Economic Value Added - EVA

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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)

BREAKING DOWN '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.

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RELATED FAQS
  1. What's the difference between economic value added (EVA) and economic rent?

    Economic value added (EVA) measures the performance of a company's management team by comparing operating profit to total ... Read Full Answer >>
  2. What's the difference between economic value added (EVA) and producer surplus?

    The difference between economic value added (EVA) and producer surplus is that EVA measures the returns of a company above ... Read Full Answer >>
  3. What's the difference between economic value added (EVA) and total revenue?

    While economic value added, or EVA, is an internal management measure that compares a company's net operating profit to its ... Read Full Answer >>
  4. What's the difference between economic value added (EVA) and accounting profit?

    Economic value added (EVA) is a measure of a company's economic profit, which is the profit earned by a company minus the ... Read Full Answer >>
  5. What is the point of calculating economic value added (EVA)?

    Economic value added, or EVA, is a management performance measure that shows the profit earned by a company minus the cost ... Read Full Answer >>
  6. What is the difference between economic value added and market value added?

    Economic value added (EVA) is a performance measure developed by Stern Stewart & Co that attempts to measure the true ... Read Full Answer >>
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