Financial Decision Making Report: Samsung's Accounting and Finance

This report examines the crucial role of financial decision-making, accounting, and finance within an organization, using Samsung as a case study. It explores the significance of accounting in recording financial transactions, analyzing financial statements, and its impact on business strategy, budgeting, and performance analysis. The report further delves into the calculation and interpretation of key financial ratios, including return on capital employed, net profit margin, current ratio, and debtor collection period, providing insights into Samsung's financial performance. The analysis highlights the importance of accounting professionals in protecting assets, ensuring regulatory compliance, and preparing financial statements. The report concludes by emphasizing the importance of financial acumen in driving profitability, managing risk, and ensuring sustainable business practices. This report is a valuable resource for students seeking to understand financial concepts and their practical application.

Financial decision making

Table of Contents
INTRODUCTION...........................................................................................................................2
MAIN BODY..................................................................................................................................3
Task 1...............................................................................................................................................3
Role of accounting and finance within the organisation..............................................................3
Task 2...............................................................................................................................................6
Calculations of ratio.....................................................................................................................6
Performance of Alpha Limited....................................................................................................8
Conclusion.......................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Financial decision making is not easy but very important to take t properly because it will
decide the future of the company. Effective decisions will help company to smoothly survive for
long time and wrong decisions can be to failure. To take financial related decisions company
should have such workforce who have finance knowledge (Brierley, 2017). Samsung is the
multinational company which deals in electronic devices like mobiles phones, television, laptops,
house related appliances etc. this report will discuss the role of accounting and finance in the
company and why it is important. Further it will evaluate different ratios calculated from
company's financial statements.
MAIN BODY
Task 1
Role of accounting and finance within the organisation
Accounting:
Accounting is the method to record all financial transactions related to business. The
process of accounting involves reporting, analysing and summarizing the transactions in order to
regulate agencies and tax collection. The financial statements which is used in the accounting is
the summary of financial transactions of the business and also show its financial position.
Finance:
finance is the wide term which identifies activities which are related to capital markets,
banking, investments, debt, money etc. in general sense finance can be said as money
management and is also the method to acquire needed funds.
When it comes to accounting and finance then it plays important role in the business.
Business runs with the help of money so it is important that money is utilised and control in
proper manner so that business can run smoothly (What is the Role of the Accounting and
Finance Department., 2021). Accountant in the company like Samsung plays vital role because it
helps company in managing their expenses and incomes and also checks the flow of money.
With the help of proper accounting practice, company can understand flow of money and then
can start with budgeting. In the budgeting process company checks revenue and allot money in
doing different business activities and also make decisions about the growth of the business. It is
helpful in achieving proper financial records. It also helps in checking company's past
performance so that they can improve in the future. After seeing the financial statements,

stakeholders of Samsung can find out that where the money is going and also from where it is
coming and what benefit it will going to provide in longer period. Every business want to earn
profit and profit making is the main objective of the company. To get increased profits company
have to build strong strategy. In order to make strategy Samsung checks financial statements of
their company with the help of that they can understand the market condition in which they are
operating.
It is also helpful in fixing budgets. Budget refers to the incomes and expenditure of the company.
By using financial statements company can make master budgets which consists of incomes and
expenses. With the help of budget company can create different reports. Accounting also helps in
analysing the costs for the business (Ding, Hellmann and De Mello, 2017). As with the help of
accounting business gets understanding about the costs of the products and also on what amount
it should be sold which can help company in getting high profit margins via high sales volume.
With the help of financial records, Samsung can also analyse their business performance. As
financial records will show operations results and also financial position of corporations. In
simple language, it is helpful to know that financially what is happening inside the business. It
can be find out that laws and regulations are constantly changing. But with the help of proper
accounting systems, statutory compliance can be ensured. As with the help of accounting
systems company can make sure that liabilities like VAT, incomes and sales tax or other taxes
are properly paid. It is also helpful in filing financial statements with the registrar. Entities like
Samsung which are listed on stock exchange which are needed to file them.
It is also used for the purpose of filing direct or indirect tax. Accounts and finance professionals
plays important role in protecting company's assets. Assets are protected by designing and
executing internal controls. Accounting and finance department also provide assistance in the
inventory and management control. As this department can better control and manage inventory.
To prepare financial statements for the company is the legal responsibilities for every company.
So finance and accounting department will help company in preparing financial statements.
Accounting services are necessary for the business. Samsung have experienced accountants who
can easily work with advanced accounting systems and also helps in overall accounting
processes (Warren, Quinn and Kristandl, 2018). It can be said that without accounting
department an organisation cannot survive for long period because company will not get idea
that where there money is going because they will not able to manage that money. Accountant is

