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Comparative Ratios Analysis 2011 KFC and McDonald’s
please do a comparative ratio analysis between two companies (KFC and McDonald’s), please note the analysis should be for 2011. please include the below:
• Executive Summary
• Proper introduction
• Body of the Project
• Conclusions
• Recommendations
please follow the above guidelines, and include any excel sheet if used for calculations
Executive summary
The main objective of this research is to compare the financial performance of the McDonald’s Corporation and KFC (Kentucky Fried Chicken) for the financial year 2011. In drawing the comparison, financial ratios shall be used. The ratios that shall be used are liquidity ratios, leverage ratios, profitability ratios and activity ratios. The performance will be gauged by using ratios interpretation criteria , example a company that is performing well should have current ratio that is more than one and the higher the ratio the better the performance of the company in question. After analyzing the ratios the conclusion shall be drawn based on their accomplishment. This research will reveal which of the two companies did well in terms of utilizing its assets efficiently, maximizing share holders wealth and striking a balance of its stock and debt. Conclusion of the analysis shall provide vital information to the investors, analysts or stakeholders of the companies so as to gauge how well the management has been running the firms.
Introduction
This research shall touch on the analysis of the McDonald’s Corporation and KFC (Kentucky Fried Chicken) on their annual financial performance in year 2011. McDonald’s Corporation is a chain of fast food restaurant with its headquarters in United States (Royle, 2007). It has branches and franchise in 119 countries around the world. In the year 2011, the restaurant had a total asset net worth of $ 32389.9 million and revenue of $ 27006 million. According to its 2011 financial report it serves more than 68 million customers everyday (McKenna 20110)
On the other hand Corporation and KFC (Kentucky Fried Chicken) is a subsidiary of a restaurant company called Yum! Brands. It has more than 18000 outlets which are spread in one hundred and twenty countries around the world. By the end of the financial year 2011 the company generated revenue amounting to $ 23.29 billion. On the same year it had a total asset net worth of $ 1805 billion. The restaurant specialises mainly in fried chickens and has its head quarter in Louisville, Kentucky in the United States. This research shall compare the two firms and offer a recommendations based on the findings of the financial ratio analysis.
Financial Ratio analysis
As a show of financial situation of the two restaurants this research shall capitalise on financial ratios using the information provided in their financial report. The ratios under consideration are: liquidity ratios, profitability ratios, financial leverage ratios and asset turn over ratios.
Liquidity ratios
Liquidity ration: this ratio shows the firm’s ability to finance its short time liabilities Troy, 2009). The ratios that are used are the current ratio and liquidity ratio. A current ratio of more than one shows that a company is sound in terms of servicing its short term financial needs. Quick ratio of more than one shows that the firm can be able to meet its short term obligation using its most liquid asset (Oluwa, 2007)
Quick ratio = (current asset-inventory)/current liability
Current ratio=current asset / current liability
| company’s name | total Current asset | inventory | total current liability | current ratio | quick ratio |
| McDonald’s Corporation | 4403 | 116.8 | 3509.2 | 1.254701926 | 1.221417987 |
| KFC | 1805.872757 | 211.2090471 | 1508.972268 | 1.196756757 | 1.05678795 |
According to the liquidity ratio indications, both restaurants can be able to meet their short term obligations with ease. They are not running a risk of running out of means should the short term creditors demand their cash. With a current ratio of 1.25 and a quick ratio of 1.22 McDonald’s Corporation did well in this year compared to KFC which recorded a current ratio of 1.197 and a quick ratio of 1.06. Thus McDonald’s Corporation has a relatively more ability to meet its short term debts than KFC.
PROFITABILTY RATIOS
This ratios offer different success measures of the………………………..