SCHOOL OF ARCHITECTURE, BUILDING & DESIGN

Foundation in Natural and Built Environment (FNBE)

March intake 2012 Semester 2

Basic Accounting (FNBE0145)

TEO KEAN HUI (0310165)

LUCAS WONG KOK HOE (0309421)

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Table of Content

No. Title Page

1. Company Background and Recent Development 3-4

2. Ratio Calculations 5-8

3. Interpretation on the Ratio Results 9-10

4. Investment Recommendation 11

5. Appendix 12-22

6. Reference List 23

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Company Background

Samsung's History

Founding chairman Byung-Chull Lee started a business in Taegu, Korea, with 30,000 won on the 1st of March 1938.

In the beginning, his business was mainly focused on trade export, selling dried Korean fish, vegetables, and fruit to Manchuria and Beijing. After a decade, Samsung-which means "three stars" in Korean-would have its own flour mills and confectionery machines, having its own manufacturing and sales operations, and ultimately evolve to become the modern global corporation that still bears the same name today.

From a small business in Taegu, Korea, Samsung has grown to become one of the world's leading electronics companies. Samsung is specialised in digital appliances and media, semiconductors, memory, and system integration. Today, Samsung's innovative and top quality products and processes are world recognised. This digital age captures the major milestones in Samsung's history. It shows how the company expanded its product lines and reach, growing its revenue and market share, and how it has followed its mission of making life better for consumers around the world.

Vision 2020

In the newly stated motto, Samsung Electronics' vision for the new decade is, "Inspire the World, Create the Future."

This new vision reflects Samsung Electronics’ commitment to inspiring its communities by leveraging Samsung's three key strengths: "New Technology," "Innovative Products," and "Creative Solutions." -- And to promoting new value for Samsung's core networks -- Industry, Partners, and Employees. Through these efforts, Samsung hopes to contribute to a better world and a richer experience for all users.

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Recent Developments1. SAMSUNG Recognized for Sustainability Leadership at 2013 International CES

LAS VEGAS – January 10, 2013, The first to achieve Gold Level UL Environment certification for TVs and winning four 2013 Eco-Design Awards demonstrate Samsung’s commitment to advancing technology that promote sustainability.

2. Samsung Galaxy S3 sales top 40 Million. Samsung announced that it was selling around 190,000 Galaxy S3 headsets everyday and now has reached more than 100 million sets of its Galaxy S products. Becoming the leader in worldwide smartphone shipments in 2012, the company increased its share of smartphone shipments to 31.3%.

3. CES 2013: Samsung stand complete with dancing televisions display. Samsung includes its new product, the world’s first curve OLED TV.

4. Samsung Galaxy Note 2 hits and exceeds 20 million sales in 2 months. Galaxy Note 2 being one of the highest sales in Samsung’s history have sold for 20 million in exactly 2 months since its launching.

5. Samsung plans on developing small and big OLED panels. Samsung want to start the mass production of small OLED panels in the first half of 2013. The big OLED panels are planned in the second half of 2013. Samsung also started to develop high-resolution flexible AMOLED displays in 2013. The first devices with YOUM technology are planned in 2013.

6. Launch of Samsung Galaxy Camera. Samsung has a new idea -- to bring together the best of the standalone camera and the smartphone. Its new Galaxy Camera is what you'd get if a point-and-shoot camera were crossed with an Android phone

7. Samsung to Invest $42B USD in 2012 -- Mostly on Chip making, OLED TVs.

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Ratio calculation

Profitable Stability 2010 (in U.S. Dollar)

Profitability Ratios Formula CalculationReturn On Equity (ROE)

Net Profit Average Owner’s Equity

14,177,29871,294,360

= 19.89%Net Profit Margin (NPM)

Net ProfitNet Sales

14,177,298135,771,646

= 10.44%Gross Profit Margin (GPM)

Gross Profit Net Sales

45,626,046135,771,646

= 33.6%Selling Expenses Ratio (SE)

Total Selling Expenses Net Sales

11,521,258135,771,646

= 8.49%General Expenses (GE)

Total General Expenses Net Sales

11,521,258135,771,646

= 8.49%Financial Expenses (FE)

