Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
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
General Mills Inc., economic profit calculation
US$ in thousands
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
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
= 2,274,308 – 10.98% × 27,385,340 = -731,349
The analysis of economic profit from 2014 to 2019 reveals a persistent inability to generate returns exceeding the cost of capital. Throughout the observed six-year period, economic profit remained consistently negative, indicating that the company did not create economic value for its shareholders during this timeframe.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited significant volatility, experiencing a sharp decline to US$ 1.62 billion in 2015 before trending upward to reach a period peak of US$ 2.27 billion in 2019. Despite this eventual recovery in operational earnings, the profit levels were consistently insufficient to cover the associated capital charges.
- Invested Capital Trends
- Invested capital remained relatively stable between 2014 and 2017, oscillating between US$ 18.4 billion and US$ 19.4 billion. A substantial shift occurred in 2018, where invested capital increased abruptly to US$ 27.61 billion. This expansion of the capital base placed significantly higher demands on the required return, contributing to a deeper economic deficit in the latter years of the analysis.
- Cost of Capital
- The cost of capital fluctuated within a narrow range, peaking at 12.75% in 2016 and reaching a low of 10.22% in 2018. The relative stability of this percentage suggests that the negative economic profit is primarily driven by the relationship between the scale of invested capital and the generated NOPAT, rather than by drastic shifts in the cost of funding.
- Economic Profit Analysis
- Economic profit remained in negative territory for all six years. The deficit narrowed to its lowest point in 2017 at negative US$ 167.42 million, but widened sharply in 2018 to negative US$ 901.45 million. This deterioration in 2018 directly correlates with the significant increase in invested capital occurring in the same period, demonstrating that the additional capital deployed did not yield a proportional increase in operating profit.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Net Operating Profit after Taxes (NOPAT)
General Mills Inc., NOPAT calculation
US$ in thousands
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in LIFO reserve. See details »
4 Addition of increase (decrease) in reserve for restructuring and other exit charges.
5 Addition of increase (decrease) in equity equivalents to net earnings attributable to General Mills.
6 2019 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 437,340 × 3.34% = 14,607
7 2019 Calculation
Tax benefit of interest expense, net of capitalized interest = Adjusted interest expense, net of capitalized interest × Statutory income tax rate
= 542,007 × 21.00% = 113,822
8 Addition of after taxes interest expense to net earnings attributable to General Mills.
9 2019 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 8,200 × 21.00% = 1,722
10 Elimination of after taxes investment income.
An analysis of the financial performance from 2014 to 2019 reveals a consistent variance between Net Operating Profit After Taxes (NOPAT) and net earnings. NOPAT remained higher than net earnings in every reporting period, indicating that the operational performance of the business generated more value than what was ultimately reflected in the net income after non-operating costs and financial obligations were deducted.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT exhibited a volatile but generally upward trajectory toward the end of the period. A significant decline occurred between 2014 and 2015, with values dropping from US$ 2,219,325 thousand to US$ 1,616,844 thousand. A recovery phase followed, bringing the figure back above the US$ 2 million threshold by 2016. After a slight dip in 2018 to US$ 1,920,512 thousand, NOPAT reached its highest point in the analyzed period in 2019, totaling US$ 2,274,308 thousand.
- Net Earnings Volatility
- Net earnings attributable to the company showed more pronounced fluctuations than NOPAT. The most substantial decrease was noted in 2015, falling to US$ 1,221,300 thousand. Earnings then trended upward, reaching a peak of US$ 2,131,000 thousand in 2018. However, this growth was not sustained into 2019, as net earnings decreased to US$ 1,752,700 thousand.
