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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

Honeywell International Inc., economic profit calculation

US$ in millions

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net operating profit after taxes (NOPAT)¹	5,956)	5,460)	5,961)	5,331)	6,640)
Cost of capital²	12.47%	12.59%	12.33%	12.28%	12.66%
Invested capital³	48,147)	47,332)	48,349)	49,130)	42,865)

Economic profit⁴	(49)	(497)	—)	(704)	1,215)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 5,956 – 12.47% × 48,147 = -49

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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.	Honeywell International Inc. economic profit decreased from 2021 to 2022 but then increased from 2022 to 2023 not reaching 2021 level.

Honeywell International Inc., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net income attributable to Honeywell	5,658)	4,966)	5,542)	4,779)	6,143)
Deferred income tax expense (benefit)¹	153)	(180)	178)	(175)	179)
Increase (decrease) in allowances²	(3)	149)	(25)	56)	(51)
Increase (decrease) in LIFO reserve³	—)	—)	—)	(45)	6)
Increase (decrease) in customer advances and deferred income⁴	(219)	402)	199)	488)	133)
Increase (decrease) in obligations for product warranties and product performance guarantees⁵	6)	(10)	(20)	(26)	(41)
Increase (decrease) in repositioning reserves⁶	(30)	(102)	(190)	(50)	85)
Increase (decrease) in equity equivalents⁷	(93)	259)	142)	248)	311)
Interest and other financial charges	765)	414)	343)	359)	357)
Interest expense, operating lease liability⁸	33)	20)	24)	24)	23)
Adjusted interest and other financial charges	798)	434)	367)	383)	380)
Tax benefit of interest and other financial charges⁹	(168)	(91)	(77)	(80)	(80)
Adjusted interest and other financial charges, after taxes¹⁰	630)	343)	290)	303)	300)
Interest income	(321)	(138)	(102)	(107)	(255)
Investment income, before taxes	(321)	(138)	(102)	(107)	(255)
Tax expense (benefit) of investment income¹¹	67)	29)	21)	22)	54)
Investment income, after taxes¹²	(254)	(109)	(81)	(85)	(201)
Net income (loss) attributable to noncontrolling interest	14)	1)	68)	86)	87)
Net operating profit after taxes (NOPAT)	5,956)	5,460)	5,961)	5,331)	6,640)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowances.

³ Addition of increase (decrease) in LIFO reserve. See details »

⁴ Addition of increase (decrease) in customer advances and deferred income.

⁵ Addition of increase (decrease) in obligations for product warranties and product performance guarantees.

⁶ Addition of increase (decrease) in repositioning reserves.

⁷ Addition of increase (decrease) in equity equivalents to net income attributable to Honeywell.

⁸ 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,093 × 3.00% = 33

⁹ 2023 Calculation
Tax benefit of interest and other financial charges = Adjusted interest and other financial charges × Statutory income tax rate
= 798 × 21.00% = 168

¹⁰ Addition of after taxes interest expense to net income attributable to Honeywell.

¹¹ 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 321 × 21.00% = 67

¹² Elimination of after taxes investment income.

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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.	Honeywell International Inc. NOPAT decreased from 2021 to 2022 but then increased from 2022 to 2023 not reaching 2021 level.

Honeywell International Inc., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Tax expense	1,487)	1,412)	1,625)	1,147)	1,329)
Less: Deferred income tax expense (benefit)	153)	(180)	178)	(175)	179)
Add: Tax savings from interest and other financial charges	168)	91)	77)	80)	80)
Less: Tax imposed on investment income	67)	29)	21)	22)	54)
Cash operating taxes	1,434)	1,654)	1,503)	1,380)	1,176)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

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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.	Honeywell International Inc. cash operating taxes increased from 2021 to 2022 but then decreased significantly from 2022 to 2023.

Honeywell International Inc., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Commercial paper and other short-term borrowings	2,085)	2,717)	3,542)	3,597)	3,516)
Current maturities of long-term debt	1,796)	1,730)	1,803)	2,445)	1,376)
Long-term debt, excluding current maturities	16,562)	15,123)	14,254)	16,342)	11,110)
Operating lease liability¹	1,093)	967)	1,032)	828)	705)
Total reported debt & leases	21,536)	20,537)	20,631)	23,212)	16,707)
Total Honeywell shareowners’ equity	15,856)	16,697)	18,569)	17,549)	18,494)
Net deferred tax (assets) liabilities²	1,702)	1,672)	1,874)	1,353)	1,584)
Allowances³	323)	326)	177)	202)	146)
LIFO reserve⁴	—)	—)	—)	—)	45)
Customer advances and deferred income⁵	4,670)	4,889)	4,487)	4,288)	3,800)
Obligations for product warranties and product performance guarantees⁶	219)	213)	223)	243)	269)
Repositioning reserves⁷	279)	309)	411)	601)	651)
Equity equivalents⁸	7,193)	7,409)	7,172)	6,687)	6,495)
Accumulated other comprehensive (income) loss, net of tax⁹	4,135)	3,475)	2,895)	3,377)	3,197)
Redeemable noncontrolling interest	7)	7)	7)	7)	7)
Noncontrolling interest	578)	622)	673)	241)	212)
Adjusted total Honeywell shareowners’ equity	27,769)	28,210)	29,316)	27,861)	28,405)
Construction in progress¹⁰	(878)	(769)	(856)	(825)	(724)
Available for sale investments¹¹	(280)	(646)	(742)	(1,118)	(1,523)
Invested capital	48,147)	47,332)	48,349)	49,130)	42,865)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

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 LIFO reserve. See details »

⁵ Addition of customer advances and deferred income.

