Compare and Contrast: financial statements

FINANCIAL STATEMENTS COMPARE AND ANALYSIS
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FINANCIAL STATEMENTS COMPARE AND ANALYSIS
Several financial statements are the balance sheet, cash flow statement, income statement, and shareholders' equity statement. The balance sheet shows the financial position by presenting assets, liabilities, and shareholders’ equity at a particular point in time (Subramanyam & Song, n.d.). In the balance sheet, the assets are equal to liabilities and shareholders' equity. The income statement displays a company's performance over a period showing the revenue and expenses and evaluates a company's profitability. The cash flow statement depicts the changes in cash from start to end for every period. Financial analysis is done to understand better the information in all the financial statements (Subramanyam & Song, n.d.). This paper will analyze and compare financial statements for McDonald and KFC companies from the year 2017 to 2019 using data sources from yahoo finance.
KFC and McDonald's companies are in the food industry, serving as restaurants, and both operate as franchises. The liquidity ratio analysis evaluates whether a company can manage short-term debts. It contains the current ratio, cash ratio, and quick ratio (Lewellen, 2004). The following is the liquidity ratio of KFC and McDonald as from yahoo finance.
KFC liquidity ratio
Ratio/year

2017

2018

2019

Current ratio

1.75

1.70

1.76

Cash ratio

0.49

0.25

0.49

Quick ratio

0.74

0.64

0.76

McDonald liquidity ratio
Ratio/year

2017

2018

2019

Current ratio

1.85

1.35

0.99

Cash ratio

0.83

0.30

0.21

Quick ratio

1.81

1.33

0.96

From the above liquidity ratios, for McDonald's, the percentages are decreasing over the years. In 2019, the liabilities were higher than the assets implying that it cannot manage its short-t...