McDonald’s Corp. (NYSE:MCD)

The analysis of the financial ratios over the five-year period reveals several notable trends in the company's leverage and coverage metrics.

Debt to Capital

The debt to capital ratio shows a gradual decline from 1.26 in 2020 to 1.10 in 2024, indicating a modest reduction in the proportion of debt relative to total capital. This downward trend suggests an improving capital structure with potentially lower financial risk over time.

Debt to Capital Including Operating Lease Liability

When operating lease liabilities are included, the debt to capital ratio similarly decreases from 1.18 in 2020 to 1.08 in 2024. This mirrors the trend observed without operating leases, reinforcing the notion of a slightly deleveraging stance by the company.

Debt to Assets

The debt to assets ratio experienced more fluctuation. It decreased from 0.71 in 2020 to 0.66 in 2021, then increased to 0.74 in 2022, before stabilizing around 0.73 in the subsequent years. This pattern might indicate variations in asset base or debt levels that affect this ratio differently than debt to capital.

Debt to Assets Including Operating Lease Liability

Including operating lease liabilities, the debt to assets ratio follows a similar trend but remains consistently higher, ranging from 0.98 in 2020 to 0.94 in 2024. Although it shows a slight decrease over the period, the high ratio highlights the significance of lease obligations in the company's overall liabilities.

Interest Coverage

The interest coverage ratio improved from 6.04 in 2020 to a peak of 8.73 in 2023, before slightly declining to 7.87 in 2024. This indicates an enhanced ability to meet interest expenses from operating earnings over most of the period, reflecting potentially stronger earnings or lower interest expenses.

Fixed Charge Coverage

Fixed charge coverage also shows improvement, rising from 3.28 in 2020 to 4.62 in 2023, followed by a small decrease to 4.35 in 2024. This trend suggests a better capacity to cover fixed financial obligations, including lease-related charges, progressing positively over time.

Overall, the data indicates a gradual reduction in leverage ratios accompanied by an improvement in the ability to meet interest and fixed charges. The relatively high debt to assets ratios when including operating leases highlight the importance of lease liabilities in the financial structure. Nonetheless, the coverage ratios demonstrate a consistently solid capacity to service debt and fixed charges throughout the period analyzed.

The data reveals several notable trends in the financial structure over the five-year period.

Total Debt

The total debt experienced fluctuations, initially decreasing from $37,440 million in 2020 to $35,623 million in 2021. Thereafter, it increased steadily, reaching a peak of $40,921 million in 2023 before slightly declining to $40,205 million in 2024. Overall, the total debt displayed a net increase across the period, indicating a rising reliance on borrowed funds after a brief reduction.

Shareholders’ Equity (Deficit)

Shareholders' equity showed persistent negative values, signifying a deficit throughout the period. This deficit improved from -$7,825 million in 2020 to -$4,601 million in 2021, suggesting some reduction in the equity deficit. However, in 2022, it worsened again to -$6,003 million before decreasing to -$4,707 million in 2023 and -$3,797 million in 2024. The overall trend points to fluctuations but a general improvement in the equity deficit over the five years.

Debt to Equity Ratio

Due to the absence of specific debt to equity ratio data, a precise ratio cannot be calculated. Nevertheless, given the negative shareholders’ equity and consistently high total debt levels, the debt to equity ratio would effectively be negative or undefined. This situation typically reflects a high financial risk profile and suggests the company is heavily leveraged, relying substantially on debt financing compared to equity capital.

In summary, the financial data suggests increasing total debt with improving but still negative shareholders’ equity, indicative of ongoing financial challenges related to equity deficits and leverage. The company's capital structure appears to be predominantly debt-oriented, which could impact financial stability and risk.

The data reveals several key trends related to McDonald’s Corp.'s financial position from the end of 2020 through the end of 2024.

Total Debt

The total debt, including operating lease liabilities, experienced fluctuations over the observed period. It started at $51,463 million at the end of 2020 and decreased to $49,349 million in 2021, followed by a further decline to $48,699 million in 2022. However, this trend reversed in 2023, when total debt rose notably to $53,091 million, before slightly decreasing again to $51,948 million in 2024. Overall, total debt remained within a relatively stable range but showed a U-shaped pattern, with a trough occurring in 2022.

Shareholders’ Equity (Deficit)

Shareholders’ equity was negative throughout the period, indicating a deficit. The deficit improved from -$7,825 million at the end of 2020 to -$4,601 million in 2021, showing a significant reduction in the negative equity position. Despite a setback in 2022 when the deficit worsened to -$6,003 million, it improved again in the subsequent years, reaching -$4,707 million in 2023 and -$3,797 million in 2024. This trend suggests a gradual recovery in net equity, although it remained in negative territory at the end of 2024.

Debt to Equity Ratio

The debt to equity ratio data is not provided directly, but given the negative shareholders' equity throughout the period, calculation of a meaningful debt to equity ratio is complicated. The negative equity values imply that the conventional debt to equity ratio would be negative or undefined, as equity is used as the denominator. This negative equity context indicates potential financial distress or significant liabilities exceeding assets over these years, suggesting that debt levels relative to net assets remain a point of concern despite the observed improvements in equity deficit.

