Fundamental of Financial

Management

REPORT

FPT Corporation

OVERVIEW

Purpose:
 Conduct financial analysis for FPT corporation using FPT’s financial
report of the latest 5 years (2013, 2015, 2016, 2017, 2017).M
 Main contents:s
1. Introduction of the industry and the company’s main business
lines, revenue driver(s), competitive advantages, name of main
competitors.
2. Financial analysis : The company’s financial ratios :
 Profitability ratios
 Asset utilization ratios
 Liquidity ratios
 Solvency ratios
 Market ratios
3. Comparison of 2016 and 2017's ratios
Company: FPT Corporation
I. INTRODUCTION OF
 FPT CORPORATION

1. History:
 Established on September 13, 1988, with IT and Telecommunications as its
core business sectors, FPT has provided services to 63 provinces and cities in
Vietnam and has constantly expanded globally to a current presence in 21
countries
 In 1988: Taking the first steps with 13 founders
In 1990: Selecting IT as the core business sector
1994 – 1997: Entering the distribution sector with the goal of bringing new
technology products in Vietnam
In 1999: Entering foreign markets with software outsourcing as strategic
direction
In 2000: Receiving ISO 9001 certification, establishing the foundation or a
comprehensive management system
2. Main Activities:
 FPT Corporation is a Vietnam-based technology conglomerate. It operates
through two segment Information Technology & Telecommunication (IT&T),
and Investments.
 The IT&T segment comprises:
- Telecommunications, including individual and household Internet services,
corporate Internet leased line services, domestic and international
telecommunication services
- Digital content, including online information services for corporate and
individual clients; Software development
 - System integration, including the provision of software application
solutions
- IT-related services
- Education, including computer training and business administration
education at college, university and post-graduate levels, and Manufacture,
distribution and retail of IT products, including hardware, software, mobile
phones, digital cameras and others.
 The Investment segment comprises portfolio management and
infrastructure development
3. Operation network:
 FPT is now present in 21 countries all over the world
With its presence in 21 countries, FPT can simultaneously use both inside and
outside resources to most efficiently provide services/solutions to customers.
 Currently, FPT is providing services to more than 400 giants around the world,
50 of which are among the Fortune 500. FPT is also a senior partner of the
leading technology firms namely Microsoft, Amazon Web Services, SAP...
4. Strategic Partners of FPT:

- Amazon - Cisco - Tripwire

- Microsoft - IBM - Unilever
- Apple - Agilis - Deutsche bank
- Symantec - Oracle - Mizuro
- SAP - Foxconn
5. Distribution network:

Headquarters FPT Cau Giay Building

Duy Tan Street, Dich Vong Hau Ward,
Cau Giay District, Ha Noi
Shares Outstanding 459.34 million
Assets 29,912.45 billion
Equity 11,448.01 billion
Market Cap 21,772.92 billion
Employees 26,818
Branches 17
Industry Telecommunications, Software
Web Address www.fpt.com.vn
6. Stock Information:

II. FINANCIAL
ANALYSIS
Ratio analysis is a quantitative analysis of the relationship among selected items in a
company’s financial statement. Ratio analysis is used to evaluate financial
performance such as, liquidity, profitability and solvency.

1. Profitability ratios
a) Gross profit margin (GPM)

The profitability ratios is a financial metric used to assess a company's financial

health and business model by revealing the percentage of money left over
from sales after accounting for the cost of goods sold (COGS).

Sales−COGS
GPM = Sales

Object 5

This ratio measures the gross profit earned on sales and reports how much of each
sales is available to cover operating expenses and contribute to profits. After a slight
drop from 2013 to 2014, the gross profit margin of FPT had an upward trend.To be
more specific, in 2014, the GPM of FPT was about 19.78% and kept going up to
21.29% in 2015, 23.13% in 2016 and 23.84% in 2017. Which is a good indication of
financial health for the company.

b) The return on asset (ROA)

ROA is an indicator of how profitable a company is relative to its total

assets. It also shows how effective the business is converting the money it
has to invest into net income.

Net Income
ROA = Total Assets ( Average Total Assets)

Object 9

In the graph, ROA increased slowly from 6.48% in 2013 to 6.9%1 in 2014. Then there
was a moderate rise to 7.94% in 2015. After that the ROA ò the company grew sharply
until 2017 the percentage was 10.68 which was an impressive number. This indicates
the effectiveness of the business in five years.
 c) The return on equity (ROE)

ROE is the amount of net income returned as a proportion of shareholder

equity. It measures a corporation’s profitability by revealing how much profit a
company generates with the money shareholders have invested.

