Trường đại học Mở TP.

HCM

---------------------------

Topic:

An Analysis of the Financial Position and the Impact of Accounting Policy for

Allowance for Doubtful Debts on the Financial Statements of BIENHOA

Concrete Joint Stock Company (2023-2024)

Lecturer: Đỗ Phương Thảo

Subject: Financial Accounting

Class: DH23FB05C

Students: Trần Thị Xuân Đào

Huỳnh Thị Mỹ Huyền
Trần Thị Yến Ngọc
Huỳnh Bảo Như

1
2
 GROUP REPORT

N Contributio
Student ID Full Name Tasks
O n
Collect and analyse
1 2354030069 Trần Thị Xuân Đào 100%
data
Collect and analyse
2 2354030123 Huỳnh Thị Mỹ Huyền 100%
data
Collect and analyse
3 2354030243 Trần Thị Yến Ngọc 100%
data
Collect and analyse
4 2354030279 Huỳnh Bảo Như 100%
data

3
Comments from the guiding lecturer

4
Contents:
PART 1: FINANCIAL PERFORMANCE ANALYSIS OF THE ENTERPRISE........5
1.1. Overview of the Company......................................................................................5
1.2 Extract and present key financial indicators:........................................................6
1.3 Financial Ratio Analysis........................................................................................10
1.4 Comparison between 2023 and 2024....................................................................13
1.5 Conclusion:..............................................................................................................14
PART 2: ANALYSIS OF ACCOUNTING POLICY ON PROVISION FOR
DOUBTFUL DEBTS.......................................................................................................15
2.1 Accounting Policy on Provision for Doubtful Debts:..........................................15
2.2 Provision for bad debt............................................................................................16
2.3 Comparison of Provision Balances Between 2023 and 2024..............................18
2.4. Impact of Provisions on Financial Statements....................................................20
2.5 Conclusion:..............................................................................................................23
PART 3: CREATE A COMPARATIVE TABLE ILLUSTRATING THE
FINANCIAL IMPLICATIONS IN SCENARIOS........................................................23
REFERENCE:.................................................................................................................26

5
PART 1: FINANCIAL PERFORMANCE ANALYSIS OF THE ENTERPRISE
1.1. Overview of the Company
Company Name: Hoa Binh Construction Group Joint Stock Company (HBC)
Business Activities:
HBC primarily operates in the field of civil and industrial construction.
Its main business segments include high-rise building construction, civil works, industrial parks,
technical infrastructure, and, more recently, expansion into EPC general contracting, real estate
investment, and international construction projects.
History and Development:
Hoa Binh Construction Group Joint Stock Company (HBC) was founded in 1987 by architect Le
Viet Hai.
Initially a small construction office, Hoa Binh gradually developed into one of Vietnam’s leading
construction contractors.
In 2006, the company was listed on the Ho Chi Minh Stock Exchange (HOSE).
The period from 2010 to 2020 marked strong growth, with many large-scale projects and
expansion into international markets.
Recently, HBC has faced challenges due to the sluggish real estate market and is undergoing
restructuring.
Core Brands:
The Hoa Binh Construction Group brand is prominent in the construction of high-rise buildings,
urban areas, and industrial facilities.
In addition, the company operates under other brands such as:
 HBRE (renewable energy)
 HBIC (international construction)
 Hoa Binh Green (real estate)
Scale:
Hoa Binh is one of the leading construction groups in Vietnam, employing thousands of staff
with a network of branches and representative offices both domestically and internationally.
Annual revenue typically ranged from VND 10,000 to 14,000 billion during its peak period
(2017–2021), though it has recently declined due to the general downturn in the real estate and
construction sectors.

