Graduation thesis Academy of finance DECLARATION I here with formally declare that this thesis is the presentation of result of my own research during the time of internship in Agricare Viet Nam Co.,Ltd, and has not been submitted for a degree to any other universities or institutions. To the best of my knowledge, the thesis does not contain material previously published or another people, except where due acknowledgement is made in the text. Ha Noi, 9 May, 2016 Student Dinh Thi Thien Hue 1 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance 2 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance ACKNOWLEDGEMENTS During graduation thesis, I have collected a lot of knowledge about working capital at Agricare Viet Nam Co. First of all, I would like to thank all professor lecturers whose experience helped me a lot in developing the thesis.
I also express my great gratitude to my supervisor M.A Tran Thu Hoai for her inspiring guidance, suggestions and critical evaluation of the work for the successful completion of my thesis. Secondly, I would like to give thanks to all lecturers at Academy of Finance for their enthusiasm through the teaching and support process. Thirdly, I would like to express my sincere thanks to all staff of Agricare Viet Nam Co. Ltd for giving me assistance and corporation that helped me in writing this thesis.
Last but not least, I would like to thank my parents and friends for their care, support, encouragement, without which my thesis would not have been accomplished. 3 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance ABSTRACT In the context of development of global economy, Vietnam enterprises have less competitive advantages than international companies. Agricare Viet Nam Co.Ltd, as many other companies, has to face many difficulties from globalization. In this study, author analyzed working capital management of Agricare Viet Nam Co.Ltd to assess its efficiency and effectiveness.
From the results, author drew out the current situation of working capital management, identified strength, weakness and other outstanding points. In the end of study are some recommendations that might be applied to improve the efficiency and effectiveness of working capital management. 4 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance 5 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance LIST OF ABBREVIATIONS No Abbreviations Full Phrase 1. AR Accounts Receivables 2.
CCC Cash conversion cycle 4. EOQ Economic order quantity 5. FA’s Financial accounting statement 6. JIT Just in time 7.
P&L Profit and loss 8. WC Working capital 9. WCM Working capital management 6 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance LIST OF TABLES Table 2.1 Business performance results of Agricare Viet Nam from 2012 to 2014 Table 2.2 Cash and cash equivalents Table 2.3 Cash management efficiency ratios Table 2.4 Receivables management efficiency ratios Table 2.5 Inventories management efficiency ratios LIST OF FIGURES Figure 1.1 Classification of working capital Figure 1.2 Typical inventory cycle Figure 1.3 EOQ and Inventory Cost Chart 2.1: Structure of current asset of Agricare Viet Nam in 2014 Chart 2.2: Comparing working capital from 2012 to 2014 Chart 2.3: Comparing working capital with fixed capital and total capital Chart 2.4: Cash and cash equivalent in total working capital Chart 2.5: Proportion of receivables in total working capital Chart 2.6: Proportion of inventories in total working capital 7 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance TABLE OF CONTENT LIST OF TABLES 5 CHAPTER 1 1 LITERATURE REVIEW OF WORKING CAPITAL MANAGEMENT 1 1. Introduction of working capital in enterprises 1 1.
Definition of working capital 1 1. Classification of working capital 1 1.3 Role of working capital 4 1.4 Structure of working capital 4 1.5 Factors affecting working capital 6 1. Working capital management 9 1. Working capital management and its objectives 9 1.
Managing working capital 10 1. Working capital management efficiency ratios 16 CHAPTER 2 MANAGEMENT AT AGRICARE VIET NAM CO.1 General overview of Agricare Viet Nam Co.1 History of the company’s establishment and development 26 2.2 Business fields and products 26 2.3 Organizational structure of Agricare Viet Nam Co.4 Financial situation of Agricare Vietnam Co.2 Working capital management situation in Agricare Viet Nam Co.1 Working capital structure 31 2.2 Cash management situation in Agricare Viet Nam Co. Account receivable management situation in Agricare Viet Nam Co.4 Inventory management situation in Agricare Viet Nam Co.5 Other management situation in Agricare Viet Nam Co., Ltd 44 8 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance CHAPTER III SOLUTIONS FOR IMPROVING WORKING CAPITAL MANAGEMENT IN AGRICARE VIET NAM CO.4 Other recommendations 49 CONCLUSION 51 REFERENCE 58 9 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance 10 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance Introduction 1. Rationale of the study In the market economy, capital is one of the most important factors for enterprises to survive and develop beside others factors such as human resources, the inventions, patents, technical management.Generally, in the commercial activity and particularly in the commercial enterprises, capital is also an effective tool to enhance the competitiveness of enterprises.
