THAI NGUYEN UNIVERSITY SOUTHERN LUZON STATE UNIVERSITY Socialist Republic of Viet Nam Republic of Philippines TO THI NGOC LAN (ENGLISH NAME: JENNY) FINANCIAL MANAGEMENT SYSTEM OF VIETNAM POSTS AND TELECOMMUNICATIONS GROUP AND ITS EFFECTS ON FINANCIAL EFFICIENCY OF THE COMPANY DOCTORAL DISSERTATION ABSTRACT ADVISER: DR JOANNA PAULA A ELLAGA AUGUST, 2013 ABSTRACT In the background of deeper and wider regional and international economic integration, enterprises have to face with more formidable competition from big multinational economic organizations in the world In order to adapt to that situation, many countries are incessantly increase scales of businesses, establishing and developing economic groups In order to ensure the high efficiency of those economic groups and State owned enterprises, it is necessary to improve efficiency of financial management system of economic groups With such an approach to issues, the main objectives of dissertation is study the current status of system financial management of VNPT and its effect on financial efficiency of company In order to obtain main objectives of study, the researcher used the descriptive method to get data which includes: Primary data was collected by sending questionnaires to 169 respondents and secondary data: From the annual financial reports of VNPT from 2010 to 2012 For assessing the current status of VNPT’s financial management system, the dissertation focuses on studying the profile and the formation and development process of VNPT as well as VNPT’s regulations on capital mobilization, management and use of capital and assets, management of revenues, expenses and profit distribution, thereby assessing financial management system and its effects on VNPT’s financial efficiency from 2010 to 2012 All this proves that the financial management system of VNPT effects positively to financial efficiency of the Group CHAPTER I: INTRODUCTION There are many studies about financial management system in economic groups under the eyes of theory, situation evaluation as well as summary of experience in the country and foreign countries Followings are typical ones: Firstly, the study, which was published into book, has title: “Business Groups and financial management system in Business Groups” published in 2003, by author Pham Quang Trung This study shows many basic theoretical matters about financial management system in economic groups, State owned enterprises as well as descriptions, summaries, analysis of overall picture of actual situation of applying financial management system in economic groups, State owned enterprises in Vietnam in the first period when economic groups, State owned enterprises started to go into operation Secondly, the study under form of textbook has title “Financial management of modern enterprises” published in 2009, author Duong Huu Hanh This study, although not directly mentioning words “financial management system in economic groups”, has contents of financial management in modern enterprises under the view of financial management of enterprises Thirdly, the study “Establishment and management of business Groups in VietNam” in 1996 and the author Nguyen Dinh Phan In this study, the author has written few pages of financial management in business groups; however, to some extent, the content about this issue is limit and suggestive Generally, about financial management system in the economic groups in Vietnam, there are some works under the form of books which mention different angles, but all were released from the 2000 onwards Nowadays under the impact of regional and international economic integration, and the management of the State for State economic groups inevitably arises many new issues in the financial management system of economic groups in VietNam 1.1 Statement of the objectives This study intended to analysis of financial management system of VNPT and its effects on financial efficiency of the Group Specifically, the specific objectives of this study are: (1) To identify the profile of the company in terms of the following: Type of the company and Size of the company; (2) To determine the current status of financial management system of VNPT in terms of the following: Capital mobilization, Capital management and use, Asset management, Management of revenue, expense and profit distribution; (3) To assess the financial efficiency of VNPT in terms of the following financial ratios: the asset turnover ratio and the debtor days ratio; (4) To determine the effects of the financial management system to the financial efficiency of VNPT; (5) To identify the problems encountered in carrying out the financial management system of VNPT; (6) To propose actions that will respond to the problems encountered in carrying out the financial management system of VNPT 1.2 Significance of the Study This research will be beneficial for the following: Investors take an interest in information about the financial efficiency of VNPT On the one hand, they want to obtain the adequate amount of information needed for decision-making about investments in the Group On the other hand, owners and investors want to make sure whether invested resources are properly evaluated and optimized Managers need to know about financial management for current and longterm decisionmaking Employees are naturally interested in prosperity, economic and financial stability of VNPT It is concerned with job security, possibilities in wage and social policy, or other benefits provided by the employer For researcher, provide theoretical knowledge of the financial management system of economic groups in general and VNPT in particular 1.3 Scope and limitation of the Study The study of current status of financial management system in VNPT is performed from 2010 to 2012 In my case, Financial efficiency, viewed as dependent variables Accounting information system practices; Financial reporting and analysis practices; Capital structure management practices; Capital mobilization practices; Capital management and use practices; Asset management practices; Revenue, expense and profit distribution management practices, viewed as independent variables But time and my ability is limited, I will focus on: Capital mobilization practices; Capital management and use practices; Asset management practices; Revenue, expense and profit distribution management practices, viewed as independent variables CHAPTER II: RELATED LITERATURE 2.1 Review