Financial Data and Strategic Decision Making for Samsung PLC

This article evaluates the sources of financial data, need for financial data in business strategy, risks related to financial decisions, and a comparative analysis of financial data using ratio analysis for Samsung PLC. It also includes an interpretation of Samsung's financial statements and recommendations based on the analysis.

Task 1 – Financial Data and Strategic Decision Making
Q1: An evaluation of the sources of financial data which can be used to inform
business strategy.
A business generally has different objectives to work in a market. The main objective is to make
money and be profitable to sustain in the marketplace. The business earns to pay its bills and invest
these funds to earn a return (Bongomin and et.al., 2018). There are different sources of financial
information which is required to be taken into account before formulating the strategies for the
business. The financial performance of the business is summarised in the three main financial
statements which are Balance sheet, Income Statement and the Cash Flow statements. Three of
these statements provides all the necessary information related to finance of the business to the
different users of this information. Following is the detailed evaluation of these financial statements:
Balance Sheet or the Statement of Financial position:
The balance sheet refers to the statement which clarifies the financial position of the business. This
provides information to the users about what the business owns as in its assets and what the
business is obliged to pay as to their liabilities with the net worth which is the owner's equity. The
assets of the business are bifurcated into two types, current and non-current assets. Current assets of
the refers to those assets which can be easily converted into cash (Chiu and Lee, 2020). The non-
current assets of the business include the long term assets which gives return to the business for a
long period of time.
Income Statement or statement of profit and loss:
Income statement of the business shows different incomes and expenses which are covered by the
business in the period of its operations (Craja, Kim and Lessmann, 2020). It shows the net profit or
loss the business has earned or incurred in the business due to these incomes and expenses.
Cash flow statement:
The statement of cash flows highlights the ways and from/ in all the activities where the cash of the
business is inflowing or out flowing in/from the business (Grody, 2018). This information it is ascertain
if the business has net inflow or net outflow of cash in the given period of time.
Q2: An assessment of the need for financial data and information in relation to the
formulation of business strategy.
The financial data is necessary in the business to provide different important information related to the
financial position, cash flows and the performance of the business to the different users of the
financial information. This set of data helps the different users of the financial information to take
decisions which are related to the business (Hussain and Siemiatycki, 2018). The company's
revenue, expenses, profitability and the ability to meet its short term and long term financial
obligations shows the financial performance of the business. Different users of financial information

are investors, management, creditors, directors, shareholders, and many more uses this data to
analyse the fiscal performance of the company.
Q3: An analysis of the risks related to financial business decisions.
The financial risk refers to the danger that may arise in the business that might put a threat on the
financial position of the business. The financial risk for Samsung is discussed below with the help of
ratio analysis of the last two accounting year (Martinez, Scherger and Guercio, 2018). Any business
uses different tools to assess the risks that are associated with the operations of the business. There
can be enormous risks which a business may face. Some of these risks are, financial risks,
operational risks, liquidity risks, legal risks, equity risks. The credit risk arises when the business has
borrowed funds from the investors and the liquidity of the business has tarnished. The ability of the
business to repay the loans may be affected. The external factors of the business affects and puts
different risks in the business which pose a real threat on the working of the business. A detailed
PESTLE analysis is beneficial for the business to determine the degree with which the business may
be affected by these external forces.
Q4: A review of methods that can be used for appraising strategic capital
expenditure projects and strategic direction.
Following are the methods for making strategic decisions for appraising capital expenditure:
Payback Period: The payback period analysis refers to the time which is taken by the project or the
investment to return back the investment which was initially made by the business. It shows in how
much years the business will achieve the cost of investment which was made. Lower the Payback is,
more viable the project becomes for the business (Opperman and Adjasi, 2019).
Net present value technique: this technique refers to the present value of the cash inflows that will be
received in the future by the business over a period of time. This helps the business estimate the cash
flows and their value in the current times. Higher the NPV is, more viable the project becomes for the
business.
Task 2 – Discussion Paper
Q1: An interpretation of the financial statements of Samsung PLC to assess the
current viability of the organisation.
Interpretation of Balance Sheet or Statement of Financial Position of Samsung PLC:
The balance sheet refers to the statement which clarifies the financial position of the business. This
provides information to the users about what the business owns as in its assets and what the
business is obliged to pay as to their liabilities with the net worth which is the owner's equity. The
assets of the business are bifurcated into two types, current and non-current assets. Current assets of
the refers to those assets which can be easily converted into cash (Chiu and Lee, 2020). The non-
current assets of the business include the long term assets which gives return to the business for a

