FINANCIAL ANALYSIS OF
     PHU NHUAN JEWELRY JOINT STOCK COMPANY
                                                     

                                                     Lecture:   Mrs. Nguyen Thi Nga

                                                     Subject:   Interpretation of Financial Statements
                                                     Class:       CityU 7A
                                                     Students:  1. Bùi Quang Duy
                                                                         2. Nguyễn Quỳnh Anh
                                                                         3. Nguyễn Duy Nghĩa
                                                                         4. Trần Thị Vân Trang
                                                                         5. Trịnh Ái Nhi

Ha Noi, 15th May, 2021

 TABLE OF CONTENTS: 

I. Introduction:
1. Overview:
2. Mission –vision and core values                                                                 
3. Honors and awards typical

II. Balance Sheet Statement:

1.Assets:

2.Liabilities:

3.Equity:

III. Income Statement:

1. Vertical and Horizontal Analysis:

IV. Cash Flow Statement:

V. Financial Ratio:

1.Activity Ratios:

2.Liquidity Ratios:

3.Solvency Ratios:

4.Probability ratio:

VI. Conclusion:

REFERENCES
I. INTRODUCTION: 

1. Overview: 
PNJ whose full name is Phu Nhuan Jewelry Joint Stock Company- a leading jewelry
manufacturer in Vietnam. The HOSE of the company: PNJ. The company’s head office is
located 170E Phan Dang Luu Street, Ward 3, Phu Nhuan District, Ho Chi Minh City,
Viet Nam with a brand logo as follow: 

                      
2. Mission –vision and core values: 
Phu Nhuan Jewelry Joint Stock Company was established on 28/04/1988. Throughout

development history, the company has strived to maintain its core visions and values– to

achieve mutually successful partnerships, drive business forward and offer the highest

levels of quality and value. The mission is “Enhance customers' satisfaction, by

diversifying products and services at highest quality and reasonable price, by advancing

management and manufacturing systems, and improving craftsmen’s skills”. The vision

is “Become the leading jewelry fashion brand, with core attributes being Creativity,

Fineness, and Reliability.” and the core values are:

 2.1: Honesty is the leading ethical standard in business and in life that every individual

or organization aims to. Legal profit and business ethics are the base for every activity.

Building credibility and transparency to earn trust. Constantly fighting against all

dishonest actions
2.2: Quality is a solid basis to ensure survival and a measure of every individual or

organization ‘s value. Always guaranteeing the materials’ quality to make high quality

products. Every member commits to accomplish assigned tasks with the best quality and

not to deliver substandard products to anyone else.

2.3: Responsibilities - Taking responsibility as a motivation, a driving force for every

activity. Put customers’ and social benefits into company’s. Every individual commits to

live responsibly with himself, his family, the company and the community. Carrying out

excellently every task with voluntary, active, creative and dedicated spirit.

2.4: Innovation is the foundation of everlasting development in a company. Do not be

complacent with achievements. Be open, willing to learn and apply new knowledge,

experience and skills. Constantly improving to optimize benefit for the company.

2.5: Creativity-  Create significant differences and competitive advantages. Meeting

customers’ expectations is a base to orient creativity. With responsible spirit and passion,

every member of the company and the company itself commit to create continuously,

offer breakthrough solutions, produce outstanding products and services.

3. Honors and awards typical:

During its operation, the company has achieved many valuable honors and awards. Here

are some of the outstanding honors and awards. Business with the Best working

environment award 2018 by HR Asia magazine announced on September 14, 2018 in

Vietnam; PNJ was honored in Top 10 in 100 Vietnam Sustainable Development

Enterprises; Top 50 best listed companies in Viet Nam; Viet Nam high quality goods;

Outstanding enterprise of the year - ASEAN, etc… . PNJ consistently achieves

outstanding business results. Enterprises are constantly working to improve the working

environment, care for the material and spiritual well-being of their employees, and so on:

build a healthy, stable and progressive corporate culture environment towards sustainable

development firmly in the process of integration and development.

II. BALANCE SHEET STATEMENT: 

In the Balance Sheet, we will focus on analyzing the three most important and sure

components: Assets, Liabilities, and Equity.

