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Mcdonald 's Is The World 's Leading Global Food Service

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McDonald’s Corp operates and franchises McDonald’s restaurants in the global restaurant industry. The restaurants are either operated by the company or by franchises that includes conventional franchises and foreign affiliates and development licensees (Bloomberg). “McDonald’s is the world’s leading global food service retailer with over 36,000 locations serving approximately 69 million customers in over 100 countries each day” (McDonalds). One of McDonald’s biggest competitors is Yum Brands that has about 41,000 restaurants in 125 countries. Over the three years, McDonald’s return on equity was lower than that of its competitor, Yum. There was a consistent downturn in McDonald’s performance as measured by return on equity but by…show more content…
The company is issuing more shares and thus distributing more profits to shareholders in comparison to Yum. In 2014, McDonald’s sales generated 17 cents of profit, while Yum earned 7.9 cents for each dollar of sales. It shows that McDonald has been keeping expenses low but because sales have also decreased, over 3 years the profit margin has reduced. Finally, with respect to fixed turnover ratio, Yum had a higher turnover in 2014 than McDonald’s. For each dollar invested in fixed assets, Yum was able to earn $2.97, while McDonald’s only earned $1.12. This implies that the management of Yum was able to operate more efficiently than its competitor, which is also apparent in the McDonald’s fall in turnover ratio in 2013. In 2014, Yum had a cash ratio of 0.61 which indicates that its cash reserve were less than that of McDonald’s who had a ratio of 0.76. Thus, the company has on hand 76 cents for each $1 of current liabilities and is more liquid to pay off its debt, but a ratio below 1 is not that strong. McDonald’s current ratio in 2014 was $1.52, which is quite strong in comparison to Yum that had a ratio of 0.68. It demonstrates that the company can easily make current debt payments and as McDonald operates in a food industry and cash flows are predictable and stable the current ratio can be below 2, which is considered a financially conservative threshold.Yum’s current ratio, on the other
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