6
 Market Position:
Hoa Binh is considered one of the largest private construction contractors in Vietnam, frequently
ranked among the top three most reputable civil and industrial construction companies
nationwide.
The company has participated in many key projects such as Vinhomes Central Park and
developments by major groups like FLC, Sun Group, Novaland, and high-end complexes in Ho
Chi Minh City, Hanoi, Da Nang, among others.
Additionally, Hoa Binh has expanded operations to international markets such as Malaysia,
Myanmar, and the Middle East.
Current Situation:
In recent years, HBC has encountered numerous difficulties due to Vietnam’s stagnant real estate
market, tightened cash flow, rising financial costs, and intense competition from both domestic
and foreign contractors.
However, the company is striving to restructure and pursue sustainable growth through financial
restructuring strategies, international market expansion, and investment in construction
technology.
1.2 Extract and present key financial indicators:
From the Extracted Balance Sheet:
- Total Assets:
In 2023, total assets amounted to VND 15,249 billion, increasing to VND 15,411 billion in 2024
– a growth of approximately 1.06% compared to 2023.
This slight increase indicates that the company maintained stability in asset size amidst a volatile
market. Although the growth is not significant, it reflects efficient asset management,
contributing to a solid financial foundation for sustainable business operations.
Possible reasons include:

 Strategic investment expansion: The company may have focused investment only on key
projects, avoiding aggressive expansion to control risks and ensure capital efficiency.

 Effective cost and asset management: Maintaining reasonable expenses and effective asset
management allowed the company to stabilize total assets without significant increase.

7
  Market and economic impact: Macroeconomic factors or slow construction market growth
might have limited rapid asset expansion, resulting in only a slight increase.

- Inventories:
In 2023, inventories (including raw materials, finished and semi-finished goods, production and
business-related costs) were VND 2,333 billion, increasing to VND 2,396 billion in 2024 — a
rise of about 2.7%.
This increase may indicate the company is preparing materials and goods for upcoming
construction projects, ensuring a smooth supply chain. It may also reflect stockpiling to manage
supply chain risks. However, the moderate increase suggests the company retains good inventory
control, avoiding excessive stock that could burden cash flow or risk obsolescence.
- Total Liabilities:

 Short-term liabilities declined from VND 13,703 billion in 2023 to VND 12,410 billion in
2024, a decrease of 9.44%, indicating improved short-term debt management, reduced
financial pressure, and enhanced liquidity.

 Long-term liabilities dropped from VND 1,453 billion in 2023 to VND 1,253 billion in
2024, down by 13.76%. This reflects proactive repayment of long-term debts, reducing
financial burdens and interest costs, improving capital structure.
Total liabilities in 2023 were VND 15,156 billion and decreased to VND 13,663 billion in
2024 — a reduction of approximately 9.85%.
This improvement signals enhanced financial health and better debt management in both
the short and long term.

- Possible causes:
 Improved receivables collection and cash flow management
 Higher operating efficiency
 Prudent financial strategy focusing on internal funding and debt restructuring
- Owner’s Equity:
Equity increased significantly from VND 93 billion in 2023 to VND 1,747 billion in 2024 — an
extraordinary increase of about 1,778%.
Possible reasons:

8
  Capital increase: New equity issuance or shareholder contributions
 Retained earnings: Accumulated profits added to equity
 Financial restructuring: Converting debt into equity or new equity investment
 Stock dividend issuance
- This major increase strengthens financial capacity, enabling future investments and enhancing
competitiveness.
- Provisions:

 Short-term provision for doubtful debts: Decreased from VND -2,476 billion in 2023 to
VND -1,897 billion in 2024 — a reduction of around 23.39%.
This reflects improved receivables quality, effective debt collection, and reduced credit
risk. The decline in provision also improves financial standing and liquidity, indicating
strong risk management capabilities.

 Overall, the company maintained asset stability with a slight 1.06% increase, showing
efficient asset management amid market challenges. Inventory growth of 2.7% reflects
preparation for upcoming operations. Liabilities decreased nearly 9.85%, reducing
financial pressure. The sharp 1,778% rise in equity reinforces capital strength. Provision
for doubtful debts declined by 23.39%, indicating enhanced receivables control.
→ Overall, the company has a strong financial base, efficient operations, and is
positioned for sustainable growth.

From the Income Statement:

- Revenue:

 Net revenue from sales and services: Decreased from VND 7,537 billion in 2023 to VND
6,420 billion in 2024 — a drop of 14.81%.
This decline reflects business difficulties possibly due to a slowdown in the construction
sector, loss of key clients, or adverse macroeconomic conditions (e.g., high interest rates,
declining demand). The company may need to reassess its strategies and expand market
reach.

