STRATEGY > EVA

 
 

EVA

In the field of corporate finance, economic value added (or EVA) is a way to determine the value created for the shareholders of a company. EVA is often defined as the value of an activity that is left over after subtracting from it the cost of executing that activity and the cost of having lost the opportunity of investing consumed resources in an alternative activity.

The basic formula is:

Shareholders of the company will receive a positive value added when the return from the equity employed in the business operations is greater than the cost of that capital. Any value obtained by employees of the company or by product users is not included in the calculations.

EVA is also the registered trademark of Stern Stewart & Co. - the organization http://www.eva.com that created this concept.

 

 
 

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