PART 1: COMPANY INTRONDUCTION

1. Company overview

American Vietnamese Biotech Incorporation (AMVI BIOTECH,INC) established on 26/ 08/ 2002 with the capital of 15 billion Vietnam Dong was the corporation of The Sun company (100% foreign investment), Incomex SaiGon (100% state investment) and Dopharco (100% state investment).

AMVI BIOTECH, INC. is operating in the field of manufacturing and trading of Bio Medical Diagnosis, which is the first leading enterprise in Vietnam to develop and manufacture the series product “quick bio diagnosis” with modern technology and high quality. These products are as good as exotic products but with cheaper prices. They are Quick Test for pregnant HCG, HIV, Hepatitis B HBsAg, Hepatitis C, Malaria, Dengue Hemorrhagic fever, Syphilis, prostate cancer PSA, LH Ovulation, Opirates – Heroin – Morphine, combo 5 categories of Hepatitis B (HbsAg, HbeAg, HbcAb, HbsAb, HbeAb), combo 5 categories of Drugs.

All of the equipment of the firm is imported from the USA, German, Japan, Swiss, China, … which can meet the requirements of quality, capacity, manufacture demand and R&D.

Main business activities:

Pharmaceutical business, trade of medical equipment, tools and chemicals for medical tests.

Manufacture of medical test tools Manufacture and trade of vaccines, medical biological. Agents for consigning goods. Financial Investment. Real estate business. Technology transfer. Manufacture and trade of soap, antibacterial hand gel, mouthwash, dishwashing

liquid, detergent chemicals. AMVI BIOTECH, INC runs under the mission of “To enhance the lives and health of

citizens by preventing disease from the provision of reliable diagnostic tests with the most effective cost.”, which is the task that all the employers of the company have to implement.

Operational function

1. Industry

- AMV Vaccine

- AMV Diagnostic

- AMV Pharmaceutical

- AMV Food Supplement

- Comestic

2. Development and investment strategies

- Keep maintaining and expanding business activities: Manufacture rapid diagnostic

tests, expanded its business, develop some additional rapid diagnostic test products.

- Expand distribution network inland to run business of biologicals qualitative

diagnostic, quantitative diagnostic, DNA diagnostic

- Promote market expansion, export products to new and potential markets such as

Laos, Cambodia and some countries in Africa, Eastern Europe and Middle East

investors.

- Strengthen cooperation in depth research, workshops with hospitals and research

institutes in the whole country to serve the development of new products, such as

Rapid Tests (Qualitative diagnosis biologicals), Elisa (quantitative diagnostic

biologicals), disinfectants (germicidal solution), DNA, RNA

- Construct a new factory in Ho Chi Minh City Hi-Tech Park meets the standards of

WHO GMP, ISO to enhance the production capacity and production of new

products.

The organizational structure and the company’s management.1.1 The organization chart:

Northern General Agency

Quality Control Dept.

Manufacturing Dept.

ACCOUNTING DEPARTMENT

ADMINISTRATION DEPARTMENT

SALES DEPARTMENT

MANUFACTURING PLANTS

EXECUTIVE COMMITTEE

BOARD OF MANAGEMENT

BOARD OF DIRECTORS

ANNUAL GENERAL MEETING

1.2 The organization chart explanation:- Annual General Meeting

Annual General Meeting is the most powerful part of the Company according to the Enterprise of Law and Corporate Charter. Annual General Meeting is responsible for discussing and approving long-term and short-term policies about the development of the Company, the decision on capital structure, electing the board of directors and executing business operation of the Company.

- Board of DirectorsBoard of Directors includes five members, have full authority to represent the Company to

decide all matters relating to the objectives and benefits of the Company except matters within the jurisdiction of the Annual General Meeting that was not authorized. Board of Directors is responsible for developing strategic decisions of the Company; construction of production and business plans; building organizational structure, management regulations; giving the measures and decisions to achieve the objectives set by the Annual General Meeting.

