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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

eBay Inc., economic profit calculation

US$ in millions

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	2,553)	821)	1,955)	1,944)	2,846)
Cost of capital²	16.35%	16.92%	16.67%	16.88%	18.47%
Invested capital³	7,597)	6,903)	7,687)	7,328)	20,937)

Economic profit⁴	1,311)	(347)	674)	707)	(1,021)

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

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
= 2,553 – 16.35% × 7,597 = 1,311

Between 2014 and 2018, the financial trajectory reveals a volatile yet ultimately positive trend in economic value creation. A fundamental shift in capital employment occurred early in the period, which significantly altered the company's ability to generate economic profit relative to its cost of capital.

Invested Capital and Cost of Capital: A substantial reduction in invested capital is observed between 2014 and 2015, where the figure dropped from 20,937 million to 7,328 million. Following this sharp contraction, the invested capital base remained relatively stable, fluctuating within a narrow range between 6,903 million and 7,687 million through 2018. During the same period, the cost of capital showed a gradual downward trend, decreasing from a peak of 18.47% in 2014 to 16.35% by the end of 2018.
Net Operating Profit After Taxes (NOPAT): NOPAT exhibited significant volatility over the five-year span. After starting at 2,846 million in 2014, earnings declined and plateaued around 1,950 million in 2015 and 2016. A notable contraction occurred in 2017, with NOPAT falling to 821 million, before a strong recovery in 2018 brought the figure back up to 2,553 million.
Economic Profit Analysis: The economic profit transitioned from a deficit of 1,021 million in 2014 to positive values in 2015 and 2016. This reversal was primarily driven by the massive reduction in invested capital, which lowered the capital charge required to achieve a positive return. While a dip in NOPAT led to a negative economic profit of 347 million in 2017, the period concluded with a significant peak of 1,311 million in 2018, indicating that operational recovery combined with a lean capital structure maximized value creation.

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eBay Inc., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Net income (loss)	2,530)	(1,016)	7,266)	1,725)	46)
Deferred income tax expense (benefit)¹	(153)	1,729)	(4,556)	(32)	2,808)
Increase (decrease) in allowance for doubtful accounts and authorized credits²	4)	21)	(3)	(2)	(4)
Increase (decrease) in deferred revenue³	33)	7)	4)	(2)	30)
Increase (decrease) in restructuring reserve⁴	8)	—)	—)	—)	—)
Increase (decrease) in equity equivalents⁵	(108)	1,757)	(4,555)	(36)	2,834)
Interest expense	326)	292)	225)	144)	123)
Interest expense, operating lease liability⁶	18)	9)	7)	5)	10)
Adjusted interest expense	344)	301)	232)	149)	133)
Tax benefit of interest expense⁷	(72)	(105)	(81)	(52)	(47)
Adjusted interest expense, after taxes⁸	272)	196)	150)	97)	87)
(Gain) loss on marketable securities	1)	(7)	(1,299)	(1)	(52)
Interest income	(176)	(177)	(125)	(97)	(133)
Investment income, before taxes	(175)	(184)	(1,424)	(98)	(185)
Tax expense (benefit) of investment income⁹	37)	64)	498)	34)	65)
Investment income, after taxes¹⁰	(138)	(120)	(926)	(64)	(120)
(Income) loss from discontinued operations, net of tax¹¹	(2)	4)	19)	222)	—)
Net operating profit after taxes (NOPAT)	2,553)	821)	1,955)	1,944)	2,846)

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

¹ Elimination of deferred tax expense. See details »

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

³ Addition of increase (decrease) in deferred revenue.

⁴ Addition of increase (decrease) in restructuring reserve.

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

⁶ 2018 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 515 × 3.45% = 18

⁷ 2018 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 344 × 21.00% = 72

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

⁹ 2018 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 175 × 21.00% = 37

¹⁰ Elimination of after taxes investment income.

¹¹ Elimination of discontinued operations.

The financial data reveals notable fluctuations in profitability over the five-year period.