long period of time. The total assets of Samsung plc as on 31st December 2020 were, $ 320,414,624.
Liabilities of the business are also divided into two categories, current and non-current assets. The
current liabilities are required by the business to pay back within a short period of time but the non-
current liabilities of the business put pressure on the business for a long period of time. The total
liabilities of Samsung Plc are $ 86,650,926. The difference of these two is the owner's equity which is
$ 233,763,698 for Samsung plc.
Interpretation of Statement of profit and loss or Income Statement of Samsung PLC:
Income statement of the business shows different incomes and expenses which are covered by the
business in the period of its operations (Craja, Kim and Lessmann, 2020). It shows the net profit or
loss the business has earned or incurred in the business due to these incomes and expenses. The
expenses of Samsung plc fall into different categories like production of different items, research and
development costs for different technologies etc. The net profit earned by Samsung in the year 2020
is $ 22,370,853.
Interpretation of Statement of Cash Flow of Samsung PLC:
The statement of cash flows highlights the ways and from/ in all the activities where the cash of the
business is inflowing or out flowing in/from the business (Grody, 2018). This information it is ascertain
if the business has net inflow or net outflow of cash in the given period of time. The net inflow in
Samsung plc in the year 2020 is $ 2,114,926.
Q2: A comparative analysis of financial data using ratio analysis for Samsung PLC.
You are advised to download consecutive year’s accounts from the Samsung PLC
website.
LIQUIDITY RATIO
Current Ratio = Current Assets ÷ Current Liability
2.621748305 = 167914259 ÷ 64046674
* Ability To satisfy short term needs is 2.621748305
Quick Ratio = (Current Assets – Inventory) ÷ Current Liability
2.197921566 = (167914259 – 27144693) ÷ 64046674
* Ability To satisfy short term needs Or Liability After Excluding the lest Liquid Assets Is 2.197921566
ACTIVITY RATIO
Inventory Turnover Ratio = Cost of goods sold ÷ Inventory
4.5 = 122400294 ÷ 27144693
* Number Of Time In Which The company can finish The Inventory Cycle Which Is Purchasing The
Raw Material And Producing The Product And Selling It Is 4.5 Times Per Year.
Average Age Of Inventory = The number of days Per year ÷ Inventory Turnover Ratio

81 = 365 ÷ 4.5
* Each Inventory Cycle Needs Almost 81 Days Per Year
Average Collection Period = Account Receivable ÷ Average sales Per day
53 = }(26231413 + 3053511) ÷ (200606179 ÷ 365) {
* Company Needs Almost 53 days To collect Account Receivable Per Year
Total Assets Turnover Ratio = Sales ÷ Total Assets
0.626083094 = 200606179 ÷ 320414624
* Ability Of Assets To Generate Sales is 0.626083094
DEBT RATIO
Debt Ratio = Total liability ÷ Total Assets
0.270433743 = 86650926 ÷ 320414624
* Percentage Of Assets Financed By Debt is 0.270433743
PROFITABILITY RATIO
Gross Profit Margin = Gross profit ÷ Sales
0.389847837 = 78205885 ÷ 200606179
Operating Profit Margin = Operating Profit ÷ Sales
0.015201291 = 3049473 ÷ 200606179
Net Profit Margin = Net Profit ÷ Sales
0.110177688 = 22102325 ÷ 200606179
(B)
FINANCIAL RATIO EQUATION Which is
biter 2020 2019 2018
Liquidity Ratio
Current Ratio Current Assets ÷ Current
Liability higher 2.622 2.844 2.529

