Concept Introduction:
Ratio Analysis
Ratio analysis is a study of several key metrics of a company based on the data presented in its' financial statements with an objective to evaluate the financial health of a company.
It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.
The key metrics mentioned above include the following:
It seeks to measure the relation to the cash flows earned on the total assets i.e. the resources employed by the business to directly or indirectly increase revenue or reduce costs.
Requirement 1:
Recent two years cash flows to assets ratio of Samsung
Answer to Problem 3AA
Recent two years cash flows to assets ratio of Samsung is highlighted in the table as follows:
| Samsung | ||||
| W Millions | Current Year | Prior 1 Year | Prior 2 Years | |
| Cash Flows To Total Assets | 20.60% | 18.07% | 16.54% | |
Explanation of Solution
| Samsung | ||||
| W Millions | Current Year | Prior 1 Year | Prior 2 Years | |
| Operating Cash Flows | 62,162,041 | 47,385,644 | 40,061,761 | |
| Total Assets | 301,752,090 | 262,174,324 | 242,179,521 | |
| Cash Flows To Total Assets | 20.60% | 18.07% | 16.54% | |
| (Operating Cash Flows / Total Assets x 100) | ||||
Cash Flow on Assets ratio is calculated as Operating Cash Flows / Assets x 100. It is an indicator of the return earned from the Assets employed by the business.
The Operating Cash Flows are given as W62,162,041 million, W47,385,644 million and W40,061,761 million for the Current Year, Prior 1 Year and Prior 2 Years respectively.
Total Assets are given as W301,752,090 Million, W262,174,324 Million and W242,179,521 million for the Current Year, Prior 1 Year and Prior 2 Years respectively.
Hence the Cash flows on Assets ratio has been calculated for Samsung.
Concept Introduction:
Ratio Analysis
Ratio analysis is a study of several key metrics of a company based on the data presented in its' financial statements with an objective to evaluate the financial health of a company.
It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.
The key metrics mentioned above include the following:
Cash flows on Total Assets − A measure of the total returns on investment in the form of assets. It is an indicator of the profitability of the assets employed by the business.
It seeks to measure the relation to the cash flows earned on the total assets i.e. the resources employed by the business to directly or indirectly increase revenue or reduce costs.
Requirement 2:
If recent two years cash flows to assets ratio of Samsung show a favorable or unfavorable trend
Answer to Problem 3AA
The recent two years cash flows to assets ratio of Samsung show a favorable trend since there is a year on year increase as highlighted in the table below:
| Samsung | ||||
| W Millions | Current Year | Prior 1 Year | Prior 2 Years | |
| Cash Flows To Total Assets | 20.60% | 18.07% | 16.54% | |
Explanation of Solution
| Samsung | ||||
| W Millions | Current Year | Prior 1 Year | Prior 2 Years | |
| Operating Cash Flows | 62,162,041 | 47,385,644 | 40,061,761 | |
| Total Assets | 301,752,090 | 262,174,324 | 242,179,521 | |
| Cash Flows To Total Assets | 20.60% | 18.07% | 16.54% | |
| (Operating Cash Flows / Total Assets x 100) | ||||
Cash Flow on Assets ratio is calculated as Operating Cash Flows / Assets x 100. It is an indicator of the return earned from the Assets employed by the business.
The cash flow to total assets ratio is fluctuating year on year and increases from 16.54% to 20.60% over a period of 3 years.
This is an indicator of increasing profitability and higher return on assets as compared to the similar companies in the industry.
Hence the Cash flows on Assets ratio has been calculated for Samsung and trend analysis has been performed for the same.
Concept Introduction:
Ratio Analysis
Ratio analysis is a study of several key metrics of a company based on the data presented in its' financial statements with an objective to evaluate the financial health of a company.
It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.
The key metrics mentioned above include the following:
Cash flows on Total Assets − A measure of the total returns on investment in the form of assets. It is an indicator of the profitability of the assets employed by the business.
It seeks to measure the relation to the cash flows earned on the total assets i.e. the resources employed by the business to directly or indirectly increase revenue or reduce costs.
Requirement 3:
Recent two years cash flows to assets ratio of Samsung compared to Apple and Google
Answer to Problem 3AA
Recent years cash flows to assets ratio of Samsung, Apple and Google is highlighted as follows:
| Samsung | Apple | ||||||
| Particulars | Current Year | Prior 1 Year | Prior 2 Years | Current Year | Prior 1 Year | Current Year | Prior 1 Year |
| Cash Flows To Total Assets | 20.60% | 18.07% | 16.54% | 16.95% | 20.46% | 18.80% | 21.51% |
Explanation of Solution
| Samsung | Apple | ||||||
| Particulars | Current Year | Prior 1 Year | Prior 2 Years | Current Year | Prior 1 Year | Current Year | Prior 1 Year |
| Operating Cash Flows | 62,162,041 | 47,385,644 | 40,061,761 | $ 63,598.00 | $ 65,824.00 | $ 37,091.00 | $ 36,036.00 |
| Total Assets | 301,752,090 | 262,174,324 | 242,179,521 | $ 375,319.00 | $ 321,686.00 | $ 197,295.00 | $ 167,497.00 |
| Cash Flows To Total Assets | 20.60% | 18.07% | 16.54% | 16.95% | 20.46% | 18.80% | 21.51% |
| (Operating Cash Flows / Total Assets x 100) | |||||||
Cash Flow on Assets ratio is calculated as Operating Cash Flows / Assets x 100. It is an indicator of the return earned from the Assets employed by the business.
Apples' Cash flow on Assets Ratio steadily decreases from 20.46% to 16.95% over a period of 2 years. A negative trend seems to follow as the overall ratio declines over a period of 2 years.
Googles' Cash flow on Assets Ratio steadily decreases from 21.51% to 18.80% over a period of 2 years. A negative trend seems to follow as the overall ratio declines over a period of 2 years.
The cash flow to total assets ratio is fluctuating year on year and increases from 16.54% to 20.60% over a period of 3 years.
This is an indicator of increasing profitability and higher return on assets as compared to the similar companies in the industry.
Samsung seems to be stronger in terms of the cash flow on assets as its returns are consistently increasing over a period of 3 years.
Since Samsung's cash flows to assets ratio is steadily increasing, this an indicator of increasing profitability and higher return on assets as compared to the similar companies in the industry such as Apple and Google.
Hence the Cash flows on Assets ratio has been calculated for Samsung as compared to Apple and Google.
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