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Femsa, Financial Statement Analysis

In: Business and Management

Submitted By romyvi
Words 2287
Pages 10
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 statement analysis?

The importance for credit analysts to consider in reviewing Mexican financial statements is because the net effect of inflation accounting will be to produce financial statements that will not have the conservative bias of statements produced under U.S. GAAP.
For example, some of the differences will show on the balance sheet where in Mexican statements all non-monetary assets are restated at current value and the disclosure requirements on Mexican statements are not as comprehensive as in the U.S.
When considering the notes to the financial statements in Mexico these notes may contain information about contingent liabilities, debt maturities, and loan covenants - information of vital importance to determining the long-term strength of the company. In US, the use of a credit-scoring program for financial statement analysis on both domestic and international accounts, calculates a financial strength score based on liquidity, profitability, and financial leverage.

3. Compute the same ratios listed in 1 using the financial statements prepared using the financial statements prepared using US GAAP.

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