General Electric Co. (GE)

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

General Electric Co., economic profit calculation

USD $ in millions

12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Net operating profit after taxes (NOPAT)¹
Cost of capital²	%	%	%	%	%
Invested capital³

Economic profit⁴

Source: Based on data from General Electric Co. Annual Reports

2017 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.	General Electric Co.'s economic profit increased from 2015 to 2016 but then declined significantly from 2016 to 2017.

General Electric Co., NOPAT calculation

USD $ in millions

	12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Net earnings (loss) attributable to the Company
	Deferred income tax expense (benefit)¹
	Increase (decrease) in allowance for losses²
	Increase (decrease) in LIFO reserve³
	Increase (decrease) in liability for product warranties⁴
	Increase (decrease) in equity equivalents⁵
	Interest and other financial charges
	Interest expense, operating lease obligations⁶
	Adjusted interest and other financial charges
	Tax benefit of interest and other financial charges⁷
	Adjusted interest and other financial charges, after taxes⁸
	(Gain) loss on marketable securities
	Investment income, before taxes
	Tax expense (benefit) of investment income⁹
	Investment income, after taxes¹⁰
	(Income) loss from discontinued operations, net of tax¹¹
	Net income (loss) attributable to noncontrolling interest
	Net operating profit after taxes (NOPAT)

Source: Based on data from General Electric Co. Annual Reports

2017 Calculations

¹ Elimination of deferred tax expense. See Details »

² Addition of increase (decrease) in allowance for losses.

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

⁴ Addition of increase (decrease) in liability for product warranties.

⁵ Addition of increase (decrease) in equity equivalents to net earnings (loss) attributable to the Company.

⁶ Addition of interest expense on capitalized operating leases. See Details »

⁷ Tax benefit of interest and other financial charges = Adjusted interest and other financial charges × Statutory income tax rate
= hidden × 35% = hidden

⁸ Addition of after taxes interest expense to net earnings (loss) attributable to the Company.

⁹ Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 35% = hidden

¹⁰ Elimination of after taxes investment income.

¹¹ Elimination of discontinued operations.

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.	General Electric Co.'s NOPAT increased from 2015 to 2016 but then declined significantly from 2016 to 2017.

General Electric Co., cash operating taxes calculation

USD $ in millions

	12 months ended	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Provision (benefit) for income taxes
	Less: Deferred income tax expense (benefit)
	Add: Tax savings from interest and other financial charges
	Less: Tax imposed on investment income
	Cash operating taxes

Source: Based on data from General Electric Co. Annual Reports

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.	General Electric Co.'s cash operating taxes declined from 2015 to 2016 but then slightly increased from 2016 to 2017.

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

USD $ in millions

		Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
	Short-term borrowings
	Non-recourse borrowings of consolidated securitization entities
	Bank deposits
	Long-term borrowings
	PV of operating lease payments¹
	Total reported debt & leases
	Total GE shareowners' equity
	Net deferred tax (assets) liabilities²
	Allowance for losses³
	LIFO reserve⁴
	Liability for product warranties⁵
	Equity equivalents⁶
	Accumulated other comprehensive (income) loss, net of tax⁷
	Redeemable noncontrolling interests
	Noncontrolling interests
	Adjusted total GE shareowners' equity
	Leasehold costs and manufacturing plant under construction⁸
	Investment securities⁹
	Invested capital

Source: Based on data from General Electric Co. Annual Reports

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 liability for product warranties.

⁶ Addition of equity equivalents to total GE shareowners' equity.

⁷ Removal of accumulated other comprehensive income.

⁸ Subtraction of leasehold costs and manufacturing plant under construction.

⁹ Subtraction of investment securities.

Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	General Electric Co.'s invested capital declined from 2015 to 2016 but then slightly increased from 2016 to 2017.

General Electric Co., cost of capital calculations


Equity²	÷	=	×	%	=	%
Preferred stock	÷	=	×	%	=	%
Borrowings, include interest rate and currency derivatives designated as hedges of borrowings³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from General Electric Co. Annual Reports

¹ USD $ in millions

² Equity. See Details »

³ Borrowings, include interest rate and currency derivatives designated as hedges of borrowings. See Details »

⁴ PV of operating lease payments. See Details »


Equity²	÷	=	×	%	=	%
Preferred stock	÷	=	×	%	=	%
Borrowings, include interest rate and currency derivatives designated as hedges of borrowings³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from General Electric Co. Annual Reports

¹ USD $ in millions

² Equity. See Details »

³ Borrowings, include interest rate and currency derivatives designated as hedges of borrowings. See Details »

⁴ PV of operating lease payments. See Details »


Equity²	÷	=	×	%	=	%
Preferred stock	÷	=	×	%	=	%
Borrowings, include interest rate and currency derivatives designated as hedges of borrowings³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from General Electric Co. Annual Reports

¹ USD $ in millions

² Equity. See Details »

³ Borrowings, include interest rate and currency derivatives designated as hedges of borrowings. See Details »

⁴ PV of operating lease payments. See Details »


Equity²	÷	=	×	%	=	%
Preferred stock	÷	=	×	%	=	%
Borrowings, include interest rate and currency derivatives designated as hedges of borrowings³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from General Electric Co. Annual Reports

¹ USD $ in millions

² Equity. See Details »

³ Borrowings, include interest rate and currency derivatives designated as hedges of borrowings. See Details »

⁴ PV of operating lease payments. See Details »


Equity²	÷	=	×	%	=	%
Preferred stock	÷	=	×	%	=	%
Borrowings, include interest rate and currency derivatives designated as hedges of borrowings³	÷	=	×	% × (1 – 35%)	=	%
PV of operating lease payments⁴	÷	=	×	% × (1 – 35%)	=	%
Total:						%

Source: Based on data from General Electric Co. Annual Reports

¹ USD $ in millions

² Equity. See Details »

³ Borrowings, include interest rate and currency derivatives designated as hedges of borrowings. See Details »

⁴ PV of operating lease payments. See Details »

General Electric Co., economic spread calculation

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in millions)
Economic profit¹
Invested capital²
Ratio
Economic spread³	%	%	%	%	%

Source: Based on data from General Electric Co. Annual Reports

2017 Calculations

¹ Economic profit. See Details »

² Invested capital. See Details »

³ Economic spread = 100 × Economic profit ÷ Invested capital
= 100 × hidden ÷ hidden = hidden %

Ratio	Description	The company
Economic spread	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	General Electric Co.'s economic spread improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.

General Electric Co., economic profit margin calculation

	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013
Selected Financial Data (USD $ in millions)
Economic profit¹
Sales of goods and services
Ratio
Economic profit margin²	%	%	%	%	%

Source: Based on data from General Electric Co. Annual Reports

2017 Calculations

¹ Economic profit. See Details »

² Economic profit margin = 100 × Economic profit ÷ Sales of goods and services
= 100 × hidden ÷ hidden = hidden %

Ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company's 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.	General Electric Co.'s economic profit margin improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.

	General Electric Co.	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis
Financial Reporting Quality

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Financial Statements
Common-Size Financial Statements
Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis
Financial Reporting Quality

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Dec 31, 2017

Dec 31, 2016

Dec 31, 2015

Dec 31, 2014

Dec 31, 2013

Economic Spread

Economic Profit Margin