'Financial Analysis of McDonalds Company\r'

'PART 1, COMPANY OVERVIEW:a. McDonald’s is an Ameri endure debased nutriment chemical filament that sells a innovation of fast regimen alternatives, but most nonably has take in its reputation and success for the hamburger. It is the hulkyst fast food chain in the world, with globally acknowledge â€Å"golden arches” symbolizing a unquestionable meal can be had in over 119 countries. McDonald’s has go on to contract their menu to reflect the desire/demands of their customers. The up-to- run across CEO of McDonald’s is Mr. Don Thompson. b. McDonald’s was started in the 1940s as a BBQ outrideaurant owned and operated by Richard and Maurice McDonald’s in California, U.S.A.The McDonald’s certify was not established until 1955, when man by the transmit of Ray Kroc opened the ninth McDonald’s restaurant in Des Plaines, Illinois. By 1961, McDonald’s filed trademark for the partnership anticipate and â€Å"dr ive-thru” service. Ray Kroc eventually forced the McDonald’s brothers out of the business and successfully ranch the keep high society throughout the world. Today, McDonald’s is an international sign of globalization. c. McDonald’s invests in properties, operates restaurants, and is a libertyr of the McDonald’s chain, in order to go money. McDonald’s operates differently than most franchise companies. Most franchised companies make their money by claiming a percentage of the income made at each chain; however, often propagation McDonald’s Corporation ordain buy the property the franchise is on and charge rent.d. Arguably, the main thing McDonald’s sells is union and expectations. This is to say, when you order from McDonald’s you know what you will plump all(prenominal) single cartridge clip; no surprises. McDonald’s makes money doing this by selling the food for significantly more(prenominal) than  than what they purchased it for. McDonald’s also makes money by participating in the strategy discussed preceding(prenominal) spend in properties and charging franchise owners rent, franchise markups of 40%, operating restaurants, etc. e. McDonald’s has over 33,000 locations in over 119 countries crosswise the globe to include places like Israel, Brazil, Scotland, Russia, the U.S., India, and China. at bottom each of those countries McDonald’s can be found in a variety of places in a variety of forms; such(prenominal) as, coffee stands in Paris, drive-thru only restaurants in Ger galore(postnominal), airport vendors, or even machine-accessible to gas stations.f. In recent long time McDonald’s has taken criticism on the unhealthy food choices on their menu, so much to where at near restaurants they fork up listed the total caloric intake per meal. That said, McDonald’s was the official food sponsor of the 2012 summertime Olympics in London, England, where they built their largest restaurant to date to support the massive crowds.PART 2, FINANCIAL OVERVIEW:a. gross revenue and Income Record:————- Fiscal Years ————-2007 2008 2009 2010 2011 gross revenue 22.79 23.52 22.74 24.07 27.01 Percent Change in gross sales Each Year3% -3% 6% 12% elucidate Income 2.34 4.31 4.55 4.95 5.5 Percent Change in benefit Income Each Year84% 6% 9% 11%GRAPH OF SALES & deoxyadenosine monophosphate; simoleons INCOME, FY 2007 †2011COMMENTS: Aside from 2009, the society has seen growth in both sales and net income every year. The decrease in sales for 2009 could peradventure be a result of the sparing times, where m any(prenominal) of McDonald’s customers whitethorn micturate reduced their spending and become more conservative with their expenses. The growth percentages since 2010 argon increasing, which indicates a positive trend in the family moving forward. It would be unreal istic to encounter that the company can continue image its growth percentages, but a continued growth of 12% to 15% is possible.b. expense Distribution:FY 2011 Major Expenses:\r\nCOGS 16.3 SG&A 2.2 Interest 0.49 Taxes 2.5PIE CHART OF EXPENSES, FY 2011COMMENTS: As visualised in the chart, the companies’ largest expense is Cost of Goods interchange (COGS). In order to increase their make margin, McDonald’s must continue to provide and find ways to reduce COGS. This is because many of the other expenses atomic number 18 much harder to influence. interchange General and Administrative (SG&A) expenses realise most likely already been gelded to the minimum over the company’s life, taxes are required by the Government, and provoke expense makes up only a small portion of expenses. The company may need to do a cost-benefit depth psychology to determine what may be through with(p) to reduce COGS. unity idea may to better vertically integrate the com pany, or to remove menu items which are less-traveled and/or seasonal.c. summations Distribution:year-end