Tài liệu Phân tích báo cáo tài chính công ty vinamilk

CHAPTER 1 INTRODUCTION 1.1 Background of the research  Context of the research Milk markets in many developed countries such as Europe and The United States have matured and have had fierce competition between milk brands. To enhance market share and expand business activities, the milk companies must enter milk markets in developing countries such as China, Vietnam, India and Asia countries (Research and Markets, 2013). When Vietnam became an member of the World Trade Organization (WTO) in 2007, Vietnam must remove trade barriers and open Vietnamese economy so that foreign investors or companies enter and operate in Vietnam. With a deregulated milk market, a fast economy and a stable political situation, Vietnam has become a place attracting attention of foreign investors around the world entering dairy industry. This causes many competitive challenges for domestic milk companies in Vietnam. Vietnamese dairy industry contributes to development of Vietnamese economy. The growth rate of Vietnamese dairy industry is about 20 percent annually in recent years. The number of dairy cows in Vietnam increased from 11,000 in 1990 to 167,000 in 2012 and domestic milk production was 381,000 tonnes in 2012. The lack of fresh milk is the biggest challenge to Vietnamese dairy industry because domestic fresh milk production only meets 30 percent of demands of consumers in Vietnam. The lack of fresh milk in Vietnamese dairy industry occurs because Vietnam has the nature of the small farms and lack of modern and environmentally friendly husbandry techniques. Vietnam is one of the 20 biggest milk importers in the world (importing about 1.2 million tonnes of milk per year, especially ice cream, processed and condensed milk). Vietnam has had a target to increase the number of cows from 170,000 in 2013 to 500,000 by 2020 in order to produce one billion litres of milk to meet demands of Vietnamese people (Vietnamplus, 2013). In 2011, Vietnamese dairy industry grew to twice as much as 2008 with 39,000 tonnes of full cream powder milk, 149,000 tonnes of fresh milk and 27,000 tonnes of low-fat milk. Vietnam has become a high potential dairy market because its dairy products met 30 percent of the domestic consumption in 2010. Moreover, the dairy products of Vietnam will meet 34 percent of the domestic consumption in 2015 and 38 percent of the domestic consumption in 2020; therefore, up to the year 2020, domestic and foreign investors have many opportunities of expanding market share of 60 percent. Price of fresh milk in Vietnam is higher than foreign countries; therefore, many foreign companies want to operate in Vietnam to take the advantage. Price of fresh milk price in Europe and South America is around $0.5-0.9 per litre, but price of fresh milk in Vietnam is around $1.1 per litre (Dairy Vietnam, 2014). Vietnam dairy market has 4 segments including powder milk, liquid milk, condensed milk and yogurt. Liquid milk and powder milk make up 72.4% of the total market value and grow about 20% per year. Yogurt makes up 10.7% of the total market value and is expected to grow about 31% per year in the period 2010 – 2015 (ABB Merchant Banking, 2012). Figure 1.1: Vietnam dairy market share by segments Source: ABB Merchant Banking (2012) Vietnamese dairy industry has average gross profit margin of Yogurt (about 54%) and Liquid milk (about 40%) is high in 2012 (ABB Merchant Banking, 2012). Figure 1.2: Average gross profit margin of Vietnamese dairy industry Source: ABB Merchant Banking (2012) Nowadays, domestic milk companies no longer dominate the Vietnamese milk market. Famous brands such as Vinamilk, TH True Milk, Dutch Lady, Ba Vi Milk, Nutifood, Moc Chau Milk, Hanoi Milk, FrieslandCampina Vietnam and Long Thanh Milk are gaining a big share market in Vietnam. Among big brands, Vinamilk has the highest share market in Vietnam with 48.7% compared to market share of FrieslandCampina Vietnam with 25.7%, and TH True Milk with 7.7%. Although per capita consumption in Vietnam is not still high (about 15 litres a year in comparison with 25-27 litres in China and 21 litres in Thailand), there is a forecast of increasing per capita consumption in the next years, namely over 20 litres in 2020. To meet increasing needs for drinking milk of Vietnamese people, meet control of quality, standards of environmental protection and food safety and hygiene, many domestic milk companies focus on building and expanding factories of producing milk in Vietnam. Vinamilk increase its annual milk output by 10% and its domestic market share from 47.8% to 60% in 2014 and has a plan of developing a material supplying areas suitable to international standards such as grass cultivation, controlling veterinary and bovine food processing, and environment protection. TH True Milk enhances to work with farmers to improve grass cultivation, cow breeding, and technical facilities. FrieslandCampina Vietnam has 35,000 head of milk cow in Vietnam that can provide daily milk output of around 240 tonnes (The Voice of Vietnam, 2013). Vietnamese dairy market is expected to grow at 21% from 20102015 because Vietnam is a promising market of any consumer goods industry with 68% of young population (ABB Merchant Banking, 2013). Figure 1.3: Milk consumption per capita in 212 Source: ABB Merchant Banking (2012) Almost domestic companies in Vietnam have financial performance lower than foreign companies because they have many advantages of operating in Vietnam such as financial strengths, good experience of management, advanced manufacturing systems, profuse material resources, high sales, ease of borrowing money from banks. Many domestic companies cannot growth in Vietnam if they do not improve their weaknesses (Research and Markets, 2013).  