McDonald’s Corporation (MCD)
Solvency ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.70 | 0.66 | 0.71 | 0.66 | 0.67 |
| Debt-to-capital ratio | 1.11 | 1.15 | 1.20 | 1.15 | 1.29 |
| Debt-to-equity ratio | — | — | — | — | — |
| Financial leverage ratio | — | — | — | — | — |
The solvency ratios for McDonald's Corporation provide insights into the company's ability to meet its long-term financial obligations.
1. Debt-to-assets ratio:
- The debt-to-assets ratio measures the proportion of a company's assets financed by debt. From 2020 to 2024, McDonald's debt-to-assets ratio has fluctuated between 0.66 and 0.71, indicating that the company relies on debt for around 66% to 71% of its total assets. Overall, the ratio has remained relatively stable over the period, suggesting a consistent level of debt utilization in financing the company's operations.
2. Debt-to-capital ratio:
- The debt-to-capital ratio illustrates the extent of a company's capital structure supported by debt. McDonald's debt-to-capital ratio has gradually decreased from 1.29 in 2020 to 1.11 in 2024. This declining trend indicates that the company has been reducing its reliance on debt to fund its capital structure, which can be viewed positively as it implies a lower level of financial risk.
3. Debt-to-equity ratio:
- The debt-to-equity ratio reflects the proportion of a company's financing that comes from debt and equity. As the data indicates that the debt-to-equity ratio is not provided for the years 2020 to 2024, it is not possible to analyze the specific relationship between debt and equity in McDonald's capital structure over the period.
4. Financial leverage ratio:
- The financial leverage ratio measures the company's ability to meet its financial commitments using a combination of equity and debt. The absence of data for the financial leverage ratio for the years 2020 to 2024 suggests that the comprehensive assessment of McDonald's financial leverage is not available based on the provided information.
In conclusion, the analysis of McDonald's solvency ratios indicates a stable debt-to-assets ratio, a decreasing trend in the debt-to-capital ratio, and an absence of information on the debt-to-equity ratio and financial leverage ratio. This suggests that McDonald's has maintained a reasonably balanced approach to its long-term financial obligations, with potential improvements in the capital structure by reducing reliance on debt.
Coverage ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Interest coverage | 7.87 | 8.73 | 7.48 | 8.70 | 6.04 |
Interest coverage ratio measures a company's ability to meet its interest payments on outstanding debt. Based on the provided data for McDonald’s Corporation, the interest coverage ratio has been consistently strong over the five-year period from December 31, 2020, to December 31, 2024.
In December 31, 2020, the interest coverage ratio was 6.04, indicating that McDonald’s generated operating income 6.04 times greater than its interest expenses, demonstrating a moderate ability to cover interest obligations.
By December 31, 2021, the interest coverage ratio improved to 8.70, reflecting a significant increase in the company's ability to cover interest payments.
In the subsequent years, McDonald’s maintained a healthy interest coverage ratio, with values of 7.48 on December 31, 2022, 8.73 on December 31, 2023, and 7.87 on December 31, 2024. These ratios suggest that McDonald’s continued to generate robust earnings relative to its interest expenses, indicating a strong financial position and ability to meet its debt obligations.
Overall, the trend of increasing interest coverage ratios over the five-year period reflects McDonald’s Corporation's effective management of its debt and ability to generate sufficient profits to service its debt obligations.