UNIVERSITY OF RENNES 1

FOREIGN TRADE UNIVERSITY

MSc FINANCE IN TREASURY

INTERNSHIP REPORT

Student:CAO Phuong Thao

Hanoi, July 2013CONTENTS

AcknowledgementiSummaryiiIntroduction1Part 1: GOLDSUN INTRODUCTION21.1.Company overview21.2.Scale21.3.Products31.4.Manufacturing activity4Part 2: CASH BUDGETING FACTS AT GOLDSUN72.1Advantages82.2Disadvantages9Conclusion10APPENDIX

i

ACKNOWLEDGEMENT

First, I would like to thank to Ms. NGUYEN Thi Thu Ha, associate director, manager of producing department Goldsun Joint stock company, for giving me the opportunity to do an intership within the organization. For me, it is a unique experience to be in Goldsun and to study an interest experience. It also helps me to improve my knowledge involved in treasury and to have a new plan for my future career.

I also would like to thank to the staff working at Accounting Department at the office of Goldsun located in Tu Liem district, Hanoi. With their patience and openness, they have created an enjoyable working environment.

At last, I would like to thank to Center of International Development (CID), especially to Ms. NGUYEN Van Ha to support me to do this internship.ii

SUMMARY

Within my study Msc in Finance (treasury), I am interested in cash management. It was a great opportunity for me to do an one month internship at Goldsun Joint stock company. The internship concentrated on cash management facts at Goldsun. At the beginning of the internship, I set several learning targets, regarding to the improvement of knowledge and skills within a firm and experience in cash management.

During my stay, several activities had been done to contribute to the complishment of my own targets. I went to the company daily. The objective here was to understand the accounting structure within the company. I could observe the method they implemented their own operation activities daily. I also understood the process creating a financial statements. Additionally, I also accessed to data keeping system in Goldsun.

In the end of the internship, I took part in an education program, created by the Goldsun to educate their new employers and to generate a positive attitude for new staffs when working with the older one.

In conclusion, internship was a useful experience. I have found out what my strengths and weakness are, I gained my knowledge and skills and met new people. Despite some conditions that do not permit me to fulfill the internship goals as I set before, I finished many of my targets in this internship.

At last, this internship has given me new insights and motivation to pursue my career in finance, and in treasury.1

INTRODUCTION

This report is a short description of my one month internship carried out as a compulsory component of the MSc in Finance (Treasury) in 2012-2013 year. The internship was carried out with Goldsun Joint Stock Company head quartered at Tu Liem district, Hanoi. Since I have been specialized on finance (Treasury), I concentrated on the cash management at the Goldsun, I interned at Accounting Department of Goldsun from June 20th to July 25th, 2013.

At the beginning of the internship, I set several learning goals which I wanted to achieve:

To understand the working condition of a small firm in Vietnam, say Goldsun.

To understand the function and working condition of Accounting department.

To see how to work in a professional working condition with experienced experts

To see if this kind of work is a possibility for my career in future.

To use my gained skills and knowledge

To collect data for my thesis

To enhance my communication skill

To build a network.

This internship report contain many information about the company and activities that have contributed to achieve a number of my stated goals. In the following chapter, I would like to describe the organization of Goldsun and specialize on the cash management activities at Goldsun, which I have accessed to fulfill my thesis. Finally, I give a conclusion on the internship experiences according to my leaning goals.2

Part 1:

GOLDSUN INTRODUCTION

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1.1. COMPANY OVERVIEW

The Goldsun household JSC is the contribution of two famous financial funds namely Mekong Capital and BVIM capital fund , working mainly in field of producing household devices.

In 1994: start the business by selling gas in Hanoi

In 2005: Evaluated as one of potential companies in the market, Goldsun sells their stocks out and attract the investment of Mekong capital.

In 2007: Sold their stocks for Vietnam Investment Fund ( VIF)

In 2009: With the financial contribution of Goldsun Joint stock company, the Goldsun household JSC was founded. \

SCALE

The Goldsun household JSC remains over 1000 staff who are working at the plants in Hanoi, Da Nang branch and Ho Chi Minh city branch.

In Hanoi, the surface area for producing includes:

Plant 1: 14000m2 in use ( 2 floors) for head office and factory which are specialized in producing stainless-steel appliances and punching the

mechanical details for the product gas stove, barbecue grill, house-hold electrics.

Plant 2: 4000m2 used as the factory to make gas stove and BBQ grill.

Plant 3: 1700m2 in use as factory to assemble household electric.

Plant 4: 3700m2 to be a store and a specialized factory for the customer Kitchen-aid. 3

1.3. PRODUCTS

The main products of the company are (including products made from companys factory and OEM imported from Chinese) Rice cooker, Microwave oven, Vacuum cleaner, Electric stove, Hair dryer, Iron, Electric fan, Electric pressure cooker, Electric pot, Gas stove and Kitchen cabinet, BBQ grills ,

Cookware ( Stainless steel pot, stainless steel pans, ainless steel pan (non-stick and non-stick), aluminum non-stick pans, kettles, kitchen appliances, such as ladles, spoons, forks ...)