Reasons for selecting the research topic Firstly, financial performance plays an important role in attracting attention of foreign investors, enhancing the ability to borrow money from creditors, attracting excellent employees, increasing loyalty of customers and enhancing brand image. Financial performance of a company is indicated through financial information in financial statements. Investors and creditors consider and assess financial performance of the company before investors invest their money in the company and creditors lend the company borrow money. When a company has high financial performance, investors invest much their money in business operation of the company and it is easy for the company to borrow money for creditors. Financial performance is are also important to managers of the company because publishing good financial statements, they can prove that their company has good operation and high growth and their management ability are good. This helps shareholders believe their management ability and continue to create good conditions for them to manage the company. Moreover, high financial performance can attract excellent employees because the employees often desire to work for the company that always has growth of business, provides many opportunities for the employees to develop their careers and training for the employees, gives the employees instrumental and emotional support, and empower the employees to enhance their working performance. Financial performance of a company reduces recruitment costs because of lower staff turnover. Employees who work in a company having financial performance tend to be happier in their jobs, and are less likely to leave the company than companies having low financial performance. Moreover, when a company has high financial performance, it can have enough financial strength to invest advanced manufacturing systems that produce high quality products at reasonable prices and are friendly to environment. When the company provides high quality products, this increases loyalty of customers. When a company has high financial performance in many years and financial strengths, its brand image also becomes strong and famous in its industry (Way, 2014). Secondly, customers increase needs for adequate nutrition because there are an increase of living standard, and income of Vietnamese people. However, Vietnam still imports up to 70 percent milk products because domestic companies do not still meet all demands of Vietnamese people (Vietnamplus, 2013). There are many prestigious domestic milk brands such as Vinamilk, Long Thanh Milk, Ba Vi Milk, Moc Chau Milk, etc. Among domestic milk brands, Vinamilk has high position in minds of customers because Vinamilk provides high quality products at reasonable prices and high financial performance in many years. Therefore, the Vinamilk has many competitive advantages in the fierce milk market in Vietnam and attract many customers if Vinamilk continues to remain financial performance in the next years and produce high quality products with suitable prices (The Voice of Vietnam, 2013). Lastly, there are a series of difficulties that Vietnam faces such as inconsistent policies for dairy industry and basic dairy products in Vietnam. Domestic milk companies in Vietnam face many difficulties such as lack of management experience, lack of preservation and restoring equipment and poor collecting systems. Many foreign dairy companies have different promotion campaigns that enhance competitiveness in domestic fresh milk collection process (Dairy Vietnam, 2014). Although financial performance of Vinamilk is relatively high compared to its competitors, financial performance of Vinamilk is not still suitable to its financial strengths and capability. In other words, Vinamilk can achieve higher financial performance if it takes full advantage of financial strengths and capability to business and deeply understand financial factors influencing on financial performance (The Voice of Vietnam, 2013). Therefore, Vinamilk will enhance financial performance in the milk market by improving financial factors (financial ratios) and salvaging financial strengths and capability. Since the three above reasons, the author determines to select the topic of the dissertation as follows: “Applying ratio analysis in financial performance of Vinamilk ” 1.2 Significance of the research Financial performance is vital to management because a company with high financial performance compared to its competitors attracts attention of investors and easily borrows money from bank and has high competitive advantage in its industry; therefore, many researchers are interested in research on financial performance (Agiomirgiannakis et al., 2006). Many researchers have studied on financial performance of pension funds (Klumpes and McCrae, 1999), determinants of financial performance of Indian companies (Kakani et al., 2001), financial performance of privatized companies in transition economies (Jelic et al., 2001), financial performance of Omani commercial banks (Tarawneh, 2006), financial performance and ownership structure of companies in South Korea (Lee, 2008), financial performance of health agencies (Suarez et al., 2011), factors influencing on financial performance of Jordanian insurance companies (Almajali et al., 2012). However, most researchers have performed researches on