Mcdonalds Financial Case Analysis

Sales have been increasing year over year. In terms of absolute value sales by company-operated restaurants have increased 15.89% from 2001 to 2003 (+4.16% from 2001 to 2002, +11.27% from 2002 to 2003). In addition revenues from franchised and affiliated restaurants have increased 13.47% from 2001 to 2003 (+2.01% from 2001 to 2002, +11.24% from 2002 to 2003). These increases have led to total revenues increasing 15.27% from 2001 to 2003 (+3.6% from 2001 to 2002, +11.26% from 2002 to 2003). Another item that stands out is that revenues from company operated restaurants account for roughly 75% of total revenues (74.25% in 2001, 74.65% in 2002, 74.65% in 2003), while revenues from franchised and affiliated restaurants account for about 25% of total revenues (25.75% in 2001, 25.35% in 2002, 25.35% in 2003).

Some of the major expenses that are "eating away" at profitability are food/paper expenses, payroll/employee benefits and occupancy/other operating expenses. Together these costs represent more than 63% of total revenues for all three years (63.57% in 2001, 64.3% in 2002 and 64.21% in 2003). All of these costs are related to company-operated restaurants. In contrast we can see that expenses from franchised restaurants are roughly 5% of total revenue (5.38% in 2001, 5.45% in 2002 and 5.47% in 2003).

In terms of absolute value, net income decreased by 10.09% from 2001 to 2003 (-45.41% from 2001 to 2002, +64.68% from 2002 to 2003). Looking at a common size income statement we can see net income as a percentage of total revenues was 11.01% for 2001 5.79% for 2002 and 8.58% for 2003.

In terms of absolute value, interest expense decreased by 14.24% from 2001 to 2003 (-17.31% from 2001 to 2002, +3.72% from 2002 to 2003). Looking at a common size income statement, interest expense was 3.04% for 2001, 2.42% for 2002 and 2.26% for 2003. We can see that as a percent of total revenues interest expense has declined year over year. This decline in interest...