Introduction
This write-up will analyze the financial aspects of McDonald’s since the entity leads in the fast-food sector. Additionally, MacDonald’s statements are easily available. The analysis of its statement will encompass various aspects. McDonald’s is performing exceptionally. Despite the challenging financial times, the firm has registered growth annually in key items. MacDonald has encountered a tough credit market and reduced spending capability. Nonetheless, McDonald’s has managed to maintain its exceptional performance. Comparative analysis will entail evaluation of McDonald’s performance over several years. Moreover, it will evaluate the performance of the stocks. The assets of the entity have increased steadily since 2007. However, in the 2010-2011 fiscal years, the increment was higher. The upsurge in the entity’s assets will denote that the entity is expanding. However, such acquisitions may result from funds obtained from initial public offers (IPO). Nevertheless, there are minimal changes in the capital structure. Hence, the growth in assets has resulted from MacDonald’s internal resources. McDonald’s capital setup has also changed. However, this is predominantly attributable to the annual profit that the entity plows back. Other key parameters that require scrutiny are gross profits, turnover, and cash flow. The entity’s profit has improved marginally. The gross profit has increased similarly. It is imperative to analyze the gross profit since it denotes if the fundamental operations of the entity are still viable. McDonald’s is not facing any liquidity concerns. Hence, the entity has an apt cash flow since the turnover has expanded considerably. Finally, McDonald’s has fully owned subsidiaries since there is no minority interest in its statements since 2007(Investing money, 2012).
Trend analysis
This is a critical constituent of business analysis, which seeks to forecast an entity’s performance. It is imperative to note that McDonald’s has performed outstandingly in a tough economic duration. Consequently, as the economy improves, McDonald’s will continue to post outstanding results. Additionally, the accounting records reveal ever-expanding reserves. These reserves can assist in neutralizing departmental losses. Additionally, the entity may opt to make further investments to boost its turnover. The entity seems immune to a receding economy. MacDonald has an enormous gross profit. Consequently, the entity’s basic operation is viable. The above factors have set the stage for a bright future. The entity has adequate assets to finance its operations. Additionally, the assets can also meet any liquidity demands of the entity. The entity’s proportion of capital financed by debt is minimal hence; McDonald has minimum business risk.
Ratio analysis
Current ratio
McDonald’s current ratio is 1.4. This denotes an improvement from the preceding years. This means that MacDonald’s current assets exceed its current liabilities. Therefore, the entity has the capability of meeting the short-term liabilities.
Quick ratio
This denotes the capability of the entity to settle its short-term liabilities from its exceedingly liquid assets. Therefore, the calculation of this ratio excludes inventory.
Leverage ratio
This ratio seeks to determine the proportion of debt that constitutes the entire capital structure. Debt capital amplifies an entity’s risk. Consequently, it is vital to establish its proportion.
Percentages analysis
Earnings before interest and tax (EBIT) Margin
EBIT margin is 31%. This reveals the proportion of profits before the deduction of interest and tax. This percentage denotes the profitability of the entity relative to its turnover.
Earnings before interest, tax, depreciation, and amortization (EBITDA) Margin
EBITDA Margin is 35%. The ratio denotes the profitability of McDonald’s before the deduction of interest, tax, amortization, and depreciation. This indicates the operational profitability of the entity. The above discussion only contains a few of the vital ratios and percentages.
Discussion Board
Pricewaterhouse Coopers (PWC) audited Marks and Spencer Group’s accounts. The report revealed that the accounts made a fair representation of the firm. The audit entailed several subsidiaries owned by the holding firm. This audit encompassed an assortment of tests that would reveal facts about the records. The audit was in adherence to the UK’s legislation and the international accounting and auditing regulations. The audit findings revealed that the records adhered to the accounting and auditing regulations. Additionally, the records followed the statutes of the UK company law. The report concluded that the directors adopted the appropriate going concern basis. Additionally, the entity made appropriate disclosures ensuring that investors can make appropriate decisions based on published records. The auditor conducted substantive tests to verify the validity of transactions. This critical test seeks to crosscheck the paperwork supporting recorded transactions. The auditor also tests the controls of the business. The test of control establishes the reliability of records that the entity has prepared. Additionally, the auditor conducts tests that enable the sampling of documents. The auditor does not evaluate all the Marks and Spencer Group’s documents. Therefore, it is imperative to adopt an appropriate sampling technique that ensures that the auditor selects sample documents that represent the entity in a holistic manner (Marks and Spencer, 2011).
The decision of whether to hire anti-fraud services depends on specific aspects. First, it is essential to evaluate the reliability of the department. If the department can provide appropriate services that ensure the safety of investments, then it is unnecessary to hire anti-fraud security. Nonetheless, evaluating the reliability of in-house departments is tricky. Therefore, if an investor cannot evaluate the reliability of the departments, then it is crucial to hire anti-fraud services. Finally, the business practice should be within legal limits. Additionally, it is vital to ensure that owners act in good faith. As such, the proprietors should not earn abnormal profits. The above would culminate in the exploitation of the clientele. These denote a key ethical concern in the business world.
References
Investing money. (2012). McDonalds Corp. Web.
Marks and Spencer, (2011). Independent auditors’ report to the members of Marks and Spencer Group plc. Web.