1.

1
Balance Sheet
Balance sheet: is a statement which records the asset, liabilities, debt and
capital of on organization. The balance sheet is the only statement which
applies to a single point in time of a business' calendar year. A balance
sheet summarizes an organization or individual's assets, equity and
liabilities at a specific point in time. Individuals and small businesses tend
to have simple balance sheets. Larger businesses tend to have more
complex balance sheets, and these are presented in the organization's
annual report. Large businesses also may prepare balance sheets for
segments of their businesses. In addition, balance sheet is a
measurement of both long-term and short-term of staying power of the.
Therefore, manager and investor are given information about the ability to
pay back the liabilities or debt, how many asset and Capital Company
have through balance sheet. (Investopedia, 2016)
Purpose of Balance sheet
Another name for the balance sheet is the statement of financial position.
Creditors and interested stock investors use the balance sheet to
determine a company's financial standing because it lists what a company
owns and what it owes. The balance sheet contains summarized
information on a company's assets -- the things that it owns and its
liabilities -- the debts it has. When you subtract the company's liabilities
from the assets, what is left is called stockholder's equity, the amount that
is held by the company's owners or stockholders.
Formats of Balance sheet

Figure 1 Source:
Sheet-00a0.png

http://www.yourmomhatesthis.com/images/Balance-

Income Statement
Profit and loss statement (income statement): it reports all incomes,
expenses in order to calculate the profit of company in the period of time.
It gives information for internal and external stakeholder whether
company makes profit or lost in one specific period of time. Based on
income statement, manager can evaluate all kind of incomes and
expenditure to give decision in order to make profit for company
(Averkamp, 2016)
Purpose of Income Statement
Also called the profit and loss statement, or income and expense
statement, this document provides a snapshot of the company's
profitability during a specific period. An income statement includes a note
that says something similar to: "For the period covering January 1 through
January 31, 2013." Periods for reporting the financials are company
directed and could differ from company to company. One section of the
income statement is dedicated to the income and revenue summarized

into a sub-total for the period. The other half of the statement reflects the
expenses for the same period. The difference between the two numbers
determines whether the company was profitable or not during the stated
period. If expenses were higher than income, the company experienced a
loss during that business cycle.
Formats of Income Statement

Figure
2
Source:
http://principlesofaccounting.com/wp-staging/wpcontent/gallery/chapter-5/huntercompany.png
Cash flow statement
Cash flow statement: is a statement which gives more detail where a
business gets capital, investment from and how and where the firm uses
these capitals for. It is important for large company to prepare a cash flow
statement. Cash flow provides information on a firm's liquidity and
solvency and its ability to change cash flow in future circumstances,
additional information for evaluating changes in assets, liabilities and
equity. Furthermore, the cash flow statement is intended to improve the
comparability of different firms' operating performance by eliminating the
effects of different accounting methods and indicate the amount, timing
and probability of future cash flows. Moreover, the cash flow statement is
useful to determine the ability to pay debt or bills.
Purpose of Cash Flow Statement
The purpose of the cash flow statement or statement of cash flows is to
provide information about a company's gross receipts and gross payments
for a specified period of time.
Format of Cash Flow Statement:

Figure
2Source:
http://www.principlesofaccounting.com/chapter16/emersondirect.png
4.2
Impact of finance on balance sheet
Use more loan, loan increase in balance sheet.
Use more money of the owner, owner capital will increase in balance
sheet
Impact of finance on income statement
Use more loan, interest expense will increase in income statement.
However, the company can take advantage of corporation tax deduction.

Use more money of the owner, no interest expense but dividend will
increase in income statement.
Impact of finance on Cash flow statement
If company use more owner equity and money from loan, the financing
activities will increase. But the money have to pay for interest will
increase so that the operating activities will change.

4.3
Comparison criteria
Income Statement

Balance sheet

Cash flow statement

Sole trader
Companies
- Sole Trader has to - Companies have to
pay Personal income pay business tax, so in
tax (higher than the a companys income
business
tax
of statement
will
have
companies), so in a Business tax value
sole trader income -Have
shareholders
statement will have dividend
Personal income tax
value
-Dont have dividend
- Owner equity, so sole - Shareholders, so in the
trader balance sheet companys
balance
will have owner equity sheet
will
have
value
shareholders capital.
No difference

4.4 Interpret financial statements using appropriate ratios and

comparisons, both internal and external.
I choose two company to compare in this comparison are Hoa Phat
Group Joint Stock Company and Ha Tien 1 Cement Joint Stock
Company. All information of these two companies are got from
trusted website: Vietstock.vn
* Rate of return on average equity (ROE) comparison between Hoa Phat
Group Joint Stock Company and Ha Tien 1 Cement Joint Stock Company
from 2013 to 2014:
Hoa Phat:
Rate
return
average

