Foreign financial statements is international ratio

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Reference no: EM131215778

One of the potential Problems in Analyzing Foreign Financial Statements is International Ratio Analysis:

Differences in culture and economic environments have an impact on the relevance of ratios

A study of companies in Japan, Korea, and the U.S. found significant differences due to business environment

Japanese and Korean companies borrow much more on a short-term basis than U.S. companies, leading to lower current ratios

Debt ratios also tend to be higher in Japan and Korea because of the sources of financing

Lower profit margins in Japan in 1978, relative to the U.S., can be partly explained by the Japanese companies having their focus on market share as opposed to profits

Do you feel that if an analyst did their research first that these differences would still be an issue? Or do you think that the analyst could find a way to still compare two countries like this?

Reference no: EM131215778

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