Analysis of Liquidity Ratios
Liquidity ratios measure the company ability to meet its short-term obligations.
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- Statement of Comprehensive Income
- Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Return on Equity (ROE) since 2005
- Price to Operating Profit (P/OP) since 2005
- Analysis of Debt
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Liquidity Ratios (Summary)
McDonald’s Corp., liquidity ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Current ratio | ||||||
| Quick ratio | ||||||
| Cash ratio |
Based on: 10-K (reporting date: 2024-12-31), 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).
The analysis of the liquidity ratios over the five-year period reveals notable fluctuations and an overall trend that suggests variations in short-term financial stability and cash management.
- Current Ratio
- The current ratio increased markedly from 1.01 in 2020 to a peak of 1.78 in 2021, indicating a substantial improvement in the company's ability to cover short-term liabilities with current assets during that year. However, after 2021, the ratio declined to 1.43 in 2022 and further decreased to 1.16 in 2023, stabilizing slightly at 1.19 in 2024. This downward trend after the peak suggests a reduction in current assets relative to current liabilities, possibly reflecting tighter working capital conditions or changes in asset composition.
- Quick Ratio
- The quick ratio showed a similar pattern to the current ratio, rising significantly from 0.90 in 2020 to 1.64 in 2021, indicating an increased capacity to meet short-term obligations without relying on inventory. Following this peak, the quick ratio declined consecutively to 1.24 in 2022, then to 1.03 in 2023, and further down to 0.90 in 2024. The steady decline implies a decrease in liquid assets excluding inventory, pointing toward a potentially more cautious liquidity stance or a decrease in highly liquid assets over the last three years.
- Cash Ratio
- The cash ratio experienced the most pronounced volatility. It more than doubled from 0.56 in 2020 to 1.17 in 2021, reflecting a strong liquidity buffer in terms of cash and cash equivalents at the start of the period. Thereafter, it dropped sharply to 0.68 in 2022 and remained nearly flat at 0.67 in 2023, before plunging to 0.28 in 2024. This significant decline in the final year indicates a considerable reduction in cash reserves relative to current liabilities, which may reflect strategic cash deployment, increased liabilities, or other operational factors impacting cash levels.
In summary, liquidity ratios showed a substantial improvement in 2021, suggesting optimal liquidity conditions during that time. Subsequently, there has been a general downward trend, particularly in the cash ratio, indicating a tightening liquidity position in more recent years. This could warrant closer monitoring of short-term liquidity management and cash flow strategies moving forward.
Current Ratio
McDonald’s Corp., current ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Current assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Current ratio1 | ||||||
| Benchmarks | ||||||
| Current Ratio, Competitors2 | ||||||
| Airbnb Inc. | ||||||
| Booking Holdings Inc. | ||||||
| Chipotle Mexican Grill Inc. | ||||||
| Starbucks Corp. | ||||||
| Current Ratio, Sector | ||||||
| Consumer Services | ||||||
| Current Ratio, Industry | ||||||
| Consumer Discretionary | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 2024 Calculation
Current ratio = Current assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
- Current Assets
- Current assets exhibited fluctuation over the five-year period. Starting at 6,243 million USD in 2020, there was a noticeable increase to 7,149 million USD in 2021, followed by a sharp decline to 5,424 million USD in 2022. The figure rebounded in 2023, reaching 7,986 million USD, the highest value in the time span, before dropping again to 4,599 million USD in 2024. This pattern indicates variability in the company's short-term asset base with significant year-to-year changes.
- Current Liabilities
- Current liabilities decreased from 6,181 million USD in 2020 to 4,020 million USD in 2021, followed by a slight reduction to 3,802 million USD in 2022. However, liabilities surged to 6,859 million USD in 2023, then fell sharply to 3,861 million USD in 2024. These fluctuations suggest inconsistent short-term borrowing or obligations management across the periods.
- Current Ratio
- The current ratio showed variability but remained generally above 1.0 throughout, indicating a stable ability to cover current liabilities with current assets. It started near parity at 1.01 in 2020, improved significantly to 1.78 in 2021, and slightly decreased to 1.43 in 2022. The ratio declined further to 1.16 in 2023 and held steady at 1.19 in 2024. Despite fluctuations, the ratio's position above 1 suggests the company maintained a prudent liquidity position overall, although the downward trend after 2021 could imply a relative tightening of liquidity.
