Reporting debt securities, common stock, equity, and any financial activities on financial statements is a common practice by the McDonald’s corporation which has assisted them to plan true financial growth. Debt securities are reported on financial statements which are on a McDonald’s balance sheet. Accounting professionals should classify the different types of debt security since it will require a different accounting method. Some the debt securities will fall under current assets and non-current assets.McDonald’s is bound by following the generally accepted accounting principles or GAP like any other company as debt security is accounted for. McDonald’s Corporation has an estimated 900,000 shareholders and records stock as common stock on their balance sheet ender liabilities. McDonald’s discloses the par value of the stock that is shared with investors.
Common stock has a par value that is required amount needed to contribute to the purchase the shares.The par value is very similar to a stock price, the difference is that the stock price is what it is bought and sold in the stock market. Today McDonald’s common stock value is going for $1 01. 99 a share and it is trading for SSL 03.
59. Previous recorded high for McDonald’s in stock has been record as $102. 41 for a record fifty-two weeks and the report low has been $83. 31 for fifty-two weeks.
McDonald’s stockholders’ equity is listed on the balance sheet. The common stock has a value $101. 99, with 1. 0 billion shares that are outstanding.In their financial statement they authorize the amount that the McDonald’s corporation reports to the state the numbers of shares they will be selling and their price. Typically the state is the one that authorizes the shares. McDonald’s corporations must release the amount of shares it is planning to authorize. The total common stock equity for McDonald’s is valued at fifteen billion dollars and has seen a nine percent increase over the last four years.
On the balance sheet retained earnings totaled thirty-two billion dollars and have seen an eight percent increase on average over the last for years.McDonald’s discloses the number of issued shares any number of shares issued on their financial statement. Looking at McDonald’s consolidated statements of operations show a net income five billion and a net income of $5.
41 per share. The diluted value is at $5. 36 per share.
Dividends that were declared per common share totaled seventy cents per share in 2012 by their board of directors. The consolidated statements of cash flows record payment of vividness on common stock to shareholders.Payment of dividends on common stock totaled 32. 9 billion in 2012.
The McDonald Corporation would invest in stock and debt securities to earn more money until the corporation decides to invest money into certain projects of their own. They can also decide to return the cash back to the shareholders in the form of stock purchase or dividends. The investment in debt securities could perhaps be a hedge against their own interest rate exposure.
The corporation’s relative risks and rewards of equity versus debt securities are various.On one hand, gassing cash through debt is considered to be cheaper as the company takes out a loan for a period of time, which the company either pay (or accrue) interest over the life of the loan. It is also considered cheaper because the Interest on the debt can be deducted on the company’s tax return, lowering the actual cost of the loan to the company. At term, you pay it all back, it is off the books and the company keeps the ownership of the company.
Additionally, if the company is successful, the owners will benefit a larger portion of the rewards than they would if they had sold stock in the company to investors.The risk of raising cash through debts is it makes the company a weak position where it usually must pledge its assets to the lender as collateral and the owner can even have to guarantee repayment of the loan. On the other hands, raising cash through equity means that you will give up pieces of your company to shareholders through common or preferred stocks and if the company makes is big and is very successful you can expect the same return that it would if you had not ceased your shares. You don’t use the company assets as collateral and the owners don’t have to guarantee personally repayment of the loan.In the most recent K of MacDonald, we can see that the number of shareholders of record and beneficial owners of the Company’s common stock as of January 31, 2011 was estimated to be 1 MacDonald is a successful that reached maturity and was quickly profitable; hence they reinvest the cash needed and the cash left is distributed to shareholders as we can see read in K excerpt below : “Given the Company’s returns on equity, incremental invested capital and assets, management believes it is prudent to reinvest in the business in markets with acceptable returns and/or opportunity for long-term growth ND use excess cash flow to return cash to shareholders through dividends, share repurchases or a combination of both. The Company has paid dividends on common stock for 35 consecutive years through 201 0 and has increased the dividend amount at least once every year.
As in the past, future dividend amounts will be considered after reviewing profitability expectations and financing needs, and will be declared at the discretion of the Company’s Board of Directors” (MacDonald, 201 2) As we have previously mentioned, equity and debt securities are financial instruments that assist companies to ease cash and finance their operations. One on hand, debt securities are legal obligations to repay borrowed funds at a specified maturity date and provide interim interest payments as specified in the agreements such as commercial papers, bonds, loans, debentures, and Treasury bills among others. The benefits for companies of Issuing debt securities are that the interests paid are tax-deductible, indeed they are expensed hence the company pays less tax. Also, issuing debts protect companies from losing control over operations since no equity has been handed.On the other hand, debt securities increase the probability of bankruptcy and expected bankruptcy costs; indeed, it reduces the financial flexibilities due to negative covenants for example.
While, equity securities represent an ownership and stake in a company, such as common and preferred shares. Shareholders are entitled to dividends from post-tax earnings, which are taxed at a lower rate than interest payments received for bonds. However they receive dividends only after every creditor has been paid. In summary, today’s financial corporations like McDonald’s use debt securities, and stock investments to assist them with n increasing capital and future profits from maturity of investments.McDonald’s uses financial statement to chart their future plans and report financial transactions, common stock, investments, debt securities on financial statements provides a good snapshot current financial standing and provides stockholders important transparent information. McDonald’s has shown a financial performance improvement over the last four years which has improved confidence by investors on the market Financial managers for McDonald’s have done a good job analyzing the risks of investments, equity and debt securities. Common stock has yielded McDonald’s very positive returns along with providing stockholders dividends.
McDonald’s corporation has shown that their leaders and accounting professionals have strong understanding of the difference between equity and debt securities which has assisted their global growth and has made McDonald’s a household name.