In summary, total debt showed a rebound after decreasing for two years, while shareholders' equity remained negative but demonstrated signs of gradual improvement. The absence of a reported debt to equity ratio likely results from the persistent negative equity, which complicates traditional leverage analysis. These observations point to a company navigating through a challenging financial structure with ongoing liability management efforts and incremental equity recovery.

Total Debt

The total debt exhibited some fluctuations over the examined period. Initially, it decreased from 37,440 million US dollars in 2020 to 35,623 million in 2021, followed by a modest increase to 37,225 million in 2022. Subsequently, the total debt rose more significantly to 40,921 million in 2023, before slightly declining to 40,205 million in 2024. Overall, the debt level experienced a recovery and growth trend after a brief decline.

Total Capital

Total capital showed a general upward trajectory throughout the period. Starting at 29,616 million US dollars in 2020, it increased steadily each year to reach 36,408 million by the end of 2024. The most notable increment occurred between 2022 and 2023, indicating possible infusion of capital or retained earnings strengthening the capital base.

Debt to Capital Ratio

The debt to capital ratio demonstrated a consistent improvement in the company's leverage position. The ratio declined from 1.26 in 2020 to 1.10 in 2024, indicating a gradual reduction in relative debt burden against the capital base. After a decline in 2021, the ratio slightly increased in 2022 but resumed its downward trend thereafter, suggesting effective management of financial leverage and capitalization during the latter years.

The data reveals the following trends and observations over the five-year period from December 31, 2020, to December 31, 2024:

Total debt (including operating lease liability)

The total debt showed a generally decreasing trend from 2020 through 2022, falling from approximately 51,463 million US dollars in 2020 to 48,699 million US dollars in 2022. However, this was followed by an increase in 2023 to 53,091 million US dollars, before a slight decrease to 51,948 million US dollars in 2024. Overall, the debt level fluctuated but remained within a relatively narrow range over the period.

Total capital (including operating lease liability)

Total capital modestly increased from 43,638 million US dollars in 2020 to 44,748 million US dollars in 2021, then decreased to 42,696 million US dollars in 2022. Subsequently, it rose to a peak of 48,384 million US dollars in 2023 before a minor decline to 48,151 million US dollars in 2024. This pattern indicates some volatility in capital structure with a notable recovery after 2022.

Debt to capital ratio (including operating lease liability)

The ratio decreased from 1.18 in 2020 to 1.10 in 2021, indicating an improvement in leverage or a shift in the capital structure reducing the proportionate debt level. It then slightly increased to 1.14 in 2022, followed by a reduction to 1.10 in 2023 and further improvement to 1.08 in 2024. This overall downward trend in the debt to capital ratio suggests a gradual enhancement in financial stability and a somewhat lower reliance on debt as a component of total capital by the end of the period.

Total Debt

The total debt exhibited fluctuations over the reported periods. Initially, there was a decrease from 37,440 million US dollars in 2020 to 35,623 million in 2021, followed by an increase in 2022 reaching 37,225 million. The upward trend continued more markedly in 2023, peaking at 40,921 million, before a slight decrease to 40,205 million was observed in 2024.

Total Assets

Total assets showed variability across the years. From 52,627 million US dollars in 2020, assets increased slightly to 53,854 million in 2021. However, there was a notable decline in 2022 to 50,436 million. Subsequently, assets rose again, reaching a high of 56,147 million in 2023, before tapering off to 55,182 million in 2024.

Debt to Assets Ratio

The debt to assets ratio presented a general pattern of fluctuation. It declined from 0.71 in 2020 to 0.66 in 2021, indicating improved asset coverage relative to debt. This was followed by an increase to 0.74 in 2022, signaling higher leverage. The ratio then stabilized at 0.73 in both 2023 and 2024, suggesting a consistent level of leverage in the most recent years.

Summary of Financial Position Trends

Overall, the data reflect a dynamic financial structure with periods of debt reduction and accumulation. Total assets did not follow a linear path, showing both decreases and increases that influenced the leverage ratios. The debt to assets ratio’s movement indicates periods of both deleveraging and increased leverage, with recent years maintaining a stable, moderately high level of debt relative to assets. This suggests that the entity has managed its balance sheet to optimize leverage while responding to asset base changes.

Over the observed five-year period, the total debt including operating lease liability exhibited a fluctuating but generally stable trend. Starting at 51,463 million US dollars in 2020, it saw a slight decrease by 2021 to 49,349 million US dollars, followed by a further small decline in 2022 to 48,699 million US dollars. This was followed by an increase in 2023 to 53,091 million US dollars, before settling again at 51,948 million US dollars in 2024. Overall, the total debt remained within a narrow range, indicating relatively consistent leverage levels.

