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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.
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Broadcom Inc. pages available for free this week:
- Statement of Comprehensive Income
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Return on Equity (ROE) since 2009
- Current Ratio since 2009
- Total Asset Turnover since 2009
- Price to Sales (P/S) since 2009
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Economic Profit
12 months ended: | Oct 31, 2021 | Nov 1, 2020 | Nov 3, 2019 | Nov 4, 2018 | Oct 29, 2017 | Oct 30, 2016 | |
---|---|---|---|---|---|---|---|
Net operating profit after taxes (NOPAT)1 | |||||||
Cost of capital2 | |||||||
Invested capital3 | |||||||
Economic profit4 |
Based on: 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-11-01), 10-K (reporting date: 2019-11-03), 10-K (reporting date: 2018-11-04), 10-K (reporting date: 2017-10-29), 10-K (reporting date: 2016-10-30).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
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. economic profit decreased from 2019 to 2020 but then increased from 2020 to 2021 exceeding 2019 level. |
Net Operating Profit after Taxes (NOPAT)
Based on: 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-11-01), 10-K (reporting date: 2019-11-03), 10-K (reporting date: 2018-11-04), 10-K (reporting date: 2017-10-29), 10-K (reporting date: 2016-10-30).
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 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income (loss) attributable to Broadcom Inc. stockholders.
8 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
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. NOPAT increased from 2019 to 2020 and from 2020 to 2021. |
Cash Operating Taxes
Based on: 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-11-01), 10-K (reporting date: 2019-11-03), 10-K (reporting date: 2018-11-04), 10-K (reporting date: 2017-10-29), 10-K (reporting date: 2016-10-30).
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. cash operating taxes increased from 2019 to 2020 and from 2020 to 2021. |
Invested Capital
Based on: 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-11-01), 10-K (reporting date: 2019-11-03), 10-K (reporting date: 2018-11-04), 10-K (reporting date: 2017-10-29), 10-K (reporting date: 2016-10-30).
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. invested capital increased from 2019 to 2020 but then slightly decreased from 2020 to 2021. |
Cost of Capital
Broadcom Inc., cost of capital calculations
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2021-10-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2020-11-01).
1 US$ 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 | ÷ | = | × | = | |||||||||
8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2019-11-03).
1 US$ 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 | ÷ | = | × | = | |||||||||
8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2018-11-04).
1 US$ 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 | ÷ | = | × | = | |||||||||
8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 17.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 17.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2017-10-29).
1 US$ 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 | ÷ | = | × | = | |||||||||
8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 17.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 17.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2016-10-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Oct 31, 2021 | Nov 1, 2020 | Nov 3, 2019 | Nov 4, 2018 | Oct 29, 2017 | Oct 30, 2016 | ||
---|---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | |||||||
Economic profit1 | |||||||
Invested capital2 | |||||||
Performance Ratio | |||||||
Economic spread ratio3 | |||||||
Benchmarks | |||||||
Economic Spread Ratio, Competitors4 | |||||||
Advanced Micro Devices Inc. | |||||||
Analog Devices Inc. | |||||||
Applied Materials Inc. | |||||||
Intel Corp. | |||||||
Lam Research Corp. | |||||||
Micron Technology Inc. | |||||||
NVIDIA Corp. | |||||||
Qualcomm Inc. | |||||||
Texas Instruments Inc. |
Based on: 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-11-01), 10-K (reporting date: 2019-11-03), 10-K (reporting date: 2018-11-04), 10-K (reporting date: 2017-10-29), 10-K (reporting date: 2016-10-30).
1 Economic profit. See details »
2 Invested capital. See details »
3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
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. economic spread ratio deteriorated from 2019 to 2020 but then improved from 2020 to 2021 exceeding 2019 level. |
Economic Profit Margin
Oct 31, 2021 | Nov 1, 2020 | Nov 3, 2019 | Nov 4, 2018 | Oct 29, 2017 | Oct 30, 2016 | ||
---|---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | |||||||
Economic profit1 | |||||||
Net revenue | |||||||
Performance Ratio | |||||||
Economic profit margin2 | |||||||
Benchmarks | |||||||
Economic Profit Margin, Competitors3 | |||||||
Advanced Micro Devices Inc. | |||||||
Analog Devices Inc. | |||||||
Applied Materials Inc. | |||||||
Intel Corp. | |||||||
Lam Research Corp. | |||||||
Micron Technology Inc. | |||||||
NVIDIA Corp. | |||||||
Qualcomm Inc. | |||||||
Texas Instruments Inc. |
Based on: 10-K (reporting date: 2021-10-31), 10-K (reporting date: 2020-11-01), 10-K (reporting date: 2019-11-03), 10-K (reporting date: 2018-11-04), 10-K (reporting date: 2017-10-29), 10-K (reporting date: 2016-10-30).
1 Economic profit. See details »
2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Net revenue
= 100 × ÷ =
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 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. economic profit margin deteriorated from 2019 to 2020 but then improved from 2020 to 2021 exceeding 2019 level. |