffs and employees.

Thirdly, duration of maintenance contracts for power plants which was signed

between the company and partners was usually 8-10 years. Over the years, the

company continued to record revenue from services provided to the power plant, so

the company's revenue is predicted to increase sustainably.

Finally, to make the maintenance and overhaul service professional, the

NTMED needs to have many efforts in both human and technological development

in this area.

3.2.



Solutions and recommendations for enhancing financial capacity of



NTMED

3.2.1. Solutions for enhancing financial capacity of NTMED

From the analysis in previous section, we can see that though the company had

many efforts but they still had some disadvantage in financial management which

affecting to business performance. Thus, some solutions for NTMED were made to

have better control in their financial issues and enhance profit.



CHU THI HUONG GIANG



CLASS: CQ50/51.02



GRADUATION THESIS



ACADEMY OF

FINANCE



a) The NTMED need to adjust reasonable financial structure and have

effective funded policy



 About Assets

Firstly, the company needs to increase cash and equivalents assets in order to

enhance liquidity and reduce risks about interest rate, exchange rate. The company

has to calculate reasonable cash and equivalents reserve, manage input – money

sources and output – money sources in company’s budget; manage use of spending

and collecting by cash because this activity always happens. On other hand, cash is

high liquidity asset which has high payment ability and may be transformed to other

asset easily

Secondly, the company needs to increase the proportion of accounts

receivables and decreasing amount of receivables by tightening the policy of debt

collecting, managing credit policies, limiting capital misappropriation of customer,

monitoring bad debt to create impairment of inventory provision for them to boost

revenue

Thirdly, inventory control is very important work for any enterprise because

inventories always account for large proportion of total asset. Good inventory

control helps to minimize storage costs and improve using current asset efficiency

Although the increased amount of inventories of the company did not show the bad

performance but the management team still has long – term strategy to accelerate

inventory turnover, restrict inventories as few as possible by creating inventories

provision if it’s excess causes extra costs, always checking storage situation,

choosing suitable suppliers,…

Finally, using the fixed – assets for the most reasonable way in order to

maximize long – term benefits and emphasizing on more long – term investment.

 About Liabilities and Equities

Firstly, the purpose of reducing the proportion of liabilities is to save interest

costs and minimize financial risk, increase the self – finance and reduce debt burden

of the company.



CHU THI HUONG GIANG



CLASS: CQ50/51.02



GRADUATION THESIS



ACADEMY OF

FINANCE



Secondly, the company needs to reduce external debt by raising capital from

owners’ equity such as issuing shares or bonds to use capital resource which was

more stable and less risk than banks loans

Thirdly, the company should use equity for investment in fixed assets, avoid

financial imbalance and reduce the short – term debt payments burden

Fourthly, the company should consider to taxes and amount payable to the

State budget: such as: calculating accurate amount of tax such VAT tax, corporate

income tax, personal income tax… and finishing tax payment obligation to the State

budget

Fifthly, trade payables of NTMED were paid for foreign supplier about

importation of equipment’s. The company needs to monitor and track trade payables

according to each supplier, specific period of time to pay in order to create good

impression and reputation, attract more other prestige suppliers in the world then

NTMED will improve quality of services to bring best benefits for customers

Sixthly, instead of using the high – cost debt, company should find other long

– term debt sources with lower cost to reduce financing costs

Finally, company needs to increase amount of equity by issuing shares and

bonds in the stock market

b) The NTMED should enhance business efficiency by increasing revenue and

reducing costs

 Increasing revenue

Company needs to enhance the search for customers which were in healthcare

area in Vietnam such as: using advertising, marketing and promotion to introduce

the image as well as the quality of services of the company to customers. Recently,

the development of Vietnam economy means that there are many potential

customers for increase revenue of NTMED

Also, company needs to ensure providing the best equipment’s in order to

promote good image and reputation to customer for using products, investor,

shareholder for investment in the company and lender for borrowing loans



CHU THI HUONG GIANG



CLASS: CQ50/51.02



GRADUATION THESIS



ACADEMY OF

FINANCE



Company should focused on the quality of staffs and employees, open many

trainings for them to improve knowledge and skills in order that they can

experience with model and advanced equipment’s

 Reducing cost

Company should decrease the proportion of liabilities with purpose of

reducing the financial cost in business operations. The company needs to make

specific business plan for each year to establish specific sales goal and determine

appropriate amount of inventory. Although the increase of inventories did not effect

on revenue and profit, it’s necessary to avoid the issue of excess inventory that leads

to high inventory costs and increase interest charges.

The company needs to create cost management policies in order to control the

General and Administration Cost effectively. For example, the company has to save

cost in non – business activities, monitor amount of money in receipt voucher or

payment voucher, remind employees paying back advanced account on time by

determining clearly person received, check amount of advanced money and time

pay back…

3.2.2 Recommendations to implement solutions for enhancing financial

capacity of NTMED effectively

a)



For the State

In the context of globalization, then Vietnam’s companies faced many



challenges from the competitiveness. Thus, the Government, Line Ministry… needs

to have protective methods including priority policies about price, tax…for

domestic enterprises. Moreover, the State needs to complete legal document to

create equity business environment for local enterprises and foreign enterprises.

In addition, the State should make administrative regulatory reform, decreasing

procedures which cause difficulties for enterprises. For example, reducing custom

procedures when importing goods and materials,



CHU THI HUONG GIANG



CLASS: CQ50/51.02



GRADUATION THESIS



ACADEMY OF

FINANCE



Also, the State needs to build the average ratios system fully and standard in

order to use them as a base for assessing financial situation and looking for

solutions

b) For the NTMED

Firstly, the company should always consider workforce element in business

operations to have huge advantages and increase the competitiveness:

 Training staffs with specialized knowledge, goods and services

knowledge, ability to negotiate with suppliers and clients to take potential contracts

 Paying salaries, bonuses and many awards for implementation

achievement to encourage them

 Considering organizational structure of the company, offloading abundant

human resources and using each people for each work reasonably, recruit qualified

persons, especially management positions

Secondly, the company should increase equity by raising more shares in the

market

Thirdly, the company needs to build closely relationship and a good image

with the suppliers because they play the important role in supplying good materials

supporting company’s business activities

Fourthly, the company should performed synchronous solutions to overcome

disadvantages in management, inventories monitoring, debt payment on time,

receivables, accelerate rotation capital speed…

Fifthly, the company should review customer categories to give priority for

potential and important customer

Sixthly, the company needs to make detailed business plan and strategy strictly

Finally, the company should analyze periodic financial situation to review

advantages and disadvantages in financial management and find out the solutions



CHU THI HUONG GIANG



CLASS: CQ50/51.02



GRADUATION THESIS



ACADEMY OF

FINANCE

CONCLUSION



Enhancing financial capacity is very important role over the activities of a

company. It is the leading determinants of the size and position of a company in the

market. Realizing the importance of financial capacity, the companies are trying to

enhance it as well as possible. However, this process is becoming harder than ever

because of the difficulty of economic as well as the completive condition in

healthcare sector nowadays.

Thus, for NTMED, without a doubt, also have some certain difficulties.

NTMED in recent years has raised its profit from 2012 to 2014; however,

there were some restrictions that the firm has been stuck in, such as unreasonable

assets and capital structure, poor asset management and low liquidity.

From that, the writer suggests some personally recommendations to help the

firm to improve the current financial situation more effectively and efficiently.

The recommendations mostly suggest that the company needs to adjust

reasonable financial structure and have effective funded policy, as well as enhance

business efficiency by increasing revenue and reducing costs. Capable of doing that,

along with the help of State and government in helping the economy recovers from

difficulty, the writer believes that NTMED will have a better result in financial

capacity in the near future.



CHU THI HUONG GIANG



CLASS: CQ50/51.02



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