FINANCIAL ANALYSIS ASSIGNMENT

Subject: Business Finance

 FINANCIAL STATEMENT

Wall Street Securities Company (WSS)

Unit: MIllion Dong

Year Year Year

201701/0 201801/0 201901/0
1- 1- 1-
12/31KT/ 12/31KT/ 12/31KT/
Balance Sheet ĐL ĐL ĐL
Current assets 562,683 618,503 524,957
Cash and cash equivalents 159,309 68,579 75,938
Short-term investments 342493 488358 311964
Short-term receivables 3,088 4,333 5,469
Other short-term assets 57,793 57,233 131,586
Non-current assets 30,868 36,33 35,792
Long-term investments 14 19,75 19,75
Fixed assets 669 517 249
Other long-term assets 16,199 16,063 15,793
Total assets 593,551 654,833 560,748
Liabilities 46,449 62,738 48,559
Short-term liabilities 46,449 62,738 48,559
Long-term liabilities
Owner's equity 547,102 592,094 512,189
Charter capital 503 503000 503000
Financial reserves 8,354 8,354 8,354
Retained earnings 35,748 80,741 835
Minority interest
Total owner's equity and liabilities 593,551 654,833 560,748

Year Year Year

201701/0 201801/0 201901/0
1- 1- 1-
12/31KT/ 12/31KT/ 12/31KT/
Income Statement ĐL ĐL ĐL
Net revenue 62,058 91,693 26,995
Operating expenses 38,052 36,517 96,040
Gross profit 24,005 55,176 -69,045
General and Administrative expenses 7,098 7,846 8,067
Operating profit 16,082 44,952 -80,245
Other profit -953 40 339
Profit/Loss of investments in associates and
joint ventures
Profit before tax 15,129 44,993 -79,905
Net profit after tax 15,129 44,993 -79,905
Profit after tax for shareholders of parent
company 15,129 44,993 -79,905
Earning per share (VND) 301 894 -1,589

Year Year Year

201701/0 201801/0 201901/0
1- 1- 1-
12/31KT/ 12/31KT/ 12/31KT/
Statement of Cash Flow (Direct) ĐL ĐL ĐL
I. CASH FLOW FROM SECURITIES TRADING
ACTIVITIES
Net cash flows from securities business 48,971 -96,980 90,360
II. CASH FLOW FROM INVESTING
ACTIVITIES
Net cash flows from investing activities 1,000 -5,750 -72,000
III - CASH FLOWS FROM
FINANCING ACTIVITIES
Net cash flows from financing activities 43,000 12,000 -11,000
Net cash flows during the period 91,973 -90,730 7,360
Cash and cash equivalents at beginning of the
period 67,336 159,309 68,579
Cash and cash equivalents at end of the period 159,309 68,579 75,938
 1. About the company