financial performance in companies in developed countries (Prieto and Revilla, 2006) and few studiers have implemented researches on financial performance in developing countries, especially Asian markets (Chen and Wong, 2004). Therefore, any findings of previous researches on financial performance in developed nations cannot be unrelated and unsuitable to developing country like Vietnam. The dissertation can fill the gap in literature of evaluating financial performance of Vietnamese companies. The dissertation can help Vinamilk identify financial factors (financial ratios) influencing on financial performance to enhance its financial performance and competition position. The dissertation can help domestic and foreign investors deeply understand financial factors (financial ratios) to avoid risks when investing their money in Vinamilk. The research can help domestic and foreign managers of Vietnamese companies in dairy industry are more interested in financial factors (financial ratios) influencing on financial performance planning and implementing business strategies and enhancing The dissertation can examine whether a theoretical model of measuring financial performance that is used by foreign companies can be used in Vietnamese company like Vinamilk. 1.3 Research aims and objectives The major research aim of the dissertation is to assess financial performance of Vinamilk through analysing financial ratios of Vinamilk. The major research aim of dissertation is achieved by completion of the following four research objectives: - To deeply explore the knowledge about financial performance. - To examine financial factors (financial ratios) which influence on financial performance of Vinamilk. - To assess financial performance of Vinamilk through analysing financial ratios of Vinamilk. - To give recommendations to managers of Vinamilk to enhance financial performance of Vinamilk. 1.4 Research questions To complete the four above research objectives, the dissertation must answer research questions as follows: - What are the definition of financial performance and financial factors influencing on financial performance? - What are financial factors (financial ratios) influencing on financial performance of Vinamilk? - What is the financial factor that most influences on financial performance of Vinamilk? - How is financial performance of Vinamilk through analysing financial ratios of Vinamilk? - What are recommendations to managers of Vinamilk to enhance financial performance of Vinamilk? The question one will be answered in the chapter two of the dissertation. The author answers the question 1 through reviewing theories related to financial performance from books, journals and other articles. The question 2 and question 3 will be answered in the chapter four of the dissertation through multiple regression analysis between financial performance and financial ratios of Vinamilk. The question 4 will be answered in the chapter four of the dissertation through analysing financial ratios of Vinamilk and comparing with financial ratios of competitors of Vinamilk. The question 5 will answered in the chapter five of the dissertation through basing on findings of the dissertation. 1.5 Boundary of the research There are both financial factors such as total assets turnover, current ratio, debt to equity ratio, etc and non-financial factors such as size of company, age of company, management competence index (Almajali et al., 2012) influence on financial performance of a company. However, the author only assess financial performance of Vinamilk through analysing financial factors (financial ratios) because company size and company age and management competence of Vietnamese company in dairy industry is nearly equal (The Voice of Vietnam, 2013). In other words, non-financial factors have few influences on financial performance of companies in Vietnam. The dissertation only assesses financial performance of Vinamilk in Hanoi City because Vinamilk is one of the most leading domestic companies in dairy industry and Hanoi is one of the most development cities of dairy industry in Vietnam. The development of dairy industry occurs in Hanoi because there is an increase of living standard, need for adequate nutrition, and income of Vietnamese people. Moreover, there are limitations of time implementing the dissertation; therefore, author only researches on financial performance of Vinamilk in Hanoi. There are five groups of financial ratios including activity ratios, liquidity ratios, solvency ratios, profitability ratios and valuation ratios. Activity ratios or efficiency ratios (such as asset turnover ratio, stock turnover ratio, receivables turnover ratio, etc) indicate how a firm effectively implement daily tasks and assets turnover ratio is considered as an important ratio measuring the effectiveness of use of resources of a company (Suarez et al., 2011). Liquidity ratios (such as current ratio, quick ratio, cash ratio, etc) state the ability of a company to pay its short-term debts and liquidity of a company is usually measured by current ratio (the current assets to current liabilities). Solvency ratios or debt ratios (such as debt ratio, debt to equity ratio, etc) show the ability of a company to pay its long-term obligations. Debt leverage (debt to equity ratio) shows the degree to which a company is utilizing money that it borrows and the debt to equity ratio is most widely used to measure financial leverage of a company. Profitability ratios (such as ROE, ROA, ROS, etc) indicate the ability of a company to use its resources and control