Czech University of Life Sciences Prague

Faculty of Economics and Management

Department of Economic Theories

Bachelor Thesis

Financial analysis of a chosen firm

Nomin Badralt
© 2021 CULS Prague
 Declaration

I declare that this bachelor thesis has been composed by myself and that the
work has not been submitted for any other degree or professional qualification. I
confirm that the work submitted is my own, except where work which has formed
part of jointly-authored publications has been included. I declare that I have worked
on my bachelor thesis titled "Financial analysis of a chosen firm" by myself and I
have used only the sources mentioned at the end of the thesis. As the author of the
bachelor thesis, I declare that the thesis does not break copyrights of any their person.

In Prague on 30/11/2021 ___________________________

 Acknowledgement

I wish to express my sincere appreciation to my supervisor, Ing. Pavel Srbek,

Ph.D. for his guidance and advice during the work on my bachelor thesis. I wish to
acknowledge the support and great love of my family, my partner, Giuseppe; my
mother, Gerel; and friends. They kept me going on and this work would not have been
possible without their input in this ongoing pandemic.
 Financial Analysis of Chosen Firm

Abstract

This bachelor thesis aims to evaluate the financial health of a selected

company, which is Samsung Electronics Co., Ltd . The period taken under
consideration is from 2010 to 2020 . This work intends to help, either internal or
external users, to have a better understanding of the company’s financial site,
including all its activities. Therefore, to conduct a financial analysis, the company’s
financial statements have been taken as a source of data and analysed by the tools of
this analysis. The thesis itself will consist of two major parts: theoretical background
and practical work. In the first part, there will be provided the literature review of the
chosen methodology, where each aspect of financial analysis will be described. It
includes a detailed explanation of every relevant tool and technique applied in this
analysis. In the practical work part, there will be a practical approach to the literature
review provided in the first part. Therefore, it is an interpretation and explanation of
data analysis of the chosen period. The data will be presented in the form of tables.

Keywords: Financial analysis, financial ratios, horizontal analysis, vertical analysis

 Finanční analýza vybrané firmy

Abstrakt

Tato bakalářská práce si klade za cíl zhodnotit finanční zdraví vybrané

společnosti, kterou je Samsung Electronics Co., Ltd. Období analýzy je od roku 2010
do roku 2020. Cílem této práce je pomoci interním i externím uživatelům získat
přehled o finanční stránce společnosti včetně všech jejích aktivit. K provedení
finanční analýzy je proto třeba brát finanční výkazy společnosti jako zdroj dat a
analyzovat pomocí nástrojů této analýzy. Samotná práce bude sestávat ze dvou
hlavních částí: teoretického základu a praktické práce. V teoretické části bude
poskytnut literární přehled vybrané metodiky. Očekává, že tam budou popsány
všechny aspekty finanční analýzy. Zahrnuje podrobné vysvětlení všech příslušných
nástrojů a technik použitých v této analýze. V praktické části bude proveden praktický
přístup k literární rešerši uvedené v první části. Jde tedy o interpretaci a vysvětlení
analýzy dat za zvolené období. Data budou prezentována ve formě tabulek.

Klíčová slova: Finanční analýza, finanční ukazatele, horizontální analýza, vertikální

analýza

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 Table of contents
1 Introduction..............................................................................................6
2 Objectives and Methodology ..................................................................7
2.1 Objectives ........................................................................................................... 7
2.2 Methodology ...................................................................................................... 7

3 Theoretical part .......................................................................................8

3.1 Main sources of Financial Analysis ................................................................... 8
3.1.1 The Balance Sheet....................................................................................... 9
3.1.2 The Income Statement .............................................................................. 10
3.1.3 The Cash Flows Statement........................................................................ 11
3.2 Methods of Financial Analysis ......................................................................... 12
3.2.1 Absolute indicators ................................................................................... 12
3.2.2 Ratio indicators ......................................................................................... 14

4 Practical Part .........................................................................................22

4.1 Horizontal analysis ........................................................................................... 25
4.1.1 Horizontal analysis of assets ..................................................................... 25
4.1.2 Horizontal analysis of Equity and Liabilities............................................ 26
4.1.3 Horizontal analysis of Income Statement ................................................. 27
4.2 Vertical analysis ............................................................................................... 28
4.2.1 Vertical analysis of Assets ........................................................................ 29
4.2.2 Vertical analysis of Equity and Liabilities ................................................ 31
4.2.3 Vertical analysis of Income Statements .................................................... 34
4.3 Ratio indicators ................................................................................................ 35
4.3.1 Liquidity Ratios ........................................................................................ 35
4.3.2 Profitability Ratios .................................................................................... 37
4.3.3 Activity ratios............................................................................................ 39
4.3.4 Stability ratios analysis ............................................................................. 41
4.4 Competitors analysis..........................................................................................43

5 Results and discussion ...........................................................................51

6 Conclusion ..............................................................................................51
7 References ...............................................................................................56
8 Appendix .................................................................................................56

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List of pictures
Picture 1: Balance sheet
Picture 2: Performance measures by area and viewpoint
Picture 3: Top 10 Largest Electronics Companies in the World by Revenue in 2020:

List of tables
Table 1: Horizontal analysis of Assets ( percentage changes)
Table 2: Horizontal analysis of Assets ( absolute changes)
Table 3: Horizontal analysis of Equity and Liabilities ( percentage changes)
Table 4: Horizontal analysis Equity and Liabilities (absolute changes)
Table 5: Horizontal analysis of Income Statements ( percentage changes)
Table 6: Horizontal analysis of Income Statements ( absolute changes)
Table 7: Vertical analysis of Assets (percentage)
Table 8: Vertical analysis of Equity and Liabilities (percentage)
Table 9: Vertical analysis of Income Statements (percentage)
Table 10 Liquidity ratios analysis
Table 11 Profitability ratios analysis
Table 12 Activity ratios analysis
Table 13 Stability ratios analysis
Table 14: Horizontal analysis of Assets ( percentage changes)
Table 15: Horizontal analysis Equity and Liabilities ( percentage changes)
Table 16: Vertical analysis of Assets (percentage)
Table 17: Vertical analysis of Income Statements (percentage)

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List of figures
Figure 1: Comparisation of liquidity ratios
Figure 2: RatioROA
Figure 3: Ratio ROE
Figure 4: Ratio Gross profit margin
Figure 5: Ratio Total assets turnover
Figure 6: Ratio inventory turnover
Figure 7: Ratio fixed assets turnover
Figure 8: Ratio debt to assets
Figure 9: Ratio debt to equity
Figure 10: Ratio interest coverage

List of abbreviations
CF: cash flow
CR: cash ratio
COGS : cost of foods sold
CuR: current ratio
EBIT: net profit before tax and interest
EBT: net profit before tax
ICR: interest coverage ratio
QR: quick ratio
ROA: return on assets
ROE: return on equity
US: United States
USD: United States Dollar

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1 Introduction
Numerous business owners and managers have found that insight gained from
their examination of company financial statements can be inestimable. companies can
benefit from such insight into their profitability, cash flow, and value. Financial
analysis helps to control business operations, plan, make decisions, find out how the
business is performing.
The purpose of the bachelor´s thesis is to give students an opportunity by
working in depth with a limited subject area to independently demonstrate their ability
to formulate a business-related topic, select relevant literature, process data, conduct
analyses, apply methodologies, make critical assessments, and present answers to
questions raised in the problem statement. In my opinion, working on a thesis gives
the opportunity for students to study and practice more in their interested field. After
working few years in the finance team, I understood that financial analysis is one of
the most important skills in the financial field. The ability to read and comprehend
financial data, as well as present information in the form of financial reports, is very
challenging and stimulating. Consequently, I chose financial analysis as my bachelor
thesis topic to challenge myself and practice my skills.
The first part is theory and methodology, and it focuses on explaining the
financial analysis, as well as financial ratios, and indicators. The second part will
include a general overview of the company, using methods and indicators from the
first part to illustrate the results from chosen company. One important tool that can
help sort out the data we need is the ratio analysis.
Ratio analysis looks at the relationships between key numbers on a company’s
financial statements. After the ratios are calculated, they can be compared to industry
standards and the company’s past results, projections, and goals to highlight trends
and identify strengths and weaknesses.

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2 Objectives and Methodology

2.1 Objectives

This bachelor thesis is devoted to the evaluation of a selected company’s

financial performance with the use of financial analysis such as horizontal, vertical
and ratio analysis with the addition of competitors analysis and in industry overview.
The theoretical part generally characterizes financial analysis which are
mentioned in the beginning and other related topics.
In the practical part, selected methods will be applied to the data obtained from
company’s financial statements and the evaluated findings. Furthermore, analysis will
be performed by comparing the selected ratios towards the company´s main
competitors which are in direct competition with the company. Evaluation will be
done by comparing liquidity, profitability, leverage and activity ratios between the
companys. Therfore, this approach perform a more detailed overview than a general
industry average.
In the end of the practical part this bachelor thesis, should be able to answer the
following research questions.
- Is Samsung electronics financially healthy?
- Is Samsung electronics good choice for investment?
- How the current situation will effect/effecting the company?

2.2 Methodology

Relevant scientific literature will be used for the theoretical part, while the
financial statements of the chosen company will be the main source that will provide
data for the practical part of the bachelor thesis.

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3 Theoretical part

3.1 Main sources of Financial Analysis

Financial analysis is a transformation of the data to financial metrics, which

assists in an aspect of the overall business finance function that involves examining
historical data to gain information about the current and future financial health of a
company.
Users of financial information:
- Shareholders and investors ( financial information is used for determining
value of the investment – usually from annual reports )
- Financial analysts ( it is hard to understand financial reports and their
connections, so analysts provide and advise their client/investors )
- Management ( for operating decisions )
- Lenders ( banks and other institutions uses the information to know whether
their loans are going to be repaid )
- Taxation or other authorities ( determining whether the company recorded
their financial information in line with the regulation in order to prevent
customers from fraud )
- Employees ( secure their future )

Financial analysis can be seen in following approaches:

- First approach is financial analysis of an investment standpoint. Analysis
can be identified through investment evaluation and the accounting divisions
are using tools to reflect capital expenditures or financing options. This
approach is to quantify the returns on investments and also to create an
overview of suitable financing options.
- Secondly, is the financial analysis is beneficial to the management who are
directly involved in decision making process. It is continuing process of
monitoring the current process within the company. Financial analyst has to
be able to identify the key operations within the company and apply suitable
measures that will have a positive influence on certain indicators.

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 - Lastly, the demands of the management. The analysts has to provide
answers to the specific questions which were raised by the management.

