The reason to choose the topic
In the challenging landscape of the global and Vietnamese market economies, businesses must implement effective strategies for survival and growth To maximize company value, it is essential for enterprises to master the management of operating cash flow and working capital Efficient management of current assets serves as a crucial factor in helping businesses reach their goals and enhance overall performance.
Current assets play a crucial role in a company's capital structure, making effective management essential By optimizing the use of current assets, businesses can gain a comprehensive understanding of their financial resources, enabling them to implement strategies that reduce expenses and enhance profitability.
During my internship at Medical Publishing House Limited Company, I became increasingly aware of the significance of effective management practices This prompted me to conduct extensive research on current management strategies Drawing from my practical experience and findings, I have chosen to focus my graduation thesis on "Solutions to Improve the Efficiency of Current Assets Management in Medical Publishing House Limited Company."
Research overview
Numerous studies have explored ways to enhance the efficiency of current asset management In Vietnam, Master Nguyen Thi Thu Yen conducted research in 2012 focusing on improving asset management efficiency at Bibica Joint-Stock Company, a prominent player in the food industry.
With the tobacco production and business company, Tran Hoang Minh
In 2015, it was highlighted that enhancing the efficiency of asset management is crucial for Thang Long Tobacco Company, particularly as the company faces challenges in mobilizing working capital.
Phan Thi Mai Huong (2015) highlights the significance of enhancing current asset management to improve business outcomes at Son Tay Water Joint-Stock Company, particularly during a challenging period of divestment and the loss of government capital support.
In conclusion, the three studies collectively examine the efficiency of current asset management by providing an overview of its effectiveness, evaluating the practical implementation within the company, and proposing solutions to enhance asset management efficiency.
The target of the research
- Study the theoretical and practical basis of current assets and the efficiency of current assets management.
- Analysis and assessment the efficiency of current assets management in Medical
The object and the research scope
The object of the research: solutions to improve the efficiency of current assets management in Medical Publishing House Limited Company
The research scope: solutions to improve the efficiency of current assets management in Medical Publishing House Limited Company during the period 2018 -2020.
The research methods
Research methods in the thesis include comparative methods, horizontal analysis methods, vertical analysis, proportional analysis
Based on the data is provided and the status of the company operations,calculation, assessments and conclusions have been done throughout the thesis.
The structure of the thesis
The content of thesis is divided into 3 main parts:
Chapter 1: Theoretical basis of current assets and the efficiency of current assets management
Chapter 2: The current assets management in Medical Publishing House Limited Company
Chapter 3: Solutions to improve the efficiency of current assets management inMedical Publishing House Limited Company
Theoretical basis of current assets and the efficiency of current
Overview of current assets
An asset is a valuable resource owned or controlled by an individual, corporation, or country, with the expectation of future benefits Recorded on a company's balance sheet, assets are essential for enhancing a company's value and supporting its operations They can generate cash flow, reduce expenses, or increase sales, encompassing a wide range of items from manufacturing equipment to patents.
An asset is an economic resource that provides a firm with unique advantages not available to others It encompasses legally enforceable rights or access, allowing a firm to utilize these resources at its discretion, while ownership may impose limitations on their use.
Assets can be classified into several types: current assets, fixed assets, financial investments and intangible assets
Current assets are the resources of a company that are anticipated to be utilized or converted into cash within one year These assets are listed on the balance sheet, which is a crucial financial statement prepared annually.
Current assets, including cash and cash equivalents, accounts receivable, inventories, marketable securities, and other current assets, are highly liquid and can be readily converted into cash Effective management and utilization of these current assets play a crucial role in influencing a business's financial health and operational efficiency.
Current assets are strategically allocated across all phases of the production and business process to ensure stability, minimize capital losses, and maintain solvency and return on assets Consequently, a company's current assets exhibit specific characteristics that support these objectives.
Current assets, including cash and inventory, are typically utilized within a business cycle or annually, contrasting with fixed assets such as machinery, equipment, and workshops, which are employed over a longer duration.
