ACC351A – Midterm Quiz

Name

Refer to the supporting documentation.

1. (10%) Below is ratio data for McDonalds, a key competitor of Wendys/Arbys. Calculate the following ratios for the 2010 fiscal year for Wendys/Arbys and indicate whether they are better or worse than the industry ratios.

| |MCD |Wendys/Arbys |Better/Worse |
|Net Profit Margin |20.33% |0.14% |Worse |
|Revenue Growth |4.52% |96.45% |Worse |
|Return on Assets |11.41% |0.1% |Worse |

2. (10%) Calculate Wendys/Arbys’ Long Term Debt to Equity ratio for fiscal year ended 1/3/10 and state whether it is better or worse than the industry average of 89.6%. Do you think that Wendys/Arbys has the capacity to incur (take on) additional debt?

LTD 1,500,784/2,336,339 = 64.2%

Need an answer to whether Wendy’s has the capacity for further debt.

3. (10%) Wendys/Arbys’s current stock price and P/E are $4.91 and 22.3. McDonald’s current stock price and P/E are 77.32 and 15.22. Which stock is more expensive Wendys/Arbys or McDonalds and why? Which company would you invest your hard earned money in right now and why? (Brief explanation)

Wendy’s stock has a higher P/E, so more expensive.

Need an answer as to which stock you would buy AND why.

4. Wendys/Arbys is looking for an opportunity for growth but it has fallen significantly behind its chief rival, McDonalds. Also, other fast food/quick service sandwich companies have also eroded its market share, i.e., Quiznos and Subway. The CEO believes that it may have an opportunity by pursuing an expansion of small