Quick Ratio
(Current Assets –
Inventory) ÷ Current
Liability
higher 2.198 2.424 2.109
Activity Ratio
Inventory Turnover Ratio Cost of Goods Sold ÷
Inventory higher 4.5 5.5 4.6
Average Age Of Inventory 365 ÷ Inventory Turnover less 81 66 80
Average Collection Period Account Receivable ÷
Average Sales Per Day less 53.283 55.654 50.71
Total Assets Turnover
ratio Sales ÷ Total Assets higher 0.626 0.653 0.718
Debt Ratio
Debt Ratio Total Liability ÷ Total
Assets less 0.27 0.254 0.27
Profitability Ratio
Gross Profit Margin Gross Profit ÷ Sales higher 0.39 0.336 0.457
Operating Profit Margin Operating Profit ÷ Sales higher 0.152 0.121 0.242
Net Profit Margin Net Profit ÷ Sales higher 0.11 0.093 0.18
Current ratio means that the ability of the firm to satisfy the short term obligation is … (2.622 & 2.844
& 2.529) To Years ( 2020 & 2019 & 2018) Consecutive. Higher Is better.
Quick ratio means that the ability of the firm to satisfy the short term obligation after excluding the
least liquid asset which is the inventory is …(2.198 & 2.424 & 2.109) To Years ( 2020 & 2019 &
2018) Consecutive. Higher Is better.
Inventory turnover means the number of times the firm takes to sell the inventory is .. (4.5 & 5.5 &
4.6) To Years ( 2020 & 2019 & 2018) Consecutive. Higher Is better.
Average Age of inventory means the number of days the firm needs to finish one cycle of inventory
Is .. (81 & 66 & 80) To Years ( 2020 & 2019 & 2018) Consecutive. less Is better.
Average collection period no of days the firm needs to collect it’s A/R (53.283 & 55.654 & 50.71)
To Years ( 2020 & 2019 & 2018) Consecutive. less Is better.
Debt ratio the percentage by which the firm is financed by debts (0.27 & 0.254 & 0.27) To Years
( 2020 & 2019 & 2018) Consecutive. less Is better.
Gross profit margin is the percent of gross profit to the net income (0.39 & 0.336 & 0.457) To
Years ( 2020 & 2019 & 2018) Consecutive. Higher Is better.

Operating profit margin is the percent of operating profit to the net income (0.152 & 0.121 & 0.242) To
Years ( 2020 & 2019 & 2018) Consecutive. Higher Is better.
Debt ratio the percentage by which the firm is financed by debts (0.152 & 0.121 & 0.242) To Years
( 2020 & 2019 & 2018) Consecutive. Higher Is better.
Extension activities:
Q3: Makes recommendations to Samsung PLC based on your analysis and
interpretation of the financial position.
From the above calculated ratios and their interpretation, following points can be recommended to
Samsung:
 The collection period of the business is really high. The acceptable collection period of the
business is 30 days. The business of Samsung should take steps in reducing its collection
period for making its working capital cycle more smooth, with higher efficiency in the business.
 The operating profit margins of the business are very less. This means that the business is not
able to use its resources effectively and efficiently. The business of Samsung is recommended
to reduce its different expenses up to a limit and more resources of the business should be
used more efficiently to increase its revenue and in return, its profits.
 The quick ratio of the business is high compared to its current ratio. Which means that the
business has much cash which is unused in the business. The business is recommended to
invest these extra cash and funds so that these can be put to use and the business may earn
interest on these investments.
Task 3 – Information Leaflet
Q1: The impact of ‘creative accounting’ techniques when making strategic
decisions.
The influence of the techniques of creative accounting on the strategic decision making
Creative accounting techniques is a strategy which is used to misuse the information
presented in the financial statements and then interpret in a dishonest way. Management can use
various types of creative accounting techniques to manipulate the outcome of the financial
statements, which comply with all applied accounting standards and other regulations. The essential
consideration behind the establishment to take part in profit the board is to make the salaries and
income look more unsurprising and less unstable. This impacts more expected investors to draw in
with the organization and contribute. It is typically an awful system to expect that financial backers can
be impacted this way (Chang and et.al., 2019). It can have a positive and adverse consequences.
This concentrates about the adverse consequences of innovative bookkeeping strategies on the stiff
quality of monetary detailing. The adverse consequences of it cannot be eliminated totally however it

