McDonalds Financial Position

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1. Introduction

In this report I will analyze financial position of MacDonald’s, one of the leading foodservice retailers in the  world.The  aim  of  the  analyses  is  to  assess  the  firm’s  ability  to  meet  it’s  long-­‐term  and  short-­‐term obligations, whether it uses its assets efficiently and effectively, can it produce proper profits for shareholders or does it have enough power to retain sustainability on the competitive market. Also to find out what is firm’s position on the market and in the whole industry, what improvements have been done comparing to previous years? What is the trend for the future? Etc.

There are several ratios that can be used to analyze questions mentioned above, including:

• Profitability ratios;

• Efficiency ratios;
• Leverage and coverage ratios
• Liquidity ratios
• Return ratios

I have chosen to highlight 16 important financial ratios that bring up specific company’s strengths and weaknesses ;

The ratios will be analyzed over 3 year period and compared with one of the direct competitors, with Burger King as well as with the industry.

1. Company profile

Having unique strategy and business model v in fast-­‐food, McDonald’s has gained competitive advantage and captured the main share of the market pie. Today it manages 35,000 local restaurants in more than 100 countries and serves about 70mln people each day.

Main products of McDonald’s are: hamburgers, cheeseburgers, French fries, soft drinks, milkshakes, deserts, salads, fruits and etc. Taking into account local consumers tastes and preferences there are various menus for different geographical segments.

McDonald’s runs its business through franchise, subsidiary or corporation itself. It generates  revenue from several sources: rent from property, fees from franchising, and sales from operating restaurants. Most of the Mcdonald’s restaurants are operated through franchise and joint ventures and small amount is owned by the corporation directly.

McDonald’s has unique business model. It not only gets fees from franchising, but also rents out it’s property where McDonald’s franchises operate. Mcdonald’s supplies its franchises with food and materials by means of third parties, without directly selling them by itself.

McDonald’s operates in service sector in restaurant industry. It’s main direct competitors are: Burger King Worldwide, Inc.; Yum! Brands, Inc.; Wendy's International, Inc. and etc.

McDonald’s strategic positioning on the market is based on implementation  of  low  cost  strategy  and  family friendly and customer focused business model. It is oriented on cutting costs and reducing the delivery  time.  To  achieve  the  main  goals  McDonald’s  has  introduced  different  services  like  “Drive-­‐ through service”, playgrounds to meet family friendly idea and etc.