EVA is registered trademark of Stern Stewart.

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

Cisco Systems Inc., economic profit calculation

US$ in millions

	12 months ended	Jul 27, 2019	Jul 28, 2018	Jul 29, 2017	Jul 30, 2016	Jul 25, 2015	Jul 26, 2014
	Net operating profit after taxes (NOPAT)¹
	Cost of capital²
	Invested capital³

	Economic profit⁴

Based on: 10-K (filing date: 2019-09-05), 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09).

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
= hidden

–

×

=

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.	Cisco Systems Inc.’s economic profit declined from 2017 to 2018 but then increased from 2018 to 2019 not reaching 2017 level.

Cisco Systems Inc., NOPAT calculation

US$ in millions

	12 months ended	Jul 27, 2019	Jul 28, 2018	Jul 29, 2017	Jul 30, 2016	Jul 25, 2015	Jul 26, 2014
	Net income
	Deferred income tax expense (benefit)¹
	Increase (decrease) in allowance for doubtful accounts²
	Increase (decrease) in deferred revenue³
	Increase (decrease) in product warranty liability⁴
	Increase (decrease) in restructuring liability⁵
	Increase (decrease) in equity equivalents⁶
	Interest expense
	Interest expense, operating lease liability⁷
	Adjusted interest expense
	Tax benefit of interest expense⁸
	Adjusted interest expense, after taxes⁹
	(Gain) loss on marketable securities
	Interest income
	Investment income, before taxes
	Tax expense (benefit) of investment income¹⁰
	Investment income, after taxes¹¹
	Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2019-09-05), 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09).

¹ Elimination of deferred tax expense. See details »

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

³ Addition of increase (decrease) in deferred revenue.

⁴ Addition of increase (decrease) in product warranty liability.

⁵ Addition of increase (decrease) in restructuring liability.

⁶ Addition of increase (decrease) in equity equivalents to net income.

⁷ 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= hidden × hidden = hidden

⁸ 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 21.00% = hidden

⁹ Addition of after taxes interest expense to net income.

¹⁰ 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 21.00% = hidden

¹¹ 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.	Cisco Systems Inc.’s NOPAT declined from 2017 to 2018 but then increased from 2018 to 2019 not reaching 2017 level.

Cisco Systems Inc., cash operating taxes calculation

US$ in millions

	12 months ended	Jul 27, 2019	Jul 28, 2018	Jul 29, 2017	Jul 30, 2016	Jul 25, 2015	Jul 26, 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: 2019-09-05), 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09).

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.	Cisco Systems Inc.’s cash operating taxes increased from 2017 to 2018 but then slightly declined from 2018 to 2019 not reaching 2017 level.

Cisco Systems Inc., invested capital calculation (financing approach)

US$ in millions

		Jul 27, 2019	Jul 28, 2018	Jul 29, 2017	Jul 30, 2016	Jul 25, 2015	Jul 26, 2014
	Short-term debt
	Long-term debt, excluding current portion
	Operating lease liability¹
	Total reported debt & leases
	Total Cisco shareholders’ equity
	Net deferred tax (assets) liabilities²
	Allowance for doubtful accounts³
	Deferred revenue⁴
	Product warranty liability⁵
	Restructuring liability⁶
	Equity equivalents⁷
	Accumulated other comprehensive (income) loss, net of tax⁸
	Noncontrolling interests
	Adjusted total Cisco shareholders’ equity
	Available-for-sale investments⁹
	Invested capital

Based on: 10-K (filing date: 2019-09-05), 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09).

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 product warranty liability.

⁶ Addition of restructuring liability.

⁷ Addition of equity equivalents to total Cisco shareholders’ equity.

⁸ Removal of accumulated other comprehensive income.

⁹ Subtraction of available-for-sale investments.

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

Cisco Systems Inc., cost of capital calculations

	Weights			Cost of capital
Equity²		÷	=		×		=
Debt³		÷	=		×	× (1 – 21.00%)	=
Operating lease liability⁴		÷	=		×	× (1 – 21.00%)	=
Total capital:	Total weights:			Cost of total capital:

Based on: 10-K (filing date: 2019-09-05).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Weights			Cost of capital
Equity²		÷	=		×		=
Debt³		÷	=		×	× (1 – 27.00%)	=
Operating lease liability⁴		÷	=		×	× (1 – 27.00%)	=
Total capital:	Total weights:			Cost of total capital:

Based on: 10-K (filing date: 2018-09-06).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Weights			Cost of capital
Equity²		÷	=		×		=
Debt³		÷	=		×	× (1 – 35.00%)	=
Operating lease liability⁴		÷	=		×	× (1 – 35.00%)	=
Total capital:	Total weights:			Cost of total capital:

Based on: 10-K (filing date: 2017-09-07).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Weights			Cost of capital
Equity²		÷	=		×		=
Debt³		÷	=		×	× (1 – 35.00%)	=
Operating lease liability⁴		÷	=		×	× (1 – 35.00%)	=
Total capital:	Total weights:			Cost of total capital:

Based on: 10-K (filing date: 2016-09-08).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Weights			Cost of capital
Equity²		÷	=		×		=
Debt³		÷	=		×	× (1 – 35.00%)	=
Operating lease liability⁴		÷	=		×	× (1 – 35.00%)	=
Total capital:	Total weights:			Cost of total capital:

Based on: 10-K (filing date: 2015-09-08).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Weights			Cost of capital
Equity²		÷	=		×		=
Debt³		÷	=		×	× (1 – 35.00%)	=
Operating lease liability⁴		÷	=		×	× (1 – 35.00%)	=
Total capital:	Total weights:			Cost of total capital:

Based on: 10-K (filing date: 2014-09-09).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Cisco Systems Inc., economic spread ratio calculation

		Jul 27, 2019	Jul 28, 2018	Jul 29, 2017	Jul 30, 2016	Jul 25, 2015	Jul 26, 2014
	Selected Financial Data (US$ in millions)
	Economic profit¹
	Invested capital²
	Performance Ratio
	Economic spread ratio³

Based on: 10-K (filing date: 2019-09-05), 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × hidden ÷ hidden = hidden

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

Cisco Systems Inc., economic profit margin calculation

		Jul 27, 2019	Jul 28, 2018	Jul 29, 2017	Jul 30, 2016	Jul 25, 2015	Jul 26, 2014
	Selected Financial Data (US$ in millions)
	Economic profit¹
	Revenue
	Add: Increase (decrease) in deferred revenue
	Adjusted revenue
	Performance Ratio
	Economic profit margin²

Based on: 10-K (filing date: 2019-09-05), 10-K (filing date: 2018-09-06), 10-K (filing date: 2017-09-07), 10-K (filing date: 2016-09-08), 10-K (filing date: 2015-09-08), 10-K (filing date: 2014-09-09).

¹ Economic profit. See details »

² 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × hidden ÷ hidden = hidden

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.	Cisco Systems Inc.’s economic profit margin deteriorated from 2017 to 2018 but then improved from 2018 to 2019 not reaching 2017 level.

	Cisco Systems Inc.	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

	All companies
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

Cisco Systems Inc. (CSCO)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Jul 27, 2019

Jul 28, 2018

Jul 29, 2017

Jul 30, 2016

Jul 25, 2015

Jul 26, 2014

Economic Spread Ratio

Economic Profit Margin