- Executive CommitteeExecutive Committee is the agency responsible for assisting the Annual General Meeting

to supervise and evaluate the results of business operations of the Company in an objective manner in order to ensure benefits for shareholders.

- Board of ManagementBoard of Management includes: General Manager and Deputy Manager. Board of Management is the executive agency of all business and production activities of

the Company, is responsible for Annual General Meeting and Board of Directors of the entire production and business operations, implement measures aimed to achieve the objectives of the Company.

- DepartmentsAccounting Department

Middle General Agency

Southern General Agency

- Develop financial plans in short-term and long-term to ensure appropriate funding sources for the operation and reinvestment.- Assist Sales Department for sales statistics and billing.- Summarize the information, analysis and report to the Board of Director for reference and decision-making of business operations.Administration Department- Recruit new employees, train employees.- Decide salary scale, approve day off.- Receive and draft documents, application documents to register products, organize workshops to introduce products. Sales Department- Manage the entire distribution systems and general agencies throughout the country, support agencies the implementation of the marketing for the procurement and sale of products.- Forecast product demand; propose business policies consistent with market conditions.Manufacturing Plants include following departments: Quality Control Department: Deploy, implement and monitor quality control activities and ensure the quality of the Company's products. Establish, implement plans in standards and maintain quality-test equipment.Printing Department: design sample packaging, order printing frame and packages. Operate and organize the printing of packaging products. Packing Department: Package and storage products.

PART 2: FINACIAL ANALYSIS

Items 2012 2013 2014 2012 2013 2014A. CURRENT ASSETS 6,507,419,017 9,455,003,249 8,887,993,228 27.12% 34.96% 35.24%I. Cash and cash equivalents 1,784,426,962 2,181,523,772 1,503,535,227 7.44% 8.07% 5.96%1. Cash 1,784,426,962 2,181,523,772 1,503,535,227 7.44% 8.07% 5.96%2. Cash equivalents - - - - - -II. Short-term investments - - - - - -1. Short-term investments - - - - - -2. Provision for diminution in the value of short-term investments

- - -- - -

III. Account receivables 1,408,344,076 4,982,321,443 4,529,774,607 5.87% 18.42% 17.96%1. Trade accounts receivable 1,209,473,633 3,068,323,064 334,846,232 5.04% 11.35% 1.33%2. Prepayments to suppliers 98,330,000 1,913,232,730 4,194,928,375 0.41% 7.07% 16.63%3. Intercompany receivables - - - - - -5. Other receivables 100,540,443 765,649 - 0.42% 0.00% -6. Provision for doubtful debts - - - - - -IV. Inventories 2,758,273,074 1,999,663,847 2,095,996,728 11.50% 7.39% 8.31%1. Inventories 2,758,273,074 1,999,663,847 2,095,996,728 11.50% 7.39% 8.31%V. Other current assets 556,374,905 291,494,187 758,686,666 2.32% 1.08% 3.01%1. Short-term prepayments 299,344,060 67,337,685 226,616,485 1.25% 0.25% 0.90%2. Value Added Taxed deductibles

81,183,970 177,693,595 430,863,3300.34% 0.66% 1.71%

4. Other current assets 175,846,875 46,462,907 101,206,851 0.73% 0.17% 0.40%B. NON CURRENT ASSETS

17,485,851,127 17,588,083,001 16,332,930,69372.88% 65.04% 64.76%

I. Non-current account receivables

- - -- - -

II. Fixed assets 16,249,118,468 16,831,298,998 13,454,601,975 67.72% 62.24% 53.35%1. Tangible fixed assets 1,296,225,276 2,798,948,052 6,476,595,157 5.40% 10.35% 25.68%Cost 4,078,423,396 6,052,066,506 10,173,918,646 17.00% 22.38% 40.34%Accumulated depreciation -2,782,198,120 -3,253,118,454 -3,697,323,489 -11.60% -12.03% -14.66%2. Financial leasehold of Fixed assets

