Accounting Financial Analysis Report for Samsung Electronics

This report provides a detailed financial analysis of Samsung Electronics, including company insights, news, stock market activity, and ratio analysis. Samsung Electronics is a pioneer in mobile and electronics manufacturing and is ranked seventh in the world in terms of renowned brands. The report recommends investing in Samsung shares due to the overall performance and strategy of the company. The report also includes an organizational chart, company news, and ratio analysis.

Accounting financial
analysis report

1
By student name
Professor
University
Date: 25 April 2018.
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Contents
Research Summary......................................................................................................................................3
Company and the insights...........................................................................................................................3
Company News............................................................................................................................................5
Stock Market Activity...................................................................................................................................7
Financial Statement Analysis.......................................................................................................................8
Ratio Analysis............................................................................................................................................10
References.................................................................................................................................................11
Appendices................................................................................................................................................14
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Research Summary
Samsung electronics Co., Ltd. (SSNLF), is one of the pioneer companies in the field of mobile
and electronics manufacturing and is holding a good share of market as of now in the world and
is amongst one of the arch rivals of the renowned company Apple. The company has a number of
products and is coming on with the new ones every now and then and is therefore ranked seventh
in the world in terms of world’s most renowned brands. It has also filed a number of patents iver
a past couple of years (Timothy).
Holding the shares of this company has never been easy for the investors. Though the company
has been one of the prospective avenues for the investment particularly for the US investors, but
the shares have fluctuated a lot due to heavy competition in the recent past. But looking at the
overall performance and strategy of the company, it is recommended to invest in the given
shares.
Company and the insights
The company chosen is Samsung Electronics. In the year 1938, a store trading in grocery was
formed and inaugurated by Lee Byung-Chull. China and its provinces started importing from
Korea in which Samsung had started its business of noodles and other goods. The word Samsung
in Korean language means ‘three stars’ which was picked by the founder himself when the
company was at the stage of incorporation with the motive that one day the company will
become powerful and everlasting just like the stars in the skies (Belton).
The leader of home appliances came into existence as Samsung. It diversified its business up to
different criteria being infotainment which relates to information as well as telecommunication
where life care business was there as taking utmost care of the environment around and the
society as a whole involving energy conservation and health care. It wanted to meet the demands
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of the present consumers as well looking after the future generations for a better tomorrow of the
society as a whole. For a better lifetime of the shoppers United Nations agency square measure
the top users of any product or service it developed 3 business divisions being shopper physics,
IT & Mobile communications and Device Solutions. These 3 divisions established to deliver its
merchandise of a wonderful quality.
Now, Samsung physics has been the foremost rising Company within the world (Alexander).
At Samsung there are 3 divisions based on the physical science of the product. The names of
these divisions are IM division, DS division and the metal division. The divisions have been
constructed in such a fashion to give a competitive edge to the company based on products. The
products being manufactured by metal division includes laundry machines, washing machines,
the refrigerators, TVs, monitors, etc. On the other hand, the IM division of the company is
involved in manufacturing and selling of the smartphones, telecommunication devices, network
systems and the final division namely DS division is responsible for manufacturing and selling
chips, flash cards, DRAM and completely different elements to be utilized in IT and mobile
devices (Choy).
Organizational Chart
The company has a wide organizational chart and the same can be seen from 2016. At the end of
2016, Samsung had over 220 operational hubs worldwide. Besides that the company also had
sales and the manufacturing subsidiaries and vogue and R&D centres all across the world. The
company also has 15 regional offices in Korea, Europe, Africa, North America and other
different parts of the world (Werner).
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Samsung natural philosophy is presently manufacturing banker's bill of its mobile phones in
Vietnam and entirely pool ball in Korean Peninsula. At present, Samsung physics is running six
moveable manufacturing facilities at intervals the six countries of Vietnam, China, India, Brazil,
Indonesia, and Korean Peninsula (Vieira, O’Dwyer and Schneider).
