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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
Economic Profit Margin

Intuitive Surgical Inc., economic profit calculation

USD $ in thousands

	12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Net operating profit after taxes (NOPAT)¹
	Cost of capital²
	Invested capital³

	Economic profit⁴

Based on: 10-K (filing date: 2019-02-04), 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-02), 10-K (filing date: 2015-02-06).

2018 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
= hidden – hidden × 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.	Intuitive Surgical Inc.’s economic profit increased from 2016 to 2017 and from 2017 to 2018.

Intuitive Surgical Inc., NOPAT calculation

USD $ in thousands

	12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Net income attributable to Intuitive Surgical, Inc.
	Deferred income tax expense (benefit)¹
	Increase (decrease) in allowance for doubtful accounts and sales returns²
	Increase (decrease) in deferred revenue³
	Increase (decrease) in equity equivalents⁴
	Interest expense
	Interest expense, operating lease obligations⁵
	Adjusted interest expense
	Tax benefit of interest expense⁶
	Adjusted interest expense, after taxes⁷
	(Gain) loss on marketable securities
	Investment income, before taxes
	Tax expense (benefit) of investment income⁸
	Investment income, after taxes⁹
	Net income (loss) attributable to noncontrolling interest
	Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2019-02-04), 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-02), 10-K (filing date: 2015-02-06).

2018 Calculations

¹ Elimination of deferred tax expense. See Details »

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

³ Addition of increase (decrease) in deferred revenue.

⁴ Addition of increase (decrease) in equity equivalents to net income attributable to Intuitive Surgical, Inc..

⁵ Interest expense on capitalized operating leases = PV of operating lease payments × Discount rate
= hidden × hidden = hidden

⁶ 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 attributable to Intuitive Surgical, Inc..

⁸ 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.	Intuitive Surgical Inc.’s NOPAT declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Intuitive Surgical Inc., cash operating taxes calculation

USD $ in thousands

	12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Income tax expense
	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: 2019-02-04), 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-02), 10-K (filing date: 2015-02-06).

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.	Intuitive Surgical Inc.’s cash operating taxes increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Intuitive Surgical Inc., invested capital calculation (financing approach)

USD $ in thousands

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	PV of operating lease payments¹
	Total reported debt & leases
	Total Intuitive Surgical, Inc. stockholders’ equity
	Net deferred tax (assets) liabilities²
	Allowance for doubtful accounts and sales returns³
	Deferred revenue⁴
	Equity equivalents⁵
	Accumulated other comprehensive (income) loss, net of tax⁶
	Noncontrolling interest in joint venture
	Adjusted total Intuitive Surgical, Inc. stockholders’ equity
	Construction-in-process⁷
	Available-for-sale marketable securities⁸
	Invested capital

Based on: 10-K (filing date: 2019-02-04), 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-02), 10-K (filing date: 2015-02-06).

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 total Intuitive Surgical, Inc. stockholders’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of construction-in-process.

⁸ Subtraction of available-for-sale 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.	Intuitive Surgical Inc.’s invested capital declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Intuitive Surgical Inc., cost of capital calculations


Equity²	÷	=	×		=
PV of operating lease payments³	÷	=	×	× (1 – 21.00%)	=
Total:

Based on: 10-K (filing date: 2019-02-04).

¹ USD $ in thousands

² Equity. See Details »