Management Efficiency Ratios: Burger King vs. McDonalds

This paper seeks to compargon Burger King (BK) with its competitor McDonald (MCD) in the restaurant manufacture, development their financial statements as basis in toll of profitability and circumspection power ratios for the latest fiscal year. This will also discuss the purpose of operating court, evaluate the annual and closing results of the 2 companies, and interpret BK as take over target compared with its competitors. Burger Kings profitability is plain lower than MCD.Based on net profit margin for year 2008, BK had 7. 3% as compared with MCDs 18. 3% for the same year. The same fashion may be observed in impairment of pre-tax margin, where BK had 11% as against that of MCD at 26. 2 % for the same year. It is only in terms of gross margins that BK has exceeded that of MCD but the net margin and pre-tax margin are better ways to measure profitability as expenses need to be deducted further.For purposes of comparing the net profit margin and pre-tax margin of the two c ompanies against the industry average, BK is worse but MCD is definitely better. The Return of Asset (ROA) of BK is 7. 1% for the 2008 and is lower than that of MCD, which reflected ROA of 14. 9% for the same year. The results of these ratios further confirmed preliminary observation in net profit margin. The same better profitability is further observed in terms of Return of Equity (hard roe) where BK showed 22. 2% for 2008, which is still lower than MCDs 30.1% for 2008. While ROA measures how in force(p) concern a beau monde is in terms of assets employed in business, ROE measures how much management is compensating resources invested by stockholders, the results would still reinforce earlier determination that BK, is less(prenominal) profitable and less efficient than MCD. The less profitability and efficiency of BK as against MCD is also further proven in terms of the formers lower receivable turnover of 18. 67 for 2008 as against 23. 7 for MCD and 46. 8 for industry averag e.Inventory turnover for BK is not likely because of its absence of inventory for 2008 while that of MCD, the figure is over 100 multiplication for 2008, which is even high than industry average. Even if no comparison could be made in terms of inventory turnover, in that respect is sufficient enjoin to show better profitability and efficiency for MCD as against BK. To discuss the notion of operating cost for operating a business, the same must be minimized in order to maximize profits since costs or expenses must be deducted from revenues in order to derive profit.The lower the cost, the higher would be the profit assuming revenues are the same. To evaluate the annual and year-end results of the two companies and interpret BK as takeover target compared with its competitors, there is need to look at profitability and management efficiency of the two companies. As found out, BK was less profitable and less efficient than MCD. However, a company wishing to take over another compa ny does not necessarily follow that it can also take over a better competitor of the target for many reasons.What must be controlling on the part of the company making the takeover is the judge profit of the takeover, both over the short and the longer-term, and which should be higher than the cost of capital or operating cost in order to cut the takeover. It can be concluded that BK may be less profitable and less efficient than its competitor MCD may, but if the profitability of BK could improve the profitability and efficiency of both the acquired and the acquired company combined unneurotic after the takeover, there is still justification to continue the takeover of BK.ReferencesMSN (2009a) fiscal Ratios of Burger King, www document URL http//moneycentral. msn. com/investor/invsub/results/compare. asp? Symbol=US%3aBKC, Accessed April 17, 2009.MSN (2009b) fiscal Ratios of McDonalds, www document URL http//moneycentral. msn. com/investor/invsub/results/compare. asp? Symbol=MCD, Accessed April 17, 2009.