of related studies In this chapter, the author presented some related studies 2.2 Theoretical and conceptual framework In this part, the author presented definition of finance, contents of financial management system, factors influencing financial management system, criteria for financial efficiency evaluation of financial management system and definition of financial efficency 2.3 Research Paradigm FINANCIAL MANAGEMENT SYSTEM OF VNPT AND ITS EFFECTS ON FINANCIAL EFFICIENCY OF THE COMPANY Independent Variable Dependent Variable Company profile  Type of company  Size of company Current status of financial management system Financial Efficiency  Capital mobilization  Capital management and use  Asset management  Management of revenue, expense and profit distribution Problems encountered CHAPTER III: METHODOLOGY 3.1 Data collection method - Primary data was collected by sending questionnaires to 169 respondents (CFO of VNPT, director of financial department of VNPT, deputy director of financial department of VNPT, CFO of VNPT’s subsidiaries) working in VNPT and its subsidiaries - Secondary data: From the annual financial reports of VNPT from 2010 to 2012 3.2 Data processing method After information is collected, information in the questionnaire will be cleaned and processing by SPSS 16.0 3.3 Statistical treatment This study used statistical methods to process data analysis as indicates The asset turnover ratio Sales Revenue The asset = turnover ratio Net Assets The debtor days ratio Debtors The debtor = days ratio x 365 Sales turnover CHAPTER IV: PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA In the chapter of this dissertation, the first the author focused on analyzing the current status of financial management systems and its impact to the financial efficiency of VNPT in the period 2010 - 2012 Capital mobilization of VNPT both ensure the autonomy and the security The financial management system created new initiative in capital mobilization helping to address shortage of capital in the context of capital scarcity as currently Capital management and use in VNPT are rather strict, not only facilitating to increase the self-control, self-responsibility of VNPT but also strengthening examination, supervision on Representative owners of State capital Asset management of the VNPT has relatively clear separation between ownership and rights to use assets Management of revenue, expense and profit distribution is quite clear, explicit to ensure balance between benefit of State, cooperation and temporary and long-term benefit of workers, cooperation, contributing to encourage for saving and to improve efficiency in production business at VNPT Then, the author make some evaluation about financial efficiency of VNPT 4.1 Assess the financial efficiency of VNPT The asset turnover ratio This measures the productivity of the business It is calculated using the following formula: Sales Revenue The asset = turnover ratio Net Assets Table The asset turnover ratio of VNPT from 2010 to 2012 Unit: Billion dongs Year 2010 2011 2012 Sales Revenue 101,569 120,800 130,000 Net Assets 69,499 71,807 73,968 The asset turnover ratio 1.46 1.68 1.76 The debtor days ratio This shows how long, on average, a business takes to collect the debts owed to it by customers who have purchased their goods on credit It is calculated using the following formula: Debtors The debtor = days ratio x 365 Sales turnover Table The debtor days ratio of VNPT from 2010 to 2012 Unit: Billion dongs Year 2010 2011 2012 Debtors 13,003 14,737 15,193 Sales turnover 104,869 125,100 134,495 The debtor days ratio 45.26 43.0 41.23 4.2 Effects of the financial management system to the financial efficiency of VNPT Financial management system of VNPT has been conducted well so sales revenue and net assets increased steadily from 2010 to 2012 Sales revenue and net assets increased lead to the asset turnover ratio increased In 2010, the asset turnover ratio was 1.46; In 2011, the asset turnover ratio 10 was 1.68, increasing 15.068% compared with 2010; In 2012 the asset turnover ratio was 1.76, increasing 4.762% compared to 2011 The same, we see that financial management system of VNPT has been conducted well so the debtor days ratio decreased steadily from 2010 to 2012 In 2010, the debtor days ratio was 45.26 days; In 2011, the debtor days ratio was 43.0 days, decreasing 5.526% compared with 2010; In 2012 the debtor days ratio was 41.23 days, decreasing 4.293% compared to 2011 All this proves that the financial management system of VNPT effects positively to financial efficiency of the Group 11 CHAPTER V: CONCLUSIONS AND RECOMMENDATIONS 5.1 Summary of the findings For current status of financial management system of VNPT - Current status capital mobilization in VNPT Capital mobilization of VNPT both ensure the autonomy and the security The financial management system created new initiative in capital mobilization helping to address shortage of capital in the context of capital scarcity as currently - Current status capital management and use in VNPT Generally, capital management and use in VNPT are rather strict, not only facilitating to increase the self-control, self-responsibility of VNPT but also strengthening examination, supervision on Representative owners of State capital - Current status of asset management in VNPT Asset management of the VNPT has relatively clear separation between ownership and rights to use assets - Current status of revenue, expense and profit distribution management in VNPT The managing revenue, cost and profit distribution is quite clear, explicit to ensure balance between benefit of State, cooperation and temporary and long-term benefit of workers, cooperation, contributing to encourage for saving and to improve efficiency in production business at VNPT For effects of financial management system on financial efficiency of the VNPT 12 Financial management system of VNPT has been conducted well so sales revenue and net assets increased steadily from 2010 to 2012 It lead to the asset turnover ratio increased and the debtor days ratio decreased All this proves that the financial management system of VNPT effects positively to financial efficiency of the Group For the problem encountered by financial management system of VNPT Firstly, capital mobilization of VNPT’s subsidiaries meet many difficult and limited Secondly, investment out of main business operations to VNPT without efficiency