UNIVERSITY OF ECONOMIC - DA NANG UNIVERSITY

ACCOUNTING DEPARTMENT



GROUP ASSIGNMENT
FINANCIAL STATEMENT ANALYSIS
TRAPHACO JOINT STOCK COMPANY

Lecturer: Tran Thi Nga

Group 3_Class 41K06.1 CLC
1. Nguyen Thi Ngoc Anh
2. Vo Thi Le Hang
3. Truong Thi My Linh
4. Hoang Thi Thu Thuy

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Contents
CHAPTER 1: INDUSTRY ANALYSIS .........................................................................1
I. General information ..................................................................................................1
1. Main business operations ...................................................................................1
2. Competitive strategy ..........................................................................................1
II. Porter’s “five forces” .............................................................................................2
1. Rivalry among existing terms: high ...................................................................2
2. Threat of new entrants: high ..............................................................................3
3. Threat of substitute products: low......................................................................3
4. Bargaining power of buyers: low .......................................................................3
5. Bargaining power of suppliers: High .................................................................4
CHAPTER 2: FINANCIAL STRUCTURE ANALYSIS ...............................................5
I. Asset structure analysis .............................................................................................5
1. Proportion of current assets ...............................................................................5
2. Proportion of non-current assets ........................................................................5
II. Resource structure analysis ...................................................................................6
III. Financial balance analysis .....................................................................................7
1. Long-term financial balance ..............................................................................7
2. Short-term financial balance ..............................................................................7
CHAPTER 3: THE OPERATIONAL EFFICIENCY ANALYSIS ................................8
I. Overall financial performance analysis ....................................................................8
1. Overall analysis of revenue and profit ...............................................................8
2. Cost-saving efficiency analysis..........................................................................9
3. Net operating profit analysis ..............................................................................9
4. Factors influenced to net operating profit ........................................................10
5. Expenses...........................................................................................................10
II. Asset use efficiency analysis ...............................................................................11
 1. Analysis of assets use efficiency of company .................................................11
2. The disaggregating of working capital efficiency over the years: ...................11
3. Working capital turnover .................................................................................12
III. Profitability analysis ............................................................................................13
1. Analysis of operating profitability ...................................................................13
2. Disaggregating ROA ........................................................................................13
3. Indicator from cash flow ..................................................................................14
CHAPTER 4: THE RISK ANALYSIS .........................................................................14
I. Business risk analysis .............................................................................................14
1. Quantitative analysis ........................................................................................14
2. Qualitative analysis ..........................................................................................15
3. The degree of operating leverage-DOL ...........................................................15
II. Financial risk analysis .........................................................................................15
III. Insolvency risk ....................................................................................................16
1. Short-term liquidity risk ...................................................................................16
2. Long-term solvency risk ..................................................................................18
3. Bankruptcy prediction model ...........................................................................18
CHAPTER 5: BUSINESS VALUATION ....................................................................18
SUMMARY AND CONCLUSION ..............................................................................19
 TRAPHACO JOINT STOCK COMPANY

CHAPTER 1: INDUSTRY ANALYSIS

I. General information
Transaction name: TRAPHACO JOINT STOCK COMPANY
Short name: Traphaco
Charter capital: 345.455.160.000 VND
Shares are listed: 41,453,673 shares
Outstanding shares: 41,450,540 shares
Stock code: TRA
Headquarter address: No. 75 Yen Ninh, Street, Ba Dinh District, Ha Noi
Telephone: 84-(4) 3683 0751 Fax: 84-(4) 3681 5097
Email: info@traphaco.com.vn
Website: http://traphaco.com.vn

Logo:
From a small pharmaceutical factory was formed in 1972 with the task of producing
medicines for railway workers - Traphaco Joint Stock Company is constantly growing
in both quantity and quality, deserving to be one of the units producing leading the
pharmaceutical industry of Vietnam.
1. Main business operations
• Purchasing, cultivating and processing medicinal herbs
• Producing and trading pharmaceuticals, chemicals and medical equipment
• Prepare prescription drugs
• Consulting on production of pharmaceuticals, cosmetics
• Trading import and export of raw materials for medicine and medicines
• Manufacturing and trading cosmetics
• Producing and trading food
• Consultancy on scientific and technical services, technology transfer in the field of
medicine and pharmacy
• Producing, trading beer, wine, soft drinks (not including bar business)
2. Competitive strategy
Traphaco is a company with a long history of manufacturing and manufacturing in
the pharmaceutical sector. The company has a wide range of product categories as well
as forms that meet the needs of consumers. Apart from paying attention to the quality
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of products to ensure safety, the company also develops models and packages. Traphaco
focuses on the production of traditional medicines, the company promotes all of its
advantages to create effective traditional medicines. Efforts are made to differentiate the
product.
Focus on price stability to the maximum suitable for all users. Traphaco uses
differentiated pricing strategies based on the company's superiority and prestige. The
company is constantly promoting and branding with the orientation of the brand of the
public. The company has a distribution network throughout 64 provinces. The company
wants to meet all the needs of users

II. Porter’s “five forces”

1. Rivalry among existing terms: high
There are 15 listed pharmaceutical (+ health) companies listed on the market, and
more than 180 pharmaceutical companies.
Vietnam's pharmaceutical market is on an upbeat trend. In 2017, domestic sales are
expected to reach $ 5.2 billion, according to Business Monitor International (BMI) data,
about 10% year-on-year and are expected to continue double-digit growth over the next
five years.
As the population increases rapidly, the per capita income rises, people's
knowledge is improved, the demand for medicines of the people will grow. The capital
spending on medicines in Vietnam increased from $ 9.85 in 2005 to $ 22.25 in 2010 and
was nearly doubled in 2015 ($ 37.97). The average annual growth in drug spending is
14.6% between 2010 and 2015, and is expected to remain at an annual growth rate of at
least 14% per year by 2025, per capita expenditure on drugs. Vietnam is projected to
double to US $ 85 in 2020 and US $ 163 in 2025.
The pharmaceutical market is being regarded as a "land of riches" attracting to
many foreign investors, national corporations in the world, and even domestic investors
operating outside the industry. The pharmaceutical market in Vietnam is more and more
diversifying the promotion of research, the introduction of quality drugs, competitive
prices with foreign drugs. The value of Vietnam is being the company top priority.
Combined with improving pharmaceutical quality, enterprises in the industry also aim
to expand, occupy market share.
The situation of pharmaceutical import of Vietnam has tended to increase sharply
in recent years. In 2016, import value of pharmaceuticals reached 2.56 million USD, up
10.4% over 2015, of which, importing pharmaceutical materials accounted for nearly
15% of the total value, reaching $ 381 million.
In the pharmaceutical industry, the products are relatively diversified, but the difference
between the companies is not high, especially the cost of product conversion is low.
This increases the level of competition. Given the current pharmaceutical industry
situation, pharmaceutical companies in the Vietnamese market have many opportunities
to develop, and also face high competition among existing companies.

