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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

Time Warner Cable Inc., economic profit calculation

US$ in millions

12 months ended:	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Net operating profit after taxes (NOPAT)¹	3,391)	3,745)	3,388)	3,807)	3,328)
Cost of capital²	10.14%	9.24%	9.38%	7.87%	8.21%
Invested capital³	45,332)	44,929)	44,327)	46,124)	44,961)

Economic profit⁴	(1,204)	(408)	(771)	179)	(362)

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2015 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,391 – 10.14% × 45,332 = -1,204

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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.	Time Warner Cable Inc. economic profit increased from 2013 to 2014 but then decreased significantly from 2014 to 2015.

Time Warner Cable Inc., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Net income attributable to TWC shareholders	1,844)	2,031)	1,954)	2,155)	1,665)
Deferred income tax expense (benefit)¹	593)	756)	363)	562)	638)
Increase (decrease) in allowance for doubtful accounts²	(15)	32)	12)	3)	(12)
Increase (decrease) in deferred revenue and subscriber-related liabilities³	26)	10)	5)	14)	6)
Increase (decrease) in restructuring reserves⁴	4)	(35)	16)	(6)	11)
Increase (decrease) in equity equivalents⁵	608)	763)	396)	573)	643)
Interest expense	1,402)	1,419)	1,555)	1,614)	1,524)
Interest expense, operating lease liability⁶	42)	44)	43)	41)	42)
Adjusted interest expense	1,444)	1,463)	1,598)	1,655)	1,566)
Tax benefit of interest expense⁷	(506)	(512)	(559)	(579)	(548)
Adjusted interest expense, after taxes⁸	939)	951)	1,038)	1,075)	1,018)
Net income (loss) attributable to noncontrolling interest	—)	—)	—)	4)	2)
Net operating profit after taxes (NOPAT)	3,391)	3,745)	3,388)	3,807)	3,328)

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

¹ Elimination of deferred tax expense. See details »

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

³ Addition of increase (decrease) in deferred revenue and subscriber-related liabilities.

⁴ Addition of increase (decrease) in restructuring reserves.

⁵ Addition of increase (decrease) in equity equivalents to net income attributable to TWC shareholders.

⁶ 2015 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 681 × 6.22% = 42

⁷ 2015 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,444 × 35.00% = 506

⁸ Addition of after taxes interest expense to net income attributable to TWC shareholders.

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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.	Time Warner Cable Inc. NOPAT increased from 2013 to 2014 but then slightly decreased from 2014 to 2015 not reaching 2013 level.

Time Warner Cable Inc., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Income tax provision	1,144)	1,217)	1,085)	1,177)	795)
Less: Deferred income tax expense (benefit)	593)	756)	363)	562)	638)
Add: Tax savings from interest expense	506)	512)	559)	579)	548)
Cash operating taxes	1,057)	973)	1,281)	1,194)	705)

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

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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.	Time Warner Cable Inc. cash operating taxes decreased from 2013 to 2014 but then slightly increased from 2014 to 2015.

Time Warner Cable Inc., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Current maturities of long-term debt	5)	1,017)	1,767)	1,518)	2,122)
Long-term debt, excluding current maturities	22,497)	22,701)	23,285)	25,171)	24,320)
Operating lease liability¹	681)	740)	724)	689)	696)
Total reported debt & leases	23,183)	24,458)	25,776)	27,378)	27,138)
Total TWC shareholders’ equity	8,995)	8,013)	6,943)	7,279)	7,530)
Net deferred tax (assets) liabilities²	12,830)	12,291)	11,764)	10,963)	9,931)
Allowance for doubtful accounts³	94)	109)	77)	65)	62)
Deferred revenue and subscriber-related liabilities⁴	224)	198)	188)	183)	169)
Restructuring reserves⁵	12)	8)	43)	27)	33)
Equity equivalents⁶	13,160)	12,606)	12,072)	11,238)	10,195)
Accumulated other comprehensive (income) loss, net of tax⁷	414)	324)	(44)	663)	559)
Noncontrolling interests	4)	4)	4)	4)	7)
Adjusted total TWC shareholders’ equity	22,573)	20,947)	18,975)	19,184)	18,291)
Construction in progress⁸	(424)	(476)	(424)	(438)	(468)
Invested capital	45,332)	44,929)	44,327)	46,124)	44,961)

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

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 deferred revenue and subscriber-related liabilities.

⁵ Addition of restructuring reserves.

⁶ Addition of equity equivalents to total TWC shareholders’ equity.

⁷ Removal of accumulated other comprehensive income.

⁸ Subtraction of construction in progress.

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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.	Time Warner Cable Inc. invested capital increased from 2013 to 2014 and from 2014 to 2015.

