The following ratios were computed using 1997 financial statements for McDonald's Corporation. Also included, are ratios...

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The following ratios were computed using 1997 financial statements for McDonald's Corporation. Also included, are ratios for the industry in the same year. Use this information to comment on McDonald's key areas of performance. Performance Ratios Area Liquidity Operating Profitability Financing Decisions Current ratio Acid-test ratio liabilities Average collection Accounts period Inventory turnover Operating profit margin Return on asset Current asset/current liability (Current asset- inventory)/current Total asset turnover Fixed asset turnover Return on equity Debt ratio Times interest earned receivable/daily credit sales COGS/inventory Operating income/sales Operating income/total assets Sales / total assets Sales/ fixed assets Net income/ common equity Total debt/ total assets McDonald's Industry .38 .36 15.3 days 24.3% 15.3% .63 .77 92 times/yr 35 18.3% 51% Operating income / 7.22 interest .70 29 .40 6.5 days times/yr 6.1% 11.6% 92 1.9 3.2 12.78% 69% 3.3 The following ratios were computed using 1997 financial statements for McDonald's Corporation. Also included, are ratios for the industry in the same year. Use this information to comment on McDonald's key areas of performance. Performance Ratios Area Liquidity Operating Profitability Financing Decisions Current ratio Acid-test ratio liabilities Average collection Accounts period Inventory turnover Operating profit margin Return on asset Current asset/current liability (Current asset- inventory)/current Total asset turnover Fixed asset turnover Return on equity Debt ratio Times interest earned receivable/daily credit sales COGS/inventory Operating income/sales Operating income/total assets Sales / total assets Sales/ fixed assets Net income/ common equity Total debt/ total assets McDonald's Industry .38 .36 15.3 days 24.3% 15.3% .63 .77 92 times/yr 35 18.3% 51% Operating income / 7.22 interest .70 29 .40 6.5 days times/yr 6.1% 11.6% 92 1.9 3.2 12.78% 69% 3.3

Answer rating: 100% (QA)

Liquidity Ratios Current Ratio McDonalds current ratio of 038 is below the industry average of 070 This means that McDonalds has less current assets t... View the full answer