COURSE NAME ACCOUNTING FOR DECISION

MAKING
FACULTY DR. ANUPAM
FINAL PROJECT SONY INC.
SUBMITTED ON 04 -12-2014

ANALYZED AND PRESENTED BY

SECTION A GROUP 6
MEMBERS:Bhavna Shrikumar SMBA 14023
Divya Shanmugam SMBA 14025
Sanjana Ramaseshan SMBA 14054
Dilna Sudhir SMBA 14077
Monalisa Hota SMBA 14037

Table of contents

S.NO

Topic

1.

Summary of analysis

2.

Sony at a glance

3.

4.

5.

6.

7.

8.

9.

Page No.
3
4
5

Industry competitors

Segment analysis

10

Share prices

11

Financial statement analysis

13

Ratio analysis

18

Trend analysis

25

SWOT analysis

10.

Future prediction & Recommendation

11.

Conclusion

12.

References

26
27
28

Summary of the analysis

Sorry that we failed to meet shareholders expectations, Hirai said at the companys annual
meeting in Tokyo. We will bear responsibility to complete restructuring in fiscal 2014, with
a strong sense of crisis and without further delay. [1]
Gone are the times of Sony Walkman, now Sony is struggling to pay dividends to its
shareholders. The company announced a second quarter loss of $1.2 billion for the year
ended 2014. The main problem that Sony faces is its diversification of products, they have a
variety of products in almost all the entertainment sectors and clearly this is reducing their
efficiency. Apart from this internal problem of Sony, it faces a tough competition from its
competitors in various sectors. Sony however is known for its technological advancements
and innovation but gradually it has lost this advantage as a brand due to the increasing
competitors and now even the investors are very disappointed with non-payment of dividend.
After in depth analysis of Sonys history, model, its financial statements using ratios, trend
analysis, Porters Five Forces Analysis and a SWOT analysis, the following were few
findings:
Sony has been incurring a continuous loss since 2008, currently it is facing a loss of
approx $ 2.1 billion.
Sony must make proper use of their increased leverage and other asset items in order
to generate more sales.
It is very evident from the stock price analysis that the current share holders have no
faith or confidence in Sony anymore, and since they are so disappointed it would be
very hard for Sony to win them back.
Sony has a way too diverse line and must try and stick to a few product lines so that
they can allocate their resources appropriately and increase their efficiency.

We therefore recommend Sony to do the following :

Establish a key area of focus and develop and improve only that aspect.
Improve their pricing and marketing strategies to ensure fair competition with their
competitors.
Cost of Goods sold can be reduced by improving their bargaining power as well as
improving supplier volume discounts.
Management must be encouraged to take quick strategic decisions without being too
reserved as it has definitely been seen that a drastic change is required with
immediate effect to save the company from further loss.

SONY CORPORATION AT A GLANCE

Sony Corporation is a Japanese Multinational company that has its headquarters in Konan
Minato, Tokyo, Japan. It was founded by Masaru Ibuka in 1946, under the name Tokyo
Tsushin Kogyo (Tokyo Telecommunications Engineering Corporation), but the name of the
company was later changed to Sony Corporation in January 1958 for want of a name that was
easier for the westerners to pronounce and that would hence do well in the western market.
The Sony Corporation of America was established in the US in 1960 and they became the
first Japanese company to offer their shares in the US market. Their shares became listed on
the NYSE in 1970. Today, they operate in approximately 200 countries and territories.
Sony deals in the development, design, manufacture, sale and distribution of the following
products and services:i.
ii.
iii.
iv.
v.
vi.
vii.
viii.

Electronic equipment & Devices

Game Consoles
Software
Motion Picture
Home Entertainment Systems
Television products
Recorded Music
Financial Service businesses

Sony has always believed in creating and developing their own technology by conducting
their own research rather than copying the standards of other manufacturers. They
particularly pride themselves in this aspect. There have been many instances to prove this
success. For example the Walkman became a world-wide sensation and held a brand image
of its own in the market for over a period of time. Subsequently they came out with the
Discman, with advancements in technology, which was also quite a success. Sony has grown
dramatically over the years with a certain percentage of its growth attributing to various joint
ventures, acquisitions and accumulation of subsidiaries.
However, over the last few years Sony has not been performing too well financially. They
have been facing severe competition from other electronic companies like Apple Inc. and
Samsung. Studying their trend over the last decade, the drop in their performance is clearly
visible. In 2000, Sony had a net worth of $100 billion but ten years later by 2012, their net
worth had fallen to $18 billion, proving that the last ten years has not been kind to this
company. Sony attempted to tackle these losses, through joint ventures and outsourcing,
however, these attempts have yet to be rewarded in the form of profits or dividends. Hence
this has left Sony in a sort of an uncomfortable situation financially which in turn impacts
their future growth and sustainability. [2]

Competitors analysis
Porters five forces Model of industry analysis (quickmba.com)

Supplier
power

Threat of
new
entrants

Rivalr
y

Threat
of
substitu
tes

Buyer
power

Using porters model for analysing Sonys competitors:

INTERNAL RIVALRY :
Sonys main market segments include Electronics, Game, Pictures, and Financial Services
and Joint Ventures (wiki-invest), as Sony has many segments it faces a lot of competition and
its main competitors are Apple, Samsung, LG, Microsoft and Cannon. The following is the
income summary of its competitors.( As on 26th November 2014).

[3]

From the comparative analysis of the main competitors of Sony Inc. the following were the
findings:

Net income: The industry average till November, 2014 is $547,908 but Sony has
incurred a net loss of $-221,026 this shows the poor performance of Sony for that
particular year. However, it can be duly noted that the other competitors such as Apple
and Samsung are either close to the industry average or even higher. The industry or
the economic conditions prevailing in that particular period cannot be blamed and it is
the fault of Sony Inc. for incurring such a huge loss.
Dividend Yield %: This is the yield that an investor can expect from purchasing a
particular stock. And since the dividend available to Sony is less, the dividend yield
ratio is also low as compared to Apple and Panasonic where the dividend yield % is
1.6 and 1.2 respectively.
Interest Coverage: This is the companys ability to pay its interest expenses with its
earnings before interest and tax .Low interest coverage means the company is in more
debt. And from the above table it is evident that Sony Inc. has the maximum amount
of debt. Although LG is very close to Sony in terms of this ratio, Sony still has a
lower ratio and will therefore find it difficult to cover its interest expenses.

Threat of new entrants :

The threat of new entrants in the market is very low mainly because for a new firm to enter
the market they need to acquire the same technological strength and also because the capital
6

requires is quite high as Sony products are high end and luxury goods. However if new
entries do occur in the market then Sony will not be able to withstand the competition as it
lacks consumer loyalty but are surviving in the market due to their innovation strategies.

Threat of substitutes :
Sony faces high threat of substitutes as it has a lot competitors who sell the similar product
for a comparatively lesser cost and especially because Sony doesnt enjoy much of brand
loyalty it is very easy for the consumers to switch to other brands. Although Sony tries to
differentiate their product through lot of innovative ideas and designs it still faces a lot of
competition.

Supplier power:
The supplier power for Sony is quite low because they try their best to bargain with their
suppliers in order to be cost efficient .Sonys main motive is to produce high-end products for
the minimal cost to withstand the competition faced by them in the industry. Therefore, they
do everything they can to make the input cost as less as possible.

