Table of Content Introduction.2 Task 2c.3 Task 2d.4 Task 3a.6 Task 3b.8 Task 3c..9 Task 4a.

10 Task 4b.12 Task 4c..14 Conclusion20 References.20 Appendix

Introduction Managing financial resources and decisions are designed to give students a broad understanding of how the financial management of a business organization. Students will learn how to evaluate different sources of finance, compare the ways in which they are used and will learn how to use financial information to make decisions. There will be consideration of decisions relating to pricing and investment, as well as budget. Finally, they will learn techniques for the evaluation of financial operations.

The decisions making of finance statement Internal user: Board of Directors: A board of director is a body of members elected or appointed persons monitoring the activities of a company or organization. Typical tasks of the Board include: -Organization by establishing broad policies and objectives; -Selection, appointment, support and review implementation of the CEO; -Ensure the availability of sufficient financial resources; -Approve the annual budget; -Account for the stakeholders of the organizational activities. -Set salaries and compensation Board of Directors set corporate strategy and determine the policies of the company, supervising the management of enterprises, evaluation of internal company, control procedures, and monitor the quality of information provided to the neck shareholders and financial markets and financial reporting in connection with financial transactions. Therefore, the Board of Directors of the company needs to keep up with current financial situation of the company to assess whether the costs exceed the current budget or have any problem with working for adjustment and implementation of the current business strategy to achieve corporate objectives, mission and vision. Management: Management plays important role in all business and organizational activities in Company. They know all information about the companys financial and directly using available resources efficiently and effectively. Management sets planning, organizing, staffing, leading or directing, and controlling financial situation with more details to effort for the purpose of accomplishing a goal. Here, the management has responsibility to analyze, make manager controls the business efficiently and solve all problems to develop company. Therefore, the management needs the financial report to make business plan. To know exactly about the financial of company, the financial statement is necessary for management because it provides more comprehensive information of company. Managers require financial statements to make

important business decisions that affect its continued operations. Financial analysis is then performed on these statements to provide management with a more detailed understanding of the figures. These statements are also used as part of management's annual report to the stockholders.1 Shareholders: Share holder means any person, company, or other institution that owns at least one share in a company. They are positive corporate image of company. They bring high profit and invest money for company. Therefore, they need to know all information about their benefits to make decision investing in Company. If KindDo attracts many shareholders and make believe about company from shareholders, the company has many profits to finance daily activities and its business. Employee: Employees and their representative groups are interested in information about the stability and profitability of their employers. They are also interested in information which enables them to assess the ability of the enterprise to provide remuneration, retirement benefits and employment opportunities. They join in activities and missions in company when they receive the task from the manager. Therefore, employees should be provided some information about the financial situation of the company. Employees need to know to make the collective bargaining agreement of their wages to their owners. When employees work in good condition with reasonable salary, they can use all good ability to have good results in work. External users: Investors: The providers of risk capital and their advisers are concerned with the risk inherent in, and return provided by, their investments. They need financial information to help them determine whether they should buy, hold or sell. Shareholders are also interested in information which enables them to assess the ability of the enterprise to pay dividends. (Investors are owners of the co. It can be argued that they are external stakeholders, but it's also hard to call your owners outsiders) Customers: They are people who purchase companys products. They are important part in business because they are the main profit of the company. The successful of company depends on the number of customers and loyal customers. Customers are the survival of company, so Company need to improve the quality of
1

http://en.wikipedia.org/wiki/Financial_statement

products and service to keep the loyal customers. Besides, customers need to know about the financial information because it provides the business activities of Company and affect to the decision purchase of Company products. Suppliers: Suppliers are interested in the success and stability of the company so they can ensure they will have a customer in the future. Suppliers have a long term relationship with the firm. They play important role in provide raw material for the company. Many suppliers ask for financial statements to determine their risk in working with you. If you order supplies from them and you pay them for those supplies before they ship to you that is usually not a problem. But if you expect them to ship products to you before you pay (which means that they are extending credit to you) they want to be sure that you are credit worthy and that you will be able to pay them for the products you ordered. Therefore, Company needs to provide financial information help suppliers know about the number of materials. From that, supplier is easy to provide the good materials for Company to produce good products because the quality of products depends on the quality of material. Government: The government responsibility is that to make sure the company has to follow the law, regulations, policy and principles in business. Company has responsible to pay tax for government. The tax based on the profit of Company and the salaries of company. From that the government can know the employees receive suitable salaries or not and government will decide suitable tax for company The financial situation (banks and other lending companies) use them to decide whether to grant a company with new working capital or extend debt securities (such as a bank term loan limit or bonds) to run business or make other things. When company want to lend money, company must show that they run business well and can repay the loan in right time. Besides, the lender wants to know the reasonability of company when company lends it.

