Overview

To prepare for your report in Project Two, you must calculate the financial ratios needed to determine your chosen business's current financial health. Once you've calculated these ratios, you will use the results to analyze the business's current financial position. This will help you make decisions about how to improve or maintain their financial health. Pay close attention to working capital management. If liquidity is an issue, think about how the company will meet its short-term obligations.

Financial information - McDonald's

(McDonalds. (2022). Financial information - McDonald's. McDonalds Financial Information. https://corporate.mcdonalds.com/corpmcd/investors/financial-information.html)

Directions

For the company you chose in the Module Two journal assignment, open the following documents:

• The balance sheet, income statement, and cash flow statement from the most recent fiscal quarter (from Mergent Online)
• The Ratios Most Recent Fiscal Qtr worksheet in the Project Two Financial Formulasworkbook below.

CURRENT RATIO (Current Assets / Current Liabilities)

TOTAL ASSET TURNOVER RATIO (Total Revenue / Total Assets)

Current Assets

Total Revenue

Current Liabilities

Total of both from being divided

Total Assets

Total of both from being divided

WORKING CAPITAL (Current Assets - Current Liabilities)

FINANCIAL LEVERAGE (Total Assets / Shareholder's Equity)

Current Assets

Total Assets

Current Liabilities

Total of both from being subtracted

Shareholder's Equity

Total of both from being divided

DEBT RATIO (Total Liabilities / Total Assets)

NET PROFIT MARGIN (Net Income / Total Revenue)

Total Liabilities

Net Income

Total Assets

Total of both from being divided

Total Revenue

Total of both from being divided

EARNINGS PER SHARE (Net Income / Weighted Average Common Shares Outstanding)

RETURN ON ASSETS (Net Income / Total Assets)

Net Income

Net Income

Shares Outstanding

Total of both from being divided

Total Assets

Total of both from being divided

PRICE EARNINGS RATIO (Share Price (end of quarter / EPS)

RETURN ON EQUITY (Net Income - Preferred Dividends / Shareholder's Equity)

Stock Price

NI - Pref. Div.

EPS

Total of both from being divided

Shareholder's Equity

Total of both from being divided

• For example, if the most recent fiscal quarter available is the third quarter in 2022, you'll compare those results to the same financial calculations from the third quarter in 2021.

Use the documents to calculate key financial ratios.

Then open the following documents:

• The balance sheet, income statement, and cash flow statement from the same fiscal quarter one year ago
• The Ratios Same Fiscal Qtr 1 Year Ago worksheet

ACCOUNTING & FINANCIAL RATIOS

CURRENT RATIO (Current Assets / Current Liabilities)

TOTAL ASSET TURNOVER RATIO (Total Revenue / Total Assets)

Current Assets

Total Revenue

Current Liabilities

Total of both from being divided

Total Assets

Total of both from being divided

WORKING CAPITAL (Current Assets - Current Liabilities)

FINANCIAL LEVERAGE (Total Assets / Shareholder's Equity)

Current Assets

Total Assets

Current Liabilities

Total of both from being subtracted

Shareholder's Equity

Total of both from being divided

DEBT RATIO (Total Liabilities / Total Assets)

NET PROFIT MARGIN (Net Income / Total Revenue)

Total Liabilities

Net Income

Total Assets

Total of both from being divided

Total Revenue

Total of both from being divided

EARNINGS PER SHARE (Net Income / Weighted Average Common Shares Outstanding)

RETURN ON ASSETS (Net Income / Total Assets)

Net Income

Net Income

Shares Outstanding

Total of both from being divided

Total Assets

Total of both from being divided

PRICE EARNINGS RATIO (Share Price (end of quarter / EPS)

RETURN ON EQUITY (Net Income - Preferred Dividends / Shareholder's Equity)

Stock Price

NI - Pref. Div.

EPS

Total of both from being divided

Shareholder's Equity

Total of both from being divided

Use the documents to calculate the same financial ratios. Finally, compare those ratios and analyze your results.

Specifically, you must address the following rubric criteria:

1. Financial Calculations. Calculate accurate financial formulas to assess the business's current financial health. Specifically, calculate the following formulas using the Ratios Most Recent Fiscal Qtr and the Ratios Same Fiscal Qtr 1 Year Ago worksheets in the Project Two Financial Formulas workbook:
   1. Working capital
   2. Current ratio
   3. Debt ratio
   4. Earnings per share
   5. Price/earnings ratio
   6. Total asset turnover ratio
   7. Financial leverage
   8. Net profit margin
   9. Return on assets
   10. Return on equity
2. Fiscal Quarter Comparison. Summarize the differences between the following:
   1. The results from your financial calculations of the most recent fiscal quarter
   2. The results of the same financial calculations of the same fiscal quarter from one year ago
      1. For example, if the most recent fiscal quarter available is the third quarter in 2022, you'll compare those results to the same financial calculations from the third quarter in 2021.
3. Comparison Analysis. Explain what your calculations and comparison show about the business's current financial health. Give examples to support your explanation for the following questions:
   1. Do the results show the business is financially healthy or unhealthy? Which results indicate this?
   2. What might be the causes of the business's financial success or failure?
   3. Is more information needed to determine the business's financial health? If so, which pieces of information might still be needed?
4. Short-Term Financing. Explain how potential short-term financing sources could help the business raise funds needed to improve its financial health. Base your response on the business's current financial information.