Buyer power:
Buyer power for Sony is high even if they try to differentiate their product with better
innovation and technology, the close substitutes are easily available and hence the buying
power of consumers is relatively high. Another important factor to note here is that as Sony
operates globally it can become a stepping mat for currency exchange rate. Since Yen goes on
appreciating it can lead to a decrease in the profits of the company as this appreciation of
currency in turn leads to increase the price. [4]

Segment analysis
According to the latest(2013) segment analysis, the following are the various sectors:

Mobile products
Home entertainment
Imaging products
Devices
Pictures
Music
Financial services
Game
Others

[5]

The segment analysis for Sony Inc. are as follows:

The majority of the sales is contributed by mobile products and communication, it

totals to 17.9% of the total.
Mobile product is followed by Home entertainment and sound which contributes to
almost 14.6% of sales.
Another significant contribution is made by financial services (10.7%) and that is
followed by equal contribution of imaging and pictures.
8

 The least sales contribution is made by the music sector of Sony, it contributes only
6.3%.
The contribution of the different segments to sales and the operating income/loss are:

[5]

Comparing the contribution of segments for 2012 and 2013:

Mobile Products: The sales of mobile products has drastically increased from 622.7
in 2012 to 1,257.6 in 2013.And Sony also incurred a major operating loss only
because of this segment, the loss amounts to 97.2 .
Home Entertainment : The sales of home entertainment has decreased in 2013 to
994.8 as they incurred a huge operating loss of 203.2 in 2012 by selling
1,283.2,therefore their sales was decreased the next year yet it incurred a operating
loss of 84.3.
Devices : Not much of a fall in sales in 2013 as compared to 2012,however in 2013
they incurred a operating loss of 43.9 whereas the previous year a profit of 22.1.
Financial Services : One of the positive increase in sales from 871.9 to 1,007.7 has
led to increase in operating profit of 14.4.
All the other segments had a very minute contribution to the operating income in the
year 2013.

Therefore, we conclude by saying that mobile phones segment is majority part of the
proportion of sales contributed and it also contributed to a operating loss of 97.2 in
2013.

STOCK PRICE [6]

In 2011, Sonys stock price declined by 54%. In order to determine if the price is high
or low, we need a ratio that can compare the stock price and any fundamental
indicator of the companys financial strength. Due to a negative income incurred by
Sony, price/earnings ratio cannot be applied
Sony Corp saw immense profit throughout the 1990s and early 2000s especially due
to the Playstation line. However they encountered financial difficulties from mid-tolate 2000s due to a number of factors which included the global financial crisis and
the devastating earthquake that occurred in Japan in 2011.2012 was when the
company faced the worst of its series of losses(roughly US$6.36 billion), since it was
founded.
In September 2000 Sony had a market capitalization of $100 billion; but by December
2011 it had plunged to $18 billion, reflecting falling prospects for Sony but also
reflecting grossly inflated share prices. Net worth, as measured by stockholder equity,
10

has steadily grown from $17.9 billion in March 2002 to $35.6 billion through
December 2011.

Financial statement analysis [7]

Income statement analysis

Revenues are the amounts that a business earns from selling goods or by providing
services to its customers. The revenue of Sony as on 2008 was 86,400. But over the years
it declined and the revenue during 2014 is 75,809. This shows that the sales of the
company has reduced when compared to its previous years.
Cost of goods sold (COGS) refers to the actual goods that are sold by a company to its
customers. COGS as on 2008 was 61,260 but it reduced to 50,167 in 2014.
Gross profit is the difference between the sales and cost of goods sold. Sony has 20,921
in 2009 and currently has 25,642. This shows that the company has enough funds
available for operating expenses and taxes.
The gross profit margin reflects the businesss ability to earn a profit on merchandise
inventory. The gross profit margin is the most closely watched measures of profitability.
The gross profit margin in 2008 was 29.10 and it fell to 26.77 in 2009. It then again
increased to 32.18 in 2010 and 33.99 in 2013. In 2014, it fell just a little to 33.82. This
ratio is lower than the industry average of 43%. But the improving rise in income shows a
good sign for the company.
Operating Income also called Earnings before Interest and Taxes(EBIT) is a measure of
profitability that measures the firms profit that includes all expenses except interest and
income tax expense. The operating income has been constantly low and the years 2009
and 2012 show a negative balance of 2,303 and 828 respectively. The operating income
rose to 2317 in 2013 but again fell drastically to 259 in 2014. This shows that there has
been a constant fluctuation during the years. Because of this there will be less money for
the shareholders.
Interest expense is the amount of money borrowed by the company. The expense has
continuously been having a negative balance
Net income during the year 2008 was 3,542. It then declined to -1.033 in the year 2009
and has continuously been on a negative side till 2012. 2013 showed a positive net
income but again the next year the net income fell to - 1,253. Reduction in net income is
of a serious concern for the company and it shows that the company has been suffering
huge losses.
11

