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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

Apple Inc., economic profit calculation

US$ in millions

	12 months ended	Sep 28, 2019	Sep 29, 2018	Sep 30, 2017	Sep 24, 2016	Sep 26, 2015	Sep 27, 2014
	Net operating profit after taxes (NOPAT)¹
	Cost of capital²
	Invested capital³

	Economic profit⁴

Based on: 10-K (filing date: 2019-10-31), 10-K (filing date: 2018-11-05), 10-K (filing date: 2017-11-03), 10-K (filing date: 2016-10-26), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-27).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

<>⁴ 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
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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.	Apple Inc.’s economic profit decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Apple Inc., NOPAT calculation

US$ in millions

	12 months ended	Sep 28, 2019	Sep 29, 2018	Sep 30, 2017	Sep 24, 2016	Sep 26, 2015	Sep 27, 2014
	Net income
	Deferred income tax expense (benefit)¹
	Increase (decrease) in deferred revenue²
	Increase (decrease) in accrued warranty and related costs³
	Increase (decrease) in equity equivalents⁴
	Interest expense
	Interest expense, operating lease liability⁵
	Adjusted interest expense
	Tax benefit of interest expense⁶
	Adjusted interest expense, after taxes⁷
	(Gain) loss on marketable securities
	Interest and dividend income
	Investment income, before taxes
	Tax expense (benefit) of investment income⁸
	Investment income, after taxes⁹
	Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2019-10-31), 10-K (filing date: 2018-11-05), 10-K (filing date: 2017-11-03), 10-K (filing date: 2016-10-26), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-27).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in deferred revenue.

³ Addition of increase (decrease) in accrued warranty and related costs.

⁴ Addition of increase (decrease) in equity equivalents to net income.

⁵ 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= hidden × hidden = hidden

⁶ 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 21.00% = hidden

⁷ Addition of after taxes interest expense to net income.

⁸ 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 21.00% = hidden

⁹ Elimination of after taxes investment income.

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.	Apple Inc.’s NOPAT decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Apple Inc., cash operating taxes calculation

US$ in millions

	12 months ended	Sep 28, 2019	Sep 29, 2018	Sep 30, 2017	Sep 24, 2016	Sep 26, 2015	Sep 27, 2014
	Provision for income taxes
	Less: Deferred income tax expense (benefit)
	Add: Tax savings from interest expense
	Less: Tax imposed on investment income
	Cash operating taxes

Based on: 10-K (filing date: 2019-10-31), 10-K (filing date: 2018-11-05), 10-K (filing date: 2017-11-03), 10-K (filing date: 2016-10-26), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-27).

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.	Apple Inc.’s cash operating taxes increased from 2017 to 2018 but then slightly decreased from 2018 to 2019 not reaching 2017 level.

Apple Inc., invested capital calculation (financing approach)

US$ in millions

		Sep 28, 2019	Sep 29, 2018	Sep 30, 2017	Sep 24, 2016	Sep 26, 2015	Sep 27, 2014
	Commercial paper
	Current portion of term debt
	Non-current portion of term debt
	Operating lease liability¹
	Total reported debt & leases
	Shareholders’ equity
	Net deferred tax (assets) liabilities²
	Deferred revenue³
	Accrued warranty and related costs⁴
	Equity equivalents⁵
	Accumulated other comprehensive (income) loss, net of tax⁶
	Adjusted shareholders’ equity
	Marketable securities⁷
	Invested capital

Based on: 10-K (filing date: 2019-10-31), 10-K (filing date: 2018-11-05), 10-K (filing date: 2017-11-03), 10-K (filing date: 2016-10-26), 10-K (filing date: 2015-10-28), 10-K (filing date: 2014-10-27).

¹ Addition of capitalized operating leases.

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

³ Addition of deferred revenue.

⁴ Addition of accrued warranty and related costs.

⁵ Addition of equity equivalents to shareholders’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of marketable securities.

Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Apple Inc.’s invested capital decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Apple Inc., cost of capital calculations


Equity²	÷	=	×		=
Commercial paper and term debt³	÷	=	×	× (1 – 21.00%)	=
Operating lease liability⁴	÷	=	×	× (1 – 21.00%)	=
Total:

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

¹ US$ in millions

² Equity. See details »