Project Objective

The goal of this project is to analyze the financial performance of McDonald's from 2002 to 2022 and to uncover key insights into the company’s revenue growth, profitability, and asset management. Using advanced statistical techniques, including correlation analysis and multiple regression, the project aims to explore relationships between critical financial variables and provide a data-driven understanding of McDonald's operational efficiency and financial strategy.

Key Questions

Performance Over Time:

How has revenue and earnings grown over time, and what key trends or fluctuations can be observed?

Profitability and Efficiency

Is there a relationship between McDonald's revenue and operating margin? Does increased revenue lead to higher operating margins?

Asset Management:

How have McDonald’s net assets and total assets grown in relation to revenue, and is there a pattern indicating efficient asset management?

Advanced Analysis (Multiple Regression):

What is the combined impact of revenue and total debt on McDonald’s operating margin? Can multiple regression modeling provide insights into which factors most significantly influence profitability?

Methodolgy

Cleaning

The first step in my methodology is to ensure data integrity. I do this by running some basic query's to ensure the data is clean and has no errors.

Advanced modeling

Next I want to see if there is a relationship between Mcdonald's revenue and operating margin. I do this by running a basic excel function to figure this out.

I ran a regression analysis in Excel to determine the impact of key financial variables, such as Revenue and Total Debt, on McDonald's Operating Margin, providing insights into which factors most significantly influence the company's profitability.

Results

1. After running the correlation analysis we get is .455 which is a moderate positive correlation. This tells us that there is a moderate relationship between revenue and operating margin. As revenue increases so does the operating margin but not in perfect sync.

2. After running a regression model we can see 76.9% of the variation in Operating Margin (based on R-squared), which is a strong fit. The adjusted R-squared of 74.3% confirms that the model still performs well even after accounting for the number of variables.

Total Debt is also positively correlated with Operating Margin, but the effect is smaller compared to revenue. For every 1 billion increase in debt, Operating Margin increases by 0.42 units. This is counterintuitive (as we might expect debt to negatively impact margins), but it might indicate that McDonald's is leveraging debt efficiently to increase profitability.

Conclusion

In conclusion, the analysis revealed a moderate positive correlation between McDonald's Revenue and Operating Margin, suggesting that revenue growth contributes to improved profitability. Additionally, the multiple regression analysis indicated that both Revenue and Total Debt significantly influence Operating Margin, with Revenue having a stronger impact. These insights can help inform McDonald's financial strategy, particularly in balancing revenue growth with debt management for sustained profitability.