BANKING ACADEMY

FINANCE FACULTY
Lecturer: : MSc. Nguyen Thi Nga
Class: : K20CLCC
Group: :1
Members: : 1. Nguyen Thi Minh Hanh (20A4010856)
2. Ta Minh An (20A4010679)
3. Bui Thi Kim Ngan (20A4011148)
4. Nguyen Nhu Ngoc (20A4011160)
5. Quan Thu Thao (20A4010552)
6. Dao Minh Thu (20A4011319)

ASSIGNMENT
FINANCIAL STATEMENT ANALYSIS

TOPIC: VINAMILK’S FINANCIAL STATEMENTS

ANALYSIS FROM 2017 TO 2019

Hanoi, 06/2020
 TABLE OF CONTENTS

1. Overview about Vinamilk............................................................................3

2. Industry analysis..........................................................................................4
2.1. Strength..................................................................................................4
2.1.1. Economic environmental factors.......................................................4
2.1.2. Cultural & social factors...................................................................5
2.2. Weakness................................................................................................6
2.2.1. Rivals................................................................................................6
2.2.2. Product preservation.........................................................................6

3. Balance sheet analysis..................................................................................7

3.1. Total assets analysis...............................................................................7
3.2. Total resources analysis........................................................................8

4. Income statement analysis.........................................................................10

4.1. Net revenue, cost of sales and gross profit analysis...........................10
4.3. Profit before tax, income tax and net profit after tax analysis:........14

5. Cash flows statement analysis...................................................................15

5.1. Evaluation of the sources and uses of cash........................................15
5.1.1. Major sources and use.....................................................................15
5.1.2. Primary determinants of operating cash flow..................................15
5.1.3. Primary determinants of investing cash flow..................................16
5.1.4. Primary determinants of financing cash flow..................................16
5.2. Common size analysis of the statement of cash flows.......................17
5.3. Free cash flow to the firm and free cash flow to equity....................18

6. Financial ratios analysis.............................................................................19

6.1. Activity ratios analysis........................................................................19
6.2. Liquidity ratios analysis......................................................................21
6.3. Solvency ratios analysis.......................................................................22
6.4. Profitability ratios analysis.................................................................23
7. Conclusion..................................................................................................24

2
1. Overview about Vinamilk
Vietnam Dairy Joint Stock Company (Vinamilk) is a Vietnam-based food
manufacturer. The company is mainly engaged in manufacturing, marketing
and distribution of dairy products, especially milk of various forms and other
derived products, as well as nutrition food and non-alcoholic beverages. It also
provides packaging and logistics services, offers other technical supports to
cultivation and breeding processes to farmers and operates a healthcare
polyclinic. The company was established in 1976 as the state-owned Southern
Coffee-Dairy Company, then became the Vietnam Dairy Company in 1993. In
2003, following its IPO to the Ho Chi Minh Stock Exchange, the company
legally changed its name to Vietnam Dairy Products Joint Stock Company
(Vinamilk).
Reaching more than 31 countries and generating over 1.5 billion USD per
year in revenue, Vinamilk is currently a leading corporation in Vietnam and has
significant contributions to the country and its people. In 2010, Vinamilk is the
first company in Vietnam to be included in the Forbes Asia’s 200 Best Under A
Billion list that highlights 200 top-performing small and mid-sized companies.
After almost 40 years of development with policies for applying new
technologies, facilitating innovation and creativity, Vinamilk has become an
economic bright spot on the landscape of Vietnam joining the WTO.
Vinamilk desires to become one of the most favorite brands in every
region and territory. Their business philosophy is “We keep in our mind and
our heart that the quality and innovation are always our most important
companions. We act with customer-centered approach and commit to respond
to all their needs.”. Vinamilk also continues to expand its existing geographical
coverage and product portfolios to maintain its sustainably dominant position
in the local market and maximizing its shareholder value.
Vinamilk commits to bring us the nutrition solution with international
standards, meeting the needs of consumers with delicious and nutritious
products and leading favorite brands in markets. The company products involve
in liquid milk, yoghurt, condensed milk, powdered milk, fruit juice, etc.

3
2. Industry analysis
2.1. Strength
2.1.1. Economic environmental factors
The economic environment performs an important role within the
movement and development of the market. Its factors, such as economic
growth or inflation, affect purchasing power, consumer demand and therefore
additionally directly have an impact on business activities of the company.
Understanding the economic environment enables the employer to apprehend
the needs of consumers and their capacity to spend on the company’s products.

