Đang tải... (xem toàn văn)
TABLE OF CONTENTSABSTRACT.…4ACKOWLEDGEMENT5LIST OF ABBREVIATIONS6LIST OF FIGURES7LIST OF TABLES8CHAPTER I. INTRODUCTION91.1.Purpose (Statement of problem)91.2.Structure of the thesis11CHAPTER II. THEORETICAL FRAMEWORK122.1.Cash budgeting122.1.1.Overview of cash budgeting122.1.2.The role of cash budgeting in manufacturing firms142.1.3.Cash budgeting techniques152.2.Overview of Monte Carlo Simulation192.2.1.Introduction to Monte Carlo Simulation192.2.2.Monte Carlo simulation in finance202.2.3.Steps in the Monte Carlo simulation212.2.4Using Monte Carlo simulation as cash budgeting tool22CHAPTER III.APPYLING MONTE CARLO SIMULATION TO CASH BUDGETING FOR BIM SON CEMENT JOINT STOCK COMPANY233.1.Introduction about Bim Son Cement Joint Stock Company233.1.1.Brief introduction233.1.2.Main products of the company243.1.3.Financial performance of the company in the last 2 years263.1.4.Position of the company in the industry283.2.Applying Monte Carlo simulation to cash budgeting for Bim Son Cement Joint Stock Company303.2.1.Cash budgeting steps using Monte Carlo simulation303.2.2.Assumptions313.2.3.Process of cash budgeting for the company373.2.4.Result and analysis433.2.5.Recommendations for Vietnamese firms and Bim Son Cement Joint stock Company46CONCLUSION48REFERENCES49APPENDIX A..50
FOREIGN TRADE UNIVERSITY UNIVERSITY OF RENNES (FRANCE) MASTER THESIS Major: Finance (Treasury) APPLYING MONTE CARLO SIMULATION TO CASH BUDGETING FOR BIMSON CEMENT JOINT STOCK COMPANY Student’s full name: HOANG Thanh Huyen NGUYEN Thi Kim Thanh Intake: Supervisor: 2015-2016 Assoc Prof., PhD NGUYEN Viet Dzung Hanoi, August 2016 TABLE OF CONTENTS ABSTRACT ACKOWLEDGEMENT LIST OF ABBREVIATIONS LIST OF FIGURES LIST OF TABLES .8 CHAPTER I9 INTRODUCTION 1.1 Purpose (Statement of problem) 1.2 Structure of the thesis .11 CHAPTER II 11 THEORETICAL FRAMEWORK 12 2.1 Cash budgeting 12 Overview of cash budgeting 12 The role of cash budgeting in manufacturing firms 14 Cash budgeting techniques 15 2.2 Overview of Monte Carlo Simulation .19 a Introduction to Monte Carlo Simulation 19 b Monte Carlo simulation in finance 20 c Steps in the Monte Carlo simulation 20 2.2.4 Using Monte Carlo simulation as cash budgeting tool 22 CHAPTER III 22 APPYLING MONTE CARLO SIMULATION TO CASH BUDGETING FOR BIM SON CEMENT JOINT STOCK COMPANY 22 3.1 Introduction about Bim Son Cement Joint Stock Company 22 Brief introduction 22 Main products of the company 24 Applying Monte Carlo simulation to cash budgeting for BCC Financial performance of the company in the last years .25 Position of the company in the industry .27 ii Applying Monte Carlo simulation to cash budgeting for Bim Son Cement Joint Stock Company 29 3.2.1 Cash budgeting steps using Monte Carlo simulation 29 Figure 5: Cash budgeting steps using Monte Carlo simulation 29 30 3.2.2 Assumptions .30 3.2.3 Process of cash budgeting for the company .36 3.2.4 Result and analysis 43 3.2.5 Recommendations for Vietnamese firms and Bim Son Cement Joint stock Company .45 CONCLUSION 47 REFERENCES 48 1.http://cafef.vn 48 2.http://ximangbimson.com.vn (website of BCC) 48 3.http://hnx.vn/web/guest/home (website of Hanoi Stock Exchange) 49 4.Andreas Grau, 2012, How can I implement Monte-Carlo Simulations in MS Excel? http://computeraidedfinance.wordpress.com .49 5.Create a Monte Carlo Simulation using excel 49 http://www.investopedia.com/articles/investing/093015/create-monte-carlosimulation-using-excel.asp .49 6.http://www.minitab.com .49 7.https://www.riskamp.com 49 8.https://www.lancaster.ac.uk 49 APPENDIX A49 Applying Monte Carlo simulation to cash budgeting for BCC ABSTRACT Monte Carlo simulation is a useful capital budgeting tool that allows the user to reflect the uncertainty associated with various cash components The output from the simulation consists of distributions of net cash flows, which can be used for decisionmaking and risk management However, Monte Carlo simulations are often implemented using specialized software, making them inaccessible to many people because of its difficulties and cost consuming In this thesis, we demonstrate how to implement Monte Carlo simulation to cash budgeting for a manufacturing company using Microsoft Excel which is not only easy to use and understood but also delivering the reliable outputs that will be useful for the managers in cash management and decision making Applying Monte Carlo simulation to cash budgeting for BCC ACKOWLEDGEMENT We would like to express our gratitude to all those who help us to complete this thesis Especially, we