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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: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2015 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,391 – 10.35% × 45,332 = -1,301
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. | Time Warner Cable Inc. economic profit increased from 2013 to 2014 but then decreased significantly from 2014 to 2015. |
Net Operating Profit after Taxes (NOPAT)
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for doubtful accounts.
3 Addition of increase (decrease) in deferred revenue and subscriber-related liabilities.
4 Addition of increase (decrease) in restructuring reserves.
5 Addition of increase (decrease) in equity equivalents to net income attributable to TWC shareholders.
6 2015 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 681 × 6.22% = 42
7 2015 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,444 × 35.00% = 506
8 Addition of after taxes interest expense to net income attributable to TWC shareholders.
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. | Time Warner Cable Inc. NOPAT increased from 2013 to 2014 but then slightly decreased from 2014 to 2015 not reaching 2013 level. |
Cash Operating Taxes
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
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. | Time Warner Cable Inc. cash operating taxes decreased from 2013 to 2014 but then slightly increased from 2014 to 2015. |
Invested Capital
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
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 revenue and subscriber-related liabilities.
5 Addition of restructuring reserves.
6 Addition of equity equivalents to total TWC shareholders’ 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. | Time Warner Cable Inc. invested capital increased from 2013 to 2014 and from 2014 to 2015. |
Cost of Capital
Time Warner Cable Inc., cost of capital calculations
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 52,402) | 52,402) | ÷ | 76,796) | = | 0.68 | 0.68 | × | 13.29% | = | 9.07% | ||
Debt3 | 23,713) | 23,713) | ÷ | 76,796) | = | 0.31 | 0.31 | × | 6.22% × (1 – 35.00%) | = | 1.25% | ||
Operating lease liability4 | 681) | 681) | ÷ | 76,796) | = | 0.01 | 0.01 | × | 6.22% × (1 – 35.00%) | = | 0.04% | ||
Total: | 76,796) | 1.00 | 10.35% |
Based on: 10-K (reporting date: 2015-12-31).
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 | 42,062) | 42,062) | ÷ | 71,236) | = | 0.59 | 0.59 | × | 13.29% | = | 7.84% | ||
Debt3 | 28,434) | 28,434) | ÷ | 71,236) | = | 0.40 | 0.40 | × | 5.95% × (1 – 35.00%) | = | 1.54% | ||
Operating lease liability4 | 740) | 740) | ÷ | 71,236) | = | 0.01 | 0.01 | × | 5.95% × (1 – 35.00%) | = | 0.04% | ||
Total: | 71,236) | 1.00 | 9.43% |
Based on: 10-K (reporting date: 2014-12-31).
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 | 40,225) | 40,225) | ÷ | 66,185) | = | 0.61 | 0.61 | × | 13.29% | = | 8.07% | ||
Debt3 | 25,236) | 25,236) | ÷ | 66,185) | = | 0.38 | 0.38 | × | 5.88% × (1 – 35.00%) | = | 1.46% | ||
Operating lease liability4 | 724) | 724) | ÷ | 66,185) | = | 0.01 | 0.01 | × | 5.88% × (1 – 35.00%) | = | 0.04% | ||
Total: | 66,185) | 1.00 | 9.57% |
Based on: 10-K (reporting date: 2013-12-31).
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 | 25,692) | 25,692) | ÷ | 58,165) | = | 0.44 | 0.44 | × | 13.29% | = | 5.87% | ||
Debt3 | 31,784) | 31,784) | ÷ | 58,165) | = | 0.55 | 0.55 | × | 5.89% × (1 – 35.00%) | = | 2.09% | ||
Operating lease liability4 | 689) | 689) | ÷ | 58,165) | = | 0.01 | 0.01 | × | 5.89% × (1 – 35.00%) | = | 0.05% | ||
Total: | 58,165) | 1.00 | 8.01% |
Based on: 10-K (reporting date: 2012-12-31).
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 | 24,392) | 24,392) | ÷ | 51,530) | = | 0.47 | 0.47 | × | 13.29% | = | 6.29% | ||
Debt3 | 26,442) | 26,442) | ÷ | 51,530) | = | 0.51 | 0.51 | × | 6.04% × (1 – 35.00%) | = | 2.01% | ||
Operating lease liability4 | 696) | 696) | ÷ | 51,530) | = | 0.01 | 0.01 | × | 6.04% × (1 – 35.00%) | = | 0.05% | ||
Total: | 51,530) | 1.00 | 8.36% |
Based on: 10-K (reporting date: 2011-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | ||||||
Economic profit1 | (1,301) | (491) | (855) | 115) | (429) | |
Invested capital2 | 45,332) | 44,929) | 44,327) | 46,124) | 44,961) | |
Performance Ratio | ||||||
Economic spread ratio3 | -2.87% | -1.09% | -1.93% | 0.25% | -0.95% | |
Benchmarks | ||||||
Economic Spread Ratio, Competitors4 | ||||||
Alphabet Inc. | — | — | — | — | — | |
Comcast Corp. | — | — | — | — | — | |
Meta Platforms Inc. | — | — | — | — | — | |
Netflix Inc. | — | — | — | — | — | |
Walt Disney Co. | — | — | — | — | — |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2015 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -1,301 ÷ 45,332 = -2.87%
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. | Time Warner Cable Inc. economic spread ratio improved from 2013 to 2014 but then deteriorated significantly from 2014 to 2015. |
Economic Profit Margin
Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | Dec 31, 2012 | Dec 31, 2011 | ||
---|---|---|---|---|---|---|
Selected Financial Data (US$ in millions) | ||||||
Economic profit1 | (1,301) | (491) | (855) | 115) | (429) | |
Revenue | 23,697) | 22,812) | 22,120) | 21,386) | 19,675) | |
Add: Increase (decrease) in deferred revenue and subscriber-related liabilities | 26) | 10) | 5) | 14) | 6) | |
Adjusted revenue | 23,723) | 22,822) | 22,125) | 21,400) | 19,681) | |
Performance Ratio | ||||||
Economic profit margin2 | -5.48% | -2.15% | -3.87% | 0.54% | -2.18% | |
Benchmarks | ||||||
Economic Profit Margin, Competitors3 | ||||||
Alphabet Inc. | — | — | — | — | — | |
Comcast Corp. | — | — | — | — | — | |
Meta Platforms Inc. | — | — | — | — | — | |
Netflix Inc. | — | — | — | — | — | |
Walt Disney Co. | — | — | — | — | — |
Based on: 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31), 10-K (reporting date: 2011-12-31).
1 Economic profit. See details »
2 2015 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × -1,301 ÷ 23,723 = -5.48%
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. | Time Warner Cable Inc. economic profit margin improved from 2013 to 2014 but then deteriorated significantly from 2014 to 2015. |