45618 FA project s22

Lazarski University
FACULTY OF ECONOMICS AND MANAGEMENT
Module Title
Programme
Project weight
Financial accounting
BA in Management
40%
Semester
Level
Project
st
Spring 2022
4
1 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

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