Apple Inc. (NASDAQ:AAPL) | Economic Value Added (2024)

Table of Contents
Economic Value Added (EVA) Economic Profit Net Operating Profit after Taxes (NOPAT) Cash Operating Taxes Invested Capital Cost of Capital Economic Spread Ratio Economic Profit Margin

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
  • Net Operating Profit after Taxes (NOPAT)
  • Cash Operating Taxes
  • Invested Capital
  • Cost of Capital
  • Economic Spread Ratio
  • Economic Profit Margin

Economic Profit

Apple Inc., economic profit calculation

US$ in millions

12 months ended: Sep 30, 2023 Sep 24, 2022 Sep 25, 2021 Sep 26, 2020 Sep 28, 2019 Sep 29, 2018
Net operating profit after taxes (NOPAT)1 94,296) 101,652) 91,407) 58,673) 53,447) 25,278)
Cost of capital2 15.54% 15.38% 15.26% 15.11% 14.73% 14.49%
Invested capital3 60,243) 46,661) 42,700) 36,252) 50,655) 26,376)
Economic profit4 84,936) 94,477) 84,892) 53,195) 45,988) 21,456)

Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-24), 10-K (reporting date: 2021-09-25), 10-K (reporting date: 2020-09-26), 10-K (reporting date: 2019-09-28), 10-K (reporting date: 2018-09-29).

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
= 94,296 – 15.54% × 60,243 = 84,936

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. Apple Inc. economic profit increased from 2021 to 2022 but then slightly decreased from 2022 to 2023 not reaching 2021 level.

Net Operating Profit after Taxes (NOPAT)

Apple Inc., NOPAT calculation

US$ in millions

12 months ended: Sep 30, 2023 Sep 24, 2022 Sep 25, 2021 Sep 26, 2020 Sep 28, 2019 Sep 29, 2018
Net income 96,995) 99,803) 94,680) 57,411) 55,256) 59,531)
Deferred income tax expense (benefit)1 (3,024) 895) (4,774) (215) (340) (32,590)
Increase (decrease) in deferred revenue2 (300) 500) 1,700) 2,100) (700) (44)
Increase (decrease) in equity equivalents3 (3,324) 1,395) (3,074) 1,885) (1,040) (32,634)
Interest expense 3,933) 2,931) 2,645) 2,873) 3,576) 3,240)
Interest expense, operating lease liability4 355) 264) 219) 184) 381) 321)
Adjusted interest expense 4,288) 3,195) 2,864) 3,057) 3,957) 3,561)
Tax benefit of interest expense5 (900) (671) (601) (642) (831) (873)
Adjusted interest expense, after taxes6 3,387) 2,524) 2,263) 2,415) 3,126) 2,689)
(Gain) loss on marketable securities 253) 205) (273) (82) 31) (20)
Interest and dividend income (3,750) (2,825) (2,843) (3,763) (4,961) (5,686)
Investment income, before taxes (3,497) (2,620) (3,116) (3,845) (4,930) (5,706)
Tax expense (benefit) of investment income7 734) 550) 654) 807) 1,035) 1,398)
Investment income, after taxes8 (2,763) (2,070) (2,462) (3,038) (3,895) (4,308)
Net operating profit after taxes (NOPAT) 94,296) 101,652) 91,407) 58,673) 53,447) 25,278)

Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-24), 10-K (reporting date: 2021-09-25), 10-K (reporting date: 2020-09-26), 10-K (reporting date: 2019-09-28), 10-K (reporting date: 2018-09-29).

1 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in deferred revenue.

3 Addition of increase (decrease) in equity equivalents to net income.

4 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 11,818 × 3.00% = 355

5 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 4,288 × 21.00% = 900

6 Addition of after taxes interest expense to net income.

7 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 3,497 × 21.00% = 734

8 Elimination of after taxes investment income.

See Also
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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. Apple Inc. NOPAT increased from 2021 to 2022 but then slightly decreased from 2022 to 2023 not reaching 2021 level.

Cash Operating Taxes

Apple Inc., cash operating taxes calculation

US$ in millions

12 months ended: Sep 30, 2023 Sep 24, 2022 Sep 25, 2021 Sep 26, 2020 Sep 28, 2019 Sep 29, 2018
Provision for income taxes 16,741) 19,300) 14,527) 9,680) 10,481) 13,372)
Less: Deferred income tax expense (benefit) (3,024) 895) (4,774) (215) (340) (32,590)
Add: Tax savings from interest expense 900) 671) 601) 642) 831) 873)
Less: Tax imposed on investment income 734) 550) 654) 807) 1,035) 1,398)
Cash operating taxes 19,931) 18,526) 19,248) 9,729) 10,617) 45,437)

Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-24), 10-K (reporting date: 2021-09-25), 10-K (reporting date: 2020-09-26), 10-K (reporting date: 2019-09-28), 10-K (reporting date: 2018-09-29).