The impact of finance on the financial statements

The management of the company's financial controls of the company through financial statements because it gives details of all financial records for management. Financial statement contains Income statement, balance sheet, cash flow statements, etc. Financial statement is the best way to show about the financial situation of company. Firstly, the impact of finance on the financial statements can show when customers buy their products and the profits brings for company. When the company buys products for customer, the income statement will reflect about the. For example, when the company buys products for customers with price $10000, it means that the company earns $10000 and it will calculate in the revenues of company. When company buys many products for customer, it means that company can earn many profits for company; it brings good effect for company because they increase the revenue of company. Therefore when the revenues of company is good or bad, it also have affect into the income statement and the financial statement of company. Secondly, the company must show their expense in expense in the income statement. Every activities of Kinh Do need to use money so the company will so it in their financial statement. If the company spends much money, it will generate expense and as a result of them, expense will affect gross profit. The more expense the company spends, the less profit they receive. Next, the company will pay tax for government. This action will show in tax in Income statement and then, Profit after tax will be illustrated. It is because Profit after tax is equal Profit before tax minus tax. Then, when the company wants to expand their business, they need to sell issue or borrow capitals from the banks to run their business. When they sell issue for shareholders, it will increase interest because they need to spend money to issue new shares to public. The company must pay more dividends to shareholders so it will affect the income statement. Thus, the retained earning will reduce. On the other hand, the action will increase their capital. Furthermore, the company will purchase treasury shares. cash and cash equivalent on balance sheet will decreased. Besides when company borrows money from the banks or others, they will pay the interests of money at the right time. When the company borrows money from the

banks, the company will increase capital. Creditor in balance sheet will increase but raise capital. Interest in income statement will increase. Therefore, profit ordinary activities before taxation decreases. Finally, all activities such as buy or sell will be record in financial statements and its will be changed. For example: when company buys the raw material from the supplier with $1000000, it means the assets of company decrease $1000000. It makes the change in the income statements that means the purchase increase $ 1000000 and it also makes the sell revenue increase in the balance sheets and the assets of company decrease $ 1000000. Therefore, the objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities, equity, income and expenses are directly related to an organization's financial position.2

http://en.wikipedia.org/wiki/Financial_statement

Analyzing the budgets and making appropriate decisions 1. Original Budget A Sales Direct material Direct labor Variable overhead Fixed overhead Sales(units) Total cost Profit $200.000 $10.000 $22.500 $10.000 $6.000 2.000 $47.500 $151.500 B 250.000 13.500 25.000 13.500 9.000 1.750 61.000 189.000 C 300.000 20.500 34.000 20.500 7.500 1.300 82.500 217.500 191.000 558.000 Total 750.000 44.000 81.500 44.000 22.500

2. Per unit information Selling price per unit = the sales ($)/ the sales (unit) Direct material per unit = total direct material/ the sales (unit) Direct labor per unit = total direct material/ the sales (unit) Variable overhead per unit= total variable direct material/ the sale (unit) A Selling price per unit Direct material per unit Direct labor per unit Variable over head per unit $100 $5 $11.25 $5 B 142.86 7.71 14.29 7.71 C 230.77 15.77 26.15 15.77

Direct labor hour = direct labor/ direct labor rate Direct labor hour per unit = direct labor hour / the sales (unit) A B $5/unit 5000 hours 2.86 hours C $5/unit 6800 hours 5.23 hours $5/unit 4500 hours 2.25 hours

Direct labor rate Direct labor hours Direct labor hour per unit

3. Estimated Demand for Sales Increases (30%) A Sales (units)(increased by 30% Direct labor hours needed Direct labor hours available Surplus (deficit) = 18000h - 21173h = 2600 5850 B 2275 6500 C 1690 8840 21190 hours -3190 hours Total 6565 21190

Contribution per direct labor hour Contribution margin= sales price variable cost (direct labor+ direct material+ variable overhead) Contribution per DLH= contribution margin/ direct labor hours A Contribution margin ($) Direct labor hours Contribution per DLH Rank $157.500 4500 hours $35 2 B 198.000 5000 hours 39.6 1 C 225.000 6800 hours 33.1 3

4. Allocation of Direct Labor Hours Available Hour available: 18000 Hours to produce product = Sales units * Direct LH per unit Hours to produce product B: 2275*2.86 = 6500 hours Hours to produce product A: 2600*2.25 = 5850 hours Hours to produce product C: 18,000 12350= 5650 hours A B C 5650 hours Total 18000 hours

