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.
Economic Profit
McDonald’s Corp., economic profit 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 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
= 10,268 – 10.13% × 53,916 = 4,804
The analysis of economic value added indicates a period of volatility followed by sustained value creation. Economic profit remained positive throughout the five-year period, confirming that the entity consistently generated returns in excess of its cost of capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT experienced a contraction in 2022, falling to US$ 7,131 million from US$ 8,491 million in 2021. However, a significant recovery followed, with profits increasing to US$ 9,274 million in 2023 and reaching a peak of US$ 10,268 million by 2025. This trajectory suggests an improvement in operational efficiency and revenue generation over the latter half of the period.
- Cost of Capital
- The cost of capital exhibited a gradual upward trend, rising from 9.64% in 2021 to 10.13% by 2024, where it remained stable through 2025. This incremental increase represents a rising hurdle rate for value creation, requiring higher operating returns to maintain economic profit levels.
- Invested Capital
- Invested capital decreased in 2022 to US$ 45,461 million before entering a general growth phase. By 2025, invested capital expanded to US$ 53,916 million. The increase in the capital base, particularly between 2024 and 2025, aligns with the growth in NOPAT, indicating that capital deployments are contributing positively to the operating bottom line.
- Economic Profit
- Economic profit mirrored the volatility observed in NOPAT, with a notable decline in 2022 to US$ 2,593 million. Following this trough, economic profit rebounded to US$ 4,260 million in 2023 and continued an upward trajectory to reach US$ 4,804 million by 2025. The sustained positive values signify that the business model effectively generates wealth beyond the minimum required return for providers of capital.
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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
= 12,488 × 4.20% = 524
5 2025 Calculation
Tax benefit of interest expense, net of capitalized interest = Adjusted interest expense, net of capitalized interest × Statutory income tax rate
= 2,106 × 21.00% = 442
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$10,268 million in 2025.
- Relationship to Net Income
- NOPAT consistently exceeded net income across all reported years. The difference between NOPAT and net income suggests the presence of significant non-operating items or accounting adjustments impacting reported net income. The gap between the two metrics remained relatively stable throughout the period, indicating a consistent pattern in these adjustments.
The increase in NOPAT from 2022 to 2025 suggests improved operational efficiency or increased profitability from core business activities. The 2022 dip warrants further investigation to determine the underlying causes, but the subsequent recovery indicates a resilient business model. The continued growth in NOPAT into 2025 is a positive indicator of the company’s ability to generate profit from its operations.
- Growth Rate
- From 2021 to 2025, NOPAT increased by approximately 20.9%. The most significant growth occurred between 2024 and 2025, with an increase of 11.5%. This acceleration in growth suggests potentially favorable market conditions or successful implementation of strategic initiatives.
Overall, the NOPAT figures indicate a strengthening operational performance, particularly in the latter part of the analyzed period. Continued monitoring of NOPAT, alongside net income and other key financial metrics, is recommended to assess the sustainability of this positive trend.
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Cash Operating Taxes
McDonald’s Corp., cash operating taxes calculation
US$ 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$568 million. This suggests a growing divergence between reported income tax expense and actual cash outflows for taxes. This difference could be attributable to various factors, including deferred tax assets or liabilities, tax credits, or changes in tax laws.
The fluctuations in cash operating taxes, particularly the decrease in 2025, warrant further investigation. Understanding the drivers behind these changes is crucial for accurate financial modeling and forecasting, especially when calculating economic value added (EVA).
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Invested Capital
McDonald’s Corp., invested capital calculation (financing approach)
US$ 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.
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Cost of Capital
McDonald’s Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 236,598) | 236,598) | ÷ | 290,138) | = | 0.82 | 0.82 | × | 11.72% | = | 9.56% | ||
| Debt obligations and finance lease liability3 | 41,052) | 41,052) | ÷ | 290,138) | = | 0.14 | 0.14 | × | 3.86% × (1 – 21.00%) | = | 0.43% | ||
| Operating lease liability4 | 12,488) | 12,488) | ÷ | 290,138) | = | 0.04 | 0.04 | × | 4.20% × (1 – 21.00%) | = | 0.14% | ||
| Total: | 290,138) | 1.00 | 10.13% | ||||||||||
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 | 221,997) | 221,997) | ÷ | 272,120) | = | 0.82 | 0.82 | × | 11.72% | = | 9.56% | ||
| Debt obligations and finance lease liability3 | 38,380) | 38,380) | ÷ | 272,120) | = | 0.14 | 0.14 | × | 3.81% × (1 – 21.00%) | = | 0.42% | ||
| Operating lease liability4 | 11,743) | 11,743) | ÷ | 272,120) | = | 0.04 | 0.04 | × | 4.10% × (1 – 21.00%) | = | 0.14% | ||
| Total: | 272,120) | 1.00 | 10.13% | ||||||||||
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 | 213,669) | 213,669) | ÷ | 265,815) | = | 0.80 | 0.80 | × | 11.72% | = | 9.42% | ||
| Debt obligations and finance lease liability3 | 39,976) | 39,976) | ÷ | 265,815) | = | 0.15 | 0.15 | × | 3.72% × (1 – 21.00%) | = | 0.44% | ||
| Operating lease liability4 | 12,170) | 12,170) | ÷ | 265,815) | = | 0.05 | 0.05 | × | 4.00% × (1 – 21.00%) | = | 0.14% | ||
| Total: | 265,815) | 1.00 | 10.01% | ||||||||||
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 | 192,881) | 192,881) | ÷ | 239,177) | = | 0.81 | 0.81 | × | 11.72% | = | 9.45% | ||
| Debt obligations and finance lease liability3 | 34,822) | 34,822) | ÷ | 239,177) | = | 0.15 | 0.15 | × | 3.42% × (1 – 21.00%) | = | 0.39% | ||
| Operating lease liability4 | 11,474) | 11,474) | ÷ | 239,177) | = | 0.05 | 0.05 | × | 3.60% × (1 – 21.00%) | = | 0.14% | ||
| Total: | 239,177) | 1.00 | 9.98% | ||||||||||
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 | 182,201) | 182,201) | ÷ | 235,927) | = | 0.77 | 0.77 | × | 11.72% | = | 9.05% | ||
| Debt obligations and finance lease liability3 | 40,000) | 40,000) | ÷ | 235,927) | = | 0.17 | 0.17 | × | 3.11% × (1 – 21.00%) | = | 0.42% | ||
| Operating lease liability4 | 13,726) | 13,726) | ÷ | 235,927) | = | 0.06 | 0.06 | × | 3.70% × (1 – 21.00%) | = | 0.17% | ||
| Total: | 235,927) | 1.00 | 9.64% | ||||||||||
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 | 4,804) | 4,181) | 4,260) | 2,593) | 3,885) | |
| Invested capital2 | 53,916) | 49,627) | 50,097) | 45,461) | 47,779) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 8.91% | 8.42% | 8.50% | 5.70% | 8.13% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Airbnb Inc. | 24.35% | 24.17% | 9.44% | 11.07% | -11.03% | |
| Booking Holdings Inc. | 24.31% | 29.18% | 14.72% | 3.87% | -13.58% | |
| Chipotle Mexican Grill Inc. | 9.13% | 8.59% | 7.01% | 2.81% | -1.68% | |
| DoorDash, Inc. | -18.69% | -26.72% | -39.16% | -52.94% | -39.45% | |
| Starbucks Corp. | -4.63% | 3.52% | 5.22% | 2.82% | 4.07% | |
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 × 4,804 ÷ 53,916 = 8.91%
4 Click competitor name to see calculations.
The analysis of economic value creation indicates a general upward trajectory in profitability and capital efficiency over the five-year period from 2021 to 2025, despite a notable contraction in 2022.
- Economic Profit
- Economic profit experienced a significant decline in 2022, dropping from 3,885 million US$ to 2,593 million US$. However, a strong recovery followed in 2023, with profit increasing to 4,260 million US$. After a marginal dip in 2024 to 4,181 million US$, the value reached a peak of 4,804 million US$ by the end of 2025, demonstrating a resilient capacity for value generation above the cost of capital.
- Invested Capital
- Invested capital exhibited fluctuations consistent with the economic profit trends. A reduction was noted in 2022 to 45,461 million US$, followed by a period of expansion. Capital investment grew to 50,097 million US$ in 2023, remained relatively stable in 2024 at 49,627 million US$, and ultimately increased to 53,916 million US$ in 2025, indicating a steady expansion of the capital base to support operational growth.
- Economic Spread Ratio
- The economic spread ratio highlights the efficiency of capital utilization. A sharp decrease occurred in 2022, with the ratio falling to 5.70% from 8.13% in 2021. This contraction was reversed in 2023 as the ratio rose to 8.50%. The ratio remained stable in 2024 at 8.42% before reaching its highest point of 8.91% in 2025. This trend suggests that the company successfully expanded its return over its cost of capital, enhancing overall economic efficiency toward the end of the period.
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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 | 4,804) | 4,181) | 4,260) | 2,593) | 3,885) | |
| Revenues | 26,885) | 25,920) | 25,494) | 23,183) | 23,223) | |
| Add: Increase (decrease) in deferred revenues, initial franchise fees | 167) | (12) | 32) | 20) | 36) | |
| Adjusted revenues | 27,052) | 25,908) | 25,526) | 23,202) | 23,259) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 17.76% | 16.14% | 16.69% | 11.17% | 16.70% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Airbnb Inc. | 11.34% | 13.13% | 5.49% | 8.80% | -9.98% | |
| Booking Holdings Inc. | 11.66% | 15.95% | 7.87% | 3.09% | -18.59% | |
| Chipotle Mexican Grill Inc. | 5.58% | 5.17% | 4.25% | 1.75% | -1.22% | |
| DoorDash, Inc. | -15.32% | -15.60% | -23.75% | -42.78% | -25.65% | |
| Starbucks Corp. | -3.00% | 2.29% | 3.23% | 1.80% | 3.32% | |
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 × 4,804 ÷ 27,052 = 17.76%
3 Click competitor name to see calculations.
The financial trajectory from 2021 to 2025 is characterized by a period of initial volatility followed by a sustained recovery and growth in value creation. Adjusted revenues remained stable between 2021 and 2022 before entering a consistent upward trend, increasing from US$ 23,202 million in 2022 to US$ 27,052 million by the end of 2025.
- Economic Profit Trends
- Economic profit experienced a significant decline in 2022, dropping to US$ 2,593 million from US$ 3,885 million in 2021. A robust recovery was observed in 2023, where profit surged to US$ 4,260 million. After a marginal decrease to US$ 4,181 million in 2024, the metric reached a five-year peak of US$ 4,804 million by December 31, 2025.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the volatility of absolute economic profit, contracting from 16.70% in 2021 to a low of 11.17% in 2022. The margin rebounded to 16.69% in 2023 and, despite a slight dip to 16.14% in 2024, expanded to 17.76% in 2025. This progression indicates an increasing efficiency in generating economic value relative to the revenue base.
- Revenue and Value Creation Correlation
- A positive correlation is evident between adjusted revenue growth and economic profit starting in 2023. The expansion of the revenue stream by approximately US$ 3,850 million between 2022 and 2025 supported the overall increase in economic profit, suggesting that the growth in scale was successfully leveraged to enhance the company's economic value added.
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