8.00%

7.00%

6.00%

5.00%

4.00%
GDP growth rate
3.00%

2.00%

1.00%

0.00%
2010 2011 2012 2013 2014 2015 2016 2017 2018

Vietnam’s GDP growth rate from 2010 to 2018 (in %) (Source: WorldBank)
In 2017, Vietnam's GDP growth reached 6.81%, exceeding the goal of
6.7% of the National Assembly within the identical year. Moreover, the
average income also improved notably with the figure of 2,385 $/person, up
170 $ from the preceding year. With the above GDP growth, the demands for
goods, services and product quality also increase, so the company need to
expand the producing scale to adapt with the current economic conditions.
2.1.2. Cultural & social factors
Currently Vietnam's population is on the rise. In 2017, the total
population surpassed 91 million, which means that the number of children is

4
increasing. The habit of drinking milk is becoming more and more popular
among Vietnamese, especially kids. Therefore, this is a superb opportunity for
dairy companies like Vinamilk to attract more customers and expand their
market.
In addition, nowadays, along with the improvement of income and living
standards, people are more concerned about health, so the demand for milk also
increases. This is a favorable condition for Vinamilk to develop many product
lines to satisfy the diverse needs of consumers.
2.1.3. Natural factors
The natural environment in Vietnam also has many advantages for dairy
industry. The most obvious benefit is there are perfect lands for developing
organic dairy cows. For example, Da Lat has a temperate climate, which is
suitable for raising cows. In March 2017, Vinamilk completed an organic dairy
farm in Da Lat. In addition, Vinamilk also has a system of 10 operating farms,
all of which are large-scale and meet up international standards.
Today, with the improvement of science and technology, Vinamilk has
taken measures to overcome, control, and at the identical time expand the scale
of dairy farming so that it will be able to supply a large amount of milk to the
market, meeting the demand of consumers.
2.1.4. Technological factors
Technology is the factor that creates many opportunities for this business.
Vinamilk’s investment in developing technology has help them reached a few
achievements. Vinamilk is now applying high-temperature rapid sterilization
technology to produce pasteurized fresh milk; using new technology to produce
2-piece cans and improving milk extraction technology in order to ensure
product quality and hygiene.
With modern technology and equipment, Vinamilk are producing more
and more products that are highly nutritious and meet hygienic standards. This
contributes to improving the reliability of customers to the company's products,
thereby increasing the quantity of sales of the company.

5
2.2. Weakness
2.2.1. Rivals
With the attractive features of the industry, the dairy market has turn out
to be more and more competitive. There are currently more than 50 dairy
companies in Vietnam, most of them are small and medium. However, the
market is very concentrated, the manufacturer with the most market share is
Vinamilk with 55% market share, followed by FrieslandCampina Vietnam
(formerly Dutch Lady). Next are products from brands such as Nutifood,
Nestle... with mainly powdered milk products.
Despite their massive market share in the dairy industry, Vinamilk still
faces many difficulties. The fact that smaller competitors such as Nutifood,
Dutch Lady and TH True Milk are launching many new products widen the
choices of customers, therefore, Vinamilk needs to have effective marketing
strategies to affirm its role and earn customers’ trust. In addition, international
dairy companies such as Abbott, FrieslandCampina, Mead Johnson, Nestle and
many other dairy firms are also working on product development as well as
carrying out advertising strategies. Therefore, these organisations are always a
risk to Vinamilk.
2.2.2. Product preservation
The weather of Vietnam with tropical monsoon climate creates challenges
for the dairy industry in product preservation. Milk can be perishable, easily
degenerated… if not stored and handled promptly; this adversely affects the
quality of the milk. Even though Vinamilk has been working on developing
product preservation, it is still vital to always keep their eyes on this matter in
order to ensure product qualities.

6
 3. Balance sheet analysis
3.1. Total assets analysis
150%
145%
140%
135%
PERCENTAGE

130% Current assets

125% Long-term assets
120% Total assets
115%
110%
105%
100%
2017 2018 2019

Changes of Vinamilk’s total assets items from 2017 to 2019 (in %)

It is clear from the given line graph that all these categories showed an
upward trend between 2017 and 2019. Beginning with Vinamilk’s total assets,
this figure experienced an increase of 28.94% over the 3-year period, from
34,667,318,837,497 VND in 2017 to 44,699,873,386,034 VND in 2019. To be
more detail, current assets slightly rose by 1.24% during 2017 - 2018, then took
off by 20.24% and reached 24,721,565,376,552 VND in 2019. Meanwhile,
long-term assets underwent a steady growth of 39.13% with the total rise of
5,618,423,961,514 VND throughout the period from 2017 to 2019.

