Balance Sheet and America Merrill Lynch Essay

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Global Environments and Problem Sets
ACC/300 – Week 5

When you think about market growth, you have to consider the trends. What makes it increase? Why does it increase? Market growth is increasing mainly for the reason of occupied clients not having time to prepare a dish and for the comfort factor. In addition, the food industry is expanding very quickly because of the circumstances international markets offer. Take McDonald’s for example, they absolutely have a competitive edge both in the U.S. and abroad. They have influenced many countries and they are successful in these countries. Every company in the food industry is vulnerable of dissipating clients, thus, the industry must depend solely on their brand’s appearance and the condition of their goods. McDonald’s has numerous adversaries but they are presently at the top of the industry in market capitalization with a $39.31 billion cap and as mentioned on every sign “Over One Billion Served” (McDonald’s Corporation, 2015).
According to bloomberg.com, McDonald’s Corp., whose shares have fallen 8 percent this year as sales growth decelerated, is finding more success in the bond market. The world’s biggest restaurant chain issued $400 million of 1.875 percent, seven-year debt yesterday to equal the coupon higher-rated International Business Machines Corp. paid on $600 million of similar-maturity bonds May 8, according to data compiled by Bloomberg. The two-part sale, which also included $500 million of 0.75 percent, three-year notes raises a measure of the company’s debt load to the most in five years, the data show. McDonald’s is the most profitable of U.S. fast-food chains having a market value of more than $10 billion, with a net profit margin of 19.4 percent, Bloomberg data show. Its offering yesterday boosts the company’s ratio of debt to earnings before interest, taxes, depreciation and amortization to 1.35, the most since 2007 and the highest of the fast-food group, though that measure should fall to 1.29 as $638 million of bonds come due this year. While McDonald’s shares cost less relative to earnings than competitors Yum! Brands Inc., Chipotle Mexican Grill Inc. and Starbucks Corp., its bonds have set records this year. The restaurant owner claimed the lowest yield on 30-year debt on Feb. 2, and matched the record coupon set by IBM on May 8 even after the extra yield investors demand to hold investment-grade debt instead of government securities increased 23 basis points to 2.25 percentage points, according to Bank of America Merrill Lynch index data. A basis point is 0.01 percentage point. Its 1.875 percent notes, which sold at 99.05 cents on the dollar yesterday, traded at 99.15 cents at 10:26 a.m. in New York to yield 2.01 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The three-year bonds traded at 100.2 cents to yield 0.68 percent. McDonald’s sold the new debt as it plans to hire 70,000 people in China this year, almost doubling its workforce there, and accelerates store openings there to compete with Yum! Brands’s KFC and Pizza Hut. (http://www.bloomberg.com/news/articles/2012-05-24)
In addition, bloomberg.com also states that McDonald’s 0.75 percent notes maturing in 2015 yielded 45 basis points more than similar-maturity Treasuries, compared with an average 126 basis-point spread for investment-grade issues of three-year bonds this year, according to data compiled by Bloomberg. The seven-year notes had a spread of 88 basis points versus a 221 basis-point average for equal-maturity issues. High-yield U.S. bonds have lost 1.3 percent this month, while investment-grade corporate debt is unchanged, Bank of America Merrill Lynch index data show. McDonald’s, which generates 68 percent of its sales outside the U.S., is also continuing its decade-long plan to boost revenue by renovating restaurants and expanding its menu to increase visits, according to Bryan Elliott, an analyst at
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