McDonald's Financial Report and Financial Analysis: 2015 to 2019
McDonald's Financial Report and Financial Analysis started with an in-depth review of McDonald's 10k Annual report, specifically, McDonald's income statement and balance sheet.
Next Paul Borosky, MBA., summarized their financial information and input it into a proprietary financial model, which shows their income statement and balance sheet trends as well as calculations for McDonald's financial ratios, and financial ratio trends covering 5 years.
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McDonald’s stock price started 2019 at $181.96. It ended the year with a stock price of $202.62. This is a growth rate annually of 11.35%. From an investor’s perspective, this growth rate well exceeds overall market returns from other industry competitors.
McDonald’s has been consistently paying dividends over the last five years. Further, their dividend payments have been growing continuously as well. Investors should expect this growth rate to continue for your seeable future.
McDonald's Income Statement Summary
Cost of Goods Sold
McDonald’s cost of goods, as compared to revenues, was about 22% in 2015, in the next several years, their cost of goods, as a percentage of revenues, would continually decline until it reached a 14.1% ratio in 2019. This shows that the organization is taking action to improve its gross profit margin. Changes may have included better-negotiating strategies with vendors. Also, the company may be eliminating the middleman and their supply chain by developing more supply stream activities in-house. For example, the firm may be purchasing warehouses or even farms to ensure low cost for their products.
McDonald's Summary Income Statement 2019
|R & D||-||-||-||-||-|
McDonald's Balance Sheet Summary
McDonald’s inventory had fallen from $100 million in 2015 to approximately $50 million in 2019. The significant reduction in inventory could be a result of the firm's improved products ordering business models. However, a better explanation for the reduction in inventory would be that the company may be divesting or selling corporate stores and moving more towards managing franchisees.
McDonald's Summary Balance Sheet 2019
|Short Term Investment||-||-||-||-||-|
|LT Debt - Current||59||-||-||77||-|
|Total Current Liabilities||3,621||2,974||2,891||4,849||9,643|
|Total Equity & Liability||47,510||32,811||33,804||31,024||37,939|
McDonald's Financial Ratio Summary and Analysis
McDonald’s quick ratio had ranged from 1.82 in 2017 to .97 in 2019. A .97 quick ratio shows that the firm has sufficient liquid assets to cover its current liabilities, regardless of inventory count. However, in the restaurant industry, inventory turns over relatively quickly. This only adds an additional layer of solvency for the organization.
Days Sales Outstanding
McDonald’s days' sales outstanding ended 2015 at 18.6. In the next several years, their days' sales outstanding would grow to 38.5. This shows that most of the expansion within the organization has come from franchises opening stores as compared to corporate-owned expansion. As this strategic trend increases, investors should expect the company’s days sales outstanding to increase as well. However, with an improved Accounts Receivable strategic models, the company may be able to reach an optimal 30 day days sales outstanding point.
Net Profit Margin
McDonald’s net profit margin ended 2015 at 17.8%. In the next several years, the firm would systematically improve their net profit margin to 28.6% in 2019. The main reason for the improved net profit margin is the organization’s cost-cutting measures, specifically in their cost of goods and operational activities. Unfortunately, though, the company’s net profit margin cannot grow too much more without substantial revenue growth. Cost-cutting measures can only improve net profit margin so far without correlated revenue growth.
McDonald's Liquidity Ratios 2019
|Net Working Capital||234||386|
|McDonald's Asset Utilization 2019|
|Total Asset Turnover||0.44||0.64|
|Fixed Asset Turnover||0.87||0.92|
|Days Sales Outstanding||38.52||42.39|
|Accounts Receivable Turnover||9.48||8.61|
|Working Capital Turnover||90.07||54.50|
|Average Days Inventory||1.15||1.13|
|Average Days Payable||0.06||0.05|
McDonald's Profitability Ratios 2019
|Return on Assets||12.68%||18.05%|
|Return on Equity||-73.39%||-94.66%|
|Net Profit Margin||28.59%||28.18%|
|Gross Profit Margin||85.86%||85.00%|
|Operating Profit Margin||43.03%||41.96%|
|Basic Earning Power||19.09%||26.89%|
McDonald's Long-term Debt 2019
|Times Interest Earned||8.09||8.99|