Financial statements are not regular recordings, it is very important to

understand the analysis and choose right indicators and techniques to define the
rational connections. Correctly chosen analysis would explain a lot and approach
deeper understandings where the real valuable information comes from.
The three main sources of data for financial analysis are a company's balance
sheet, income statement, and cash flow statement.

3.1.1 The Balance Sheet

The balance sheet is prepared as of a specific date, records the categories and
amounts of assets employed by the business ( resources committed) and the offsetting
liabilities incurred to lenders and owners (funds obtained). Recorded value of the total
assets invested in the business at any point in time must be matched precisely by the
recorded liabilities and owners’ equity supporting these assets. On the other hand it
must be balance all the time. (Erich Helfert, 2001, p37)
The balance sheet is a snapshot, representing the state of a company's finances
(what it owns and owes) as of the date of publication.
Fundamental analysts use balance sheets, in conjunction with other financial
statements, to calculate financial ratios.
3 major sections:
 Assets - resources of the business enterprise
The balance sheet can have the following type of assets on its record: cash, accounts
receivable, inventory, investments, buildings and land. Based on the availability at
which they can be turned into cash they are put into current and non-current assets
(McCrary, 2010).
 Liabilities - obligations of the business enterprise
The balance sheet can have the following type of liabilities on its record: bank loans,
payable accounts and lease capital. Liabilities represent the money which are to be
paid back to the source in the short or long term future.
 Equity - ownership interest of the business enterprise

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The balance sheet can have the following type of equities on its record: invested
capital and retained earnings

Formula Used for a Balance Sheet:

The balance sheet adheres to the following accounting equation, where assets on
one side, and liabilities plus shareholders' equity on the other, balance out:

𝐴𝑠𝑠𝑒𝑡𝑠 = 𝐸𝑞𝑢𝑖𝑡𝑦 + 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡y

(Investopedia.com, 2020)

Picture 1: Balance sheet

Source: (Gitman, 2015, p13)

An important distinction is made between short term and long term assets and
liabilities. The current assets and current liabilities are short term assets and short term
liabilities. This means they are expected to be into cash ( current assets ) or paid (
current liabilities ) within 1 year or less than this. All other assets and liabilities, along
with stockholders equity, which is assumed to have an infinite life are considered long
term or fixed, because they are expected to remain on the company’s books for more
than 1 year. ( Gitman, p45)

3.1.2 The Income Statement

The income statement reflects the effect of management’s operating decisions

on business performance and the resulting accounting profit or loss for the owners of
the business over a specified period of time. The income statement represents the best

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effort of the firm’s accountants to match the relevant items of revenue with the
relevant items of cost and expense for the period, a process which involves accrual
accounting and extensive use of allocation of prior and future revenues and costs. The
profit or loss calculated in the statement increases or decreases owners’ equity on the
balance sheet.
Thus, the income statement is a necessary adjunct to the balance sheet in
explaining this major component of change in owners’ equity, and it provides a
variety of performance assessment information. The income statement, also referred
to as the operating statement, earnings statement, or profit and loss statement, displays
the revenues recognized for a specific period, and the costs and expenses charged
against these revenues, including write-offs (e.g., depreciation and amortization of
various assets) and taxes. (Erich Helfert, 2001, p39-42)

To better understanding of income statement, the simplified scheme below is

provided:

+ Sales or revenues
− Cost of goods sold (cost of sales)
= Gross profit
− Operating expenses (selling, administrative, depreciation)
= Operating profit
− Other expenses / + other revenues
= Earnings before interest and taxes (EBIT)
− Interest expense
= Earnings before taxes (EBT)
− Taxes

3.1.3 The Cash Flows Statement

The statement that captures both the current operating results and the
accompanying changes in the balance sheet is the cash flow statement, statement of
cash flows, or funds flow statement. It gives us a dynamic picture of the ultimate

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changes in cash resulting from the combined decisions made during a given period.
(Erich Helfert, 2001, p44)

The cash flows statement includes of three sections:

1. CF from Operating Activities consists of sources and uses of cash that are
from the normal firm’s operations ( working capital ).
2. CF from Investing Activities consists of increases and decreases in
noncurrent and fixed assets and other firms’ equity ( subsidiaries or joint ventures of
the parent firm).
2. CF from Financing Activities occurs when cash inflows are created by
increasing notes payable and long-term liability and equity accounts ( stock issues and
bonds). (Reilly, 2012, p263).

3.2 Methods of Financial Analysis

In order to understand deeply about a company’s performance, many tools and

indicators are being used to analyse. There are several types of financial analysis
commonly used in corporate practice. In order to read deeply about a company’s
performance, various tools and indicators are applied such as absolute indicators, flow
indicators, state indicators, ratio indicators within horizontal, vertical and other
indicators involving more calculations. For my financial analysis for the chosen
company, I chose the most common indicators used in financial analysis (absolute
indicators and ratio indicators).

3.2.1 Absolute indicators

This subchapter summarizes analysis of absolute indicators. For better

understating it is necessary to recognize the difference between state and flow
indicators. State indicators basically demonstrate a value of account in a specific point
of time. State indicators are found in balance sheet. Typical examples are assets or
liabilities. On contrary, flow indicators illustrate current change of account during a
specific time period. This information is available in income statement and cash flow
statement for instance revenues and expenses. This analysis performs with values of

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items in its absolute form. Horizontal and vertical analyses are key instruments
(RŮČKOVÁ, 2015).

3.2.1.1 Horizontal analysis

Horizontal analysis is the restatement of financial statements with a fixed

number as a common denominator or reference, allowing us to identify trends and
major differences. , in which we use the accounts in a given period as the benchmark
or a base period and restate every account in subsequent period as a percentage of the
base period’s same account. This ratio shows the ratio of assets, liabilities, expenses
to total assets, liabilities, income.
The findings of horizontal analysis provide valuable data for the managers’
subsequent planning and development of business policies to improve corporate
performance. ( Wells, 2007, p389).
Horizontal analysis is a time series analysis and is useful for identifying trends
and growth in accounts over time. Whereas each account in a vertical analysis is
restated each year as a proportion of the reference account, each account in a
horizontal analysis is instead compared with the value of that same account in a
benchmark year.
Horizontal analysis ( trend analysis ) can be presented as either in absolute value
change or in percentage change. For the base year ( also can be calculated by monthly
or quarterly ) numbers are presented as 100%. Calculated by following formula:

Percentage changes= (Current year / Base year)*100

Absolute changes= Current year – Base year

3.2.1.2 Vertical analysis

In vertical analysis, we compare the accounts in a given period to a benchmark

item in that same year. According to the definition provided by Wells, vertical
analysis is “a technique for analyzing the relationships between the items on an
income statement, balance sheet, or statement of cash flows by expressing
components as percentages.” In contrast to horizontal analysis aimed at revealing

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dynamics, vertical analysis focuses on the static perspective, investigating the
structure of particular groups of financial statement items. ( Wells, 2007, p390). This
is why another common name for designating vertical analysis is structural analysis.
At the same time, vertical analysis can be combined with horizontal analysis, in which
case the analyst investigates how the structure of particular items has changed on a
particular time interval. Vertical analysis focuses more on the internal structure
analysis of various items in the report. It just does a vertical analysis of the current
income statement or balance sheet.
Calculated by following formula:

Percentage changes= ( Individual Account / Base account)*100

3.2.2 Ratio indicators

Financial ratios have been used by many investors, managers, and shareholders
to calculate the profitability and financial conditions of a firm. Other parties that use
financial ratios analysis include the customers, suppliers, competitors, and academics.
Ratio analysis is a method of calculating and interpreting financial ratios to
analyze and monitor how the firm is performing. The basic sources of financial ratios
are the company’s income statement and balance sheet. (Gitman, 2015, p49).
Ratio analysis is of interest to shareholders, creditors, and the firms current and
future level of risk and return. Firstly, they interested into company short term
liquidity and companys ability to make interest and principal payments. Second,
companys profitibality in case compamys financially healthy.
Financial ratios are very useful to compare and analyse firm’s financial status.
Understanding how to calculate and interpret ratios will help company’s managers
and investor make better decision and have a better overview of company’s
productivity over some time.
There are so many tools for doing performance assessment, we must remember
that different techniques address measurement in very specific and often narrowly
defined ways. One can be tempted to “run all the numbers,” particularly given the
speed and ease of computer spreadsheets. Yet normally, only a few selected

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relationships will yield information the analyst really needs for useful insights and
decision support.(Erich Helfert, 2001, p122)

Picture 2: Performance measures by area viewpoint

Source: (Erich Helfert, 2001, p98)

Therefore I will use for the thesis some common indicators such as profitability
ratios, liquidity ratios, activity ratios and stability ratios.

3.2.2.1 Profitability ratios

There are many measures of profitability. As a group, these measures enable the
analyst to evaluate the firm’s profits with respect to a given level of sales, a certain
level of assets, or the owners’ investment. Without profits, a firm could not attract
outside capital. Owners, creditors, and management pay close attention to boosting
profits because of the great importance placed on earnings in the marketplace.
Here the issue is the effectiveness with which management has employed both
the total assets and the net assets as recorded on the balance sheet. This is judged by

15
relating net profit, defined in a variety of ways, to the resources utilized in generating
the profit, for the company as a whole or for any of its parts. The relationship is used
quite commonly, although the nature and timing of the stated values on the balance
sheet and the accounting aspects of recorded profit will again tend to distort the
results. As we’ll see later, the approach can be refined to reflect the cash flow
concepts underlying shareholder value creation. ( Erich Helfert, 2001, p112)

Return on assets (ROA)

Return on assets (ROA) is an indicator of how profitable a company is relative
to its total assets. ROA gives a manager, investor, or analyst an idea as to how
efficient a company's management is at using its assets to generate earnings. Return
on assets is displayed as a percentage.

ROA = EBIT / Total assets

ROA uses EBIT instead of net income because EBIT includes external expenses
(taxes, interest), therefore we can get more correct information of efficiency of the
company as a whole.
Recommended value: ROA > 0

Return on equity (ROE)

Return on equity (ROE) is a measure of financial performance calculated by
dividing net income by shareholders´equity. Because shareholders' equity is equal to a
company’s assets minus its debt, ROE is considered the return on net assets. ROE is
considered a measure of how effectively management is using a company’s assets to
create profits.

