HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY – VNU

FALCULTY OF INDUSTRIAL MANAGEMENT– FINANCIAL ACCOUNTING

OFFICE FOR INTERNATIONAL STUDY PROGRAMS


2022 ANNUAL REPORT ANALYSIS

COMPANY:
MOBILE WORLD INVESTMENT CORPORATION (MWG)
Subject: FINANCIAL ACCOUNTING (IM1015)
Instructor: Ph.D. DƯƠNG NHƯ HÙNG
Ms. HEIDI NGUYỄN
Class: CC01 – Semester 223
Group 4_Information:
No Last name First name Student ID
1 Lê Mỹ Nhàn 1852624
2 Nguyễn Trường Phú 2051058
3 Nguyễn Văn Quang 1952937
4 Hoàng Nhật Quang 1852691
5 Nguyễn Thị Huỳnh Khuê 2153489

Ho Chi Minh City, August 8th, 2023

 TABLE OF CONTENTS

I. INTRODUCTION....................................................................................................................................................... 1
A. OVERVIEW OF THE COMPANY..................................................................................................................................1
B. PURPOSE OF THE REPORT......................................................................................................................................... 1
II. ETHICAL PRACTICES OF THE COMPANY.....................................................................................................1
A. MWG INVESTS IN EMPLOYEE SKILLS.....................................................................................................................1
1. Description.......................................................................................................................................................... 1
2. Discussion........................................................................................................................................................... 2
B. SUSTAINABLE DEVELOPMENT..................................................................................................................................2
1. Description.......................................................................................................................................................... 2
2. Discussion........................................................................................................................................................... 2
C. PRICE STRATEGY...................................................................................................................................................... 3
1. Description.......................................................................................................................................................... 3
2. Discussion........................................................................................................................................................... 3
III. INCOME STATEMENT ANALYSIS....................................................................................................................4
A. ITEM 9: SELLING EXPENSES.....................................................................................................................................4
1. Description......................................................................................................................................................... 4
2. Impact on income statement analysis..................................................................................................................4
3. Evaluation the company’s performance related to this item...............................................................................4
B. ITEM 10: GENERAL AND ADMINISTRATIVE EXPENSES.............................................................................................5
4. Description.......................................................................................................................................................... 5
5. Impact on income statement analysis..................................................................................................................5
6. Evaluation the company’s performance related to this item...............................................................................5
C. ITEM 18: NET PROFIT AFTER TAX...........................................................................................................................5
7. Description.......................................................................................................................................................... 5
8. Impact on income statement analysis..................................................................................................................5
9. Evaluation the company’s performance related to this item...............................................................................5
IV. BALANCE SHEET ANALYSIS.............................................................................................................................6
A. UNDISTRIBUTED EARNINGS......................................................................................................................................6
B. SHORT-TERM LOANS................................................................................................................................................ 6
C. INVENTORY.............................................................................................................................................................. 7
V. CASH FLOW STATEMENT ANALYSIS..............................................................................................................7
A. INVESTING ACTIVITIES............................................................................................................................................ 7
1. Purchasing and selling long-term assets.............................................................................................................7
2. Purchasing and selling marketable securities.....................................................................................................8
B. FINANCING ACTIVITIES............................................................................................................................................8
1. Issuing and repurchasing equity.........................................................................................................................8
2. Borrowing and repaying debt.............................................................................................................................9
VI. NOTES ANALYSIS................................................................................................................................................. 9
A. TWO ITEMS ARE IN THE NOTES BUT NOT IN FS.......................................................................................................9
1. Company risk management................................................................................................................................. 9
2. Bad debt risk..................................................................................................................................................... 10
3. Importance of these items..................................................................................................................................10
B. TWO ACCOUNTING STANDARDS IN THE NOTES......................................................................................................10
1. Inventories standards........................................................................................................................................ 10
2. Business combination........................................................................................................................................ 10
3. Importance of these standards.......................................................................................................................... 11
VII. CONCLUSION..................................................................................................................................................... 11

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VIII. REFERENCES.................................................................................................................................................... 12

I. Introduction

A. Overview of the company

Mobile World Investment Corp (MWG) is a retailing company. It carries out the

trading, repair, and maintenance of digital mobile devices and consumer electronics. The

company offers mobile phones, tablets, laptops, accessories, wearable devices, electronics,

white goods, and small appliances. It also retails food and beverages, including meat,

seafood, and vegetables. MWG operates the retail chains under the gioi di dong, Dien May

Xanh and Bach Hoa Xanh. The company markets its products through stores and online.

MWG is headquartered in Thu Dau Mot City, Binh Duong, Vietnam.

B. Purpose of the report

In this report, we will analyze some issues such as Ethical practices, Income statement,

Balance sheet, Cash flow statement, Note analysis of Mobile World Investment Joint Stock

company and indicate how these categories affect the company’s operation.

II. Ethical practices of the company

Mobile World Investment Joint Stock Company is one of the leading companies

focusing on building a good corporate culture, specifically business ethics. These can best be

identified through the development of a published set of business rules of conduct. The

company always remembers that if building trust is difficult, maintaining trust is even more

difficult. Therefore, the company always puts business ethics and corporate responsibility

first. At the same time, the company has applied the most advanced management models in

the world to operate the company and develop opportunities in a sustainable way, affirming

its position as a national brand to match the requirements of customers.

A. MWG invests in Employee Skills

1. Description

Mobile World Investment Corporation has built the best human resource management

policies and welfare regimes for employees. Employees always receive high salaries. In

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addition, the company always focuses on training employees from expertise to corporate

culture, opening soft skills classes to help employees develop their careers in the future.

2. Discussion

MWG excellently received five Vietnam HR Awards 1018 jointly organized by Labor

and Social Newspapers. Thereby, the company was honored as an enterprise with an effective

policy of attracting talents and an effective working environment. Moreover, 99% of all

senior managers at MWG are promoted based on ability. Therefore, there are many store

managers who only need six months to be promoted.

Building the concept that “people are the key point of difference in retail services''.

Management levels are always ready to listen and support employees to do their best. Always

uphold transparency and a worthy income. The salary of employees at the company is

assessed to be stable and quite high compared to the average. According to actual records, the

employee's Tet bonus in 2019 ranges from 6 to 9 months' salary. For the management team,

the average bonus is 200–300 million VND.

Comprehensive training policy and professional training to raise the level of staff and

workers through the organization of internal training classes. In addition, the company also

has other attractive welfare policies: (1) Participate in team building twice a year. (2)

Maternity leave up to 10 months is still paid for female employees.

B. Sustainable development

1. Description

In recent years, MWG has begun to make strong efforts and commitments toward

promoting environmental protection activities, making great contributions to social

responsibility and corporate governance in a transparent and upright manner. This is made

clear through the six Sustainable Development Commitments issued in 2022. In this case, we

consider the commitment to electricity..

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 2. Discussion

As a retailer, MWG mainly uses electricity in offices and chain stores. As the number

of stores increases continuously for many years, electricity usage tends to increase year by

year. However, since 2022, the Company has made efforts to improve the operation and use

of electricity to control costs and reduce emissions to the environment, as follows:

● Equip with energy-saving and environmentally friendly equipment such as LED lights

and inverter air conditioners.

● Applying ioT technology through touch devices that automatically turn on time

● Turn off the electricity and air conditioner during the time frames.

● Deployment of a solar power system.

MWG focuses on reducing greenhouse gas emissions, controlling the use of resources,

and raising awareness among employees, customers, and partners about sustainable

development (ESG). MWG has saved 158 tonnes of CO2 per year.

C. Price strategy.

1. Description

Pricing strategy tailored to the customer. Contrasting with price in MWG's business

ethics, building a pricing strategy is an important part of promoting customers as well as

building an image and ethics in business.

2. Discussion

Facing the context of an uncertain economy and consumers tightening their spending,

the Chairman of Mobile World, Nguyen Duc Tai, forecast that difficulties will continue until

the third quarter of this year. The evidence is that in the first three months of the year, this

unit's revenue reached VND 27,106 billion, fell to the lowest level in six quarters, and

recorded the second consecutive quarter of negative growth in the context of industries from

electronics to phones.

