Economic Value Added (EVA)
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
Kraft Foods Group Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2014 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 989 – 11.79% × 14,787 = -755
| 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. | Kraft Foods Group Inc. economic profit increased from 2012 to 2013 but then decreased significantly from 2013 to 2014. |
Net Operating Profit after Taxes (NOPAT)
Kraft Foods Group Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowances related to accounts receivable.
3 Addition of increase (decrease) in restructuring costs liability.
4 Addition of increase (decrease) in equity equivalents to net earnings.
5 2014 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 369 × 4.62% = 17
6 2014 Calculation
Tax benefit of interest and other expense, net = Adjusted interest and other expense, net × Statutory income tax rate
= 501 × 35.00% = 175
7 Addition of after taxes interest expense to net earnings.
| 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. | Kraft Foods Group Inc. NOPAT increased from 2012 to 2013 but then decreased significantly from 2013 to 2014. |
Cash Operating Taxes
Kraft Foods Group Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
| 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. | Kraft Foods Group Inc. cash operating taxes increased from 2012 to 2013 and from 2013 to 2014. |
Invested Capital
Kraft Foods Group Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
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 costs liability.
5 Addition of equity equivalents to 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. | Kraft Foods Group Inc. invested capital increased from 2012 to 2013 but then slightly decreased from 2013 to 2014 not reaching 2012 level. |
Cost of Capital
Kraft Foods Group Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 37,731) | 37,731) | ÷ | 49,101) | = | 0.77 | 0.77 | × | 14.44% | = | 11.10% | ||
| Debt3 | 11,000) | 11,000) | ÷ | 49,101) | = | 0.22 | 0.22 | × | 4.62% × (1 – 35.00%) | = | 0.67% | ||
| Operating lease liability4 | 369) | 369) | ÷ | 49,101) | = | 0.01 | 0.01 | × | 4.62% × (1 – 35.00%) | = | 0.02% | ||
| Total: | 49,101) | 1.00 | 11.79% | ||||||||||
Based on: 10-K (reporting date: 2014-12-27).
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 | 32,851) | 32,851) | ÷ | 43,973) | = | 0.75 | 0.75 | × | 14.44% | = | 10.79% | ||
| Debt3 | 10,700) | 10,700) | ÷ | 43,973) | = | 0.24 | 0.24 | × | 4.62% × (1 – 35.00%) | = | 0.73% | ||
| Operating lease liability4 | 422) | 422) | ÷ | 43,973) | = | 0.01 | 0.01 | × | 4.62% × (1 – 35.00%) | = | 0.03% | ||
| Total: | 43,973) | 1.00 | 11.55% | ||||||||||
Based on: 10-K (reporting date: 2013-12-28).
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 | 30,654) | 30,654) | ÷ | 42,536) | = | 0.72 | 0.72 | × | 14.44% | = | 10.41% | ||
| Debt3 | 11,500) | 11,500) | ÷ | 42,536) | = | 0.27 | 0.27 | × | 4.62% × (1 – 35.00%) | = | 0.81% | ||
| Operating lease liability4 | 382) | 382) | ÷ | 42,536) | = | 0.01 | 0.01 | × | 4.62% × (1 – 35.00%) | = | 0.03% | ||
| Total: | 42,536) | 1.00 | 11.24% | ||||||||||
Based on: 10-K (reporting date: 2012-12-29).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Kraft Foods Group Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Economic profit1 | (755) | 1,882) | 788) | |
| Invested capital2 | 14,787) | 16,041) | 13,807) | |
| Performance Ratio | ||||
| Economic spread ratio3 | -5.11% | 11.73% | 5.70% | |
| Benchmarks | ||||
| Economic Spread Ratio, Competitors4 | ||||
| lululemon athletica inc. | — | — | — | |
| Nike Inc. | — | — | — | |
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 Economic profit. See details »
2 Invested capital. See details »
3 2014 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -755 ÷ 14,787 = -5.11%
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. | Kraft Foods Group Inc. economic spread ratio improved from 2012 to 2013 but then deteriorated significantly from 2013 to 2014. |
Economic Profit Margin
Kraft Foods Group Inc., economic profit margin calculation, comparison to benchmarks
| Dec 27, 2014 | Dec 28, 2013 | Dec 29, 2012 | ||
|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||
| Economic profit1 | (755) | 1,882) | 788) | |
| Net revenues | 18,205) | 18,218) | 18,339) | |
| Performance Ratio | ||||
| Economic profit margin2 | -4.15% | 10.33% | 4.29% | |
| Benchmarks | ||||
| Economic Profit Margin, Competitors3 | ||||
| lululemon athletica inc. | — | — | — | |
| Nike Inc. | — | — | — | |
Based on: 10-K (reporting date: 2014-12-27), 10-K (reporting date: 2013-12-28), 10-K (reporting date: 2012-12-29).
1 Economic profit. See details »
2 2014 Calculation
Economic profit margin = 100 × Economic profit ÷ Net revenues
= 100 × -755 ÷ 18,205 = -4.15%
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. | Kraft Foods Group Inc. economic profit margin improved from 2012 to 2013 but then deteriorated significantly from 2013 to 2014. |