1. ASSETS: % per unit

ASSETS Vertical Analysis Horizontal Analysis

2017 2018 2019 2017- 2018-
2018 2019
Cash, cash equivalents, marketable 3.9 3.21 1.11 17.99 -53.94
securities
1.88 2.41 1.51 83.4 -16.44
Short-term receivable

75.73 77.17 81.72 46.04 41.51

Inventories

10.85 11.17 10.74 47.62 28.44

Fixed assets

Table 1: Assets Structure

PNJ assets mainly come from Cash and cash equivalents, Short-term receivables,

Inventories, Fixed assets .

Cash and cash equivalent in 2017 was 175,208,552,187 VND. In the next year, it rose up

to 206,721,179,629 VND and then suddenly tumbled down to 95,224,439,008 VND. The

reason for the increase in money may be due to the short-term borrowing of businesses,

liquidation and sale of some fixed assets have collected long-term investments to

maturity. Saving money helps businesses ensure the ability to pay regularly and quickly.

However, it does not guarantee the effectiveness in management (easily causing

problems). The phenomenon of corruption benefits itself, reducing the ability to turn

capital when letting idle cash. Realizing it, in 2019 PNJ has used the money to invest in

other portfolios to earn profits. 

Short-term receivables in 2017 was 84,622,464,067 VND and sharply increased to

155,196,257,825 VND in 2018 and then plummeted to 129,688,313,476VND in 2019.

The ability to recover debt has changed. This demonstrates PNJ's misappropriation of

capital funds. However, we can see businesses' efforts in the reduction of the proportion

from 36.57% to 16.44%, indicating that the company has a quite good credit policy, as

debts are tightening. To avoid the formation of difficult debts, management needs to pay

more attention to debt collection. Account receivable at the highest level is still short-

term advances to suppliers increased sharply from 33,682,107,963 to 74,867,455,343

VND.  The increase in payment to sellers could be due to an overabundance of orders

causing a shortage of production materials, necessitating an urgent need to add materials,

resulting in a higher price. Or, to put it another way, PNJ wants to produce a large

quantity of goods to avoid having to return them in the event of an unexpected order, so

imported materials are also higher, resulting in an increased short-term advance to

suppliers as well.

The highest amount of inventories in 2019 peaked at more than 7 trillion VND, an

increase of 106.7% compared to 2017. Overproduction but not high consumption; too

much inventory of goods;  spare parts, raw materials, hardware, etc., with defects could

be the cause of such a sharp increase in inventories. A high inventory ratio indicates poor

inventory management optimization. It increases storage costs, opportunity costs lead to

financial losses.

Between 2017 and 2018, fixed assets increased by 232 billion VND, equivalent to 47.6%,

so the company mobilized capital from issuing new common shares 17.7 billion, recovery

of short-term investments 160 billion, evicting 14.7 billion from long-term receivables,

the rest must be converted from working capital. From 2018 to 2019 the percentage

increased 28.4%  and reached 923,870,354,474 VND. 

2. LIABILITIES: % per unit 

2017 2018 2019

Liabilities 34.34 41.83 46.79

Equity 65.66 58.17 53.21

Assets 100 100 100
Table 2: Capital Structure
In general, the capital structure of PNJ was facing a downward trend in the period of

2017-2019 as the amount of liabilities increased steadily, whereas the company’s total

equity witnessed an opposite trend in the same period. Statistically, total equity capital of

enterprises in 2019 decreased compared to 2017 12.45%. Following David Durand’s

viewpoint: ‘Do not accept the existence of an optimal capital structure.’ Under the net

income approach, the cost of debt and the cost of equity are assumed to be independent of

capital structure. The average cost of capital decreases and the total value of the firm

increases with increasing average utilization.

From 2017 to 2019, the ratio of liabilities increased rapidly, debt accounted for 46.79% in

2019. This shows that the company has more limited dependence and consider using debt

as a tax shield, helping the company reduce tax costs. Mainly short-term debt, accounting

for about 80% in a 3-year average, and in 2019, short-term debt accounts for 99.8% of

total debt. Long-term debt accounts for a small proportion and tends to decrease over the

period. To be specific, while long-term liabilities went down to only about 7 billion,

which was a good sign, in contrast, the increasing amount of money for short-term debt

reached over 4,017 billion. It means the total short-term money in hand of the company

increased dramatically. Although the short-term debts were bigger, the current assets also

increased strongly, so it wasn’t a bad situation for the company at the end of the 2017-

2019 period.

