Bus 650 - Financial Management

The LG Group

Xxxx

BUS650 - Financial Management

Instructor: xxxxx

June 3, 2013

LG

Financial Analysis: The LG group:

The LG group is the largest global manufacturer of electronics. It is the third largest producer of mobile phones. It was begun in 1947 under the Lak Hui trading name. It was a cosmetics and trading concern (Lee, 2010). In the 1960s, the electronics division of the company, then named Goldstar, expanded into the current LG electronics. LG stood for Luk Hai Goldstar; it was changed to stand for Lucky Goldstar.

Financial statement overview:

These statements in review constitute the financial position of the Korean Firm LG Electronics as of September 3oth 2012. The statements under review are those of financial position, cash flow, owner’s equity, and the relevant financial reports. The statements relate to the company and its subsidiaries, referred to as the group. The statements review the performance of the company in 2012 as contrasted with 2011.The first item that catches the eye in the financial statements is the decline in cash held by the group. This is in effect contrasted by the significant increase in trade receivables. This represents an unfavorable state of affairs because it predisposes the company to default on debts. It compensates for the ability to meet short-term obligations. Inventories held have decreased markedly as the prepaid tax also decreases (Baker, 2011). This represents a favorable shift because electronic goods are subject to steep depreciation curves. Holding fewer items in stock as compared to the former year represents a shift in policy.

Overall, there is a sharp decline in current assets in the latter year. In liabilities, there is a marked decline in trade payables. Further, there is a large increase in borrowings. This is not a favorable situation regarding the fact that there have been difficult credit terms during the period in question. Commendable, the group has managed to maintain a healthy gap between current liabilities and current assets. This shows that the group is in a competent position to address the needs of short-term liabilities. This relates to the ability to meet obligations that may fall due to a short time relative to the trading period. The gap between the current liabilities and the current assets has reduced sharply in a worrying twist. This perhaps goes to show that the company faced difficult trading times during the current year as opposed to the years prior. The fixed assets of the group are almost the same in value as the current liabilities of the same. This represents an unfavorable