Total Financial Expenses Net Sales

6,760,997135,771,646

= 4.98%

*Average Owner’s Equity = 78,452,095 + 64,136,652

2

= 71,294,360

*Selling and General Expenses = 23,776,910

2

= 11,521,258

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x 100% x 100%

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x 100%

Profitable Stability 2011 (in U.S. Dollar)

Profitability Ratios Formula CalculationReturn On Equity (ROE)

Net Profit Average Owner’s Equity

11,908,49582,890,147.5

= 14.37%Net Profit Margin (NPM)

Net ProfitNet Sales

11,908,495143,069,254

= 8.32%Gross Profit Margin (GPM)

Gross Profit Net Sales

46,830,791143,069,254

= 32.73%Selling Expenses Ratio (SE)

Total Selling Expenses Net Sales

11,888,455143,069,254

= 8.3%General Expenses (GE)

Total General Expenses Net Sales

11,888,455143,069,254

= 8.3%Financial Expenses (FE)

Total Financial Expenses Net Sales

6,844,204 143,069,254

= 4.78%Price/Earnings Ratio (PE)

Current ShareEarnings per Share

707.0084.19= 8.40 times

*Average Owner’s Equity = 77,472,549 + 88,307,746

2

= 82,890,147.5

*Selling and General Expenses = 23,776,910

2

= 11,888,455

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x 100% x 100%

x 100% x 100%

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x 100%

x 100%

x 100%

x 100%

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x 100%

Financial Stability 2010 (in U.S. Dollar)

Financial Ratios Formula CalculationWorking Capital (WC) Total Current Assets

Total Current Liabilities 53,913,94235,073,071

= 1:1.54Total Debts (TD) Total Liabilities

Total Assent 39,458,823117,910,918

= 33.46%Inventory Turnover (IT)

COGS Average Inventory

90,145,600 10,186,958.5

= 41 DaysDebtor Turnover (DT) Credit Sales

Average Debtors 135,771,646 18,046,190.5

= 48 DaysInterest Coverage (IC)

Interest Exp. + Net Profit Interest Exp.

6,760,997 + 14,177,298 6,760,997

= 3 timesPrice/Earnings Ratio (PE)

Current ShareEarnings per Share

707.00100.18= 7.06 times

*Average Inventory = 11,734,590 + 8,639,327

2

= 10,186,958.5

*Average Debtors = 18,710,013 + 17,382,368

2

= 18,046,190.5

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x 100% x 100%

365 Days ÷

365 Days ÷

365 Days ÷

365 Days ÷

Financial Stability 2011 (in U.S. Dollar)

Financial Ratios Formula CalculationWorking Capital (WC) Total Current Assets

Total Current Liabilities 61,997,80046,636,548

= 1:1.33Total Debts (TD) Total Liabilities

Total Assent 46,636,548 134,944,294

= 34.56%Inventory Turnover (IT)

COGS Average Inventory

97,238,463 12,607,837.5

= 47 DaysDebtor Turnover (DT) Credit Sales

Average Debtors 143,069,254 19,709,469.5

= 50 DaysInterest Coverage (IC)

Interest Exp. + Net Profit Interest Exp.

6,844,204 + 11,908,495 6,844,204

= 2 times

*Average Inventory = 13,627,603 + 11,588,072

2

= 12,607,837.5

*Average Debtors = 20,942,537 + 18,476,402

2

= 19,709,469.5

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x 100% x 100%

365 Days ÷

365 Days ÷

365 Days ÷

365 Days ÷

Ratio Interpretation

Profit Stability

From year 2010 to 2011, the percentage of Return On Equity (ROE) have decreased from 19.89% to 14%. This shown that Samsung Company’s owner receives lesser return in his investment in year 2011.

Net Profit Margin (NPM), the percentage has also decrease from 10.44% in year 2010 to 8.32% in year 2011. This means that Samsung Company was unable to control their expenses in year 2011 as well as in year 2010.

Gross Profit Margin (GPM) has decrease from 33.6% to 32.73% in year 2010 to 2011. This has shown that Samsung Company was unable to control their Cost Of Goods Sold (COGS) expenses in year 2011 as well as in year 2010.

