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vs. 8%, which means that productivity of the assets is much lower than that of 1998, Indeed, the total sales increasing from 1998 to 2002 was around 10%, while the total assets increasing from the same period was around 21%, among which the non-current assets increasing was 25%, much faster than that of increasing, which was the root cause of the low performance on return ratios, the good thing was the management of McDonald's noticed that and took measure to 'cut capital expenditure by 40% in 2003' (MARINO, 2005, p. 18) and consequently the returned ratios will be increased. 2. Liquidity ratios Ratio Q3 2003 Q2 2003 Q1 2003 2002 2001 2000 1999 1998 Current Ratio 74% 78% 79% 71% 81% 70% 48% 52% Quick ratio 69% 74% 75% 66% 76% 66% 45% 49% Inventory to net working capital -17% -21% -22% -16% -25% -14% -5% -7% From the above ratios, McDonald's Liquidity ratios are quite healthy. 3. Leverage ratios Ratio Q3 2003 Q2 2003 Q1 2003 2002 2001 2000 1999 1998 Debt-to-Assets ratio 54% 54% 56% 57% 58% 58% 54% 52% Debt-to-equity ratio 117% 115% 126% 133% 139% 136% 118% 109% Long-term debt-to-equity ratio 80% 81% 90% 94% 91% 85% 58% 65% times-interest-earned ratio 1028% 812% 663% 565% 597% 774% 838% 667% Although McDonald's long term debt ratio increased around 15% over the past 6 years, however the ability the company got to meet its annual interest costs increased almost double, so the leverage ratios of McDonald's in healthy as well. 4. Activity ratios Ratios Q3 2003 Q2 2003 Q1 2003 2002 2001 2000 1999 1998 Fixed assets Turnover 16% 16% 14% 59% 62% 60% 59% 57% Total Assets turnover 18% 17% 16% 64% 66% 66% 63% 63% Average collection period (days) 57 69 78 20 22 20 19 18 From the above Activity ratios, we learned that Although the ratio in 2003 was higher in average collection period, it was a figure from a quarter which could be inaccurate, other than that, McDonald's kept the activity ratios at the same level of 1998. In summary, according to the data provided by Marino, 2005, The strategy of McDonald's worked quite well in terms of marketing and financial performance. Reference: Thompson, A & Strickland, A & Gamble, J 2005, Crafting and Executing Strategy, 14th ed. McGraw-Hill, NY Marino, L & Jackson, K 2005, McDonald's: Polishing the Golden Arches, Marino, 2005 of Crafting and Executing Strategy, 14th ed. McGraw-Hill, NY Porter, M 1979, How Competitive Forces Shape Strategy, Harvard Business Review, March-April. Weihrich, H 1982, The TOWS Matrix-A tool for Situational Analysis, Long Range Planning, Vol. 15, No. 2, pp. 54-66. A Guide to Case Analysis Appendix 1: Market Size and Growth rate As case indicated that the US market size for quick-service sandwich industry was around $ 64 billion in 2003, while the growth rate was only 2% annually.The case also provided the evidence that the major players are willing to use price cut, improve customer service to attract customers, which aligned with what described by Thompson as competitive shake out stage in US market. However, the stage is different in other markets, such as China. Scope of competitive rivalry As case indicated most companies within this industry operate internationally and because of the saturation of US market, International expansion is becoming more important to a company's long term competitive success. Number of rivals From the statistics provided by the case, In US markets the fast food industrial was dominated by a