McDonald's Negative McEquity

A negative book value of equity is generally a bad sign as it often indicates a company has accumulated losses that have exceeded shareholder capital contributed. However, as with any other accounting number, it must not be taken at face value. For example, hamburger giant McDonald's has an interesting shareholder equity that indicates something entirely different. If you take a look, McDonald's Treasury stock has exceeded its retained earnings since 2016, which indicates that the company has repurchased more of its stock than it has reinvested from earnings. While this is a good thing for investors, it does create a problem when evaluating the company's financial ratios. For example, the ROE as calculated is negative, which is generally not good, but the 28 percent profit margin in 2018 is a very good sign.