would like to thank our supervisor Assoc Prof., PhD NGUYEN Viet Dzung for his supervision, time and patience during the course of this thesis We would also like to thank the lecturers at the University of Rennes 1, Foreign Trade University and our colleagues in the MSc course Finally, we would like to extend our sincere thank to our families and friends for their love, support and encouragement which were extremely important for the completion of this thesis Applying Monte Carlo simulation to cash budgeting for BCC LIST OF ABBREVIATIONS BCC Bim Son Cement Joint Stock Company MCS Monte Carlo Simulation COGS Cost of goods sold CBBL Cash Balance Before Loan ARP Average receivable period APP Average payment period MS Excel Microsoft excel Applying Monte Carlo simulation to cash budgeting for BCC LIST OF FIGURES FIGURE Fluctuation of cash and cash equivalents of BCC from 2006 to 2016 10 FIGURE Five steps for a cash budgeting 17 FIGURE Steps to follow Monte Carlo simulation 21 FIGURE Breakdown of sales by geographical 26 FIGURE Cash budgeting steps using Monte Carlo simulation 30 FIGURE Normality test for Net sales data 33 FIGURE Net sales of BCC from Q4/2006-Q4/2015 33 FIGURE Generating net sales 39 FIGURE Calculation of actual net sales 39 FIGURE 10 Calculation of actual COGS 39 FIGURE 11 Calculation of sales collection 40 FIGURE 12 Calculation of COGS payment 40 FIGURE 13 Calculation of financial expenses 41 FIGURE 14 Calculation of Cash disbursement 41 FIGURE 15 Macro output of CBBL 43 FIGURE 16 Macro output of loan 43 Applying Monte Carlo simulation to cash budgeting for BCC LIST OF TABLES TABLE Example of ScenariosAnalysis for cash budgeting 18 TABLE Breakdown of sales from 2014 to 6M/2016 24 TABLE Operating results of BCC from 2014 to 6M/2016 26 TABLE Cost structure of the company 2014-2015 27 TABLE Estimated minimum cash balance requirement for BCC 37 TABLE Mean and Standard Deviation calculation 37 TABLE Average ARP and APP 38 TABLE Minimum and maximum value of income 38 TABLE Minimum and maximum value of expenses 38 TABLE 10 Example of ending cash balance of BCC for next quarters 42 TABLE 11 Example of cash budget of BCC for next quarters 42 TABLE 12 Comparison for actual loan and forecasted loan of Q2/2016 45 Applying Monte Carlo simulation to cash budgeting for BCC CHAPTER I INTRODUCTION 1.1 Purpose (Statement of problem) The difference between a company that succeeds and one that fails is often cash management Having too little cash means a business may have to pass on profitable ventures or take out loans to overcome liquidity issues Too little cash may also mean a company may be unable to operate at normal levels or be forced to shut down completely With different stages of development, cash is always a vital factor securing for smoothly business operations To avoid these issues, companies rely on cash budget to plan and control cash receipts and payments Ms Hsin-hui I.H Whited (RBFS Vol No.1 2014) – an Associate Professor of Finance at the Hasan School of Business, Colorado – in her research on short-term financial planning for entrepreneurs has stated that Cash is lifeblood of an entrepreneurial venture Without sufficient cash, a venture cannot stay alive This is the truth for every type of ventures, from manufacturing ones to trading ones Bim Son Cement Joint Stock Company (BCC) was founded in 1980s, during the starting period of reconstructing Vietnam’s economy and has nearly 40 years of striving and growing Today, Bim Son has its own position as one of the leading enterprises in the domestic cement and clinker market In the context of high competition and fluctuation economy recently, alike other enterprises BCC has to struggle to express itself and improve the effectiveness of the operation As a manufacturing company, BCC always requires a certain amount of cash available satisfying for operating and producing activities As one of the leading cement manufacturers in Vietnam that meets the consumption demand of about 70 million tons per year both for domestic market and exporting market, the cash management and cash budgeting is for sure the integral matter to take into account for the company By using historical data in the balance sheet of BCC from 2006 to the very first month of 2016, we have seen the fluctuation of cash and cash equivalents of BCC shown in numbers of minimum value is VND 22 billion, maximum value is VND 352 billion and the standard deviation is VND 63 billion The fluctuation of cash and cash equivalents is shown in the following figure: Applying Monte