Finance For Strategic Managers

From This analysis is based on past financial statements and
company has no idea of similar happenings in future.
 If company changes its accounting methods in
future, then comparison becomes difficult.
 Change in prices make comparison difficult in
future. In Samsung case ratio of sales to total
assets in 2018 is much higher due to rise in prices
because fixed assets being shown at cost not
market price.
3. Importance’s of cash flow management in
evaluating proposals for capital expenditure
Cash flow management is important for analyzing
company's surplus or shortage of cash in the financial
year. Cash inflows and outflows on capital expenditure
shows under cash flow from investing activities. If
company incurred capital expenditure like purchase of
fixed assets it will be treated as cash outflow and if sales
fixed assets, then its cash inflow. So it is important to
manage cash flows regarding capital expenditure.
1. Impact of creative accounting techniques on
strategic decision
Creative Accounting refers to practices which an
organization needs to follow required rules and
regulations but deviate from what those standards intend
to fulfil. For example, some companies manipulate
balance sheet amounts by using artificial transaction,
reclassification and presentation of financial amounts
with the help of balance sheet manipulation for finding
smooth financial ratios. Like this Samsung also uses
creative accounting techniques for regulatory flexibility,
dearth of regulation in which few accounting treatments
could be fully regulated as there is few compulsory
requirements, management has large extent of estimation
in unrestricted areas like assumption in provision for bad
debts.
Samsung identified creative accounting behaviors
by analyzing financial statement through ratio analysis
which provide adequate information to financial
statement users and this information enable users to
adjust for creative accounting as some investors trust on
reported earnings figures in income statement.
2 Limitations of Ratio Analysis tool for decision
making
There are certain limitations in ratio analysis tool
which impact on Samsung's strategic decision making:
Finance for Strategic Manager