Company News
1. Samsung Will make $110 for every iPhone X Sold
Samsung really incorporates an unconditional interest within the iPhone X being a
large success. According to The Wall Street Journal, the corporate stands to form
around $110 from every phone sold , that in all may end in billions over the
corporate even created on its own most-recent flagship, the Galaxy S8. To be clear,
all that money can attend Samsung cluster, the conglomerate, as hostile specifically
the mobile division of the corporate. Why the windfall? Samsung created the OLED
show, NAND flash, and DRAM chips within the iPhone. It’s presently the sole
company capable of producing these things at the amount that Apple wants, which
implies Apple should get the components from Samsung (Knechel and Salterio).If the
iPhone X sells the approach analysts assume it'll, which means Samsung stands to
form billions of bucks off its competition. In fact, the Journal reports that one
analyst thinks Samsung can probably earn $4 billion additional from marketing
components to Apple than it did from sales of its own phone. “These are 2 of the
biggest firms on the world deeply tied at the hip and directly competitive,” David
Office, a prof at Harvard grad school, UN agency has studied Apple and serves on
Intel firm’s board told The Journal. “That makes this stand out compared with
nearly any relationship you'll think about (Raiborn, Butler and Martin).”
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2. Apple commitments
How much of an iPhone is formed by Samsung?
The company apple doesn’t produces the APPLE IPhone on its own. The company
neither manufactures the wholesome product nor assembles it on its own. The internal
elements of the phone are received from the variety of supplier all around the world and
the same is being reassembled in one of the Taiwanese firm having its plant in Shenzhen,
China. The name of the company is Foxconn. iSuppli, one of the market research firms
has found out that a substantial number of parts that go into the making of the iPhone
comes from Samsung and therefore it plays a very critical role in the evolution of the
Apple as the number one company. Some of the important parts being supplied by
Samsung includes memory, operating software, application processor and the DRAM.
All this puts Samsung in a slightly uncommon position as it is rival of Apple and the
supplier of Apple at the same time. This has been the business model of Samsung for
quite a long time now. Apple receives more than half the percentage of the goods from
associate and competitor companies and that helps Apple to focus on its strength like ease
of service, anti-virus enhancements, software and hardware maintenance, etc.
Even after so much of dependency on Samsung, Apple sued the company in April
recently on the looks of Galaxy S phone which was mentioned to be imitated as iPhone,
claiming that the hardware and the looks were being copied but Samsung retaliated by
means of counter question.
Stock Market Activity
Samsung has listed its company in a pair of overseas stock markets, the London securities market
and conjointly the Luxemburg stock exchange. Samsung has been the flagship company in terms
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of revenue and profitability growth in the past years. It was on the growth spree until 2013 when
the revenues achieved the record height of 228.69 trillion KRW except for the small period in
2008 when the global financial crises was going on. However, from 2014, the company started
losing its market share to the competitors. Post 2014, the revenues of the company has fell down
by 9.83% whereas the profitability declined by 31% in 2014 as compared to the year before. The
same business trend continued for the next 2 years as well and had an impact on both the topline
as well as the bottomline. One of the major business divisions DS was expected to rise after 3
continuous years of the fall in performance, due to the rise in the demand of semiconductors.
Samsung came up with the new strategy with the mission of internationalisation, mergers and
acquisitions, new product development and re-examination of the overall strategies for growth
and development so that it can gain the lost market share and thereby have an improvement in
the share prices as well. Samsung also came up with the new 40 nm semiconductor technology
and DRAM (dynamic random access memory) which helped the company in gaining the lost
market share and holding the no. 1 position in the market in DRAMexchange. Thus, it can be
said that the company had wide strategies and have come up with real good quality products in
order to overcome the market spike (Oberoi).
Financial Statement Analysis
Samsung Asian nation crossed the 50000 crore sales landmark in 2016-17 and becoming one of
the biggest MNCs to be filling the company’s financials with the Registrar of Companies (RoC).
The Korean giant’s total gain, at the side of turnover and various gain, grew by 15.5% to Rest
fifty 5, 511.9 whole number in FY 2017 from Rest forty eight, 053 whole number among the
previous year despite the introduction by many Chinese companies and their smartphones in the
world market which usually came at a very lower price.
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Samsung Physics is also one of the leaders in the world in terms of production of the
semiconductor and the telecommunication devices and the digital media. It has become one of
the most valuable brands off late. The company is headquartered in Suwon and employs more
than 300000 people all around the world. The company also spends nearly 15 billion US
greenbacks on the research, analysis and development. It also has most number of patents filed in
US (Gooley).
