Question

Liquidity Analyses for McDonald’s and Wendy’s

The following information was summarized from the balance sheets included in Form 10-K of McDonald’s Corporation at December 31, 2015, and The Wendy’s Company and Subsidiaries at January 3, 2016.

		McDonald’s		Wendy’s
		(in millions)		(in thousands)
Current Assets:
Cash and cash equivalents*		$ 2,112		$ 253,912
Accounts and notes receivable		1,221		69,690
Inventories		113		8,832
Prepaid expenses and other current assets		796		73,343
Advertising funds restricted assets				62,643
Total current assets		$ 4,242		$ 468,420
Total current liabilities		$ 2,629		$ 348,455
Total noncurrent liabilities		$19,551		$2,078,834
Total shareholders’ equity**		$12,590		$1,728,155

*Described as ‘‘Cash and equivalents’’ by McDonald’s.

**Described as ‘‘Stockholders’ equity’’ by Wendy’s.

Required:

1. Using the information provided, compute the following for each company at year-end:

1. Working capital. Enter amounts for McDonalds in millions, Wendy's in thousands.
2. Current ratio. Round your answers to two decimal places.
3. Quick ratio. Round your answers to two decimal places.

	McDonald's	Wendy's
a. Working capital	$	$
b. Current ratio
c. Quick ratio

Answer 1

A. Working Capital= Current assets- Current liabilities

McDonald's =$4,242 - $2,629 =$1,613

Wendy's =$468,420 - $348,455 =$119,965

B. Current Ratio = Current assets/ Current liabilities

McDonald's =$4,242/$2,629 =1.61 times

Wendy's =$468,420/$348,455 =1.34 times

C. Quick ratio = Quick Assets/ Current liabilities

McDonald's =$3,333/$2,629 =1.26 times

Wendy's =$323,602/$348,455 =0.92 times

Quick assets = Cash and cash equivalents + Accounts and notes receivable

____×____

All the best