As the world economy becomes more integrated, one question facing financial analysts is whether financial ratios can be compared across national boundaries. For example, at one time the average P/E ratio for Japanese companies was around 60, and the average for U.S. companies was between 15 and 20. (A P/E ratio in excess of 30 is considered quite high in the United States.) This dramatic variation was a result of differences in the two national economies and in their accounting methods. One of the accounting differences is that Japanese companies generally depreciate their fixed assets over shorter lives than do U.S. companies.
In addition to differences in accounting methods, what other challenges are faced by financial analysts in comparing the financial ratios of a U.S. company to those of a Japanese, German, or British company?