McDonald’s is comprised of many restaurants that are operated by the company, however they also have a large amount of franchises. Under the terms of the franchise arrangements, the franchisees are operated under joint-venture agreements. McDonald’s relies heavily on its franchising activities with approximately 70% of the restaurants being owned and operated by independent business people all over the world. The company is an equal opportunity franchiser with a proven 34% of franchiser and 70% of applicants being US minorities and women (McDonald’s, 2002). McDonald’s offers support in all areas of franchising from operation

s, training, advertising and marketing to real estate, construction, purchasing and equipment. In 2001, franchise sales amounted to 24,838 million dollars with company-operated sales and affiliated sales amounting to 15,297 million dollars (McDonald’s, 2002).

McDonald’s financial ratios further illustrate their outstanding financial position in today’s business world. Most of McDonald’s results exceed industry standards. By analyzing the profitability ratios, we are able to see that McDonald’s shows a higher return on the sales dollar (11.01%) than the industry average of 6.7%. However, the return on assets (7.3%) is lower than the industry norm (10%). This is primarily due to the large amount of total assets. McDonald’s satisfactory return on assets is due to the company’s high profit margin (11.01%). McDonald’s return on equity (17.2%) is due to their generous utilization of debt, total assets and generous payment to shareholders. McDonald’s persistently stresses their commitment to their shareholders.

McDonald’s asset utilization ratio illustrate McDonald’s high turnover of assets in some aspects. McDonald’s collects it at a receivables turnover rate of 16 times this is due to their no credit sales. Most of their sales are cash excluding franchise related costs. Also, McDonald’s turns over their inventory 140.9 times a year indicating that McDonald’s has very

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