Financial Analysis of the McDonalds Company MCD, New York Stock Exchange One McDonald's Plaza Oak Brook, IL 60523 1-630-623-3000 Natona A. Davis COMPANY OVERVIEW a. Brief description of the company: McDonalds has a purpose that goes beyond just selling burgers and fries. Although food is what originally brought them into the mainstream, they have evolved and continued to grow in a positive way. They are using a reach to be a positive force for their customers, employees, and their communities. They promote choices, real ingredients, great taste and transparency. They also create opportunity, encourage diversity, offer training, and facilitate teamwork. They are known for championing happy and healthy kids, by keeping families together through Ronald McDonald House Charities. They are proud of everything they do, and dedicated to doing more alongside their customers. b. Company history: Dick and Mac McDonald opened their eponymous burger stand in 1948 in San Bernardino, California under the guidance of Ray Kroc, a onetime milkshake-mixer salesman. By the end of the 1960s, there were more than 1,000 across the U.S. In 1937, Patrick McDonald opened "The Airdrome" restaurant at the Monrovia Airport in Monrovia, California. Hamburgers were ten cents, and all-you-can-drink orange juice was five cents. In 1940 his two sons, moved the entire building 40 miles to the corner of 14th and E Streets in San Bernardino, California. The restaurant was renamed "McDonald's". c. Organization: In 1948, the brothers Richard and Maurice McDonald introduced the "Speedy Service System" which established the principles of the modern fast-food restaurant. In 1954, Ray Kroc, a seller of Multimixer milkshake machines, learned that brothers Richard and Maurice (Dick and Mac) McDonald were using eight of his high-tech Multimixers in their San Bernardino, California, restaurant. His curiosity was piqued, and he went to San Bernardino to take a look at the McDonalds' restaurant. The McDonald Brothers had been in the restaurant business since 1937. In 1948, they closed down a successful carhop drive-in to establish the streamlined operation Ray Kroc saw in 1954. The menu was simple: hamburgers, cheeseburgers, French fries, shakes, soft drinks, and apple pie. The carhops were eliminated to make McDonald's a self-serve operation. Mac and Dick McDonald had taken great care in setting up their kitchen like an assembly line, to ensure maximum efficiency. d. Main products and services: Believing that the McDonald formula was a ticket to success, Kroc suggested that they franchise their restaurants throughout the country. When they hesitated to take on this additional burden, Kroc volunteered to do it for them. He returned to his home outside of Chicago with rights to set up McDonald's restaurants throughout the country, except in a handful of territories in California and Arizona already licensed by the McDonald brothers. Kroc's first McDonald's restaurant opened in D ...

1. Financial Analysis of the McDonalds Company
MCD, New York Stock Exchange
One McDonald's Plaza Oak Brook, IL 60523
1-630-623-3000
Natona A. Davis
COMPANY OVERVIEW
a. Brief description of the company: McDonalds has a purpose
that goes beyond just selling burgers and fries. Although food
is what originally brought them into the mainstream, they have
evolved and continued to grow in a positive way. They are using
a reach to be a positive force for their customers, employees,
and their communities. They promote choices, real ingredients,
great taste and transparency. They also create opportunity,
encourage diversity, offer training, and facilitate teamwork.
They are known for championing happy and healthy kids, by
keeping families together through Ronald McDonald House
Charities. They are proud of everything they do, and dedicated
to doing more alongside their customers.
b. Company history: Dick and Mac McDonald opened their
eponymous burger stand in 1948 in San Bernardino, California
under the guidance of Ray Kroc, a onetime milkshake-mixer
salesman. By the end of the 1960s, there were more than 1,000
across the U.S. In 1937, Patrick McDonald opened "The
Airdrome" restaurant at the Monrovia Airport in Monrovia,
California. Hamburgers were ten cents, and all-you-can-drink
orange juice was five cents. In 1940 his two sons, moved the
entire building 40 miles to the corner of 14th and E Streets in
San Bernardino, California. The restaurant was renamed
"McDonald's".

