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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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 and a rising cost of capital. Net operating profit after taxes (NOPAT) exhibited initial growth followed by stabilization and a slight increase. A detailed examination of these components reveals key performance trends.
- 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 initial performance followed by a correction and subsequent stabilization with modest growth.
- Cost of Capital
- The cost of capital consistently increased throughout the period, rising from 9.40% in 2020 to 10.15% in 2024. This steady increase indicates a growing expense associated with funding the company’s operations and investments, potentially due to changing market conditions or increased risk perception.
- Invested Capital
- Invested capital generally trended upward, increasing from US$75,674 million in 2020 to US$86,857 million in 2024. There was a slight decrease observed between 2021 and 2022, from US$80,311 million to US$79,959 million, but the overall trajectory is one of expansion. This suggests continued investment in the business.
- Economic Profit
- Economic profit peaked at US$3,374 million in 2021, coinciding with the highest NOPAT and a relatively lower cost of capital. It then decreased to US$2,113 million in 2022, increased to US$2,472 million in 2023, and settled at US$2,127 million in 2024. While remaining positive throughout the period, the fluctuations in economic profit demonstrate sensitivity to changes in both profitability and the cost of capital. The 2024 value represents a decrease from the 2023 level despite the increase in NOPAT, attributable to the higher cost of capital and increased invested capital.
In summary, the company experienced growth in NOPAT and invested capital, but also faced a rising cost of capital. Economic profit, while positive, exhibited volatility, indicating a complex interplay between profitability, investment, and financing costs. The recent stabilization of NOPAT alongside continued increases in invested capital and cost of capital warrants further investigation to assess long-term sustainability of economic profit generation.
Net Operating Profit after Taxes (NOPAT)
Coca-Cola Co., NOPAT calculation
US$ 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 period under review demonstrates fluctuating economic performance. Economic profit exhibited an initial increase followed by a period of relative stabilization and a slight decline. Invested capital consistently increased throughout the period, while the economic spread ratio mirrored the profit trend, showing initial growth, peaking, and then a gradual decrease.
- Economic Profit
- Economic profit increased significantly from US$1,538 million in 2020 to US$3,374 million in 2021, representing a substantial improvement in value creation. However, profit decreased to US$2,113 million in 2022 before recovering somewhat to US$2,472 million in 2023. A further slight decrease was observed in 2024, with economic profit reaching US$2,127 million. This suggests potential challenges in sustaining the high levels of profitability achieved in 2021.
- Invested Capital
- Invested capital experienced a consistent upward trend throughout the period. It rose from US$75,674 million in 2020 to US$86,857 million in 2024. This indicates a continuous reinvestment in the business, potentially through capital expenditures or acquisitions, despite fluctuations in economic profit.
- Economic Spread Ratio
- The economic spread ratio, a measure of efficiency in capital allocation, initially increased from 2.03% in 2020 to a peak of 4.20% in 2021, coinciding with the increase in economic profit. The ratio then declined to 2.64% in 2022, increased slightly to 2.96% in 2023, and further decreased to 2.45% in 2024. This downward trend suggests that while the company continues to generate economic profit, the rate of return relative to invested capital is diminishing. The decreasing ratio, coupled with increasing invested capital, warrants further investigation into the efficiency of capital deployment.
Overall, the analysis reveals a pattern of increasing investment alongside fluctuating profitability, resulting in a declining economic spread ratio. While the company remains profitable, the trend suggests a potential need to optimize capital allocation strategies to improve returns on investment.
Economic Profit Margin
Coca-Cola Co., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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 period under review demonstrates fluctuating economic profit alongside consistent revenue growth. Economic profit experienced a substantial increase between 2020 and 2021, followed by a decline in 2022, a partial recovery in 2023, and a further decrease in 2024. Net operating revenues, conversely, exhibited a steady upward trajectory throughout the entire period.
- Economic Profit
- Economic profit began at US$1,538 million in 2020 and more than doubled to US$3,374 million in 2021. This was followed by a decrease to US$2,113 million in 2022. A modest increase to US$2,472 million occurred in 2023, but economic profit decreased again in 2024, settling at US$2,127 million. The volatility suggests potential shifts in the cost of capital or operational efficiency impacting value creation.
- Net Operating Revenues
- Net operating revenues increased consistently year-over-year. From US$33,014 million in 2020, revenues grew to US$38,655 million in 2021, then to US$43,004 million in 2022, US$45,754 million in 2023, and finally reached US$47,061 million in 2024. This consistent growth indicates a strong market position and effective revenue generation strategies.
- Economic Profit Margin
- The economic profit margin mirrored the fluctuations in economic profit. It rose significantly from 4.66% in 2020 to 8.73% in 2021, indicating improved profitability relative to revenue. The margin then decreased to 4.91% in 2022, increased slightly to 5.40% in 2023, and declined to 4.52% in 2024. The decreasing trend in the economic profit margin in the latter years, despite increasing revenues, suggests that the cost of generating those revenues, or the cost of capital, may be increasing at a faster rate than revenue growth, thereby eroding economic profit.
In summary, while the organization demonstrates consistent revenue growth, its ability to translate that revenue into economic profit has been inconsistent. The declining economic profit margin in recent years warrants further investigation to identify the underlying drivers and potential areas for improvement.