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 2. Threat of new entrants: high
Traphaco is a company specializing in producing traditional medicines. However,
the pharmaceutical market accounts for only a small proportion of total pharmaceuticals
industry value, about 10% of the total manufacturing value. The habit of using
traditional medicines of Vietnamese has been accumulated for a long time will be the
premise for the development of traditional medicines industry. With the concept of
safety, fewer side effects, as the habit of consuming over-the-counter medicines
increasing, the rate of consumption of traditional medicines is predicted to continue to
grow well in the coming years. The opportunities that this potential market brings are
always attractive to new entrants into the industry, increasing the competitive pressure
of the domestic market.
In addition, WTO integration brings a large of challenges of competition in the
pharmaceutical industry in Vietnam. Tax reduction schedule will certainly attract more
foreign pharmaceutical companies to enter the market with strong financial and
technological potential. In addition, Traphaco will face to strong competition from
Chinese pharmaceutical companies after integrating with the world economy has
expanded and competition comes from the production of pharmaceutical products is the
same drug of Traphaco. In spite of unknown quality, its price is cheaper. Recurrent
cerebral hemorrhage is the most imitated product. This fact requires Traphaco to further
improve the quality of its medicines, improve its technology and diversify products to
survive and compete in the domestic market.
3. Threat of substitute products: low
Replacing products: In the market today there are many products which are nearly
the same use and function, so the risk of replacement products used is quite high.
Paracetamol, for example, treats headache, muscle aches, analgesia, and so on. But there
is another drug called panadol, which also contains the paracetamol ingredient. As such,
consumers have more options for their use.
Replacing need: Each kind of drug has its own need and purpose, so it is very
difficult to replace the drug. In addition, when the patients want to cure disease can only
use drugs to cure and must buy under the guidance of the new doctor cured. So there is
no need to replace the product in the industry.
The pharmaceutical market is a favorable market in Vietnam and most of the
companies have not much different products, so the pressure created for businesses is
making them better and take as much advantage as possible. Traphaco is with "green"
strategy, green value chain development from raw materials, industry, products or
distribution services. The company has become a provider of social services that are rich
in traditional values and services that go beyond the mere interests of a business to fulfill
its corporate responsibilities.
4. Bargaining power of buyers: low
Customers of the pharmaceutical industry are divided into two main groups:
indirect customers and direct customers.
Groups of indirect customer (end-users in the country and abroad): The bargaining
power of this customer groups is very weak, no pressure on the industry. Pharmaceutical
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is one of the essential items, which is related to the life and health of users, no substitute
products and no bargain. Besides, almost the buyer is affected by the doctor, they have
no other choice so the impact on the customer is very easy and they hardly exert
downward pressure on prices for companies in the industry.
Group of direct customers: divided into two groups:
+ Group 1: includes hospitals and treatment facilities at all levels
+ Group 2: includes branches, agents, distributors, pharmacies (such as pharmaceutical
import-export companies, trading companies, retailers)
The bargaining power of this consumer group is greater than that one. These
customers are likely to exert downward pressure on prices for companies in the industry
because of the following reasons:
- They purchase a large number of products, accounting for high sales in total sales of
the pharmaceutical industry. The pharmaceutical industry is difficult to distribute drugs
and pharmaceuticals directly to users (patients). Products wanted to reach consumers
must through their distribution channels.
- They have many choices about the suppliers and the cost of switching suppliers is low
- They have full information about the needs, prices, characteristic of consumers.
However Traphaco Joint Stock Company is a famous pharmaceutical brand which
is trusted by a lot of customers. The company also has its own distribution network and
cooperates with many long-term sustainable organizations. The distribution system of
the company includes: 1 distribution subsidiary; 28 representative branches; 27,000
retailers; 40 agents spread over 64 provinces across the country. Therefore, this
customer group does not exert pressure too much on the company.
5. Bargaining power of suppliers: High
At present, the strength of raw materials and materials suppliers for drug processing
is high. Most of the materials used for the production of drugs are primarily imported
from countries on the world such as Austria, Italy, Netherlands, India, China.
According to the Ministry of Industry and Trade, the basic chemical industry and
pharmaceutical industry in our country has not developed, materials depend on imports
up to more than 90%. Dependence on imported raw materials makes the pharmaceutical
industry vulnerable from external factors such as exchange rate fluctuations, material
price fluctuations, material quality risks, trade risks, risk of political instability, risk of
credit payment,… About 5-6% of the drug materials (including pharmaceuticals and
excipients) can be produced by themselves, and most of them are single items, most of
them are excipients such as inorganic compounds, some pharmacological origin of
medicinal herbs.
Up to now, some pharmaceutical companies have found and built their own raw
materials so they have been able to hold the initiative in source raw materials for
production. However, this rate is very low and among them the typical company is the
joint stock company Traphaco.
Because Traphaco's main products are oriental herbs, most of its raw materials used
to produce pharmaceuticals are domestically produced (accounting for 65%, among
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which the company supplies 35%). The rest (35%) is used to produce medicine
(Germany, France, Switzerland ...) and medicinal herbs, also called traditional medicine
(20% of total pharmaceutical demand in China). Traphaco signed a 3-5 year contract
with pharmaceutical suppliers, contracted by the year for importing materials to ensure
stability, reduce raw material price fluctuations. Materials suppliers are less likely to
exert pressure on prices for Traphaco Company.

CHAPTER 2: FINANCIAL STRUCTURE ANALYSIS

I. Asset structure analysis

1. Proportion of current assets
𝑁𝑒𝑡 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑎𝑠𝑠𝑒𝑡 𝑖
Proportion of asset i =
𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
According to the table 1-Appendix 2:
Total assets were large and increased gradually through three years. Short-term assets
accounted for a large proportion of the enterprises, accounting for nearly 8/10 total
assets in 2015 (73.24%), until 2017, it decreased to approximately 50%. As follow:
+ Cash and cash equivalents accounted for a high proportion (about 10-30% of total
assets). But it decreased significantly from 26.62% in 2015 to only 10.66% in 2017 =>
High liquidity but low profitability.
+ Inventories accounted for a high proportion, approximately 25% /total assets of
enterprise and it decreased gradually in three years from 24.10% to 22.05%. Because
the enterprise specializes in manufacturing, finished goods and work in progress account
for high proportions. But until 2017, the proportion of inventories reduced to the lowest
figure in 3 years => Consumption situation of enterprises was more and more good.
+ Short-term receivable accounted for a quite high proportion (about 10-20% of total
assets). But it decreased considerably from 21.69% to 13.25% => Traphaco
implemented a quick recovery policy. This was a good sign that business was less likely
to be financially distressed by other firms. Once proportion of short-term receivable is
high, it will promote consumption. Enterprise was increasingly seeking to recoup their
debt for use in other short-term projects.
+ Short-term investments accounted for an extremely low proportion in total assets. It
was only under 1%. Through 3 years, this proportion had continuous fluctuations =>
Short-term investment activities didn’t affect much to the operation of the business.
2. Proportion of non-current assets
According to the table 1 - Appendix 2:
In 2017, long-term assets accounted for a relatively small proportion, only ¼ in total
assets (26.76%). But it increased through years and up to over 50% in 2017. As follows:
+ Fixed assets accounted for the highest proportion in total long-term assets and grew
significantly from 18.15% to 45.40% (2015-2017). It was approximately half of its long-
term assets. In 2017, this item was nearly equal with total long-term assets =>. In long-
term, the enterprise mainly invested in fixed assets to invest in production and business.
As the company specializes in the manufacturing, it is necessary to invest in machinery

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and equipment, means of transport… => the proportion of fixed assets accounts for a
high proportion. Therefore, enterprise subjected to high risk.
+ Long-term receivable accounted for an extremely low proportion in total assets, only
around 1%, even equal with 0% in 2017. It means that capital occupancy rate was very
low.
+ In the long term, Traphaco company didn’t trend in invest outsides. Especially, in
2017, it occupied only 0.03%, approximately equal 0. It showed that the company hardly
has any long-term financial investment outside.
 The company implemented safety policy, not risk with long-term investments
outside the core business.

II. Resource structure analysis

To analyze resource structure of the company, we consider 2 aspects: Financial
autonomy and fund stability.
Financial autonomy is expressed by 2 indicators:
𝑇𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
Debt ratio = *100%
𝑇𝑜𝑡𝑎𝑙 𝑟𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑠

𝑇𝑜𝑡𝑎𝑙 𝑜𝑤𝑛𝑒′𝑠 𝑒𝑞𝑢𝑖𝑡𝑦

Self-fund ratio = *100%
𝑇𝑜𝑡𝑎𝑙 𝑟𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑠

To analyze fund stability, we use:

𝑇𝑜𝑡𝑎𝑙 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 short−term resources
Short-term resources ratio = *100%
𝑇𝑜𝑡𝑎𝑙 𝑟𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑠

𝑇𝑜𝑡𝑎𝑙 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 long−term resources

Long-term resources ratio = *100%
𝑇𝑜𝑡𝑎𝑙 𝑟𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑠

𝑇𝑜𝑡𝑎𝑙 𝑜𝑤𝑛𝑒𝑟′𝑠 𝑒𝑞𝑢𝑖𝑡𝑦

Owner's equity/long-term resources ratio = *100%
𝐿𝑜𝑛𝑔−𝑡𝑒𝑟𝑚 𝑟𝑒𝑠𝑜𝑢𝑟𝑐𝑒𝑠

According to table 2 - Appendix 2

In general, the company's resources have increased over 3 years, from 1,296,523
million VND in 2015 to 1,509,701 million VND in 2017. In the resource structure of
three years, the self-fund ratio changes over the years, but it’s always higher 70% in
three years. In three years, the debt ratio is about 26%. The company's resources have
the high self-fund ratio, so the company’s financial autonomy is high. The company
with high financial autonomy will easily mobilize loans.
The short-term resources ratio is about 25% in three years. It changes insignificantly
over three years, in the range of 25.22-25.75%. The long-term resources ratio is always
higher 74% in three years. It is high so the fund stability is high. The company with the
big long-term resources will be favorable for long-term investment. The fund stability
is high, so the company isn’t subject to short-term repayment pressure.

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 Besides, the debt/owner's equity ratio changes insignificantly over three years. This
shows the stability of the components in the company's resources. The owner's
equity/long-term resources ratio is very high, over 99% in three years (99.96% in 2015,
99.22% in 2016 and 99.11% in 2017). The company has small long-term liabilities, so
it’s not subject to a lot of pressure to pay interest.

III. Financial balance analysis

1. Long-term financial balance
Long-term financial balance is presented by the indicator: Net working capital (NWC)
Long-term resources = Owners' equity + Long-term liabilities
Net working capital = Current assets - Current liabilities
= Long-term resources - Long-term assets
= Equity + Long-term liabilities - Long-term assets
Long-term self-financing rate = The Equity/Long-term assets rate
Based on the above formulas, calculate the table 3 - Appendix 2
According to the table 3, Net working capital (NWC) of the Traphaco corporate is
more than 0 in 2015, 2016 and 2017. NWC has positive value which is quite high
throughout 3 years, in the range of 365,103 million VND to 620,298 million VND.
However, NWC decreased significantly over the years, NWC declined considerably
from 620,298 million in 2015 to 486,815 million in 2016 and continuously there is a
deduction 121,712 million in 2017 compared to 2016. More details:
- The long-term resources increased gradually between 2015 and 2017, from 967,265
million to 1,128,948 million, always at about 1,000,000 million VND. The long-term
resources of 2016 grew 5.73% compare with 2015 and especially in the2016-2017
period, increased remarkably 10.39%.
- The reason why NWC decreased is long-term assets increase dramatically through 3
years. The growth rate of the long-term assets in 2016 was up to 54.45% and reached
42.53% in 2017.
- The Long-term resources/Long-term assets over 3 years were all more than 1. It is
noteworthy that in 2015, this target was 2.79, a great value. In 2016 and 2017, the value
of this target is 1.91 and 1.48 respectively.
Overall, the value of NWC was positive over the years, suggesting that the long-term
resources of the company were enough to finance for not only the long-term assets (non-
current assets) but also a portion of short-term assets (current assets). This is a positive
sign for the performance of the company. The long-term financial balance of Traphaco
is considered good and safe, the company reaches the balance in the long-term financing.
2. Short-term financial balance
Net working capital requirement = Inventories + short-term account receivables and
other current assets – short-term liabilities (excluding interest bearing liabilities)
Net fund = Net working capital – Net working capital requirement