Current assets include various types such as cash and cash equivalents, as well as inventories, each serving distinct purposes Cash and cash equivalents offer high liquidity, ensuring the business meets its solvency requirements, while inventories play a crucial role in the production process.
Current assets play a crucial role in the cyclic production process, where expenses related to their transformation into finished goods are accounted for before the products enter the market.
To efficiently manage current assets, it is essential to understand their components and structures Long-term assets require different classifications based on specific management needs Current assets are primarily divided into two categories: those involved in the business process and those that can be easily converted into cash.
Current assets in the business process:
Current assets take part in core businesses: raw materials, work in progress, tools or packaging materials,
Current assets take part in sub-businesses: working in mobile repairs or providing service.
Current assets take part in the management of a firm: administrative management, business management with materials for vehicles, offices, and stationery tools,
Current assets with the ability of conversion into cash:
Cash and cash equivalents refer to liquid assets available during a sale process, including cash, bank deposits, and cash in transit Cash equivalents are short-term investments, typically maturing in less than three months, that can be easily converted into cash These investments are closely linked to cash, ensuring quick accessibility and liquidity in financial transactions.
Short-term investments refer to the total value of financial assets that are expected to be converted into cash within a year This includes short-term securities, loans, and other similar investments, with the total calculated after deducting any provisions for potential devaluation.
Current accounts receivable represent the amounts owed by customers, reflecting sales made on credit and other receivables during the reporting period If a business extends longer credit terms, some of these receivables may not qualify as current assets Additionally, any uncollectible accounts will be recorded as doubtful debts, which are excluded from current asset calculations.
Inventory represents the current value of goods held during production and business operations, encompassing raw materials, work-in-progress, and finished products Each inventory category necessitates distinct and careful evaluation Various accounting methods can be employed to manipulate inventory values, which may lead to inflated figures.
Other current assets include short-term prepaid expenses, taxes receivable, and various other assets reported during the accounting period This category represents valuable resources owned by a company that can be utilized to generate income and converted into cash within a single business cycle While these assets are liquid, they are often considered uncommon or of minor significance.
Current assets are crucial to the overall business process, as they enable companies to effectively carry out their operations To maintain these activities, firms must invest in purchasing goods and raw materials, which serves as a fundamental requirement for ongoing business success.
Moreover, current assets are also the condition so as to maintain a continuous business process These numbers of assets must be synchronized to not affect production and business activities.
The efficiency of current assets management
Economic efficiency assesses how effectively a company manages its resources to optimize business outcomes while maximizing owner benefits at the lowest possible cost.
Efficient management of current assets is a crucial economic factor that highlights an enterprise's ability to maintain solvency while minimizing expenses.
Enhancing the efficiency of production and business activities is crucial for firms aiming to thrive in a competitive market economy While all enterprises share the common objective of maximizing profits and minimizing costs, their ultimate aim is to increase asset value To achieve this, businesses must focus on improving management practices and developing strategies that align with their financial circumstances and growth potential.
1.2.2 Indicators to evaluate the efficiency of current assets management Liquidity ratios
Liquidity ratios assess the ability of the enterprise to solve short-term debts. These coefficients are interested by many various entities such as banks, investors, and suppliers.
First up, to improve the efficiency of using current assets, an enterprise entity must evaluate the efficiency of using current assets during the past periods From
The current ratio measures a company's capacity to meet short-term obligations using its short-term assets A higher amount of current assets suggests a faster conversion into cash, enabling the firm to efficiently settle its debt maturities.
A decrease in the solvency ratio compared to the previous year indicates a decline in the enterprise's financial health, potentially signaling upcoming financial difficulties Conversely, a high solvency ratio suggests that the firm is well-prepared to meet its debt obligations However, an excessively high ratio may negatively impact operational efficiency, as it implies that the company is over-investing in current assets.
The conversion of inventories is often considered the worst compared to other kinds of current assets As a consequence, to evaluate the solvency precisely, the quick ratio is more preferable.
„ Current assets + Short-term investments + Account receivables
The quick ratio assesses a company's ability to meet its short-term liabilities by converting current assets, excluding inventories, into cash This financial metric indicates that for every unit of short-term debt, there is a corresponding unit of current assets available, ensuring liquidity and financial stability.