Balance sheet analysis

Cash and cash equivalents (CCE) Companies with high amounts of cash and cash
equivalents are better able to get through hard times when sales are low or expenses are
particularly high.
The balance sheet shows that at the end of March 2008, Sony had a cash equivalent of
10,561. But in 2009 their cash equivalents fell drastically in 2009 to just 6,680. But it
improved over the years and currently stands at 10,214.
Current assets are those assets which have the capability to pay off current (short term)
liabilities. Sonys current assets have also been decreasing. From 12,600 in 2008, it has
declined to only 5,302 in 2014. This explains that even if the short term liabilities have to
be paid the company does not have enough current assets to pay off its liabilities. This is
of a serious concern as inability to pay would mean bankruptcy.
The various Fixed Assets such as land, building, equipments and plant also show a
decline when compared to the year 2008.
Accounts payable :The accounts payable was increasing at a gradual pace from 8,732 in
2008 to 13,209 in 2012. But in the year 2013, it drastically fell to 5,852. This shows that
the company is paying its suppliers and creditors at a much slower pace that what it
actually used to do. It also explains that the company does not have enough money to pay
back its creditors.
Current liabilities In 2013, the amount of current liabilities was at 23,773. The current
assets during the year 2013 were just 5,302. This shows that there is not enough assets to
pay off these current liabilities.
The total liability has been constantly increasing and stands at 127,619 in 2013. This
again does not show a good picture for the company and shows that the company is
actually struggling to pay off its shareholders.
Total equity is the total of common stock, preferred stock, retained earnings and treasury
stock. In 2008, the total equity was 33,747. It fell to 29,970 in 2009 but again increased to
31,737 in 2010. In the year 2014, it decreased to 22,040. This decrease could also be
because of the net loss the company has incurred during the year. The total equity to total
asset ratio is 0.15. This shows the amount of assets that the shareholders have claim on. A
higher percentage indicates more risk. Since it is 0.15, the company is not in any risk
when it comes to total equity.
12

COMPARATIVE AND COMMON SIZE STATEMENTS

From the common size and comparative statements, we can see that the Cost of Goods Sold
(COGS) has been decreasing. There is a fall of 4.73% from 2008 to 2014. With the fall in
revenue, the COGS also has been reducing. This explains that the number of goods actually
being sold has been reducing over the years.
The Operating Income shows a decrease of about 5.02% from the years 2008 to 2014. It is
clear that the Sony does not have revenue and hence it is unable to make profits. The Net
Income also shows a negative balance and has not been having enough income.
The Balance Sheet shows that there has been a decline in the current assets by 12.48%. Even
though there has been a decline of 7.71% in the Current Liabilities, the amount of Liabilities
is much more than the assets. This clearly shows that the company does not have enough
liquidity to pay off their liabilities. The inventory level has also been reducing over the years.

RATIO ANALYSIS [8]

1. Receivables Turnover Ratio:An accounting measure used to quantify a firm's effectiveness in extending credit as
well as collecting debts.

2010
Receivables
Turnover Ratio

2011
-

2012
64.28

2013

2014

38.84

47.68

Sony Corp. has an almost consistently high receivables turnover ratio over the
last three years.
This implies that Sonys extension of credit to its debtors and collection of its
receivables is efficient.

