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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
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

McDonald’s Corp., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net operating profit after taxes (NOPAT)¹	9,274,313)	7,131,045)	8,491,205)	6,161,563)	7,516,971)
Cost of capital²	9.45%	9.42%	9.10%	8.76%	8.98%
Invested capital³	50,097,000)	45,460,500)	47,778,700)	46,817,000)	42,668,200)

Economic profit⁴	4,539,874)	2,847,537)	4,142,104)	2,059,706)	3,687,484)

Based on: 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), 10-K (reporting date: 2019-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 9,274,313 – 9.45% × 50,097,000 = 4,539,874

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	McDonald’s Corp. economic profit decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

McDonald’s Corp., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net income	8,468,800)	6,177,400)	7,545,200)	4,730,500)	6,025,400)
Deferred income tax expense (benefit)¹	(686,400)	(345,700)	(428,300)	6,400)	149,700)
Increase (decrease) in deferred revenues, initial franchise fees²	32,300)	19,500)	36,300)	41,400)	32,800)
Increase (decrease) in equity equivalents³	(654,100)	(326,200)	(392,000)	47,800)	182,500)
Interest expense, net of capitalized interest	1,360,800)	1,207,000)	1,185,800)	1,218,100)	1,121,900)
Interest expense, operating lease liability⁴	486,812)	413,057)	507,877)	532,866)	535,152)
Adjusted interest expense, net of capitalized interest	1,847,612)	1,620,057)	1,693,677)	1,750,966)	1,657,052)
Tax benefit of interest expense, net of capitalized interest⁵	(387,999)	(340,212)	(355,672)	(367,703)	(347,981)
Adjusted interest expense, net of capitalized interest, after taxes⁶	1,459,613)	1,279,845)	1,338,005)	1,383,263)	1,309,071)
Net operating profit after taxes (NOPAT)	9,274,313)	7,131,045)	8,491,205)	6,161,563)	7,516,971)

Based on: 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), 10-K (reporting date: 2019-12-31).

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 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 12,170,300 × 4.00% = 486,812

⁵ 2023 Calculation
Tax benefit of interest expense, net of capitalized interest = Adjusted interest expense, net of capitalized interest × Statutory income tax rate
= 1,847,612 × 21.00% = 387,999

⁶ Addition of after taxes interest expense to net income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	McDonald’s Corp. NOPAT decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

McDonald’s Corp., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Provision for income taxes	2,053,400)	1,648,000)	1,582,700)	1,410,200)	1,992,700)
Less: Deferred income tax expense (benefit)	(686,400)	(345,700)	(428,300)	6,400)	149,700)
Add: Tax savings from interest expense, net of capitalized interest	387,999)	340,212)	355,672)	367,703)	347,981)
Cash operating taxes	3,127,799)	2,333,912)	2,366,672)	1,771,503)	2,190,981)

Based on: 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), 10-K (reporting date: 2019-12-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	McDonald’s Corp. cash operating taxes decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

McDonald’s Corp., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Short-term borrowings and current maturities of long-term debt	2,192,400)	—)	—)	2,243,600)	59,100)
Current finance lease liability	45,500)	21,500)	—)	—)	—)
Long-term debt, excluding current maturities	37,152,900)	35,903,500)	35,622,700)	35,196,800)	34,118,100)
Long-term finance lease liability	1,530,000)	1,300,200)	—)	—)	—)
Operating lease liability¹	12,170,300)	11,473,800)	13,726,400)	14,022,800)	13,378,800)
Total reported debt & leases	53,091,100)	48,699,000)	49,349,100)	51,463,200)	47,556,000)
Shareholders’ equity (deficit)	(4,706,700)	(6,003,400)	(4,601,000)	(7,824,900)	(8,210,300)
Net deferred tax (assets) liabilities²	(1,342,000)	(479,500)	(281,400)	(110,100)	179,200)
Deferred revenues, initial franchise fees³	790,100)	757,800)	738,300)	702,000)	660,600)
Equity equivalents⁴	(551,900)	278,300)	456,900)	591,900)	839,800)
Accumulated other comprehensive (income) loss, net of tax⁵	2,456,000)	2,486,600)	2,573,700)	2,586,800)	2,482,700)
Adjusted shareholders’ equity (deficit)	(2,802,600)	(3,238,500)	(1,570,400)	(4,646,200)	(4,887,800)
Investments⁶	(191,500)	—)	—)	—)	—)
Invested capital	50,097,000)	45,460,500)	47,778,700)	46,817,000)	42,668,200)

Based on: 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), 10-K (reporting date: 2019-12-31).