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Net working capital = Current assets – Current liabilities
Based on the above formulas, getting out table 4 and chart 4– Appendix 2
Net working capital requirements is decrease through the years, especially sharply fall
from 2016 to 2017, this is because:
+ Short-term receivables decreased sharply from 291,660 million in 2016 to 200,062
million in 2017.
+ The inventory is decrease from 2015 to 2016, but the increase in 2017, increase about
25 million VND. But the other assets rapidly increase from 8,693 million in 2015 to
29,419 million and then 43,459 million in 2017.
+ The short-term liabilities significantly increase through 3 years, particularly rise about
32,924 million from 2015 to 2016.
+ The value of Net fund is higher than zero and decrease through years, so the net
working capital meets the capital needs in the short-term. The excess can be used to
invest in the high liquid securities in order to increase the efficiency of employed capital.
Because of the stable NWC and the decrease NWC requirements, funds values will
always be positive for short-term balances and surpluses from other investments to
increase profits for businesses.

CHAPTER 3: THE OPERATIONAL EFFICIENCY ANALYSIS

I. Overall financial performance analysis

1. Overall analysis of revenue and profit
According to table 5 – Appendix 3:
Overall analysis of revenue and profit - Appendix 3, we can easily see that the
business result of the company fluctuated through the years 2015, 2016 and 2017.
Revenue from sale of goods and rendering of services reduced from 2015 to 2017, but
gross profit from sale of goods and rendering of services and accounting profit before
tax gradually increased between 2015 and 2017. More details:
- Compared to 2015, net revenue from sale of goods and rendering of services in 2016
increased slightly by 1.23 % but decreased significantly more than 6% in 2017. This
was partly due to sale deduction sharply increased, from 2,971 million VND to 9,697
million VND, and also partly due to revenue from sale of goods and rendering of
services in 2017 decreased than previous years by 6.25% (125,401 million VND).
- Gross profit from sale of goods and rendering of services gradually grew between 2015
and 2017, increased 131,413 million VND. This is mainly the cause of the reduction of
cost of goods sold and services rendered which continuously reduced within 3 years.
Specifically, cost of goods sold in 2016 decreased 61,104 million VND (5.74%)
compared with 2015 and it continuously strongly dropped in 2017, by 17.32 %.
- Although revenue from sale of goods and rendering of services fluctuated from 2015
to 2017, accounting profit before tax increased steadily over three years (increased by
11.21% between 2015 and 2016 and by 13.94% between 2016 and 2017). It leads net
profit after tax grew too. The reason for this increase is probably the raise gross profit
from sale of goods and rendering of services over the years and higher financial income
in year later. We can easily see that gross profit from sale of goods and rendering of
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services gradually grew between 2015 and 2017 and financial income in 2016 increased
significantly by 70.83% (6,380 million VND) compared to 2015.
2. Cost-saving efficiency analysis
According to table 6 – Appendix 3
In the period from 2015 to 2016, the business results of the company have good
signs. Revenue from sale of goods and rendering of services, Gross profit from sale of
goods and rendering of services and Accounting profit before tax increased over two
years. Although deductions rise significantly 2,491 million VND by about 35%, but unit
sales higher and cost of goods sold and services rendered only raise slightly. This is
leading to the increase of gross profit from sale of goods and rendering of services. In
addition, finance income increased sharply from 9,007 to 15,387 million VND, about
71%. Therefore, accounting profit before tax still increased in spite of the grown of
finance expenses (7.65%), selling expenses (7.97%), general and administrative
expenses (12.74%) and other expenses (8.89%). Due to the amount of goods and
rendering of services which sold makes the proportion of these expenses increased. In
this period, the company control price of materials well and operated quite effective.
In the period from 2016 to 2017, revenue from sale of goods and rendering of
services decreased 125,401 million VND, more than 6%. However, because of the
reduction of cost of goods sold and services rendered (reduced 173,869 million VND),
gross profit from sale of goods and rendering of services grew by 4.62%, from 994,681
to 1,040,658 million VND. Within double years 2016-2017, selling expenses, general
and administrative expenses increased slightly; otherwise, finance expenses dropped
dramatically from 82,652 to 2,890 million VND, by 96.5%. And so, other expenses
reduced 124 million VND (4.4%). Therefore accounting profit before tax increased
significantly amount 39,470 million VND, approximately 5%. Although in the 2016-
2017, there is a reduction of revenue from sale of goods expenses and increase expenses,
the company controls expenses and cost of good sold well.
Overall, Traphaco operated efficiently over the three years, from 2015 to 2017.
Though revenue of the company fluctuated over the years, profit grew steadily thank to
both the good control of cost of goods sold and revenue-expenses management.
3. Net operating profit analysis
According to table 7 – Appendix 3:
From 2015 to 2017, net operating profit fluctuated significantly over 3 years,
between 317,847 million VND to 348,426 million VND. The reason of net operating profit
of the company was unstable was net revenue tended to fluctuate similarly. The net
revenue increase 24,332 million in 2016 comparing to 2015 but in 2017, this number
decrease 127,893 million VND compared to 2016. We can see that cost of goods sold
of the company trend in reduction over the years. That makes gross profit increased from
909,245 million VND in 2015 to 1,040,658 million VND in 2017. However, selling
expenses and administrative expenses has increased significantly between 2015 and
2016. Therefore balancing the cost-benefit structure of the company's net revenue
fluctuated, this is inconstant fluctuation that needs to be considered. Administrative
expenses rise may be due to the company's poor management costs or long-term
strategic policies that increase administrative expenses.
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 4. Factors influenced to net operating profit
According to table 8 - Appendix 3:
Factors influenced to net operating profit are revenue and cost saving efficiency.
In the period from 2016 to 2017, net operating profit decreased slightly from 17.43% to
17.27%, though cost of good sold declined about 5% (50.52% in 2016 down to 44.36%
in 2017). The reason is that selling expenses and administrative increase considerably.
Specifically, selling expenses increased from 23.23% to 26.92%. This increased
expenses by 69,019 million and the revenue fall about 29,709 million. Administrative
expenses increased about 2.33%, this increased the cost by 43,581 million and the
revenue decreased 11,651 million.
So that the ratio net operating profit on net revenue slightly decreased about 0.16%.
The degree of influence to net operating profit is cost of good sold decreased, selling
and administrative expenses increased. It shows that the company is not well controlled
costs to operate more effectively, they should reduce expenses.
The problem is to cut costs but businesses still have to ensure the efficiency from
the action itself. This is a very difficult problem for business managers. Therefore, in
order to ensure efficiency after cutting costs, enterprises should link cost cutting
programs with cost management activities.
5. Expenses
According to table 9 - Appendix 3
In the cost structure of enterprises, COGS always accounts for the highest
proportion of total cost of enterprises. According to table 9, we see that net operating
profit/cost of goods sold tended to increase gradually in three years period 2015-2017.
This figure was 24% in 2015 and approximately 40% in 2017. It increased nearly 15%,
however it only fluctuates less than 40%. It means that one dong cost of goods sold
during the period gives nearly 0.3 to 0.4 dong of net operating profit. This figure was
extremely low, it shows that the profitability of the cost of goods sold was low, which
leads to the business efficiency was low. But from 2016 to 2017, it indicated that net
operating profit/cost of goods increased 11%, it means that Traphaco used cost of goods
sold more and more efficient.
Net operating profit/selling expenses also had trend in increase slowly in 3 years
period. In 2016 it grew 2% compare to in 2015 and year 2017 grew 4% compare to year
2017. Although it didn’t increase a lot of, it showed that the company attended to save
cost. In 2015, this figure was 58% and then rose to 64% in 2017. It accounted for high
portion. It means that one dong selling expenses during the period gives over 0.6 dong
of net operating profit. Through this index, we see that the company had efficient cost
saving policies. This is due to grow business efficiency.
Net operating profit/administrative expense accounted for the highest portion
among three kinds of expenses which was included in table 3.5 during three years period
2015-2016. This figure fluctuated steadily over 155% and had a slowly reduce by 3%.
But it didn’t affect significantly to net operating profit. The reason is that one dong
administrative expense during the period gives over 1.5 dong of net operating profit. We

