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Microsoft Excel LibreOffice Calc

UnitedHealth Group Inc. (UNH)


Economic Value Added (EVA)

Difficulty: Advanced

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

UnitedHealth Group Inc., economic profit calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net operating profit after taxes (NOPAT)1 hidden hidden hidden hidden hidden
Cost of capital2 hidden hidden hidden hidden hidden
Invested capital3 hidden hidden hidden hidden hidden
 
Economic profit4 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-12), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-08), 10-K (filing date: 2016-02-09), 10-K (filing date: 2015-02-10).

1 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

<>4 2018 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= hiddenhidden × hidden = hidden

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. UnitedHealth Group Inc.’s economic profit increased from 2016 to 2017 and from 2017 to 2018.

Net Operating Profit after Taxes (NOPAT)

UnitedHealth Group Inc., NOPAT calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net earnings attributable to UnitedHealth Group common shareholders hidden hidden hidden hidden hidden
Deferred income tax expense (benefit)1 hidden hidden hidden hidden hidden
Increase (decrease) in receivables allowances2 hidden hidden hidden hidden hidden
Increase (decrease) in unearned revenues3 hidden hidden hidden hidden hidden
Increase (decrease) in equity equivalents4 hidden hidden hidden hidden hidden
Interest expense hidden hidden hidden hidden hidden
Interest expense, operating lease liability5 hidden hidden hidden hidden hidden
Adjusted interest expense hidden hidden hidden hidden hidden
Tax benefit of interest expense6 hidden hidden hidden hidden hidden
Adjusted interest expense, after taxes7 hidden hidden hidden hidden hidden
(Gain) loss on marketable securities hidden hidden hidden hidden hidden
Investment income, before taxes hidden hidden hidden hidden hidden
Tax expense (benefit) of investment income8 hidden hidden hidden hidden hidden
Investment income, after taxes9 hidden hidden hidden hidden hidden
Net income (loss) attributable to noncontrolling interest hidden hidden hidden hidden hidden
Net operating profit after taxes (NOPAT) hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-12), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-08), 10-K (filing date: 2016-02-09), 10-K (filing date: 2015-02-10).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in receivables allowances.

3 Addition of increase (decrease) in unearned revenues.

4 Addition of increase (decrease) in equity equivalents to net earnings attributable to UnitedHealth Group common shareholders.

5 2018 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= hidden × hidden = hidden

6 2018 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= hidden × 21.00% = hidden

7 Addition of after taxes interest expense to net earnings attributable to UnitedHealth Group common shareholders.

8 2018 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= hidden × 21.00% = hidden

9 Elimination of after taxes investment income.

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. UnitedHealth Group Inc.’s NOPAT increased from 2016 to 2017 and from 2017 to 2018.

Cash Operating Taxes

UnitedHealth Group Inc., cash operating taxes calculation

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Provision for income taxes hidden hidden hidden hidden hidden
Less: Deferred income tax expense (benefit) hidden hidden hidden hidden hidden
Add: Tax savings from interest expense hidden hidden hidden hidden hidden
Less: Tax imposed on investment income hidden hidden hidden hidden hidden
Cash operating taxes hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-12), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-08), 10-K (filing date: 2016-02-09), 10-K (filing date: 2015-02-10).

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. UnitedHealth Group Inc.’s cash operating taxes declined from 2016 to 2017 and from 2017 to 2018.

Invested Capital

UnitedHealth Group Inc., invested capital calculation (financing approach)

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Commercial paper and current maturities of long-term debt hidden hidden hidden hidden hidden
Long-term debt, less current maturities hidden hidden hidden hidden hidden
Operating lease liability1 hidden hidden hidden hidden hidden
Total reported debt & leases hidden hidden hidden hidden hidden
Shareholders’ equity hidden hidden hidden hidden hidden
Net deferred tax (assets) liabilities2 hidden hidden hidden hidden hidden
Receivables allowances3 hidden hidden hidden hidden hidden
Unearned revenues4 hidden hidden hidden hidden hidden
Equity equivalents5 hidden hidden hidden hidden hidden
Accumulated other comprehensive (income) loss, net of tax6 hidden hidden hidden hidden hidden
Redeemable noncontrolling interests hidden hidden hidden hidden hidden
Nonredeemable noncontrolling interests hidden hidden hidden hidden hidden
Adjusted shareholders’ equity hidden hidden hidden hidden hidden
Investments7 hidden hidden hidden hidden hidden
Invested capital hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-12), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-08), 10-K (filing date: 2016-02-09), 10-K (filing date: 2015-02-10).

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 unearned revenues.

5 Addition of equity equivalents to shareholders’ equity.

6 Removal of accumulated other comprehensive income.

7 Subtraction of investments.

Item Description The company
Invested capital Capital is an approximation of the economic book value of all cash invested in going-concern business activities. UnitedHealth Group Inc.’s invested capital increased from 2016 to 2017 and from 2017 to 2018.

Cost of Capital

UnitedHealth Group Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Commercial paper, long-term debt and other financing obligations3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 21.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 21.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

Based on: 10-K (filing date: 2019-02-12).

1 US$ in millions

2 Equity. See details »

3 Commercial paper, long-term debt and other financing obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Commercial paper, long-term debt and other financing obligations3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

Based on: 10-K (filing date: 2018-02-13).

1 US$ in millions

2 Equity. See details »

3 Commercial paper, long-term debt and other financing obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Commercial paper, long-term debt and other financing obligations3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

Based on: 10-K (filing date: 2017-02-08).

1 US$ in millions

2 Equity. See details »

3 Commercial paper, long-term debt and other financing obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Commercial paper, long-term debt and other financing obligations3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

Based on: 10-K (filing date: 2016-02-09).

1 US$ in millions

2 Equity. See details »

3 Commercial paper, long-term debt and other financing obligations. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 hidden hidden ÷ hidden = hidden hidden × hidden = hidden
Commercial paper, long-term debt and other financing obligations3 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Operating lease liability4 hidden hidden ÷ hidden = hidden hidden × hidden × (1 – 35.00%) = hidden
Total capital: hidden Total weights: hidden Cost of total capital: hidden

Based on: 10-K (filing date: 2015-02-10).

1 US$ in millions

2 Equity. See details »

3 Commercial paper, long-term debt and other financing obligations. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

UnitedHealth Group Inc., economic spread ratio calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in millions)
Economic profit1 hidden hidden hidden hidden hidden
Invested capital2 hidden hidden hidden hidden hidden
Performance Ratio
Economic spread ratio3 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-12), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-08), 10-K (filing date: 2016-02-09), 10-K (filing date: 2015-02-10).

1 Economic profit. See details »

2 Invested capital. See details »

3 2018 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × hidden ÷ hidden = hidden

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. UnitedHealth Group Inc.’s economic spread ratio improved from 2016 to 2017 and from 2017 to 2018.

Economic Profit Margin

UnitedHealth Group Inc., economic profit margin calculation

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Selected Financial Data (US$ in millions)
Economic profit1 hidden hidden hidden hidden hidden
Revenues hidden hidden hidden hidden hidden
Add: Increase (decrease) in unearned revenues hidden hidden hidden hidden hidden
Adjusted revenues hidden hidden hidden hidden hidden
Performance Ratio
Economic profit margin2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-12), 10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-08), 10-K (filing date: 2016-02-09), 10-K (filing date: 2015-02-10).

1 Economic profit. See details »

2 2018 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × hidden ÷ hidden = hidden

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. UnitedHealth Group Inc.’s economic profit margin improved from 2016 to 2017 and from 2017 to 2018.