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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
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2019 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= -572 – 19.25% × 62,770 = -12,654
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. | DuPont de Nemours Inc. economic profit increased from 2017 to 2018 and from 2018 to 2019. |
Net Operating Profit after Taxes (NOPAT)
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful receivables.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in deferred revenue.
5 Addition of increase (decrease) in restructuring reserve.
6 Addition of increase (decrease) in equity equivalents to net income attributable to DuPont.
7 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 554 × 4.07% = 23
8 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 691 × 21.00% = 145
9 Addition of after taxes interest expense to net income attributable to DuPont.
10 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 56 × 21.00% = 12
11 Elimination of after taxes investment income.
12 Elimination of discontinued operations.
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. | DuPont de Nemours Inc. NOPAT increased from 2017 to 2018 but then decreased significantly from 2018 to 2019. |
Cash Operating Taxes
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
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. | DuPont de Nemours Inc. cash operating taxes increased from 2017 to 2018 but then decreased significantly from 2018 to 2019. |
Invested Capital
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
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 deferred revenue.
6 Addition of restructuring reserve.
7 Addition of equity equivalents to total DuPont stockholders’ equity.
8 Removal of accumulated other comprehensive income.
9 Subtraction of construction in progress.
10 Subtraction of marketable securities.
Item | Description | The company |
---|---|---|
Invested capital | Capital is an approximation of the economic book value of all cash invested in going-concern business activities. | DuPont de Nemours Inc. invested capital increased from 2017 to 2018 but then decreased significantly from 2018 to 2019. |
Cost of Capital
DuPont de Nemours Inc., cost of capital calculations
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 39,262) | 39,262) | ÷ | 58,866) | = | 0.67 | 0.67 | × | 27.25% | = | 18.18% | ||
Preferred stock, series A, $1.00 par (book value) | —) | —) | ÷ | 58,866) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
Short-term borrowings and long-term debt3 | 19,050) | 19,050) | ÷ | 58,866) | = | 0.32 | 0.32 | × | 4.07% × (1 – 21.00%) | = | 1.04% | ||
Operating lease liability4 | 554) | 554) | ÷ | 58,866) | = | 0.01 | 0.01 | × | 4.07% × (1 – 21.00%) | = | 0.03% | ||
Total: | 58,866) | 1.00 | 19.25% |
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 39,083) | 39,083) | ÷ | 83,391) | = | 0.47 | 0.47 | × | 27.25% | = | 12.77% | ||
Preferred stock, series A, $1.00 par (book value) | —) | —) | ÷ | 83,391) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
Short-term borrowings and long-term debt3 | 41,531) | 41,531) | ÷ | 83,391) | = | 0.50 | 0.50 | × | 4.34% × (1 – 21.00%) | = | 1.71% | ||
Operating lease liability4 | 2,777) | 2,777) | ÷ | 83,391) | = | 0.03 | 0.03 | × | 4.34% × (1 – 21.00%) | = | 0.11% | ||
Total: | 83,391) | 1.00 | 14.59% |
Based on: 10-K (reporting date: 2018-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 55,780) | 55,780) | ÷ | 94,739) | = | 0.59 | 0.59 | × | 27.25% | = | 16.05% | ||
Preferred stock, series A, $1.00 par (book value) | —) | —) | ÷ | 94,739) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
Short-term borrowings and long-term debt3 | 36,123) | 36,123) | ÷ | 94,739) | = | 0.38 | 0.38 | × | 3.88% × (1 – 35.00%) | = | 0.96% | ||
Operating lease liability4 | 2,836) | 2,836) | ÷ | 94,739) | = | 0.03 | 0.03 | × | 3.88% × (1 – 35.00%) | = | 0.08% | ||
Total: | 94,739) | 1.00 | 17.08% |
Based on: 10-K (reporting date: 2017-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 24,371) | 24,371) | ÷ | 49,418) | = | 0.49 | 0.49 | × | 27.25% | = | 13.44% | ||
Preferred stock, series A, $1.00 par (book value) | —) | —) | ÷ | 49,418) | = | 0.00 | 0.00 | × | 8.50% | = | 0.00% | ||
Short-term borrowings and long-term debt3 | 23,079) | 23,079) | ÷ | 49,418) | = | 0.47 | 0.47 | × | 4.70% × (1 – 35.00%) | = | 1.43% | ||
Operating lease liability4 | 1,967) | 1,967) | ÷ | 49,418) | = | 0.04 | 0.04 | × | 4.70% × (1 – 35.00%) | = | 0.12% | ||
Total: | 49,418) | 1.00 | 14.99% |
Based on: 10-K (reporting date: 2016-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 17,133) | 17,133) | ÷ | 41,627) | = | 0.41 | 0.41 | × | 27.25% | = | 11.22% | ||
Preferred stock, series A, $1.00 par (book value) | 4,000) | 4,000) | ÷ | 41,627) | = | 0.10 | 0.10 | × | 8.50% | = | 0.82% | ||
Short-term borrowings and long-term debt3 | 18,454) | 18,454) | ÷ | 41,627) | = | 0.44 | 0.44 | × | 5.40% × (1 – 35.00%) | = | 1.56% | ||
Operating lease liability4 | 2,040) | 2,040) | ÷ | 41,627) | = | 0.05 | 0.05 | × | 5.40% × (1 – 35.00%) | = | 0.17% | ||
Total: | 41,627) | 1.00 | 13.76% |
Based on: 10-K (reporting date: 2015-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term borrowings and long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | ||||||
Economic profit1 | (12,654) | (17,423) | (22,990) | (3,740) | 1,836) | |
Invested capital2 | 62,770) | 153,164) | 149,192) | 50,610) | 46,288) | |
Performance Ratio | ||||||
Economic spread ratio3 | -20.16% | -11.38% | -15.41% | -7.39% | 3.97% | |
Benchmarks | ||||||
Economic Spread Ratio, Competitors4 | ||||||
Linde plc | -8.54% | — | — | — | — |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -12,654 ÷ 62,770 = -20.16%
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. | DuPont de Nemours Inc. economic spread ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019. |
Economic Profit Margin
Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | ||||||
Economic profit1 | (12,654) | (17,423) | (22,990) | (3,740) | 1,836) | |
Net sales | 21,512) | 85,977) | 62,484) | 48,158) | 48,778) | |
Add: Increase (decrease) in deferred revenue | —) | (41) | 2,332) | —) | —) | |
Adjusted net sales | 21,512) | 85,936) | 64,816) | 48,158) | 48,778) | |
Performance Ratio | ||||||
Economic profit margin2 | -58.82% | -20.27% | -35.47% | -7.77% | 3.76% | |
Benchmarks | ||||||
Economic Profit Margin, Competitors3 | ||||||
Linde plc | -23.76% | — | — | — | — |
Based on: 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31).
1 Economic profit. See details »
2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × -12,654 ÷ 21,512 = -58.82%
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. | DuPont de Nemours Inc. economic profit margin improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019. |