Net Income
ROE = Average Total Equity

The return on equity (ROE)

25 23.75
21.34
19.3
20 18.23 18.41

15

10

0
2013 2014 2015 2016 2017

The chart shows that FPT’s ROE fluctuated slightly in five years. In detail, from 2013
to 2014, there was a slow decrease by 1.07%. Then in 2015, the ROE of FPT went up
to 21.34% after that it went down to 18.41% in 2016. However, in 2017 ROE has
upward trend. The ROE went up steeply to 23.75% and this percentage was the
highest point over five years (2013– 2017).
 d) The operating profit margin (OPM)

OPM is the profit that a business earns from its operating activities. It reveals
the financial viability of the core operations of a business before any
extraneous financial or tax-related effects. It is expressed as a propotion of
sales and shows the efficiency of a company controlling the costs and expenses
associated with business operations.

EBIT
OPM = Sales

The operating profit margin (OPM)

12

9.83
10
9.28

8 7.48 7.37 7.45

0
2013 2014 2015 2016 2017

FPT’s operating profit margin decreased slightly by 1.8% from 2013 to 2014. Then it
maintained in the next three years (In 2014, the percentage was 7.48%, 2015 was
7.37% and in 2016 was 7.45%). However, between 2016 and 2017, there was a
steeply rise from 7.45% to 9.83%. This shows a positive sign in the operating of the
company.
 e) The net profit margin (NPM)

NPM is the ratio of net profits to revenues for a company or business segment.
NPM is higher shows that a firm is more efficient at converting sales into actual profit.
NPM analysis is not similar to gross profit margin. Under gross profit, fixed costs are
excluded from calculation. NPM measures how successful a company has been at the
business of marking a profit on each dollar sales.

Net Profit
NPM = Net Sales

The net profit margin (NPM)

9
8.27
7.64
8
7 6.37 6.42 6.52
6
5
4
3
2
1
0
2013 2014 2015 2016 2017

NPM had the same trend as OPM. There was a downward trend from 2013 to 2014
(7.64%- 6.37%). It was stable in three years (2014: 6.37%, 2015: 6.42% and 2016:
6.52%)- a slow increase but not much. After that NPM climbed considerately
between 2016 and 2017.

2. Liquidity ratios:
Liquidity Ratios measures the ability of the corporation to meet the firm current
financial obligations, meet unexpected short-term needs for cash.

a) Net working capital :

Net working capital is often used to test the firm capacity to pay its current liabilities.

Net Working Capital = Current Assets – Current

Liabilities

Net Working Capital

6,000,000
4,959,593
5,000,000 4,479,007
3,839,503 3,991,454
4,000,000

3,000,000
2,121,479
2,000,000

1,000,000

0
2013 2014 2015 2016 2017
years
This line chart illustrates an upward trend in the net working capital. After a gradual
decline by 1,718,024 VND from 2013 to 2014. The NWC of FPT increased
significantly to 3,991,454 VND in 2015, 4,479,007 VND in 2016 and 4,959,593 VND
in 2017. Based on this, FPT has proved that FPT assets is in increasing trend and the
corporation has ability to pay current liabilities.

b) Current ratio :

The current ratio, sometimes called the working capital ratio or bankers’ ratio and
measures a company’s ability to pay its current liabilities.

Current Assets
Current Ratio= Current Liabilites

CURRENT RATIO
3
2.73
2.5

1.5 1.27 1.45

1.42 1.26

0.5

0
2013 2014 2015 2016 2017

From the graph, FPT’s current ratio shows a downward trend over five years. In detail,
there was a moderate growth by 1.31% ( 2013- 2014) then dropped significantly from
2.73% to 1.26% in the next two years. From 2016 to 2017, the current ratio increased
slightly from 1.26% to 1.45% but this rise was not strong enough to show the
improvement.

c) Quick ratio :

Quick Ratio, (acid-test ratio) is a ratio that measures the short term paying debt
ability of a company.

Quick Assets
Quick Ratio= Currents Liabilites

QUICK RATIO
1.6

1.4 1.35

1.2
1.06
0.95 0.99
1 0.91
0.8

0.6

0.4

0.2

0
2013 2014 2015 2016 2017

As seen in the chart, quick ratio experienced a slow decreasing trend by 0.15% from
2013 to 2015 and slight increasing trend from 2015 to 2016 from 0.91% to 0.99%.
After that the quick ratio increased substantially to 1.35% in 2017. This shows the
ability of paying debt in short- term of the company has improved.

