GROUP 2_42K18.

3-CLC

OPERATIONAL EFFICIENCY ANALYSIS

1. Assets use efficiency

Year 2015 2016 2017
Items
Net sales 354,804,830,635 417,005,970,457 327,297,597,399
Financial revenues 12,011,095,768 6,866,527,878 6,604,156,228
Other revenues 8,916,193,953 4,265,975,480 466,371,020
Total assets 286,081,043,628 294,615,102,186 240,022,328,156
Total average assets 289,903,302,120.50 290,298,072,907 267,268,715,171

Total sales and revenues 375,732,120,356 428,138,473,815 334,368,124,647

Assets use efficiency 1.3 1.47 1.25

 The Assets use efficiency index increased slightly in 2016 compared to 2015 (up
from 1.3 to 1.47), however, it fell sharply in 2017 (down to 1.25, lower than
2015).
 This may prove that SCD's asset use efficiency has declined markedly in 2017,
which is a bad reaction to the company's financial situation.
 The reason may be due to a sharp drop in total sales and revenue while the average
total assets of the company decreased insignificantly, leading to a sharp drop in
this index in 2017.

2. Fixed assets turnover.

Year 2015 2016 2017
Items

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Net sales 354,804,830,635 417,005,970,457 327,297,597,399

Original price of 22,378,109,926 1,300,192,426 1,300,192,426
intangible assets
Original cost of tangible 66,190,175,469 58,320,874,036 58,674,510,400
assets
Average historical cost of 88,568,285,395 59,621,066,462 59,974,702,826
fixed assets
Fixed assets turnover. 4 6.9 5.4
 The index fixed assets turnover of 2016 sharply increased (from 4 to 6.9), which
occurred in part because the company's net sales index increased sharply this year
(from 354,804,830,635 to 417,005,970,457) and the index average historical cost
of fixed assets decreased (from 88,568,285,395 to 59,621,066,462).
 While a higher fixed asset turnover ratio is generally better, if the fixed asset
turnover ratio is too high, then the business firm is likely operating over capacity
and needs to either increase its asset base (plant, property, equipment) to support
its sales.
 However, by 2017 this index falls from 6.9 to 5.4, mainly due to the sharp drop of
net sales index, which proves that the company is having problems in sales and
sales revenue. low while selling costs are higher than in previous years.

3. Current assets turnover.

Year 2015 2016 2017
Items
Net sales 354,804,830,635 417,005,970,457 327,297,597,399
Current asset 225,311,490,724 242,516,249,560 192,288,057,739

Average current assets 223,836,285,109 233,913,870,142 217,402,153,649.5

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Current assets turnover. 1.59 1.78 1.51

 In 2017, the current asset turnover index is higher than the remaining years,
showing a higher intensity of current asset use.
 The uptrend of this ratio is a good sign because this means that the company is
trying to consistently improve its policies in inventory, receivables, cash and asset
management, other current.
 This means that a larger portion of the financial resources can be used for
strengthening existing or investment activities.
 However, by 2017, this index will drop significantly (even if the tower is higher
than 2015). The decline of the current asset cycle shows the increasing demand for
financial resources.
 In case the current asset turnover value is low there are following ways to increase
it:
 Decreasing the inventory stock to the minimum level, which would
allow the continuous operational process;
 Sales promotion and decreasing the finished goods stock;
 Activation of the accounts receivable collection process, etc.

4. Disaggregating current assets turnover (1 year).

Year 2016 2017
Items
Current assets turnover. 1.78 (1) 1.51(2)
Net sales. 417,005,970,457 (3) 327,297,597,399 (4)

(4) - 32,878,321,042
∆ Current assets turnover. −
(2)

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(4)
(1)

(4) (3) - -59,409,518,581

∆ Net sales. −
(2) (2)

Disaggregating current assets - -26,531,197,539

turnover.

-From the above analysis shows that the current assets turnover index in 2017 decreased
from 1.78 to 1.51 (down 26,531,197,539 compared to 2016) because current assets
turnover increased by 32,878,321,042 (123.9%) while net sales decreased by
59,409,518,581(-223.9%).

Items/Year 2015 2016 2017

Net sales 354,804,830,635 417,005,970,457 327,297,597,399

Financial income 12,011,095,768 6,866,527,878 6,604,156,228

Other income 8,916,193,935 4,265,975,480 466,371,020

Total sales and

revenues 375,732,120,338 428,138,473,815 334,368,124,647

Average total assets 289,903,302,121 290,348,072,907 267,318,715,171

Profit before tax 33,031,271,079 37,883,276,489 (2,731,129,457)

ROS 8.79% 8.85% -0.82%

ROA 11.39% 13.05% -1.02%

Assets turnover 1.30 1.47 1.25

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5. ROS
 From 2015 to 2016, ROS of SCD company is quite high and stable ( nearly 9
percent). This indicator shows that SCD company manage operating efficiency to
minimum cost so reach maximum profit. But in 2017, a decrease can be seen is
the lowest in 3 years at -0.82 percent. ROS is low because SCD company does not
manage operating efficiency and also revenue reduce . Therefor, Declining the
competitiveness of SCD company with compared the drink industry.

