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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

3M Co., economic profit calculation

US$ in millions

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net operating profit after taxes (NOPAT)¹	6,058)	5,797)	4,679)	5,630)	5,388)
Cost of capital²	11.41%	11.37%	11.23%	12.00%	12.11%
Invested capital³	39,156)	38,880)	38,698)	31,616)	32,308)

Economic profit⁴	1,590)	1,375)	334)	1,836)	1,474)

Based on: 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), 10-K (reporting date: 2017-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 6,058 – 11.41% × 39,156 = 1,590

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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.	3M Co. economic profit increased from 2019 to 2020 and from 2020 to 2021.

3M Co., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net income attributable to 3M	5,921)	5,384)	4,570)	5,349)	4,858)
Deferred income tax expense (benefit)¹	(172)	(158)	(136)	(109)	253)
Increase (decrease) in allowances²	(44)	72)	66)	(8)	15)
Increase (decrease) in deferred revenue³	31)	68)	(187)	104)	(16)
Increase (decrease) in product warranty liabilities⁴	—)	—)	3)	(2)	3)
Increase (decrease) in accrued restructuring action balances⁵	(63)	16)	39)	36)	82)
Increase (decrease) in equity equivalents⁶	(248)	(2)	(215)	21)	337)
Interest expense	488)	529)	448)	350)	322)
Interest expense, operating lease liability⁷	15)	21)	27)	32)	8)
Adjusted interest expense	503)	550)	475)	382)	330)
Tax benefit of interest expense⁸	(106)	(115)	(100)	(80)	(116)
Adjusted interest expense, after taxes⁹	398)	434)	376)	301)	215)
Interest income	(26)	(29)	(80)	(70)	(50)
Investment income, before taxes	(26)	(29)	(80)	(70)	(50)
Tax expense (benefit) of investment income¹⁰	5)	6)	17)	15)	18)
Investment income, after taxes¹¹	(21)	(23)	(63)	(55)	(33)
Net income (loss) attributable to noncontrolling interest	8)	4)	12)	14)	11)
Net operating profit after taxes (NOPAT)	6,058)	5,797)	4,679)	5,630)	5,388)

Based on: 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), 10-K (reporting date: 2017-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowances.

³ Addition of increase (decrease) in deferred revenue.

⁴ Addition of increase (decrease) in product warranty liabilities.

⁵ Addition of increase (decrease) in accrued restructuring action balances.

⁶ Addition of increase (decrease) in equity equivalents to net income attributable to 3M.

⁷ 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 854 × 1.80% = 15

⁸ 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 503 × 21.00% = 106

⁹ Addition of after taxes interest expense to net income attributable to 3M.

¹⁰ 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 26 × 21.00% = 5

¹¹ 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.	3M Co. NOPAT increased from 2019 to 2020 and from 2020 to 2021.

3M Co., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Provision for income taxes	1,285)	1,318)	1,130)	1,637)	2,679)
Less: Deferred income tax expense (benefit)	(172)	(158)	(136)	(109)	253)
Add: Tax savings from interest expense	106)	115)	100)	80)	116)
Less: Tax imposed on investment income	5)	6)	17)	15)	18)
Cash operating taxes	1,557)	1,585)	1,349)	1,811)	2,524)

Based on: 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), 10-K (reporting date: 2017-12-31).

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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.	3M Co. cash operating taxes increased from 2019 to 2020 but then slightly decreased from 2020 to 2021.

3M Co., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Short-term borrowings and current portion of long-term debt	1,307)	806)	2,795)	1,211)	1,853)
Current obligations of finance leases	7)	22)	21)	17)	13)
Long-term debt, excluding current portion	16,056)	17,989)	17,518)	13,411)	12,096)
Finance leases, net of current obligations	93)	93)	111)	75)	60)
Operating lease liability¹	854)	865)	854)	1,000)	1,069)
Total reported debt & leases	18,317)	19,775)	21,299)	15,714)	15,091)
Total 3M Company shareholders’ equity	15,046)	12,867)	10,063)	9,796)	11,563)
Net deferred tax (assets) liabilities²	(124)	(538)	(220)	(86)	(276)
Allowances³	189)	233)	161)	95)	103)
Deferred revenue⁴	529)	498)	430)	617)	550)
Product warranty liabilities⁵	—)	—)	51)	48)	50)
Accrued restructuring action balances⁶	116)	179)	163)	124)	88)
Equity equivalents⁷	710)	372)	585)	798)	515)
Accumulated other comprehensive (income) loss, net of tax⁸	6,750)	7,661)	8,139)	6,866)	7,026)
Noncontrolling interest	71)	64)	63)	52)	59)
Adjusted total 3M Company shareholders’ equity	22,577)	20,964)	18,850)	17,512)	19,163)
Construction in progress⁹	(1,510)	(1,425)	(1,310)	(1,193)	(843)
Marketable securities¹⁰	(228)	(434)	(141)	(417)	(1,103)
Invested capital	39,156)	38,880)	38,698)	31,616)	32,308)

Based on: 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), 10-K (reporting date: 2017-12-31).

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 deferred revenue.

⁵ Addition of product warranty liabilities.

⁶ Addition of accrued restructuring action balances.

⁷ Addition of equity equivalents to total 3M Company shareholders’ equity.

⁸ Removal of accumulated other comprehensive income.

⁹ Subtraction of construction in progress.

