School of Trade and Economics
National Economics University of Vietnam
loitv@neu.edu.vn
taloiktqd@yahoo.com.vn
Introduction
More than 100,000 firms have declared bankruptcy and 200,000 firms have undergone financial distress between 2011 and 2012 according to the General Statistics Office of Vietnam. In just the first quarter of 2013, 10,000 firms were no longer of going concern. This increase in financial distress is due to the span and scope of the economic recession that has created one of the most severe liquidity crises in recent memory for both firms and the investing public. Understanding financial distress early warning signals allows investors to appropriately gauge risk and institutions to better tailor recovery-oriented economic policies.
Viettrans is one of the largest logistics service providers in Vietnam. Viettrans is an international freight forwarder that specializes in the transportation and warehousing of goods to and from Vietnam. Viettrans boasts a nationwide warehousing and distribution system, a global network of reliable and effective agents with good connections to competent authorities, and a well-trained staff that allows the firm to be in a position to satisfy customers at home and abroad.
Research Objective
By analyzing the financial statements of Viettrans, this paper intends to study early warning signals in determining financial distress and to provide possible recommendations to improve the financial health of firms in the long-term.
Research Methodology
The method used to analyze early warning signals is as follows:
- Quantitative: primary data is collected from the firm’s available resources and calculations follow the selected bankruptcy prediction model. Secondary data is used as testimony of the model’s result
- Qualitative: Comments and conclusions about the firm’s financial health are based on the quantitative outcomes
- Scope: Due to resource constrains, only the financial statements over the last ten years were analyzed. The figures will address basic bankruptcy prediction models and their ability to predict financial distress in the near future (up to 3 years).
While many Vietnamese firms have experienced financial distress, the impact on the firm’s ability to remain of going concern depends on many financial indicators. The Altman Z Score model serves as a reliable tool to predict whether or not Vietnamese firms will declare bankruptcy. As such, institutions like the government need to utilize this tool to assist firms in overcoming financial distress by understanding the early warning signals.