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I
THE IMPACT OF ACCOUNTING INFORMATION ON MANAGEMENT
DECISION MAKING PROCESS
CASE TUDY: SAMSUNG ELECTRONIC CORPORATION
BY
BUI THI CAM DUYEN
Graduation Project Submitted to the Department of BusinessStudies,
HELP University College, in Partial Fulfilment of the Requirements
for
the Degree of Bachelor of Business (Accounting) Hons
OCTOBER 2011
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II
DECLARATION OF ORIGINALITY ANDWORD COUNT
I hereby declare that the graduation project is based on my original work except for
quotations and citations which have been duly acknowledged. I also declare that it
has not been previously or concurrently submitted for any other course/degree at
Help University College or other institutions. The word count is 10, 286 words.
______________________
BUI THI CAM DUYEN17 October, 2011
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III
ACKNOWLEDGEMENT
This project would not have been made possible without the assistance, support and
encouragement of many people. I wish to take this opportunity to thank all the people
who have helped me during the time of completing the dissertation.
Firstly, I would like to express my deep gratitude to my supervisor Dr. NGUYN
VAN ANH,. she has kindly helped me and supported me all the way through. For
that, I am very grateful.
I also would like to extend my special thanks to managers, accountants, my friends,
and other people who have help me to carry out the survey. I want to thank them for
all their support, interest and valuable hints.
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IV
THE IMPACT OF ACCOUNTING INFORMATION ON MANAGEMENT
DECISION MAKING PROCESS
CASE TUDY: SAMSUNG ELECTRONIC CORPORATION
By
BUI THI CAM DUYEN
October 2011
Supervisor: Dr. NGUYEN VAN ANH
ABSTRACT
This paper aims to explore factors, which influence the process of accounting
information implementation in the context of developing countries like Vietnam
where the challenging are much more than opportunities, as well as analyze and
explain the change area of methodology and organization of company, after
accounting information implementation. In this research, have finding for both
theorical and practical are more importance. Beside, according the accounting
information will lead to different profits to a company, therefore choosing a suitable
accounting information is very important for managers. In additional, focuses on
some of these tools, including the costing system, profitability, costing tools and
budgeting, which will be presented in this thesis. The costing system contributes to
the available knowledge of costs, building the basis for several decisions, like
determining prices. Profitability is used especially for decisions concerning
discontinuing operations, whereas budgeting deals with the evaluation of investments.
This financial information supports decisions making. Various decision-making
models have been identified in literature to examine this process of decision-making.
Out of this pool a sequential model was chosen to illustrate the decision-making
steps in SAMSUNG ELECTRONIC CORPORATION. This model divides the
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decision-making process into several stages that follow each other. However, it will
be illustrated that the decision-making process in SAMSUNG is a bit more complex
and cannot be easily squeezed into these steps. It will become apparent in this paper
that this process is influenced by many people, making it difficult to determine one
final decision-maker as well as a certain decision-making point. Besides,
experiences, feelings, preferences and other qualitative factors can have an impact on
decisions in SAMSUNG COPORATION.
Nevertheless, financial information affects the decision-making process. In the role
of management accounting information is interwoven and integrated in the whole
decision course, having the ability to influence the process at almost every stage.
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VI
TABLE CONTENT
DECLARATION OF ORIGINALITY AND WORD COUNT.i
TABLE OF CONTENT....ii
ABSTRACT...iii
TABLE OF CONTENIS.v
LIST OF FINGURES & CHATS..v
Chapter 1 Introduction ................................................................................... 1
1.1 Introduction ............................................................................................. 2
1.2Problem statement .................................................................................... 2
1.3The objective of research ............................................................................ 4
1.4Structure of research ................................................................................. 5
Chapter 2: Literature review........................................................................... 7
2.1 Managerial decision making process ............................................................. 7
2.1.1 Planning process ..................................................................................... 8
2.1.2 Control process .................................................................................... 10
2.2 The importance and impact of accounting information on decision making process
................................................................................................................. 11
2.2.1 Accounting information and its role in decision making process..................... 11
2.2.2 Management accounting and decision making ............................................ 12
2.3 Financial statements, the importance source of accounting information for manager
in electronics industry. .................................................................................. 14
2.4 Tool for decision making .......................................................................... 17
2.4.1 Cost accounting system .......................................................................... 18
2.4.2 Pricing and competition ......................................................................... 20
2.4.3 Profitability
......................................................................................... 23
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VII
Chapter3: Research and Methodology ............................................................. 25
3.1 Research objective................................................................................... 26
3.2 Research approach .................................................................................. 26
3.3 Data collection ........................................................................................ 27
3.3.1Primary data ........................................................................................ 27
3.3.2 Secondary data..................................................................................... 28
Chapter 4: Case study................................................................................... 29
4.1 Samsung background............................................................................... 30
4.2 Company vision and strategy..................................................................... 31
4. 3 Case study analysis ................................................................................. 31
4.3.1 Accounting applied in Samsung Company ................................................. 31
Chapter5: Conclusion and recommendation...................................................... 47
5.1 Conclusions:........................................................................................... 48
5.2 Recommendations ................................................................................... 49
5.3 Limitation of study. ................................................................................. 49
5.4 suggestions for future research .................................................................. 50
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LIST OF TABLE AND FIGURE
Table 1: Structure cost of the Samsung Company.................................................33
Table 2: the different prices of electronics customer of three companies
Samsung, Sony and LG.......................................................................................... 35
Table 3: the different price of two companies Samsung and Sony.........................37
Table 4: competitive positioning of Samsung in DRAM market............................39
Figure 1: target costing............................................................................................22
Figure 2: revenue structure of product.....................................................................43
Graph 1: adapted from DRURYs model (2000).................................................... 8
Graph 2: adapted from DRURYs model (2000).....................................................19
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Chapter 1 Introduction
1.1Introduction1.2Problem statement1.3The objective of research1.4Structure of researchChapter one cover the whole picture about the idea of this paper, these help manager
and user easy to link each other between the accounting information and
management decision making process. This also covers the structure and introduction
about the topic as well as related issues.
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1.1 Introduction
Nowadays, in the industry, accounting information is more and more importance.
And decisions making is part of our life. In the competitive environment and develop
manufacturing, reliability accounting information is important for all business, like
manufacturing business, service business and merchandise business. Considering
organizational to organization, this is the main functions and actions of management.
Decision-making and management are usually regarded as belonging together as
management in the company often makes the main decisions of the organization. The
diversity managers will make the different decision with the different information
and report, so making decision will depend on managers policy. To have successful,
organization are need to make decisions, also to implement the right ones. A decision
is concerned with the selection of an action often out of a number of alternatives. To
make the right decision, manager needs any guidance to making decision, which is a
part provided by information assemble by management accounting. In fact, there are
many factors that influent to the management decision making, but in this contention,
put only to the intention on the importance and impact of accounting information in
decision making process.
