Accounting equation : Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below: Assets = Liabilities + Owners' Equity To Indicate: The type of business for the given companies.

Question

Wendy’s International, Inc., and McDonald’s Corporation, two leading fast-food chains, are classified in SIC code 5812—Eating Places. Recent results for each company, along with industry averages, follow. Wendy’s McDonald’s Industry Average Return on assets 7.7 % 9.9 % 6.4 % Return on common stockholders’equity 11.9 % 17.7 % 14.0 % Net income as a percentage of sales 7.4 % 12.7 % 2.9 % Debt-to-equity ratio 0.67 0.98 1.04 How do Wendy’s and McDonald’s compare to the industry averages? Based on your analysis, would you consider these two companies to be industry leaders? Why or why not? The industry data reported here represent Dun and Bradstreet’s industry median. Dun and Bradstreet also reports industry norms for the upper quartile (top 25%) of companies in the industry. In the top quartile, return on assets was 15.1%, return on common stockholders’ equity was 34.7%,…

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Chapter 1, Problem 1.1EX

a)

To determine

Accounting equation: Accounting equation is an accounting tool expressed in the form of equation, by creating a relationship between the resources or assets of a company, and claims on the resources by the creditors and the owners. Accounting equation is expressed as shown below:

Assets = Liabilities + Owners' Equity

To Indicate: The type of business for the given companies.

b)

To determine

To Indicate: To which company accounting equation is relevant.

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Wendy’s International, Inc., and McDonald’s Corporation, two leading fast-food chains, are classified in SIC code 5812—Eating Places. Recent results for each company, along with industry averages, follow. Wendy’s McDonald’s Industry Average Return on assets 7.7 % 9.9 % 6.4 % Return on common stockholders’equity 11.9 % 17.7 % 14.0 % Net income as a percentage of sales 7.4 % 12.7 % 2.9 % Debt-to-equity ratio 0.67 0.98 1.04 How do Wendy’s and McDonald’s compare to the industry averages? Based on your analysis, would you consider these two companies to be industry leaders? Why or why not? The industry data reported here represent Dun and Bradstreet’s industry median. Dun and Bradstreet also reports industry norms for the upper quartile (top 25%) of companies in the industry. In the top quartile, return on assets was 15.1%, return on common stockholders’ equity was 34.7%,…

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