Carlo simulation to cash budgeting for BCC Figure 1: Fluctuation of cash and cash equivalents of BCC from 2006 to 2016 Times Series for Cash and Cash equivalent 4.0000E+11 VND 3.0000E+11 2.0000E+11 1.0000E+11 Q4/2006 Q1/2016 From Q4/2006 to Q1/2016 “What will be the cash balance for the next quarters? How much we need to borrow?” These are obviously questions that BCC has to answer periodically By some direct interviews with accounting manager of BCC, we have learnt that in fact, BCC estimates and predicts the need of cash in such a very simple way that only answers the question “what will occur and which will occur” by choosing one of the three among “the best, the most likely and the worst case” scenarios They use historical data to average value of some recent periods which can not exactly represent for the fluctuation of the data, and then this method seems to be helpful but sometimes the estimated results will not be correct in comparision to actual data, because it can not cover all sources of variability and not estimate based on the distribution of uncertainty input Moreover, this way of performing the cash budgeting task takes much time and effort to this In the period of unstable world economy, especially in the cement industry where competetion is increasingly fierce, lacking of cash or surplus of cash will effect directly to any maufacturing firm Any delay in inward cash flow will postpone the production (not enough cash to pay the raw material suppliers/pay salaries to staffs/pay interests to banks, etc) Any unexpected surplus in cash will make the investing decision not exactly, not in time with the opportunity So, obviously, the company should start studying and applying a forecasting method regarding all sources of variability and uncertainty input such as Monte Carlo simulation This method is a statistical approach which is concerned with experiments employing random numbers It is used by proessionals with applications in a wide 10 Applying Monte Carlo simulation to cash budgeting for BCC The average interest on short-term loan is about 1,43%/quarter as provided by BCC Finally, after the loan amount is determined, the interest payment can also be calculated Then, the total cash disbursements of each forecasted quarter are determined • Other disbursements Dividend payment: According to the resolution of Annual general meeting of shareholders, BCC will pay stock dividend instead of cash dividend So, in our forecasted period, there will be no cash outflow for dividend payment Capital expenditures: is the money spent by the company on acquiring or maintaining fixed assets, such as land, buildings, and equipment However, due to the lack of information, we assume that the funds used for capital expenditures are zero 3.2.1.6 Ending cash balance Ending cash balance = CBBL + Loan amount Since we set the minimum cash balance requirement for BCC, so the ending cash balance will be always equal or greater than the minimum cash balance requirement in each quarter 3.2.3 Process of cash budgeting for the company 3.2.2.1 STEP 1: Setting minimum cash balance requirement According to the assumptions mentioned in the previous part, the estimation for minimum cash balance requirement is: Unit: VND Table 5: Estimated minimum cash balance requirement for BCC Selling expenses 50,553,895,812 Administrative expenses Wages to employees Subtotal Reserve for extraordinary expenses (0,5% average sales 2012 - Q1/2016) Minimum cash balance requirement 32,075,735,533 70,249,997,430 152,879,628,775 4,944,272,495 157,823,901,270 36 Applying Monte Carlo simulation to cash budgeting for BCC For BCC, the minimum cash balance requirement is VND 157,823,901,270 It means that the company needs to maintain at least this amount in order to cover all the costs that are likely to be incurred as well as not to be put in the passive situation in the case of emergencies 3.2.2.2 STEP 2: Calculating mean and standard deviation of ln (net sales) for each quarter After importing the data of net sales for each quarter, by using the formulas in excel, we get the means and standard deviations shown in the following table: Table 6: Mean and SD calculation Period Mean Ln(net sales) SD Ln(net sales) Unit: VND Q2 Q1 Q3 Q4 27.0218 27.3250 27.2377 27.3844 0.8091 0.3652 0.3745 0.3911 3.2.2.3 STEP 3: Calculating ARP and APP By using the formulas mentioned above, with the available historical data, we get the results of average ARP and average APP: Table 7: Average ARP and APP Period Unit: days Q2 Q3 Q1 Q4 Average ARP 37.88 39.30 