Financial Report

11





Table of Contents
Introduction 2
1. The different users (Stakeholders) of financial statements and their needs of VinGroup and the implications for users of financial statements (1.1 & 1.3) 3
Internal stakeholders 3
External Stakeholders 4
2. The legal and regulatory influences on financial statements (1.2) 5
3. The different laws/regulations are dealt with by accounting and reporting standards (1.4) 6
4. The calculation of accounting ratios to assess the performance and financial position of VinGroup (4.1) 8
5. A report incorporating and interpreting accounting ratios, including suitable comparisons. 13
Conclusion 17
Appendix 18




Introduction
As a client service manager providing advice and assistance to clients on financial accounting and general business issues. In this report, the analytical review of the financial position and reporting of Vingroup Company in Vietnam Stock Exchange. The report will show understand of the regulatory framework for financial reporting, which show the different users of financial statements and their needs, who are the stakeholder of Vingroup. In the next part, the legal and regulatory influences on financial statements and the implications of each stakeholders.
At the end of the report is the list of formula of ratio which can be used to evaluate and assess the performance of the company such as profitability, solvency, liquidity, etc. A brief report incorporating and interpreting accounting ratios, which including suitable comparisons between Vingroup Company with the average of the industry.

1. The different users (Stakeholders) of financial statements and their needs of VinGroup and the implications for users of financial statements (1.1 & 1.3)
In the VinGroup Company, there are two types of stakeholders who concern about the performance of the company which are internal stakeholders and external stakeholders. However, whether they are in internal stakeholders or external stakeholders, with different position, they have a difference needs and concern in the performance of the company.
Internal stakeholders
Manager and owners of the company:
Chairman Mr. Pham Nhat Vuong, Board of Director - General Director: Ms. Le Thi Thu Thuy…
Managers of the company are who have main responsibility for the working of the company. They has to ensure the company working properly. The information needs of Chair-man help him evaluate the financial situation of the company in the period to make an appropriate strategy and drive the company go to the right way. To do that, he concern the information of gross profit, operating expenses to assess the operation of the company as well as the profitability of the VinGroup Company.
The manager of the company concern about the ability of the company to generate earning in operation, so they need to focus on the value of the profitability ratio, which are Return on Sale, Asset turnover Ratio, Return on Equity and Return on investment. Ratios describe the profit of the company compare with asset or equity to evaluate the efficiency of the VinGroup's operating. For example, to assess the profit and profit grow of the company, the manager will concern about ROCE ratio which shows the ability of generating profit from capital employed. Furthermore, to evaluate the efficiency of investment, the manager will concern to Return on Investment and Return on Equity, to find out the generate profit from its shareholder investment in the company.
Employees: staff who work for VinGroup Company
The employee of the company use financial reports or financial statements for making collective bargaining agreements. Using the information from income statements, they can make the discussion of salary hike, commission based on the gross sales of the company. Besides, the ability of the company to pay salary, wage, retirement benefits and employment opportunities are also assessed by the employee.
Because of many information need have been mentioned above, the employee of the company concern about the solvency and liquidity ratio and short-term. For example, the employee use current ratio and quick ratio to measure the ability of the company to pay its own debt in a short-term period. Furthermore, the debt to asset ratio is used by employee to assess the risk of the company and the degree of leverage.
External Stakeholders
Institutional investor
Because VinGroup is an international company, so that investors of the company are not only come from Vietnam, they also come from outside of Vietnam (such as Warburg Pincus Organization (Nguoiduatin, 2014) . Almost investors' concern is the earning of the company, the equity, liability, the profitability and company's current "state of health". The earning of the company and the dividend the company will pay for them is the most concern of the investor. So that, the information needs of this stakeholders can be seen in the income statement of the company.
With that information needs, the investors are interested in the investment ratios, such as earning per share (EPS) to measure how much they will earn per each share from company, and dividend yield to measure the amount of cash dividends distributed to investors relative to the market value per share.
Supplier
VinGroup is a multi-industry company, they participate in real-estate, supply chain, education and health. So that, there are many supplier for the company in each industry. Specially, in real estate, Secoin is one of many companies who provide high quality terrazzo brick for Royal City Project of the company as material. The supplier of the company have the information needs in the ability to pay the purchase the company made.
To identify the potential customer, the supplier concern to the solvency and liquidity ratio in short-term period of the company to measure the ability to pay in cash and also the debt situation of the company for selling in credit.
Lenders
The lenders of the company are bank or creditors of the company. In the case of VinGroup, their creditor is Credit Suisse AG (branch in Singapore), Maybank Berhad Bank and Deutsche Bank AG Singapore (Nguoiduatin, 2014). The lenders want to measure the ability of the company to pay debt and interest. Besides, they also concern about the solvency and liquidity of the company in the long-term as well as the debt situation of the company.
Because of that, they concern about the profit of the company by using profitability ratio as well as solvency and liquidity to measures the ability of the company to pay debt and interest. Furthermore, lenders also concern about the debt ratio, the debt per equity ratio of the company. So that, they can measure the debt situation of the company.
2. The legal and regulatory influences on financial statements (1.2)
The Company Act 2006 (Legislation, 2014)
The financial statements of the limited liability companies must be prepared as in the requirement of the Company Act 2006. The first requirement is that the company have to prepare accounts annually for distribution to their shareholders. Besides, every registered company is required to prepare a balance sheet and profit and loss account for each financial year which gives a "true and fair view". It can be proved by showing and explaining the company's transactions. Based on many requirement to satisfy two out of three criteria: turnover, balance sheet totals and number of employee (AccountingTechnicians, 2013), the company have been classified into "small", "medium" and "large", which influences on the way company prepare financial statements. In general, the private company limited by shares need to prepare auditor's report and a statement of financial position. The bigger the company, the more finance statement they have to be prepared such as Statement of Comprehensive Income, Director's report and a Corporate Governance Statement.
EU Directives
Seventh Council Directive 83/349/EEC of 13 June 1983 based on Article 54(3) (g) of the Treaty on consolidated accounts (Europa, 2009)
This directive concern about a consolidation of existing directives on consolidated accounts of companies with limited liability. It defines that any parent company which legally controls another subsidiary company have a duty to prepare consolidated accounts. Through the Directives, the consolidated accounts comprise the consolidated balance sheet, the consolidated profit and loss accounts and the notes to the accounts. A "true and fair view" of assets, liabilities, financial position and profit and loss of the companies must be given in consolidated accounts. Besides, the consolidated accounts must be drawn up on the same date and by the same methods as the annual accounts of the parent company. Moreover, the Directives also regulate the contents of the consolidated annual report, which is the required information of the development of business and the position of the undertakings included certain indications for each of those undertakings (number and nominal value of shares, etc.)
Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54(3)-(g) of the Treaty on the annual accounts of certain types of companies
These Directives apply to all limited companies and also apply to certain forms of partnership (Europa, 2009). The annual account are to comprise a profit and loss account, a balance sheet and notes to the accounts. In the balance sheet, these are two layouts which are provided by the Directives for Member States to choose, and the same things in the profit and loss account. The Directives also list the information which must be provided in the notes to the accounts: the valuation methods applied to the various items, certain types of the company's debts, financial commitments, etc.
3. The different laws/regulations are dealt with by accounting and reporting standards (1.4)
There are two main types of accounting and reporting standards in the UK which are UK Standard and International Standard.
International Financial Reporting Standards (IFRSs)
International Financial Reporting Standards (IFRSs) are produced by International Accounting Standards Board (IASB). To deal with the different laws/regulations, IFRSs have a Standards Advisory Council (SAC) assists the IASB in standard setting. Besides, the IASB develops IFRSs through an international process that involves the world-wide accountancy profession, national standard setting bodies, and the user of financial statements. The objectives of the IFRS Foundation are to develop, in the public interest, a single set of high quality, understandable, enforceable and globally principles. Besides, it is to promote the use and rigorous application of standard
Financial statements prepared under IFRSs are required to present fairly the financial position, financial performance and cash flows of the equity. It is the way the IFRSs are deal with the requirement of the Companies Act 2006 – "a true and fair view"
UK Accounting Standards
The UK Accounting Standards have been produced by the system consists of the four bodies which are the Financial Reporting Council (FRC), the Accounting Standards Board (ASB), the Financial Reporting Review Panel (FRRP) and the Urgent Issues Task Force (UITF) (icaew, 2013). In which, the FRC operates as the main department, they have responsible for the enforcement of the standard, the ASB and FRRP is the two operating arm of it.
The Accounting Reporting Review Panel (FRRP) have the main responsibility to examines accounts published by companies, if it appears that Companies Act requirement have been breached. So that, the FRRP ensure that UK Accounting Standards' accounts show a true and fair views.
Overall, the two accounting standards have the similarity in the way produce their own standard with the main department. Besides, they also have main arm departments to assist them to revise and change the standard to deal with the laws and regulations. After that, they also have the department to make a quickly act when an authoritative ruling is urgently needed. They are International Financial Reporting Interpretations Committee (IFRIC) in IFRSs and UITF in UK Accounting Standards. However, in the differences, SAC of IFRSs are drawn from organization all over the world even in IMF and the World Bank, so the way they deal with the laws/regulations more comprehensive in all over the world, while the UK Accounting Standard is suitable inside country.
4. The calculation of accounting ratios to assess the performance and financial position of VinGroup (4.1)
To assess the performance and position of the company, a several ratio have been calculated which can be divide in many group such as profitability for assessing the operation of the company, liquidity and solvency for assessing the ability convert to cash of the asset of the company as well as the ability payments by cash of the company… The information below show the result of ratio of the Vingroup Company in 2013, which have been calculated from the financial statement of the company in the end of the report as well as the detail formula.
PROFITABILITY RATIOS
Return on Capital Employed
ROCE= Profit before interest and taxationCapital employed
This ratio is importance ratio for assessing the profit and profit growth, which is a profitability ratio that measures how efficiently a company can generate profits from its capital employed by comparing net operating profit to capital employed. It is a long-term profitability ratio In the VinGroup:
ROCE= 22.81%
The ROCE of the company at 22.81% which means that each 100VND of the capital employed of the company, it can generate 22VND as the profit of the company.
Return on Equity
Return on Equity= Net Income after TaxShareholder's Equity
This ratio is a profitability ratio that measures the ability of a firm to generate profits from its shareholders investments in the company. It is also indicator of how effective management is at using equity financing to fund operations and grow the company.
Return on Equity= 38.40%

