Goodwill and Intangible Asset Disclosure
Adjustments to Financial Statements: Removal of Goodwill
Adjusted Financial Ratios: Removal of Goodwill (Summary)
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Emerson Electric Co., balance sheet: goodwill and intangible assets

US$ in millions

	Sep 30, 2019	Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014
Customer relationships	1,973)	1,968)	1,392)	580)	1,508)	1,594)
Intellectual property	1,565)	1,469)	1,012)	730)	1,051)	1,052)
Capitalized software	1,334)	1,230)	1,137)	1,071)	1,178)	1,190)
Identifiable intangible assets, gross carrying amount	4,872)	4,667)	3,541)	2,381)	3,737)	3,836)
Accumulated amortization	(2,257)	(1,916)	(1,651)	(1,479)	(2,211)	(2,147)
Identifiable intangible assets, net carrying amount	2,615)	2,751)	1,890)	902)	1,526)	1,689)
Goodwill	6,536)	6,455)	5,316)	3,909)	6,653)	7,182)
Goodwill and other intangibles	9,151)	9,206)	7,206)	4,811)	8,179)	8,871)

Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).

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Item	Description	The company
Identifiable intangible assets, net carrying amount	Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.	Emerson Electric Co. identifiable intangible assets, net carrying amount increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.
Goodwill	Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.	Emerson Electric Co. goodwill increased from 2017 to 2018 and from 2018 to 2019.
Goodwill and other intangibles	Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.	Emerson Electric Co. goodwill and other intangibles increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

Emerson Electric Co., adjustments to financial statements

US$ in millions

	Sep 30, 2019	Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014
Adjustment to Total Assets
Total assets (as reported)	20,497)	20,390)	19,589)	21,743)	22,088)	24,177)
Less: Goodwill	6,536)	6,455)	5,316)	3,909)	6,653)	7,182)
Total assets (adjusted)	13,961)	13,935)	14,273)	17,834)	15,435)	16,995)
Adjustment to Common Stockholders’ Equity
Common stockholders’ equity (as reported)	8,233)	8,947)	8,718)	7,568)	8,081)	10,119)
Less: Goodwill	6,536)	6,455)	5,316)	3,909)	6,653)	7,182)
Common stockholders’ equity (adjusted)	1,697)	2,492)	3,402)	3,659)	1,428)	2,937)
Adjustment to Net Earnings Common Stockholders
Net earnings common stockholders (as reported)	2,306)	2,203)	1,518)	1,635)	2,710)	2,147)
Add: Goodwill impairment	—)	—)	—)	—)	—)	508)
Net earnings common stockholders (adjusted)	2,306)	2,203)	1,518)	1,635)	2,710)	2,655)

Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).

Emerson Electric Co., Financial Data: Reported vs. Adjusted

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Emerson Electric Co., adjusted financial ratios

	Sep 30, 2019	Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014
Net Profit Margin
Reported net profit margin	12.55%	12.66%	9.94%	11.26%	12.15%	8.75%
Adjusted net profit margin	12.55%	12.66%	9.94%	11.26%	12.15%	10.82%
Total Asset Turnover
Reported total asset turnover	0.90	0.85	0.78	0.67	1.01	1.01
Adjusted total asset turnover	1.32	1.25	1.07	0.81	1.45	1.44
Financial Leverage
Reported financial leverage	2.49	2.28	2.25	2.87	2.73	2.39
Adjusted financial leverage	8.23	5.59	4.20	4.87	10.81	5.79
Return on Equity (ROE)
Reported ROE	28.01%	24.62%	17.41%	21.60%	33.54%	21.22%
Adjusted ROE	135.89%	88.40%	44.62%	44.68%	189.78%	90.40%
Return on Assets (ROA)
Reported ROA	11.25%	10.80%	7.75%	7.52%	12.27%	8.88%
Adjusted ROA	16.52%	15.81%	10.64%	9.17%	17.56%	15.62%

Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).

Financial ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Emerson Electric Co. adjusted net profit margin ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Emerson Electric Co. adjusted total asset turnover ratio improved from 2017 to 2018 and from 2018 to 2019.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Emerson Electric Co. adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Emerson Electric Co. adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Emerson Electric Co. adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.

Emerson Electric Co., Financial Ratios: Reported vs. Adjusted

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	Sep 30, 2019	Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014
As Reported
Selected Financial Data (US$ in millions)
Net earnings common stockholders	2,306)	2,203)	1,518)	1,635)	2,710)	2,147)
Net sales	18,372)	17,408)	15,264)	14,522)	22,304)	24,537)
Profitability Ratio
Net profit margin¹	12.55%	12.66%	9.94%	11.26%	12.15%	8.75%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted net earnings common stockholders	2,306)	2,203)	1,518)	1,635)	2,710)	2,655)
Net sales	18,372)	17,408)	15,264)	14,522)	22,304)	24,537)
Profitability Ratio
Adjusted net profit margin²	12.55%	12.66%	9.94%	11.26%	12.15%	10.82%

Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).

