FPT

Solvency
Ratios Analysis
December 19, 2021
Present by Group 4:
Tran Cong Nhan
Vuong Doan Anh Tu
Phung Van Hung
Truong Thi My Hanh
Agenda
 FPT profile

 Ratio Analysis

 Solvency (Debt) ratios

 Conclusion

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 FPT profile 30,651
FPT is the largest ICT company in the private sector in
Vietnam. $1.3 Total
30 years of pioneering Billion Number of
 1988: FPT Corporations establishment. Employees
Revenue in
 1999: the foundation of FPT software
2020
 2008: $1billion company
 2016: Gartner’s Cool Vendor in Emerging Market
$2.7
 2019: Pioneer of Vietnam’s Digital Transformation alliance
 To the largest ICT Corporation in Southeast Asia
Billion
Market
Capitalizatio
n in 2020
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Ratio Analysis
Profitability
Ratios

Investment Efficiency
Ratios Ratios
Five main
categories
of ratios

Solvency
Liquidity
(Debt)
Ratios
Ratios

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Objective of Solvency Ratios
 Solvency means the company’s ability to stay afloat i.e. the ability of a
firm to meet its obligations.
 These ratios establish relationships between cash and other current
assets to current obligations and provide a quick measure of liquidity.
 These ratios interest short term creditors such as bankers and suppliers
of raw materials.

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Major Solvency Ratios

Debt to Asset Ratio Interest Coverage

Ratio

Debt to Equity Ratio

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1. Debt to Assets Ratio
Debt to assets = Total debt / Total assets
The debt to assets ratio measures the percentage of a company's assets that
have been financed with debt (short-term and long-term). A higher ratio
indicates a greater degree of leverage, and consequently, financial risk.
• A ratio equal to one (=1) means that the company owns the same amount
of liabilities as its assets. It indicates that the company is highly leveraged.
• A ratio greater than one (>1) means the company owns more liabilities
than it does assets. It indicates that the company is extremely leveraged
and highly risky to invest in or lend to.
• A ratio of less than one (<1) means the company owns more assets than
liabilities and can meet its obligations by selling its assets if needed. The
lower the debt to asset ratio, the less risky the company.

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 1. Debt to Assets Ratio
Unit: Billion VND
Particulars 2020 2019
Total Debt 5,499 1,622
Total Assets 16,604 11,306
Ratios 0.33 0.14

• A ratio of less than one (<1) means the company owns more assets than liabilities and can
meet its obligations by selling its assets if needed.
• The ratios shows a low level of financial leverage. As a result, FPT will see a greater degree
of financial flexibility and not face significant default risk if interest rates rise. The
economy is going through a recession, FPT can still hold out.

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2. Debt to Equity Ratio

Debt to equity = Total debt / Total equity

»The debt to equity (D/E) ratio indicates the degree

of financial leverage (DFL) being used by the
business and includes both short-term and long-term
debt. A rising debt-to-equity ratio implies higher
interest expenses, and beyond a certain point, it may
affect a company's credit rating, making it more
expensive to raise more debt.

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2. Debt to Equity Ratios
Unit: Billion VND
Particulars 2020 2019
Total Debt 5,499 1,622
Share holder’s fund 7,840 6,784
Ratios 0.7 0.24

 If the ratio is increasing, the company is being financed by creditors

rather than from its own financial sources which may be a dangerous
trend.
 Here the company is not being funded by creditors but is working on
owner’s funds.
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3. Interest Coverage Ratios

Interest coverage ratio =

Operating income (or EBIT) / Interest expense

» The interest coverage ratio measures the company's

ability to meet the interest expense on its debt, which
is equivalent to its earnings before interest and taxes
(EBIT). The higher the ratio, the better the company's
ability to cover its interest expense.

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3. Interest Coverage Ratios
Unit: Billion VND
Particulars 2020 2019
EBIT 3,032 1,978
Interest 139 51
Ratios 21.83 38.44

 This ratio indicates the company’s ability to meet interest.

 A higher ratios is desirable but a very high ratios indicates that the firm
is very conservative in using debt.
 A very low ratio means excessive use of debt.

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Solvency Ratios vs. Liquidity
Ratios: What's the Difference?
Solvency and liquidity are both terms that refer to an enterprise's state of financial
health, but with some notable differences.
Liquidity Ratios:
 A company with adequate liquidity will have
enough cash available to pay its ongoing
bills in the short run.
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Solvency Ratios:
 A solvent company is one that owns more
than it owes; in other words, it has a positive
net worth and a manageable debt load. While
liquidity ratios focus on a firm's ability to
meet short-term obligations, solvency ratios
consider a companies long-term financial
wellbeing.
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 Conclusion
In general, these are the most basic indicators to
evaluate how likely a company will be to
continue meeting its debt obligations. A stronger
or higher ratio indicates financial strength.
FPT is a stock worth long-term investment
despite the impact of COVID 19, the company's
performance. FPT is still growing. FPT has a long
history of development in Vietnam, is an
enterprise operating stably for many years, with a
solid foundation, fast and stable growth, good
liquidity, fast asset turnover, reaching the pepper.
in terms of good profitability...
In addition, FPT is increasingly reaching out to
the world, raising the Vietnamese brand name.
The above shows that FPT is worth receiving and
long-term investment.

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