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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

Starbucks Corp., economic profit calculation

US$ in thousands

	12 months ended	Sep 30, 2018	Oct 1, 2017	Oct 2, 2016	Sep 27, 2015	Sep 28, 2014	Sep 29, 2013
	Net operating profit after taxes (NOPAT)¹
	Cost of capital²
	Invested capital³

	Economic profit⁴

Based on: 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14), 10-K (filing date: 2013-11-18).

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.	Starbucks Corp.’s economic profit declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Starbucks Corp., NOPAT calculation

US$ in thousands

	12 months ended	Sep 30, 2018	Oct 1, 2017	Oct 2, 2016	Sep 27, 2015	Sep 28, 2014	Sep 29, 2013
	Net earnings attributable to Starbucks
	Deferred income tax expense (benefit)¹
	Increase (decrease) in allowance for doubtful accounts²
	Increase (decrease) in stored value card liability and deferred revenue³
	Increase (decrease) in equity equivalents⁴
	Interest expense
	Interest expense, operating lease liability⁵
	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: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14), 10-K (filing date: 2013-11-18).

2018 Calculations

¹ Elimination of deferred tax expense. See Details »

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

³ Addition of increase (decrease) in stored value card liability and deferred revenue.

⁴ Addition of increase (decrease) in equity equivalents to net earnings attributable to Starbucks.

⁵ Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= hidden × hidden = hidden

⁶ Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 24.50% = hidden

⁷ Addition of after taxes interest expense to net earnings attributable to Starbucks.

⁸ Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 24.50% = 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.	Starbucks Corp.’s NOPAT declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Starbucks Corp., cash operating taxes calculation

US$ in thousands

	12 months ended	Sep 30, 2018	Oct 1, 2017	Oct 2, 2016	Sep 27, 2015	Sep 28, 2014	Sep 29, 2013
	Income tax expense (benefit)
	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: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14), 10-K (filing date: 2013-11-18).

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.	Starbucks Corp.’s cash operating taxes increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Starbucks Corp., invested capital calculation (financing approach)

US$ in thousands

		Sep 30, 2018	Oct 1, 2017	Oct 2, 2016	Sep 27, 2015	Sep 28, 2014	Sep 29, 2013
	Current portion of long-term debt
	Long-term debt, excluding current portion
	Operating lease liability¹
	Total reported debt & leases
	Shareholders’ equity
	Net deferred tax (assets) liabilities²
	Allowance for doubtful accounts³
	Stored value card liability and deferred revenue⁴
	Equity equivalents⁵
	Accumulated other comprehensive (income) loss, net of tax⁶
	Noncontrolling interests
	Adjusted shareholders’ equity
	Marketable securities⁷
	Invested capital

Based on: 10-K (filing date: 2018-11-16), 10-K (filing date: 2017-11-17), 10-K (filing date: 2016-11-18), 10-K (filing date: 2015-11-12), 10-K (filing date: 2014-11-14), 10-K (filing date: 2013-11-18).

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 stored value card liability and deferred revenue.

⁵ Addition of equity equivalents to shareholders’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ 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.	Starbucks Corp.’s invested capital increased from 2016 to 2017 and from 2017 to 2018.

Starbucks Corp., cost of capital calculations


Equity²	÷	=	×		=
Long-term debt, including current portion³	÷	=	×	× (1 – 24.50%)	=
Operating lease liability⁴	÷	=	×	× (1 – 24.50%)	=
Total:

Based on: 10-K (filing date: 2018-11-16).

¹ US$ in thousands

² Equity. See Details »