In certain cases, a business may exhibit strong short-term debt solvency and quick solvency, yet still struggle to settle short-term debts due to uncollected accounts receivable or unsold inventory To evaluate a company's immediate payment capability, analysts can utilize the cash ratio at the time of assessment.
„ 1 Cash and Cash Equivalent + Short-term investments
Cash ratio means that a short-term debt is going to be secured by how many price units cash and cash equivalents.
Analysts and administrators often consider the above ratios through reasonable limits In general, the current ratio should be at the level of 2, the quick ratio should be
The cash ratio should ideally be maintained at 0.5, although acceptable levels can vary based on the specific characteristics of a business's activities, industry, structure, and the quality of its current assets.
To analyze operating ratios of an enterprise entity, we can calculate the 3 following ratios:
Accounts Receivable Turnover ratio =Average Accounts Receivable Net Sales
This index indicates the investment required in accounts receivable to sustain a company's revenue, enabling analysts to evaluate the effectiveness of the company's commercial credit policy.
In business, extending payment terms for buyers can stimulate customer purchases and increase accounts receivable turnover cycles However, if this practice persists over time and results in low-quality turnover, it is crucial for companies to reassess their commercial credit policies and receivables management strategies for necessary adjustments.
> Inventory Turnover Ratio: τ , rτ , „ , Cost of goods sold
Inventory turnover ratio shows the average number of times that inventory has been circulated during the period and how effective the firm's business administration's ability is.
The inventory turnover ratio is a key metric used to evaluate a company's business administration effectiveness over time A higher ratio indicates faster inventory turnover, which can enhance client trust in the company's performance and liquidity Conversely, a low ratio suggests stagnant business performance or potential shifts in corporate strategy, possibly in preparation for increased production To accurately analyze this ratio, it is crucial to keep updated on the firm's policies and market demands.
A lower accounts receivable management ratio indicates better efficiency, while a high ratio suggests that a business's capital is tied up in unpaid invoices, creating pressure to meet obligations to suppliers A significantly reduced average collection period can signal a positive strategy, especially if the firm is implementing a more lenient credit policy to foster business growth and enhance market presence.
To effectively assess an enterprise's accounts receivable management, it is essential to analyze not only the ratio from the previous period but also to identify the factors that contribute to changes in net sales and average accounts receivable.
1.2.3 Factors impact on the efficiency of current assets management
> The management of the Government:
The Government is the most powerful entity in every country Policies executed by the Government have a great impact on all fields, for example: economy, culture, society
Business enterprises play a crucial role in the economy and are subject to government regulation The government implements favorable policies for specific industries, which support the growth of these enterprises by enhancing production activities, increasing product availability, and improving overall business efficiency.
The government is committed to fostering a supportive business environment that enables companies to thrive However, a lack of appropriate guidance during different periods can lead to significant challenges for businesses in the industry.
The current assets management in Medical Publishing House
Overall information about Medical Publishing House Limited Company
Name: Medical Publshing House one member Company Limited
Other name: MPH CO., LTD
Head office: No.352 Doi Can Street, Cong Vi Ward, Ba Dinh District, Hanoi City, Vietnam
Website: http://www.xuatbanyhoc.vn
2.1.1 History of the foundation and development and organization structure of Medical Publishing House Limited Company
History of the foundation and development
Medical Publishing House (MPH) was established under Decision No 906-BYT /
HL on 31/10/1959 MPH is under the management of the Ministry of Health.
On June 30, 2010, the Ministry of Health transformed the Medical Publishing House into a one-member state-owned limited company The Medical Publishing House operates a branch located at 139A Trieu Quang Phuc, Ward 11, District 5, Ho Chi Minh City.
Medical Publishing House has played a significant role in disseminating medical knowledge since its inception, notably publishing books on trauma management and wound treatment during the Vietnam War From 1976 to 1985, it operated under a subsidy system, producing valuable resources for medical staff training, disease prevention, and public health promotion In 1997, the company transitioned to a new operational phase under the Law on State Enterprises, guided by the Ministry of Health and the dedicated efforts of its staff.
