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Chapter4 Analysis Of Financial Statements
Chapter4 Analysis Of Financial Statements
Methods of financial statement analysis: ratio analysis, vertical analysis, and horizontal analysis
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McDonald's & Wendy's Financial Statement Comparison Financial Statement Analysis Project The two companies that I will be comparing in this project are McDonalds and Wendys. Both of these companies are competitors in the same industry. I am using the information from their 2005 Financial Statements. Debt-to-Assets Ratio When comparing the debt-to-assets ratio of McDonalds and Wendys, you have to divide the firms total liabilities by their total assets. Essentially, the debt-to-assets ratio is the primary indicator of the firms debt management. As the ratio increases or decreases, it indicates the firms changing reliance on borrowed resources. The lower the ratio the more efficient the firm will be able to liquidate its assets if operations were discontinued, and debts needed to be collected. In 2005 Wendy's had $2,076,043 worth in total assets and $846,264 in total liabilities. When divided, Wendys has the lower ratio of the two competitors at 40%. This means that they would take losses of 40% if operations were shut down, and the cash received from valuable assets would still be sufficient to pay off the entire debt. It also means that 40% of Wendys assets are made through debt. McDonalds in 2005 had $12,545.3 (in millions) of total liabilities and $22,534.5 (in millions) of total assets. After doing the math, McDonalds ends up with a ratio of 56% which is higher than Wendys by sixteen percent. This means that there is more default on McDonalds liabilities, which can be a costly event from lenders perspective. McDonalds makes 56% of all its assets through debt. In reality, its not good to have a debt-to-assets ratio over 50%. Its also not good to have a debt-to-assets ratio that is too low because... ... middle of paper ... ... likely to have more investors. After comparing the two firms as an investor I would invest in McDonalds. Based on McDonalds debt-to-assets ratio, I believe that McDonalds is actively using all its assets to maximize profits. As an investor McDonalds stock is also cheaper and gives a greater return. Wendys isn't far behind and seems like a firm with economic success and great debt management, but with the money in my pocket I would use it on McDonalds. References Bourdette, D. (2003). Campground Data - Appraisal. Retrieved Dec. 7, 2005, from Dale Bourdette: http://www.campground-data.com/library.html Hoevel, A. (2005, July 15). Luxury camping: roughing it the easy way. CNN News. Retrieved December 4, 2005, from http://www.cnn.com/2003/travel/07/15/sprj.st03 Mabee, Y. (2004, May). Accounting for a marina/resort. Management Accounting, 11. 50-53.
Net working capital represents organization’s operating liquidity. In order to compute the net working capital, total current assets are divided from total current liabilities. When there is sufficient excess of current assets over current liabilities, an organization might be considered sufficiently liquid. Another ratio that helps in assessing the operating liquidity of as company is a current ratio. The ratio is calculated by dividing the total current assets over total current liabilities. When the current ratio is high, the organization has enough of current assets to pay for the liabilities. Yet, another mean of calculating the organization’s debt-paying ability is the debt ratio. To calculate the ratio, total liabilities are divided by total assets. The computation gives information on what proportion of organization’s assets is financed by a debt, and what is the entity’s ability to pay for current and long term liabilities. Lower debt ratio is better, because the low liabilities require low debt payments. To be able to lend money, an organization’s current ratio has to fall above a certain level, also the debt ratio cannot rise above a certain threshold. Otherwise, the entity will not be able to lend money or will have to pay high penalties. The following steps can be undertaken by a company to keep the debt ratio within normal
We compared the two companies in a variety of ways. To start, we will give a brief background
I chose to analyze the third largest retail drugstore chain in the United States, Rite Aid Corporation. I chose to analyze Rite Aid Corp. because our family owns approximately 1200 shares and we have taken quite a loss on our investment. We are in the process of deciding whether or not we should sell our stock. Additionally, my Mother has been a pharmacist at Rite Aid Corp for 11 years and she often pays close attention to the financial stability of the company. We both feel that when you are employed by a corporation, that the corporation should be financially stable. A financially secure employer is one who generally offers better compensation and advancement to its employees.
Yahoo! Finance (2014, January 31). MCD Competitors | McDonald's Corporation Common S Stock - Yahoo! Finance. Retrieved January 21, 2014, from http://finance.yahoo.com/q/co?s=MCD
Apple’s debt to equity ratio is not very high compared to the industry average of 2.23. The Debt to Equity Ratio of 2014 is 1.08, in which the normal ratio should be less than 1. This ratio of 1.08 shows that the company is financing more assets with debt than equity. In spite
Look at the Financial Review/5 year summary. Profile an analysis of the performance of each company from their 5 year summaries. Assess the operations of each company by store growth, product range, types of stores etc.
