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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

salesforce.com inc., economic profit calculation

US$ in millions

12 months ended:	Jan 31, 2020	Jan 31, 2019	Jan 31, 2018	Jan 31, 2017	Jan 31, 2016	Jan 31, 2015
Net operating profit after taxes (NOPAT)¹	2,330	2,601	1,799	1,311	1,016	629
Cost of capital²	14.14%	14.01%	13.96%	13.67%	13.77%	13.68%
Invested capital³	46,885	29,066	18,985	16,914	10,966	9,522

Economic profit⁴	(4,299)	(1,473)	(852)	(1,002)	(493)	(673)

Based on: 10-K (filing date: 2020-03-05), 10-K (filing date: 2019-03-08), 10-K (filing date: 2018-03-09), 10-K (filing date: 2017-03-06), 10-K (filing date: 2016-03-07), 10-K (filing date: 2015-03-06).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2020 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,330 – 14.14% × 46,885 = -4,299

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.	salesforce.com inc.’s economic profit decreased from 2018 to 2019 and from 2019 to 2020.

salesforce.com inc., NOPAT calculation

US$ in millions

12 months ended:	Jan 31, 2020	Jan 31, 2019	Jan 31, 2018	Jan 31, 2017	Jan 31, 2016	Jan 31, 2015
Net income (loss)	126	1,110	127	180	(47)	(263)
Deferred income tax expense (benefit)¹	27	(283)	(6)	(231)	1	(3)
Increase (decrease) in allowance for doubtful accounts²	1	1	9	2	2	3
Increase (decrease) in unearned revenue³	2,098	1,569	1,552	1,251	970	799
Increase (decrease) in equity equivalents⁴	2,126	1,287	1,555	1,022	973	800
Interest expense	131	154	87	89	72	73
Interest expense, operating lease liability⁵	86	161	124	106	82	79
Adjusted interest expense	217	315	211	195	154	152
Tax benefit of interest expense⁶	(46)	(66)	(71)	(68)	(54)	(53)
Adjusted interest expense, after taxes⁷	172	249	140	127	100	99
(Gain) loss on marketable securities	(1)	4	1	(5)	(1)	—
Investment income, interest income	(117)	(61)	(36)	(22)	(14)	(10)
Investment income, before taxes	(118)	(57)	(36)	(27)	(15)	(10)
Tax expense (benefit) of investment income⁸	25	12	12	10	5	4
Investment income, after taxes⁹	(93)	(45)	(24)	(18)	(10)	(7)
Net operating profit after taxes (NOPAT)	2,330	2,601	1,799	1,311	1,016	629

Based on: 10-K (filing date: 2020-03-05), 10-K (filing date: 2019-03-08), 10-K (filing date: 2018-03-09), 10-K (filing date: 2017-03-06), 10-K (filing date: 2016-03-07), 10-K (filing date: 2015-03-06).

¹ Elimination of deferred tax expense. See details »

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

³ Addition of increase (decrease) in unearned revenue.

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

⁵ 2020 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 3,195 × 2.70% = 86

⁶ 2020 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 217 × 21.00% = 46

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

⁸ 2020 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 118 × 21.00% = 25

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.	salesforce.com inc.’s NOPAT increased from 2018 to 2019 but then slightly decreased from 2019 to 2020.

salesforce.com inc., cash operating taxes calculation

US$ in millions

12 months ended:	Jan 31, 2020	Jan 31, 2019	Jan 31, 2018	Jan 31, 2017	Jan 31, 2016	Jan 31, 2015
Provision for (benefit from) income taxes	580	(127)	75	(154)	112	50
Less: Deferred income tax expense (benefit)	27	(283)	(6)	(231)	1	(3)
Add: Tax savings from interest expense	46	66	71	68	54	53
Less: Tax imposed on investment income	25	12	12	10	5	4
Cash operating taxes	574	210	140	135	160	103

Based on: 10-K (filing date: 2020-03-05), 10-K (filing date: 2019-03-08), 10-K (filing date: 2018-03-09), 10-K (filing date: 2017-03-06), 10-K (filing date: 2016-03-07), 10-K (filing date: 2015-03-06).

