Stock Analysis on Net

McDonald’s Corp. (NYSE:MCD)

Financial Reporting Quality: Aggregate Accruals 

Microsoft Excel

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
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Operating Assets
Total assets 56,146,800 50,435,600 53,854,300 52,626,800 47,510,800
Less: Cash and equivalents 4,579,300 2,583,800 4,709,200 3,449,100 898,500
Operating assets 51,567,500 47,851,800 49,145,100 49,177,700 46,612,300
Operating Liabilities
Total liabilities 60,853,500 56,439,000 58,455,300 60,451,700 55,721,100
Less: Short-term borrowings and current maturities of long-term debt 2,192,400 2,243,600 59,100
Less: Current finance lease liability 45,500 21,500
Less: Long-term debt, excluding current maturities 37,152,900 35,903,500 35,622,700 35,196,800 34,118,100
Less: Long-term finance lease liability 1,530,000 1,300,200
Operating liabilities 19,932,700 19,213,800 22,832,600 23,011,300 21,543,900
 
Net operating assets1 31,634,800 28,638,000 26,312,500 26,166,400 25,068,400
Balance-sheet-based aggregate accruals2 2,996,800 2,325,500 146,100 1,098,000
Financial Ratio
Balance-sheet-based accruals ratio3 9.94% 8.46% 0.56% 4.29%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Airbnb Inc.
Booking Holdings Inc. -468.72% -68.38% 2.00% -21.49%
Chipotle Mexican Grill Inc. 18.41% 18.43% 13.32% 28.47%
Starbucks Corp. 13.66% 10.72% -25.79% 45.93%
Balance-Sheet-Based Accruals Ratio, Sector
Consumer Services 5.15% -1.96% -0.80% -1.16%
Balance-Sheet-Based Accruals Ratio, Industry
Consumer Discretionary 11.73% 12.34% 15.91% 5.08%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

1 2023 Calculation
Net operating assets = Operating assets – Operating liabilities
= 51,567,50019,932,700 = 31,634,800

2 2023 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2023 – Net operating assets2022
= 31,634,80028,638,000 = 2,996,800

3 2023 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 2,996,800 ÷ [(31,634,800 + 28,638,000) ÷ 2] = 9.94%

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. deteriorated earnings quality from 2022 to 2023.

Cash-Flow-Statement-Based Accruals Ratio

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

US$ in thousands

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Net income 8,468,800 6,177,400 7,545,200 4,730,500 6,025,400
Less: Cash provided by operations 9,611,900 7,386,700 9,141,500 6,265,200 8,122,100
Less: Cash used for investing activities (3,184,500) (2,678,100) (2,165,700) (1,545,800) (3,071,100)
Cash-flow-statement-based aggregate accruals 2,041,400 1,468,800 569,400 11,100 974,400
Financial Ratio
Cash-flow-statement-based accruals ratio1 6.77% 5.35% 2.17% 0.04%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Airbnb Inc.
Booking Holdings Inc. -519.27% -67.03% -11.13% -40.67%
Chipotle Mexican Grill Inc. 24.18% 30.18% -9.35% 13.32%
Starbucks Corp. 12.06% 36.35% -47.73% 36.84%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Consumer Services 0.66% -4.61% -8.21% -15.73%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Consumer Discretionary 4.90% 1.96% 12.28% 3.83%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

1 2023 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × 2,041,400 ÷ [(31,634,800 + 28,638,000) ÷ 2] = 6.77%

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. deteriorated earnings quality from 2022 to 2023.