2014
of 29.53
on

2013
22.23

equity
(ROEA) (%)
Ha Tien 1:
2014
of 8.82
on

Rate
return
average
equity
(ROEA) (%)

2013
0.1

According to the ROEA from 2013 to 2014 of Hoa Phat and Ha Tien
1, the value of Hoa Phat increased from 2013 to 2014, so did Ha Tien 1.
Until 2014,Hoa Phats ROEA is 29.53%, which means Ha Tien 1get 29.53%
profit on per paying that they used for their capital, which is higher than
ROEA of Ha Tien 1 in 2014 about more than three times (29.53 > 8.82),
which means they get 8.82% profit for each amount of payment that they
used for their capital. With the interest for the deposit at the bank per
year is 8%, both Hoa Phat and Ha Tien 1 are investing more profitable
than save money in the bank. If they can maintain these rate numbers,
they should invest for the following years.
* Rate of return on average total assets (ROA) comparison between Hoa
Phat and Ha Tien 1 from 2013 to 2014:
Hoa Phat:
2014
Rate
of 13.92
return
on
average
total assets
(ROAA) (%)

2013
9.29

Ha Tien 1:
2014
Rate
of 2.37
return
on
average
total assets
(ROAA) (%)

2013
0.02

According to the ROA from 2011 to 2014 of Hoa Phat and Ha Tien 1,
the ROAA of both Hoa Phat and Ha Tien 1 increased in two years. ROAA of

Hoa Phat is 13.92 % and Ha Tien 1 is 2.37% in 2014, which means in this
year, Hoa Phat has got more profit in their businesses much more than Ha
Tien 1 in 2014 which is about more than 5 times. Which means that Hoa
Phat get more profit on total assets than Ha Tien 1 do. These rate
numbers also showed that Ha Tien 1is not a hard competitor to Hoa Phat.
These two company exploit the total assets efficiently.
* Solvency Interest comparison between Hoa Phat and Ha Tien 1 in 2013
and 2014:

Hoa Phat:
Solvency
Interest
(times)

2014
1.3

2013
1.11

2014
1.76

2013
1.01

Ha Tien 1:
Solvency
Interest
(times)

According to the Solvency Interest of Hoa Phat and Ha Tien 1, both

of them can pay for their loans in 2013 and 2014 (values are higher than
1). In 2014, FPT Corp. can pay for their loans with the solvency 15.8 times,
and ELC can also pay for their loans with the solvency 11.44 times. But
FPT Corp. has higher solvency than ELC, which means FPT Corp.
affordability is higher than ELC.
* Debt ratio on total assets comparison between Hoa Phat and Ha Tien 1
in 2013 and 2014:
Hoa Phat:
2014
Debt ratio on 45.83
total assets
(%)
Ha Tien 1:

2013
58.46

2014
Debt ratio on 62.74
total assets
(%)

2013
70.67

According to the Debt ratio on total assets of Hoa Phat and Ha Tien
1. has lower Debt on total assets than Ha Tien 1 in 2014 (45.83% <
62.74%), which means Hoa Phat has borrowed less than Ha Tien 1 has
borrowed for investing in their business. The rate number 45.83% of Hoa
Phat Debt on total assets is not high and it can considered to be average
rate number, which showed that their total debt represented 45.83% of
their total assets. With Ha Tien 1, this number is 62.74% which can be
considered to be higher than normal but is still safe, Ha Tien 1s debt ratio
on total assets means their total debt represented 62.74% of their total
assets, still lower than FPT Corp. Both two companys debt ratio on total
assets has decreased from 2013 to 2014 which means that both company
has good business and get profit.
* Ratio of Debt on Equity comparison between Hoa Phat and Ha Tien 1 and
2013 and 2014:
Hoa Phat:
2014
Ratio of Debt 57.2
on
Equity
(%)

2013
79.74

Ha Tien 1:
2014
Ratio of Debt 194.06
on
Equity
(%)

2013
257.23

According to the Ratio of Debt on Equity of Ha Tien 1 is much more

higher than the Ratio of Debt on Equity of Hoa Phat about more than 3
times (194.06% > 57.2%) in 2014, which means that the number of Ratio
of Debt on Equity of Ha Tien 1 is much higher than Hoa Phat means that
the capital of Ha Tien 1 is from loan more than from owners than that of
Hoa Phat. The lower rate of Hoa Phat in 2013 and 2014 means Hoa Phat
didnt have to borrowed too much to invest to their business, they use
their own equity from the shareholders, business owners contrary to the 3
times rates of Ha Tien 1 which is risky to the business. The higher rate of
Ha Tien will threat to the bankrupt of business because of the money from
loan is too high.