Recent Developments in International Financial Environment and Financial Analysis of MacDonald

This article analyzes the impact of recent developments in the international financial environment on MacDonald's performance. It discusses the company's response to the Covid-19 pandemic and supply chain inefficiencies. The article also includes a financial analysis of MacDonald, including its dividend policy, sources of finance, and ratio analysis.

International Finance

Table of Contents
Introduction .....................................................................................................................................3
Section-A.........................................................................................................................................3
Critically discuss two recent developments in the international financial environment which
appear to have impacted on your chosen company’s recent performance and development
along with its impact...................................................................................................................3
Development 1: The Global Pandemic – Covid-19....................................................................3
Development 2: Supply Chain Inefficiencies.............................................................................4
Strategy implementation in order to rationalize the impact of the Supply Chain Inefficiencies 4
Section – B.......................................................................................................................................4
Dividend Policy...........................................................................................................................4
Sources of Finances.....................................................................................................................5
Section – C.......................................................................................................................................6
Ratio Analysis.............................................................................................................................6
Conclusion.....................................................................................................................................11
References......................................................................................................................................12
Books & Journals......................................................................................................................12

Introduction
International finance is considered as an important concept that helps in assessing the monetary
transactions between the different nations. The area on which the concept of international finance
majorly focuses on the area of foreign direct investment along with the exchange rates of
currency. For the purpose of conducting the present study , MacDonald is taken into
consideration. Macdonald is an American company which is having huge number of retail
outlets around the world. For the purpose of the analysis of study, the evaluation of the financial
performance of Macdonald is given consideration. Also, the different risks and its management
which are in relation to the different sources of finance and dividend policy has been critically
evaluated.
Section-A
Critically discuss two recent developments in the international financial environment which
appear to have impacted on your chosen company’s recent performance and development
along with its impact.
Development can be defines as progressive change that helps in the enhancement of the
performance of an individual or an institution at a considerable level (Floreani and Habib, 2018).
The two key developments which have helped MacDonald in order to address the major
inefficiencies or the disruption to achieve higher level of efficiency in its business operations are
mentioned below:
Development 1: The Global Pandemic – Covid-19
The global pandemic covid 19 has been considered as an infectious disease which have spread
across the whole world and resulted into the tremendous amount of losses. In context to
MacDonald, there was a decline in the annual revenues of the company which therefore reduced
the annual profitability of the company extensively. As per the annual reports of te respective
business organization the global sales of the company have decreased considerably by 7.7% as a
result of Covid – 19. also, the net income of the company got decreased from 21% to $4.7 billion
which has ultimately resulted into the dilution of the earning of the company oer every common
share reduced 20% to $6.31 billion. In this way almost all the parts of this business giant have
been affected to a major context.
Strategy implementation in order to rationalize the impact of the Covid-19.

In order to mitigate the impact of the global pandemic covid-19, various strategies have been
implemented and executed by Macdonald. In response to this global pandemic, it has made all
the decisions in regards to guidelines prescribed by the government of all the country in which
MacDonald is operating (Ding, and et. al., 2019). The company also mobilized the leadership
teams which were capable to make better and effective decisions. It has also provided general
support to the managers so that the overall employee support can be accelerated effectively.
Development 2: Supply Chain Inefficiencies
The supply chain issues are considered as serious which affects the working of the business
organization severely. In context to MacDonald, volatile supply chains have affected the
bushiness performance to a greater level. Also, this has caused severe disruptions in running the
operations of the business effectively. In case of BREXIT, it is also expected that the supply
chain costs will also increase which may put a financial burden on the company. The company
have faced shortage issue in the supply chain which have adversely affected the suppliers as well
the whole business structure. This has resulted in the increment in the costs of production along
with putting a limit to the availability of the products.
Strategy implementation in order to rationalize the impact of the Supply Chain Inefficiencies
In order to deal with the supply chain inefficiency, the company have outsourced its functions
related to the supply chain management operations. It helped in dealing with the problems
mentioned in the above mentioned inefficiency. It also helped the respective bsuiness
organization to build better offerings and also dealing with the incremental costs of supply chain
became easier with outsourcing.
Section – B
Dividend Policy
A dividend policy can be considered as an important profit tactic which is used by a business
organization in order to structure the earnings payable to the investors of the company. The
Company have increased its quarterly cash dividend per share almost by 3% to $1.29 for the
fourth quarter of the year which is equivalent to the annual dividend of $5.16 per share as per the
annual report of the MacDonald. In the year 2020, the Company have returned approximately
$4.6 billion back to the shareholders majorly in the form of dividends paid. The company have
paid the dividends to the shareholders with an increment which is disclosing that the company