3. EQUITY: 
Equity capital mainly comes from owners' contributed capital. Even though equity is

declining and liabilities are rising, equity still accounts for a larger proportion of PNJ's

capital structure, as shown in Table 2. Higher equity ratios indicate that a company has

effectively funded its asset requirements with the least amount of debt. In 2019, PNJ has

approved the plan to issue more than 55.6 million bonus shares, implementation ratio 3:1,

the expected charter capital after the issuance is over VND 2,226.7 billion, equivalent to

an increase of more than 33%. The meeting also approved the plan to issue more than 2.2

million ESOP shares with the issuing price of VND 20,000 for the leaders and key

managers of PNJ and its subsidiaries.

The charter capital of the company increased  from 1,621.4 billion VND to  2,226.7

billion VND. The company's financial autonomy is good, with a high level of financial

security, as evidenced by the increasing trend in equity capital accounts. A decrease in

the owner’s equity can occur when a company loses money during the normal course of

business and owners need to move equity into normal business operations. It also

decreases when an owner withdraws money for personal use. A company might also

suffer a decrease in equity because of some unusual event that requires owners to invest

equity in replacing assets, such as when a natural disaster destroys equipment or

inventory. 

III. INCOME STATEMENT:

1. Vertical and Horizontal Analysis:

 Vertical Analysis Horizontal Analysis

2017 2018 2019 2017-2018 2018-2019

Gross sales 100.0

% 100% 100.0% 32.85 16.8

Less deductions 0.7% 0.73% 0.8% 49.15 -233.35

Net income 99.3% 99.27% 99.2% 32.74 16.67

Cost of goods sold 82.0% 80.33% 79.0% 30.9 14.82

Gross profit 17.3% 20.19

18.93% % 45.35 24.53

Income from financial activities 0.1% 0.05% 0.1% 22.16 145.69

Expenses from financial activities 0.5% 0.45% 0.8% 17.48 101.49

Selling expenses 7% 7.97% 7.9% 50.98 16.39

Administration Expenses 1.7% 2.36% 2.8% 84.03 37.58

Operating profit 8.2% 8.2% 8.8% 33.54 25.14

Other incomes 0.1% 0.03% 0.0% -37.28 2.65

Other expenses 0.0% 0.02% 0.0% 97.53 55.98

Other profits 0.1% 0.01% 0% -68.33 -73.93

 Profit before tax 8.2% 8.21% 8.8% 32.86 24.98

Current income tax expense 1.6% 1.7% 1.8% 37.05 26.53

Income tax expense is deferred 0.0% 0.03% 0.0% 697.1 -25.37

Net profit after tax 6.6% 6.54% 7.0% 32.35 24.38

Table 3: Vertical Income Statement

In general, PNJ experienced an upward trend in most of the main items in Income

Statements from 2017 to 2019. The percentage indicates that the company has growth

and development potential financial position when gross profit fluctuates over 3 years

with the upward trend. This graph depicts how well the company managed its costs and

operated its business to increase profits. 

Gross profit from 2017 to 2019 increased from 17.3% to 20.2%. This increase stems from

the fact that PNJ has completely resolved all issues relating to product shortages caused

by the ERP system's impact, while at the same time, the market's purchasing power for

jewelry products has begun to recover since August 2019. According to PNJ, in the

month, production capacity recovered to its previous capacity level, the point of putting

the ERP system into operation. Moreover, 2019 is considered an successful year for the

jewelry manufacturing and retailing industry, those who have demand for jewelry are

mainly middle class upper-class and upper-class, aged from 25 to 55 years old.

According to the Brookings Institution, middle class people in Vietnam with income and

expenses spending from 10 USD to 100 USD/day will increase 16% per year in the
period 2013 - 2022. So this will drive gold consumption jewelry to continue to increase in

the future. Besides, after deducting all other accounts, generally, net profit after tax in the

2017- 2019 period experienced a slight increase. Similarly, that also increased from 6.6%

in 2017 to 7% in 2019. 

Because this is a typical feature for this type of company, especially in the jewelry

market, as can be seen in Table 3, cost of goods sold and services rendered always made

up a large percentage of total revenue.  During the 2017-2019 period, the cost of goods

sold decreased from 82% to 79%, indicating that the company's production has improved

and thus production costs have decreased. Perhaps the company has taken some of the

following steps: Stop making products that cannot sell, Find lower cost materials,

Negotiate with supply chain ( manufacturers, raw material providers, logistics companies,

storage facilities) to get a better deal on materials when importing them, and to avoid

wasting money, Eliminate costly waste ( waste a lot of raw materials and company may

even need to pay to dispose of them), shrinkage (when products are damaged, stolen, or

go missing) can also be significant.

On the account of vertical analysis, the company showed the portion of operating profit

also increased during the 2017-2019 period from 8.2% to 8.9%. This indicates that the

company is improving and growing.

The operating profit figure increased from 8.2% in 2017 to 8.8% in the last year of the

period. That means PNJ's business effectively manages its operating expenses.

Furthermore, the data shows that the proportions of operating and pre-tax profits are
almost not skewed over time, which is another indicator of a company's cost management

efficiency. 

On the other hand, financial income decreased slightly from 0.1% in 2017 to 0.05% in

2018 and then back to 0.1% in 2019. Financial expenses decreased from 2017 to 2018

then rose up to 0.8% in 2019 because the foreign exchange loss dropped while interest

accounts rose. Selling expenses increased marginally from 7% in 2017 to 7.9% in 2019

due to a rise in materials ( gold, silver, diamond,.. ) import-export, and other costs. From

2017-2019, the general and administrative account rose, especially increasing to 2.8% in

2019 due to a variety of factors, including the expansion of the company's scale, which

resulted in an increase in personnel, increased premises, and increased costs for services.

Fixed asset costs, office fees... Because the company is profitable, it decides to raise

employee salaries, bonuses, and allowances. They hired more people in the business, so

there are more expenses for business management than usual.

IV. CASH FLOW STATEMENT: 

As can be seen from the Cash flow Statements from 2017 to 2019, net accounting profit

before tax and operating before changes in working capital increased gradually by

approximately 600 and 700 billion VND. However, the net cash generated in operating

activities witnessed a downward trend in the same period (from 109 billion to minus 661

billion). These figures can be affected by any changes in net income, in this

circumstance, the most noticeable figures were the changes in inventories, prepaid

expense, interest paid and CIT. Thus, despite the larger amount of net accounting profit
and working capital, the company had to face bigger expenses, resulting in net cash

generated in operating activities stood at negative 661 billion VND at the end of 2019.

In general, cash flow from investing activities decreased from 264 billion to 221 billion

in the 2017-2019 period. It can be understood that PNJ lowered its investing activities but

if we look at the content specifically, what made 2017 and 2018 figures different from

2019 was the cash outflow from investing in time deposits. The figure of 264 billion was

included by 160 billion cash outflow and 115 billion in acquisition and constructing fixed

assets, but in the next 2 years, PNJ invested more on its fixed assets and didn’t face any

cash outflow. The year 2018 had the lowest amount of money because PNJ received back

the money that they spent on the previous year, but it is the year that the company

invested in their fixed assets the most with 336 billion VND

Looking at the financial report in more detail, the year 2019 saw the largest amount of

money that PNJ invested in their financing activities, at 771 billion VND. Also, the

money that the company borrowed increased with more than 5,435 billion. In contrast,

proceeds from share issue and owner's contributed capital decreased from 975 billion in

2017 to 68 billion in 2019. In addition, dividends paid by PNJ also increased as well.

Overall, due to the fact that the company spent  large amounts of money in financing

activities, their change in cash and cash equivalent was negative 111 billion, and at the

end of the 2017-2019 period, these figures decreased from 155 billion to 95 billion VND.

V. FINANCIAL RATIO: 
1. Activity Ratio:

a. Inventory Turnover and Days of Inventory on Hand:

Activity Ratios 2018 2019 Industry Ratio

Inventory Turnover 2.82 2.26 19.02
Days of Inventory on Hand 129.44 161.5 -
Receivables Turnover 122.42 120.36 16.86
Days of Sales Outstanding 2.98 3.03 -
Payables Turnover 5.66 4.04 -
Number of Days of 64.48 90.24 -
Payables
Working Capital Turnover 5.72 5.67 2.63
Fixed Asset turnover 24.33 20.87 -
Total Asset turnover 2.67 2.28 1.42
Table 4: Activity Ratios of PNJ