70% revenue of Goldsun comes from the imported market, the rest comes from the domestic consumes. In the domestic market, the market share is located 28% in the North, 6% in the Middle and the rest in the South.

In terms of product lines, revenue comes 1/3 from Domestics applicanse, 28% form gas and domestics kitchen devices. The rest of reveneue comes from domestic Inox applicances, exported Inox and gas store.

Chart 1.1. SALES FOR EACH PRODUCT LINE

13%30%

Domestic Appliances

16%

Gas and Domestic TBNB

13%

Domestic Inox Appliances

28%

Exported Inox

Exported Gas store

Sources:Competitiveness report of Goldsun, 2012

Currently, Goldsun has 2 main supply channels: foreign suppliers and domestic suppliers. As of 2013, there are 114 foreign suppliers and 100 domestic suppliers shall provide for each product line of Golden Sun. The consolidated purchasing activities are implemented by the Purchase Department and Department of Quality Management if necessary.4

According to the company policy, most household electrical products, gas stove and some DC components will still bought by Golden Sun from the third party. The line of Inox appliances (medium-high stainless steel pot, rice cooker, vacuum cleaner, electric stove, electric fans and barbecue grill) is the product line that Goldsun plans to continuously produce. In the purchasing, Goldsun faces an obstacle is that the lead time is quite long.

1.4. MANUFACTURING ACTIVITY

About materials: mainly imported from Japan, Taiwan and China.

The process: Raw materials (Inox, Steel sheet) enter the cutting machine, initial cutting, sudden punch and then each product line have different plus steps

Inox appliances: welding, edging, polishing, assembling.

Stove: Carried away into a number of stages in the outside plant such as painting, gilding and take back to the company for completely assembling.

About workshops

Punching Workshop: Includes 90 employees, working in the lines of:

01 line of slab cutting: there are 1 plasma cutter (for cutting the product with complex models), 1 brakes, 5 cutters

01 line of initial cutting

02 lines of chaps punching

01 lines of pod lid punching

01 lines of bottom wrap

02 lines of stove punching

03 line of graving

01 welding machine masat 1600 tons, 02 heat welding machine, 01 high wave welding machine and 5 spot welding machine.

Beside the cutting and welding machines mentioned above, the lines also use the system containing 20 hydraulic press puncher from 65 tons to 450 tons; 50 12-150-tons Crankshaft machines. In particular, the production of stainless steel5

technological take over the rest in Vietnam because it use the bottom welding technology called impact-bonding ( or called friction puncher), thus, meet the standard of high-end products for the European market and American technology instead of conventional high-frequency welding.

Sub-plant of making mold: The company has deep stamping technology with modern machines including 03 CNC string cutter; 01 CNC milling machine, 01 old-version milling machine; 1 copper wire cutters; 1 machine pulses; 1 hole shot machine momentum; 3 lathes and 25 high-tech workers. Labor resources and modern equipment help making precision molds rapidly. Meet the requirements of new product development through directly making mold stamper to shape the inox products.

Sub-plant of polishing: The step of polishing use 22 automatic polishing machines, 24 matting polishing machines and 8 2-shaft manual polishing machines. Besides, 1 lines high-productive polishing machine and 33 automatic polishing machines. The total amount of workers in this step are 110.

The manufactory produces gas stove and BBQ grills:

The current gas stove serves mainly the local market, a few of them to Middle East. The producing line of gas stove includes 40 people. The details of the shape after punching in the plant are brought to the subcontractor in the neighborhood for processing (painting, gilding,...) and put on the gas burner assembly plant for finishing, then testing and packaging before being available to the market.

BBQ Grill is the product line for exporting. Currently the company is producing OEM for Landmann. The production line includes 1 BBQ main line and 3 secondary lines, the total number of employees for this line on the season is 80.

The factory is located in one location and industrial lease for its headquarters, area 4000m2, facilitate management, transportation and trading. 6

Sub-plant for assembling electric appliance: Previously, the product was imported electrical appliances (purchased by OEM by Goldsun brand and

Goldsuns standards of quality) from China to sell mainly in the local market.

Currently, the company has invested more assembly lines stick, Injection molding machine to put into production. In the early stages, this line offers 30 jobs working at the plant in the area of 1700m2 in industrial park.7

PART 2:

CASH BUDGETING FACTS AT GOLDSUN

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At Goldsun company, the budgeting cash flow has been estimated mainly basing on the estimation about sales. With these predictions about sale receipts and disbursements, Goldsun defines the cash in reserve in each month.

There are two basic approaches for cash budgeting: The cash method and the accrual method. Goldsun uses the second method to budget cash: income and expenses are recognized when they are incurred despite when cash is transferred.

