McDonald's Financial Situation, Future Possibilities, and Operational Issues
Overview
People should understand the impact of different types of risk on financial health, whether they’re dealing with personal or corporate finances. The risks for personal finance often only affectindividuals and families. These risks come up, for example, when deciding whether you can afford to buy a house or invest in stocks. Financial risks for businesses often affect multiple people throughout the entire company. This includes individuals who do not work in the finance department. When businesses make finance-related decisions, it’s important that they know how their decisions affect all parts of their company.
Directions
Go to McDonald's ("the company") Financial Information webpage.Under SEC Filings, locate and download the quarterly report (Form 10-Q) with the most recent Filing Date. Then write a response.
Specifically, you must address the following rubric criteria:
Systematic and Unsystematic Risk: Explain the differences between systematic and unsystematic risk.
Financial Risks: Describe the potential impacts of the following types of financial risk on the company based on the quarterly report: Interest rate risk
Economic risk Credit risk Operational risk
Lower Growth Impact: Explain the impact that a lower growth in sales could have on the dividend policy and retained earnings for the company based on the quarterly report.
Higher Growth Impact: Explain the impact that a higher growth in sales could have on the dividend policy and retained earnings for the company based on the quarterly report.
What to Submit
Your submission should be a 2- to 3-page Word document with 12-point Times New Roman font, double spacing, and one-inch margins. Sources should be cited according to APA style.
The Financial Data for McDonald's
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Introduction
Individuals and corporations must understand risk management and financial well-being. Personal or strategic financial decisions need a full awareness of the effect of various risks. Economic hazards extend beyond the finance division and influence numerous organization sections for corporations like McDonald's. This essay will investigate systematic and unsystematic risk and its ramifications by examining McDonald's most recent quarterly report. Additionally, it will explore the implications of other financial risks, such as interest rates, economic circumstances, credit, and operations, and examine how sales growth affects retained profits and dividend policies. This report gives useful information on McDonald's financial situation, future possibilities, and operational issues.
Systems Risk and Nonsystematic Risk
Systematic risk, referred to as market risk, describes dangers built into the economy or market as a whole and cannot be eliminated via diversification. It encompasses elements like interest rate fluctuations, economic recessions, political unrest, and natural calamities and impacts the entire market or a single industry. However, Unsystematic risk, usually called specialized risk, is distinctive to a given business or sector. Investing in a varied portfolio may be diversified away (Iscru, 2019). Product recalls, labor unrest, management changes, and legal actions are examples of unsystematic risk.
Financial Peril
Interest rate risk is the potential of interest rate variations hurting an organization's financial health. If McDonald's has loans, higher interest rates may raise the cost of borrowing, reducing profitability (Singh, 2019). In addition, decreased consumer spending may result from rising borrowing rates, which could impact McDonald's sales—economic risk concerns how the economy is generally doing and how it will affect a firm. Economic growth, inflation, unemployment rates, and customer confidence may impact McDonald's business operations and financial performance. Consumer spending may decline in a down economy, affecting the company's sales and profitability.
Credit risk implies the likelihood of loss if customers or business partners fail to meet...