the person who knows and have responsibility to record and evaluate financial statements. Senior
accountants in the organisation have responsibility to manage complex finance related tasks. The
basic duty of any accountant is to record transactions on daily basis. They make sure that
financial documents are accurate and also as per the legal standards.
They also design important financial reports. Along with that taxes are also their responsibility so
they prepare tax reports and also ensure that taxes are paid on time. They also monitor financial
operations so that best practices and problems can be identified. After identifying issues,
solutions can be found out which helps organisation to run effectively (Bui, 2021). With the help
of accounting company gets guidance in regards of cost reduction, increasing revenue and
maximizing profits. Financial statements also helps in analysing risks and forecasting.
Accountants have to to their work honestly and should have follow legal practices. Accountant
cannot perform any unethical practice to record financial transactions. Accountant professionals
should have proper knowledge and skills of accounting. If they will not have proper accounting
knowledge then they will not be able to record transactions properly. As to record such large
transactions is not easy there are chances that they can make mistakes. And it is observed most of
the time that small mistakes turns to large problems in the future. So that is why Samsung
provide training to the accountant officials also so that they does not make any error while
keeping and recording transactions. In order to handle financial data, accounting team has to
understand basic accounting functions so that data can be interpret accurately.
Samsung makes sure that they have proper computer facility at their workplace so that their
accountants can carry their business functions. Company also provide training to their existing
accountants related to how to use advanced accounting software. Collecting all financial data and
after that analysing them is not the easy task but accounting and finance is not limited to this
because after analysing data accountants have to draw patterns and find out potential problems.
And accountant should also have proper communication skills because they have to listen
carefully to every party which includes all stakeholders like employees, suppliers, managers,
investors eta so that proper figures and information can gets collected from them. Accountant
have responsibility to show that how they have calculated and if they had made any mistakes
then they are answerable for the same because even small mistakes can cause big losses to the
companies. Normally people thinks that an accountant should have mathematical skills as well
and it is true also to some extent because they have to compare and contrast figures and data but

only basic maths are required and not the complex mathematical skills to be an accountant
(Carrera, 2017). Samsung mostly hired such candidate for accounting position who possess
knowledge and skills to do accounting because to work in accounting and finance team is not
very easy so one should have knowledge related to the same.
Task 2
Calculations of ratio
Return on capital employed
Particular 2017 2018
PBIT 300 262.5
Total Assets 2235 4035
Current liabilities 1162.50 1110
ROCE 27.97% 8.97%
Return on capital employed is popularly known as profitability ratio which is being used by
companies to measure write how effectively company is generating profit by using capital which
is being employed within the organisation (Xu, and et.al 2019). It is one of the long-term
profitability ratios because it provides efficiency of assets which has been taken into
consideration by the company and assets are able to generate long term finance for the company
as well. Therefore this ratio is known as return on equity as well. Apart from this return on
capital employed ratio is also beneficial for the perspective of investors may cause with the help
of this ratio interested can know how much return they have generated on their investment and
whether they want to keep the investment order want to withdraw. This ratio is used for
calculation of operating profit as well as capital employed. To calculate return on capital
employed organisation needs profit before interest and tax then only it can provide accurate
result. As per the case study the return on capital employed ratio was 27.97 percent in 2017
however in 2018 it has been decreased and reaches 28.97%. Which is not a good sample for the
company because this ratio of source profitability and return on capital employed ratio decrease
then the overall profitability of the company also get decreased.
Net profit margin ratio

Particular 2017 2018
Profit 300 262.5
Revenue 2400 3000
Margin 12.5 8.75%
Net profit margin is also a profitability ratio which represents the profit from various business
operations and it is identified in the form of percentage of various revenues generated by the
company by sales. Net profit margin ratio also uses various expenses such as cost of goods sold
which has been incurred to the company (Esteve 2019). In short net profit margin ratio compares
the overall profit of the company with the money invested initially. This pressure also provides
financial health and stability of the company to the investors because it provides return generated
by the company by sales so if the sales is high then the written will also high and therefore it is
beneficial for investors. As per this case study of Alpha Limited the net profit margin ratio was
12.5% in 2017 but in 2018 this was also the decrease and becomes 8.75% . In the case of Alpha
Limited the net profit margin ratio is continuously decreasing which is showing that company is
not able to generate high revenue by sales. This is not beneficial for the company because if the
sells do not get increased then company may lose their existing investors apart from this it will
put negative impact on the new investors as well because if company is not able to generate
profit then no one New investor touch this company.
Current ratio
Formula = current assets/ current liabilities
For 2017
757.50/322.50= 2.34
For 2018
1035/1110=0.93
capability of the business so that it can meet all their short-term needs within a year. Current
ratio known to be the weight of all the current assets of the company because it provides the
financial snapshot of the company and also help the organisation to maximise the overall
liquidity with the help of current assets. Current ratio provides all the necessary information
about the company’s liquidating so that complete induces current assets to repay their short-term
obligations. Current ratio is being calculated by dividing current assets to current liabilities.