2. c. Organization: In 1948, the brothers Richard and Maurice
McDonald introduced the "Speedy Service System" which
established the principles of the modern fast-food restaurant. In
1954, Ray Kroc, a seller of Multimixer milkshake machines,
learned that brothers Richard and Maurice (Dick and Mac)
McDonald were using eight of his high-tech Multimixers in
their San Bernardino, California, restaurant. His curiosity was
piqued, and he went to San Bernardino to take a look at the
McDonalds' restaurant. The McDonald Brothers had been in the
restaurant business since 1937. In 1948, they closed down a
successful carhop drive-in to establish the streamlined operation
Ray Kroc saw in 1954. The menu was simple: hamburgers,
cheeseburgers, French fries, shakes, soft drinks, and apple pie.
The carhops were eliminated to make McDonald's a self-serve
operation. Mac and Dick McDonald had taken great care in
setting up their kitchen like an assembly line, to ensure
maximum efficiency.
d. Main products and services: Believing that the McDonald
formula was a ticket to success, Kroc suggested that they
franchise their restaurants throughout the country. When they
hesitated to take on this additional burden, Kroc volunteered to
do it for them. He returned to his home outside of Chicago with
rights to set up McDonald's restaurants throughout the country,
except in a handful of territories in California and Arizona
already licensed by the McDonald brothers. Kroc's first
McDonald's restaurant opened in Des Plaines, Illinois, near
Chicago, on April 15, 1955, the same day that Kroc
incorporated his company as McDonald's Corporation. This was
the begging of the largest food chain corporation known today,
McDonalds.
e. Geographic area of operations: As the worlds leadings global
food service retailer, with over 36,000 locations serving

3. approximately 69 million customers in over 100 countries each
day, McDonalds sets the bar for all food chains to follow. More
than 80% of McDonald's restaurants worldwide are owned and
operated by independent local businessmen and women. The
strength of the alignment among the Company, its franchisees
and suppliers (collectively referred to as the "System") has been
key to McDonald's success. By leveraging their system, they are
able to identify, implement and scale ideas that meet customers'
changing needs and preferences. In addition, their business
model enables McDonald's to consistently deliver locally
relevant restaurant experiences to customers and be an integral
part of the communities we serve. McDonald’s franchises
restaurants in many international markets, most decisions
relating to the selection of candidates, are made locally by the
management in the country where the restaurant is located.
McDonalds provide high quality products, such as burgers,
fries, drinks, muffins, etc., which are safe and reliable that it
does what it is supposed to do, but not only does the quality of
the products matter, the good value for money affects the
business. E.g. buy one extra value meal and get one free with a
food voucher that represents the offer only. They ensure that a
high standard of the product is carried out at all times and they
try to compete very competitively with other fast food
businesses with their good value for money. McDonalds also
play a role especially into the goods being safe to use and being
very reliable with provided instructions. This will benefit the
customer's safety and hoping to be very reliable during the
customer's use because its helps the business to increase it sales
by keeping the existing customers and attracting new ones. The
products of McDonalds are safely packaged when it is required
for the product, in order the customer does not have any
problems or and negative feedbacks to McDonalds, i.e., hot
coffee cups have plastic lids on top so it does not spill or burn
on the customer. Also, McDonalds ensure to offer nutritional
guide of the product clearly state what the product contains.

4. f. Recent developments: The McDonalds corporations Company
Headquarters operates in 119 countries across 35,000 outlets.
The recent developments that McDonalds include; the Board of
Directors declared a quarterly cash dividend of $0.85 per share
of common stock payable on June 15, 2015 to shareholders of
record at the close of business on June 1, 2015, announcement
of a global commitment on deforestation across the company's
expansive global supply chain. The commitment builds upon
McDonald's Global Sustainability Framework and longstanding
leadership in the area of sustainable sourcing, and enhanced
benefits for employees at its company-owned restaurants,
including a wage increase and paid time-off for full and part-
time crew employees. In addition, the company is expanding its
Archways to Opportunities education offerings to provide
eligible U.S. restaurant employees -- at both company-owned
and franchised restaurants -- with free high school completion
and college tuition assistance. Under pressure to provide
healthier meals, McDonald’s announced on Thursday that it
would no longer market some of its less nutritional options to
children and said it also planned to include offerings of fruits
and vegetables in many of its adult menu combinations. It plans
to make the changes to its menu in 20 of the company’s largest
markets, which account for more than 85 percent of its overall
sales, including overseas. But it will take three years or more to
put them into place in about half the restaurants in those
markets, and the remainder may not have the changes until
2020.
PART 2, FINANCIAL OVERVIEW:
a. Sales and Income Record:
2009
2010

