financial analysis
Samsung and LG: Financial Analysis
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SAMSUNG AND LG: FINANCIAL ANALYSIS
Samsun and LG’s are among the leading companies in South Korea. Samsung is a multinational corporation with several subsidiaries and associated business, mainly under the brand name Samsung. LG is also an international electronics organization that operates through its four divisions: Home Appliances, Mobile Communications, Air Conditioning and Energy Solutions, and Home Entertainment. It is among the top producers of television sets and mobile phones. This paper focuses on Samsun and LG’s financial analysis. It compares the two companies using risk analysis and profitability analysis. In risk analysis, liquidity ratio and solvency ratio will be focused on. In profitability analysis, focus is on return on assets, profit margin, gross profit ratio, asset turnover, return on equity, and price earnings ratio.
Risk Analysis
Liquidity Ratio
Liquidity ratios measure the liquidity of a business. Liquidity ratios are important as it measures a business ability to meet its short and long-term financial obligations. Current and Debt/Equity ratio are used to measure liquidity.
Current ratio: it measures a company’s ability to meet short-term financial obligation. It is obtained by dividing Total Current Assets by Total Current Liabilities. Samsung’s current ratio for the financial period 2011 is given as 1.46 and 1.45 for the financial period 2010 (Samsung Electronics Co Ltd, 2012). The ratios indicate that the company is secured as it has the capacity to settle its immediate financial liabilities. On the other hand, LG’s current ratio for 2011 is 0.79, and 1.0 for 2010. In 2011, LG may not be able to meet short-term financial obligation, and thus, faces a high risk. acid test ratio: it indicates the business ability to settle short-term financial obligation using the available immediate financial resources. It is obtained
\
SAMSUNG AND LG: FINANCIAL ANALYSIS
Samsun and LG’s are among the leading companies in South Korea. Samsung is a multinational corporation with several subsidiaries and associated business, mainly under the brand name Samsung. LG is also an international electronics organization that operates through its four divisions: Home Appliances, Mobile Communications, Air Conditioning and Energy Solutions, and Home Entertainment. It is among the top producers of television sets and mobile phones. This paper focuses on Samsun and LG’s financial analysis. It compares the two companies using risk analysis and profitability analysis. In risk analysis, liquidity ratio and solvency ratio will be focused on. In profitability analysis, focus is on return on assets, profit margin, gross profit ratio, asset turnover, return on equity, and price earnings ratio.
Risk Analysis
Liquidity Ratio
Liquidity ratios measure the liquidity of a business. Liquidity ratios are important as it measures a business ability to meet its short and long-term financial obligations. Current and Debt/Equity ratio are used to measure liquidity.
Current ratio: it measures a company’s ability to meet short-term financial obligation. It is obtained by dividing Total Current Assets by Total Current Liabilities. Samsung’s current ratio for the financial period 2011 is given as 1.46 and 1.45 for the financial period 2010 (Samsung Electronics Co Ltd, 2012). The ratios indicate that the company is secured as it has the capacity to settle its immediate financial liabilities. On the other hand, LG’s current ratio for 2011 is 0.79, and 1.0 for 2010. In 2011, LG may not be able to meet short-term financial obligation, and thus, faces a high risk. acid test ratio: it indicates the business ability to settle short-term financial obligation using the available immediate financial resources. It is obtained
References: LG Electronics Inc. (2011). Annual Report 2011. LG Electronics Inc. Samsung Electronics Co Ltd. (2012). 2011 Annual report. Samsung Group Ltd.