In VinGroup Company, the return on equity is 38.40%, it show the ability of generating profit from its shareholders investment at the grade of 38VND for each 100VND.
Return on Investment
Return on Investment= Net profit after tax and interestTotal Assets
According to Ready-Ratio (2013), this ratio is used to measure the efficiency of investment. It compares the magnitude and timing of gains from investment directly to the magnitude and timing of investment costs.
Return on Investment=14.78% 
In VinGroup Company, the Return of investment of the company have 14.78%, which is the rate of return of investment of the investor in the company have
SOLVENCY RATIOS
Debt to Equity ratio
Debt to Equity ratio= The long-term debtTotal Equity
This ratio indicates the degree of financial leverage being used by the business and includes long-term debt. The higher ratio the higher interest expenses and beyond it affect a company's credit rating.
Debt to Equity ratio=1.68
Debt to Asset ratio
Debt ratio= Total debtsTotal Assets
This ratio measures the percentage of a company's assets that have been financed with debt (short-term and long-term). The higher ratio indicates a greater degree of leverage, and consequently, financial risk.
Debt ratio=0.75 
Invest coverage ratio
Invest coverage ratio= Operating Income (EBIT)Interest Expenses
This ratio measures the company's ability to meet the interest expense on its debt with its operation income, which is equivalent to its earnings before interest and taxes. The higher ratio the better company's ability to cover its interest expenses.
Invest coverage ratio=6.67 
Capital gearing ratio
Capital gearing ratio=Longterm debt Shareholders'equity+long term debt
This ratio is a useful tool to analyze the capital structure of a company and is computed by dividing the common stockholders' equity by fixed interest or dividend bearing funds.
Capital gearing ratio=0.63
LIQUIDITY RATIOS
Current ratio
Current ratio= Current AssetsCurrent Liabilities
Current ratio is a liquidity ratio that measures company's ability to pay its debt over the next 12 months or its business cycle. (Or measures whether or not a company has enough resources to pay its debt over the next business cycle (usually 12 months)
Current ratio=1.49 
Quick ratio
Quick ratio= Current Asset-InventoriesCurrent Liabilities
Quick ratio is an indicator of company's short-term liquidity. Measure the ability to use its quick assets (cash and Cash equivalents, Marketable securities and account receivable) to pay its current liabilities. It specifies whether the assets that can be quickly converted into cash are sufficient to cover current liabilities.
Quick ratio=0.78 

