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Analyzing financial statement of Vinamilk Group 2

Principles of Accounting (Đại học Đà Nẵng)

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DA NANG UNIVERSITY

DA NANG UNIVERSITY OF ECONOMICS

ACCOUNTING FACULTY

------------

FINANCIAL STATEMENT ANALYSIS:

VIETNAM DAIRY PRODUCTS JSC

Lecturer: Associate Professor Đoàn Ngọc Phi Anh

GROUP 2:
Lê Thị Thuý Hằng: 42K18.2-CLC
Phạm Hà Lan Chi: 42K18.2-CLC
Hồ Thị Thuý Hà: 42K18.2-CLC
Hoàng Thị Yến Nhi: KT42K18CT2.1-CLC

Da Nang, 04/2019

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MỤC LỤC
I. General information: ..................................................................................................... 1
II. Assets structure: ............................................................................................................ 1
III. Resource structure: .................................................................................................... 3
1. Financial autonomy: .................................................................................................. 3
2. Fund stability: ............................................................................................................ 4
3. Financial balance: ...................................................................................................... 5
IV. The factors affecting the efficiency of using current assets: ..................................... 6
V. Operational efficiency: ................................................................................................. 7
1. Analysis of asset use efficiency: ............................................................................... 7
2. Inventories turnover: ................................................................................................. 7
3. Customer accounts receivable turnover .................................................................... 8
4. Account payable turnover ......................................................................................... 9
5. Return on sales (ROS) ............................................................................................. 10
6. Return on assets (ROA) ........................................................................................... 10
7. Return on equity (ROE) .......................................................................................... 11
8. DuPont Analysis and factors affect ROE: ............................................................... 11
VI. Analyzing financial risks and business risks in 3 financing options: ...................... 13
VII. Analyze insolvency risk of enterprises: .................................................................. 13
1. Short-term liquidity risk: ......................................................................................... 13
2. Long-term solvency risk:......................................................................................... 15
VIII. Change depreciation method: .................................................................................. 16
IX. Evaluate the performance of enterprises through EVA: ......................................... 17
X. Conclusion: ................................................................................................................. 19

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Vietnam Dairy Products JSC Group 2

I. General information:
Vinamilk (Vietnam Dairy Products JSC) is the largest dairy company in Vietnam.
Based on the UNDP 2007 Top 200 largest firms in Vietnam report, it is also the 15th
largest company in Vietnam and the most valuable public company listed in Vietnam. In
2010, it is the first company in Vietnam to be included in the Forbes Asia's 200 Best
Under A Billion list that highlights 200 top-performing small- and mid-sized companies
with annual revenue under US$1 billion.
The company was established in 1976 as the state-owned Southern Coffee-Dairy
Company, to nationalize and take over the operations of three previously private dairy
factories in South Vietnam: Thống Nhất (belonging to a Chinese company), Trường Thọ
(formerly owned by Friesland Foods, best known for its production of condensed milk
that was widely distributed across the South) and Dielac (Nestlé). It was renamed United
Enterprises of Milk Coffee Cookies and Candies in 1978. It became the Vietnam Dairy
Company, formally established in 1993. In 2003, following its IPO to the Ho Chi Minh
Stock Exchange, the company legally changed its name to Vietnam Dairy Products Joint
Stock Company (Vinamilk). The principal activities of the Vinamilk are to produce and
distribute condensed milk, powdered milk, fresh milk, soya milk, yogurts, ice-cream,
cheese, fruit juice, coffee and other products derived from milk.
II. Assets structure:

2015 2016 2017

Criteria

Propot Propot Propot

Amount Amount Amount
ion ion ion

Current 15,822,463,92 61% 17,801,341,38 19,002,943,39

63.30% 58.45%
assets 5,273 2,408 5,528

Cash
and
1,067,935,585 485,358,843,1 733,003,539,9
Cash 4% 1.73% 2.25%
,325 52 43
equivale
nt

Short
term 8,653,183,732 10,368,523,48 10,515,000,83
33% 36.87% 32.34%
financial ,226 8,016 1,849
investm

