Shareholder Value Added - SVA

What is 'Shareholder Value Added - SVA'

Shareholder value added (SVA) is a value-based performance measure of a company's worth to shareholders. The basic calculation is net operating profit after tax (NOPAT) minus the cost of capital from the issuance of debt and equity, based on the company's weighted average cost of capital:

Shareholder Value Added (SVA)

BREAKING DOWN 'Shareholder Value Added - SVA'

Using the market value of the company, rather than the accounting-based value in the above calculation, will give the market value added to shareholders.

RELATED TERMS
  1. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating ...
  2. Shareholder Value Transfer - SVT

    A metric intended to guide shareholders in how much equity compensation ...
  3. Shareholder Value

    The value delivered to shareholders because of management's ability ...
  4. Cost Of Capital

    The required return necessary to make a capital budgeting project, ...
  5. Shareholder Equity Ratio

    A ratio used to help determine how much shareholders would receive ...
  6. Value-Based Pricing

    The setting of a product or service's price, based on the benefits ...
Related Articles
  1. Economics

    Explaining Net Operating Profit After Tax

    Net operating profit after tax (NOPAT) describes a company’s potential cash earnings.
  2. Markets

    EVA: Pulling It All Together

    By David Harper, (Editor In Chief - Investopedia Advisor) Contact David By working through the components of economic profit over the previous chapters, we've been building an economic profit ...
  3. Term

    What is the Shareholder Equity Ratio?

    The shareholder equity ratio shows how much money shareholders will receive if a company has to liquidate its assets.
  4. Markets

    EVA: Overview

    By David Harper, (Contributing Editor- Investopedia Advisor) Contact David Examining the components of economic profit and studying the finer points of its calculation require an understanding ...
  5. Markets

    EVA: What Does It Really Mean?

    By David Harper, (Contributing Editor - Investopedia Advisor) Contact David As we performed a sequence of calculations to find Disney's (DIS) 2004 economic profit, we discovered that despite ...
  6. Investing

    Weighted Average Cost Of Capital (WACC)

    Weighted average cost of capital may be hard to calculate, but it's a solid way to measure investment quality
  7. Investing Basics

    Knowing Your Rights As A Shareholder

    We delve into common stock owners' privileges and how to be vigilant in monitoring a company.
  8. Personal Finance

    Target Corp: WACC Analysis (TGT)

    Learn about the importance of capital structure when making investment decisions, and how Target's capital structure compares against the rest of the industry.
  9. Credit & Loans

    Debt Ratios: Capitalization Ratio

    By Richard Loth (Contact | Biography)The capitalization ratio measures the debt component of a company's capital structure, or capitalization (i.e., the sum of long-term debt liabilities and ...
  10. Investing

    McDonald's Stock: Capital Structure Analysis (MCD)

    Learn about the importance of capital structure, and what equity and debt capitalization measures can tell us about the performance of McDonald's Corporation.
RELATED FAQS
  1. Why is it beneficial to use Net Operating Profit After Tax to compare companies within ...

    Understand why it's beneficial to use net operating profit after tax (NOPAT) to compare companies within the same industry ... Read Answer >>
  2. How can a company improve its Economic Value Added (EVA)?

    Find out about some of the ways a company could try to improve its economic profit, also known as its economic value added, ... Read Answer >>
  3. How do you calculate the proper weights of different costs of capital?

    Understand how to calculate the weights of the difference costs of capital and how this calculation is used to determine ... Read Answer >>
  4. How do analysts and investors interpret Economic Value Added?

    Understand how economic value added (EVA) is interpreted by analysts and investors and how to calculate this important metric ... Read Answer >>
  5. What does it signify about the state of a company if it has unusually high shareholders' ...

    Understand the meaning and calculation of shareholder equity and what a high level of shareholder equity signifies about ... Read Answer >>
  6. How do you calculate shareholder equity?

    Find out more about shareholders' equity, what shareholders' equity measures and how to calculate a company's shareholders' ... Read Answer >>
Hot Definitions
  1. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  2. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  3. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  4. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  5. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  6. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
Trading Center