INVESTMENT RATIO
Dividend Yield
Dividend yield =Dividend pershareMarket price pershare
This ratio is a financial ratio that measures the amount of cash dividends distributed to common shareholders relative to the market value per share. It is used by investors to show how their investment in stock is generating either cash flows in the form of dividends or increases in asset value. Vingroup in 2013 did not pay dividend so the dividend yield ratio in 2013 is 0.
Earnings per share
Earnings per share=profit for the year for equityNumber of ordinary share
This ratio is used for measure the company performance, and compare the result of the company over a period of time as well as compare the performance of one company's shares against the performance of other company's share.
Earnings per share=7,896
The EPS of Vingroup Company show that the investor and the owner of the company have a profit of 7,896vnd each share they own.
Price Earnings ratio
Price Earnings ratio =Share priceEarnings per share
This ratio indicates the strong shareholder confidence in the company and its future. This ratio also can be used to compare with other companies in the same business sector and with other companies generally.
Price Earnings ratio =1.51
This ratio shows that the company have low P/E ratio, however, to evaluate shareholder confidence, it is necessary for detail analysis
ASSETS RATIO
Asset turn over
Asset turnover =SalesCapital employed
It is an efficiency ratio that measures a company's ability to generate sales from its assets by comparing sales with total capital employed (Laura, 2014)
Asset turnover = 0.37
In this ratio, the higher ratio is always more favorable. With only 0.37, it can be seen that the sales of the company are much lower than the capital employed in the company.


5. A report incorporating and interpreting accounting ratios, including suitable comparisons.

REPORT
To: Director of Finance, Vingroup Ltd
From: Client Service Manager, financial consultancy firm
Date: 26th December 2014
Performance and position of Vingroup Ltd
As requested, I have analyzed the performance and position of Vingroup Ltd with special reference to selected accounting ratios. The calculation of the ratios is shown in the appendix attached to this report. The purpose of the analysis is to determine the performance of the company and making the suitable comparisons.
General comments
In the period from 2011 to 2013, it cannot be denied that the decrease trend of the real estate's price have made a significant to this industry as well as the company, which make the company have face with many difficulty.
Returned on Capital Employed

