The Problem of Comparing Financial Reporting Indicators in International Rating Systems for Enterprises

Abstract

The article considers the problem of comparing financial indicators of international companies in the ratings formed by well-known analytical institutions. In practice, the methodology for evaluating and selecting data depends on market expectations and takes into account the requirements of the general public rather than industry professionals, so the question arises as for choosing the optimal system for evaluating the performance of multinational enterprises from different countries due to various managerial approaches, tax and accounting standards. The article aims to review the most common indicators and ratios used in international financial comparisons, and to prove (on the example of a global rating approach) that only the complex business analysis, even at a prior level, should be used for the reliable estimation of a company’s stability in the market. The study uses a database of key financial indicators of 2,000 companies included in the Forbes rating, such as sales, profit, asset and market value. Based on these indicators, the financial ratios were calculated and the characteristics of groups of enterprises were given by the methods of descriptive statistics. Net profit is emphasised as a key performance indicator, and it has been proven that the companies with the highest asset value do not have excessive financial ratios. The latest Forbes ranking covers companies from 61 countries, the leaders in headquartering the companies are the United States, China and Japan. It has been found that most companies have assets of up to $500 billion, while the market value of assets (calculated on the value of placed securities) is on average twice as low. The ranking also includes unprofitable enterprises (about 15% of the total), which indicates the lack of effective mechanisms for assessing the effectiveness of management of multinational enterprises and possible errors in investment decisions, as the focus is more on working capital and market coverage (sales) than the ability of management to develop strategic decisions. In the most stable companies, the ratio of net profit to sales does not exceed 20%, which proves the assumption of the advantage of moderate development and financial management. There is almost no correlation between profit/sales and asset value, while it is the strongest between asset value and market value of the company, and profit and market value. The companies with the largest assets have lower absolute and relative financial indicators than the average in the total sample of 2000 enterprises (with some exceptions). The practical significance of the article is the creation of a new sustainable international rating system of enterprises.