44.11 33.57 Average APP 70.01 64.31 70.24 57.48 3.2.2.4 STEP 4: Calculating income and expenses over net sales • Financial income and other income: Using the historical data of 38 quarters, we calculate the proportion of financial income and other income over the net sales Then, we take the minimum and maximum value of proportion as follows: Unit: VND Table 8: Minimum and maximum value of income Financial income Min (% net sales) 0.01530% Max (% net sales) 12.55893% Other income 0.0360% 3.2523% Criteria Min*100,000 Max*100,000 Rounded Rounded max 15.30 12,558.93 15 12,559 36 3,252.30 36 3252 37 Applying Monte Carlo simulation to cash budgeting for BCC The formula used for taking random number is RANDBETWEEN (bottom, top) However, this formula returns the integer number between the specified numbers So, in this case, we have to multiply the proportion value by 100,000 and rounding them as shown in the table above Then, the value we get will be divided by 100,000 to get the actual results • Expenses over net sales We also calculate the proportion of all expenses over the net sales for 38 quarters and then follow the same steps that we have done for the income above Details are as follows: Unit: VND Table 9: Minimum and maximum value of expenses Criteria Cost of goods sold Min (% net sales) Max (% net sales) Min*100,000 Max*100,000 Rounded Rounded max 69.84830% 85.89349% 69,848.30 85,893.49 69,848 85,893 Selling expenses 0.17141% 11.41009% 171.41 11,410.09 171 11,410 Administrative expenses 2.87682% 6.76511% 2,876.82 6,765.11 2,877 6,765 Other expenses 0.08171% 3.05610% 81.71 3,056.10 82 3,056 -0.83954% 4.16419% -839.54 4,164.19 -840 4,164 0.01326% 17.88169% 13.26 17,881.69 13 17,882 Taxes Financial expenses 3.2.2.5 STEP 5: Calculating Actual Net sales and actual COGS • Actual Net sales: Given the uncertainty in sales, the actual net sales will be the random value which is generated from the predefined mean and standard deviation of each quarter by using the function NORMINV(RAND(), mean, standard deviation)) in excel However, they are not the final results To get the actual net sales, we need to one more step which is converting numbers into real net sales by using EXP(number) function in excel Figure 8: Generating net sales Figure 9: Calculation of actual net sales 38 Applying Monte Carlo simulation to cash budgeting for BCC • Actual COGS: The actual COGS of a particular forecasted quarter is calculated by taking the random value between the min-max range of COGS over net sales, then multiplied by the actual net sales of that quarter which is already calculated in the previous step Figure 10: Calculation of actual COGS 3.2.2.6 STEP 6: Simulation model • Estimating cash receipts The components of cash receipts are all the income (cash inflow) that the company may generate from all activities in each quarter, which are: Sales collection: By the formulas mentioned in the “Assumptions” part, knowing average ARP and actual net sales give us the value of sales collection for the next four quarters Figure 11: Calculation of sales collection Income from financial activities and other income: 39 Applying Monte Carlo simulation to cash budgeting for BCC • Estimating cash disbursement COGS payment Figure 12: Calculation of COGS payment Financial expenses, selling expenses, administrative expenses and taxes The calculation method for financial expenses, selling expenses and administrative expenses are the same For the case of corporate income tax expenses, we still take the random value between and max proprtion of net sales, however, the remaining factor is not the current net sales but the net sales of previous quarter Details are already mentioned in the “Assumptions” part Figure 13: Calculation of Financial expenses Figure 14: Calculation of cash disbursements 40 Applying Monte Carlo simulation to cash budgeting for BCC • Cash balance before loan and ending cash balance of BCC The cash balance before loan (CBBL) is equal to Initial cash balance plus Total cash receipts minus Total cash disbursements The CBBL helps the company to decide which amount of loan that they have to take in order to meet the minimum cash balance requirement which is already estimated The loan will be the value of max (0, minimum cash balance requirement – CBBL) Ending cash balance is equal to CBBL plus loan amount As we can see in the table below, for the next quarters, BCC will be always in the situation of shortage of cash (CBBL is less than 0), and thus, they have to borrow money for the whole periods to meet their cash