Therefore, every business which wants to exist and develop has to concern about the capital creation and management. Working capital is one of the two components of capital. For commercial businesses, working capital accounts for a large proportion of the total capital approximately 75% - 95%. Working capital management is an important area of financial management in every business function.
Working capital management deals with the administration of the liquidity components of firms’ short-term current assets and current liabilities (Baker and Powell, 2005; Brigham and Ehrhardt, 2005; Gitman, 2009). The most important current assets are cash, debtors or account receivables, stock or inventory and current liabilities consisting of creditors or account payables, accrued expenses, taxation liabilities, short-term debt such as commercial bills, and provisions for current liabilities such as dividends declared but not yet paid. This is the reason why working capital management has become a hot topic for all enterprises, and improving working capital efficiency is the target for all business. Recognizing the important of working capital management in the firm’s survival , growth and after my internship time in Agricare Viet Nam Co.Ltd, I 11 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance had a chance to work in Finance- accounting department where had overall responsibility for using, managing capital, and contributing to company growth and profitability.
I choose the topic “Working capital and some solutions to improve its management efficiency at Agricare Vietnam Co.Ltd” as topic of the thesis. Aims of the study The main objective of the study is to analyze the working capital management and suggest some methods to improve the efficiency of the process. The specific aims of the thesis include: ● To provide a source of information on capital concepts encompassing definition capital, the importance of working capital. ● To get a better understanding of working capital management at Agricare Viet Nam Co.
● To evaluate the current situation of organization and management of working capital at Agricare Viet Nam Co. o To offer business management recommendations on managing working capital. Method of the study For this study the following approach was adopted. Firstly, relevant literature, publications and studies are reviewed in order to get in-depth information on fixed capital management in general and this concept at Agricare Viet Nam in particular.
The company’s background is also studied and reviewed. Secondly, data related to working capital management at the firm including financial statements and other required documents will be 12 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance collected and examined. Finally, the information obtained is analyzed, processed to evaluate the working capital management efficiency. 13 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance 4.
Scope of the study Due to the limited time and the scale, this dissertation emphasizes on working capital management at Agricare Viet Nam Co.Ltd in the period from 2012-2014 and propose some solutions for improvement. Organization of the study Apart from the Introduction, Conclusion, Reference and Appendix, the thesis is divided into three main parts as follows: ● Chapter 1: LITERATURE REVIEW. This chapter provides general background on capital and working capital management. ● Chapter 2: THE STUDY.
This chapter gives the data and analysis of the enterprise’s working capital management. ● Chapter 3: SOLUTIONS AND RECOMMENDATIONS. This chapter suggests some recommendations to improving working capital management efficiency at Agricare Vietnam Limited Liability Company. 14 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance CHAPTER 1 LITERATURE REVIEW OF WORKING CAPITAL MANAGEMENT 1.
Introduction of working capital in enterprises 1. Definition of working capital In accounting and financial statement analysis, working capital involves a firm’s current assets and current liabilities that have maturities of less than one year and are needed for a normal business cycle. The net working capital is the difference between current assets and current liabilities. The current assets primarily include cash and short-term investments in marketable securities, inventories of raw materials, work-in- progress and finish goods as well as accounts receivables.
If the current assets excess the current liabilities, this indicates that the firm has ability to meet its short-term financing obligations. The greater the net working capital is the more liquid or solvent the firm is. According to a financing perspective, working capital is the amount a firm invests in short-term or current assets that required for day-to-day operation. Current assets regularly turn over and play a key role for a firm to continuously operate.
If consider a business as a machine, the current assets could be seen as “lubricating oil” helping the “engine” of non-current assets to well function. Classification of working capital The amount of funds needed for meeting requirements normally varies from time to time in every business. However, business always needs a certain amount of assets in the form of working capital if it is to carry out its functions. 15 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance This permanent need and the variable requirements are the basis for a convenient classification of working capital as regular, permanent, or variable as follows: Figure 1.1 Classification of working capital 1.1 Permanent or fixed working capital A part of the investment in current assets is as permanent as the investment in fixed assets.
It covers the minimum amount necessary for maintaining the circulation of the current assets. Working capital invested in the circulation of the current assets and keeping it moving is permanently locked up. The permanent or fixed working capital is of two kinds: (a) Regular working capital It is the minimum amount of liquid capital required to keep up the circulation of the capital from cash to inventories to receivables and back again to cash. This would include a sufficient amount of cash to maintain reasonable quantities of raw materials for processing into finished goods to ensure quick delivery etc.
(b) Reserve margin or cushion working capital: It is extra capital required to meet unforeseen contingencies that may arise in the future. These contingencies may crop up on account of rise in prices, business depression, strikes, lock-outs, fires and unexpected 16 Dinh Thi Thien Hue LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Graduation thesis Academy of finance competition.