1. Introduction:This paper seeks to take a financial look at Panasonic and its parent company, Matsushita Electric Industrial Co., Ltd by looking at the company’s profitability liquidity, solvency, comparison against its competitors, Company Chairman’s statements regarding 2007 financial performance, auditors reports and other relevant information on company’s stocks as of the fiscal year ended March 31, 2007.
2. Analysis and Discussion2.1. Broad company background and history and then focus on Panasonics professional video equipment industry.
Matsushita Electric Industrial Co., Ltd. is engaged in producing and selling electronic and electric products for consumer, business, and industrial uses. It divides its operation into six segments which include the Audiovisual and Computer Products (AVC) Networks, Home Appliances, Components and Devices, MEW and PanaHome, JVC, and Other.
Under its AVC Networks segment, the Matsushita makes available DVD recorders and players, televisions, digital and video cameras, SD memory cards, and audio equipment. To be included are its offers for notebook PCs and ruggedized notebook PCs, mobile phones, cordless telephones, and other products which attuned with the latest technology in electronic and electric products. (Matsushita Electric Industrial Co., Ltd, 2007a)The company carries Panasonic as an international brand name for its products, where Matsushita sells plasma display panels, Blu-ray players, telephones, DVD recorders and players, digital cameras, laptop computers, and microwave ovens, projectors.
It was in 1955 that the brand Panasonic was created by Matsushita for the US, Canada and Mexico for incapacity to us the National brand as other had name registered ahead. (Matsushita Electric Industrial Co., Ltd, 2007a) The word Panasonic means uses “pan” which means “all” combined with “sonic” which means “sound” (Matsushita Electric Industrial Co., Ltd, 2007a) 2.
2. Using a chart, utilize 6 to 8 different financial ratios comparing Panasonic/Matsushita to the industry as a whole as well as one or two competitors like, Sony and Canon. MCCanonSonyAverage3/31/0712/31/063/31/07Net Profit Margin0.020.
110.020.05Gross Margin0.300.
500.220.34Total asset turnover1.150.
520.710.79Quick assets ratio1.191.
191.021.13Current Ratio1.531.
531.281.45Debt equity ratio1.021.
022.481.50Sources: Yahoo Finance (2007) in relation to Matsushita Electric Industrial Co., Ltd.
(2007b); Sony (2007); and Canon (2007); See Appendix A 2.3. After the chart comparison, discuss each ratio and explain if Panasonic/Matsushita has the better or worse ratio compared to the industry and competition as well as how Panasonic/Matsushita could improve on the numbers. The net profit margin of 2 % for Matsushita is below industry average of 0.
05. Among the three competitors, it the company appears to have the lowest together with Sony. The same is true with its gross margin at 0.30 which also below industry average of 34 but this time it has higher one over that of Sony.
This could mean that company is performing less efficiently than Sony as higher gross margin could have given company higher net profit margin than Sony. This is indicative of higher operating expenses for the company as may also be observed when compared with Canon which was able to maintain high net profit given the latter’s higher gross margin than Matsushita. Although showing positive profitability, the company may be capable of producing better if industry average is set as criterion.Despite less efficient performance against competitors, the company liquidity both in terms of current ratio quick assets ratio is above industry average.
This means that the current ratio of 1.53 and quick ratio of 1.15 is a good indication that company could meet it currently maturing obligations hence it faces less risks of short term insolvency. Being above average in liquidity, it has the same ratios as that of Canon which had in fact performed better in terms of profitability.
This could mean that company is a good financial manager of its resources as compared to competitors.In terms of solvency, the company is again operating industry averages as shown in debt to equity ratio of 1.02 as against industry average of 1.5.
Compare again with competitors, the company seems to be doing better than competitors since Canon should have been better before of more profitable operation, yet the company has the same as that of canon both in terms of liquefy and solvency. 2.4. Write 20 to 25 lines about Panasonic/Matsushita’s past year and future from the Chairman’s letter in the 2007 Annual Report.
The Chairman in regard to financial performance of the company for the year ended March 31, 2007 was telling the stakeholders that the said was a key year as it was the close of the company’s management plan Leap Ahead 21, launched in fiscal 2005. He was also telling the stakeholders that the year 2007 was a tough being characterized by challenging operating environment. This changing environment is about the increasing prices of raw material prices for its manufacturing of plasma TV’s and other product categories. As part of the challenging environment is also the admission of the chairman about the reality of deepening global competition.
The Chairman was happy to announce about the strategies that the company has adopted and implemented to reach the company’s defined target. One strategy is the fact of active investment made in growth fields to allow the company to cultivate new business that will drive future earnings. This means that the company did open its options into new areas of investments that could produce better profits for the company. Such is a sign of the company’s unending innovativeness despite its long years of conducting business.
