Femsa, Financial Statement Analysis

2293 words 10 pages
FEMSA 2007: THE FINANCIAL STATEMENT ANALYSIS IMPACT OF DIFFERENCES IN MEXICAN AND US GAAP

1. Compute the following ratios for 2007 using the financial statements prepared using Mexican FRS and expressed in pesos. [Assume the weighted average number of shares outstanding is 17,891,000]

a. Current Ratio: Current assets/Current liabilities b. Inventory Turnover: Cost of Goods Sold/Average Inventory c. Profit Margin on Sales: Net Income/Net Sales d. Debt to Assets Ratio: Total Liabilities/Total Assets e. Book Value per Share: Common Stockholders’ Equity/Outstanding Shares

2. Compute the same ratios listed in 1 using the amounts expressed in US$. What are the implications for international financial
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These four aspects of IFRS are believed to produce more transparent financial statements backed by straightforward thinking and flexible interpreting of accounting and reporting standards. This approach encourages a more ethical judgment than following the normal rule based U.S. GAAP. On the other hand, U.S. GAAP focuses on large complex economies that have less room for interpretation and provides a guideline approach to implementation. It is believed that if there are more rules and guidance, then a company does not need to disclose as much within their financial statements. In comparison, U.S. GAAP does not easily allow for thinking outside the box. Many individuals in the U.S. believe that U.S. GAAP should remain the “Gold Standard” because they believe that having a more rules based approach will reduce interpretation and will produce more transparent financial results. Supporters of IFRS believe that business decisions do not rely on rules, but on professional judgment. They believe that failing to disclose the professional judgment within a company’s financial statement could misleads investors.”1

The cause of the biggest difference here is not unique to FEMSA, these differences apply to all companies.

5. Obtain through your library, internet

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