Wall Street Securities Joint Stock Company (WSS) is a company

based in Vietnam involved in providing investment services. It provides
security brokerage services, security investment advisory services and
depository services. The company is also involved in stock trading and
provides other corporate financial advisory services, such as research
and analysis services, financial restructuring services and advisory
services for initial public services, share offerings, and mergers and
acquisitions.
The establishment of Wall Street Securities Joint Stock Company is
the first step in implementing the plan to build a leading financial
corporation in Vietnam.
The company is honored to become one of the securities
companies participating in Vietnam’s stock market with wide range of
services: Securities brokerage, securities investment advisory, securities
Depository, repurchase agreement (Repo), research & Analysis,
securities underwriting, merger & Acquisition (M&A) advisory
Some outstanding strengths of WSS: are shown in the leading
position in the application of information technology in the field of
securities business and corporate governance; The company has a
strategic vision; Their offices located in some financial centers of many
cities. WSS fully recognizes the importance of human resources in the
company’s path to success. Currently, the Company has recruited a
team of high skilled, high energy and hardworking staffs and
collaborators in the fields of finance, banking, securities and information
technology experts. Most of WSS ‘professionals have graduated from
well-known local and foreign universities.
In the market, there are several companies that also have the same
services in the field of securities, some of the chief competitors of WSS
are:
- BIDV Securities Joint Stock Company
- Phuong Nam Securities Corporation
- SHB Securities Joint Stock Company
- SJC Securities Corporation
- FPT Securities Joint Stock Company
2. Common size statements
 Year Year Year
201701/0 201801/0 201901/0
1- 1- 1-
12/31KT/ 12/31KT/ 12/31KT/
Vertical Analysis of Balance Sheet ĐL ĐL ĐL
Current assets 94.80 94.45 93.62
Cash and cash equivalents 26.84 10.47 13.54
Short-term investments 57.70 74.58 55.63
Short-term receivables 0.52 0.66 0.98
Other short-term assets 9.74 8.74 23.47
Non-current assets 5.20 5.55 6.38
Long-term investments 2.36 03.02 3.52
Fixed assets 0.11 0.08 0.04
Other long-term assets 2.73 2.45 2.82
Total assets 100.00 100.00 100.00
Liabilities 7.83 9.58 8.66
Short-term liabilities 7.83 9.58 8.66
Long-term liabilities 0.00 0.00 0.00
Owner's equity 92.17 90.42 91.34
Charter capital 84.74 76.81 89.70
Financial reserves 1.41 1.28 1.49
Retained earnings 06.02 12.33 0.15
Minority interest 0.00 0.00 0.00
Total owner's equity and liabilities 100.00 100.00 100.00

From the Balance Sheet, we can see that almost all the assets that
WSS has are current assets and they remain the same through the
years. However, its compositions did have some significant changes.
Cash and cash equivalents were accounted for one-third of short-term
assets in 2017 but were cut off over a half in the next year. Meanwhile,
the current investments went from 57.7% to 74.6% in just one year, but
shortly after went back to where it was in 2017. Not only invest for a
short period, but WSS also invests in the long-term. The company keeps
the risks as low as possible so the non-current investment rate only
takes about 10% part of the short-term one and remains constant. WSS
does not have any long term loans. The statistics do imply that there are
slight changes in the current obligations but it still accounts for a
minority, which can be said that the company is being conservative in
managing its debts. On the other hand, the portion of charter capital is
quite high. This rate maybe is too high, which is not a very good sign
because it may lead to higher license tax and affect the other
transactions. We witness significant changes in retained earnings,
especially in the most recent year, the number almost equals zero It can
be said that 2019 was a bad year for WSS since it does not gain
anything after paying dividends for its shareholders.

Year Year Year

201701/0 201801/0 201901/0
1- 1- 1-
12/31KT/ 12/31KT/ 12/31KT/
Vertical Analysis of Income Statement ĐL ĐL ĐL
Net revenue 100,00 100,00 100,00
Operating expenses 61,00 40,00 356,00
Gross profit 39,00 60,00 -256,00
General and Administrative expenses 11,00 9,00 30,00
Operating profit 26,00 49,00 -297,00
Other profit -2,00 0,00 1,00
Profit/Loss of investments in associates and
joint ventures 0,00 0,00 0,00
Profit before tax 24,00 49,00 -296,00

Look in the Income Statement of WSS, we can see that operating

expenses account for a significant part of the revenue. In the first two
years, the proportion is about two to three out of five of sales, but
recently it sharply climbed up to 3.5 times of the revenue, made the
gross profit drop to 250% under zero. Operating profit percentage and
profit before tax have the same case with gross profit. Besides, the other
profit was witnessed to have a slight fluctuation, going from -2% to 1%,
yet it nearly does not leave any effect. The association is losing a lot of
money due to the operating expenses were triple that of the previous
year.