Net Income (Loss): The net income shows significant volatility. It increased markedly from 46 million US dollars in 2014 to a peak of 7,266 million US dollars in 2016, indicating strong profitability during this period. However, there was a sharp decline in 2017, with a net loss of 1,016 million US dollars, signaling a challenging financial year. In 2018, the net income rebounded to a positive 2,530 million US dollars, suggesting a recovery but not returning to the peak levels observed in 2016.
Net Operating Profit After Taxes (NOPAT): NOPAT demonstrated a declining trend from 2,846 million US dollars in 2014 to 821 million US dollars in 2017, reflecting a gradual erosion of operating profitability over these years. Nonetheless, 2018 saw a significant improvement to 2,553 million US dollars, nearly returning to the level seen in 2014. This recovery in NOPAT suggests enhanced operational efficiency or better cost management in the last year of the period.

Overall, the data illustrates a period of growth followed by a downturn and partial recovery. The volatility in net income is more pronounced than in NOPAT, which may indicate that factors beyond core operations—such as extraordinary items or financial costs—impacted net profitability, particularly in 2017. The improvements in 2018 across both indicators suggest a positive shift in financial performance.

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eBay Inc., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Provision (benefit) for income taxes	190)	3,288)	(3,634)	459)	3,485)
Less: Deferred income tax expense (benefit)	(153)	1,729)	(4,556)	(32)	2,808)
Add: Tax savings from interest expense	72)	105)	81)	52)	47)
Less: Tax imposed on investment income	37)	64)	498)	34)	65)
Cash operating taxes	378)	1,600)	505)	509)	659)

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

Provision (benefit) for income taxes: The provision for income taxes exhibited significant volatility over the period analyzed. In 2014, the provision was substantially positive, amounting to 3,485 million US dollars, indicating a considerable tax expense. This value sharply decreased to 459 million US dollars in 2015. In 2016, the provision turned negative to -3,634 million US dollars, signaling a tax benefit rather than an expense. However, in 2017, the provision reverted to a positive figure of 3,288 million US dollars before dropping again to 190 million US dollars in 2018. This pattern suggests considerable fluctuations in taxable income or changes in tax regulations affecting the reported tax expense or benefit.
Cash operating taxes: Cash operating taxes demonstrated a generally declining trend from 2014 through 2016, starting at 659 million US dollars in 2014 and slightly decreasing to 505 million US dollars in 2016. A notable spike occurred in 2017, with cash operating taxes rising sharply to 1,600 million US dollars, which is more than a threefold increase compared to the previous year. This sudden increase might reflect a higher cash tax payment or changes in tax payment timing. In 2018, cash operating taxes fell substantially to 378 million US dollars. Overall, the data indicate variability in the company's cash tax payments, with the exceptional increase in 2017 representing a significant deviation from prior and subsequent years.

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eBay Inc., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Short-term debt	1,546)	781)	1,451)	—)	850)
Long-term debt	7,685)	9,234)	7,509)	6,779)	6,777)
Operating lease liability¹	515)	281)	212)	206)	419)
Total reported debt & leases	9,746)	10,296)	9,172)	6,985)	8,046)
Stockholders’ equity	6,281)	8,063)	10,539)	6,576)	19,906)
Net deferred tax (assets) liabilities²	(1,868)	(1,769)	(3,155)	1,669)	3,188)
Allowance for doubtful accounts and authorized credits³	106)	102)	81)	84)	102)
Deferred revenue⁴	170)	117)	110)	106)	188)
Restructuring reserve⁵	8)	—)	—)	—)	—)
Equity equivalents⁶	(1,584)	(1,550)	(2,964)	1,859)	3,478)
Accumulated other comprehensive (income) loss, net of tax⁷	(498)	(717)	124)	(526)	(1,171)
Adjusted stockholders’ equity	4,199)	5,796)	7,699)	7,909)	22,213)
Marketable securities⁸	(6,348)	(9,189)	(9,184)	(7,566)	(9,322)
Invested capital	7,597)	6,903)	7,687)	7,328)	20,937)

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

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 deferred revenue.

⁵ Addition of restructuring reserve.

⁶ Addition of equity equivalents to stockholders’ equity.

⁷ Removal of accumulated other comprehensive income.

⁸ Subtraction of marketable securities.

