In: Accounting
McDonald's Corp.
What type of instruments does the company consider to be cash equivalent? Calculate the cash ratio. How does this ratio compare with the industry?
What is the balance of accounts receivables for the company?
Compute the acid-test ratio. If the current liabilities came due immediately, could the company pay them?
Compute the accounts receivable turnover at year end. Compute days sales in receivables at year end. Based on the acid-test ratio, accounts receivable turnover, and days sales in receivables, how does the company compare to the industry?
https://finance.yahoo.com/quote/MCD/financials?p=MCD
http://corporate.mcdonalds.com/content/dam/AboutMcDonalds/Investors/2016%20Annual%20Report.pdf
Answer
1.
Cash primarily consists of cash on hand and bank deposits. Cash equivalents consist of money market funds, commercial paper, corporate bonds and time deposits with an original maturity of 3 months or less when purchased.
Cash ratio = Cash + cash equivalent / Current liabilities
= 2240 / 7122
= 0.315
The industry avarege of cash ratio = 0.30
2.
Balance of Accounts recivables is 1347 million
3.
Acid test ratio = Quick assets /Current liabilities
= (total current assets - other assets - inventories) /Current liabilities
= (10516-384-4864) / 7122
= 0.74
No, the company would not be able to pay off it dues immediately. To pay its dues immediately, the company should have the acid test ratio = 1.
4.
Accounts receivables turnover =Sales / accounts receivables
= 39403/1347
= 29.25
5.
Days sales in receivables = 365 days / Accounts receivable turnover
= 365/29.25
= 12.48
6.
As compared to the industry, the company is performing well, it isalmost equivalent to the industry average.