 Financial income: Increased from VND 74 billion in 2023 to VND 244 billion in 2024 — a
surge of 229.73%.

9
 This increase partially offset the drop in operating revenue, improving profitability and
diversifying income sources. However, sustainable growth still depends on core operations.

- Expenses:

 Financial expenses: Decreased from VND 559 billion in 2023 to VND 407 billion in 2024
— a reduction of 27.19%.
This is a positive sign indicating reduced debt levels and borrowing costs. It also shows
better financial structure and possibly more favorable market conditions (e.g., lower
interest rates, loan restructuring).

 Selling expenses: Declined slightly from VND 38 billion in 2023 to VND 36 billion in
2024 (down 5.26%).
This reflects improved cost control or a contraction in sales scale, consistent with falling
net revenue.

 General and administrative expenses: Dropped drastically from VND 757 billion in 2023 to
-VND 266 billion in 2024 — a change of -135.13%.
This abnormal change may be due to reversal of large provisions (e.g., bad debt),
accounting adjustments, or recognition of other income. This is likely a technical
adjustment rather than a cost-cutting result.

- Profit:

 Profit before tax: Increased from a loss of VND -1,079 billion in 2023 to a profit of VND
1,009 billion in 2024 — up 193.58%

 Profit after tax: Rose from a loss of VND -1,115 billion in 2023 to a profit of VND 962
billion in 2024 — up 186.28%
These improvements result from cost control, increased financial income, and reversal of
provisions.

- Key contributing factors:

 Lower financial expenses (especially interest)
 Higher financial income (nearly tripled)
 Reduced SG&A expenses

10
  Reversal of doubtful debt provisions
 Improved working capital and debt management

→ In summary, despite a decline in core revenue, the company achieved a significant turnaround
in profitability through cost optimization, improved financial income, and efficient provision
management — providing a solid base for sustainable recovery and growth.

1.3 Financial Ratio Analysis

1. Liquidity Ratios

a. Current Ratio = Current Assets / Current Liabilities

Indicator 2023 2024

Current Assets (VND) 13.449.275.190.03 13.734.790.530.380

5

Current Liabilities (VND) 13.703.264.680.58 12.410.681.510.139

6

Current Ratio 0.98 1.11

- The current ratio increased from 0.98 (2023) to 1.11 (2024), indicating that HBC has improved
its short-term liquidity position.

- This improvement was mainly due to a reduction in current liabilities by over VND 1,200
billion, while current assets increased slightly.

- Although a ratio above 1 is considered positive, the level of financial safety remains limited,
especially in the construction industry, which is typically exposed to high cash flow risks. The
company should continue to closely monitor receivables and inventories.

b. Cash Ratio = Cash and Cash Equivalents / Current Liabilities

Indicator 2023 2024

Cash and Cash Equivalents 388.531.074.373 268.157.396.740

(VND)

Current Liabilities (VND) 13.703.264.680.586 12.410.681.510.139

Cash Ratio 0.028 0.022

11
- The cash ratio declined from 0.028 to 0.022, reflecting a weakening in the company's ability to
meet short-term obligations using cash on hand.

- This is a critically low level, especially for a construction company, which often requires
significant upfront capital outlay before payment is received.

- HBC needs to improve its cash flows to avoid liquidity imbalances, especially in the face of
market fluctuations or delays in receivables collection.

2. Profitability Ratios

a. ROA – Return on Assets = (Net Profit / Average Total Assets) × 100

Indicator 2023 2024

Net Profit (VND) -1.115.337.522.268 962.962.482.606

Average Total Assets 15.330.807.427.632 15.330.807.427.632

(VND)

ROA (%) -7.28 6.28

- In 2023, ROA was deeply negative (-7.28%), showing that HBC’s assets not only failed to
generate profit but also incurred substantial losses.

