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 th
...
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
External Sources of Finance: Short Term Debt (Overdrafts) - ANS-Due to the COVID-19
pandemic, McDonald's drew US$1 billion on an overdraft, which is needed to help meet
cash flow needs. It reports that it still has a further overdraft facility of US$3.5 billion that
it has not accessed.
External Sources of Finance: Short Term Debt (Commerical Bills) - ANS-McDonald's
issues "commercial paper" to raise funds.
External Sources of Finance: Long Term Debt (Mortgage) - ANS-As McDonald's
franchisees rarely own the land upon which their restaurants sit, they would be unable
to take out a traditional mortgage for their store. They may, however, take out a chattel
mortgage for specific assets, including equipment and machinery.
External Sources of Finance: Long Term Debt (Unsecured Notes and Debentures) -
ANS-McDonald's has borrowed cash at fixed interest rates using unsecured notes and
debentures...
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