Financial Statement Analysis

Ratio Analysis

Liquidity Ratio

December 31, 2016 December 31, 2015 December 31, 2014

Current Ratio 1.87 2.52 2.39
Quick Ratio .95 1.40 1.40

Liquidity ratios are an important class of financial metrics used to determine a debtor's ability to pay off
current debt obligations without raising external capital. We deemed it best to use Current and Quick
Ratio for the analysis on liquidity.

Current Ratio is the ratio of Current Asset over Current Liabilities which measures a company's ability to
pay short-term obligations or those due within one year. On the year ended December 2014 figures have
shown a current ratio of 2.39 following an increase of .13 leading to a 2.52 ratio at year 2015. Despite a
decrease to 1.87 on the year 2016 the company has the ability to settle its short term obligations.

Leverage/ Solvency Ratio

December 31, 2016 December 31, 2015 December 31, 2014

Debt to Asset 2.38 1.49 1.04
Debt to Equity .58 .51 .51

Solvency Ratios help determine a company’s ability to settle its long-term obligations with the resources
contributed by its equity and debt holders. There are various solvency ratios to determine if the company
has the means to stay solvent in the long run. Deb-to-asset ratio indicates the proportion of a company's
assets that are being financed with debt, rather than equity. Used hand in hand with the previous one is a
Debt to Equity ratio which provides another vantage point on a company's leverage position, in that it
compares total liabilities to shareholders' equity as opposed to total assets in the debt ratio.
Profitability Ratio

December 31, 2016 December 31, 2015 December 31, 2014

Gross Profit Margin 38.43% 34.65% 35.31%
Net Profit Margin 16.33% 15.59% 16.83%
Return on Asset 4.64% 4.83% 5.15%
Investment

Profitability ratios are frequently used to measure the company’s ability to generate earnings and profits
as compared to its expenses and other costs.

It is a rule of thumb that the higher the Gross Profit Margin the better for the company, the figures show
a slight decrease in GPM during 2014-2015 which is then recuperated by a 3 percent increase in the year
2016.

On the other hand, the Net profit margin (NPM) is the percentage of net profit over the company’s net
sales. The NPM during the course of three years has decreased slightly which signifies that the company
is slightly ineffective in controlling its costs and/or provide goods or services at a price significantly
higher than its costs.

Lastly, return on asset incestment is the ratio of net profit to total assets - measures the degree of
efficiency in the use of resources to generate net income.
Production and Operation

GADC, the master franchise holder of McDonald’s brand in the Philippines, reported a 62% surge in net
profit to P1.2 billion from P760 million a year ago as revenues climbed 12% to P22.8 billion.
This all-time high is achieved from the opening of 44 new restaurants (22 companyowned,
17 franchised, 1 joint venture), renovation of existing restaurants, expansion of business extensions
(delivery service, drive-thru, dessert centers, midnight hours and breakfast daypart), the introduction of
new products (Chicken Fillet ala King, Cheesy Eggdesal, Mushroom
Soup) and the continuous marketing and promotions of core menu. The new and improved Burger McDo
was introduced on May 27, 2016.

The new restaurants contributed about 3% to total system sales while business extensions comprise 23%
of the total. Drive-thru is the extension which has the biggest contribution of 12% of total revenues. There
were 520 restaurants operating by the end of 2016, as compared to 481 restaurants a year ago, out of
which 275 were company owned and operated as compared to 254 a year ago.