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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

AT&T Inc., economic profit calculation

US$ in millions

12 months ended:	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Net operating profit after taxes (NOPAT)¹	24,495	27,894	18,425	20,093	21,337
Cost of capital²	6.23%	6.04%	5.79%	6.22%	6.02%
Invested capital³	437,536	438,899	358,259	318,708	315,443

Economic profit⁴	(2,765)	1,366	(2,335)	268	2,355

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-18).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 24,495 – 6.23% × 437,536 = -2,765

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.	AT&T Inc.’s economic profit increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.

AT&T Inc., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Net income attributable to AT&T	13,903	19,370	29,450	12,976	13,345
Deferred income tax expense (benefit)¹	1,701	610	(15,940)	2,947	4,117
Increase (decrease) in allowances for doubtful accounts²	328	244	2	(43)	250
Increase (decrease) in equity equivalents³	2,029	854	(15,938)	2,904	4,367
Interest expense	8,422	7,957	6,300	4,910	4,120
Interest expense, operating lease liability⁴	1,061	1,014	949	1,024	955
Adjusted interest expense	9,483	8,971	7,249	5,934	5,075
Tax benefit of interest expense⁵	(1,991)	(1,884)	(2,537)	(2,077)	(1,776)
Adjusted interest expense, after taxes⁶	7,491	7,087	4,712	3,857	3,299
(Gain) loss on marketable securities	—	—	(302)	(2)	(24)
Investment income, before taxes	—	—	(302)	(2)	(24)
Tax expense (benefit) of investment income⁷	—	—	106	1	8
Investment income, after taxes⁸	—	—	(196)	(1)	(16)
Net income (loss) attributable to noncontrolling interest	1,072	583	397	357	342
Net operating profit after taxes (NOPAT)	24,495	27,894	18,425	20,093	21,337

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-18).

¹ Elimination of deferred tax expense. See details »

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

³ Addition of increase (decrease) in equity equivalents to net income attributable to AT&T.

⁴ 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 25,255 × 4.20% = 1,061

⁵ 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 9,483 × 21.00% = 1,991

⁶ Addition of after taxes interest expense to net income attributable to AT&T.

⁷ 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 0 × 21.00% = 0

⁸ 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.	AT&T Inc.’s NOPAT increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

AT&T Inc., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Income tax expense (benefit)	3,493	4,920	(14,708)	6,479	7,005
Less: Deferred income tax expense (benefit)	1,701	610	(15,940)	2,947	4,117
Add: Tax savings from interest expense	1,991	1,884	2,537	2,077	1,776
Less: Tax imposed on investment income	—	—	106	1	8
Cash operating taxes	3,783	6,194	3,664	5,608	4,656

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-18).

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.	AT&T Inc.’s cash operating taxes increased from 2017 to 2018 but then slightly decreased from 2018 to 2019 not reaching 2017 level.

AT&T Inc., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Debt maturing within one year	11,838	10,255	38,374	9,832	7,636
Long-term debt, excluding maturing within one year	151,309	166,250	125,972	113,681	118,515
Operating lease liability¹	25,255	23,039	21,576	24,373	23,869
Total reported debt & leases	188,402	199,544	185,922	147,886	150,020
Stockholders’ equity attributable to AT&T	184,221	184,089	140,861	123,135	122,671
Net deferred tax (assets) liabilities²	59,334	57,748	43,176	58,717	55,088
Allowances for doubtful accounts³	1,235	907	663	661	704
Equity equivalents⁴	60,569	58,655	43,839	59,378	55,792
Accumulated other comprehensive (income) loss, net of tax⁵	(5,470)	(4,249)	(7,017)	(4,961)	(5,334)
Noncontrolling interest	17,713	9,795	1,146	975	969
Adjusted stockholders’ equity attributable to AT&T	257,033	248,290	178,829	178,527	174,098
Under construction⁶	(4,176)	(5,526)	(4,045)	(5,118)	(5,971)
Investment securities⁷	(3,723)	(3,409)	(2,447)	(2,587)	(2,704)
Invested capital	437,536	438,899	358,259	318,708	315,443

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-18).

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 equity equivalents to stockholders’ equity attributable to AT&T.

⁵ Removal of accumulated other comprehensive income.

⁶ Subtraction of under construction.