1.2Problem statement
In this project, the main idea related to the impact of accounting information on
decision making of manager. The accounting information includes information
applied to make ready financial statements that report the effects and financial
position of an organization in order to help manager better making decision. Owners
and manager use this information to argue about the results and effects of business
operations also make decision about their management. External users such as
suppliers, tax authorities, creditors also applied accounting information for their
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decision making, i.e. judging whether the business will be able to return loans, pay
for goods sold, whether taxes are paid correctly, etc. Management accounting tool
also applied are may have contributed to some scale to the beneficial decision.
Thereby, the company needs to analyze their ability, benefit, costing. Besides, they
also need to consider to the factor that may be influence such as economy, sociality
and environment. So there are some problems statements of the paper as follow will
be discuss.
First, what is accounting information and which and how accounting tools will be
used?
Second, how does the organization use accounting information in the decision-
making process?
Third, we examine several reason why accounting information are importance in the
decision making process in the case study of Samsung electronics.
- If accounting information is adjective by manager that are decision makingare under viewing a transformations in the accounting information that shall
not affect on his decision.
- The notion of accounting information hold by decision maker base on hisidea or his opinion on what and how accountants will and accounting system
determine weights significant attributes and how characteristic of agents
affecting and affected by a decision, this will affect the weight when any
information is available given to accounting information in the decision
process.
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- A good of information is an element important to determine the weight ofaccounting information to the decision maker when decision making process.
As deeper analysis of this thesis, this will reply above these questions to orient
for the firms want to use accounting information to decision making and which
want to adoption or implementation of accounting information.
1.3The objective of research
Accounting information is the main factors that directly affected to the assets,
profitability, and development of the company. Moreover, accounting information
including information are applying to prepare financial statements which account the
results and financial position of a business to help manager make the right decision.
Hence, management accountings are playing a smarter role in the performance of the
entity. Accounting information is a tool that is very useful; it is used by all most of
company in all over the world. For instance, in Toyota motor sale (TMS), they have
very successfully in the motor industry because of measuring, evaluating and
rewarding performance. Toyota Motor sales area and general managers are
measured and evaluated by accounting information Wagner, the firm group vice
president for Toyota sale. Wagner use the performance of a region as a measure of
performance of a regional and general manager is checked through various means
that includes the balance scorecard. The balance scorecards have become fertile
fields of theories and scholastic research, as time past of balance scorecard was
altered by various individual and in depending on the need of environment. The
balance scorecard was introduced to measure whether the activity of the company is
meetings the objective. The balance scorecard use financial and non financial
measure. With the balance scorecard TMS was able to see the financial situation and
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problem of the company and it was able to see how this affects the non financial
aspect of the firm.
Management accounting has been developed in recent year, and accounting
information is more importance with every company, special in developing countries
like Vietnam. This research aim is to discuss the practicable use of accounting
information. The discussions is about whether use accounting information has an
influence on firms activities and performance, and how company can accept
information in accounting system. The aims of research are to analyzes the chance
and threats when choose the accounting information in Vietnam, so, the companies
can minimizing the risk for themselves by solving the matter based on the theory of
this method. The failure also the success of using wrong and right information of any
company also will be considered to avoiding the material will be meet mistake when
management makes the decision.
1.4Structure of research
There are five chapters in this research, in each chapter has own major problem.
Chapter one introduces about any problem of the research. It identified the research
question, purpose, objectives, and the significant and the structure of the project.
Chapter two gives the relevance of literature review. Specifically, it gives the
information about accounting information, decision making process, management
accounting, chapter two also covers the tool of decision making that indicate the
impact and importance of accounting information in management decision making
process.
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Chapter three presents research methods. It is orient by theories and data will be
collected and analyzed.
Chapter four will discuss by the case study: Samsung Electronics Corporation in
Vietnam.
And the last chapter will summarized the main ideal of research, and conclusion
derived contribution of this research to existing body of knowledge. Beside, the
limitation of research will be discuss and tells more about the future research
opportunities.
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Chapter 2: Literature review
2.1 Managerial decision making process
2.1.1 Planning process
2.1.2 Control process
2.2 The importance and impact of accounting information on decision making
process
2.2.1 Accounting information and its role in decision making process.
2.2.2 Management accounting and decision making
2.3 Financial Statements The Important Source of Accounting Information for
manager in electronics industry.
2.4 tool for decision making
2.4.1 Cost accounting system
2.4.2 Pricing and competition
2.4.3 Profitability
2.5 Requirements of Investors about the Quality of Accounting Information
Disclosure
In chapter two will provide information about accounting information, managerial
decision making process and accounting tools. Understanding about managerial
decision making process, cost accounting also accounting information can helps
managers know what kind of information and how much of information need to
make efficient decisions.
2.1 Managerial decision making process
Decision can be made in any ways depending on different purpose of various group
or organization. Based on Drurys model the steps in this may be used as a whole
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picture for the decision making process, it is very useful in defiance of decision type
and maker. (Holsapple, C.W., Whinstone, A.B).
Drurys model includes seven stages; planning process belong to the decision making
process, it may be described as making choices between choices. Control
process is the last step of decision making process, which should measure and
correct the material performance of the alternative chosen.
Graph 1: adapted from DRURY C (2000)
2.1.1 Planning process
In today, the competitive business environment are very high, so the company should
be engage the strategic planning process that clearly defined about the objective,
strategic, value of the company on both internal and external situation.
We will discuss five steps in the strategic planning process:
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The first steps will defined about the goals and objective, with the guiding
direction, the decision maker will estimate the desirability of fixed way of action
compared with any another. The objective of the company should be challenging but
achievable. Besides, they should be measure so that the company can monitor its
progress. And from economic point of view profit maximization for the companys
owner or shareholder assets should be the main objective.
The second steps are finding for choosing course of action, manager has to
find for chosen courses of actions that make it may be achieve the goals. The change
of external environment also usually has more potential risk and new opportunity. So
the company must know the ability also the limitation in order to the company can be
achieved with a higher profitability success. The most importance and also the most
difficult on the management decision making process that is the entity should
concentrate on product of themselves and the market development.
The third steps is gather data about alternative, to attain the superior
profitability, the company should make a competitive advantage. In this step,
management accounting information contributes a large importance. Based on the
collect of data and costing information, and management accounting can able to
predict likely effect on decisions such as the change in value, price changeas
potential growth rate, profit in market share, areas of activities, and more important
information is compose for every idea.
The next step is the select qualify alternative course of action, the selection that
best satisfies the target of an organization (Idem) will be accepted. The strategy
implementations are based on the programs, budgets and procedures. If the main aim
is profit maximization, all choice should be listed in terms on differences in profit.
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The selective that seems to achieve the goal best should then be picked by the
decision makers.
And the last step is the implementation of decision, it includes defined
parameter to be measure, defined target value for those measured, perform
measurements, compare measured result to the pre-design standard, and make
necessary changes. All decision will be complex investigation and put into through
financial plan.
2.1.2 Control process
Control process is statistic process and engineering discipline that deals with
architecture, mechanisms, and algorithms for maintaining the output of specific
process within a design range.
