PES University

(Established under the Karnataka Act No.16, of 2013)

100Ft Outer Ring Road, Bengaluru 560085
Karnataka, India

Research Project on
“A study on the Service Quality Issues of Samsung”

Under the guidance of

Prof. Jayesh Jadhav
Designation: Asst. Professor
Department of Management Studies & Commerce
(Faculty of Management Studies Program)

Submitted By
Prajwal R (PES1202200547)
B Com (Hons) with ACCA
SRN: PES1UG22BC668

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 Faculty of Management Studies & Commerce
Department of B Com (ACCA)

CERTIFICATE
This is to certify that the research project entitled
“A study on the Service Quality Issues of Samsung”
is a Bonafede work carried out by

PRAJWAL R (PES1202200547)

In the partial fulfilment for the course work in the program of Study
in B Com ACCA under the rules & regulations of PES University,
Bengaluru during the period August 2022 – December 2022. It is
certified that all corrections/suggestions indicated for internal
assessment have been incorporated in the report.
The dissertation has been approved as it satisfies the 1st Semester
academic reports of the project work.

Signature with Date & Seal

Internal Guide

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 DECLARATION

I, PRAJWAL R, hereby declare that the research project entitled “A study on

the Service Quality Issues of Samsung” is an original work done by myself
under the guidance of Mr. JAYESH JADHAV, designation, affiliation and is
being submitted in the partial fulfilment of the requirements for the completion
of course work in the Program of study in B Com (Hons) with ACCA in PES
University

Place: Bangalore
Date: 9/10/2022

Name and Signature of the candidate

(Prajwal R)

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 ACKNOWLEDGEMENT

Various individuals have bestowed their blessings and heartful support upon me
as a result of the completion of the research report, and I would like to take this
gratitude and appreciation to him (Prof. Jayesh Jadhav).

Primarily, I would like to express my first token of gratitude to the Almighty for
blessing me with the strength and intellect to complete this project on time.
Then, I would like to extend my thanks to our “Business & Corporate Law”
faculty, Mr. Jayesh Jadhav, Department of Management and Commerce, whose
valuable guidelines have been the key pillar for this project to be a full-proof
success. It wouldn’t have been possible without his support.
Next, I’d wish to express my gratitude to a few of my tutors who took time out
of their work schedules to aid me with tricky issues and doubts. Not to forget,
an extended vote of thanks to my parents and friends whose suggestions did me
make my work simple and easy to complete.
Last, but not least, I would like to extend my sincere thanks to my classmates,
who never let me swayed away from the prevailing competitive environment
and helped me stay on one track mind focus.

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 Table of Contents
Sl.No Heads & Sub-Heads Pg No
Acknowledgement

Table of Contents

List of tables and Figures

1. Introduction
1.1. Introduction of “Samsung Electronics”
1.2. Early Days of “Samsung Electronics”
1.3. Consumer Struggles of “Samsung Electronics”
1.4. Samsung’s Relationship with “Apple”
1.5. Major Clients of “Samsung Electronics”
1.6. Literature Review of “Samsung Electronics”
1.7. Study perspectives of the research paper

2. Description of Samsung Electronics

2.1. Company Overview
2.2. Area of Operations
2.3. Components & Design Strategy
2.4. Performance Key Indicators

3. Overview of the aspects for study

3.1. Objectives of the study
3.2. Data Collection Methods & Representations
3.3. Limitations of the study
3.4. SWOT& PESTLE Analysis of the company
3.5. Current Ratio
3.6. Inventory Turnover Ratio
3.7. Net Profit Ratio

3.8. Cash Flow Statements

3.9. Reserves Valuation
3.10. Investments

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4. Analysis & Understandings of Samsung Electronics Statements
4.1. Standalone & Financial Statements

4.2. Financial Analysis of Samsung Electronics

4.2.1. Current Ratio of the company
4.2.2. Quick Ratio of the company
4.2.3. Receivables Turnover ratio of the company
4.2.4. Total Asset Turnover Ratio of the company
4.2.5. Debt Ratio of the company
4.2.6. Times Interest Earned Ratio
4.2.7. Net profit ratio of the company
4.2.8. Profitability Ratio of the company
4.2.9. Profit Margin of the company
4.2.10. Cash Flow Statements of the company
4.2.11. Reserves & Surplus of the company
4.2.12. Investments Description

5. Observations & Conclusions of the analysis carried out by Samsung

Electronics Statements
5.1. Observations & Findings of the study
5.2. Tools for process improvement and quality control
5.3. Recommendations for future products
5.4. Conclusion

6. Bibliography

Appendix

List of Tables

Table Name

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Table
No

1.5 Major clients of Samsung Electronics

2.1 Table representing strategic analysis of the company – Samsung Electronics

3.1 Table representing various components of cash flow and its descriptions

3.5 Table representing current assets & current liabilities

4.2.11 Table representing the reserve analysis of the company for the FY 2017-2020

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 List of Figures

Fig
Figure Name
No

Graphical Representation of the position of Current Assets & Current Liabilities of the
4.2.1
company

4.2.2 Graphical Representation of the Quick Ratio of the company

4.2.3 Graphical Representation of the Inventory Turnover Ratio of the company

4.2.4 Graphical Representation of the Receivables Turnover Ratio of the company

4.2.5 Graphical Representation of the Debt Ratio of the company

4.2.6 Graphical Representation of the Times Interest Earned Turnover Ratio of the company

4.2.7 Graphical Representation of the Net Profit Ratio of the company

4.2.8 Graphical Representation of the Profitability Ratio of the company

4.2.9 Graphical Representation of the Profit Margin of the company

Graphical Representation of the retained earnings of the company

4.2.11
Graphical Representation of the retention ratio of the company

4.2.12 Graphical Representation of Total change of investments in the company

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 UNIT-I
Introduction

1.1 Introduction to the topic “Samsung Electronics”

Samsung Electronics Company Ltd was founded by Lee Byung-Chul on January 13, 1969.
Sometimes abbreviated as SEC (Samsung Electronics Company), (SAMSUNG) is a South
Korean multinational electronics company headquartered in Yeongtong-gu, South Korea.
This is the pinnacle of Samsung Chaebol, who accounted for his 70% of the group's revenue
in 2018. Samsung Electronics has played an important role in the group's corporate
governance through circular ownership. It has assembly plants (where all the components of a
complete unit are stocked) and a distribution network in about 74 countries around the world,
employing about 300,000 people. Samsung is majority-owned by foreign investors.
According to a 2019 report, Samsung Electronics ranks as the world's second-largest
technology company by revenue, and its market cap is $520.65 billion, making it his 12th
largest in the world. Samsung is a leading manufacturer of electronic components such as
lithium-ion batteries, semiconductors, image sensors, camera modules and mobile his
displays for customers such as Apple, Sony, HTC and Nokia.
Samsung is the world's largest manufacturer of mobile phones and smartphones, first with his
Samsung Solstice and later with his Samsung Galaxy series of devices. The company is also a
provider of tablets and his computers, notably his Android-based Samsung Galaxy Tab
collection, and is known for pioneering the phablet market with the 'Samsung Galaxy Note'
family of devices. increase. It is currently developing 5G-enabled smartphones such as the
Samsung Galaxy S22 and foldable smartphones such as the Samsung Galaxy Z Fold 3.
Samsung is the world's largest and number one manufacturer and TV manufacturer since
overtaking Apple in 2011. Famous for being the largest memory chip manufacturer. It was
the world's largest semiconductor company in 2017-2018.

