mcdonalds financial reort analysis

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Analysis of McDonald’s Annual Financial Report Name: Institution Affiliation: Date: Analysis of McDonald’s Annual Financial Report Presentation of the Information Related to the Company’s Derivatives Derivatives can either be financial assets or liabilities. Fair value is relied on by the Company to recognize variations of financial assets and liabilities as well as non-financial assets and liabilities. Fair value constitutes the money that the Company would receive for the sale of an asset in a rational market or the money the Company would pay for the acquisition of a liability in a similar market. To optimize the application of observable inputs, the company ranks fair value disclosures based on three hierarchies (McDonald's Corporation 2015 Annual Report, 2015). A valuation hierarchy relies on the transparency of input during the valuation of asset or liability at the measurement date. The three hierarchies are stipulated as follows: 1. Level 1 – Inputs are valued based on the quoted prices of similar asset or liability in a rational market. 2. Level 2 – Inputs are valued based on the quoted prices of similar asset or liability in a rational market and prices of an asset or liability are also valued based on models. 3. Level 3 – The methodology used to value an asset or liability is unobservable and significant to the fair value valuation of the asset or liability. Types of Derivatives Used By the Company The Company is predisposed to volatility in foreign exchange rates and interest rates since it operates in a global economy. The Company relies on debt denominated in foreign currency as well as derivative instruments to cushion

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