Finance for Strategic Managers - Desklib

FINANCE
FOR
STRATEGIC
MANAGERS

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................4
Task1: Financial Data and Strategic Decision Making:..................................................................4
(Covered in PPT)....................................................................................................................4
Task 2: Discussion Paper:................................................................................................................4
2.1 Interpretation of financial statements of Samsung PLC to assess the current viability of the
organisation:...........................................................................................................................4
2.2 Comparative analysis of financial data using ratio analysis for Samsung PLC:..............5
2.3 Recommendation to Samsung PLC based on analysis and interpretation of financial
position:..................................................................................................................................6
Task 3: Information Leaflet:............................................................................................................6
3.1 Impact of creative accounting technique while making strategic decisions:...................6
3.2 Limitation of ratio analysis as a tool for strategic decision making:................................7
3.3 Importance of cash flow management while evaluating proposal for capital expenditure:
................................................................................................................................................8
3.4 Recommendation for methods and tools that allow business to analyse financial data for
strategic decision making purpose:........................................................................................9
Task 4: Capital Expenditure Appraisal:.........................................................................................11
4.1 Evaluation of capital expenditure proposal using appropriate financial technique:.......11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Finance is the process of raising funds in order to meet out the expenditure needs of organisation.
Funds can be raised from multiple sources to finance the business such as loan from bank or
financial institution, raising funds from issue of equity or debt in capital market. Financial needs
are the backbone for any business as it supports the working capital needs of corporations.
Strategic financial management means managing the finance of entity with an intention to
succeed the business by achieving the entity’s goals and objectives so that wealth of the business
concern will raise along with satisfying the needs of shareholders or other person connected with
the enterprise.
In this report initially the sources of financial data have been identified that supports the business
strategy of organisation such as financial statement which includes income statement, statement
of financial position and cash flow statement which helps the entity to build or update their
strategy’s on the performance of financial figures. There are certain types of risk that affects
business strategy such as credit risk, market risk, liquidity risk etc. has been explained broadly.
This report includes the analysis for financial figures with respect to Samsung PLC including
ratio analysis for different accounting period so that evaluation can be made regarding their
performance. Recommendation has been made to Samsung PLC with respect to improvisation
they need in their strategy so that business activities and process can improve. At the end of this
report capital budgeting decision has been carried out with respect to replacement of old machine
to new machine using different financial techniques such as Net present value method, Internal
rate of return method, Profitability index etc. and conclusion drawn on whether such replacement
is beneficial to entity or not.
This reports also highlights about review of various sources of financial data, and approaches to
analyse the financial data, what are the limitation of use of ratio analysis and further the
evaluation of financial statements of Samsung Plc so that accordingly the report can be prepared.
At the end of this study investment evaluation methods have been implemented on practical
question so that which option is best can be judged in make the investment decision.

MAIN BODY
Task1: Financial Data and Strategic Decision Making:
(Covered in PPT)
Task 2: Discussion Paper:
2.1 Interpretation of financial statements of Samsung PLC to assess the current viability of the
organisation:
Samsung Plc also called as Samsung electronics limited founded during the year 1969 and
registered as listed company in the stock exchange during the year 1975. They had a wide range
of products and working on different segments including consumer electronics, mobile
telecommunication, information technologies etc. Further these range of products is divided into
various products such as in consumer electronics they offer television, washing machines, air
conditioners and so on. Similarly, in mobile communication they offer mobile handsets,
telecommunication networks, workstations etc. Their books of accounts have been prepared by
complying with Korean international financial reporting standards also known as Korean IFRS
(About us: Samsung Plc 2021)
The interpretation on financial statement has been carried out by studying the consolidated
financial statements of the group expressed in USD thousand for the year 2021, 2020, 2019 and
2018 and evaluation of changes in financial figures have been carried out which is mentioned
below: -
 Statement of financial Position:
After analysing the balance sheet figures of Samsung Plc the conclusion drawn that
company total current assets reflected are USD are 190,685,555 and 173,250,348 in the
year ended December 2021 and 2020 Similarly their currents assets during the year ended
2019 and 2018 are 155,634,050 and 149,895,684 respectively which indicated the decline
in current assets and the reason can be the falls and rise in operational cash activities of
Samsung PLC. However, such decrease can be easily offset by either increase in another
asset or decrease in their liability or equity or any operating expense (Bouaziz and
Hachicha, 2018).

Similarly, their non-current assets are 372,888,268 and 330,596,969 in 2021 and 2020
which involves majority of assets in the form of property plant and equipment which is
around 53% of non-current assets that simply signifies that Samsung has invested in
developing fixed infrastructure around the world to expand their business as they deal in
range of products. Similar flows have been seen after analysing the non-current assets
during the 2019 and 2018 which is 302,511,023 and 291,178,800 respectively. Here the
difference is Samsung plc has generated some intangible assets amounting to 17,764,234
and 12,777,442 other then property plant and equipment. The total current liability over
the period of 2021 and 2020 is 77,018,789 & 66,081,991 respectively which reflects an
increase in current liability and the reason for same can be that during such year Covid 19
has affected the operating cycle of many business and due to such reason Samsung needs
more funds to flow into their working capital as the goods and services are not consumed
in such period by consumers whether residential or institutional. Similarly, the results of
2019 and 2018 period are 54,727,544 & 59,274,029 which shows decline in current
liability that signifies that Samsung has recovered from the pandemic and they are able to
generate sufficient cash to repay their short term dues.
 Statement of financial Performance:
Samsung’s gross profit in 2017 was 110,284,715 which has been increased to KRW
110,284,715 in 2018, thereafter it has been declined to 83,161,332 in 2019 which further
increased to 92,318,692 in 2020. After 2017, the company’s overall operating expenses
has been increased. The net profit of Samsung in 2017 was 41,344,569 which has been
increased to 43,890,877 in 2018. But in 2019, Samsung’s net profit has been majorly
decreased to 21,505,054 in 2019 which further rose to 26,090,846 in 2020.
 Statement of Cash flow:
Cash Flow Statement: Analysis of the cash-flow statement of Samsung depicts that
company’s Operating cash flows have been declined from 67,031,863 in 2018 to
45,382,915 in 2019, which further increased to 65,287,009 in 2020. Samsung’s net cash
used in investing activities has been increased from 39,948,171 in 2019 to 53,628,591 in

2020. The free cash flow of Samsung in 2019 was 16,765,245 which has been increased
to 25,015,196 in 2020
2.2 Comparative analysis of financial data using ratio analysis for Samsung PLC:
The following is the ratio analysis of Samsung PLC as shown under: -
Net Profit Margin:
Period Year 2017 Year 2018 Year 2019 Year 2020
Net Profit reported $ 41344569 $ 43890877 $ 21505054 $ 26090846
Sales amount Reported $ 239575376 $ 243771415 $ 230400881 $ 236806988
Net Profit Margin (%) = NP /
Sales
= 41344569 /
239575376 *
100 = 17.26
%
= 43890877 /
243771415 *
100 = 18 %
= 21505054 /
230400881 *
100 = 9.33 %
= 26090846 /
236806988 *
100 = 11.02
%
Analysis of aforementioned table shows that Samsung company has reported an Net-
profit ratio of 11.02 percent for 2019, 9.33 percent for 2018, as well as 17.26 percent for 2017,
indicating a declining trend there in the enterprise 's overall net profitability. Such NP percentage
graph clearly discloses that Samsung plc's collective efficacy of generating net profitability has
been dropped throughout the previous four years. Meanwhile, Samsung's NP ratio has