McDonald's Financial Analysis and Financial Ratios

Quality Business Consultant's financial analysis expert, Paul Borosky, MBA., doctoral candidate, and published author, has created proprietary financial models to help analyze McDonald's financial performance using McDonald's summarized income statements and balance sheets for the last five years, 2016 to 2020, found in their Annual Reports and McDonald's 10ks. 

Further, our financial model also calculates over 10 popular financial ratios, such as McDonald's current ratio, return on equity, and debt ratio. This information is the basis of our financial report, "McDonald's Inc. Financial Report", where we offer insights into understanding McDonald's financial standing through insightful financial analysis.

McDonald's Financial Report and Annual Report

McDonald's 2020 Financial Report by Paul Borosky, MBA.

McDonald's Financial Report by Paul Borosky, MBA.

Hey All,

Thanks for considering my McDonald's Inc. Financial Report. In this report, you will be able to find preliminary information about McDonald's current financial performance as well as some historical track records and trends. Also, 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 ten 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 where I use plain English to explain concepts.

Sincerely,

Paul, MBA.

Learn More

Sample Report

Sample report 2
Financial Report Sample 1

McDonald's Income Statement Analysis Sample

In this section of the financial report, I walk you through a broad definition of what an income statement is and why it is important.  From this, I then discuss and define important income statement line items, such as revenues, gross profits, etc., in detail.  Finally, I offer a summary analysis of the company's important income statement line item trends.  For example,...

McDonald's Cost of Goods Sold.

McDonald’s ended 2016 with a cost of goods of $4.8 billion.  In the next four years, McDonald’s cost of goods would also decline.  However, McDonald’s cost of goods sold is declining at a faster pace as compared to revenues.  Specifically, revenues are declining by approximately 6% annually.  For the cost of goods sold, this line item is declining at a 14.7% rate annually.  This shows that the firm is taking action to reduce its raw material cost.  In doing this, even though their revenues are falling, their profits may be staying steady or even increasing.  Unfortunately, the organization can only reduce raw material costs so much before the inevitable profit decline is suffered.

McDonald's Summary Income Statement 2021

Income Statement

Column1

2021 2020 2019 2018

2017

Revenues                    23,223                    19,207                    21,364                    21,257                      22,820
COGS                      3,097                      2,564                      2,980                      3,154                        4,034
Gross Profit                    20,126                    16,643                    18,384                    17,871                      18,787
 
SG&A                      2,378                      2,245                      1,966                      1,985                        2,231
Depreciation                      1,868                      1,751                      1,617                      1,482                        1,363
R & D                            -                            -                            -                            -                             -
Other                            -                            -                            -                            -                             -
Total Operating Expenses                      9,770                      9,319                      9,026                      8,866                        9,234
EBIT                    10,356                      7,324                      9,069                      8,823                        9,553
Other Income                            -                            -                            -                            -                             -
Interest Expense                      1,186                      1,218                      1,121                         981                           921
EBT                      9,128                      6,140                      8,018                      7,816                        8,573
Taxes                      1,583                      1,410                      1,992                      1,892                        3,381
Net Income                     7,545                     4,730                     6,025                     5,924                      5,192

McDonald's Balance Sheet Analysis Sample

In this section of the financial report, I walk you through a broad definition of what a balance sheet is and why it is important.  From this, I then discuss and define important balance sheet line items, such as cash, inventory, etc., in detail.  Finally, I offer a summary analysis of the company's important balance sheet line item trends.

McDonald's Property, Plant, and Equipment

McDonald’s property, plant, and equipment ended 2016 at $21.2 billion.  In the next four years, the organization would moderately increase its property, plant, and equipment ending 2020 at $24.9 billion. 

Surprisingly, the organization’s revenues are falling while the company is taking on more property, plants, and equipment.  Usually, when organizations suffer sustained revenue losses, they try to better utilize their fixed assets by selling off underperforming assets.  McDonald’s seems to be going against the grain and adding more assets even though its revenues are declining.  Not sure this strategy makes sense.

