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Economic Profit

Bristol-Myers Squibb Co., 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 Bristol-Myers Squibb Co. 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
= % × =

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. Bristol-Myers Squibb Co.'s economic profit increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level.

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Net Operating Profit after Taxes (NOPAT)

Bristol-Myers Squibb Co., 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 attributable to BMS
Deferred income tax expense (benefit)1
Increase (decrease) in bad debt allowances2
Increase (decrease) in deferred income3
Increase (decrease) in restructuring liability4
Increase (decrease) in equity equivalents5
Interest expense
Interest expense, operating lease obligations6
Adjusted interest expense
Tax benefit of interest expense7
Adjusted interest expense, after taxes8
(Gain) loss on marketable securities
Investment income
Investment income, before taxes
Tax expense (benefit) of investment income9
Investment income, after taxes10
Net income (loss) attributable to noncontrolling interest
Net operating profit after taxes (NOPAT)

Source: Based on data from Bristol-Myers Squibb Co. Annual Reports

2017 Calculations

1 Elimination of deferred tax expense. See Details »

2 Addition of increase (decrease) in bad debt allowances.

3 Addition of increase (decrease) in deferred income.

4 Addition of increase (decrease) in restructuring liability.

5 Addition of increase (decrease) in equity equivalents to net earnings attributable to BMS.

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

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

8 Addition of after taxes interest expense to net earnings attributable to BMS.

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

10 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. Bristol-Myers Squibb Co.'s NOPAT increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level.

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Cash Operating Taxes

Bristol-Myers Squibb Co., 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
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

Source: Based on data from Bristol-Myers Squibb Co. 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. Bristol-Myers Squibb Co.'s cash operating taxes increased from 2015 to 2016 and from 2016 to 2017.

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Invested Capital

Bristol-Myers Squibb Co., 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 debt obligations
Long-term debt, excluding current portion
PV of operating lease payments1
Total reported debt & leases
Total Bristol-Myers Squibb Company shareholders' equity
Net deferred tax (assets) liabilities2
Bad debt allowances3
Deferred income4
Restructuring liability5
Equity equivalents6
Accumulated other comprehensive (income) loss, net of tax7
Noncontrolling interest
Adjusted total Bristol-Myers Squibb Company shareholders' equity
Construction in progress8
Marketable securities9
Invested capital

Source: Based on data from Bristol-Myers Squibb Co. 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 deferred income.

5 Addition of restructuring liability.

6 Addition of equity equivalents to total Bristol-Myers Squibb Company shareholders' equity.

7 Removal of accumulated other comprehensive income.

8 Subtraction of construction in progress.

9 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. Bristol-Myers Squibb Co.'s invested capital increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level.

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Cost of Capital

Bristol-Myers Squibb Co., cost of capital calculations

Fair Value1 Weights Cost of Capital
Equity2 ÷ = × % = %
Debt3 ÷ = × % × (1 – 35%) = %
PV of operating lease payments4 ÷ = × % × (1 – 35%) = %
Total: %

Source: Based on data from Bristol-Myers Squibb Co. Annual Reports

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

Source: Based on data from Bristol-Myers Squibb Co. Annual Reports

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

Source: Based on data from Bristol-Myers Squibb Co. Annual Reports

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

Source: Based on data from Bristol-Myers Squibb Co. Annual Reports

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

Source: Based on data from Bristol-Myers Squibb Co. Annual Reports

1 USD $ in millions

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

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Economic Spread

Bristol-Myers Squibb Co., 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 Bristol-Myers Squibb Co. Annual Reports

2017 Calculations

1 Economic profit. See Details »

2 Invested capital. See Details »

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

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. Bristol-Myers Squibb Co.'s economic spread improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017 not reaching 2015 level.

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Economic Profit Margin

Bristol-Myers Squibb Co., 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
Revenues
Increase (decrease) in deferred income
Ratio
Economic profit margin2 % % % % %

Source: Based on data from Bristol-Myers Squibb Co. Annual Reports

2017 Calculations

1 Economic profit. See Details »

2 Economic profit margin = 100 × Economic profit ÷ (Revenues + Change in deferred income)
= 100 × ÷ ( + ) = %

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. Bristol-Myers Squibb Co.'s economic profit margin improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017 not reaching 2015 level.

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