For over 50 years, the Medical Publishing House has significantly contributed to healthcare by publishing numerous valuable books aimed at enhancing disease treatment and promoting health protection Recognized for its dedication to public health, the Publishing House has received prestigious awards from the Government, including the Labor Medal and several other esteemed honors.
We focus on compiling, publishing, printing, and distributing publications related to science and technology, economic management, law, and socio-political issues in the health sector Our efforts aim to foster a culture of reading among the public and to promote a reading culture that aligns with the Law of Publication.
- Organize effective production and business to preserve and develop the capital invested by the Owner on the basis of complying with all law provisions.
- Carrying out public services on publishing cultural reading publications serving the prevention, protection and improvement of the people's health.
- The company is under the management of the Government, the Ministry of Health.
- Implementing social-cultural projects in accordance with the Government's assignments.
Organization structure of MPH company
The director oversees all business operations within the company, guiding publishing tasks and printing strategies while directly assigning responsibilities to affiliated units Additionally, the director is responsible for making decisions regarding the company's financial plans.
An editor oversees the editorial division, working closely with the Director to ensure compliance with legal standards in politics, thought, science, and art within publications Their responsibilities include compiling and editing content, signing economic contracts with authors, directing the overall content strategy, and promoting advertising for current and future publications.
The annual personnel planning process involves creating strategies for training, promotion, and recruitment, while also ensuring compliance with legal guidelines This includes managing external administrative communications, overseeing company assets and office management, and establishing a clear organizational structure with defined departmental functions and responsibilities Additionally, it focuses on developing a comprehensive human resource development strategy and implementing effective processes and regulations to streamline personnel activities within the company.
The Accounting Department is tasked with monitoring and updating the status of capital assets and business performance, ensuring compliance with state regulations It is responsible for managing the company's financial framework, maintaining accurate financial records, and preparing financial statements The department reports directly to the director and is legally accountable for its assigned responsibilities.
We develop and implement procedures for signing economic contracts with authors, as well as contracts for purchasing raw materials and selling publications Additionally, we focus on advertising strategies to promote both current and upcoming publications.
The company experiences a high order value per transaction, as customers typically place large orders for printed books and finished goods based on book pack contracts Book consumption peaks during the back-to-school months of August, September, and October; however, the company maintains a steady publication schedule throughout the year To prepare for each business period, the company establishes a specific consumption plan to guide raw material purchases Additionally, to accommodate the substantial transaction values, the company provides discounts and offers flexible payment options, including slow and installment payments, to its customers.
The company's products, primarily paper and paperboard, are susceptible to dampness, mold, and crumpling Additionally, the storage space at the company's headquarters is limited, located on the second floor, which complicates operations Despite organizing finished books and raw materials into boxes by type, the receipt and expense processes are time-consuming due to the storekeeper's need to search for items, leading to delays in fulfilling customer orders and production.
The company's finished goods, including books and medical and pharmaceutical journals, particularly foreign publications, must adhere to strict internal standards to maintain their academic and professional integrity Any minor flaws in content can significantly reduce a book's value As knowledge continually evolves, original works are regularly updated and reprinted to enhance their completeness Consequently, when newer editions are released, older versions may lose value or become unsold.
The company specializes in selling books and publications related to medicine and pharmacy, while also acquiring titles from other publishers Previously, it held exclusive rights to print and publish in this field However, changes by the Ministry of Health and the Ministry of Education in 2012 and 2013 allowed other publishers to enter the market, resulting in some titles being unavailable or outside the company's copyright Consequently, the company now purchases books from other publishers to meet customer demand effectively.