Direct labor hours available 5850 hours 6500 hours

5. Revised Budget for Sales Increase (30%) A Sales(units) Sales Direct material Direct labor Variable overhead Fixed overhead Advertising cost Total fixed cost Profit 2600 $260000 $13000 $29250 $13000 B 2275 325000 17550 32500 17550 C 1080 249265 17033 28250 17033 Total 5955 834265 47583 90000 47583 22500 8000 30500 618599

The profit will increase if it compare with original budget 618599- 588000= 60599 6. Extra profit based on Extra 3.500 Direct Labour Hours Extra 3500 hours (18000+3500=21500 hours) Additional Sales units product C = (Sales units demanded - Sales units specified in Revised Budget) = 1690 -1080 = 610 units Increase in profit is $105511 C Additional sales (units) Additional sales ($) Additional direct material Additional direct labor Additional variable overhead Additional fixed overhead 610 $140735 $9617 $15950 $9617

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Increase in profit scenario. Calculate relevant cost A/ Materials

$105551

Calculate unit costs and make pricing decisions using relevant information given in the

$22,500 of materials would need to be purchased so it is relevant cost. $14,000 of materials would need to be transferred from another contract so it is relevant cost. Stocks current disposable value is $5,000. This cost consider as opportunity cost so it is relevant cost. B/ Labor cost The contract would involve labor cost of $100,000, of which $55,000 would be incurred regardless of whether the contract was undertaken. Therefore, $45,000 is relevant cost. C/ Salary, bonus The production manager received a salary of $45,000 per year so $45,000 is irrelevant cost. On successful completion of the contract he would receive a bonus of $7,250 so $7,250 is relevant cost. D/ Additional administrative expenses. Additional administrative expenses incurred in undertaking the contract are estimated to be $4,325. It is a relevant cost. E/ Fixed overhead

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The company absorbs its fixed overheads at a rate of 12% per machine hour. The contract require 4,000 machines hours. It is an irrelevant cost Calculate the minimum contract price that would be acceptable to KIMCUONG LTD: Material Purchase From other project Obsolete stock Labor cost Bonuses Addition administrative expenses Total $22.500 $14.000 $5,000 $45,000 $7.250 $4.325 $98,075

The total cost of the product was $ 98,075. It is the minimum contract price that would be acceptable to KIMCUONG LTD. The company sold products over the higher minimum cost to get profits. The company didnt accept the contract if the price is lower than minimum cost.

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Calculate investment cost Accounting rate of return (ARR) Accounting rate of return, also known as the Average rate of return, or ARR is a financial ratio used in capital budgeting. The ratio does not take into account the concept of time value of money. ARR calculates the return, generated from net income of the proposed capital investment. The ARR is a percentage return. Say, if ARR = 7%, then it means that the project is expected to earn seven cents out of each dollar invested. If the ARR is equal to or greater than the required rate of return, the project is acceptable. If it is less than the desired rate, it should be rejected. When comparing investments, the higher the ARR, the more attractive the investment. Over one-half of large firms calculate ARR when appraising projects. 3
Accounting rate of return( ARR)= (Average profit/ Average value of investment) x 100%

Year 1 2 3 4 5 Total profit Average profit Machine A:

A $210.000 $210.000 $170.000 $165.000 $60.000 $815.000 $163.000

B 125.000 125.000 150.000 215.000 140.000 755.000 151.000

Depreciation A = (initial cost - residual value)/ 5 = (700000 - 60000)/5 = $128000 Total profit of machine A = (338+338+298+293+188) -700= $755,000 Average profit of machine A =
210 + 210 + 170 + 165 + 60 = $163,000 5

http://en.wikipedia.org/wiki/Accounting_rate_of_return

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Machine B: Depreciation B= (initial cost - residual value)/ 5= (700000 20000)/5 = $136000 Total profit of machine B = (261+261+286+351+276) 700= $735,000
125 + 125 + 150 + 215 + 140 = $151,000 5

Average profit of machine B = Machine A Initial cost Residual value

700.000 60.000 380.000

Average value of investment

Average investment (in $000) =

700 + 60 = $380,000 2

Machine B Initial cost Residual value Average value of investment 700.000 20.000 360.000

Average investment (in $000) =

700 + 20 = $360,000 2

Accounting rate of return( ARR)= (Average profit/ Avarage value of investment) x 100% Rate of return of machine A Average profit Average value of investment Rate of return 163.000 380.000 42.9%
163 * 100% = 42,9% 380

ARR= Average profit/ Avarage value of investment =

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Rate of return of machine B Average profit Average value of investment Rate of return ARR== Average profit/ Avarage value of investment = 151.000 360.000 41.9%
151 * 100 = 41.94% 360