2017 2018 2019

VND % VND % 31/12/2019 %
Current 20,559,756,794,83 24,721,565,376,55
20,307,434,789,529 58.58% 55.02% 55.31%
assets 7 2
Long-
16,806,351,859,34 19,978,308,009,48
term 14,359,884,047,968 41.42% 44.98% 44.69%
2 2
assets
Total 37,366,108,654,17 44,699,873,386,03
34,667,318,837,497 100% 100% 100%
assets 9 4
Vinamilk’s common-size total assets from 2017 to 2019 (in VND and %)

7
 Looking at the percentage, it can be seen that current assets took up more
than a half in the proportion of total assets over the period from 2017 to 2019,
which showed that Vinamilk’s assets had high liquidity. It is noticeable that
while this figure showed an increase in amount after 3 years, as a percentage of
total assets, it declined in 2018 and then levelled off in 2019. The reason for
this is because long-term assets data improved moderately during the 3 years in
term of amount and proportion. Compared to the total assets, the percentage of
tangible fixed assets went up by 26.79% during 2017 - 2018, whereas
intangible assets experienced an upturn of 1.72% during 2018 - 2019.
The proportion of Vinamilk’s receivables as well as their invetories
slightly fell in the period, which may indicate that they performed well in
collecting cash and selling products. The company also showed some interest
in investing activities, as their short-term financial investments, which account
for 30.47% of total assets in 2017, went up after 3 years.
3.2. Total resources analysis
160.00%
140.00%
120.00%
PERCENTAGE

100.00% Current liabilities

80.00% Long-term liabilities
60.00% Owner's equity
40.00% Total resources
20.00%
0.00%
2007 2008 2009
Changes of Vinamilk’s total resources items from 2017 to 2019 (in %)
Like total assets, Vinamilk’s total resources increased by 28.94%
throughout the studied period. In particular, current liabilities rose 41.66% over
the period, whereas long-term liabilities had a sharp fall of 23.98% from
598,698,196,544 VND to 455,147,352,790 VND between 2017 and 2018, then
slightly grew to 525,766,348,310 VND in 2019, which is 87.82% compared to
the first year. Owner’s equity went up by 24.54% in 3 years, reaching
29,731,255,204,364 VND at the end of 2019.

8
 2017 2018 2019
VND % VND % VND
Current 10,195,562,827,09 29.41 10,639,592,009,46 28.47 14,442,851,833,36
liabilities 2 % 2 % 0
Long-
term 598,698,196,544 1.73% 455,147,352,790 1.22% 525,766,348,310
liabilities
Owner’s 23,873,057,813,86 68.86 26,271,369,291,92 70.31 29,731,255,204,36
equity 2 % 7 % 4
Total
34,667,318,837,49 37,366,108,654,17 44,699,873,386,03
resource 100% 100%
7 9 4
s
Vinamilk’s common-size total resources from 2017 to 2019 (in VND and %)
It can be seen from the graph that most of Vinamilk’s debts was short-
term. The company’s current liabilities ratio began at 29.41% in 2017, then
showed a minimal decrease in the next year, but quickly climbed to 32.31% in
2019. On the contrary, long-term debts only took up an extremely small
proportion of total resources, which was around 1% in 3 years.
Vinamilk’s equity always accounted for the largest proportion in its total
resources. However, much as the amount of this company’s equity went up
substantially in 3 years, the ratio showed a volatility. To be specific, owner’s
equity to total resources ratio changed from 68.86% to 70.31% in the first two
years, and finally declined to 66.51%. This contrast is due to the fact that in the
last year, Vinamilk’s current liabilities witnessed a significant increase in both
amount and percentage respects. It is noticeable that their short-term
borrowings grew nearly 5 times from 1,060,047,652,329 in 2018 to
5,351,561,260,191 VND in 2019, represented 11.97% of total capital. Most of
these loans were bank-lending, and some came from financial companies.
Vinamilk claimed that all of them were guaranteed by property, plants and
equipment as well as invetories, which made it quite certain that they would
fulfil these financial obligations.

