1. What 3 items of important information does the income statement reveal about the financial performance of McDonalds Corp (MCD) over the last three years?

2. What 3 items of important information does the balance sheet reveal about the financial position of McDonalds Corp (MCD) over the last two years?

3. Can you identify the major sources of funding used by McDonalds Corp (MCD) from the information presented in the company's annual report? If not, how could you get this information?

4. Who is responsible for: The issuance, and the content of the company financial statements?

5. What assurance, if any, is there that the financial statements are in compliance with GAAP, and are free of material misstatements?

6. Of what use, if any, are the notes to the financial statements?

1. What 3 items of important information does the income statement reveal about the financial performance of McDonalds Corp (MCD) over the last three years? 2. What 3 items of important information does the balance sheet reveal about the financial position of McDonalds Corp (MCD) over the last two years? 3. Can you identify the major sources of funding used by McDonalds Corp (MCD) from the information presented in the company's annual report? If not, how could you get this information? 4. Who is responsible for: The issuance, and the content of the company financial statements? 5. What assurance, if any, is there that the financial statements are in compliance with GAAP, and are free of material misstatements? 6. Of what use, if any, are the notes to the financial statements? Key Questions 2) What 3 items of important information does the income statement reveal about the financial performance of the company over the last three years? Income Statement % Revenue Growth Gross Profit/Revenue SG&A Expense/Revenue Operating Income/Revenue Net Income/Revenue 2020 1% 38% 29% 2019 -3% 37% 28% 2018 10% 9% 11% 5% 5% 8% 37% 27% Revenue: Should be growing over time: Not in the recession years of 2019/10 (1%, -3%). Growth is anaemic. Gross Profit: Should be a stable % of Sales Revenue. Consistent 37%-38% each of last 3 years. SG & A1 Expenses: Should be a stable % of Sales Revenue. Fairly stable, but a hint of upward creep each year. Operating Income (EBIT2): Should be a stable % of Sales Revenue. Fairly stable at about 9-11% in 2018-2020. Operating Income (EBIT3): Should be a stable % of Sales Revenue. Stable at 5% in 2019/2020. But was 8% in 2018. In sum, Example Company is surviving rather than prospering in the current recession. 1 SG&A = Selling, General, and Administrative Expenses. 2 EBIT = Earnings Before Interest and Taxes. 3 EBIT = Earnings Before Interest and Taxes. 1) What 3 items of important information does the balance sheet reveal about the financial position of the company over the last two years? Are Current Assets > Current Liabilities? Yes. Current Assets at 1/30/20 are more than $4 million and Current Liabilities are $2 million. This indicates current liquidity is fine. Is Total Stockholders' Equity > Noncurrent Liabilities? No. $1.6 million vs. $3 million. In Millions of Dollars Long-term liabilities $2,993 65.6% Stockholders' Equity $1,572 34.4% Total LT Financing $4565 100% This indicates very heavy dependence on borrowing, and questionable long-term solvency. This is known as \"leverage\" or \"gearing\" in the U.K. and excessive leverage is risky. Like excessive alcohol, leverage makes the good times better and the bad times worse. High leverage boosts the Return on Stockholders' Equity (ROE) so long as the company is profitable, but also makes the operations more risky if there is an economic downturn. Interest to debt-holders is a legal obligation and debt has fixed maturity dates, while dividends to shareholders can be easily avoided or reduced in hard economic times. Is Market Value of Total Stockholders' Equity > Book Value? Yes. Ratio is 4.76. Market Cap = $8 million, and Book Value is $1.5 million on 12/31/2019. So Example Company is a very successful company in creating value for stockholders