Analysis of Mcdonald’s Performance
McDonald’s restaurants and franchises have achieved great fame and fortunes since their inception in 1954 by Ray Kroc. Kroc had no idea of how far and wide the business would reach, but he had the strong idea of opening multi location restaurant serving each and every person. Since then the business flourishes and in 1965 went to public by its initial public offering and by 1985 it had a place in Dow Jones Exchange. The menu of McDonald’s is not limited to hamburgers and drinks but also include coffee, salads, chicken wings and goes greater with the regional tastes.
Today McDonald’s is serving more than 68 million people in 119 countries through 33,500 restaurants about 20,000 of which are operated by the local franchisees1. McDonald’s competitors in the field of fast food chain are Pizza Hut (Yum Brands Incorporation), KFC, Taco Bell, and Long John Silver Chains. McDonald’s continued to remain at the top through its quality preference as the Annual report of the company emphasizes much focus on winning competitors through better quality. Recent times study revealed that McDonald’s and its competitors are now focusing to reach each and every customer through reliability and affordability.
Its 1 dollar menu can cherish you with adequate food at breakfast or any time you want. This paper discusses briefly about the past performance of McDonald’s Corporation. The main sources from the data collected are Annual Reports of the entity published annually at the year ended December 31. Through annual reports major financial ratios are calculated and financial performance of the entity has been analyzed. Discussion on stock performance is mainly dependent on performance of company’s stocks in New York Stock Exchange.
It has been revealed by analyzing the financial performance of the company that it has made a remarkable progress during the past years and maintained adequate financial progress. Financial Statements for the year ended December 2011 revealed that company has adequate working capital requirements. It has maintained a good sufficient amount of cash flows during the year; $ 2,387 million (during 2010) which constitutes around 55% of its total current assets, similarly in 2011 it stood at $ 2,336 million and constitutes around 53% of its total current assets.
Maintaining high liquid is always better for an organization, which indicates the ability to pay its debt more quickly. Financial Stability of McDonald’s is evident from the favorable financial ratios, these ratios advocates the success of this corporation. It has high current ratio around 1. 25 better than the industry average which stands at 1. 19. It means McDonald’s has more current asset than current liability and eventually 125% more current asset to pay its current debt/liability. Inventory turnover of McDonald’s is 20 times more than the industry average, i. . 231. 22 while industry average is 10. 52; this indicates that the management is handling sales efficiently, and inventory is sold 231 times during a financial year. It also has sustainable operating profit margin which stands at 31. 58% percent better than its competitors and industry average. It also shows a continued increasing graph operating profit margin from 17. 02% in the year 2007. It has also witnessed a 5% increase in Return on equity from 33. 80% (2010) to 38. 24% (2011), thus supporting a sustainable growth for the owners.
Analyzing stock performance of McDonald’s Corporation (MCD) also gives a better picture and increasing share value of the corporation since 2007. Stock prices of the corporation have shown a rapid increase and almost tripled since 2007. During the year 2011 the graph only witnessed a sharp increase i. e. 70. 46 in January 2011 and 98. 86 in December 2011 around $28 increase in a year advocates the stability of its performance in the stock market. By looking at the historical performance of McDonald’s one can easily go for investing in it because it has proved itself recession proof during the last 4 years.
McDonald’s above average performance summed up in the beta’s of corporation stock, 0. 44. This number indicates the stock is less dynamic and more sustainable to the market as a whole. It has fallen from 0. 77 in the year 2008 when it was declared to be more volatile. However McDonalds today also is the better option for safe investors. The company is operating in 119 countries with strong brands association and demands in general public that is why stock fluctuation is rare.
Morning Star international investment research suggest investors and prospective investors that despite having much challenging environment worldwide, more competitive prices and rapid increase in inflation, McDonald’s continues to strive and thrive for its sustainability and proved its success all the time. Morning Star is optimistic about the McDonald’s future performance and expects superior return on invested capital. They are confident because of its incredibly strong brand and generous growth opportunities internationally for McDonald’s4.
McDonald’s unique ability to adapting the culture and traditions of its operating regions make it number one choice for its customers. It celebrates Christmas in America as well as Diwali in India. In today’s corporate world like all enormous organizations, McDonald’s too will have to be aware of its customers’ demands and markets in which it operates in order to remain ahead of the current economical crisis the world faces. Though the corporation’s current economic and financial statistics suggest that it has the capability of meeting all the challenges ahead and in future it will remain the same number 1 choice for its customers.