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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

PayPal Holdings Inc., economic profit calculation

US$ in millions

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net operating profit after taxes (NOPAT)¹	1,747)	3,793)	4,527)	2,151)	1,833)
Cost of capital²	15.59%	16.13%	16.63%	16.56%	16.78%
Invested capital³	31,496)	31,317)	30,260)	22,276)	17,780)

Economic profit⁴	(3,163)	(1,257)	(506)	(1,538)	(1,150)

Based on: 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), 10-K (reporting date: 2018-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 1,747 – 15.59% × 31,496 = -3,163

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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.	PayPal Holdings Inc. economic profit decreased from 2020 to 2021 and from 2021 to 2022.

PayPal Holdings Inc., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net income	2,419)	4,169)	4,202)	2,459)	2,057)
Deferred income tax expense (benefit)¹	(811)	(482)	165)	(269)	(171)
Increase (decrease) in restructuring reserve²	19)	(50)	46)	6)	3)
Increase (decrease) in equity equivalents³	(792)	(532)	211)	(263)	(168)
Interest expense	304)	232)	209)	115)	77)
Interest expense, operating lease liability⁴	22)	23)	24)	25)	20)
Adjusted interest expense	326)	255)	233)	140)	97)
Tax benefit of interest expense⁵	(68)	(54)	(49)	(29)	(20)
Adjusted interest expense, after taxes⁶	257)	201)	184)	111)	76)
Interest income	(174)	(57)	(88)	(197)	(168)
Investment income, before taxes	(174)	(57)	(88)	(197)	(168)
Tax expense (benefit) of investment income⁷	37)	12)	18)	41)	35)
Investment income, after taxes⁸	(137)	(45)	(70)	(156)	(133)
Net operating profit after taxes (NOPAT)	1,747)	3,793)	4,527)	2,151)	1,833)

Based on: 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), 10-K (reporting date: 2018-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in restructuring reserve.

³ Addition of increase (decrease) in equity equivalents to net income.

⁴ 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 720 × 3.00% = 22

⁵ 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 326 × 21.00% = 68

⁶ Addition of after taxes interest expense to net income.

⁷ 2022 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 174 × 21.00% = 37

⁸ 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.	PayPal Holdings Inc. NOPAT decreased from 2020 to 2021 and from 2021 to 2022.

PayPal Holdings Inc., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Income tax expense (benefit)	947)	(70)	863)	539)	319)
Less: Deferred income tax expense (benefit)	(811)	(482)	165)	(269)	(171)
Add: Tax savings from interest expense	68)	54)	49)	29)	20)
Less: Tax imposed on investment income	37)	12)	18)	41)	35)
Cash operating taxes	1,790)	454)	728)	796)	475)

Based on: 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), 10-K (reporting date: 2018-12-31).

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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.	PayPal Holdings Inc. cash operating taxes decreased from 2020 to 2021 but then increased from 2021 to 2022 exceeding 2020 level.

PayPal Holdings Inc., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Short-term debt	—)	—)	—)	—)	1,998)
Current portion of long-term debt	418)	999)	—)	—)	—)
Long-term debt, excluding current portion	10,417)	8,049)	8,939)	4,965)	—)
Operating lease liability¹	720)	762)	786)	507)	586)
Total reported debt & leases	11,555)	9,810)	9,725)	5,472)	2,584)
Total PayPal stockholders’ equity	20,274)	21,727)	20,019)	16,885)	15,386)
Net deferred tax (assets) liabilities²	(1,285)	(361)	(67)	(307)	(115)
Restructuring reserve³	24)	5)	55)	9)	3)
Equity equivalents⁴	(1,261)	(356)	(12)	(298)	(112)
Accumulated other comprehensive (income) loss, net of tax⁵	928)	136)	484)	173)	(78)
Noncontrolling interest	—)	—)	44)	44)	—)
Adjusted total PayPal stockholders’ equity	19,941)	21,507)	20,535)	16,804)	15,196)
Invested capital	31,496)	31,317)	30,260)	22,276)	17,780)

Based on: 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), 10-K (reporting date: 2018-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of restructuring reserve.

⁴ Addition of equity equivalents to total PayPal stockholders’ equity.

⁵ Removal of accumulated other comprehensive income.

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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.	PayPal Holdings Inc. invested capital increased from 2020 to 2021 and from 2021 to 2022.

PayPal Holdings Inc., cost of capital calculations

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	91,415)	91,415)	÷	102,126)	=	0.90	0.90	×	17.12%	=	15.32%
Debt³	9,991)	9,991)	÷	102,126)	=	0.10	0.10	×	3.22% × (1 – 21.00%)	=	0.25%
Operating lease liability⁴	720)	720)	÷	102,126)	=	0.01	0.01	×	3.00% × (1 – 21.00%)	=	0.02%
Total:	102,126)					1.00					15.59%

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	144,810)	144,810)	÷	154,970)	=	0.93	0.93	×	17.12%	=	16.00%
Debt³	9,398)	9,398)	÷	154,970)	=	0.06	0.06	×	2.50% × (1 – 21.00%)	=	0.12%
Operating lease liability⁴	762)	762)	÷	154,970)	=	0.00	0.00	×	3.00% × (1 – 21.00%)	=	0.01%
Total:	154,970)					1.00					16.13%