The given picture depicts the View of Samsung Digital City whose headquarters are situated
in Suwon, Gyeonggi (which is in South Korea)

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1.2 Early Days of “Samsung Electronics”
Samsung Electric Industries was established on January 19, 1969 in Suwon, South Korea as
an industrial division of the Samsung Group. At that time, the Samsung Group was known to
the South Korean public as a fertilizer and sweetener trading company.
Lacking technology and resources, they were even shorter than their domestic competitors.
Samsung Group said it would improve its manufacturing position by competing with
Japanese firms and focus on "exporting". rice field. In December of the same year, the
company established a joint venture (joint venture) with Sanyo and Sumitomo Corporation
and named it Samsung-Sanyo Electric. This is the direct predecessor of today's "Samsung
Electronics". The early products of the joint venture were electronic and electrical products
including televisions, calculators, refrigerators, air conditioners, washing machines and
others)” and the manufacture of home appliances and AV equipment by Sumitomo
Corporation. Samsung NEC later became Samsung SDI, the display and battery division of
the group. In 1973, Samsung & Sanyo created his Samsung-Sanyo parts, the predecessor of
"Samsung-Electro-Mechanics". By 1981, Samsung Electrics had manufactured over 10
million black-and-white televisions. In 1974, Samsung Group entered the semiconductor
business by acquiring Korean Semiconductor, which was on the brink of bankruptcy when it
was building one of Korea's first chip manufacturing plants. Shortly thereafter, Korean
Telecommunications, an electronic circuit maker and Samsung Group company, acquired the
semiconductor business and became Samsung Semiconductors and Communications. In
February 1983, as a board member and event sponsor of the Samsung Industry & Corporation
Agreement, Lee made an announcement that would later become known as the "Tokyo
Manifesto", announcing that Samsung would be making dynamic his random access his
memory (DRAM) memory. said it intended to be its provider.
A year later, Samsung succeeded in developing his 64kb DRAM, which he said had narrowed
the technology gap between first-world companies and fledgling electronics makers, which
he had widened from more than a decade to four years. Announced. During this process, the
Samsung team used technology imported from Micron Technology in the United States to
develop dynamic RAM, and developed SRAM (Static Random Access Memory) and ROM
(Read Only Memory) from Sharp Corporation in Japan. In 1988, Samsung Industries merged
with Samsung Semiconductors & Communications to form Samsung Electronics. Before that,
they weren't a company, they weren't running a joint venture, but they weren't rivals. In the
beginning, Samsung sold PCs under the Leading Technology brand. However, the device was
manufactured by his Samsung itself, and the FCC Fillings (Federal Communications
Commission) noted that during this particular period he mentioned a product supplied by
Samsung.

1.3 Consumer Struggles of “Samsung Electronics”

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In 1988, Samsung Electronics introduced its first mobile phone to the Korean market. Sales
were initially very weak compared to other competitors in the market, and in the early 1990s,
"Motorola" held about 60% market share in the domestic mobile phone market, while
Samsung users It was his 10%.
Samsung's mobile phone division also suffered from poor quality and inferior products until
the mid-1990s, and its abrupt exit from the industry was a common topic within the company.

1.4 Samsung’s Relationship with “Apple”

Despite recent legal battles, Samsung and Apple have been labelled "enemies," meaning
friends or foes with whom they share a love-hate relationship. Samsung is an important
supplier to Apple, especially supplying his early iPod devices in 2005, and Apple is an
important customer for Samsung. Samsung's parts sales in 2012 were thought to be around $8
billion, but Apple's CEO "Tim Cook" said that the company's key parts supply chain, his
Apple Initially opposed to his lawsuit against Samsung for change. In April 2011, Apple Inc.
announced it would sue Samsung over the design of its Galaxy line of mobile phones. They
filed a lawsuit on April 15, 2011, alleging that Samsung had infringed Apple's trademarks
and patents with its iPhone and iPad. Samsung filed a countersuit against Apple for patent
infringement. In August 2011, the District Court granted Apple an injunction against the sale
and marketing of the Samsung Galaxy Tab 10.1 throughout Europe except the Netherlands.
In the European Union, with the exception of Germany, bans have been lifted temporarily,
with an investigation into whether the original injunction was appropriate. On August 31,
2012, the Tokyo District Court ruled that Samsung Electronics' mobile devices cannot
infringe Apple's patents. The lawsuit, which deals exclusively with Apple's patents that allow
mobile devices and PCs to sync or exchange data with each other, is inconsistent with the US
court's decision on August 24th.
On October 18, 2012, the United Kingdom (UK) Supreme Court ruled that Samsung did not
infringe Apple's design patents. Apple was also forced to issue a court-ordered apology to
Samsung on its official UK website.

1.5 Major Clients of “Samsung Electronics”

The major clients of “Samsung Electronics” are listed below.

Samsung Clients
% of total
Rank/Company Description
shares

1. Sony DRAM, NAND Flash, LCD Panels etc 3.7

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 AP (Mobile Processor), AMOLED Display,
2. Apple Inc 2.6
DRAM, NAND Flash, etc

3. Dell DRAM, Flat-Panels, Lithium -ion Battery, etc 2.5

4. Hewlett Packard DRAM, Flat-Panels, Lithium -ion Battery, etc 2.2

5. Verizon
Handsets and much more 1.3
Communications

6. AT & T Inc. Handsets and much more 1.3

1.6 Literature Review of “Samsung Electronics”

Founded in 1969, Samsung Electronics is the world's largest IT company by business scale.
The company was mainly engaged in semiconductors, display panels, home appliances and
mobile devices. From the standpoint of the Korean government, the electronics industry used
to assemble imported parts before the 19070s, whereas the Ministry of Trade and Industry
(MTI) decided in 1966 to focus on the electronics industry during his five-year promotion.
Decided to go ahead with the plan. This will allow Samsung to develop into a strong export-
oriented company. Government support comes in two different forms: market influence and
influence. Early stages of internationalization as part of government-zaibatsu relations. We
supported Samsung and provided incentives. This continued to be dictated by strict policy
objectives. Another observation by scholars also revealed that Samsung was aiming at the
market to show strong ownership in a geographically distant market by building up his
experience. Samsung adopted a latecomer imitation strategy when entering the global market.
Patinkin (1989) further identifies Samsung as a prime example of a common catch-up
strategy in the electronics industry. In the semiconductor field, which Samsung had no
experience in, Samsung hired scientists and researchers from established companies such as
IBM and Intel. He will build his R&D facility in Silicon Valley, the centre of the competitive
semiconductor industry. In the 1980s,
Samsung has gone from being a latecomer/latecomer to his market leader in the area of
memory his chips. Samsung entered the industry later than companies such as NEC and
Micron in the US, but Samsung quickly caught up in terms of technological advancements,
revenue and market share, compared to Micron's 9.2% in the DRAM sector. doubled 20.1%.
This was an area that would later become a key technical characteristic of the internal
hardware of modern mobile devices. This foresight, however, was not due to government
support for the electronics industry, but to Chaebol's foresight to the future and the outlook

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for the impact semiconductors will have on future devices. In return, they give the chaebol an
edge in dealings/negotiations with the South Korean government.
Currently, Samsung remains at an innovation-driven stage due to its large, centralized
corporate structure. The ways you can contribute to Samsung's success can be summarized
below.
 Creation Speed Competence - Employed vertical integration, purposeful, fast
management speed, and speed of investment decision-making and opportunity
capture. Synergies have also been achieved through strong leadership from owners
who practice flexibility in management, diversification, a unified marketing network,
and bundled operations and maintenance.

Samsung also has a strong internal influence in applying the technical knowledge it has
learned to all its products.

1.7 Study Perspectives of the paper

The main objectives/perspectives of this research project have been formed in order to fulfil
the following objectives which are given below as follows.
<a> To study the financial performance of “Samsung Electronics” and also study whether
Samsung Electronics were impacted crucially during the pandemic.
<b> To know about what the influences “Samsung Electronics” is today as the largest mobile
phone manufacturer in today’s era gaining the tagline – “Globally recognised industry leader
in technology”.
<c> To study the deeper financial stories & insights of what the auditors notice while
studying the financial criteria of the company - Samsung Electronics.
<d> To express whether Samsung is doing good or whether are they facing any kind of
challenges or will they be facing any problems in the future days.

This research project analysis and utilises the produced Annual Reports of Samsung
Electronics Co. Ltd in its consolidated versions from the 2016 till 2021.
This research project is based on the comparative basis & would like to utilise the means of
ratio analysis to determine the health and wellbeing of the company.
----------------------------------------------------------------------------------------------------------------

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 UNIT-II
Description of “Samsung Electronics”

Every plan, ranging from a proprietorship till a large company or an MNC, has a unique
historical background that sets the foundation and the addresses of the cause of its
establishment in the timely evolving market.
This overview of the company named “Samsung Electronics Co. Ltd” would be discussed in
the upcoming sub sections in this research project.