2,014,068,211 - -8.39% - -

Cost 2,609,442,583 - - 10.88% - -Accumulated depreciation -595,374,372 - - -2.48% - -3. Intangible fixed assets 9,348,306,480 8,892,914,988 4,614,523,496 38.96% 32.88% 18.30%Cost 13,530,830,000 13,530,830,000 9,707,830,000 56.39% 50.03% 38.49%Accumulated amortisation -4,182,523,520 -4,637,915,012 -5,093,306,504 -17.43% -17.15% -20.19%4. Construction in progress 3,590,518,501 5,139,435,958 2,363,483,322 14.96% 19.00% 9.37%III. Goodwill - - - - - -IV. Long-term investments - - 2,510,208,355 - - 9.95%1. Investment in subsidiaries - - - - - -2. Investment in joint ventures and associates

- - 2,510,208,355- - 9.95%

V. Other non-current assets 1,236,732,659 756,784,003 368,120,363 5.15% 2.80% 1.46%1. Long-term prepayments 43,072,059 31,446,003 368,120,363 0.18% 0.12% 1.46%2. Other long-term assets 1,193,660,600 725,338,000 - 4.97% 2.68% -TOTAL ASSETS 23,993,270,144 27,043,086,250 25,220,923,921 100.00% 100.00% 100.00%

1. Financial structure1.1 Assets structure

Structure of total assets of the company Amvi Biotech as follows:

• Current assets of the company over the years 2012-2014 tended to rise gradually, from 27% to 35% of total assets and long-term assets decreased from 73% to 65% in total assets. Specifically, in 2014 the company's total assets reached 25,220,923,921 VND, of which current assets reached 8,887,993,228, representing 35.24% of total assets and long-term assets reached 16,332,930,693, representing 64.76% of total assets. In particular, the structure of current assets and long-term assets as follows:

Current assets mainly consist of accounts receivables and inventories. Specifically, receivables represent high proportion in total assets 17.96% ( 4,529,774,607VND), inventories account for 8.31% of total assets (2,095,996,728 VND). Cash accounted for 5.96% and the company has no short-term financial investments .

Long term assets mainly fixed assets are accounted for 50% to 60% of total asset in this period.

Assets fluctuation

Through the table shows that the total assets of the company have strong fluctuations over the years. Specifically, in 2012 total assets growth is -14.62% compared with 2011. In 2013, it got a positive growth rate of 12.71%, but in 2014 it was -6.74%. The variation in total assets is mainly caused by fluctuations in current assets. Details are as follows:

Current assets show a abnormal fluctuations, in 2012 all the items in of current assets decreased compared with the previous, especially, short-term assets and accounts receivable decreased over a half (yoy) . The period 2013-2014 also fluctuated erratically. Revenue fell steadily through the year, while short-term assets showed abnormal movements, this show that company are facing up with many difficulties in business and inventory, debt, account receivables management are not effective.

Long-term assets of the company also declined in recent years, in 2014 it decreased to 20% compared to previous year.

1.2 Capital-sources structure

  2012 2013 2014 2012 2013 2014

A. LIABILITIES 3,133,450,674 6,038,550,75913,420,419,67

0 13.06% 22.33% 53.21%I. Current liabilities 2,056,017,826 4,525,416,539 2,058,885,450 8.57% 16.73% 8.16%1. Short-term loans and borrowings 1,500,000,000 500,000,000 930,183,461 6.25% 1.85% 3.69%2. Trade accounts payable 230,231,950 117,026,800 587,100,180 0.96% 0.43% 2.33%

Items Growth 2012/2011

Growth 2013/2012

Growth2014/2013

A. CURRENT ASSETS -37.51% 45.30% -6.00%I. Cash and cash equivalents -29.02% 22.25% -31.08%II. Short-term investments      III. Account receivables -52.53% 253.77% -9.08%IV. Inventories -18.16% -27.50% 4.82%V. Other current assets -64.38% -47.61% 160.28%B. NON CURRENT ASSETS -1.15% 0.58% -7.14%I. Fixed assets -0.45% 3.58% -20.06%II. Long-term investments      III. Other non-current assets -9.52% -38.81% -51.36%TOTAL ASSETS -14.62% 12.71% -6.74%

