Finance > QUESTIONS & ANSWERS > Business- Financial Management McDonalds Case Studies 2023 Update Solution (All)

Business- Financial Management McDonalds Case Studies 2023 Update Solution

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Strategic Role of Financial Management - ANS-financial management at McDonald's is concerned with how assets are deployed, how these assets are financed (either via debt or equity) and the overall ... profitability of the company. Objectives of Financial Management: Profitability - ANS-McDonald's aimed for consistent operating margins in the mid-40% range. (Overall net profit for the company before interest and tax.) Halfway through 2020, this was below 20%. Objectives of Financial Management: Growth - ANS-McDonald's had the goal of increasing systemwide sales growth by 3% to 5%. Systemwide sales were down 13% worldwide for the first 6 months of 2020. Objectives of Financial Management: Efficiency - ANS-return on incremental invested capital in the mid-20% range. (That is, McDonald's expected a rise of 25%.) COVID saw a significant reduction in income and the amount of capital being invested. Objectives of Financial Management: Liquidity - ANS-Ensure enough cash is available to meet operating expenses and return equity to shareholders via dividends and share buybacks. COVID forced the suspension of the program that was returning equity to shareholders. Acquisition of US$6.5 billion in cash which was funded by a new US$1 billion overdraft and US$5.5 billion in issued notes. Objectives of Financial Management: Solvency - ANS-Mcdonald's aimed to stabilise the debt of the company through the company has increased level of debt due to COVID19. Its current debt is higher than management would like, they're aiming on reducing that debt as soon as practical. The Difference Between Short and Long term - ANS-no case study. However, McDonald's in the short time is to recover from COVID as seen achieved through their liquidity and gearing objectives. Interdependence with Other Key Business Functions - ANS-no case study. Internal Sources of Finance: Retained Profits - ANS-Management has indicated that they have four main priorities with profits. Investing in the business through capital expenditure, paying a dividend, buying back shares and paying off the debt that matures, Mcdonald's continues to pay its shareholders dividends at a level higher than ever before. External Sources of Finance: Short Term Debt (Factoring) - ANS-no case study Continues... [Show More]

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