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Economic Value Added |
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Economic value added (EVA) A method of performance evaluation that adjusts accounting performance for investors' required return on investment. Suppose a division produces a 12% return on capital invested. Given the risk of the division's business line, if investors would usually require 14% on capital invested for this level of risk, the division destroyed shareholder value by the EVA metric. This Stern-Stewart has a trade mark on this term. Economic Value Added A company's after-tax earnings less its opportunity cost. The economic value added measure is a metric of how well it has performed over a given period of time compared to how it could have performed. Economic Value Added (EVA) What Does Economic Value Added (EVA) Mean? A measure of a company's financial performance that is based on the residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis). Also called economic profit. The formula for calculating EVA is as follows: EVA = Net Operating Profit after Taxes (NOPAT) - (Capital × Cost of Capital). Investopedia explains Economic Value Added (EVA) This measure was devised by Stern Stewart & Co. and is used as a way to ascertain the true economic profit of a company. Related Terms: How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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A key metric is linking planning with some economic value measure, such as EVA or ROIC," Roth said in an interview, referring to economic value added and return on invested capital. CalPERS chose its target companies based on stock performance, board practices and a financial performance measure called economic value added. NYSE:TDW) announced today that it has adopted the Economic Value Added (EVA) management and incentive system. |
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