3. Advances from customers 64,866,608 8,218,935 164,430,320 0.27% 0.03% 0.65%4. Tax and other payables to the State Budget 157,753,751 - - 0.66% - -5. Payables to employees 44,742,776 42,128,441 163,639,105 0.19% 0.16% 0.65%6. Accrued expenses 17,172,741 96,792,363 172,282,384 0.07% 0.36% 0.68%7. Other current liabilities 41,250,000 3,761,250,000 41,250,000 0.17% 13.91% 0.16%II. Non-current liabilities 1,077,432,848 1,513,134,220

11,361,534,220 4.49% 5.60% 45.05%

Long-term loans and borrowings 1,077,432,848 1,513,134,220

11,361,534,220 4.49% 5.60% 45.05%

B. OWNERS' EQUITY20,859,819,47

021,004,535,49

111,800,504,25

1 86.94% 77.67% 46.79%

1. Contributed capital21,157,500,00

021,157,500,00

021,157,500,00

0 88.18% 78.24% 83.89%2. Investment and Development fund 1,562,792,834 1,562,792,834 1,562,792,834 6.51% 5.78% 6.20%

3. Retained earnings-

1,860,473,364-

1,715,757,343

-10,919,788,58

3 -7.75% -6.34%-

43.30%

TOTAL RESOURCES23,993,270,14

427,043,086,25

025,220,923,92

1100.00

%100.00

%100.00

%

2012 2013 20140%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

8.57%16.73%

8.16%4.49%

5.60%

45.05%

86.94%77.67%

46.79%

Capital

Current liabilities Non-current liabilities Owner's equity

a. Self-funded Analysis: Table 4.4: Quota to analyze financial resoures by years

Ratio 2014 2013 20121. Liabilities 13,420,419,670 6,038,550,759 3,133,450,6742. Current liabilities 2,058,885,450 4,525,416,539 2,056,017,8263. Non-current liabilities 11,361,534,220 1,513,134,220 1,077,432,8484. Owners' equity 11,800,504,251 21,004,535,491 20,859,819,4705. Total asset 25,220,923,921 27,043,086,250 23,993,270,144

6.Dept ratio = (1):(5) 53.21% 22.33% 13.06%

7.Self- funded ratio = (4):(5) 46.79% 77.67% 86.94%

8.Permenant sources =(3)+(4) 23,162,038,471 22,517,669,711 21,937,252,318

9.Temporary sources = (2) 2,058,885,450 4,525,416,539 2,056,017,826

10.Permenant sources ratio= (8):(5)

91.84% 83.27% 91.43%

11.Temporary sources ratio= (9):(5)

8.16% 16.73% 8.57%

As we can see from the table, in 2014 the self-funded ratio is increasing significantly (30,88%) from 2013 to 2014. The main reason is that the owner equity decrease by 56,2% (while other items in equity remains stable, the retained earning has a sharpen decrease in 2014 by 536% (-10,919,788,583 VND) compared with that in 2013 (-1,715,757,343 VND) and 2012 (-1,860,473,364) while the liabilities has a considerable rise by 122% equal to 7,381,868,911 VND (while current liabilities goes down 54,55% and the non-current liabilities goes up to 650%). This lead to the increase in the dept ratio of the company because the company need to finance themselves by other resources besides the equity.

b. Stability of funded source analysis As we can see from the table, permenant sources ratio in 2014 is 91,84% and in 2013 is

83,27%.