5. 2011
2012
2013
Sales revenue
22.74B
24.07B
27.01B
27.57B
28.11B
Percent change in sales each year
-
-.060352422
-0.1221437
-.020733061
-0.0195865
Net Income
4.55B
4.95B
5.5B
5.46B
5.59B
Percent change in net income each year
-
-.0879120
-.111111
.007273
-.023809
GRAPH OF SALES & NET INCOME, FY 2009 – 2013
Comments: It can be seen from the graph that sales are in an
increasing trend. Sales had an upswing from 2010 to 2011. On
the other hand, net income shows a smooth increasing trend.
Thus, it can be said that, Sales and Net income of McDonald’s

6. are in satisfactory condition
. b. Expense Distribution:
List of expensesFY 2013 (First Quarter) (In Millions)
Company Operated restaurant Expense
3726.0
Franchised restaurants –occupancy expense
395.2
S, G & A expenses
596.5
Impairment and other charges
(61.9)
Interest Expense
128.1
Non-Operating Expense
4.6
Tax Expense
546.6
PIE CHART OF EXPENSES, FY 2012
Comments: Most of the expenses of the company go to the
expenses to run the company operated restaurants. 68% of
expenses go to this category. Second highest expense is of
SG&A expense. 3rd Highest expense is tax expense. Then
comes the expense of franchised restaurants. Interest expense,
impairment and non-operating expense is not much descriptive.
C.Assets Distribution:
List of Assets
Year-end FY 2013 in thousands
Cash
2798700
Accounts Receivable

7. 1319800
Inventory
123700
Prepaid expenses
5890000
Other Assets
5828900
PIE CHART OF ASSETS, Year-end FY 2013
Comments: Highest amount of asset owned by McDonald’s is
fixed assets, then comes cash equivalents. Sufficient amount of
inventory other assets are also shown in the graph.
c. Capital Structure:
Capital Structure
Year-end FY 2013 in thousands
Current Liabilities
3170000
Long-term and other liabilities
1669100
Preferred Stock (if any)
-
Common Stock
16600
Comments: From the chart it can be said that highest amount of
debt is in long-term and other liabilities. Lowest amount of
capital structure amount is in common stock.
CAPITAL STRUCTURE PIE CHART, Year-end FY 2012

8. Comments: From the chart it can be seed that highest amount of
debt is in long-term liabilities. Lowest amount of capital
structure amount is in common stock.
PART 3: RATIO ANALYSIS
(1) LIQUIDITY:
FY 2011
FY 2012
Current Ratio
McDonald’s
1.254702
1.446358
Wendy’s
2.18504
2.474455
Quick Ratio
McDonald’s
1.221418
1.410596
Wendy’s
2.146723
2.42633
Comments: From the above scenario it can be seen both the
companies have higher liquidity ratios. As both the ratios are
above 1 it means both the companies have higher liquidity. But
Wendy’s has higher liquidity than McDonald’s.
(2) ASSET MANAGEMENT:
FY 2011
FY 2012

9. Total Asset Turnover
McDonald’s
0.818614
0.779026
Wendy’s
0.495812
0.510853
Average Collection period
McDonald’s
18.03916
18.20962
Wendy’s
11.73111
10.23023
Comments: From the above table it can be seen asset turnover is
better of McDonald’s but collection period is higher of
McDonald’s than Wendy’s. But the collection period is better
for both companies. So, asset management condition of both the
companies is good.
(3) DEBT MANAGEMENT:
FY 2011
FY 2012
Total Debt to Total Assets
McDonald’s
0.5638
0.567815
Wendy’s