3. DEBT MANAGEMENT RATIOS

Solvency Ratios is the ability to meet its financial obligations (debts), these ratios
measure the ability of a company to survive for over a long period of time
 a) Ratio of fixed-asset to long term liabilities :

The Ratio of Fixed Assets to Long-term Liabilities is a solvency measure that

indicates the margin of safety of the note-holders or bondholders. It also indicates
the ability of the business to borrow additional funds on a long-term basis. The
bigger the ratio's value, the better the company are able to cover the long-term
liabilities, and also the debt capacity of the company.

Ratio of Fixed-Assets to Long-term Liabilities =

Fixes Assets (net)
Long−term Liabilities

Ratio of fixed-asset to long term liabilities

12 11.24
10.63
10

7.96
8

6
4.33 4.61
4

0
2013 2014 2015 2016 2017

With this line chart, FPTs’ ratio slowly rose 0.61% in 2014. However, in 2015, there
was a sharp drop from 11.24% to 4.33%. There was a problem about the debt of FPT.
But this situation was improved. Between 2015 and 2016, the ratio went up slowly
from 4.33% to 4.61% and after that one year, it increased moderately from 4.61% to
7.96%. This shows a positive sign of FPT in improvement.

b) Ratio of liabilities to Stockholder Equity

Ratio of Liabilities to Stockholder Equity is the relationship between the total claims
of the creditors and the owners, the ratio of liabilities to stockholders’ equity, is a
solvency measure that indicates the margin of safety for creditors.
Ratio of Liabilites to Stockholder Equity =
Total Liabilities
'
Total Stockholder s Equity

Ratio of liabilities to Stockholder Equity

1.8
1.69 1.61
1.6 1.56
1.4
1.29
1.2
1
0.89
0.8
0.6
0.4
0.2
0
2013 2014 2015 2016 2017

The FPT ratio in this graph fluctuated. The ratio rose from 1.29% to 1.69% in 2013
and 2014. Then it dropped to 1.56% in 2015 and grew to 1.61% in 2016. However, in
2017 it decreased significantly to 0.89%. Overall, the ratio of liabilities of Stockholder
Equity was in a downward trend.

c) Debt ratio

Debt Ratio measures the extent of a company’s leverage, the ratio of total debt to total
assets. It is the proportion of a company’s assets financed by debt.

Total Debt
Debt Ratio = Total Assets
 Debt ratio
0.6
0.53
0.5 0.49

0.4
0.34 0.33
0.3

0.2
0.18

0.1

0
2013 2014 2015 2016 2017

The graph illustrates that the debt ratio decreased gradually. In details, it was 0.53% in
2013 and then went down to 0.18% in 2017. Hence, it is clear that the trend goes
downward, which is a good sign for the corporation.

d) Interest Coverage Ratio

The Interest Coverage Ratio is used to determine how easily a company can pay
interest expenses on outstanding debt. The ratio is calculated by dividing a
company's earnings before interest and taxes by the company's interest
expenses.

EBIT
Interest Coverage Ratio = Interest Expense
 Interest Coverage Ratio
25

2020

15.8
15

11.86 12.55
10
9.05

0
2013 2014 2015 2016 2017

In the first 4 years, the trend went down noticeably from 20% in 2013 to 9.05% in
2016. In the following year, it rose up to 12.55% which may lead to increasing trend
in the future.

4. Asset Utilization Ratios

Assets utilization ratios measures the total of a company’s sales or revenues

earned relative to the assets of a company own. These ratios also indicate the
efficiency with which a company is deploying its assets in generating revenue.

a) Account Receivable Turnover

Account Receivable Turnover is the relationship between sales and accounts

receivable and it collects accounts receivable as quickly as possible improves a
company’s liquidity. Because of the time value of money principle, a firm loses
more money the longer it takes to collect on it credit sales.

Net Sales
Account Receivable Turnover = Average Account Receivable
 Account Receivable Turnover
10
9 8.95
8.51 8.66
8
7
6.53
6 6.15

5
4
3
2
1
0
2013 2014 2015 2016 2017

There was an overall upward trend during the period given. Standing at 6.53 % in
2013, FPT's Receivable Turnover dipped at 6.15 % in the next year before peaking at
8.95 % two years after. The figure then slipped back slightly before climbing back to
8.66 % at the end of the period. In conclusion, FPT may have poor collecting
processes, a bad credit policy, or a bad customers or customers with financial
difficulties.

b) Number of Days’ Sales in Receivable

Number of Days’ Sales in Receivable is the number of days’ sales in receivables

is an estimate of the length of time (in days) the accounts receivable have been
outstanding earning interest for the corporation.