⁶ Addition of obligations for product warranties and product performance guarantees.

⁷ Addition of repositioning reserves.

⁸ Addition of equity equivalents to total Honeywell shareowners’ equity.

⁹ Removal of accumulated other comprehensive income.

¹⁰ Subtraction of construction in progress.

¹¹ Subtraction of available for sale investments.

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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.	Honeywell International Inc. invested capital decreased from 2021 to 2022 but then increased from 2022 to 2023 not reaching 2021 level.

Honeywell International Inc., cost of capital calculations

Dec 31, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	128,591)	128,591)	÷	149,475)	=	0.86	0.86	×	14.10%	=	12.13%
Debt³	19,791)	19,791)	÷	149,475)	=	0.13	0.13	×	3.11% × (1 – 21.00%)	=	0.33%
Operating lease liability⁴	1,093)	1,093)	÷	149,475)	=	0.01	0.01	×	3.00% × (1 – 21.00%)	=	0.02%
Total:	149,475)					1.00					12.47%

Based on: 10-K (reporting date: 2023-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	133,942)	133,942)	÷	153,482)	=	0.87	0.87	×	14.10%	=	12.30%
Debt³	18,573)	18,573)	÷	153,482)	=	0.12	0.12	×	2.84% × (1 – 21.00%)	=	0.27%
Operating lease liability⁴	967)	967)	÷	153,482)	=	0.01	0.01	×	2.10% × (1 – 21.00%)	=	0.01%
Total:	153,482)					1.00					12.59%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	128,241)	128,241)	÷	149,837)	=	0.86	0.86	×	14.10%	=	12.07%
Debt³	20,564)	20,564)	÷	149,837)	=	0.14	0.14	×	2.30% × (1 – 21.00%)	=	0.25%
Operating lease liability⁴	1,032)	1,032)	÷	149,837)	=	0.01	0.01	×	2.30% × (1 – 21.00%)	=	0.01%
Total:	149,837)					1.00					12.33%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	141,583)	141,583)	÷	166,184)	=	0.85	0.85	×	14.10%	=	12.01%
Debt³	23,773)	23,773)	÷	166,184)	=	0.14	0.14	×	2.30% × (1 – 21.00%)	=	0.26%
Operating lease liability⁴	828)	828)	÷	166,184)	=	0.00	0.00	×	2.90% × (1 – 21.00%)	=	0.01%
Total:	166,184)					1.00					12.28%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	128,845)	128,845)	÷	146,644)	=	0.88	0.88	×	14.10%	=	12.39%
Debt³	17,094)	17,094)	÷	146,644)	=	0.12	0.12	×	2.79% × (1 – 21.00%)	=	0.26%
Operating lease liability⁴	705)	705)	÷	146,644)	=	0.00	0.00	×	3.30% × (1 – 21.00%)	=	0.01%
Total:	146,644)					1.00					12.66%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Honeywell International Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in millions)
Economic profit¹	(49)	(497)	—)	(704)	1,215)
Invested capital²	48,147)	47,332)	48,349)	49,130)	42,865)
Performance Ratio
Economic spread ratio³	-0.10%	-1.05%	0.00%	-1.43%	2.83%
Benchmarks
Economic Spread Ratio, Competitors⁴
Boeing Co.	-14.72%	-20.11%	-18.75%	-30.30%	-20.28%
Caterpillar Inc.	4.45%	0.81%	0.76%	-5.36%	0.99%
Eaton Corp. plc	-2.72%	-4.81%	-4.58%	-6.69%	-4.00%
GE Aerospace	7.11%	-9.04%	-14.03%	-4.12%	-6.66%
Lockheed Martin Corp.	17.22%	13.21%	14.20%	17.51%	18.13%
RTX Corp.	-3.30%	-3.17%	-2.70%	-8.22%	0.27%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -49 ÷ 48,147 = -0.10%

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.	Honeywell International Inc. economic spread ratio deteriorated from 2021 to 2022 but then improved from 2022 to 2023 not reaching 2021 level.

Honeywell International Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in millions)
Economic profit¹	(49)	(497)	—)	(704)	1,215)

Net sales	36,662)	35,466)	34,392)	32,637)	36,709)
Add: Increase (decrease) in customer advances and deferred income	(219)	402)	199)	488)	133)
Adjusted net sales	36,443)	35,868)	34,591)	33,125)	36,842)
Performance Ratio
Economic profit margin²	-0.13%	-1.39%	0.00%	-2.12%	3.30%
Benchmarks
Economic Profit Margin, Competitors³
Boeing Co.	-8.49%	-15.35%	-14.88%	-24.81%	-9.41%
Caterpillar Inc.	4.00%	0.79%	0.88%	-7.44%	1.07%
Eaton Corp. plc	-3.68%	-7.13%	-6.88%	-10.27%	-5.52%
GE Aerospace	5.53%	-8.20%	-14.16%	-6.58%	-9.90%
Lockheed Martin Corp.	6.99%	5.33%	6.06%	7.51%	7.78%
RTX Corp.	-5.36%	-5.36%	-4.81%	-16.80%	0.36%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Economic profit. See details »

² 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × -49 ÷ 36,443 = -0.13%

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.	Honeywell International Inc. economic profit margin deteriorated from 2021 to 2022 but then improved from 2022 to 2023 not reaching 2021 level.

Honeywell International Inc. (NASDAQ:HON)

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