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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

Nike Inc., economic profit calculation

US$ in millions

12 months ended:	May 31, 2023	May 31, 2022	May 31, 2021	May 31, 2020	May 31, 2019	May 31, 2018
Net operating profit after taxes (NOPAT)¹	5,013)	5,557)	5,490)	2,477)	4,182)	2,703)
Cost of capital²	13.79%	13.77%	13.94%	13.52%	14.00%	13.90%
Invested capital³	20,394)	21,137)	21,022)	19,083)	14,182)	15,218)

Economic profit⁴	2,199)	2,646)	2,560)	(104)	2,197)	588)

Based on: 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31), 10-K (reporting date: 2018-05-31).

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
= 5,013 – 13.79% × 20,394 = 2,199

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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.	Nike Inc. economic profit increased from 2021 to 2022 but then decreased significantly from 2022 to 2023.

Nike Inc., NOPAT calculation

US$ in millions

12 months ended:	May 31, 2023	May 31, 2022	May 31, 2021	May 31, 2020	May 31, 2019	May 31, 2018
Net income	5,070)	6,046)	5,727)	2,539)	4,029)	1,933)
Deferred income tax expense (benefit)¹	(117)	(650)	(385)	(380)	34)	647)
Increase (decrease) in allowance for uncollectible accounts receivable²	1)	(59)	(121)	184)	—)	11)
Increase (decrease) in equity equivalents³	(116)	(709)	(506)	(196)	34)	658)
Interest expense	291)	299)	296)	151)	131)	124)
Interest expense, operating lease liability⁴	80)	74)	78)	81)	102)	105)
Adjusted interest expense	371)	373)	374)	232)	233)	229)
Tax benefit of interest expense⁵	(78)	(78)	(79)	(49)	(49)	(67)
Adjusted interest expense, after taxes⁶	293)	294)	296)	183)	184)	162)
Interest income	(297)	(94)	(34)	(62)	(82)	(70)
Investment income, before taxes	(297)	(94)	(34)	(62)	(82)	(70)
Tax expense (benefit) of investment income⁷	62)	20)	7)	13)	17)	20)
Investment income, after taxes⁸	(235)	(74)	(27)	(49)	(65)	(50)
Net operating profit after taxes (NOPAT)	5,013)	5,557)	5,490)	2,477)	4,182)	2,703)

Based on: 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31), 10-K (reporting date: 2018-05-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for uncollectible accounts receivable.

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
= 3,211 × 2.50% = 80

⁵ 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 371 × 21.00% = 78

⁶ Addition of after taxes interest expense to net income.

⁷ 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 297 × 21.00% = 62

⁸ 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.	Nike Inc. NOPAT increased from 2021 to 2022 but then decreased significantly from 2022 to 2023.

Nike Inc., cash operating taxes calculation

US$ in millions

12 months ended:	May 31, 2023	May 31, 2022	May 31, 2021	May 31, 2020	May 31, 2019	May 31, 2018
Income tax expense	1,131)	605)	934)	348)	772)	2,392)
Less: Deferred income tax expense (benefit)	(117)	(650)	(385)	(380)	34)	647)
Add: Tax savings from interest expense	78)	78)	79)	49)	49)	67)
Less: Tax imposed on investment income	62)	20)	7)	13)	17)	20)
Cash operating taxes	1,264)	1,313)	1,390)	764)	770)	1,791)

Based on: 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31), 10-K (reporting date: 2018-05-31).

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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.	Nike Inc. cash operating taxes decreased from 2021 to 2022 and from 2022 to 2023.

Nike Inc., invested capital calculation (financing approach)

US$ in millions

	May 31, 2023	May 31, 2022	May 31, 2021	May 31, 2020	May 31, 2019	May 31, 2018
Current portion of long-term debt	—)	500)	—)	3)	6)	6)
Notes payable	6)	10)	2)	248)	9)	336)
Long-term debt, excluding current portion	8,927)	8,920)	9,413)	9,406)	3,464)	3,468)
Operating lease liability¹	3,211)	3,197)	3,398)	3,358)	3,234)	3,449)
Total reported debt & leases	12,144)	12,627)	12,813)	13,015)	6,713)	7,259)
Shareholders’ equity	14,004)	15,281)	12,767)	8,055)	9,040)	9,812)
Net deferred tax (assets) liabilities²	(1,799)	(1,665)	(1,133)	(732)	(376)	(338)
Allowance for uncollectible accounts receivable³	35)	34)	93)	214)	30)	30)
Equity equivalents⁴	(1,764)	(1,631)	(1,040)	(518)	(346)	(308)
Accumulated other comprehensive (income) loss, net of tax⁵	(231)	(318)	380)	56)	(231)	92)
Adjusted shareholders’ equity	12,009)	13,332)	12,107)	7,593)	8,463)	9,596)
Construction in process⁶	(525)	(399)	(311)	(1,086)	(797)	(641)
Short-term investments⁷	(3,234)	(4,423)	(3,587)	(439)	(197)	(996)
Invested capital	20,394)	21,137)	21,022)	19,083)	14,182)	15,218)

Based on: 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31), 10-K (reporting date: 2018-05-31).

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 equity equivalents to shareholders’ equity.

⁵ Removal of accumulated other comprehensive income.

⁶ Subtraction of construction in process.

⁷ Subtraction of short-term 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.	Nike Inc. invested capital increased from 2021 to 2022 but then decreased significantly from 2022 to 2023.

