BANKING ACADEMY ADVANCED PROGRAM FACULTY OF FINANCE GRADUATION THESIS TOPIC: THE EFFECTIVENESS OF USING CURRENT ASSETS AT G&M INTERNATIONAL COMPANY LIMITED - CURRENT SITUATION AND SOLUTIONS Student name : Pham Thuy Linh Class : K20CLCD Student ID : 20A4011065 Academic year : 2017 - 2021 Lecturer : Dr. Nguyen Thi Lam Anh Hanoi, May 2021 BANKING ACADEMY ADVANCED PROGRAM FACULTY OF FINANCE GRADUATION THESIS TOPIC: THE EFFECTIVENESS OF USING CURRENT ASSETS AT G&M INTERNATIONAL COMPANY LIMITED - CURRENT SITUATION AND SOLUTIONS Student name : Pham Thuy Linh Class : K20CLCD Student ID : 20A4011065 Academic year : 2017 - 2021 Lecturer : Dr. Nguyen Thi Lam Anh Hanoi, May 2021 DECLARATION I hereby declare that the graduation thesis topic: “The effectiveness of using current assets at G&M International Company Limited - Current situation and solutions” is an independent research work under the guidance of my supervisor, Dr. Nguyen Thi Lam Anh and do not have any copying by others.
The content of the graduation thesis is the product that I have made efforts to research during my study at the school as well as the internship at G&M International Company Limited. All the information and data furnished in the report are completely honest. I would like to take full responsibility and discipline if there is a problem. Hanoi, May 19th 2021 Student Phạm Thùy Linh i ACKNOWLEDGEMENT I would like to express my special thanks of gratitude to Dr.
Nguyen Thi Lam Anh has enthusiastically guided me through at every satges of preparing and completing the graduation thesis on the topic: “The effectiveness of using current assets at G&M International Company Limited - Current siuation and solutions”. I would also like to thank the lectures at Banking Academy and the Faculty of Finance in particular for teaching and imparting knowledge to us during the past four years. Although the internship was short, I am very grateful for the help from the staff in G&M Co. to complete the thesis.
ii TABLE OF CONTENTS INTRODUCTION .1 CHAPTER 1: THEORETICAL BASIS OF CURRENT ASSETS AND THE EFFECTIVENESS OF USING CURRENT ASSETS. Theoretical basis of current assets. Definition of current assets. Characteristics of current assets.
Function of current assets. Classification of current assets. Theoretical basis the effectiveness of using current assets. Definition of managing current assets efficiency.
Indicators for evaluating managing current assets efficiency. Factors affecting managing current assets efficiency. Overview of related researchs .13 CONCLUSION OF CHAPTER 1 .15 CHAPTER 2: EFFECTIVENESS REALITY OF USING CURRENT ASSETS AT G&M INTERNATIONAL COMPANY LIMITED. Overview of G&M International Company Limited.
Specifies business of Flavors and Fragrances Industry. Formation and development process of G&M International Company Limited. Organizational structure of G&M International Company Limited. Business process of G&M International Company Limited.
Business situation of G&M International Company Limited. Effectiveness reality of using current assets at G&M International Company Limited. Current assets structure of G&M International Company Limited in the period 2018-2020. Usage reality of current assets of G&M International Company Limited in the period 2018-2020.
Analysis of effectiveness in using current assets at G&M International Company Limited in the period 2018-2020. Evaluating the effectiveness in using current assets at G&M International Company Limited in the period 2018-2020. Limitations and causes .52 CONCLUSION OF CHAPTER 2 .58 CHAPTER 3: SOLUTIONS TO ENHANCE THE EFFECTIVENESS OF USING CURRENT ASSETS AT G&M INTERNATIONAL COMPANY LIMITED. Company development orientation.
Socio-economic context and prospect of flavoring industry. Company development orientation in the near future. Solutions proposed to enhance the effectiveness of using current assets at G&M International Company Limited. Improving current asset management.
Improving staff quality. Proactive risk management. Investing material and technical facilities. Recommendations to Government.
Recommendations to G&M International Company Limited .71 CONCLUSION OF CHAPTER 3 .74 iv LIST OF ABBREVIATIONS Abreviation words Meaning G&M G&M International Company Limited COGS Cost of goods sold DSO Days Sales Outstanding DOH Days of inventory on hand EVFTA European-Vietnam Free Trade Agreement FTA Free Trade Agreement RCEP Regional Comprehensive Economic Partnership v LIST OF FIGURES Figures Page Diagram 2.1: The organizational structure of G&M 18 Chart 2.1: Sales from goods and services sold of G&M in the period 23 2018-2020 Chart 2.2: Cost of goods sold of G&M in the period 2018-2020 26 Chart 2.3: Income before tax of G&M in the period 2018-2020 28 Chart 2.4: Assets structure of G&M in the period 2018-2020 29 Table 2.1: Income Statement of G&M in the period 2018-2020 21 Table 2.2: Expenses of G&M in the period 2018-2020 25 Table 2.3: Assets of G&M in the period 2018-2020 30 Table 2.4: Current assets of G&M in the period 2018-2020 32 Table 2.5: Cash and cash equivalent of G&M in the period 2018-2020 35 Table 2.6: Accounts receivable of G&M in the period 2018-2020 37 Table 2.7: Inventory of G&M in the period 2018-2020 40 Table 2.8: Liquidity ratios of G&M in the period 2018-2020 42 Table 2.9: Receivables turnover of G&M in the period 2018-2020 46 Table 2.10: Inventory turnover of G&M in the period 2018-2020 48 Table 2.11: Return on current assets of G&M in the period 2018-2020 50 vi INTRODUCTION 1. Reasons for choosing the topic Current assets play an important role in business operations of any enterprise. Whether a business can survive in the market or not is mostly based on the current assets of that business. This is the type of capital that the enterprise often has to spend in purchasing and maintaining machinery, equipment and goods.