13

2. Total Asset Turnover Ratio:The amount of sales or revenues generated per dollar of assets.
Asset Turnover = Sales or Revenues/Total Assets

Total Asset
Turnover Ratio

2010

2011

2012

2013

2014

0.58

0.56

0.50

0.49

0.53

Sony Corp. has a consistently below average total asset turnover ratio.
This implies that Sony is unable to earn enough revenue per dollar of assets
that they own.

3. Current ratio:A liquidity ratio that measures a company's ability to pay short-term obligations.

2010

2011

2012

2013

2014

1.02

0.93

0.83

0.85

0.88

Current Ratio

The current ratio of Sony Corp has been on a steady decline since 2010 with
its lowest score in the year 2012.
Since the current ratio is under 1, we can assume that Sony Corp would not be
comfortably able to pay off its obligations if they became due at this point.
However, they could find other ways to access more liquid cash before going
bankrupt.

4. Quick Ratio:The quick ratio measures a companys ability to meet its short-term obligations with
its most liquid assets.
Quick ratio = (cash and equivalents + marketable securities + accounts
receivable) / current liabilities

14

2010

2011

2012

2013

2014

0.66

0.58

0.56

0.57

0.61

Quick Ratio

Sony Corp. has an extremely low quick ratio as compared to industry

standards. It hasnt shown any significant improvement over the last five
years.

This indicates that Sony Corp. does not have a favourable liquidity
position.

5. Interest Coverage Ratio:A ratio used to determine how easily a company can pay interest on outstanding debt.

Interest
Coverage Ratio

2010

2011

2012

2013

2014

32.04

9.57

28.86

42.33

36.89

Sony Corp. has an extremely low interest coverage ratio as compared to

industry standards (see competitor analysis) with a significantly enormous dip
in the year 2011.
A low interest coverage ratio indicates that Sonys ability to pay back its
interest expenses may be questionable.

6. Debt Equity Ratio:-

15

It indicates what proportion of equity and debt the company is using to finance its
assets.
Debt Equity Ratio = Total Liabilities / Shareholders Equity
Debt Equity
Ratio

2010

2011

2012

2013

2014

0.31

0.32

0.38

0.43

0.41

Sony Corp. has an acceptable debt equity ratio over the last five years.

This indicates that they have been able to finance their growth or increased
operation requirements mostly using the companys funds without relying too
much on outside financing.

7. Operating Cash Flow Ratio:A measure of how well current liabilities are covered by the cash flow generated from
a company's operations.
x

Operating Cash
Flow Ratio

100

2010

2011

2012

2013

2014

124.22

-32.50

-15.69

-7.32

37.92

The operating cash flow ratio shows a huge decline between the years 2011 to
2013, finally becoming positive again in the current year.

The fact that this ratios is a negative figure shows that the company does not
have a positive operating income which means that even as it is generating
16

sales revenue, it is losing money. It would have had to borrow money through
investors in order to keep on operating.

8. Net Profit Margin Ratio:The ratio of net profits to revenues for a company or business segment - typically
expressed as a percentage.

Net Profit
Margin Ratio

2010

2011

2012

2013

2014

-0.57

-3.61

-7.03

0.63

-1.65

Sony Corp. has been incurring a net loss consistently from 2010 to 2012. 2013
showed a slight improvement, however, 2014 brought them back to square one.

Since Sony Corp has been incurring a consistent loss, this is a clear indicator that they
would have to have better control of their costs and may also need to revamp their
pricing strategy as their price elasticity is comparatively high as opposed to other
brands who enjoy brand loyalty from their customers.