Inventory Turnover is the number of times a business sells and replaces its stock of goods
during a given period. It shows the resources relevant to your inventory and is used to
indicate how efficient it is to manage inventory. If a company has a high Inventory
Turnover, it generally means that goods are sold quicker. While a low Inventory
Turnover illustrates weak sales and excess inventories and may cause challenges to the
company. It considers the Cost Of Goods Sold, relative to its Average Inventory for a
year or in any a set period of time:
Cost of goods sold
Inventory Turnover=
Average Inventory
As can be seen from the graph that inventory turnover accounted for 2.82 in 2018, before
a small decrease to 2.26 by 2019. These data show that at that time, PNJ Company was
paying to keep a large amount of inventory and may be overloaded or out of date. From
which, an industry ratio is 19.02, which is nearly 9 times higher than the data of PNJ
Company. The low inventory turnover ratio shows that PNJ Company may have bought
lots of goods compared to the demand of customers, which leads to the inventory being
stagnant in the business and Days of Inventory on Hand is calculated by the formula:
 Number of days ∈ period
Days of inventory on hand=
Inventory turnover

Days of Inventory on Hand (DOH), also known as Days Inventory Outstanding (DIO), is
the number of days a company stores inventory for a period of time. DOH is used in
conjunction with Inventory Turnover to evaluate, analyze, and compare a company's
growth with industry growth or several other companies in the same industry.
Low inventory turnover also makes the DIO high. And from the day goods were
imported and sold, to the day the company can collect money, it takes 130 -162 days.
These numbers mean that the efficiency of handling inventory and managing it is infertile
and it also indicates that it takes a very long period to clear inventory.

b. Receivables Turnover and Days of Sales Outstanding:

The receivables turnover ratio indicates the velocity of a company's debt collection, the
number of times average receivables are turned over during a year. This ratio measures
how efficiently a company is collecting revenue – and by extension, how efficiently that
company is using its assets.

The following formula is used to calculate Receivables Turnover:

Revenue
Receivables Turnover =
Average Receivables

In terms of the Receivables Turnover, a considerable change has been witnessed with a
significant change from 122.42 to 120.36 in 2018 and 2019. Whereas an industry ratio of
16.86 is illustrated in the chart.

As it can be seen obviously that PNJ company did a great job in collecting receivables
and debts from customers. A high Receivables Turnover can also be seen as a sign of the
company that operates primarily based on cash. The high Receivables Turnover also
shows that the company is cautious in granting credit to customers and this may be very
beneficial because it helps the company to prevent bad debt risk. However, if the
company is too cautious, it can let potential customers fall into the hands of competing
companies with softer credit policies.

Days of Sales Outstanding shows how quickly or slowly the company charges from
customers using credit payments. Days of Sales Outstanding is calculated by the
following formula:

Number of days ∈period

Days of Sales Outstanding=
Receivables turnover

With regard to the DSO, there was a slight change of 0.05 in 2018 and 2019, which was
evidenced by a slight raise from 2.98 to 3.03. These lower ratios imply that the business
can recover capital in just a short time. PNJ company just need about 3 days to collect the
receivables from customers.
c. Payables Turnover and Number of Days of Payables:
The Payables Turnover elucidates the number of times the company pays off all its
creditors, suppliers,... in a given year. Payables Turnover is calculated by the formula:
Purchases
PayablesTurnover=
Average trade payables

As for Payables Turnover, it reached 5.66 in 2018, which then moderately dropped to
4.04 in the next year. These numbers represent the number of times PNJ Company has to
pay its payable over a period of time. These low indexes would be preferred because it is
better to defer payments for as long as possible so that the company can use funds for
other purposes which may be more productive and earn more money.
The  Number of Days of Payables reflects the average number of days a company pays its
suppliers. And Number of Days of Payables is calculated by the formula:
Number of days ∈ period
Days of Payables=
PayablesTurnover

When it comes to the Number of Days of Payables, it was 64.48 in 2018 which was
dramatically lower the next year (90.24).
d. Working capital turnover: 
Working capital turnover measures how effective a business is at generating sales for
every dollar of working capital put to use. WCT is calculated using the following
formula:
Revenue
Working Ca pital Turnover=
Average working capital

In the case of the working capital turnover, the change is insignificant as there was only a
marginal decline from 5.72 to 5.67 in 2018 and 2019. When compared to the industry
ratio, it is just 2.63. Thus, due to the higher data in Working Capital Turnover ratio, it can
be given a conclusion that it is better, and indicates that PNJ company is able to generate
a larger amount of sales and to gain higher profit margin, fast and good return of capital,
reduced inventory. If working capital turnover becomes excessively high, a company
may need to raise additional capital to support future growth.
e. Fixed assets turnover: 
Fixed asset turnover compares net sales (in the statement of earnings) to fixed assets (in
the balance sheet) and measures the company's ability to generate net revenue from asset
investments: fixed assets, namely property, plant, and equipment. 
Fixed asset turnover is calculated using the following formula:
Revenue
¿ assets Turnover= assets ¿
Average net ¿

