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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 Ratio
Economic Profit Margin

Starbucks Corp., economic profit calculation

US$ in thousands

12 months ended:	Sep 27, 2020	Sep 29, 2019	Sep 30, 2018	Oct 1, 2017	Oct 2, 2016	Sep 27, 2015
Net operating profit after taxes (NOPAT)¹	1,475,541	2,231,571	12,689,054	3,292,441	3,452,299	3,108,422
Cost of capital²	8.40%	8.62%	8.58%	8.81%	8.95%	9.25%
Invested capital³	23,348,200	20,389,137	27,242,440	17,066,282	15,161,964	12,932,291

Economic profit⁴	(484,767)	473,564	10,351,786	1,789,163	2,095,758	1,911,789

Based on: 10-K (filing date: 2020-11-12), 10-K (filing date: 2019-11-15), 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).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2020 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 1,475,541 – 8.40% × 23,348,200 = -484,767

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 decreased from 2018 to 2019 and from 2019 to 2020.

Starbucks Corp., NOPAT calculation

US$ in thousands

12 months ended:	Sep 27, 2020	Sep 29, 2019	Sep 30, 2018	Oct 1, 2017	Oct 2, 2016	Sep 27, 2015
Net earnings attributable to Starbucks	928,300	3,599,200	4,518,300	2,884,700	2,817,700	2,757,400
Deferred income tax expense (benefit)¹	(28,500)	(1,448,800)	726,800	114,200	290,600	20,400
Increase (decrease) in allowance for doubtful accounts²	20,400	(1,300)	(1,800)	400	(1,400)	4,100
Increase (decrease) in stored value card liability and deferred revenue³	41,600	(405,200)	7,125,700	121,700	187,400	189,300
Increase (decrease) in equity equivalents⁴	33,500	(1,855,300)	7,850,700	236,300	476,600	213,800
Interest expense	437,000	331,000	170,300	92,500	81,300	70,500
Interest expense, operating lease liability⁵	222,763	293,028	250,410	177,347	165,130	134,188
Adjusted interest expense	659,763	624,028	420,710	269,847	246,430	204,688
Tax benefit of interest expense⁶	(138,550)	(131,046)	(103,074)	(94,446)	(86,250)	(71,641)
Adjusted interest expense, after taxes⁷	521,212	492,982	317,636	175,401	160,179	133,047
(Gain) loss on marketable securities	(4,900)	(900)	3,600	(6,400)	(5,200)	3,500
Investment income, before taxes	(4,900)	(900)	3,600	(6,400)	(5,200)	3,500
Tax expense (benefit) of investment income⁸	1,029	189	(882)	2,240	1,820	(1,225)
Investment income, after taxes⁹	(3,871)	(711)	2,718	(4,160)	(3,380)	2,275
Net income (loss) attributable to noncontrolling interest	(3,600)	(4,600)	(300)	200	1,200	1,900
Net operating profit after taxes (NOPAT)	1,475,541	2,231,571	12,689,054	3,292,441	3,452,299	3,108,422

Based on: 10-K (filing date: 2020-11-12), 10-K (filing date: 2019-11-15), 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).

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 2020 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 8,910,500 × 2.50% = 222,763

⁶ 2020 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 659,763 × 21.00% = 138,550

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

⁸ 2020 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 4,900 × 21.00% = 1,029

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 decreased from 2018 to 2019 and from 2019 to 2020.

Starbucks Corp., cash operating taxes calculation

US$ in thousands

12 months ended:	Sep 27, 2020	Sep 29, 2019	Sep 30, 2018	Oct 1, 2017	Oct 2, 2016	Sep 27, 2015
Income tax expense	239,700	871,600	1,262,000	1,432,600	1,379,700	1,143,700
Less: Deferred income tax expense (benefit)	(28,500)	(1,448,800)	726,800	114,200	290,600	20,400
Add: Tax savings from interest expense	138,550	131,046	103,074	94,446	86,250	71,641
Less: Tax imposed on investment income	1,029	189	(882)	2,240	1,820	(1,225)
Cash operating taxes	405,721	2,451,257	639,156	1,410,606	1,173,530	1,196,166

Based on: 10-K (filing date: 2020-11-12), 10-K (filing date: 2019-11-15), 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).

