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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

Broadcom Inc., economic profit calculation

US$ in millions

12 months ended:	Nov 3, 2019	Nov 4, 2018	Oct 29, 2017	Oct 30, 2016	Nov 1, 2015	Nov 2, 2014
Net operating profit after taxes (NOPAT)¹	3,003	4,475	1,798	(712)	1,315	348
Cost of capital²	9.73%	10.32%	10.33%	10.17%	10.86%	10.16%
Invested capital³	60,032	44,617	51,048	45,840	8,437	8,755

Economic profit⁴	(2,841)	(130)	(3,477)	(5,375)	399	(542)

Based on: 10-K (filing date: 2019-12-20), 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29).

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
= 3,003 – 9.73% × 60,032 = -2,841

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.	Broadcom Inc.’s economic profit increased from 2017 to 2018 but then slightly decreased from 2018 to 2019 not reaching 2017 level.

Broadcom Inc., NOPAT calculation

US$ in millions

12 months ended:	Nov 3, 2019	Nov 4, 2018	Oct 29, 2017	Oct 30, 2016	Nov 1, 2015	Nov 2, 2014
Net income (loss) attributable to Broadcom Inc. stockholders	2,724	12,259	1,692	(1,739)	1,364	263
Deferred income tax expense (benefit)¹	(787)	(8,548)	(235)	418	(220)	(92)
Increase (decrease) in allowances for doubtful accounts²	—	—	(9)	6	1	1
Increase (decrease) in restructuring liabilities³	86	(23)	(106)	125	(14)	40
Increase (decrease) in equity equivalents⁴	(701)	(8,571)	(350)	549	(233)	(51)
Interest expense	1,444	628	454	585	191	110
Interest expense, operating lease liability⁵	24	17	20	13	6	5
Adjusted interest expense	1,468	645	474	598	197	115
Tax benefit of interest expense⁶	(308)	(136)	(81)	(102)	(33)	(19)
Adjusted interest expense, after taxes⁷	1,160	510	393	496	163	95
(Gain) loss on marketable securities	(145)	(3)	1	—	—	—
Interest income	(98)	(114)	(44)	(10)	(8)	(6)
Investment income, before taxes	(243)	(117)	(43)	(10)	(8)	(6)
Tax expense (benefit) of investment income⁸	51	25	7	2	1	1
Investment income, after taxes⁹	(192)	(92)	(36)	(8)	(7)	(5)
(Income) loss from discontinued operations, net of tax¹⁰	12	19	6	112	27	46
Net income (loss) attributable to noncontrolling interest	—	351	92	(122)	—	—
Net operating profit after taxes (NOPAT)	3,003	4,475	1,798	(712)	1,315	348

Based on: 10-K (filing date: 2019-12-20), 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowances for doubtful accounts.

³ Addition of increase (decrease) in restructuring liabilities.

⁴ Addition of increase (decrease) in equity equivalents to net income (loss) attributable to Broadcom Inc. stockholders.

⁵ 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 649 × 3.70% = 24

⁶ 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,468 × 21.00% = 308

⁷ Addition of after taxes interest expense to net income (loss) attributable to Broadcom Inc. stockholders.

⁸ 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 243 × 21.00% = 51

⁹ Elimination of after taxes investment income.

¹⁰ Elimination of discontinued operations.

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.	Broadcom Inc.’s NOPAT increased from 2017 to 2018 but then slightly decreased from 2018 to 2019 not reaching 2017 level.

Broadcom Inc., cash operating taxes calculation

US$ in millions

12 months ended:	Nov 3, 2019	Nov 4, 2018	Oct 29, 2017	Oct 30, 2016	Nov 1, 2015	Nov 2, 2014
Provision for (benefit from) income taxes	(510)	(8,084)	35	642	76	33
Less: Deferred income tax expense (benefit)	(787)	(8,548)	(235)	418	(220)	(92)
Add: Tax savings from interest expense	308	136	81	102	33	19
Less: Tax imposed on investment income	51	25	7	2	1	1
Cash operating taxes	534	575	343	324	328	143

Based on: 10-K (filing date: 2019-12-20), 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29).