- In 2024, ROA rebounded to 6.28%, indicating that the company has started using its assets
more effectively to generate profits—evidence of a successful restructuring and cost control
process.

b. ROE – Return on Equity = (Net Profit / Average Equity) × 100

Indicator 2023 2024

Net Profit (VND) - 962.962.482.606

1.115.337.522.268

Average Equity (VND) 920.640.492.780 920.640.492.780

ROE (%) -121.13 104.61

- ROE in 2023 was significantly negative (-121.13%), reflecting severe losses that heavily
eroded shareholders' equity.

- In 2024, ROE surged above 100%, demonstrating strong profitability. Each VND of equity
generated more than one VND of profit—an extremely impressive result. However, it should be
noted that this was partly due to the very low equity base in 2023.

12
c. Net Profit Margin = (Net Profit / Net Revenue) × 100

Indicator 2023 2024

Net Profit (VND) -1.115.337.522.268 962.962.482.606

Net Revenue (VND) 7.537.096.580.846 6.420.844.922.154

Net Profit Margin (%) -14.8 15.00

- The net profit margin in 2023 was nearly -15%, indicating poor cost control and inefficient
operations.

- In 2024, the margin recovered strongly to 15%, demonstrating a significant improvement in

core business profitability, driven by successful restructuring strategies and operational
optimization.

3. Asset Utilization Ratios

a. Total Asset Turnover = Net Revenue / Average Total Assets

Indicator 2023 2024

Net Revenue (VND) 7.537.096.580.846 6.420.844.922.154

Average Total Assets 15.330.807.427.632 15.330.807.427.632

(VND)

Total Asset Turnover 0.49 0.42

- The asset turnover ratio slightly declined from 0.49 to 0.42 times, showing a drop in the
efficiency of asset utilization to generate revenue in 2024.

- This was likely due to a decline in revenue while total assets remained high, suggesting the
need to reassess investment efficiency.

b. Inventory Turnover = Cost of Goods Sold / Average Inventory

Indicator 2023 2024

Cost of Goods Sold 7.293.009.825.276 6.063.289.790.982

(VND)

Average Inventory (VND) ≈ 2.317.617.664.476 ≈ 2.317.617.664.476

Inventory Turnover 3.15 2.62

13
 - Inventory turnover declined from 3.15 to 2.62 times, indicating a slowdown in inventory
movement.

- This may imply increased inventory levels, tying up more working capital and reducing the
efficiency of capital use.

- The company should revisit its inventory management and production planning strategies.

Conclusion: During the 2023–2024 period, HBC experienced several positive developments in
its financial performance:

- Liquidity: The current ratio improved to a safer level (1.11), reflecting enhanced short-term
solvency. However, the very low cash ratio still indicates potential short-term cash flow risks.

- Profitability: ROA, ROE, and net profit margin all rebounded significantly from negative to
impressive positive figures. This suggests that HBC has begun to effectively control costs and
revive its business. That said, the sharp rise in ROE was partly driven by the low equity base in
2023.

- Asset Efficiency: Both asset turnover and inventory turnover showed room for improvement,
signaling a need for better asset utilization and inventory control.

=> HBC is on a recovery path with positive signals in profitability, but must strengthen cash
flow management and asset efficiency to ensure more sustainable growth.
1.4 Comparison between 2023 and 2024
Financial statements are more than just numbers – they provide a quick picture of how a
company is actually performing during a given period. Reviewing these reports over the years
helps both investors and company leaders understand growth trends and make more informed
decisions. For Hoa Binh Construction Group Joint Stock Company (HBC), in the period of 2023-
2024 with many major fluctuations, the comparison of financial results helps clarify the level of
improvement and shape the financial trend of the business in the context that the construction
industry is gradually recovering from difficulties.

Comparison of HBC's financial results in 2023 and 2024:

Quota 2023 2024

Turnover 7,537,096,580,846 6,420,844,922,154
Profit after tax -1,115,337,522,268 962,962,482,606
Return on assets (ROA) -7.28 6.28
Return on Equity (ROE) -121.13 104.61