9. Return on Assets Ratio:An indicator of how profitable a company is relative to its total assets. It is expressed
as a percentage.
Return on Assets = Net Income / Total Assets
Return on
Assets Ratio

2010

2011

2012

2013

2014

-0.33

-2.01

-3.48

0.31

-0.87

Sony Corp. has a negative return on assets ratio consistently for the last five
years and has shown no significant improvement.
17

This indicates that Sony is unable to convert its investment in its assets into
profit successfully. This shows the managements inability to make strategic
decisions that would enable them to make good profit with little investment. It
can also portray a negative impression to the investors. synergy

10. Return on Equity:The amount of net income returned as a percentage of shareholders equity. It is expressed
as a percentage,
Return on Equity = Net Income/Shareholder's Equity
Return on
Equity Ratio

2010

2011

2012

2013

2014

-1.38

-9.42

-19.96

2.04

-5.76

Sony Corp. has a negative return on equity ratio for four years out of the five year
analysis done. The shareholders were most impacted in 2012.

This proves that the investors have been quite negatively affected by the
companys performance in the last five years as they have received negative
returns on their investment. The management of Sony Corp. needs to use the
available equity more efficiently.

Additional Cash Flow Indicator Ratios :-

1. Cash Flow Coverage Ratio:The cash flow coverage ratio is an indicator of the ability of a company to pay interest
and principal amounts when they become due.
Cash Flow Coverage Ratio = Operating Cash Flows / Total Debt

2010

2011

Cash Flow
18

2012

2013

2014

Coverage Ratio

0.45

0.34

0.26

0.27

0.33

Sony Corp. has an extremely low cash flow coverage ratio

which has been more or less consistent over the last five
years.
A low cash flow coverage ratio indicates that the company has
poor cash generation or very high debt. They urgently need to
improve their financial position if they want to continue
operating.

2. Free Cash Flows / Operating Cash Flows Ratio :Free cash flows to a firm is a measure of potential cash flows that can be distributed to
capital providers without affecting the production capacity of the firm. It is expressed as a
percentage.
FCF/OCF Ratio = Free Cash Flows / Operating Cash Flows x 100%

2010

2011

2012

2013

2014

62%

58%

26%

31%

57%

FCF/OCF Ratio

The Free Cash Flows to Operating Cash Flows ratio has

constantly been declining over the last five years. Its lowest
scores was observed between 2012 and 2013.
The higher this ratio, the better it is for the company. The ratio
in the current year has seen an improvement as compared to
the last two years however it is still not at that level where
there would be enough free cash for the capital providers and
for further investment in the business.

3. Cash Flow Return on Investment Ratio:Cash flow return on investment (CFROI) is the indicator that helps a firm to evaluate
the performance of an investment or product.
CFROI = Cash Flow / Market Value of Capital Employed

Cash Flow
Return on
Investment

2010

2011

2012

2013

2014

0.35

-0.11

-0.11

-0.09

0.16

19

Ratio

Sony Corp has a consistently unfavourable CFROI ratio,

especially in the years 2011-2013 where the ratio is negative.
This indicates that the returns received from the investments
that the company has made is extremely low and in the years
2011-2013, the returns have been negative.

4. Price/Cash Flow Ratio:Price/cash flow ratio is an investment valuation ratio used by investors to evaluate the
attractiveness of investing in a companys shares.

Price/Cash Flow ratio =(Operating Cash Flow Preferred Dividends) /Common

Shares Outstanding.

Price / Cash
Flow Ratio

2010

2011

2012

2013

2014

9.73

7.38

6.37

4.54

6.31

The Price/Cash Flow ratio of Sony Corp, has been more or less
on a steady decline since the year 2010.

Trend analysis
Income statement trend analysis

20

Revenue Trend (%)

120.00
100.00
80.00
Revenue Trend (%)

60.00
40.00
20.00
0.00
39873
40603
41334
39508
40238
40969
41699

The Line chart for Trend Analysis of Revenue shows an irregular curve
over the years 2008 t0 2014. It decreased till 2010 and then increased for
the year 2011, but again decreased for year 2012 and 2013. In 2014, it
showed partial increase in the Revenue, i.e. less than what it was six years
back.

