Calculations In Millions Of Korean Won

Published Date: 02 Nov 2017

"Working capital management is the administration of current assets and current liabilities. Effective management of working capital ensures that the organization is maximizing the benefits from net current assets by having an optimum level to meet working capital demands." [1]

Working Capital = Current Assets - Current Liabilities

Current assets - the type of assets which can be faster converted into cash within one year. These type of assets are using in current operation and usually used for short-term operations of the company. Current assets are included: cash, bank, debtors, bill receivables, prepaid expenses, outstanding incomes.

Current Liabilities - debts or obligations of a company that should be paid within one year. This liability is shown in the balance sheet till the moment when payment has been made to the creditors. Current liabilities are included: creditors, outstanding bills, bank overdraft, bills payable and short term loans, outstanding expenses, advance incomes.

Working Capital is very important to firms. In situationwhen creditiors are want to take their money back, the firm is using working capital to cover these expenses. Having sufficient amount of working capital is very important. Easily paying off the creditors the firm creates good reputation in market. In the situation when firm isn’t able to pay off the creditors, the firm becomes bankrupt, or have to take loan at high rate of interest. Both situations aren’t good for firm. Positive working capital is using to pay day to day expenses like wages, overheads and other operating expenses. One more advantage of having positive working capital is ability to do risky work without any problems in self security.

Working capital

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Retrieved from: http://www.samsung.com/us/aboutsamsung/ir/financialinformation/auditedfinancialstatements/downloads/consolidated/2012_con_quarter04_bs.pdf

Retrieved from: http://www.samsung.com/us/aboutsamsung/ir/financialinformation/auditedfinancialstatements/downloads/consolidated/2012_con_quarter04_bs.pdf

Calculations in millions of Korean Won

Current assets = â‚© 87 269 017

Current liabilities = â‚© 46 933 052

Current assets - Current liabilities = Working capital

Working capital = â‚© 87 269 017 - â‚© 46 933 052 = â‚© 40 335 965

1.1 Current ratio = = = 1.859436224177367 ≈ 1.86

Calculations in thousands of U.S. dollars

Current assets = $ 81 476 069

Current liabilities = $ 43 817 619

Current assets - Current liabilities = Working capital

Working capital = $ 81 476 069 - $ 43 817 619 = $ 37 658 450

Sources: 1.http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=005930:KS&dataset=balanceSheet&period=A&currency=native

2.http://www.samsung.com/us/aboutsamsung/ir/financialinformation/auditedfinancialstatements/IR_AuditedConsolidated.html

Other Liquidity ratios

All calculations in millions of Korean Won

Quick (Acid test)ratio - indicator that shows level of short-term assets available to pay off immediate liabilities without selling inventory.

Quick (Acid test)ratio = = 1,45

Cash ratio determines ability and speed of repaying short-term debt by the company.

1.1 Cash ratio = =

≈ 0,94

Sources: 1.http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=005930:KS&dataset=balanceSheet&period=A&currency=native

2.http://www.samsung.com/us/aboutsamsung/ir/financialinformation/auditedfinancialstatements/IR_AuditedConsolidated.html

Cash conversion cycle

All calculations in millions of Korean Won

1.DIO + 2.DSO – 3.DPO =4.CCC

Days Inventory Outstanding (DIO). This indicator shows how many days шы needed to sell the inventory. (The lower number is the better)

DIO = Average inventory/COGS per day

Average Inventory = (beginning inventory + ending inventory)/2

DIO = ₩ 16 732 064/ (₩ 126 651 931/365 days) ≈ 48.22 days

Days Sales Outstanding (DSO). This indicator shows how many days are needed to cоllect оn sales and involves Accounts Receivable. (The smaller number is the better)

DSO = Average Accounts Receivable / Revenue per day

DSO = ₩ 22 871 681/ (₩ 201 103 613 / 365 days) ≈ 41.51 days

Days Payable Outstanding (DPO). This indicator shows the firm's payment of own bills and Accounts Payable. Maximizing this indicator company maximizing its investment potential. (Longer DPO is better)

DPO = Average Accounts Payable / COGS per day

DPO = ₩ 17 699 420/ (₩ 126 651 931/ 365 days) ≈ 51.01 days

Average Inventory = (beginning inventory + ending inventory)/2

Average Inventory = (17 747 413 + 15 716 715)/2 = 16 732 064

Average AR= (beginning AR + ending AR)/2

Average Accounts Receivable = (23 861 235 + 21 882 127)/2 = 22 871 681

Average AP = (beginning AP + ending AP)/2

Average Accounts Payable = (18 509 490 + 16 889 350)/2 = 17 699 420

(CCC) The cash conversion cycle is one of the methods of measuring management effectiveness. This indicator shows the ability of a cоmpany to cоnvert cash оn hand into bigger amount cash оn hand. The cash conversion cycle does this by converting the cash as into inventory and accounts payable, through sales and accounts receivable, and after that back into cash. (The smaller number is the better)

CCC= 48.22 days + 41.51 days - 51.01 days = 38.72 days

Sources: 1.http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=005930:KS&dataset=balanceSheet&period=A&currency=native

2.http://www.samsung.com/us/aboutsamsung/ir/financialinformation/auditedfinancialstatements/IR_AuditedConsolidated.html

1 . http://www.acornlive.com/demos/pdf/P1_Chapter_10.pdf