14
From the results of the above comparison table, we can see:

 Revenue decreased from VND 7,537 billion (2023) to VND 6,421 billion (2024), down
about 15% compared to the previous year. This decline may be due to the influence of a
difficult market or because the company cuts back on inefficient investments to focus on
more profitable areas.
 Profit after tax increased sharply from (-1,115) billion VND (2023) to 962 billion VND
(2024), changing sharply from loss to profit. It is a significant improvement that HBC has
effectively controlled costs and business strategy.
 The ROA changed from negative to positive from (-7.28%) in 2023 to 6.28% in 2024,
indicating that the Company has used its assets much more efficiently compared to the
previous year.
 The ROE also soared from (-121.13%) in 2023 to 104.61% in 2024, indicating that HBC
has generated significant returns on equity, marking a clearer and more sustainable
financial recovery

 Although HBC's revenue in 2024 decreased compared to 2023, the company has made a
marked transformation when moving from a heavy loss (-1,115 billion VND) to a profit of nearly
962 billion VND. This shows that the business has improved its operational efficiency, focusing
on projects that bring real value. The strong improvement in ROE and ROA indicators shows
that the company has made the right strategic adjustments, improved operational efficiency and
used capital more effectively.

1.5 Conclusion:

Through the analysis of the overall situation and key financial indicators of Hoa Binh Construction Group
Joint Stock Company (HBC) during the 2023–2024 period, it is evident that the company is facing
significant financial challenges. Total assets and equity remain at a high level, reflecting the company's
notable position in the construction industry. However, the high levels of receivables and bad debt
provisions indicate potential risks in debt management and asset quality.

In terms of operational performance, indicators such as ROA, ROE, and net profit margin have
all declined, reflecting low profitability and the negative impact of operating expenses as well as
market difficulties. Liquidity has also been affected, as shown by low liquidity and cash ratios.
Asset utilization has not improved significantly, with a slow asset turnover and fluctuations in
inventory levels.

15
 When comparing 2023 and 2024, HBC has made efforts to control costs and improve its
financial structure, but the results are not yet clearly visible. Strengthening financial
management, enhancing debt recovery efficiency, and optimizing asset use will be key factors
for HBC’s recovery and sustainable development in the coming years.

PART 2: ANALYSIS OF ACCOUNTING POLICY ON PROVISION FOR

DOUBTFUL DEBTS
2.1 Accounting Policy on Provision for Doubtful Debts:

- State regulations (as per Circular 48/2019/TT-BTC):

 Under Clause 3, Article 2, provision for doubtful debts is a reserve for expected losses in
receivables that are overdue or not yet due but potentially uncollectible.
 Under Clause 1, Article 6, eligible debts include overdue receivables and those likely to
become overdue.
- Company Policy – HBC Corporation:
 Purpose: To reflect the actual value of receivables and hedge against potential credit losses.
 Scope: All receivables (e.g., from customers, advances, other receivables) with collection
risks.
 Basis: Assessment of recoverability based on aging and debtor’s financial position.
 Method: Provision rates by aging bracket:

Overdue Period Provision Rate

6–12 months 30%

1–2 years 50%

2–3 years 70%

Over 3 years 100%

For debts with high loss probability (e.g., bankrupt clients), 100% provision is applied.

- Recognition:
 Provision expenses are recorded as operating expenses, reducing profit before tax.

16
  When a receivable is deemed irrecoverable, the related provision is used for write-off.

2.2 Provision for bad debt

Provision for bad debt is an important concept in accounting, playing a key role in ensuring the
accuracy and truthfulness of financial statements. This is the process of making a provision for
potential risks and losses that may occur in the future. The provision not only helps businesses
better prepare for unforeseen fluctuations but also strictly complies with legal regulations.

The provision for bad debts is to compensate for actual losses that occur when customers have
not repaid debts, and also to preserve business capital.

1. Method of setting aside provisions for receivables of HBC

HBC applies the method of provisioning in accordance with the provisions of Circular
200/2014/TT-BTC and Vietnamese accounting standards (VAS 18, VAS 21), specifically:

 Estimated Loss Rate

HBC assesses the ability to recover debts based on:

 Overdue time.
 The level of customer trust.
 The buyer's actual ability to repay debts.
 Business conditions and risks in the construction industry.

Ordinary appropriation ratios as prescribed:

Group of receivables Appropriation rate (%)

Overdue receivables of more than 6 months to less than 1 year 30%
Overdue receivables from 1 year to less than 2 years 50%
Overdue receivables from 2 years to less than 3 years 70%
Debts receivable for 3 years or more 100%

The application of these ratios helps HBC accurately reflect the net recoverable value of
receivables, while ensuring compliance with current accounting regulations and financial
transparency to shareholders and investors.

17
2. Time limit for recovery of HBC's receivables

Quota 2023 2024

Revenue 7,537,096,580,846 6,420,844,922,154
Profit after tax -1,115,337,522,268 962,962,482,606
Days Sales Outstanding (DSO) 386 days 400 days

The average time to recover money from HBC's customers in 2023 is up to 386 days, which is
more than 12 months. This is a very high level for a construction business, showing that:

 Weak debt management ability.

 There may be many overdue receivables.
 Slow cash flow causes the company to have to borrow working capital, increasing financial
costs.
 The risk of capital loss or bad debts increases if customers do not pay on time.

The situation has not improved, but it has worsened: the time to collect money from customers
has increased by 14 days compared to 2023. Although the profit after tax in 2024 is positive
again (more than VND 962 billion), the prolonged DSO shows:

 HBC has difficulty collecting money from projects that have been handed over or
completed.
 Large receivables may lie in customers who are late in payment, or the project is delayed in
acceptance and settlement.
 This makes the actual cash flow not correspond to accounting profits, putting pressure on
working capital.
 Prolonged DSOs reflect high customer credit risk, which requires a review of credit
policies and contract approvals.

HBC's debt collection period (DSO) in 2023 and 2024 is 386 days and 400 days, respectively,
both far exceed the usual level in the construction industry. This shows:

 The ability to manage debt and cash flow from customers is still too slow

18
  The risk of capital loss is high, as the extended debt period increases the likelihood of
customers becoming insolvent.
 Although HBC has a strong improvement in after-tax profit in 2024, the increase in DSO to
400 days is a warning signal: profit is not accompanied by cash flow efficiency.

2.3 Comparison of Provision Balances Between 2023 and 2024

a) Asset Provisions:

2023 2024
Item
Beginning Ending Beginning Ending
(01/01/2023) (31/12/2023) (01/01/2023) (31/12/2023)
Provision for
inventory (55.923.822.869) (55.439.373.282) (55.923.822.869) (55.439.373.282)
devaluation
Provision for
doubtful short- (2.059.045.843.198
(2.476.507.836.278) (2.059.045.843.198) (2.476.507.836.278)
term )
receivables
Provision for
long-term
(16.467.056.817) (18.063.143.919) (16.467.056.817) (18.063.143.919)
financial
investments

Comment:

- Provision for inventory devaluation: Decreased by over VND 15.86 billion by the end of 2024.
This indicates:

 Inventory value has improved or been consumed, reducing the need for provisioning.
 HBC may have actively addressed slow-moving inventory or benefited from a market price
recovery, lowering the required devaluation provision.

- Provision for doubtful short-term receivables: Dropped sharply by over VND 579 billion.
This could be due to:

 HBC recovering a portion of previously doubtful receivables from customers.

19
  Part of the provision may have been reversed due to reassessed higher recoverability.
 This is a positive sign, contributing to improved net profit and indicating better receivables
management.

- Provision for long-term financial investments: Declined by more than VND 3.97 billion,
reflecting the possibility that:

 Some long-term investments have regained value or have been partially sold/liquidated.
 HBC may be restructuring its investment portfolio to reduce risk.

b) Provisions for Liabilities

2023 2024
Item
Beginning Ending Beginning Ending
(01/01/2023) (31/12/2023) (01/01/2023) (31/12/2023)
Provision for
short-term 37,722,270,047 49,119,084,490 49,119,084,490 72,821,913,432
payables
Provision for
long-term 218,412,258,057 201,370,651,005 201,370,651,005 167,176,213,038
payables

Comment:

- Provision for short-term payables: Increased by VND 23.7 billion, indicating:

 Possible emergence of additional uncertain short-term liabilities (e.g., construction costs,

contractual disputes, taxes, etc.).
 HBC may be taking a more cautious approach in recognizing short-term liabilities to
mitigate sudden financial risks.

- Provision for long-term payables: Decreased by VND 34.24 billion, possibly reflecting:

 Certain long-term obligations have been settled or reassessed as having lower risk of
occurrence.
 HBC may be restructuring its debt or has fully resolved some contingent liabilities.

20
2.4. Impact of Provisions on Financial Statements

1. Impact on Net Profit After Tax

Indicator 2023 2024

Net Profit (VND) -1.115.337.522.268 962.962.482.606

Provision for Short-term Doubtful Debts -2.476.507.836.278 -1.897.075.557.883

(VND)

Analysis of impact:

- The provision for short-term doubtful debts is an expense that is deducted from accounting
profit before tax, thereby reducing net profit after tax. This item reflects the risk of non-recovery
of short-term receivables from customers or partners.

- In 2023, HBC made a provision of more than VND 2,476 billion, significantly increasing
expenses and directly contributing to a net loss of over VND 1,115 billion. Without this
provision—or with a smaller one—the net loss could have been much less severe.

- In 2024, the provision was reduced to VND 1,897 billion, a decrease of approximately VND
579 billion, helping relieve cost pressure and contributing to a return to profitability with nearly
VND 963 billion in net profit. This improvement may stem from better receivables management
or successful collection of outstanding debts, reducing the need for provisioning.

Assessment:

- Provisions are necessary to reflect the true financial position, but excessively large provisions
(like in 2023) can significantly distort profitability and make financial statements less attractive
to investors.

- Conversely, a lower provision in 2024 had a clearly positive effect on net profit, contributing to
a turnaround in HBC's financial results. However, this must be accompanied by real
improvements in receivables quality.

21
2. Impact on Current Assets

Indicator 2023 2024

Estimated Current Assets Before Provision ≈ ≈

(VND) 15.925.783.026.313 15.631.866.088.263

Provision for Short-term Doubtful Debts -2.476.507.836.278 -1.897.075.557.883

(VND)

Current Assets (VND) 13.449.275.190.035 13.734.790.530.380

Analysis of impact:

- Provisions for short-term doubtful debts are directly deducted from current assets to reflect the
realizable value of receivables.

- In 2023, without the provision, current assets would have been nearly VND 15,926 billion.
However, after deducting the VND 2,476 billion provision, this figure dropped to VND 13,449
billion, indicating a substantial asset impairment due to doubtful receivables.

- In 2024, the provision decreased by VND 579 billion, allowing current assets to rise to VND
13,735 billion, despite no major change in asset structure. This suggests a more stable short-term
asset situation, but the realism of this improvement needs to be verified through actual cash
inflows.

Assessment:

- Provisions reduce current assets, affecting liquidity and related ratios such as the current ratio.

- Nevertheless, they reflect prudence and transparency in financial reporting, helping to avoid
overstatement of non-recoverable assets.

- The decrease in provisioning in 2024 gives the impression of asset recovery, but this should be
supported by actual cash collections.

22
3. Impact on Financial Ratios (ROA, ROE)

Impact Analysis:
 Effect on ROA (Return on Assets):

- ROA measures the profitability of total assets. An increase in provisioning expenses reduces
net profit, thereby lowering ROA.

- In 2023, the large provision contributed to a deeply negative ROA (-7.28%). Without or with
smaller provisions, ROA could have been higher—but this could result in overstated assets,
distorting actual profitability.

- In 2024, the reduced provision contributed to a ROA increase to 6.28%, indicating better actual
returns on assets.
 Effect on ROE (Return on Equity):

- ROE is similarly affected since net profit after tax is directly influenced by provisioning costs.

- In 2023, ROE was severely negative (-121.13%), reflecting significant losses caused by large
provisions and a low equity base.

- In 2024, with lower provisions and improved profitability, ROE rebounded strongly to
104.61%, showing a significant improvement in capital efficiency.

Assessment:

- High provisioning reduces ROA and ROE, making the company appear less efficient in its
financial performance.

- However, such provisioning provides a more accurate picture of financial risks. In contrast,
reducing provisions may improve financial ratios but must be supported by genuinely improved
receivable quality.

