Economic Value Added (EVA)
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
Procter & Gamble Co., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2025-06-30), 10-K (reporting date: 2024-06-30), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2025 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 16,618 – 9.53% × 100,282 = 7,058
The financial performance over the observed period indicates a strong positive trajectory in economic value creation, characterized by a consistent increase in operating profitability that has effectively outpaced the costs associated with capital investment.
- Net Operating Profit After Taxes (NOPAT)
- A steady upward trend is observed in NOPAT, which grew from US$ 12,785 million in 2020 to US$ 16,618 million in 2025. The growth was incremental between 2021 and 2024, followed by a more pronounced acceleration in the final year of the period.
- Cost of Capital
- The cost of capital exhibited a gradual increase from 9.30% in 2020 to a peak of 9.65% in 2024. This upward movement was reversed in 2025, where the rate declined to 9.53%, indicating a slight reduction in the required return on invested capital.
- Invested Capital
- Invested capital followed a U-shaped trajectory. An initial decline occurred between 2020 and 2022, reaching a low of US$ 93,924 million. Subsequently, a period of steady reinvestment began, with the capital base expanding to US$ 100,282 million by 2025, effectively returning to the levels seen at the start of the period.
- Economic Profit
- Economic profit demonstrated substantial growth, increasing from US$ 3,385 million in 2020 to US$ 7,058 million in 2025. A significant surge occurred between 2020 and 2021, after which the value remained relatively stable between US$ 5,400 million and US$ 5,700 million for several years. The period concluded with a sharp increase in 2025, driven by the combination of peak NOPAT and a slight reduction in the cost of capital.
Overall, the analysis reveals that the growth in NOPAT has been the primary driver of economic value, as the increase in operating profits significantly exceeded the incremental capital charges, resulting in a higher economic profit for the organization.
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Net Operating Profit after Taxes (NOPAT)
Procter & Gamble Co., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2025-06-30), 10-K (reporting date: 2024-06-30), 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).
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 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 956 × 4.60% = 44
5 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 951 × 21.00% = 200
6 Addition of after taxes interest expense to net earnings attributable to Procter & Gamble (P&G).
7 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 469 × 21.00% = 98
8 Elimination of after taxes investment income.
- Net earnings attributable to Procter & Gamble (P&G)
- The net earnings of the company demonstrated a consistent upward trend over the analyzed periods. Starting at 13,027 million US dollars in mid-2020, earnings increased steadily each year, reaching 15,974 million US dollars by mid-2025. The growth, although steady, showed minor fluctuations in the rate of increase, with a slightly slower increment between mid-2022 and mid-2023, followed by renewed acceleration towards the end of the period.
- Net operating profit after taxes (NOPAT)
- NOPAT exhibited a parallel pattern to net earnings, indicating effective operational management and stable profitability. It rose from 12,785 million US dollars in mid-2020 to 16,618 million US dollars in mid-2025. The increment was generally consistent, with a slight deceleration in growth between mid-2021 and mid-2022, before regaining momentum through to the final period. This trend suggests sustained operational efficiency and the capacity to enhance profitability over time.
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Cash Operating Taxes
Procter & Gamble Co., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2025-06-30), 10-K (reporting date: 2024-06-30), 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).
- Tax Expense
- Over the period from June 30, 2020, to June 30, 2025, the tax expense exhibits an overall upward trend. Starting at 2,731 million USD in 2020, it increases to 3,263 million USD in 2021. A slight decline occurs in 2022 with 3,202 million USD, followed by a renewed increase to 3,615 million USD in 2023. The upward trajectory continues through 2024 and 2025, reaching 3,787 million USD and 4,102 million USD, respectively. This reflects an aggregate growth of approximately 50% over the six-year span.
- Cash Operating Taxes
- Cash operating taxes also show an upward movement initially but with some fluctuation. Beginning at 3,400 million USD in 2020, the figure rises steadily through to 2023, peaking at 4,168 million USD. However, subsequent years see a slight decline, with values of 4,135 million USD in 2024 and further reduction to 4,054 million USD in 2025. Despite this late decrease, cash operating taxes overall have increased by roughly 19% compared to the initial 2020 figure.