McDonald's Summary Balance Sheet 2021

Column1

2021

2020 2019 2018

2017

Cash

                       4,709

                   3,449                       898                       866

                   2,464

Short Term Investment                              -                         -                         -                         -                         -
Account Receivable

                       1,872

                   2,110                    2,224                    2,442

                   1,976

Inventory

                            56

                        51                         50                         51

                        59

Other                              -                         -                         -                         -                         -
Current Assets

                      7,149

                 6,243                  3,557                  4,053

                 5,327

Net PPE

                     24,721

                 24,958                  24,160                  22,843

                 22,448

Goodwill

                       2,783

                   2,773                    2,677                    2,331

                   2,380

Other                         -                         -                         -                         -
Total Assets

                   53,854

               52,626                47,510                32,811

               33,804

 
Accounts Payable

                       1,007

                      741                       988                    1,208

                      925

Accrued Expense

                       1,347

                   1,138                    1,035                    1,284

                   1,425

Accrued Taxes

                          597

                      968                       578                       481

                      541

Notes Payable                         -                         -                         -
LT Debt - Current                              -

                   2,243

                        59                         -

                        -

Other                         -                         -                         -                         -
Total Current Liabilities

                       4,020

                   6,181                    3,621                    2,974

                   2,891

 
LT Debt

                     35,623

                 35,196                  34,118                  31,075

                 29,536

Other                              -                         -                         -                         -                         -
Total Liabilities

                   58,455

               44,802                39,300                26,553

               30,536

 
Common Stock

                       8,248

                   7,903                    7,653                    7,393

                   7,089

Treasury

                   (67,810)

               (67,066)                (66,328)                (61,529)

               (56,504)

Retained Earnings

                     57,535

                 53,908                  52,930                  50,487

                 48,326

Other                              -                         -                         -                         -                         -
Total Equity

                    (4,601)

                (7,824)                 (8,210)                 (6,258)

                (3,268)

Total Equity & Liability

                   53,854

               52,626                47,510                32,811

               33,804

McDonald's Financial Ratios Sample

In this section of the financial report, I walk you through definitions of various popular financial ratios, how to calculate the ratios, formulas used, etc. Also, for some popular financial ratios, I provide brief explanations of what the ratios mean as it is related to the company.

McDonald's Fixed Asset Turnover Ratio

McDonald’s fixed asset turnover ended 2016 at 1.16.  Again, in the next several years, the organization’s fixed asset turnover would continually fall, ending 2020 at .77.  It does seem like McDonald’s has a significant amount of fixed assets that are underutilized.  To mitigate this problem, divesting underutilized fixed assets is an excellent starting point.  In other words, start selling stuff that’s not being used efficiently.

McDonald's Return on Equity

McDonald’s return on equity has been negative for the last five years.  In 2016, the organization’s return on equity was -212%.  In the last four years, the organization’s return on equity would substantially improve, ending 2020 at a -60.46%. 

An important reason for the organization’s negative return on equity could be that the firm has purchased a significant amount of outstanding common stock shares over the last several years.  As a company repurchases shares from the open market, its equity position falls substantially.  In order to improve this line item, the company should lower its debt load instead of its equity position.  In other words, the company needs to stop repurchasing shares in the marketplace and focus on paying off its debt and lowering risk.

McDonald's Liquidity Ratios 2021

Ratios 2021 2020
Current Ratio

                          1.78

                   1.01

Cash Ratio

                          1.17

                   0.56

Quick Ratio

                          1.76

                   1.00

Net Working Capital

                        3,129

                      62

       
McDonald's Asset Utilization 2021
Ratios 2021 2020 2019 2018 2017
Total Asset Turnover

                          0.43

                   0.36

Fixed Asset Turnover

                          0.94

                   0.77

Days Sales Outstanding

                        31.30

                 41.18

Inventory Turnover (Using Sales)

                      435.70

               380.34

Inventory Turnover (Using COGS)

                        58.10

Accounts Receivable Turnover

                        11.66

                   8.86

Working Capital Turnover

                          7.42

               309.79

AP Turnover

                          3.55

                   2.97

Average Days Inventory

                          6.28

                   7.19

Average Days Payable

                      102.85

               123.02

     

McDonald's Profitability Ratios 2021

Ratios 2021 2020
Return on Assets

14.01%

8.99%

Return on Equity

-163.99%

Net Profit Margin

32.49%

24.63%

Gross Profit Margin

86.66%

86.65%

Operating Profit Margin

44.59%

38.13%

Basic Earning Power

19.23%

13.92%

ROCE

20.78%

15.77%

Capital Employed

                      49,834

               46,445

ROIC

27.59%

19.05%

     

McDonald's Debt Ratios 2021

Ratios 2021 2020
Debt Ratio

66.15%

71.14%

 
Debt/Equity

-774.24%

-478.51%

     
Times Interest Earned

                          8.73

                   6.01