needs By making some loans, they can cover all the payments and also bring the ending cash balance of each quarter to the minimum required level Table 10: Example of Ending cash balance of BCC for next quarters Period Cash balance before loan (CBBL) Loan Ending cash balance Unit: VND Q2/2016 Q3/2016 Q4/2016 Q1/2017 -364,371,021,221 -390,001,453,881 -395,923,930,943 -524,205,563,120 522,194,922,491 547,825,355,151 553,747,832,213 682,029,464,390 157,823,901,270 157,823,901,270 157,823,901,270 157,823,901,270 Table 11: Example of cash budget of BCC for next quarters Period Actual Net sales Q2/2016 Q3/2016 Unit: VND Q4/2016 Q1/2017 1,247,796,111,084 987,359,455,452 1,453,361,114,616 775,520,303,195 939,490,647,957 55,523,810,557 821,700,286,016 157,823,901,270 1,160,654,186,132 157,823,901,270 645,543,100,380 157,823,901,270 1,155,936,671,410 1,048,314,584,181 1,395,173,258,642 991,216,120,224 Income from financial activities 87,794,934,376 47,413,001,051 29,401,495,349 63,073,066,259 Other income 20,613,591,755 10,949,816,361 42,743,350,381 13,749,974,976 1,264,345,197,541 1,106,677,401,593 1,467,318,104,372 1,068,039,161,459 951,924,137,123 851,727,124,687 1,060,674,469,142 884,653,435,505 Actual COGS Initial cash Cash reciepts Sales collection Total cash reciepts Cash disbursements COGS payment 41 Applying Monte Carlo simulation to cash budgeting for BCC Table 11: Example of cash budget of BCC for next quarters Period Financial expenses Q2/2016 Q3/2016 Unit: VND Q4/2016 Q1/2017 159,780,292,024 28,830,896,099 63,642,683,209 137,150,765,620 159,780,292,024 24,400,233,050 59,496,255,534 134,366,079,643 4,430,663,049 4,146,427,675 2,784,685,977 92,848,508,626 54,502,241,941 25,550,088,395 75,566,698,343 36,722,639,549 31,901,584,006 72,595,387,675 24,351,337,520 Other expenses 1,983,995,817 14,425,321,644 23,864,189,502 2,946,977,152 Taxes Current portion of long-term liabilities Principal repayment (on additional loan) Total cash disbursements 3,842,465,792 -5,091,008,133 13,645,307,674 55,823,600,412 231,419,000,000 110,078,714,623 110,078,714,623 110,078,714,623 316,475,932,103 296,173,405,377 198,906,141,225 1,478,521,038,931 1,402,850,806,970 1,666,224,245,597 1,489,477,670,400 -158,652,030,833 -138,349,504,107 -41,082,239,955 -263,614,607,671 Loan 316,475,932,103 296,173,405,377 198,906,141,225 421,438,508,941 Ending cash balance 157,823,901,270 157,823,901,270 157,823,901,270 157,823,901,270 Financial expenses (excluding interest expenses on additional loan amount) Interest expenses (on additional loan) Selling expenses Administrative expensses Cash balance before loan (CBBL) By using formulas built in excel, we already estimate the change in cash and the loan amount for BCC in the next four quarters However, particular result can not give us the comprehensive and reasonable analysis for the company So, we will one more step that is copying the CBBL and loan for 10,000 times to generate the possible outcomes We can use a very useful tool in excel to this called macros The syntax of macros is shown in Appendix A After running Macro, we get the output as follows: Figure 15: Macro output of Cash balance before loan Figure 16: Macro output of Loan 42 Applying Monte Carlo simulation to cash budgeting for BCC 3.2.4 Result and analysis The results from simulation on cash balance before loan show that the average loan of BCC for the next four quarters are always negative which are more than -262 billiion VND in quarter 2/2016, more than -328 billion VND in Q3, approximately -355 billion VND in Q4 and more than -374 billion VND in quarter of 2017 It means that the company may be always in the situation of shortage of cash They may not able to pay all of their obligations when they due The minimum cash balance before loan is about -1,280 billion VND in Q1/2017, the lowest one compared with the other quarters of 2016 (from quarter - quarter 4) The maximum value of cash balance also lies in Q1/2017 Since the outputs are generated randomly, so the maximum value of CBBL doesn’t tell much We can see that on average, the lowest number of CBBL is in Q1/2017 We will discuss about the reasons for it after taking a look at the simulation for loan of each quarter It is obvious that sometimes the company is not in the shortage of cash because the minimum loan for each quarter is equal The maximum loan amount is about 1,100 billion VND in Q1/2007 which is the highest number out of forecasted quarters The maximum loan amount is lowest in Q2/2016 This is reasonable and consistent with the number of CBBL