¹⁰ Subtraction of marketable securities.

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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.	3M Co. invested capital increased from 2019 to 2020 and from 2020 to 2021.

3M Co., cost of capital calculations

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	93,455)	93,455)	÷	113,317)	=	0.82	0.82	×	13.39%	=	11.04%
Debt and finance lease liabilities³	19,008)	19,008)	÷	113,317)	=	0.17	0.17	×	2.70% × (1 – 21.00%)	=	0.36%
Operating lease liability⁴	854)	854)	÷	113,317)	=	0.01	0.01	×	1.80% × (1 – 21.00%)	=	0.01%
Total:	113,317)					1.00					11.41%

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

¹ US$ in millions

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	102,559)	102,559)	÷	124,841)	=	0.82	0.82	×	13.39%	=	11.00%
Debt and finance lease liabilities³	21,417)	21,417)	÷	124,841)	=	0.17	0.17	×	2.68% × (1 – 21.00%)	=	0.36%
Operating lease liability⁴	865)	865)	÷	124,841)	=	0.01	0.01	×	2.40% × (1 – 21.00%)	=	0.01%
Total:	124,841)					1.00					11.37%

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

¹ US$ in millions

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	93,759)	93,759)	÷	116,015)	=	0.81	0.81	×	13.39%	=	10.82%
Debt and finance lease liabilities³	21,402)	21,402)	÷	116,015)	=	0.18	0.18	×	2.67% × (1 – 21.00%)	=	0.39%
Operating lease liability⁴	854)	854)	÷	116,015)	=	0.01	0.01	×	3.20% × (1 – 21.00%)	=	0.02%
Total:	116,015)					1.00					11.23%

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

¹ US$ in millions

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	115,068)	115,068)	÷	130,957)	=	0.88	0.88	×	13.39%	=	11.76%
Debt and finance lease liabilities³	14,889)	14,889)	÷	130,957)	=	0.11	0.11	×	2.43% × (1 – 21.00%)	=	0.22%
Operating lease liability⁴	1,000)	1,000)	÷	130,957)	=	0.01	0.01	×	3.15% × (1 – 21.00%)	=	0.02%
Total:	130,957)					1.00					12.00%

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

¹ US$ in millions

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2017

	Capital (fair value)¹	Weights					Cost of capital
Equity²	132,731)	132,731)	÷	148,261)	=	0.90	0.90	×	13.39%	=	11.99%
Debt and finance lease liabilities³	14,461)	14,461)	÷	148,261)	=	0.10	0.10	×	1.97% × (1 – 35.00%)	=	0.12%
Operating lease liability⁴	1,069)	1,069)	÷	148,261)	=	0.01	0.01	×	0.75% × (1 – 35.00%)	=	0.00%
Total:	148,261)					1.00					12.11%

Based on: 10-K (reporting date: 2017-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

3M Co., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Selected Financial Data (US$ in millions)
Economic profit¹	1,590)	1,375)	334)	1,836)	1,474)
Invested capital²	39,156)	38,880)	38,698)	31,616)	32,308)
Performance Ratio
Economic spread ratio³	4.06%	3.54%	0.86%	5.81%	4.56%
Benchmarks
Economic Spread Ratio, Competitors⁴
Boeing Co.	-18.74%	-30.29%	-20.27%	—	—
Caterpillar Inc.	0.77%	-5.36%	0.99%	—	—
Eaton Corp. plc	-4.58%	-6.69%	-4.00%	—	—
GE Aerospace	-14.02%	-4.12%	-6.66%	—	—
Honeywell International Inc.	0.00%	-1.43%	2.83%	—	—
Lockheed Martin Corp.	14.19%	17.50%	18.12%	—	—
RTX Corp.	-2.71%	-8.23%	0.26%	—	—

Based on: 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), 10-K (reporting date: 2017-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,590 ÷ 39,156 = 4.06%

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.	3M Co. economic spread ratio improved from 2019 to 2020 and from 2020 to 2021.

3M Co., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Selected Financial Data (US$ in millions)
Economic profit¹	1,590)	1,375)	334)	1,836)	1,474)

Net sales	35,355)	32,184)	32,136)	32,765)	31,657)
Add: Increase (decrease) in deferred revenue	31)	68)	(187)	104)	(16)
Adjusted net sales	35,386)	32,252)	31,949)	32,869)	31,641)
Performance Ratio
Economic profit margin²	4.49%	4.26%	1.05%	5.59%	4.66%
Benchmarks
Economic Profit Margin, Competitors³
Boeing Co.	-14.87%	-24.81%	-9.41%	—	—
Caterpillar Inc.	0.88%	-7.44%	1.07%	—	—
Eaton Corp. plc	-6.88%	-10.27%	-5.51%	—	—
GE Aerospace	-14.16%	-6.58%	-9.90%	—	—
Honeywell International Inc.	0.00%	-2.12%	3.30%	—	—
Lockheed Martin Corp.	6.06%	7.51%	7.78%	—	—
RTX Corp.	-4.82%	-16.82%	0.35%	—	—

Based on: 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), 10-K (reporting date: 2017-12-31).

¹ Economic profit. See details »

² 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × 1,590 ÷ 35,386 = 4.49%

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.	3M Co. economic profit margin improved from 2019 to 2020 and from 2020 to 2021.

3M Co. (NYSE:MMM)

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