Beside, control process is continuous flow between comparing, measuring and action.
There are two steps are establishing performance standard such as: compare actual
and plan outcome, responding to divergences from plan,
With the compare actual, plan outcome: The family budget department provide the
present figures for each month to the management group ... As seen in the test part
the management team looks at the picture and compares them every month. So the
financial department plays an importance role in general issues areas and also in
terms of measuring the own performance between the control process. Profit is most
commonly used to feedback-tool. It allows for a comparison of different stages and
an assessment of their performances.
In the next step, responding to divergence from plan: the functions in accounting
control are plays a leading role to indentify whether or the firms is moving in the
right direction. The managing director further added that sometimes it is difficult to
admit a mistake.
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When management accounting in the company provides information to supports the
steps on the process of the decision-making, somehow, they may be seen as collected
and classify through the decision making process. Moreover, the control processes
also are difficult without the data share out from the financial department, which
compares between planned and actual outcomes. Thus, it helps in gathering data
about possible selective, and actual financial information about the possible
outcomes and finally it gives financial feedback during the implementation and in the
future.
2.2 The importance and impact of accounting information on decision making
process
2.2.1 Accounting information and its role in decision making process
Accounting is commonly concern with recognition dealing and recording the
historical financial of the transaction in a company, so the main concentrates on
accounting information of present financial events, but not events in the future
(Hogget, Edward, & Merlin, 2006). Though, accounting information is not an event
in the future, this information is usually used as a leading to later estimates of the any
alternative nets effect. Managers on the organization often wish for know which or
what kinds are being done thus, this information are very important for manager to
do decision for the afterward plans, then they need continuous fast updated
information in order to control whether actual performance in objective.
Beside, accounting can be identified same as the process of estimating, recording
and communicating economic information to authorized informed rules and
economic decisions. The basic objectives of accounting are to help persons in an
organization make economic decisions. Moreover, accounting information provides
the basis elements for decisions making of resource allocation.
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In the economic activity, Accounting informations are also seen as financial
information. All economic entities for example, government agencies, business,
families, charitable entities need information because they are very useful for making
economic decisions about those entities activity.
The financial information is needed when making economics decision. It
concentrates on the real events. For the aim on decision making process, the past is
use as an instruct to future estimates of the after-effect of any choices. With the use
of both internal decision maker and external decision maker, the accountant may
support important in the domain of investigating, interpreting, budgeting, and
communicating.
2.2.2 Management accounting and decision making
Management accounting is an unusual subset of accounting essential mass up in
house needs of business, they offer information about financial also any other
information of all levels of management (including CEO, manager, account
managers, or general managers) in an business organization to assist them to go their
planning, controlling, and decision making responsibility.
The activity of management accounting are usually cost volume profit and cost
behavior relationship, manager often make decision for financial control and plan
through incremental analysis, budgeting, capital budgeting, flexible budgeting for
redeem evaluation, the established of manufacturing coast, costing systems,
accounting and referring for business segment operation.
Decision making on management accounting
Decision-making is the main on managerial function. Manager makes decision
which can be distributed like marketing, production, and financial. In addition, it also
classify like strategic and tactical or long run and short run. A major goal of the
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decision-making is to achieve best condition use of capital or deposits of the business.
Doing effective decision claims qualify information and unusual analysis of the data.
In addition, decision-making could be simply defined as choosing a course of behave
from any selective. If no alternatives, then there is no decision is required. One
assumption seen as basis of the best decision related to sale or least amount of cost.
The duty of manager wills helps management accountant to find the best solution.
Making investment decision
The systems to evaluate the investment project are usually found on the quantitative
information and provide quantitative indicators. However, both quantitative and
qualitative factors are considered to make decision. Thus, although capital
investment is not common made in without an assessment by using several systems,
the decision will not made alone on the main of this assessment between alternative.
Other factors (Crothers, D. (2004)) that need to considered , this is the aims of the
business, the on hand of financial resources, the cash flow effects and business
incorporation into the whole cash budget and non-quantifiable cost, qualitative
elements and benefits..
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2.3 Financial statements, the importance source of accounting information for
manager in electronics industry.
The purposes of financial statements are providing useful information about the
financial position, performance and changes of financial position in business
organization which is useful for variety of users and manager in making economic
decisions.
The following are the main financial under accounting standard:
The balance sheetThe balance sheet is one of the financial statements that are very important to
business; it reflects overall value of existing assets and a part of assets formed of an
organization at a fixed time. By balance sheet, manager or every user analyses,
evaluates the potential and future prediction.
Income statementIncome statement tells ingorm the business activities and results of business
operations. Through the result income statement, managers hold financial
information as profit, cost of goods sold, interest, revenue, etc. are apply to count the
financial ratios as bias for recount the financial situation of an organization. Manager
will seeks suitable information and help company make decision investment.
Cash flow statementOperating activities, financial activities and investing activities that cash flow
statement provided are three main activities to generate and use money.
Manager using cash flow statement to assess the quality and result of income that
entity generates. It helps managers discard doubles about the use of accounting
method to make profit for the company.
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Two point of information are disclosure under public companies in accordance
with Vietnam accounting standard.
Firstly, are periodical disclosures of information? Within 10days from the date of
expiry of deadline for finished the annual financial statements, a public company
need disclosure information about its annual financial statements by an independent
auditing firm which satisfies practicing conditions in accordance with regulations of
ministry of finance.
The subject matter of information to be periodically disclosed about financial
statements are the following:
If public entity is a parent company of other entity, the disclosure of annualfinancial statement will cover the financial statements of parent entity as well
as consolidated FS in suitable with the learning objective accounting.
The dates to completion of annual financial statements are in ninety (90) daysfrom the last days of accounting period in accordance with learning objective
accounting.
Secondly, extraordinary disclosures of information, a public company have made
special disclosure information amongst twenty four hours of the occurrence of one of
the following events:
Temporary suspension of business; There is change in personnel of the firm (such as member of managing board,
assembly of controllers, and board of the general director or chief
accountant).
There must making decision in the general conference of shareholders or theboard of management on share dividends to be paid.
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Public company must also take particular disclosure information amongst seventy
two (72) hours of appearance in the following events:
The boards of management will make decision on development strategies oron the days business plan of the company; or a decision to renew the
useable accounting network.
The company receives a notice from court accepting jurisdiction of a petitionto commence enterprise bankruptcy proceedings
When public company disclosure particular information, it have determines the event
happened also its reason, and a plan and solution for make good the problem (if
applicable).
Financial ratioAnalyzing about financial ratios, it will show full meaning of relationship between
individual values in financial statement. Analyzed this ratio, investor have important
comparisons in order to consider and evaluate the results of business operation in
relation to the overall economy, the key competitors in the domain of industry, and
the previous performance of the business. There is any financial ratio as following:
a. Liquidity ratioLiquidity ratio provides information about the abilitys firm operation to meets in
short term financial objectives. The expanding provisional credit to the firm is
interested in specifics liquidity ratio. Two popular liquidity ratios are current ratio
and quick ratio.