6. Factors influenced to net operating profit.

Value Variance

2,016 2,017

1.Net revenue 417,005,970,457 327,297,597,399 (89,708,373,058)

2. Cost

Cost of good sold 293,231,679,856 252,708,169,775 (40,523,510,081)

Selling cost 58,218,851,250 48,601,039,081 (9,617,812,169)

Administrative 35,438,093,162 35,541,302,256 103,209,094

2. Total cost 386,888,624,268 336,850,511,112 (50,038,113,156)

3.Net operating
profit 30,117,346,189 (9,552,913,713) (39,670,259,902)

4. Expense/ revenue
ratio 92.78% 102.92% 10.14

 Net profit decrease from the influence of revenue

=decrease of revenue * expense/revenue ratio2016
=89,708,373,058*92.78%= 83,229,381,583

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From formula, the data shows when revenue decline with expense/revenue ratio of
base year-2016, Net profit decline at 83,339,381,583 in 2017. The reason that the
pricing policy of SCD is not suitable. In the other hand, The marketing policy is
not efficiency to attrative customers
 Net profit decrese from the influence of cost saving efficiency
=increase of expense/revenue ratio* Revenue2016
=10.14*417,005,970,457=4,228,440,540,434
From formula, the data shows when expense/revenue ratio rise with revenue of
base year -2016, Net profit decline at 4,228,440,540,434 in 2017. The largest
reason that SCD company is no effect of cost management.

7. ROA
 From 2015 to 2016, ROA of SCD company rise nearly 2 percent. ROA in 2016 is
higher than ROA of the drink industry average (12.58%). This shows that SCD
company exploits its assets effectively, corresponding the greater the profitability
of assets. But in 2017, a decrease can be seen is the lowest in 3 years, ROA about -
1.02%. The lower the profitability of assets is.

8. Disaggregating ROA
 Supposedly, SCD company has assets turnover between 2016 to 2017 at 1.47
disparity of ROS=(HROS2017-HROS2016)*Hassets turnover

=(-0.82-8.85)*1.47= -14.25%

In 2017, if SCD company has the same of assets turnover, ROS decline -14,25
percent. The data shows that SCD company has not manage the operating
efficiency and also not yet minimized cost management.
 Supposedly, SCD company has ROS between 2016 to 2017 at -0.82%
Disparity of assets turnover=HROS2017*(HAT2017-HAT2016)

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= -0.82%*(1.25-1.47)=0.0018

In 2017, if SCD company has the same of ROS, asset turover rise slightly at
0.0018. The data shows that SCD company does not improve to use efficiency of
assets.

9. Impact factors to ROE

Index 2015 2016 2017
Profit before tax (1) 33,031,271,079 37,883,276,489 (2,731,129,457)
Interest expense (2) 37,777,778 - 225,555,556
Average total assets (3) 289,903,302,121 290,348,072,907 267,318,715,171
Return on assets variation (RE)
11.41% 13.05% (1)%
(4) = ((1)+(2))/(3)
Profit after tax (5) 26,170,573,321 30,005,862,206 (3,039,045,461)
Average owner's equity (6) 195,665,517,538 206,667,965,419 199,193,080,893
Return on equity (ROE)
13.38% 14.52% (2)%
(7) = (5)/(6)

1. Return on assets variation – RE:

Rertun on assets variation tends to decrease (from 2015 to 2017, respectively
20.63%, 13.05%, -1%) shows that the company's use of capital is ineffective and
has no profit.
2. Return on equity – ROE:
From 2015 to 2016, Return on equity of the company using equity is effective
shows that the efficiency of owners' equity in 2016 improved compared to 2015
but decreased compared to 2015, in 2017, every 100 VND of the company only
brings -2 VND of profit after tax. Industry average ROE is 18.64%. Company 's
ROE is lower than the industry average in 2017, indicating that the company did

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not use equity effectively. The reason is that the company did not mobilize
maximum resources owned into business activities to increase profitability.
3. Impact factors to ROE:

Index 2016 2017

Average total assets (1) 290,348,072,907 267,318,715,171
Average owner's equity (2) 206,667,965,419 199,193,080,893
Debt (3) 81,900,153,681 54,631,114,687
Equity (4) 212,714,948,505 185,671,213,280
Interest expense (5) - 225,555,556
Profit before tax (6) 37,883,276,489 (2,731,129,457)
Return on sales – ROS (7) 8.85% (1)%
RE (8) 13.05% (1)%
Assets turnover (9) 1.44 times 1.22 times
Self-fund ratio (10) 72.20% 77.36%
Debt to equity ratio
38.50% 29.42%
(11) = (3)/(4)
Interest coverage ratio (ICR)
- (11)
(12) = ((6)+(5)/(5)

