Topics: Financial ratios, Balance sheet, Asset Pages: 13 (4049 words) Published: February 16, 2013
Sheridan College|
McDonald’s Report|
Finance Group Project Assignment|
Group Member:|
Aman KumarIbrahim KhanRyan TanSakina KhanSheldon Coelho|


Table of Contents
Key Success Factors3
Key Issues and Problem5
Managerial Problem5
Financial Problem7
Financial Analysis8
Important ratios to notice8
Current ratio8
Quick Ratio8
Cash Ratio9
Cash and equivalents9
Account Payables10
Times interest earned10
Debt Ratio10
Net Working Capital Ratio11
Return on Equity12
SWOT Analysis12
Porter 5 Forces14
Threat of Substitute15
Power of Supplier15
Power of Buyer15
Alternatives analyzed16

McDonald's Corporation is the world's largest chain of fast food restaurants, serving nearly 47 million customers daily through more than 31,000 restaurants in 119 countries worldwide. McDonald’s sells various fast food items and soft drinks including, burgers, chicken, salads, fries, and ice cream. Many McDonald’s restaurants have included a playground for children and advertising geared toward children, and some have been redesigned in a more 'natural' style, with a particular emphasis on comfort: introducing lounge areas and fireplaces, and eliminating hard plastic chairs and tables. Each McDonald's restaurant is operated by a franchisee, an affiliate, or the corporation itself. The corporations' revenues come from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants Key Success Factors

McDonald’s key success factors have been its franchises. Majority of the total sales comes from sales from franchises. The chains owned by McDonald’s bring in very few of the sales revenue; but it is still significant since 100% of those profits would come to McDonald’s. The Franchisees keep majority of the profits and pay the royalties to McDonald’s. Also, the initial capital required with franchise is lowered with franchise model.

Another key success factor is that McDonald’s receives funds from its franchises not only from the royalties but also through rent money from the franchisees. McDonald’s owns most, if not all, property that has McDonald’s restaurants built on it. Franchisees then pay rent to occupy that space. McDonald’s generates more money from its rent than from its franchise royalty fees.

McDonald’s also markets their excess land, property and buildings to public. Between rent and profits from land sales, McDonald’s real estate represents a significant portion of its overall company value along with ventures in earning income will allow McDonald’s to continue to be successful and profitable in the future.

McDonald’s goes big on advertising and takes brand imaging very seriously. They’re slogan of “I’m lovin’ it” it widely known all over the world. In USA alone, McDonald’s advertising budget is estimated to exceed $2 billion, by far the largest in the United States. (New York Times, 2012). One of the aims of the Marketing teams of McDonald’s is the continue improving the perception of the food and beverages they offer to the consumers, they believe in a continuous increase of their customer base. “The consumer perception of the quality of our food is not where we want it to be..... We also believe that there are more people that would want to come — if they could feel better about the product.” Neil Golden, the company’s chief marketing officer for its American restaurants.

Key Issues and Problem
Managerial Problem
McDonald’s is among the most popular fast food brands in the world. Started out in the fifties, McDonald’s now boasts of operating, franchising, and serving a worldwide chain of around 30,000 fast food restaurants that prepare, package and sell a menu of ready to eat foods....
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