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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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 financial performance, as measured by economic profit, demonstrates a fluctuating yet generally positive trend over the five-year period. Net operating profit after taxes (NOPAT) experienced initial decline followed by recovery and growth, while the cost of capital remained relatively stable. Invested capital showed a similar pattern of initial decrease followed by expansion. These factors collectively influenced the observed economic profit.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT decreased from US$8,491 million in 2021 to US$7,131 million in 2022, representing a decline of approximately 15.8%. However, a substantial recovery occurred in 2023, with NOPAT rising to US$9,274 million. This upward trend continued, albeit at a slower pace, reaching US$10,268 million in 2025. This indicates improving operational efficiency and profitability in the later years of the period.
- Cost of Capital
- The cost of capital exhibited a modest increasing trend throughout the period, rising from 9.30% in 2021 to 9.78% in 2025. This increase, while gradual, suggests a potentially higher risk profile or changing market conditions impacting the company’s funding costs. The changes were relatively small, indicating a stable capital structure.
- Invested Capital
- Invested capital decreased from US$47,779 million in 2021 to US$45,461 million in 2022, a decrease of approximately 5.0%. Subsequently, invested capital increased significantly to US$50,097 million in 2023 and continued to grow, reaching US$53,916 million in 2025. This suggests a reinvestment phase and expansion of the company’s asset base.
- Economic Profit
- Economic profit followed a pattern mirroring NOPAT, declining from US$4,046 million in 2021 to US$2,752 million in 2022. A recovery began in 2023, with economic profit reaching US$4,435 million, and continued to increase to US$4,996 million in 2025. This indicates that the company generated returns exceeding its cost of capital, particularly in the later years of the analyzed period. The overall trend suggests improved value creation.
In summary, the period began with a decline in profitability and invested capital, resulting in lower economic profit. However, a strong recovery and subsequent growth in NOPAT and invested capital led to improved economic profit by the end of the period. The relatively stable cost of capital suggests that the improvements in economic profit were primarily driven by operational performance and strategic investments.
Net Operating Profit after Taxes (NOPAT)
McDonald’s Corp., NOPAT calculation
US$ 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 economic spread ratio exhibited a fluctuating, yet generally positive trend over the five-year period. Economic profit demonstrated variability, while invested capital increased overall. The interplay between these two factors drove the observed changes in the economic spread ratio.
- Economic Spread Ratio
- The economic spread ratio decreased from 8.47% in 2021 to 6.05% in 2022, indicating a reduced ability to generate returns exceeding the cost of capital during that period. A subsequent recovery was observed, with the ratio rising to 8.85% in 2023 and remaining relatively stable at 8.78% in 2024. The ratio continued to improve, reaching 9.27% in 2025, representing the highest value within the observed timeframe. This suggests an increasing efficiency in capital allocation and profitability towards the end of the period.
- Economic Profit
- Economic profit decreased from US$4,046 million in 2021 to US$2,752 million in 2022. This decline contributed to the reduction in the economic spread ratio observed in the same year. A recovery followed, with economic profit increasing to US$4,435 million in 2023 and US$4,357 million in 2024. Further growth was seen in 2025, reaching US$4,996 million, supporting the improvement in the economic spread ratio.
- Invested Capital
- Invested capital experienced a slight decrease from US$47,779 million in 2021 to US$45,461 million in 2022. Subsequently, it increased to US$50,097 million in 2023 and US$49,627 million in 2024, before continuing its upward trajectory to US$53,916 million in 2025. The overall increase in invested capital suggests expansion or reinvestment in the business, which, when coupled with improving economic profit, contributed to the positive trend in the economic spread ratio.
The positive correlation between economic profit and the economic spread ratio is evident. While invested capital increased throughout the period, the growth in economic profit, particularly in the later years, was sufficient to drive an overall improvement in the economic spread ratio, indicating enhanced value creation.
Economic Profit Margin
McDonald’s Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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 economic profit exhibited fluctuations over the five-year period, while adjusted revenues demonstrated a consistent upward trajectory. The economic profit margin showed corresponding variability, ultimately concluding with an increase.
- Economic Profit
- Economic profit began at US$4,046 million in 2021, decreased to US$2,752 million in 2022, and then recovered to US$4,435 million in 2023. This level was sustained in 2024 at US$4,357 million before increasing to US$4,996 million in 2025. The largest year-over-year decrease occurred between 2021 and 2022, while the largest increase occurred between 2024 and 2025.
- Adjusted Revenues
- Adjusted revenues remained relatively stable between 2021 and 2022, at US$23,259 million and US$23,202 million respectively. A noticeable increase was observed in 2023, reaching US$25,526 million, and continued to rise to US$25,908 million in 2024 and US$27,052 million in 2025. This indicates a consistent growth trend in revenue generation over the latter part of the analyzed period.
- Economic Profit Margin
- The economic profit margin mirrored the fluctuations in economic profit. It started at 17.40% in 2021, declined to 11.86% in 2022, and then rebounded to 17.38% in 2023. A slight decrease to 16.82% was seen in 2024, followed by an increase to 18.47% in 2025. The margin’s performance suggests a strengthening relationship between profitability and revenue generation in the most recent year.
The observed increase in both economic profit and economic profit margin in 2025, coupled with the consistent revenue growth, suggests improved operational efficiency and profitability in the final year of the period.