 Influence factors: ROS, assets turnover:

𝑇𝑜𝑡𝑎𝑙 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑎𝑠𝑠𝑒𝑡𝑠𝑠
ROE = 𝑅𝑂𝑆 ∗ 𝐴𝑠𝑠𝑒𝑡𝑠 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 ∗ ∗ (1 − 𝑇)
𝑇𝑜𝑡𝑎𝑙 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑒𝑞𝑢𝑖𝑡𝑦

From the above model, we see that ROS is low ( every 100 VND of net
revenue in the company, it only brings -1VND profit before tax), showing the
ability to manage low cost, and the company's operating efficiency is poor,
hence reduces profitability on the company's assets. And assets turnover

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decreased by 0.22 times, reflecting the low and ineffective exploitation of the
company's total assets.
 Influence factors: Self-fund ratio:
𝑃𝑟𝑜𝑓𝑖𝑡 𝑏𝑒𝑓𝑜𝑟𝑒 𝑡𝑎𝑥∗(1−𝑇) 1
ROE = ∗
𝑇𝑜𝑡𝑎𝑙 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑎𝑠𝑠𝑒𝑡𝑠𝑠 𝑠𝑒𝑙𝑓−𝑓𝑢𝑛𝑑 𝑟𝑎𝑡𝑖𝑜

From the above model, we see that the self-fund ratio of the company is high at
77.36% (2017). So, the ability to self-finance is high and the level of financial
independence increases.
 Influence factors: Debt to equity ratio:
ROE = [𝑑𝑒𝑏𝑡 𝑡𝑜 𝑒𝑞𝑢𝑖𝑡𝑦 𝑟𝑎𝑡𝑖𝑜 ∗ (𝑅𝐸 − 𝑟)] ∗ (1 − 𝑇)
RE < r : ROE < RE*(1 – T)  RE –r < 0
From the above model, we see the negative effect on financal leverage, the
company is maintaining high debt ratio 29.42%, affecting the financial
performance of the company and risks in Short-term payment. So the company
should not borrow.
 Influence factors: Interest coverage ratio:
1 𝑑𝑒𝑏𝑡
ROE = (1 − ) ∗ (1 − 𝑇) ∗ 𝑅𝐸 ∗ (1 + )
𝐼𝐶𝑅 𝑒𝑞𝑢𝑖𝑡𝑦

From the above model, we see that ICR < 1  -11 < 1, the company
borrowed too much compared to its capacity, or the company been in poor
business to the extent that its profit did not enough to pay interest.

10. EPS, P/E, BV

No Index 2015 2016 2017
1 Profit after tax 26,170,573,321 30,005,862,206 (3,039,045,461)
2 Dividends on Preferred
- - -
stock
3 Weight average number
8,477,640 8,477,640 8,477,640
of common shares

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outstanding
4 EPS 3,087 3,539 (358)
5 Market price per share 10,000 10,000 10,000
6 P/E 3.24 2.83 (27.90)
7 Total shareholder
200,620,982,332 212,714,948,505 185,671,213,280
equity
8 Preferred equity - - -
9 BV 23,665 25,091 21,901

 The table shows that the company's after-tax profit in 2015 and 2016 is very high,
but then suddenly changes from profit to loss. Since then, the EPS and P / E index
have fluctuated greatly. From a company with large EPS and P / E ratios (highest
in 2016 EPS reached 3539 per share, in 2015 reached 3.24). But by 2017, the
indicators have turned negative (EPS = (358), P / E = (27.9)). This will greatly
affect investors and owners. The company suffered losses may be due to market
fluctuations, the company market share decreased, the board of directors did not
have good business strategy, ...
 Book value per share fluctuates from 2015 to 2017 (highest in 2016: 25,091). This
represents a relatively high value of the business.

11. Indicator from cash flow

No Index 2015 2016 2017

1 CFO 29,909,677,342 33,855,672,424 559,260,163
2 Total revennue 354,804,830,635 417,005,970,457 327,297,597,399
3 CF margin 8.430% 8.119% 0.171%

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4 Net income 26,170,573,321 30,005,862,206 (3,039,045,461)

5 CF from operations
1.143 1.128 (0.184)
to net income
6 Average number of
common shares 8,477,640 8,477,640 8,477,640
outstanding
7 CF per share 3,528 3,994 66
8 Total assets 286,081,043,628 294,615,102,186 240,022,328,156
9 CF return on assets 0.105 0.115 0.002
10 Cash provide by
24,308,829,515 36,923,406,235 (3,196,979,082)
operating activities
11 Net income to cash
provided by 1.077 0.813 0.951
operating income

 The table shows that the company's CF margin in 2 years 2015 and 2016 is
relatively stable (about 8%), but in 2017 this ratio is only 0.171%. It shows that
cash generated from operations and sales is very low. The company may not have
enough cash to pay dividends, suppliers, service its debt, and invest in new capital
assets, so cash is just as important as profit to a business firm.

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