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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

Cisco Systems Inc., economic profit calculation

US$ in millions

12 months ended:	Jul 29, 2023	Jul 30, 2022	Jul 31, 2021	Jul 25, 2020	Jul 27, 2019	Jul 28, 2018
Net operating profit after taxes (NOPAT)¹	12,636)	12,468)	11,686)	12,905)	9,686)	1,433)
Cost of capital²	12.95%	12.75%	12.73%	12.29%	12.07%	12.11%
Invested capital³	58,979)	59,063)	57,460)	53,498)	53,469)	50,294)

Economic profit⁴	4,998)	4,938)	4,372)	6,329)	3,231)	(4,660)

Based on: 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25), 10-K (reporting date: 2019-07-27), 10-K (reporting date: 2018-07-28).

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
= 12,636 – 12.95% × 58,979 = 4,998

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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.	Cisco Systems Inc. economic profit increased from 2021 to 2022 and from 2022 to 2023.

Cisco Systems Inc., NOPAT calculation

US$ in millions

12 months ended:	Jul 29, 2023	Jul 30, 2022	Jul 31, 2021	Jul 25, 2020	Jul 27, 2019	Jul 28, 2018
Net income	12,613)	11,812)	10,591)	11,214)	11,621)	110)
Deferred income tax expense (benefit)¹	(2,084)	(309)	(384)	(38)	(350)	900)
Increase (decrease) in allowance for credit loss²	2)	(26)	(34)	7)	7)	(82)
Increase (decrease) in deferred revenue³	2,286)	1,100)	1,718)	1,979)	(1,218)	1,191)
Increase (decrease) in product warranty liability⁴	(4)	(3)	5)	(11)	(17)	(48)
Increase (decrease) in restructuring liability⁵	204)	(25)	(38)	40)	(40)	(44)
Increase (decrease) in equity equivalents⁶	404)	737)	1,267)	1,977)	(1,618)	1,917)
Interest expense	427)	360)	434)	585)	859)	943)
Interest expense, operating lease liability⁷	32)	23)	20)	15)	35)	38)
Adjusted interest expense	459)	383)	454)	600)	894)	981)
Tax benefit of interest expense⁸	(96)	(80)	(95)	(126)	(188)	(265)
Adjusted interest expense, after taxes⁹	362)	303)	359)	474)	706)	716)
(Gain) loss on marketable securities	21)	(9)	(53)	(42)	13)	(287)
Interest income	(962)	(476)	(618)	(920)	(1,308)	(1,508)
Investment income, before taxes	(941)	(485)	(671)	(962)	(1,295)	(1,795)
Tax expense (benefit) of investment income¹⁰	198)	102)	141)	202)	272)	485)
Investment income, after taxes¹¹	(743)	(383)	(530)	(760)	(1,023)	(1,310)
Net operating profit after taxes (NOPAT)	12,636)	12,468)	11,686)	12,905)	9,686)	1,433)

Based on: 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25), 10-K (reporting date: 2019-07-27), 10-K (reporting date: 2018-07-28).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for credit loss.

³ Addition of increase (decrease) in deferred revenue.

⁴ Addition of increase (decrease) in product warranty liability.

⁵ Addition of increase (decrease) in restructuring liability.

⁶ Addition of increase (decrease) in equity equivalents to net income.

⁷ 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,020 × 3.10% = 32

⁸ 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 459 × 21.00% = 96

⁹ Addition of after taxes interest expense to net income.

¹⁰ 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 941 × 21.00% = 198

¹¹ Elimination of after taxes investment 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.	Cisco Systems Inc. NOPAT increased from 2021 to 2022 and from 2022 to 2023.

Cisco Systems Inc., cash operating taxes calculation

US$ in millions

12 months ended:	Jul 29, 2023	Jul 30, 2022	Jul 31, 2021	Jul 25, 2020	Jul 27, 2019	Jul 28, 2018
Provision for income taxes	2,705)	2,665)	2,671)	2,756)	2,950)	12,929)
Less: Deferred income tax expense (benefit)	(2,084)	(309)	(384)	(38)	(350)	900)
Add: Tax savings from interest expense	96)	80)	95)	126)	188)	265)
Less: Tax imposed on investment income	198)	102)	141)	202)	272)	485)
Cash operating taxes	4,688)	2,953)	3,009)	2,718)	3,216)	11,809)

Based on: 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25), 10-K (reporting date: 2019-07-27), 10-K (reporting date: 2018-07-28).