Current ratio = current asset / current liability
Short term creditors riskcan be reduced if high current ratio. But, shareholders are
more concern in a lower current ratio to secure that firms assets are used to make the
development of business. Standard values are used to estimate the current ratio by
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company and industry. For instant, company in cyclical industry may retain a higher
current ratio in order to keep solvent during recession.
The current ratio remain at disadvantage that inventory may include some items
which have low liquidity ability and the value is not clear. Quick ratio is the best
alternative to estimate the solvency of a company with no inventory of existing asset.
The quick ratio can be calculated as following formula:
Quick ratio = current assetinventory/ current liability
The current assets would be cash, notes receivable and account receivable. This asset
could be accounted as current assets less inventory. The quick ratio usually regarded
as the acid test.
b. Profitability ratioProfitability ratio reflects to the success of organization in making profit. It will takes
into account the various individual measures: gross profit margin, return on assets,
return on equity, earning per share, price earnings ratio. The gross profit margin is a
measure as profit earn on sales. The gross profit margin considers the firms cost of
goods sold, but does not cover other cost. It is defined as follow:
Gross profit margin = salescost of goods sold / sales.
2.4 Tool for decision making
Manager must to know about the cost incurred in an organization. Because of this,
the cost accounting system specifies the costs to produce cargo in a company. So, it
can be seen as the main basic tool in leading decisions, and it will be clarified first.
Lack of information about price, costs, manager would not be established prices or
making investment decisions. Therefore, more and more management accounting
notions continued applied for decision-making is based on the platform cost. Several
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of those equipments will be debated comprising the opinion of target costing, cost
plus pricing, and profitability.
2.4.1 Cost accounting system
Cost accountings are a reach to evaluating the all cost which is associated the overall
with conducting business. As the accounting standard practice, cost accounting is a
tool that manager used to determine what and which type also how much expense
related to maintaining the current business model. By identify the production cost
and continuous determine the cost to produced goods by and more consecutive
business cycle. It is may be to note any tendency that show an increase in production
costs none any changes in valuable and rise in production of goods and services.
There are two steps in the cost accounting system:
The first step is cost accumulation by classifying costs into category; it is reduce the
cost of collection by applying classification criteria, same the suitable of cost.
Dissimilar decision required the specification type of different cost. So they are very
useful for decision making process to category cost likely fixed cost or variable cost,
relevant or irrelevant, direct or indirect. For instant, make or buy decision should
concentrate on relevance cost in a specific decision situation.
The second step is the assignment cost to cost objective. Costing system are consider
as information system, the information such as units produced; and dollars of direct
labor are called by these costing system to be of value.
Because accountant would need to delay the cost assignment process; and calculate
until the actual data is available, so it is often impossible to use actual overhead cost.
To overcome this problem, standard costs are used. At the end of accounting period,
under or over recovery of overheads that constitute the different among planed and
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the actual cost. This is general to treat this dissimilar as periodic cost and also to add
or delete it from profit or loss of period.
As propose by Drury, both allocations can be described by using two steps
framework.
Overhead cost account
First step
Second step
Graph 2: Adapted from: Drury, C. (2000)
The first step is indirect costs that allocate to cost centre that setup places and
function etc. to which indirect costs can be allocated Usually ABC determined more
cost centre than traditional costing methods.
In the second step are the cost allocate to cost target with the help the cost driver.
When using the Traditional Accounting System, they ought to talk about the
relationship between a reasonable and realizable the cost driver and the sum of the
indirect costs. This system are often better than other when the production process is
Cost objective
(Activity)Cost
centre
(Activity)Cost
centre
(Activity)Cost
centre
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simplify and easy to use. Besides, they are eliminating to apply this system when the
ABC-method is too expensive and the benefits too low. However, this case may quite
rare, because the environment in today tends to be very compound what makes ABC
often beneficial (Horngren, C. et al. (2002), p. 140). They are also remarkable, which
firm indicates an inclination towards not replacing an already operating system.
(Lambert, S.J. et al. (1996)).
2.4.2 Pricing and competition
Pricing isthe process that company determines what exchange will receive in its
products. Pricing elements are often related to production cost, competition market,
and quality of product. Pricing are an important variable in microeconomic theory of
price allot. Pricing is a basis factor of financial modeling and is one of the fours Ps of
the marketing mix. Price is an element to create revenue in the four Ps, the rest being
cost centers.
Making decision on pricing may be in long-run and short run. It is one of the
major decision manager have to face. There are many elements that affect to the
pricing decision such as market, competitors, compatibility with other product, and
competition from substitute products, suppliersin this, the outcome pricing
decision for the new product and competitor is primary because if the cost in the long
time are not price, a firm can be reject of business easily. Moreover, if making
decision in pricing is limited by agents on the market like advantage market leaders,
firm may be identified as a person taking the price. These decisions are more
essential if the company can acceptable the price. Firms are market leaders and offer
products or services that are highly customized or differentiated can be described as
price setters. In such company can be cost information with high impact on their
pricing decision. (DRURY C. (2000) PP 390, 378)
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Target costing and cost plus pricing are two main common instruments for pricing.
In reducing cost, Target costing are main an effective entrustment to keep customer
value. It is found on three installments:
1) Orienting products to customer affordability or market-driven pricing,
2.) Treating product cost as an independent variable during the definition of a
product's requirements,
3.) Proactively working to achieve target cost during product and process
development.
This target costing approach is represented in Figure below:
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Target price less profit
Balance target cost and requirement
Explore product and
process design alternative
& design product, process
Product requirement & market analysis
Production
Continuous cost reduction
Figure 1: target costing (source internet display 2011)
Before the target designed as a target cos, it is establised that is founed on the
products expected price and company required profit. Then task of manager control
cost in order that they do not exeed target cost.( IPIT..pp 203,204)
Market buysanalysis
Supplierstarget
Costprojection
DFMA &value
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There is no fixed markup when cost plus pricing, because it underlying on cusumer
demand and on cost how the price will look like. Cost-plus pricing are calculating as
an average cost adding up a markup (desired difference between price and costs) in
order to achieve benefits on investment (money that an investor gets in return for
his/her investment). In the long run, it should including the variable cost and also it
should be cover the fixed cost.
In competition, firm usually used the benchmarking to found out which
competitors are up to. The conception of Benchmarking are process ofcomparing
oneself against the best competition, is also used as a objective setting tools in order
to become or remain competitive. Thus benchmarking has also advancing factors for
sample to find main rival goals and to learn new ideas. This is very necessary for a
firms continued progress to work towards an organizations vision of becoming
excellent in almost all it undertakings. However, a risky of benchmarking is to
become a copy cat, which means duplicating others ideas or ways of doing things.
(Balm, G.J. (1996), pp. 2829)
2.4.3 Profitability
Profitability can simply identified by the capability to create a gain meanwhile profit
can be defined same as a clear gain out of an entity operation after minus all
expenses. Profit planning is usually done during the sweepings process.
