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 PRESENTATION ON
FINANCIAL STATEMENT ANALYSIS

Prepared and presented by: Md. Mazedur Rahman (mazed1000@gmail.com)

 Background

• The multinational conglomerate contains

numerous subsidiaries and affiliated businesses,
most of them under the Samsung brand.
• Here are key dates in the company's history:
1938: Samsung is founded by Lee Byung-chull as
a trading company. Its core business focus is
home appliances, telecommunications and
semiconductors. (Samsung website)
 Major Events:

Date of Brief description of Effect on end of

event event year financial
statements

Samsung stole patented Both

2013 design of iPhone Following years
(cultofmac.com)
2015 CEO in prison, $36.4m Affected
Donation to a non-profit
organization, for
2017 political shelter of
(CEO
Arrested) Samsung electronics
(cultofmac.com)
(BBC News)
2016 Battery incident. Income Statement
(Cnet.com) Same year
Sales analysis: ( Year to year analysis)
$250,000,000
$216,708,677
$195,882,955
$200,000,000 $187,754,283
$177,365,404 $174,047,940

$150,000,000

$100,000,000

$50,000,000

$0
2012 2013 2014 2015 2016
Sales Years

Sales Years
Percentage
changes 2012 2013 2014 2015 2016
year by year
31% 15% (9.6%) (9.5%) (1.9%)
Discussion on Sales:

Samsung sales from 2012 to 2013 increased dramatically by 15%.

However, from 2013 to 2016 sales decreased rapidly by each year,
although Samsung launched different types of updated products to the
market. From year 2013 to 2014 sales decreased by 9.6%, 2014 to 2015
decreased by 9.5% and finally by 1.9% in 2016.The reasons behind
these changed on sales may be due to the various types of scandal
suffered by Samsung such as Samsung paid penalty to Apple for
stealing patent (Proven by 4 June 2013, cultofmac.com). And also can
be the competitive markets, other competitors continuously developed
their own brand i.e iPhone, Vivo, Oppo, Huawei.
 Profitability Ratios:
A class of financial metrics that are used to assess a business's
ability to generate earnings as compared to its expenses and
other relevant costs incurred during a specific period of time
(Investopedia).
 Gross Profit Margin
 Net Profit Margin

Name Formula Years

2016 2015 2014 2013 2012
Gross Profit Gross Profit× 100 40.42% 38.46% 37.80% 39.80% 37.02%
Margin Turnover

Net Profit Net Profit × 100 11.26% 9.50% 11.34% 13.33% 11.86%
Margin Turnover
 Profitability Ratios

45.00% 40.42% 39.80%

38.46% 37.80%
40.00% 37.02%

35.00%

30.00%
Percentage

25.00%

20.00%
13.33%
15.00% 11.26% 11.34% 11.86%
9.50%
10.00%

5.00%

0.00%
2016 2015 2014 2013 2012
Years

Gross proit Net Profit

Discussion on Profitability:

Gross profit increased every years from 2012 to 2016 except 2014, in 2014 gross profit
decreased by 2% compare to 2013. The reasons of decreasing the gross profit margin were
sales declined sharply in 2014 than last year. From 2014 to 2015 gross profit raised by
0.66% only, in 2015 both sales and cost of sales dropped, compare to the last year, in 2015
cost of sales declined by 10%, but sales decreased by 9.5%, from here cost of sales
declined 1.5% more than sales in same year. 2015 to 2016 gross profit increased by 1.96%,
although sales and cost of sales both dropped. Gross profit margins were in satisfactory
level for all individual.

On the other hand, in 2013 Samsung recorded maximum sales for five years period but net
profit margin increased by 1.47% only. Due to the high level of Selling and Administration
cost, non-operating cost and income tax expenses than last year. However, in 2014 net
profit knocked down almost by 2%, due to the sales decreased and non-operating cost
increased dramatically in 2014 compare to 2013. Again in 2015 net profit was 9.5%, which
was lowest for the 5 years. The main reasons were financial expenses and income tax
expenses , which were extremely high in 2015.
Liquidity Ratios:
Liquidity ratios are the ratios that measure the ability of a
company to meet its short term debt obligations. These ratios
measure the ability of a company to pay off its short-term
liabilities when they fall due (readyratios.com).
 Current Ratio
 Quick Ratio

Name Formula Years

2016 2015 2014 2013 2012

Current Current Asset 2.58:1 2.47:1 2.23:1 2.16:1 1.86:1

Ratio Current liabilities
Quick Current Assets - Inventories 2.25:1 2.10:1 1.88:1 1.78:1 1.48:1
Ratio Current Liabilities
 Liquidity Ratios

3
2.58
2.47
2.5
2.25 2.23
2.1 2.16

1.88 1.86
2 1.78

1.48
Times

1.5

0.5

0
2016 2015 2014 2013 2012
Years

Curret ratio Quick ratio

 Discussion 0n Liquidity Ratios:

General rule of thumb for current ratio is 2:1, in every single year Samsung maintained
its current ratio more than the given standard, however in 2012 current ratio was lower
than 2. In 2012 income tax payable increased by more than double, accrued expenses
also went up, advance received increased, current portion of long term borrowings and
debenture had risen by 34.5 times than last year, these are the main reasons of low
current ratio. On the other hand, all components of current assets are better than last year.
However, in the same year the net profit margin is better than the recorded worsen profit
in 2015.

Quick Ratio – The quick ratio position is good for every year from 2012 to 2016, that’s
mean the company has ability to cover its debt without counting the inventory.
 Efficiency Ratios:
The efficiency ratio is typically used to analyze how
well a company uses its assets and liabilities
internally (Investopedia).

 Inventory Turnover Period

 Receivable Collection Period
 Payable Payment Period

Name Formula Years

2016 2015 2014 2013 2012

Inventory Inventory ×365 days 56 days 56 days 49 days 51 days 51 days

Turnover Cost of Sales
Receivable Receivable×365 days 44 days 46 days 44 days 44 days 48 days
Collection Turnover
Period
Payable Payable × 365 days 20 days 18 days 23 days 47 days 49 days
Payment Cost of Sales
Period
 Efficiency Ratios

60 56 56
51 51
49 48 49
50 46 47
44 44 44

40
Days

30
23
20
18
20

10

0
2016 2015 2014 2013 2012
Years

Inventory Turnover Receivable days Payable days

Discussion on Efficiency Ratios:

Inventory turnover days lower is better. In 2016 and 2015, the turnover days were higher than
the previous years. It implies that Samsung took long time to sell and to convert inventory into
cash or convert raw material into finished goods, leading to damage, out of date of stocks,
raising inventory holding costs.

In 2012 its receivable payment period was 48 days and was maximum for the 5 years period. In
2016 reduced to 44 days, reasons of these were in this year the amount of receivable was
lower. However, if we analyzed the trend from 2012 to 2016 receivable days were almost same
but high may be this is due to the nature of business. More days in receivables means
customers taking long time to pay, leading unexpected expense i.e. bad debt, which can lead the
company to short fall of cash.

From 2012 to 2016 payable days reduced to 20 days from 49 days. In 2012 trade payable was
higher, this was the main reason of higher payable days. But the following years trade payable
began to decrease. On the other hand the company’s receivable days are not improving in line
with the payable days, from our calculation Samsung paid earlier to the creditors but received
money from debtors in late. That will lead to the future cash shortage and Samsung needs to
arrange some other sources of finance (Overdraft) to fulfill the gap.
Investment Ratios:
Ratios which are used to assess the performance
of a company's shares, for example, RETURN
ON CAPITAL EMPLOYED, EARNINGS PER
SHARE and RETURN ON EQUITY. In addition
to being of great interest to the ordinary
shareholders, investment ratios are also of interest
to potential investors, analysts and competitors.

Name Formula Years

2016 2015 2014 2013 2012

ROCE PBIT × 100 19.96% 18.77% 19.71% 28.34% 28.22%

Capital Employed
Return on Net profit × 100 11.80% 10.60% 13.90% 20.30% 19.6%
Equity Equity
EPS Net profit × 100 29.21% 24.50% 30.06% 39.17% 30.65%
No of ordinary share
Dividend Net profit 7.4 times 6.20 times 11.66 times 25.19 times 28.82 times
Cover Dividend of the year
 Investment Ratios

39.17%
40.00%

35.00%

30.06% 30.65%
29.21%
30.00% 28.34% 28.22%

24.50%
25.00%

19.96% 19.71% 20.30%

19.60%
20.00% 18.77%

13.90%
15.00%
11.80%
10.60%
10.00%

5.00%

0.00%
2016 2015 2014 2013 2012
Years
ROCE ROE EPS
Discussion on Investment Ratios:

ROCE – ROCE is reasonable over all the years , except, 2015 and 2016.

