Prior to beginning work on this discussion, go to American Airlines (Links to an external site.)’ and Samsung Electronics (Links to an external site.)’ most recent annual reports by clicking on the “Investor Relations” link found at each company’s website. The companies and their Internet addresses are listed below.
American Airlines Group Inc. (AAL)
Samsung Electronics Co., Ltd. (SSNLF)
American Airlines and Samsung are offering their products and services like many other companies over the internet. In an initial post of at least 200 words use the most recent annual filings for American Airlines and Samsung Electronics in Form 10-K to answer the questions below:
- Determine the following for each company:
- A product description
- A product price
- A list of costs that are required to produce and sell the product selected in the product description as listed in the annual report on SEC Form 10-K
- Whether the costs identified above are fixed costs or variable costs.
- Which of the products do you believe has the largest markup on variable cost?
- While Samsung is a hugely popular brand, holding its shares has never been easy for U.S. investors. How can an investor buy Samsung stock in the US?
Guided Response: Review several of your peers’ posts. In a post of at least 100 words, respond to at least two of your peers’ posts in a substantive manner. Provide information that they may have missed or may not have considered in regard to why variable-cost pricing can trick managers into setting prices so low that they hurt profits, or worse yet, cause net losses since it does not fully account for fixed costs. Do you agree with your peers’ findings? Why or why not?
Post by classmate 1
American Airlines is a regional subsidiary and third-party regional carrier operating as American Eagle. American Airlines operates on average of 6,700 flights per day to almost 350 destinations in 50 different countries. American Airlines Group INC was formed on December 2013, with a merger that was settled between American Airlines and US Airway Group (American Airlines Group, 2020).
Samsung Electronics is the world’s largest manufacturer of mobile phones and smart phones and is a South Korean company. Samsung is known for manufacturing major electronic components such as, appliances, semiconductors, flash memory and digital media devices. Samsung is known for its lineup of Android powered smart phone devices such as the note family of devices, and the Samsung galaxy collection. Samsung is also a major vendor of tablet computers and Android powered Galaxy tablets. Samsung has been the world’s largest television manufacturer since 1996 and the world’s largest manufacturer of smartphones since 2011. Back in July 2017, Samsung Electronics overtook Intel as the largest semiconductor chip maker in the world (Samsung, 2020).
American Airlines has a product price of $16.58 (as of May 16, 2021), which fluctuates based on the stock market.
Samsung Electronics has a product price of around $61,000 KRW, which also fluctuates based on the stock market.
A list of costs that are required to produce and sell the product selected in the product description as listed in the annual report on SEC Form 10-K
In reviewing the SEC Form 10-K for American Airlines a lists of costs that are required to produce and sell the product selected in the product description would be fuel, maintenance, employee wages, rental fees, advertisements, benefits, and selling expenses. Wages, advertisements, and rental fees are fixed costs. Fuel and maintenance are variable costs.
In reviewing the SEC Form 10-K for Samsung Electronics a lists of costs that are required to produce and sell the product selected in the product description would be costs of rent, employee wages, taxes, advertising, raw materials and utilities. Rent, advertising, and wages are fixed costs. Where raw materials and supplies variable costs.
Products with Largest Markup Costs
I believe Samsung Electronics would have the largest markup on variable costs because of the assortment of different items they sell. They sell an assortment of products that require more material/equipment to make the product.
How Can an Investor Buy Samsung Stock in the United States?
An investor can purchase Samsung stock in the United States by going directly through the Korean Stock Exchange, but it is a process. According to Sadek (2020), “American investors can buy Samsung shares through a local broker in South Korea or invest directly (after filing the appropriate paperwork). The latter requires an investor to obtain an investor registration certificate (IRC) from South Korea’s Financial Supervisory Service. After that, a stock trading account can be opened at a Korean securities firm, funds can be transferred and shares can be traded in real-time. Of course, there is much paperwork to submit, such as a standing proxy agreement, and investment ID application, registration of signature, criteria for determination of non-resident in Korea, and – of course – a copy of the investor’s passport” (para. 3).
Sadek, S. (2020). Samsung stock: how to invest in EWY, KF. Investopedia. Retrieved from https://www.investopedia.com/articles/investing/082714/how-invest-samsung.asp
American Airlines. Investor Relations. Retrieved from https://www.aa.com
Samsung. Investor Relations. Retrieved from https://www.samsung.com/us/
Post by classmate 2
According to American Airlines (AA) and the Samsung Group, the prerequisites are met.
AA is noted for its extensive coverage and regional partners who span both the domestic and international markets.
Samsung is a renowned electronic device maker that offers a wide range of products to its clients· The price of an AA ticket depends on the location, seat preference, and expected amenities. If the sum can be reimbursed or not, and the kind of the ticket
AA Except for rent charges and employee salaries, practically all of the costs listed above are variable costs. as well as the cost of marketing the goods.
