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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

Procter & Gamble Co., economic profit calculation

US$ in millions

12 months ended:	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Net operating profit after taxes (NOPAT)¹	14,689)	14,588)	14,283)	12,785)	3,768)	8,451)
Cost of capital²	7.94%	7.86%	7.77%	7.71%	7.72%	7.45%
Invested capital³	96,550)	93,924)	95,095)	101,100)	89,875)	92,231)

Economic profit⁴	7,021)	7,208)	6,892)	4,992)	(3,166)	1,578)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 14,689 – 7.94% × 96,550 = 7,021

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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.	Procter & Gamble Co. economic profit increased from 2021 to 2022 but then slightly decreased from 2022 to 2023 not reaching 2021 level.

Procter & Gamble Co., NOPAT calculation

US$ in millions

12 months ended:	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Net earnings attributable to Procter & Gamble (P&G)	14,653)	14,742)	14,306)	13,027)	3,897)	9,750)
Deferred income tax expense (benefit)¹	(453)	(402)	(258)	(596)	(411)	(1,844)
Increase (decrease) in restructuring reserves²	27)	(131)	(194)	4)	(45)	236)
Increase (decrease) in equity equivalents³	(426)	(533)	(452)	(592)	(456)	(1,608)
Interest expense	756)	439)	502)	465)	509)	506)
Interest expense, operating lease liability⁴	29)	26)	32)	38)	20)	24)
Adjusted interest expense	785)	465)	534)	503)	529)	530)
Tax benefit of interest expense⁵	(165)	(98)	(112)	(106)	(111)	(149)
Adjusted interest expense, after taxes⁶	620)	367)	422)	398)	418)	381)
(Gain) loss on marketable securities	—)	1)	(4)	(2)	17)	(7)
Interest income	(307)	(51)	(45)	(155)	(220)	(247)
Investment income, before taxes	(307)	(50)	(49)	(157)	(203)	(254)
Tax expense (benefit) of investment income⁷	64)	11)	10)	33)	43)	71)
Investment income, after taxes⁸	(243)	(40)	(39)	(124)	(160)	(183)
Net income (loss) attributable to noncontrolling interest	85)	51)	46)	76)	69)	111)
Net operating profit after taxes (NOPAT)	14,689)	14,588)	14,283)	12,785)	3,768)	8,451)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in restructuring reserves.

³ Addition of increase (decrease) in equity equivalents to net earnings attributable to Procter & Gamble (P&G).

⁴ 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 817 × 3.50% = 29

⁵ 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 785 × 21.00% = 165

⁶ Addition of after taxes interest expense to net earnings attributable to Procter & Gamble (P&G).

⁷ 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 307 × 21.00% = 64

⁸ Elimination of after taxes investment income.

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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.	Procter & Gamble Co. NOPAT increased from 2021 to 2022 and from 2022 to 2023.

Procter & Gamble Co., cash operating taxes calculation

US$ in millions

12 months ended:	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Tax expense	3,615)	3,202)	3,263)	2,731)	2,103)	3,465)
Less: Deferred income tax expense (benefit)	(453)	(402)	(258)	(596)	(411)	(1,844)
Add: Tax savings from interest expense	165)	98)	112)	106)	111)	149)
Less: Tax imposed on investment income	64)	11)	10)	33)	43)	71)
Cash operating taxes	4,168)	3,691)	3,623)	3,400)	2,583)	5,387)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

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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.	Procter & Gamble Co. cash operating taxes increased from 2021 to 2022 and from 2022 to 2023.

Procter & Gamble Co., invested capital calculation (financing approach)

US$ in millions

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Debt due within one year	10,229)	8,645)	8,889)	11,183)	9,697)	10,423)
Long-term debt, excluding due within one year	24,378)	22,848)	23,099)	23,537)	20,395)	20,863)
Operating lease liability¹	817)	800)	850)	891)	1,143)	1,253)
Total reported debt & leases	35,424)	32,293)	32,838)	35,611)	31,235)	32,539)
Shareholders’ equity attributable to Procter & Gamble	46,777)	46,589)	46,378)	46,521)	47,194)	52,293)
Net deferred tax (assets) liabilities²	4,647)	5,197)	3,939)	4,008)	4,453)	4,192)
Restructuring reserves³	174)	147)	278)	472)	468)	513)
Equity equivalents⁴	4,821)	5,344)	4,217)	4,480)	4,921)	4,705)
Accumulated other comprehensive (income) loss, net of tax⁵	12,220)	12,189)	13,744)	16,165)	14,936)	14,749)
Noncontrolling interest	288)	265)	276)	357)	385)	590)
Adjusted shareholders’ equity attributable to Procter & Gamble	64,106)	64,387)	64,615)	67,523)	67,436)	72,337)
Construction in progress⁶	(2,980)	(2,756)	(2,358)	(2,034)	(2,579)	(3,223)
Investment securities⁷	—)	—)	—)	—)	(6,217)	(9,422)
Invested capital	96,550)	93,924)	95,095)	101,100)	89,875)	92,231)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of restructuring reserves.

⁴ Addition of equity equivalents to shareholders’ equity attributable to Procter & Gamble.

⁵ Removal of accumulated other comprehensive income.

⁶ Subtraction of construction in progress.

⁷ Subtraction of investment securities.

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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.	Procter & Gamble Co. invested capital decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

Procter & Gamble Co., cost of capital calculations

Jun 30, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	366,043)	366,043)	÷	400,038)	=	0.92	0.92	×	8.44%	=	7.72%
Short-term and long-term debt³	33,178)	33,178)	÷	400,038)	=	0.08	0.08	×	3.28% × (1 – 21.00%)	=	0.21%
Operating lease liability⁴	817)	817)	÷	400,038)	=	0.00	0.00	×	3.50% × (1 – 21.00%)	=	0.01%
Total:	400,038)					1.00					7.94%

Based on: 10-K (reporting date: 2023-06-30).

¹ US$ in millions

² Equity. See details »

³ Short-term and long-term debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	345,816)	345,816)	÷	377,314)	=	0.92	0.92	×	8.44%	=	7.73%
Short-term and long-term debt³	30,698)	30,698)	÷	377,314)	=	0.08	0.08	×	1.82% × (1 – 21.00%)	=	0.12%
Operating lease liability⁴	800)	800)	÷	377,314)	=	0.00	0.00	×	3.20% × (1 – 21.00%)	=	0.01%
Total:	377,314)					1.00					7.86%

Based on: 10-K (reporting date: 2022-06-30).

¹ US$ in millions

² Equity. See details »

³ Short-term and long-term debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	343,262)	343,262)	÷	378,181)	=	0.91	0.91	×	8.44%	=	7.66%
Short-term and long-term debt³	34,069)	34,069)	÷	378,181)	=	0.09	0.09	×	1.50% × (1 – 21.00%)	=	0.11%
Operating lease liability⁴	850)	850)	÷	378,181)	=	0.00	0.00	×	3.80% × (1 – 21.00%)	=	0.01%
Total:	378,181)					1.00					7.77%

Based on: 10-K (reporting date: 2021-06-30).

¹ US$ in millions

² Equity. See details »

³ Short-term and long-term debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	329,929)	329,929)	÷	368,495)	=	0.90	0.90	×	8.44%	=	7.56%
Short-term and long-term debt³	37,675)	37,675)	÷	368,495)	=	0.10	0.10	×	1.78% × (1 – 21.00%)	=	0.14%
Operating lease liability⁴	891)	891)	÷	368,495)	=	0.00	0.00	×	4.30% × (1 – 21.00%)	=	0.01%
Total:	368,495)					1.00					7.71%

Based on: 10-K (reporting date: 2020-06-30).

¹ US$ in millions

² Equity. See details »

³ Short-term and long-term debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	285,958)	285,958)	÷	318,788)	=	0.90	0.90	×	8.44%	=	7.57%
Short-term and long-term debt³	31,687)	31,687)	÷	318,788)	=	0.10	0.10	×	1.79% × (1 – 21.00%)	=	0.14%
Operating lease liability⁴	1,143)	1,143)	÷	318,788)	=	0.00	0.00	×	1.79% × (1 – 21.00%)	=	0.01%
Total:	318,788)					1.00					7.72%

Based on: 10-K (reporting date: 2019-06-30).

¹ US$ in millions

² Equity. See details »

³ Short-term and long-term debt. See details »

⁴ Operating lease liability. See details »

Jun 30, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	205,609)	205,609)	÷	238,915)	=	0.86	0.86	×	8.44%	=	7.26%
Short-term and long-term debt³	32,053)	32,053)	÷	238,915)	=	0.13	0.13	×	1.90% × (1 – 28.10%)	=	0.18%
Operating lease liability⁴	1,253)	1,253)	÷	238,915)	=	0.01	0.01	×	1.90% × (1 – 28.10%)	=	0.01%
Total:	238,915)					1.00					7.45%

Based on: 10-K (reporting date: 2018-06-30).

¹ US$ in millions

² Equity. See details »

³ Short-term and long-term debt. See details »

⁴ Operating lease liability. See details »

Procter & Gamble Co., economic spread ratio calculation

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Selected Financial Data (US$ in millions)
Economic profit¹	7,021)	7,208)	6,892)	4,992)	(3,166)	1,578)
Invested capital²	96,550)	93,924)	95,095)	101,100)	89,875)	92,231)
Performance Ratio
Economic spread ratio³	7.27%	7.67%	7.25%	4.94%	-3.52%	1.71%

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 7,021 ÷ 96,550 = 7.27%

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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.	Procter & Gamble Co. economic spread ratio improved from 2021 to 2022 but then slightly deteriorated from 2022 to 2023 not reaching 2021 level.

Procter & Gamble Co., economic profit margin calculation

	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019	Jun 30, 2018
Selected Financial Data (US$ in millions)
Economic profit¹	7,021)	7,208)	6,892)	4,992)	(3,166)	1,578)
Net sales	82,006)	80,187)	76,118)	70,950)	67,684)	66,832)
Performance Ratio
Economic profit margin²	8.56%	8.99%	9.05%	7.04%	-4.68%	2.36%

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).

¹ Economic profit. See details »

² 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 7,021 ÷ 82,006 = 8.56%

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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.	Procter & Gamble Co. economic profit margin deteriorated from 2021 to 2022 and from 2022 to 2023.

Procter & Gamble Co. (NYSE:PG)

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