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 Ratio
Economic Profit Margin

Emerson Electric Co., economic profit calculation

US$ in millions

12 months ended:	Sep 30, 2019	Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014
Net operating profit after taxes (NOPAT)¹	2,461)	2,124)	1,776)	1,731)	2,871)	2,212)
Cost of capital²	14.49%	14.77%	14.59%	13.73%	13.48%	14.31%
Invested capital³	16,266)	15,617)	15,181)	16,521)	17,328)	17,628)

Economic profit⁴	104)	(183)	(439)	(538)	536)	(310)

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).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,461 – 14.49% × 16,266 = 104

Download chart

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.	Emerson Electric Co. economic profit increased from 2017 to 2018 and from 2018 to 2019.

Emerson Electric Co., NOPAT calculation

US$ in millions

12 months ended:	Sep 30, 2019	Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014
Net earnings common stockholders	2,306)	2,203)	1,518)	1,635)	2,710)	2,147)
Deferred income tax expense (benefit)¹	(48)	(250)	(42)	(13)	(29)	(153)
Increase (decrease) in allowances²	(1)	22)	(1)	3)	14)	11)
Increase (decrease) in product warranty³	16)	4)	14)	5)	(26)	10)
Increase (decrease) in liability for restructuring costs⁴	17)	(13)	11)	(16)	53)	17)
Increase (decrease) in equity equivalents⁵	(16)	(237)	(18)	(21)	12)	(115)
Interest expense	201)	202)	201)	215)	200)	218)
Interest expense, operating lease liability⁶	14)	23)	19)	16)	23)	27)
Adjusted interest expense	215)	225)	220)	231)	223)	245)
Tax benefit of interest expense⁷	(45)	(55)	(77)	(81)	(78)	(86)
Adjusted interest expense, after taxes⁸	170)	170)	143)	150)	145)	159)
Interest income	(27)	(43)	(36)	(27)	(29)	(24)
Investment income, before taxes	(27)	(43)	(36)	(27)	(29)	(24)
Tax expense (benefit) of investment income⁹	6)	11)	13)	9)	10)	8)
Investment income, after taxes¹⁰	(21)	(32)	(23)	(18)	(19)	(16)
(Income) loss from discontinued operations, net of tax¹¹	—)	—)	125)	(45)	—)	—)
Net income (loss) attributable to noncontrolling interest	22)	21)	32)	29)	23)	37)
Net operating profit after taxes (NOPAT)	2,461)	2,124)	1,776)	1,731)	2,871)	2,212)

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).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowances.

³ Addition of increase (decrease) in product warranty.

⁴ Addition of increase (decrease) in liability for restructuring costs.

⁵ Addition of increase (decrease) in equity equivalents to net earnings common stockholders.

⁶ 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 470 × 3.06% = 14

⁷ 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 215 × 21.00% = 45

⁸ Addition of after taxes interest expense to net earnings common stockholders.

⁹ 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 27 × 21.00% = 6

¹⁰ Elimination of after taxes investment income.

¹¹ Elimination of discontinued operations.

Download chart

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.	Emerson Electric Co. NOPAT increased from 2017 to 2018 and from 2018 to 2019.

Emerson Electric Co., cash operating taxes calculation

US$ in millions

12 months ended:	Sep 30, 2019	Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014
Income tax expense	531)	443)	660)	697)	1,428)	1,164)
Less: Deferred income tax expense (benefit)	(48)	(250)	(42)	(13)	(29)	(153)
Add: Tax savings from interest expense	45)	55)	77)	81)	78)	86)
Less: Tax imposed on investment income	6)	11)	13)	9)	10)	8)
Cash operating taxes	619)	737)	766)	782)	1,525)	1,394)

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).

Download chart

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.	Emerson Electric Co. cash operating taxes decreased from 2017 to 2018 and from 2018 to 2019.