Samsung, on the other hand, suffered costs due to material requirements and labor efforts.
In terms of the range of variable charges, I believe the AA service fee has the highest markup.
The conditions are met based on the AA rating given by the companies and the Samsung corporation.
The product’s marketing is included in the product description and demonstrating its worth to clients by detailing its features and the challenges it can answer and other advantages obtained that would aid in sales generation.
AA is well recognized for its extensive regional coverage and partnerships, which cover both the local and international markets by operating at least 6,800 flights each day to 350 destinations in 50 countries.
Samsung is a renowned electronic device maker that offers a wide range of products to its clients and the electronics industry, which produced appliances.
The price of a product is established by adding up all of the costs associated with assigning that product and a profit percentage it wishes to achieve. Many factors influence the pricing, including demand, product availability, and supply.
Laitinen, E.K., 2011. Management accounting in pricing decisions. In Review of management accounting research (pp. 311-342). Palgrave Macmillan, London.
Prior to beginning work on this discussion, please read the Investing Newsletter of Forbes Operating Leverage (Links to an external site.). The Finnish company Rovio Entertainment Corporation (Links to an external site.) that produces and sells the game Angry Birds, following years of falling earnings, job cuts and divestments announced that its revenue increased 34% in 2016 to 190 million euros ($201 million dollars). According to Rosendahl, the operating result improved to a profit of 17.5 million euros from a loss of 21 million in 2015, increasing earnings by 83% (Rosendahl, 2017). In 2015, Rovio Entertainment Corporation announced that its revenues for 2014 decreased nine percent compared to those of 2013; even worse, its earnings had decreased by 73% (Read the article, Investors Take Flight After Angry Birds Maker Warns on Profit (Links to an external site.)).
After reading Forbes’ Investing Newsletter, in an initial post of at least 200 words, explain why relatively small changes in companies’ revenues can result in relatively large changes in their earnings or losses. In other words, if a company’s sales increase 12%, why do its earnings not also increase 12%?
Guided Response: Review several of your peers’ posts. In a post of at least 100 words, respond to at least two of your peers’ posts in a substantive manner. Provide information that they may have missed or may not have considered in regard to operating leverage. A company’s earnings can rise faster, as a percentage, than its revenue due to operating leverage, and operating leverage is due entirely to the fixed costs. Do you agree with your peers’ findings? Why or why not?
Post by classmate 1
Good Morning Class!
Economic Value Added (EVA) would be described as a measure based on the residual income technique, which measures the return generated over and above investors’ required rate of return (hurdle rate). The metric serves as an indicator of the profitability of projects undertaken and its underlying premise consists of the ideas that (1) real profitability occurs when additional wealth is created for the shareholders, and (2) that projects create value when they generate returns above their cost of capital.
The balanced scorecard (BSC) is a strategic planning and management system. Organizations use BSCs to communicate what they are trying to accomplish, align the day-to-day work that everyone is doing with strategy, prioritize projects, products, and services, and measure and monitor progress towards strategic targets.
So, how do the two items above compare to corporate and divisional performance measurement? Corporate performance measurement is essentially the balanced scorecard since it uses metrics and processes to manage a business performance. Divisional performance measurement is using operating income as a percent of revenues and would be comparable to Economic Value Added (EVA) since it is looking mostly at the profitability aspect of a business.
Corporate Finance Institute. (2018, April 28). EVA – Economic Value Added. Corporate Finance Institute; Corporate Finance Institute. https://corporatefinanceinstitute.com/resources/knowledge/valuation/eva-economic-value-added/
Balanced Scorecard Institute. (2022, February 24). Balanced Scorecard Basics. Balanced Scorecard Institute. https://balancedscorecard.org/bsc-basics-overview/
Warren, C.S. (2018). Survey of accounting (8th ed.). Retrieved from http://www.cengage.com
Post by classmate 2
Describe the Balanced Scorecard and the Economic Value Added and their claimed advantages. Then compare these two systems to corporate and divisional performance measurement.
The Balanced Scoreboard (BSI) provides services such as consulting, training, and professional certification services. BSI works with clients to create a structure that aligns with the training they need to gain the desired knowledge. BSI is a performance tool to help managers keep track of the activities of their staff and monitor any actions that arise. The Balanced Scorecard provides feedback inside both business procedure and external outcome so that it solidly improves essential performance along with results.
Economic Value Added (EVA) measures the company’s financial performance by calculating and deducting the cost of capital from the operating profit. EVA is used as an indicator of how profitable the company’s projects are and serve as a reflection of the performance in the management.
I personally believe that the Balanced Scoreboard would be more beneficial on a divisional level one-on-one level. Whereas the Economic Value Added would be more beneficial on a corporate level. I think both tools when used hand in hand at a company would help the organization to run smoothly and be able to identify issues before they arise creating a enjoyable work environment.