Executive Summary 3
Sony's financial statements analysis 4
Sony's financial ratio trends analysis 6
Stock data 11
Recommendations 15
References 18
Executive Summary
Sony Corporation is a conglomerate based in Konan Minato in Tokyo, Japan. It is one of the leading electronic companies in the globe and specializes in the production of electronics both for consumer and professional business. The business has diversified its scope of operations over the years and currently also deals in financial services sector, entertainment and gaming. It was founded by co-founders namely Akio Morita and Masaru Ibuka in 1930s. Since its inception, the business has grown by rapidly to be leading electronic companies in the world. It has always adopted an aggressive expansionist strategy which explains it global presence. Despite its successes, the organization is grappling with serious challenges such as cut throat competition in the electronic business, legal challenges, and the global economic crisis. The main competitors of Sony Corporation include Samsung Electronics, LG Electronics, Apple Inc., and Nokia Inc. (Kerzner, 2009).
This report shows the assessment of the following information with regard to Sony Corporation
- The three years financial performance of Sony Corporation for the 2013, 2012, and 2011.
- The stock performance for three years which are 2013, 2012, and 2011.
- Recommendations on how to boost the financial health of the business.
On the basis of audited financial statement, the report will put into perspective critical analysis of the financial health of Sony Corporation.
Sony's financial statements analysis
Sony's financial ratio trends analysisLiquidity Ratios 2013 2012 2011
Current Ratio= Current Assets = 14206 13295 12911
Current Liabilities 11522 10785 9955
=1.23 = 1.23 =1.30
The firm should have a current ratio level that is above 1 since one is the business ratio. The company has a good current ratio because all the ratios from the year 2010 and 2013 are greater than 1. High current ratio usually shows that the company can honor its short term financial obligations.Quick (Acid-test) Ratio= Current Assets – Inventory
Current liabilities
2010 2011 2012
= 82661 – 71054 = 894576 - 707052 = 70303 – 53200
11522 10785 9955
= 1.122 = 1.14 =1.12
- The quick ratio which is also referred to as acid test ratio measures the ability of Sony Corporation to honor its short term obligations by using less liquid assets apart from stock. The recommended business ratio for quick ratio is 1. The company has a quick ratio that is more than one which shows that the company is a good position to honor its short term financial ratio.Activity RatiosInventory turnover = Cost of goods sold
Inventory
2010 2011 2012
=6800000 =6493000 =7181000
710054 707052 704043
=9.58 =9.18 =10.20
Average age of inventory =365/9.58 =365/9.18 = 365/10.20
38.1 days =39.76 days =35.78 days
The activity ratio of Sony is very impressive, it Samsung sold and restocked the entire stock about seven times during the three years’ time. Furthermore, inventory was on the shelf 47 to 51 days before it sold during the three years’ time.Average collection period = Accounts receivable
Average sales per day
= Accounts receivable
Annual sales
365
2010 2011 2012
14206 13295 12911
6800000 6493000 7181000
365 365 365
= 45 days =48 days =43 days
It is always good to have good low collection time because it shows that the company has effective working capital. The average collection period allows the business to have a positive cash flow which makes their ongoing concern concept to be achievable.Debt ratio = Total liabilities
Total assets
2013 2012 2013
= 11522 10785 21978
24769 22535 9955
.4654 or 46.51% ..4791 or 47.91% .4530 or 45.30%
Debt ratio is a critical financial ratio that measure how much of the business operations is funded by the debt. Sony has maintained a good debt ratio which means that it is striking a good balance between share capital and debt capital (Hirschey, 2008). This shows that the company will not have to repay so much in debt principal amount and interest amount. Moreover, the company also ensures that the control is not diluted by having too many shareholders.
(2)Times interest earned ratio = Earnings before interest and taxes(2)Times interest earned ratio = Earnings before interest and taxes
Interest
=22.30 =48.11 =18.12
The ratio measures the capability of the company to pay its debts for payment. Higher times interest rate is good because it manifests that the business can take care of its debts and the interest they attract several times. For instance, in 2013, the number of times in which the company was able to repay the interest that it has attracted is 22.30. On the other hand, in the year 2012 and 2011, the times interest earned ratio were 48.11 and 18.12 times. This ratio manifests the ability of the business to repay the interest that its debt capital attracts.
Profitability ratios
- Gross profit margin = Sales – Cost of goods sold = Gross profit
Sales Sales
2013 2012 2011
237048 544226 185757
6800000 6493000 7181000
=3.49% =8.38.0% 8.12%
The profitability ratios are often used to analyze if the business is being run profitably or otherwise. This implies that it strives to show if the company is using the assist from shareholders to generate income or otherwise. The gross profit percentages of Sony Corporation are very impressive and they are a pointer that the company is doing all that is in its power to create profits.Stock data for Sony Corporation
The stock price of the company is usually dictated by the experience of the firm to realize revenue in its operations. The earnings for Sony Corporation have been increasing all along and this explains why the earning per share price has also been on the increase for the business.