its expenses to generate an acceptable rate of return (Almajali et al., 2012). There are different measures of profitability performance of a company such as return on sales (ROS), return on assets (ROA) and return on equity (ROE). Return on sales indicates how much a firm earns related to its sales. Return on assets indicates a company’s ability to make use of assets of the company while return on equity states how much investors return after implementing (Almajali, 2012). Among these measures, ROA is considered as the most widely used measure of profitability performance by most researchers (Tangen, 2003; Agiomirgiannakis et al., 2006 and Almajali, 2012). Therefore, the author uses ROA as a measure of profitability performance of Vinamilk. Valuation ratios or market value ratios (such as EPS, payout ratio, etc) indicate return on investment for shareholders or ownership of a company. Among the valuation ratios, EPS is usually used to measure market value of a company (Robinson et al., 2009). In short, five financial factors (financial ratios) are chosen to examine the relationship between financial performance and financial factors (financial ratios) including asset turnover ratio (efficiency), current ratio (liquidity), debt to equity (leverage), ROA (profitability) and earnings per share (valuation). 1.6 Structure of the research The dissertation has the following five important chapters: Chapter one – Introduction In the chapter one, the author shows the context of the research, major reasons for choosing the study topic of the dissertation. The context of the research indicates background of dairy industry in Vietnam and major reason for choosing the study topic of the dissertation helps readers understand importance of financial performance of milk companies in Vietnam, especially Vinamilk. Moreover, the chapter also indicates the research objectives, research question, the boundary of the dissertation and the structure of the dissertation. Chapter two - Literature Review The chapter two explores theories related to financial performance including definition of financial performance, financial factors and non-financial factors which influence on financial performance. However, the chapter two focuses on important financial factors (financial ratios) of influencing on financial performance because financial factors have many influences on financial performance of milk companies in Vietnam and non-financial factors have few influences on financial performance of milk companies in Vietnam. In the chapter three, hypotheses of the relationship between financial performance and financial factors (financial ratios) in Vinamilk are proposed and then a specific researching framework is formulated for the dissertation. Chapter three - Research Methodology The chapter three shows theories of research methodology and provides reasons for choosing research methodology suitable to the research objectives including research philosophy, research approach, research strategy and research method, sampling techniques, sampling size, data collection techniques and data analysis techniques. The dissertation will use positivism philosophy, deduction approach, case study, quantitative method, simple random sampling to implement the dissertation. Moreover, the author uses questionnaire to collect primary data and software of SPSS 16.0 to analyse primary data collected from 150 managers of Vinamilk. The chapter three also indicates ethical issues and limitations of the research methodology. Chapter four – Findings, analysis and discussion The chapter four shows and analyses collected primary data. The hypotheses are formulated in the chapter two of the dissertation are explained in the chapter four. The research findings will be analysed, discussed and compared with literature reviewed in the chapter two. The findings of the dissertations help the author propose recommendations for managers of Vinamilk to enhance financial performance of Vinamilk. Chapter five - Conclusions and recommendations The chapter five provides a summary of the researcher process and indicated major findings of the dissertation. The chapter also assess contributions of the dissertation, and the degree to which the dissertation answer research questions and research objectives mentioned in the chapter 1 of the dissertation. Moreover, the chapter five states limitations and suggestions for further study and give recommendations for enhancing financial performance of Vinamilk. CHAPTER 2 LITERATURE REVIEW 2.1 Chapter introduction Analysis of financial performance is very important for managers because it maintains stability of their company and enhance market share of the company. Financial performance helps many companies attract attention of foreign investors, increase their ability to borrow money from creditors, attract excellent employees, enhance loyalty of customers and develop brand image; therefore, the companies are much interested in build good financial ratios in financial statements to prove their good financial performance in many recent years (Hansen and Mowen, 2005). This chapter writes about theories involved in the research objectives including understanding of financial performance, the financial factors (financial ratio) influencing on financial performance, evaluation of financial performance through financial ratios and previous researches related to factors influencing on financial performance and evaluation of financial performance. 