Because the ARR of machine A> the ARR of machine B so Company should be purchase machine A Net present value (NPV) In finance, the net present value (NPV) or net present worth (NPW)[1] of a time series of cash flows, both incoming and outgoing, is defined as the sum of the present values (PVs) of the individual cash flows of the same entity. In the case when all future cash flows are incoming (such as coupons and principal of a bond) and the only outflow of cash is the purchase price, the NPV is simply the PV of future cash flows minus the purchase price (which is its own PV). NPV is a central tool in discounted cash flow (DCF) analysis, and is a standard method for using the time value of money to appraise long-term projects. Used for capital budgeting, and widely throughout economics, finance, and accounting, it measures the excess or shortfall of cash flows, in present value terms, once financing charges are met. The NPV of a sequence of cash flows takes as input the cash flows and a discount rate or discount curve and outputs a price; the converse process in DCF analysis - taking a sequence of cash flows and a price as input and inferring as output a discount rate (the discount rate which would yield the given price as NPV) - is called the yield, and is more widely used in bond trading.4 Net Present Value= Total Present value initial cost Net present Value of machine A
4

http://en.wikipedia.org/wiki/Net_present_value

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Year 0 1 2 3 4 5

Cash flow $ (700.000) 338.000 338.000 298.000 293.000 248.000

Present value factor 10% 1.000 0.909 0.826 0.751 0.683 0.620 NPV

Present value $ (700,000) 307.273 279.339 223.892 200.123 153.988 464.615

NPV= TPV- Initial cost= (307.273+279.339+223.892+200.123+153.988)-700= $464.615 Net present Value of machine B Year 0 1 2 3 4 5 Cash flow $ (700.000) 261.000 261.000 286.000 351.000 296.000 Present value factor 10% 1.000 0.909 0.826 0.751 0.683 0.620 NPV Present value $ (700.000) 237.273 215.702 214.876 239.738 183.793 391.382

NPV= TPV- Initial cost= (237.273+215.702+214.876+239.738+183.793)-700= $391.382

Because the NPV of machine A> the NPV of machine B so Company should be purchase machine A Conclusion: Based on the accounting rate of return and net present value for Machine A and Machine B, we can see that Machine A bring more profitability than Machine B, therefore KINHDO corporation should choose Machine A to have good effect in work and bring more profitability for Company.

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The purpose of the financial statements The purpose of a financial statement is to enable a business to establish the result of its operations over a period of time and to determine its worth at a specific date. Financial statements are often prepared by business people to assist them in evaluating their financial condition.5 There are 4 basics financial statement: Balance Sheet: The balance sheet basically gives an idea of the financing structure of the company. The balance sheet's purpose is to show the assets of the
5

http://www.hbsmc.com/purpose-of-financial-statements/

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company. Balance sheets are based on a fix point called a reporting period---a day, a month, a quarter, a year. A quick glance at a balance sheet will show you what the company owns and how much it owes. Balance sheets include assets (property, cash, anything owned of value), liabilities (debt owed) and shareholder's equity.6 The balance sheet must follow the following formula: Assets = Liabilities + Shareholders' Equity With the help of this one can predict the funds that would be utilized in the future. It would further reflect the capacity of the firm to raise additional capital. Income statement: This type of financial statement keeps an account of the net surplus or deficits. The net surplus or deficit is calculated by considering all the activities in the last financial year. By having a detailed account of the past, one can forecast or assess the future performance of the company.7 The income statement includes profit and loss statement. Purpose of Income statements show the revenue earned during a reporting period. Included in this report are the expenses and cost of creating the revenue. Once the expenses and costs are removed from the total revenue, the bottom line of the report reveals whether or not the company lost money or made money. The income statement helps company evaluate the profits of company. Thus, the income statement is required for each company, investors and creditors to determine the past performance of the business financial forecast future performance, and evaluate the ability to create the future cash flows through the income statement. Cash flow statement: Cash flow statements track the inflow and outflow of cash. They reveal whether or not cash was generated by the business. The data for a cash flow statement comes from an income statement and the balance sheet. The cash flow statement reveals net decreases or increases of cash for the reporting period. The purpose of this financial statement is to keep an account of the different activities of the company. It also provides information on the mode of generation of funds required for repayment. The cash flow statement also helps to analyze the amount of cash that would be required in order to meet the operating costs.

