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Microsoft Excel LibreOffice Calc


Economic Value Added (EVA)

Difficulty: Advanced

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

General Electric Co., economic profit calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
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 hidden hidden hidden hidden hidden
Cost of capital2 hidden% hidden% hidden% hidden% hidden%
Invested capital3 hidden hidden hidden hidden hidden
Economic profit4 hidden hidden hidden hidden hidden

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
= hiddenhidden% × 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.

Net Operating Profit after Taxes (NOPAT)

General Electric Co., NOPAT calculation

USD $ in millions

Microsoft Excel LibreOffice Calc
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 hidden hidden hidden hidden hidden
Deferred income tax expense (benefit)1 hidden hidden hidden hidden hidden
Increase (decrease) in allowance for losses2 hidden hidden hidden hidden hidden
Increase (decrease) in LIFO reserve3 hidden hidden hidden hidden hidden
Increase (decrease) in liability for product warranties4 hidden hidden hidden hidden hidden
Increase (decrease) in equity equivalents5 hidden hidden hidden hidden hidden
Interest and other financial charges hidden hidden hidden hidden hidden
Interest expense, operating lease obligations6 hidden hidden hidden hidden hidden
Adjusted interest and other financial charges hidden hidden hidden hidden hidden
Tax benefit of interest and other financial charges7 hidden hidden hidden hidden hidden
Adjusted interest and other financial charges, after taxes8 hidden hidden hidden hidden hidden
(Gain) loss on marketable securities hidden hidden hidden hidden hidden
Investment income, before taxes hidden hidden hidden hidden hidden
Tax expense (benefit) of investment income9 hidden hidden hidden hidden hidden
Investment income, after taxes10 hidden hidden hidden hidden hidden
(Income) loss from discontinued operations, net of tax11 hidden hidden hidden hidden hidden
Net income (loss) attributable to noncontrolling interest hidden hidden hidden hidden hidden
Net operating profit after taxes (NOPAT) hidden hidden hidden hidden hidden

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.

Cash Operating Taxes

General Electric Co., cash operating taxes calculation

USD $ in millions

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

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.

Invested Capital

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

USD $ in millions

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

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.

Cost of Capital

General Electric Co., cost of capital calculations

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Preferred stock hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Borrowings, include interest rate and currency derivatives designated as hedges of borrowings3 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
Total: hidden hidden hidden%

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 »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Preferred stock hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Borrowings, include interest rate and currency derivatives designated as hedges of borrowings3 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
Total: hidden hidden hidden%

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 »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Preferred stock hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Borrowings, include interest rate and currency derivatives designated as hedges of borrowings3 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
Total: hidden hidden hidden%

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 »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Preferred stock hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Borrowings, include interest rate and currency derivatives designated as hedges of borrowings3 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
Total: hidden hidden hidden%

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 »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Preferred stock hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Borrowings, include interest rate and currency derivatives designated as hedges of borrowings3 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 35%) = hidden%
Total: hidden hidden hidden%

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 »


Economic Spread

General Electric Co., economic spread calculation

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

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.

Economic Profit Margin

General Electric Co., economic profit margin calculation

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

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.