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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 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	9,207)	9,274)	7,131)	8,491)	6,162)
Cost of capital²	10.52%	10.39%	10.37%	10.01%	9.62%
Invested capital³	49,627)	50,097)	45,461)	47,779)	46,817)

Economic profit⁴	3,988)	4,068)	2,418)	3,709)	1,658)

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
= 9,207 – 10.52% × 49,627 = 3,988

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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 increased from 2022 to 2023 but then slightly decreased from 2023 to 2024.

McDonald’s Corp., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Net income	8,223)	8,469)	6,177)	7,545)	4,731)
Deferred income tax expense (benefit)¹	(574)	(686)	(346)	(428)	6)
Increase (decrease) in deferred revenues, initial franchise fees²	(12)	32)	20)	36)	41)
Increase (decrease) in equity equivalents³	(586)	(654)	(326)	(392)	48)
Interest expense, net of capitalized interest	1,506)	1,361)	1,207)	1,186)	1,218)
Interest expense, operating lease liability⁴	481)	487)	413)	508)	533)
Adjusted interest expense, net of capitalized interest	1,987)	1,848)	1,620)	1,694)	1,751)
Tax benefit of interest expense, net of capitalized interest⁵	(417)	(388)	(340)	(356)	(368)
Adjusted interest expense, net of capitalized interest, after taxes⁶	1,570)	1,460)	1,280)	1,338)	1,383)
Net operating profit after taxes (NOPAT)	9,207)	9,274)	7,131)	8,491)	6,162)

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
= 11,743 × 4.10% = 481

⁵ 2024 Calculation
Tax benefit of interest expense, net of capitalized interest = Adjusted interest expense, net of capitalized interest × Statutory income tax rate
= 1,987 × 21.00% = 417

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 increased from 2022 to 2023 but then slightly decreased from 2023 to 2024.

McDonald’s Corp., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Provision for income taxes	2,121)	2,053)	1,648)	1,583)	1,410)
Less: Deferred income tax expense (benefit)	(574)	(686)	(346)	(428)	6)
Add: Tax savings from interest expense, net of capitalized interest	417)	388)	340)	356)	368)
Cash operating taxes	3,112)	3,128)	2,334)	2,367)	1,772)

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).

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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 increased from 2022 to 2023 but then slightly decreased from 2023 to 2024.

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

US$ in millions

	Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Short-term borrowings and current maturities of long-term debt	—)	2,192)	—)	—)	2,244)
Current finance lease liability	11)	46)	22)	—)	—)
Long-term debt, excluding current maturities	38,424)	37,153)	35,904)	35,623)	35,197)
Long-term finance lease liability	1,770)	1,530)	1,300)	—)	—)
Operating lease liability¹	11,743)	12,170)	11,474)	13,726)	14,023)
Total reported debt & leases	51,948)	53,091)	48,699)	49,349)	51,463)
Shareholders’ equity (deficit)	(3,797)	(4,707)	(6,003)	(4,601)	(7,825)
Net deferred tax (assets) liabilities²	(1,629)	(1,342)	(480)	(281)	(110)
Deferred revenues, initial franchise fees³	778)	790)	758)	738)	702)
Equity equivalents⁴	(851)	(552)	278)	457)	592)
Accumulated other comprehensive (income) loss, net of tax⁵	2,553)	2,456)	2,487)	2,574)	2,587)
Adjusted shareholders’ equity (deficit)	(2,095)	(2,803)	(3,239)	(1,570)	(4,646)
Investments⁶	(226)	(192)	—)	—)	—)
Invested capital	49,627)	50,097)	45,461)	47,779)	46,817)

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.

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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 increased from 2022 to 2023 but then slightly decreased from 2023 to 2024.

McDonald’s Corp., cost of capital calculations

Dec 31, 2024

	Capital (fair value)¹	Weights					Cost of capital
Equity²	221,997)	221,997)	÷	272,120)	=	0.82	0.82	×	12.20%	=	9.95%
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					10.52%

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 »

Dec 31, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	213,669)	213,669)	÷	265,815)	=	0.80	0.80	×	12.20%	=	9.81%
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					10.39%

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 »

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	192,881)	192,881)	÷	239,177)	=	0.81	0.81	×	12.20%	=	9.84%
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					10.37%

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 »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	182,201)	182,201)	÷	235,927)	=	0.77	0.77	×	12.20%	=	9.42%
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					10.01%

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 »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	157,554)	157,554)	÷	215,277)	=	0.73	0.73	×	12.20%	=	8.93%
Debt obligations and finance lease liability³	43,700)	43,700)	÷	215,277)	=	0.20	0.20	×	3.09% × (1 – 21.00%)	=	0.50%
Operating lease liability⁴	14,023)	14,023)	÷	215,277)	=	0.07	0.07	×	3.80% × (1 – 21.00%)	=	0.20%
Total:	215,277)					1.00					9.62%

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 »

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	3,988)	4,068)	2,418)	3,709)	1,658)
Invested capital²	49,627)	50,097)	45,461)	47,779)	46,817)
Performance Ratio
Economic spread ratio³	8.04%	8.12%	5.32%	7.76%	3.54%
Benchmarks
Economic Spread Ratio, Competitors⁴
Airbnb Inc.	27.30%	12.86%	14.29%	-7.97%	-114.28%
Booking Holdings Inc.	30.12%	15.66%	4.79%	-12.64%	-12.31%
Chipotle Mexican Grill Inc.	8.15%	6.50%	2.51%	-2.18%	-4.22%
Starbucks Corp.	6.71%	8.50%	6.08%	7.34%	-5.35%

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 × 3,988 ÷ 49,627 = 8.04%

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 improved from 2022 to 2023 but then slightly deteriorated from 2023 to 2024.

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	3,988)	4,068)	2,418)	3,709)	1,658)

Revenues	25,920)	25,494)	23,183)	23,223)	19,208)
Add: Increase (decrease) in deferred revenues, initial franchise fees	(12)	32)	20)	36)	41)
Adjusted revenues	25,908)	25,526)	23,202)	23,259)	19,249)
Performance Ratio
Economic profit margin²	15.39%	15.93%	10.42%	15.95%	8.61%
Benchmarks
Economic Profit Margin, Competitors³
Airbnb Inc.	14.79%	7.38%	11.28%	-7.17%	-174.96%
Booking Holdings Inc.	16.46%	8.37%	3.82%	-17.31%	-26.37%
Chipotle Mexican Grill Inc.	4.90%	3.95%	1.56%	-1.58%	-3.46%
Starbucks Corp.	4.37%	5.25%	3.87%	5.98%	-5.21%

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 × 3,988 ÷ 25,908 = 15.39%

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 improved from 2022 to 2023 but then slightly deteriorated from 2023 to 2024.

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