Analysis of Samsung Finances - Case Study Example

Samsung Finances Name Institution Affiliation Introduction Samsung is a South Korean multinational conglomerate company that is based in South Korea in Samsung town. The company comprises numerous subsidiaries which are all affiliated to the business. It is common for all the company products to have the Samsung brand. The business platform requires one to undertake varies and multiple concepts in a wide range of problems across business finance function. Finance is in Samsung conglomerate is identified as an important resource within the company since it is used as a basis for effective decision-making within the company. This paper seeks to evaluate the importance of finance as a resource in an organization where it will identify the major techniques that are used in investment decisions. It will also contrast and compare the financing options which will then recommend a course of action. Description of the Samsung Company Samsung Company was started in 1938 by Lee Byung-Chul where he made it a trading company. The company then diversified into insurance, securities, retail and food processing. In the 1960s the organization then entered into the electronics industry which was a major step towards prosperity. In 1987, Lee Byung died where the business separated into four business group which included the Hansol, CJ group, Shinsegae, and Samsung group. Today, Samsung is identified as one of the largest companies in the world when ranked by total revenue. Samsung industrial subsidiaries include Samsung heavy industry which is the second largest shipbuilder in the world, Samsung electronics which forms a world largest information technology enterprise, Samsung engineering and Samsung C&T which forms 13th and 36th world-largest construction companies. Due to the high revenue that the company generates, the company has a high influence on South Korean economic development, culture, media, and politics. The company has become an instrumental driving force of economic and infrastructure development within the companies Financial analysis of Samsung in the year 2015 Current ratio=2.471 Net Profit margin = Return on equity= Debt ratios= Fixed asset turnover= Debt equity ratios= Price/sales ratio= Gross profit margin= 0774802556 Return on assets= Problem(s) identification Samsung company offers a large variety of products in the market within the global world. The company largely earns it revenue from payments that are made from retail installment and sales. To ensure maximum revenue generation, it is important for the company to have subsidiaries that will help in making wholesale sales in different parts of the world. From the analysis conducted on the company, It is evident that the company is operating in an effective manner this shows it has the ability to offset its liabilities and make both short and long investment activities in an effective manner. For the company to have an increased production and revenue generation, it is important for the company to ensure that it generates high revenue hence high profitability. Communicating with the employees makes them feel part of the company which in turn makes them contribute to the company development. Additionally, any decision made should be consulted over the whole department from the junior employees to the senior management. Individual opinions should not be ignored. However, the final decision-making duties should be left as the duty of the management team. It is instrumental to ensure that such decisions are agreed upon. An ultimate unilateral decision is more likely to face little or no objection compared to decisions made by one person. Through open communication, decisions can be made in a timely and effective manner to ensure production and provision of services are carried out in an effective and conducive manner. The company plant and machinery should be made and constructed to ensure effectively and enough production. This will help in meeting the unit's demands for the market. Since the company is in a market where it is experiencing high demand for the products, it is important to maintain and also ensure that the machinery work at their maximum production capacity. High production is will lead to increased sales which will then increase the supply of products into the market. When a company is able to meet the demand for products, such a company is then said to be working in a convenient manner compared to other companies that have no ability to meet the production needs. Alternatively, it is important for the management and strategic planner to keep a track of the forecast before making decisions. The budget should be maintained within the working environment where any deviation from the laid down budget should be avoided at all costs. Budgets are instrumental as they show whether the company is operating within the allowed specifics. This ensures that any deviation is easily noted and collected hence minimizing the effects that it may have on the system. Additionally, budgets are also instrumental in the decision-making process as it shows where the company is coming from its current state and expected future positions in the monetary and financial state. The company should ensure that it keeps its debts as minimum as it can, debts are considered to be liabilities in organizations. Such liabilities contribute to the decline and unprofitability that may be experienced by an organization. The company can reduce its borrowing rate, for the existing loans and other liabilities; measures should be taken to offset such requirements in an organization. A company with little or no debts, its financial records only shows how operational the company is in making certain that money generated is for the development of the organization or the profits are shared to the shareholders within the company. Lastly, the company should also make plans where it should have enough working capital that has the ability to meet all the financial debts that are incurred within its operations. Measures should be taken to raise such capital through short and long term debts. Such money should then be used in upgrading the team and other machinery to make them more effective in their operations. The Role of Finance In Samsung Industry In this organization, the fiancé department is given the responsibility of maximizing the shareholders' value. Through decisions and operations taken by the organization, the value maximization is done through both short and long-term operations that determine how best the company's financial ability may appear within the shareholders perspective. Connectively, the finance department within the organizations also tasked with the responsibility of estimating on how to allocate assets for the overarching goals. This is done by making certain the right assets are placed within the right place and at the right time. Lastly, in Samsung, the finance company also manages the company's liabilities with an intention of making sure that the company is not involved in high-risk dealings. Techniques used to Evaluate Investment Decisions Every organization is highly interested in making certain that it is involved in a productive operation. The effective decision-making process is identified as an effective way through which such decisions can be made. The company should ensure it formulate long term and short term goals this shows the company has a live mission which it Is working to achieve. Identification of new investment opportunities is paramount as it provides the company with a rough idea of what is expected from such measures. Creation of a strong administrative framework with an ability to monitor the crucial aspects of project execution. This helps in identification f acceptable and unacceptable alternative. Recommendations Samsung being a multinational company, the high bureaucratic nature within the company should be avoided; this helps in the effective decision-making process within the finance department and other relevant departments within the company. It is important for the management to ensure every decision they may consider taking is well through of and backed up by vast facts. Development and growth within the company should be carried out in phases to ensure effective running of the business. It is important for the company to account for every brand on its own in different market location. This is instrumental as it helps the management to identify the products that are not performing or contributing to a loss. Such products should be then lead to fast decisions such as the high and more rapid advertisement or make the company cease producing such products. Additionally, the research and development team within the company should be considered as one of the most important department. This is because it helps in making certain that products produced from the organization are of high quality which promotes brand loyalty. References Arnold, G. (2008). Corporate financial management. Harlow, Eng: Pearson Financial Times/Prentice Hall. Brigham, E. F., & Houston, J. F. (2016). Fundamentals of financial management. Boston, MA,USA:Cengage Learning Gitman, L. J., Zutter, C. J., Elali, W., & Al-Roubaie, A. (2013). Principles of managerial finance. Essex : Pearson Fields, Edward, Essentials of Finance and Accounting for Non-Financial Managers, 2nd Edition Read More