More accounting tool close to profitability are: gross profit, operating profit, working
capital.
Gross profit defined as the amount of money that sale price exceed the cost of goods
sold.
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Operating profit can be defined as the excess of revenue over the current
replacement cost of services applied in production of benefits. This calculation is
performed before the interests and taxes are paid. (Parkas, P., Sunder S. (1979), p. 2.)
Working capital is the actual asset of a company minus its actual debts. The result of
this account can be positive or negative depending on a company whether or not any
liabilities.
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Chapter3: Research and Methodology
3.1 Research objective
3.2 Research approach
3.3 Data collection
3.3.1 Primary data
3.3.2 Secondary data
Chapter three provided a discussion and information of the research and
methodology used in this research.
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3.1 Research objective
The aim of this research are concerning about the value of accounting information.
Any financial statement are discuss in chapter two, these statement are reported
under the accounting standard. As mention, accounting information on management
has large impacted on the management decision making process. This study may
carry out the opinion about what and how should determine the management
decision at a company among others.
3.2 Research approach
Accounting theory can develop by applying some research methodologies
(Schroeder, R.G. et. al (2005). There are many different types of approach such as
deductive, inductive, pragmatic, qualitative, quantitative approach. Among them the
case study will choose only qualitative approach, which will be explained in the
following.
The concepts of qualitative methods are an intensive, holistic description and
analysis of single entity, phenomenon, orsocial units. It is helpful for an in sound
analysis of master to understand process or situations in context.
Often qualitative data will form based on a pilot study, as broadly defined data, the
goals is to get the best possible feel for the situation. And then, results from the pilot
study are used to produce a relatively better and more quantified approach.
From the fluctuations of electronics market overtime, this study evaluates a usage of
accounting information of manager on management decision-making process in
electronics market; this is one of the original source make the situation of electronic
industry. Analysis situation case study and analysis data is the best choice to get full
information to know the usage of accounting information of manager in Samsung
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Electronics Corporation. So, value relevance of accounting information in making
decision could be evaluated clearly.
Data collected from the financial statement, index of Samsung Company are applied
to analyze and assess the usefulness of accounting information on decision-making
process of Samsung electronics industry. It has absolutely no business purpose or
trade and use only within the scope of this research.
3.3 Data collection
Collecting and selecting the information also analysis data is an important part to
completing this project. Data can be divided two types such as primary data and
secondary data.
3.3.1Primary data
In this research, primary data is a useful data source. Any questionnaire to
manager of company are distribute by assembles of the researcher. The interviews
also consider as a good and effective way of data collection, by reason of they give
any insights in the framework for the user. Besides, they are the most used way of
collecting data. (Kociatkiewicz, J. (2006), lecture notes). The quantitative study is
the researches that are exploited, this is very useful and necessary because primary
data is data that look and collected directly from surveys, interview and questionnaire.
However, this study uses qualitative method and case study analysis so secondary
data is the better choice for the case study of Samsung Electronics Corporation.
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3.3.2 Secondary data
Secondary data is data that are published by any company from the one that
originally collected and published the data. Thus, in this research secondary data is
collected from accounting books, studies and researches, which was written by many
authors in different areas in the world and within Vietnam also. This research also
uses information available in the internet to finish this study. (Rajput, 2007).
In short, consider literature review, analysis case study, and analysis data as price,
profit, financial statement and information as the most important methods for the
research purpose. The research used case study to determine how accounting
information used in Samsung Company electronic and making decision based on
accounting information. Those methods allow getting a good insight within time
limitation. Moreover think that through the available data collecting methods are able
to gain sufficient information to conduct about the Samsung electronics company.
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Chapter 4: Case study
4.1 Samsung background
4.2 Company vision and strategy
4.2 Samsung analysis
Chapter four will discuss the case study of Samsung Electronics Corporation, this
introduce the Samsung back ground, the accounting use in this company, and
analysis about the price, competition and profitability of the company.
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4.1 Samsung background
Samsung Electronics Co., Ltd., is the chief subsidiary of South Korea's giant
Samsung Group and one of the largest electronics producers in Asia. Products built
by Samsung Electronics include televisions and many other kinds of home
appliances, telecommunications equipment, and computers. Its most important
product is semiconductors. Savvy management and heavy investment in research and
development in the late 1980s and early 1990s were turning the company into a
leading contender in the global electronics industry.(source: Samsung electronics,
2010)
. It makes many kinds of consumer devices, including DVD players, big-screen
television sets, and digital still cameras; computers, color monitors, LCD panels, and
printers; semiconductors such as DRAMs, static RAMs, flash memory, display
drivers, and MP3 player chips; and communications devices ranging from wireless
phones to networking switches. The company, which is the flagship member of
Samsung Group, also makes microwave ovens, refrigerators, air conditioners, and
washing machines.
To become the top brand in the electronics business, Samsung has spent enormous
sums on marketing and branding. As part of fulfilling this strategy, the company
devised in 1996 a plan to sponsor major sporting events. It succeeded in becoming an
official sponsor for the 1998 Nagano Winter Olympics. Samsung today is the name
that almost always appears in many big games.[
In the Worlds Most Reputable Companies 2010 ranking published by Reputation
Institute of the United States, Samsung was placed at 22nd, a large advancement
from the previous years 74th. This ranking, compiled by the U.S. consulting
http://en.wikipedia.org/wiki/Samsung_Electronics#cite_note-32http://en.wikipedia.org/wiki/Samsung_Electronics#cite_note-32http://en.wikipedia.org/wiki/Samsung_Electronics#cite_note-32http://en.wikipedia.org/wiki/Samsung_Electronics#cite_note-327/30/2019 Bui Thi Cam Duyen (1)
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company since 2006, reflects survey results collected from consumers in 24 different
countries for global 600 large corporations in terms of annual revenue and its GDP
share in respective countries. The respondents answer questions in seven categories
including products and services, innovativeness, work conditions, corporate
governance, social responsibility, leadership, and financial performance.
4.2 Company vision and strategy
As stated in its new motto, Samsung electronics vision for the new decade is
inspire the world, create the future.
The new vision reflects Samsung electronics to inspiring its communities by
leveraging Samsungs three key strength: new technology, innovative product,
and creative solution and to promoting new value for Samsungs score networks
industry, partners, and employees. Through these efforts, Samsung hopes to
contribute to a better world and richer experience for all.
4. 3 Case study analysis
There are two parts in this section. The first one concern about the accounting tools
applied in Samsung Electronics Corporation. In addition, the second one will focus
on how Samsung group can use these accounting tools in decision-making process
4.3.1 Accounting applied in Samsung Company
As the mention on the theory, action of the management accounting used in the firm,
it is needful to defined Samsung strategic goals. Officially, the main intention of
Samsung stated on the homepage is customer satisfaction. However, the indirectly
goals of company implies the purpose of profit generation. Therefore, Samsung
considers profitability as the most grave of accounting means. Moreover, other vital
tools will express in the following: Cost accounting system, pricing and competition.
