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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 Mills Inc., economic profit calculation

USD $ in thousands

Microsoft Excel LibreOffice Calc
12 months ended May 27, 2018 May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013
Net operating profit after taxes (NOPAT)1 hidden hidden hidden hidden hidden hidden
Cost of capital2 hidden% hidden% hidden% hidden% hidden% hidden%
Invested capital3 hidden hidden hidden hidden hidden hidden
Economic profit4 hidden hidden hidden hidden hidden hidden

Source: Based on data from General Mills Inc. Annual Reports

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
= 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 Mills Inc.'s economic profit increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Net Operating Profit after Taxes (NOPAT)

General Mills Inc., NOPAT calculation

USD $ in thousands

Microsoft Excel LibreOffice Calc
12 months ended May 27, 2018 May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013
Net earnings attributable to General Mills hidden hidden hidden hidden hidden hidden
Deferred income tax expense (benefit)1 hidden hidden hidden hidden hidden hidden
Increase (decrease) in allowance for doubtful accounts2 hidden hidden hidden hidden hidden hidden
Increase (decrease) in LIFO reserve3 hidden hidden hidden hidden hidden hidden
Increase (decrease) in restructuring and other exit costs reserve4 hidden hidden hidden hidden hidden hidden
Increase (decrease) in equity equivalents5 hidden hidden hidden hidden hidden hidden
Interest expense, net of capitalized interest hidden hidden hidden hidden hidden hidden
Interest expense, operating lease obligations6 hidden hidden hidden hidden hidden hidden
Adjusted interest expense, net of capitalized interest hidden hidden hidden hidden hidden hidden
Tax benefit of interest expense, net of capitalized interest7 hidden hidden hidden hidden hidden hidden
Adjusted interest expense, net of capitalized interest, after taxes8 hidden hidden hidden hidden hidden hidden
(Gain) loss on marketable securities hidden hidden hidden hidden hidden hidden
Interest income hidden hidden hidden hidden hidden hidden
Investment income, before taxes hidden hidden hidden hidden hidden hidden
Tax expense (benefit) of investment income9 hidden hidden hidden hidden hidden hidden
Investment income, after taxes10 hidden hidden hidden hidden hidden hidden
Net income (loss) attributable to noncontrolling interest hidden hidden hidden hidden hidden hidden
Net operating profit after taxes (NOPAT) hidden hidden hidden hidden hidden hidden

Source: Based on data from General Mills Inc. Annual Reports

2018 Calculations

1 Elimination of deferred tax expense. See Details »

2 Addition of increase (decrease) in allowance for doubtful accounts.

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

4 Addition of increase (decrease) in restructuring and other exit costs reserve.

5 Addition of increase (decrease) in equity equivalents to net earnings attributable to General Mills.

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

7 Tax benefit of interest expense, net of capitalized interest = Adjusted interest expense, net of capitalized interest × Statutory income tax rate
= hidden × 29% = hidden

8 Addition of after taxes interest expense to net earnings attributable to General Mills.

9 Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 29% = hidden

10 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. General Mills Inc.'s NOPAT increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Cash Operating Taxes

General Mills Inc., cash operating taxes calculation

USD $ in thousands

Microsoft Excel LibreOffice Calc
12 months ended May 27, 2018 May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013
Income taxes hidden hidden hidden hidden hidden hidden
Less: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden hidden
Add: Tax savings from interest expense, net of capitalized interest hidden hidden hidden hidden hidden hidden
Less: Tax imposed on investment income hidden hidden hidden hidden hidden hidden
Cash operating taxes hidden hidden hidden hidden hidden hidden

Source: Based on data from General Mills Inc. 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 Mills Inc.'s cash operating taxes declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.

Invested Capital

General Mills Inc., invested capital calculation (financing approach)

USD $ in thousands

Microsoft Excel LibreOffice Calc
May 27, 2018 May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013
Current portion of long-term debt hidden hidden hidden hidden hidden hidden
Notes payable hidden hidden hidden hidden hidden hidden
Long-term debt, excluding current portion hidden hidden hidden hidden hidden hidden
PV of operating lease payments1 hidden hidden hidden hidden hidden hidden
Total reported debt & leases hidden hidden hidden hidden hidden hidden
Stockholders' equity hidden hidden hidden hidden hidden hidden
Net deferred tax (assets) liabilities2 hidden hidden hidden hidden hidden hidden
Allowance for doubtful accounts3 hidden hidden hidden hidden hidden hidden
Excess of FIFO over LIFO cost4 hidden hidden hidden hidden hidden hidden
Restructuring and other exit costs reserve5 hidden hidden hidden hidden hidden hidden
Equity equivalents6 hidden hidden hidden hidden hidden hidden
Accumulated other comprehensive (income) loss, net of tax7 hidden hidden hidden hidden hidden hidden
Redeemable interest hidden hidden hidden hidden hidden hidden
Noncontrolling interests hidden hidden hidden hidden hidden hidden
Adjusted stockholders' equity hidden hidden hidden hidden hidden hidden
Construction in progress8 hidden hidden hidden hidden hidden hidden
Marketable securities9 hidden hidden hidden hidden hidden hidden
Invested capital hidden hidden hidden hidden hidden hidden

Source: Based on data from General Mills Inc. 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 restructuring and other exit costs reserve.

6 Addition of equity equivalents to stockholders' equity.

7 Removal of accumulated other comprehensive income.

8 Subtraction of construction in progress.

9 Subtraction of marketable 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 Mills Inc.'s invested capital increased from 2016 to 2017 and from 2017 to 2018.

Cost of Capital

General Mills Inc., cost of capital calculations

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Debt3 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 29%) = hidden%
PV of operating lease payments4 hidden hidden ÷ hidden = hidden hidden × hidden% × (1 – 29%) = hidden%
Total: hidden hidden hidden%

Source: Based on data from General Mills Inc. Annual Reports

1 USD $ in thousands

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Debt3 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 Mills Inc. Annual Reports

1 USD $ in thousands

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Debt3 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 Mills Inc. Annual Reports

1 USD $ in thousands

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Debt3 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 Mills Inc. Annual Reports

1 USD $ in thousands

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Debt3 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 Mills Inc. Annual Reports

1 USD $ in thousands

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »

Fair Value1 Weights Cost of Capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden% = hidden%
Debt3 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 Mills Inc. Annual Reports

1 USD $ in thousands

2 Equity. See Details »

3 Debt. See Details »

4 PV of operating lease payments. See Details »


Economic Spread

General Mills Inc., economic spread calculation

Microsoft Excel LibreOffice Calc
May 27, 2018 May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013
Selected Financial Data (USD $ in thousands)
Economic profit1 hidden hidden hidden hidden hidden hidden
Invested capital2 hidden hidden hidden hidden hidden hidden
Ratio
Economic spread3 hidden% hidden% hidden% hidden% hidden% hidden%

Source: Based on data from General Mills Inc. Annual Reports

2018 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 Mills Inc.'s economic spread improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Economic Profit Margin

General Mills Inc., economic profit margin calculation

Microsoft Excel LibreOffice Calc
May 27, 2018 May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013
Selected Financial Data (USD $ in thousands)
Economic profit1 hidden hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden hidden
Ratio
Economic profit margin2 hidden% hidden% hidden% hidden% hidden% hidden%

Source: Based on data from General Mills Inc. Annual Reports

2018 Calculations

1 Economic profit. See Details »

2 Economic profit margin = 100 × Economic profit ÷ Net sales
= 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 Mills Inc.'s economic profit margin improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.