In the case of fixed asset turnover, there was an apparent rise of 3.46, from 24.33 (2018)
to 20.87 (2019). The higher fixed assets turnover ratio indicates that PNJ Company had
effectively used its fixed asset investments to generate revenue. From 2018 to 2019, there
was a declining trend in Fixed Assets Turnover, which may mean that PNJ Company is
over investing in the property, plant or equipment.
f. Total assets turnover:
The total asset turnover ratio compares the sales of a company to its asset base. The ratio
measures the ability of an organization to efficiently produce sales, and is typically used
by third parties to evaluate the operations of a business. Total asset turnover is calculated
by the formula:
 Revenue
Total Assets Turnover=
Average total assets

The number in 2018 illustrated that 1 dollar of assets generate 2.67 dollar of revenue.
While the data in 2019 shows that 1 dollar of assets generate 2.67 dollars of revenue.
Which is a little bit higher when compared to the data of Industry ratio (1.42). 

2. Liquidity Ratio: 

Liquidity measures how fast an asset is converted to cash. The bottom is an important

financial metric in determining the ability of a borrower to repay without using outside

capital.

Liquidity 2017 2018 2019  Industry Ratio 

Ratios
Current Ratio 2.62 2.02 1.82 2.39
Quick Ratio 0.28 0.13 0.05 1.68 
5 6
Table 5: Cash Ratio 0.22 0.07 0.02 0.24  Liquidity
7 4
Ratios of PNJ

a. Current ratio and Quick ratio: 

Current ratio and Quick ratio is calculated by the formula:

Current assets
Current Ratio=
Current liabilities

Cash+ Short−term marketable investment + Receivables

Quick Ratio=
Current liabilities
This ratio measures liquid assets, the type of assets expected to be consumed or converted

to cash within a year, in relation to short-term liabilities that are gradually reduced over a

year. A higher ratio indicates a higher level of liquidity. The quick ratio is more

conservative than the current ratio because it only includes liquid assets with higher

liquidity (sometimes referred to as "quick assets") than short-term liabilities. Like the

current ratio, a higher quick ratio indicates higher solvency.

As can be observed from the financial statements of the company, the current ratio and

quick ratio decreased noticeably in the period of 3 years, dropping down to 1.82 and

0.056 respectively at the end of 2019. While the current ratio in 2019 was 1.82, in

Vietnam it can be considered as a decent figure, but the quick ratio is below 1, showing

that the company does not have the ability to pay quickly. The most reasonable

explanation is that the company increased its short-term liabilities (From 1,488 billion in

2017 to over 4 billion in 2019), in which the company increased its bank short-term

loans. Thus, the year 2019 showed that the company decreased their ability to pay short-

term debts 

b. Cash ratio

Cash Ratio is calculated by the formula:

Cash+ Short−term marketable investment

Cash Ratio=
Current liabilities

Cash ratios often represent a reliable measure of an individual's liquidity in a crisis

situation. Includes only short-term high market investments and cash. 

According to the financial report of the company, PNJ had an increase in cash and cash

equivalent amount from 175 billion to over 206 billion. However, the figure decreased

dramatically at the end of 2019 (95 billion VND), which also explained why the cash

ratio decreased to 0.024 (below 1), there are more current liabilities than cash and cash

equivalents if a company's cash ratio is less than one. means there isn't enough cash on

hand to pay off short-term debt. This may not be a bad thing if the company's balance

sheets are skewed by factors like longer-than-normal credit terms with suppliers, well-

managed inventory, and little credit extended to customers 

3. Solvency Ratios:

According to Kenton (2020), “The solvency ratio is a key metric used to measure an

enterprise’s ability to meet its debt obligations and is used often by prospective business

lenders. The solvency ratio indicates whether a company’s cash flow is sufficient to

meet its short-and long-term liabilities”.  Solvency ratios measure the company’s ability

to meet long-term obligations.

