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Essay Available:
Pages:
2 pages/≈550 words
Sources:
2 Sources
Style:
MLA
Subject:
Accounting, Finance, SPSS
Type:
Case Study
Language:
English (U.S.)
Document:
MS Word
Date:
Total cost:
$ 9.36
Topic:

Financial Accounting: McDonalds & The Wendy's Company

Case Study Instructions:

Question 2a and 4a Our company choice is : McDonalds & The Wendy's Company
2. Using the Extended DuPont analysis as reference (and included in the exhibits) identify:
a. significant changes over the three-year analysis period which warrant further attention. Explain the reason(s) for these changes as explained in or based on the notes to the financial statements and in the Management Discussion and Analysis section. If necessary, you may refer to outside reports and analysis including stock analyst reports. Indicate whether you believe that these are favorable or unfavorable trends and discuss your interpretation of such trends along with their implications.
4. Investigate and Use the 10-k to Obtain Information:
a. What type of inventory cost flow assumption(s) do your companies employ? (do NOT copy the paragraph from the 10-K. Provide only one line for each company). If one or both of the companies uses LIFO, what would have been the impact of using FIFO on the comparison of the inventory turnover? Explain.

Case Study Sample Content Preview:
Question 2a and 4a
Question 2a and 4a Our company choice is: McDonald’s & The Wendy’s Company2. Using the Extended DuPont analysis as reference (and included in the exhibits), identify:a. significant changes over the three-year analysis period, which warrant further attention. ROA = Net Profit Margin * Asset Turnover
ROA =Net Profit Margin * Asset Turnover
= (Net Income / Net Sales)*(Net Sale / Average Total Assets)
=Net Income * Average Total Assets
Du Pont Equation, ROE = ROA * Financial Leverage = Asset Turnover * Profit Margin * Financial Leverage
McDonald’s
McDonald’s total shareholders’ equity (deficit) for the year ended in December 2020 was (7,824.9) million compared to -8,210 million in 2019 and -6,258 million in 2018. Return on equity (ROE) is determined as the net income divided by shareholders’ equity and has been negative for the past three years. After decomposing the drivers of the ROE under DuPont analysis, the financial leverage is negative and causes negative ROE. The financial leverage is negative as there is total shareholders’ equity (deficit). The financial leverage or equity multiplier indicates the total assets financed by shareholders’ equity. The financial leverage ratio increases when a company uses more debt than equity. The negative ROE has decreased from -124.38% in 2018 to -59%. A negative ROE indicates the shareholders are losing value and not gaining. While the ROE is negative, there has been improvement, partly because of the return on assets (ROA) from 17.79 % to 9.45%.
Wendy’s Company
Wendy’s return on equity (ROE) has declined over the past three years. Considering the DuPont components, the biggest change was the net profit margin that changed from 70.61% in 2018 to 19.35% in 2019 and 16.30% in 2020. Wendy’s total revenues increased gradually from 1223.4 million in 2016 to 1733.8 million in 2020, but the net income was...
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