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.
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- Statement of Comprehensive Income
- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Long-term (Investment) Activity Ratios
- Enterprise Value (EV)
- Dividend Discount Model (DDM)
- Return on Equity (ROE) since 2005
- Debt to Equity since 2005
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Economic Profit
Time Warner Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2017 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes remained relatively stable over the five-year period, starting at 5,150 million USD in 2013 and ending slightly lower at 5,040 million USD in 2017. The value peaked marginally in 2014 at 5,167 million USD before experiencing a decline in 2015 to 4,751 million USD, followed by a modest recovery in 2016 and 2017. Overall, the trend indicates minor fluctuations with a slight downward trajectory by the end of the period.
- Cost of Capital
- The cost of capital exhibited minor variations across the years. It was 11.32% in 2013, rising slightly to 11.34% in 2014. It then decreased to its lowest point at 10.76% in 2015, followed by a rebound to 11.43% in 2016. In 2017, it settled at 11.38%. The pattern reflects a degree of stability with modest shifts, showing a dip in the middle that was not sustained.
- Invested Capital
- Invested capital showed some fluctuations throughout the period. The value began at 56,262 million USD in 2013, decreased to its lowest point of 52,455 million USD in 2014, then experienced incremental growth in subsequent years, reaching 57,150 million USD in 2017. This indicates an overall recovery and growth in invested capital after an initial drop in 2014.
- Economic Profit
- The economic profit was negative for all years under review, indicating that returns did not exceed the cost of capital during the period. The deficit tended to worsen over time, starting at -1,219 million USD in 2013 and deteriorating to -1,463 million USD by 2017. Despite minor improvement in 2014 (-782 million USD), the overall trend shows increasing negative economic profit, highlighting ongoing challenges in generating value above capital costs.
Net Operating Profit after Taxes (NOPAT)
Time Warner Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
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.
4 Addition of increase (decrease) in accrued restructuring and severance costs.
5 Addition of increase (decrease) in equity equivalents to net income attributable to Time Warner Inc. shareholders.
6 2017 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2017 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 35.00% =
8 Addition of after taxes interest expense to net income attributable to Time Warner Inc. shareholders.
9 2017 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 35.00% =
10 Elimination of after taxes investment income.
11 Elimination of discontinued operations.
- Net Income Attributable to Time Warner Inc. Shareholders
- A consistent upward trend in net income is observable over the five-year period. Starting at $3,691 million in 2013, net income increased marginally each year, reaching $3,927 million in 2016. A notable rise occurred in 2017, with net income sharply increasing to $5,247 million, indicating a significant enhancement in profitability in that year.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT shows a relatively stable but slightly fluctuating pattern. From $5,150 million in 2013, it increased slightly to $5,167 million in 2014, followed by a decline to $4,751 million in 2015. The figure then recovered somewhat in 2016 and 2017, reaching $5,040 million by the end of 2017. Overall, NOPAT remained within a narrow range, suggesting moderate operational profit stability with some variation over the years.
- Comparative Observations
- While net income demonstrated a robust growth trajectory, especially in the final year, NOPAT displayed greater stability but without a clear upward trend. The divergence between the increasing net income and relatively stable NOPAT in the last year might indicate changes in non-operating factors such as financing activities, tax adjustments, or other income components contributing positively to net income.
Cash Operating Taxes
Time Warner Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
- Current and Deferred Income Taxes on Income from Continuing Operations
- The amount of current and deferred income taxes provided on income from continuing operations exhibited a fluctuating trend over the five-year period. In 2013, the value was 1,749 million US dollars, which decreased significantly to 785 million in 2014. It then increased again to 1,651 million in 2015, followed by a decline to 1,281 million in 2016. By the end of 2017, this measure further dropped to 701 million US dollars, marking the lowest point in the observed range. Overall, the data suggest variability with no clear upward or downward long-term trend, but a general reduction from the starting value.
- Cash Operating Taxes
- Cash operating taxes showed a more consistent upward trend compared to the income taxes provided on continuing operations. Starting at 1,442 million US dollars in 2013, there was a notable increase to 1,048 million in 2014, which appears to be a decline; however, the following years reversed this pattern with values rising to 1,757 million in 2015 and then slightly decreasing to 1,465 million in 2016. The amount surged substantially in 2017 to 2,078 million US dollars, representing the highest value within the period. This trend indicates growing cash tax liabilities over time, with some minor fluctuations in the middle years.
- Comparison Insights
- Comparing both tax-related measures reveals divergent patterns: while current and deferred income taxes showed a volatile yet generally declining trend, cash operating taxes tended to increase, especially markedly in the final year. This divergence may indicate changes in tax accounting, timing differences, or shifts in taxable income and cash tax payment obligations across the reporting years.
