Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

McDonald’s Corp. (NYSE:MCD)

Financial Reporting Quality: Aggregate Accruals

Advanced level

Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.


Balance-Sheet-Based Accruals Ratio

McDonald’s Corp., balance sheet computation of aggregate accruals

US$ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Operating Assets
Total assets 52,626,800  47,510,800  32,811,200  33,803,700  31,023,900 
Less: Cash and equivalents 3,449,100  898,500  866,000  2,463,800  1,223,400 
Operating assets 49,177,700  46,612,300  31,945,200  31,339,900  29,800,500 
Operating Liabilities
Total liabilities 60,451,700  55,721,100  39,069,600  37,071,700  33,228,200 
Less: Current maturities of long-term debt 2,243,600  59,100  —  —  77,200 
Less: Long-term debt, excluding current maturities 35,196,800  34,118,100  31,075,300  29,536,400  25,878,500 
Operating liabilities 23,011,300  21,543,900  7,994,300  7,535,300  7,272,500 
 
Net operating assets1 26,166,400  25,068,400  23,950,900  23,804,600  22,528,000 
Balance-sheet-based aggregate accruals2 1,098,000  1,117,500  146,300  1,276,600  — 
Financial Ratio
Balance-sheet-based accruals ratio3 4.29% 4.56% 0.61% 5.51%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Starbucks Corp. 45.93% 25.97% -119.87% -7.62% 9.78%
Balance-Sheet-Based Accruals Ratio, Sector
Consumer Services 8.43% 6.12% -17.37% 2.47%
Balance-Sheet-Based Accruals Ratio, Industry
Consumer Discretionary 6.63% 5.02% 5.81% 12.97%

Based on: 10-K (filing date: 2021-02-23), 10-K (filing date: 2020-02-26), 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-03-01).

1 2020 Calculation
Net operating assets = Operating assets – Operating liabilities
= 49,177,70023,011,300 = 26,166,400

2 2020 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2020 – Net operating assets2019
= 26,166,40025,068,400 = 1,098,000

3 2020 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 1,098,000 ÷ [(26,166,400 + 25,068,400) ÷ 2] = 4.29%

4 Click competitor name to see calculations.

Financial ratio Description The company
Balance-sheet-based accruals ratio Ratio is found by dividing balance-sheet-based aggregate accruals by average net operating assets. Using the balance-sheet-based accruals ratio, McDonald’s Corp. improved earnings quality from 2019 to 2020.

Cash-Flow-Statement-Based Accruals Ratio

McDonald’s Corp., cash flow statement computation of aggregate accruals

US$ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Net income 4,730,500  6,025,400  5,924,300  5,192,300  4,686,500 
Less: Cash provided by operations 6,265,200  8,122,100  6,966,700  5,551,200  6,059,600 
Less: Cash (used for) provided by investing activities (1,545,800) (3,071,100) (2,455,100) 562,000  (981,600)
Cash-flow-statement-based aggregate accruals 11,100  974,400  1,412,700  (920,900) (391,500)
Financial Ratio
Cash-flow-statement-based accruals ratio1 0.04% 3.98% 5.92% -3.98%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Starbucks Corp. 36.84% -22.66% -120.76% -6.31% 6.75%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Consumer Services 3.70% 2.03% -12.99% -4.52%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Consumer Discretionary 7.79% -4.04% -2.57% 7.34%

Based on: 10-K (filing date: 2021-02-23), 10-K (filing date: 2020-02-26), 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-03-01).

1 2020 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 11,100 ÷ [(26,166,400 + 25,068,400) ÷ 2] = 0.04%

2 Click competitor name to see calculations.

Financial ratio Description The company
Cash-flow-statement-based accruals ratio Ratio is found by dividing cash-flow-statement-based aggregate accruals by average net operating assets. Using the cash-flow-statement-based accruals ratio, McDonald’s Corp. improved earnings quality from 2019 to 2020.