The principal goal of this assignment is to understand the impact that the use of different set of generally accepted accounting principles (GAAP) in the Analysis of an international company’s financial statements. In this assignment we need to understand and analyze the impact of the Company FEMSA Annual Report with the two variables using on this report; Mexican pesos and U.S. Dollars.
FEMSA, the largest beverage company in Latin America, started operations in 1890. FEMSA work thru three important roots: Coca-Cola FEMSA, FEMSA Cerveza (Heiniken Mexico) and FEMSA Comercio. (See Figure 1.1.)
Figure 1.1 Participation of the operations of FEMSA
Coca-Cola FEMSA ...view middle of the document...
Now we are going to analyze the financial statements in terms in US dollars and Mexican pesos and see the impact or implications that this results represents.
ANALYSIS OF THE ANNUAL REPORT
In order to understand the differences between the financial numbers in terms of Mexican pesos and U.S. Dollars we need to compute ratios for the 2007 year Annual Report. The ratios to compute are the next ones:
* Current Ratio: [Current assets/Current liabilities]
* Inventory Turnover: [Cost of Goods Sold/Average Inventory]
* Profit Margin on Sales: [Net Income/Net Sales]
* Debt to Assets Ratio: [Total Liabilities/Total Assets]
* Book Value per Share: [Common Stockholders’ Equity/Outstanding Shares]
The results of these ratios are showed in the Figure 2.1
Figure 2.1 Ratios Annual Report 2007
As we can see, the variations of the ratios are minimum, in other words we can say that there are not impacts using dollars or pesos, to get the Ratios.
RATIOS ANALYSIS OF THE ANNUAL REPORT
The current Ratio express in Dollars or in Mexican Pesos shows that the company has more assets than liabilities; this ratio is on line with the fact that FEMSA has the capacity to pay its obligations and that this company has more capacity to acquired more actives than to pay the liabilities.
To know the rotation of the inventory in a company we use the Inventory Turnover, which represents how many times a company´s inventory is sold and replaced over a period of time, in this case in the 2007. The result is 7.9 for this ratio, that means a high and strong capacity of sales. The cost of goods sold is higher than the average inventory, so the performance of the inventory rotation in FEMSA is good.
The Profit Margin of FEMSA is around 0.057 [5.7%] which means that for each dollar of sales, 5.7 cents goes to the net income. In other words is the portion of the sales that contribute with the income of FEMSA
The Debt to Assets ratio indicates the portion of the FEMSA´s assets which are financed by a debt. In this case the ratio is 0.49 [49%] it means that the financed of the assets come from the Equity.
Finally the Book Value per Share Ratio is 5.01 in Mexican pesos. The Book value per Share by definition indicates the amount of value for a shareholder would get if the company were to liquidate. In this case the 5.01 is a good variable because indicate that FEMSA is undervalued. In terms of bull or bear stock, this ratio represents a bull stock, which it means that the stock price is higher that the book value. The stock value of FEMSA is now 92.71 (10/Dic/2011).
Summary all the analysis of the ratios, we can consider FEMSA as a sustainable company which has a good inventory rotation as well as a good administration of the assets. That represents in a great performance and a rise of utilities in the last years.
ANALYSIS OF THE ANNUAL REPORT USING US GAAP INFORMATION
Now that we obtained the ratios in terms of Mexican...