Samsung is one of the leading brands in the smartphone manufacturing and selling and is
occupying the pioneer position in the industry with Apple being the arch rival and having neck to
neck competition. It sold nearly 300 million smartphone sets in 2017 and other competitors
besides Apple includes Oppo, Vivo, Huawei, etc. It also holds quite a sizeable market cap in
terms of Android powered Samsung Galaxy tab and is 2nd largest pill merchant across the planet,
accounting for nearly 16% of the worldwide market (Marques).
Besides having giant share in the mobile segment of business, it also holds a considerable and
respectable share in the semiconductor and TV business (Goldmann). It has been a consistent
player in the market place for almost a decade and has been the largest manufacturer since 2008.
At the same time, it is also the largest producer of the liquid show panels and the planet
semiconductor market. It left behind Intel in 2017 to become the market leader in the
semiconductor segment and having a share of more than 15%.
Ratio Analysis
In case the ratio analysis is being studied, it can be seen that the company has performed
invariably good and outstanding in terms of the profitability where each one of the profitability
ratios, the return on equity, the return on assets, the gross margin, the net margin, all have
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increased in the year 2017 as compared to the year 2016 and is way above the industry trend. It
just goes on to show the overall dominance of Samsung in the marketplace whereby it is having
the leadership position (Linden and Freeman).
In terms of the efficiency ratios again, though it is behind the industry trend but yet again it has
improved as compared to the last year in terms of the accounts receivable turnover ratio and the
inventory turnover ratio. This goes on to show that the company has good internal control
measures and thus is gaining in terms of cash flow and working capital management.
In terms of the liquidity ratios the company is having the liquid ratio of 2.15 times which is way
above the normal required ratio of 2 times and hence Samsung will be able to pay off its short
term debts in time and not default in the same (Bromwich and Scapens).
Lastly in case the solvency ratios is being analysed, we can see that the overall debt proportion is
only to the tune of 7.15% which is above industry trend but still it shows that the company is
relying and doing business majorly on equity. The times interest earned ratio has improved
considerably in 2017 and is currently at 84.51 times which is very healthy indication.
The EV/EBITDA NTM relation of Samsung natural philosophy Co., Ltd. is significantly not up
to the median of its peer group: around seven.00. Per these cash ratios Samsung natural
philosophy Co., Ltd.'s valuation has been lagging far behind the market valuation of its
competitors (Kewell and Linsley).
The EV/EBITDA NTM relation of Samsung natural philosophy Co., Ltd. is significantly not up
to the common of its sector (Consumer Electronics): six.12. per these cash ratios Samsung
natural philosophy Co., Ltd.'s valuation is far below the market valuation of its sector.
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While Samsung is also a massively well-liked whole, it has never been simple to hold the shares
of the company especially for the US investors. This is because of the fact that the company has
a huge competition in the marketplace and is holding an ever collapsible smartphone segment. In
order to counter the same, the company has come up with one of the hybrid product, known as
“smartlet,” which is basically a 5 inch smartphone that unfolds into a 7 inch pill as per one of
news agencies in Korea, ETNews.
References
Alexander, F.K. “The Changing Face of Accountability.” The Journal of Higher Education 71.4 (2016): 411-
431.
Belton, P. Competitive Strategy: Creating and Sustaining Superior Performance. London: Macat
International ltd, 2017. <https://www.routledge.com/Competitive-Strategy-Creating-and-
Sustaining-Superior-Performance/Belton/p/book/9781912128808>.
Bromwich, M and R.W Scapens. “Management Accounting Research: 25 years on.” Management
Accounting Research 31.1 (2016): 1-9.
Choy, Y. K. “Cost-benefit Analysis, Values, Wellbeing and Ethics: An Indigenous Worldview Analysis.”
Ecological Economics (2018): 145. <https://doi.org/10.1016/j.ecolecon.2017.08.005>.
Goldmann, K. “Financial Liquidity and Profitability Management in Practice of Polish Business.” Financial
Environment and Business Development 4.3 (2016): 103-112.
Gooley, J. Principles of Australian Contract Law. Australia: Lexis Nexis, 2016.
