The company I have chosen for my analysis is McDonalds. It is a organization which serves more than 58 million customers every day. It is the world's largest chain of hamburger fast food restaurants. In 1940, two brothers Richard and Maurice opened a restaurant called McDonalds at San Bernardino, California. In 1948 they launched speed service system which led to the establishment of the modern principal of fast-food restaurant. At first McDonald's restaurant was opened "the United States, Canada, Costa Rica, Panama, Japan, the Netherlands, Germany, Australia, France, El Salvador and Sweden". The company has generated $24.075 billion as revenue during the year financial year (2010) . The operating income of the company is$7.473 billion (2010).The primary products sold by McDonald's are hamburgers, chicken, and cheeseburgers, French fries, soft drinks, shakes, and desserts. The company has added healthier menu such as fruits, salads and wraps in response to the criticism over its products regarding obesity and healthiness in western countries.
Background
McDonalds the worlds No1 speed service restaurants which serves more than 58 million customers per day with more than 32,500 restaurants in 117 countries serving burgers and Fries.the Company has decided to increase their menu offering in Europe and Asian countries to tempt new customers. I would like to analyze how the idea of new menu is going to favour them and what would be its effect on the firm.
IMPACT OF CURRENT EVENTS
McDonalds' new idea of increasing the menu has helped them to draw in new customers. McDonalds has reported a profit raise of 2.1% in the fourth quarter. Now it is expected that McDonalds will probably increase the praise this year as to counter balance the raise of ingredient cost.
APPENDIX
Annual financials for McDonalds' Corporation
Annual financials for McDonalds' Corporation
Amounts in millions(U.S dollars) except per share amounts
2007 2008 2009
(TTM) (TTM) (TTM)
Assets
Cash and equivalents
1981.30
2,063.40
Restricted cash
0.00
0.00
Marketable securities
0.00
0.00
Accounts receivables
1053.80
931.20
Loans receivables
0.00
0.00
Other receivables
0.00
0.00
Receivables
1053.80
931.20
Raw materials
0.00
0.00
Work in progress
0.00
0.00
Purchased components
0.00
0.00
Finished goods
0.00
0.00
Other inventories
125.30
111.50
Inventories-Adj allowances
0.00
0.00
Inventories
125.30
111.50
Prepaid expenses
421.50
411.50
Current deferred income taxes
0.00
0.00
Other current asset
0.00
0.00
Total current asset
3581.90
3517.60
Gross fixed assets (plant, prop &equip)
32203.70
31,152.40
Accumulated depreciation &depletion
11219.00
10,897.90
Net fixed asset
20984.70
20,254.50
Intangibles
0.00
0.00
Cost in excess
2301.30
2,237.40
Non-current deferred income taxes
0.00
0.00
Other Non-current asset
2523.80
2,452.00
total Non-current asset
25809.80
24,943.90
Total assets
29391.70
28,61.50
Liabilities
Accounts payable
624.10
620.40
Notes payable
1126.60
0.00
Short term Debt
864.50
31.80
Accrued Expenses
0.00
0.00
Accrued liabilities
1635.30
1,633.00
Deferred Revenues
0.00
0.00
Current Deferred income Taxes
0.00
0.00
Other current liabilities
248.00
252.70
Total current liabilities
4498.50
2,537.90
Long term debt
7310.00
10,186.00
Capital lease obligations
0.00
0.00
Deferred income taxes
960.90
944.90
Other Non-Current liabilities
1342.50
1,410.10
Minority Interest
0.00
0.00
Preferred securities of Subsidiary Trust
0.00
0.00
Preferred Equity outstanding stock equity
0.00
0.00
Total Non-current liabilities
9613.40
12,541.00
Total liability
14111.90
15,078.90
Stock holders equity
Preferred stock Equity
0.00
0.00
Common Stock Equity
15279.80
13,382.60
Common par
16.60
16.60
Additional Paid in capital
4226.70
4,600.20
Cumulative Translation Adjustment
0.00
0.00
Retained Earnings
26461.50
28,953.90
Treasury Stock
-16762.40
-20,289.40
Other Equity Adjustments
1337.40
101.30
Total Equity
15279.80
13,382.60
Total Capitalization
22589.80
23,568.60
Total Liability &stock Equity
29391.70
28,461.50
Ratio Analysis
Current ratio
Current ratio is the first tool in the analysis of financial statement. It is been calculated to find how much liquidity does the company has.