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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.	Cisco Systems Inc. cash operating taxes decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

Cisco Systems Inc., invested capital calculation (financing approach)

US$ in millions

	Jul 29, 2023	Jul 30, 2022	Jul 31, 2021	Jul 25, 2020	Jul 27, 2019	Jul 28, 2018
Short-term debt	1,733)	1,099)	2,508)	3,005)	10,191)	5,238)
Long-term debt, excluding current portion	6,658)	8,416)	9,018)	11,578)	14,475)	20,331)
Operating lease liability¹	1,020)	1,046)	1,168)	1,002)	1,095)	1,118)
Total reported debt & leases	9,411)	10,561)	12,694)	15,585)	25,761)	26,687)
Equity	44,353)	39,773)	41,275)	37,920)	33,571)	43,204)
Net deferred tax (assets) liabilities²	(6,514)	(4,394)	(4,226)	(3,909)	(3,970)	(3,078)
Allowance for credit loss³	85)	83)	109)	143)	136)	129)
Deferred revenue⁴	25,550)	23,264)	22,164)	20,446)	18,467)	19,685)
Product warranty liability⁵	329)	333)	336)	331)	342)	359)
Restructuring liability⁶	213)	9)	34)	73)	33)	73)
Equity equivalents⁷	19,663)	19,295)	18,417)	17,084)	15,008)	17,168)
Accumulated other comprehensive (income) loss, net of tax⁸	1,575)	1,622)	417)	519)	792)	849)
Adjusted equity	65,591)	60,690)	60,109)	55,523)	49,371)	61,221)
Marketable securities⁹	(16,023)	(12,188)	(15,343)	(17,610)	(21,663)	(37,614)
Invested capital	58,979)	59,063)	57,460)	53,498)	53,469)	50,294)

Based on: 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25), 10-K (reporting date: 2019-07-27), 10-K (reporting date: 2018-07-28).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of deferred revenue.

⁵ Addition of product warranty liability.

⁶ Addition of restructuring liability.

⁷ Addition of equity equivalents to equity.

⁸ Removal of accumulated other comprehensive income.

⁹ Subtraction of marketable securities.

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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.	Cisco Systems Inc. invested capital increased from 2021 to 2022 but then slightly decreased from 2022 to 2023.

Cisco Systems Inc., cost of capital calculations

Jul 29, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	230,275)	230,275)	÷	239,995)	=	0.96	0.96	×	13.34%	=	12.80%
Debt³	8,700)	8,700)	÷	239,995)	=	0.04	0.04	×	4.78% × (1 – 21.00%)	=	0.14%
Operating lease liability⁴	1,020)	1,020)	÷	239,995)	=	0.00	0.00	×	3.10% × (1 – 21.00%)	=	0.01%
Total:	239,995)					1.00					12.95%

Based on: 10-K (reporting date: 2023-07-29).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jul 30, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	186,418)	186,418)	÷	197,764)	=	0.94	0.94	×	13.34%	=	12.58%
Debt³	10,300)	10,300)	÷	197,764)	=	0.05	0.05	×	3.98% × (1 – 21.00%)	=	0.16%
Operating lease liability⁴	1,046)	1,046)	÷	197,764)	=	0.01	0.01	×	2.20% × (1 – 21.00%)	=	0.01%
Total:	197,764)					1.00					12.75%

Based on: 10-K (reporting date: 2022-07-30).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jul 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	247,159)	247,159)	÷	262,027)	=	0.94	0.94	×	13.34%	=	12.59%
Debt³	13,700)	13,700)	÷	262,027)	=	0.05	0.05	×	3.36% × (1 – 21.00%)	=	0.14%
Operating lease liability⁴	1,168)	1,168)	÷	262,027)	=	0.00	0.00	×	1.70% × (1 – 21.00%)	=	0.01%
Total:	262,027)					1.00					12.73%