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ents

Short
term
2,558,257,733 2,707,207,940 4,177,896,085
accounts 10% 9.63% 12.85%
,837 ,196 ,300
receivab
le

Inventor 3,467,279,028 4,098,729,148 3,447,759,304

13% 14.57% 10.61%
ies ,328 ,422 ,261

Other
75,807,844,55 146,521,962,6 129,283,635,1
current 0.29% 0.52% 0.40%
7 22 75
assets

Non-
10,186,083,96 10,321,862,96 13,506,629,94
current 39% 36.70% 41.55%
8,354 2,386 2,142
assets

Long
term
14,238,293,77 15,126,638,17 43,381,778,32
accounts 0.05% 0.05% 0.13%
0 6 4
receivab
le

Fixed 6,195,233,101 5,790,522,519 6,578,193,561

24% 20.59% 20.23%
assets ,403 ,072 ,054

Long
term
3,255,627,270 3,616,419,284 5,358,856,346
financial 13% 12.86% 16.48%
,385 ,278 ,187
investm
ents

Other
non- 303,968,077,3 334,590,662,5 460,319,984,4
1% 1.19% 1.42%
current 61 07 83
assets

Total 26,008,547,89 28,123,204,34 32,509,573,33

100% 100% 100%
assets 3,627 4,794 7,670

 2016: Expanding four more potential markets in Africa.

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Vietnam Dairy Products JSC Group 2

Contributed 18% share capital of APIS JSC as to expand and broaden goods
supply chain of Vinamilk.
Opened a respresentative office in Thailand.
 2017: Cu Chi Raw Milk Center was went under operation.
Invested in sugar industry by acquiring 65% share capital of Vietnam Sugar JSC
(formerly known as Khanh Hoa Sugar JSC) and 25% share capital of Asia Coconut
Processing JSC.
Cash: in 2017, cash significantly increases because thanks to good business
results, the Company always maintained a high level of cash and managed this cash flow
in an effective and safe way. The risk management policy was set up to ensure that term
deposits were always at optimal levels of safety and flexibility in order to meet the
Company's capital needs at all times.
Accounts receivable: accounted for 12.85% of total assets. No significant bad
debts were incurred during the year. The Company maintained a good policy on
receivables management. The amount of accounts receivable in 2017 increases nearly
double compared to the previous year. That because since mid-November 2017, the
Company has changed its credit policy for domestic customers, in which the credit period
was increased to support sales better. This change led to an increase in receivables from
customers.
Inventories: There was a significant decrease in the proportion of inventories in
2017 compared to the previous year. Because in 2017, The "Just in time" procurement
strategy has been applied together with the optimization of inventory management and
warehouse planning at the subordinate units that have brought about remarkable results in
the Company’s inventory control, compared to the previous year.
III. Resource structure:
1. Financial autonomy:
2015 2016 2017
Total liabilities 5,650,757,468,579 6,329,270,261,772 9,213,216,736,722
Total assets 26,008,547,893,627 28,123,204,344,794 32,509,573,337,670
Total liabilities/Total
22% 23% 28%
assets (Debt ratio)
Owner equity 20,357,790,425,048 21,793,934,083,022 23,296,356,600,948
Total assets 26,008,547,893,627 28,123,204,344,794 32,509,573,337,670
Owner equity/Total 78% 77% 72%

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assets (Self-funded
ratio)

