Economic Value Added (EVA)
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.
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Coca-Cola Co. pages available for free this week:
- Cash Flow Statement
- Common-Size Balance Sheet: Assets
- Analysis of Liquidity Ratios
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Capital Asset Pricing Model (CAPM)
- Return on Assets (ROA) since 2005
- Debt to Equity since 2005
- Analysis of Debt
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Economic Profit
Coca-Cola Co., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The period under review demonstrates fluctuating economic profit alongside increasing invested capital. Net operating profit after taxes (NOPAT) exhibited initial growth followed by stabilization, while the cost of capital consistently increased. These factors combined to influence the observed trends in economic profit.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT increased from US$8,649 million in 2020 to US$11,202 million in 2021, representing a substantial gain. However, it subsequently decreased to US$10,120 million in 2022 before recovering to US$10,884 million in 2023 and further increasing to US$10,945 million in 2024. This suggests a period of strong performance followed by a slight contraction and subsequent stabilization.
- Cost of Capital
- The cost of capital experienced a consistent upward trend throughout the period, rising from 10.54% in 2020 to 11.38% in 2024. This indicates increasing financing costs, potentially due to broader economic conditions or changes in the company’s capital structure.
- Invested Capital
- Invested capital generally increased over the five-year period, moving from US$75,674 million in 2020 to US$86,857 million in 2024. There was a minor decrease between 2021 and 2022, but the overall trend is one of expansion. This suggests continued investment in the business.
- Economic Profit
- Economic profit showed considerable variation. It began at US$676 million in 2020, peaked at US$2,419 million in 2021, then decreased to US$1,141 million in 2022. It recovered to US$1,464 million in 2023 before settling at US$1,065 million in 2024. The fluctuations in economic profit appear to be influenced by the interplay between NOPAT, the cost of capital, and invested capital. Despite the increasing cost of capital and invested capital, the company generally maintained positive economic profit throughout the period.
The observed trends suggest that while the company has been able to generate positive economic profit, maintaining this performance requires careful management of NOPAT, cost of capital, and investment decisions. The increasing cost of capital presents a continuing challenge, and future performance will depend on the ability to offset these rising costs through operational improvements or strategic investments.
Net Operating Profit after Taxes (NOPAT)
Coca-Cola Co., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowances.
3 Addition of increase (decrease) in accrued expenses related to restructuring.
4 Addition of increase (decrease) in equity equivalents to net income attributable to shareowners of The Coca-Cola Company.
5 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2024 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 shareowners of The Coca-Cola Company.
8 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
- Net Income Attributable to Shareowners
-
The net income attributable to shareowners shows a generally positive trend over the five-year period. Starting at 7,747 million US dollars at the end of 2020, there was a significant increase to 9,771 million in 2021. Although the net income slightly declined to 9,542 million in 2022, it rebounded in 2023 to reach the highest value of 10,714 million. A marginal decrease occurred again in 2024, with net income at 10,631 million, which still represents a notable improvement compared to the initial figure in 2020.
- Net Operating Profit After Taxes (NOPAT)
-
The NOPAT figures also demonstrate an upward trajectory with some fluctuations. Beginning at 8,649 million US dollars in 2020, there was an increase to 11,202 million in 2021. This was followed by a decline to 10,120 million in 2022. Subsequently, NOPAT rose again to 10,884 million in 2023 and continued to increase slightly to 10,945 million by the end of 2024. Overall, the NOPAT values reflect growth over the period, despite the intermittent decreases.
- Comparative Insights
-
Both net income and NOPAT exhibited growth from 2020 through 2024, though neither metric maintained a strictly linear progression. The year 2021 marked a peak for both measures within the period, followed by declines in 2022. Recovery occurred in subsequent years, with net income reaching a maximum in 2023 before a slight drop in 2024, whereas NOPAT progressed to its highest point at the end of 2024. These trends suggest volatility but overall improved profitability and operational efficiency over the five-year span.
Cash Operating Taxes
Coca-Cola Co., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
- Income Taxes
- Income taxes show a fluctuating trend over the reported periods. The value increased significantly from 1981 million US dollars in 2020 to 2621 million in 2021, indicating a rise in tax expenses. However, in 2022, there was a notable decrease to 2115 million US dollars. From 2022 onward, the income taxes resumed an upward trajectory, reaching 2249 million in 2023 and further increasing to 2437 million in 2024. Overall, the trend exhibits variability with a dip in 2022 amid a general tendency to increase.
- Cash Operating Taxes
- Cash operating taxes demonstrated a somewhat irregular pattern over the five-year span. Starting at 2201 million US dollars in 2020, there was a decline to 1907 million in 2021, suggesting reduced cash tax payments despite the prior increase in income taxes. The figure rebounded sharply in 2022 to 2414 million, surpassing the initial 2020 value. Slight reductions followed in 2023 to 2314 million, but the amount rose again in 2024, reaching the highest point of 2529 million US dollars. These fluctuations may reflect changes in taxable income, timing differences, or tax planning actions affecting cash tax outflows.
Invested Capital
Coca-Cola Co., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
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 accrued expenses related to restructuring.