1 The Return on Capital Employed of Vingroup from 2011 to 2013 (Appendix)
Looking at the diagram, it is easy to see that, even though, there is a slight decrease from 14.73% in 2011 to 13.88% in 2012, the ROCE of the company have increase up to 22.81% (go up 8.93%). While, look at the detail number, the profit of the company and the capital employed was increase together, but with the decrease of ROCE in 2012, the company have realize the bad operation of the company, when the profit is not growing up as the increase of the capital employed. However, the company have fixed that and have great result in 2013 with the rapidly increase in the profit before interest and taxation as well as the capital employed.
DuPont Analysis – Return on Assets, Return on Equity and Equity Multiplier
To have more analysis and the evaluation in the performance of the company, DuPont Analysis will be used. With the DuPont system, the formula of the Return of Equity can be understood that:
Return on Equity =Net profit Margin ×Total Asset Turnover ×Debt Ratio
In which, the multiple of the Net profit Margin and Total Asset Turnover is the Return of Asset. So that, with the information have been calculated in Appendix, the diagram below will show the value of each ratio in the period of 2011- 2013

Return on Equity
Net Profit Margin
Total Asset Turnover
Debt Ratio
2011
16.51%
46.4%
0.46
0.77
2012
17.49%
23.36%
0.92
0.81
2013
38.4%
38.9%
0.37
0.75
2DuPont Analysis (Appendix)
In general, the Return on Equity of the company have the increase trend, especially, in 2013, from 17.49% to 38.4%, it means that the high ability of a firm to generate profits from its shareholders investments in the company as well as the effective management is at using equity financing to fund operations and grow the company. However, when go back in the pass, from 2011 to 2012, even though, the ROE of the company have a slight increase, the Net profit margin of the company have been decrease, instead there is the increase in debt ratio and total asset turnover. So that, the increase of return on equity but the company have face with the decrease of net profit margin, which show that the company making poor profits from their product. Besides, with the increase of debt ratio, the company have borrowed more money from the bank. In the 2013, with the increasing rapidly of ROE, using DuPont Analysis, we can see that, the Net profit Margin of the company have the strong increase from 23.36% to 38.9% and the debt ratio also decrease to 0.75. Besides, According to cophieu68 (2014), in real estate industry, the ROE are 11%, so that with the high ratio, it can be ensure that the company have go through the difficult period in the industry.
Quick ratio and Current ratio

3Quick ratio of Vingroup from 2011 - 2013
In the quick ratio of Vingroup Company, which are evaluate the solvency and liquidity of the company by identifying the current asset less inventory of the company. Because inventory is the current asset of the company but difficult to sell for cash, so that this kind of ratios are useful to evaluate the ability of the company to pay in cash and sell asset for cash. In the period from 2011 to 2012, the quick ratio of the company have decreased. However, look in the current ratio of the company, the slightly increase can be seen from 0.93 to 1.12. This means the company have more inventory in their asset, and the ability of the company to pay in cash in this period was very weak. The positive scene have be seen in the period from 2012 to 2013, the company have realize their problem. The increase trend have been seen in both ratio, which shows that the company have many change in the policy of keeping good in inventory. Based on that, the company in 2013 have improve the solvency and liquidity of the company, and the ability to pay in cash of the company as well as selling asset for cash is also increase.
Earnings per share and Price earnings ratio

In the diagram of price earnings ratio of the company (value in right-side) and the earning per shares (the value in left-side), the earning per shares show the profit of the investor and shareholder of the company, and the price earnings ratio indicates the strong shareholder confidence in the company and its future. In the period from 2011 to 2012, the price earnings ratio increase see the strong confidence of the company, however the main reason is the decrease of the earning per shares of the company. In 2013, the price earnings ratio of the company decrease dramatically because of the high earning per shares, which grow up from 1819vnd to 7896vnd per shares. So that, with the experience investors, this ratio do not affect the company so much in attracting new investor as well as evaluate the performance of the company.
Conclusion
Even though, meeting enormous of difficulty in the recession period in the real estate industry, the company not only went through, but they also have more improvement and development, which shown in their liquidity, solvencies, profitability and the investment ratio in current year and in the past. When comparing with the average industry, Vingroup show the high performance to be a tough company in the real estate in the industry. Vingroup should keep the current policies about liquidity and solvency and make improvement in their profitability.


Conclusion
In sum up, the report have been show clearly an analytical review of the financial position and reporting of Vingroup Company registered in Vietnam Stock Exchange.