The debt ratio reflects the level of debt use of the company. In 2017, this ratio is
28%, means 28% of the company's asset value is financed from debt.
The debt ratio of Vinamilk gradually increases over the years (from 22% to 28%
over the past three years), but still quite low compared to the industry average (Milk
industry’s debt ratio is 68.98%.). Company uses less debt to finance its assets. This has
the positive side of the ability to financial autonomy and the ability to borrow a high debt
in the future. However, the downside is that the company does not take advantage of
financial leverage and loses the opportunity to save the tax from the use of debt.
Healthy financial from
structure
22% tobrings
28% significant advantages for the Company in
over the past three years
implementing M&A deals on a large scale.
Debt ratios tend to increase over the years because in recent years, there are more
big competitors such as TH True Milk, Nutifood ... and dozens of liquid milk brands
imported from abroad. This competitive pressure forces Vinamilk to increase its
investment even further in order to keep its market dominance. Vinamilk has very good
cash flow generated from stable business operations, with high profit growth. This is a
platform for flexible implementation of business strategies, putting pressure on all
competitors. Market forces show that only foreign competitors are competitors that can
threaten Vinamilk's position.
Accompanying it is expanding exports to potential markets. Vinamilk has factories
overseas such as the US (owning 100% Driftwood factory in California state), Cambodia
(owning 100% Angkormilk factory in Phnom Penh capital), and New Zealand (owning
22.8%) with 1 subsidiary in Poland. The company's products have been exported to 43
countries around the world such as the US, Japan, Australia, Thailand, Myanmar,
Bangladesh, countries in the Middle East region ...
2. Fund stability:
2015 2016 2017

(1) Current liabilites

5,563,657,738,579 6,233,534,218,272 9,111,522,890,254

(2) Non-current 87,099,730,000 95,736,043,500 101,693,846,468

liabilites

(3) Owner’s equity

20,357,790,425,048 21,793,934,083,022 23,296,356,600,948

(4) Permanent capital 20,444,890,155,048 21,889,670,126,522 23,398,050,447,416

= (2)+(3)

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(5) Temporary 5,563,657,738,579 6,233,534,218,272 9,111,522,890,254

capital = (1)

(6) Total capital

26,008,547,893,627 28,123,204,344,794 32,509,573,337,670

(7) Permanent capital 78.61% 77.83% 71.97%

ratio (%)=(4/(6)
(8)Temporary capital 21.39% 22.17% 28.03%
ratio (%)=(5)/(6)

2017: Vinamilk's owner’s equity increased significantly because the company

implemented a bonus share issuance policy for existing shareholders at the ratio of 5: 1,
meaning each shareholder owns 5 shares will receive 1 additional issue share.
In general, a high permanent capital ratio indicates the greater the stability of the
funding.
3. Financial balance:
Figures 2015 2016 2017
(1) Current assets 15,822,463,925,273 17,801,341,382,408 19,002,943,395,528
(2) Current liabilities 6,004,316,835,213 6,233,534,218,272 9,111,522,890,254
(3) Net working capital 9,818,147,090,060 11,567,807,164,136 9,891,420,505,274
= (1)+(2)
(4) Inventories 3,467,279,028,328 4,098,729,148,422 3,447,759,304,261
(5)Short-term
2,558,257,733,837 2,702,207,940,196 4,177,896,085,300
receivables
(6)Short-term account
payable (not including 4,321,647,738,579 5,033,534,218,272 9,111,522,890,254
bank loans) = (7)-(8)
(7)Short-term account
5,563,657,738,579 6,233,534,218,272 9,111,522,890,254
payable
(8) Short-term
borrowings and finance 1,242,010,000,000 1,200,000,000,000 0
lease liabilities
(9)Net working capital
required 1,703,889,023,586 1,767,402,870,346 (1,485,867,500,693)
= (4)+(5)-(6)
(10) Net fund = (3)-(9) 8,114,258,066,474 9,800,404,293,790 11,377,288,005,967

There was a sharp increase in short-term account payables from 2015, 2016 to
2017 because of a sudden increase in other payables from 574,093,150,299 (2016) to
3,023,434,643,866 (2017). The reason is in 2017, Vinamilk pays a proportion of the

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profit as a dividend to shareholders and in 2016, they didn’t. This makes net working
capital required significantly increase, so net fund is improved.
Company has sufficient capital to finance current assets. Positive net funds
represent a safe financial balance because businesses do not have to borrow to offset the
shortage of net working capital needs so they do not meet difficulties in short-term
payment.
IV. The factors affecting the efficiency of using current assets:
% changes
Figures 2015 2016 2017
2016/2015 2017/2016
Average
current 15,210,520,640,436 16,811,902,653,841 18,402,142,388,968 10.53% 9.46%
assets
Net sales 37,913,499,514,763 43,809,126,381,210 47,506,683,942,486 15.55% 8.44%
Current 2.58
assets use 2.49 2.61
efficiency
Average
day of
current 144.3 138.15 139.45
asset
turnover
Average current assets all increased over 3 years, specific in 2016 increased
10.53% compared to 2015, although still increases but in 2017 compared to in 2016
(9.46%) less than in 2016 compared to 2015.