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.	Broadcom Inc.’s cash operating taxes increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

Broadcom Inc., invested capital calculation (financing approach)

US$ in millions

	Nov 3, 2019	Nov 4, 2018	Oct 29, 2017	Oct 30, 2016	Nov 1, 2015	Nov 2, 2014
Current portion of long-term debt	2,787	—	117	454	46	46
Long-term debt, excluding current portion	30,011	17,493	17,431	13,188	3,903	4,543
Convertible notes payable to related party, non-current	—	—	—	—	—	920
Operating lease liability¹	649	512	591	410	140	112
Total reported debt & leases	33,447	18,005	18,139	14,052	4,089	5,621
Total Broadcom Inc. stockholders’ equity	24,941	26,657	20,285	18,892	4,714	3,243
Net deferred tax (assets) liabilities²	1,481	(115)	9,998	9,979	(315)	(3)
Allowances for doubtful accounts³	—	—	—	9	3	2
Restructuring liabilities⁴	108	22	45	151	26	40
Equity equivalents⁵	1,589	(93)	10,043	10,139	(286)	39
Accumulated other comprehensive (income) loss, net of tax⁶	140	115	91	134	73	50
Noncontrolling interest	—	—	2,901	2,984	—	—
Adjusted total Broadcom Inc. stockholders’ equity	26,670	26,679	33,320	32,149	4,501	3,332
Construction in progress⁷	(85)	(67)	(411)	(361)	(153)	(198)
Invested capital	60,032	44,617	51,048	45,840	8,437	8,755

Based on: 10-K (filing date: 2019-12-20), 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29).

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 restructuring liabilities.

⁵ Addition of equity equivalents to total Broadcom Inc. stockholders’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of construction in progress.

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

Broadcom Inc., cost of capital calculations

	Capital (fair value)¹	Weights					Cost of capital
Equity²	126,896	126,896	÷	165,591	=	0.77	0.77	×	11.64%	=	8.92%
8.00% Mandatory Convertible Preferred Stock, Series A	4,394	4,394	÷	165,591	=	0.03	0.03	×	8.00%	=	0.21%
Debt³	33,652	33,652	÷	165,591	=	0.20	0.20	×	3.70% × (1 – 21.00%)	=	0.59%
Operating lease liability⁴	649	649	÷	165,591	=	0.00	0.00	×	3.70% × (1 – 21.00%)	=	0.01%
Total:	165,591					1.00					9.73%

Based on: 10-K (filing date: 2019-12-20).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	99,745	99,745	÷	116,884	=	0.85	0.85	×	11.64%	=	9.93%
8.00% Mandatory Convertible Preferred Stock, Series A	—	—	÷	116,884	=	0.00	0.00	×	0.00%	=	0.00%
Debt³	16,627	16,627	÷	116,884	=	0.14	0.14	×	3.38% × (1 – 21.00%)	=	0.38%
Operating lease liability⁴	512	512	÷	116,884	=	0.00	0.00	×	3.38% × (1 – 21.00%)	=	0.01%
Total:	116,884					1.00					10.32%

Based on: 10-K (filing date: 2018-12-21).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	107,061	107,061	÷	125,605	=	0.85	0.85	×	11.64%	=	9.92%
8.00% Mandatory Convertible Preferred Stock, Series A	—	—	÷	125,605	=	0.00	0.00	×	0.00%	=	0.00%
Debt³	17,953	17,953	÷	125,605	=	0.14	0.14	×	3.38% × (1 – 17.00%)	=	0.40%
Operating lease liability⁴	591	591	÷	125,605	=	0.00	0.00	×	3.38% × (1 – 17.00%)	=	0.01%
Total:	125,605					1.00					10.33%

Based on: 10-K (filing date: 2017-12-21).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	72,590	72,590	÷	86,642	=	0.84	0.84	×	11.64%	=	9.75%
8.00% Mandatory Convertible Preferred Stock, Series A	—	—	÷	86,642	=	0.00	0.00	×	0.00%	=	0.00%
Debt³	13,642	13,642	÷	86,642	=	0.16	0.16	×	3.15% × (1 – 17.00%)	=	0.41%
Operating lease liability⁴	410	410	÷	86,642	=	0.00	0.00	×	3.15% × (1 – 17.00%)	=	0.01%
Total:	86,642					1.00					10.17%

Based on: 10-K (filing date: 2016-12-23).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	38,841	38,841	÷	42,930	=	0.90	0.90	×	11.64%	=	10.53%
8.00% Mandatory Convertible Preferred Stock, Series A	—	—	÷	42,930	=	0.00	0.00	×	0.00%	=	0.00%
Debt³	3,949	3,949	÷	42,930	=	0.09	0.09	×	4.15% × (1 – 17.00%)	=	0.32%
Operating lease liability⁴	140	140	÷	42,930	=	0.00	0.00	×	4.15% × (1 – 17.00%)	=	0.01%
Total:	42,930					1.00					10.86%

