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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

RTX Corp., economic profit calculation

US$ in millions

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net operating profit after taxes (NOPAT)¹	4,118)	4,663)	5,054)	(1,590)	7,238)
Cost of capital²	6.97%	7.28%	7.10%	6.84%	6.72%
Invested capital³	112,037)	113,345)	114,687)	115,597)	103,395)

Economic profit⁴	(3,690)	(3,588)	(3,088)	(9,501)	286)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

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
= 4,118 – 6.97% × 112,037 = -3,690

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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.	RTX Corp. economic profit decreased from 2021 to 2022 and from 2022 to 2023.

RTX Corp., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net income (loss) attributable to common shareowners	3,195)	5,197)	3,864)	(3,519)	5,537)
Deferred income tax expense (benefit)¹	(402)	(1,663)	(88)	(99)	35)
Increase (decrease) in allowance for expected credit losses²	(136)	(23)	(71)	292)	(99)
Increase (decrease) in LIFO reserve³	—)	—)	—)	—)	7)
Increase (decrease) in equity equivalents⁴	(538)	(1,686)	(159)	193)	(57)
Interest expense	1,653)	1,300)	1,330)	1,430)	1,773)
Interest expense, operating lease liability⁵	62)	64)	58)	62)	94)
Adjusted interest expense	1,715)	1,364)	1,388)	1,492)	1,867)
Tax benefit of interest expense⁶	(360)	(286)	(291)	(313)	(392)
Adjusted interest expense, after taxes⁷	1,355)	1,078)	1,096)	1,179)	1,475)
Interest income	(100)	(70)	(36)	(42)	(162)
Investment income, before taxes	(100)	(70)	(36)	(42)	(162)
Tax expense (benefit) of investment income⁸	21)	15)	8)	9)	34)
Investment income, after taxes⁹	(79)	(55)	(28)	(33)	(128)
(Income) loss from discontinued operations, net of tax¹⁰	—)	19)	33)	367)	—)
Net income (loss) attributable to noncontrolling interest	185)	111)	248)	224)	411)
Net operating profit after taxes (NOPAT)	4,118)	4,663)	5,054)	(1,590)	7,238)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for expected credit losses.

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

⁴ Addition of increase (decrease) in equity equivalents to net income (loss) attributable to common shareowners.

⁵ 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,760 × 3.50% = 62

⁶ 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,715 × 21.00% = 360

⁷ Addition of after taxes interest expense to net income (loss) attributable to common shareowners.

⁸ 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 100 × 21.00% = 21

⁹ Elimination of after taxes investment income.

¹⁰ 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.	RTX Corp. NOPAT decreased from 2021 to 2022 and from 2022 to 2023.

RTX Corp., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Income tax expense	456)	700)	786)	575)	2,295)
Less: Deferred income tax expense (benefit)	(402)	(1,663)	(88)	(99)	35)
Add: Tax savings from interest expense	360)	286)	291)	313)	392)
Less: Tax imposed on investment income	21)	15)	8)	9)	34)
Cash operating taxes	1,197)	2,635)	1,158)	978)	2,618)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

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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.	RTX Corp. cash operating taxes increased from 2021 to 2022 but then slightly decreased from 2022 to 2023 not reaching 2021 level.

RTX Corp., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Short-term borrowings	189)	625)	134)	247)	2,364)
Long-term debt currently due	1,283)	595)	24)	550)	3,496)
Long-term debt, excluding currently due	42,355)	30,694)	31,327)	31,026)	37,788)
Operating lease liability¹	1,760)	1,942)	2,068)	1,998)	2,688)
Total reported debt & leases	45,587)	33,856)	33,553)	33,821)	46,336)
Shareowners’ equity	59,798)	72,632)	73,068)	72,163)	41,774)
Net deferred tax (assets) liabilities²	3,015)	3,579)	5,010)	4,493)	2,126)
Allowance for expected credit losses³	316)	452)	475)	546)	389)
LIFO reserve⁴	—)	—)	—)	—)	126)
Equity equivalents⁵	3,331)	4,031)	5,485)	5,039)	2,641)
Accumulated other comprehensive (income) loss, net of tax⁶	2,419)	2,018)	1,915)	3,734)	10,149)
Redeemable noncontrolling interest	35)	36)	35)	32)	95)
Noncontrolling interest	1,612)	1,546)	1,596)	1,689)	2,457)
Adjusted shareowners’ equity	67,195)	80,263)	82,099)	82,657)	57,116)
Marketable securities held in trusts⁷	(745)	(774)	(965)	(881)	(57)
Invested capital	112,037)	113,345)	114,687)	115,597)	103,395)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

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 equity equivalents to shareowners’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of marketable securities held in trusts.

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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.	RTX Corp. invested capital decreased from 2021 to 2022 and from 2022 to 2023.