mentioned in the previous paragraph The probability of loan higher than is extremely high for BCC which is more than 99% So, the company has to take a short-term loan in Q2, Q3 and Q4/2016 In quarter 1/2017, the probability is lower but still very high, it is 96.64% The probability of loan > in Q1 is lowest out of quarter because the sales in this quarter are always 43 Applying Monte Carlo simulation to cash budgeting for BCC lowest in a fiscal year (based on historical data and seasonal nature of BCC) However, the probability is only a little bit lower than the remaining quarters Most of time in their business life, they have to rely on debt and in case of BCC, it is bank loan Using leverage may make the company profitable but they will also face the potential liquidity risk As we already mentioned about the average CBBL is lowest in Q1 and the highest loan amount is also in quarter 1, we have some explanation for this Sales collection: Since the sales are always highest in quarter 4, the average ARP is lower than average APP so after selling products, BCC can get cash faster from their customers but pay money slower to their suppliers; so, for the selling activities, the cash inflows may be higher than the cash outflows in quarter A portion of cash from Q4/2016 will be received in Q1/2017, however, the average ARP for Q4 is short (about 33,5 days), so the portion of cash received in Q1 will be not much COGS payment: In another hand, when the sales are highest in Q4/2016, the COGS payment which is the calculation related to the proportion of COGS over sales and average APP will be high It means that when sales increase, COGS payments will increase It always goes in line with sales Moreover, because the average APP of Q4/2016 is more than 57 days, so a relatively big amount of COGS payments of Q4/2016 will be paid in Q1/2017 Tax expenses: Since the cash outflow for the tax expenses follow the rule that the tax expenses of current quarter will be paid in the next quarter It means that the tax payable in Q4/2016 will be actually paid in Q1/2017 Meanwhile, the sales in Q4 are highest and logically, the income before tax will be also highest So, the maximum amount of tax payable will be in quarter but in fact, it is paid in quarter This is also one of the reasons why the cash disbursements of Q1/2017 is increasing while the sales is lowest Principal repayment: Another important reason for the largest amount of shortage of cash in Q1/2017 is related the principal and interest payment for the short-term loans of Q4/2016 Since the sales of Q4 are highest, then the additional loan for Q4 will also be high All the loans (with the average of 500 billion VND) will be paid in the next quarter, so the cash outflow will be in Q1/2017 and this is really a big number This is the reason why the cash 44 Applying Monte Carlo simulation to cash budgeting for BCC disbursements increase much in Q1/2017 Besides, at the time we collect historical data, the financial statements of Q2/2016 has not been disclosed However, by the time we finish the thesis, we are able get BCC’s financial statements of quarter 2/2016 and thus, we have an opportunity to make some comparisons between the forecasted numbers and real number of the company as follows: Table 12: Comparison for actual loan and forecasted loan of Q2/2016 Criteria Forecasted loan amount Actual loan amount Minimum loan 668,794,792,300 Maximum loan 605,662,721,729 Average loan 416,877,742,541 Unit: VND Difference -63,132,070,571 As in our forecast, the short-term loan for quarter 2/2016 will be in the range between VND and VND 605,662,721,729 The number picked up from BCC’s financial statement is VND 668,794,792,300 So, the difference of these numbers is not much, about more than VND 63 billion Moreover, another good sign for us is that the probability of taking loan is more than 99% reflects exactly the real situation of the company With all the reasons stated above, we can conclude that our results are reasonable and reliable 3.2.5 Recommendations for Vietnamese firms and Bim Son Cement Joint stock Company Today, in Vietnam, Monte Carlo simulation has not been used widely in the enterprises and many SMEs not know about it Especially, Monte Carlo simulation is mostly known as a tool to analyze risks and making decision in many fields and projects but we have not known any cases in Vietnam that use this model for cash budgeting However, after applying this model to cash budgeting for BCC, we find it very interesting Besides, in fact, BCC has not used any software