Financial Analysis of Samsung PLC for Strategic Decision Making

This report provides a detailed financial analysis of Samsung PLC, covering various aspects of its financial performance and strategic decision-making processes. The first task evaluates the sources of financial data used to inform business strategy, emphasizing the importance of financial statements like balance sheets and profit-and-loss accounts. It discusses the need for financial data in making key organizational decisions, such as monitoring performance and determining profitability, and analyzes the risks associated with financial business decisions, including macroeconomic factors and internal management issues. Furthermore, it reviews methods for appraising strategic capital expenditure projects. The second task involves an interpretation of Samsung PLC's financial statements to assess the organization's current viability, including an overview of its profits, sales, and sales volume per segment. It also includes a comparative analysis of financial data using ratio analysis, examining ratios such as Return on Equity (ROE), Return on Assets (ROA), and Debt to Equity (D/E). Based on the analysis, the report offers recommendations for Samsung PLC to maintain its competitive advantage.

Task 1 – Financial Data and Strategic Decision Making
 An evaluation of the sources of financial data which can be used to
inform business strategy.
Finance management is an important factor that contributes to a
company's competitive advantage. The vital assessment of a company's
income streams is significant to finance management. Fiscal management
also requires developing precise strategies for marketing, people, and
expenditure to improve the firm's responsibility. Essentially, accountability in
the management of a company's financial resources is critical to its long-term
growth and profitability (Arabi, 2014). The plan also allows a company to
enhance its client base and willingness to invest, resulting in an exceptional
performance in the stock exchange market. A critical examination of Samsung
Plc's financial statements and fiscal strategy is vital for improving modern
company managers' and investors' understanding of how to maintain a firm's
responsibility.
The study improves stakeholders' and potential investors' understanding of
Samsung Plc's financial status. According to fiscal analysis, financial data is
critical for the formulation of various decisions inside a corporation. Financial
data also allows stakeholders to gain meaningful insights into a company's
financial status. Fiscal data is also required for the development of risk-
mitigation measures.
Samsung is one of South Korea's most powerful companies. According to
respected periodicals such as Forbes and the New York Financial Times,
Samsung is the world's second-largest maker of information technology
equipment. The firm also manufactures semiconductors, lithium-ion batteries,
chips, flash memory, and hard drives. Samsung benefits from strategic
alliances with Dell, Hewlett Packard, Apple, HTC, and Sony. The strategic
alliances allow the South Korean company to keep its market dominance. A
thorough examination of the company's financial records shows a total market
worth of more than $300 billion US dollars. Samsung generates an annual
income of more than $100 billion US dollars. With a total asset advantage of
over 26 billion US dollars, the international corporation also dominates the
stock exchange market. The corporation provides over 20% of South Korea's
GDP.
 The sources of financial data that informs a business strategy
A company's financial data comes from a variety of sources. Financial
statements, for example, such as balance sheets and trade and profit
accounts, provide reliable information about a company's financial situation
and performance.
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The balance sheet provides vital information about an organization's
assets, obligations, and flexibility to the stakeholders. The balance sheet
improves the calculation of several financial statistics such as liquidity and
current ratios. When evaluating a company's financial performance and
market domination, the computation of the ratios provides a valid reference
point.
The profit-and-loss statement also gives accurate and essential
information about a company's performance. The profit-and-loss statement
predicts a company's total loss and net revenue. The declaration also allows a
firm to obtain relevant information about its competitive advantage and
growth. Furthermore, fiscal analysts demonstrate that the statement serves
as a powerful reference point during the formulation of crucial judgments
inside modern multinational corporations such as Samsung Plc.
 An assessment of the need for financial data and information in
relation to the formulation of business strategy.
Financial data and information are required for the formulation of major
choices such as
• monitoring performance
• determining how to boost profits
• company growth Savings on expenses Policy development.
Financial data and information are required for the formulation of major
organizational decisions. According to the research, fiscal statements such as
balance sheets and profit-and-loss accounts give critical information about a
company's success. For example, financial data from the balance sheet is
critical in a firm's choice to expand its sales volume to boost its profitability.
The trustworthy information provided by the balance sheets helps the
relevant stakeholders to create strategies that aim to improve the purchase of
diversified additional assets. The data also allows important stakeholders
inside modern corporations such as Samsung Plc to develop strategic plans
aimed at increasing the company's dominance over rising market entrants
such as Apple, HTC, and Sony.