ROE = Net income / Equity

ROE uses net income instead of EBIT because we care about the final profit,
what we really earn after expenses.
Recommended value: ROE > 0

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3.2.2.2 Liquidity ratios

One way to test the degree of protection afforded lenders focuses on the
shortterm credit extended to a business for funding its operations. It involves the
liquid assets of a business, that is, those current assets that can readily be converted
into cash, on the assumption that they form a cushion against default. ( Erich Helfert,
2001, p126).
The liquidity ratio is an important financial indicator to determine the debtor's
ability to repay the current debt without increasing external capital. Analyze current
liabilities against current assets to assess the coverage of short term liabilities in an
emergency.
Current ratio
The ratio most commonly used to appraise the debt exposure represented on the
balance sheet is the current ratio. This relationship of current assets to current
liabilities is an attempt to show the safety of current debt holders’ claims in case of
default. . ( Erich Helfert, 2001, p127)

Current ratio = Current assets / Current liabilities

A ratio under 1 indicates that the company’s debts due in a year or less are
greater than its assets. However, while a high ratio, say over 3, it may indicate that it's
not using its current assets efficiently, is not securing financing very well, or is not
managing its working capital.
Recommended value: CuR ≥ 1.5

Quick ratio ( acid test )

The quick ratio (acid test) is similar to the current ratio. But comparing with the
current ratio, which was mentioned before, looks only at the most liquid assets. Quick
ratio does not include accounts such as inventories and prepaid expenses ( the least
liduid asstes) because this ratio measures the ability of the firm to pay its short-term
liabilities with only that assets, which can be quickly converted into cash.

Quick ratio = (Current assets – Inventory) / Current liabilities

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 A company that has a quick ratio of less than 1 may not be able to fully pay off
its current liabilities in the short term, while a company having a quick ratio higher
than 1 can instantly get rid of its current liabilities. A result of 1 indicates that the
company is fully equipped with exactly enough assets to be instantly liquidated to pay
off its current liabilities. When a quick ratio and current ratio are too high is that
company is leaving too much cash instead of investing it to increase profits.
Recommended value: QR ≥ 1

Cash ratio
The cash ratio is stricter than other liquidity ratios ( current ratio and acid test )
because only cash can pay current debt obligations. The cash ratio indicates whether
the company is able to pay off its current liabilities with only cash and cash
equivalents. All assets are described as cash equivalents and it can be quickly and
easily converted into cash with minimal level of risk. (accounts, money market
instrumentals and treasury bills). (Corporate Finance Institute, 2017, p25)

Cash ratio = Cash / Current liabilities

If a company's cash ratio is less than 1, there are more current liabilities than
cash and cash equivalents. A cash ratio lower than 1 does sometimes indicate that a
company is at risk of having financial difficulty. However, a low cash ratio may also
be an indicator of a company's specific strategy that calls for maintaining low cash
reserves. If a company's cash ratio is greater than 1, the company has the ability to
cover all short-term debt and still have cash remaining. High cash ratios may indicate
that a company is inefficient in the utilization of cash or not maximizing the potential
benefit of low-cost loans.
Recommended value: 0.5< CR < 1.0
Higher cash ratio indicates a company can easily pay off its debt obligations.
But having very high cash ratio presents that company keeps unneceraly too much
cash instead of reinvesting for future profts which is same with other liquidity ratios.
Corporate Finance Institute, 2017, p24)

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3.2.2.3 Activity ratios

The activity ratios measure the speed measurements with which various
accounts are converted into sales or cash (inflows or outflows). With regard to current
accounts liquidity are generally inadequate because differences in the composition of
companys current assets and current liabilities can affect liquidity. These ratios
evaluate how efficient can be a company and operates along a number of dimensions (
inventory management, disbursements, and collections). A number of ratios are
available for measuring the activity of important current accounts ( inventory,
accounts receivable, and accounts payable). (Gitman, 2015, p55).

Total assets turnover

Assets turnover ratio is an indicator that reflectsthe efficiency of enterprise
assets utilization. This index is used for subsequent analysis of the efficiency of firm’s
own assets management. Further, the indicator is also used to understand whether the
assets in the firm are sufficient in relation to current or forecasted sales volumes
(Belbin, 2013, p. 187).

Total assets turnover = Net sales / Average total assets

Where:
Average total assets=(Beginning assets + Ending ending assets)/2
The asset turnover ratio is calculated in every year. When the asset turnover
ratio is high or higher means a company is performing very well.

Inventory turnover ratio

The inventory ratio indicates how the company effectively managed its
inventories. The ratio reflects the speed with which the company moves its inventory
from raw materials through production into finished goods and to the customer as a
completed sales. It calculates how many times inventory is turned or sold during a
specific period by using cost of goods sold with average inventory for a selected
period. (Gitman, 2015, p50)

Inventory turnover = Cost of goods sold / Average Inventory

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 Inventory turnover ratio is important to have higher values. In this case higher
indicator shows the company does not overspend by purchasing too much inventory
and wastes its resources to save inventory which cannot be sold. Generally it presents
the company can effectively sell the inventory which it purchased.

Fixed assets turnover ratio

It measures a compamy’s return on investment in business, plant and equipment
by comparing revenues to fixed assets. The result will give us information about how
many times fixed assets can turnover during one year. Fixed assets turnover ratio will
explain how effectively and efficiently a business is using its fixed assets to generate
profit.

Fixed assets turnover ratio = Revenues / Fixed assets

3.2.2.4 Stability ratios ( Leverage ratio)

From the lender’s viewpoint, however, when earnings do not exceed or even fall
short of the interest cost, fixed interest and principal commitments must still be met.
The owners must fulfill these claims, which might severely affect the value of
owners’ equity. The positive and negative effects of leverage increase with the
proportion of debt in a business. With higher leverage, the risk exposure of the
providers of debt grows, as does the risk exposure of the owners. From the lender’s
point of view, a variety of ratios that deal with total debt, or long-term debt only, in
relation to various parts of the balance sheet, are more inclusive measures of risk than
leverage alone. These ratios measure the risk exposure of the lenders in relation to the
available asset values against which all claims are held. . ( Erich Helfert, 2001, p153.)

Debt to equity ratio

Debt to Equity Ratio indicates the relative uses of debt and equity as sources of
capital to finance the firm's assets. The Debt to Equity Ratio is calculated as follows:

Debt to equity ratio = Total liabilities / Total equity

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 It is a measure of the degree to which a company is financing its operations
through debt versus wholly-owned funds. More specifically, it reflects the ability of
shareholder equity to cover all outstanding debts in the event of a business downturn.
Recommended value: 1 < DER < 1.5

Interest coverage ratio

The Interest Coverage Ratio also known as the Times-Interest-Earned Ratio
(TIE Ratio) indicates the firm's ability to satisfy interest obligations on its debt.

Interest coverage = EBIT / Interest expense

If a company has a low-interest coverage ratio, a low-interest coverage ratio

means there is a low amount of profits available to meet the interest expense on the
debt. Also, if the company has variable-rate debt, the interest expense will rise in a
rising interest rate environment. A high ratio indicates there are enough profits
available to service the debt, but it may also mean the company is not using its debt
properly. For example, if a company is not borrowing enough, it may not be investing
in new products and technologies to stay ahead of the competition in the long-term.
Recommended value: ICR > 1.5

21
4 Practical Part

Samsung Electronics Co., Ltd

In today’s world of digitalism, there are companies drifted towards the digital
technology. The Samsung Electronics Co., Ltd is one of the top famous company in
electronic industry. The company has made his position in the market by themselves
and now days recognised as the most innovative and good quality brand in the era of
electronic industry. The Samsung Electronics Co., Ltd was established in 1969 in
Taegu, Korea. Under the support of proctionist government policy, Samsung
transformed itself to the second largest electronics company in the world and the
largest South Korean company followed by Hyundai motors ( 2020 revenue almost
doubled the Huyndai motors). The company has started business with the
manufacturing of black and white televisions. The Samsung Electronics Co., Ltd is a
company that is very technology oriented and it continuously improves its technology
infrastructure and acquisition. The company uses the most advanced technologies
available to come up with new and innovative offerings for customers to attract them
away from its competitors such as Apple and Lenovo.The company follows the policy
of “we will devote out human resources and technologies to create superior products
and services thereby contributing a better global society”.

Nowadays numerous difficulties are facing Samsung Electronics Co., Ltd and
these include very strict competition from its main rivals. When it comes to most of
its main products such as its smartphones, and various other electronics. The main
threat of competition comes from its smartphone segment and this is because of the
rise of many other smartphone manufacturers that threaten the company for market
share. This is a challenge that can result in the company suffering from a significant
detriment if it is not addressed properly. Besides that, its competitors like Apple,
Huawei and Lenovo are engaged in a great degree of diversification, and this poses a
challenge to Samsung. . In contrast to the pace of innovation of Apple, Samsung is
still slightly left behind as its diversification pace is much lower and thus it usually
finds itself struggling to compete with Apple in certain areas.

22
 In addition to that, Covid 19 is also a significant challenge which has resulted in
the company experiencing numerous difficulties and loss of growth as well. The rise
of this pandemic has resulted in significant problems being encountered by the
company in a variety of areas such as its manufacturing processes, its supply chain
activities as well as the marketing of its products. In addition to that, this pandemic
has resulted in consumers being unwilling to spend unnecessarily on consumer
electronics in such troubling times. Many countries are in recession across the world
and this means that consumers have a lower purchasing power and thus will not be
very willing to spend money on purchasing expensive items such as smartphones and
other consumer electronics like those affected by Samsung. Therefore, it is likely that
Samsung will experience the challenge of loss of sales volume and also decreasing
profitability.

Important historical timelines:

1938 - Samsung ("three starts" in Korean) is founded with 30,000 Won by Lee
Byung-chul as a trading company in Su-dong, near Daegu, Korea.

1947 - As the company begins to grow, Lee establishes Samsung's office in

Seoul. A sugar refinery would be started soon and would succeed in a very short span
of time.

1951 - Samsung Moolsan is established (later Samsung Corporation).

1969 - Samsung-Sanyo Electronics is established. The partnership would lead to

the production of inexpensive TVs, microwave ovens and other consumer products
for Western companies such as Sears and General Electric.

1972 - Samsung completes a table calculator factory and a TV factory.

1973 - Samsung announced its second "five-year management plan", which set
goals for these business areas and allowed Samsung to enter the shipbuilding industry.

1981 - Samsung's partnership program is organized.

1982 - Samsung opens sales subsidiary in Germany and builds a television

assembly plant in Portugal.

1983 - Samsung begins the production of personal computers.

1985 - Samsung builds a television assembly plant in Tokyo.

1986 – Samsung established Samsung Economic Research Institute (SERI).

23
 1989 - Samsung Welfare Foundation was established.

1990 - Samsung Electronics developed the world's third 16M DRAM.

1996 - Samsung Group became the fifth largest group in the world, including
multiple subsidiaries and several other legal entities.

2006 - the Samsung Group became the 35th largest economy in the world.

