Introduction
McDonald’s corporation is the world’s leading retail chain of fast food restaurants serving many customers in about 118 countries (Duchac, Reeve & Warren, 2010). The company reports high profits from the business, thus yielding substantial revenue for stock investment. Just like other successful companies, McDonald’s attracts investors by allowing stock investments as a way of diversifying and increasing its turnover. The business ensures the reporting of stock investment in the financial statements through various transparent ways at the end of every trading period. The proper recording of McDonald’s stock investments aims at maintaining the business’s good. This paper focuses on the reasons why McDonald’s would invest in stocks as well as debt securities.
Discussion
Considering the notable dividend yield, impressive profits, and strong cash flows, McDonald’s consistently reports its stock investment in the financial statement. The provision of financial statements is a requirement by law and the businesses’ many investors. Investors rely on the information to make informed decisions regarding their investments. The skilled professionals in McDonald’s utilizing cash flow statements, income statements, and balance sheets show the performance of the corporation in stock investment (Duchac et al., 2010). The reports on the financial statements indicate changes in performance of the stock investment as well as the financial position of the company. Cash flow statements show the inflows and outflows of transactions, as well as amounts to indicate the net cash flow that shows the financial performance of the company. In addition, balance sheets indicate the financial situation of the company in terms of its assets and liabilities. This strategy is useful in drawing income statements that show the profitability of the company’s investment. The reporting of the performance of stock investment in the financial statement is vital for prospective investors, because they require the information to decide on the viable areas for investment.
The McDonald’s corporation includes stocks and debt security investments in its portfolio due to the crucial benefits that accrue from them. Investing in debt securities such as bonds is more reliable compared to equity securities (Duchac et al., 2010). They are safer since the lender gets the principal amount upon maturity of the term. Through this strategy, debt securities also help preserve capital while still making investments. Stock and debt security investments provide steady returns to investors. Their returns are predictable as they mainly pay interest semi-annually. The interest rates from investing in stocks and debt securities are favorable in the end as compared to other sectors. Furthermore, the trading of stocks and debt securities is electronic, thus easing the process of investment while attracting potential investors. These benefits provide the rationale why McDonald’s corporation can heavily invest in stocks and debt securities.
Conclusion
Owing to the corporation’s remarkable performance, McDonald’s way of reporting its stock investment on the financial statements is of interest to many businesses that emulate it, therefore it is necessary for ensuring its continued operational success. The drawing of various charts to represent the stock, market, and dividend performance of the corporation enhances the reporting of stock investments in the financial statements. Given McDonald’s impressive profits, as well as the many benefits of stock and debt securities investments, it will be convenient for the business to venture into the investment. This move will be significant in ensuring that McDonald’s remains the leading chain of fast food hamburger restaurant.
Reference
Duchac, J., Reeve, J., & Warren, C. (2010). Financial Accounting: An Integrated Statements Approach. Connecticut: Cengage Learning Publishers.