- Comparative Analysis of Operating vs. Bottom-Line Profitability
- A notable divergence is observed between 2018 and 2019. During this interval, NOPAT increased by approximately US$ 353.8 million, while net earnings decreased by approximately US$ 378.3 million. This inverse movement suggests that while operational efficiency and core profitability improved, non-operating pressures—such as increased interest expenses or one-time tax impacts—adversely affected the final net earnings. The widest gap between operating profit and net earnings occurred in 2019, highlighting a decoupling of operational success from final net profitability.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Cash Operating Taxes
General Mills Inc., cash operating taxes calculation
US$ in thousands
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
An analysis of tax obligations reveals significant volatility between 2014 and 2019. While both income taxes and cash operating taxes exhibit fluctuating patterns, the cash outflow associated with operating taxes shows a general downward trajectory over the analyzed period, despite periodic increases.
- Cash Operating Tax Trajectory
- Cash operating taxes reached a peak in May 2014 at 821.36 million US dollars and declined to a period low of 383.9 million US dollars by May 2019. This indicates a substantial reduction in actual cash tax outflows over the six-year window, although this decline was non-linear, with intermittent increases observed in 2016 and 2018.
- Accounting versus Cash Divergence
- A significant divergence between reported income taxes and cash operating taxes occurred in May 2018. During this fiscal year, income taxes dropped sharply to 57.3 million US dollars, whereas cash operating taxes remained elevated at 674.79 million US dollars. This disparity suggests a period where cash tax payments far exceeded the tax expense recognized on the income statement, likely reflecting the settlement of deferred tax liabilities or specific one-time tax adjustments.
- Comparative Volatility and Correlation
- For most of the analyzed period, cash operating taxes moved in relative correlation with reported income taxes, specifically during the decreases seen in 2015 and 2017 and the increase in 2016. However, the breakdown of this correlation in 2018 highlights a decoupling of accrual-based tax accounting from actual cash expenditures, emphasizing the importance of distinguishing between tax expense and cash tax paid when calculating economic value added.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Invested Capital
General Mills Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
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 reserve for restructuring and other exit charges.
6 Addition of equity equivalents to stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
9 Subtraction of marketable securities.
The analysis of invested capital between May 2014 and May 2019 reveals a period of relative stability followed by a significant expansion in the overall capital base.
- Invested Capital Trends
- Invested capital remained consistent from 2014 through 2017, fluctuating within a narrow range between 18.4 billion and 19.4 billion US dollars. A substantial increase occurred in 2018, where the figure rose to 27.6 billion US dollars, representing a significant expansion over the prior year. This elevated level was maintained into 2019, ending the period at 27.4 billion US dollars.
- Debt and Lease Obligations
- Total reported debt and leases exhibited moderate volatility from 2014 to 2017, remaining below 10 billion US dollars. A sharp upward trajectory is observed in 2018, with obligations increasing to 16.3 billion US dollars. This surge acted as the primary driver for the expansion of invested capital in 2018, followed by a slight contraction to 14.9 billion US dollars in 2019.
- Stockholders' Equity Movements
- Stockholders' equity experienced a steady decline from May 2014 to May 2017, falling from 6.5 billion US dollars to 4.3 billion US dollars. This trend reversed in 2018, with equity rising to 6.1 billion US dollars and continuing upward to 7.1 billion US dollars by May 2019, indicating a recovery and eventual increase in the equity component of the capital structure.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Cost of Capital
General Mills Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 31,614,919) | 31,614,919) | ÷ | 46,793,759) | = | 0.68 | 0.68 | × | 14.98% | = | 10.12% | ||
| Debt3 | 14,741,500) | 14,741,500) | ÷ | 46,793,759) | = | 0.32 | 0.32 | × | 3.34% × (1 – 21.00%) | = | 0.83% | ||
| Operating lease liability4 | 437,340) | 437,340) | ÷ | 46,793,759) | = | 0.01 | 0.01 | × | 3.34% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 46,793,759) | 1.00 | 10.98% | ||||||||||
Based on: 10-K (reporting date: 2019-05-26).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 26,262,461) | 26,262,461) | ÷ | 42,483,443) | = | 0.62 | 0.62 | × | 14.98% | = | 9.26% | ||
| Debt3 | 15,719,500) | 15,719,500) | ÷ | 42,483,443) | = | 0.37 | 0.37 | × | 3.57% × (1 – 29.40%) | = | 0.93% | ||
| Operating lease liability4 | 501,482) | 501,482) | ÷ | 42,483,443) | = | 0.01 | 0.01 | × | 3.57% × (1 – 29.40%) | = | 0.03% | ||
| Total: | 42,483,443) | 1.00 | 10.22% | ||||||||||
Based on: 10-K (reporting date: 2018-05-27).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 31,723,169) | 31,723,169) | ÷ | 41,956,879) | = | 0.76 | 0.76 | × | 14.98% | = | 11.32% | ||
| Debt3 | 9,781,100) | 9,781,100) | ÷ | 41,956,879) | = | 0.23 | 0.23 | × | 3.21% × (1 – 35.00%) | = | 0.49% | ||
| Operating lease liability4 | 452,610) | 452,610) | ÷ | 41,956,879) | = | 0.01 | 0.01 | × | 3.21% × (1 – 35.00%) | = | 0.02% | ||
| Total: | 41,956,879) | 1.00 | 11.83% | ||||||||||
Based on: 10-K (reporting date: 2017-05-28).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 42,579,531) | 42,579,531) | ÷ | 51,834,677) | = | 0.82 | 0.82 | × | 14.98% | = | 12.30% | ||
| Debt3 | 8,898,800) | 8,898,800) | ÷ | 51,834,677) | = | 0.17 | 0.17 | × | 3.83% × (1 – 35.00%) | = | 0.43% | ||
| Operating lease liability4 | 356,346) | 356,346) | ÷ | 51,834,677) | = | 0.01 | 0.01 | × | 3.83% × (1 – 35.00%) | = | 0.02% | ||
| Total: | 51,834,677) | 1.00 | 12.75% | ||||||||||
Based on: 10-K (reporting date: 2016-05-29).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 33,882,568) | 33,882,568) | ÷ | 43,852,795) | = | 0.77 | 0.77 | × | 14.98% | = | 11.57% | ||
| Debt3 | 9,612,400) | 9,612,400) | ÷ | 43,852,795) | = | 0.22 | 0.22 | × | 3.54% × (1 – 35.00%) | = | 0.50% | ||
| Operating lease liability4 | 357,828) | 357,828) | ÷ | 43,852,795) | = | 0.01 | 0.01 | × | 3.54% × (1 – 35.00%) | = | 0.02% | ||
| Total: | 43,852,795) | 1.00 | 12.10% | ||||||||||
Based on: 10-K (reporting date: 2015-05-31).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 32,493,574) | 32,493,574) | ÷ | 42,134,409) | = | 0.77 | 0.77 | × | 14.98% | = | 11.55% | ||
| Debt3 | 9,300,300) | 9,300,300) | ÷ | 42,134,409) | = | 0.22 | 0.22 | × | 3.96% × (1 – 35.00%) | = | 0.57% | ||
| Operating lease liability4 | 340,535) | 340,535) | ÷ | 42,134,409) | = | 0.01 | 0.01 | × | 3.96% × (1 – 35.00%) | = | 0.02% | ||
| Total: | 42,134,409) | 1.00 | 12.14% | ||||||||||
Based on: 10-K (reporting date: 2014-05-25).
1 US$ in thousands
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
General Mills Inc., economic spread ratio calculation, comparison to benchmarks
| May 26, 2019 | May 27, 2018 | May 28, 2017 | May 29, 2016 | May 31, 2015 | May 25, 2014 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | (731,349) | (901,449) | (167,420) | (316,775) | (710,571) | (131,274) | |
| Invested capital2 | 27,385,340) | 27,608,082) | 18,984,610) | 18,400,346) | 19,241,428) | 19,362,635) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -2.67% | -3.27% | -0.88% | -1.72% | -3.69% | -0.68% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Coca-Cola Co. | — | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
1 Economic profit. See details »
2 Invested capital. See details »
3 2019 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -731,349 ÷ 27,385,340 = -2.67%
4 Click competitor name to see calculations.
Throughout the period from 2014 to 2019, the financial performance relative to the cost of capital remained consistently negative, indicating a continuous failure to generate economic value added. The persistence of negative economic profit across all six fiscal years demonstrates that the returns on invested capital did not exceed the company's cost of capital, resulting in the destruction of economic value over the analyzed timeframe.
