Sony expects first loss in 14 years amid downturn :(

[NJ5]

Slimebeast said:

NJ5 said:

Slimebeast said:

NJ5 said:
The worse part is that during all those years of profits they were racking up debt instead of building up a money pile for times like these. That's a big part of why Sony will have a hard time recovering.

 

 How's that possible?

When you take up debt, that doesn't mean you're losing money. Like a person can have a paid job and get a loan at the same time. The only loss from taking a loan is the money paid as interest.

 

Hmm... I didn't think of it that way, that companies would do that like private persons. But why do they chose that kind of strategy, generally speaking?

Is it like money to 'different pockets' (share holders want their share of profits, but at the same time the company takes loans to invest in stuff)? Or is it due "technical and tactical reasons", much like for private persons it's actually smart to save in pension funds but at the same time take low rate loans on housing (that u can deduct from taxes and stuff)?

(^did that make any sense?)

 

Sony is primarily in the electronics manufacturing business, which is very capital intensive. You need lots of money to build a new factory to make TVs for example. I suspect a lot of the debt was contracted to build these kinds of assets, basically to grow and maintain the company.