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.
Paying user area
Try for free
McDonald’s Corp. pages available for free this week:
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to McDonald’s Corp. for $24.99.
This is a one-time payment. There is no automatic renewal.
We accept:
Economic Profit
McDonald’s Corp., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 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), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial data indicates several notable trends over the five-year period ending December 31, 2024. The net operating profit after taxes (NOPAT) generally shows an upward trajectory, with some fluctuations. Specifically, NOPAT increased substantially from 6,162 million USD in 2020 to 8,491 million USD in 2021, then declined to 7,131 million USD in 2022 before rising again to 9,274 million USD in 2023 and slightly decreasing to 9,207 million USD in 2024. This suggests episodic variations in operational efficiency or profitability, with a strong recovery following a dip in 2022.
The cost of capital has exhibited a gradual increase each year, moving from 9.52% in 2020 to 10.41% in 2024. This steady rise implies an increased expected return by investors or a higher risk profile over time, which could affect investment and financing decisions.
Invested capital shows some fluctuations but remains relatively stable. After an initial slight increase from 46,817 million USD in 2020 to 47,779 million USD in 2021, it decreased to 45,461 million USD in 2022, rose again to 50,097 million USD in 2023, and then marginally declined to 49,627 million USD in 2024. These changes may indicate adjustments in asset base or capital structure, possibly reflecting strategic investments, asset disposals, or revaluation effects.
Economic profit, representing the value created beyond the cost of capital, mirrors the trend seen in NOPAT with some volatility. It increased from 1,705 million USD in 2020 to 3,760 million USD in 2021, dropped to 2,468 million USD in 2022, then climbed to 4,123 million USD in 2023 and slightly decreased to 4,043 million USD in 2024. The positive economic profit across all years suggests the company consistently generated returns exceeding its cost of capital, albeit with variations that may reflect changing operational performance or market conditions.
Overall, the data presents a picture of an organization experiencing growth in profitability and value creation despite fluctuations and a rising cost of capital. The stability in invested capital alongside increasing economic profit points toward efficient capital management, although the increase in cost of capital signifies a potentially more challenging financial environment going forward.
Net Operating Profit after Taxes (NOPAT)
McDonald’s Corp., NOPAT calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2020-12-31).
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 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2024 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.
The data reveals the financial performance of the company over a five-year period, highlighting trends in net income and net operating profit after taxes (NOPAT).
- Net Income
- There was a noticeable increase in net income from 2020 to 2021, rising from $4,731 million to $7,545 million. This was followed by a decline in 2022 to $6,177 million. Subsequently, net income rebounded strongly in 2023 to $8,469 million, before experiencing a slight decrease in 2024 to $8,223 million. Overall, net income exhibited volatility but maintained an upward trend across the period, ending significantly higher than the initial year.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT demonstrated a similar pattern to net income across the five years. Starting at $6,162 million in 2020, it increased to $8,491 million in 2021, then declined to $7,131 million in 2022. The figure rose again in 2023 to $9,274 million and slightly decreased in 2024 to $9,207 million. The overall trend shows growth over the period with some fluctuations, indicating effective operational profitability maximized after tax impacts.
- Comparative Insights
- The parallel movement between net income and NOPAT suggests a consistent relationship between operating efficiency and overall profitability. Both metrics experienced peak values in 2023, followed by modest declines in 2024. Despite the dips in 2022 and 2024, the data reflects resilience and recovery in financial performance, emphasizing the company's ability to manage profits through varying economic conditions.
Cash Operating Taxes
McDonald’s Corp., cash operating taxes calculation
US$ in millions
Based on: 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), 10-K (reporting date: 2020-12-31).
- Provision for Income Taxes
- The provision for income taxes shows a consistent upward trend from 2020 to 2024. Starting at 1,410 million USD in 2020, it increased moderately to 1,583 million USD in 2021, and 1,648 million USD in 2022. There was a more pronounced rise in 2023 to 2,053 million USD, followed by a smaller increase to 2,121 million USD in 2024. Overall, this indicates a steady growth in the anticipated income tax expense over the five-year period.
- Cash Operating Taxes
- Cash operating taxes also exhibit a clear upward trajectory during the same period. Beginning at 1,772 million USD in 2020, the amount rose significantly to 2,367 million USD in 2021. It remained relatively stable in 2022 with a slight decrease to 2,334 million USD but then surged to 3,128 million USD in 2023. In 2024, there was a marginal decrease to 3,112 million USD. Despite the minor fluctuations, the overall pattern reflects increasing cash tax outflows over the years.
- Comparative Insights
- Both provision for income taxes and cash operating taxes demonstrate upward trends, indicating increasing tax obligations and cash outflows related to taxes. The cash operating taxes consistently exceed the provision for income taxes each year, with the gap widening particularly in 2023 and 2024. This could imply differences in timing, payment schedules, or adjustments between the accrual-based provision and actual cash payments. The growth in tax-related expenses corresponds with expected increases in earnings or taxable income, reflecting an expansion in the company's tax base or changes in tax rates and regulations over time.