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.	salesforce.com inc.’s cash operating taxes increased from 2018 to 2019 and from 2019 to 2020.

salesforce.com inc., invested capital calculation (financing approach)

US$ in millions

	Jan 31, 2020	Jan 31, 2019	Jan 31, 2018	Jan 31, 2017	Jan 31, 2016	Jan 31, 2015
Current portion of debt	4	3	1,025	—	—	—
Noncurrent debt, excluding current portion	2,673	3,173	695	2,008	1,294	1,371
Operating lease liability¹	3,195	3,418	2,724	2,382	1,889	1,811
Total reported debt & leases	5,872	6,594	4,444	4,390	3,183	3,182
Stockholders’ equity	33,885	15,605	9,388	7,500	5,003	3,975
Net deferred tax (assets) liabilities²	152	(104)	(12)	(5)	(4)	(7)
Allowance for doubtful accounts³	23	22	21	12	10	8
Unearned revenue⁴	10,662	8,564	7,095	5,543	4,292	3,321
Equity equivalents⁵	10,837	8,482	7,104	5,550	4,298	3,323
Accumulated other comprehensive (income) loss, net of tax⁶	93	58	27	76	50	24
Adjusted stockholders’ equity	44,815	24,145	16,520	13,126	9,350	7,322
Marketable securities⁷	(3,802)	(1,673)	(1,978)	(602)	(1,567)	(982)
Invested capital	46,885	29,066	18,985	16,914	10,966	9,522

Based on: 10-K (filing date: 2020-03-05), 10-K (filing date: 2019-03-08), 10-K (filing date: 2018-03-09), 10-K (filing date: 2017-03-06), 10-K (filing date: 2016-03-07), 10-K (filing date: 2015-03-06).

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 revenue.

⁵ Addition of equity equivalents to stockholders’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ 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.	salesforce.com inc.’s invested capital increased from 2018 to 2019 and from 2019 to 2020.

salesforce.com inc., cost of capital calculations

	Capital (fair value)¹	Weights					Cost of capital
Equity²	151,792	151,792	÷	157,880	=	0.96	0.96	×	14.61%	=	14.05%
Debt³	2,893	2,893	÷	157,880	=	0.02	0.02	×	3.54% × (1 – 21.00%)	=	0.05%
Operating lease liability⁴	3,195	3,195	÷	157,880	=	0.02	0.02	×	2.70% × (1 – 21.00%)	=	0.04%
Total:	157,880					1.00					14.14%

Based on: 10-K (filing date: 2020-03-05).

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	119,551	119,551	÷	126,146	=	0.95	0.95	×	14.61%	=	13.85%
Debt³	3,176	3,176	÷	126,146	=	0.03	0.03	×	3.46% × (1 – 21.00%)	=	0.07%
Operating lease liability⁴	3,418	3,418	÷	126,146	=	0.03	0.03	×	4.71% × (1 – 21.00%)	=	0.10%
Total:	126,146					1.00					14.01%

Based on: 10-K (filing date: 2019-03-08).

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	93,200	93,200	÷	98,421	=	0.95	0.95	×	14.61%	=	13.83%
Debt³	2,497	2,497	÷	98,421	=	0.03	0.03	×	2.58% × (1 – 33.80%)	=	0.04%
Operating lease liability⁴	2,724	2,724	÷	98,421	=	0.03	0.03	×	4.57% × (1 – 33.80%)	=	0.08%
Total:	98,421					1.00					13.96%

Based on: 10-K (filing date: 2018-03-09).

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	58,369	58,369	÷	63,142	=	0.92	0.92	×	14.61%	=	13.50%
Debt³	2,392	2,392	÷	63,142	=	0.04	0.04	×	2.43% × (1 – 35.00%)	=	0.06%
Operating lease liability⁴	2,382	2,382	÷	63,142	=	0.04	0.04	×	4.46% × (1 – 35.00%)	=	0.11%
Total:	63,142					1.00					13.67%

Based on: 10-K (filing date: 2017-03-06).

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	47,292	47,292	÷	50,780	=	0.93	0.93	×	14.61%	=	13.61%
Debt³	1,599	1,599	÷	50,780	=	0.03	0.03	×	2.68% × (1 – 35.00%)	=	0.05%
Operating lease liability⁴	1,889	1,889	÷	50,780	=	0.04	0.04	×	4.34% × (1 – 35.00%)	=	0.10%
Total:	50,780					1.00					13.77%

Based on: 10-K (filing date: 2016-03-07).

