Capital Structure : Samsung and Intel Essay

September 3, 2017 Construction

As per the tabular array above. it is clear that in 1997. the capital construction of Samsung Electronics was extremely leveraged. The capital construction of Samsung was 85 % debt and 15 % Equity compared to Intel with a 33 % debt and 67 % Equity as per the fiscal informations Year End 1997. The healthy blend of a 33 % debt to a 67 % of equity for Intel. a bit fabrication house based in the US. indicates that the company is expeditiously pull offing its investings by optimally utilizing debt to finally ensue in an addition in value for the stockholders. Samsung Electronics has 70 % of its USD 9 billion debt in the signifier of foreign currency loans. This is a major hazard component sing the exchange rate hit the company faced.

This immense dependance on foreign debt is something that explains the built-in disagreement that existed because of Samsung being portion of a Korean Chaebol. Like most Korean Chaebols. Samsung had the scheme of increasing size and disregarding profitableness. Access to recognition was via informal recognition markets and the support of the Government. Besides because most of the debt was besides issued via a transverse debt warrant. this caused a coiling consequence when a daze hit. There is besides an investing of Samsung Electronics into an unrelated industry viz. Samsung Motors. 21. 1 per centum of the interest at Samsung motors was acquired.

Such an unrelated investing is non a pattern amongst a comparable house Intel. Besides as per the tabular array. Samsung has a low equity which implies low stockholder committedness to concern via the channeling of ain financess. Intel on the other manus has high equity sums which back up the committedness of the company stakeholders to concern. Over all as per tabular array the major difference between the two companies is that Samsung has raised a batch of capital via debt. because of the weak authorities construction and hapless corporate administration.

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