- Comparative Insights
- Both tax expense and cash operating taxes show general increases across the analyzed timeframe, indicating a growing tax burden in absolute terms. The tax expense growth is more consistent and robust, whereas cash operating taxes peak earlier and then slightly decline. The divergence in the last two years could suggest changes in tax payment timing, cash management strategies, or variations in tax structures impacting cash taxes differently than accrued tax expenses.
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Invested Capital
Procter & Gamble Co., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2025-06-30), 10-K (reporting date: 2024-06-30), 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).
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.
- Total Reported Debt & Leases
- The total reported debt and leases showed a general decline from 35,611 million USD in mid-2020 to 32,293 million USD by mid-2022. However, this downward trend reversed slightly, with debt levels rising again to 35,424 million USD by mid-2023, followed by a moderate decrease in mid-2024 to 33,369 million USD, before increasing once more to 35,464 million USD by mid-2025. This pattern indicates fluctuations in debt levels, with no clear long-term reduction or increase over the six-year period.
- Shareholders’ Equity Attributable to Procter & Gamble
- Shareholders’ equity remained relatively stable between mid-2020 and mid-2023, fluctuating marginally between approximately 46,378 million USD and 46,777 million USD. From mid-2023 onward, equity showed a notable upward trend, rising to 50,287 million USD by mid-2024 and further to 52,012 million USD by mid-2025. This growth suggests an improvement in the company's net asset base and potential enhancement in shareholder value in recent years.
- Invested Capital
- Invested capital declined from 101,100 million USD in mid-2020 to 93,924 million USD by mid-2022, reflecting a reduction in the total funds employed in operations. After this trough, invested capital began to increase again, reaching 96,550 million USD in mid-2023 and continuing to rise steadily to 100,282 million USD by mid-2025. This trend implies a recovery in capital investment levels, trending toward the original 2020 amounts.
- Overall Insights
- The data reveals a cyclical pattern in key financial metrics over the six-year timeframe. Debt levels experienced a decrease followed by a rebound, while shareholders’ equity showed stability initially and then increased significantly in the later years. Invested capital decreased initially but reversed to a recovery path toward previous levels. Together, these trends indicate a period of financial adjustment followed by stabilization and growth in equity and capital investment, with debt management remaining somewhat variable.
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Cost of Capital
Procter & Gamble Co., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 353,136) | 353,136) | ÷ | 387,727) | = | 0.91 | 0.91 | × | 10.21% | = | 9.30% | ||
| Short-term and long-term debt3 | 33,635) | 33,635) | ÷ | 387,727) | = | 0.09 | 0.09 | × | 3.22% × (1 – 21.00%) | = | 0.22% | ||
| Operating lease liability4 | 956) | 956) | ÷ | 387,727) | = | 0.00 | 0.00 | × | 4.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 387,727) | 1.00 | 9.53% | ||||||||||
Based on: 10-K (reporting date: 2025-06-30).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 395,622) | 395,622) | ÷ | 427,584) | = | 0.93 | 0.93 | × | 10.21% | = | 9.45% | ||
| Short-term and long-term debt3 | 31,053) | 31,053) | ÷ | 427,584) | = | 0.07 | 0.07 | × | 3.31% × (1 – 21.00%) | = | 0.19% | ||
| Operating lease liability4 | 909) | 909) | ÷ | 427,584) | = | 0.00 | 0.00 | × | 4.50% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 427,584) | 1.00 | 9.65% | ||||||||||
Based on: 10-K (reporting date: 2024-06-30).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 366,043) | 366,043) | ÷ | 400,038) | = | 0.92 | 0.92 | × | 10.21% | = | 9.35% | ||
| 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 | 9.57% | ||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 345,816) | 345,816) | ÷ | 377,314) | = | 0.92 | 0.92 | × | 10.21% | = | 9.36% | ||
| 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 | 9.48% | ||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 343,262) | 343,262) | ÷ | 378,181) | = | 0.91 | 0.91 | × | 10.21% | = | 9.27% | ||
| 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 | 9.39% | ||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 329,929) | 329,929) | ÷ | 368,495) | = | 0.90 | 0.90 | × | 10.21% | = | 9.15% | ||
| 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 | 9.30% | ||||||||||
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 »
Economic Spread Ratio
Procter & Gamble Co., economic spread ratio calculation
Based on: 10-K (reporting date: 2025-06-30), 10-K (reporting date: 2024-06-30), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 7,058 ÷ 100,282 = 7.04%
Between June 30, 2020, and June 30, 2025, a consistent upward trajectory in economic value creation is observed. The company demonstrated an ability to increase its economic profit while managing its invested capital base, resulting in an overall expansion of the economic spread ratio over the six-year period.