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	315,562)	315,562)	÷	326,048)	=	0.97	0.97	×	17.12%	=	16.57%
Debt³	9,700)	9,700)	÷	326,048)	=	0.03	0.03	×	2.50% × (1 – 21.00%)	=	0.06%
Operating lease liability⁴	786)	786)	÷	326,048)	=	0.00	0.00	×	3.00% × (1 – 21.00%)	=	0.01%
Total:	326,048)					1.00					16.63%

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	140,626)	140,626)	÷	146,133)	=	0.96	0.96	×	17.12%	=	16.47%
Debt³	5,000)	5,000)	÷	146,133)	=	0.03	0.03	×	2.69% × (1 – 21.00%)	=	0.07%
Operating lease liability⁴	507)	507)	÷	146,133)	=	0.00	0.00	×	5.00% × (1 – 21.00%)	=	0.01%
Total:	146,133)					1.00					16.56%

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 »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	106,586)	106,586)	÷	109,170)	=	0.98	0.98	×	17.12%	=	16.71%
Debt³	1,998)	1,998)	÷	109,170)	=	0.02	0.02	×	3.34% × (1 – 21.00%)	=	0.05%
Operating lease liability⁴	586)	586)	÷	109,170)	=	0.01	0.01	×	3.34% × (1 – 21.00%)	=	0.01%
Total:	109,170)					1.00					16.78%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

PayPal Holdings Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in millions)
Economic profit¹	(3,163)	(1,257)	(506)	(1,538)	(1,150)
Invested capital²	31,496)	31,317)	30,260)	22,276)	17,780)
Performance Ratio
Economic spread ratio³	-10.04%	-4.01%	-1.67%	-6.90%	-6.47%
Benchmarks
Economic Spread Ratio, Competitors⁴
Accenture PLC	7.74%	9.58%	10.15%	8.89%	—
Adobe Inc.	10.06%	12.47%	4.74%	2.85%	—
Cadence Design Systems Inc.	9.12%	9.35%	10.15%	4.63%	—
CrowdStrike Holdings Inc.	-2.95%	-5.22%	5.65%	—	—
International Business Machines Corp.	-9.79%	-4.77%	-4.47%	-0.77%	—
Intuit Inc.	-6.09%	1.61%	4.97%	18.61%	—
Microsoft Corp.	23.43%	32.45%	30.48%	25.61%	—
Oracle Corp.	-1.52%	6.55%	0.89%	3.52%	—
Palantir Technologies Inc.	-37.83%	-45.30%	-85.30%	—	—
Palo Alto Networks Inc.	5.81%	-2.88%	-3.86%	-0.69%	—
Salesforce Inc.	-10.62%	-8.34%	-11.37%	-7.35%	—
ServiceNow Inc.	3.57%	4.78%	6.40%	5.82%	—
Synopsys Inc.	2.52%	-3.50%	-3.32%	-6.31%	—

Based on: 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), 10-K (reporting date: 2018-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -3,163 ÷ 31,496 = -10.04%

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.	PayPal Holdings Inc. economic spread ratio deteriorated from 2020 to 2021 and from 2021 to 2022.

PayPal Holdings Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in millions)
Economic profit¹	(3,163)	(1,257)	(506)	(1,538)	(1,150)
Net revenues	27,518)	25,371)	21,454)	17,772)	15,451)
Performance Ratio
Economic profit margin²	-11.49%	-4.96%	-2.36%	-8.65%	-7.44%
Benchmarks
Economic Profit Margin, Competitors³
Accenture PLC	3.73%	4.91%	5.17%	4.11%	—
Adobe Inc.	11.72%	15.53%	6.80%	4.28%	—
Cadence Design Systems Inc.	9.10%	9.50%	10.23%	4.50%	—
CrowdStrike Holdings Inc.	-4.62%	-10.85%	4.96%	—	—
International Business Machines Corp.	-17.00%	-9.10%	-7.77%	-1.31%	—
Intuit Inc.	-11.72%	2.04%	5.59%	12.40%	—
Microsoft Corp.	22.46%	26.93%	22.62%	18.94%	—
Oracle Corp.	-2.80%	12.95%	2.02%	6.41%	—
Palantir Technologies Inc.	-63.46%	-74.62%	-173.77%	—	—
Palo Alto Networks Inc.	6.77%	-3.87%	-6.26%	-0.76%	—
Salesforce Inc.	-29.48%	-19.13%	-27.99%	-14.46%	—
ServiceNow Inc.	2.87%	4.14%	5.22%	4.26%	—
Synopsys Inc.	3.55%	-5.57%	-5.70%	-10.90%	—

Based on: 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), 10-K (reporting date: 2018-12-31).

¹ Economic profit. See details »

² 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Net revenues
= 100 × -3,163 ÷ 27,518 = -11.49%

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.	PayPal Holdings Inc. economic profit margin deteriorated from 2020 to 2021 and from 2021 to 2022.

PayPal Holdings Inc. (NASDAQ:PYPL)

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