Cost accounting system
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When selecting between the strategy of development and production, the manager in
financial department will compares charge of both alternatives. As suggested in the
theorical part, only relevant costs examine in the case of producing in the
organization. Those costs that are not avoid by outsourcing, seen as irrelevant for the
decision. The implementation costs considered carefully in order to reduce cost and
increasing profits for companies. The process of cost control is carrying out right
from purchasing raw materials to sales process. Especially in the manufacturing
process, to reduce material consumption, the company set the technical specifications
for each product. Every month, management accounting department tracking of
production costs through the periodic reports on the production costs of each unit, the
report analyzes the use of materials... Based on these reports, company control costs
better in the production of next month. The management will review the report
regularly.
Cost element
Year 2010 Year 2009
Value %
Revenue
Value %
Revenue
1 Cost of goods
sold
154,360,328 64,14% 136,324,670 60.64%
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2 Cost of sales 102,666,824 15.02% 94,594,863 10.57%
3 Administration
cost
26,243,122 3.23% 23,362,098 2.35%
Total cost 301,270,274 82.39% 254281631 73.56%
Table 1: structure cost of the Samsung Company.(source: financial report in
Samsung )
As report by the company in 2010, the table above indicates the cost of Samsung
Electronics Corporation, the cost of services sold increase over the year. The major
proportion in revenue in the cost of goods sold is 64, 14% compare with 2009 is
60.64%.
While the cost of sales and administration cost account for small proportion in
revenue and decrease in two year. This shows that Samsung group manages the cost
as well. Furthermore, the cost of sales is the cost for the second largest in price of
electronics, from 8% to 30%. While the advertising and promotion cost account from
3% to 21.2%. Samsung electronics the proportion is 16.9%. However, the trademark
of the company is forming mainly by advertising, so Samsung took advantages of
famous and prestigious brand in order to reduce advertising and promotion cost.
Furthermore, the difference between fixed cost and variable cost should consider and
allocation of cost is the one of important role of collecting cost. The variable costs
incurred in proportion to the level of service performance. Therefore, in some case,
cost allocation based on revenue is still reasonable. The fixed cost on the other hand
is stable, so it cans allocated based on level of using inputs or services. Dissimilar
between the administration cost, which has seen as the fixed cost, and production
cost that are regarded as variable cost. This is quite easy to understand the costs and
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interpretation of cost behaviors. Thus, the direct and indirect cost can effect to the
outcome of the decisions
Price and competitionPricing is a very important tools within Samsung, they refers to the market react on
their price. Pricing is the value that the customers willing to pay for the products or
services in order to meet their demands. Price is also considering an important
competitive factor in attracting customers of all businesses. So making the
appropriated price policy will help Samsung to have an effective business strategy.
The company is also applying the combination of cost plus pricing and target costing.
Giving an example about the target costing, the company decides how many its costs
and then their department work together with the production to stay within this cost
structure. The cost plus pricing done by accounting an average cost adding up
difference between price and costs in order to achieve a desired return on investment
while target-costing sets founded on the products expected price and the company
has required profit before design products. Hence, the information of cost is very
important for setting right price and assures the profit. The formation and
manipulation of electronics prices are affecting by many factors. When manager
decisions making about the price, Samsung company needs consider the factors
effecting electronics devices such as market competitors, suppliers, common policies,
information on the price of electronic products on the market, competition from
substitute products and the price adjustment...Increasing the cost of production is one
of the main reasons for increase price of products. For big investment that affects the
whole business for many years and that cost more than a determine amount,
Samsung calculate the capital and cost expense and then check the measurement to
the accounting and auditing department for makes the final decision. For instant,
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Samsung now doing a big investment into new machines, the old machine has been
in the company for five years and considering the ongoing technological
developments, it is rather old now. The idea to replace it has developed through cost
calculations. However, to invest the new machine and new electronics as improve
Samsung mobile, television, etc. Samsung will need the agreement of the main
offices accounting to have accurate information. (Source: Samsung webpage)..
Level customer Sony TV ($) LG TV ($) Samsung TV ($)
Lower income 3D LED TV 26
$378.00-$498
3D LED TV 32
$380-$453
3D LED TV 32
$347-$400
Premium
income
32 Smart LED TV
$719-$949
32 Smart LEDTV
$632-$700
32 Smart LED TV
$598-$612
Higher income 3D 46H 820 3DTV50PZ950
$1399-$1510
4046D8000
$1545-$1799
Table2: the difference prices of Electronics for customer of three companies.
(Source: internet display).
So look at the example of products for level of customer, the price of the Company
Samsung is cheaper than other company's products ($347-$379) compare with Sony
($378-$498) and LG ($360-$453) in the lower customer income. The reason for this
is explained by other firms plus the cost of advertising, branding into the product
price. In addition, the targeted customers of Samsung is middle class, so the highest
price of the products of Samsung is only 5%, while prices of imported raw materials
increased by 30-40%, which is due to the reduction of imported raw materials and
replace 35% of domestic raw materials. Another factor that Samsung needs to
consider is reputation and product quality. In fact, products of high quality, secured
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respected and create confidence for consumers that will allow the company can sell
higher price without causing reactions from consumers. For instant, Samsung
produce TV with good depth, greater color. Currently, TV LED 3D of Samsung has
an international quality and this is required for nutritional products for higher
customer and the interests of Asia, Africa also in Vietnam consumers. With an
internal product prices but the quality is acceptable even in the countries of Europe,
the Middle East ... the consumer can fully trust options. Therefore, the managers
need to determine the price that suitable with quality of each product.
Samsung will also be subjected to strong competition of Sony and LG, Samsung also
need to research the cost, price and sale price, the quality of rival products because
the consumers often compare prices of companies with products before to make
purchasing decisions.
In the competitive business environment, understanding information about
competitors is an advantage to the success of any businesses. Knowing about the
competition can help companies map out the strategic lines of business and
consistent with business capabilities and create competitive advantage. Besides,
collecting and analyzing the information of competitors will increase the ability to
response their act. Electronics market may still be active by increased consumer
demand in the urban market and competition between producers will become
increasingly fierce.
Table following indicates the different price of Samsung and Sony:
SAMSUNG SONY
Types Products Price ($) Products Price
($)
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Camera Camera MV 800, 14.2
megapixel
279.9 Sony A390, 14.2
megapixel
498
Mobile
phone Galaxy S Smartphone 519 Sony Ericson
X10 Smartphone
699
Table 3: the different price between two companies Samsung and Sony.
(Source: internet display)
In this table, the product price of Samsung is lower than price of Sony. The reason
for this difference is due to the buying price of Samsung with Sony in same product.
This is much lower than Sony. Moreover, the commission or bonus for the industry
is small while the bonus policy of Samsung is maintained frequently.
In addition, Samsung have the advantage of the wide distribution system and
diversified products. Therefore, each products sector expected to use by customers in
the future.
Mobile phone sales (in millions of units)-source: strategic analytical.
