This document is a financial ratio analysis report submitted by students Tan Chuu Yee and Mak Mun Chonn on January 24, 2014 for their FNBE0145 course. It analyzes the financial ratios of Sony Corporation from 2012-2013. It provides background on Sony's history and recent developments. The analysis includes calculations and interpretations of profitability, stability, and price ratios. It recommends that Sony's shares are not suitable for investment due to its high P/E ratio of 38.02 and lack of good profitability and stability.

1. Assignment: Financial Ratio Analysis
Subject: FNBE0145
Tittle: Sony Corporation
Group members: Tan Chuu Yee (0315097)
Mak Mun Chonn (0314928)
Submission date: 24th January 2014 (Week 16)

2. Brief background history of Sony Corporation
Sony originally called Tokyo Tsushin Kogyo (Tokyo Telecommunications
Engineering Company). Sony’s roots go back over half a century to 1964 and it
was founded by Masaru Ibuka. Sony found its beginning in the wake of World
War II. In 1946, Masaru Ibuka started an electronics shop in a department
store building in Tokyo. Sony Corporation, commonly referred to as Sony, is a
Japanese multinational conglomerate corporation headquartered in
Konan Minato, Tokyo, Japan. Its diversified business is primarily focused on the
electronics, game, entertainment and financial services sectors. The company
is one of the leading manufacturers of electronic products for the consumer
and professional markets. Sony is ranked 87th on the 2012 list of Fortune
Global 500.

3. Sony recent development
The Latest Sony news and reviews of products including PS4, PS3, PS2, PSP,
Sony Ericsson mobile phones, Cyber shot camera, Sony Walkman MP3 players,
Sony XL TVs and other Sony products and services.
As of March 31, 2013, Sony had approximately 146,300 employees, a
decrease of approximately 16,400 employees from March 31, 2012. During the
fiscal year ended March 31, 2013, while employees of the Financial Services
segment increased, the total number of employees decreased significantly due
to production adjustments implemented mainly at manufacturing sites in the
East Asia areas, restructuring and the sale of chemical products related
business during the same fiscal year.
Sony Corporation's headcount peaked at 23,000 in 1993, after which it
remained fairly consistent at approximately 17,000. As of March 31, 2013,
Sony Corporation's headcount was approximately 15,500. Sony has fewer
stores than they did in the past. Now, Sony has 130 stores in the world.

4. Profitability
The table below show the calculations and interpret the trend form the 20122013 periods. (Yen in millions)
Profitability
Ratios
Return on Equity
(ROE)
2012
2013
Interpretation
(4,56,660)
2028891+2547987
2
=(4,56,660)
2,288,439
=-0.1996 x 100
=-19.96%
43,034
2,197,766+2,028,891
2
=43,034
2,113,328.5
=0.0204 x 100
=2.04%
During the period of 2012 to
2013, ROE has increase from
negative 19.96% to 2.04%.
This means an owner is
getting a higher return on
his capital these years.
Net Profit Margin
(NPM)
(456,660)
5,526,611
=-0.0826 x 100
=-8.3%
43,034
5,691,216
=7.5614 x 100
=0.8%
Gross Profit
Margin
(GPM)
1,140,164
5,526,611
=0.2063 x 100
=20.6%
1,205,791
5,691,216
=0.2119 x 100
=21.2%
Selling Expenses
Ratio (SER)
687,943.5
5,526,611
=0.1245 x 100
=12.5%
728,813
5,691,216
=0.1281 x 100
=12.8%
General Expenses
Ratio (GER)
687,943.5
5,526,611
=0.1245 x 100
=12.5%
728,813
5,691,216
=0.1281 x 100
=12.8%
Financial
Expenses Ratio
(FER)
736,050
5,526,611
=0.1331 x 100
=13.3%
855,971
5,691,216
=0.1504
=15%
During the period 2012 to
2013, NPM has increase
from negative 8.3% to
positive 0.8%. This means
businesses are getting
better at control its
expenses.
During the period of 2012 to
2013, GPM has decrease
from 20.6% to 21.2%. This
means a business are getting
better at control its COGS
expenses.
During the period of 2012 to
2013, SER has increase from
12.5% to 12.8%. This means
a business is getting worse
at control its selling
expenses.
During the period of 2012 to
2013, GER has increase from
12.5% to 12.8%. This means
a business is getting worse
at control its general
expenses.
During the period of 2012 to
2013, FER has increase from
13.3% to 15%. This means a
business is getting worse at
control its financial
expenses.

5. Stability
The table below show the calculations and interpret the trend form the 20122013 periods. (Yen in millions)
Stability Ratios
2012
2013
Working Capital
(WCR)
3,754,962
4,529,981
=0.8289
=0.83:1
3,646,533
4,315,089
=0.845
=0.85:1
Total Debt
(TDR)
10,785,546
13,295,667
=0.8112 x 100
=81.1%
11,522,117
14,206,292
=0.8110 x 100
=81.1%
Stock Turnover
(STR)
365/(4,386,447)
708,553
=365/6.19
=59 days
365/(4,485,425)
708,553
=365/6.33
=57.7 days
Debtor Turnover
(DTR)
365/(2,763,305.5) 365/(2,845,608)
101,022
74,071
=365/27.35
=365/38.42
=13.4 days
=9.5 days
Interest Coverage
(ICR)
23,432-456,660
23,432
=(18.5) times
26,657+43,034
26,657
=2.6 times
Interpretation
During the period of 2012 to
2013, WCR has increase from
0.83:1 to 0.85:1. This means a
business ability to pay of the
current liabilities using current
assets is getting better. In
addition, it does not satisfy the
minimum 2:1 ratio.
During the period of 2012 to
2013, TDR has no change from
81.1%. This means that total
level have maintain. However,
it is still above the maximum
50% level.
During the period of 2012 to
2013, STR has decrease from
59 days to 57.7 days. This
means a business is selling its
stock faster.
During the period of 2012 to
2013, DTR has decrease from
13.4 days to 9.5 days. This
means a business is effectively
collecting debts.
During the period of 2012 to
2013, ICR has increase from
negative 18.5 times to positive
2.6 times. This means a
business ability to pay its
interest expense is getting
better. In addition, its didn’t
satisfy a minimum 5 times
requirement.

6. Price
= Current share price
Earnings per share
(in number of times)
=17.11
0.45
=38.02
Recommendation: The Sony Corporation’s share as not suitable for investment.
In according to a P/E ratio of 10 means that an investor will need to wait for 10
years to recoup his investment because the higher the P/E ratio, the more
expensive a share is. The calculation above showed that the ratio as 38.02.
These means the investor will have to wait even longer 30 years more to claim
back his original principal. As we knew that the company has no good
profitability and stability, and it is currently available at a higher price, then I
recommend the company’s shares as not suitable for investment.

7. Appendix

11. Reference list
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Data.cnbc.com. (2014). Sony corp - sne - stock quotes. [online] Retrieved from:
http://data.cnbc.com/quotes/SNE [Accessed: 23 Jan 2014].
Unknown. (2014). [online] Retrieved from:
http://research.uvu.edu/management/mcarthur/Boilerplate/FinanceRatios.pd
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Caldbeck, R. (2012). 5 essentials of small business investing. [online] Retrieved
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Businesshelp.lloydsbankbusiness.com. (2014). Key accounting ratios | business
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[Accessed: 23 Jan 2014].