GROUP 9
ANALYSIS OF OPERATING CYCLE
AND CASH CONVERSION CYCLE:
VINAMILK VS. MOC CHAU MILK
1. Introduction
In this report, we conduct a comprehensive analysis of the operating cycle and cash
conversion cycle (CCC) for Vinamilk and Moc Chau Milk. These two companies are
among the leading dairy manufacturers in Vietnam, with Vinamilk being a long-
established market leader and Moc Chau Milk emerging as a strong competitor. By
analyzing key financial indicators, we aim to evaluate their efficiency in managing
working capital and liquidity.
2. Financial Data and Calculation Methods
The following financial metrics were extracted from the 2024 financial reports of
Vinamilk and Moc Chau Milk:
2.1 Key Financial Data
2.2 Calculation Formulas
The operating cycle and cash conversion cycle are calculated using the following
formulas:
Days Inventory Outstanding (DIO) = (Average Inventory / COGS) × 365
Days Sales Outstanding (DSO) = (Average Accounts Receivable / Net Revenue) ×
365
Days Payable Outstanding (DPO) = (Average Accounts Payable / COGS) × 365
Operating Cycle (OC) = DIO + DSO
Cash Conversion Cycle (CCC) = OC - DPO
3. Calculation Results
Based on the formulas above, we computed the following results:
3.1 Vinamilk’s Operating and Cash Conversion Cycle
3.2 Moc Chau Milk’s Operating and Cash Conversion Cycle
4. Observations and Comparison
Based on the calculated financial metrics, the table below compares the operating
cycle and cash conversion cycle of Vinamilk and Moc Chau Milk:
METRIC VINAMILK MOC CHAU MILK
DIO (Days Inventory Outstanding) 59.58 days 31.58 days
DSO (Days Sales Outstanding) 37.70 days 45.76 days
DPO (Days Payable Outstanding) 17.95 days 1 day
Operating Cycle (OC) 97.28 days 77.34 days
Cash Conversion Cycle (CCC) 79.33 days 76.76 days
4.1. Analysis of DIO (Days Inventory Outstanding)
Vinamilk has a DIO of 59.58 days, which is significantly higher than Moc Chau Milk
(31.58 days).
This suggests that Vinamilk holds inventory for a longer time before selling it,
possibly due to a larger product portfolio or a different stock management strategy.
Moc Chau Milk's lower DIO indicates a faster inventory turnover, which reduces
storage costs and the risk of inventory obsolescence.
4.2. Analysis of DSO (Days Sales Outstanding)
Vinamilk's DSO is 37.70 days, whereas Moc Chau Milk's DSO is 45.76 days.
Moc Chau Milk takes longer to collect payments from customers, which may indicate
lenient credit terms or slower payment behavior from its buyers.
Vinamilk's lower DSO reflects a more efficient receivables collection process, which
improves cash flow.
4.3. Analysis of DPO (Days Payable Outstanding)
Vinamilk's DPO is 17.95 days, compared to only 1 day for Moc Chau Milk.
This indicates that Vinamilk is able to delay payments to suppliers for a longer period,
effectively managing its short-term liquidity.
Moc Chau Milk's extremely low DPO suggests that it pays suppliers almost
immediately, which could put pressure on its cash reserves but may also result in
stronger supplier relationships or better pricing.
4.4. Analysis of Operating Cycle & Cash Conversion Cycle
Vinamilk's operating cycle (OC) is 97.28 days, longer than Moc Chau Milk's
77.34 days, meaning that it takes more time for Vinamilk to complete its production
and sales cycle.
Vinamilk's CCC is 79.33 days, while Moc Chau Milk's CCC is 76.76 days.
A longer CCC means that Vinamilk takes slightly more time to convert inventory into
cash, while Mộc Châu Milk has a slightly more efficient cash flow cycle.
5. Conclusion
5.1. Cash Flow Efficiency
Both companies have a positive Cash Conversion Cycle (CCC), meaning they
require external financing or working capital to sustain operations.
Vinamilk's CCC is slightly longer (79.33 days), suggesting it takes more time to
turn its investments in inventory and receivables into cash.
Moc Chau Milk’s CCC is 76.76 days, indicating slightly better cash flow efficiency.
5.2. Inventory and Sales Management
Vinamilk holds inventory longer (DIO of 59.58 days), which may be due to a
broader product line or bulk production strategies.
Moc Chau Milk has a shorter inventory turnover time (DIO of 31.58 days),
which is beneficial for reducing storage costs and improving operational efficiency.
5.3. Supplier Payment Strategy
Vinamilk strategically extends supplier payments (DPO of 17.95 days), allowing
it to optimize cash flow management.
Moc Chau Milk pays suppliers almost immediately (DPO of 1 day), which may
indicate strong supplier relationships but could also lead to tighter cash flow
constraints.
5.4. Overall Financial Impact
Vinamilk has a longer operating cycle, which may be influenced by its business
model, larger scale, and distribution network.
Moc Chau Milk, with a shorter operating cycle and quicker cash turnover, has a
slightly more efficient working capital management system.
If Vinamilk can reduce its inventory holding period or improve receivables collection,
it could enhance cash flow and financial performance.
Moc Chau Milk may consider negotiating better supplier payment terms to ease cash
flow pressures.
DATA SOURE
VINAMILK:
[Link]
-_VNM_-_BCTC_VNM_31.12_.2024_-_HOP_NHAT_-_VN_.pdf
MOC CHAU MILK:
[Link]
2024-TA-signed_compressed.pdf
