Never miss a story

Get subscribed to our newsletter


×
A woman sells vegetables at an outdoor market in Hanoi, Vietnam. VOA

Businesses in Vietnam face a cash shortage that is preventing as much as $24 billion that could be invested in the nation’s $250 billion economy, according to a study by PwC Vietnam.

The financial services company analyzed the 500 businesses in Vietnam with the highest revenue that have been listed on both the Ho Chi Minh City Stock Exchange and the Hanoi Stock Exchange for the last four years or more. PwC Vietnam analysts said that those companies’ “cash conversion cycle” has increased, meaning that they have to wait longer from the start of the business cycle, when they first make their investments, until those investments start to pay off in the form of revenue.


“We continue to see cash flows being sacrificed to attain top line targets in Vietnam, which is not sustainable for businesses in the long run,” said Mohammad Mudasser, who leads the working capital management practice at PwC Vietnam. “Managing operating working capital is a cross-functional responsibility,” he added.

Top line refers to revenue, while bottom line refers to profit.


Due to lesser investments in businesses, startups are not growing in Vietnam. VOA

To sacrifice cash for the sake of revenue targets usually means that companies are willing to make an initial cash investment, often to buy inventory that can be sold for revenue. However the long cash conversion cycle suggests that there are some inefficiencies along the way, such as longer wait times between billing a customer and actually collecting the payment.

While there is no perfect business cycle, the PwC Vietnam study suggests companies in Vietnam could tackle some inefficiencies to unlock further potential in the already fast growing economy.

In 2018 Vietnam had one of the highest cash conversion cycles in Asia, at 67 days, which is an increase of two days compared with 2017, according to PwC Vietnam. That compares with an average in Asia of 58 days, and in particular 64 days in neighboring Thailand and 54 in Malaysia. That means those other Southeast Asian countries are able to turn their investments into cash sooner than Vietnam does.

“The fast-growing companies had significantly higher short term debt growth, indicating risks to the sustainable growth of these companies,” PwC Vietnam, a consulting company that sells tax and accounting services, said in a press release.

If the U.S. Federal Reserve Bank increases interest rates in the coming year, as some economists are expecting, emerging markets, such as Vietnam, could follow. That would increase borrowing costs for companies, increasing their vulnerability to debt.

Also Read-Know About this New Law in Illinois that Allows People to Buy Marijuana Legally

However it estimated that only a fraction of that capital could be released, $11 billion, because some of the capital has to stay in the business cycle. Analysts said inventory and outstanding invoices, known as accounts receivable, where the best bet for improving efficiency. That could mean that too much inventory is being held, or that companies are waiting too long to be paid by customers. (VOA)


Popular

Human hair wigs have several advantages over synthetic wigs

By- Digital Hub

I prefer synthetic wigs as it isn't something that I would wear all the time - just when I look different. Additionally, their ease of use is an essential factor for me. However, suppose you're looking to wear a wig for a fashionable accessory or as a way for you to show your personality. In that case, I'd recommend buying multiple synthetic wigs of various styles and colors instead of only the one human hair wig at the same amount. However, be cautious - only purchase top-quality synthetic braids that are more expensive as you might be disappointed by the new style you've chosen.

Keep Reading Show less
Photo found on Google Images

Nominated Books for Booker Prize 2021

The prestigious British-based, Booker Prize, is one of the most prestigious and acclaimed awards given annually to the best work of fiction. This award is given to a work of fiction which is primarily written in English language and published in the United Kingdom or Ireland by the writers of any nationality.

This year, six authors were nominated for their work of fiction, and the winner will be announced on the 3rd of November.

Keep Reading Show less
Photo found in Google Images

Michiyo Tsujimura performing experiments in a laboratory.

Today, 17 September,marks the 133rd birth anniversary of Michiyo Tsujimura, who was a Japanese scientist, and worked extensively on decoding the nutritional value of green tea.

Tsujimura spent her early career as a science teacher. And, in 1920, she chased her dream of becoming a scientific researcher at the Hokkaido Imperial University, where she began to analyse the nutritional properties of Japanese silkworms, in which she was very much interested.

Keep reading... Show less