Quick Ratio
McDonald’s Corp., quick ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and equivalents | ||||||
| Accounts and notes receivable | ||||||
| Total quick assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Quick ratio1 | ||||||
| Benchmarks | ||||||
| Quick Ratio, Competitors2 | ||||||
| Airbnb Inc. | ||||||
| Booking Holdings Inc. | ||||||
| Chipotle Mexican Grill Inc. | ||||||
| Starbucks Corp. | ||||||
| Quick Ratio, Sector | ||||||
| Consumer Services | ||||||
| Quick Ratio, Industry | ||||||
| Consumer Discretionary | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 2024 Calculation
Quick ratio = Total quick assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
The annual financial data indicates variability in the company's liquidity position over the observed period.
- Total Quick Assets
- There is a fluctuating trend in the total quick assets, with an initial increase from 5,559 million USD in 2020 to 6,582 million USD in 2021, followed by a decline to 4,699 million USD in 2022. The value then rises again to 7,067 million USD in 2023 before sharply dropping to 3,468 million USD in 2024. This pattern shows inconsistency in the liquid resources available for immediate obligations.
- Current Liabilities
- Current liabilities also show considerable fluctuation. A significant decrease occurred from 6,181 million USD in 2020 to 4,020 million USD in 2021, with a slight further reduction to 3,802 million USD in 2022. However, liabilities surged back to 6,859 million USD in 2023 and decreased again to 3,861 million USD in 2024. This irregular movement suggests varying levels of short-term obligations over time.
- Quick Ratio
- The quick ratio, representing the ability to cover current liabilities with quick assets, follows a similar fluctuating trend. It rose significantly from 0.9 in 2020 to 1.64 in 2021, indicating improved liquidity. Subsequent years show a decline to 1.24 in 2022 and a near parity level of 1.03 in 2023, finally returning to 0.9 in 2024, the same as in 2020. This reveals that the company’s short-term liquidity improved markedly in 2021 but deteriorated back to the initial level by 2024.
Overall, the data suggests the company experienced periods of improved liquidity and reduction in short-term liabilities, notably in 2021, but these gains were not sustained in later years. The reduced quick assets and corresponding decrease in quick ratio by 2024 signal a return to tighter liquidity conditions, which may warrant further monitoring and analysis to manage operational and financial risk effectively.
Cash Ratio
McDonald’s Corp., cash ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Cash and equivalents | ||||||
| Total cash assets | ||||||
| Current liabilities | ||||||
| Liquidity Ratio | ||||||
| Cash ratio1 | ||||||
| Benchmarks | ||||||
| Cash Ratio, Competitors2 | ||||||
| Airbnb Inc. | ||||||
| Booking Holdings Inc. | ||||||
| Chipotle Mexican Grill Inc. | ||||||
| Starbucks Corp. | ||||||
| Cash Ratio, Sector | ||||||
| Consumer Services | ||||||
| Cash Ratio, Industry | ||||||
| Consumer Discretionary | ||||||
Based on: 10-K (reporting date: 2024-12-31), 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).
1 2024 Calculation
Cash ratio = Total cash assets ÷ Current liabilities
= ÷ =
2 Click competitor name to see calculations.
- Total cash assets
- The total cash assets exhibited notable fluctuations over the five-year period. Initially, there was an increase from 3,449 million to 4,709 million US dollars between 2020 and 2021. This was followed by a sharp decline to 2,584 million in 2022. In 2023, cash assets recovered to 4,579 million, but a significant drop occurred in 2024, reaching a low of 1,085 million. These variations indicate a volatile liquidity position with substantial decreases in the most recent year.
- Current liabilities
- Current liabilities showed a less volatile pattern than cash assets but still experienced considerable changes. From 6,181 million in 2020, the liabilities decreased substantially to 4,020 million in 2021, followed by a smaller decline to 3,802 million in 2022. However, in 2023, current liabilities surged to 6,859 million, almost returning to the 2020 level, before falling again to 3,861 million in 2024. The pattern indicates oscillations in short-term obligations, with peaks in 2020 and 2023.
- Cash ratio
- The cash ratio, a measure of liquidity calculated as cash assets divided by current liabilities, exhibited considerable variability. It rose sharply from 0.56 in 2020 to a peak of 1.17 in 2021, suggesting strong immediate liquidity during that year. Subsequently, the ratio declined to 0.68 in 2022 and remained relatively stable around 0.67 in 2023. A marked decrease to 0.28 in 2024 reflects a weakened liquidity stance, indicating that cash assets cover less than a third of current liabilities at the end of the period. This decline may signal potential challenges in meeting short-term liabilities solely with cash resources.