It can be said that the rational management and use of current assets will increase business performance, as well as maximize profits for the company. Current assets are also a measure that reflects the volatility of an enterprise's business. Through the analysis, businesses can actively change to be able to easily adapt to the fluctuations of the business environment. G&M International Company Limited is one of the few companies operating in the Flavors and Fragrances industry in Vietnam, specializing in the supply of stabilizers, food and industrial flavorings.
In the near future, the company aims to expand the market, so improving the management of the company's assets becomes more necessary than ever. In the context that the economy is having negative impacts due to the impact of the Covid-19 epidemic taking place around the world, all industries are more or less affected, including the Flavors and Fragrances industry. During the period of operation, the company has a certain standing in the industry, but in terms of asset management, especially current assets, the company has faced difficulties and little experience. The effective use of current assets plays a very important role, directly affecting the business activities of the company.
Realizing the importance of effective use of current assets as well as assessing the impact of the epidemic on the company, during my internship here, I focused on learning about the current situation of using current assets at the company. Therefore, I decided to conduct a thesis with the topic "The effectiveness of using current assets at G&M International Company Limited - Current situation and solutions" in order to contribute somewhat to the improvement of management of current assets that the 1 Company is dealing with, and at the same time, the company assist in the development and achievement of the set business goals. Research targets The thesis is carried out with the item of starting searching from the basic theory of current assets and the effectiveness of using current assets. From those theories, through the observation and analysis of the current situation of using current assets at G&M International Co., Ltd in the last three years, the thesis evaluates the achieved results, the remaining limitations, indicating the cause of the condition.
Thereby, the thesis offers solutions and recommendations to help the company improve as well as improve the efficiency of using current assets. Object and scale of research Research object: Current assets and effectiveness of using current assets of a company Research scale: Current situation of current assets and use of current assets at G&M International Co., Ltd in the period of 2018-2020. From there, the thesis offers measures and recommendations to improve the efficiency of using current assets at the company. Research questions The thesis is researched to answer three main questions: - What are current assets? What is the effective use of current assets? - What is the current situation of using current assets at G&M International Company Limited in the period of 2018 - 2020? - What are the solutions to improve the effectiveness of using current assets at G&M International Company Limited in the coming period? 5.
Research methods In order to have a complete and accurate thesis, I have applied what I have learned to analyze the financials of a company. The thesis has applied mainly methods such as the general analysis method, horizontal comparison method, and 2 vertical comparison method to evaluate the efficiency of using current assets at G&M International Company Limited in the period 2018 - 2020. Structure of the thesis Besides the introduction, conclusion, list of references and appendix, the thesis consists of three main chapters: Chapter 1: Theoretical basis of current assets and the effectiveness of using current assets. Chapter 2: Effectiveness reality of using current assets at G&M International Company Limited.
Chapter 3: Solutions to enhance the effectiveness in using current assets atat G&M International Company Limited. 3 CHAPTER 1: THEORETICAL BASIS OF CURRENT ASSETS AND THE EFFECTIVENESS OF USING CURRENT ASSETS 1. Theoretical basis of current assets 1. Definition of current assets Current assets are essential and vital to companies, especially commercial enterprises.
Current assets are allocated all stages to ensure the continuous and stable business process, to avoid wastage and loss due to production stoppage, not affect the solvency and ensure the profitability of assets. Current assets represent all the assets of a company that are supposed to be conveniently sold, consumed, used, or exhausted through standard business operations for one year. Current assets appear on a company's balance sheet, which is one of the annual financial statements that must be done. To production and business enterprises, the value of short-term assets will often have a large proportion, ranging from 25-50% of the total assets of the business.
Current assets and current accounts are two terms that can be used interchangeably. A current asset is a company's cash and its other assets that are expected to be converted to cash within one year of the date appearing in the heading of the company's balance sheet. However, if a company has an operating cycle that is longer than one year, an asset that is expected to turn to cash within that longer operating cycle will be a current asset. Furthermore, short-term assets are highly liquid assets that can be easily sold to recover money.
Therefore, the management as well as the use of short-term assets will have a great impact on the ability of enterprises to fulfill their common tasks. Current assets include cash and cash equivalents, short-term financial investments, accounts receivable, inventory, and other current assets. - Cash and cash equivalents: are the working cash on the current balance sheet of the business, including assets that are short-term and highly liquid investments that can be easily converted to money and have low risk of price changes. 4 - Short-term financial investments: when the business has an idle amount of money on its balance sheet, it eliminates the opportunity cost of investing for that idle money.
Therefore, the business will choose to invest that unused money in various short-term business projects such as mutual funds or demand deposits to invest and use that money. - Accounts receivable: reflects receivables from customers, prepayments to suppliers, internal receivables, receivables according to the progress of contract plans or other receivables calculated at the reporting time.