Financial Statement Analysis Case - McDonald's Corporation
McDonald's is the largest and best-known global food-service retailer, with more than 32,000 restaurants in 118 countries. On any day, McDonald's serves approximately 1 percent of the world's population. The following is information related to McDonald's property and equipment.
Property and Equipment. Property and equipment are stated at cost, with depreciation and amortization provided using the straight-line method over the following estimated useful lives: buildings-up to 40 years; leasehold improvements-the lesser of useful lives of assets or lease terms, which generally include option periods; and equipment-three to 12 years.
Property and Equipment - Net property and equipment consisted of:
December 31
(In millions) 2014 2013
Land $ 5,788.4 $ 5,849.3
Buildings and improvements on owned land 14,322.4 14,715.6
Buildings and improvements on leased land 13,284.0 13,825.2
Equipment, signs and seating 5,113.8 5,376.8
Other 617.5 588.7
39,126.1 40,355.6
Accumulated depreciation and amortization (14,568.6) (14,608.3)
Net property and equipment $24,557.5 $25,747.3
Depreciation and amortization expense for property and equipment was (in millions): 2014-$1,539.3; 2013-$1,498.8; 2012-$1,402.2.
[In its 6-year summary, McDonald's provides the following information.]
(in millions) 2014 2013 2012
Cash provided by operations $6,370 $7,121 6,966
Capital expenditures 2,583 2,825 3,049
Instructions -
(a) What method of depreciation does McDonald's use?
(b) Does depreciation and amortization expense cause cash flow from operations to increase? Explain.
(c) What does the schedule of cash flow measures indicate?