Net sales also increased each year, specific in 2016, it increased by 15.55%
compared to 2015, although it still increased but in 2017 compared to 2016 (8.44%) less
than in 2016 compared to 2015.

Current assets use efficiency in 2017 was 2.58 and 2016 was 2.61 to show each
short-term asset of the company in turn generated 2.58 and 2.61 dong of revenue.

We can see that Average day of current asset turnover in 2017 has decreased
compared to 2016 because the change of net sales percentage is less than the percentage
of Current Assets. But overall, still larger than Average day of current asset turnover the
industry average.

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Vietnam Dairy Products JSC Group 2

V. Operational efficiency:
1. Analysis of asset use efficiency:
% change
Figures 2015 2016 2017
2016/2015 2017/2016
Average
total 25,245,581,143,455.5 27,065,876,119,210.5 30,316,388,841,232 7.21% 12.01%
assets
Total
sales and 38,796,950,031,012 44,848,115,301,649 48,943,156,735,159 15.60% 9.13%
revenues
Assets
use 1.54 1.66 1.61
efficiency

In 2016: There is a significant revenue growth because keep up with market

demand and technological progress, offers many products with featured and benefits meet
the customer's diverse need. For foreign market, the presence in 43 countries and
territories also brings a significant revenue.
In 2017: Each property of the company generated 1.61 dong of revenue, this
suggests that efficiency of assets use of company as well. However, have a slight
decrease compared to 2016.
The market share: 5 main categories liquid milk, Powdered milk, Eating Yogurt,
Drinking Yogurt and condensed milk all increased their market share compared to 2015.
Specifically: milk increased 1.5% to 54.5%, eating yogurt increased 0.4% to 84.7% and
drinking yogurt increases abruptly 1.9% to 33.9%.
Total asset turn over of the industry average 1.27, this suggests that efficiency of
assets use of company as well.
2. Inventories turnover:
Difference
Targets 2015 2016 2017
2016/2015 2017/2016
Cost of
goods sold 22,470,518,366,089 22,522,706,121,326 24,244,098,117,020 0.23% 7.64%
(COGS)
Average
3,422,053,205,546 3,783,004,088,375 3,773,244,225,842 10.55% -0.26%
inventories
Inventories
6.57 5.95 6.43 -9.33% 7.92%
turnover

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Inventories
54.82 60.47 56.03 10.29% -7.34%
period

Cost of goods sold increased over the years, especially in 2017 increased to 7.64%
compared to 2016, leading to an increase in average inventories.
Despite the fluctuation of inventories turnover index, it is still in a reasonable and stable
level, consistent with the inventory management policy of the Company. The company
does not allow any significant slowdown in inventory.
3. Customer accounts receivable turnover
Difference
Targets 2015.00 2016.00 2017.00
2016/2015 2017/2016
Net sales
15.55% 7.78%
37,913,499,514,763 43,809,126,381,210 47,506,683,942,486
VAT 204,127,132,111 245,031,363,448 375,861,148,168
Average
Customer
2,644,915,302,990 -96.20% 97.23%
accounts 2,526,218,506,831 3,469,306,220,998
receivable
Customer
accounts
15.09 16.656 13.80 10.377% -17.15%
receivable
turnover
Account
receivable 23.86 21.613 26.08 -9.42% 20.67%
period

The customer accounts receivable turnover of 2017 is 13.8, in 2016 it is 16.656.

The number of customer receivables receivable in 2017 is lower than in 2016, proving
that the company's debt recovery rate in the year is slower than in 2016, this is generally
not good.
The reason is that the growth rate of revenue (7.78%) is lower than the growth rate
of the average customer accounts receivable from customers (97.23%) in 2017 compared
to 2016. Since mid-November 2017, the company debt policy changes for domestic
customers. Accordingly, customer payment time is increased to support better sales. This
change has increased the customer accounts receivable and reduced the customer
accounts receivable turnover. The company considers this policy change to have a
positive impact on the company and its receivables policies are effectively managed,
creating a certain competitive advantage in the domestic market.