Revenue from sales of merchandises and services rendered
Net revenue from sales of merchandises and services rendered
Gross profit from sales of merchandises and services rendered
2.1.3 The business result of the firm
Table 2.1: Income statement of Medical Publishing House Limited Company
Net profit from operating activity
92.629.285 -100,13 Total accounting profit before tax
Current corporate income tax expense
Deferred corporate income tax expense
Profit after corporate income tax
(Source: Income Statement of MPH, 2018-2020)
Net revenue from sales of merchandises and services rendered
Chart 2.1: Net revenue of MPH
(Source: Income Statement of MPH, 2018-2020)
As can be seen from the chart, MPH's net revenue tends to decline from 2018 to
2020 In 2018, net revenue was 19.1 billion VND, it diminishes by 13.24% to 16.6 billion VND in 2019 and only 14.3 million in 2020.
From the beginning of the year 2020 until now, due to the impact of the COVID-
In 2020, MPH faced significant challenges in achieving its growth targets due to the impact of the Covid-19 pandemic Initially, the company aimed for a total revenue of 22 billion VND, representing a 15% increase from 2019, and a profit before tax of 850 million VND, up by 35.5% However, the emergence of the pandemic prompted MPH to revise its revenue and profit targets downward, citing the uncertainties in the Vietnamese market economy that adversely affected production activities.
Table 2.2: Revenue deduction of MPH
(Source: Income Statement of MPH, 2018-2020)
In response to the COVID-19 pandemic, MPH has actively transformed its production models and enhanced its online presence by expanding the market for selling books and e-books through its website in 2020 Although the online book market in Vietnam has experienced significant growth, it remains insufficient to offset the decline in the traditional book market, which still holds over 50% of the market share.
The current assets management in Medical Publishing House Limited Company
In 2020, profit after tax for MPH dropped to 332.2 million VND, reflecting a significant decline of 48.62% compared to 2019, primarily due to the stagnant economic conditions caused by the pandemic Despite these challenges, MPH continues to expand its production scale by utilizing bank loans and mobilizing funds to implement its strategic plans.
In general, throughout the above figures and data analysis, we can see that during
3 years 2018,2019 and 2020, both revenue and profit of MPH have a downward trend. Their business activities are hugely impacted from Vietnam economy, especially in
In 2020, the global and Vietnamese economies faced significant losses due to the pandemic, yet MPH demonstrated resilience by overcoming challenges and achieving profitability in a highly competitive market from 2018 to 2020.
2.2 The current assets management in Medical Publishing House Limited Company
2.2.1 Analyzing the structure of current assets
Table 2.6: The structure of current assets
(Source: Balance sheet of MPH, 2018-2020)
From 2018 to 2020, MPH Company experienced a steady increase in current assets, rising from 20.97 billion VND in 2018 to 22.09 billion VND in 2019, marking an increase of 1.12 billion VND In 2020, current assets further expanded to 24.38 billion VND, reflecting a growth of 2.28 billion VND compared to the previous year This upward trend in current assets is driven by the company's growing scale, necessitating higher cash and cash equivalents to meet payment obligations and maintain inventory for sales.
Chart 2.4: Structure of MPH’s current assets
(Source: Balance sheet of MPH, 2018-2020)
The chart reveals that cash and cash equivalents, along with inventories, constitute nearly 82% of current assets In 2020, inventories accounted for 45.73%, translating to 9.59 billion VND, while cash represented 36.18% Current receivables held the smallest share at 18.09% Over the years, the percentage of inventories has declined, whereas the proportion of cash and cash equivalents has steadily increased in 2019 and 2020 Although other current assets were introduced, their impact on the overall structure of current assets remained minimal.
There is a small change in the proportion of current assets in 2019 Cash and cash equivalents takes the first place with the rate of 52,76%, which is 16,58% bigger than in
In 2018, inventories accounted for 40.35%, reflecting a decline of 5.38% from the previous year Additionally, current receivables experienced a significant decrease of 6.78% Meanwhile, other current assets saw a modest increase of just 0.11% on the balance sheet.
In 2020, cash and cash equivalents experienced a slight increase, reaching 13,176,825,428, which represents a 54.04% growth Current receivables rose by a moderate 9.62%, reflecting a 2.84% expansion compared to 2019 However, inventory levels showed a decline, falling by 4.01% from the previous year.
