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Microsoft Excel LibreOffice Calc


Economic Value Added (EVA)

Difficulty: Advanced

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

Becton, Dickinson & Co., economic profit calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Sep 30, 2018 Sep 30, 2017 Sep 30, 2016 Sep 30, 2015 Sep 30, 2014 Sep 30, 2013
Net operating profit after taxes (NOPAT)1 hidden hidden hidden hidden hidden hidden
Cost of capital2 hidden hidden hidden hidden hidden hidden
Invested capital3 hidden hidden hidden hidden hidden hidden
Economic profit4 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-26), 10-K (filing date: 2013-11-27).

2018 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
= hiddenhidden × 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. Becton, Dickinson & Co.'s economic profit declined from 2016 to 2017 and from 2017 to 2018.

Net Operating Profit after Taxes (NOPAT)

Becton, Dickinson & Co., NOPAT calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Sep 30, 2018 Sep 30, 2017 Sep 30, 2016 Sep 30, 2015 Sep 30, 2014 Sep 30, 2013
Net income hidden hidden hidden hidden hidden hidden
Deferred income tax expense (benefit)1 hidden hidden hidden hidden hidden hidden
Increase (decrease) in allowance for doubtful accounts2 hidden hidden hidden hidden hidden hidden
Increase (decrease) in restructuring liability3 hidden hidden hidden hidden hidden hidden
Increase (decrease) in equity equivalents4 hidden hidden hidden hidden hidden hidden
Interest expense hidden hidden hidden hidden hidden hidden
Interest expense, operating lease obligations5 hidden hidden hidden hidden hidden hidden
Adjusted interest expense hidden hidden hidden hidden hidden hidden
Tax benefit of interest expense6 hidden hidden hidden hidden hidden hidden
Adjusted interest expense, after taxes7 hidden hidden hidden hidden hidden hidden
Interest income hidden hidden hidden hidden hidden hidden
Investment income, before taxes hidden hidden hidden hidden hidden hidden
Tax expense (benefit) of investment income8 hidden hidden hidden hidden hidden hidden
Investment income, after taxes9 hidden hidden hidden hidden hidden hidden
(Income) loss from discontinued operations, net of tax10 hidden hidden hidden hidden hidden hidden
Net operating profit after taxes (NOPAT) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-26), 10-K (filing date: 2013-11-27).

2018 Calculations

1 Elimination of deferred tax expense. See Details »

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

3 Addition of increase (decrease) in restructuring liability.

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

5 Addition of interest expense on capitalized operating leases. See Details »

6 Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 24.50% = hidden

7 Addition of after taxes interest expense to net income.

8 Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 24.50% = 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. Becton, Dickinson & Co.'s NOPAT increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Cash Operating Taxes

Becton, Dickinson & Co., cash operating taxes calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Sep 30, 2018 Sep 30, 2017 Sep 30, 2016 Sep 30, 2015 Sep 30, 2014 Sep 30, 2013
Income tax provision (benefit) hidden hidden hidden hidden hidden hidden
Less: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden hidden
Add: Tax savings from interest expense hidden hidden hidden hidden hidden hidden
Less: Tax imposed on investment income hidden hidden hidden hidden hidden hidden
Cash operating taxes hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-26), 10-K (filing date: 2013-11-27).

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. Becton, Dickinson & Co.'s cash operating taxes declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Invested Capital

Becton, Dickinson & Co., invested capital calculation (financing approach)

USD $ in millions

Microsoft Excel LibreOffice Calc
Sep 30, 2018 Sep 30, 2017 Sep 30, 2016 Sep 30, 2015 Sep 30, 2014 Sep 30, 2013
Short-term debt hidden hidden hidden hidden hidden hidden
Long-term debt, excluding current portion hidden hidden hidden hidden hidden hidden
PV of operating lease payments1 hidden hidden hidden hidden hidden hidden
Total reported debt & leases hidden hidden hidden hidden hidden hidden
Shareholders’ equity hidden hidden hidden hidden hidden hidden
Net deferred tax (assets) liabilities2 hidden hidden hidden hidden hidden hidden
Allowance for doubtful accounts3 hidden hidden hidden hidden hidden hidden
Restructuring liability4 hidden hidden hidden hidden hidden hidden
Equity equivalents5 hidden hidden hidden hidden hidden hidden
Accumulated other comprehensive (income) loss, net of tax6 hidden hidden hidden hidden hidden hidden
Adjusted shareholders’ equity hidden hidden hidden hidden hidden hidden
Short-term investments7 hidden hidden hidden hidden hidden hidden
Invested capital hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-26), 10-K (filing date: 2013-11-27).

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 liability.

5 Addition of equity equivalents to 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. Becton, Dickinson & Co.'s invested capital increased from 2016 to 2017 and from 2017 to 2018.

Cost of Capital

Becton, Dickinson & Co., cost of capital calculations

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Cumulative Preferred Stock Series A hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 24.50%) = hidden
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 24.50%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2018-11-21).

1 USD $ in millions

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Cumulative Preferred Stock Series A hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2017-11-22).

1 USD $ in millions

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Cumulative Preferred Stock Series A hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2016-11-23).

1 USD $ in millions

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Cumulative Preferred Stock Series A hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2015-11-25).

1 USD $ in millions

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Cumulative Preferred Stock Series A hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2014-11-26).

1 USD $ in millions

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Cumulative Preferred Stock Series A hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2013-11-27).

1 USD $ in millions

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »


Economic Spread

Becton, Dickinson & Co., economic spread calculation

Microsoft Excel LibreOffice Calc
Sep 30, 2018 Sep 30, 2017 Sep 30, 2016 Sep 30, 2015 Sep 30, 2014 Sep 30, 2013
Selected Financial Data (USD $ in millions)
Economic profit1 hidden hidden hidden hidden hidden hidden
Invested capital2 hidden hidden hidden hidden hidden hidden
Ratio
Economic spread3 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-26), 10-K (filing date: 2013-11-27).

2018 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. Becton, Dickinson & Co.'s economic spread improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Economic Profit Margin

Becton, Dickinson & Co., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Sep 30, 2018 Sep 30, 2017 Sep 30, 2016 Sep 30, 2015 Sep 30, 2014 Sep 30, 2013
Selected Financial Data (USD $ in millions)
Economic profit1 hidden hidden hidden hidden hidden hidden
Revenues hidden hidden hidden hidden hidden hidden
Ratio
Economic profit margin2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-26), 10-K (filing date: 2013-11-27).

2018 Calculations

1 Economic profit. See Details »

2 Economic profit margin = 100 × Economic profit ÷ Revenues
= 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. Becton, Dickinson & Co.'s economic profit margin deteriorated from 2016 to 2017 and from 2017 to 2018.