very well may be weakened to the lower level. Subsequently the investigation discovered that
dynamic corporate administration standards can be utilized to control the acts of imaginative
bookkeeping by utilizing autonomous non-chief chiefs.
Impact of creative accounting techniques:
 Adjustment and application of accounting standards for limited estimates and consistency in
the application of accounting policies influences the decision of the investor. It can be a
positive impact for the organization as the decision maker will think about the productivity of
the company.
 Creative accounting techniques can be improperly used in the preparation of the financial
statements to meet management needs regarding the company's performance and this leads to
the misleading of financial statements and impact the strategic decisions (Libório and et.al.,
2020).
 It can be a negative aspect for the organization because it manipulates the actual figure of the
company which its own. So, the decision which are made according to the changed reports can
be hazardous for the enterprise.
 It can be a positive impact on the decision making of the investors after seeing the reports
which are change accordingly so that the data and information share can be proved beneficial
for the company.
 The cookie jar reserves methods suggest that the information should be kept in disguise and
used at the appropriate time to meet the prospective expectations of the investors.

 The decision made through the help of the creative accounting methods can reciprocate on the
company in a negative way for not following the GAAP norms which is mandatory for every
organization to follow.
 It can help in analyzing the problem which the undertaking is facing and can help in the future
growth and development of the company (Wang and et.al., 2020).
 By taking the aggressive decision can be a problem for the chamber as it will directly affect the
reputation and goodwill of the company.
Q2: The limitations of ratio analysis as a tool for strategic decision making.
The limitations of ratio analysis as a tool for strategic decision making.
Ratio analysis compares the line data from the firm's financial statement to bring out display
regarding profitability, liquidity, functional efficiency and solvency. It can grade how the company is
acting over the time, while comparison with one firm to another within the same sector.

Limitations: As ratios are useful tools for financial statement of company they do have some
limitations such as:
 The company can make some changes in the end of year to improve what is wrong. This is
kind of dusting to company (Aifuwa and Embele, 2019).
 Ratios sometimes dismiss the level of changes due to economic process, may of ratios are still
calculated with old and historical concepts and they do not represent the correct information.
Thus, there is lack of correction in data.
 Company ignores the qualitative aspects and just focus on monetary aspects which is
quantitative data, but both the aspects must be put into consideration and should be working on
dual concepts which will help in completing goals quickly.
 While calculating some of the ratios company forgets to consider some points. For example,
when calculating current ratio just considering current liabilities and ignoring bank overdrafts it
can result in wrong data interpretation and thus company will not be able to know the exact
position.
 It is difficult to compare because other companies are not ready to share their internal
information.
 The information the firm is using that might be collected differently in past, so the analysis on
trend line does not compare the same information of entire time period.
 Company needs to analyses according to the business environment. For example, 40 days of
sales outstanding for receivables might considered bad in period of fast growing sales, but it
can be best during economic contraction when customers are dealing with financial crisis and
are not able to pay their own bills.
 It does not take internal or external factors such as global financial condition (Kablan, 2020).
 Ratios do not help to solve financial problems of company, they just mean to end and not the
actual solution.
 Ratio analysis is merely a tool for calculations. Hence, it becomes of use if they are put
separately from where they are calculated.
 Ratios give hints to analysts and not the complete information. Then they need to be interpreted
by some experts and there are no major rules for interpretation.
 They need to be taken by two analysts who may interpret the same ratio in different way.

Only one ratio does not convey more sense. To be in better situation number of ratios have to be
calculated which confuses the analyst then helping in making any sense-full determination.
Q3: The importance of cash flow management when evaluating proposals for
capital expenditure.
Significance of cash flow management for the evaluation of the capital expenditure proposals.
The cash flow management is the main part of every enterprise. A sound income guarantees
that the business can pay compensations on time and have assets for the development and extension
of the business. Assets are likewise accessible for taking care of seller bills and duties on schedule.
Regular examination of business funds guarantees that one can estimate the future income with
precision and accuracy and make an important decision for the productivity of the organisation (Saa,
Al-Emran and Shaalan, 2019).
 By the help of the cash flow statement the future business and the investing decisions can be
taken for the establishing a good capital expenditure for the company.
 It enhances the productivity by giving an estimate to increase or decrease the current assets so
that the cash inflow can be increased.
 It helps in identifying the current economic status of the company by defining the operating,
investing and the financing activities performed by the enterprise.
 It assists in understanding the receivables from the customers and the client which can enhance
in making the strategic decision for the future growth of the company.

Q4: Recommends, with justifications, methods and tools that allow businesses to
analyse financial data for strategic decision making purposes.
Strategic decision making refers to a process which requires a detailed understanding of the
business, its processes, the macro external environment and how the products of the
business are performing in the market. After collection of all the above mentioned data, the
strategic managers of the business critically evaluate the threats and the opportunities which
can be help them to take a decision related to the business. This strategic decision making
requires them to go through the financials of the business. There are different tools and
techniques which help the strategic managers of the business to interpret the financial
position of the business. These are discussed below:
 Comparative Financial Statements: It refers to a statement which is used by the
management to compare the financial statement with the previous year financial
statements. This tools is helpful for the investors as it easily makes them track the
progress of the company and its other competitors.
 Statement of changes in working capital: This is yet another statement which can
be prepared by the management of the business to measure an increase or a
decrease in the current assets and current liabilities of the business and shows the net
change in the working capital of the business during an accounting year.
 Common size balance sheet: This is another balance sheet of the business which
shows the numeric value and the relative percentage of the assets, liabilities and the
equity of a business over a given period. If the business. The business may want to
use this tool to critically analyse the change in the value of the business due to the
change in different elements of the business.
 Income Statements: Income statements of the business shows from where the
business is able to earn revenue and turn it into the profits of the business. This
provides insight to the managers about what element of the business is eating up the
profit margins of the business.

 Trend Analysis: The trend analysis of the business attempts in predicting the future
stock price of the business using the historical data which is available with the
business related to market and business itself.
 Ratio Analysis: The ratio analysis of the business compares the elements that are present
in the financial statements of the business. It measures the business's profitability, operational
efficiency, and the solvency of the business.

YEAR
CURRENT
MACHINE
UNITS
NEW
MACHINE
UNITS
UNIT PRICE
FOR ALL
CURRENT
MACHINE
REVENUE
NEW
MACHINE
REVENUE
YEAR UNITS
CURRENT
MACHINE
REVENUE
(NPV)
NEW
MACHINE
REVENUE
(NPV)
1ST 90000 90000 5 450000 450000 0.87 391500 391500
2ND 50000 50000 5 250000 250000 0.756 189000 189000
3RD 30000 30000 5 150000 150000 0.658 98700 98700
TOTAL 679200 679200
SELLINGE
VALUE AFTER 3 YEARS YEAR UNITS
NPV TO VALUE CURRENT MACHINE 0 0.572 0
NPV TO VALUE NEW MACHINE 75000 0.572 42900
cost year current
machine
new
machine
current
machine
unit
new
machine
unit
current
machine ex
new
machine ex
year
unitS
NPV current
machine ex
NPV new
machine ex
Direct material 1.8 1.8 90,000 90,000 162,000 162,000 0.870 140,940 140,940
Direct labour 0.75 0.6 90,000 90,000 67,500 54,000 0.870 58,725 46,980
Variable overheads 0.45 0.3 90,000 90,000 40,500 27,000 0.870 35,235 23,490
Depreciation 0.35 0.55 90,000 90,000 31,500 49,500 0.870 27,405 43,065
Direct material 1.89 1.89 50,000 50,000 94,500 94,500 0.756 71,442 71,442
Direct labour 0.7875 0.63 50,000 50,000 39,375 31,500 0.756 29,768 23,814
Variable overheads 0.45 0.3 50,000 50,000 22,500 15,000 0.756 17,010 11,340
Depreciation 0.35 0.55 50,000 50,000 17,500 27,500 0.756 13,230 20,790
Direct material 1.9845 1.9845 30,000 30,000 59,535 59,535 0.658 39,174 39,174
Direct labour 0.826875 0.6615 30,000 30,000 24,806 19,845 0.658 16,323 13,058
Variable overheads 0.45 0.3 30,000 30,000 13,500 9,000 0.658 8,883 5,922
Depreciation 0.35 0.55 30,000 30,000 10,500 16,500 0.658 6,909 10,857
Total NPV 465043.043 450872.04
1st
2nd
3rd
Task 4 – Capital Expenditure Appraisal
Pietro would like you to produce a business report that can be given to the company offering
advice on the best course of action for the purchase / replacement machine.
REQUIRED
Q1: Prepare a report that evaluates the capital expenditure proposals using
appropriate financial techniques.
For immediate purchase the company will receive £120 000-part exchange allowance.
NPV = 120,000