Gross Profit Trend (%)

120.00
100.00
80.00
Gross Profit Trend (%)

60.00
40.00
20.00
0.00
39873
40603
41334
39508
40238
40969
41699

The Line chart for Trend Analysis of Gross Profit is highly irregular over
the years. The gross profit was less for the year 2009 than of 2008. Then
the gross profit increased to a maximum level in the year 2011, and then

21

shows decreasing trend till 2013. In 2014, the gross profit increased to a
level just nearly same as of base year.

Operating Income Trend (%)

120.00
100.00
80.00
Operating Income
Trend (%)

60.00
40.00
20.00
0.00
39873
40603
41334
-20.00
39508
40238
40969
41699
-40.00
-60.00

The Line chart for Trend Analysis of Operating Income follow same
trend as Operating margin, that is highly irregular decrease and increase
over the years.

Net Income Trend (%)

150.00
100.00
50.00
Net Income Trend (%)

0.00
39873
40603
41334
-50.00
39508
40238
40969
41699
-100.00
-150.00
-200.00

The Line chart for Trend Analysis of Net Income shows that the Net
Income decreased irregularly over the years. Net income hit all-time low
in 2012, and then increased for the year 2013, but again decreased for

22

2014. The level of net income is very low in 2014 as compared to base
year 2008.

Balance sheet trend analysis

Cash and Cash Equivalent Trend (%)

140.00
120.00
100.00
Cash and Cash
Equivalent Trends (%)

80.00
60.00
40.00
20.00
0.00
39873
40603
41334
39508
40238
40969
41699

The Line chart for Trend Analysis of Cash and Cash Equivalent shows a very
Irregular Trend, i.e. decreasing, and then suddenly increasing and then gradually
decreasing from year 2010 till 2013. It then increases to the level as it was six
years before in 2008.

Current Assets Trend (%)

120.00
100.00
80.00

Current Assets Trends

(%)

60.00
40.00
20.00
0.00
39873
40603
41334
39508
40238
40969

23

 The Line chart for Trend Analysis of Current assets is an irregular curve, from
2008 till 2009, it showed a sharp fall i.e. 20% less than year 2008, and then the
trend increased gradually till 2012 and then again decreased for the year 201213.

Total Inventories Trends (%)

120.00
100.00
80.00

Total Inventories
Trends (%)

60.00
40.00
20.00
0.00
39873
40603
41334
39508
40238
40969
41699

The Line chart for Trend Analysis Total Inventories decreased from 2008 till 2010,
and then increased till 2012. After 2012, a decreasing trend is plotted.

Total Current Liabilities Trend (%)

160.00
140.00
120.00
100.00

Total Current Liabilities

(%)

80.00
60.00
40.00
20.00
0.00
39873
40603
41334
39508
40238
40969
41699

24

 The Line chart for Trend Analysis of Total Current liabilities is unstable and

shows increase in the trend till 2012 and then decrease for the year 2013 and the
partial increase till 2014.

Total Liabilites Trend (%)

180.00
160.00
140.00
120.00
100.00
80.00
60.00
40.00
20.00
0.00

Total Liabilites Trend

(%)

39873
40603
41334
39508
40238
40969
41699

The Line chart for Trend Analysis of Total Liabilities is nearly same as that of total
current liabilities, and it shows increasing trend till 2012 and then gradually
decreasing for the year 2013 and partially increasing in 2014.

Total Equity Trend (%)

120.00
100.00
80.00
Total Equity Trend (%)

60.00
40.00
20.00
0.00
39873
40603
41334
39508
40238
40969
41699

The Line chart for Trend Analysis of Total Equity shows unsteady decrease in the
total equity over the year 2008 to 2014.

25

Cash flow trend analysis

Cash Flow from Investing Activites Trend (%)

140
120
100

Cash Flow from

Investing Activites
Trend

80
60
40
20
0
39508398734023840603409694133441699

The Line chart for Trend Analysis of Cash flow from Investing Activities
shows a irregular curve, it increased for the year 2009, but again decreased
for 2010. Finally in 2014, the Cash flow is at a lower level than that of base
year.