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. Apple Inc. cash operating taxes decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

Invested Capital

Apple Inc., invested capital calculation (financing approach)

US$ in millions

Sep 30, 2023 Sep 24, 2022 Sep 25, 2021 Sep 26, 2020 Sep 28, 2019 Sep 29, 2018
Current portion of finance leases 165) 129) 79) 24) —) —)
Commercial paper 5,985) 9,982) 6,000) 4,996) 5,980) 11,964)
Current portion of term debt 9,822) 11,128) 9,613) 8,773) 10,260) 8,784)
Non-current portion of term debt 95,281) 98,959) 109,106) 98,667) 91,807) 93,735)
Non-current portion of finance leases 859) 812) 769) 637) —) —)
Operating lease liability1 11,818) 11,470) 10,955) 9,181) 8,535) 7,973)
Total reported debt & leases 123,930) 132,480) 136,522) 122,278) 116,582) 122,456)
Shareholders’ equity 62,146) 50,672) 63,090) 65,339) 90,488) 107,147)
Net deferred tax (assets) liabilities2 (17,251) (14,537) (13,073) (8,157) (8,045) (5,834)
Deferred revenue3 12,100) 12,400) 11,900) 10,200) 8,100) 10,340)
Equity equivalents4 (5,151) (2,137) (1,173) 2,043) 55) 4,506)
Accumulated other comprehensive (income) loss, net of tax5 11,452) 11,109) (163) 406) 584) 3,454)
Adjusted shareholders’ equity 68,447) 59,644) 61,754) 67,788) 91,127) 115,107)
Marketable securities6 (132,134) (145,463) (155,576) (153,814) (157,054) (211,187)
Invested capital 60,243) 46,661) 42,700) 36,252) 50,655) 26,376)

Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-24), 10-K (reporting date: 2021-09-25), 10-K (reporting date: 2020-09-26), 10-K (reporting date: 2019-09-28), 10-K (reporting date: 2018-09-29).

1 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of deferred revenue.

4 Addition of equity equivalents to shareholders’ equity.

5 Removal of accumulated other comprehensive income.

6 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. Apple Inc. invested capital increased from 2021 to 2022 and from 2022 to 2023.

Cost of Capital

Apple Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 2,747,394) 2,747,394) ÷ 2,857,021) = 0.96 0.96 × 15.96% = 15.35%
Commercial paper, term debt, and finance leases3 97,809) 97,809) ÷ 2,857,021) = 0.03 0.03 × 6.53% × (1 – 21.00%) = 0.18%
Operating lease liability4 11,818) 11,818) ÷ 2,857,021) = 0.00 0.00 × 3.00% × (1 – 21.00%) = 0.01%
Total: 2,857,021) 1.00 15.54%

Based on: 10-K (reporting date: 2023-09-30).

1 US$ in millions

See Also
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2 Equity. See details »

3 Commercial paper, term debt, and finance leases. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 2,477,530) 2,477,530) ÷ 2,598,723) = 0.95 0.95 × 15.96% = 15.22%
Commercial paper, term debt, and finance leases3 109,723) 109,723) ÷ 2,598,723) = 0.04 0.04 × 4.53% × (1 – 21.00%) = 0.15%
Operating lease liability4 11,470) 11,470) ÷ 2,598,723) = 0.00 0.00 × 2.30% × (1 – 21.00%) = 0.01%
Total: 2,598,723) 1.00 15.38%

Based on: 10-K (reporting date: 2022-09-24).

1 US$ in millions

2 Equity. See details »

3 Commercial paper, term debt, and finance leases. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 2,457,678) 2,457,678) ÷ 2,600,781) = 0.94 0.94 × 15.96% = 15.08%
Commercial paper, term debt, and finance leases3 132,148) 132,148) ÷ 2,600,781) = 0.05 0.05 × 4.16% × (1 – 21.00%) = 0.17%
Operating lease liability4 10,955) 10,955) ÷ 2,600,781) = 0.00 0.00 × 2.00% × (1 – 21.00%) = 0.01%
Total: 2,600,781) 1.00 15.26%

Based on: 10-K (reporting date: 2021-09-25).

1 US$ in millions

2 Equity. See details »

3 Commercial paper, term debt, and finance leases. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 1,850,816) 1,850,816) ÷ 1,982,754) = 0.93 0.93 × 15.96% = 14.90%
Commercial paper, term debt, and finance leases3 122,757) 122,757) ÷ 1,982,754) = 0.06 0.06 × 4.16% × (1 – 21.00%) = 0.20%
Operating lease liability4 9,181) 9,181) ÷ 1,982,754) = 0.00 0.00 × 2.00% × (1 – 21.00%) = 0.01%
Total: 1,982,754) 1.00 15.11%

Based on: 10-K (reporting date: 2020-09-26).

