What are the linkages among financial decisions, return, risk and stock value for this firm? Samsung Electronics is a multinational company, which specializes in technology while focusing on innovation and technological improvements. Samsung makes financial decisions based on the valuation of their stock. These decisions are directly linked to their expected return on an investment and various risk measures, such as volatility, net capital ratio, and value at risk (VaR), which measures the maximum potential loss an investment could experience within a given time frame at a specific level of confidence. They also assess the current state of their net cash. These measures help determine the required return for investors. Samsung also utilizes ratios to help in financial planning such as current ratio, liability/equity, debt/equity net/debt equity, asset turnover and leverage. Why are these linkages important? These linkages between financial decisions, stock value, risk and return are important for increasing stockholders' wealth. They are often necessary because the formal structure of an organization doesn't always facilitate how work happens or needs to happen to meet financial goals. Therefore, the linkages between decisions, risk, return and stock value help Samsung adequately implement their financial plans for future success. How does the financial manager incorporate these as s/he manages the assets and liabilities of the firm? Samsung has a risk management system, and the Board of Directors operates a body for each decision-making process. This system consists of a risk cost system in which risk costs are calculated for each division. This allows Samsung to incorporate risk management into financial performance. There is also an assessment personnel to assess the risk and return of target assets for the company's investments. How can stockholders know that these linkages are being managed well? A stock's market price at different points in time can give stockholders an estimate of its value. Most stock valuation measures are available to determine a stock's value and potential for future gain. Monitoring a firm's financial performance as well as book value, liquidation value and price per share value can leave hints on how the linkages are being managed. How might these linkages differ in different industries? Banks and insurance companies have risk departments headed by a chief risk officer (CRO). Regulators require banks over $50 billion in assets to have a CRO and a board risk committee. Banks may use different measures to analyze their financial performance and stock valuation. For example, banks use debt differently than other companies, they don't use it for borrowing but rather to create their products such as loans so they would typically have a high debt to equity ratio. Because they do not sell goods and they deal with financial instruments primarily, they would not be concerned with performance measures as it relates to tangible products and inventory, and they may be less innovative. They may be more concerned with measuring dividends rather than Free cash flows. They have different risks to assess than other industries such as credit risk and interest rate risk. This would cause the formation of linkages to differ from other non-bank industries

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The linkages among financial decisions return risk and stock value are crucial for Samsung Electronics as they directly impact stockholders wealth and the overall success of the company Lets delve dee... View the full answer