McDonalds Financial Statements and Financial Ratios Analyzed from 2015 to 2019
Hey All,
Thanks for visiting my McDonald’s Financial Report page. On this page, you will be able to find preliminary information about McDonald’s current financial performance as well as some historical track records and trends.
For a more detailed examination of McDonald’s financial performance, please check out the "Financial Report". In this report, written by myself, Paul Borosky, MBA., Doctoral Candidate, and published author, you will find:
- Summarized income statement for the last 5 years.
- Summarized balance sheet for the last 5 years.
- Summary analysis by myself of important income statement, balance sheet, and financial ratio trends and other happenings.
- Five year’s worth of over twenty common financial ratios presented with formulas, calculations, and analysis tips for each ratio.
- Line by line description, explanation, and analysis tip for most financial statement line items and financial ratios.
- Professional financial analysis tips provided in each section to help YOU conduct your OWN financial analysis!
- Each section includes an “in other words” segment. This is were I use plain English to explain concepts.
Enjoy the preliminary information and for a more detailed analysis, buy the financial report!
Sincerely,
Paul MBA.
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Sample Financial Report
McDonald's Company Summary From 2015 to 2019
McDonald's sells several food products, soft drinks, coffees, and other thirst-quenchers. The quick-service restaurant services both breakfast and lunch menu items. As of 2019, the company runs over 37,000 establishments, including over 35,000 franchised-owned quick-service operations.
The firm was founded in 1940. Their headquarters is in Chicago, Illinois. In the last several years, the company has been moving toward a healthier menu due to customer demand and governmental pressures.
McDonald's Financial Report Sources
"McDonald's 2019 Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” was written by, Paul Borosky, MBA., doctoral candidate, and owner of Quality Business Plan. In this summarized book, the author researched McDonald's 10k, McDonald's 2019 10k annual report, McDonald's 2016 10k annual report, McDonald's 2015 10k annual report, and McDonald's 2019 10k annual report as the basis for information gathering. Once all of McDonald's 10k annual statements were collected, the author then inserted McDonald's income statement information and McDonald's balance sheet information into a customized financial template.
Section 1: McDonald's Income Statement Analyzed 2015 to 2019
In this section, I walk through a broad definition as to what an income statement is and why it is important. From this, I then discuss and define income statement line items, such as revenues, gross profits, etc. in detail. After each line item is defined and discussed, I finally offer a summary analysis of McDonald's important income statement line item trends from 2015 to 2019, in most cases.
Revenue Growth: McDonald’s ended 2015 with $25.4 billion in revenues. As of 2019, the revenue flow decreased to approximately $21 billion. Further, this decrease has been steady over the last five years. This indicates that the organization is losing market share to competitors. Also, this may indicate that consumer trends are shifting away from unhealthy foods to more healthy choices. To mitigate continued revenue losses, the firm needs to reevaluate their target market needs and better align its menu selection with those needs.
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 |
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| Column1 | 2019 | 2018 | 2017 | 2016 | 2015 |
| Revenues | 21,076 | 21,025 | 22,820 | 24,621 | 25,413 |
| COGS | 2,980 | 3,154 | 4,034 | 4,897 | 5,552 |
| Gross Profit | 18,096 | 17,871 | 18,787 | 19,724 | 19,861 |
| SG&A | 2,229 | 2,200 | 2,231 | 2,384 | 2,434 |
| Depreciation | 1,617 | 1,482 | 1,363 | 1,516 | 1,555 |
| R & D | - | - | - | - | - |
| Other | - | - | - | - | - |
| Operating Expenses | 12,006 | 12,020 | 13,267 | 16,877 | 18,267 |
| EBIT | 9,069 | 8,823 | 9,553 | 7,745 | 7,145 |
| Other Income | - | - | - | - | - |
| Interest Expense | 1,121 | 981 | 921 | 884 | 638 |
| EBT | 8,018 | 7,816 | 8,573 | 6,866 | 6,556 |
| Taxes | 1,992 | 1,892 | 3,381 | 2,179 | 2,026 |
| Net Income | 6,025 | 5,924 | 5,192 | 4,687 | 4,529 |
Section 2: McDonald's Balance Sheet Analyzed from 2015 to 2019
For McDonald's balance sheet, I again go through each important line item from the balance sheet. In reviewing each line item, I will define McDonald's balance sheet line item, such as cash, property, plant and equipment, and liabilities between 2015 to 2019. Next, I then offer an analysis of Apple’s balance sheet line item.