The structure of liabilities in 2014 includes: current liabilities accounts for 8,16 % of total equity and non-current liabilitis accounts for 45,05% of total equity. The non-current liabilities accounts for most of the amount of the liabilities (while the proportion of current liabilities is very small) so the permenant sources ratio và the self-funded ratio have a big difference. Although the self-funded ratio decreases and the dept ratio increases due to the sharpend decrease in equity and increase in the long-term liabilities, the high permenant sources ratio during 3 years (over 83%) shows the high stability of

c. Analysis of financial balanceTable: Summary of financial balance’s analyzed indicators by years

Units: dong

2012 2013 2014

1.Owner equity 23,993,270,144 27,043,086,250 25,220,923,921

2. Long-term assets 17,485,851,127 17,588,083,001 16,332,930,693

3.Net Working capital (NWC)

= (1)-(2) 6,507,419,017 9,455,003,249 8,887,993,228

4.Inventory 2,758,273,074 1,999,663,847 2,095,996,728

5.Short-term receivable 1,408,344,076 4,982,321,443 4,529,774,607

6.Short-term debts

( without bank loan ) 556,017,826 4,025,416,539 1,128,701,989

7.Need for NWC

=(4)+(5)-(6) 3,610,599,324 2,956,568,751 5,497,069,346

8.Net budget = (3)-(7) 2,896,819,693 6,498,434,498 3,390,923,882

From the table we can see that NWC always positive implying financing from capital is quite good. And even though company not only has enough long-term capital to support its long-term assets but also surplus to finance short-term needs.

In addition, owner equity always greater than zero and increases steadily over years, hit the top in 2013. Otherwise, long-term debts rising continuously and unevenly in 2014 shows that company has invested such relatively large projects and has possibility to face to uncertainty in safety as well as ability of autonomy in capital.

Net working capital analyzing: is the short-term capital that company needs to offset part of current assets including inventory and account receivable.

Need for NWC is low, however does not remain constant due to poor inventory and account receivable management, and ineffective financing support seeking also. However, positive numbers indicate that financial balance is still in safe because company is not required to borrow in order to offset the lack of demand for NWC.

Net buget : although NWC of company quite low and the pace of growth is not high, however, the need still larger than NWC. Positive net budget shows that company does not encounter harship in short-term payment and it’s enabled to maintain current business.

Inconclusion, company’s financing reaches the equilibrium in short-term and NWC meets the needs of short-term capital.

2. The operational efficiency analysis2.1 Assets use efficiency

3. Items 2014 2013 2012

1.Sales and revenues (net revenue from sales + Financial income + other income)

7,093,913,253 9,094,600,906 9,807,380,538

2. Average total assets 26,132,005,086 25,518,178,197 26,047,625,067

3. Average fix assets

15,142,950,487 16,540,208,733 16,285,592,264

4. Net sales 4,172,714,450 7,740,903,709 9,583,300,417

5.Average working capital

9,171,498,239 7,981,211,133 8,460,255,695

6.Cost of goods sold 4,361,282,599 5,449,016,139 6,969,518,062

7.Average inventory

2,047,830,288 2,378,968,461 3,064,232,760

8.Average account receivables

4,756,048,025 3,195,332,760 2,187,497,381

9.Assets turnover = (1):(2)

0.27 0.36 0.38

10.Fix assets turnover = (1): (3)

0.47 0.55 0.60

11. Working capital turnover= (4) : (5)

0.45 0.97 1.13

12. Number of days of working capital turnover

791.27 371.18 317.81

13.Inventories turnover =(6) : (7)

2.13 2.29 2.27

14.Inventories turnover period

169.04 157.17 158.28

15.Acount receivables turnover = (4): (8)

0.88 2.42 4.38

16.Account receivable period

410.33 148.60 82.17

2.2 Profitability of sales extimation:

Profit over sales ratioFrom the table below, we can easily see the ratio between profit before tax and total sales

decreases by years. This is because the speed of the decrease in the profit before tax is higher than that of the total sales.

Table: 4.8: Quota for estimating the profitability of sales and assets.