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4. Account payable turnover

Figures 2015 2016 2017

COGS
22.470.518.366.089 22.522.706.121.326 24.244.098.117.020
The beginning
account payable 1.647.920.447.124 2.118.962.866.700 2.568.934.375.909
The endning
account payable 2.118.962.866.700 2.568.934.375.909 3.608.952.910.564
The average
account payable 1.883.441.656.912 2.343.948.621.305 3.088.943.643.237
Account payable
11,93 9,61 7,85
turnover
Account payable turnover decreases over 3 years.

 The company is appropriating the seller's capital.

The account receivables turnover is quite good and larger than the account
payables turnover.

 The company is appropriating the capital of sellers rather than being appropriated
by customers. This means that the company's short-term solvency is good, earning
customers' money before having to pay suppliers. The company is able to secure money
for production and payment for sellers.
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Vietnam Dairy Products JSC Group 2

5. Return on sales (ROS)

% change
Figures 2015 2016 2017 2017/20
2016/2015
16
Profit
before 9,245,534,638,5 11,066,936,634, 12,496,851,735, 19.70% 12.92%
tax 33 605 222
Total
sales
38,796,950,031, 44,848,115,301, 48,943,156,735,
and 15.60% 9.13%
012 649 159
revenu
es
Return
on 24% 25% 26% 2.82% 5.36%
sales
Over the years, the ROS index has increased due to the increase in revenue and profit
before tax over the years, in which the profit before tax increased a lot of revenue.
The company's revenue in 2017 increased significantly over 2 years from
38,796,950,031,012 to 48,943,156,735,159. It can be seen that this significant change is
due to the company changing sales policy resulting in a change in ROE index, every 100
dong of revenue, 26 dong profits will be generated in 2017.
6. Return on assets (ROA)
% change
Figures 2015 2016 2017
2016/2015 2017/2016
Profit
before 19.70% 12.92%
9,245,534,638,533 11,066,936,634,605 12,496,851,735,222
tax
Average
total 7.21% 12.01%
25,245,581,143,456 27,065,876,119,211 30,316,388,841,232
assets
ROA 36.62% 40.89% 41.22% 4.27% 0.33%

Vinamilk's return on assets increased gradually over the years in the period of
2015-2017, every 100 dong of assets, 41.26 dong profits will be generated in 2017.
Despite a positive change, the rate of increase has decreased over the years from 4.27%
to 0.33%. The reason for this decline is that the growth rate of pre-tax profit is
significantly lower than the average growth rate of total assets.
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Vietnam Dairy Products JSC Group 2

Since ROA is affected by interest, so that comparisons are more accurate, we

make RE comparisons.
The table below shows the economic return on assets (RE):
Figures 2015 2016 2017
Total
accounting
profit before 9,245,534,638,533 11,066,936,634,605 12,496,851,735,222
tax
Loan interest
expenses 13,936,351,072 29,633,689,355 12,869,222,222

EBIT
9,259,470,989,605 11,096,570,323,960 12,509,720,957,444
Average total
assets 25,245,581,143,456 27,065,876,119,211 30,316,388,841,232
RE 36.68% 41.00% 41.26%

After deducting interest, it can be seen that the profitability ratio of the company's
assets is still high, indicating that the company is still profitable.
7. Return on equity (ROE)
% change
Figures 2015 2016 2017 2017/201
2016/2015
6
Profit after
20,42% 14,06%
tax 7.677.375.711.774 9.245.370.494.638 10.545.161.872.454
Average
shareholder 5,89% 6,97%
19.903.327.166.750 21.075.862.254.035 22.545.145.341.985
equity
ROE 38,57% 43,87% 46,77% 5,29% 2,91%

ROE increased sharply over the years, from 38.57% in 2015 to 43.87% in 2016
and continued in 2017 to 46.77%. Therefore, it can be seen that enterprises have
efficiently used their capital and the resources brought to shareholders are increasing. The
financial performance of the business also increased.
8. DuPont Analysis and factors affect ROE:

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ROE is nearly twice as high as the industry average, in which the business
performance of the company is nearly twice as high as that of the industry due to a
significant increase in ROS compared to the industry.
ROS is 26% is a huge profit / Sales ratio shows that the company is doing well and
tends to dominate the market.
Asset turnover of 1.6 is a little higher than the industry average; it is effective to use
the company's assets in production and business activities. In which inventories turnover
approximates the industry average, the ability to manage goods is relatively good while
the company's debt recovery rate is slightly lower than the industry average because the
company is changing its selling policy. Therefore, asset turnover increased due to fixed
asset turnover likely higher than the industry average.
The debt ratio of the company is double that of the industry average, showing that
the company is using less debt instruments to finance its assets. This has the positive side
of the ability to financial autonomy and the ability to borrow a high debt of the company,

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however, the downside is that the company does not take advantage of financial leverage
and lose the opportunity tax from the use of debt.
With RE is 41.26% compared to loan interest rate that is less than 10%, the company
should use more debt to amplify ROE.
Conclusion:
In order to increase ROE efficiency, the company often focuses on increasing the
efficiency of asset use to generate revenue (asset turnover) and ROS. Asset turnover
decreased slightly but this ratio is still higher than the average industry. However, thanks
to the cost control, ROS increased sharply compared with to the industry which helped
ROE rise dramatically.
The company maintains the use of leverage at a safe level, hardly use loan capital.
From focuses on to high safety, the company pushed the tax burdens rise.
VI. Analyzing financial risks and business risks in 3 financing options:
ROE=(RE+(RE-i)*D/E)*(1-T).
RE 4% 6% 8% 10% 12%
Option 1 3.20% 4.80% 6.40% 8.00% 9.60%
Option 2 0.00% 3.20% 6.40% 9.60% 12.80%
Option 3 -9.60% -1.60% 6.40% 14.40% 22.40%

In case of RE = i, (RE-i) * D/ E=0 leads to capital structure without affecting

ROE.
In case of RE> i, the financial leverage will affect the ROE amplification so in the
case of RE = 10, 12%, option 3 will be the optimal option.
In case of RE <i, the use of debt instruments will not be effective for the company
so in case of RE = 4.6%, option 1 will be the optimal option.
Business risk is not affected by the capital structure, so the company's business
risk in all three options is the same.
VII. Analyze insolvency risk of enterprises:
1. Short-term liquidity risk:
Figures 2015 2016 2017

Current assets 15,822,463,925,273 17,801,341,382,408 19,002,943,395,528

Current liabilities 6,004,316,835,213 6,233,534,218,272 9,111,522,890,254

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Inventories 3,467,279,028,328 4,098,729,148,422 3,447,759,304,261

Other current assets 75,807,844,557 146,521,962,622 129,283,635,175

Current ratio 2.6352 2.8557 2.0856

Quick ratio 2.0451 2.1747 1.6930

Cash & Cash equivalents 1,067,935,585,325 485,358,843,152 733,003,539,943

Cash ratio 0.1779 0.0779 0.0804

2,5

Current ratio
1,5
Quick ratio
Cash ratio
1

0,5

0
2015 2016 2017

 The short-term solvency of the company is developing positively.

a. Current ratio:
From the chart above, the current ratio is always greater than 1 over the years =>
Current assets> Short-term liabilities. The short-term assets available are larger than the
short-term demand, so the financial position of the company is healthy at least in the
short term. On the other hand, because of current assets> Short-term debt should be fixed
assets <Long-term debt + Equity, so long-term capital of the Company is not enough to
finance the fixed assets but also balance to finance the current assets. Specifically:
This ratio of 2017 is more than 2016 which proves that liquidity problem has been
improved.