10
can say that Traphaco managed administrative expense well. Therefore, the company’s
administrative expense affected very large to business efficiency.
Overall, cost is always an important factor that directly affects the profitability of
enterprises. According to table 3.5, rates between net operating profit and total expense
were only from 15% to 20%. Each year, it increased 2% to 4%. This figure is very low.
One dong cost of business only gives less 0.2 dong net operating profit. It was probably
the cause of little efficient costing saving policies of Traphaco corporate. It leads to
business efficiency low.

II. Asset use efficiency analysis

1. Analysis of assets use efficiency of company
Total sales and revenues
Assets use efficiency (assets turnover) =
Average total assets

Total sales and revenues = Net sales + Financial revenues + other revenues
Comments: According to table 10 and chart 5 - Appendix 3
- Average assets of Traphaco corporate increased steadily over three years, from
1,214,286 million VND in 2015 to 1,443,577 million VND in 2017.
- Average historical cost of fixed assets increased dramatically in the period 2015-
2017, from 428,439.5 million VND to 712,445 million VND, indicating that the
company has invested more material facilities in production and business. Therefore,
Traphaco might have good production capacity.
- Average working capital has continuous fluctuations over the years. In 2015, this
index was 876,365 million and then increasing to 903,703 million in 2016, following
to falling to 793,703 million in 2017.
- Assets use efficiency ratio means that each 1 dong of total assets generates how much
of net sales and revenue. In 2015, assets use efficiency ratio of Traphaco was 1.64,
but it declined to 1.51 in 2016 and 1.30 in 2017. This shows that in 2017 assets
moved more slowly, the reason is that the business tended to increase inventory.
Therefore, the efficiency of using asset of enterprises more and more decreases.
- Fixed assets use efficiency ratio was relatively high in 2015 and 2016. It was over 4,
however in 2017, this index reduced dramatically to only 2.63. This shows that the
company uses fixed assets with quiet high efficiency. Company invested 1 dong in
fixed assets they earn nearly 3 to 4 dong of net sales.
- Working capital turnover ratio was slowly fluctuated over three years (all over 2
throughout three years from 2015 to 2017, a range of 2.21-2.36). It means that one
dong of working capital earn more than two dong of Net sales. This indicates that
the company had quite efficient working capital turnover, it only took less than a half
year to working capital make a round, which is a sign of efficient use of working
capital.
2. The disaggregating of working capital efficiency over the years:
∆ HWC = HWC OF THEN-YEAR – HWC OF BASE-YEAR
∆HWC = ∆Net Sales + ∆WC
𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 𝑜𝑓 𝑠𝑢𝑏𝑗𝑒𝑐𝑡−𝑦𝑒𝑎𝑟 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 𝑜𝑓 𝑏𝑎𝑠𝑒−𝑦𝑒𝑎𝑟
∆ Net sales = −
𝑊𝐶 𝑜𝑓 𝑏𝑎𝑠𝑒−𝑦𝑒𝑎𝑟 𝑊𝐶 𝑜𝑓 𝑏𝑎𝑠𝑒−𝑦𝑒𝑎𝑟

11
 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 𝑜𝑓 𝑠𝑢𝑏𝑗𝑒𝑐𝑡−𝑦𝑒𝑎𝑟 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 𝑜𝑓 𝑠𝑢𝑏𝑗𝑒𝑐𝑡−𝑦𝑒𝑎𝑟
∆ Net sales = −
𝑊𝐶 𝑜𝑓 𝑠𝑢𝑏𝑗𝑒𝑐𝑡−𝑦𝑒𝑎𝑟 𝑊𝐶 𝑜𝑓 𝑏𝑎𝑠𝑒−𝑦𝑒𝑎𝑟
Analyzing to Traphaco corporate:
∆ HWC2017/2016 = HWC2017 – HWC2016 = 0.15
∆ HWC2017/2016 = ∆ Net Sales + ∆WC = (-0.142) + 0.287 = 0.15
∆ HWC2016/2015 = HWC2016 – HWC2015 = -0.04
∆ HWC2016/2015 = ∆ Net Sales + ∆WC = 0.028 + (-0.069) = -0.04
From the above calculations, we see that a difference of working capital turnover ratio
in 2017 compared to 2016 is 0.15 which shows that year 2015 was more efficient.
In contrast, the difference of working capital turnover ratio in 2016 compared to 2015
is (-0.04). It expressed that in 2016, company used wastage of working capital. The
fluctuation of working capital was 0.069 and a small fluctuation of net sales was 0.028.
3. Working capital turnover
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑
Inventory turnover =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑖𝑒𝑠
360
Inventories turnover =
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑖𝑒𝑠 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟

𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 + 𝑉𝐴𝑇

Accounts receivable from =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑎𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 𝑓𝑟𝑜𝑚 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟
customer turnover
360
Accounts receivable =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑎𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 𝑓𝑟𝑜𝑚 𝑐𝑢𝑠𝑡𝑜𝑚𝑒𝑟
from customer turnover

According to table 11 – Appendix 3

Inventory turnover represents the ability to manage the inventory of the business
and the number of turns that the inventory moves in the period. The higher the ratio, the
faster the sales are and not stagnant goods. However it is too high is not good, because
then the goods stored in the warehouse is not much, if market demand increases
dramatically, the enterprise does not meet riders of the time and have never been to try
to compete for market share. In the period 2015-2017, inventory turnover of Traphaco
decreased slowly from 3.69 to 3.25 in 2016 and to 2.60 in 2017. This figure was low. It
showed that the company tended to reserve a lot of merchandise in the warehouse,
leading to increase cost of business and reduce revenue.
Accounts receivable turnover is the number of times per year that a business collects
its average accounts receivable. This ratio is high, the more money it proves. Accounts
receivable from customer ratio of Traphaco tends to increase in 3 years period 2015-
2017, in which receivables from customers tend to decrease strongly, decreasing by
68,414 million VND, from 205,487 million VND to 137,073 million VND. From 2015
to 2017, receivables turnover increased by 4.44, 10.57 in 2015 and 15.01 in 2017, which
means the number of times per year that Traphaco collected its average accounts
receivable tended to decrease.

12
III. Profitability analysis
1. Analysis of operating profitability
According to the table 12 and chart 7, 8 – Appendix 3, ROA has increased over the
past three years from 20.97% in 2015 to 22.35% in 2017. Compared with ROA of the
pharmaceutical industry (8.15%), the company has very high ROA. The ability to use
assets of the company is good. Profit before tax has increased over three years. This is
a reason for the ROA increase over 3 years.
ROE has increased over the past three years from 22.17% in 2015 to 24.41% in
2017. Compared with ROE of the pharmaceutical industry (25.82%), the company has
smaller ROE. The ability to use assets of the company is relatively good. Profit after tax
has increased over three years. This is a reason for the ROE increase over 3 years.
Besides, ICR of the company is high. The company is easy to payment interest
expense. ROCE has increased over three years, from 26% in 2015 to 30% in 2017.
Earning per share has decreased over three years, from 8.3 (thousand) in 2015 to
6.9 (thousand) in 2017. However, price/earnings ratio has increased over three years
from 13.39 (thousand) in 2015 to 21.87 (thousand) in 2017.
General, the operating profitability of the company is relatively good.
2. Disaggregating ROA
𝑃𝑟𝑜𝑓𝑖𝑡 𝑏𝑒𝑓𝑜𝑟𝑒 𝑡𝑎𝑥 𝑇𝑜𝑡𝑎𝑙 𝑠𝑎𝑙𝑒𝑠 𝑎𝑛𝑑 𝑟𝑒𝑣𝑒𝑛𝑢𝑒𝑠
ROA = *
𝑇𝑜𝑡𝑎𝑙 𝑠𝑎𝑙𝑒𝑠 𝑎𝑛𝑑 𝑟𝑒𝑣𝑒𝑛𝑢𝑒𝑠 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

ROA = HROS * HAT

∆ROA = ∆𝐻 ROS + ∆𝐻 AT
∆𝐻 ROS = (HROS1 – HROS0) * HAT0
∆𝐻 AT = HROS1 * (HAT1 – HAT0)
Unit: million VND
No Items 2015 2016 2017
1 Average total assets 1,214,286 1,336,988 1,443,577
2 Profit before tax 254,627 283,179 322,648
3 Total sales and revenues 1,976,972 2,005,540 1,880,138
4 HROS (2/3) 0.13 0.14 0.17
5 HAT (3/1) 1.63 1.50 1.30
+ 2015-2016
∆𝐻 ROS = (HROS2016 – HROS2015) * HAT2015 = (0.14-0.13)*1.63*100%= 2.02%
∆𝐻 AT = HROS2016 * (HAT2016 – HAT2015) = 0.14*(1.5-1.63)*100% = -1.81%
∆ROA = ∆𝐻 ROS + ∆𝐻 AT = 1.63% + (-1.82%) = 0.21%
+ 2016-2017
∆𝐻 ROS = (HROS2017 – HROS2016) * HAT2016 = (0.17-0.14)*1.5*100%= 4.56%
∆𝐻 AT = HROS2017 * (HAT2017 – HAT2016) = 0.17*(1.3-1.5)*100% = -3.39%
13
∆ROA = ∆𝐻 ROS + ∆𝐻 AT = 4.5% + (-3.4%) = 1.17%
3. Indicator from cash flow
According to table 13 – Appendix 3, we can see that cash flow margin ratio was
stable through three years, approximately 0.10. This figure of year 2015 and 2017 was
equal. That's an indication that Traphaco's business is quite stable and stable at
converting earnings from sales into actual cash flow. Specifically, cash flow from
operations to net income decreased from 0.77 to 0.57 through the years of 2015, 2016,
2017. Cash flow per share was highly low, it was only around 0. Even in 2017, this
figure was absolutely equal to 0. It can be said that in 2017, the net cash a firm produces
on a per-share basis hardly has. Cash flow return on assets ratio of Traphaco
corporations was extremely low over three years. It's only under 0.2 (from 0.12 to 0.15)
and tended to decrease slightly. So we can say that this company had yet to use asset
efficiently in order to collect cash from sales and customers. Net income to cash
provided by operating income ratio increased within three years from 1.31 in 2015 to
1.75 in 2017.