Average Account Receivable

Number of Days’ Sales in Receivable = Average Daily Sales
 Number of Days’ Sales in Receivable
70
59.35
60
55.7
50
42.89
40 40.72 42.15

30

20

10

0
2013 2014 2015 2016 2017

Overall, the figure decreased during the period given. In the first year, FPT's Number
of Days' Sales stood at 55.7 days and reached a high of 59.35 days a year later. There
was a sudden drop in 2015 to 40.72 days, followed by small fluctuations at around 42
days during the last two years. Number of days’ sales in receivables indicate that the
company should improve the policies so as to ensure the timely collection of imparted
credit that is not earning interest for the corporation.

c) Inventory Turnover

Inventory turnover is the relationship between the volume of goods

(merchandise) sold and inventory. The purpose of this ratio is to assess the
efficiency of a firm in managing its inventory. A low turnover implies weak sales.
A high ratio implies either strong sales and/or large discounts.

Cost of Goods Sold

Inventory Turnover = Average Inventory
 Inventory Turnover
14
11.83
12

10

8
6.19 6.33
6.46
6 5.76
4

0
2013 2014 2015 2016 2017

By looking at the five data points, there appears to be a clear upward pattern in FPT's
Inventory Turnover. During the first 4 years, there was a minor shift in value of the
ratio at around 6 %. However, while beginning at 6.46 % in 2013, the figure nearly
doubled its value to 11.83 % in the latest year. A low turnover implies weak sales. A
high ratio implies either strong sales and/or large discounts.

d) Number of Days Sales in Inventory

The number of Days’ Sales in Inventory is a rough measure of the length of time
it takes to purchase, sell, and replace the inventory. Generally, it is important to
note that the numbers of days’ sales in inventory varies from one industry to
another.

Average Inventory
Number of Days Sales in Inventory = Average Daily Cost of Goods Sold
 Number of Days Sales in Inventory
70
63.37
56.5
60
58.59
57.65
50

40

30 30.85

20

10

0
2013 2014 2015 2016 2017

Number of days from 2013 to 2016 had a tendency to decrease. In 2013, the number
was 56.5 days and then increased to 63.37 days in 2014. Since then, it slowly went
down in the next 3 years. By 2017, the number of days dropped to 30.85 days, which
was less than that in 2016 approximately 26.8 days and 27.95 days in 2013.

e) Total Assets Turnover

Asset Turnover ratio measures the value of a company’s sales. The Asset
Turnover ratio can often be used as an indicator of the efficiency with which a
company is deploying its assets in generating revenue. , the higher the asset
turnover ratio is, the better the company performs.

Net Sales
Total Assets Turnover = Average Total Assets
 Total Assets Turnover
1.6

1.56 1.56
1.55
1.54

1.5

1.45
1.44

1.4 1.4

1.35

1.3
2013 2014 2015 2016 2017

Total assets Turnover from 2013 to 2017 had dramatic fluctuations. By 2013 it started
with 1.54 % then went down to 1.44 in 2014. From 2014 to 2015, it rose 0.22 %. To
2016, it fell down again with 0.16 % but a sharp increase in 2017 when it went back to
1.56 %, which was nearly as the same as that in 2013, showing some improvements of
the business.

f) Fixed Assets Turnover

The Fixed-Asset Turnover ratio is used by analysts to measure operating

performance. A higher fixed-asset turnover ratio indicates that a company has
more effectively utilized investment in fixed assets to generate revenue. This ratio
measures how able a company is to generate net sales from fixed-asset
investments, etc.

Average
Fixed Assets Turnover = Net Sales
Assets ¿
¿
 Fixed Assets Turnover
9.6

9.4
9.34
9.2

9 8.9
8.82
8.8
8.67
8.6 8.57
8.4

8.2

8
2013 2014 2015 2016 2017

The fixed assets turnover was 8.82 % in 2013, then declined slightly to 8.57 % in
2014. After that, it grew moderately up to 9.34 % in 2015. Hence, the trend in the first
3 years was kind of fluctuating. However, during 2016 – 2017 period, the trend went
down and ended up at 8.67 % in 2017.

5. Market Ratio

When a stock analyst wants to understand how other investors value a

company, they look at market ratios. These measures all have one factor in
common; they're evaluating the current market price of a share of common
stock versus an indicator of the company's ability to generate profits or assets
held by the company.

a) Price / earnings (P/E) ratio:

Price earnings ratio measures the amount investors are willing to pay for each Riyal
of the firms’ earnings, reflects the investors’ expectations concerning the firms’ future
prospects. Higher PE ratio shows investor optimism towards the company or vice
versa.