The study also demonstrates that the profit-and-loss account gives critical
information about a company's monetary success over a specific period. The
data gives a strong reference point for the prior year's performance. For
example, information from the profit and loss account may lead to
stakeholders making decisions such as reducing various indirect expenses to
increase profitability. The profit and loss account information also helps the
management team to develop precise strategies that improve the distribution
of money among stakeholders. As a result, modern business managers must
constantly adhere to financial data from various fiscal accounts to make
sound judgments.
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 An analysis of the risks related to financial business decisions.
The unemployment rate has risen.
Consumer purchasing power is dwindling.
Rates of inflation
Inconsistency in leadership (lack thereof)
Financial decisions in business can expose you to a variety of hazards,
both systematic and non-systematic. The systemic dangers are caused by
various adjustments in the macro-environment. For example, negative
external financial indicators such as an increase in unemployment rates and a
reduction in consumer purchasing power may cause massive losses to a firm's
financial investments. A decrease in customer purchasing power may cause a
decrease in a company's sales volume, undermining its excellent financial
success. Introducing negative indicators such as high inflation rates may also
discourage enterprises from purchasing financial assets, resulting in a growth
standstill.
Non-systematic hazards arise from a company's microenvironment. Poor
management and a lack of harmony, for example, may cause the failure of
many financial decisions. The General System Theory constructions also show
that a lack of harmony among the key parts in a specific organization might
result in losses on various financial choices and investments. As a result,
during the formulation of financial choices, management should focus on the
coordination of the essential parties. The management should also collect
detailed input on the importance of various financial decisions in increasing a
company's profitability and relevance. Adopting a suitable leadership
approach also aids in the formulation of competent financial judgments,
therefore protecting a form from massive losses. The method also allows
stakeholders to detect potential uncertainties that may impede the efficacy of
various financial decisions. This factor is also important in aiding the
development of effective risk-mitigation strategies.
 A review of methods that can be used for appraising strategic capital
expenditure projects and strategic direction.
According to a review of the literature, capital expenditure assessment is
critical in a company organization. Using evaluation tools aids in determining
the worth of investing in a certain business. Using assessment metric tools
also aids in the identification of a firm's spending, strategic direction, and
investment portfolio. As a result, corporate managers employ many
assessment approaches, such as calculating Net Present Value (NPV).
The NPV assists managers and stakeholders in various firms in determining
financial resource shortages and excesses after investing in a certain strategic
direction and capital expenditure plan. According to the NPV's tenets,
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corporations should focus on investing in endeavours that increase a
company's financial resources. The approach also proposes that managers
use a variety of techniques to assess the influence of future uncertainties and
emerging macroeconomic indicators on specific capital expenditure and
strategic direction (El Hanandeh & El-Zein, 2007). A comprehensive study of
future uncertainties and threats assists managers and key stakeholders in
embracing appropriate investment portfolios.
A critical assessment approach is the Internal Rate of Return (IRR). The
approach aids in determining the temporal value of a certain investment
portfolio across its lifespan. The strategy helps company managers at global
firms such as Samsung to assess the relevance of participating in a certain
endeavour (Leviauskait, 2010). The IRR assists investors and managers in
determining the expected rates of return. The feedback serves as a useful
foundation for deciding on capital expenditure, strategic direction, and
investment portfolios.
Task 2 – Discussion Paper
 An interpretation of the financial statements of Samsung PLC to
assess the current viability of the organization.
An Overview of the Existing Financial Statements
The Company’s Profits and Sales 2011-2017.
The graphic aids in the estimation of Samsung Plc's profitability and
sales volume. It aids in projecting Samsung Plc's sales and profitability
improvement over the last seven years across several quarters. According to
the financial study, the South Korean enterprises' sales volume would
continue to expand steadily. However, the company's profitability has been
subject to regular changes. According to financial analysts, the developing
tendency is due to increased rivalry from established corporations like Apple
and HTC. In addition, the company confronts significant and complex rivalry
from rising market entrants such as Sony. The financial report also shows a
strong sales performance in the first quarter of 2017. However, the essential
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stakeholders should concentrate on developing an appropriate plan to
address the company's declining profitability.
The Company’s Sales Volume per Segment.