or model to cash budgeting They only track the cash inflows and outflows on the daily basis and prepare cash for very short-term purpose, on daily or weekly basis By doing this, they may be not only put in the passive situation in the case of emergencies but also not see the whole financial picture of their company for a certain period Although they have not faced any big problems in the past by doing like this but it still contains hidden risks 45 Applying Monte Carlo simulation to cash budgeting for BCC Having a plan is always better than no plan Moreover, if the company applies Monte Carlo simulation using pure MS excel to the forecast, it will not be costly and time consuming So, that’s why we think that Monte Carlo simulation is a good choice for BCC However, nothing is perfect So, when using this model, users need to be aware of the limitations of the Monte Carlo simulation to have the overall view of the model that they intend to apply We all know the proverb “rubbish in, rubbish out” which means that if the input data are not complete, accurate and timely, then the resulting output is unreliable and of no useful value So, this model requires the users to have enough knowledge and experiences in the fields they work in order to have good input assumptions In our opinion, BCC should combine both traditional simple method with this simulation method to make the comparisons, then making several adjustments based on their experiences to get the results which are best fit to them We already asked the company to try to use it to see whether it works for them and they agreed with that Although this model still has some limitations, we believe that its benefits will outweigh the drawbacks Therefore, we also come up with the idea that we will recommend Monte Carlo simulation not to BCC only but also to other enterprises in Vietnam with the belief that they will not be disappointed when applying it 46 Applying Monte Carlo simulation to cash budgeting for BCC CONCLUSION In conclusion, it can be said that our forecast for BCC for the next four quarters has partially reflected the real situation of the company So, once again, we believe that Monte Carlo simulation is a very useful tool and recommend Bim Son Cement Joint Stock Company as well as other enterprises to apply it, not only in cash budgeting in particular but also in other fields in general By using this method, the enterprises may enhance their effectiveness in the cash management which all of the managers are aware of the importance but some may not know how to it efficiently In the extent of this thesis and in the context of lack of information, the output data can not reflect fully the real situation of the company However, we just want the company or the ones who concern about it get the ideas of what Monte Carlo simulation is, how it works and how useful it is When it is applied in a real business, with the full information, experiences and the understandings about such firm, it is certainly that the CEO and CFO will get the better output which is helpful for them in cash management and making decisions 47 Applying Monte Carlo simulation to cash budgeting for BCC REFERENCES Paper sources Intermediate Financial Management, 9th edition, Eugene F.Brigham and Phillip R Daves (2007) Bao Haijun, Chong Alain Yee-Loong, Wang Hongdi, Wang Liyuan, Huang Yikun, 2012, Quantitative decision making in land banking: A Monte Carlo simulation, International Journal of Strategic Property Management Monte Carlo Simulatio and Risk Assessment in Capital Budgeting, Caitlin Gallagher (2012) Gerald E Evans, Belva Jones, 2009, The Application of Monte Carlo Simulation in Finance, Economics and Operations Management, 2009 World Congress on Computer Science and Information Engineering Michael Kraten, 2009, Revisiting 'Monte Carlo' Simulation Modeling, The CPA Journal Wayne L Winston, 2011, Microsoft Excel 010: Data Analysis and Business Modeling, Microsoft Press Webb, Eugene J., Donald T Campbell, Richard D Schwartz and Lee Sechrest (1966) Unobtrusive Measures: Nonreactive Research in the Social Science Chicago: Rand McNally Internet sources http://cafef.vn http://ximangbimson.com.vn (website of BCC) 48 Applying Monte Carlo simulation to cash budgeting for BCC http://hnx.vn/web/guest/home (website of Hanoi Stock Exchange) Andreas Grau, 2012, How can I implement Monte-Carlo Simulations in MS Excel? http://computeraidedfinance.wordpress.com Create a Monte Carlo Simulation using excel http://www.investopedia.com/articles/investing/093015/create-monte-carlosimulation-using-excel.asp http://www.minitab.com https://www.riskamp.com https://www.lancaster.ac.uk APPENDIX A Syntax of Macros where: - x = row number of the first cell in the area that we want to paste data - Range (“AT122:AW122”): the range of sample data (CBBL) 49 Applying Monte Carlo simulation to cash budgeting for BCC - Cells (x, 41): the position of the first cell (row, column) in the area that we want to paste data 50 [...]