2.1. Company Profile of “Samsung Electronics”

Samsung Electronics, founded in 1969, is the world's largest IT company by revenue. The
company primarily manufactured semiconductors, display panels, home appliances, and
mobile devices. According to the Korean government, the electronics industry used to
assemble imported parts prior to the 1970s, whereas the Ministry of Trade and Industry
(MTI) decided in 1966 to focus on the electronics industry during his five-year promotion.
The plan was approved which would allow Samsung to grow into a strong export-oriented
company. Government assistance comes in two varieties: market influence and influence.
The early stages of this company’s internationalisation were as a part of government
relations.
This is a small representation of the insights of Samsung Electronics Co. Ltd, which can be
observed from the pictorial SWOT Analysis which is given below as follows.

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2.2. Areas of operations of “Samsung Electronics”
Samsung is one of the brands that has solidified its image in modern culture. To maintain its
image as a highly efficient organisation, Samsung has focused heavily on product quality,
regularly updating relevant requirements and strictly controlling output. When examining the
organization's global operation management (GOM), one must give credit to its approach to
quality management. The company has been researching new methods of maintaining high
levels of quality. For example, by incorporating the 8-Point Battery Safety Check framework,
Samsung was able to avoid defects during the assembly stage of the manufacturing process.
Similarly, Samsung's multi-layer safety measures protocol has contributed to tighter control
over the SCM production stage, particularly the assembly process.
The company has been looking into new ways to keep quality high. For example, the
incorporation of the 8-Point Battery Safety Check framework has enabled Samsung to avoid
defects during the assembly stage of the manufacturing process. Similarly, Samsung's multi-
layer safety measures protocol has helped to tighten control over the SCM production stage,
particularly the assembly process.

TABLE 2.1
The below table represents the strategic analysis of the company – Samsung
Electronics

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2.3. Components & Design Strategy of the company
Samsung Electronics, a prosperous international business with its headquarters situated in
South Korea, strives to be among its rivals "Tier One" companies by mastering the less
obvious, more perceptible aspects of exceptional design. Students will learn about Samsung's
transformation in a little over three decades from a modest OEM manufacturer of generic TV
sets to a titan in a variety of product categories, from components (such LCD screens) to
common consumer electronics (such as cell phones). This engineering-driven business has
transitioned over the last ten years into a design-driven business that places equal focus on
R&D. However, despite receiving engineering and design prizes from all around the world,
they are unable to produce a "iconic" product (such as Apple's iPod).

2.4. Performance Key Indicators of the company

The key performance indicators provide us the several aspects of the company and in
resulting to this, it evaluates the financial performance business. It also shows us the
organisation capabilities. Some of the KPI of the company are given below as follows.
 Increment in demand of the company
 Growth in the market share of the company
 Positive feedback from the customers
 Growth in the sales and profits
 Competitiveness over other companies
 Increase in the satisfaction level of the consumers
 Increment in the brand value
----------------------------------------------------------------------------------------------------------------

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 UNIT-III
Aspects to be used to judge the performance of the company

3.1. Objectives of the study

A profound knowledge or an understanding would provide us a clear picture as to the
preferences of one brand over the another which motivates the brand loyalty behind and
informs us on how brand loyalty is built.
The main objectives of this study are given below as follows.
 To understand the marketing strategies adopted by the company
 To understand the market position of the company
 To know about the awareness of the products in the company
 To understand the marketing mix of the company
 To analyse the data collected & draw the conclusions about the same.

3.2. Data Collection methods & Representations

Both the primary as well as the secondary data were chosen to collect the data that were used
in analysing the research study.
 The primary data were obtained through the questionnaires, which were given to the
respondents.

 The secondary data were gathered through the Journals, articles, internet and other
published materials.

3.3. Limitations of the study

 The data which is published here may not be completely accurate as the sample size
was small and does not represent the entire universe.

 Unable to obtain the company certificate due to the time constraint.

3.4. SWOT & PESTLE Analysis of the company

(1) SWOT Analysis:

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An organization's strengths, weaknesses, opportunities, and threats may be identified and
analysed using the SWOT analysis framework. The SWOT acronym is made up of these
terms. The main objective of a SWOT analysis is to raise awareness of the variables that
influence company decisions or the formulation of business strategies. We will now discuss
the company’s SWOT Analysis in detail below.

Strengths
 Samsung is the world’s most successful electronics manufacturer. It is the world’s
largest manufacturer of television sets, liquid crystal display (LCD) panels, mobile
phones and smartphones.

 Samsung is the world’s number one marketer of mobile phones with 21.4% of the
world’s largest market share in the second quarter of 2015. Apple is number two with
13.9%

 Samsung has impressive research and design capabilities. It was able to create and roll
out Samsung Pay, a payment app with similar capabilities to Apple Pay, in less than a
year. Samsung has been able to replicate many of the capabilities of both Apple Inc.’s
phones and Google Inc.’s Android operating system for mobile devices.

 Samsung has strong manufacturing and marketing capabilities.

 Samsung has long-standing relationships with retailers in the United States and
Europe that provides a steady sales channel for its products.

Weakness
 Samsung has not been able to match Apple Inc.’s marketing capabilities for
smartphones. Its share of the U.S. smartphone market fell by 2.3% between 2014 and
2015. In contrast, Apple’s share price grew by 34.9%.

 Some Chinese competitors are catching up to Samsung in the smartphone market.

Between 2014 and 2015 Huawei’s share grew by 48.1%, and Xiaomi’s share grew by
29.4%.

 Samsung is heavily dependent upon consumer electronics sales in markets with

limited potential for growth, such as the United States and Europe, for much of its
revenue.

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  Samsung’s devices use the Google Android open-source operating system. Many
consumers seem to view Android as an inferior product to Apple’s iOS. The public
has not been as accepting of Android as the tech community has.

 Some consumers view Apple products as more advanced and dependable than
Samsung products.

 Samsung’s marketing efforts are not as sophisticated as Apple’s.

Opportunities
 Growing market for smartphones, tablets and other mobile devices, especially in
developing regions such as Africa and India, where consumers are unfamiliar with
PCs. Sales of tablets finally overtook sales of traditional personal computers in 2015.

 Increased demand for tablet and smartphone-based solutions such as Samsung Pay

 New technologies such as wearable tech

 Growing middle class in developing world will increase market for consumer
electronics.

 Growing online market from sales channels such as Amazon.com

Threats
 Apple has emerged as the dominant smartphone and tablet brand in some markets,
such as the United States. Samsung has not been able to overcome Apple’s reputation
for reliability.

 Apple’s reputation for quality, reliability and sophistication seems to be growing.

 The Google Android operating system, which Galaxy devices depend upon, is not as
popular with average people as iOS is.

 Declining or stagnating middle-class incomes in North America and the United States
could reduce consumer buying power in those key markets for Samsung.

 Chinese manufacturers such as Huawei and Xiaomi could emerge as serious rivals to
Samsung. These companies’ share of the critical mobile device market is growing
while Samsung’s is falling.

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  Apple could enter more consumer products areas such as home appliances and
cameras and directly compete with Samsung in those markets.

(2) PESTLE Analysis:

An organization's primary external influences—political, economic, sociological,
technological, legal, and environmental—are examined through a PESTLE study. It may be
applied in a variety of situations and aid senior managers and human resource experts in
making strategic decisions. We will now discuss the company’s PESTLE analysis in detail
below.

Political
In most of the markets where Samsung operates, the political environment is conducive to its
operations and though there are minor irritants in some of the foreign markets like India,
overall Samsung can be said to be operating in markets where the political factors are benign.
However, in recent months, it has faced significant political headwinds in its home country of
South Korea because of the country’s tensions with North Korea wherein the company has
had to take into account not only the political instability but also the threat of war breaking
out in the Korean Peninsula. Apart from this, Samsung faces political pressures in many
African and Latin American countries where the political environment is unstable and prone
to frequent changes in the governing structures. Of course, this is not yet a major cause for
worry as the company has more or less factored the political instability into its strategic
calculations.

