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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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Emerson Electric Co. pages available for free this week:
- Statement of Comprehensive Income
- Common-Size Balance Sheet: Assets
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Analysis of Reportable Segments
- Common Stock Valuation Ratios
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Return on Equity (ROE) since 2005
- Total Asset Turnover since 2005
- Analysis of Revenues
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Economic Profit
12 months ended: | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | Sep 30, 2014 | |
---|---|---|---|---|---|---|---|
Net operating profit after taxes (NOPAT)1 | |||||||
Cost of capital2 | |||||||
Invested capital3 | |||||||
Economic profit4 |
Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).
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
= – × =
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. | Emerson Electric Co. economic profit increased from 2017 to 2018 and from 2018 to 2019. |
Net Operating Profit after Taxes (NOPAT)
Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowances.
3 Addition of increase (decrease) in product warranty.
4 Addition of increase (decrease) in liability for restructuring costs.
5 Addition of increase (decrease) in equity equivalents to net earnings common stockholders.
6 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2019 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net earnings common stockholders.
9 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
10 Elimination of after taxes investment income.
11 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. | Emerson Electric Co. NOPAT increased from 2017 to 2018 and from 2018 to 2019. |
Cash Operating Taxes
Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).
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. | Emerson Electric Co. cash operating taxes decreased from 2017 to 2018 and from 2018 to 2019. |
Invested Capital
Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).
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 product warranty.
5 Addition of liability for restructuring costs.
6 Addition of equity equivalents to common stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
Item | Description | The company |
---|---|---|
Invested capital | Capital is an approximation of the economic book value of all cash invested in going-concern business activities. | Emerson Electric Co. invested capital increased from 2017 to 2018 and from 2018 to 2019. |
Cost of Capital
Emerson Electric Co., cost of capital calculations
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2019-09-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 24.50%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 24.50%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2018-09-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2017-09-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2016-09-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2015-09-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | ÷ | = | × | = | |||||||||
Debt3 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
Operating lease liability4 | ÷ | = | × | × (1 – 35.00%) | = | ||||||||
Total: |
Based on: 10-K (reporting date: 2014-09-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | Sep 30, 2014 | ||
---|---|---|---|---|---|---|---|
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: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).
1 Economic profit. See details »
2 Invested capital. See details »
3 2019 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. | Emerson Electric Co. economic spread ratio improved from 2017 to 2018 and from 2018 to 2019. |
Economic Profit Margin
Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | Sep 30, 2014 | ||
---|---|---|---|---|---|---|---|
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: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).
1 Economic profit. See details »
2 2019 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. | Emerson Electric Co. economic profit margin improved from 2017 to 2018 and from 2018 to 2019. |