It is hard to disagree that financial statements and their purposes are of great importance for small and major companies. They provide stakeholders, including potential investors, with essential information about the financial status of the organization at a certain point in time and can also help define its weaknesses and strengths. Moreover, these statements also assist companies in making informed and beneficial decisions regarding their future. The purpose of this paper is to discuss the day’s sales outstanding, days’ inventory, and days’ payables of Kroger Co. and Samsung Electronics Co. Ltd.’s financial statements.
First of all, days of sales outstanding may be defined as the number of days it takes an organization to get a sale’s payment. Consequently, the lower this indicator, the better for the company. According to the organizations’ financial statements, Kroger’s highest days sales outstanding was 5,35 days, while Samsung’s highest is 46,09, which is not critical but could be lower. As for the day’s inventory, this indicator shows the number of days it takes an organization to turn its inventory into sales.
For the electronics industry, in which Samsung Electronics Co. Ltd. belongs, it is common for the days inventory to be between 50 and 70, which means that this indicator is good in this company. However, Kroger is a supermarket company, and it is necessary for the food industry’s organizations to have the days outstanding inventory of about 6. Otherwise, the risk of food spoilage increases, for example, due to disturbed storage or transportation conditions.
Finally, the two companies have almost the same days’ payables, which practically means that it takes Kroger and Samsung no less than 20 days to pay their bills. Overall, this is neither too high nor too low for this indicator. As for other indicators shown in the financial statements, they are crucial for operating performance. For example, the return on assets should be 5% or more, which means that the company is effective at generating profits (Birken and Curry). It is noticeable that both Samsung’s and Kroger’s returns on assets are greater than 5%. Since operating performance is believed to be the critical factor that defines an organization’s success, it is essential to consider its components when analyzing the company’s financial health.
Work Cited
Birken, Emily Guy, and Benjamin Curry. “Understanding Return on Assets (ROA).” Forbes. 2021. Web.