Thirdly, although revenue of VNPT increase steadily from 2010 – 2012 but profit of VNPT decrease 5.2 Conclusions - The assets and equity of VNPT had tended to increase over the years from 2010 to 2012 - The rate of total payable liabilities over owner capital was 2.74 fold, 2.33 fold respectively in in 2011, 2012 - The revenue of VNPT had tended to increase over the years from 2010 to 2012 - But the profit of VNPT had tended to decrease over the years from 2010 to 2012 5.3 Recommendations Firstly, complete capital mobilization of VNPT’s subsidiaries To extend the capital mobilization of VNPT, it is required to focus on handling the main problems as follows: 13 - In general, perform the capitalization for VNPT and foster the listing in the security market - For VNPT itself, set the instruction frame including: target, limit, loan procedure… instead of approval for each case in the current time - Parallel with the extension of capital mobilization regime for subsidiaries of VNPT, it is required to cooperate synchronously with the strengthening of supervision, administration regime and the system of final criteria on effectiveness, the extension of capital mobilization regime for member units under the Group can become true and obtain the achievement as expected Secondly, complete investment out of main business operations To correct the limitations of investment in the outside VNPT, it is required to re-assess the capital, assets of VNPT accurately and re-structure the group toward centralized objectives as increasing the financial efficiency of VNPT in new situation Raise the role in advising, moderating, supervising related parties to investment decisions, project sponsorship and distribution polices in inner VNPT Thirdly, complete the management of revenue, expenses, and profit distribution - Complete the system of economic and technical regulations in compliance with conditions, operating characteristics of VNPT both assuring the scientific and actual requirements, innovation of plan making on revenue, cost for innovating the ways of profit distribution in direction of focusing on long term benefit of VNPT - For the management of revenue, expenses and profit distribution, it is required to focus on expense management because of only good management on expenses and cost reduction results in extending the production and business and increasing revenue and profit 14 [...]... this proves that the financial management system of VNPT effects positively to financial efficiency of the Group 11 CHAPTER V: CONCLUSIONS AND RECOMMENDATIONS 5.1 Summary of the findings For current status of financial management system of VNPT - Current status capital mobilization in VNPT Capital mobilization of VNPT both ensure the autonomy and the security The financial management system created new... complete the management of revenue, expenses, and profit distribution - Complete the system of economic and technical regulations in compliance with conditions, operating characteristics of VNPT both assuring the scientific and actual requirements, innovation of plan making on revenue, cost for innovating the ways of profit distribution in direction of focusing on long term benefit of VNPT - For the management. .. the extension of capital mobilization regime for subsidiaries of VNPT, it is required to cooperate synchronously with the strengthening of supervision, administration regime and the system of final criteria on effectiveness, the extension of capital mobilization regime for member units under the Group can become true and obtain the achievement as expected Secondly, complete investment out of main business... saving and to improve efficiency in production business at VNPT For effects of financial management system on financial efficiency of the VNPT 12 Financial management system of VNPT has been conducted well so sales revenue and net assets increased steadily from 2010 to 2012 It lead to the asset turnover ratio increased and the debtor days ratio decreased All this proves that the financial management system. .. asset management in VNPT Asset management of the VNPT has relatively clear separation between ownership and rights to use assets - Current status of revenue, expense and profit distribution management in VNPT The managing revenue, cost and profit distribution is quite clear, explicit to ensure balance between benefit of State, cooperation and temporary and long-term benefit of workers, cooperation, contributing... system of VNPT effects positively to financial efficiency of the Group For the problem encountered by financial management system of VNPT Firstly, capital mobilization of VNPT’s subsidiaries meet many difficult and limited Secondly, investment out of main business operations to VNPT without efficiency Thirdly, although revenue of VNPT increase steadily from 2010 – 2012 but profit of VNPT decrease 5.2 Conclusions... mobilization helping to address shortage of capital in the context of capital scarcity as currently - Current status capital management and use in VNPT Generally, capital management and use in VNPT are rather strict, not only facilitating to increase the self-control, self-responsibility of VNPT but also strengthening examination, supervision on Representative owners of State capital - Current status of asset... business operations To correct the limitations of investment in the outside VNPT, it is required to re-assess the capital, assets of VNPT accurately and re-structure the group toward centralized objectives as increasing the financial efficiency of VNPT in new situation Raise the role in advising, moderating, supervising related parties to investment decisions, project sponsorship and distribution polices... mobilization of VNPT’s subsidiaries To extend the capital mobilization of VNPT, it is required to focus on handling the main problems as follows: 13 - In general, perform the capitalization for VNPT and foster the listing in the security market - For VNPT itself, set the instruction frame including: target, limit, loan procedure… instead of approval for each case in the current time - Parallel with the extension... distribution in direction of focusing on long term benefit of VNPT - For the management of revenue, expenses and profit distribution, it is required to focus on expense management because of only good management on expenses and cost reduction results in extending the production and business and increasing revenue and profit 14