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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

Monsanto Co., economic profit calculation

US$ in millions

12 months ended:	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
Net operating profit after taxes (NOPAT)¹	2,582)	1,816)	2,361)	2,633)	2,743)	2,247)
Cost of capital²	13.27%	12.79%	12.76%	13.33%	14.51%	14.40%
Invested capital³	16,366)	15,963)	18,327)	16,260)	15,770)	14,553)

Economic profit⁴	410)	(226)	22)	465)	454)	151)

Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2017 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,582 – 13.27% × 16,366 = 410

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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.	Monsanto Co. economic profit decreased from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

Monsanto Co., NOPAT calculation

US$ in millions

12 months ended:	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
Net income attributable to Monsanto Company	2,260)	1,336)	2,314)	2,740)	2,482)	2,045)
Deferred income tax expense (benefit)¹	46)	28)	(288)	(45)	126)	241)
Increase (decrease) in allowance for doubtful trade receivables²	(16)	35)	(13)	4)	4)	(34)
Increase (decrease) in LIFO reserve³	(6)	(4)	(6)	(9)	26)	(43)
Increase (decrease) in deferred revenues⁴	238)	186)	(68)	(170)	14)	(69)
Increase (decrease) in restructuring reserves⁵	(198)	27)	217)	—)	—)	(24)
Increase (decrease) in equity equivalents⁶	64)	272)	(158)	(220)	170)	71)
Interest expense	452)	436)	433)	248)	172)	191)
Interest expense, operating lease liability⁷	18)	18)	17)	19)	20)	14)
Adjusted interest expense	470)	454)	450)	267)	192)	205)
Tax benefit of interest expense⁸	(164)	(159)	(158)	(93)	(67)	(72)
Adjusted interest expense, after taxes⁹	305)	295)	293)	173)	124)	133)
(Gain) loss on marketable securities	3)	2)	(4)	(5)	(9)	8)
Interest income	(76)	(74)	(105)	(102)	(92)	(77)
Investment income, before taxes	(73)	(72)	(109)	(107)	(101)	(69)
Tax expense (benefit) of investment income¹⁰	26)	25)	38)	37)	35)	24)
Investment income, after taxes¹¹	(47)	(47)	(71)	(70)	(66)	(45)
(Income) loss from discontinued operations, net of tax¹²	(13)	(17)	(28)	(13)	(11)	(6)
Net income (loss) attributable to noncontrolling interest	13)	(23)	11)	22)	43)	48)
Net operating profit after taxes (NOPAT)	2,582)	1,816)	2,361)	2,633)	2,743)	2,247)

Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).

¹ Elimination of deferred tax expense. See details »

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

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

⁴ Addition of increase (decrease) in deferred revenues.

⁵ Addition of increase (decrease) in restructuring reserves.

⁶ Addition of increase (decrease) in equity equivalents to net income attributable to Monsanto Company.

⁷ 2017 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 458 × 3.88% = 18

⁸ 2017 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 470 × 35.00% = 164

⁹ Addition of after taxes interest expense to net income attributable to Monsanto Company.

¹⁰ 2017 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 73 × 35.00% = 26

¹¹ Elimination of after taxes investment income.

¹² Elimination of discontinued operations.

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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.	Monsanto Co. NOPAT decreased from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

Monsanto Co., cash operating taxes calculation

US$ in millions

12 months ended:	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
Income tax provision from continuing operations	626)	695)	864)	1,078)	915)	901)
Less: Deferred income tax expense (benefit)	46)	28)	(288)	(45)	126)	241)
Add: Tax savings from interest expense	164)	159)	158)	93)	67)	72)
Less: Tax imposed on investment income	26)	25)	38)	37)	35)	24)
Cash operating taxes	719)	801)	1,272)	1,179)	821)	708)

Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).

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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.	Monsanto Co. cash operating taxes decreased from 2015 to 2016 and from 2016 to 2017.

Monsanto Co., invested capital calculation (financing approach)

US$ in millions

	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
Short-term debt, including current portion of long-term debt	870)	1,587)	615)	233)	51)	36)
Long-term debt, excluding current portion	7,254)	7,453)	8,429)	7,528)	2,061)	2,038)
Operating lease liability¹	458)	464)	467)	491)	435)	318)
Total reported debt & leases	8,582)	9,504)	9,511)	8,252)	2,547)	2,392)
Total Monsanto Company shareowners’ equity	6,438)	4,534)	6,990)	7,875)	12,559)	11,833)
Net deferred tax (assets) liabilities²	(372)	(545)	(677)	(506)	(526)	(742)
Allowance for doubtful trade receivables³	78)	94)	59)	72)	68)	64)
Excess of FIFO over LIFO cost⁴	144)	150)	154)	160)	169)	143)
Deferred revenues⁵	841)	603)	417)	485)	655)	641)
Restructuring reserves⁶	46)	244)	217)	—)	—)	—)
Equity equivalents⁷	737)	546)	170)	211)	366)	106)
Accumulated other comprehensive (income) loss, net of tax⁸	2,427)	2,808)	2,801)	1,114)	1,278)	1,036)
Noncontrolling interest	20)	11)	15)	39)	169)	203)
Adjusted total Monsanto Company shareowners’ equity	9,622)	7,899)	9,976)	9,239)	14,372)	13,178)
Construction in progress and other⁹	(1,820)	(1,367)	(1,096)	(1,169)	(873)	(680)
Investments¹⁰	(18)	(73)	(64)	(62)	(276)	(337)
Invested capital	16,366)	15,963)	18,327)	16,260)	15,770)	14,553)

Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).

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 LIFO reserve. See details »

⁵ Addition of deferred revenues.

⁶ Addition of restructuring reserves.

⁷ Addition of equity equivalents to total Monsanto Company shareowners’ equity.

⁸ Removal of accumulated other comprehensive income.

⁹ Subtraction of construction in progress and other.

¹⁰ Subtraction of investments.

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

Monsanto Co., cost of capital calculations

Aug 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	53,493)	53,493)	÷	62,431)	=	0.86	0.86	×	15.07%	=	12.91%
Debt³	8,480)	8,480)	÷	62,431)	=	0.14	0.14	×	3.88% × (1 – 35.00%)	=	0.34%
Operating lease liability⁴	458)	458)	÷	62,431)	=	0.01	0.01	×	3.88% × (1 – 35.00%)	=	0.02%
Total:	62,431)					1.00					13.27%

Based on: 10-K (reporting date: 2017-08-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Aug 31, 2016

	Capital (fair value)¹	Weights					Cost of capital
Equity²	44,889)	44,889)	÷	54,776)	=	0.82	0.82	×	15.07%	=	12.35%
Debt³	9,423)	9,423)	÷	54,776)	=	0.17	0.17	×	3.80% × (1 – 35.00%)	=	0.42%
Operating lease liability⁴	464)	464)	÷	54,776)	=	0.01	0.01	×	3.80% × (1 – 35.00%)	=	0.02%
Total:	54,776)					1.00					12.79%

Based on: 10-K (reporting date: 2016-08-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Aug 31, 2015

	Capital (fair value)¹	Weights					Cost of capital
Equity²	41,226)	41,226)	÷	50,436)	=	0.82	0.82	×	15.07%	=	12.32%
Debt³	8,743)	8,743)	÷	50,436)	=	0.17	0.17	×	3.74% × (1 – 35.00%)	=	0.42%
Operating lease liability⁴	467)	467)	÷	50,436)	=	0.01	0.01	×	3.74% × (1 – 35.00%)	=	0.02%
Total:	50,436)					1.00					12.76%

Based on: 10-K (reporting date: 2015-08-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Aug 31, 2014

	Capital (fair value)¹	Weights					Cost of capital
Equity²	54,303)	54,303)	÷	62,955)	=	0.86	0.86	×	15.07%	=	13.00%
Debt³	8,161)	8,161)	÷	62,955)	=	0.13	0.13	×	3.78% × (1 – 35.00%)	=	0.32%
Operating lease liability⁴	491)	491)	÷	62,955)	=	0.01	0.01	×	3.78% × (1 – 35.00%)	=	0.02%
Total:	62,955)					1.00					13.33%

Based on: 10-K (reporting date: 2014-08-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Aug 31, 2013

	Capital (fair value)¹	Weights					Cost of capital
Equity²	56,591)	56,591)	÷	59,307)	=	0.95	0.95	×	15.07%	=	14.38%
Debt³	2,282)	2,282)	÷	59,307)	=	0.04	0.04	×	4.49% × (1 – 35.00%)	=	0.11%
Operating lease liability⁴	435)	435)	÷	59,307)	=	0.01	0.01	×	4.49% × (1 – 35.00%)	=	0.02%
Total:	59,307)					1.00					14.51%

Based on: 10-K (reporting date: 2013-08-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Aug 31, 2012

	Capital (fair value)¹	Weights					Cost of capital
Equity²	47,414)	47,414)	÷	50,179)	=	0.94	0.94	×	15.07%	=	14.24%
Debt³	2,447)	2,447)	÷	50,179)	=	0.05	0.05	×	4.48% × (1 – 35.00%)	=	0.14%
Operating lease liability⁴	318)	318)	÷	50,179)	=	0.01	0.01	×	4.48% × (1 – 35.00%)	=	0.02%
Total:	50,179)					1.00					14.40%

Based on: 10-K (reporting date: 2012-08-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Monsanto Co., economic spread ratio calculation, comparison to benchmarks

	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
Selected Financial Data (US$ in millions)
Economic profit¹	410)	(226)	22)	465)	454)	151)
Invested capital²	16,366)	15,963)	18,327)	16,260)	15,770)	14,553)
Performance Ratio
Economic spread ratio³	2.50%	-1.42%	0.12%	2.86%	2.88%	1.04%
Benchmarks
Economic Spread Ratio, Competitors⁴
lululemon athletica inc.	—	—	—	—	—	—
Nike Inc.	—	—	—	—	—	—

Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2017 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 410 ÷ 16,366 = 2.50%

⁴ Click competitor name to see calculations.

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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.	Monsanto Co. economic spread ratio deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.

Monsanto Co., economic profit margin calculation, comparison to benchmarks

	Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
Selected Financial Data (US$ in millions)
Economic profit¹	410)	(226)	22)	465)	454)	151)

Net sales	14,640)	13,502)	15,001)	15,855)	14,861)	13,504)
Add: Increase (decrease) in deferred revenues	238)	186)	(68)	(170)	14)	(69)
Adjusted net sales	14,878)	13,688)	14,933)	15,685)	14,875)	13,435)
Performance Ratio
Economic profit margin²	2.75%	-1.65%	0.15%	2.96%	3.06%	1.13%
Benchmarks
Economic Profit Margin, Competitors³
lululemon athletica inc.	—	—	—	—	—	—
Nike Inc.	—	—	—	—	—	—

Based on: 10-K (reporting date: 2017-08-31), 10-K (reporting date: 2016-08-31), 10-K (reporting date: 2015-08-31), 10-K (reporting date: 2014-08-31), 10-K (reporting date: 2013-08-31), 10-K (reporting date: 2012-08-31).

¹ Economic profit. See details »

² 2017 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × 410 ÷ 14,878 = 2.75%

³ Click competitor name to see calculations.

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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.	Monsanto Co. economic profit margin deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.

Monsanto Co. (NYSE:MON)

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