Strategic Financial Management (pdf)

Finance for
Strategic Managers

Table of Content
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
An evaluation of the sources of financial data which can be used to inform business strategy. .1
Need for financial data and information in relation to the formulation of business strategy......1
An analysis of the risks related to financial business decisions..................................................1
Methods for appraising strategic capital expenditure projects and strategic direction................1
TASK 2............................................................................................................................................2
Interpretation and the comparative of the financial statements of the Samsung PLC so that they
assess the current viability of the organization as the comparative analysis is being done by the
help of ratio..................................................................................................................................2
Recommendations to the Samsung PLC......................................................................................3
TASK 3............................................................................................................................................4
The impact of ‘creative accounting’ techniques when making strategic decisions.....................4
The limitations of ratio analysis as a tool for strategic decision-making....................................4
Importance of cash flow management while evaluating proposals for capital expenditure........4
Recommends, with justifications, methods and tools that allow businesses to analyse financial
data for strategic decision-making purposes................................................................................4
TASK 4............................................................................................................................................4
Investment appraisal- decision regarding whether to purchase or replace the machinery..........4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7
Contents...........................................................................................................................................9
INTRODUCTION.........................................................................................................................10
TASK 2..........................................................................................................................................10
REFERENCES..............................................................................................................................13

INTRODUCTION
This report is about the Pietro yon who was an Italian born organist and the composer
who has made their career in the United States. Pietro yon born in Settimo Vittone and served for
the time as an organist in the Vatican and at the royal church in the Rome. In the year 1926 he
become the assistant organist of St. Patric Cathedral, New York. He is the local businessman
who owes and manages the retail stores who has been sell the number of home wares and also
become the member of the local business and chamber of commerce and is being asked to chair
the committee for the research and did the research on the success of Samsung PLC. This report
contains the evaluation of the various sources of the financial data that can be used in making the
business strategy and did the analysis of risk that is being related business decision that is being
based on the financial business decision. This report also contains the interpretation of the
financial statements of the Samsung PLC to find out the current viability of the business. This
report also elaborate the limitations of the ratio analysis as a tool for the strategic decision
making (Christensen and et.al., 2015).
TASK 1
An evaluation of the sources of financial data which can be used to inform business strategy
Need for financial data and information in relation to the formulation of business strategy
An analysis of the risks related to financial business decisions
Methods for appraising strategic capital expenditure projects and strategic direction
(Enclosed in PPT)
1

TASK 2
Interpretation and the comparative of the financial statements of the Samsung PLC so that they
assess the current viability of the organization as the comparative analysis is being done by
the help of ratio
2

Investment ratios
Particulars Formula 2017 2018
Earnings per share
(Net income - preferred
dividend) / Number of
shares outstanding 5,997 6,461
Recommendations to the Samsung PLC
As profitability ratio is most valuable for the business and one of the most frequently
used tool in doing the financial analysis of ratio that is being used to determine the company’s
bottom line and return to its investors. As the Samsung PLC is having the positive impact of this
ratio and it shows the company’s overall efficiency as well as performance.
In the case of liquidity ratio of Samsung PLC is also having the positive impact on the
business from the previous year as they are the important class in the financial matrix as it is
been helpful for analysing the debtor’s ability for identification of their debt obligation that too
without any external support. From the above analysis it is being clearly interpret ate that the
3

company is having the ability to pay off its debt obligation and maintains the margin of safety
through the various calculations and the company is having the ability that they can convert their
cash very quickly and it shows the company is having more liquid and having the better coverage
of its outstanding debt.
Solvency ratio is the ratio that shows the company ability to meet its long term
obligations so it is important to keep the eye on the solvency ratio and it helps the company in
preventing the bankrupt and the company has maintain the good solvency ratio (Wuttke and
et.al., 2013).
As the company is having the favourable Efficiency ratio that shows the company is how
well in utilising its assets to generate the income , as the company often looks to collect the cash
from the customer or it represent the time the company convert its inventory into the cash. As
Samsung is good in selling its product with the average price at high volumes.
Investment ratio is also increasing as it assess the company performance of distributing its shares
by giving the dividend and the company has paid good amount of dividend.
Overall the company is doing the growth as the Samsung is being reached the economies
of scale by outsourcing its production to different countries and gain the competitive advantage
in producing the quality as well as maintain the small cost as by offering the product at low cost
from its competitors. As Samsung is doing the continuous growth and now it becomes the one of
the most recognisable brand in the world. As company has did the financial growth from 2017 to
2018 as the earning per share is being increased from that the investors will invest more in the
company (Yazdanfar and Öhman, 2015).
TASK 3
The impact of ‘creative accounting’ techniques when making strategic decisions
The limitations of ratio analysis as a tool for strategic decision-making.
Importance of cash flow management while evaluating proposals for capital expenditure
Recommends, with justifications, methods and tools that allow businesses to analyse financial
data for strategic decision-making purposes
(Enclosed in Leaflet)
TASK 4
Investment appraisal- decision regarding whether to purchase or replace the machinery
Net Present Value:
4