Selling Expenses Ratio (SER) has decrease from 8.49% in year 2010 to 8.3% in year 2011. This means Samsung Company has control their selling expenses better in year 2011 compare to year 2010.

General Expenses Ratio (GER) has decrease from 8.49% in year 2010 to 8.3% in year 2011. This means Samsung Company has control better and has reduce their general expenses in year 2011 compare to year 2010.

Financial Expenses Ratio (FER) has decrease from 4.98% in year 2010 to 4.78% in year 2011. This means Samsung Company has control their financial expenses better in year 2011 compare to year 2010.

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Ratio Interpretation

Financial Stability

Working Capital (WC) of Samsung Company has decrease from 1:1.54 in year 2010 to 1:1.33 in year 2011. Samsung Company still has no ability to pay current liabilities using current assets because the amount current liabilities are still more than the amount of current assets. But it is getting better from year 2010 to 2011 because the amounts of current liabilities are lesser.

Total Debts (TD) has increase from 33.46% to 34.56% in year 2010 to 2011. Samsung Company has borrowed more debt in year 2011 compared to 2010. This shown that Samsung Company was not able to control well on borrowing debt in year 2011 compared to year 2010.

Inventory Turnover (IT) of Samsung Company has increase from 41 days to 47 days. The rate of selling its goods by the company has decreased in 2011 compared to 2010.

Besides that, the Debtor Turnover has increased from 48 days to 50 days. This shows that the business has less effectiveness in collecting the debts in 2011 compared to 2010.

However, the Interest Coverage has increased by 1 time. This shows that the business has the better management in covering its interests expenses in 2011 compared to 2010.

In 2011, the price and earnings ratio was increased from 7.06 times to 8.40 times. This shows that the share is earning more than the previous year 2010.

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Investment Recommendation

In the Profit Stability, the Return of Equity (ROE), Net Profit Margin (NPM) and Gross Profit Margin (GPM) have decreased gradually, the Selling Expenses (SE), General Expenses (GE) and Financial Expenses (FE) have also decreased gradually to cover up the loss of the business. Therefore the business have achieved an average equilibrium.

In the Financial Stability, the Working Capital has decreased but it is still not enough to cover its liabilities. The Total Debts, Inventory Turnover and Debtor Turnover have increased showing that the business isn’t that by comparing the two years. However the Interest Coverage and Price/Earnings Ratio have increased. This still shows that the loss is more than its profit.

As a conclusion, even if the shares are below 15 times, it is still not worth to invest this business because the business is still losing a lot compared to its profit.

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Appendices

Appendix A1

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Appendix A2

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Appendix A3

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Appendix A4

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Appendix A5

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Appendix B1

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Appendix B2

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Appendix B3

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Appendix B4

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Appendix B5

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Appendix C

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Reference ListJohNan. (10 December, 2012). Samsung starts development of high-resolution flexible AMOLED displays.

Retrieved from http://www.sammobile.com: http://www.sammobile.com/2012/12/10/samsung-starts-development-of-high-resolution-flexible-amoled-displays/

Mick, J. (17 January, 2012). Samsung to Invest ~$42B USD in 2012 -- Mostly on Chipmaking, OLED TVs. Retrieved from http://www.dailytech.com: http://www.dailytech.com/Samsung+to+Invest+42B+USD+in+2012++Mostly+on+Chipmaking+OLED+TVs/article23796.htm

Richmond, S. (14 January, 2013). Samsung Galaxy S III sales top 40m. Retrieved from http://www.telegraph.co.uk: http://www.telegraph.co.uk/technology/samsung/9800843/Samsung-Galaxy-S-III-sales-top-40m.html

Samsung Profile. (2013). Retrieved from http://www.samsung.com/us.

Stern, J. (24 December, 2012). Samsung Galaxy Camera Review: Android Meets Point-and-Shoot Camera. Retrieved from http://abcnews.go.com: http://abcnews.go.com/Technology/samsung-galaxy-camera-review-android-meets-point-shoot/story?id=18055760

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