Based on: 10-K (filing date: 2015-12-17).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	25,863	25,863	÷	31,435	=	0.82	0.82	×	11.64%	=	9.57%
8.00% Mandatory Convertible Preferred Stock, Series A	—	—	÷	31,435	=	0.00	0.00	×	0.00%	=	0.00%
Debt³	5,460	5,460	÷	31,435	=	0.17	0.17	×	4.01% × (1 – 17.00%)	=	0.58%
Operating lease liability⁴	112	112	÷	31,435	=	0.00	0.00	×	4.01% × (1 – 17.00%)	=	0.01%
Total:	31,435					1.00					10.16%

Based on: 10-K (filing date: 2014-12-29).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

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

	Nov 3, 2019	Nov 4, 2018	Oct 29, 2017	Oct 30, 2016	Nov 1, 2015	Nov 2, 2014
Selected Financial Data (US$ in millions)
Economic profit¹	(2,841)	(130)	(3,477)	(5,375)	399	(542)
Invested capital²	60,032	44,617	51,048	45,840	8,437	8,755
Performance Ratio
Economic spread ratio³	-4.73%	-0.29%	-6.81%	-11.73%	4.73%	-6.19%
Benchmarks
Economic Spread Ratio, Competitors⁴
Advanced Micro Devices Inc.	-21.65%	-17.76%	-27.50%	-44.35%	-45.10%	—
Analog Devices Inc.	-6.20%	-8.93%	-13.01%	8.03%	0.16%	—
Apple Inc.	84.57%	70.04%	88.48%	101.15%	128.55%	95.03%
Applied Materials Inc.	10.94%	12.55%	13.67%	2.49%	-5.47%	-6.80%
Cisco Systems Inc.	6.77%	-8.53%	9.19%	12.96%	11.50%	6.96%
Intel Corp.	17.03%	14.29%	0.65%	7.19%	8.08%	—
Lam Research Corp.	4.23%	9.36%	16.15%	-3.06%	1.16%	—
Micron Technology Inc.	-2.01%	20.61%	1.85%	-14.22%	3.72%	3.86%
NVIDIA Corp.	57.18%	18.51%	19.58%	10.60%	7.76%	—
Qualcomm Inc.	12.48%	-31.01%	-12.11%	11.31%	3.90%	19.89%
Texas Instruments Inc.	29.43%	30.93%	18.49%	15.14%	10.72%	—

Based on: 10-K (filing date: 2019-12-20), 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -2,841 ÷ 60,032 = -4.73%

⁴ Click competitor name to see calculations.

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.	Broadcom Inc.’s economic spread ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.

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

	Nov 3, 2019	Nov 4, 2018	Oct 29, 2017	Oct 30, 2016	Nov 1, 2015	Nov 2, 2014
Selected Financial Data (US$ in millions)
Economic profit¹	(2,841)	(130)	(3,477)	(5,375)	399	(542)
Net revenue	22,597	20,848	17,636	13,240	6,824	4,269
Performance Ratio
Economic profit margin²	-12.57%	-0.62%	-19.71%	-40.60%	5.84%	-12.69%
Benchmarks
Economic Profit Margin, Competitors³
Advanced Micro Devices Inc.	-10.98%	-7.30%	-11.50%	-23.31%	-24.75%	—
Analog Devices Inc.	-18.99%	-26.83%	-50.65%	9.40%	0.18%	—
Apple Inc.	17.67%	7.93%	19.79%	19.23%	21.24%	20.57%
Applied Materials Inc.	7.58%	8.25%	11.43%	2.28%	-6.61%	-7.05%
Cisco Systems Inc.	7.14%	-8.49%	10.55%	12.48%	10.18%	6.34%
Intel Corp.	19.08%	15.18%	0.69%	7.78%	8.92%	—
Lam Research Corp.	3.70%	8.14%	13.99%	-4.78%	1.22%	—
Micron Technology Inc.	-3.33%	24.01%	2.59%	-25.25%	3.85%	3.78%
NVIDIA Corp.	23.35%	12.31%	11.45%	5.08%	4.10%	—
Qualcomm Inc.	11.05%	-25.85%	-27.03%	8.69%	3.21%	12.61%
Texas Instruments Inc.	24.67%	24.52%	14.65%	13.60%	10.15%	—

Based on: 10-K (filing date: 2019-12-20), 10-K (filing date: 2018-12-21), 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29).

¹ Economic profit. See details »

² 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Net revenue
= 100 × -2,841 ÷ 22,597 = -12.57%

³ Click competitor name to see calculations.

Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company’s 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.	Broadcom Inc.’s economic profit margin improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.

Broadcom Inc. (NASDAQ:AVGO)

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