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Acc 561 Week 2 Financial Statement Analysis






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Acc 561 Week 2 Financial Statement Analysis
Financial Statement Analysis
ACC/561 Accounting
University of Phoenix
Samsung – International Manufacturing Company
Samsung served as the manufacturing industry and international
company analyzed. Samsung has been in business for over 70 years
and manufactures products for diverse markets, including: digital media,
high -tech electronics, home appliances, information technology and
telecommunication. Samsung's motto is to "inspire the world and create
the future" by leveraging three key strengths: new technology, innovative
products and creative solutions.
| Samsung | Wells Fargo | AT&T |
Current Ratio | 1.4101 | 1.1500 | 1.6467 |
Debt to Equity Ratio | 0.6768 | 9.8100 | 0.9675 |
Profitability Ratio | 0.2881 | 2.3500 | 0.3069 |
Return on Sales | 0.0736 | 2.0900 | 0.9563 |
Dupont Ratio | 0.1200 | 0.6900 | 0.3496 |
Financial Leverage | 1.1317 | 1.3500 | 1.0724 |
Total Asset Turnover | 2.5035 | 0.0100 | 0.9003 |
When you compare Samsung to AT&T, the retail sales company we
profiled, Samsung has a lower current ratio by 20%. Samsung's debt to

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equity ratio is almost 30% lower than AT&T. Samsung's profitability ratio
is very similar to AT&T, though 2% lower. Samsung's return on sales is
comparable to AT&T, thought slightly lower. AT&T is much strong on
return on equity, with almost 3X the Dupont ratio of Samsung.
Samsung's financial leverage is slightly higher than AT&T. The key
strength of Samsung over AT&T's financial performance is the total asset
turnover which is almost 3X that of AT&T. Samsung's focus on lean
manufacturing and supply chain management enable the company to
perform so strongly in this area.
When you compare Samsung to Wells Fargo, the services industry
company we profiled, Samsung has a higher current ratio by more than
20%. Samsung also has a much stronger debt to equity ratio position
than Wells Fargo, with Wells Fargo being 15X higher debt/equity than
that of Samsung. Wells Fargo shows a much higher profitability ratio
than Samsung, with over 8X that of Samsung. This is to be expected as
services are typically more profitable than hardware sales which operate
on leaner margins. Wells Fargo also outperforms Samsung significantly
on return on sales with over 25X better performance. This again is
attributable to better margins on services than hardware. Wells Fargo
has a much stronger return on equity than Samsung with a Dupont ratio
over 5X higher than Samsung's. Samsung has a stronger financial
leverage ratio than Wells Fargo with almost 20% lower ratio for
Samsung. Samsung also has a much lower total asset turnover than
Wells Fargo. This is attributable to the quick turnover of assets in the
manufacturing industry compared to the slow turnover of assets in the
financial services sector.
With Samsung being the only international company evaluated, there
doesn't seem to be any significant impact of IASB over FASB standards
for accounting. With the ratios used, the core components of the balance
sheet and income statement were utilized. The key elements of revenue,
expenses, assets and liabilities weren't significantly impacted by IASB
over FASB standards.
Wells Fargo – Domestic Services Industry Company
Wells Fargo is an international company based in United States and
Canada. Wells Fargo has several divisions and services, ranging from
basic deposit accounts to complex commercial loans. Wells Fargo is a
publicly traded company and must adhere to certain guidelines for its

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accounting practices. The FASB and IASB require Wells Fargo to
comply with financial reporting to its shareholders and the SEC. These
guidelines help to prevent Wells Fargo’s executives from “cooking the
books” and taking advantage of its shareholders. Without these
regulations, Wells Fargo would be able to run rampant, controlling their
company without regard for their shareholders. With these standards
and guidelines in place, Wells Fargo, as a retail/commercial bank, will
have to follow certain rules to be thorough and clear toward all of its
shareholders and the SEC. With these guidelines, the SEC has been
able to keep large companies in check as it reports its numbers to
current and potential shareholders. With banking being regulated in
today’s market, the IASB has helped banks tighten credit and provide a
better service to those needing that service. With all the REO and bad
loans on the books, IASB has allowed a simpler way to classify and
value these assets in order to balance the books in a more efficient way.
This will, overall, help control the banks from what they have on their
books and the damage it can do to the company as well as the national
economy. (Jones, 2009)
AT&T – Domestic Retail Industry Company
For more than a century, AT&T has consistently provided innovative,
reliable, high-quality products and services and excellent customer care.
Today, the company’s mission is to connect people with their world,
everywhere they live and work, and do it better than anyone else. The
company has began fulfilling this vision by creating new solutions for
consumers and businesses and by driving innovation in the
communications and entertainment industry. AT&T is a large corporation
that operates in the domestic market and uses accrual accounting
methods. Accrual basis taxpayers include items when they are earned
and claim deductions when expenses are incurred. With the ability to
service the domestic market as a top competitor, AT&T has began to
gain a name for themselves in the international market as well, by
offering use of their services through out the world.
As a domestic market competitor AT&T must comply with the guidelines
and regulations of the Financial Accounting Standards Board. The
FASB’s rules have required AT&T to comply with the standards that are
set forth for AT&T, any other service company, retail sales organization,
and even the manufacturing organizations. The main purpose of FASB is
to develop generally accepted accounting principals within the United

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