CHAPTER 4: THE RISK ANALYSIS

I. Business risk analysis

Business risk is the risk coming along with uncertainly, fluctuation in the
company’s performance and operating efficiency. The business performance and
operating efficiency are presented by indicators: Sales, profit, ROA, RE…
Business risk assessment: + Variance, standard deviation, coefficient of variation
+ The degree of operating leverage/risk ratio
1. Quantitative analysis
There are some inherence risks of the business. Before analyzing the indicators to
say about the level of business risk of enterprises, we will look at the characteristics of
pharmaceutical industry. As a manufacturing enterprise, the fluctuation in price and
quality of raw materials has a great impact on the company's production and business
activities. Pharmaceutical raw materials are imported from 11 countries around the
world with dramatically fluctuating price which depends on economic situation. That
leads to the risk of inadequate inputs, or rising costs.
Consumption demand of consumers: Recently, there are a lot of information show
that our pharmaceutical market has many kinds of counterfeit medicines and illegal
drugs. The use of these drugs will directly threaten the lives of people, causing customer
worry and have more anxiety when using pharmaceutical products.
Competitive risks of the pharmaceutical industry
Specific risks of pharmaceutical products
Investment costs, time and effort devoted to product research, development as well
as market penetration of the pharmaceutical companies are relatively high compared to
other industries in the world, whereas the success of the new product test is very low.
In addition, the goods in the pharmaceutical sector have a limited expiry date. The
not consumption of all products at the expiry of the use will bring the risk of loss of
profits, and be subject to costs for destruction.

14
 Therefore, it can be said that level of potential risk of Traphaco Company is
valuated in quite high level.
2. Qualitative analysis
Analysis through variance, standard deviation and coefficient of variation
2
Variance = Var (ROE) =𝛿 2= ∑𝑛𝑖=1(𝑘ᵢ − 𝑘̂ ) ∗ 𝑝ᵢ
2
Standard deviation = 𝛿 = √∑𝑛𝑖=1(𝑘ᵢ − 𝑘̂ ) ∗ 𝑝ᵢ

𝛿
Coefficient of variance = ; k̂= ∑𝑛𝑖=1 𝑝ᵢ𝑘ᵢ
𝑘̂
According the table 14 and 15 – Appendix 4, it can be showed that:
Variance: The variance of the ROE of the Traphaco enterprise was low, only
under 2. It reflected that ROE of company through three years was relatively stable.
Comparing with other companies, Traphaco is higher than PPP, but it is much lower
than VBT and PMC. The variance of PMC has nearly 2 times comparing with
Traphaco firm, and especially, that figure is fifth as high as with DBT.
However, the size of each company isn’t the same, so if we only comment the
level of risk through variance, it will not be accurate. In order to remove the affection
of different size between these companies, we look at the value of the coefficient
variability. From the index of above table, it can be showed that Traphaco and PMC
firms are equal and have the lowest level, and then it is PPP and DBT in turns.
In short, through the coefficient variability, we can say that Traphaco has the low
level of risk
3. The degree of operating leverage-DOL
% change in operating profit Contribute margin
DOL = =
% change in sales Profit
According to the table 16 – Appendix 4, we see that in general, the degree of
operating leverage of Traphaco through three years is extremely slow. Even this figure
2016-2017 is negative, only (-2.32). It showed that 1 % change in sales makes change
from -2.32% to 1.32% in EBIT.
In addition, the degree of operating leverage is low leading to the low business. It
also can be seen that Traphaco has a large proportion of variable cost, meaning that
company earned a smaller profit on each sale, but does not have to increase sales as
much to cover its lower fixed costs.

II. Financial risk analysis

The degree of financial leverage:
% 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑅𝑂𝐸 𝐸𝐵𝐼𝑇
DFL = =
% 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝐸𝐵𝐼𝑇 𝐸𝐵𝑇

According to table 17 – Appendix 4

15
 In generally, over the years, the degree of financial leverage of company was stable
with a safe ratio, more than 1% in all three years. It’s mean that 1% change in profit
before tax and interest would make profitability on equity change about 1%. With this
ratio, the sensitivity of the firm's return on equity to its pre-tax profit and interest is low.
This shows that the company uses safety policies, they use less of external financing to
finance for business activities. Therefore, it can be said, the financial risk or so-called
risk of debt brought to the company is low.
From the above table, we see that financial leverage of the company has slight
fluctuations. In 2016, degree of financial leverage decreases about 0,003% compared to
last years. But in 2017, it increases about 0,005%, indicating that the company can
gradually adopt the policy of using financial leverage to finance the production process.
In the future, good corporate governance will increase the company's profitability
through the use of effective capital. However, if the management is not good, business
is less effective due to the profit may be reduced by increasing interest expenses. But
the degree of financial leverage of the company is low, the effect of leverage will not
significantly affect.
In short, financial risk of enterprise is in low level.

III. Insolvency risk

1. Short-term liquidity risk
- Current liabilities coverage ratio:
Current assets
+ Current ratio =
Current liabilities
Current assets − Inventory − other current assets
+ Quick ratio =
Current liabilities
Cash and cash equivalents
+ Cash ratio =
Current liabilities
Net cash flow from operations
+ Cash flow ratio =
Current liabilities
According to table 18 and chart 9 – Appendix 4
Current ratio
The current ratio measures the ability of a company to cover its short-term liabilities with
its current assets. Current ratio of Traphaco firm between 2015 and 2017 are greater than 1.0.
This is an indication that the company is well-positioned to cover its current or short-term
liabilities. Specially, in 2015, the current ratio of the company reached 2.88, the highest
current ratio within 3 years, from 2015 to 2017. In 2016, this indicator declined
considerably 2.37 and continuously fell to 1.96.
The current ratio inherently assumes that the company would or could liquidate all
of most of its current assets and convert them to cash to cover these liabilities. In reality,
a certain level of working capital will still be needed. Companies with a seemingly high
current ratio may not be safer than a company with a relatively low current ratio.
Therefore, current ratio of Traphaco decreased continuously over 3 years but they are
more than 1, this indicates that the performance of the company is still good and the risk
sign is low.

