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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

eBay Inc., economic profit calculation

US$ in millions

12 months ended:	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Net operating profit after taxes (NOPAT)¹	2,553)	821)	1,955)	1,944)	2,846)
Cost of capital²	12.57%	12.95%	12.76%	12.90%	14.07%
Invested capital³	7,597)	6,903)	7,687)	7,328)	20,937)

Economic profit⁴	1,598)	(73)	974)	999)	(99)

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2018 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,553 – 12.57% × 7,597 = 1,598

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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.	eBay Inc. economic profit decreased from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

eBay Inc., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Net income (loss)	2,530)	(1,016)	7,266)	1,725)	46)
Deferred income tax expense (benefit)¹	(153)	1,729)	(4,556)	(32)	2,808)
Increase (decrease) in allowance for doubtful accounts and authorized credits²	4)	21)	(3)	(2)	(4)
Increase (decrease) in deferred revenue³	33)	7)	4)	(2)	30)
Increase (decrease) in restructuring reserve⁴	8)	—)	—)	—)	—)
Increase (decrease) in equity equivalents⁵	(108)	1,757)	(4,555)	(36)	2,834)
Interest expense	326)	292)	225)	144)	123)
Interest expense, operating lease liability⁶	18)	9)	7)	5)	10)
Adjusted interest expense	344)	301)	232)	149)	133)
Tax benefit of interest expense⁷	(72)	(105)	(81)	(52)	(47)
Adjusted interest expense, after taxes⁸	272)	196)	150)	97)	87)
(Gain) loss on marketable securities	1)	(7)	(1,299)	(1)	(52)
Interest income	(176)	(177)	(125)	(97)	(133)
Investment income, before taxes	(175)	(184)	(1,424)	(98)	(185)
Tax expense (benefit) of investment income⁹	37)	64)	498)	34)	65)
Investment income, after taxes¹⁰	(138)	(120)	(926)	(64)	(120)
(Income) loss from discontinued operations, net of tax¹¹	(2)	4)	19)	222)	—)
Net operating profit after taxes (NOPAT)	2,553)	821)	1,955)	1,944)	2,846)

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts and authorized credits.

³ Addition of increase (decrease) in deferred revenue.

⁴ Addition of increase (decrease) in restructuring reserve.

⁵ Addition of increase (decrease) in equity equivalents to net income (loss).

⁶ 2018 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 515 × 3.45% = 18

⁷ 2018 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 344 × 21.00% = 72

⁸ Addition of after taxes interest expense to net income (loss).

⁹ 2018 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 175 × 21.00% = 37

¹⁰ Elimination of after taxes investment income.

¹¹ Elimination of discontinued operations.

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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.	eBay Inc. NOPAT decreased from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

eBay Inc., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Provision (benefit) for income taxes	190)	3,288)	(3,634)	459)	3,485)
Less: Deferred income tax expense (benefit)	(153)	1,729)	(4,556)	(32)	2,808)
Add: Tax savings from interest expense	72)	105)	81)	52)	47)
Less: Tax imposed on investment income	37)	64)	498)	34)	65)
Cash operating taxes	378)	1,600)	505)	509)	659)

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

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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.	eBay Inc. cash operating taxes increased from 2016 to 2017 but then decreased significantly from 2017 to 2018.

eBay Inc., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Short-term debt	1,546)	781)	1,451)	—)	850)
Long-term debt	7,685)	9,234)	7,509)	6,779)	6,777)
Operating lease liability¹	515)	281)	212)	206)	419)
Total reported debt & leases	9,746)	10,296)	9,172)	6,985)	8,046)
Stockholders’ equity	6,281)	8,063)	10,539)	6,576)	19,906)
Net deferred tax (assets) liabilities²	(1,868)	(1,769)	(3,155)	1,669)	3,188)
Allowance for doubtful accounts and authorized credits³	106)	102)	81)	84)	102)
Deferred revenue⁴	170)	117)	110)	106)	188)
Restructuring reserve⁵	8)	—)	—)	—)	—)
Equity equivalents⁶	(1,584)	(1,550)	(2,964)	1,859)	3,478)
Accumulated other comprehensive (income) loss, net of tax⁷	(498)	(717)	124)	(526)	(1,171)
Adjusted stockholders’ equity	4,199)	5,796)	7,699)	7,909)	22,213)
Marketable securities⁸	(6,348)	(9,189)	(9,184)	(7,566)	(9,322)
Invested capital	7,597)	6,903)	7,687)	7,328)	20,937)

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

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 restructuring reserve.

