Case Study Mcdonalds

Improved Essays
1. What are the top four countries from which McDonald’s acquired its debt? A lot of new business owners today use open forms of mobilizing loans from financial institutions or individuals if they do not want to call for other investors to take total control of the business. Mobilize the majority of loans are used when just starting a new business. Depend on each country, on the population and the need of each country to open more McDonald’s restaurant. From this, the debt will raise on how many of restaurant in each country.
In million of U.S dollar, US borrowed 8725.7 in 2012 and 8360.6 in 2013, Europe borrowed 2195.2 in 2012 and 3242.1 in 2013, Japan borrowed 1067.5 in 2012 and 878.5 in 2013, British borrowed 730.1 in 2012 and
…show more content…
Why does McDonald’s need to finance up to 40 percent of its assets with debt? Business activities through mobilizing loans allow business owners took control of the entire business operation. The interest rate payable on the loan is considered as eligible costs and is tax deductible. This deduction is part of the profits of the enterprise and helps reduce the amount of annual tax business. Creditors of the business are not entitled to the company 's profits. The companies in the industry with low business risk, stable cash flow more often use debt. Therefore, McDonald needs to finance up to 40 percent of its assets with debt for the long-term bond. The equipment, building, and land need a huge investment. To save the time of collecting the investment, McDonald finances with debt. McDonald only pays the same interest in each period of time. So the owner does not need to have large investment or share with another investor. They get the benefits from debt. And with this debt fund, McDonald can use for any stable expenses. On the other hand, the debt does not really help with the long-term bond. If the business faces a risk in later time, they may be struggling with the interest …show more content…
A long-term loan is an important source of credit for the development of enterprises. Long-term loans are generally understood to be loans in more than a year time. Long-term loan interest rate can be fixed rate or floating rate depending on the negotiations between the two sides. Long-term loans usually have some financial benefits related to short-term debts. Interest rates are often lower because the assets generally secure long-term loans. So people use this long-term debt to invest into big business. Besides, during the business, when the companies need more money for their business or they are not able to pay back the debt, they may issue the long-term bond. Bond is a loan that the issuers borrow from the buyer of bonds- bondholders. Governments, businesses, and local governments issue bonds at all levels to raise more capital. Bonds pay periodic interest and repay the principal at a specified time. McDonald was using these long-term bonds for the land, the equipment, the building, because those things have expensive cost and it needs a long time to cover. It can help the business continue to running and lowest risk. By Bank loan, the owner does not need to share the profit with another person. The owner only needs to pay the interest for the bank, and this interest is stable. Bank loan can use for short-term debt. So the business may use this loan for

Related Documents

  • Great Essays

    Financial Analysis of Nordstrom Inc. In Seattle Washington in 1901 John W. Nordstrom and Carl F. Wallin founded one of the countries largest and well-known retail stores in North America, Puerto Rico, and Canada. Nordstrom began as a shoe retailer but quickly expanded its inventory to include clothing, accessories, handbags, jewelry, cosmetics, and fragrances; along with some locations housing wedding dress and home furnishing departments. Currently Nordstrom has 347 stores that operate in 40 different states, as well as stores in Puerto Rico and Canada. The Nordstrom brand not only includes the Nordstrom department stores but 215 Nordstrom Rack stores, 5 Trunk Club clubhouses, 2 Jeffrey Luxury “Last Call” boutiques, and 2 clearance stores.…

    • 1507 Words
    • 7 Pages
    Great Essays
  • Decent Essays

    Issuing Debt Benefits

    • 53 Words
    • 1 Pages

    Because of tax advantages on issuing debt, it is cheaper to issue debt rather than equity. At some point, the cost of issuing debt becomes higher because of the increasing default risk with increasing debt, which also increases the interest rate that the company will have to pay in order to raise…

    • 53 Words
    • 1 Pages
    Decent Essays
  • Improved Essays

    Solvency ratios are designed to measure the company’s level of financial risk. Evaluating the debt to assets ratio for Target Co. and Wal-Mart, I concluded that the higher level of financial risk has Target Co. The debt to assets for Target Co. is higher with 9.71% than for Wal-Mart, which is considered riskier to invest or loan to because it is more leveraged. This means that Target Co. will have to pay a greater percentage of its profit for principal and interest payments. The plant assets to long-term liabilities ratio shows also that Target Co has a higher financial risk.…

    • 513 Words
    • 3 Pages
    Improved Essays
  • Improved Essays

    AASB 138 Essay

    • 665 Words
    • 3 Pages

    Q1: The AASB 138 had been adopted by the reporting entities in Australia after the introduction in the International Financial Reporting Standards (IFRS). It became effective for reporting companies on or after 1 January, 2005. This introduction would completely change the way it is recognized and measured for accounting purposes as per the Australian standards. The main motive behind the introduction of this section is to identify how the non-monetary assets shall be represented in the financial statements.…

