Financial Analysis Case Study Essay

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Pages: 12

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
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The quick ratio provides a better measure of overall liquidity only when a firm’s inventory cannot be easily converted into cash. If inventory is liquid, the current ratio is a preferred measure of overall liquidity (Gitman & Zutter, 2012, p. 72).
Quick Ratio = (Cash + Short Term Investments + AR) ÷ Total Current
McDonald’s QR = (2,335.7 + 1,334.7) ÷ 3,509.2
McDonald’s QR = 1.05
The Long Term Debt/Equity Ratio looks at the company's capital base. A ratio of 1.00 means the company's long-term debt and equity are equal. The Total Debt/Equity Ratio includes long-term debt and short-term debt. Long Term Debt To Total Equity is equal to the Total Long Term Debt divided by Total Shareholder Equity. While Total Debt to Total Equity is equal to the Total Debt divided by Total Shareholder Equity for the same period.
McDonald’s LT Debt/Equity ratio = 12,133.8 ÷ 14,390.2
McDonald’s LT Debt/Equity ratio = 0.84
McDonald’s Total Debt/Equity Ratio = 12,500.4 ÷ 14,390.2
McDonald’s Total Debt/Equity Ratio = 0.87
Is a class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well. These