6 7

http://www.ehow.com/about_5047231_purpose-financial-statements.html http://finance.mapsofworld.com/financial-report/statement/purpose.html

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Retain earning: When companies make profits, they do not spend it, they keep it. The amount is kept as retained earnings. The profit is reinvested for businesses to maintain and expand operations. For businesses, retained earnings are a very important source of finance. Retained earnings may affect the number of dividend-paying stakeholders. If enterprises use retained earnings to grow and expand its activities, there will be some money to pay for the stakeholders. Like any company, KINHDO Corporation retains their earnings to invest in areas where the company can create growth opportunities. Use retained earnings to expand the market is much safer than other options. The company does not pay interest to others and receive the total benefits from their projects. They are also independent of the strategy to establish and control their capital without pressure from others (interest rate, time expression).

The differences between the formats of financial statements (profit and loss statement and balance sheet) for different types of business such as sole proprietor, partnership and limited company. Balance sheet: A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.

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Profit and loss statement: A Profit and Loss Statement is a standard financial document that summarizes a company's revenue and expenses for a specific period of time, usually one quarter of a fiscal year and the entire fiscal year.8 There are many different between profit and loss statement and balance sheet for different types of business such as sole proprietor, partnership and limited company For sole traders, the financial statement for sole traders is simple; because the report is just serving for the owner of the company. So, it may not have the balance sheet and income statement. The report just needs to show the profit and loss account compared to a public limited liability company which will have to prepare based on international financial reporting standard (IFRS) and generally accepted accounting principle (GAAP). Example: Appendix1 For partnership, financial statements related to the interests and profits of those who contributed to the company's capital. Objectives of financial statements are the accounting balance sheet, profits, income, result and report the loss. When you create financial statements, the income statement will usually be prepared first because of income or net loss became part of the report which of the partners. The claim of capital partners is to prepare the second because the ending balance of capital became part of the balance sheet. This statement focuses on the analysis of capital and profits of the company circulated inside the company.9 Example: Appendix2 For limited company, the financial statement must reflect the current, noncurrent assets, liabilities, sales, profits, cost of income tax payable and earning per share. The income statement shows a statement of changes in equity changes in share capital, profits, earnings and capital reserve account in the profit and loss year. The company's liability limit will normally be made within one year from the date the account last year's. Balance sheet includes different categories such as share capital, retained earnings, other income and capital reserves. With the limited company. Tax for a separate legal entity and shall be reflected in the balance Example: Appendix 3
8 9

http://management.about.com/cs/adminaccounting/g/profitandloss.htm http://www.oppapers.com/essays/Different-Formats-Of-Financial-Statements-For/470327?topic

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Analyze financial statements using appropriate ratios and comparisons, both internal and external. Calculate ratios for the year ended (showing your workings) for Kinh Do Corporation Current ratio The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's current assets to its current liabilities. It is expressed as follows:

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10

Calculation of the ratio is Current assets Current liabilities Current ratio 2007 1.754.629 467.800 3.75 2008 1.474.434 663.885 2.22

Based on above table, we can see that the current assets in 2008 are lower and the current liabilities are higher 2007. In 2007, it means that for 1(VNDm) the company in the short term it has 3.75 (VNDm) available in assets that can be converted to cash in the short term. In 2008, it means that for 1(VNDm) the company in the short term it has 2.2 (VNDm) available in assets that can be converted to cash in the short term. Therefore, in 2007 the current ration is safer than 2008. It means that in 2008 the business of KinhDo is not good because the company may be affected by the economic crisis and the business plan of company is not suitable. Therefore, I think the company should have suitable plan to develop in next years. The company should pay some taxes and borrow money from the bank to increase the assets of company. Besides, the company can sell issue to increase the current assets of company.

Quick ratios Quick ratios = Total Quick Assets/ Total Current Liabilities Quick Assets = Total Current Assets (minus) Inventory

Total current Assets Inventory Quick Assets Total current Liabilities Quick ratios
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2007 1.754.629 136.272 1.618.357 467.800 3.46

2008 1.474.434 181.656 1.292.778 663.885 1.9

http://en.wikipedia.org/wiki/Current_ratio

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5 In finance, the Acid-test or quick ratio or liquid ratio measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately. Quick assets include those current assets that presumably can be quickly converted to cash at close to their book values. A company with a Quick Ratio of less than 1 can not currently pay back its current liabilities.11 Based on above table, the quick ratios in 2008 is slightly decrease than 2007, it means that in 2008 the quick ratio is low, it may be the cash or account receivable decrease and the company is hard to pay the current liabilities on time. In 2007 the quick ratios is higher, therefore the company can pay the current liabilities on time. Thus, the good solution of company is to increase the sales of products. It helps company increase your cash and the account receivable

Profitability Ratios: Rate of profit to the company a success is to make a profit or return on investment that it has achieved in business. + Gross margin + Roce + Net Profit Margin + Return on assets + Return on Equity Gross Profit Margin =( gross profit/ sales) *100% 2007 Gross profit
11

2008 369.78 8

321.978

http://en.wikipedia.org/wiki/Quick_ratio

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1.230.80 Sales Gross profit Margin 2 % 1.455.768 26.1 25.4 %

From the result above, we can see that the total sales in 2008 are higher than in 2007. The total sales in 2008 increase that show the business of company is better. The gross profit in 2008 is increase but the gross profit margin in 2008 is lower than in 2007. It may be the company decreases the price of products to increase the numbers of sales. The gross profit margin show about the how much profit every dollar of revenue a company is earning. In 2007 the gross profit margin is higher it means that the company can earn more profits on sale than in 2008. Therefore, the company should have plan to increase the gross profit margin to get more effective in work and attract more investor to invest in company.

