ACTIVITY 3.5.1 SAMSUNG'S PROFITABILITY The following data was obtained from Samsung's published accounts (all figures are in billions South Korean wons) 2012 2013 Revenue 201 104 228693 Cost of sales 126 6S2 137696 Net profit 2995 38364 Current assets BT270 110760 Inventories TT 14T 19135 Current liabilities 45933 51315 Capital employed 134 139 162 760 In April 2014 Samsung Electronics, the world's biggest maker of TVs and mobile phones, reported a drop in net profit for the second quarter in a row. This is down on the same period in 2013. The fall in profit is largely a result of increased competition, forcing prices down and shrinking profit margins. Samsung has warned that it expects competition in the market to intensity further. Samsung's chip-making business only makes a net profit margin of 20% but its main competitorsk hynix, has recorded a 28.25. margin. Business analysts are suggesting that Samsung may need to cut costs in order to increase profits again. What Samsung needs to do this year are things like cost reduction and reduce marketing costs,' said Greg Roth, an analyst with HMC Securities Samsung has no way to prevent a decline in profits without improving internal efficiencies 36 marks, 72 minutes 1. Define the following terms a. capital employed 121 b. net profit margin 121 2. Calculate Samsung's gross profit for both years Profitability and liquidity ratio a 3. Calculate the following ratios from Samsung's accounts for both years gross profit margin net profit margin ROCE current ratio acid test ratio. 101 4. Using the ratics you have calculated, comment on Samsung's performance over the two years 110 5. Evaluate two strategies that Samsung could adopt in an attempt to improve its profitability ratios 110