In 2010, Samsung Electronics reinforced their market leadership by achieving sales
of $280 million mobile phones worldwide, up 23% over 2009 and a double-digit
increase in operating profits. Their flagship GALAXY S model posted sales of 10
million units, while the GALAXY Tab also led the Android tablet PC market,
earning glowing customer reviews. Their leadership in full touch and messaging
mobile phones continued in both advanced and emerging markets. In 2011, manager
plan to challenge a market that grows ever more competitive. By launching
277
280
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GALAXY S II, their flagship strategy Smartphone, they will emphasize their
category leadership and provide readily available lineup options for global customers.
They are expanding and improving Samsungs unique mobile solutions as we
strengthen their competitive lead in both services and content.(Samsung electronics)
Therefore, when making decision, the managers have to consider which segment to
concentration and developing. Samsung group has focus on the products, which
account for almost the market share such as Galaxy S 2, Smartphone. Moreover,
exploitation and use the brand power of electronics as a reputation and reliable brand
of Korea also in foreign in order to gain more market share in condensed electronic
segmentation. In addition, Samsung is also more actively in raw material and
reducing the risk of price fluctuation in both the world and domestic.
Beside, Samsung also are the top market DRAM, already the largest share of the
DRAM market, Samsung electronics company also remain in the best competitive
position when past and present are considered. In a new analysis that takes into
consideration three factors, including a DRAM manufacturers cash balance, cash
relative to sales, overall market shares -South Korea Samsung emerge the winner
when the various metric are combine.
Samsungs cash to debt ratio is the highest in the industry, and the company has
strongest product portfolio as well as the highest market share, as a result, it appears
highly unlikely that Samsungs dominance of the DRAM markets could be jeopardy
anytime soon, HIS concludes
Overall
bank
Company Cash(billion
$US)
Cash/sales
Higher is better
2010 market
share
1 Samsung 1.94 0.54 42.10%
2 Micron 1.04 0.96 12.60%
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3 Hynix 1.52 0.8 22.20%
4 Elpida 1.99 1.7 13.60%
5 Win bond 0.06 0.54 1.20%
6 Nanya 0.17 0.46 4.20%
7 Power chip 0.08 0.35 2.60%
8 promos 0.06 0.45 1.50%
Table4: Competitive positioning of Samsung in DRAM market.
(Source: HIS issupli, March 2010)
The first metric of pure cash is telling indicator because companies able to finance
their own capital expenditure enjoys a competitive advantage over those that are
unable. Samsung are clearly more cash to maintain its current market share than a
smaller company like Nanya. As the above table, in market share, Samsung has
highest with 42.10%, it indicator the companys relative competitiveness. Samsung
has strong position and the highest of healthy balance sheet. As comparisons,
proMOS are $0.06 billion in cash and Power chip is $0.08 billion in cash, Samsung
Company is higher of cash with $1.94million. This implement, Samsung has right
decision making in research and development to the market in order to receive the
highest market share, strong positioning and keep up product development efforts,
such as Samsung and Micron have the greatest opportunity for continued longevity
in the year to come.
ProfitabilitySamsung company is commonly used tool profitability, it is very important. They
defined as the value of customer pays minus the production expense by manager who
are in the financial field. The company refers to the profits to get money for news
investment. Profit always was the purpose of the company. Managing director
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underlined profit data monthly and this account also rewarded to the Samsung group
who is highly interested in the highlight use of profit in order to eliminate not
profitable products. Manager in Samsung making decision, Samsung continuously
tries to raise the standard of product that not profitable products or if necessary to
write off unprofitable ones. Moreover, the financial manager also supported that
gross profit; operating profit and working capital are the three most important tools
within the company. These are closely related to the profitability tool and thus match
with the objective of Samsung group. Therefore, the manager can consider
information about the profit in order to make right decision.
As in the financial statement of Samsung.
Income statement Year 2008
($billions)
Year 2009
($billions)
Year 2010
($billions)
Sales 121,294 136,324 154,630
Operating profit 6,032 10,925 17,297
Net income 5,526 9,761 16,147
(Source: Samsung financial summary 2010)
Samsung has become a market leader with the main revenues increasing of
electronic in the production and consumption. In 2010, Samsung achieved all targets
of sales and profit. The total sales increased by 154,630 as compared to 2009
with 136,324 and 2008 is 121,294, the operating profit also strong increase in 2010
with 17,297 compare with year 2009 is 10,925. These indicate, the company has
strong profit and net income. This also useful for internal purposes, such as assessing
progress and making plans for the future as long-term investment and short term
investment.
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In addition, competition is also cause of Samsung profit and market share. Increase
competition mean reduces in Samsungs profit and market share by reason of it
creates over supply and reduce in sales. Over supply is due to increase in supply
while sales are decreasing. This happen because more than competitors is issuing the
same product, so, there are more alternative for consumer in which creates demand in
lower price. Therefore, Samsung has made any solution to improve their sales and
profitability. They are redesigning it to make innovative electronics. To continue
attract customer, Samsung has upgrade and improve their product, introducing
product to the both urban market and foreign market as Vietnam, china, India, etc.
and become one of the top seller in the electronic market. By different product as TV,
semiconductor, LCD, digital imaging...Samsung has performed the strong position in
the electronics industry.
Figure2: Revenue structure by product (source: Samsung electronics)
The figure above indicates that a digital imaging segment product is the biggest sales
contributor to the local sales of Samsung with the contribution of approximately 41%.
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All the products are consuming in any market. The competition in the market
segment of fresh milk is highly intensive since there are many other local involving
players, not mention to some other product brands imported.
The second largest product is LCD; this contributed 25.7% percentage of category
sales, industry leader, Samsung has achieved number 1 market share for LCD panels
for nine consecutive years owing to their exceptional technology and product
quality. . This market segment of Samsung is under the severe competition with the
imported products of international brands as well as from the other local competitors.
The potential for growth of this product range is great and in the coming years, this
will be the ongoing emphasis of Samsung for LCD development strategy with the
aim to develop the industries most efficient and highest quality products.
In addition, the last one is TV segmentation. The sales from this group account for
22.1% of Samsung global product sales. Samsung has remained its dominant position
in this market segment and the perspective for the development of this product range
in the future is still great. Supported by their vital technologies and inimitable design,
in the word with TV market share Samsung Electronics has achieved No. 1 for five
years in a row since 2006. After establishing the new market for LED TVs in 2009,
we have extended their competitive lead with sales of 45.11 million TVs. That
included 39.26 million flat panel TVs in 2010, as our Full HD 3D LED TV became
readily available. With sales of 2 million 3D TVs, they also are leading the next-
generation market. Moreover, they intend to maintain their position as the global
leader in the TV market. (Source: Samsung display search 2010).
Therefore, based on this information, Samsung tend to change the direction of
revenue from any electronics product to become the most important products.