Current asset
Current Ratio = -----------------------------
Current liabilities
TABLE No. 1
Year
Current asset
Current liabilities
Ratio (Times)
2007
3581.90
4498.50
0.79
2008
3517.60
2,537.90
1.38
2009
3,416.30
2,988.70
1.14
Interpretation
The Current Ratio during the year 2007, 2008, and 2009, are 0.79, 1.38, and 1.14 respectively.
Net Working Capital Ratio
Net working capital ratio is calculated to measure both a company's efficiency and short term financial health.
Net Working Capital
Net Working Capital Ratio = ---------------------------------------
Total Asset
TABLE No. 2
Year
Current asset
Current liabilities
Total Asset
Ratio
2007
3581.90
4498.50
29391.70
-0.03
2008
3517.60
2,537.90
28461.50
0.01
2009
3,416.30
2,988.70
30224.90
0.01
Interpretation
The Net working capital Ratio during the year 2007, 2008, and 2009, are -0.03, 0.01, and 0.0 respectively.
Return on capital employed ratio(ROCE)
Return on capital employed ratio is used to prove the value the business gains from its assets and liabilities.it basically can be used to show how much a business is gaining for its assets, or how much it is losing for its liabilities.
Return on capital employed ratio(ROCE)
operating capital
= ------------------------------------------------------------------------*100
share capital + reserves + non-current liabilities
Interpretation
The Return on capital employed Ratio during the year 2007, 2008, and 2009, are19.12,30.40 and 33.66 respectively.
Return on share holders fund ratio(ROSF)
Return on share holders fund ratio is calculated to measure that the company is in profitable and has more profit available for share holders
Return on share holders fund ratio(ROSF)
net profit less any preference dividend
= ------------------------------------------------------------------------*100
ordinary share capital + reserves
Interpretation
The Return on share holder fund during the year 2007, 2008, and 2009, are34.80,45.79 and 46.89 respectively.
Stock turnover ratio
Stock turnover ratio is calculated to measures how well a company coverts stock into revenues
average stock
stock turnover ratio = -----------------------------*365
cost of sales
Interpretation
TheStock turnover ratioduring the year 2007, 2008, and 2009, are 199.01, 185.82 and 163.05 respectively.
Debtors collection period ratio
Debtor collection period ratio is calculated to find the years sales which are outstanding at the balance shaeet date,It is a rough way to measure the days of credit that a firms offer to its client.
Average debtor
Debtor collection period = ------------------------------------*365
Sales
Interpretation
TheDebtor collection period ratioduring the year 2008, and 2009, are 12.74 and 12.01 respectively.
Creditors payment period ratio
Creditors payment period ratio is calculated to find how many days it takes on average for a business to pay to its creditors.
Average creditors
Creditors payment period = ------------------------------------*365
purchase
Interpretation
Thecreditors payment period ratioduring the year 2008, and 2009, are 3.58 and 0.85 respectively.
FINANCIAL GEARING
The financial gearing ratio is calculated to compares owners capital or borrowed fund.
Borrowed Capital
Gearing ratio = -------------------------------*100
Total capital
Interpretation
The financial gearing ratioduring the year 2007, 2008, and 2009, are 543.21,327.12 and 172.87 respectively.
RECOMMENDATION:
The recommendation given in the report is based on ratio analysis from the income statement, balance sheet and cash flow statement. The ratio has been keenly evaluated and weighed from the given information. This is not based on assumption and does not mean that it can be applicable to them.
The strength of the company in terms of turnover and profit is growing every year that proves their strategies even in the global economics crisis period.
The company should focus on the sundry creditors to increase its profit.
Though it is shown as if the profit has increased it affects the long term working capital of the company.
The company must concentrate on maintaining stocks in such a way that it would meet the demands when required.
If the company provides more due dates for the credit customers that would increase the profit.
The liquidity of the firm was not sufficient during these years because of less credit sales.