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 2018 to 2019 but then decreased significantly from 2019 to 2020.

Starbucks Corp., invested capital calculation (financing approach)

US$ in thousands

	Sep 27, 2020	Sep 29, 2019	Sep 30, 2018	Oct 1, 2017	Oct 2, 2016	Sep 27, 2015
Current portion of long-term debt	1,249,900	—	349,900	—	400,000	—
Long-term debt, excluding current portion	14,659,600	11,167,000	9,090,200	3,932,600	3,202,200	2,347,500
Operating lease liability¹	8,910,500	8,799,637	8,183,340	7,778,382	6,526,864	5,102,191
Total reported debt & leases	24,820,000	19,966,637	17,623,440	11,710,982	10,129,064	7,449,691
Shareholders’ equity (deficit)	(7,805,100)	(6,232,200)	1,169,500	5,450,100	5,884,000	5,818,000
Net deferred tax (assets) liabilities²	(1,631,800)	(1,579,400)	135,500	(789,100)	(870,700)	(1,137,400)
Allowance for doubtful accounts³	27,100	6,700	8,000	9,800	9,400	10,800
Stored value card liability and deferred revenue⁴	8,055,000	8,013,400	8,418,600	1,292,900	1,171,200	983,800
Equity equivalents⁵	6,450,300	6,440,700	8,562,100	513,600	309,900	(142,800)
Accumulated other comprehensive (income) loss, net of tax⁶	364,600	503,300	330,300	155,600	108,400	199,400
Noncontrolling interests	5,700	1,200	6,300	6,900	6,700	1,800
Adjusted shareholders’ equity (deficit)	(984,500)	713,000	10,068,200	6,126,200	6,309,000	5,876,400
Marketable securities⁷	(487,300)	(290,500)	(449,200)	(770,900)	(1,276,100)	(393,800)
Invested capital	23,348,200	20,389,137	27,242,440	17,066,282	15,161,964	12,932,291

Based on: 10-K (filing date: 2020-11-12), 10-K (filing date: 2019-11-15), 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).

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 (deficit).

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 decreased from 2018 to 2019 but then slightly increased from 2019 to 2020.

Starbucks Corp., cost of capital calculations

	Capital (fair value)¹	Weights					Cost of capital
Equity²	109,776,161	109,776,161	÷	136,625,461	=	0.80	0.80	×	9.88%	=	7.94%
Debt³	17,938,800	17,938,800	÷	136,625,461	=	0.13	0.13	×	3.19% × (1 – 21.00%)	=	0.33%
Operating lease liability⁴	8,910,500	8,910,500	÷	136,625,461	=	0.07	0.07	×	2.50% × (1 – 21.00%)	=	0.13%
Total:	136,625,461					1.00					8.40%

Based on: 10-K (filing date: 2020-11-12).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	99,452,010	99,452,010	÷	120,284,647	=	0.83	0.83	×	9.88%	=	8.17%
Debt³	12,033,000	12,033,000	÷	120,284,647	=	0.10	0.10	×	3.33% × (1 – 21.00%)	=	0.26%
Operating lease liability⁴	8,799,637	8,799,637	÷	120,284,647	=	0.07	0.07	×	3.33% × (1 – 21.00%)	=	0.19%
Total:	120,284,647					1.00					8.62%

Based on: 10-K (filing date: 2019-11-15).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	84,559,296	84,559,296	÷	102,064,636	=	0.83	0.83	×	9.88%	=	8.18%
Debt³	9,322,000	9,322,000	÷	102,064,636	=	0.09	0.09	×	3.06% × (1 – 24.50%)	=	0.21%
Operating lease liability⁴	8,183,340	8,183,340	÷	102,064,636	=	0.08	0.08	×	3.06% × (1 – 24.50%)	=	0.19%
Total:	102,064,636					1.00					8.58%

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

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	81,000,004	81,000,004	÷	92,817,386	=	0.87	0.87	×	9.88%	=	8.62%
Debt³	4,039,000	4,039,000	÷	92,817,386	=	0.04	0.04	×	2.28% × (1 – 35.00%)	=	0.06%
Operating lease liability⁴	7,778,382	7,778,382	÷	92,817,386	=	0.08	0.08	×	2.28% × (1 – 35.00%)	=	0.12%
Total:	92,817,386					1.00					8.81%

