Analysis of Capital Structure and Solvency:

We can see that McDonald’s has drastically reduced its debt to equity ratio.

The company is currently using 65% of its debt to finance its operations. We feel

McDonald’s will continue to lower this figure and are in far better shape compared

to industry norms. When we compare this ratio to the dividend payout ratio, which

has been significantly increasing we realize that they are not using their debt to

payout dividends, which we see as a good sign. McDonald’s is keeping a

conservative approach with its debt to equity and are mindful about avoiding any

undue financial distress risk.

By looking at our debt ratio’s we can easily see that McDonald’s

competitors have almost as much debt as they do assets. We can see from

McDonald’s figure that they have significantly more assets then they do debt.

McDonald’s financial index greater than 1 tells us that McDonald’s is using

is debt in a positive way. This clearly shows us that, as borrowing for the company

has increased the debt the company took on was beneficial

Although it is difficult to determine a firm’s optimal capital structure,

through this analysis we have determined that McDonald’s has had consistently if

not a safe capital structure. We have seen consistency and stability with

McDonald’s capital structure and have also been able to confirm that the company

does not have any unpaid taxes with the IRS, or unpaid wages to its employees.

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