Appendix
The financial information of Vingroup Company in 2012.
The calculation of outcome 4.1
Profitability ratios

2013
2012
2011
Profit on ordinary before tax
9,740,085,981,878
2,655,063,125,963
1,471,471,446,573
Plus: Interest Payable
1,459,922,785,660
1,097,254,164,113
807,484,484,862
PBIT
11,200,008,767,538
3,752,317,290,076
2,278,955,931,435
1. Return on Capital Employed



Total Asset
75,772,648,425,795
55,824,875,804,676
35,512,635,123,484
Less: Current Liabilities
26,675,265,408,188
28,796,286,198,535
20,039,498,304,151
Capital employed
49,097,383,017,607
27,028,589,606,141
15,473,136,819,333
 



Profit before interest and Taxation
11,200,008,767,538
3,752,317,290,076
2,278,955,931,435
Capital employed
49,097,383,017,607
27,028,589,606,141
15,473,136,819,333
ROCE
22.81%
13.88%
14.73 %

RETURN ON EQUITY
2013
2012
2011
Net Income after Tax
7,149,288,120,557
1,846,667,924,525
1,073,560,198,764
Shareholder's Equity
18,616,542,841,288
10,556,569,188,706
6,501,237,900,575
ROE
38.40%
17.49%
16.51%

RETURN ON INVESTMENT
2013
2012
2011
Net profit after tax and interest
11,200,008,767,538
3,752,317,290,076
2,278,955,931,435
Total Assets
75,772,648,425,795
55,824,875,804,676
35,512,635,123,484
ROI
14.78%
6.72%
6.42%

NET PROFIT MARGIN
2013
2012
2011
Profit after tax
7,149,288,120,557
1,846,667,924,525
1,073,560,198,764
Revenue
18,377,638,845,706
7,904,472,849,072
2,313,739,781,730
NPM
38.90
23.36
46.40



Solvency ratios
DEBT TO EQUITY RATIO
2013
2012
2011
The long-term debt
24,360,164,494,408
18,762,506,644,958
5,408,778,229,684
Total Equity
14,471,837,198,264
10,873,631,260,181
8,252,176,984,539
Debt to Equity ratio
1.68
1.73
0.66

DEBT RATIO
2013
2012
2011
Total Debts
57,156,105,584,507
44,951,244,544,495
27,260,458,138,945
Total Assets
75,772,648,425,795
55,824,875,804,677
35,512,635,123,484
Debt to asset
0.75
0.81
0.77

Invest coverage ratio
2013
2012
2011
Operating Income (EBIT)
9,740,085,981,878
2,655,063,125,963
1,471,471,446,573
Interest Expenses
1,459,922,785,660
1,097,254,164,113
807,484,484,862
Invest coverage ratio
6.67
2.42
1.82

Capital Gearing Ratio
2013
2012
2011
Long-term debts
24,360,164,494,408
18,762,506,644,958
5,408,778,229,684
Shareholders' equity + Long term debts
38,832,001,692,672
29,636,137,905,139
13,660,955,214,223
Capital Gearing Ratio
0.63
0.63
0.39
Liquidity ratios

2013
2012
2011
Current Assets
39,844,677,687,769
28,796,286,198,535
20,039,498,304,151
Current Liabilities
26,675,265,408,188
25,644,122,141,113
21,630,198,244,261
Current ratio
1.49
1.12
0.93


2013
2012
2011
Current Assets less Inventories
20,930,960,265,756
11,011,395,672,093
10,757,095,730,979
Current Liabilities
26,675,265,408,188
25,644,122,141,113
21,630,198,244,261
Quick ratio
0.78
0.43
0.50



2013
2012
2011
Sales
18,379,268,633,216
7,908,016,426,443
2,313,739,781,730
Capital employed
49,097,383,017,607
10,156,120,340,596
4,682,892,938,033
Asset turnover
0.37
0.92
0.46





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