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Microsoft Excel LibreOffice Calc

Time Warner Inc. (NYSE:TWX)


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

Time Warner Inc., economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
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 (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).

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
= × =

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 Inc.’s economic profit decreased from 2015 to 2016 and from 2016 to 2017.

Net Operating Profit after Taxes (NOPAT)

Time Warner Inc., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net income attributable to Time Warner Inc. shareholders
Deferred income tax expense (benefit)1
Increase (decrease) in allowance for doubtful accounts2
Increase (decrease) in deferred revenue3
Increase (decrease) in accrued restructuring and severance costs4
Increase (decrease) in equity equivalents5
Interest expense
Interest expense, operating lease liability6
Adjusted interest expense
Tax benefit of interest expense7
Adjusted interest expense, after taxes8
(Gain) loss on marketable securities
Interest income
Investment income, before taxes
Tax expense (benefit) of investment income9
Investment income, after taxes10
(Income) loss from discontinued operations, net of tax11
Net income (loss) attributable to noncontrolling interest
Net operating profit after taxes (NOPAT)

Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).

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.

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 Inc.’s NOPAT increased from 2015 to 2016 and from 2016 to 2017.

Cash Operating Taxes

Time Warner Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Current and deferred income taxes provided on Income from continuing operations
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense
Less: Tax imposed on investment income
Cash operating taxes

Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).

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 Inc.’s cash operating taxes decreased from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

Invested Capital

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

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Debt due within one year
Long-term debt, excluding due within one year
Operating lease liability1
Total reported debt & leases
Total Time Warner Inc. shareholders’ equity
Net deferred tax (assets) liabilities2
Allowance for doubtful accounts3
Deferred revenue4
Accrued restructuring and severance costs5
Equity equivalents6
Accumulated other comprehensive (income) loss, net of tax7
Redeemable noncontrolling interest
Noncontrolling interest
Adjusted total Time Warner Inc. shareholders’ equity
Construction in progress8
Marketable securities9
Invested capital

Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).

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.

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 Inc.’s invested capital increased from 2015 to 2016 and from 2016 to 2017.

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 (filing date: 2018-02-22).

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: 2017-02-23).

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: 2016-02-25).

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: 2015-02-26).

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: 2014-02-26).

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

Microsoft Excel LibreOffice Calc
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

Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).

1 Economic profit. See details »

2 Invested capital. See details »

3 2017 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

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 Inc.’s economic spread ratio deteriorated from 2015 to 2016 and from 2016 to 2017.

Economic Profit Margin

Time Warner Inc., economic profit margin calculation

Microsoft Excel LibreOffice Calc
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

Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).

1 Economic profit. See details »

2 2017 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =

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. Time Warner Inc.’s economic profit margin deteriorated from 2015 to 2016 and from 2016 to 2017.