Economical
This dimension is especially critical for Samsung, as the opening up of many markets in the
developing world has meant that the company can expand its global footprint. However, this
dimension is also a worry since the ongoing global economic crisis has severely dented the
purchasing power of consumers in many developed markets forcing Samsung to seek
profitable ventures in the emerging markets. The key point to note here is that the
macroeconomic environment in which Samsung operates globally is beset with uncertainty
and volatility leading to the company having had to reorient its strategies accordingly. The
saving grace for the company is that it has adjusted rather well to the tapering off of the
consumer disposable incomes in the developed world by expanding into the emerging and the
developing markets. Indeed, this is the reason Samsung has begun an aggressive push into the
emerging markets in the hope of making up for lost business from the developed world.

Sociological

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Samsung is primarily a South Korean Chaebol or a family owned multinational. This means
that despite its global footprint it still operates from the core as a Korean company.
Therefore, there are several aspects to its global operations some of which include adapting
itself to the local conditions. In other words, Samsung being a Global company has had to act
locally meaning that it has had to adopt a global strategy in many emerging markets. Apart
from this, Samsung has had to tailor its products to the fast changing consumer preferences in
the various markets where it operates. The key point to note here is that Samsung operates in
a market niche that is strongly influenced by the lifestyle preferences of consumers and given
the fact that socio cultural factors are different in each country; it has had to reorient itself in
each market accordingly.

Technological
Samsung can be considered as being among the world’s leading innovative companies. This
means that the company is at an advantage as far as harnessing the power of technology and
driving innovation for sustainable business advantage is concerned. This has translated into
an obsessive mission by the company to be ahead of the technological and innovation curve
and a vision to dominate its rivals and competitors as far being the first to reach the market
with its latest products is concerned. however, as we shall discuss later, this has also resulted
in the company cutting corners with its imitation of the legendary Apple’s product design and
this has brought legal and regulatory scrutiny and troubles for the company. There is a lesson
here for other technology driven companies from Samsung’s experiences and it is that no
matter how fast you are to reach the consumer in this age of Big Bang Disruption, doing the
basics right is still the key to success.

Legal
As mentioned in the last section, Samsung has had to face heavy penalties for its alleged
imitation of the Apple’s iPad and iPhone and this has led to the company taking a beating as
far as public perceptions and consumer approval of its strategies are concerned. It remains to
be seen as to how the company would wriggle out of the legal maze that it finds itself in the
developed markets because of the various lawsuits.

Environmental
With the rise of the ethical consumer who wants his or her brands to source and make the
products in a socially and environmentally responsible manner, Samsung has to be aware of
the need to make its products to satiate the ethical chic consumer. This means that it has to
ensure that it does not compromise on the working conditions or the wages it pays to its
labour who are engaged in making the final product.

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 Ratio Analysis
Every financial report has a message it wants to convey to its readers, as if it were trying to say
something. Guidance is needed to understand financial statements, just as an illiterate person
needs guidance whether it is a person or a book. This guide can be in the form of numbers,
ratios, graphs, tables, assumptions, notes, etc. Using a specific guide, this study closely
analyses the company's performance from FY 2017 to FY 2020, trying to understand the
hidden meanings between the lines, and actually discovering what lies behind those walls. I
was trying to figure things out and happened to expose these numbers during the process. We
also look at the actual situation of Samsung Electronics, as well as whether it has grown or lost
money this time. in the next few years.

3.5. Current Ratio

One liquidity indicator designed to test a company's short-term solvency is the liquidity ratio,
which is the relationship between current assets and current liabilities. It indicates whether the
company is able to meet its short-term financial obligations and when payments are due. It can
be calculated using the given formula.

Wherein, these below list can represent what all comes under current assets and current
liabilities.

Current Assets Current Liabilities

Current Investments Short Term Borrowings

Short Term Investments and marketable securities Trade Payables

Inventories (excluding loose tools, spares &

Short Term Provisions
stores)

Trade Receivables (excluding PDD)

Cash & Cash Equivalents

Page 22 of 51
 Other Current Assets

One point to note is that current rates are calculated for a specific date and not for an
individual. In an ideal situation, the generally accepted standard of the prevailing payout ratio
is 2:1, which can vary across industries depending on the risk involved. The main meaning of
this ratio is to show the number of times current assets are current liabilities. There are two
cases in this report. They are given below as follows.

 In the case of low current ratio: A company having a low current ratio indicates
the adequacy in meeting its short-term obligations due to the fact that they are in a
situation of inadequate investment in the current assets which may result in low
liquidity, and may threaten the solvency of an enterprise.

 In the case of high current ratio: A company having a low current ratio indicates
that the company is able to meet its current obligations on time as its adequately
liquid.

 In the case of very high current ratio: A company having very high current ratio
i.e., more than 2:1 which can display an image of poor operation efficiency. This
could be possible due to certain reasons of the mentioned below.

1. Stocks may be increasing due to poor sales.

2. Large amount is invested in trade receivables due to the poor collection or extended credit
period.

3. Cash & bank balances are lying idle due to poor cash management.

3.6. Inventory Turnover Ratio

Used as one of the Activity or Performance or Turnover Ratios, it establishes a relationship
between cost of revenue from operations, also referred to as cost of goods sold (COGS) end
average inventory carried during that period. It aims to determine the efficiency with which
inventory is used. It can be calculated by using the formula given below.

Page 23 of 51
Wherein, Cost of goods sold has three approaches to solve it. They are given below as
follows.

1.Using Revenue from Operations method

If gross profit (GP) or gross loss (GL) is found
 RFO + Gross Loss or =RFO – Gross Profit

2.Using Net purchases method

 Opening Inventory + Net purchases + Direct Expenses – Closing Inventory

3.Using a method in case of manufacturing expenses

 Cost of materials consumed + Purchase of stock in trade + Change in inventories of
finished goods, work in progress and stock in trade + Direct Expenses

Average inventory is calculated by using the formula given below.

"TIMES" is used to denote average inventory. The primary goal of calculating the inventory
turnover ratio is to determine if the investment in stock, which is the only necessary amount
invested in the stock, is wise or not. In addition to measuring inventory management
effectiveness, it also shows how frequently the money used to purchase goods is cycled.
In this ratio, there lies three kinds of cases. They are as follows.

 In the case of low inventory turnover ratio: A low inventory turnover ratio
means that there is inefficient use of investments in inventory, over investments in
stocks, the accumulation of the inventories etc.

 In the case of high inventory turnover ratio: A high inventory turnover ratio
shows that there are more sales being used or produced by a rupee of investments in
the inventories.

 In the case of very high inventory turnover ratio: A very high inventory
turnover ratio shows overtrading and it might result in shortage of working capital.

Page 24 of 51
3.7. Net Profit Ratio
The net profit ratio is one of the most used profitability ratios. This is mostly used to assess
the company's financial performance. The link between net profit and net sales, or revenue
from operations, is established by the net profit ratio. The formula to calculate net profit ratio
is given below.

Wherein,
 Net Profit = Revenue from operations (Net Sales) – Cost of Revenue from operations
(COGS) – Operating Expenses – Non-Operating Expenses + Non-Operating Income –
Tax

 Gross Profit = Non-Operating expenses + Non-Operating income – Tax

Revenue of operations have various ways to be found. A few of the ways out of them are
given below as follows.

 Using COGS: In the terms of cost of goods sold, it is found out that when the cost
of goods sold is added with gross loss or subtracted with the gross profit.

 Using sales: In terms of sales, it is found out that the below given formula is used
which is Net Sales = Sales – Sales Returns
Wherein, the sales can be even the summation of cash & credit sales.
It is inscribed as ‘PERCENT’. This ratio serves as a gauge for the company's general
effectiveness. Net profit ratio, which is also known as the profit margin, shows how each unit
of currency revenue that a business generates is converted into profits. Because rising profit
margins (earnings) are directly correlated with rising share prices, it is common to see
corporations with increasing net profits rewarded with rising share prices.
Every organization's financial health is directly correlated with its net profit ratio.

