Abbott Laboratories (ABT)

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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

Abbott Laboratories, economic profit calculation

USD $ in millions

12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Net operating profit after taxes (NOPAT)¹
Cost of capital²	%	%	%	%	%
Invested capital³

Economic profit⁴

Source: Based on data from Abbott Laboratories Annual Reports

2017 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.	Abbott Laboratories's economic profit declined from 2015 to 2016 and from 2016 to 2017.

Abbott Laboratories, NOPAT calculation

USD $ in millions

	12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Net earnings
	Deferred income tax expense (benefit)¹
	Increase (decrease) in allowances for doubtful accounts and product returns²
	Increase (decrease) in restructuring Plans, accrued balance³
	Increase (decrease) in equity equivalents⁴
	Interest expense
	Interest expense, operating lease obligations⁵
	Adjusted interest expense
	Tax benefit of interest expense⁶
	Adjusted interest expense, after taxes⁷
	(Gain) loss on marketable securities
	Interest income
	Investment income, before taxes
	Tax expense (benefit) of investment income⁸
	Investment income, after taxes⁹
	(Income) loss from discontinued operations, net of tax¹⁰
	Net operating profit after taxes (NOPAT)

Source: Based on data from Abbott Laboratories Annual Reports

2017 Calculations

¹ Elimination of deferred tax expense. See Details »

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

³ Addition of increase (decrease) in restructuring Plans, accrued balance.

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

⁵ Interest expense on capitalized operating leases = PV of operating lease payments × Discount rate
= hidden × hidden % = hidden

⁶ Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 35% = hidden

⁷ Addition of after taxes interest expense to net earnings.

⁸ Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 35% = hidden

⁹ Elimination of after taxes investment income.

¹⁰ Elimination of discontinued operations.

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.	Abbott Laboratories's NOPAT declined from 2015 to 2016 and from 2016 to 2017.

Abbott Laboratories, cash operating taxes calculation

USD $ in millions

	12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Taxes on earnings from continuing operations
	Less: Deferred income tax expense (benefit)
	Add: Tax savings from interest expense
	Less: Tax imposed on investment income
	Cash operating taxes

Source: Based on data from Abbott Laboratories Annual Reports

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.	Abbott Laboratories's cash operating taxes increased from 2015 to 2016 and from 2016 to 2017.

Abbott Laboratories, invested capital calculation (financing approach)

USD $ in millions

		Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Short-term borrowings
	Current portion of long-term debt
	Long-term debt, excluding current portion
	PV of operating lease payments¹
	Total reported debt & leases
	Total Abbott shareholders' investment
	Net deferred tax (assets) liabilities²
	Allowances for doubtful accounts and product returns³
	Restructuring Plans, accrued balance⁴
	Equity equivalents⁵
	Accumulated other comprehensive (income) loss, net of tax⁶
	Noncontrolling interests in subsidiaries
	Adjusted total Abbott shareholders' investment
	Construction in progress⁷
	Marketable securities⁸
	Invested capital

Source: Based on data from Abbott Laboratories Annual Reports

¹ Addition of capitalized operating leases. See Details »

² Elimination of deferred taxes from assets and liabilities. See Details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of restructuring Plans, accrued balance.

⁵ Addition of equity equivalents to total Abbott shareholders' investment.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of construction in progress.

⁸ 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.	Abbott Laboratories's invested capital increased from 2015 to 2016 and from 2016 to 2017.

Abbott Laboratories, cost of capital calculations


Equity²	÷	=	×	%	=	%
Debt³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from Abbott Laboratories Annual Reports

¹ USD $ in millions

² Equity. See Details »

³ Debt. See Details »

⁴ PV of operating lease payments. See Details »


Equity²	÷	=	×	%	=	%
Debt³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from Abbott Laboratories Annual Reports

¹ USD $ in millions

² Equity. See Details »

³ Debt. See Details »

⁴ PV of operating lease payments. See Details »


Equity²	÷	=	×	%	=	%
Debt³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from Abbott Laboratories Annual Reports

¹ USD $ in millions

² Equity. See Details »

³ Debt. See Details »

⁴ PV of operating lease payments. See Details »


Equity²	÷	=	×	%	=	%
Debt³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from Abbott Laboratories Annual Reports

¹ USD $ in millions

² Equity. See Details »

³ Debt. See Details »

⁴ PV of operating lease payments. See Details »


Equity²	÷	=	×	%	=	%
Debt³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from Abbott Laboratories Annual Reports

¹ USD $ in millions

² Equity. See Details »

³ Debt. See Details »

⁴ PV of operating lease payments. See Details »

Abbott Laboratories, economic spread calculation

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in millions)
Economic profit¹
Invested capital²
Ratio
Economic spread³	%	%	%	%	%

Source: Based on data from Abbott Laboratories Annual Reports

2017 Calculations

¹ Economic profit. See Details »

² Invested capital. See Details »

³ Economic spread = 100 × Economic profit ÷ Invested capital
= 100 × hidden ÷ hidden = hidden %

Ratio	Description	The company
Economic spread	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Abbott Laboratories's economic spread deteriorated from 2015 to 2016 and from 2016 to 2017.

Abbott Laboratories, economic profit margin calculation

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in millions)
Economic profit¹
Net sales
Ratio
Economic profit margin²	%	%	%	%	%

Source: Based on data from Abbott Laboratories Annual Reports

2017 Calculations

¹ Economic profit. See Details »

² Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × hidden ÷ hidden = hidden %

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.	Abbott Laboratories's economic profit margin deteriorated from 2015 to 2016 and from 2016 to 2017.

	Abbott Laboratories	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis
Financial Reporting Quality

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Financial Statements
Common-Size Financial Statements
Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis
Financial Reporting Quality

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Dec 31, 2017

Dec 31, 2016

Dec 31, 2015

Dec 31, 2014

Dec 31, 2013

Economic Spread

Economic Profit Margin