9
4. Income statement analysis
4.1. Net revenue, cost of sales and gross profit analysis
112.00%

110.00%
PERCENTAGE

108.00%
Net revenue
106.00% Cost of sales
Gross profit
104.00%

102.00%

100.00%
2017 2018 2019

Changes of Vinamilk’s net revenue, cost of sales and gross profit 2017 to 2019
(in %)
Looking at the graph, it is immediately obvious that Vinamilk’s net
revenue, cost of sales and gross profit experienced an upward trend from 2017
to 2019. Throughout the period, cost of sales registered the highest increase out
of all three groups examined. This soared dramatically from about 26 million
VND in 2017 to around 29 million VND in 2019, which was 110.96%
compared to the beginning year. Net revenue and gross profit also increased.
This number of net revenue grew to 102.98% in 2018, and continued to
increase to 110.34%, reached 56,318,122,762,744 VND by the end of the
period. The figure of gross profit rose more slowly to 109.65% in 2019, which
was about 26 billion VND.

10
 2017 2018 2019
VND % VND % VND %
Net
51,041,075,885,109 100% 52,561,949,970,592 100% 56,318,122,762,744 100%
revenue
Cost of
26,806,931,066,476 52.52% 27,950,543,501,501 53.18% 29,745,906,112,117 52.82%
sales
Gross
24,234,144,818,633 47.48% 24,611,406,469,091 46.82% 26,572,216,650,627 47.18%
profit
Vinamilk’s common-size net revenue, cost of sales and gross profit from 2017
to 2019 (in VND and %)
Looking at the table above, it can be seen that cost of sales account for the
majority of net revenue in 3 years. To be specific, in 2017, the rate of cost of
sales made up 52.52% of total net revenue. This figure fluctuated during the
period before reaching 52.82% in 2019. An opposite tendency could be
observed in the allocation of gross profit, which experienced a small drop from
47.48% in 2017 to 47.18% in 2019. The fact that their cost of goods sold and
gross profit both increased in amount, but witnessed contrast trends as a
percentage of total net revenue showed that Vinamilk need a more efficient
strategy to consume their products.

11
4.2. Net revenue, operating expenses and net operating profit analysis

115.00%

110.00%
PERCENTAGE

105.00% Net revenue

Total operating expenses
100.00% Net operating profit

95.00%

90.00%
2017 2018 2019

Changes in net revenue, total operating expenses and net operating profit 2017
to 2019 (in %)
The given line graph shows how net revenue, total operating expenses and
net operating profit changed between 2017 and 2019. As can be inferred from
the data, net revenue and operating expenses witnessed an upward progressor,
whereas net operating profit experienced a fluactuation. Overall, total operating
expenses registered the most significant number out of total. In 2018, it grew to
104.39% (41,349,780,639,724 VND), and then showed a sharp rise to 111.42%
(44,135,663,081,924 VND) in next year. A similar trend was witnessed in the
percentage of net revenue, as explained above. Conversely, the percentage of
the net operating profit dropped to 97.14% in 2018, before growing again to
104.67% in the year of 2019, reached 12,797,090,115,372 VND. The company
claimed that the decrease in 2018 was because prices of some main materials
soared.

12
 2017 2018 2019
VND % VND % VND
Net
51,041,075,885,109 100.00% 52,561,949,970,592 100.00% 56,318,122,762,744
revenue
Cost of
26,806,931,066,476 52.52% 27,950,543,501,501 53.18% 29,745,906,112,117
sales
Selling
11,536,533,571,799 22.60% 12,265,936,906,433 23.34% 12,993,454,552,852
expense
G&A
1,267,606,271,090 2.48% 1,133,300,231,790 2.16% 1,396,302,416,955
expenses
Net
operating 12,226,418,187,645 23.95% 11,876,513,440,752 22.60% 12,797,090,115,372
profit
Vinamilk’s common-size net revenue, operating expenses and net operating
profit from 2017 to 2019 (in VND and %)
From the given table, it is obvious that total operating expenses includes
three kinds of expenses that showed different trends. As the aforementioned
data, cost of sales represented the majority of operating expenses because it
came from producing products, which is the main activity of Vinamilk.
Between 2017 and 2018, the allocation of selling expense increased from
22.60% to 23.34%, then slightly declined to 23.07% and became the second
largest percentage compared to others in 2019. In the meantime, the proportion
of general and administration expenses remained minimal throughout the
studied period, which were around 2% in three years. In addition, net operating
profit represented roughly a quarter of the aggregate amount of net revenue in
2017 before decreasing to over 22% in the next two years. Overall, it can be
seen that the proportion of Vinamilk’s operating expenses remained relatively
unchanged throughout the years, which led to the stability of its net operating

