Financial ratio analysis is one of the best techniques for identifying and evaluating internal strengths and weaknesses. Potential investors and current shareholders look closely at firms’ financial ratios, making detailed comparisons to industry averages and to previous periods of time. Financial ratio analyses provide vital input information for developing an IFE Matrix.

Instructions

Step 1 On a separate sheet of paper, number from 1 to 20. Referring to McDonald’s income statement and balance sheet (pp. 31–32), calculate 20 financial ratios for 2008 for the company. Use Table 4-7 as a reference.

Step 2 In a second column, indicate whether you consider each ratio to be a strength, a weakness, or a neutral factor for McDonald’s.

Step 3 Go to the Web sites in Table 4-6 that calculate McDonald’s financial ratios, without your having to pay a subscription (fee) for the service. Make a copy of the ratio information provided and record the source. Report this research to your classmates and your professor.

Data from  McDonald’s income statement and balance sheet

Table 4-6

Table 4-7

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EXHIBIT 5 McDonald's Consolidated Statement of Income In millions, except per share data Years ended December 31 REVENUES Sales by Company-operated restaurants Revenues from franchised restaurants Total revenues OPERATING COSTS AND EXPENSES Company-operated restaurant expenses Food & paper Payroll & employee benefits Occupancy & other operating expenses Franchised restaurants-occupancy expenses Selling, general & administrative expenses Impairment and other charges, net Other operating (income) expense, net Total operating costs and expenses Operating income Interest expense-net of capitalized interest of $12.3, $6.9 and $5.4 Nonoperating (income) expense, net Gain on sale of investment Income from continuing operations before provision for income taxes Provision for income taxes Income from continuing operations Income from discontinued operations (net of taxes of $34.5 and $101.9) Net income 2008 $16,560.9 6,961.5 23,522.4 5,586.1 4,300.1 3,766.7 1,230.3 2,355.5 6.0 (165.2) 17,079.5 6,442.9 522.6 (77.6) (160.1) 6,158.0 1,844.8 4,313.2 $4,313.2 2007 $16,611.0 6,175.6 22,786.6 5,487.4 4,331.6 3,922.7 1,139.7 2,367.0 1,670.3 (11.1) 18,907.6 3,879.0 410.1 (103.2) 3,572.1 1,237.1 2,335.0 60.1 $2,395.1 2006 $15,402.4 5,492.8 20,895.2 5,111.8 3,991.1 3,802.2 1,058.1 2,295.7 134.2 69.1 16,462.2 4,433.0 401.9 (123.3) 4,154.4 1,288.3 2,866.1 678.1 $3,544.2