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value addedthe 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.