Based on: 10-K (filing date: 2017-11-17).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	81,167,658	81,167,658	÷	91,508,522	=	0.89	0.89	×	9.88%	=	8.76%
Debt³	3,814,000	3,814,000	÷	91,508,522	=	0.04	0.04	×	2.53% × (1 – 35.00%)	=	0.07%
Operating lease liability⁴	6,526,864	6,526,864	÷	91,508,522	=	0.07	0.07	×	2.53% × (1 – 35.00%)	=	0.12%
Total:	91,508,522					1.00					8.95%

Based on: 10-K (filing date: 2016-11-18).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

	Capital (fair value)¹	Weights					Cost of capital
Equity²	90,676,736	90,676,736	÷	98,180,927	=	0.92	0.92	×	9.88%	=	9.12%
Debt³	2,402,000	2,402,000	÷	98,180,927	=	0.02	0.02	×	2.63% × (1 – 35.00%)	=	0.04%
Operating lease liability⁴	5,102,191	5,102,191	÷	98,180,927	=	0.05	0.05	×	2.63% × (1 – 35.00%)	=	0.09%
Total:	98,180,927					1.00					9.25%

Based on: 10-K (filing date: 2015-11-12).

¹ US$ in thousands

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Starbucks Corp., economic spread ratio calculation, comparison to benchmarks

	Sep 27, 2020	Sep 29, 2019	Sep 30, 2018	Oct 1, 2017	Oct 2, 2016	Sep 27, 2015
Selected Financial Data (US$ in thousands)
Economic profit¹	(484,767)	473,564	10,351,786	1,789,163	2,095,758	1,911,789
Invested capital²	23,348,200	20,389,137	27,242,440	17,066,282	15,161,964	12,932,291
Performance Ratio
Economic spread ratio³	-2.08%	2.32%	38.00%	10.48%	13.82%	14.78%
Benchmarks
Economic Spread Ratio, Competitors⁴
Booking Holdings Inc.	—	34.27%	41.33%	25.62%	20.05%	25.31%
McDonald’s Corp.	—	12.17%	14.75%	10.21%	7.83%	6.06%

Based on: 10-K (filing date: 2020-11-12), 10-K (filing date: 2019-11-15), 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).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2020 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -484,767 ÷ 23,348,200 = -2.08%

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.	Starbucks Corp.’s economic spread ratio deteriorated from 2018 to 2019 and from 2019 to 2020.

Starbucks Corp., economic profit margin calculation, comparison to benchmarks

	Sep 27, 2020	Sep 29, 2019	Sep 30, 2018	Oct 1, 2017	Oct 2, 2016	Sep 27, 2015
Selected Financial Data (US$ in thousands)
Economic profit¹	(484,767)	473,564	10,351,786	1,789,163	2,095,758	1,911,789

Net revenues	23,518,000	26,508,600	24,719,500	22,386,800	21,315,900	19,162,700
Add: Increase (decrease) in stored value card liability and deferred revenue	41,600	(405,200)	7,125,700	121,700	187,400	189,300
Adjusted net revenues	23,559,600	26,103,400	31,845,200	22,508,500	21,503,300	19,352,000
Performance Ratio
Economic profit margin²	-2.06%	1.81%	32.51%	7.95%	9.75%	9.88%
Benchmarks
Economic Profit Margin, Competitors³
Booking Holdings Inc.	—	25.44%	21.10%	12.97%	12.37%	18.98%
McDonald’s Corp.	—	24.61%	25.87%	17.17%	12.02%	10.82%

Based on: 10-K (filing date: 2020-11-12), 10-K (filing date: 2019-11-15), 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).

¹ Economic profit. See details »

² 2020 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net revenues
= 100 × -484,767 ÷ 23,559,600 = -2.06%

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’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.	Starbucks Corp.’s economic profit margin deteriorated from 2018 to 2019 and from 2019 to 2020.

Starbucks Corp. (NASDAQ:SBUX)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin