McDonald’s Corporations
The Student of Finance
Department of Management Sciences
SARA SALEEM
GSCWU
Subject: transmission of annual report for the period ended 2024
Dear Ma’am,
We are pleased to present McDonald’s corporations annual report
for the year ending 2023. The company was incorporated in Pakistan as a public
company by shares in 1998. McDonald’s Pakistan makes a substantial economic
contribution locally, serving as a major revenue generator and contributing
significantly to Pakistan’s economy. McDonald’s Pakistan also stands as a key
economic player, not only as a revenue power house but as a catalyst for
economic diversity. Its widespread presence stimulates related businesses
ranging for suppliers to logistics, creating a robust economics ecosystem.
Analysis of financial ratios
For the year ended 2023
Profitability Ratios
2023 2022 2021 2020 2019
Gross 57.12 56.97 54.17 50.77 50.96
profit
margin
Operating 45.68 40.42 44.59 38.13 41.50
profit
margin
Net profit 33.22 26.65 32.49 24.63 28.20
margin
Return on 15.08 12.25 14.01 8.99 12.68
assets
Earnings 11.56 8.33 10.04 6.31 8.42
per share
Return on -179.93 -102.90 -163.99 -60.45 -73.39
equity
Return on 26.10 20.66 24.32 17.28 23.26
investment
Return on -109.32 -69.38 -102.19 -44.64 55.34
tangible
equity
Interpretation:
1. Gross profit margin :
The gross profit margin increased slightly from 56.97% in 2022 to 57.12% in
2023. This suggests that the company's profitability has improved slightly, as it
is able to generate more profit from each dollar of revenue. This could be due
to a number of factors, such as increased sales prices, decreased cost of goods
sold, or a combination of both.
2. Operating profit margin :
The operating profit margin increased from 40.42% in 2022 to 45.68% in 2023.
This is a significant improvement in the company's profitability, indicating that
it is becoming more efficient at generating profits from its core operations.
This could be due to a number of factors, such as increased sales, decreased
operating expenses, or a combination of both.
3. Net profit margin :
The net profit margin increased from 26.65% in 2022 to 33.22% in 2023. This
significant improvement indicates that the company has become much more
efficient at converting revenue into actual profit. This could be attributed to
various factors such as, Reduced operating expenses, Improve pricing
strategies, Enhanced operational efficiency and the company might have
streamlined its operations, leading to reduced production costs and Favorable
tax benefits.
4. Return on assets :
The return on assets (ROA) increased from 12.25% in 2022 to 15.08% in 2023.
This indicates that the company has become more efficient at generating
profits from its assets. Possible reasons for this increase include: Increased
sales revenue, Reduce asset base, Improve asset utilization and higher profit
margins.
5. Earnings per share:
Earnings per share (EPS) increased from 8.33 in 2022 to 11.56 in 2023. This
indicates a significant improvement in the company's profitability for
shareholders. Possible reasons for this increase include, Higher net income,
Share repurchases, Improved operational efficiency and Favorable tax benefits.
6. Return on equity:
The provided Return on Equity (ROE) figures for 2023 (-179.93%) and 2022 (-
102.90%) are both significantly negative. This indicates a severe loss of
shareholder value and a critical financial situation. A negative ROE implies that
the company is generating losses instead of profits. For every dollar of equity
invested by shareholders, the company is incurring substantial losses.
7. Return on investment:
The return on investment (ROI) increased from 20.66% in 2022 to 26.10% in
2023. This indicates a significant improvement in the company's ability to
generate returns on its investments. Possible reasons for this increase include,
Improve operational efficiency, successful investment decisions, Increase
profitability and the company may have experienced an increase in
profitability, driving higher returns on investments.
8. Return on tangible equity:
The return on tangible equity (ROTE) decreased from -69.48% in 2022 to -
109.32% in 2023. This indicates a significant deterioration in the company's
ability to generate returns for shareholders on their investment in tangible
assets. Possible reasons for this worsening performance include, Increase
losses, decline in tangible asset value and Increase debt.
