Essay Example: Financial Statement of Cash Flows Report of McDonald's

2 pages
540 words
Sewanee University of the South
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McDonalds Corporation in the year 2016 the company had faced many challenges and stiff competition from the competitors in the food industry. Despite the challenges, there has been an increase in net income compared to that of 2015. For the year ended December 31st, 2016 net income was $4,686,500 while that of 2015 was $4,529,300. From the information provided by the cash flows statement, the sources of cash flows of McDonalds Corporation comes from its operating activities which earn the company enough credit to fund any kind of expense. Therefore, meaning that the company is able to pay its debts, dividends as well and meet its obligations. This is so because the market for McDonalds is big and readily available with many outlets around the country of the US and Canada. This shows there was a 7% decrease in the cash flows in 2016 caused by high-income taxes. The year 2015 there was a decrease in cash of 3% provided by operations offset partly by high net income the amount being $191 million. In 2016 investing activities used a total of $982 million. This was a decrease of $438 million compared to 2015. In 2015 the cash used for investing totaled to $1.4 billion. $11.3 billion was used for financing activities in 2016, which was an increase of $12 billion compared to 2015. The decrease was due to net income borrowings and purchase of treasury stock. $735 million was provided by financing activities in the year 2015 with a $5.4 billion increase. The balance of cash and cash equivalents of the company was $1.2 billion and $7.7 billion for 2016 and 2015 year end respectively. High net borrowings caused the decrease in 2015 which was used in 2016 for share repurchases.

The operations of McDonalds are affected by the economic conditions which can impact the spending habits of consumers thus lowering the number of sales made every year. From the operating income expense, McDonald's has been affected negatively from the year 2014 to 2016. The results were negative since the British pound was weak for the year 2016. In 2015, the weaker Euro affected the results negatively and in 2014, the weaker Russian Ruble together with Australian Dollar and some other currencies affected the results negatively.

Revenues of the company are comprised of restaurants operated franchisees fees and company-operated restaurants. The company is speeding up the process of franchising in order to optimize the mix of owning a restaurant, generate a stable stream of cash flow and predictable revenue. Revenues decreased in the year 2016 to 3% and due to refranchising activities partly offset by positive sales. A decrease of 7% in 2015 was seen and an increase of 3% in currencies constantly due to the translation of foreign currency.

The operating income expense net in the year 2016 increased while in 2015 net income expenses and asset dispositions gained a profit of $135 million generated from the property of restaurants sold in the US.

From the overall data shown in the statement of cash flows, it is agreeable for one to conclude that McDonalds Corporation is able to meet its obligations, pay its debts and dividends to the stakeholders.

Annual Income Statement (values in 000)Cash Flow

Period ended12/31/201612/31/2015

Net Income$4,686,500$4,529,300

Cash Flows-operating Activities


Net Income Adjustments($310,400)($286,200)

Changes in Operating Activities

Accounts Receivables($159,000)($180,600)

Changes In Inventories$28,100$44,900

Other Operating Activities$0$0


Net Cash Flow-Operating$6,059,600$6,539,100

Cash Flows-Investing Activities

Sales and Purchase of Stock($10,871,600)($5,782,000)

Net Borrowings$2,670,400$9,755,200

Other Financing Activities($3,000)($58,700)

Net Cash Flow-Financing($11,262,400)$735,300

Effect of Exchange Rate($103,700)($246,800)

Net Cash Flow($6,288,100)$5,607,600

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