Financial Analysis of the McDonalds Company MCD 60523, Oak Brook, IL (630)-623-3000 Erin Cross PART 1, COMPANY OVERVIEW: a. Brief description of the company McDonalds is among the leading food retailers worldwide with approximately 36,000 outlets in 119 countries. McDonald's mainly sells fast foods (Busch & Bain, 2004). Due to the changing consumer tastes, the company's menu expanded to include fish, smoothies, salads, fruits and fish. Approximately 81% of McDonald's outlets worldwide are owned as franchisees. McDonalds is the second largest private employer in the world employing more than 420,000 people. b. Company history Richard and Maurice McDonald started McDonalds in 1940 as a barbecue outlet in San Bernardino, California. Today the corporation operates as one of the largest chain of fast food restaurants with 36, 535 outlets operating in 119 countries. McDonalds serves more than sixty nine million customers in a day. c. Organization McDonalds Corporation runs about 19% of the restaurants the rest are independently owned as franchisees (Vignali, 2001). The organizations structure is made up of the Chairman, CEO and COO at the top followed by various departments. d. Main products and services McDonald's mainly sells hamburgers, French fries milk shakes, desserts, chicken, soft drinks, cheese burgers and chicken (Vignali, 2001). Due to alternating consumer tastes and preferences, McDonalds added salads, smoothies, fish, wraps and fruits to their menu. The McDonalds Corporation makes money as restaurant franchiser, investor of properties and as a restaurant operator. e. Geographic area of operations McDonalds Corporation operates in Europe, America, Asia, Middle East and Africa. The most expensive Big Mac in the world is found in Switzerland with the cheapest found in India. f. Recent developments In recent news, McDonalds has plans to open their first restaurant in Kazakhstan. The corporation is also rewarding kids worldwide with an opportunity to attend the 2016 Rio Olympics opening ceremony. McDonalds also has the plan to unlock it growth potential in Asia (Vignali, 2001). PART 2, FINANCIAL OVERVIEW: a. Sales and Income Record: ------------- Fiscal Years ------------2008 2009 2010 2011 2012 -- Sales ____ -- Percent change in sales each year -- Net Income -- Percent change in ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ net income each year ____ ____ ____ ____ GRAPH OF SALES & NET INCOME, FY 2008 - 2012 -| -| -| (Plot Sales and Net Income for the -| last five fiscal years on the graph) -| -| (Recommend you prepare the graph in Excel, -| then copy and paste it into the report) -| -| -| -|--------|---------|---------|---------| 2008 2009 2010 2011 2012 COMMENTS: Comment on the trends you see in your numbers and on the graph. Be sure to include comments! The numbers and the chart are meaningless by themselves. Comment on what you see. b. Expense Distribution: FY 2012 Major Expenses: ________ (list the major expense categories ________ from the latest income statement) ________ PIE CHART OF EXPENSES, FY 2012 Note - Do not \"explode\" the pie slices COMMENTS: Comment on the company's expense distribution. c. Assets Distribution: Year-end FY 2012 Assets: Cash Accounts receivable ________ ________ Inventory Fixed Assets Other Assets ________ ________ ________ PIE CHART OF ASSETS, Year-end FY 2012 COMMENTS: Comment on the company's asset distribution. c. Capital Structure: Year-end FY 2012 Capital Structure: Current Liabilities Long-term & Other Liabilities Preferred Stock (if any) Common Equity ________ ________ ________ ________ CAPITAL STRUCTURE PIE CHART, Year-end FY 2012 COMMENTS: Comment on the company's capital structure. PART 3, RATIO ANALYSIS: (1) LIQUIDITY: FY 2011 FY 2012 ____ ____ Current Ratio: McDonalds Wendy's ____ ____ ____ ____ ____ ____ Quick Ratio: McDonalds Wendy's Comments On McDonalds Liquidity: Be sure to include comments! The numbers are meaningless by themselves. Comment on what you see. What story do the numbers tell? (2) ASSET MANAGEMENT FY 2011 FY 2012 ____ ____ ____ ____ ____ ____ ____ ____ Total Asset Turnover: McDonalds Wendy's Average Collection Period: McDonalds Wendy's Comments On McDonalds Asset Management: (3) DEBT MANAGEMENT: FY 2011 FY 2012 ____ ____ ____ ____ ____ ____ ____ ____ Total Debt to Total Assets: McDonalds Wendy's Times Interest Earned: McDonalds Wendy's Comments On McDonalds Debt Management: (4) PROFITABILITY: FY 2011 FY 2012 ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ ____ Net profit Margin: McDonalds Wendy's Return on Assets: McDonalds Wendy's Return on Equity: McDonalds Wendy's Modified Du Pont Equation, FY 2012: Net Profit Margin Total Asset Turnover Equity Multiplier McDonalds ____ ____ ____ Wendy's ____ ____ ____ Comments On McDonalds Profitability: (5) MARKET VALUE RATIOS: FY 2011 FY 2012 ____ ____ ____ ____ ____ ____ ____ ____ PE Ratio: McDonalds Wendy's Market to Book Ratio: McDonalds Wendy's Comments On McDonalds Market Value Ratios: PART 4, CONCLUSIONS AND RECOMMENDATIONS - Summarize your analysis. Review your comments in the financial analysis section and provide your assessment of the overall status of the firm. Include any recommendations you think are appropriate. - List any other recommendations you have for the firm in view of your analysis. * End of report Outline * Submit the Financial Overview portion of the case study for review here. 1. Refer to the Case Study topic lecture on the Week 3: Case Study Development page. Using the information you obtained last week, complete the Part 2, Financial Overview portion of the case study report and submit it as an attachment here. Note that your Financial Overview should contain: a. A Sales and Income Record, to include sales and net income figures for 20082012 and a graph displaying the trends. b. c. d. e. f. g. Comments on the Sales and Income Record. A list of the company's major expenses for FY 2012 and a pie chart showing the Expense Distribution. Comments on the expense distribution. A list of the company's major assets for FY 2012 and a pie chart showing the Assets Distribution. Comments on the assets distribution. A list of the company's major capital accounts for FY 2012 and a pie chart showing the Capital Structure. h. Comments on the capital structure. i. Format Use the Financial Overview portion of the Case Study Complete Outline for your report. 2. Revise your Company Overview file based on your instructor's feedback when received. 3. Refer to your online sources of information. Download and save the income statement, balance sheet, and statement of cash flows for 2012 for The Wendy Company (Wendy's). (you will need them next week for comparison to McDonalds). Once you have obtained the data, it would be a good idea to transfer it to an Excel spreadsheet. \f