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Microsoft Excel LibreOffice Calc

Qualcomm Inc. (QCOM)


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

Qualcomm Inc., economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Sep 30, 2018 Sep 24, 2017 Sep 25, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
Net operating profit after taxes (NOPAT)1 hidden hidden hidden hidden hidden hidden
Cost of capital2 hidden hidden hidden hidden hidden hidden
Invested capital3 hidden hidden hidden hidden hidden hidden
 
Economic profit4 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

<>4 2018 Calculation
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. Qualcomm Inc.’s economic profit declined from 2016 to 2017 and from 2017 to 2018.

Net Operating Profit after Taxes (NOPAT)

Qualcomm Inc., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Sep 30, 2018 Sep 24, 2017 Sep 25, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
Net income (loss) attributable to Qualcomm hidden hidden hidden hidden hidden hidden
Deferred income tax expense (benefit)1 hidden hidden hidden hidden hidden hidden
Increase (decrease) in allowances for doubtful accounts2 hidden hidden hidden hidden hidden hidden
Increase (decrease) in unearned revenues3 hidden hidden hidden hidden hidden hidden
Increase (decrease) in restructuring accrual4 hidden hidden hidden hidden hidden hidden
Increase (decrease) in equity equivalents5 hidden hidden hidden hidden hidden hidden
Interest expense hidden hidden hidden hidden hidden hidden
Interest expense, operating lease liability6 hidden hidden hidden hidden hidden hidden
Adjusted interest expense hidden hidden hidden hidden hidden hidden
Tax benefit of interest expense7 hidden hidden hidden hidden hidden hidden
Adjusted interest expense, after taxes8 hidden hidden hidden hidden hidden hidden
(Gain) loss on marketable securities hidden hidden hidden hidden hidden hidden
Interest and dividend income hidden hidden hidden hidden hidden hidden
Investment income, before taxes hidden hidden hidden hidden hidden hidden
Tax expense (benefit) of investment income9 hidden hidden hidden hidden hidden hidden
Investment income, after taxes10 hidden hidden hidden hidden hidden hidden
(Income) loss from discontinued operations, net of tax11 hidden hidden hidden hidden hidden hidden
Net income (loss) attributable to noncontrolling interest hidden hidden hidden hidden hidden hidden
Net operating profit after taxes (NOPAT) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).

1 Elimination of deferred tax expense. See details »

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

3 Addition of increase (decrease) in unearned revenues.

4 Addition of increase (decrease) in restructuring accrual.

5 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to Qualcomm.

6 2018 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= hidden × hidden = hidden

7 2018 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 25.00% = hidden

8 Addition of after taxes interest expense to net income (loss) attributable to Qualcomm.

9 2018 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 25.00% = hidden

10 Elimination of after taxes investment income.

11 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. Qualcomm Inc.’s NOPAT declined from 2016 to 2017 and from 2017 to 2018.

Cash Operating Taxes

Qualcomm Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Sep 30, 2018 Sep 24, 2017 Sep 25, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
Income tax provision hidden hidden hidden hidden hidden hidden
Less: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden hidden
Add: Tax savings from interest expense hidden hidden hidden hidden hidden hidden
Less: Tax imposed on investment income hidden hidden hidden hidden hidden hidden
Cash operating taxes hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).

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. Qualcomm Inc.’s cash operating taxes declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Invested Capital

Qualcomm Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Sep 30, 2018 Sep 24, 2017 Sep 25, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
Short-term debt hidden hidden hidden hidden hidden hidden
Long-term debt hidden hidden hidden hidden hidden hidden
Operating lease liability1 hidden hidden hidden hidden hidden hidden
Total reported debt & leases hidden hidden hidden hidden hidden hidden
Total Qualcomm stockholders’ equity hidden hidden hidden hidden hidden hidden
Net deferred tax (assets) liabilities2 hidden hidden hidden hidden hidden hidden
Allowances for doubtful accounts3 hidden hidden hidden hidden hidden hidden
Unearned revenues4 hidden hidden hidden hidden hidden hidden
Restructuring accrual5 hidden hidden hidden hidden hidden hidden
Equity equivalents6 hidden hidden hidden hidden hidden hidden
Accumulated other comprehensive (income) loss, net of tax7 hidden hidden hidden hidden hidden hidden
Noncontrolling interests hidden hidden hidden hidden hidden hidden
Adjusted total Qualcomm stockholders’ equity hidden hidden hidden hidden hidden hidden
Construction in progress8 hidden hidden hidden hidden hidden hidden
Marketable securities9 hidden hidden hidden hidden hidden hidden
Invested capital hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).

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 unearned revenues.

5 Addition of restructuring accrual.

6 Addition of equity equivalents to total Qualcomm stockholders’ equity.

7 Removal of accumulated other comprehensive income.

8 Subtraction of construction in progress.

9 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. Qualcomm Inc.’s invested capital increased from 2016 to 2017 but then slightly declined from 2017 to 2018 not reaching 2016 level.

Cost of Capital

Qualcomm Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 25.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 25.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

Based on: 10-K (filing date: 2018-11-07).

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

Based on: 10-K (filing date: 2017-11-01).

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

Based on: 10-K (filing date: 2016-11-02).

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

Based on: 10-K (filing date: 2015-11-04).

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

Based on: 10-K (filing date: 2014-11-05).

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

Based on: 10-K (filing date: 2013-11-06).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Qualcomm Inc., economic spread ratio calculation

Microsoft Excel LibreOffice Calc
Sep 30, 2018 Sep 24, 2017 Sep 25, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
Selected Financial Data (US$ in millions)
Economic profit1 hidden hidden hidden hidden hidden hidden
Invested capital2 hidden hidden hidden hidden hidden hidden
Performance Ratio
Economic spread ratio3 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).

1 Economic profit. See details »

2 Invested capital. See details »

3 2018 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. Qualcomm Inc.’s economic spread ratio deteriorated from 2016 to 2017 and from 2017 to 2018.

Economic Profit Margin

Qualcomm Inc., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Sep 30, 2018 Sep 24, 2017 Sep 25, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
Selected Financial Data (US$ in millions)
Economic profit1 hidden hidden hidden hidden hidden hidden
Revenues hidden hidden hidden hidden hidden hidden
Add: Increase (decrease) in unearned revenues hidden hidden hidden hidden hidden hidden
Adjusted revenues hidden hidden hidden hidden hidden hidden
Performance Ratio
Economic profit margin2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).

1 Economic profit. See details »

2 2018 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 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. Qualcomm Inc.’s economic profit margin deteriorated from 2016 to 2017 and from 2017 to 2018.