Mcdonald's Across Time Case Study

Evaluate the profitability of McDonald across time.

McDonald Corporation’s average return on total assets is 14.97% during the 3-year period, with slight decrease in 2013 and notable decrease in 2014. The gross margin remains stable and the average is 66.20%. The average profit margin ratio is 28.39%, with a sharp decline from 29.38% to 26.19% respectively. These two ratios reflect the profitability of McDonald’s.
The figures indicate that McDonald’s Corporation’s ability of making profits out of assets is weakening, but it still remains at a high level. McDonald’s Corporation still enjoys a high profitability over time.
Evaluate the profitability of Yum across time.

Yum! Brands, Inc.’s average return on total assets during the 3-year

Both ratios of McDonald’s Corporation are larger than 1, showing a more fluid liquidity with current assets and quick assets both exceeding the amount of current liabilities. In contrast, ratios of Yum are both less than 1, indicating a limited ability to pay short-term liabilities which may cause difficulty in paying short-term debts. McDonald’s Corporation also behaves stable and has an increasing trend with respect to future development, while Yum shows a decreasing trend. This fact is a reminder for Yum to adopt some cautious actions to lower its future

Yum has a high account receivable turnover which decreased by 12.77% from 40.32 to 35.17 in the period. Its collecting method is not as aggressive as before, but this may increase total sales because of the more liberal credit terms.
Its inventory turnover was decreasing from 13.22 to 12.36. The available inventory amount is not controlled as well as before.
The total assets turnover decreased in 2013 but increased again in 2014. This may show that Yum first met problems and applied proper methods to raise the efficiency in using assets in 2014.
Compare the efficiency of McDonald against Yum. Yum has a much higher accounts receivable turnover than McDonald’s (Yum’s 35.17 & McDonald’s 14.34 in 2014). Yum is more efficient in collection but the ratio may be too high. Its restrictive credit terms may explain its little growth of sales. And the lower ratio guides McDonald’s to apply more aggressive collection efforts.
McDonald’s inventory turnover is about three times of Yum’s (Yum’s 52.46 & McDonald’s 12.36 in 2014), indicating McDonald’s more efficient inventory management. But the ratio may be so high that its sales dropped in 2014. Yum should improve its inventory