Using Financial Reports: Preparing a Classified Balance Sheet and Analyzing the Financial Leverage Ratio
The following accounts, in alphabetical order, are adapted from a recent McDonald’s Corporation’s balance sheet (amounts are in millions of dollars):
| Current | Prior |
| Current | Prior |
| Year | Year |
| Year | Year |
Accounts and Notes |
|
| Long-Term Debt | $ 6,188.6 | $ 4,834.1 |
Receivable | $ 609.4 | $483.5 | Notes Payable (short-term) | 686.8 | 1,293.8 |
Accounts Payable | 621.3 | 650.6 | Notes Receivable due |
|
|
Accrued Liabilities | 783.3 | 503.5 | after One Year | 67.9 | 67.0 |
Cash and Equivalents | 299.2 | 341.4 | Other Long-Term Liabilities | 1,574.5 | 1,491.0 |
Contributed Capital | 1,065.3 | 787.8 | Other Noncurrent Assets | 538.3 | 608.5 |
Current Maturities of |
|
| Prepaid Expenses and |
|
|
Long-Term Debt | 168.0 | 335.6 | Other Current Assets | 323.5 | 246.9 |
Intangible Assets | 973.1 | 827.5 | Property and Equipment, |
|
|
Inventories | 77.3 | 70.5 | Net | 16,041.6 | 14.961.4 |
Investments in and Advances |
|
| Retained Earnings | 8,458.9 | 8.144.1 |
to Affiliates (long-term) | 854.1 | 634.8 | Taxes Payable | 237.7 | 201.0 |
Required:
1.Construct a classified balance sheet (with two years reported) for McDonald’s Corporation in good form (assume that the current year ends on December 31, 2011).
2.Compute the company’s financial leverage ratio for the current year.
3.In comparison to the ratio for the companies in the restaurant industry (as indicated in the chapter for Papa John’s and others), how do you interpret this ratio for McDonald’s?
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