Research Project - McDonald's Corporation

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Business shrinkage

In 2015, for the first time in more than 40 years, MdC reported that the number of U.S. restaurants it has is shrinking. And McD closed more restaurants in the U.S. than it opened in 2015. The possible cause would be increasing operating cost as well as the health diet mentality across consumers in U.S. It somehow dim the outlook of future years of the McD operation if the business wouldn't optimize the ingredient and offer healthier / low calories menu.

Part Four - Entity performance

Financials and stock performance

The market has the mixed performance review for McDonald's Corp. Zacks Investment, an notable investment firm, reports a Hold recommendation for stock investment in recent month. The reasons are the following. McD has 15% Earn Per Share (EPS) Growth compared to previous year and approximately 17% compared to previous quarter. EPS is one of the most important indicators for the stock performance. However, sales growth has went down 4% in compare with the same time frame in previous year. The following graphic illustration of financial performance clearly demonstrates the financial situation of McD.

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Sales revenue has been gradually increased and peaked at 2013 then followed a down-trend. McD reported 25413 million in sales in 2015 fiscal year in compared with 27441 million in 2014. It showed around 7.4% decreasing. Similarly, net income in 2015 was reported as 4529 million in compare with 4758 million globally in 2014 fiscal year, with 4,7% decrease. Another warning sign comes from net cash flow from operating activity, which indicate cash inflows and outflows from a McD's main business activities of buying and selling merchandise, providing services has been lower than previous years.

Credit Rating

In Dec 2,2015, Moody's assigns Baa1 to McDonald's proposed senior unsecured debt offerings. The Baa1 rating initiated at Nov 1,2015, when moody's downgrades McD unsecured ratings to Baa1 and commercial paper affirmed at Prime-2 with stable outlook. And previously at May 15,2015, Moody's downgrades McD unsecured ratings to A3 and commercial paper to Prime-2 with stable outlook.

Future Outlook

McD's Chief Executive Officer Steve Easterbrook addressed the future outlook to shareholders. Some of the highlights are mentioned as below.

- Four operating principles were introduce– customer-centricity, simplicity, progress over perfection and personal accountability. These assist business mode to reassert McDonald’s leadership

- Re-emphasize quality, service and cleanliness in the restaurants to improve order accuracy, and simplified drive-thru menu boards

- Outlook is positive since the management’s strategy is to franchise 93 percent of its restaurants as opposed to the present 81 percent, from 3,500 restaurants to 4,000 restaurants, by 2018

- Maintain the goal of repositioning McDonald’s as a modern, progressive burger company and improving consumer perceptions of quality

Part Five - Internal Controls Information

McDonald's Corporation has a set of standard of business conduct, which include Internal Control measures in place to protect enterprise's asset.

Assets Protection

McD has guideline for employees to advise employees not use company computers or network that could compromise the security or integrity of company's information or software. Also, McD forbid employees take advantage of company's property, information or position for personal gain. Furthermore, McD advise employees not to loan, borrow, donate, sell or dispose of any company property unless specifically authorized by the officer in charge.

Conflict of Interest

As policy clearly indicated in employee guideline, doing business with family and friends may lead to conflict of interest. Employee must disclose any potential conflict of interest to both of supervisor and global compliance office. Also, outside employment or other business arrangements must not interfere with the job duty.

McD would not pay bribes or provide anything of value that may influence or appear to influence the judgment or actions of another. Also, employees at all levels cannot seek or accept bribes, kickbacks or any improper payments. Not only employees but immediate family members of company employee. In fact, for more than three decades, the U.S. Foreign Corrupt practices Act (“FCPA”) has applied to McDonald’s business operations nationally and globally. The FCPA requires that all publicly-traded

companies such as McD maintain a system of internal controls and books and records that accurately reflect every transaction. Employees who violate the law or the Standards of Business Conduct are subject to disciplinary action, up to and including termination of employment.

Electronic Communications Usage

McD launched an effective electronic communication system in order to appropriately monitor all communications and information created, received, saved or sent on McDonald’s systems due to protection motive to protect property of the company. The company will randomly perform monitoring of individual employee usage. Under such circumstances, employees have no personal right to privacy in any material created, received, saved or sent using the company’s e-mail or computer systems, nor an expectation of privacy in such communications.

Work Cited

https://www.thestreet.com/story/13845909/1/mcdonald-s-mcd-stock-lower-faces-increasing-pressure-from-gourmet-burger-chains.html. Accessed 15 Oct 2016

http://www.mcdonalds.com/ .Accessed 15 Oct 2016

https://webcache.googleusercontent.com/search?q=cache:QuBo_mIWb0kJ:https://www.mcdonalds.com/dam/AboutMcDonalds/Investors/9497_SBC_International_EN-US%2520v2%2520final%2520061311.pdf+&cd=1&hl=en&ct=clnk&gl=us. Accessed16 Oct 2016