Value Added

Value added is the risk adjusted return generated by an investment strategy: the return of the investment strategy minus the return of the benchmark.

Value Added

The increase to the value of a product at each stage in a production cycle or supply chain. For example, a timber company cuts down trees, which adds value to the wood because it can then be used. It may then sell the timber to a miller, who adds value by refining the timber into planks of wood. A carpenter who buys the planks adds value by making them into a table, which can then be sold to a customer. The concept of value added is most important in countries and other jurisdictions that have a value-added tax.

value added

the difference between the value of a firm's (or industry's) output (i.e. the total revenues received from selling that output) and the cost of the input materials, components or services bought in to produce that output. Value added focuses attention on the value that a company adds to its bought-in materials and services through its own production and marketing efforts within the company.

A firm will measure its value added as the difference between its SALES REVENUE and the COST of its bought-in materials and services. Where a firm operates at only one level of production or distribution in a VALUE-ADDED CHAIN, it will generally add less value than a vertically integrated firm which embraces several production and distribution stages. See VALUE CREATED MODEL, CONSUMER SURPLUS, VERTICAL INTEGRATION, VALUE-ADDED TAX, VALUE-ADDED STATEMENT, VALUE ADDED PER EMPLOYEE, PROFIT AND LOSS ACCOUNT, ECONOMIC VALUE ADDED.

value added

the difference between the value of a firm's (or industry‘s) output (i.e. the total revenues received from selling that output) and the cost of the inputs of raw materials, components or services bought in to produce that output. ‘Value added’ is the value that a firm adds to its bought-in materials and services through its own production and marketing efforts within the firm. See VALUE-ADDED TAX, VALUE-CREATED MODEL.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005

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References in periodicals archive

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