McDonald’s has many factor that can affect the financial position in the next three years. William Smith describes why the importance of financial statements impact the business. “To understand how financial accounting can help to control the adverse selection problem, it is desirable to have an appreciation of how investors make decisions” (Smith, 2005). McDonald’s uses Increase in revenues, accounts payable, and Inventory as some factors on their future financial statements. The increase in revenues can cause McDonald’s to have a better year, more sales is good for the company. Accounts payable is the suppliers McDonald’s may owe money too. The increase of demand can cause McDonald’s to have to order more inventory, resulting in a larger invoice from the supplier to be paid. The Inventory McDonald’s has has expiration dates and this can result in possible food expirations if not used in time and is a huge reason a financial statement can fluctuate is a disaster happened to an area McDonald’s is located. Another factor that can change the trajectory’s of the next three years financial statements are excessive or inadequate stock. This will affect financial performance, where by excessive inventory brings out holdings cost that negatively affect the financial statements. Marek states, “We consider jumps in the equity market as large infrequent changes in stock prices. These jumps can be used as a proxy for unexpected investment news, which influences a significant stock price movement. In the case of expected investment news, the stock price should contain no jumps, because the market participants had already incorporated such information into the stock price” (Marek, 2020).
