analysis of MCD
Liquidity Ratios
The four liquidity ratios provide an indication of McDonald’s Corporation’s ability to pay off its debt in the short term. The Cash to Assets ratio measures the corporation’s financing ability for new projects without seeking more debt or equity. From 2009 to 2011, this ratio was maintained at about .54, but fell in 2012 to .47, indicating a drop in independent financing ability.
The Current ratio measures the extent to which current assets surpass current liabilities. This ratio has fluctuated greatly in the past from 1.14 to 1.49 and as of 2012 was at 1.45, indicating that the corporation has the ability to immediately pay off its liabilities with liquidated assets but that the amount in excess is unstable. The Quick ratio measures the ability to pay off liabilities with only the more liquid assets. McDonald’s Corporation’s Quick ratio values vary with the Current ratio values, but all values from 2009 are greater than 1.0 with the 2012 value being 1.41. Therefore, the corporation would be able to pay off all its debts even its inventories could not be liquidated.
The final liquidity ratio is the Cash Interval Measure, which calculates the number of days a corporation could remain in operation without any additional revenue. This value jumped up ten days from 2009 to 2010 but has declined slightly in the next two years with the 2012 value being 38.59 days.
Long-Term Solvency Ratios
Long-term solvency ratios measure the company’s ability to pay off long-term debt comfortably. Total Debt to EBITDA measures the extent to which the total debt exceeds the cash flow. This ratio for McDonald’s Corp. has grown steadily since 2009, except for a dip in 2011, and the value was at 1.35 as of 2012, indicating that growth of total debt is out-pacing growth of cash flow.
The Total Debt to Equity ratio measures the dollar amount of debt for each dollar of equity invested. This ratio has steadily increased from .75 in 2009 to .89 in 2012, indicating that
The four liquidity ratios provide an indication of McDonald’s Corporation’s ability to pay off its debt in the short term. The Cash to Assets ratio measures the corporation’s financing ability for new projects without seeking more debt or equity. From 2009 to 2011, this ratio was maintained at about .54, but fell in 2012 to .47, indicating a drop in independent financing ability.
The Current ratio measures the extent to which current assets surpass current liabilities. This ratio has fluctuated greatly in the past from 1.14 to 1.49 and as of 2012 was at 1.45, indicating that the corporation has the ability to immediately pay off its liabilities with liquidated assets but that the amount in excess is unstable. The Quick ratio measures the ability to pay off liabilities with only the more liquid assets. McDonald’s Corporation’s Quick ratio values vary with the Current ratio values, but all values from 2009 are greater than 1.0 with the 2012 value being 1.41. Therefore, the corporation would be able to pay off all its debts even its inventories could not be liquidated.
The final liquidity ratio is the Cash Interval Measure, which calculates the number of days a corporation could remain in operation without any additional revenue. This value jumped up ten days from 2009 to 2010 but has declined slightly in the next two years with the 2012 value being 38.59 days.
Long-Term Solvency Ratios
Long-term solvency ratios measure the company’s ability to pay off long-term debt comfortably. Total Debt to EBITDA measures the extent to which the total debt exceeds the cash flow. This ratio for McDonald’s Corp. has grown steadily since 2009, except for a dip in 2011, and the value was at 1.35 as of 2012, indicating that growth of total debt is out-pacing growth of cash flow.
The Total Debt to Equity ratio measures the dollar amount of debt for each dollar of equity invested. This ratio has steadily increased from .75 in 2009 to .89 in 2012, indicating that