Could you assist with these follow up questions to the last question you helped me with? My professor provided this feedback: Commenting only on part 3 ratio analysis: 1. good comments and calculations; but could a case be made that Wendy's is TOO high? Idle current assets earning nothing? Industry avg? 2.Whats industry avg of asset turnover? Who is each firm collecting its A/R from for the ACP? you and I pay cash or ccard...? 3. Whats industry avg debt ratio? Could higher debt ratio be good by taking advantage of financial leverage? Why would they want to pay off interest 16 times over? needs more explanation 4. good profit section except how do figures compare to industry avg's? Which part of Dupont should each firm focus on? Why? 5. more analysis is needed in the mkt value section; which stock is under or overvalued; what might be the reason? Could you please address the above questions regarding the attached file. Just need to add to what is already there by answering the above questions.

Financial Analysis of the McDonalds Company MCD, New York Stock Exchange One McDonald's Plaza, Oak Brook, IL 60523 (603) 623-3000 Michael Dreger Jr. PART 1, COMPANY OVERVIEW: a. Brief description of the company (one paragraph, briefly summarizing the company's business) \"McDonald's is the world's leading global food service retailer with over 36,000 locations serving approximately 69 million customers in over 100 countries each day. More than 80% of McDonald's restaurants worldwide are owned and operated by independent local business men and women\" (McDonalds.com). \"Our goal is to become customers' favorite place and way to eat and drink by serving core favorites such as our World Famous Fries, Big Mac, Quarter Pounder and Chicken McNuggets\" (McDonalds.com). b. Company history \"Since 1955, McDonalds has been proud to serve the world some of its favorite food. And along the way, we've managed not just to live history, but create it: from drive-thru restaurants to Chicken McNuggets to college credits from Hamburger U and much more. It's been quite the journey, and McDonalds promises this is just the beginningthey got their hearts set on making more history\" (McDonalds.com). c. Organization \"The power of our franchisees, suppliers and employees working together toward a common goal is what makes McDonald's the world's leading quick-service restaurant brand. Franchisees bring the spirit of entrepreneurship and commitment to communities. Suppliers are dedicated to highest levels of quality and safety. The company facilitates learning and sharing across McDonald's more than 36,000 restaurants\" (McDonalds.com). d. Main products and services \"While a global Brand, the vast majority of McDonald's restaurants - more than 80% worldwide and nearly 90% in the U.S. - are owned and operated by approximately 5,000 independent, small- and mid-sized businessmen and women. Franchisees often live in the communities they serve and are committed to making a positive impact locally - from providing good food, customer service and job opportunities, to supporting local charities and other ways of giving back\" (McDonalds.com). e. Geographic area of operations The business is managed as distinct geographic segments that include: U.S. Europe Asia/Pacific, Middle East and Africa (APMEA) Other Countries & Corporate (OCC) including Canada, Latin America and Corporate e. Recent developments McDonald's Reports Global Comparable Sales For February- March 09, 2015 McDonald's Announces Key Management Changes - February 09, 2015 Margo Georgiadis Joins McDonald's Board of Directors - January 28, 2015 PART 2, FINANCIAL OVERVIEW: a. Sales and Income Record: Sales 2008 23522 Net Income Percentage change 4313.2 2010 24075 2011 27006 2012 27567 -3.31% Percentage change 2009 22744 5.85% 12.17 % 2.08% 2013 28105. 7 1.95% 4551 5.51% 4946 8.68% 5503 11.26 % 5465 -0.69% 5585.9 2.21% COMMENTS: From the above graph it can be inferred that the company has maintained its revenue as well as net income. The revenue increased by 12.17% in 2011 as compared to previous years along with the increase in net income by 11.26% whereas in 2012 the net income decreased. As you can see in 2012 and 2013, the net income as well as revenue very slightly, and considering the industry and the competitors, we can say that McDonalds has outperformed the industry average as well as its competitors with its consistent sales and net income. The company has been able to improve on its sales as well as net income. McDonald's is one of the well-established global brands. The company's 34,480 restaurants in 119 countries have reinforced the brand identity of McDonald's. Many of its products like Big Mac, McGriddle and McMuffin are reputed fast food brands with strong customer loyalty. McDonald's products are most recognized as affordable fast food products that offer good quality. The company's brand equity can be gauged by the fact that on an average the company serves nearly 69 million customers every day. Also, McDonald's consistently ranks among the top most brands in several brand surveys. In 2013, the company was ranked among the top 10 brands in the top 100 global brands list by an industry source specializing in brand services and activities. It was also ranked among top 25 brands in the world's top 500 brands list in 2013 by an industry source specializing in brand valuation. In addition, McDonald's was featured in the list of world's most valuable brands 2013 released by a business magazine. b. Expense Distribution: Major Expenses 2013 Food and Paper Payroll and employee benefits Occupancy and other operating expenses Franchised restaurants-occupancy expenses Selling, general & administrative expenses Total operating costs and expenses 6361.3 4,824 4,393 1,624 2,386 19,589 PIE CHART OF EXPENSES, FY 2013 COMMENTS: The major expenses that the company has incurred are company operated restaurant expenses, which includes food and paper, payroll and employee benefits and occupancy, and other operating expenses. Food and paper accounts about 33% of the major expenses, followed by payroll and employee benefits, which is about 25%. Considering the industry trend, the major expenses borne by the food industry is related to food and paper, as that counts to be the major inventory of the company. b. Assets Distribution: Assets Cash Accounts receivables Goodwill Fixed Assets Other Assets 2013 2,799 1,320 2872.7 40,356 1,747.10 PIE CHART OF ASSETS, Year-end FY 2013 COMMENTS: Major investment by the company is on fixed assets, which account for about 82% of total assets. The fixed assets are important part as they help the company to manufacture and produce the food that is served to the customers. As the food items are perishable in nature, the inventory held by them is quite less; they hold a days inventory because of the spoilage of the food items. c. Capital Structure: Capital structure Current liabilities Long term liabilities Preferred stock Common stock 3170 17446.6 0 16009.7 CAPITAL STRUCTURE PIE CHART, Year-end FY 2013 COMMENTS: Considering the capital structure, debt hold the highest proportion of 56%, followed by equity i.e. 44%. Long-term debt holds 47% of the total capital structure whereas 9% is current liabilities. This states that the company is highly financed by debt. Considering the industry average, McDonalds hold debt as per the industry standards. The industry average of liabilities to assets is about 66.47% PART 3, RATIO ANALYSIS: (1) LIQUIDITY: McDonalds 2013 Current ratio Current Assets Current liabilities Wendy's 2012 1.45 2013 2.64 2012 2.47 5050.10 4922.1 3170.00 3403. 922411 349526 709827 286862 1.59 1 1.55 1.41 2.61 2.43 Current Assets - inventories 4926.40 912185 696022 Current liabilities 3170.00 4800. 4 3403. 1 349526 286862 Quick ratio Comments On McDonalds Liquidity: McDonalds has better ability to pay off its short-term obligations when compared with Wendy. The company has about 1.59 times of current assets as compared to current liabilities. The company holds very less inventory, thus the quick ratio is about 1.55 times. Thus, it can be said that the company has adequate ability to pay off its shortterm obligations but less than the ability of Wendy. (2) ASSET MANAGEMENT McDonalds 2013 Wendy's 2012 2013 2012 Total Asset turnover 76.74% 77.90% 57.01% 58.22% Sales / Revenue Total Assets 28105.7 27567 36626.3 35386.5 2487410 4363040 2505242 4303199 Average collection period Days Accounts receivable Sales / Revenue 17.14 18.21 9.23 8.91 365 1319.8 28105.7 365 1375.3 27567 365 62885 2487410 365 61164 2505242 Comments On McDonalds Asset Management: McDonalds uses its assets effectively which can be seen from its asset and inventory turnover. The company is also able to collect its receivables in 14.14 days, which states that the company's credit policy is adequate. (3) DEBT MANAGEMENT: McDonalds 2013 Wendy's 2012 2013 2012 Total Debt to total Assets 56.29% 56.78 % 55.78% 53.85% Total Debt Total assets 20616.6 20092.9 36626.3 35386.5 2433554 4363040 2317344 4303199 Times interest earned Operating income Interest expense 16.79 16.66 1.96 1.24 8764.3 521.9 8604.6 516.6 135142 69012 122747 98604 Comments On McDonalds Debt Management: Company's capital structure is highly governed by debt. Thus the company has weak capital structure because of strong emphasis on debt rather than equity. The company is able to pay off its interest expenses about 16 times which is sound ability to pay off interest and debt. (4) PROFITABILITY: McDonalds Wendy's 2013 2012 2013 2012 Net Profit margin 19.87% 19.82 % 1.83% 0.38% Net income Sales / Revenue 5585.9 28105.7 5464.8 27567 45487 2487410 9467 2505242 Return on Assets 15.25% 15.44 % 1.04% 0.22% Net Income Total Assets 5585.9 5464.8 36626.3 35386.5 45487 4363040 9467 4303199 Return on Equity 34.89% 35.73 % 2.36% 0.48% Net Income Total Equity 5585.9 5464.8 16009.7 15293.6 45487 1929486 9467 1985855 35.73 % 0.04% 0.48% Net profit margin Total Asset turnover Equity multiplier 19.87% 19.82% 15.25% 77.90% 2.29 2.31381 1.83% 1.04% 2.26 0.38% 58.22% 2.16693 Total Assets Total shareholder's equity 36626.3 35386.5 16009.7 15293.6 4363040 1929486 4303199 1985855 Du Pont 6.93% Comments On McDonalds Profitability: McDonalds shows positive sign of profitability and earns 19.87% return on income, and about 15.25% return on assets. The company has high return on equity, which shows that the company is able to give adequate return to its shareholders as well as investors. (5) MARKET VALUE RATIOS: McDonalds Wendy's 2013 2012 2013 2012 PE Ratio 17.36 16.3 79.25 243.5 Price (Market value) EPS 97.03 5.59 88.21 5.41 9.51 0.12 4.87 0.02 Market to book ratio 2.66 5.83 1.57 0.96 97.03 88.21 36.43 15.1407 9.51 6.04 4.87 5.09 Price (Market value) Price (Book value) Comments On McDonalds Market Value Ratios: The PE ratio and market to book ratio of the company is adequate which states that the company is performing adequately in market and the market prices of stock are in line with the book value. PART 4, CONCLUSIONS AND RECOMMENDATIONS McDonalds is one of the biggest fast food chains across the globe, which has successfully strived through the economic downturn and has been able to live up to the expectations of the customers. The company beats the competition of Wendy as well as Burger King. McDonalds needs to improve on its capital structure. References "Company Profile :: AboutMcDonalds.com." Company Profile :: AboutMcDonalds.com. N.p., n.d. Web. 05 June 2015. http://www.aboutmcdonalds.com/mcd/investors/company_profile.html "Our History." :: McDonalds.com. N.p., n.d. Web. 05 June 2015. http://www.mcdonalds.com/us/en/our_story/our_history.html Industry standard from: http://www.bloomberg.com/research/stocks/financials/ratios.asp?ticker=MCD