Invested Capital
Time Warner Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
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.
5 Addition of accrued restructuring and severance costs.
6 Addition of equity equivalents to total Time Warner Inc. shareholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
9 Subtraction of marketable securities.
- Total Reported Debt & Leases
- The total reported debt and leases exhibited a generally increasing trend from 2013 to 2016, rising from $21,765 million to $25,355 million. However, in 2017, there was a slight decrease to $24,720 million. This indicates an overall growth in debt commitments over the period, with a minor reduction in the final year.
- Total Time Warner Inc. Shareholders’ Equity
- Shareholders’ equity showed a declining trend from 2013 through 2015, decreasing from $29,904 million to $23,619 million. In 2016, the equity slightly increased to $24,335 million and further rebounded more significantly in 2017 to $28,375 million. This pattern suggests a period of equity contraction followed by recovery toward the end of the analyzed timeframe.
- Invested Capital
- Invested capital declined from $56,262 million in 2013 to $52,455 million in 2014, followed by a modest increase in subsequent years, reaching $57,150 million in 2017. The leveling and eventual rise in invested capital imply a stabilization and renewed investment activities after an initial drop.
- Overall Observations
- Over the five-year period, the company’s financial structure demonstrated changes characterized by an initial increase in debt and decrease in equity and invested capital, followed by a stabilization and partial recovery. The reduction in shareholders’ equity between 2013 and 2015 could be indicative of challenges faced, while the subsequent increases in equity and invested capital suggest restored confidence and investment. The relatively stable debt levels near the end of the period highlight a controlled leverage approach.
Cost of Capital
Time Warner Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2017-12-31).
1 US$ 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 (reporting date: 2016-12-31).
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 (reporting date: 2015-12-31).
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 (reporting date: 2014-12-31).
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 (reporting date: 2013-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Time Warner Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2017 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit demonstrated a continual negative trend over the analyzed period. Starting at -1,219 million US dollars in 2013, it improved somewhat in 2014 to -782 million, but then deteriorated again, reaching -1,463 million by 2017. This pattern indicates persistent economic losses, with the largest deficit occurring in the final year.
- Invested Capital
- The invested capital showed moderate fluctuations but an overall gradual increase. It decreased from 56,262 million US dollars in 2013 to 52,455 million in 2014, then steadily increased each year, reaching 57,150 million by 2017. This suggests a reinvestment or asset growth strategy following the initial decline.
- Economic Spread Ratio
- The economic spread ratio was consistently negative throughout the period, indicating that the returns on invested capital were below the cost of capital. The ratio improved in 2014 (-1.49%) from the previous year but worsened afterward, declining to -2.56% by 2017. This trend reflects decreasing efficiency in generating returns over the invested capital.
Economic Profit Margin
Time Warner Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
Based on: 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31).
1 Economic profit. See details »
2 2017 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit exhibited a consistently negative trend throughout the five-year period. Starting at -1219 million US dollars in 2013, it improved to -782 million in 2014, indicating a temporary reduction in losses. However, this improvement was followed by a deterioration, with economic profit decreasing to -969 million in 2015, further dropping to -1336 million in 2016, and reaching -1463 million by 2017. This pattern suggests increasing economic losses after an initial partial recovery.
- Adjusted Revenues
- Adjusted revenues demonstrated an overall upward trend over the period analyzed. Revenues began at 29,738 million US dollars in 2013, then experienced a decline to 27,360 million in 2014. Subsequently, revenues rose steadily each year, increasing to 28,192 million in 2015, 29,400 million in 2016, and 31,400 million in 2017. This indicates a recovery and growth in the company's top-line performance following the initial drop in 2014.
- Economic Profit Margin
- The economic profit margin also remained consistently negative throughout the five years, reflecting unprofitable economic performance relative to revenues. The margin improved from -4.1% in 2013 to -2.86% in 2014, showing a temporary enhancement in efficiency or profitability. Nonetheless, this trend reversed thereafter, with margins declining to -3.44% in 2015, further worsening to -4.55% in 2016, and slightly declining again to -4.66% in 2017. This downward trajectory aligns with the patterns observed in economic profit figures.
- Summary Insights
- The data reveals a significant challenge in achieving positive economic profit over the examined period despite growing adjusted revenues after 2014. The initial improvement in economic profit and margin in 2014 was not sustained, indicating increasing costs, investments, or other factors negatively impacting economic profit. The persistent negative economic profit margin highlights ongoing difficulties in generating returns exceeding the cost of capital, despite revenue growth in the latter years. This suggests a need for strategic or operational adjustments to improve profitability metrics going forward.