- Economic Profit Trends
- Economic profit experienced significant growth, rising from US$ 3,385 million in 2020 to a peak of US$ 7,058 million in 2025. A period of rapid acceleration occurred between 2020 and 2022, followed by a slight contraction in 2023 to US$ 5,452 million. However, this was followed by a strong recovery, culminating in the highest recorded profit in the final year of the period.
- Invested Capital Dynamics
- Invested capital exhibited a U-shaped pattern. An initial reduction was observed from US$ 101,100 million in 2020 to a low of US$ 93,924 million in 2022. Following this trough, capital requirements steadily increased each year, returning to US$ 100,282 million by June 30, 2025. This indicates a phase of capital optimization followed by a period of strategic reinvestment.
- Economic Spread Ratio Analysis
- The economic spread ratio, which measures the efficiency of value creation relative to the capital employed, improved from 3.35% in 2020 to 7.04% in 2025. The most substantial gain occurred between 2020 and 2021, where the ratio jumped to 5.64%. Despite a minor dip in 2023 to 5.65%, the ratio ended the period at its maximum level, suggesting that the growth in economic profit significantly outpaced the growth in invested capital toward the end of the analysis period.
The correlation between declining invested capital and rising economic profit between 2020 and 2022 drove an initial surge in efficiency. In the subsequent years, the continued expansion of the economic spread ratio, despite increasing invested capital, indicates an enhancement in the quality of the capital deployed and an improved ability to generate returns exceeding the cost of capital.
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Economic Profit Margin
Procter & Gamble Co., economic profit margin calculation
Based on: 10-K (reporting date: 2025-06-30), 10-K (reporting date: 2024-06-30), 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).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 7,058 ÷ 84,284 = 8.37%
The organization has demonstrated a consistent upward trajectory in its ability to generate economic value over the six-year period ending June 30, 2025. There is a clear correlation between the growth in net sales and the expansion of economic profit, culminating in a significant improvement in value creation efficiency.
- Economic Profit Trends
- Economic profit experienced a substantial increase from $3,385 million in 2020 to $7,058 million in 2025. The most pronounced growth occurred between 2020 and 2021, with profit rising by approximately 58%. Although a slight contraction was observed in 2023, the figure recovered strongly, reaching its peak in the final year of the period.
- Net Sales Progression
- Net sales grew steadily from $70,950 million in 2020 to $84,284 million in 2025. The growth rate remained consistent between 2020 and 2024, followed by a period of stabilization between 2024 and 2025, during which sales increased by a marginal 0.3%.
- Economic Profit Margin Analysis
- The economic profit margin expanded from 4.77% in 2020 to 8.37% in 2025. Following an initial surge to 7.04% in 2021, the margin remained relatively stable, fluctuating between 6.65% and 7.08% over the subsequent three years. A notable spike occurred in 2025, where the margin reached its highest point. Given that this margin expansion occurred while net sales growth flattened, the data suggests a significant increase in operational efficiency and a heightened ability to generate returns above the cost of capital.
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