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:
- Common-Size Income Statement
- Analysis of Solvency Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Price to FCFE (P/FCFE)
- Selected Financial Data since 2005
- Operating Profit Margin since 2005
- Total Asset Turnover since 2005
- Price to Sales (P/S) since 2005
- Analysis of Debt
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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 period under review demonstrates fluctuating financial performance as measured by economic profit. Net operating profit after taxes (NOPAT) initially decreased before exhibiting a recovery and subsequent growth. The cost of capital remained relatively stable, while invested capital showed an increasing trend over the five-year period. Consequently, economic profit mirrored the NOPAT trend, initially declining, then recovering, and ultimately reaching its highest point in the observed timeframe.
- NOPAT Trend
- Net operating profit after taxes experienced a decrease from US$8,491 million in 2021 to US$7,131 million in 2022, representing a decline of approximately 15.8%. This was followed by a substantial increase to US$9,274 million in 2023. The growth moderated slightly in 2024 to US$9,207 million, before continuing upward to US$10,268 million in 2025. This suggests a recovery from a temporary setback and a return to a growth trajectory.
- Cost of Capital
- The cost of capital exhibited a modest increase over the period, rising from 9.19% in 2021 to 9.66% in 2024 and remaining constant at that level through 2025. This incremental rise indicates a slightly increasing cost of funding operations, though the changes are relatively small.
- Invested Capital
- Invested capital demonstrated a consistent upward trend, increasing from US$47,779 million in 2021 to US$53,916 million in 2025. There was a slight dip in 2022 to US$45,461 million, but it quickly recovered and continued to grow. This suggests ongoing investment in the business and expansion of its asset base.
- Economic Profit
- Economic profit followed a pattern similar to NOPAT. It decreased from US$4,099 million in 2021 to US$2,804 million in 2022, then increased to US$4,492 million in 2023 and US$4,415 million in 2024. The highest level of economic profit was achieved in 2025, reaching US$5,058 million. This indicates that the company generated returns exceeding its cost of capital, with the margin of that excess improving over time.
Overall, the analysis suggests a period of initial challenge followed by a strengthening financial position. The increasing invested capital, coupled with the recovery and growth in NOPAT, resulted in improved economic profit generation by the end of the observed period.
Net Operating Profit after Taxes (NOPAT)
McDonald’s Corp., NOPAT calculation
US$ 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 period under review demonstrates fluctuations in economic performance alongside consistent growth in capital employed. Economic profit exhibited volatility, while the economic spread ratio generally improved over the five-year span. A closer examination reveals specific trends worthy of note.
- Economic Profit
- Economic profit decreased from US$4,099 million in 2021 to US$2,804 million in 2022, representing a significant decline. However, it subsequently recovered, reaching US$4,492 million in 2023 and US$4,415 million in 2024. The final year of the period, 2025, saw a further increase to US$5,058 million, indicating a positive trajectory in absolute profit generation.
- Invested Capital
- Invested capital experienced a slight decrease between 2021 and 2022, moving from US$47,779 million to US$45,461 million. Following this, invested capital increased consistently through 2025, reaching US$53,916 million. This suggests a strategic reinvestment phase, or potentially acquisitions, contributing to the expansion of the capital base.
- Economic Spread Ratio
- The economic spread ratio decreased from 8.58% in 2021 to 6.17% in 2022, mirroring the decline in economic profit. From 2022 onward, the ratio demonstrated an upward trend, reaching 8.97% in 2023, 8.90% in 2024, and peaking at 9.38% in 2025. This indicates an improving ability to generate returns exceeding the cost of capital, despite the initial dip. The consistent increase in the ratio, coupled with growing invested capital, suggests enhanced efficiency in capital allocation and utilization.
In summary, while economic profit experienced initial volatility, the overall trend in the economic spread ratio is positive. The company appears to be effectively deploying increasing levels of invested capital to generate returns above the cost of that capital, as evidenced by the rising economic spread ratio. The recovery in economic profit in the later years further supports this conclusion.
Economic Profit Margin
McDonald’s Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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 economic profit exhibited fluctuations over the five-year period, while adjusted revenues demonstrated a consistent upward trajectory. The economic profit margin showed an overall positive trend, though with intermediate variability.
- Economic Profit
- Economic profit began at US$4,099 million in 2021, decreased to US$2,804 million in 2022, and then increased to US$4,492 million in 2023. This level was sustained in 2024 at US$4,415 million before rising further to US$5,058 million in 2025. The decline in 2022 represents the only period of negative change within the observed timeframe, followed by a recovery and subsequent growth.
- Adjusted Revenues
- Adjusted revenues were reported as US$23,259 million in 2021 and experienced a slight decrease to US$23,202 million in 2022. From 2022 onward, a clear upward trend is evident, reaching US$25,526 million in 2023, US$25,908 million in 2024, and culminating in US$27,052 million in 2025. This indicates consistent revenue growth in the latter part of the period.
- Economic Profit Margin
- The economic profit margin began at 17.62% in 2021, decreased to 12.09% in 2022, coinciding with the reduction in economic profit. The margin recovered to 17.60% in 2023, then slightly decreased to 17.04% in 2024. The highest margin observed was in 2025, at 18.70%. The margin’s movement generally aligns with the fluctuations in economic profit, suggesting a strong relationship between profitability and revenue generation.
The observed increase in the economic profit margin in 2025, despite the increase in adjusted revenues, suggests improved efficiency in converting revenue into economic profit. The initial dip in both economic profit and margin in 2022 warrants further investigation to determine the underlying causes.