Financial Analysis Case Study

Topics: Generally Accepted Accounting Principles, Financial ratios, Revenue Pages: 9 (2971 words) Published: November 11, 2012
McDonald's Financial Analysis Case Study

The purpose of this study is to assess a company’s future financial health. This study provides a "hands on" experience to synthesize the finance concepts that we learned throughout the course by applying them to a "real life" individual or organization. On this study I elected to assess McDonald Corporation’s future financial health. McDonald’s Corporation franchises and operates McDonald’s restaurants in the global restaurant industry. These restaurants serve a menu at various price points providing value in 119 countries globally. As of December 31, 2011 out of the 33,510 restaurants in 119 countries around the world 27,075 were franchised or licensed (including 19,527 franchised to conventional franchises, 3,929 licensed to developmental licensees and 3,619 licensed to foreign affiliates primarily in Japan and the Company operated 6,435. McDonald’s menu includes Big Mac, Quarter Pounder with Cheese, hamburgers and cheeseburgers, Filet-O-Fish, Chicken McNuggets, some chicken sandwiches, salads, Snack Wraps, French fries, oatmeal, shakes, sundaes, McFlurry desserts, soft serve cones, pies, soft drinks, McCafe beverages, coffee and other beverages. McDonald’s, the world famous fast food restaurant has been successful across the years. Over the years, they have ensured there is no change in their services, and product line, but kept the quality high and maintained the standards across their branches. Not only do they offer customers a delicious meal, but also offer something for the children and adults alike- their happy meal! Children look forward to the doll inside, while parents look forward to watching their children enjoy a meal without a complaint. Now we’ll see and find out what was their growth? How much was their annual sales? And any future plans. Investors and other external users of financial information will often need to measure the performance and financial health of an organization. This is done in order to evaluate the success of the business, in this study we will determine any weaknesses of the business, compare current and past performance, and compare current performance with industry standards. Financially stable organizations are desirable, because a financially stable business is one that successfully ensures its ability to generate income for investors and retain or increase value. Financial summary: McDonald’s has announced for the six months ended 30 June 2012, the company revenues increased 3% to $13.46B. Net income decreased less than 1% to $2.61B. Revenues reflect U.S. segment increase of 6% to $4.34B, APMEA segment increase of 7% to $31.1B, Company’s store sales(Growth%) U.S. increases of 69% to 6.3%. Net income reflects U.S. segment income increase of 6% to $1.84B, APMEA segment income increase of 4% to $742.7M. Valuation Ratios

Price/Earnings (TTM)16.58
Price/Sales (TTM)3.24
Price/Book (MRQ)6.34
Price/Cashflow (TTM)12.8

Profitability Ratio (%)
Gross margin (TTM)39.54
Operating Margin (TTM31.45
Net Profit Margin (TTM)20.03

Financial Strength
Quick Ratio (MRQ)1.21
Current Ratio (MRQ)1.24
LT Debt/Equity (MRQ)0.91
Total Debt/Equity (MRQ)0.97

Per Share Data
Earnings (TTM)5.32
Sales (TTM)26.59
Book Value (MRQ)13.92
Cash Flow (TTM)6.74
Cash (MRQ)2.29

Management Effectiveness (%)
Return on Equity (TTM)39.54
Return on Assets (TTM)31.45
Return on Investment (TTM)20.03

Dividend Information
Dividend Yield (%)3.17
Dividend per Share (MRQ)0.70
Payout Ratio (MRQ)52.66

TTM: Trailing twelve months; MRQ: Most recent quarter; Latest fiscal year: 2011; Most recent quarter: 2; Fiscal year end month: December; All Ratios are calculated for the latest fiscal year end. Key Ratio and Statistics

Financial Strength
Financial strength looks at business risk. The stronger a company is from a financial standpoint, the less risky it is. The Quick Ratio compares cash and short-term...
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