QUESTION 15 For the following question, please refer to the attached spreadsheet. This sheet contains income statements and balance sheets for McDonald's and Yum! Brands (Yuml owns fast food chains KFC, Taco Bell, and Pizza Hut). These financial statements are actual statements taken from the U.S. Securities and Exchange Commission's database--for those of you who have only seen financial data presented in a textbook, it may take a couple minutes getting used to the format. Which company provides a more attractive return? Justify your answer by calculating appropriate financial ratios and stating the numbers you've calculated Lell Styles Clipboard Font Styles 111 X for McDonald's Corporation 2016 Annual Report Consolidated Statement of Income Years ended December 31 2016 2015 2014 $ 1529500 $ 16.488 30 9.326.90 8.924.70 24.621 90 25.413.00 $ 18.160.30 9.272.00 27.441.30 In millions, except per share data REVENUES Sales by Company-operated restaurants Revenues from franchised restaurants Total revenues OPERATING COSTS AND EXPENSES Company operated restaurant expenses Food & paper Payrol & employee benefits Occupancy & other operating expenses Franchised restaurants occupancy expenses Selling general & administrative expenses Other operating (income) expense, net Total operating costs and expenses Operating income Interest expense-net of capitalized interest of $7.1. 59.4 and $14.7 Nonoperating (income) expense, net Income before provision for income taxes Provision for income taxes Net income Earnings per common share-basic Earnings per common share-diluted Dividends declared per common share Weighted average shares outstanding basic Weighted average shares outstanding-diluted 4,896.90 4,134 20 3,667.70 1.718.40 2,384 50 7570 16,877 40 7.744.50 5,552 20 4.400.00 4,024.70 1.646.90 2.434 30 209.40 18.267 50 7.145.50 16 6,129.70 4.756 00 4.402.60 1,697 30 2.487 90 18.60 19.492.10 7.949 20 22 23 88480 638 30 576.40 (630) (48.50) 0.80 6,866,00 6,556.70 7.37200 2.179.50 2026.40 2614 20 4 686 50 $ 4.529 30 $ 4.757 80 5.495 4825 485 5.44 $ 480 $ 482 361 $ 344 5 854 40 939 40 980.50 861 20 944.60 986 30 26 12/31/2016 12/31/2015 $ Consolidated Balance Sheet In millions, except per share data ASSETS Current assets Cash and equivalents Accounts and notes receivable Inventores, at cost, not in excess of market Prepaid expenses and other current assets Assets of businesses held for sale Total current assets Other assets Investments in and advances to attes McDonalds Yum! 1.223.40 1.474 10 58 90 565.20 1,527.00 48-48 60 $ 7,685 50 1298 70 100.10 558.70 9.643 00 725 90 792 70 CU yles Clipboard Font Styles 58.90 $ 1.223.40 $ 7,685.50 1.474 101 298.70 100.10 56520 558.70 1,527 00 4848 60 9643 00 725 90 2,336,50 1,855.30 4.917.70 79270 2,516.30 1,869.10 5.178.10 34.443.40 37.692.40 (13,18580) (14,574 80) 21,257.60 23,117 60 $ 31,023 90 $37.938 70 A 34 Current assets Cash and equivalents Accounts and notes receivable Inventories, at cost, not in excess of market Prepaid expenses and other current assets Assets of businesses held for sale Total current assets Other assets Investments in and advances to amates Goodwil Miscellaneous Total other assets Property and equipment Property and equipment, at cos! 48 Accumulated depreciation and amortuation 49 Net property and equipment Total assets LIABUTIES AND SHAREHOLDERS' EQUITY Current abilities Accounts payable Income taxes Other ses Accrued interest Accrued payroll and other bites Current matures of long-term debt Labelties of businesses held for sale Tot current l es 61 Long term debt 62 Other long term bites Deferred income taxes 64 Shareholders' equity deficit) Preferred stock, no par value authorized - 1650 milion shares 66 issued - none Common stock, 5.01 par value authored - 3.5 billion shares 68 sued - 1660 6 milion shares 69 Additional paid in capital 70 Retained earnings Accumulated other comprehensive income Common stock in treasury a cost 841 3 and 753 8 min To Shareholders' equity (deficit) 74 Total abates and shareholders' equity deficit) $ 874.70 154 80 309.00 233 10 1.378.80 756.00 26720 266.30 247.50 1.159.30 77 20 694 80 3.468 30 25,878 50 2064 30 1817 10 59 295040 24 122 10 2.074 00 1,704 30 16.60 6,757.00 46.222.70 (3.09290) (52,108 60) (2.204 30) $31023 90 16 60 6,533 40 50450 (2 879 80) (41,176.80) 7.087.90 37 938 70 73 McDonalds Yum! 2/2/2020 134 O CDE Yum! Brands Consolidated and Combined Statements of Income (Loss) - USD ($) Sin Millions 12 Months Ended Dec 31, Dec. 31, Dec 31, 2016 2015 2014 Revenues Company sales $6,622 $6,789 $6,821 Franchise fees and income 130 120 113 Total revenues 6,752 6,909 6,934 Costs and Expenses, Net Food and paper 1,919 2,159 2,207 Payroll and employee benefits 1432 1,386 1,407 Occupancy and other operating expenses Company restaurant expenses General and administrative Franchise expenses Closures and impairment expenses, 10 13 (56) (26) (51) 17 18 19 20 6,112 6,931 11 22 Refranchising gain, net Other income, net Total costs and expenses, net Operating Profit Interest income, net Changes in fair value of financial instruments Income Before Income Taxes Income tax provision Net Income (loss) - including noncontrolling interests Net income (loss)-noncontrolling interests Net Income (Loss) - Yum China Holdings, Inc. Basic Earnings (Loss) Per Common Share Diluted Earnings (Loss) Per Common Share 672 (158) (168) (37) (30) $ 502 $ 323 S (7) $0.89 S(0.02) 51.36 50.89 S(0.02) Consolidated and combined Balance Sheets USD 15) Sin Millions Dec. 31. 2016 Dec 31 2015 33 S885 $ 425 35 36 Current Assets Cash and cash equivalents Short-term investments Accounts receivable, net Inventories, net Prepaid expenses and other current 38 39 40 41 Total Current Assets Property, plant and equipment, net Goodwill Intangible assets, net 1.647 S 0.89 $10.02) Basic Earnings (Loss) Per Common Share Diluted Earnings (Loss) Per Common Share $0.89 (0.02) Consolidated and Cognbined Balance Sheets USD ($) $ in Millions 30 Dec. 31. Dec 31, 2016 2015 1.647 7985 88107 21 116 32 Current Assets 33 Cash and cash equivalents 34 Short-term investments 35 Accounts receivable, net 36 Inventories, net Prepaid expenses and other current assets 38 Total Current Assets Property, plant and equipment, net Goodwill Intangible assets, net Investments in unconsolidated affiliates Other assets Deferred income taxes Total Assets Current Liabilities Accounts payable and other current liabilities Income taxes payable Total Current Liabilities Capital lease obligations 51 Other liabilities and deferred credits Total Liabilities Redeemable Noncontrolling Interest Equity Common stock, So 01 par value; 1000,000,000 shares authorized; 383.344 335 42 shares issued and outstanding at December 31, 2016 56 Treasury stock Additional paid-in capital 58 Retained earningsta) 59 Parent Company Investmentb) Accumulated other comprehensive 1004 1,216 2,352 1.791 1,921 62 63 Total Equity - Yum China Holdings Noncontrolling interests Total Equity Total Liabilities, Redeemable Noncontrolling Interest and Equity 1.979 53.201 McDonalds Yum