13
 profit percentage. This might indicate that their strategy of spending and selling
did not have significant changes over the three recent years.
4.3. Profit before tax, income tax and net profit after tax analysis:

2017 2018 2019

Profit before tax 12,228,945,384,136 12,051,696,266,123 12,795,709,638,557

Current income tax 1,967,066,705,229 1,874,905,225,483 2,238,365,796,113

Deferred income tax (16,295,874,259) (28,838,670,599) 3,011,961,553

Net profit after tax 10,27,174,553,166 10,205,629,711,239 10,554,331,880,891

Changes in profit before tax, income tax and net profit after tax 2017 to 2019
(in VND)
It is clear from the graph that between 2017 and 2018, the number in all
four categories experienced a downward trend . However, the figures increased
significantly in 2019. To be more specific, in 2017, profit before tax reached to
over 12,228,945,384,136 VND. It decreased by 177 million VND after one
year before experiencing a moderate increase to nearly 1 billion in 2019. Being
a constant part of profit before tax, current income tax expense experienced the
same trend as the previous item, as it fell slightly by nearly 93 million from
2017 to 2018 and then climbed to 2,238,365,796,113 VND in 2019, while net
profit after tax remained almost unchanged. Another noticeable point is
deferred income tax, which declined dramatically in 2018 from
(16,295,874,259) VND to (28,838,670,599) VND and then witnessed a sharp
growth to 3,011,961,553 VND, became an expense instead of a benefit of the
company.

14
 5. Cash flows statement analysis
5.1. Evaluation of the sources and uses of cash
5.1.1. Major sources and use
2017 2018 2019
Net cash flows
from operating 9,601,594,525,092 8,140,239,032,649 11,409,928,541,690
activities
Net cash flows
from investing (1,770,989,020,947) (1,045,144,636,184) (6,747,874,852,168)
activities
Net cash flows
from financing (7,535,345,429,473) (6,535,107,071,546) (3,515,978,671,653)
activities
Net cash flows
295,260,074,672 559,987,324,919 1,146,075,017,869
during the year
Net cash flows activities of Vinamilk from 2017 to 2019 (in VND)
Vinamilk is a mature company in the Vietnamese dairy market. It can be
seen from the chart that net cash flows had a positive trend from 2017 to 2019.
The majority of Vinamilk’s cash came from operating activities, while most of
their cash flows were spent on investing and financing activities. Operating
cash flows were consistently positive, which is a good sign because the
company wouldn’t need to borrow much money or issue too many stocks to
fund the inadequacy. Furthermore, cash generated from operating activities can
either be used in investing or financing activities. Both of the cash flows from
the two other sources were negative, however, while financing cash flows
increased gradually in 3 years, cash flows from investing activities had a
downward trend. The company used over VND 6 billions for this activity in
2019.
5.1.2. Primary determinants of operating cash flow
Two of the major determinants that make operating cash flow grew was
receivables and inventories. These items both increased from 2017 to 2019.
Beside, it is clearly from the chart that net cash flows from operating activities

15
is lower than net revenue from 2017 to 2019. This is a sign of poor earnings
quality, which means Vinamilk was excellent in increasing its income, but the
company did not have an effective plan to generate cash for its business.
5.1.3. Primary determinants of investing cash flow
It can be seen that net cash flows from investing activities decreased
from 2017 to 2019. Firstly, Vinamilk spend most of their money on additions to
fixed assets and other long-term assets, term deposits and investments in other
entities. Secondly, the company received money from some specific sources.
Among investing activities, receipts of interest and dividends brought Vinamilk
the largest cash. Besides, collections on disposals of fixed assets and other
long-term assets, loans, investments in other entities also contributed a huge
amount of money to the company’s investing cash flows.
5.1.4. Primary determinants of financing cash flow
Most of the nature of Vinamilk’s capital sources was shareholders’ equity.
The fact that net cash flows from financing activities, especially payment of
dividends and loans were negative indicated that Vinamilk was repaying
capitial for the last 3 years.
Although cash flow from financing activities was negative, it had a
significant increase from 2017 to 2019. Standing at more than (7) billions at
2017, it increased to nearly VND (4) billions at 2019. This is due to the large
number of payments for repurchase of treasury shares, proceeds from
borrowings and payments to acquire additional interests in a subsidỉay from
non-controlling interest. This is a positive sign for financing activities of
Vinamilk, and it means that they can use money came from these activities to
invest in new projects and facilitate development in the future.

