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7: Ratio analyze
7.1 Activity ratios
Working capital turnover = Revenue / Average working capital
Fixed asset turnover = Revenue / Average net fixed assets
Total asset turnover = Revenue / Average total assets
Inventory turnover = Cost of sale / Average inventory
Receivables turnover = Revenue / Average receivables.

Year

Number Activity ratios 2018 2019 2020

1 Inventory turnover 8,64 9,35 7,63

2 Receivables turnover 25,79 28,59 20,35

3 Toatl asset turnover 2,82 2,60 2,53

4 Fixed asset turnover 7,37 5,18 5,92

5 Working capital turnover (32,57) (31,71) 1458,23

.
Inventory turnover tends to decrease from 8.64 cycles in 2018 to 7.63 cycles in
2020, and the number of days an inventory turnover is long over the years. A business
with low turnover means weak revenue as well as low demand for the product. This
proves that the inventory turnover decreases over the years, but it is not possible to draw
conclusions about the efficiency of inventory management because it depends on the
inventory management plan.
However, the receivable turnover lower because account receivable increased
much higher than the growth of sales. The cause may be due to the company did not
manage receivable well or loosening trade credit policy to improve sale. The second
reason may be right because inventory decreased in 2018
Companies with low total assets turnover tend to decrease over the years, which
shows that the company is not using its assets effectively to generate sales..
Fixed asset turnover tends to decrease sharply from 7.37 rounds in 2018 to 5.92
rounds in 2020. Low fixed asset turnover also does not mean that businesses are
inefficient. The reason is that there are many cases where enterprises have sold off
valuable machines and equipment of the enterprise or implemented business investment
strategies that have scope outside the enterprise.
The company's working capital turnover tends to decrease slightly from 2016 to
2017 by only 0.25 rounds, which shows that the company is having a bed signal because
the lower the working capital turnover ratio, the more efficient it isn’t in using capital.
The lower the working capital, the slower the working capital will help the business
generate less cash and revenue.
7.2 Liquidity ratios
Current ratio = Current assets / Current liabilities
Quick ratio = ( Cash + Short-term marketable investments + Account receivables) /
Current liabilities
Cash ratio = ( Cash + Short-term marketable investment) / Current liabilities

Year

Number Liquidity ratio 2018 2019 2020

1 Current ratio 0,85 0,84 1,00

2 Quick ratio 0,21 0,19 0,29

3 Cash ratio 0,04 0,04 0,06

The current ratio tends to decrease slightly, showing that solvency is still
guaranteed, meaning that 1 dong of short-term debt is secured by 3.2 dongs of assets in
2016, the guaranteed value decreased slightly by 0.18 dong in 2016. 2017. Enterprises
with a quick ratio is greater than 1, the ability to pay the short-term debt is high. In
fact, the ability to pay debts of enterprises will be easily done
The quick ratio tends to decrease slightly: in 2016 the quick ratio was 2.2 which
means that 1 dong of short-term debt is secured by 2.2 dongs of assets, down to 0.18
dong in 2017 but not significantly. In general, the quick ratio is larger than 1 every year,
which is also a good sign for investors when the business has enough potential to pay its
current debts without having to sell long-term assets. , which means the company can
maintain its sales performance and asset diversification potential in the long term.
The cash ratio of 2018 of enterprises is quite low with only 0.04 and tends to
increase slightly in 2020 at 0.06, showing that the solvency of the organization is difficult
to trust, it reflects the usage situation. The short-term debt of the business is not good.
The relationship between short-term capital and cash capital is bad. The generally
accepted cash payout ratio is approximately 0.5.
7.3 Solvency ratios
Debt - to - assets ratio = Total debt / Total assets
Financial leverage ratio = Average total assets / Average total equity
Interest coverage = EBIT / Intersest payments

Year

Number Solvency ratios 2018 2019 2020

1 Debt - to - assets ratio 0,76 0,68 0,63

2 Financial leverage ratio 4,13 3,15 2,69

3 Interest coverage 0,71 0,94 2,19

Debt - to - assets ratio in 2020 of 0.63, down 0.13 from 2018 indicates lower
leverage and therefore lower financial risk. Debt - to - assets all 3 years under 1.00 means
most of the company's assets are financed with equity. The decrease in Debt ratios
indicate that the capital structure of company was safer in 2019.
 Financial leverage ratio tends to decrease over the years but remains high. A high
financial leverage ratio can increase risk and degrade a company's ability to do business,
but with this higher risk comes the potential for higher returns.
Interest coverage in 2018 and 2019 are all less than 2, showing that the company's
ability to pay interest on loans is low. But by 2020, interest coverage has increased
sharply by 3.08 times compared to 2018 and 2.33 times compared to 2019, showing a
good signal when the ability to pay interest on loans of enterprises is more positive.
7.4 Profitability ratios
Gross profit margin = Gross Profit / Revenue
Operating profit margin = Operating income / Revenue
Net profit margin = Net income / Revenue
ROA = Net income / Average total assets
ROE = Net income / Average total equity
All the profitability ratios have decreased in 2019. This is not a good sign for the firm.
Continue to explain and assess for the reasons of the change of each ratio.

Year

Number Profitability ratios 2018 2019 2020

1 Gross profit margin 4,68% 5,05% 6,28%

2 Operating profit margin 0,87% 1,02% 2,73%

3 Net profit margin 0,88% 1,03% 3,06%

4 ROA 2,49% 2,68% 7,75%

5 ROE 10,27% 8,45% 7,75%

Gross profit margin tends to decrease quite strongly over the years from 66.67% to
58.93%, showing that the business is not profitable and inefficiently using investment
capital. At the same time, the ability to control costs effectively is also inferior to
competitors.
The company's operating profit margin tends to decrease slightly from 2018 to
0.87% in 2019 to 1.02% and 2.73% by 2020. We see that operating profit margin
declines more slowly than gross profit margin indicating an improvement in operating
cost control and vice versa.
Net profit margin in 2020 compared to 2018 decreased sharply by 3.47 times and
growing slower for many consecutive years is a bad sign that businesses are becoming
more and more less efficient when they can generate less profits from a dollar of revenue.
. This may be due to the company did not manage its cost well (COGS and interest
expense).
The company's ROA tends to decrease gradually in 2018 reaching 2.49% in 2019
is 2.68% and in 2020 is 7.75%. This is a sign that the company's capital investment
efficiency in 2020 has decreased sharply compared to 2018. It can be seen that the
decrease is due to the decrease in the efficiency of the company's asset use or the speed
of the company. The rate of revenue is lower than the rate of decrease of assets. From
2018 to 2020, revenue from revenue tends to decrease sharply and steadily over the years,
that is, after-tax profit on revenue gradually decreases.
ROE in 2020 compared to 2018 decreased sharply, in 2018 ROE reached 10.27 %
but by 2020 it is only 7.75%. This is a bad sign. It can be said that the volatility of ROE is
influenced by two factors, which are ROA and the impact of debt. If a business can
maintain ROE > 20% for 3 years, it can be fully competitive in the market. Thus, this
enterprise can hardly have enough competitiveness in the market and does not work
efficiently when ROE over the years is below 11%.