the following table show financial ratios of McDonalds & Burger King during the years 2020 - 2021 - 2022

answer what you can of the following questions.

Liquidity

1. Look at the current ratio and the quick (acid-test) ratio of the firm. What trends do you notice over 2018-20, and what does this suggest about firm's liquidity? How does firm's liquidity in 2020 compare with the industry average
2. Now study the accounts receivables turnover and inventory turnover of the firm. What do these patterns suggest about the firm's conversion of accounts receivable and inventories to cash?
3. Considering your answers to the two questions above, what is your overall assessment of the firm's liquidity position? What two major factors account for your assessment?

Asset Management

• What is your assessment of the way the firm is managing its assets? Pay attention to both trends and industry averages.

Financing of Assets

• What is your assessment of the way the firm is financing its assets? Pay attention to both trends and industry averages. What is the relationship between the total debt ratio and times interest earned as these relate to the firm? And is there any other possible explanation (outside of the firm's financial statements) for the observed trend in times interest earned?

Profitability

1. What can you say about the firm's operating profit margin and pre-tax net profit margin? Explain any patterns observed.
2. How are the firm's pre-tax net profit margin, total asset turnover, and total debt ratio affecting the firm's pre-tax return on assets (ROA) and return on equity (ROE)? What is your overall assessment of the firm's profitability, including its earnings per share (EPS)?

Cash Flow

• Referring to the firm's statement of cash flow for 2019 and 2020, assess firm's cash flow situation noting both inflows and outflows?

Bankruptcy and manipulation

• using Altman and Beneish models, do you think the companies might face bankruptcy or they are manipulating their financial information.

Overall Evaluation

1. Based on your answers to the questions above, what is your overall evaluation of the firm's financial condition? (Pull all your analysis together in answering this question.)
2. What is the market's assessment of the firm's financial condition? Explain. Does the market's assessment confirm or refute your analysis?
3. Based on your evaluation of the firm and the market's assessment of the firm, would you accept employment with the company? Explain.

TABLES FOR REFERENCE

Mcdonalds (2020-2021-2022)

Financial Ratios
	2022		2021		2020
Firm liquidity
Current ratio	1.42663265		1.7782338		1.0100304
Quick or Acid-test ratio	1.23584335		1.6372139		0.8994046
Asset Management
Accounts receivables turnover	10.9610402		12.402745		9.1019286
Inventory turnover	191.834615		191.41547		185.04305
Fixed assets turnover	1.21532034		1.1018333		0.8625896
Total assets turnover	0.45964755		0.4332113		0.3649813
Financing decisions
Total debt ratio (%)	1.119031		1.0858293		1.1486866
Times interest earned	8.57050539		8.3257716		5.9161809
Profitability
Operating profit margin (%)	0.4462226		0.4251278		0.3751861
Net profit margin (%) [before tax]	0.26646709		0.3249034		0.2462802
Return on assets (%) [before tax]	0.12248095		0.1407519		0.0898877
Return on equity (%) [before tax]	-1.0289836		-1.639904		-0.604544
Market Value
Price-earnings ratio	idk		idk		idk
Market-to-book ratio	-5		-6.742382		-3.498051

Burger King (2020-2021-2022)

Financial Ratios
	2022		2021		2020
Firm liquidity
Current ratio	0.9678639		0.9669862		1.4141162
Quick or Acid-test ratio	0.846881		0.8700745		1.3091818
Asset Management
Accounts receivables turnover	10.594463		10.491773		9.2686567
Inventory turnover	29.37594		34.802083		22.270833
Fixed assets turnover	2.1454485		1.8132701		1.5607917
Total assets turnover	0.2859843		0.2468812		0.2181148
Financing decisions
Total debt ratio (%)	0.8123626		0.8342511		0.8366334
Times interest earned	3.7954972		3.809901		3.1299213
Profitability
Operating profit margin (%)	0.3109915		0.33525		0.3200483
Net profit margin (%) [before tax]	0.1549577		0.1460185		0.0978261
Return on assets (%) [before tax]	0.0443155		0.0360492		0.0213373
Return on equity (%) [before tax]	0.2361762		0.2174929		0.1306101
Market Value
Price-earnings ratio	idk		idk		idk
Market-to-book ratio	3.5937207		3.9327797		3.9140016

Answer rating: 100% (QA)

ANSWER McDonalds Financial Analysis Liquidity Current Ratio McDonalds current ratio decreased from 2019 to 2020 but increased significantly in 2021 This suggests a fluctuating liquidity position possi... View the full answer