Price per share

P/E ratio = Earnings per share
 Price / earnings (P/E) ratio
10.5 10.34
10.15
10 9.94

9.5
9.5

8.98
9

8.5

8
2013 2014 2015 2016 2017

In the period of 2013 - 2015, the ratio rose moderately from 8.98 % to 9.94 %. For the
next 2 years, it went up slightly and reached the rate of 10.34 % in 2017. In general,
P/E ratio had a tendency to increase considerably, which proved that investors still
believed in FPT corporation in crisis time and that it would be better soon resulting in
high dividends.

b) Earnings per share (EPS):

Investors want know how much profit is generated by each share they hold that is
provided by EPS. The market fetches higher prices for high profit growth companies.
Small capitalization companies with high profits will naturally show attractive EPS.
 Earnings per share (EPS)
7000

6000
5858
5000 4746 5129
4386
4000
3625
3000

2000

1000

0
2013 2014 2015 2016 2017

In 2013, the earnings per share was $5858. However, it decreased gradually and ended
up at $3925 in 2016. The EPS in 2017 started to grow remarkably and successfully
reached $5129, which was just less than that in 2013 about $729.

Reference: https://fpt.com.vn/vi/nhadautu/cong-bo-thong-tin/bao-cao-tai-chinh?
fbclid=IwAR1KmENFLYBYZJI2UqQ9dc5VtfilzIgQ_R1zA9AjIZneL0XcstoFpCOLy
Pc
III. COMPARISION OF
2016 AND 2017’S
RATIOS

1. Profitability ratios
Items 2016 2017

ROA (%) 9.22 10.68

ROE (%) 18.41 23.75
NET PROFIT
6.52 8.27
MARGIN (%)
OPERATING
7.45 9.83
MARGIN (%)
GROSS PROFIT
23.13 23.84
MARGIN (%)

The table illustrates the profitability ratios of the 2 years 2016 and 2017. It is
clear that the data of 2017 increased much compares to that in 2016. In details,
the percentage of ROA, ROE, Net profit margin and Operating margin in 2017 rose
markedly; in the gross profit margin the number somehow remained the same,
only 0.71 % difference. As a result, FPT in 2017 is more efficient at converting
sales into actual profit and making much profit after paying for variable costs of
production than in 2016. Also, higher ROE and ROA mean that it generates more
profit with the money shareholders have invested and converts the money it has
to invest into the net income more effectively. Overall, there is no doubt an
improvement in the way they operated the corporation. Therefore, we can
conclude that FPT had chosen the suitable business model to improve their
financial health.

2. Liquidity ratios

Items 2016 2017

NET WORKING
4,479,007 4,959,593
CAPITAL
CURRENT RATIO 1.26 1.45
QUICK RATIO 0.99 1.35
Liquidity ratios in 2017 show a slight improvement compares to the data given in
2016. It means that in 2017 FPT had more working capital to meet the demand of
the corporation’s unexpected needs. This could help them to be flexible in doing
new plans.

3. Asset utilization ratios

The numbers faltered in the 2 years. In details, the account receivable

turnover, inventory turnover and total assets turnover, the data in 2017
were higher; in other parts in 2016 the data were higher than that in 2017.
It indicates that the company's efficiency is not so stable with each dollar
of assets it had.
 4. Solvency ratios

Items 2016 2017

RATIO OF FIXED ASSETS
TO LONG-TERM 4.61 7.96
LIABILITIES
RATIO OF LIABILITIES TO
1.61 0.89
STOCKHOLDERS’ ENTITY
DEBT RATIO 0.33 0.18
INTEREST COVERAGE
9.05 12.55
RATIO

From 2016 to 2017 the numbers are faltered. In 2017, the ratio of fixed assets to
long- term liabilities is much higher than in 2016 by 3.35%. Also the interest
coverage ratio in 2016 was less by 3.5% comparing with the ratio in 2017.
However, in 2017, the ratio to liabilities to stockholders’ entity and debt ratio is
lower than in 2016. This indicates whether a company's net income is able to
cover its total liabilities. Generally, a company with a higher solvency ratio is
considered to be a more favorable investment.

5. Market ratio

Items 2016 2017

P/E ratio 10.15 10.34
EPS 3925 5129

The table indicates the improvement of Market ratios in 2017. It means that
FPT’s economic status in public were quite good, the value of the company grew
considerably. This could help their investors to continue staying with the
corporation.