Financial Ratio Analysis of Samsung For the year 2013-2014
Current ratio
Quick ratio
Debt equity ratio
Capital turnover ratio
Fixed Assets Turnover ratio
Working capital turnover ratio
Stock turnover ratio
inventory conversion period
Debtors turnover ratio
Gross profit ratio
net profit ratio
etc
2. Financial Analysis
Assessment of the firm’s past, present and future financial conditions.
Done to find firm’s financial strengths and weaknesses.
Primary Tools :
Financial Statements.
Comparison of financial ratios to past, industry, sector and all firms.
3. Financial Ratios:
– Liquidity Ratios: Assess ability to cover current obligations.
– Leverage Ratios: Assess ability to cover long term debt obligations.
Operational Ratios:
– Activity (Turnover) Ratios: Assess amount of activity relative to amount of
resources used.
– Profitability Ratios: Assess profits relative to amount of resources used
Valuation Ratios: Assess market price relative to assets or earnings
4. Currency in Millions of
South Korean Wons
Dec 31
2013
(KRW)
Dec 31
2014
(KRW)
Revenues 228,692,667.0 206,205,987.0
TOTAL REVENUES 228,692,667.0 206,205,987.0
Cost of Goods Sold 137,696,309.0 128,278,800.0
GROSS PROFIT 90,996,358.0 77,927,187.0
Selling General & Admin Expenses, Total
38,934,012.0 37,446,184.0
R&D Expenses 14,319,402.0 14,385,506.0
Depreciation & Amortization, Total 957,931.0 1,070,426.0
OTHER OPERATING EXPENSES, TOTAL
54,211,345.0 52,902,116.0
OPERATING INCOME 36,785,013.0 25,025,071.0
Interest Expense -509,658.0 -592,940.0
Interest and Investment Income 1,463,768.0 3,269,596.0
NET INTEREST EXPENSE 954,110.0 2,676,656.0
Income (Loss) on Equity Investments 504,063.0 342,516.0
Currency Exchange Gains (Loss) -330,105.0 -250,088.0
Other Non-Operating Income (Expenses) -588,606.0 646,942.0
EBT, EXCLUDING UNUSUAL ITEMS 37,324,475.0 28,441,097.0
Impairment of Goodwill -- --
Gain (Loss) on Sale of Investments 1,117,029.0 -571,588.0
Gain (Loss) on Sale of Assets -77,225.0 5,525.0
Other Unusual Items, Total -- --
EBT, INCLUDING UNUSUAL ITEMS 38,364,279.0 27,875,034.0
Income Tax Expense 7,889,515.0 4,480,676.0
Minority Interest in Earnings -653,549.0 -311,859.0
Earnings from Continuing Operations 30,474,764.0 23,394,358.0
NET INCOME 29,821,215.0 23,082,499.0
NET INCOME TO COMMON INCLUDING EXTRA ITEMS
29,821,215.0 23,082,499.0
NET INCOME TO COMMON EXCLUDING EXTRA ITEMS
29,821,215.0 23,082,499.0
5. Currency in Millions of
South Korean Wons
Dec 31
2013
(KRW)
Dec 31
2014
(KRW)
Assets
Cash and Equivalents 16,284,780.0 16,840,766.0
Short-Term Investments 38,171,930.0 44,911,895.0
TOTAL CASH AND SHORT TERM INVESTMENTS
54,456,710.0 61,752,661.0
Accounts Receivable 24,988,532.0 24,694,610.0
Notes Receivable 15,449.0 50,760.0
Other Receivables 2,887,402.0 3,539,875.0
TOTAL RECEIVABLES 27,891,383.0 28,285,245.0
Inventory 19,134,868.0 17,317,504.0
Prepaid Expenses 2,472,950.0 3,346,593.0
Other Current Assets 6,804,360.0 4,444,023.0
TOTAL CURRENT ASSETS 110,760,271.0 115,146,026.0
Gross Property Plant and Equipment
168,784,544.0 183,286,006.0
Accumulated Depreciation -93,288,156.0 -102,413,056.0
NET PROPERTY PLANT AND EQUIPMENT
75,496,388.0 80,872,950.0
Goodwill 560,534.0 739,576.0
Long-Term Investments 12,654,995.0 17,894,293.0
Deferred Tax Assets, Long Term 4,621,780.0 4,526,595.0
Deferred Charges,Long Term 752,669.0 1,239,933.0
Other Intangibles 2,667,397.0 2,805,964.0