In another aspect, the Chairman also emphasized of the company’s having strengthening the it’s operations by raising management efficiency in a range of areas and by pursuing further cost reductions. This means that the company continues to demand continued management efficiency improvement in many areas. Improving management efficiency could imply company’s requirement of higher standard of performance from its managers by pursuing time tested criteria’s to evaluate management performance. It could also mean having the company not accepting mediocre performance based on its previously defined standards (Matsushita Electric Industrial Co.
, Ltd, 2007b). In connection of with requirement from management to demand better performance the company has also admitted further reduction of cost of its doing business. To assert further cost reduction requires also the setting of standard that must be measurable. In business sense, this could only mean following standard level of cost or expenses that are further improved and attained by management.
By having holistic view of the how Matsushita attained its objective, it may be observed that the company is an ever responsive company that does not limits its strategic and tactical choices in running its business. Going into new ventures was possibility while improving on existing practices is another possibility, hence it could only mean flexibility to the changing environment (Matsushita Electric Industrial Co., Ltd, 2007b).As the company capped its three management plan as of March 31, 2007, the Chairman again announced that Fiscal is the first year of its new three-year management plan, GP3.
The chairman described the plan to include a host of measures to accelerate the Company’s growth. Under the new plan the company appeared to have targeted more revenues across a big number of its varied product categories. Its is eyeing many parts of the world as part of its growth strategies of the three year plan and this include the US, Europe, Russia, Brazil and India. Indeed the company is company to watch as it carefully attains it target as announced by the Chairman (Matsushita Electric Industrial Co.
, Ltd, 2007b). 2.5. Write 5 to 10 lines about the Auditors Report.
The Auditors Report is addressed to the directors and stockholders of the company stating to the effect that the financial statements as of March 31, 2007 of Matsushita have been audited said auditors. The financial statements referred as audited is included the balance sheet, the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years in the three-year period ended March 31, 2007. With statement of financial statements audited is the acknowledgement by the auditor that preparation of the same is the responsibility of Matsushita’s management (Matsushita Electric Industrial Co., Ltd, 2007b).
Part of the auditors report is a statement made about the conduct of the audit my the auditors in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require planning and performance of the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement (Matsushita Electric Industrial Co., Ltd, 2007b) The report also contained a statement by the auditors the auditors in fact audited the books of company in accordance with the standards of the Public Company Accounting Oversight Board (United States), while effectiveness of company’s and it subsidiaries’ internal control over financial reporting is based on criteria established in Internal Control under issued regulation by proper commission. The last part of the report stated that the accompanying consolidated financial statements have been translated into United States dollars solely for the convenience of the reader. (Matsushita Electric Industrial Co.
, Ltd, 2007b) 2.6 Write 5 to 10 lines using Panasonic/Matsushita trading symbol `MC` to discuss recent stock price changes. When Matsushita’s stock is viewed on a per day behavior on a 5 day period, one could observed the stable prices as shown in the graph as there was not much variability as the graph almost approximates straight line. See Figure I, Appendix B.
When view under a three month period, it is evident that stock prices of MC has shown slight increases and big from October 25, 2007 level, which means that the company’s could continue to go up. See Figure 2, Appendix BHowever when view is expanded to see a longer period, it is clear that the increase that was attained in October 27 or near that point was just a recovery of price level some at the month of June, 2007. Over on the short term the stocks of the company could just be predicted to be following a similar path of a certain level of stability with sudden increases and decrease within weeks or months. See Figure 3, Appendix B.
3. Conclusion Based on analysis made on relevant information about the company, this researcher finds that Panasonic/Matsushita is a good investment to investment 10K given that the increase in price for the latest transaction would indicate a recovery of previous months’ price level and given the attainment of corporate objectives as announced by chairman as evidence by profitable operation, moderate liquidity and proven financial stability of the company.Appendices: Appendix A, See Excel file: computation of financial ratios for the company; worksheet: ratios Appendix B, Figure 1, Figure 2, Figure 3, See Excel file under worksheet: graph. References: Canon (2007) 2006 Annual Report {www document} URL http://www.
canon.com/ir/index.html, accessed November 10, 2007Matsushita Electric Industrial Co., Ltd.
(2007a), Panasonic Global Website, {www document} URL http://panasonic.net/, accessed November 10, 2007Matsushita Electric Industrial Co., Ltd. (2007b) 2007 Annual Report {www document} URL http://ir-site.panasonic.com/, accessed November 10, 2007Sony (2007) 2007 Annual Report {www document} URL http://www.sony.net/SonyInfo/IR/, accessed November 10, 2007Yahoo Finance (2007) Financial Statements of Sony, Canon and Matsushita, {www document} URL www.yahoo.com, accessed November 10, 2007