Debt Ratios:

According to Hargrave (2020), “the debt-to-capital ratio is a measurement of a

company's financial leverage”. It is calculated by :

Total liabilities
Debt−¿−capital Ratio=
Total capital

Solvency Ratio 2017 2018 2019

Debt-to-capital ratio 0.343 0.42 0.47
 Table 6: Solvency Ratio of PNJ

In general, the debt-to-capital ratio increased in the 2017-2019 period. This number only
has a financial impact on the company's ability to meet the payment needs of all short-
and long-term debts owed to individuals and organizations with whom the company has a
relationship. PNJ's high solvency certifies the company's financial capacity, ensures
timely payment of corporate debts, and demonstrates that PNJ is safe and has numerous
development opportunities. Economically, PNJ is a very potential enterprise, and it is
worth paying attention to and pouring capital into here.

According to the balance sheet and performing a longitudinal analysis, we can see that
assets make up a large portion of total liabilities and equity, with inventory accounting
for 75.73 percent of total liabilities and equity in 2017. Although solvency is good, owing
primarily to inventory, it does not achieve the highest level of efficiency. Because a
business wants high liquidity and the percentage of cash and cash equivalents must be
large, but here the percentage of cash and cash equivalents is only 3.9%, so it is difficult
to pay short-term liabilities with short-term assets, because total short-term assets
accounted for 16.44% and short-term liabilities was 33.14%. 

As can be seen in the years 2018 and 2019, inventory continues to rise, increasing PNJ's
solvency but not its liquidity. As a result, while PNJ has a good ratio, it is not suitable for
the business's liquidity. Inventory reliance is excessive, resulting in low liquidity.
Comparing the industry-wide debt-to-capital ratio of 0.53, the debt-to-capital ratio of PNJ
is lower, showing that PNJ has a safe equity and has enough capacity to pay short and
long-term debts and at a safer level. The debt-to-capital ratio has remained below 0.5 for
all of these years. (An equity level of 0.5 indicates that there is enough cash on hand to
cover current obligations.) When the index is less than 0.5, we can see that PNJ belongs
to the group of businesses with a healthy payment and capital structure.

4. Probability ratios:
 Unit: times 2017 2018 2019
Return on Sales:
Gross profit margin 18.9 20.2
17.3%
% %
Operating profit margin 8.16% 8.2% 8.8%
Net profit margin 6.54 6.96
6.57%
% %
Return on Investment 2017- 2018-2019

2018
ROA 17.6% 15.9%
ROE 28.68% 28.69%
Table 7: PNJ’s Profitability Ratios

2017-2018 2018-2019
Average total assets 5,465,070,694,708 7,520,429,989,210

Average total equity 3,347,293,008,843 4,161,151,619,625

Table 8: Average assets + equity

4.1: Return on Sales

4.1.1: Gross profit margin:
Gross profit margin is calculated by the following formula:

Gross profit
Gross profit margin=
Revenue

The gross profit margin has increased slightly from 2017 to 2019, revenue has increased
year over year from 17.3% to 20.2% and the business is profitable and efficient,
according to the data table. This is a positive signal because it indicates that the
enterprise's production activities have improved the production process, resulting in
increased efficiency. This implies a benefit as well, the competition in the business is
becoming increasingly fierce. 
4.1.2: Operating profit margin:
Operating profit margin is calculated by the following formula:
Operatingincome
Operating profit margin=
Revenue
The operating profit margin also rises as a result of this. It is clear that PNJ has
improved its ability to manage non-COGS expenses, increasing from 8.26% to 8.88%.
The operating margin index measures a company's profitability after subtracting
production and business-related expenses from the total. Operating shows a more
holistic view, taking into account operating costs to generate revenue. For many years,
high operating and growth has demonstrated that businesses can do more than just
increase profit margins, controlling the associated operating costs is also possible. 
4.1.3: Net profit margin:
Net profit margin is calculated as follow:
Net income ( net profit after tax )
Net profit margin=
Revenue

Although the operating profit margin increased slightly from 2017 to 2018, the net
profit margin decreased slightly from 6.57% to 6.54%, indicating that in addition to
managing sales expenses, the net profit margin decreased slightly. PNJ is also having
trouble managing expenses other than COGS. However, net profit increased slightly
from 2018 to 2019, rising to 6.54 and 6.96% , indicating that the company's ability to
manage other expenses is gradually improving.