Total reported debt & leases: The total reported debt and leases showed fluctuations over the analyzed period. Starting at 8,046 million USD at the end of 2014, the figure decreased to 6,985 million USD in 2015. However, it then increased sharply to 9,172 million USD in 2016 and further rose to a peak of 10,296 million USD in 2017. In 2018, the total reported debt and leases slightly declined to 9,746 million USD. Overall, the trend suggests a general increase in debt levels, especially from 2015 to 2017, followed by a minor reduction in 2018.
Stockholders’ equity: Stockholders’ equity experienced significant volatility during the period. It started at a relatively high level of 19,906 million USD in 2014, then declined substantially to 6,576 million USD in 2015. There was a partial recovery in 2016, with equity rising to 10,539 million USD, but this was not sustained in subsequent years. Equity decreased again to 8,063 million USD in 2017 and further declined to 6,281 million USD by the end of 2018. The overall pattern indicates considerable erosion of equity value compared to the initial year, with notable declines after 2016.
Invested capital: Invested capital mirrored the general downward trend observed in stockholders’ equity, beginning at 20,937 million USD in 2014 and decreasing sharply to 7,328 million USD by 2015. From 2015 to 2018, invested capital remained relatively stable but low, fluctuating around the 6,900 to 7,600 million USD range. This indicates a significant contraction in the invested capital base post-2014, with minimal recovery through to the final year observed.
Summary: The overall financial pattern presents a scenario of increasing leverage as evidenced by rising total reported debt after 2015, contrasted against declining stockholders’ equity and reduced invested capital. The significant drop in equity and invested capital in 2015 could suggest a major restructuring, asset reduction, or other strategic adjustments affecting the capital structure. The leverage increase may indicate a higher reliance on debt financing over the latter years, potentially affecting the company's financial stability and risk profile.

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eBay Inc., cost of capital calculations

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	31,179)	31,179)	÷	40,698)	=	0.77	0.77	×	20.51%	=	15.71%
Debt³	9,004)	9,004)	÷	40,698)	=	0.22	0.22	×	3.45% × (1 – 21.00%)	=	0.60%
Operating lease liability⁴	515)	515)	÷	40,698)	=	0.01	0.01	×	3.45% × (1 – 21.00%)	=	0.03%
Total:	40,698)					1.00					16.35%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	42,882)	42,882)	÷	53,294)	=	0.80	0.80	×	20.51%	=	16.50%
Debt³	10,131)	10,131)	÷	53,294)	=	0.19	0.19	×	3.30% × (1 – 35.00%)	=	0.41%
Operating lease liability⁴	281)	281)	÷	53,294)	=	0.01	0.01	×	3.30% × (1 – 35.00%)	=	0.01%
Total:	53,294)					1.00					16.92%

Based on: 10-K (reporting date: 2017-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2016

	Capital (fair value)¹	Weights					Cost of capital
Equity²	34,818)	34,818)	÷	43,932)	=	0.79	0.79	×	20.51%	=	16.25%
Debt³	8,902)	8,902)	÷	43,932)	=	0.20	0.20	×	3.07% × (1 – 35.00%)	=	0.40%
Operating lease liability⁴	212)	212)	÷	43,932)	=	0.00	0.00	×	3.07% × (1 – 35.00%)	=	0.01%
Total:	43,932)					1.00					16.67%

Based on: 10-K (reporting date: 2016-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2015

	Capital (fair value)¹	Weights					Cost of capital
Equity²	28,218)	28,218)	÷	34,925)	=	0.81	0.81	×	20.51%	=	16.57%
Debt³	6,500)	6,500)	÷	34,925)	=	0.19	0.19	×	2.53% × (1 – 35.00%)	=	0.31%
Operating lease liability⁴	206)	206)	÷	34,925)	=	0.01	0.01	×	2.53% × (1 – 35.00%)	=	0.01%
Total:	34,925)					1.00					16.88%

Based on: 10-K (reporting date: 2015-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2014

	Capital (fair value)¹	Weights					Cost of capital
Equity²	65,948)	65,948)	÷	73,885)	=	0.89	0.89	×	20.51%	=	18.30%
Debt³	7,519)	7,519)	÷	73,885)	=	0.10	0.10	×	2.41% × (1 – 35.00%)	=	0.16%
Operating lease liability⁴	419)	419)	÷	73,885)	=	0.01	0.01	×	2.41% × (1 – 35.00%)	=	0.01%
Total:	73,885)					1.00					18.47%

Based on: 10-K (reporting date: 2014-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

eBay Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Selected Financial Data (US$ in millions)
Economic profit¹	1,311)	(347)	674)	707)	(1,021)
Invested capital²	7,597)	6,903)	7,687)	7,328)	20,937)
Performance Ratio
Economic spread ratio³	17.26%	-5.02%	8.77%	9.65%	-4.88%
Benchmarks
Economic Spread Ratio, Competitors⁴
Amazon.com Inc.	—	—	—	—	—
Home Depot Inc.	—	—	—	—	—
Lowe’s Cos. Inc.	—	—	—	—	—
TJX Cos. Inc.	—	—	—	—	—

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2018 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,311 ÷ 7,597 = 17.26%

⁴ Click competitor name to see calculations.

