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Ratios McDonalds - Return on Assets = 4,946.3/31,975.2 =...

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Valerie Bodden10-0014 and Xavier Baquero 10-0126 Analysis of Financial Statements Tuesday, July 5 th , 2011 Professor Shindell McDonalds Ratio Analysis for 2010 (in millions) Liquidity Ratios: Current Ratio = Current Assets/Current Liabilities Current Ratio = 4,368.5/2,924.7 = 1.49 Having ratio of over 1, means that the company is not running risk, which is beneficial for creditors and investors. Quick Ratio = (Current Assets-Inventory)/Current Liabilities Quick Ratio = (4368.5 – 109.9)/2,924.7 = 1.45 No major difference with the current ratio, it the company suffers a major issue now, they would quickly be able to cover their losses and debts. Sales to Working Capital = Sales/(Current Asset – Current Liabilities) Sales to Working Capital = 24,074.6/(4,368.5-2,942.7) = 16.88 This number that the corporation needs a large amount of cash, which is 16.88 million dollars, in order to mantain this level of sales. Profitability Ratios:
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Return on Assets = Net Income/Total Assets
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Unformatted text preview: Return on Assets = 4,946.3/31,975.2 = 0.154 Because McDonald’s is a corporation of high investments, then this is reflected with a low ROA. Return on Equity = Net Income/Shareholder Equity Return of Equity = 4,946.3/14,634.2 = 0.337 McDonald’s Co. has a desirable ROE, which would attract investors, since it is over 20%. In this case is it over 33%. Common Share Dividend Yield = Dividend per Share/Share Price Dividend Yield = 2.26/84.99 = 0.026 This number does not inspire great increase in dividends for the future. Financial Leverage: Gross Profit Margin = Gross Income/Sales Gross Profit Margin = 0.78 Prior to this year, the company experienced a drop, meaning that they received less profit per every dollar sold. Net Profit Margin = Net Income/Sales Net Profit Margin = 0.21 These values have remained stable during the last 3 years, leaving the company with almost the same amount of profit....
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