3.8. Cash Flow Statements

The Cash Flow Statement, one of the required documentations that must be prepared by
every organisation in conformance with IFRS requirements, gives information on cash
inflows and outflows that is sometimes absent from our financial and income statements. The
main cause for the difference between the opening and closing balances of cash and cash
equivalents is shown in the Cash Flow Statements.

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 Operating Activities, Investing Activities, and Financial Activities make up the three main
parts of these statements. As the aggregate of these three gives us the net change value, each
of them is reliant on the other two.
The table which is represented below represents the summarized description of the three
components of the Cash Flow Statements.

TABLE 3.1
Table representing the various components of cash flow and its descriptions

Activity Name Negative Value Positive Value

Items present in it
under CFS (Depiction) (Depiction)

Net profit before tax

and extraordinary Cash flow generated
Operating Activities Cash Flow used here
items, Cash generated here
from operations, Tax

Sale and purchase of

tangible goods,
Cash flow generated
Investing Activities investments receiving Cash flow used here
here
interest, rent and
dividend

Sale & Purchase of

shares, debts,
Cash flow generated
Financing Activities dividends etc, Cash flow used here
here
repayment of financial
items etc.

Additionally, other tiny details as changes would be taken into account in order to determine
the overall change. Not only that, but it also shows how the operations, investments, and
financials are doing, where all the money is going or coming from, how much more or less
money is coming in than before, and if the process was successful or unsuccessful.

Page 26 of 51
3.9. Reserves Valuation
Each organisation's daily operations depend heavily on their reserves. It refers to the part of
profits set aside by the organisation to cover potential losses, future uncertainties, enhance
financial situations, or have money for any upcoming plans or investments. To satisfy their
needs during pivotal moments, different organisations maintain a variety of general and
particular reserves.
In case of Samsung Electronics Co. Ltd, these are the following reserves maintained.

 Security Premium Reserve

The amount received in excess of the nominal (face) value of securities (such as shares,
debentures, etc.) is credited to the securities premium reserve. It may be utilised by the
business for the objectives outlined in Section 52(2) of the Companies Act 2013.
Additionally, the corporation views it as a capital reception because the money is not
permitted to be included as revenue. In actuality, the company's members never get a
dividend from the sum held in the securities premium reserve.

 General Reserve
To prepare for any potential future uncertainty, the money is being maintained separate
from the earnings in this. The reserve is established in Samsung Electronics Co. Ltd.
instance in order to transfer equity components to other partners. General reserve items
are frequently not classified under the income statement.

 Retained Earnings
In accounting terminology, retained earnings refer to the fraction of profit that remains
after distribution to shareholders. Though money belongs to the shareholders in either
case, the firm has the right to retain some of its earnings, which might be employed in
future aspects of the company. There is never a scope of retained earnings in financial
years where the corporation registers a net loss. Most dividend decisions are made by the
firm in light of not just their own development, but also of external environmental
prospects. As a result, the decision of whether to retain earnings or distribute them to
shareholders is highly subjective.

 Employee Welfare Fund

This is a sum of money set aside for use in promoting the wellbeing of employees, often
known as the Labour Welfare Fund. In the case of Samsung Electronics Co. Ltd, around
1% of their net earnings after tax is being used in this area, which focuses on aspects like
housing, education, and health needs.

Page 27 of 51
  Scientific Research Fund
To be able to cover costs incurred outside of the R&D department, money has been set
aside in this fund. In the instance of Samsung Electronics Co. Ltd, this is around 1% of
their net profit after tax.

3.10. Investments
Every company's investment in one area or another is essential to its operation. Investments
aid in both personal and professional progress by enabling the organisation to expand
geographically and boost yearly profits. The increase in profitable investments results in an
increase in earnings, which ultimately results in an increase in dividend payments to
shareholders. Investments are therefore crucial to consider while examining the company's
financial success and health.
----------------------------------------------------------------------------------------------------------------

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 UNIT-IV
Analysis & Understandings of the company

4.1. Standalone & Financial Statements

Every organization produces two sets of financial statements each year: standalone
statements and consolidated financial statements.

Standalone Financial Statements are those financial reports that show the individual
financial situation of an entity. This is a significant flaw in that it does not take into account
the financial status of the company's subsidiaries. Due to incomplete information, investors
may analyse these types of claims and make poor investing judgments.
There is a high possibility that a single entity's development would vary from that of its
subsidiaries, which the standalone financial statements do not indicate.

Financial status of the organization as a whole is shown in Consolidated Financial

Statements. Investor would be getting a clear image of both the parent firm and the
subsidiary company through this type of statement. Certain transactions which have a greater
influence on standalone financial statements might not appear in the consolidated statements
and might become clear to investors during their inspection.

However, here in the case of simplicity, this research project would be considering the
Consolidated Financial Statements for the analysis of Samsung Electronics Co. Ltd.

4.2. Financial Analysis of Samsung Electronics

The following given below is a detailed analysis of the data analysed using Samsung
Electronics Co. Ltd.’s annual reports for the above mentioned aspects.

4.2.1 Current Ratio of the company

Fig 1: Graphical Representation of the position of Current Assets & Current
Liabilities

Page 29 of 51
 Ratio/Year 2019 2018 2017 2016

Current Ratio 2.84 2.53 2.19 2.59

Quick Ratio 2.42 2.11 1.82 2.25

Cash Ratio 1.71 1.46 1.24 1.61

The below excel chart represents the current ratio of the company.

Current ratio
3.00

2.50 2.84
2.53 2.59
2.00
2.19

1.50

1.00

0.50

0.00
2019 2018 2017 2016

The current ratio, commonly known as a measure of a company's ability to repay short-term
loans, indicates how well its current assets can cover its current liabilities. Anything below
1.0 indicates that they do not have sufficient money to meet their present liabilities, while
anything above 2.0 indicates that they have enough money to meet their short-term liabilities.

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The ideal ratio must be between 1.5 and 2.0. SEC indicates consistently high ratios for a time
period of four years, all of which are above 2.0, and it has begun to rise more rapidly since
2017. It indicates that they are capable of handling of their current commitments. Their
capability can be explained by the SEC's emphasis on liquidity. The SEC have established
strict management to safeguard against every deteriorating situation that might cause them to
be become illiquid.

4.2.2. Quick Ratio of the company

The below excel chart represents the quick ratio of the company.

Quick Ratio
3.00

2.50
2.42
2.00 2.25
2.11
1.82
1.50

1.00

0.50

0.00
2019 2018 2017 2016

A quick ratio, particularly includes inventory, provides a better understanding of how liquid a
firm is when it comes to covering its immediate liabilities. Since the ratio has maintained
over 1 through that timeframe, SEC will not really seem to have difficulty in paying its short-
term debts off within the four-year period between 2016 and 2019. The rise in the ratio from
1.87 in 2017 to 2.42 in 2019 not only indicates that the SEC has excellent liquidity
management, but also how effective they are in enhancing their liquidity position.

4.2.3. Inventory Turnover Ratio of the company

Fig 2: Graphical Representation of Inventory Turnover Ratio of the company
The below excel chart represents the inventory turnover ratio of the company.

2019 2018 2017 2016

Page 31 of 51
 Ratio/Year

Inventory
5.50 4.57 5.18 6.55
Turnover

Receivables
6.56 7.20 8.56 8.31
turnover

Total Assets
0.65 0.72 0.79 0.77
Turnover

Inventory Turnover
7.00

6.00 6.55

5.00
5.50 5.18
4.00 4.57

3.00

2.00

1.00

0.00
2019 2018 2017 2016

Inventory turnover ratio indicates how frequently a business is selling and replaces its
inventory at a certain time. A relatively high turnover ratio would be advisable for the firm

because a low turnover can be an indication of inefficient inventory control. SEC data
indicates that they replaced their inventory 6.55 times in 2016, but that number is dropped

Page 32 of 51
down to 4.57 times in 2018. It did, however, appear to have made a little recovery since it
increased to 5.50 times in 2019, indicating that the inventory was handled more efficiently in
2019 than it was in the preceding two years.