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Cash Flow from Financing Activities (%)

120
100
80

Cash Flow from

Financing Activities (%)

60
40
20
0
39873
40603
41334
-20
39508
40238
40969
41699

The Line chart for Trend Analysis of Cash Flow from Financing Activities shows
a very irregular trend, i.e. decreasing and increasing for the years 2008 to 2014.
The all-time low in cash flow from financing was in 2011 when it went more
than 100percent below the base year.

Capital Expenditure Trend (%)

120
100
80

Capital Expenditure
Trend

60
40
20
0
39873
40603
41334
39508
40238
40969
41699

The Line chart for Trend Analysis of Capital Expenditure shows little increase in
the Capital expenditure in 2009, and then less expenditure for the years 2010
and 2011. The expenditure increased again in 2012, further decreasing to alltime low in the year 2014.

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Free Cash Flow Trend (%)

250
200
150

Free Cash Flow Trend

(%)

100
50
0
39873
40603
41334
-50
39508
40238
40969
41699

The Line chart for Trend Analysis of Free Cash flow decreased in the year 2009,
and then increased for the year 2010. And then it gradually decreased till 2013.
In 2014, it increased but that is just little more than that of the base year.

SWOT ANALYSIS

STRENGTHS

WEAKNESSES
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Extremely wide range of products

Unable to specialize in one or few
products.
Comparatively expensive.

Good Brand Name

Broad Sales Network
Innovation
Small but loyal customer base.

OPPORTUNITIES

THREATS

Might be able to recover after

market economic crisis.
Should focus on a profit making
range of products

Intense Competition.

Future prediction

In order to predict Sonys position in 2015, we have used the inflation method
to predict revenue for 2015. For cost of sales and further on, we have taken
weighted average of the percentage from 2008 to 2014.

29

(kindly refer to the excel sheet for further calculations)

After calculating the future figures, the following are our recommendations:
Revenue, Cost of Goods Sold & GP - Compared to last year the revenue is
decreased by 2%,
cost of goods sold increased by 2% and the GP % is reduced by 2%. Sales
could have been
increased by analysing competitor prices and strong marketing. Cost of goods
sold could be
reduced by strong bargain power as well as asking supplier
volume discount etc.
Net Income: Even though the company was able to contain all other
expenses, the company is
still running in loss. The management could take appropriate step to minimise
the loss and
to help the company to get profit by introducing
corrective actions.

CONCLUSION

After the detailed analysis of the financial statements and position conducted in this report for
Sony Corporation we can come to the conclusion that Sony needs to do something significant
and immediately to improve their current financial position. This constant loss that they have
been incurring since 2008 can have serious implications to the health of the company if it
continues any longer in this direction. Hence the management needs to take a strategic
decision to ensure their speedy recovery.
30

The fact that they have been unable to reward their shareholders and the fall of their stock
price over a period of time has caused the shareholders to lose faith in the management and
would also discourage further investment in this company.
Another major focus of Sony should be their pricing and marketing strategy to ensure that
they can compete with their fierce competitors (Samsung, LG) who offer the same products at
a lower cost under a trusted brand name.
Lastly, Sony must be able to find a segment focus. Their wide range of electronic and
entertainment products have caused them to focus too much on widening their empire instead
of specializing on a couple of areas and ensuring quality as well as price effectiveness in their
chosen area.

REFERENCES

[1] japantimes.co.jo
[2] http://www.sony.net/SonyInfo/IR/financial/fr/historical.html
[3] http://financials.morningstar.com/ratios/r.html
[4] SNE&region=USA&culture=en
[5] www.sony.net
[6]https://www.google.ae/webhp?
sourceid=chromeinstant&ion=1&espv=2&ie=UTF8#q=stock+price+of+sony+corporation
[7] www.gurufocus.com/financials.php?symbol=SNE
[8] www.investopedia.com

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