2010 - Samsung’s smartphones adopted the Android operating system.

2012 - Samsung became the first cooperative OEM manufacturer of Microsoft

Windows Phone 8

2013 - Samsung announced that they had made breakthrough progress in the
research and development of 5G mobile communication technology

2016 - South Korean media reported that in order to improve business

conditions, Samsung Electronics is expected to reduce R&D investment, along with
large-scale layoffs. This is the first time Samsung Electronics has made the above
decision in 18 years. Samsung has been generous in research and development
expenses.

2018 - Samsung has closed its factory in Tianjin ( China ) also due to fierce
competition and declining market share, and chose to move to a place with lower cost.
The largest mobile phone factory under the brand was built in Noida, India.

2019 - Samsung Electronics stopped producing mobile phone products in China

because of increasing competition from domestic competitors.

In this bachelor thesis, there are financial analysis of Samsung Electronics Co.,
Ltd in relation to the last eleven years summary based on the audited financial
statements of from 31st of December 2009 until 31st of December 2020.

24
4.1 Horizontal analysis

As mentioned in the theoretical part, horizontal analysis can be represented in

two ways: absolute values and percentages. The analysis is conducted through the
data taken from the balance sheet.

4.1.1 Horizontal analysis of assets

In the following tables, absolute and percentage indicators of assets are

presented. Year 2010 used as base year.

Table 1: Horizontal analysis of assets (percentage changes)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Total
15.9% 45.2% 74.2% 88.0% 83.8% 94.1% 129.1% 164.9% 156.5% 175.2%
Assets
Current
16.4% 53.0% 97.1% 105.4% 107.2% 129.0% 144.1% 198.2% 188.6% 215.4%
Assets
Non
current 15.4% 38.6% 54.9% 73.3% 64.2% 64.7% 116.5% 136.8% 129.5% 141.3%
Assets

Source: Own calculations based on audited financial statements of Samsung Electronics Co., Ltd
(annual reports from 2010 till 2020)

Table 2: Horizontal analysis of assets ( absolute change in million US dollars )

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Total Assets 18506 52613 86418 102449 97633 109606 150344 192009 182229 203976
Current Assets 8757 28235 51715 56141 57088 68699 76708 105545 100416 114673
Noncurrent Assets 9749 24378 34703 46308 40545 40907 73636 86464 81813 89302

Source: Own calculations based on audited financial statements of Samsung Electronics Co., Ltd
(annual reports from 2010 till 2020)

As we see in calculated datas, total assets are rapidly growing through the last
10 years. Because of increase in currents assets and noncurrent assets increases.

25
 From 2010 until 2014, increased dramatically with avarege change of 55.82% or
64996.5 million US dollars in total assets. Total assets in 2010 ( 116439 millions of
USD ) was doubled in 2014 ( 218888 millions of USD).

Unfortunately in 2015, total assets decreased by 4.2% or 4816 million US

dollars from last year ( 2014 ). Main reason was decrease of non current assets in
Available for sale financial assets by 4668 million USD, long term prepaid expenses
by 818 million USD and other noncurrent assets from previous year.

And in 2019 total assets decreased by 8.4% or 9780 million US dollars from last
year ( 2018 ). Decrease in both current and noncurrent assets. Main reason was
decrease in cash by 4801 million USD, in inventories 3670 million USD and in
property plant equipment by 3396 million USD.

4.1.2 Horizontal analysis of Equity and Liabilities

In the following tables, absolute and percentage indicators of Equity and

Liabilties are presented. Year 2010 used as base year.

Table 3: Horizontal analysis Equity and Liabilities ( percentage changes )

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Total
13.9% 46.4% 83.5% 106.1% 99.9% 114.7% 144.8% 190.7% 187.4% 206.7%
Equity
Total
19.7% 42.8% 55.8% 51.9% 43.2% 53.1% 97.9% 113.7% 94.9% 122.3%
Liabilities
Total
Equity
15.9% 45.2% 74.2% 87.9% 83.8% 94.1% 129.1% 164.9% 156.5% 175.2%
and
Liabilities

Source: Own calculations based on audited financial statements of Samsung Electronics Co., Ltd
(annual reports from 2010 till 2020)

Table 4: Horizontal analysis Equity and Liabilities (absolute change in million US dollars)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Total Equity 10835 35944 64682 82201 76911 88899 112162 147715 145221 160164

Total
7670 16670 21736 20248 16828 20707 38182 44295 37008 47685
Liabilities

26
Total Equity
and 18506 52613 86418 102449 97633 109606 150344 192009 182229 203976
Liabilities

Source: Own calculations based on audited financial statements of Samsung Electronics Co., Ltd
(annual reports from 2010 till 2020)

As we see in calculated datas, Total Equity and Liabilities are increasing

through the last 10 years. Morever rapid increases in total equity.

Unfortunately in 2015, total Equity and Liabilities decreased by 4.2% or 4816

million US dollars from last year ( 2014 ). Main reason was decrease of non current
liabilities by 4335. million USD from previous year.

And in 2019 total Equity and Liabilities decreased by 8.4% or 9780 million US
dollars from last year ( 2018 ). Main reason was decrease in current liabilities by 8757
million USD.

4.1.3 Horizontal analysis of Income Statement

In the following tables, absolute and percentage indicators of profits and losses
are presented. Year 2010 used as base year.

Table 5: Horizontal analysis of Income statement ( percentage changes )

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Gross 0.45% 52.35 88.99% 62.25 49.31 54.18 113.70 121.87 56.39 71.41
profit % % % % % % % %
Cost of 7.87% 31.17 44.74% 35.18 21.08 15.04 26.80% 33.49% 40.15 35.78
Sales % % % % % %
Net - 57.03 103.69 56.75 18.84 38.21 163.08 184.30 31.57 57.79
Income 16.00 % % % % % % % % %
%

Source: Own calculations based on audited financial statements of Samsung Electronics Co., Ltd
(annual reports from 2010 till 2020)

Table 6: Horizontal analysis of Income statement (absolute change in million US dollars)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

27
Gross profit 205 23884 40602 28400 22499 24719 51878 55607 25729 32580

Cost of Sales 7093 28099 40335 31711 19005 13557 24162 30190 36190 32255

Net Income -2269 8085 14701 8046 2671 5417 23121 26129 4475 8194

Source: Own calculations based on audited financial statements of Samsung Electronics Co., Ltd
(annual reports from 2010 till 2020)

In 2011, Net income decreased by 16% from previous year ( 2010 ) or by 2269
million USD but cost of sales increased by 7.87% or 13557 million USD which
caused 0.45% or 205 million USD in Gross profit. In Income statement, non
significant diffrence between 2010 and 2011. Except cost of sales is increased by
7092 million USD but net income decreased by 2269 million USD.

In 2012 and 2013, we can see increares in all 3 indicators. Specially in Net
income significantly increased. Than in 2014 and 2015, slow decreases in all 3
indicators from previous years. From 2016 until 2018, there were slow increases in all
3 indicators.

Unfortunaly, in 2019 and 2020 significantly high cost of sales and very low
increase in Net income.

4.2 Vertical analysis

Vertical analysis is a method of analyzing financial statements that list each line
item as a percentage of a base figure within the statement within single selected
period. The first line of the statement always shows the base figure at 100%, with
each following line item representing a percentage of the whole. In following
outcome will be using annual reports from 2010 until 2020.

28
4.2.1 Vertical analysis of Assets

By unifying the data of Samsung Electronics Co., Ltd from its balance sheet for the
past 11 years, I can get some useful data from it. Base data is chosen as Total Assets.
In following table 7, Vertical analysis of Assets reprensented in percentages.

Table 7: Vertical analysis of Assets (percentage)

2010 2011 2012 2013 2014 2015

Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Current Assets 45.72% 45.94% 48.20% 51.74% 49.97% 51.54%
Cash and cash equivalents 7.29% 9.44% 10.38% 7.61% 7.31% 9.35%
Short-term financial instruments 8.59% 7.41% 9.61% 17.15% 18.09% 18.26%
Available-for-sale financial
assets 0.86% 0.42% 0.70% 0.70% 1.43% 1.91%
Trade and other receivables 15.87% 15.52% 14.73% 13.02% 10.72% 10.39%
Advances 0.97% 0.92% 0.92% 0.90% 0.86% 0.70%
Prepaid expenses 1.64% 1.50% 1.25% 1.16% 1.45% 1.31%
Inventories 9.95% 10.10% 9.80% 8.94% 7.52% 7.77%
Other current assets 0.56% 0.64% 0.08% 1.00% 0.78% 0.43%

Noncurrent Assets 54.28% 54.06% 51.80% 48.26% 50.03% 48.46%

Available-for-sale financial
assets 2.26% 2.07% 2.89% 2.91% 5.50% 3.44%
Associates and joint ventures 6.21% 5.91% 4.85% 3.00% 2.27% 2.18%
Property, plant and equipment 39.44% 39.87% 37.82% 35.27% 35.10% 35.71%
Intangible assets 2.07% 2.16% 1.85% 1.86% 2.08% 2.23%
Deposits 0.49% 0.51% 0.44% 0.00% 0.00% 0.00%
Long-term prepaid expenses 2.64% 2.22% 1.91% 1.62% 2.11% 1.77%
Deferred income tax assets 0.84% 1.04% 0.98% 2.16% 1.96% 2.31%
Other non-current assets 0.33% 0.28% 0.24% 1.44% 1.01% 0.83%

Source: Own calculations based on audited financial statements of Samsung Electronics Co., Ltd
(annual reports from 2010 till 2015 )

29
 2016 2017 2018 2019 2020
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00%
Current Assets 53.94% 48.71% 51.48% 51.45% 52.41%
Cash and cash equivalents 12.25% 10.12% 8.94% 7.63% 7.77%
Short-term financial 20.00% 16.39% 19.42% 21.63% 24.44%
instruments
Available-for-sale financial 1.39% 1.06% - - -
assets
Trade and other receivables 9.26% 9.18% 9.98% 9.96% 8.19%
Advances 0.55% 0.58% 0.40% 0.00% 0.00%
Prepaid expenses 1.34% 1.27% 1.22% 0.68% 0.60%
Inventories 7.00% 8.28% 8.54% 7.59% 8.47%
Other current assets 0.50% 0.47% 0.69% 1.17% 0.99%

Noncurrent Assets 46.06% 51.29% 48.52% 48.55% 47.59%

Available-for-sale financial 2.60% 2.57% - 2.53% 3.32%
assets
Associates and joint ventures 2.23% 2.25% 2.16% 2.15% 2.14%
Property, plant and equipment 34.89% 37.01% 34.01% 33.99% 34.09%
Intangible assets 2.04% 4.89% 4.39% 5.87% 4.88%
Deposits 0.00% 0.00% 0.00% 0.00% 0.00%
Long-term prepaid expenses 1.46% 1.14% 1.48% - -
Deferred income tax assets 2.03% 1.68% 1.61% 1.28% 1.13%
Other non-current assets 0.60% 1.44% 2.26% 2.27% 1.35%

Source: Own calculations based on audited financial statements of Samsung Electronics Co., Ltd
(annual reports from 2016 till 2020 )

Based on the calclutions of past 11 years, proportion of current asset in total

assets is increasing that means noncurrent assets were dicreasing. Main factors were
Short-term financial instruments, Cash and cash equivalents, and Property, plant and
equipment.

