McDonald's Corporation Analysis
McDonald’s Corporation Analysis
1) Summary of the Company: McDonald’s Corporation is the world’s largest chain of hamburger fast food restaurants. There are over 31,000 McDonald’s locations worldwide primarily selling hamburgers, cheeseburgers, chicken products, french fries, breakfast items, soft drinks, and desserts.
2) Financial Ratios Analysis:
1. Net Profit Margin- The net profit margin of 18.34 percent for 2008 indicates that 18.34 cents of net income was generated for each dollar of sales. The significant increase of 7.83 percent, from 2007’s 10.51 percent, yielded an additional $1.84 billion in profit on the company’s $23.52 billion in revenue.
2. Gross Profit Percentage- McDonald’s gross profit percentage for 2008 was about 27.39 percent, which was a good increase from 2007’s gross profit percentage of 17.02 percent. The increase indicates McDonald’s made 10.37 cents more gross profit on each dollar of revenue, making the company’s cash flows more liquid.
3. Asset Turnover- The asset turnover ratio for 2008 was a relatively low 0.81, only a 0.3 increase from 2007. This indicates 0.81 of revenue was generated for every dollar 's worth of assets in 2008, which is not so good. It also implies the company’s pricing strategy is of high profit margins.
4. Fixed Asset Turnover- The 1.14 fixed asset turnover ratio for 2008 is relatively low similar to 2007’s fixed asset turnover ratio of 1.13. This indicates McDonald’s generated about $1.14 in sales revenue for every dollar invested in fixed assets meaning the company is not operating efficiently enough.
5. Return on Assets- The return on assets ratio for McDonald’s increased by 6.7 percent from 2007’s 8.21 to 2008’s 14.91 percent, which comes from the product of the net profit margin and the asset turnover ratios. This is good because it indicates the company earned almost 15 cents for each dollar invested in 2008.
6. Return on Equity- In 2007 ROE was 15.58 percent and it almost doubled in 2008 to
1) Summary of the Company: McDonald’s Corporation is the world’s largest chain of hamburger fast food restaurants. There are over 31,000 McDonald’s locations worldwide primarily selling hamburgers, cheeseburgers, chicken products, french fries, breakfast items, soft drinks, and desserts.
2) Financial Ratios Analysis:
1. Net Profit Margin- The net profit margin of 18.34 percent for 2008 indicates that 18.34 cents of net income was generated for each dollar of sales. The significant increase of 7.83 percent, from 2007’s 10.51 percent, yielded an additional $1.84 billion in profit on the company’s $23.52 billion in revenue.
2. Gross Profit Percentage- McDonald’s gross profit percentage for 2008 was about 27.39 percent, which was a good increase from 2007’s gross profit percentage of 17.02 percent. The increase indicates McDonald’s made 10.37 cents more gross profit on each dollar of revenue, making the company’s cash flows more liquid.
3. Asset Turnover- The asset turnover ratio for 2008 was a relatively low 0.81, only a 0.3 increase from 2007. This indicates 0.81 of revenue was generated for every dollar 's worth of assets in 2008, which is not so good. It also implies the company’s pricing strategy is of high profit margins.
4. Fixed Asset Turnover- The 1.14 fixed asset turnover ratio for 2008 is relatively low similar to 2007’s fixed asset turnover ratio of 1.13. This indicates McDonald’s generated about $1.14 in sales revenue for every dollar invested in fixed assets meaning the company is not operating efficiently enough.
5. Return on Assets- The return on assets ratio for McDonald’s increased by 6.7 percent from 2007’s 8.21 to 2008’s 14.91 percent, which comes from the product of the net profit margin and the asset turnover ratios. This is good because it indicates the company earned almost 15 cents for each dollar invested in 2008.
6. Return on Equity- In 2007 ROE was 15.58 percent and it almost doubled in 2008 to