Emerson Electric Co., invested capital calculation (financing approach)

US$ in millions

	Sep 30, 2019	Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014
Short-term borrowings and current maturities of long-term debt	1,444)	1,623)	862)	2,584)	2,553)	2,465)
Long-term debt, excluding current maturities	4,277)	3,137)	3,794)	4,062)	4,289)	3,559)
Operating lease liability¹	470)	592)	481)	550)	782)	810)
Total reported debt & leases	6,191)	5,352)	5,137)	7,196)	7,624)	6,834)
Common stockholders’ equity	8,233)	8,947)	8,718)	7,568)	8,081)	10,119)
Net deferred tax (assets) liabilities²	230)	410)	339)	(226)	9)	156)
Allowances³	112)	113)	91)	92)	128)	114)
Product warranty⁴	140)	124)	120)	106)	167)	193)
Liability for restructuring costs⁵	69)	52)	65)	54)	70)	17)
Equity equivalents⁶	551)	699)	615)	26)	374)	480)
Accumulated other comprehensive (income) loss, net of tax⁷	1,722)	1,015)	1,019)	1,999)	1,617)	575)
Noncontrolling interests in subsidiaries	40)	43)	52)	50)	47)	48)
Adjusted common stockholders’ equity	10,546)	10,704)	10,404)	9,643)	10,119)	11,222)
Construction in progress⁸	(471)	(439)	(360)	(318)	(415)	(428)
Invested capital	16,266)	15,617)	15,181)	16,521)	17,328)	17,628)

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).

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 product warranty.

⁵ Addition of liability for restructuring costs.

⁶ Addition of equity equivalents to common stockholders’ equity.

⁷ Removal of accumulated other comprehensive income.

⁸ Subtraction of construction in progress.

Download chart

Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Emerson Electric Co. invested capital increased from 2017 to 2018 and from 2018 to 2019.

Emerson Electric Co., cost of capital calculations

Sep 30, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	44,511)	44,511)	÷	51,171)	=	0.87	0.87	×	16.29%	=	14.17%
Debt³	6,190)	6,190)	÷	51,171)	=	0.12	0.12	×	3.06% × (1 – 21.00%)	=	0.29%
Operating lease liability⁴	470)	470)	÷	51,171)	=	0.01	0.01	×	3.06% × (1 – 21.00%)	=	0.02%
Total:	51,171)					1.00					14.49%

Based on: 10-K (reporting date: 2019-09-30).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Sep 30, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	42,867)	42,867)	÷	48,354)	=	0.89	0.89	×	16.29%	=	14.44%
Debt³	4,895)	4,895)	÷	48,354)	=	0.10	0.10	×	3.81% × (1 – 24.50%)	=	0.29%
Operating lease liability⁴	592)	592)	÷	48,354)	=	0.01	0.01	×	3.81% × (1 – 24.50%)	=	0.04%
Total:	48,354)					1.00					14.77%

Based on: 10-K (reporting date: 2018-09-30).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Sep 30, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	38,676)	38,676)	÷	44,134)	=	0.88	0.88	×	16.29%	=	14.28%
Debt³	4,977)	4,977)	÷	44,134)	=	0.11	0.11	×	3.89% × (1 – 35.00%)	=	0.29%
Operating lease liability⁴	481)	481)	÷	44,134)	=	0.01	0.01	×	3.89% × (1 – 35.00%)	=	0.03%
Total:	44,134)					1.00					14.59%

Based on: 10-K (reporting date: 2017-09-30).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Sep 30, 2016

	Capital (fair value)¹	Weights					Cost of capital
Equity²	35,333)	35,333)	÷	43,006)	=	0.82	0.82	×	16.29%	=	13.39%
Debt³	7,123)	7,123)	÷	43,006)	=	0.17	0.17	×	2.99% × (1 – 35.00%)	=	0.32%
Operating lease liability⁴	550)	550)	÷	43,006)	=	0.01	0.01	×	2.99% × (1 – 35.00%)	=	0.02%
Total:	43,006)					1.00					13.73%