Time Warner Cable Inc., cost of capital calculations

Dec 31, 2015

	Capital (fair value)¹	Weights					Cost of capital
Equity²	52,402)	52,402)	÷	76,796)	=	0.68	0.68	×	12.97%	=	8.85%
Debt³	23,713)	23,713)	÷	76,796)	=	0.31	0.31	×	6.22% × (1 – 35.00%)	=	1.25%
Operating lease liability⁴	681)	681)	÷	76,796)	=	0.01	0.01	×	6.22% × (1 – 35.00%)	=	0.04%
Total:	76,796)					1.00					10.14%

Based on: 10-K (reporting date: 2015-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2014

	Capital (fair value)¹	Weights					Cost of capital
Equity²	42,062)	42,062)	÷	71,236)	=	0.59	0.59	×	12.97%	=	7.66%
Debt³	28,434)	28,434)	÷	71,236)	=	0.40	0.40	×	5.95% × (1 – 35.00%)	=	1.54%
Operating lease liability⁴	740)	740)	÷	71,236)	=	0.01	0.01	×	5.95% × (1 – 35.00%)	=	0.04%
Total:	71,236)					1.00					9.24%

Based on: 10-K (reporting date: 2014-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2013

	Capital (fair value)¹	Weights					Cost of capital
Equity²	40,225)	40,225)	÷	66,185)	=	0.61	0.61	×	12.97%	=	7.88%
Debt³	25,236)	25,236)	÷	66,185)	=	0.38	0.38	×	5.88% × (1 – 35.00%)	=	1.46%
Operating lease liability⁴	724)	724)	÷	66,185)	=	0.01	0.01	×	5.88% × (1 – 35.00%)	=	0.04%
Total:	66,185)					1.00					9.38%

Based on: 10-K (reporting date: 2013-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2012

	Capital (fair value)¹	Weights					Cost of capital
Equity²	25,692)	25,692)	÷	58,165)	=	0.44	0.44	×	12.97%	=	5.73%
Debt³	31,784)	31,784)	÷	58,165)	=	0.55	0.55	×	5.89% × (1 – 35.00%)	=	2.09%
Operating lease liability⁴	689)	689)	÷	58,165)	=	0.01	0.01	×	5.89% × (1 – 35.00%)	=	0.05%
Total:	58,165)					1.00					7.87%

Based on: 10-K (reporting date: 2012-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2011

	Capital (fair value)¹	Weights					Cost of capital
Equity²	24,392)	24,392)	÷	51,530)	=	0.47	0.47	×	12.97%	=	6.14%
Debt³	26,442)	26,442)	÷	51,530)	=	0.51	0.51	×	6.04% × (1 – 35.00%)	=	2.01%
Operating lease liability⁴	696)	696)	÷	51,530)	=	0.01	0.01	×	6.04% × (1 – 35.00%)	=	0.05%
Total:	51,530)					1.00					8.21%

Based on: 10-K (reporting date: 2011-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Time Warner Cable Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Selected Financial Data (US$ in millions)
Economic profit¹	(1,204)	(408)	(771)	179)	(362)
Invested capital²	45,332)	44,929)	44,327)	46,124)	44,961)
Performance Ratio
Economic spread ratio³	-2.66%	-0.91%	-1.74%	0.39%	-0.81%
Benchmarks
Economic Spread Ratio, Competitors⁴
Alphabet Inc.	—	—	—	—	—
Comcast Corp.	—	—	—	—	—
Meta Platforms Inc.	—	—	—	—	—
Netflix Inc.	—	—	—	—	—
Walt Disney Co.	—	—	—	—	—

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2015 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -1,204 ÷ 45,332 = -2.66%

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.	Time Warner Cable Inc. economic spread ratio improved from 2013 to 2014 but then deteriorated significantly from 2014 to 2015.

Time Warner Cable Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012	Dec 31, 2011
Selected Financial Data (US$ in millions)
Economic profit¹	(1,204)	(408)	(771)	179)	(362)

Revenue	23,697)	22,812)	22,120)	21,386)	19,675)
Add: Increase (decrease) in deferred revenue and subscriber-related liabilities	26)	10)	5)	14)	6)
Adjusted revenue	23,723)	22,822)	22,125)	21,400)	19,681)
Performance Ratio
Economic profit margin²	-5.07%	-1.79%	-3.48%	0.84%	-1.84%
Benchmarks
Economic Profit Margin, Competitors³
Alphabet Inc.	—	—	—	—	—
Comcast Corp.	—	—	—	—	—
Meta Platforms Inc.	—	—	—	—	—
Netflix Inc.	—	—	—	—	—
Walt Disney Co.	—	—	—	—	—

Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).

¹ Economic profit. See details »

² 2015 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × -1,204 ÷ 23,723 = -5.07%

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.	Time Warner Cable Inc. economic profit margin improved from 2013 to 2014 but then deteriorated significantly from 2014 to 2015.

Time Warner Cable Inc. (NYSE:TWC)

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