Total assets demonstrated some variability over the period. The figure was 52,627 million US dollars in 2020, increased moderately to 53,854 million US dollars in 2021, then declined to 50,436 million US dollars in 2022. From 2022 onwards, total assets rose to 56,147 million US dollars in 2023, before a slight reduction to 55,182 million US dollars in 2024. This pattern indicates a degree of asset base volatility but with a general upward trend in the latter years.

The debt to assets ratio, which incorporates operating lease liabilities, showed a decline from 0.98 in 2020 to 0.92 in 2021, suggesting an improvement in the company's capital structure relative to its assets. However, it increased again to 0.97 in 2022, then decreased to 0.95 in 2023 and slightly further to 0.94 in 2024. These movements imply fluctuations in leverage but with a gradual improvement in the ratio after 2022, reflecting a better balance between debt and assets.

In summary, while total debt remained relatively stable with minor fluctuations, total assets showed some volatility but increased towards the end of the period. Consequently, the debt to assets ratio reflected this dynamic, initially improving, then rising, and finally showing a gradual improving trend, indicating a cautious but steady management of leverage relative to assets.

The analysis of the provided annual financial data reveals several notable trends and developments over the five-year period ending December 31, 2024.

Total Assets

The total assets of the company experienced moderate fluctuations. Starting at $52,627 million in 2020, assets slightly increased to $53,854 million in 2021 before declining to $50,436 million in 2022. Subsequently, assets rose notably to $56,147 million in 2023, followed by a marginal decrease to $55,182 million in 2024. Overall, the asset base demonstrated resilience with intermittent variability, ending the period largely higher than the initial value.

Shareholders’ Equity (Deficit)

Shareholders’ equity remained negative throughout the period, indicating a deficit each year. The deficit improved from -$7,825 million in 2020 to -$4,601 million in 2021, suggesting an initial recovery or reduction in liabilities relative to assets. However, in 2022, the equity deficit worsened to -$6,003 million before moderately improving again to -$4,707 million in 2023 and further to -$3,797 million in 2024. This pattern shows volatility but an overall trend toward decreasing equity deficit, implying gradual strengthening of the company’s net asset position despite remaining in negative territory.

Financial Leverage

Financial leverage data is not available for the reported years, limiting the ability to analyze the company's use of debt in relation to equity and assets.

In summary, the company maintained a relatively stable total asset base with some fluctuations, while the shareholders’ equity remained negative but showed signs of improvement over the period. The lack of financial leverage information restricts a more comprehensive assessment of capital structure risk and leverage changes. The gradual reduction in equity deficit could indicate positive progress in financial health that merits further monitoring and analysis when additional data become available.

Earnings before interest and tax (EBIT)

The EBIT showed an overall upward trend from 2020 to 2024. Starting at 7,359 million USD in 2020, it significantly increased in 2021 to 10,314 million USD. In 2022, there was a decline to 9,032 million USD, followed by a recovery and growth in 2023 to 11,883 million USD. In 2024, EBIT slightly decreased to 11,851 million USD but remained close to the previous year's peak. This indicates that the company generally improved its operating profitability, albeit with some fluctuations.

Interest expense, net of capitalized interest

Interest expense remained relatively stable between 2020 and 2022, fluctuating marginally around the 1,200 million USD level. However, from 2022 onwards, there was a noticeable increase, rising to 1,361 million USD in 2023 and further to 1,506 million USD in 2024. This upward trend suggests a rising cost of debt or increased borrowing during the latter years.

Interest coverage ratio

The interest coverage ratio, which measures the ability to meet interest obligations from EBIT, improved markedly from 6.04 in 2020 to 8.7 in 2021, reflecting better coverage driven by higher EBIT and stable interest expenses. In 2022, it decreased to 7.48, aligning with the drop in EBIT that year. It rebounded to 8.73 in 2023 due to strong EBIT growth but declined again to 7.87 in 2024 as interest expenses rose and EBIT slightly decreased. Despite some volatility, the ratio remained generally strong, indicating that the company maintained adequate capacity to cover interest expenses throughout the period.

Earnings before Fixed Charges and Tax

The earnings show an overall upward trend from 2020 to 2024, increasing from 8,838 million USD to 13,433 million USD. The growth is notable, with a peak in 2023 at 13,425 million USD, followed by a slight increase in 2024. There was a decline in 2022 compared to 2021, but the earnings quickly rebounded in the subsequent years.

Fixed Charges

Fixed charges exhibit a gradual increase over the five-year period, rising from 2,697 million USD in 2020 to 3,088 million USD in 2024. The increase is steady but moderate, indicating a consistent rise in obligations related to fixed financial costs.

Fixed Charge Coverage Ratio

The fixed charge coverage ratio improves significantly from 3.28 in 2020 to a high of 4.62 in 2023, before slightly declining to 4.35 in 2024. This indicates the company’s increasing ability to cover its fixed charges with earnings before interest and taxes up to 2023, with a minor reduction in coverage efficiency in the final year analyzed, though still at a strong level.