Kewell, B. and P. Linsley. “Risk tools and risk technologies.” The Routledge Companion to Accounting and
Risk, 15 (2017).
Knechel, W.B and S.E Salterio. Auditing:Assurance and Risk. fourth. New York: Routledge, 2016.
Linden, B and R.E Freeman. “Profit and Other Values: Thick Evaluation in Decision Making.” Business
Ethics Quarterly 27.3 (2017): 353-379.
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Marques, R. P. F. “Continuous Assurance and the Use of Technology for Business Compliance.”
Encyclopedia of Information Science and Technology (2018): 820-830.
Oberoi, J. “Interest rate risk management and the mix of fixed and floating rate debt.” Journal of
Banking and Finance 86 (2018): 70-86.
Raiborn, C, J.B Butler and K Martin. “The internal audit function: A prerequisite for Good Governance.”
Journal of Corporate Accounting and Finance 28.2 (2016): 10-21.
Timothy, G. “Managing interest rate risk in a rising rate environment.” RMA Journal, Risk Management
Association (RMA) (2004).
Vieira, R, B O’Dwyer and R Schneider. “Aligning Strategy and Performance Management Systems.” SAGE
Journals 30.1 (2017).
Werner, M. “Financial process mining - Accounting data structure dependent control flow inference.”
International Journal of Accounting Information Systems 25 (2017): 57-80.
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Appendices
WORKSHEET-A
Currency in
Millions of South Korean Wons AS ON Dec 312017(KRW) AS ON Dec 312016 (KRW) AS ON Dec 312015 (KRW)
Current Asset 146,982,464 141,429,704 124,814,725
PPE, net 111,665,648 91,473,041 86,477,110
Goodwill and intangible 34,483,452 23,307,630 24,594,247
Other Asset 8,620,526 5,963,949 6,293,439
TOTAL ASSETS 301,752,090 262,174,324 242,179,521
Current Liabilities 67,175,114 54,704,095 50,502,909
Non current liabilities 20,085,548 14,507,196 12,616,807
Contributed capital 4,403,893 4,403,893 4,403,893
Retained Earning 215,811,200 193,086,317 185,132,014
Treasury stock and SE 5,723,665- 4,527,177- 10,476,102-
TOTAL L & SE 301,752,090 262,174,324 242,179,521
YEAR END AS ON Dec 312017(KRW) AS ON Dec 312016 (KRW) AS ON Dec 312015 (KRW)
Current Asset 118 113 100
PPE, net 129 106 100
Goodwill and intangible 140 95 100
Other Asset 137 95 100
TOTAL ASSETS 125 108 100
Current Liabilities 133 108 100
Non current liabilities 159 115 100
Contributed capital 100 100 100
Retained Earning 117 104 100
Treasury stock and SE 55 43 100
TOTAL L & SE 125 108 100
Currency in
Millions of South Korean Wons AS ON Dec 312017(KRW) AS ON Dec 312016 (KRW) AS ON Dec 312015 (KRW)
Current Asset 49% 54% 52%
PPE, net 37% 35% 36%
Goodwill and intangible 11% 9% 10%
Other Asset 3% 2% 3%
TOTAL ASSETS 100% 100% 100%
Current Liabilities 22% 21% 21%
Non current liabilities 7% 6% 5%
Contributed capital 1% 2% 2%
Retained Earning 72% 74% 76%
Treasury stock and SE -2% -2% -4%
TOTAL L & SE 100% 100% 100%
CONDENSED CLASSIFIED BALANCE SHEET
BALANCE SHEET ANALYSIS
SAMSUNG ELECTRONIC CO LTD
CONDENSED CLASSIFIED BALANCE SHEET
BALANCE SHEET ANALYSIS
SAMSUNG ELECTRONIC CO LTD
CONDENSED CLASSIFIED BALANCE SHEET
BALANCE SHEET ANALYSIS
SAMSUNG ELECTRONIC CO LTD
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Currency in South Korean Wons AS ON Dec 312017(KRW) AS ON Dec 312016 (KRW) AS ON Dec 312015 (KRW)
Sales Revenue 239,575,376 201,866,745 200,653,482
Cost of goods sold 129,290,661 120,277,715 123,482,118
Gross Profit 110,284,715 81,589,030 77,171,364
Operating Expenses 56,639,677 52,348,358 50,757,922
Operating Income 53,645,038 29,240,672 26,413,442
