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Lazarski University FACULTY OF ECONOMICS AND MANAGEMENT Module Title Programme Project weight Financial accounting BA in Management 40% Semester Level Project st Spring 2022 attempt Due date Module Leader Internal Moderator Written report: May 25/27, Dr Tomasz M Napiórkowski 2022 In-class presentation: June 01/03, 2022 Financial Analysis of Samsung and LG Electronics Name: Duong Thi Thao Ly Student number: 45618 Introduction to Company Samsung is a South Korean multinational company that was established in 1969 and right now becoming one of the world's largest corporations and is known globally for its electronic products The company is manufacturing several technologies, and electronic appliances such as mobile phones, laptops, TVs, refrigerators, and other products One of their competitors is LG Electronics, which was established in 1958 in South Korea and has led the way into the advanced digital era thanks to the technological expertise acquired by manufacturing many home appliances such as radios and TVs Now, it is the second-largest electronics maker after Samsung Electronics Although LG Electronics lags behind Samsung in semiconductors and smartphones, the two companies are in close competition in areas such as TVs, washing machines, and refrigerators, at home and abroad Ratio Analysis Liquidity ratios calculate the willingness of a corporation to repay its liabilities using its current asset Checking the cash ratio, current ratio, and quick ratio, Samsung has 0,44, 2.48, and 2.01 in 2021 while LG Electronics only has 0.26, 1.16, and 0.26 That means Samsung company manages its liquidity better than LG However, the frequency of a company selling and replacing Samsung inventory at a certain time is worse than LG because the Inventory turnover of Samsung in 2019, 2020, and 2021 are respectively 1.32, 4.91, and 4.53 while LG has 7.9, 7.5, and 6.49 Solvency ratios examine a firm's ability to meet its long-term debts and obligations The Ratio of Fixed Assets to Long-term Abilities of LG shows lower numbers from 2019 to 2021 than Samsung It means that Samsung has the ability to cover its debt better than LG Recording a higher profitability ratio is getting the firm better financially In general, based on ROE and ROA ratio, the finance of Samsung shows a better looking than LG However, during Covid 19 pandemic in 2020, LG show a higher performance with 13% ROE while Samsung has only 4% The price-earnings ratio tells investors how much a company is worth Both LG and Samsung have unstable PE ratios from 2019 to 2021 The PE ratio of Samsung and LG both increased from 2019 to 2020 and both decreased from 2020 to 2021 Goal - Short-term goal: Samsung announced that in 2022 they will promote environmental sustainability by saving more energy and encouraging more eco-conscious energy use, ramping up the use of recycled plastic - Long-term goal: Samsung's long-term goal is to become the leading consumer electronics organization in the world thanks to its large customer base and devote their talent and technology to create premium products and services that contribute to a better global society - Short-term goal: LG's short-term goal is to let customers experience the new concept F.U.N for "first, unique and new" in 2022 LG also commits that they will reduce environmental impact and increase the use of recycled materials in packaging and reduction of plastic components - Long-term goal: LG aims to create the values needed by society through constant interaction with society, minimize any negative effects on society and the environment and positively impact the world in the process of promoting its corporate business management PESTEL Analysis LG Electronics Tax laws change, political crisis in Asia, leadership changes often, terrorism prone Samsung Faced political pressures in African and Latin American countries India, China support for Samsung Economic The currency fluctuations affect business of LG Electronics Social People's income increased and the desire for social status increased that cause the needs of buying advanced appliances LG keeps pace with technical advancements and changing consumer needs Expand profitable ventures in emerging nations Corporate finance is affected by volatility in the stock market Successfully customize products according to the needs of local customers in term of caring sociocultural forces Use digital technology to market and establish customer relationships Invest heavily in research and development Focus on reducing its energy consumption and managing risk associated with water consumption, establish targets to significantly reduce greenhouse emissions Face heavy penalties for imitating Apple’s iPads and iPhones Customer claims