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    Investing in McDonalds and Wendy's

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    After reviewing financial data on MCD and WEN, and gathering ratios figures, it obvious to see how numbers are arrived at. However, for a non-finance person, what are some of the in-depth understanding is what I'm trying to get a good capture. I want some direction on whether to recommend investments on these companies and support it with not just numbers but a greater understanding. Here are the questions I need some help with:
    1. Would you invest in McDonald's or Wendy's or recommend these companies to new investors? Please elaborate based on net profit margin, return on assets, and return on equity.
    2. Discuss risk with both MCD and WEN.
    3. Based on 5, 10, 15-year history of MCD and WEN stock price, make correlation/comparison to S&P 500, and comment. If charts are available, please include.

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    https://brainmass.com/business/dividends-stock-repurchase-and-policy/investing-mcdonalds-wendys-580687

    Solution Preview

    QUESTION 1
    These are the formulas I used in computing the financial ratios I based the decision on whether to invest in MCD or WEN:
    Profit margin = Net income / Sales
    Return on assets = Net income / Total Assets
    Return on equity = Net income / Total Equity

    To get the financial data I used for the computation of the above ratios, I used Securities and Exchange Commission's EDGAR (http://www.sec.gov/edgar/searchedgar/companysearch.html) to search for the Form 10-K (Annual Report) of McDonalds and Wendys.

    McDonalds Form 10-K for the year ended December 31, 2013 can be accessed at http://www.sec.gov/Archives/edgar/data/63908/000006390814000019/mcd-12312013x10k.htm.
    The company's Consolidated Statement of Income is on page 26
    The company's Consolidated Balance Sheet is on page 28

    Wendy's Form 10-K for the year ended December 31, 2013 can be accessed at http://www.sec.gov/Archives/edgar/data/30697/000003069714000006/0000030697-14-000006-index.htm.
    The company's Consolidated Statement of Income is on page 26
    The company's Consolidated Balance Sheet is on page 28

    The result of the computation (also attached in the Excel file)

    I ...

    Solution Summary

    This in-depth solution makes a decision to either invest in McDonald's or Wendy's by analyzing financial ratio and stock price comparisons with the S&P 500. All calculations are supplied with clear explanations in a step-by-step manner.

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