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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: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 10,514 – 14.01% × 50,194 = 3,484
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. | GE Aerospace economic profit increased from 2021 to 2022 and from 2022 to 2023. |
Net Operating Profit after Taxes (NOPAT)
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in deferred income.
4 Addition of increase (decrease) in liability for product warranties.
5 Addition of increase (decrease) in equity equivalents to net earnings (loss) attributable to the Company.
6 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,973 × 4.40% = 87
7 2023 Calculation
Tax benefit of interest and other financial charges = Adjusted interest and other financial charges × Statutory income tax rate
= 1,205 × 21.00% = 253
8 Addition of after taxes interest expense to net earnings (loss) attributable to the Company.
9 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. | GE Aerospace NOPAT increased from 2021 to 2022 and from 2022 to 2023. |
Cash Operating Taxes
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
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. | GE Aerospace cash operating taxes increased from 2021 to 2022 but then slightly decreased from 2022 to 2023 not reaching 2021 level. |
Invested Capital
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
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 income.
5 Addition of liability for product warranties.
6 Addition of equity equivalents to total GE shareholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of leasehold costs and manufacturing plant under construction.
Item | Description | The company |
---|---|---|
Invested capital | Capital is an approximation of the economic book value of all cash invested in going-concern business activities. | GE Aerospace invested capital decreased from 2021 to 2022 and from 2022 to 2023. |
Cost of Capital
GE Aerospace, cost of capital calculations
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 148,601) | 148,601) | ÷ | 171,263) | = | 0.87 | 0.87 | × | 15.66% | = | 13.59% | ||
Preferred stock | —) | —) | ÷ | 171,263) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
Borrowings3 | 20,689) | 20,689) | ÷ | 171,263) | = | 0.12 | 0.12 | × | 3.95% × (1 – 21.00%) | = | 0.38% | ||
Operating lease liability4 | 1,973) | 1,973) | ÷ | 171,263) | = | 0.01 | 0.01 | × | 4.40% × (1 – 21.00%) | = | 0.04% | ||
Total: | 171,263) | 1.00 | 14.01% |
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Borrowings. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 88,548) | 88,548) | ÷ | 128,146) | = | 0.69 | 0.69 | × | 15.66% | = | 10.82% | ||
Preferred stock | 5,795) | 5,795) | ÷ | 128,146) | = | 0.05 | 0.05 | × | 5.00% | = | 0.23% | ||
Borrowings3 | 31,410) | 31,410) | ÷ | 128,146) | = | 0.25 | 0.25 | × | 4.19% × (1 – 21.00%) | = | 0.81% | ||
Operating lease liability4 | 2,393) | 2,393) | ÷ | 128,146) | = | 0.02 | 0.02 | × | 3.80% × (1 – 21.00%) | = | 0.06% | ||
Total: | 128,146) | 1.00 | 11.92% |
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Borrowings. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 106,447) | 106,447) | ÷ | 156,437) | = | 0.68 | 0.68 | × | 15.66% | = | 10.66% | ||
Preferred stock | 5,935) | 5,935) | ÷ | 156,437) | = | 0.04 | 0.04 | × | 5.00% | = | 0.19% | ||
Borrowings3 | 41,207) | 41,207) | ÷ | 156,437) | = | 0.26 | 0.26 | × | 3.51% × (1 – 21.00%) | = | 0.73% | ||
Operating lease liability4 | 2,848) | 2,848) | ÷ | 156,437) | = | 0.02 | 0.02 | × | 4.00% × (1 – 21.00%) | = | 0.06% | ||