Ratio 2014 2013 2012

1.Average total asset. 38,742,467,046 25,518,178,197 -

1. Revenue 4,172,714,450 7,740,903,709 9,583,300,417

3.Total revenue = net revenue from sales + Financial income + other income 7,093,913,253 9,094,600,906 9,807,380,538

4.Net sale +financial income 4,177,507,086 7,747,600,906 9,628,449,174

5.Profit before tax -7,592,624,458 122,412,495 -356,415,307

6.Financial income 4,792,636 6,697,197 45,148,757

7.Other income 2,916,406,167 1,347,000,000 178,931,364

8.Net profit from operating -3,108,615,140 438,607,209 507,811,663

9.Interest expense 302,557,523 307,467,642 903,712,250

10. Net operating profit + interest expense -3,411,172,663 746,074,851 1,411,523,913

11. Profit before tax+ Interest expense -7,290,066,935 429,880,137 547,296,943

12. Profit before tax/ Total revenue = (5) : (3)

-107.03% 1.35% -3.63%

13. Net profit from operating /( Net sale +financial income) =(8) : (4)

-74.41% 5.66% 5.27%

14.

(Net operating profit + interest expense)/ ( Net sale +financial income) = (10) :(4)

-82% 10% 15%

Profitability of sales estimation      

15.ROA 4.19 11.95 -

16.RE -0.20 0.0048 -

Nguồn: Số liệu được tính toán từ BCTC của TRC

Ratio between net operating profit/ net operating revenue:As we can see in the table above, we can see that the ratio between the net profit from

operating and net revenue from oprerating is very low (5.27% in 2012, 5.66% in 2013) and become negative in 2014 (-74,41%).

.

Ratio between profit over net operating revenue excluding financial structure: This ratio decreases continuously from 15% to -82% through 3 years. This is because the

speed of the decrease in net profit from operating and interest expenses higher than that of revenue..

2.3 Return on assets (ROA):ROA of company is at very low levels over recent years, especially is the sudden fall to

minus 35% in 2014. In other words, executives are using inefficient assets, stemming from excessive debt to invest in assets (long-term investments 2.5 billions for upgrading the plant in 2014) rather than investing for the sale of products to customers. In more detal, in 2012, total debt was approximately 6 billions and about 5 billions in 2013 but jumped to 13.5 billion at the year of 2014.

To illustrate clearly about the factors affecting the rising in ROA, we have Dupont equation

= Profit beforetax

revenueratio* Property efficiency

Criteria analyzing: ΔROA= ROA2014 – ROA2013 = (34,67%) - (-1,51%) = (-33,16%)

Effect of Profit beforetax

revenueratio:

AERe ==Profit before tax

over revenue ratio in 2014

--

Profit before tax over revenue ratio in

2013*x

Property efficiency

in 2013

= [(-220,58%) – 1,87%] * 0,28 = (-62,286%)

Effect of Property efficiency:EPr =

Property efficiency

in 2014

Property efficiency

in 2013

Profit before tax over revenue ratio in 2014

-

= ( 0,28 – 0,47) * 1,87% = (-0,3553%)

E = ERe + EPr = (-62,286%) + ( -0,3553%) = (-62,6413%)

Conclusion: Negative ROA stems from the company performed perfunctorily production business in parallel with the construction and upgrading factories making serious revenue decline; costs (mainly interest expenses) increased leading to ROA are not as good as the shareholders expected.

Return on equity (ROE):

From 2013 to 2014, the owner equity had got nearly halved, despiting the company's assets have not changed much, making the ratio of assets to owner equity double, or we can see that possibilities of ROE changes proportionaly (in the same direction) with ROA.

