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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

Chevron Corp., economic profit calculation

USD $ in millions

	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
	Cost of capital²
	Invested capital³

	Economic profit⁴

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-20).

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
= 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.	Chevron Corp.’s economic profit increased from 2016 to 2017 and from 2017 to 2018.

Chevron Corp., NOPAT calculation

USD $ in millions

	12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Net income (loss) attributable to Chevron Corporation
	Deferred income tax expense (benefit)¹
	Increase (decrease) in allowance for doubtful accounts²
	Increase (decrease) in LIFO reserve³
	Increase (decrease) in accrued severance liability⁴
	Increase (decrease) in equity equivalents⁵
	Interest and debt expense
	Interest expense, operating lease obligations⁶
	Adjusted interest and debt expense
	Tax benefit of interest and debt expense⁷
	Adjusted interest and debt expense, after taxes⁸
	Net income (loss) attributable to noncontrolling interest
	Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-20).

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 LIFO reserve. See Details »

⁴ Addition of increase (decrease) in accrued severance liability.

⁵ Addition of increase (decrease) in equity equivalents to net income (loss) attributable to Chevron Corporation.

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

⁷ Tax benefit of interest and debt expense = Adjusted interest and debt expense × Statutory income tax rate
= hidden × 21.00% = hidden

⁸ Addition of after taxes interest expense to net income (loss) attributable to Chevron Corporation.

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.	Chevron Corp.’s NOPAT increased from 2016 to 2017 and from 2017 to 2018.

Chevron Corp., cash operating taxes calculation

USD $ in millions

	12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Income tax expense (benefit)
	Less: Deferred income tax expense (benefit)
	Add: Tax savings from interest and debt expense
	Cash operating taxes

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-20).

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.	Chevron Corp.’s cash operating taxes increased from 2016 to 2017 and from 2017 to 2018.

Chevron Corp., invested capital calculation (financing approach)

USD $ in millions

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Short-term debt
	Long-term debt, excluding debt due within one year
	PV of operating lease payments¹
	Total reported debt & leases
	Total Chevron Corporation stockholders’ equity
	Net deferred tax (assets) liabilities²
	Allowance for doubtful accounts³
	LIFO reserve⁴
	Accrued severance liability⁵
	Equity equivalents⁶
	Accumulated other comprehensive (income) loss, net of tax⁷
	Noncontrolling interests
	Adjusted total Chevron Corporation stockholders’ equity
	Marketable securities⁸
	Invested capital

Based on: 10-K (filing date: 2019-02-22), 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-20).

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 LIFO reserve. See Details »

⁵ Addition of accrued severance liability.

⁶ Addition of equity equivalents to total Chevron Corporation stockholders’ equity.

⁷ Removal of accumulated other comprehensive income.

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.	Chevron Corp.’s invested capital declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.

Chevron Corp., cost of capital calculations


Equity²	÷	=	×		=
Debt³	÷	=	×	× (1 – 21.00%)	=
PV of operating lease payments⁴	÷	=	×	× (1 – 21.00%)	=
Total:

Based on: 10-K (filing date: 2019-02-22).

¹ USD $ in millions

² Equity. See Details »

³ Debt. See Details »