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
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread
Economic Profit Margin

Eli Lilly & Co., economic profit calculation

USD $ in thousands

	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: 2019-02-19), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-19).

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.	Eli Lilly & Co.’s economic profit declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Eli Lilly & Co., NOPAT calculation

USD $ in thousands

	12 months ended	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Net income (loss)
	Deferred income tax expense (benefit)¹
	Increase (decrease) in allowances²
	Increase (decrease) in LIFO reserve³
	Increase (decrease) in equity equivalents⁴
	Interest expense
	Interest expense, operating lease obligations⁵
	Adjusted interest expense
	Tax benefit of interest expense⁶
	Adjusted interest expense, after taxes⁷
	(Gain) loss on marketable securities
	Interest income
	Investment income, before taxes
	Tax expense (benefit) of investment income⁸
	Investment income, after taxes⁹
	Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2019-02-19), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-19).

2018 Calculations

¹ Elimination of deferred tax expense. See Details »

² Addition of increase (decrease) in allowances.

³ Addition of increase (decrease) in LIFO reserve. See Details »

⁴ Addition of increase (decrease) in equity equivalents to net income (loss).

⁵ Addition of interest expense on capitalized operating leases. See Details »

⁶ Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 21.00% = hidden

⁷ Addition of after taxes interest expense to net income (loss).

⁸ Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 21.00% = hidden

⁹ 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.	Eli Lilly & Co.’s NOPAT declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Eli Lilly & Co., cash operating taxes calculation

USD $ in thousands

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

Based on: 10-K (filing date: 2019-02-19), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-19).

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.	Eli Lilly & Co.’s cash operating taxes increased from 2016 to 2017 but then slightly declined from 2017 to 2018 not reaching 2016 level.

Eli Lilly & Co., invested capital calculation (financing approach)

USD $ in thousands

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Short-term borrowings and current maturities of long-term debt
	Long-term debt, excluding current maturities
	PV of operating lease payments¹
	Total reported debt & leases
	Total Eli Lilly and Company shareholders’ equity
	Net deferred tax (assets) liabilities²
	Allowances³
	LIFO reserve⁴
	Equity equivalents⁵
	Accumulated other comprehensive (income) loss, net of tax⁶
	Noncontrolling interests
	Adjusted total Eli Lilly and Company shareholders’ equity
	Construction in progress⁷
	Investments⁸
	Invested capital

Based on: 10-K (filing date: 2019-02-19), 10-K (filing date: 2018-02-20), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-19), 10-K (filing date: 2015-02-19).

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 equity equivalents to total Eli Lilly and Company shareholders’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of construction in progress.

⁸ Subtraction of investments.

Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Eli Lilly & Co.’s invested capital declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Eli Lilly & Co., cost of capital calculations


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

Based on: 10-K (filing date: 2019-02-19).

¹ USD $ in thousands

² Equity. See Details »

³ Debt. See Details »