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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

3M Co., economic profit calculation

US$ in millions

	12 months ended:	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016
	Net operating profit after taxes (NOPAT)¹
	Cost of capital²
	Invested capital³

	Economic profit⁴

Based on: 10-K (filing date: 2021-02-04), 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09).

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
= – × =

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.	3M Co.’s economic profit decreased from 2018 to 2019 but then increased from 2019 to 2020 not reaching 2018 level.

3M Co., NOPAT calculation

US$ in millions

	12 months ended:	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016
	Net income attributable to 3M
	Deferred income tax expense (benefit)¹
	Increase (decrease) in allowances²
	Increase (decrease) in deferred revenue³
	Increase (decrease) in product warranty liabilities⁴
	Increase (decrease) in accrued restructuring action balances⁵
	Increase (decrease) in equity equivalents⁶
	Interest expense
	Interest expense, operating lease liability⁷
	Adjusted interest expense
	Tax benefit of interest expense⁸
	Adjusted interest expense, after taxes⁹
	Interest income
	Investment income, before taxes
	Tax expense (benefit) of investment income¹⁰
	Investment income, after taxes¹¹
	Net income (loss) attributable to noncontrolling interest
	Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2021-02-04), 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowances.

³ Addition of increase (decrease) in deferred revenue.

⁴ Addition of increase (decrease) in product warranty liabilities.

⁵ Addition of increase (decrease) in accrued restructuring action balances.

⁶ Addition of increase (decrease) in equity equivalents to net income attributable to 3M.

⁷ 2020 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

⁸ 2020 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =

⁹ Addition of after taxes interest expense to net income attributable to 3M.

¹⁰ 2020 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

¹¹ 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.	3M Co.’s NOPAT decreased from 2018 to 2019 but then increased from 2019 to 2020 exceeding 2018 level.

3M Co., cash operating taxes calculation

US$ in millions

	12 months ended:	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016
	Provision for income taxes
	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: 2021-02-04), 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09).

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.	3M Co.’s cash operating taxes decreased from 2018 to 2019 but then increased from 2019 to 2020 not reaching 2018 level.

3M Co., invested capital calculation (financing approach)

US$ in millions

		Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016
	Short-term borrowings and current portion of long-term debt
	Current obligations of finance leases
	Long-term debt, excluding current portion
	Finance leases, net of current obligations
	Operating lease liability¹
	Total reported debt & leases
	Total 3M Company shareholders’ equity
	Net deferred tax (assets) liabilities²
	Allowances³
	Deferred revenue⁴
	Product warranty liabilities⁵
	Accrued restructuring action balances⁶
	Equity equivalents⁷
	Accumulated other comprehensive (income) loss, net of tax⁸
	Noncontrolling interest
	Adjusted total 3M Company shareholders’ equity
	Construction in progress⁹
	Marketable securities¹⁰
	Invested capital

Based on: 10-K (filing date: 2021-02-04), 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09).

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 product warranty liabilities.

⁶ Addition of accrued restructuring action balances.

⁷ Addition of equity equivalents to total 3M Company shareholders’ equity.

⁸ Removal of accumulated other comprehensive income.

⁹ Subtraction of construction in progress.

¹⁰ 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.	3M Co.’s invested capital increased from 2018 to 2019 and from 2019 to 2020.

3M Co., cost of capital calculations


Equity²	÷	=	×		=
Debt and finance lease liabilities³	÷	=	×	× (1 – 21.00%)	=
Operating lease liability⁴	÷	=	×	× (1 – 21.00%)	=
Total:

Based on: 10-K (filing date: 2021-02-04).

¹ US$ in millions

² Equity. See details »