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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.
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Carrier Global Corp. pages available for free this week:
- Statement of Comprehensive Income
- Balance Sheet: Assets
- Common-Size Income Statement
- Analysis of Liquidity Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Total Asset Turnover since 2020
- Price to Operating Profit (P/OP) since 2020
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Economic Profit
12 months ended: | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
---|---|---|---|---|
Net operating profit after taxes (NOPAT)1 | ||||
Cost of capital2 | ||||
Invested capital3 | ||||
Economic profit4 |
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
= – × =
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. |
Net Operating Profit after Taxes (NOPAT)
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
= × =
8 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
9 Addition of after taxes interest expense to net income attributable to common shareowners.
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. |
Cash Operating Taxes
12 months ended: | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
---|---|---|---|---|
Income tax expense | ||||
Less: Deferred income tax expense (benefit) | ||||
Add: Tax savings from interest expense | ||||
Cash operating taxes |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
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. |
Invested Capital
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.
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. |
Cost of Capital
Carrier Global Corp., cost of capital calculations
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
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 »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
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 »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
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 »
Economic Spread Ratio
Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
---|---|---|---|---|
Selected Financial Data (US$ in millions) | ||||
Economic profit1 | ||||
Invested capital2 | ||||
Performance Ratio | ||||
Economic spread ratio3 | ||||
Benchmarks | ||||
Economic Spread Ratio, Competitors4 | ||||
Boeing Co. | ||||
Caterpillar Inc. | ||||
Eaton Corp. plc | ||||
GE Aerospace | ||||
Honeywell International Inc. | ||||
Lockheed Martin Corp. | ||||
RTX Corp. |
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 × ÷ =
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. | Carrier Global Corp. economic spread ratio deteriorated from 2020 to 2021 but then improved from 2021 to 2022 exceeding 2020 level. |
Economic Profit Margin
Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
---|---|---|---|---|
Selected Financial Data (US$ in millions) | ||||
Economic profit1 | ||||
Net sales | ||||
Performance Ratio | ||||
Economic profit margin2 | ||||
Benchmarks | ||||
Economic Profit Margin, Competitors3 | ||||
Boeing Co. | ||||
Caterpillar Inc. | ||||
Eaton Corp. plc | ||||
GE Aerospace | ||||
Honeywell International Inc. | ||||
Lockheed Martin Corp. | ||||
RTX Corp. |
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 × ÷ =
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 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. |