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By 2017, the current payment ratio of the company is 2.0856, while the current ratio
of the industry average is 2.63. This ratio of company is lower than the industry average.
Ít indicates that The company has difficult in a current liability.
b. Quick ratio:
With a quick ratio of higher than 1, Vinamilk appears to be well positioned to cover its
current liabilities and has liquid assets available to cover each dollar of short-term debt. A
quick ratio of 2.0451 in 2015 indicates that the company has $2.0451 of liquid assets
available to cover each $1 of its current liabilities.
In 2017, the quick ratio of the company (1.6930) is much lower than the ratio of the
average industry (2.03), as it means that the company has the trouble in a short-term
liability.
 Both the current ratio and the quick ratio of the company in 2017 have a big
difference from the average industry and compared with the previous year due to the
current liabilities. It increases abruptly because Vinamilk declared a dividend in 2017.
c. Cash ratio:
All cash ratio in over years of company are less than 1, there are more current
liabilities than cash and cash equivalents and there is insufficient cash on hand to pay off
short-term debt
The cash ratio in 2016 sharply pulls down from the ratio in 2016 beacause the
company decided that investments are more essential than cash reserves
Besides, The cash ratio in 2017 is more than the ratio in 2016 which proves that the
liquidity of the company is improved.
2. Long-term solvency risk:
Figures 2015 2016 2017
Total liabilities 5,650,757,468,579 6,329,270,261,772 9,213,216,736,722
Total assets 26,008,547,893,627 28,123,204,344,794 32,509,573,337,670
Total shareholder's
20,357,790,425,048 21,793,934,083,022 23,296,356,600,948
equity
Long-term debt 87,099,730,000 95,736,043,500 101,693,846,468
Ebit 9,275,004,183,993 9,259,470,989,605 12,509,720,957,444
Interest expense 13,936,351,072 29,633,689,355 12,869,222,222
Liabilities to assets ratio 22% 23% 28%
Liabilities to
28% 29% 40%
shareholder's equity ratio

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Long-term debt to long-

0.426% 0.437% 0.435%
term capital ratio
Long-term debt to
0.428% 0.439% 0.437%
shareholder's equity ratio
Interest coverage ratio 665.53 312.46 972.07

In term of the ratio D/E, this ratio in 2017 is higher than 2016. This means that for
every dollar in equity, the firm has $0,28 in leverage in 2017 and $0.29 in leverage in
2016. => Vinamilk was using liabilities to finance the assets.
Liabilities to shareholder's equity ratio is less than 1, the company used debt less than
equity to finance assets => the financial autonomy ang the ability to borrow capital of
Vinamilk are high, however, the company didn’t take advantage of financial leveage and
lost opportunities for saving tax from using debt.
The interest coverage ratio (ICR) is a measure of a company's ability to meet its
interest payments. In 2017, ICR of the company is 972.02, being more than double 2016.
This means that the ability to pay interest amount is very well because every dollar in
interest expense, the company has $972.02 from profitable operation to pay.
The interest payable can make the income tax decrease but the dividends per share
don’t. Because the company using debt instrument is responsible for pay a stable interest
expense. It makes financial cost be limited and creates situation which the financial
leverage of the company is used effectively.
VIII. Change depreciation method:
Regarding discount cash flow method, firm’s value is determined by the present
value of the free cashflow in future. This cash flow is determined by the formula:
FCFF = EBIT x (1 - Tax Rate) + Depreciation of fixed assets – Capital Expenditure
– Changes in Net Working Capital.
Because Depreciation is these expense as a tax deduction on Income Statement but it
differs with other expenses in that it is not an expenditure. The cashflow from operation
activities will higher than net profit from depreciation. If the company change the
depreciation method, in the earlier years, the amount of depreciation under the double-
declining-balance method will be significant greater than the amount under straight-line
method.
 The free cashflow in future will increase.
 The firm’s value increase.

