A Comparison of the Financial Characteristics of U.S., E.U., and Japanese Manufacturing Firms

Meric, Ilhan; Weidman, Stephanie M.; Welsh, Carol N.; Meric, Gulser
June 2002
American Business Review;Jun2002, Vol. 20 Issue 2, p119
Academic Journal
There is fierce competition between U.S., E.U., and Japanese firms to capture a greater market share in each other's local markets and in the world's other markets. Knowing how the financial characteristics of U.S. firms compare with the financial characteristics of E.U. and Japanese firms would be helpful to U.S. corporate managers. Financial ratio analysis is a useful analytical tool for this purpose. Financial ratios reveal the relative strengths and weaknesses of companies in the same industry. One of the two objectives of this study is to provide information to U.S. corporate managers about the relative strengths and weaknesses of U.S. firms vis-a-vis their European and Japanese counterparts by comparing U.S. financial ratios with E.U. and Japanese financial ratios in three major manufacturing industries. E.U. countries and Japan are the most favored foreign countries in the world for U.S. international investors. It would be useful for U.S. investors to know how U.S. firms compare with E.U. and Japanese firms as potential investment opportunities. The second objective of our study is to provide information to U.S. international investors about the relative strengths and weaknesses of U.S., E.U., and Japanese manufacturing firms in terms of liquidity, asset management, financial leverage, profitability and sales growth. The paper is organized as follows: In the next section, we explain the data and methodology of the study In the following section, we use the MANOVA (Multivariate Analysis of Variance) technique to compare the financial characteristics of U.S., E.U., and Japanese manufacturing firms. In the last section, we summarize our findings and present our conclusions.


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