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Compare and contrast companies from different countries

Response is 685 words.

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Question 1

Listed below are certain financial ratios used by analysts
Liquidity: current ratio: cash flow rom operations to current liabilities
Solvency: debt to equity; debt to assets
Profitability: return on assets: return on equity

Required assume that you are comparing the financial ratios of companies from two countries discussed in this chapter. Discuss how the account practices identified in exhibit below would affect your comparison for each of the six ratios in the list

France Germany Japan nertherlands UK US
Business combinations purchase or pooling purchase Purchase1 Purchase1 Purchase1 Purchase1 purchase
Good will Capitalize amortize Capitalize & amortize Capitalize2 & amortize Capitalize & amortize Capitalize & amortize Capitalize & impairment tested
Affiliated companies Equity method Equity method Equity method Equity method Equity method Equity method
Foreign currency translations current rate method temporal method Autonomous subsidiaries integrated subsidiaries Autonomous subsidiaries integrated subsidiaries Not used Autonomous subsidiaries integrated subsidiaries Autonomous subsidiaries integrated subsidiaries Autonomous subsidiaries integrated subsidiaries
Asset valuation Historical cost Historical cost Historical cost Historical cost current cost Historical cost and current cost Historical cost
Depreciation charges
Economic based
Tax based
Tax based
Economic based
Economic based
Economic based

LIFO inventory valuation Not used Not used Not used Not used Not acceptable used
Finance leases Not capitalized Not capitalized capitalized Capitalized Capitalized Capitalized
Deferred taxes accrued Accrued7 Accrued Accrued Accrued Accrued
Reserves for income smoothing Used Used No Some Some no

Question two

Listed below are certain financial ratios used by analysts
Liquidity: current ratio: cash flowf rom operations to current liabilities
Solvency: debt to equity; debt to assets
Profitability: return on assets: return on equity

Required assume that you are comparing the financial ratios of companies from two countries discussed in this chapter. Discuss how the account practices identified in exhibit below would affect your comparison for each of the six ratios in the list

Czeh repub China tawian mexico
Consolidated financial statements Required Required Required required
Statement of cash flows In notes Required Required Required
Business combinations purchase or pooling Purchase Purchase Purchase Both
Good will Immediate write off or capitalize and amortize 15 year maximum Capitalize and amortize 10 year maximum Capitalize and amortize 20 year maximum Capitalize and amortize 20 year maximum
20% to 50% owned affiliates Equity method Equity method Equity method Equity method
Asset valuation Historical cost Historical cost Revaluation allowed Constant purchasing power
Depreciation Economic based Economic based Economic based Economic based
LIFO Valuation Not used Acceptable Acceptable acceptable
Finance leases Not capitalized Capitalized Capitalized Capitalized
Deferred taxes Accrued Optional accrual Capitalized accrual Capitalized accural

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Solution Summary

Discussion is 685 words to guide you through these issues.

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