    • 665 Words
    • 3 Pages
    Improved Essays
  • Decent Essays

    The value of the firm is increasing when the firm purchase acquisitions with debt financing because debt is secured by the assets of the company. A profitable business can generate cash flow or income to repay interest and principal of the loan. The main reason for taking an acquisition debt is to make a large purchase without having to deploy large sum of capital. Berkshire Hathaway is a very profitable company, even though they showed some loss in their revenue in the last quarter due to natural disasters. This is a risky approach, however, if the acquisition can create stronger and more profitable company, then the debt is valuable.…

    • 109 Words
    • 1 Pages
    Decent Essays
  • Improved Essays

    Small Business Debt Essay

    • 374 Words
    • 2 Pages

    In the past, new businesses and startup companies often turned to conventional banking institutions when they needed to borrow money or refinance. However, several years ago, that changed when banks began to limit funding opportunities for small businesses. Today, many entrepreneurs now rely on credit cards or lines of credit when they need funding to resolve small business debt. Although those forms of funding can fill short-term financing gaps, they can also lead to problems when businesses use them to deal with long-standing or recurring small business debt.…

    • 374 Words
    • 2 Pages
    Improved Essays
  • Decent Essays

    HMC Balance Sheet

    • 212 Words
    • 1 Pages

    Since HMC faces very high debt of $2,000 million, it should restructure its balance sheet in order to improve the overall financial situation. Possible ways to get rid of debt are either to buy it off or transfer it to equity holdings. This would lower the interest obligations and therefore the eventuality of bankruptcy. Furthermore, MCs balance sheet shows an amount greater than $500 million as receivables and $200 million of inventory.…

    • 212 Words
    • 1 Pages
    Decent Essays
  • Decent Essays

    Bradous, the financial manager of 850 LLC, a Fortune 500 company, must borrow $100 million within the coming year for the expansion of the production activities of the company into new markets. In fact, according to Saunders and Cornett (2015) the fund user could lack sufficient internal funds to support the project. Bradous and 850 LLC represent fictive names for this assignment. Moreover, the manager should show the indirect financial investment of private individuals into the company. Further, one should present the type of loan that the company really needs to apply for, including secured or unsecured loan.…

    • 271 Words
    • 2 Pages
    Decent Essays
  • Decent Essays

    The debt-to-equity ratio suggests how heavily General Motors and Tesla rely on funds provided by creditors. The two companies have the obligation to pay back the amount of financing provided by creditors. If they have high debt-to-equity ratios, which means the heavily reliance on creditors, the two companies will not be able to run successfully under the obligation during a business downturn. The debt-to-equity ratio for General Motor has increased over the past three years, so the risk that GM may not be able to fulfill its obligation is increasing.…

    • 217 Words
    • 1 Pages
    Decent Essays
  • Decent Essays

    Bcs Inc Case Study Essay

    • 342 Words
    • 2 Pages

    Whereas, the loan is immediate, but there will be interest accrual, which will affect the bottom line. I chose to launch the IPO. Secondly, I had to decide whether to consolidate the short term debt into long term loan at a 4.2% interest rate or payoff short term debt…

    • 342 Words
    • 2 Pages
    Decent Essays
  • Improved Essays

    Dynashears Case Analysis

    • 1281 Words
    • 5 Pages

    Dynashears manufacturers a complete line of household scissors and industrial shears, and distributes their goods through jobbers to specialty, hardware and department stores. A cyclical business, Dynashears deals with a period of high sales during the months of July to December. By nature, cyclical businesses like Dynashears engage in short-term borring from banks to finance the additional working capital needed to support high sales periods. Dynashears is usually able to pay back its short-term loans by the end of the year. However, due to the economic recession, Dynashears sales began to not reach the projected level in July 1990.…

    • 1281 Words
    • 5 Pages
    Improved Essays
  • Superior Essays

    Companies use debt for tax advantages while keeping ownership in the company and the ease of access to capital in times of low-interest rates (Reinartz & Schmid, 2016). Equity is more expensive than issuing debt because the corporation shares the future earnings with the part owners. Debt payments are required regardless if earnings decline, corporations do not have to pay part owners if earnings decline. Oracle currently uses short and long-term debt and common stocks to finance the overall…

    • 865 Words
    • 4 Pages
    Superior Essays
  • Improved Essays

    Coca-Cola Company is one of the multinational companies in the United State. Its capital structure plays an influential role in Shareholder’s Wealth Maximization. Normally, US multinational companies have the relatively higher indebtedness, so they often use the debt financing (Dobrica, 2007). According to Puravankara (2007), Coca-Cola Company uses debt financing to reduce the overall cost of capital, which can increase the return on shareholders’ equity.…

    • 747 Words
    • 3 Pages
    Improved Essays
  • Great Essays

    Introduction This report is prepared for Shalom, who is considering purchasing shares in a company, ‘The Warehouse Group’. This report is aimed to provide Shalom with an analysis of the company and the viability of the investment in shares in ‘The Warehouse Group’. The Warehouse Group consists of four major segments which are: • The Warehouse (Red Sheds) • Torpedo 7 • Noel Lemmings • Warehouse…

    • 2423 Words
    • 10 Pages
    Great Essays

Related Topics