2.2 Understanding of financial performance According to Hansen and Mowen (2005), firm performance is very important for management because the firm performance is a result which has been gotten by a group of individuals in the firm involved in its authority and responsibility in getting business objectives legally and obeying ethic and morale. Firm performance shows what had been gotten by the firm which indicates good condition for certain time. The objectives of measuring firm performance to have helpful information involved in use of fund, flow of fund, and efficiency of business and the useful information can encourage managers to make the best business decision. Firm performance is the ability of a firm to gain and control its resources in various ways to create competitive advantage. There are types of firm performance including financial performance (economic performance) and non-financial performance (innovative performance). Financial performance shows growths of sales, stock prices, employment and turnover while non-financial performance indicates patents, results of innovations, expenditures, and percentage of innovative sales (Haves and Senneseth, 2001). Financial performance is a measure of how well a company use its resources to generate revenues and profits. Financial performance shows overall financial health of the company over a given period of time and can be used to compare companies in the same industry. There are many various ways to measure financial performance of companies but all measurements need to be taken in aggregation. Measurement of financial performance is implemented through revenue of operations, operational income and cash flows from operations (Halkos and Salamouris, 2004). Financial performance evaluation encourages companies to get a higher performance through indicating current financial position of the company in comparison with other companies and creating a competitive environment. Financial performance evaluation is considered as a useful step to attain a self evaluation method and improving of accountability power. Financial performance evaluation is the most important method used for assessing the company performance which is mainly based on financial statements. Analysis of financial performance provide valuable information related to procedures, qualities, correlations, quality of financial positions, dividends, company weaknesses and strengths (Khajavi et al., 2010). Non-financial performance is often expressed in terms of contract quantity, customer quantity, customer satisfaction index, number of full time employees, manager quantity, human capital index, costs of training, rotation of employees, costs of computerization in total administrative expenditure, insurance policy in newly launched products, change and development. A combination of financial information and non-financial information is necessary for management to have a more balanced impression of the overall financial performance of the company (Ryan et al., 2002). There are many stakeholders who are interested in financial performance. Firstly, mangers and owners are interested in financial performance to understand the welfare of their company in order to suitable decision-making for their company and increase market value of their company. Secondly, investors, commercial partners pay their attention to financial performance of a company to understand solvency and stability of the company to sure that the company provides them with profits. Thirdly, credit institutions are interested in financial performance of the company to insure that the company has the ability to repay loans on time. Fourthly, employees and governments pay their attention to financial performance because employees want to have stable job and high salaries while the governments want the company to pay its taxes and create good jobs for their citizens. Lastly, commercial partners are interested in financial performance of a firm because they ensure that they should or should not create stable commercial relationships with the company (Tehrani et al., 2012). 2.3 Financial factors (financial ratios) influence on financial performance 2.3.1 The relationship between financial ratios and financial performance The primary ratios are used for evaluating financial performance of a firm can be categorized into five groups of financial ratios including activity ratios, liquidity ratios, debt ratios, profitability ratios and market value ratios. These financial ratios can combined to identify the rate of return for a firm and owners of the firm and the rate that the firm can grow the sustainable rate of growth. Activity ratios indicate how a company effectively conduct daily tasks and assets turnover ratio is considered as a vital ratio measuring the effectiveness of resource use of a firm (Suarez et al., 2011). Liquidity ratios indicate the ability of a firm to pay its short-term debts and liquidity of the firm is usually measured by current ratio. Debt ratios show the ability of a firm to pay its long-term debt and debt leverage (debt to equity ratio) shows the ability of the firm to utilize money that it borrows and the debt to equity ratio is most widely used to measure financial leverage of the company. Profitability ratios (such as ROE, ROA, ROS, etc) indicate the ability of a company to use its resources and manage its expenses to have a suitable rate of return (Almajali et al., 2012). Among these measures, ROA is considered as the most widely used measure of profitability performance by most researchers (Tangen, 2003; Agiomirgiannakis et al., 2006 and Almajali, 2012). Market value ratios show return on investment for shareholders or ownership of a company and EPS is usually used to measure market value of the company (Robinson et al., 2009). In short, important financial factors (financial ratios) are chosen to examine the relationship between financial performance and financial factors (financial ratios) in Vinamilk including asset turnover ratio, current ratio, debt to equity ratio, ROA and earnings per share. 