Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
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- Income Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Price to FCFE (P/FCFE)
- Selected Financial Data since 2005
- Return on Assets (ROA) since 2005
- Price to Book Value (P/BV) since 2005
- Price to Sales (P/S) since 2005
- Analysis of Debt
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Return on Invested Capital (ROIC)
McDonald’s Corp., ROIC 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Airbnb Inc. | ||||||
| Booking Holdings Inc. | ||||||
| Chipotle Mexican Grill 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 NOPAT. See details »
2 Invested capital. See details »
3 2024 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes exhibited an overall upward trend from 2020 to 2024. Starting at 6,162 million US dollars in 2020, the figure increased significantly in 2021 to 8,491 million. Although there was a decline in 2022 to 7,131 million, the profit rebounded strongly in 2023 to 9,274 million and slightly decreased to 9,207 million in 2024. This pattern shows periods of volatility but generally reflects growth in operating profitability over the five-year span.
- Invested Capital
- The invested capital experienced moderate fluctuations during the analyzed periods. It started at 46,817 million US dollars in 2020, increased slightly to 47,779 million in 2021, and then decreased to 45,461 million in 2022. In 2023, it rose sharply to 50,097 million before slightly declining to 49,627 million in 2024. These movements indicate periodic adjustments in capital commitments, peaking in 2023 before a minor contraction in the last year.
- Return on Invested Capital (ROIC)
- The return on invested capital showed a positive and improving trend throughout the period. From 13.16% in 2020, the ROIC increased significantly to 17.77% in 2021, followed by a slight decline to 15.69% in 2022. Subsequently, it improved markedly again to 18.51% in 2023 and marginally increased to 18.55% in 2024. This pattern suggests enhanced efficiency in generating profits from invested capital over time, with minor variability in the middle years.
- Summary Insights
- Over the examined years, the company demonstrated an overall improvement in profitability and capital efficiency. Despite fluctuations in net operating profit and invested capital, the return on invested capital consistently trended upward, indicating successful management of capital resources. The spike in invested capital in 2023, coupled with the highest values in NOPAT and ROIC, implies strategic investments that translated into improved returns. Slight declines in 2024 across NOPAT and invested capital were accompanied by a stable ROIC, suggesting maintained operational efficiency despite reduced capital deployment.
Decomposition of ROIC
McDonald’s Corp., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2024 | = | × | × | ||||
| Dec 31, 2023 | = | × | × | ||||
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × | ||||
| Dec 31, 2020 | = | × | × |
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 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The analysis of the financial data over the five-year period reveals significant trends in profitability, efficiency, tax management, and returns on invested capital.
- Operating Profit Margin (OPM)
- The operating profit margin exhibits a fluctuating yet generally positive trend. Starting at 41.21% in 2020, it increased notably to 46.68% in 2021, declined to 40.79% in 2022, then rose again to peak at 48.59% in 2023 before slightly decreasing to 47.55% in 2024. This indicates generally strong profitability with some year-to-year variability, possibly influenced by operational changes or cost factors.
- Turnover of Capital (TO)
- Capital turnover shows a steady improvement, beginning at a ratio of 0.41 in 2020, then increasing consistently each year to reach 0.52 by 2024. This upward trend suggests enhanced efficiency in utilizing invested capital to generate revenue.
- Effective Cash Tax Rate (CTR) Complement (1 – CTR)
- The metric representing one minus the effective cash tax rate stands relatively stable, fluctuating narrowly between approximately 74.74% and 78.20%. It indicates a consistent tax impact over the years, with a minor decrease from 77.67% in 2020 to around 74.74% in 2024, reflecting slight improvements in tax management or changes in tax regulations.
- Return on Invested Capital (ROIC)
- Return on invested capital demonstrates a generally positive trajectory with some volatility. Starting at 13.16% in 2020, the figure improves notably to 17.77% in 2021, dips to 15.69% in 2022, then increases again to approximately 18.5% in 2023 and 2024. This pattern aligns with changes in operating margin and capital turnover, suggesting that the company is increasingly effective at generating returns from its capital investments.
Overall, the data display strong operational profitability and growing capital efficiency. Despite some fluctuations in operating margin and ROIC, the underlying trends are positive. The steady turnover of capital and relatively stable effective tax rate contribute to improving returns on invested capital, indicating enhanced financial performance and asset utilization over the analyzed period.
Operating Profit Margin (OPM)
McDonald’s Corp., OPM 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenues, initial franchise fees | ||||||
| Adjusted revenues | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Airbnb Inc. | ||||||
| Booking Holdings Inc. | ||||||
| Chipotle Mexican Grill 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 NOPAT. See details »
2 Cash operating taxes. See details »
3 2024 Calculation
OPM = 100 × NOPBT ÷ Adjusted revenues
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit Before Taxes (NOPBT)
- The net operating profit before taxes displayed a generally increasing trend from 2020 through 2023, rising from 7,933 million USD in 2020 to a peak of 12,402 million USD in 2023. However, in 2024, there was a slight decline to 12,319 million USD, which, although marginal, indicates a plateauing after several years of growth.
- Adjusted Revenues
- Adjusted revenues increased consistently over the period under review. Starting at 19,249 million USD in 2020, revenues rose steadily, reaching 25,908 million USD by the end of 2024. This represents a solid upward trajectory, with no apparent declines or reversals.
- Operating Profit Margin (OPM)
- The operating profit margin showed some fluctuations over the years but generally exhibited an upward trend. The margin increased notably from 41.21% in 2020 to reach a high of 48.59% in 2023. In 2024, there was a slight decrease to 47.55%, which, while lower than the previous year, remains significantly above the margin recorded in 2020 and 2022.
- Overall Analysis
- Overall, the financial metrics indicate positive operational performance with expanding revenues and improving profitability margins over the time frame. The growth in net operating profit before taxes generally aligns with the rise in adjusted revenues and increased operating margins, suggesting effective cost management and operational efficiency. The slight declines observed in 2024 for both net operating profit before taxes and operating profit margin may warrant further investigation, but they are relatively minor and do not negate the overall positive trend established in prior years.
Turnover of Capital (TO)
McDonald’s Corp., TO 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) | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenues, initial franchise fees | ||||||
| Adjusted revenues | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Airbnb Inc. | ||||||
| Booking Holdings Inc. | ||||||
| Chipotle Mexican Grill 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 Invested capital. See details »
2 2024 Calculation
TO = Adjusted revenues ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
- Adjusted Revenues
- The adjusted revenues exhibited an upward trend over the observed period, increasing from 19,249 million US dollars in 2020 to 25,908 million US dollars in 2024. The revenues saw a significant rise between 2020 and 2021, followed by a marginal decrease in 2022. Subsequently, revenues resumed growth through 2023 and 2024, reaching their highest level at the end of the period.
- Invested Capital
- Invested capital showed some fluctuations, starting at 46,817 million US dollars in 2020, slightly increasing in 2021, then declining in 2022. It rebounded sharply in 2023 before decreasing again in 2024. Despite the volatility, the general level of invested capital remained within a relatively narrow range around 45,000 to 50,000 million US dollars over the five-year span.
- Turnover of Capital (TO)
- The turnover of capital ratio improved consistently from 0.41 in 2020 to 0.52 in 2024, indicating enhanced efficiency in using invested capital to generate revenues. This steady increase suggests a positive trend in asset utilization and operational performance, with a notable improvement occurring particularly between 2020 and 2021, followed by sustained growth in subsequent years.
- Overall Insights
- Over the period analyzed, the company demonstrated growth in revenues accompanied by a generally steady invested capital base. The simultaneous increase in the turnover of capital ratio implies better capital efficiency, meaning the company was able to generate more sales per unit of invested capital. This points to improvements in management effectiveness and potentially favorable market conditions. The fluctuations in invested capital merit attention, but they did not hinder the upward trajectory of revenue or efficiency measures.
Effective Cash Tax Rate (CTR)
McDonald’s Corp., CTR 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Tax Rate | ||||||
| CTR3 | ||||||
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Airbnb Inc. | ||||||
| Booking Holdings Inc. | ||||||
| Chipotle Mexican Grill 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 NOPAT. See details »
2 Cash operating taxes. See details »
3 2024 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
- Cash Operating Taxes
- The cash operating taxes show a general upward trend from 2020 to 2023, increasing from 1,772 million USD in 2020 to 3,128 million USD in 2023. However, in 2024, there is a slight decline to 3,112 million USD, indicating a stabilization or minor decrease after consistent growth over the previous years.
- Net Operating Profit Before Taxes (NOPBT)
- The NOPBT figures increased significantly from 7,933 million USD in 2020 to a peak of 12,402 million USD in 2023. Although there is a minor reduction in 2024 to 12,319 million USD, the overall trend is strongly positive, reflecting consistent profitability growth with a small dip in the final year observed.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate remained relatively stable from 2020 through 2024, ranging from 21.8% to 25.26%. There is a slight upward trend starting in 2022 at 24.66%, rising to approximately 25.2% in 2023 and 2024, suggesting a gradual increase in the tax rate on operating profits over the period.
- Overall Insights
- Over the five-year period, the company demonstrates a strong increase in operating profitability, reflected by the growth in NOPBT. This profitability increase correlates with rising cash taxes paid, which is consistent with the upward trend in the effective cash tax rate. The slight decline or stabilization in cash taxes and NOPBT in the final year may indicate a plateau in growth or adjustments in operational performance or tax strategy. The relatively stable but slightly increasing tax rate suggests consistent tax obligations relative to operating profit, without drastic policy or expense changes.