Ratio Analysis Paper

Ratio Analysis Paper - Zach Holland 11137169 11/22/11...

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Zach Holland 11137169 11/22/11 Ration Analysis Paper Liquidity A company’s ability to pay its liabilities when they are due. (Short-term liabilities) -As shown by the data McDonalds with a 1.55:1 ratio will be able to pay off their short- term obligations while Yum! will have trouble paying off their obligations with a .94:1 ratio. This is because Yum! does not have a very liquid cash flow with most of their assets invested in capital. McDonald’s collections of receivables is also more efficient with a turnover ratio of 21.5 while Yum!’s turnover ratio is 4.58. These numbers make McDonald’s collection period almost 5 times shorter than Yum!’s collection period. Both being in the fast-food industry explains why companies have a very low number of days in inventory. Yum! has a 6 day inventory turnover while McDonald’s has inventory for slightly less than 2 days. Solvency How much a company’s assets exceed their liabilities. (Long-term liabilities) -The debt to total asset ratio for McDonalds is 54% while Yum! has a ratio of 81%.
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Ratio Analysis Paper - Zach Holland 11137169 11/22/11...

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