ROCE Capital employed includes Non- current liabilities Total equity Minority interest 2007 125.713 2.453.494 20.468 2.599.675 2008 172.041 2.075.923 71.561 2.319.525

PBIT is measured as

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Interest expense Operating Profit ROCE

2007 244.030 31.710 275.740 10.6%

2008 -27.749 52.364 24.615 1.06%

ROCE ( return on capital employed) is used to prove the value the business gains from its assets and liabilities. From the above table, we can see that in 2008 the Roce is lower than in 2007. ROCE uses to evaluate about the profit of company. In 2008 the profit of company is lower than in 2007. It may be the company use the capital of company is not good in 2008, it make the ROCE is lower than 2007 therefore it also affect to the business of company. Therefore the company should have solution to increase ROCE of KinhDo such as decrease the cost, ect.

Profit Margin A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every dollar of sales a company keeps in earnings.12Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. Profit Margin = (Net Profit / Net Sales) x 100 PAT to the companys shareholders Net sales
12

2007 224.127 1.230.82

2008 85.316 1.455.758

http://www.investopedia.com/terms/p/profitmargin.asp

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0 18.2 Profit Margin % % 5.86

From the above table, we can see that in 2008 the profit margin in 2007 is better than in 2008 because the profit in 2007 is higher than in 2008 although the total sales in 2008 is better than in 2007. Profit margin is an indicator of a company's pricing strategies and how well it controls costs. In 2008 the profit margin decreases therefore it is not safer than in 2007 because a low profit margin indicates a low margin of safety: higher risk that a decline in sales will erase profits and result in a net loss, or a negative margin. Thus the business operation of KinhDo is not good in 2008. The best solution of company is to attract customer to buy their products and have good strategy business to make the work effectively.

Return on Assets: Return on assets is an indicator of how profitable a company is before leverage, and is compared with companies in the same industry. Since the figure for total assets of the company depends on the carrying value of the assets, some caution is required for companies whose carrying value may not correspond to the actual market value.13 Return on Assets = (Net Profit / Total Assets) x 100 An indicator of a company is how profitable relative to their total assets. 2007 2008 224.12

Net Profit
13

86.416

http://en.wikipedia.org/wiki/Return_on_assets

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7 3.067.47 Total Assets Return on Assets 5 7.3 % 2.9% 2.983.410

Return on assets gives an indication of the capital intensity of the company, which will depend on the industry; companies that require large initial investments will generally have lower return on assets. From the above table, we can see that in 2008 the return on asset is lower than in 2007 it means that in 2007 KinhDo uses asset to earn more profit than in 2008. In 2008 the investment plan is not good to run their business because Company uses the asset to earn lower profit than in 2007. Therefore the Company should check their work to have suitable plan to get more profit than in 2008. KinhDo can increase their asset by selling inventory and marketing their products.

The Return on Equity = (net income/ total equity)* 100% Net income Total equity The Return on Equity 2007 224.127 2.453.49 4 9.1% 2008 85.316 2.075.92 3 4.1 %

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Return on equity (ROE) measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners. It measures a firm's efficiency at generating profits from every unit of shareholders' equity (also known as net assets or assets minus liabilities). ROE shows how well a company uses investment funds to generate earnings growth. From the above table, we can see that the return on equity in 2007 is better than in 2008 it means that in 2007 Kinhdo uses the capitals from the shareholder to earn more profits than in 2008. The return on equity shows about the attract of shareholder in 2008 is lower than in 2007. It means that the business plans of company is not good and the economic crisis in 2008 therefore KinhDo dont receive more profits from shareholders. Thus, the Company should have suitable plans to increase the number of sales to make more profits for equity. By this way Kinhdo can attract more shareholders investing in their company

Inventory Turnover ratio: the Inventory turnover is a measure of the number of times inventory is sold or used in a time period such as a year. The equation for inventory turnover equals the cost of goods sold divided by the average inventory. Inventory Turnover Ratio = Net Sales / Inventory It could also be calculated as:

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Inventory Turnover Ratio = Cost of Goods Sold / Inventory 2007 Cost of goods sold Total Inventory Inventory Turnover Ratio 908.825 0 181.65 136.272 6 6,7 times 6 times 2008 1.085.98

From the above table, we can see that in 2008 the inventory turnover ratio is less than in 2008, it means that the ineffective inventory management because the inventory usually zero rate of return and lost many cost to storage. It means that the sales are not good and many customers arent satisfied with KinhDo products. In 2007, higher inventory turnover ratios are considered a positive indicator of effective inventory management. Therefore KinhDo should have plan to reduce the number of inventory by improve the quality of products, reduce the price of inventory products and have good solution to marketing their products.