have delivered an acceptable amount of revenue in the form of dividend. Also this have resulted
in increment in the delivery of the value to the customers.
Sources of Finances
It can be defined as the activity that is made to deal with the requirements of the company on the
financial grounds (Styhre, 2020). This helps in covering the short as well as long term
requirements of the company which can be for different requirements. Sources of finance help an
organization to meet its financial obligations in an effective manner.
Sources of finance for MacDonald
Similar to all the other giant business ventures, MacDonald also funds the operations of the
company with the help of debts and equity. These are considered as the key sources of funds.
The major source of funds for MacDonald is sales proceed. The company is using its proceeds
from sales is being used to finance the various expansion projects effectively. The amount is
considered as the retained earning majorly. The company is also using the owners saving to
finance its operations for the purpose of disposal. In case of the external sources of finance, the
company is getting finances from the partnership ventures along with the bank loans and the
debenture loans. The detailed amount of these finances obtained is mentioned below in the
Statement of Balance Sheet.
Illustration 1: Statement of Dividend

MacDonald is having an optimal structure of capital which is explaining that it is having an
efficient combination of debt and equity financing which is majorly helping the firm in
maximizing the value of the company by delivering more to the shareholders and on the other
hand minimizing the cost of capital (Ortiz and Muniesa, 2018). MacDonald is having the major
objective to minimize the cost of weighted average so that the company can have lowest cost for
the purpose of financing.
Section – C
Ratio Analysis
 Profitability Ratio
 Return on capital employed: It is considered as an important ratio which is
helped for the purpose of financing, valuation and accounting. The major
objective of this ratio is to assess the relative profitability of the company on the
basis of capital utilized.
Formula Calculation
Profit before interest and taxes /
capital employed * 100
2019 2020
Illustration 2: Statement of Balance Sheet

9069.8 / 47510.8
- 3621.0 * 100
7,324.0/ 52,626.8-
6,181.2* 100
Result 20.664% 15.768%
INTERPRETATION: The difference between the ratios of 2019 & 2020 is at a
high level of difference. In the year 2019, the ROCE was 20.664% stating a
higher value of the company showing the capability to return back the value to the
stockholders as compared to the year 2020 with 15.768% representing a lesser
capacity to return back to the stakeholders. Therefore, there is a downfall in the
presentation.
 Operating Profit Margin: It can be defined as a type of profitability ratio which
is having an objective of showing the amount of percentage profits that the
company has the capability to generate out of its business procedures before
decreasing all the taxes and interest charges (Dorsman, Ediger and Karan eds.,
2018).
Formula Calculation
Operating Profit / Net Sales * 100 2019 2020
9,069.8 /
21,364.4*100
7,324.0 /
19,207.8*100
Result 42.452 % 38.130 %
INTERPRETATION: Although, the difference between the ratios of 2019 & 2020
is holding not a high level of difference. The operating profit margin must be higher
than 15% which is considered as good. In case of critical comparison between both
the years, the operating profit ratio was slightly higher and better in the year 2019
with 42.452 % as compared to 38.130 % in the year 2020.

 Return on equity: This ratio can be defined as the assessment tool of level of
profitability of the business organization in relation to the value of the equity
(Prasad, 2021). This ratio can be considered as return on the assets deducted from
liabilities of the establishment.
Formula Calculation
Net income / shareholders’ equity 2019 2020
21,364.4 / 7,824.9 19,207.8 / 8,210.3
Result 2.730 2.339
INTERPRETATION: The ratio in the year 2019 is at a higher side stating 2.730
stating that the company was in a better situation to generate profits as compared
to the year 2020 with the value of 2.339.
 Efficiency Ratio
 Inventory turnover ratio: This ratio is specifically utilized for the purpose of the
measurement of how many times the stock is being sold or it is used in the
financial period of a financial year (Haggard, Maxfield and Lee, eds., 2019). This
specific ratio is intended to examine that whether the business association is
having the extreme inventory as compared to its level of sales.
Formula Calculation
COGS / Average Inventory 2019 2020
12,294.6 / 101.3 /
2
11,883.8 / 101.3 / 2
Result 60.684 58.656
INTERPRETATION: Comparing performance of both the years, 2019 was
comparatively improved condition stating that the business is undergoing better cash

