Economic Value Of Equity - EVE


DEFINITION of 'Economic Value Of Equity - EVE'

A cash flow calculation that takes the present value of all asset cash flows and subtracts the present value of all liability cash flows. This calculation is used by banks for asset/liability management.

BREAKING DOWN 'Economic Value Of Equity - EVE'

The value of a bank's assets and liabilities are directly linked to interest rates. By calculating its EVE, a bank is able to construct models that show the effect of different interest rate changes on its total capital. This risk analysis is a key tool that allows banks to prepare against constantly changing interest rates.

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  4. Asset

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  1. What's the difference between EaR, Value at Risk (VaR), and EVE?

    Earnings at risk (EaR), value at risk (VaR) and economic value of equity (EVE) are measures used to assess potential value ... Read Full Answer >>
  2. How can working capital affect a company's finances?

    Working capital, or total current assets minus total current liabilities, can affect a company's longer-term investment effectiveness ... Read Full Answer >>
  3. What are working capital costs?

    Working capital costs (WCC) refer to the costs of maintaining daily operations at an organization. These costs take into ... Read Full Answer >>
  4. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  5. How can companies use the cash flow statement to mislead investors?

    Cash flow is a means for most investors to examine the actual economics of a business they might invest in, especially from ... Read Full Answer >>
  6. How do dividends affect the balance sheet?

    Dividends paid in cash affect a company's balance sheet by decreasing the company's cash account on the asset side and decreasing ... Read Full Answer >>

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