16
 5.2. Common size analysis of the statement of cash flows

2017 2018 2019

VND % VND % VND %
Operating
activities 9,601,594,525,092 18.81 8,140,239,032,649 15.49 11,409,928,541,690 20.26

Investing
(1,770,989,020,947) (3.47) (1,045,144,636,184) (1.99) (6,747,874,852,168) (11.98)
activities
Financing
activities (7,535,345,429,473) (14.76) (6,535,107,071,546) (12.43) (3,515,978,671,653) (6.24)

Net
51,041,075,885,109 100 52,561,949,970,592 100 56,318,122,762,744 100
revenue
Vinamilk’ common size of cash flows from 2017 to 2019 (in %)
Firstly, among three sources of cash flows, operating activities
represented the largest proportion of Vinamilk’s net revenue from 2017 to
2019. Cash flows from operating activities were more than 9 billions VND and
took up 18.81% of net revenue in 2017, and then had a slight increase to more
than 20% in 2019. To explain for this case, it can be seen from the cash flows
statement that Vinamilk had a little depreciation expense (around 2%), which
added back to determine operating cash flow.
Secondly, net cash flow from financing activities had a same trend with
operating activities. The figures of this activities accounted for more than (6)%
of net revenue in 2019. It increased from 2017 to 2019, because Vinamilk
repurchased a large amount of its treasury stock during this period.
By contrast, cash flows from investing activities had a small percentage
in net revenue. As the amount of investing cash flows dropped, the proportion
of this item in net revenue also decreased over three years, from (3.47)% in
2017 to (11.98)% in 2018.

17
5.3. Free cash flow to the firm and free cash flow to equity
Free cash flows are computed in the tables below.

2017 2018 2019

Cash flows
from
operating 9,601,594,525,092 8,140,239,032,649 11,409,928,541,690
activities
(CFO)
Interest
expense 29,438,568,563 51,367,418,852 108,824,893,987
(Int)
Tax rate (t) 20% 20% 20%
Capital
expenditure (2,793,700,896,726) (3,280,270,950,563) (2,272,339,194,338)
(FCInv)
Free cash
flow to the 12,418,846,276,668 11,461,603,918,294 13,769,327,651,218
firm
Free cash flow to the firm of Vinamilk from 2017 to 2019 (in VND)

18
 2017 2018 2019
Cash flows
from
operating 9,601,594,525,092 8,140,239,032,649 11,409,928,541,690
activities
(CFO)
Capital
expenditure (2,793,700,896,726) (3,280,270,950,563) (2,272,339,194,338)
(FCInv)
Debt
598,698,196,544 455,147,352,790 525,766,348,310
repayment
Free cash
flow to the 11,796,597,225,274 10,965,362,630,422 13,156,501,387,718
equity
Free cash flow to the equity of Vinamilk from 2017 to 2019 (in VND)
It can be seen that free cash flows are positive, which means that the company
has an excess of operating cash flow over amounts needed for investments for
the future and repayment of debt. This cash would be available for distribution
to owners.

6. Financial ratios analysis

6.1. Activity ratios analysis

19
 2018 2019
Working capital turnover 5.25 5.58
Fixed asset turnover 4.38 3.99
Total asset turnover 1.46 1.37
Inventory turnover 5.86 5.66
Days of inventories on hand 62.34 64.48
Receivables turnover 22.43 24.35
Days of sale outstanding 16.27 14.99
Payable turnover 7.40 11.47
Days of payable 49.30 31.83
Activity ratios of Vinamilk in 2018 and 2019
Working capital turnover: In 2018, working capital is quite high, which
illustrated that Vinamilk is being very efficient in using its short-term assets
and liabilities for supporting sales, and the firm has limited need for additional
funding. In 2019, the rate increased to nearly 6, which shows a healthy
financial sign of this company.
Fixed asset turnover: Vinamilk’s fixed asset turnover ratio in 2018 is
4.38, which is a high number and preferred for most businesses. The high ratio
of the company indicated that they bought more fixed assets to serve their
expansion and the company also knew how to use fixed assets to bring about
higher sales. However, this ratio dropped to 3.99 in 2019, which could be
because the increasing rate of fixed assets is larger than the rate of revenue
growth.
Total asset turnover: In 2018, the total asset turnover ratio of Vinamilk
was 1.46, higher than the average ratio of consumer goods companies in
Vietnam (1.39). In the following year, the rate fell slightly to 1.37, lower than
the industry average ratio (1.4). It showed that the company worked less
efficiency in this period.
Inventories turnover and DOH: In the case of Vinamilk, this rate did
not fluctuate very much. In 2018, while the ratio of this company was 5.86, the
inventories turnover of consumer goods companies in Vietnam was 9.87. It
shows that the company reserve goods to re-use later in their production
process. In 2019, although there is a decrease in this ratio. In addition, DOH