YEAR CURRENT
MACHINE
NEW
MACHINE
YEAR
UNITS
NPV CURRENT
MACHINE
NPV NEW
MACHINE
1ST 7000 1000 0.87 6090 870
2ND 7000 1000 0.756 5292 756
RD 7000 1000 0.658 4606 658
TOTAL NPV 15988 2284
MAINTANANCE EX
481,031
453,156TOTAL NEW MACHINE EX (NPV)
TOTAL CURRENT MACHINE EX (NPV)
NPV PURCHASE CASE EQUALE (679200 + 42900 + 120000 - 453156) = 388944 £
VPV UNPURCHASE CASE EQUALE (679200 - 481031) = 198169 £
We will Select the purchase case because it is in it that the highest NPV is achieved

Recommendations
It can be recommended that the chamber should take care while applying the creative
accounting as it may affect it reputation in the market, of caught of the activities. Although it allows the
organisation to evaluate the financial reports and make the strategic decision. The cash flow
management is helpful for making the right decision for the growth of the organisation only if used in a
correct format and by analysing the right activities of the business.
Extension activities:
Q2: To gain a distinction grade you must include an assessment of the impact of
the business proposal on the strategic direction of the organisation.
Business proposal is a written document which encompasses the detailed description of the benefits
of the project or product. It is a blueprint which is maintained by the organisation to attract various
clients for raising the funds require in the enterprise.
Strategic directions indicate the plans required to complete the vision and objectives of the
organisation. It is necessary to work according to the strategic directions for achieving the goals of the
organisation. There are several investment appraisal techniques which helps in making strategic
directions of the organisation clear and transparent-
 Traditional method or non-discounting factors – These techniques of capital budgeting do not
consider the time value of the money. The foremost tools are payback period which signifies
the duration or time required to recover the cost of an investment. It is calculated by using
initial investment divided by average annual inflows. Another method is accounting rate of
return which does not consider cash flow but takes average earning. These methods help to
determine the viability of the project. In case of pay back, if the project is taking more time to
recover the cost of an investment then it will be rejected and the project taking less time will be
accepted. In taking the strategic decisions, it helps in decision making to the management by
selecting the project which is beneficial for the purpose of investment.
 Modern or discounting factor method – These techniques considers the time value of money
to calculate cash flows on present value. It includes net present value method, profitability
index and internal rate of return. NPV helps to choose between the mutually exclusive
projects. In business proposals, if organisation has to select only one project from two options
then NPV method is considered. It also helps in deciding the amount of dividend, shareholders
will get. The profitability index is useful in rationing of capital. Internal rate of return consider
two rates because it attains the level of IRR where NPV of the project will be zero. Therefore,

these discounting techniques helps to take investing decisions which directly or indirectly
impact the strategic directions of the enterprise.

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