flow with 60.684 as it was earning on high sales as compared to the year 2020 with
58.656.
 Receivable Turnover Days: This is one of the accounting analytical tool for the
ratio calculation which is utilized for the measurement of the company’s
effectiveness to extend finances or credits as well as gathering amount overdue).
This ratio is basically ides by the company in order to analyse the efficiency to
utilize its assets in the business operations.
Formula Calculation
Net credit sales / Average accounts
receivables
2019 2020
21,364.4 /
2,224.2 /2
19,207.8 / 2,110.3 /
2
Result 4.802 4.550
INTERPRETATION: The company’s capacity to recompense off its arrears
became weaker in the year 2020 as the ratio went down to 4.550 from 4.802 in the
year 2019 respectively. Therefore, it can be considered that the performance was
comparatively better in the year 2019.
 Liquidity Ratio
 Current Ratio: This is one of the type of liquid ratio that assists in analysing the
financial liquidity status of the business organization in order to examine the
capability of the business to compact with the short term financial responsibility
for up to one financial year (Kellner and Rösch, 2019).
Formula Calculation
Current assets / current liabilities 2019 2020
3,557.9 / 3,621.0 6,243.2 / 6,181.2

Result 0.982 1.010
INTERPRETATION: The current ratio in the year 2020 is competent for the
particular company with less risk as the current assets were greater than the
current liabilities. While the ratio in the year 2019 was 0.982 which shows that the
business was having lesser assets as well as lesser liabilities compared to the year
2020.
 Quick Ratio: It is also known as acid test ratio which majorly helps in measuring the to
utilizing its cash as well as the quick assets to salary off the current liabilities of the
business.
Formula Calculation
Quick assets / current liabilities 2019 2020
3,557.9 - 50.2 /
3,621.0
6,243.2- 51.1 /
6,181.2
Result 0.968 1.001
INTERPRETATION: The quick ratio in the year 2020 was better and higher in
the year 2019 because in the year 2019 the business was able to pay off its
liabilities with company's liquid resources less competently as compared to the
year 2020 with 1.001. While this was representation of a weak financial position
on the basis of liquid resources or assets.
 Gearing Ratio: These are the ratios that benefits in computing the monetary leverage of
the business association in order to judgmentally examine the degree to which the
business operations are sponsored majorly through the equity capital and debt capital.
Name of the Ratio Formula Calculation
Gearing Ratio Non-Current Liabilities /
Non-Current Liabilities +
2019 2020
52100/ 52100 54270.5 /

Total Equity * 100 + (8,210.3)
*100
54270.5 +
(7,824.9)
*100
Results 118.706% 116.847%
INTERPRETATION: The gearing ratio shows 118.706 % of debt in 2019 while
116.847 % of debt in the year 2020. It can be seen that the MacDonald was highly
leveraged in the year 2019 with higher amount of debt.

Conclusion
From the above analysis done in the report, it can be concluded that the financial performance of
the company MacDonald has been satisfactorily performing well with high level of
efficiency. The balance sheet as well as the income statement have disclosed a healthy
financial position of the company with high level of operational effectivity. It can also be
clearly considered that MacDonald is a great and major player in the retail food industry
with substantial level of productivity amongst all the competitors in the industry.

References
Books & Journals
Floreani, V. A. and Habib, M. M., 2018. The euro area bias and the role of financial
centres. International Journal of Finance & Economics, 23(3). pp.233-256.
Ding, H., and et. al., 2019. The relationship between international trade and capital flow: A
network perspective. Journal of International Money and Finance, 91. pp.1-11.
Styhre, A., 2020. Thinly and thickly capitalized projects: Theorizing the role of the finance
markets and capital supply in project management studies. Project Management
Journal, 51(4). pp.378-388.
Ortiz, H. and Muniesa, F., 2018. Business schools, the anxiety of finance, and the order of the
‘middle tier’. Journal of Cultural Economy, 11(1). pp.1-19.
Dorsman, A. B., Ediger, V. Ş. and Karan, M. B. eds., 2018. Energy Economy, Finance and
Geostrategy. Springer International Publishing.
Prasad, E. S., 2021. The Future of Money: How the Digital Revolution is Transforming
Currencies and Finance. Harvard University Press.
Haggard, S., Maxfield, S. and Lee, C. H. eds., 2019. The politics of finance in developing
countries. Cornell University Press.
Kellner, R. and Rösch, D., 2019. A country specific point of view on international
diversification. Journal of International Money and Finance, 98. p.102064.