FY 2011 Assets:\r\n coin 2.3 Accounts Receivable 1.3 Inventory 0.12 Fixed Assets (PP&E) 22.8 other Assets 1.67PIE CHART OF ASSETS, Year-end FY 2011COMMENTS: As depicted in the chart, the companies’ assets are more often than not repair. This comes as no surprise since the company consists of over 33,000 restaurant locations worldwide. The percentage of fixed assets as compared to accredited assets does mean though that the company is not liquid, which means it cannot officious convert its assets to cash. The low inventory which real makes up just 0.4% of the asset dissemination is dominion due to the fact that the company is a restaurant chain, and much of the shine has a quick shelf life.c. enceinte organise: Year-end FY 2011 Capital Structure:Current Liabilities 3.5 Long-term & Other Liabilities 13.73 Common Equity 14.4CAPITAL STRUCTURE PIE CHART, Year-end FY 2011COMMENTS: As depicted in the chart, the companies’ heavy(p) structure is made up more often than not of common equity and long-term liabilities. The company has been super successful, and has gained equity over the long time as it became the world’s largest chain of hamburger fast food restaurants. Additionally, in order to continue their growth, the company has spread out its locations, which required long-term debt financing. Because of these characteristics, the percentages of each of these categories are expected. Furthermore, the company has low period liabilities, which is normal for yearly operations in this sector.PART 3, proportion ANALYSIS:(1) LIQUIDITY:Comments On McDonalds liquid state:McDonald’s has a levelheaded up-to-date ratio. It is in a higher(prenominal) place 1, which means that it has enough current assets to cover current liabilities. Also, since the number is not too high, we know that the company is utilizing its assets efficiently. The quick ratio is also good because it is above 1, meaning McDonald’s does not trust on their inventory. Comparing the numbers to Wendy’s, McDonald’s has room for improvement.(2) ASSET MANAGEMENTComments On McDonalds Asset Management:McDonald’s has abundant essential Asset Turnover when compared with Wendy’s. They are do over $0.75 for every dollar of assets. Also, their fair(a) Collection Period is very good, fetching on average 18 days to collect on receivables.(3) DEBT MANAGEMENT:Comments On McDonalds Debt Management: Both companies’ debt ratios are similar, and are not alarming for the industry. However, McDonald’s time Interest Earned is much higher than Wendy’s. This shows possibly lenders that McDonald’s can considerably meet their interest owed (17x).(4) PROFITABILITY:Comments On McDonalds Profitability:For the industry, McDonalds has good profitability. Wendy’s seems to b e struggling in this area, and it may be best to compare the company against another(prenominal) peer to determine how they are doing.(5) merchandise VALUE RATIOS:Comments On McDonalds Market esteem Ratios:McDonald’s market value is good compared to both industry numbers, as intumesce as against Wendy’s market value ratios. McDonald’s ratios prove the company is economically strong. Part 4, Summary and ConclusionThe McDonald’s phoner is continuing to grow, both physically and monetarily, as seen in the increase in locations and sales per year. This is a good sign, especially during the current economic times. The company also has mensuration asset, expense, and capital distribution for companies deep down the fast food industry. This is good because there are no glaring issues that would inhibit investing in the company. Additionally, the company has great ratios when compared with The Wendy’s Company, as well as the rest of the fast food in dustry. One can fully understand how well the McDonald’s company is doing in comparison to the industry.Looking forward, the McDonald’s Company can try to get better by finding efficiencies where possible. One way the company could do this is by reducing its Cost of Goods Sold. Through eliminating some specialty items, this may be possible. Also, the company may want to look at a way to increase their return on assets and equity as any increase, large or small, will eternally help a company. Again, the company is doing extremely well already, but great companies should everlastingly continuously look for efficiencies and improvements in these areas.Overall, the McDonald’s Company has postured itself to become a large and extremely successful company within the fast food industry. It has grown from a small upstart in the 1940’s, to a symbol of globalization today because of the numerosity of restaurant locations around the world. I imagine The McDona ld’s Company is a great investment opportunity as it seems to continually improve, develop, and grow to serve its consumers around the world.\r\n'