1 US$ in millions

2 Equity. See details »

3 Commercial paper, term debt, and finance leases. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 1,105,307) 1,105,307) ÷ 1,227,322) = 0.90 0.90 × 15.96% = 14.37%
Commercial paper, term debt, and finance leases3 113,480) 113,480) ÷ 1,227,322) = 0.09 0.09 × 4.46% × (1 – 21.00%) = 0.33%
Operating lease liability4 8,535) 8,535) ÷ 1,227,322) = 0.01 0.01 × 4.46% × (1 – 21.00%) = 0.02%
Total: 1,227,322) 1.00 14.73%

Based on: 10-K (reporting date: 2019-09-28).

1 US$ in millions

2 Equity. See details »

3 Commercial paper, term debt, and finance leases. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 956,672) 956,672) ÷ 1,079,810) = 0.89 0.89 × 15.96% = 14.14%
Commercial paper, term debt, and finance leases3 115,164) 115,164) ÷ 1,079,810) = 0.11 0.11 × 4.03% × (1 – 24.50%) = 0.32%
Operating lease liability4 7,973) 7,973) ÷ 1,079,810) = 0.01 0.01 × 4.03% × (1 – 24.50%) = 0.02%
Total: 1,079,810) 1.00 14.49%

Based on: 10-K (reporting date: 2018-09-29).

1 US$ in millions

2 Equity. See details »

3 Commercial paper, term debt, and finance leases. See details »

4 Operating lease liability. See details »

Economic Spread Ratio

Apple Inc., economic spread ratio calculation, comparison to benchmarks

Sep 30, 2023 Sep 24, 2022 Sep 25, 2021 Sep 26, 2020 Sep 28, 2019 Sep 29, 2018
Selected Financial Data (US$ in millions)
Economic profit1 84,936) 94,477) 84,892) 53,195) 45,988) 21,456)
Invested capital2 60,243) 46,661) 42,700) 36,252) 50,655) 26,376)
Performance Ratio
Economic spread ratio3 140.99% 202.48% 198.81% 146.74% 90.79% 81.35%
Benchmarks
Economic Spread Ratio, Competitors4
Arista Networks Inc. 28.47% 23.93% 38.92% 21.26% 26.76% —
Cisco Systems Inc. 8.38% 8.27% 7.51% 11.74% 5.95% -9.35%
Super Micro Computer Inc. 10.16% 0.50% -6.95% -9.74% -4.65% -2.24%

Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-24), 10-K (reporting date: 2021-09-25), 10-K (reporting date: 2020-09-26), 10-K (reporting date: 2019-09-28), 10-K (reporting date: 2018-09-29).

1 Economic profit. See details »

2 Invested capital. See details »

3 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 84,936 ÷ 60,243 = 140.99%

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. Apple Inc. economic spread ratio improved from 2021 to 2022 but then deteriorated significantly from 2022 to 2023.

Economic Profit Margin

Apple Inc., economic profit margin calculation, comparison to benchmarks

Sep 30, 2023 Sep 24, 2022 Sep 25, 2021 Sep 26, 2020 Sep 28, 2019 Sep 29, 2018
Selected Financial Data (US$ in millions)
Economic profit1 84,936) 94,477) 84,892) 53,195) 45,988) 21,456)
Net sales 383,285) 394,328) 365,817) 274,515) 260,174) 265,595)
Add: Increase (decrease) in deferred revenue (300) 500) 1,700) 2,100) (700) (44)
Adjusted net sales 382,985) 394,828) 367,517) 276,615) 259,474) 265,551)
Performance Ratio
Economic profit margin2 22.18% 23.93% 23.10% 19.23% 17.72% 8.08%
Benchmarks
Economic Profit Margin, Competitors3
Arista Networks Inc. 21.53% 16.51% 22.86% 16.62% 19.68% —
Cisco Systems Inc. 8.34% 9.27% 8.38% 12.25% 6.28% -9.31%
Super Micro Computer Inc. 3.44% 0.21% -2.51% -3.61% -1.50% -0.72%

Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-24), 10-K (reporting date: 2021-09-25), 10-K (reporting date: 2020-09-26), 10-K (reporting date: 2019-09-28), 10-K (reporting date: 2018-09-29).

1 Economic profit. See details »

2 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × 84,936 ÷ 382,985 = 22.18%

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. Apple Inc. economic profit margin improved from 2021 to 2022 but then deteriorated significantly from 2022 to 2023.
Apple Inc. (NASDAQ:AAPL) | Economic Value Added (2024)
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