- Economic Profit Trends
- Economic profit remained in negative territory throughout the period, with significant volatility in the magnitude of the losses. The most pronounced deficit occurred in May 2018, reaching negative 901.4 million US dollars. While a period of relative improvement was observed in May 2017, where losses narrowed to negative 167.4 million US dollars, this trend did not persist, as losses widened again in the subsequent two years.
- Invested Capital Analysis
- Invested capital exhibited relative stability between 2014 and 2017, maintaining a range between 18.4 billion and 19.4 billion US dollars. A sharp increase is observed in May 2018, where invested capital rose to 27.6 billion US dollars, remaining at a similarly high level of 27.4 billion US dollars in May 2019. This substantial expansion in the capital base suggests a significant investment or acquisition event during the 2018 fiscal year.
- Economic Spread Ratio Performance
- The economic spread ratio was consistently negative, reflecting a negative gap between the return on invested capital and the weighted average cost of capital. The lowest point was recorded in May 2015 at -3.69%, followed by another significant dip to -3.27% in May 2018. The correlation between the surge in invested capital in 2018 and the deepening of the negative spread indicates that the additional capital deployed did not immediately generate returns sufficient to cover its associated costs.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?
Economic Profit Margin
General Mills Inc., economic profit margin calculation, comparison to benchmarks
| May 26, 2019 | May 27, 2018 | May 28, 2017 | May 29, 2016 | May 31, 2015 | May 25, 2014 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Economic profit1 | (731,349) | (901,449) | (167,420) | (316,775) | (710,571) | (131,274) | |
| Net sales | 16,865,200) | 15,740,400) | 15,619,800) | 16,563,100) | 17,630,300) | 17,909,600) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -4.34% | -5.73% | -1.07% | -1.91% | -4.03% | -0.73% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Coca-Cola Co. | — | — | — | — | — | — | |
| Mondelēz International Inc. | — | — | — | — | — | — | |
| PepsiCo Inc. | — | — | — | — | — | — | |
| Philip Morris International Inc. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
1 Economic profit. See details »
2 2019 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × -731,349 ÷ 16,865,200 = -4.34%
3 Click competitor name to see calculations.
The financial performance from May 2014 to May 2019 is characterized by a consistent inability to generate positive economic profit, indicating that the returns on invested capital did not exceed the company's cost of capital during this six-year period.
- Economic Profit Trends
- Economic profit remained negative throughout the observed period and exhibited significant volatility. A sharp increase in the deficit occurred between 2014 and 2015, moving from -131.3 million USD to -710.6 million USD. A recovery phase followed, with the deficit narrowing to -167.4 million USD by May 2017. However, a substantial decline was recorded in 2018, where the deficit widened to its period peak of -901.4 million USD, before slightly improving to -731.3 million USD in 2019.
- Net Sales Performance
- Net sales followed a U-shaped trajectory. A steady contraction was observed from May 2014, when sales were 17.9 billion USD, down to a low of 15.6 billion USD in May 2017. This downward trend reversed in 2018, with sales increasing to 16.9 billion USD by May 2019, although total revenue remained below the 2014 baseline.
- Economic Profit Margin Analysis
- The economic profit margin remained negative for the duration of the period, reflecting the persistent value destruction. The margin fluctuated from -0.73% in 2014 to a period low of -5.73% in 2018. The significant drop in the margin during 2018 occurred despite a slight recovery in net sales, suggesting that the decline in economic value was driven by factors other than revenue, such as an increase in the cost of capital or a reduction in net operating profit after tax.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
How can I help you?