4-5 pages paper

Financial Analysis Group Project (Based on an NYU project in International Accounting)

A written analysis will be submitted and an oral presentation will be made in class.

International ratio comparisons are subject to a number of pitfalls. Inter-country comparisons are complicated by differences in national accounting principles, foreign exchange rate fluctuations, differences in prices, etc. To understand how a company is doing it is also necessary to know the economic, social, business and legal environment in which it operates.

Select a large non-U.S. manufacturer company headquartered in a foreign country and a company in a similar industry in the U.S. You are to make an assessment as to which you feel is the “better” company and why. It will be necessary for you to adjust for significant differences in accounting principles, currency differences and fluctuations, and price differences.

You should also identify environmental variables, such as differences in social/cultural, financial and legal considerations that might further account for observed profitability and risk differences. Knowledge gained with regard to such environmental differences will sharpen your ability to properly evaluate the risk and return features of foreign security investments.

A suggested outline follows:

I. Introduction-objective and scope of financial analysis

II. Country analysis

A. Macro-economic analysis and economic ties

B. Political analysis

C. Providers of financing

D. Cultural analysis

E. Legal analysis

F. Tax analysis

III. Industry analysis

IV. Company specific analysis

A. Specific GAAP adjustments

B. Ratio analysis

C. Cash flow analysis; i.e. free cash flows

V. Conclusion and recommendations