iphone vs samsung

A138872 ZHANG LUWEN

A138900 WANG KETAO

A138876 LU JIAYAO

A138853 HUANG XING

VS

Organization of Apple was established in 1976 as a computer company. However, in the last decade, Apple has expanded into a complex company that specializes in much more than just computers. In 2001, Apple broke the barrier with the iPod, eventually becoming the dominant market leader in music players. In following, Apple joined the phone industry in 2007 with the iPhone, which has also been widely successful.

In 1938, Samsung began as a small business trading produce and consumer goods. Almost 70 years later, Samsung has transformed itself into a global powerhouse whose superior products and services now range from semiconductors and LNG ships to fine chemicals and financial services, just to name a few.

Background-Apple

-Samsung

Apple & Samsung Financial Statements (2009, 2010 and 2011)

-Apple

-Samsung

Apple Ratios and analysis (in thousands of US dollars)

I. Liquiditya) Current Ratio

The primary liquidity ratio is the current ratio, which is calculated by dividing current assets by current liabilities:

Current ratio = Current assets/ Current liabilities

2009 2010 2011

Current ratio 0.40x 2.01x 1.61x

2009 2010 20110

0.5

1

1.5

2

2.5

Current ratio

Current ratio

2009 2010 2011

Quick ratio 0.32x 1.96x 1.58x

b)Quick Ratio The second liquidity ratio is the quick ratio, which is

calculated by deducting inventories from current assets and then using the remainder to divide current liabilities:

Quick ratio = (Current assets-Inventories)/ Current liabilities

2009 2010 20110

0.5

1

1.5

2

2.5

Quick ratio

Quick ratio

2009 2010 2011

Inv. turnover 80.30x 62.06x 139.50x

II. Asset Managementa) Inventory Turnover Ratio

Inventory turnover is calculated by sales dividing inventories.

Inventory turnover = Sales / Inventories

2009 2010 20110

20406080

100120140160

Inv. turnover

Inv. turnover

2009 2010 2011

DSO 33.58 30.83 18.10

b) DSO (Days Sales Outstanding)It is calculated using account receivables to divide the

average daily sales .Thus, the DSO represents the average length of time the firm must wait after making a sale before receiving cash:

DSO= Receivables / Average sales per day

2009 2010 201105

10152025303540

DSO

DSO

c) Asset Turnover Ratioi) Fixed Assets Turnover RatioFixed Assets Turnover = Sales / Net fixed assetsii) Total Assets Turnover Ratio

Total Assets Turnover = Sales / Total assets

2009 2010 2011

FA turnover 0.84x 1.95x 1.52x

TA turnover 0.68x 0.87x 0.93x

2009 2010 20110

0.5

1

1.5

2

2.5

FA turnoverTA turnover

2009 2010 2011

D/A 48% 36% 34%

III. Debt Management RatiosThe use of debt will increase, or “leverage up”, a firm’s ROE if

the firm earns more on its assets than the interest rate it pays on debt. However, debt exposes the firm to more risk than if it is financed only with equity:

Debt ratio = Total debt / Total assets

2009 2010 20110%

10%

20%

30%

40%

50%

60%

D/A

D/A

2009 2010 2011PM 16% 21% 24%BEP 14.8% 24.7% 29.4%

IV. Profitability Ratios:a) Profit MarginThe profit margin, also sometimes called the net profit margin, is calculated

by using net income to divide sales:Profit margin = Net income/Sales

b) Basic Earning Power (BEP) RatioThe Basic Earning Power Ratio is calculated by using operating income

(EBIT) to divide total assets:BEP = EBIT/Total

assets

2009 2010 20110%

5%

10%

15%

20%

25%

30%

35%

PMBEP

C) Return on Assets Return on Assets=Net income/Total assetsd) Return on Equity Return on Equity=Net income/Total common equity

2009 2010 2011

ROA 11% 19% 22%

ROE 20.4% 29.3% 33.8%

2009 2010 20110%

5%

10%

15%

20%

25%

30%

35%

40%

ROAROE

Samsung Ratios and analysis

I. Liquiditya) Current RatioThe primary liquidity ratio is the current ratio, which is calculated by current assets dividing current liabilities:

Current ratio = Current assets/ Current liabilities

2009 2010 2011

Current ratio 1.65x 1.54x 1.61x

2009 2010 20111.48

1.5

1.52

1.54

1.56

1.58

1.6

1.62

1.64

1.66

Current ratio

Current ratio

b) Quick Ratio The second liquidity ratio is quick ratio, which is calculated by deducting inventories from current assets and then using the remainder to divide current liabilities:

