Here if the final copy of the work. Confirm that it is satisfactory.
SAMSUNG ELECTRONICS CO. LTD
Financial analysis is one of the ways investors and portfolio managers use to evaluate the performance,
liquidity, profitability, efficiency and suitability of an entity or a company before investing their money into a
firm. This analysis focuses on the income statement, the balance sheet and the cash flow statement. Financial
ratios are one of the major ways of conducting a financial analysis of a firm. It involves expressing certain
values in the financial statement as a ratio of other values in the same financial statements mainly to determine a
relationship between those items. These relationships are very important as they help in comparing one
company with another as well as comparing a company with its historical performance.
Financial analysis has however faced a couple of challenges due to factors such as the difference in
currencies used to prepare the statements by various companies and also the terminologies used as well as the
mode of representation of financial statements by various companies. However, ratio analysis is able to
eliminate these challenges by providing values that can be used to perform side by side comparisons between
In this paper, two mobile competing companies- Apple Inc. and Samsung Electronics Co. Ltd, have
been compared using financial ratios to determine which company is more suitable to invest in. These two
companies are involved in designing developing and selling computer software, online services as well as
consumer electronics. Apple Inc. is an American company, with its headquarters at California. It was founded in
1976 by Steve Jobs, Ronald Wayne and Steve Wozniak. It is a publically trading company whose financial
reports are presented according to the US GAAP as part of the form 10-K. Samsung, on the other hand, is also a
multinational electronic Korean company with its headquarters in Suwon, South Korea. It was founded on
January 13 1969. It is also a publically trading company whose shares are traded at the Korea Exchange. Its
financial statements are presented following the IFRS guidelines.
The difference in the accounting standards employed by the two companies, therefore, necessitates the
need for financial ratios as a tool to analyze the companies and make a decision on the best company to invest
Looking at the side by side comparison between the two companies, specifically taking a look at the
short-term liquidity ratios, we see that Samsung is at a better position to pay up is short-term debts as compared
to Apple Inc., therefore, a creditor who is keen on this would prefer Samsung to Apple. Looking further at the
long-term liquidity ratios, Apple is in a better position to handle its long-term debt more comfortably as
compared to Samsung. In addition, it is also able to pay up its interest expense more comfortably than Samsung.
A review of the efficiency ratios indicates that Apple is selling its inventory at a slightly higher rate than
Samsung although its debt collection period is too long compared to that of Samsung. Also, the accounts
receivables ratio for Apple is quite high compared to that of Samsung which is not a very good indication of
efficiency. The profitability rations reveal that Apple Inc. is a more profitable company than Samsung. This is
shown by the high ratios of net profit margin, return on equity ratio and return on assets ratio.
Lastly, a review on the market ratios indicates that Samsung offers better earnings compared to Apple.
Therefore an investor who is keen on earnings will invest in Samsung while a potential creditor who is keen on
profitability and security will invest in Apple Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except number of shares which are reflected in thousands and per share amounts)
Cost of sales
Research and development
Selling, general and administrative
Total operating expenses
Income before provision for income taxes
Provision for income taxes