16
Quick ratio
Quick ratio measures the level of the most liquid current assets available to cover
current liabilities. In 2015 Quick ratio was high, reached 1.91; however, this ratio
dropped to 1.4 in 2016 and fell to 0.97 in the year 2017. Although this ratio trend in
decreasing over 3 years, they are more than or approximately 1, means that a company
is sufficiently able to meet its short-term obligations.
Cash ratio
This index shows the level of the firm’s cash and near-cash investments relative to
their current liabilities. In 2015, cash ratio of the company is 1.05 and then this ratio
decrease alternately with 0.58 in 2016 and 0.42 in 2017. This does not mean that this is
a bad sign. Because it is not realistic for a company to maintain excessive levels of cash
and cash in equivalent assets to cover with current liabilities. It is often seen as poor
asset utilization for a company to hold large amounts of cash on its balance sheet, as this
money could be returned to shareholders or used elsewhere to generate higher returns.
Cash flow ratio
The operating cash flow ratio is a measure of how well current liabilities are
covered by the cash flows generated from a company's operations. Cash ratio of the
company tended to decrease throughout 3 years. In 2015, this highest ratio is 0.58, and
then this ratio declined slightly, in turn 0.51 in 2016 and 0.49 in 2017. Those ratios from
2015 to 2017 were less than one indicates that the firm has not generated enough cash
to cover its current liabilities. To investors and analysts, a low ratio could mean that the
firm needs more capital. The cause of this condition is the growth of current liabilities,
from 329,257 to 380,753 million VND and the decline of net cash flow from operations,
from 191,764 to 185,135 million VND. The company needs to control net cash flow
from its operations and current liabilities.
Overall, ability to meet company’s short-term financial obligations is quite good
and there is not the sign that the company will have difficulty meeting its short-term
financial obligations, and consequently in running its day-to-day operations.
- Working capital turnover:
Cost of goods sold
+ Inventory turnover =
Average inventory
360
+ Inventory turnover period =
Inventory turnover
Sales + VAT out put
+ Accounts receivable turnover =
Average accounts receivable
360
+ Accounts receivable turnover period =
Accounts receivable turnover

According to table 19 – Appendix 4

Inventory turnover of the company declined slightly from 3.69 in 2015 to 2.6 in
2017. Inventory turnover measures how fast a company sells inventory. Although
inventory turnover decreased over three years, those indexes are more than 2.5. That
implies that the business sales are relatively good, inventory is not stagnant too much.
However, the company needs to improve sales operation.

17
 The receivables turnover is an accounting measure used to quantify a firm's
effectiveness in extending credit and in collecting debts on that credit. Between 2015
and 2017, accounts receivable turnover ranges from 10.57-19.70 which are high
receivables turnover ratios and increased continuously over three years. This indicated
that the company’s collection of accounts receivable is efficient, and that the company
has a high proportion of quality customers that pay off their debts quickly.
2. Long-term solvency risk
Table 20 – Appendix 4
Liabilities to assets ratio changes not significant over three years. It is approximate
26% in three years. This indicator is relatively stable that can see the debt management
company is relatively good. So the risk is low. Besides, liabilities to shareholder’s equity
ratio change over three years. It isn’t very high.
Long-term debt to long-term capital ratio and Long-term debt to shareholder’s
equity ratio are very low. In Long-term capital ratio, debt accounted for a small
proportion. So the company does not have to bear the burden of long-term debt. The risk
of the company is low.
Interest coverage ratio changes over three years. However, it is always higher 125.
Specially, it is 316.7 in 2016. It showed that EBIT’s company is available for payment
for Interest expense.
 The company has low long term solvency risk.
3. Bankruptcy prediction model
Z= 1.2T1 + 1.4T2 + 3.3T3 + 0.6T4 + 1.0T5
T1= Net working capital/Total assets (measure of liquidity)
T2= Retained earnings/Total assets (measure of cumulative profitability)
T3= EBIT/Total assets (measure of return on assets)
T4= Market value of equity/book value of total liabilities (measure of markrt leverage)
T5= Sales/Total assets (measure of sales generating potential of assets)
Z= 1.2T1 + 1.4T2 + 3.3T3 + 0.6T4 + 1.0T5
According table 21 – Appendix 4, Z in all three years are over 2.99. Specifically, Z is
6.76 in 2015, 9.07 in 2016 and 9.80 in 2017. With the analysis of Alman Z-score, the
company is in a safe area, “non-bankrupt sector”.

CHAPTER 5: BUSINESS VALUATION

In 2017, Forbes Vietnam publishes the list of 40 most valuable corporate brands.
Traphaco ranked 30th on the list with a brand value of $ 28.6 million. Traphaco has
more than 210 products registered in the market, of which 70% of products are from
natural medicines. Big contribution to sales Traphaco is a drug of typical medicinal
properties such as heroin, Boganic, and neuroleptics. Bleed cerebral hemorrhage -
Cebraton is currently the 4th and 13th most popular OTC drugs in the market. The
manufacturing and exclusively distributed good account for 80% Traphaco’s revenue
18
structure, increasing by 4% compared to 2016. This show that the company is focusing
on developing product with advantages of quality, brand name and high gross profit
margin.
In 2017, revenue reached 1,870 billion VND, increasing by 11 % compared to 2016,
market captitalization reached 4,800 billion VND 20 times of after tax profit.
In 2017, ROE and ROA of Traphaco ranked first compared to listed companies in the
same field.
TRA DHG IMP DMC OPC PME
ROA 22.35% 15.99% 8.01% 17.40% 9.52% 16.01%
ROE 24.41% 22.73% 10.07% 22.62% 15.68% 19.51%
ROS 13.73% 15.81% 10.07% 15.50% 9.09% 17.66%
In 2017, Traphaco continued to gain good indicators compared to the pharmaceutical
companies listed on the HOSE such as account receivable turnover. ROA, ROE; and
was one of the companies with high dividend payouts (30%).
Over the years, Traphaco has won many honors and awards, such as leading among the
top 10 pharmaceutical companies in Vietnam, Top 40 Most Valuable Company Brand
in Vietnam, Top 10 most famous brands in Vietnam, Top 10 Sustainable Firms Vietnam.

SUMMARY AND CONCLUSION

Financial analysis is more and more necessary and beneficial for businesses and
investors alike. This analysis has partly clarified the financial situation of Traphaco Joint
Stock Company.
As analyzed in micro-environment and macro-environment, the company has
many conditions for development. Nowadays, in Vietnam, pharmaceutical industry is
more and more concerned about significantly, which is a good opportunity for the
development of Traphaco.
The structure of the company's assets is good. The total amount of assets has
increased over the years, matching with the company in the conditions that the
economies are growing. In terms of capital structure, Traphaco has capital with high
autonomy and stability. The net working capital analysis over the years indicates that
the company's long-term resources are not just enough to finance long-term assets but
also a portion of short-term assets. The company has a good long-term financial balance.
In addition, Traphaco also obtained short-term financial balances. The efficiency of
using assets and capital of the company is relatively good. Strikingly, they are ROA,
ROE, over the years, approximate to industry average.
On the risk side, Traphaco is in a safe area. Business risk, financial risk in the short-
term or long-term is relatively low. The company is in the process of development. All
financial indicators have positive meaning.

19