4.2.4. Receivables turnover ratio of the company

The below excel chart represents the receivables turnover ratio of the company.

Receivable Turnover
10.00
9.00
8.00 8.65
8.31
7.00
7.20
6.00 6.56
5.00
4.00
3.00
2.00
1.00
0.00
2019 2018 2017 2016

Receivable Turnover Ratio measures how effectively and efficiently a business collects the
funds owed to it by its clients. If the ratio is said to be greater, it would indicate that the
business has been accepting debtor payments from clients more promptly, which is absolutely
ideal as there are more chances to enhance cash flow. Efficiency increased slightly between
2016 and 2017, rising from 8.31 times to 8.56 times. So in between 2017 and 2019, it began
to decrease, falling from 8.56 to 6.56 times. When compared to the preceding three years,
2019, it turned out, had the lowest Receivable Turnover. This indicates that they are
experiencing some issues with getting their debtors to repay them.

4.2.5. Debt ratio of the company

Fig 3: Graphical Representation of Debt Ratio of the company

Ratio/Year 2019 2018 2017 2016

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 Debt Ratio 25% 27% 29% 26%

Times Interest
40.46 87.29 81.85 49.74
Earned Ratio

The below excel chart represents the receivables turnover ratio of the company.

The debt ratio shows the proportion of a company’s assets that are financed by debt. SEC
shows a debt ratio of less than 100%, which is desirable for investors and creditors to see. It
also indicates that they have more assets than debts, which suggests that they are financially
healthy. 2017 was the year that SEC had experienced its highest debt ratio of 29% within the
4 years. However, it has fallen from 29% to 25% in 2019. This is a good indication of SEC’s
financial health as they do not appear to be heavily reliant on debts to fund their assets,
especially since it had decreased from 2017 to 2019.

Debt ratio
30%

29%

28% 29%

27%
27%
26%
26%
25% 25%
24%

23%
2019 2018 2017 2016

4.2.6. Times Interest Earned Ratio of the company

The below excel chart represents the times interest earned ratio of the company.

Page 34 of 51
 Times Interest Earned Ratio

100.00
90.00
80.00 87.29
70.00 81.85
60.00
50.00
40.00 49.74
30.00 40.46
20.00
10.00
0.00
2019 2018 2017 2016

The times interest ratio measures a company's ability to cover interest costs using existing
EBIT (Earnings Before Interest & Tax).  It shows how often an organisation might be using
EBIT to pay interest. Since their ratio in 2016 indicates that the company is 49 times
sufficient to cover their interests, SEC illustrates that they are quite able to meet their duty to
pay interest, with 2018 acting as the highest ratio at 87 times. The significant number of times
that illustrate the company's willingness to pay interest shows that it will have no difficulty
fulfilling its long-term obligations. However, in 2019, the ratio decreased dramatically to
nearly 40 percent. This is possibly reflected by the company's declining sales, which have
caused its EBIT to fall. With the additional issue of increasing interest payments in 2019, it is
assumed that this has led to the company's difficulties in meeting its requirements.
The organization seems to be less reliant on borrowing to support its assets, which is shown
by the SEC's debt ratios, which has also improved further in 2019. The SEC was in decent
condition from 2016 to 2018, though, as seen by the Time Interest Earned Ratio, which fell
by 50% in 2019. SEC nevertheless provides a low risk for creditors and investors in choosing
the firm as the choice for lending to or investing in, because the ratios show the company to
be solvent, based on their high regularity of paying interest and low debt to equity ratio.

4.2.7. Net profit ratio of the company

The below excel chart represents the net profit ratio of the company.

Page 35 of 51
 90,000
80,000
70,000
60,000
50,000
Net Profit

40,000
30,000
20,000
10,000

0
1 2 3 4
Net Profit

Over here, as shown in the graph, the levels of profits can be seen as being in a mixed
relationship with the change in investments, which represents how effectively the two types
of investments have been striving to balance each other's impacts in order for SEC to benefit
from the returns. However, an exception of the least investments has resulted in a decline in
Net Profits as these demonstrate the serious impacts of the pandemic. Coronavirus, which
affected the whole economy. However, profitability wasn't the company's primary objectives.
Its numerous stakeholders were equally concerned in the valuation of the returns offered in
terms of equity and dividend.

4.2.8. Profitability ratio of the company

Fig 4: Graphical Representation of Profitability Ratio of the company

Ratio/Year 2019 2018 2017 2016

Return on
8% 18% 20% 12%
Equity

Return on
6% 13% 14% 9%
Assets

Page 36 of 51
 Profit Margin 9% 18% 17% 11%

The below excel chart represents the times profitability ratio of the company.

Profitability Ratio
25%

20%
20%
18%
15%

10% 12%
8%
5%

0%
2019 2018 2017 2016

Profitability ratio shows a company’s ability to effectively utilize their shareholder’s equity
into profits. If the percentage is high, it indicates that the company is effectively using their
investor’s funds to produce profit, which is what most shareholder’s desire to see as it
indicates higher returns from their investments. With an increase from 12% to 20% in 2016 to
2017, SEC has been utilizing their shareholder’s equity effectively to generate profits.
However, from 2017 to 2019, it has fallen from 20% to 8%. This can suggest that Samsung
may have slowed down in seeking to generate returns for their investors as they have been
ineffectively used their investor’s finance from 2017. Moreover, it is suggested that this drop
could be due to the decline in their profits. This can be risky factor as it could discourage
potential investors in selecting SEC to invest in. It can be explained with the help of Returns
to Total Assets.
The below excel chart represents the return of total assets of the company.

Page 37 of 51
 Return on Total Assets
16%

14%
14%
12%
13%
10%

8%
9%
6%

4% 6%

2%

0%
2019 2018 2017 2016

Return on Total Assets measures how efficiently a firm can generate profit from its assets.
From 2016 to 2017, it grew from 9% to 14%, illustrating that the company was efficiently
employing their assets to earn profit. However, it has reduced from 14% in 2017 to 6% in
2019. This shows that the SEC has inefficiently leveraged its assets to generate profits, since
their net income has reduced in 2019. The decrease in their ROA is similarly related to the
decrease in their ROE, since that it indicates that they have not been employing their
investor's funds efficiently in order to generate profits. The decline in this ratio might be
disheartening for investors who are looking for a firm that really can assure strong returns on
their investments.

4.2.9. Profit margin of the company

Profit Margin
20%
18%
16% 18%
14% 17%

12%
10%
11%
8%
9%
6%
4%
2%
0%
2019 2018 2017 2016

Page 38 of 51
The above excel chart represents the times profit margin of the company.
Profit margin shows how a company effectively generates profits from the sales that they
have made. SEC shows that they have been successful in the growth of sales from 2016 to
2017, resulting to an increase in profit margins from 11% to 17%. This can be explained
through their release of their QLED TV, which is the very first kind of TV in the global
market, and this had boosted their sales as they were highly demanded. They continued to
secure their leadership in the year 2018, which improved their profit margin to 18%.
However, there is a decline in their profits due to fall in sales during 2019. It has been
suggested that Samsung had been negatively affected by the trade war between US and China
and to fierce competition, which results to a fall in demand towards one of their products,
semiconductors. This resulted to significant fall in sales and it had affected the company’s
profits. Overall, this can be predicted on the basis of their ROA and ROE, as the previous
ratios had depicted an inefficient usage of assets to generate profits.
Overall, the profitability ratios show that the company had experienced difficulties in
generating profits over the years from 2018 to 2019. This fall in profits can be explained
through the increases in operating costs and decline in sales, which had led to a significant
fall in their operating profit in 2019 as compared to 2018. Furthermore, their ROE and ROA
has shown that the company has been inefficient in utilizing their total assets in generating
sales, which had led to the fall in their profits. The drop in these ratios can be discouraging
for potential investors as low confidence is expected when these figures depict potential low
returns for SEC’s shareholders.

4.2.10. Cash flow statements of the company

Cash flow analysis of Samsung Electronics Co. Ltd

Cash Flow Statements of SEC FY 2017-2020

70,000,000

60,000,000

50,000,000

40,000,000

30,000,000

20,000,000

10,000,000

0
1 2 3 4

Operating Investing Financing

Page 39 of 51
The above graph depicts the various sources of cash flows of the company, namely
Operating, Investing & Financing for the FY 2017-2020. They can be seen briefly as follows
given below.

1.Financial Year 2017 (April 2016 – March 2017)

In FY'17, it can be seen that, as compared to the previous financial year, operating
activities, rose in terms of generating more revenue for the firm by a margin of 21.21%.
Investing activities have consumed nearly 27% more cash in the acquisition of the resources
and commodities for the firm than that of the previous year. Analysing the financial
operations, additional cash was used to repay various financial issues, resulting in an overall
drop of approximately 8.68% in FY'17.

2.Financial Year 2018 (April 2017 – March 2018)

In FY'18, it can be seen that, as compared to the preceding financial year, operating activities
earned a higher amount of funds in the firm by almost 17.76%. Investing activities have
fallen by about 9.5% in the acquisition of various types of assets, receiving things such as
dividends and interests. Financial activities, on the other hand, have exhibited a 204.27%
increase in overall income utilisation towards repayment of financial instruments as
compared to the preceding year.

3.Financial Year 2019 (April 2018 – March 2019)

When compared to the previous calendar year, operating activities earned nearly 44% less
revenue in the firm in FY'19. The sale of various types of assets have increased, while the
collection of commodities such as dividends and interest has dropped by approximately
57.36%. Financial activities, on the other hand, have exhibited a 14.21% reduction in overall
cash utilization towards repayment of financial instruments compared to the preceding
financial year.

4.Financial Year 2020 (April 2019 – March 2020)

The deadly Coronavirus first appeared in this fiscal year (FY'20), and every business in the
world had been devastated by its effects. Operating activities generated the least amount of
cash in the firm in the FY'2/0, a decrease of 47.04% from the preceding financial year, as can
be observed. The sale of various types of assets have increased, and payments of items like
dividends and interest have decreased by almost 84.28%, reflecting an increase in investment
activity. The financial sector, on the other hand, has seen a 5.31% decrease in the total
amount of money used altogether to repay the financial instruments from the preceding year.

Page 40 of 51
 4.2.11. Reserves & Surplus of the company
An organisation has various kinds of reserves & surplus in his business, in order to provide a
security against any sort of economical uncertainty or loss, which has become a common
practice for occurrence.
In other words, this stands as a protection against any risk factor, which is or can be faced by
the company.

Years Securities Reserves created

Capital Reserves General Reserves Retained Earnings
Premium on Amalgamation

Openin Closing Openin Closing Openin Closing Openin Closing Openin Closing
g₹ ₹ g₹ ₹ g₹ ₹ g₹ ₹ g₹ ₹

FY
4,241 4,241 2 2 29,309 29,309 2,57,353 3,19,627 9,153 9,153
2017

FY
4,241 4,241 2 2 29,309 29,309 3,19,627 3,19,627 9,153 9,153
2018

FY
4,241 4,241 2 2 29,309 29,309 3,71,027 4,16,520 9,153 9,153
2019

FY
4,241 4,241 2 2 29,309 29,309 4,16,520 4,42,143 9,153 9,153
2020

The different reserves and surplus that Samsung Electronics Co. Ltd. holds are shown in the
above table. However, the company's retained earnings are the one that has undergone the
maximum alterations.

Retained Earnings are the portion of net earnings that have been set aside for the
shareholders, to simply define it. It can also be considered as the upper end of shareholder
equity, which aids the business in determining the book value of the shares.
Many individuals might assume that the revenue and retained earnings are connected.
Nevertheless, the revenue is the sum that the firm receives at the completion of all of its
economic activities. This sum eventually becomes a portion of net income, a portion of which
is referred to as retained profits.

Page 41 of 51
The amount of income classified as Retained Earnings is based on the company's history in
the sector and its present age. In other words, the amount of money that may be appropriately
set aside as Retained Earnings depends on the company's competence. A Win-Win situation
is created when more mature and experienced businesses choose to operate at greater income
levels, which allows them to set away lesser funds and distribute the remaining funds to their
shareholders. On the other hand, smaller businesses must devote a significant portion of their
profits to retained earnings in order to survive in the market, leaving them with less revenue
to distribute to their shareholders.

The below excel chart represents the retained earnings of the company.

Retained Earnings of SEC

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000

Series1

The above graph depicts the change in the level of the retained earned kept by the company
in each of the financial years from 2017 to 2020. It can be explained as follows.

1.Financial Year 2017 (April 2016 – March 2017)

Page 42 of 51
Retained Earnings were valued approximately at 24.2% higher in this financial year than they
were in the previous one, as we can observe from the comparison. The potential rise in net
sales valuation from FY16 to FY17 of around 19% shows the most likely cause of an increase
in valuation.

2.Financial Year 2018 (April 2017 – March 2018)

Retained Earnings were valued for less in this year's financial year than in that of the
previous one, a fall of nearly 13.85% from the valuation in the prior year. The fact that the
expenditure of depreciation and amortisation increased by a margin of 14.52% in that year
indicates what is likely to have caused this decline in the value.

3.Financial Year 2019 (April 2018 – March 2019)

Retained Earnings were valued at a lower amount this year than they were valued last year, a
fall of an additional 12.26% from the previous financial year. The fact that in that year, a
6.66% increase in dividend amounts for preference shareholders as well as a 9.46% increase
in costs spent out of depreciation and amortisation for that year may be considered as the
likely cause of this continuous fall in the valuation.

4.Financial Year 2020 (April 2019 – March 2020)

The fatal Coronavirus impacted worst this year, having an impact on the global economy and
all firms everywhere. It is clear that the valuation of retained earnings has decreased by
6.15% this year as compared to the prior fiscal year. This is due to the business's Net
Revenue value dropping by about 11%, as well as a rise in depreciation and amortisation
costs of INR 5,076 million. Even the distribution of dividends to stockholders remained
unchanged during this pivotal pandemic year.

Along with the above mentioned Retained Earnings, the proportion of the retained earnings to
its net revenue could be depicted in the following manner.

Graphical representation of the Retention Ratio analysis of the company.

Page 43 of 51
In simple terms, the retention ratio calculates the percentage of net earnings that are held back
for future use rather than being distributed to shareholders. As it withdraws the earnings
belonging to the company's investors, it is frequently used as the plowback ratio.

The above given graph displays how much of the amount is being retained back by the
business. It can be briefly explained as follows.

1.Financial Year 2017 (April 2016 – March 2017)

The retention ratio for this FY'17 has been approximately 40%. This is a 1.35% increase in
the value of Retained Earnings over the prior year. This indicates that the earnings are being
allocated in a larger 4:6 ratio, giving preference shareholders an edge over equity owners in
terms of remuneration and the corporation setting aside more money for their future
requirements.

2.Financial Year 2018 (April 2017 – March 2018)

The retention ratio has grown in this FY'18 by 4%, or to a final value of 44%. The payment
for preference has now decreased somewhat from its initial pay out of 0.6 per INR to now,
0.56 per INR, when compared to the preceding year. In the instance of the organization, their
retention of the earned revenue has increased in comparison to the preceding year.

3.Financial Year 2019 (April 2018 – March 2019)

Analysis of the FY'19 reveals a further increase in the retention ratio of 3% over the prior
year. The valuation of the payout to preference shareholders is declining as a result of the
retention ratio's ongoing growth.

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4.Financial Year 2020 (April 2019 – March 2020)
The conditions surrounding the devastating pandemic caused by the Coronavirus in this
FY'20 have been critical for the firm. The corporation has grown to 56% in this. This
illustrates the fact that the major reason for keeping these profits was to protect the business
from the devastating pandemic's consequences on the operations.

