BUS 3360- The goal of this assignment is to expand your understanding

BUS 3360- The goal of this assignment is to expand your understanding

Subject: Business    / Finance   
Question

Question:

The goal of this assignment is to expand your understanding of the uses of financial statement information. This project is based on the information provided in Ch. 4. We will examine the financial performance of McDonald's and one of its competitors. You will need to select a competitor.

Obtain financial statements and market data (current stock price, number of shares outstanding) for the two companies from its Hoover's dataset (easy and available through the library website), company's website, finance.yahoo.com, money.msn.com, SEC.gov, or Edgar (also easy and available through the library website).

Calculate following ratios and measures for McDonald's and the company you selected and compare them to the industry ratios. McDonald's is usually classified as a quick service restaurant, but depending on the competitor you pick, you may be able to justify another industry classification. Here are the ratios that you will need to calculate:

    Performance measures:
        Market value added (MVA)
        Market-to-book ratio
    Economic value added and profitability measures:
        EVA
        Return on capital (ROC)
        Return on assets (ROA)
        Return on equity (ROE)
    Measuring efficiency—asset management or turnover measures:
        Assets turnover
        Fixed assets turnover
        Inventory turnover
        Average days in inventory
        Receivables turnover
        Average collection period
    Analyzing the return on assets
        Profit margin
        Operating profit margin
        The DuPont system
    Measuring financial leverage—long-term solvency measures
        Long-term debt ratio
        Long-term debt-equity ratio
        Total debt ratio
        Times interest earned
        Cash coverage ratio
    Measuring liquidity—short-term solvency or liquidity measures
        NWC to total assets ratio
        Current ratio
        Quick ratio
        Cash ratio
    Growth measures:
        Payout ratio
        Sustainable growth

For each ratio, comment on how it would be viewed relative to the competitor or industry. You cannot just say that a ratio is higher than average or lower than average; you must explain WHAT the ratio means and WHY the value would be viewed either positively or negatively.

For example, suppose you calculate the inventory turnover ratio. How would you interpret the ratio? How dos your company compare to the industry averages for this ratio? Is it better to have higher or lower inventory turnover in this industry or does it not matter so much?

You will need to find cost of capital for the McDonald's industry to calculate EVA. This is the link to the dataset with different industries' costs of capital (WACC):

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/wacc.htm

Deliverables:

Provide submit a report in Excel on Moodle with financial statements and all formulas in a following format:

Performance Measure or Ratio
    

McDonald's
    

Competitor
    

Industry Average Comment

Performance Measures:

MVA

Market-to-Book Ratio

Economic Value Added and Profitability Measures: