The efficiency with which McDonald’s turns its receivables into cash is

drastically improving and is working its way towards its top competitor. We regard

this as a strong sign as the company is continually trying to improve its short-term

liquidity. The average number of days McDonald’s needs to sell its inventory has

also been consistent and well below its competitors.

The negative working capital for McDonald’s indicated that they may lack

the funds necessary for growth. We know that McDonald’s is undergoing

renovations to their domestic facilities and well as expansions on a global level and

they are using some of their liquid assets for this undertaking. They are very

comparable to its top competitor and we do not foresee a problem.

Overall, by looking at McDonald’s short-term liquidity analysis we believe

that they have a strong footing in the industry. We are also still mindful about the

globalization trends and the impact this may have as it goes into new markets and

strengthen existing markets and how this may positively impact future short-term

liquidity figures once they are stabilized.

Analysis of Capital Structure and Solvency Ratios

Measure 2004 2003 2002 2001 2000 Wendy's Yum Yum Industry
1. Total Debt to Equity 0.6572545 0.838123 0.9983173 0.968003 0.9053713 1.31 2.57 1.42
2. Total Debt Ratio 0.3353031 0.388664 0.4281763 0.407588 0.3843199 0.77 0.72
5. Financial Leverage Ratio 2.049982 2.237297 2.3523848 2.365483 2.1738399 3.01 4.17
6. Financial Leverage Index 3.15 3.44 3.62 3.64 3.34 na na

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