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	42,003	42,003	÷	45,414	=	0.92	0.92	×	14.61%	=	13.51%
Debt³	1,600	1,600	÷	45,414	=	0.04	0.04	×	2.37% × (1 – 35.00%)	=	0.05%
Operating lease liability⁴	1,811	1,811	÷	45,414	=	0.04	0.04	×	4.37% × (1 – 35.00%)	=	0.11%
Total:	45,414					1.00					13.68%

Based on: 10-K (filing date: 2015-03-06).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

salesforce.com inc., economic spread ratio calculation, comparison to benchmarks

	Jan 31, 2020	Jan 31, 2019	Jan 31, 2018	Jan 31, 2017	Jan 31, 2016	Jan 31, 2015
Selected Financial Data (US$ in millions)
Economic profit¹	(4,299)	(1,473)	(852)	(1,002)	(493)	(673)
Invested capital²	46,885	29,066	18,985	16,914	10,966	9,522
Performance Ratio
Economic spread ratio³	-9.17%	-5.07%	-4.49%	-5.92%	-4.50%	-7.07%
Benchmarks
Economic Spread Ratio, Competitors⁴
Adobe Inc.	—	6.25%	3.88%	8.55%	7.69%	-1.53%
Alphabet Inc.	—	20.61%	22.16%	7.56%	14.80%	10.19%
Autodesk Inc.	1.90%	-19.18%	-31.14%	-28.93%	-10.40%	-9.69%
Facebook Inc.	—	15.17%	24.28%	24.62%	12.63%	-3.22%
International Business Machines Corp.	—	-2.82%	-3.12%	-5.89%	-1.81%	1.95%
Intuit Inc.	—	21.83%	19.51%	24.12%	22.35%	15.66%
Microsoft Corp.	—	29.76%	9.16%	24.29%	41.42%	17.69%
Oracle Corp.	3.27%	6.20%	-2.85%	4.06%	6.79%	5.46%
ServiceNow Inc.	—	4.11%	0.12%	0.65%	-26.26%	-14.25%

Based on: 10-K (filing date: 2020-03-05), 10-K (filing date: 2019-03-08), 10-K (filing date: 2018-03-09), 10-K (filing date: 2017-03-06), 10-K (filing date: 2016-03-07), 10-K (filing date: 2015-03-06).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2020 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -4,299 ÷ 46,885 = -9.17%

⁴ Click competitor name to see calculations.

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.	salesforce.com inc.’s economic spread ratio deteriorated from 2018 to 2019 and from 2019 to 2020.

salesforce.com inc., economic profit margin calculation, comparison to benchmarks

	Jan 31, 2020	Jan 31, 2019	Jan 31, 2018	Jan 31, 2017	Jan 31, 2016	Jan 31, 2015
Selected Financial Data (US$ in millions)
Economic profit¹	(4,299)	(1,473)	(852)	(1,002)	(493)	(673)

Revenues	17,098	13,282	10,480	8,392	6,667	5,374
Add: Increase (decrease) in unearned revenue	2,098	1,569	1,552	1,251	970	799
Adjusted revenues	19,196	14,851	12,032	9,643	7,637	6,173
Performance Ratio
Economic profit margin²	-22.40%	-9.92%	-7.08%	-10.39%	-6.46%	-10.90%
Benchmarks
Economic Profit Margin, Competitors³
Adobe Inc.	—	9.40%	6.35%	11.15%	9.98%	-2.34%
Alphabet Inc.	—	12.78%	14.05%	4.46%	11.81%	9.70%
Autodesk Inc.	2.51%	-31.26%	-45.34%	-43.14%	-13.11%	-11.61%
Facebook Inc.	—	14.09%	26.22%	25.19%	17.67%	-5.70%
International Business Machines Corp.	—	-4.82%	-4.38%	-8.01%	-2.42%	2.42%
Intuit Inc.	—	14.53%	12.96%	13.41%	12.63%	9.92%
Microsoft Corp.	—	20.03%	6.03%	18.56%	21.35%	7.78%
Oracle Corp.	7.44%	11.29%	-5.14%	8.33%	11.77%	9.64%
ServiceNow Inc.	—	3.02%	0.10%	0.52%	-19.72%	-12.55%

Based on: 10-K (filing date: 2020-03-05), 10-K (filing date: 2019-03-08), 10-K (filing date: 2018-03-09), 10-K (filing date: 2017-03-06), 10-K (filing date: 2016-03-07), 10-K (filing date: 2015-03-06).

¹ Economic profit. See details »

² 2020 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × -4,299 ÷ 19,196 = -22.40%

³ Click competitor name to see calculations.

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.	salesforce.com inc.’s economic profit margin deteriorated from 2018 to 2019 and from 2019 to 2020.

salesforce.com inc. (NYSE:CRM)

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