Nike Inc., cost of capital calculations

May 31, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	164,518)	164,518)	÷	175,624)	=	0.94	0.94	×	14.57%	=	13.65%
Short-term borrowings and long-term debt³	7,895)	7,895)	÷	175,624)	=	0.04	0.04	×	3.05% × (1 – 21.00%)	=	0.11%
Operating lease liability⁴	3,211)	3,211)	÷	175,624)	=	0.02	0.02	×	2.50% × (1 – 21.00%)	=	0.04%
Total:	175,624)					1.00					13.79%

Based on: 10-K (reporting date: 2023-05-31).

¹ US$ in millions

² Equity. See details »

³ Short-term borrowings and long-term debt. See details »

⁴ Operating lease liability. See details »

May 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	175,082)	175,082)	÷	187,222)	=	0.94	0.94	×	14.57%	=	13.63%
Short-term borrowings and long-term debt³	8,943)	8,943)	÷	187,222)	=	0.05	0.05	×	3.03% × (1 – 21.00%)	=	0.11%
Operating lease liability⁴	3,197)	3,197)	÷	187,222)	=	0.02	0.02	×	2.30% × (1 – 21.00%)	=	0.03%
Total:	187,222)					1.00					13.77%

Based on: 10-K (reporting date: 2022-05-31).

¹ US$ in millions

² Equity. See details »

³ Short-term borrowings and long-term debt. See details »

⁴ Operating lease liability. See details »

May 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	252,677)	252,677)	÷	266,352)	=	0.95	0.95	×	14.57%	=	13.82%
Short-term borrowings and long-term debt³	10,277)	10,277)	÷	266,352)	=	0.04	0.04	×	3.02% × (1 – 21.00%)	=	0.09%
Operating lease liability⁴	3,398)	3,398)	÷	266,352)	=	0.01	0.01	×	2.30% × (1 – 21.00%)	=	0.02%
Total:	266,352)					1.00					13.94%

Based on: 10-K (reporting date: 2021-05-31).

¹ US$ in millions

² Equity. See details »

³ Short-term borrowings and long-term debt. See details »

⁴ Operating lease liability. See details »

May 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	153,540)	153,540)	÷	167,791)	=	0.92	0.92	×	14.57%	=	13.33%
Short-term borrowings and long-term debt³	10,893)	10,893)	÷	167,791)	=	0.06	0.06	×	2.98% × (1 – 21.00%)	=	0.15%
Operating lease liability⁴	3,358)	3,358)	÷	167,791)	=	0.02	0.02	×	2.40% × (1 – 21.00%)	=	0.04%
Total:	167,791)					1.00					13.52%

Based on: 10-K (reporting date: 2020-05-31).

¹ US$ in millions

² Equity. See details »

³ Short-term borrowings and long-term debt. See details »

⁴ Operating lease liability. See details »

May 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	135,849)	135,849)	÷	142,617)	=	0.95	0.95	×	14.57%	=	13.88%
Short-term borrowings and long-term debt³	3,533)	3,533)	÷	142,617)	=	0.02	0.02	×	3.15% × (1 – 21.00%)	=	0.06%
Operating lease liability⁴	3,234)	3,234)	÷	142,617)	=	0.02	0.02	×	3.15% × (1 – 21.00%)	=	0.06%
Total:	142,617)					1.00					14.00%

Based on: 10-K (reporting date: 2019-05-31).

¹ US$ in millions

² Equity. See details »

³ Short-term borrowings and long-term debt. See details »

⁴ Operating lease liability. See details »

May 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	123,499)	123,499)	÷	130,578)	=	0.95	0.95	×	14.57%	=	13.78%
Short-term borrowings and long-term debt³	3,630)	3,630)	÷	130,578)	=	0.03	0.03	×	3.03% × (1 – 29.20%)	=	0.06%
Operating lease liability⁴	3,449)	3,449)	÷	130,578)	=	0.03	0.03	×	3.03% × (1 – 29.20%)	=	0.06%
Total:	130,578)					1.00					13.90%

Based on: 10-K (reporting date: 2018-05-31).

¹ US$ in millions

² Equity. See details »

³ Short-term borrowings and long-term debt. See details »

⁴ Operating lease liability. See details »

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

	May 31, 2023	May 31, 2022	May 31, 2021	May 31, 2020	May 31, 2019	May 31, 2018
Selected Financial Data (US$ in millions)
Economic profit¹	2,199)	2,646)	2,560)	(104)	2,197)	588)
Invested capital²	20,394)	21,137)	21,022)	19,083)	14,182)	15,218)
Performance Ratio
Economic spread ratio³	10.78%	12.52%	12.18%	-0.54%	15.49%	3.87%
Benchmarks
Economic Spread Ratio, Competitors⁴
lululemon athletica inc.	4.46%	10.36%	2.25%	7.51%	5.24%	—

Based on: 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31), 10-K (reporting date: 2018-05-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 2,199 ÷ 20,394 = 10.78%

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.	Nike Inc. economic spread ratio improved from 2021 to 2022 but then deteriorated significantly from 2022 to 2023.

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

	May 31, 2023	May 31, 2022	May 31, 2021	May 31, 2020	May 31, 2019	May 31, 2018
Selected Financial Data (US$ in millions)
Economic profit¹	2,199)	2,646)	2,560)	(104)	2,197)	588)
Revenues	51,217)	46,710)	44,538)	37,403)	39,117)	36,397)
Performance Ratio
Economic profit margin²	4.29%	5.66%	5.75%	-0.28%	5.62%	1.62%
Benchmarks
Economic Profit Margin, Competitors³
lululemon athletica inc.	2.47%	6.42%	1.86%	5.65%	3.90%	—

Based on: 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31), 10-K (reporting date: 2018-05-31).

¹ Economic profit. See details »

² 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenues
= 100 × 2,199 ÷ 51,217 = 4.29%

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.	Nike Inc. economic profit margin deteriorated from 2021 to 2022 and from 2022 to 2023.

Nike Inc. (NYSE:NKE)

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