compensation due to exploding mobile phone Political Technology Environment The electronic waste that is produced was unregulated how much carbon effect they have behind with every unit of item they produce LG protects its technology so that competitors cannot copy it illegally and take away a competitive advantage Environmental laws should be strictly followed by LG Legal Recommendation and Conclusion Based on the comparison of the two companies' ratios, it is clearly seen that investing in Samsung's stock for the long term is safer than LG Electronics because Samsung’s consistent profitability has been matched by an equally consistent profit margin The company has remained profitable year after year, even in the face of the COVID-19 pandemic In conclusion, both companies appear to be doing well financially However, there are both internal and external factors such as economic fluctuations, Covid-19, management, and business strategies that two companies have different challenges and values Appendix Liquidity Accounts Receivable 2019 9.79 LG Electronics 2020 2021 9.36 9.75 2019 6.68 Samsung 2020 7.17 2021 7.80 Turnover Numbers of Days' Sales in Receivables 37.29 38.99 37.42 54.65 50.94 46.79 Inventory Turnover Numbers of Days' Sales in Inventory 7.90 46.18 7.50 38.40 6.49 56.21 , 69.10 4.91 74.28 4.53 80.53 Cash Ratio Working Capital Current ratio Quick ratio Solvency 0.27 2095569 1.12 0.79 0.42 117602496 2.84 2.42 2019 6.6089 0.39 122611228 2.62 2.20 Samsung 2020 6.7465 0.44 130046052 2.48 2.01 2019 2.3297 0.29 0.26 3031928 3867864 1.15 1.16 0.78 0.26 LG Electronics 2020 2021 2.3879 2.6623 1.9843 1.9862 1.9374 0.3518 0.3821 0.4109 2.2982 7.6880 14.4507 45.3388 124.6312 124.6312 2019 0.07% 0.2% 1.57528 LG Electronics 2020 2021 4% 2% 13% 6% 1.50539 1.68842 2019 6% 9% 0.68064 Samsung 2020 11% 4% 0.66228 2021 10% 14% 0.70979 0.00392 0.05019 0.02547 0.06414 0.10900 0.09859 0.00219 0.13225 0.06309 0.08689 0.09985 0.13919 0.00385 0.12720770 0.05820851 0.0864509 0.099441 0.1388202 2020 3841 2021 5777 17.83 2994 4% 15.55 1444 1.8% Ratio of Fixed Assets to Long-Term Liabilities Ratio of Liabilities to Stockholders' Equity Number of Times Interest Charges Are Earned Profitability Return on Assets Return on Equity Ratio of Sales to Assets Rate Earned on Total Assets Rate Earned on Stockholders' Equity Rate Earned on Common Stockholders' Equity Market EPS on Common Stock Price-Earnings Ratio Dividends per Share Dividend Yield LG Electronics 2019 2020 84.50 5466 2021 2886 Samsung 2019 3166 16.60 750 1% 10.88 850 0.6% 10.36 1416 2.6% 17.30 1200 1.1% References Anon., n.d [Online] Available at: https://finance.yahoo.com/quote/005930.KS/profile?p=005930.KS 2021 6.2034 Anon., n.d [Online] Available at: https://images.samsung.com/is/content/samsung/assets/global/ir/docs/2021_con_quarter04_bs.pdf Anon., n.d [Online] Available at: https://images.samsung.com/is/content/samsung/assets/global/ir/docs/2021_con_quarter04_soi.pdf Anon., n.d [Online] Available at: https://images.samsung.com/is/content/samsung/assets/global/ir/docs/2020_con_quarter04_bs.pdf Anon., n.d [Online] Available at: https://images.samsung.com/is/content/samsung/assets/global/ir/docs/2020_con_quarter04_bs.pdf Anon., n.d [Online] Available at: https://images.samsung.com/is/content/samsung/assets/global/ir/docs/2019_con_quarter04_bs.pdf Anon., n.d [Online] Available at: https://images.samsung.com/is/content/samsung/assets/global/ir/docs/2019_con_quarter04_soi.pdf Anon., n.d [Online] Available at: file:///C:/Users/Trang %20Thuy/Downloads/LGE_19%204Q_consolidated_f_signed.pdf Anon., n.d [Online] Available at: file:///C:/Users/Trang %20Thuy/Downloads/LGE_20%204Q_consolidated_f_signed.pdf Anon., n.d [Online] Available at: file:///C:/Users/Trang %20Thuy/Downloads/LGE_21%204Q_consolidated_f_signed.pdf Anon., n.d Yahoo Finance [Online] Available at: https://finance.yahoo.com/quote/LGLD.IL?p=LGLD.IL&.tsrc=fin-srch Nobanee, H., 2020 Research Gate [Online] Available at: https://www.researchgate.net/publication/342703035_Ratio_Analysis_for_LG_Display_Co Telan, K & Nobanee, H., 2020 [Online] Available at: https://www.researchgate.net/publication/342703045_Ratio_Analysis_of_Samsung_Electronics ... after year, even in the face of the COVID-19 pandemic In conclusion, both companies appear to be doing well financially However, there are both internal and external factors such as economic... led the way into the advanced digital era thanks to the technological expertise acquired by manufacturing many home appliances such as radios and TVs Now, it is the second-largest electronics... Electronics Tax laws change, political crisis in Asia, leadership changes often, terrorism prone Samsung Faced political pressures in African and Latin American countries India, China support for Samsung