Each competitor 's current ratio, quick ratio, and cash ratio are able to be found in this exhibit for the year ended in 2015. McDonald’s currently has a cash ratio of 0.76, a quick ratio of 1.20, and a 1.52. Starbucks has a cash ratio of 0.44, a quick ratio of 0.64, and a current ratio of 1.19. Finally, the Dunkin Brand Group Inc. has a cash ratio of 0.59, a quick ratio of 0.74, and a current ratio of 1.25. When looking at these ratios one is able to find that compared to its competitors, Starbucks is less liquid than McDonald 's and Dunkin Brand Group
Kodak’s debt ratio has been improving since 2012 when it was considerably above 1. Their 2014 debt ratio is 0.89, which is very close to Hewlett-Packard and Sony. The debt-to-equity ratio of Kodak is the first signal within the ratios that the company is not performing well. Generally, this ratio should be below 1 and for Kodak in 2014 it was 8.83. Their equity is almost non-existent and this is signaling very weak balance sheet strength. Compared to Kodak, Hewlett-Packard and Sony are doing okay, but their ratios are both well above 1. In terms of ability to pay interest, Kodak’s only strong year was 2013. Their ratio has dipped in 2014, showing that they aren’t able to pay their interest or are struggling to pay it. Hewlett-Packard had no interest expense in their latest fiscal year and Sony’s ratio is very strong. In 2012, Kodak’s free cash flow was in the negatives (-$1,176,000). Surprisingly, it reached over two million in 2013, but then dropped to only $33,000 in 2014. Without sufficient cash flow, Kodak is going to have a difficult time increasing their shareholder value. Hewlett-Packard has free cash flow over five million dollars which is huge compared to Kodak. Kodak does not seem to have sufficient cash to handle their business obligations. The cash flow adequacy ratio should be above 1, but Kodak’s are negative. The competitors are around 0.5 for their cash flow adequacy ratio, which
...rs, setting a good trend for the corporation. They also have a very low debt-to-equity ratio, indicating that they have enough equity to easily pay off any funds acquired from creditors. As a creditor I would feel safe in lending them funds for any future projects or endeavors.
Industry – According to IBIS World’s Campgrounds & RV Parks Market Research Report, camping is a five billion dollar a year industry with stable growth expected in the next five years especially with the growing retiree population. Then, The American Camper Report indicates that 2.5 million people went camping in 2011 spending a total of 534.9 million days camping (The Outdoor Foundation, 6). However, when looking at the future of camping, fifty-five percent of campers say that the biggest challenge to camping is finding the time to get away (The Outdoor Foundation, 58). Also, the camping industry has a high turnover rate of sixteen percent meaning that current campers are stopping; however, there are more new campers trying it for the first time to still get an increase of over two million campers in 2010-2011 (The Outdoor Foundation, 10).
Each year, America’s travel and tourism industry generates approximately $1.5 trillion dollars in economic output, or about 2.6% of the country’s gross domestic product (Select USA, 2016). Nearly 20% of this economic activity is directly related to accommodations, which serve the short term lodging needs of pleasure and business travelers. Unlike other American economic sectors, this lodging industry is a highly fragmented, diversified market with an incredible variety of suppliers. Temporary overnight lodging can range from undeveloped campsites, hostels, and capsule hotels all the way up to mansions and incredibly luxurious five store hotels. Price ranges run the gamut from just a few dollars a night to thousands of
Ratios traditionally measure the most important factors such as liquidity, solvency and profitability, as well as other measures of solvency. Different studies have found various ratios to be the most efficient indicators of solvency. Studies of ratio analysis began in the 1930’s, with several studies of the concluding that firms with the potential to file bankruptcy all exhibited different ratios than those companies that were financially sound. Among the study’s findings were that the deciding factor of the predictor of bankruptcy should not be only a few ratios, as the measure of a company’s financial solvency may differ as the firm’s situations differ. The important question is to which ratios are to be used and of those ratios chosen, which ratios are given priority weight.
There are many things you can converse about when comparing these two topics. The first topic to compare is the price of the food at each restaurant. All in all, Mcdonald’s is cheaper than Burger King in several ways. Mcdonald’s
The companies I have selected for this assignment is Malaysia Steel Works (KL) Bhd (5098) and Kossan Rubber Industries Bhd. (7153), both of the company is from industrial products sector and its share is traded in main market.
McDonald’s restaurant was founded by two brothers, Richard and Maurice (Dick and Mac) McDonald, in 1940. They initially opened the restaurant under the name McDonald’s Barbeque which was located in San Bernardino, California. The McDonald brothers had a vision of a drive-in restaurant that focused on quality food and good service. They served a simple menu consisting of 20-25, mainly barbeque, items. In 1948 after eight years of operations the McDonald 's brothers discovered that the majority of their revenue was coming from hamburgers. With this in mind, they decided to change the menu and set their focus mainly on hamburgers. They also changed the name of the restaurant to simply “McDonald’s” and adopted an assembly line approach in the production process. After continued