What does return on equity mean?

How much profit the company earns on the money shareholders have invested.

How do you interpret return on equity?

Higher is better, but very high ROE can be manufactured by leverage — a thin equity base inflates the ratio. Read it next to debt-to-equity and ROIC to tell genuine returns from balance-sheet engineering.

How does return on equity compare across companies?

Comparable across peers, with the leverage caveat. Negative or near-zero equity makes ROE meaningless, so it is suppressed there.

McDonald's MCD Return on equity

Discontinued — last reported Q4 '15

Return on equity at other companies

Chipotle Mexican GrillCMG

49.2%+3.7pp

Restaurant Brands InternationalQSR

37.9%-6.1pp

Other financials

Income statement

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Revenue$6.5B+9.4%

Gross profit$5.8B+9.5%

Operating income$3.0B+11.5%

Net income$2.0B+6.2%

EPS (diluted)$2.78+6.9%

Balance sheet

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Cash & equivalents$1.2B-5.5%

Total debt$54.9B+4.0%

Total equity-$1.3B+62.8%

Total assets$60.0B+6.6%

Cash flow

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Operating cash flow$2.4B-0.7%

CapEx$682.0M+23.8%

Free cash flow$1.7B-7.8%

Valuation

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Market cap$201.66B-0.8%

Enterprise value$255.37B+0.1%

P/E23.2×-1.7×

P/S7.4×-0.6×

Profitability

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Gross margin86.6%—

Operating margin46.3%+1.0pp

Net margin31.6%-0.1pp

Returns & leverage

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Debt / equity6.5×—

Current ratio1.1×0.0×

Where this comes from

Calculated from McDonald's’s reported figures.

net income/total stockholders equity=45.4%

Based on trailing twelve months.

The official record: McDonald's’s 10-K, filed February 22, 2019, on SEC EDGAR. View the filing →

Questions, answered.

What does return on equity mean?: How much profit the company earns on the money shareholders have invested.
How do you interpret return on equity?: Higher is better, but very high ROE can be manufactured by leverage — a thin equity base inflates the ratio. Read it next to debt-to-equity and ROIC to tell genuine returns from balance-sheet engineering.
How does return on equity compare across companies?: Comparable across peers, with the leverage caveat. Negative or near-zero equity makes ROE meaningless, so it is suppressed there.