Invested Capital
McDonald’s Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 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), 10-K (reporting date: 2020-12-31).
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.
- Total Reported Debt & Leases
-
The total reported debt and leases values show a generally fluctuating trend over the five-year period. Beginning at 51,463 million US dollars in 2020, the amount decreased to 49,349 million in 2021 and further slightly declined to 48,699 million in 2022. However, a notable increase occurred in 2023, rising to 53,091 million before slightly decreasing again to 51,948 million in 2024. This pattern indicates a period of debt reduction followed by renewed borrowing or lease commitments, and then a minor contraction.
- Shareholders’ Equity (Deficit)
-
The shareholders’ equity, reported as a deficit throughout the period, displays a fluctuating but improving trend after an initial deterioration. Starting at a deficit of -7,825 million US dollars in 2020, the deficit narrowed to -4,601 million in 2021, suggesting an improvement in net assets. Subsequently, it worsened again to -6,003 million in 2022 but improved substantially to -4,707 million in 2023, and further to -3,797 million in 2024. Overall, despite remaining negative, the equity position shows a gradual reduction in deficit size toward the end of the period.
- Invested Capital
-
The invested capital shows moderate year-to-year variation. Starting at 46,817 million US dollars in 2020, it increased slightly to 47,779 million in 2021 before decreasing to 45,461 million in 2022. This is followed by a considerable increase to 50,097 million in 2023, before a slight decline to 49,627 million in 2024. The data suggests fluctuating levels of capital invested in the business, with a peak in 2023 and a mild reduction afterward but still maintaining a level above the initial years.
- Summary Insights
-
The overall financial structure reflects a company managing its debt and equity with some volatility. The fluctuations in total reported debt and leases indicate active adjustments in financing strategies. Despite a consistent equity deficit, the trend toward reducing the deficit over time is a positive sign of improving net asset value. Invested capital variations imply measured reinvestment and capital allocation strategies, with a peak in 2023 suggesting increased operational or strategic investment that is somewhat maintained in 2024. The combined trends show an entity engaged in dynamic financial management amid a negative but improving equity backdrop.
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: 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 »
| 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: 2020-12-31).
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, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| 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: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit exhibited a general increasing trend over the five-year period. It started at 1,705 million US dollars in 2020, more than doubled to 3,760 million in 2021, then experienced a decline to 2,468 million in 2022. Subsequently, it rebounded strongly to 4,123 million in 2023, before slightly decreasing to 4,043 million in 2024. Despite some fluctuations, the values in the latter years remained substantially higher than the initial figures.
- Invested Capital
- Invested capital showed some volatility but generally increased slightly from 46,817 million US dollars in 2020 to a peak of 50,097 million in 2023. It decreased marginally to 49,627 million in 2024. The fluctuation in invested capital suggests periodic adjustments in asset base or capital structure, but overall it maintained a relatively stable range close to 47,000 to 50,000 million over the period.
- Economic Spread Ratio
- The economic spread ratio saw a significant rise from 3.64% in 2020 to 7.87% in 2021, indicating improved efficiency or profitability relative to the cost of capital. Although it dropped to 5.43% in 2022, it recovered strongly in the following years, reaching 8.23% in 2023 and slightly decreasing to 8.15% in 2024. This pattern corresponds with the economic profit trend, underscoring overall enhancement in economic returns during the period.
Economic Profit Margin
McDonald’s Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| 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: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit exhibited a generally increasing trend over the five-year period. It started at 1,705 million US dollars in 2020, rose substantially to 3,760 million in 2021, then declined to 2,468 million in 2022. A significant recovery followed in 2023, reaching 4,123 million, before slightly decreasing to 4,043 million in 2024. This pattern indicates fluctuations in profitability but overall demonstrates growth compared to the initial year.
- Adjusted Revenues
- Adjusted revenues showed consistent growth from 19,249 million US dollars in 2020 to 25,908 million in 2024. The increase was steady, with notable increments between 2020 to 2021 and 2022 to 2023. There was a slight plateau between 2021 and 2022, where revenues decreased marginally from 23,259 to 23,202 million, but the general trend remained upward over the five years.
- Economic Profit Margin
- The economic profit margin reflected a pattern similar to economic profit. It increased from 8.86% in 2020 to 16.17% in 2021, then dropped to 10.64% in 2022. The margin rebounded to 16.15% in 2023 and slightly declined to 15.61% in 2024. This suggests that profitability relative to revenue faced volatility but maintained a strong position in the latter years compared to the beginning of the period.
- Overall Insights
- The data reveals a positive trajectory for both adjusted revenues and economic profit across the timeline, despite some setbacks in 2022. The correlation between economic profit and its margin indicates operational efficiency improvements after 2022. The stabilization of economic profit margin above 15% from 2023 onwards signals sustained profitability and effective cost management, supporting the revenue growth observed.