Based on: 10-K (reporting date: 2016-09-30).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Sep 30, 2015

	Capital (fair value)¹	Weights					Cost of capital
Equity²	32,734)	32,734)	÷	40,714)	=	0.80	0.80	×	16.29%	=	13.10%
Debt³	7,198)	7,198)	÷	40,714)	=	0.18	0.18	×	2.98% × (1 – 35.00%)	=	0.34%
Operating lease liability⁴	782)	782)	÷	40,714)	=	0.02	0.02	×	2.98% × (1 – 35.00%)	=	0.04%
Total:	40,714)					1.00					13.48%

Based on: 10-K (reporting date: 2015-09-30).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Sep 30, 2014

	Capital (fair value)¹	Weights					Cost of capital
Equity²	44,497)	44,497)	÷	51,742)	=	0.86	0.86	×	16.29%	=	14.01%
Debt³	6,435)	6,435)	÷	51,742)	=	0.12	0.12	×	3.28% × (1 – 35.00%)	=	0.27%
Operating lease liability⁴	810)	810)	÷	51,742)	=	0.02	0.02	×	3.28% × (1 – 35.00%)	=	0.03%
Total:	51,742)					1.00					14.31%

Based on: 10-K (reporting date: 2014-09-30).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Emerson Electric Co., economic spread ratio calculation, comparison to benchmarks

	Sep 30, 2019	Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014
Selected Financial Data (US$ in millions)
Economic profit¹	104)	(183)	(439)	(538)	536)	(310)
Invested capital²	16,266)	15,617)	15,181)	16,521)	17,328)	17,628)
Performance Ratio
Economic spread ratio³	0.64%	-1.17%	-2.89%	-3.26%	3.09%	-1.76%
Benchmarks
Economic Spread Ratio, Competitors⁴
Boeing Co.	-19.82%	—	—	—	—	—
Caterpillar Inc.	1.20%	—	—	—	—	—
Cummins Inc.	4.71%	—	—	—	—	—
Eaton Corp. plc	-3.77%	—	—	—	—	—
General Electric Co.	-6.49%	—	—	—	—	—
Honeywell International Inc.	3.08%	—	—	—	—	—
Lockheed Martin Corp.	18.14%	—	—	—	—	—
RTX Corp.	0.25%	—	—	—	—	—

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).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 104 ÷ 16,266 = 0.64%

⁴ Click competitor name to see calculations.

Download chart

Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Emerson Electric Co. economic spread ratio improved from 2017 to 2018 and from 2018 to 2019.

Emerson Electric Co., economic profit margin calculation, comparison to benchmarks

	Sep 30, 2019	Sep 30, 2018	Sep 30, 2017	Sep 30, 2016	Sep 30, 2015	Sep 30, 2014
Selected Financial Data (US$ in millions)
Economic profit¹	104)	(183)	(439)	(538)	536)	(310)
Net sales	18,372)	17,408)	15,264)	14,522)	22,304)	24,537)
Performance Ratio
Economic profit margin²	0.57%	-1.05%	-2.87%	-3.70%	2.40%	-1.26%
Benchmarks
Economic Profit Margin, Competitors³
Boeing Co.	-9.20%	—	—	—	—	—
Caterpillar Inc.	1.30%	—	—	—	—	—
Cummins Inc.	3.02%	—	—	—	—	—
Eaton Corp. plc	-5.20%	—	—	—	—	—
General Electric Co.	-9.65%	—	—	—	—	—
Honeywell International Inc.	3.58%	—	—	—	—	—
Lockheed Martin Corp.	7.79%	—	—	—	—	—
RTX Corp.	0.34%	—	—	—	—	—

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).

¹ Economic profit. See details »

² 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 104 ÷ 18,372 = 0.57%

³ Click competitor name to see calculations.

Download chart

Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Emerson Electric Co. economic profit margin improved from 2017 to 2018 and from 2018 to 2019.

Emerson Electric Co. (NYSE:EMR)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin