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Economic Value Added (EVA)
Advanced level
EVA is registered trademark of Stern Stewart.
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
Accenture PLC, economic profit calculation
US$ in thousands
| 12 months ended: | Aug 31, 2019 | Aug 31, 2018 | Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | |
|---|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | |||||||
| Cost of capital2 | |||||||
| Invested capital3 | |||||||
| Economic profit4 | |||||||
Based on: 10-K (filing date: 2019-10-29), 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30), 10-K (filing date: 2014-10-24).
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
= – × =
| 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. | Accenture PLC’s economic profit increased from 2017 to 2018 and from 2018 to 2019. |
Net Operating Profit after Taxes (NOPAT)
Accenture PLC, NOPAT calculation
US$ in thousands
Based on: 10-K (filing date: 2019-10-29), 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30), 10-K (filing date: 2014-10-24).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowances for client receivables.
3 Addition of increase (decrease) in deferred revenues.
4 Addition of increase (decrease) in equity equivalents to net income attributable to Accenture plc.
5 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income attributable to Accenture plc.
8 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
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. | Accenture PLC’s NOPAT increased from 2017 to 2018 and from 2018 to 2019. |
Cash Operating Taxes
Accenture PLC, cash operating taxes calculation
US$ in thousands
Based on: 10-K (filing date: 2019-10-29), 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30), 10-K (filing date: 2014-10-24).
| 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. | Accenture PLC’s cash operating taxes increased from 2017 to 2018 but then slightly decreased from 2018 to 2019. |
Invested Capital
Accenture PLC, invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (filing date: 2019-10-29), 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30), 10-K (filing date: 2014-10-24).
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 revenues.
5 Addition of equity equivalents to total Accenture plc shareholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of short-term investments.
| Item | Description | The company |
|---|---|---|
| Invested capital | Capital is an approximation of the economic book value of all cash invested in going-concern business activities. | Accenture PLC’s invested capital increased from 2017 to 2018 and from 2018 to 2019. |
Cost of Capital
Accenture PLC, cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (filing date: 2019-10-29).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 25.70%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 25.70%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (filing date: 2018-10-24).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (filing date: 2017-10-26).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (filing date: 2016-10-28).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (filing date: 2015-10-30).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Outstanding debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (filing date: 2014-10-24).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Accenture PLC, economic spread ratio calculation, comparison to benchmarks
| Aug 31, 2019 | Aug 31, 2018 | Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | |||||||
| Invested capital2 | |||||||
| Performance Ratio | |||||||
| Economic spread ratio3 | |||||||
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Automatic Data Processing Inc. | |||||||
Based on: 10-K (filing date: 2019-10-29), 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30), 10-K (filing date: 2014-10-24).
1 Economic profit. See details »
2 Invested capital. See details »
3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
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. | Accenture PLC’s economic spread ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019. |
Economic Profit Margin
Accenture PLC, economic profit margin calculation, comparison to benchmarks
| Aug 31, 2019 | Aug 31, 2018 | Aug 31, 2017 | Aug 31, 2016 | Aug 31, 2015 | Aug 31, 2014 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | |||||||
| Revenues | |||||||
| Add: Increase (decrease) in deferred revenues | |||||||
| Adjusted revenues | |||||||
| Performance Ratio | |||||||
| Economic profit margin2 | |||||||
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Automatic Data Processing Inc. | |||||||
Based on: 10-K (filing date: 2019-10-29), 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30), 10-K (filing date: 2014-10-24).
1 Economic profit. See details »
2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =
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. | Accenture PLC’s economic profit margin improved from 2017 to 2018 and from 2018 to 2019. |