The two brands, The Gioi Di Dong and Dien May Xanh launched the campaign "The

price is too cheap" (Giá Quá Rẻ) to help customers buy products at the right price while still

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ensuring quality service. The strategy "It's too cheap" expresses the message of focusing on

cheap work. The business representative explained that the difficult economy made

consumers think more carefully when they had to "slope their wallets". In the current volatile

economic period, the purchasing power in different sectors tends to decrease, showing

people's fear of spending. Therefore, the business decided to help users overcome their

obsession with price when shopping by implementing a series of activities for this new

strategy.

Accordingly, products at these two chains will have a discount of up to 50%, some

with many other promotions or installment packages to help users easily access the product.

Mr. Doan Van Hieu Em, General Director of Mobile World Joint Stock Company, shared:

"We are willing to sacrifice profits to get closer to customers, and we hope that the price is

too cheap' will be the action. practical to help share the burden of spending with consumers in

the current economic situation".

III. Income Statement Analysis

A. Item 9: Selling Expenses

1. Description

Selling expenses represent the costs directly related to the company's sales activities,

essential for promoting and distributing its products or services, generating revenue, and

expanding market presence.

2. Impact on income statement analysis

These expenses impact the income statement by being deducted from net revenue to

arrive at gross profit. Higher selling expenses decrease gross profit, while lower expenses

increase it.

3. Evaluation the company’s performance related to this item

The company's performance related to this item shows a significant increase in selling

expenses from the previous year (17,914,173,302,345) to the current year

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(22,336,838,067,678). This suggests active investment in marketing campaigns, advertising,

and sales promotions to drive revenue growth and capture a larger market share.

B. Item 10: General and Administrative Expenses

4. Description

General and administrative expenses include operational costs for managing and

supporting overall business activities, such as salaries for non-production staff, office rent,

utilities, legal fees, and other administrative costs.

5. Impact on income statement analysis

These expenses directly impact operating profit and net profit. Effective cost

management can lead to improved financial performance.

6. Evaluation the company’s performance related to this item

In the current year, general and administrative expenses decreased to

1,881,027,579,714 from 3,823,390,074,765 in the previous year. This reduction in expenses

indicates better control of administrative costs and a positive trend in cost management,

contributing to an improvement in operating profit and net profit.

C. Item 18: Net Profit After Tax

7. Description

Net profit after tax is the company's bottom-line profitability after accounting for all

taxes and expenses.

8. Impact on income statement analysis

It reflects the final earnings available to shareholders and is influenced by all the items

above it on the income statement.

9. Evaluation the company’s performance related to this item

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 In the current year, the net profit after tax decreased to 4,101,714,424,939 from

4,901,426,673,890 in the previous year. This decline indicates a decrease in overall

profitability. Several factors might have contributed to this, such as increased expenses

(though general and administrative expenses reduced, other expenses and finance expenses

increased), changes in revenue, or changes in tax expenses. Investors should investigate the

reasons behind this decline and assess the company's strategies to address the challenges and

improve profitability in the future.

IV. Balance Sheet Analysis

Some noticeable data on MWG’s balance sheet are undistributed earnings, liabilities,

cash and cash equivalents and inventory.

A. Undistributed earnings

In 2022, undistributed earnings show a decrease of 31,16% from 12,674,574,164,065

to 8,723,934,226,370 (No. 421 page 121). Usually, a decrease in undistributed earnings will

result in a decrease in retained earnings, which shows that the company is having a loss in the

current year. On the other side, an increase in the undistributed earnings after dividends

shows that the company is making profit. But if the distributed earnings remain stable, or do

not change remarkably, it does not show that the company is making a loss or profit, since

every company has a different strategy with their own money flow.

B. Short-term loans

Liabilities is another notable point in the balance sheet, showing a quite sharply

decrease (-25,1%) compared with the beginning of 2022, especially short-term payables and

short-term loans has fallen remarkably by more than 56% compared to the beginning of the

year. Until the end of 2022, short-term loans decreased from 24,647,474,278,786 to

10,688,138,631,456 (No.320 page 130). This result, maybe, as the company is concentrating

on paying debts from last year (2021) as in 2021 most companies are stuck to operate as the

Covid-19 pandemic has happened. This is a good signal for the company as the company has

to pay debt before making any business or extension on the market. Depending on the

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situation, an increase or decrease in liabilities is a good or bad signal for the company. With a

healthy economy situation, an increase in liabilities show that the company is using financial

leverage in business development and contrary. If the liabilities remain stable with a decrease

in owner’s equity, that is a bad signal for a company and also investors need to consider

before buying this company’s stock. In the end of 2022, MWG recorded a 5.900 trillion long-

term borrow from banks (No 338 page 130), which indicates that the company may have a

long-term plan for the market.

