Every corporation has to deal with finances and the distribution of resources. The management and selection of priorities is what differentiates one business from another.
Investments and budgeting techniques must be advantageous in order for further development and growth. McDonald’s is a corporation that has been rather successful in managing its finances and other resources, as can be seen from its popularity and well established economical base.
It is obvious that McDonald’s Corporation has been wise in managing its resources and continuing its development worldwide. The fact that it can diversify and adjust to the environment and the demanding market shows that the management is able to figure out what consumers want. A rather straightforward employment has allowed for lower salaries which lead to more cash flow.
The capital is used to open up new locations over the world and the evidence is seen in the following: McDonald’s has opened locations “in over 118 countries serving approximately 48 million customers per day” (Plunkett, 2008). This means that a large amount of resources is spent on development of McDonald’s restaurants and the satisfaction of customers’ needs and wants.
In 2003, the corporation generated $23 billion but at the same time, there were some losses. A new strategy had to be developed to adjust to changes. As the work began, by 2008, “revenue rose 3 per cent to $ 23.5 billion, but profits jumped 80 per cent to $4.3 billion” (Plunkett, 2008).
This took place due to financial modeling and close observations, as the managers were able to determine the specific estimates and values that would be present in the market. Formulating strategies and close comparison to the assets available would yield best results in future expenditures and gains (Hitt, 2008).
Since 2010, the operating income has been steadily rising, from 8,780 it grew to 10,093 in 2012 and is estimated to be as high as 11,008 to 11,676 in 2014 and 2015. The key to success are the strategies that focus on bettering the working conditions and customer relations. As the capital is being increased, the company is able to output more resources and invest in potentially beneficial franchises or service modifications.
A key factor is the increase in the skills of employees which are bettered by training and constant upgrades to the environment. At the same time, the values and stocks have to analyzed, so that the money invested into the company will not lose in the future. When considering discounted cash flow in relation to the net present value, it is important to have in mind that money made can be worth less than money invested.
This happens due to market fluctuations and ever increasing expenses. Thus, a wise strategy would be to calculate the amount of finances made by investments and relate it to the rate of return. This would allow to see how much capital can be used and what the strong sides of investments are (Hitt, 2008). The market, especially on an international level, is a flexible entity that must be closely observed.
Just as many other large corporations, McDonald’s heavily relies on investments, future predictions, the market and the economy. An ability to predict any changes in consumers’ wants will define the criteria by which the financial resources of the business are spent and what policies are outdated and must be changed.
References
Hitt, M. (2008). Competing for Advantage. Mason, United States: Cengage Learning.
Plunkett, J. (2008). The Almanac of American Employers 2009. Houston, United States: Plunkett Research, Ltd.