There are many similarities that may occur in budgeting between rival companies within the same industry. Samsung Electronics and LG are both large corporations within the electronics industry; by working to compare their spending habits it is not only possible, but quite easy to see where their spending habits lie, and what this has to say about their companies. The below table will show the capital spending for a three year period for Samsung and LG and allow for the determination regarding whether or not their spending has been constant or has fluctuated during that time. LG did not have information available after 2011, though Samsung’s 2010 report contained the information for 2009 and 2008.
In order to calculate the net capital spending for each year, the change in total assets has been subtracted from the change in total liabilities. As can be seen from the above table, there is fluctuation in the amount of spending between both companies on a yearly basis, and furthermore, there is a fluctuation between the amounts spent by each company in each year. Samsung has had the more modest expenditures, the more modest liabilities, and lower assets; however they are showing stability, whereas LG is a newer company which is showing intense fluctuation between years. Samsung’s capital spending is always within a few grand of each other on a yearly basis, as opposed to LG whose differences can vary between the tens of thousands and the hundreds of thousands.
Samsung’s debt has remained at consistent levels, though it has started to rise slightly in recent years. LG on the other hand shows wide levels of fluctuation in their debt levels, which serve to account for the variations in capital spending. Samsung’s assets have steadily grown, while LG’s assets were low, fluctuated wildly, and are showing more modest growth in recent years. LG is all over the boards while Samsung is exhibiting steady and consistent growth.
The company’s capital expenditures were used to acquire assets or improve the useful life of existing assets over the period of more than one year (What Is Capital Expenditure, 2013). While no specific numeric information regarding the total expenditures was conclusively provided within the annual reports, Samsung does state that their historical cost contains the expenditure information for the company in regards to their buildings, auxiliary structures, machinery and equipment, tools and fixtures and vehicles and their estimated useful lives (Samsung, 2011). The historical costs include other information regarding the costs of the business and as such a conclusive and definitive number cannot be gained. No information was provided in LG’s annual reports detailing historical costs, expenditures, or estimated useful lives for any buildings, auxiliary structures, machinery and equipment, tools and fixtures or vehicles owned by the company (LG, 2011; LG, 2010; LG 2009). This does not indicate that LG does not keep track of this information, but rather indicates that they choose not to incorporate this information into their annual report.
Changes in capital spending between LG and Samsung do fluctuate wildly on a yearly basis. The most likely reason for this fluctuation is as a result of the different directions that the companies choose to go in. While Samsung has a firm grasp on their assets, spending, liabilities, and expenditures, LG does not yet have that type of grasp on theirs. It is possible that this is as a result of the fact that Samsung is the older of the two companies; however, it is more likely a result of different styles and different approaches to management, budgeting, and the visions of their companies. By working to review the information provided by Samsung and LG it is possible to see how the two companies are similar in their expenses, spending, assets, and liabilities, and how the two companies vary greatly, indicating that there are far more differences between the two companies than it may otherwise first appear on the surface.
- LG. (2009). Annual report. Retrieved from http://www.lg.com/
- Samsung. (2010). Annual report 2010. Retrieved from https://www.samsung.com
- What is capital expenditure. (2013). Retrieved from http://www.wisegeek.com/what-is-a-capital-expenditure.htm