This exercise is designed to give you experience preparing projected financial statements. Pro forma analysis is a central strategy-implementation technique because it allows managers to anticipate and evaluate the expected results of various strategy-implementation approaches.

Instructions

Step 1 Work with a classmate. Develop a 2008 projected income statement and balance sheet for McDonald’s. Assume that McDonald’s plans to raise $900 million in 2010 to begin serving Africa and plans to obtain 50 percent financing from a bank and 50 percent financing from a stock issuance. Make other assumptions as needed, and state them clearly in written form.

Step 2 Compute McDonald’s current ratio, debt-to-equity ratio, and return-on-investment ratio for 2008 and 2009. How do your 2010 projected ratios compare to the 2008 and 2009 ratios? Why is it important to make this comparison? Use http://finance.yahoo.com to obtain 2009 financial statements.

Step 3 Bring your projected statements to class, and discuss any problems or questions you encountered.

Step 4 Compare your projected statements to the statements of other students. What major differences exist between your analysis and the work of other students?