Accounting analysis

Profitability
- Profit Margin
 Gross margin = gross profit or income/ net sales
 EBIT (Operating) Margin = EBIT or Operating profit / net sales
 EBTIDA Margin = EBITDA/net sales
 Pre-tax margin = pre-tax profit or income/net sales
 Net profit (Income) Margin = net profit or income/ net sales
- Returns
 Return on Asset (ROA) = net income/ total assets
 Return on Sales (ROS) = net profit or income / net sales
 Return on Equity (ROE) = net income/BV of equity
Liquidity
- Current ratio = current assets / current liabilities
- Quick ratio = current assets – inventories/current liabilities
- Cash ratio = cash +marketable investment / current liabilities

Asset Utilization or Activity

- Total assets turnover = net sales/total assets
- Inventories turnover = COGS/Inventories
o Average inventories days = 365/inventories turnover
- Receivable turnover = net sales/receivables
o Average receivable collection period = 365/ receivable turnover
- Payable turnover = COGS or inventory purchase/ trade payables
o Payables payment period = 365 / payable turnover
- Fixed assets turnover = net sales/fixed assets
- Cash conversion cycle = Inventory days + Receivable collection period – Payables
payment period

Leverage or Solvency
- Debt to Assets = total debt/ total assets
- Financial leverage = total equity/ shareholder’s equity
- Interest coverage = EBIT/interest expense

Why

- Current ratio = current assets / current liabilities

- Quick ratio = current assets – inventories/current liabilities
- Cash ratio = cash +marketable investment / current liabilities

Liquidity ratios are used to determine a company’s ability to pay-off current debt obligations
without raising external capital.
Current ratio is used to
Cash ratio is used to evaluate a company’s ability to pay-off its short-term debt.

- Total assets turnover = net sales/total assets

- Fixed assets turnover = net sales/fixed assets
-
- Cash conversion cycle = Inventory days + Receivable collection period – Payables
payment period
-

Leverage or Solvency
- Debt to Assets = total debt/ total assets
- Financial leverage = total equity/ shareholder’s equity
- Interest coverage = EBIT/interest expense

 Gross margin = gross profit or income/ net sales

 EBIT (Operating) Margin = EBIT or Operating profit / net sales

Net income
ROA
ROE

Ratio 2020 2021 2022

Current ratio 1.01X 1.78X 1.43X
Quick ratio 1.00X 1.76X 1.41X
Cash ratio 0.56X 1.17X 0.68X
Total Asset Turnover 0.36X 0.43X 0.46X
Fixed Asset Turnover 0.50X 0.61X 0.64X
Inventory Turnovers (Days) 185.04X 191.42X 191.83X
(1.97 DAYS) (1.91 DAYS) (1.90 DAYS)
Receivable Turnover (Days) 9.10X 12.40X 10.96X
(40.1 DAYS) (29.43 DAYS) (33.30 DAYS)
Payable Turnover (Days) 12.76X 10.57X 10.18X
(28.61 DAYS) (34.53 DAYS) (35.87 DAYS)
Cash Conversion Cycle (Days) 13.46 -3.19 -0.66
Debt ratio 0.98X 0.92X 0.97X
Financial Leverage Ratio -6.73X -11.70X -8.40X
 Interest Coverage -5.14X -7.33X -7.57X
Gross Margin 50.77% 54.17% 56.97%
EBIT Margin 38.91% 42.51% 44.62%
Net Margin 24.63% 32.49% 26.65%
ROA 8.99% 14.01% 12.25%
ROE -60.45% -163.99% -102.90%
Beta

Yum!Brand 2022
Chipotle Mexican Grill 2022

2022
Ratio McDonald’s Yum!Brand Chipotle
Current ratio 1.43X 0.97X 1.28X
Quick ratio 1.41X 0.97X 1.24X
Cash ratio 0.68X 0.24X 1.25X
Total Asset Turnover 0.46X 1.17X 1.25X
Fixed Asset Turnover 0.64X 3.58X 1.64X
Inventory Turnovers (Days) 191.83X 191.83X
(1.90 DAYS) 0 (1.90 DAYS)
Receivable Turnover (Days) 10.96X 10.56X 80.77X
(33.30 DAYS) (34.57 DAYS) (4.52 DAYS)
Payable Turnover (Days) 10.18X 14.55X 28.5X
(35.87 DAYS) (25.09 DAYS) (12.81 DAYS)
Cash Conversion Cycle (Days) -0.66 9.48 -5.81
Debt ratio 0.97X 2.17X 0.54X
Financial Leverage Ratio -8.40X -0.66X 2.93X
Interest Coverage -7.57X -7.57X -2952.75X
Gross Margin 56.97% 48.33% 39.07%
EBIT Margin 44.62% 31.89% 13.68%
Net Margin 26.65% 23.74% 10.41%
ROA 12.25% 22.7% 13.0%
ROE -102.90% -14.9% 38%
Beta 0.77 1.22 1.32