Other Long-Term Assets 6,560,984.0 7,197,621.0
TOTAL ASSETS 214,075,018.0 230,422,958.0
LIABILITIES & EQUITY
Accounts Payable 8,437,139.0 7,914,704.0
Accrued Expenses 11,344,530.0 12,876,777.0
Short-Term Borrowings 6,438,517.0 8,029,299.0
Current Portion of Long-Term Debt/Capital Lease
2,425,831.0 1,778,667.0
Current Portion of Capital LeaseObligations
19,811.0 14,807.0
Current Income Taxes Payable 3,386,018.0 2,161,109.0
Other Current Liabilities, Total 19,283,374.0 19,253,357.0
TOTAL CURRENT LIABILITIES
51,315,409.0 52,013,913.0
Long-Term Debt 2,213,783.0 1,379,871.0
Capital Leases 82,402.0 77,682.0
Minority Interest 5,573,394.0 5,906,463.0
Pension & Other Post-Retirement Benefits
1,854,902.0 201,342.0
Deferred Tax Liability Non-Current
6,012,371.0 4,097,811.0
Other Non-Current Liabilities 2,580,141.0 4,564,151.0
TOTAL LIABILITIES 64,059,008.0 62,334,770.0
Common Stock 897,514.0 897,514.0
Additional Paid in Capital 4,403,893.0 4,403,893.0
Retained Earnings 148,600,282.0 169,529,604.0
Treasury Stock -7,323,432.0 -8,429,313.0
Comprehensive Income and Other
-2,135,641.0 -4,219,973.0
TOTAL COMMON EQUITY 144,442,616.0 162,181,725.0
TOTAL EQUITY 150,016,010.0 168,088,188.0
TOTAL LIABILITIES AND EQUITY
214,075,018.0 230,422,958.0
6. CURRENT RATIO =
CURRENT ASSETS
CURRENT LIABILITIES
For 2013, CURRENT RATIO =
110760271
51315409
= 2.16
For 2014, CURRENT RATIO =
115146026
52013913
= 2.21
The company has the ability to pay its liabilities, as the definition says that higher the
ratio, greater the ability of the firm to pay its bills.
7. QUICK RATIO =
(Current Assets − Stock − Prepaid Expenses)
CURRENT LIABILITIES
For 2013, QUICK RATIO =
89152453
51315409
= 1.74
For 2014, QUICK RATO =
94481929
52013913
= 1.82
The increase in the ratio is an indication that the firm has relatively better position to
meet its current obligation in time.
8. DEBT EQUITY RATIO =
LONG TERM DEBTS
SHAREHOLDERS FUNDS
For 2013, DEBT EQUITY RATIO =
2213783
150016010
= 0.015
For 2014, DEBT EQUITY RATIO =
1379871
168088188
= 0.008
The ratio shows the company’s ability to cover its debts through its total assets. The
ratio has to be low.
9. CAPITAL TURNOVER RATIO =
NET SALES
CAPITAL EMPLOYED
For 2013, CAPITAL TURNOVER RATIO =
228692667
152229793
= 1.50
For 2014, CAPITAL TURNOVER RATIO =
206205987
169468059
= 1.22
There is a decrease in the efficiency of capital utilization in the business.
10. FIXED ASSETS TURNOVER RATIO =
NET SALES
NET TOTAL FIXED ASSETS
For 2013, FIXED ASSETS TURNOVER RATIO =
228692667
103314747
= 2.21
For 2014, FIXED ASSETS TURNOVER RATIO =
206205987
115276932
= 1.79
There is a decrease in the efficiency of assets management.
11. WORKING CAPITAL TURNOVER RATIO =
NET SALES
WORKING CAPITAL
WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES
For 2013, WORKING CAPITAL TURNOVER RATIO =
228692667
5944862
= 3.85
For 2014, WORKING CAPITAL TURNOVER RATIO =
206205987
63132113
= 3.27
The lower working capital turnover ratio shows that the firm has to face the shortage
of working capital to meet its day-to-day business activities unsatisfactorily.
12. STOCK TURNOVER RATIO =
NET SALES
INVENTORY
For 2013, STOCK TURNOVER RATIO =
228692667
19134868
= 11.95
For 2014, STOCK TURNOVER RATIO =
206205987
17317504
= 11.91
The slight decrease in ratio indicates that the investment in stock in trade is efficiently
not used.