Nonoperating revenue and expenses 2,550,929 1,472,980 452,447-
Income before income tax 56,195,967 30,713,652 25,960,995
Provision for income tax 14,009,220 7,987,560 6,900,851
Income from continuing operation 42,186,747 22,726,092 19,060,144
Nonreccuring Items 842,178- 310,437- 365,516-
NET INCOME 41,344,569 22,415,655 18,694,628
Currency in South Korean Wons AS ON Dec 312017(KRW) AS ON Dec 312016 (KRW) AS ON Dec 312015 (KRW)
Sales Revenue 119 101 100
Cost of goods sold 105 97 100
Gross Profit 143 106 100
Operating Expenses 112 103 100
Operating Income 203 111 100
Nonoperating revenue and expenses 564- 326- 100
Income before income tax 216 118 100
Provision for income tax 203 116 100
Income from continuing operation 221 119 100
Nonreccuring Items 230 85 100
NET INCOME 221 120 100
Earning per share
Currency in South Korean Wons AS ON Dec 312017(KRW) AS ON Dec 312016 (KRW) AS ON Dec 312015 (KRW)
Sales Revenue 100% 100% 100%
Cost of goods sold 54% 60% 62%
Gross Profit 46% 40% 38%
Operating Expenses 24% 26% 25%
Operating Income 22% 14% 13%
Nonoperating revenue and expenses 1% 1% 0%
Income before income tax 23% 15% 13%
Provision for income tax 6% 4% 3%
Income from continuing operation 18% 11% 9%
Nonreccuring Items 0% 0% 0%
NET INCOME 17% 11% 9%
Earning per share
INCOME STATEMENT
SAMSUNG ELECTRONIC CO LTD
FISCAL YEAR ENDED
Statement of Cash flow Analysis
SAMSUNG ELECTRONIC CO LTD
FISCAL YEAR ENDED
INCOME STATEMENT
SAMSUNG ELECTRONIC CO LTD
FISCAL YEAR ENDED
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WORKSHEET-C
Currency in South Korean Wons AS ON Dec 312017(KRW) AS ON Dec 312016 (KRW) AS ON Dec 312015 (KRW)
Net Cash from Operating activities 62,162,041 47,385,644 40,061,761
Net Cash from Investing activities 49,385,216- 29,658,675- 27,167,787-
Net Cash from Financing activities 12,560,867- 8,669,514- 6,573,509-
Effect of exchnage rate on cash 1,782,270- 417,243 524,487-
Net change in Cash 1,566,312- 9,474,698 5,795,978
Cash, Beginning 32,111,442 22,636,744 16,840,766
Cash, ending 30,545,130 32,111,442 22,636,744
Currency in South Korean Wons AS ON Dec 312017(KRW) AS ON Dec 312016 (KRW) AS ON Dec 312015 (KRW)
Net Cash from Operating activities 155.17 118.28 100.00
Net Cash from Investing activities 181.78 109.17 100.00
Net Cash from Financing activities 191.08 131.89 100.00
Effect of exchnage rate on cash 339.81 -79.55 100.00
Net change in Cash -27.02 163.47 100.00
Currency in South Korean Wons AS ON Dec 312017(KRW) AS ON Dec 312016 (KRW) AS ON Dec 312015 (KRW)
Net Cash from Operating activities 100% 100% 100%
Net Cash from Investing activities -79% -63% -68%
Net Cash from Financing activities -20% -18% -16%
Effect of exchnage rate on cash -3% 1% -1%
Net change in Cash -3% 20% 14%
CONDENSED COMMON-SIZE STATEMENT OF CASH FLOWS
SAMSUNG ELECTRONIC CO LTD
FISCAL YEAR ENDED
CONDENSED STATEMENT OF CASH FLOWS
Statement of Cash flow Analysis
SAMSUNG ELECTRONIC CO LTD
FISCAL YEAR ENDED
CONDENSED TREND ANALYSIS STATEMENT OF CASH FLOWS
SAMSUNG ELECTRONIC CO LTD
FISCAL YEAR ENDED
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WORKSHEET D
COMPANY NAME: SAMSUNG ELECTRONICS CO LTD
2017 2016
Profitability Ratios
Return on sales 10.98% stronger/weaker 20.18% 18.50%
Return on assets 8.40% stronger/weaker 15.49% 14.30%
Return on equity 11.63% stronger/weaker 21.77% 20.70%
Gross Profit margin 38.55% stronger/weaker 46.61% 45.50%
Efficiency Ratios
Accounts Receivable Turnover 8.06 Quicker/Slower 7.89 6.95
Inventory Turnover 6.59 Quicker/Slower 5.24 5.10