Because Goldsun is a producing company, most of its revenue comes from the operating activity, therefore, cash flow forecasted by Goldsun has been established from the operating activity, including components such as: cash from sales, selling expenses, administrative expenses and other expenses

In general, cash budget situation in Goldsun is quite simple, and even in some case, it makes no sense. For the second half of 2013, Goldsun has been estimated the cash outflow and cash inflow from operating activity as shown in table 2.1.

From the calculation in table 2.1, Goldsun has set the cash balance for each month, in which, the amount of surplus money available in July 2013 is 2,678,650,000VND. This number has increased significantly until the end of the year, and accounted 6,269,881,000 VND in December. The cash balance of Goldsun remains low in the second quarter and high in the last quarter of the year because of the characteristics of Goldsun: It has the second quarter for purchasing material and the last quarter for selling in Christmas season and Tet season.

Table 2.1. Cash balance estimation of Goldsun from July-December 2013

1000 VND8

JulyAugustSeptemberOctoberNovemberDecember

CASH INFLOW31,700,00034,200,00038,300,00042,600,00049,710,00056,741,000

Cash receipt =31,700,00034,200,00038,300,00042,600,00049,710,00056,741,000

(1)+(2)

(1) Domestic20,700,00022,200,00025,300,00026,500,00027,400,00030,100,000

(2) Export11,000,00012,000,00013,000,00016,100,00022,310,00026,641,000

CASH29,021,35031,002,30034,718,95038,190,90044,217,04550,471,120

OUTFLOW

Cost of goods26,628,00028,557,00031,980,50035,571,00041,159,88046,981,548

sold

Selling1,014,4001,094,4001,225,6001,107,6001,292,4601,475,266

Expenses

Management523,050564,300631,950617,700720,795822,745

expense

Other expense855,900786,600880,900894,6001,043,9101,191,561

(insurance)

NET CASH2,678,6503,197,7003,581,0504,409,1005,492,9556,269,881

FLOW

Sources: Goldsun business plan, 2013.

There are some advantages but also disadvantages of this cash budgeting method of Goldsun.

Advantages:

Easy to estimate. This estimation seems to be easy to practice because, firstly, it bases on the assumption that most of the revenue of Goldsun comes from operating activity. That reduces the number of components which are used in the calculation. As a result, this task is now becoming quite simple. Secondly, this method is also easy because Goldsun has been operated for nearly 20 years, therefore, with its experiences in business, data about revenue can be estimated easily basing on the business cycle.

In some case, the result would be worthy. Goldsun has been operated for nearly 20 years, therefore, it can forecast exactly the change in revenue in normal economic condition. Additionally, components of expenses can also be defined exactly as a percentage of total revenue because of process lines of Goldsun are nearly fully-established. From these points, it can be 9

said that the method Goldsun used to budget cash today can be used to

draw an overview of cash flow in a year.

Disadvantages:

Ccash flow from investment activities are neglected. Although the main activity of Goldsun is operating, but any firms always have another activity, including investment and financial activity in its life. To Goldsun, because the production lines are nearly fully established, and in the difficult period of 2010-2013, it has not had any investment decision, it can make sense that there is no investment cashflow. However, the other activity, say financial activity, also creates cash outflow and this flow affects directly to the cash balance of the company. The problem here is that Goldsun does not use any assumptions involved in financial activity in cash budgeting.

Rarely the revenues occurs as the forecast, or in other word, the probability of an exact number of sales happens is nearly 0. Sale receipt is forecasted as a fixed number, for example, Goldsun will receive 31,700,000,000 VND in July 2013. However, in practice, the probability that Goldsun receives that amount of money is really low, because the sale receipt is a natural number, and so it can change randomly. This factor cause a minus point to the cash budget method which Goldsun has been applying.

From these problems, to estimate more efficiently and exactly, Goldsun needs a new way which can be useful in forecast cash flow. One solution for Goldsun in budgeting cash is using Monte Carlo simulation.10

CONCLUSION

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On the whole, this internship was a useful experience. I have gained new skills and experience, otherwise, I have also created my own network. I achieved several of my goals, however for some the conditions did not permit. Importantly, I collected enough data for my thesis for the course of MSc in Finance (Treasury).

I got insight into professional practice. I learned the different facts in cash budgeting in Goldsun and realized that it was completely far more complicated than theories only. At Goldsun I tried by best to finished tasks the company required and this was also a great opportunity for me to practice what I have learnt in cash management skills and gained my experience a lot. Besides, I also fulfilled my practice in the field of accounting in general and cash budgeting in detail.

Even Goldsun has method to budget cash, I still shew myself in improving the budgeting at Goldsun. I suggested a new method, called Monte Carlo simulation to budget cash. My succeed here was to provide a new way to forecast the cash situation at the company instead of the old way. The method I provided in some case had corrected some weakness of the current system at Goldsun accounting department.

The internship also helped me to find out my strength and weakness as well. This helped me to define what skills and knowledge I should to improve in future to be more professional in the field of finance.

At last, this internship has given me new insights and motivation to pursue a career in cash management./.