Leverage ratios Leverage ratio describes the amount of debt that companies use to finance investment in assets: Total debt ratio

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Long-term debt ratio debt to equity Long-term debt to equity

Total Debt Ratio

2008 Total liabilities Total assets Total debt ratio 2007 Total liabilities Total assets Total debt ratio 593.513 3.067.475 19.35% 835.926 2.983.410 28.02%

From the above figure, we can see that in 2008 the total debt ratio is more than in 2007. It means that KinhDo has more debt in 2008 and it also has more affect into the business of KinhDo. In 2008 the debt is more than therefore the company has the risk level and they will hard to borrow money from others to open their business because higher portion of company's assets are claimed by it creditors. If a company notices that interest rates have fallen below the rate the company is currently paying on its debt, the company may choose to pay off the high-rate debt with new, lower-rate debt. The best solution for KinhDo is to pay some debts to reduce the number of interest to balance their work as soon as.

Long-term Debt Ratio 2007 2008 112.41 Long term debt Total assets Long-term Debt Ratio 0 3.067.47 5 3.6 156.029 2.983.41 0 5.2

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From the above tables, we can see that in 2008 the long-term debt ratio is increase therefore it is not good for the business of KinhDO. This means the potential risk the company faces in terms of its debt-load is higher. The ratio provides a general measure of the financial position of a company, including its ability to meet financial requirements for outstanding loans. If a company notices that interest rates have fallen below the rate the company is currently paying on its debt, the company may choose to pay off the highrate debt with new, lower-rate debt. The best solution for KinhDo is to pay some debts to reduce the number of interest to balance their work as soon as.

Debt to Equity The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets.[1] Closely related to leveraging, the ratio is also known as Risk, Gearing or Leverage. The two components

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are often taken from the firm's balance sheet or statement of financial position (socalled book value), but the ratio may also be calculated using market values for both, if the company's debt and equity are publicly traded, or using a combination of book value for debt and market value for equity financially.14 Debt to equity = (short-term debt/ total equity)*100% Short-term debt Total equity Debt to equity 2007 263.003 2.453.49 4 10,7% 2008 335.922 2.075.923 16,2%

Based on the figure, the debt on equity of 2008 is more than that of 2007; it is not safer for company. It compares the resources provided by creditors with the resources provided by the shareholders. A high rate means higher risk. This means that the financial situation of the Kinh in 2008 of high-risk than in 2007. Overall, the proportion of high debt on equity in 2008 shows that a company may not be able to generate enough cash to meet its debt obligations. However, the debt ratio low on equity in 2008 also indicated that companies are not taking advantage of the profit increase financial leverage can bring. Investors often prefer low-debt ratio on equity because their interests are better protected in the event of a decline in business. Thus, companies with debt on high equity may not be able to attract more capital. Therefore, KinhDo should issuance of common stock to reduce debt on equity by maintaining debt levels consistent

Long-term Debt to Equity Long term debt Total equity

14

2007 112.410 2.453.49

2008 156.029 2.075.923

http://en.wikipedia.org/wiki/Debt-to-equity_ratio

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4 4.5 Long term debt to equity % % 7.5

The long term debt to equity ratio is simply similar to gearing, except that short term debt is excluded from the calculation. This is most simply interpreted as a measure of capital structure, but is also used as a measure of financial strength. Base on the figure we can see that the long term debt to Equity in 2008 is more than that in 2007, therefore the company work not well than 2007. It makes company is not safer than 2007. Thus, the company should ensure that long-term-debt-to-equity ratios are adequate by properly managing operating cash and resorting to short-term financing activities, such as stock issuance.