RTX Corp., cost of capital calculations

Dec 31, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	122,387)	122,387)	÷	166,026)	=	0.74	0.74	×	8.17%	=	6.02%
Debt³	41,879)	41,879)	÷	166,026)	=	0.25	0.25	×	4.60% × (1 – 21.00%)	=	0.92%
Operating lease liability⁴	1,760)	1,760)	÷	166,026)	=	0.01	0.01	×	3.50% × (1 – 21.00%)	=	0.03%
Total:	166,026)					1.00					6.97%

Based on: 10-K (reporting date: 2023-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	143,375)	143,375)	÷	174,079)	=	0.82	0.82	×	8.17%	=	6.73%
Debt³	28,762)	28,762)	÷	174,079)	=	0.17	0.17	×	4.00% × (1 – 21.00%)	=	0.52%
Operating lease liability⁴	1,942)	1,942)	÷	174,079)	=	0.01	0.01	×	3.30% × (1 – 21.00%)	=	0.03%
Total:	174,079)					1.00					7.28%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	142,174)	142,174)	÷	180,305)	=	0.79	0.79	×	8.17%	=	6.44%
Debt³	36,063)	36,063)	÷	180,305)	=	0.20	0.20	×	4.00% × (1 – 21.00%)	=	0.63%
Operating lease liability⁴	2,068)	2,068)	÷	180,305)	=	0.01	0.01	×	2.80% × (1 – 21.00%)	=	0.03%
Total:	180,305)					1.00					7.10%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	110,147)	110,147)	÷	151,071)	=	0.73	0.73	×	8.17%	=	5.96%
Debt³	38,926)	38,926)	÷	151,071)	=	0.26	0.26	×	4.20% × (1 – 21.00%)	=	0.85%
Operating lease liability⁴	1,998)	1,998)	÷	151,071)	=	0.01	0.01	×	3.10% × (1 – 21.00%)	=	0.03%
Total:	151,071)					1.00					6.84%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	135,161)	135,161)	÷	186,500)	=	0.72	0.72	×	8.17%	=	5.92%
Debt³	48,651)	48,651)	÷	186,500)	=	0.26	0.26	×	3.70% × (1 – 21.00%)	=	0.76%
Operating lease liability⁴	2,688)	2,688)	÷	186,500)	=	0.01	0.01	×	3.50% × (1 – 21.00%)	=	0.04%
Total:	186,500)					1.00					6.72%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

RTX Corp., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in millions)
Economic profit¹	(3,690)	(3,588)	(3,088)	(9,501)	286)
Invested capital²	112,037)	113,345)	114,687)	115,597)	103,395)
Performance Ratio
Economic spread ratio³	-3.29%	-3.17%	-2.69%	-8.22%	0.28%
Benchmarks
Economic Spread Ratio, Competitors⁴
Boeing Co.	-14.30%	-19.71%	-18.38%	-29.94%	-19.78%
Caterpillar Inc.	4.75%	1.11%	1.04%	-5.09%	1.23%
Cummins Inc.	-7.00%	-1.25%	2.69%	-0.63%	4.75%
Eaton Corp. plc	-2.42%	-4.52%	-4.30%	-6.41%	-3.74%
General Electric Co.	7.46%	-8.77%	-13.76%	-3.91%	-6.47%
Honeywell International Inc.	0.18%	-0.77%	0.28%	-1.16%	3.12%
Lockheed Martin Corp.	17.27%	13.26%	14.25%	17.56%	18.18%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -3,690 ÷ 112,037 = -3.29%

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.	RTX Corp. economic spread ratio deteriorated from 2021 to 2022 and from 2022 to 2023.

RTX Corp., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in millions)
Economic profit¹	(3,690)	(3,588)	(3,088)	(9,501)	286)
Net sales	68,920)	67,074)	64,388)	56,587)	77,046)
Performance Ratio
Economic profit margin²	-5.35%	-5.35%	-4.80%	-16.79%	0.37%
Benchmarks
Economic Profit Margin, Competitors³
Boeing Co.	-8.25%	-15.04%	-14.58%	-24.52%	-9.18%
Caterpillar Inc.	4.28%	1.07%	1.20%	-7.06%	1.33%
Cummins Inc.	-4.23%	-1.00%	1.95%	-0.55%	3.05%
Eaton Corp. plc	-3.28%	-6.70%	-6.46%	-9.85%	-5.15%
General Electric Co.	5.80%	-7.95%	-13.89%	-6.25%	-9.61%
Honeywell International Inc.	0.23%	-1.01%	0.39%	-1.72%	3.63%
Lockheed Martin Corp.	7.01%	5.34%	6.08%	7.53%	7.80%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Economic profit. See details »

² 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × -3,690 ÷ 68,920 = -5.35%

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.	RTX Corp. economic profit margin deteriorated from 2021 to 2022 and from 2022 to 2023.

RTX Corp. (NYSE:RTX)

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