2.3.2 Hypothesis development of the research  Asset turnover ratio influences on financial performance According to Ryan (2008), the formula of asset turnover ratio is as follows: Asset turnover ratio = Sales or Revenues/Total Assets. The ratio refers to the amount of sales or revenues of a company generated from using assets of the company. The asset turnover ratio is a financial indicator that indicates the efficiency or the ability of a company to deploy its assets. When the asset turnover ratio of a company is higher than other company in the same industry, the company has better financial performance because the company is generating more revenues or sales from assets (Tehrani, 2009). However, different industries differ widely in the asset turnover ratio; therefore, comparisons of the asset turnover ratio between two different companies are only meaningful when the two companies in the same industry. The asset turnover ratio of companies operating in sectors related to consumer staples tends to be higher because the companies have relatively small assets but high amount of sales. In contrast, companies operating in sectors related to utilities and telecommunications have very large assets and thus have the low asset turnover ratio (Mehragan, 2008). The author bases on the above discussion related to the relationship between asset turnover ratio and financial performance, the first hypothesis (H1) is proposed as follows: H1: There is a significant effect of asset turnover ratio on financial performance Vinamilk. 2.3.2 Current ratio influences on financial performance According to Ryan (2008), the formula of current ratio is as follows: Current ratio = Current assets/Current liabilities Current ratio refers to the level that a company pays debt coming due in the next 12 months from cash or assets which will be turned into cash. In other words, the current ratio shows the ability of a company to pay back short-term liabilities of the company (debt and payables) with short-term assets of the company such as cash, inventory and receivables (John and Healas, 2000). Current ratio is measured by the current assets to current debts and shows the ability of the company to turn assets into cash quickly. Moreover, current ratio refers to the ability of the company to control working capital at a good level. When a company has the current ratio higher than other companies in the same industry, the company is more capable of paying back short-term obligations. The current ratio is smaller than 1 indicates that the company will not be capable of paying off its obligations if they come due at that point. Moreover, this indicated that the company does not have good financial health and cannot go bankrupt. A firm may use liquid assets to finance business activities and investments of the company when external finance is not meet demands of the business activities and investments or the external finance is too costly. Moreover, high current ratio will help a company to solve unexpected contingencies and deal with debts of the company during periods of low earnings (Damodaran, 2002). The author bases on the above discussion related to the relationship between current ratio and financial performance, the second hypothesis (H2) is proposed as follows: H2: There is a significant effect of current ratio on financial performance Vinamilk. 2.3.3 Debt to equity ratio influences on financial performance According to Ryan (2008), the formula of debt to equity ratio is as follows: Debt to equity ratio = Total liabilities/shareholders’ equity A financial leverage of a company is measured by dividing total liabilities of the company by equity of shareholders. The debt to equity ratio shows a company uses what proportion of equity and debt to finance assets of the company. In other words, the ratio of total debt to equity is used for measurement of debt leverage (Drury, 2006). The debt to equity ratio indicates the level that a company utilizes borrowed money in its business activities. The high debt to equity ratio shows that a company has been aggressive in financing business activities of the company with debt that can result in changing incomes because of additional interest costs. Companies with a high debt to equity ratio can face risk of bankruptcy because they have the ability to be unable to make payments on their debt. Moreover, the companies having high debt leverage can be lent by credit institutions in the future. However, high debt leverage is not always bad because it can enhance return on investment of shareholders and using of tax advantages related to borrowing (Atkinson, 2007). The author bases on the above discussion related to the relationship between debt to equity and financial performance, the third hypothesis (H3) is proposed as follows: H3: There is a significant effect of debt to equity ratio on financial performance Vinamilk. 