20
was over 60 days in both years, it means that it took about 2 months to turn
inventory into cash
Receivable turnover and days of sales outstanding (DSO): In 2018,
receivable turnover ratio is 22.43 and increased to 24.35 after 1 year. In this
period, the number of days of collecting cash decreased, 2018 was 16.27 but
2019 has fell to nearly 15. This leads to the fact that company’s collection of
accounts receivable is efficient and that the company has a high proportion of
quality customers that pay their debts quickly. However, a high ratio can also
suggest that this company is conservative when it comes to extending credit to
its customers.
Payable turnover and number of days of payable:. Even though in
2019, there was an amount of long-term payables, which didn’t appear in the
two previous years, the ratio has increased from 7.4 in 2018 to 11.47 in 2019.
This means that Vinamilk has used efficiently the advantage of early payment
discount during this time. The number of days the company took to pay debts
also decreased from nearly 50 days to around 30 days. This information
indicate that the company’s financial condition is healthy.
6.2. Liquidity ratios analysis
2017 2018 2019
Cash ratio 1.1304 0.95836 1.04556
Quick ratio 1.58076 1.39441 1.35736
Current ratio 1.99 1.93 1.71
Liquidity ratios of Vinamilk from 2017 to 2019

Current ratios: It can be seen that current ratios had a slight decreased
from 1.99 in 2017 to 1.71 in 2019. This reduction may be caused by the
significant increase in the amount of current liabilities which went up more
than 4 billions after 3 years. Furthermore, theoretically, the current ratio should
be between 2 and 4, larger than Vinamilk’s current ratio, therefore, it shows
that the company is not being very effective in paying short-term debts by its
current assets.

21
 Quick ratios: It could be clearly seen that quick ratio of the firm dropped
over the period, from 1.58 in 2017 to 1.36 in 2019. These numbers between 1
and 2 – the theoretical limit of quick ratio, which means that the firm are able
to pay its current debts with more liquid assets. However, the fact that these
rates decreased indicated that the meet of short-term obligations was less
efficient.
Cash ratios: In 2017, cash ratio of the firm was 1.13 and the next year,
this rate slightly declined to 0.95. However, in 2019, the cash ratio of Vinamilk
increased to 1.045, which indicated that the company would be able to pay off
its current liabilities with cash and cash equivalents, and have funds left over.
Moreover, creditors prefer a high cash ratio, as it indicates that the company
can easily pay off its debt.
6.3. Solvency ratios analysis
2017 2018 2019
Debt to assets 31% 30% 33%
Debt to capital 31% 30% 33%
Debt to equity ratio 45% 42% 50%
Financial leverage ratio 1.44 1.47
Interest coverage 416.41 235.62 118.58
Solvency ratios of Vinamilk from 2017 to 2019
Debt to assets: From 2017 to 2019, Vinamilk's debt to assets remained
stable at a safe level, below 50%. It shows that the company's financial
autonomy is relatively high, most of the company's assets are financed by its
equity. However, the slight increase from 31% to 33% also shows that
Vinamilk is taking actions to exploit financial leverage and raise capital by
borrowing.
Debt to capital: Similar to debt to assets ratio, debt to capital ratio of
Vinamilk did not changed much. During this 3-year period, the highest rate
reached 33%. (2019), which means that only 33% of the company’s capital
came from debts. This rate is assessed to be low risk and therefore preferred by
investors.
Debt to equity ratio: Over the last 3 years, Vinamilk’s debt to equity
ratio fluctuated a little bit. It decreased from 45% in 2017 to 42% in 2018, and