Cash: McDonald’s cash position has fallen from $7.6 billion in $2015 to $898 million in 2019. There are a few possible reasons for the reduction in the cash position. First, the company may be exploiting its ability to generate cash flows from its restaurants on a continuous basis. These cash flows will enable the firm to pay its debt as it comes due. From this, having a lower cash balance may be a smart strategic move. A second reason for the reduced cash position could be that the firm is actually running out of cash because of their costs and lack of revenue growth. If I were a betting man, I would say their cash position reduction was more due to a strategic plan as compared to liquidity issues.
Accounts Receivable: In 2015, McDonald’s had an Accounts Receivable of $1.3 billion. Or 5.1% of sales. In the next several years, their Accounts Receivable would expand to $2.2 billion, or 10.6% of sales. One possible reason for the significant increase in accounts receivable is that the firm is using more franchises as compared to opening corporate restaurants. In doing this, the organization may need to wait for royalty payments and restaurant supply payments from their franchisees.
McDonald's Summary Balance Sheet 2019 |
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| Column1 | 2019 | 2018 | 2017 | 2016 | 2015 |
| Cash | 898 | 866 | 2,464 | 1,223 | 7,686 |
| Short Term Investment | - | - | - | - | - |
| Account Receivable | 2,224 | 2,442 | 1,976 | 1,474 | 1,299 |
| Inventory | 50 | 51 | 59 | 59 | 100 |
| Other | - | - | - | - | - |
| Current Assets | 3,557 | 4,053 | 5,327 | 4,849 | 9,643 |
| Net PPE | 24,160 | 22,843 | 22,448 | 21,258 | 23,118 |
| Goodwill | 2,677 | 2,331 | 2,380 | 2,337 | 2,516 |
| Other | - | - | - | - | - |
| Total Assets | 47,510 | 32,811 | 33,804 | 31,024 | 37,939 |
| Accounts Payable | 988 | 1,208 | 925 | 756 | 875 |
| Accrued Expense | 1,372 | 1,284 | 1,425 | 481 | 1,612 |
| Accrued Taxes | 578 | 481 | 541 | 534 | 464 |
| Notes Payable | - | - | - | ||
| LT Debt - Current | 59 | - | - | 77 | - |
| Other | - | - | - | - | - |
| Total Current Liabilities | 3,621 | 2,974 | 2,891 | 4,849 | 9,643 |
| LT Debt | 34,118 | 31,075 | 29,536 | 25,879 | 24,122 |
| Other | - | - | - | - | - |
| Total Liabilities | 39,300 | 26,553 | 30,536 | 28,820 | 30,851 |
| Common Stock | 7,653 | 7,393 | 7,089 | 6,775 | 6,550 |
| Treasury | (66,328) | (61,529) | (56,504) | (52,109) | (41,177) |
| Retained Earnings | 52,930 | 50,487 | 48,326 | 46,223 | 44,595 |
| Other | - | - | - | - | - |
| Total Equity | (8,210) | (6,258) | (3,268) | (2,204) | 7,088 |
| Total Equity & Liability | 47,510 | 32,811 | 33,804 | 31,024 | 37,939 |
Section 3: McDonald's Financial Ratio Summary From 2015 to 2019
For this section, I have chosen several different financial ratios to review for McDonald's Inc from 2015 to 2019. In reviewing each of McDonald’s financial ratios, I first start with defining the financial ratio. Next, I supply the financial formula for calculating the specific ratio. Finally, I offer a brief analysis of McDonald's Important Financial ratios.
