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Microsoft Excel LibreOffice Calc

McDonald’s Corp. (MCD)


Economic Value Added (EVA)

High level of difficulty

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.


Economic Profit

McDonald’s Corp., economic profit calculation

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net operating profit after taxes (NOPAT)1 hidden hidden hidden hidden hidden
Cost of capital2 hidden hidden hidden hidden hidden
Invested capital3 hidden hidden hidden hidden hidden
 
Economic profit4 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-24).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

<>4 2018 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= hiddenhidden × hidden = hidden

Item Description The company
Economic profit Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital. McDonald’s Corp.’s economic profit increased from 2016 to 2017 and from 2017 to 2018.

Net Operating Profit after Taxes (NOPAT)

McDonald’s Corp., NOPAT calculation

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net income hidden hidden hidden hidden hidden
Deferred income tax expense (benefit)1 hidden hidden hidden hidden hidden
Increase (decrease) in deferred revenues, initial franchise fees2 hidden hidden hidden hidden hidden
Increase (decrease) in equity equivalents3 hidden hidden hidden hidden hidden
Interest expense, net of capitalized interest hidden hidden hidden hidden hidden
Interest expense, operating lease liability4 hidden hidden hidden hidden hidden
Adjusted interest expense, net of capitalized interest hidden hidden hidden hidden hidden
Tax benefit of interest expense, net of capitalized interest5 hidden hidden hidden hidden hidden
Adjusted interest expense, net of capitalized interest, after taxes6 hidden hidden hidden hidden hidden
Net operating profit after taxes (NOPAT) hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-24).

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 2018 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= hidden × hidden = hidden

5 2018 Calculation
Tax benefit of interest expense, net of capitalized interest = Adjusted interest expense, net of capitalized interest × Statutory income tax rate
= hidden × 21.00% = hidden

6 Addition of after taxes interest expense to net income.

Item Description The company
NOPAT Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income. McDonald’s Corp.’s NOPAT increased from 2016 to 2017 and from 2017 to 2018.

Cash Operating Taxes

McDonald’s Corp., cash operating taxes calculation

US$ in thousands

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Provision for income taxes hidden hidden hidden hidden hidden
Less: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden
Add: Tax savings from interest expense, net of capitalized interest hidden hidden hidden hidden hidden
Cash operating taxes hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-24).

Item Description The company
Cash operating taxes Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction. McDonald’s Corp.’s cash operating taxes increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Invested Capital

McDonald’s Corp., invested capital calculation (financing approach)

US$ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Current maturities of long-term debt hidden hidden hidden hidden hidden
Long-term debt, excluding current maturities hidden hidden hidden hidden hidden
Operating lease liability1 hidden hidden hidden hidden hidden
Total reported debt & leases hidden hidden hidden hidden hidden
Shareholders’ equity (deficit) hidden hidden hidden hidden hidden
Net deferred tax (assets) liabilities2 hidden hidden hidden hidden hidden
Deferred revenues, initial franchise fees3 hidden hidden hidden hidden hidden
Equity equivalents4 hidden hidden hidden hidden hidden
Accumulated other comprehensive (income) loss, net of tax5 hidden hidden hidden hidden hidden
Adjusted shareholders’ equity (deficit) hidden hidden hidden hidden hidden
Invested capital hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-24).

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.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. McDonald’s Corp.’s invested capital increased from 2016 to 2017 but then slightly declined from 2017 to 2018 not reaching 2016 level.

Cost of Capital

McDonald’s Corp., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt obligations3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 21.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 21.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

Based on: 10-K (filing date: 2019-02-22).

1 US$ in thousands

2 Equity. See details »

3 Debt obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt obligations3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

Based on: 10-K (filing date: 2018-02-23).

1 US$ in thousands

2 Equity. See details »

3 Debt obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt obligations3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

Based on: 10-K (filing date: 2017-03-01).

1 US$ in thousands

2 Equity. See details »

3 Debt obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt obligations3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

Based on: 10-K (filing date: 2016-02-25).

1 US$ in thousands

2 Equity. See details »

3 Debt obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt obligations3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

Based on: 10-K (filing date: 2015-02-24).

1 US$ in thousands

2 Equity. See details »

3 Debt obligations. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

McDonald’s Corp., economic spread ratio calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in thousands)
Economic profit1 hidden hidden hidden hidden hidden
Invested capital2 hidden hidden hidden hidden hidden
Performance Ratio
Economic spread ratio3 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-24).

1 Economic profit. See details »

2 Invested capital. See details »

3 2018 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × hidden ÷ hidden = hidden

Performance ratio Description The company
Economic spread ratio The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. McDonald’s Corp.’s economic spread ratio improved from 2016 to 2017 and from 2017 to 2018.

Economic Profit Margin

McDonald’s Corp., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in thousands)
Economic profit1 hidden hidden hidden hidden hidden
Revenues hidden hidden hidden hidden hidden
Add: Increase (decrease) in deferred revenues, initial franchise fees hidden hidden hidden hidden hidden
Adjusted revenues hidden hidden hidden hidden hidden
Performance Ratio
Economic profit margin2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-23), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-24).

1 Economic profit. See details »

2 2018 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × hidden ÷ hidden = hidden

Performance ratio Description The company
Economic profit margin The ratio of economic profit to sales. It is the company’s profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin. McDonald’s Corp.’s economic profit margin improved from 2016 to 2017 and from 2017 to 2018.