Financial ratio:
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In order to understand more about the business activity of Samsung group and
provide more information to the managements decision-making, the financial ratios
analysis need to be discussed. These based on some financial criteria such as
liquidity, capital structure, operational capability, and profitability.
operational capabilityReceivable turnover 2009 = credits sales/ receivable
= 20,572,586,889/1,214,682,261
=16.9
Receivable turnover 2010 = credit sales/ receivable
= 15,752,613,890/882,365,028
= 17.85
Compare within two year 2009 and 2010. This shows that the account receivable
tend to turnover is faster more and more with 16.9% in 2009 and increase in 2010 is
17.5%. This also implement the ability to use working capital are better.
Inventory turnover 2009 = cost of good sold/ inventory
= 10,375,197,061/ 2,113,540,576
= 4.90
Inventory turnover 2010 =cost of goods sold/ inventory
= 12,579,802,219/3513, 345,229
= 3.40
The ratios represent the ability to manage inventory well. Inventory turnover is so
fast 3.40 in 2010 and 4.90 in 2009 round per year. This results in creating more profit
and reducing cost and capital. This shows that the management of inventory in 2010
is more effectively than 2009; the profit is also higher than previous year. In fact, the
profit of Samsung Company increase approximately 22% per year.
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capital structureDebt to equity = liabilities/ owners equity
= 4,955,800,758/ 9,364,236,590
= 0.52
The ratio 0.52 or 52% the entitys capital comes from debt and company is able to
meet its debt obligations on the long-term basis. In addition, Long-term debt
accounts for only about 3% of total capital that means financial capacity of Samsung
electronic corporation is strong. The company does not have to borrow capital from
outside to operation. This leads to company be more active in implementing its
investment projects, reducing significantly borrowing costs and increasing profit for
the shareholders.
liquidityCurrent ratio = current assets/ current liabilities
= 7,208,199,786/ 4,645,210,152
= 1.55
The liquidity indicates that the companys ability highly pays current obligations.
Moreover, short-term assets are more dominant when accounting for over 63% of the
total assets of Samsung group while short-term debt accounts for 21% of capital
structure, thus the solvency of Samsung always guaranteed a good level. In the past,
Samsung maintained large amounts of cash and short-term receivables, but the
company recently takes the advantage of these cash stored to increase the inventory
to avoid price fluctuations of raw materials on world markets and increased financial
investment.
profitabilityProfit margin 2009 = net income/ net sales
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= 7,512,072,432/ 17,527,565,499
= 0.4285
Profit margin 2010 = 4,731,672,538/12,613,570,900
= 0.3751
The profit margin ratio measures the entitys profitability. These ratios indicate that
the profitability next year better than last year because of controlling the cost of
advertising, promotion and distribution support the reduction, enterprise management
costs also reduced. Furthermore, the company develops priority of the high value
products such as TV and LCD. So the cost material of powdered electronics tends to
reducing.
Debt accounts for small proportion of Samsungs capital, so taking advantage to
increase return on equity is little.
Return on equity = Net income / shareholders equity
= 6,521,432,207/8,469,364,590
= 0.7700
Return on equity is high due to profit after tax of Samsung is good.
Return on assets = Net income / total assets
= 6,521,432,207/ 12,377,323,595
= 0.52
The proportion of asset takes part in production is large and highly effective.
Therefore, the profit and operation are better more and more. In short, the profit of
the company is growing due to the improved management cost of inputs well,
business expenses used effectively. In the coming years as new plants come into
operation, if the company remain to manage good cost of inputs then the company's
profits may also optimistic.
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Based on accounting information, financial statement with realizable information and
truthfulness, manager in Samsung electronics can evaluate the economics
performance of the business and plan for future growth. Manager can use
information financial ratio to entice new investor.
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Chapter5: Conclusion andrecommendation
5.1 Conclusions
5.2 Recommendations
5.3 Limitation of study
5.4 Suggestions for future research
In this last chapter are the conclusion and recommendation of this research. Besides,
it gives to any limitation of this study and further suggestion of the research.
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5.1 Conclusions:
From the data analysis and select information in this paper, the manager and
supervisor are more concern accounting information by reason of it is very grave and
effectiveness. It may difficult to figure out the framework of accounting information
as well as the numbers of experiments which are applied; however, they are very
extremely important role in managers' on decision-making process.
Accounting information reflects the financial terms and business environment of
organization. On management, business decisions are based on reliable information.
So, the unlucky could be limited and investments are more efficient. For Samsung
electronics, reliability and truthfully accounting information reflect the financial,
business situation of company is considered key important and contain the substance
about efficiency of electronic placement. Lack and limitation of unrealizable
information about listed company this shows the risk in the decision of managers
would be excellent.
Accounting information has suitable with international accounting practices and
standard. So, board of finance need to update accounting and auditing standard a
abiding to international practices, it is simultaneously fit with economy activity to
attain international recognition about quality of accounting information. In addition,
information of accounting system also must meet the different needs of managers in
short run management, long run management.
The role of qualitative data are providing by accounting books, internet source, etc of
the accounting information, as well as the decision-makers has an important impact
on decision making.
By this project the importance of financial information as advantage through
management accounting tools was underlined. Apparently, decisions are affected by
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data; this is also the case in Samsung electronics. This answer the purpose of what
and how those accounting tools affects the decisions made by the company.
5.2 Recommendations
Throughout the paper the case study made suggestions how Samsung could profit
more of the financial data for decision-making purposes. It is left to say with the
managing director who stated that the controlling function of the financial
department should be more developed in the future.
Through the analysis the price, competition, profitability, the alternative of
accounting information from financial data, this shows Samsung has advantage
leader market because of various qualify and innovative such as TV, LCD, DRAM,
etc with a lower price than competitor like Sony or LG Electronics company.
Moreover, the manager in Samsung Corporation should responsible for improving
the quality of accounting information disclosed and for preventing distortion acts of
accounting information. Beside, analyzed the financial ratio also help Samsung
Electronics Corporation make right decision on investment. Financial department
should strengthen financial supervisory activities to prevent cheating in making
financial statement. An indispensable factor to ensure the transparency of
information is independently audited. Beside, Samsung should be improving the
quality of accounting information through the focus on senior management, the code
of ethics and internal control. They also should establish internal control systems as
the basis to improve the quality of financial statement also quality of information.
5.3 Limitation of study.
The accounting information cannot express all idea about accounting
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This research is done on accounting information which only available in financial
statement. The result of this research may limit and not accurate when putting to
other types of information.
The major limitations of this study are using secondary data and concentrate on the
case study method. Both of them has many advantages, however in order to make the
companys performance looks better, the data should be used a lot of times, therefore
in fact the way in managing can be hidden. Besides that, this project only focuses on
a specific company so the recommendations might be useless and inapplicable for
other companies. Moreover, most of analyses are based on the others research so it
can be arguable and difficult for users to apply in the reality.
5.4 suggestions for future research
Due to the various limitation of this research, there should be some suggestion for
future researches which have similar topic.
The other suggestion research for future is that it should be conducted on different
types of accounting information.
To get a more in depth view about the research problem further research would be
interesting. Such researches should be conducted in various and if possible in any
companies.
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