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Economic Value Added - EVA
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Economic Value Added - EVA
A measure of a company's financial performance based on the residual wealth calculated by deducting cost of capital from its operating profit (adjusted for taxes on a cash basis).
The formula for calculating EVA is as follows:
= Net Operating Profit After Taxes (NOPAT) - (Capital * Cost of Capital)
This measure was devised by Stern Stewart & Co. Economic value added attempts to capture the true economic profit of a company.
- Looking for a formula to determine whether a company is creating wealth? Time to learn all about
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http://www.investopedia.com/terms/e/eva.asp02/02/2005 23:30:15