22
rose again to 50% in the last year. Despite this instability, the fact that it always
remained lower than 50% indicates that Vinamilk relied mostly on the owner’s
equity rather than debt to finance for its projects. In other words, the company
had a safe capital structure.
Financial leverage ratio: In 2 years of 2018 and 2019, the financial
leverage ratio of Vinamilk only increased slightly by 0.03. This shows that
Vinamilk’s policy of using financial leverage is being applied and implemented
effectively, maintaining income sources and stable debt payment capacity.
Interest coverage: During this period, the company's interest coverage
ratio plummeted by 50%. It indicated that Vinamilk’s ability to pay interest
from its earnings is showing signs of significant reduction. Vinamilk needs to
have more effective solutions to use their income to pay interest and ensure
solvency for its creditors.
6.4. Profitability ratios analysis
2017 2018 2019
Gross profit margin 47% 46.82% 47.18%
Operating profit margin 24% 22.60% 22.72%
Net profit margin 20.14% 19.42% 18.74%
ROE 0.43 0.39 0.35
ROA 0.30 0.27 0.24
Profitability ratios of Vinamilk from 2017 to 2019
Gross profit margin: Vinamilk's gross profit margin during the 3 years
was around 47%. The company needs to continue to maintain these high results
and make improvements in the production process as well as the product
quality to earn competitive advantage in the market.
Operating profit margin: Over a 3-year period, operating profit margin
tended to decrease slightly from 24% to 22.72%. This decline is caused by the
uneven increase of net revenue and net operating profit. Vinamilk needs to take
measures to expand profit margins and control related operating costs.
Net profit margin: The company’s net profit margin went down over the
period, from 20.14% in 2017 to 18.74% in 2019. This may implied that

23
Vinamilk’s ability to transfer sales into profit is decreasing, because much as
the company’s revenue was high, they also had a large amount of expenses.
ROE: Compared to the average of the food industry, Vinamilk's ROE is
always rated to remain high, but we can see that the company's ROE tends to
decrease steadily from 0.43 in 2017 to 0.35. in 2019. The reason for this
decline is that the company's equity increased continuously while net profit
after tax remained relatively unchanged.
ROA: We can see that the ROA and ROE of Vinamilk have quite similar
trends. In 3 years, ROA has decreased from 0.30 to 0.24. However, the
company still has a larger ROA than the industry average, which is a good sign
that Vinamilk is managing assets effectively.

7. Conclusion
To sum up, it can be seen from the research that Vinamilk’s financial
index are mostly positive. As one of the leading business in its industry,
Vinamilk’s financial performance is quite excellent. The company has a safe
capital structure as most of their resources are funded by its owner’s equity, the
firm is able to repay their debts by cash and their free cash flow to the equity is
positive; which are optimistic signs for investors. Furthermore, Vinamilk’s
revenue is increasing rapidly throughout the years, and its operating cash flow
is going up as well. However, on the opposite side, there are also some
drawbacks that Vinamilk need to surmount in order to help its business
growing stronger. For instance, Vinamilk’s expenses are quite large, which
explained why its net profit is much smaller than its revenue. By overcoming
the drawbacks, Vinamilk will grow stronger and ensure its leading position in
the industry.

24
 REFERENCES
1. Vinamilk consolidated financial statement for the year ended 31
December 2017, <
https://www.vinamilk.com.vn/static/uploads/documents/bctc/158849337
3_B%C3%A1o_c%C3%A1o_t%C3%A0i_ch%C3%ADnh_h%E1%BB
%A3p_nh%E1%BA%A5t_Q4_-2017-En-_ch%C6%B0a_xo
%C3%A1t_x%C3%A9t.pdf>
2. Vinamilk consolidated financial statement for the year ended 31
December 2018, <
https://www.vinamilk.com.vn/static/uploads/documents/bctc/158839770
2_B%C3%A1o_c%C3%A1o_t%C3%A0i_ch%C3%ADnh_h%E1%BB
%A3p_nh%E1%BA%A5t_Q4_-2018__en-ch%C6%B0a_xo
%C3%A1t_x%C3%A9t.pdf>
3. Vinamilk consolidated financial statement for the year ended 31
December 2019,
<https://www.vinamilk.com.vn/static/uploads/documents/bctc/15883979
27_B%C3%A1o_c%C3%A1o_t%C3%A0i_ch%C3%ADnh_h%E1%BB
%A3p_nh%E1%BA%A5t_Q4-2019-EN_%C4%91%C3%A3_so
%C3%A1t_xet.pdf>
4. Industry comparation and analysis, <
https://finance.tvsi.com.vn/tools/CompareIndustry?
fbclid=IwAR2paXh0jdB6iMIFDRrC6vuITUP-
ZYredyAS83CMFzaiiMy_VwYOkun4SrM>

25