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Paper Topic:

Burger King Financial Analysis

Running Head : Financial Analysis

Financial Analysis : Burger King Holdings , Inc

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Liquidity

The current ratio of the company is negative ninety-three hundredths .93 ) while it net working capital ratio is negative one and nineteen hundredths (-1 .19 . Generally , a negative current ratio and net working capital ratio is not a good one and casts doubt as to ability of the company to meet short-term obligations as they fall due . However , the Company 's ability to meet short-term obligation is not solely determined by its current ratio . The Company

can have the ability to meet short-term obligations even if it has a negative current ratio if it has access to credit facilities and has good credit standing and history with its suppliers

Generally , a good current ratio is two (2 (Ratio analysis technique meaning current assets should twice be as much as current liabilities This is not a hard and fast rule , other factors must be considered in determining the acceptable current ratio , such as the industry practice or the practice of the leading companies of the industry . In the case of the Company , it is possible that the company 's low current ratio is because it has had a long relationship with its suppliers , which allows it to continue buying on credit in larger amounts . However , the company 's size and industry standing does not completely account for the fact that it has a negative current ratio . The industry 's leading company , McDonalds , has a much better current ratio of one and twenty-one hundredths (1 .21

Even the company 's net working capital ratio is significantly less impressive than McDonalds , which has ratio of two and twelve hundredths If a leader of the industry keeps a much higher liquidity ratio than the company , then the company 's size and standing in the industry does not completely account for the negative liquidity ratio . Based on these comparisons and the general rule on current ratio mentioned above , the company is not very liquid

Leverage

The debt-to-asset ratio shows the portion of the asset that was purchased through debt . The company has a debt to asset ratio of seventy-one and fifty-five hundredths (71 .55 , which means that for each peso of asset the company has debt of a little more than seventy cents These is a very high debt ratio , it gives the debtors of the company less security or cushion (Ratio analysis technique . This number is also less significantly larger than industry leader , McDonalds McDonalds has a debt-to-asset ratio of forty-six and seventy-four hundredths . Because of the high debt-to-asset ratio creditors may be hesitant in extending loans to the company since it places them in a higher risk than giving a loan to other companies like McDonalds

The company 's debt to equity ratio of two and fifty-two hundredths (2 .52 ) is also very high . This ratio means that for each dollar of the stockholders ' fund the company has a debt of two dollars and fifty-two cents . This ratio shows...

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