Quick ratio =( Current assets-Inventories)/ Current liabilities

2009 2010 2011

Quick ratio 1.38x 1.20x 1.26x

2009 2010 20111.1

1.15

1.2

1.25

1.3

1.35

1.4

Quick ratio

Quick ratio

II. Asset Managementa) Inventory Turnover Ratio Inventory turnover is calculated by sales dividing inventories.

Inventory turnover = Sales / Inventories

2009 2010 2011

Inv. turnover 13.93x 11.57x 10.50x

2009 2010 20110

2

4

6

8

10

12

14

16

Inv. turnover

Inv. turnover

b) DSO (Days Sales Outstanding)It is calculated using account receivables to divide the average daily sales .Thus, the DSO represents the average length of time the firm must wait after making a sale before receiving cash:

DSO= Receivables / Average sales per day

2009 2010 2011

DSO 65.73 50.30 53.43

2009 2010 20110

10

20

30

40

50

60

70

DSO

DSO

c) Asset Turnover Ratioi) Fixed Assets Turnover RatioIt is the ratio of sales (on the profit and loss account) to the value of fixed assets (on the balance sheet). It indicates how well the business is using its fixed assets to generate sales. This ratio is calculated by using sales to divide net fixed assets.

Fixed Assets Turnover = Sales / Net fixed assets

ii) Total Assets Turnover RatioIt measures the efficiency of a company's use of its assets in generating sales revenue or sales income to the company. This ratio measures the turnover of all of the firm’s assets, and it is calculated using sales to divide total assets:

Total Assets Turnover = Sales / Total assets

2009 2010 2011

FA turnover 2.47x 2.12x 1.96x

TA turnover 1.18x 1.15x 1.06x

2009 2010 20110

0.5

1

1.5

2

2.5

3

FA turnoverTA turnover

III. Debt Management RatiosThe use of debt will increase, or “leverage up”, a firm’s ROE if the firm

earns more on its assets than the interest rate it pays on debt. However, debt exposes the firm to more risk than if it is financed only with equity:

Debt ratio = Total debt / Total assets

2009 2010 2011

D/A 38% 33% 35%

2009 2010 201130%

31%

32%

33%

34%

35%

36%

37%

38%

39%

D/A

D/A

IV. Profitability Ratiosa) Profit MarginThe profit margin, also sometimes called the net profit margin, is calculated

using net income to divide sales:Profit margin = Net income/Sales

b) Basic Earning Power (BEP) Ratio The Basic Earning Power Ratio is calculated using operating income

(EBIT) to divide total assets:BEP = EBIT/Total assets

2009 2010 2011

PM 19.2% 21.5% 24%

BEP 14% 11% 18%

2009 2010 20110.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

PMBEP

c) Return on assetsThe (ROA) percentage shows how profitable a company's assets are in generating revenue. This ratio is calculated using net income to divide total assets.

Return on Assets=Net income/Total assets

d) Return on equityThis ratio is calculated using net income to divide total common equity. It measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners, and measures a firm's efficiency at generating profits from every unit of shareholders' equity .ROE shows how well a company uses investment funds to generate earnings growth.

Return on Equity=Net income/Total common equity

2009 2010 2011

ROA 8.6% 12% 8.8%

ROE 14% 18% 13%

2009 2010 20110.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

ROAROE

COMPARISONS OF THE TWO COMPANIES

Samsung(2011) Apple(2011)0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

Current ratio

Current ratio

Samsung(2011) Apple(2011)0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

Quick ratio

Quick ratio

Liquidity positionLiabilities

Inventory management

Samsung(2011) Apple(2011)0

20

40

60

80

100

120

140

160

Inv. turnover

Inv. turnover

Samsung(2011) Apple(2011)0

10

20

30

40

50

60

DSO

DSO

Inventory Collection of cashCredit policy

Samsung(2011) Apple(2011)0

0.5

1

1.5

2

2.5

FA turnover

FA turnover

Samsung(2011) Apple(2011)0.85

0.9

0.95

1

1.05

1.1

TA turnover

TA turnover

Fixed assetSales Current Assets

Samsung(2011) Apple(2011)32%

34%

36%

D/A

D/A

Samsung(2011) Apple(2011)0%

5%

10%

15%

20%

25%

30%

Profit margin

Profit margin

DebtAccount payable

Net incomeSalesCosts

Samsung(2011) Apple(2011)0%

5%

10%

15%

20%

25%

30%

35%

BEP

BEP

Samsung(2011) Apple(2011)0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

ROA

ROA

EBITNet income

Samsung(2011) Apple(2011)0%

5%

10%

15%

20%

25%

30%

35%

40%

ROE

ROE

Net incomeTotal common equity

Conclusion

• Samsung: good in 2010, decreases in 2011• Apple: upward performance tendency• Assets: Apple bigger• Inventory : Samsung bigger• DSO: Samsung longer• Debt: Samsung bigger• EBIT: Apple bigger• Costs: Samsung bigger

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