... accounting for 49,2% in 2015; the second one is in Quang Tri province, accounting for 48,5% in 2015, and 36.6% in Ha Noi 28 Applying Monte Carlo simulation to cash budgeting for BCC ii Applying Monte Carlo simulation to cash budgeting for Bim Son Cement Joint Stock Company 3.2.1 Cash budgeting steps using Monte Carlo simulation Figure 5: Cash budgeting steps using Monte Carlo simulation 29 Applying Monte Carlo. .. cash budgeting for Bim Son Cement Joint Stock Company Despite our effort, as this is our first touch on this subject, shortcomings are about to be expected Hopefully, it can still provide some practical knowledge on and inspiring initial to cash budgeting for Bim Son Cement Joint Stock Company by applying Monte Carlo simulation CHAPTER II 11 Applying Monte Carlo simulation to cash budgeting for BCC THEORETICAL... need to use the logarithm of net sales to make the data follow normal distribution Details for this will be in the next chapter when we go into specific data of BCC CHAPTER III APPYLING MONTE CARLO SIMULATION TO CASH BUDGETING FOR BIM SON CEMENT JOINT STOCK COMPANY 3.1 Introduction about Bim Son Cement Joint Stock Company 1 Brief introduction • Company profile 22 Applying Monte Carlo simulation to cash. .. Applying Monte Carlo simulation to cash budgeting for BCC 2.1.3.3 Cash budgeting techniques Non -simulation budgeting technique: 17 Applying Monte Carlo simulation to cash budgeting for BCC The net difference between estimated cash inflow and outflow for corresponding months/quarters is the net cash flow The value of the net cash flow for each month/quarter is then compared to the desired cash balance... simulation for better forecasting the potential cash flows in the future, we have chosen the topic Applying Monte Carlo simulation to cash budgeting for Bim Son Cement Joint Stock Company to study and assess in this thesis in order to provide some possible recommendations and solutions to improve the cash budgeting in this manufacturing firm With the historical data from 4th quarter of 2006 to 1st quarter... Therefore, MCS can be implemented Monte Carlo simulation provides flexibility and can handle multiple sources of uncertainty In the concept of this thesis, we focus on cash budgeting for a manufacturing firm, with the uncertainty called “net sales” c Steps in the Monte Carlo simulation 20 Applying Monte Carlo simulation to cash budgeting for BCC As per Paul Sheehy and Eston Martz in “Doing Monte Carlo Simulation ,... simulation 29 Applying Monte Carlo simulation to cash budgeting for BCC 3.2.2 Assumptions In order to apply Monte Carlo simulation to cash budgeting for Bim Son Cement Company, we not only collected historical data which are disclosed on the website of Hanoi Stock Exchange but also from the company through several quick interviews However, it is impossible to get all the information we need So, in this... outgoing cash that has been 15 Applying Monte Carlo simulation to cash budgeting for BCC recorded on credit Statement of cash flow is used to predict the future cash flow, which helps with matters in budgeting 2.1.3.2 Constructing a cash budgeting Building a cash budget is a short-term financial planning which concentrates on a company s cash needs and involves constructing the schedules of sales, inventory... 3.2.1.3 Initial cash balance The initial cash balance of current period is the ending cash balance of the previous period on the Balance sheet of the company For example, the initial cash balance of quarter 2/2016 is equal to the ending cash balance of quarter 1/2016 31 Applying Monte Carlo simulation to cash budgeting for BCC 3.2.1.4 Cash receipts • Sales collection: Formulas used for calculation:... repayment) = max (0; minimum cash balance requirement – cash balance before loan) in which: o Minimum cash balance requirement: already calculated o Cash balance before loan (CBBL) = initial cash balance + Total cash receipts – Total cash disbursements Interest payment: Interest payment = principal repayment * interest on loan 35 Applying Monte Carlo simulation to cash budgeting for BCC The average interest