Economic Value Added - EVA
Definition of 'Economic Value Added - EVA'
A measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis). (Also referred to as "economic profit".)
The formula for calculating EVA is as follows:
= Net Operating Profit After Taxes (NOPAT) - (Capital * Cost of Capital)
Investopedia explains 'Economic Value Added - EVA'
This measure was devised by Stern Stewart & Co. Economic value added attempts to capture the true economic profit of a company.