The examination of the company's sales per category is also important in
determining market share and dominance. Feedback is also necessary for the
design of strategy in crucial areas such as marketing to boost the company's
sales volume (Leviauskait, 2010). CE stands for consumer electronics, DS for
varied device solutions, and IM is for information technology and mobile
communications. According to the graphic, Samsung achieved significant
sales in the IM segment from 2011 to the second quarter of 2014. However,
sales in the area have seen a large fall in sales volume, resulting in
unfavourable swings in the firm's profitability. The fiscal diagram also
demonstrates that the South Korean corporation has had an amazing
performance in terms of the sales volume of the designed solutions
(Leviauskait, 2010). Analysts credit the company's rise to Samsung's ability to
build strategic alliances with well-known firms like Dell, Hewlett Packard, and
Apple. The picture also illustrates that the corporation should adopt the
proper approach to handle the stagnation in consumer electronics sales
volume.
 A comparative analysis of financial data using ratio analysis for
Samsung PLC. You are advised to download consecutive years’
accounts from the Samsung PLC website.
An Overview of Fiscal Statements
Samsung's 2016 balance reflects a market worth of more than $300 billion, a
10% gain over the previous year. The record also forecasts a 15% growth in
overall asset leverage. The purchase of firms such as Proximal Data, Yesco
Electronics, Rich Communication Services, and VIV Company is credited with
the favourable trend, according to the company's management. Profit-and-
loss records for the corporation show additional returns of almost 22 billion US
dollars (Reilly & Brown, 2015). The fiscal analysis conducted by Samsung
serves as a trustworthy reference point for the creation of numerous strategic
choices.
A Comparison of Samsung Plc’s Financial Ratios.
The computation of a company's financial ratios is critical for determining and
analysing numerous elements such as profitability, liquidity, solvency, and
efficiency in various activities. A careful examination of Samsung's financial
parameters is required to determine the South Korean firm's efficiency. The
following is a summary of Samsung's critical ratios.
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Ratio 2011 2012 2013 2014 201
5
201
6
Return on
Equit
y
(ROE
)
22.99 14.75 10.84 12.41 7.52 12.1
4
Return
on
Asset
(ROA)
15.22 10.17 7.68 8.84 9.07 5.34
Debt to
Equity
(D/E)
0.08 0.07 0.07 0.08 0.08 0.07
Equity to
Asset
(E/A)
0.68 0.70 0.71 0.71 0.71 0.71
Debt to
Asset
(D/A)
0.05 0.05 0.05 0.06 0.06 0.05
The
Dividend
payout
ratio
(D/P)
0.07 0.13 0.17 0.18 0.17 0.89
According to the report, Samsung has had significant financial development
throughout the years. A high ROE demonstrates that the firm has been
generating exceptional returns across a wide range of portfolios. An excellent
ROA underpins the South Korean firm's prominence in international trading.
Furthermore, the corporation has a low D/E ratio. The low ratio suggests that
a diverse group of investors is interested in investing in the company's
portfolio. Samsung has also maintained a high dividend pay-out ratio. The
feature implies that the firm has been generating a high rate of return on the
portfolios of its stakeholders.
 Makes recommendations to Samsung PLC based on your analysis
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and interpretation of the financial position.
Recommendations
The financial statements and ratios serve as a powerful foundation for the
creation of many suggestions aimed at maintaining the company's
competitive advantage. For example, according to the financial records,
Samsung has seen a significant fall in consumer electronics sales volume and
profitability. Financial experts' feedback and analysis of market dynamics
explain the drop in sales volume to reasons such as intense competition from
established corporations such as Apple and LG. Sony and other growing
market competitors are also posing a threat to the corporation (Reilly &
Brown, 2015). As a result, the company's management should strive to adopt
the marketing strategy in order to increase the awareness of their products
among varied clientele all over the world. The corporation should also focus
on capitalizing on the ongoing expansion in the African and Asian markets in
order to improve customer access to accessible items.
According to critics, Samsung has also had difficulties in developing rules to
enable the continuance of goods. They also blame the Samsung 7's failure on
a lack of continual product improvement and assimilation of user input. As a
result, the firm should prioritize the ongoing inclusion of client input in order
to support the enhancement of the currently offered product (Rutkauskas &
Stasytyte, 2008). The foundations of Keller's theory on consumer equity show
that incorporating customer feedback is critical to increasing public
awareness of current items.
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Task 3 – Information Leaflet
 The impact of ‘creative accounting’ techniques when making
strategic decisions.