4.2.12. Investment Description of the company

A company invests primarily for two reasons: firstly, to have a source of income, and
secondly, to have a source for future growth requirements. The liabilities side of the
positioning statement takes care of the expansion demands, while the assets side of the
positional statement has historically been the source of return.
The main reason for the assets being a source of investment is the very fact that it is always
acquired by the business to generate the economical values for the business. As stated in
International Finance Reporting Standards (IFRS), A38, point no.4, it has described assets as
“Present economic resource which is controlled by the entity as a result of the past events”
and point no.4.4 states economic rights as “A right which is having the potential to produce
the economic benefits”.
The investments are assessed here with both long-term and short-term investments in mind,
since each provide various sets of advantages to the company. Both are distinguished by the
operational cycle component, that is, while the former does not dwell in the duration of the
operating cycle, which is approximately 12 months, the latter always does.
These investments would then be examined to determine the amount of net profits generated
by these investments, as well as how effectively the earnings and dividends per share value
are formed from these returns.

The valuation of the changes in the level of Non-Current and Current Investments of
Samsung Electronics Co. Ltd from the FY 2017-20. This can be analysed as follows.

1.Financial Year 2017 (April 2016 – March 2017)

The total condition of non-current investments grew by nearly 38.1% in this fiscal year due to
a rise in the values of equity instruments in associate firms and joint ventures. Current
investments, on the other hand, have risen by 90.1%, with the growth being driven by an
increase in mutual debt fund valuations.

2.Financial Year 2018 (April 2017 – March 2018)

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The position in non-current investments has improved by nearly 29.42% in this fiscal year,
owing to further investments in equity instruments in associate firms and joint ventures. In
contrast, a 44.13% drop in current investments was seen in comparison to the previous year,
owing to a drop in mutual debt fund investments.

3.Financial Year 2019 (April 2018 – March 2019)

When looking at the fiscal year 2019, it is clear that non-current investment valuations have
dropped by 7% compared to the previous year, owing to a drop in other equity-based
investments, though the difference has been counterbalanced by an increase in investments in
associate companies, joint ventures in equity instruments, and long term debt instruments.
Current investments, on the other hand, have increased by 314.5% due to an increase in
investments in short-term mutual debts.

4.Financial Year 2020 (April 2019 – March 2020)

In this fiscal year, the organization faced a critical position due to the devastating epidemic
caused by the Covid. Non-current investments have increased at about 12% in comparison to
the previous year's value in order to protect the firm against long-term uncertainty. The
growth has been seen in associate firms and long-term credit unions, while joint ventures
have taken a hit. Current investments, on the other hand, have fallen by about 76%, owing to
a decline in short-term mutual debts. This can be explained with the help of a graphical
representation which is given below.

Graphical Representation of the Total change of investments in the company

T otal C hange of Investments in S E C

12

10

0
- 60,000 - 40,000 -20,000 0 20,000 40,000 60,000 80,000 100,000 120,000

----------------------------------------------------------------------------------------------------------------

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 UNIT-V
Observations & Conclusions

5.1. Observations & Findings of the study

Post the analysis, the following observations can be made and they are given
below as follows.
 Until the end of fiscal year 2019, the company has been strategically performing well
in its operations, investment, and financial aspects. Yes, it is true that the
Coronavirus had a significant influence on the firm; as a manufacturing industry, it
had severe consequences on production scales and sales generations during those
years, but the corporation nevertheless maintained its consumers satisfaction.

 In terms of the trend exhibited in the current ratio, SEC's current obligations meeting
capability isn't outstanding, leaving opportunity for development in order to preserve
good relations with its short-term debt holders.

 It has strong inventory value control, which maintains its inventory utilisation within
a range, but it can absolutely improve.

 Due to the extensive distribution of the image and also its exceptional customer
service, post-purchase evaluations have also fuelled purchases, which have poured
large quantities of Profits, despite the effects of Coronavirus. The reason that the
profit level has not dropped much is due to the great services supplied to its new and
loyal consumers.

 Finally, its relationships with its internal stakeholders have been extremely positive
in terms of the returns obtained. However, in the future years, it will need to be more
tactical with its relationships, as possibilities to influence minds abound, if it appears
more appealing than its existing returns.

Post the analysis, the following findings have been made and they are given
below as follows.
 Goods or services offered by SEC are considered to have a good quality when
working or has the desired value as desired. The quality of the services provided gives
a very well positive impression & make their customers more loyal.

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  It is stated that a quality becomes an important aspect to meet its overall
characteristics and quality of a product or a service affects its ability to meet their
implied needs.

5.2. Tools for process improvement & quality control

The necessary tools for improving the process and quality of Samsung are briefly explained
below as follows.

 Six Sigma: After applying six sigma quality practices to the company’s business
functions. Samsung has managed to achieve almost 50% of its defects in 1991-2001.
The same year, the net income of the company was $2.2 billion while the revenues
were $24.4 billion. By the year 2001, their market capital was around $43.6 billion.
Until today, the overall consumer satisfaction has reached 85.4 point in the year 2019.

 Material Quality Control: The selection of reliable suppliers, constant material

and components assessment are key points for achieving performance improvements
in Samsung. For example, a new Qualcomm Snapdragon 865 processor was found to
be better than the previous Snapdragon 855 by 25% in terms of CPU, and by 20% in
terms of GPU. Now, among the best global brands Samsung is in 5th place with brand
value of $62.3 billion and 2% year on year growth rate.

5.3. Recommendations for future products

From the perspective of the consumer, Samsung performs superior after-sales services in
South Korea, but not as well in the rest of the globe. Technical support, staff passion, and
service speed are critical and must be enhanced at Samsung. This might also assist the firm in
managing its community, and its consumers would be more loyal to the company.
Samsung is always developing and implementing good leadership techniques. The evidence
of their effectiveness suggests that executives should concentrate on continual corporate
transformation. Limiting oneself to a single product or service will not ensure survival in the
present competitive environment. Leaders should consequently focus their expertise on
developing a platform with a broad ecosystem. Both firms are working hard to provide a
pleasant environment for group work. As we suggest, this may be a wise decision. Leaders
should focus all of their skill, proficiency, and potential on how to build harmony among staff
in order to come up with ideas that will satisfy their customers.
Furthermore, we can observe from this study that Samsung has spent more money on HR
management and received benefits for their talent development.

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In terms of performance, data has demonstrated that the organisation has a unique approach
to controlling quality in that sector. Samsung, on the other hand, may employ balanced
scorecards for ongoing quality control. This research clearly demonstrates that the
organisation is focused on hardware/software innovation. As a result, in order to improve
quality, the organisation broadened its target area to capture and manage excellent innovation
and design.
Finally, the company's performance gains reveal that, from a production and material
standpoint, they exceed the bulk of mobile vendors, including Apple, owing to good ties with
large suppliers like as Qualcomm. To become a really powerful corporation, Samsung must
use these strategies at the design stage. Samsung has to reconsider their Six Sigma procedures
of determining which input factors have the most influence on the output.

5.4. Conclusion
According to the findings of this study, the brand name, brand image, and service quality all
have an impact on the formation of buying intentions for Samsung's smartphones. This
research also demonstrates the impact of purchase intention on Samsung product purchase
decisions. This condition indicates that the purchase intention is high when the customers
receive the advantages that they expect, and the quality perceived by the consumers
influences their propensity to acquire a product. Furthermore, the greater the customers
perception of value, the greater the consumers’ willingness to purchase the goods.

This research project contains suggestions to the manufacturer of Samsung electronic

products to design a product that is safe, easy, and enjoyable for its users, since if the
customers feel good and satisfied, they will purchase the product. In addition, Samsung's
service centres will assist to strengthen the image of the products by providing outstanding
products and service centres in every place where the Samsung firm operates. It would be
more useful to customers who want to buy that company's product.

Finally, it can be concluded that Samsung Electronics, even after decades of

existence, has been living up to the expectations of its customers and investors,
and has the potential to rise in the eyes of its stakeholders, provided it preserves
its heritage which has been functioning for many years.
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 BIBLIOGRAPHY

1. Wikipedia - Samsung Electronics

2. Research Methodology of Samsung Electronics & Co. Ltd by Nikita Jangid)
3. Quality Management practices of Samsung Electronics by Alisher Kadamov
4. Management Study Guide on PESTLE Analysis
5. Ratio Analysis of Samsung Electronics by Karen Telan
6. Quality Management practices of Samsung Electronics & Apple by the team
"The Manifest"

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APPENDIX

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