Conclusion: Provisions for short-term doubtful debts have a substantial impact on net profit
after tax, reducing short-term earnings but offering a more realistic valuation of assets. High

23
 provisioning results in lower profits and financial ratios like ROA and ROE, making the
company appear weaker in financial reports. Conversely, low or no provisions may artificially
inflate profit, exposing the company to risks of uncollectible assets and undermining the
credibility of its financial statements. Therefore, HBC must strike a balance in provisioning
policies to accurately reflect its financial position while maintaining operational efficiency and
investor confidence.
2.5 Conclusion:

HBC’s policy on provisioning for doubtful debts demonstrates proper compliance with
Vietnamese Accounting Standard No. 18 and adherence to the principle of prudence in
accounting practices. The company’s proactive approach in making provisions based on
estimated loss rates and the aging of receivables reflects its efforts to manage financial risk—
particularly in the context of a volatile construction and real estate market, which has negatively
impacted customers’ payment capabilities.

However, the significant increase in provisions in 2024 has led to several noteworthy
consequences. Specifically, the sharp rise in provision expenses has considerably reduced net
profit after tax, thereby causing a marked decline in key financial performance indicators such as
Return on Assets (ROA) and Return on Equity (ROE). In addition, the value of current assets has
been adjusted downward due to the deduction of provisions from receivables, resulting in
changes to the company’s short-term asset structure.

This situation indicates that while provisioning is necessary and enhances transparency,
inadequate control over receivables may lead to increasing financial risk in future accounting
periods. Therefore, HBC should strengthen its trade credit management, improve the assessment
and evaluation process of customers’ payment capacity, and closely monitor overdue receivables
to implement more effective collection measures. Doing so will not only help reduce the need for
excessive provisioning but also protect shareholder interests and ensure the company’s long-term
financial stability.

PART 3: CREATE A COMPARATIVE TABLE ILLUSTRATING THE

FINANCIAL IMPLICATIONS IN SCENARIOS

Higher
Quota Appropriation is Actual
No appropriation appropriation than
lower than reality appropriation
reality

Revenue 6,420,844,922,154 6,420,844,922,154 6,420,844,922,154 6,420,844,922,154

24
Provision for
bad debt 0 -948,537,778,941.5 -1,897,075,557,883 -4,742,688,894,707

Profit after tax 2,860,038,040,489 2,101,207,817,336 962,962,482,606 1,444,443,723,909

ROE 310.76% 227.49% 104.61% 156.8%

Observe:

Provision for bad debts when:

 No appropriation: The enterprise fails to reflect credit risks, distorting the nature of
finance.
 Appropriation is lower than reality: There is an attempt to record bad debts but it is
incomplete, there are still potential risks and create false optimism.
 Realistic appropriation: Honestly reflect the financial situation, comply with prudent
accounting principles.
 Higher than reality: Excessive provisions can cause profits to be distorted lower than they
actually are.

Profit after tax gradually decreases as the level of provision increases. This reflects the inverse
relationship between contingency costs and profits:

 No deduction: brings virtual profits, easy to mislead investors.

 Appropriation is lower than reality: helping businesses still have quite high profits but
still have potential risks of being adjusted later.
 Actual deduction: shows that the profit has been adjusted to a reasonable level – the
closest reflection of actual efficiency.
 Appropriation is higher than reality: reduces current profits but can be considered a
prudent financial strategy or to spread profits over periods.

25
ROE represents a business's profitability per equity:

 No appropriation: ROE is very high, but may not be sustainable because it does not
reflect risk.
 Provision is lower than reality: ROE is still high, but does not properly reflect the level of
credit risk.
 Realistic deduction: ROE is significantly reduced, closely reflecting the real efficiency
and helping investors have a more honest perspective.
 Higher than actual provisioning: ROE has improved compared to actual appropriation
(because profit after tax is higher), but still much lower than in incomplete cases. This
may reflect conservatism in financial management.

26
REFERENCE:
https://cafef.vn/du-lieu/bao-cao-tai-chinh/hbc/bsheet/2024/0/0/0/ket-qua-hoat-dong-kinh-doanh-.chn

https://hbcg.vn/report/financial.html

https://hbcg.vn/page/58-lich-su.html

27