C. Inventory

Last but not least, inventory. Increase in accounts receivable and inventory related to

revenue: money in accounts receivable or in inventory is money that does not generate profit.

While it's important to have enough inventory to meet a company's market manipulation

campaign, a company doesn't want accounts receivable to make up a large chunk of revenue

or stock a lot of unsold inventory.

As for the balance sheet, inventory was also notably decreased (-11.9%) from

29,167,232,293,922 to 25,696,077,735,282 (No. 140 page 128) and an increase in cash and

cash equivalents. This shows that the company had put effort in selling inventory and not

buying more. As same as liabilities, an increase or decrease in inventory is considered

positive or negative depending on the market and economics. In this situation, MWG’s

inventory deduction had given the company liquidity. On the contrary, an increase in

inventory while the economy is improving, which is when people tend to buy things more,

may be a result of market manipulation in the company strategy.

V. Cash Flow Statement Analysis

A. Investing Activities

Investing activities are transactions that involve the purchase or sale of long-term

assets or investments by a company. They are one of the three main categories of cash flows

on the cash flow statement, along with operating activities and financing activities. Two

critical investing activities are:

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 1. Purchasing and selling long-term assets

This refers to acquiring or disposing of fixed assets, such as property, plant, and

equipment (PP&E), that are used to produce goods or services for the company.

In 2022, MWG spent 4.465.359.523.505 VND (No.21 Page 135) for purchasing or

building fixed assets and other long-term assets. Purchasing long-term assets can help a

company expand its production capacity, improve its efficiency, or diversify its product line.

The annual report also states that, in 2022, MWG received 5.331.159.526 VND

(No.22 Page 135) for liquidation and sale of fixed assets. Selling long-term assets can help a

company generate cash, reduce maintenance costs, or dispose of obsolete or underutilized

assets.

2. Purchasing and selling marketable securities

This refers to buying or selling short-term or long-term investments, such as stocks,

bonds, mutual funds, or derivatives, that are held for trading or income purposes.

In 2022, MWG spent 181.034.840.000 VND to invest in and contribute capital to

other companies. Purchasing marketable securities can help a company earn returns on its

excess cash, hedge against risks, or take advantage of market opportunities.

Besides that, selling marketable securities can help a company raise cash, realize

gains, or reduce exposure to market fluctuations.

These two investing activities have different impacts on a company’s cash flow,

profitability, and risk profile. MWG should balance its investing activities to optimize its

asset utilization and investment performance.

B. Financing Activities

Financing activities are transactions that involve the movement of funds between a

company and its investors, creditors, or owners. They are important for understanding how a

company raises and uses its capital, as well as its liquidity and solvency. Two critical

financing activities are:

1. Issuing and repurchasing equity

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 This refers to selling or buying back the company’s shares to or from the public.

Based on No.31 Page 135 in the annual report, proceeds from issuance of shares and

capital contribution of non-controlling shareholders is 192.628.370.000 VND. Issuing equity

can help a company raise funds for growth or expansion, but it also dilutes the ownership and

control of the existing shareholders.

Meanwhile, MWG spent 5.025.640.000 NVD (No.32 Page 136) for repurchasing

shares that the company published. Repurchasing equity can increase the earnings per share

and the market value of the remaining shares, but it also reduces the cash available for other

purposes.

2. Borrowing and repaying debt

This refers to taking or returning loans from banks or other lenders.

In 2022, MWG received 65.251.647.851.081 VND (No.33 Page 136) from borrowing

debt. Borrowing debt can provide a company with immediate cash for its operations or

investments, but it also creates an obligation to pay interest and principal in the future.

Beside borrowing debt, the loan principal payment is 73.313.739.286.999 VND

(No.34 Page 136). Repaying debt can reduce the interest expense and the financial risk of the

company, but it also lowers its leverage and potential return on equity.

These two financing activities have different advantages and disadvantages for a

company, depending on its financial situation, goals, and strategy. MWG should balance its

financing activities to optimize its capital structure and maximize its shareholder value.