The adoption of innovative accounting approaches is critical to the
development of a powerful framework that improves the formulation of
appropriate business choices. Adopting good accounting processes improves
the production of trustworthy data about a company's financial status
(Rutkauskas & Stasytyte, 2008). In most cases, the availability of correct
financial documents such as balance sheets allows business managers to
prepare decisions on many areas such as expansion and increased sales
volumes. Accounting skills are also necessary for identifying practices that
impede a firm's competitive edge.
 The limitations of ratio analysis as a tool for strategic decision
making.
The study demonstrates that financial ratios are critical in determining
a firm's financial status. However, the only use of financial measures in
determining a firm's dominance may confront several difficulties. Many of the
ratios, for example, lack consistency in calculating a company's financial
status.
Fiscal skeptics argue that different financial measurements cannot account for
changes in the market environment (Sinha, 2012). Failing to account for
variances in elements such as inflation rates makes it difficult to compute
correct statistics on a firm's financial performance and situation.
The results also show that different firms follow different accounting
procedures. Accounting policy deviations impede the collection of standard
metrics on the performance of various organizations, reducing the efficacy of
financial ratios.
 The importance of cash flow management when evaluating
proposals for capital expenditure.
The examination of cash flow management is critical for the
formulation of critical capital expenditure choices. Cash flow management
allows a company to match its income with its expenses (Rutkauskas &
Stasytyte, 2008). The approach also allows the key stakeholders to calculate
the break-even analysis, which improves the formulation of appropriate
investment decisions. The plan improves the usage of a company's
resources even further.
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 Recommendations, with justifications, methods and tools that
allow businesses to analyze financial data for strategic decision-
making purposes.
According to the report, Samsung's important stakeholders should
adopt many measuring tools that improve the formulation of solid financial
decisions. For example, determining the firm's financial status requires a
rigorous examination of financial statements such as balance sheets (Singh,
2012). The balance sheet examination improves the appraisal of capital
assets and liabilities. Furthermore, a careful examination of Samsung's profit
and loss statement is required to determine profitability.
Samsung should also make use of financial statements using a variety of
ratios. The financial ratios will aid in identifying the company's current
financial status cost-effectively. Incorporating the strategies is also
necessary for obtaining standard outcomes on the company's performance.
Task 4 – Capital Expenditure Appraisal
 Prepare a report that evaluates the capital expenditure proposals
using appropriate financial techniques.
Introduction
So far, modern-day company enterprises have been confronted with
dynamic developments in the worldwide commerce arena. Aspects such as
high inflation rates, currency instability, and upward movements in
manufacturing costs are important drivers driving development in modern
commercial enterprises. Managers are constantly adopting approaches such
as the use of various managerial tools. The computation of critical
components such as the rate of return and net present value aids in
evaluating the likely return from a portfolio (Arkan 2016, 13). The
computation's output provides a trustworthy reference point when developing
risk-mitigation policies. A careful examination of Pietro Yon expands investors'
and business managers' understanding of the various aspects that contribute
to a favourable return on investment.
Case Study’s Overview
According to the survey, significant stakeholders at Pietro Yon are
thinking about selling their present equipment for $260,000. They intend to
replace it with a new one that will cost $220,000. A $120,000 part exchange
will help with the purchasing of the new equipment. The old and new
machinery will make it easier to meet the firm's production targets. The table
that follows shows critical data about the machines.
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Old machine New machine
Direct materials 1.80 1.80
Direct labor 0.75 0.60
Variable overheads 0.45 0.30
Depreciation 0.35 0.55
According to the estimate, demand will be nil in three years because of
growing technology features in manufacturing. The computation of critical
components such as the rate of return on investment is critical for improving
the manager's understanding of the break-even point of investing in a new
machine.
Computation of Essential Financial Ratios
Analysis of Cost Variables
Old machine New machine Variables
Direct
materials
1.80 1.80 0
Direct labor 0.75 0.60 -0.15
Variable
overheads
0.45 0.30 0.15
Depreciation 0.35 0.55 -0.20
Anticipated Rate of Return
(Current value - original value) / Original value) x 100 = rate of return
Original value $220,000
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Depreciation 0.55 per annum
Current value 1st year 0.55 × 220.000 = 121,000
Current value second year 0.55 × 121,000= 66,550
Current value third year 0.55 × 66,550 = 36602.5
(Current value - original value) / Original value) x 100 = return rate
(36,602- 220,000) ÷ 220,000 x 100
= -38.3625
= -38. 36
Net Present Value
The formula for computing NPV is as follows:
Ct = the net cash flow during a particular
period
Co =the total initial investment
r = discount rate
t = number of times in a particular period
Ct = the net cash flow during a particular period
Units produced 30,000
Cost per unit 5
Cumulative cost 150,000
Maintenance cost 7,000
New machine 1,000
Net flow (150,000 – 8,000) = 142,000
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As a result, in the third month, the corporation is projected to record
a net present value of $ 142,000.
