PROJECT ON FINANCIAL STATEMENT

ANALYSIS
Case Study : McDonalds company
MBA 4 th FINANCE

GROUP MEMBER( I ):

AJAB KHAN
SHUKRI YUSUF

MCDONALD'S IN PAKISTAN

McDonald's

Pakistan opened its doors in September

1998 at Lahore and presently operating in six major cities
with a network of 20 restaurants.

McDonald's Pakistan has an aggressive plan to

expand in all other cities of Pakistan and is rapidly
growing with the focus to provide friendly and quick
service restaurant experience to our customers.

McDonald's a Global Phenomenon

Formed in 1954, McDonald's brand is the leading global

foodservice retailer with more than 3,000 local
restaurants serving nearly 50 million people in more than
120 countries each day.
Our rich history began with the founder Ray Kroc's vision
and his commitment, transformed in our talented
executives, and will keep the shine on McDonald's
arches for years to come.

OBJECTIVE OF THIS ANALYSIS

To analyze the internal and external
activities of the company .
To analyze the financial strength of the
company .
To compare with other competitors.
To give a suitable financial strategy ,and as
a credit manager deciding further dealings
with this company.

Perspective
Lend more money or not (credit
manager).
Investment would be beneficial or not
in this company (stake holder).
Existence and future of this company
toward Govt ,employees and other
general public.

MCDONALDS BALANCE SHEET FOR THE PERIOD OF

DEC 2005,2006,2007
Assets

Dec07

Dec06

Dec05

Cash

1,981.3

2,136.4

4,260.4

Net Receivables

1,053.8

904.2

795.9

Inventories

125.3

149.0

147.0

Other Current Assets

421.5

435.7

646.4

Total Current Assets

3,581.9

3,625.3

5,849.7

Net Fixed Assets

20,984.7

20,845.7

19,908.0

Other Non current Assets

4,825.1

4,552.8

4,231.1

Total Assets

29,391.7

29,023.8

29,988.8

Dec 07

Dec 06

Dec 05

Accounts Payable

3,634.0

2,739.0

3,377.6

Short-Term Debt

864.5

17.7

658.7

CurrentLiabilities

4,498.5

3,008.1

4,036.3

Long-Term Debt

7,310.0

8,416.5

8,937.4

Other Non current

Liabilities

2,303.4

2,140.9

1,869.0

TotalLiabilities

14,111.9

13,565.5

14,842.7

Common Stock Equity

15,279.8

15,458.3

15,146.1

TotalEquity

15,279.8

15,458.3

15,146.1

Liabilitiesand
Shareholder's
Equity

McDonalds Income Statement For The Period Of 2005,2006,2007

Dec07

Dec06

Dec05

Revenue

22,786.6

21,586.4

20,460.2

Cost of Goods
Sold

9,819.0

14,602.1

14,136.0

Gross Profit

12,967.6

6,984.3

6,324.2

Gross Profit
Margin

56.9%

32.4%

30.9%

SG&A Expense

7,990.1

1,289.3

1,053.1

Depreciation &
Amortization

1,214.1

1,249.9

1,249.5

Operating Income

3,763.4

4,445.1

4,021.6

Operating Margin

16.5%

20.6%

19.7%

Non operating
Income

103.2

123.3

36.1

Non operating
Expenses

410.1

402.0

356.1

Income Before
Taxes

3,572.1

4,166.4

3,701.6

Income Taxes

1,237.1

1,293.4

1,099.4

Net Income After

Taxes

2,335.0

2,873.0

2,602.2

Ratio Analysis for the year

(2005,2006,and 2007)
Ratios:

2005

2006

2007

Debt to Equity
Receivable turn Over
Inventory turn Over
Payable Turn Over
Asset turn Over
Net Profit Margin
Return On Investment
Return On Equity

0.63
26time
96time
------0.7
12.7%
8.7%
17%

0.55
24time
98time
0.4time
0.74
13%
10%
19%

0.53
22time
78time
0.4time
0.78
10%
8%
15%

CASH DISBURSEMENT
(DEC2008)

Total Cash Receipt (6%)

COGS Average)

2005

2006 2007 2008

20460.2

21586.4 22786.6 24153.80

14136.0

14602.1 9819.0

12852.47

CASH DISBURSEMENT FOR

Account Payables
Non Operating Expense
Income Tax (31%EBT)
Long Term Debt
Total Disbursement
Projected Net Cash Flow
Add Opening Balance
Ending Cash Balance

3377.6

2739.0

3634.0

3186.8

36.1

123.3

103.2

88.52

1099.4

1293.4

1237.1

1182.14

8937.4

8416.5

7310.0

6203.5

13450.5

12572.2 12284.3 10660.96

7009.7

9014.2

10502.3 13492.84

4260.4

216.4

1981.3

11270.1

11150.6 12483.6 15315.64

1822.80

Projected Income Statement (Dec2008)

Items

2005

2006

2007

2008

Net
Revenue(5.6%Growth)

20460.2

21584.4

22786.6

24062.65

COGS (Average)

14136.0

14602.1

9819.0

12852.47

Gross Profit

6324.2

6982.3

12967.6

11210.18

Non Operating
Expense

36.1

123.3

103.2

88.52

Depreciation Expense

1249.5

1249.9

1214.1

1237.8

IBT

5038.6

5609.1

11650.3

9883.86

Income Tax

1099.4

1293.4

1237.1

1182.14

Net Income

3939.2

4315.7

10413.2

8701.72

FORECASTED BALANCE SHEET FOR 2008

ASSETS

2005

2006

2007

2008

Cash and cash equivalents

11270.1

11150.6

12483.6

15315.64

Account Receivables (16.55%)

