Money, Banking, and International FinancePEMEX experienced a gain of 17,627,605 pesos from currency exchange. Thus, the U.S. dollar
must have appreciated against the Mexican peso during 2005.
Table 1. The 2005 Income Statement for PEMEX
Net Sales
Domestic 505,109,185 p
Export 423,533,791
Total Revenues 928,642,976 p
Costs and Operating Expenses
Cost of sales 361,177,339 p
Transportation expenses 21,910,789
Administrative expenses 46,800,391
Total cost and operating expenses (429,888,519) p
Exchange gain (loss) 17,627,605 p
Taxes and duties (580,629,293) p
Net income (64,247,231) p
Source: PEMEX (2006)
The Mexican national government relies on PEMEX to pay taxes because the company paid
580,629,293 pesos in taxes and duties. Consequently, PEMEX earned a 64,265,231 peso loss
because it paid a large amount of taxes to the Mexican government. If you want to know the
approximate U.S. dollar value, then divide all numbers in the Table 1 by 11 because the peso-
dollar exchange rate roughly equaled $1 = 11 pesos in 2005.
Balance Sheet is the second financial statement and shows the financial position of a
business on a specific date. Balance sheet itemizes a business’s assets, liabilities, and equity.
Assets are economic resources owned by a business while liabilities are debts and financial
obligations of the business. Finally, equity equals total assets minus total liabilities that we also
call net assets. We express equity in Equation 1. Moreover, creditors want businesses to have a
positive equity. If a business cannot repay its debts, the creditors can legally force the business
to sell its assets to repay debts. We list several assets and liabilities in Table 2.
Equity = Total Assets – Total Liabilities ( 1 )A corporation divides its equity into two capital accounts: Contributed Capital and Retained
Earnings. Contributed Capital is the amount of capital that a corporation sold. In other words,
the amount of stock that circulates between investors outside of the corporation. Table 3 shows
stockholders’ equity for preferred stock and common stock. We list the amounts of authorized
and outstanding shares for both stock types. When a corporation earns profits, it records the