The following ratios for McDonald's Corporation and its competitor YUM Brands, Inc., (the owner of KFC, Pizza Hut, and Taco Bell) were obtained from reuters.com/finance. Compare the two companies based on the following ratios:
Ratio McDonald's YUM
Debt-to-Assets......... 0.54............ 0.80
Asset Turnover Ratio.. 0.76 ............1.47
Net Profit Margin.... 20.55%........ 10.21%
Required:
1. Which company appears to rely more on debt than stockholders' equity for financing?
Describe the ratio that you used to reach this decision, and explain what the ratio means.
2. Which company appears to use its assets more efficiently? Describe the ratio that you used to reach this decision, and explain what the ratio means.
3. Which company appears to better control its expenses? Describe the ratio that you used to reach this decision, and explain what the ratio means.