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Economic Value Added (EVA)
Advanced level
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
Raytheon Technologies Corp., economic profit calculation
US$ in millions
| 12 months ended | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
| 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. | Raytheon Technologies Corp.’s economic profit decreased from 2017 to 2018 and from 2018 to 2019. |
Net Operating Profit after Taxes (NOPAT)
Raytheon Technologies Corp., NOPAT calculation
US$ in millions
Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).
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 service and product warranties and product performance guarantees.
5 Addition of increase (decrease) in accrued restructuring costs.
6 Addition of increase (decrease) in equity equivalents to net income attributable to common shareowners.
7 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
8 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
9 Addition of after taxes interest expense to net income attributable to common shareowners.
10 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
11 Elimination of after taxes investment income.
12 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. | Raytheon Technologies Corp.’s NOPAT increased from 2017 to 2018 but then slightly decreased from 2018 to 2019. |
Cash Operating Taxes
Raytheon Technologies Corp., cash operating taxes calculation
US$ in millions
Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).
| 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. | Raytheon Technologies Corp.’s cash operating taxes decreased from 2017 to 2018 but then increased from 2018 to 2019 not reaching 2017 level. |
Invested Capital
Raytheon Technologies Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).
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 service and product warranties and product performance guarantees.
6 Addition of accrued restructuring costs.
7 Addition of equity equivalents to shareowners’ equity.
8 Removal of accumulated other comprehensive income.
9 Subtraction of available-for-sale 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. | Raytheon Technologies Corp.’s invested capital increased from 2017 to 2018 and from 2018 to 2019. |
Cost of Capital
Raytheon Technologies Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (filing date: 2020-02-06).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (filing date: 2019-02-07).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (filing date: 2018-02-09).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (filing date: 2017-02-09).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (filing date: 2016-02-11).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Raytheon Technologies Corp., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Boeing Co. | ||||||
| General Dynamics Corp. | ||||||
| Lockheed Martin Corp. | ||||||
| Northrop Grumman Corp. | ||||||
Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).
1 Economic profit. See details »
2 Invested capital. See details »
3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
| 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. | Raytheon Technologies Corp.’s economic spread ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019. |
Economic Profit Margin
Raytheon Technologies Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | ||||||
| General Dynamics Corp. | ||||||
| Lockheed Martin Corp. | ||||||
| Northrop Grumman Corp. | ||||||
Based on: 10-K (filing date: 2020-02-06), 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11).
1 Economic profit. See details »
2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =
3 Click competitor name to see calculations.
| Performance 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. | Raytheon Technologies Corp.’s economic profit margin deteriorated from 2017 to 2018 and from 2018 to 2019. |