Title/论文题目： FINANCIAL ANALYSIS OF TWO FAST FOOD COMPANIES MC’DONALDS AND DUNKIN’

DONUTS (2008-2019)

Major/专业： BACHELOR INTERNATIONAL ACCOUNTING

Name/姓名： MUTSVENE BLESSED

Student No./学号： 2016178132

Supervisor/指导老师： WANG CHUN

School of International Exchange By ____________________________

A Research Submitted To The University Of Accounting and Finance (Shanghai Lixin University of
Accounting and Finance) In Partial Fulfillment Of The Requirement For The Award Of Bachelor Of
International Accounting.
Chapter 1 DECLARATION
I____MUTSVENE BLESSED______ declare that this project is my own original work and that it has not
been submitted for any academic award in any other College or University.

Student’s Name Date

MUTSVENE BLESSED

…………………………….. ……………………………..
Chapter 2 APPROVAL
The undersigned approval that, the supervisor has read and hereby recommends for acceptance by the
Shanghai Lixin University of Accounting and Finance, dissertation titled Assessment on

FINANCIAL ANALYSIS OF TWO CLOTHING RETAIL COMPANIES H&M AND ZARA (2014-2018)
____________________________________________________________________________

WANG CHUN DATE

…………………………….. …………………….
Content
1 Introduction
2 The main goal and methodology of this paper
2.2 Rationale of the study
2.3 RESEACH PROBLEM QUESTIONS
2.4 RESEARCH OBJECTIVE
3 LITERATURE RESEARCH
3.1 Financial analysis
3.2 Origins of financial Analysis
3.4 Financial analysis users
3.4.1 External users of financial analysis
3.4..2 Internal users of financial analysis .
3.5 Financial ratios articles
3.6 Source of information for financial analysis
3.6.1 Profit and loss statement
3.6.2 The balance sheet
3.6.3 Cash flow
 ABSTRACT

Fast food industry has played a big role in people lives ,it brings families
together ,reunites and some eat fast food at special events .Mc Donald’s
and Dunkin’ Donuts are the biggest international fast food restaurant and
they expand their business globally Coffee to some people a morning they
cannot begin without ,for some it’s necessary for every ht and very
addictive .For some Hard-core coffee drinkers they take pride in distinguish
between a good coffee and bad coffee. By doing international business it
created competition between Mc Donald’s and Dunkin’ Donuts

This thesis brings out the financial analysis of the two companies Mc
Donald’s and Dunkin donuts basing on the year 2008 to 2019 .To see all the
financial activities and the results of these two companies a financial
analysis has to be done .This financial analysis will brings out achievements
enormous success, international growth trends , best practices in the global
food industry and challenges they both faced during that period. In this
research financial ratios also measure a flow ratio , cleverage ratios,
profitability ratios and liquidity ratios . This study exmines the differents of
these two companies. After reading this ,the readers are expected to be able
to get a full understanding of calculation and also the interpretation of
investors and credit , basic financial ratio and its implication for financial
managers , the significance of many business financial analysis and the
importance of understanding the external business institutions and
environment of Mc Donalds ad Dunkin donuts. t

The financial analysis of ma donalds and dunkun donuts results ,

information and conclusion will show that the two companies has a long way
to go to improve their finances .This will provide the strength and weakness
of these companies.
CHAPTE
R 1
 1.
INTRODUCTION

Every company across the world has its primary source of data which is its
annual report, that include the financial statement ,management
commentary and the notes .The management commentary includes the
operating and financial review which is also called the managements
discussion and analysis. When summarizing the financial analysis the
financial report data , ratio analysis and evaluation of the financial position
and its performance. Financial analysis is very useful in decision making and
also in assessing a companies performance. Financial analysis can be
applied in also in managerial accounting giving the companies managers the
ability or the tools they need in decision making .

Based on the findings of the financial analysis it also helps with the financial
health of the company by assessing the three main factors which is the
profitability ,liquidity and leverage .that mainly controls the internal factors
of the company .The liquidity deals with the company’s ability to pay the
expenses and its current bills .The Leverage is when the company a
company ‘s financial analysis is reviewed by both investors and bankers.
Profitability is of the advantage of the financial analysis in that it involve
calculation of the financial return that the company earns on the money that
they invested .

By reaching a companies goal it is important tool for a company to have

financial analysis for both small and managers so that they all measure their
performance and progress. External Investors can also use the financial
analysis to accompany disclosures and to see if it is worthwhile to investor
lent money to the entity .This normally involve ratio Analysis that is to see if
the organization or the company is sufficiently liquid and also generates a
sufficient amount of the cash flow. Internal Investors also .financial Analysis
addresses financing ,capital structures and foreign exchange risk. It also
include financial forecasting discounted flow analysis and its essential desk
reference for the companies that wants to make better decisions

This information from the Financial analysis provides a deeper understanding

of the operations of the organizations or the company .This also helps in
assessing if the company is following the policies of the government and
following the accounting procedures and making the decisions accordingly.
s

2. The main goal and methodology of

this paper
The main goal of this thesis is to make an evaluation of the financial analysis
of Mcdonalds and Dunkin Donuts .This financial analysis will be bring out the
results that will be used to measure how these two companies can be
improved and also their downfalls and the health of the company .This will
not only bring out how the companies can be improved financially but also
the managerial accounting .

The history of these two companies also help the investors to a view of how
much they can put in these companies and they can also decide not to invest
in it by the figures produced by the financial statements .By understanding
the financial ratio and financial data also helps to know how the financial
figures were drawn and how the company is evaluated An assessment of the
company provide a quantitative data .This thesis will also measure the
performance and the evaluation of the companies and how gives a clear
picture of its accuracy of the companies.

2.2 Rationale of the study

Rationale of this thesis has to do with the investors, organizations and the
creditors evaluating and assessing the history and the future of the
companies .furthermore the data provided will be accurate and shows the
performance of the companies.

2.3 RESEACH PROBLEM QUESTIONS

1. What’s haunting Mc Donald’s, DUNKIN Donuts .What are the problems

Mc Donald’s and dunkin donuts face at home and abroad ?
 2. How did the two companies manage to survive in 2008 financial crisis/
meltdown?

3. How is ratio analysis useful to the shareholders ,creditors and

management investors in their business departments or divisions?

4. Where does the two companies get most of their revenues from?

5. How is investing in these two companies different from each other?

6. Ratios used to analyze the two companies and the capital structure
analysis of the two companies’ stock

7. is ratio analysis useful in the prediction evaluation and performance of

the business as well as intensifying ares that might regret development

2.4 RESEARCH OBJECTIVES

The main objectives of this research basing on the research question is

stated below:

 To give the investors a clear vision of how they can invest in the fast food
industry
Companies

 To give a full evaluation of the companies for future decision financially

and also managerial accounting

3 To assess the ratio analysis provided so that the two companies will
improve their decision making in terms of competitiveness and
operating

4 To provide the ratio analysis so as to see the company’s performance

5 To show the academic literature that that bring out the cash flow
within the fast food industry
6 To provide the financial statements which is Trading Profit and Loss
,cash flow and ratio analysis so as to see if the company made a
profit or a loss for the whole year.

7 High lighting the sample chosen companies existing status situation

and provide suggestions and recommendations based on ratio analysis
in the respect of

a)markert share

b) solvency

c) operation efficiency

d) market share

e) profitability
chapter
2:
Literature Review
3 .LITERATURE RESEARCH
3.1 Financial analysis
Financial analysis is the process whereby a company’s financial statements are reviewed
and analyzed so as to make better decision to earn income in the future.it involves the
income statement, balance sheet, statement of cash the future prospects of a specific
company of organization
Methods used by financial analysis that are common include Dupont analysis ,horizontal
and vertical analysis and fundamental analysis and also use the financial ratios which is
very essential .When it comes to Chartered Financial Analyst designation is normally
Available for professional financial analysts .after the statements are out the financial
statements are therefore may be used to make future decisions and the futures
performance .

The financial statements are therefore used for many stakeholders which include the
equity and credit investors ,the public , the government and also the decision makers
within the company or the organization .all these stakeholders normally have different
interest and they all have different wants and needs ,they also apply variety of of
different techniques so as to meet their needs and wants. For instance the equity are
always interested in a long term earnings power of the company or the organize at the
ion and that include the sustainability and growth of dividend payments . however the
creditors want to ensure the interest and also principals is paid on the organizations debt
securities for example bonds .By analyzing the two companies Dunkin Donuts and
McDonald’s there will be a bigger picture of how these two companies performed
financially

3.2Origins of financial Analysis

Several thousands of years the market began , and with the records about economic
phenomena .The basic of the principles of so called (accounting statements ) where in the
code of Hammurabi (1955-1912 BC).Money and hence the financial analysis began and
also financial analysis too . The development of civilization and the the production of
technology have been accompanied by the development of accounting and methods of
evaluating and analyzing the accounting statements.
 The agenda of doing a financial analysis is to express how a business is performing, its
financial position as well as decision making .In making financial analysis there are
financial statements that provide us with variety of different information that will bring out an
accurate figure or information needed .That include the IFRS which are accounting standard that
are issued by the IFRS foundation and also including the (IASB). These basically describes the
companies financial performance so that the statements will be reasonable and understandable
globally.

3.4 Financial analysis users

There are many legal and physical entities which have an interest in the financial health of the
selected companies .There are two categories which are external and internal users.

External users of financial analysis

 Investors - these are becoming a large number of users of information obtained by the
financial analysis ,they also make decisions into which company with better
performance so as to put their capital. In addition they are the ones who contribute to
the stability of the company , its future development ,level of risk and its level of
capital appreciation
 Stock brokers - based on the stock exchange the stock brokers need information about
the financial situation of the company traded on the stock exchange continuously for
decision making on the secure transactions
 Banks – they monitor and solvency and liquidity of the company ,they also assess
profitability in the future and also in the long term in order to determine the ability to
create money and pay long term commitments including the long term interests
 Business partners -these are customers primarily interested in the long term stability
of the company so that they manage incase of any bankruptcy ,there wont be any
problem with the provision of production .suppliers in the financial situation of
potential customers they choose the most suitable buyer so that they benefit . mostly
they are primarily interested in the financial solvency of the company .The structure of
the current liabilities and current assets and also cash flow process.
 State institutions and the state itself - the information is necessary for formulating
economic policy and monitoring the implementation of the taxes and all the taxes and
including the business payment duties needed
 Auditors, tax advisors and accountants - they use the financial analysis to see the
success and the failures of the company financially .considering the failures of the
company they are the ones who will be able to find the solutions of the problems for
the stability of the company .
 Company bondholder- they manage the financial stability of the company and also its
ability to pay in order to determine whether they will be securely paid on time and in
the agreed amount and accounts

Internal users of financial analysis .

  Owners of the company- with the financial analysis the owners of the company
are able to verify their investments and performance if its properly used and
properly appreciated .furthermore their most focus is the development of the
company ,profitability indicators and also the cash flow for the company long
term commitments and opportunities.
 Managers - they used the results of the financial analysis for strategic operational
and financial management . Considering the access of the information they are
best positioned to handle the financial analysis just because there are information
which is not publicly available for the external users like the banks ,investors
and more . managers are the ones who know much of the nature of the
company’s financial condition and the general use of daily work. This is so as to
ensure that all the activities are subordinate to the basic objectives are
subordinate to the basic objectives of the company .
 Employees - they have a natural interest in the success and financial stability of
their company on which there is employment and material security depend

3.5 Financial ratios articles

According to Igben (1999) defined financial ratios as a proportion or a fraction or a type
of percentage that express the relationship between one item that is in set of financial
statements and another item that is in other statements. He therefore goes on to state that
the accounting ratios are most powerful of all the tools used to evaluate the financial
analysis ,however the ratio analysis include taking stats of items or the numbers out of
the financial statements thus forms the ratios with them .thus enhance informed
decisions made and judgements. However Li Hua 2014 examines and discovered that the
current and quick ratios are the most used indications in the measuring of the liquidity
but cash conversation cycle (CCC) may be a better approach .

Hermarson et at (1992) states that the financial analysis is consist of applying all the
necessary analysis and tools to financial account and all the relevant data to bring out the
importance of the relationship that has important and useful information. However
financial accounts can be viewed as the break down translation of data that is in the
financial statements and the interpretation to provide the information and also show
important relationship of the items of the accounting statements hence draw a conclusion
of the performance of the company and its current financial position .

David Graham and Benjamin Graham published a book called (security analysis) in the
year 1934 .their approach refers to fundamental analysis that include the industry analysis
,economic analysis and company’s analysis .The main focus of the book is mostly
centered in market pricing mechanism for the financial securities consist of bonds and
bonds which is based upon irrational and faulty analytical processes .the results in the
marketing price of the security work hand in hand with the intrinsic value.

Essien 2006 observed that financial analysis carry lots of that are not viewed publicly
in the figures. furthermore the data and the figures of the financial statement become
more and more useful mostly when they are related to each other or to some of the to
some of the related financial figure or data .moreover in 2006 those users of financial
information goes a further more to establish relationships or ratio among the selected
data in the financial statements.

Jarrow 2013 revised with the fundamentals of the maximum leverage ratio is the capital
adequacy rules .he therefor calculated the maximum leverage ratio which the probability
of the insolvency is lower than the some of the predetermined amount . eventually the
similarity between leverage rule can also be analyzed which is the effect risk with the
Value-at Risk (VaR) capital adequacy rule . To find the communications that the
leverage ratio rules are comparatively instinctive and easier from the VaR rules and
regulations.

According to McShane et al (2000) ,he stated that decision making is the conscious
process of making choices having one or more alternative with the interior of moving
towards some desired state of affairs available . however another definition of decision
making is that it is as choices relating to the location and can be a use of the business
resources so as to achieve the business goal and ambition .The article paper is carried out
to show how the decision making is there to help the shareholders ,investors ,creditors ,
and other potential investors to see if they can decide based on the previous performance
of the company and even the potential of the company .even though the financial
statements provide the financial status of the companies it must be noted that the decision
made after this is not always easy owing to the problem of summarizing the nature of
this information that we find provided by the financial statements.

3.6 Source of information for financial analysis

The internal financial statement (cash flow, trading profit and loss statement and balance
sheet ), different statistical investigation ,GAAP measure etc are not the only sources of
financial analysis . other data such as external data are also important because it helps the
company to compare with its competitor in the same industry as well as in the market in
general .considering the fact that most of the information are drawn from the accounting
statements ,it is important to put in mind that this is historical created using the current
accounting statements /principals which does not take inflation into to consideration .
Data for financial analysis can be divided as follows
 Quantifiable non-financial information
I. Official economic status
II. Demand , employment , sales business status etc
III. Internal regulation , brochures
 Nonquantifiable information
I. Comments of the managers
II. Personal contacts
III. News of executive of individual company ,departments , news of
directors and auditors
IV. Professional press comments
V. Prognois and independent evaluation
 Financial information include:
I. Internal financial statements
II. Stock market news
III. financial analysis and senior management
IV. The media news and economic news
V. The financial statement of financial accounting and all the annual
report
VI. The reports of imp trade exchange

 Estimate of analytics from different institutions

Most of the information sources present financial statements of financial accounts .in the
financial statements an enormous amount of all the potential information is stored ,
because they gather the information , data and document company management in
detail .The most important aspect of all this are trading profit and loss statement ,balance
sheet and cash flow

Profit and loss statement

The profit and loss of every company are calculated in the profit and loss statement .This
statement captures and bring out the structure of operating the income as well as the
expenses .after the results of the profit and loss the balance sheet therefore enables for
assessment of maintaining the stability as well as the health of the company .Basically
the main aim of the profit and loss is to bring out whether the company made profit or
loss during as set amount of time. This statement is also as important as the balance sheet
.
To get the result of this statement we express as follows :
 Revenue (Sales) – Expenses = Earnings (profit /loss)

The main difference between profit and loss and balance sheet is that profit and loss
statement relates to a certain time period and balance sheet captures assets and liabilities
at a concrete moment in time .