Current ratio of Alpha Limited was 2.34 % in 2017 which has will be decreased to 0.93%. Which
is again not a good symbol for the goodwill and reputation of the company?
Debtor Collection period
Particular 2017 2018
Net credit sales 2400 3000
Average net receivables 450 600
Total amount of days in period 365 365
Debtor Collection period 68.44 73
Debtor collection period refers to the average time taken to collect debts. Basically it provide in
depth detail of time which is being taken by the business to collect all the money from their trade
debtors. For example if the company give debt for one month then the company must collect all
the debts within 45 days. The average debtor collection period of a company indicates the overall
efficiency of the entire account receivables. In this case the debtors collection period was 68.4
days which has been increased to 73 days it means complete taking more time to repair which is
not beneficial for the company.
Creditor’s payment period
Particular 2017 2018
Payable trades 285 1050
Cost of sales 1950 2625
Total amount of days in period 53.34 146
Creditor’s payment period refers to the time duration in which two current liabilities remain
outstanding and company uses free credit (Ahmed and et.al 2018). Creditor’s payment period
provides Insight about the company that whether they are taking the full advantage of credit trade
or not. Formula of identifying returns payment period is trade payables divided by cost of sales
and further it will be multiplied by 365. It is also been computed by dividing all the numbers of
working days in the year by the overall turnover ratio of creditors. In Alpha Limited the
creditors’ payment period was 53.3 days on the other hand in 2018 it increased to 146 days
means companies taking advantage of credit payment. It states that company as using more days
and they are investing such capital to generate more cash flows.

Performance of Alpha Limited
After analysing the position of two years such as 2017 and 2018 of this company it has been
stated that Alpha Limited is not in a good condition. The overall profitability of this company is
continuously decreasing all the ratios are not working in the favour of the company. For example
capital return employed ratio is also decreasing and this ratio measures the overall profitability it
means the company is facing loss and the overall profit is continuously decreasing which is not
good for the reputation and Goodwill of the company.
Apart from this net profit margin ratio is also not showing any positive response because this is
also decreasing it means the overall net profit of this company is decreased and not generating
any fruitful result (Singh and et.al 2017). The effect of changes in 2017 and 2018 is totally
against the company. Apart from this current ratio is also increasing which means company is
not able to generate more cash by current assets and not able to repay their short-term obligations
and liabilities. These changes also not beneficial for the company.
On the other hand debtor’s collection period is continuously increasing it means companies
taking more time to repair which is again a negative symbol this impact of average receivable
days is not beneficial for the company. Apart from this average payable days are also increasing
it Means Company wants to keep the money with them and therefore they are not replying to
their creditors so the overall performance of Alpha Limited is not sufficient for the company.
Due to such ratios investors are also facing loss and they are not able to recover the invested
amount as well. The company needs to work on the profitability in sales because when the sales
will get increase then only company can generate revenue. This company must make certain
changes in their strategies so that it can generate more output and give best possible returns to the
investors as well.
Conclusion
Through this report it can be concluded that accounting and finance both are very much
important for every organisation. As both of these departments deals with money and to record
and analyse monetary transactions on daily basis is not easy and cannot do manually. So for that
purpose company require accounting and finance team which can record daily transactions and
also interpret data so that can be used for the future. Accountants use accounting software to
record such transactions. Report has evaluated role of accounting and finance in Samsung. As
Samsung is the large organisation so have to deal with millions of transactions on daily basis.

Without keeping accounts and finance team it is not possible for the company to know their
financial position or it can be said that company cannot run in the absence of these two
departments. Report has also calculated ratios by using financial statements of the company and
also commented on performance of the company. Ratio analysis is important because it helps inn
ascertaining company's performance and position. It is also used to find out profitability,
efficiency of using funds, risk, solvency etc.

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