The financial performance from 2014 to 2018 is characterized by significant volatility in value creation and a substantial restructuring of the capital base. The period is marked by alternating cycles of economic profit and loss, culminating in a peak performance level in the final year of the sequence.

Economic Spread Ratio: The economic spread ratio exhibits a highly inconsistent trend, fluctuating between negative and positive territory. A negative spread of -4.88% in 2014 shifted to a positive 9.65% in 2015 and 8.77% in 2016, before declining again to -5.02% in 2017. A significant recovery occurred in 2018, with the ratio reaching a period high of 17.26%, indicating a substantial increase in the return generated over the cost of invested capital.
Invested Capital: A dramatic contraction in invested capital occurred between 2014 and 2015, falling from 20,937 million US$ to 7,328 million US$. Following this sharp decline, the invested capital remained relatively stable, fluctuating within a narrow range between 6,903 million US$ and 7,687 million US$ from 2015 through 2018. This suggests a fundamental shift in the company's capital structure or a major divestment early in the period.
Economic Profit: Economic profit mirrors the volatility of the spread ratio. The period began with an economic loss of 1,021 million US$ in 2014, followed by two years of modest gains in 2015 and 2016. A return to negative territory was observed in 2017 with a loss of 347 million US$, which was subsequently reversed in 2018. The 2018 economic profit of 1,311 million US$ represents the strongest absolute value creation across the analyzed timeframe.

The correlation between the reduction in invested capital and the subsequent fluctuations in the economic spread ratio suggests that the entity operated with a much leaner capital base after 2014. While the ability to generate economic value remained unstable through 2017, the results in 2018 demonstrate a marked improvement in capital efficiency and value generation.

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eBay Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
Selected Financial Data (US$ in millions)
Economic profit¹	1,311)	(347)	674)	707)	(1,021)

Net revenues	10,746)	9,567)	8,979)	8,592)	17,902)
Add: Increase (decrease) in deferred revenue	33)	7)	4)	(2)	30)
Adjusted net revenues	10,779)	9,574)	8,983)	8,590)	17,932)
Performance Ratio
Economic profit margin²	12.17%	-3.62%	7.50%	8.23%	-5.69%
Benchmarks
Economic Profit Margin, Competitors³
Amazon.com Inc.	—	—	—	—	—
Home Depot Inc.	—	—	—	—	—
Lowe’s Cos. Inc.	—	—	—	—	—
TJX Cos. Inc.	—	—	—	—	—

Based on: 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31).

¹ Economic profit. See details »

² 2018 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net revenues
= 100 × 1,311 ÷ 10,779 = 12.17%

³ Click competitor name to see calculations.

The financial performance from 2014 to 2018 is characterized by significant volatility in economic value creation and a substantial structural shift in revenue generation. While adjusted net revenues experienced a sharp contraction after 2014, the subsequent years show a steady recovery and growth trend.

Adjusted Net Revenue Trends: A significant reduction in adjusted net revenues occurred between 2014 and 2015, falling from 17,932 million US$ to 8,590 million US$. Following this decline, a consistent growth pattern emerged, with revenues increasing annually to reach 10,779 million US$ by December 31, 2018.
Economic Profit Performance: Economic profit exhibited high variability throughout the analyzed period. A negative value of -1,021 million US$ in 2014 shifted to positive territory in 2015 and 2016. This trend reversed in 2017 with a loss of 347 million US$, before rebounding strongly in 2018 to reach a period high of 1,311 million US$.
Economic Profit Margin Analysis: The economic profit margin closely mirrored the fluctuations in absolute economic profit. The margin moved from -5.69% in 2014 to 8.23% in 2015, followed by a slight contraction to 7.50% in 2016. A further decline occurred in 2017, bringing the margin to -3.62%, before a substantial increase to 12.17% was recorded in 2018, indicating an improvement in capital efficiency and value generation relative to revenue.

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eBay Inc. (NASDAQ:EBAY)

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