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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

Carrier Global Corp., economic profit calculation

US$ in millions

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Net operating profit after taxes (NOPAT)¹	3,800)	1,932)	2,367)
Cost of capital²	13.95%	13.42%	12.63%
Invested capital³	19,880)	18,835)	19,032)

Economic profit⁴	1,027)	(596)	(36)

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

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
= 3,800 – 13.95% × 19,880 = 1,027

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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.	Carrier Global Corp. economic profit decreased from 2020 to 2021 but then increased from 2021 to 2022 exceeding 2020 level.

Carrier Global Corp., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Net income attributable to common shareowners	3,534)	1,664)	1,982)
Deferred income tax expense (benefit)¹	(124)	(74)	97)
Increase (decrease) in allowance for expected credit losses²	29)	(1)	—)
Increase (decrease) in LIFO reserve³	58)	23)	(2)
Increase (decrease) in product warranty provisions⁴	27)	10)	26)
Increase (decrease) in restructuring reserve⁵	(30)	5)	(17)
Increase (decrease) in equity equivalents⁶	(40)	(37)	104)
Interest expense	302)	319)	298)
Interest expense, operating lease liability⁷	22)	20)	27)
Adjusted interest expense	324)	339)	325)
Tax benefit of interest expense⁸	(68)	(71)	(68)
Adjusted interest expense, after taxes⁹	256)	268)	257)
Interest income	—)	—)	—)
Net income (loss) attributable to noncontrolling interest	50)	37)	24)
Net operating profit after taxes (NOPAT)	3,800)	1,932)	2,367)

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

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for expected credit losses.

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

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

⁵ Addition of increase (decrease) in restructuring reserve.

⁶ Addition of increase (decrease) in equity equivalents to net income attributable to common shareowners.

⁷ 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 661 × 3.40% = 22

⁸ 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 324 × 21.00% = 68

⁹ Addition of after taxes interest expense to net income attributable to common shareowners.

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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.	Carrier Global Corp. NOPAT decreased from 2020 to 2021 but then increased from 2021 to 2022 exceeding 2020 level.

Carrier Global Corp., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Income tax expense	708)	699)	849)
Less: Deferred income tax expense (benefit)	(124)	(74)	97)
Add: Tax savings from interest expense	68)	71)	68)
Cash operating taxes	900)	844)	820)

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

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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.	Carrier Global Corp. cash operating taxes increased from 2020 to 2021 and from 2021 to 2022.

Carrier Global Corp., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Current portion of long-term debt	140)	183)	191)
Long-term debt, net of current portion	8,702)	9,513)	10,036)
Operating lease liability¹	661)	657)	803)
Total reported debt & leases	9,503)	10,353)	11,030)
Equity attributable to common shareowners	7,758)	6,767)	6,252)
Net deferred tax (assets) liabilities²	(278)	(408)	(91)
Allowance for expected credit losses³	117)	88)	89)
LIFO reserve⁴	199)	141)	118)
Product warranty provisions⁵	551)	524)	514)
Restructuring reserve⁶	24)	54)	49)
Equity equivalents⁷	613)	399)	679)
Accumulated other comprehensive (income) loss, net of tax⁸	1,688)	989)	745)
Non-controlling interest	318)	327)	326)
Adjusted equity attributable to common shareowners	10,377)	8,482)	8,002)
Invested capital	19,880)	18,835)	19,032)

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

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 product warranty provisions.

⁶ Addition of restructuring reserve.

⁷ Addition of equity equivalents to equity attributable to common shareowners.

⁸ 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.	Carrier Global Corp. invested capital decreased from 2020 to 2021 but then increased from 2021 to 2022 exceeding 2020 level.

Carrier Global Corp., cost of capital calculations

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	37,030)	37,030)	÷	45,076)	=	0.82	0.82	×	16.48%	=	13.54%
Long-term debt, including current portion³	7,385)	7,385)	÷	45,076)	=	0.16	0.16	×	2.90% × (1 – 21.00%)	=	0.38%
Operating lease liability⁴	661)	661)	÷	45,076)	=	0.01	0.01	×	3.40% × (1 – 21.00%)	=	0.04%
Total:	45,076)					1.00					13.95%

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

¹ US$ in millions

² Equity. See details »

³ Long-term debt, including current portion. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	39,405)	39,405)	÷	50,171)	=	0.79	0.79	×	16.48%	=	12.94%
Long-term debt, including current portion³	10,109)	10,109)	÷	50,171)	=	0.20	0.20	×	2.80% × (1 – 21.00%)	=	0.45%
Operating lease liability⁴	657)	657)	÷	50,171)	=	0.01	0.01	×	3.00% × (1 – 21.00%)	=	0.03%
Total:	50,171)					1.00					13.42%

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

¹ US$ in millions

² Equity. See details »

³ Long-term debt, including current portion. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	32,378)	32,378)	÷	44,300)	=	0.73	0.73	×	16.48%	=	12.04%
Long-term debt, including current portion³	11,119)	11,119)	÷	44,300)	=	0.25	0.25	×	2.70% × (1 – 21.00%)	=	0.54%
Operating lease liability⁴	803)	803)	÷	44,300)	=	0.02	0.02	×	3.40% × (1 – 21.00%)	=	0.05%
Total:	44,300)					1.00					12.63%

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

¹ US$ in millions

² Equity. See details »

³ Long-term debt, including current portion. See details »

⁴ Operating lease liability. See details »

Carrier Global Corp., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Selected Financial Data (US$ in millions)
Economic profit¹	1,027)	(596)	(36)
Invested capital²	19,880)	18,835)	19,032)
Performance Ratio
Economic spread ratio³	5.17%	-3.16%	-0.19%
Benchmarks
Economic Spread Ratio, Competitors⁴
Boeing Co.	-21.04%	-19.59%	-31.10%
Caterpillar Inc.	0.18%	0.33%	-6.19%
Eaton Corp. plc	-5.90%	-5.64%	-7.73%
GE Aerospace	-10.02%	-14.99%	-4.85%
Honeywell International Inc.	-2.10%	-1.03%	-2.36%
Lockheed Martin Corp.	12.74%	13.74%	17.06%
RTX Corp.	-2.83%	-2.37%	-7.92%

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

¹ Economic profit. See details »

² Invested capital. See details »

³ 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,027 ÷ 19,880 = 5.17%

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.	Carrier Global Corp. economic spread ratio deteriorated from 2020 to 2021 but then improved from 2021 to 2022 exceeding 2020 level.

Carrier Global Corp., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Selected Financial Data (US$ in millions)
Economic profit¹	1,027)	(596)	(36)
Net sales	20,421)	20,613)	17,456)
Performance Ratio
Economic profit margin²	5.03%	-2.89%	-0.21%
Benchmarks
Economic Profit Margin, Competitors³
Boeing Co.	-16.06%	-15.54%	-25.47%
Caterpillar Inc.	0.17%	0.38%	-8.57%
Eaton Corp. plc	-8.75%	-8.47%	-11.87%
GE Aerospace	-9.08%	-15.13%	-7.75%
Honeywell International Inc.	-2.77%	-1.43%	-3.50%
Lockheed Martin Corp.	5.14%	5.86%	7.32%
RTX Corp.	-4.78%	-4.22%	-16.18%

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

¹ Economic profit. See details »

² 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 1,027 ÷ 20,421 = 5.03%

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.	Carrier Global Corp. economic profit margin deteriorated from 2020 to 2021 but then improved from 2021 to 2022 exceeding 2020 level.

Carrier Global Corp. (NYSE:CARR)

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