Asset Turnover 0.87 Quicker/Slower 0.74 0.83
Liquidity Ratios
Current Ratio 2.58 More/Less Liquid 2.39 2.15
Solvency Ratios
Debt ratio 6.65% More/Less Risk 7.14% 6.85%
Financial leverage 1.40 More/Less Risk 0.85 1.2
Times interest earned (EBIT/Interest) 74.85 More/Less Risk 84.51 52.71
Additional data needed for ratio computations:
(Currency in South Korean Wons) Year 2017 2016 2015
Accounts Receivable 27,695,995 24,279,211 25,168,026
Inventory 24,983,355 18,353,503 18,811,794
Interest expenses 655,402 587,831 776,511
Capital expenditures 42,792,234 24,142,973 25,880,222
Dividends paid 6,804,297 3,114,742 3,129,544
COMPANY RATIO
RATIO ANALYSIS
CHANGE
INDUSTRY
RATIOS AVERAGE
TITLE OF RATIOS
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COMPANY NAME: SAMSUNG ELECTRONICS CO LTD
INDUSTRY NAME: ELECTRONICS INDUSTRY
Ratio RoS X Asset Turnover = ROA X Financial Leverage = ROE
Type Profitability Effi ciency Solvency
Formula NI/Rev Rev/A NI/A A/SE NI/SE
Your Company 20.18% 0.74 15.49% 1.2 21.77%
Your Industry 10.98% 0.87 8.40% 1.4 11.63%
3. Significant current events and other information of importance:
Some of them have been listed:
a. Samsung Will make $110 for every iPhone X Sold.
b. More than 40% of the Apple made iPhone constitutes of Samsung made parts.
c. Heavy competition in the recent past by Chinese competitors.
a. Good overall returns for the shareholders.
b. Less of repayment risk for debtholders and low levels of debt.
c. Continuous growth in the past years.
d. Strategy of expansion in the coming years.
e. Plans to venture into with new products and in new regions.
f. Positive cash flow over the years.
g. Ranks seventh on the list of the world’s most respected brands.
h. World’s largest manufacturer since 2008 with the market share of 15%.
4. Investment Decision
To Invest in the company Samsung
Efficiency: Average
Explain: The company has performed invariably good and outstanding in terms of the profitability where each one of the
profitability ratios, the return on equity, the return on assets, the gross margin, the net margin, all have increased in the
year 2017 as compared to the year 2016 and is way above the industry trend. It just goes on to show the overall
dominance of Samsung in the marketplace whereby it is having the leadership position.
Profitability: Strong
1. Financial Analysis of the company
2. DuPont Analysis of ROE
Explain: In case the solvency ratios is being analysed, we can see that the overall debt proportion is only to the tune of
7.15% which is above industry trend but still it shows that the company is relying and doing business majorly on equity.
The times interest earned ratio has improved considerably in 2017 and is currently at 84.51 times which is very healthy
indication.
Solvency: Average
Explain: In terms of the liquidity ratios the company is having the liquid ratio of 2.15 times which is way above the
normal required ratio of 2 times and hence Samsung will be able to pay off its short term debts in time and not default
in the same.
Liquidity: Strong
Explain: In terms of the effi ciency ratios again, though it is behind the industry trend but yet again it has improved as
compared to the last year in terms of the accounts receivable turnover ratio and the inventory turnover ratio. This goes
on to show that the company has good internal control measures and thus is gaining in terms of cash flow and working
capital management
WORKSHEET E: RESEARCH SUMMARY
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