Security Analysis of 10k Form Of McDonalds - Assignment Example

Security analysis of 10K form of McDonalds (MCD) This analysis of the famous McDonald’s Corporation or in short the McDonald’s, is to demonstrate the research, judgment, and process used in building a recommendation on the McDonald’s stock. This security analysis will comprise a corporate history and life cycle scrutiny including the demographic trends as depicted in the 10k form. Industry forces along with competition are also put into analysis. This analysis will focus on security and the return on equity of the corporation its utility as a measure of the basis for growth. The Projected future and growth rate of income, required rate of return, and the Intrinsic Value is also put into analysis. The rundown and overall outcome of the review of the analysis of the 10K form will be used to create a conclusion for recommendations and professional opinion. This security analysis and explanation is solely supposed to be appealing and informative. It can be of particular value to any investor looking forward to use this analysis as a decision making instrument for their own or others dealings with the company. In addition to this they can also do their own research plus due diligent away from this analysis (Graham and Dodds 144). Analysis The McDonald's company (NYSE: MCD) is undisputed the world's largest chain of hamburger and fast food restaurants. The company serves around 68 million consumers daily in over 119 countries. The company’s headquartered is located in the United States, the corporation started in 1940 as a mere barbecue restaurant that was at that time being operated by Richard and Maurice McDonald. In the year 1948, Richard and Maurice reorganized their commerce as hamburger joint using known production line principles. Another important occasion that ensued was when businessperson Ray Kroc joined the business as a grant agent in the year 1955. He consequently purchased the chain of the fast food outlets from Ray and Maurice McDonald and he eventually oversaw its global growth. A franchisee, an affiliate, or the company itself runs a normal McDonald’s eatery. McDonald's company income comes from the rental fees, royalties, and the various fees paid by the numerous franchisees. Other revenue comes from sales in company-operated cafes. In 2012, astonishingly McDonald's company had total annual income of 27.5 billion dollars, and net profits of 5.5 billion dollars. McDonald's mainly sells hamburgers, chicken, cheeseburgers, French fries, breakfast grabs, soft drinks, desserts and milkshakes. In response to the ever-changing consumer tastes and interests, the corporation has extended its menu to comprise salads, wraps, fish, smoothies, and fruits. McDonald's cafes are found in over 118 countries and territories allover the globe and serve about 68 million consumers each day. McDonalds Company runs over 34,000 outlets globally, employing over 1.7 million people in 118 countries. The corporation also runs other restaurant trademarks like Piles Cafe (Mieth 14). Concentrating on its nucleus brand, McDonald's started advertising itself of other production chains it had attained during the 1990s. The corporation possessed a majority stake in the Chipotle Mexican Grill up until late 2006, when the McDonald’s fully withdrew their investment from Chipotle Grill through the stock exchange. The company until December 2003, was owning Donators Pizza and on August 27 in 2007, McDonald's company sold Boston Market to the Sun Capital Partners (Mieth 44). Outstandingly, McDonald's has amplified shareholder dividends for 26 successive years. this makes the company one of the infamous S&P 500 Dividend Aristocrats. In October 2012, unfortunately its total monthly sales dwindled for the first time in more than nine years. Regarding the 10K form of the company, we can examine many financial rudiments. McDonald's Financial Analysis In a nation, where the fast food business is huge and where the obesity rates are shockingly sky rocking it is quite interesting to observe if the menus obtainable by the yellow and the orange clown in addition making people fa and obese are also making the investors’ wallets increase in size (Doyle 34). McDonald’s (MCD) company has many competitors and threats in the fast food business but it is considered a boss in its zone and throughout this analysis, it will be discussed if this corporation is a good financial investments destination based on the business financial results. By calculating and computing different financial parameters and managerial ratios then it will be determined if it gives the best menu to the important hungry investor (Doyle 43-45). Opening with the Net income of the corporation, the company seems to be doing quite well. Net income 2012 2011 2010 In Millions $ 5,465 $ 5,503 $ 4,946 As evident, we can note that there is an overall increase in income over the past three years. The following is a six year financial summery and data from the McDonalds. Cash provided by operations in 2012 was $ 6,966 in 2011 it was 7,150 in 2010 it was 6,342 in 2009 it was 5,751 in 2008 it was 5,917 and in 2007 it was 4,876. Focusing on the cash used for investing activities in 2012 it was $ 3,167 in 2011 it was 2,571 in 2010 it was 2,056 in 2009 it was 1,655 in 2008 it was 1,625 and in 2007 it was 1,150. Also equally important is the Capital expenditures of which they were $ 3,049 in 2012 , 2,730 in 2011, 2,135 in 2010, 1,952 in 2009, 2,136 in 2008 and 1,947 in 2007. The cash used for financing activities, were $ 3,850 in 2012, 4,533 in 2011, 3,729 in 2010, 4,421 in 2009, 4,115 in 2008, 3,996 in 2007. The treasury stock purchases were $ 2,605 in 2012, 3,373 in 2011, 2,648 in 2010, 2,854 in 2009, 3,981 in 2008, and 3,949 in 2007. The common stock cash dividends of the company were $ 2,897 in 2012, 2,610 in 2011, 2,408 in 2010, 2,235 in 2009, 1,823 in 2008, and 1,766 in 2007. From the above analysis, we can note that the company's financial position has improved nicely. If we focus on the data above we can comfortably advice an investment in the McDonald Company. It can be misleading if we rely only in the information on expenditure and profit ratios to make long term conclusions. Another important financial matter to consider in this analysis is the amount of money the company uses in its investment activities. The cash that is dedicated in investment activities shows the company's willingness to expand and explore the market. This figure also reflects the organizations concern in customer’s tastes and interests (Graham and Dodds 128). The following is a short breakdown of the corporation’s financial data on investment activities. Common stock dividends (2,896.6 in 2012) (2,609.7 in 2011) (2,408.1 in 2010) Proceeds attained from stock option exercises 328.6 in 2012, 334.0 in 2011 and 463.1 in 2010 Excess tax benefit that is based o compensation 142.3 in 2012, 112.5 in 2011, and 128.7 in 2010. Other expenditures on investment are (13.6 in 2012) (10.6 in 2011) (1.3 in 2010) Another crucial area to investigate in coming up with the security analysis is the debt condition of a company. The debt ratio of the McDonald's Company is significant in giving investors an outlook of the financial stability of the entire corporation. The debt situation gives the investors the confidence in dealing with the company (Graham and Dodds 144). Asset and capital management ratio of a companyt also shows that the company assets can sufficiently manage the companys debts. This ratio also shows the management capabilities of the company. The ratio can efficiently be used in the creation of profits. An analysis of the McDonalds company stock also shows that the stock has been demonstrating strong performance in the business market for the last thirty years (Graham and Dodd 52). Works Cited Doyle, Joseph J. Mcdonald's Corporation. S.l.: Smith, Barney & Co, 1975. Print. Mieth, Heike. The History of Mcdonald's. Mu?nchen: GRIN Verlag, 2007. Internet resource. Graham, Benjamin, David L. Dodd, Sidney Cottle, Roger F. Murray, and Frank E. Block. Graham and Dodd's Security Analysis. New York: McGraw-Hill, 1988. Print. Read More