Analyze the financial performance and position of Kinh Do for the year ended and compared to the previous year INCOME STATEMENT Revenue 2007 1.230.802 2008 1.455.768 Percentage changes +18%

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COGS Gross profit Operating profit Profit before tax Tax Profit after tax Minority interest PAT to the

908.825 321.987 244.030 222.469 1.659 224.127 companys 224.127 31.710 1.754.629 530.438 522.518

1.085.960 369.788 27.749 61.690 1.087 60.603 24.713 85.316 52.364 1.474.434 206.808 584.291 58.732 489.407 181.656 1.165 12.271 1.508.976 31.059 749.092 673.385 51.357 55.440 2.983.410 663.885 335.922 172.041 156.029 571.149 1.721.014 147.004 2.075.932 71.561 2.983.410

+19.5% +14.8% -88.6% -72.2% -34.8% -73% -62% +65% -16% -61% +11.8% +1090% -12.7% +33.3% +195% +141% +14.4% +0.47 % +55.7% -15.5% -3.79%

shareholder Interest expense BALANCE SHEET(VNDm) Current Assets Cash & equipment Short term financial investment Provision for short

term 4.932

investment Short term receivables 560.318 Inventory 136.272 Provision for inventory 395 devaluation Other short term assets Non-current assets Long term receivables Fixed assets Long term financial investment Provision for long term investments Other long term assets TOTAL ASSETS Current liability Short term debt Non-current liabilities Long term debt Chartered capital Capital surplus Retained earnings Total equity Monitory interest TOTAL CAPITAL 5.082 1.312.846 30.911 480.860 797.351 196.257 3.725 3.067.475 467.800 263.003 125.713 112.410 469.997 1.725.694 181.798 2.453.494 20.468 3.067.475

-2.7% +42% +27.7 % +36.8% +38.8% +21.5% -0.26% -19.1% -15.4% +249% -2.7 %

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From the above table about the financial statement, we can see that in 2008 the business activities in 2008 are not good when compared in 2007. The profit, total asset and total capital decrease but the debt increases, therefore it makes the company is not safer than 2007. Although the revenue, total sales, costs of products sold increase in 2008 but the profit after tax decrease, it means that the prices of products decrease. Therefore, the business of Kinhdo in 2008 is not better than in 2007. In balance sheet the current assets of company decrease but the non-current assets increase. The total sales in 2008 is more increase than in 2007 but the retained earnings is lower, it means that the business of Kinhdo has problems, it may be Kinhdo reduce the price of products to increase the total sales and decrease the number of the inventory. Besides, the current liability, the non-current liability, the short and long term debts increase but the total assets and the investment decrease. Therefore, the company uses the assets of company to pay the tax and the banks. Finally, the total equity decrease in 2008, it shows that Kinhdo cannot use the capital from the equity and shareholders; therefore it has affect to the profits of equity. Suggestion: The Company should have good business plans and pay some debts to decrease the total debts to help KinhDo to stable business operation of Kinhdo.

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Conclusion: The report aims to discuss three aspects that are the financial implications as a resource in the business, making financial decisions based on financial information and financial analysis of business performance business. First, it describes the information needs of different decision makers and the financial impact of the financial statements. Next, it analyzes budgets for decision making at reasonable prices as well as evaluating the feasibility of a project using the techniques of investment evaluation. Finally, it explains the purpose of financial statements and describes the differences between the formats of financial statements for the business types.

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Reference: MFRD book http://www.investorwords.com/1957/financial_statement.html http://en.wikipedia.org/wiki/Accounting_rate_of_return http://en.wikipedia.org/wiki/Net_present_value http://www.hbsmc.com/purpose-of-financial-statements/ http://www.ehow.com/about_5047231_purpose-financialstatements.htmlhttp://finance.mapsofworld.com/financial-report/statement/purpose.html http://management.about.com/cs/adminaccounting/g/profitandloss.htm HNC & HND (2002). Managing Financial Resources. London http://www.investopedia.com/terms/p/profitmargin.asp

Appendix 1: Sold trader

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38

http://www.svtuition.org/2010/01/proforma-of-profit-and-loss-account-and.html

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Appendix2: Partnership Income statement for partnership

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http://learnaccounting.wordpress.com/2007/12/21/three-most-common-types-of-smallbusinesses-%E2%80%93-sole-proprietorship-partnership-and-private-limitedcompany/partnership-example-of-income-statement-and-balance-sheet-part-1-of-3/ Balance sheet for partnership

http://business-plan.planmagic.com/online-business-plan/balance_sheet_forecast.htm

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Appendix 3: Limited Company Income statement for Limited company

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http://learnaccounting.wordpress.com/2007/12/21/three-most-common-types-of-smallbusinesses-%E2%80%93-sole-proprietorship-partnership-and-private-limitedcompany/private-limited-company-example-of-income-statement-and-balance-sheet/ Balance sheet for Limited company Head Shoppe Company Limited Balance Sheet December 31, 1989

http://aics.acadiau.ca/case_studies/headshoppe.html

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