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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
= 19,452 – 6.99% × 304,400 = -1,835
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. | Verizon Communications Inc. economic profit decreased 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 equity equivalents to net income attributable to Verizon.
4 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 24,268 × 3.60% = 874
5 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 6,398 × 21.00% = 1,344
6 Addition of after taxes interest expense to net income attributable to Verizon.
7 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 349 × 21.00% = 73
8 Elimination of after taxes investment income.
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. | Verizon Communications Inc. NOPAT decreased 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. | Verizon Communications Inc. 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 equity equivalents to equity attributable to Verizon.
5 Removal of accumulated other comprehensive income.
6 Subtraction of work in progress.
7 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. | Verizon Communications Inc. invested capital increased from 2021 to 2022 and from 2022 to 2023. |
Cost of Capital
Verizon Communications Inc., cost of capital calculations
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 166,994) | 166,994) | ÷ | 338,963) | = | 0.49 | 0.49 | × | 8.40% | = | 4.14% | ||
Short-term and long-term debt, including finance leases3 | 147,701) | 147,701) | ÷ | 338,963) | = | 0.44 | 0.44 | × | 7.70% × (1 – 21.00%) | = | 2.65% | ||
Operating lease liability4 | 24,268) | 24,268) | ÷ | 338,963) | = | 0.07 | 0.07 | × | 3.60% × (1 – 21.00%) | = | 0.20% | ||
Total: | 338,963) | 1.00 | 6.99% |
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 168,037) | 168,037) | ÷ | 334,502) | = | 0.50 | 0.50 | × | 8.40% | = | 4.22% | ||
Short-term and long-term debt, including finance leases3 | 140,773) | 140,773) | ÷ | 334,502) | = | 0.42 | 0.42 | × | 7.38% × (1 – 21.00%) | = | 2.45% | ||
Operating lease liability4 | 25,692) | 25,692) | ÷ | 334,502) | = | 0.08 | 0.08 | × | 3.20% × (1 – 21.00%) | = | 0.19% | ||
Total: | 334,502) | 1.00 | 6.87% |
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 223,828) | 223,828) | ÷ | 421,420) | = | 0.53 | 0.53 | × | 8.40% | = | 4.46% | ||
Short-term and long-term debt, including finance leases3 | 170,530) | 170,530) | ÷ | 421,420) | = | 0.40 | 0.40 | × | 7.79% × (1 – 21.00%) | = | 2.49% | ||
Operating lease liability4 | 27,062) | 27,062) | ÷ | 421,420) | = | 0.06 | 0.06 | × | 3.10% × (1 – 21.00%) | = | 0.16% | ||
Total: | 421,420) | 1.00 | 7.11% |
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 233,805) | 233,805) | ÷ | 413,326) | = | 0.57 | 0.57 | × | 8.40% | = | 4.75% | ||
Short-term and long-term debt, including finance leases3 | 158,036) | 158,036) | ÷ | 413,326) | = | 0.38 | 0.38 | × | 7.69% × (1 – 21.00%) | = | 2.32% | ||
Operating lease liability4 | 21,485) | 21,485) | ÷ | 413,326) | = | 0.05 | 0.05 | × | 3.50% × (1 – 21.00%) | = | 0.14% | ||
Total: | 413,326) | 1.00 | 7.22% |
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
Capital (fair value)1 | Weights | Cost of capital | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Equity2 | 240,707) | 240,707) | ÷ | 392,677) | = | 0.61 | 0.61 | × | 8.40% | = | 5.15% | ||
Short-term and long-term debt, including finance leases3 | 130,316) | 130,316) | ÷ | 392,677) | = | 0.33 | 0.33 | × | 7.25% × (1 – 21.00%) | = | 1.90% | ||
Operating lease liability4 | 21,654) | 21,654) | ÷ | 392,677) | = | 0.06 | 0.06 | × | 4.00% × (1 – 21.00%) | = | 0.17% | ||
Total: | 392,677) | 1.00 | 7.22% |
Based on: 10-K (reporting date: 2019-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including finance leases. 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 | (1,835) | 7,333) | 9,285) | 6,427) | 9,370) | |
Invested capital2 | 304,400) | 301,478) | 290,004) | 247,730) | 220,656) | |
Performance Ratio | ||||||
Economic spread ratio3 | -0.60% | 2.43% | 3.20% | 2.59% | 4.25% | |
Benchmarks | ||||||
Economic Spread Ratio, Competitors4 | ||||||
AT&T Inc. | 0.14% | -6.62% | 0.89% | -6.08% | -2.34% | |
T-Mobile US Inc. | 0.60% | -3.18% | -3.19% | -2.67% | 0.70% |
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 × -1,835 ÷ 304,400 = -0.60%
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. | Verizon Communications Inc. economic spread ratio deteriorated 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 | (1,835) | 7,333) | 9,285) | 6,427) | 9,370) | |
Operating revenues | 133,974) | 136,835) | 133,613) | 128,292) | 131,868) | |
Performance Ratio | ||||||
Economic profit margin2 | -1.37% | 5.36% | 6.95% | 5.01% | 7.11% | |
Benchmarks | ||||||
Economic Profit Margin, Competitors3 | ||||||
AT&T Inc. | 0.38% | -16.96% | 2.31% | -14.58% | -5.65% | |
T-Mobile US Inc. | 1.41% | -7.45% | -7.35% | -6.90% | 1.13% |
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 ÷ Operating revenues
= 100 × -1,835 ÷ 133,974 = -1.37%
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. | Verizon Communications Inc. economic profit margin deteriorated from 2021 to 2022 and from 2022 to 2023. |