DuPont Analysis of Sony CorporationReturn on equity = net income x sales x total assets
Sales total assets total equity
2013
237048 x 6800000 x 10589000
6800000 10589000 48640900
= = .1648232692 or 16.48%
2012
544226 x 6493000 x 9540000
6493000 9540000 3135060
= .1440807547 or 14.41%
2011
185757 x 718100 x 9067000
718100 9067000 407915
0.14561211 Or 14.56%
The Du Pont analysis of Sony Corporation points out that the company is more operational efficient as compared to other electronic companies. Sony Corporation was more operational efficient in 2013 as compared to 2011, 2012, and 2013. This shows that it was more efficient in moving sales dollars to net income than before.Recommendations
Sony Corporation has different strengths that have promoted its success in the technology industry. Very strong relationships with suppliers who supply quality raw materials at the right time to enable Sony Corporation to meet its manufacturing objective. The other notable strength of Sony Corporation is existence of a very strong brand thanks to it is strategic marketing. The Corporation has been making huge profit margins over the years save for the recent global financial crisis. The huge profit margins are attributable to very efficient operations at the business (Pahl & Richter, 2009). The management understands the target market of the business and has been able to diversify its production lines; it has ventured into music, financial services, and gaming. Sony Corporation is also famed for producing excellent quality products such as Sony Bravia, sophisticated Phones such Sony Experia S just to name a few. Finally, the experience of the business to sustain effective research and innovation has buttressed its capacity in the electronic industry (Chau V. & Witcher, 2010).
The major opportunity that exists for Sony Corporation is exploitation of the market gap caused by its competitors. The leading competitors have not diversified their production line and are limited to just electronic production. In order to command an edge in the market Sony needs to exploit this by coming up with diversified product lines such as Sony Music and Sony Gaming World. The other opportunity is an entry into new markets through adopting effective marketing entry strategy. These strategies include licensing, acquisitions, and mergers. There has been growing concern that most electronic products are unhealthy through emission of dangerous ultra violet rays. Sony Corporation needs to conduct research to come up with additional user friendly electronics (Sekhar, 2009).
It is recommended that Sony Corporation enter into a long term strategic planning that will ensure that it has better business performance in terms of profitability and revenue base. The subsequent bulletins show the various recommendation’s for Sony Corporation.
Net income –When the profits and other earnings of the company are in the increase then it suggests that the going concern concept of the business be on course. Moreover, it is a boost to investors’ confidence because they get the confidence that they will earn their h dividends as well as experience the value of their shares increase. The company exhibits good trend since in its net income, for instance, in 2013 the profits of the business were at 3.49%.Earnings per share Investors’ earning per share- is a crucial indicator for the financial health of the business. It shows that the business can take care of its investor’s interest. The earnings per share of the market shows improving the trend in the last three years and this increase the investors’ confidence levels.
Shareholders’ equity- The shareholder equity of the company has increased since 2011 to 2013. Moreover, it is an indication that the resources of the business are being used efficiently to create profitability.
The current ratio-The liquidity ratios of the company which includes quick ratio, current ratio, and cash ratio is on the increase and above the average mark of 1. This is good indicators because they show that the company is in a place to take care of its short term debts.
The average age of inventory at Sony Corporation is 45 days that show that the company is an appropriate place to take care of its story and it also shows that the business has in the market because its products are on high demand in the market.
The average collection period for Sony Corporation is equally good in terms of the average time of collection of debts. This is a good indication which points out that the company has a sound working capital which it can use to manage its long term and short term financial obligations that may come calling. It is recommended that Sony Corporation continue to communicate well with its customers to ensure that they improve the working capital management.
The operating profit margin measures how efficient the company can utilize assets to generate income. Samsung numbers show increases from 2011 to 2012.
In general, the financial performance of Sony Corporation is looking up and it is a pointer that the company has a future in the competitive electronics industry.
References
Daniell M. (2004). World of Risk: A New Approach to Global Strategy and Leadership. New Jersey: John Willey and Sony.
Guru Focus. (2014). Sony Corporation. Retrieved March 22, 2014, from Guru Focus: http://www.gurufocus.com/financials.php?symbol=SNE
Kerzner H. (2009). Project Management: A Systems Approach to Planning, Scheduling, and Controlling. New Jersey: John Wiley & Sons.
Sekhar G. (2009). Business Policy and Strategic Management. New York: I. K. International Pvt Ltd.
Sony Corporation. (2014). Sony. Retrieved March 22, 2014, from Sorny Corporation: http://www.sony.net/
