Analysis of Debt
Total Debt (Carrying Amount)
McDonald’s Corp., balance sheet: debt
US$ in millions
Based on: 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), 10-K (reporting date: 2020-12-31).
The data reflect the debt structure and obligations over the five-year period ending December 31, 2024. Several notable trends can be observed across short-term borrowings, current and long-term finance lease liabilities, long-term debt, and overall total debt obligations.
- Short-term borrowings and current maturities of long-term debt
- The figures show a value of $2,244 million in 2020, with missing data for 2021 and 2022, followed by a similar level of $2,192 million in 2023 and no data for 2024. This indicates relative stability in short-term borrowings for the years with available data, with minor fluctuations that suggest a consistent approach to managing short-term debt.
- Current finance lease liability
- There are no recorded values until 2022, when the liability appears at $22 million, increasing sharply to $46 million in 2023, before dropping to $11 million in 2024. This pattern suggests that current finance lease liabilities rose significantly in the early 2020s but were actively reduced by 2024, possibly due to repayment or lease restructuring.
- Long-term debt, excluding current maturities
- Long-term debt shows a steady upward trend, rising from $35,197 million in 2020 to $38,424 million by 2024. The increase is gradual but consistent, indicating an ongoing reliance on long-term borrowing with incremental increases in long-term debt levels over the five-year span.
- Long-term finance lease liability
- This debt component appears from 2022 onwards, starting at $1,300 million, then increasing to $1,530 million in 2023, and further to $1,770 million in 2024. The continuous rise in finance lease liability suggests a strategic increase in leasing obligations, potentially reflecting changes in asset management or capital structure preferences.
- Total debt obligations and finance lease liability (carrying amount)
- Total debt shows fluctuations over the period. Starting at $37,440 million in 2020, it dips slightly to $35,623 million in 2021, then rises to $37,225 million in 2022, sharply increasing to $40,921 million in 2023 before a small decline to $40,205 million in 2024. The overall upward trend, particularly the sharp rise between 2022 and 2023, points to an increase in total leverage, influenced by growth in both long-term debt and finance lease liabilities.
In summary, the company has maintained relatively stable short-term borrowings, while gradually increasing its long-term debt. Finance lease liabilities, both current and long-term, have emerged and grown in recent years, representing a shift in the composition of total debt. The total debt obligations have generally increased, with notable growth after 2021, which could impact the company's leverage and financial risk profile going forward.
Total Debt (Fair Value)
| Dec 31, 2024 | |
|---|---|
| Selected Financial Data (US$ in millions) | |
| Debt obligations | 36,600) |
| Finance lease liability | 1,780) |
| Total debt obligations and finance lease liability (fair value) | 38,380) |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | 0.95 |
Based on: 10-K (reporting date: 2024-12-31).
Weighted-average Interest Rate on Debt
Weighted-average effective interest rate on debt obligations and finance lease liability: 3.81%
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| 4.20% | 24,134) | 1,014) | |
| 5.70% | 1,290) | 74) | |
| 2.50% | 8,875) | 222) | |
| 5.30% | 311) | 16) | |
| 3.70% | 371) | 14) | |
| 4.10% | 1,559) | 64) | |
| 4.00% | 1,390) | 56) | |
| 2.90% | 79) | 2) | |
| 1.20% | 605) | 7) | |
| 0.70% | 2) | —) | |
| 4.00% | 1,780) | 71) | |
| Total | 40,396) | 1,540) | |
| 3.81% | |||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Weighted-average interest rate = 100 × 1,540 ÷ 40,396 = 3.81%
Interest Costs Incurred
McDonald’s Corp., interest costs incurred
US$ in millions
Based on: 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), 10-K (reporting date: 2020-12-31).
The annual interest costs incurred demonstrate an overall upward trend over the five-year period.
- Interest Expense
- The interest expense shows a moderate increase from 1,218 million US dollars in 2020 to 1,506 million US dollars in 2024. There is a slight decline in 2021, but the values rebound and progressively increase through to 2024, indicating rising costs associated with borrowing or interest-bearing liabilities.
- Capitalized Interest
- Capitalized interest exhibits a consistent increase each year, rising from 6 million US dollars in 2020 to 22 million US dollars in 2024. This upward trend suggests an increasing amount of interest cost being included as part of the cost of assets under construction or development, reflecting ongoing investment activities.
- Interest Costs Incurred
- The total interest costs incurred, which combine interest expense and capitalized interest, follow a similar increasing pattern. The figure rises from 1,224 million US dollars in 2020 to 1,528 million US dollars in 2024. This growth aligns with the individual trends and confirms an increase in the overall financial burden related to interest over the period.
In summary, the data reveals a clear escalation in both the interest expense and capitalized interest components, resulting in progressively higher total interest costs incurred. This trend may be indicative of increased borrowing activity, higher interest rates, or expanded capital investment during this timeframe.
Adjusted Interest Coverage Ratio
Based on: 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), 10-K (reporting date: 2020-12-31).
2024 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense, net of capitalized interest
= 11,851 ÷ 1,506 = 7.87
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest costs incurred
= 11,851 ÷ 1,528 = 7.76
- Interest Coverage Ratio (Without Capitalized Interest)
-
The interest coverage ratio displays an overall positive trend from 2020 to 2024, indicating an improving ability to meet interest obligations. The ratio increased significantly from 6.04 in 2020 to a peak of 8.7 in 2021. Following this peak, it moderately declined to 7.48 in 2022 before rising again to 8.73 in 2023. In 2024, a slight decrease to 7.87 was observed, yet this level remains higher than the initial 2020 figure. The fluctuations suggest variability in earnings relative to interest expenses but overall reflect strong coverage capacity across the five-year span.
- Adjusted Interest Coverage Ratio (With Capitalized Interest)
-
The adjusted interest coverage ratio, which accounts for capitalized interest, follows a very similar pattern to the unadjusted ratio. Beginning at 6.01 in 2020, it reached a high of 8.65 in 2021 before dipping to 7.42 in 2022. The ratio then increased to 8.64 in 2023 and decreased slightly to 7.76 in 2024. The close alignment between the adjusted and unadjusted ratios suggests that capitalized interest has a minimal impact on the overall capacity to cover interest expenses. The consistency in movement across both measures reinforces the reliability of the company's interest coverage position during the period under review.