⁷ Subtraction of investment 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.	AT&T Inc.’s invested capital increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

AT&T Inc., cost of capital calculations

	Capital (fair value)¹	Weights					Cost of capital
Equity²	276,945	276,945	÷	487,624	=	0.57	0.57	×	8.33%	=	4.73%
Preferred stock, $1 par value, 5% cumulative	1,262	1,262	÷	487,624	=	0.00	0.00	×	5.00%	=	0.01%
Debt³	184,162	184,162	÷	487,624	=	0.38	0.38	×	4.40% × (1 – 21.00%)	=	1.31%
Operating lease liability⁴	25,255	25,255	÷	487,624	=	0.05	0.05	×	4.20% × (1 – 21.00%)	=	0.17%
Total:	487,624					1.00					6.23%

Based on: 10-K (filing date: 2020-02-20).

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	224,730	224,730	÷	425,032	=	0.53	0.53	×	8.33%	=	4.41%
Preferred stock, $1 par value, 5% cumulative	—	—	÷	425,032	=	0.00	0.00	×	0.00%	=	0.00%
Debt³	177,263	177,263	÷	425,032	=	0.42	0.42	×	4.40% × (1 – 21.00%)	=	1.45%
Operating lease liability⁴	23,039	23,039	÷	425,032	=	0.05	0.05	×	4.40% × (1 – 21.00%)	=	0.19%
Total:	425,032					1.00					6.04%

Based on: 10-K (filing date: 2019-02-20).

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	225,824	225,824	÷	421,158	=	0.54	0.54	×	8.33%	=	4.47%
Preferred stock, $1 par value, 5% cumulative	—	—	÷	421,158	=	0.00	0.00	×	0.00%	=	0.00%
Debt³	173,758	173,758	÷	421,158	=	0.41	0.41	×	4.40% × (1 – 35.00%)	=	1.18%
Operating lease liability⁴	21,576	21,576	÷	421,158	=	0.05	0.05	×	4.40% × (1 – 35.00%)	=	0.15%
Total:	421,158					1.00					5.79%

Based on: 10-K (filing date: 2018-02-20).

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	254,752	254,752	÷	408,984	=	0.62	0.62	×	8.33%	=	5.19%
Preferred stock, $1 par value, 5% cumulative	—	—	÷	408,984	=	0.00	0.00	×	0.00%	=	0.00%
Debt³	129,858	129,858	÷	408,984	=	0.32	0.32	×	4.20% × (1 – 35.00%)	=	0.87%
Operating lease liability⁴	24,373	24,373	÷	408,984	=	0.06	0.06	×	4.20% × (1 – 35.00%)	=	0.16%
Total:	408,984					1.00					6.22%

Based on: 10-K (filing date: 2017-02-17).

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	227,533	227,533	÷	381,699	=	0.60	0.60	×	8.33%	=	4.97%
Preferred stock, $1 par value, 5% cumulative	—	—	÷	381,699	=	0.00	0.00	×	0.00%	=	0.00%
Debt³	130,297	130,297	÷	381,699	=	0.34	0.34	×	4.00% × (1 – 35.00%)	=	0.89%
Operating lease liability⁴	23,869	23,869	÷	381,699	=	0.06	0.06	×	4.00% × (1 – 35.00%)	=	0.16%
Total:	381,699					1.00					6.02%

Based on: 10-K (filing date: 2016-02-18).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

AT&T Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit¹	(2,765)	1,366	(2,335)	268	2,355
Invested capital²	437,536	438,899	358,259	318,708	315,443
Performance Ratio
Economic spread ratio³	-0.63%	0.31%	-0.65%	0.08%	0.75%
Benchmarks
Economic Spread Ratio, Competitors⁴
Verizon Communications Inc.	5.10%	3.80%	4.31%	2.92%	8.35%

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-18).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -2,765 ÷ 437,536 = -0.63%

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.	AT&T Inc.’s economic spread ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.

AT&T Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015
Selected Financial Data (US$ in millions)
Economic profit¹	(2,765)	1,366	(2,335)	268	2,355
Operating revenues	181,193	170,756	160,546	163,786	146,801
Performance Ratio
Economic profit margin²	-1.53%	0.80%	-1.45%	0.16%	1.60%
Benchmarks
Economic Profit Margin, Competitors³
Verizon Communications Inc.	8.53%	6.25%	6.93%	4.29%	11.61%

Based on: 10-K (filing date: 2020-02-20), 10-K (filing date: 2019-02-20), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-18).

¹ Economic profit. See details »

² 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Operating revenues
= 100 × -2,765 ÷ 181,193 = -1.53%

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.	AT&T Inc.’s economic profit margin improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

AT&T Inc. (NYSE:T)

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