In 2018, inventory levels constituted the largest portion of current assets, but by 2020, cash and cash equivalents emerged as the dominant asset category It is crucial for the firm to monitor this shift, ensuring that inventory levels are appropriately managed to prevent shortages that could disrupt production activities.
Cash and cash equivalents help companies with their working capital needs since these liquid assets are used to pay off current liabilities, which are short-term debts and bills.
Table 2.7: Cash and cash equivalents of MPH
(Source: Balance sheet of MPH, 2018-2020)
The company's cash and cash equivalents have shown a consistent upward trend over the years, increasing from 11.65 billion VND in 2019, up by 4.07 billion VND from 2018, to 13.17 billion VND in 2020, marking a rise of 1.52 billion VND from the previous year This growth in cash reserves indicates a significant demand for liquidity to manage daily financial operations, allowing the firm to comfortably cover short-term expenses However, this focus on maintaining high cash levels may hinder the company's ability to invest in more profitable long-term opportunities.
Effective receipts and expenses prediction enables a company to manage its cash reserves efficiently, allowing for the accurate tracking of surpluses or deficits over time By adhering to these forecasts, businesses can implement appropriate strategies to maintain financial stability, ensuring that cash levels remain consistent when performance aligns with expectations.
Currently, the company focuses solely on managing cash receipts and expenses without a defined annual strategy for income and expenditures or an established optimal reserve level As a result, any unexpected fluctuations in business activities could significantly impact the company's solvency.
Current accounts receivable represent the funds owed to a business by its debtors, serving as a crucial metric for estimating future revenue and enhancing cash flow planning Between 2018 and 2020, the primary components of MPH's current accounts receivable were customer receivables and other current receivables.
Table 2.8: Current Accounts Receivables of MPH
(Source: Balance sheet of MPH, 2018-2020)
In 2018, customer current receivables reached 3.74 billion VND, making up 98.80% of the total current receivables However, this figure saw a significant decline in 2019, dropping to just 1.40 billion VND, before experiencing a subsequent increase.
2020 (2,30 billion VND) Although the growth of current receivables of customers index tend to slowly accelerate, company still has to face the challenge in recovering working capital.
MPH primarily serves medical students, researchers, and individuals interested in science across the country To alleviate challenges posed by the stagnant economy and foster long-term business relationships, the company has implemented incentive payment policies, including installment and deferred payment options However, MPH's credit policy remains underdeveloped, lacking a systematic approach to identify eligible customers, and currently offers only discounted interest rates based on order value.
MPH should focus on optimizing accounts receivables management and refining its credit policy to reduce working capital while maintaining efficient sales velocity for its goods and services.
Other current receivables represent a minimal portion of the company's total current accounts receivables Analyzing the data over three years, the highest value was recorded in 2019 at 92.55 million VND, constituting 6.18% of the total In contrast, other receivables were valued at 45.38 million VND in 2018 and 39.10 million VND in 2020, accounting for 1.20% and 1.67% of the company's current accounts receivables structure, respectively.
Evaluating the efficiency of current assets management of Medical Publishing House Limited Company
In analyzing MPH's business results from 2018 to 2020, it is evident that the stagnant economy in 2020, largely due to the Covid-19 pandemic, significantly impacted production activities and led to increased costs for raw materials Despite these challenges, MPH has successfully navigated through difficulties and achieved a positive profit after tax in a highly competitive market.
(Source: Income statement of MPH, 2018-2020)
The current ratio has consistently remained at a healthy level between 2.1449 and 2.9942 from 2018 to 2020, exceeding the reasonable benchmark of 2 This indicates that the company's solvency is strong, positively influencing its reputation among investors.
(Source: Balance sheet of MPH, 2018-2020)
The quick ratio of MPH is notably high, demonstrating the firm's strong ability to meet short-term debt obligations Over the past three years, the quick ratio has ranged from 1.3149 to 1.7861, reflecting an improvement that enhances the company's financial stability This robust ratio not only indicates a solid capacity to cover current liabilities but also helps mitigate risks associated with lenders seeking rapid debt recovery Maintaining a quick ratio above the reasonable benchmark of 1 positions MPH favorably in terms of liquidity management.
(Source: Balance sheet of MPH, 2018-2020)
With over 60 years of experience, MPH has established a vast network of dedicated customers, including medical students and researchers in science and technology Its strong reputation in the publishing industry, coupled with a commitment to enhancing customer service quality, has made MPH a trusted long-term partner in the medical and pharmaceutical fields.
MPH operates under the Ministry of Health's management and, guided by its board of directors, has established itself as a leader in the publishing industry The company excels in printing and distributing publications focused on science and technology, economic management, law, and socio-political issues related to health Through these efforts, MPH has significantly contributed to enhancing and fostering a reading culture nationwide.
As MPH continues to grow, it prioritizes the well-being of its workforce by offering competitive salaries and bonus opportunities that motivate employees to enhance their performance The company fulfills its obligations regarding employee insurance, ensuring job security and stability Additionally, the experienced leadership team is committed to maintaining high management standards, which guarantees that the manufacturing processes adhere to industry benchmarks.
> The structure of the current assets is not reasonable:
As we analyzed above, the percentage of the cash and cash equivalents was extremely high throughout the years (36,18%; 52,76%; 54,04% respectively in 2018-
In 2020, MPH's ineffective use of liquid assets raised concerns, as excessive cash reserves could leave the company vulnerable to sudden incidents like fires, theft, or natural disasters, potentially leading to bankruptcy and employee layoffs This situation contradicts the Non-cash Payment Program established by the Prime Minister, which aimed to reduce cash payments to below 10% by the end of 2020.
> The cash management needs to improve:
Currently, MPH company only manages strictly in the daily cash receipts and expenses activities The firm has not yet built a yearly receipts and expenses strategy or
Cash flow forecasting for business activities has primarily relied on the sales consumption plan from the Business Department, lacking input from other departments This limited approach has resulted in an insufficiently detailed plan, making it challenging to accurately predict the required cash amount and necessary cash reserves.
> The effectiveness of account receivables management is low:
MPH company's decision to loosen its credit policy has led to a notable increase in revenue; however, this has also resulted in a rapid rise in receivables and appropriations The company lacks a specific system to identify which customers can benefit from its credit policy, instead offering discounted interest rates solely based on the order value.
To enhance customer engagement and encourage prompt cash payments, MPH should implement a more focused discount policy In light of the COVID-19 pandemic, it is crucial for MPH to invest in marketing efforts to promote their website and attract new customers Currently, the website only supports QR and prepaid payment methods, requiring customers to pay in cash before order fulfillment Additionally, MPH relies on Vietnam Post for shipping, which results in extended delivery times of approximately 5-7 days, particularly for customers in remote areas.
Besides, the company has not made provision for bad debts, so the risk is quite high when the company is expanding credit policy.
> The inventory management of MPH still needs to enhance:
Inventories represent a substantial portion of total current assets, comprising 45.73%, 40.3%, and 36.34% from 2018 to 2020 Despite this, MPH relies solely on a computer-based input-output product control program in the business department, while other accounting tasks are performed manually, resulting in wasted expenses and time Additionally, there is currently no specific legislation governing fixed rates for inventory damage or loss.
The declining proportion of inventories within the current asset structure poses challenges, such as potential shortages of raw materials, highlighting that the company has yet to establish an optimal inventory level The existing inventory of raw materials and finished goods is heavily reliant on the Business Department's sales consumption plan Additionally, the decrease in inventory turnover ratio from 2018 to 2020, attributed to customer credit implementation and increased commodity production, signals the need for improved inventory management practices within the firm.
MPH company has failed to account for the potential devaluation of its inventory, which consists primarily of books, newspapers, and paper materials that are highly susceptible to deterioration and dirt.
To evaluate the efficiency of current asset management within a company, it is essential to analyze not only the previously discussed features but also additional criteria that impact this efficiency These factors can be categorized into two primary groups.
In the course of its operational and production activities, a firm is influenced by multiple factors that impact decision-making regarding asset distribution, particularly current assets Each business entity operates within its unique cycle, leading to variations in product manufacturing durations, which can range from lengthy to shorter processes.