3. Ratios Analysis
 Year Year Year
201701/0 201801/0 201901/0
1- 1- 1-
12/31KT/ 12/31KT/ 12/31KT/
RATIOS Unit ĐL ĐL ĐL
Current Ratio Times 12.11 9.86 10.81
Quick Ratio Times 10.87 8.95 8.10
Cash ratio Times 3.43 01.09 1.56
Debt to Equity Ratio % 8 11 9
Equity Ratio % 92 90 91
Debt Ratio % 92 90 91
Fixed asset turnover Times 75.17 154.57 70.48
Total asset turnover Times 0.11 0.15 0.04
Gross profit margin % 38.68 60.17 -255.17
Net profit margin % 24.38 49.07 -296.00
ROE % 2.8 7.9 -14.47
ROA % 2.68 7.21 -13.15

a. Liquidity Analysis

The current ratios of WSS were noticed some fluctuations, yet in all
3 years, they are too high. It means that the company can cover their
obligations but on the other hand, it indicates the inefficiency of using its
current assets or its short-term financing facilities and problem in
working capital management. The same situation happens to quick ratio.
It can be said that the association is able to pay off its short-term debts
without having to sell any capital or long-term assets. In addition, the
acid ratios fluctuate contemporaneously with current ratios, which
implies that WSS does not rely much on inventories and they remain the
same through years. On the contrary, the cash ratios are much much
smaller, but it still higher than the rate of 1:1. As we can see about the
ratios, WSS does keep quite a lot of cash on hand. Overall, it can be
said that the liquidity of the company is very high, which describes the
abilities of paying bills in a timely manner.

b. Solvency Analysis
 The debt to equity ratio is quite low and it does not change much in
the three year period. This means that WSS relies less on debt and
more on equity to support its business. Debt carries with it the
requirement to make regular payments and to pay interest, so a heavy
debt load can mean increased risk. Under equity financing, ownership is
given up, but equity financing allows the company to control cash
outflows, such as dividends paid. The debt to asset ratio has the same
meaning and the same fluctuations. The minor portion indicates a
smaller degree of leverage, and stays away from financial risk. Contrary
to those two, equity accounts for about nine out of ten of the assets, in
other words, WSS’ investors owned about nine out of ten of the
company. Overall, the solvency ratios can be described as quite good,
this is a good choice to invest in this association.

c. Asset Management

The fixed asset ratio of this organization is way too high, especially
in 2018 this portion was even double the last year. We can tell that this
company is using the fixed assets very efficiently and effective to
generate sales. However, the plant and equipment are probably
breaking down because WSS are operating over capacity. Completely
opposite to the enormous number of fixed asset ratio, the total asset
ratio only remain about 0.1 to 1. The company is using some of the
assets such as inventories, receivables or working capital inefficiently in
creating sales. This low ratio indicates unnecessary blocking of fund in
assets resulting in idle capacity. WSS should keep this ratio about 2:1
instead of relying too much on fixed assets.

d. Profitability Analysis

In 2017 and 2018, the company was doing very well, both gross and
net profit margin is quite high, in 2018 the number even doubled the
previous year. The organization was earning about 0.3 profit per dollar
after excluding all expenses, it indicated higher efficiency of core
operations, meaning it could still cover operating expenses, fixed costs,
dividends, and depreciation, while also providing net earnings to the
business. Nevertheless, in the most recent year, 2019, those number
went from a positive number to an huge negative number, approximate
-300% in net profit margin and -250% in gross profit margin. In other
words, for each dollar of revenue, WSS lost $3 in net profit. The
company is losing money and it may because of high cost of goods sold,
which can be attributed to adverse purchasing policies, low selling
prices, low sales, stiff market competition, or wrong sales promotion
policies. Of course the same thing happen to the ROA and ROE ratios.
The ROA ratio specifically reveals how much after-tax profit the
company generates for every one dollar of assets it holds. It also
measures the asset intensity of the business. The lower the profit per
dollar of assets, the more asset-intensive a company is considered to
be. WSS with a low return on equity are usually less capable of
generating cash internally, and therefore less independent on debt
financing.