Finance for Strategic Managers - Desklib

Finance for Strategic
Managers

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
TASK 2............................................................................................................................................3
2.1 Interpreting financial statements of Samsung Plc for year 2020..........................................3
2.2 Analysing financial data using ratio analysis for Samsung PLC..........................................4
2.3 Recommendations to Samsung PLC.....................................................................................5
TASK 3............................................................................................................................................7
3.1 Impact of 'creative accounting' technique when making strategic decisions........................7
3.2 Limitations of ratio analysis as a tool for strategic decision-making....................................8
3.3 Importance of cash flow management when evaluating proposals for capital expenditure. 8
3.4 Methods and tools used by organization to examine financial data for strategic decision-
making process............................................................................................................................7
TASK 4............................................................................................................................................9
4.1 Evaluating capital expenditure proposals using various techniques.....................................9
4.2 Assessing the impact of business proposal on strategic direction of company...................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Finance is important to set financial goals of company for longer periods. Strategies
regarding financial management are formulated and implemented to generate profits and ROI.
The present case scenario is based upon evaluation of Samsung Plc's performance to provide
useful learnings. Initially, the report will evaluate the need and sources of financial data used to
frame business strategy along with the risks related to financial business decisions. It will also
review the methods that are used for appraising capital expenditure projects.
Further, report will interpret financial statements of company to examine viability of it.
The study will also perform comparative analysis of financial data by applying ratios and
providing suggestions to improve performance. In addition to this, study will produce an
information leaflet which will assess impact of accounting techniques while making strategic
decisions, limitations of ratio analysis and importance of cash flow management while
evaluating proposals of capital expenditure. Lastly, report will evaluate investment proposals
using financial techniques.
TASK 1
Incorporated in PPT
TASK 2
2.1 Interpreting financial statements of Samsung Plc for year 2020
Annual report is very important document published by company in order to provide vital
information about company to all major stakeholders. The annual report of Samsung plc for the
year 2020 is interpreted to examine financial performance and position of company and also to
identify viability of organisation.
First of all, gross profit earned by company has increased from previous year which
shows that company is making good sales to cover up all cost of sales and generate sufficient
profits. Samsung Plc is trying to increase its sales by reducing cost by applying cost effective
techniques of production and acquiring basic resources at low price in bulk quantities. On the
other hand, the huge difference between net profit and gross profit shows that company is
incurring large amount of indirect expenses.
At the time of balance sheet interpretation, it was noted that company is having enough
current assets to meet its short term obligations on time. Company has made no changes in its

equities and has retained his profits in business for expansion purpose. Samsung Plc has also
paid back its debentures and long term loans which shows decreased burden of company on
external finance.
Cash Flow statement depicts that company is generating adequate cash from its basic
operational activities which increased from previous year. On contrary, company is utilizing its
cash in acquiring investment and financial assets which means it is investing in newer
technologies to create smart solutions to issues. It will also help in achieving economies of scale
which increases profits on long run. Samsung Plc has also used its cash to pay back its loans and
advances and dividend payments (Financial Statements, 2021).
2.2 Analysing financial data using ratio analysis for Samsung PLC
particular formula 2021 2020
Net profit margin Net profit/sales*100 10.92 8.83
Net profit 7141685 4884926
sales 65388503 55325178
Gearing ratio Total debt/total shareholder equity 0.43 0.37
Total debt 118557683 102287702
Total equity 274268591 275948016
Current ratio Currents assets/currents liabilities 2.32 2.62
Current assets 209155353 198215579
Current liabilities 90109462 75604351
Asset turnover ratio Net sales/total assets 0.17 0.15
Net sales 65388503 55325178
Total assets 392826274 378235718
Inventory turnover
ratio Net sales/AISP 2.14 1.73