2019 Calculations

¹ Net profit margin = 100 × Net earnings common stockholders ÷ Net sales
= 100 × 2,306 ÷ 18,372 = 12.55%

² Adjusted net profit margin = 100 × Adjusted net earnings common stockholders ÷ Net sales
= 100 × 2,306 ÷ 18,372 = 12.55%

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Profitability ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Emerson Electric Co. adjusted net profit margin ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

	Sep 30, 2019	Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014
As Reported
Selected Financial Data (US$ in millions)
Net sales	18,372)	17,408)	15,264)	14,522)	22,304)	24,537)
Total assets	20,497)	20,390)	19,589)	21,743)	22,088)	24,177)
Activity Ratio
Total asset turnover¹	0.90	0.85	0.78	0.67	1.01	1.01
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net sales	18,372)	17,408)	15,264)	14,522)	22,304)	24,537)
Adjusted total assets	13,961)	13,935)	14,273)	17,834)	15,435)	16,995)
Activity Ratio
Adjusted total asset turnover²	1.32	1.25	1.07	0.81	1.45	1.44

Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).

2019 Calculations

¹ Total asset turnover = Net sales ÷ Total assets
= 18,372 ÷ 20,497 = 0.90

² Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 18,372 ÷ 13,961 = 1.32

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Activity ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Emerson Electric Co. adjusted total asset turnover ratio improved from 2017 to 2018 and from 2018 to 2019.

	Sep 30, 2019	Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014
As Reported
Selected Financial Data (US$ in millions)
Total assets	20,497)	20,390)	19,589)	21,743)	22,088)	24,177)
Common stockholders’ equity	8,233)	8,947)	8,718)	7,568)	8,081)	10,119)
Solvency Ratio
Financial leverage¹	2.49	2.28	2.25	2.87	2.73	2.39
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted total assets	13,961)	13,935)	14,273)	17,834)	15,435)	16,995)
Adjusted common stockholders’ equity	1,697)	2,492)	3,402)	3,659)	1,428)	2,937)
Solvency Ratio
Adjusted financial leverage²	8.23	5.59	4.20	4.87	10.81	5.79

Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).

2019 Calculations

¹ Financial leverage = Total assets ÷ Common stockholders’ equity
= 20,497 ÷ 8,233 = 2.49

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted common stockholders’ equity
= 13,961 ÷ 1,697 = 8.23

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Solvency ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Emerson Electric Co. adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019.

	Sep 30, 2019	Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014
As Reported
Selected Financial Data (US$ in millions)
Net earnings common stockholders	2,306)	2,203)	1,518)	1,635)	2,710)	2,147)
Common stockholders’ equity	8,233)	8,947)	8,718)	7,568)	8,081)	10,119)
Profitability Ratio
ROE¹	28.01%	24.62%	17.41%	21.60%	33.54%	21.22%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted net earnings common stockholders	2,306)	2,203)	1,518)	1,635)	2,710)	2,655)
Adjusted common stockholders’ equity	1,697)	2,492)	3,402)	3,659)	1,428)	2,937)
Profitability Ratio
Adjusted ROE²	135.89%	88.40%	44.62%	44.68%	189.78%	90.40%

Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).

2019 Calculations

¹ ROE = 100 × Net earnings common stockholders ÷ Common stockholders’ equity
= 100 × 2,306 ÷ 8,233 = 28.01%

² Adjusted ROE = 100 × Adjusted net earnings common stockholders ÷ Adjusted common stockholders’ equity
= 100 × 2,306 ÷ 1,697 = 135.89%

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Profitability ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Emerson Electric Co. adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.

	Sep 30, 2019	Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014
As Reported
Selected Financial Data (US$ in millions)
Net earnings common stockholders	2,306)	2,203)	1,518)	1,635)	2,710)	2,147)
Total assets	20,497)	20,390)	19,589)	21,743)	22,088)	24,177)
Profitability Ratio
ROA¹	11.25%	10.80%	7.75%	7.52%	12.27%	8.88%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted net earnings common stockholders	2,306)	2,203)	1,518)	1,635)	2,710)	2,655)
Adjusted total assets	13,961)	13,935)	14,273)	17,834)	15,435)	16,995)
Profitability Ratio
Adjusted ROA²	16.52%	15.81%	10.64%	9.17%	17.56%	15.62%

Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).

2019 Calculations

¹ ROA = 100 × Net earnings common stockholders ÷ Total assets
= 100 × 2,306 ÷ 20,497 = 11.25%

² Adjusted ROA = 100 × Adjusted net earnings common stockholders ÷ Adjusted total assets
= 100 × 2,306 ÷ 13,961 = 16.52%

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Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Emerson Electric Co. adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.

Emerson Electric Co. (NYSE:EMR)

Analysis of Goodwill and Intangible Assets

Goodwill and Intangible Asset Disclosure

Adjustments to Financial Statements: Removal of Goodwill

Emerson Electric Co., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Goodwill (Summary)

Emerson Electric Co., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)