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Microsoft Excel LibreOffice Calc


Economic Value Added (EVA)

Difficulty: Advanced

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

Facebook Inc., economic profit calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net operating profit after taxes (NOPAT)1 hidden hidden hidden hidden hidden
Cost of capital2 hidden% hidden% hidden% hidden% hidden%
Invested capital3 hidden hidden hidden hidden hidden
Economic profit4 hidden hidden hidden hidden hidden

Source: Based on data from Facebook Inc. Annual Reports

2017 Calculations

1 NOPAT. See Details »

2 Cost of capital. See Details »

3 Invested capital. See Details »

4 Economic profit = NOPAT – Cost of capital × Invested capital
= hiddenhidden% × hidden = 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. Facebook Inc.'s economic profit increased from 2015 to 2016 and from 2016 to 2017.

Net Operating Profit after Taxes (NOPAT)

Facebook Inc., NOPAT calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net income hidden hidden hidden hidden hidden
Deferred income tax expense (benefit)1 hidden hidden hidden hidden hidden
Increase (decrease) in allowance for doubtful accounts and allowance for unbilled receivables2 hidden hidden hidden hidden hidden
Increase (decrease) in deferred revenue3 hidden hidden hidden hidden hidden
Increase (decrease) in equity equivalents4 hidden hidden hidden hidden hidden
Interest expense hidden hidden hidden hidden hidden
Interest expense, operating lease obligations5 hidden hidden hidden hidden hidden
Adjusted interest expense hidden hidden hidden hidden hidden
Tax benefit of interest expense6 hidden hidden hidden hidden hidden
Adjusted interest expense, after taxes7 hidden hidden hidden hidden hidden
Interest income hidden hidden hidden hidden hidden
Investment income, before taxes hidden hidden hidden hidden hidden
Tax expense (benefit) of investment income8 hidden hidden hidden hidden hidden
Investment income, after taxes9 hidden hidden hidden hidden hidden
Net operating profit after taxes (NOPAT) hidden hidden hidden hidden hidden

Source: Based on data from Facebook Inc. Annual Reports

2017 Calculations

1 Elimination of deferred tax expense. See Details »

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

3 Addition of increase (decrease) in deferred revenue.

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

5 Addition of interest expense on capitalized operating leases. See Details »

6 Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 35% = hidden

7 Addition of after taxes interest expense to net income.

8 Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 35% = 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. Facebook Inc.'s NOPAT increased from 2015 to 2016 and from 2016 to 2017.

Cash Operating Taxes

Facebook Inc., cash operating taxes calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Provision for income taxes hidden hidden hidden hidden hidden
Less: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden
Add: Tax savings from interest expense hidden hidden hidden hidden hidden
Less: Tax imposed on investment income hidden hidden hidden hidden hidden
Cash operating taxes hidden hidden hidden hidden hidden

Source: Based on data from Facebook Inc. Annual Reports

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. Facebook Inc.'s cash operating taxes declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

Invested Capital

Facebook Inc., invested capital calculation (financing approach)

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Current portion of capital lease obligations hidden hidden hidden hidden hidden
Capital lease obligations, less current portion hidden hidden hidden hidden hidden
PV of operating lease payments1 hidden hidden hidden hidden hidden
Total reported debt & leases hidden hidden hidden hidden hidden
Stockholders' equity hidden hidden hidden hidden hidden
Net deferred tax (assets) liabilities2 hidden hidden hidden hidden hidden
Allowance for doubtful accounts and allowance for unbilled receivables3 hidden hidden hidden hidden hidden
Deferred revenue4 hidden hidden hidden hidden hidden
Equity equivalents5 hidden hidden hidden hidden hidden
Accumulated other comprehensive (income) loss, net of tax6 hidden hidden hidden hidden hidden
Adjusted stockholders' equity hidden hidden hidden hidden hidden
Construction in progress7 hidden hidden hidden hidden hidden
Marketable securities8 hidden hidden hidden hidden hidden
Invested capital hidden hidden hidden hidden hidden

Source: Based on data from Facebook Inc. Annual Reports

1 Addition of capitalized operating leases. See Details »

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 equity equivalents to stockholders' equity.

6 Removal of accumulated other comprehensive income.

7 Subtraction of construction in progress.

8 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. Facebook Inc.'s invested capital increased from 2015 to 2016 and from 2016 to 2017.

Cost of Capital

Facebook Inc., cost of capital calculations

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Capital lease obligations3 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
Total: hidden hidden hidden%

Source: Based on data from Facebook Inc. Annual Reports

1 USD $ in millions

2 Equity. See Details »

3 Capital lease obligations. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Capital lease obligations3 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
Total: hidden hidden hidden%

Source: Based on data from Facebook Inc. Annual Reports

1 USD $ in millions

2 Equity. See Details »

3 Capital lease obligations. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Capital lease obligations3 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
Total: hidden hidden hidden%

Source: Based on data from Facebook Inc. Annual Reports

1 USD $ in millions

2 Equity. See Details »

3 Capital lease obligations. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Capital lease obligations3 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
Total: hidden hidden hidden%

Source: Based on data from Facebook Inc. Annual Reports

1 USD $ in millions

2 Equity. See Details »

3 Capital lease obligations. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Capital lease obligations3 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
Total: hidden hidden hidden%

Source: Based on data from Facebook Inc. Annual Reports

1 USD $ in millions

2 Equity. See Details »

3 Capital lease obligations. See Details »

4 PV of operating lease payments. See Details »


Economic Spread

Facebook Inc., economic spread calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (USD $ in millions)
Economic profit1 hidden hidden hidden hidden hidden
Invested capital2 hidden hidden hidden hidden hidden
Ratio
Economic spread3 hidden% hidden% hidden% hidden% hidden%

Source: Based on data from Facebook Inc. Annual Reports

2017 Calculations

1 Economic profit. See Details »

2 Invested capital. See Details »

3 Economic spread = 100 × Economic profit ÷ Invested capital
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Economic spread The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital. Facebook Inc.'s economic spread improved from 2015 to 2016 and from 2016 to 2017.

Economic Profit Margin

Facebook Inc., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Selected Financial Data (USD $ in millions)
Economic profit1 hidden hidden hidden hidden hidden
Revenue hidden hidden hidden hidden hidden
Increase (decrease) in deferred revenue hidden hidden hidden hidden hidden
Ratio
Economic profit margin2 hidden% hidden% hidden% hidden% hidden%

Source: Based on data from Facebook Inc. Annual Reports

2017 Calculations

1 Economic profit. See Details »

2 Economic profit margin = 100 × Economic profit ÷ (Revenue + Change in deferred revenue)
= 100 × hidden ÷ (hidden + hidden) = hidden%

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. Facebook Inc.'s economic profit margin improved from 2015 to 2016 and from 2016 to 2017.