In 2010, proprotion of Short-term financial instruments was 8.59% from that

period it grew continiously. In 2020, Short-term financial instruments proportion in
total assets hit 24.44% of it and its almost quarter of the total assets.

30
 From 2010 until 2012, , Cash and cash equivalents were increasing. But in
2013, it dropped by 2.77%. From that time proportion were increasing until 2016 and
again started decreasing until current period.

Property, plant and equipment proportion were stable through the years filling
80% ( average) of noncurrent assets and 36% ( average ) of total assets.

4.2.2 Vertical analysis of Equity and Liabilities

Vertical analysis is a method of analyzing financial statements that list each line
item as a percentage of a base figure within the statement. The first line of the
statement always shows the base figure at 100%, with each following line item
representing a percentage of the whole.

By unifying the data of Samsung Electronics Co., Ltd from its balance sheet for
the past 11 years, I can get some useful data from it. Base data is chosen as Total
Liabilities &Equity. In following table 8, Vertical analysis of Total Liabilities
&Equity reprensented in percentages.

31
Table 8: Vertical analysis of Equity and Liabilities (percentage)

2010 2011 2012 2013 2014 2015

Total Liabilities &Equity 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Total Liabilities 33.46% 34.56% 32.91% 29.92% 27.05% 26.06%
Non-current liabilities 3.71% 6.08% 6.99% 5.95% 4.48% 23.51%
Debentures 0.44% 0.82% 1.01% 0.61% 0.59% 0.51%
Long-term borrowings 0.47% 2.37% 2.00% 0.46% 0.04% 0.11%
liabilities
Long-term other payables 0.80% 0.66% 0.64% 0.49% 1.11% 1.26%
Retirement benefit 0.45% 0.27% 0.96% - - -
obligation
Deferred income tax 1.23% 1.50% 1.89% 2.81% 1.78% 2.13%
liabilities
Provisions 0.22% 0.23% 0.23% 2.81% 0.22% 0.22%
Other non-current liabilities 0.12% 0.23% 0.26% 0.50% 0.65% 0.84%

Current Liabilities 29.75% 28.48% 25.92% 23.97% 22.57% 2.55%

Trade payables 11.95% 11.89% 9.33% 8.24% 3.43% 4.61%
Short-term borrowings 6.28% 6.20% 4.66% 3.01% 3.48% 3.66%
Advance received 0.66% 0.93% 0.84% 0.80% 0.62% 0.55%
Withholdings 0.78% 1.10% 0.53% 0.55% 0.50% 0.41%
Accrued expenses 5.29% 5.03% 5.24% 5.30% 5.59% 4.80%
Income tax payables 1.53% 0.81% 1.78% 1.58% 0.94% 1.40%
Current portion of long-term 0.84% 0.02% 0.55% 1.13% 0.77% 0.09%
borrowings and debentures
Provisions 2.17% 2.26% 2.79% 3.15% 2.60% 2.65%
Other current liabilities 0.25% 0.23% 0.19% 0.22% 0.14% 0.12%

Total Equity 66.54% 65.44% 67.09% 70.08% 72.95% 72.12%

Preferred stock 0.09% 0.08% 0.07% 0.06% 0.05% 0.05%
Common stock 0.58% 0.50% 0.43% 0.36% 0.34% 0.32%
Share premium 3.28% 2.83% 2.43% 2.06% 1.91% 1.82%
Retained earnings 63.31% 62.68% 66.26% 69.42% 73.57% 76.44%
Other reserve -3.52% -3.37% -4.52% -4.42% -5.52% -7.26%
Non-controlling interest 2.80% 2.73% 2.42% 2.60% 2.56% 2.55%

Source: Own calculations based on audited financial statements of Samsung Electronics Co., Ltd
(annual reports from 2010 till 2015)

32
 2016 2017 2018 2019 2020
Total Liabilities &Equity 100.00% 100.00% 100.00% 100.00% 100.00%
Total Liabilities 26.40% 28.92% 26.99% 25.44% 27.04%
Non-current liabilities 5.53% 6.66% 6.63% 7.35% 7.05%
Debentures 0.02% 0.32% 0.28% 0.28% 0.25%
Long-term borrowings
0.47% 0.60% 0.03% 0.62% 0.53%
liabilities
Long-term other payables 1.27% 0.68% 0.94% 0.62% 0.44%
Retirement benefit obligation - - - - -
Deferred income tax liabilities 2.78% 3.88% 4.47% 4.84% 4.97%
Provisions 0.14% 0.15% 0.20% 0.17% 0.28%
Other non-current liabilities 0.79% 0.90% 0.57% 0.68% 0.46%

Current Liabilities 20.87% 22.26% 20.36% 18.09% 19.99%

Trade payables 2.47% 3.01% 2.50% 2.47% 2.57%
Short-term borrowings 4.86% 5.23% 4.00% 4.08% 4.38%
Advance received 0.52% 0.41% 0.24% 0.30% 0.30%
Withholdings 0.26% 0.26% 0.28% 0.25% 0.26%
Accrued expenses 4.78% 4.64% 5.99% 5.49% 6.43%
Income tax payables 1.08% 2.46% 2.57% 0.39% 1.17%
Current portion of long-term
0.47% 0.09% 0.01% 0.24% 0.19%
borrowings and debentures
Provisions 1.75% 1.42% 1.29% 1.15% 1.15%
Other current liabilities 0.13% 0.13% 0.31% 0.29% 0.30%

Total Equity 73.60% 71.08% 73.01% 74.56% 74.17%

Preferred stock 0.05% 0.04% 0.04% 0.03% 0.03%
Common stock 0.30% 0.26% 0.23% 0.22% 0.21%
Share premium 1.68% 1.46% 1.30% 1.25% 1.16%
Retained earnings 73.65% 71.52% 71.52% 72.21% 71.67%
Other reserve -4.55% -4.61% -2.34% -1.41% -2.30%
Non-controlling interest 2.49% 2.41% 2.26% 2.26% 2.19%

Source: Own calculations based on audited financial statements of Samsung Electronics Co., Ltd
(annual reports from 2016 till 2020)

Based on the calclutions of past eleven years, proportion of Total Liabilities in

Total Liabilities &Equity is increasing by avarage 1.5% therefore Total Equity were
dicreasing by avarage 1.5% . Long-term borrowings liabilities passed over 2% in
2012 and 2013. Proportion average was less than 0.4% was through the years.
Proportion between total equity and total liabilty is average of 7:3 which means total
equity is almost doubled the total liabilties.

33
 Trade payables and short-term borrowings decreased slowly until 2015. From
2016, Trade payables and short-term borrowings kept stable proportion in the total
Liabilities &Equity.

4.2.3 Vertical analysis of Income Statements

By unifying the data of Samsung Electronics Co., Ltd from its of Income
Statements for the past eleven years, I can get some useful data from it. Base data is
chosen as Revenue. In ooofollowing table 9, Vertical analysis of Income Statements
reprensented in percentages.

Table 9: Vertical analysis of Income Statements (percentage)

2010 2011 2012 2013 2014 2015

Revenue 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of Sales 66.40% 67.97% 62.98% 60.21% 62.21% 61.59%
Gross profit 33.60% 32.03% 37.02% 39.79% 37.79% 38.41%

Selling, informational
&administrative 16.97% 16.62% 22.58% 23.70% 25.65% 25.30%
expenses

Operating profit 11.19% 9.85% 14.44% 16.08% 12.14% 13.16%

Other non-operating
1.47% 0.85% 0.77% 0.58% 0.91% 1.56%
income/expenses
Finance income 4.83% 4.49% 3.90% 3.50% 4.01% 5.24%

Finance expense 4.98% 4.78% 3.95% 3.39% 3.54% 5.00%

EBIT 12.50% 10.40% 14.88% 16.78% 13.66% 12.94%

Income Taxes 2.06% 2.08% 3.02% 3.45% 2.17% 3.44%

Net Income 10.44% 8.32% 11.86% 13.33% 11.35% 9.50%

2016 2017 2018 2019 2020

Revenue 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of Sales 59.58% 53.97% 54.31% 63.91% 61.02%
Gross profit 40.42% 46.03% 45.69% 36.09% 38.98%

Selling, informational
&administrative 25.93% 23.64% 21.53% 24.04% 23.79%
expenses

34
 Operating profit 14.49% 22.39% 24.16% 12.05% 15.20%

Other non-operating
0.39% 0.75% 0.36% 0.34% 0.25%
income/expenses
Finance income 5.64% 4.06% 4.10% 4.41% 5.18%

Finance expense 5.30% 3.75% 3.53% 3.59% 4.78%

EBIT 15.21% 23.46% 25.09% 13.21% 15.35%

Income Taxes 3.96% 0.58% 6.90% 3.77% 4.20%

Net Income 11.26% 17.61% 18.19% 9.44% 11.15%

Source: Own calculations based on audited financial statements of Samsung Electronics Co., Ltd
(annual reports from 2010 till 2020).

During analysed period Cost of Sales was steadily fall year by year by 66.40%
beginning share of the revenue until 2018 with 54.31% of the share. In 2019 cost of
sales hit 63.91% rise by 9.6% from last year. In 2020, it decreased by 2.89%.
Consequently, gross profit was increasing over the period mentioned before as Cost of
Sales was decreasing.

Operating expenses are increased drastically. Main factor was Selling,

informational &administrative expenses, which was in 2010 only 16.97% hit in 2020
23.79% of the share. The highest operating profit recorded in 2018 by share of
24.16% and the lowest was in 2011 by share of 9.85%. Therefore EBIT hit the
highest share by 25.09% and Net income by 18.19% in 2018.

4.3 Ratio indicators

4.3.1 Liquidity Ratios

The liquidity of a firm is measured by its ability to satisfy its short-term

obligations as they come due. Liquidity refers to the solvency of the firm’s overall
financial position the ease with which it can pay its bills. Because a common
precursor to financial distress and bankruptcy is low or declining liquidity, these
ratios are viewed as good leading indicators of cash flow problems.