4.2:  Return on Investment:

4.2.1: Return on Assets ( ROA ):

According to Hargrave (2020), "Return on assets (ROA) is an indicator of how profitable

a company is relative to its total assets". In this case, it is calculated by:

Net income(net prfoit after tax)

ROA=
Average total assets
Taking a gander at the table, we can see that PNJ's ROA is diminishing from 2017-2019,
explicitly. ROA diminished from 17.6% to 15.9%. Perceive how effective the utilization
of business resources is by large marginally diminished. In any case, contrasted with the
business normal ROA of 6.45%, PNJ is still a lot higher, showing that PNJ is overseeing
resources for business purposes well indeed. As indicated by worldwide guidelines, ROA
is 7.5%, or more than 10% is an all around created business, and PNJ has a much higher
ROA, showing a flourishing business.

4.2.2: Return on Equity ( ROE ):

Return on equity (ROE) indicates how effectively a company’s equity capital is utilized

to generate profit. It is calculated as:

Net income (net profit after tax)

ROE=
Average total equity
Also, ROE expanded marginally, practically insignificant from 28.68% to 28.69%. The
ROE figures for the 2017-2019 period show that PNJ has grown very strongly and
demonstrates the efficiency of the enterprise's use of capital, and PNJ has a higher ROE
than the industry average of 13.93%. Thus, it can be seen that in general, PNJ has
managed the equity of the enterprise very well. In addition, PNJ's ROE is much higher
than the average bank rate of 4% for funding. And a business with a ROE higher than
15%, will attract more investors, because it shows the level of efficiency in the business.

4.2.3: Dupont Analysis:

DuPont analysis breaks ROA, ROE into their constituent components to determine which
of these components is most responsible for changes in ROA, ROE.
Net income Revenue
ROA= x
Revenue Average as sets

¿ Net profit margin X Total assets

Average assets
ROE=ROA x Leverage=ROA x
Average equity
 2017- 2018  2018-2019
ROA 17.6% 15.9%

ROE 28.68% 28.69%

Net profit margin 6.54% 6.96%

Assets Turnover Sales/Average assets 2.68 2.28

Financial Leverage Average assets/ 1.63 1.80
Average equity

The decrease in ROA, from 17.6 % to 15.9%, was offset by an increase in net profit
margin, from 6.54% to 6.96%, indicating that the factor causing the decrease in ROA was
the decrease in assets turnover, which fell by 0.4 percent from 2.68 to 2.28 percent. A
lower ratio indicates that a company is not efficiently utilizing its assets and may be
experiencing internal issues. PNJ may try to increase its low asset turnover ratio by
stocking its shelves with items that are highly marketable and replenishing inventory only
when necessary. It is also possible to cut expenses, raising selling prices; however, if the
product is competitive, consumption will not be affected. To maximize efficiency,
liquidate or scale up operations for unused assets.
ROE is now a function of ROA and the use of financial leverage in the company. From
the data in the table, it shows that over a 3 year period, ROA has decreased . Therefore,
the main reason for the small rise in ROE in 2019 is the increase in leverage. ROE
increased insignificantly, financial leverage also increased slightly by 0.17% from 1.63 to
1.8. This shows that PNJ has a stable, long-term business strategy without much risk.

VI. CONCLUSION:

After analyzing and evaluating the financial statements and ratios of Phu Nhuan Jewelry

Joint Stock Company, we can draw a pretty clear and detailed view of the company's
financial position in 3 consecutive years from 2017 to 2019, PNJ experienced an upward

trend in most of the main items from 2017 to 2019. When gross profit fluctuates over

three years with an upward trend and is expected to grow in the future, the percentage

indicates that the company has a stable financial position and long-term growth potential.

The company has specific plans to solve all problems for the company to develop in the

best way. In conclusion, we can classify PNJ as one of the most typical businesses in

Vietnam's jewelry manufacturing industry. The company not only benefits the

community, shareholders, and employees, but it also provides high-quality products and

services and improves everyone's living standards. Phu Nhuan will be one of the

companies with many opportunities to expand their business model in the coming years,

based on current developments.

REFERENCES: 

https://www.pnj.com.vn/images/quan-he-co-dong/7c-Audited-Consolidated-financial-

statements-2017_Signed_v2.pdf

https://www.pnj.com.vn/images/quan-he-co-dong/6c-

BCTC_nam_2018_da_duoc_kiem_toan_boi_PwC_Hop_nhat_ENGLISH_Signed.pdf

https://www.pnj.com.vn/images/quan-he-co-dong/2020/11c-

BCTC_nam_2019_da_duoc_kiem_toan_boi_PwC_Hop_nhat.pdf