VI. Notes Analysis

A. Two items are in the Notes but not in FS

1. Company risk management

The risk of interest rate fluctuations in the market:

- The Company's financial investments are short-term deposits and bonds, so it is exposed

to the risk of interest rate fluctuations in the market. These investments are closely

monitored and evaluated by the Audit Committee. Accordingly, the Audit Committee

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 concluded that. There were no cases affecting the Company's operations and financial

position in 2022.

2. Bad debt risk

- Risk of bad debt arising from receivables from installment partners and risk of

prepayment for imported goods are monitored and controlled. In 2022, there are no cases

where it is necessary to make provision for these receivables, money and goods are

received in full.

3. Importance of these items

Interest rate fluctuations in the market: impact on profitability and borrowing

costs: Interest rate fluctuations can directly affect a company's borrowing costs. If interest

rates rise, borrowing costs could increase, negatively affecting a company's net profit.

Conversely, if interest rates fall, the company may have an opportunity to reduce borrowing

costs and improve profits.

Bad debt risk: negative impact on profitability: NPLs are loans that customers are

unable or unwilling to repay, often due to financial or business difficulties. As the number of

NPLs increases, the financial company will have to record the uncollectible debt in its

financial statements. This can lead to a reduction in the company's profits and the potential to

pay dividends, reducing the value of the stock and potentially damaging shareholders.

B. Two accounting standards in the Notes

1. Inventories standards

This is a standard designed to guide and prescribe accounting principles for backlog

and inventory items. The basis of this standard is based on the data and methods of

calculating the accounting values for inventories to prepare the financial statements.

2. Business combination

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 Standards on business combinations will guide and prescribe accounting principles for

consolidation through the acquisition method.

After the An Khang pharmacy chain was officially incorporated into the group's

business results at the end of 2021, An Khang has expanded from 178 stores to 500 stores by

the end of 2022. The chain contributes more than 1,500 billion VND in revenue to MWG and

is currently the Top 3 largest drugstore chains in Vietnam in terms of number of points of

sale.

The newest member to join MWG is the electronics retail chain EraBlue in Indonesia.

This is a joint venture between Di World Joint Stock Company Dong and PT Erafone Artha

Retailindo Company (Erafone). Erafone is a subsidiary of Erajaya Corporation, a retailer of

digital products 1 in Indonesia operates a network of 1,200 retail stores across Indonesia.

3. Importance of these standards

Inventory standards: For a large-scale retail company like MWG, inventory control

is a very important item in the operation, business operations and risk management of the

business. Above all, protect your cash flow motion. Healthy cash flow helps MWG to stand

firm through challenging years, giving the Company room and initiative to accelerate as soon

as favorable business conditions and strong development opportunities come in the future.

Business combination standards: Comparability is improved by following

standardized accounting principles, companies can consistently present their financial

information. This makes it easier for investors, analysts and other stakeholders to compare the

financial results of different companies and evaluate their performance more accurately.

About Improved transparency, business combination standards require detailed disclosure of

assets, liabilities, and goodwill acquired. This transparency helps investors understand the

impact of the acquisition on the financial position and performance of the acquiring company.

VII. Conclusion

This report provides an overview of MWG, a leading retailer of mobile phones and

consumer electronics in Vietnam. The report examines the ethical practices of the company,

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such as environmental protection, social responsibility, and customer satisfaction. It also

analyzes the company’s income statement and balance sheet, focusing on key items that

investors should pay attention to, such as finance income, general and administrative

expenses, net profit after tax, undistributed earnings, liabilities, cash and cash equivalents,

and inventory. The report also analyzes investing and financing activities as well as discusses

the implications of the critical activities. The report aims to evaluate the company’s

performance and financial position in the financial year 2022.

VIII. References

1. Link pdf to the MWG’s annual report: MWG_Baocaothuongnien_2022.pdf

2. MWG: Mobile World Investment Corporation - MWI CORP. | VietstockFinance

3. https://spcapital.vn/nhung-dau-hieu-bat-thuong-can-luu-y-khi-doc-bao-cao-tai-chinh/

4. https://mwg.vn/uploads/eng/2023/3/annual-report-2022-1.pdf

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