35
 By unifying the data of Samsung Electronics Co., Ltd annual reports for the
past 11 years, I can get some useful data from it. In following table 10, cash ratio,
quick ratio, current ratio will be prensented.

Table 10: Liquidity ratios analysis

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Current ratio 1.54 1.61 1.86 2.16 2.21 2.17 2.59 2.19 2.53 2.84 2.62
Quick ratio 1.20 1.26 1.48 1.79 1.88 1.71 2.25 1.82 2.11 2.42 2.20
Cash ratio 0.25 0.33 0.40 0.32 0.32 0.66 0.59 0.45 0.44 0.42 0.39

Source: Own calculations based on audited financial statements of Samsung Electronics Co., Ltd
(annual reports from 2010 till 2020)

Figure 1: Comparisation of liquidity ratios

2.5

Current ratio
1.5
Quick ratio

Cash ratio

0.5

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

As mentioned before in the theoretical part, current ratio represent capability of

the company to pay its current liabilities by using its current assets. All of the current
ratios are higher than 1.5 means they are financing and managing very well its
working capital in selected period. However, in 2019 current ratio hit 2.84 which is
very close to 3.00.

36
 Also all quick ratios are more than 1.0, which was the lowest in 2010 with 1.2
and the highest was in 2019 with 2.42. Moreover, company is able to pay its current
liabilities.

Every single cash ratios in selected period are more than 0.2 and less than 0.5.
Therefore, company uses their cash efficiently and very well reinvesting through the
years.

4.3.2 Profitability Ratios

By unifying the data of Samsung Electronics Co., Ltd annual reports for the
past 11 years, I can get some useful data from it. In following table 11, ROA, ROE,
Gross profit margin will be prensented.

Table 11: Profitabilty ratios analysis

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
ROA 15% 11% 17% 18% 12% 11% 12% 19% 18% 9% 10%
ROE 18% 13% 20% 20% 14% 11% 12% 20% 18% 8% 9%
Gross profit margin 34% 32% 37% 40% 38% 38% 40% 46% 46% 36% 39%

Source: Own calculations based on audited financial statements of Samsung Electronics Co., Ltd
(annual reports from 2010 till 2020)

Figure 2: Ratio ROA

ROA
20

15

10
ROA

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

37
 Return on assets (ROA) are more than 0 means the company was the highest
profitable in 2017 ( by 0.19%) and the lowest profitable was in 2019 ( by 0.09 % )
relatively to its assets.
Figure 3: Ratio ROE

ROE
25

20

15

ROE
10

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Return on equities (ROE) are more than 0 means the company was the highest
profitable in 2012, 2013,2014 ( by 0.20%) and the lowest profitable was in 2019 ( by
0.08% ) are relatively to its assets.
Figure 4: Ratio Gross profit margin

Gross profit margin

50

40

30

20 Gross profit margin

10

Recommended industrial average for gross profit margin stays between 15%-
20%. In the table 11, the lowest was in 2011 ( 32%) and the highest was in 2017 and
2018 ( 46% ).

38
4.3.3 Activity ratios

By unifying the data of Samsung Electronics Co., Ltd annual reports for the
past 11 years, I can get some useful data from it. In following table 12, Total assets
turnover, Inventory turnover, and Fixed assets turnover will be prensented.

Table 12: Activity ratios analysis

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Total assets turnover 1.17 1.06 1.11 1.07 0.89 0.83 0.77 0.79 0.72 0.66 0.63
Inventory turnover 7.78 7.14 7.14 7.20 7.41 6.56 6.55 5.18 4.57 5.57 4.51
Fixed assets turnover 2.96 2.66 2.94 3.03 2.55 2.32 2.21 2.15 2.11 1.95 1.84

Source: Own calculations based on audited financial statements of Samsung Electronics Co., Ltd
(annual reports from 2010 till 2020)
Figure 5: Ratio Total assets turnover

Total assets turnover

1.4

1.2

0.8

0.6 Total assets

turnover
0.4

0.2

According to data, total assets turnover decreased year by year ( by average 0.9)
. The main reason is total assets are increasing faster than the sales.
Fugure 6: Ratio inventory turnover

39
 Inventory turnover
9
8
7
6
5
4 Inventory turnover
3
2
1
0 2017
2010
2011
2012
2013
2014
2015
2016

2018
2019

The inventory turnover ratio is was in 2010, 7.78 ( the highest ) and in 2020, 2020

4.51 ( the lowest ). For the company when inventory turnover ratio is bigger is better
but in our case ratio is drastically dropped. Therefore we can say company is
purchasing inventories more than needed or keeps unnecessary inventories which can
not sell.
Figure 7: Ratio fixed assets turnover

Fixed assets turnover

3.5

2.5

1.5 Fixed assets

turnover
1

0.5

Fixed turnover ratio decreased year by year. In 2010, the ratio was 2.96 ( can be
returned almost three times in one year). However, turnover in 2020 is still good with
the lowest ratio 1.84 ( difference in 11 years- 1.12 ).

40
4.3.4 Stability ratios analysis

By unifying the data of Samsung Electronics Co., Ltd annual reports for the
past 11 years, I can get some useful data from it. In following table 13, Debt to assets,
Debt to equity, and Interest coverage will be prensented.

Table 13: Stability ratios analysis

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Debt to assets 0.33 0.35 0.33 0.30 0.27 0.26 0.26 0.29 0.27 0.25 0.27
Debt to equity 0.50 0.53 0.49 0.43 0.37 0.36 0.36 0.41 0.37 0.34 0.36
Interest coverage - - - - - - 49.74 81.85 87.29 40.46 61.74

Source: Own calculations based on audited financial statements of Samsung Electronics Co., Ltd
(annual reports from 2010 till 2020)
Figure 8: Ratio debt to assets

debt to assets
0.4
0.35
0.3
0.25
0.2
debt to assets
0.15
0.1
0.05
0

In 2010, Debt to assets ratio described as 0.33 ( the highest in selected period).
And slow fall continued until 2016. In 2017, ratio increased by 0.03 in 2019 increased
by 0.02 in 2018. Overall risk is quite stable with range of 0.1.
Figure 9: Ratio debt to equity

41
 debt to equity
0.6

0.5

0.4

0.3
debt to equity
0.2

0.1

As the debt to equity ratio continues to drop below 1 ( the highest 0.5 in 2010
and the lowest 0.34in 2019 ). When the debt to equity ratio is lower than 1, then that
means its assets are more funded by equity.
Figure 10: Ratio interest coverage

interest coverage
100
90
80
70
60
50
interest coverage
40
30
20
10
0
2016 2017 2018 2019 2020

According to the table 13, company has high ability to cover its interest
expense. In 2016, ratio was 49.74 times. In following years 2017 and 2018, interest
coverage increased to 81.85, 87.79. Generally company performs really well.

42
4.4 Competitors analysis

Top 10 Largest Electronics Companies in the World by Revenue in 2020:

Picture 3: Top 10 Largest Electronics Companies in the World by Revenue in

2020:

Source: Investors.com

Samsung electronics is the world’s second largest electronics technology

company by its revenue, just behind Apple Inc. After looking at the financial
performance individually, the main competitor of the company will be introduced as
well with a general overview.

Therefore, I have chosen Apple Inc. as a competitor company to the financial

analysis to have better overview of the company performance and main
understandings in industrial area.

Apple Inc.

Apple Inc. was founded in 1971 by Steve Jobs and now is the largest electronics
company in the world by its revenue. American multinational corporation that designs
and markets consumer electronics, computer software, and personal computers.

43
 The company's bestknown hardware products include the Macintosh line of
computers, the iPod, the iPhone, the Mac and the iPad and such as consumer software,
macOS, iOS, iPad OS, watch OS, the tv OS operating system, the iTunes multimedia
browser, the Safari web browser, the iLife and iWork creative and productivity
packages. The iPhone is series of smart phones developed and sold by Apple Inc
which uses on the iOS mobile operating system developed by Apple Inc. According to
their last 5 years of financial statement, only the iPhone itself makes approximately
over 60% of share of total revenue.

Apple Inc is considered one of the Big Four technology companies, along with
Microsoft, Google, and Amazon. Apple became the world’s first company to record a
market capitalization of $1 trillion, and subsequently passed the $1.3 trillion threshold
in Dec. 2019 and roughly two years later, became the first publicly traded U.S.
company to surpass $2 trillion. As of March 15, 2021, Apple's market cap increased
to $2.08 trillion.

Apple operates under five major segments, Americas ( includes North America
and South America ), Europe ( includes all the European countries, India, and the
Middle East ), China ( includes Hong Kong, China, and Taiwan ), Japan, and the Rest
of Asia Pacific ( all the Asian countries, Australia, and other regions not represented
under the five segments).

1976 - Apple Computer Inc. was founded by Steve Jobs, Steve Wozniak and
Ron Wayne. The first Apple computer was assembled in the garage of Jobs’ family.

1977 - Apple Computer Inc. was incorporated. In the same year, Apple II
microcomputer was introduced.

1980 - Apple Computer Inc. went public and earned over $100 million.

1983 - Apple produced the world's first personal computer.

1984 - Apple released Macintosh.

2001 - Apple introduced Mac OS X and introduced iPod and iTunes, and iPod
beat SONY's Walkman.

44
 2007 - Apple introduced iPhone.

2008 - Apple introduced iPhone 3G and MacBook Air.

2010 - Apple introduced iPad.

2020 - Apple introduced first iPhones to support 5G.

Horizontal analysis of Apple Inc,.

Horizontal analysis analysis is conducted through the data taken from the
balance sheet. In the following tables, percentage indicators of assets are presented.
Year 2016 used as base year.

Table 14: Horizontal analysis of assets (percentage changes)

In millions of US dollars 2016 2017 2018 2019 2020

Current Assets 100% 119.57% 120.38% 102.09% 123.97%
Cash and cash equivalents 100% 96.99% 99.05% 127.72% 188.49%
Short-term marketable 100%
227.87% 11.47% 74.94% 128.04%
securities
Accounts receivable, net 100% 93.5% 113.46% 129.72% 98.88%
Inventories 100% 90.76% 227.72% 81.48% 103.79%
Vendor non-trade 100%
100.38% 131.41% 145% 88.64%
receivables
Other current assets 100% 54.91% 168.25% 86.73% 102.19%

Noncurrent Assets 100% 103.88% 114.25% 87.72% 61.68%

Long-term marketable 100%
120.2% 125.08% 122.26% 90.49%
securities
Property, plant and 100%
120.41% 104.6% 122.59% 148%
equipment, net
Other non-current assets 100% 106.89% 114.83% 95.02% 74.96%

Source: Own calculations based on audited financial statements of Apple Inc, (annual reports from
2016 till 2020)

According to data we analyzed we can see that in 2017 and 2018, the amount of
cash and cash equivalents decreased. In 2019, short-term and long-term stock prices
fell and the market value fell below $ 800 billion almost close to year 2015. However,

45
in 2016-2020, Apple Inc's liquid assets continued to grow. Apple Inc's total assets
pointed to an increase in 2016-2020 while Apple Inc's total assets tended to decline in
2019-2020 due to factors such as stock declines and industry competition.

Table 15: Horizontal analysis Equity and Liabilities ( percentage changes )

Total Liabilities
100% 110.79% 116.67% 97.44% 92.56%
&Equity
Total Liabilities 100% 113.13% 124.73% 107.17% 95.92%

Non-current liabilities 100% 126.61% 122.74% 101.56% 95.92%

Long-term debt 100% 141.44% 128.88% 96.43% 97.94%

Other non-current 100%
105.27% 110.89% 113.09% 103.25%
liabilities

Current Liabilities 100% 98.01% 127.6% 114.99% 91.19%

Accounts payable 100% 105.08% 131.52% 113.94% 82.73%

Other current liabilities 100% 84.47% 116.87v 129.46% 113.18%

Deferred revenue 100% 90.38% 93.42% 79.04% 92.56%

Commercial paper 100% 95.36% 147.77% 99.89% 49.89%

Short-term debt 100% 140% 185.6% 135.22% 116.8%

Total Equity 100% 107.45% 104.52% 79.93% 84.45%

Common stock 100% 113.99% 114.77% 112.08% 112.37%

Retained earnings 100% 104.42% 102.04% 71.6% 65.2%

Accumulated other 100%
comprehensive 183.77% -23.66% -23.67% 16.91%
income/(loss)

Source: Own calculations based on audited financial statements of Apple Inc, (annual reports from
2016 till 2020)

According to data we analyzed we can see that in that total current liabilities
decreased in 2020 due to a drop in commercial paper and deferred revenue. The total
amount of common stock and shareholders' equity increased continuously during
these five years. Apple Inc's total debt dropped in 2020 due to a decrease in long-term
debt and commercial paper. From 2016 to 2020, Apple Inc's common stock remained
to increase.

46
Vertical analysis of Apple Inc,.

Vertical analysis is a method of analyzing financial statements that list each line
item as a percentage of a base figure within the statement within single selected
period. The first line of the statement always shows the base figure at 100%, with
each following line item representing a percentage of the whole. In following
outcome will be using annual reports from 2016 until 2020.

By unifying the data of Apple, Inc, from its balance sheet for the past 5 years, I can
get some useful data from it. Base data is chosen as Total Assets. In following table
16 , Vertical analysis of Assets reprensented in percentages.

Table 16: Vertical analysis of Assets

In millions of US dollars 2016 2017 2018 2019 2020
Current Assets 30.78% 33.22% 34.28% 35.91% 48.1%
Cash and cash equivalents 7.27% 6.37% 5.41% 7.09% 14.43%
Short-term marketable
7.05% 14.51% 14.36% 11.04% 15.28%
securities
Accounts receivable, net 5.8% 4.9% 4.76% 6.34% 6.77%
Inventories 0.81% 0.66% 1.29% 1.08% 1.21%
Vendor non-trade
4.65% 4.21% 4.74% 7.06% 6.76%
receivables
Other current assets 5.20% 2.57% 3.71% 3.3% 3.65%

Noncurrent Assets 69.22% 66.78% 65.72% 64.09% 51.9%

Long-term marketable
56.51% 52.98% 51.88% 46.7% 31.12%
securities
Property, plant and
7.74% 8.4% 9. % 11.29% 11.04%
equipment, net
Other non-current assets 4.97% 5.4% 4.84% 6.09% 9.74%

Source: Own calculations based on audited financial statements Apple Inc,, (annual reports from 2016
till 2020 )

According to the data, we analyzed we can see that from 2016 to 2020, Apple
Inc's current assets were increasing. The proportion of current assets rose from
30.78% in 2016 to 48.10% in 2020. In particular, the ratio of current assets grew by

47
12.19% between 2019 and 2020. The reason is that Apple Inc's long-term securities
fell 15.58% between 2019 and 2020. Meanwhile, during the years 2016 to 2018,
Apple Inc's total assets increased, while from 2019 to 2020, apple's total assets started
to decrease. Comparization between year 2020 with year 2018, Apple Inc's total
assets dropped by 9.81%. The ratio of net asset value, net plant and equipment value
was stable for last five years.

By unifying the data of Apple Inc, from its of Income Statements for the past
eleven years, I can get some useful data from it. Base data is chosen as Revenue. In
ooofollowing table 17, Vertical analysis of Income Statements reprensented in
percentages..

Table 17: Vertical analysis of Income Statements (percentage)

In millions of US dollars 2016 2017 2018 2019 2020

Revenue 100% 100% 100% 100% 100%

Cost of Sales 59.94% 60.92% 61.53% 61.66% 62.17%

Gross profit 40.06% 39.08% 38.47% 38.34% 37.82%

Selling, informational &administrative

6.13% 6.58% 6.66% 6.29% 7.01%
expenses

Operating profit 30.48% 27.84% 26.76% 26.69% 24.57%

Other non-operating income/expenses 0.55% 0.63% 1.2% 0.75% 0.69%

EBIT 31.03% 28.46% 27.96% 27.45% 25.27%

Income Taxes 8.18% 7.27% 6.87% 5.03% 4.03%

Net Income 22.85% 21.19% 21.09% 22.41% 21.24%

Source: Own calculations based on audited financial statements of Apple Inc, (annual reports from
2016 till 2020).

The gross profit margin continued to decrease from 2016 to 2020. The main
reason was caused by the improvement of the cost structure of new products,
consumers' increasing pursuance of high-quality goods, and the increase of industry
labor costs. Proportion of Research and developments spending was increased from

48
2016 to 2020. Specially in 2019, as other mobile phone companies in the industry
were producing 5G mobilr phones, while Apple Inc, intends to produce in 2020.
During these five years, the percentage of operating revenue decreased, main cause is
increase of spending on operating expenses and advertising. Net revenue proportions
fluctuated from 2016 to 2020,

49
5 Results and Discussion

Overall, Samsung Electronics Co. Ltd. appears to be financially healthy in terms

of horizontal, vertical, and ratio analyses. The company has a stable liquidity ratio but
be in bad shape: it might have a consistantly poor ratio (be insolvent) for 10 years
straight. Alternativel it may be too liquid for long periods of time (suggests minimal
investments and low project pipelin = minimal growth prospects) and ratio analyses
reveal it is capable of repaying short term debts while maintaining a minimal reliance
on debt financing for its operations. Conversely, activity ratios for 2019 reveal
Samsung incurred efficiency losses arising from longer collection periods as debtors
increased repayment time, increasing, in turn, the company’s own repayment time.
Samsung Electronics Co. Ltd. sustained a slow growth period from 2010-2018, over
which profits consistently increased. This trend was reversed in 2019, however, as the
company delivered its worst results in the last ten years. This was largely due to the
changing economic environment and stiffened competition of the electronics industry.

According to the ratio analysis, we can say that the company's debt is in good
condition. The company only finances its assets through its own resources and
shortterm liabilities. Despite the high debt ratio in 2017, which did not pose a danger
due to its short-term nature, the company has achieved positive results in the debt
sector. In terms of liquidity, Samsung achieved high overall liquidity and other
liquidity during the reporting period.

It is assumed theses changes will persist into 2020 with greater economic
instability is expected due to the ongoing pandemic ( Covid-19 ) by affecting the
company's financial performance. As such, it is likely a negative impact on the
company’s performance will be observed by the financial year’s end. Nonetheless, the
financial analysis presented in this thesis demonstrates Samsung Electronic’s Co. Ltd.
is stable and finacially healthy. With strong liquidity and a sound capital structure that
is not overleveraged, the company is well positioned to eventually overcome today’s
financial and economic headwinds.

50
6 Conclusion

The goal of this bachelor thesis was to conduct a financial analysis of Samsung
Electronics Co. Ltd. over the last eleven years. As the author of this thesis, I used
published books and reputable online references for academic purposes. Annual
financial statements are taken from audited reports of the Samsung Electronics Co.
Ltd. Investor relations website for data processing and analysis. Forming the core of
this thesis is the exhustive financial analysis I conducted based on eleven years of
availbable financial data. This document consists of two main sections: a theoretical
and practical one. According to the goal questions asked in the beginning:
- Is Samsung electronics financially healthy?
Yes, depending on Samsung electronics the last 10 years of datadatalyzed under
vertical and horizontal analysis have shown that comthe pany is financially healthy
and stable. Samsung electronics retains a robust liquidity profile, Its debt is mostly a
short-term trade product, with little financial debt on its balance sheet except for
foreign-currency debt. Samsung electronics maintains a similar cash balance
throughout the year with no seasonality. The company is to continue to maintain its
net cash position over the longer term.
- Is Samsung electronics good choice for investment?
Yes, even during the last years analysis have shown negative results company has
strong management and control and company has extremely low chances of
bankruptcy, and it good for investors and creditors as it shows high chances of
earning repayment. Firstly, semiconductor and memory intensity in computing and
consumer electronics products is only likely to rise in the longer term, driven by the
continued migration to cloud computing and 5G smartphones that will drive memory
demand. Moreover, Samsung is seen as a leader in advanced process technologies in
memory products and this could help its margins. The company has been expanding
mass production of 14 nm DRAM and 176-layer V-NAND. Samsung’s next
generation foldable smartphones have also seen a strong response and it’s likely that
they could help to drive growth in the coming years.
- How the current situation will affect/effecting the company?

51
 The effects of COVID-19 are having a significant impact on the technology
sector, affecting raw materials supply, disrupting the electronics value chain, and
causing an inflationary risk on products. Samsung electronics has strong liquidity and
a sound capital structure that is not overleveraged, the company is well-positioned to
eventually overcome today’s financial and economic headwinds. More positively, the
disruption has caused an acceleration of remote working, and a rapid focus on
evaluating and de-risking the end-to-end value chain. In addition, potential carbon
emission reductions could result in renewed focus on sustainability practices.

