Financial statement analysis and common stock valuation

Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
Quarterly Data

Liabilities and stockholders’ equity components shown as percentage of total liabilities and stockholders’ equity.

Common-Size Balance Sheet: Assets
Quarterly Data

Assets components shown as percentage of total assets.

Analysis of Debt

• Total Debt (Carrying Amount)
• Total Debt (Fair Value)
• Weighted-average Interest Rate on Debt
• Interest Costs Incurred
• Adjusted Interest Coverage Ratio

Analysis of Liquidity Ratios

Measures the adequacy of McDonald’s Corp. cash resources to meet its near-term cash obligations.

• Liquidity Ratios (Summary)
• Current Ratio
• Quick Ratio
• Cash Ratio

Analysis of Short-term (Operating) Activity Ratios

Evaluates revenues and output generated by the McDonald’s Corp. assets. Operating performance ratios describe the relationship between the McDonald’s Corp. level of operations and the assets needed to sustain operating activities.

• Short-term Activity Ratios (Summary)
• Inventory Turnover
• Receivables Turnover
• Payables Turnover
• Working Capital Turnover
• Average Inventory Processing Period
• Average Receivable Collection Period
• Operating Cycle
• Average Payables Payment Period
• Cash Conversion Cycle

Present Value of Free Cash Flow to Equity (FCFE)

The FCFE valuation approach estimates the value of equity as the present value of future FCFE discounted at the required rate of return on equity.

• Intrinsic Stock Value (Valuation Summary)
• Required Rate of Return (r)
• FCFE Growth Rate (g)

Analysis of Revenues

• Revenues as Reported

Capital Asset Pricing Model (CAPM)

CAPM is a theory concentrated with deriving the expected rates of return on risky assets based on the assets’ systematic risk levels. Systematic risk is the variability of returns that is due to macroeconomic factors that affect all risky assets. It cannot be eliminated by diversification.

• Rates of Return
• Variance and Covariance
• Systematic Risk (β) Estimation
• Expected Rate of Return

Enterprise Value to FCFF (EV/FCFF)

Free cash flow to the firm is the cash flow available to the McDonald’s Corp. suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made.

• Free Cash Flow to The Firm (FCFF)
• Interest Paid, Net of Tax
• EV to FCFF Ratio, Current
• EV to FCFF Ratio, Historical

Income Statement

The income statement (statement of earnings) reports on the performance of McDonald’s Corp., the result of its operating activities.

Analysis of Reportable Segments

McDonald’s Corp. operates in 3 segments: U.S.; International Operated Markets; and International Developmental Licensed Markets & Corporate.

• Segment Profit Margin
• Segment Return on Assets (Segment ROA)
• Segment Asset Turnover
• Segment Capital Expenditures to Depreciation
• Revenues
• Operating income
• Assets
• Capital expenditures
• Depreciation and amortization

Balance Sheet: Assets

The assets reports major classes and amounts of resources owned or controlled by McDonald’s Corp..