McDonalds 2006 financial statements contain the following selected data (in millions).
|
Current assets |
$ 3,625.3 |
Interest expense |
$ 402.0 |
|
Total assets |
29,023.8 |
Income taxes |
1,293.4 |
|
Current liabilities |
3,008.1 |
Net income |
3,544.2 |
|
Total liabilities |
13,565.5 |
Instructions
(a) Compute the following values and provide a brief interpretation of each.
(1) Working capital.
(2) Current ratio.
(3) Debt to total assets ratio.
(4) Times interest earned ratio.
(b) The notes to McDonald’s financial statements show that subsequent to 2006 the company will have future minimum lease payments under operating leases of $11,119.8 million. If these assets had been purchased with debt, assets and liabilities would rise by approximately $9,900 million. Recompute the debt to total assets ratio after adjusting for this. Discuss your result.