52
7 References

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55
8 Appendix
Appendix 1: Simplified Balance Sheet based on audited financial statements of
Samsung Electronics Co., Ltd (annual reports from 2010 till 2015)

In millions of US dollars 2010 2011 2012 2013 2014 2015

Total Assets 116,439 134,944 169,052 202,857 218,888 214,072
Current Assets 53,241 61,998 81,476 104,956 109,382 110,329
Cash and cash equivalents 8,490 12,739 17,544 15,431 15,998 20,009
Short-term financial instruments 9,997 9,997 16,243 34,798 39,603 39,096
Available-for-sale financial assets 1,005 569 1,175 1,411 3,122 4,090
Trade and other receivables 18,476 20,943 24,904 26,415 23,458 22,247
Advances 1,129 1,245 1,563 1,827 1,890 1,508
Prepaid expenses 1,908 2,020 2,112 2,343 3,179 2,803
Inventories 11,588 13,628 16,569 18,132 16,451 16,628
Other current assets 647 857 137 2,024 1,705 915

Noncurrent Assets 63,198 72,946 87,576 97,901 109,506 103,743

Available-for-sale financial assets 2,636 2,795 4,882 5,911 12,033 7,365
Associates and joint ventures 7,227 7,981 8,202 6,086 4,971 4,664
Property, plant and equipment 45,924 53,797 63,939 71,540 76,824 76,440
Intangible assets 2,410 2,909 3,133 3,772 4,546 4,770
Deposits 569 687 739 - - -
Long-term prepaid expenses 3,073 2,995 3,225 3,284 4,614 3,796
Deferred income tax assets 975 1,400 1,665 4,380 4,300 4,940
Other non-current assets 384 383 413 2,928 2,218 1,767

Total Liabilities &Equity 116,439 134,944 169,052 202,857 218,888 214,072

Total Liabilities 38,966 46,637 55,636 60,702 59,214 55,794
Non-current liabilities 4,331 8,209 11,818 12,076 9,804 50,325
Debentures 509 1,110 1,708 1,242 1,288 1,088
Long-term borrowings liabilities 550 3,193 3,383 933 97 236
Long-term other payables 930 889 1,088 999 2,434 2,689
Retirement benefit obligation 518 363 1,615 - - -
Deferred income tax liabilities 1,433 2,023 3,202 5,697 3,893 4,557
Provisions 256 315 381 5,697 474 462
Other non-current liabilities 134 316 441 1,010 1,427 1,805

Current Liabilities 34,635 38,428 43,818 48,626 49,410 5,469

56
Trade payables 13,916 16,049 15,768 16,710 7,518 9,861
Short-term borrowings 7,309 8,371 7,883 6,101 7,627 7,836
Advance received 766 1,258 1,417 1,617 1,356 1,188
Withholdings 913 1,487 902 1,114 1,103 878
Accrued expenses 6,158 6,784 8,865 10,750 12,232 10,279
Income tax payables 1,779 1,095 3,009 3,209 2,053 3,007
Current portion of long-term
975 26 933 2,299 1,690 196
borrowings and debentures
Provisions 2,530 3,047 4,719 6,383 5,692 5,675
Other current liabilities 289 311 321 443 310 254

Total Equity 77,473 88,308 113,416 142,155 159,673 154,384

Preferred stock 104 104 112 113 113 106
Common stock 675 675 726 737 739 688
Share premium 3,819 3,819 4,112 4,173 4,183 3,893
Retained earnings 73,714 84,577 112,021 140,813 161,043 163,645
Other reserve -4,098 -4,547 -7,649 -8,963 -12,092 -15,540
Non-controlling interest 3,260 3,681 4,095 5,281 5,611 5,465

57
Appendix 2: Simplified Balance Sheet based on audited financial statements of
Samsung Electronics Co., Ltd (annual reports from 2016 till 2020)

In millions of US dollars 2016 2017 2018 2019 2020

Total Assets 226,045 266,783 308,448 298,668 320,415
Current Assets 121,940 129,949 158,786 153,657 167,914
Cash and cash equivalents 27,686 27,005 27,577 22,776 24,891
Short-term financial
45,207 43,717 59,892 64,595 78,310
instruments
Available-for-sale
3,137 2,822 - - -
financial assets
Trade and other
20,933 24,486 30,783 29,761 26,231
receivables
Advances 1,242 1,550 1,238 - -
Prepaid expenses 3,019 3,391 3,759 2,038 1,920
Inventories 15,824 22,088 26,345 22,675 27,145
Other current assets 1,134 1,256 2,114 3,492 3,181

Noncurrent Assets 104,105 136,834 149,662 145,011 152,500

Available-for-sale
5,867 6,854 7,205 7,557 10,653
financial assets
Associates and joint
5,033 6,014 6,647 6,431 6,842
ventures
Property, plant and
78,867 98,725 104,904 101,508 109,240
equipment
Intangible assets 4,608 13,050 13,535 17,539 15,645
Deposits - - - - -
Long-term prepaid
3,306 3,036 4,553 - -
expenses
Deferred income tax
4,588 4,475 4,970 3,816 3,621
assets
Other non-current assets 1,355 3,855 6,983 6,772 4,332

Total Liabilities
226,045 266,783 308,448 298,668 320,415
&Equity
Total Liabilities 59,673 77,148 83,261 75,974 86,651
Non-current liabilities 12,508 17,758 20,471 21,942 22,604
Debentures 50 843 874 826 803
Long-term borrowings
1,073 1,604 77 1,861 1,694
liabilities
Long-term other payables 2,860 1,807 2,903 1,850 1,426

58
Retirement benefit
- - - - -
obligation
Deferred income tax
6,288 10,354 13,782 14,447 15,935
liabilities
Provisions 309 411 603 518 891
Other non-current
1,778 2,395 1,774 2,041 1,462
liabilities

Current Liabilities 47,165 59,390 62,789 54,032 64,047

Trade payables 5,591 8,031 7,708 7,385 8,250
Short-term borrowings 10,990 13,940 12,349 12,193 14,023
Advance received 1,172 1,104 746 908 970
Withholdings 591 702 865 760 826
Accrued expenses 10,801 12,374 18,487 16,400 20,611
Income tax payables 2,446 6,550 7,926 1,176 3,753
Current portion of long-
term borrowings and 1,063 246 30 717 607
debentures
Provisions 3,964 3,797 3,985 3,447 3,685
Other current liabilities 303 356 959 878 955

Total Equity 166,371 189,635 225,187 222,694 237,637

Preferred stock 103 106 109 101 101
Common stock 671 688 707 659 659
Share premium 3,797 3,894 4,003 3,731 3,731
Retained earnings 166,478 190,802 220,594 215,665 229,630
Other reserve -10,290 -12,288 -7,209 -4,209 -7,359
Non-controlling interest 5,638 6,435 6,984 6,747 7,012

59
Appendix 3: Simplified Income Statement based on audited financial statements of
Samsung Electronics Co., Ltd (annual reports from 2010 till 2015)

In millions of US dollars 2010 2011 2012 2013 2014 2015

Revenue 135772 143069 187754 216709 195883 177365

Cost of Sales 90146 97238 118245 130481 121857 109151

Gross profit 45626 45831 69510 86228 74026 68125

Selling, informational &administrative

23043 23777 42389 51371 50254 44867
expenses

Operating profit 15187 14090 27121 34857 23772 23348

Other non-operating income/expenses 1991 1213 1450 1250 1790 2775

Finance income 6555 6419 7316 7595 7846 9295

Finance expense 6761 6844 7408 7349 6929 8867

EBIT 16971 14878 27929 36354 26750 22948

Income Taxes 2794 2970 5667 7476 4256 6100

Net Income 14177 11908 22262 28878 22223 16848

60
Appendix 4: Simplified Income Statement based on financial statements of Samsung
Electronics Co., Ltd (annual reports from 2016 till 2020)

In millions of US dollars 2016 2017 2018 2019 2020

Revenue 174048 211812 221568 197691 200606

Cost of Sales 103703 114308 120336 126336 122400

Gross profit 70345 97504 101233 71355 78206

Selling, informational &administrative

45134 50076 47709 47529 47714
expenses

Operating profit 25211 47428 53523 23826 30491

Other non-operating income/expenses 685 1585 802 667 507

Finance income 9817 8609 9089 8719 10392

Finance expense 9231 7938 7825 7100 9588

EBIT 26481 49684 55589 26112 30789

Income Taxes 6887 1239 15284 7459 8418

Net Income 19594 37298 40306 18653 22371

61
Appendix 5: Simplified Balance Sheet based on audited financial statements of Apple
Inc, (annual reports from 2016 till 2020)

In millions of US dollars 2016 2017 2018 2019 2020

Current Assets 89378 106869 128645 131339 162819
Cash and cash equivalents 21120 20484 20289 25913 48844
Short-term marketable
20481 46671 53892 40388 51713
securities
Accounts receivable, net 16849 15754 17874 23186 22926
Inventories 2349 2132 4588 3956 4106
Vendor non-trade
13494 13545 17799 25809 22878
receivables
Other current assets 15085 8283 13936 12087 12352

Noncurrent Assets 200967 214817 246674 234386 175697

Long-term marketable
164065 170430 194714 170799 105341
securities
Property, plant and
22471 27010 33783 41304 37378
equipment, net
Other non-current assets 14431 17377 18177 22283 32978

Total Liabilities
290345 321686 375319 365725 338516
&Equity
Total Liabilities 170990 193437 241272 258578 248028
Non-current liabilities 37051 39004 43251 48914 50503
Long-term debt 53329 75427 97207 93735 91807
Other non-current
37051 39004 43251 48914 50503
liabilities

Current Liabilities 80610 79006 100814 115929 105718

Accounts payable 35490 37294 49049 55888 46236
Other current liabilities 25181 22027 25744 33327 37720
Deferred revenue 8940 8080 7548 5966 5522
Commercial paper 8499 8105 11977 11964 5980
Short-term debt 2500 3500 6496 8784 10260

Total Equity 119355 128249 134047 107147 90488

Common stock 27416 31251 35867 40201 45174
Retained earnings 92284 96364 98330 70400 45898
Accumulated other
comprehensive -345 634 -150 -3454 -584
income/(loss)

62
Appendix 6: Simplified Income Statement based on audited financial statements of
Apple Inc, (annual reports from 2016 till 2020)

In millions of US dollars 2016 2017 2018 2019 2020

Revenue 233715 215639 229234 265595 260174

Cost of Sales 14089 131376 141048 163756 161756

Gross profit 93626 84263 88186 101839 98392

Selling, informational &administrative

22396 24239 26842 30941 34462
expenses

Operating profit 71230 60024 61344 70898 63930

Other non-operating income/expenses 1285 1348 2745 2005 1807

EBIT 72515 61372 64089 72903 65737

Income Taxes 19121 15685 15738 1372 10481

Net Income 53394 45687 48351 59531 55256

63