Analysis of Debt
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- Statement of Comprehensive Income
- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Assets
- Enterprise Value to EBITDA (EV/EBITDA)
- Dividend Discount Model (DDM)
- Return on Equity (ROE) since 2005
- Return on Assets (ROA) since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Sales (P/S) since 2005
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Total Debt (Carrying Amount)
McDonald’s Corp., balance sheet: debt
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
Total debt obligations, as measured by the carrying amount, exhibited an overall increasing trend between 2021 and 2025. However, this progression was not consistently upward, with a slight decrease observed between 2023 and 2024.
- Overall Debt Trend
- The total debt obligations began at US$35,623 million in 2021 and rose to US$42,325 million in 2025, representing an approximate 18.8% increase over the five-year period. The most significant increase occurred between 2022 and 2023, with an addition of US$3,696 million.
- Short-Term Debt
- Short-term borrowings and current maturities of long-term debt were not reported for 2021 and 2022, but reached US$2,192 million in 2023. Values for 2024 and 2025 are unavailable. This suggests a potential shift in debt structure towards shorter-term financing in 2023, though the lack of prior year information limits definitive conclusions.
- Finance Lease Liabilities
- Both current and long-term finance lease liabilities demonstrated consistent growth throughout the period. The current finance lease liability increased from US$22 million in 2022 to US$23 million in 2025, while the long-term finance lease liability more than doubled, rising from US$1,300 million in 2022 to US$2,329 million in 2025. This indicates an increasing reliance on finance leases as a funding source.
- Long-Term Debt
- Long-term debt, excluding current maturities, constituted the largest portion of the total debt. It increased steadily from US$35,623 million in 2021 to US$39,973 million in 2025. The rate of increase slowed between 2023 and 2024, contributing to the overall decrease in total debt during that period.
The slight decrease in total debt between 2023 and 2024, from US$40,921 million to US$40,205 million, warrants further investigation. This could be attributed to debt repayment, a change in accounting practices, or a combination of factors. The subsequent increase in 2025 suggests this decrease may have been temporary.
Total Debt (Fair Value)
| Dec 31, 2025 | |
|---|---|
| Selected Financial Data (US$ in millions) | |
| Debt obligations | |
| Finance lease liability | |
| Total debt obligations and finance lease liability (fair value) | |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | |
Based on: 10-K (reporting date: 2025-12-31).
Weighted-average Interest Rate on Debt
Weighted-average effective interest rate on debt obligations and finance lease liability:
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| Total | |||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Weighted-average interest rate = 100 × ÷ =
Interest Costs Incurred
McDonald’s Corp., interest costs incurred
US$ in millions
| 12 months ended: | Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Interest expense | |||||||||||
| Capitalized interest | |||||||||||
| Interest costs incurred |
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
Interest expense and related costs have demonstrated a consistent upward trend over the five-year period. While capitalized interest represents a smaller portion of total interest costs, it also exhibits growth. The analysis below details these trends.
- Overall Interest Costs
- Interest costs incurred have increased steadily from US$1,193 million in 2021 to US$1,611 million in 2025. This represents a cumulative increase of approximately 35% over the period. The year-over-year increases have been relatively consistent, ranging from approximately 1.6% to 4.3% annually.
- Interest Expense
- The primary driver of the increase in interest costs is the growth in interest expense itself. Interest expense rose from US$1,186 million in 2021 to US$1,582 million in 2025, an increase of roughly 33.4%. The rate of increase in interest expense appears to be accelerating slightly in later years.
- Capitalized Interest
- Capitalized interest, while smaller in magnitude, has also shown consistent growth. It increased from US$7 million in 2021 to US$29 million in 2025, representing a substantial percentage increase over the period. This suggests an increase in projects or assets qualifying for interest capitalization.
The consistent rise in both interest expense and capitalized interest indicates a potential increase in overall debt levels or higher borrowing rates, or a combination of both. Further investigation into the company’s debt structure and interest rate environment would be necessary to determine the specific factors contributing to these increases.
Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
2025 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense, net of capitalized interest
= ÷ =
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs incurred
= ÷ =
The observed interest coverage ratios demonstrate a generally stable, yet slightly declining, trend over the five-year period. Both the standard interest coverage ratio and the adjusted interest coverage ratio, which incorporates capitalized interest, exhibit similar patterns.
- Interest Coverage Ratio (without capitalized interest)
- The interest coverage ratio began at 8.70 in 2021, decreased to 7.48 in 2022, and then recovered to 8.73 in 2023. A subsequent decline is noted in 2024, falling to 7.87, followed by a minimal change to 7.89 in 2025. This suggests a cyclical pattern with fluctuations around the 8.0 level, but with a potential for a downward drift.
- Adjusted Interest Coverage Ratio (with capitalized interest)
- The adjusted interest coverage ratio mirrors the trend of the standard ratio. Starting at 8.65 in 2021, it decreased to 7.42 in 2022, increased to 8.64 in 2023, and then decreased to 7.76 in 2024, concluding at 7.75 in 2025. The difference between the standard and adjusted ratios remains consistently small throughout the period, indicating that capitalized interest has a limited impact on the overall coverage assessment.
- Comparative Analysis
- The difference between the two ratios is minimal across all years, generally ranging between 0.01 and 0.05. This indicates that the amount of capitalized interest is relatively consistent and does not significantly alter the company’s ability to cover its interest expense. The slight decrease observed in both ratios from 2021 to 2025 warrants monitoring, as a continued decline could signal increasing financial risk.
Overall, the company maintains a reasonable ability to meet its interest obligations, as indicated by the ratios consistently above 7.0. However, the recent downward trend suggests a need for continued monitoring of earnings and debt levels.