Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
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Economic Profit
McDonald’s Corp., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2025 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The analysis of economic profit over the five-year period from 2021 to 2025 reveals a general upward trajectory in value creation, despite a notable contraction in 2022. The company consistently maintained a positive economic profit, indicating that the returns generated from operations exceeded the total cost of the capital employed.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT exhibited volatility in the early part of the period, decreasing from 8,491 million US$ in 2021 to 7,131 million US$ in 2022. However, a strong recovery followed, with figures rising to 9,274 million US$ in 2023 and peaking at 10,268 million US$ by 2025. This growth suggests an improvement in operational efficiency and profitability over the long term.
- Cost of Capital Evolution
- A steady and incremental increase in the cost of capital is observed, rising from 9.34% in 2021 to 9.82% in 2025. This gradual rise indicates a higher hurdle rate for investments, meaning the company had to generate higher operating returns to maintain the same level of economic value added.
- Invested Capital Movements
- Invested capital fluctuated between 2021 and 2024, with a dip to 45,461 million US$ in 2022 and a slight correction in 2024. A significant expansion occurred in 2025, with invested capital reaching 53,916 million US$. The overall trend shows an expansion of the capital base to support operational growth.
- Economic Profit Synthesis
- Economic profit mirrored the fluctuations of NOPAT, falling to a period low of 2,734 million US$ in 2022 before rebounding. By 2025, economic profit reached 4,975 million US$, the highest value in the observed period. The fact that economic profit grew despite an increasing cost of capital demonstrates that the growth in NOPAT outpaced the rising costs of financing and the expansion of the capital base.
Net Operating Profit after Taxes (NOPAT)
McDonald’s Corp., NOPAT calculation
US$ 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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in deferred revenues, initial franchise fees.
3 Addition of increase (decrease) in equity equivalents to net income.
4 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2025 Calculation
Tax benefit of interest expense, net of capitalized interest = Adjusted interest expense, net of capitalized interest × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income.
Net operating profit after taxes (NOPAT) exhibited a fluctuating pattern over the five-year period. While net income experienced some volatility, NOPAT demonstrated a generally positive trajectory, particularly in the later years of the observed timeframe.
- NOPAT Trend
- In 2021, NOPAT stood at US$8,491 million. A decrease was observed in 2022, with NOPAT declining to US$7,131 million. However, a substantial recovery occurred in 2023, as NOPAT increased to US$9,274 million. This upward trend continued into 2024, with a slight decrease to US$9,207 million, before culminating in a significant rise to US$10,268 million in 2025.
- Relationship to Net Income
- NOPAT consistently exceeded net income across all reported years. The difference between NOPAT and net income suggests the presence of significant non-operating items or accounting adjustments impacting reported net income. The gap between the two metrics remained relatively stable throughout the period, indicating a consistent pattern in these adjustments.
The increase in NOPAT from 2022 to 2025 suggests improved operational efficiency or increased profitability from core business activities. The 2022 dip warrants further investigation to determine the underlying causes, but the subsequent recovery indicates a resilient business model. The continued growth in NOPAT into 2025 is a positive indicator of the company’s ability to generate profit from its operations.
- Growth Rate
- From 2021 to 2025, NOPAT increased by approximately 20.9%. The most significant growth occurred between 2024 and 2025, with an increase of 11.5%. This acceleration in growth suggests potentially favorable market conditions or successful implementation of strategic initiatives.
Overall, the NOPAT figures indicate a strengthening operational performance, particularly in the latter part of the analyzed period. Continued monitoring of NOPAT, alongside net income and other key financial metrics, is recommended to assess the sustainability of this positive trend.
Cash Operating Taxes
McDonald’s Corp., cash operating taxes calculation
US$ 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).
The provision for income taxes and cash operating taxes both demonstrate an increasing trend over the five-year period. However, the magnitude and consistency of these increases differ between the two measures. Cash operating taxes exhibit greater volatility than the provision for income taxes.
- Provision for Income Taxes
- The provision for income taxes increased steadily from US$1,583 million in 2021 to US$2,334 million in 2025. This represents a cumulative increase of approximately 47.4% over the period. The year-over-year growth rates were relatively consistent, ranging from 3.5% to 12.8% annually.
- Cash Operating Taxes
- Cash operating taxes began at US$2,367 million in 2021, decreased slightly to US$2,334 million in 2022, and then increased significantly to US$3,128 million in 2023. Following this peak, cash operating taxes decreased slightly to US$3,112 million in 2024 before declining further to US$2,902 million in 2025. Overall, from 2021 to 2025, cash operating taxes increased by approximately 22.6%. The largest single-year change was an increase of 34.1% between 2022 and 2023.
The difference between the provision for income taxes and cash operating taxes widens over time. In 2021, cash operating taxes exceeded the provision for income taxes by US$784 million. By 2025, this difference had grown to US$568 million. This suggests a growing divergence between reported income tax expense and actual cash outflows for taxes. This difference could be attributable to various factors, including deferred tax assets or liabilities, tax credits, or changes in tax laws.
The fluctuations in cash operating taxes, particularly the decrease in 2025, warrant further investigation. Understanding the drivers behind these changes is crucial for accurate financial modeling and forecasting, especially when calculating economic value added (EVA).
Invested Capital
McDonald’s Corp., invested capital calculation (financing approach)
US$ 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).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of deferred revenues, initial franchise fees.
4 Addition of equity equivalents to shareholders’ equity (deficit).
5 Removal of accumulated other comprehensive income.
6 Subtraction of investments.
The reported invested capital exhibited fluctuations over the five-year period. Total reported debt & leases and shareholders’ equity (deficit) collectively influence the level of invested capital. An examination of these components reveals specific trends.
- Invested Capital Trend
- Invested capital decreased from US$47,779 million in 2021 to US$45,461 million in 2022, representing a decline of approximately 5.0%. It then increased to US$50,097 million in 2023, followed by a slight decrease to US$49,627 million in 2024. The most recent year, 2025, shows a further increase, reaching US$53,916 million. Overall, the trend indicates a recovery and growth in invested capital after the initial decline.
- Debt & Leases
- Total reported debt & leases generally remained stable, fluctuating between US$48,699 million and US$53,091 million. A decrease was observed from 2021 to 2022, followed by increases in 2023 and 2025. The value in 2024 was slightly lower than in 2023, but still higher than in 2022. This suggests a consistent reliance on debt financing, with some year-to-year adjustments.
- Shareholders’ Equity (Deficit)
- Shareholders’ equity consistently reported a deficit throughout the period. The deficit widened from US$4,601 million in 2021 to US$6,003 million in 2022, before decreasing to US$4,707 million in 2023 and further to US$3,797 million in 2024. By 2025, the deficit had reduced to US$1,791 million. This indicates an improving, though still negative, equity position over time.
The interplay between debt and equity significantly impacts the invested capital. The reduction in the shareholders’ equity deficit, coupled with increases in debt, contributed to the overall growth in invested capital observed in 2023, 2024, and particularly 2025. The fluctuations suggest active capital management and potential shifts in financing strategies.
Cost of Capital
McDonald’s Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt obligations and finance lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt obligations and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt obligations and finance lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt obligations and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt obligations and finance lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt obligations and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt obligations and finance lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt obligations and finance lease liability. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt obligations and finance lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt obligations and finance lease liability. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
McDonald’s Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Airbnb Inc. | ||||||
| Booking Holdings Inc. | ||||||
| Chipotle Mexican Grill Inc. | ||||||
| DoorDash, Inc. | ||||||
| Starbucks Corp. | ||||||
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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial performance from 2021 to 2025 demonstrates a period of volatility followed by a sustained recovery in economic value creation. A notable decline occurred in 2022 across all measured metrics, which was subsequently reversed through a strong rebound in 2023 and continued growth leading into 2025.
- Economic Profit
- Economic profit experienced a significant contraction in 2022, falling from 4,028 million USD to 2,734 million USD. However, a robust recovery was observed in 2023, with profit rising to 4,416 million USD. Following a period of relative stability in 2024 at 4,338 million USD, the value reached a five-year peak of 4,975 million USD by the end of 2025.
- Invested Capital
- Invested capital showed a slight reduction in 2022, decreasing to 45,461 million USD from 47,779 million USD in the prior year. From 2023 onward, a consistent upward trend is evident, with capital expanding to 50,097 million USD in 2023 and reaching 53,916 million USD by 2025, indicating an increase in the scale of the capital base employed to generate returns.
- Economic Spread Ratio
- The economic spread ratio, which measures the excess return over the cost of capital, mirrored the trend of economic profit. The ratio declined from 8.43% in 2021 to a low of 6.02% in 2022. A sharp recovery occurred in 2023, bringing the ratio to 8.81%. The ratio remained stable in 2024 at 8.74% before achieving its highest level of 9.23% in 2025, suggesting an improved efficiency in generating value relative to the cost of invested capital.
The correlation between the increase in invested capital and the rising economic spread ratio from 2022 to 2025 indicates that the expansion of the capital base was managed effectively, resulting in higher absolute economic profit and enhanced value creation efficiency.
Economic Profit Margin
McDonald’s Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenues, initial franchise fees | ||||||
| Adjusted revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Airbnb Inc. | ||||||
| Booking Holdings Inc. | ||||||
| Chipotle Mexican Grill Inc. | ||||||
| DoorDash, Inc. | ||||||
| Starbucks Corp. | ||||||
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).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
The analysis of economic profit and adjusted revenues from 2021 to 2025 reveals a trajectory of initial volatility followed by steady growth and value creation. While the 2022 fiscal year experienced a notable contraction, the subsequent three years demonstrate a consistent recovery and an expansion in the company's ability to generate returns exceeding its cost of capital.
- Adjusted Revenue Trends
- Adjusted revenues remained relatively flat between 2021 and 2022, with a marginal decrease from 23,259 million USD to 23,202 million USD. However, a sustained upward trend is observed from 2023 onward, with revenues climbing to 25,526 million USD in 2023 and reaching 27,052 million USD by the end of 2025. This represents a total increase of approximately 16.3% over the five-year period.
- Economic Profit Performance
- Economic profit exhibited significant fluctuation, dropping from 4,028 million USD in 2021 to a period low of 2,734 million USD in 2022. A strong recovery occurred in 2023, where profit surged to 4,416 million USD. Following a slight stabilization in 2024 at 4,338 million USD, the metric reached its peak in 2025 at 4,975 million USD, indicating an overall improvement in the generation of economic value.
- Economic Profit Margin Analysis
- The economic profit margin closely mirrors the trend of absolute economic profit. The margin decreased sharply from 17.32% in 2021 to 11.79% in 2022, reflecting a period of diminished efficiency in value creation relative to revenue. A recovery to 17.30% was achieved in 2023, and the margin continued to strengthen, ending the period at 18.39% in 2025. The expansion of this margin suggests that the growth in economic profit has outpaced the growth in adjusted revenues in the final years of the analysis.