A detailed financial analysis was performed on McDonald's Corporation. The analysis found that McDonald's Corporation remains the premier player in the fast food industry on a global basis. The company, however, is showing signs of slowing growth, which could mean that either the company or the industry is entering the mature stage of the life-cycle. It might also be true that both the company and the industry are entering the mature stage of the life-cycle. There are actions that company management can take to improve return on equity (such as reducing the level of the company's fixed assets); however, a maturation process in either the industry or the company environment may indicate that McDonald's will become a better income investment than its is a growth investment.
McDonald's is the world's largest fast-food chain in terms of both revenues and restaurants. The company operates in 121 countries. Most of the company's restaurants are free-standing facilities; however, the company also operates mini-restaurants in Wal-Mart, Chevron gasoline stations/stores, and at other sites. The company also owns and operates Donatos Pizza chain and the Boston Market chain.
Analysis of Financial Trends, Future Expectations, and Ratio Analysis
The trend in revenues was steadily upward over the entire five-year period (1997-2001) of analysis. Gross profit also trended upward over the entire period of analysis. EBITDA, EBIT, EBT, and net income, however, all trended downward. This performance indicates that the company's non-operating costs are increasing at a faster rate than are its revenues. This issue is one that requires the attention of the company's management.
The calculations of the company's capital requirements are exceptionally high. The reason is the company's high level of fixed assets in relation to sales revenues, a situation that does not characterize the fast food industry as a whole. McDonald's management ...