Based on: 10-K (reporting date: 2021-07-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jul 25, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	173,359)	173,359)	÷	191,761)	=	0.90	0.90	×	13.34%	=	12.06%
Debt³	17,400)	17,400)	÷	191,761)	=	0.09	0.09	×	3.11% × (1 – 21.00%)	=	0.22%
Operating lease liability⁴	1,002)	1,002)	÷	191,761)	=	0.01	0.01	×	1.50% × (1 – 21.00%)	=	0.01%
Total:	191,761)					1.00					12.29%

Based on: 10-K (reporting date: 2020-07-25).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jul 27, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	205,557)	205,557)	÷	232,945)	=	0.88	0.88	×	13.34%	=	11.77%
Debt³	26,293)	26,293)	÷	232,945)	=	0.11	0.11	×	3.22% × (1 – 21.00%)	=	0.29%
Operating lease liability⁴	1,095)	1,095)	÷	232,945)	=	0.00	0.00	×	3.22% × (1 – 21.00%)	=	0.01%
Total:	232,945)					1.00					12.07%

Based on: 10-K (reporting date: 2019-07-27).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Jul 28, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	216,133)	216,133)	÷	243,651)	=	0.89	0.89	×	13.34%	=	11.84%
Debt³	26,400)	26,400)	÷	243,651)	=	0.11	0.11	×	3.37% × (1 – 27.00%)	=	0.27%
Operating lease liability⁴	1,118)	1,118)	÷	243,651)	=	0.00	0.00	×	3.37% × (1 – 27.00%)	=	0.01%
Total:	243,651)					1.00					12.11%

Based on: 10-K (reporting date: 2018-07-28).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Cisco Systems Inc., economic spread ratio calculation, comparison to benchmarks

	Jul 29, 2023	Jul 30, 2022	Jul 31, 2021	Jul 25, 2020	Jul 27, 2019	Jul 28, 2018
Selected Financial Data (US$ in millions)
Economic profit¹	4,998)	4,938)	4,372)	6,329)	3,231)	(4,660)
Invested capital²	58,979)	59,063)	57,460)	53,498)	53,469)	50,294)
Performance Ratio
Economic spread ratio³	8.47%	8.36%	7.61%	11.83%	6.04%	-9.27%
Benchmarks
Economic Spread Ratio, Competitors⁴
Apple Inc.	141.20%	202.69%	199.02%	146.94%	90.99%	81.54%
Arista Networks Inc.	28.63%	24.09%	39.08%	21.43%	26.92%	—
Super Micro Computer Inc.	10.38%	0.69%	-6.74%	-9.52%	-4.43%	-2.04%

Based on: 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25), 10-K (reporting date: 2019-07-27), 10-K (reporting date: 2018-07-28).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 4,998 ÷ 58,979 = 8.47%

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.	Cisco Systems Inc. economic spread ratio improved from 2021 to 2022 and from 2022 to 2023.

Cisco Systems Inc., economic profit margin calculation, comparison to benchmarks

	Jul 29, 2023	Jul 30, 2022	Jul 31, 2021	Jul 25, 2020	Jul 27, 2019	Jul 28, 2018
Selected Financial Data (US$ in millions)
Economic profit¹	4,998)	4,938)	4,372)	6,329)	3,231)	(4,660)

Revenue	56,998)	51,557)	49,818)	49,301)	51,904)	49,330)
Add: Increase (decrease) in deferred revenue	2,286)	1,100)	1,718)	1,979)	(1,218)	1,191)
Adjusted revenue	59,284)	52,657)	51,536)	51,280)	50,686)	50,521)
Performance Ratio
Economic profit margin²	8.43%	9.38%	8.48%	12.34%	6.37%	-9.22%
Benchmarks
Economic Profit Margin, Competitors³
Apple Inc.	22.21%	23.95%	23.12%	19.26%	17.76%	8.10%
Arista Networks Inc.	21.66%	16.63%	22.96%	16.75%	19.80%	—
Super Micro Computer Inc.	3.52%	0.29%	-2.43%	-3.53%	-1.43%	-0.66%

Based on: 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25), 10-K (reporting date: 2019-07-27), 10-K (reporting date: 2018-07-28).

¹ Economic profit. See details »

² 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × 4,998 ÷ 59,284 = 8.43%

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.	Cisco Systems Inc. economic profit margin improved from 2021 to 2022 but then deteriorated significantly from 2022 to 2023.

Cisco Systems Inc. (NASDAQ:CSCO)

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