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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McDonald’s Corp. pages available for free this week:
- Statement of Comprehensive Income
- Analysis of Liquidity Ratios
- Analysis of Solvency Ratios
- Enterprise Value (EV)
- Enterprise Value to FCFF (EV/FCFF)
- Present Value of Free Cash Flow to Equity (FCFE)
- Net Profit Margin since 2005
- Operating Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Analysis of Revenues
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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 value generation over the five-year period reveals a general trend of growth and value creation, despite intermittent fluctuations. The organization has consistently maintained a positive economic profit, indicating that returns on invested capital have exceeded the required cost of capital throughout the observed timeframe.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT experienced a notable decline in 2022, dropping to 7,131 million US dollars, before recovering strongly in 2023 to 9,274 million US dollars. Following a period of relative stability in 2024, a peak was reached in 2025 with a value of 10,268 million US dollars, demonstrating an overall upward trajectory in operating profitability.
- Cost of Capital
- A consistent upward trend is observed in the cost of capital, which rose incrementally from 9.47% in 2021 to 9.96% by 2025. This steady increase suggests a rising threshold for the minimum required return on capital investments over the period.
- Invested Capital
- Invested capital followed a pattern similar to operating profits, with a contraction in 2022 to 45,461 million US dollars. This was followed by a series of expansions, culminating in a high of 53,916 million US dollars in 2025, indicating a broader capital base deployed to generate returns.
- Economic Profit
- Economic profit mirrored the volatility of NOPAT and invested capital, reaching a period low of 2,671 million US dollars in 2022. However, a significant recovery occurred in 2023, and the trajectory continued upward to reach 4,898 million US dollars by 2025. The ability to expand absolute economic profit while facing a rising cost of capital indicates an enhancement in the organization's ability to generate value above its financing costs.
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’ deficit.
5 Removal of accumulated other comprehensive income.
6 Subtraction of investments.
An analysis of the capital structure from 2021 to 2025 reveals a general upward trajectory in invested capital, characterized by fluctuations in debt obligations and a consistent recovery in shareholders' equity positions.
- Invested Capital Trends
- Invested capital experienced an initial decline from 47,779 million in 2021 to 45,461 million in 2022. This was followed by a period of expansion, reaching 50,097 million in 2023, a slight correction to 49,627 million in 2024, and a peak of 53,916 million by December 31, 2025.
- Debt and Lease Obligations
- Total reported debt and leases showed a pattern closely aligned with the overall invested capital. After a marginal decrease to 48,699 million in 2022, obligations increased significantly to 53,091 million in 2023. Despite a brief dip in 2024, the figure rose to its highest point of 54,813 million by 2025.
- Shareholders' Deficit Dynamics
- The company maintained a negative shareholders' equity position throughout the period. The deficit widened from 4,601 million in 2021 to a peak of 6,003 million in 2022. Subsequently, a sustained trend of improvement is observed, with the deficit narrowing consecutively to 4,707 million in 2023, 3,797 million in 2024, and 1,791 million in 2025.
The interaction between these variables indicates that the growth in invested capital was primarily driven by increased debt and lease liabilities, while the simultaneous reduction of the shareholders' deficit contributed to a more stable capital base toward the end of the analyzed period.
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 through 2025 demonstrates a resilient growth pattern in economic value creation. Despite a notable contraction in 2022, the subsequent period is characterized by a steady recovery and expansion in both absolute economic profit and the efficiency of invested capital.
- Economic Profit
- A period of volatility is observed, with economic profit declining from 3,964 million USD in 2021 to 2,671 million USD in 2022. However, a strong recovery followed, with figures rising to 4,346 million USD in 2023 and reaching a peak of 4,898 million USD by 2025. This upward trajectory indicates an enhanced ability to generate value over and above the required return on capital.
- Invested Capital
- The capital base experienced a slight reduction in 2022 to 45,461 million USD but expanded consistently thereafter, reaching 53,916 million USD by the end of 2025. This suggests a strategic increase in investment to support growth and operational scalability.
- Economic Spread Ratio
- The spread ratio mirrors the trend of economic profit, falling to 5.87% in 2022 before rebounding to 8.67% in 2023. After remaining relatively stable at 8.60% in 2024, the ratio reached a five-year high of 9.08% in 2025. The widening spread indicates that the return on invested capital is increasing relative to the cost of capital, signifying improved economic efficiency and value creation.
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 value added metrics reveals a period of volatility followed by steady expansion between 2021 and 2025. While adjusted revenues maintained a consistent upward trajectory, economic profit and the corresponding profit margin experienced a significant contraction in 2022 before recovering to reach peak levels by the end of the observed period.
- Adjusted Revenues
- A consistent growth pattern is observed in adjusted revenues, which rose from US$ 23,259 million in 2021 to US$ 27,052 million in 2025. This steady increase indicates a sustained expansion in the company's top-line financial scale over the five-year horizon.
- Economic Profit
- Economic profit exhibited a sharp decline in 2022, dropping to US$ 2,671 million from US$ 3,964 million in 2021. A substantial recovery occurred in 2023, with profit increasing to US$ 4,346 million. Following a marginal dip to US$ 4,267 million in 2024, the figure reached its highest point in 2025 at US$ 4,898 million.
- Economic Profit Margin
- The economic profit margin reflected the volatility of the absolute profit figures, falling from 17.04% in 2021 to a low of 11.51% in 2022. The margin returned to 17.02% in 2023 and, despite a slight contraction to 16.47% in 2024, expanded to a period high of 18.11% in 2025, suggesting an improvement in the efficiency of value creation relative to revenue generation.