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Microsoft Excel LibreOffice Calc

Caterpillar Inc. (CAT)


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

Caterpillar Inc., economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net operating profit after taxes (NOPAT)1 hidden hidden hidden hidden hidden
Cost of capital2 hidden hidden hidden hidden hidden
Invested capital3 hidden hidden hidden hidden hidden
 
Economic profit4 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

<>4 2018 Calculation
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. Caterpillar Inc.’s economic profit increased from 2016 to 2017 and from 2017 to 2018.

Net Operating Profit after Taxes (NOPAT)

Caterpillar Inc., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Profit (loss) attributable to common stockholders hidden hidden hidden hidden hidden
Deferred income tax expense (benefit)1 hidden hidden hidden hidden hidden
Increase (decrease) in LIFO reserve2 hidden hidden hidden hidden hidden
Increase (decrease) in product warranty liability3 hidden hidden hidden hidden hidden
Increase (decrease) in employee separation liability4 hidden hidden hidden hidden hidden
Increase (decrease) in equity equivalents5 hidden hidden hidden hidden hidden
Interest expense excluding Financial Products hidden hidden hidden hidden hidden
Interest expense, operating lease liability6 hidden hidden hidden hidden hidden
Adjusted interest expense excluding Financial Products hidden hidden hidden hidden hidden
Tax benefit of interest expense excluding Financial Products7 hidden hidden hidden hidden hidden
Adjusted interest expense excluding Financial Products, after taxes8 hidden hidden hidden hidden hidden
(Gain) loss on marketable securities hidden hidden hidden hidden hidden
Investment income, before taxes hidden hidden hidden hidden hidden
Tax expense (benefit) of investment income9 hidden hidden hidden hidden hidden
Investment income, after taxes10 hidden hidden hidden hidden hidden
Net income (loss) attributable to noncontrolling interest hidden hidden hidden hidden hidden
Net operating profit after taxes (NOPAT) hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in LIFO reserve. See details »

3 Addition of increase (decrease) in product warranty liability.

4 Addition of increase (decrease) in employee separation liability.

5 Addition of increase (decrease) in equity equivalents to profit (loss) attributable to common stockholders.

6 2018 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= hidden × hidden = hidden

7 2018 Calculation
Tax benefit of interest expense excluding Financial Products = Adjusted interest expense excluding Financial Products × Statutory income tax rate
= hidden × 21.00% = hidden

8 Addition of after taxes interest expense to profit (loss) attributable to common stockholders.

9 2018 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 21.00% = hidden

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. Caterpillar Inc.’s NOPAT increased from 2016 to 2017 and from 2017 to 2018.

Cash Operating Taxes

Caterpillar Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Provision for income taxes hidden hidden hidden hidden hidden
Less: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden
Add: Tax savings from interest expense excluding Financial Products hidden hidden hidden hidden hidden
Less: Tax imposed on investment income hidden hidden hidden hidden hidden
Cash operating taxes hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).

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. Caterpillar Inc.’s cash operating taxes increased from 2016 to 2017 but then slightly decreased from 2017 to 2018.

Invested Capital

Caterpillar Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Short-term borrowings hidden hidden hidden hidden hidden
Long-term debt due within one year hidden hidden hidden hidden hidden
Long-term debt due after one year hidden hidden hidden hidden hidden
Operating lease liability1 hidden hidden hidden hidden hidden
Total reported debt & leases hidden hidden hidden hidden hidden
Equity attributable to common stockholders hidden hidden hidden hidden hidden
Net deferred tax (assets) liabilities2 hidden hidden hidden hidden hidden
LIFO reserve3 hidden hidden hidden hidden hidden
Product warranty liability4 hidden hidden hidden hidden hidden
Employee separation liability5 hidden hidden hidden hidden hidden
Equity equivalents6 hidden hidden hidden hidden hidden
Accumulated other comprehensive (income) loss, net of tax7 hidden hidden hidden hidden hidden
Noncontrolling interests hidden hidden hidden hidden hidden
Adjusted equity attributable to common stockholders hidden hidden hidden hidden hidden
Construction-in-process8 hidden hidden hidden hidden hidden
Available-for-sale securities9 hidden hidden hidden hidden hidden
Invested capital hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).

1 Addition of capitalized operating leases.

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

3 Addition of LIFO reserve. See details »

4 Addition of product warranty liability.

5 Addition of employee separation liability.

6 Addition of equity equivalents to equity attributable to common stockholders.

7 Removal of accumulated other comprehensive income.

8 Subtraction of construction-in-process.

9 Subtraction of available-for-sale 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. Caterpillar Inc.’s invested capital decreased from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Cost of Capital

Caterpillar Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 21.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 21.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2019-02-14).

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 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2018-02-15).

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 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2017-02-15).

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 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2016-02-16).

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 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total: hidden hidden hidden

Based on: 10-K (filing date: 2015-02-17).

1 US$ in millions

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Caterpillar Inc., economic spread ratio calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in millions)
Economic profit1 hidden hidden hidden hidden hidden
Invested capital2 hidden hidden hidden hidden hidden
Performance Ratio
Economic spread ratio3 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).

1 Economic profit. See details »

2 Invested capital. See details »

3 2018 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × hidden ÷ hidden = hidden

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. Caterpillar Inc.’s economic spread ratio improved from 2016 to 2017 and from 2017 to 2018.

Economic Profit Margin

Caterpillar Inc., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in millions)
Economic profit1 hidden hidden hidden hidden hidden
Sales of Machinery, Energy & Transportation hidden hidden hidden hidden hidden
Performance Ratio
Economic profit margin2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-14), 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17).

1 Economic profit. See details »

2 2018 Calculation
Economic profit margin = 100 × Economic profit ÷ Sales of Machinery, Energy & Transportation
= 100 × hidden ÷ hidden = hidden

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. Caterpillar Inc.’s economic profit margin improved from 2016 to 2017 and from 2017 to 2018.