It is a technique of investment appraisal in which present value of the cash inflows that
would generated by the proposed investment in the future is assessed and is compared against the
initial cash outlay for finding out the profitability of the intended capital expenditure. It is
basically the difference between present value of cash inflows and cash outflows (Abdel-Kader,
Dugdale and Taylor,2018.).
Cash Inflows from new machinery
year 1 2 3
Sales 391500 189000 98700
Less: Direct materials 140940 71442 37308.6
Direct labour 49329 31500 18900
variable overhead 23490 11340 5922
Repairs & maintenance 870 756 658
Contribution 176871 73962 35911.4
less : Depreciation 35000 35000 35000
Cash Inflows 141871 38962 911.4
New Machinery Amount
Cash Outflow 220000
Less: Allowance 120000
less: Residual value 49350
Net Cash Outflow 50650
Cash Inflows from Current Machinery
year 1 2 3
Sales 391500 189000 98700
Less: Direct materials 140940 71442 37308.6
Direct labour 67500.04 28350 14805
variable overhead 35235 17010 8883
Repairs & maintenance 6090 5292 4606
Contribution 141734.96 66906 33097.4
Less:Depreciation 91000 91000 91000
Net Cash Inflow 50734.96 -24094 -57902.6
Old
Machinery
Cash outflow 260000
From the above calculations, it can be observed that net cash flows from the purchase of
new machinery for the three years are higher than the cash flows that would be generated by
5

existing machinery during the stipulated years. This could become base for the finance manager
in selecting the option of purchase the new machinery instead of continuing with the existing
machinery. If the manager chose the option of continuing the current machinery, after one year,
the machinery will not be able to generate cash inflows for the business since which is evident
from the negative cash inflows. While on the other hand, if the finance manager opts for new
machinery, the business would be facilitated with cash inflows in all the mentioned years.
CONCLUSION
From the above project, it can be summarized that there are different sources of financial
data through which company informs its business strategies to its interested stakeholders such as
net cash available, profitability ratios, operational efficiency, growth rate of revenue. It was seen
in the report that a company needs financial data for the purpose of forming strategic business
decision-making. This is because by the way of financial information, organization is enabled to
evaluate its own performances that allows it in taking corrective actions for the purpose of
improving the same for meeting the future needs of the business. Further, it was observed in the
report that there are various risks which a business organization could face in its financial
decision-making such as market risk, interest rate risk, credit risk etc. Moreover, the financial
information of Samsung Plc was analysed by the way of ratio analysis through which the
operational efficiency was highlighted.
6

REFERENCES
Books and Journals
Abdel-Kader, M. G., Dugdale, D. and Taylor, P., 2018. Investment decisions in advanced
manufacturing technology: A fuzzy set theory approach. Routledge.
Wuttke, D.A and et.al.,2013. Managing the innovation adoption of supply chain finance—
Empirical evidence from six European case studies. Journal of Business Logistics. 34(2).
pp.148-166.
Yazdanfar, D. and Öhman, P., 2015. Debt financing and firm performance: an empirical study
based on Swedish data. The Journal of Risk Finance. 16(1. pp.102-118.
Christensen, D.M and et.al., 2015. Top management conservatism and corporate risk strategies:
Evidence from managers' personal political orientation and corporate tax
avoidance. Strategic Management Journal. 36(12). pp.1918-1938.
Bromiley, P and et.al., 2015. Enterprise risk management: Review, critique, and research
directions. Long range planning. 48(4). pp.265-276.
7

FINANCE FOR STRATEGIC
MANAGERS
8

Contents
INTRODUCTION......................................................................................................................3
TASK 2......................................................................................................................................3
Interpretation and the comparative of the financial statements of the Samsung PLC so that they
assess the current viability of the organisation. As the comparative analysis is being done by
the help of ratio.......................................................................................................................3
Recommendations to the Samsung PLC that is being based on the analysis and interpretation
of the financial position:.........................................................................................................4
REFERENCES...........................................................................................................................6
9

INTRODUCTION
This report is about the Pietro yon who was an Italian born organist and the composer who has
made their career in the United States. Pietro yon born in Settimo Vittone and served for the time
as an organist in the Vatican and at the royal church in the Rome. In the year 1926 he become the
assistant organist of St. Patric Cathedral, New York. He is the local businessman who owes and
manages the retail stores who has been sell the number of home wares and also become the
member of the local business and chamber of commerce and is being asked to chair the
committee for the research and did the research on the success of Samsung PLC. This report
contains the evaluation of the various sources of the financial data that can be used in making the
business strategy and did the analysis of risk that is being related business decision that is being
based on the financial business decision. This report also contains the interpretation of the
financial statements of the Samsung PLC to find out the current viability of the business. This
report also elaborate the limitations of the ratio analysis as a tool for the strategic decision
making (Christensen and et.al., 2015).
TASK 2
Interpretation and the comparative of the financial statements of the Samsung PLC so that they
assess the current viability of the organisation. As the comparative analysis is being done
by the help of ratio.
Profitability ratio
analysis
Particulars Formula 2017 2018
Gross Profit
11028471
5
11137700
4
Net profit 41344569 43890877
Sales revenue
23957537
6
24377141
5
Earnings before interest and tax
or operating profit 53645038 58886669
GP ratio Gross profit / sales * 100 46% 46%
NP ratio Net profit / sales * 100 17% 18%
Liquidity ratio analysis
Particulars Formula 2017 2018
10

