Page 86 - merged.pdf
P. 86
•66 The 100 Greatest Business Ideas of All Time
an important indicator of managers’ real created value. It certainly has a benefit
internally as managers who are targeted on EVA are forced to realise constantly that
all capital has a cost.
Market value added (MVA)
Very much linked to EVA, market value added takes the market capitalisation of a
business and subtracts the total of its capital employed. Assuming this is positive,
MVA is said to put a value on the ‘stock market wealth created’.
In summary, EVA tries to show the return to shareholders on an annual basis,
while MVA attempts to show the total return.
Added value
The difference between the market value of a company’s outputs and the cost of its
inputs. An improving trend here should augur a successful performance. The main
problem is to get the necessary data to make the calculation from published mate-
rial.
Total shareholder return
This measures the return to shareholders from dividend income and capital gains in
the value of the shares. It can take time into account by discounting income and
gains made to present value, and is a very useful tool of comparison between one
share and another.