Payback
Payback = Investment Cost ÷ Annual cash flow Payback = 220,000 ÷
142,000
= 1.54
=1.5 years
Internal Rate of Return
Anticipated cash flow= 142,000 Payback time= 1.54 years
Non-Financial Factors
Considering additional elements such as technology advancements and
customer preferences will allow stakeholders to develop policies that will
increase the company's profitability.
An assessment of the impact of the business proposal on the
strategic direction of the organization.
Assessment
According to the specified calculation, the firm is expected to
encounter a variety of cost factors following the installation of the new
equipment. For example, installing the new equipment will allow for a
decrease in direct labor expenditures. The technique will also result in a
reduction in various manufacturing overhead expenses. However, the new
machine depreciates at a faster pace than the older one. According to
business analysts, the installation of new equipment should aid in the
attainment of the company's goals (Yeshmin & Hossan 2011, 78). According
to a critical examination of the case study, the firm is expected to face a
zero rate of demand for its products in the third year owing to various
technological advancements.
Furthermore, the output of the older machine is comparable to that of
the new one. The installation of the new machine will result in a negligible
change in the reduction of recurring costs and overheads (Yeshmin &
Hossan 2011, 78). As a result, the company's key stakeholders should
prioritize the preservation of the old machine. The policy will protect the
corporation against excessive loss as a result of increasing depreciation,
different technical improvements, and a drop in demand.
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The calculation of the expected rate of return allows stakeholders to
identify the break-even point of a certain investment. Essentially, an
investment should aim for high rates of return since they improve a
company's competitive edge, profitability, and growth. The installation of
the new machine is anticipated to assist in a -38 return.
According to the comments, the acquisition of the new equipment
lacks an adequate break-even point. Negative developing elements, such as
a drop in demand and a high depreciation rate, would further reduce
returns. As a result, the Pietro Yon management team should design
strategies that will allow the firm to boost the efficiency of the old
equipment. The plan will assist the organization in mitigating risks such as a
fall in demand, dynamic consumer purchasing patterns, and upcoming
technological evolutions (Okoye et al. 2013, 113).
The analysis of the company's cash flows allows key stakeholders to
develop appropriate investment strategies. A calculation of the company's
cash flow indicates a low net present value of 121,000 over three years.
The negative phenomena will be caused by factors such as a
reduction in demand, significant depreciation, and technological advances.
Investing in the installation of new equipment is unlikely to generate a high
return. Stakeholders, in collaboration with employees, should adopt
appropriate approaches to reduce future uncertainty (Ahid & Augustine
2012, 15).
Recommendations
According to the assessment, Pietro Yon's investment in the new
machine will not increase efficiency. The new machine is also subject to a high
rate of depreciation. Future technological advancements may jeopardize its
applicability. As a result, the company's management should implement
strategies to increase the efficiency of the old equipment. The rules should
also aid in aligning the company's operations with dynamic developments in
the global trade environment. According to the tenets of power management
systems like Total Quality Management, businesses should conduct a constant
requirements assessment to predict projected market changes (Yeshmin &
Fowzia 2010, 131). For example, projected changes in customer preferences
would allow the business company to adopt policies that will allow it to stay
relevant and responsive to the clients' desires.
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According to the report, the firm will see a decrease in demand for its
products. Adoption of appropriate marketing mix tactics is one of the
important measures that will allow it to deal with evolving trends. The
marketing mix plan will make it easier to identify changes that result in a
decrease in demand. Instead of constructing new equipment, adopting
appropriate marketing methods is more likely to affect customer behavior
toward acquiring the company's items. Relevant stakeholders in the
manufacturing process should accept dynamic technological changes.
A high proportion of commercial enterprises in contemporary society
are operating in a complex market environment. A crucial difficulty for
commercial enterprises is a dynamic change in consumer preferences.
Adopting financial ratios aids in estimating the expected rate of return on a
portfolio. The analysis's feedback is vital for the creation of risk-mitigation
policies.
References
Arabi, K. (2014). Portfolio formation: Empirical evidence from Khartoum
Stock Exchange'. International Journal of Current Business and Social
Sciences, 1(2), 38-57.
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