5 Addition of equity equivalents to equity attributable to shareowners of The Coca-Cola Company.
6 Removal of accumulated other comprehensive income.
7 Subtraction of marketable securities.
- Total reported debt & leases
-
This financial metric experienced a general decline from 44,415 million US dollars in 2020 to 40,603 million US dollars in 2022. However, a reversal of this trend is observed in the subsequent years, with debt rising to 43,426 million US dollars in 2023 and continuing to increase to 45,735 million US dollars in 2024. This indicates an initial reduction in the company's leverage followed by a renewed accumulation of debt and lease obligations in the last two reported periods.
- Equity attributable to shareowners of The Coca-Cola Company
-
Equity shows a consistent upward trend from 19,299 million US dollars in 2020, rising to 22,999 million in 2021, further increasing to 24,105 million in 2022, and reaching its peak at 25,941 million in 2023. However, a slight decrease to 24,856 million occurs in 2024. Overall, the equity base has strengthened significantly over the period, reflecting potential retained earnings growth or capital infusions, despite a modest decline in the final year.
- Invested capital
-
Invested capital generally increased over the entire period. Starting from 75,674 million US dollars in 2020, it grew steadily to 80,311 million in 2021. A slight dip followed in 2022 to 79,959 million, but the upward momentum resumed with figures rising to 83,542 million in 2023 and 86,857 million in 2024. This suggests ongoing investment activities, possibly including both debt and equity financing components, resulting in a growing capital base employed by the company.
Cost of Capital
Coca-Cola Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
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 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Coca-Cola Co., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
| Philip Morris International Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The economic spread ratio exhibited considerable fluctuation between 2020 and 2024. Initial values demonstrated a substantial increase followed by a period of moderation. Economic profit also showed volatility, while invested capital generally trended upward throughout the period.
- Economic Spread Ratio
- The economic spread ratio began at 0.89% in 2020, indicating a relatively narrow spread between return on invested capital and the cost of capital. A significant increase was observed in 2021, reaching 3.01%, suggesting a considerably improved profitability relative to the capital employed. This ratio then decreased to 1.43% in 2022, and further to 1.23% in 2024, with a slight increase to 1.75% in 2023. This suggests a diminishing, though still positive, spread between returns and the cost of capital in recent years.
- Economic Profit
- Economic profit increased markedly from US$676 million in 2020 to US$2,419 million in 2021, aligning with the increase in the economic spread ratio. A decline to US$1,141 million was noted in 2022, followed by a recovery to US$1,464 million in 2023. The most recent year, 2024, saw a slight decrease to US$1,065 million. While fluctuating, economic profit remained positive throughout the observed period.
- Invested Capital
- Invested capital demonstrated a consistent upward trend, increasing from US$75,674 million in 2020 to US$86,857 million in 2024. This indicates a continuous reinvestment in the business or acquisition of new assets. The growth was not linear, with a slight decrease observed between 2021 and 2022, but the overall trajectory remained positive.
The interplay between these metrics suggests that while the company continued to expand its invested capital base, its ability to generate returns exceeding the cost of that capital has varied. The peak performance in 2021 was not sustained, and the economic spread ratio has moderated in subsequent years, despite continued growth in economic profit.
Economic Profit Margin
Coca-Cola Co., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net operating revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Mondelēz International Inc. | ||||||
| PepsiCo Inc. | ||||||
| Philip Morris International Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Net operating revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit margin exhibited considerable fluctuation between 2020 and 2024. Initial values demonstrated growth, followed by a period of decline and stabilization. A review of the economic profit and net operating revenues reveals the underlying drivers of these changes.
- Economic Profit Margin
- The economic profit margin began at 2.05% in 2020, increasing substantially to 6.26% in 2021. This represents a significant improvement in profitability relative to revenues. However, the margin decreased to 2.65% in 2022, indicating a reduced ability to generate economic profit from each dollar of revenue. A partial recovery was observed in 2023, with the margin reaching 3.20%, but this was followed by a further decrease to 2.26% in 2024. The 2024 value is only marginally higher than the initial 2020 level.
- Economic Profit
- Economic profit increased from US$676 million in 2020 to US$2,419 million in 2021, aligning with the increase in the economic profit margin. A substantial decline to US$1,141 million was recorded in 2022, contributing to the margin reduction. Subsequent increases to US$1,464 million in 2023 and US$1,065 million in 2024 suggest some volatility but do not fully offset the 2021 peak. The 2024 economic profit is higher than 2020, but lower than 2021-2023.
- Net Operating Revenues
- Net operating revenues consistently increased throughout the period, moving from US$33,014 million in 2020 to US$47,061 million in 2024. This consistent revenue growth did not translate into a consistently increasing economic profit margin, suggesting that revenue growth alone is not sufficient to drive profitability. The decreasing margin in 2022 and 2024, despite rising revenues, indicates that costs or capital charges may have increased at a faster rate than revenue.
In summary, while net operating revenues demonstrated consistent growth, the economic profit margin experienced significant fluctuations. The peak margin in 2021 was not sustained, and the margin in 2024 was comparable to the level observed in 2020. Further investigation into the factors influencing economic profit, such as cost of capital and operating expenses, is recommended to understand the underlying drivers of these trends.