2.4 Financial efficiency analysis Return on Equity

Table 4.9: Items reflect financial efficiency and factors impact on financial efficiencyItems 2014 2013 2012

1. Owner's Equity 11,800,504,251 21,004,535,491 20,859,819,470 2. Profit before tax and interest (8,901,473,717) 452,183,663 373,953,326 3. Interest expenses 302,557,523 307,467,642 903,712,250 4. Profit after tax (9,204,031,240) 144,716,021 (529,758,924)

ROA

5.   Return on Equity (ROE)(5) = (4):(1)

-78% 0.69% -2.51%

6. Interest coverage ratio (from profit)(6)= (2):(3)

(29.42) 1.47 0.41

7. The economic rate of return on assets (RE) (table 4.8)

-0.35 0.02 0.02

8. Self-funded ratio (table 4.4) 0.47 0.78 0.879. Return on Assets (ROA) (table 4.8) -0.3522 0.0057 -0.0203

Source: http://ezsearch.fpts.com.vn

According to table 4.9, it can be seen that ROE is fluctuated through years. ROE in 2012 was -2.51%; in 2013 was 0.69% and in 2014 was -78%. If in 2012, each 100 dong of equity made 2.51 dong of loss in profit after tax, this number in 2014 was 78 dong. This means that financial efficiency of the company was very bad.

Factors impact on financial efficiency:To be clearer about which factors impact on financial efficiency, it needs to analyze

factors affecting oprating efficiency and impact of financial leverage ratio.

o Factors affecting operating efficiency:Table 4.10: Factors impact on operating efficiency

Items 2014 2013 20121. Profit after tax (9,204,031,240) 144,716,021 (529,758,924)2. Total sales 4,172,714,450 7,740,903,709 9,583,300,417 3. Total assets 25,220,923,921 27,043,086,250 23,993,270,144 4. Owner's equity 11,800,504,251 21,004,535,491 20,859,819,470

5. Profit after tax/ Total sales(5)= (1):(2)

-220.58% 1.87% -5.53%

6. Total assets/ Average equity (6) = (3):(4)

213.73% 128.75% 115.02%

7. Total sales/ Total assets (7) = (2):(3)

16.54% 28.62% 39.94%

Source: http://ezsearch.fpts.com.vn

- We have: ROE = Profit after tax

Total sales x Total salesTotalassets x

Total assetsAverage equity

- Indicator to be analyzed:ΔROE = ROE2014 – ROE2013 = (-78%) - 0.69% = -78.69%

- Effect of Profit after tax/ Total sales on ROE:

ROE = (Profit after tax/ Total sales in 2014 - Profit after tax/ Total sales in 2013) x Total assets/ Average equity in 2014 x Total sales/ Total assets in 2014 ROE = (-220.58% - 1.87%) x 213.73% x 16.54% = -78.66%

- Effect of Total assets/ Average equity on ROE:ROE = (Total sales/ Total assets in 2014 – Total sales/ Total assets in 2013) x

Profit after tax/ Total sales in 2013 x Total assets/ Average equity in 2014 ROE = (16.54% - 28.62%) x 1.87% x 213.73% = -0.48%

- Effect of Total sales/ Total assets on ROE:ROE = (Total assets/ Average equity in 2014 – Total assets/ Average equity in

2013) x Profit after tax/ Total sale in 2013 x Total sales/ Total assets in 2013 ROE = (213.73% - 128.75%) x 1.87% x 28.62% = 0.45%

=> In combination: -78.66% + (-0.48%) + 0.45% = -78.69%

In conclusion, factor(s) which increase ROE is (are) ... and ... don’t (doesn’t) improve financial efficiency.

o Impact of financial leverage ratio:Table 4.11: Factors about financial leverage ratio

Items 2014 2013 20121. Liablities 2,058,885,450 4,525,416,539 2,056,017,826 2. Owner's equity 11,800,504,251 21,004,535,491 20,859,819,470 3. Debt-to- Equity ratio(3) = (1):(2)

25,89% 37,47% 30,54%

4. The economic rate of return on assets (RE) (table 4.8)

-0.35 0.02 0.02

Source: http://ezsearch.fpts.com.vn

The ROE-RE equation and its factors:

ROE = RE + (RE – I) x Debt

Equity x (1 – T)

In which:I: Average interest rateT: Income tax rate

From the table above, it can be seen that RE < I, because average interest rate in market through years always larger than RE. This means that the company’s debt didn’t increase financial efficiency. In this case, financial leverage ratio is negative; the company shouldn’t increase their debt for business expansion.

