Perform a Financial Ratio Analysis for McDonald’s

Full Answer Section

     

1. Calculate the following ratios using the spreadsheet:
   • Current ratio: Current assets / Current liabilities
   • Quick ratio: (Cash + Marketable securities + Accounts receivable) / Current liabilities
   • Total debt to equity ratio: Total debt / Total equity
   • Return on equity: Net income / Total equity
   • Return on assets: Net income / Total assets
   • Net profit margin: Net income / Revenue
   • Gross profit margin: (Revenue - Cost of goods sold) / Revenue
   • Operating margin: (Revenue - Cost of goods sold - Operating expenses) / Revenue

Step 3: Develop an IFE Matrix for McDonald's

Internal factors	Weight	Rating	Weighted score
Strengths
Strong brand recognition	0.20	5	1.00
Global reach	0.15	5	0.75
Efficient supply chain	0.15	4	0.60
Loyal customer base	0.10	5	0.50
Financial strength	0.10	4	0.40
Weaknesses
High reliance on franchising	0.15	3	0.45
Rising costs of food and labor	0.15	4	0.60
Competition from other fast food restaurants	0.10	4	0.40
Negative publicity related to unhealthy food	0.10	3	0.30
Slow growth in mature markets	0.10	3	0.30

drive_spreadsheetExport to Sheets Total weighted score: 4.30 Strategies to capitalize on strengths:

• Expand into new markets
• Develop new products and services
• Invest in marketing and advertising to maintain brand recognition
• Continue to improve supply chain efficiency
• Reward customer loyalty

Strategies to improve on weaknesses:

• Reduce reliance on franchising
• Find ways to reduce costs of food and labor
• Differentiate McDonald's from other fast food restaurants
• Address negative publicity related to unhealthy food
• Focus on growth in emerging markets

McDonald's has a number of strengths, including strong brand recognition, global reach, an efficient supply chain, a loyal customer base, and financial strength. However, the company also has some weaknesses, such as its high reliance on franchising, rising costs of food and labor, competition from other fast food restaurants, negative publicity related to unhealthy food, and slow growth in mature markets. McDonald's can capitalize on its strengths by expanding into new markets, developing new products and services, investing in marketing and advertising, continuing to improve supply chain efficiency, and rewarding customer loyalty. To improve on its weaknesses, McDonald's can reduce its reliance on franchising, find ways to reduce costs of food and labor, differentiate itself from other fast food restaurants, address negative publicity related to unhealthy food, and focus on growth in emerging markets.  

Sample Solution

     

Step 1: Find McDonald's financial ratios

Step 2: Convert McDonald's financial statements into the template format

To convert McDonald's financial statements into the template format, you will need to:

1. Create a spreadsheet with the following columns:
   • Account
   • Current year
   • Prior year
2. Enter the following information into the spreadsheet:
   • Account: Enter the name of each account from McDonald's financial statements.
   • Current year: Enter the value of each account from McDonald's current year financial statements.
   • Prior year: Enter the value of each account from McDonald's prior year financial statements.