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.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	McDonald’s Corp. invested capital decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

McDonald’s Corp., cost of capital calculations

Dec 31, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	213,669,476)	213,669,476)	÷	265,815,276)	=	0.80	0.80	×	11.03%	=	8.86%
Debt obligations and finance lease liability³	39,975,500)	39,975,500)	÷	265,815,276)	=	0.15	0.15	×	3.72% × (1 – 21.00%)	=	0.44%
Operating lease liability⁴	12,170,300)	12,170,300)	÷	265,815,276)	=	0.05	0.05	×	4.00% × (1 – 21.00%)	=	0.14%
Total:	265,815,276)					1.00					9.45%

Based on: 10-K (reporting date: 2023-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt obligations and finance lease liability. See details »

⁴ Operating lease liability. See details »

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	192,881,116)	192,881,116)	÷	239,176,616)	=	0.81	0.81	×	11.03%	=	8.89%
Debt obligations and finance lease liability³	34,821,700)	34,821,700)	÷	239,176,616)	=	0.15	0.15	×	3.42% × (1 – 21.00%)	=	0.39%
Operating lease liability⁴	11,473,800)	11,473,800)	÷	239,176,616)	=	0.05	0.05	×	3.60% × (1 – 21.00%)	=	0.14%
Total:	239,176,616)					1.00					9.42%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt obligations and finance lease liability. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	182,200,563)	182,200,563)	÷	235,926,963)	=	0.77	0.77	×	11.03%	=	8.52%
Debt obligations and finance lease liability³	40,000,000)	40,000,000)	÷	235,926,963)	=	0.17	0.17	×	3.11% × (1 – 21.00%)	=	0.42%
Operating lease liability⁴	13,726,400)	13,726,400)	÷	235,926,963)	=	0.06	0.06	×	3.70% × (1 – 21.00%)	=	0.17%
Total:	235,926,963)					1.00					9.10%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt obligations and finance lease liability. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	157,554,306)	157,554,306)	÷	215,277,106)	=	0.73	0.73	×	11.03%	=	8.07%
Debt obligations and finance lease liability³	43,700,000)	43,700,000)	÷	215,277,106)	=	0.20	0.20	×	3.09% × (1 – 21.00%)	=	0.50%
Operating lease liability⁴	14,022,800)	14,022,800)	÷	215,277,106)	=	0.07	0.07	×	3.80% × (1 – 21.00%)	=	0.20%
Total:	215,277,106)					1.00					8.76%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt obligations and finance lease liability. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	156,618,342)	156,618,342)	÷	207,597,142)	=	0.75	0.75	×	11.03%	=	8.32%
Debt obligations and finance lease liability³	37,600,000)	37,600,000)	÷	207,597,142)	=	0.18	0.18	×	3.16% × (1 – 21.00%)	=	0.45%
Operating lease liability⁴	13,378,800)	13,378,800)	÷	207,597,142)	=	0.06	0.06	×	4.00% × (1 – 21.00%)	=	0.20%
Total:	207,597,142)					1.00					8.98%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in thousands

² Equity. See details »

³ Debt obligations and finance lease liability. See details »

⁴ Operating lease liability. See details »

McDonald’s Corp., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in thousands)
Economic profit¹	4,539,874)	2,847,537)	4,142,104)	2,059,706)	3,687,484)
Invested capital²	50,097,000)	45,460,500)	47,778,700)	46,817,000)	42,668,200)
Performance Ratio
Economic spread ratio³	9.06%	6.26%	8.67%	4.40%	8.64%
Benchmarks
Economic Spread Ratio, Competitors⁴
Airbnb Inc.	13.48%	14.90%	-7.36%	-113.66%	—
Booking Holdings Inc.	17.26%	6.35%	-11.05%	-10.75%	30.90%
Carnival Corp. & plc	-8.78%	-22.43%	-30.35%	-33.73%	-10.54%
Chipotle Mexican Grill Inc.	8.02%	3.98%	-0.70%	-2.73%	-2.51%
Starbucks Corp.	9.62%	7.20%	8.46%	-4.27%	0.15%

Based on: 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), 10-K (reporting date: 2019-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 4,539,874 ÷ 50,097,000 = 9.06%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	McDonald’s Corp. economic spread ratio deteriorated from 2021 to 2022 but then improved from 2022 to 2023 exceeding 2021 level.

McDonald’s Corp., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in thousands)
Economic profit¹	4,539,874)	2,847,537)	4,142,104)	2,059,706)	3,687,484)

Revenues	25,493,700)	23,182,600)	23,222,900)	19,207,800)	21,076,500)
Add: Increase (decrease) in deferred revenues, initial franchise fees	32,300)	19,500)	36,300)	41,400)	32,800)
Adjusted revenues	25,526,000)	23,202,100)	23,259,200)	19,249,200)	21,109,300)
Performance Ratio
Economic profit margin²	17.79%	12.27%	17.81%	10.70%	17.47%
Benchmarks
Economic Profit Margin, Competitors³
Airbnb Inc.	7.73%	11.76%	-6.62%	-174.02%	—
Booking Holdings Inc.	9.22%	5.07%	-15.14%	-23.03%	22.61%
Carnival Corp. & plc	-16.04%	-81.37%	-739.93%	-295.52%	-19.40%
Chipotle Mexican Grill Inc.	4.86%	2.48%	-0.51%	-2.24%	-1.89%
Starbucks Corp.	5.95%	4.59%	6.90%	-4.17%	0.12%

Based on: 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), 10-K (reporting date: 2019-12-31).

¹ Economic profit. See details »

² 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × 4,539,874 ÷ 25,526,000 = 17.79%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	McDonald’s Corp. economic profit margin deteriorated from 2021 to 2022 but then improved from 2022 to 2023 not reaching 2021 level.

McDonald’s Corp. (NYSE:MCD)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin