Femsa, Financial Statement Analysis

2278 Words Apr 17th, 2012 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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The accounts or amounts that affect all the financial statement need to be adjusted or consolidated. For example, for US GAAP these accounts appear as part of the Investment in shares capitation and equity, in other cases these same accounts appear consolidated. These small differences produce totally different results.

4. Determine the percentage difference between the results of your computation in requirements #1 and #3 by using #1 as the base [ie., (#3 -#1) /#1]. Which ratio has the biggest difference? Smallest difference? What difference in US and Mexican GAAP do you suspect had the biggest impact on financial statement differences? What are the implications of differences between US GAAP and foreign GAAP for international financial statement analysis? Do you think the cause of the biggest difference here is unique to FEMSA?

The ratio that has the biggest difference is Debt to Assets Ratio and the one that has the smallest difference is Inventory turnover.
Profit Margin on Sales had the biggest impact on financial statement differences because this ratio reflects one of the most important results of a company, the profit that it has obtained for the sales of its products.
US GAAP and foreign GAAP are similar but there exists some problems between them especially on how financial statements are presented, how revenues are recognized and on what the fair market value is. According to Hernán A.
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