Bui Thi Cam Duyen (1)

7/30/2019 Bui Thi Cam Duyen (1)

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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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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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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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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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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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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-32


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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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