Subject: Financial ManagementLecturer: Professor BradleyMember:

Nguyen Minh NguyenQuach Tieu Yen

Nguyen Thi Nhu ThaoTran Kha Tu

Global same-store sales grew 2.6 percent, the combined result of positive growth of 2.5 percent domestically and 3.1 percent in international markets.

During 2010, they continued to strengthen our balance sheet and used cash to pay down $16.6 million of debt. At year-end, their outstanding debt was $66.0 million, and their total leverage ratio was 1.4 to 1, which gives them a comfortable and conservative capital structure. They also completed a new five-year $100 million credit facility in late December, gaining more favorable interest rates and greater financial flexibility as they work to create additional long-term value for stakeholders.

Net unit growth significantly moved from 20 to 39. The great news is they are moving what they measure.

Sales met 150 million USD with the net profit around 2% and on going. During the year, they strengthened their development pipeline and delivered another year of positive net unit growth. They opened 106 restaurants in U.S markets and abroad, with a net total of 39 restaurants in 2010 compared with 14 in 2009.

McDonald’s net income climbed from $2.4 billion in 2007 to $4.3 billion in 2008, and $4.5 billion in 2009; it is projected to reach $4.6 billion in 2010 and $5.0 billion in 2011.

However, McDonald’s stocks are traded less than its mean and median target value. The following target summary shows predictions for McDonald’s stock prices. The low target for stock of McDonald’s is $73.00, while the mean target is $85.56. The “close” price at which McDonald’s stock was traded on December 10, 2010 was $77.56 with a decrease of 0.5 percent.

The following chart depicts the trend in McDonald’s stock prices relative to its main rival, Yum Brands Inc. from November 1, 2009 to November 1, 2010. Over this period, McDonald’s price climbed 22.3 percent or $14.01 per share from $62.72 to $76.73. Likewise, Yum Brand’s price soared 36.9 percent or $13.11 per share from $35.49 to $48.60. Although McDonald’s had a greater dollar gain, Yum Brand outperformed McDonald’s with a faster growth rate.

These ratios are important for investors to evaluate and decide if the company is healthy for investment and what returns to expect on their investment.

Accordingly, McDonald’s holds a strong position among its competitors. McDonald’s return on investment (ROI) of 20.6 percent is less than the industry average of 29.9 percent and that of its top five competitors of 30.2 percent. Similarly, McDonald’s return on equity (ROE) of 23.9 percent is below the industry average of 28.2 percent and that of its top five competitors 45.0 percent.

Exhibit 2 presents the industry’s liquidity ratios. Likewise, these ratios help determine McDonald’s standing among its competitors.

The liquidity ratios are important to debtors to see the strength of credit rating of a particular company. McDonald’s ratio of 28.3 percent is close to the industry average of that of its competitors. The fluctuations among the ratios are insignificant for detailed analysis.

Exhibit 3 shows the industry’s debt ratios, which are the measurements of the company’s ability to pay its debts on time.

McDonald’s quick ratio of 0.6 is considerably less than the industry average of 3.4 and its top five competitors of 2.3. Similarly, McDonald’s long- term debt to equity ratio of 0.6 is less than the industry average of 4.4 or its competitors of 2.4. These ratios might frighten investors knowing that debtors would be the first in life to receive compensation during bankruptcy or other hard conditions to the company

McDonald’s asset turnover ratio of 0.8 percent is less than the industry average of 13.0 and that of its competitors of 1.8. Similarly, the ratio of cash and cash equivalents of 9.7 is much smaller than the industry average of 32.2. Despite these low ratios, McDonald’s has a notable advantage in the inventory turnover of 102.0 compared to the industry average of 45.9.

- Increase market share without losing sales and operating income over both short- and long-term.- Pay more attention to the existing restaurants rather than opening new ones -> Place greater emphasis on sales rather profits and prices of its products.

- Continue to do build the brand, run great restaurants, strengthen unit economics, and ramp up unit growth. - Still have a long way in pursuing performance, and predict the potential for greater growth ahead among all strong competitors.