Current assets
14698246
4
17469742
4
Current liabilities 67175114 69081510
Inventory 24983355 28984704
Prepaid expenses 5588892 5497974
Quick assets
Current assets - (stock +
prepaid expenses)
11641021
7.00
14021474
6.00
Current ratio
Current assets / current
liabilities 2.188049 2.528859
Quick ratio
Quick Assets/current
liability 1.732937 2.0297
Solvency ratio analysis
Particulars Formula 2017 2018
Long-term debt 2710269 996935
Shareholder's equity
20721341
6
24006899
3
Debt-equity ratio
Long-term debt /
shareholders equity 0.01308 0.004153
Efficiency ratio analysis
Particulars Formula 2017 2018
Cost of goods sold
12929066
1
13239441
1
Average Inventory
(Current + past inventory)
/ 2 21668429 26984030
Turnover or sales revenue
23957537
6
24377141
5
Average total assets
(Current + past total
assets) / 2
28196320
7
32055466
7
Average fixed assets
(Current + past fixed
assets) / 2
10156934
5
11354118
6
Receivables or debtors 27695995 33867733
Stock turnover ratio (In
times)
Cost of goods sold
/Average Inventory 5.966776 4.906399
Total assets turnover ratio
Turnover or sales revenue
/Average total assets 0.849669 0.760468
Fixed assets turnover ratio
Turnover or sales revenue
/Average fixed assets 2.358737 2.146987
11

Receivables or debtors
turnover ratio (in days)
(Debtors * 365) / Credit
sales 42.19565 50.7103
Investment ratios
Particulars Formula 2017 2018
Earnings per share
(Net income - preferred
dividend) / Number of
shares outstanding 5,997 6,461
Recommendations to the Samsung PLC that is being based on the analysis and interpretation of
the financial position:
As the profitability ratio is the most valuable for the business and one of the most frequently
used tool in doing the financial analysis of ratio that is being used to determine the company’s
bottom line and return to its investors. As the Samsung PLC is having the positive impact of this
ratio and it shows the company’s overall efficiency as well as performance.
In the case of liquidity ratio of Samsung PLC is also having the positive impact on the business
from the previous year as they are the important class in the financial matrix as it is being used to
determine the ability of the debtors to pay off their current debt obligations without raising the
external capital on the company. From the above analysis it is being clearly interpret ate that the
company is having the ability to pay off its debt obligation and maintains the margin of safety
through the various calculations and the company is having the ability that they can convert their
cash very quickly and it shows the company is having more liquid and having the better coverage
of its outstanding debt.
Solvency ratio is the ratio that shows the company ability to meet its long term obligations so it
is important to keep the eye on the solvency ratio and it helps the company in preventing the
bankrupt and the company has maintain the good solvency ratio (Wuttke and et.al., 2013).
As the company is having the favourable Efficiency ratio that shows the company is how well in
utilising its assets to generate the income , as the company often looks to collect the cash from
the customer or it represent the time the company convert its inventory into the cash. As
Samsung is good in selling its product with the average price at high volumes.
Investment ratio is also increasing as it assess the company performance of distributing its shares
by giving the dividend and the company has paid good amount of dividend.
Overall the company is doing the growth as the Samsung is being reached the economies of scale
by outsourcing its production to different countries and gain the competitive advantage in
producing the quality as well as maintain the small cost as by offering the product at low cost
from its competitors. As Samsung is doing the continuous growth and now it becomes the one of
the most recognisable brand in the world. As company has did the financial growth from 2017 to
2018 as the earning per share is being increased from that the investors will invest more in the
company (Yazdanfar and Öhman, 2015).
12

REFERENCES
Books and journals
Wuttke, D.A., Blome, C., Foerstl, K. and Henke, M., 2013. Managing the innovation adoption of
supply chain finance—Empirical evidence from six European case studies. Journal of
Business Logistics. 34(2). pp.148-166.
Yazdanfar, D. and Öhman, P., 2015. Debt financing and firm performance: an empirical study
based on Swedish data. The Journal of Risk Finance. 16(1. pp.102-118.
Christensen, D.M., Dhaliwal, D.S., Boivie, S. and Graffin, S.D., 2015. Top management
conservatism and corporate risk strategies: Evidence from managers' personal political
orientation and corporate tax avoidance. Strategic Management Journal. 36(12). pp.1918-
1938.
Bromiley, P., McShane, M., Nair, A. and Rustambekov, E., 2015. Enterprise risk management:
Review, critique, and research directions. Long range planning. 48(4). pp.265-276.
13

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14