Economic Value Added (EVA), registered trademark of Stern Stewart & Co. , is a performance metric used to measure the economic profit of a company.
When sharing financial data about your company, you want to present it in the best light but also be as accurate as possible. Some companies prefer to use an economic value added analysis when measuring their operating performance.
Economic Value Added (EVA) is a financial tool used to calculate the dollar return on an investment after taxes, the cost of the capital used for the investment and the cost of assets used in the creation of the product. The after-tax profit minus the product of the cost of the assets times the weighted average expense of the capital used gives a dollar value.
In corporate finance, Economic Value Added (EVA), is an estimate of a firm's economic profit – being the value created in excess of the required return of the ...
(Also referred to as "economic profit".) The formula for calculating EVA is as follows: = Net Operating Profit After Taxes (NOPAT) - (Capital * Cost of Capital)
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Economic value added (EVA) is an internal management performance measure that compares net operating profit to total cost of capital. Stern Stewart & Co. is ...
The Economic Value Added (EVA) is a measure of surplus value created on an ... It is closest in both theory and construct to the net present value of a project in ...
Mar 13, 2012 ... Longer answer: Unless you're really into math, Economic Value Added (EVA, trademarked by Stern Stewart) can be complicated to calculate.
Economic Value Added Calculation | Formula | Example.
We introduce the concept of economic value added, which uses the same discount rate developed for capital budgeting. We begin with a simple example.
Full explanation of this financial valuation and measurement concept, where and how it can be used. Includes links to more financial measurement tools.
Economic Value Added: The Invisible Hand at Work. By: Michael Durant, CPA, CCE. Abstract. Adam Smith, one of the fathers of classical economic thought, ...
Economic Value Added (EVA) is a term used to indicate the estimated economic profit of a business. Although this term is commonly used in corporate finance, it is trademarked by the management firm of Stern Stewart & Co. In business settings, you may have heard EVA called economic profit.
EVA highly values cash in a business and views some expenses as actual investments towards the future health of the company. It also stringently evaluates equity capital. The greatest advantage of EVA is its ability to summarize into a single statistic the value created by financial obligations. You can also use the EVA of your business as an operational metric to help you build value in your company.
EVA is not the only method used to assess the potential of a business. Residual income (RI) and residual cash flow can also be used to determine the health of the business. However, EVA is considered the most successful performance metric used by consultants and other companies. Market value added (MVA) is also a common value metric used by consultants when evaluating a business.
Using the EVA can help you determine the health of your own company or the viability of a potential business acquisition. To learn more about Economic Value Added (EVA), browse Business.com and visit some of the provided links.