Total: | 156,437) | 1.00 | 11.63% |
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Borrowings. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 102,848) | 102,848) | ÷ | 197,910) | = | 0.52 | 0.52 | × | 15.66% | = | 8.14% | ||
Preferred stock | 5,918) | 5,918) | ÷ | 197,910) | = | 0.03 | 0.03 | × | 5.00% | = | 0.15% | ||
Borrowings3 | 86,171) | 86,171) | ÷ | 197,910) | = | 0.44 | 0.44 | × | 3.19% × (1 – 21.00%) | = | 1.10% | ||
Operating lease liability4 | 2,973) | 2,973) | ÷ | 197,910) | = | 0.02 | 0.02 | × | 4.50% × (1 – 21.00%) | = | 0.05% | ||
Total: | 197,910) | 1.00 | 9.44% |
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Borrowings. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 103,659) | 103,659) | ÷ | 210,313) | = | 0.49 | 0.49 | × | 15.66% | = | 7.72% | ||
Preferred stock | 5,738) | 5,738) | ÷ | 210,313) | = | 0.03 | 0.03 | × | 5.00% | = | 0.14% | ||
Borrowings3 | 97,754) | 97,754) | ÷ | 210,313) | = | 0.46 | 0.46 | × | 3.31% × (1 – 21.00%) | = | 1.22% | ||
Operating lease liability4 | 3,162) | 3,162) | ÷ | 210,313) | = | 0.02 | 0.02 | × | 4.90% × (1 – 21.00%) | = | 0.06% | ||
Total: | 210,313) | 1.00 | 9.13% |
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Borrowings. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | ||||||
Economic profit1 | 3,484) | (6,137) | (10,200) | (4,961) | (8,805) | |
Invested capital2 | 50,194) | 66,842) | 72,026) | 117,528) | 130,228) | |
Performance Ratio | ||||||
Economic spread ratio3 | 6.94% | -9.18% | -14.16% | -4.22% | -6.76% | |
Benchmarks | ||||||
Economic Spread Ratio, Competitors4 | ||||||
Boeing Co. | -15.04% | -20.43% | -19.04% | -30.58% | -20.67% | |
Caterpillar Inc. | 4.31% | 0.68% | 0.64% | -5.48% | 0.87% | |
Eaton Corp. plc | -2.81% | -4.90% | -4.67% | -6.77% | -4.08% | |
Honeywell International Inc. | -0.19% | -1.14% | -0.09% | -1.52% | 2.75% | |
Lockheed Martin Corp. | 17.44% | 13.44% | 14.43% | 17.73% | 18.36% | |
RTX Corp. | -3.06% | -2.90% | -2.44% | -7.99% | 0.51% |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 3,484 ÷ 50,194 = 6.94%
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. | GE Aerospace economic spread ratio improved from 2021 to 2022 and from 2022 to 2023. |
Economic Profit Margin
Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | ||||||
Economic profit1 | 3,484) | (6,137) | (10,200) | (4,961) | (8,805) | |
Sales of equipment and services | 64,565) | 73,602) | 71,090) | 73,022) | 87,487) | |
Add: Increase (decrease) in deferred income | (61) | 134) | 266) | 516) | 126) | |
Adjusted sales of equipment and services | 64,504) | 73,736) | 71,356) | 73,538) | 87,613) | |
Performance Ratio | ||||||
Economic profit margin2 | 5.40% | -8.32% | -14.29% | -6.75% | -10.05% | |
Benchmarks | ||||||
Economic Profit Margin, Competitors3 | ||||||
Boeing Co. | -8.68% | -15.59% | -15.10% | -25.04% | -9.59% | |
Caterpillar Inc. | 3.88% | 0.66% | 0.74% | -7.62% | 0.95% | |
Eaton Corp. plc | -3.81% | -7.26% | -7.01% | -10.40% | -5.63% | |
Honeywell International Inc. | -0.25% | -1.50% | -0.12% | -2.25% | 3.19% | |
Lockheed Martin Corp. | 7.08% | 5.42% | 6.16% | 7.60% | 7.88% | |
RTX Corp. | -4.97% | -4.91% | -4.35% | -16.32% | 0.68% |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Economic profit. See details »
2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted sales of equipment and services
= 100 × 3,484 ÷ 64,504 = 5.40%
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. | GE Aerospace economic profit margin improved from 2021 to 2022 and from 2022 to 2023. |