3. Risk analysis

3.1 Business risk

Risk of the fluctuation of input material’s prices. Nowadays, in the pharmaceutical manufacture and business industry, the materials input of most of the domestic firms depend much on the materials imported from other countries while the price is always fluctuating. The fluctuation of the input prices has not only affected the prices of medicine products but also the customer sentiment. This is one of the most risky factors affecting the cost of production an the capability of the profitability of pharmaceutical companies generally, including Amvi Biotech. Therefore, production and business operations of the company are affected much by the fluctuation of raw material prices on the international market.

The risk of exchange rate. Most of the raw material and machinery of the company are imported from China, Germany, America,… and the currency used to pay mainly is the US dollar (USD) while the company’s products are sold in the domestic market. Hence, the fluctuations in the exchange rate between Vietnam dong and US dollar would impact negatively on input cost and affect the result of the business operations.

to minimize the risks that may occur due to the exchange rate fluctuations, Amvi always monitors and updates the increase and decrease of the exchange rate while predicting the volatility to offer reserving policy for inventories reasonably.

Risks in product circulation registration

Amvi BIOTECH business is the manufacturing and producing rapid diagnosis (quick test) categories. Before the distribution on the market, products of the company must comply with the inspection and licensing stringent product circulation by the Health Ministry. On the other hand, licenses for distribution of products for the pharmaceutical, health care industry is valid only for a period of 5 years. Therefore, the time to register their license renewed circulation and circulation permit for the new products also have significant impact to business operations of the company.

Competitive risks.

Vietnam is in the process of integration into the region and world economy. Especially when Vietnam joins the WTO, along with the removal of tariff barriers, will attract the participation of abroad companies with strong financial strength and modern technology. Since then, the business environment will be more intense competitive for pharmaceutical manufacturing enterprises in the country in terms of price, quality and product categories.

3.2 Financial risk analysis:Table 4.13: Items reflect financial risk

Items 2014 2013 2012

1. Profit before tax and interest (8,901,473,717) 452,183,663 373,953,326

2. Profit before tax (9,204,031,240) 144,716,021 (529,758,924)

3. The Degree of Financial Leverage (DFL) = (1):(2)

0.97 3.12 -0.71

Source: http://ezsearch.fpts.com.vn

From the table above, it can be seen that the degree of financial leverage was fluctuated through years and remained at low level. In 2014, there were only 0.0008% of short-term loans and borrowings over total owner’s equity and 0.0096% of long-term loans and borrowings over total owner’s equity. Interest expenses in 2014 were 302,557,523 dong, a small amount in profit before tax and interest, so the degree of financial leverage was low. Consequence, the company used less debts, the lower DOL was, the lesser the financial risk was.

3.3 Insolvency risk analysis:Table 4.14: Item reflect insolvency risk of the company

Items 2014 2013 2012

Current assets 8,887,993,228 9,455,003,249 6,507,419,017

Cash and cash equivalents 1,503,535,227 2,181,523,772 1,784,426,962

Inventories 2,095,996,728 1,999,663,847 2,758,273,074

Current liabilities 2,058,885,450 4,525,416,539 2,056,017,826

Current ratio 4.32 2.09 3.17

Quick ratio 3.30 1.65 1.82

Cash ratio 0.73 0.48 0.87

Source: http://ezsearch.fpts.com.vn

It can be seen from the table above that quick ratio of the company in 2014 was nearly doubled compared to 2013. This was because in 2014 current assets growth (-6.00%) was higher than current liability growth (-54.50%). Quick ratio of the company in 2014 was also higher than in 2013 even though inventories in 2014 were increased compared to 2013 while inventories in 2013 were decreased compared to 2012. This was also because in 2014 current assets growth was higher than current liability growth. Cash ratio of the company was improved in 2014. This was because in 2014 cash and cash equivalents growth (-31.08%) was higher than current liability growth (-54.50%). While in 2013, cash and cash equivalents growth (22.25%) was lower than current liability growth (120.11%).