ROE - Return on equity was more than a profit, its measure of efficiency. ROE in Samsung is
highest in 2013, in this year Samsung recorded the best profit. However, in the following
years ROE fell to 10.60% in 2015 and 11.80 in 2016, in 2015 return on equity is better than
2015 may be due to the higher net profit in 2016. In 2015 the ROE was worst because profit
in this year is lower than previous year but total equity was higher.

EPS – Earnings per share is a vital financial measure, this is an indication of profitability.
Higher the EPS better the profitability. Again in 2015 EPS was minimum than any five years.
This is due to the lower profit in this years. In 2016 EPS started to recovered.
From the above calculation and findings Samsung’s performance was worst in 2015 in all
respect of the investment ratios. The reasons may due to the scandal which affected Samsung
in 2015 severely.

Dividend Cover- In 2012 dividend cover was the best. However, its fell year by year, in 2012
Samsung had more money as the dividend cover is high. However, in 2015 dividend cover
was low that means Samsung paid more proportion of profit to the shareholders. In this year
company did have much money for investment.
Stability Ratios:
Stability is the long-term counterpart of liquidity.
Stability analysis investigates how much debt can
be supported by the company and whether debt and
equity are balanced (business-planning-for-
managers.com).

Name Formula Years

2016 2015 2014 2013 2012

Gearing Long Term Liability× 100 7.78% 7.30% 6.18% 8.33% 10.81%
Ratios Shareholder Funds
Interest PBIT 3.87 times 3.9 times 4.82 times 5.95 times 4.77 times
Cover Interest Expenses
 Stability Ratios

5.95
600.00%

4.82 4.77
500.00%

3.87 3.9
400.00%

300.00%

200.00%

100.00%

7.78% 7.30% 6.18% 8.33% 10.81%

0.00%
2016 2015 2014 2013 2012
Gearing Ratio Interest Cover Years
Discussion on Stability Ratios:

From the year of 2012 until 2016 the gearing of the company is improved, in 2012 gearing
was 10.81% and reduced to 7.78% in 2016. From this interpretation Samsung is not risky
organization and the stability is good enough. However, in 2016 debenture decreased, long
term borrowing increased, deferred tax decreased compare to 2015 and shareholders’ funds.

Interest cover of Samsung is reduced in 2016 the company has less amount of profit to cover
its interest expense than 2012. In 2013 gearing ratio was high also the company had good
interest cover ratio. In all the five years the company had up down trend of gearing along with
the interest cover ratios.
 Cash Flow Ratio:

The operating cash flow ratio is a measure of how well liabilities are
covered by the cash flow generated from a company's operations.

Name Formula Years

2016 2015 2014 2013 2012
Cash Flow Net cash from operation 68.5% 63.5% 59% 73% 64%
Total Liabilities
 Cash flow ratio

80.00%
73%
68.50%
70.00% 63.50% 64%
59%
60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%
2016 2015 2014 2013 2012
Years
Cash flow ratio
Discussion on cash flow ratio:

This is another way of measuring the risk of an organization, as the rule of thumb the
higher the cash flow ratio, lower the risk faced by the company. In 2013 cash flow
ratio of Samsung was 73%, which was the highest for five years. In this year Samsung
revenue was more than any other year, may be this was the main reason for highest
cash flow ratio.

Although in 2012 cash flow ratio was lower than 2013 from our calculation and
findings current liabilities increased and non-current liabilities decreased in 2013, so
there is a risk that Samsung could suffer from liquidity problems if short-term debt
providers and creditors ask for money. However, in 2014 cash flow fall sharply from
73% (2013) to 59% (2014). This happened may be due to the Samsung scandal of
stealing patent of Apple. However, the overall cash flow from 2012 to 2016 is in
satisfactory level.
Conclusion:

From overall analysis of financial data and ratios, we found that in some extent
Samsung performance is excellent and in some area performance is not good
enough. From 2012 to 2016 Samsung suffered different types of drastic scandal,
which affected company’s overall financial performance specially in 2014 and
2015. However, in respect overall profitability, liquidity and stability Samsung is
still a leading organization in the industry and lucrative for the prospective
stakeholders. Last but not least, hoping a better future and wishing a very good
luck to Samsung.
Reference:
https://successstory.com/companies
/samsung-group

https://www.samsung.com/global/ir/
financial-information/audited-
financial-statements/