795.9

904.2

1053.8

1228.20

Inventories (average)

147

149

125.3

140.43

Other assets

646.4

435.7

421.5

414.5

TOTAL CURRENT ASSET

12857.4

12639.5

14084.2

17098.77

Net fixed asset ( 0.666% )

19908.0

20845.7

20984.7

21124.45

TOTAL ASSET

32767.4

33485.2

35068.9

38223.22

Account payables

3377.6

2739.0

3634.0

3186.8

Short term debt

658.7

17.7

864.5

513.63

TOTAL CURRENT LIABILITY

4036.3

2756.7

4498.5

3700.43

Long term debt

8937.4

8416.5

7310.0

6203.5

Non current liabilities (7.5%)

1869.0

2140.9

2303.4

2465.9

TOTAL LIABILITY

14842.7

13314.1

14111.9

12369.83

TOTAL EQUITY

15146.1

15458.3

15279.8

15294.7

LIABILITY AND EQUITY

CDONALDS CASH FLOW FOR THE PERIOD OF 2005, 2006, 2007

Dec 07

Dec 06

Dec 05

In Millions of USD (except for per share items)

Net Income/Starting Line

2,395.10

3,544.20

2,602.20

Depreciation/Depletion

1,214.10

1,249.90

1,249.50

Deferred Taxes

-39.10

33.40

-31.60

Non-Cash Items

1,342.40

-322.80

104.40

Changes in Working Capital

-36.20

-163.20

412.30

Cash from Operating Activities

4,876.30

4,341.50

4,336.80

Capital Expenditures

-1,946.60

-1,741.90

-1,606.80

Other Investing Cash Flow Items, Total

796.50

467.80

-211.00

Cash from Investing Activities

-1,150.10

-1,274.10

-1,817.80

Financing Cash Flow Items

2.10

5.00

105.40

Total Cash Dividends Paid

-1,765.60

-1,216.50

-842.00

Issuance (Retirement) of Stock, Net

-2,805.40

-1,983.70

-433.90

Issuance (Retirement) of Debt, Net

572.60

-2,264.70

1,612.30

Cash from Financing Activities

-3,996.30

-5,459.90

441.80

Foreign Exchange Effects

123.30

267.60

-80.20

Net Change in Cash

-146.80

-2,124.90

2,880.60

Cash Interest Paid, Supplemental

392.70

430.30

390.30

Cash Taxes Paid, Supplemental

1,436.20

1,528.50

795.10

Whose food do Americans really

like best?

Best-tasting food?

Best-tasting
burgers?

Wendys
Burger King
McDonalds

Burger King
Wendys
McDonalds

* Percent of respondents

36%*
32%
21%

42%
32%
17%

Income Trends
Returns
20.0%

17.7%

18.0%
16.0%
14.0%
12.0%

14.7%
13.0%
12.3%

16.6%
14.6%

14.7%

14.4%

10.2%

10.0%

9.1%

8.0%

6.7%

6.0%

4.5%

4.0%
2.0%
0.0%
1994
2003

1995
2004
Revenue

1996
2005
Net Income

Profit margin

1997
2006

Stock Price
$100

$84

$80

$63
$50

$60
$40

$48

$58

$20
$2005

2006
McDonald's Growth

2007
S&P Industry Growth

1997 Competitor Financial

Comparison

Comparison
Financial

Growth Rates
%

Compan
y

Industr
y

S&P

1.15

Sales (Qtr vs. year

ago qtr)

6.20

7.30

12.50

1.0

1.2

Net Income (YTD vs

YTD)

213.4
0

129.6
0

15.30

0.9

0.8

1.0

Net Income (Qtr vs.

year ago qtr)

18.70

-0.70

6.20

31.1

22.6

58.6

8.14

9.28

13.44

2.2

4.5

3.7

Net Income (5-Year

Annual Avg.)

18.67

13.34

19.30

11.71

10.13

20.27

Dividends (5-Year
Annual Avg.)

44.27

29.49

12.23

Compan
y

Industr
y

S&P

Debt/Equity
Ratio

0.76

2.07

Current
Ratio

1.0

Quick Ratio

Conditio
n

Interest
Coverag
e
Leverage
Ratio
Book
Value/Sh
are

50
0

Sales (5-Year
Annual Avg.)

50
0

CONCLUSION OF THE
ANALYSIS:

McDonald commenced their business in 1954, and they are running 3000
local restaurant in more than 120 countries, with major products like
hamburger, cheeseburger, chicken products and other breakfast items. Our
main objective was to analyze financial strength of the company in view of
his stakeholders. For This purpose we have analyzed some key financial
activities, which are very important in judging the performance of any
company. In ratio analysis we found fluctuations in different dimensions,
some of them are in favor and some are against.
Balance sheet and income statement of McDonald having healthy figures,
but in comparing McDonald with its competitors we found very low
performance of this company. We forecasted some statements for this
corporation on the basis of information.
CONSEQUENTLY: As a credit manager our credit policy divided in two
ways:
Generally the company is performing well according to its financial activities,
so we can extend our credit policy to this company.
But if we compare this with common industry or its competitors , then We
will not prefer to extend our credit policy further.

RECOMMENDATIONS
Extension of business is required as
compare to the market.
Increase in product line to gain more
revenue is concentrated.
Concentration is also required on the
quality of its products.
Decrease in debt would be beneficial
for this company.