2.3.4 Return on assets (ROA) influences on financial performance According to Ryan (2008), the formula of return on assets (ROA) is as follows: Return on assets (ROA) = Net income/Total assets ROA is financial indicator that indicates the profitability of a company related to using total assets of the company. In other words, the ratio shows that the ability of managers to use assets of their company to generate earnings. ROA indicates what earnings generated from invested assets of a company. ROA of companies in two industries differs widely and highly depends on the industries; therefore, it is best to compare ROA of companies in the same industry (Ryan, 2006). The assets of a firm consist of both debt and equity. Both debt and equity are used for financing business activities of the firm. The ROA indicates how effectively the firm converts invested money of the firm into net income. When a firm has the high ROA, the firm has good financial performance because it is gaining much money from its investment. Therefore, wise managers often make wise selects in allocation of their resources to earn large profits with less investment assets (Rice, 2002). The author bases on the above discussion related to the relationship between return on assets (ROA) and financial performance, the fourth hypothesis (H4) is proposed as follows: H4: There is a significant effect of ROA on financial performance Vinamilk. 2.3.5 Earnings per share (EPS) influence on financial performance According to Ryan (2008), the formula of earnings per share (EPS) is as follows: Earnings per share (EPS) = (Net income – Dividends on preferred stock)/Total common shares Earnings per share (EPS) indicate the portion of profit of a company allocated to each common share. EPS is considered as a financial indicator of a company's profitability. EPS is regarded as the most single and important financial indicator in identifying price of a share. When a company has the high EPS, the company has good financial performance and investors should invest their money in business activities of the company (Pike and Neale, 2002). However, an important aspect of earnings per share (EPS) that is often ignored is required capital to generate net income in the calculation. Two firms can generate the same EPS figure, but the firm having less equity will have more efficiency of using its capital to generate net income. Moreover, investors also need to deeply understanding manipulation of EPS that will influence on the true quality of EPS number and they need to rely on many other financial indicators to generally understand financial performance of a company in order to make exact investment decisions in the company (Parker, 1999). The author bases on the above discussion related to the relationship between earnings per share (EPS) and financial performance, the fifth hypothesis (H5) is proposed as follows: H5: There is a significant effect of earnings per share (EPS) on financial performance Vinamilk. 2.4 How to evaluate financial performance The evaluation of financial performance of a company through exploration and assessment of the meaning of financial ratios has an important role in making financial decisions of managers because the evaluation of financial performance helps assess potential risks and benefits related to the financial performance of the company in the future (Horngren et al., 2008). Measurement of financial performance needs to implement because two major reasons. Firstly, measurement of financial performance such as return to assess, and return to equity articulates directly with long-term business objectives. Secondly, suitably selected financial performance measurement provides an aggregate view of a company’s performance. The measurement of aggregate financial performance such as division profitability and corporate profitability is an overall measure of success of business strategies and operation methods of the company (Higson, 2002). Kaplan and Norton (2001) indicate that balanced scorecard is one of the financial indicator groups. The method of balanced scorecard is widely used to assess business performance, especially financial performance around the world such as using the method of balanced scorecard to assess business performance of companies in tourism industry by Philips and Louvieris (2005), and evaluate strategic planning and business performance of family business by Craig and Moores (2005), assess business performance of medium and small-sized companies in England by Sousa et al. (2006), and evaluate business performance of manufacturing companies by Fernandes et al (2006). Analysis of role of financial indicators (financial ratios) helps a company have additional information and knowledge about financial situation of the company to make business decision. Kaplan and Norton (2001) consider that different market situations, business strategies and competition require various the method of balanced scorecard. The method of balanced scorecard are adapted to culture, mission, business strategy and technology of specific companies. According to Craig and Moores (2005) indicate that key financial performance indicators using the method of balanced scorecard in family companies includes revenue growth, improvements of productivity. Philips and Louvieris (2005) show that main financial performance indicators through using the method of balanced scorecard in hotel industry includes gross operating profit, net operating profit, cash flow, meeting financial targets, revenue per available room, getting predicted room and occupancy rates, achieved revenues and adhering to budget. Through the method of balanced scorecard, Fernandes (2006) claim that manufacturing companies need to use main financial performance indicators including return on equity, growth of revenue, unit cost, EBIT (earnings before interest and tax), and economic value addition to evaluate financial