McDonald’s Current Ratio
Current Ratio: McDonald’s current ratio ended in 2015 at 1.0. In the realm of finance, a 1.0 current ratio is the optimal position to have. This shows that the company has enough current assets to cover its current liabilities in the next 12 months. In the next three years, their current ratio would increase to approximately 1.36. This shows that the firm has a bit too much current assets as compared to current liabilities. Fortunately, in 2019, the firm would reduce its current ratio to .98. In reviewing other organizations with significant cash flow such as McDonald’s, investors should expect the current ratio to decline over the next several years. By declining their current ratio, the company will be able to better utilize some current assets for investments, expansion, or even possible acquisitions.
McDonald's Total Asset Turnover
Total Asset Turnover: McDonald’s total asset turnover ended 2015 at .67. In the next two years, their total asset turnover would increase to .79 and then fall to .68. This shows that the firm improved its asset utilization. However, in the next two years, their total asset turnover would fall to .44 in 2019. This indicates that the company is significantly underutilizing all assets in their company. To mitigate this issue, the firm needs to sell some fixed assets that are underperforming.
McDonald's Return on Assets
Return on Assets: McDonald’s return on assets would end 2015 at 11.94%. In the next four years, the company would improve its return on assets to approximately 18%. This shows that the firm is making more money on a continuous basis with assets employed. However, in 2019, the return on assets would fall to 12.7%. If this negative trend continues, then the firm needs to examine opportunities for selling underperforming assets like underperforming restaurants or even land or building holdings.
McDonald's Debt Ratio
Debt Ratio: McDonald’s debt ratio ended 2015 at 63.6%. Over the next several years, the organization would peak with its debt at 94.7% in 2018. In 2019 though, the organization did reduce its debt load to 71.8%. As a mature company, the organization is expected to have significant debt. This helps the company drive up its return on equity. However, with the debt ratio of 71%, this is well above industry standards. Because of this, the firm should take continuous action to reduce its debt load to a more manageable level.
McDonald's Liquidity Ratios 2019 |
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| Ratios | 2019 | 2018 | 2017 | 2016 | 2015 |
| Current Ratio | 0.98 | 1.36 | |||
| Cash Ratio | 0.25 | 0.29 | |||
| Quick Ratio | 0.97 | 1.35 | |||
| Net Working Capital | 234 | 386 | |||
| McDonald's Asset Utilization 2019 | |||||
| Ratios | 2019 | 2018 | 2017 | 2016 | 2015 |
| Total Asset Turnover | 0.44 | 0.64 | |||
| Fixed Asset Turnover | 0.87 | 0.92 | |||
| Days Sales Outstanding | 38.52 | 42.39 | |||
| Inventory Turnover | 421.52 | 411.45 | |||
| Accounts Receivable Turnover | 9.48 | 8.61 | |||
| Working Capital Turnover | 90.07 | 54.50 | |||
| AP Turnover | 21.33 | 17.41 | |||
| Average Days Inventory | 1.15 | 1.13 | |||
| Average Days Payable | 0.06 | 0.05 | |||
McDonald's Profitability Ratios 2019 |
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| Ratios | 2019 | 2018 | 2017 | 2016 | 2015 |
| 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% | |||
| ROCE | 20.66% | 29.57% | |||
| Capital Employed | 43,889 | 29,838 | |||
| ROIC | 27.94% | 28.79% | |||
McDonald's Long-term Debt 2019 |
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| Ratios | 2019 | 2018 | 2017 | 2016 | 2015 |
| Debt Ratio | 71.81% | 94.71% | |||
| Debt/Equity | -415.57% | -496.54% | |||
| Times Interest Earned | 8.09 | 8.99 | |||