13. INVENTORY CONVERSION PERIOD =
365
STOCK TURNOVER RATIO
For 2013, INVENTORY CONVERSION PERIOD =
365
11.95
= 30.54 days
For 2014, INVENTORY CONVERSION PERIOD =
365
11.91
= 30.65 days
The increase in the value shows that the total inventory is converted into sales faster
than the previous year.
14. DEBTORS TURNOVER RATIO =
TOTAL SALES
ACCOUNTS RECEIVABLE
For 2013, DEBTORS TURNOVER RATIO =
228692667
24988532
= 9.15
For 2014, DEBTORS TURNOVER RATIO =
206205987
24694610
= 8.35
The decrease in value represents the debtors are converted into cash slowly compared
to the previous year.
15. DEBT COLLECTION PERIOD RATIO =
MONTHS IN A YEAR
DEBTORS TURNOVER RATIO
For 2013, DEBT COLLECTION PERIOD RATIO =
12
9.15
= 1.31 months
For 2014, DEBT COLLECTION PERIOD RATIO =
12
8.35
= 1.44 months
The decrease in ratio indicates that the efficiency of firm's credit collection and
efficiency of credit policy is decreasing.
16. GROSS PROFIT RATIO =
GROSS PROFIT
NET SALES
× 100
FOR 2013, GROSS PROFIT RATIO =
90996358
228692667
× 100 = 39.78% i.e. 40%
FOR 2014, GROSS PROFIT RATIO =
77927187
206205987
× 100 = 37.79% i.e. 38%
The decrease in ratio indicates the firms profitability and effective standard of
performance is decreasing.
17. NET PROFIT RATIO =
NET PROFIT AFTER TAX
NET SALES
× 100
For 2013, NET PROFIT RATIO =
29821215
228692667
× 100 = 13.04%
For 2014, NET PROFIT RATIO =
23082499
206205987
× 100 = 11.19%
This ratio reveals the firm's overall efficiency in operating the business is not going
well.
18. OPERATING RATIO =
OPERATING COST
NET SALES
× 100
For 2013, OPERATING RATIO =
54211345
228692667
× 100 = 23.70%
For 2014, OPERATING RATIO =
52902116
206205987
× 100 = 25.65%
This ratio indicates the firm's ability to cover total operating expenses is increasing.
19. OPERATING PROFIT RATIO =
NET SALES−(COGS+OPERATING EXPENSE)
NET SALES
× 100
For 2013, OPERATING PROFIT RATIO =
36785013
228692667
× 100 = 16.08%
For 2014, OPERATING PROFIT RATIO =
25025071
206205987
× 100 = 12.14%
This indicates the operational efficiency of the firm and the firm's ability to cover the
total operating expenses is increasing.
20. RETURN ON ASSETS RATIO =
NET INCOME
TOTAL ASSETS
For 2013, RETURN ON ASSETS RATIO =
29821215
214075018
= 0.14%
For 2014, RETURN ON ASSETS RATIO=
23082499
230422958
= 0.10%
The ratio is low which means that the company is not doing a good job in using
its assets to generate sales.
21. RETURN ON CAPITAL EMPLOYED RATIO =
NET PROFIT BEFORE INTEREST AND TAX
CAPITAL EMPLOYED
× 100
For 2013, RETURN ON CAPITAL EMPLOYED RATIO =
36785013
152229793
× 100 = 24.16%
For 2014, RETURN ON CAPITAL EMPLOYED RATIO =
25025071
169468059
× 100 = 14.77%
With respect to the total investments made in the business the profit made by the
firm is less compared to the previous year.
22. RETURN ON INVESTMENT RATIO =
NPAT
SHAREHOLDERS FUNDS
× 100
For 2013, RETURN ON SHAREHOLDERS FUNDS RATIO =
29821215
150016010
× 100 = 19.88%
For 2014, RETURN ON SHAREHOLDERS FUNDS RATIO =
23082499
1680118118
× 100 = 13.73%
The return on the shareholders investment has decreased to a great extent.
23. Conclusion
The company is the world’s largest mobile phones and smartphones
vendor. It is the largest memory chip maker and the largest TV
manufacturer.
But its overall position is not good compared to its previous year. We
can notice this decrease by the calculated ratios.