10. 0.534621
0.538517
Times Interest Earned
McDonald’s
17.30864
16.65621
Wendy’s
1.201578
1.244422
Comments: From the table above it can be seen that both the
ratios are higher for McDonald’s. SO, debt management
condition is better of McDonald’s.
(4) PROFITABILITY:
FY 2011
FY 2012
Net profit Margin:
McDonald’s
0.203773
0.198237
Wendy’s
0.004655
0.004322
Return on Assets:
McDonald’s
0.166812
0.154432
Wendy’s

11. 0.002308
0.002208
Return on Equity:
McDonald’s
0.38242
0.357326
Wendy’s
0.00496
0.004784
Modified Du Pont Equation FY 2012
McDonald’s
Wendy’s
Net Profit Margin
0.198237
0.004322
Total Asset Turnover
0.779026
0.510853
Equity Multiplier
2.313811
2.166925
ROE
0.357326
0.004784
Comments: From the tables above it can be seen that
profitability condition of McDonald’s is much better than
Wendy’s. Though every ratio has decreased from 2011 to 2012
but they are higher in McDonald’s account than Wendy’s. May
be as McDonald’s is a large size multinational restaurant asset
and profit size of McDonald’s is higher than Wendy’s. For this
reason Profitability condition is better in McDonald’s
(5) MARKET VALUE RATIOS:

12. FY 2011
FY 2012
PE Ratio
McDonald’s
19.03795
16.45709
Wendy’s
218
116.75
Market to Book Ratio
McDonald’s
7.11852
5.785075
Wendy’s
1.027055
0.922075
Comments: From the table above it can be seen that P/E ratio of
Wendy’s is much higher than McDonald’s. This is because
earnings per share of Wendy’s are very low. But market to book
value ratio is higher in McDonald’s because they have higher
equity.
PART 4, CONCLUSIONS AND RECOMMENDATIONS
Conclusion:
McDonald’s is a growing and developing food chain restaurant.
It remains focused on its menu and customer satisfaction and
thrives to become more relevant in modern customer. Despite
some criticism regarding its menu, expansion, and business
practices, the company is a growing one and frequently
proffered by its customers around the world.

13. Recommendations:
Some recommendations for McDonald’s-
· Continuous update with the new trend.
· Adapting with the growing and complex competition.
· Development in employee skills.
· More emphasize on research and development.
· Remain consistent with good performance.
* End of report Outline *
_1456433074.xls
Chart12798700131980012370058900005828900
Sheet1List of assetsFY 2013CASH2798700A/C
recievables1319800Inventory123700Fixed asset5890000Other
assets5828900
Sheet1
Sheet2
Sheet3
_1456433076.xls
Chart122.74.5524.074.9527.015.527.575.4628.115.59
Sales
Net Income
Sheet1SalesNet
Income200922.74.55201024.074.95201127.015.5201227.575.46
201328.115.59
Sheet1
Net Income
Sheet2List of expensesFY 2013 (First Quarter) (In
Millions)Company Operated restaurant Expense3726Franchised
restaurants –occupancy expense395.2S, G & A
expenses596.5Impairment and other charges-61.9Interest
Expense128.1Non-Operating Expense4.6Tax Expense546.6

14. Sheet2
FY 2013 (First Quarter) (In Millions)
_1456433071.xls
Chart13170001669100PREFFERED STOCK16600
Sheet1CAPITAL STRUCTUREFY2013CURRENT
LIABILITIES317000OTHER
LIABILITIES1669100PREFFERED STOCKCOMMON
STOCK16600
Sheet1
Sheet2
Sheet3
Commenting only on part 3 ratio analysis:
you only need to go to two decimal places on ANY ratio
1. good calculations; but could a case be made that Wendy's is
TOO high? Idle current assets earning nothing?
2.why do you think asset turnover has gotten better? Industry
avg?? Who is each firm collecting its A/R from for the ACP?
you and I pay cash or ccard...?
3. No analysis; just observations;Whats industry avg debt ratio?
Could higher debt ratio be good by taking advantage of
financial leverage? Analysis about TIE!
4. we calculate ratios to take out the distortion of company
size...industry avg's? whats the Dupont formula tell you is
Wendy's biggest problem? McD's?
5. M/B is not high because of high equity; its because of high
mkt value compared to low equity