⁶ Addition of equity equivalents to stockholders’ equity.

⁷ Removal of accumulated other comprehensive income.

⁸ 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.	eBay Inc. invested capital decreased from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.

eBay Inc., cost of capital calculations

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	31,179)	31,179)	÷	40,698)	=	0.77	0.77	×	15.57%	=	11.93%
Debt³	9,004)	9,004)	÷	40,698)	=	0.22	0.22	×	3.45% × (1 – 21.00%)	=	0.60%
Operating lease liability⁴	515)	515)	÷	40,698)	=	0.01	0.01	×	3.45% × (1 – 21.00%)	=	0.03%
Total:	40,698)					1.00					12.57%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	42,882)	42,882)	÷	53,294)	=	0.80	0.80	×	15.57%	=	12.53%
Debt³	10,131)	10,131)	÷	53,294)	=	0.19	0.19	×	3.30% × (1 – 35.00%)	=	0.41%
Operating lease liability⁴	281)	281)	÷	53,294)	=	0.01	0.01	×	3.30% × (1 – 35.00%)	=	0.01%
Total:	53,294)					1.00					12.95%

Based on: 10-K (reporting date: 2017-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2016

	Capital (fair value)¹	Weights					Cost of capital
Equity²	34,818)	34,818)	÷	43,932)	=	0.79	0.79	×	15.57%	=	12.34%
Debt³	8,902)	8,902)	÷	43,932)	=	0.20	0.20	×	3.07% × (1 – 35.00%)	=	0.40%
Operating lease liability⁴	212)	212)	÷	43,932)	=	0.00	0.00	×	3.07% × (1 – 35.00%)	=	0.01%
Total:	43,932)					1.00					12.76%

Based on: 10-K (reporting date: 2016-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2015

	Capital (fair value)¹	Weights					Cost of capital
Equity²	28,218)	28,218)	÷	34,925)	=	0.81	0.81	×	15.57%	=	12.58%
Debt³	6,500)	6,500)	÷	34,925)	=	0.19	0.19	×	2.53% × (1 – 35.00%)	=	0.31%
Operating lease liability⁴	206)	206)	÷	34,925)	=	0.01	0.01	×	2.53% × (1 – 35.00%)	=	0.01%
Total:	34,925)					1.00					12.90%

Based on: 10-K (reporting date: 2015-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2014

	Capital (fair value)¹	Weights					Cost of capital
Equity²	65,948)	65,948)	÷	73,885)	=	0.89	0.89	×	15.57%	=	13.90%
Debt³	7,519)	7,519)	÷	73,885)	=	0.10	0.10	×	2.41% × (1 – 35.00%)	=	0.16%
Operating lease liability⁴	419)	419)	÷	73,885)	=	0.01	0.01	×	2.41% × (1 – 35.00%)	=	0.01%
Total:	73,885)					1.00					14.07%

Based on: 10-K (reporting date: 2014-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

eBay Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Selected Financial Data (US$ in millions)
Economic profit¹	1,598)	(73)	974)	999)	(99)
Invested capital²	7,597)	6,903)	7,687)	7,328)	20,937)
Performance Ratio
Economic spread ratio³	21.04%	-1.05%	12.67%	13.63%	-0.47%
Benchmarks
Economic Spread Ratio, Competitors⁴
Amazon.com Inc.	—	—	—	—	—
Home Depot Inc.	—	—	—	—	—
Lowe’s Cos. Inc.	—	—	—	—	—
TJX Cos. Inc.	—	—	—	—	—

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2018 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,598 ÷ 7,597 = 21.04%

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.	eBay Inc. economic spread ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

eBay Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Selected Financial Data (US$ in millions)
Economic profit¹	1,598)	(73)	974)	999)	(99)

Net revenues	10,746)	9,567)	8,979)	8,592)	17,902)
Add: Increase (decrease) in deferred revenue	33)	7)	4)	(2)	30)
Adjusted net revenues	10,779)	9,574)	8,983)	8,590)	17,932)
Performance Ratio
Economic profit margin²	14.83%	-0.76%	10.85%	11.63%	-0.55%
Benchmarks
Economic Profit Margin, Competitors³
Amazon.com Inc.	—	—	—	—	—
Home Depot Inc.	—	—	—	—	—
Lowe’s Cos. Inc.	—	—	—	—	—
TJX Cos. Inc.	—	—	—	—	—

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

¹ Economic profit. See details »

² 2018 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net revenues
= 100 × 1,598 ÷ 10,779 = 14.83%

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.	eBay Inc. economic profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

eBay Inc. (NASDAQ:EBAY)

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