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As the declining balance method is only suitable to enterprises operate in easily

obsolete technology fields which it has the fixed assets changing quickly. On the other
hand, Vinamilk is manufacturing companies; the machines and equipment, that Vinamilk
uses, have the relatively long estimated useful life:
 Tangible fixed assets: 5-50 years.
 Intangible fixed assets: over 5 years.
Vinamilk should not change from the straight-line method to the double-declining-
balance method.
IX. Evaluate the performance of enterprises through EVA:
(Unit: 1.000.000d)
Figures Amount
1 EBIT 12,509,721
2 Total owner’s equity 32,509,573

3 Interest rate of WACC 11.50%

Weight average cost of capital

4 3,738,001
(WACC) =(2)x(3)
5 EVA = (1)-(4) 8,771,720
EVA/ Total owner’s equity
6 27%
(%)=(5)/(2)
7 ROI (%)=(1)/(2) 38%

Net profit of the company in 2017 is about VND 10,545,161 million while EVA is
8,771,720. It confirms that in 2017, Vinamilk not only has profit but also creates and
increases the additional value for shareholders. The additional value is 8,771,720,
equivalent with 70,12%. This shows that profit can cover the loan interest and gain the
expected rate of return of shareholders. However, like the other measurement, EVA has
still restriction for using mainly the accounts on the accrual basic to measure business
income instead of using the accounts on the cash basic. In order to overcome this
weakness, when calculating the EVA measurement, the company have to adjust some
accounting information to improve this indicator's usefulness.
Adjusting:
Invested
Index (NOPAT)
capital (TC)
Invested capital ( Balance Sheet) 32,509,573

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NOPAT 11,530,566
Subtract the indexes not Invested capital 10,772,970
1. The funds: 3,523,643
the reward and welfare funds 674,169
The Investment Funds 2,849,474
2. Interest-free loans. 7,249,327
Accounts payable 3,608,952
Deferred revenue 58,920
Taxes and other payables to the State budge 375,861
Payables to employees 173,777
Short-term Unearned Revenue 7,344
Long-term Unearned Revenue 1,039
Other Short-term liabilities 3,023,434
Total 985,405 989,661

3. R&D cost - -
4 . Operating Lease 4,400 4,400
5. The allowances: 125,555 125,555

603
Short-term provisions 603
long-term provisions 100,654 100,654
Provision for bad debts 4,159 4,159
Provision for devaluation of stocks 4,814 4,814
allowances for long-term investments 15,325 15,325
6. The accural expenses: 855,450 855,450
The short-term accural expenses 425,525 425,525
The long-term accural expenses 429,925 429,925
7. Deferred income tax assets 4,256
Invested capital after adjusting 21,736,603
NOPAT after adjusting 10,540,905

Figures Amount
1 EBIT after adjusting 10,540,905
Total owner’s equity after
2 21,736,603
adjusting
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3 Interest rate of WACC 11.50%

Weight average cost of capital 2,499,709

4
(WACC) =(2)x(3)
5 EVA = (1)-(4) 8,041,195
EVA/ Total owner’s equity after
6 37%
adjusting (%)=(5)/(2)
7 ROI (%)=(1)/(2) 48%

With the above calculation results, after adjusting the accounting data to reduce
the difference due to the accounting method of accounting, the added economic value of
the company in 2017 is about 8,041,195,000,000 shows that the company still ensures to
create real value for shareholders as well as the true value of the business is at a high
level.
X. Conclusion:
Continue to manage the key costs (cost of good sold, selling expense), investing in
technology => Increases in labour productivity, management capacity.
Continue to keep the account receivable turnover higher than the account payable
=> take the initiative to manage cash and liquidity.
Continue to maintain to manage the inventory turnover => Minimize power cuts in
costs, reduce the damaged goods.
You can use higher debt ratios to increase business efficiency, use more debt
instrument to relieve the tax burden.

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REFERENCES
1. Separate financial statement of Vietnam Dairy Products JSC in 2015, 2016, 2017.
2. Annual report of Vietnam Dairy Products JSC in 2015,2016,2017.
3. General information of the industry at https://vn.investing.com/equities/vietnam-
dairy-products-jsc-ratios.
4. Slides of Associate Professor Đoàn Ngọc Phi Anh - lecturer in Accounting Faculty
in Danang university of Economics.

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EVALUATION

No Full name Contribution Signature Notes

1 Lê Thị Thuý Hằng 25%

2 Phạm Hà Lan Chi 25%

3 Hồ Thị Thuý Hà 25%

4 Hoàng Thị Yến Nhi 25%

Total 100%

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